LCC Norwegian will slash capacity and divest 13 additional aircraft this year in a bid to stem losses, which widened to NOK3 billion ($350 million) in the 2018 fourth quarter from NOK713 million in the year-ago period. Revenue in the fourth quarter grew to NOK9.7 billion, up 23.2% from NOK7.8 billion a year earlier.

Net loss for the full-year was NOK1.45 billion compared to a net loss of NOK299 million for 2017.

The airline is targeting a net profit in 2019 and insists its strategy shift from growth to profitability, combined with the capital it raises from selling aircraft, its recently announced rights issue and ongoing cost-cutting program will help to reverse fortunes.

Most of the capacity cuts will occur in its short-haul network and the aircraft divestments are all narrowbodies, despite the long-haul side of its business being the least profitable.

Norwegian expects to see a NOK1 billion liquidity effect from the sale of 13 aircraft this year. The airline is involved in a three-way discussion with Airbus and “a very strong Asian partner” about a joint venture project that could enable it to offload part of its Airbus orderbook, Norwegian CFO Geir Karlsen said Feb.7 during a full-year results presentation. Boeing aircraft divestments may also be included in the joint venture.

Norwegian sold 15 aircraft last year and has signed letters of intent to divest a further four. It has postposed 12 Boeing 737 MAX deliveries from 2020 to 2023 and 2024, and four Airbus A321LR deliveries from 2019 to 2020. The company will take delivery of 16 MAXs this year and will continue to divest 737NGs, for which CEO Bjorn Kjos said there is “huge demand” in Asia.

“We are in a position to sell a lot of NGs, especially at the end of this year. The market is good to divest short-haul aircraft,” Kjos said. Norwegian announced on Feb. 5 it had sold two Airbus A320neos, which were being leased out by Arctic Aviation Assets, a subsidiary of the airline.

Norwegian plans capacity growth of 5%-10% over the next four years, which includes 5%-10% growth in widebody ASKs and 3%-5% in narrowbody capacity. By contrast, last year the airline increased its overall capacity by 37%, with 90% growth on the widebody side and around 10% on the narrowbody side.

Bernstein analyst Daniel Roeska is unconvinced by Norwegian’s focus on its long-haul operation over its short-haul network.

“The bulk of this capacity growth will be in the loss-making long-haul business, while Norwegian will seek to ‘reduce’ short-haul operations. As long as Norwegian continues to reduce capacity in its Nordics network, the only part of its business that it notably profitable, and increase capacity in its heavily loss-making long-haul business, earnings will continue to be challenged,” Roeska said in a research note.

The airline has already announced a series of base closures and plans for a NOK3 billion rights issue in an attempt to increase liquidity in the absence of a strategic investor. The rights issue announcement came days after International Airlines Group (IAG) said it would sell its 3.93% stake in Norwegian and would not make any more takeover offers for the airline.

Despite the airline’s current predicament, its CEO remains bullish about the future. Subject to market conditions, Kjos said he anticipated posting a net profit for full-year 2019 and that Norwegian’s domestic operation in Argentina would be profitable from 2Q.

Kjos also said the airline is in talks with “other huge airlines” in North America with a view to entering a connections partnership similar to the one Norwegian has with UK LCC easyJet in Europe.

“We're looking to build a network on the other side of the Atlantic … [to have] an alliance with short-haul operators on the other side.”

Kerry Reals,