GlobalData queries low-cost long-haul model

BTN News
Thursday, 21 January 2021
Norwegian Air's departure from the long-haul game calls into question the business model’s viability going forward, according to analysis by  GlobalData.
Gus Gardner, travel and tourism analyst at GlobalData said: “Legacy carriers are able to subsidise basic economy fares with premium (first and business class) tickets, a luxury that Norwegian did not have. The lack of a high-yielding cabin meant the airline could not generate sufficient profit, resulting in its exit from the market, which was also accelerated by the Covid-19 pandemic.”

Norwegian’s attempt to disrupt the market, especially on transatlantic routes, was largely successful at the start. However, it did not take long for other carriers like British Airways and Delta to introduce basic economy fares to compete. This resulted in price-conscious travellers, who valued comfort on a long-haul flight, selecting Norwegian’s competitors, leaving the airline in a price war that it could not afford. 

“More travellers will opt for domestic or short-haul trips for at least the short-term,” said Gardner. "GlobalData’s latest Covid-19 Recovery Survey (06 Dec 2020) showed that 39 per cent of global respondents are likely to reduce international travel in the ‘new normal’ after the pandemic, compared to 28 per cent who would reduce domestic travel. As a result, long haul carriers, especially low-cost, will be hampered in their recovery efforts as demand may not rebound to levels previously seen.”

GlobalData queries low-cost long-haul model

BTN News
Thursday, 21 January 2021
Norwegian Air's departure from the long-haul game calls into question the business model’s viability going forward, according to analysis by  GlobalData.
Gus Gardner, travel and tourism analyst at GlobalData said: “Legacy carriers are able to subsidise basic economy fares with premium (first and business class) tickets, a luxury that Norwegian did not have. The lack of a high-yielding cabin meant the airline could not generate sufficient profit, resulting in its exit from the market, which was also accelerated by the Covid-19 pandemic.”

Norwegian’s attempt to disrupt the market, especially on transatlantic routes, was largely successful at the start. However, it did not take long for other carriers like British Airways and Delta to introduce basic economy fares to compete. This resulted in price-conscious travellers, who valued comfort on a long-haul flight, selecting Norwegian’s competitors, leaving the airline in a price war that it could not afford. 

“More travellers will opt for domestic or short-haul trips for at least the short-term,” said Gardner. "GlobalData’s latest Covid-19 Recovery Survey (06 Dec 2020) showed that 39 per cent of global respondents are likely to reduce international travel in the ‘new normal’ after the pandemic, compared to 28 per cent who would reduce domestic travel. As a result, long haul carriers, especially low-cost, will be hampered in their recovery efforts as demand may not rebound to levels previously seen.”