ANALYSIS: Why Norwegian thinks it's different

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Oasis Hong Kong Airlines and Zoom Airlines tried it. All-premium operators Eos, Maxjet and Silverjet offered their own take on it. Further back in the mists of time, Laker Airways had a go at it; more recently, AirAsia X refocussed its approach. History has shown that low-cost long-haul operations, particularly out of Europe, is no easy trick to pull off. But Norwegian is convinced it can buck the historical trend.

"We know it works, because we have been flying it since May," said Bjørn Kjos at a press briefing in London on 17 October, as his airline revealed plans to launch services from London Gatwick to Fort Lauderdale, Los Angeles and New York. It already serves Bangkok and New York from Oslo and Stockholm. For its Gatwick-New York flights, Norwegian is quoting a tax-inclusive one-way fare of £149 ($241). For the Floridian and Californian services, it has set price-points of £179 and £199, respectively.

Kjos is not haunted by the ghosts of long-haul low-costs past. For one thing, "there are way more airlines that go bust on the short-haul than on the long-haul", he argues. In any case, he sees infrastructure as an area in which Norwegian has differentiated itself: "I don’t think that you can do it without having a short-haul network. You have to have a profitable, large short-haul network. The long-haul network has to come on top."

But infrastructure is not the central plank in Norwegian's argument for being capable of succeeding where others have failed. Rather, it's aircraft. Kjos is firm in his conviction that only the newest long-haul types – specifically the Airbus A350 and Boeing 787 – are viable candidates for low-cost long-haul operation. "We sat down and looked at the figures and did the mathematics," he says.

His reasoning is thus: low fares require low cost, which requires high utilisation, which requires range. Utilisation is helped by the 787's long maintenance intervals, says Kjos, What's more, "the fuel efficiency on the Dreamliner is another world", he argues. Factor in the purchase price and interest rates, and the contest with the 747 is "not even close", Kjos concludes.

He puts a figure on it: the next-best aircraft in the A350/787 class, which Kjos declines to specify, would be £5 million ($8 million) more costly per aircraft per year. Presented with the argument that AirAsia X and Oasis Hong Kong both struggled in the long-haul market despite strong financial backing, Kjos points again to the fleet type. "AirAsia used the A340: forget it," he says. "Oasis: 747. Forget it. You cannot fly low-cost with a 747. You don’t have to be Einstein to understand that."

In Kjos's world view, the short-haul and long-haul sectors are, ultimately, not so different. And while legacy carriers have failed with low-cost long-haul ventures, they've also failed with low-cost subsidiaries in the short-haul sector, he notes. "We go the opposite way," he says. "I would say most legacy carriers have a loss-making short-haul operation. So what do you need in order to do the long-haul? What you need is infrastructure. If you fly to [say] Dubai instead of New York, what the heck is the difference? It’s another airport."

The already-dubious distinction between short- and long-haul is only going to blur more in the future, argues Kjos, citing the range of Boeing's re-engined Max narrowbodies (3,620nm, for the Max 8). "It will be serving a lot of destinations that today, you can only serve with widebodies," says Kjos. "From our bases we can serve airports in Pakistan, for example. Today, it’s a widebody mission. Tomorrow, it will be a narrowbody mission."

In the meantime, Kjos is breezily confident that Norwegian's long-haul services from Gatwick can be competitive with the multiplicity of rival services offered from London Heathrow by big-gun legacy carriers. Such foes may be able to use the yield from passengers in the front of the cabin to drop prices in the back, but "they can't do it on every flight for every passenger", argues Kjos. "We would never have gone into this business if we didn’t know that we could operate it in a low-cost way," he asserts. "And compared to most of the legacy carriers, we know that we’re 50% of the cost."