Research Proposal

Research Question: To what extent would Norwegian Airlines offering a

differently priced luxurious flight cabin (‘Business Class’) on flights between
New York and London be beneficial and profitable?

Rationale
Although Norwegian Airlines has grown exponentially in the past 3 years, it
faced a loss of USD 175 million in 20181, blaming rapid expansion, faulty Rolls
Royce engines on the B787 that has led to grounded planes as well as rising
fuel prices. It is due to this loss that it should be in the best interest of
Norwegian Airlines to investigate how to maintain and grow their market share.
Perhaps, offering a renovated, luxurious cabin could help them do so by tapping
into new sub-markets (luxury travel).
Methodology
Possible Sources
Primary Research
- Contact Norwegian staff to find out:
o The feasibility of the proposal.
o How this might affect Norwegian’s operations.
o A potential route/s.

- Distribute an electronic questionnaire to a range of people (ethnicity,

geographical location, age, gender, social class) to probe their travel
habits, find out how attractive this proposal would be to them as well as
what specific niceties should be offered to increase the cachet of the
experience.

1
Kaplan, Seth. "JetBlue Faces Strong Competition on Routes to London." The Points Guy. N.p., 11 Apr.
2019. Web. 14 Oct. 2019. <https://thepointsguy.com/news/jetblue-london-competition/>.
Secondary Research
- Use online sources (such as the Norwegian website, and their financial
reports which they have to publish as they are an Allmennaksjeselskap
(Public Stock Company)).
- Research past implementation of luxurious cabins in other airlines
(Emirates, Singapore Airlines etc.).
Area of the syllabus to be covered

- Organizational Objectives.
- Stakeholders.
- Growth and Evolution.
- Organizational Planning Tools.

Methods for data collection and analyzing:

- Use Google Forms to collect data as it is a practical way to conduct a
questionnaire internationally and anonymously, as well as the data being
easy to organize.
- A Decision Tree to determine how to do this while not pressuring the
company’s financial capabilities too hard. This will allow me to evaluate
the proposal from a quantitative perspective which is ever as relevant
because of their current financial situation.
- A Force Field Analysis to weigh the proposal based on qualitative data
and the effects this proposal will have.

Anticipated Difficulties and Solutions

Possible Problem
Information being sought
after is confidential or not
available
Bias in interviews with
staff in favor of their
employer
Possible Solution
Finding suitable
alternative information
Research to validate
statements

2
 Language barrier Use clear sentences and
presenting a problem in simple language
the questionnaire
Calculating the variables Extensive research on
needed for the Decision- both Norwegian and
Tree (probability of competitors in the
outcome, and value of aviation history
return)
Limited information on Using third-party experts
Emirates as it is owned and finding average
by the Government of statistics
Dubai
A limited range of people Sharing via multiple
answering the survey social media platforms
and through parents

Action Plan
Date Activity
22/02-19 Selection of topic
5/05-19 Research Proposal
10/05-19 Create a fact-dossier
11/05-19 Formulate interview and
questionnaire

Conduct them
20/05-19 Analyze Data
21/05-19 Secondary Research
13/10-19 First Draft
08/01-20 Final Submission

Word Count: 500

3
 Business Management Higher Level

Internal Assessment

To what extent could Norwegian Airlines offering a differently priced luxurious

flight cabin (‘Business Class’) on flights between New York and London be
beneficial and profitable?

Intended Audience: The management of Norwegian Air Shuttle.

Candidate Number: hst208

Session: May 2020

Written Report
Word Count
Executive Summary: 200

Investigation: 1992

4
 Acknowledgements

I would like to thank (Captain) Per Larson for his collaboration by granting an
interview giving his perspective as an employee of the airline, and a veteran of
the luxurious travel industry. I would also like to thank my business teacher for
her help in guiding me throughout the production of this internal assessment.

5
Table of Contents
EXECUTIVE SUMMARY .............................................................................................................. 7

INTRODUCTION .......................................................................................................................... 8

RESEARCH QUESTION................................................................................................................. 8

METHODS EMPLOYED............................................................................................................... 9

MAIN RESULTS AND FINDINGS .............................................................................................. 10

ANALYSIS AND DISCUSSION ................................................................................................. 12

THE ANSOFF MATRIX ................................................................................................................ 12

FORCE FIELD ANALYSIS ............................................................................................................ 12
DECISION TREE ........................................................................................................................ 14

CONCLUSION............................................................................................................................ 18

RECOMMENDATIONS ................................................................................................................. 18

BIBLIOGRAPHY ........................................................................................................................ 19

APPENDIX ................................................................................................................................. 22

APPENDIX I: A BUSINESS CLASS SUITE ON THE SAS AIRBUS 330 ................................................ 22

APPENDIX II: QUESTIONNAIRE QUESTIONS AND RESULTS ........................................................... 22
APPENDIX III: ANSOFF MATRIX .................................................................................................. 27
APPENDIX IV: FORCE-FIELD ANALYSIS ...................................................................................... 28
APPENDIX V: DECISION TREE .................................................................................................... 30
APPENDIX VI: INTERVIEW WITH CAPTAIN LARSON, DONE IN PERSON ON THE 5TH OF AUGUST, 2019.
............................................................................................................................................... 31

6
Executive Summary

Norwegian airlines were well known for low prices and high-quality flights,
however faulty engines led them to needing to subcontract flights to airlines
providing a worse service, scathing their image. In such a volatile industry where
airlines are constantly appearing and disappearing, striving to stand out by having
Business Class on a route connecting two financial cities (and bringing together
two markets: luxurious travel and cheap travel) could allow Norwegian to recover,
and even transform their image and as follows, their financial situation.

Two primary sources provided the backbone to the investigation: an interview

with a Norwegian pilot experienced in luxury travel, and a survey sent to the
general public. This - along with secondary sources such as Norwegian’s Annual
Report 2018 and the manufacturers of Emirate’s cabins – allowed me to evaluate
the proposal using a Decision Tree and Force Field analysis.

The investigation concludes that Norwegian should roll out a more affluent
service allowing them to increase revenue per unit floorspace, whilst not deriving
too much from their current service to maintain old clientele, as well as attracting
new ones. However, they should conduct their own research with less limitations
and more thorough knowledge to validate this investigation’s conclusions.

Word Count: 200

7
Introduction

Founded in 1993, Norwegian Air Shuttle is a multi-award-winning low-cost airline,

currently operating 161 airplanes ranging from the short-range Boeing 737, to the
transcontinental Boeing 787. Although Norwegian’s competitive prices keeps it a
favorite in the airline market, it recorded a loss of 117,932,221 EUR2
(1,154,000,000 NOK) in 2018 despite unit costs dropping by 12%, and
transporting 13% more passengers than in 20173. This IA aims to deduce
whether or not Norwegian should offer a more expensive luxurious cabin than its
‘Premium’ seats on flights between New York, USA and Gatwick, London similar
to the one in Appendix I. This IA focuses primarily on the financial effect as a
financial recovery is an urgent strategic priority of theirs, however, factors such
as reputation and brand image are also taken into account. With regards to the
business tools used, the chapter “Business Organization and Environment”4 is
the most relevant. The Gatwick – New York route is paramount to the airline as
Norwegian is New York’s “biggest foreign carrier”5, with, on average, 10 daily
flights6 between the two financial cities, using 9x Boeing 787s.

Research Question

To what extent could Norwegian Airlines offering a differently priced luxurious

flight cabin (‘Business Class’) on flights between New York and London be
beneficial and profitable?

2
Southworth, Emily. "Norwegian's 2018 Financial Report." Morten Beyer & Agnew. N.p., 07 Feb. 2019.
Web. 13 Oct. 2019. <https://www.mba.aero/norwegians-2018-financial-report/>.
3
Ibid.
4
Lominé, Loykie, Martin Mwenda Muchena, and Robert A. Pierce. "Business Organization and
Environment." Business Management: Course Companion. Oxford: Oxford UP, 2014. 1-92. Print.
5
Creedy, Steve. "Norwegian Plans Big Boost to Europe-US Routes for Summer." Airline Ratings, 14
Oct. 2019. Web. 14 Oct. 2019. <https://www.airlineratings.com/news/norwegian-plans-big-boost-
europe-us-routes-summer/>.
6
Larson, Per, Captain. "How Reasonable Is the Proposed Norwegian Business Class?" Personal
interview. 5 Aug. 2019.

8
Methods Employed

For my primary research, a survey was shared over social media (Appendix II),
this market research obtained essential data needed for the Decision Tree and
Force-Field Analysis. An interview with Captain Per Larson (who pilots the
Norwegian B787) also allowed me to gain an experienced insider view as he has
also flown for Emirates Airlines and Singapore Airlines - two leaders in the luxury
flight market. (Full transcript in Appendix V)
In terms of secondary research, I analyzed the company’s 2018 financial reports
and the manufacturer of Emirates’ and Singapore’s cabin seats online, amongst
others. This investigation is based on a balanced variety of qualitative and
quantitative information, allowing a detailed understanding of the feasibility and
reasonability of executing such a move. To do so, I used a Decision-Tree, Force-
Field Analysis and the Ansoff Matrix. At first, this IA focused on the incorporation
of a luxury cabin on all long-haul flights, however due to a lack of information this
IA now solely focuses on the aforementioned route. The degree of accuracy of
the decision tree is not high as several assumptions were made such as: not all
tickets are guaranteed sold; all seat units will not cost the same as for Emirates’
who likely buy in bulk; frequency of flights might be affected by environmental,
mechanical or political reasons, especially in the wake of Brexit.

9
Main Results and Findings

Norwegian’s colossal 2018 loss can be attributed to 3 main causes: fuel prices
rising 40% in 20187 alone; failure of Rolls-Royce turbines on long-haul vehicles
meant they had to ground planes and sub-contract; and an expensive increased
fleet size by 18%.8 In a response tailored to cut costs, Norwegian closed multiple
seasonally-profitable bases leading to just a few airbases needing to operate at
a higher pace to maintain the company9, this, amongst other measures, has led
to the business successfully cutting costs by 14% (excluding fuel prices)10.
Airlines such as Emirates and Singapore target another market as they provide
a more luxurious experience, for a higher price. Merely 12% of Emirate’s capacity
is comprised of ‘First Class’, yet it generates 40% of their revenue. Such luxurious
seats can cost up to $250,000 per unit and each takes up the space of 4-6
economy seats. Rising fuel prices has led to most airlines increasing prices –
which were already around 70% more expensive than in ‘economy’. This, along
with the increased presence of budget airlines, has led to the classic First-Class
market gradually dying, with airlines favoring ‘premium-business’ which are a lot
cheaper to install, operate and take up less space. This is something Norwegian
has capitalized on as they offer both economy, and premium economy tickets,
with the latter including a 3-course meal, headsets, blankets, and other
commodities11. Undoubtedly, Norwegian’s long-haul service is quickly
expanding, with New York being a pivotal destination. However, they face fierce
competition from established airlines such as British Airways, and American
Airlines (as seen in Figure 112) which provide luxurious cabins targeting

7
Tangel, Andrew, and Alison Sider. "Higher Fuel Costs Hit Airlines." The Wall Street Journal. N.p., 27
July 2018. Web. 13 Oct. 2019.
8
"Annual Report 2018." Norwegian.com. NORWEGIAN AIR SHUTTLE ASA, 31 Dec. 2018. Web. 14
Oct. 2019.
9
Sander, Daniel. "Norwegian Axes 5 Bases As Part Of Cost Cutting Program." Airways Magazine. N.p.,
16 Jan. 2019. Web. 14 Oct. 2019. <https://airwaysmag.com/airlines/norwegian-axes-5-bases-as-part-of-
cost-cutting-program/>.
10
"Norwegian Presents 2018 Full Year Results and the Strategy for Returning to
Profitability." Mynewsdesk. N.p., 07 Feb. 2019. Web. 14 Oct. 2019.
11
"A Premium Experience." Norwegian. N.p., n.d. Web. 14 Oct. 2019.
<https://www.norwegian.com/us/travel-info/on-board/premium-cabin/>.
12
Kaplan, Seth. "JetBlue Faces Strong Competition on Routes to London." The Points Guy. N.p., 11 Apr.
2019. Web. 14 Oct. 2019. <https://thepointsguy.com/news/jetblue-london-competition/>.

10
businessmen13. The London to New York market is one that Norwegian should
focus on as it is the most profitable route14 in the world according to the Official
Airline Guide. 2018 did however bear fruit with productivity increasing by 37%15,
and 13% more customers16.

Figure 1: Leaders in terms of New York-London market share.

13
Dudovskiy, John. “British Airways Segmentation, Targeting and Positioning – Research-Methodology.”
Research Methodology. N.p., 11 June 2016. Web. 14 Oct. 2019.
14
Rosen, Eric. "This Airline Route Makes $1 Billion Annually." Forbes. N.p., 6 July 2018. Web. 14 Oct.
2019. <https://www.forbes.com/sites/ericrosen/2018/07/06/worlds-most-profitable-flights-this-airline-
route-makes-1-billion-annually/#33d256537a8c>.
15
Press Release. "Norwegian Presents 2018 Full Year Results and the Strategy for Returning to
Profitability." Norwegian. N.p., 07 Feb. 2019. Web. 15 Oct. 2019.
<https://media.uk.norwegian.com/pressreleases/norwegian-presents-2018-full-year-results-and-the-
strategy-for-returning-to-profitability-2833546>.
16
"Annual Report 2018." Norwegian.com. NORWEGIAN AIR SHUTTLE ASA, 31 Dec. 2018. Web. 14
Oct. 2019.

11
Analysis and Discussion
The Ansoff Matrix
This proposal can be considered “Product Development” (according to the Ansoff
Matrix, Appendix III) because it involves introducing a new product (a ‘budget’
business class) into pre-existing and established markets (luxurious travel and
low-cost flights), hence requiring “effective market research, a strong research &
development system and having a first mover advantage”17 for it to succeed.
Norwegian would have a first mover advantage, but should strengthen their
Research & Development department to further innovate the product and lower
the cost per unit.

Force Field Analysis

The Force-Field Analysis is a qualitative analytical tool utilized by businesses
when weighing the advantages and disadvantages of a decision where each
factor is given a ‘weight’ on a scale of 1-5, with 5 being ‘very significant’. These
weights were allocated by myself following a study of secondary research (mainly
their financial reports, and conducting the questionnaire (a full list of questions
and answers are present in Appendix II) and the interview.

17
Lominé, Loykie, Martin Mwenda Muchena, and Robert A. Pierce. "The Ansoff Matrix" Business
Management: Course Companion. Oxford: Oxford UP, 2014. 51. Print.

12
 Figure 2: Force Field Analysis
Driving Forces Restraining Forces

Previous-customers thinking
78.6% want this as an option Norwegian is fully transforming
4 2 into a luxury airline could no
(Source: Questionnaire)
longer identify with the airline and
change to other budget airlines.

Norwegian High short-term cost and might be

Airlines difficult to obtain a loan to finance
adding a 4
88.1% would change from it because of their financial
competitors to Norwegian 5 more history.
(Source: Questionnaire) luxurious
class to
Capital and logistics are required
planes
for training staff with new seats
dedicated 2 and service, as well as
to the New maintanence and the actual
York – installation itself.
Increased pool of customers
Gatwick
(people travelling for both
3 route.
leisure (from a wider range of Planes grounded during the
social classes) and business) A slightly installation period means that they
2
more cannot fly as often, or even require
detailed sub-contracting
version can
New brand image (overlooking be located
their previous reputation of under If the cost is too high and the
cheap flights and sub- 3 Appendix IV 3 project does not succeed, it could
contracting) risk the survival of the company

Total: 15 Total: 13

The driving forces (advantages) outweigh the restraining forces (disadvantages)

with 15 points motivating Norwegian to execute such a transformation, and 13
holding them back. However, due to the small margin ruling out a decisive
difference, this Force-Field Analysis should not serve as a definite deciding force,
but rather a qualitative helping-hand in the decision-making process. It serves as
a reminder of benefits to be reaped, and risks that can become actual. It is
important to address their mission statement (“Attract customers by offering

13
competitive low fares and a quality travel experience”18) and they should aim not
to veer off it significantly, as stakeholder conflicts might arise, namely previous
customers no longer identifying with Norwegian’s brand image, and management
focusing too much on financial increment, thus excessively rebranding the airline
and purely developing the aforementioned problem.
Secondly, quantitative data is required to support the decision of the Force-Field
Analysis as the proposal prioritizes a necessary financial recovery having the
potential of prolonged flourishment. A decision tree allows this, taking several
variables into consideration such as the estimated revenues, costs, and
probability of successes across multiple options.

Decision Tree
The three potential options are dubbed 2, 3 and 4:
2: 10 business class seats on 9x B787’s (approximately 9 airplanes fly this
route daily19)
3: 32 business class seats (the mean number of business class seats
between British Airways,20 Qatar,21 and Etihad)22 on 9x B787’s
4: 10 business class seats on 5x B787’s (so that wealthier customers
wanting to travel in business class can, but on certain planes and thus certain
times)

18
"Our Vision and Values." Norwegian. N.p., n.d. Web. 14 Oct. 2019.
<https://www.norwegian.com/en/about/our-story/vision-and-values/>.
19
Larson, Per, Captain. "How Reasonable Is the Proposed Norwegian Business Class?" Personal
interview. 5 Aug. 2019.
20
"British Airways Boeing 787-8 Seat Maps." Seat Guru. N.p., n.d. Web. 14 Oct. 2019.
<https://www.seatguru.com/airlines/British_Airways/British_Airways_Boeing_787-8.php>.
21
"Qatar Airways Boeing 787-8 Seat Maps." Seat Guru. N.p., n.d. Web. 14 Oct. 2019.
<https://www.seatguru.com/airlines/Qatar_Airways/Qatar_Airways_Boeing_787-8.php>.
22
"Etihad Airways Boeing 787-9 Seat Maps Layout 1." Seat Guru. N.p., n.d. Web. 14 Oct. 2019.
<https://www.seatguru.com/airlines/Etihad_Airways/Etihad_Airways_Boeing_787_900.php>.

14
 Legend:

Decision Node

Possible Outcome Node

Dismissed Option/s

Note that all values (except the cost of the seats which is a 1-time cost) are during
a 1-year period, and that maintenance, installation, amenities, transport of
material and aircraft, training of staff as well as loses incurred because of
grounded planes are not taken into account, reducing its accuracy. The estimated
loss if the project fails is simply the cost of the project for each respective option
as I was not able to find out what load-factor would be considered a failed project.
The probability was found through conducting market research (Appendix 1,
Question 6), with the estimated return assuming that each flight had a 100% load-
factor and tickets consistently costing:
- Business Class: $600
- Premium: $345
- Economy: $100
The $600 recommended price is taken from market research (Appendix II,
Question 9) where $600 was the mean price survey answerers were willing to

15
pay. The Premium and Economy tickets are based on average prices I found on
their website in the years 2019 and 2020. The quantity of premium and economy
seats was reduced accordingly to accommodate Business Class which takes the
room of 3 economy seats,23 each. 20 Premium seats were left so that those not
able to travel in business, yet desire a finer experience than in economy may do
so.
As shown in Figure 1, British Airways & American Airlines are Norwegian’s
toughest competitors on the London « New York route, but they charge $4210
and $4267 for Business Class, respectively24. The suggested $600 price for
Norwegian would incentivize BA and AA customers to travel with Norwegian.
With the full version in Appendix IV, we can determine through the following
Expected Value calculations that Option 3 will be the most profitable (gross profit).

All values in USD1000

EV2 - cost: 105,274.796 − 22,500.000 = 82,774.800
EV3 - cost: 86,656.757 − 72,000.000 = 14,656.800
EV4 - cost: 101,742.921 − 12,500.000 = 89,242.900

The calculations above conclude that Norwegian should indeed invest in 10

chairs on only 5 airplanes that fly this route, as a start. It offers promising returns
as well as bearing a smaller financial risk than Option 3 which would require a
long-term loan for such a costly implementation, without jeopardizing their
survival. However, this should not be a significant problem for a prominent airline.
We can also expect the cost per unit to decrease if they buy in bulk, especially if
they wish to expand this program to the rest of their B787 fleet.

After conducting the questionnaire, certain amenities have come forward as

being desirable in the proposed Business Class:

23
Mulady, Lara. "Economy, Business and First Class Seats: What’s the Difference?" Momondo. N.p., 19
July 2019. Web. 14 Oct. 2019. <https://www.momondo.com/discover/article/economy-business-
and-first-class-seats>.
24
"Flights Between LGW London and NYC New York." Www.expedia.com. N.p., 14 Oct. 2019. Web. 14
Oct. 2019.

16
Table 1: Amenities to be included, recommended by market research
A selection of food.
More comfortable seats; more leg room.
Drinks (i.e. champagne).
Lounge Access at airports.
Fast-track pre- and post-flight.
Priority Luggage.
Extra Luggage & Carry-On.
Personal TV screen with free movies and series.
Toiletry products (eye masks, tooth brushes etc.).
Seats capable of flat-bed mode.
More (and more comfortable) pillows.
High speed Wi-Fi.

Norwegian currently offers the listed amenities but at an added expense for the
customer, this additional cost should be removed for business class passengers
to encourage brand loyalty as is the case with Emirates and Singapore. This chart
further reiterates and orders features that are tied with “luxurious travel” and
should be strongly taken into account if Norwegian goes ahead with this plan.

Figure 4: Survey Question on valued

aspects of a flight

17
Conclusion

Having analyzed to what extent Norwegian Airlines offering a differently priced

luxurious flight cabin on flights between New York and Gatwick could be
profitable for the future, both the qualitative and quantitative data support the
conclusion that implementing 10 seats (with 20 premium seats, leaving 294
economy seats) on 5 Boeing 787s flying between London and New York will be
financially beneficial for Norwegian in the long run as not only will their brand
image be elevated (previously riddled with bankruptcy and cheap ‘economy’), but
they will be able to generate a larger amount of revenue per unit floorspace
(achieving economies of scale) than they currently generate with their economy
seats, all whilst not revolutionizing so much that they completely enter the luxury
travel market or so that their customers cannot identify with their current mission
statement: “Attract customers by offering competitive low fares and a quality
travel experience”25.

Recommendations
- Norwegian Airlines should make sure that they do not focus too much on
a wealthier market to prevent stakeholder conflicts (as identified in the
Force-Field Analysis where their normal clientele may no longer identify
with Norwegian’s mission statement).
- Norwegian Airlines should increase their R&D to further investigate how
appropriate this proposal is with more thorough market research, and
receive quotas from manufacturers.
- Mean whilst, Norwegian Airlines should focus on tailoring their current
service to a wider audience (primarily business travelers because
businesses are more likely to pay for a nicer seat, so if they establish brand
loyalty early on they will already have potential customers when they
implement the proposal) to expand their target market, and hence pool of
customers.

25
"Our Vision and Values." Norwegian. N.p., n.d. Web. 14 Oct. 2019.
<https://www.norwegian.com/en/about/our-story/vision-and-values/>.

18
It would also be interesting to see how this proposal could be implemented into
other routes, as well as in the future.

Bibliography

"Annual Report 2018." Norwegian.com. NORWEGIAN AIR SHUTTLE ASA, 31

Dec. 2018. Web. 14 Oct. 2019.

Ben. "Review: SAS Business Class A330 Los Angeles To Stockholm." One Mile
at a Time. N.p., 17 Apr. 2017. Web. 14 Oct. 2019.
<https://onemileatatime.com/review-sas-business-class-a330/>.

"British Airways Boeing 787-8 Seat Maps." Seat Guru. N.p., n.d. Web. 14 Oct.
2019.
<https://www.seatguru.com/airlines/British_Airways/British_Airways_Boein
g_787-8.php>.

Creedy, Steve. "Norwegian Plans Big Boost to Europe-US Routes for Summer."
Airline Ratings, 14 Oct. 2019. Web. 14 Oct. 2019.
<https://www.airlineratings.com/news/norwegian-plans-big-boost-europe-
us-routes-summer/>.

Dudovskiy, John. "British Airways Segmentation, Targeting and Positioning -

Research-Methodology." Research Methodology. N.p., 11 June 2016. Web.
14 Oct. 2019.

"Etihad Airways Boeing 787-9 Seat Maps Layout 1." Seat Guru. N.p., n.d. Web.
14 Oct. 2019.
<https://www.seatguru.com/airlines/Etihad_Airways/Etihad_Airways_Boein
g_787_900.php>.

"Flights Between LGW London and NYC New York." www.expedia.com. N.p., 14
Oct. 2019. Web. 14 Oct. 2019.

19
Kaplan, Seth. "JetBlue Faces Strong Competition on Routes to London." The
Points Guy. N.p., 11 Apr. 2019. Web. 14 Oct. 2019.
<https://thepointsguy.com/news/jetblue-london-competition/>.

Larson, Per, Captain. "How Reasonable Is the Proposed Norwegian Business

Class?" Personal interview. 5 Aug. 2019.

Lominé, Loykie, Martin Mwenda Muchena, and Robert A. Pierce. "Business

Organization and Environment." Business Management: Course
Companion. Oxford: Oxford UP, 2014. 1-92. Print.

Lominé, Loykie, Martin Mwenda Muchena, and Robert A. Pierce. "The Ansoff
Matrix" Business Management: Course Companion. Oxford: Oxford UP,
2014. 52. Print.

Mulady, Lara. "Economy, Business and First Class Seats: What’s the
Difference?" Momondo. N.p., 19 July 2019. Web. 14 Oct. 2019.
<https://www.momondo.com/discover/article/economy-business-and-first-
class-seats>.

"Norwegian Presents 2018 Full Year Results and the Strategy for Returning to
Profitability." Mynewsdesk. N.p., 07 Feb. 2019. Web. 14 Oct. 2019.

"Our Vision and Values." Norwegian. N.p., n.d. Web. 14 Oct. 2019.
<https://www.norwegian.com/en/about/our-story/vision-and-values/>.

"A Premium Experience." Norwegian. N.p., n.d. Web. 14 Oct. 2019.

<https://www.norwegian.com/us/travel-info/on-board/premium-cabin/>.

Press Release. "Norwegian Presents 2018 Full Year Results and the Strategy for
Returning to Profitability." Norwegian. N.p., 07 Feb. 2019. Web. 15 Oct.
2019. <https://media.uk.norwegian.com/pressreleases/norwegian-
presents-2018-full-year-results-and-the-strategy-for-returning-to-
profitability-2833546>.

"Qatar Airways Boeing 787-8 Seat Maps." Seat Guru. N.p., n.d. Web. 14 Oct.
2019.

20
 <https://www.seatguru.com/airlines/Qatar_Airways/Qatar_Airways_Boeing
_787-8.php>.

Rosen, Eric. "This Airline Route Makes $1 Billion Annually." Forbes. N.p., 6 July
2018. Web. 14 Oct. 2019.
<https://www.forbes.com/sites/ericrosen/2018/07/06/worlds-most-
profitable-flights-this-airline-route-makes-1-billion-
annually/#33d256537a8c>.

Sander, Daniel. "Norwegian Axes 5 Bases As Part Of Cost Cutting

Program." Airways Magazine. N.p., 16 Jan. 2019. Web. 14 Oct. 2019.
<https://airwaysmag.com/airlines/norwegian-axes-5-bases-as-part-of-cost-
cutting-program/>.

Southworth, Emily. "Norwegian's 2018 Financial Report." Morten Beyer &

Agnew. N.p., 07 Feb. 2019. Web. 13 Oct. 2019.
<https://www.mba.aero/norwegians-2018-financial-report/>.

Tangel, Andrew, and Alison Sider. "Higher Fuel Costs Hit Airlines." The Wall
Street Journal. N.p., 27 July 2018. Web. 13 Oct. 2019.

21
Appendix
Appendix I: A Business Class suite on the SAS Airbus 33026

Appendix II: Questionnaire Questions and Results

1. How old are you?

26
Ben. "Review: SAS Business Class A330 Los Angeles To Stockholm." One Mile at a Time. N.p., 17
Apr. 2017. Web. 14 Oct. 2019. <https://onemileatatime.com/review-sas-business-class-a330/>.

22
 2. Have you flown with Norwegian before?
3. If you were travelling with a low-cost airline, would you like the option to
fly in Business Class (like in the photo)?
4. How many times do you fly every year?

5. What would you expect a Business suite to offer? (creams, bed, drinks,
luxury food etc.)
Food, drink, overnight bags, beds
Bed, TV, drinks, good food
Bed, drinks, premium/healty food, good wifi
Bed
luxury food, more leg space, comfier chairs
More leg room, better food
Luxury foods drinks
better food, more space, chair that can lie down etc
Variety of food, well known brands on furniture and creams.
All of the above
Creams, bedding, good food, free drinks

23
Food
Everything
Drinks at least
All that and more. Like WiFi
Drinks, food and a bed
Good bed, few drinks, some snacks...
Pillow, blanket, unlimited drinks, bed, high quality food, small toiletry bag (toothpaste, brush,
creams, razor, etc).
very good seat drinks good food
Flat bed
bed, luxurious food
Bed, luxury food mainly
Better seats, free drinks, and food
beds, better food
Complementary eye mask, blanket,
ear plugs, pillow, bigger seat, personal TV screen, drinks, speciality food (gluten free, vegan,
etc.)
All of above
Drinks, lux food, free snacks, TV system with movies
food, drink, good service
All of the above
Bed, drinks, food, lounge, space, fast track, priority luggage, extra weight, extra hand
luggage...
Creams drinks etc
All the above
Better food than coach,drinks, not beds
I would expect the business class to receive more than the economy class, E.g better alcohol,
food and seats
Drinks, food and a bed
Champagne, a selection of good food, enough pillows

6. Would you be willing to change to Norwegian from airlines such as

Emirates and Singapore Airlines if you could fly with similar comfort and
service for a cheaper Price?

24
7. Which airline do you usually fly with?

8. Where do you usually fly to, and from where?

Survey results on individual most common travel

routes

23% 27%

5%

18%
27%

Dubai to UK EU to US Dubai to EU Aus to EU UK to US

This figure excludes short-haul flights from the collected data.

25
9. If Premium Economy (bigger seat, meal, more baggage) (London to New
York) costs 340 Euros, how much would you be willing to pay for a
business class similar to the one in the picture, with services such as

varied and better-quality meals, duvets, bigger screens etc.

10. What do you value the most when flying?

26
 11. Which class do you usually fly in?

Appendix III: Ansoff Matrix

Existing New

Existing Market Product

Penetration Development
New Market Diversification
Development

Product Development: It’s the development of a new product for an existing

market, or a variation of an existing product.27 In this case, Norwegian is looking
at introducing a low-cost version of business class in an existing market of
business class cabins.

27
Lominé, Loykie, Martin Mwenda Muchena, and Robert A. Pierce. "The Ansoff Matrix" Business
Management: Course Companion. Oxford: Oxford UP, 2014. 51. Print.

27
Appendix IV: Force-Field Analysis

1 5

6
2
Should Norwegian
Airlines add a more
luxurious class to
7
their long-haul
flights?
3

4
9

This figure was remade to fit into the main body.

Arrow Driving Forces Weight
1 Market research (the questionnaire) 4
concludes that 78.6% want the option to fly in
a Business Class suite similar to the one in
Appendix I
2 Market research (the questionnaire) 5
concludes that 88.1% would change from
luxury airlines (like Emirates Airlines and
Singapore Airlines) to Norwegian if a suite
similar to Appendix I was an option to
purchase or be upgraded to
3 It allows Norwegian to increase their pool of 3
possible consumers as they enter a new sub-
market

28
 4 It will revolutionize the image of Norwegian; 3
rendering the previous reputation of possible
bankruptcy and cancelled flights old
Restraining Forces
5 People might associate Norwegian as a 2
‘luxury’ airline, - or one attempting to be seen
in that manner - and hence use other budget
airliners
6 They will incur a great short-term cost to 4
purchase and install the units; it might be
difficult to find a short-term source of finance
after their reputation of being in an
undesirable financial situation.
7 It will require additional capital and logistics 3
to:
o Train cabin crew staff and engineers
o Maintain their functional operation
o Purchase commodities

8 Planes will have to be grounded and flown to 2

Prestwick, Scotland28 which will lower the
production capability of the airline, this is a
critical time for Norwegian to generate much
needed revenue and idle planes require
short-term outsourcing or cancelled flights
9 If the project is not financially successful, it 3
can prove detrimental to their survivability.

28
Larson, Per, Captain. "How Reasonable Is the Proposed Norwegian Business Class?" Personal
interview. 5 Aug. 2019.

29
Appendix V: Decision Tree

If tickets cost:
Business Class: $600
Premium Economy: $345
Economy: $100
*Before dividing by 1000 (as done in the Main Body):

Option 2: 10 Business Class, 20 Premium Economy, 294 Economy x 9 planes x 365

days =
(10 x 600) + (20 x 345) + (294 x 100) x9 x 365= $138,955,500

COST: 250,000 x 10 seats x 9 planes =$22,500,000

Option 3: 32 Business Class, 20 Premium Economy, 228 Economy x 9 planes x 365

days =
(32 x 600) + (20 x 345) + (228 x 100) x 9 x 365 =$160,636,500

COST: 250,000 x 3 seats x 9 planes = $72,000,000

Option 4: 10 Business Class, 20 Premium Economy, 294 Economy x 5 planes x 365

days =
((10 x 600) + (20 x 345) + (294 x 100) x 5) +((56 x 345) + (288 x 100) x 4) x 365=
$126,297,300

COST: 250,000 x 10 x 5=$12,500,000

All values in USD1000

EV:(𝑒𝑥𝑝𝑒𝑐𝑡𝑒𝑑 𝑟𝑒𝑡𝑢𝑟𝑛 𝑖𝑓 𝑠𝑢𝑐𝑐𝑒𝑠𝑠𝑓𝑢𝑙 × 𝑝𝑟𝑜𝑏𝑎𝑏𝑖𝑙𝑖𝑡𝑦 𝑜𝑓 𝑠𝑢𝑐𝑐𝑒𝑠𝑠) +
(𝑒𝑥𝑝𝑒𝑐𝑡𝑒𝑑 𝑟𝑒𝑡𝑢𝑟𝑛 𝑖𝑓 𝑖𝑡 𝑓𝑎𝑖𝑙𝑠 × 𝑝𝑟𝑜𝑏𝑎𝑏𝑖𝑙𝑖𝑡𝑦 𝑜𝑓 𝑓𝑎𝑖𝑙)
Probabilities come from Appendix II, Question 6.
EV2: (116455,5 × 0.881) + (22500 × 0.119) =105,274.796

EV3: (88636,5 × 0.881) + (72000 × 0.119) =86,656.757

EV4: (113797,3 × 0.881) + (12500 × 0.119) =101,742.921

30
 Decision Tree Diagram All values in USD1000 during a period of 1 year

success
138,955.50
88.1%

2
22,500.00
fail 11.9%
22,500.00

success 160,636.50
88.1% 160,636.50
1 3
72,000.00
fail 11.9%
72,000.00

success
126,297.30
88.1%

4
12,500.00
fail 11.9%
12,500.00
12

Appendix VI: Interview with Captain Larson, done in person on the 5th of
August, 2019.

Me: Good afternoon, thank you for taking the time to answer a few questions.

Captain: My pleasure.

Me: First off, could you describe the US to Europe market from Norwegian’s
perspective?

Captain: Sure. It’s one of the most prominent markets we operate, especially the
route between London and New York. It is the route that I fly the most as my base
is in Gatwick, London. We fly between the two destinations on average 10 times
a day, using 9 B787s.

31
Me: And, how do you think Norwegian could be affected financially and
reputation-wise if they were to implement a ‘Business Class’, with respect to your
experience at Emirates Airlines and Singapore Airlines?

Captain: It is a difficult question that I do not have a lot of knowledge about.

Norwegian’s product is very different from Emirate’s and Singapore’s and can’t
really be compared. Offering a similar business class isn’t within Norwegian’s
current model because it would involve a completely new logistic with catering
and cabin-crew training which would mean higher costs which would be passed
on to the customer. This product would not reach the standard of Emirates,
Singapore or other legacy airlines and hence not be a strong competitor. On long-
haul flights, we already have 56 premium economy seats which are already
normally sold-out. However, that does present an opportunity to expand the
current premium service by increasing the quality and standard, yet not invading
the territory of Emirates, etc.

32