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Has Low-Cost Airline Norwegian Just Begged to be Nationalised?

Has Low-Cost Airline Norwegian Just Begged to be Nationalised?

Norwegian is Asking for More Time to Pay Off Outstanding Loans

The embattled low-cost airline Norwegian has welcomed a move by the Norwegian government to temporarily remove aviation taxes in an attempt to reduce its financial burden but says “this is not enough”. Jacob Schram, the airline’s chief executive begged for immediate government measures to improve Norwegian’s liquidity with normal credits and loans no longer an option.

With fears that the airline is teetering on the brink of collapse, Schram said of the situation yesterday: “We welcome the fact that the government has decided to remove aviation taxes in Norway, but sadly, this is not enough as we’re in a very demanding situation at the moment.”

“We need exact measures to strengthen our liquidity in the short term immediately,” he continued. “We are asking for these solutions (from the Norwegian government) to come quickly”.

The airline has ripped up its financial guidance for 2020 which initially the airline was hoping would show a positive result after several years of heavy losses. In the last month, shares in Norwegian Air Shuttle have lost over 80 per cent in value.

In the last couple of days, Norwegian announced plans to cancel at least 4,000 flights between now and the end of May. All flights to Italy have been axed and short-haul capacity across Europe has been reduced by 25 per cent – although this is likely to increase as more and more travel bans are unilaterally introduced by European governments.

Norwegian has also cut all flights between Scandanavia and the United States after President Trump imposed a 30-day travel ban. Flights between London Gatwick and its destinations in the U.S. are not yet affected but last night Trump indicated the ban could be extended to the United Kingdom.

As the airline desperately tries to reduce costs, at least 50 per cent of its workforce will be temporarily laid off. That number is likely to increase in the coming days and weeks.

“The turmoil in the capital markets has meant that in practice loans and credits are now closed, which means that it is not possible to finance businesses in a normal fashion. This means that the coronavirus has created an extraordinary situation for us,” the airline explained in a statement.

There is now the very real possibility that Norwegian may have to be nationalised if it is going to continue operating in any way. Yesterday, the European Commission indicated that it would relax State Aid rules to allow national governments to support airlines during this unprecedented situation.

The Lufthansa Group has already asked the German government for financial support, while Delta Air Lines and United said they were both in talks with the White House for some form of financial aid.

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