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Norwegian’s Growth Continues in March 2017: Here’s How the Airline Works

Norwegian’s Growth Continues in March 2017: Here’s How the Airline Works

Norwegian continues to grow in March - How does NAI employ Cabin Crew and why is it the airline so controversial?

A few years ago you had probably never heard of Norwegian – Unless of course, you were from Norway.  And yet, since 2012 Norwegian is suddenly making waves across the aviation sector.  The airline is now the sixth largest low-cost carrier in the world and even has Tim Clark, President of mega-airline Emirates, concerned.

Yesterday, Norwegian reported nearly 2.5 million passengers flew with them in March alone.  That was a 12% increase on the year before, with an impressive 84.1% load factor.  The carrier carried approximately 30 million passengers in 2016 and that number is set to increase massively through 2017.

The airline promises low costs for all, opening up fresh routes with brand new aircraft.  It has opened long-haul bases at London Gatwick and in Barcelona and is set on a massive push into the United States.  The deal sounds sweet for all but Norwegian has amassed a lot of criticism along the way.

The airline’s CEO, Bjørn Kjos accuses U.S. labour groups of protectionism but critics quickly point the finger at Norwegian’s unorthodox business practices.  Norwegian doesn’t run its airline like conventional, legacy carriers and quite frankly it’s a little complicated.

We’ve peeled back the layers to explain who Norwegian are, how they run the business and why it matters for both staff and consumers.

How Did Norwegian Get So Big?

Norwegian started life in 1993 as a fairly unremarkable charter airline working for a company called Braathens and headquartered in Oslo.  With just a small fleet of Fokker twin turboprop aircraft, Norwegian offered regional services for the best part of a decade.

But when the Scandinavian airline, SAS, bought Braathens in 2002 it decided to terminate Norwegian’s contract.  The carrier had to go it alone so it started to operate its own scheduled services as a low-cost airline.

Norwegian quickly expanded across Scandinavia.  It built up a fleet of Boeing 737 jets and established an extensive route network in the region.  By 2010, Norwegian was looking further afield as it started its first long-haul services from Oslo to New York and Bangkok.

The airline’s long-haul business rapidly grew as Norwegian marketed one-way fares from the United States to Europe from just $69 USD.  With a major presence at London Gatwick and Barcelona, Norwegian broke free from its Nordic heritage.

With new long-haul routes being launched seemingly every month, the rise of Norwegian seems unstoppable.

Where Does Norwegian Fly?

The company boasts that it offers 450 routes to over 147 destinations in 37 countries.  Its short-haul network is still mainly focused on Scandinavian regional services and inter-European services from Sweden, Norway and Denmark.  However, Norwegian has also expanded its presence in Spain, the UK and France to offer flights to destinations across Europe.

Nearly seven years ago, Norwegian introduced its first long-haul routes with services from Oslo to New York and Bangkok.  The long-haul network now reaches to destinations in the United States, Caribbean, Northern Africa, Middle East and South East Asia.

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Most of these long-haul destinations are served from Scandinavian airports but Norwegian has moved quickly to build a route network from London Gatwick and Barcelona.

A controversial focus for Norwegian has been breaking the U.S. market.  At the time of publication, Norwegian operated 55 direct flights from the United States to Europe.

A soon to be very outdated map of the Norwegian long-haul route network. Photo Credit: Norwegian
A soon to be outdated map of the Norwegian long-haul U.S. route network. Photo Credit: Norwegian

Norwegian currently flies to the following cities in the United States: Boston, Fort Lauderdale, Las Vegas, Los Angeles, New York City, Oakland/San Francisco, Orlando and San Juan.  Since starting services to the U.S., Norwegian has now flown over 4 million passengers on transatlantic flights.

New U.S. destinations to join the network this year include:

  • Denver to London Gatwick – From September 16th
  • Seattle to London Gatwick – From September 17th
  • New York and Rhode Island to Bergen – From July

In June, Norwegian will launch 10 new routes to the United States using smaller, point-to-point airports.  Hartford, in Connecticut, will be connected with Edinburgh.  Newburgh, 60 miles from New York City will have flights to Belfast, Dublin, Edinburgh and Shannon.  Meanwhile, Providence will be connected with Belfast, Cork, Dublin, Edinburgh and Shannon.

What’s So Special About the Norwegian Fleet?

Norweigan has come a long way from the twin turboprops that it operated in the early days.  The airline now has 120 aircraft in its fleet, the majority of which are Boeing 737-800’s.  It’s the favourite choice of aircraft for low-cost airlines and Norweigan exclusively uses this jet type in its short-haul network.

For its long-haul routes, Norwegian started off with Boeing 787 Dreamliners.  By 2020, the carrier will have 42 Dreamliners in its fleet.  But that’s just the start – Norwegian signed the biggest aircraft order in European history for 200 aircraft.

Norwegian has ordered a total of 32 Boeing 787 Dreamliners for its long-haul flights. Photo Credit: Norwegian
Norwegian has ordered a total of 32 Boeing 787 Dreamliners for its long-haul flights. Photo Credit: Norwegian

Norwegian will be the European launch airline for the state of the art 737 MAX.  The airline has 100 on order and takes delivery with the first to be delivered later this year.  They’ll be used on new long-haul ‘point to point’ routes like Hartford, Newburgh and Providence.

The average age of the Norwegian fleet is just 3.5 years old.  The fuel efficient 787 Dreamliner and 737 MAX are vital to its success as a low-cost airline.

In 2019, Norwegian will take delivery of long-range Airbus A321’s that will open up new routes between Europe and the United States, Asia and South America.

How is the Business Set Up?

So far, so good – But this is where things get a little complicated (and controversial).  Norwegian, or as it’s officially known, Norwegian Air Shuttle (NSA) is the parent company of a number of fully and partially owned subsidiary companies.  The main companies are as follows:

  • Norwegian Air Norway (NAN) – runs the airline’s European short-haul network.
  • Norwegian Air International (NAI) operates Norwegian’s long-haul network.
  • There’s also Norwegian UK (NUK) which is based in London.
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Then there’s a whole host of other companies including Norwegian Cargo and Norwegian Holidays.  None of this makes a difference to the passenger – every service is branded just as ‘Norwegian’ with the famous red-nosed planes and ‘tailfin hero’s’.

However, critics argue that NAS has deliberately created subsidiary companies to circumvent strict Norwegian employment laws.

Does Norwegian Outsource Employees?

Cabin Crew and pilots aren’t directly employed by Norwegian but through a company that NAS partially owns called OSM Aviation.  There are divisions of OSM Aviation in countries around the world.

There’s concern that Cabin Crew are simply contracted by NSA and as such don’t get the same rights, entitlements and privileges as employees who are directly employed by an airline.  Many are employed on short-term or temporary contracts with pilots being treated in a similar manner.  This has led to Norway’s largest union withdrawing its support of the airline.

In other regions, including Thailand and Singapore, Norwegian uses employment agencies who employ Cabin Crew on much lower wages and without access to staff associations.

For its part, Norwegian claim they’re a good employer with plenty of opportunities in a fast growing business.  The airline produced this short video to sell itself to potential new hires:

What’s the Controversy Over NAI?

Using third-party employment agencies is still a relatively unusual method to employ Cabin Crew and pilots but it’s not entirely unheard of – So why is Norwegian getting such heavy flak?

This is where Norwegian Air International (NAI) comes into the equation.  NAI was set up and registered in Ireland with the purpose of operating Norweigan’s long-haul services to the United States – Even though it didn’t have any plans to operate any flights between the two countries at the time.

But for Norweigan to use NAI for this purpose it had to apply for an Air Operators Certificate.  Suddenly, Norwegian faced serious opposition from a number of interested parties.  The Association of Professional Flight Attendants (APFA), the largest cabin crew union in the U.S, claims “NAI is nothing more than a ‘flag of convenience’ scheme designed to undercut (the) established US aviation industry.”

They believe that NAI will employ cheap labour from Thailand and other Asian countries to undercut American labour.  APFA and other industry bodies battled to prevent NAI getting its Air Operators Certificate.

How Did Norwegian Respond?

NAI was established in 2013 and received its Irish air operators certificate just a year later.  But the U.S. authorities delayed issuing an AOC – that effectively stopped NAI operating any flights between Europe and the United States.

While it waited, Norwegian simply operated long-haul flights through its Norway-based unit.  It was able to do this because Norway has signed up to the Open Skies agreement between the EU and U.S.

Norwegian said that it wanted to set up business in Ireland because it allowed “access to future traffic rights to and from the EU” and “better financing conditions.”  But it had to counter accusations that NAI would be “used to destroy the US aviation system” by undercutting American business and American jobs.

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Norwegian went on a charm offensive with the American authorities.  It employed U.S. Cabin Crew (through OSM Aviation) and set up two bases in Fort Lauderdale and New York City.  The forty or so flights attendants hired so far have even been given access to a labour union.

Norwegian flight attendants lobbying the U.S. Department of Transport. Photo Credit: Norwegian
Norwegian flight attendants lobbying the U.S. Department of Transport. Photo Credit: Norwegian

The airline also plans to hire U.S. pilots in 2017 and has promised not to use Asian crew on North American flights.

What’s the Future for Norwegian?

Late last year, Norwegian was finally issued its U.S. Air Operators Certificate.  The airline has already announced a slew of new routes that will be operated through its Irish-based business unit.

In response to the DOT’s decision APFA National President Bob Ross wrote to Secretary Elaine Chao: “This last-minute decision on the part of the outgoing Transportation Secretary was a slap in the face of the hard-working men and women who have built the finest commercial aviation system in the world. It is time for President Trump to reverse this decision.”

Despite protests from the American aviation industry, it’s unlikely that Trump will revoke NAI’s certificate.  That opens up the possibility of Norwegian using cheap Asian labour in the future.  Back in 2014, Norwegian openly admitted that “special rules” in Norway prevented it from doing so – the company is no longer held back by those shackles.

Will the Business Succeed?

For the time being Norwegian is riding high and is seemingly unstoppable.  But the aviation industry is in constant change and detractors claim that Norwegian faces a number of significant obstacles in the near future.

The boss of Qatar Airways, Akbar Al Baker, has recently said Norwegian’s “nose is just above the water,” and cast doubt on its long-term future.  Then there’s ‘Level’ – a new low-cost airline being launched by the owners of British Airways to directly compete with Norwegian in Barcelona.

For Norwegian to remain profitable it will have to keep costs low and its load factor high.  The airline has done well off the back of low oil prices but this won’t be the case forever.

Al Baker recently noted: “Maybe long-haul low-cost will work when the fuel price is 30 dollars a barrel. But once it goes beyond 50 dollars I guarantee it is not feasible. The cost to operate becomes so high that the yield you get from low-cost long-haul will not cover the cost,”

Whatever happens, it’s unlikely that legacy airlines are going to allow Norwegian to continue its expansion unchecked.  But with a glut of new capacity and competition heating up between established carriers and Norwegian, the news for passengers at least looks good.

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