Budget airline Norwegian Air Shuttle has today reported a lower-than-expected operating loss, helped by a stronger Norwegian crown, jet fuel hedges and lower prices for EU Emissions Trading System (ETS) allowances.
Norwegian's operating loss narrowed to 220 million Norwegian crowns ($24m) in the seasonally weaker first quarter, from a loss of 611 million crowns last year. Analysts polled by the company had expected a loss of 954 million crowns.
Shares of the airline were up 6.3% this morning.
The airline's CEO Geir Karlsen said overall demand was "encouraging", but cautioned that the carrier was "navigating a complex and unpredictable market with both economic and political uncertainty".
The US-Israeli war with Iran and the blockade of the Strait of Hormuz have disrupted global oil supplies, sending fuel prices to record highs.
Rising jet fuel costs have prompted flight cancellations and fare hikes across the industry and raised concerns of fuel shortages if the conflict continues for longer.
Norwegian forecast aviation fuel costs for the full year will "increase significantly" from last year due to the current market situation and said capacity, measured in available seat kilometres (ASK), would increase by 5% in the upcoming quarter.
However, its aviation fuel expenses fell in the first quarter to 1.53 billion crowns from 1.97 billion a year earlier, helped by a stronger crown, jet fuel hedging and lower costs related to EU Emissions Trading System (EU ETS) allowances, which airlines must purchase to cover their carbon emissions.
There are no signs from suppliers of a jet fuel shortage in the short term, Karlsen said on a conference call, adding that Norwegian sources fuel mainly from Scandinavia and other parts of Europe.
Its unit costs - the average cost of flying one aircraft seat - rose 6% from a year ago to 0.83 crowns in the quarter.
Norwegian, which flies mainly within Europe, saw stronger demand heading into the peak summer season than a year earlier despite higher ticket prices, Karlsen told Reuters.
