Since Norwegian Air Shuttle’s rebranding to the simpler Norwegian in 2002, the airline has expanded its footprint significantly. It has evolved from an airline mostly intra-European routes out of Norway to one of the world’s leading short- and long-haul low-cost airlines.
Besides its expansion within Europe, it launched long-haul routes to the United States, South America, and Southeast Asia. It even started a domestic airline in Argentina under the same “Norwegian” brand.
The one region that the airline has not been able to expand into yet is East Asia since it doesn’t have rights to overfly Siberia. Reports that emerged recently, though, suggest that the airline might have found a way to solve the problem. The solution is said to be, interestingly, a purchase of Russia-made Sukhoi Superjet regional aircraft.
Why Norwegian Wants to But Can’t Use the Siberian Flight Corridor
It’s not impossible for airlines to operate between Europe and countries like South Korea and Japan without overflying Russia. However, it’s estimated that doing so would cost Norwegian about $80,000 more in expenses and add about five hours of travel time roundtrip.
Setting the increased travel time aside, the extra expenses would account to almost $120 per seat, one-way. Considering that the airline often sells seats on its long-haul flights for a couple hundred dollars one way, that’s an expense that it – or any other low-cost airline – cannot afford.
The reason that Norwegian can’t secure those rights traces back to 1956.
Back then, Denmark, Norway, and Sweden signed a deal with the then-Soviet Union decided signed an agreement stating that only one airline from each country could use the corridor. That one airline was – and still is – SAS Scandinavian Airlines.
While the Norwegian government has been trying to renegotiate the deal for the last couple of years, it didn’t have much success. The former Norwegian Transport Minister, Ketil Solvik-Olsen, is reported to have said the following in 2018:
It does not lack the will on our part but they control their airspace. We will do what we can to raise Russia’s willingness to allow increased air traffic over Siberia, and those who make the final decision.
A Potential Package Deal: Sukhoi Superjet & Overflight Rights
In the midst of Norwegian’s frustration, there might be a (albeit arguably not that attractive) glimmer of hope for the airline’s ambitions to serve East Asia.
A glimmer of hope in the form of a potential package deal consisting of the valuable rights to overfly Siberian airspace and the unsuccessful Sukhoi Superjets (SSJ). A few days ago, Russian media reported that Norwegian has signed a Memorandum of Understanding (MoU) for 40 SSJs in exchange for those rights.
While the airline has rejected the claims that it has signed an MoU, it confirmed that it held meetings with the Russian government as well as the aircraft manufacturers. As such, the deal – in one way or another – might indeed be on the table.
Considering that the Sukhoi Superjet didn’t enjoy the success the manufacturer – and the Russian government – hoped for, the deal would certainly make sense for Russia.
Local airlines form the majority of the type’s customer base and its two biggest foreign customers – Interjet in Mexico and CityJet in Ireland – have severely limited in the former case or completely stopped in the latter case their SSJ operations. This year, Sukhoi signed only one new order for the SSJ.
Norwegian and The Sukhoi Superjet
Currently, Norwegian uses a fleet of a bit more than 100 737-800s for its short-haul operations within and out of Europe. The airline also owns a number of 737 MAX aircraft which are currently grounded. Norwegian Air Argentina currently operates three 737-800s on domestic routes within the country. It plans to increase that number to ten.
According to the current rumors – i.e. assuming the airline ends up ordering 40 of the type – Norwegian’s subsidiary in Argentina would receive 10 airframes first before the European parent company would receive 30 airframes.
Putting the issue of how the SSJ compares to other similarly sized aircraft aside for a second, Norwegian would see one big drawback and a (potentially useful) benefit:
- Loss of fleet commonality: The airline would see increased maintenance and crew related costs as it would no longer rely solely on the 737 for its short-haul operations. It would have to have two sets of crews, two sets of spare parts, and so on.
- Ability to serve thinner routes: While not uncommon for low-cost airlines, the fact that Norwegian only operates the relatively large 737-800 limits the routes it can serve. Adding a regional jet to its fleet could allow the airline to expand its network to include thinner but underserved routes.
Taking the above into account, adding the SSJs into its small Argentinian fleet might not be a bad idea. The airline could serve thinner domestic routes that the 737-800 is too large for, and it could focus its expansion on the SSJ. Considering that the 737-800s come from its parent, it could cancel the plan to grow its 737-800 fleet. If it wanted to keep a single-type fleet in Argentina, it could even transfer the existing 737-800s to Europe.
In Europe where the (not only low-cost) network is already very well developed and the airline is facing stiff competition from the likes of Ryanair, easyJet, and WizzAir, introducing another type – especially one with a higher cost per available seat mile – might be more problematic.
Then there’s the fact that the Sukhoi Superjet is, quite simply, not the best jet in its category as shown by non-Russian airlines phasing the type out. Russian also tend not to be favorite among European travelers.
Combining all of the above, it’s clear that – assuming the deal is in discussion in the form reported on in the media – Norwegian has a tough decision to make.
It has to, of course, think whether it will be able to operate the regional jets profitably enough (or at a loss small enough) to justify their acquisition in exchange for the rights to overfly Siberia. But, it also has to decide whether all the extra hassle that comes with it – having to operate the notoriously unreliable SSJ, having to find routes to serve with the aircraft, and losing fleet commonality among others – is actually worth it.
The list price of a Sukhoi Superjet is about $50 million, putting the potential order value at $2 billion. Even though the actual cost of the aircraft would likely be considerably lower than the list price, it would still mean a significant investment for the airline.
For a second, let’s assume that the company would, actually, pay the list price – and that:
- The Siberian flight corridor would save $80,000 per roundtrip compared to an alternative route
- Norwegian would break even on its SSJ operations (excluding the cost of the aircraft itself)
- Norwegian would operate three daily rotations between Europe and East Asia
In this scenario, it would take the airline almost twenty five years for the savings from using the Siberian flight corridor to reach the $2 billion for the aircraft. Whether Norwegian will expect the profit from the potential East Asian routes to be high enough to provide an acceptable return on investment into the SSJs remains to be seen.
As an aviation enthusiast, I certainly hope so – I would love seeing Sukhoi Superjet return to Europe.
That said, personally, as much as I think that this deal would make sense for Russia, I am not convinced that it would be attractive enough for Norwegian to accept.
Even though the rights to overfly Siberia are extremely valuable when it comes to operating flights between Europe – especially Scandinava – and East Asia, I am not convinced they are worth having to take up forty of aircraft that essentially no one wants.