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Wednesday, June 19, 2024

Norwegian likely to end long-haul routes

Norwegian Air, currently operating minimal service under bankruptcy protection, looks set to drop the popular but unprofitable low-fare intercontinental routes that it launched less than a decade ago. The airline will likely concentrate instead on routes within Norway and Europe, if its bankruptcy reorganization succeeds.

Speculation is flying that Norwegian Air’s owned fleet of 11 Boeing 787 Dreamliner aircraft will be sold, and the others returned to leasing companies that own them. PHOTO: Norwegian Air

Norwegian’s intercontinental expansion began in 2013 with flights from Oslo to Bangkok and New York. It was a bold plan that made Norwegian the first airline to attempt low-fare long-haul service using Boeing’s then-brand-new 787 Dreamliner jets, and Norwegian’s founder and CEO Bjørn Kjos expanded it quickly to more destinations in North America and, ultimately, South America.

It turned into a nightmare, however, plagued by technical trouble that regularly grounded the Dreamliners and stranded passengers. It also left Norwegian with heavy debt and economic problems that it was still trying to work out when the Corona crisis hit in March and quickly grounded airlines all over the world.

Norwegian is currently trying to recapitalize and restructure in order to survive, and recently was granted bankruptcy court protection in both Ireland and Norway. The airline has already been unloading some of its aircraft that have been parked in Stavanger since last spring.

Board members inclined to slim down
Newspaper Dagens Næringsliv (DN) reported Wednesday that now more members of the Oslo-based airline’s board want to shut down the intercontinental service permanently. The goal, according to DN, is to relaunch Norwegian without its long-distance service and only fly routes around Europe and Scandinavia.

It’s long been expected that Norwegian’s long-haul routes would remain grounded when others resume. The airline’s beleaguered management is still scrambling to raise up to NOK 4 billion in fresh capital but can’t approach potential investors until they settle on whether the airline will be with or without intercontinental servie.

Shareholders are due to vote on a refinancing plan at a general assembly later this week. The airline is obligated to present a profitable business plan to the bankrupcty courts both in Ireland and Norway, and some fear that won’t be possible if it includes the intercontinental service.

Lots of meetings
DN reported that board members have had several meetings at which the fate of the long-distance routes is the main topic. One thing is clear: the “new” Norwegian will be a much slimmer version of its former self. CEO Jacob Schram has said earlier that the emphasis will be on the airline’s “home market” in Scandinavia. He has wanted, meanwhile, to maintain some long-distance service but with considerably fewer Dreamliners than the 37 DN reports as remaining in the fleet. Most can be returned to the leasing companies that own them, while Norwegian would need to sell the 11 it owns itself.

Analyst Lars-Daniel Westby at Sparebank1 Markets has followed Norwegian Air closely and thinks the company realizes that its intercontinental service can’t continue.

“Norwegian must put forth a credible business plan to the court in Ireland, and it must convince the court that the plan is profitable,” Westby told DN. “Norwegian has had variable profitability on its long-distance routes and therefore it’s most probable that the company with fly on with it.” Berglund



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