Of course, in an industry that has been scarred by bankruptcies, it is reasonable to wonder how the cheap tickets are possible, and whether they are sustainable in the long run, particularly as oil prices continue to rise. Jet fuel is one of the airline industry’s largest costs.
Part of the reason for the cheap airfares are new, more fuel-efficient planes like the Boeing 737 MAX and the Airbus A320neo, Mr. Pearce said.
“This is partly technology-driven,” he said. But airlines like Norwegian also keep their prices low by selling airfare-only tickets and charging more for bags and other onboard services.
“We’ve debundled the fare so passengers are able to choose if they want to have the luggage, assigned seats, et cetera,” said Thomas Ramdahl, the airline’s chief commercial officer. “The freedom to choose is important to us, but we are in the game to make money as well, so we are not giving away tickets.”
He also said that the lower fares actually helped the airline save money on advertising.
“The lowest prices are a tool for marketing,” Mr. Ramdahl said. “Instead of using tons of money on big campaigns, we can use the fares as a campaign instead.” The low prices also mean the airline is less likely to have empty seats on its flights.
But if oil prices continue to rise, Mr. Mann said, long-haul low-cost airlines like Norwegian could be caught in a financial bind and struggle to keep their fares so low. Other larger airlines will certainly be affected, too, but may be more resilient to short-term rises in the price of oil, partly because they have more passengers willing to pay higher fares.
Mr. Pearce estimated that the larger airlines made 60 percent of their revenue from premium cabin customers on North Atlantic routes in 2017. Those margins also mean that legacy airlines are better able to compete with low-cost airlines for budget-conscious international travelers, because their larger premium cabins can help subsidize the lower fares.
