Norwegian Air Shuttle is in the fight for its life, with the CEO writing an open letter on LinkedIn yesterday addressed to all airline supporters and employees. Can Norwegian survive the approaching storm and will it be rescued by the Norwegian government?
What has happened to Norwegian so far?
If Emirates is “the lucky airline”, then Norwegian is the unlucky airline. The carrier seemed to strike onto the market with a fantastic value proposition as a European low-cost-carrier.
This went into overdrive when they started to operate transcontinental and transatlantic flights for far less than the competition, powered by a fleet of state-of-the-art Boeing 787s.
The airline decided to expand rapidly in 2007, which saw them open new routes to North America, South America, Asia, and across Scandinavia. Norwegian’s aggressive expansion strategy saw it grow to a fleet of 165 aircraft in 2018, transporting 37 million passengers.
Norwegian would become the third biggest low-cost carrier in Europe behind easyJet and Ryanair.
The carrier would go on to create several subsidiaries:
- 2012, Norwegian Long Haul was formed based out of Norway
- 2014, Norwegian Air International
- 2015, Norwegian Air UK out of London Gatwick
- 2017, Norwegian Air Argentina
- 2018, Norwegian Air Sweden AB
Why are they considered unlucky?
All this expansion is expensive, requiring a considerable debt to be undertaken. Alas, things started to go wrong for the airline around 2018 when it switched away from rapid growth to a focus on profitability.
First, the airline’s long-haul Boeing 787 fleet suffered engine problems. Additionally, an issue with the batteries onboard the Norwegian aircraft resulted in them being grounded for weeks, and the airline had to hire the expensive Hi Fly Airbus A380 to compensate.
Following this was the Boeing 737 MAX disaster. This caused the fleet of Norwegian Boeing 737 MAXs to be completely grounded on 12 March 2019. The carrier had recently placed an order for 110 of the type and only had 18 delivered, meaning a significant amount of capital was stored up in Boeing orders.
Thanks to these issues, the carrier had to withdraw from exciting new markets like Argentina, which it had only entered months before. It also sold some of its aircraft in order to shore up its cash flow.
2019 was not an easy year for the airline. Unfortunately, not even three months into 2020, the current aviation crisis has hit, knocking down the airline again, harder.
How has the virus affected Norwegian?
The first major impact was that the airline was essentially grounded. It could only operate a skeleton network of routes due to government restrictions, and 98% of its demand had vanished.
“Despite the measures that the company has already taken, coupled with the lack of significant financial support from the Swedish and Danish governments, we are left with no choice. The Board of the below companies in the Norwegian Group today Monday 20 April decided to file for bankruptcy:
- Norwegian Pilot Services Sweden AB
- Norwegian Pilot Services Denmark ApS
- Norwegian Cabin Services Denmark ApS
- Norwegian Air Resources Denmark LH ApS
Norwegian won’t go down without a fight
Norwegian CEO Jacob Schram posted on LinkedIn how the airline was drawing up battleplans for the next few weeks, with the airline fighting for its very survival.
The airline is holding out for a general meeting in May, where it can restructure the carrier and apply for government support from the Norwegian government. From there, the airline plans a long-term strategy of working its way back up to a level that will allow it to rehire all its old employees.
What do you think of this story? Will Norwegian survive? Let us know in the comments.