Winter losses mounted up at low cost carrier Norwegian in the face of rising fuel costs, intense competition, unfavourable exchange rates and a late Easter.
The airline’s first quarter losses almost doubled to 1.5 billion Norwegian krone (NOK) from NOK 800 million in the same three months last year.
The deteriorating finances came despite a 14% increase in the number of passengers carried to 6.7 million as 39 new routes were added.
Overall capacity grew by 24% year-on-year to give a load factor of 84% during the seasonally weak first quarter.
Norwegian’s strongest growth during the first three months of the year was in the US, Spain and France.
Sales and distribution costs rose by 12% in the period to NOK 224 million while fuel costs soared by 77% to more than NOK 1.5 billion.
“Despite strong passenger growth, higher fuel costs, tough competition and a stronger NOK contributed to the negative result,” the airline said.
“Increased credit card commissions from sales in international markets and increased sales through travel agents are more than offset by unit cost reductions from increased production and increased average sector length.”
CEO Bjørn Kjos said: “In this quarter, we particularly see the effects of higher fuel costs combined with a strengthened krone against the British pound, euro and Swedish krone, which accounts for almost half of our sales.
“In addition, the figures are affected by the fact that Easter was not in the first quarter, like last year.
“At the same time, we are filling aircraft and attracting more passengers both in new and more established markets.
“Our long-haul operation is now well established, proving that customers want affordable fares and new aircraft on intercontinental routes.”
The airline believes its global growth strategy – including new transatlantic routes from Scotland and Ireland and long haul services from Gatwick to Singapore, Denver and Seattle – will provide economies of scale and lower unit costs.
Looking forward, Kjos said: “The demand for travelling with Norwegian and advance bookings have been satisfactory entering the second quarter of 2017.
“Norwegian will continue to take advantage of its increasing competitive power realised through continuous cost efficiency, and from introducing larger aircraft – 17 new Boeing 737-800Ws, nine new Boeing 787- 9s and six 737-MAX will be delivered in 2017 – with a lower operating cost.”
However, he cautioned: “Norwegian may decide to adjust capacity in order to optimise the route portfolio depending on the development in the overall economy and in the marketplace.”
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