Oslo-based Norwegian Air Shuttle has managed to buy itself some time after successfully unlocking the first slice of a government aid package designed to help keep the airline in business. The indebted low-cost carrier is together with other airlines fighting for survival during the current coronavirus pandemic that is spreading around the world.
According to Newswire Bloomberg, Norwegian Air Shuttle shares jumped 25% when the Oslo Stock Exchange opened for trading on Tuesday morning. Overall though, the Fornebu-headquartered airline stock is still down 75% for the year.
Norwegian Chief Financial Officer Geir Karlsen said in a phone interview with Bloomberg “It’s a bit early to say what the outcome will be, but now that we’re able to access the first tranche, that helps.”
Norwegian has laid-off 90% of its staff
In a statement, the airline said that two Nordic banks will release 10% of the initial 300 million Norwegian krone ($275 million) that has been promised to the airline. The Norwegian government will back the remaining 90%.
“Norwegian is pleased to announce that two Nordic banks have obtained credit committee approval to provide a guarantee for the required 10%,” a company statement said.
“Norwegian will secure the necessary headroom to pursue further guarantees from the Norwegian government.”
A week earlier, Norway said that it would issue credit guarantees to Norwegian Air Shuttle of up to three billion krone in a bid to help the airline survive the coronavirus crisis. To survive the COVID-19 outbreak Norwegian Air Shuttle has grounded nearly all of its aircraft and furloughed some 90% of its employees.
Norwegian will continue flying domestically
Despite the grounding of most aircraft, Norwegian has said that it will continue flying domestically in Norway and Sweden to maintain critical infrastructures. This is to ensure that people, goods, and medical supplies can get to where they are needed. In addition to these measures, Norwegian has conducted repatriation flights to bring Norwegian, Swedish, and Danish holidaymakers back home.
In the statement released earlier today, the airline said that it will now continue to seek more guarantees from financial institutions to access further tranches.
“The government guarantee scheme is crucial for the company as the current state of the capital markets in combination with the challenging times for the airline industry limit the options available,” Norwegian said.
As the virus continues to spread and stricter quarantine measures come into place, it is looking as though governments around the world are going to have to bail out the airline industry. One thing is for sure, however, and that is should this pandemic continue into the summer we will eventually wake up to an aviation scene that is a lot different from what we have been accustomed to.
What do you think about the Norwegian government bailing out Norwegian Air Shuttle, and should other governments do the same or let the airlines fail?
Please let us know your thoughts in the comments section.