This airline says it can fly you from the US to Europe for $175 one-way. History says: No chance.
Airline’s survival may come down to how many times its planes can cross the pond each week
You’re the air traveler who doesn’t care about perks like food or legroom. You strap yourself in, grab a book and sit there for the next six or eight hours as the airplane hurtles across the Atlantic.
So the news that low-cost carrier Norwegian Air Shuttle continues its plans to expand routes between Europe and the US — for as little as $175 one-way — is very welcome. Except that every major attempt to do what it’s doing has failed.
Before Norwegian there was PeoplExpress and before that Laker Airways. Both tried to make low-cost runs across the pond and flamed out in the process.
“Those were the two earliest, biggest examples, and it seems like, every so many years, somebody forgets how hard it is and tries again,” said Seth Kaplan, an industry analyst with Airline Weekly. “You have to ask yourself if they just haven’t learned what history has to teach them.”
Laker Airways, launched in the 1960s by Sir Freddie Laker, began low-cost long hauls across the Atlantic, between London’s Gatwick and New York’s JFK, but floundered in the early 1980s amid a global recession and high oil prices. In 1981, PeoplExpress, inspired by Laker, attempted a similar model. First it made its mark by packing people into short-haul flights from lesser airports — Newark in its case — then expanded to longer routes as its shorter ones raked in the profit. PeoplExpress was felled by an air traffic controllers strike, analysts say, and by getting too big, too fast. Its no-frills approach earned it the nickname “People Distress,” which probably didn’t help.
In 2002, undaunted by the failures of its predecessors, Canada-based Zoom Airlines attempted low-cost flights across the Atlantic, but it, too, couldn’t make the trek and shuttered in 2008.
(By the way, airline industry analysts have differing ideas of what constitutes a “low-cost” carrier and there are some gray areas. But, generally, they’re no-frills, offering limited entertainment, food and lounge areas, and charge for all the extras, like bags. They’re not to be confused with tour-group operated airlines, such as Thomas Cook and TUI, that are moderately profitable, but considered charters.)
So why can’t these airlines make it work?
Southwest is the classic, pioneering low-cost airline, but its model — like that of its many emulators, including Ireland’s Ryanair — is based on the short-haul flight. It makes its money by keeping planes in the air, beating its competitors on airport turnaround times and keeping lean crews, among other things. A carrier that can shave 10 minutes off the time it spends at an airport, where it accumulates costs on ground crews, earns 10 more minutes of profit from its time in the air — 10 more minutes over its competitor.
“If you’re Southwest, the airplane might be up and down six or seven times during the day. That adds up to a giant advantage. Other efficiencies on the ground add up to more,” Kaplan explained. “When you’re up and down twice a day, it just doesn’t add up.”
In other words, the advantages that low-cost carriers have on short-haul flights don’t translate to flights across the Atlantic. And, meanwhile, the traditional, higher-cost carriers can pull the same profit-making tricks the low-cost carriers can, like packing more seats into airplanes — known in the industry as “densification” — on long-haul flights.
The CEO of Norwegian Air Shuttle has said the company’s new fleet of Boeing Dreamliners, designed to be more efficient, will help keep fuel costs low. But Kaplan and other industry analysts, have noted that expensive new planes always have to be in the air for airlines to justify their (in this case) $225 million-plus price tag. That means they have to fly, even half-empty in the off season.
Ryanair’s CEO has said he wouldn’t make the same gambit as Norwegian Air Shuttle’s.
“Unless you get very cheap fuel or very cheap aircraft, it’s going to be hard to differentiate your costs from Lufthansa or Air France,” he said at an industry conference in 2011.
Fuel prices might be low right now. The Dreamliner’s isn’t.
But for anyone who likes to travel and doesn’t care about a few, less-than-luxurious hours in the air, eating peanuts, Norwegian Air Shuttle’s transatlantic bid means cheap fares. For now.
