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Montevideo, March 23rd 2019 - 02:40 UTC

Norway’s discount carrier orders 222 Boeing and Airbus, totalling 21.5bn dollars

Thursday, January 26th 2012 - 05:19 UTC
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Norwegian Air currently operates an all-Boeing fleet Norwegian Air currently operates an all-Boeing fleet

Norwegian Air Shuttle ASA ordered 222 Boeing Co. and Airbus SAS airliners valued at 127 billion Kroner (21.5 billion dollars) as Europe's fourth-biggest discount carrier steps up its competition with state-backed SAS AB.

Norwegian Air will buy the latest fuel-efficient models, ordering 100 Boeing 737 MAX8 single-aisle planes and the same number of Airbus A320neos, plus 22 of Boeing's existing 737- 800s, the Fornebu-based carrier said today in a statement.

The order will add capacity and pare operating costs as the carrier seeks to strip traffic from SAS, the Stockholm-based owner of Scandinavian Airlines. Founded in 1993, Norwegian Air switched to a discount model in 2001, emulating Ryanair Holdings Plc and EasyJet Plc, before adding long-haul flights last year.

“By ordering so many aircraft Norwegian will certainly be positioned as one of the major players in the European marketplace,” said Hans-Erik Jacobsen, an analyst at First Securities ASA with a “buy” rating in the stock. “It will help to keep costs even lower and to stay competitive.”

Norwegian Air surged as much as 15% and closed 13% higher at 74.75 Kroner in Oslo. The stock has advanced 35% so far this year, valuing the company at 2.58 billion Kroner (436 million dollars).

The order is Airbus's first from Norwegian Air, which operates an all-Boeing fleet of 48 737-800s and 14 737-300s, according to the carrier's website.

There's no issue with financing, which is supported by the Export-Import Bank of the U.S. and European Export Credit Agencies, Chief Executive Officer Bjoern Kjos said today.

Loans will comprise 85% of the order's value, requiring 15% equity, or about 10 billion Kroner, according to Per Kristian Reppe, an analyst at Pareto Securities in Oslo, who said in a note that that's likely to be provided from operational cash flow and the sale of older aircraft.

“Management seemed comfortable that an equity issue would not be needed, although one could not totally eliminate such a scenario considering the size of the order,” he said.

The deal is also the first in Europe for Boeing's MAX model, which the US company decided to offer last year to blunt the success of the A320neo. Single-aisle aircraft are the most widely used globally, and the neo had become the fastest- seller in aviation history as customers sought to cut costs.

Deliveries will start in 2016, Norwegian Air said, and the agreement also includes options for 100 MAX8s and 50 neos. Airbus has said it plans to provide the first neos by late 2015. Boeing's target for the first 737 MAX delivery is 2017.

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