Norwegian Eyes Staff Layoffs And Massive Flight Cuts

Troubled Norwegian Air has hit a new headwind today as it has been revealed the airline is to cancel approximately 3,000 departures between mid-March and June, as the coronavirus travel slump takes its toll. In addition to the cancellations, Norwegian is looking to lay off a number of staff on a temporary basis in an attempt to gain control of its overheads.

Norwegian has slashed around 3,000 flights. Photo: Getty

15% of services cut

Norwegian Air has announced today that it will cancel around 3,000 flights between the middle of this month and mid-June. The cancellations represent some 15% of Norwegian’s overall capacity during the period.

No firm details have been given by the airline as to which routes or services are likely to be cut. It has said that full details will be shared as soon as they are available, but that the cuts will be spread across its entire network.

Passengers booked to fly Norwegian will be likely offered alternative flights, and may be eligible for a refund. They will not, however, be entitled to compensation under EU 261. The airline had previously scrapped long haul flights from two of its three Scandinavian hubs, and last week confirmed 22 transatlantic services would be suspended.

The airline is attempting to mitigate the impact of coronavirus. Photo: Norwegian

Eyeing staff layoffs

As well as the service cuts, Norwegian is reportedly in talks with unions in regard to laying off a share of its employees. The layoffs, it says, crosses all sectors of the business, including cabin crew, pilots, ground staff and even office employees.

These layoffs are looking to be temporary, although the company doesn’t specify how many people they could affect or for how long. It entered into formal consultation with various trade unions regarding the situation today.

CEO Jacob Scram, who only took the helm a couple of months ago, is reported by City AM as saying,

“This is a critical time for the aviation industry, including us at Norwegian. We encourage the authorities to immediately implement measures to imminently reduce the financial burden on the airlines in order to protect crucial infrastructure and jobs.

“Unfortunately, cancellations will affect a significant share of our colleagues at Norwegian. We have initiated formal consultations with our unions regarding temporary layoffs for flying crew members as well as employees on the ground and in the offices.

“We will continue to engage in constructive dialogue with unions and employees to work through this difficult situation together.”

Jacob Schram
Schram took over as CEO in January. Photo: Norwegian

Is Norwegian in danger of collapse?

It’s no big secret that Norwegian has been in financial strife for some time. The carrier, that pinned all its hopes on the long range narrowbody 737 MAX, has been one of the hardest hit by the grounding, which has lasted a year today. Added to this, its Dreamliners are equipped with the problematic Trent 1000 engines, which have caused groundings, inflight incidents and have hit Norwegian’s capacity hard.

On Sunday this week, a number of hedge funds increased their bets against Norwegian as their predictions that it would be the next carrier to follow Flybe grew stronger. The airline is viewed as being particularly vulnerable to the issues caused by coronavirus due to its somewhat sizeable debt pile.

The airline has raised equity three times in the past two years, in a bid to mitigate the rapid decline in its share price. The Telegraph estimates that some 16% of the airline’s shares are currently on loan to hedge funds, the same funds that are currently betting against Norwegian making a recovery.

Norwegian 787 Aircraft
The airline’s reliance on 737 MAX and Trent 1000 powered Dreamliners has added to its woes. Photo: Norwegian

Shares in the airline have plummeted by 90% since the start of 2019, and by a further 70% since the start of February. In the hours following the announcement of the cancellations and layoffs, shares have further dropped by 12%.

While everyone hopes the airline will successfully pull through this latest challenge to its financial health, there are some fairly stark warning signals emanating from the carrier.

What do you think? Will Norwegian get through these trying times, or are we watching another Flybe in action? Let us know in the comments.