Norwegian Air Shuttle (Norwegian.com) (Oslo) recorded a net loss of NOK 1.05 billion ($138.5 million) for 2014, a surprising change from a net profit of NOK 322 million $42.4 million) in 2013. Norwegian blamed the reversal on its expansion and fuel hedging. The airline issued these details (translated from Norwegian):
Norwegian’s results for 2014 are characterized by strong revenue growth, increase in capacity and investment for the future. Fuel hedging for 2015 represents a major expense item on the 459 million Norwegian kroner, which affects the annual result significantly. Major expenses for 2015 has thus been taken already in the beginning of the year. Results for the year amounted to -1.05 billion NOK compared to 322 million Norwegian kroner for 2013.
After seven years of surpluses presents Norwegian negative annual results. Sales amounted however, to 19.5 billion NOK – an increase of 25 percent. Capacity (ASK) increased by 35 percent, yet the load factor of 81 percent, up three percentage points from the previous year. A total of 24 million passengers traveled with Norwegian in 2014, an increase of 16 percent from 2013.
For the fourth quarter totaled underlying earnings to the same level as in 2013. The deficit of -958 million NOK depends largely on fuel hedging for 2015 and a weak krone. Thanks to the transfer of large parts of the Norwegian’s fleet to the subsidiary Arctic Asset Aviation Ltd. (AAA), the value of aircraft increased as the dollar. This has had a positive effect on 361 million Norwegian kroner on equity, which effectively compensates currency losses for operations during the fourth quarter of 2014.
Explanation of results in 2014
Major changes in exchange rates and fuel hedging for 2015 negatively impacted earnings and accounted for 690 million Norwegian kroner for the year as a whole. Furthermore, delays in the long lines cost the company 265 million Norwegian kroner in 2014. These costs include lease expenses, additional fuel and the cost of hotels, food and drink to delayed passengers. Cost of delay in the approval of the EU’s application for a US pilot’s license totaled EUR 117 million Norwegian kroner. Only “one-man strike” among cabin staff union Parat effected in May 2014 being accounted for 101 million Norwegian kroner.
Fourth quarter 2014
In the fourth quarter the Norwegian 4.6 billion Norwegian kroner, an increase of 22 percent compared to the same quarter last year. Profit amounted to SEK -958 million NOK compared to -194 million Norwegian kroner last year. During the fourth quarter flew 5.65 million passengers, with the company which corresponds to a passenger growth of eight percent. Capacity growth increased further towards the end of the year to 21 percent, while load factor increased by three percentage points to 81 percent.
“There is no reason to hide the fact that 2014 was a weak year for Norwegian. At the same time, we see several bright spots in the beginning of 2015. 2014 was marked by international expansion, particularly substantial investment in long-haul traffic. We notice that our growth strategy takes the form of an even stronger foothold internationally. Despite high investment costs, we have managed to reduce unit costs and renewed fleet further so that the average age is now down to 4 years.
We enter 2015 with good demand for air travel and get the full effect of low oil prices during the first quarter. Meanwhile, there is no doubt that the costs must be reduced further to ensure the company’s competitiveness in a very tough industry”, says Norwegian’s CEO Bjørn Kjos.
Copyright Photo: SPA/AirlinersGallery.com. Norwegian Boeing 737-8JP WL LN-NGD (msn 39049) with the image of Ivo Caprino on the tail arrives at Gatwick Airport near London.
Norwegian aircraft slide show: