In an encouraging development, Norway’s government agreed to contribute to Norwegian’s rescue, having previously refused to do so. The move gives new hope to the airline’s employees.
Having previously failed to get Norway’s support, Norwegian has decided to make some radical changes in its operations. The airline will no longer operate long-haul routes. For 2021, they will scale down their operations dramatically, keeping only 50 aircraft in line service. If the plan works, they hope to grow to 70 aircraft, in 2022. Norwegian hoped its plan would convince investors to participate in the company’s rescue.
The airline’s plan calls for a drastic debt reduction to NOK 20 billion ($2.36bn, €1.94bn). They also hope to raise NOK 4-5 billion ($473-591m, €389-486m) in capital investment. Unfortunately, these plans will inevitably lead to drastic redundancies. However the airline simply wasn’t viable in its previous form. And apparently it is this switch to Norwegian’s new plan that convinced Norway’s government, to support it.
Iselin Nybo, Norway’s Minister of Trade and Industry, had this to say about Norwegian’s plan and the government’s support:
“The plan seems more robust than the one we said no to in October. That is why we are now positive towards contributing.”
Norway’s Means of Supporting Norwegian
Norway’s government will help Norwegian, by offering them a hybrid loan. The announcement did not specify the amount of this loan. And while the loan itself comes with some conditions, they seem to align with the airline’s goals. Essentially, the government wants the airline to stick to its plan. Norway’s loan is conditional on Norwegian reaching its capital investment goal, i.e. getting NOK 4.5 billion ($534 million).
Jacob Schram, Norwegian’s CEO, had this to say about Norway’s support:
“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. We still have a lot of work ahead of us, but a participation from the government underscores that we are heading in the right direction.”
Norwegian believes that the backing from Norway’s own government will be, in itself, a big factor in drawing more capital. However, this support is critical for another reason. Tomorrow (the 22nd of January) is when Norwegian will have to go back to court in Ireland, to present its restructuring plan. Doing so with governmental backing, could be decisive.
Some Hope For The Future?
With Norway’s government support and hopefully the nod from Ireland, Norwegian can look forward to a slow but steady recovery. Looking at its future, it will be interesting to see what sort of fleet Norwegian ends up with. Sadly, abandoning long-haul means the loss of its Dreamliner fleet. Beyond that, the airline has a 737 fleet.
At present, this fleet numbers 77 737-800s (including subsidiaries). They had also received 18 737 MAX-8 models. Clearly a lot of these aircraft will go back to lessors. But it will be interesting to see if they will retain any of the newer jets.
The pandemic already saw the demise of too many airlines. So, given that Norwegian was in trouble even before it, its rescue with Norway’s support, will be a welcome break from this doom and gloom!