Aviation in Norway has traditionally been dominated by the Scandinavian carrier SAS, however newcomer LCC Norwegian Air Shuttle has clawed back some of the market share held by SAS to become a second force in the domestic market, while also emerging as a key player in European and long-haul aviation. The main gateway to Norway is Oslo Airport, run by Avinor AS – the state-owned company which operates the majority of civil airports in Norway.
The Civil Aviaiton Authority of Norway is the regulatory authority responsible for the formulation and implementation of aviation policy in the country, while also providing air navigation services.
Airports in Norway
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In 3Q2013, IAG continued the turnaround in its operating result that began in 2Q2013. All three of its main brands – British Airways, Iberia and Vueling – saw an increase in their result from the same quarter of 2012. The improvement was mainly driven by healthy unit revenues, although these were diluted by currency effects, and the addition of LCC Vueling in the full quarter for the first time.
It seems that IAG’s prediction that Iberia’s restructuring programme would start to bear fruit in the second half of the year is being proven correct.
Moreover, new FY2013 guidance, for an operating result of around EUR740 million, is ahead of IAG’s previous target, even allowing for the Vueling acquisition. After its 2Q2013 results, we asked if that was a turning point for IAG? At the moment, it would seem that the answer is yes.
Finnair celebrates its 90th birthday on 1-Nov-2013, making it one of the world’s oldest airlines. It also has one of the newest CEOs, Pekka Vauramo, who joined on 1-Jun-2013.
Finnair’s strategic niche is based on using its Helsinki hub to connect Europe with Asia. While it saw traffic growth and market share gains in both regions in 3Q2013, the weakness of the yen led to a collapse in Asia revenues. The approval on 16-Oct-2013 of Finnair’s application to join the BA/JAL revenue-sharing joint venture on routes between Europe and Japan could not have come at a more opportune moment. The resulting coordination of pricing and schedules should help to counter revenue weakness.
Nevertheless, the fall in Finnair’s 3Q2013 profits and its consequent profit warning for the full year highlight the scale of the challenge facing Mr Vauramo. Although Finnair achieved a further reduction in unit costs, he will need to push through more cost cuts, while simultaneously seeking to shore up unit revenues.
Norwegian Air Shuttle: Asia's longhaul LCC model comes to the N Atlantic (but watch falling profits)
Norwegian Air Shuttle reported a fall in 3Q2013 net profit, affected by Boeing 787 disruptions and weaker demand as a result of the good northern European summer weather. Nevertheless, Norwegian continues to build for the future and announced its first UK-US trans-Atlantic routes on 17-Oct-2013.
In Jul-2014, Norwegian will launch three long-haul routes from London Gatwick to Los Angeles, New York and Fort Lauderdale, in addition to the trans-Atlantic routes operated from its Scandinavian bases. The airline is already using 787-8s on its Bangkok service.
This will be the first modern attempt to introduce the successful Asian long-haul LCC model to the North Atlantic from the UK, a concept that Ryanair's Michael O'Leary has often floated in the past. Earlier this month Qantas subsidiary Jetstar took delivery of the first of a fleet of 787-8s that it will be using on long-haul routes in Asia. SIA subsidiary Scoot will receive 787-8/9s from late 2014 and AirAsia X will use A350-900s from 2018.
bmi regional’s plans to enter the Norwegian domestic market, together with its recently commenced contract flying for Flyglinjen in the Swedish domestic market, highlight its ability to find new regional niches. Seven of its top 10 international routes are monopolies and it has announced 11 new routes in just over a year since its sale by IAG to Sector Aviation Holdings in Jun-2012.
bmi regional’s target is to be profitable in its second full year of operations and its chairman said in Jun-2013 that it was fast approaching a cash neutral position. Not surprisingly, this implies that it is loss-making, and that it will benefit from a focus on unit costs: CASK is king in the airline sector. Once it does start to generate cash, it may consider its fleet replacement options. Not only is the fleet ageing, but also the size of its Embraer jets (50 seats and fewer) are a challenge in matching the unit costs of competitors.
SAS made a bigger profit in 3QFY2013 (May-Jul) than in the same period a year ago, building on the positive momentum developed in 2Q, when it narrowed its losses after reporting wider losses in 1Q. Its ‘4Excellence Next Generation’ restructuring plan delivered further savings in the quarter and SAS has made good progress with most of the key savings and liquidity measures identified in the plan. It has confidently reiterated its FY2013 target of positive earnings.
SAS has also announced plans to order new long-haul aircraft and should complete the sale of Wideroe and the outsourcing of ground-handling in the near future. Focusing the network around the needs of frequent flyers and investing in cabin refurbishment should provide some differentiation from, and appeal relative to, LCC competitors on both short-haul and long-haul. Nevertheless, SAS is still a high-cost carrier and remains vulnerable to price-based competition.
Finnair’s operational result fell by EUR10 million in 2Q2013 compared with the same period of 2012. Moreover, the carrier lowered its full year revenue outlook from expected growth to “approximately at the 2012 level”, due to the weak Japanese yen. Nevertheless, there are also some more positive signs for new CEO Pekka Vauramo, who joined on 3-Jun-2013.
First, without the impact of its fuel hedging programme, Finnair's operational result would have improved by EUR12 million. Second, its strategic focus on carrying passengers between Europe and Asia was reflected in strong traffic growth and market share gains in these two regions. Third, Finnair’s cost reduction programme reached its EUR140 million savings target six months ahead of schedule and the company remains committed to achieving a further EUR60 million in savings by 2014, mainly through labour productivity improvements.