Norwegian Air may not survive pandemic

by



[ad_1]

The coronavirus pandemic and travel restrictions have forced Norwegian Air to tie up the vast majority of its fleet and lay off nearly all of its workers. The heavily indebted carrier’s inventory has collapsed and its cash reserves are nearly depleted.

“Norwegian depends on additional working capital to continue operating in the first quarter of 2021 and beyond,” the airline said on Tuesday, releasing its latest financial results.

A potential rescuer has already turned his back on the airline that once had the ambition to repeat Ryanair (RYAAY) short-haul success on longer routes. Norwegian Air said on Monday that the Norwegian government had ruled out providing it with further financial assistance, leaving the carrier in what it described as a “difficult situation”.

CEO Jacob Schram said in a statement that the decision “is very disappointing and looks like a slap in the face.” Airlines around the world receive significant financial support from their respective governments, he said, and Norwegian Air should benefit because of its contribution to the Norwegian economy. “How anyone could come to a different conclusion is impossible to understand,” said Schram.

The CEO went further at a press conference. “I’m not ruling anything out now,” Schram told reporters in Oslo, according to the Financial Times. “That implies [bankruptcy], layoffs, layoffs. “

Norwegian Air was founded in 1993, but began rapid expansion almost ten years ago, seeking to apply the business model launched by Ryanair in Europe and the Southwestern United States to transatlantic flights. In 2012, it placed an order for 222 aircraft, the largest in the history of European aviation. But the aggressive strategy left him with huge debts and little leeway in the event of a problem.

Tuesday’s earnings statement shows Norwegian Air is in serious distress. The carrier only operated 25 of its 140 planes in the third quarter, and passenger numbers fell to 1 million from 10.5 million in the same period last year.

The company’s quarterly operating loss was SEK 2.8 billion ($ 310 million), while revenue fell 91% from a year ago to SEK 1.3 billion ($ 143 million). Cash and cash equivalents had fallen to just 3.4 billion crowns ($ 376 million) by the end of September.

Schram said the government’s decision not to provide aid would force it to further reduce the number of people employed over the next few months to 600, from more than 10,000 before the pandemic. More planes will be taken out of service and the airline will reduce the number of domestic routes it operates.

Boeing's biggest order success to date: Norwegian cancels 97 jets

“The company is currently assessing the effects of the current situation with the aim of safeguarding the interests of all stakeholders,” he said Tuesday.

Bernstein analysts said the government’s decision not to provide support would make it “difficult for the company to continue operating.”

“It is likely that this move, combined with continued foreclosure measures, will be the end of the line for the company. There is little hope of recovering equity from this company,” wrote Daniel Roeska and Alex Irving in a research note.

As other airline shares soared on Monday in hopes that a coronavirus vaccine will fuel a travel upturn, Norwegian shares fell 13%. The stock was slightly higher on Tuesday, but it’s still lost over 98% of its value so far this year.

[ad_2]

Source link