By Pádraig Hoare
Norwegian Air has dismissed concerns about its commitment to its Irish transatlantic routes after it revealed it would post larger-than-expected losses for the current quarter.
Shares in the low-cost long-haul airline fell more than 2% after it said it raised £119.5m (€136.8m) in a share sale to help fund its expansion and cope with higher fuel costs. Analysts questioned whether Norwegian can continue pursuing the long-haul strategy with losses piling up.
Karl-Johan Molnes, chief analyst at brokerage Norne Securities, said: “The results of the share issue show investors have enormous confidence in the company. And they should not, because Norwegian Air is losing an enormous amount of money.”
Mr Molnes said Norwegian should dismantle the long-haul business “very quickly” because it could not replicate the success on shorter routes.
Long-haul customers are mainly high-paying business-class customers, while Norwegian Air is focusing on economy customers, he said.
Davy said that while the share sale provided “breathing space”, it warned that “issuing new equity equivalent to 24% of one’s market cap in order to improve equity levels” and a weaker-than-expected first quarter update was “about as difficult as it gets”.
Norwegian reiterated its confidence in building a profitable long-haul business and said now was the time it had to spend to build its transatlantic business.
Norwegian Air acting CFO Tore Oestby said: “This is still early days for us. We are very comfortable with our transatlantic operations.”
A spokesman said its Irish routes remained a key focus. “It’s an important market for our continued growth,” he said.
The first-ever transatlantic flight from Cork took off last summer to Providence, Rhode Island, while the airline also has a number of flights from Dublin, Shannon and Belfast. The airline said last month that its Irish expansion “is just getting started” and that it is in a much better position for growth this year.
Chief executive Bjorn Kjos said he hoped 2017 would be the “last year of loss” and that he was optimistic of the picture at the end of the year.