Norwegian: 2 weeks to bankruptcy?

Norwegian is just two weeks from bankruptcy as it offers shareholders a deal that will in effect, see their investments wiped out to save the airline.

Even if they do accept the deal, and some are said to be sitting heavily on the fence, wondering wether of not they should even waste their time with a lost cause, the ailrine said yesterday some 80-90% of its fleet will remain grounded up to and including the first quarter of 2021.

Norwegian has just 7 aircraft flying, and those are government subsidised internal domestic cargo flights on passenger aircraft. The other 140 are grounded around Europe.

The airline needs a state backed £230 ($US287.5) million bail out. Norwegian expects its bond holders, share holders and lease owners to take a massive hit and get shares in what will be a “New Norwegian”.

This so called “New Norwegian” will be 30% smaller, ditch every route to long haul secondary airports, and only fly profitable routes, although what they will be in the future is now highly questionable.

The leasing companies will be asked to forget $500m in lease debts and payments due or overdue, in exchange for shares in the new company.

Shareholders will vote on May 4th, if they agree on May 11th, New Norwegian will be born, and the value of their old shares, almost worthless now, will drop by another 95%.

Norway however, is a ver wealthy country, and they see Norwegian as a bold new flag carrier. Something Norway has never previously had.

There is even a move to change the law that will allow it to enter a Chapter-11 type of protection, where it can carry on and just tell every other supplier or creditor to suck it up and move on, rather as US companies do, normally at the expense of workers, small supplier companies and the like. However Norway isn’t quite as accepting of such practices as America.

Analysts in Norway seem quite happy to accept that Norwegian will be sliced down to a regional airline only, flying in and out of Norway.

There is always the possibility this vote will fail – if it does, that’s the end for Norwegian.

Meanwhile Virgin Atlantic’s been told it won’t get any help from Delta, and Branson continues to try and find other investors while negotiating with the Government for a loan.

Lufthansa has been told to expect a multi-billion Euro bail out and it won’t be allowed to go under.

It’s Austrian subsidiary has been promised €870m by its government.

AF-KLM has received €10 billion in total from the French and Dutch governments. But it came with a lot of pre-conditions, including an insistence on environmental advances, sustainability, no dividends and a big pay cut for executives, and no bonuses.

United States airlines have access to two pots of $25bn have been earmarked for airlines from the US’s $2.2tn stimulus package. The first will provide grants and cheap loans according to each airline’s payroll, and be given on condition of keeping staff employed. Airlines can apply for additional loans from the second pot. The biggest carriers, such as United, American Airlines and Delta, are expected to receive up to $5bn each from the first loans and grants.