Budget airline Norwegian hit by storm clouds of higher costs


Norwegian Air Shuttle, whose Norwegian Air International arm began flights from Ireland to the US this month, has reported a fall in earnings, with the outlook for costs and growth worse than previously expected.

Norwegian, Europe’s third-largest budget airline behind Ryanair and EasyJet, said its second-quarter pre-tax result of €730m was down on last year, blaming higher oil prices and Norway’s new air passenger tax. Results were “light years” behind forecasts, one analyst told wire service Reuters.

It said that Norwegian Air’s strategy of taking on more established flag carriers comes with risks such as buying or leasing larger, more expensive planes, such as the Boeing 787 Dreamliner, and its plan has been hit by rising costs in recent months.

Bjørn Kjos CEO of Norwegian

The airline reported that during the second quarter, it carried 8.6m passengers, an increase of 12pc. It said  strongest growth in terms of passenger numbers was at Oslo Airport and London Gatwick. During this quarter, Norwegian started up transatlantic flights with single-aisle aircraft, launched a new pilot base in Rome and announced its first ever route to South America (Gatwick to Buenos Aires).

Operating expenses jumped 45pc, fuelled by a 56 percent increase in technical maintenance costs, which it blamed on fleet changes, rising engine service costs and the strong US dollar.

But it said securing financing for new planes due to be delivered in 2018 would not be a problem. “Anyone who believes we can’t pay for the aircraft will be disappointed,” Chief Executive Officer Bjørn Kjos told an earnings presentation.

He added: “I am very pleased with the high load factor for this quarter. I’m also grateful that more than 200m passengers have shown confidence in us and chosen to fly with Norwegian since we began flying in 2002. However, we have had significant additional costs for leasing of aircraft, high oil price and the air passenger tax implemented by the government in Norway last year, which have had a negative impact on the result.

“Bookings and pre-sales for the coming months are looking very good and it has also been a great pleasure to receive fantastic feedback from our customers in the form of two SkyTrax awards.”




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