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Monday, June 24, 2024

Norwegian Air spreads its wings

Low-fare carrier Norwegian Air, clearly recovering from a crippling pilots’ strike earlier this year, has announced a doubling of third-quarter profits, a doubling of its fleet of long-distance aircraft and more major expansion of  intercontinental routes. The majority of those routes won’t be flown, however, from Norwegian’s homebase in Norway.

Norwegian Air's Dreamliners have had lots of problems but also been packed with passengers, and they're now the key to the airline's international expansion. PHOTO: Norwegian Air
Norwegian Air’s Dreamliners have had lots of problems but also been packed with passengers, and they’re now the key to the airline’s international expansion. PHOTO: Norwegian Air

Instead, Norwegian now aims to expand its long-haul service from other European cities, after announcing the purchase of another 19 Boeing 787-9 Dreamliner jets. In addition to boosting flights from London’s Gatwick Airport, Norwegian plans to launch new routes to North America and beyond from cities like Paris, Rome and Barcelona.

Norwegian’s ambitious founder and chief executive, Bjørn Kjos, told newspaper Aftenposten that those are the airports “where the large passenger streams will be.” He hastened to add that there will be new routes to and from Norway as well, but the biggest planned growth will take off from elsewhere in Europe.

Norwegian, after reporting pre-tax profits of NOK 1.1 billion in the third quarter, also announced that it’s investing NOK 30 billion in 19 new Dreamliners that have longer range and a longer fuselage that can accommodate 53 more seats. That’s important, since Norwegian could boast that 90 percent of the seats on its existing fleet of 19 Dreamliners have been sold during the two years since it launched its intercontinental service.

Flights on its long-haul routes are so packed that employees regularly get bumped in order make room for paying passengers. The popularity and demand for seats on Norwegian Air, despite horror stories of passengers stranded when the airline’s Dreamliners failed to function as expected, “just shows that there has been a great need for cheap tickets between Europe and the US and Asia,” Kjos said. “That need will definitely become greater in the future.”

After running into major turbulence over the troubled launch of the Dreamliners and then a pilots’ strike that grounded Norwegian’s shorter-haul service within Norway, Scandinavia and the rest of Europe, Kjos is firmly back in an optimistic mood, brimming with bold expansion plans at a time when Norway’s economy otherwise is facing its first downtown in years. And despite all the nightmares with the Dreamliners, Kjos claims he only has one regret: that he didn’t order more of them initially. By 2020, he predicts, Norwegian will have a fleet of 38 Dreamliners in service and the airline’s growth will come from them.

Kjos has already announced plans to run service to South America (Buenos Aires and Rio de Janeiro), South Africa and Hawaii, and now the airline is setting course for Canada, with new flights between France and cities like Montreal and Toronto. Kjos also sees lots of growth potential in routes from Spain to South America, and from Italy.

Newspaper Dagens Næringsliv (DN) reported that analysts weren’t as impressed as might be expected, though, by Norwegian’s third-quarter profits. Costs were higher than expected, according to analyst Kenneth Sivertsen at SEB, while Swedbank pointed not only to higher costs for fuel and aircraft leasing but also lower operating revenues than they’d expected. Citi cited concerns for overcapacity in Scandinavia, which could undermine operating results and lead to a need for a new share issue.

It all led to Norwegian’s share price diving on the Oslo Stock Exchange Thursday afternoon. By Friday morning, though, the sudden descent seemed to be over and shares in the company officially listed as Norwegian Air Shuttle were heading back up to cruising altitude. Berglund



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