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.