Norwegian Air struggles to fill planes
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 percent.
The company, which has been courted by British Airways owner IAG, has ramped up its transatlantic business but has also said that growth will slow as it prioritizes profitability over expansion.
“Several of our summer routes have been extended into November, which has affected the load factor,” Chief Executive Bjoern Kjos said in a statement. “A full transition into the winter program will take place early next year, , once the busy holiday season is behind hind us.”
While the airline’s capacity grew 34 percent year-on-year on-year in November, revenueegenerating passenger r kilometers increased by 26 percent, its monthly traffic report showed, lagging a forecast of 33.7 percent in a poll of analysts.
The load factor, a meaasure of how many seats ts are sold on each flight, t, fell to 78.8 percent for the he month, the lowest since ce May 2014. That fell short ort of a forecast of 82.7 percent ent and was down from 83.7 percent a year ago. “Overall, rall, we find the traffic figures to be soft,” Danske Bank analy lyst Martin Stenshall, who has a “sell” recommendati tion 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 su substantial losses from he hedging positions it ente tered into at higher prices, Pa Pareto Securities said.
For the first two months of the fourth quarter, Norw wegian estimated a loss fro from fuel hedging amountin ing to 1.46 billion Norwegi gian crowns ($171 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 kilometers 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 program and (that) demand will restore,” brokerage Pareto said, reiterating a “buy” recommendation.
Norwegian’s shares were down 8.2 percent lower at 195.7 Norwegian crowns at 9:32 a.m. GMT, against a 2.1 percent drop for the Oslo benchmark index.