Norwegian Air reported annual losses of almost 1.5 billion Norwegian krone as it reiterated efforts to return to profitability this year.
Europe’s third largest budget carrier, which operates a network of long-haul low cost routes from Gatwick, blamed the 2018 deficit on engine issues, fuel hedge losses and “tough competition” in a period of strong growth.
The loss was reduced 19% from a net deficit of NOK 1.8 billion in 2017.
It came despite the airline reporting passenger carryings up by 13% to more than 37 million with a load factor of 85.8%.
Total revenue last year was more than NOK 40 billion, an increase of 30% over 2017 as 25 new aircraft entered the fleet, contributing to capacity growth of 37%.
The carrier is strengthening its balance sheet through a fully underwritten rights issue of NOK 3 billion in order to increase its financial position.
“The key priority going forward is returning to profitability through a series of measures, including an extensive cost reduction programme, an optimised route portfolio and sale of aircraft,” Norwegian said.
“The company was hit by several unforeseen challenges during 2018.
“Continued tough competition and high jet fuel prices affected the results, in addition to significant costs related to Rolls Royce engine issues on the [Boeing 787] Dreamliners.
“Norwegian was forced to wet lease aircraft to avoid delays and cancellations on intercontinental flights.
“Norwegian has now reached an agreement with the engine manufacturer, which will have a positive effect in 2019. The Dreamliner operation is now running smoothly, and we don’t foresee that engine issues will affect our service going forward.”
The airline said its growth and investments will “decrease considerably” going into 2019, and a series of initiatives have been undertaken to return to profitability this year.
CEO Bjorn Klos said: “We have taken a series of initiatives to improve profitability by reducing cost and increasing revenue going forward.
“We have optimised our base and route structure to streamline the operation as well as divested aircraft, postponed aircraft deliveries and not least started an internal cost reduction program, which will boost our financials and bring us back to profitability.
“Going into 2019, we will enter a period of slower growth and fewer investments, while constantly looking for new and smarter ways to improve our efficiency and offer new products and services to attract new customers.”
The airline reported total revenue of NOK 9.7 billion for the forurt quarter of 2018, up 23% year-on-year, primarily driven by international growth as well as increased traffic in the Nordics.
More than nine million passengers were carried in the period, up 12%.
However, Norwegian incurred losses of NOK 1.8 billion on its current hedge positions in the quarter.
“Some of the loss has since reversed due to the latest increase in the jet fuel price. The company’s unit costs, excluding fuel, decreased by 14% compared to the fourth quarter in 2017,” the airline added.