Norwegian Air’s shares plunge as it looks at slimmed down future

Carrier’s financial rescue plan will mean a huge stake dilution for existing shareholders

A Norwegian Air Boeing 737-800 at Ezeiza airport in Buenos Aires, Argentina.

A Norwegian Air Boeing 737-800 at Ezeiza airport in Buenos Aires, Argentina.

 

Budget airline Norwegian Air looks likely to live on in a very slimmed-down form after completing a cut-price share sale and winning bondholders’ backing for a refinancing, after the coronavirus crisis compounded the carrier’s financial problems.

The airline’s shares initially plunged 51 per cent to 2.51 Norwegian crowns (23 cent) on Monday before recovering to trade at 4 crowns by late morning, still down 22 per cent on the day.

The debt conversion and share sale will allow Norwegian Air to tap government guarantees of up to 2.7 billion crowns, which hinge on a reduction in leverage, in addition to 300 million crowns it has already received.

After governments worldwide gradually shut down air travel in March, Norwegian Air said it would run out of cash in mid-May unless it was able to tap government funds.

The plan to save it involves flying just seven aircraft for up to 12 months before a gradual buildup to 110-120 planes in 2022, down from a fleet size of almost 150 aircraft before the novel coronavirus crisis.

Depending on developments in demand, Norwegian Air’s buildup of services could start earlier than outlined in its main scenario, its management has said.

The carrier is valuable to its home country because of Norway’s geography, stretching more than 2,200 kilometres across fjords and mountains with few train lines to transport locals and tourists.

A pioneer in low-fare transatlantic air travel, Norwegian Air’s rapid expansion left it with some $8 billion of debt at the end of 2019, making it vulnerable to the fallout from the novel coronavirus that causes the COVID-19 respiratory disease.

Norwegian Air’s future focus is expected to include the Nordic region and also a significant part of its European operation, while the transatlantic operation will maintain only its most profitable routes, the company said last month.

The deeply discounted sale of 400 million new shares, at just 1 crown each, was about seven times oversubscribed, and the new stock can be traded from later this week, the budget carrier said. – Reuters