Norwegian Air, which less than a decade ago challenged British Airways and other long-established rivals by launching transatlantic flights, has said that it will end its transatlantic services, with 2,000 job losses, and seek government help.
The budget airline, which was founded in 1993, has been forced to ground all but six of its 138 aircraft due to the COVID-19 pandemic, and will now focus on Nordic and European routes.
"We have decided that long-haul is no longer in our business plan," Norwegian Air chief executive Jacob Schram told an online news conference.
The plan also involves closing units in the United States, Italy, France and Britain, including its base at London's Gatwick Airport.
"The brutal reality is that [they] will be declared bankrupt...2,000 employees are affected," Schram said.
The airline said that it is aiming to cut its fleet to approximately 50 aircraft before expanding to approximately 70 in 2022.
The plan must be approved by an Irish bankruptcy court. The next hearing is on January 22.
The company and the centre-right minority government are now discussing possible state participation, both sides said.
"We are in the process of carefully considering the new business plan and Norwegian's request to us to participate in a restructured company," the industry ministry said in a statement to Reuters.
Norwegian's 35-strong long-haul fleet of Boeing Dreamliners, most of which are leased, is now up for negotiation, Norwegian Air finance chief Geir Karlsen told Reuters.
"Overall, this seems like a sensible plan," brokerage Davy said. "The long-haul business was volatile and generally loss making since its launch in 2013. In this environment, withdrawal is the only viable option."
Norwegian risks running out of cash by the end of March if it fails to restructure debt and liabilities of 66.8 billion crowns ($7.89 billion), including 48.5 billion in interest-bearing debt, it warned late last year.
It hopes to cut debt to approximately 20 billion crowns and raise four to five billion from new shares and hybrid capital.
The new plan aligns with "signals" from Norwegian politicians about what would be required for the state to provide further help, Schram told Reuters.
The plan could return Norwegian to profit before interest, tax, depreciation and amortisation (EBITDA) later this year, based on conservative assumptions, it said.
Bernstein Analysts' Opinion
However, Bernstein analysts said that the planned debt reduction is too small. "It is more likely, in our view, that the current Norwegian will eventually have to be wound down, and any continuation of the business will need to be built anew."