Norwegian secures $27M guarantee for 1st state aid installment
Norwegian Air Shuttle says it has secured necessary financial support approvals from the country’s banks to be eligible to receive the first installment from Norwegian government’s $274 million state aid package, offered the prior week.
On March 19, 2020, the Norwegian government proposed a $547 million (NOK 6 billion) state aid package for the country’s aviation companies. While half of the sum would be distributed among various airlines, including SAS Scandinavian Airlines and Widerøe, Norwegian Air Shuttle could be the sole beneficiary of the other half, totaling to $274 million (NOK 3 billion).
However, in Norwegian’s case, terms and conditions apply. The government would direct 90% guarantee to the airline, if it finds and convinces financial institutions to contribute the remaining 10%.
On March 24, Norwegian Air Shuttle announced it has completed the task, as Nordic banks have obtained credit committee approval to provide a guarantee for the required 10% for the first tranche of $27.4 million (NOK 300 million).
“The Government guarantee scheme is crucial for the Company as the current state of the capital markets in combination with the challenging times for the airline industry limit the options available,” as outlined in the statement by Norwegian Air shuttle. “The first NOK 300 million will create necessary headroom to pursue the remaining tranches of the guarantee scheme.”
The first trench is to help the airline reduce its interest and repayments to creditors. The second trench, $110 million (NOK 1.2 billion), is to help the carrier improve its solvency to a “satisfactory level”, after which it would receive the remaining $137 million (1.5 billion), as previously indicated in a statement by the Norwegian government.
Struggling to cope with the impact of the COVID-19 virus outbreak and consequential travel restrictions and country lockdowns imposed by multiple countries around the world, Norwegian Air Shuttle had canceled 85% of its routes and temporarily laid off 7,300 employees by March 16, 2020. On March 24, the company updated that “most” of its fleet was grounded and around 90% of its workforce was temporarily laid off, while additional cost measures would be implemented going forward.
Having operated several repatriation flights to Norway, Denmark and Sweden, the airline is now keeping its operations at a minimum and is planning to operate mostly domestic flights in Norway and Sweden, as well as between Oslo and Stockholm.
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