Norwegian Air has booked an impairment charge of 12.8 billion crowns ($1.5 billion) for the fourth quarter as it cancels a major Airbus order and plans to shrink its current fleet to avoid bankruptcy.
Norwegian received protection from bankruptcy late last year in both Norway and Ireland, where most of its assets are registered, and it aims to come out of its restructuring process with fewer aircraft and less debt.
"We are doing everything we can to emerge as a more financially secure and competitive airline with an improved customer offering," Norwegian Air chief executive Jacob Schram said. "As soon as Europe begins to reopen, we will be ready to welcome more customers on board."
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The company said that its restructuring in Norway and its examinership process in Ireland, under which it aims to get rid of 78 aircraft, are progressing as planned and expected to end during the second quarter.
The airline has warned that it risks running out of cash by the end of March if it fails to restructure its debt and liabilities.
Terminating aircraft purchase contracts with jet makers Airbus and Boeing led to a charge of 4.8 billion crowns in the quarter related to pre-delivery payments.
The company has since agreed terms with Airbus, but a deal with Boeing is unlikely before the restructuring is completed, Norwegian Air chief financial officer Geir Karlsen told Reuters.
Norwegian has cancelled all the 88 narrow-body jets that according to Airbus' financial filings remained on order, a Norwegian spokesperson said, adding that the company is in a legal process with Boeing.
Airbus said that it has no comment on discussions with customers.
A person familiar with the discussions said that Airbus will not contest the cancellation imposed by an Irish court but has not voluntarily agreed to the move. The plane maker is now expected to move swiftly to start selling empty delivery slots.
Norwegian unilaterally terminated its remaining orders with Boeing for 97 aircraft last year and sought compensation for the grounding of Boeing 737 MAX jets and technical problems with 787 Dreamliners.
Boeing has contested the move and also made counterclaims against Norwegian, documents filed by the airline show.
The company said that it will present a detailed plan for its future this week and is preparing to carefully increase its operating fleet from 10 aircraft now, depending on demand and travel restrictions.
Norwegian has already said that it will end its long-haul service and focus on the Nordic and European network.
Its total liabilities had fallen to 56.2 billion crowns by the end of December of 2020 from 66.8 billion on September 30, while its interest-bearing debt dropped 8.3 billion to 40.2 billion.
It hopes to cut its debt to approximately 20 billion crowns and raise four billion to five billion from new shares and hybrid capital. Norway has already agreed to contribute 1.5 billion crowns.
Negotiating Terms With Lessors To Reduce Its Fleet Size
Norwegian said that its fleet had been cut to 131 aircraft by the end of 2020. It is negotiating terms with lessors to reduce its fleet to 53 aircraft from 140 previously.
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