Thursday, 14 January 2021

Norwegian drops long-haul operations....

The struggling European budget carrier Norwegian has announced today that it plans to rip away all hopes of restarting its popular and industry defining low-cost-long-haul operations.  The firm's board of directors want to simplify the airline's business structure and concentrate on just a short-haul route network with between 50 - 70 aircraft.

This move,  if approved by the Examiner and Reconstructor in Ireland and Norway and investors will see the liquidation of the various entities employing the long haul staff in Italy, France, the UK and the US with thousands of job losses. 

The new plan will mean the company will build on this foundation, focusing on its core Nordics business, operating a European short-haul network with narrow-body 737 aircraft. It will continue to operate domestic routes in Norway, across the Nordics and to key European destinations and retain the low-cost ethos.

"Our short-haul network has always been the backbone of Norwegian and will form the basis of a future resilient business model," said Jacob Schram, CEO of Norwegian, further outlining the plans: "The current plan is to serve these markets with around 50 narrow-body aircraft in operation in 2021 and to increase that number to around 70 narrow-body aircraft in 2022. Furthermore, Norwegian targets to reduce its debt significantly to around NOK 20 billion and to raise NOK 4 - 5 billion in new capital through a combination of a rights issue to current shareholders, a private placement and a hybrid instrument. The company has received concrete interest in participation in the private placement. Norwegian has recently reinitiated a dialogue with the Norwegian government about possible state participation based on the new business plan.

I am pleased to present a robust business plan today, which will provide a new start for the company. By focusing our operation on a short-haul network, we aim to attract existing and new investors, serve our customers and support the wider infrastructure and travel industry in Norway and across the Nordics and Europe," said Schram.

"Our focus is to rebuild a strong, profitable Norwegian so that we can safeguard as many jobs as possible. We do not expect customer demand in the long haul sector to recover in the near future, and our focus will be on developing our short-haul network as we emerge from the reorganisation process," said Schram. "It is with a heavy heart that we must accept that this will impact dedicated colleagues from across the company. I would like to thank each one of our affected colleagues for their tireless dedication and contribution to Norwegian over the years."

Customers with bookings affected by the future changes in our route network will be contacted directly and will be refunded. 

The entire long-haul 787 fleet has been grounded since March last year because of the coronavirus pandemic and the airline is struggling to survive after the Norwegian government pulled out of an agreed loan with many doubting that current negotiations with officials will conclude with more funding. 

Last week the beleaguered airline started to return some of the aircraft to AerCap, the owners in Shannon, Ireland. It is, therefore, not completely surprising the carrier is not restarting its long-haul route network, yet for many staff and customers alike, this news will come as a bitter blow.  Whilst the board believe this will make the airline more attractive to new investors, the European low-cost market is so saturated and oversubscribed its hard to see how another one could make headway in such a difficult market situation. The competition is stronger, bigger, better established and with much deeper pockets, therefore it will be a battle to grow and make use of those 50 aircraft. During December Norwegian flew just nine aircraft and even with that few planes flying, only managed to have a load factor of around 54% - which isn't great, especially considering this included the peak Christmas travel period.  I don't expect the airline, in its current or new form will be around this time next year,  indeed,  given the ongoing situation, I fear it may not survive until summer this year. 

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