Norwegian Air Shuttle is filing for protection from creditors under the Irish equivalent of Chapter 11, as the pioneering low-cost airline becomes the aviation industry’s largest casualty of the pandemic.
Norwegian said late on Wednesday that two of its main subsidiaries would file for examinership in Ireland, a reorganisation process akin to filing for Chapter 11 in the US.
The airline said it would use the reorganisation to cut its vast debt pile, offload aircraft, and raise new capital in a process expected to take up to five months.
“Seeking protection to reorganise under Irish law is a decision that we have taken to secure the future of Norwegian for the benefit of our employees, customers and investors,” said Jacob Schram, Norwegian’s chief executive.
“Our aim is to find solutions with our stakeholders that will allow us to emerge as a financially stronger and secure airline.”
Norwegian’s fate was sealed last week when Norway’s centre-right government refused to give it a second bailout this year. Ministers in Oslo said they did not think it was a “sound use” of taxpayers’ money to prop up the low-cost airline that entered the crisis as one of the most vulnerable carriers due to a debt-fuelled rapid expansion into long-haul flights.
Founded in 1992 by an ex-fighter pilot, Bjorn Kjos, Norwegian turned into a rival of Ryanair and easyJet in the past two decades as it expanded from its Nordic base into low-cost travel in Europe and then flights to the US and Asia as well.
Lars-Daniel Westby, an analyst at SpareBank 1 Markets in Norway, who last week told the Financial Times Norwegian was likely to file for bankruptcy in Ireland or the US, has said it could split into a profitable short-haul European operation and a lossmaking long-haul business.
Norwegian said it would try to continue operating as normal with its current route network, which is severely limited by Covid-19 to a few domestic flights in Norway.
The airline said it believed it had enough cash to get through examinership, an Irish process that allows companies 100 days of protection from creditors to put together a rescue plan, subject to High Court approval.
Mr Schram said: “Our intent is clear. We will emerge from this process as a more financially secure and competitive airline, with a new financial structure, a right-sized fleet and improved customer offering.”
Norwegian converted NKr18bn ($2bn) from debt to equity under an earlier government-backed rescue plan, but still had NKr48bn of debt at the end of September.
Arctic Aviation Assets, a Norwegian subsidiary based in Dublin, handles aircraft financing and ownership for the airline, making Ireland an obvious location for its reorganisation.