Norwegian Air has come in for heavy criticism by politicians who have accused the Oslo-based airline of showing “poor judgement” for paying $3.5 million in management bonuses just as the carrier emerged from bankruptcy protection and restructuring. Norwegian has shed thousands of jobs over the last year and asked shareholders to take a significant financial hit.
Lawyers acting on behalf of Norwegian, however, claim the bonuses were essential to retain key managers who the board feared would jump ship just as their skills were most needed. Former chief executive Jacob Schram is believed to have received a $1 million bonus as part of this retention scheme just before he was sacked with immediate effect.
Norway’s Minister of trade and industry Iselin Nybo said Norwegian had shown “poor judgement” to go ahead with the bonus payments. He described the fiasco, which has caused anger amongst the Norwegian public, shareholders and laid-off workers, as “deeply disappointing”.
“The board and chief executive Geir Karlsen have a big job ahead of them to explain this and rebuild Norwegian’s reputation,” Nybo commented on Tuesday.
The Norwegian government offered $350 million in loan guarantees to the airline in mid-2020 but later refused to keep funding the troubled carrier because it “wouldn’t be a good use” of public money. The then chief executive Jacob Schram slammed the decision and demanded taxpayer funding to keep the carrier afloat.
The government eventually offered a further $175 million in a hybrid loan.
Norwegian applied for bankruptcy protection in both Norway and Ireland and convinced creditors and shareholders to take a financial hit in order to recapitalise the airline.
Thousands of staff were laid-off after Norwegian decided to abandon its long-haul business. In February, the airline said it didn’t have any money to pay laid-off pilots and flight attendants their last wage.
After removing Schram from his post, Norwegian’s board said it had tried to reduced the ex-CEO’s redundancy package but had failed to reach a deal.
Scharm’s contract entitles him to nine months notice and he’ll remain at the airline to “support” the board on a full-time basis through to March 31, 2022. He will then be entitled to a 15-month severance payment paid in monthly installments.
Earlier this month, Air Canada said two senior executives would repay $2 million in “shameless” performance bonuses after an angry backlash shook the airline.
Mateusz Maszczynski honed his skills as an international flight attendant at the most prominent airline in the Middle East and has been flying throughout the COVID-19 pandemic for a well-known European airline. Matt is passionate about the aviation industry and has become an expert in passenger experience and human-centric stories. Always keeping an ear close to the ground, Matt's industry insights, analysis and news coverage is frequently relied upon by some of the biggest names in journalism.