Chris Sloan, Senior Partner and Managing Editor of Airways Magazine, conducted this interview with Thomas Ramdahl, Norwegians’ current CCO on Saturday, February 3, 2018, in New York. This interview has been edited for brevity and grammar.
Mr. Thomas Ramdahl (born 1971) was Norwegian’s Director of Network Development and part of the company’s commercial management team since 2008, before becoming Chief Commercial Officer in 2014.
He has long and varied experience in the aviation industry and has previously worked for SAS and Braathens, where he held positions in Revenue Management, Route Management, and Charter. Mr. Ramdahl has a bachelor’s degree from the Norwegian School of Business (BI).
Courtesy of Norwegian Airlines.
AIRWAYS: It’s been 6 months since the launch of the 737 MAX routes from Providence, Hartford, and Stewart. Can we get a sense of how these are fairing? In terms of load factors what are the standout markets?
RAMDAHL: Of course, you have the seasonality difference in July. First, we had a late pre-sale because we didn’t know when the 737 MAX would be delivered. We were supposed to have it in May. And then things were put on hold after that. The Stewart routes have been performing throughout the winter as well up to expectations. The Irish routes, Shannon and Dublin, are really performing. Dublin is performing so well that we are increasing to double daily from the beginning of May. We’re removing one aircraft from the Edinburgh base to the Dublin base. I would say that both Shannon and Dublin have been our better routes.
What we also had in mind when we launched was with Scottish Government regarding the Airline Passenger Duty tax, which they have. Which is the same throughout the whole UK. And there were talks about cutting that APD tax in half. So from 83 pounds down to around 40 pounds which didn’t happen in 2017. We’ve done some reductions on the capacity from Edinburgh into Stewart and Providence. And also we are cutting Hartford completely. The APD tax is really hitting us quite hard on the low prices.
If you look at Providence, it’s more of a seasonal route. So next winter we will pull it a bit down during the winter but will keep on flying during the summer.
What are the load factors in the markets?
So during the start, I would say that most of the routes were in the nineties during the summer, and of course, you have lower loads during the winter. I’m not going into details of specific, which are probably better than the others, but you can imagine if you’re increasing on Dublin that that’s performing
Where’s the traffic stimulation coming from European versus the U.S. side?
It’s generated on both sides and it’s really much more point to point than on the bigger aircraft that we’re flying into London. And the natural part there is that we don’t have such a huge network into Edinburgh and Dublin from the European side, basically.
Why were these particular markets chosen where Norwegian doesn’t have the network feed on the Ireland and Scotland side?
We concentrated on the bigger areas within the British Islands as those are within the range of the 737 MAX. And of course, Dublin is a serious market. We had been speaking to Shannon and Edinburgh before looking at the point-to-point traffic and how much connecting traffic they have via London as well. We were looking at more on the point to point instead of a connecting network.
Give us a sense of how those customers are using the route vis-a-vis stopping at the destination versus self-connecting?
Since we’re mainly point-to-point it’s difficult to see if they’re coming in from others. I would say that they will probably be there may be 10-20 percent self-connecting because we see that throughout our own network. So it shouldn’t be any different from what you would probably see with somebody coming in with Ryanair aircraft into Dublin and self-connecting or coming in cars from Glasgow to Edinburgh.
As an example on Monday, they had people flying from wherever in the US into Philadelphia, taking a car up to the Stewart and waiting there for more than five hours to catch a flight into Edinburgh. They had people driving seven hours with their own car, parking at the airport and then flying out with Norwegian into Europe. So we certainly don’t market these fares seven hours out of Stewart, so people are finding this online such as on Kayak, and so on.
What expansion do you foresee on the 737 MAX North Atlantic routes?
Nothing I can announce about the MAX, but we’ll be exploring the possibility with the Airbus A321neo LR, which we will be getting in 2019. That has a longer range than the 737 MAX, so really we’ll be able to fly from Budapest, Prague, Berlin, with a full aircraft into Stewart and even other U.S. East Coast cities.
If you look at the Airbus A321neo LR, that’s a perfect aircraft operating between London and Washington where you probably need more frequency if you’re going to also attract the business market. So that aircraft will open up new possibilities in 2019.
I’ve never really considered Norweigan a business-oriented airline on long-haul. But now you’re looking at on the transatlantic LCC model and introducing a little bit more frequency even if you have to down-gauge the size of aircraft to have a bit more of appeal on a corporate level. Is that accurate?
Yeah, we do that on the Boeing 787 as well. So if you look at London Gatwick to JFK we’re flying twice daily, now. When we introduced the second day, we saw that we were more involved in the corporate market as well. So basically we are the first carrier out of London in the morning. So you depart between 6 & 6:30 am, you arrive at JFK at 9:00 a.m., and then quickly pass through customs. And if you’re only traveling with handbags, you are basically in Manhattan at around 10:15 am. And then you can catch our evening flight back to London, so you basically can round trip in a single day with meetings and go back again to London and wake up the morning after.
Have the new 737 MAX secondary market routes cannibalized JFK at all, or is there any overlap there for Stewart?
Not at all. A good thing about Stewart is they have a runway which is always open. So during the winter storm a couple of weeks ago we flew into Stewart and that was good for the customer. It’s an additional airport for the New York market.
And what about Boston and Providence. Do these markets cannibalize each other?
I think one of the problems with Providence is that you’re not able to sell it in Boston. So Providence is Providence, it’s not stealing from the Boston traffic at all.
Many established competitors and critics, decry the LCC long-haul mode. Yet IAG with Level, AF/KLM with Joon, and Lufthansa with Eurowings are playing in that field. Why is there such doubt that it will work, but at the same time there are countless new entrants?
I’d say that they see that it works, basically. That’s why they’re trying to launch their own brands within their own family. I would say that Level is the only true model that is similar to us. It seems that they now they take us seriously and see that we are filling up the aircraft with a certain kind of passenger that they haven’t been thinking. Whether or not the airline will work, I don’t know. My view on it is that they’re going to make it work because they need to have their own family airline competing against the big brother as well. If they only want the airline to come in one certain route, then it won’t work. That’s my opinion on it. They really need to be an airline that is competing against us and themselves.
Long haul LCC flying may be a hit with passengers, but it’s also been a hit to your bottom line. What does it take to make it profitable? The margins have yet to bear fruit.
When you’re when you’re wrapping up on adding nine aircraft (737 MAX) and three new destinations, there are costs with that. You will have cost to those aircraft way before you receive the plane. We need to train the crew as well with this new service.
I believe the strategy will bear fruit that this on a unit revenue basis that this is will be profitable. The ULCC long-haul flying can be a profitable venture.
With all the competition entering the market, How will Norwegian keep its first mover advantage?
You always try to find those big markets where the competition is not yet out there. They’re basically just following where we are. We are in Paris, they announced Paris now; we’re in Barcelona, they are going to announce they’re in Barcelona. I’m not surprised. But I think we will strive to use the competition and get better in our product service compared to the competition and we will try to find those good routes.
Initially Norwegian zigged where others zagged. Now, you are competing head-on against legacies in smaller and developing markets like Denver and Austin to London. What’s the criterion for launching like there? Do you find them underserved?
Those are two markets which we believe that they will not put service into Gatwick because they have that capacity in Heathrow. We try to find the gate and we try to reinvent what the competition will do.
Your cost base is lower at Gatwick. Can you speak to that in any detail?
No, when we start off bases and routes we do some deals with the airport but I can’t go into details about that. I would say that the traffic we generate is a good thing for the airport. We are the third largest carrier at Gatwick and then you have BA at number 2. We are number three in all traffic but by the end of 2018, I think we will be the largest long-haul carrier.
How, if any will Brexit impact your operations at Gatwick and the UK?
We have a UK LLC. I don’t see any problems around that as long as the UK and the U.S. government come to an agreement on their bilateral.
What do you say to those who say Norwegian and particularly NAI flaunts and exploits Open Skies? Why is Norwegian such a lightning rod for controversy?
Well, we’re just following what the Open Skies agreement is all about, and that is providing competition that’s good for everybody. We are the only carrier who is really doing something great with the Open Skies Agreement. I would say they’re set up to be a legacy, so that means their structure, which is the way things have been done before. It’s a new area, why shouldn’t we be able to do what we do in Europe but also the U.S.?
Can we get an update on the code-shares with competing LCC’s RyanAir and EasyJet? Is the RyanAir deal dead?
Basically, we were in discussions with both Ryanair and EasyJet on finding a way of cooperation. We came to an agreement with EasyJet, but we didn’t come to an agreement with Ryanair. So basically, EasyJet is selling and using a platform selling an EasyJet ticket and a Norwegian ticket with a connected product on top.
How is that working out for each side?
Well, it’s up and running. We see it giving us some traffic. But then again, we have that APD tax on a ticket that maybe shouldn’t have been taxed. But we are in discussions with the UK government to see how we are able to go around it. If you’re flying into Amsterdam, via London onward to New York, then the competition will be selling without the APD tax. We are not price-competitive at the moment, so we are in dialogue with the UK government that will make us be more competitive in price in the future.
NAA Norwegian Air Argentina just received its AOC and is set for a Summer launch. Argentina is by far the most expensive operating environment in Latin America, even as it liberalizes. How will Norwegian get this extensive new service to operate up to 72 domestic and 80 international routes to fit in the business model?
We will introduce our low-cost model in Argentina that will focus on doing the domestic launch first which at the moment is very regulated. The Argentinian authorities are looking at all the different sides of regulation at the moment. We hope that they will be more and more lenient in those areas in the future which they haven’t been before. It’s a huge country where there are lots of buses – people taking buses for 18 hours. We believe it’s a window of opportunity in Argentina and also within South America, so we will take it step by step going forward.
Are there other high priced near monopoly or duopoly countries ripe for your entry?
There might be, but I think at the moment we need to focus on the huge market that is Argentina. But if we look at Africa, it has so many low-cost carriers coming up so I think if you look at that but there are difficulties with the corruption part. Basically, it’s not that easy to survive. So I think you know the main thing has been to have it good with the authorities if you’re going to make it happen without paying anything. It’s important because corruption is not good for the industry.
Do you see a place for consolidation in Europe for the LCC’s?
I think you will see some consolidation in Europe. It’s a question of size. Either you’ll be bought up, do the buying, or be out of business in the future. Lufthansa, they’ve been buying up a lot. There are still question on a certain Italian airline. It’s difficult to say, but if you’re going to survive on your own you need to have a scale and you need to have more than one leg up to stay up.
Norwegian is much beloved by customers, but by investors not as much. What is Norwegian doing to increases its operating margins to gain on competitors Ryan, Wizz, and EasyJet?
From my perspective, we take care of the home markets with really good products and then also are focused on trying out new the markets where we see the greatest possibility. And if we think they’re not doing performing than we need to be quite fast to reschedule and find new ways of doing things. One really important thing for me is to have those aircraft up in the air. You’re not making any money having them sitting on the ground, utilization is crucial.
Can we get a sense of how the new Singapore and existing Bangkok routes are working? With Air Asia X, and perhaps eventually Scoot and Jetstar aggressively courting the same market, do you expect to continue expansion in Asia?
Asia is a huge market so I’m trying to find even more capacity coming into Bangkok but at the moment the airport is constrained. And also the other interesting destination Singapore is picking up. The combination of people self-connecting in Singapore and also it’s a good cargo business.