Norwegian Air Shuttle warned on Monday that it is facing a “very uncertain future” after the government of Norway earlier in the day had declined its request for a second bailout to help its bridge the loss of revenue during the pandemic. “The recently imposed strict Covid-19 measures in conjunction with this rejection for further financial aid support leaves Norwegian Air Shuttle in a challenging situation,” the Oslo-based low-cost carrier said in a regulatory filing with the Oslo stock exchange. It added it is currently evaluating the effects of the current situation with “an aim to safeguard the interest of all stakeholders.”
Norwegian will report third-quarter results on Tuesday but has it has canceled its results presentation.
The company, which struggled with too much debt and low profitability pre-Covid-19, already signaled in August that it would need more financial help at the end of the year if Covid continues to worsen through the winter. Norwegian secured a 3 billion Norwegian kroner ($340 million) loan guarantee from Norway’s government in the second quarter and a multibillion Norwegian kroner debt-for-equity swap involving aircraft leasing companies and the carrier’s bondholders. According to Minister of Trade and Industry, Iselin Nybø, Norwegian’s request for a second tranche of financial support amounted to billions of kroner “and the government has assessed that in this situation, it is not a justifiable use of funds.”
The airline’s CEO, Jacob Schram, described the Norwegian government’s decision as “disappointing,” and called it “a slap in the face for everybody at Norwegian who is fighting for the company when our competitors are receiving billions in funding from their respective governments.”
He did not reveal how much in aid the company has requested but noted that Norwegian boosts the local economy by approximately 18 billion kroner, which, “clearly demonstrates that even moderate financial support would constitute a profitable investment for Norway,” he said. “How anyone could come to a different conclusion is impossible to understand.”
Schram asserted that, before the pandemic hit Europe, Norwegian anticipated “the best summer ever” for the company. “We could clearly see the results of our hard work to go from growth to profitability, which was initiated in 2018,” he said. “With further support to get Norwegian through this unprecedented crisis for the aviation industry, we would come out as a more sustainable and competitive airline, with a new structure and improved operation. Without support, the way forward has become much more uncertain.”
Since the Covid-19 crisis and the subsequent travel restrictions, Norwegian has grounded most of its fleet. In October, the LCC operated just 21 aircraft, mainly on domestic routes in Norway. Compared with the same period last year, total capacity decreased by 93 percent and passenger traffic decreased by 96 percent. The load factor was 55.3 percent, down 32 percentage points. Passenger numbers tumbled 90 percent year-on-year, to 319,477.