In this news, we discuss the Norwegian Air suffers body blow as govt rules out more support.
OSLO (Reuters) – The Norwegian government will not provide additional financial support to the pandemic-stricken Norwegian Air NORR.OL, he said on Monday, leaving the cash-strapped carrier in dire straits.
Norwegian Air, which has been hit hard by the coronavirus crisis and has grounded most of its fleet, said in August that it would run out of cash in the first quarter of 2021 unless it could secure new funds and had discussions with the government hoping to gain support.
The company’s shares fell 23% at 8:18 a.m. GMT to a record high of Kroner 0.49, extending this year’s price drop to 99%.
“It’s a difficult message to get across. But we are responsible for the responsible use of public funds, ”Minister of Industry Iselin Nyboe said at a press conference.
“Norwegian Air has a financial structure that makes it risky for us to enter with support. It was not defensible.
A pioneer of low-cost transatlantic air travel, Norwegian Air’s rapid expansion has left it with nearly $ 8 billion in debt by mid-2020, making it vulnerable to the fallout from the COVID-pandemic. 19.
The government’s rejection leaves the Norwegian in a “difficult situation,” the carrier said in a statement.
“The fact that the government has decided to reject the request for funds is disappointing and sounds like a punch to everyone at Norwegian,” said Managing Director Jacob Schram.
Norwegian Air, which releases third quarter results on Tuesday, said it will hold its own press conference at 9:30 a.m. GMT.
Timeline: The rise of Norwegian Air and its battle for survival
The carrier has shown great ability to overcome financial difficulties in the past, said Transport Minister Knut Arild Hareide.
“I don’t want to speculate on their ability to do that,” said Hareide, when asked about Norwegian’s chances of remaining in operation.
Creditors and lessors took control of the airline in May with a financial bailout that gave it access to state-guaranteed loans of 3 billion crowns ($ 329 million) as the company sought to operate a lean service.
Norwegian only operated 21 of its aircraft last month, leaving more than 100 on the ground, including its entire fleet of 37 Boeing 787 Dreamliners used on transatlantic travel.
The airline industry is likely to provide sufficient services and will still experience healthy competition in the years to come, Nyboe said.
The Scandinavian carrier SAS SAS.ST is a major competitor in Norway and the Hungarian Wizz Air WIZZ.L recently launched several services to Norwegian cities.
“Norwegian is evaluating the effects of the current situation with the aim of safeguarding the interests of all stakeholders,” the airline said.
The company said more funding could come from the sale of planes, converting more debt into equity or from its owners and the Norwegian government, while declining to say how much it might seek.
The government also said it had rejected a request from a start-up carrier for public funds.
So far this year, the government has provided around SEK 13 billion to support the airline industry, including loans, guarantees and tax cuts, he said.
Additional reporting by Nora Buli; Edited by Richard Pullin and David Goodman
Original © Thomson Reuters
Originally posted 2020-11-09 02:56:10.