LONDON – As is well known in the industry, Norwegian has had plenty of struggles over the last few years. With COVID-19 and other factors placing significant strain on the carrier post-bailout, this article looks at whether the fight ahead is something that is sustainable.
Even with a government bailout being handed to the airline following the execution of its long-haul network in January, maintaining competitiveness may prove to be difficult from both the domestic and intra-European perspective.
However, as will be explored later on in this piece, the very positive working culture that has been experienced by the workforce in the airline, fighting long and hard may prove to work in its favour.
A Look at the Last Two Years
One of the main problems that had arisen with the airline is that it “does not have the financial characteristics of large low-cost carriers, like Ryanair and easyJet. In fact, its liquidity and solvency are merely in line with those of large European network carriers… [It suffers] from considerable losses, which likely affects its competitive strength” (Zuidberg, 2019).
Even before the COVID-19 pandemic had time to kick in, CEO Jacob Schram stated that 2019 “was an eventful year that presented renewed challenges in the aviation industry as tough competition and the global trading environment intensified” (Norwegian, 2020).
2019 was a particularly difficult due to “ongoing issues with Rolls Royce Trent engines affected the full utilization of [their] Boeing 787 fleet and the global grounding of the Boeing 737 MAX” (ibid).
As a result, the airline had its losses increase by over 150 million NOK, meaning that such financial performance was worsening (ibid).
Then, of course, 2020 came and hit Norwegian far more harder than it did in 2019, forcing the airline to “ground all but six of its 138 aircraft due to the health crisis”, and is looking to reduce its fleet to 50 aircraft from that number, with the plan of growing to 70 by 2022, dependent on such market conditions (Reuters, 2021).
Through such a government lifeline and its restructuring plans, the airline will look to reduce debt to around 20 billion NOK, and hopes to raise around four to five billion more NOK from potential investors (Key.Aero, 2021).
Such restructuring actions has caused the “withdrawal from London Gatwick”, as well as “the discontinuing of long-haul operations” in order to achieve this (ibid).
Will the lifeline make a difference?
In a press release back in January, CEO Schram thanked the Norwegian government for its support in trying to keep the airline alive, but stated that there was a lot of work still yet to do.
“On behalf of everyone at Norwegian, I would like to sincerely thank the government for their support.”
“Norwegian has been faced with a very challenging and demanding situation due to the pandemic, and the government’s support significantly increases our chances of raising new capital and getting us through the reconstruction process we are currently in.”
“We still have a lot of work ahead of us, but a participation from the government underscores that we are heading in the right direction” (Norwegian, 2021).
“With a new business plan, and a participation from the government, we are confident we can attract investors and get through the Examinership and reconstruction process.”
“We have received extensive support from political parties, customers, colleagues, shareholders, and business partners, for which we are extremely grateful, especially during these challenging times.”
“Furthermore, the government’s support will contribute to help securing jobs and maintain healthy competition within the aviation sector.”
Whilst this level of support is a positive, the main question is whether the actions may be enough. New Norwegian startup called “flyr”, who aims to enter both the European and Domestic markets, is the latest threat to the airline’s financial solvency.
As reported by RoutesOnline in January 2021, the airline “outlined a strategy to fly domestic and short-haul international routes using Boeing 737-800 aircraft”, with it offering a “longer-term ambition” “to own a fleet of up to 30 aircraft”.
This ultimately means that the route to profitability may be harder to achieve, especially if flyr decides to take on Norwegian on the same routes, which is likely to be the case.
Norwegian Offers a Strong Culture
One thing that Norwegian does have up its sleeve, and is very similar to the likes of Southwest, is its people-orientated culture. Back in January, AviationSource got to speak with Dan Cooney, who was a Senior Flight Dispatcher for Norwegian at London Gatwick Airport.
Although he was made redundant in July 2020, he still feels that the long-haul exodus and job redundancies of late still remind him of the past. But, in this interview, he discusses what it was like to work for the airline and this could be the key to its successful turnaround.
JF: Dan, thanks for speaking to me in the wake of what has happened. Explain to me your situation, and how the announcement of the long-haul exodus has affected everyone you know who works there?
DC: I got made redundant back in the end of July last year. However, any news on Norwegian I obviously listen very closely and see what is happening, because there was the chance that when things got better, I could potentially go back.
I know that at the time, Norwegian were hoping to start long-haul again, back in March this year. And they were actively selling tickets to New York, Los Angeles, et cetera. They were putting in place the schedule.
So, when the news about the long-haul exodus came, it was sad. We all knew we probably were not going to get through this totally unscathed. Something was probably going to have to give. We did not know what, but we were expecting something, but just seeing it clarified and confirmed just makes it harder.
I have come to terms with being made redundant. However, it was difficult watching all my friends who were getting made redundant last week [January 2021], when the news came. We were all talking to each other and reminiscing about the good old times and what we used to do including having a laugh just before we took place the doors for departure, et cetera. It was hard, but it was nice to rekindle some of those memories.
JF: Was the news from Norwegian a surprise for you and your colleagues?
DC: I know Norwegian’s not been in the best place for the last couple of years financially. But we were on track to have the best year ever in 2020 and was going to make some money. We would have been in quite a good position really, because of Jacob Schram. He was very tough, and he was very business orientated. He did not really have a lot of background when it came to aviation, but he was known for turning companies around and making them profitable. So, he was doing that. He was doing it, and it was evident.
Schram was concerned at first about cutting back as much of the product as possible before the damage went onto the employees. I flew with the company once from London to New York. In the time of such cutbacks, they would have breakfast in the morning and then they would not have a lunch before they landed. So, the cutbacks at the time were going to just one meal service on such flights. That would of course save money. It was neat. He has done the best job he could do in the wake of everything that has happened.
JF: What was it like working for Norwegian? What was the culture like? Was it, you know, was it like what people would say is very sort of family-orientated because based on your answers, it does seem like you are quite a close and tight knit family of people working with you?
DC: It is by far the biggest family you could ever imagine. Even when the days were rubbish and there was weather delays and you sat on the ground for two hours and passengers are complaining, et cetera, you could always go to it whoever you wanted at the airline and just de-stress. It was brilliant. Because I was based at Gatwick and obviously had the Gatwick base flight crew, you got to know people well, and we all live within like the same sort of area of West Sussex, et cetera. We would all go out on nights out and meet up at the pub. It was an amazing culture.
JF: Do you feel the issues with the Boeing 787 and the 737 MAX was a contributing factor to the position of the airline today?
DC: Massively they have had a huge effect on our business even pre COVID. A lot of us used to say that Norwegian has got the worst luck because of the problem with the Dreamliner engines as well as the grounding of the MAX too. As a result, we had to wet-lease aircraft from different airlines, which hurt our reputation a bit more especially as the product is not up to the same standard that you would see on a Norwegian flight. So, it was a plethora of things that made things more difficult for us.
JF: Do you think Norwegian would have had better success if the problems had not appeared with the aircraft? Do you also think that the airline should have gone for the Airbus A350 instead of the 787 to produce a better rate of durability and success?
DC: When I started working at the airline, I was told that initially the airline was supposed to go for the A350, but they could not at the time as they wanted to go into the long-haul market quickly. With delays occurring with the A350, they opted for the 787 as it would become available quicker. They would have loved to have had the A350 because it was more powerful, it could lift more cargo and payload. So, it would have been a different circumstance had the airline gone to the A350.
JF: Do you think that Norwegian will ever return to long-haul? And with that in mind, do you think they would switch it over to the A350 from the B787?
DC: Maybe in five years’ time, when they are a bit more financially stable that they might revisit the idea of going back to the long haul. They might take the Dreamliner back on because they know that they can, they know that the passengers were attracted to the aircraft and the product that it offered so it probably is a safer bet now even with the issues surrounding the Dreamliner. But again, this is purely speculative, and the decision does like with Schram over this.
JF: Is there anything else that you wish to say to our readers regarding Norwegian and its approaches, especially going into the future?
DC: Norwegian was not just an airline. It was a family. You would not have changed anything for it because the people there were just the most incredible people that you had ever met. And they were from all walks of life. You know, we would have people fly and commute, even though they were based at Gatwick. They would even fly from Amsterdam, or commute from Madrid. They had come in from all over the world, just so they could fly and work for the company. That was the pure dedication and pure love for the industry and the love for the company.
We all became the so-called red nose warriors, because we were the ones that were trying to push and drive the company towards success. There was even a Facebook group, that was made to support the airline as well as petitions from passengers, launching crowdfunding campaigns to stop the airline from going bust.
All I will say is that we need to all work hard to make sure the airline survives, even if I am not working for them right now. With people trying to support us, we really will try and do our absolute best to get back to where we were pre-COVID. We just need the world to cooperate.
JF: Dan, thanks very much for speaking to us.
This discussion with Dan highlights that Norwegian has the cultural strength to get through this, rather than the main focus of economics. Whilst that element is majorly important, and Mr. Schram having to make important decisions as a result, it means that there is still a roadmap for the airline to succeed, even in the wake of adverse competition.
It also remains clear that going forward, Norwegian need to make the correct decisions and not place a foot wrong. If it does that, then it may very well be game over for the airline.
- Zuidberg, J. (2019), Network Geographies and Financial Performances in Low-Cost Carrier Versus Network Carrier Competition: The Case of Norwegian versus SAS, Journal of Transport Geography, Vol 79, July 2019, https://doi.org/10.1016/j.jtrangeo.2019.102462
- Norwegian (2020), Annual Report 2019, https://www.norwegian.com/globalassets/ip/documents/about-us/company/investor-relations/reports-and-presentations/annual-reports/annual-report-norwegian-2019.pdf [Last Accessed 22nd January 2021]
- Reuters (2021), Norwegian Air Gets Backing for Survival, https://sg.news.yahoo.com/norwegian-air-gets-backing-survival-104302774.html [Last Accessed 22nd January 2021]
- Key.Aero (2021), Norwegian’s New Rescue Strategy Wins Govt Support, https://www.key.aero/article/norwegians-new-rescue-strategy-wins-govt-support?utm_content=152099333&utm_medium=social&utm_source=twitter&hss_channel=tw-1468126154 [Last Accessed 22nd January 2021]
- Norwegian (2021), Norwegian appreciates support from the Norwegian Government, https://media.uk.norwegian.com/pressreleases/norwegian-appreciates-support-from-the-norwegian-government-3066398 [Last Accessed 22nd January 2021]
- RoutesOnline (2021), Flyr to operate route network with 737-800s, https://www.routesonline.com/news/29/breaking-news/295070/flyr-to-operate-route-network-with-737-800s/?fbclid=IwAR01EIPVNBQxoXLDmv6OWVFH8gwk-JcPbgdjrtoOkgb3QV_OXHmJ7GK6O-M [Last Accessed 24th January 2021]