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Photo: Norwegian

Norwegian may save millions in fuel costs

Norwegian’s chief executive Bjørn Kjos may be breathing more easily with a possible €300mn lower fuel bill.

A fall in oil prices could slash Norwegian’s fuel bill for the year by almost NOK 3 billion (€308 million), speculates an article in Norway’s business newspaper Dagens Næringsliv.

Oil prices reached a four-year peak of $86.74 per barrel on October 3, a trend that had been worrying many airlines, but since then prices have fallen by 30%.

Such a reduction in fuel costs gives Norwegian around NOK 3.6 billion lower costs, claims Dagens Næringsliv, which refers to the carrier’s most recent quarterly report.

Since Norway’s currency has weakened by around 5% against the dollar, this provides a loss of NOK 850 million. But bringing the two trends together, it will result in an overall annual saving of NOK 2.7 billion for the airline.

However, this of course depends on how much fuel Norwegian has purchased by hedging at a fixed price.

Breathing space
Millions in savings could mean that Bjørn Kjos, Norwegian’s chief executive, can achieve some much-needed equity to deflect from weaker profitability and high debt – given that oil prices do not rise again, the newspaper writes after consulting Peter Hermanrud, head of strategy at Sparebank 1 Markets.

“The fall in oil prices is good news for all airlines, including us,” concedes Anne-Sissel Skånvik, Norwegian’s communications manager.

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