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Photo: © Thorbjørn Brunander Sund, danishaviationphoto.com

Norwegian hits back at ‘debt violation’ claims

The airline says it is urgently addressing its debts with a new cost savings scheme, among other measures.

Norwegian has released a statement laying out its financial plans into 2019, hitting back at doubts raised by Danske Bank and media reports about its rising debts, costs and economic pressures.

A year of high fuel costs and renewed competition from legacy airlines are impacting budget carriers, with Primera Air going under and Wow Air continuing to suffer.

Now attention is increasingly turning to Norwegian, which faces “a mountain of debt payments that are due by the end of the month”, as Forbes puts it, citing Norwegian news sources.

Martin Stenshall, an analyst at Danske Bank, thinks Norwegian “will violate the terms of its loans by New Year”, Newsinenglish.no reports.

Due to large losses over the last two years equity is under pressure, and the business news site DN.no warns there is a risk the equity may fall below NOK 1.5 billion (€150 million) at the start of 2019, which would prevent the airline from meeting the requirements of several of its loans.

Norwegian has now responded that this is “pure speculation”, pointing to its “satisfactory” liquidity and passenger numbers that grow each month by the “hundreds of thousands”.

It also argues that it continues to be “working on selling parts of our fleet, which will further strengthen our financial situation”.

The airline claims in its “year-end update” that “to meet the competitive environment in a period with seasonally lower demand in Europe”, it has made “several changes to its route portfolio as well as adjusted its capacity” – measures that “should improve the financial performance from the start of 2019”.

Cost savings
Norwegian says it is six weeks into a new cost savings programme called #Focus2019, aimed at making savings of a minimum of NOK 2 billion in 2019.

It adds that it has reached an agreement with Rolls-Royce to end disruptions in engines on its Dreamliners, which “will have a positive effect from the first quarter of 2019”.

In addition, Norwegian argues that the financing for all aircraft deliveries for the first half of 2019 is secured – including the “refinancing” this month of one of the delivered Dreamliners, which strengthened liquidity by NOK 275 million.

Newsinenglish.no thinks that two of the airline’s deep-pocketed shareholders – founder Bjørn Kjos, 72, and Bjørn Kise, 68 – will inject more cash into the operation. The company is clearly keen on getting its debts fully settled as soon as possible.

But these debts, which have accrued with its rapid growth over the last 15 years, were recently intensified by the costly shutdown at the carrier’s important London Gatwick base this week.

“Were the airline to suddenly cease operations on December 31st, tens of thousands of passengers could be stranded around the world,” Forbes speculates.

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