Several days ago there were questions about Norwegian Air’s ability to survive into the New Year. A report from a Danish bank suggested they could breach financing covenants which could have led to the unraveling of the low cost carrier that has been driving down transatlantic airfares and that is active in Europe.
The carrier though has announced several moves that they say should shore up their balance sheet. Whether these are enough depends on a variety of factors such as the cost of fuel and demand during the winter dip in travel.
- $230 million (annualized) cost savings program. The immediate effect of this is likely to be limited.
- Refinancing a Boeing 787 to generate $30 million cash.
- Upcoming cuts to poor performing routes to conserve funds.
- An undisclosed agreement with Rolls Royce, whose engines have been the source of significant unplanned maintenance expense. If they’ve sold significant claims against Rolls Royce in exchange for immediate cash that could help (while reducing future upside).
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They expect to continue to sell aircraft and are working on plans to restructure the company. There’s still the option of a cash call from existing major shareholders, as well as selling the whole enterprise to British Airways parent IAG which continued to express interest as recently as two months ago.
Meanwhile the airline faces heavy debt, high costs of fuel hedging in the face of falling oil, and weak seasonal demand on top of questions over whether its business model is sustainable over the long term.