Norwegian Air’s Future on Thin Ice as Government Declines More Aid
Norwegian’s future became even more tenuous when Norway’s government signaled it would not provide more state aid to the troubled airline. In addition, a second wave of coronavirus infections in Europe is prompting the government to make travel restrictions stricter, further imperiling the carrier.
The future is frightening, but the present is no great shakes. The company called itself “in hibernation” in its third-quarter earnings report. Demand is down more than 90%. The carrier has grounded most of its fleet, with just 25 out of its 140 aircraft in operation during the quarter. It has sold off several Boeing 737s. And another round of furloughs has brought it down to just 600 employees.
Earlier this week, Norway’s government said it would not offer any more state aid to the country’s airline industry. In May, Norwegian availed itself of $329 in government-backed loans. Without more aid, the airline could be forced into bankruptcy. “It is crucial that the Norwegian aviation industry receive further support if we are going to survive,” CEO Jacob Schram said.
It remains to be seen if Norway’s government will step up should Norwegian declare bankruptcy, but there may be little political appetite to prop up an airline that flies international routes, like London-New York, for example, that do not serve Norway directly. Additionally, the domestic market has become more competitive, with the expansion of Wizz Air in Norway and possibly entry of a new domestic airline. A Norwegian bankruptcy would not result in an SAS monopoly, in other words.
“So now the government in Oslo see that there could be three airlines…The pressure to have more taxpayer money funnel into an airline that’s losing money very rapidly, mainly on their intercontinental business, which is almost shut down,” Air Lease Corp. Executive Chairman Steven Udvar-Hazy said this week about Norwegian.
The company could convert debt to equity or raise money from its remaining aircraft, and it could press for further state aid. “There are realistic alternatives,” Norwegian said in its third-quarter report.
Norwegian reported a third-quarter loss of $108 million. Capacity is down 94% as it shuttered much of its international network.
In the last decade, Norwegian under former CEO Bjorn Kjos expanded rapidly, opening subsidiaries in Ireland and the U.K. and even Argentina. It shifted its focus from Norway’s domestic market to longhaul, low-cost intercontinental travel. The company sold its Argentine franchise to JetSmart last year.Subscribe Now to Airline Weekly