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Norwegian Air shares fall as Sweden rejects a key state guarantee scheme

Suban Abdulla
·2-min read
In May, the group received emergency financial guarantees from the Norwegian government.
In May, the group received emergency financial guarantees from the Norwegian government. Photo: Nicolas Economou/NurPhoto via Getty Images

The Swedish government announced on Tuesday that it rejected a state credit guarantee for struggling airline Norwegian Air (NAS.OL).

The country’s debt office, which runs the government support programme, said that the credit can only be granted to airlines that were financially viable on the last day of 2019.

Shares fell 5% on Tuesday morning.

Norwegian Air indicated the decision would not have an immediate impact on the carrier, according to Reuters.

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In May, the airline received emergency financial guarantees from the Norwegian government, after it raised cash from its owners and forced creditors to convert parts of the debt to equity.

Norwegian Air’s July passenger volume fell by 90.4% on the year, after the coronavirus pandemic and global lockdowns saw most of its fleet grounded. It flew only 356,093 passengers during July 2020, compared to 3.7 million in the previous year.

Norwegian Air's shares over the last five days. Image: Yahoo Finance
Norwegian Air's shares over the last five days. Image: Yahoo Finance

After COVID-19 forced the budget carrier to limit its operations to domestic Norway flights, using only eight aircrafts, it has begun to fly more widely in Europe due to the relaxing of lockdown restrictions. Its transatlantic operations are still on hold.

In June, the group said it would claim compensation from US plane maker Boeing (BA) after it cancelled orders for 97 aircrafts, following the grounding of the 737 MAX and for engine issues on its 787 Dreamliner jets.

Norwegian Air also filed a legal claim seeking compensation for the company’s losses following the grounding of the 737 MAX and the return of pre-delivery payments related to the aircraft.

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The European budget airline revolutionised transatlantic travel after it sprung on the scene in 2012 with a multi-year order for up to 372 planes, of which 222 were from Boeing (BA) and 150 from Airbus (AIR.PA).

After rapid growth and expansion Norwegian Air became Europe’s third-largest budget airline and the biggest non-US carrier serving New York and other major US cities, which caused it to accrue debts and liabilities totalling about $8bn (£6bn) by the end of 2019.

Norwegian Air cannot appeal the Swedish debt office's decision.