By Ole Petter Skonnord and Gwladys Fouche
OSLO, Feb 16 (Reuters) - Norwegian Air, Europe'sthird-biggest budget airline by passenger numbers, warned onThursday costs are rising faster than expected as it expandsworldwide, knocking its shares.
The airline is building up its transatlantic operations, hasup to 29 Dreamliners on order from Boeing for $18.5billion and is considering ordering more.
Shares in the airline were down 5.52 percent at 0949 GMT,lagging an Oslo benchmark index down 0.27 percent.
Its underlying unit cost, which excludes fuel, was 0.32crown in the fourth quarter, down 1 percent year-on-year, alower-than-expected reduction for some analysts.
"Q4 results show another disappointing cost performance,"said Ross Harvey, an analyst at Irish brokerage Davy.
"The underlying cost performance was again disappointing –down 1 percent versus our -3 percent expectation, with thelargest escalation occurring across peripheral cost lines inanticipation of 2017 growth."
"Cost guidance for 2017 has increased by circa 2.6 percenton previous guidance, which means we will revise our expectationof a 4.7 percent improvement (at constant currency) downwards.
In addition, Norwegian Air said its 2017 unit cost would behigher than it previously expected, now guiding for a range of0.39-0.40 crown, against 0.38-0.39 crown previously.
"Unit cost for 2017 is guided up by NOK 0.01 ... due to moretraining and more leasing costs, this is likely to lead to lowerestimates for 2017," said Dan Togo Jensen, an analyst atHandelsbanken Capital Markets.
Norwegian Air defended the higher cost expectations, sayingit had to build capacity. "It is necessary for us to build up aswe receive Dreamliners," CEO Bjoern Kjos said during apresentation.
"We are guiding upwards on costs as we have to consider ourgrowth and what our ramp-up implies. We are recruiting 2,000people in 2017. And those who will fly the Dreamliners, we haveto train up ourselves," said CFO Frode Foss.($1 = 8.3068 Norwegian crowns) (Editing by Alexander Smith)
easyJet (EZJ)