Crisis-hit Norwegian Air launched a bankruptcy process on Wednesday, filing for protection from creditors in Ireland where some of its main subsidiaries are based. The deeply troubled airline aims to reorganize and maintain at least some of its operations in the meantime, with most already scaled way back because of the Corona virus crisis.
Norwegian Air officials were promising more details of the bankrupcy filing, after trading in the shares of Norwegian Air Shuttle ASA (NAS) shares had been suspended on the Oslo Stock Exchange. They stressed that the bankrupcty filing is aimed at giving the company a chance to reorganize, based on a plan being launched for its subsidiaries Norwegian Air International Ltd (NAI) and its wholly owned Arctic Aviation Assets DAC (AAA).
Both are based in Ireland, which offers a bankruptcy protection and reorganization process that can also encompass parent company NAS “as a related party,” the company stated in a report to the stock exchange late Wednesday afternoon. Norwegian Air management said it chose to file in Ireland, instead of Norway where the company remains headquartered, since its aircraft assets are held in Ireland.
‘Safeguarding as many jobs as possible’
The reorganization process under the auspices of an administrator/examiner can give the airline some breathing room, with management claiming the bankruptcy filing was being made “in the interests of its stakeholders.” The company further stated that Norwegian, with most of its aircraft fleet grounded since the Corona crisis began, will continue to operate its drastically reduced route network and both its bonds and shares “will trade as normal” on the Oslo Stock Exhange. Its frequent flyer program known as “Norwegian Reward” will also “continue as normal, honouring and earning Cash-Points for its members.”
Manaagement also stated that “safeguarding as many jobs as possible, while right-sizing its asset base, will continue to be a top priority for the management team throughout the process,” which may last for up to five months.
The goal, according to Norwegian Air officials, is to emerge from the bankrupcty process “as a stronger and leaner airline ready to meet renewed airline travel demand in 2021 after the Covid pandemic subsides.” They stressed that several other transport companies have also launched variations of reorganization and “examinership processes” with “a positive outcome for customers, employees, shareholder and other stakeholders.”
Plans laid for a ‘New Norwegian’
Norwegian has been teetering on the brink of bankrupcty, not least after the Norwegian government refused the airline management’s recent request for nearly NOK 5 billion worth of more emergency aid. They’d made it clear more crisis aid would be necessary as early as August, after a disappointing summer season.
Then much of Europe landed back in a high infection situation that forced governments to reimpose strict Corona containment measures that have all but halted most travel. Norway’s prime minister told Norwegians to just “stay home,” and strict new border controls and quarantine rules are in place.
Most economists and analysts, along with Norway’s competition authority, backed the Norwegian government’s decision not to offer more specific aid to Norwegian Air, but rather to the airline industry as a whole. Norwegian Air officials were nonetheless bitterly disappointed and forced to launch yet another strategy. Norwegian Air’s CEO Jacob Schram laid plans for a “New Norwegian” that’s expected, according to newspaper Dagens Næringsliv (DN), to re-emerge as a smaller airline with around 100 aircraft and operations concentrated much more on its home market in Scandinavia. The airline’s ambitious and rapid expansion into intercontinental route traffic proved difficult to operate reliably and left the company saddled with huge debt.
DN reported that the airline already had intended to cut spending to a minimum until next summer, when it hopes demand for air travel will resume.