Norwegian starts to unravel as desperation creeps in

Over the years in theses pages it’s been a consistent theme that Norwegian Airlines is in many ways a financial house of cards – and that’s being polite.

It’s whole corporate structure has been designed to create an illusion of profitable operation, multiple companies and lots of wooden dollars moving from one shell to another, while sucking in as much cash as possible through relentless expansion and high expenditure.

That had to come to an end and it has. It simply couldn’t keep expanding at that rate and the 787 and 737MAX groundings pulled the rug from under it, forcing a reckoning.

Less than a year ago it raised some $350m and has burnt through that so fast it’s almost got nothing left.

Some analysts lauded the success of that share sale – yet it was a disaster – only its founder put a wedge of money in and the rest was found from underwriters because nobody else would buy. In other words the insurance company paid up and didn’t actually expect to have to. It was a bad bet.

Norwegians runway is running out. It’s now found another $246m from doing the only thing it can: sell the family silver.

It’s still having to rent in HiFly’s A380 again – an expensive option. It’s recent withdrawal of the Irish-US/Canada routes are extremely late in the day. It could have dropped those far sooner and saved it’s reputation and the financial damage – but again, it didn’t do what was needed.

Part of the complex web of holdings inside Norwegian is a shareholding of a bank – Norwegian Finance Holding – which owns BankNorwegian that finances Norwegian Airlines leasing company and airline groups and props up the house of cards.

While it means Norwegian has extended its runway across the winter months – maybe up to February/March 2020, it’s got little else anyone wants, to sell.

This only came about because a second sale of yet more shares was, allegedly, said to be impossible to underwrite, never mind find a genuine buyer.

When you start asset stripping to pay the bills things are bad. Norwegian is running out of options.

Norwegian’s assets are few, the airlines leases are held by various companies and its own Arctic Aviation – is likely to be sold off next.

Norwegians problems will deepen if the new bank owners – a partly Chinese owned conglomerate – feel they can’t invest more in the group. It’s a risk that had to be accepted.

Meanwhile the predators like IAG sit waiting, quietly, patiently. They know the end is coming and a bargain is their to be had. And they have as long as it takes.