While airlines naturally hate competition on their own turf, one carrier has proven a thorn in the side of network airlines for years. That airline in Norwegian Air, a budget carrier that has pushed transatlantic airfare sharply downward through its no-frills business model. Now the airline industry is rooting for troubled Norwegian Air to collapse, as evidenced by the performance of airline stocks today.
As Norwegian Air Faces Collapse, Competitors Rejoice
IAG, the parent of company of British Airways and Iberia, is surging today in London trading. So is Wizz Air, a low-cost competitor growing across Europe. So is EasyJet and Ryanair. It seems counterintuitive, doesn’t it? Lockdowns in the UK and across Europe have forced airlines to dramatically slash schedules and warn of more job cuts. Passengers numbers are down so much that British Airways has temporarily closed its lounges in London Heathrow.
But today is cause for celebration for these carriers and others. Why? On Monday, Norway denied a request from Norwegian Air more funding. As Iselin Nybø, Norway’s Industry Minister, noted:
“It is a tough message to get. But we are answerable for the responsible use of public funds. Norwegian Air has a financial structure that makes it risky for us to go in with support. It was not defensible.”
Of course Norwegian pushed back and called it a “slap in the face.” But Norway can hardly be blamed and the idea that Norwegian Air is Norwegian is tenuous at best. The carrier has several subsidiaries and uses Irish law to skirt taxes and hire foreign crews from Thailand at wages far below what would be considered “living” in Norway.
The demise of Norwegian Air would directly benefit the other incumbents operating in Europe. Today’s surge in stock prices are hardly surprising and go far beyond hopes of an effective COVID-19 vaccine.
CONCLUSION
To be clear, I don’t want to see Norwegian fail. Not only is its premium economy product above average, but its presence in the market is good for consumers. One thing in particular I love about Norwegian is that you are not penalized for buying one-way fares. On both U.S. and European legacy airlines, you are often charged more for a one-way than a round-trip. Not so on Norwegian, which has forced other airlines to adjust pricing (downward). If Norwegian fails, I expect the availability of attractive one-way pricing will be greatly reduced and consumers will see higher fares on many routes.
At the same time, I just don’t see the business case for another bailout. Norwegian was in bad shape before the pandemic and its financial issues now appear insurmountable considering that reported virus cases are surging against on both side of the Atlantic.
image: Norwegian Air
Just seems like they’re riding the tailwind from the vaccine news like the rest of the industry.
Agreed
https://amp.ft.com/content/48400214-6caf-4d88-b145-75a3cead2b23
It’s very sad to hear the larger carriers are rejoicing at the possible demise of Norwegian. If the real truth was to be printed people would realise that this is far more than an airline it’s a family and friend to those who are employed there, I hope that Norwegian can work their magic and produce one more trick to give these airlines a true run for their money it’s a great product that should survive
Are they all cheering for TAP to fail too? The last dozen or so cheapest non-Paris TATL fares I’ve run into were all on TAP, not Norwegian.
If TAP adjusts their prices upward as well, I hope United reflects that in their mileage earning. Right now you’d be lucky to find a fare class that credits anything at all.
One way fares are good for students. I remember having to search for ways to get to Europe because cheap round trip fares did not allow long trips, like one semester. The challenge was to get to Europe then for Christmas, I could buy a round trip to the US for a 3 or 4 week stay. The hunt for a one way in June.
So the competition cackle with glee at the prospect of the imminent demise of Norwegian and the ensuing ability to jack up prices on the customer? Lovely.
Norwegian clearly has shown that there is strong demand for low cost airline trans-Atlantic travel, may all airlines be aware to serve this target market with or without Norwegian. I hope Norwegian survives, it has great service and has allowed me to travel more often to and around Europe for the past several years , so thanks to you, Norwegian Air!
The stock market rally (airline stocks included) has nothing to do with Norwegian collapsing and everything to do with Covid vaccination trial results. Stick to talking about lounges and first class seats
“Nothing” is a strong and presumptive word. Also an incorrect assessment of the situation…
Also a tad presumptive yourself to assume a causal relationship between these two events, no?
We have always used Norwegian to fly to spain and have found them to be a very good price.
They have plenty of leg room and you are not cramped.
I do hope they do not go under
Where were you seeing “competitors rejoicing?”