How Irish is Norwegian Air Shuttle?

How Irish is Norwegian Air Shuttle? A High Court judge wanted to know last week. Enough to grant protection from creditors, it turned out.

A few weeks earlier the Norwegian government was asking the low-cost airline how Norwegian it really was. Not enough to get a second bailout was the government’s conclusion.

The nationality of a company can often seem unimportant. Businesses are founded in one country, move to a second and can list on the stock exchange in a third, all while their main business could be in a fourth.

But as Norwegian and others have discovered in recent months, when things go badly, nationality can suddenly become very important.

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The airline started life almost three decades ago as a regional Norwegian carrier. It was in this country that it took steps first to become a low-cost challenger to SAS in Scandinavia and then a rival to Ryanair and Easyjet in much of the rest of Europe.

High-cost, heavily unionised Norway does not seem the ideal country from which to launch a low-cost airline. And so it proved as Norwegian set up subsidiaries in the Republic for operations and aircraft financing and also in UK for operations, as well as countries such as Spain, Denmark, and Sweden for staffing.

Hubris then appeared to strike. It started regional flights in Argentina at the same time as it tried to crack the lucrative transatlantic market, something no low-cost carrier had ever managed. Soon, rivals, analysts and bankers were forecasting a humbling as its rapid expansion led to an equally rapid growth in debt.

Norwegian entered the Covid-19 pandemic as one of the most heavily leveraged of large airlines in Europe and despite a first, limited bailout from Oslo it was clear that surviving this winter was going to be an almighty challenge.

Norwegian is undoubtedly an important airline in Norway and many away from Oslo remember the days of an SAS monopoly and the high ticket prices that came with that. But Norwegian politicians were hesitant to back it further, worrying not just about its high debt load but also if it was sufficiently Norwegian.

“I feel like they have the name, but very little else has been Norwegian in the last few years. The crew are Danish or Spanish or British. Do we have to support them just because they are called Norwegian?” one opposition politician told me this autumn.

Irish nature

The government concluded no. Weeks later though, Mr Justice Michael Quinn was asking Norwegian to justify its Irish nature. Lawyers for the airline pointed to bases in the country for both Norwegian Air International, which it used for flights from the UK and the Republic to the US, and Arctic Aviation Asset, the group's financing arm. The judge was satisfied, and bankruptcy protection was unleashed. A day later, the company filed for a reconstruction under Norwegian law as well.

It is not just Norwegian that has confused nationality in the Nordics. Ikea is often described as a Swedish retailer. But its two main headquarters have not been in Sweden for more than four decades, even if it retains a strong presence there. They moved first to Denmark, and then the Netherlands. The two main parts of the flat-pack furniture empire are based in Leiden and Delft, and owned by Dutch and Liechtenstein foundations. Tax clearly played a role, but so did the demand of founder Ingvar Kamprad that they be protected from takeover and banks, hence the foundation owners designed to give Ikea "eternal life".

Does it matter to those that buy meatballs in stores clad in the colours of the Swedish flag, or people flying in planes with Thor Heyerdahl or Roald Dahl on the tail fins? Perhaps not, but it may surprise them and at the margins, affect their view of the brand and its desirability.

Still, companies have to be aware of the downsides of being too rootless, especially when times are tough. The centre-left Norwegian politician said: "Theresa May [former UK prime minister] talked of citizens of nowhere; I'm worried some companies are like that."

Norwegian has now bought itself time through the tricky winter season to try to restructure its debts and sell some aircraft in the hope of becoming a leaner, more viable airline. Meanwhile, for those in Norway worried that not backing Norwegian could lead to less competition, help has arrived. Hungary's Wizz Air is offering flights between Oslo and Tromso at an even lower price.

Richard Milne is Nordic and Baltic Correspondent at The Financial Times

– Copyright The Financial Times Limited 2020