Shares of Norwegian Air Shuttle stock crashed on Monday 20% to 5 cents each after the country’s government denied the airline’s request for more help.
Norway’s government denied the cash request due to Norwegian Air Shuttle’s heavy debt load at 40B NOK even after restructuring this summer.
The Government of Norway doesn’t see propping up the airline as the best use of taxpayer money per The Local:
Norway’s government refused Monday to mount another bailout for struggling low-cost carrier Norwegian Air Shuttle which said the “slap in the face” meant its future was uncertain.
“Norwegian asked for help in the billions (of kroner) and the government believes, that in the current situation, this is not the best use of taxpayer money,” Commerce and Industry Minister Iselin Nybo said.
“Such aid could also be deemed anti-competitive,” he added in a statement.
Here’s the statement that the Norwegian Air Shuttle released:
Norwegian is very disappointed that the government will not support the company with liquidity. Norwegian has been clear that support is needed to maintain operations through the corona crisis. The company is now facing a very uncertain future, but will do everything in our power to get through the crisis and continue what Norwegian has done for almost 20 years; to ensure competition in the Norwegian market and ensure that most people can afford to fly.
– I would first like to thank customers, employees, the Storting, shareholders, leasing companies, creditors, bondholders, the tourism industry and others who have supported Norwegian so far through a demanding time. The fact that the government has now decided not to provide Norwegian with further liquidity support is very disappointing and is perceived as a real fist in the stomach for everyone throughout Norwegian who has fought for the company and at a time when our competitors receive double-digit billions from their countries’ authorities, says Norwegians CEO Jacob Schram.
Norwegian has 2,300 employees in Norway, in addition to several thousand Norwegian colleagues abroad.
– Our name is Norwegian. We are Norwegian. We are part of Norway, and Norway is part of us. This has been the case for almost 20 years, and the support the company has received from customers has meant an incredible amount in all these years, not least now during the corona crisis. We offer routes from Kristiansand in the south to Svalbard in the north, routes that can not be replaced overnight. It will take time, and it will have consequences for the competitive situation in Norway, as we have also seen before. And we see that airlines in other countries around the world, which, like Norwegian, are dependent on support to survive, receive billions in support from their authorities. With tourists we fly into Norway, we contribute to maintaining 24,000 jobs in the country and a value creation of around NOK 18 billion a year. This alone would indicate that continued support for the company would be a socio-economically profitable investment. How one can land on another conclusion is difficult for me to understand. Local tourism and business have also repeatedly emphasized the importance of Norwegian’s route offerings, most recently two weeks ago when I visited all four of our Norwegian bases and also met politicians and the business community locally, says Schram.
Since the corona crisis hit aviation worldwide in March, Norwegian has carried out a significant financial restructuring and, among other things, converted NOK 18 billion from debt to equity. At the beginning of the year, it was time for the best summer ever for the company.
– We could clearly see the results of the work to turn growth into profitability that was started back in 2018. With additional support to help Norwegian through an unparalleled crisis for aviation, we would come out on the other side as a more sustainable and slimmer airline, with new structure and better operation. Without support, the road ahead has suddenly become much more difficult, but we will do everything in our power to get through the crisis, both in terms of our hard-working colleagues – our “Red Nose Warriors” – and our customers, says CEO Jacob Schram.
It is complicated for Norwegian (the airline) to come out of this pandemic, considering that the airline was losing money left and right even during the best of times.
This year, merely converting existing liabilities to equity didn’t provide the airline cash that is desperately needed. Norway’s government has guaranteed a loan worth $328M.
Norway is not a shareholder of SAS or Norwegian that is a wise move. Most governments have propped up their airlines around Europe, guaranteeing up loans that will never be repaid.