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Five years ago, you would have to pay £1100 for a British Airways economy round-trip flight from London to San Francisco. The same flight for the same dates but this year, are only £550 round trip with British Airways.

Why is there such a huge price difference? Well back in 2013, Norwegian did not fly direct to San Francisco for only £400. Has Norwegian been the leading change in making airline travel the most affordable it has ever been?

Why flights are so cheap?

On a top level, if we assume that passengers are only looking for the best deal (and adopt a price first mentality, searching for the cheapest flight to their destination), we must assume that these airlines are competing on price. By Norwegian offering the cheapest flights around, they have brought down the prices of all other airlines.

But it’s a little more complicated. Airlines are making even more money than ever before through a combined effort of more passengers and more planes flying full. So, they are not suffering and through reduced prices, they are only mildly competing and still making quite the profit, whilst still offering a full service. Some ‘full-service’ airlines are now starting to charge for previously included extras, such as choosing your seat or extra baggage.

One could conclude that through the major airliners greed, they let Norwegian become quite the thorn in their side today.

Let us explain Norwegian’s success:

We will assume that the average passenger would always choose the airline to their destination based off the price, and if all the prices were the same, they would then choose the airline that came with the most inclusions, such as baggage, meals, entertainment, service, loyalty program etc.

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Norwegian Air Shuttle entered the market with the plan to disrupt the industry, and to take the long-haul price challenge to the full-service incumbents. They did this by charging for everything, from Meals, to Pillows, to Headphones, allowing passengers to fly incredibly cheap if they so choose, or choosing to upgrade their service specifically on the touch points that provided the best experience for them.

The major airlines, yet, provided everything we listed above from the get-go for a far more expensive price. We have to wonder if they had simply price match from the start, by not being greedy, they would have still made money and it would have regulated Norwegian to a domestic carrier only servicing its fjords.

Now – they’re locked in a price war which will never end. Norwegian started off offering very little and continues to, while major airlines started off offering a lot, and no longer does. Who do you think is playing into who’s hand?” – GSTP publication.

The industry has always had a bit of trouble pricing itself, from the 2 cent flight price war in India (Which may lead to a collapse of 2-3 carriers in the next 60 days) to flights only available for reward points. As customers, we rely on upstarts like Uber or Airbnb to disrupt industries, and in this case, it seems that the same old story is being told, or schooled, by Norwegian.

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In the end, this will only result in good things for customers.

Featured Image: Norwegian