Today the airline announced that it has taken delivery of its 100th 737-800. This will be the final 737-800 delivery, as the airline is now taking delivery of 110 737 MAX8s. The airline’s fleet growth has been impressive.
The airline operates their 737s under several brands: Norwegian Air Argentina (1), Norwegian Air International (64 737-800 & 6 MAX8), Norwegian Air UK (1) and Norwegian Air Shuttle (52). The company also operates several 787-8s and -9s.
As the airline proudly notes: “Norwegian is the world’s sixth largest low-cost airline and carried around 33 million passengers in 2017. The airline operates 500 routes to 150 destinations in Europe, North Africa, Middle East, Thailand, Caribbean, the U.S and South America. Norwegian has a fleet of 150 aircraft, with an average age of 3.6 years, making it one of the world’s youngest fleets.”
The rapid growth has its costs as we learned from the 2017 results which were recently announced. The net loss was –299 million NOK in 2017, while EBITDA was 60 million NOK. Significant costs related to increased fuel prices, wet lease and passenger care affect the results. Going into 2018, Norwegian is far better positioned with stronger bookings and a better staffing situation. The company’s 2017 revenue was ~31 billion NOK which was an increase of 19% compared to 2016. The fleet grew by 32 new aircraft which meant ASK growth of 25%. Load factor in 2017 was unchanged from 2016’s 88%.
CEO Bjørn Kjos sounds ebullient: “Norwegian is far better positioned for 2018, with stronger bookings, a growing network of intercontinental routes complimenting our vast European network and not least, a better staffing situation. Our major global expansion reaches its peak in the second half of 2018 when 32 of our 42 Dreamliners on order will have been put into service.”
Last year the airline suffered several 787 engine challenges. But their 737 fleet has been robust. Of course with a growing fleet, there are issues. The biggest concern one hears about at the airline is its rapid growth.
Perhaps the operating challenges will be overcome and fleet reliability will improve. It has to because there has been bad press. Also here. Yet, the CEO is confident and why shouldn’t he be? Load factors are high and are likely to remain that way because the airline’s fares are relatively low. Norwegian has to keep its eye on the emerging LCC competition that is coming on stream. Airlines like Primera Air for example. Norwegian also to contend with the competition based in Iceland. Even the established network airlines will not ignore Norwegian.
Rapid airline growth does not mean the market grows as quickly – in the short run, Norwegian is taking traffic from others. We have seen this before with the ME3. Unfortunately for Norwegian, older airline brands are aware of how the ME3 disrupted their revenue flow. They will not let this happen again without a faster response.
For Norwegian to succeed it must improve its operational performance. Low fares do not equal low expectations. If people buy a ticket, they have a reasonable expectation of being transported from A to B with no fuss (and no frills). Crucially as a service business, the airline seems aware of the challenges it has in terms of customer interface. One hopes the “better staffing situation” addresses this. Fixing flight ops and customer interface can help keep load factors high and also ensure Norwegian can sustain its disruptive ways.