May 20, 2013
Norwegian's CEO Bjorn Kjos has a clear vision: “You have to be a niche player or a global player.” Quite deliberately, he has decided his airline will be—both.
The carrier is not only Europe's fastest-growing low-cost carrier, it is also entering another stage of its development, one that will be crucial for its long-term future. Norwegian will become the first of the current generation of European LCCs to enter the long-haul market on May 30 with the launch of services to New York and Bangkok. Both cities will be served from Oslo and Stockholm. Several additional routes are to follow soon, among them Fort Lauderdale, Fla., from Stockholm and Copenhagen, in the fall. And Kjos is convinced Norwegian will not remain alone: “We will be the first to build up a long-haul low-cost carrier in Europe, but there will be plenty of them around, just wait and see,” he tells Aviation Week in his Oslo office.
Many have tried this approach, but fell short. Freddy Laker's famous Skytrain, an early predecessor of today's airlines, failed in the 1982. More recent examples include Oasis Hongkong and Air Asia X—Oasis has shut down and the Malaysian carrier has curtailed its long-haul network. “I have never actually understood how Air Asia X could think of flying long-haul low-cost using an Airbus A340,” Kjos says. “It is as stupid as for a short-haul LCC to fly MD-80s. It does not work because it is way too expensive.”
Ironically, Norwegian is forced to launch long-haul service using a wet-lease A340 itself after Boeing delayed delivery of Norwegian's first widebodies. But that is only an interim fix. Kjos believes the defining factor will be the Boeing 787. Norwegian will take the first of eight on firm order at the end of June. “The 787 will be incredibly good in terms of fuel burn and maintenance so we will have extremely low-costs.”
Norwegian plans to operate its 787-8s in a 291-seat configuration. There will be 37 premium seats up-front featuring a 42-in. pitch, and the economy-class will offer the industry-standard 31 in.
Norwegian will need a healthy cost advantage because shifting a larger part of revenues is an idea other airlines have had. Many players believe they should aim for greater exposure on long-haul to reduce their dependence on the weak intra-European market. Of course, Kjos has a slightly different view: “Short-haul is not difficult, that is where we earn our money. You just have to run a very tight ship.”
The grand plan began with Kjos—who turned a failing airline into one of Europe's most promising carriers—and he continues to hold the reins. Once a fighter pilot in the Norwegian air force and later a lawyer, Kjos was involved in rewriting the business model for Norwegian's predecessor, which was a regional feeder for SAS Scandinavian Airlines. When he did not find investors, he put his own money into the airline and became its CEO. Kjos is still a significant minority shareholder. Because he is so soft-spoken, some may tend to underestimate him—but not those with whom he has done business. He is a tough negotiator, both with suppliers and unions, and has a strong focus on cost control.