FOXTROTS

Fox – sly.  Trots – left-leaning (Trotsky) plus its more insalubrious meaning.

Foxtrots – leading the industry in a dance.

 

Norwegian would if it could

The Economist has done it again – run a poorly-informed report on a sector of the travel business. This one is on airlines – longhaul no-frills-airline (NFA) routes and Norwegian’s attempts to make profits on such routes.

 

The theme I detected is that maybe this time longhaul NFA will work. That means to be profitable; longhaul NFA is easy operationally, and in some parts of the world, particualarly Europe, administratively. Also, it easy to fill seats (those low prices motivate travellers).

 

But despite that theme, the facts in the report seem to indicate that longhaul NFA will not work for Norwegian. Those facts include problems at the airline – falling share price, falling profits, farewelling CFO.

 

One important point not noted in the report was ‘schedule reliability’. Ok having a daily flight New York-Frankfurt. What happens when the plane has a technical delay? On Lufthansa, there are other flights scheduled on the same day, plus partner airlines.

 

Another is the definition of ‘longhaul’. In general, North Atlantic from Europe would be medium-haul; NAt to Asia, or Europe-Asia, would be longhaul.

 

Here, then, are some mistakes/misinterpretations/glossovers in the report, in no particular order:

 

[] Jetstar reported as a subsidiary of Qantas. Correct but, depending on how you count, there are 4/5 Jetstars with separate operations. Only one of those JSs is sort-of longhaul, and those flights are operated for Qantas.

 

[] Scoot is named as a longhaul NFA. Indeed, it was created by Singapore Airlines to operate longhaul routes, but it never has. And in the meantime, it has effectively merged with Tiger Air (the Singapore one; don’t ask about the others) – which was disembowelled to help fill Scoot’s seats. To date, it is a conceptual failure.

 

[] The Economist says Jetstar and Scoot are “making a fist” of longhaul NFA flights. As only Jetstar operates such routes (about two), I cannot comment. Also no comment because my knowledge of schoolchild English colloquialisms does not extend to ‘making a fist’. If it means profit, the comment is wrong.

 

[] Air Asia X is named as a Virgin Group subsidiary; that’s news to me and, presumably, VG. The Economist says AAX stopped its Europe routes because of competition from ‘highly-subsidised flag-carriers’.

 

‘Flag carriers’ is an outdated term which was not precisely defined at the time, but generally used for state-owned big airlines – when airlines such as Air France, British, Lufthansa, were majority- or totally-owned by the state. Those days are long long passed.

 

AAX operated only to London and Paris. Of the big airlines in Europe, only Air France still has a (minority) state share.

 

[] The defunct Oasis is described as having had routes to Europe and the US. It had one route, to London. It failed because it did not follow NFA rules (make fares simple; certainly no travel agency commissions, business class, refunds, etc; see end of this report). And its fares were only about US$50 (one-way) below those of the lowest on the route – which was sometimes, say, Thai Airways via Bangkok. It failed, as many have, because of bad management, not because a proper NFA model did not work.

 

[] Why would ICAG (owner of AerLingus British Iberia Vueling, others) be waiting to “snap up” (=buy) Norwegian if the sale price falls low enough? This shows a misunderstanding of Europe’s comprehensive aviation freedoms. No need to buy; if Norwegian falls, just start on those same routes if it wishes to.

 

[] There is something more to the decision of British Airways to launch an airline in Barcelona (named Level – really). Why did ICAG not create it – not least because ICAG already has an airline based in Barcelona – Vueling? So why just BA? Surely if there is traffic loss to Norwegian, then the main loser would be ICAG’s Iberia?

 

(Note that Vueling’s traffic growth currently is slowing. Not a concern at present, but something to watch.)

 

[] Laker and Zoom okay.

 

 

There is a way to make longhaul NFAs profitable. Probably, at present (in the future there will be different criteria), the best chance is a group with three types of airlines – NFA, low-cost-airline, full-service-airline. Norwegian would stand a better chance if it had not expanded so quickly. And if it had a different name. ‘Norwegian’ will mostly be associated with Norway/Europe. What marketing benefit is that for its flights from the US to France’s Caribbean colonies?

 

 

*Notes: Our airline-type definitions:

-FSA = full-service-airline. Offering first/business/economy, travel agency bookings, meals/bookings/baggage/cancellations included, etc. As its name indicates – full service.

 

-LCA = low-cost-airline. (Not a no-frills-airline; see next.) An FSA but with lower operating costs – cheaper longer-hours flight-deck crew, younger/new longer-hours cabin crew, tighter cost control (twinned 3-star hotel rooms, for example), fewer fare types, may have first and business cabins as well as economy, and which allows bookings through travel agencies etc. If relevant, usually similar to the parent airline, but a different name, and competition against parent airline allowed.

 

-NFA = no-frills-airline. We believe that among the many essential elements that make a successful NFA are: shorthaul point-to-point routes; market freedom in terms of fares, routes; single aircraft type; where relevant, competition against parent airline allowed; extremely-low fares when bought at least three months in advance, say US$25; one fare at one time (no wholesale rates, travel agency commissions, etc); no refunds; no (free) service frills; single economy-class cabin; no (free) seat selection; two toilets for 150-seat aircraft; 25-minute turnaround time; cabin crew do daytime cabin cleaning; name and flight change charged at least US$25 each; no trade shows; plenty of consumer advertising and promotion; and much more.

 

 

 

The Fox

Remember, I’m an industry expert in the parallel world.

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