OSLO Feb 16 Norwegian Air, Europe's
third-biggest budget airline by passenger numbers, warned on
Thursday costs are rising faster than expected as it expands
worldwide, knocking its shares.
The airline is building up its transatlantic operations, has
up to 29 Dreamliners on order from Boeing for $18.5
billion and is considering ordering more.
Shares in the airline were down 5.52 percent at 0949 GMT,
lagging an Oslo benchmark index down 0.27 percent.
Its underlying unit cost, which excludes fuel, was 0.32
crown in the fourth quarter, down 1 percent year-on-year, a
lower-than-expected reduction for some analysts.
"Q4 results show another disappointing cost performance,"
said Ross Harvey, an analyst at Irish brokerage Davy.
"The underlying cost performance was again disappointing –
down 1 percent versus our -3 percent expectation, with the
largest escalation occurring across peripheral cost lines in
anticipation of 2017 growth."
"Cost guidance for 2017 has increased by circa 2.6 percent
on previous guidance, which means we will revise our expectation
of a 4.7 percent improvement (at constant currency) downwards.
In addition, Norwegian Air said its 2017 unit cost would be
higher than it previously expected, now guiding for a range of
0.39-0.40 crown, against 0.38-0.39 crown previously.
"Unit cost for 2017 is guided up by NOK 0.01 ... due to more
training and more leasing costs, this is likely to lead to lower
estimates for 2017," said Dan Togo Jensen, an analyst at
Handelsbanken Capital Markets.
Norwegian Air defended the higher cost expectations, saying
it had to build capacity. "It is necessary for us to build up as
we receive Dreamliners," CEO Bjoern Kjos said during a
"We are guiding upwards on costs as we have to consider our
growth and what our ramp-up implies. We are recruiting 2,000
people in 2017. And those who will fly the Dreamliners, we have
to train up ourselves," said CFO Frode Foss.
($1 = 8.3068 Norwegian crowns)
(Editing by Alexander Smith)