Norwegian cuts weight of on-order Max jets as it ‘pushes hard’ on costs
Scandinavian low-cost carrier Norwegian is working on raft of measures to offset the impact of the high-cost environment, including through the removal of certain “add-ons” from its incoming Boeing 737 Max jets. Outlining a strong Q3 performance on 2 November, CE Geir Karlsen nevertheless said the operator is taking extra steps to ensure “sustainable profitability” amid high yields but significant cost headwinds. “We have to do this, we have to push it extremely hard, and I think we will show results as we go down into 2024,” he says. Those headwinds include the Norwegian krone’s falls against the US dollar and euro, which added 6% to unit costs year on year in Q3. Weakness against the dollar was particularly pronounced, Karlsen notes, pushing up costs paid in the currency, including those related to fuel and leasing. Meanwhile, inflation hit a whole range of costs, he says, adding 5% to unit costs on the same basis. At the same time, the carrier’s push into more corporate markets is adding to its distribution costs, Karslen says, although it is also bringing a “significantly positive” impact on profit through extra, higher-yield revenue. Among a long list of fresh operational and structural initiatives that Norwegian is working on to push costs down, Karlsen says the weight of up to 80 incoming 737 Max jets from its order with the airframer – the first of which is due for delivery in 2025 – will be reduced by the removal of “low-value add-ons” and “optimisation” of specifications, which will contribute to lower operating costs. “We have been going into the specification in detail, to adjust the specification more in accordance with the market we are flying,” he says, insisting that the customer experience will not be affected. As well as the operational savings those adjustments will achieve, Karlsen says that based on the order price agreed with Boeing in 2022, “we will reduce the capex on the 50-80 aircraft order by millions of dollars”.<br/>
https://portal.staralliance.com/cms/news/hot-topics/2023-11-03/unaligned/norwegian-cuts-weight-of-on-order-max-jets-as-it-2018pushes-hard2019-on-costs
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Norwegian cuts weight of on-order Max jets as it ‘pushes hard’ on costs
Scandinavian low-cost carrier Norwegian is working on raft of measures to offset the impact of the high-cost environment, including through the removal of certain “add-ons” from its incoming Boeing 737 Max jets. Outlining a strong Q3 performance on 2 November, CE Geir Karlsen nevertheless said the operator is taking extra steps to ensure “sustainable profitability” amid high yields but significant cost headwinds. “We have to do this, we have to push it extremely hard, and I think we will show results as we go down into 2024,” he says. Those headwinds include the Norwegian krone’s falls against the US dollar and euro, which added 6% to unit costs year on year in Q3. Weakness against the dollar was particularly pronounced, Karlsen notes, pushing up costs paid in the currency, including those related to fuel and leasing. Meanwhile, inflation hit a whole range of costs, he says, adding 5% to unit costs on the same basis. At the same time, the carrier’s push into more corporate markets is adding to its distribution costs, Karslen says, although it is also bringing a “significantly positive” impact on profit through extra, higher-yield revenue. Among a long list of fresh operational and structural initiatives that Norwegian is working on to push costs down, Karlsen says the weight of up to 80 incoming 737 Max jets from its order with the airframer – the first of which is due for delivery in 2025 – will be reduced by the removal of “low-value add-ons” and “optimisation” of specifications, which will contribute to lower operating costs. “We have been going into the specification in detail, to adjust the specification more in accordance with the market we are flying,” he says, insisting that the customer experience will not be affected. As well as the operational savings those adjustments will achieve, Karlsen says that based on the order price agreed with Boeing in 2022, “we will reduce the capex on the 50-80 aircraft order by millions of dollars”.<br/>
