By Gwladys Fouche
OSLO (Reuters) -Norwegian Air shares rose on Wednesday after reporting an increase in third-quarter net profit boosted by recovery from the pandemic and a pilot strike at rival SAS, but said it would reduce capacity by a quarter during winter.
Norwegian, which came close to collapse when the pandemic broke out in 2020, posted quarterly revenue of 7.1 billion crowns ($688 million), the highest of any quarter since the final three months of 2019, according to Refinitiv Eikon data.
Net profit for the three-months ending Sept. 30 rose to 910 million crowns ($87.57 million) from a year-ago profit of 169 million, Norwegian said.
Norwegian Air shares were up 8.5% at 0912 GMT, beating a flat Oslo benchmark index, though share are still down 17% over the past year, lagging a benchmark down by 6% over the same period.
The airline will reduce its capacity by a quarter in winter, when demand is usually lower, by not using the planes it is leasing, and will closely follow how cash-strapped consumers behave in the first quarter.
“We have a flexibility with our fleet that means we can reduce our capacity by up to 30%,” Chief Executive Officer Geir Karlsen told Reuters. “We can leave planes on the ground, we can make them fly less.”
Smaller Norway-based rival Flyr on Oct. 4 said it would implement heavy spending cuts to preserve cash during the winter season, reducing the number of flights due to weak demand.
Pilots at main Nordic rival SAS went on a two-week strike in July, boosting Norwegian’s bookings at the height of the region’s summer travel.
While booking levels were so far “good”, said Karlsen, consumers tended to book closer to the time of their departure than they used to in the past, making it harder to anticipate demand.
To cope, Norwegian was putting more cash aside and had 8.2 billion crowns available at the end of the third quarter, up from 7.5 billion at the end of the second.
Cost-wise, Norwegian said it was adversely impacted by the strong US dollar, affecting services it buys such as technical maintenance.
To counter rising fuel costs, Norwegian has started to hedge up to 5% of its 2023 expected costs, and planned to do more, Chief Financial Officer Hans-Joergen Wibstad told the presentation.
($1 = 10.3139 Norwegian crowns)
(Reporting by Gwladys Fouche; Editing by Terje Solsvik and Mike Harrison)
