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Analysts see liquidity risk at Norwegian

Analysts at Credit Suisse and Bernstein warn there may be a risk the airline’s coffers could soon be empty.

Two well-recognised financial institutions in Switzerland and the United States believe that there is a danger the airline Norwegian will run out of cash.

Analysts at Credit Suisse and Bernstein are warning there may be a risk that Norwegian’s coffers could soon be empty, the Norwegian news agency TDN Finans writes.

Norwegian may run out of cash if jet fuel prices stay above $700 per tonne, according to Credit Suisse.

With a current fuel price of $780 per tonne and hedging for just 22% of consumption for the rest of 2018, this may quickly pose challenges for the airline.

Bernstein also sees danger signals at Norwegian and is tracking any breach of agreements with lenders and a negative cash flow for the low-cost carrier.

“However, this is not a final warning that the company will go bankrupt,” says Bernstein’s message to the Wall Street Journal, according to TDN.

Wiggle room
There is still wiggle room in this potentially difficult situation, it adds.

“If Norwegian can sell some of its booked flights, find financing for the remainder and retrieve capital in order to secure its loan agreements and get funding for operations next year, the company can survive the storm, which is based on long-haul routes and increased fuel costs,” estimates Bernstein.

The assessment is shared by equity research manager Jacob Pedersen from Sydbank, Check-in.dk writes. For many years, the analyst has followed SAS shares closely and therefore also its competitors in Scandinavia.

“Without the capital increase earlier this year, Norwegian would not have been able to fly on the same level as before,” he says.

“The company is still in a major earnings crisis, but I’m convinced that they can find the money that’s needed for the company to fly on.”

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