Norse Atlantic weighs alliance options with larger airlines

Norse Atlantic ASA has been approached by two larger airlines interested in buying a minority stake in the young carrier, Chief Executive Officer Bjorn Tore Larsen said, as he weighs a potential partnership that would bolster the company’s low-cost, long-haul business plan.

An alliance would help the transatlantic discounter save on costs and increase revenue, while providing access to the partner’s network, Larsen said in an interview Wednesday in London. He declined to identify the suitors but said both were cash-rich: one a major airline, the other medium-sized. 

The CEO spoke after Norse, which started transatlantic services in June 2022, completed a $55 million fundraising this week, giving it a cash cushion to address accelerated payments to a key supplier during the slow winter season. Norse isn’t rushing to find a partner, Larsen said, declining to provide further details. The company said last week it hired advisers after being approached by potential airline investors. 

A partnership with Norse “would be of interest to some of the big players, not necessarily only in Europe, but elsewhere as well,” the CEO said.

Shares of Arendal, Norway-based Norse rose as much as 9.8%, and were up 1.2% in afternoon trading on Wednesday. They have advanced 61% this year, lifting the market value to about $77 million.

Airline Deals

Stronger airlines are leading a wave of post-Covid 19 consolidation after many carriers were weakened by the travel downturn. In Europe, Deutsche Lufthansa AG has agreed to invest in Italy’s state-owned ITA Airways, while Air France-KLM plans to buy an initial stake in SAS AB. Portuguese flag-carrier TAP is also up for sale, while IAG SA is seeking approvals to take over Spain’s Air Europa.

Norse, formed in 2021, began service in June 2022 with a flight from Oslo to New York’s John F. Kennedy International. The company uses Boeing Co. 787 Dreamliners once operated by Norwegian Air Shuttle, having secured long-term leases substantially below current market prices, Larsen said. “There’s no way we could get that cost today,” he said.

Five of its 15 aircraft are sublet to Air Europa. Those will be returned to Norse gradually under conditions currently being negotiated, Larsen said. 

Norse’s leasing costs for all the 787s are capped under its contracts, he said, though payment terms are shifting from power-by-hour to fixed fees — impeling the company to utilize the aircraft during slow periods outside of the busy summer season. High demand for available aircraft and for charter placements that add to revenue work to Norse’s benefit, Larsen said.    

“There’s a shortage in the market, so we’re on the lucky side of the table when it comes to capacity versus demand,” Larsen said. 

As its operation puts more aircraft to use, Norse is prioritizing filling its existing network rather than expanding it, for example introducing more routes between airports where it is already present. Bangkok is the only destination Norse serves in Asia and although the airline would consider more routes to the continent, the CEO said the company wants to go slow. “We’d rather be boring,” he said.

Norse reported its first profitable quarter last week, benefiting from strong summer demand on transatlantic routes. The airline’s goal is to be profitable for all of 2024, after scaling up operations during 2022 and 2023.

“2023 is the year of construction,” Larsen said. “2024 is going to be more of a normal year.”