A decades-old dream of many low-cost carriers to break into the market for long-haul flights has also been a long-standing nightmare for executives at full-service airlines, who earn their corn chiefly on such routes.
So a series of setbacks for Norwegian, the latest low-cost carrier to try its hand at long-haul flights, has set off a round of Schadenfreude at established airlines across Europe.
Last week, Norwegian revealed a disappointing set of results for the three months to June. A week earlier its chief financial officer of 15 years, Frode Foss, resigned with immediate effect, sending the share price down by 8 percent. Over the past year the shares have lost a third in value, as investors grow nervous.
The worries go back to Norwegian's decision to begin long-haul flights. Founded in 1993 by Bjørn Kjos, still its CEO and biggest shareholder, it took over some domestic routes in Norway from a bankrupt charter airline, Busy Bee.
Then in 2002 it went into short-haul flights in Europe, becoming the continent's third-largest low-cost carrier. After a few years of decent profits, in 2012 Norwegian ordered 222 new planes that together cost several times its own value, and announced its new "no-frills" long-haul routes to the United States and Asia.
Investors were skeptical. Many low-cost carriers have gone under trying to enter the long-haul market, or had to admit defeat. The pioneer of no-frills transatlantic flights in the 1970s, Sir Freddie Laker, could not make his ventures work. Kjos sees Laker as an inspiration; this spring Norwegian painted his face on one of its jets.
Yet changes in aircraft technology, consumer tastes and workers' benefits mean that the long-haul low-cost model has a better chance of working today. Andrew Charlton of Aviation Advocacy, a consultancy, notes that new, fuel-efficient aircraft, such as the Boeing 787 and 737MAX aircraft purchased by Norwegian, mean it is now possible to fly smaller numbers of passengers over long distances at relatively low cost.
Passengers have grown accustomed to low-cost carriers — which fly more than two-fifths of all passengers within Europe each year — and are more willing than in the past to try out no-frills airlines on longer routes, too. A third factor helping low-cost long-haul travel is that airlines are less encumbered by generous labor contracts and unfunded pension costs than before. Low-cost carriers such as Scoot, owned by Singapore Airlines, and Jetstar, owned by Australia's Qantas, are using similar tactics to Norwegian to build their networks of low-cost long-haul flights.
