Norway finally ready to help Norwegian airline avoid bankruptcy

The Norwegian government wants to save Norwegian from bankruptcy. Photo: Henning Bagger

Norwegian airlines has announced that the government of Norway is ready to help the airline financially under certain conditions. The government of Norway has agreed to help Norwegian by granting a so-called hybrid loan, which is a loan without an expiration date with special terms. The conditions for joining are that Norwegian raises at least NOK 4.5 billion from private investors and the airline must get a comprehensive rescue plan in place.

Norwegian presented the government with a plan for how the company will emerge from the crisis. As part of other initiatives, the airline hopes to be able to more than half its debt and raise between NOK 4-5 billion by issuing new shares in the company. Norwegian will also drop its investment in long-distance routes to Asia the USA and instead only focus on short-distance routes within Europe.

Norwegian is currently subject to bankruptcy protection in Ireland, where the majority of the company’s aircraft and debt is registered. Bankruptcy protection is a process in which the company can, without the risk of being declared bankrupt, negotiate a solution in place with the company’s creditors that can secure the company’s future. Norwegian is currently negotiating, among other things, to have a large part of its debt written down.

Danish Jacob Pedersen, Sydbank’s head of equity research, who closely follows the aviation industry says that the support means that the risk of Norweigan going bankrupt has magically disappeared. He adds that the support from the government will motivate other investors to invest in the airline as well.

According to Berlingske, Iselin Nybø (V), Norwegian Minister of Trade and Industry says in a press release that the new plan is much more appalling than previous plans. She says that the airline’s new business plan involves major changes in the company’s debt structure and an injection of NOK 4-5 billion in capital. Furthermore, she adds that the plan appears to be more solid than the one the government said no to in October and that is why they are positive about contributing now.