By Terje Solsvik
OSLO (Reuters) – The Norwegian government will not provide additional financial support for Norwegian air (OL: NORR) affected by the pandemic, the Ministry of Industry and Transport announced on Monday, leaving the stricken airline in a precarious position.
Norwegian Air, which has been badly hit by the coronavirus crisis and landed most of its fleet, said in August that it will run out of cash in the first quarter of 2021 unless it can and has new funds in the hope of gaining support in talks with the government.
Norwegian Air, a pioneer in low-cost transatlantic air travel, was burdened with nearly $ 8 billion in debt by mid-2020 due to its rapid expansion, making it vulnerable to the aftermath of the COVID-19 pandemic.
The government’s rejection leaves Norwegians in a “challenging situation,” the carrier said in a statement.
“That the government has decided to reject the application for funds is disappointing and a slap in the stomach for all Norwegians,” said CEO Jacob Schram.
The company’s shares have already fallen 98% this year.
The Department of Industry and the Department of Transportation started a press conference on the aviation industry at 8:00 am GMT.
Norwegian Air, which publishes third quarter results on Tuesday, announced that it will hold its own press conference at 9:30 am GMT.
STATE RESCUE
Creditors and lessors took control of the airline in May with a financial bailout that allowed it to access government-guaranteed credit of 3 billion Norwegian kroner ($ 329 million) when the company tried to get a scaled-down service operate.
“Norwegian Air has asked for billions in additional support and the government has concluded that it would not be a responsible use of public funds,” said Industry Minister Iselin Nyboe.
Norwegian operated just 21 of its aircraft last month and left more than 100 on the ground, including its entire fleet of 37 Boeing (NYSE: BA) 787 Dreamliners used for transatlantic voyages.
The aviation industry is likely to provide adequate services and continue to see healthy competition in the period ahead, Nyboe said.
Scandinavian airline SAS (ST: SAS) is a major competitor in Norway, and Hungarian airline Wizz Air (L: WIZZ) recently launched several flights to Norwegian cities.
“Norwegian is evaluating the impact of the current situation with the aim of keeping the interests of all parties involved,” the company said.
The company has stated that more funds could come from selling aircraft, converting more debt into equity, or from its owners and the Norwegian government while refusing to disclose the desired amount.
The government also said it had turned down a start-up carrier’s application for public funding.
So far this year the government has allocated an estimated 13 billion kronor to support the aviation industry, including loans, guarantees and tax cuts.
($ 1 = 9.1185 Norwegian crowns).
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