Norwegian Air says that it remains fully committed to starting Cork flights to the US in July despite its share price dropping sharply on the back of rising costs for its expanding transatlantic fleet.
Shares fell more than 6% following Norwegian’s warning that costs were rising faster than expected as it expands worldwide.
The airline is building up its transatlantic operations, has up to 29 Dreamliners on order from Boeing for €17bn and is considering ordering more.
Norwegian Air, which is Europe’s third-biggest budget airline by passenger numbers, defended the higher cost expectations, saying it had to build capacity.
Its underlying unit cost, which excludes fuel, was down 1% year-on-year, a lower-than-expected reduction for some analysts.
CEO Bjorn Kjos said it was necessary for the airline to build up as it received Dreamliners during a presentation for investors.
CFO Frode Foss said: “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.”
A spokesperson for Norwegian told the Irish Examiner the rising costs would have no bearing on plans by its subsidiary Norwegian Air International to fly from Cork to New England from July and that the finalised routes would be announced in the coming weeks.
He said the Cork flights were not a factor of the rising costs as they would be using Boeing 737 aircraft, suitable to take off from Cork Airport’s shorter runway.
The spokesperson said the Dreamliners were used for existing transatlantic routes from other European airports like Gatwick, Paris and Oslo.
“We will continue to use our new and existing Dreamliners to deliver new routes through 2017 and beyond.
“We’ll see a total of 50 new global routes launched in 2017. This includes a 55% increase in our Dreamliner transatlantic routes from Gatwick, for example.”
Norwegian will fly direct to the east coast, with New Hampshire and Rhode Island, near Boston and New York, the most likely airport destinations, because of their lower landing charges compared to Logan and JFK international airports.
The airline received the go-ahead from the US Department of Transport for a licence to fly from Ireland to the US in the last weeks of the Obama administration, following a protracted battle.
Opposition came from Democrats and Republicans, as well as the biggest labours union in the US, who claimed Norwegian would hire staff cheaply from Asia and undermine American jobs. Norwegian vehemently deny the claims.
President Donald Trump’s administration has also signalled that it had no objections to the plans.
Meanwhile, a resilient start to 2017 from Air France-KLM and a better- than-expected operating profit lifted shares in the airline to their highest level since July.
Shares rose up to 7% in response to the 34% jump in 2016 operating profit to €1.05bn.
“We are not euphoric, we are cautious, that’s why we’re continuing to work on costs,” said chief financial officer Frederic Gagey. n Additional reporting by Reuters.
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