Norwegian posts strong operating profit, shares rise after beating market expectations

Norwegian Air Shuttle ASA posted a strong operating profit of NOK 593 million ($55.2 million), beating market expectations, in its second quarter results. It was down 9%, though, from its second quarter operating profit last year. ""We have delivered good operations in the second quarter amidst a hectic ramp-up into the summer season,"" said Norwegian CEO Geir Karlsen. The airline said its operating profit results were driven by strong growth in both capacity and passenger numbers. The Norwegian Group had 7.3 million passengers in the quarter, of which 6.3 million were passengers of Norwegian and 1 million of its subsidiary Wideroe. Compared to the same period last year, the number of passengers increased by 680,000 and 122,000 for Norwegian and Wideroe respectively. Capacity was up 19% compared to the second quarter last year, though the group added that slightly lower demand was impacting its ticket prices. Norwegian's operating revenues were up 36% on the second quarter last year to NOK 9.3bn ($865.9 million). However, its total operating expenses excluding aircraft lease, depreciation and amortization amounted to NOK 7.5bn ($698 million). Delays in deliveries from OEMs have pushed the group to lease aircraft externally to meet capacity demands. ""We were supposed to get deliveries in the quarter [from Boeing], which we did not get,"" said Karlsen. ""As a result we had to take in one to two lines of aircraft from the market, which is also adding costs."" Lease and rental expenses amounted to NOK 1.3bn ($121 million) for the second quarter. ""It is the fight against increasing costs here at Norwegian, it has been for a while,"" said Karlsen. He added the group has been having ""tough negotiations"" with both its cabin crew and pilots. ""We definitely had a risk of dispute,"" he commented. It did not result in strike action, but it did have impact on its bookings, though Karlsen said it was ""difficult"" to ascertain how much of an impact was made. With climbing expenses, its net profit was down 11% on last year's second quarter at NOK 477.1 million ($44.4 million). The company's liquidity position improved through the quarter to NOK 11.5bn ($1.1bn) at the end of the quarter, up NOK 1.1bn ($102.4 million) from the previous quarter. The company is setting aside NOK 823 million ($76.6 million) to its dividend fund to be paid out to shareholders. The group is also expanding its winter offerings with 27 new routes and anticipates a fleet growth for the upcoming summer season. The company noted stable bookings ahead for the third quarter, with capacity increasing around 10%. It added that it had sold an additional 400,000 tickets over the third quarter of last year, though they were sold at yield flat compared to the same period. Similar to Delta's second quarter results, Norwegian's corporate passengers were up 28% over the second quarter last year, as well as up 19% over 2019's second quarter.