Following a turbulent couple of years, Norwegian are once again on the brink of failure. Their CEO asks the Norwegian government for cash to stay in the air, “in weeks, not months.”
The rapid spread of the coronavirus around Europe has caused chaos to air travel perhaps more than any other industry. Now, one of the biggest names in European air travel is on the verge of bankruptcy once again.
Norwegian have cancelled thousands of flights as a result of the coronavirus-related drop in demand. In addition, around 5,000 of their staff have been laid off. Their CEO Jacob Schram—who currently sits in home quarantine after recent travels as per Norway's new emergency measures—is asking the Norwegian government for urgent help.
Weeks away from collapse
Schram admits that Norwegian is “weeks, not months” away from collapse unless they receive a cash injection. He says the company is now doing everything they can to get through what he describes as the biggest crisis in the company's history.
That's quite a statement given how turbulent the last 18 months have been for the carrier. Norwegian have been hit by the grounding of the Boeing 737 MAX fleet, which is still unresolved. They then required agreement from creditors to extend the period of bond repayments, which was far from certain.
So what's happening now?
Virtually every airline around the world is now in crisis following the outbreak of the coronavirus. For many it's a double whammy. First the drop in demand, second the implementation of drastic measures by authorities around the world in an attempt to curb the spread of infection. For example, Denmark announced the closure of its borders last night.
In a stock exchange notification on Friday, Norwegian said the turmoil in capital markets has led to the effective closure of access to loans or credit. “It hurts me to have to push the button on about 5,000 people, about half our employees,” said Schram.
What Norwegian wants
In the stock exchange notification, the company said “we need immediate concrete measures to strengthen our liquidity in the short term.” Details on the amount of money Norwegian need have not been revealed. When asked what form of aid they want, Schram said to e24 that there are many alternatives.
“What we need is now is a modern form of Marshall aid, which can take us further and get the wheels going again,” said Schram, referring to the European Recovery Program in the years following World War II.
Read more: Coronavirus in Norway: The latest news
Jacob Schram's statements have received support from the rest of the airline industry and its employees, the majority of which also requires immediate action to secure liquidity of the industry.
Patrick Whyte of travel industry website Skift said that Norwegian's position is moving from severe to critical: “Unless it gets significant government help, it won’t survive the crisis.”
Will the Norwegian government rescue Norwegian?
“I am optimistic the government will help us with the liquidity crisis,” Schram said. But despite the name, the Norwegian government has no financial interest in Norwegian. However, the airline is a critical service provider of domestic flights, short-haul European services, and long-haul flights to the USA.
It is in the interests of the Norwegian government to ensure the airline stays in the air. That's even more so given that the government has recommended that people don't travel unless absolutely necessary.
The government has already taken some steps to ease the pressure on the airline industry. Finance Minister Jan Tore Sanner announced the suspension of all airport fees for the first half of 2020 along with the air passenger tax for a period of 10 months.
In addition, the government announced it would pay a greater share of the bill for any companies making temporary layoffs.
No government guarantees
While the chances seem good that the Norwegian government will step in, there are no guarantees. Prime Minister Erna Solberg cautioned that while her government will implement measures that help companies in trouble, some may still collapse.
She said there are limits to governments’ appetite for major state intervention. “While it’s crucial to help viable companies at a difficult time, some might have to go bankrupt. Not all companies will make it.”
There's also the question of other airlines. The Norwegian government sold the last of its shares in Scandinavian Airlines (SAS) in 2018, but the airline is just as important to Norway's domestic and international transport as Norwegian. SAS recently announced huge winter losses, and have also cancelled thousands of flights.
Not forgetting Widerøe, of course. The small airline's fleet of propellor planes provide a critical transport link to remote communities all over Norway. The airline is also in trouble, cancelling many flights, and have been hit by the closure of nine small airports by airport operator, Avinor.
If the government comes to the rescue of Norwegian, could they justify not helping SAS and Widerøe too?