I hate being the pessimist here, but I believe Norwegian is going to face big problems with their long-haul venture. The reasons why I believe it will are the following:
- Norwegian's cost structure for the long-haul operation was based on having cheap crew from Asia. As far as I know, the Norwegian state has forbidden that kind of labour under a Norwegian registry.
- SAS, which would be one of their main competitors have highly reduced their costs (becoming more competitive) and has also a frequent flyer program and Star Alliance offering connections making them attractive for the high yield passengers which I believe Norwegian could need.
- Norwegian is initially replacing their 787's to come by A340-300 which makes the start of their long-haul venture more costy and complicated.
- Norwegian is going into a market with a lot of competitors: SAS, Finnair, Thai, SIA
, Emirates, Thomas Cook, TUI and possibly KLM for the long-haul destinations like Bangkok, Phuket etc and getting more and more head to head with Easyjet and Ryanair on the short haul market.
- Norwegian has feeding traffic, but again most of that comes from the Scandinavian countries which means less than a 20 million in population. I have a hard time seing passengers from Europe transitting in Oslo/Stockholm and getting a more competitive price than for instance via Amsterdam with KLM.
- The long-haul low cost concept has always been a tough market to catch and I believe that if there was that much business to make, both Easyjet and Ryanair would have already had something up and running. Therefore, I see it hard for Norwegian to make it work.
- Finally, when you look at the general conditions in Norway (and Scandinavia in general), it's an industry which is highly taxed, has expensive labour, has high fuel prices which makes an LCC operation very hard in comparison to Ireland or UK.
That being said, I'd like to be proven wrong. Most of my friends are working in Norwegian and it would be a pleasure to see them succeed. I just think this long-haul is one step too far especially since Norwegian will fight on many fronts.
When business goes to hell, you get rid of three things. Your private jet, your yacht and your mistress..........and most importantly in that order.
~ Russian Billionaire ~