A few days ago we learned that the low-cost airline, Norwegian will attempt to make cost savings in the region of $350 million over the next 12-months. The “ambitious” target was described by the airline’s chief executive, Bjorn Kjos as “critical” as the cost of continuing Boeing 787 Dreamliner engines woes mount and fuel prices continue to rise.
We already know that Norwegian is planning to make some minor changes to its service flow in an attempt to save costs, as well as implementing a series of internal cost reduction initiatives. And now, the Oslo-based carrier has laid out further plans to tighten its belt – plans that aren’t likely to be entirely welcomed by staff.
In the run up to the festive season, Norwegian has said it will curtail or limit planned Christmas parties and other social events. That might be disappointing, yet permanent staffers are likely to be more concerned about an announcement that there won’t be any pay raises in 2018, including for management (who say they want to lead by example).
Interestingly, the plan to reduce costs in this way isn’t going to affect cabin crew – they are employed by OSM Aviation, a third-party Human Resources company. Norwegian already outsources alot of its other functions, such as ground handling jobs so the scope of this announcement is going to mainly affect Head Office personnel and directly employed management at its bases around the world.
Norwegian has expanded rapidly over the last few years and has been credited with transforming low-cost long-haul air travel. Yet critics claim the airline is in a precarious financial situation – in the last few months, Norwegian has sold off a number of Airbus A320 aircraft in a bid to boost its balance sheet and has entered talks for a joint venture to lease out the rest of aircraft fleet.
Despite concerns, however, Norwegian continues its worldwide expansion. The airline recently started domestic operations in Argentina and recently announced a slew of new routes, including a direct service between London and Rio de Janeiro. This latest round of cost-cutting isn’t entirely surprising and probably just goes to show that the airline is entering a new grown-up phase.
Kjos has previously said that Norwegian plans to slow down expansion and consolidate its position in the market following a whirlwind few years. Norwegian certainly isn’t too big to fail but it’s very unlikely to disappear anytime soon.