Norwegian’s days of pushing the risk envelope seem to be well and truly over. At the close of business yesterday its shares were down 60% from their high point in 2018.
Yesterday’s announcement of huge losses and a share issue that’s equal to almost 50% of the company’s entire valuation, that will only see it through the first trimester of the year, shocked even the most optimistic of the share holding groups.
Bjørn Kos, the CEO and founder is being quietly told he has to take a back seat and let calmer heads prevail as the airline manages its risks. It has to find $252 million by December just to pay back a single bond.
Aircraft sales and cancellations seem imminent and a culling of any route unlikely to make the grade will be essential to bring things back under control. That’s on top of the big reductions and base cuts already announced in January.
Kos is largely seen as the reason the company wasn’t sold off to IAG, he just couldn’t bring himself to accept that it wasn’t worth as much as he thought IAG should pay.
The airline is also starting to find that competition, once non-existent on its long-haul operations, is growing quickly.
Established airlines Like BA and Virgin Atlantic have modified their fare structures in the UK at Gatwick, the UK’s biggest leisure travel airport. Meanwhile in Europe, Lufthansa has introduced Eurowings on Long haul, IAG has added Level and the imminent arrival of the A321neoLR is threatening to undermine the US East Coast economics as more airlines buy in to it.
Norwegian has a place, but its shareholders now realise that’s not at any price and things must change. Even if Kos was removed completely, which is unlikely, Norwegian needs to recognise stability and consolidation are now its watch words.