Norwegian expects to park more aircraft every winter as the airline undertakes a “deep dive” into its future strategy.
Speaking during a second-quarter results briefing today, the Scandinavian low-cost carrier’s chief executive Geir Karlsen said one of his “main concerns” since joining the company in 2018 is that “we are losing way too much money in the low season”.
Karlsen’s view is that Norwegian’s bottom line “is not delivered in the summer, it is actually delivered during the winter”.
Therefore, in the coming years, “we will take out much more capacity than before during the low season”, he says. “We will park aircraft during the winters.”
That strategic shift will form a key part of the carrier’s in-development business plan for the post-pandemic period, which will also consider how to “take out the cost base for serving those aircraft” at the same time.
The carrier’s other areas of priority looking into 2022 and beyond are “crew efficiencies”, to bring them “more in line with the best guys in the market”, and improving ancillary revenues, Karlsen explains.
For now, however, the coming winter is about “preserving a lot of liquidity”.
Norwegian is in a “very comfortable cash position” amid “positive momentum in the booking curve”, Karlsen says, but still needs to “play it smart through this period to be ready for 2022”.
The carrier’s temporary ‘power-by-the-hour’ agreements for its leased aircraft will be important over the next few months, he adds.
“We can keep a higher proportion of the fleet in the air, even if we lower capacity,” Karlsen says of the benefits of such agreements, which lapse in 2022. “That means that over the winter, we can cover a wider part of our market but still with lower capacity.
“This is a massive flexibility and gives us help to get through the [coming] low season.”
Norwegian’s financial results continue to be significantly impacted by its restructuring programme – which was concluded during the second quarter – to the extent that it reported a net profit of NKr1.59 billion ($184 million) for the first half of 2021, solely thanks to the positive impact of some restructuring provisions.
It made an operating loss during the same period of NKr2.23 billion, versus a loss of NKr5.08 billion in the first half of 2020.
Total revenue in the first half of 2021 was NKr591 million, compared with NKr7.14 billion in the same period last year, when the airline was bigger and two of the months featured relatively little impact from Covid-19.
Its cash and equivalents at the end of the first half doubled year on year to NKr7.48 billion.
Karlsen says Norwegian could end the year seeing “relatively low cash burn”, with a target of being “cash neutral on the operation side” during the current quarter.
The carrier’s fleet consists of 51 Boeing 737-800 jets, which are being deployed on a slimmed-down, Scandinavia-focused network.
Denmark has been the carrier’s strongest market since it emerged from restructuring, Karlsen says, followed by Sweden and Norwegian domestic services.