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Norwegian Air books $1.5 billion charge as it seeks fresh start

Victoria Klesty
·2-min read
FILE PHOTO: Norwegian Air Sweden Boeing 737-800 plane SE-RRY approaches Riga International Airport in Riga

By Victoria Klesty

OSLO (Reuters) - Norwegian Air booked a charge of 12.8 billion crowns ($1.5 billion) in the fourth quarter for its plans to cut its fleet and cancel aircraft orders, the budget airline said on Friday.

Norwegian received protection from bankruptcy late last year in both Norway and Ireland, where most of its assets are registered, and it aims to come out of its restructuring process with fewer aircraft and less debt.

"We are doing everything we can to emerge as a more financially secure and competitive airline with an improved customer offering," Chief Executive Jacob Schram said.

"As soon as Europe begins to reopen, we will be ready to welcome more customers on board."

The company said its restructuring in Norway and its examinership process in Ireland, under which it aims to get rid of 78 aircraft, were progressing as planned and expected to end during the second quarter.

The airline has warned that it risks running out of cash by the end of March if it fails to restructure its debt and liabilities.

Terminating aircraft purchase contracts with jet makers Airbus and Boeing led to a charge of 4.8 billion crowns in the quarter related to pre-delivery payments.

The company has since agreed terms with Airbus but a deal with Boeing is unlikely before the restructuring is completed, Chief Financial Officer Geir Karlsen told Reuters.

Norwegian unilaterally terminated its remaining orders with Boeing for 97 aircraft last year and sought compensation for the grounding of Boeing 737 MAX jets and technical problems with 787 Dreamliners.

The company said it would present a detailed plan for its future next week and was preparing to carefully increase its operating fleet from 10 aircraft now, depending on demand and travel restrictions.

Norwegian has already said it will end its long-haul service and focus on the Nordic and European network.

Its total liabilities had fallen to 56.2 billion crowns by the end of December from 66.8 billion on Sept. 30, while its interest-bearing debt dropped 8.3 billion to 40.2 billion.

It hopes to cut its debt to about 20 billion crowns and raise 4 billion to 5 billion from new shares and hybrid capital. Norway has already agreed to contribute 1.5 billion crowns.

Norwegian said its fleet had been cut to 131 aircraft by the end of 2020. It is negotiating terms with lessors to reduce its fleet to 53 aircraft from 140 previously.

(Editing by Shri Navaratnam, Keith Weir and David Clarke)