Nor­we­gian strug­gles to fill planes

The Irish Times - Business - - MARKETS -

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 per cent yes­ter­day.

The com­pany, which has been courted by Aer Lingus owner IAG, has ramped up its transat­lantic busi­ness but has also said that growth will slow as it pri­ori­tises prof­itabil­ity over ex­pan­sion.

“Sev­eral of our sum­mer routes have been ex­tended into Novem­ber, which has af­fected the load fac­tor,” chief ex­ec­u­tive Bjorn Kjos said in a state­ment.

“A full tran­si­tion into the win­ter pro­gramme will take place early next year, once the busy hol­i­day sea­son is be­hind us.”

While the air­line’s ca­pac­ity grew 34 per cent year-on-year in Novem­ber, rev­enue-gen­er­at­ing pas­sen­ger kilo­me­tres in­creased by 26 per cent, its monthly traf­fic re­port showed, lag­ging a fore­cast of 33.7 per cent in a Reuters poll of an­a­lysts.

The load fac­tor, a mea­sure of how many seats are sold on each flight, fell to 78.8 per cent for the month, the low­est since May 2014. That fell short of a fore­cast of 82.7 per cent and was down from 83.7 per cent 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 (€150 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 kilo­me­tres 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 pro­gramme and (that) de­mand will re­store,” bro­ker­age Pareto said, reit­er­at­ing a ‘buy’ rec­om­men­da­tion. – Reuters

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