Norwegian Air Shuttle on the Brink

by Ajay Prakash
Norwegian Air Shuttle B737 aircraft

Norwegian Air Shuttle filed for bankruptcy in Ireland last week. This signals the end of a meteoric rise by this low-cost airline. From an unheard-of airline, Norwegian Air Shuttle seemed to be flying everywhere – all across Europe and several cities in the United States and South America.

Norwegian Air Shuttle B737 aircraft

Norwegian Air Shuttle B737 aircraft © norwegian.com

Filing for Bankruptcy

It may be recalled that the airline was awarded a bail-out package of over $1 billion in May this year. The bail-out effectively handed over the ownership of the airline to its creditors, leaving only 5.2% of the ownership in the hands of the shareholders. The airlines had approached the Norwegian Government for the second round of funding, which was rejected last week.

The process of Examinership now begins. Examinership means that Norwegian will have a window of time to reduce its debt levels and look for further funding while its assets are protected.  It remains optimistic that it will secure additional funding and reduce its debt during the examinership period.

It is no surprise

The ground reality is that only six-hundred (600) of eleven thousand (11,000) employees remain with the airline, and it is operating a highly curtailed schedule with six (6) operational aircraft. The number of flights the airline operates has diminished significantly. According to FlightRadar24, the week from November 10 to November 16 saw just 324 total flights, compared to 3692 in the same week in 2019.

Norwegian Weekly Flights Comparison © FlightRadar24

For many, including the airline employees, it is no surprise that the airline has gone bankrupt. Norwegian’s troubles started much before the pandemic struck the world. Founder business magnate Bjorn Kjos (CEO of Norwegian) pursuit for ‘expand at any cost’ led to the initial meteoric rise and then contributed to the downfall of the airline. By the start of 2019, Norwegian was loaded with a debt of $6.4 billion.

Norwegian’s Founder and Former-CEO Bjørn Kjos | © Wikipedia

True Low-Cost Airline but Someone Else Paid

Norwegian Air Shuttle targeted under-served routes and routes where competitors were charging high fares. This amounted to purchasing customers, which was great from the consumer perspective. A transatlantic ticket was sold for $65. Eventually, it was the Norwegian Government, creditors, and shareholders who had to pay for the misadventure.

Is it the end of the road for the Norwegian Air Shuttle?

It would not be good for the industry and or the consumers if one more airline goes down. But this airline did have big dreams. Norwegian’s CEO Jacob Schram said as much when news of the bankruptcy in Ireland came out –

Our intent is clear. We will emerge from this process as a more financially secure and competitive airline, with a new financial structure, a rightsized fleet, and improved customer offering.”

We hope that is true.

What are your thoughts about this? Please write to us in the comments section below.

Editorial Disclaimer: Examinership is a principle of Irish Law and is comparable to Chapter 11 Bankruptcy (US) and Part II of the Insolvency Act 1986 (UK) thus the use of the word ‘bankruptcy’ within the article – It should be noted the airline is, at the time of writing, seeking reorganisation to protect against insolvency and as of 22/11/20 remains solvent.

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Gretchen
Gretchen
8 months ago

They did not file for bankruptcy, please report correctly instead of using incorrect information to attract more readers. The applied for examinership, which is a protection from bankruptcy.

Luke Will
Admin
Luke Will
7 months ago
Reply to  Gretchen

Hi Dave, Apologies for any confusion – Having re-read the article myself, it appears the term ‘bankruptcy’ is used in relation to the filing of Examinership and the journalist – Ajay – has done so to phrase in a way relatable to the majority of readers. Examinership is a principle of Irish Law and is comparable to Chapter 11 Bankruptcy (US) and Part II of the Insolvency Act 1986 (UK) thus the rephrasing and use of the word ‘bankruptcy’ within the article. I will speak with the journalist involved and rephrase some elements/add a disclaimer in to clarify this further… Read more »

Dave
Dave
8 months ago

This article is very poor, does not give correct information regarding examiners hip and doesn’t even have the correct CEO named. How can any journalist use Wikipedia as a reference. Laughable.

Luke Will
Admin
Luke Will
7 months ago
Reply to  Dave

Hi Dave,

Thank you for your comment and pointing out the incorrect labelling of ‘Bjørn Kjos’ as CEO instead of ‘Founder and Former-CEO’

To clarify around Wikipedia, this was the image copyright owner used within the article, and not the reference or citation of the article or it’s contents; Wikipedia (and it’s sub entity Wikimedia Commons) are frequently used by Travel Radar journalists as image sources due to their freely-usable licenses sometimes requiring either photographer attribution or source attribution: In this case ‘wiki’.

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