MIAMI – Pursuing a US$1.2bn debt-for-equity swap, Norwegian Air (DY) said it would maintain the majority of its fleet grounded until 2021 while it expects a full recovery during 2022.

As the carrier expects short-haul operations to get back to normal in 2021 and long-haul’s in 2022, DY will restructure its financial situation in the short term by leaning on its shareholders and bonds.

Financial actions to be taken

Today, the company announced that its shareholders would be relieved from their debt for equity swap and fourth rights issue while it plans to convert bonds into equity.

Consequently, 60% of the carrier’s bonds, 85% of a convertible bond, and US$500m from lessors would represent the necessary equity to leave shareholders with 5,2% of the share capital prior to a separate US$40m rights issue.

Further, the airline asked creditors and lessors to delay their making of installments or interest payments until July 2021, when it expects to gradually resume operations.

Reaching this US$1.2bn debt-for-equity swap would include DY in the list of eligible companies to receive government loans to rescue the Norwegian aviation industry, in this case, it will allow the airline to receive NKr2.7bn in loan guarantees.

As the equity ratio of the government is 8%, the carrier said that converting 15% of its total debt into equity and raising NKr400m of capital would boost its ratio equity to successfully be part of the rescue plan.

Otherwise, if the state aid was not received, DY already warned that it would run out of cash in July 2020 with the possibility of needing further aid. In April, the company announced that four Swedish and Danish subsidiaries had filed for bankruptcy, cutting staffing contracts and putting 4,700 jobs at risk.

PHOTO: Wikimedia.

Possible scenarios

Regarding its latest statements, DY expects two outcomes. The first one is a coming recovery starting in the third quarter of 2020, and the second one a significative grounding of its fleet and the running out of cash between six and nine months.

Apart from the seven aircraft currently flying, DY future plans include a parked fleet through April 2021, when a gradual increase of flights to Europe and Asia would presumably start; thus, a normal schedule return would be feasible no sooner than January 2022.