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Norwegian Air’s Fares Slide as Capacity Glut Stokes Competition

Norwegian Air Shuttle AS (NAS) said that yields, which reflect average fares, fell 21 percent last month as competition among Europe’s discount carriers intensified, sending the stock to its sharpest decline in three months.

Unit revenue also dropped 20 percent in February as the Fornebu, Norway-based carrier boosted capacity measured in available seat-kilometers by 46 percent, it said in a statement.

Norwegian Air’s average flight was also 14 percent longer than a year ago after it entered long-haul flying using Boeing Co. 787 Dreamliners to offer cut-price trans-Atlantic trips. The carrier’s European growth plans are among the most ambitious in the history of aviation, incorporating orders for 222 Boeing and Airbus Group NV (AIR) single-aisle planes worth $22 billion.

“We believe reasons behind the continued yield decline are price competition in the Nordic countries, a low pricing of the company’s new routes on the pan-European market as part of a marketing strategy and long haul flights which contribute negatively to overall yield development,” Danske Bank analyst Martin Stenshall said today in a note to investors.

Norwegian Air shares fell 5.5 percent to 251 kroner, the biggest drop since Dec. 6, before trading 0.9 percent lower at 263.20 kroner as of 11:33 a.m. in Oslo.

The stock has gained 11 percent in the past 12 months, valuing the company at 9.25 billion kroner ($1.5 billion).

“There’s strong competition in the market and many affordable tickets available,” the carrier said today.

February’s passenger total rose 22 percent to 1.5 million, and Norwegian Air managed to boost occupancy levels by 1 point to 79.3 percent.

New routes this year will include Corfu, Cyprus, Santorini and Sicily, to be served from London’s Gatwick Airport.

The carrier began services from Scandinavia to New York, Ft. Lauderdale and Bangkok last year and will add trips to Los Angeles, Oakland and Orlando this spring. Long-haul flights from the U.K. are due begin in July.

To contact the reporter on this story: Kari Lundgren in London at klundgren2@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

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