Norwegian Air Will Cut Costs To Avoid Collapse

Advertisement:

Following news that Norwegian could enter a financial crisis in as little as six days, Simple Flying has learnt that the airline has begun to cut costs. While this mainly involves restructuring and cost-cutting, reports also suggest that IAG are still interested. While IAG is still interested in the struggling airline, Simple Flying understands this would be for much less than they initially offered. Norwegian has already tried to sell some undelivered aircraft, while the airline has already cut some less profitable routes. Simple Flying takes a look at the measures proposed by Norwegian.

Norwegian
2019 has been a rough year for Norwegian. Photo: Norwegian

Why Are Norweigian Facing Collapse?

Reports state that the airline could be facing collapse as the new year starts. Following many factors which have caused poor financial performance of late, suggestions are that the airline is just days away from a full crisis. The crisis follows large aircraft acquisitions which have left the airline in “heavy debt”. A number of other recent factors haven’t helped much either. One of the airlines B737s is stranded in Iran while engineers try to figure out how to get around US sanctions. Additionally, the airline was forced to wet-lease an A380 during the B787 engine troubles. Norwegian had to hire the aircraft again following the recent Gatwick Airport disruption.

Norwegian
Norwegian is reportedly days away from a “full crisis”. Photo: Norwegian

What Is Norwegian Considering?

According to Reuters, Norwegian Airlines is considering some ways to cut costs and raise money. Among the measures touted includes route cuts. In total, the airline intends to:

  • Refinance a B787 to raise US$30m in cash;
  • Cut poorly performing routes;
  • A $230m p.a. cost saving program which will have limited immediate effect;
  • Norwegian has also reached an agreement with Boeing regarding earlier B787 issues which will have a positive effect from Q1 of 2019.
Norwegian
Along with refinancing an aircraft, Boeing has reached an agreement with Boeing regarding 2018’s 787 issues. Photo: Norwegian

The airline confirmed in a press release that it had secured financing for all of its aircraft deliveries in the first half of 2019. Speaking about the agreement with Boeing, a statement said “Norwegian’s long-haul operation has been disrupted by challenges with the Rolls-Royce engines on the Dreamliners. The Company has now reached an agreement with Rolls-Royce which will have a positive effect from the first quarter of 2019. The commercial terms of the agreement remain confidential.”

Speaking about selling off aircraft, a spokesperson added: “The process of divesting aircraft continues, and we experience significant interest in our existing fleet as well as future deliveries. The Company recently signed a letter of intent for the sale of two aircraft with delivery in the first quarter of 2019.”

Do you think Norwegian will survive into the new year? Let us know in the comments down below!

Advertisement:
Advertisement: