Norwegian has today reported their results for the first quarter of 2019, and they’re… interesting.
Norwegian’s first quarter 2019 results
Keep in mind that historically the first quarter is one of the most challenging for European and transatlantic airlines, given weak demand in winter.
So some aspects of Norwegian’s performance in the first quarter seem positive:
- Total revenue was up by 14%, to NOK 8 billion
- Number of passengers carried was up by 9%, to more than 8 million
- The airline achieved NOK 467 million in cost reductions this quarter
- Unit costs, excluding fuel, decreased by 8%
- On-time performance improved from 73% to 81.3%
- Load factor decreased from 84.5% to 81%
While the load factor decreasing isn’t good, most other metrics seem good, including higher revenue, more passengers, cost reductions, etc.
So, how did the company do in the first quarter? Horribly. Norwegian lost NOK 1.489 billion, which is ~171.5 million USD.
Norwegian has obviously been extremely unlucky with their fleet. The airline uses the 787 for their long haul flights, which has had Rolls Royce engine issues, causing many of their planes to be grounded. Then Norwegian also uses the 737 MAX, which is grounded.
While some factors are outside of their control, one has to wonder how much longer the airline can sustain losses like this.
Norwegian secured additional funding earlier this year
Earlier this year Norwegian announced an additional NOK 3 billion of funding, which came from a company controlled by John Fredriksen, who is Norway’s richest man.
Norwegian’s first quarter loss is equal to half of that additional funding, just to give a sense of the pace at which they’re losing money.
We don’t know how the airline is doing in the second quarter (though they’ve had to cancel a lot of flights due to the 737 MAX groundings), but the good news for them at least is that the busy summer season is ahead, which will hopefully be a good period for them.
Bottom line
There’s no denying that some of Norwegian’s challenges have come from the 737 MAX and the 787-9’s Rolls Royce engines, so they’ve been quite unlucky in that regard.
However, for so long this airline has been all about building market share with no regard for profit, and that’s a trend they’re finally being forced to reverse. It remains to be seen whether they can actually turn things around enough to turn a profit.
Back in the day it was easy enough to secure financing for a money-losing airline as long as they showed good growth, but with the recent liquidations we’ve seen in the industry, it’s a new era.
the scariest part of their accounts is the increase in financing costs ... so even if they continue with their cost reductions and revenue increases - the higher finance costs will eat away at the profits.
have a look at page 8 of the pdf to see how their improved operating performance (768m NOK positive movement) becomes a 1,443m NOK deterioration at the bottom line.
I thought Norwegian wet-leased its planes, so groundings would hurt them less than an airline that owned its planes?
Perhaps more surprising is that LH Group posted an "adjusted" EBIT of minus 336m EUR. Most of that came from Eurowings (-257m EUR), which is not recovering, but going deeper into red ...
Of course, this does not put LH Group in a financially dangerous position, but it might raise some questions about the strategy ...
Norwegian will eventually fail. It’s just a matter of time.
Why would anyone take this trash of an airline? Save yourself the headache/uncertainty and just book with an established carrier. Did we forget what happened to Primera Air & WOW Air?
It’s only a matter of time before Norwegian is forced to pull the plug too...
@Sharon The cost difference is that Norwegian Premium (which I hear is between premium economy & business class on the big airlines) is the same price as Iberia's premium economy. Since it's an overnight flight, any extra legroom & increase in recline is welcome!
@James My problem with Iberia is that I can only get PE for the same price as Norwegian...and IB still makes you pay for seat assignments on top of that. I'll look into points though, thanks!
I personally enjoy flying on Norwegian, The crews are very friendly and attentive, I personally feel that I must continue to support them, I use to pay unbelievable fares to cross the pond, Now Im in Business class for a fare much cheaper than, AA, UA and DL, would put me in steerage. Mark my words if they go under The big 3 will crush us with fare increases.
Good, the quicker this garbage airlines goes away the better.
If I'm flying to Madrid, I'd be on Iberia. Their rates, on average, seem to be about the best. Even if you don't fly their actual planes, their codeshare rates seem to be very competitive. I'm flying to London, then Copenhagen, then Helsinki then back to Boston, thru London. All booked on Iberia. They are upgrading their fleet, too. And if you run points, their Avianca whatever they call it are had very cheaply.
The problems with the Rolls engines is due to corrosion apparently, and has nothing to do directly with Boeing.
"The “Package C” variants of Rolls-Royce Trent 1000s are on some planes used by airlines including Air New Zealand, ANA, British Airways, LATAM, and Virgin Atlantic, as well as Norwegian. There’s been concern about corrosion of turbine blades towards the back of the engines since 2016, and a replacement program is in place."
http://aeronauticsonline.com/engine-problems-for-norwegians-787s/
The problems with the Rolls engines is due to corrosion apparently, and has nothing to do directly with Boeing.
"The “Package C” variants of Rolls-Royce Trent 1000s are on some planes used by airlines including Air New Zealand, ANA, British Airways, LATAM, and Virgin Atlantic, as well as Norwegian. There’s been concern about corrosion of turbine blades towards the back of the engines since 2016, and a replacement program is in place."
http://aeronauticsonline.com/engine-problems-for-norwegians-787s/
Donna, it’s nothing to do with the Rolls Royce engines it’s the software that Boeing installed!!!
Yeah, you should be fine. Norweigan is a large enough airline. Just curious, what's the cost difference between Norwegian and the other flights?
Trying to decide whether to book with them on BOS-MAD in Sept. I know that if the airline fails, I'll get my ticket value back...but that doesn't help me get a replacement seat on another airline. Would you guys feel comfortable booking cross-Atlantic flights on Norwegian in September?
That IAG offer doesn’t look too bad now. Should have taken it while it was on the table.
They should sue Rolls Royce, not Boeing for the 787 fiasco.
“They’ve been quite unlucky” = “they’ve been quite Boeing”
Hope they sue Boeing. If they don't, I don't see them surviving, which will only increase transatlantic fares across the board.
Factual error - "John Fredriksen, who is Norway’s richest man".
John Fredriksen is Norwegian-born, but not Norwegian anymore.
They should take Boeing to the cleaners