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Norwegian To Reduce Fleet, Cost-Saving Begins In 2019

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Norwegian To Reduce Fleet, Cost-Saving Begins In 2019

Norwegian To Reduce Fleet, Cost-Saving Begins In 2019
December 24
12:49 2018

MIAMI — Norwegian has logged a record-breaking number of passengers flying with them during the month of November—2.8 million, representing a 14% increase compared to the previous year. Despite these positive figures, many European airlines are feeling the pinch as fuel prices increase and passenger demand begins to slow down.

On Christmas Eve day, Norwegian unveiled a cost-saving program, which is designed to see the airline reduce its overall costs for the first half of 2019, and produce savings up to £180m.

Part of these savings will see the airline offer some early delivery slots to other airlines, as Norwegian deals with much lower than anticipated passenger demand across Europe during the third quarter of 2018.

Nordic low-cost carrier Primera Air went bankrupt in October 2018 following its ambitious desire to compete against heavyweight giants in the airline industry, such as Ryanair and EasyJet, by competing on a variety of European routes.

The subsequent launch of low fare transatlantic services in competition with Norwegian ultimately sealed Primera’s fate as it struggled to finance and introduce new aircraft at the same time as adding numerous destinations around the world at an incredible rate.

Norwegian is seeking to avoid such pitfalls by taking pre-emptive measures, which are designed to ensure the airline’s future well beyond 2019.

Part of these savings could see Norwegian offer early delivery slots to other airlines for its soon-to-be-delivered Airbus A321 NEO LR (long range), Boeing 737 MAXs, and Boeing 787 Dreamliners.

Norwegian is scheduled to receive the first of their new Long Range Airbus A321neos in 2019. Exact delivery dates of the type and timescales for entry into service have not been revealed yet.

Cost Saving Program


In addition, the airline has launched an extensive cost savings program, #Focus2019, which will contribute to estimated savings of minimum NOK 2 billion in 2019.

Six weeks into the program, Norwegian has already identified significant savings, which will have a positive effect on the bottom line.

The company will update the market with results from their #Focus2019 initiative in connection with the announcement of the results for the first quarter of 2019.

It has been well documented that Norwegian’s long-haul operation has been disrupted continuously by challenges with the Rolls-Royce engines on its Dreamliner fleet.

Reportedly, the airline has reached an agreement with Rolls-Royce, which might see some form of compensation for further travel disruptions. The exact commercial terms of this agreement between the engine-maker and the airline remain confidential.

Part of these cost-savings come at the same time that Norwegian Air Shuttle suspend their final transatlantic route from Edinburgh Airport in March 2019, having already suspended services to the USA from Belfast International Airport.

Despite being popular routes given their low price, they have proved unsustainable over the past two years.

A mix of low yields, combined with a high rate of air passenger duty tax, has negated Norwegian’s ambitions to further expand these niche transatlantic services from its European bases.

Norwegian has also announced that the financing for all aircraft deliveries in the first half of 2019 is secured. This also includes refinancing of one of the delivered Dreamliners, resulting in a positive liquidity effect of NOK 275 million in December 2018.

The process of divesting aircraft continues, and Norwegian has experienced significant interest in its existing fleet of Boeing 737s and 787s as well as future deliveries.

The airline recently signed a letter of intent for the sale of two aircraft with delivery in the first quarter of 2019.

Norwegian has also had discussions about forming a joint venture for aircraft ownership.

The upcoming year will indeed be an interesting one to see what lies ahead for Norwegian as the airline continues its battle as one of the most recognised low-cost carriers in Europe.

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Jonathan Winton

Jonathan Winton

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