Norwegian tumbles on the stock Exchange : the results of the ogre low-cost collapse

Some patterns of French airlines had the smile this Thursday. The drop of more than 14% of the action of Norwegian on the Oslo stock Exchange, which has followed the publication of the financial results for the second quarter of extremely poor, gave them the balm to the heart. It shows in their eyes as the steamroller is perhaps not as solid as it seems, then, that the policy of the “Blitzkrieg” of the low-cost airline on the long haul threat to their survival.

Results in free-fall

While the environment is favorable to the airlines with the weakness of the oil price, Norwegian reported on Thursday an operating loss in the second quarter of 862,9 million crowns (106 million euros), compared with a profit of a billion crowns a year ago. Results of free-fall that surprised analysts who had been pencilling in a loss of 3.5 times lower, to 246 million crowns.

“The results are “light years ahead” of market expectations”, commented Hans Ludvigsen, an analyst at Swedbank.

The net income has been increased by 44%, to 1.1 billion crowns. It comes from the capital gain related to the sale of shares in the subsidiary bank, Bank. Reflecting the strong increase in passenger traffic that has accompanied the very strong growth of the company, in particular on the long-haul, the turnover was also up 17% to nearly $ 7.8 billion.

The company brings exceptional items

Already weakened by the resignation unexpectedly at the beginning of the month of its chief financial officer Frode Foss, management has relied on exceptional factors to explain the under-performance.

“We have had additional costs to be significant for the lease of aircraft, the high price of oil and the tax on air passengers put in place by the Norwegian government last year, which has had a negative impact on the result”, said in a press release the director general and principal shareholder, Bjørn Kjos.

Growth all-round

For other analysts surveyed by The Tribune, Norwegian pays the cost of its extremely rapid development on the long-haul.

“Such a development is expensive, especially at this speed”, argued one of them.

Beyond to see Norwegian go right into the wall, there is a not that they do not cross. For them, in effect, the model of the company is not threatened to the extent that the company does not encounter any difficulties to finance its aircraft.

“Investors seem to be willing to take the risk,” says an analyst.

So, if the company is assured of such support, the Norwegian has rather interest to continue its phenomenal growth to be able to achieve economies of scale.

“There was a certain level of production, a large part of the fixed costs will be amortized,” says the same analyst.

On the only long-haul, twenty-eight Boeing 787 will enter the fleet between 2017 and 2020, which will, from 2019, the first A321 Neo LR.


These poor results may, however, encourage Norwegian to accelerate its development on its markets with the most promising in terms of potential. France is obviously part of it. Above all, a development to the west Indies and Asia could ultimately prove to be salvific for the Norwegian company, as it would help to offset the impact of seasonality on the United States, with its main axis of development today on the long-haul. During the winter season in effect, the period of low season, regular airlines compete in prices with the low-cost long-haul because they are forced to launch aggressive promotions to fill the flights.

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