Norwegian Air hit by rising costs as operating profit falls short

Budget airline Norwegian Air Shuttle predicted rising costs this year as it coped with the effects of strikes in France and its second-quarter operating profit fell slightly short of expectations.

The company also said it had ordered 30 longer-range versions of the Airbus A321neo aircraft, upgrading part of an existing order for 100 A320neo jets. It did not give a value for the deal.

Norwegian, Europe's third-biggest budget airline by passenger numbers after Ryanair and easyJet, has launched flights to the Middle East, southeast Asia and the United States, bringing low-cost offers into the long-haul segment, as well as expanding in its core European market.

It said its 2016 unit cost guidance (Cask) would be around 0.38 Norwegian crowns, nudging it up from previous guidance for around 0.37 crowns. Cask broadly measures total operating and leasing expenses against available seat kilometres.

"We have had significant additional costs for leasing of aircraft and passenger compensation," chief executive Bjoern Kjos said in a statement. The compensation came after Norwegian Air's flights were disrupted by strikes in France protesting against labour reforms.

In addition, this month the airline had a conflict with the Norwegian pilots’ union that meant many pilots did not come to work at the start of the busy summer season.

The company’s shares were down 3.2 per cent at 297.4 crowns on the Oslo bourse by 0820 GMT.

Operating profit before leasing and depreciation was slightly below expectations at 1.97 billion billion crowns (€211 million), against the 2.06 billion crowns seen in a Reuters poll of analysts, up from 1.29 billion at the same time a year ago.

Reuters