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Norwegian posts surprise profit, sending shares flying

© TT NEWS AGENCY/AFP/File | Norwegian Air Shuttle has attracted takeover interest from rival carriers

OSLO (AFP) - 

Norwegian Air Shuttle reported a hefty profit on Thursday, dramatically wrong-footing industry analysts who had expected a big loss as the low-cost airline burns through cash in its drive for growth, especially on ultra-competitive transatlantic routes.

Shares in the airline, which have been volatile since Norwegian started undercutting large rivals on long-haul routes, jumped in response to the surprise second quarter figures showing a net profit of 300 million kroner ($37 million, 31.7 million euros).

Financial analysts had been expecting a net loss of around 428 million kroner, according to consensus forecasts compiled by FactSet, a data provider.

"Despite being at the peak of our growth phase, we have been able to present a profit and decreased unit costs during the second quarter," Norwegian said in a statement.

The airline said it managed to cut costs by nine percent in the second quarter, and 19 percent excluding fuel.

Revenue rose by 31.5 percent to nearly 10.3 billion kroner, a record high, in the second quarter.

"Norwegian surprised the markets today," Hans Jorgen Elnaes, an independent aviation advisor, said in a tweet.

Norwegian CEO Bjorn Kjos hailed the results, saying the company's growth drive would flatten, leading to a decreasing ramp-up costs.

"Going forward, the growth will slow down and we will reap what we have sown for the benefit of our customers, staff and shareholders," he said.

The group, which had previously planned to invest $1.9 billion for this year and $2.6 billion for 2019, lowered the amounts to $1.75 billion and $2.2 billion, respectively.

- Takeover bids-

Europe's third largest budget airline after Ryanair and Easyjet carried 10 million passengers in the second quarter compared to 8.6 million in the same quarter the previous year, an increase of 16 percent.

The company has ordered dozens of the latest fuel-efficient aircraft from Airbus and Boeing as part of its plans to expand and gain a cost edge against rivals.

Some of those rivals have been mulling takeover bids for Norwegian with, analysts suspect, the possible aim of shutting down a disruptive competitor on profitable Europe-US routes.

In May, the carrier said it had turned down two separate takeover bids by British Airways owner IAG, which acquired a 4.61 percent stake in the company.

There were also "several inquiries" from other suitors, Norwegian said in April, but refused to disclose the suitors' identities.

Norwegian is one of the few low-cost airlines to have ventured into long-haul flights, which has long been the preserve of major carriers, and has been rapidly adding routes.

But it is also heavily indebted and financial turbulence has been a worry since its rapid expansion drive.

In March, it raised 1.3 billion kroner in a private placement of shares in order to ease financial pressure.

On Thursday, Norwegian shares surged in response to the second-quarter figures. By mid-afternoon on the Oslo stock exchange, they were up nearly four percent at 247.50 kroner, having earlier hit a session high of 258.50.

© 2018 AFP