The stakes in the transatlantic fare war sparked by low-cost carrier (LCC) Norwegian Air Shuttle just went up yet again. The airline announced yesterday that it would expand with four new transatlantic routes from Los Angeles and New York to Milan, Amsterdam, and Madrid starting in the summer. The airline now offers 61 nonstop routes in the competitive transatlantic market.
Ever since Norwegian proved that passengers will, in fact, forgo basic amenities and services for cheap long haul flights, mainline competitors have been forced to adapt. Meanwhile, the carrier has gobbled up an ever-growing slice of the transatlantic pie, with travel intelligence firm OAG stating that Norwegian’s capacity on the route is up 72% from December last year, accounting for 7.34% of all capacity offered on Europe to North America routes.
With introductory fares to Madrid and Milan nonstop one-way from Los Angeles as low as $229 (including taxes) passengers are pleased. But investors? Not so much. While the expansion has been nothing short of aggressive—Reuters reports these four new routes add up to 25 new routes this year alone—it has strained the balance sheet and resulted in an increase of net debt, leaving investors worried.
The Financial Times reports that the company’s share price has dropped 40% over the course of the year. Meanwhile, other LCCs such as Ryanair, EasyJet, and IAG (which owns the Norwegian long-haul competitor LEVEL) are up, thanks in part to an overall robust year for the airline industry.
One top Norwegian investor, speaking to the FT summed up the airline’s apparent position concisely: “The strategy is good, but the execution is not.”