For many airlines, replicating a low-cost Southwest (LUV) or EasyJet model on long international routes is a bit like the hunt for cold fusion: awesome … in theory. Well, the hypothetical may be nearing reality for airlines, if not for nuclear researchers.
As Boeing’s (BA) new carbon-composite 787 Dreamliner begins filtering into the world’s airline fleets—followed next year by the similar Airbus A350—the idea of long flights with lower fares and actual profits is gaining traction. Norwegian Air Shuttle, the first low-cost carrier to order the 787, wants to be among the first to do so, Chief Executive Bjørn Kjos said Oct. 10 in an interview at Bloomberg’s New York headquarters. Norwegian shocked many airline industry observers with a massive, 222-plane order last year with Boeing and Airbus, betting on huge growth for the low-cost, long-haul model; it has already sold one-way, nonstop tickets from New York to Scandinavia for less than $300.
Will it work? Previous low-cost, low-fare ventures have consistently faltered because the cost of fuel for transoceanic flights is enormous. Kjos, an attorney and former fighter pilot for the Norwegian military, has heard the skepticism before. “They haven’t had the tools to do it,” he says. “The Dreamliner is the first airplane that can do it.”
The airline has two 787s, with a third arriving in November and a fourth in 2014. It opened a crew base in Bangkok in September and plans two more abroad soon, in New York and Fort Lauderdale, Fla., to capitalize on growth it expects from Americans seeking cheaper flights to Europe and from Asians on holiday who want to travel to the U.S. East Coast. Nearly a third of its current transatlantic traffic originates in America, and Kjos says as many as 500 million people in Asia and India will begin traveling abroad over the next 10 to 15 years.
Ryanair (RYAAY) boss Michael O’Leary has long dreamed of $10 fares across the Atlantic, coupled with a lavish business-class cabin to help subsidize those riding in the back. In Asia, several carriers, such as Air Asia X, JetStar, and Scoot, have been attempting to revolutionize the long-haul, low-cost model. Early last year, Air Asia X dropped its flights from Malaysia to London and Paris due to the fuel costs of an older Airbus. The company says it will resume European service in 2015 with an A350. Scoot, the budget offshoot of Singapore Airlines, plans to acquire 20 787s, with the first arriving in 2014.