Norwegian Air: 1Q results continue improving trend thanks to lower fuel. Long haul strategy develops

The Norwegian Air Shuttle group is enjoying a period of good news. It narrowed its underlying operating loss for the seasonally weak first quarter, after returning to full-year profit in 2015 following a loss in 2014. Its 1Q2016 results demonstrate that this improving trend is continuing. Norwegian's 1Q results came soon after the US Department of Transportation (DoT) had given tentative approval of a US foreign carrier permit to Norwegian's Irish-registered subsidiary, NAI.

However, this is not the time for Norwegian to sit back and relax. Its improved profitability is in no small measure due to lower fuel prices, while ex fuel unit cost increased in 1Q2016. In addition, contracts for the leasing out of Norwegian's first A320neo deliveries have been temporarily delayed, highlighting the added challenge of running this new and growing line of business. Moreover, until the DoT approval is final, there may be some nervousness surrounding it.

Meanwhile, Norwegian is growing NAI at its new Rome Fiumicino base, which joins Madrid and Barcelona as major NAI airports with no Norwegian intercontinental routes. As it pursues 40% pa ASK growth over the next several years, these are likely candidates to be its next long haul bases.