Norwegian Air to accelerate capacity growth in 2017

Budget airline Norwegian Air Shuttle said its capacity growth will speed up in 2017 as it rapidly expands low-cost flights to the United States and other long-haul destinations.

Europe's third-largest low-cost carrier by revenue after Ryanair and EasyJet reported record third-quarter earnings, beating market expectations with a 20 per cent rise in net profit.

The airline said its capacity growth, measured by available seat kilometres (ASK), would be 30 per cent next year, up from 18 per cent in 2016. ASK measures an airline’s passenger-carrying capacity.

Norwegian will have 32 new aircraft, including nine fuel-efficient Boeing Dreamliners, entering operation next year, bringing its total fleet to 144 by the end of 2017.

“The overall development is good in all markets, and the biggest growth is in Spain, particularly on domestic routes. The routes between London and Paris and the US are in high demand,” chief executive Bjoern Kjos said in a statement.

Norwegian has launched flights to the Middle East, southeast Asia and the United States, as well as expanding routes in its core European market, taking its low-cost offer into the long-haul market. It has even offered an eye-catching promise of $69 fares to cross the Atlantic.

Brexit

Unlike many of its European peers, Norwegian has been spared a negative impact from Britain's vote in June to leave the European Union.

“We are monitoring the post-Brexit situation in the UK and don’t see any effects in bookings so far,” chief financial officer Frode Foss told a news conference.

Germany’s Lufthansa lifted its 2016 profit target late on Wednesday, after business bookings proved stronger than expected in September, sending the share up by some 7.7 per cent by 7.50am Irish time.

Earlier this week Ryanair cut its annual profit forecast however due to a weaker pound. EasyJet, which depends on Britain for about half of sales, has already cut its profit forecast by a quarter for the year following the Brexit vote.

Competition remains fierce and Ryanair said it expected to boost its market share in the coming months by selling more tickets at cheaper prices.

Shares in Norwegian jumped more than 5 per cent on Thursday but are still down about 8 per cent so far this year, outperforming Ryanair and EasyJet, which are down 16 and 46 per cent respectively.

“The report was clearly above expectations, booking remains good and cost performance solid,” SEB analyst Kenneth Sivertsen said in a note to clients, adding that 2017 earnings estimates could rise by 5-10 per cent. SEB has a “buy” rating on the stock.

Norwegian’s third-quarter net profit was its best quarterly result ever, and came in at 992 million Norwegian crowns (€110 million), 19 per cent above last year, beating expectations for 943 million crowns in a Reuters poll.

Its unit cost is still seen at 0.38 crowns this year, while unit costs next year were targeted at 0.38-0.39 crowns. – (Reuters)