Norwegian Air Loses Millions Due to Boeing 737 MAX 8 Grounding
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Norwegian Air, the cash-strapped low-cost carrier, said in its first quarter earnings call on Thursday that the grounding of the Boeing 737 MAX will throw a wrench in its efforts to finally become profitable.
“Due to the uncertainty related to the MAX grounding, the company sees increased risk related to the target of a positive net profit in 2019,” Norwegian said in its earnings report, according to Reuters.
The airline estimated the grounding of its 18 MAX planes will cost it about 500 million Norwegian kroner ($57.7 million USD). The MAX is expected to be out of commission worldwide through the peak summer travel season. This means Norwegian must lease additional aircraft to replace its MAX fleet through this busy travel time. “The company will continue to limit passenger disruptions by also offering flights with wet lease companies whenever necessary,” the airline said in its earnings report.
The Oslo-based carrier was caught in a similar situation, as were airlines worldwide, when it was forced to ground several of its 787 Dreamliners for engine work last year.
Southwest Airlines also said in its Wednesday earnings call that it lost at least $200 million due to the grounding of its 34 MAX planes, as well as other factors like bad weather and issues with its maintenance workers. In its earnings report, Southwest said that it canceled 10,000 flights due to its grounded MAXs. The LUV carrier, however, still managed to grow its revenue by 4% more than the same quarter last year to $5.1 billion.
Norwegian’s losses could mean dire straits for the airline, which has been trying to cut costs and increase its cashflow to turn into a profitable business. At the beginning of the year, the airline raised about $353 million in a share sale and has made moves like cutting its service to the Caribbean as part of putting “cost-cutting measures as a priority and aircraft utilization in focus.”
The airline did say it was able to cut 467 million kroner ($53 million USD) in spending this quarter, and hopes to keep shrinking costs.
Norwegian reported huge losses in 2018, totaling a net loss of 1.5 billion Norwegian kroner ($175 million USD). Aviation experts have been watching Norwegian for signs of collapse for many months.
“Norwegian is in a race against time,” BBC’s Theo Leggett wrote in January. “It needs to become consistently profitable, before the money runs out.”
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