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Norwegian posts surprise profit, sending shares flying
OSLO, July 13, 2018 (BSS/AFP) – Norwegian Air Shuttle reported a hefty
profit on Thursday, dramatically wrong-footing industry analysts who had
expected a big loss as the low-cost airline burns through cash in its drive
for growth, especially on ultra-competitive transatlantic routes.
Shares in the airline, which have been volatile since Norwegian started
undercutting large rivals on long-haul routes, jumped in response to the
surprise second quarter figures showing a net profit of 300 million kroner
($37 million, 31.7 million euros).
Financial analysts had been expecting a net loss of around 428 million
kroner, according to consensus forecasts compiled by FactSet, a data
provider.
“Despite being at the peak of our growth phase, we have been able to
present a profit and decreased unit costs during the second quarter,”
Norwegian said in a statement.
The airline said it managed to cut costs by nine percent in the second
quarter, and 19 percent excluding fuel.
Revenue rose by 31.5 percent to nearly 10.3 billion kroner, a record high,
in the second quarter.
“Norwegian surprised the markets today,” Hans Jorgen Elnaes, an independent
aviation advisor, said in a tweet.
In closing trade on the Oslo stock exchange, Norwegian’s share price was up
nearly two percent at 243.5 kroner, having earlier gone as high as 258.50.
Norwegian CEO Bjorn Kjos hailed the results, saying the company’s growth
drive would flatten, leading to a decreasing ramp-up costs.
“Going forward, the growth will slow down and we will reap what we have
sown for the benefit of our customers, staff and shareholders,” he said.
The group, which had previously planned to invest $1.9 billion for this
year and $2.6 billion for 2019, lowered the amounts to $1.75 billion and $2.2
billion, respectively.
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– Takeover bids-
Europe’s third largest budget airline after Ryanair and Easyjet carried 10
million passengers in the second quarter compared to 8.6 million in the same
quarter the previous year, an increase of 16 percent.
The company has ordered dozens of the latest fuel-efficient aircraft from
Airbus and Boeing as part of its plans to expand and gain a cost edge against
rivals.
Some of those rivals have been mulling takeover bids for Norwegian with,
analysts suspect, the possible aim of shutting down a disruptive competitor
on profitable Europe-US routes.
In May, the carrier said it had turned down two separate takeover bids by
British Airways owner IAG, which acquired a 4.61 percent stake in the
company.
There were also “several inquiries” from other suitors, Norwegian said in
April, but refused to disclose the suitors’ identities.
Norwegian was among the first low-cost airlines to venture into long-haul
flights five years ago, leading to other major players rapidly adding routes
ever since.
Last year, IAG launched its its own long-haul and low-cost airline Level
with flights from Barcelona to Los Angeles and Buenos Aires, among others.
And German Lufthansa’s budget carrier Eurowings kicked off long haul
flights from Munich to Las Vegas this year.
Norwegian’s success comes with a price as it’s heavily indebted and
financial turbulence has been a worry since its rapid expansion drive.
In March, it raised 1.3 billion kroner in a private placement of shares in
order to ease financial pressure.
BSS/AFP/HR/0922