Norwegian Air Q2 results show improvement from Q1


Norwegian Air released its financial results for the second quarter of 2020 (Q2 results) in Oslo on Friday. The results were presented as “Norwegian Air Shuttle ASA First Half Year 2020 Financial Report“.

Passenger counts have decreased by 71 percent, 8,000 employees have been furloughed or laid off, while 140 airplanes have been parked. The airline still has a lot of work to be done in order to tackle the challenges ahead.

Q1 to Q2 improvement

On the brighter side, Norwegian ended up with a Q2 after-tax loss of *NOK -1.51 billion which was only half of the loss experienced during the first quarter (Q1) when the losses amounted to NOK -3.3 billion.

*1 USD = NOK 8.86 as of August 28, 2020.

The airline also plans to put more flights into service again this autumn.

Norwegian in 2019, prior to the coronavirus pandemic. Hopefully, the very popular airline will succeed in becoming profitable in the future, benefitting millions of fliers around the world. Norwegian/YouTube.

Comparing Norwegian Air’s results from last year

Compared to the second quarter of 2019 the numbers look grim. However, Norwegian was supposed to experience a hefty revenue increase during the summer. Needless to say, the corona pandemic spun Norwegian as well as the entire airline world into a crisis like never before seen.

In a written statement, Norwegian CEO Jacob Schram said,

“At the beginning of 2020, we expected a positive result and the best summer ever thanks to successful cost-saving initiatives and more efficient operations. Then we were hit by Covid-19, and the demand for tickets literally stopped overnight.”

Without the cost cuts and downsizing that the airline implemented, he result would probably have been much worse.

Norwegian Air’s numbers compared to last year’s

  • Turnover fell from 12.2 billion to 632.5 million.
  • Gross operating profit before depreciation and leasing costs (EBITDAR) fell from NOK 2.2 to NOK −1.2 billion
  • Profit before tax fell from NOK 111.4 million to NOK −1.5 billion.
  • During the first half of 2020, the company had a turnover of NOK 5.1 billion, down from NOK 20.2 billion at the same time last year. That left Norwegian with a negative net income after tax of NOK −5.4 billion, down from NOK −1.4 billion last year.

Norwegian Air Shuttle ASA First Half Year 2020 Financial Report

The airline’s results were reported as a “First half year 2020 financial report.” You can read the official report here.

Norwegian Air’s plans to go from survival to profit

The comprehensive rescue package that Norwegian came up earlier this year ensured that the company avoided bankruptcy.

However, the airline has indicated doubts about its ability to survive if it cannot meet its financial obligations next year.

Raising additional funds

Norwegian expects to raise additional funds in the first quarter of 2021; a move that will involve:

  • Placement of additional shares.
  • Sale of assets.
  • Revising the current business plan.

Norwegian Government rescue-aid

The rescue plan and strengthened equity through stock dilution qualified Norwegian for government loans of NOK 3 billion. However, the governments of Sweden and Denmark did not agree to take part in the rescue of Norwegian Air Shuttle.

Stock dilution

Part of that package involved raising fresh capital and to get rid of large amounts of debt by compensating creditors with shares. This resulted in stock dilution, bringing Norwegian stock values to an all-time per-share low.

A further dilution, exchanging debt for equity, has been scheduled for October 9 and December.

The company got leasing companies and several suppliers to drop their payment claims in exchange for shares.

As a result, the leasing companies AerCap, BOC Aviation, and MG Aviation are now Norwegian’s three largest shareholders. The companies have an ownership of 10 to 15 percent each.

Equity and cash

Norwegian’s equity at the end of June was NOK 12.3 billion. Thanks to the NOK 15.3 billion boost received through the company’s rescue package, the current equity would have stood at NOK 3 billion in minus at this time.

Norwegian’s cash balance started at NOK 3.10 billion at the beginning of the year and fell to NOK 2.26 billion at the end of March. At the end of June, the cash balance was up to NOK 4.98 billion.

Operations during the first half of the year resulted in a money replenishment of NOK 609.2 million. NOK 2.76 billion was spent on investment expenses and NOK 1.4 billion was spent on financial expenses.

Norwegian did not disclose its detailed cash flow in the first and second quarters. However, we do know that the company received NOK 328.4 million net in fresh capital through the stock-issue this spring, plus NOK 3.29 billion in fresh loans (NOK 3.0 billion in government-guaranteed loans and 300 million in bank loans).

Saved, for now

Without the crisis-package and the government-guaranteed loans, Norwegian would have been out of business by the first half of the year, something the Norwegian management also warned about in March.

What do you think about Norwegian Air’s Q2 results? Are they slowly moving in the right direction? Please let us know here.

Featured Image: Norwegian.

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