Norwegian’s Scandinavian Crew Subsidiaries File For Bankruptcy
Norwegian Air Shuttle said its pilot and cabin crew subsidiaries in Sweden and Denmark were filing for bankruptcy, in the latest casualty of the COVID-19 crisis.
The LCC added that it had terminated crew provision agreements elsewhere in Europe, putting around 4,700 jobs at risk.
“The closure of borders and quarantine restrictions has effectively brought the entire airline industry to a halt. Consequently, almost all of Norwegian’s flight operations have been canceled, while the costs for air crew remain,” Norwegian said in an April 20 statement. “Unfortunately, despite the measures that the company has already taken to reduce costs, the board of these companies are left with no choice but to apply for bankruptcy.”
“The impact the coronavirus has had on the airline industry is unprecedented. We have done everything we can to avoid making this last-resort decision and we have asked for access to government support in both Sweden and Denmark,” Norwegian CEO Jacob Schram said. “We are working around the clock to get through this crisis and to return as a stronger Norwegian with the goal of bringing as many colleagues back in the air as possible.”
The LCC said that while an efficient furlough scheme was available in Norway under which the government pays for all salary-related costs during the furlough period, the equivalent did not exist in Swedish or Danish schemes. It said that partly because of “the lack of significant financial support from the Swedish and Danish governments, we are left with no choice.”
The companies filing for bankruptcy are Norwegian Pilot Services Sweden AB, Norwegian Pilot Services Denmark ApS, Norwegian Cabin Services Denmark ApS and Norwegian Air Resources Denmark LH ApS. Bankruptcy courts and bankruptcy trustees in the two countries are now handling the bankruptcy filing procedures.
The airline also said that due to force majeure it had notified OSM Aviation that it had canceled crew provision agreements with several of its jointly owned OSM Aviation subsidiaries, affecting 1,571 pilots and 3,134 cabin crew based in Finland, Spain, Sweden, the UK and the U.S. About 700 pilots and 1,300 cabin crew based in France and Italy and Norway are not affected.
Norwegian, which prior to the pandemic was already facing financial pressures after a period of rapid expansion left it overstretched, is seeking shareholder approval for plans to convert debt to equity to meet the requirements of a Norwegian state guarantee program that would unlock NOK3 billion ($291 million) in funding.
The airline has already received an initial NOK300 million but must meet a requirement of an equity ratio at the end of the last quarterly period of at least 8%, meaning it needs to improve its balance sheet.