Stay updated with the latest Lex news by subscribing to our free updates.
We will send you a daily digest email, called myFT Daily Digest, summarizing the latest Lex news every morning.
John Fredriksen, a shipping magnate originally from Norway, has a history of using debt to finance growth. However, with Norwegian Air Shuttle, he took a different approach by injecting much-needed equity since 2019 to tidy up their imbalanced financials. As a result, his company, Geveran Trading, now holds an 11.9% stake, making it the largest shareholder.
By eliminating the burden of debt, the low-cost carrier was able to regain stability. Unfortunately, the market remains skeptical about Norwegian’s prospects.
Second-quarter results have shown signs of recovery following a mandatory restructuring in 2021, even discussing the possibility of paying dividends. The net debt as of June stood at NKr3.7bn ($345mn), just over half of the expected ebitda. This is a significant improvement compared to the NKr58bn debt the company had in 2019.
After enduring a painful debt restructuring and receiving additional equity from Fredriksen, Norwegian has achieved a quarterly operating profit of NKr538mn, excluding the NKr2bn refund received from Boeing for jet prepayments. This has reversed their previous losses.
The direction in which Norwegian is heading is crucial. In the second quarter, the airline carried approximately 10% more passengers compared to the previous year, totaling 5.6 million. Strong bookings throughout the summer and into October signify promising prospects. Norwegian may also be able to pass on any increased costs that have led to higher revenues.
Norwegian’s success isn’t solely dependent on favorable market conditions. The company aims to solidify its dominant position in the Nordic region, taking advantage of SAS’s bankruptcy in neighboring Sweden. In fact, Norwegian recently agreed to acquire the local short-haul airline Widerøe for NKr1.1bn. Even Ryanair, known for its competitive pricing, has taken notice by establishing a new base in Copenhagen for European flights.
Two years after the restructuring, Fredriksen may have expected a better return on investment. However, Norwegian’s share price has remained stagnant. Compared to other European airlines, most of which are currently undervalued, Norwegian’s stock is trading at one-third below its peers, with an enterprise value of just two times forward ebitda. The recent increase in oil prices since June has further hindered airline stocks.
Although the anticipated travel boom has finally materialized, investors have chosen to explore other sectors instead.
Have you ever wondered how to be a Lex analyst? Join Lex writers at 3pm during the FTWeekend Festival on Saturday, September 2. We will share valuable tips and hacks for private investors. The event will take place at Kenwood House Gardens, Hampstead Heath. Tickets can be purchased here.
Denial of responsibility! VigourTimes is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.
