LONDON – After a series of debt restructuring, Norwegian Air (DY) has received a state-backed loan from the Norwegian government valued at US$271m.

This comes following the news that the airline would run out of money by the middle of this month, being around this point, unless it could secure the necessary arrangements.

Norwegian had already secured a US$30m loan at an earlier stage, meaning that the total loan amounts to US$301.

Norwegian at JFK. Photo Vincenzo Pace @jfkjetsofficial

Such necessary arrangements have resulted in a US$830m debt conversion which ultimately raised its equity ratio to 17% from 4.8% at the end of 2019, which exceeds government requirements for it to be 8%.

Commenting on the news was CEO Jacob Schram, who has been in charge of such restructuring and business management.

“I want to thank everyone who has supported the company during this unprecedented crisis that has affected the entire airline industry: The Government and Parliament; customers; employees: shareholders; leasing companies; creditors; bondholders, the travel industry and other Norwegian supporters.”

“Nevertheless, the months ahead will remain challenging and with a high degree of uncertainty for the industry. Norwegian will still need to collaborate closely with a number of creditors as the company currently has limited revenues,”

Schram also added that a clear direction and strategy is needed in order to ensure survival in this market.

“In addition to securing that the company survives this crisis, our goal has been that Norwegian should have a strong position in the future airline industry, with a clear direction and strategy. This will ensure sustainable operations and a structure that will be to the benefit of both shareholders, customers and colleagues”.

More Power for Shareholders?

As a result of such actions, Norwegian’s shares have dropped 60% due to such recapitalization plans as it is effectively handing over control to aircraft lessors and bondholders.

Leasing companies such as AerCap and BOC Aviation have had their stake increased to 16% and 13% respectively.

PHOTO: Juraj Patekar.

This means that both companies are among the largest owners inside the carrier.

In the fleet of 140 aircraft at the moment, 98 aircraft are leased. It is unclear whether BOC and AerCap own all of the leased aircraft but in the scenario that they are, they could have been used as collateral.

Since the end of 2018, the airline has been taking specific actions leading to profitability.

It is of unfortunate circumstances for the carrier because if the Coronavirus pandemic had not emerged when it did, then profitability would have occurred for DY by the end of 2020 as well as the summer season being “set to be the strongest in the company’s history,” according to its CEO.

The ‘New’ Norwegian?

Because of such government approval for the loan, the airline is now developing a new strategy dubbed “New Norwegian” which aims for a strengthened version of the airline when travel restrictions are lifted and demand returns for the carrier.

Such plans had been seen previously stated that recovery would begin in the third quarter of this year, with short-haul operations due to return to full capacity in 2021 and long-haul in 2022.

According to, the whole group has 140 aircraft in its fleet, with 17 aircraft on the way.

Photo: Joe G Walker

This is aligned with the initial plan of having close to 168 aircraft in the fleet by this period on a pre-COVID’-19 case.

Because of the virus, it looks like the fleet could initially be reduced to 110-120 aircraft, according to sources at Forbes.

CEO Schram appears to be taking such financial changes seriously, especially due to the immediate resignation of Bjorn Kjos last year.

In a press conference in April, Schram had solidified that view, criticizing his predecessor for such a rapid expansion.

“When we have this in place, it’s about when demand comes back. That in itself is quite a critical exercise, because if we accelerate too fast then we get too much cost compared to revenue. So escalation is a critical phase”.

The Right Steps Must Be Taken

With 2020/21 being a “hibernation phase” for the carrier, it gives Schram a good opportunity to keep unnecessary cash burn at a low point if the airline has any premise of making it through this pandemic.

With Norwegian having a difficult few years, this direction that is being taken could prove to be the difference between survival, even through and after the pandemic, and its ultimate demise. It can be done but only if the right steps are taken.