Norwegian has said that its joint venture with China Leasing International Corporation DAC (CCBLI) will aim to strengthen its financials considerably.
Initially, the joint venture will comprise of 27 Airbus A320neo aircraft to be delivered from 2020 to 2023. CCBLI, a 100% owned subsidiary of China Construction Bank Corporation, will also provide aircraft financing for aircraft within the joint venture.
Under the joint venture terms, CCBLI will be the majority owner with a 70% share, with Norwegian, through its wholly-owned subsidiary Arctic Aviation Assets DAC, holding the remaining 30%.
Norwegian has said that in addition to a positive equity effect, the joint venture will reduce its capital expenditure by approximately $1.5 billion based on the initial 27 aircraft.
Aircraft deliveries to the joint venture will commence in Q1 2020. CCBLI has committed to provide senior debt financing to the joint venture for the 27 aircraft.
Acting CEO Geir Karlsen of Norwegian commented: “Following several months of negotiations, I’m very pleased to announce that we have reached an agreement with CCBLI to establish a joint venture for an initial 27 Airbus A320 NEO aircraft.
"This agreement will contribute significantly to reducing our current and future capital expenditure. The JV is one of many important initiatives that need to be realised to deliver on our strategy of moving from growth to profitability.
“I am convinced that CCBLI with its professionalism, financial strength and capabilities will be an excellent partner for Norwegian going forward. This JV is an important first step in building a strong strategic partnership between our two companies."
The airline also revealed its third-quarter results which showed profit before tax improve 38% to NOK 2.2 billion compared to the same quarter last year.
Unit revenue and revenue per passenger kilometre (yield) both increased by 3% this quarter. Total revenue was NOK 14.4 billion, an increase of 8% from the same period last year, primarily driven by intercontinental growth. Norwegian carried approximately 10.5 million passengers; a reduction of 3% due to lower capacity. The load factor was 91.2%, up 0.7 percentage points.
The production growth (ASK) in the third quarter was 3%, down from the peak growth of 48% in the second quarter of 2018.