Low cost carrier Norwegian is embarking on a major fund raising mission after admitting that first quarter losses will be worse than 2017 levels.
The airline that runs a network of transatlantic and European routes from Gatwick is bolstering its finances with a cash call and the sale of up to five Airbus A320neos that are leased out in Asia.
It is also considering options for its Norwegian Reward loyalty scheme.
Other “superfluous” aircraft may be sold while further expansion is being put on hold from the summer with only single digit short haul growth expected in the future.
Norwegian is raising NOK 1.3 billion through a share placement as it battles a 12% hike in fuel costs and fluctuating currencies with the euro 8% stronger than anticipated.
The airline described currency and fuel price effects as being “challenging” in the first three months of 2018 despite forward bookings being well ahead of last year with stable prices.
Losses for the first three months of the year are projected at NOK 2.6 billion against NOK 1.8 billion in the same period 12 months ago despite revenue rising to NOK 7.1 billion from NOK 5.4 billion.
The airline disclosed that higher fuel prices and a stronger euro have had a negative impact on costs.
“Operations have also suffered from somewhat challenging weather conditions,” Norwegian said.
Additional capital from the share placing “will boost competitiveness and protect existing and future investments in a market characterised by higher oil prices and fluctuating currencies.
“The company is now positioning itself for the final stages of a strong growth period that has lasted for several years and will reach its peak by the second quarter of 2018.”
The carrier is taking delivery of nine Boeing 787 Dreamliners in the first half of 2018, bringing the long-haul fleet up to 30 aircraft by the summer.
“Demand is strong and the growth in sales for the intercontinental routes is higher than the capacity growth,” Norwegian said.
However, the capacity growth rate long-haul operations will slow in the second half of the year as only two new 787s are due for delivery in the period.
The growth rate in Dreamliner deliveries will decline further in 2019, with the final delivery of a current order in 2020.
“Norwegian has a strong market position in the European short-haul market and sees stable demand growth. Going forward Norwegian expects single digit growth rates in the European short-haul network,” the airline added.
Norwegian currently operates a fleet of 150 aircraft, consisting of 125 Boeing 737s and 25 Boeing 787s.
“Norwegian will continue to renew the fleet and maintain its internationally leading position with regards to aircraft quality and average age. Superfluous aircraft may thus be sold,” the airline said.
Norwegian is in discussions to sell up to five A320neos leased to HK Express with an estimated gain of $15-20 million.
The airline currently holds orders for 65 A320neos, 30 A321LRs, 104 Boeing 737 MAXs and 17 Boeing 787-9 Dreamliners.
“Norwegian has initiated a review of strategic options for Norwegian Reward, including its incorporation and possibly its ownership,” the carrier added.
“Norwegian Reward currently has more than seven million members, expected to grow to nine million by the end of 2018.”
A sale and leaseback deal for six Dreamliners by subsidiary Arctic Aviation Assets will improve liquidity by about $250 million, according to the carrier.