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Norwegian Cancels Jet Orders Amid Restructuring
Low-cost airline Norwegian Air Shuttle revealed changes on Wednesday to its future aircraft orders as part of its restructuring plan, Reuters reports. The airline is approaching its orders with Airbus and Boeing differently, but it is ultimately working toward its goal of having a smaller, more sustainable fleet.
Norwegian was granted bankruptcy protection in both Norway and Ireland at the end of 2020. The airline has committed to a restructuring plan that will see it cut its fleet and destinations, including a permanent end to its long-haul operations.
Before the coronavirus pandemic, Norwegian had contractual commitments for $9.55 billion worth of Boeing and Airbus aircraft to be delivered from 2020 to 2027. It had also leased numerous aircraft from multiple aircraft leasing companies, most notably for its Boeing 787 aircraft.
Norwegian’s Airbus Orders
Norwegian and Airbus agreed to cancel the remaining orders Norwegian has. The airline ordered 100 aircraft from Airbus in 2012, of which only 12 have been delivered. The 88 remaining aircraft are all Airbus A320-family aircraft.
The move includes aircraft intended for both Norwegian and Arctic Aviation, its asset-owning subsidiary.
“We have agreed, judge, in the last short while, the terms of a consent order,” Norwegian Air lawyer Brian Kennedy said in court regarding the repudiation. An Airbus lawyer confirmed that the two parties have reached an agreement.
Airbus will keep any repayments it has received from Norwegian, and the carrier has agreed to pay an additional 600,000 pounds ($847,800).
While Norwegian and Airbus have struck a new deal, the airline says that Boeing is not engaging in the restructuring plan, a move that could complicate Norwegian’s proceedings. Boeing in December wrote to Norwegian saying it will not submit to the jurisdiction of Norwegian courts, a position the manufacturer is expected to take with proceedings in Ireland as well.
Boeing “to date hasn’t engaged in the examinership process, or the Norwegian reconstruction … it is not anticipated that Boeing will engage in either,” Kennedy said.
Norwegian has, though, already cancelled orders for 97 Boeing aircraft it had on order and has sought compensation for the recent problems with both 737 MAX and 787 Dreamliner aircraft. Boeing has contested the move and has already made counterclaims against the airline, and it still lists Norwegian’s orders on its website.
Norwegian marks some of the first major aircraft cancellations related directly to the pandemic. While orders with other airlines have been cancelled or deferred, none have been on the same scale as Norwegian, which just a year ago was among the biggest long-haul, low-cost airlines in the world. Airbus is, however, reportedly in talks with AirAsia, another long-haul low-cost carrier that is among Airbus’ largest customers, over whether the airline group might both delay some deliveries and obtain a partial return on deposits.
As it works to slash its size and reduce its debt, Norwegian has plans to cut its narrowbody fleet in half and totally abandon its long-haul operations. The carrier returned all of its Boeing 787s to lessors in early January, and it plans to operate 70 aircraft, mostly Boeing 737s with some A321s mixed in, by the end of 2022, down from the 132 total aircraft it had at the end of 2020.
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