Running Fewer Flights Helps Norwegian Air Improve Profitability
November traffic figures show Norwegian Air's drive to slash flights is helping to improve profitability. The cut-backs helped the budget carrier to fill remaining flights, increasing the number of...
November traffic figures show Norwegian Air's drive to slash flights is helping to improve profitability.
The cut-backs helped the budget carrier to fill remaining flights, increasing the number of seats sold on each aircraft as well as income per passenger.
Overall capacity, a measure of distance flown and the number of seats available (ASK), fell 27% year-on-year in November. Analysts in a Reuters poll had on average expected a 23% drop.
But the airline's yield - income per passenger carried and kilometre flown - rose 12% to 0.37 Norwegian crown ($0.04), beating a 0.35 crown forecast.
Norwegian has shaken up the transatlantic travel market with low fares, but breakneck expansion also brought mounting debts and losses. The company raised cash from its owners in November for a third time in 20 months.
Overcapacity and cut-throat competition in Europe's airline market are adding challenges to Norwegian's recovery efforts.
On average, Norwegian filled 83.0% of seats in November, up from a so-called load factor of 78.8% last year and beating an average forecast of 82.3%.
"The planned capacity reduction has improved the figures...we continue to deliver on our strategy of moving from growth to profitability," acting chief executive Geir Karlsen said.
Prior to October, when Norwegian's capacity fell 5% from the same month in 2018, the airline's year-on-year ASK had risen every month since it went public in 2003.
The company is targetting a 10% cut in ASK for 2020 from 2019, it said in October.
"Well-Positioned To Meet The Actual Demand"
"We have adjusted our route portfolio and capacity for the coming winter season and summer seasons to ensure that we are well-positioned to meet the actual demand," Karlsen said.
As temporary CEO since July, Karlsen has postponed debt payments, raised cash, brought in a Chinese leasing firm to take stakes in its fleet and partnered with US carrier JetBlue to strengthen the business.
Last week, the company announced the sale of its domestic network in Argentina to JetSMART.
Karlsen, who is also chief financial officer (CFO), returns to being CFO and deputy CEO when industry outsider Jacob Schram takes the helm next year.
Schram, a former management consultant and petrol retail executive, will replace Bjoern Kjos, the company's founder who stepped down in July having turned Norwegian into Europe's third-largest budget airline.