GlobalData released this analysis:
Just two months after Norwegian ceased its long-haul operations in January 2021, a new entrant into the market, Norse Atlantic Airways, plans to replace and improve upon Norwegian’s attempts to crack the low-cost transatlantic business model. Launching with a strategy from which an established airline has pulled back, especially in the COVID-19 recovery period, is a risky move and Norse Atlantic Airways must learn from the mistake that Norwegian made if it is to survive, says GlobalData, a leading data and analytics company.
Rheanna Norris, Travel and Tourism Analyst at GlobalData, comments: “Consumer confidence is at an all-time low and travelers will stay brand loyal due to heightened needs for trust and reliability. There is also little appetite for long-haul holidays currently, as, according to GlobalData, just 36% of people are willing to travel out of the continent they reside in. While travel bans from Europe to the US are still in place, the new airline may gain little traction in the short-term.”
Norwegian’s main reason for its failure in terms of its long-haul low-cost operations is that the low-cost model is not suited to long-haul – these routes cannot turn enough profit to support low, attractive fares. Full-service carriers are now entering into this market by offering low-cost options. This will attract a type of traveler that may not have considered flying this way before and could have the potential to become loyal customers due to an increased standard of service and enticing loyalty programs. This increased competition will also make things harder for the new entrant.
Norris adds: “Norse Atlantic Airways must change its business model if it is to survive. The only way full-service carriers can succeed in this low-cost market is due to the provision of high yielding business and first-class cabins, making flights more profitable. To give itself the best possible chance of success, Norse Atlantic needs to take this into consideration and learn from the mistake that Norwegian made – namely not having such cabins.”