Norway's Norse hopes to crack budget transatlantic airline market
29/04/2022 09:21
By Victoria Klesty
OSLO, April 29 (Reuters) - New Nordic airline Norse Atlantic
NORSE.OL started ticket sales on Friday for budget
transatlantic flights, hoping to succeed where Norwegian Air
spectacularly failed, by betting on aircraft leased at
rock-bottom rates during the pandemic.
Having assembled a fleet of widebody planes, Norway-based
Norse will initially connect U.S. destinations New York, Fort
Lauderdale, Los Angeles and Orlando with Norway's capital Oslo,
and with London and Paris to follow.
Its first flight will take off in Oslo on June 14, heading
for New York's John F. Kennedy International Airport, its
booking system showed.
While the favourable terms of its leases and the
fuel-efficiency of its modern aircraft should give it an edge on
cost, the question is whether it can fill the planes and
generate enough revenue to be profitable.
"It is always a bit of a risk when you are in the airline
business but we think it's a pretty good timing," Chief
Executive Bjoern Tore Larsen told Reuters.
Larsen, an aviation enthusiast and the company's biggest
shareholder, made his fortune in the shipping industry and
controls ship management group OSM Maritime.
The United States is his personal favourite travel
destination, and he believes there is a massive demand for
budget travel between Europe and North America.
"We are pretty sure we will fill these aircraft with both
Americans going to Europe and Europeans going to America," he
added.
Uncertainty about post-pandemic travel patterns and rising
energy costs are worries for the airline industry, and travel
restrictions remain, especially in Asia.
"What we see from the companies that have started reporting
is that there are strong booking numbers for cross-Atlantic
flights, so I think demand is there," Larsen said.
REPLACING NORWEGIAN?
The pandemic sent the airline industry into a tailspin with
many players racking up losses and ridding themselves of
overcapacity where possible, meaning there were rich pickings
for anyone interested in finding bargains.
One of the biggest cutbacks came from the collapse of
Norwegian Air NAS.OL , which axed its long-haul operation
during bankruptcy proceedings, emerging last year in a
slimmed-down version as a regional European carrier.
urn:newsml:reuters.com:*:nL5N2ND215
Enter Norse, which took delivery of its first Boeing BA.N
787-9 Dreamliner in December 2021 and plans to have a fleet of
15 leased aircraft.
Four of the aircraft will initially be on an 18-month
sub-lease to Spain's Air Europa, however, which Norse said would
generate a positive cash flow.
Under the arrangements with its lessors, Norse at the outset
only has to pay for the time the aircraft are being used, known
as "power-by-the-hour" contracts, which means some of the
pressure to keep the aircraft flying is off.
"So we will start out carefully and try to match supply and
demand, but we won't go along and fly half-full aircraft,"
Larsen said.
While rising fuel costs will "no doubt" add to ticket
prices, Larsen said the inflationary pressure was limited and
not enough to significantly impact demand.
Bjoern Kjos, founder and former CEO of Norwegian Air,
pioneered budget cross-Atlantic flights and the airline became
the biggest non-North American airline to serve New York City
with him at the helm.
Having retired from Norwegian Air in 2019, Kjos was an early
investor in Norse Atlantic and has a seat on its board.
"We have a great cost position - Dreamliner is the aircraft
you need to fly really, you have to fly modern aircraft,
especially with the oil prices we have now," Kjos said.
FEEDER NETWORK
As a pure long-haul player, Norse Atlantic lacks a "feeder"
service from regional connections, which could make it hard to
sell seats beyond top routes such as London-New York, said James
Halstead, managing partner at consultancy Aviation Strategy.
"Very few (long-haul) routes around the world survive on
pure "O&D" traffic," Halstead said, referring to traffic from a
single origin to a single destination.
Norwegian Air is, however, in talks with Norse to see
whether schedules could align for it to act as a feeder service,
Norwegian Air's Chief Executive Geir Karlsen said.
"If we can collaborate on some front on the destinations,
then we are happy to do so," he said.
Larsen said he expected to launch flights from Paris to the
United States this summer, and to fly London-New York before the
end of the year.
(Reporting by Victoria Klesty
Editing by Mark Potter)
((victoria.klesty@thomsonreuters.com; +47 2331 6592; Reuters
Messaging: victoria.klesty.thomsonreuters.com@reuters.net))