Norwegian Air halts talks to buy Dreamliners, may quit Ireland

Jack1985 · 28-04-2014 4:42pm #1

Norwegian Long Haul AS (Norwegian Air Shuttle's Long-Haul arm based in Dublin, Ireland) has halted talks to buy further dreamliners and may quit operations from Ireland. Norwegian's CEO Bjoern Kjos has said the company may re-base its operations to Norway.

* Suspends talks on Boeing plane due to US govt delay

* CEO says in letter that may rebase long-haul fleet in Norway

* Share price falls after comments (Adds detail from the CEO's letter)

OSLO, April 28 (Reuters) - Budget airline Norwegian Air has suspended talks on buying 20 Dreamliner planes from Boeing because of a delay in receiving U.S. backing for its long-haul plans, Chief Executive Bjoern Kjos said in a letter.

The airline may also reconsider plans to locate its long-haul operations in Ireland, giving up the advantage of having a European Union-based carrier, Kjos told Irish transport minister Leo Varadkar in a letter dated April 23.

Norwegian launched flights to the U.S. and Bangkok from its Nordic bases last year and obtained an Irish air operators' certificate, hoping to base the business in the EU, where it can operate under more favourable conditions and take advantage of the Open Skies trade between the U.S. and the EU.

Norwegian is operating its flights to the U.S. under a temporary permit issued by the government in Oslo.

Its application to the U.S. Department of Transportation for a permanent licence, made via Norwegian's Irish affiliate, has been fiercely contested by its rivals and by unions.

They argue that Norwegian is simply trying to escape high Nordic labour costs and wants to employ cheap Thai crew, gaining an unfair advantage.

"Unfortunately, the delay in the DOT process has given us no other choice than to put our ongoing negotiations with Boeing to purchase 20 new 787-9 Dreamliner aircraft - due to be registered in Ireland - on hold until Norwegian Air International's future in the U.S. has been decided," Kjos said in the letter seen by Reuters on Monday.

"An additional delay - or in the worst case, a negative decision by the U.S. DOT - may regrettably force us to reverse our commitment to build an international long-haul airline in Ireland."

Norwegian has been expanding at breakneck pace in recent years and has more than 200 aircraft on order. It is opening bases across Europe and plans to take on one of the most competitive markets this summer, launching long-haul flights between London and New York.

If it left Ireland, where its long-haul planes are registered, it would rebase them in Norway, where it has a permit to operate, Kjos said.

The firm already has commitments to buy or lease 14 Dreamliners but it has been looking for additional planes, because it consumes 20 percent less fuel than older jets, giving the firm a cost advantage. The 20 new Dreamliners have a combined list price of $5 billion.

ballooba · 28-04-2014 6:14pm

Posturing.

basill · 28-04-2014 8:48pm

I would love him to go through with his threats but I can't see it happening unfortunately.

L1011 · 28-04-2014 9:57pm

Grandstanding, "let us in or you lose 5Bn of investment". Would likely work if Boeing were in the **** financially and the state could be easily pressured, but they aren't.

kub · 28-04-2014 10:00pm

Everyone else's fault :rolleyes:

Jack1985 · 28-04-2014 11:24pm

Agree it kind of back's up the theory of low-cost airlines not being able to bring their game to long-haul, simply don't make enough to cover the immediate start-up costs.

Dublinflyer · 29-04-2014 8:20am

There is a bit of grandstanding going on here but I am not sure if it will help them with the US DOT. I always thought they were trying to get this up and running very quickly and maybe getting well ahead of themselves setting up offices in Dublin. I know a few people who have left the airport to go work for them, I met this is the last thing they want to hear. Jack1985 is right, a lot of the lcc's just don't have the influence or resources to get into long haul quickly.