Published on March 12th, 2018 | by Mark Dwyer0
Passenger numbers up in February but poor Q4 results for Norwegian
As announced on 8th February (see here) Norwegian will double capacity on Dublin – US routes this summer. The expanded schedule will commence on 26th April with the second rotation operating as the D81842/1843. The additional flight will leave Dublin at 0810 and leave New York Stewart at 1225. The existing afternoon flight from Dublin is unchanged departing at 1430 and leaving New York Stewart at 2055.
The change will mean an additional 66,000 seats on the Dublin-Stewart route with a total of 29 weekly transatlantic flights from Ireland. Stewart International Airport will be renamed New York Stewart International Airport as part of a $37 million airport upgrade to better handle soaring international passenger numbers. Norwegian is the only airline to operate international flights from Stewart International Airport.
Norwegian currently operates six routes from Dublin to destinations in the USA and Nordic countries including Providence, Oslo, Copenhagen, Stockholm and Helsinki. Passengers flying Norwegian from Dublin and Shannon can use US Preclearance facilities to clear US immigration and customs before departure. Norwegian’s growth at Shannon means the airport has its largest number of transatlantic services in over 17 years. The airline opened a new pilot base at Dublin Airport in 2017 to support the airline’s growing international operations. Effective 12th August 2018, the company will be operating the Boeing 737-8 MAX on the Dublin – Oslo route.
According to the Sunday Business Post, Norwegian Air is pumping $250m into its Irish subsidiary as it continues to expand its operations here. This latest tranche of funding brings the Nordic carrier’s total investment in Ireland to more than $750m since it established its Irish subsidiary, Norwegian Air International (NAI), in 2013.
Norwegian will reduce its service to Edinburgh this summer, including dropping Hartford altogether, as a result of the Scottish government’s failure to reduce the UK’s air passenger duty at the airport, said Thomas Ramdahl, chief commercial officer of Norwegian. FlightGlobal schedules show Edinburgh seats will be down 42% to Stewart and 24% to Providence year on year in the third quarter.
Service from Ireland is meeting or exceeding expectations, Ramdahl says. The airline plans to increase Dublin-Stewart frequency to twice daily this summer and is just awaiting slot assignments in Dublin to begin marketing the flight.
In addition, demand to Providence is proving seasonal, whereas to Stewart it is year-round, says Ramdahl. “Providence is working quite well for us during the summertime. It’s always important to have a year-round presence, or the market cost of building up the next season is quite high,” he says, when asked if Norwegian will continue to serve the airport after the peak summer season. The airline will fly nearly 7% more seats to Providence in the third quarter versus last year, schedules show.
Traffic Up in February but poor 2017 Q4 Results
Norwegian reported 32% traffic (RPK) growth in February 18, with passengers up 11% to 2.3m and passenger load factor down 2.0 points to 84.3%. Traffic for the last 12 months was up 25%, passenger numbers up 13% to 33.6m and passenger load factor down 0.5 points to 87.2%. February revenue per ASK (in NOK) was down 6%.
Norwegian produced dreadful results for 2017 Q4. Reported Profit before Tax worsened from NOK299.7m (€31.3m) profit in 2016 Q4 2016 to NOK1431m (€149m) loss in Q4 this year. This was primarily driven by the poor cost performance. Unit cost was up 7% in the quarter while revenue per ASK and per RPK was down 2%. Reported net loss of NOK918.5m (€95.8m) was worse than NOK197.2m (€20.5m) profit in Q4 last year, mainly driven by forex and other hedging gains last year.
Cash flow from operating activities in in Q4 amounted to NOK -853m (€89m) compared to NOK +206m (€21m) in 2016. Some of the high costs are attributed to getting ready for a much bigger programme in 2018.
For the full-year, the company reported an underlying operating loss of NOK2.4bn (€250m), much worse than the operating profit of NOK1.14bn (€118m) in 2016.
The company has offered guidance for 40% capacity growth in 2018 (up from its guidance of 35% growth at Q3 results). It guides widebody production to rise 90% and narrow body 20%. The airline is adding 2 B37-800s, 12 B737 MAXs and 11 B787-9s in 2018 and, by year-end, will operate 32 787s. Norwegian’s first 5 Airbus A321LRs will be delivered in 2018, but will be leased to China LCC HK Express. Norwegian will not begin operating the A321LR until 2019.
Norwegian’s transatlantic B737-8 capacity will be down by 12.2% year on year in the third quarter, schedules show. However, that is entirely driven by the Edinburgh reductions, with other capacity up 7%.
It guides to a 5% decline in its unit cost in 2018, but the current spot price for fuel is USD625/MT – 10% higher than the assumption used by the company. The company expects better non fuel costs from improved utilisation of pilots, scale effect on overheads and less wet leasing. Norwegian has on balance sheet net debt of NOK22bn (€2.3bn) and equity of NOK4bn (€417m).
Norwegian Expansion to Canada and South America
Norwegian Air International has applied for a scheduled international licence to operate a service between member states of the European Union and Canada. Norwegian Air Argentina plans to operate service from Buenos Aires to Barcelona, Madrid and Malaga and from Cordoba to Barcelona and Madrid in 2019.
Norwegian’s CEO, Bjorn Kjos, said Norwegian will continue to pursue further route expansion from London to South America and Asia. The airline is exploring potential new routes to more South American countries due to strong ticket sales on the Buenos Aires route. In Asia, destinations being considered include Tokyo, Shanghai and Beijing if the airline receives access to the Siberian corridor. The Siberian corridor gives Norwegian the most efficient and direct routing across Russia to the Far East.