Norwegian Air Shuttle will proceed with private placements through the conversion of some 10 billion Norwegian kroner ($966 million) worth of bonds and lease debt to shares and carry out a public offering valued at up to 400 million kroner, the company said in a filing with the Oslo Stock Exchange. More than 95 percent of votes taken at an Extraordinary General Meeting (EGM) on Monday went in favor of the proposed private placements.
The plan effectively hands over control of the near defunct airline to creditors and leaves shareholders with only 5.2 percent of the company. However, it helps qualify Norwegian for another two tranches of state aid worth 2.7 billion kroner. The airline has already received an initial 300 million kroner tranche under the country’s coronavirus relief plan, but any further funding hinged on the company’s ability to shed most of its debt.
Norwegian has cut virtually all its passenger services since a March 16 announcement that it would gradually shed 85 percent of its flights and lay off 7,300 employees—or 90 percent of its workforce—as stagnating demand and government-enforced travel restrictions worldwide due to the Covid-19 crisis force dramatic measures across the industry. Now flying just seven airplanes on state-subsidized domestic routes in Norway, Norwegian has since cut 95 percent of its capacity and 7,650 employees from its payroll. About 200 employees remain in operations.
Entering what it calls a hibernation phase, Norwegian doesn't expect a recovery until the high season of 2021 nor a return to normal operations until 2022. By that time, it expects the size of its fleet to shrink from its pre-Covid peak of 168 to about 110 to 120. Under plans for what it calls New Norwegian, the airline would see its long-haul network consolidate by some 40 percent, concentrating on "top-tier" cities and "key flows" between the European Union and the U.S., where Norwegian enjoys inherent strength in terms of scale and market presence, such as at London Gatwick, New York JFK, and Los Angeles International.
Meanwhile, Norwegian's short-haul network would benefit from simplification of schedule design to gain crew efficiencies and improved on-time performance. Plans call for a focus on the airline's intra-Nordic core routes, while overall production falls by about 10 percent "as a precaution for [a] lower demand environment."