Almost two years after canceling a huge order for 92 aircraft, Norwegian Air has recommitted itself to the Boeing MAX 8 again. The carrier said on May 30 that it has in principle agreed to order fifty aircraft plus options for thirty. The agreement is expected to be concluded by the end of June. Norwegian in love again with the Boeing MAX 8.
The fifty aircraft on firm order will be delivered between 2025 and 2028. Their arrival will be close to the schedule of the phasing out of 737-800s when their lease contracts expire. This means that the net size of the fleet will remain at the current level, says Norwegian, which will be around seventy this summer. The airline said in February that its short-term strategy sees an expansion of the fleet to between 95 and 100 aircraft by 2024.
The recommitment to the MAX 8 confirms that Norwegian has a keen interest in the type to build its future fleet on. The current fleet is based around the 737-800 and includes just three MAX 8s. In June 2020, it had taken delivery of eighteen MAX 8s. The decision on the cancelation of 92 aircraft remaining on order was taken when Norwegian – like many airlines – was forced to drastically restructure following the outbreak of Covid. Most MAX aircraft were returned to their lessors.
Since then, Norwegian has restructured its debts and amended its business model. It terminated its long-haul low-cost operations with Boeing 787s to focus solely on rebuilding a network, first in Norway and currently in Europe, serving key cities and seasonal destinations. For this reason, the airline canceled its orders for more 787s as well as for 63 Airbus A321neo’s and thirty A321XLRs.
Following the gradual and successful rebuilding of its operations since 2021, Norwegian has been looking at sourcing new aircraft again. After considering options that still included the A321neo, it signed a lease agreement for ten MAX 8s with AerCap that sees the aircraft joining the fleet in time for the 2023 summer schedule to bring the fleet to some 85 aircraft. The aircraft from the purchase agreement complement the leased ones and will give Norwegian a fleet of fuel-efficient aircraft that will help it reduce its fuel costs and emissions.
Financing through operating activitites
Norwegian says that it will finance the new aircraft’s pre-delivery payments through positive cash flow from operating activities, so it will not seek new loans that would grow its debt position. “A significant share” will be owned by the airline, leaving sale and leasebacks on the table as an alternative.
“This is a landmark deal that sets out a path whereby Norwegian will own a large share of its fleet. This will result in lower all-in costs and increased financial robustness, enabling us to further solidify our Nordic stronghold. The deal also allows us to serve our customers with state-of-the-art aircraft that can run increasingly on sustainable aviation fuel,” said Svein Harald Oygard, Chairman of the Board, in a media statement.
CEO Geir Karlssen added: “The overall terms achieved are attractive for Norwegian, and the deal fits well with our long-term fleet strategy and route program. It will enable us to serve our customers with modern fuel-efficient aircraft with the latest technology, significantly reducing our carbon footprint. The deal will also strengthen the company’s equity considerably, further solidifying Norwegian’s financial position.”
The media statement doesn’t include any details on the legal litigation case that the carrier was still in with Boeing over the termination of the 787 order and compensation for the MAX delays of the original order.
Active as a journalist since 1987, with a background in newspapers, magazines, and a regional news station, Richard has been covering commercial aviation on a freelance basis since late 2016.
In 2022, he has gone full-time freelance. Richard has been contributing to AirInsight since December 2018. He is also writing for Airliner World and Aviation News. From January 2023, he will add a part-time role with Dutch website and magazine Luchtvaartnieuws. Twitter: @rschuur_aero.