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Norwegian unlikely to return to profit in 2014

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To raise profits in 2014 would be “major achievement”

In an analysis of Norwegian’s finances, CAPA shows that its CASK (cost available seat kilometres) is about right for a low-cost carrier flying the kinds of distances it operates. Looking ahead, however, the airline’s implied 2014 target of a CASK reduction of around 5% may need to be more ambitious.

As previously reported, Norwegian has posted a fourth quarter loss, which dragged down its full-year result for 2013. CAPA argues that returning Norwegian to profit growth in 2014 will be “a big challenge”.

CAPA produces a graph showing CASK versus trip length for a variety of low-cost and legacy airlines. Assuming the airline’s long-haul operations are below the best fit for a budget airline and its short-haul operations are above it, CAPA says that this leaves it “exposed to price-based competition from larger and lower cost LCCs on its European network”, though it of course remains much lower cost than Europe’s legacy carriers on its intercontinental routes.

But, CAPA says, “the bulk of Norwegian’s operations are still very much in the competitive short-haul market and, on long-haul, it still faces a significant management challenge as it adds to its 787 fleet, opens new routes and recruits crew in remote bases. It will be a major achievement to increase profits once more in 2014.”

CAPA

[photo courtesy Norwegian]

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