Airlines are in free fall, and the Norwegian Government may have just provided Norwegian Air with a parachute at the zero hour. The question is, will it be able to carry the heavy load?
Recognizing the pivotal moment in aviation, Norway is injecting up to $530 million into local airlines SAS, Wideroe and Norwegian, but not without sustainable terms and conditions. It’s a huge stay of execution for Norwegian, whether it gets them through the storm in the long run, or not…
$278 Million, But Only If…
Norwegian stands to take in 50% of the $530 million conditional loans on offer, amounting to $278 million over time. To ensure a shrewd investment, the government has attached conditions which won’t guarantee Norwegian’s survival, but if goals are met, will go a long way toward sustainability.
According to Flight Global, Norwegian will receive a $28 million payout for near term solvency, but the outstanding $250 million comes in two stages, contingent upon reaching agreements with other creditors and finance relationships.
If the airline can reduce costly interest rates and balances on current debt obligations, an additional $111 million would be released to the airline, and if Norwegian then meets a series of newly outlined solvency demands then a further $139 million would be released in due time.
Far From Over, But Far From Over
$28 million is a lot of money to any individual, but to a debt ridden airline which just terminated 90% of its employees and all long haul flying flying, it’s nothing more than a band-aid. The remaining $250 million however, could be life changing.
Norwegian already renegotiated terms with creditors in 2019, and its believed that $380 million leash would not be extended again. But now that the government is involved, stakeholders may find a new sense of hope and opportunity, particularly with state backed support.
Not all airlines will weather the current storm, and if Norwegian can, they’ll be one of the few long haul low cost airlines still in business, which could be an even more unique USP than it was before. For passengers hoping for a return of low fares, lets hope they do…
I’m tired of Norwegian. They’ve served their purpose and frankly should go bankrupt in the near future. But the thing with Norwegian is that they’ve been given more chances than any other airline but their management seems extremely arrogant. They grew far too quickly and spread themselves far too thinly, their finances are consistently awful but they turned down chance after chance. The chance to temporarily halt growth to save money. That got rejected. IAG offer to buy the airline. That got rejected. And now the Norwegian government is wading in to this mess. I hope that stakeholders realise that this constant soap opera drama that is Norwegian is no longer worth continuing with. Stumbling from stock sell off to government bailout is no way to operate any business. Norwegian has been mismanaged and years of unnecessary Argentinian subsidiaries and having a business plan of compete with BA everywhere.