Norwegian Group downgrades profit outlook
The Norwegian Group has revised its profit outlook downwards as a number of factors including softer traffic demands and aircraft delivery delays start to bite.
During its results announcement for the first quarter of 2024 on 24 April, the group provided a results outlook forecasting an operating profit (EBIT) of Norwegian krone (NOK) 2.5 to NOK 3.2 billion for the full-year of 2024.
The profit outlook excluded any profits from Widerøe, the regional carrier which Norwegian acquired in January of 2024.
Unit costs excluding fuel for Norwegian were forecasted to be flat compared to 2023 while the dollar-krone exchange rate was assumed to be 10.5.
However, the group has now revised its projections and is now forecasting a group operating profit (EBIT) for 2024 of NOK 2.1 billion to NOK 2.6 billion, including Widerøe.
A statement provided by the company blamed the downwards revision on four factors, including softer traffic demand during the second quarter with year-on-year load factors and yields contracting.
Secondly, a higher than projected wage settlement for pilots following the conclusion of new collective-bargaining agreements this quarter has added extra costs.
Aircraft delivery delays from Boeing have forced the company to source external capacity corresponding to between one and two aircraft during the summer season, while optimism over the exchange rate with the dollar has not come to pass with the krone weakening.
Looking ahead, the company is also forecasting unit cost excluding fuel for Norwegian to increase by a low single-digit percentage compared to 2023, based on current foreign exchange and jet fuel forward prices for the remainder of the year.
The downgrading comes despite positive news for the group which recorded an increase in passenger numbers during June.
Norwegian carried 2.25 million passengers on its 86 aircraft throughout the month, an 11% increase on June 2023 while Widerøe recorded 346,747 passengers representing 6% growth year on year.
Norwegian CEO Geir Karlsen said: “I am pleased about the double-digit percentage increase in passengers travelling with Norwegian compared to June last year, as well as the positive passenger figures for Widerøe.
“Primarily due to a significant capacity increase on longer flights, Norwegian experienced a slight decrease in yield and load factor.
“We are excited to continue serving a growing number of customers as they embark on their summer holidays.”
Further detail for June show capacity (ASK) was 3,706 million seat kilometres, up 18% from the same period last year while actual passenger traffic (RPK) was 3,126 million seat kilometres, an increase of 16% from June 2023.
Load factor has improved compared to April and May, although it was still down 1 percentage point from June 2023.
Karlsen added Norwegian has launched 50 new routes this year, in particular to Northern Norway which has seen a surge in popularity.
He added: “We are enthusiastic about the growing interest in Northern destinations from Europe. The extensive networks of Norwegian and Widerøe in Norway, along with our new routes in Sweden and Finland, allow us to connect European travellers with the best that the North has to offer.”
