Sunday 22 April 2018

Regional airports left out in the cold by Norwegian

The airline's transatlantic winter retreat from Cork is a blow to a proud city

Norwegian, headed by group CEO Bjorn Kjos expects to grow capacity by 40pc this year with Dublin leading the way Pic: Brian Lougheed
Norwegian, headed by group CEO Bjorn Kjos expects to grow capacity by 40pc this year with Dublin leading the way Pic: Brian Lougheed

Fearghal O'Connor

The announcement by Norwegian that it is scaling back transatlantic routes from Shannon and Cork is a blow to tourism interests in the west and southwest. It could also be a sign that the boom in transatlantic travel has reached the limits of its expansion.

In recent years, Norwegian has been at the vanguard of the low-cost transatlantic revolution. It and other carriers such as Wow helped add millions of extra seats to overall capacity between Europe and the US, putting legacy carriers under pressure.

Fares as low as €99 have helped create a whole new market in lower key destinations. Aer Lingus has also expanded hugely, creating an increasingly successful transatlantic hub through Dublin.

But Aer Lingus itself warned internally, as previously reported by this newspaper, that it was feeling the pain of increased competition from Norwegian. And Norwegian's most recent set of financial results, posted in February, showed that the airline that is perhaps feeling the most pressure from the Norwegian model is Norwegian itself.

A fourth-quarter net loss of NKr919m (€95.7m), compared to a profit of NKr197m one year earlier, was put down to the huge pressure that its rapid expansion is putting on its costs.

Questions around Norwegian's financial health are nothing new. Last September, Ryanair's Michael O'Leary caused a stir when he questioned the Scandinavian airline's viability: "They are running out of cash. They are scrabbling around daily," he said.

Norwegian was quick to bat this away, telling media that O'Leary's comments had more to do with Norwegian's ability to lure precious pilots away from Ryanair than anything else.

Indeed, growth has continued, not least in Dublin where Norwegian has opened a pilot and cabin crew base. Overall, the airline has said that it expects to grow its capacity by 40pc this year, compared with 25pc last year.

Last week the company announced passenger capacity grew by 44pc in March compared to a year earlier, while load factor - a key airline measure of how many available seats have been sold - increased to 86.7pc, higher than anticipated. But new transatlantic destinations launched in recent weeks are to larger European cities such as Amsterdam, Madrid and Milan.

Meanwhile smaller, more peripheral services, are being shaved back, with Norwegian suspending winter services from Boston Providence to Cork, Shannon and Edinburgh.

Expansion of its Shannon to New York service to four flights a week for the winter takes away some pain for the independent Co Clare airport, but for DAA-owned Cork it was terrible news.

Shannon and Cork were two of the highest profile beneficiaries of the low-cost transatlantic revolution. The two airports had been placed at the forefront of a major battle with US authorities fought by Norwegian's Irish registered international arm to win approval to fly to the US.

At the time, Tore Jenssen, the CEO of the company's Irish-based subsidiary Norwegian Air International, had hinted that Cork might be in line for a direct service to New York as well.

"It took us three years to fight to get this," he said at the launch, less than a year ago.

"We thought it would take us three weeks. It is fitting that we are launching in the rebel county - the longer we waited, the more sure we were that we had to fight it."

But since then all the growth appears to have been at rapidly expanding Dublin Airport and it may be hard for those closest to Cork airport to avoid the feeling that it was at its most useful for Norwegian when the airline had a tough battle to fight for which it needed political support.

And to add salt into the wounds, Norwegian group CEO Bjorn Kjos said that although the airline was still interested in a Cork-New York route, the runway at Cork may be too short.

A short runway has long hindered long-haul expansion from the Munster airport, but Norwegian's arrival seemed to suggest a brighter future.

In January, Cork Airport recorded a 5pc increase in passengers compared to the same period in 2017. Undoubtedly the airport has had success winning other new routes - for example, just this week Aer Lingus announced a flight to Lisbon. But the Providence flight was the star of the show and its curtailment is a blow.

The transatlantic revolution spearheaded by Norwegian was always one of two parts.

One part saw substantial growth from transfer traffic through secondary hubs like Dublin, allowing passengers to avoid congested and overstretched airports like London Heathrow.

But the second part was that small airports like Cork and Shannon could benefit too with direct services on a new generation of efficient aircraft. Sadly, the Norwegian announcement suggests that this experiment may not have run as well as hoped.

Sunday Indo Business

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