The CEO of Ryanair, Michael O’Leary, gave an interview where he claimed that Norwegian “will go in four or five months. They are running out of cash. They are scrabbling around daily.”
He calls out both Norwegian and Monarch claiming that both “may not survive through the winter.”
Even while he claims Ryanair is talking with Norwegian about connecting flights, feeding Norwegian’s long haul flying,
“We are still talking to Norwegian [about connecting flights], but I’m not sure they will still be flying in 12 months.”
That may well be hyperbole but they have a couple of hundred aircraft on order. While O’Leary rightly points out they don’t have the cash to pay for the planes, airlines generally finance their aircraft. The trouble here then isn’t what O’Leary thinks, it’s what financial markets think, and I wrote two months ago that markets are skittish about the carrier’s expansion plans in the face of rising fuel costs.
Copyright william87 / 123RF Stock Photo
In the U.S. Norwegian serves or has announced service to Austin, Boston, Chicago, Denver, Fort Lauderdale, Hartford, Las Vegas, Los Angeles, New York JFK, Newark, Stewart-Newburgh, Oakland, Orlando, Providence and Seattle. That’s insane especially considering they aren’t serving these cities with just a single destination in many cases. They fly to London Gatwick, Paris, Stockholm, Barcelona, Copenhagen, Oslo, Rome and more.
The airline is seen as an ultra low cost carrier because of its low fares and its unbundling (fees) model. However it’s not clear the airline’s current costs make those fares sustainable especially as to the extent that new routes take time to grow their load factors. The bet of course is that Norwegian will attain a scale that will drive down costs if it has enough runway to get there.
I’ve argued that it’s not the big Middle East carriers US airlines need to worry about competing against — it’s airlines like Norwegian and Ryanair.
Norwegian is a big part of why we’re seeing deeper discount transatlantic fares than ever before – like $252 roundtrip. Norwegian’s expansion is good news for consumers.
There’s some chance that Norwegian’s model isn’t sustainable, but in the meantime, we should be grateful to what Norwegian is doing to pricing — and in fact their non-US websites sell US flights even cheaper (just use Google Translate and a credit card that doesn’t add foreign transaction fees).
Meanwhile Ryanair’s CEO has been promising pay toilets and seats where you’re forced to stand up for years. So not everything he says is true.