In It For The “Long Haul”
Norwegian Turns Up The Heat With Affordable Long-Haul Service
Norwegian Air Shuttle ASA (Norwegian) challenges airlines to think differently about long-haul transportation with its extremely low pricing.
Experiencing the vast array of cultures around the globe firsthand is one of life’s priceless opportunities. Yet, these traveling opportunities are often altered, cut short or eliminated due to the hefty price tag typically accompanying them. The main culprit? Roundtrip airfare, which often constitutes a large majority of the overall cost of a trip abroad.
What if the cost was drastically reduced, making long-haul transportation more affordable and the total cost of international travel a more-realistic option for travelers on a budget? This is exactly what Norwegian aims to do — offer a truly unbeatable price for long-haul air transportation to the budget-conscious traveler. As of May 2013, Norwegian stands as the only European low-cost carrier to offer trans-Atlantic routes to London from New York, Los Angeles and Fort Lauderdale, starting at rates under US$300 for a one-way ticket.
Norwegian Goes Global To Stay Competitive
Norwegian has grown substantially in its 20 years in business. It is Europe’s third-largest low-cost carrier and the continent’s ninth-largest airline in terms of passengers boarded. In 2008, it announced its first destination outside of Europe — a non-stop route from Scandinavia to Dubai.
On the heels of this announcement came yet another, stating plans to fly to a variety of other intercontinental destinations, including New York, Fort Lauderdale and Bangkok as well as cities in North Africa.
Fast forward to present day. Norwegian offers trans-Atlantic flights at incredibly low rates and provides affordable options to those desiring to travel abroad. As part of the airline’s strategy to offer low fares and high-quality service — including WiFi onboard, direct-to-plane for those not checking bags, in-flight entertainment, SMS ticket, etc. — it plans to expand in the near future to other U.S. destinations including Orlando, Florida; and Oakland/San Francisco and Los Angeles, California; as well as European destinations such as Budapest, Hungary; Sicily, Italy; and Santorini, Greece.
How is Norwegian able to offer long-haul flights at such reasonable rates? Much of the airline’s success is credited to the Boeing 787 Dreamliner, Boeing’s most fuel-efficient aircraft. The airline has purchased/leased 10 Dreamliners, which enables it to fly greater distances at lower costs. The aircraft’s aerodynamic design and green infrastructure accommodates up to 330 passengers, a drastic difference from the jumbo Boeing 777 and Boeing 747 that carry up to 600 passengers. (The Dreamliner is Boeing’s most fuel-efficient aircraft and the world’s first airplane manufacturer to use composite materials as the primary material in the construction of its airframe. The Dreamliner is 20 percent more fuel efficient than the Boeing 767 it replaces.)
Ultimately, this means lower fuel costs for the airline, as it carries less weight in bags and passengers. In addition, it highlights Norwegian’s business strategy by demonstrating how an airline’s selection of aircraft equipment is an important contributor to the success of its business model.
Dreamliner Goes The Distance
Norwegian Air Shuttle has purchased/leased 10 Dreamliner aircraft, which it uses on longer-haul routes at lower costs. The airline received three of the aircraft last year, and it will take delivery of four more this year, one next year and two in 2016. The Dreamliner, which is 20 percent more fuel efficient replaces the Boeing 767.
Let’s put Norwegian’s strategy to a test. Lauren is a 24-year-old female who lives in the United States and graduated with a university degree. Before her full-time job begins, her dream is to travel the world. But with student loan payments looming, she is extremely price conscious.
After researching online, she discovers the cost of a roundtrip ticket from New York City to London is around US$2,000 — a large chunk of cash for anyone to part with, especially a recent graduate. Furthermore, this price does not include her hotel accommodations, meals, cab fares, train tickets, souvenirs, entertainment, etc. Needless to say, the cost of Lauren’s dream is rapidly nearing an unthinkable amount of money.
Many airlines may not think there are enough “Laurens” in the world to consider Norwegian’s strategy viable, but think again. According to the Boston Consulting Group, studies show that Lauren and her peers will be at the core of travel spend in just five to 10 years from now for both leisure and business travel. In fact, this group is projected to represent more than half of the total spend on business airfare by 2020.
In addition, this particular population segment is incredibly vocal and willing to share both good and bad experiences with their social networks. Tools such as Facebook, Twitter and Instagram disperse this information to their networks instantaneously, and research indicates that this collective data will heavily influence the opinions and decisions of those it touches.
When Norwegian Air Shuttle entered the Norwegian domestic market 12 years ago, it challenged a well-established and long-lasting airline monopoly. Therefore, the airline appropriately adorned the tails of its aircraft with Norwegian personalities who have pushed the boundaries, challenged the established and inspired others. Those personalities, who the airline refers to as “our heros,” include famous figures such as Norwegian Explorer Fridtjor Nansen, Writer Camilla Collett, Actress Asta Nielsen, Author Elsa Beskow and Poet Johan Ludvig Runeberg.
A Glance At The Future
So what does Norwegian’s strategy mean for the airline? In short, the airline could potentially be on the brink of a major movement for both the LCC model and the overall airline industry. In other words, if the airline secures long-term success with its low-fare, high-quality service strategy, it could influence and/or change the way other airlines position themselves in the trans-Atlantic market.
“Norwegian’s decision to operate high-quality services on new long-range aircraft offering good-value fares to the United States from London Gatwick is a significant industry game-changer,” said Stewart Wingate, chief executive of Gatwick Airport in London, in an interview with MailOnline.com. “This is one of the most exciting route developments since Gatwick’s change of ownership four years ago.”
Offering affordable trans-Atlantic air transportation opens doors to possibilities and opportunities once unimaginable by breaking down one of the largest barriers for international travelers — expensive roundtrip airfare. For the budget-conscious traveler, long-haul travel becomes more of a reality, enabling people such as Lauren to see the world and experience foreign cultures.
But with the airline’s strategy still in its early stages, some questions remain: Is this just the beginning of a potential major movement by airlines competing in the trans-Atlantic market? Will other LCCs around the world follow suit, or will they maintain their long-standing practice of providing low-cost competition in local markets only?
What does this mean for traditional network carriers?
A number of major airlines have flown routes between London Gatwick and the United States for decades. However, despite the credibility they have established over the years, competing with new low-cost entrant Norwegian in this territory will be no simple task.
“Launching long-haul routes between London Gatwick and the United States is an important part of our strategy to expand internationally and obtain a stronger foothold in markets outside Scandinavia,” Norwegian Chief Executive Officer Bjørn Kjos told MailOnline.com.
Norwegian’s strategy indicates its intent to compete with major airlines and win market share by introducing extremely low fares (while the fares come with a certain amount of complimentary services, naturally there are some optional expenses such as meals, fees for checked bags, reserved seats, etc). Travelers are some of the most price-sensitive consumers in the global marketplace, displaying incredibly high levels of patience and diligence in their search for inexpensive airfares. Most of them utilize the Internet, which enables them to compare fares from various airlines on dozens of websites. Norwegian’s fares hardly come close to what most major airlines charge for roundtrip trans-Atlantic routes, which ultimately makes the price-conscious traveler’s purchasing decision a simple one.
Norwegian’s overall expansion strategy may pose a serious threat to long-established, full-service carriers, possibly giving them a sense of urgency to adapt and respond quickly to remain relevant and competitive. To do so, they will need to either lower their prices in these particular markets to more closely match Norwegian’s fares, differentiate themselves by building and sustaining best-in-class service or, perhaps, a combination of the two.
Stringent Safety Measures
In addition to providing its customers with exceptional, high-quality service, Norwegian’s in-flight crewmembers, as part of its strict safety protocol, are required to use a Web-based reporting system to log irregularities. This information is used for statistical analysis and trend monitoring.
Powered By Technology
Clearly, the Boeing 787 Dreamliner is a big enabler for Norwegian’s new service. However, the airline’s success also depends on its ability to effectively reach travelers worldwide as they search for affordable trans-Atlantic fares. This is where technology plays a significant role.
As part of its low-cost, long-haul strategy, Norwegian entered its content into the Sabre® global distribution system, enabling Sabre® Connected travel agencies to sell the airline’s total seat inventory with real-time, interactive confirmation.
“By moving into the long-haul business, it’s extremely important to have cost control/focus” said Lars Sande, senior vice president of sales for Norwegian. “Having the newest, most cost-efficient aircraft, and having high utilization is vital. We also need to be efficient on the commercial side. Offline marketing is way too expensive, and it’s hard to measure the effect of money spent. So moving forward, digital marketing and wide, efficient distribution is key. It’s important that customers find us in the channels in which they buy their tickets in the markets we step into.
We feel we get that with our partnership with Sabre Travel Network®. To succeed selling tickets in the U.S. market, Sabre is important.”
This move enables Norwegian to connect its new service offerings with the global demand. In addition, it provides the airline with access to more sales opportunities than ever before, as well as the ability to generate revenue far beyond the limits within its local markets. In addition, as Norwegian continues to expand into new markets, it will have access to more-sophisticated distribution solutions, further securing its growing global footprint.
As for the future of long-haul travel, there is a method to Norwegian’s madness. However, only time will tell how the industry at large will respond to the airline’s long-haul, high-quality service strategy.