Norwegian Air Shuttle has been fighting for survival for the last few years. Due to a huge debt fueled expansion it is one of the most leveraged airlines in the world. The airline has 168 aircraft, bases as far afield as Argentina, and a long haul 787 operation. It has survived a 97% drop in its share price and various other crises, but Covid-19 may be one step too far.

Covid-19

Currently, only 7 aircraft are flying on government charter missions, whilst the management and government plan the company’s survival. The airline has said it expects short haul operations to start in 2021 at a reduced schedule, whilst a full ramp up might not be possible until at least the summer. The company cancelled the majority of its services in March and has temporarily laid off 80% of it’s workforce. Without state aid the company only has enough cash to last until the middle of May.

Survival

The airline is currently trying to persuade shareholders to accept a huge Norwegian state bailout valued at 3bn Kroner (£230m). ‘New Norwegian’ is asking its bondholders, shareholders and aircraft lessors to make a huge sacrifice. Aircraft lessors will have to agree to take equity in the company rather than go after debts – thought to be close to £400m. Bondholders similarly will be expected to take equity in the company, whilst shareholders can expect a 95% value reduction. If agreed, the airline is planning to re-emerge with a 30% smaller fleet, a focus on the most profitable routes, and will delay or close Norwegians long-haul operation.

Support

The government support package has garnered political support in Norway although it is likely that this support will mean the company will have to focus operations on flights in its home country market. Even with the government support package the airline predicts it only has enough money for six to nine months of operations.

This period of hugely reduced operation may be exactly what is needed to keep Norwegian alive. What is clear is that ‘New Norwegian’ will be a very different airline to its pre-corona namesake.

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