4 ms·

Norwegian didn't start in 2007. They go back to the early 90's. Re: leasing. This is true of virtually all airlines these days outside of some flag carriers -

Norwegian didn't start in 2007. They go back to the early 90's. Re: leasing. This is true of virtually all airlines these days outside of some flag carriers - I was being sloppy with my wording :) However, you get much better lease rates if you're willing to commit to a very large order and are negotiating it during a downturn. Which is what both Ryanair and Norwegian did. Airline manufacturers and leasing companies traditionally experience a large drop off in their deal pipeline at the beginning of an economic shock/downturn because most airlines are badly run, cash strapped, slow moving and have no appetite from their creditors to commit to multi-billion, multi-year leases just when the wider economy is going to shit (and hurting their passenger loads). Non-legacy airlines (mainly budgets) have more tools available: they quickly drop routes, slash staff count etc. to ride the downturn while at the same time investing for the inevitable swing back. Helps too that they are the last to be hit by falling pax numbers since their ticket prices are so cheap. There's lots of other factors at play too that I haven't really touched on. How an airline hedges its fuel and forex, what deals they have with airports, which manufacturer they standardise on (Boeing or Airbus), where they get their crews from, how they retail their tickets, which markets they're strong in, what AOC(s) they have, who their investors/creditors are (state, bank, sovereign wealth fund, pe, private) and on and on and on.

bogomipz 9y ago
>"Norwegian didn't start in 2007. They go back to the early 90's." Sure, I didn't say that they started in 2007. I'm unsure why you are refuting that particular point. Norwegian did begin with leased planes however: "Norwegian Air Shuttle (NAS) was founded on 22 January 1993 to take over the regional airline services produced by Busy Bee for Braathens in Western Norway. Busy Bee, founded in 1966, was a subsidiary of Braathens that operated a fleet of Fokker 50 aircraft on charter services. This included the network of regional services between cities on the west coast of Norway operated on wet lease for the mother company. Following Busy Bee's bankruptcy in December 1992, NAS took over three leased Fokker 50 aircraft, and started operating from Bergen Airport, Flesland to Haugesund Airport, Karmøy, as well as from Bergen to Molde Airport, Årø or Kristiansund Airport, Kvernberget, and onwards to Trondheim Airport, Værnes."[1] While leasing is very common, bigger carriers are a mix of both purchase and leases, leasing is still only 40% of total of plane makers sales[2]. Leasing cuts both ways as plane is much cheaper for a carrier if it is used for its entire 30 year lifespan. [1] https://en.wikipedia.org/wiki/Norwegian_Air_Shuttle https://en.wikipedia.org/wiki/Norwegian_Air_Shuttle [2] http://www.economist.com/news/business-and-finance/21699893-cheaper-oil-has-helped-many-parts-aviation-industry-not-leasing http://www.economist.com/news/business-and-finance/21699893-...
- corford 9y ago
  Sorry, misunderstood when you said "Starting an airline is not a trivial undertaking, certainly not something you could hope to complete during a temporary downturn or use "market timing" like you would with equities.". I thought you were implying the founders of Norwegian spotted an opportunity and started-up during the downturn. Outside of some state backed airlines, I would have thought any airline founded in the last 35 years will have started with 100% leased aircraft. For airlines that own their own equipment, in the first world at least, most of them tend to offload aircraft at the 17 to ~20 year stage (at which point they're usually sold on to leasing companies who then lease them out to charter/acmi operators or they find their way down to Africa or LATAM). The problem with buying your own equipment (from a budget airline PoV) is that you can't benefit from newer model fuel efficiencies or improved pax capacity. They also put much higher pressure cycle loads on the hulls due to the increased rotation frequency of the short-haul point-to-point model (which reduces the serviceable life of the airframe and hence the re-sale value). Running a mixed leased/purchased fleet starts making more sense when your route network isn't dominated by short-haul. As an example, Ryanair's average fleet age is < 6 years (across 300 aircraft).

bogomipz 9y ago

>"Norwegian didn't start in 2007. They go back to the early 90's." Sure, I didn't say that they started in 2007. I'm unsure why you are refuting that particular point. Norwegian did begin with leased planes however: "Norwegian Air Shuttle (NAS) was founded on 22 January 1993 to take over the regional airline services produced by Busy Bee for Braathens in Western Norway. Busy Bee, founded in 1966, was a subsidiary of Braathens that operated a fleet of Fokker 50 aircraft on charter services. This included the network of regional services between cities on the west coast of Norway operated on wet lease for the mother company. Following Busy Bee's bankruptcy in December 1992, NAS took over three leased Fokker 50 aircraft, and started operating from Bergen Airport, Flesland to Haugesund Airport, Karmøy, as well as from Bergen to Molde Airport, Årø or Kristiansund Airport, Kvernberget, and onwards to Trondheim Airport, Værnes."[1] While leasing is very common, bigger carriers are a mix of both purchase and leases, leasing is still only 40% of total of plane makers sales[2]. Leasing cuts both ways as plane is much cheaper for a carrier if it is used for its entire 30 year lifespan. [1] https://en.wikipedia.org/wiki/Norwegian_Air_Shuttle https://en.wikipedia.org/wiki/Norwegian_Air_Shuttle [2] http://www.economist.com/news/business-and-finance/21699893-cheaper-oil-has-helped-many-parts-aviation-industry-not-leasing http://www.economist.com/news/business-and-finance/21699893-...

corford 9y ago
Sorry, misunderstood when you said "Starting an airline is not a trivial undertaking, certainly not something you could hope to complete during a temporary downturn or use "market timing" like you would with equities.". I thought you were implying the founders of Norwegian spotted an opportunity and started-up during the downturn. Outside of some state backed airlines, I would have thought any airline founded in the last 35 years will have started with 100% leased aircraft. For airlines that own their own equipment, in the first world at least, most of them tend to offload aircraft at the 17 to ~20 year stage (at which point they're usually sold on to leasing companies who then lease them out to charter/acmi operators or they find their way down to Africa or LATAM). The problem with buying your own equipment (from a budget airline PoV) is that you can't benefit from newer model fuel efficiencies or improved pax capacity. They also put much higher pressure cycle loads on the hulls due to the increased rotation frequency of the short-haul point-to-point model (which reduces the serviceable life of the airframe and hence the re-sale value). Running a mixed leased/purchased fleet starts making more sense when your route network isn't dominated by short-haul. As an example, Ryanair's average fleet age is < 6 years (across 300 aircraft).