Norwegian Air struggles for survival, asks bond holders for support

Norwegian Air is facing high level of debts and has asked bond holders to decide its fate

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The Norwegian Air is Norway’s largest airline and Europe’s third largest low-cost carrier. The airline is seeking a lifeline from the bond holders as it struggles with a cash crunch. Norwegian Air has asked for two more years to repay its largest outstanding bonds worth $380 million and is putting it up its lucrative landing slots at the second busiest airport of London as collateral.

Daniel Roeska, the Bernstein analyst while talking to a leading daily said, “They are managing the crisis as best they can but they are on the verge of a cliff edge”. The airline has grown rapidly. In 2012, it was preparing to take on the big players in the transatlantic market and had placed an order for 222 air crafts which was the biggest in European aviation history.

At the same time the aggressive plans of expansion had left the company in high level of debts which means it has little room to move if things go wrong. Since then a lot of things have gone wrong. The airline had to halt flights between Ireland and North America on September 15 because of the grounding of all 18 of its Boeing 737 MAX aircraft. The stocks of Norwegian Air plunged by 65 percent this year. In the month of July, 2019, Bjoern Kjos, the CEO and founder, who was also the largest shareholder of the company, had stepped down. The airline is still looking for a replacement.

The delay in payments from the credit card companies had reduced its working capital by about 4 billion Norwegian Kroner in the second quarter of 2019 compared to the same period in 2019. This had also wiped out $353 million that it raised by issuing new shares in March along with the proceeds from the recent sale of a stake in a Norwegian bank that netted it 934 million Norwegian Kroner.

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