Norwegian believes in long-haul low-cost, but scales it back
Norwegian Air Shuttle’s chief executive officer (CEO) Jacob Schram said he still believed in his company’s ability to achieve success in the long-haul low-cost model. Despite the fact, Schram recognized that the current market situation would force Norwegian to scale back its long-haul operations, as passenger demand for international travel remained questionable.
“We believe in the long-haul low-cost. We need to scale back and we need to rebuild it,” stated Schram during the company’s presentation to investors as it announced its H1 2020 financial results. While Norwegian had a lot of profitable routes in the model, added the chief executive, the company will reduce the size of its long-haul unit and build it from there.
Starting April 2020, when the low-cost carrier kick-started its operations once again, Norwegian operated between seven and eight aircraft on domestic routes in Norway, as it was required to do so if the company wanted to receive state aid. This has resulted in a 71% reduction in passenger numbers, as the situation of operating domestic flights only continued until July 2020.
The carrier reduced its fleet size by 16 aircraft compared to the end of 2019, as it sold 10 and returned six Boeing 737-800NGs. In the process of selling the 737s, Norwegian managed to raise NOK2.7 billion ($307 million). Its Dreamliner fleet, consisting of 11 owned Boeing 787s and 26 leased, has only grown since the start of 2019, as the low-cost carrier added one owned and two leased units to its aircraft portfolio.
“On the MAX situation, we are not going to say that much about that, but we do not see any MAXs in the air in 2020. So, we definitely think that we will see 2021 before any MAXs are up in the air again,” stated chief financial officer (CFO) of Norwegian Geir Karlsen. The company canceled its orders for 92 Boeing 737 MAXs and five 787 aircraft and sued Boeing for alleged negligence on both of the aircraft models.
In total, the company had NOK4.9 billion ($557.7 million) of cash at the end of H1 2020, an increase of almost NOK1.9 billion ($216 million) when compared to the end of 2019. It ended the first half of 2020 with a net loss of NOK4.7 billion ($534 million).
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