Coronavirus may keep Norwegian flying – but it’s not much to celebrate

As one of Norway’s greatest exports, A-ha, put it, in their classic 1980s hit Take on Me, it’s no better to be safe than sorry. This advice may appear ever more overwhelmingly wrong to those who bet their kroner on the vision of the two Bjorns, Kjos and Kise, the co-founders turned chief executive and chairman of Norwegian Air.

The pair wisely exited the scene last year after an extraordinary ride during which they turned Norwegian from a small local carrier into a global pioneer of low-cost, long-haul air travel, and eventually established bases all around Europe. With half an eye on transatlantic links and another on a booming short-haul operation, Norwegian became a dizzying array of subsidiaries whose complexity could not disguise the fact that it was heading for financial disaster.

Although Norwegian had started to streamline and argues that it was on its way back from the brink prior to coronavirus, the pandemic may yet allow it to unexpectedly survive. However, the terms of that survival may be little consolation to investors, who face the choice of salvaging crumbs or waving goodbye to it all.

Norway’s government has offered a lifeline, a 3bn kroner (£230m) aid package to tide it through months of grounded planes, but dependent on the airline effectively making itself solvent again by wiping out debt. Three groups have to decide just how palatable the scraps on offer are. First, the bondholders, who are being asked to take equity in the airline instead of ever seeing their money repaid, and whose foot-dragging past deadlines on Friday suggested little appetite for playing along.

Second, the aircraft lessors, who have in theory until Sunday night to decide whether to accept an even less alluring proposition. For these firms, who own the tangible, flying, metal-and-carbon-fibre assets instead of mere paper, the swap is not exactly tempting. Do they want to trade $500m of aircraft payments to own a chunk of an airline? Norwegian’s hope is that the leasing companies decide it is better to take a stake – effectively becoming the airline operator themselves – rather than parking dozens of Boeings and trying to find a new customer in the current market.

Should those two groups get on board, it finally falls to Norwegian’s battered shareholders, at an emergency general meeting on Monday, to approve the plans. That will mean voting for their own stake to be diluted again to just 5% of the current value – which, in context, is already only 3% of where it stood just two years ago.

In those brave days, the Bjorns’ ambition was so great that they even launched a Norwegian operation in Argentina, which has to be the most insanely optimistic South American transport venture since Fitzcarraldo attempted to haul a steamship over a rainforested Peruvian mountain. And, having placed enormous orders for Dreamliners and other new planes, Norwegian boasted that it had the youngest and most fuel-efficient fleet in the world.

Of a fleet that was due to grow beyond 160 aircraft this summer, just seven planes remain in operation – pootling around Norway, delivering bits and bobs of essential cargo. Norwegian may yet rise from these ashes – but no investor will ever want to see a Bjorn again.

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