The Norwegian Group, comprised of Norwegian Air and Widerøe, experienced a positive trend in passenger numbers for June 2024.
Norwegian carried 2,245,735 passengers, while Widerøe transported 346,747, bringing the group total to 2,592,482.
This translates to an 11% increase for Norwegian and a 6% increase for Widerøe compared to June 2023.
Revised 2024 Profit Outlook: Here’s Why
However, despite the positive passenger trends, the group announced a downward revision to its 2024 profit outlook. This adjustment stems from four key factors impacting the airline industry:
Softer Than Expected Demand
The second quarter witnessed a decline in both load factor, a measure of how full flights are, and yield, the average fare per passenger, compared to the previous year. This indicates a softening in travel demand, potentially due to economic uncertainties.
Increased Pilot Wages
The recent conclusion of new collective bargaining agreements resulted in higher-than-anticipated pilot wages. While pilot pay is crucial for retaining talent and ensuring safety, it can also impact profitability.
Boeing Delivery Delays
Delays in aircraft deliveries from Boeing forced Norwegian to secure temporary external capacity during the peak summer season. This unexpected expense disrupts the airline’s operational budget.
Currency Fluctuations
The Norwegian Krone weakened against the US Dollar compared to initial forecasts. Since a significant portion of airline expenses are denominated in USD (like fuel), a weaker Krone translates to higher costs for the airline.
Passenger Growth Highlights Positive Trends
Despite the profit outlook revision, the passenger numbers paint a positive picture for the Norwegian Group.
Both Norwegian and Widerøe reported year-over-year increases, indicating a continued demand for their services.
Notably, Norwegian’s capacity (ASK), which reflects the total number of seats available for sale multiplied by the distance traveled, rose by 18% to 3,706 million seat kilometers.
This expansion was met with strong passenger traffic (RPK), measured by passengers multiplied by the distance traveled, which rose by 16% to 3,126 million seat kilometers.
Widerøe also saw growth, with their capacity reaching 185 million seat kilometers and passenger traffic at 142 million seat kilometers.
Operational Performance
The Norwegian Group maintained a high level of operational efficiency in June. Regularity, which refers to the percentage of flights operating as scheduled, remained impressive at 99.4%.
Punctuality, measured by flights departing within 15 minutes of their scheduled time, was 75.0%. While punctuality decreased slightly compared to June 2023, it’s important to note that 96% of flights still arrived within an hour of their scheduled arrival time.
Additionally, the airline operated an average of 86 aircraft throughout June, demonstrating its commitment to meeting passenger demand.
Expansion in Northern Norway
The Norwegian Group is making strategic investments in Northern Norway. They’ve launched a total of 50 new routes in 2024 so far, with a particular focus on increasing connectivity between this region and popular European destinations.
Ten new routes now connect Northern Norway to various European cities, opening up new travel opportunities for both inbound and outbound tourism.
This focus on regional development aligns with broader trends in the travel industry, where travelers are increasingly seeking unique and off-the-beaten-path experiences.
Norwegian: Current Outlook for 2024
The revised profit outlook for 2024 reflects the Norwegian Group’s commitment to transparency. The original outlook, excluding Widerøe, forecasted an operating profit (EBIT) of NOK 2.5 to 3.2 billion.
The revised group outlook, including Widerøe, now forecasts an operating profit between NOK 2.1 billion and NOK 2.6 billion.
The company also anticipates a low single-digit percentage increase in unit costs excluding fuel for Norwegian compared to 2023.
These revised forecasts are based on current foreign exchange rates and jet fuel prices for the remainder of the year.
Ahead: Challenges and Opportunities
While the profit outlook has been adjusted, the Norwegian Group remains optimistic about its future.
The significant passenger growth and network expansion, particularly in Northern Norway, demonstrate a positive trajectory.
The group is well-positioned to navigate the current economic climate by focusing on operational efficiency, strategic route development, and cost control measures.
By continuing to prioritize customer satisfaction and adapt to industry trends, the Norwegian Group can ensure its long-term success.
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