iflyjetz

Boeing has done that in order to keep a single type rating for 737s. If Boeing did the right thing - build a new plane to replace the 757/767 rather than continue to stretch the 737 in order to fill the gap, the new plane would require a different type rating (let's call it a 797 for the sake of this discussion). A new aircraft type costs airlines a bunch of money in training costs. And then the pilots would only be able to fly either the 737 or 797. Pilots wouldn't be able to go back and forth between the two aircraft types.

I've discussed with other pilots that Boeing has kept the 737 alive well past its 'best by date' for more than a few years. The model needs to be retired and Boeing needs to go with a clean sheet design. If you have a candid conversation with any airline pilot, almost all would agree that it's time to retire the 737. Well, maybe Southwest pilots think it's OK to keep the 737 going.

oliver2002

In any case, Norwegian doesn't own the 737 it flies, they are all leased. The leasing companies will insist on lease payments regardless as their cash is blocked. NAS can fight with Boeing for compensation, I'm sure they already have enough practice when their B788 fleet was grounded over and over. However in that case they probably used the Boeing Gold MRO package deal they had signed as a launch customer.

iflyjetz

Well, Norwegian really does own their planes. They lease their planes from Arctic Aviation Asset Ltd. Arctic Aviation Asset Ltd is wholly owned by Norwegian Air.
If you click on the Assets and Financing tab, you'll be able to confirm this: https://www.norwegian.com/us/about/c...ate-structure/

4sallypat

Agreed the 737 should have been retired and a new clean design should have come out to avoid having to put on "add on software" to compensate for the better fuel efficient and larger engine they just slapped onto the existing airframe.

The MAX design has taken the good name of the legacy 737 and trashed it.

iahphx

I've always assumed that Norwegian's finances were now OK through summer, but the continued grounding of the MAX has got to hurt. I've read this is costing Norwegian $1.5 million/day -- money they definitely don't have. Honestly, I think it's a miracle they're still flying: they have a horrible transatlantic business plan that's been hurt further by some very bad airplane luck (first the engine issue and now this MAX problem). I'm sure they're going to quickly get out of crazy places like Newburgh but it's not like flying from the major airports is going to help much. Logic tells me they've got about a year left, but who knows.

iahphx

duplicate

Agneisse

I have a flight booked on them at the end of the month (and a backup Avios option) - really hoping they make it through the summer.

oliver2002

The max grounding can be claimed from Boeing, so I wouldn't factor this into their business plans. Also the ma fiasco can be used to cancel flights that didn't sell well... add to that the WOW bk, which takes out one of the direct competitors in the TATL market.

iflyjetz

The question is how much of the ~$330M Norwegian raised was used to cure bond defaults. I thought I had read that Norwegian was going to use a decent chunk of that money to pay down debts. We won't know until the Q1 conference call near the end of April.
$1.5M/day sounds correct. They're doing some wet leases as equipment substitutions - that's additional cost to Norwegian.

American and Southwest announced this morning that they're taking the Max off of their schedule through early June. The word I've gotten is that the Max fix is going to be harder than initially anticipated.

Quote:

Originally Posted by oliver2002

The max grounding can be claimed from Boeing, so I wouldn't factor this into their business plans. Also the ma fiasco can be used to cancel flights that didn't sell well... add to that the WOW bk, which takes out one of the direct competitors in the TATL market.

While Norwegian will likely be reimbursed from Boeing, we don't know what form those credits will take. If they're credits toward future purchases - which seems to be what Boeing has favored in the past - that won't do Norwegian any good. Norwegian needs cash and doing yet another secondary stock offering doesn't seem very viable at the current price of their stock.

The fact that Norwegian's CEO Bjorn Kjos flew out to Seattle to have a face to face with Boeing execs smacks of desperation in that he's trying to get Boeing to do something that they're likely not contractually required to do. It also indicates that Norwegian isn't happy with the current settlement terms that has been offered by Boeing.

The bottom line with Norwegian is that they're just a larger version of WoW. Both WoW and Norwegian have/are selling tickets at below their cost. Eventually Norwegian will run out of investor money to subsidize the cheap ticket prices and will go out of business like so many TATL discount carriers before them.

hughw

All other things being equal the WoW bankruptcy can only help drive business to Norwegian that they might not already have had...full planes = happy airline

iflyjetz

Yes, losing money on every ticket sold but they'll make it up with volume. Works until they run out of money.

Norwegian's March load factor was 85.4% so there's not a whole lot of extra seats to sell. Of course their yield fell 4% year over year so they continue to sell tickets below cost. They have to raise ticket prices. Considerably.

oliver2002

NAS has plenty of experience in milking Boeing for money... when the B788s were out of service in 2013 they wetleased a ton of aircraft on Boeings account. The current engine checks are on happening the same way. I'm pretty certain the max fiasco is not hurting Norwegian. While the Wow BK has provided relief, the legacy carriers are desparate to fill the newly purchase longhaul widebodies and have introduced basic fares to match DY & co. That will hurt in S19. Also inside Europe the legacies are fighting FR and DY tooth and nail, so that still provides for cash flow but doesn't earn much. That said I doubt they are selling below cost.

iflyjetz

They have had to do a capital raise in both 2018 and 2019. In 2019, they violated bond covenants. They have most of their aircraft fleet actively for sale.
In 2018, they had a net loss of NOK 1.454B.
In 2017, they had a net loss of NOK 1.794B.

I'm not sure how you figure they're not selling tickets below cost. Even if you use questionable accounting, they still have losses. (Norwegian had to restate earnings a while back due to their accounting methods).

At the current ticket prices, Norwegian Air is not a sustainable business model. They ran out of money earlier this year and the only thing that 'saved' them was a massively dilutive secondary stock offering.

iahphx

While Boeing has some incentive to keep airlines like WN and AA happy, I'm not sure what incentive they have to keep Norwegian happy -- basically, to go above and beyond what they're contractually obligated to do. I don't think there's anyone in the sector who would bet on Norwegian being in business a couple years from now. So their current "happiness" probably isn't worth much to Boeing at the moment.

oliver2002

The order book of Norwegian with Boeing is quite substantial.