Boeing 737 Max grounding continues to affect Norwegian

posted on 11th July 2019 by Justin Burns
Boeing 737 Max grounding continues to affect Norwegian

Norwegian has reported that its second quarter (Q2) results were characterised by reduced growth and improved profitability which it said was in line with the company’s strategy.

The airline said the negative impacts on production, demand, operating expenses of the grounding of its Boeing 737 Max aircraft, the underlying operating result before ownership costs more than doubled from the same quarter in 2018.

The underlying operating result before ownership costs was more than NOK 2.3 billion ($269 million), the highest ever in a Q2 and NOK 1.2 billion higher than last year. The unit revenue (RASK) increased by 13 per cent, and the revenue per passenger per kilometer (yield) increased by 11 percent.

Norwegian said the grounding of 18 Boeing Max 8 aircraft in March affected results by NOK 400 million in Q2. It expects the negative impact on the 2019 results to be approximately NOK 700 million ($81 million) .

For Q2 the total revenue was more than NOK 12 billion, an increase of 19 per cent from the same period last year, primarily driven by intercontinental growth. Almost 10 million passengers flew with Norwegian this quarter, on par with the same quarter in 2018. The load factor was 88 per cent, up 1.2 percentage points from last year.

Norwegian said its key priority is returning to profitability through a series of measures, including an optimised route portfolio and an extensive cost-reduction program. The production growth (ASK) in Q2 was six per cent, down from the peak growth of 48 per cent in Q2 2018. The company’s internal cost reduction program #Focus2019 continues with full effect and achieved cost reductions this quarter were NOK 554 million, reaching the goal of NOK 1 billion so far in 2019.

“Norwegian’s Q2 results show that we are delivering on our strategy of moving from growth to profitability. Despite operational issues outside of our control, like the grounding of our 737 MAX fleet, we are delivering the highest second quarter operating revenue in the history of Norwegian. I am also pleased with the booking figures for the coming months, especially on long-haul,” said CEO of Norwegian, Bjørn Kjos.