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Norwegian Air has been on the verge of liquidation since the start of the pandemic, but suffice it to say that the current situation has only exacerbated the problems.
The airline has done everything to improve its financial situation, even if it does not go far. In August, the airline announced it would run out of cash by the first quarter of 2021 at the latest without additional funding.
Norwegian Air had one last hope, and it now seems irrelevant …
Norwegian Air refuses Norway’s rescue
Earlier this year, Norwegian Air secured a Norwegian government-backed loan worth $ 340 million. This was made possible by a debt-to-equity swap with an aircraft leasing company, a prerequisite for obtaining this financing.
Several weeks ago it was revealed that Norwegian Air was once again in talks with the Norwegian government about additional government funding. The possibility of the airline being nationalized was even avoided.
Well, it looks like it’s not happening. Norway announced today that it will not provide any additional funding to Norwegian Air. As the Norwegian Minister of Industry, Iselin Nybø, describes this decision:
“It’s a difficult message to get across. But we are responsible for the responsible use of public funds. Norwegian Air has a financial structure that makes it risky for us to enter with support. It was not defensible.
It seems fair enough to me. Norwegian was in danger of going bankrupt before the pandemic, so pouring even more money into the airline is probably not a good idea.
Norway will not provide more funding to Norwegian Air
Norwegian Air calls it a ‘slap in the face’
Following the news, Norwegian Air said it was “very disappointed” at Norway’s lack of help, and said it sounded like a “slap in the face”. He notes that this help was necessary to maintain operations throughout the coronavirus pandemic and that the company “now faces a very uncertain future”.
This is all fair enough.
What I can understand is some of the comments from Norwegian Air CEO Jacob Schram:
“We call ourselves Norwegians, we are Norwegians. We are part of Norway and Norway is part of us. “
Look, I understand that Norwegian is trying to play patriotism here to get help from a particular country, but let’s face it. Yes, the airline is called Norwegian, but it largely stops there:
- Only a small percentage of Norwegian’s transatlantic flights originate from Norway, with most coming from other countries, ranging from France and Greece to Spain and the United Kingdom.
- It is an airline that has taken advantage of all European business opportunities (some might say ‘loophole’), as it has registered planes in Ireland, hired crews from Thailand who only do a fraction of what their colleagues do. Europeans did, etc.
There is nothing inherently wrong with that, but I also don’t think Norwegian is really in a position to claim to be fully focused on Norway as a country.
Schram goes on to note how the airline maintains many jobs in Norway, creates competition and serves unique routes. He suggests the following:
“This alone clearly shows that even moderate financial support would be a worthwhile investment for Norway. How anyone could come to a different conclusion is impossible to understand. “
I really don’t think it’s that hard to figure out. Unfortunately, the Norwegian has become a bottomless financial pit. I fully agree that the airline was working on a turnaround before the pandemic, but it is too little too late.
The airline is so leveraged that there is so little benefit at this point, and frankly, an airline had better start from scratch.
Would “moderate financial support” be “a profitable investment?” How long does Schram think this support would last, and then what?
I think the Norwegian Minister of Industry is absolutely right – it is not about whether aviation in general is worth supporting, but rather that Norwegian is just too risky for one. investment and that the government should not invest money in something that is unlikely to succeed. survivor.
Can Norwegian Air find a new source of funding in the coming months?
At the end of the line
Norwegian Air has great employees and I hate to see people lose their jobs. In fact, Norwegian has been strong against the competition, delivering a low cost yet fun experience that passengers have grown to love.
But that doesn’t negate the reality of Norwegian’s business. The airline has been run like a technology company for years, focused exclusively on market share rather than profitability. Then British Airways wanted to acquire it, but Norwegian became greedy. While the airline finally started to focus on the right things, it was arguably too late.
At this point Norwegian is being ridiculously exploited, and I can’t blame anyone (be it a private investor or a government) for not wanting to throw more money at the airline. Norwegian has already had more lives than a cat …
What do you think, is this the end of Norwegian at last, or will the airline find a new way to stay in business?
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