April 10, 2019 / 4:32 PM / 4 months ago

Norwegian Air postpones Airbus plane delivery to cut costs

OSLO (Reuters) - A Norwegian Air subsidiary has agreed with Airbus to postpone plane deliveries scheduled for this year and next, cutting its capital spending by $570 million, the loss-making budget carrier said on Wednesday.

FILE PHOTO: The Airbus logo is pictured at Airbus headquarters in Blagnac near Toulouse, France, March 20, 2019. REUTERS/Regis Duvignau/File Photo

It is the second time in two months that the airline has postponed aircraft deliveries.

The Oslo-listed airline has shaken up long-haul rivals by offering cut-price transatlantic fares, but its rapid expansion has left it with hefty losses and high debts, leading it to shift recently to focus on bolstering its finances.

The latest postponement covers an order by Norwegian Air’s Dublin-based aircraft leasing company Arctic Aviation Assets DAC for A320neos and A321LRs, Norwegian said.

A spokeswoman declined to provide details, but said the agreement comes in addition to the previously announced plans.

In February, Norwegian said it was postponing deliveries of 12 Boeing 737 MAX 8 aircraft from 2020 to 2023 and 2024, and four Airbus 321LR aircraft from 2019 to 2020.

Postponing those deliveries was expected to reduce the airline’s capital spending in 2019 by about 1.7 billion Norwegian crowns ($200.12 million), Norwegian said in its annual report published on Wednesday.

At the end of 2018, Norwegian had multi-year commitments to take a total of 63 A320neos, 30 A321LR and 92 Boeing 737 MAX 8, the report showed.

Norwegian Chief Executive Bjoern Kjos confirmed in a letter to shareholders on Wednesday that the company planned to continue replacing its old Boeing 737-800s with newer and more fuel-efficient 737 MAXes, despite having to ground all MAXes in the wake of an Ethiopian Airlines crash last month.

More than 300 Boeing 737 MAX jets have been grounded worldwide after two crashes - in Indonesia and in Ethiopia - killed nearly 350 people. It is still unclear when the MAX jets will fly again.

Boeing’s changes made to the plane’s control system after the crashes appeared to be foolproof, Kjos said last week after visiting the plane maker in Seattle.

Norwegian also said it expected to take delivery of five new Boeing 787 Dreamliners, which it uses on its intercontinental routes, in the first half of 2019.

The company flies several routes between Europe and the United States. However, due to issues with Dreamliner engines it had to rent out planes with crews, a practice known as “wet-leasing”, to avoid cancellations.

“We have taken measures to limit the impact in 2019, and we expect the entire Dreamliner fleet to be fully back in service in 2019,” Kjos said in the letter to shareholders.

The company, which raised 3 billion crowns ($350 million) in a rights issue to boost its liquidity in February, is targeting a positive net profit for 2019, “subject to market conditions”.

Kjos said the company expected the low-cost competition in the Nordic market to increase.

Reporting by Nerijus Adomaitis; Editing by John Stonestreet and Susan Fenton

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