Norwegian ‘must reduce costs’ on long-haul strategy

Norwegian ‘must reduce costs’ on long-haul strategy

By Pádraig Hoare

Norwegian must bring down costs if it is to make its business model successful, according to Davy — as the airline announced it was scaling back a number of transatlantic services to the US East Coast, including from Cork.

The low-cost long-haul airline said it was suspending its year-round routes such as Cork, Shannon and Edinburgh to Providence in Rhode Island for the winter months, instead concentrating on the March-October schedule for 2019.

Norwegian said it was “fully committed” to its Irish routes last month, after saying it would post larger-than-expected losses for the current quarter, and that it had raised €136.8m in a share sale to help fund its expansion and cope with higher fuel costs.

Davy analyst Ross Harvey said the model “could only work if it is actually low-cost” amid speculation about its sustainability. Mr Harvey said: “We believe Norwegian is targeting a potentially profitable niche, namely leisure oriented, high density, long-haul low-cost from major European cities. However, for capital providers — debt, equity and leasing — to retain confidence in the Norwegian version of this, there needs to be an improving cost trajectory through the second half of 2018.”

The first-ever transatlantic flight from Cork took off last summer, while the airline also has flights from Dublin, Shannon and Belfast. The airline said in February 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.

The airline has undertaken an ambitious expansion plan, buying more than 200 new fuel-efficient jets.

However investors have voiced concerns that its drive to put more passengers on more planes is pushing up costs quickly without producing higher returns.

Meanwhile, Dubai-based airline Emirates said it was looking to recruit a number of Irish pilots for both passenger and freighter aircraft.

The airline said it would offer a tax-free salary, monthly housing allowance, 42 days annual leave and chauffeur-driven transport to and from work.

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