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
0

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.


US intelligence says Huawei funded by Chinese state security: report

Updated 20 April 2019
0

US intelligence says Huawei funded by Chinese state security: report

  • The accusation comes at a time of trade tensions between Washington and Beijing
  • Huawei dismissed the allegations

US intelligence has accused Huawei Technologies of being funded by Chinese state security, The Times said on Saturday, adding to the list of allegations faced by the Chinese technology company in the West.
The CIA accused Huawei of receiving funding from China’s National Security Commission, the People’s Liberation Army and a third branch of the Chinese state intelligence network, the British newspaper reported, citing a source.
Earlier this year, US intelligence shared its claims with other members of the Five Eyes intelligence-sharing group, which includes Britain, Australia, Canada and New Zealand, according to the report.
Huawei dismissed the allegations in a statement cited by the newspaper.
“Huawei does not comment on unsubstantiated allegations backed up by zero evidence from anonymous sources,” a Huawei representative told The Times.
The company, the CIA and Chinese state security agencies did not respond immediately to requests for comment.
The accusation comes at a time of trade tensions between Washington and Beijing and amid concerns in the United States that Huawei’s equipment could be used for espionage. The company has said the concerns are unfounded.
Authorities in the United States are probing Huawei for alleged sanctions violations.
Meng Wanzhou, Huawei’s chief financial officer and daughter of its founder, Ren Zhengfei, was arrested in Canada in December at the request of the United States on charges of bank and wire fraud in violation of US sanctions against Iran.
She denies wrongdoing and her father has previously said the arrest was “politically motivated.”
Amid such charges, top educational institutions in the West have recently severed ties with Huawei to avoid losing federal funding.
Another Chinese technology company, ZTE Corp. , has also been at the center of similar controversies in the United States.
US sanctions forced ZTE to stop most business between April and July last year after Commerce Department officials said it broke a pact and was caught illegally shipping US-origin goods to Iran and North Korea. The sanctions were lifted after ZTE paid $1.4 billion in penalties.
Reuters reported earlier this week that the United States will push its allies at a meeting in Prague next month to adopt shared security and policy measures that will make it more difficult for Huawei to dominate 5G telecommunications networks.