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.


Toyota recalls 70,000 vehicles to replace air bag inflators

Updated 12 December 2018
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Toyota recalls 70,000 vehicles to replace air bag inflators

  • Takata uses the chemical ammonium nitrate to create a small explosion and inflate the bags
  • Can deteriorate and burn too fast, blowing apart a metal canister

DETROIT: Toyota is recalling about 70,000 Toyota and Lexus brand vehicles in North America to replace air bag inflators that could explode and hurl shrapnel at drivers and passengers.
The recall covers the 2003 to 2005 Corolla, the 2002 to 2005 Sequoia, the 2003 to 2005 Tundra and the 2002 to 2005 Lexus SC.
Takata uses the chemical ammonium nitrate to create a small explosion and inflate the bags. But it can deteriorate and burn too fast, blowing apart a metal canister.
The Toyota and Lexus vehicles were recalled previously and the inflators replaced with new ones that still used ammonium nitrate. In the latest recall, Toyota will use inflators made by another company with a safer chemical.
Owners will be notified early next year. Toyota says it has replacement parts available.
About 65,000 of the recalled vehicles are in the US
Toyota says it’s doing the recall a year ahead of a schedule set by the US National Highway Traffic Safety Administration.
At least 23 people have died worldwide due to the problem caused by inflators made by Takata Corp., resulting in the largest series of auto recalls in US history. They cover 37 million vehicles and about 50 million inflators in the US About 100 million inflators are being recalled worldwide.
The recalls forced Takata of Japan to seek bankruptcy protection.