Shares in financially ailing Norwegian Air soared after the government announced it would take part in the “reconstruction” of the airline after all. Share prices were up 2.6 percent since the opening on Thursday, and were among the most actively traded all day.
The burst of activity was prompted by confirmation from Norway’s business and trade ministry that it would support the airline’s effort to relaunch itself as a much smaller carrier without long-distance intercontinental service. The airline is currently operating under bankruptcy court protection and still needs another major recapitalization.
The government had initially resisted further aid to Norwegian Air, arguing that its financial problems began long before the Corona crisis. The government offered NOK 3 billion worth of loan guarantees last spring but had stopped short of further aid, citing too much risk. Without a successful relaunch, however, the state now risks losing on the loan guarantees, so therefore decided to offer assistance in the form of a loan that could be converted to shares, as long as other investors put of NOK 4.5 billion in fresh funding and the courts approve its restructuring plan.
“If Norwegian succeeds with that work, the government has said it can contribute with a hybrid loan,” Trade Minister Iselin Nybø stated. “But it’s a demanding process and Norwegian remains dependent on finding long-term and strategic owneres. The state has no ambitions of becoming owners of Norwegian.”
Airline officials thanked the government for the new show of support and admitted they were still “in an extremely demanding situation” because of the Corona pandemic that greatly restricts travel. The state aid can, at the very least, boost the airline’s chances of attracting new capital and completing its restructuring process.