Norwegian Group has gone to investors begging to delay its debt repayments.
The airline group is due to pay $380 million in bonds to investors and is desperate to delay them for at least two years.
In order to persuade reluctant investors – some of whom are said to be understandably nervous at present – the airlines is willing to put up its valuable London Gatwick slots as collateral, although it’s unlikely they’d cover more than half the amount.
Norwegian has ploughed through the cash it raised last year and there’s no hope of it raising any more. It’s already sold off the groups banking arm to keep going in the last month.
Norwegian’s also looking at a deal that in effect sells off its rights to its large order of A320 series on order and in high demand.
Norwegian has nobody but itself to blame. It expanded too fast, let costs get out of control and runs a system of wooden dollar profit and loss accounting, while not illegal, that inevitably would become obvious to even the most ardent believer in its success.
Clobbered by an over-commitment to Boeing, it’s lost business because of the MAX saga and a double whammy with the Rolls Royce engined 787’s, disasters that weren’t its own fault but it had no means, or plan, to deal with.
Rather than use the A320 series orders for its own use – which would have saved it a lot of bother in the past year, it had to sell them to pay its escalating bills.
Every way you look at Norwegian you see amateurs at work- overly optimistic, full of bluster and while the core idea is a good one, it’s been approached with zero strategy and no financial common sense.
It seems to have come as a shock for example that European rules on advanced ticket sale revenue were changing and they needed to be ring fenced for longer – costing the company a lot of its newly raised cash.
While it is trying to change – it’s like a house eaten by termites – looks great on the outside but one shove and it’ll collapse into a heap of rubble.
Norwegian’s runway is running out. It’s only real solution is to look for a buyer. And nobody is going to offer much for an airline near bankruptcy.