Norse Atlantic Posts 97% Revenue Growth To $78.2 Million In Q1: Is It Enough?

Norse Atlantic Airways, the long-haul low-cost carrier, grew its revenues to $78.2 million in Q1 2024. With the airline looking to end 2024 with a net profit, will its cost-cutting measures, as well as revenue initiatives, be enough to help Norse Atlantic achieve its first full-year profit?

Chartering flights

In Q1 2024, the airline’s executives, including Bjorn Tore Larsen, the founder and chief executive officer (CEO) of Norse Atlantic, focused on looking for ways to earn revenue on non-scheduled flights, which includes chartering its aircraft to other airlines and/or organizations. According to Larsen, this winter, which includes the latter half of 2023 and early 2024, the airline emphasized holiday destinations and charters.

“Norse Atlantic managed a record high of 107 charter flights during the quarter. We will refine this strategy further for next winter, with several longer-term contracts secured or under negotiation.”

As a result, the airline earned $78.2 million in revenue during the period. Still, the long-haul low-cost carrier’s operating loss was $53.4 million, an improvement compared to the operating loss in Q1 2023 of $62.5 million. The net loss was $62.8 million, once again a year-on-year (YoY) improvement. However, its cash balance has worsened during the one-year period, with Norse Atlantic ending Q1 2023 with $42 million, while by the end of Q1 2024, the carrier’s liquidity measured $33.2 million in cash.

Related

Norse Atlantic Won’t Fly Its Full Boeing 787 Fleet This Summer

The airline will operate all 15 of its Boeing 787s only in 2025, if the lease agreements are not extended further.

Positive operating cash flow

Anders Jomaas, the chief financial officer (CFO) of Norse Atlantic, explained that the airline’s operating cash flow was positive, being $3.1 million in Q1 2024. Last year, it was -$20.7 million. However, due to investing and financing cash flows, both of which were negative $8.8 million and $15.2 million, the carrier lost $20.6 million of free cash during the three-month period.

To improve its liquidity, Norse Atlantic entered into a $20 million revolving credit facility from its shareholders after the quarter. As a result, Jomaas remarked that this will be a buffer for the airline during a hectic period when the carrier plans to ramp up its operations during the upcoming summer season.

Photo: Norse Atlantic

The CFO also explained that while its equity, representing the amount that would be returned to the owners or shareholders in case of liquidation, was a negative $146.4 million, it includes aggregate non-cash lease accounting costs of $149 million.

“You should also take into consideration the positive net present value [NPV] of the favorable leasing terms, which brings the value-adjusted equity well into the positive landscape.”

Related

Norse Atlantic Airways Expects To Make First Profits In 2024

The young airline has been growing slowly but steadily.

Focus on the summer season

During the quarter, the airline operated 207 more flights YoY, carrying 201,462 passengers with an average load factor of 73%. In Q1 2023, its average load factor was 54%. The airline operated 11 aircraft in Q1 2024, with an additional four Boeing 787s being subleased out to other parties.

Larsen shared that Norse Atlantic’s strategy is evolving daily, with the CEO adding that the carrier has two seasons. During the summer, the airline resorts to “normal” operations, selling tickets on scheduled flights from/to popular destinations in Europe, the United States, and other regions.

“We see that we have evolved the network into a network that is now maturing and getting more traction and higher fill rates.”

However, during the winter, Larsen said that Norse Atlantic becomes more of a charter airline, flying some scheduled routes, particularly to sunny destinations. These have become very popular, which is a welcoming trend, the CEO added.

Photo: Norse Atlantic Airways

Nevertheless, a “good portion” of its business during the colder northern hemisphere months involves chartering out aircraft to other airlines, tour operators, cruise operators, or other organizations. According to Larsen, the scheduled flights during the winter have been performing well, with the executive seeing good sales on these routes, making Norse Atlantic optimistic about its future prospects. In addition, the charter side is off to a very good start, with the airline already selling out more charter flights during the next winter than it flew during the past winter period.

Related

Why Norse Atlantic Picked Cape Town As Its First African Destination

Norse Atlantic will start scheduled flights to Cape Town in October 2024.

Full-year profitability

The CEO stated that Norse Atlantic’s continued focus is on reducing its costs. The airline had managed to reduce its cost per available seat kilometer (CASK) from $0.95 to $0.67, with Larsen adding that it has a “durable cost advantage” versus its competition in the transatlantic market. Furthermore, its capital expenditure (CapEx) is the lowest for the aircraft that it has, with the airline having a fleet of 15 Boeing 787 aircraft.

“Cost is an area where you cannot stop focusing on, you have to be on the ball every day. We are chasing ways where we could become more efficient, and that includes quite heavy investment in technology that gives a very quick payback, both in terms of reducing costs and in terms of revenues.”

As such, Larsen that the company aims to become a profitable airline by the end of the year. While it had failed to become profitable in 2023, the low-cost carrier had some positive quarters, including Q3 2023, when the airline earned a net profit of $1.6 million. Still, its full-year 2023 net loss was $168.6 million.

Photo: Gatwick Airport

One of the main advantages of Norse Atlantic have been its favorable lease terms. The low-cost carrier, which operated its first flight in June 2022, said that the average remaining terms of its aircraft leases are more than ten years, with staggered maturities up to the end of 2038.

“The aircraft leases have no pricing increases nor inflationary adjustments during the lease term. Such fixed lease terms are highly favourable compared to current market rates for the aircraft type and stand as a notable advantage compared to prevailing market rates for similar aircraft.”

According to data from aviation analytics company Cirium, it was evidently clear that Norse will significantly ramp up operations during the upcoming summer. While in April and May 2024, the carrier had scheduled 75 and 100 weekly flights, respectively, in June, July, and August, the carrier plans to operate 146 weekly one-way itineraries on its two air operator’s certificates (AOC) in Norway and the United Kingdom.

Related

Ouch: Norse Atlantic’s Troubles Continue With $169 Million Net Loss In 2023

Passenger traffic rose to almost 980,000.