Norse Atlantic Airways, the new, Norwegian start-up airline, has confirmed that Bjorn Tore Larsen, Norse’s CEO, will subscribe for stock worth the equivalent of $10 million, while $64 million has been allocated to Handelsbanken, DNB Asset Management and Nordea Investment Management.
Following the private sale at 20 kroner a share, the airline plans to list on the Oslo Stock Exchange in mid-April. Arctic Securities, Pareto Securities and SpareBank 1 Markets have been appointed to manage the placement.
Proceeds from the share sale will provide working capital and fund lease deposits on up to 12 (depending on how the sale goes) ex-Norwegian 787s. Norse is looking to launch in December 2021 with services linking New York, Los Angeles and Miami with London, Paris and Oslo, with expansion to Asia coming after.
This comes on the back of Flyr raise of 600 million kroner, backed by investors that Nordea. Flyr aims to begin flying in the first half of 2021. Currently, Flyr shares are trading down from the IPO level and this might yet have an impact on the Norse Atlantic placement. Lessors will rejoice the fact that the Norwegian 787s will be going straight back out on lease as the pandemic restrictions begin to lift at the end of 2021 and this outcome is better than anyone could have hoped for not 12 months ago.
Can Norse succeed where so many low-cost transatlantic hopefuls have failed? That is what everyone, even members of the public with no aviation expertise, will ask since it seems to be general knowledge that many have tried, and all have failed – including much of this very same Norse team. The base costs for running the airline will be lower this time around than any attempt before it, and it therefore it has the best chance of succeeding compared to any venture of this type has ever had. The one thing it doesn’t have is a recognisable brand name - others Norwegian/Virgin at the outset/Laker – all had that advantage. Norse does not have that power, which worries many. Nonetheless, Norse will gamble, to an extent, on the fact that the flag carriers are too weak to come down to its price level and compete. I do not believe that for one minute; I believe that the likes of IAG will fight to ensure total domination on the all-important core Atlantic routes. It is this point that many fail to grasp. Indeed, when it comes to Atlantic routes and options for expansion, IAG will exit COVID restrictions far stronger than it went in. The news today that Aer Lingus will finally base at Manchester, UK for direct flights to NYC, Orlando and Barbados is very welcome news and – make no mistake – the demand for such scheduled direct routes in a catchment area of some 7m people is significant.
Before COVID restrictions, we were all talking about the move to direct flights over stop-overs. COVID-19 will speed that trend for direct flights exponentially. Aer Lingus has seen this and has acted. This is what Norse is up against. If it stays at LGW as Norwegian then it has to compete with the full might of BA, Virgin and all the US majors out of the fully globally connected LHR just up the road. If Norse wants to really crack the UK/US market, it has to compete at airfields such as Manchester in the North with very large population areas in the immediate vicinity. Emirates and Etihad saw this and acted a decade ago to great success, but the low-cost carriers have all to-date been fixated upon London – a market where they cannot hope to win against all the majors of the UK and US combined. IAG/Aer Lingus were pondering the Manchester move before COVID struck but, in the context of this editorial, we could argue it is as if they saw the possible threat coming and moved to close the market gap at the soonest opportunity in 2021. We can expect a lot more of that over the coming months and years.
In the UK, we remain in lockdown as are many jurisdictions around the world, but wow what a market we are in. The bounce – when it comes – is going to be terrific and airlines must use that high demand period to rid themselves of costly debt as fast as they can. COVID-19 – although nearly destroying the aviation sector in the process – has shown every adult from Beijing to LA, to Berlin and back again that air travel is essential. Be it for personal wellbeing, education and/or business – you simply cannot do without air travel and you cannot have a truly global economy without it.
We wish Norse and all airlines the very best of luck.