Norse Atlantic Airways is a long haul low cost carrier that launched in 2022. The airline exclusively flies Boeing 787s, and primarily operates transatlantic flights. Being a profitable low cost long haul carrier can be challenging, especially in highly seasonal markets, like across the Atlantic.
Several months ago, I wrote about the carrier’s rather disastrous 2023 financial results, which saw the airline having a net loss of $169 million on just $439 million in revenue. At the time, executives at the airline insisted that 2024 would be a turnaround year for the airline, and that they saw “a clear path to profitability on a year-round basis.”
So, how is that working out? Norse Atlantic has just revealed its financial results for the first half of 2024, and they’re not pretty. Not only that, but the airline is planning fundamental changes to its business model, which seem sensible, frankly.
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Norse Atlantic reports strong demand, low yields
Let’s take a look specifically at Norse Atlantic’s Q2 2024 financial results, since the second quarter is historically strong across the Atlantic, so this is when Norse Atlantic should be doing best. So, how did Norse Atlantic do?
- Revenue increased by 65%, to $164.8 million
- The number of passengers carried increased by 99%, to 406,306
- The load factor increased from 75% to 82%
- Unit costs ex fuel were down 35%
- Revenue per passenger decreased from $425 to $380
The airline reported a loss of $31.7 million for the quarter. That’s slightly better than in the previous year, but still awful, frankly, when you consider revenue was “only” $164.8 million. That’s a margin of almost negative 20%, which is rough.
Of course the industry overall has been dealing with lower yields, as 2023 was a one-of-a-kind year in terms of low industry capacity, plus huge demand. But Norse Atlantic wasn’t able to turn a profit in the first half of 2023, and it also wasn’t able to turn a profit in the first half of 2024.
At the end of the second quarter, Norse Atlantic had $23.7 million cash on hand, which, ummm, isn’t a whole lot when you’re losing more than that even in your best quarter.
How Norse Atlantic plans to transform business model
Norse Atlantic seems to finally be realizing that the current business model isn’t working great. I don’t see where the upside is for the airline at this point. I don’t think industry yields will improve anytime soon, as there’s no shortage of capacity.
As a result, Norse Atlantic has announced that it’s evolving its business strategy, “to maximize profitability and balance risks.” This entails a few things:
- Norse Atlantic will increasingly grow its proportion of capacity dedicated to wet lease and charter flying; a big uptick in that kind of flying is expected as of Q4 2024, and the airline hopes at least half of its planes will operate with these agreements
- Norse Atlantic hopes that more of the fleet’s capacity and revenue will be locked into long term contracts, whereby the airline will fly aircraft on behalf of other airlines for periods of multiple years
- Norse Atlantic has ended the lease on three Boeing 787-8s early, so the carrier will now only fly Boeing 787-9s, to maximize fleet consistency
So yeah, Norse Atlantic is starting to shrink a bit compared to previous plans, and intends to shift its capacity to charter flights rather than to scheduled flights. If Norse Atlantic can lease those planes out at slightly above marginal costs, then that’s probably the carrier’s best bet. At the same time, I wonder what airlines would be looking to sign a multi-year contract to lease planes.
Norse Atlantic’s challenges should surprise no one
I absolutely love the airline industry, and am grateful that there are people who are passionate about starting and growing airlines. But my gosh, how desperate are people to light money on fire, to launch a business like this? It amazes me that investors buy into these concepts, since there are so many ways you can get a good return on an investment, and this just doesn’t seem like it’s among them.
Running a long haul low cost carrier in a seasonal market isn’t easy. As many are probably aware, the Norse Atlantic business model isn’t unique. In 2021, Norwegian discontinued its long haul flights, as the airline was hemorrhaging money on those routes, and was on the verge of liquidation.
Yet Norse Atlantic is essentially a reincarnation of Norwegian, with exactly the same aircraft, many of the same executives, and some of the same routes. But despite the failure of Norwegian, they tried exactly the same thing, and unsurprisingly, it’s not working out.
Yes, it’s not that hard to make money flying across the Atlantic in summer (though Norse Atlantic isn’t even doing that, it seems), as demand is nearly endless. The challenge is what you do for the non-peak months of the year, when demand is much more limited.
Trying to lease out aircraft to other airlines makes sense, but the challenge is that the aircraft needs for other airlines largely overlap with when Norse Atlantic wants to operate its own schedule, in summer. There are airlines that are successful wet lease operators, like HiFly. But that’s their focus, rather than it just being a side hustle.
I know the executives at Norse Atlantic started the airline with a great cost structure, as they reportedly got amazing deals on the 787 leases, at a time when travel demand was depressed. Even with a good cost structure, it doesn’t change the underlying economics of running a transatlantic low cost carrier. Yet somehow it’s an idea that is tried over and over and over again.
As the airline continues to rack up losses, executives are seemingly starting to realize that the path to profitability with this business model just isn’t there. I just don’t get what they were thinking…
Bottom line
Norse Atlantic Airways has reported its financial results for the first half of 2024, and they’re rough. The airline is continuing to lose money, even during what’s supposed to be the most profitable time of year across the Atlantic.
The airline is now updating its business model, focusing on leasing out its jets as much as possible, while also reducing its fleet, by getting rid of Boeing 787-8s. I’m curious if this is enough to keep the airline in business, or if these 787s will be on the market for a third time…
What do you make of these updates at Norse Atlantic?
The author in this article, although I agree with everything he wrote but when it comes to Norwegian and his conclusion about long haul low cost model. I must say I don't fully agree, one fundamental or rather 2 fundamental issues Norwegian in particular was facing was the infamous rolls royce engine problems that created huge disruptions. Not to mention all the battery issues at release that were causing fire that Boeing had to fix....
The author in this article, although I agree with everything he wrote but when it comes to Norwegian and his conclusion about long haul low cost model. I must say I don't fully agree, one fundamental or rather 2 fundamental issues Norwegian in particular was facing was the infamous rolls royce engine problems that created huge disruptions. Not to mention all the battery issues at release that were causing fire that Boeing had to fix. Norwegian was flying 43 dreamliners at its height, and despite all the challenges, the airline was almost getting ready to be profitable on the long haul market. Buy then the devastating effects of the pandemic came and put a deathblow into everything and killed off the entire project. You could argue and say that Norwegian was the unlucky airline. The formula that they were trying to achieve was working if it wasn't for all the external factors beyond the company's control. Another big difference between Norwegian and Norse is that Norwegian has better branding and recognition than Norse. Norse is not even known in their own hometown which is Norway. I think Norwegian would be in a good position to start flying long haul again in the near future, but not before 2028. First, all the NG fleet needs to be replaced to MAX aircraft, and Boeing being delayed with aircraft deliveries might delay things even further.
I am amazed Norse Atlantic was even given a licence to operate. The original business model had failure written all over it. The definition of madness is trying the same thing repeatedly but expecting a different outcome.
Problem for Norse is they are just not competitive once you add extras that you basically need for long-haul flying. Legacy carriers frequently have great deals and include everything. Also Norse is notorious for awful customer service that is much worse than those legacy carriers no matter your general feelings about them and when things go wrong they do little to help - this obviously doesn't help with brand loyalty, as people try them, have...
Problem for Norse is they are just not competitive once you add extras that you basically need for long-haul flying. Legacy carriers frequently have great deals and include everything. Also Norse is notorious for awful customer service that is much worse than those legacy carriers no matter your general feelings about them and when things go wrong they do little to help - this obviously doesn't help with brand loyalty, as people try them, have an extremely bad experience and never fly with them again. I just can't see any way they can work.
I thought Norse had a power-by-the-hour deal with Boeing, which was suppose to help with the seasonality. In any case, Norse hasn't done enough to resolve winter traffic. Kudos for trying something but I'd say it needs to get more aggressive -- something like Sun Country and Transavia used to do. Obviously, opportunities are limited for wide-bodies, but maybe something like an agreement with a pre-Westjet Sunwing.
That said, as a customer, I love Norse...
I thought Norse had a power-by-the-hour deal with Boeing, which was suppose to help with the seasonality. In any case, Norse hasn't done enough to resolve winter traffic. Kudos for trying something but I'd say it needs to get more aggressive -- something like Sun Country and Transavia used to do. Obviously, opportunities are limited for wide-bodies, but maybe something like an agreement with a pre-Westjet Sunwing.
That said, as a customer, I love Norse and it's downward pressure on transatlantic fares.
It will be hard for them to sign those wet lease contracts in a short period. And agreed with Ben that multi-year wet leases would be unusual in the biz, as they are usually seasonal, sometimes shorter.
The network needs to be considered. Ex-LGW they are operating in very competitive markets, which on one hand I understand due to volume, but on the other hand the competition is too challenging. Why not secondary-ish markets with...
It will be hard for them to sign those wet lease contracts in a short period. And agreed with Ben that multi-year wet leases would be unusual in the biz, as they are usually seasonal, sometimes shorter.
The network needs to be considered. Ex-LGW they are operating in very competitive markets, which on one hand I understand due to volume, but on the other hand the competition is too challenging. Why not secondary-ish markets with fewer frequencies? They also seem to have limited flights into other markets - BKK and CPT seems to be the extent, if looking at their website correctly. Maybe it's traffic rights, but couldn't they be looking at other volume leisure and VFR markets? LGW-HKT, LGW-CUN (had a group of pals traveling from LON to CUN this month, and there were no direct flights they could find), LGW-JRO-ZNZ triangulate, etc etc etc...?
TUI already operate many of these routes you are suggesting Norse try.
LGW-DXB would be my suggestion over the winter months for them to try.
"had a group of pals traveling from LON to CUN this month, and there were no direct flights they could find"
They suck at searching then, or they lied to you about trying.
BA2203 is 6xWk LGW-CUN
BY048 is 3xWk LGW-CUN
Both have been operating all month. Took 5seconds to find them.
Carriers like NORSE are a problem with their lower fares and generally inferior product which the larger legacy carriers are forced to match with a diminished product. The market is often driven by the low cost Operator even though those Carriers barely manage to stay afloat. Carriers like NORSE are a parasite and need to go away. No way in hell will the legacy carriers offer a Better experience while matching the fare of a...
Carriers like NORSE are a problem with their lower fares and generally inferior product which the larger legacy carriers are forced to match with a diminished product. The market is often driven by the low cost Operator even though those Carriers barely manage to stay afloat. Carriers like NORSE are a parasite and need to go away. No way in hell will the legacy carriers offer a Better experience while matching the fare of a bottom feeder like NORSE and people need to understand that. Why would they?
Hey, all start ups need time and money, and generally are going to lose money the first 3 to 5 years. It,s naive to think otherwise. And face it, their competitors do not want to have to compete with a low cost business model. Especially on these long distance routes. My only suggestion would be to improve the inflight product experience. But competition is good for the consumer, so really hope they find the keys...
Hey, all start ups need time and money, and generally are going to lose money the first 3 to 5 years. It,s naive to think otherwise. And face it, their competitors do not want to have to compete with a low cost business model. Especially on these long distance routes. My only suggestion would be to improve the inflight product experience. But competition is good for the consumer, so really hope they find the keys they are going to need to be a success. And contrary to the comments I see, they have increased their turnover and pax carried by a lot this year..and reduced their loses...
Longhaul low cost flying doesn't work esp. since they don't compete for high fare business traffic which is what keeps legacy/global carriers going during the off-peak periods of low tourism-related demand.
It is also becoming increasingly apparent that UA's strategy of holding onto aircraft during the pandemic probably was not the right choice as yields soften even with a much smaller transatlantic low cost sector. UA did not get the operating cost improvements that most...
Longhaul low cost flying doesn't work esp. since they don't compete for high fare business traffic which is what keeps legacy/global carriers going during the off-peak periods of low tourism-related demand.
It is also becoming increasingly apparent that UA's strategy of holding onto aircraft during the pandemic probably was not the right choice as yields soften even with a much smaller transatlantic low cost sector. UA did not get the operating cost improvements that most other legacy carriers got by retiring aircraft and those cost improvements are necessary as yields will continue to weaken on international routes.
And it is also notable that the 787-8 is increasingly being pushed out of service; the baseline or non-stretch versions of aircraft never provide economies as good as stretch versions and that is all the more true with widebodies in longhaul international service.
Oh good. More UA comments in a thread that has nothing do with them at all. Loon.
it has EVERYTHING to do with UA.
Whether you know it or not, Scott Kirby SPECIFICALLY said early on during covid and covid recovery that its strategy NOT to remove aircraft types as AA and DL did was based on a belief that pricing would fundamentally be stronger because so much low cost TATL capacity was pulled from the market including because of the failure of Norwegian.
It was a given that there would be...
it has EVERYTHING to do with UA.
Whether you know it or not, Scott Kirby SPECIFICALLY said early on during covid and covid recovery that its strategy NOT to remove aircraft types as AA and DL did was based on a belief that pricing would fundamentally be stronger because so much low cost TATL capacity was pulled from the market including because of the failure of Norwegian.
It was a given that there would be a rebalance of capacity to demand and that TATL demand would fall as the amount of revenge travel falls - which is what we are seeing.
AA and DL reset their cost structures and DL led the industry with pay raises which were possible because of its higher revenue generating ability. It took a chunk of its aircraft-related efficiency gains and rolled it into higher employee compensation.
AA lags on revenue generation which is why its profit margins on its international network continue to fall while UA has one of the least fuel efficient international fleets of any global airline which shows up by the fact that DL's international system profit for 2023 was almost 50% higher than UA's even though UA operates a much larger international network. It also isn't a surprise that AA and UA are dragging their feet in getting new contracts for their FAs.
Long-haul low cost carrier doesn't work in TATL as you said, but it does work in TPAC. ZIPAIR Tokyo, subsidiary of JAL, is profitable, and so is Air Premia of South Korea.
TATL market is just too competitive. Icelandair is doing quite well thanks to its geographical advantage, and both TAP Portugal and SAS are dumping the airfare by flying narrowbodies.
TPAC is quite different because there's nothing like Icelandair in this market...
Long-haul low cost carrier doesn't work in TATL as you said, but it does work in TPAC. ZIPAIR Tokyo, subsidiary of JAL, is profitable, and so is Air Premia of South Korea.
TATL market is just too competitive. Icelandair is doing quite well thanks to its geographical advantage, and both TAP Portugal and SAS are dumping the airfare by flying narrowbodies.
TPAC is quite different because there's nothing like Icelandair in this market and because it's too far to fly narrowbodies. Chinese carriers used to dump the price but they're now almost non-existent in TPAC due to political reasons.
TPAC fares are very high because of the significant reductions in Chinese carrier capacity so the S. Korean and Japanese carriers don't have to lower fares near as much in order to gain passengers.
Yes, and that's why long-haul low cost works in TPAC now. Chinese carriers are not likely to regain the TPAC capacity in a decade, and FSCs are charging really high prices thanks to it.
Most Asians earn less than Americans or West Europeans, so even a slightly lower fare than FSCs is very attractive to them. They're a lot more cost-sensitive than Westerners, and long-haul LCCs fulfill their needs.
Norse will fail. Only a matter of time.
More morons that think if we can only increase our load factor for every fare we lose money on some how we will make money. The ULCC business model only works it seems within inter Europe flying (short hops often out of under used airports).
LCCs in Europe fly out of normal airports too, its not 2005 anymore.
Ryanair makes money, despite low fares, by offering a superior product at a lower price to the likes of LH/BA/etc. on top of making loads of ancillaries.
There is more legroom on Ryanair than in BA J within Europe.