Struggling low-cost carrier Norwegian has agreed to establish a joint venture with China Construction Bank Leasing Corporation.

The deal is designed to assist Norwegian with the finance for aircraft it has on order, with both partners taking an ownership stake in planes due to be delivered to the carrier.

Initially, the joint venture will comprise 27 Airbus A320neo aircraft to be delivered from 2020 to 2023.

China Construction Bank Leasing Corporation, which is a subsidiary of China Construction Bank Corporation, will own 70 per cent of the venture.

Norwegian, through subsidiary Arctic Aviation Assets DAC, will take the remaining 30 per cent.

Norwegian said the deal would strengthen its financial situation “considerably”.

“Following several months of negotiations, I’m very pleased to announce that we have reached an agreement with China Construction Bank Leasing Corporation to establish a joint venture for an initial 27 Airbus A320neo aircraft.

“This agreement will contribute significantly to reducing our current and future capital expenditure.

“The joint venture is one of many important initiatives that need to be realised to deliver on our strategy of moving from growth to profitability,” said Norwegian acting chief executive, Geir Karlsen.

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

“We have during the past year developed a good relationship to Norwegian, including two already executed transactions and we are very much looking forward to continue to build on this relationship through this joint venture,” said Kevin Mi, head of Aviation, China Construction Bank Leasing Corporation.

Results

Also today, Norwegian has reported its “best every quarterly result”.

Profit before tax for the third quarter improved by 38 per cent to NOK2.2 billion (£185 million) compared to the same quarter last year.

Unit revenue and revenue per passenger kilometre (yield) both increased by three per cent in the quarter.

Total revenue was NOK14.4 billion (£1.2 billion), an increase of eight per cent from the same period last year, primarily driven by intercontinental growth.

The load factor was 91.2 per cent, up 0.7 percentage points.

“Norwegian’s third quarter results show that we are delivering on our strategy of moving from growth to profitability.

“We are delivering record-high earnings, record-high operating revenue and reduced unit cost, even when hit by operational issues outside of our control,” concluded Karlsen.