Norwegian Air Shuttle applied to the High Court of Ireland seeking to prematurely end leasing agreements on 36 aircraft held by its Irish-registered subsidiaries on January 28, 2021.
Among other measures in order to rescue the business, including the goal of raising €500 million ($607 million), the company also indicated its plans to reduce its fleet. Norwegian reportedly told the court that the repudiation of lease agreements needed to be completed as possible.
Kieran Wallace, the court-appointed examiner of Norwegian, remained confident that the airline will be able to survive the crisis and prepared a scheme of arrangement regarding the lease agreements, which if approved by the court, should allow the air carrier to continue “as a going concern,” reported the Irish outlet Independent.
The examiner also noted that Norwegian’s recent decision to cease long-haul operations would have a significant impact on its employment rates that depended on the reduced fleet and service offering. With its new business model, the low-cost carrier plans to operate as many as 68 Boeing 737 aircraft in 2022, focusing on short-haul connections within Europe.
Meanwhile, lawyers representing lessors affected by the proposed Norwegian’s repudiation, argued that the lack of detail in the airline’s application raised concerns. The lawyers also noted that lessors could sue the airline if the issue is not resolved between the two concerning parties.
According to the latest investor presentation, Norwegian aims to gain fresh equity by late-February or early-March 2021. The company estimated that before the restructuring, the write-off of leased aircraft assets would cut its equity by $1.2 billion. However, it was expected that the majority of creditors would convert the debt into equity.
The airline also indicated that after it would exit the restructuring process, new investors would own 70% of the air carrier’s equity, while converted creditors would hold 25%. Meanwhile, current shareholders would have 5% of the airline’s shares.
Norwegian entered the Irish examinership process in November 2020. A month later, the High Court of Ireland granted Norwegian protection from its creditors giving the company time to continue on the restructuration of its debts and escape an imminent collapse.