Norwegian Air Shuttle’s first results since it emerged from bankruptcy protection showed the low-cost airline still struggling with the impact of the Covid-19 pandemic, even as it improved its financial position.
Norwegian said it expected future bookings to continue to increase as travel restrictions across Europe are eased, but warned that the uncertainty over Covid was still too high to provide profit guidance this year.
Under its preferred measure of earnings before interest, tax, depreciation, amortisation and restructuring costs excluding other gains and losses, Norwegian’s losses widened from 467 million Norwegian kroner in the first half of 2020 to 1.86 billion kroner (€182 million) in the first six months of this year.
Restructuring
Revenues dropped 92 per cent to 591 million kroner. But, thanks to its financial restructuring, which it completed in May, it swung from a pre-tax loss of 4.79 billion kroner last year to a profit in 2021 of 1.59 billion kroner.
Its chief executive, Geir Karlsen, said the first-half results represented “a clear improvement” in Norwegian’s financial situation as the airline had cut its operating costs and debt, allowing it to plan for the future with “renewed confidence and focus”.
He added: “Forward bookings continue to increase in response to the relaxation of travel restrictions and the rollout of international vaccination programmes. We expect to see this trend continue in the remaining months in 2021 and through 2022.”
Norwegian overextended itself before the pandemic, increasing its debt substantially to fund a loss-making transatlantic long-haul programme. It has now abandoned those flights and is seeking to concentrate mostly on its home Nordic region and flights from there to Europe.
The low-cost airline ended 2019 with a fleet of 156 aircraft but had only about 10 aircraft operating this spring. By the end of June, that had increased to 51 aircraft and Norwegian estimated it would operate about 70 next year should the recovery in air traffic go to plan.
Debt
Norwegian managed to reduce its debt by 96 per cent from a year earlier in its financial restructuring in Ireland and Norway which ended in a large debt-for-equity swap and left creditors owning most of the airline.
Norwegian now operates most of its aircraft on a power-by-the-hour basis, meaning it only pays for them when it uses them, so its costs should be much more in line with demand. Its cash burn in June – the first full month since its restructuring – was significantly reduced from its level at the start of the pandemic.
Shares in Norwegian, which have fallen steeply and steadily over the past three years, were flat at 10 kroner on Tuesday morning.
– Copyright The Financial Times Limited 2021