Norwegian Air on the Brink ?

[Goldstone1976]

My partner and I used Norwegian a couple of weeks ago for 4 flights to and from, err, Norway; everything about the experience was spot on.

The travel industry is in for a real kicking, I’m afraid. Good luck to those employed by it...

 

[Tom Hark Preston Park]

Hope the staff laid off aren’t just dumped on the streets with no money etc

It's in the airlines own interest for see that their laid off staff are well looked after, because at some point they're going to be scaling up operations again and will need to hit the ground running

 

[Kinky Gerbil]

Jamaica have shut the boarder.

 

[portslade seagull]

I think it is a special case for all businesses so government's if prepared to should be able to bail these companies out in whatever field they work.

 

[Cowfold Seagull]

I think they’ll be a massive loss. Ive flown with them probably 50+ times (short haul) and the planes are great, the service excellent and on the routes I’ve flown the delays have been very rare.

They’re not very good at long haul by all accounts but otherwise I don’t think many others offer that level of service at such a good price.

Absolutely right, like you l have flown with Norwegian a lot, either on their own services, both short & longhaul, and on Norwegian aircraft & crew that have been subcontracted by Tui to operate some of their services due to a shortage of aircraft.

Virtually without exception all of the said flights operated to schedule, the on board service was very good, and the prices they charge are very reasonable too.

 

[SUA Seagull]

In my experience of flying with them, they offer an excellent product at fares many other carriers can’t match for similar service.

They have been hit really hard by the triple whammy of a now 12-month Boeing 737 MAX grounding, perennial Boeing 787 RR Trent 1000 engine problems and – out of the blue – the covid-19 virus, causing a severe reduction in their forward bookings, which have resulted in the staff layoffs and route cancellations recently announced.

They’re having to lease in third-party aircraft to cover the absence of the MAXs, and under-performing 787s, all at additional cost to them. None of those issues are their fault. Add to that a stretched balance sheet and it’s the perfect storm. In the press yesterday their CEO announced that the government has offered a cut in aviation taxes to help them but he went on to say “sadly, this is not enough as we’re in a very demanding situation at the moment. We need exact measures to strengthen our liquidity in the short term immediately.”

Norway is part of EFTA which, in order to trade with the EU, has had to accept EU rules on state aid, which outlaw direct government financial support for private sector companies (such as Norwegian). So a straight government bailout is unlikely, unless it can be “dressed up” as something else.

Other, competing carriers (IAG, Lufthansa and the US majors), with whom Norwegian competes on transatlantic routes, would love to see them fail and will fiercely lobby against any official or unofficial state aid offered to Norwegian. If they were to fail, an excellent competitor would be removed from Europe-US routes, air fares would rise and passengers would lose out.

These are unprecedented and challenging times for the airline industry and the next few days and weeks will be a critical time for Norwegian and many other airlines.

 

[Weststander]

Absolutely right, like you l have flown with Norwegian a lot, either on their own services, both short & longhaul, and on Norwegian aircraft & crew that have been subcontracted by Tui to operate some of their services due to a shortage of aircraft.

Virtually without exception all of the said flights operated to schedule, the on board service was very good, and the prices they charge are very reasonable too.

We’ve flown with Norwegian, never had any delays or issues, good customer care.

 

[Weststander]

In my experience of flying with them, they offer an excellent product at fares many other carriers can’t match for similar service.

They have been hit really hard by the triple whammy of a now 12-month Boeing 737 MAX grounding, perennial Boeing 787 RR Trent 1000 engine problems and – out of the blue – the covid-19 virus, causing a severe reduction in their forward bookings, which have resulted in the staff layoffs and route cancellations recently announced.

They’re having to lease in third-party aircraft to cover the absence of the MAXs, and under-performing 787s, all at additional cost to them. None of those issues are their fault. Add to that a stretched balance sheet and it’s the perfect storm. In the press yesterday their CEO announced that the government has offered a cut in aviation taxes to help them but he went on to say “sadly, this is not enough as we’re in a very demanding situation at the moment. We need exact measures to strengthen our liquidity in the short term immediately.”

Norway is part of EFTA which, in order to trade with the EU, has had to accept EU rules on state aid, which outlaw direct government financial support for private sector companies (such as Norwegian). So a straight government bailout is unlikely, unless it can be “dressed up” as something else.

Other, competing carriers (IAG, Lufthansa and the US majors), with whom Norwegian competes on transatlantic routes, would love to see them fail and will fiercely lobby against any official or unofficial state aid offered to Norwegian. If they were to fail, an excellent competitor would be removed from Europe-US routes, air fares would rise and passengers would lose out.

These are unprecedented and challenging times for the airline industry and the next few days and weeks will be a critical time for Norwegian and many other airlines.

Double standards then, from some EU governments:

Thomas Cook’s german holding company Condor was ‘lent’ €380m by their government to prevent its collapse last year.

Alitalia has received government bail outs of €9b in the last 12 years, including €400m three months ago.

 

[Bozza]

In my experience of flying with them, they offer an excellent product at fares many other carriers can’t match for similar service.

They have been hit really hard by the triple whammy of a now 12-month Boeing 737 MAX grounding, perennial Boeing 787 RR Trent 1000 engine problems and – out of the blue – the covid-19 virus, causing a severe reduction in their forward bookings, which have resulted in the staff layoffs and route cancellations recently announced.

They’re having to lease in third-party aircraft to cover the absence of the MAXs, and under-performing 787s, all at additional cost to them. None of those issues are their fault. Add to that a stretched balance sheet and it’s the perfect storm. In the press yesterday their CEO announced that the government has offered a cut in aviation taxes to help them but he went on to say “sadly, this is not enough as we’re in a very demanding situation at the moment. We need exact measures to strengthen our liquidity in the short term immediately.”

Norway is part of EFTA which, in order to trade with the EU, has had to accept EU rules on state aid, which outlaw direct government financial support for private sector companies (such as Norwegian). So a straight government bailout is unlikely, unless it can be “dressed up” as something else.

Other, competing carriers (IAG, Lufthansa and the US majors), with whom Norwegian competes on transatlantic routes, would love to see them fail and will fiercely lobby against any official or unofficial state aid offered to Norwegian. If they were to fail, an excellent competitor would be removed from Europe-US routes, air fares would rise and passengers would lose out.

These are unprecedented and challenging times for the airline industry and the next few days and weeks will be a critical time for Norwegian and many other airlines.

Lufthansa seem set to cap in hand already - https://simpleflying.com/lufthansa-state-aid-fleet-grounded/

As you say, these are unprecedented times and moves will have to be made, somehow, to ensure there is reasonable travel infrastructure available when this is over.

 

[Beach Hut]

Jet2 has cancelled all fights to and from Spain and Spanish Islands......

However they will have a duty to get their customers back

 

[SUA Seagull]

Double standards then, from some EU governments:

Thomas Cook’s german holding company Condor was ‘lent’ €380m by their government to prevent its collapse last year.

Alitalia has received government bail outs of €9b in the last 12 years, including €400m three months ago.

Absolutely this WS. I've been involved in the aviation industry for 34 years and during that time it has never ceased to amaze me how "creative" some airlines (and their governments) are in circumventing the state aid rules. Alitalia has, as you rightly say, regularly received bailouts but they're typically dressed up as "interim support" and they have always seemed to avoid EU sanction. I would sincerely hope that Norway's government adopts a similarly pragmatic approach, supports its airline and worries about the paperwork and "rules" afterwards. They have a large Norwegian Sovereign Wealth Fund and now would seem as good a time as any for them to consider making use of that, perhaps by the issue of new equity with an option to redeem when the aviation industry stabilises?

 

[Herr Tubthumper]

In my experience of flying with them, they offer an excellent product at fares many other carriers can’t match for similar service.

They have been hit really hard by the triple whammy of a now 12-month Boeing 737 MAX grounding, perennial Boeing 787 RR Trent 1000 engine problems and – out of the blue – the covid-19 virus, causing a severe reduction in their forward bookings, which have resulted in the staff layoffs and route cancellations recently announced.

They’re having to lease in third-party aircraft to cover the absence of the MAXs, and under-performing 787s, all at additional cost to them. None of those issues are their fault. Add to that a stretched balance sheet and it’s the perfect storm. In the press yesterday their CEO announced that the government has offered a cut in aviation taxes to help them but he went on to say “sadly, this is not enough as we’re in a very demanding situation at the moment. We need exact measures to strengthen our liquidity in the short term immediately.”

Norway is part of EFTA which, in order to trade with the EU, has had to accept EU rules on state aid, which outlaw direct government financial support for private sector companies (such as Norwegian). So a straight government bailout is unlikely, unless it can be “dressed up” as something else.

Other, competing carriers (IAG, Lufthansa and the US majors), with whom Norwegian competes on transatlantic routes, would love to see them fail and will fiercely lobby against any official or unofficial state aid offered to Norwegian. If they were to fail, an excellent competitor would be removed from Europe-US routes, air fares would rise and passengers would lose out.

These are unprecedented and challenging times for the airline industry and the next few days and weeks will be a critical time for Norwegian and many other airlines.

State subsidies are allowed under certain circumstances though. If you look up the rules the main issue the EU have is, very broadly speaking, with governments giving selective, unfair, market distorting advantages to companies and/or sectors. Numerous companies, sectors and even nations, have been given state aid to see them through turbulent times which also satisfy the EU legislation. I appreciate you can make a case for saying that keeping a company afloat satisfies the selective, unfair blah blah but the law’s aim is more to prevent piss taking governments more than choke companies and that’s what it does. Of course some politicians will use this to their advantage hence, for example, you had Germany helping Thomas Cook whilst the U.K. said their hands were tied by the EU. The same government that then went and helped FlyBe. Maybe Thomas Cook weren’t Tory donors unlike at least one of the three members of the FlyBe consortia?

 

[Weststander]

Absolutely this WS. I've been involved in the aviation industry for 34 years and during that time it has never ceased to amaze me how "creative" some airlines (and their governments) are in circumventing the state aid rules. Alitalia has, as you rightly say, regularly received bailouts but they're typically dressed up as "interim support" and they have always seemed to avoid EU sanction. I would sincerely hope that Norway's government adopts a similarly pragmatic approach, supports its airline and worries about the paperwork and "rules" afterwards. They have a large Norwegian Sovereign Wealth Fund and now would seem as good a time as any for them to consider making use of that, perhaps by the issue of new equity with an option to redeem when the aviation industry stabilises?

Thanks. A personal view, I'm not averse to bailouts in certain circumstances, it's the hypocrisy from some authorities.

Yes, I mentioned that recently, Norway had (pre markets dip) investments and cash of $1T in the wealth fund.

 

[Live by the sea]

Norwegian air been having funding issues for the last 6 months, this crisis will probably finish it off.

 

[Swansman]

Cant see the Norwegian government allowing this to happen

 

[bhafc99]

Cant see the Norwegian government allowing this to happen

No way Norway


Sent from my iPhone using Tapatalk

 

[SUA Seagull]

Cant see the Norwegian government allowing this to happen

I hope that you are right.

I’m aware from some good friends who work for Norwegian (in both Oslo and at Gatwick) that their CEO’s statement (see post #46) was specifically aimed at the Norwegian government in an attempt to push them to act with tangible financial support, and not just reductions in passenger and airport taxes – which won’t amount to much when passengers aren’t flying and will also be too little too late.

Also, in a country that is reliant on air travel to serve some of its geographically more far flung communities, I would hope that the government will see the strategic importance of not exposing its citizens to the mercy, and unknown scope, of a foreign carrier's flight operations.

That said, the government will also be weighing up what it can do for Norwegian versus the demands of other business sectors in the Covid-19 crisis. For example, alternative options (if Norwegian was allowed to fail) could be for the government to ask Widerøe, a Norwegian regional operator, to operate short-haul domestic routes with fellow Scandinavian operator SAS (principally Danish and Swedish owned) to operate longer domestic and international routes.

Or restructure Norwegian to a slimmed down version of its current self, operating domestic routes only leaving long haul traffic to other carriers. All of these potential solutions will take time to evaluate and implement, pending which Norwegian will need urgent, immediate financial support, as the CEO has stated.

I personally can’t see who else other than the government (or local banks guaranteed by the government) will be able to provide such near-term financial support.

 

[Marty McFly]

Just back from a week in Brighton.

Our flights from Ottawa to Toronto, and Toronto to Heathrow were, at best, half full.

Our return flight today from Heathrow to Ottawa was overbooked, with no visible spare seats. I imagine it's Canadians racing back before the borders close (if rumours are to be believed.) Found the lack of screening in Canada (despite news reports to the contrary) to be rather surprising!

Glad to be back home now. Two weeks of isolation for me and the gf, then back to work!

 

[drew]

I'm no financial expert but it strikes me as rather odd that whilst governments are closing down things left right and centre, the money markets are allowed to keep trading as their all jumping ship the value of a lot of these companies is being unrealistically reduced. Why don't governments agree to close the money markets, say for 4 weeks, whilst the world deals with this crisis.

Wouldn't that give companies some element of stability whilst they plan for the future?