Posted on: 12 February 2015 by Ross McSweeny
Norwegian has published its 2014 results featuring strong revenue and capacity growth but, for the first time after seven profitable years, the carrier had a negative overall result with a net loss of NOK 1,050 million, compared with a NOK 322 millon net profit in 2013.
Fuel hedging for 2015 for the amount of NOK 459 million was a considerable cost in 2014, but it does mean that major costs for 2015 have already been covered.
The company’s total revenue was NOK 19.5 billion, an increase of 25% compared with revenue in 2013. Available seat kilometres (ASK) put intot he market by the airline increased by 35%, while the load factor remained high at 81%, up three percentage points from the year before. Norwegian carried 24 million passengers in 2014, an increase of 16% from previous year.
For the fourth quarter (4Q14), the underlying result was in line with the same quarter in 2013 – a net loss of NOK 958 million caused mainly by fuel hedging and a weak Norwegian krone. By transferring a major part of Norwegian’s fleet to its subsidiary Arctic Asset Aviation Ltd. (AAA), the value of the aircraft has increased in line with the dollar. This has had a positive effect of NOK 361 million on the equity, which in practice offsets the exchange loss between the Norwegian krone and US dollar during the fourth quarter of 2014.
Major currency fluctuations and fuel hedging for 2015 had a negative result effect of NOK 690 million for the full year. Moreover, long-haul delays amounted to NOK 265 million in 2014. This includes wet lease costs, extra fuel, as well as expenses related to accommodation, food and drinks for delayed passengers. Costs related to the delayed approval of a US foreign air carrier permit for the company’s EU subsidiary were NOK 117 million, while the strike from labour union Parat in May 2014 cost the airline NOK 101 million.
“There is no denying that 2014 has been a weak year for Norwegian,” admitted CEO Bjørn Kjos. “At the same time, we do see several positive trends entering 2015. Last year was characterised by the continued international expansion, not least the launch of new long-haul routes. Our growth strategy yields results as we continue to gain a stronger global foothold. Even with large investment costs, we have managed to reduce unit costs and renewed our fleet considerably.
“Entering 2015, we see a satisfactory demand for quality flights at affordable fares and are already in the first quarter benefitting from the low oil price. Still, there is no doubt that we need to further reduce our cost level in order to stay competitive in a very challenging market,” Kjos added.