OSLO (Reuters) – Norwegian Air will lease planes and postpone the sale of older models in its fleet following the grounding of Boeing 737 MAX aircraft, the airline said on Monday.
The budget carrier will also use some of its bigger Boeing 787 Dreamliners to offset the effects of the grounding of its 18 MAX jets – about 11 percent of its fleet.
The 737 MAX was grounded worldwide this month following a deadly crash in Ethiopia.
“In addition to continuing combining flights and reallocating aircraft, the company has decided to delay potential sales of six Boeing 737-800 aircraft and use available 787 Dreamliner capacity on high-volume routes, which will add flexibility,” Norwegian said in a statement.
“The company is further preparing to wetlease aircraft to fill the remaining capacity gap,” it added, referring to the industry practice of renting fully-staffed aircraft for a period of time.
Norwegian said earlier this month it would seek compensation from Boeing for costs resulting from the grounding of the global MAX fleet.
“The company has a good dialogue with Boeing and is confident of reaching a constructive agreement,” Norwegian said, without elaborating.
Norwegian Air CEO repeats plan to turn profitable in 2019
Norwegian Air aims to turn profitable this year, its chief executive said on Monday, reiterating plans to turn around the situation at the loss-making budget airline.
“We aim to become profitable in 2019,” Bjoern Kjos told Norwegian public broadcaster NRK. “We’re managing well as an independent company.”
* Norwegian cancels some flights after grounding MAX 8 aircraft
* Airline says it maintains outstanding order for more planes
* Ethiopian crash was second involving MAX 8 since October
* Boeing has expressed confidence in safety of its plane
* Analyst sees limited short-term impact for Norwegian (Adds statement on Dublin-New York replacement aircraft)
OSLO, March 13 (Reuters) – Norwegian Air said on Wednesday it will seek compensation from plane maker Boeing for costs and lost revenue after grounding its fleet of 737 MAX 8 aircraft in the wake of the Ethiopian Airlines crash.
“We expect Boeing to take this bill,” Norwegian said in an emailed statement.
The
Oslo-based airline has 18 ‘MAX’ passenger jets in its 163-aircraft
fleet. European regulators on Tuesday grounded the aircraft following
Sunday’s crash of a similar plane in Ethiopia, which killed 157 people
and was the second crash involving that type of plane since October.
Boeing
Chief Executive Dennis Muilenburg said on Monday that he was confident
in the safety of the 737 MAX in an email to employees, which was seen by
Reuters.
Industry sources, however, said the planemaker faces big claims after the crash.
Norwegian
has bet heavily on the ‘MAX’ to become its aircraft of choice for
short- and medium-range flights in coming years as the low-cost carrier
seeks to boost its fuel efficiency and cut the cost of flying.
“What
happens next is in the hands of European aviation authorities. But we
hope and expect that our MAXes will be airborne soon,” Norwegian Air’s
founder and Chief Executive Bjoern Kjos said in a video recording
released on social media.
“Many
have asked questions about how this affects our financial situation.
It’s quite obvious that we will not take the cost related to the new
aircraft that we have to park temporarily. We will send this bill to
those who produce this aircraft,” he added.
Idle
planes will add to pressures on the airline, which is making losses
amid intense competition at a time when several smaller European
competitors have gone out of business.
The
carrier has raised 3 billion Norwegian crowns ($348 million) from
shareholders in recent months and said it would cut costs as it tries to
regain profitability this year.
“If
this situation gets solved within the next fortnight, this will not be
very serious for Norwegian,” said analyst Preben Rasch-Olsen at
brokerage Carnegie, adding that seasonally low demand in March likely
leaves spare capacity.
“The little extra costs they are incurring, they can probably get that covered by Boeing,” Rasch-Olsen said.
“But
if this situation continues into the Easter holidays, or May and June,
then it is a problem. They (will) need to get in new planes. And then
comes the costs.”
Europeans
tend to book their summer holidays in May, so the grounding may not yet
affect bookings for the peak season for the airline industry, the
analyst said.
Meanwhile,
Norwegian was maintaining its order for more aircraft of the same type
from Boeing, spokesman Lasse Sandaker-Nielsen said.
Norwegian
is expected to take delivery of dozens more of the ‘MAX’ in coming
years, raising the overall number to more than 70 by year-end 2021,
according to recent company announcements.
Shares in the airline have now dropped 6.8 percent this week as investors worried about the impact of the Ethiopian crash.
They fell by 4.8 percent in early trade on Wednesday but later recovered to trade up 2.7 percent by 1246 GMT.
Norwegian
cancelled some flights on Tuesday, and on Wednesday it cancelled at
least three dozen departures, its website showed, most of which were due
to fly from airports in Oslo, Stockholm and other Nordic cities.
The airline was booking passengers on to other flights and using other types of planes from its fleet to help fill the gaps.
In
a separate statement, Norwegian said it would deploy one of its larger
Boeing 787 Dreamliner aircraft to operate its daily route from Dublin to
Stewart airport north of New York City, replacing the grounded MAX.
($1 = 8.6093 Norwegian crowns)
(By Terje Solsvik and Gwladys Fouche. Additional reporting by Lefteris Karagiannopoulos; Editing by Susan Fenton and Louise Heavens)
OSLO
(Reuters) – Norwegian Air’s shareholders overwhelmingly endorsed on
Tuesday the lossmaking airline’s plan for a deeply discounted cash call
to help bolster its finances, Chairman Bjoern Kise said.
Norwegian
Air said on Jan. 29 it would raise 3 billion Norwegian crowns ($348
million) in a rights issue, just days after British Airways owner IAG
ruled out a bid for the budget carrier.
Norwegian
is trying to replicate on transatlantic flights the low-cost model that
dominates the short-haul market, exemplified by the likes of Ryanair
and easyJet, but is struggling to make the business profitable.
The
European airline sector faces overcapacity and high fuel costs, with
several operators going out of business, the latest being British-based
Flybmi which filed for bankruptcy on Sunday.
In
the rights issue, Norwegian’s owners will get the right to buy two new
shares at 33 crowns each for every share they own, compared with
Monday’s closing price of 93 crowns.
Holders of more than 99 percent of Norwegian’s equity backed the proposal at a meeting on Tuesday, company officials said.
By
selling new shares far below the market price, Norwegian will boost the
value of each of the purchasing rights, which can be bought and sold.
This
in turn allows Norwegian Air Chief Executive Bjoern Kjos and his
business partner, the group’s chairman, to sell some of their
subscription rights and reinvest the proceeds in new shares, thus
limiting the dilution of their joint stake which stands at 24.66
percent.
Norwegian said last month that billionaire investor John Fredriksen was among those who had agreed to take part in the issue.
($1 = 8.6295 Norwegian crowns)
(By Terje Solsvik, Editing by Nerijus Adomaitis and David Holmes)
