Several days ago there were questions about Norwegian Air’s ability to survive into the New Year. A report from a Danish bank suggested they could breach financing covenants which could have led to the unraveling of the low cost carrier that has been driving down transatlantic airfares and that is active in Europe.
The carrier though has announced several moves that they say should shore up their balance sheet. Whether these are enough depends on a variety of factors such as the cost of fuel and demand during the winter dip in travel.
- $230 million (annualized) cost savings program. The immediate effect of this is likely to be limited.
- Refinancing a Boeing 787 to generate $30 million cash.
- Upcoming cuts to poor performing routes to conserve funds.
- An undisclosed agreement with Rolls Royce, whose engines have been the source of significant unplanned maintenance expense. If they’ve sold significant claims against Rolls Royce in exchange for immediate cash that could help (while reducing future upside).
Copyright william87 / 123RF Stock Photo
They expect to continue to sell aircraft and are working on plans to restructure the company. There’s still the option of a cash call from existing major shareholders, as well as selling the whole enterprise to British Airways parent IAG which continued to express interest as recently as two months ago.
Meanwhile the airline faces heavy debt, high costs of fuel hedging in the face of falling oil, and weak seasonal demand on top of questions over whether its business model is sustainable over the long term.
I really hope they make it. I’ve flown them trans-Atlantic a couple of times in their premium class (a nicer version of most airlines’ premium economy – something like 42-44″ pitch, decent IFE, nice service, on a 2-3-2 789 plane), which for the price (about $650 from Europe to Boston, for instance) was a very good deal. Their on-the-ground service isn’t great – long lines just to check in for one flight, and waited an hour for luggage upon landing. And I wouldn’t book them if I absolutely couldn’t deal with delays or even waiting until the next day due to a cancellation, since their contingencies under such circumstances are weak. Having said all that, I’d still fly them again. And by virtue of the competition they provide, they offer a a good alternative to and a bit of pressure on other airlines.
The problem with making public those plans of cost cutting measures is that they make matters worse by scaring away people from buying tickets from a company that seems to be on the verge of bankruptcy.
“I really hope they make it. I’ve flown them trans-Atlantic a couple of times in their premium class (a nicer version of most airlines’ premium economy – something like 42-44″ pitch, decent IFE, nice service, on a 2-3-2 789 plane), which for the price (about $650 from Europe to Boston, for instance) was a very good deal.“
But that’s the point; undercuttIng rivals for market share to a level below cost is simply unsustainable. It’s the hallmark of sofa and carpet stores.
The difference in air travel is that it achieves nothing and helps only the few who get to take advantage of those unrealistic cheap fares whilst they are around.
Norwegian has been a classic case of economic smoke, mirrors and creative accounting for too long.
The time is fast approaching when they will either be bought out or will cease to operate in a very abrupt and disruptive manner.
Because other airlines have made it either impossibly expensive, mileage-wise, or just plain impossible to book a business class seat from NYC to Europe, I have happily flown premium on Norwegian several times but will not book it again unless I am confident that they are on sounder financial ground. Thanks for keeping your readers updated on the latest developments.
Unlike Wizz or even Wow, Norwegian seems to have a number of options. Whilst I doubt it will be around in the same format in 10 years, it’s probably ok for the next year.
So who could buy them….(for the routes)…..SAS, LH group, Icelandair, IAG ?
Maybe LH’s Eurowings….?
In answer to Ric, I will renew my observation that Ryan could swoop in and do some bottom feeding and become a major TATL player on the el-cheapo. Just think of the possibilities
Let’s see if they’re still operating on the day I’m flying in early January 😀