Norwegian Air Files For Bankruptcy Protection

Filed Under: Norwegian

Norwegian Air has just filed for bankruptcy protection in Ireland… is the end near?

Norwegian Air has run out of options

Norwegian Air was struggling long before the pandemic started, and of course coronavirus made things significantly worse. Recently it was announced that Norway won’t be providing Norwegian Air with any further aid, which the airline was relying on to be able to continue operations.

We know that Norwegian Air will run out of money by early 2021, so something has to give…

Well, Norwegian Air Shuttle ASA has decided to initiate an examinership process in Ireland relating to:

  • Norwegian Air International Limited (NAI)
  • Its wholly owned asset company Arctic Aviation Assets DAC (AAA)
  • Some of AAA’s subsidiaries

Norwegian will also enter in and get protection of the Irish Examinership process as a related party. The reason Norwegian has chosen to do this in Ireland is because its aircraft assets are held in Ireland.

The airline will continue to trade on the Oslo Stock Exchange and operate its limited route network. Norwegian claims to have sufficient liquidity to go through this process, though that seems highly optimistic.

As Norwegian Air CEO Jacob Schram describes this move:

“Seeking protection to reorganise under Irish law is a decision that we have taken to secure the future of Norwegian for the benefit of our employees, customers and investors. Our aim is to find solutions with our stakeholders that will allow us to emerge as a financially stronger and secure airline.

Our intent is clear. We will emerge from this process as a more financially secure and competitive airline, with a new financial structure, a rightsized fleet and improved customer offering.”

Norwegian Air has entered bankruptcy protection

How does the examinership process work?

The process of examinership in Ireland allows financially sustainable businesses to address elements of the business that require restructuring, with the aim of protecting jobs and preserving the core value of the business. This is done through a court appointed examiner, who allows a company to secure new capital and implement a legally binding scheme for the settlement of debts.

What does that look like for Norwegian? The airline hopes to reduce debt, rightsize the fleet, and secure new capital. This process protects assets of the Norwegian group while allowing the company to focus on the rightsizing of the group. Norwegian hopes that this process will take about five months.

The thing I’d take slight issue with here is that this is a process intended for financially sustainable businesses, and I’m not sure Norwegian has proven itself to be that.

Norwegian hopes this process will take five months

Bottom line

Norwegian Air filing for bankruptcy protection seemed inevitable. The airline has been on the brink of liquidation so many times before, though somehow has narrowly escaped bankruptcy every single time.

At this point the airline is incredibly leveraged and it’ll likely be years before we see a full recovery for the airline industry. While I can appreciate the value of being able to renegotiate certain things under bankruptcy protection, I’d be fascinated to learn more about Norwegian’s logic in thinking it has the liquidity to get through this process.

What do you guys think — is this the end for Norwegian, or will this process give the airline another life?

Comments
  1. “We will emerge from this process as a more financially secure and competitive airline” — Jet Airways made similar claims. It’s sad for all affected, but Norwegian’s downfall is long overdue.

  2. I flew SFO-LGW on Norwegian in a brand new B787-9 for $99. I ended up upgrading to PE on one leg. I’m not sure how sustainable their long haul business model would have been in the long run let alone through an intermittent pandemic. It would be so unfortunate to see them fall, as seeing everyday folks to be able to travel to far away places in a pinch and for less was quite exciting.

  3. Success went to their heads, and made the classic mistake of expanding too fast. They have around USD 5 billion in debt, and have 6 aircraft flying domestic routes in Norway.

    I’ll be sad to see them go, but it’s not a viable business. The best case scenario I can see is someone buying their Norwegian operations, as they have in general been profitable. Everything else is then liquidated. I honestly can’t see how long creditors & shareholders are willing to bleed. However, I think it’s more likely they’ll end up in receivership.

  4. @Walt (and others) – And yet some people are wondering why airlines continue to go bankrupt…

    USD 99.00 TATL fares are not sustainable for any carrier. Norwegian thought (foolishly) that they could come into a market with dirt cheap fares to stimulate demand and then be able to somehow sustain their operation long-term.

    Fools and their money. It’s one thing to try this stunt in an “orphan market” with little to no major carrier competition. But coming into a place that’s already extremely well-served like SFO is only being asked to have your ass handed to you on a silver platter.

    In the case of Norwegian; dinner has been served.

  5. I bet they are kicking themselves to not accepting that offer from IAG which significantly undervalued their prospects!

  6. While I doubt it, I hope they survive. One of the only direct-to-Europe flights from my home airport of MCO.

    Their premium econ was actually quite a fine way to fly the 8 hour hop without blowing the budget (or points balance).

    Fingers crossed.

  7. I flew them 2019 CDG – LAX. Return on KLM.
    Brand new 787 on Norwegian, old 747 on KLM. Would choose Norwegian any day again. Sad to see them go….

  8. What about those who have a summer 2021 reservation already? I haven’t been notified the flight is cancelled.

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