Norwegian Air's cash crisis could force the debt-laden budget airline to halt operations early next year, the company warned as it issued another plea for rescue funding after reporting quarterly results on Tuesday November 10.
The rapid expansion of the pioneer in low-fare transatlantic flights has left it with heavy debts, with its problems being compounded by the COVID-19 pandemic. It is now serving domestic routes only, with six of its 140 aircraft flying.
"Norwegian is dependent on additional working capital in order to continue operating through the first quarter of 2021 and beyond," the carrier said.
The company held cash and cash equivalents of 3.4 billion crowns ($376 million) at the end of September, down from 4.98 billion crowns three months earlier.
On Monday November 9, Norway's government rejected a plea for more state support for the airline, the shares of which have lost 99% of their value since January, saying it would be too risky.
Shares in Norwegian were down 6.2% at 0921 GMT on Tuesday November 10.
The company said on November 9 that it would furlough 1,600 more staff, leaving only 600 people still working out of 10,000 before the pandemic.
After Oslo's aid refusal, the grim quarterly numbers point to a likely collapse, Bernstein analyst Daniel Roeska said.
"It's not a pretty picture," he said, adding that credit from the airline's suppliers is likely to dry up rapidly.
"This could cause a liquidity crunch in the very near term and we see few ways out for the group," he said.
The company said that funding could potentially come from debt refinancing, a sale of aircraft and other assets, a conversion of debt to equity or from its owners.
But aircraft leasing companies that own more than half of the airline after swapping earlier debts for equity are unlikely to put in any new cash, a source close to one of the firms said.
"Norwegian was a credit red light for lessors even before COVID," the source said, adding that they joined the rescue initially because liquidation would have saved only a few cents on each dollar owed and it would have had to sell aircraft in a market that was strained even before the coronavirus crisis.
"Norwegian was getting a friendly ear because it would have meant a glut of 787s," the source said. "But that's become nearly irrelevant. 787s, 737s, A320s - they're all on the ground now."
Norwegian's third-quarter operating loss stood at 2.8 billion crowns, down from a 3 billion crown profit during the same period last year, with overall debt and liabilities of 66.8 billion crowns.
With only six of its 140 aircraft now operating, down from 21 last month, most of its short-haul planes are grounded alongside its entire fleet of 37 Boeing 787 Dreamliners.