Norwegian airports: Avinor looks to cut costs after its 1Q2019 loss


Norway's state-owned airport operator Avinor, which has responsibility for most of the country's airports and, to a diminishing degree, the air traffic control system, reported a small loss in the first quarter of 2019. While that is not unusual for airlines, it is a little less so for airports.

In fact, revenues did grow, and strongly in some segments. Moreover, Avinor's airports have a good reputation for customer service, despite not a great deal having been spent on them recently.

But Avinor is faced with the potential loss, for various reasons, of Norwegian and SAS services in the future, and while it is concentrating right now on cost-cutting, it might need to invest more in route development.

  • Avinor, Norway's state-owned airport operator, reported a net loss of EUR4.9 million in Q1 2019.
  • Revenues increased in most segments, except for security and other sales.
  • Avinor is focusing on cost-cutting measures to streamline its business and maintain safe operations.
  • Air navigation services are being outsourced to Spain's Saerco, which is expected to save NOK15 million per year.
  • Avinor has no foreign airport interests and is unable to increase its income through sales at foreign airports.
  • The Norwegian government's proposed changes to air passenger tax could impact Avinor's operations and may require a shift in focus towards route development.


  • Avinor reports a EUR4.9 million net loss in 1Q2019.
  • The operator has no opportunity for raising revenues in foreign markets and will instigate a cost-cutting exercise.
  • Air navigation services are being outsourced.
  • Aviation taxes conspire against it.

The bottom line is down but revenues are up

Avinor has reported that it is continuing its efforts to reduce costs after registering a NOK46 million (EUR4.9 million) net loss in 1Q2019.

Avinor acknowledged that "The first quarter is usually weak in the aviation sector, and this year is no exception. This stresses the importance of continuing our efforts to cut costs and further streamline the business", CEO Dag Falk-Petersen has said.

Avinor results for the three months ending 31-Mar-2019



(EUR million)

Percentage change over

previous comparable period

Total revenue



Airport operations



Traffic revenue






Duty-Free sales






Other sales



Air navigation services



En route charges



Inter-group income approach and control tower services



Group expenses






Airport operations



Air navigation services



Net profit (loss)


Down from a loss of EUR3.7 million

in previous comparable period

Total assets



Cash and cash equivalents



Total liabilities



The first fact that stands out is that revenue did rise during the period and across all profit centres, apart from 'security' and 'other'; i.e. it did rise in the key categories of airport operations, traffic revenues, duty-free sales (a small increase) and parking (a large one).

While public transport to and from the main Oslo Gardermoen Airport is well developed and sophisticated, that isn't always the case at the other 53 airports. Companies such as Uber may not operate there and taxis and minicabs may be thin on the ground; private vehicle parking is likely to be an important revenue generator at most of them.

Air Navigation services are an important aspect of Avinor's work; the airports and ATM were not split up as they were in Sweden but that is starting to change, as detailed below. A fall-off in en route navigation charges was made up partially by control tower services. Norway is a leading exponent of remote tower services, and 36 sites in Norway have been designated for RTS.

Even so, EBITDA losses from air navigation services stood in contrast to the healthy gain from airport operations.

Overall, EBITDA grew slightly despite group expenses increasing by 3.3%, but net profit declined by EUR1.2 million.

Avinor has no foreign airport interests

There is no opportunity for Avinor, a state-owned limited company, to increase its income while avoiding some of the costs its domestic operations entail by way of sales at foreign airports for the simple reason that there aren't any. Avinor has investigated the pros and cons of foreign investment but has so far committed no resources to it. Nor is there any inward foreign investment, and the private sector currently has no place in the running of Norway's airports (with one exception) except as part of collaborative infrastructure engagements such as business parks and 'airport cities'.

In what is topographically a long, thin and relatively uninhabited country (34 persons per square mile, making Norway only the 213th most densely populated country on Earth, parts of which are in the Arctic Circle), the nation has enough to do keeping the domestic airports open and functioning.

Moreover, any attempt to sell off airports would inevitably result in 'cherry-picking' by investors, leaving remote, unprofitable airports to their fate.

In keeping with the owner's expectations of "more transport for every penny", Avinor has initiated a cost-reduction programme. The programme includes initiatives to reduce both operational and administrative costs while maintaining safe and stable operations.

Competition results in cost-cutting

On the ATC side, the operator has reiterated that a five-year contract was awarded to Spain's Saerco for the operation of Avinor's ATC services in Feb-2019, beginning on 01-Mar-2020. Outsourcing is expected to save NOK15 million (EUR1.5 million) per annum.

In 2017 the Norwegian parliament, the Storting, had adopted a white paper on the operations of Avinor, stating that Avinor had to put air traffic control services out to tender. The goal was: less expensive and/or better services.

As a result of this, air navigation service contracts for Ålesund and Kristiansand airports were sent out for competition in 2018. In Feb-2019 Avinor's board of directors agreed to award a five-year contract to Saerco.

As Avinor increasingly loses responsibility for air navigation and so has greater human resources to focus on its airports, it has already done so at some of its main ones.

Pride of place goes to Oslo Gardermoen, or just 'Oslo Airport' as it now known, which is operated by a subsidiary, Oslo Lufthavn AS. Oslo Airport handled 28.5 million passengers in 2018 (+3.8%).

Gardermoen's 117,000sqm Terminal 2 having opened in Apr-2017, at a cost of EUR900 million and increasing capacity to 32 million ppa, the next project is the non-Schengen east terminal expansion by 30,000sqm already under way. This represents an investment of NOK3.3 billion (EUR343.7 million/USD402 million) and completion is scheduled for 2Q2022, increasing capacity from 5.5 million passengers per annum to eight million per annum. (Source: CAPA Airport Construction Database).

It was Terminal 2, and the way it had been reconciled with T1, that won Oslo the 'Medium Airport of the Year' award in the 2018 CAPA Awards for excellence.

Investment at other airports is outlined below. Only three are represented here: the North Sea coast airports of Bergen, Stavanger and Trondheim, which are also collectively a profit centre in their own right, being the next three busiest airports.


Passenger traffic 2018 (million) and growth percentage

Infrastructure projects


4.2/ +2%

International terminal extension completed May-2016. No current projects.


6.3/ 3.2%

New and extended terminal facilities, USD693 million, opened Aug-2017. No current projects.


4.4/ 0.3

Extensions to terminal A, increasing the terminal's total area to 21,500sqm (2013). No current projects.

It could be argued from the statistics here that Avinor has already reined in Capex, if not Opex, at these airports, and the CAPA Airport Construction Database has records of only three current infrastructure projects at Avinor airports - at Oslo, Alta, and Tromsø, where a new terminal building is under construction.

But in its defence, there are three new airport projects - at Mo I Rana/Helgeland Arctic Circle (USD240 million, completion 2029); Bodø (USD718 million, completion 2025); and Hadselsanden, which remains a feasibility study.

Customer service awards

Returning to the theme of awards, in Mar-2019 Airports Council International (ACI) named Oslo Airport and Bergen Airport as the best in Europe for customer service in their respective categories. Bergen also won the award for the airport with the best progress in customer service in 2018.

Scandinavia and the Nordic countries are impacted by the propensity for left-leaning, ecologically aware national governments to impose swinging taxes on aviation. That has certainly been the case in Sweden, where traffic is down by as much as 5%.

Domestic air tax down, international up

Norway's Government recently proposed to make changes to its infamous air passenger tax via its 2019 budget draft.

The proposal calls for the lowering of the NOK83 (EUR9) charge on domestic and European flights to NOK75 (EUR8) and the raising of it on international services to NOK200 (EUR21). The changes were slated to take effect in Apr-2019.

Just as in Scotland, where a threatened reduction in Air Passenger Duty (a political manoeuvre to get one over on the English) was dumped in favour of a more pragmatic 'green' approach, this is not what Norwegian aviation needs - the airline Norwegian having been already struggling before its Boeing 737-8 MAX's were grounded and SAS again wracked by strikes.

Indeed, Avinor might well be forced to put route development above cost-cutting in the remainder of this year if this state of affairs continues.

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