Norwegian Sells 5 Boeing 737-800s To Gain $50m Cash

Norwegian intends to sell five Boeing 737-800s to China Aircraft Leasing. Post-sale proceeds will be used to shore up the carrier’s finances and boost its liquid cash by $50 million.

NAS B737-800 at airport gate
NAS will sell five B737-800s by the end of 2019. Photo: Norwegian

Flight Global has reported that Norwegian will transfer the jets to the Hong Kong-based recycling business by the end of the year. The sale represents a switch of strategy from rapid growth to stability and, it is hoped, profitability.

Following repayment of outstanding debt, the sale will afford Norwegian liquidity of around $50 million. A spokesperson for the carrier told Flight Global,

The sale is in line with the company’s continued strategy. Of capitalizing on the scale built up over the last few years and the changed focus from growth to profitability.”

The jets will be sold to China Aircraft Leasing Group Holdings (CALC). CALC is primarily an aircraft leasing company but also turns its hand to aircraft disassembly and resale. It owns US-based Universal Asset Management.

We have contact Norwegian for a comment about the sale.

B737 MAX grounding causes change of tack

NAS had already sold two B737-800s at the start of the year as part of its program of belt-tightening. However, the planned sale of a further six aircraft of type was abandoned in late March following the grounding of the 737 MAX.

NAS B737 MAX airborne
The planned sale of B737-800s was delayed due to MAX grounding. Photo: Norwegian

With 19 B737 MAXs no longer at its disposal, Norwegian was forced to postpone the sale of the -800s until further notice. The carrier had used the MAX on several of its new transatlantic routes between Cork, Shannon, Dublin, New York and Providence.

On March 25th of this year, Norwegian informed investors that rather than selling its old rolling stock it would again start wet leasing to account for the shortfall in capacity caused by the MAX’s block.

Fleet renewal takes its toll

But the postponement of the sale was a headache for Norwegian. Following its colossal fleet renewal, the airline had found itself with over $170 million of debt. With the group’s total liabilities approaching $6 billion by the end of 2018, the growth strategy was abandoned in favor of one of profitability.

And the need to sell was pressing.

Of Norwegian’s 2007-17 hunger for airframes, Flight Global quotes Andrew Lobbenberg of HSBC as saying, “The business was run around the growth agenda – they had too many aeroplanes. The tail was wagging the dog because the network was being designed to absorb the fleet plan rather than the fleet plan was being designed to meet the network.”

By the end of 2018 Norwegian owned 164 aircraft, according to Reuters.

Last year should thus have seen a recovery. Norwegian had already started to cut costs and optimize its routes. Furthermore, 13 aircraft in total had been slated for sale in order to generate a vital $117 million; that income would have allowed NAS to consolidate its assets as planned in 2019.

NAS B737 landing
2018 should have been a year of stability for Norwegian. Photo: Norwegian

Profitability a priority

Today, despite the continued uncertainty of the future of the MAX Norwegian is clearly not in a position to play a waiting game. The sale of these five B737-800s could not come sooner for an airline that has stretched itself to breaking point.

De-risking the business must now be the ultimate priority for Norwegian. Along with its cutting of unprofitable services (three US-bound, several European), a quick sale of stock is seen as the only viable option to return Norwegian to liquidity.