Norwegian Air Wins State Support, Scraps Long-Haul Network
Carrier looks to be a “dedicated short-haul” airline, as Oslo agrees to back a hybrid loan package if other investors can be found
January 25, 2021
The government of Norway has agreed to be part of a hybrid loan program to support Norwegian Air’s restructuring plan. However, the government assistance is contingent on the airline being able to raise 4.5 billion kroner ($529 million) from other investors.
The airline has revealed plans to simplify its business structure and operate “a dedicated short-haul route network,” effectively scrapping its long-haul services.
“Our short-haul network has always been the backbone of Norwegian and will form the basis of a future resilient business model,” said the carrier’s CEO Jacob Schram in announcing the restructuring last week. “We do not expect customer demand in the long haul sector to recover in the near future, and our focus will be on developing our short haul network as we emerge from the reorganization process.”
In May, Oslo extended 3 billion kroner ($354 million) in loan guarantees to the carrier, but in November, Norwegian’s plea for a second government aid package was rejected since some of the money would support operations outside Norway.
The airline says the government’s latest offer will boost the ailing carrier’s bid to attract new investors and continue to operate “across a broad range of domestic routes in Norway, across the Nordics and to key European destinations.”
In a statement, Schram said “the government’s support significantly increases our chances of raising new capital and getting us through the reconstruction process we are currently in.”
Norwegian had expanded its long-haul operations rapidly between 2010 and 2017, adding numerous routes from Gatwick to the US, including New York, Boston, Orlando, Chicago, San Francisco and Los Angeles.
But the carrier has been operating at a loss, and in recent years had been forced to drop several routes, including all transatlantic services from Ireland. When COVID-19 struck, the airline was forced to slash it routes and ground its fleet of long-haul 787 Dreamliners which have remained idle since.
Under the latest restructuring plan, the airline will operate around 50 narrow body aircraft in 2021, increasing to 70 in 2022. The restructuring will also spell the loss of around 2,100 jobs around the world with the biggest impact in the UK, but the carrier also has long-haul bases in the US, France, Italy, Spain.
The plan must still clear the hurdle of getting approval from a bankruptcy court in Ireland, where its aircraft are registered.
“The Covid-19 pandemic has profoundly affected the entire aviation industry,” the company said. “Under these circumstances a long haul operation is not viable for Norwegian and these operations will not continue. The consequence of this decision is that the board of directors of the legal entities employing primarily long haul staff in Italy, France, the UK and the US have contacted insolvency practitioners.”