Norwegian Air has asked an Irish court to oversee a restructuring of its massive debt as it seeks to stave off collapse amid the coronavirus pandemic, the budget airline has said.
Last week, Norway's government rejected the airline's plea for another injection of state funds, and the company said the following day that it was at risk of having to halt operations in early 2021 unless it got access to more cash.
"The main purpose here is to come out of this process quite shortly with a company that is 'investable', where we can be attractive again for investors," Norwegian Air chief financial officer Geir Karlsen told Reuters.
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The company has opted for an Irish process because its aircraft assets are held in Ireland.
After growing rapidly to become Europe's third-largest low-cost airline and the biggest foreign carrier serving New York and other major US cities, Norwegian's debt and liabilities stood at 66.8 billion crowns ($7.4 billion) at the end of September.
It has scaled back its operations drastically, now serving just domestic routes with six of its 140 aircraft.
The airline said that it will operate its flights as planned and that its bonds and shares will trade as normal.
Karlsen declined to say how many aircraft Norwegian could have at the end of the bankruptcy protection process, which lasts for up to five months. An Irish court will hear the application on December 7.
"The creditors are a mix of leasing houses and banks which finance the aircraft that Norwegian owns," Karlsen said.
The company hopes to eventually resume long-haul flights.
"We've said in the past that we may halve the size of the long-haul fleet, which remains our starting point," CEO Jacob Schram told a news conference.
Before the pandemic, Norwegian helped transform transatlantic travel, expanding the European budget airline business model to longer-haul destinations.
Having lost money each year from 2017 to 2019, and raised new equity from shareholders three times as it haemorrhaged cash, Norwegian was seen as vulnerable even before the virus outbreak.
Included in the overall amount owed is net interest-bearing debt of 48.5 billion crowns, while Norwegian's cash holdings stood at just 3.4 billion at the end of the third quarter.
The Norwegian government granted three billion crowns of loan guarantees to the company earlier this year, but reiterated on Wednesday November 18 that providing more direct financial aid would mainly benefit Norwegian's foreign creditors.
"We've told Norwegian that we don't have any money for equity," prime minister Erna Solberg told parliament.
However, the government said later on November 18 that the airline is still important for both travel in Norway and tourism.
"I hope the company can find a viable solution through negotiations with creditors and owners and that this will allow it to survive," industry minister Iselin Nyboe said.
AerCap Holdings Cuts Ownership To 9%
Leasing company AerCap Holdings, which became Norwegian's biggest owner earlier this year through a debt-for-equity swap that gave it a stake of 13.4%, said on Wednesday November 18 that it has cut its ownership to 9%.