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Norwegian Air CEO Bjørn Kjos resigns

Norwegian Air CEO Bjørn Kjos resigns

Norwegian Air CEO Bjørn Kjos resigns

 

The executive director and co-founder of Norwegian Air Shuttle, Bjørn Kjos, retired after 17 years in charge of the airline.

Under the leadership of Mr. Kjos, 72, Norwegian Air became a small domestic airline in the third cheapest airline in Europe.

It also broke into the transatlantic market with low rates.

However, the company has struggled to make a profit and has also been hit by the grounding of the Boeing 737 Max aircraft.

Norwegian has 18 aircraft and on Thursday said it did not expect to return to service until October, beyond its previous estimate for August.

Boeing hit by new problem 737 Max
The airline said the grounding could cost as much as 700 million Norwegian kroner (£ 65 million, $ 82 million) this year, and could also undo its plan to return to profitability.

The 737 Max aircraft fleet was grounded after two crashes, the first was a Lion Air flight that crashed into the sea in Jakarta last year, and the second, an Ethiopian Airlines flight that crashed shortly after Take off from Addis Ababa in March. In total 346 people died.

Norwegian’s low rates have allowed it to grow rapidly. Last year it launched 35 new routes, transported more than 37 million passengers and added 2,000 employees.

Its great innovation has been to operate low-cost long-haul flights between the United Kingdom and the United States, which began in 2014. It now flies to 12 US destinations from London Gatwick Airport.

According to figures from the Port Authority of New York and New Jersey, it has become the largest international airline serving the New York City area, transporting more passengers than British Airways, Air Canada or Lufthansa.

However, that growth has come at the expense of profits.

The airline lost 1.45 billion crowns last year, which it attributed to fuel costs, tough competition and problems with the engines of its Dreamliner airplane.

Change of strategy
In March, to shore up its finances, Norwegian raised 1.3 billion crowns through a stock sale and also sold some aircraft.

Mr. Kjos, a former fighter pilot, has vowed to slow the airline’s growth and focus on profitability this year.

He said the strategy was reflected in the company’s second quarter results, published on Thursday, which show a net profit of 82.8 million crowns.

“Norwegian’s second quarter results show that we are complying with our strategy of moving from growth to profitability,” he said.

“Despite operational problems beyond our control, such as the grounding of our 737 Max fleet, we are delivering the highest operating revenues in the second quarter of Norwegian’s history.”

Analysis
Theo Leggett, international business correspondent for the BBC

Bjørn Kjos was one of the founders of the company. As the man in the pilot’s seat since 2002, he was also the driving force behind his expansion from a small regional operator to becoming a major player in Europe’s low-cost market. He also led the movement towards the long distance market, using a new generation of efficient aircraft such as the Boeing 787 Dreamliner to offer cheap flights to the United States, South America and even Thailand.

There was no shortage of passengers, but all this growth came at a cost. The airline has a debt of billions of dollars and, in recent years, has accumulated large losses. In March, he was forced to sell new shares to raise hundreds of millions of pounds in new funds. He has also had to cut routes and sell some planes.

The signs are that this radical action is starting to take effect, which gives Mr. Kjos the opportunity to retire on a positive note. Now a new leader can be appointed to guide the company, as it tries to convert market share into sustainable profits. It will not be easy. As Monarch, Flybe and Air Berlin have shown, the low-cost market is a hostile environment, where only the fittest survive.

Of course, there is another option. A new CEO could be more willing than Mr. Kjos to consider an acquisition approach, for example, from the parent company IAG of British Airways. But let’s not forget that the outgoing CEO will continue to be a powerful influence within the company, both through the participation of his company, HBK Holding, and through his new role as an advisor.

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