AF022
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Re: Norwegian Air Fights for Survival

Fri Sep 06, 2019 12:53 pm

I'm not that up to date on what is going on, but if Norwegian wanted to get rid of some of their aircraft I would think this would be easy. 737-800s must be in big demand right now with the groundling of the MAX. And the 787s are used by many airlines.
Shouldn't be a problem should it?
 
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enilria
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Re: Norwegian Air Fights for Survival

Fri Sep 06, 2019 12:59 pm

evanb wrote:
enilria wrote:
There is one thing that very few people on a.net seem to understand about LCCs. If you are a legacy your business model is to charge local passengers as much as possible because you have the only non-stop and they fill up 30-50% of the plane (e.g. local fare $1400 rt transatlantic). The connect traffic is VERY competitive because everybody has a connect so the pricing is much lower (e.g. $1100 rt). Then you are using two planes to get the passenger from A to B (e.g. $1100 rt split over a long-haul and a short-haul probably means $700 or so to the long flight and $400 to the short flight, rough numbers). So now you have a long-haul plane 50-70% filled with connect passengers .paying only $700rt for that flight plus the remainder at $1400rt. The average of the two might be $900 rt on a legacy. If a ULCC was able to lower the local fare to $900 rt and get enough passengers to full the entire plane without connects then they are getting the exact same revenue as the legacy, but the fares are 30-40% lower.


I respectfully disagree...

Furthermore, your example regarding O&D vs. connecting is moot since Norwegian are using an awful amount of connecting traffic on the long haul flights ...

It's great that you disagree, but it's just math and it's how all ULCCs work. There's nothing to disagree with. Never said legacies were not maximizing revenue. Often there are situation where you can, for example, add better food that costs $8 and charge $10 for it and increase your revenue and perhaps profits, but adding these perks is not requisite and a model that doesn't add all these perks is not "wrong". By your definition Saks 5th Avenue should be way more profitable than Walmart. It isn't.

First, I'm interested where you see Norwegian's connect traffic rate. Second, while you can connect on some ULCCS they typically use sum of locals pricing which is the same as not connecting from a revenue point of view. I just priced LAX-ARN-AMS, for example, and the price on an AP fare is the same or higher than the sum of locals. So, effectively they aren't connecting from a revenue point of view.
 
MIflyer12
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Re: Norwegian Air Fights for Survival

Fri Sep 06, 2019 1:04 pm

AF022 wrote:
I'm not that up to date on what is going on, but if Norwegian wanted to get rid of some of their aircraft I would think this would be easy. 737-800s must be in big demand right now with the groundling of the MAX. And the 787s are used by many airlines.
Shouldn't be a problem should it?


No doubt there's a ready market for decently-maintained 738s and 787s. It's a question of whether NAS is more profitable (let's say Return on Invested Capital) with fewer planes instead of more. A liquidation makes reallocation of aircraft easy: lessors get their planes, financing banks get their planes, and there are established resale mechanisms.
 
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enilria
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Re: Norwegian Air Fights for Survival

Fri Sep 06, 2019 1:05 pm

jayunited wrote:
enilria wrote:
There is one thing that very few people on a.net seem to understand about LCCs. If you are a legacy your business model is to charge local passengers as much as possible because you have the only non-stop and they fill up 30-50% of the plane (e.g. local fare $1400 rt transatlantic). The connect traffic is VERY competitive because everybody has a connect so the pricing is much lower (e.g. $1100 rt). Then you are using two planes to get the passenger from A to B (e.g. $1100 rt split over a long-haul and a short-haul probably means $700 or so to the long flight and $400 to the short flight, rough numbers). So now you have a long-haul plane 50-70% filled with connect passengers .paying only $700rt for that flight plus the remainder at $1400rt. The average of the two might be $900 rt on a legacy. If a ULCC was able to lower the local fare to $900 rt and get enough passengers to full the entire plane without connects then they are getting the exact same revenue as the legacy, but the fares are 30-40% lower.


Enilria you have made a compelling argument over the course of this entire thread.

Even if DY is granted the two additional years they are requesting how will they get in front of their debt crisis? The MAX grounding, the RR engine crisis are all a part of the cost of doing business. Those crisis have effect a lot of airlines so I have little to no pity on DY just because they are a LCC who happens to be effected by two crisis at the same time its the nature of the beast.
While your arguments have been on point and eye opening we have to face the facts which are JV's aren't going anywhere, the MAX grounding will probably continue until next year and the RR engine issues on the 787 are ongoing. Other facts we have to face are One World, Sky Team and Star Alliance are here to stay, these ATI JV's whether we agree with them or not are here to stay.

How does DY chart a path forward to profitability while facing the MAX and RR issues and facing stiff competition on both sides of the Atlantic from both European and US carriers? This life line if granted doesn't get DY out of their troubles the truth is they are going to have to make some really tough decisions to ensure their survival.

I have come to believe that Norwegian is toast. The combination of anti-competitive capacity dumping and the 737MAX grounding is likely more than they can survive. My argument is that the model is not flawed, the problem is primarily that the legacy fanboys/girls cheered creating ATI JVs that now have 80+% of the market and now they declare that nobody else can possibly make any money. The system is broken. There is hope. The unions are starting to turn on the JVs. We can hope that they have now also come to realize that they exist to restrict capacity in order to prop up fares which is bad for consumers AND airline employees alike. The worry is that the unions are bought off with wage increases to the senior members who control the union and the costs are further passed on to consumers.
 
BrianWilkes
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Re: Norwegian Air Fights for Survival

Fri Sep 06, 2019 1:30 pm

The airline must downsize ASAP.
 
tphuang
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Re: Norwegian Air Fights for Survival

Fri Sep 06, 2019 2:20 pm

enilria wrote:
jayunited wrote:
enilria wrote:
There is one thing that very few people on a.net seem to understand about LCCs. If you are a legacy your business model is to charge local passengers as much as possible because you have the only non-stop and they fill up 30-50% of the plane (e.g. local fare $1400 rt transatlantic). The connect traffic is VERY competitive because everybody has a connect so the pricing is much lower (e.g. $1100 rt). Then you are using two planes to get the passenger from A to B (e.g. $1100 rt split over a long-haul and a short-haul probably means $700 or so to the long flight and $400 to the short flight, rough numbers). So now you have a long-haul plane 50-70% filled with connect passengers .paying only $700rt for that flight plus the remainder at $1400rt. The average of the two might be $900 rt on a legacy. If a ULCC was able to lower the local fare to $900 rt and get enough passengers to full the entire plane without connects then they are getting the exact same revenue as the legacy, but the fares are 30-40% lower.


Enilria you have made a compelling argument over the course of this entire thread.

Even if DY is granted the two additional years they are requesting how will they get in front of their debt crisis? The MAX grounding, the RR engine crisis are all a part of the cost of doing business. Those crisis have effect a lot of airlines so I have little to no pity on DY just because they are a LCC who happens to be effected by two crisis at the same time its the nature of the beast.
While your arguments have been on point and eye opening we have to face the facts which are JV's aren't going anywhere, the MAX grounding will probably continue until next year and the RR engine issues on the 787 are ongoing. Other facts we have to face are One World, Sky Team and Star Alliance are here to stay, these ATI JV's whether we agree with them or not are here to stay.

How does DY chart a path forward to profitability while facing the MAX and RR issues and facing stiff competition on both sides of the Atlantic from both European and US carriers? This life line if granted doesn't get DY out of their troubles the truth is they are going to have to make some really tough decisions to ensure their survival.

I have come to believe that Norwegian is toast. The combination of anti-competitive capacity dumping and the 737MAX grounding is likely more than they can survive. My argument is that the model is not flawed, the problem is primarily that the legacy fanboys/girls cheered creating ATI JVs that now have 80+% of the market and now they declare that nobody else can possibly make any money. The system is broken. There is hope. The unions are starting to turn on the JVs. We can hope that they have now also come to realize that they exist to restrict capacity in order to prop up fares which is bad for consumers AND airline employees alike. The worry is that the unions are bought off with wage increases to the senior members who control the union and the costs are further passed on to consumers.


I think DY expanded too much, added too much complexity, too many fleet types. And then they actually wet-leased when those planes are out of action. That's terrible for cost management. And they added too many routes where they have no point of sale on either side.

But I think once B6 gets into TATL, you will see some level of shakeup in the TATL market. You can do low cost long haul, but it's important to keep it as a natural extension of your network rather than routes out of blue. Both A321XLR and A220 are going to allow for LCCs to get into the TATL game.
 
Andy33
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Re: Norwegian Air Fights for Survival

Fri Sep 06, 2019 2:35 pm

tphuang wrote:
I think DY expanded too much, added too much complexity, too many fleet types..

Expanded too much? Agree
Too much complexity? Agree
But too many fleet types? Really? 738s for intra-European flying, Max8s because (a) Boeing had stopped making 738s and the shorthaul fleet works on a replacement cycle so they had to take something else instead and this was the least 'complex' option possible; and (b) they offered the possibility of TATL between US East Coast and the UK/Ireland at low operating cost; 787s for long haul. Doesn't look too many to me, unless you (like me) think they should have kept out of long-haul altogether. Admittedly there are orders for A320 neo series planes as well, but none of these have been delivered yet, and at least at the time they were ordered they were said to be for Norwegian's leasing arm to supply to other airlines, not for operation by their own airlines.
 
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eta unknown
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Re: Norwegian Air Fights for Survival

Fri Sep 06, 2019 2:43 pm

The same analogy that was directed at Laker Airways many years ago: if you can't stand the heat, get out of the kitchen.
 
evanb
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Re: Norwegian Air Fights for Survival

Fri Sep 06, 2019 3:05 pm

enilria wrote:
It's great that you disagree, but it's just math and it's how all ULCCs work. There's nothing to disagree with. Never said legacies were not maximizing revenue. Often there are situation where you can, for example, add better food that costs $8 and charge $10 for it and increase your revenue and perhaps profits, but adding these perks is not requisite and a model that doesn't add all these perks is not "wrong". By your definition Saks 5th Avenue should be way more profitable than Walmart. It isn't.

First, I'm interested where you see Norwegian's connect traffic rate. Second, while you can connect on some ULCCS they typically use sum of locals pricing which is the same as not connecting from a revenue point of view. I just priced LAX-ARN-AMS, for example, and the price on an AP fare is the same or higher than the sum of locals. So, effectively they aren't connecting from a revenue point of view.


Rubbish! Firstly, I never said that they're reliance on the connecting traffic. I simply made the point that they do it. They offer through fares. How they price them wasn't part of my argument. But it does suggest that they are struggling to find ways to increase unit revenue since it's not something that is typical of LCCs. But keep making the strawman about revenue which is not the point that I made, and that you willfully ignore. My point is about cost and cost structure and you're not making any contribution to that.

In order to operate a LCC or ULLC one needs to functionally lower your cost base, the more dramatically you can do that, the more scope you have to be competitive on price and attract volume through price rathe than some other attribute of product. It's not conceptually difficult to see how short haul carriers do that as a part of their business model and structure. These are common knowledge, including things like single fleeting, higher utilization, shorter turnarounds, cabin service, etc. Nobody seems to be willing, or able, to note how a long haul LCC or ULCC can functionally lower their cost structure. As a benchmark in the short haul market one needs to likely get closer to a 50% lower unit cost. How does one do this on long haul? It's a question that people have been trying to answer to nearly two decades and nobody has found any magic pills. I'd suggest that if there were, we'd see Ryanair or easyJet or Southwest jumping into transatlantic routes very quickly.
 
evanb
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Re: Norwegian Air Fights for Survival

Fri Sep 06, 2019 3:08 pm

enilria wrote:
First, I'm interested where you see Norwegian's connect traffic rate.


Norwegian Chief Commercial Officer Thomas Ramdahl said: “We already see a large number of passengers making connections between Norwegian’s own long-haul and short-haul networks."
 
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enilria
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Re: Norwegian Air Fights for Survival

Fri Sep 06, 2019 4:56 pm

tphuang wrote:
But I think once B6 gets into TATL, you will see some level of shakeup in the TATL market. You can do low cost long haul, but it's important to keep it as a natural extension of your network rather than routes out of blue. Both A321XLR and A220 are going to allow for LCCs to get into the TATL game.

I agree, but you won't get wildcard gateways, what Norwegian was doing or NK/F9 do domestically where something like PVD or SWF or CLE is going to be able to get Europe service. B6 is going to be BOS/JFK only which is much less disruptive to the status quo. I'd even be surprised if B6 tried EWR. You may even see the Norwegian 787 capacity from JFK and BOS more or less transition to the same number of B6 seats which is more or less a yawn in terms of competition.
evanb wrote:
In order to operate a LCC or ULLC one needs to functionally lower your cost base, the more dramatically you can do that, the more scope you have to be competitive on price and attract volume through price rathe than some other attribute of product. It's not conceptually difficult to see how short haul carriers do that as a part of their business model and structure. These are common knowledge, including things like single fleeting, higher utilization, shorter turnarounds, cabin service, etc. Nobody seems to be willing, or able, to note how a long haul LCC or ULCC can functionally lower their cost structure. As a benchmark in the short haul market one needs to likely get closer to a 50% lower unit cost. How does one do this on long haul? It's a question that people have been trying to answer to nearly two decades and nobody has found any magic pills. I'd suggest that if there were, we'd see Ryanair or easyJet or Southwest jumping into transatlantic routes very quickly.

I agree that you need to lower your costs to succeed. My point is that there are also ways to charge lower fares in the non-stop market and have the same revenue by changing the traffic mix. DL is like $1700 RT to Europe from MSP. They would probably double the market size with a $900 price point and that rate is still a profitable level. It just doesn't fit their model. Lowering fares can be done without impacting revenue depending upon demand elasticity in the local market. This is the rock bottom basis of ULCC revenue management. That is my point.
 
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enilria
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Re: Norwegian Air Fights for Survival

Fri Sep 06, 2019 4:58 pm

evanb wrote:
enilria wrote:
First, I'm interested where you see Norwegian's connect traffic rate.


Norwegian Chief Commercial Officer Thomas Ramdahl said: “We already see a large number of passengers making connections between Norwegian’s own long-haul and short-haul networks."

I would put that in the same category as DL saying "Seattle is meeting expectations" in the first year after they took on Alaska. It is a statement that may be technically true and still meaningless. What is large?
 
JamesCousins
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Re: Norwegian Air Fights for Survival

Fri Sep 06, 2019 6:57 pm

ei146 wrote:
A quote from the article:
...and is putting up its lucrative landing slots at London's second busiest airport as collateral.

Are the slots so lucrative in the current situation? I'd consider any investment into UK slots risky right now. So probably they are not worth as much anymore as they once were.


"Any investment into UK slots risky right now" What evidence do you have to support this claim? I'd guess your following line "so they probably are not worth as much anymore" answers my question: none whatsoever. Tourism to the UK is stronger than it has been due to the weak currency making flights cheaper, and while European holidays may have gotten more pricey those further afield have not - travel to Turkey and Eastern Europe is at record levels. Furthermore, passenger numbers transatlantic are at record levels, and the UK - NY route was recently re-affirmed as the most lucrative globally. Add this to FlyBE's sale of their LGW slots, for the very reason they are lucrative into the mix, and Virgin Atlantic's demands to want slot guarantee's at an expanded LHR...

A creditor clearly still sees value in them even with the impending doom the UK is on course for
Q400, A320-200, A321-200, 737-500, 737-800, 747-400, 757-200, 787-9 // FCA, TOM, TUI, MON, MT, BA, VS, DL, BE, X9, OLY
 
AndrewJM70
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Re: Norwegian Air Fights for Survival

Fri Sep 06, 2019 8:00 pm

I have been involved in a detailed analysis of DY’s P&L position for Q3 ahead of the results in early October. Our resources are the financial statements that appear on their Investor Relations pages. We have looked at revenue and cost trends and it does not look good.

Bear in mind that Q3 is when LCCs make their best profits. The cash often has to see them through the Winter where break-even results are often the best that can be expected. Q3 2018 made profits in excess of NOK 1bn. This was not enough to ensure a profitable year.

Passenger numbers have been released for July and August and are essentially flat. Our internal data suggests that average fares are either flat or slightly down over 2018.

Seat costs are up significantly this year. Q1 and Q2 are about 20% up on the same quarters last year. Additionally we analysed the difference in Q3 seat costs versus Q2. We did this for 2016/7/8 and found that Q3 seat costs were generally around 17% higher than Q2 and this did not vary by year.

Now here is the significant finding. When we compared the 17% increase on Q2 2019 seat costs with the 20% increase on Q3 2018, the two figures were almost identical.

If the actual seat costs are anywhere close to this figure, we think the airline could end up losing around NOK 1bn in Q3.

We know our passenger figures are almost spot on and we are pretty sure the average revenue is flat at best. The only unknown is the precise seat cost. But even if we are quite a way out (which we don’t think we are) it is hard to see how the airline could get anywhere near last year’s profit for Q3.
Last edited by AndrewJM70 on Fri Sep 06, 2019 8:07 pm, edited 2 times in total.
 
YIMBY
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Re: Norwegian Air Fights for Survival

Fri Sep 06, 2019 8:00 pm

evanb wrote:
enilria wrote:
First, I'm interested where you see Norwegian's connect traffic rate.


Norwegian Chief Commercial Officer Thomas Ramdahl said: “We already see a large number of passengers making connections between Norwegian’s own long-haul and short-haul networks."


The connectivity of Norwegian is very limited. They only allow one stop. Two stop connections are not sold.
 
ei146
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Re: Norwegian Air Fights for Survival

Fri Sep 06, 2019 8:38 pm

JamesCousins wrote:
ei146 wrote:
A quote from the article:
...and is putting up its lucrative landing slots at London's second busiest airport as collateral.

Are the slots so lucrative in the current situation? I'd consider any investment into UK slots risky right now. So probably they are not worth as much anymore as they once were.


"Any investment into UK slots risky right now" What evidence do you have to support this claim? I'd guess your following line "so they probably are not worth as much anymore" answers my question: none whatsoever. Tourism to the UK is stronger than it has been due to the weak currency making flights cheaper, and while European holidays may have gotten more pricey those further afield have not - travel to Turkey and Eastern Europe is at record levels. Furthermore, passenger numbers transatlantic are at record levels, and the UK - NY route was recently re-affirmed as the most lucrative globally. Add this to FlyBE's sale of their LGW slots, for the very reason they are lucrative into the mix, and Virgin Atlantic's demands to want slot guarantee's at an expanded LHR...

A creditor clearly still sees value in them even with the impending doom the UK is on course for


Well, the number of visitors and nights stayed in the UK rose every year with a peak in 2017. 2018 they went slightly down and numbers available for 2019 so far indicate a furher decline. Various sources for that including the UK Office for National statistics.
Do you want me to spend more time digging for data to verify your other statements? But as I found the first one to be wrong please understand that I take the rest with a grain of salt.
Anyway, I asked if the slots are still that valuable. And gave my opinion about it. Yours is different, fine.
 
davidjohnson6
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Re: Norwegian Air Fights for Survival

Fri Sep 06, 2019 10:50 pm

YIMBY wrote:
The connectivity of Norwegian is very limited. They only allow one stop. Two stop connections are not sold.


Given Norwegian's network, I doubt there is much traffic that would be profitable on 2-stop connections apart from people travelling to/from Argentina
Norwegian is not a member of a major alliance, so has very little shorthaul to feed their longhaul flights outside Europe and Argentina. They are in a much weaker position than (for example) SAS which partners with United and has N.America short haul feed in addition to their feeder traffic at CPH, OSL and ARN
 
HP69
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Re: Norwegian Air Fights for Survival

Fri Sep 06, 2019 11:33 pm

davidjohnson6 wrote:
YIMBY wrote:
The connectivity of Norwegian is very limited. They only allow one stop. Two stop connections are not sold.


Given Norwegian's network, I doubt there is much traffic that would be profitable on 2-stop connections apart from people travelling to/from Argentina
Norwegian is not a member of a major alliance, so has very little shorthaul to feed their longhaul flights outside Europe and Argentina. They are in a much weaker position than (for example) SAS which partners with United and has N.America short haul feed in addition to their feeder traffic at CPH, OSL and ARN


Good point.
 
NWADTWE16
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Re: Norwegian Air Fights for Survival

Sat Sep 07, 2019 5:05 am

with all the analysis , what is Norwegian in line to get in compensation for the Max and the 787 issues which have been a huge part of their negative reality, forcing them into short expensive wet leases. I am sure that whole fiasco plays more than 50% role in the higher costs per seat, and many other issues, like denied boarding, cancelled flights and so on
I haven't been everywhere, but it's on my list!
 
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lesfalls
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Re: Norwegian Air Fights for Survival

Sat Sep 07, 2019 9:38 am

davidjohnson6 wrote:
YIMBY wrote:
The connectivity of Norwegian is very limited. They only allow one stop. Two stop connections are not sold.


Given Norwegian's network, I doubt there is much traffic that would be profitable on 2-stop connections apart from people travelling to/from Argentina
Norwegian is not a member of a major alliance, so has very little shorthaul to feed their longhaul flights outside Europe and Argentina. They are in a much weaker position than (for example) SAS which partners with United and has N.America short haul feed in addition to their feeder traffic at CPH, OSL and ARN

They are part of the GatwickConnect system at LGW (EZY) + they interline with Wideroe for connections.
Lufthansa: Einfach ein bisschen mehr.
 
dcajet
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Re: Norwegian Air Fights for Survival

Sat Sep 07, 2019 4:20 pm

davidjohnson6 wrote:
YIMBY wrote:
The connectivity of Norwegian is very limited. They only allow one stop. Two stop connections are not sold.


Given Norwegian's network, I doubt there is much traffic that would be profitable on 2-stop connections apart from people travelling to/from Argentina
Norwegian is not a member of a major alliance, so has very little shorthaul to feed their longhaul flights outside Europe and Argentina. They are in a much weaker position than (for example) SAS which partners with United and has N.America short haul feed in addition to their feeder traffic at CPH, OSL and ARN


While I don't have access to Norwegian's LGW-EZE-LGW's profitability, the airline has been extremely successful from an occupancy perspective on the route as well as selling connections to other points in Europe via LGW. Connections at Buenos Aires require an airport transfer between EZE & AEP, as Norwegian has chosen to operate domestically in Argentina via AEP, chasing AEP's higher yielding customer.

It is low season currently in Argentina and here are the loads for the past 4 days:

LGW-EZE 4/9 323 pax, 5/9 325 pax, 6/9 325 pax, 7/9 319 pax

EZE-LGW 4/9 340 pax, 5/9 334 pax, 6/9 326 pax, 7/9 326 pax

I understand that the GIG route has been successful too.from an occupancy perspective.
"Unattended children will be given espresso and a free kitten"
 
NotFinals
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Re: Norwegian Air Fights for Survival

Sat Sep 07, 2019 4:29 pm

HP69 wrote:
What are the odds they make it to 2020?


Very good
 
IrishLessor
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Re: Norwegian Air Fights for Survival

Sun Sep 08, 2019 7:12 am

Very interesting debate and commentary all round.

I think there are some points not being mentioned in the discussion, about pricing seasonality and pax mix.

Based on my industry experience I'll make some observations;

Traditionally long haul flying need a business and/ or first cabin to bring in strong yield, a large proportion of the income from ticket sales comes from these cabins. As a result of having said cabins, this enables the late booking not so price sensitive corporate clients who pay above the odds to fly. A relevant proposition.

Airlines have contracts with travel management companies e.g. Amex, CWT, BCD etc. And contracts with large corporates e.g. Google, Facebook, Barclays, and SMEs etc. These clients have rebates and discount schemes, the volume is mind blowing and high yielding. The end user who is not paying is also drawn by FFPs and airline alliances.

The demand is great in the mentioned space in the front cabins and said customers also fly in economy and typically their customers buy late and due the yield management the last seats left are highly priced, again this client supporting lucrative economy tickets.

Norwegian are not positioned for much of this.

Consequently, Norwegian are LARGELY reliant on leisure travellers who want the highly contested low price. Leisure travel is more seasonal by its nature hence why come October Norwegian's cashflow is dismal and financing is needed to sustain the operation. As was the case with Thomas Cook, Monarch, WOW and so it goes...

I wouldn't put Norwegian's premium economy cabin (though good and well documented) into this category so in effect they don't have the right product to attract the profitable business they need. There challenge is not loads but yield.

Norwegian in summary do not have a sustainable competitive advantage. They are positioned in the leisure market, without significant business traveller volume, their business is low yielding and unprofitable.

Separately, I think they have a simple fleet inventory (apart from current max and RR engine issues) and are well positioned from a cost base perspective (obv excluding accumulated losses, I mean unit costs). I make this statement because there is so much debate on here about what's wrong with the model, and much of it is fair game but in my view not the cornerstone item.

The lack of a comprehensive range of connecting partner airlines is also a drawback too at their gateways.

Just my opinion..
 
VictorKilo
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Re: Norwegian Air Fights for Survival

Sun Sep 08, 2019 12:27 pm

Another large part of the problem is that Norwegian has to pay debt on a large new fleet all year round - high fixed costs - when they only profit from it during high season.

Perhaps, in order to make the TATL ULCC model work, you need to have Better places to deploy the capacity profitably during low season, and/or you need to spend less on your fleet so you can lower utilize it during t the low season.

For example, B6 will be paying less on a 321xlr than for a 789, and it can redeploy it on an extra JFK- PBI flight in the winter when it’s not doing BOS-DUB.
 
Cointrin330
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Norwegian offers bondholders security (LGW slots) in exchange for amended bond maturities

Tue Sep 10, 2019 1:33 am

To help pay down bond debt obligations coming due worth $400MM.

I've flown them a few times and found the service to be good and almost indistinguishable from a full service, legacy carrier in many ways, except for the tedious late late evening departures from the US East Coast on some flights and back from Europe (have flown them inside Europe as well), but the model seems to be a bit of a joke (Norwegian Argentina? Hello!) and very susceptible to fuel spikes, economic downturns (the 787 engine issues and the MAX groundings are beyond their control, yes) but the whole operation and business model seems deeply flawed.

Reported in Airwaysmag.com
Last edited by SQ22 on Tue Sep 10, 2019 8:16 am, edited 2 times in total.
Reason: Title updated
 
Scarebus34
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Re: Norwegian Considering Sale of Some LGW Slots

Tue Sep 10, 2019 1:36 am

Paging JetBlue...
 
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lightsaber
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Re: Norwegian Considering Sale of Some LGW Slots

Tue Sep 10, 2019 2:58 am

Scarebus34 wrote:
Paging JetBlue...

LoL

My first thought too.

A definitive cash crunch.
IM messages to mods on warnings and bans will be ignored and nasty ones will result in a ban.
 
UPNYGuy
Posts: 278
Joined: Thu Jan 06, 2011 4:14 pm

Re: Norwegian Considering Sale of Some LGW Slots

Tue Sep 10, 2019 3:49 am

Ok. I am going to let somebody with more industry knowledge explain this, but it does not make sense to me. Why would an airline sell slots when they NEED them for ops? won’t this put them in a bind? And I am not talking about the slot swap type deals, or when an airline rids themselves of the slots because they’re no longer operating at that airport.

If they sell off more than they can chew so to speak, won’t they be boned more they already are? Or are they not using them anyway being that the MAX isn’t in the air.
 
Andy33
Posts: 2446
Joined: Tue Sep 15, 2009 9:30 am

Re: Norwegian Considering Sale of Some LGW Slots

Tue Sep 10, 2019 6:12 am

Firstly, LGW slots exist on a use-it-or-lose-it basis. If they are not used for flights on at least 80% of possible dates.they are liable to be confiscated by the slot coordination authority and returned to the unallocated pool, without any financial compensation.
Second, because of this, LGW is just about the last airport where Norwegian's plane shortages due to MAX grounding and 787 engine woes are allowed to bite. Wet leases are being used to cover for missing 787s, and the shorthaul services are run by 738s.
Third, last week the proposal (announced in several different media outlets and with its own thread here) was to use the slots as collateral in securing extensions to the term of bonds, not to sell them outright. Is this sale a change of plan, or a misunderstanding of what the airline is actually saying?
Finally, because of the 80% use rule, this has come at a very bad time for JetBlue. If the slots are for sale, and they bought them, they aren't in any position to use them now (no suitable planes, no ETOPS operations approval from the FAA). All they could do is lease them out to another airline for eighteen months or so (and which airline would want slots for such a short period) or fly them using wet leased planes at considerable expense.
 
jghealey
Posts: 131
Joined: Fri May 11, 2018 5:46 pm

Re: Norwegian Considering Sale of Some LGW Slots

Tue Sep 10, 2019 6:50 am

I thought they were just using the slots as securities for the loan repayments - and that they weren't actually going to sell them properly?
 
flyjay123
Posts: 55
Joined: Sun Oct 01, 2017 11:07 am

Re: Norwegian Considering Sale of Some LGW Slots

Tue Sep 10, 2019 7:50 am

Andy33 wrote:
Finally, because of the 80% use rule, this has come at a very bad time for JetBlue. If the slots are for sale, and they bought them, they aren't in any position to use them now (no suitable planes, no ETOPS operations approval from the FAA). All they could do is lease them out to another airline for eighteen months or so (and which airline would want slots for such a short period) or fly them using wet leased planes at considerable expense.



Norwegian could lease them back!
 
B777LRF
Posts: 2460
Joined: Sun Nov 02, 2008 4:23 am

Re: Norwegian Considering Sale of Some LGW Slots

Tue Sep 10, 2019 8:01 am

Will someone please correct this false headline?

Norwegian is contemplating putting up some of their Gatwick slots as collateral for a bond extension. They are not, by any stretch of the imagination, seeking to sell those slots.

Norwegian gets enough bad press, both here and elsewhere, that it shouldn't really be necessary to inject fake news as well.
Signature. You just read one.
 
User avatar
SQ22
Moderator
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Re: Norwegian Considering Sale of Some LGW Slots

Tue Sep 10, 2019 8:15 am

The official press release reads a bit different:

https://media.uk.norwegian.com/pressrel ... es-2912793

There was already an ongoing thread about this subjetct and I have merged both threads into one and title has been updated as well.
 
AndrewJM70
Posts: 52
Joined: Mon Jun 27, 2016 1:08 pm

Re: Updated: Norwegian offers bondholders security (LGW slots) in exchange for amended bond maturities

Tue Sep 10, 2019 8:27 pm

https://www.euronews.com/2019/09/10/nor ... call-price

Why would this be announced ahead of the bondholders’ meting? Surely it could be used as a negotiation tactic? I am guessing it is academic as I doubt the bond will be repaid early but even so it smells of desperation.
 
AndrewJM70
Posts: 52
Joined: Mon Jun 27, 2016 1:08 pm

Re: Updated: Norwegian offers bondholders security (LGW slots) in exchange for amended bond maturities

Wed Sep 11, 2019 7:55 pm

Reports on Pprune that the major bindholder will reject the offer, wanting a share issue instead. Not good.
 
Dieuwer
Posts: 1407
Joined: Tue Dec 26, 2017 6:27 pm

Re: Updated: Norwegian offers bondholders security (LGW slots) in exchange for amended bond maturities

Mon Sep 16, 2019 5:54 pm

Bondholders ACCEPT Norwegian offer: https://business.financialpost.com/pmn/ ... ief-plan-2
The limping will continue for another two years ;)
 
MIflyer12
Posts: 5620
Joined: Mon Feb 18, 2013 11:58 pm

Re: Updated: Norwegian offers bondholders security (LGW slots) in exchange for amended bond maturities

Mon Sep 16, 2019 7:25 pm

Virgin America lenders did a debt-for-equity swap - a recapitalization of a majority of our operating lease and debt obligations in May 2013 - a few years before VX being acquired by ALK. This isn't debt for equity; this is yet higher debt payments in return for a delay of payments. The joys of financial engineering!
 
mcdu
Posts: 1522
Joined: Thu Apr 28, 2005 5:23 am

Re: Updated: Norwegian offers bondholders security (LGW slots) in exchange for amended bond maturities

Mon Sep 16, 2019 8:58 pm

A spike in oil will be the final nail in the coffin for Norwegian. If the Saudi production issue isn’t resolved quickly they won’t make it past Christmas
 
Bongodog49
Posts: 88
Joined: Fri Feb 08, 2019 11:35 am

Re: Updated: Norwegian offers bondholders security (LGW slots) in exchange for amended bond maturities

Mon Sep 16, 2019 9:09 pm

Dieuwer wrote:
Bondholders ACCEPT Norwegian offer: https://business.financialpost.com/pmn/ ... ief-plan-2
The limping will continue for another two years ;)


Loss making airline agrees to pay higher interest charges, hardly a recipe for success

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