Norwegian Air Shuttle in 222 Jet Order

Norwegian Air Shuttle, which is a low-cost airline, has placed one of the biggest plane orders ever in Europe. On Wednesday, it announced that it’s going to buy 222 narrow-body aircraft, which is worth about $21.5 billion at list price. The carrier is taking advantage of the great economic health in the Nordic countries while the credit crisis across Europe and other airlines are finding it difficult raise profits.

The 222 planes on order aren’t coming from just one manufacturer but will be split between both Boeing and Airbus. Boeing, however, did secure the larger of the split for 122 planes – 22 B787-800s and 100 B737 MAX8s. Airbus secured the other 100 aircraft – all A320neos. This is only the second major order for the new B787-800 planes since Southwest Airlines ordered 150 in December. It has also broken tradition for the carrier, as this is the first time it has ever ordered Airbus aircraft to add to its all-Boeing fleet. Additionally, the carrier has signed options for another 100 new B787-800s and 50 A320neos as it aims to replace its whole fleet of 62 planes, with deliveries beginning in 2016. It says that it’s in talks with Boeing already about expanding its current order for six 787 Dreamliners as well.

Norwegian Air Shuttle chief executive Bjoern Kjos told reporters that their idea is to act a little out of the norm for the market – when it’s darkest at night. The global economy is in a declining state, which is when action should be taken. He noted that his company got a favourable price since the aviation industry in Europe is going down the tube.

Kjos said he’s not worried about financing the order, as the deal is completely supported by borrowings from the European Export Credit Agencies and the Export-Import Bank of the United States. He says a share issue wasn’t in the cards – especially in this market climate. If they do issue shares one day, the market will look different than now. Deals dependent on going into the market to get money shouldn’t be made. Ideally, he thinks fleets should be more than 10 aircraft…more like 20-30 depending on where they are put. He wants more Dreamliners in the future (2015, 2016 and beyond), and Boeing wants to sell them, so he believes it will work out.

The order from Norwegian Air Shuttle comes just weeks after Air France-KLM announced it will shrink its fleet by reducing a planned expansion project by more than €1 billion. The carrier’s order also pushes rival SAS further into the void, with the airline struggling with an aged fleet, budget rivals and debt. It also coincides with plans by both Boeing and Airbus to increase the production of narrow-body B737 and A320 aircraft. The manufacturers are expecting continued healthy demand from carriers looking to save money on fuel and meet traffic growth in the Middle East and Asia.

Norway is the eighth biggest exporter of oil in the world, as well as the second largest exporter of natural gas. The country has also saved $570 billion in a wealth fund, which has put it in a great position in the economy.