Low cost airline Norwegian has struggled, in part because of the brutally competitive low cost transatlantic market, in part because of high costs at the airline, and in part by bad luck – the grounding of the 737 MAX, the long-term stranding of a plane in Iran, major engine retrofit work that was required for many of their aircraft.
They looked like they were in a perilous position a year ago. 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. And this was before the coronavirus pandemic. On March 6 I identified Norwegian’s failure as a coronavirus risk.
Norwegian didn’t have the flush summer they’d hoped for to accumulate cash to survive, and now their CEO acknowledges “we don’t have the financial muscle to get through the winter.”
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This makes it almost laughable that this week they’ve touted a commitment to reduce CO2 emissions by 45% by 2030, there’s risk they could reduce CO2 emissions 100% by 2021.
The airline has 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.
They restructured costs, giving aircraft lessors a stake in the company. They got a $341 million government bailout. They declared four subsidiaries bankrupt. Now they’re looking for another bailout from the Norwegian government.
The airline believes it still has a viable business, even if it could take until 2025 to turn around. Airlines have generally been able to access capital markets during the pandemic. At some point more airlines will fail, though, and Norwegian has raised its hand as continuing to be one of the most vulnerable.