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Can Norse Atlantic Airways succeed where Norwegian failed?
Norwegian finally ceased its long-haul operations in January 2021 in a move that was anticipated after reporting losses long before the Covid-19 pandemic. Now a new Norway-based airline, Norse Atlantic Airways, plans to follow in Norwegian’s footsteps and serve Europe to US routes.
Norwegian’s long-haul struggles originated long before the pandemic. Using a model which rarely works elsewhere in the world, Norse Atlantic Airways is now following in the footsteps of Norwegian with a carbon copy of its failed business model.
Low-cost operations depend on destinations close to each other (four hours flight time maximum), allowing operators to use smaller aircraft and airports. This helps an airline to keep costs and fares low, which is why the model works so well for European low-cost carriers easyJet and Ryanair.
Full-service carriers are now incorporating low-cost options in their offerings, which will tap into travellers’ Covid-19-impacted budgets. Components such as hand-luggage-only fares and limited seat selection options help to reduce fares, allowing full-service carriers to compete with low-cost carriers. These lower fares will attract low-cost customers who may not have considered a full-service carrier and could be enticed by the improved level of service and loyalty programmes available.
The business model needs to change to succeed
For new player Norse Atlantic Airways, there are signs that this new venture may not work. The airline plans to fly the same aircraft and operate from the same airports as Norwegian, and will probably hire the same, recently laid-off staff. Norwegian CEO and founder Bjørn Tore Larsen is also a 15% shareholder in the new venture. He has confidence in this opportunity and believes there will be a need for an innovative low-cost long-haul carrier in the continental market.
However, following the same path could lead to failure. Norse Atlantic Airways must look at Norwegian’s failings and adapt to be successful.
One element that could be changed is the lack of business and first-class cabins. Premium classes often make full-service flights profitable. The introduction of a new business class could help Norse make profit.
JetBlue, for instance, has recently announced that it expanding its existing low-cost model to long-haul flights. To stand out from its competitors, it introduced a new MINT-class cabin, giving a refreshing take on premium travel experiences and attracting higher-spending customers. Business-class passengers may historically shy away from low-cost airlines for premium or business trips, but recent budget cuts in all sectors due to the pandemic could create an opportunity for low-cost business offerings to prosper.
Meeting the needs of the market
Consumer confidence is at an all-time low due to the pandemic’s impact on travel. Flexibility is key to gaining trust from travellers and increasing cash flow. Booking with a new operator that is following in the footsteps of a failed airline may not create a great deal of confidence for travellers.
Travellers are likely to be brand loyal and book with well-known, flexible operators with contingency plans and protection if flights are cancelled or the airline falls into administration.
Long-haul travel is also low on travellers’ priority list for the near future, while domestic travel is expected to boom in the short to medium term.
These factors cast doubt over the future success of Norse Atlantic Airways, a new venture that will need to be flexible and adaptable to take off in the current, uncertain travel climate.
For more market data and analysis visit GlobalData's Travel & Tourism Intelligence Centre.
Main image: Norse Atlantic plans to succeed where Norwegian failed with a new low-cost, long-haul venture. Credit: Nieuwland Photography / Shutterstock.com
