Norwegian Air gets government backing for survival plan
Low-cost carrier to end long-haul operations and instead focus on European cities
OSLO, Norway: The Norwegian state said on Thursday it was ready to offer aid to Norwegian Air, after the ailing low-cost airline presented a new plan to survive its COVID-induced crisis.
Hit hard by the COVID-19 pandemic’s impact on travel, having already been in financial trouble before, Norwegian applied for bankruptcy protection in both Ireland and Norway in December to buy time to work out a solution with its creditors.
The low-cost airline presented a series of proposals on Jan. 14, including an end to its long-haul flights in favor of a refocusing on Europe, and a massive debt reduction target coupled with raising new capital.
The government was asked to support the plan and has now signaled its willingness, on condition that private investors “do their part.”
“The plan seems more robust than the one we said no to in October. That’s why we are ready to contribute,” Trade Minister Iselin Nybo said in a statement.
Norwegian’s shares jumped by nearly 16 percent on the Oslo Stock Exchange, although they are still down by more than 98 percent year-on-year.
The state, which extended 3 billion kroner ($356 million, €292 million) in public guarantees to Norwegian last year before turning off the tap, could offer aid in the form of a “hybrid” loan that can be converted into shares later.
But the government made clear it had no intention of becoming an owner.
“Norwegian needs, among other things, to bring in long-term strategic shareholders. The state has no ambition to become a shareholder,” Nybo said.
Oslo said its condition would be that Norwegian manage to raise 4.5 billion Norwegian kroner (€440 million) in new capital “mainly” from strategic institutional investors.
An airline statement welcomed the government’s response, saying “it significantly increases Norwegian’s chances of working through the crisis caused by the pandemic.”
“We still have a lot of work ahead of us, but a participation from the government underscores that we are heading in the right direction,” Norwegian CEO Jacob Schram said separately.
Norwegian, Europe’s third largest low-cost airline until the pandemic paralyzed global air transport last year, has seen its debt and losses pile up since 2017.
The airline had a pre-COVID-19 fleet of 140 aircraft, of which only six are currently airborne, and the number of employees is down to 600, from more than 10,000 before the crisis.
The company plans to reduce debt to 20 billion kroner and put some 50 aircraft back into operation this year, followed by about 70 more in 2022.
It will also scrap long-haul subsidiaries in Britain, France, Italy and the US.