Norwegian Air Shuttle Announcement of New Flights: A Threat to Commercial Aviation in the United States?

This Boeing 787-800 “Dreamliner” aircraft was being prepared to operate as flight 942 by Norwegian Air Shuttle to Copenhagen on a gloomy day at Oslo Airport, Gardermoen. Photograph by FlyerTalk member JamesBond_ppk. Click on the photograph for a trip report written by JamesBond_ppk.

An announcement from Norwegian Air Shuttle that the airline will launch service between Gatwick Airport south of London and three destinations located in the United States as of July of 2014 using Boeing 787 “Dreamliner” aircraft has members of the Air Line Pilots Association, International concerned that the flights present a threat to the aviation industry in the United States.

According to FlyerTalk member Swiss Tony, a seat in the economy class cabin on a round-trip flight to be operated by Norwegian Air Shuttle to New York will cost as little as £300.00 — equivalent to approximately $492.00 — including all taxes and fees; whereas a seat in the premium class cabin starts at £1,200.00 or approximately $1,966.00…

…and this alleged undercutting of carriers based in the United States by as much as 50 percent on comparable routes between London and New York, Los Angeles and Fort Lauderdale is what concerns the Air Line Pilots Association, International.

“What is it going to take to wake U.S. policymakers up to the fact that our nation’s aviation industry is competing on a very un-level playing field with state-owned and some other airlines?” an article posted at the Pilot Partisan weblog asks. “Today’s announcement by Norwegian Air Shuttle (NAS) underscores the need to recognize the unfair advantages used by some foreign airlines to take markets from U.S. airlines. It’s time for the U.S. government to step in and level the playing field.”

Could carriers based in the United Kingdom be similarly threatened — especially when FlyerTalk member Raffles claims that the taxes for a similar flight on British Airways to New York when redeeming Avios frequent flier loyalty program points is £360.00?

According to the aforementioned article, Norwegian Air Shuttle is able to take advantage of loopholes which are currently unavailable to airlines based in the United States — including registering their fleet of long-haul aircraft in Ireland while hiring flight crew personnel based in Thailand who will reportedly work under Singaporean contracts.

The headquarters of Norwegian Air Shuttle — the third-largest low-cost carrier in Europe — is based in Fornebu, Norway.

The article argues that “While passengers riding NAS might enjoy cheaper fares in the short-term, the unfair competition will drive down revenue at American carriers. This potential race to the bottom could ultimately harm our airline industry and put quality U.S. jobs at risk. U.S. airlines contribute more than $1 trillion to the U.S. economy and nearly 10 million jobs. Their health and success is a major driver for economic growth.”

Perhaps — but FlyerTalk member HIDDY counters that “Ryanair would already be doing it if it was viable. It won’t last.” FlyerTalk member callum9999 argues that the business models of Norwegian Air Shuttle and Ryanair may be similar but are not the same.

I believe that while the concern of a threat to the commercial aviation industry in the United States by the Air Line Pilots Association, International may be justified and credible, could this possibly be a comparison similar to the ones between apples and oranges? Other than cost, there are many other factors which can affect the preference of one flight over another by a customer: seats, amenities, schedules and service, to name a few…

…and there is nothing stopping a carrier based in the United States from launching a competing flight which may lose money temporarily in an attempt to “kill” off the threat — at least as far as I can tell. It is certainly not unprecedented in the domestic market in the United States, with examples too numerous to mention here.

Is there room for transatlantic service operated by low-cost carriers without posing a significant threat to the established legacy carriers currently operating transatlantic routes — or do the legacy airlines have a legitimate concern? Is it possible that there is a market of passengers who currently do not patronize the airlines currently operating transatlantic flights but would take advantage of the service to be offered by Norwegian Air Shuttle? Should there be a policy by the government of the United States to prevent “a race to the bottom in the international air travel market” and create a level playing field for commercial airlines based in the United States, as called upon by the Air Line Pilots Association, International?

What are your thoughts?

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Comments (Showing 20 of 22)

  • hencjo at 2:24am October 18, 2013

    Norwegian is not state-owned, but privately owned and publically traded.(Norwegian Stock Exchange: NAS)

  • Kevincm at 6:50am October 18, 2013

    It would help if the legacy airlines who are moaning out loud take a good look at their products and seeing how they could innovate whilst reducing costs.

    However, we live in a period of a free market and freedom of choice. Because Gobalisation is just that – applies GLOBALLY rather than regionally. In addition, there is the existence of open skies agreements which allow exactly for this

    If sanctions are imposed, then we have protectionism. Which is rather rich to put it blunt, and would hope the EU retaliates in kind.

    Or is competition fine.. as long as its one countries airlines who have the competition?

    Put it like this, good luck to NAS to see if they can make this work – their numbers say it can… I’ll be interested to see if they can expand their service. Because at the moment they’re adding 2000 seats a week.

    Add more planes, and then make the legacies sweat…

    • Brian Cohen at 8:42am October 18, 2013

      Well said, Kevincm. I agree: let the global free market determine and sort out which players deserve to compete. However, what if one country blatantly practices protectionism unfairly against foreign carriers — resulting in a supposedly unfair advantage against the product or service provided by a company in another country where protectionism is not in effect? Would the Air Line Pilots Association, International have a point? What course of action should be taken, if any?

  • BearX220 at 11:15am October 18, 2013

    There has never yet been a successful intercontinental LCC, from the Laker SkyTrain to Highland Express to Oasis Hong Kong. Hard to believe NAS knows something new about cracking the formula.

    That said, if US commercial aviation interests spent as much energy competing and innovating and raising service standards instead of whining about the unfairness of the world and everybody else’s imagined advantages, they’d be unassailable. Most US airlines are last-resort choices for overseas flights, and NAS-type challenges are not the reason.

  • scnzzz at 11:33am October 18, 2013

    Truth be told, I’m not convinced a 2x weekly service to such O/D powerhouses as FLL and OAK (from ARN, I think) are really going to hurt legacies. The leisure, price-driven travelers on these flights are not making or breaking DL, AA, UA etc. The money is in paid J and F, and in cargo. The former group isn’t going to move to NAS. The latter is largely tied up in contracts, and I can’t see the big customers there moving to a not-so-every-other-day service….

  • WeAreALPA at 11:41am October 18, 2013

    Norwegian Air Shuttle’s proposed routes from Gatwick are clearly a threat to US airline jobs. While travelers who fly frequently may assign more weight to other factors (schedule, loyalty programs, etc.), the largest factor in consumer flight selection is still cost. Even for those who do give higher priority to other factors will have to consider whether their preference is worth a 50% cost-savings.

    Furthermore, U.S. carriers have to make money; they cannot simply slash their prices to compete with such low fares for an indefinite amount of time. Remember, this is an industry that is just recovering from the global recessions, volcanic ash, massive spike in fuel costs and terrorism of the last decade. In 2012, the U.S. airline industry made only 37 cents per passenger – an incredibly small amount, but yet the industry’s highest profit since 2000. U.S. airlines are not in a position to fight a costly price war with an airline whose business model shouldn’t be permitted to operate on these routes in the first place.

    There may be a market for a low-cost, trans-Atlantic carrier, but if it exists it needs to be on a level playing field with the companies already competing there.

    For more, please visit our level the playing field page: http://www.alpa.org/ALPADeptInfoPages/Departments/CommunicationsDepartment/LevelingthePlayingField/tabid/7048/Default.aspx

  • kburges at 12:16pm October 18, 2013

    The ALPA are whiners, what about the nickel and diming on our carriers, reminds me of LCC & why cant we improve our product as I agree with Bear X220 “Most US airlines are last-resort choices for overseas flights”

    I know I actively seek out foreign carriers when flying abroad and would do so if they were allowed to fly domestic.

    quit whining and compete.

  • SSteegar at 1:17pm October 18, 2013

    Like FlyerTalk member HIDDY, I would be surprised to see this last at this price. It’s true, the taxes & fees RT from LHR to New York on a Coach seat are currently listed as $239. Farely.com estimates fuel at $240.

    That leaves $13 for labor wages, plus other crew costs (hotel, transit and per diem), plus profit! Obviously NAS has different numbers, but I wonder where the magic is.

  • cvarming at 8:53pm October 18, 2013

    Look at NAS prices on their existing routes. The super low fares is a publicity gimmick.

  • busfan at 5:50am October 19, 2013

    “…registering their fleet of long-haul aircraft in Ireland while hiring flight crew personnel based in Thailand who will reportedly work under Singaporean contracts.”

    umm… no thanks.

  • usafwso at 12:44pm October 19, 2013

    Must U.S. carriers simply SUCK! It is always my point to select a foreign carrier when traveling internationally to and from the U.S. Domestic carries lost my business years ago.

  • Josh Davis at 2:14pm October 19, 2013

    ‘Leveling the Playing Field’ should involve allowing US carriers to operate in the same way as (in this case) NAS – let them register their aircraft in Ireland and hire Thai crew if they want. Shouldn’t try to achieve parity by forcing the US’s restrictive laws on others, should at least try for something like a two-way process…

  • Minos at 8:06am October 20, 2013

    So while thy are at it, ALPA wants to restrict Boeing from selling ultra-efficient aircraft abroad?
    Pathetic

  • Cannonball Run at 11:19am October 20, 2013

    Just hoping LAX is on the list. I would love to see this market with some competition! And…. it won’t last – Just ask Freddie

  • lsed at 1:02pm October 20, 2013

    I hate flying Y and LCCs are even worse. But I’ve flown Norwegian twice and both times I was very impressed with the airline.

  • LayoverJunkie at 6:14pm October 20, 2013

    ALPA wants to stop sales of aircraft? Hardly the case, MInos. I do have the right to expect my government to work for ME, and not on behalf of foreigners. I think that Emirates and NAS should have no trouble finding financing without help from the US government, since they’re such model enterprises, and not state-owned coddles, nest-ce pas?

    We are all perfectly happy to compete in a FAIR market where no one is chiseling away at the international treaties to gain a competitive advantage.

    Usually, that refers to the carriers from the Persian Gulf. They don’t report earnings, don’t allow unions, don’t pay taxes, don’t have to worry about little details like the price of oil. They are not legitimate businesses, they are de facto departments of their home governments.

    In the case of NAS, you have a cut rate operator from Norway with employees from Thailand working under a Singaporean labor contract and an Irish operating certificate flying between two OTHER nations, the UK and the USA.

    And which entity FINANCED the NAS fleet growth? You guessed it, the United States Export-Import Bank. Your tax dollars working against your interests.

    Who exactly does the Open Skies treaty exist to serve, if not the respective signatories? And when will Congress decide that we have lost enough jobs to these predatory foreign carriers?

  • Minos at 10:22pm October 20, 2013

    This seems like a pretty pathetic story and your explanation does not make any sense.

    1) Hiring of foreign nationals. All the airlines do that. United Airlines has a crew base in Tokyo Narita. Ever heard of that? And guess what? Employees from that base can fly all over the US if they wished so.

    1b) You seem so much attached to the idea of US workers working on US planes. Do you know who does the maintenance for United Airlines planes? Chinese people with no union whatsoever. US Airways? In Central America.

    2) Registration of the plane abroad. Again done everywhere in the world. Expecialy aircraft that are leased. United Airlines was perfectly OK to wet lease some Aer Lingus aircraft a couple of years ago with Irish crews.

    3) EXIM ban Yeah sure someone drank the koolaid. EXIM financed is done so that Boeing can sell these pathetic liners. Your tax dollars at work indeed so that people can work (and strike) in Seattle. Tell me how you would sell planes to Ethiopia, Marocco and the like without the EXIM bank. Plus if US airlines were so smart, they would purchase from Airbus so as to get exactly the same financing help from their European counterparts. When Delta buys new Airbus, Delta does not complain it seems about getting financing subsidies from the European ECA bank…

    4) Fair and open market are touted all over the place especially when it comes to protecting the US interest. Otherwise these great ideas of fairness goes to the toilet…

    5) Finally… middle East carriers and the price of oil. OK. Got it. You have no idea what you are talking about. Do you think Emirates ferries its jetfuel to Auckland from the DXB for the return trip? We have heard that one so many times…do yourself a favor and stop relaying this BS. (btw you know there is almost no oil left in Dubai?)

    6) Open skies agreement are usually there to serve the public. Not necessarily a bunch of unionized pilots, whining at the competition which is eroding their $200,000 salaries. Competitive advantage of DL was certainly lost when ALPA basically forced DL out of purchasing new 777 that could have been helpful back then to contain some of these new competitors

  • londonbus at 3:19pm October 27, 2013

    Let’s see how long this lasts.

    Air Asia X couldn’t make the European routes stack up. I’m not convinced that Ultra Low Cost works beyond short haul….

  • Firewind at 7:42am October 29, 2013

    Sounds like an editor or a key person in the ALPAI leadership has a burr under his saddle.

    I manage two businesses, my business and me. I think of pilots as being on my side of the table in most dealings with the airlines. Here they are simply not on my side. Fare price supports in whatever forms – and many are already extant – are at my expense.

    And it always irks me when the red herring of state-owned and state-subsidized airlines giving unfair advantage is invoked. U.S. airlines, actually all airlines, are substantially subsidized by the U.S. government through generous overhead granted Boeing in defense contracts and tax expenditures. And have you ever heard why every Boeing commercial airline plane’s first flight is to Canada? Tax evasion. Even that.

    Both definitions below apply — the first presently and the second, by analogy, what this guy is seeking…

    https://www.google.com/search?q=canard&oq=canard&aqs=chrome..69i57.1945j0j1&sourceid=chrome&espv=210&es_sm=93&ie=UTF-8

  • Firewind at 8:02am October 29, 2013

    To add a suggestion to MY complaint…

    ALPAI would do much better to align with customers in pushing back against egregious taxes and fees, especially the UK’s, which put immediate, significant (and targetable) downward pressure on prices, and thus APAI’s and my pieces on the table. To date, these grow without restraint or organized effective opposition.

    We should use each other. Together, we can be more effective than what will just be perceived as ALPAI’s – or this guy’s – self-serving, unsupported and unaligned pout.

  • Firewind at 10:14am October 29, 2013

    Just one more thing (I think). The “I” in ALPAI jumps out in this instance. “International”? Really? When it’s the U.S. airline industry that is supposedly the abused to the advantage of “foreign” airlines? Back to the top re “burr under his saddle,” it seems as though someone or a cabal within ALPA”I” is abusing the organization. It can easily be suggested that this little campaign was rolled out before it was ready for prime time within ALPA”I”. And, OK, this post isn’t my own work. It comes from a domestic – DL 757/767 – pilot friend.

  • Planetalker2013 at 1:32pm October 29, 2013

    Came out in the news in Norway today that a flight attendant earns $500 dollars a month in salary plus per diem. In addition they also earn a “bonus” of $50 for a twelve hour trip. To save money, they walk for almost an hour from Oslo airport to the nearest grocery store to buy food. Try that in January in 0 degree Fahrenheit and blowing snow.
    Oh well, at least we can save a few dollars on our airline tickets. Who cares about workers and their conditions. A modern sweat factory on the air. Rather spend a few more dollars and sleep well at night.

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