Documents provided in a presentation to shareholders show that low-cost carrier Norwegian Air is preparing itself for various scenarios in response to the COVID-19 pandemic. Part of its strategy for survival and ultimate recovery will see the airline shrink its operations and focus on its ancillary revenue over the next few months.
Norwegian’s focus will be on cash preservation. The airline envisions the “New Norwegian” will have a fleet size of between 110 and 120 aircraft. This is a nearly 30% reduction in the number of aircraft that it operated pre-COVID-19. The main driver behind this is international travel restrictions, which have largely been in place since late-March. There is a great deal of uncertainty as to when each country will lift its travel bans, leaving the carrier to plan for the worst. Travel restrictions mean fewer routes and thus fewer aircraft.
However, until March-April 2021 the airline is planning (as a worst case) to have only seven aircraft in operation on its Norwegian short-haul operations, with a focus on minimizing cash burn. As for its European short-haul and long-haul operations, the airline is bracing itself for a full grounding for the next 11 months. This, it notes, is its “slow recovery” scenario and there is flexibility for it to restore operations earlier upon sufficient demand.
When travel restrictions do finally ease, the airline will focus on top-tier cities and key flows between the EU and the US. It on these routes where Norwegian has “inherent strengths in terms of scale and existing presence”, listing London Gatwick, New York JFK, and Los Angeles/LAX as its focus cities. It was unclear if this flying would be done by the U.S. based crews that were recently furloughed, or if the flying would be completed by crews based in Europe.
The airline envisions ancillary revenue becoming an important path to profitability and loss avoidance. As such, passengers may see new products or more promotions for extra services beyond the basic cost of airfare.
