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Norwegian Air: A321neo LR gives short long haul options; 2Q margin grows on lower fuel

Norwegian Air continued its trend of improving profitability in 2Q2016, when it marked its sixth successive quarter of year-on-year increases in its operating margin. It achieved a further gain in load factor, in spite of double-digit capacity growth. The biggest sources of its growth were its US widebody routes and its operations in Spain, where it has recently opened a seventh base at Palma de Mallorca.

To a large extent its recent positive trend of growing profits has been the result of lower fuel prices. Ex fuel unit costs have been rising for several quarters, outpacing increases in unit revenue. Norwegian has only managed to achieve margin gains because of lower fuel CASK.

Norwegian's operations should become more efficient if it received US foreign airline permits for its Irish and UK subsidiaries, although there is currently little sign that this is about to happen. A new order for 30 A321LRs (part of the A320neo family) should also help Norwegian's unit cost performance and give it more choice over aircraft deployment on shorter long haul routes.

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