The Oslo Stock Exchange (OSE) ended its first trading day after the Easter holidays on Tuesday with its main index up 2.86 percent. Shares in deeply troubled Norwegian Air, however, all but crash-landed at just NOK 4.60 each, down 44.38 percent from OSE’s close last Wednesday.
Investors clearly don’t like the terms of a new crisis plan for Norwegian, since it would likely dilute their own holdings. Newspaper Dagens Næringsliv (DN) reported Tuesday afternoon how analysts in London set share price expectations at or near zero for Norwegian, and investors dumped shares since it’s highly unclear whether the airline’s leasing companies will swap debt for shares, as the plan demands.
DN reported on Tuesday how Norwegian’s chief executive Jacob Schram, who’s only been at the helm since late last year, has asked small shareholders to hang on even though most of their money may be lost. He and his team have been working day and night to save the airline, and got a boost when the state offered assistance last month as the Corona crisis was first unfolding.
The state’s capital demands for Norwegian are tough to meet, however. Schram’s job is to remain optimistic: “The airline we’re trying to create now, and which could keep operating on the other side of the Corona crisis, is one with a much stronger balance sheet, much less debt and more capital,” he stated. “Then I think there’s still a strong upside for today’s shareholders to stick with us.”
He also claimed that the current crisis isn’t only Norwegian’s, since the entire airline industry is struggling in its worst crisis ever. Airlines lost most of their revenues overnight when Corona containment measures closed borders, called for people to just stay home and halted travel worldwide. There’s no question, though, that Norwegian was struggling before Corona hit hard, mostly because of its heavy debt.
Shares can be rendered ‘worthless’
DNreported how London brokerage firm Bernstein wrote Tuesday that it was cutting Norwegian’s share price to zero since the company’s plans to convert debt to shares would render existing shares “worthless.” Bernstein analyst Daniel Röska wrote that Norwegian ordered too many aircraft and hasn’t managed to reorganize its route system well. Questions also continue to fly around whether the airline’s troubling expansion into long-distance intercontinental routes can continue.
Route re-structuring, cost cutting and sale of assets looked like they “could give the company a chance,” Röska continued, but with the massive downturn in travel and ill effects of the global Corona virus crisis, “that’s over.” Nor is it certain whether Norwegian Air’s crisis plan will win approval from bond holders. If not, Bernstein expects operations will cease, bankruptcy proceedings will begin and shareholders won’t get anything.
With other analysts issuing gloomy outlooks as well, shares in what’s officially listed as Norwegian Air Shuttle (NAS) also took a dive on the OSE last week. On Tuesday, NAS’ total shareholdings were valued at less than NOK 752.4 million. The company has also been put under special observation on the OSE while Norwegian’s management continues to negotiate with its lenders and leasing firms.
Founders bail out
The airline’s once-high-flying founders Bjørn Kjos and Bjørn Kise have also been dumping their shareholdings, and it emerged Tuesday that they no longer are among even the airline’s 50 largest shareholders. They once ruled supreme at Norwegian, where Kjos, a former fighter jet pilot, guided its growth from a small West Coast air shuttle firm into first a major domestic airline that rivalled SAS, then a major low-fare airline around Europe and, finally, the now problematic expansion into long-haul, low-fare flights.
Other shares traded on OSE performed much better on Tuesday, with large Norwegian companies like salmon producer Mowi up 4.97 percent, Telenor up 3.92 percent, Orkla up 3.01 percent and Norway’s largest bank, DNB, up 3.26 percent. Only Equinor, in which the Norwegian state still has a 67 percent stake, sllipped, down 0.85 percent to NOK 134.65 per share as uncertainty swirled around the outlook for currently low oil prices and the future of the industry itself.