Low-cost Norwegian crowns transatlantic routes

Source:Reuters-Global Times Published: 2018/10/11 17:38:39

As Europe’s long-haul flight market expands, biofuels benefit

Norwegian Air Shuttle ASA takes off at London Gatwick Airport in Crawley, UK File photo: VCG

Norwegian Air Shuttle has overtaken British Airways (BA) as the biggest non-US airline on transatlantic routes to and from the New York area, in the latest illustration of the low-cost carrier's move into British Airways territory.

Norwegian carried 1.67 million passengers to or from airports in the New York area in the 12 months to the end of July, compared with the 1.63 million carried by British Airways, data from the Port Authority of New York & New Jersey showed.

No-frills carrier Norwegian has been rapidly expanding in the transatlantic market over the last five years, prompting International Airlines Group (IAG), the owner of British Airways, to try to buy it earlier this year.

The data showed four US airlines, led by United Airlines, are the biggest carriers of international passengers out of the main airports in the New York area, which include John F. Kennedy International, LaGuardia and Newark Liberty International.

Air Canada is the biggest non-US carrier of international passengers, but its dominance is in travel between the US and Canada.

Norwegian, and other relatively recent entrants to the market such as Wow Air, have led a charge to shake up Europe's long-haul flight market, offering ticket prices that can be as little as half those charged by traditional carriers.

Big Apple budget

The traditional airlines have responded by selling a new budget class of ticket, as well as setting up, in IAG's case, new airline Level to compete directly with Norwegian on prices.

"Our commitment to New York is as strong as ever," a BA spokeswoman said. "We fly up to 70 times a week from all three of our London airports, and we recently announced a $65 million investment on new lounges, improved food, seating and shops at JFK Terminal 7."

Lufthansa has also started budget long-haul flights using its Eurowings brand.

Norwegian said in May it had rejected two approaches from IAG, which also owns the Iberia, Aer Lingus and Vueling brands, because they undervalued the company. IAG owns a 4.6 percent stake in Norwegian.

The pace of Norwegian's growth - figures from July 2017 show it only carried 750,000 passengers into and out of the New York region - has weighed on its finances and it faces mounting pressure to control costs and shore up its balance sheet.

"Fares have been too high for too long as transatlantic routes have been long dominated by carriers with outdated legacies running on fumes," a Norwegian spokesman said.

"Norwegian will continue to spread its wings to the Big Apple with a third-daily service between London and New York JFK from 28 October," the spokesman said.

Biofuel benefits

However, it's still unclear whether the low-cost advantage of Norwegian Air Shuttle could be maintained. As part of Norway's push to cut greenhouse gas emissions, the country said on October 4 that the aviation fuel industry must mix 0.5 percent advanced biofuel into jet fuel from 2020 onward, a move which will force airlines to use the more costly fuel.

"The government's goal is that by 2030, 30 percent of the airline fuel will be sustainable with a good climate effect," said Norway's Ministry of Climate and Environment.

This corresponds to around 6 million liters of what is also known as second-generation biofuels, a product of waste and leftovers, and cannot be based on palm oil, Norway's Climate and Environment Minister Ola Elvestuen said.

Biofuels for aviation cost around two or three times more than regular jet fuel, according to a report by Norway's environmental agency, the civil aviation authority and State-owned operator Avinor, he added.

However, as there is no functioning market for biofuels in aviation, the real prices are uncertain, said Elvestuen.

"According to the report, a quota obligation of 0.5 percent advanced biofuels can correspond to a price increase for the airlines of around 54 million Norwegian crowns annually," he said. This cost amounts to roughly $6.6 million.

Even though there are other initiatives and trials around the world, Elvestuen said Norway's move to legislate biofuels use in aviation may be the first bill introduced worldwide on the topic.

"As far as we are aware, no other country has proposed legislation similar to the Norwegian plans," said the minister.


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