Already in trouble before the Covid-19 burst, Norwegian is on the brink. The low-cost company announced on Monday the bankruptcy of its Swedish and Danish subsidiaries.
In total some 4,700 employees are affected. They are based in Sweden, Spain, Great Britain, Finland or the United States. Norwegian employees based in Norway, France and Italy, 2,000 in total, are not affected for the moment because they are covered by partial unemployment, a device which does not exist in Denmark and Sweden.
“We have done everything possible to avoid this decision and have asked for the support of the Swedish and Danish governments” CEO Jacob Schram said in a statement.
After a decade of very strong growth, the low-cost company had become the first non-American carrier serving New York and several other large American cities. But in doing so, it has accumulated a considerable debt of almost $ 8 billion.
This debt had already caused its share price to collapse before the crisis. The last weeks without activity, and therefore without income, have made his situation untenable. The company is now trying to get a debt-to-equity conversion. A general meeting of shareholders is scheduled on this subject on May 4.
Norwegian’s plight is no doubt just the beginning of a thunderstorm that is shaking the entire industry. American companies have obtained 25 billion dollars in aid from Washington. In Europe, all are in discussions with their governments to obtain aid which could come too late, especially for the smallest. Virgin Atlantic warned on Monday that it would only survive if the British government came to its aid.
For consumers, and in particular transatlantic travelers, the consequence will probably be an increase in ticket prices when the borders are reopened. “Between the companies that have disappeared and the others that will decrease the number of flights, capacity will necessarily decrease, predicts a company executive. The fierce competition of recent years which has driven prices down is unlikely to be the same for a long time ”.
