Europe’s Startup Airlines Face a Long Winter

Photo credit: Flyr Boeing 737 Takes Off From Oslo Flickr / Anna Zvereva

Winter has long been a low season for air travel in Europe with the seasonal fluctuation from peak summer months greater than in many other global markets, including the U.S. This winter is proving no different, but the added challenges of high inflation and energy costs is weighing on some airlines, particularly the startups that launched during the pandemic.

Flyr, a Norway-based startup that took off in June 2021, said Tuesday that it would cut its winter schedule drastically. Instead of flying a planned 12 aircraft, the airline will operate just five or six and suspend flights to all but a few key markets — including Alicante, Barcelona, Paris, and Rome — of the 27 destinations it served in September. The cuts, plus involuntary staff furloughs, aim to reduce expenses by half this winter and minimize cash burn to 400 million Norwegian kroner ($38 million). On top of the macroeconomic issues, Flyr CEO Tonje Wikstrøm Frislid said competition with legacy carriers, an age old challenge for any startup, was also challenging.

“It has taken longer than expected to build loyalty among business travelers on domestic routes in Norway, where the incumbent carriers maintain large market shares,” he said.

Another Norway-based startup, Norse Atlantic Airways, is not doing much better. The carrier will suspend its flights to Los Angeles from Berlin and Oslo for the winter — routes previously planned to be flown year round — in what amounts to a 28 percent cut to planned capacity for the November-through-March period, according to Diio by Cirium schedules.

“The winter season is historically more challenging for the industry and this year faces the additional burden of high fuel prices, increasing inflation in the markets that we operate and uncertainty in overall demand,” a Norse spokesperson said. “We have taken action to trim certain frequencies from Oslo and Berlin to the U.S…. The routes that we will continue to operate throughout the winter schedule are in strong demand.”

Flyr lost nearly $61 million and Norse $51 million in the first half of 2022, according to their latest available financial data. However, the latter only began flying in June.

The cuts come as many more established European airlines indicate surprisingly resilient travel demand despite the seasonal and economic pressures. SAS, which competes with both Flyr and Norse Atlantic, said on September 30 that it expects passenger numbers to continue to recover to 90 percent of pre-pandemic levels during the first half of its 2023 fiscal year, or the winter November-to-April 2023 period. The legacy carrier, which is restructuring in U.S. Chapter 11, also said leisure demand was robust while corporate demand was returning at a slower pace.

And Wizz Air CEO Josef Varadi said at a Eurocontrol event on Tuesday that European air travel “demand [was] surpassing previous levels.” The discounter was the fifth largest airline in Europe in terms of seats from January through September, Diio data show.

“We expect a stronger demand/fare environment, as leisure demand continues to be more resilient than previously expected, particularly related to peak holiday travel,” Raymond James analyst Savanthi Syth wrote on the European outlook on Tuesday. She noted that macroeconomic factors, including energy prices and inflation, could weigh on profitability even as travel demand remains robust.

Other European startup airlines also appear to be in a better situation than Flyr and Norse. Play Airlines CEO Birgir Jónsson told Airline Weekly that the carrier has a “positive outlook” for the winter, particularly for the transatlantic service to the U.S. that launched in April. Demand continues to increase with “consumer travel confidence,” and Play expects a continued increase in passenger load factors during the winter holidays and into 2023. Play launched in June 2021.

Norwegian Air, one of Flyr’s main competitors, has not updated its winter guidance since the end of August. At the time, executives said they were seeing a “normal” slowdown in bookings from the summer as compared to pre-pandemic years. Norwegian planned to seasonally reduce its winter capacity by roughly 28 percent with a focus on profitability.

European airlines will provide updated guidance later in October, and in November when they report September quarter results.

Story updated with comments from Play CEO Birgir Jónsson.