March 20, 2018 / 5:23 PM / a month ago

UPDATE 1-Norwegian Air plans share issue, warns of wider Q1 loss

(Adds detail, background)

OSLO, March 20 (Reuters) - Fast-growing budget airline Norwegian Air will raise up to 1.3 billion crowns ($168 million) in a share issue to help fund its expansion, it said on Tuesday, as it warned of a larger than expected first-quarter loss.

Norwegian Air is trying to crack the transatlantic market by undercutting established rivals, but faces pressures to control costs and shore up its balance sheet in the face of stiff competition.

Its fate rests on the still unproven strategy of adapting the success of low-cost short-haul travel to long-haul routes. Its shares have fallen 36 percent over the past year, suggesting some investors have doubts.

“Additional capital will boost competitiveness and protect existing and future investments in a market characterised by higher oil prices and fluctuating currencies,” it said in a statement.

“The company is now positioning itself for the final stages of a strong growth period that has lasted for several years and will reach its peak by the second quarter of 2018.”

The airline said the planned share issue had the backing of biggest shareholder HBK Holding, which controls 26.4 percent of the company’s capital, and “significant support” from its existing shareholder base.

Norwegian Air is massively expanding its transatlantic route network to capture market share, with routes between Canada and Europe starting from July. It is also planning to fly to, from and within Argentina.

PROFIT WARNING

The company said it would post a first-quarter pretax loss of 2.6 billion crowns, versus a 1.8 billion crown loss in the same period last year. It is due to report quarterly results on April 26.

While the January-March revenue projection of 7.1 billion crowns was almost in line with the 7.24 billion estimated by analysts, according to Thomson Reuters Eikon, the pretax loss was 550 million crowns bigger than expected, as costs ballooned.

“The average price for jet fuel in Q1 2018 is so far 12 percent higher than the assumption in the company’s current guidance,” said Norwegian Air.

To further help its finances, Norwegian will review options, including a change of ownership, for its customer loyalty programme, which has more than seven million members and is expected to grow to nine million by the end of the year.

“Capacity adjusted forward bookings are currently well ahead of last year, with stable prices,” the company said.

Norwegian is also in discussions to sell up to five Airbus 320neo aircraft, currently leased to HK Express.

For the share issue, Norwegian has engaged Arctic Securities, Carnegie, Danske Bank and Pareto Securities as joint lead managers.

The application period for the issue started at 1630 hours CET (1530 GMT) on Tuesday and is expected to close on Wednesday at 0800 CET (0700 GMT).

$1 = 7.7268 Norwegian crowns Reporting by Gwladys Fouche and Camilla Knudsen Editing by David Goodman and Mark Potter

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