Norwegian wins gov’t backing for plan – with conditions

Norway’s government has announced that it supports Norwegian’s new rescue plan to avoid bankruptcy, a change from its position adopted in October. The airline welcomed the move, which it said “significantly increases Norwegian’s chances of working through the crisis caused by the pandemic and position itself as a key player within Norwegian and European aviation.” The centre-right coalition’s trade and industry minister, Iselin Nybø, revealed in a statement on January 21 that although the government “has no ambitions to become a shareholder” it “is positive about contributing money to a reconstructed Norwegian” as long as private investors do too. The company’s plan to end long-haul flights, turning away from its base at London Gatwick to refocus on the Nordic region while significantly cutting debt and raising NOK4-5 billion kroner (USD474-593 million) in fresh capital, “seems more robust than the one we said no to in October. That is why we are now positive towards contributing,” Nybø said. In light of the new business plan, which Norwegian outlined on January 14, the low-cost carrier subsequently asked the state to reconsider participating in the restructuring. “If Norwegian succeeds with this work, the government can contribute with a hybrid loan. But it is a demanding process the company is undergoing, and Norwegian is, among other things, dependent on bringing in long-term and strategic owners,” Nybø stressed. Government aid depends on several conditions, she said, including an influx of at least NOK4.5 billion (USD534 million) in new capital “mainly from institutional and strategic investors”; participation in a hybrid loan must take place on market terms; and the courts must approve the restructuring. It also depends on approval from Norway’s parliament, although several opposition parties have urged the government to help Norwegian in its efforts to survive the crisis. Jacob Schram, Norwegian’s chief executive, said the support demonstrated that the airline was “heading in the right direction” and he underlined that “the government’s support significantly increases our chances of raising new capital and getting us through the reconstruction process we are currently in.” The news agency Reuters quoted analysts at Copenhagen-based bank Sydbank as commenting in a note: “The support of the Norwegian government is an invaluable piece in the rescue of Norwegian. With a magic wand, a Norwegian bankruptcy seems now, therefore, quite unlikely.” As previously reported, Norwegian entered into an Irish examinership process late last year. Its new business plan is based on a simplified business structure with a fleet of around 50 aircraft in operation this year, gradually rising to about 70 in 2022 pending demand and potential travel restrictions.