Norwegian Air Shuttle, together with the Norwegian government, announced that the latter is keen to support the airline’s new business plan and grant state support for the ailing carrier.
The positive response to the request for government support came following Norwegian’s new business plan announcement. The airline will ax its long-haul routes and shrink its fleet significantly, as the low-cost carrier looks to re-focus on Scandinavia and short-haul flights from the region. Going forward, the airline will operate with 50 Boeing 737 aircraft – a stark contrast to the 156 jets, including 37 Boeing 787s that the airline finished 2019 with. If demand recovers, the number could be increased to 70 narrow-bodies in 2022.
The company also wants to reduce its debt to around NOK 20 billion ($2.3 billion) and to raise fresh capital between NOK4 and 5 billion ($472.1 and $590 million) in order to fulfill its new plan and become financially stable.
Seemingly, the new business plan swayed the Norwegian government to change its tone. Previously, in October 2020, the government had refused to grant any sort of aid to the airline.
Following the refusal, the company was forced to enter an examinership process in Ireland, where most of its key assets, namely aircraft, were registered in November 2020. The process, similar to Chapter 11 bankruptcy protection in the United States, allows a business entity to be protected from its creditors while it restructures its business. Additionally, Norwegian entered a supplementary reconstruction process in Norway in early-December 2020.
Change of tone
“The fact that our government has decided to refrain from providing Norwegian with further financial support is very disappointing and feels like a slap in the face,” at that time stated Chief Executive Officer (CEO) Jacob Schram. With the announcement of the new business plan in January 2021, the airline also mentioned the fact that it was once again in a dialogue with the Norwegian government “about possible state participation based on the current business plan.”
“The plan appears more robust than the one we said no to in October. That is why we are now positive about contributing,” read Norway’s Minister of Trade and Industry Iselin Nybø statement on January 21, 2021. According to Nybø, while the government is keen to support the airline with a hybrid loan, the company “is, among other things, dependent on bringing in long-term and strategic owners.”
“The state has no ambitions to become an owner of Norwegian,” she added.
However, the Norwegian government is not willing just to throw cash at the airline’s problems. If Norwegian wants to access the loan, it first must raise at least NOK4.5 billion ($531 million) of fresh capital and receive approval for the restructuring process within the framework presented by the company. Furthermore, participation in a hybrid loan will take place on market terms, read the Ministry’s conditions.
Nevertheless, the government wants to ensure that Norway maintains good connectivity and a strong aviation market once the current crisis subsides and people are able to travel once again. “We believe a reconstructed Norwegian can be an important player in Norwegian aviation in the future,” said Norway’s Minister of Transport Knut Arild Hareide.
“On behalf of everyone at Norwegian, I would like to sincerely thank the government for their support. Norwegian has been faced with a very challenging and demanding situation due to the pandemic, and the government’s support significantly increases our chances of raising new capital and getting us through the reconstruction process we are currently in,” commented Schram.
“With a new business plan, and a participation from the government, we are confident we can attract investors and get through the Examinership and reconstruction process,” Norwegian’s chief executive added.
Norwegian is set to exit the Irish examinership process either on January 27, 2021, or February 26, 2021, if the process is extended to 100 days.