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Photo: Norwegian

Norwegian CEO warns airline must cut costs

The warning comes despite Norwegian seeing 8% more passengers last month, year-on-year.

The chief executive of Norwegian has warned it must cut costs, despite seeing 8% more passengers last month.

The low-cost carrier’s Bjørn Kjos says that the airline is facing tough competition and high oil prices as it enters the winter’s long period of quieter months.

It carried almost 3,389,000 passengers in October, an increase of almost a quarter of a million compared with the same month in 2017.

Norwegian’s load factor tumbled by 2.4 percentage points to exactly 85% over the same period, while the airline saw a 29% growth in capacity year-on-year, highlighting its rapid expansion over the last 12 months.

Total traffic growth (RPK) increased by 25% in October, driven by the 29% capacity growth (ASK).

Norwegian has struggled to contain costs while it has grown and had around £2 billion (€2.3 billion) of net debt at the end of last year, the Press Association reports.

The airline has invested heavily in new planes and is due to take delivery of 11 Boeing 787-9 Dreamliners, 12 Boeing 737 MAX 8 and two Boeing 737-800 aircraft this year. It is also selling some of its fleet.

Unit income declined by 5 percentage points to NOK 0.33 per seat kilometre, while at the same time unit costs were NOK 0.44 per seat kilometre, Check-in.dk writes.

The loss of ticket sales – before income from the sale of additional services – could therefore be around NOK 1 billion, although this will be compensated by around NOK 600 million through revenues from additional sales based on an average income of NOK 177 per passenger.

Lower demand
“We are very pleased that an increasing number of passengers choose Norwegian for their travels. The long-haul routes represent the largest growth this month and the demand is satisfactory,” Kjos said.

“However, we are now entering a period of lower demand, tough competition and high oil prices, making it even more important for the company to continue reducing its costs.”

The airline said in a statement: “In general, the yield development is positive, but is negatively affected by the fact that the company now operates a greater number of longer flights than the same month last year. As the revenue per passenger kilometre is lower on longer flights, the company’s total yield falls when the share of long-haul flights increases.”

Ryanair’s chief executive, Michael O’Leary, has predicted Norwegian will “go bust this winter”, but Norwegian retorted this idea has “no root in reality”.

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