January 5, 2018 / 10:23 AM / 3 months ago

Passenger figures and outlook lift Norwegian Air

OSLO, Jan 5 (Reuters) - Budget carrier Norwegian Air reported stronger-than-expected December passenger traffic figures on Friday, a day after raising 2018 capacity forecasts, sending its shares surging more than 12 percent.

The rapidly expanding airline, which offers transatlantic flights as well as European short haul, said late on Thursday that bookings for the coming year were stronger than this time last year, even when taking into account significant growth in the size of its fleet.

The company raised its 2018 capacity growth target (ASK) to 40 percent from an earlier 35 percent, thanks to higher fleet utilisation. The ASK figure is based on the number of seats multiplied by the distance flown over a year.

At 1010 GMT, Norwegian Air’s shares traded 12.7 percent higher at 213.9 Norwegian crowns, just below an earlier peak of 214.4 crowns, the highest level seen since early November.

Norwegian’s shares fell by 39 percent last year as investors fretted over rising costs and high debts accompanying its fast expansion into long-haul flights, leading to heavy short-selling of its stock.

The company’s traffic, measured by revenue-generating passenger kilometres (RPK) rose by 32 percent year-on-year in the final month of 2017, beating a forecast of 30.9 percent in a Reuters poll of analysts.

Its yield, a measure of revenues per passenger carried and kilometres flown, was steady year-on-year at 0.37 Norwegian crowns, while analysts had expected a drop to 0.36 crowns.

In a statement late on Thursday the company said expenses would only rise slightly despite rising fuel costs, as the higher fleet utilisation partly compensates.

“We consider the traffic figures highly positive,” brokers Pareto Securities, which have a buy rating on the stock, said in a note to clients.

“The new 2018 guidance released yesterday emphasizes that outlook for cost is improving and hence we still argue that the long-term case remains intact,” it added.

Danske Bank, which has a “hold” rating on the stock, welcomed the passenger data and stronger outlook, but cautioned that Norwegian’s costs for 2018 could turn out higher than the company projects. (Reporting by Ole Petter Skonnord, writing by Terje Solsvik; Editing by Keith Weir)

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