Only Norwegian Air’s crews back home in Norway were spared more drastic cuts on Monday, when the struggling airline put its Swedish and Danish subsidiaries into bankruptcy. Nearly 5,000 Norwegian Air employees lost their jobs, leaving CEO Jacob Schram only hoping that he could hire them back some day.
“We have done everything in our power to cut costs, but it wasn’t enough,” Schram said at a press conference in Oslo Monday afternoon. Only seven of Norwegian’s fleet of more than 170 aircraft were operating on Monday, all of them in Norway.
Schram said that’s why Norwegian declared its companies employing pilots and flight attendants outside Norway bankrupt on Monday. The bankruptcy filing allowed the airline to avoid meeting payroll for employees who currently have nothing to do. The only reason the airline’s Norwegian pilots and flight attendants weren’t affected was because the Norwegian government is currently picking up most of their payroll costs.
“This was an extremely difficult decision, and I want to apologize in the strongest of terms to our colleagues who are affected,” Schram said.
Norwegian Broadcasting (NRK) reported that at the same time, Schram claimed he and his management team were “working day and night to survive the current crisis, and come back better and stronger than ever. And then I hope we will be able to offer jobs to as many as possible who are affected by this (bankruptcy) today.”
Still negotiating with creditors
Norwegian remains in negotiations with its creditors in the hopes of becoming eligible for an emergency relief package offered by the Norwegian government. Schram wouldn’t say how the talks were going, but the airline clearly is having a hard time meeting strict capitalization requirements to qualify for a total of NOK 3 billion in state financial assistance.
Norwegian Air was already in trouble when the Corona crisis hit hard in early March. Now its situation is critical, with virtually no revenues flowing into the company (because of closed borders and airports all over the world) while costs continue to mount.
Schram claimed that his only alternative was to declare four Scandinavian subsidiaries bankrupt: Pilot Services Sweden AB, Norwegian Pilot Services Denmark Aps, Norwegian Cabin Services Denmark Aps and Norwegian Air Resources Denmark LH Aps.
Norwegian also cancelled its contracts with crewing companies OSM Aviation and Rishworth. Both have delivered crewing and recruiting services to Norwegian, with OSM run by Espen Høiby, the brother of Norway’s Crown Princess Mette-Marit.
‘This crisis is acute’
The bankruptcies and cancelled agreements have cut a total of 1,571 pilots and 3,134 flight attendants in Sweden, Denmark, Finland, Spain, Great Britain and the US. It’s now up to courts in the respective countries to administer the bankruptcies.
Parent company Norwegian and its roughly 700 pilots and 1,300 flight attendants based in Norway, France and Italy are not affected by the bankruptcy. Schram said the airline “didn’t have time” to wait any longer for potential relief packages in Sweden and Denmark, “because this crisis is acute.”
Newspaper Dagens Næringsliv (DN) reported Monday evening that the airline’s pilots organization had a savings proposal ready when the bankruptcy declaration came. “We got the message that they didn’t have time to look at it (the savings plans that may have saved jobs),” Alf Hansen, leader of the Norwegian Pilot Union, told DN. “We’re disappointed over how our proposal was handled.”
Lasse Sandaker-Nielsen, Norwegian’s information director, confirmed receipt of a proposal that involved “salary adjustments, but would nonetheless mean that the company remained sitting with considerable salary costs for employees who aren’t working. The proposal did not get support at today’s board meetings in the respective subsidiaries that are now declared bankrupt.”
Sandaker-Nielsen called the situation “extremely unfortunate, but we simply had no choice given the situation now.” He said the airline’s management would continue to “work day and night to get through this crisis, so that we have a stronger and better Norwegian on the other side of Covid-19 (the Corona virus illness) that can best serve all employees, customers and shareholders.”
Airline analysts now predict that Norwegian Air will continue to cut costs and ultimately return to its roots as a low-fare carrier in the Norwegian domestic market. Its aircraft remain parked at the Sola Airport in Stavanger on Norway’s West Coast, with its popular if troubled intercontinental flights all grounded.