Analyst: – Norwegian needs to do more

Norwegian CEO Bjørn Kjos is waiting for the cold weather to triple.

"We are now entering a period characterized by generally weak demand, fierce competition and high oil prices, making it even more important to continue working to reduce business costs," says Kjos in a statement. Press release.

Kjos low cost carriers have just posted new traffic figures for October. Growth continues as expected, while revenues decreased in October compared to last October.

Revenues decline

If the receipts on the notes decrease, it means that the profits on the note will be lower and that this could affect the profits in Norwegian.

• In October, revenue per passenger per kilometer (yield) decreased by 2% to NOK 0.38 compared to the same month last year.
• Another income target, RASK (revenue per seat per kilometer), decreased by 5% to 0.33 crown.

"The figures presented were a little weak, especially the degree of filling has dropped.The yield was also below expectations, but it seems that the company adjusts the prices at the expense of filling the plane. Norwegian is supplying figures lower than 2017, while costs are rising dramatically with rising oil prices and stronger dollars, Sivertsen said.

He points out that Pareto is not happy that prices are lower than the figures of 2017

"There was no party in the fourth quarter of last year and the numbers for November indicate that the result will be even lower this year.We also find that the demand for short-haul flights is low and that booking in advance suggests to us that this will continue for a while, "Sivertsen said.

"It's pretty skinny"

For airlines, the spring and summer months are the time during which money must be earned before the period is harder in the winter. For a long time, Norwegian had high equity and debt, but last week, Norwegian earned half a billion dollars in fees after the sale of five planes.

"It looks like the company is heading for a difficult and difficult winter, something that will affect the entire aviation industry." Norwegian may need to do more, including continuing to sell aircraft, reducing thus the number of lost routes, which can support the book capital, said Sivertsen.

Norwegian has committed $ 1.3 billion by the end of March to meet the company's loan terms, which states that the company must have an accounting balance of at least $ 1.5 billion.

– According to estimates by Pareto, the bookkeeper would be around NOK 1.6 billion in the first quarter of 2019. In fact, the need for financing amounts to 1.5 billion. In addition, the Norwegian Finans Holding has recorded a loss, if it does not significantly increase, and a fuel loss insurance of 228 million NOK, Sivertsen said.

– If Norwegian breaks the terms of the loan, he will have to adapt to the situation, he adds.

The analyst says the losses must now be reduced.

"Norwegian has announced a cost reduction of two billion crowns next year, as well as an improvement in regularity to avoid additional costs of one billion in 2019. If the company is ready, she is going away, but with harsh winters, one must act fast and that is what is uncertain if they manage, says Sivertsen.

Strong scholarship this year

The price of Norwegian shares has been turbulent this year, mainly because of the willingness of the British company IAG to buy the Norwegian giant at low costs. In several rounds, IAG made an offer for Norwegian, but did not succeed.

So far this year, the stock has increased by 29% in Oslo Børs.

"The numbers do not mean that the stock will rise today, quite the contrary, it will probably be something down there.

The last push came after the figures released by Norwegian for the third quarter. As expected, the $ 1 billion surplus was expected, but Norwegian also announced a cooperation project with a financial player to divide a large portion of the aircraft into a shared company.

"This guarantees funding for both the loans we have paid and the new aircraft – it is such a powerful player that none of them will raise funding problems," Kjos said of the presentation of results.(Conditions)Copyright Dagens Næringsliv AS and / or our suppliers. We would like you to share our business using a link directly to our pages. The copy or any other form of use of all or part of the content may only be done by written authorization or as permitted by law. For other terms please see here.