FlyerTalk Forums - View Single Post - Norwegian to fly between UK, Ireland and U.S. NE Coast cities. from Summer 2017.
Old Jul 17, 2018, 12:01 pm
  #407  
itsallgood
 
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Originally Posted by iahphx
But it seems to be all fake! I'm honestly amazed this accounting is legal (a matter that Norwegian has had trouble with in the past).

First, they do admit that their unit revenue was down another 11% year over year. Here's my Captain Obvious statement: if you're losing lots of money as an airline, and you rapidly expand but then suffer another double-digit unit revenue decline, you're not going to magically become profitable.

But wait, you say, their costs are down! That seems curious given that fuel prices have skyrocketed. But they claim their non-fuel costs have dramatically declined. But again, this seems like smoke and mirrors. For example, they grew capacity 48% (wow), but didn't incur any additional maintenance expense on their fleet. What?

And there are lots more gems. Air Transport World notes that "second-quarter profit was helped by a one-off gain amounting to NOK455 million, reversed from a NOK197 million loss, resulting partly from translation of working capital in foreign currency and a gain of NOK 254 million from forward contracts on currency and fuel. " Say what? Who came up with this? This obviously isn't "real" income.

Charitably, what seems to be going on here is the proverbial putting lipstick on a pig. I'm not surprised that Irish Guy fell for it, but Bloomberg? C'mon. How bad is our financial press these days? Regardless, I don't think Walsh will be impressed.
Norwegian had a one time gain of 454.8M NOK due to currency and fuel hedges. This allowed the company to report a paper profit. If not for those gains, they would have reported a 301.2M NOK loss before taxes.

Their hedging, plus the new stock issuance of 200M NOK will keep Norwegian alive through the third quarter, possibly Q4.
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