MIAMI – Norwegian Air (DY) announced today that four Swedish and Danish subsidiaries have filed for bankruptcy, axing staffing contracts in Europe and the United States, putting some 4,700 jobs at risk.
The carrier’s four subsidiaries in Sweden and Denmark employ pilots and cabin crew based in Spain, Britain, Finland, Sweden and the United States.
In all, some 4,700 pilots and cabin crew members would be affected by the cancelations. However, the measure excludes 700 pilots and 1,300 cabin crew based in Norway, France and Italy.
According to Reuters, DY is seeking to convert debt to equity, money from shareholders and Norwegian state guarantees in a bid to survive the COVID-19 pandemic.
In today’s statement, CEO Jacob Schram said,“We have done everything we can to avoid making this last-resort decision and we have asked for access to government support in both Sweden and Denmark.”
Schram added that DY was working around the clock to get through this crisis and to return as a stronger Norwegian, “with the goal of bringing as many colleagues back in the air as possible.”
Upon the news, DY’s shares went down 3.6% while its stock shed 86% of its value for 2020. Norwegian, Europe’s third-largest low-cost airline and US major hub’s biggest foreign carrier, has accumulated debt and liabilities in the order of $8 billion.
Insufficient measures and lack of goverment support
On March 16, DY announced flight reductions by 85% and the temporary layoff of 7,300 workers due to the drop in passenger demand and worldwide governmental travel restrictions. A week earlier, DY suspended 3,000 flights, cutting 15% from its network capacity.
Following the modified capacity, the main priority of the carrier at the time was to maintain the majority of scheduled flights to return passengers to their home destinations in conjunction with authorities.
Today, without the financial support needed from the Swedish and Danish governments and despite the above-mentioned measures, DY is “left with no choice,” according to its statement.
The carrier states, “In Norway, there are efficient furlough opportunities which means that the government pays for all salary-related costs throughout the duration of the furlough period. Unfortunately, there is not the equivalent coverage in Sweden or Denmark schemes.”
Norwegian joins the list of carriers that have filed for bankruptcy due to a combination of accumulated debt, insufficient cash flow for the remainder of the year and a lack of government aid to survive the COVID-19 fallout.
Today, Virgin Australia (VA) has also filed for administration voluntarily after recording around £2.55bn in debt as well as having a £714m bailout request from the federal government being rejected.