UPDATED: Oslo-based Norwegian Air faced more turbulence this week, after the latest deadly crash of a Boeing 737 MAX-8 jet that was similar to those in Norwegian’s fleet. The airline’s already-struggling share price took a dive on Monday and was still down on Tuesday, despite release of figures showing strong passenger growth and improved punctuality.
Norwegian analysts were expressing concern this week that the crash of a new Ethiopian Airlines MAX-8 shortly after takeoff on Sunday would cause more trouble for Norwegian Air. The airline has struggled with its rapid intercontinental growth in recent years and faced what analysts called “a negative effect on passenger demand” or willingness to fly on Boeing’s new 737 MAX 8s. Norwegian Air already has 18 Boeing 737 MAX jets in its fleet, with another 90 on order.
The Ethiopian Airlines crash, which killed all 157 people on board including two residents of Norway, came just a few months after another new 737 MAX 8 operated by Lion Air crashed after takeoff in Indonesia. None of the 189 people on board survived that crash either.
It was also one of Norwegian Air’s own new Boeing 737 MAX 8 jets that developed engine trouble after taking off from Dubai in December. Its pilots opted to shut down the engine and make a controlled landing at the nearest airport, which turned out to be Shiraz in Iran. The aircraft then remained stuck in Iran because of US sanctions against the country that prevented Boeing from servicing the aircraft. It has since been released.
Norwegian Air officials announced Monday that despite the trouble and the two MAX crashes, it was not grounding its fleet of MAX 8 jets in service. “All of our 737 MAX 8 aircraft are flying as normal,” said Tomas Hesthammer of Norwegian Air in a statement issued to news bureau NTB. “We are, as always, in tight dialogue with Boeing and acting in accordance with their recommendations and those of aviation authorities.”
That decision was reversed later on Tuesday afternoon, even though Norway’s own aviation authority, Luftfartstilsynet, has not ordered any grounding of 737 MAX 8s pending investigations into the latest crash in Ethiopia. Nor has Norway banned the jets from its airspace, like a growing list of other countries have done. The aircraft is also used by charter airline TUI on flights from Norway, and TUI also halted flights using the MAX 8s. Hesthammer insisted on Monday that “the safety of our passengers always comes first,” but Norwegian Air initially saw no need to ground its MAX 8s like other airlines and authorities in China and Singapore have.
Investors did not seem to respond positively to Norwegian Air’s decision, sending its share price down by another 6 percent on Monday even as the airline issued February traffic figures showing that more than 2.5 million passengers flew on Norwegian Air last month, up 8 percent over February of last year. The airline confirmed, however, that such strong growth will taper off now as its strategy shifts “from growth to profitability.”
Analysts remained cautious, with DNB Markets writing that “two accidents in a short time,” both involving a new aircraft that’s had relatively few deliveries “can lead to a lot of speculation and questions about the safety of the aircraft.” That in turn can hurt passenger demand, airlines’ interest in the aircraft and their value, noted DNB Markets, the securities arm of Norway’s biggest bank. And that can hurt Norwegian, which has already been suffering from its major international expansion.
Preben Rasch-Olsen, an analyst at Carnegie in Oslo, was on state broadcaster NRK’s national nightly newscast Monday saying much the same thing. He showed graphs showing how Norwegian’s share price dove on Monday, while also noting that the airline’s passenger growth and improved punctuality amounted to good news at the same time of the crash news.
On Tuesday, US aviation authorities demanded that Boeing change programming on the new 737 MAX 8 aircraft but stopped short of ordering any groundings. Boeing confirmed it will do so, as authorities in Singapore banned the 737 MAX 8s from its airspace. Chinese authorities have alreaded ordered Chinese airlines to ground their MAX 8s, as have those in Indonesia. Royal Air Maroc and Aeromexico are among carriers grounding thier MAX 8s, while pilots for Aerolineas Argentinas refuse to fly them until the cause of the crash in Ethiopia is established.
Norwegian Air’s share price was down by another 1.4 percent as of midday on Tuesday and then fell as much as 9 percent when the grounding decision was eventually made.
newsinenglish.no/Nina Berglund
