Norwegian’s New Cost-cutting Program Means You Don’t Have to Say Goodbye to Those Cheap Flights to Europe — Yet
2018 was arguably a hard year for low cost airlines.
While some budget carriers like Ryanair, Frontier and Spirit Airlines have managed to maintain or even improve their profitability in the last year, according to Chicago Business Journal, other carriers like WOW Air, Primera Air and Norwegian Air have struggled.
While Skytrax named Norwegian Air the second best low-cost carrier for 2018 in its annual ranking of World Airline Awards, the company continues to find itself dispelling rumors of shut-down in the next year, according to Reuters and The Points Guy.
The airline announced earlier this week that is is planning to put forth a “$230 million cost savings program,” dubbed #Focus2019, which includes changing or even discontinuing certain routes and adjustments to capacity, among other changes, the airline said in a statement on the Oslo Stock Exchange on Monday.
The airline added that these changes are being made “to meet the competitive environment in a period with seasonally lower demand in Europe,” adding, “Six weeks into the program, we have already identified significant savings.
Like many airlines, Norwegian Air has had some ups and downs over the last year. Most recently, the carrier has experienced some issues with equipment. Many of the carrier’s planes with Rolls-Royce engines have been grounded for repairs, which put a severe damper on operations, according to The Points Guy. The airline has struck an agreement with the engine manufacturer, which possibly includes compensation, though the details of the deal are confidential.
But despite these setbacks, the airline is confident it will not only be able to save money but also be able to order 200 new planes in the first half of next year without issues with liquidity.
“[The program] also includes refinancing of one of the delivered (Boeing) Dreamliners, resulting in a positive liquidity effect of NOK 275 million (just over $31 million USD) in December 2018,” the company said, according to Reuters. Some existing planes in Norwegian Air’s fleet are also planned to be sold.
“We experience significant interest in our existing fleet as well as future deliveries. The company recently signed a letter of intent for the sale of two aircraft with delivery in the first quarter of 2019,” the company said in a statement.
The Points Guy reported earlier this week that there were rumors of the carrier struggling to maintain book equity (also known as shareholder’s equity, or net worth), which is the company’s total assets (what it owns) minus total liabilities (company debts). But earlier this week, the carrier told TPG that the rumors were “pure speculation” and that “liquidity is satisfactory.”
Still, Norwegian Air said in its statement that it is still looking to “[form] a joint venture for aircraft ownership.”
The company intends to give another update in April, after its first quarter report is in.