Norwegian Air ramps up fare war with four new routes

The low-cost carrier has added 25 new US routes this year. (Reuters)
Updated 14 December 2017

Norwegian Air ramps up fare war with four new routes

NEW YORK: Norwegian Air Shuttle ASA will start flying four new routes between the US and Europe, the budget carrier said on Thursday, rapidly expanding its low-cost trans-Atlantic flights and increasing pressure on established carriers.
Starting next summer, Norwegian will operate flights to Amsterdam, Madrid and Milan from New York’s John F. Kennedy International and Los Angeles International airports.
These add up to 25 new US routes for Norwegian this year alone, and 11 more are already planned for 2018.
Norwegian’s rapid growth in the US market since being granted flying rights by the outgoing Obama administration in 2016 has rankled legacy carriers. They complain that it undermines wages and degrades working standards, but Norwegian has dismissed those claims.
Established US and European airlines have been forced to reassess the way they court customers as budget airlines offer cheap tickets for relatively comfortable flights on newer, sleeker jets.
Among US airlines in particular, the fight for both low and big budget travelers faces added challenges. A pricing squeeze from low-cost carriers such as Norwegian has pushed down fares, while higher-end airlines such as Emirates have raised customer expectations for comfort.
Including taxes, introductory fares for nonstop Norwegian flights to both Madrid and Milan from Los Angeles start at $229 for a one-way, main cabin seat. Nonstop flights to Amsterdam and Madrid start at $199 and $229 one-way from New York.
Summer fares listed on Google Flights on these routes are more than 10 times as expensive on other carriers.
On the Los Angeles-Milan route, no other nonstop flights from other airlines are listed during that time, and Norwegian will be the only airline operating year-round nonstop flights from Los Angeles to Madrid and Milan.

Record budget spurs Saudi economy

The budget sets out to lift spending and cut the deficit. (Shutterstock)
Updated 19 December 2018

Record budget spurs Saudi economy

  • “It is a growth-supportive budget with both capital and current expenditure set to rise.”
  • Government spending is projected to rise to SR 1.106 trillion

RIYADH: Saudi Arabia on Tuesday announced its biggest-ever budget — with spending set to increase by around 7 percent — in a move aimed at boosting the economy, while also reducing the deficit. 

However, analysts cautioned that the 2019 budget is based on oil prices far higher than today — which could prove an obstacle in hitting targets. 

Government spending is projected to rise to SR 1.106 trillion ($295 billion) next year, up from an actual SR 1.030 trillion this year, Minister of Finance Mohammed Al-Jadaan said at a briefing in Riyadh. 

The budget estimates a 9 percent annual increase in revenues to SR 975 billion. The budget deficit is forecast at SR 131 billion for next year, a 4.2 percent decline on 2018.

“We believe that the 2019 fiscal budget will focus on supporting economic activity — investment and wider,” Monica Malik, chief economist at Abu Dhabi Commercial Bank (ADCB), told Arab News.

“It is a growth-supportive budget with both capital and current expenditure set to rise.”

A royal decree by Saudi Arabia’s King Salman, also announced on Tuesday, ordered the continuation of allowances covering the cost of living for civil sector employees for the new fiscal year.

“The continuation of the handout package will be positive for household consumption by nationals,” said Malik. “We expect to see some overall fiscal loosening in 2019, which should support a further gradual pickup in real non-oil GDP growth.”

World oil prices on Tuesday tumbled to their lowest levels in more than a year amid concerns over demand. Brent crude contracts fell to as low as $57.20 during morning trading.

Malik cautioned that the oil-price assumptions in the Saudi budget looked “optimistic.”

“We see the fiscal deficit widening in 2019, with the higher spending and forecast fall in oil revenue,” she told Arab News.

Jason Tuvey, an economist at London-based Capital Economics, agreed that the oil forecast was optimistic, but said this should not pose problems for government finances.

“The government seems to be expecting oil prices to average $80 (per barrel) next year,” he said. 

“In contrast, we think that oil prices will stay low and possibly fall a little further to $55 … On that basis, the budget deficit is likely to be closer to 10 percent of GDP. That won’t cause too many problems given the government’s strong balance sheet. 

“Overall, then, we think that there will be some fiscal loosening in the first half of next year, but if oil prices stay low as we expect, the authorities will probably shift tack and return to austerity from the mid-2019, which will weigh on growth in the non-oil sector,” Tuvey said.

John Sfakianakis, chief economist at the Gulf Research Center, based in Saudi Arabia, said that the targets of the budget were “achievable” and the forecast oil price reasonable. 

“It is an expansionary budget that should spurt private sector activity and growth,” he said. 

“With Brent crude averaging around $68 per barrel for 2018 and $66 per barrel for 2019, the authorities have applied a conservative revenue scenario.”