Norse Atlantic ASA, the young transatlantic carrier, is considering a potential partnership with two larger airlines that have expressed interest in acquiring a minority stake in the company. Chief Executive Officer Bjorn Tore Larsen revealed in an interview that an alliance would not only save on costs and increase revenue for Norse Atlantic but also provide access to the partner's extensive network. While Larsen declined to name the interested parties, he did mention that one was a major airline, while the other was medium-sized and both were financially strong. Norse Atlantic completed a $55 million fundraising this week, boosting its cash reserves and enabling it to address payments to a key supplier during the slow winter season.
Consolidation has been a significant trend among airlines in the wake of the Covid-19 pandemic, with stronger carriers seeking strategic partnerships or investments. Norse Atlantic, founded in 2021 and commencing operations in June 2022, is now attracting attention from potential airline investors. The CEO noted that the company is not rushing into a partnership and is currently assessing its options. Larsen believes that a partnership with Norse would be of interest to major players in the industry, both in Europe and beyond.
Norse Atlantic differentiates itself by operating low-cost, long-haul flights using Boeing 787 Dreamliners previously flown by Norwegian Air Shuttle. The company was able to secure long-term leases for these aircraft at significantly lower prices than the current market rates. According to Larsen, Norse Atlantic would not be able to access these cost savings if it were to source similar aircraft today. The company has 15 aircraft, out of which five are leased to Air Europa. Negotiations are underway to gradually return these aircraft to Norse Atlantic's fleet.
The airline's leasing costs for all its 787s are capped under existing contracts, providing cost certainty. However, payment terms are transitioning from power-by-hour to fixed fees, prompting Norse Atlantic to find ways to maximize aircraft utilization during slower periods, such as the winter season. Fortunately, the demand for available aircraft and charter placements has been strong, benefiting Norse Atlantic.
While the company is focusing on filling its existing network rather than expanding it, Norse Atlantic is open to the possibility of adding more routes to Asia. Currently, Bangkok is the airline's only destination on the continent. However, CEO Larsen mentioned that the company wants to proceed cautiously and prioritize consolidation over rapid expansion. He stated, "We'd rather be boring."
Norse Atlantic reported its first profitable quarter recently, driven by robust demand on its transatlantic routes during the busy summer period. The company's goal is to achieve profitability for the entirety of 2024, with plans to scale up operations in 2022 and 2023. Larsen emphasized that 2023 would be a year of construction for Norse Atlantic, while 2024 is expected to be a more stable and normal year.
As Norse Atlantic considers potential alliance opportunities with larger airlines, it remains well-positioned in the marketplace due to its low-cost, long-haul model, cost-effective aircraft leasing, and strong demand for transatlantic travel. The company's strategic decisions and partnerships could play a crucial role in shaping its future growth and profitability within the competitive aviation industry.