Norwegian attempts to repeat airline history

Cantillon: Insurgent hopes to prove low fares can deliver profit on transatlantic routes

Norwegian: the Ryanair of transatlantic flights? Photograph: Chris Ratcliffe/Bloomberg

Norwegian: the Ryanair of transatlantic flights? Photograph: Chris Ratcliffe/Bloomberg

 

Willie Walsh, the Irish chief executive of Aer Lingus parent IAG Group, came out swinging Friday as he reported improved profitability at the airline.

Aer Lingus is about to face more or less direct competition on its key transatlantic routes with the announcement from Norwegian Air International that it is launching 24 flights a week during the summer season from Dublin, Cork, Shannon and Belfast to the United States’ east coast. Mr Walsh is sceptical, claiming the fares Norwegian is offering – as low as €69 one way – are simply a stunt and not the building block of a viable business.

“The fares that they’ve launched are clearly just designed to get some headline media coverage. They’re not sustainable,” said Walsh, whose IAG also runs British Airways and Iberia.

And Walsh could not avoid having a dig at his new competition, noting that “the difference between Norwegian and us is we’re profitable”.

‘Mirage’

Of course the advent of competition and dire warnings that cheap fares are nothing but a chimera are nothing new in the airline world. Back in 1992, ahead of the advent of the single market and the open competition it promised for airlines, the then British Midland chairman Michael Bishop warned the “prospect of dramatically lower air fares remains, at this stage, no more than a mirage”.

He was speaking as the industry battled losses of $9 billion in the opening years of the 1990s, more than erasing profits through the whole of the previous decade.

Sir Adam Thompson, head of the collapsed British Caledonian airline, caught the mood rather colourfully: “If you have to tighten your belt, you are in a recession; if you have no belt to tighten, you are in a slump; and if your trousers are around your ankles, you are in the airline industry.”

Of course, we now know that a young Ryanair was just about to capitalise on the new era of competition to alter fundamentally the landscape of air travel with cheap fares and no-frills flights while still making a tidy profit.

Who’s to say Norwegian Air International cannot replicate that success on the transatlantic routes?

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