Hard times for Norwegian

[speedrestriction]

Apparently the market for used wide bodies is not great at the minute - pulling the plug now would not necessarily result in great returns to the creditors after liquidation.

£2,700,000,000 is a lot of money to owe.

[directmisbi]

https://www.reuters.com/article/us-n...KBN1X30CX?il=0


It’s a testament to Norwegian’s business strategy that they can deliver this kind of result despite of its entire 737MAX fleet grounded and ongoing Rolls Royce engine problems.

[lederhosen]

I wish Norwegian and the many ex colleagues who fly there well. This is definitely good in cash flow terms. However the enthusiasm is mainly about another asset sale. It may have been a smart move to order Airbus NEOs particularly given the growing success of the long range 321. It does though give Norwegian a bit more breathing space.

[beardy]

There was a really interesting article, granted by a journalist, about Chinese investors having difficulty picking good investments in the West. There seems to be an assumption of growth rates similar to tho seen in their domestic market and which are unachievable in the stressed companies they choose. Of course there are notable exceptions to this observation, I hope that this is one.

[calypso]

This is not really an asset sale. The aircraft concerned have not been built yet and therefore they are not really company assets. Since Norwegian has decided to stop growing and to concentrate on making some money it makes perfect sense to sell the delivery slots. Better that than to keeping pushing aircraft onto new routes that might take years to become profitable

[procede]

Any company can post a profit by selling off all their assets. Medium to long term, I would not say it is looking good. Direct operational costs will definately go up due to the sale and lease back...

[NEDude]

Originally Posted by lederhosen

I wish Norwegian and the many ex colleagues who fly there well. This is definitely good in cash flow terms. However the enthusiasm is mainly about another asset sale. It may have been a smart move to order Airbus NEOs particularly given the growing success of the long range 321. It does though give Norwegian a bit more breathing space.

It is true it is about an asset sale, but it is not an asset Norwegian uses in its operation. It is also not a full sale of the assets. Norwegian will have a stake in the leasing company that is buying the airplanes, and will be able to earn some income off of the leases. The big thing this does is reduces the financial obligations of Norwegian over the next few years, significantly reducing their debt load, which has been a noose around their necks.

[happybiker]

Delays cannot help the balance sheet either!
https://www.dailymail.co.uk/news/art...k-airport.html

[Wickerbill]

Originally Posted by NEDude

It is true it is about an asset sale, but it is not an asset Norwegian uses in its operation. It is also not a full sale of the assets. Norwegian will have a stake in the leasing company that is buying the airplanes, and will be able to earn some income off of the leases. The big thing this does is reduces the financial obligations of Norwegian over the next few years, significantly reducing their debt load, which has been a noose around their necks.

I absolutely agree, large debt piles that linger around for years are the death-knell of companies - just witness Thomas Cook Group. Getting control of debt so that the EBITDAR is not completely eaten away by interest payments and leasing costs is the ONLY way to survive long term. Arguably, Norwegian should sell further assets and consolidate around areas of its operation that are profitable or have the potential to be profitable in the near future. "Slow burners" and prestige routes / assets need to go...nowish.

[Meester proach]

Originally Posted by happybiker

Delays cannot help the balance sheet either!
https://www.dailymail.co.uk/news/art...k-airport.html

emotional support animals are a massive pain in the ass. However I would think it’s US lawyers that have forced carrying these on airlines.

[RTO]

Norwegian apparently looking at buying 40 SSJ in order to secure RU overflight permits, according to NO newspapers:
https://translate.google.com/transla...ale-er-signert

[directmisbi]

Norwegian may have found one "loophole" for large-scale operation to Asia.
If the company is to succeed with low-cost long-distance travel to South-East Asia, access to the Siberian Corridor is a must, but the aviation agreement between Scandinavia and Russia only gives permission to SAS and there is little likelihood that there will be any change to it.
But, if a deal is made with Russian aircraft manufacturer Sukhoi and it includes the purchase of 40 aircraft, then it could open up the Siberian corridor for Norwegian! These 40 Sukhoi aircraft do not have Norwegian use for themselves, but they can be added to the new JV leasing company, where the Chinese bank owns 70% and Norwegian 30%. Sukhoi aircraft are already operating in China and the need for short and medium-haul aircraft in China and a number of other markets in Asia is considerable, thus there is limited downside risk if an order for 40 new Sukhoi aircraft is placed for the new JV leasing company.

[Dave Gittins]

With Covid 19 about I expect most other airline shares are at a low too

[NOC40]

Bonds

Don't look at the shares, look at the bonds. Convertibles issued at 100 in November trading at 45-50. ie debt investors expecting to get back 50p in the pound

[WHBM]

Originally Posted by Dave Gittins

With Covid 19 about I expect most other airline shares are at a low too

Well IAG, to take an example, may have fallen over the last month, but are the same place they were 6 months ago, at 431p. Norwegian have lost three-quarters of their value over the same period. IAG actually went up from 408 to 431 in the course of today.

[rotorwills]

I truly would not be surprised if they can survive. It's not a good prognosis for the aviation industry. Hope they do but have my doubts they can survive the virus event.

[Doors to Automatic]

I am not sure how they are going to raise more funds at the moment. Investors would get a similar return by taking the cash out in bank notes and setting fire to it.

Unfortunately over-zealous expansion and launch of long-haul have placed this great airline at the edge of the cliff.

I hope I am wrong but I would give them a 10% or lower chance of survival beyond this year.

[directmisbi]

Batten down the hatches

Card aquirers have a hold back of almost 100 percent. Funds are released on the day pax are travelling. This has been the situation for more than a year. Receivables are standing at more than 11 billion nok. These are insane numbers and any normal company would have been bust long time ago if it wasn't for the work of a brilliant CFO. It that context it can't really get worse, only better. Recent analysis from HSBC (Andrew Lobbenberg) estimate that even in their Corona ”high impact scenario”Norwegian woule ”..still be able to meet the book equity and liquidity covenants..”
Norwegian are already in battle mode with most of the network on part-time, recruitment freeze, and a absolute minimum expenditure across the network. Something most companies are only starting to implement under a lot more stressful circumstances.
Please also consider the fact that Norwegian are almost unhegded on fuel, another great advantage towards it's peers.
Lastly, I would like to point out that Norwegian has 18 max on the ground and (as the only company, something most Scandinavian analytics have forgotten) not received a single dime from Boeing yet. Negotiations are ongoing and a large cash amount are expected.
If this is not enough, professional investors can see through all of this, and think 6 months ahead..

[WHBM]

Originally Posted by directmisbi

Card aquirers have a hold back of almost 100 percent. Funds are released on the day pax are travelling. This has been the situation for more than a year. Receivables are standing at more than 11 billion nok. These are insane numbers and any normal company would have been bust long time ago if it wasn't for the work of a brilliant CFO.

This is difficult to understand. Merchant Card Acquirers know that even in the event of a failure, not everybody makes a Chargeback claim. It's not as if refunds are automatic, there's a convoluted process to go through. So 100% holding is over the top. There's a comparable scheme in the UK for train fare refunds in the event the train is cancelled/late more than a certain amount. Apparently claims run at about 10-15% of those entitled.

[Doors to Automatic]

Originally Posted by WHBM

This is difficult to understand. Merchant Card Acquirers know that even in the event of a failure, not everybody makes a Chargeback claim. It's not as if refunds are automatic, there's a convoluted process to go through. So 100% holding is over the top. There's a comparable scheme in the UK for train fare refunds in the event the train is cancelled/late more than a certain amount. Apparently claims run at about 10-15% of those entitled.

The railway claims include a range of options depending on how late the train is. For many tickets a slightly late train might only entitle the passenger a refund of a few pounds so most won’t bother. Likewise, if a train is cancelled there will probably be another one within an hour, so many people won’t bother claiming, or may not even know about the scheme. An airline collapse is a different matter. Someone stranded in San Francisco for example cannot just hop onto another plane. Most people would contact their credit card company I would think and certainly many more than 15%