UPDATE 2-Norwegian Air secures Airbus fleet deal, earnings top forecast

OSLO (Reuters) – Norwegian Air (NWC.OL) said on Thursday it has struck a deal with China’s CCB Leasing to take joint ownership of 27 Airbus (AIR.PA) aircraft on order and reported earnings for the peak summer holiday season above expectations, boosting its finances.

The cash-strapped carrier has for months said it aimed to find a partner to help take ownership of the Airbus fleet, allowing Norwegian to cut its debt and increase its equity.

CCB Leasing Corp DAC (CCBLI), a wholly owned subsidiary of China Construction Bank Corp (601939.SS), will own 70% of the joint venture, while Norwegian Air’s Arctic Aviation unit will own the remaining 30%.

Under the terms of the agreement, the joint venture will purchase an initial 27 Airbus A320 NEO aircraft from Arctic to be delivered from 2020 to 2023.

“In addition to a positive equity effect, the joint venture will reduce Norwegian’s committed capital expenditure by approximately $1.5 billion based on the initial 27 aircraft,” the company said.

“This agreement will contribute significantly to reducing our current and future capital expenditure,” acting Norwegian Air CEO Geir Karlsen said in a statement.

Net profit for the third-quarter came in at 1.67 billion crowns ($183 million), beating the average analyst forecast in a Refinitiv poll for a profit of 1.47 billion crowns and up from a profit of 1.30 billion crowns a year ago.

The firm cut its 2019 capital expenditure guidance by $200 million this year to $1.0 billion, while raising it by $100 million to $1.4 billion for next year.

The airline has shaken up the long-haul market with cut-price transatlantic fares, but its rapid expansion left it with hefty losses and high debts, forcing it to raise cash from shareholders and postpone debt payments earlier this year.

The company has switched in 2019 to prioritising profits over growth and said its 2019 cost cuts would amount to 2.3 billion crowns, more than the 2 billion crowns target it had set.

It also narrowed its 2019 guidance for earnings before interest, taxes, depreciation, amortisation, and restructuring (EBITDAR), excluding other losses or gains, to about 6.1-6.5 billion crowns, from earlier guidance for 6-7 billion.

Norwegian earlier this year abandoned a target of turning profitable in 2019, due to the grounding of Boeing (BA.N) 737 MAX aircraft and technical problems with Rolls Royce (RR.L) engines on Boeing 787s.

Bondholders in September accepted the company’s plea to postpone repayment of $380 million by up to two years, providing some financial relief.

Reporting by Terje Solsvik; Editing by Christopher Cushing and Richard Pullin