Norwegian Air Shuttle ASA (Norwegian), Norway’s largest carrier is under a lot of pressure to secure its operations amid turbulent times emphasised by the coronavirus crisis. While the airline has been offered emergency funding by the Norwegian government in an attempt to save the carrier, the money is not guaranteed. Indeed, Norwegian has been struggling for years, the cause of which is due to a surge in fleet numbers in a very short period of time.
Norwegian’s uncontrolled growth, coupled with rising fuel prices and now the coronavirus crisis is making it difficult for the carrier to survive. The Norwegian government has pledged NOK3 billion in emergency funding but it’ll take some effort for the airline to secure it. The state said it would guarantee 90 percent of the loan proceeds on the condition that external banks, credit institutions or other commercial lenders make up the remaining 10 percent. According to Dagens Næringsliv (DN), two banks have guaranteed 10% (NOK300 million/GBP23 million) of the NOK3 billion. This includes DNB and Danske Bank.
While NOK3 billion may seem like a lot, this will only be enough money to secure the carrier’s operations until June. Again, only 10% of the money has been guaranteed so Norwegian still have a long way to go before they are stable again. At this rate, many believe that the airline will cease operations in the coming weeks.
However, Norwegian will only receive the money provided it had capital of at least 8 percent at the end of the last quarter. In that respect, Norwegian is not liable for the emergency funding. The Norwegian government says that Norwegian “will have to get its creditors to forgive their interest rate charges and postpone principal payments for three months, in order for Norwegian to qualify for second-phase financing of up to NOK 1.2 billion. For the final third-phase NOK 1.5 billion in loan proceeds, Norwegian must show that it’s able to increase its own capital,” reports Norway’s News in English.
Overall, Norway had guaranteed NOK6 billion for its aviation industry as a whole. Norwegian was entitled to half of that, provided it meets the requirements. The NOK300 million, according to Norwegian, will ‘create necessary headroom to pursue the remaining tranches of the guarantee scheme.’