Norwegian Sees Credit Guarantee Rejected By Sweden

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Another setback has hit struggling Norwegian Air. On Tuesday, the Swedish National Debt Office announced it had rejected the airline’s request for a state credit guarantee. The government agency did not want to back the carrier as it was not deemed to be financially viable at the end of 2019, a condition for airlines being granted aid through the Swedish financial support program.

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Norwegian has been rejected for a Swedish state credit guarantee. Photo: Getty Images

Application denied

The Swedish National Debt Office has been mandated to issue credit guarantees for new loans to airlines holding a license for commercial aviation in Sweden as of January 1st, 2020, and have their main operations in Sweden. This is part of a SEK5 billion ($576 million) state-backed corona-crisis rescue package.

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While SAS has been granted hundreds of millions of dollars from the program, Norwegian’s Swedish branch has now been rejected. This was on the grounds that the airline was not “financially viable” at the end of 2019.

“The Debt Office’s assessment in regard to Norwegian is that as of 31 December 2019 there was a very high risk that Norwegian would not be able to fulfil its financial commitments and that the company was not deemed capable then of managing further indebtedness. (…) Accordingly, Norwegian’s application has been denied,” the statement, seen by Simple Flying, read.

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First, it was a no, then a yes, and then a no again to Swedish state-backed loans. Photo: Getty Images

Not competition friendly

A spokesperson for Norwegian said that the decision process had been somewhat haphazard. At first, the Debt Office had told the airline the application would not go through. Subsequently, it changed its mind due to EU competition regulation concerns. However, it appears the latest decision is final, as it is not subject to appeal.

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The spokesperson further told Simple Flying that the airline finds it odd that Sweden did not wish to safeguard the 1000 jobs Norwegian provides in the country. And in addition, that it did not take into consideration the one million foreign tourists, along with their revenue, traveling to Sweden with Norwegian every year.

“This clearly shows that competition is not something that is desired in Sweden,” Charlotte Holmbergh Jacobsson, Head of Communications, said on the decision to grant billions of Swedish krona in aid to SAS while denying Norwegian “a few hundred million.”

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SAS has been granted hundreds of millions of dollars in state-guaranteed loans. Photo: Getty Images

$8 billion in debt in 2019

Norwegian has indeed struggled financially for several years. Quick expansions and low-cost long-haul gambles left the carrier with about $8 billion in debt and liabilities at the end of last year. The airline halted all but a few Norwegian domestic routes back in March. In July it was back at only 10% of capacity year-on-year, carrying only 350 000 people.

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In May, Norwegian bondholders agreed on a substantial debt-to-equity swap, which essentially saved the airline and unlocked millions in Norwegian governmental support,  but left them with only 5% of the company.

While the decision may not impact the airline directly right now, it has previously made it clear that it will need more funds to rebuild operations for a “New Norwegian.”

What do you think of the future of Norwegian Air? Will the airline survived a prolonged crisis and recovery scenario? Let us know your thoughts in the comment section. 

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