Norwegian lowers operating profit outlook for 2024 after wage increases and Boeing delays

Norwegian has lowered its operating profit outlook for 2024 in its revision on July 4, 2024. The group is now forecasting an operating profit of NOK 2.1bn-2.6bn Norwegian krone ($198.5 million-245.8 million), down from its initial forecast of 2.5bn-3.2bn Norwegian krone ($236.3 million-302.5 million). Several factors contributed to the revision. Norwegian saw softer traffic demand during the second quarter, with a contraction in both load factor and yield compared to last year. “Primarily due to a significant capacity increase on longer flights, Norwegian experienced a slight decrease in yield and load factor,” said Norwegian CEO Geir Karlsen. “We are excited to continue serving a growing number of customers as they embark on their summer holidays.” In addition, the second quarter also saw a higher than initially projected wage settlement for pilots following the conclusion of its new collective-bargaining agreements. The airline had reached a pay deal with its pilots after concluding negotiations with the Norwegian Pilot Union on June 1, 2024. The deal meant it managed to avert a strike that could have seen a large level of cancellations. Details of the increased wages have not yet been revealed. Norwegian claimed delays from Boeing’s commercial aircraft deliveries had further impacted its operating profit outlook. It was forced to source external capacity corresponding to between one and two aircraft during the summer season. It added that the local currency exchange rate had been weaker compared to the US dollar. Unit costs excluding fuel for the carrier is expected to increase by “a low-single-digit percentage” compared to 2023. The original outlook had been expected to be flat compared to last year. Its initial profit outlook excluded any profits from Wideroe, the regional carrier Norwegian acquired in January 2024. However, the group, including Norwegian and Wideroe, saw an 11% increase in passengers in June 2024 when compared to last year. Norwegian carried 2.2 million in June while Wideroe reported just over 340,000 passengers. Norwegian's capacity was up 18% in June compared to last to 3.7bn available seat kilometres. Its revenue passenger kilometres (RPK) were up 16% to 3.1bn, while its load factor was down one percentage point versus a year prior down to 84.4%.