OSLO (Reuters) - Loss-making budget airline Norwegian Air (NWC.OL) has sold subsidiary Norwegian Air Argentina (NAA) for an undisclosed sum, with JetSMART Airlines taking control with immediate effect.
Norwegian’s Argentina operation launched only in October last year and currently offers flights from Buenos Aires to eight cities. However, Norwegian has switched this year from rapid growth to cost cuts, trimming its sprawling network to stem losses and preserve cash.
“Attaining satisfactory profitability for a relatively small domestic operation has proved difficult to achieve, given the overall situation in the country,” Norwegian Air’s acting Chief Executive Geir Karlsen said of the Argentinian business.
“While most of NAA’s costs are denominated in dollars, revenue is obtained in pesos only, and the sharp depreciation of the peso against the dollar has created a significant gap between costs and revenue.”
The company said JetSMART will continue to operate scheduled flights from Buenos Aires, with the Norwegian brand expected to be phased out in the domestic Argentinian network over several months.
The combined entity will have market share of about 10% and become Argentine’s third-largest operator, Norwegian said.
Three Boeing 737 aircraft currently operated by NAA will be replaced by JetSMART’s Airbus A320 aircraft, while the Boeings will return to service for Norwegian in Europe.
The sale did not affect Norwegian’s transatlantic flights between London and Buenos Aires.
Budget carrier JetSMART was created by investment fund Indigo Partners, the airline’s website says.
Reporting by Victoria Klesty and Terje Solsvik; Editing by Christina Fincher and David Goodman