Norwegian drops long-haul, cuts 2,160 jobs, to raise $590mn

Norwegian (DY, Oslo Gardermoen) will shut down its long-haul operations to focus instead on “a simplified business structure and dedicated short-haul route network” as it seeks to complete its debt restructuring, it announced in a statement presenting a new business plan on January 14. The airline’s executives warned last month that they were contemplating giving up their once-prized long-haul business. The new plan, which is subject to approval by courts in Ireland as part of the ongoing the examinership process there, would cut Norwegian’s fleet from 140 aircraft today to around 50 narrowbody aircraft, raising that to about 70 in 2022. “The company will build on [its low-cost] foundation, focusing on its core Nordics business, operating a European short-haul network,” it said, admitting that its entire B787 fleet had been grounded since March. Norwegian pledged to cut its debt to NOK20 billion kroner (USD2.36 billion), while also raising between NOK4 billion and NOK5 billion (USD470-590 million) in new capital through a combination of three measures, a rights issue for current shareholders, a private placement for which it claimed to have received “concrete interest”, and a hybrid instrument. Norwegian CEO Jacob Schram warned in a separate stock exchange filing on the same date that existing shareholders would likely be left with just 5% of the new company post-reconstruction. This would make it the second time in less than a year that it has obliterated its current investor base. Norwegian’s impaired creditors would hold about 25% of the shares in the company after the restructuring, “as compensation for their participation in the debt reduction,” while new investors in the equity issue and hybrid instrument would hold about 70% of the shares. Norwegian is in debt to creditors for about EUR4 billion euros (USD4.9 billion), much of it to lessors such as AerCap, Bank of China, and SMBC Aviation Capital. The company said it had recently reinitiated dialogue with the Norwegian government about possible state participation based on the new business plan. The government rejected an earlier bailout in part because some of the aid would have been used to fund long-haul operations, which are focused on London Gatwick Airport and so would not benefit Norway.