The new airlines betting flying is about to take off

Monday, May 30, 2022

The pandemic brought about the most turbulent period in commercial aviation history.

Yet, over the past year dozens of new carriers have started up around the world, hoping that air travel is about to take off again.

It’s actually a very good time to launch an airline, says Bjorn Tore Larsen, Chief Executive of Norse Atlantic Airways.

There is a huge pent up demand. People haven’t been able to travel for two years or more, particularly between continents.

Norse Atlantic Airways is among the newcomers and will begin flying its “longboats” between Europe and North America from 14 June, having snapped up planes for low prices, and being able to secure valuable airport slots including London Gatwick and New York JFK.

The Norwegian firm received more than 3,000 applications for its first 50 pilot jobs.

These are actually brand new aircraft, says Mr Larsen, pointing to the fleet of Boeing Dreamliners on the tarmac at Oslo Airport.

Norse will be competing with established players, such a British Airways and Air France. But Mr Larsen believes there are benefits to building the airline from scratch.

The entrepreneur, who also runs a shipping business, tells a news channel that he had a passion for aviation but hadn’t been tempted earlier due to the high risks involved – strong competition, typically very expensive to source the aircraft, hard to recruit staff, and difficult to get landing and take-off slots.

The International Air Transport Association (IATA), the trade body that represents the aviation sector, has described 2020 as “the worst year on record”.

With flights grounded, global passenger numbers two years ago fell 60% – down to 1.8 billion from 4.5 billion in 2019.

This resulted in 55 airlines going out of business in 2020. Yet, what is perhaps initially surprising is that at the same time 32 new airlines were launched, the IATA stated.

Due to much of the industry being grounded, these new carriers were able to buy cheap aircraft as prices had fallen alongside the decline in demand. Newly available arrival and departure slots could also be snapped up, and staff were suddenly available.

It was a similar picture in 2021. While worldwide passenger numbers recovered slightly to 2.3 billion, a further 35 airlines closed down, while 57 new ones were launched.

Airlines have never experienced a situation like the last two years, says aviation expert, Hans Joergen Elnaes.

Mr Elnaes adds that, since 2020, new airlines could also easily attract out of work cabin crew and pilots – many of whom lost their jobs during the pandemic.

However, he thinks this unique window has now closed, particularly in terms of securing cheap financing.

Both Norse and Iceland’s Play will operate low-cost transatlantic flights.

This is an areas of the market where other new entrants have failed. Wow ceased operations in 2019, while Norwegian Airlines axed its long-haul routes in early 2021.

However, Mr Elnaes reckons valuable lessons have been learned, and the current is different.

Both are being very careful not to be too ambitious, not to operate too many flights, before they have established themselves and see how things work, he says.

Another new Norwegian carrier, Oslo-based Flyr, launched domestic and European flights last summer. Its chief executive, Tonje Wikstrom Frislid, says being small and lean helped it weather the later lockdowns.

With coronavirus travel restrictions continuing to be lifted around the world, global passenger numbers are now rising strongly.

In March they 76% higher than the same month last year, according to the latest figures from the IATA. Yet, the organisation still doesn’t expect 2019’s pre-pandemic high to be equalled until 2024.

And just as the coronavirus crisis has waned, another unforeseen problem has arisen for airlines – the war in Ukraine.

This has made Ukraine too dangerous to fly over, at the same time as Russia has closed its airspace to Western airlines.

This has added hours to some routes between Europe and Asia, and made them unprofitable.

More significantly, global oil prices have soared, and the cost of jet fuel has doubled since last year. IATA’s Director-General, Willie Walsh has suggested that as a result higher fares are “inevitable”.

Flyr’s Ms Frislid says her airline is flying brand new aircraft, which saves them about 14% fuel [compared with older planes].

So, that’s also one way of handling the increasing fuel prices. Meanwhile, Norse has opted for a slightly softer launch with fewer aircraft.

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