Norwegian cuts deliveries to save money – symptom of real financial weakness?

A few weeks ago I got a call from a company who trade in aviation stocks. Part of that conversation involved a discussion on Norwegian and it’s “amazing” backlog of orders with Airbus for aircraft – aircraft it was not going to use itself but sell off via its Arctic Aviation subsidiary and lease holding company.

Norwegian, I was told was going to make handsome profits on these aircraft. My response was “yes but they have to buy them in the first place and they don’t have any money”.

This I was told was simply not how it works. I begged to differ.

Norwegian yesterday announced it was in talks with Airbus to delay and cut back on taking delivery of these very aircraft.

The airline group simply doesn’t have the finances to buy aircraft it can supposedly sell at the drop of a hat to desperate buyers.

It will save it around US$570m across a two year period. What this really tells you is it couldn’t raise the money from any other source to pay for the aircraft and lease them on.

Take that a little further and you can extrapolate that if it can’t raise money for a more or less guaranteed lease return, it has no access to funds to keep the airline running without massive cuts, increased prices, and a major reorganisation. And if that doesn’t work it’s in serious trouble.

So while everything as always looks rosey at Norwegian, it’s actually make or break time.

Let’s hope this time serious people keep hold of its future and its able to ride out the problems it’s created for itself.