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On 19 March 2020, the Norwegian government announced that it was prepared to inject 6 billion Norwegian Krone (~$600m) to airlines under its jurisdiction with half of that sum earmarked for Norwegian. However, unlike a number of other governments who have bailed out their national carriers with very few caveats, the Norwegian government insisted that Norwegian meet certain strict criteria before it could qualify for all the aid available. As of today, Norwegian has met all those criteria.
To earn access to the full $300m in government aid Norweigan had to reduce its debt, raise additional equity and provide guarantors for 10% of the aid and, on 24 March, the first step of that process was achieved when two Nordic banks stepped forward to provide the necessary guarantees (link).
On 1 May the airline hit a stumbling block as bondholders dismissed a plan put forward by the airline which would have seen that debt turned into equity but, just two days later (3 May) enough bondholders were won over and a $1.2bn debt-for-equity deal was agreed (link). On the same day, the airline announced a share issue which it hoped would raise a further $40m.
Today, 20 May, Norwegian has confirmed that its restructuring is complete, it has met all the conditions set by the Norwegian government and that the government loan guarantee of NOK 3bn ( ~$300m) has been approved (link)
Norwegian lives to fight another day…again.
Here’s what Norwegian’s CEO Jacob Schram had to say:
“I want to thank everyone who has supported the company during this unprecedented crisis that has affected the entire the airline industry: The Government and Parliament; customers; employees: shareholders; leasing companies; creditors; bondholders, the travel industry and other Norwegian supporters. Now that we can access the state loan guarantee, we can continue to transform the company. Through this process, the belief in New Norwegian and the company’s strategy have been confirmed by shareholders, the market, bondholders, leasing companies, other creditors and lenders. Nevertheless, the months ahead will remain challenging and with a high degree of uncertainty for the industry. Norwegian will still need to collaborate closely with a number of creditors as the company currently has limited revenues,”
It’s far from clear that this is the end of Norwegian’s troubles (the airline seems to have been in perpetual financial trouble for years) and current plans only see the airline returning to the skies no sooner than the summer season next year, but this is still very good news.
It’s good news for the remaining staff at Norwegian and it’s good news for travelers because Norwegian is one of the key elements that helps keep airfares down…especially across the Atlantic. As long as we have an airline like Norwegian offering low-cost long-haul fares to/from the US, it’s very hard for airlines like American, United, Delta, and British Airways to set prices as high as we know they’d like to set them and to make the cost of travel considerably more expensive than it is right now.
I may not have any plans to fly in the back of Norwegian’s Dreamliners any time soon, but I’ve very glad there may still be an opportunity for others to do so in the not too distant future.