A delegation from aircraft manufacturer Boeing was due to land in Oslo on Wednesday afternoon for what media outlets are calling “crisis talks,” after Boeing’s new 787 Dreamliner jets have caused nothing but nightmares for Norwegian Air. The once-high-flying airline, meanwhile, also faces the threat of a strike later this autumn.
Newspaper Dagens Næringsliv (DN) reported on Wednesday that analysts believe Norwegian is suffering not only a tarnished reputation because of all the trouble with its new Dreamliners, but heavy financial losses as well. Delays and cancellations can cost as much as NOK 1,300 per passenger, DN reported, while tens of thousands of passengers have been affected when the Dreamliners have had to be replaced with older, leased-in aircraft.
Analyst Hans Erik Jacobsen at Swedbank First Securities, for example, told DN that he initially expected Norwegian’s losses on the new long-haul routes to hit NOK 150 million. Ongoing problems with the Dreamliners have worsened the situation, he says, and Norwegian is expected to demand compensation from Boeing.
Shareholders have also been hit hard by the Dreamliner problems, with Norwegian’s share price down 40 percent in the past two months. The dive is especially significant since Norwegian otherwise is reporting increased profitability on its European operations, and has benefited from lower fuel prices and better exchange rates against the US dollar.
‘Too many operating problems’
Norwegian Air’s chief executive and pilot himself, Bjørn Kjos, summoned the representatives for Boeing after what airline spokeswoman Anne-Sissel Skånvik has called “too many operating problems with our Dreamliner aircraft.” She told news bureau NTB that the problems “should have been spotted before the aircraft were delivered. We’re demanding that Boeing gets a grip on these technical things.”
Norwegian still only has two Dreamliners to serve its new long-haul routes to Bangkok and New York. Their delivery was delayed by more than two months because of earlier battery problems that grounded the new aircraft worldwide. Since then, other problems have occurred involving the aircraft’s hydraulics and Norwegian has had to lease in other aircraft for the intercontinental routes.
This has led to ongoing flight cancellations and lengthy delays, with passengers left sitting in airports. On Sunday, for example, Norwegian’s scheduled flight to New York that’s supposed to leave at 6pm didn’t take off until around 9:45pm. No advance warnings were issued regarding the delay, and when one passenger called Norwegian at around 2pm, she was told the flight was on time. She ended up languishing at the airport along with other passengers for hours, just as she had when traveling to Oslo from New York the week before. Passengers complained that Norwegian’s crew still failed to offer food or drink on board as compensation for the delay, “not even a cup of coffee” before finally landing late at their destination.
The unreliability and poor service on board is hurting Norwegian’s reputation, even though the problems arguably stem from Boeing’s failure to deliver reliable aircraft. “The reliability hasn’t been as expected for brand-new aircraft, so something needs to be done quickly,” Skånvik said. “Boeing clearly hasn’t had quality control that was good enough.”
It can also be argued, though, that it was Norwegian’s decision to go ahead with its launch of new intercontinental service before the new Dreamliners were delivered, and without any membership in international airline alliances that could have offered back-up support for stranded passengers. Norwegian’s decision to operate the routes to Bangkok and New York with only the two Dreamliners thus left the airline vulnerable when the Dreamliners failed to perform as expected.
All told, Norwegian has ordered eight Dreamliners, with the third one now due for delivery in November. The other five are expected in 2014 and 2015 and will be put on additional new routes to San Francisco and Orlando.
Strike threat, too
Norwegian, meanwhile, also faces the threat of a strike this autumn. Labour organization Parat complains that Norwegian isn’t upholding agreements on use of foreign pilots and cabin crews.
Newspaper Aftenposten reports that a demand for regulation of such use will be part of labour negotiations this fall. If the two sides don’t agree, pilots and/or flight attendants may be called out on strike.
The cabin crews are unhappy that Norwegian has used, for example, Spanish crews who are paid much lower wages than Norwegian crews on flights within Norway. Parat officials said they had no objections to the use of Spanish crews, but claimed they must receive the same pay as Norwegian crews when they work on flights within Norway or originating from Norway.
Skånvik responded that Norwegian Air doesn’t intend to turn over operations of the airline to the unions representing employees. Skånvik told Aftenposten that Norwegian will view Parat’s complaint as “posturing” before negotiations, and that actual negotiations will take place around the table.