Norwegian Air struggles to fill planes as fleet grows

Bjorn Kjos, CEO of Norwegian Group, presents Norwegian Air's first low-cost transatlantic flight service from Argentina at Ezeiza airport in Buenos Aires, Argentina. (Reuters)
Updated 06 December 2018
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Norwegian Air struggles to fill planes as fleet grows

  • The company, which has been courted by British Airways owner IAG, has ramped up its transatlantic business but has also said that growth will slow as it prioritizes profitability over expansion
  • While the recent fall in crude oil prices will eventually bring down fuel costs, the company is expected to first book substantial losses from hedging positions it entered into at higher prices

OSLO: Budget carrier Norwegian Air struggled to fill its aircraft in November as capacity growth far outpaced demand, while a loss on fuel hedge contracts added to the airline’s woes, sending its shares down 9 percent.

The company, which has been courted by British Airways owner IAG, has ramped up its transatlantic business but has also said that growth will slow as it prioritizes profitability over expansion.

“Several of our summer routes have been extended into November, which has affected the load factor,” Chief Executive Bjoern Kjos said in a statement.

“A full transition into the winter program will take place early next year, once the busy holiday season is behind us.”

While the airline’s capacity grew 34 percent year-on-year in November, revenue-generating passenger kilometers increased by 26 percent, its monthly traffic report showed, lagging a forecast of 33.7 percent in a poll of analysts.

 

The load factor, a measure of how many seats are sold on each flight, fell to 78.8 percent for the month, the lowest since May 2014. That fell short of a forecast of 82.7 percent and was down from 83.7 percent a year ago.

“Overall, we find the traffic figures to be soft,” Danske Bank analyst Martin Stenshall, who has a ‘sell’ recommendation on the stock, wrote in a note to clients.

While the recent fall in crude oil prices will eventually bring down fuel costs, the company is expected to first book substantial losses from hedging positions it entered into at higher prices, Pareto Securities said.

For the first two months of the fourth quarter, Norwegian estimated a loss from fuel hedging amounting to 1.46 billion Norwegian crowns ($171 million), although the full quarterly loss will only be calculated at the end of December.

On the positive side, the company’s November yield, a key measure of revenue per passenger carried and kilometers flown, was unchanged year on year at 0.33 Norwegian crowns. Analysts had expected it to ease to 0.32 crowns.

“Keep in mind that November is a transition month from summer to winter program and (that) demand will restore,” brokerage Pareto said, reiterating a ‘buy’ recommendation.

Norwegian’s shares were down 8.2 percent lower at 195.7 Norwegian crowns at 0932 GMT, against a 2.1 percent drop for the Oslo benchmark index.

FASTFACTS

For the first two months of the fourth quarter, Norwegian estimated a loss from fuel hedging amounting to $171 million.


Shareholders of India’s Jet Airways approve debt-for-equity swap

Updated 23 February 2019
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Shareholders of India’s Jet Airways approve debt-for-equity swap

  • The plan will mean the lenders will have a bigger holding than any other shareholder
  • Currently, Chairman Naresh Goyal owns a 51 percent stake in the company and Abu Dhabi’s Etihad Airways owns 24 percent

MUMBAI: India’s Jet Airways said late on Friday that its shareholders approved a plan to convert existing debt to equity, paving the way for the troubled company’s lenders to infuse funds and nominate directors to its board.
Jet’s board last week approved a plan by lenders, led by State Bank of India, for an equity infusion, debt restructuring and the sale or sale-and-lease-back of aircraft.
The plan will mean the lenders will have a bigger holding than any other shareholder.
Currently, Chairman Naresh Goyal owns a 51 percent stake in the company and Abu Dhabi’s Etihad Airways owns 24 percent.
Jet, which had net debt of 72.99 billion rupees ($1.03 billion) as of end-December, has debt payments looming next month, according to rating agency ICRA. It has been unable to pay pilots’ salaries and has outstanding bills to aircraft lessors.
The company, India’s biggest full-service carrier, is struggling with competition from budget rivals, high oil prices and a weaker rupee. The share price took a beating in 2018, losing nearly 70 percent of its value.
In a regulatory filing, Jet said on Friday that 98 percent of its shareholders voted to increase the share capital to 22 billion rupees ($309.8 million) from 2 billion rupees at a special meeting.
Jet, whose financial woes are set against the backdrop of wider aviation industry problems, has been in the red for four straight quarters.