Norwegian cuts routes over 737 Max grounding

Norwegian Air plane
Image copyrightNORWEGIAN

Budget airline Norwegian Air has said it will end flights between Ireland and the US next month, blaming the grounding of the Boeing 737 Max.

If passengers no longer wanted to travel with the airline, Norwegian said they would be offered a full refund.

“We will continue to offer scheduled services from Dublin to Oslo, Stockholm and Copenhagen as normal,” said Mr Wood.

The airline said any redundancies resulting from the decision to end the Ireland-US routes would be “a last resort”.

“Our 80 Dublin-based administrative staff at Norwegian Air International and Norwegian Group’s asset company, Arctic Aviation Assets, will not be affected by the route closures,” Mr Wood added.

Rapid growth

Norwegian Air was founded in 1993 as a small domestic airline, but changed strategy in 2002 to become a budget carrier.

Its low fares have helped it grow rapidly, and it is now Europe’s third biggest low-cost carrier.

Last year it launched 35 new routes, carried more than 37 million passengers and added 2,000 staff.

Its big innovation has been to operate low-cost long-haul flights between the UK and the US, which it started in 2014. It now flies to 12 US destinations from London’s Gatwick airport.

It has become the biggest international carrier to serve the New York City area, carrying more passengers there than British Airways, Air Canada or Lufthansa, according to figures from the Port Authority of New York & New Jersey.

However, that growth has come at the expense of profits.

The airline lost 1.45bn kroner (£135m) last year, which it blamed on fuel costs, tough competition and issues with engines on its Dreamliner aircraft.

In March, to shore up its finances, Norwegian raised 1.3bn kroner through a share sale and also sold some aircraft.

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Launched in 1972, the Interrail pass enables European citizens to travel around 31 countries by train and ferry, while the older Eurail pass lets non-European citizens to do the same.

Over the decades it has been a rite of passage for millions of mostly young tourists, although older people use the passes too.

RDG stressed British people would still be able to buy Interrail tickets and that the move had “no relation” to Brexit.

It also said Eurostar trains would not be affected by the decision, which means passholders will be able to travel from Paris, Brussels and Amsterdam to London and vice versa.H

owever, travel outside of Eurostar’s terminals in London and the South East will require a separate ticket, affecting both UK and non-UK citizens.

Currently, if a Briton buys an Interrail pass it includes a train to get them from home to the Eurostar and back again at the end.

RDG said the dispute stemmed from a decision by Eurail Group, a Dutch organisation, to merge its two passes into one.

RDG said the new pass would clash with its own Britrail pass, also aimed at non-European citizens, which covers UK rail travel and offers discounts on local tourist attractions.

It added that Eurail decided to end its membership of Interrail/ Eurail after RDG declined to sell the new product.

RDG regional director Robert Nisbet said: “The rail industry boosts British tourism and, working together, rail companies are offering the best option for tourists with BritRail, which is recommended by Visit Britain [the UK’s official tourism promotion agency].”

Eurail said that all Interrail and Eurail passes purchased before 31 December 2019 were still valid for travelling on UK trains until the end of their validity period.

But it added: “As a consequence of RDG not being part of Eurail and Interrail, travellers who buy a Eurail or Interrail Global Pass in 2020 will no longer be able to travel in Great Britain.”

RDG said that it wanted to work with Eurail Group to develop an offer for tourists who want to buy the Eurail and Britrail passes together.

Brexit uncertainty ‘could lead to interest rate cut’

Bank of England

The Bank of England may need to cut interest rates should Brexit uncertainty persist, one of its policymakers has said.

Even if the UK avoids a no-deal Brexit, rates may still need to be cut, Michael Saunders said.

Interest rates have been on hold at 0.75% since August 2018, when they were raised from 0.5%.

Last week, the Bank said Brexit uncertainty meant the UK economy was performing below its potential.

“If the UK avoids a no-deal Brexit, monetary policy also could go either way and I think it is quite plausible that the next move in Bank Rate would be down rather than up,” Mr Saunders told local businesses in Barnsley.

The pound dropped against the dollar after his comments were reported, trading down about 0.4% at $1.2277, before paring losses.

BBC graph showing UK interest rates unchanged since August 2018

Mr Saunders, who is a member of the Bank of England’s Monetary Policy Committee (MPC), said that even without a no-deal Brexit, high levels of uncertainty surrounding the UK’s departure from the EU would persist and act as a kind of “slow puncture” for the economy.

“In this case, it might well be appropriate to maintain a highly accommodative monetary policy stance for an extended period and perhaps to loosen policy at some stage, especially if global growth remains disappointing,” he said.

Passively waiting to see what happened with Brexit risked inappropriate monetary policy, and the cost of reversing a rate cut if the outlook improved would be low, he added at the event at the Barnsley and Rotherham Chamber of Commerce and Institute of Chartered Accountants.

“In general, I would prefer to be nimble, adjusting policy if it appears necessary to keep the economy on track, and accepting that it may be necessary to change course if the outlook changes significantly,” he said.

Policy options

At its last meeting on interest rates, the MPC unanimously held rates at 0.75%.

Mr Saunders said he still agreed with recent Bank guidance that a limited and gradual increase in interest rates would be needed over the medium term, if Brexit uncertainty reduced significantly and global growth speeds up.

In the event of a no-deal Brexit, Mr Saunders repeated the Bank’s position that all policy options would be open, depending on the damage to growth and how much inflation spikes from a further fall in sterling.

A disorderly no-deal Brexit could leave the Bank of England’s rate setters with an unenviable dilemma.

Do they cut interest rates to boost growth – or raise them to curb inflation caused by a possible fall in the exchange rate, shortages and tariffs?

With tackling inflation at the top of its remit, the Bank’s economic models assume rates would rise in such circumstances. But rates are set by nine humans, not machines.

The governor, Mark Carney, recently indicated he’d be inclined to cut in the event of a no-deal – and the vote usually goes the boss’s way.

But what is remarkable is that there appears to a change of view on his panel of what to do even in the event of a deal.

Just last week, the MPC repeated its mantra that rates would likely go up slowly and gradually in the event of a deal.

But now, one of those who had previously warned of the dangers of not raising rates – Michael Saunders – says that a cut is plausible, deal or no deal.

The Bank says the economy has lost momentum; Michael Saunders likens the pace to a slow puncture. If he’s shifting in his position, it’s likely others are too

But how much would lower rates help in the event of a disorderly no-deal?

A cut aims to put more money in pockets. But if any hit to growth was due to shortages and disruption, a supply shock, boosting demand, may be counterproductive.

More money is great – as long as there’s things to spend it on.

Earlier this month, Bank governor Mark Carney estimated that in a worst-case, chaotic scenario that a no-deal Brexit could reduce the size of the economy by 5.5%.

The Paris-based OECD has predicted a 2% hit in the case of a more managed no-deal Brexit.

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