The largest low-cost carrier in Europe has been told it may face restrictions or even a ban on its flights…
Chinese Government-Backed Lessor Takes Stake in Norwegian Air
Amid the coronavirus pandemic, revenue sources of most airlines are petrified, thus forcing them to struggle to maintain the survival of their business.
BOC Aviation, a global aircraft leasing company and a subsidiary of the state-owned Bank of China, has become a major shareholder in the struggling low-cost airline Norwegian Air Shuttle.
Norwegian Air said in an announcement released on Wednesday that Ireland-based AerCap Holdings, the world’s largest independent aircraft leasing company, will become the biggest shareholder with 15.9% of the shares while BOC Aviation, wholly controlled by the Chinese state, will hold a 12.67% stake in the airline.
The involvement of the international leasing companies is part of the state-backed rescue package, which was approved at the beginning of May, to prevent the airline, facing a substantial debt burden, from going bankrupt. According to the rescue plan, Norway’s largest airline had to convert part of its debt into shares, which was a prerequisite for further state aid.
The move enabled Norwegian to meet the requirement to receive 2.7 billion Norwegian Krone (approximately $270 million USD) aid from the Norwegian government – in addition to 300 million Krone ($30 million USD) that have already gone to the airline.
The airline’s CEO Jacob Schram nevertheless warned that the upcoming months will be “a challenge” for the industry. He stated that Norwegian will reduce the number of flights and, above all, serve profitable connections.
“I want to thank everyone who has supported the company during this unprecedented crisis that has affected the entire airline industry: The Government and Parliament; customers; employees: shareholders; leasing companies; creditors; bondholders, the travel industry and other Norwegian supporters. Now that we can access the state loan guarantee, we can continue to transform the company,” said Schram.
“Through this process, the belief in New Norwegian and the company’s strategy has been confirmed by shareholders, the market, bondholders, leasing companies, other creditors and lenders. Nevertheless, the months ahead will remain challenging and with a high degree of uncertainty for the industry. Norwegian will still need to collaborate closely with a number of creditors as the company currently has limited revenues,” added Schram.
Due to the travel restrictions and lack of demand caused by the pandemic, Norwegian has grounded almost all of its fleet. The airline will operate only seven aircraft next year and it is not planning to use 110 to 120 jets again until 2022.
Schram warned that the coming months would remain difficult due to the uncertainty surrounding aviation. “Norwegian must continue to work closely with a number of creditors as the company currently has limited revenue,” said Schram.
Norwegian was one of the first low-cost airlines to offer long-haul flights before the COVID-19 pandemic. The airline will not be able to reduce the size of its fleet sufficiently because of leasing contracts it is bound to.
“In addition to securing that the company survives this crisis, our goal has been that Norwegian should have a strong position in the future airline industry, with a clear direction and strategy. This will ensure sustainable operations and a structure that will be to the benefit of both shareholders, customers and colleagues,” said Schram.
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