Norwegian's tough winterBack to Forum
Norwegian now admits it is in grave trouble.
“Norwegian Air Says It Will Run Out of Cash in Weeks,” (Skift, 13 March 2020)
When the government intercedes it has to be neutral and not favour any one particular airline. And that is what it has done.
“As a first step on Friday, Norway suspended all airport fees for the first six months of 2020 and the tax Norway charges for each passenger will be lifted for a period of 10 months”, Finance Minister Jan Tore Sanner told a news conference.
But the pertinent question is, “Has enough been done to save Norwegian (and the other airlines)?”
The value of the Norwegian´s shares has dropped about 80% in the last couple of weeks which makes the value of the whole company about USD34 million. That is nothing for an airline. However, when we consider the state of the market and the unknown future prospects for all airlines then a takeover bid for Norwegian does not look to be on the cards.
We have to consider that with this pandemic ANY airline could go bust. As capetoniamn has said Norway is effectively closed down. It has been joined by Denmark. Even “healthy” IAG has seen its share value drop 50% in the last few weeks – mostly in the last few days. What does the future hold,?Nobody knows.14 Mar 2020
Norwegian Air Says It Will Run Out of Cash in Weeks
It ran out of cash a long time ago. It has now exhausted the possibilities of its loans and financing being extended further. A pity, but it has its back to the wall, and it may only be the first of several major airlines to end up this way.14 Mar 2020
With the Free Republic of Ireland and the Brexited United Kingdom now part of the US travel ban (on Monday), Norwegian Airlines will surely cease operations very shortly.14 Mar 2020
This will be difficult to survive. At least they are hoping for more help from the Norwegian government. Which is much more than what the UK government is doing.
“Norwegian Cuts 85% Of Flights And Lays Off 90% Of Staff”, (Simple Flying, 16-3-20)
“Coronavirus: Norwegian cancels 85% of flights and lays off 90% of staff”, (Travel Weekly, 16-3-20)17 Mar 2020
Actually, I think this crisis could be the saviour of Norwegian. Always thought they were stupid to expand at the rate that they did. Didn’t learn the lessons of others, especially trying to dip their toes in the long haul market.
Similar to how RBS had to restructure itself and pull back from being a mega global bank to pretty much focussing on its roots in Scotland.
My prediction is Norwegian will have no option but to do the same, and pare back to its original strengths focussing on flights originating from Scandinavian airports to select routes in Europe.17 Mar 2020
I agree with the above, but it’s not so easy. They did expand too fast, and they will, I am afraid, pay the price. I hope you’re right, that this will be the saviour of Norwegian, but I fear the opposite.
There are commitments made in the past that have to be honoured, salaries, a/c leases, and so on. In the old days if an airline was operating an unprofitable route they could redeploy the assets to make better use of them, but that is not going to help now.17 Mar 2020
Many people forget that Norwegian’s original aim for long-haul was to serve NE Asia … in other words mainland China, S Korea, Japan and possibly Hong Kong.
But all these destinations are best served by overflying Russia and this airline seems to have been naive in expecting to gain overflying rights without having to pay money.
Hence Norwegian postponed its Asian ambitions and targetted the N Atlantic, later Latin America, instead.
Yes Norwegian does serve Bangkok (from Scandinavia) in SE Asia, and for a time it did serve Singapore (from LGW), but for both destinations Russian overflying rights are not essential.
As we reported at the time Norwegian, just like Air Asia X, discovered that indirect flight competition was too fierce for long-haul low-cost to Singapore and that route didn’t last long.18 Mar 2020
jjlasne – Part of the LCCs’ business model is to grow a particular the market. If they fail they quickly exit that market.
As regards London-Singapore it’s a combination of yield and competition and we referred to both in our piece above.19 Mar 2020
BT reported that Norwegian is getting a US$265m bailout. Although it seems there will be quite a few catches.
One condition is an 8% equity requirement which Norwegian does not have. So for now the company will only receive US$28m.
Once it achieves a reduction in interest and repayments to creditors it will receive another US$111.
The remainder would be received when Norwegian returns to ‘satisfactory’ levels of solvency.
The norwegian goverment is also making it a condition that a certain amount of flights are operated WITHIN Norway.20 Mar 2020
Despite the offer of help from the Norwegian government, with conditions, Norwegian now sees its founders jumping ship.
HBK Holdings is the investment vehicle for former executives Bjorn Kise and Bjorn Kjos who have just reduced their holding from 9.99% to 4.64%.
But the headline about a reduction of the holding in half does not tell the whole story. At the beginning of 2018 HBK held 26.8% of the shares. Since then there has been a constant sale of the shares until the last one, which valued the shares at 88 US cents each. the 5.35% sale produced only US$546.000.
Thus these two individuals have seen the writing on the wall, decided to run down their shareholding, get out, and leave everyone else holding the baby.
The chances to keep the airline running were available before (e.g. the two offers from IAG) but now only with financial engineering and the loan from a Norwegian billionaire have kept the airline in the air.This airline is now flat on its back and will not fly again unless it changes its name to Lazarus. Anyway it was good while it lasted.
“Norwegian shareholder HBK Holding halves its stake”, (ch-aviation 2-4-20)3 Apr 2020