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Norwegian Air Q3 Net Profit Rises, To Cut Capacity In Winter

By Dave Simpson

Norwegian Air shares rose after reporting an increase in third-quarter net profit boosted by recovery from the pandemic and a pilot strike at rival SAS, but said it would reduce capacity by a quarter during winter.

Details

Norwegian, which came close to collapse when the pandemic broke out in 2020, posted quarterly revenue of 7.1 billion crowns ($688 million), the highest of any quarter since the final three months of 2019, according to Refinitiv Eikon data.

Net profit for the three-months ending 30 September rose to 910 million crowns ($87.57 million) from a year-ago profit of 169 million, Norwegian said.

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The airline will reduce its capacity by a quarter in winter, when demand is usually lower, by not using the planes it is leasing, and will closely follow how cash-strapped consumers behave in the first quarter.

"We have a flexibility with our fleet that means we can reduce our capacity by up to 30%," chief executive 0fficer Geir Karlsen told Reuters. "We can leave planes on the ground, we can make them fly less."

Smaller Norway-based rival Flyr on 4 October said it would implement heavy spending cuts to preserve cash during the winter season, reducing the number of flights due to weak demand.

Pilots at main Nordic rival SAS went on a two-week strike in July, boosting Norwegian's bookings at the height of the region's summer travel.

While booking levels were so far "good", said Karlsen, consumers tended to book closer to the time of their departure than they used to in the past, making it harder to anticipate demand.

To cope, Norwegian was putting more cash aside and had 8.2 billion crowns available at the end of the third quarter, up from 7.5 billion at the end of the second.

Cost-wise, Norwegian said it was adversely impacted by the strong US dollar, affecting services it buys such as technical maintenance.

To counter rising fuel costs, Norwegian has started to hedge up to 5% of its 2023 expected costs, and planned to do more, chief financial officer Hans-Joergen Wibstad told the presentation.

Airline Flyr Seeks Up To $51m In Cash To Survive Winter

The above news was followed by news that loss-making airline Flyr plans to raise up to 530 million Norwegian crowns ($50.73 million) in new equity to alleviate a "very strained financial situation", the Norway-based carrier said.

The company, whose rivals include Norwegian Air and SAS, said on 4 October it would implement heavy spending cuts to preserve cash during the winter, including furloughs, and that non-profitable routes were put on hold.

The new shares will be sold at just 0.01 crown each, reflecting the company's near-term liquidity needs, challenging capital market conditions and investor feedback, Flyr said.

"By implementing these measures, we will be well positioned to ramp-up with full force for the coming spring and summer," board Chair Erik Braathen said in a statement.

The share issue comes in the form of an institutional offering of 430 million crowns and a further 100 million for other investors.

Braathen's private investment company will invest 10 million crowns in the share issue.

Flyr, which launched its first flight in June 2021, reported an operating loss of 231.7 million crowns for the third quarter of 2022 on revenue of 610.4 million crowns.

The company faces a "challenging and unpredictable market going forward," Flyr said in its earnings report.

Airline Flyr Plans Smaller Share Issue, Eyes More Cash Later

All of the above news was followed by news that loss-making airline Flyr, which failed on Tuesday 8 November to raise the new equity it had aimed for, now instead plans a smaller initial cash injection offered by a group of investors, the company said on Wednesday 9 November.

Flyr on 3 November said raising cash was vital for the company to survive the upcoming winter season and prepare for a ramp-up in spring and summer of 2023.

Under the revised plan, Flyr will initially raise 250 million Norwegian crowns ($24.4 million) in a private placement and up to 100 million from a subsequent offering to current shareholders, less than the 530 million crowns it had aimed for.

To cover the remaining cash needs, investors participating in the share issues would get subscription rights allowing them to buy additional stock during the first quarter of 2023, potentially raising another 350 million crowns, Flyr said.

"If the company fails to raise this additional new capital by the end of Q1 2023, the company may not be able to sustain its future operations," Flyr said.

The company, whose rivals include Norwegian Air and SAS, said on 4 October it would implement heavy spending cuts to preserve cash during the winter, including furloughs, and that non-profitable routes were put on hold.

News by Reuters, edited by Hospitality Ireland. Click subscribe to sign up for the Hospitality Ireland print edition.

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