Norwegian Air plunged into the winter fight for survival

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.

"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.