BBC: Norwegian and IAG/BA

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Old Feb 13, 18, 11:28 pm
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BBC: Norwegian and IAG/BA

Interesting article around Norwegian’s launch of new route to South America. Lots of reference to IAG and BA and how they have responded.

http://www.bbc.co.uk/news/business-4304955
On Wednesday, the first ever budget flight from London to South America departs from Gatwick airport.

Fares on the 14-hour Norwegian Air Shuttle flight to Buenos Aires start from £259 one-way.

The seats are tightly packed and food and luggage cost extra, but the no-frills model of flying, so well established on short-haul routes, is becoming increasingly common on intercontinental flights.

A new breed of low-cost carriers such as Norwegian, Wow, and Primera are taking on the old guard such as British Airways and Air France-KLM in the skies above the Atlantic.


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Old Feb 13, 18, 11:39 pm
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BA are responding, specifically, with densified 777s to ensure that they can match Norwegian on price. The message to Norwegian is, you're not going to make money on our patch. Elsewhere, IAG have Level. There are interesting times ahead!
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Old Feb 14, 18, 12:13 am
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Originally Posted by TedToToe View Post
...densified...
The word that strikes fear in the heart of every traveller...
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Old Feb 14, 18, 12:51 am
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Donít worry though Alex says BA is still a premium airline.
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Old Feb 14, 18, 12:58 am
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Slightly off topic, but I'm slightly confused here as I saw a Norwegian 787 at EZE last month. Was the route not already operational?
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Old Feb 14, 18, 1:30 am
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Originally Posted by hartwith View Post
.... I'm slightly confused here as I saw a Norwegian 787 at EZE last month....
Could be from another base.
IMHO Norwegian have too many 3-3-3 economy seats that are all the same on the B789, have an extra legroom section and a 2-4-2 section for extra revenues. There are many PAX who are too tall and broad shouldered for smallest pitch narrow seat hell.
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Old Feb 14, 18, 2:36 am
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The problem BA have is the usual one, it's much more difficult to stoop into low cost from a premium positioning than it is for Norwegian to delight and astound with low fares and slightly better than expected service levels. And because Cruz comes from a low cost background, he doesn't instinctively understand "premium", which fundamentally is about packaging a commodity payload with high perceived value extras and selling the bundle for more than the sum of the parts. As soon as you strip the extras back, you're in a relentless dogfight with very difficult and determined competition. And that's the trap BA seem to be falling into, as I've said before they get stuck in the middle between premium and low cost which is the worst possible positioning.

I'd back IAG in this particular fight though - I don't think Norwegian are dealing with rapid expansion very well and they could easily overreach and collapse. But in fighting them off on a low cost basis, BA and IAG will devalue their own offer irreversibly.
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Old Feb 14, 18, 2:43 am
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Interesting times, indeed, in the apocryphal chinese curse sense.

In the mid to longer term I'd be worried about whether Norwegian stays the course, leaving many passengers with the only option of low-cost hell but at legacy airline premium prices.
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Old Feb 14, 18, 3:34 am
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I bet Level never actually gets it's own AOC.

Norwegian is bleeding cash and their unit revenues are down while their unit costs are up. It's great for passenger as they are putting downward pressure on fares, but IAG is making money elsewhere and can just lose a little on those routes. But I just don't see how Norwegian survives much longer. I'd bet they survive this winter, but they are going to come to a cash crunch at some point in the not too distant future and just not be able to pay to keep on operating. (could possibly be extended by leasing out some aircraft and cutting capacity)

When that happens, BA keeps it's densified 777 but with higher yields and "Level" takes of its mask and reveals to the world they were just IB all along and then get reconfigured to go into IB branded service.
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Old Feb 14, 18, 3:49 am
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Originally Posted by LupineChemist View Post
I bet Level never actually gets it's own AOC.

Norwegian is bleeding cash and their unit revenues are down while their unit costs are up. It's great for passenger as they are putting downward pressure on fares, but IAG is making money elsewhere and can just lose a little on those routes. But I just don't see how Norwegian survives much longer. I'd bet they survive this winter, but they are going to come to a cash crunch at some point in the not too distant future and just not be able to pay to keep on operating. (could possibly be extended by leasing out some aircraft and cutting capacity)

When that happens, BA keeps it's densified 777 but with higher yields and "Level" takes of its mask and reveals to the world they were just IB all along and then get reconfigured to go into IB branded service.
Undoubtedly a possibility, but by no means a certainty.

I wouldn't be surprised if in 10 years' time Norwegian is one of the main players in the industry and highly successful. I also wouldn't be surprised if in 10 years' time it was long gone. (As you can tell, I'm not a betting man )
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Old Feb 14, 18, 4:14 am
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Originally Posted by LupineChemist View Post
I bet Level never actually gets it's own AOC.

Norwegian is bleeding cash and their unit revenues are down while their unit costs are up. It's great for passenger as they are putting downward pressure on fares, but IAG is making money elsewhere and can just lose a little on those routes. But I just don't see how Norwegian survives much longer. I'd bet they survive this winter, but they are going to come to a cash crunch at some point in the not too distant future and just not be able to pay to keep on operating. (could possibly be extended by leasing out some aircraft and cutting capacity)
Of course none of the gushing press articles about Norwegian ever mention its loses, especially in the LH subsidiary. Journalists aren't exactly renounced for their financial literacy, the socialist comrades at the BBC especially. All bubbles pop eventually, Bitcoin, London house prices, and Norwegian....
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Old Feb 14, 18, 4:18 am
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Originally Posted by Worcester View Post
Donít worry though Alex says BA is still a premium airline.
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Old Feb 14, 18, 5:30 am
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Interestingly, Norwegian have recently moved 'ownership' of their flight from DY#### - "Norwegian Air Shuttle ASA" to DI#### - "Norwegian Airlines UK".
is this a financial move?
Also they are seeing the Trent 1000 issue on their 787s, having to bring in replacement aircraft
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Old Feb 14, 18, 5:55 am
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Norwegian are going to start operating a domestic network in Argentina this year. Which means they're shrewder than I thought or have totally lost the plot!!,
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Old Feb 14, 18, 5:55 am
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Originally Posted by AlanA View Post
Interestingly, Norwegian have recently moved 'ownership' of their flight from DY#### - "Norwegian Air Shuttle ASA" to DI#### - "Norwegian Airlines UK".
is this a financial move?
I suspect it's more of an insurance move against potential regulatory changes / market access rules resulting from Brexit.
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