LONDON – Norwegian Air Shuttle (DY) has notified Boeing of the termination of its purchase agreement for the Boeing 737 MAX and Boeing 787 Dreamliner aircraft on order.
DY also terminated its GoldCare service agreements with the American manufacturer.
According to an internal source, despite a long dialogue with Boeing aimed at finding a resolution to the aircraft reliability issues, an agreement could not be reached. DY has thus filed a legal claim for compensation for its losses against Boeing.
The announcement does not impact the airline’s New Norwegian growth strategy to build a stronger airline and bring it back to profitability.
Order cancelation in numbers
Norwegian’s fleet of 18 Boeing 737 MAX aircraft has been grounded since March 2019, causing disruption to operations resulting in major losses. With a further 92 undelivered Boeing 737 MAX aircraft on order, it was decided to terminate these agreements and seek a refund of all pre-delivery payments.
Additionally, the Rolls Royce Trent 1000 powered Boeing 787 Dreamliner aircraft have suffered from reliability issues that have also disrupted DY’s operations, resulting in major losses. For this reason, the Boeing 787 Dreamliner fleet will suffer a 40% cut.
The order involved for the now-canceled delivery of 92 MAX and 5 Dremliners has a total value of US$10.2bn.
Future plans for the Airline
Norwegian will reduce its current fleet to about 120 planes as part of its restructuring and new growth strategy.
The restructuring comes because the European budget carrier, which revolutionized transatlantic travel by offering cheap fares, was already struggling before the COVID-19 pandemic brought the industry to its knees.
Norwegian creditors and shareholders approved a restructuring plan in May, which will ensure the airline’s survival for the time being. However, the plans are to keep most of the fleet on the ground until March 2021.
Until then, DY’s strategy involves a minimum flight plan for short-haul routes.
Additionally, the company is thinking about reorganizing its network which, for obvious reasons, also involves a reorganization of both its fleet and bases.