Norwegian Air’s cash crisis could force the indebted low-cost airline to cease operations early next year, the company warned when it filed another request for bailout funding following Tuesday’s quarterly results.
The pioneer ‘s rapid expansion in low cost transatlantic flights has resulted in high levels of debt and problems, compounded by the COVID-19 pandemic. It only serves domestic routes, only six of the 140 aircraft fly.
“Norwegian is reliant on additional working capital to continue operating in the first quarter of 2021 and beyond,” the airline said.
The company had cash and cash equivalents of 3.4 billion kroner ($ 380 million) at the end of September, compared to 4.98 billion kroner ($ 550 million) three months ago.
The latest plea in law comes after the Norwegian government on Monday turned down calls for more government support to the airline, whose shares have lost 99 percent of their value since January, saying it was too risky.
Following this rejection, the company announced late Monday that it would employ 1,600 more people, so that before the pandemic, only 600 people would work out of a total of 10,000 employees.
In another sign of Norwegian running out of time, the executive board representative of its largest shareholder – leasing company AerCap Holdings – resigned on Tuesday.
Anton Joiner was Vice President of Norwegian Air and was elected in June. The airline did not reveal the reason for his resignation, and an AerCap spokeswoman had no immediate comment.
AerCap held a 13.4 percent stake in the airline at the end of September.
“Likely to collapse”
After Oslo’s rejection of aid, grim quarterly numbers point to a likely collapse, said Bernstein analyst Daniel Roeska, adding, “It’s not a pretty picture.”
Roeska also said the airline’s supplier credit is likely to dry up quickly.
“This could lead to a liquidity crisis in the short term and we see few ways out for the group,” he added.
Despite those pessimistic assessments, the company said the funding could potentially come from refinancing debt, selling airplanes and other assets, converting debt into equity, or raising funds from its owners.
However, aircraft leasing companies that own more than half of the airline after exchanging previous debt for equity are unlikely to bring in new money, according to a source close to one of the companies.
“Norwegian was a red light for lessors even before COVID,” the source said, adding that they initially joined the bailout because the liquidation would have saved only pennies for every dollar owed and would have had to sell planes in a market , which was already tense before the coronavirus crisis.
“Norwegian got a kind ear because it would have meant a flood of 787s,” the source said. “But that has become almost irrelevant. 787, 737, A320 – they’re all on the ground now. “
The company’s operating loss for the third quarter was 2.8 billion kroner, compared to a profit of 3 billion kroner ($ 330 million) in the same period last year with total debt and liabilities of 66.8 billion kroner (Jan. , $ 4 billion).
With just six of the 140 aircraft now in service compared to 21 last month, most of Norweigian Air’s short-haul aircraft are on the ground alongside its entire fleet of 37 Boeing 787 Dreamliners.
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