November 6, 2018 / 8:00 AM / a month ago

Norwegian Air says cost cuts even more important as growth slows

OSLO, Nov 6 (Reuters) - Budget carrier Norwegian Air will continue to cut costs amid tough competition, higher fuel prices and a slowdown in growth, the company said as it reported weaker-than-expected October traffic numbers on Tuesday.

The company, which has been courted by British Airways owner IAG, has grown strongly in recent years as it ramped up its transatlantic business, but reiterated its growth will slow down as it prioritises profitability over expansion.

Norwegian’s capacity grew by 29 percent year-on-year in October, lagging the 34.2 percent predicted in a Reuters poll of analysts, and the company filled 85 percent of available seats, below an average expectation of 87.3 percent.

While the airline said demand remained satisfactory, the upcoming winter months are generally associated with lower travel volumes.

“We are now entering a period of lower demand, tough competition and high oil prices, making it even more important for the company to continue reducing its costs,” Chief Executive Bjoern Kjos said in a statement.

“We consider traffic figures to be on the soft side,” Pareto Securities said in a research note. The brokerage, which has a “buy” recommendation on Norwegian’s shares, plans to cut its earnings forecasts for the airline, it added.

The company’s October yield, a key measure of revenues per passenger carried and kilometres flown, fell to 0.38 Norwegian crowns from 0.39 a year ago, while analysts on average had expected it would be unchanged year-on-year.. (Reporting by Terje Solsvik and Ole Petter Skonnord; Editing by Mark Potter)

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