Braced for turbulence: Norwegian Air puts brakes on 2019 expansion plans
Norwegian Air has cut its capacity growth plans for 2019 to just 9 percent from 15-20 percent seen previously as it seeks to preserve cash and prioritize profits over growth, it said on Thursday while reporting a fourth-quarter loss.
Europe’s third-largest budget carrier by passenger numbers, which on Wednesday postponed 16 aircraft deliveries from Boeing and Airbus, had raised its capacity by 37 percent in 2018 from 2017.
“The key priority is returning to profitability through a series of measures, including an extensive cost-reduction program, an optimized route portfolio and sale of aircraft,” it said on Thursday.
The airline has shaken up long-haul rivals by offering cut-price transatlantic fares, but its rapid expansion has left it with hefty losses and high debts, leading it to shift recently to focus on bolstering its finances.
After IAG, British Airways’ parent company abandoned its attempt to buy the firm, Norwegian last week announced plans to raise 3 billion Norwegian crowns ($350 million) from shareholders in coming weeks.
Norwegian’s fourth-quarter result plunged to a loss of 3 billion crowns from a deficit of 713 million a year ago. The company had warned of a loss on Jan. 29.
For the full year, the company’s loss stood at 1.45 billion crowns, a small improvement on the 1.79 billion crowns it lost in 2017.
“Based on current forecast, the company targets a positive net profit in 2019,” Norwegian said. However, the airline added that the goal was “subject to market conditions.”
In total, a cut of 5 percent in unit costs, as well as postponed investments and the planned share issue are expected to have a positive impact on the company’s liquidity of 7.7 billion crowns.
Capital expenditure for 2019 is now estimated at $2 billion, down from the $2.2 billion the company had announced last October.
While the company was preparing for a potential no-deal Brexit, there were currently no effects on bookings from Britain’s planned exit from the EU, Norwegian said.