Norwegian Air secures extension to court protection
Covid-19 uncertainty hinder examiner in efforts to put together rescue scheme
The High Court has extended by another 50 days the protection period for Norwegian Air and three related subsidiaries from its creditors. Photograph: Pontus Lundahl/AFP via Getty Images
The extension, to 150 days, was granted by Mr Justice Michael Quinn on Friday after he was satisfied exceptional circumstances – the devastating impact of Covid-19 on the airline – exist to allow the court extend the period.
Seeking the extension, the airline’s examiner Kieran Wallace of KPMG, said extra time was required to agree a scheme of arrangement with creditors, subject to approval by the High Court, to allow the airline continue to trade as a going concern.
Paul Sreenan SC, with Kelly Smith SC, for the examiner, said the impact of the pandemic, the primary reason why the airline sought protection, continues to cause serious disruption and uncertainty to the aviation sector.
Counsel said this examinership was one of the biggest and most complicated examinerships in the history of the state. Recent developments such as regional and new variations of covid-19, and issues over the delivery of vaccinations, had added to the uncertainty, counsel said.
The uncertainty had not helped the examiner in his efforts to put together a scheme with creditors or efforts to secure the fresh investment the airline needs to survive.
Another complicating factor, the court heard is the companies’ ongoing efforts for repudiation of aircraft leases and service contracts it had entered into. The company says, if it is to survive, it needs to have those agreements set aside.
Several contested applications regarding leases, arising mainly out of Norwegian’s decision to reduce its fleet when it opted to cease its long-haul services, are due before the High Court next week.
In the circumstances it would not be possible to conclude the examinership process in a 100 day period, normally the maximum period allowed, the court was told.
While Mr Wallace was seeking the maximum 50-day extension, he remains hopeful of being a position to put a proposal to the court in 25 days but wanted the additional time in case of any slippage. Despite the difficulties, Mr Wallace “remains confident” he can put together a proposal that will allow the airline to survive.
There was no opposition to the application to extend protection.
Mr Justice Quinn, who made orders in other motions from the examiner over the approval of pre-petition payments for critical services, fixed April 16th to the examiner’s application to formally approve any scheme of arrangement approved by creditors.
In December, the High Court placed the airline’s Norwegian registered parent, Norwegian Air Shuttle (ASA), into examinership and appointed Mr Wallace as examiner.
Irish registered Arctic Aviation Assets DAC, Norwegian Air International Ltd, Drammensfjorden Leasing Ltd and Lysakerfjorden Leasing Ltd, were also granted protection. Those firms are involved in activities including the leasing, management and subleasing of assets, including aircraft, and financing.
Arising out of Norwegian’s decision to cease its long-haul services, the court ordered the winding up another Irish-based subsidiary, Torskefjorden Leasing Ltd (TLL).
In 2019 the group had employed over 10,000 staff and operated 20 bases in 11 countries. The last 18 months have been extremely difficult for the group and it commenced several cost reduction measures aimed at restoring it to profitability.
The airline was severely impacted by the outbreak of the Covid19 pandemic, and had gone into hibernation. The grounding of Boeing 737 Max and Boeing 787 Dreamliner aircraft also adversely affected it..
While it had entered into arrangements regarding its debts under a restructuring plan, the Norwegian government announced late last year it would no longer provide any more State financial support to the group.