Norwegian Air has posted its results for the first quarter of its 2019 financial year, recording a net loss of NOK 1.489bn NOK ($172m). The carrier, that has found it difficult to make a profit in recent quarters, said "the quarter was characterised by reduced costs, increased revenue and significantly improved on-time performance. The net loss was NOK 1,489 million, while the company’s unit cost excluding fuel decreased by 8% during the same period."
Norwegian has delayed delivery of additional Airbus A320 and Boeing 737 MAX aircraft. (Edward Russell)
The airline's revenue was in Q1 was NOK 8 billion, up 14% on the same period last year. However, the net loss of NOK 1.489bn represented a substantial deterioration over the NOK -46.2m loss reported a year earlier. EBIT also declined NOK -2,186m in 2018 to NOK -2,263m in 2019 although revenue increased from NOK 6,993m to NOK 7,992m. More than 8m passengers flew with the airline during the latest quarter and load factors reached 81%, with growth of 9% coming mainly from intercontinental operations.
Commenting on the results, Norwegian CEO Bjørn Kjos said: "I’m pleased with the positive developments this quarter, despite the 737 MAX issues. We have taken a series of initiatives to improve profitability by reducing costs and increasing revenue. We are optimising our base structure and route network to streamline the operation as well as divesting aircraft, postponing aircraft deliveries and not least implementing our internal cost reduction program, which will boost our financials. I am also pleased that booking figures and overall demand for the coming months look promising."
Norwegian has been impacted by problems affecting the Rolls-Royce Trent 1000 engines that power its Boeing 787 Dreamliners, and the grounding of its 18 Boeing 737 MAX aircraft following other airlines' crashes in Indonesia and Ethiopia. These problems have resulted in some cancelled flights and alternative aircraft being chartered to cover some services.
The airline's leasing arm, Arctic Aviation Assets has also reached agreement with Airbus to reschedule part of its order book, including both A320neos and A321LRs. The postponement will reduce Norwegian Group’s capital expenditure commitments by approximately $570m in 2019 and 2020. It was due to receive four Airbus A321LR in 2019 and a further 12 in 2020, but will now take 12 aircraft in 2020 and 22 in 2021. It has also delayed deliveries of 12 additional 737 MAX aircraft from 2019 and moved them back into 2023-2024.
Editorial opinion: The red ink continues for Norwegian, which has been struggling for some time under the burden of over-expansion, stiff competition and risking prices. The challenges posed by its 787s and 737 MAXs haven't helped. The good news is that it now moves into the summer period, which is profitable for almost all airlines, and there are signs its cost reduction programs are yielding results - albeit slowly. Norwegian should be fine for the next two quarters, but the real challenge will come next winter when the market slows again - especially if it has not pruned further costs by then or if fuel prices continue to escalate.
Text © The Aviation Oracle