Norwegian burning cash!

[babemagnet]

How long will Norwegian last with all this cash being burned!?
2 BN € in debt now!
Anybody?

[Piltdown Man]

So providing the punters keep turning up in droves but also keep increasing in numbers and there are no nasty fuel price hikes and rinky-dink employment contracts continue to be allowed in Europe then of course nothing will go wrong.

[skyloone]

I’m not an accountant but isn’t most of Ryanair’s debt held off the balance sheet... held by leasing companies but Ryanair need to provide the cash to keep the plates all spinning... I’m assuming many airlines are the same? Interrupt that cash flow and it gets hugely expensive.... for example when you can’t fly ac due Crew shortages!

[Boeing 7E7]

How long will Norwegian last with all this cash being burned!?
2 BN € in debt now!
Anybody?

This is how businesses grow. It's called investment and debt is the vehicle of this growth. Servicing debt, particularly at the moment due to the low interest rate environment that we have,is very cheap (even if rates increase from here) so while a 2BN euro debt may sound high to those without business expertise, it is almost 'free' money.

The banks that have lent Norwegian the capital will have studied Norwegian's business case very closely, to ensure that they receive return of both the capital and interest on it. It will not have been easy to secure these loans but the fact that they have, should demonstrate that Norwegian is pursuing a strategy that is likely to produce good results and has the backing of the financial lenders.

[Thad Jarvis]

While it many not be a major drama while it's being routinely serviced, that is still a massive debt ratio in anyone's book. I have seen more than one aviation analyst struggle with the logic. In this game, big players fail and :mad: does happen so it's not something to be ignored but at least nobody's panicking at the minute.

[Capot]

If Norwegian gets caught by an unforeseen, unplanned for and therefore catastrophic rise in interest rates on their large debt, or indeed a rise (connected?) in the value of the repayment currency vs their primary income currency, they wouldn't be the first expansionist low-cost airline to be brought down in flames by that, just when it was all going so well.

Would they, Sir Freddie?

[TowerDog]

Ask Tower Air as well.
They were expanding and doing really well, until something changed and they were not.:sad:

[Boeing 7E7]

If Norwegian gets caught by an unforeseen, unplanned for and therefore catastrophic rise in interest rates on their large debt, or indeed a rise (connected?) in the value of the repayment currency vs their primary income currency, they wouldn't be the first expansionist low-cost airline to be brought down in flames by that, just when it was all going so well.

Would they, Sir Freddie?

By that logic, maybe we should just stay at home and do nothing. Just in case something (bad) happens!

The demise of Laker had more to do with BA on this side of the Atlantic and the large airlines in the US on that side of the Atlantic conspiring to dump seat prices on the routes that Laker competed on. Their express aim was to drive Laker out of business. You remember those massive US airlines: Pan Am and TWA - Oh wait, they went bust too!

[EIFFS]

So far the Gods have by and large been kind to Bjørn and his airline.

Norwegian could very easily address its cost by stopping expansion, they will have added well over 2000 staff to the payroll this year alone.

Itis well known that long haul is now profitable in its own right especially out of LGW where it's short haul operation is struggling with scale against easyJet and access to slots.

For those not familiar with the scale of their operation at LGW the every growing list of LH destinations is impressive and frequency is increasing with LA due to go doubly daily soon building on the success of double daily JFK

So long as they can service the debt, then I don't see any major obstacles that they can't over come, they are currently ramping up the number of pilots in Scandinavia with internal bidding opening today for a 120 positions between Feb & June 2017.

What they must avoid is a re run of this years wet lease, from the recruitment I'm seeing going into the winter I think they will avoid much of this years problems.

2018 will be an interesting year for the industry and it will favour the strong for sure with interest rates on the rise maybe a war in Korea ?

[Rated De]

I’m not an accountant but isn’t most of Ryanair’s debt held off the balance sheet... held by leasing companies but Ryanair need to provide the cash to keep the plates all spinning... I’m assuming many airlines are the same? Interrupt that cash flow and it gets hugely expensive.... for example when you can’t fly ac due Crew shortages!

Correct.
Low Fare Airlines and even the established airlines hold aircraft off balance sheet. This changes ratios of debt and the like, but the money is still required to be paid.

Low Fare Airlines are not really low cost, that is code for low wage. In not owning an asset a low fare airline has less depreciation and thus more profit.

The problem for low fare airlines and indeed airlines like's Australia's Qantas subsidiary Jetstar is that accounting rules are a little opaque and that is going to change.

IFRS 16 will address the way that airlines can have an operating lease (where the aircraft is rented for a fixed term, a monthly payment made and at the end of the term handed back to the lessor) but somehow record the value of the asset, implying some ownership. Trucking and many transport companies have the same problem.

In assessing an airline it is often of use to look also at 'free' cash flow (net) to see whether the business generates enough cash to conduct operations and there are a few conventions as to how long companies ought burn cash, Oil (shale) producing companies are really interesting when looking at cash flow.

[skyloone]

I hear one of the big beast on the block has ac off balance sheet for depreciation purposes but somehow miraculously shifts the depreciated asset onto the books and bags a profit on the sale of the old frame.... open to correction. Is this common too?

[RAT 5]

Is it the possible that an airline can make a huge multi-frame order and secure a knock-down price; then take delivery and sell the a/c to subsidiary leasing company at full book and thus show an instant profit, and then lease the airframe back on a 7-10 year program.
Or purchase the airframe at a knockdown price; show it at full book value as an asset thus realising an instant paper profit; and then amortise it over 20 years on the books. Each year the 'asset' is revalued slightly less, but still above the original purchase price, so the after 7-10 years it is valued at the original purchase price and sold to the 2nd hand market for that price having cost very little.

Just a thought as there seem to be some creative constructions out there, and not just in aviation.

A question: how can a capital cost item not be included in a balance sheet? Is it an asset or not? But then again, if the airline doesn't own the airframe it's not an asset, but is rented. However, who bought it originally?
I was told at the time that BAF, as was, didn't own anything: even the office furniture was leased from outside BAF's accounts. Every engine & airframe was owned by an outside concern.

I hope some of our creative accountants can enlighten us.

[WindSheer]

Skyloone.........absolute comedy gold!

[linmar]

I'm no creative accountant but I've had a glace at a few balance sheets and result reports. What is possible (at least in my part of Europe) is that an airline may put leased aircraft in the balance sheet as an asset whilst at the same time, the lease agreement would go as a debt. Meaning, the balance sheet would look a lot bigger than it would've if you had not chose to do so. Assuming that the asset=debt this means equity ratio would fall. However, if the asset would be valued higher than the lease agreement, or dept, the equity would increase. This would especially be true should the depreciation of the asset be lower than the amortization of the lease/debt. It would introduce a cash flow problem however, but it would be possible to add on further debt to sort the cash flow. I've seen this happen in airlines where the owners interests of having and airline is blinding to the actual airline's possibility to generate any profit.

As for Norwegian, owned aircraft are considered an asset whilst leased aircraft are not. The depreciation plan is quite interesting as the residual value seem quite high whilst the depreciation plan is longer than most. From the FY16 report the residual value of the aircraft is 7 bn NOK whilst acquisition value is less than 27 (the report doesn't give exact acquisition value of the aircraft as a/c parts and installations made on leased aircraft are all put together). The depreciation plan is 25 years.

Having a look at the Q2 report it can be noted that Norwegian signed a LOI (realized during September) to sell 11 B738 and than lease them back immediately. This was taken into account in the balance sheet and results for Q2. The value of these aircraft in the balance sheet before the LOI was signed was 2,475 MNOK. However, the LOI only generated 1,899 MNOK, resulting in a loss of 576 MNOK for the 11 aircraft. Most of these aircraft were delivered in 2010. Of course, in Q3 the cash flow will show a significant increase.

My conclusion being that aircraft assets in Norwegian might not be worth the amount they hold in the balance sheet, meaning the company's equity is in reality lower than what is shown in the books. The aircraft value does not correspond to market value. Seven years after delivery, market value of these aircraft seem to be only ~75% of book value in the balance sheet.

How airlines should depreciate aircraft seem to be a topic for discussion among experts. A company with a new fleet holding on to their aircraft will in reality not be affected if the depreciation plan is flaw short term, but long term the effects will of course catch up. In the case of Norwegian, a 576 MNOK loss was not a problem given that NOFI shares were added to the balance sheet (and results) at fair value at the same time, adding 2 bn NOK to the balance sheet, but obviously not as much cash.

[Hibernia]

By that logic, maybe we should just stay at home and do nothing. Just in case something (bad) happens!

The demise of Laker had more to do with BA on this side of the Atlantic and the large airlines in the US on that side of the Atlantic conspiring to dump seat prices on the routes that Laker competed on. Their express aim was to drive Laker out of business. You remember those massive US airlines: Pan Am and TWA - Oh wait, they went bust too!

It's funny to read all the Norpilots reassuring themselves that everything is ok. You seem to think they have a tracker loan, or fixed rate one? Nope. As the American market rises, one of two things will happen. Either the Trumpian aneurism in the market bursts, or interest rates rise. Let's all hope for Norwegian's sake, the former happens first. Lockerbie did for PanAm and TWA800 did for "try walking across". It won't take a crash to finish Norwegian. Bjørn Kjos will see to that.

[cactusbusdrvr]

Ask Tower Air as well.
They were expanding and doing really well, until something changed and they were not.:sad:

I think about that every time I taxi out to 13R at JFK. I remember Tower Air. It's really hard to make money with just 747s. That plane almost sunk us at America West, and we only had 3 of them.

[cactusbusdrvr]

By that logic, maybe we should just stay at home and do nothing. Just in case something (bad) happens!

The demise of Laker had more to do with BA on this side of the Atlantic and the large airlines in the US on that side of the Atlantic conspiring to dump seat prices on the routes that Laker competed on. Their express aim was to drive Laker out of business. You remember those massive US airlines: Pan Am and TWA - Oh wait, they went bust too!

I don't doubt that there was a conspiracy to dump seats to drive Laker out. But TWA and Pan Am actually did survive in one aspect, those routes went to Delta, American and United thorough acquisition of assets.

[Boeing 7E7]

It's funny to read all the Norpilots reassuring themselves that everything is ok. You seem to think they have a tracker loan, or fixed rate one? Nope. As the American market rises, one of two things will happen. Either the Trumpian aneurism in the market bursts, or interest rates rise. Let's all hope for Norwegian's sake, the former happens first. Lockerbie did for PanAm and TWA800 did for "try walking across". It won't take a crash to finish Norwegian. Bjørn Kjos will see to that.

Such doom and gloom! There are many airlines that expanded, gained market share and survived to tell the tale. Ryanair and easyJet to name just two. I remember the same things were said when these two airlines embarked on their aggressive expansion plans 15 years ago. But the strategy worked. In that time we had 9/11, SARS and a Financial Crisis which all took their toll on the economies of the world. Granted, nothing is guaranteed. And they survived. Your tales of doom and gloom are rehashed arguments that were directed at what have now become the giants of the industry!

[Smooth Airperator]

Norwegian are doing long haul in a way that is geared for the future. It is quite a substantial product as far as millennials are concerned and that's why it will work going forward (to serve the future population of Europe, not us expired relics from the past). Millennials are not looking for a silver service and fine cuisine. All they're interested in is flying in comfort in a clean cabin with FREE Wi-Fi at a cost that means they might be able to pay the rent at the end of the month. Despite NAS's lack of advertising, the 787 is marketed brilliantly in this regard. Easy and Ryanair expanded their operating models with aircraft types that were already 2 decades old. All they had going for them was cheap cost. Here we have much more. As the route network grows we will all accept this is the ugly future we didn't want because by then a few of the long haul legacy carriers will have bit the dust too. Low cost long haul is here to stay and these guys are pioneers in that regard whilst Ryanair has been asleep.

[macdo]

I think the sociological comment by smoothoperator is correct, but assumes a continuation of the largely benign world economic environment of low interest and low oil costs.
Unexpected world events are largely what will trip these new LH loco's up.

[stoked365]

Heard of Laker Airways? Or too young?

[Smooth Airperator]

Picked up a book about the subject from the library when I was about 10, does that count?

I understand the parallels (albeit in very basic terms) but we do live in an age of super complex financing deals that have one goal in mind...to mitigate direct financial risk. Combine that with group structures and offshore entities (all things that didn't exist back in the 1970s), does anyone here truly understand Norwegian's financial status considering they own 20% of a bank?

[QOTS]

Such doom and gloom! There are many airlines that expanded, gained market share and survived to tell the tale. Ryanair and easyJet to name just two. I remember the same things were said when these two airlines embarked on their aggressive expansion plans 15 years ago. But the strategy worked. In that time we had 9/11, SARS and a Financial Crisis which all took their toll on the economies of the world. Granted, nothing is guaranteed. And they survived. Your tales of doom and gloom are rehashed arguments that were directed at what have now become the giants of the industry!
I really admire your enthusiasm 7e7 but comparing Norwegian to RYR and EZY is an invalid comparison. For one thing, both have expanded their business focusing on core competences and the business model is largely unchanged. The Norwegian biz model changes by the hour, the latest manifestation of which is this Argentinian fiasco.

Consult business studies 101 to learn that such radical change of business model is a high risk, usually forced strategy, because the pooch has been screwed elsewhere. I really wish Norwegian success, in all its weirdo manifestations, but to paraphrase the FT..."the fact that MOL hasn't launched his attempt at low cost long haul yet is proof enough that it can't as yet be profitably done." Nuf said, but consider this. RYR et all will often charge for a 40 minute ride in an owned B738/A319 what Norwegian charge for a ten hour ride in a brand new B787. Hard to imagine that boding well for NOS. The bubble will soon burst, Wells Fargo bank is about to go bang and Warren Buffet is cashed up and waiting. Buy on the cannon, sell on the trumpet. Good luck though.

[Smooth Airperator]

No I mean the poor buggers who can't get onto the housing ladder because the average cost of a home is now £250k compared to the £50k it was when you were perhaps younger? I mean those who are earning less than what you did when you were perhaps younger? (in real terms). I mean the ones who have to service a massive pension black hole. I mean the ones who have to pay through their noses to correct the mistakes of criminal bankers and their lackeys in government. I mean the ones who have become conditioned to accept that there's no point in being loyal because the politicians and establishment figures will screw you over in any case. Those Millennials. Yes.

[hobbit1983]

Don't forget also having to deal with the effects of global warming, the oncoming antibiotic apocalypse, and the rise of nazis (again). Cheers, older generations!

But no, we're all lazy and self entitled :ok:

[Boeing 7E7]

As one non millennial to another. From the replies above, I think you've been right royally told!

[hobbit1983]

Well, if you're past a certain age, you won't have to worry about it....

[thetimesreader84]

Yes it's everyone else's fault

Ok, so how do we fix it? We’re already working all hours on crap contracts for employers that would drop us as soon as we become a liability, not earning enough to save for a mortgage (rendering your point about 15% interest rates a bit academic), with a massive pension debt to pay for the previous generation, and slim to nil chance of ever enjoying our twilight years.

Any suggestions?

[Flyit Pointit Sortit]

Any suggestions?

Yes - Start a new thread!

[FlipFlapFlop]

What a load of bitter individuals on here. All the past generations fault. Well of course everything is caused by something in the past. I just cannot wait to see what a remarkable success the next generation will make. Laughing my tits off already.

[Speedbrakes Up]

Don't worry employeers like Rishworth and OSM ( I'd say Norwegian but they are not an employer of pilots) are helping clear the pension back log, by either not offering a pension (Rishworth) or one of the poorest pensions in today's industry (OSM).

Also you just need to speak to the pilots down route to hear many a tragic story of pilots going sick down route, getting no assistance from the company, and left fighting with the insurance company as to who is to pay what....
Then an income protection scheme that's not paid out to a single pilot, who has tried to cliam on it, due to legitimate long term sickness.

[EIFFS]

Norwegian today reported its third quarter results for 2017. The net result was 1 billion NOK, an improvement of 4 percent compared to the same quarter previous year. The load factor increased to 92 percent. The passenger development has been positive in all of Norwegian’s key markets, with a significant growth in the U.S. and Spain.

Well this won’t please the anti Norwegian brigade, but still winter is ahead and controlling loses in winter is key to making a full year profit.

[PA28161]

There are countless examples of companies who run up extreme debt during expansion. My own had a comparable debt with less than 1/3 of the aircraft Norwegian has. It's taking a huge chunk of this debt every year right now.

What did RYR buy 150 737s with when it expanded after 9/11? Aviation is one of those industries where the value of the primary asset (aircraft) is often many times the total annual revenue. Debt is expected and welcomed by banks that are happy to loan the amounts. If they're happy to do so, what cause for concern do we have? The repayment plan is what matters.

RYRis a very highly geared company with a gearing ratio I would guess very nearly 100%

[Sciolistes]

Well this won’t please the anti Norwegian brigade, but still winter is ahead and controlling loses in winter is key to making a full year profit.
There is a person who understands European aviation :ok:

[Nil further]

RYR is one of the best capitalised airlines that has ever existed. EZY is another. Their respective cash positions and strong balance sheets make them all but impregnable to weaker competitors.

Put simply, in EZY case. It could fly around for at least three months with no income whatsoever and it wouldn’t even blink.

It’s the legacies that have the gearing issues.

You don’t need to “imagine” their gearing A28161 look at their freely available accounts.

[babemagnet]

https://www.google.nl/amp/www.telegraph.co.uk/travel/news/norwegian-axe-spain-routes-from-birmingham/amp/

[andymiff]

[QUOTE=

Also you just need to speak to the pilots down route to hear many a tragic story of pilots going sick down route, getting no assistance from the company, and left fighting with the insurance company as to who is to pay what....
Then an income protection scheme that's not paid out to a single pilot, who has tried to cliam on it, due to legitimate long term sickness.[/QUOTE]

Yep, the policy provided does not cover you for the US rip off medical charges. I'm pretty sure a "UK" company has a duty of care for it's employees when on company business ?

[Smooth Airperator]

Do you want to fly for an airline run by greedy ***** that is very cash rich...

Or one run by people who care about employee sustainability but is cash poor?

Quality of life/renumeration not knowing if you'll still have a job in 5 years Vs. a job for life as a slave whilst being kicked in the teeth?

Answers on a postcard.

[racedo]

Such doom and gloom! There are many airlines that expanded, gained market share and survived to tell the tale. Ryanair and easyJet to name just two. I remember the same things were said when these two airlines embarked on their aggressive expansion plans 15 years ago. But the strategy worked. In that time we had 9/11, SARS and a Financial Crisis which all took their toll on the economies of the world. Granted, nothing is guaranteed. And they survived. Your tales of doom and gloom are rehashed arguments that were directed at what have now become the giants of the industry!

FR and U2 utilised those assets for circa 16-18 hrs a day with multiple flights........ now Norwegian may be getting good revenue for LH but is it really financially better than flying 8 sectors a day ?

FR and U2 are are 90% capacity so 8 a day puts you circa 1500 pax plus all their spend v 2 a day of circa 600 with significantly higher costs.

1 aircaft goes tech for FR and U2 they can cope, going tech in LAX is kind of harder.

[racedo]

Picked up a book about the subject from the library when I was about 10, does that count?

I understand the parallels (albeit in very basic terms) but we do live in an age of super complex financing deals that have one goal in mind...to mitigate direct financial risk. Combine that with group structures and offshore entities (all things that didn't exist back in the 1970s), does anyone here truly understand Norwegian's financial status considering they own 20% of a bank?

Yeah and how is Lehman Brothers doing with those NINJA Mortgages.

Bottom line in any business is cash is king, run out of it and you are dead.

Supercomplex financial deals don't mitigate risk to the borrower, only to the lender.

[racedo]

but to paraphrase the FT..."the fact that MOL hasn't launched his attempt at low cost long haul yet is proof enough that it can't as yet be profitably done." Nuf said, but consider this. RYR et all will often charge for a 40 minute ride in an owned B738/A319 what Norwegian charge for a ten hour ride in a brand new B787. .

And do this 7-8 times per day which brings in revenue every hour of every day.

[racedo]

Do you want to fly for an airline run by greedy ***** that is very cash rich...

Or one run by people who care about employee sustainability but is cash poor?

Quality of life/renumeration not knowing if you'll still have a job in 5 years Vs. a job for life as a slave whilst being kicked in the teeth?

Answers on a postcard.

Most Pilots want to be paid at the end of every month................. cash poor means when a crisis happens there isn't any cash to pay you, cash rich means when there is a crisis the company can ride it out for a while and still pay people.

No yet recorded case of a company going bust with a hundred million in cash in the bank.

[racedo]

There are countless examples of companies who run up extreme debt during expansion. My own had a comparable debt with less than 1/3 of the aircraft Norwegian has. It's taking a huge chunk of this debt every year right now.

What did RYR buy 150 737s with when it expanded after 9/11? Aviation is one of those industries where the value of the primary asset (aircraft) is often many times the total annual revenue. Debt is expected and welcomed by banks that are happy to loan the amounts. If they're happy to do so, what cause for concern do we have? The repayment plan is what matters.

EXIM funded this with interest rates that were tiny on discounts of 50-60% minimum off price and a currency that rapidly swung in FRs favour v US$.

Everybody else was shrinking back but Ryanair bet the farm and won.

US Govt happy, Boeing happy and the workers on production lines even happier as their jobs assurred.

[DutchExpat]

Not going so bad after all it seems

https://www.google.es/amp/www.marketwatch.com/amp/story/guid/AD5EF9E0-B7D7-11E7-A08D-7B9011787654

[racedo]

It is their "opinion" based on the data they have collected.

Doesn't mean it is wrong or right as they will not have access to internal information.

A short sharp shock could kill demand for 3-6 months....... low margins mean less chance of surviving.
Post 9/11 everything changed and everybody claiming they would never fly again.
In Europe Ryanair went to 1p fares and amazingly all those who would never fly again decided a few days in Barcelona (via Girona) was ok........ Yup they saved the company and in reality quite a lot of other airlines and tourist industries as well, it was about perception of being safe.
But a similar incident now may be more difficult because of social media.

[racedo]

Not going so bad after all it seems

https://www.google.es/amp/www.marketwatch.com/amp/story/guid/AD5EF9E0-B7D7-11E7-A08D-7B9011787654

It is a "could go either way".

Companys need to ensure they hold onto condidence of the lenders, soon as they get a sniff that all may not be well then they work on basis their cash is less secure.

We will know within 3 years................... if they get through that time period without a severe financial shock then decent odds that they will survive.

[Sciolistes]

Do you want to fly for an airline run by greedy ***** that is very cash rich...

Or one run by people who care about employee sustainability but is cash poor?


Work for easyJet. Hard work, there is no doubt, but at least it is a great living, treated very well and they make as much money as FR per aircraft...

A few lessons there for their competitors methinks.

[RobsonCanolo]

Saw they owe 55 800's so they still have the option to sell and leaseback frames to boost the coffin if they cannot cover expenses by operating cashflows or issuing more debt. Guess it's more expensive per mile to keep the plane in the air afterwards... Also saw they consider issuing a new bond to rollover existing one due in November, so if it's the same type broadly say soemthing about the health by looking at the coupon rate...

[EIFFS]

Racedo

Not quite as straight forward as that, 7/8 sectors a day are closer to 6 roatations being the norm for many, few Jet2 crews do more than out and back, then you have have to look at the short duration of the flight, spend on board tends to be a lot less than say a an OSL to LPA, few book hold luggage on short sectors, then ask about airport charges for each landing and take off?

A 737 will burn close to 5000kgs per hour during a climb compared with a MAX in the cruise at 2100kg per hour on a 7 hour flight, conversely crew cost for accommodation will be higher but either way short haul or long haul Norwegian will squeeze 80 hours a month out of the crew.

I think it’s way to early to say that the long haul on the 737 will or won’t work, the 787 is another matter altogether, I’ve flown on a good number of routes and they are very good load factors, premium is often full but they do auction off the spare seats in the last week, I know of people who’ve bid £150 and still not got them, on the early flights out to Denver & Seattle 2 weeks out there were only a couple of premium seats booked, on the day there were only two seats unsold, so someone is working hard at yield management.

The 787-9 is a very different beast to the 788 way better payload and huge amounts of belly cargo being shipped.

The early stages of the 737 long haul operation were limited to max 155 seats whilst awaiting ETOPS & the MAX that figure is now increased to around 175 I understand

[racedo]

All good points but we not talking LH on a 737, we are talking about whether NAS is burning money. FR and U2 don't do LH.

FR and U2 can survive a shock to aviaton market because they can drop fares and just get cash in, they may be unprofitable for a while but their reserves will cover it.

NAS not in same position because its cash position is tight and losses have to be funded from their cash.

At the moment based on publicly info available they probably 50-50 to be around in 3 years time, odds work in their favour provided economic conditions stay favourable and they get through next 12 months.

An Icelandic volcano scenario like 2010 with a huge jump in Oil prices I would revise that.

[Speedbrakes Up]

Let's see how Brexit works out, for the entire industry let alone Norwegian.

[pax britanica]

Actually Racedo, there is one case of a company going bankrupt-at least US CH 11 style with a large fortune in cash.

That was Worldom back in 1991/2 who made 'inappropriate' accounting entries for some very big ticket items and got busted for it.

Then of course there was the issue that if that was covered up what else might be. So Wcom filed Ch11 so that over time their accounts would be sanitised and believable but they had mega millions in the bank all through the process and all staff and creditors got paid every month like nothing had happened.

Back on track with this thread I could envisage FR going down that kind of route as they are not very 'corporate in their behavior but EZ i would imagine are very well run in that area ', They got a decent deal on new slots and aircraft from the Air Berlin debacle and have the mney on hand to pay for it too.

[racedo]

Worldcom was 2002/3 and it was wholsesale fraud by Directors.

Most employees were dismissed and not paid and US Govt bailed it out with a no bid Iraq contract.

C11 is a con as allows companys run away from debts and start over.............. ask any Pilots who have gone through it with airlines.


Back on track with this thread I could envisage FR going down that kind of route as they are not very 'corporate in their behavior but EZ i would imagine are very well run in that area ', They got a decent deal on new slots and aircraft from the Air Berlin debacle and have the mney on hand to pay for it too.

Think you letting personal opinion get in way of reality.

Define corporate............... all companys are goverened by Stock Exchanges / SEC / Company law.

If you have specific clear instances where FR is not following these then pleas publish otherwise you are making an unsubstantiated personal claim.
Making a claim that someone is not corporate while producing no evidence does you no favours.

They paid €40 million for slots, no aircraft paid for and nope they don't have money on hand just to hand over to Airbus, nor would I expect them to. They will use financing to do so.

[Direct Bondi]

Laurel and Hardy, Abbott and Costello are famous double acts. Norwegian has its own double act with Kjos and Kise. The Norway media reported almost daily last week on Norwegian’s precarious financial situation under the leadership of this not so dynamic duo:

“So far in 2018, the price has fallen by 38.7%...” - Link:

https://e24.no/boers-og-finans/norwegian-air-shuttle/kjos-kise-amp-co-har-tapt-en-milliard-paa-norwegian-paa-15-maaneder/24292066

“Norwegian balances on a knife edge…..” - Link:

https://www.dagbladet.no/nyheter/norwegian-balanserer-pa-en-knivsegg-tross-nye-1300-millioner-inne/69637038

“This is really bad. Well, Norwegian will probably get through the summer but that’s about it! According to Karl Johan Molnes, analyst of Norne Securities” – Link:

https://www.dn.no/nyheter/2018/03/20/1940/Luftfart/-norwegian-er-et-bunnlost-sluk

“Now the company will also invest in Argentina, a market where no one earns money” - Link:

https://e24.no/boers-og-finans/norwegian-air-shuttle/analysesjef-norwegian-er-et-bunnloest-sluk/24290923

It’s too soon to predict any crying in Argentina, but with Ola Supermouse at the helm and his unique style of “just culture” accentuated by bold and underlined email communication, get the tissues ready.

boohoo.

[OMDB30R]

Rather than post repetitive “obsessive” links like some! I thought to post other links that isn’t all doom and gloom as one would like people to think.


Norwegian Air plans to fly between Canada and Europe this summer - Business - CBC News (http://www.cbc.ca/news/business/norwegian-air-canada-flights-1.4572198)

https://www.telegraph.co.uk/travel/news/norwegian-new-routes-from-uk/

[Snapper5]

Great , and if it does do well and “wins” against other carriers everyone can enjoy NAS rubbish T&Cs how exciting I can’t wait !

[Speedbrakes Up]

Nothing wrong with the post above from Bondi.

It is Simply recent links from media sites in Norway, voicing current issues with Norwegian.

The links are fact, nothing wrong with that, it gives all crew thinking of moving to Norwegian an informed view point.
As do the posative links showing potential expansion.

But is it not worrying that with Norwegian as OMDB30R says, all the links seem to be doom and gloom and keep arising every year, don't you see a trend....

[macdo]

In the aviation business, all you need is a little recession to see who is in the sea without a swimsuit on!

[RexBanner]

I’d say it’s more than a little concerning that, despite the most benign and in fact advantageous conditions for airlines across the globe, Norwegian are losing bucket loads of money and investors. Surely that speaks volumes. Low cost long haul just doesn’t work, I’m hardly a soothsayer in predicting this will end only one way. It has been tried again and again and again. The money to be made in long haul is in the premium cabins, not with the plebs down the back paying their couple of hundred quid. It hasn’t suddenly become viable just because the 787 burns a bit less fuel and anyone betting their company on that (Kjos) is a fool.

[matt283]

I’d say it’s more than a little concerning that, despite the most benign and in fact advantageous conditions for airlines across the globe, Norwegian are losing bucket loads of money and investors. Surely that speaks volumes. Low cost long haul just doesn’t work, I’m hardly a soothsayer in predicting this will end only one way. It has been tried again and again and again. The money to be made in long haul is in the premium cabins, not with the plebs down the back paying their couple of hundred quid. It hasn’t suddenly become viable just because the 787 burns a bit less fuel and anyone betting their company on that (Kjos) is a fool.

This is why norwegian increased premium seats in 787 ;)

[RexBanner]

With respect, that’s going to make naff all difference. Norwegian’s “premium” product is premium economy at best and won’t generate anywhere near the revenues of the business and first cabins of the big boys. Allied to that Norwegian don’t have the frequency that business travellers crave nor the redundancy or resilience of the operation to keep those business pax feeling secure. They’re a busted flush and people are now starting to find that out.

[Meester proach]

With respect, that’s going to make naff all difference. Norwegian’s “premium” product is premium economy at best and won’t generate anywhere near the revenues of the business and first cabins of the big boys. Allied to that Norwegian don’t have the frequency that business travellers crave nor the redundancy or resilience of the operation to keep those business pax feeling secure. They’re a busted flush and people are now starting to find that out.


Which of course is why BA are copying all the routes out of LGW and desperately squeezing more punters in the BACK of their antiques...

[RexBanner]

They’re doing it to quicken the process of Norwegian’s demise, nothing more nothing less. If there’s anything that BA management are it’s greedy, even if Norwegian are taking one single penny off their profits they’ll do anything to claw that back, on that you can bet your bottom dollar. It’s telling to remember what has happened to the previous heralded low cost carriers BA used the same tactics against.

Of course afterwards they can continue to get more revenue from the Y Cabin by having more seats. And they may be antiques but at least BA actually own them, which is a position Norwegian are unlikely to ever be in. How’s their balance sheet looking again?

[Meester proach]

Well let’s hope there is no demise eh ?

There’s a lot of good people working there, don’t you forget.

[RexBanner]

To clarify I’m not wishing to see anyone out of a job, not for one minute. I’ve been through it before myself and it’s not pleasant. History does tell us though that airlines will come and go. It’s the unfortunate nature of our industry and profession. I’m just as interested as anyone to see how it does turn out for Norwegian, it’d be an absolute game changer if they could get it to work. However my gut feeling is the model just can’t fit the environment of long haul.

High aircraft utilisation, high turnover of passengers (potentially up to eight different sets of passengers to sell stuff to per aircraft each day), no need to nightstop crew etc these are all fundamental staples of low cost airlines on short haul that simply cannot be replicated on Long Haul. I think it speaks volumes that Ryanair and easyJet have never attempted it and still have no interest after seeing Norwegian’s initial forays.

The premium cabin heavily subsidises the economy cabin, that’s why it raises eyebrows to attempt to fill a wide body jet with the lowest yielding passengers there are, incidentally the ones who will be the first to stop flying in any downturn. The proof will be in the pudding and who knows, I could be left with egg on my face.

[Meester proach]

In actual fact O’Leary wanted some slots for 78s I’m told .

The premium cabin is getting bigger by 24 seats so I guess it’s a success

[macdo]

Prem Eco is a good product and popular with the pax, but according to my employer doesn't add much to the bottom line as the price premium is quite low compared to the loss of seats. But, it looks good in the marketing. Don't know about Norwegian, but there is a lot of 'in the checkin queue' sales as upgrades, which is a healthy uplift to an economy ticket. If it was such a good thing, there'd be an airline out there operating a Eco Plus cabins.

[WHBM]

The money to be made in long haul is in the premium cabins, not with the plebs down the back paying their couple of hundred quid.
Actually the money to be made in long haul is travel in the premium cabins, PLUS the contribution of those back in economy, with a significant proportion of them also travelling on business and not having paid bottom bucket fares, PLUS substantial belly freight loads in both directions, PLUS a good frequent traveller base to ensure all year round and continuing revenue, PLUS a balanced mixture of O&D and connecting pax rather than just all one or just all the other, PLUS service into a significant hub for at least one end of the route.

Then you might get away with it after a few years of route development.

[Thad Jarvis]

Maxjet, Eos, Slverjet were all ‘premium econ’ / low end biz class operations. It’s pretty safe to say that longetivity is not a feature of that model.

[Jumbo2]

Well let’s hope there is no demise eh ?

There’s a lot of good people working there, don’t you forget.

I appreciate there are a lot of good people working there, as in every airline.

But wouldn’t the demise of Norwegian be a good thing for the overall T&C’s in airline industry both in Europe and America?

[Gulf Julliet Papa]

I appreciate there are a lot of good people working there, as in every airline.

But wouldn’t the demise of Norwegian be a good thing for the overall T&C’s in airline industry both in Europe and America?

Although many on here seem to believe Norwegians T&Cs are the worst in Europe, they are definitely not. It won't make any difference to worldwide T&Cs, or even in Europe, as there many many many more offering worse and will continue to do so...

[HZ123]

Nice idea J2 but T and C's will continue to get worst,you only have to look at diminishing staff numbers at BA, the Mixed Fleet Cabin crew, to see the downward spiral in pay and conditions. BA are even in the process of outsourcing Load control and have issued redundancy notices to 700 check-in staff.

If there is an upside to this I presume the Flight Crews may still have some level of power as witnessed by Ryanair last year!

[Enzo999]

I didn’t realalise anyone actually worked for Norwegian! I am sure if the worse happens OSM and Rishworth will keep everyone employed.

[MCDU2]

MOL is offering 152k direct entry LHS and a type rating less than 6k and base choice. Don't worry about the Norwegian pilots for to long. Its a sellers market at the moment.

[chocolateracer]

I really hate to say this but I give them 12 months. Maximum.

[HundredPercentPlease]

But wouldn’t the demise of Norwegian be a good thing for the overall T&C’s in airline industry both in Europe and America?

If an airline goes tits-up, then the supply of pilots suddenly increases. The price they can charge then goes down.

The price of pilots is high at the moment because there are not enough of them.

[macdo]

Actually the money to be made in long haul is travel in the premium cabins, PLUS the contribution of those back in economy, with a significant proportion of them also travelling on business and not having paid bottom bucket fares, PLUS substantial belly freight loads in both directions, PLUS a good frequent traveller base to ensure all year round and continuing revenue, PLUS a balanced mixture of O&D and connecting pax rather than just all one or just all the other, PLUS service into a significant hub for at least one end of the route.

Then you might get away with it after a few years of route development.
You are quite right, historically speaking. But shoving 50 prem eco seats in the front of a 78/330 and charging a £200 uplift for the pax is not the same business model as the uplift to income from proper C class passengers who may well be paying a £1000 extra for the privilege. If you can fill 1st and business on traditional ticket prices, sure you will make a profit, with Economy just about breaking even. The problem is that the world has changed and you can no longer guarantee full C class cabins as the corporate clients get ever meaner with their budgets. I'm absolutely convinced that Prem Econ is a dead end for long haul LCC's .

[RexBanner]

There is a lot of money invested in Norwegian so the idea that they will soon give up is illogical.

Have you not even read any of the links Bondi posted (admittedly in Norwegian but there’s plenty of others elsewhere)? Investors are bailing fast. The easyJet versus BA Short Haul likened to Norwegian versus BA Long Haul is completely apples and oranges. For one thing easyJet had a sound business model. We’ve already spoken about why low cost works on short haul hence the rise of easyJet etc but that same model can’t be applied to long haul. That’s why easy were able to steal a march on BA whereas airlines like Laker weren’t.

[VinRouge]

Have you not even read any of the links Bondi posted (admittedly in Norwegian but there’s plenty of others elsewhere)? Investors are bailing fast. The easyJet versus BA Short Haul likened to Norwegian versus BA Long Haul is completely apples and oranges. For one thing easyJet had a sound business model. We’ve already spoken about why low cost works on short haul hence the rise of easyJet etc but that same model can’t be applied to long haul. That’s why easy were able to steal a march on BA whereas airlines like Laker weren’t.

Couple of points. Can see it wont be too much longer before they become too big to fail, with a significant impact on investor and bank worth if they do go TU.

Second, most of their model is set up on lease and on a service agreement basis. This also leaves a lot of OEM and service providers also in the dwang if the market is suddenly flooded by 20+ 787 and 40+ engines. Surely better to cut profit, even turn a slight loss than have 20+ 787-9 parked up somewhere arid in America. Thats not to mention their 737 MAX. Any trouble and the used market is going to depress the price of a brand spankers jet for a while.

Thirdly, Norwegian has the world's largest sovereign wealth fund. Its bigger than any Middle Eastern equivalent. This should be a worry to BA, as they could very suddenly find themselves getting deep into a price war that is mutually destructive, against a company backed by a country with a very, very, very deep pocket.

Finally, although they have lost cash, they are not losing lots of cash... yet. They are still establishing route structure, cargo capability and wider networks. The efficiency will always take time. The Scandinavians are exceptionally good at the digital thing, so expect business analysis to increase profits in the future. Be interested to see how their cargo business develops and if they can develop a decent hedge strategy.

[RexBanner]

https://www.nytimes.com/reuters/2018/03/21/business/21reuters-norweg-air-shut-equity.html

To save you the time:

"The results of the share issue show investors have enormous confidence in the company. And they should not, because Norwegian Air is losing an enormous amount of money," said Karl-Johan Molnes, chief analyst at brokerage Norne Securities, who has a "sell" rating on the stock, said Norwegian Air should dismantle the long-haul business because it could not replicate the success on shorter routes. “Long-haul customers are mainly high-paying business-class customers, while Norwegian Air is focusing on economy customers, he said. ‘They need to dismantle it very quickly,’ he said.

[dual land]

Thirdly, Norwegian has the world's largest sovereign wealth fund. Its bigger than any Middle Eastern equivalent. This should be a worry to BA, as they could very suddenly find themselves getting deep into a price war that is mutually destructive, against a company backed by a country with a very, very, very deep pocket.

Is the Norwegian state backing up the company? I haven't seen information about this, so I'm curious.

[CaptainProp]

Thirdly, Norwegian has the world's largest sovereign wealth fund. Its bigger than any Middle Eastern equivalent. This should be a worry to BA, as they could very suddenly find themselves getting deep into a price war that is mutually destructive, against a company backed by a country with a very, very, very deep pocket.

I don’t think Norwegian is going anywhere any time soon but the fact that the Norwegian state fund is massive is completely irrelevant.

CP

[VinRouge]

I don’t think Norwegian is going anywhere any time soon but the fact that the Norwegian state fund is massive is completely irrelevant.

CP

Right, so, the fact their wealth fund is looking to invest heavily in businesses with growth potential for the long term benefit of their country, and that the airline carrying the country's name is undergoing a globalised expansion, for benefits to national visibility as well as long term profit if they crack this new market, and that the wealth fund is worth over a trillion dollars, you don't potentially see that as a source of funding (either directly or indirectly via the Banking industry) going forwards?

Or I suppose the Norwegian government could just let a major carrier fold due to cash flow issues in the future whilst they get set up? I personally can't see that happening. Too much loss of face.

[5 RINGS]

The Norwegian government is already involved in SAS, its flag carrier, along with 2 neighboring governments. Moreover its souvereign fund is public money invested for a positive return for the benefit of the country and its taxpayers.

On that basis I fail to see why Norwegian Air, as a private business and competitor, would benefit from the blind & unconditionnal support of its government.

As for the too big to fail argument, this one ignores what happened to Pan Am, TWA, Swissair, Sabena, Olympic or some others more recent or still to come.

[Speedbrakes Up]

Norwegian government investment, if they were to invest in Norwegian, would it not be the Norwegian AOC and the Norwegian element of the business.
Surley Norwegian government funding for an Irish/English AOC and associated companies would not be seen as Norwegian investment in an Norwegian company.

Unless of course the funds going into the Norwegian business and they filter down to the European companies, but surley that is unfair competition, having a European carrier NAI/NUK funded by the Norwegian government.

Food for thought perhaps.

[linmar]

Norwegian government investment, if they were to invest in Norwegian, would it not be the Norwegian AOC and the Norwegian element of the business.
Surley Norwegian government funding for an Irish/English AOC and associated companies would not be seen as Norwegian investment in an Norwegian company.

Unless of course the funds going into the Norwegian business and they filter down to the European companies, but surley that is unfair competition, having a European carrier NAI/NUK funded by the Norwegian government.

Food for thought perhaps.

It makes no difference if the AOC is UK (at least before Brexit), Irish or Norwegian. Norway is part of the EEC and implement all EU legislation in order to take part of the EU internal market. Norwegian Air Shuttle will have to follow the same competition rules as the rest of the airlines in Europe and state support is not allowed. Folketrygdfondet (the state fund) is the second largest shareholder in Norwegian and was holding 6,1% of the shares before the issue of new shares two weeks ago.

if private investors are not investing, Folketrygdfondet cannot solely take part in strengthening the finances of the company. The captial raised for SAS in 2009 and 2010 where the SE/NO/DK states funding half the money was not considered to be unlawful state support as the other half was funded by private investors. The capital SAS gained from the states were rather considered a healthy investment than state support.

If Folketrygdfondet is to invest further in Norwegian, the company needs confidence from private investors to raise capital as well. If that confidence is lost, money from the Norwegian state is likely considered illegal state support (if even offered). However it takes time before a decision like that would be final so if NAS is able to turn things around and become profitable again the company might be able to pay back any "illegal" state support received.

[Elephant and Castle]

All well and good.Then again we have Alitalia

[VinRouge]

It makes no difference if the AOC is UK (at least before Brexit), Irish or Norwegian. Norway is part of the EEC and implement all EU legislation in order to take part of the EU internal market. Norwegian Air Shuttle will have to follow the same competition rules as the rest of the airlines in Europe and state support is not allowed. Folketrygdfondet (the state fund) is the second largest shareholder in Norwegian and was holding 6,1% of the shares before the issue of new shares two weeks ago.

if private investors are not investing, Folketrygdfondet cannot solely take part in strengthening the finances of the company. The captial raised for SAS in 2009 and 2010 where the SE/NO/DK states funding half the money was not considered to be unlawful state support as the other half was funded by private investors. The capital SAS gained from the states were rather considered a healthy investment than state support.

If Folketrygdfondet is to invest further in Norwegian, the company needs confidence from private investors to raise capital as well. If that confidence is lost, money from the Norwegian state is likely considered illegal state support (if even offered). However it takes time before a decision like that would be final so if NAS is able to turn things around and become profitable again the company might be able to pay back any "illegal" state support received.
You could argue the EEC could also take a view if an airline was to saturate an airfield and loss lead seats in order to force another airline into leaving, or going bust, then upping the price once they have moved out of that operation.

And as commented above its not as though it's being done via the back door elsewhere and ignored.

[EIFFS]

Thier debt is high their trading losses are not that much, the early hiccups with the MAX US operation seem to be over with good solid load factors going forward, the start double daily from Dublin to Stewart in a few weeks time, there was a massive training program for this to be crewed and a lot of expense, crew visas, second passports and the time off paid to get them, then lots of Captains training other Captains, with the recruited and on full pay American pilots sat at home awaiting the IAA to allow them the dispensation to fly EASA aircraft on a FAA, still not fully resolved but getting their resulting wholesale purchase of pilots days off and the double day off payments that went with it.

Meanwhile long haul proper has been receiving a new Dreamliner every two weeks, so just think of the advance up front costs of crewing and training that lot for routes that only started this week Austin & daily Chicago and it’s easy to see why the are burning cash, but they are burning it through investment not through flying empty aircraft, the 1st half will likely show a significant loss and I would expect a small full year loss, thereafter the critical mass should start to overwhelm the costs, cargo is doing very well out of LGW and people are paying for the premium seats, because although round trip fairs can be bought for similar money elsewhere, what you can’t do for sensible money with BA is one way legs, they are often 2 or 3 times the cost of a return flight on the same route.

So yes there’s a risk and it would please many if it went under, especially the ‘special one’ who was sacked by Norwegian and still hasn’t got over it.

[Craggenmore]

Rex. BA and AA ran at a loss with the sole purpose to put Laker out of business. Laker’s model did work and it scared the hell out of all trans-Atlantic carriers. Sadly the public were denied the chance of cheaper travel thanks to BA/AA.

These two also tried to screw Virgin but RB was a different cookie to Freddie.

[VinRouge]

Thier debt is high their trading losses are not that much, the early hiccups with the MAX US operation seem to be over with good solid load factors going forward, the start double daily from Dublin to Stewart in a few weeks time, there was a massive training program for this to be crewed and a lot of expense, crew visas, second passports and the time off paid to get them, then lots of Captains training other Captains, with the recruited and on full pay American pilots sat at home awaiting the IAA to allow them the dispensation to fly EASA aircraft on a FAA, still not fully resolved but getting their resulting wholesale purchase of pilots days off and the double day off payments that went with it.

Meanwhile long haul proper has been receiving a new Dreamliner every two weeks, so just think of the advance up front costs of crewing and training that lot for routes that only started this week Austin & daily Chicago and it’s easy to see why the are burning cash, but they are burning it through investment not through flying empty aircraft, the 1st half will likely show a significant loss and I would expect a small full year loss, thereafter the critical mass should start to overwhelm the costs, cargo is doing very well out of LGW and people are paying for the premium seats, because although round trip fairs can be bought for similar money elsewhere, what you can’t do for sensible money with BA is one way legs, they are often 2 or 3 times the cost of a return flight on the same route.

So yes there’s a risk and it would please many if it went under, especially the ‘special one’ who was sacked by Norwegian and still hasn’t got over it.

Not to mention a digital strategy that means you are connected transatlantic. For free. Something some of the more established legacy carriers don't even yet offer. A lot of E-commerce, with many millennial employees, is dependent on connectivity due to the speed of business. I know many in the sector who would pick premium economy connected over unconnected in business. No good turning up for a meeting in NY with 80% of the content changed and you are the last to know.

The legacy carriers have some learning and catching up to do imho. Both iridium and Inmarsat are going to rake it in over the next 20-30 years imho as data costs plummet for global high speed business connections for airlines.

[compton3bravo]

Not very good publicity over the last few days, Gatwick flight delayed nearly 24 hours after Hi-fly A340 subbed in went tech and then 787 waiting for a spare part. A lot of disgruntled passengers and NOT put up at hotels. Any profits for the day gone down the drain. This airline does very much remind me of Peoplexpress!

[30tywst]

Incredible really. These ops disruptions have been going on for years flushing money away. Even in a learning by doing case that shouldn’t occur this often - i.e. repeating mistakes over and over again. Who manages this? Can anyone working there shed some light on their ops. Are they managed as bad as it looks from the outside?

[20driver]

I flew Laker and loved it. I needed to get back to North America one way at short notice. Their fare was a fraction of what else was on offer.
I have flow Norwegian and their premium economy was great. All I wanted, room, a power port, wifi and enough food and drink. Nothing lavish but it worked. Air Canada did not have any wifi on their flight from Toronto to Rome.

This summer a fully refundable, changeable, PE ticket is about 1700 RT from NYC to AMS
As their routes grow I think they will do very well with the PE.
20driver

[RexBanner]

Tell me where customer sentiment fits in to the cold hard economics? Passengers love flying on the A380, however the airlines have voted with their feet as far as purchases of that model go. Same with Concorde vs the Boeing 747. In the end the economics always wins. And that does not favour Norwegian because their model is fundamentally flawed and they are a complete basket case in terms of finances.

[30tywst]

All I wanted, room, a power port, wifi and enough food and drink. Nothing lavish but it worked. Air Canada did not have any wifi on their flight from Toronto to Rome.
20driver

Free wifi on the 787?

[20driver]

Free wifi on the 787?
Yes, JFK- Oslo, 3 summers ago - maybe 4. Worked fine both ways.

[Speedbrakes Up]

I'm sorry, but 3 maybe 4 summers ago non of the Norwegian 787 fleet had WiFi.

Infact my last time on a Norwegian aircraft was end of 2017 and only then where aircraft starting to have WiFi installed.

With Norwegian the USP with WiFi was the fact it's free, I think for the long haul side of the business WiFi would have to be paid for, therefore initially it was not introduced on the widebody fleet.

[AluminBird]

They had free wifi on a flight to Stockholm about 5/6 years ago. Got my travel insurance booked using it by the time we landed ha!

[30tywst]

On the website it says no wifi on 787.

[EIFFS]

Tell me where customer sentiment fits in to the cold hard economics? Passengers love flying on the A380, however the airlines have voted with their feet as far as purchases of that model go. Same with Concorde vs the Boeing 747. In the end the economics always wins. And that does not favour Norwegian because their model is fundamentally flawed and they are a complete basket case in terms of finances.

Yep economics normally wins and the 787 is mile ahead of the nearest competitor, no WiFi on long haul until late 18

[babemagnet]

https://newsroom.aviator.aero/norwegian-air-transfers-six-b787-9s-to-boc-aviation/

[7Q Off]

https://newsroom.aviator.aero/norwegian-air-transfers-six-b787-9s-to-boc-aviation/

Probably. Norwegian is a company that if they moderate the LH expansion and keep the SH expanding they can get back on profitable numbers very fast. They should sale more of those 787 and wait for the A321LR to expand LH.

[The Crew]

Its beginning to sound like AirEurope, that went bust in 1991. I remember this event well. From wikipedia "Air Europe's success came to an end – the cost of borrowing rose (to the detriment of highly debt-leveraged companies) and financial problems beset its parent company"

OMG, this is so similar to Norwegian's predicament. The cost of borrowing is rising, and political tensions are too.

I would hate to see Norwegian beaten down by BA and IAG. Its such a thorn in BA's side, but as usual, the incumbents still win. BA AF KLM will still be around , still charging the earth, long after NLH has been gobbled up.

Anyone putting up €40000 for their B787 training bond at the moment needs to be prepared for the worst.

[VinRouge]

no down payment necessary. just a guarantee you can pay.

[A4]

no down payment necessary. just a guarantee you can pay.

....which may be called on in a liquidation/bankruptcy scenario? Are you not a debtor to the company which administrators would chase?

A4

[A4]

....er no. An administrator is required to recover as much money as possible on behalf of creditors (banks). I have no idea if it is an enforceable contract between DLH, the type rating company or agency and the pilot.

I have no desire to see DLH fail - I’ve been on the receiving end of an airline failure and it’s a horrible place to be. I’m just asking the question - that’s all.

A4

[A4]

I’d also be very surprised if it was enforceable in the event of a failure.....but with way employment practices/contracts have gone in the last few years in our industry and the bonus driven culture of management remuneration it’s not beyond belief.

A4

[Elephant and Castle]

You are all getting a bit ahead of yourselves. Norwegian has a big pile of debt, true and it is making a small loss while going through some explosive growth, true but....

It owns a whole pile of aircraft
It owns a whole load of very valuable slots at main airports
It has firm delivery slots for A320 neos, 737 MAX and 787 worth a whole pile of money (that is just the delivery slots)
It has the backing of the Norwegian sovereign wealth fund (who has a long term investment horizon unlike other funds)
It has just now gone through the first equity raise in 9 years which has been fully subscribed by existing shareholders. It hasn't even tapped the open market.
The existing debt, they say, is financed at low long term fixed rates
It has on the table a buyout offer from IAG

Expansion costs money. New routes take time to mature, newly hired staff take time and money to be trained and to be productive, AC cost money, etc, etc, etc The amazing thing is that they are able to carry out such explosive growth without raising more (much more ) capital. Some companies use their profits to make a dividend pay out, Norwegian is using them to grow and attain a critical size to allow the necessary economies of scale to compete. I am sure the Norwegian sovereign wealth fund is happy with that.

[lansen]

....which may be called on in a liquidation/bankruptcy scenario? Are you not a debtor to the company which administrators would chase?

A4

Which on the other hand is quoted in the contract, that if this is the case, the bank guarantee will become invalid. Rishworth, is btw the actual employer. The company which rents out its services to Norwegian. So if big daddy goes bust, no liquidator will ever be able to take in those guarantees. This is also the case for any other contract (e.g. the SEPLA Collective agreement in Spain). Here, the guarantee runs (again!) over OSM Aviation and not Norwegian itself.
It is clearly stated that the bonding can ONLY be claimed if the employee choses to leave within a certain amount of time. Which in this case is three years. No money will be claimable for any other reason (except of course misconduct) than the one stated above.

Stop spreading horsesh*t.

[Moonwalker]

You are all getting a bit ahead of yourselves. Norwegian has a big pile of debt, true and it is making a small loss while going through some explosive growth, true but....

It owns a whole pile of aircraft
It owns a whole load of very valuable slots at main airports
It has firm delivery slots for A320 neos, 737 MAX and 787 worth a whole pile of money (that is just the delivery slots)
It has the backing of the Norwegian sovereign wealth fund (who has a long term investment horizon unlike other funds)
It has just now gone through the first equity raise in 9 years which has been fully subscribed by existing shareholders. It hasn't even tapped the open market.
The existing debt, they say, is financed at low long term fixed rates
It has on the table a buyout offer from IAG

Expansion costs money. New routes take time to mature, newly hired staff take time and money to be trained and to be productive, AC cost money, etc, etc, etc The amazing thing is that they are able to carry out such explosive growth without raising more (much more ) capital. Some companies use their profits to make a dividend pay out, Norwegian is using them to grow and attain a critical size to allow the necessary economies of scale to compete. I am sure the Norwegian sovereign wealth fund is happy with that.

Where do you find that the Norwegian sovereign wealth fund holds any ownership in Norwegian Air Shuttle? I've just checked on their webpage and I cannot find any information that they hold a single share in NAS.

Well they don't pay out any dividends because there is hardly any money to pay out even if they wanted to. Their EBITDA margins looks like a roller coaster last 10 years and the OP cash flow hardly increase at all. Looks like they expand with negative profitability. The question seems to be for how long the lenders/shareholders accept no return on their money. It will always be a point where they have had enough. Unfortunately the only financial curves that are beautiful to look at when you screen NAS is their debts and revenue.

[A and C]

For some reason the repayment of training bonds to bankrupt companies is etched into the psyche of some pilots back in 1999 when Debonair went bust the staff / administrators meeting was dominated by questions about training bond repayment. The administrators became increasingly baffled by the same questioned asked repeatedly when they had said they could not ask for the pilots under bond to repay anything.

The fact of the matter is the courts would take a very dim view of company bankruptcy administrators taking action to recover training bond money from a person who had just had the means to repay the debt removed by the very bankruptcy they are administering.

This is a historical comment on the industry and not a comment on any other issue.

[A4]

lansen - if you note my post had a question mark at the end of it......so no spreading of horse$hit on my part. But thanks for the answer.

A4

[Elephant and Castle]

Where do you find that the Norwegian sovereign wealth fund holds any ownership in Norwegian Air Shuttle


Folketrygdfondet owns 3.57 million shares. The second largest owner behind the CEO and founder.

Another 2.13 million shares are owned by DNB Asset Management AS, which is in turn owned by the ministry of trade and industry.

All freely available info, for example at:

NAS Stock Price & News - Norwegian Air Shuttle ASA - Barron's (http://www.barrons.com/quote/stock/no/xosl/nas)

Well they don't pay out any dividends because there is hardly any money to pay out even if they wanted to

If they had chosen to not spend the money on growing the company there would be plenty of profits and money to pay out.

[VinRouge]

I’d also be very surprised if it was enforceable in the event of a failure.....but with way employment practices/contracts have gone in the last few years in our industry and the bonus driven culture of management remuneration it’s not beyond belief.

A4
Yes it is. It wouldn't pass the daily mail test for a start. You could destroy the liquidators with one interview on Radio 5/LBC/Redundant of Crawley on the third page of the daily mail.

[Boeing 7E7]

It irks me the doom and gloom sayers and most don't even understand the finances happening in the background.

Yes they are pushing hard. Yes it is risky. The core business is profitable they are just pushing hell for leather into expansion which is shortly winding back.

There is some serious heavyweight financing behind the brand and immense pride from the Norwegians who are effectively backing it.

I'm not saying it isn't risky and all is rosey but if you are going to come on here spouting confidently it will fall to bits at least bloody find out the basic easily available information about the company!!

I don’t work for Norwegian. And I fully agree with what you say. Most people have who ‘talk down’ Norwegian have next to no idea of business or economics and simply fail to understand the first thing about growing a business or the concept of debt.

[macdo]

I think it's fair to say that nobody knows anything about the financing of the aviation business until the day before the receivers walk in. Airlines do have a bit of a habit of spectacularly imploding. Not saying Norwegian is likely to go under, but if it did, or if IAG take it over, who'd be massively surprised?

[Eric Janson]

Which on the other hand is quoted in the contract, that if this is the case, the bank guarantee will become invalid. Rishworth, is btw the actual employer. The company which rents out its services to Norwegian. So if big daddy goes bust, no liquidator will ever be able to take in those guarantees. This is also the case for any other contract (e.g. the SEPLA Collective agreement in Spain). Here, the guarantee runs (again!) over OSM Aviation and not Norwegian itself.
It is clearly stated that the bonding can ONLY be claimed if the employee choses to leave within a certain amount of time. Which in this case is three years. No money will be claimable for any other reason (except of course misconduct) than the one stated above.

Stop spreading horsesh*t.

I'm familiar with a bankruptcy where the bonds were claimed. It went like this.

-Company in receivership but did not fire anyone.
-Other job was available immediately forcing the bonded people to resign in order to get this job within a limited time frame.
-As soon as they submitted their resignation the bond was claimed.
-A few days after the last bonded person resigned the company declared bankruptcy.

Don't think something similar can't happen.

[babemagnet]

https://www.forbes.com/sites/grantmartin/2018/12/22/discount-carrier-norwegian-air-faces-collapse-by-years-end/#4f2453544e9b

[Maxfli]

No covenants have been breeched yet.
Not withstanding their equipment issues, look at the presence they have in the market.
Should they require addition external funding there will be no shortage of suitors, it's just a matter of how much of the pie the principles are will to sell and to whom and at what price.

The crew will be ok and on that note Merry Christmas to all.

[directmisbi]

If norwegian needs more money, it will get it. The business case is sound and the product well received. No governants will be breached.

[ExDubai]

If norwegian needs more money, it will get it. The business case is sound and the product well received. No governants will be breached.
if the business case is that sound, why did they burn that much cash?

[calypso]

Because expanding a business is very expensive

[midnight cruiser]

Even within the last month or so, renegotiating debt has become much more difficult - against the backdrop of some failed rights issues, with underwriters expensively carrying the can, many many companies dearly wanting to widen covenants, and the Fed squeezing until the pips squeak. Equally, any potentially bidder will be loath to take on Norwegians debt. Once it's bust, that debt magically disappears!

[dirk85]

Leverage itself is not a problem in an healthy business. Actually, if the business works it is often a good idea in order to amplify the profits.
The problem here, disregarding for a second the debt situation, is that the company is not making money in its core activity, which is flying passengers from A to B. In this context leverage is only going to make the situation worse.
Of course the passengers love the product, they are flying under cost price. I would love it too. Until it lasts.

[Whisky B]

If norwegian needs more money, it will get it. The business case is sound and the product well received. No governants will be breached.

Sound business case, really?!!

That seems to contradict most, if not all, of the financial opinions out there!

[Vokes55]

Wizzair lost money for the first 9 years of operation. A lot of 'experts' don't realise that, in business, you have to spend money to make money.

That Forbes link which seems to be doing the rounds is nothing more than a Blog, which references a website, which references a newspaper, which quotes an unassociated employee of a bank.

Norwegian have significant assets, including the bulk of the 737 fleet, which are owned. Stop the scaremongering.

[directmisbi]

If we are to quote analysts then why not use Mr Kenneth Sivertsen of Pareto Securites, a private investment bank, stating
the norwegian Airlines stock is underrated, and the potential joint venture (95 airbus and 45 Boeings future deliveries)is according our calculation well worth over 40 billion norwegian kr thus removing the speculation about debt and cash position for good.

[hunterboy]

The great thing about these type of threads is time will tell......would love to reread it in 12 months time.

[RexBanner]

If norwegian needs more money, it will get it. The business case is sound and the product well received..

not it’s not. Not whatsoever. Net costs are higher than net revenues. Hardly a sound business, low cost long haul has never worked and never will. Norwegian are just the latest example of it. Of course some other fool will always come along to prove that they are the ones who can do it. I fail to see how selling off all their remaining assets paints the picture of a healthy company.

[fruitbat]

The great thing about these type of threads is time will tell......would love to reread it in 12 months time.

I think you’ll be able to reread this thread in 12 weeks and find your answer...

[directmisbi]

not it’s not. Not whatsoever. Net costs are higher than net revenues. Hardly a sound business, low cost long haul has never worked and never will. Norwegian are just the latest example of it. Of course some other fool will always come along to prove that they are the ones who can do it. I fail to see how selling off all their remaining assets paints the picture of a healthy company.

So why did IAG acquire 4.6 percent of norwegian earlier this year. The even tried to buy the company, twice but both offers were rebuffed. These are hard facts. Maybe you should phone up your CEO and tell him that low cost long haul "has never worked and never will". And Norwegian will be bust before the new year, so better sell the shares IAG took up because Norwegian is "hardly a sound business". Or a "ponzi scheme"
Could the record order of 222 aircrafts back in 2012 and the extremely lucrative price of some of these to be sold later on with huge profit be part of a business plan? Has Mr. Kjos stated earlier that this has in fact been the plan since the very beginning? Maybe you should try to research a little before jumping the gun? Could MOL have an agenda with his scaremongering? Did he badmouth Primera or Wow air? No, because they were not hurting his business.
The joint venture is imminent, and will put to rest most of the critics in the media and elsewere. Merry Christmas :-)
Post edited, the forbes article has now been updated.

I rest my case.

”...and based on communication sent from the carrier this Saturday, the airline’s liquidity position is reportedly stable. As the end of the year approaches, Norwegian seems keen on having its debts fully settled”

[hunterboy]

As someone who works for an IAG company, it gives me no pleasure to offer the opinion that the various so called smart CEO’s running IAG and its OpCo’s are no smarter than you or I. What they are is opportunistic sociopaths that happily exploit legal loopholes and gaps in employment legislation in different jurisdictions to drive down (mainly) employee costs while happily vastly increasing their own renumeration. I don’t believe that they have any more foresight than you or I.

[srjumbo747]

Unbelievable. Same comments from same people. You cannot piss passengers off as long as these guys have done. Yes the aircraft are good but they lack infrastructure and those behind the scenes don’t care.
They’ll go bust.

[Vokes55]

Intrigued to know how you came to the conclusion they’ve “pissed people off”. Their short and long haul product is excellent and their on time performance has improved markedly and is now one of the best in Europe.

The only customers that may be “pissed off” are those that end up on wet leases. Blame RR for that, I doubt BA pax were too pleased to be flying with Air Belgium either.

[Jonty]

So why did IAG acquire 4.6 percent of norwegian earlier this year. The even tried to buy the company, twice but both offers were rebuffed. These are hard facts.

They want the LGW slots when/if Norwegian no longer exists. Thought that was obvious.

Not saying Norwegian will go under, just saying I wouldn’t be taking any comfort from the fact IAG invested in it.

[speedrestriction]

So why did IAG acquire 4.6 percent of norwegian earlier this year.

Building a stake from which to launch a takeover bid. To say that part of the business model has always been to buy airframes in order to sell them off is to admit that the senior management have been adopting a ludicrously high risk strategy based on future asset values in a notoriously volatile industry - a strategy which would be unnecessary for a company which was generating a sufficient margin from its operational activities.

The the only reason Norwegian stands is because there are investors who choose to divert capital from successful economic activities into it, a marginally (at best) performing business enterprise. Things may improve over time but no rational investor looking at Norwegian’s financial results over the past few years could come to the conclusion that this is a business which is going to perform consistently well in the short term. Indeed when you look at the share price performance the most significant positive change in the last three years has occurred when a successful enterprise was contemplating a takeover (ie providing better security for Norwegian’s debts). Apart from that the share price trajectory has been steadily negative.

It is a good product which Norwegian offer but the cost of providing the product is greater than customers are willing to pay for it. To put it differently: Norwegian either have to provide the same product at lower cost or somehow convince more customers to part with more money for the product they provide. In any case, if they wish to survive in the long run they need to change, the current business model is underperforming.

https://cimg1.ibsrv.net/gimg/pprune.org-vbulletin/640x419/86113c28_ff37_4189_95c3_14c92830fd4a_f134e8e78f4ce304807c82c 395061382f2d5875b.jpeg

[hec7or]

Norwegian have significant assets, including the bulk of the 737 fleet, which are owned. Stop the scaremongering.

where did they get the money to purchase the assets?

[RexBanner]

Maybe you should phone up your CEO and tell him that low cost long haul "has never worked and never will".

Done one better than that, I told him that in a face to face conversation on a LHR-DUB flight earlier this year when the takeover speculation was going on and, for what it’s worth, he basically agreed with me and said that it’s a very niche market. I got the very real impression that Norwegian would be severely pruned back in the event of any real IAG interest and that most of the 787’s would be redeployed elsewhere. But what do I know? (I genuinely mean that by the way)

[Yorkshire_Pudding]

Done one better than that, I told him that in a face to face conversation on a LHR-DUB flight earlier this year when the takeover speculation was going on and, for what it’s worth, he basically agreed with me and said that it’s a very niche market. I got the very real impression that Norwegian would be severely pruned back in the event of any real IAG interest and that most of the 787’s would be redeployed elsewhere. But what do I know? (I genuinely mean that by the way)


isnt IAG Level Airways 330s low cost long haul?

[srjumbo747]

Intrigued to know how you came to the conclusion they’ve “pissed people off”. Their short and long haul product is excellent and their on time performance has improved markedly and is now one of the best in Europe.

The only customers that may be “pissed off” are those that end up on wet leases. Blame RR for that, I doubt BA pax were too pleased to be flying with Air Belgium either.

The people they’ve pissed off are passengers who end up either having their flights ‘delayed’ by two or three days or flying on crappy old wet leased aeroplanes.
if things go well then Norwegian Long Haul works but in this industry things never go well. Their customer service is appalling/ non existent. The onboard product works well but they, in my humble opinion, will fail.

[directmisbi]

https://media.uk.norwegian.com/pressreleases/update-from-norwegian-air-shuttle-asa-2817995

[SSDK]

It’s great to see all the “monday morning CEO’s” here om pprune... Maybe you should start an airline? You guys sure know the ins and outs of aviation. Anyways, I hope Norwegian will be ok. As always, time will tell...

press release from today:

Norwegian Air Shuttle ASA (“the Company”) would like to give the financial market a year-end update. To meet the competitive environment in a period with seasonally lower demand in Europe, the Company has made several changes to its route portfolio as well as adjusted its capacity. Combined, these measures should improve the financial performance from the start of 2019.

In addition, the Company has launched an extensive cost savings program, #Focus2019, which will contribute to estimated savings of minimum NOK 2 billion in 2019. Six weeks into the program, we have already identified significant savings. The Company will update the market with results from #Focus2019 in connection with the announcement of the results for the first quarter of 2019.

As previously communicated, Norwegian’s long-haul operation has been disrupted by challenges with the Rolls-Royce engines on the Dreamliners. The Company has now reached an agreement with Rolls-Royce which will have a positive effect from the first quarter of 2019. The commercial terms of the agreement remain confidential.

The Company is pleased to announce that the financing for all aircraft deliveries for the first half of 2019 is secured. This also includes refinancing of one of the delivered Dreamliners, resulting in a positive liquidity effect of NOK 275 million in December 2018.

The process of divesting aircraft continues, and we experience significant interest in our existing fleet as well as future deliveries. The Company recently signed a letter of intent for the sale of two aircraft with delivery in the first quarter of 2019. The discussions about forming a joint venture for aircraft ownership also continues with full force.

[3Greens]

If I wasn’t worried before, after that wooly update I’d certainly be worried now. I think the next 2 months will be critical for them.

[Mr Angry from Purley]

Renting the HiFly A380 to operate LGW-JFK won't come cheap...

[Speedbrakes Up]

The product has been altered to meet the cost cutting excercise, no longer are you entitled to free spirits in preimium, only wine and beer, which for a premium product is not great .

Having stopped, all pay rises to crew, cancelled all new joiner course for 2019 onto the 787, even stopped the Christmas meal allowance, and aiming to save 3 billion NOK In 2019, is not a sign of a stable airline .

An IAG buy out would frankly worry me if I worked for Norwegian, as airframes and slots would be passed onto Iberia and BA for example, and as mentioned before Norwegian would be cut back to the bare bones .

Let's see what the future holds......

[MCDU2]

isnt IAG Level Airways 330s low cost long haul?

Not really. Gets feed from other IAG airlines eg: Vuelling. Presumably cargo from IAG Cargo and also a small number of high yielding routes. Completely different strategy than what Norwegian have undertaken.

[Sidestick_n_Rudder]

Also, AFAIK LEVEL was created specifically to counter Norwegian’s expansion in BCN and other places.

To me it means it isn’t necessarily there to create profit as a stand-alone entity, but rather to curb the competition...

[RexBanner]

isnt IAG Level Airways 330s low cost long haul?
yes but Willie is on record as saying that the economics only work because they were able to get a spectacular price from Airbus for some end of line A330s.

[stormin norman]

Could the shares bought by IAG be one way of acquiring Slots off Norwegian at a later date ?

The rapid acquisition of new aircraft by many airlines in the past has resulted in their rapid demise when worldwide consumer confidence dips.

[BluSdUp]

Just curious stormin, how would a fiendish purchase of a small stock portfolio ever give you a slot?
Not quite how it works, is it?

[directmisbi]

Done one better than that, I told him that in a face to face conversation on a LHR-DUB flight earlier this year when the takeover speculation was going on and, for what it’s worth, he basically agreed with me and said that it’s a very niche market. I got the very real impression that Norwegian would be severely pruned back in the event of any real IAG interest and that most of the 787’s would be redeployed elsewhere. But what do I know? (I genuinely mean that by the way)




Well, I think you will find that the “IAG interest” is very real. And building a whole new airline to counter for the competition, and serve a “niche market” is unheard of, unless ofcourse, Norwegian is posing a real danger to the present business model of IAG damaging yields and getting customers used to a better product, free wifi, new aircrafts and an overall excellent “value for money” experience, all for lot less than the present inferior BA product currently at offer for leisure pax. Also, I think the current norwegian premium LH product could work really well in case of a recession where business travellers would still need to travel, but not for a BA business fare. In case of a takeover, and minding present cost of personnel, Norwegian would be scaled up, not down. But what do I know.

[Vokes55]

Finally a sensible post in this thread.

BA know that Norwegian are trashing their yields - just check out the prices on BA flights to US destinations served by Norwegian vs. those that aren’t.

If they didn’t see the Norwegian model as a credible threat, they’d have ignored them and let them burn themselves out.

[VinRouge]

Finally a sensible post in this thread.

BA know that Norwegian are trashing their yields - just check out the prices on BA flights to US destinations served by Norwegian vs. those that aren’t.

If they didn’t see the Norwegian model as a credible threat, they’d have ignored them and let them burn themselves out.
Thing is, IAG have hangar 51, NAS don't. IAG have a much wider scope ofobusiness to experiment with, see what works, what doesnt, NAS don't.

​​​​​​I think the potential takeover was nothing more than IAG identifying weakness in the business model before reconfiguring level for the kill. It's why they are loss leading certain markets. You only have to see densification of BA 320/321 and LGW 777 to see that this is a fight across the group for IAG. Not to forget that IAG can burn cash for a lot longer than NAS. What was the profit before share buyback last year for the group? NAS aren't turning much of a profit due to their overheads and debt servicing. Plus they cannot reconfigure quick enough to survive the IAG onslaught imho. Matter of time.

Imho the pay to use wi-fi in business and first is a big mistake from BA. Inflate the prices 5 quid and offer it free to every business class or first customer. People will resent the time spent entering in card details when it effectively is less than 0.1% of the face of the ticket cost. For Business travellers WiFi is essential. NAS have this right.

[Speedbrakes Up]

If IAG take over NAS, there will be no huge up scaling of Norwegian.

What IAG will do is kill it off, and let BA and Iberia continue to grow, and ticket prices across the Atlantic go back up, as people need to travel for business, and for leisure.
It's a threat yes due to low ticket costs, but why would IAG take them over, ramp up the operation and let their bigger elements, BA and Iberia suffer....

Also Norwegians tickets price's come at a cost, the pay and conditions the current employees (agency workers) receive is well below industry standards.
Yes Osm contract may pay well on the dreamliner, but at what price, you do a EZE-LGW flight, land back after 14hrs, have one clear day off, then out the door to Boston! Legal yes, morally right.... Hell no!!!!

​​​​​

[directmisbi]

Mr. Walsh stated earlier this year that Norwegian needs a partner. Granted, the mammoth aircraft order book has been weighing heavily on the financials lately. The RR engine woes, subsequent wetleases and passenger compensations haven’t helped either. Mr Kjos reluctant stance on not hedging fuel has also been expensive in the short term, but with the oil price now down by 30 percent will potentially save the company billions of norwegian kr in the coming year in comparison to its competitors.
Also, the future joint venture(watch this space) will now bear the cash obligations on future deliveries, reduce the debt and strengthen the own capital.
IAG are free to bid for a third time, but it will have to have very deep pockets.

[Speedbrakes Up]

So Norwegians future is hanging on fuel prices dropping, and prices staying down (have you seen the financial markets recently), and a future joint venture which the general public are yet to be made aware of.
Yeah I'm now 110% assured of Norwegians future........
just as I'm sure that chocolate fire guard I received for Christmas is going to work wonders.......

[Tay Cough]

Finally a sensible post in this thread.

BA know that Norwegian are trashing their yields - just check out the prices on BA flights to US destinations served by Norwegian vs. those that aren’t.

If they didn’t see the Norwegian model as a credible threat, they’d have ignored them and let them burn themselves out.

Maybe they’re helping Norwegian burn themselves out. Undercut on the same routes. Continue to charge a sensible fare on the remainder (which NAS don’t have the scale to fly, let alone compete on).

[pippobaudo]

It's always interesting to read PPRune.......it seems that the Airline always choose the wrong CEO....the wrong financial Managers.......you are all here! So let me understand (I am not that clever in those topics), IAG wish to spend a considerable amount of money to buy Norwegian and then......shut it down.
An asset with important figures in terms of passengers and network, more then 100 aircraft, good load figures especially during the high season quarters, less cost for the company per flight (the salary of a BA crew doing let's say 65/70 hours is for sure higher then the one in Norwegian), good feedback from the passengers (new plane, comfortable seats, modern IFE for all the class.......)......
I guess that if they will manage to cut the cost and solve the engines problem (maybe with some IAG people mentoring they might solve the issues faster then normal), Norwegian as the potential to be a very important asset........a huge amount of “holiday” pax they fly only if they have cheap ticket........if Norwegian is gonna shut down they are not going to revert to BA ir similar......they just won't fly.
Just my 1 cent ��

[act700]

Either way, beware when they start repainting their fleet/introducing a new identity!
You youngsters may not understand :)

[ChrisE]

As someone who works for an IAG company, it gives me no pleasure to offer the opinion that the various so called smart CEO’s running IAG and its OpCo’s are no smarter than you or I. What they are is opportunistic sociopaths that happily exploit legal loopholes and gaps in employment legislation in different jurisdictions to drive down (mainly) employee costs while happily vastly increasing their own renumeration. I don’t believe that they have any more foresight than you or I.

I really like this post, however I think it extends far further than IAG. I think this should be dictionary definition of most, if not all airline CEO's!

[VinRouge]

It's always interesting to read PPRune.......it seems that the Airline always choose the wrong CEO....the wrong financial Managers.......you are all here! So let me understand (I am not that clever in those topics), IAG wish to spend a considerable amount of money to buy Norwegian and then......shut it down.
An asset with important figures in terms of passengers and network, more then 100 aircraft, good load figures especially during the high season quarters, less cost for the company per flight (the salary of a BA crew doing let's say 65/70 hours is for sure higher then the one in Norwegian), good feedback from the passengers (new plane, comfortable seats, modern IFE for all the class.......)......
I guess that if they will manage to cut the cost and solve the engines problem (maybe with some IAG people mentoring they might solve the issues faster then normal), Norwegian as the potential to be a very important asset........a huge amount of “holiday” pax they fly only if they have cheap ticket........if Norwegian is gonna shut down they are not going to revert to BA ir similar......they just won't fly.
Just my 1 cent ��
The operation will exist, after IAG/A another asset strip the landing slots, aircraft and order book. It just wont be run by NAS and its head office.

You are also assuming that the lady doth not protest too much with respect to engine issues? IAG doesnt seem to be using this as an excuse for their 78 fleet.

If the load figures are not translating into sufficient revenue to cover costs, divvy then stow cash in the good times (i suggest with fuel prices as they are this is a good time) plus some in reserve to cover unknown unknowns, its gonna go bust at some stage.

[calypso]

Norwegian has an exclusively long haul fleet of 787s therefore the issue is of much more significance to BA which has 767, 747 and A380s.

You can speculate wildly if you wish but the available facts are that IAG has kept all airlines that it has bought running as separate entities (with the one and only exception of BMI which got merged into BA). Not only it has kept them separate but it has grown their operations wherever possible.

The model is well understood and used by many business, for example VW. It runs VW, Audi, Skoda, Lamborghini and Bentley. Why run separate brands? because it captures different consumers with different preferences while still taking advantage of economies of scale. If IAG buys Norwegian and shuts it down the only thing that will happen is that a new player will fill the void

[Meikleour]

calypso (https://www.pprune.org/members/16032-calypso) : Northeast, Cambrian, BCAL,Danair................................................. !!!! History rufutes your claim.


PS talk to any former employee of DanAir and he will tell you what "cherrypicking" in a business sense means in practice.

[calypso]

The history of IAG doesn't. I understand the process of asset stripping however that has not been the strategy of IAG so far which, in my opinion, is far more relevant to the future of a IAG take over of Norwegian than what happened to Dan air over two decades ago.

[VinRouge]

The history of IAG doesn't. I understand the process of asset stripping however that has not been the strategy of IAG so far which, in my opinion, is far more relevant to the future of a IAG take over of Norwegian than what happened to Dan air over two decades ago.
Who got monarchs lgw slots when they went pop? And who mentioned takeover? IAGs vulture fund is huge. My bet is they will wait till the recession and go for the assets in the subsequent resulting firesale. Liquidity will be king.

[rotorcloud]

If i could play the IAG CEO i’d buy NAS, blow them up AND higher the ticket prices. Blackmail all thoer IAG pilot groups that if they ask for too much money i ll put them in an agency and let NAS fly their routs and put future aircraft there.

[BluSdUp]

Interesting times.
I have to say I am getting slowly more optimistic on behalf of my Norwegian colleagues.
Why?
Well , it looks like loan default is being avoided.
Oil down like an auger.
May I add tough times": Let us use a low cost this year, Eh! Not BA!"

A few observations:
Norwegian is per date Nr 8 in Pax nr, that is no small fry. A certain critical mass has been achieved.
RR has settled with NOR on a substantial deal for the engine fiasko.
I see some of You Britts are going on about some historic stuff :Dan Air, and no airline being successful with LOCO Long Haul.
First Danair had 36 aircraft
Norwegian 163,,,,,
And yes, Big Airlines made damd well sure that Loco Long Haul was exterminated, BUT that was in the days before free and fair competition!
Utterly irrelevant!

As this thread will be up in December 26 2019 , I bet Norwegian alive and well in a year.
Some of the analysis here is just wishfull thinking, me thinks!

[speedrestriction]

I don’t think there is wishful thinking insofar as I don’t think any of the posters here want to see any airline go bust, particularly one which is bringing the fight to the legacy long haul carriers so effectively.

The question is whether it has sufficient revenue to cover its operating costs (marginal at best) and if not whether it will be able to secure additional funding until the point in time that it is able to generate sufficient profit (largely unknown and unknowable as it is subject to many outside factors).

[Vokes55]

You are also assuming that the lady doth not protest too much with respect to engine issues? IAG doesnt seem to be using this as an excuse for their 78 fleet.


Tell that to the poor folk who are traveling to Dubai on an Air Belgium A340 every day this Winter.

Granted, passengers were given a treat when they brought in Qatar A330s to cover the AOG 787s, a rare chance for BA passengers to experience a good product for a change.

[A320ECAM]

A lot of people are forgetting that Norwegian has banking, cruise, hotel and short haul businesses too which are doing extremely well.

I will be saying farewell to Thomas Cook, TUi and Virgin before Norwegian, if ever, ceases.

[Icejock]

I am quite optimistic about our future. Had not the new CFO come in and straightened our direction I would have been more worried, he is doing a fantastic job and it is about time for a cost-saving program and organizing the AOC-structure for the future. I believe this will be a critical year ahead but there are a lot of competent people working in the office. Regarding the TC's I am far better of working for Norwegian in Scandinavia than working for e.g BA in the UK. Our package is so much better with regards to roster, pension, vacation, insurances and so on.

[BluSdUp]

I am with you, I have had hundreds of flights with Norwegian that has been good , considering what I pay.
With regards to Cruise are we talking Norwegian Cruise Line, in that case I think You just expanded the brand a tad , Eh?
No connection in ownership, of the Ship, I think . Correct me if wrong.

IceJock
Indeed
I am glad to hear this.
Massive potential for savings AND extra revenue. 43 øre per seatmile is not sustainable as the Irish lot is down to 27 øre.
And that gang of Cabin Captains need to sell me at least a coffee at 06.30 departure for Oslo, either that or quit mixing private Late in the galley and putting 17 crewbags in MY overhead,,,,,

[Old King Coal]

Better news:

https://www.forbes.com/sites/grantmartin/2018/12/24/norwegian-air-shares-optimistic-forecast-amidst-financial-scrutiny/

[Icejock]

I am with you, I have had hundreds of flights with Norwegian that has been good , considering what I pay.
With regards to Cruise are we talking Norwegian Cruise Line, in that case I think You just expanded the brand a tad , Eh?
No connection in ownership, of the Ship, I think . Correct me if wrong.

IceJock
Indeed
I am glad to hear this.
Massive potential for savings AND extra revenue. 43 øre per seatmile is not sustainable as the Irish lot is down to 27 øre.
And that gang of Cabin Captains need to sell me at least a coffee at 06.30 departure for Oslo, either that or quit mixing private Late in the galley and putting 17 crewbags in MY overhead,,,,,

I believe that is synonymous with the Norwegian(the population) people’s way of working and service unfortunately. But that is a completely different discussion. I am happily based in a non-norway base.

[calypso]

My bet is they will wait till the recession and go for the assets in the subsequent resulting firesale

If you are interested in the issues surrounding Norwegian and want to pass comment on them why not inform yourself on the subject first? Willie Walsh, CEO of IAG, has made two offers for Norwegian in 2018 and is on the record from a couple of weeks ago saying he is still interested in buying Norwegian right away if the price can be agreed. The price he offered by the way is over twice the current market Cap of Norwegian.

As anyone can imagine opening new routes is an expensive business because even good routes are very rearly profitable from day 1, it takes time for a new route to become stablished (a minimum of a year?). Growing an airline is also expensive because it implies a whole raft of one off costs, like training new crew for example. In addition the issues with the RR 787 engines have brought costs that should not be ongoing. All those one off costs are the reason why Norwegian is no profitable, or bearly so, right now. In the other hand once you have made those investments running costs should be much lower and as new routes become consolidated the airline should be quite profitable. For these reasons judging Norwegain´s business model with a static picture of 2018 misses the point.

[Mr Angry from Purley]

A lot of people are forgetting that Norwegian has banking, cruise, hotel and short haul businesses too which are doing extremely well.

I will be saying farewell to Thomas Cook, TUi and Virgin before Norwegian, if ever, ceases.

A320ECAM
That's a brave shout how long have you been in the business?

[samca]

Norwegian will not fall. In the worst of the cases would be bought and manage by IAG.

[Wee Weasley Welshman]

Air Europe, Dan Air, Air Berlin, Pan Am, TWA, I could go on forever with airlines that have been too big to fail or too well established to disappear.

Flash meet Pan.


WWW

[lansen]

Air Europe, Dan Air, Air Berlin, Pan Am, TWA, I could go on forever with airlines that have been too big to fail or too well established to disappear.

Flash meet Pan.


WWW

Air Europe, Dan Air weren't even close to being half as big as Norwegian is today. Air Berlin had a 100% leased fleet, while Norwegian's fleet is 70% owned. Pan Am got hit by deregulations and TWA got bought up. Not to name the fact that Air Berlin, Pan Am and TWA had completely different business models.
Great comparison mate.. :}

[EIFFS]

There is much speculation as to where Norwegian are at at the moment, we should get a much clearer idea on the 7th when the management announce their plans for culling unprofitable routes and maybe bases as well, all new course have been frozen (differed not cancelled) and some who had already started put back into the holding pool.

Their cost cutting project (named FOCUS2019) is being rolled out, current casualties in addition to the above include funding for staff xmas parties removed, senior management pay freeze and a LGW(SH) pay offer of 0% in other words a real world cut that will off course be rejected by BALPA.

One could argue that they have been unlucky with dream liner engine farce, forcing them into expensive wet leases when they have the crews inlace to fly their own but partly grounded fleet, ditto short term oil price spike catching them off guard and then taking a heavy loss on poorly planned hedging, add to the mix LGW shutdown in the days before xmas and the list goes on, but you make own luck, good or bad and if you keep pushing growth and assuming every other factor will be fine you’re asking to get your finger burnt.

The LGW drone attack might not be as bad as first thought, yes some diversions and a lot of cancelled flights but since it reopened nearly every flight as been 100% full and of course a days worth flying didn’t happen... a lot will depend on just how much compensation is paid out, but given the CAA as ruled it as exceptional circumstances then this might fall on the passengers insurance as the first port of call.

If one looks at flight radar24 with the Norwegian filter selected it gives some idea of the scale of trans atlantic flying, which part from Europe to the US on the dreamliner also includes DUB/SNN/EDI to PVD/SWF plus the French Caribbean to FLL/JFK/PVD/YHM.

I think i'ts likely they’ll scrape through, but they do need a period of consolidation and stopping doing daft stuff just because they can.

[vikingivesterled]

Air Europe, Dan Air weren't even close to being half as big as Norwegian is today. Air Berlin had a 100% leased fleet, while Norwegian's fleet is 70% owned. Pan Am got hit by deregulations and TWA got bought up. Not to name the fact that Air Berlin, Pan Am and TWA had completely different business models.
Great comparison mate.. :}

Owned as in financed through loans direct to the company instead of via specific plane leases. Not as Ryanair's owned fleet financed through shareholder funds and profits. Norwegian never did enough share expansion schemes or had any substantial full year profits they could finance their fleet expansion with. This is why so little end up on the bottom line every time they sell some of their "owned" fleet.

[compton3bravo]

Of course the flights are nearly 100 per cent full, a lot of delayed passengers from the Gatwick debacle. Still grave concerns - robbing Peter to pay Paul comes to mind.