The expansion of low cost carriers into the long-haul market: a strategic analysis of Norwegian Air Shuttle ASA

摘要

The low-cost carrier (“LCC”) business model has been in existence for several decades and theirmarket share has been growing steadily. However, the most successful LCCs such as Southwest,Ryanair and EasyJet have focused upon implementing the low-cost strategy on short-haul routes.The main strategic objective of this thesis is to identify the underlying reasons for this phenomenonand whether there is a potential for the exploitation of the low-cost business model on long-haulflights. With this objective in mind, we conducted a case study of Norwegian Air Shuttle ASA(“NAS”), a LCC originating from Norway, and the only LCC currently operating long-haul routesfrom Europe to North America and Asia.The thesis is structured around three main parts; Literature Review, External Analysis andInternal Analysis. The Literature Review provides the theoretical background. The External Analysischapter is split in two. Firstly, we use the PESTLE model to identify the major macroeconomicfactors directly influencing the airline industry. Then we move to the microenvironment analysis thatutilises the Porter’s Five Forces framework to provide a summary of the key issues shaping industryprofitability. The third part, Internal Analysis provides an overview of the company’s history,financial performance and operational strategies in its long-haul expansion. The Chapter ends with aSWOT analysis to distinguish the key strengths, weaknesses, opportunities and threats facing NAS.Ultimately, the VRIO analysis finds that NAS currently lacks the resources to create and maintainsustainable competitive advantages in the long-haul market.In fact, the company has even failed to gain a significant price advantage over its competitors,especially when its LowFare+ product is compared with the fares of legacy airlines offering indirectservices. As such, we conclude the thesis with a Recommendations section, where we proposeseveral strategic solutions that may improve NAS’ financial and operational performance on its longhaulroutes.