Norwegian Air Shuttle Cuts Guidance Amid Krone Weakness

Norwegian Air Shuttle ASA, the Norwegian low-cost airline, has revised its full-year 2024 earnings guidance due to the weakening of the Norwegian Krone (NOK) against the US Dollar. The company now expects earnings of approximately 1.85 billion NOK, down from its previous range of 2.1 to 2.4 billion NOK. This revision is primarily attributed to the depreciation of the NOK, with the year-end exchange rate now expected to be 11.35 compared to the previously forecasted 10.70.

The depreciation of the NOK has led to significant adjustments in Norwegian Air Shuttle's balance sheet during the fourth quarter. This depreciation has resulted in an increase of approximately 75 million NOK in operating costs, aircraft leasing, and amortization for the quarter. Despite these challenges, the company expects its unit costs, excluding fuel, to increase by 4% year-over-year, in line with its previous guidance.

Norwegian Air Shuttle's revised guidance shows a significant decrease in earnings expectations compared to its competitors. For instance, Delta Air Lines, Inc. has reported a 13.47% increase in earnings over the past year, while United Airlines Holdings, Inc. has seen a 169.26% increase. Ryanair Holdings PLC has also experienced a 0.30% increase in earnings over the past year.

The weakening of the NOK has had a substantial impact on Norwegian Air Shuttle's financial outlook, leading to increased operating costs and adjustments to its balance sheet. However, the company remains optimistic about its unit cost performance for the year.

As the depreciation of the NOK continues, Norwegian Air Shuttle must carefully manage its currency exposure and adjust its pricing strategy to mitigate the risks associated with currency fluctuations. Investors should monitor the airline's financial performance closely, as the long-term effects of currency fluctuations on the company's profitability remain uncertain.

In conclusion, Norwegian Air Shuttle's revised guidance for 2024 reflects the significant impact of the depreciation of the Norwegian Krone on the company's financial performance. While the company expects its unit costs to remain in line with previous guidance, investors should be aware of the potential long-term effects of currency fluctuations on the airline's profitability.