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.
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.