- MIAMI — Norwegian Air International received an early Christmas present from the US Department of Transportation, which granted a permit that allows the carrier to expand its US operations with direct service from Ireland to US cities.
NAI is headquartered in Dublin, Ireland, and will use US and EU-based flight crews on transatlantic flights. The issue had been pending with the DOT for nearly three years.
Thomas Ramdahl, Chief Commercial Official for Norwegian, told Airways in a recent interview in Oslo that the permit was required to enable the low-cost carrier to fulfill its ambition to be a global airline. “We want to tap into the European traffic routes throughout the world. With the Irish [air operator certificate] we can fly wherever we want from Europe, Asia, South America and South Africa into the US.” The legacy carriers control 80 percent of transatlantic traffic..
Thomas Ramdahl, Chief Commercial Official for Norwegian. (Credits: Norwegian)
Ramdahl was previously with Braathens and SAS, where he worked with revenue, route and charter management. He has been with Norwegian since 2008, working with the company’s commercial management team before becoming chief commercial officer in 2014.
“Norwegian is fully committed to growing its presence in the US market, and that includes creating more American jobs. Not only do we have more US-based cabin crew than any other foreign airline, we will soon also have more US-based pilots than any other foreign airline. Norwegian is simply creating more American jobs than any other non-American airline, and we will continue to do so, just as we promised we would,” said Norwegian Group CEO Bjørn Kjos in a statement.
While it was good news for Norwegian, US Airlines and unions representing pilots and flight attendants were not pleased with the decision that will allow a low-cost carrier to compete directly with legacy carriers for the lucrative international market. But in the end, DOT had no choice because turning down the permit would be in violation of an existing US-EU air transport agreement.
In its decision, the DOT stated, “We find that the clear weight of legal analysis in this case directs us to uphold the tentative findings and conclusions previously made.”
In anticipation of a favorable ruling, the carrier has been making plans to target specific US cities for expansion.
Last year, Norwegian announced plans for a pilot base in Ft. Lauderdale, but now that it has received its long-awaited DOT approval, it will add two more pilot bases in the US. By 2017, the carrier expects to add about 100 new American pilot and cabin crew jobs. When Norwegian announced in October that it would be hiring pilots in the US, it received nearly 400 applications for the few dozen positions available.
Norwegian currently operates a total of 45 routes in the US. New routes for 2017 include Oakland/San Francisco to Copenhagen; Los Angeles to Barcelona; New York/Newark to Barcelona; Ft. Lauderdale to Barcelona and Orlando to Paris.
In 1993, Norwegian started flights in Fokker 50s to the northeast coast of Norway in partnership with Braathens until it was purchased by SAS. The service to the northeast coast was then terminated, but Norwegian transitioned to Boeing 737s, going head to head with SAS on domestic routes in Norway.
Legacy carriers have focused primarily on premium passengers – business and first class – with almost no regard for those who fly in economy, he explained. “We are trying to keep the cost down and make the experience as good as possible.”
Not surprisingly, Ramdahl doesn’t see a business class product in favorable light. “You’re paying $5,000 for a seat. It’s a bad bed and not a good restaurant,” he said of the service. “For that money, you could get a good bed in a hotel and go to a great restaurant.”
Ramdahl acknowledges that upscale business products do have a certain “snob appeal” – people like to be first in line and be shown a certain amount of deference.
“We try to have a similar experience on the [premium] product, but it is not necessarily the porcelain or the glass that will drive the cost up,” Ramdahl said. “If you have porcelain, you have to have a washing facility. We try to make the experience as good as possible, but we are trying to keep the cost down.”
To some extent, the product was designed by trial and error: what works, what doesn’t work, what adds value and what costs more.
“It can always be better,” he said, of the premium cabin. “Night flights are always filled. So, it’s more on the day flights: what do we need to do to have that up sell or have the customer choose premium.”
The premium product on Norwegian is better than most seats in a premium economy cabin, he explained. The comfortably padded premium seats are 19 inches wide with a roomy 46- inch pitch. “We struggle with what category to put ourselves into.” The cost of one way ticket in the premium cabin is on average $550 said Ramdahl. “With that ticket, you will have everything included.”
There is some duty free shopping available onboard, depending on the route. But Ramdahl said it is not sufficient to compete with duty free shopping at places like the airport in Oslo.
The carrier anticipates adding nine Dreamliners, six 737-MAX aircraft and 17 737-900s in 2017. More than 30 million customers in 2016 will fly Norwegian in 2016. It currently operates more than 450 routes to 150 destinations.
Norwegian is nowhere near the top when it comes to ancillary revenue, despite the wide array of a la carte for comfort or convenience that allows passengers to click and pay on board via touchtone screens. In 2015, ancillary revenue accounted for 15 percent of overall revenue, or $430 million, according a report from IdeaWorksCompany.
“Ancillary revenue represents the safety net which determines whether low fares can exist with airline profitablility,” the report concludes.
“We need to look at having more ancillary produce you can make the customer choose to buy,” said Ramdahl.
The DOT ruling has opened a wide door for Norwegian to proceed with a fairly aggressive expansion plan within the US.
Norwegian is set to become the launch operator of the Boenig 737 MAX and it is the European launch customer for the type. At least four of these aircraft will be based in the New York and Boston areas. The new aircraft will operate transatlantic flights from the northeastern area of the US to parts of Europe not currently served.
“We are quite innovative in the way we think,” he said. Norwegian continues to add routes within the US, according to Ramdahl, eyeing additional service at Baltimore Washington International Airport and New York’s Stuart Airport. They also plan to increase frequencies to cities currently serviced by the airline.
Ramdahl said that Norwegian structures point to point services away from hub and spoke system. “If there is an economy to a direct route, we should do it. It’s always most important for the customer if we can do it for a low cost and make money.”
Norwegian Air does not worry that much about the competition from the legacy carriers because it has the advantage of being able to offer lower fares because of their cost structures. The legacy carriers also focus on business and first – not economy, which is where Norwegian has an advantage, Ramdahl believes.
“Who is flying more? That’s the economy cabin,” he said. “The business class stays the same. We are capturing a young market.”
Even so, Norwegian does not take anything for granted.
“Having competition will keep us on our toes, rather than standing on our heels,” Ramdahl told Airways. “It’s always important to think ‘how should we do this better’.”