On two occasions since the beginning of the year, IAG has demonstrated its intention to acquire the low-cost carrier Norwegian. Then, ten days ago, Lufthansa CEO Carsten Spohr announced his intention to buy the low-cost carrier Norwegian. While the latter operates a large network of regional routes from Scandinavia and secondary cities in Europe, it is above all its long-haul network that is of interest to traditional carriers. Norwegian has succeeded what seemed impossible five years ago: to create a long-haul low-cost airline.
On the other hand, we are seeing a rationalisation of the airline offer in Europe, with the major groups segmenting their products along the lines of what car manufacturers already offer. The BMW group, for example, offers luxury (Rolls Royce), premium (BMW) and more popular (Mini) products. Lufthansa has a similar strategywhich already has brands such as Swiss, Austrian, Brussels Airlines and Eurowings. An airline such as Norwegian could naturally be included.
What would be the advantage of integrating Norwegian, whose model is the same as that of Eurowings? Costs and network. Norwegian's operating costs (excluding oil) are still at least a quarter lower than those of Eurowings. As for the network, it is exceptional. At the end of 2017, Norwegian was operating on 48 long-haul low-cost routess, compared with 12 routes for Eurowings. Norwegian offered almost 90,000 seats per week, compared with 12,000 seats for Eurowings. Level, IAG's long-haul low-cost carrier, operated four routes at the end of 2017, offering 5,500 seats per week.
In the first quarter of 2018, Norwegian operated 60 long-haul routes from its various European bases. Its regional and long-haul network in Scandinavia now accounts for only 44% of its total revenues in the first quarter of 2018. The US and Spain already account for 15% each of all revenues, the UK 9% and France 3%.
Growth in France for Norwegian
According to Norwegian's figures, is France which recorded the strongest growth in sales, up by more than 60%. From Paris CDGNorwegian serves Boston, Denver, Fort Lauderdale, Los Angeles, New York, Oakland and Orlando. From France, in October the airline will launch non-stop flights from Fort-de-France and Pointe-à-Pitre to Cayenne, Fort Lauderdale, New York and Montreal, with six weekly flights to New York from the French West Indies.
Lufthansa could in fact benefit from Norwegian's poor financial performance, which could jeopardise the airline's growth. Soaring oil costs could become a brake on the low-cost carrier's incredible growth. At the beginning of 2018, the carrier was sitting on almost three billion in debt due to its exponential growth. The company posted a loss of almost $220 million in 2017 and $5.65 million in the first quarter.
Lufthansa - like IAG, even though CEO Willie Walsh has said that he has not been in discussions with Norwegian since last May. could therefore be seen as Norwegian's financial saviours. What would happen next? If Lufthansa were to take Norwegian's fate into its own hands, the German airline would benefit from an incredibly dense network which, merged with that of Eurowings, would give it a virtual monopoly in Europe on the long-haul low-cost segment from a dozen or so countries, enabling it to cover all types of passenger, including all segments of business travel.
