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Why Boeing's 787 Is to Norwegian What Boeing's 747 Was to People Express

Stocks in this article: BA UAL


"We're giving the American people the ability to fly inexpensively and comfortably to Europe," Sandaker-Nielsen said. "As a low-cost carrier we obviously appeal to backpackers and students, but also other cost-conscious travelers who want to fly the most advanced airplane in the skies to exciting destinations.

"The Dreamliner flies you faster and more comfortably to your destinations," he said. "Why would you pay twice the price to fly with an airline that uses more time and older aircraft?"

Norwegian also benefits from high utilization of its Dreamliners, which it operates for 16 hours a day. "That is comparable to the best international fleet utilization you'll find at U.S. carriers," Mann said.

In its effort to offer low fares, People Express was helped by a provision of the bilateral treaty between the U.S. and Great Britain, which stipulated that the fares charged had to be justified by the cost of providing them. "That meant we could charge low fares," while competitors on New York-London routes -- British Airways, Pan Am and TWA -- could not because their cost structures were too high, McAdoo said.

Also, British Airways was preparing to privatize and sell shares to the public, and it did not want a fare war with its principal competitors, McAdoo said. "That would have caused a dogfight."

In many ways, People Express was a key innovator in U.S. commercial aviation. It was the first major airline to charge for bags and food. (Norwegian will charge $50 for a package that includes meals, baggage check and a reserved seat). 

Also, Mann said, "People Express revitalized Newark Airport. Had it not been for People Express, Newark might have fallen off the map." The carrier had about 200 departures a day when it was acquired by Continental in 1986. Even then, the Newark operation was the biggest hub in the New York area.

Today United (UAL), which merged with Continental in 2010, offers more than 400 daily Newark departures to more than 150 destinations.

One problem People Express did not have was widespread opposition from the U.S. labor movement. "We were so unheard of, and everybody was frightened beyond what was justified, just because we were so different," McAdoo said. "But getting certified wasn't as big a deal as the noise regarding 'how do we deal with these guys?'"

The labor movements, led by the Air Line Pilots Association, objects to Norwegian's organizational scheme, which involves a Norwegian airline registering aircraft in Ireland and hiring crews in various locations including Thailand as well as the United States.

The carrier currently operates flights to the U.S. under Norwegian registration, but has relocated its long-haul company's registration to Ireland, which is part of the European Union, while Norway is not. The newly-registered carrier needs a permit from the U.S. Transportation Department to fly to the U.S.

ALPA and the Association of Flight Attendants have filed a challenges with the DOT.  In December, the big three U.S. airlines -- American (AAL) , Delta and United -- also filed with the DOT in support of the challenge. They said Norwegian wants to "set up a shell company in Ireland to operate its aircraft using imported labor."

On Thursday, ALPA endorsed a proposal for the International Civil Aviation Organization to create a study group "to review safety implications of an airline business model that conducts all flight operations outside the borders of the state responsible for safety oversight." Norwegian's international flights do not serve Ireland, yet Ireland issued an air operator certificate, ALPA noted, adding that the situation diminishes the potential for "rigorous, effective safety oversight." 

In premarket trading on Monday, Boeing shares were up 30 cents to $122.37. Shares are down nearly 11% year-to date.

Written by Ted Reed in Charlotte, N.C.


To contact this writer,
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