Struggling Norwegian has had its restructuring plan approved by its shareholders today. At an extraordinary general meeting, shareholders voted on average 80% in favor of debt to equity swaps and other measures, including share sales. If all goes to plan, Norwegian will emerge by the end of February a smaller and leaner airline.
Norwegian rescue approved
Good news for the red-nosed airline today as Norwegian Air’s shareholders have given the green light to the airline’s proposed rescue plan. In an extraordinary general meeting today, the shareholders voted 80% in favor of a number of measures to help the airline survive.
Proposals included raising up to four billion Norwegian crowns ($470 million) through share sales or other instruments. It’s a drop in the ocean for the airline to clear its debts and liabilities, which add up to some 66.8 billion crowns ($7.75 billion), but it’s a step in the right direction.
Also included was authorization for the board to issue convertible loans of up to NOK 10 billion ($1.16 billion) and to pay executive salaries in shares rather than cash. Approval varied across all the issues but was mostly over 80% and as high as 97% in some areas.
Norwegian had previously applied for bankruptcy protection and was granted it in both Norway and in Ireland. This gave it a little room for maneuver as it fleshed out its proposal to turn debt into equity. Creditors of the airline include Airbus, aircraft lessors AerCap and BOC Aviation, as well as a US bank that finances purchases of Boeing jets.
Coming back on February 26th
It seems a rather precise prediction, but based on the timescales of the bankruptcy protection agreements, Norwegian has two choices. Either it emerges on February 26th with its issues largely resolved, or it pulls the plug and closes the business. Chief Financial Officer Geir Karlsen remains positive about the outcome, telling E24,
“The way the situation looks now, Norwegian will start to ramp up production from around April next year.”
The alternative is that the restructuring plan fails. In this situation, Reuters says that the airline will run out of money by the end of March. However, Karlsen noted at the meeting today that there is an option to extend. As reported by E24, he said,
“In practice, we have 100 days to find a solution in Ireland. We can apply for a postponement to 150 days, but it is not given that we will use that opportunity.”
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What will the new Norwegian look like?
Exactly how Norwegian will look when it emerges from this restructuring is still up for debate. At today's’ meeting, a shareholder asked the board whether Norwegian planned to drop its long-haul ambitions. Low-cost long-haul has been a difficult nut to crack for many airlines, and some experts believe it can never work.
CEO of the airline, Jacob Schram, remained uncommitted regarding this. He said, as reported by E24,
“No decision has been made on that, but it is an important topic that it is natural for the board to discuss. It is not appropriate that we take a position on it now, but it is a given that we have to take a position on it during the examinership process, and it also depends on the investor interest.”
Norwegian used to fly 37 Boeing 787 Dreamliners. However, AerCap assisted Norwegian in moving two of them to a new home back in October, so that fleet is now down to 35. Just 11 are owned, with the rest of the fleet leased.
Do you think Norwegian can be saved? Should it drop long-haul from its future plans? Let us know in the comments.