[ad_1]
Norwegian airline has offered many cheap vacations. The company has done so by raising a sea of debt. Creditors and shareholders must bear the bill, not taxpayers.
This is a comment. It is the attitude of the writer that is expressed.
This generated great disappointment among Norwegian management when it became clear on Monday this week that Trade and Industry Minister Iselin Nybø was unwilling to present a new rescue package for the airline.
This spring, the company received a NOK 3 billion loan guarantee from the state. That money is now being spent and probably lost by the state.
If you have bought a ticket, you may lose the money.
People who have purchased tickets on Norwegian and have not yet traveled have reason to be concerned, especially if the tickets have not been paid for by credit card. If a credit card is used, there is a chance to get your money back if you are not allowed to travel.
ATMs or money forever on the airline, people will probably just forget.
It is strongly cautioned against exchanging unused tickets for bonus points. Unfortunately, many people have done just that, and therefore do not get any coverage from credit card companies if things go wrong.
Also read: It is fatal to have money forever from Norwegian: – They have been taken behind the light
The airline has never been particularly profitable
As is well known, the crown crisis has severely hit Norwegian and the rest of the aviation industry.
According to the financial report for the third quarter of this year, which the company presented on Tuesday of this week, Norwegian has lost a total of NOK 6.3 billion during the first nine months of the year.
Of course, this year’s losses can be largely attributed to the crown, which has led to severe revenue shortages.
Compared to last year, the company’s revenue is down by more than 75 percent.
What is perhaps a little less known to many is that Norwegian had major problems even before the crown crisis occurred. In the years 2017-2019, the company had a total deficit of more than 4,800 million NOK.
From the company’s early days in 2001 until now, Norwegian has lost a total of NOK 9.5 billion. Thus, the airline had been a loss-making project even before the crown.
The basic problem for Norwegian has been a lack of profitability over time. This is due to fierce competition and strong growth in the world fleet.
This has put pressure on ticket prices to be able to fill all planes with passengers. And, consequently, low profitability.
Also read: The Norwegian Competition Authority advised the government that Norwegian-no
A sea of debts
Instead, what has accumulated in Norwegian is debt.
At the end of 2019, total debt liabilities exceeded NOK 81 billion.
The equity index was poor, 5 percent. That was after shareholders in November 2019 spit out NOK 2.5 billion worth of fresh shares.
In May, as mentioned above, Norwegian received a NOK 3 billion loan guarantee from the government.
At the same time, the debt of NOK 12.7 billion was converted into new equity capital. However, debt at the end of the third quarter is still almost NOK 67 billion.
This is how Norwegian airline’s accounting figures have developed since its inception in 2001. Debt has increased dramatically at the same time that profitability and capital ratio have fallen dramatically. Source: Norwegian / Kjell-Magne Rystad Annual Reports
The debt-to-equity conversion has meant that Norwegian, despite this year’s huge loss, at the end of the third quarter has a stockholders’ equity of NOK 11.1 billion and a share capital ratio of 14 percent.
Also read: Sissener: – Fear that it will be the death sentence for the Norwegian
So the company is apparently stronger now than it was before the crown crisis.
But here, accounting equity means very little. It’s just a number on paper. What matters is that the debt is still huge and that money is flowing at a rapid rate.
Around 500 million crowns a month.
Support package will not help employees
Therefore, the state has said no to further support.
Manager Jacob Schram has described it as a punch to the stomach. That is understandable.
Trade and Industry Minister Iselin Nybø (V) this week said no to more state support for Norwegian airline.
Photo: Carina Johansen (NTB)
For the company’s employees, the future is very uncertain. However, a new support package for Norwegian will not help employees in the aviation industry.
The number of employees in airlines does not depend on whether Norwegian survives as a company or not. The number of employees depends on how many passengers there are.
Without passengers, employees will have to be fired in any case. If Norwegian sells out, other airlines will carry the passengers and will need employees.
Therefore, it makes no sense to give Norwegian state support to save jobs.
Fortunately, the government has understood.
Also read: Norwegian received the message they feared: How long do you have until the box is empty?
Owners and creditors deserve to bear the loss
Over the years, the owners have been extremely patient with Norwegian and repeatedly injected new capital, even though the company as a whole had also lost before the crown.
Creditors have been willing to grant Norwegian many loans and credits. These are professional players who should definitely know what they are doing. If they misjudged the risk, they must pay for it themselves.
The largest creditors are the air leasing companies, including AerCap Holdings NV, which is now also the largest shareholder in the company. AerCap Holdings owns about 1,000 aircraft and operates in low-tax countries.
In Norwegian, there are also many small private shareholders.
Norwegian chef Jacob Schram.
Photo: Halvor Ripegutu (Nettavisen)
So far this year, the stock price has dropped almost 99 percent, so there are plenty here who have already lost most of their money. After the debt conversion in May, there have been so many shares in the company that there is no hope that the share price could rise to previous heights. Therefore, the former shareholders have lost most of what happens in the future.
Small shareholders have received a costly lesson in what risk is in the stock market.
Also read: Wizz Air surprises with even lower ticket prices
The best bankruptcy solution
Norwegian’s problems boil down to the fact that it is a huge mountain of debt, money is flowing terribly fast, and the future prospects are very bleak.
There is little reason to believe that this can be particularly good no matter what rescue packages are put in place.
Competition in aviation was intense even before the crown. There are more than enough planes in the world. The fact that the Hungarian Wizz Air is now starting to fly in Norway clearly demonstrates this.
Norwegian is not necessary now.
Trying to save Norwegian with government money or new shareholder money will, in practice, only consist of giving gift packages to airline leasing companies and other creditors. The debt in the company is almost infinite.
Creditors themselves have taken the risk by granting credit to Norway and do not deserve any rescue package or further action.
Probably the best solution is for Norwegian to file for bankruptcy. And it can happen fast.
[ad_2]
