Loading

Norwegian Air: longhaul-led capacity acceleration & rising fuel price may expose margin fragility

Norwegian's long haul operation has become its main growth engine. Although long haul still accounts for fewer ASKs than its short haul network, it will contribute more than half of Norwegian's incremental ASKs in 2017. Since the airline's long haul launch in 2013, Norwegian's widebody flights have enjoyed higher load factors than their short haul counterparts, and the company has broken new ground with its multi base long haul strategy outside its home market.

After Norwegian entered long haul it met a sudden drop in profitability, suffering losses in 2014. Its results have recovered since then, leading to its highest ever net profit and operating profit in absolute terms in 2016. At first sight this might indicate that Norwegian's long haul has healed its growing pains, and is maturing into more sustainable profitability.

However, there is evidence that Norwegian's profit recovery may have had more to do with lower fuel prices, helped also by tighter capacity growth in 2015. Moreover, its 2016 operating margin was below its own historic peak. With Norwegian facing rising fuel prices and accelerating its capacity growth in 2017, the robustness of its margin recovery will be tested this year.

This CAPA Premium Analysis article is 2,121 words.

To access CAPA Premium Analysis you need a CAPA Membership

Your window into the latest insights

CAPA employs an industry-leading Analyst team based in Europe, North America, Asia and Australia who offer unique perspectives and independent and accurate commentary of critical industry developments globally. CAPA Members rely on our Analysis to unlock valuable insights and actionable intelligence to keep ahead of the game.

Big picture strategic view

Our Analysts don’t just report the news - they take a big picture strategic view of aviation dynamics, issues and trends and analyse the implications of these developments for you.

Global intelligence

The CAPA Analyst team is based globally to ensure our CAPA Members have access to independent, unique perspectives covering an entire spectrum of daily, worldwide commercial aviation developments.

Customise your Alerts

CAPA Members can use CAPA Alerts to receive daily, weekly or monthly and customised updates on our Analysis.

I'm very impressed by the factual and detailed analysis CAPA is always doing.

- CEO, Airline Member
To learn more, contact us:
Phone: +61 2 9241 3200 | Email: membership@centreforaviation.com