Some press reports in Norway over the last week or so suggested that Norwegian Air was going to breach its banking covenants when they were tested on 31st December.
It looks like the reports may have been correct, as the company unveiled a number of measures on Monday to inject new liquidity into the airline.
According to Reuters and Bloomberg:
One Boeing 787 has been refinanced, raising $30m in cash (although of course long-term debt is increased by $30m)
A new cost-saving programme has been launched – no details yet – which is expected to save NOK 2bn in 2019. This will include closing unprofitable routes.
An “agreement” has been reached with Rolls-Royce over compensation for the Boeing 787 engine issues which have blighted Norwegian’s performance. However this is paid – either in cash or in kind – it will have an impact from the start of 2019.
Financing has been secured for all aircraft delivered due in H1 2019
Talks are continuing over the sale of some or all of its wholly owned aircraft
None of this is going to help Norwegian in the long term – in fact, by pushing up its long term debt it will make life tougher down the line – but it will get it over the next bump in the road. The hope will be that falling oil prices and the maturing of existing routes will improve revenues in the medium term.
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Interesting development Rob, appreciate the update especially given the timing, hope one and all have a relaxing festive break.
Long haul budget seems hard for most airlines, I. Guess air Asia has made it work somewhat. Interesting to see who follows next.
I’m happy to spend my £ thinly by flying up the back across continents when my usual seat is up the front on the bus in those reserved seats for the incontinent.
Long haul economy on a budget airline feels poor value after all the addons are rolled up. They haven’t convinced me saving 50 quid and eating my own sandwiches and using hand baggage is a great deal when the hotel at the destination costs as much the flight.
If I have committed to a week away with all the costs it is nice to feel very slightly pampered with a modicum of service. Long haul self service when flying seems a bit mean minded.
Maybe if i had a long distance relationship that required fortnightly flying to NYC the lowest cost would tempt me.
2019 New Years Resolution made.
Love it !! Merry Christmas 👍
Yeah but you can get a family of four into a hotel room…..
Merry Christmas
Do most companies lease out their aircraft? Is there any companies that actually own their aircraft?
Options include a) secured bank loans, b) leasing the plane short-term from a finance company which owns it or c) leasing it yourself.
When you lease the plane, the debt is not on your books BUT you are liable for the same monthly payments. Most countries have accounting rules to capitalise leases so they are treated as loans in your accounts.
That is until next year when ifrs16 willmean all leases are treated as on balance sheet. Then all will be capitalised and included as loans.
That means the 24% off sale may be worth a punt! You have 40 minutes. 🙂
Thanks for the update, Rob – makes me a bit more relaxed about my positioning flights to/from Oslo next month! (would be looking at 4-6h otherwise on multiple carriers!)
If ever fuel duty is applied to air transport to the same degree as other forms of transport, most airlines would cease to exist within a few days. Norwegian flew great services from Manchester last year at a ticket price of less than getting to the airport. Something is seriously unsustainable.
How much is£ $ € is NOK 2 Bn?
Not all of us keep up to date with exchange rates.
Use 1 to 10 as a rule of thumb but everything in Norway costs twice as much, apparently except for flights. Is knowing the amount in £ actually any more use?
2bn NOK is GB£180m.
Having just got back from an overnight trip to Oslo. And John is very right. A 50cl beer is about £10-£11. But my return flight with FY was £10!
Do you keep up with internet searches?
Any idea for how long this keeps them in the air?
Useless airline. Disgraceful customer service. The sooner they’re out of business the better.
BA? Agree.
Great comment!
Yeah it will be brilliant for the people who lose their jobs if they go out of business
Quite the opposite – the European travel market will become much more dire without Norwegian!
That is a relief having a flight to Chicago booked with them in April. We have been lucky on our previous flights and had great customer service and also managed to get good seats in the bulkhead.
Btw what is the form with people going across the bulkhead in front of you seat to go to the bathroom? ??
That’s always just been plain rude IMV. Try and block it, keep your feet up or something like that. It only takes them a few moments more to go round the proper way.
That is what I do, but I wanted to check I was in my right to do this.
This is good news (as it keeps the legacy carriers honest a little longer on pricing) but I assume that the downward spiral is hard to escape – is there much precedent for airlines taking these measures to shore up balance sheets ever recovering from the growing debt mountain it creates?
I have a load of cash points but am loathe to use them – either for work or leisure because the potential cost of last minute alternative flights is too great a risk. (And of course leisure would be my preference, and 5x backup avios bookings while possible would cost a chunk of the cash points value anyway.)
They have their faults but to be fair to them they leased an a380 to maintain their NYC service. That has to have been pricey…
I fly Norwegian from time to time, but only at short notice. I don’t trust them to be around in 6 or 12 months time