Business

Norse aims to crack challenge of low-cost transatlantic travel

Bjorn Tore Larsen is trying to crack one of the great challenges in aviation: creating a successful low-cost transatlantic airline.

The chief executive of Norwegian start-up Norse Atlantic, which flew the first of its daily services between London Gatwick and New York on Friday, believes enduring demand for travel and a “cautious” approach will help his airline succeed where others have failed and establish a credible rival to dominant carriers like British Airways and Virgin Atlantic.

“It is definitely very important for us to be conservative, simply because we are already in a business that eats cash if it gets the chance ,” he said. “I would be a fool if I did not admit the aviation or the airline business is a risky business.”

In addition to its service between London and New York, it has plans for a gradual expansion including Berlin to New York and Los Angeles, as well as routes already operating from its home base of Oslo.

Many others have tried and failed to build a successful business on these transatlantic routes, from Freddie Laker’s Skytrain in the 1970s to Iceland’s Wow Air, which collapsed in 2019.

Norse has leased 15 Boeing 787 Dreamliners that used to be flown by Norwegian Air Shuttle, another transatlantic upstart, which expanded rapidly into the long-haul market only to pull out in 2020, struggling under the weight of its own debt.

Norwegian is now a short-haul only airline after a restructuring, but its boom and bust experience has not deterred Larsen. “We are very different. We are a very different company with a very different business model,” he said.

While Norwegian combined long-haul flying with shorter flights within Europe in a complex schedule, Norse will focus only on a few point-to-point routes flown on aircraft leased at attractive rates at the height of the pandemic.

“I know some people say a low-cost long-haul airline does not work, but I would say nobody has tried it, actually,” Larsen said.

“You really haven’t seen a pure, long-haul carrier that has been able to manage the financial cycles of getting cheap, great aircraft . . . at a time where you can have low overhead costs,” he said.

Larsen promised return fares between London and New York from $300, although he said only the cheapest seats would be sold at this price. The airline has targeted profitability in its first full year of operation, 2023, and its fundraising in 2021 was nearly three times oversubscribed.

Still, Larsen, a former shipping executive, is striking out into aviation at a difficult time for the industry. After two years of travel restrictions, the industry is now struggling to cope with labour shortages and passenger numbers.

Larsen said Norse overhired across different jobs, sometimes by around 10 per cent, to give it more resilience to cope with disruption. But the worsening economic outlook raises questions about whether current high levels of demand are sustainable.

Larsen said that rising fuel costs would have to be largely passed on to consumers and that a recession would “of course” hit demand, but that many passengers would ultimately still choose to travel.

“We think travelling is very high on people’s lists . . . I think many people would go for that weekend away, rather than buy a new TV.”


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