Norwegian Air Expected to Slow Growth Amid Weak Earnings

Oct 26, 2018

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Blaming rising fuel bills, fierce competition and a strong dollar, transatlantic budget carrier Norwegian Air reported weaker-than-expected earnings on Thursday.

The Scandinavian low-cost airline reported a net profit of 1.3 billion Norwegian kroner (about $155 million USD) in the third quarter of 2018. Reuters reports analysts had been expecting the carrier to post a net income of 1.74 billion kroner (~$208.5 million USD). Norwegian said that in the third quarter, 11 million passengers flew with the airline.

The airline said in its quarterly report that its fuel bill increased 85% in the third quarter, compared to the same time period in 2017.

Norwegian’s CEO Bjorn Kjos said the airline, which has been the fastest growing low-cost carrier to date, would slow its expansion in the near future due to current forces in the aviation market.

“Going forward the growth will slow down, and we will begin to reap the large investments we have made over the years,” Kjos said in a statement on the airline’s earnings. “However, there is no doubt that tough competition, high oil prices and a strong dollar will affect the entire aviation industry, making it even more important to further streamline our operations and continue to reduce costs.”

In addition to high fuel costs, Norwegian’s operations have also continually been snarled by problems with its fleet. It has had to inspect all 21 of its Boeing 787 Dreamliners due to problems with the Rolls-Royce Trent 1000 engine. Several of the aircraft were grounded due to those engine issues. Norwegian brought in wetlease operators to replace its grounded Dreamliners, and at times those operators have been less-than-reliable. (British AirwaysANA and Virgin Atlantic have all had similar problems with the Trent 1000.)

The weak earnings are not reassuring for Norwegian — an airline which analysts and industry experts have been pegging as on the brink of total shutdown for a while. Smelling blood in the water, larger airline groups like IAG, which owns British Airways and other carriers, have attempted to bid on a buyout of the Scandinavian carrier. IAG made three attempts to buy Norwegian earlier this year, all of which failed.

More recently, fellow European low-cost carrier Ryanair fired a shot across the bow at Norwegian: On Monday, the Dublin-based airline’s CEO Michael O’Leary said it would be “inevitable” that faltering low-cost airlines will fold in the next few months, CNN reports.

“Our focus will be on one of the two major Scandinavian airlines,” O’Leary said, referencing Norwegian. “We think one or the other of those are the most likely to fail this winter.”

Featured image by Francis Dean/Corbis via Getty Images.

*This post has been updated to state that all 21 of the airline’s Boeing 787 engines have been inspected.  The post previously stated that all 21 had been grounded, which was incorrect.

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