Chalk up another unbundled airline offering bailing on a key ancillary revenue generating option: Norse Atlantic will no longer charge passengers for a carry-on bag when they purchase a “basic” fare. The move is just one of several shifts the company is making in an effort to deliver profitability in a highly competitive transatlantic market.
The new carry-on bag policy allows for a 22-pound bag, in addition to the personal under seat item, for tickets booked directly with the airline. Flights booked through third party channels may have different rules. Dropping that significant ancillary fee should make bookings more appealing to passengers, though it potentially means higher base fares to make up for the missing revenue. Pitched against a competitive landscape where economy class capacity is readily available from multiple carriers, it is not clear that Norse will have any pricing power available to drive fares higher, especially in the winter doldrums.
Shifting fleet and operations, with mixed messages
Norse is also pursuing a shift in its fleet makeup and operations as it seeks to lower costs and steady the revenue flow. The company will return three of its 787-8s to lessors before the end of 2024, leaving it with a single aircraft type (787-9) operating. Norse expects a “significant accounting gain” as a result. Those aircraft operate on a sublease basis today.
Two other 787-9s, also previously subleased to other airlines, returned to Norse’s direct operations in May 2024, boosting the total fleet to a dozen. Norse claims the boost of directly operating capacity “created further economies of scale across the business and helped drive unit cost reduction in the second quarter.”
Lower costs are a good thing. But Norse is not going to keep the planes operating on its own network. While Q3 sees direct flying still dominating the operations, “from Q4 and through the winter season we are planning to fly at least half of our operated capacity on ACMI and charter contracts.”
That shift is not a short term play. CEO Bjorn Tore Larsen notes the carrier is “working on a revised business plan that may imply more of the fleet’s capacity and revenue being locked into longerterm contracts, leaving Norse with a business model carrying lower market risk going forward.” That new business plan includes “negotiations with several airlines regarding multi-year contracts for fleet allocation,” which Larsen would deliver further significant cost reductions for the company.
Arguing that flying more of the fleet directly in Norse’s network reduces costs and also that running as a charter operator reduces costs may require certain mental gymnastics to accept, but that’s where Norse is today.
GDS access later this year
One area where costs will increase is through sales on Global Distribution System (GDS) platforms. Norse is moving to enable that by the end of 2024, allowing corporate travel agencies to sell its fares as well as leisure-focused distributors. In addition to potentially different rules around carry-on bags, Norse “will remain steadfast that the cheapest tickets will always be on our website,” even as the GDS contracts come online.
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