Budget transatlantic airline Norwegian Air faces a struggle for survival this winter after being badly hit by the economic downturn from the pandemic.
On Monday it announced that the country's government has announced that it will not provide the airline with additional financial assistance.
The airline, which has run into financial difficulties, will now hire all but six of its 154-strong fleet and 1,600 additional employees and only employ 600 of its 10,000 employees.
Norwegian Air announced in August that cash would be unavailable in the first quarter of 2021 unless it could raise new funds and held talks with the government in hopes of gaining support.
"The government's decision to reject the application for funds is disappointing and a blow in the stomach for all Norwegians," said CEO Jacob Schram.
Norwegian Air may not survive long after the country's government announced that it would not provide additional financial assistance to the airline
"The company and the board of directors will turn every stone to cope with this situation," said Schram, adding that the freight forwarder is out of money.
When asked if the company was bankrupt, Schram said he would not rule out possible outcomes.
"But we need ventilator support to get through the winter," he added.
The Norwegian share closed 13.2% and extended this year's price decline to 98.5%.
In a post-market update, Norwegian announced that another 1,600 people are employed and 600 people are still working for the airline.
The airline will also park 15 of the 21 aircraft it has operated in recent months.
Most of the airline's fleet has been suspended since the coronavirus began
The airline would only fly 12 routes, all of them domestic.
The center-right coalition government of Norway advocated free enterprise and has long ruled out the nationalization of Norwegian or other aviation companies. In 2018, it sold the remaining 10% of the state to rival SAS.
& # 39; It is difficult news to get. However, we are responsible for the responsible use of public funds, ”said Industry Minister Iselin Nyboe.
& # 39; Norwegian Air has a financial structure that makes it risky for us to provide assistance. There was no defense. & # 39;
Norwegian Air, a pioneer in low-cost transatlantic air travel, was burdened with nearly $ 8 billion in debt by mid-2020 due to its rapid expansion, making it vulnerable to the aftermath of the COVID-19 pandemic.
The airline has shown great ability to overcome financial difficulties in the past, said Transport Minister Knut Arild Hareide.
Another 1,600 employees are to be given leave of absence and 600 employees are to be left behind at the airline
"I don't want to speculate on their ability," Hareide said when asked about Norway's chances of staying in the field.
Parat, a union for pilots and other workers in the aviation industry, urged the government to reconsider this.
"Wideroe, SAS and Norwegian need help to survive the crisis," said Parat chairman Unn Kristin Olsen. Wideroe is a regional airline.
Creditors and lessors took control of Norwegian in May with a financial rescue that allowed it to access government-guaranteed credit of 3 billion kroner ($ 329 million) when the company tried to run a stripped-down service.
Norwegian has grounded more than 100 grounded aircraft, including its entire fleet of 37 Boeing 787 Dreamliners that have been used for transatlantic travel.
It was not surprising that Oslo withdrew support after Norway's bid to become a pan-European airline serving intercontinental markets failed, said Bertrand Grabowski, a former aviation banker who is now an independent advisor.
"You may be able to use Norwegian taxpayers' money to support a regional airline, but none that serve Paris-New York or London-Buenos Aires (routes)," he said.
The Scandinavian airline SAS is a major competitor in Norway, and Wizz Air from Hungary recently launched several flights to Norwegian cities.
The company will operate only 6 of the 154 aircraft on its books and will only fly 12 domestic routes, up from 149 when the airline was at its peak
Airlines are a particularly important infrastructure in Norway, whose geographic location extends over 1,367 miles across fjords and mountains and has few train lines to transport people.
Bernstein analyst Daniel Roeska said Wizz Air's plans for new services in Norway may have increased Oslo's reluctance to "toss good money at bad".
"Even if they had invested a little more money for the winter, it probably wouldn't have been enough," he said, adding that bankruptcy would keep aircraft rental companies holding planes they cannot place.
Last-minute government intervention shouldn't be entirely ruled out, however, Roeska said, adding that "the door will never close" until bankruptcy is confirmed.
The company said more funds could come from selling aircraft, converting more debt into equity, or from its owners and the Norwegian government, while refusing to disclose the amount it might seek.
Norwegian Air's rise and struggle for survival
Norwegian Air has quickly become Europe's third largest low-cost airline and is one of the few to apply the budget model to transatlantic flights. She is struggling to survive again after the Oslo government ruled out further support on Monday.
This is followed by important dates in the company's 27-year history.
Aug 28: Norwegian Air says it needs to secure funding for the next 18 months or more this year to weather the COVID-19 pandemic after reporting losses of $ 610 million in the first half of the year .
May 18: Norwegian Air completes a sale of shares at discounted prices and wins bondholders' support for a refinancing so the company can continue to operate on a reduced schedule.
March 24: The airline receives a first state injection of 300 million Norwegian kroner (29 million US dollars).
March 16: Norwegian says it is canceling 85% of its flights and temporarily laying off 7,300 employees because of the coronavirus outbreak.
March 5: The company scraps its 2020 earnings forecast and cancels some of its transatlantic flights.
Feb 13: Norwegian says it will make deeper capacity cuts in 2020 than previously announced as it looks to return to profit after three consecutive years of losses.
November 20: Jacob Schram appointed as CEO. Schram, who has no background in aviation, worked for the consulting firm McKinsey, among others.
November 5: Raised Norwegian kroner 2.5 billion to meet cash needs through 2020, with third share sale in two years and a bond issue.
September 16: Norwegian bondholders accept the company's request to postpone repayment of $ 380 million for up to two years. August 19: Agreement to sell its stake in Norwegian Finans Holding for 2.22 billion kroner.
July 11: Co-founder Bjoern Kjos resigns as CEO.
April 10: Norwegian postpones Airbus aircraft deliveries planned for 2019 and 2020 and cuts investments by $ 570 million.
March 12: Norwegian grounds its Boeing 737 MAX 8 after a fatal crash of an Ethiopian Airlines 737 MAX.
February 18-19: Norwegian announces the issuance of deep discount shares at just a third of the market price.
January 24: The International Consolidated Airlines Group (IAG), the owner of British Airways, announces that it will not make an offer for Norwegian and will sell its stake in the company.
May 4: The Board of Directors confirms that it has received two separate conditional proposals from the IAG Group with respect to the acquisition of 100% of its share capital.
April 12: Norwegian is informed that IAG has acquired 4.6% of the shares in the company.
Norwegian raises 1.3 billion kroner in a stock sale to fund expansion and manage higher fuel costs after warnings of a bigger-than-expected loss in the quarter.
July 17: Norway's first flight with the Boeing 737 MAX takes off from Edinburgh.
October 22: Norwegian orders 19 Boeing 787-9 Dreamliners, more than quadrupling its long-haul fleet.
May 30th: Norway's first intercontinental flight takes off from Oslo to New York.
January 25: Norwegian orders 122 aircraft from Boeing, 100 of which are Boeing 737 MAX 8 jets. The airline also signs an agreement with Airbus to purchase 100 Airbus A320neo jets. In total, the aircraft are worth 127 billion Norwegian kroner.
February 8: Norwegian is the first airline to offer free WiFi on European flights.
April 24: Norwegian buys FlyNordic from Finnair and becomes the largest low-cost airline in Scandinavia.
December 18: Norwegian stocks are listed on the Oslo Stock Exchange.
September 1: Norwegian Air Shuttle (NAS) renamed Norwegian and commissioned with Boeing 737-300 aircraft.
January 22nd: Norwegian Air Shuttle is founded and takes over regional flight services on the Norwegian west coast. Flights are operated in cooperation with the Norwegian airline Braathens. NAS initially works with a fleet of three leased Fokker 50s. (1 USD = 9.4785 Norwegian kroner)
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