Norwegian Air faces crisis after state denies fresh rescue

Norwegian Air Shuttle ASA risks becoming a casualty of the global aviation crisis after the state rejected a request for a second multi-billion krone rescue package.

A fresh bailout wouldn’t be a good use of public funds, the government in Oslo said Monday, leaving the discount carrier in need of help to weather the winter months as air travel remains deeply disrupted by the Covid-19 pandemic.

The airline will have “to turn over every stone” in searching for ways to outlast the downturn, Chief Executive Officer Jacob Schram told reporters.

Norwegian is one of many airlines globally to face an uncertain future without additional support, either from governments or shareholders. An expected pickup in air travel over the summer barely materialized, as a resurgence in coronavirus infections prompted states to impose additional test and quarantine measures, or to ban leisure travel altogether.

“The bankruptcy risk for Norwegian Air Shuttle has increased significantly” following the government’s decision to withhold further aid, DNB ASA analyst Ole Martin Westgaard said in a note. “We see a low likelihood of the company being able to attract external funding in a market where most airlines have been dependent upon significant government support to survive.”

Pre-Pandemic Struggles

Norwegian was struggling even before the pandemic, and was forced to ground virtually its entire fleet and furlough or fire 8,000 employees, representing almost 80% of its workforce. The company accessed a state loan worth 3 billion kroner ($330 million) in May, but was forced to hand over almost all equity to creditors as a result.

The airline employs 2,300 people in Norway and operates many vital routes there, the CEO said. Norway said it will make funds available to support domestic flights.

The shares, down 98% this year, fell to an all-time low in Oslo, valuing the company at 2.2 billion kroner.

“Based on its most recent disclosures, our stress-scenario analysis suggests the company has enough liquidity to cover its fixed costs until December, or possibly March,” Rob Barnett, an analyst for Bloomberg Intelligence, said in a note.

If Norwegian can’t meet its obligations as they fall due and its debts exceed the value of its assets, the company or one its creditors may file for bankruptcy in a Norwegian court. The court will then decide if proceedings should be initiated and appoint a trustee to manage the bankruptcy estate. The trustee would work to ensure an orderly process, including selling parts of the business that may be viable after the failure.