Low cost carrier Norwegian faces an uncertain future after the government of Norway declined further financial support to help the struggling airline through the COVID-19 pandemic.
The struggling airline had requested a second multi-billion krone aid package. Norwegian had issued a previous warning in August that it would run out of cash in the first quarter of 2021 unless new funding was secured.
Norway’s industry minister Iselin Nyboe said the government had concluded that provision of additional support for the carrier “would not be a responsible use of public funds”.Nyboe told a news conference: “It is a tough message to get. Norwegian Air has a financial structure that makes it risky for us to go in with support. It was not defensible.”
The Oslo stock exchange said: “NAS [Norwegian Air Shuttle] is currently evaluating the effects of the current situation with an aim to safeguard the interest of all stakeholders.”
“Slap in the face” for those fighting for the company
Norwegian chief executive Jacob Schram described the carrier’s predicament as a “challenging situation”. He said: “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.”
Norwegian had previously rejected a bid by IAG which sought to buy the budget carrier for £1bn. The airline was already facing losses before the colossal drop in demand caused by the coronavirus pandemic. Norwegian carried 36 million people in 2019 but posted losses of NOK1.61bn (£134m). It blamed the losses on the grounding of the Boeing 737 Max after two fatal crashes as well as issues with Rolls Royce engines fitted to its Boeing 787 aircraft.
80 per cent of workforce furloughed or redundant
Norwegian has already furloughed or made redundant 8,000 employees, representing 80 per cent of its workforce. The airline has a base at Gatwick where it was previously the third-largest airline behind easyJet and British Airways. It also flies from Edinburgh and Manchester. Most of the airline’s UK fleet and operations are currently grounded, although the airline is operating flights between Scandinavia and Gatwick.
Norwegian was forced to hand over almost all of its equity to creditors in May to access a state loan worth 3 billion kroner ($330 million) but continued COVID-19 restrictions and a new wave of lockdowns this autumn have hampered its recovery within Europe. The North Atlantic market also remains largely closed.
If Norwegian were to collapse, it would be the biggest casualty so far among European airlines and would lead to thousands of jobs losses. Thousands of customers are owed money for cancelled flights, or have accepted vouchers for future trips.
Norwegian’s stock price plunged by 24 per cent after the government’s announcement, but it added funds would be made available to support domestic flights. Additional funding could come from the sale of aircraft, conversion of more debt to equity or from the airline’s owners.