The start of 2023 has been dramatic for Norwegian aviation.
On Monday last week, Flyr announced that it was unable to complete the four-part capital raising that was started last autumn. The board saw no other choice but to notify the market that it was exploring options for continued operation.
It shouldn’t take more than two days before it was over and done with.
On Tuesday evening the following day, the company announced that it would file for bankruptcy the following day. The tender request later showed that Flyr has NOK 2.4 billion in debt.
At the same time, competitor Norwegian’s share price has risen sharply recently.
The death of one
The Norwegian share trades on Tuesday for around NOK 11, after having risen close to 50 per cent since the turn of the year. On 1 February, when Flyr filed for bankruptcy, the increase was over six percent.
The price rise has given Norwegian’s two largest owners, John Fredriksen Geveran Trading and Sundt as, paper gains totaling around NOK 848 million in just over a month.
Just since the Flyr bankruptcy, Fredriksen has had a paper gain of NOK 225 million, while Sundt has had an increase in value of nearly NOK 180 million.
The two major owners now own Norwegian shares worth NOK 1.5 billion and NOK 1.2 billion respectively. Fredriksen’s share is just over 14 per cent, while Sundt as owns 11.4 per cent of the shares in Norwegian.
Reduces estimates
In a recent analysis, Nordea Markets analysts Hans-Erik Jacobsen and Martine Kverne write that Norwegian’s strong position in the Nordic market, as well as a normalization of aviation, will lead to a “significant improvement in the company’s profitability in 2023 and beyond”.
The brokerage house currently has a hold recommendation on the share due to uncertainty about demand in the short term.
– We believe Norwegian will be able to increase revenues and lower costs per seat kilometre, which will be supported by an increased focus on business travellers, as well as the company’s more extensive operations, the analysis states.
However, it’s not all gold and green forests. The Nordea analysts also believe that expectations of continued high fuel prices, a weak krone against the dollar and strong competition in the market will put a damper on profitability growth.
For the whole of 2022, the brokerage house expects a gross result (ebitda) of NOK 891 million, a sharp upward adjustment from the estimate of minus NOK 154 million previously. The reason for the change is higher revenue per passenger and lower fuel costs.
For the current year, the analysts expect a gross profit of NOK 3.4 billion, a reduction of around five percent from previously. The downward adjustment here comes as a result of delayed deliveries from Boeing.
Norwegian will present the figures for the fourth quarter and the whole of 2022 next week.
Won’t have much to say
At the same time, Flyr’s downfall means one less competitor for Norwegian, although according to experts it will not have much to do with ticket prices.
After the crisis announcement from Flyr last week, and before the bankruptcy became a fact, Jacobsen stated that it will have little significance.
He pointed out that Flyr had already greatly reduced the offer.
– Today, Flyr does not have many departures where the company flies wing to wing against competitors such as Norwegian and SAS. As a result, Flyr has no longer pressured the prices and earning potential of its competitors, and consequently we are unlikely to see that the others will significantly raise their prices from the current level.
Jacobsen pointed out that Flyr has been flying with a limited fleet since October – and only with an average of four to five planes per week. Most of the departures have also gone out of the country to typical holiday destinations in the south of Europe, where the departures and destinations have not been directly exposed to competition.
Earlier this week, it became clear that Norwegian has entered into an agreement of intent to lease six aircraft that Flyr has previously used.(Terms)Copyright Dagens Næringsliv AS and/or our suppliers. We would like you to share our cases using links, which lead directly to our pages. Copying or other forms of use of all or part of the content may only take place with written permission or as permitted by law. For further terms see here.
