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In 1 9 9 3 , Norwegian Air Shuttle was a tiny airline with three small planes flying to local destinations. Within a decade, the
In Norwegian Air Shuttle was a tiny airline with three small planes flying to local destinations. Within a decade, the company had changed marketing direction and was beginning its ascent into the top tier of discount carriers with an ambitious new strategy that led to lower costs, lower fares, and longerdistance operations. Today, the awardwinning company, based just outside Oslo, Norway, has become Europes thirdlargest budget airline, serving more than million passengers a year. It has also become the largest foreign airline serving the New York City area.
Norwegians dramatic growth was fueled by its decision to buy dozens of new jets. These longerrange, fuelefficient aircraft could carry more passengers to more destinations at far lower costs than the companys old fleet. Whether fuel costs went up or down, Norwegians new aircraft could keep operating costs under control. This enabled the airline to promote low airfares, attract priceconscious business travelers and vacationers, and build its brand beyond Scandinavia. Now Norwegian has a fleet of jets flying to New York, London, and hundreds of other international destinations, with more jets on order to support the airlines future expansion plans with more routes to more destinations
Investing in new aircraft also helped the company enter new markets and manage costs on the ground. Norwegians young fleet has a longer range, giving the airline new opportunities to compete in the busy and lucrative transAtlantic market, among other popular international routes. Whats more, the new planes are capable of landing on shorter runways in smaller airports. This is important because larger airports generally charge higher landing fees than smaller airports. So although Norwegian flies to major hubs like New York, Chicago, and Los Angeles, it also flies to smaller, lessexpensive airports such as Providence, Rhode Island, and Orange County, New York. These airports are less centrally located than their bigcity counterparts, but millions of passengers are willing to put up with a bit of inconvenience to save a lot of money.
Another way Norwegian keeps costs low is by steering customers to its website to buy tickets. In fact, the airline charges more for tickets purchased via phone or at the airport. Rather than bundling everything into the price of the ticket, it says it wants to give customers control over the decision of which options they will pay for. Therefore, Norwegian sets a separate price for every extra, from checked luggage and reserved seating to inflight snacks and meals. This means passengers who want to reserve a seat in advance or check a suitcase at the airport can choose those options, for a fee. On the other hand, Norwegian has a frequentflyer program that rewards loyal customers with points for choosing to travel with the airline and book with its hotel and rentalcar partners. And whenever the airline inaugurates a new route, it offers a limited number of seats at bargain prices to build awareness and boost demand.
With a large number of businesses and households trying to stretch their travel budgets, Norwegian has to navigate in global skies increasingly crowded with nofrills, lowfare airlines like Ryanair, easyJet, and Wizz Air. Longestablished fullservice airlines are getting into the budget business, too. Germanys Lufthansa, for example, operates Eurowings as a lowprice subsidiary, and the parent of British Airways operates Level as a lowprice subsidiary.
USbased airlines such as American Airlines and Delta have unbundled pricing to give pricesensitive passengers the option of paying only for services they need. Then theres Texasbased Southwest Airlines, well known for its lowcost lowprice positioning. Southwest doesnt yet fly to Europe, but it does serve Mexico and the Caribbean, and its bundle pricing includes two pieces of checked luggage per passenger. As Southwest refreshes its fleet with newer jets, will it expand to destinations in Europe? Norwegian Air Shuttle is continuing to watch closely for signs of new competition as it
expands its fuelefficient fleet and adds new routes, year after year.
QUESTION: Given Norwegians positioning as a nofrills, lowfare airline, how much weight should its marketers give to competitors pricing when they set prices? Explain your answer.
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