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As A-ha, one of Norway’s largest exports, in its classic 1980s hit Take on Me, is no better prevention than cure. This advice may seem increasingly misguided to those who bet on the vision of the two Bjorns, Kjos and Kise, the co-founders who became Norwegian Air’s CEO and President.
The couple wisely stepped out of the scene last year after an extraordinary journey during which they made Norwegian from a small local airline a global pioneer of low-cost, long-distance air travel, and eventually established bases across Europe. With a half eye on transatlantic links and another on a burgeoning short-haul operation, Norwegian became a dizzying array of subsidiaries whose complexity could not hide the fact that it was heading for a financial disaster.
Although Norwegian began to rationalize and argue that it was returning from the brink before the coronavirus, the pandemic may still allow it to survive unexpectedly. However, the terms of that survival may be a small consolation for investors, who are faced with the option of saving crumbs or saying goodbye to everything.
The Bjorns even launched in Argentina, which is the craziest idea since Fitzcarraldo dragged a steamboat over a mountain.
The Norwegian government has offered a lifeguard, a 3 billion-crown (230 million-pound) aid package to help it through months of planes on the ground, but it depends on the airline effectively becoming solvent by eliminating debt. Three groups have to decide how tasty the leftovers on offer are. First, the bondholders, who are asked to take shares in the airline instead of seeing their money back, and whose late deadlines on Friday suggested little appetite to move on.
Second, the plane lessors, who theoretically have until Sunday night to decide whether to accept an even less attractive proposition. For these companies, which have tangible, flying, metal and carbon fiber assets instead of paper, the exchange is not exactly tempting. Do you want to exchange $ 500 million in aircraft payments to own a part of an airline? Norwegian’s hope is that leasing companies decide it’s best to take a stake, effectively becoming the airline’s operator, rather than parking dozens of Boeings and trying to find a new customer in today’s market.
If those two groups come together, it ultimately falls to Norwegian’s battered shareholders, at an emergency general meeting on Monday, to approve the plans. That will mean voting to have your own stake diluted back to just 5% of current value, which, in context, is only 3% of where it was just two years ago.
In those brave days, the Bjorns’ ambition was so great that they even launched a Norwegian operation in Argentina, which has to be the most incredibly optimistic South American transport company since Fitzcarraldo attempted to transport a steamboat over a Peruvian rain forest mountain. And, having placed huge orders for Dreamliners and other new aircraft, Norwegian boasted of having the youngest and most fuel efficient fleet in the world.
Of a fleet that was to grow more than 160 planes this summer, only seven planes remain in operation, stomping around Norway, delivering pieces of essential cargo. Norwegian may still rise from these ashes, but no investor will ever want to see a Bjorn again.
