Norwegian Air’s global expansion draws fire from rival Ryanair

Bloomberg

Norwegian Air “is not long for this world,” says Michael O’Leary, the chief executive of Ryanair Holdings Plc, itself in turmoil thanks to a pilot-staffing pinch that’s killed travel plans for hundreds of thousands of customers. “That’s just nonsense,” says Norwegian CEO Bjorn Kjos. Norwegian is under investor scrutiny given its large order of more than 200 aircraft, split roughly between Airbus SE and Boeing Co., to support a global growth spurt. Industry observers caution that even with low fuel and labour costs, a glut of competitive capacity and cheap fares may well injure Norwegian’s long-term financial health as it digests all the new planes. Especially if economies on either side of the Atlantic hit a rough patch.
So, despite only a modest overlap of routes and facing their own unique challenges, these two CEOs are now engaged in a very public spat. The bad blood comes just as Ryanair and Norwegian ended talks on a deal to transfer passengers on connecting flights, and as Norwegian began recruiting pilots from Ryanair. Norwegian instead announced a deal with easyJet Plc to transfer passengers at London’s Gatwick Airport.
In Europe, many passengers flying discount carriers “self-connect” at airports, so the airlines are hoping to formalise these transfers and collect new fees in the process.
It’s unclear whether O’Leary has some other reason for making his comments about Norwegian. Ryanair didn’t gain access to any non-public financial information during the transfer discussions, Norwegian spokesman Anders Lindstrom said.
“There’s nothing in these allegations,” Norwegian CEO Kjos said from New York. “We are very happy with the financial situation we have.” He added that Norwegian has financed all 32 of the aircraft it’s taking delivery of this year and has arranged financing for most of the planes coming in 2018.
“This is Michael O’Leary’s style,” Kjos said. “He likes to project headlines. I don’t have any dispute with Ryanair.” O’Leary has his own troubles, some of which he might attribute to Norwegian. Ryanair is canceling more than 2,000 flights—and the travel plans of 315,000 customers—over the next six weeks amid a pilot shortage that’s been exacerbated by Norwegian’s recruitment of as many as 160 Ryanair pilots. (Ryanair has disputed these figures, provided by Norwegian, as high.) O’Leary recently said Norwegian is over-extended due to its new planes and what he said was a shortage of cash.
In a public message to any defecting pilots, O’Leary was eager to note that while Norwegian may fly new Boeing 787s with higher pilot pay rates than 737s, it’s in a financially precarious state.
Amid its growth initiative, Norwegian has been trying to pad its cash flow by starting an aircraft leasing unit, with the initial five planes from an order for 70 Airbus A320neo aircraft going to Hong Kong Express Airways Ltd., a low-cost carrier.
The new A320s, however, have been slowed by engine glitches and subsequent replacement work at Pratt & Whitney, the engine maker owned by United Technologies Corp.