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UPDATE 1-Norwegian Air swings to surprise Q2 net profit

Thu, 12th Jul 2018 08:25

* Profit of NOK 300 mln vs forecast for a loss

* Helped by cost control

* Shares up 6 pct

* IAG interested in Norwegian Air (Adds detail)

By Gwladys Fouche and Lefteris Karagiannopoulos

OSLO, July 12 (Reuters) - Fast-growing budget airline Norwegian Air Shuttle beat expectations with a second-quarter net profit on Thursday as it controlled costs better than expected at a time when its transatlantic expansion is peaking.

Europe's third-largest budget airline by passenger numbers is trying to crack the transatlantic market by undercutting established rivals, but has faced pressures to control costs and shore up its balance sheet in the face of competition.

The company posted a net profit of 300 million crowns ($37.07 million) in the second quarter, compared with a loss of 691 million crowns a year earlier.

Analysts polled by Reuters had expected a loss of 535 million crowns.

Shares in Norwegian Air rose on the news, trading up 6.32 percent at 0704 GMT versus an Oslo benchmark index down 0.74 percent.

"Revenues came in line with expectations, while costs improved more than anticipated and this was the main reason for the earnings beat," said Pareto Securities analyst Kenneth Sivertsen, who holds a "Buy" recommendation on the stock.

The company's unit costs, including depreciation and excluding fuel, fell to 0.29 crowns from 0.35 a year earlier, helped by lower wet lease costs -- hiring spare aircraft and crew when needed -- and lower technical costs, it said.

It said it plans $1.75 billion in capital expenditure this year, down from a previous view of $1.9 billion.

"As the company is now at the peak in terms of capacity ramp-up and growth will slow markedly onwards, we expect ticket price pressure to abate and costs to continue improving," said Pareto's Sivertsen.

Operating profit before leasing and depreciation rose to 1.61 billion crowns from 990 million a year earlier, well above the 916 million expected by analysts.

Norwegian Air in recent weeks has rebuffed takeover advances by British Airways parent firm IAG. On Thursday, it did not say anything new about the process.

Its shares have gained 26 percent this year helped by IAG's interest in the company. (Editing by Subhranshu Sahu and Jason Neely)

(c) Copyright Thomson Reuters 2018. Click For Restrictions -

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