Scandinavian Airlines (SAS) reported good results earlier this month and now its arch-rival in Norway, Norwegian Air, has done the same. Norwegian is making a lot of money on the fees it charges for everything from seat reservations to checking luggage, something SAS doesn’t do but sometimes still comes out cheaper.
The two airlines have been competing hard, some might say bitterly, since Norwegian revamped its fleet and announced in 2002 that it was planning to re-launch itself as a low-cost scheduled airline flying Norway’s most trafficked domestic routes. It quickly added international routes as well and competes head-on with SAS both in Norway and around Europe.
Norwegian reported late last week that itearned a pre-tax profit of NOK 75 million during the second quarter, a sharp improvement from the NOK 188 million loss it logged in the same period last year. It also flew nearly 4 million passengers in the second quarter, up 26 percent, and had a load factor of 78 percent, compared to 75 percent last year.
Newspaper Aftenposten reported it raked in around NOK 1 billion in extra fees (usually called gebyr in Norwegian) that are charged passengers who want to sit together, transport luggage beyond what they’re allowed in strict carry-on rules or receive other services that used to be included in the price of an airline ticket. Aftenposten reported that the fees charged by Norwegian have risen from 5 percent of total revenues in 2007 to 12.3 percent last year.
“Our pricing philosophy is to give the customer the cheapest possible ticket, and then they have the freedom to pay for what they want in the form of extra services,” Frode Foss, finance director for Norwegian, told Aftenposten. “If it’s important for passengers to sit together, they can pay for seat reservations. If not, they’ll save money.”
Norwegian doesn’t want to call the extra fees gebyr, though, claiming the fees are voluntary. Rival SAS doesn’t charge extra for seat reservations or checking luggage, for example, and has advertised heavily of late that in some cases, an SAS ticket between Oslo and London, for example, can be lower than Norwegian’s total fare for the same route when its fees for the same services are included.
Foss maintains that customers “like our pricing philosophy, where they have the most freedom to choose or drop extra services.” Norwegian is offering its new on-board Internet connection free of charge through the end of this year but is evaluating whether to start charging for it, too, next year.
Now Norwegian plans new intercontinental routes and announced last week that it was already adding to its orders for new Boeing 787-8 Dreamliner jets. The airline earlier agreed to buy three and lease two Dreamliners, and now it’s leasing a sixth. Two will be delivered in 2013, allowing Norwegian to add such routes as Oslo-New York and Oslo-Bangkok.
Views and News from Norway/Nina Berglund
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