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On longer flights, premium fares can be so CEO Bjorn Kjos often reminds analysts and
profitable they subsidize the rest of the aircraft, travelers he’s not going away.
allowing full-service carriers to match prices
without materially hurting profitability. And now And he might be right. Though Norwegian Air
that many legacy airlines sell a no-frills product ranked 74th on Airline Weekly’s list of the world’s
that roughly matches a discounter’s product 75 most profitable airlines between mid-2017 and
attributes — U.S. airlines call it basic economy mid-2018, the carrier performed reasonably well
— they’re even better at price matching. last summer, producing roughly $156 million in
profit between July and September.
“If they are doing a great job in the front of bus
making half their revenue on 15 percent of these Then again, most airlines can make money flying In 2018, Skift hosted our first ever Air Pitch Startup Competition, in
seats, it will allow them to price their economy very transatlantic routes in summer, when demand is partnership with the Accenture Amadeus Alliance. We reviewed over 50
aggressively,” Skúli Mogensen, Wow Air’s founder robust. Winter is tougher, and O’Leary of Ryanair,
and CEO, said in an interview in September. “I which was No. 1 on that Airline Weekly list, has applications from startups looking to transform the airline industry. At Skift
have been impressed. The U.S. carriers at large said he’s not sure Norwegian will survive. Global Forum 2018, three startups competed in front of a live audience, but
have been far more aggressive in applying the it was Volantio who was selected as the winner.
low-cost model, segmenting the seat structure, “We expect more failures this winter,” O’Leary,
understanding the passenger, adding ancillary a longtime rival of Kjos’, said in the fall. “Mostly,
revenue, adding technology.” we think one of the two Scandinavian airlines.” Volantio is a global leader in post-booking revenue and capacity
optimization software for airlines. The platform uses machine learning
There are other issues with the long-haul, O’Leary has said similar things before, and Norwe- to help airlines reduce denied boarding, better respond to irregular
low-cost model. gian keeps chugging along. But if something
goes wrong, Norwegian might choose a soft operations, and drive higher unit revenues on full flights. This year, they’ll
Over the past four decades, low-cost, short-haul landing and sell the company. British Airways work with the team at the Accenture Amadeus Alliance Innovation Center
airlines have perfected how they turn airplanes, owner International Airlines Group, or IAG, to take their business to the next level.
ensuring little ground time. But they lose much expressed interest in Norwegian for much of last
of that advantage when each plane flies just two year, though the airline’s board has rebuffed it.
segments a day. Other full-service carriers could be interested, too.

“When a Southwest or a Ryanair plane is on the Even if they disappear, low-cost transatlantic
ground f ive, six, or maybe seven times a day, airlines have proven consumer behavior has CONGRATULATIONS
that quicker aircraft turnaround time — 10 or 15 changed. Once, legacy carriers assumed custom-
minutes faster than a legacy competitor — that ers wanted a bundled experience for long-haul
adds up to hours of additional flying during the flights, with seat assignments, baggage, and TO OUR GRAND
day,” said Seth Kaplan, managing partner of food and drink included.
Skift’s Airline Weekly newsletter. PRIZE WINNER
Now, they have gotten the message. Most sell
Then there are different demand patterns. It is unbundled fares, a trend that likely will contin-
not unusual for low-cost, short-haul airlines to ue, and some have created their own low-fare
offer outrageous pricing, like nearly $0 fares, airlines that roughly mimic Norwegian. And while
plus fees. Those fares can stimulate demand and most are defensive enterprises meant to keep
persuade people to travel more than they other- the parent company f rom losing share, some
wise might. But while $500 round trips between may keep flying no matter what happens with
the United States and Europe are a good deal, the competition.
they’re not the type of fares that can get people
off the couch and onto a plane.

Not Going Away

While it’s tempting to pronounce the low-cost, POWERED BY AND
long-haul model dead already, Norwegian Air

46 Skift