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The embattled airline Norwegian Air will follow through on its rescue plan and unlock government aid after enlisting the support of shareholders, bondholders and lessors of aircraft for a 10 billion kroner debt-to-equity swap (£ 770 million). ).
After a weekend of frantic talks, the airline’s shareholders gathered at an emergency meeting in Oslo on Monday morning and voted 95% in favor of all proposals, including a 400 million kroner issue.
The plan will grant majority ownership to the airline’s creditors (bondholders and lessors) and will leave shareholders with 5.2% of the company, but there was no other alternative, Norwegian Chief Executive Jacob Schram said.
The debt-for-equity swap deal will unlock 3 billion kroner (£ 230 million) in state aid to help steer the airline through the coronavirus crisis. The Norwegian government made the package dependent on Norway becoming solvent by eliminating its debt. It has already received SEK 300 million from the government.
Also on Monday morning, the European Union’s competition watchdog approved € 7 billion (£ 6 billion) of French state aid to Air France. The Covid-19 pandemic has plunged the global aviation industry into its worst crisis, bringing air travel almost to a standstill.
Airlines across Europe have sought government help as coronavirus blockades have forced them to land their fleets. In approving the French state guarantee and the shareholder loan to Air France, the European Commission noted the importance of the carrier, with more than 300 aircraft, to the French economy and its role in the repatriation of stranded citizens and the transport of medical supplies.
Norwegian, one of the largest airlines at London Gatwick Airport, landed 95% of its fleet in mid-March and warned that it could run out of cash in mid-month unless it moved forward with its rescue plan.
Bondholders had already endorsed the plan on Sunday, after rejecting it in a vote on Friday. The airline said it had obtained the written consent of the largest holders of the NAS07 bond after improving some of the terms. It will have another bondholder vote on May 18, where the airline will have to formally obtain 67% support.
The lessors, who own Norwegian’s plane, had also signed up for the plan, the carrier said minutes before the shareholders’ meeting began. “With significant contributions from lessors and bondholders, the company hopes to convert more than SEK 10 billion in debt into equity.”
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In recent years, Norwegian has transformed from a small local airline into a pioneer of low-cost long-distance flights, for example to the United States. It transports nearly 6 million UK passengers each year from Gatwick, Edinburgh and Manchester airports to 30 destinations worldwide.
Norwegian warned a week ago that virtually its entire fleet of 160 would remain ashore until 2021, with just seven flying at the moment, primarily carrying essential cargo on state-subsidized domestic flights in Norway. It has temporarily laid off more than 80% of its workforce.
