Norwegian Air Shuttle to expand at Copenhagen
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Norwegian Air: 1Q results continue improving trend thanks to lower fuel. Long haul strategy develops
The Norwegian Air Shuttle group is enjoying a period of good news. It narrowed its underlying operating loss for the seasonally weak first quarter, after returning to full-year profit in 2015 following a loss in 2014. Its 1Q2016 results demonstrate that this improving trend is continuing. Norwegian's 1Q results came soon after the US Department of Transportation (DoT) had given tentative approval of a US foreign carrier permit to Norwegian's Irish-registered subsidiary, NAI.
However, this is not the time for Norwegian to sit back and relax. Its improved profitability is in no small measure due to lower fuel prices, while ex fuel unit cost increased in 1Q2016. In addition, contracts for the leasing out of Norwegian's first A320neo deliveries have been temporarily delayed, highlighting the added challenge of running this new and growing line of business. Moreover, until the DoT approval is final, there may be some nervousness surrounding it.
Meanwhile, Norwegian is growing NAI at its new Rome Fiumicino base, which joins Madrid and Barcelona as major NAI airports with no Norwegian intercontinental routes. As it pursues 40% pa ASK growth over the next several years, these are likely candidates to be its next long haul bases.
Norwegian Air's NAI gets tentative US rights as common sense prevails. Objectors: time to move on
On 15-Apr-2015 Norwegian's Irish-registered subsidiary Norwegian Air International (NAI) received tentative Department of Transportation (DoT) approval of its Dec-2013 application for a US foreign air carrier permit. NAI faced strong opposition from labour organisations and a number of US and some European legacy airlines, which led to the unprecedented delay.
The main weapon deployed by NAI's opponents was Article 17 bis of the US-EU open skies agreement, aimed at upholding labour standards. Unions representing airline employees (overwhelmingly at airlines other than Norwegian) claimed concern that NAI's business model undermines labour rights. In a peculiar alliance with these unions, airlines led by the US big three used the same arguments in a thinly veiled attempt to restrict competition from a new, dynamic, and more flexible long haul low cost model.
The DoT now concludes that Article 17 bis cannot be used to deny NAI, a conclusion reached after consultation with its own legal counsel, that of the US Department of State and the Office of Legal Counsel. Opponents have 21 days from 15-Apr-2015 to raise objections, without which the DoT's approval will switch from tentative to final. It's not over yet, but the DoT's conclusion looks like a - very belated - triumph for common sense.