Less than a month after emerging from bankruptcy and being cleared for a fresh take-off, the new board of long-struggling Norwegian Air decided to dump the airline’s chief executive, Jacob Schram, late Sunday night. On Monday morning Schram had already been replaced by his right-hand man, the airline’s finance director Geir Karlsen.
It was the latest surprise announcement after the past two years of extreme turbulence at the once-high-flying airline. The board didn’t initially reveal why they decided to effectively fire Schram. He had just taken on the job as Norwegian’s CEO when the Corona crisis hit early last year, making his job to recapitalize the already-struggling airline tougher than ever.
Schram, who’d already been one of Norway’s highest-paid executives as head of the former Statoil’s chain of gasoline stations, secured a lucrative compensation package and immediately had to launch into crisis mode as Norwegian’s flights were grounded all over the world. After a long and dramatic process that included bankruptcy filings in both Norway and Ireland, he and Karlsen could boast just a few weeks ago that “We’re back!” in a vastly slimmed-down version and ready to resume more normal operations as Corona restrictions are lifted.
Both men, however, now had to answer to a new board of directors appointed by Norwegian Air’s new large investors, with shipping tycoon and multi-billionaire John Fredriksen holding the biggest stake of 19.9 percent. Other major investors in the “new” Norwegian included shipping heirs behind Sundt AS (17.6 percent) and the Ludvig Lorentzen family with 6.8 percent. The rest was held by DNB Asset Management, pension fund Folketrygdfondet and the Nordea funds, with a collective stake of 66.7 percent. Some of that’s already been sold off.
‘Fasten your seat belts’
There’s no question Norwegian Air was in for a bumpy ride. Newspaper Dagens Næringsliv (DN) reported that the airline’s new owners gave Schram and Karlsen the clear message that Norwegian Air would now have to survive without any further recapitalization assistance or crisis aid. They also brought in a new board led by Svein Harald Øygard, known for being so tough and demanding that DN slapped an unusual headline on a recent portrait article about Øygard: “Fasten your seat belts.”
Sixteen days later, Schram (who had base pay of NOK 7 million a year plus bonus and some potentially huge stock options) was replaced by Karlsen, who will earn NOK 4.9 million a year plus “a bonus tied to achievement of the goals in the business plan for 2021 and 2022, and stock options partially based on the (Norwegian’s) closing share price on June 21, 2021.”
Schram, whose term as Norwegian’s CEO ended after 18 months, wouldn’t go along with a reduced severance pay package that he’d negotiated back in 2019 before he joined the airline. He’ll thus get nine months at full pay plus another 15 months of severance pay, totalling NOK 8.75 million. The board’s press release Monday morning revealed that they had tried to reduce Schram’s severance pay “to reflect the challenges” facing the airline industry, but failed to reach agreement on that.
Board leader Øygard later told DN that he preferred to concentrate on the “miracles” Karlsen has done for Norwegian in terms of its “financial reconstruction,” and Karlsen’s ability to get Norwegian Air back in the air.
“First we decided to end our employment relation with Schram,” Øygard told DN, “then we chose Geir Karlsen as the new chief executive. The board’s evaluation was that more focused management of the company with an emphasis on delivering (its services) during the upcoming years is the most important thing now.”
Asked whether Schram couldn’t do that, Øygard said “he could certainly have offered to, he’s a clever business leader, but we wanted even stronger emphasis on the financial and operative sides. That’s what the company needs now, and then Geir Karlsen was the right choice.”
Board leader has been stranded, too
Karlsen took over as Norwegian Air’s finance director in April 2018, 20 months before Schram was hired away from the former Statoil Fuel & Retail and Circle K to take over for Norwegian’s then-semi-retiring Bjørn Kjos, who’d founded Norwegian Air but ran into huge trouble over his attempts to make Norwegian and intercontinental airline. The airline had taken on huge debt, steadily ran into operational problems because of a lack of back-up aircraft and often stranded passengers around the world. Norwegian Air’s pilots went on strike and its cabin crews around the world were low-paid by Norwegian standards and had little if any job security. They have arguably suffered the most, even before the Corona crisis hit and the vast majority lost their jobs.
Øygard has been among Norwegian Air’s frustrated passengers himself, telling DN in early June that he once was among those angry with Kjos when he was left stranded in Marrakech after hiking in the Atlas Mountains. He quickly noted, however, that SAS has let him down at times over the years, too. Now, he stresses, Norwegian Air will concentrate on what were originally its “core operations,” with around 50 aircraft flying routes in the Nordic countries and Europe. Norwegian’s big Boeing 787 Dreamliners have been or are being let go, with some speculation brewing that Kjos wants to launch a new intercontinental venture using them.
Fredriksen ties that bind
Both Øygard and Karlsen also have a history of working with John Fredriksen, long Norway’s wealthiest native who now wields financial muscle in Norwegian Air. Øygard first got acquainted with Fredriksen 20 years ago when Øygard was a partner in the international business consulting firm McKinsey and specialized in the oil and gas sector. Karlsen has also worked for Fredriksen over the years and is a former chief financial officer for Golden Ocean Group and Songa Offshore.
“I’m grateful for the confidence the board has shown in me, and I look forward to continue in Norway in the new role of chief executive,” Karlsen stated in the airline’s press release Monday.
“The most important thing for us in the time to come is to increase profitability in the low-fare sergment and to attract new and existing customers in our most important markets,” Karlsen added. “Norwegian is well-positioned in the market after the financial reconstruction of the company and we have a strong brand, popular products and services.”
The process of finding a new finance director to replace Karlsen was to begin immediately.