The Norwegian Effect: How NAX is a flight price game changer

If you’ve followed Hump Day Fare Hacks, you’ll know that I’ve begun tabulating the Norwegian Index, which is the average price (expressed in dollars) of all the Norwegian Air Shuttle flights profiled in a given week. And though it may seem to be a somewhat confusing metric, its ultimate purpose is to display the median price of low-cost transatlantic flights between the U.S. and Europe. Of course, it’s not an exact science, but it does give a relatively good indication of where the market is at.

What it doesn’t reflect, however, is the impact that low-cost carriers like Norwegian are having on the transatlantic market as a whole.

As this USA Today article points out, British Airways recently added three new U.S. destinations to its long-haul route network: Ft. Lauderdale, New Orleans, and Oakland. And while the new service between London Heathrow and the Louisiana city is indeed a revival of a former route flown by the carrier, albeit one involving London’s Gatwick Airport that flew in decades past, that had significant potential for tourism, the other two were seen to be very much competitive counterplays – assumptions that were confirmed by Willie Walsh, the CEO of International Airlines Group (IAG) which owns BA.

That counterplay was indeed a strategic calculation to Norwegian’s presence on both the LGW-FLL and LGW-OAK routes. Walsh said that, initially, Norwegian wasn’t seen to be a veritable competitor to legacy carriers in the transatlantic space, noting that, a decade ago, there was significant debate over whether passengers would want to fly on a “no-frills” airline for more than four hours. Summarily, Walsh explained that the answer is a veritable yes, saying that “[Norwegian has] clearly been able to demonstrate that there is a market there [and] we’re responding competitively.”

The last part of Walsh’s statement is perhaps the most poignant part. It should be noted that while BA already serves South Florida (MIA-LHR) and the Bay Area (SFO-LHR), its foray into Ft. Lauderdale and Oakland means that the British flag carrier is entering new cities, underscoring that Norwegian is no longer being seen as a flash-in-the-pan as far as transatlantic competition is concerned in particular cities where BA doesn’t currently have a presence.

Yet that’s not the end of the story: it appears that Norwegian’s impact goes even further, as it has forced BA’s hand in cities where the carrier already has service. For example, Norwegian’s five times weekly BOS-LGW route pales in comparison to BA’s three BOS-LHR flights per day. However, the introduction of Norwegian has decreased BA’s dominance in a very competitive transatlantic market – one which also features Delta Air Lines and Virgin Atlantic Airways. As I profiled this summer, BA is planning to  introduce the  Airbus A380 on its BOS-LHR route starting next March, which will likely – all other things equal – increase supply and drive down prices even further. Of course, there are likely a number of reasons that BA’s fares have fallen on this particular route – Brexit, low fuel costs, the introduction of the Boeing 787-900 Dreamliner on a rotation, and so on – and there are a likely a number of additional factors that have motivated BA to bring the A380 to Boston, many of which I examined. Yet I think Boston is an excellent example of the impact Norwegian has had on BA fares.

Additionally, there’s the element of ticket prices. Anecdotally speaking, BA has decreased prices across the board in the past six months or so. And while Brexit, falling fuel costs, and increasingly efficient aircraft are all likely playing important roles in this development, it would also appear that Norwegian’s ability to offer fares for extremely low prices is having perhaps the biggest impact.

Much like the way that Southwest and jetBlue have had veritable effects on the prices of domestic flights, Norwegian – through increasing competition in markets which weren’t extremely competitive – has seemingly helped to drive down the price of transatlantic flights. Yet although the carrier has endured significant scrutiny in its efforts to start new routes due to myriad factors, I don’t think any of us travelers can complain about cheaper transatlantic flights.