Oslo-based Norwegian Air is off to a rocky start of the summer travel season, with the head of Norway’s consumer council accusing it this week of “gambling with its passengers’ flights.” Now the airline’s share price has taken a dive along with its customers’ confidence, after its long-time finance director decided to call it quits.
An announcement on late this week that Frode Foss was resigning with immediate effect sent investors into a tailspin. Their Norwegian stock sell-off on Thursday drove the airline’s share price down 7.75 percent. Analysts viewed that as a sign that the airline’s investors were very sorry to see Foss go.
“It’s clear from the share price fall that Foss has been appreciated by the shareholders,” Jo Erlend Korsvold, an analyst at brokerage firm SEB, told news bureau TDN Finans. “He has had firm control over the debt situation at the airline, which is an Achilles Heel for Norwegian with its high debt exposure.”
Now there are concerns that Norwegian has lost a key management executive for reasons that prompted speculation. Foss himself insisted that after 15 years as finance director he simply wants to do something else. “There’s a time for everything,” Foss told newspaper Dagens Næringsliv (DN), saying that he’d been working at “a high tempo” for all of those years. “We have opened new chapters all the time, and I have worked much more than a full-time job.”
Resignation ‘a bit surprising’
Asked whether he wants a new job within the airline industry, Foss said he thinks it’s “time for completely different challenges. First I’ll take a long vacation.” He denied there was any conflict beind his abrupt departure, adding that it was “natural” for top management changes to occur quickly at a stocklisted company. He’ll be replaced by Tore Østby, who has worked as head of investor relations at Norwegian since the fall of 2014 after 15 years in Norwegian brokerage firms and a stint at PR bureau First House.
“Foss has been with Norwegian since the start and it came perhaps a bit surprising that he’s now quitting,” said Østby, who has worked closely with Foss for the past three years. Østby claimed that Norwegian has “good cost control, that we’ll work further with.”
Norwegian’s embattled founder and chief executive Bjørn Kjos, age 70, is left to carry on, however, without the colleague whom many viewed as his “right-hand man” and potential successor at the airline. Kjos stated that he could understand, though, that after 15 years as finance director, Foss wanted to do something else, noting that Foss had done a “very solid job” at Norwegian for which he was grateful.
The high-level management change came just as Norwegian was also hit by statistics showing that while its traffic continued to rise (up 10 percent to more than 3 million passengers in June), the airline also topped Norway’s list of airline passenger complaints. Randi Flesland, head of Norway’s consumer council (Forbrukerrådet). pointed her finger at the airline that recently stranded thousands of its passengers once again after cancelling a string of scheduled flights for which it lacked pilots.
“They gamble with passengers’ flights,” Flesland claimed. They have failed in areas such as operations, information and customer service, according to the complaints received by the consumer council.
“We understand that it’s possible to run into problems with planning, but when it happens year after year after year, then it’s gambling,” Flesland told news bureau NTB. When they do run into problems, like failing to have enough cockpit crews to operate all the flights they scheduled and sold seats for, Norwegian has much worse follow-up than other airlines: “They don’t offer enough information early enough, and it’s impossible to get through to customer service either on the phone or at the counter,” Flesland said. “They don’t have enough staffing in their customer service.”
Kjos, who’s recently been traveling on business and taking delivery of new Boeing 737 MAX aircraft for long-distance routes, was absent when passengers were stranded at Oslo’s main airport at Gardermoen and elsewhere in Europe during the first major departure weekend after school holidays began in late June. He later told Dagens Næringsliv, though, that “it’s always unfortunate when passengers are affected by unforeseen problems like this, and I don’t like that at all.” While others like Flesland question whether the problems could be characterized as “unforeseen,” Kjos insists they were. He and his management simply expected that more pilots would be willing to give up their own holidays to work, in return for double overtime pay.
Kjos also insisted that it was “not wrong of us” to bypass the Norwegian Pilot Union in Norway “and go directly to the pilots with an offer to work extra in return for extra pay. This was an acute need.” They union has claimed that violated the pilots’ collective bargaining agreement with the airline.
Norwegian’s management and the union, meanwhile, disagree strongly over whether the airline has enough pilots to fly all its scheduled flights. “We have hired 400 pilots just this year, and we have a major training program,” Kjos told DN. “And so we’re dependent on buying pilots’ days off during the most hectic weeks of the year. That’s completely normal.” His own chief in charge of the pilots, however, Tomas Hesthammer, admitted to newspaper Dagbladet last week that Norwegian has “too few” pilots. “We’re doing all we can to solve this problem,” Hesthammer told Dagbladet, “but the long-term solution is to hore more pilots.”
By late last week, Norwegian’s summer flight cancellations seemed to be forgotten as Kjos cut ribbons at Boeing’s airstrip in Seattle and the airline’s first 737 MAX took off for Oslo. Kjos even offered unusual on-board service of food and drink, including Champagne, at no charge, joking that Boeing was paying for it. The new jets’ operating costs are expected to be 25 percent lower than the airline’s other relatively new aircraft, and they can fly longer distances. Kjos disclosed that he’s also been helping Boeing with another “secret” project that involves the design of entirely new long-distance “Middle of the Market” planes that will be bigger than the 737 but smaller than the 787 Dreamliners.
Meanwhile Kjos is still trying to gain permission from Russia to fly routes directly through Russian airspace for which rival Scandinavian Airlines (SAS) currently has exclusive rights. “I have the impression that Russia is positive towards negotiating a new agreement and understands our position,” Kjos told DN. The new routes are critical for enabling Norwegian to run more flights to Asia.
Kjos will first have to go through more tough negotiations with its pilots regarding a new contract this autumn. The pilots went out on a highly disruptive strike two years ago that only ended after Kjos signed an agreement that tied the pilots legally to Norwegian’s parent company and guaranteed their jobs. Asked whether he’s willing to sign a similar agreement, Kjos said it was too early to say, “but we are utterly dependent on the pilots in Norway. We won’t be reducing our activity at home.”