Thursday, 7 February 2019

£140 million losses for Norwegian during 2018

Norwegian has reported its full year and fourth quarter 2018 results, this week which shows the airline was strongly affected by ongoing engine issues, big fuel hedge losses as well as the increased competition in a period of strong growth. 

The airline reports a net loss of NOK 1,454 million (around £140 million) in 2018, while the company’s unit costs, excluding fuel, have decreased by 12% during the same period. Norwegian was hit by several challenges during 2018, including tough competition and high jet fuel prices affected the results, in addition to significant costs related to Rolls Royce engine issues on the Dreamliners.

Because of the engine issues, the carrier was forced to wet-lease aircraft to avoid delays and cancellations on intercontinental flights. Including the Hi Fly Airbus A380 on the London Gatwick to New York JFK route. The firm has now reached an agreement with the engine manufacturer, which will have a positive effect in 2019. Its Dreamliner operations are now running smoothly, with no further issues in the foreseeable future.


The company’s total revenue in 2018 was more than NOK 40 billion, an increase of 30 percent compared to 2017. A total of 25 brand new aircraft entered the fleet, contributing to a production growth (ASK) of 37 percent. The load factor was 85.8 percent and more than 37 million passengers chose to travel with Norwegian, an increase of 13 percent compared to the previous year. The key priority going forward is returning to profitability through a series of measures, including an extensive cost reduction program, an optimised route portfolio and sale of aircraft. The company is also strengthening its balance sheet through a fully underwritten rights issue of NOK 3 billion in order to increase its financial position.

Fourth quarter results

For the fourth quarter, the total revenue was NOK 9.7 billion, an increase of 23 percent from the same period last year, primarily driven by international growth as well as increased traffic in the Nordics. More than nine million passengers flew with Norwegian this quarter, a growth of 12 percent. The load factor was 80.9 percent. The company incurred losses of NOK 1.8 billion on its current hedge positions in Q4. Some of the loss has since reversed due to the latest increase in the jet fuel price. The company’s unit costs, excluding fuel, decreased by 14 percent compared to the fourth quarter in 2017.

“We have taken a series of initiatives to improve profitability by reducing cost and increasing revenue going forward. We have optimised our base and route structure to streamline the operation as well as divested aircraft, postponed aircraft deliveries and not least started an internal cost reduction program, which will boost our financials and bring us back to profitability,” said CEO of Norwegian Bjørn Kjos.

“Going into 2019, we will enter a period of slower growth and fewer investments, while constantly looking for new and smarter ways to improve our efficiency and offer new products and services to attract new customers,” Kjos added. 
 




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