OSLO/PARIS: Heavily indebted Norwegian Air might have to halt operations in the first quarter of 2021 as it struggles with a coronavirus travel slump unless it secures fresh funding, the budget carrier said as it reported third-quarter results.
The airline, a pioneer in low-fare transatlantic flights whose rapid expansion left it with big debts, held cash and cash equivalents of 3.4 billion crowns ($376 million) at the end of September, down from 4.98 billion crowns at the end of June.
“Norwegian is dependent on additional working capital in order to continue operating through the first quarter of 2021 and beyond,” the carrier said.
Norway’s government on Monday rejected a plea for more state support from the airline whose shares have lost 99% of their value since January, saying it would be too risky.
The company said it would furlough 1,600 more staff, leaving just 600 people still working, down from a pre-pandemic 10,000. It will only fly 12 routes, all domestic.
The company had sought a government rescue package of between 4 billion and 5 billion crowns according to a report by business news site E24, citing anonymous sources.
The company said funding could potentially come from debt refinancing, a sale of aircraft and other assets, a conversion of debt to equity or from its owners.
But aircraft leasing companies that own more than half of the airline after swapping earlier debts for equity are unlikely to put in any new cash, a source close to one of the firms said.
‘CREDIT RED LIGHT’
“Norwegian was a credit red light for lessors even before COVID,” said the source, adding they joined the rescue initially because liquidation would have saved only a few cents on each dollar owed while it would have dumped aircraft to sell into a market that was strained even before the coronavirus crisis.
“Norwegian was getting a friendly ear because it would have meant a glut of 787s landing,” the source said. “But that’s become nearly irrelevant. 787s, 737s, A320s – they’re all on the ground now” due to a travel slump in the coronavirus crisis.
Norwegian’s operating loss stood at 2.8 billion crowns in the July-September period, down from a profit of 3.0 billion in the same period a year ago.
The airline’s swift expansion left it with overall debt and liabilities of 66.8 billion crowns by the end of the third quarter, making it vulnerable to the fallout from the COVID-19 pandemic.
The company’s net interest-bearing debt stood at 48.5 billion crowns, down from 61.7 billion crowns at the start of the year as parts of its debt had been converted to equity in May.
Norwegian will now operate just six of its 140 aircraft, down from 21 last month, leaving most of its short-haul planes grounded as well as its entire fleet of 37 Boeing 787 Dreamliners used for transatlantic journeys.
Shares in Norwegian were down 6.8% at 0818 GMT, lagging an Oslo benchmark index down 0.8%, bringing its share down 99% since January.
(Editing by Gwladys Fouche, Stephen Coates and Edmund Blair)
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