Wednesday, 30 September 2020

Budget airline Norwegian could be nationalised........

The budget airline Norwegian may be about to be nationalised, at least according to some local newspaper reports.

There is much speculation that the Norwegian government is in talks with the troubled carrier over a possible nationalisation programme to rescue the ailing airline, something that was first put forward by the government months ago.  

The TTG's Gary Noakes reports that the 'Norwegian government is thought to be sympathetic to the airline’s plight, as the country is oil-rich and not bound by EU regulations on state bailouts of airlines.'

Whilst the airline has always been open about talking to the government, it has not issued any further statements regarding nationalisation. 

The airline has, for quite some time been trading in difficult conditions, its finances have not always been, let's just say, healthy!  A series of loss-making avenues or ventures have had to be closed in recent times.  The ongoing coronavirus COVID-19 pandemic and downturn in business has seen the carrier cope with drops in passenger numbers of around 70%.  With mounting losses, despite government intervention in terms of loan guarantees would further indicate the airline wouldn't be able to survive this winter period if the current levels of travel remain so low.  

Something will have to happen before too long and the way I see it,  there are only really three key options with any validity  1)  A take over by another carrier.  2)  Bankruptcy.  3)   Nationalisation  /  semi-nationalisation. 

1)   The carrier was having difficulty finding any interest in a take-over or merger long before the current crisis.  So now, in the middle of the worst crisis, the aviation industry has seen for decades, the chances of another airline snapping up Norwegian is as slim as me being voted the next US President.

2)   This is a very real possibility -  if nothing changes in the next few months, I'd say it is inevitable.

3)   This may very well be the only way the airline can survive the current situation and emerge from it stronger and a more viable operation in the long-term.   It would be a gamble,  it isn't the ideal situation for the current shareholders and senior management and a lot of negotiation would need to take place before any deal is announced.

Despite having a good product, great staff and a fine reputation among the travelling public, the airline faces a very shaky future.   As chief executive Jacob Schram said recently: “We are thankful for the loan guarantee made available to us by the Norwegian government which we worked hard to obtain. However, given the current market conditions, it is not enough to get through this prolonged crisis.”

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