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Norwegian Air Cancels Order for 97 Boeing Aircraft, Sues Boeing
Norwegian Air Shuttle sent a notification to the Boeing, stating that the airline had terminated the purchase agreements of the remaining five Boeing 787 Dreamliners and 92 Boeing 737 MAX. The airline also ended the GoldCare service agreement, Boeing’s largest-ever commercial services contract, related to the 787 and MAX aircraft. The news came just hours before Norwegian will hold its delayed general shareholders meeting on Tuesday and on the same day Boeing started re-certification tests for MAX aircraft.
A Norwegian spokesperson told AirlineGeeks last week that the airline continued to have discussions with Boeing regarding their aircraft deliveries, declining to comment on the cancellations.
“We do not discuss commercially confidential details regarding any discussions that are taking place with aircraft manufacturers,” the spokesperson said.
According to the company’s publicly-filed statement made on Monday through the Norwegian stock market, Norwegian has engaged in a commercial dialogue with Boeing with a view to resolving its 787 and 737 MAX issues and obtaining compensation for its losses. However, “the dialogue has, yet to date, not led to an agreement with a reasonable compensation to the company,” said the airline in today’s trade statement.
In addition to the cancellations, Norwegian has also filed a legal claim seeking the return of pre-delivery payments related to the aircraft and compensation for the company’s losses related to the grounding of the 737-MAX and engine issues on the 787.
The airline — which was already struggling with the consequences of the technical problems with the 787 Dreamliner engines and grounding of the 737 MAX — was hit hard when the COVID-19 pandemic broke out. Almost all air traffic has been suspended, and in May, the company adopted extensive capital changes where debt was converted into shares in order to lower the company’s total debt. But as a result, former creditors became major owners of the airline. Additionally, Norwegian Air had to ground most of its fleet due to the impacts of the COVID-19 outbreak on industry demand.
“The company’s 737 MAX aircraft have been grounded since the worldwide grounding of the aircraft type was imposed on 12 March 2019. This has also disrupted the company’s operations and caused significant losses. In addition, Norwegian’s Rolls-Royce Trent 1000-powered [Boeing] 787 aircraft have suffered from long-running reliability issues that have affected reliability and resulted in premature and unplanned maintenance, which has disrupted the company’s operations and caused further significant losses,” said the airline in today’s statement.
“New Norwegian” Will Be Smaller
Norwegian has 108 737 MAXs on firm order, with commitments for 92 more airplanes. The airline has taken delivery of 18 MAX aircraft so far. The airline launched Boeing’s 737 MAX GoldCare services when its first MAX was delivered in 2017. Under the agreement, Boeing would provide coverage for Norway’s largest airline through 2034. With the GoldCare service, Boeing provided maintenance and engineering services and parts required to run the airline’s flight operations. Boeing has also provided GoldCare Services for Norwegian’s 787 fleet since 2012.
Diving deeper into the airline’s financial troubles, the low-cost giant was recently sued in the U.S. over its actions to refund customers whose flights have been canceled due to the COVID-19 pandemic. It is estimated that Norway’s largest airline owes customers a total of between $200 million and $400 million.
“We are not commenting specifically on this ongoing matter. However, we continue to refund our customers due to cancellations related to COVID-19,” the Norwegian Air spokesperson told AirlineGeeks.
The lawsuit put extra financial stress on the airline, which is battling to sustain its existence and get back on track in the midst of the pandemic. After months of service halts, the airline resumed its scheduled flight operations in Europe with a new vision.
Norwegian’s fleet consists of around 160 aircraft, including Boeing 737NG aircraft used to operate for short- and medium-haul flights and 29 Boeing 787 Dreamliners for long-haul routes. However, with the scheduled flights gradually resuming, the airline is restructuring its fleet and focusing on short- and medium-range destinations. Europe’s fourth-largest low-cost carrier will likely completely discontinue the long-haul flights that sank the company into debt.
“Further destinations and frequency increases will be announced in due course subject to passenger demand and government travel restrictions and ‘New Norwegian’ will have a reduced fleet going forward,” the spokesperson said.
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