Norwegian Air faces ‘very uncertain future’ after further state aid from Norway denied
Date added: November 11, 2020
The Norwegian government has refused to grant further financial assistance to Norwegian Air. It was bailed out in the spring, through state aid from Norway of 3bn krone (£255m), with stringent conditions attached, after the first wave of the grounding of airlines due to Covid. Now with the return of Covid across Europe, air travel demand is not returning for this winter, so Norwegian’s finances are in a grim state. But the Oslo government is not giving more money. The airline has, in the past, annoyed trade unions in Norway for using cheaper, foreign labour. It said it would now be forced to furlough another 1,600 staff, leaving only 600 employed out of more than 10,000 people at the start of the pandemic. It said it would park all but 6 aircraft (out of its fleet of 100 planes) and operate only domestic routes through the winter. It was flying from 6 UK airports, with its base at Gatwick. As well as cheap European leisure flights, it offered cheap trans-Atlantic routes. Before Covid it was one of the biggest airlines at Gatwick. Norwegian is fragile, as it has expanded too fast in recent years, and has a lot fo debt. The airline is expected to have losses of 5.3bn krone (about £450m) for the first half of 2020.
The carrier was bailed out through state aid with stringent conditions attached in the spring, after the first wave of the coronavirus and the grounding of airline fleets.
However, with a further winter lockdown in many markets and a slower recovery than hoped, Norwegian had appealed for further aid.
Although, until this year, the airline had operated entirely independently of the Norwegian state – and in the past had attracted the ire of unions in Oslo for its use of cheaper, foreign crews – its chief executive, Jacob Schram, said: “We are called Norwegian, we are Norwegian. We are a part of Norway and Norway is a part of us. This is the way it has been for almost 20 years.
“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 for everybody at Norwegian who is fighting for the company when our competitors are receiving billions in funding from their respective governments.”
The airline said it would now be forced to furlough another 1,600 staff, leaving only 600 employed out of more than 10,000 people at the start of the pandemic. It said it would park all but six aircraft and operate only domestic routes through the winter.
Norwegian was operating a fleet of well over 100 planes from a number of European bases before the pandemic. It pioneered low-cost, long-haul flights, offering cheap no-frills fares across the Atlantic in particular.
Before the coronavirus crisis it was also a significant player in the UK’s leisure and short-haul market, and one of the biggest airlines at London Gatwick.
Norwegian argued it had anticipated record profits in 2020 before the pandemic struck, after restructuring the company. Schram said: “We could clearly see the results of our hard work to go from growth to profitability, which was initiated in 2018. With further support to get Norwegian through this unprecedented crisis for the aviation industry, we would come out as a more sustainable and competitive airline.”
The rescue deal agreed in May resulted in Oslo ploughing 3bn kroner (£255m) into Norwegian, after aircraft lessors and other major creditors agreed to write off much of the airline’s debt.
By August, Norwegian indicated that the funding would not be sufficient to guarantee its survival, after reporting losses of 5.3bn kroner for the first half of 2020.
Coronavirus: Norwegian Air dealt huge blow as it is snubbed for government support
Lucy Harley-McKeown (Yahoo Finance) Mon, 9 November 2020,
Norwegian Air (NAS.OL) suffered a huge hit on Monday as the Norwegian government said it will not provide extra financial support.
In a statement, the Ministry of Transportation rejected proposals for cash to support the business, which has been badly affected by widespread COVID-19 lockdowns.
The airline had said in August that it would run out of money in Q1 2021 unless it received a fresh cash injection.
Its shares fell more than 21% in early trade in Oslo.
In September, Norway’s industry ministry said it would extended loan guarantees for Norwegian Air by two months, until the end of 2020.
Earlier this year, the country’s airline secured a state aid package worth $330m (£256m), after a debt restructuring, but it said it would need to raise more funds to get through the impact of the coronavirus crisis.
At the time, while Norway’s government didn’t disclose any details of the deal, it did say that the terms of the state guarantee scheme had changed.
Norwegian Air said in a statement: “The company is now facing a very uncertain future, but we will do everything in our power to get through this crisis and to continue doing what Norwegian has been doing for almost 20 years: Ensuring competition and providing affordable fares for all.”
The airline has been a trailblazer in creating low-cost routes over the Atlantic, and its rapid expansion left it with ballooning debt bills. By mid-2020 these totted up to close to $8bn.
Norwegian Air’s July passenger volume fell by 90.4% on the year, after the COVID-19 crisis and global lockdowns saw most of its fleet grounded. It flew only 356,093 passengers during July 2020, compared to 3.7 million in the previous year.
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 for everybody at Norwegian who is fighting for the company when our competitors are receiving billions in funding from their respective governments,” said Norwegian’s CEO Jacob Schram.
The company said it would hold a news conference at 9.30am GMT. It is due to report Q3 results tomorrow.