Bjørn Kjos seems to have picked himself up, dusted himself off and found a way to take off again, even as the airline he founded remains under bankruptcy court administration. The former Norwegian Air boss may now even profit on the remnants of his former airline’s low-fare intercontinental service, which left Norwegian Air deeply troubled and heavily in debt even before the Corona crisis grounded airlines around the world.
Kjos has been making headlines in Norway once again, less than two years after he “retired” as Norwegian’s CEO and turned over the controls to his now-beleaguered successor Jacob Schram. Kjos, age 74, has emerged as part of a group keen on launching a new airline called Norse Atlantic Airways. They’re aiming for a stock market listing next month and leasing several of Norwegian Air’s long-grounded Boeing 787 Dreamliners, to re-launch low-fare long-haul flights between Europe and the US. They hope to later expand their route system to Asia.
Plans also include a potential cooperation with a “new” and dramatically downsized Norwegian Air that’s expected to emerge from bankruptcy proceedings. Newspaper Dagens Næringsliv (DN) reported this week that Norwegian Air had confirmed talks with Kjos and others behind the fledgling Norse Atlantic Airways.
“We’re positive towards cooperation that would involve us as operators of short-distance flights in a network with other airlines,” Norwegian Air spokesman Esben Tuman wrote in and email to DN. “Right now, though, our attention is on getting out of the reorganization processes, so an eventual cooperation is something we’ll have to get back to.”
Bankruptcy and bailouts
Kjos’ successor at Norwegian Air, Schram, has already had to devote most of his attention to simply trying to keep Kjos’ once-high-flying airline in the air at all. Schram immediately needed to boost capital, pare all the debt built up during Kjos’ tenure, and return Norwegian to profitability. Then all those efforts were infected by the Corona crisis.
Norwegian Air, which suffered another 97 percent decline in traffic in February and posted losses of NOK 14.9 billion in the fourth quarter of last year, ended up filing for bankruptcy in Ireland late last year and then also in Norway, after it decided to dump its long-distance service. The parent company (with lots of subsdiaries set up for tax, crewing and regulatory purposes) now seeks to return to its roots as a domestic carrier that also will offer some routes around Scandinavia and Europe. It’s also lobbied hard for state bailouts from a Norwegian government reluctant to make Norwegian taxpayers cover losses dating back to Kjos’ ambitious expansion era. The alternative, however, was the loss of a major domestic carrier in a mountainous country that needs airline service, and the loss of lots of jobs.
Left scattered along the way have been Norwegian Air’s creditors, former Norwegian Air employees who suddenly lost their jobs, and around 34,000 frustrated customers who now can’t expect full compensation for cancelled flights last year. There’s also lots of griping over Norwegian Air’s old frequent flyer rewards program, which isn’t being honoured as expected.
Many former employees are angry and feel betrayed. They’ve been sending emails to journalists, complaining bitterly about how Norwegian and its subsidiaries can selectively file for bankruptcy and allegedly avoid responsibility for the workers. “It’s sad to see how Norwegian has handled its employees in Italy,” Nicholas Dormia told newspaper Aftenposten. He was a flight attendant on the Dreamliners and has led demonstrations against Norwegian Air in Rome.
“We were the ‘Red Nose Warriors’ as long as they (Norwegian’s management) needed our support in social media,” Dormia said. “We became the ‘Red Nose Victims’ as soon as we became expendable for the company.” That happened shortly after Norwegian announced it was dropping its intercontinental service to concentrate only on rescuing domestic and European routes.
Others who used to work on Norwegian Air long-haul routes have complained they weren’t even alerted to the bankruptcy filing that affected them directly. They call that “disgraceful” and “very disappointing.”
Now Kjos and the founders of an international crewing agency, which enabled the airline industry to have minimal responsibility for low-paid crews, are hatching the new low-cost venture. “We have an historic possibility to build up a new airline from the beginning,” claimed founder Bjørn Tore Larsen in Norse Atlantic Airways’ initial press release. “When the world opens up again (after the Corona pandemic) there will be a need for a new low-fare airline in the intercontinental market.”
That’s debatable, according to airline analysts and economists, but Larsen was joined by Espen Høiby, a former SAS pilot and brother of Crown Princess Mette-Marit, who also was a co-founder of their crewing agency OSM Aviation. “We’ll start with 12 of Norwegian’s former Dreamliners,” Larsen told Norwegian Broadcasting (NRK) on Monday. “The difference between us and Norwegian is that we don’t have any debt, and we can get the aircraft for half-price.”
They plan to invest NOK 1.5 billion in the new airline based on Norwegian Air’s remains, and start service over the Atlantic in December. Destinations will include New York, Los Angeles, Paris, London and Oslo. If things go well, they’ll expand to Asia.
Norwegian Air’s former founder Kjos will be a member of Norse Atlantic’s board, bringing in what Larsen calls “solid experience” from building up an international airline with overseas routes. “Kjos has taught us a lot about what works and doesn’t work when it comes to long-distance routes,” Larsen said. Yet another “Bjørn” is joining the team as well: Kjos’ longtime business partner Bjørn Kise.
Given Norwegian Air’s infamous debt and history of stranding passengers around the world when its Dreamliners suffered technical problems, the new airline may be best served by concentrating on what caused all the trouble, and striving to avoid it. Larsen insists Norwegian was just “very unlucky” with its defective Dreamliners, and that their motors “have been repaired.”
Analysts remain skeptical. “A low-fare strategy on long distance is extremely difficult in all markets, and I don’t think market conditions in the trans-Atlantic market can make this work,” Daniel Röska of London-based firm Bernstein told DN. “After the Norwegian odyssey, it will be interesting to see whether leading firms and aircraft producers will finance this experiment one more time.”
Frode Steen, a professor at business school NHH (Norges Handelshøyskole) in Bergen, also sees difficulties ahead. “They’re gambling on a part of the market they think will come back (after the pandemic), and they’ll need mating (partner deals with other airlines) and lots of travelers,” Steen told DN. “If they’re going to fly London-New York, there are lots of customers there, but if they intend to exploit being a Scandinavian company, they’ll need a feed.” That means it’s critical that Norse Atlantic has solid short-route partners that in turn could exploit the benefit of feeding into a long-distance carrier without the risk. That raises a question of which airlines might fly customers in the US or Britain, for example, to Norse Atlantic’s gateway points.
Steen noted that when Bjørn Kjos built up Norwegian Air, things moved quickly and he took on enormous risk with so many aircraft orders. Steen thinks perhaps Kjos and Norse Atlantic will have somewhat lower ambitions this time. Larsen indicated that they do, telling Aftenposten that “low costs are most important, and having a good product. It’s also about walking before you run. We will grow gradually and not put everything in operation overnight.”