Hard times for Norwegian
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This discussion will never end. Fact is LH lowcost worked :
“He’s proven, if not to everybody but certainly to us, that the market exists and the customer will embrace the business model.”
Wille Walsh
Two full takeover attempts were made by IAG, both were flatly denied as they “undervalued” the company. This is not flight deck chat, but information directly aimed and related to the financial markets.
Norwegian were badly let down by Boeing and Rolls/R with staggering costs as a consequence ,billions of kr. Never received a penny in compensation. Still haven't. Then covid hit, and here we are.
“He’s proven, if not to everybody but certainly to us, that the market exists and the customer will embrace the business model.”
Wille Walsh
Two full takeover attempts were made by IAG, both were flatly denied as they “undervalued” the company. This is not flight deck chat, but information directly aimed and related to the financial markets.
Norwegian were badly let down by Boeing and Rolls/R with staggering costs as a consequence ,billions of kr. Never received a penny in compensation. Still haven't. Then covid hit, and here we are.
Last edited by uncle-traveling-matt; 18th Dec 2020 at 13:28.
uncle-traveling-matt
“The customer will embrace the business model” is not the same thing as “Norwegian’s business model is financially viable“. What Willie was saying is that nobody was certain whether the punters would be keen on unbundling the Long Haul product. WW was already on record as saying that the model only worked with Level as they were able to get a quite frankly astonishingly cheap price for some end of line A330s. It was a quote more related to IAG and Level’s aspirations than a ringing endorsement of Norwegian’s attempts. In any case I’ve said it before but a market where hundred pound notes were being sold for £50 would be wildly popular but not particularly profitable!
Norwgian may or may not have been unlucky. It was their decision to order the Max just as it was their decision to opt for RR powered 787s with other providers available. If the model is not robust enough to be able to withstand shocks (and yes COVID is a rather big one but the point still stands) in an industry known to lurch from one shock to the next with alarming regularity then quite frankly the business model is fundamentally unsound and saying “we’ve been unlucky” is unwittingly a tacit admission of this fact.
“The customer will embrace the business model” is not the same thing as “Norwegian’s business model is financially viable“. What Willie was saying is that nobody was certain whether the punters would be keen on unbundling the Long Haul product. WW was already on record as saying that the model only worked with Level as they were able to get a quite frankly astonishingly cheap price for some end of line A330s. It was a quote more related to IAG and Level’s aspirations than a ringing endorsement of Norwegian’s attempts. In any case I’ve said it before but a market where hundred pound notes were being sold for £50 would be wildly popular but not particularly profitable!
Norwgian may or may not have been unlucky. It was their decision to order the Max just as it was their decision to opt for RR powered 787s with other providers available. If the model is not robust enough to be able to withstand shocks (and yes COVID is a rather big one but the point still stands) in an industry known to lurch from one shock to the next with alarming regularity then quite frankly the business model is fundamentally unsound and saying “we’ve been unlucky” is unwittingly a tacit admission of this fact.
Last edited by Plastic787; 18th Dec 2020 at 14:15.
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The maths form the 2019 Annual Report does not make much sense, but such is the ways of complex business models, based on the revenue per "head" the whole operation should move to the US. Of course we know this is smoke and mirrors. But looking at Spain (only SH) they did 34% more revenue with 17% less staff than the UK which perhaps reflects the impact of LH on the operation..
The LH operation has Never made a profit and the loss would have been more significant if the ground services and other resources were not shared between LH and SH.
The market for LC LH maybe does exist, but is not feasible when the debt ratio is more than 10 times the industry average.
Revenue Per country/Headcount
Norway 8,643.8 Headcount 2424
US 8,313. headcount 4 514
Spain 6,005.0 Headcount 1697
UK 4,458.1 Headcount 2026
Sweden 3,430.4 Headcount 733
Denmark 2,976 .6 Headcount 734
The LH operation has Never made a profit and the loss would have been more significant if the ground services and other resources were not shared between LH and SH.
The market for LC LH maybe does exist, but is not feasible when the debt ratio is more than 10 times the industry average.
Revenue Per country/Headcount
Norway 8,643.8 Headcount 2424
US 8,313. headcount 4 514
Spain 6,005.0 Headcount 1697
UK 4,458.1 Headcount 2026
Sweden 3,430.4 Headcount 733
Denmark 2,976 .6 Headcount 734
The board was still debating whether to keep the company’s long-haul routes or return to a Europe-only model. “We have discussed it on the board and ... will continue to do so going forward. but there is definitely no decision,” said Mr Schram.
Norwegian Chief Financial Officer Geir Karlsen told Reuters on Thursday that it plans to give assurances in the courts that it can get access to sufficient capital by the end of February but that the process could be drawn out further.
Justice Michael Quinn, presiding over Friday’s update, said that while it was a complex case that may not reach an outcome in time, the parties should not unduly assume it will be extended beyond the 100 days.
He also encouraged the examiner to share the company’s plans with lessors whose aircraft may be returned as a result as early as possible.
A lawyer representing some creditor lessors including Aercap and BOC Aviation complained that the information put before the court so far was “somewhat sparse”
Justice Michael Quinn, presiding over Friday’s update, said that while it was a complex case that may not reach an outcome in time, the parties should not unduly assume it will be extended beyond the 100 days.
He also encouraged the examiner to share the company’s plans with lessors whose aircraft may be returned as a result as early as possible.
A lawyer representing some creditor lessors including Aercap and BOC Aviation complained that the information put before the court so far was “somewhat sparse”
Last edited by Kirks gusset; 19th Dec 2020 at 08:53.
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Norwegian already knew the Irish Judgement would be recognised in Norway, it is possible the same case exists for Spain,
If they hold "assets" in Spain in the form of shares in the subsidiary company, it could possibly be looked at, although the process there tends to heavily favour the creditors and the success rate of "restructuring" is typically less than 10%
They already converted "crew service debts" to equity, quite what happens after the ERTE scheme ends 31st Jan is anyones guess, perhaps employees can move to Fogasa.
Spain is an important market for them, if they can keep this operation and the Norway home base, dump LH they may well survive.
If they hold "assets" in Spain in the form of shares in the subsidiary company, it could possibly be looked at, although the process there tends to heavily favour the creditors and the success rate of "restructuring" is typically less than 10%
They already converted "crew service debts" to equity, quite what happens after the ERTE scheme ends 31st Jan is anyones guess, perhaps employees can move to Fogasa.
Spain is an important market for them, if they can keep this operation and the Norway home base, dump LH they may well survive.
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On the contrary "we" are as much in dark as anyone else! but as they say "time spent on diagnosis is rarely wasted" . The facts of this restructure and the legal background can easily be found for those seeking them;
https://www.irishlegal.com/article/h...-planes-in-use
Been 11 months of false hope for many crews and suppliers, even the Irish Examiner is requesting the airline comes clean with the lease companies..
Like it, lump it,
https://www.irishlegal.com/article/h...-planes-in-use
Been 11 months of false hope for many crews and suppliers, even the Irish Examiner is requesting the airline comes clean with the lease companies..
Like it, lump it,
Last edited by Kirks gusset; 23rd Dec 2020 at 09:59.
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Vokes55
I know for a fact that Denver and Chicago to name two were massive loss makers, Singapore (not US obv but proves the point) was so successful it lasted a matter of months. The rest were marginally profitable in summer and a big drain in winter, similar to low fare long haul full stop. IAG took one look at the books and walked away saying “nah thanks”. That’s the reality.
I know for a fact that Denver and Chicago to name two were massive loss makers, Singapore (not US obv but proves the point) was so successful it lasted a matter of months. The rest were marginally profitable in summer and a big drain in winter, similar to low fare long haul full stop. IAG took one look at the books and walked away saying “nah thanks”. That’s the reality.
IAG did not walk away from Norwegian. IAG made two offers, and Kjos rejected them, foolishly believing them to be too low. It turns out the offers were significantly more than fair, and the rejection of them is what ultimately forced Kjos out of Norwegian (no...he did not retire of his own accord, he was asked to retire by the board and many of the other large shareholders). IAG's plan for Norwegian was not to operate it as a LCC, but more to position it as a mid-level type of carrier, similar to how it was operating Aer Lingus. The plan was for three levels of airlines, BA and Iberia being the full service, top end carriers, Aer Lingus and Norwegian to be mid level airlines with some long haul, with Level and/or Vueling to be the LCC carriers.
"IAG had bought almost 4% of shares in Norwegian and had been in takeover talks, with two tentative offers rebuffed."
Last edited by NEDude; 28th Dec 2020 at 08:07.
NEDude is correct.
The LGW SIN route was supposed to be a proper money maker for their LH fleet. But it looks like the comms between company and flight deck was the reason for the failure. Also the flight SIN LGW was regularly delayed which I am sure added to the list of reasons why the cargo company tore up the contract.
Everybody knows Norwegian can fill up a 787 but that does not mean they are making profit.
The LGW SIN route was supposed to be a proper money maker for their LH fleet. But it looks like the comms between company and flight deck was the reason for the failure. Also the flight SIN LGW was regularly delayed which I am sure added to the list of reasons why the cargo company tore up the contract.
Everybody knows Norwegian can fill up a 787 but that does not mean they are making profit.
Singapore is a transit hub and Norwegian had no feeder traffic from there. SIA had numerous connections available and QF went onto Australia or had Jetstar for the SE Asia market. Norwegian competed against SQ, BA and QF for pax wanting direct flights and were slightly cheaper even after adding baggage a a couple of snacks, the problem was that you could fly full service for a similar fare if you took a connecting flight with the usual suspects and unless your origin/ destination was SIN/LHR you'd need a connection anyway.
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That may very well be true if you are relying on passenger traffic to support the operation. For Norwegian, the route was more dependent upon the cargo, which would have made the route successful, but failed to communicate that fact to the front line employees who operated under the impression that passengers should have come first on that route. It was only after the route was cancelled that management decided to communicate to the employees that cargo should have been prioritized. Also they failed to invest in a decent load planning operation, instead outsourcing to the lowest bidder, with the unsurprising results. Just one of the many things Norwegian management screwed up.
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krismiler
As has been mentioned in the two posts directly above yours, passenger numbers weren’t the issue for Singapore. When it was culled it had one of the highest load factors on the network. It was the fact that loads were good that cargo ended up being offloaded when performance was restricted.
As has been mentioned in the two posts directly above yours, passenger numbers weren’t the issue for Singapore. When it was culled it had one of the highest load factors on the network. It was the fact that loads were good that cargo ended up being offloaded when performance was restricted.
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You’re obviously not a pilot, so will almost certainly fail to understand the basics of aircraft performance and it’s limitations so I’m not going to bother going into the detail on that. All I was pointing out is that your post about being unable to compete for passenger numbers due to this or that was simply not the case.
The fares were brilliant, pitched at way below BA or Singapore and consequently I was very tempted to book it myself, but yields would have been through the floor as those fares were consistently low across the extended period, certainly unsustainable in market.
London-Singapore in normal times is a highly competitive route, so nobody was creaming it with huge margins. If you’re substantially undercutting the prices of everyone else, while operating an expensive aeroplane, don’t expect much in the way of returns...