Rising costs plunge budget carrier Norwegian into the red

Norwegian plunged into the red last year with a net loss of almost 300 million NOK (£27.4 million).

This compared to a profit of more than 1.1 billion NOK (£100 million) in 2016.

The fast growing low cost carrier blamed “significant costs” related to increased fuel prices, wet lease of aircraft and passenger care.

The airline saw costs rise across staffing, sales and distribution, fuel, airport and air traffic control charges, handling fees, technical maintenance of aircraft, flight operations, aircraft leasing and administration.

Total annual revenue for 2017 rose by 19% to 31 billion NOK as capacity went up by a quarter with 32 aircraft added to the fleet.

Passenger carryings increased by 13% year-on-year to more than 33 million.

Annual earnings before interest, taxes and depreciations (EBITDA) came in at 60 million NOK (£5.5 million), down by 98% from more than 3 billion NOK the previous year.

The results came a day after the airline started its first low fare service from Gatwick to South America with flights to Buenos Aires in Argentina after signalling further long-haul expansion from the UK.

Commenting on the financial performance CEO Bjørn Kjos said: “We are not at all satisfied with the 2017 results. However, the year was also characterised by global expansion driven by new routes, high load factors and continued fleet renewal.

“Through our global strategy, we contribute to local economic boost and increased employment at our destinations, as well as ensuring that more people can afford to fly – not least between the continents.

“In 2017, we received several major international customer awards, which would never have been possible without our dedicated colleagues at Norwegian.”

Looking forward, he added: “Norwegian is far better positioned for 2018, with stronger bookings, a growing network of intercontinental routes complementing our vast European network and not least, a better staffing situation.

“Our major global expansion reaches its peak in the second half of 2018, when 32 of our 42 Dreamliners on order will have been put into service.”

He described demand and advance bookings as being “satisfactory” entering the first quarter of 2018.

However, Kjos added: “Norwegian may decide to adjust capacity to optimise the route portfolio depending on the development in the overall economy and in the marketplace.”

Norwegian has a long-term target for ancillary revenue share at 20% of total revenue.

“The increased share of ancillary revenue will be driven by third party revenue streams and introduction of new products and services.” Kjos said.

“Going forward, Norwegian will continue its fleet renewal programme and reduce ownership in non-core assets.

“Norwegian continues to establish and develop an organisational structure that will secure cost efficient, international expansion and necessary traffic rights for the future.”

More: Norwegian cuts short-haul capacity by 25%

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