Norway government cuts financial support for Norwegian Air

Paulo Afonso

The Norwegian government will not provide additional financial support to its largest airline. Hard-hit by the coronavirus crisis, Norwegian Air is now facing an uncertain future.

The airline grounded most of its fleet in March 2020. In August 2020, it announced it would run out of cash in the first quarter of 2021 unless it secures fresh funds and support from the government.

Already in great financial difficulties at the beginning of 2020, Norwegian was also hit hard by the coronavirus COVID-19 pandemic. As it was on the verge of bankruptcy, the company secured $300 million in state aid guarantee in May 2020, along with the conversion of part of its existing debt and its financial commitments into new shares.

In total, the Norwegian government has already supported the airlines with NOK 13 billion (about €1.2 billion) subsidies. Norwegian has asked for a new billion-dollar rescue package from the state and was given a negative response. 

“Norwegian Air has asked for billions of crowns in additional support, and the government has concluded that this would not be a responsible use of public funds”, said Industry Minister Iselin Nyboe.

“The fact that our government has decided to refrain from providing Norwegian with further financial support is very disappointing and feels like a slap in the face for everybody at Norwegian who is fighting for the company when our competitors are receiving billions in funding from their respective governments”, said Norwegian’s CEO Jacob Schram in a press release.

Evaluating the effects of the current situation, the company suggested that more funding could come from the sale of aircraft or debt-to-equity conversion. 

This setback comes months after the Swedish National Debt Office also rejected Norwegian’s request for a state credit guarantee. Sweden judged that the air carrier was already in a precarious situation before the pandemic, and thus was not eligible to receive financial support from the state.

During the upcoming months, services would still be provided by Norwegian as well as other competitor airlines: Scandinavian carrier SAS and Hungary’s Wizz Air. 

Norwegian Air traffic numbers were heavily influenced by the travel restrictions and decrease in demand. In October 2020, its capacity was 93% lower than the previous year with a 96% decrease in passenger traffic. 

Amid the pandemic, in June 2020, Norwegian Air Shuttle announced it would cancel its pending order for 92 Boeing 737 MAX and 5 Boeing 787 Dreamliner jets. The carrier still expects to receive compensation from Boeing for the losses it suffered because of the 737 MAX and 787 problems.

In late 2019, Norwegian was already struggling to balance out its finances, and was forced to sell its Argentinian subsidiary Norwegian Air Argentina (NAA) to JetSMART Airlines.

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