Aviation Management Report: Norwegian Air Shuttle Performance Review

This report provides a comprehensive analysis of Norwegian Air Shuttle's financial and operational performance. It begins with an introduction outlining the scope and objectives, followed by an in-depth financial analysis using key ratios such as operating profit margin, net profit margin, current ratio, and debt-equity ratio. The report then assesses the airline's operational performance, evaluating factors like safety, customer growth, and market share. A detailed SWOT analysis identifies the airline's strengths, weaknesses, opportunities, and threats. Finally, the report concludes with specific recommendations for improvement, including strategies for international market expansion, debt management, and customer satisfaction enhancement. The report is supported by references and financial appendices, offering a holistic view of the airline's performance and future prospects.

Running head: AVIATION MANAGEMENT
Aviation Management
Name of the Student:
Name of the University:
Authors Note:

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Table of Contents
Introduction:...............................................................................................................................3
Financial Analysis:.....................................................................................................................3
Operational performance analysis of the entity:........................................................................6
SWOT Analysis:........................................................................................................................9
Recommendations and suggestions:........................................................................................10
Reference..................................................................................................................................12
Appendix 1: Consolidated Income Statement..........................................................................14
Appendix 2: Consolidated financial position...........................................................................15

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Introduction:
In this report an effort is being made to conduct a detailed study of the financial and
operational performance of Norwegian Air Shuttle. The main purpose of the report will be to
highlight the financial and operational issues faced by the airlines. In pursuance of that
financial ratios will be used effectively and the corresponding implications of the results will
be studied. Further, a SWOT analysis will be conducted for the purpose of determining the
operational efficiency of the airlines.
Norwegian Air Shuttle or more popularly known and traded as Norwegian is
primarily a low-cost airline. As a matter of fact in Europe it is the third largest low-cost
airline currently operating and also the sixth largest low cost airline in the whole world. The
airline provides transportation to wide range of destinations including business as well as
holiday destinations (Van der Linden 2015). It offers flights to England as a business
destination and in the category of holiday destinations it provides flights to Mediterranean
and Canary Islands. It also provides high density flights between Finland and Scandinavia. In
the year 2016 it transported around 30 million passengers.
Financial Analysis:
The analyses of the financial performance of the airlines help of various ratios have been
taken. The results of the ratios along with their pre-defined implications will determine the
trend in the performance of the airlines (Eriksson and Steenhuis 2015). The analyses of the
various ratios are given below:
a) Operating profit margin:

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2015 2016
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
Operating Profit Margin
Operating Profit Margin
The analysis of the operating profit margin which draws the relationship between the
profit generated from the core business operations of the entity and the total revenue of the
entity gives out positive results (Baker 2015). It can be easily observed that the operating
profit margin within a span of one ear has jumped up by around 5%. This affirms the
profitability of the airline in the near future.
b) Net profit margin:
2015 2016
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
4.50%
Net Profit Margin
Net Profit Margin

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The net profit margin which reflects the relationship between the net profits as a
percentage of the total revenue earned by the airlines seems to follow the same trend as of the
operating profit margin of the company. it has increased significantly in a span of just one
year. These suggest that the company is able to generate profits for its shareholders in an
increasing trend over the years (Albers et al. 2017). It further emphasises the capability of the
airlines to create value for its shareholders.
c) Current Ratio:
2015 2016
0.41
0.42
0.43
0.44
0.45
0.46
0.47
Current ratio
Current ratio
The current ratio gives us the relationship between the current assets and the current
liabilities of the entity. It is seen that the ratio despite being significantly low is still
decreasing over the years. A decreasing current ratio especially after the ratio being already
on the lower side indicates that the company is facing crunch of current assets like cash and
cash equivalents to pay off its current liabilities (Dekker et al. 2016). The company must

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endeavour to improve its current asset immediately because any number ratio less than one
suggests that the company will not be able to repay its short term debts.
d) Debt-equity ratio:
2015 2016
0.000
0.020
0.040
0.060
0.080
0.100
0.120
0.140
0.160
Debt Equity Ratio
The debt-equity ratio depicts the relationship between the total liabilities and the total
stakeholders’ equity of the entity. It reflects the liquidity status of an entity and determines its
capability of repaying back the debt by using the owner’s funds. It seems the firm is having a
low debt-equity ratio (Fukui and Miyoshi 2017). The debt-equity ratio has risen over the
period of one year, but, the same will not affect the liquidity of the firm adversely rather it
will increase the returns of the equity shareholders by means of trading on equity.
Operational performance analysis of the entity:
The industry has some pre-determined key performance indicators which judges the
operational capability of the company within the industry to perform as per the parameters set
up by the industry itself. In pursuance of judging the operational performance of the entity a

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group of key performance indicators have been picked up and detailed analysis is being done
on them. The key performance indicators along with their results are as follows:
Safety:
The company’s record in respect of safety of the aircrafts and its customers is nearly
unbelievable. The company has been operating since 1993 and till date has not experienced
any sort of serious damages or incidents which had caused it some serious monetary and non-
monetary losses. The statistics of last 23 years stand testimony to the commitment of the
company towards the safety of its customers (Turney 2017). Hence in this category of
performance the company is performing brilliantly.
Customers:

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The trend in the number of customers on a year on year basis shows that the company
is boosting its performance with respect to increasing the number of customers. The number
of customers in the year 2016 stood at 29 million as compared to 2015’s figure of 25 million
customers that is a growth of 4 million passengers within a span of just one year (Rondinelli
et al. 2017). This shows the growing popularity of the company among the passengers. Hence
the company is doing a good job in terms of number of customers.
Market share:
In terms of the market share the company has been able to increase its market share in
Oslo. However, except that in case of other places it has just managed to retain its market
share i.e. not letting the share to get reduced (Gegg et al. 2014). The trend is not adverse but
not very satisfactory as the company should be endeavoured to increase its market share in
the existing markets.
Revenue:

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The revenue of the company has grown significantly over the period of one year. This
is sync with the increase in the number of customers of the airline. Growth in revenue
suggests the growing returns that the stakeholders can expect from the company in the future.
the company should maintain the growing trend in revenue to ensure future viability and
improvement in the market share of the company.
SWOT Analysis:
This analysis will highlight the strengths, weakness, opportunities and threats of the
Norwegian airline and thus enable the determination the future viability of the operations of
the company.
Strengths:
 The company has a growing trend when it comes to the number of customers. This
indicates the growing influence of the company in the market.
 It possess a strong hold in the domestic market due to the virtue of high domestic
flights being offered by it in the domestic market (Wagener and Ison 2014).
Weakness:
 The company is not part of any alliance of the airline companies. This may lead to
company staying aloof to the new possibilities discovered by its competitors.
 The frequency of flights offered by the company in relation to international
destinations is very low and this adversely affects the company’s customer loyalty
(Johnston and McDonald 2017).
Opportunities:
 The company can reap the benefits of the experience it has gained in the domestic
market and expand its operations in the international segment.

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 It can easily become one of the leading low cost airlines.
Threats:
 The company is faced with the threat of rising fuel costs. This will significantly
increase the cost of its operations and thereby, reducing the profitability.
 The rivals of the company are engaging themselves in an extensive marketing
campaign; this might dilute the brand value of the company (Kousoulidou and Lonza
2016).
 The fact that one of its competitors i.e. SAS receives financial aids from the
Scandinavian government gives an added advantage to it over the airline.
Recommendations and suggestions:
Subsequent to the detailed analysis of the financial and operational performance
indicators of the airline and conducting the SWOT analysis of the company the following
recommendations and suggestions can be made in respect of the company.
1) The company should immediately increase its operations in the international
market. The operational indicators of the company show a healthy state of present
operations of the company except the fact that the market share enjoyed by the
airline in most of the international destinations is very low. Hence, it should
endeavour to increase that with immediate effect.
2) The company should consider raising more money via debt in the near future.
This is because of the fact the company’s debt-equity ratio is in a very healthy
state and hence the company can utilise the funds raised from debt in increasing
its current ratio. This will help the company to meet up its short term liabilities
and also creating more value for the shareholders via trading on equity.

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3) The company should not only depend on its low cost tag rather should focus on
increasing the customer satisfaction factor by bringing in factors like services
provided to them are of premium quality and at par with that of the competitors.
The company should improve the ground staff qualities who directly communicate
with the customers to improve the customer loyalty factor of the airlines.

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Reference
Albers, S., Baum, H., Auerbach, S. and Delfmann, W., 2017. Strategic Management in the
Aviation Industry. Routledge.
Baker, D.M.A., 2015. Tourism and Terrorism: Terrorists Threats to Commercial Aviation
Safety & Security. International Journal of Safety and Security in Tourism and
Hospitality, 1(12), p.1.
Dekker, S., Dahlström, N., van Winsen, R. and Nyce, J.M., 2016. Crew resilience and
simulator training in aviation. In Resilience Engineering Perspectives, Volume 1 (pp. 133-
140). CRC Press.
Eriksson, S. and Steenhuis, H.J. eds., 2015. The global commercial aviation industry.
Routledge.
Fukui, H. and Miyoshi, C., 2017. The impact of aviation fuel tax on fuel consumption and
carbon emissions: The case of the US airline industry. Transportation Research Part D:
Transport and Environment, 50, pp.234-253.
Gegg, P., Budd, L. and Ison, S., 2014. The market development of aviation biofuel: Drivers
and constraints. Journal of Air Transport Management, 39, pp.34-40.
Johnston, N. and McDonald, N., 2017. Aviation psychology in practice. Routledge.
Kousoulidou, M. and Lonza, L., 2016. Biofuels in aviation: Fuel demand and CO2 emissions
evolution in Europe toward 2030. Transportation Research Part D: Transport and
Environment, 46, pp.166-181.

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Rondinelli, S., Gardi, A., Kapoor, R. and Sabatini, R., 2017. Benefits and challenges of liquid
hydrogen fuels in commercial aviation. International Journal of Sustainable Aviation, 3(3),
pp.200-216.
Turney, M.A., 2017. Tapping diverse talent in aviation: Culture, gender, and diversity.
Routledge.
Van der Linden, F.R., 2015. Airlines and Air Mail: The Post Office and the Birth of the
Commercial Aviation Industry. University Press of Kentucky.
Wagener, F. and Ison, D.C., 2014. Crew resource management application in commercial
aviation. Journal of aviation technology and engineering, 3(2), p.2.

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Appendix 1: Consolidated Income Statement

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Appendix 2: Consolidated financial position