Norwegian Air Declares Four Subsidiaries Bankrupt

Low cost carrier Norwegian was one of the weakest airlines going into the current crisis. They’ve been pulling out all stops to avert a shut down for some time – they were mere days away from collapse at the end of 2018. Two years ago British Airways bought a small piece of the airline to get a good look from the inside as they considered acquiring and killing the low fare competitor. Instead they left Norwegian to – they hoped – fail on its own.

Norwegian’s failure was one of 10 things I told you to expect from the coronavirus crisis. They’re now putting four subsidiaries which employ crew into bankruptcy and terminating other staffing agreements.

[F]our Swedish and Danish subsidiaries had filed for bankruptcy and said it had ended staffing contracts in Europe and the United States, putting some 4,700 jobs at risk.

It said the four companies are staffing units and the cancelled agreements involve firms providing crews based in Spain, Britain, Finland, Sweden and the United States.

Combined, it said some 4,700 pilots and cabin crew members would be affected while about 700 pilots and 1,300 cabin crew based in Norway, France and Italy remained unaffected.

Norway’s government is putting cash into the airline, so Norwegian jobs are being spared (for now). The carrier points out that the governments of Denmark and Sweden are not subsidizing jobs, so those subsidiaries were cut first. The government of Norway also pays staffing costs while employees are furloughed.

The bankrupt business units are:

  • Norwegian Pilot Services Sweden AB
  • Norwegian Pilot Services Denmark ApS
  • Norwegian Cabin Services Denmark ApS
  • Norwegian Air Resources Denmark LH ApS

In addition,

OSM Aviation that it has cancelled the crew provision agreements with several of its jointly owned OSM Aviation subsidiaries. These companies have crew based in Spain, UK, Finland, Sweden and the US.

The above actions will affect 1,571 pilots and 3,134 cabin crew.

The roughly 700 pilots and 1300 flight attendants who are based in France, Italy and Norway are not affected by these moves.

Norwegian is working to take new cash from shareholders and the government, and convince debt holders to accept equity rather than interest obligations, in order to continue to finance the business through the crisis. However without a profitable summer they will face additional challenges come winter slow times, even if the current crisis has lifted somewhat. If Norwegian makes it, I think we can expect a smaller airline.


Copyright william87 / 123RF Stock Photo

Norwegian has struggled in part because of the brutally competitive low cost transaltantic market, in part because of high costs at the airline, and in part by bad luck – the grounding of hte 737 MAX, the long-term stranding of a plane in Iran, major engine retrofit work that was required for many of their aircraft.

They brought in new financing and were well-positioned to make it through the winter. I had advised travelers not to worry about booking them over the summer. That’s when they should be making money. The question was whether it would be enough money to last them through early 2021.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. Just the beginning Gary. Looking forward the pilot shortage will work its way out now that many of the marginal carriers will go by the wayside and the larger ones retrench. It appears many are taking this time to rid themselves of older less fuel efficient planes, thats good for AB and BA ( if Boeing can stop stepping ” in it ” ).

    As the days go by the longer its going to take to get the planes flyable again and cockpit crews re certified. Here it the US vacation spots will see the first surge, I know we are looking at Palm Springs or possibly Hawaii depending on their quarantine rules.

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