The TTG Interview: A transatlantic, low-cost battle
TTG StaffNorwegian boss Bjorn Kjos’s strategy for success is to keep a close eye on the bottom line and make the most of every aircraft – but he also relishes the odd ‘dogfight’ with rivals.
As an ex-fighter pilot and the writer of a literary thriller, you might expect the boss of Norwegian to have a romantic view of flying.
After all, he’s currently pursuing one of the industry’s holy grails: long-haul and low cost – something that has been attempted with only limited success over the past 40 years.
But does Bjorn Kjos see himself as a visionary? Not quite, it seems. When we meet, I’m keen to find out if he believes there will ever come a time when he knows he has succeeded in his quest.
“We know it because it’s profitable. That’s the key to it – if you’re profitable you’ve succeeded,” he tells me bluntly.
Focusing on the bottom line is something you’d expect from a qualified lawyer. Nevertheless it would be wrong to paint Kjos as a staid, corporate executive.
Frequently in our chat he breaks out into infectious chuckles and he shares the same combative attitude to his main legacy airline rival – SAS – as Richard Branson and Michael O’Leary do for theirs.
This mix of debonair daring and a ruthless focus on cost might just explain why his company is currently doing what many people thought couldn’t be done.
Sir Freddie Laker, who was one of the first to try to sell customers cheap transatlantic tickets, failed, as did a slew of carriers including Oasis Hong Kong Airlines and Zoom Airlines. So what makes Kjos so confident that Norwegian can prosper?
He believes Laker’s failure was down to the fact that in the 1970s there was no internet, and he was solely reliant on travel agents.
Kjos is also keen to highlight that a key way to ensure success is making sure that aircraft are in the air more often than they’re sitting on the concrete.
“You don’t earn any money when the planes are on the ground. That means that you have to have high utilisation, you have as few overnights stops as possible and of course you have a very efficient operation.”
Technology edge
Kjos has also been aided by the development of new aircraft by the big two manufacturers.
Norwegian will take delivery of 30 more Dreamliners over the next five years. The jet can spend more time in the air than its gas-guzzling rivals, giving the airline greater flexibility when it comes to routes.
He cites the example of a legacy carrier flying from Europe to South Africa. The aircraft ends up sitting on the ground for most of the day because the airline has to wait for the return flight and can do nothing else in the mean time.
“We have to build a system where we fly long and short flights and where we are only on the ground for not more than two hours – preferably 90 minutes”
Only the Dreamliner and Airbus’s equivalent – the A350 – are capable of fulfilling this.
“If I had gone for the A330 I would have to actually take off passengers [due to the weight], I couldn’t fly with a full load. I don’t have the range to fly with a full load. And I can’t take on any cargo,” he says.
Norwegian’s other next-generation aircraft will offer it even more flexibility. The airline is a European launch customer of Boeing’s 737 Max jet. It intends to operate the aircraft on thinner routes direct from smaller cities, such as Edinburgh to Stockton on the US west coast.
Kjos’s plans for an uber-efficient airline with routes criss-crossing the globe are a far cry from his own and Norwegian’s humble origins.
He joined the army, then trained as a fighter pilot before embarking on a new career as a lawyer. He was one of the founders of the company back in 1993 that formed to fly regional routes for another airline, Braathens.
For around a decade the carrier flew short routes across Scandinavia.
This all came to an end in 2002 when regional powerhouse SAS bought Braathens and promptly terminated the contract with Norwegian.
“There were two options: either close it down or start all over again with a 737 operation because SAS was alone in the market,” he says, before adding: “SAS tried to take us out from day one.”
New markets
Even back then, Kjos knew that the key to being able to compete was scale, which explains why the airline has spent so much on new aircraft.
This expansion drive has come at a cost though. While Norwegian has been profitable for much of its life it made an annual net loss in 2014 of €120 million.
The fall into the red came on the back of well-publicised problems for the Dreamliner, as well as disputes with US regulators over the new transatlantic routes.
Things got worse earlier this year when workers went on strike for 11 days, resulting in 1,891 cancelled flights with more than 200,000 passengers affected.
Eventually the two sides reconciled, committing to a three-year agreement.
Norwegian has also sought to try to eliminate regulatory headaches by securing an operating licence in the UK. This would offer the airline the opportunity to head into new markets including Asia, South America and South Africa from the UK.
The move away from its Scandinavian homeland into the UK has largely been to the benefit of Gatwick, where Norwegian is now the third largest airline.
From the West Sussex airport, passengers are now able to fly to New York, Los Angeles, Fort Lauderdale, Puerto Rico and May 2016 Boston, all from £149 one way. Load factors are up at 90% and other airlines are now attempting to get in on the act.
Icelandic carrier Wow Air started flying to the US in spring, albeit with a stopover in Reykjavik and Canada’s WestJet is set to begin flying between Canada and the UK next year.
Kjos is ambivalent about his rivals. “We couldn’t get the figures to add up with the Boeing 767 [the aircraft WestJet will use]. We couldn’t reach LA and we couldn’t reach Bangkok.”
He is even more critical when it comes to the fate of his larger more established full-service legacy rivals.
“They have to actually redo their cost element – that’s essential for them to do. Remember they have been operating for a long time; they have been heavily loss making on the short-haul and they use the long-haul to subsidise the short-haul and they’re still doing it.
“We are profitable on the short-haul and we have a much larger network than these legacy carriers.”
Even at the age of 69, Kjos clearly still has the appetite for battle (he compares his skirmishes with SAS as a “dogfight”), but he says he is happy to sit back and let others take control.
“We have very professional people running the operation, running the airline… I’m more or less a coach running on the sideline applauding.”
With Norwegian planning further expansion over the coming years, it looks like he’ll have plenty of cheering to do.
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