Published on Thursday, April 25, 2019

Norwegian reveals cost of 737 MAX groundings as winter losses soar

The grounding of Boeing 737 MAX 8 aircraft is expected to cost budget carrier Norwegian up to £45 million.

Announcing a net loss of £133.5 million for the first quarter of 2019, compared with £4 million during the same period last year, the airline said it was currently assessing the financial impact of the temporary worldwide ban on MAX 8 operations since the aircraft was involved in two fatal accidents just months apart.

Norwegian has 18 of the 737 MAX 8 in its fleet and further deliveries of the model have been put on hold.

In an update this morning, chief executive Bjorn Kjos said the negative effects from the grounding was up to NOK 500 million (£45m). He added: "We have had some productive meetings with Boeing where we have discussed how we can manoeuver through the difficulties the MAX situation is causing Norwegian."

He said the airline was committed to doing its 'utmost' to ensure flights continued as planned, using wet lease companies 'where necessary'.

The airline saw its total revenue rise 14% to NOK 8 billion in the first three months of the year, largely due to intercontinental growth and rising traffic in the Nordics, and its costs, excluding fuel, fell 8%.

It said its key priority is returning to profitability through a series of measures, including an extensive cost-reductions programme, an 'optimised route portfolio' and sale of aircraft.

It shaved NOK 467 million from its operating costs in the first quarter, during which it achieved a fully underwritten rights issue of NOK 3 billion, which,the airline said, secured a stronger financial position.

In a statement, it added: "The company is well positioned to continue to attract new customers, not lease in the long-haul market, where the development is stronger than in the short-haul market."

Passenger numbers were up 9% during the first quarter to more than eight million, its aircraft flew 81% full, and its punctuality increased from 73% to 81%.

"I'm pleased with the positive developments this quarter, despite the 737 MAX issues. We have taken a series of initiatives to improve profitability by reducing costs and increasing revenue. We are optimising our base structure and route network to streamline the operation as well as divesting aircraft, postponing aircraft deliveries and not least implementing our internal cost reduction program, which will boost our financials. I am also pleased that booking figures and overall demand for the coming months look promising," added Kjos.

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  • Then why selling 737's?

    Oh, that's a surprise. I would have thought that the grounding of the MAX was a welcome coincidence since they seem to have too much capacity this year and are selling a few 737's... anyone can explain this to me?

    By Ralph Delis, Thursday, April 25, 2019

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