2,000 Norwegian employees affected – E24

On Thursday morning, Norwegian presented an updated plan to save the company. The difficult decision also arises: investment in long distance will be discontinued.

Chief Executive Officer Jacob Schram told a news conference Thursday morning about what he described as “tough decisions.”

– It is associated with a great risk to continue as today. Therefore, we have decided that long distance is not included when we now present a new business plan, Schram said.

He made no secret of the fact that this will have significant consequences for many of Norwegian’s employees around the world, employees and colleagues whom he refers to as “red-nosed warriors” because of the red noses of Norwegians.

“The brutal reality is that the boards of our long-distance countries will go bankrupt,” Schram said.

– It has been difficult to inform the more than 2,000 employees who are affected, and who have been involved in the fight for the last year, of the decision.

There has long been speculation about whether Norwegian’s long-haul fleet had a future, even before the crown pandemic hit.

– Was it you who decided this, or was it creditors, leasing companies and others who drove this?

– We went ourselves, CEO Jacob Schram tells E24.

From pain to worse for the staff

The CEO was aware that the board and management had concluded that the closure “is the only chance to ensure Norwegian” a chance to survive the corona pandemic.

The 2,000 employees who are now affected by the closure of long distance distances are in addition to the thousands of Norwegian employees who have been laid off or laid off before, both in Norway and abroad.

Norwegian has already had to send employees in Sweden, Denmark, Spain, the United Kingdom, Finland and the United States to the door, in addition to the staffing agreements that were concluded last spring.

In November, another 1,600 Norwegian employees were laid off and in December, Spanish subsidiaries were placed under bankruptcy protection.

– It takes much longer

In the years leading up to the pandemic, Norwegian grew strongly, but gradually it became clear that the company had spread too far. There were too many routes with too low profitability.

This was especially true in the long-haul business, which ultimately turned out to be very expensive for Norwegian.

In addition to the lack of profitability, Norwegian was also unfortunate that both the Rolls-Royce engines on the long-haul Dreamliner aircraft and the Max on the short-haul flights had technical problems.

Even before the crown, CFO Geir Karlsen had launched major measures to cut unprofitable routes and sell several planes.

This helped Norwegian to expect to make a profit for the first time in several years in 2020. However, when the pandemic hit, the situation turned dramatic.

In August of last year, Norwegian noted that about half of the 37 Dreamliner jets at the time were leaving. Now it has been decided that everyone should leave.

There are several reasons why you discard the long distance cards, but the uncertainty about when this market will actually return is the most important:

– When we sat down to look inside the crystal ball and we became wise about what this market and the development of the pandemic will be like in the future, and what future scenarios we can believe in, it was very difficult to see when long distance would return, he explains . Schram.

He says Norwegian still believes the short-haul market will more or less return to normal from the summer of 2022, but it is unknown when the long-haul market will be.

– What we know is that it will take more than a short distance, he says.

– In the financial situation in which we find ourselves, it will be a very great risk to continue with the long distance when we do not know how that market will develop, he continues.

Various hard grips

On Thursday, Norwegian released an updated plan that contains important new changes.

If the administration is successful, the company will survive, but it will also look very different than it did before the pandemic.

The main points of the company’s plan are:

• Reduce debt to NOK 20 billion
• Raise between 4 and 5 billion in fresh capital
• Sit down with 4-5 billion in cash after restructuring
• Stop investing in long distance and invest in routes in the Nordic countries and Europe
• Reduce short-haul fleet to a maximum of 50 Boeing 737 aircraft
• Generate positive gross operating profit (EBITDA) in 2021 after restructuring, based on current pandemic and air traffic forecasts.

The point about the abandonment of long-haul flights means that Norwegian now plans to ditch the remaining 35 long-haul planes of the Boeing 787 Dreamliner type. The company owns 11 rooms and leases the rest.

“Under the prevailing conditions, a long-haul operation is not sustainable for Norwegian and therefore this operation will not continue,” the company writes.

A reduction to 50 short-haul aircraft is in fact a doubling of the fleet cut that Norwegian introduced in April of last year.

The company then outlined a reduction in which they would go from an original plan of 168 aircraft in 2020, before the crown crisis, to between 110 and 120 aircraft after the crisis. If you subtract long-haul flights from those numbers, the company would have about 100 short-haul flights.

So now it’s a maximum of 50.