Norwegian Needs Equity Infusion

Norwegian this summer averted bankruptcy after its creditors agreed to debt to equity swap, essentially decimating existing shareholders. Aircraft lessors from Ireland and China became its most significant shareholders.

Norwegian government provided the airline some liquidity through a guaranteed loan, but it is only enough to keep the airline afloat until early 2021.

You can access Norwegian here.

Aircraft currently on the books:

Norwegian currently operates less than 20 aircraft, and all the Boeing Dreamliners (37) are grounded.

Here’s the presentation by Norwegian:

Download (PDF, 2.6MB)

The airline’s financial disclosure.

Download (PDF, 523KB)

Here’s an email that the airline sent to customers in the US:

I was surprised to see that the airline was advertising transatlantic fights when it was not supposed to restart them before the second half of 2021 per their original plan.

Conclusion

You could argue that there is not a single solvent commercial airline out there that would survive the current crisis without some form of government support, whether it comes in the form of recapitalization, guaranteed loans, or supporting salaries of employees that are not working.

So, Norwegian is not in this mess by itself. Still, the problem is that it was not performing well even during the best of times after a very aggressive growth period and breaking into the competitive transatlantic market.

I was surprised that Norwegian is sending out offer emails to those living in the United States, considering that it is unclear when and whether the routes can be reopened.

It also doesn’t build confidence that the CFO tells that the airline is essentially a going concern, and it needs more capital in early 2021 to survive.

Also, having aircraft lessors as its biggest owners create other problems too. Can Norwegian shed the aircraft it doesn’t need?

I guess that it is up to the Norwegian government to decide whether they want this airline to survive or not. They previously shed the shares of SAS. The government of Norway, however, has the largest sovereign wealth fund in the world worth more than a trillion dollars ($200K+ per Norwegian).

It is a difficult road ahead for Norwegian. Let’s hope that they can pull this through regardless of whether you like the airline or not. We need competition.

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