Thursday, 25 October 2018

Joint venture talks intensify at Norwegian as the carrier reports its latest results

One of the worlds most popular airlines, the low-cost carrier Norwegian has issued its latest figures for the third-quarter today.  In total, around 11 million passengers travelled with the airline during the third quarter - an increase of 11% and its load factor remained high at 90.5% which is just slightly down when compared to last year's 91.7%.

The numbers have been collated, crunched and calculated and the airline reported a result (EBT) of NOK1.6 billion that is £149 million for the third quarter of 2018. The airline proudly announced that it had continued to reduce its unit costs despite a capacity growth of 33%. Although looking ahead, it expects that growth will slow, consequently further reducing unit cost.

The net profit for the third quarter was  NOK1.3 billion (£121 million), an improvement of 18% compared to the same quarter last year. The company's unit costs excluding fuel have decreased by 10% this quarter. The total revenue increased by 33% to NOK13.4 billion  (£1.2 billion). 

Norwegian has made significant investments in recent years, with the establishment of new bases internationally and in new markets; recruitment of several thousand employees - primarily pilots and cabin crew - the launch of many new routes and increase of frequencies on well-established routes. The strong international footprint has, for instance, contributed to the United States now representing the largest market after Norway in terms of total revenue. The Spanish market is increasingly important for the carrier as it takes the third highest revenue position which may be a surprise to some, who thought the UK, which is fourth in revenue terms, would follow the USA. 

"I am very pleased to present a solid result this quarter with a reduced unit cost despite strong growth. Going forward the growth will slow down, and we will begin to reap the large investments we have made over the years, which will benefit customers, employees and shareholders. However, there is no doubt that tough competition, high oil prices and a strong dollar will affect the entire aviation industry, making it even more important to further streamline our operations and continue to reduce costs," said CEO Bjørn Kjos of Norwegian.

A new fleet reduces environmental emissions and costs

Norwegian has one of the world's youngest and most modern aircraft fleets with an average age of 3.7 years. Thanks to the young fleet, the company has reduced its emissions per passenger by 30 per cent since 2008. It has also been named the most environmentally friendly airline on transatlantic routes by The International Council of Clean Transportation, an international and independent environmental institute. "The report by the International Council of Clean Transportation confirms that our investment in the latest technology available on the market is the single most important environmental measure an airline can undertake. New aircraft are win-win for the environment, the passengers and the company’s costs,” Kjos continued.

During the third quarter, Norwegian has taken delivery of one brand-new Boeing 787-9 Dreamliner and four Boeing 737 MAX 8 aircraft. In 2018, Norwegian will take delivery of 11 Boeing 787-9 Dreamliners, 12 Boeing 737 MAX 8 and the two Boeing 737- 800 aircraft that have already been delivered.

Joint venture or take over talks
There are numerous rumours around at the moment regarding Norwegian's future, this isn't something new, the aviation industry has been rife with speculation, gossip and rumour on just who the Oslo based airline is talking to regarding takeovers, joint ventures, investment or other such tie-ups. In the past, the airline has talked to Lufthansa, Ryanair, British Airways as well as a small number of other carriers in Europe. It is currently conducting such talks with another, at present unnamed entity, which are, we are told is at an advanced stage. 

The latest speculation is that the carrier is close to a deal, that is worth nearly £1 billion, being concluded with an aircraft leasing firm from outside Europe. This deal will greatly assist the airline with sale and leaseback arrangement for some, if not all, the brand new aircraft the carrier has on order. It will, if the negotiations prove to be successful, will take the form of a joint venture and is expected to be announced next month.  

The airline is also understood to be talking to another airline, also operating long-haul flights which may involve merging some routes as well as taking leases on some of those forthcoming new aircraft deliveries that Norwegian are scheduled to recieve.  There has been no confirmation from the airline regarding those negotiations at this stage, although according to those close to the situation indicate that talks are at an early stage.