Norwegian Air part 2: long haul growth shows its strategic innovation, but increases debt burden

Norwegian plans to add US routes to its Edinburgh base, a development considered in part 1 of this report, adding to its growing list of European long haul bases. However, its Edinburgh-US routes will use new Boeing 737MAX-8 aircraft – its first deployment of narrowbodies for long haul. It has also ordered 30 Airbus A321neoLRs for long haul use. Narrowbodies open up new possibilities for routes between the UK (or other European markets) and the US east coast.

Norwegian also plans to add non-US destinations to its UK long haul network, with details expected during the course of 2017. Norwegian's flexibility to develop its long haul operations from the UK would be improved by the grant of a US foreign carrier permit to its UK-registered subsidiary, Norwegian Air UK.

Norwegian has had to surmount many obstacles to build and grow its global network – which may also include Latin America in 2017, when it will accelerate long haul ASK growth to 60%. However its rapid expansion, currently driven mainly by long haul growth, has led to a rapid increase in debt, and is likely to weigh on unit revenue. Norwegian's undoubted strategic innovation can only be sustained if it is financially successful.

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