Norwegian Air: rapid expansion & strategic innovation hasn't led to profits yet. It needs to soon
Norwegian Air is a remarkable agent of change. It has broken new ground strategically as the only independent European LCC with both single aisle and twin aisle operations, as well as establishing operating subsidiaries in multiple jurisdictions. Norwegian's innovation has encouraged legacy groups such as Lufthansa and IAG to launch their own long haul low cost operations, and prompted local rival SAS to establish bases outside Scandinavia.
However, Norwegian slumped back into losses in 2017, when continued rapid expansion also further inflated its growing debt.
A loss when the world's airline industry is enjoying a sustained period of historically high profitability again raises questions about Norwegian's ability to convert pioneering expansion into sustainable profitability. Even in good years, its margins have been modest.
Norwegian expects better results in 2018, but low profit margin and high debt levels leave it exposed to any cyclical downturn or localised demand shock affecting its network, and to hikes in oil prices or interest rates. Little wonder that Norwegian Air Shuttle ASA has been the worst-performing share among bigger European airlines over the past year and the past five years.
Become a CAPA Member to access Analysis Reports
Our Analysis Reports are only available to CAPA Members. CAPA Membership provides exclusive access to in-depth insights on the latest developments in the aviation and travel industry, developed by our team of dedicated analysts located in Europe, North America, Asia and Australia.
Each report offers a fresh perspective on the latest industry trends and is available online or via the CAPA mobile app, with customisable alerts to help you stay informed and identify new business opportunities.
CAPA Membership also provides access to our full suite of tools, including a tailored selection of more than 400 News Briefs every weekday and comprehensive data and analysis on thousands of companies around the world.