The days of Norwegian's budget long-haul flights between Europe and the USA could be over, regardless of whether the airline survives its financial crisis.
Norwegian Air is currently operating under bankruptcy protection, awaiting its second dramatic corporate restructure in a matter of months. Just six Norwegian planes remain in the air on a handful of domestic routes because of support from the Norwegian government.
Known internationally for its low-cost concept of long-haul travel, notably between the US and Europe, the future airline is going to look very different—if it survives.
Instead of bringing budget-conscious American travellers to Europe, the new Norwegian seems likely to return to its roots serving mainly Norwegian customers.
A much smaller airline in 2021
According to a report in Norwegian newspaper Dagens Næringsliv, some of Norwegian's board members want to permanently close long-haul operations. The newspaper claims a relaunched Norwegian would focus only on Norway, Scandinavia and select routes within Europe.
Sparebank1 Markets analyst Lars-Daniel Westby has followed Norwegian Air closely and thinks the company knows that its long-haul operation can’t continue. “Norwegian must put a credible business plan to the court in Ireland, and it must convince the court that the plan is profitable,” he told Dagens Næringsliv.
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Despite the intense speculation, CEO Jacob Schram insists the company has not yet decided on the fate of the unprofitable long-haul operations:
“I have noticed that there has been a lot of speculation about it. No decision has been made on that, but it is an important topic that it is natural for the board to discuss. It is also not appropriate that we take a position on it now, but it is a given that we must take a position on it during the examinership process and it also depends on the investor interest.”
Schram made the comments following the shareholder's meeting that approved Norwegian's restructuring plan. It is the Irish courts through the examinership process that will now decide if Norwegian can undertake those plans or not—and they will only do that with evidence of a profitable business plan.
A dramatic time for Norwegian continues
For much of the year, Norwegian has only operated a handful of domestic routes within Norway. They have been subsidised by the Norwegian government, although the state refused direct cash support.
Norwegian pioneered low-cost transatlantic air travel, but their aggressive growth strategy saddled them with debt. They also struggled with financial issues related to engine troubles on their long-haul fleet.
This left the airline in a much worse financial position than its competitors when this year's global health crisis struck. “It was only a matter of time for this once high-flying low-cost carrier. The pandemic is unforgiving but Norwegian was on wobbly ground long before coronavirus,” said Skift’s Tom Lowry.
In November, the airline has sought Irish protection for its subsidiaries Norwegian Air International and Arctic Aviation Assets, under the examinership process. This is similar to Chapter 11 in the U.S.
The international subsidiary was Norwegian’s first foreign subsidiary and is technically a different airline. It operates many routes outside of Norway under a different air operator certificate, despite using the same branding. However, Norwegian said the entire group will be protected as a related party by the Irish process.