Norwegian Air Shuttle indicated that if it does not get a fresh injection of cash, the carrier risks running out of money as soon as mid of May 2020.
The airline stated that Norwegian’s “ability to maintain its business and operations in the short-term” is dependent on reducing or restructuring its debt and being able to access a state aid package, which was announced by the Norwegian government. The company’s four subsidiaries in Denmark and Sweden already declared bankruptcy on April 20, 2020.
Now, Norwegian indicated that the situation is critical and access to the $276 million (NOK3 billion) state aid package is a must “by mid-May before the company runs out of cash.”
The airline, which currently operates only seven aircraft, estimates it could return to normal operations in 2022, as it plans to hibernate during the next winter season to conserve cash and re-launch fully during the high cash-flow summer season. Norwegian’s long-haul flights and short-haul flights in Europe are to be suspended until April 2021, based on a slow recovery of the airline industry scenario.
Even if it secures its short-term liquidity, the airline would still be in the danger zone. The company expects to “have a significant amount of debt” related to its aircraft leases and financing. Norwegian owns 55 and leases 92 aircraft and has outstanding liabilities of $2 billion (NOK21.9 billion) and $3.1 billion (NOK33.2 billion) for them, respectively.
The company plans to reduce its lease obligations by $500 million and cut current monthly expenses on leases by $4.2 million, of which $900,000 is related to returned aircraft to lessors.
New Norwegian plans
The airline aims to restructure during the coronacrisis and resurge as a “New Norwegian” with a reduced fleet and focused on the Nordic market, rather than expanding its services all around Europe.
The new Norwegian would have around 110-120 aircraft and focus on building its strength in its home market, the Scandinavian countries. The carrier would focus on its proven routes, rather than trying to pilot new ones. The long-haul offering would target on such airports as London Gatwick Airport (LGW), New York John F. Kennedy International Airport (JFK) and Los Angeles International Airport (LAX).
Despite the plans, the company still needs to address its serious financial difficulties. If the current situation persists, the airline would burn between $28 million (NOK300 million) and $47 million (NOK500 million) of cash per month starting from July 2020.