Low-cost airline Norwegian Air has filed for bankruptcy protection in Ireland, becoming the biggest casualty of the coronavirus pandemic in the aviation sector to date.
The troubled carrier has asked an Irish court to carry out a process of examinership. This should protect the group’s assets while it tries to slash debt levels and find new funding as part of a restructuring. It is expected to take as long as five months.
Norwegian will continue to operate its flight schedule, which is reduced owing to Covid-19, during the process and its shares will still be traded on the Oslo stock exchange.
The carrier built its reputation on rock-bottom fares, as low as £69, to cross the Atlantic and in 2018 overtook BA to become the biggest non-US airline linking Europe and New York.
Norwegian said it had chosen Ireland because its fleet is held there, and that it had taken the decision “in the interests of its stakeholders”.
The request to the Irish court comes just a week after Norway’s government refused to grant further financial assistance to the airline, a move Norwegian said left it facing a “very uncertain future”.
The carrier received a bailout through state aid from Norway in the spring, with stringent conditions attached, after the first wave of coronavirus grounded many planes around the world.
However, Norwegian had appealed for more financial support as the pandemic continued and fresh lockdowns in many markets slowed an expected recovery in aviation.
Jacob Schram, the airline’s chief executive, said the the decision to request bankruptcy protection had been taken to “secure the future of Norwegian for the benefit of our employees, customers and investors.
“Our intent is clear. We will emerge from this process as a more financially secure and competitive airline, with a new financial structure, a right-sized fleet and improved customer offering.”
Schram said the company wanted to work with its stakeholders to find solutions to its financial problems, and intended to save as many jobs as possible.
The carrier said it believed it had enough liquidity to get through the examinership process.
It is only flying six of its aircraft and will only operate domestic Norwegian routes during the winter.
Before the pandemic, Norwegian was operating more than 100 planes from several European bases, including London’s Gatwick airport.
The airline pioneered low-cost, long-haul flights, including cheap no-frills fares across the Atlantic.
However, the carrier’s rapid expansion, fuelled by borrowing, meant it entered the pandemic in a weaker financial state than some of its rivals.
“Norwegian’s problems were of its own making, with its ambition and expansion into low-cost long-haul flights,” said John Strickland, an analyst with JLS Consulting. “They have turned over every stone over a long period of time to stem losses, cut debt and raise equity, and then have had to deal with the pandemic on top of that.”
Strickland added that Norwegian was facing increased competition in its domestic market, with low-cost rival Wizz Air planning to open two bases in Norway, while a new home-grown airline was also being planned.
Norwegian is most likely to come out of the pandemic a very different business: a European regional carrier. However, Dan Thomas, an analyst at the research firm Third Bridge, said this would also present challenges.
“They did have a profitable short-haul business, and one would assume that they would look to regrow the business. Short-haul European routes are going to be competitive. You’ve got some well-established players like Ryanair and Wizz Air who by all accounts have weathered coronavirus fairly well, and who are going to have lots of capacity in short-haul for some time,” Thomas said.