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Huge airline order sends stock flying

Trading on the Oslo Stock Exchange took off Wednesday morning after news broke that locally based airline Norwegian Air was ordering 222 new aircraft from both Boeing and Airbus, and also has an option to order 150 more. Norwegian had already been expanding, and can now boast the biggest airline deal ever struck in Europe.

Stock in Norwegian Air was flying high on Wednesday, after the airline announced the biggest aircraft order ever in Europe. PHOTO: Norwegian / Peter Andrasovszky


Shares in Norwegian soared nearly 14 percent by mid-morning and the Oslo exchange was also boosted by positive overnight developments on Asian exchanges. But it was Norwegian’s huge aircraft order that grabbed the most attention.


It’s being called the biggest single investment ever made on the Norwegian mainland. Valued at around NOK 127 billion (USD 21 billion), it also compares to some of the major investments made in Norway’s offshore oil and gas industry.


Analyst Kenneth Sivertsen at Arctic Securities told website DN.no that the NOK 127 billion reflects the list price of the aircraft, and it’s likely Norwegian has received substantial discounts for its mass order. Other analysts say Norwegian also may avoid having to seek new capital to finance the order. “The planes are mainly being financed through export credits,” Hans Erik Jacobsen of Swedbank First Securities told DN Finans. “We also expect that Norwegian will have positive cash flow until 2016 and build up its own capital.”


Norwegian has already been taking delivery of new aircraft and the new orders will be phased in from 2016 to 2022. The airline is buying 122 aircraft from Boeing, 100 of which are the new Boeing 737 MAX8 model, which Norwegian will be the first to fly in Europe. Norwegian also has agreed to buy 100 Airbus A320neo models, and has options for another 100 Boeing 737 MAX8s and 50 more Airbus A320neos.


Norwegian’s high-profile founder and chief executive, Bjørn Kjos, is a pilot himself and called Wednesday “an historic day for Norwegian.”  The order is the largest ever placed by a European airline and is a “milestone” for the airline founded as a domestic rival to Scandinavian Airlines (SAS) that he’s been expanding ever since. Norwegian already flies all over Europe and has long planned routes to Asia and North America, but Kjos stressed that the new planes will first and foremost renew Norwegian’s current fleet instead of simply being used to serve new destinations.
It now plans to sell or lease out its older aircraft. Kjos promised that Norwegian will continue to promote low fares. “It already is cheap to fly today, and now the goal is to hold fares down at this level,” he told DN.no.


That signals his airline’s ongoing intention to compete against cut-rate carriers like Easyjet and Ryanair, and, not least, against arch-rival SAS, which also has ordered 30 new Airbus 320neos for delivery in 2016. Analysts said SAS can only expect even tougher competition to the newer, lower-cost carriers like Norwegian and Ryanair.

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