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Norwegian Air Cashes in on Slots at London Gatwick

Edward Russell

February 18th, 2022 at 12:57 PM EST

Norwegian Air profited from the sale of slots at London Gatwick last year, as the carrier continues its restructuring as a Nordic-focused budget airline.

“There’s a lot of talk about legacy here, but sometimes legacy is also a positive,” Norwegian Air CEO Geir Karlsen said during its the fourth-quarter and full-year results call on Friday. “I’m very happy that we were able to sell the [Gatwick] slots that we are not planning to use.”

The airline netted 201 million Norwegian kroner ($22.4 million) from the sale of 15 slot pairs to Wizz Air in December. Those funds, coupled with a fourth-quarter profit of 112 million Norwegian kroner, pushed Norwegian Air’s available liquidity up slightly in the quarter to 7.7 billion Norwegian kroner.

But Norwegian Air is not done divesting itself of lucrative slots at the popular London airport. Karlsen said the carrier still has “quite a few of them we are not planning to use,” indicating that more sales are likely. EasyJet and Wizz Air, both of which have already acquired additional slots at Gatwick during the crisis, are likely buyers.

In January, Wizz Air CEO József Váradi said the rapidly growing budget airline had a “desire” and “appetite” to grow in London in addition to the slots it acquired at the end of 2021. “The issue really is infrastructure available to our expansion, be it Luton, be it Gatwick,” he said referring to the availability of slots.

And in November, EasyJet CEO Johan Lundgren, fresh off a deal to lease some of British Airways’ slots at Gatwick, said there was “potentially more to come” in terms of slot acquisitions at the airport. The UK-based discounter raised £1.2 billion ($1.6 billion) in September in an effort to bolster its balance sheet and fund expansion opportunities that, among other things, included expanding and protecting its position at key airports like Gatwick.

During the peak summer months of June, July, and August, EasyJet is scheduled to operate nearly 58 percent of departures from Gatwick, according to Cirium schedules. Wizz is fifth — after British Airways, Vueling, and Ryanair, respectively — with a nearly 3 percent share. EasyJet operated 46 percent of the departures from Gatwick during the same period in 2019; Wizz did not serve the airport.

Norwegian Air continues to grow, even as it sells most of its slot portfolio in London. The airline will add 19 Boeing 737s — 17 -800s and two -8s — to its fleet by summer for a total of 70 aircraft. This will allow it to meet the strong demand that Karlsen forecasts for the period. During the call, he said yields for July already look comparable to 2019.

The airline plans to add another 15 aircraft by summer 2023, all of which will be new generation models, Karlsen said. He did not indicate whether they would be more 737 Maxes or Airbus A320neo family jets, which the airline has previously said it would consider. Norwegian Air targets having a fleet of 95-100 aircraft by 2024, which Karlsen said will allow it to fully scale the “cost side of the business.”

Unit costs excluding fuel at 0.49 Norwegian kroner in the fourth quarter were down 4 percent compared to the quarter before but up 40 percent year-over-two-years. However, the comparison to 2019 is difficult owing to Norwegian Air’s court-led restructuring that wrapped up in early 2021.

“Obviously, the [unit cost] is too high,” said Karlsen who attributed it to flying just 60-70 percent of available capacity due to the Omicron surge in the December quarter. Norwegian Air targets unit costs excluding fuel of 0.4 Norwegian kroner in the second half of this year, or a nearly 20 percent reduction from where they were at the end of 2021.

The fallout from Omicron has carried over into the first quarter. Norwegian Air plans to fly just 60-65 percent of available capacity, said Karlsen. However, he forecasts 100-120 million Norwegian kroner in savings from the airline’s power-by-the-hour agreements on its fleet. These agreements mean Norwegian Air does not pay lease fees when an aircraft is not flying.

“We need to be as competitive as we can,” Karlsen said on costs. “We need to be prepared to meet whomever decides to come into the markets that we are flying.”

The airline faces competition from startup Flyr in its home Norway, as well as growth by AirBaltic, Eurowings, Finnair, and Ryanair in the Nordic countries.

Norwegian Air’s fourth-quarter profit — its third last year — was on a 281 percent year-over-year increase in revenues to 2.5 billion Norwegian kroner. For the full year, it made 1.9 billion Norwegian kroner on 5.1 billion Norwegian kroner in revenues, the latter of which was down 44 percent compared to 2020.

The airline plans to fly roughly 28 percent of its 2019 capacity in 2022. However, the last year before the pandemic included many aspects of its business that have since been shuttered, including its money-losing long-haul routes.

Edward Russell

February 18th, 2022 at 12:57 PM EST

Photo credit: Norwegian Air plans to sell more of its slot portfolio at London Gatwick to raise cash. Gatwick Airport

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