Norwegian fails to achieve zero growth but increases unit revenue

posted on 8th January 2020 by William Hayes
Norwegian fails to achieve zero growth but increases unit revenue

Low-cost carrier Norwegian has missed its target of zero growth to increase profitability, announcing its capacity last year was 1 per cent higher than 2018.

Unit revenue for the month did rise 21 per cent however, after the Scandinavian airline cut capacity by a quarter in December last year.

Full-year unit revenue was up 7% in 2019. Traffic growth for the year, as measured in revenue passenger-kilometres, was double the 1% capacity increase, resulting in a 0.8 percentage point rise in load factor to 86.6%.

New chief executive Jacob Schram, who took the helm earlier this month, says that throughout 2019 Norwegian “worked on reducing the capacity in line with demand and worked continuously to set a route structure adapted to the large seasonal fluctuations across the industry”.

He praises the airline’s employees for making “an impressive effort delivering on the strategy of moving from growth to profitability”, although the airline acknowledges that the 1% capacity growth last year was “a little over the previously announced zero growth”.

Norwegian made a full-year operating loss of NKr3.85 billion ($438 million) in 2018, having pursued an aggressive growth strategy across Europe and on transatlantic routes. It has since scaled back its expansion plans by selling aircraft and axing unprofitable routes. These measures helped deliver a 64% rise in third-quarter 2019 operating profit, to NKr2.97 billion, and a nine-month operating profit of NKr2.13 billion.

The airline sought additional funding from investors through a convertible bond issue and the release of new shares in November, in a bid to relieve financial pressure.

Norwegian is also awaiting compensation from Boeing for its grounded 737 Max fleet. The carrier had 18 Max jets in service at the time of the aircraft’s global grounding. Cirium fleets data shows that Norwegian has a further 92 Max jets on order.

The airline said in July that the grounding would negatively impact its 2019 financial results by NKr700 million.