Rising oil price and air taxes hit Norwegian

Rising oil price and air taxes hit Norwegian

Higher oil prices and air passenger tax implemented by the government in Norway last year contributed to a fall in quarterly profits for low-cost carrier Norwegian.

The pre-tax result for the second quarter of the rapidly-expanding airline’s financial year fell by 7% to NOK 861 million (£80.5 million).

This contributed to a dramatic increase in half-year losses to NOK 986.7 million from NOK 61.6 million in the same period a year earlier.

Quarterly revenue rose by 17% to NOK 7.7 billion as capacity grew by 19%. Passenger numbers were up by 12% to 8.6 million due to growth from Oslo and Gatwick

Norwegian’s growth is estimated to be 25% for the whole year. Sales and distribution expenses rose by 22% to NOK 238 million in the second quarter. The unit cost for sales and distribution expenses increased by 2%.

“Increased credit card commissions from sales in international markets and increased sales through travel agents are partially offset by unit cost reductions from increased production and increased average sector length,” the airline said.

Aviation fuel costs soared by 38% year-on-year to more than NOK 1.7 billion while airport and air traffic control charges increased by 14% to NOK 982 million.

Staff costs also increased by 34% to NOK 1.2 billion as the average number of full time employees grew by 41%.

The airline also incurred increased costs in flight operations, aircraft leasing, general and administrative expenses, aircraft maintenance and handling charges.

Eight Boeing 737-800s were delivered during the three-month period through a sale and leaseback arrangement, two B737 MAX8s and one B787 Dreamliner.

Norwegian said its liquidity has increased from NOK 3 billion last year to just under NOK 6 billion this year.

“The overall performance was positive in all of Norwegian’s main markets during the second quarter,” the airline said.

“The load factor for the second quarter has remained high at 88%, the same as the second quarter last year. This means fuller aircraft and a significant reduction in CO2 emissions per passenger kilometre.”

Norwegian started transatlantic flights with single-aisle B737 aircraft in the period, established a new pilot base in Rome and announced its first route to South America with flights planned from Gatwick to Buenos Aires.

Chief executive Bjørn Kjos said: “I am very pleased with the high load factor for this quarter. I’m also grateful that more than 200 million passengers have shown confidence in us and chosen to fly with Norwegian since we began flying in 2002,

“However, we have had significant additional costs for leasing of aircraft, high oil price and the air passenger tax implemented by the government in Norway last year, which have had a negative impact on the result.

“Bookings and pre-sales for the coming months are looking very good.”

More:

EasyJet and Norwegian report increased June passenger carryings

Norwegian unveils low-cost Gatwick-Austin and Chicago services

Norwegian Air plans massive growth in Argentina

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