Norwegian Air Cuts Costs to Stay Afloat

Dec 24, 2018

This post contains references to products from one or more of our advertisers. We may receive compensation when you click on links to those products. Terms apply to the offers listed on this page. For an explanation of our Advertising Policy, visit this page.

Numerous articles and blog posts have surfaced in recent weeks claiming that Norwegian Air, arguably the pioneer of successful low-cost trans-Atlantic flying, was on the verge of collapse. Over the weekend, Norwegian told us the company is healthy and talk of a demise is pure speculation, and on Monday it reiterated that its liquidity is satisfactory — in other words, it can still pay its suppliers.

This past year has been especially tough for low and ultra-low-cost rans-Atlantic carriers with Primera Air abruptly ceasing all operations in October and WOW Air facing collapse and being possibly rescued by Indigo Partners, the private equity firm that also owns Frontier and Volaris.

The cabin of a Norwegian 737 MAX 8 (Photo courtesy of Norwegian)

Norwegian may have  bought itself time, however, with a cost-cutting manuever just before the holiday break. Reuters is reporting that Norwegian has outlined a rigorous and comprehensive effort to “shore up its balance sheet” through cost-cutting measures. While the extent of these cost-cutting measures isn’t clear, it does appear that Norwegian plans to cut its fleet, cut routes, and overhaul its operations to run more profitably. The measures are reportedly going to save over $230 million. Norwegian outlined plans to refinance one of its Boeing 787s and confirmed financing for all future deliveries in 2019.

In a press release posted on the Oslo Stock Exchange, Norwegian Air said that issues with its Boeing 787s powered by Rolls-Royce engines also stunted profitability. Some Rolls-Royce powered 787s have had to be grounded for repairs, wreaking havoc with airline schedules all over the world. Norwegian has been forced to lease airplanes from other carriers to cover for its grounded 787s, at great cost.  

Norwegian said it has reached a confidential agreement with the engine manufacturer, presumably for a hefty compensation. Changes to capacity are also imminent. However, the airline has yet to make any of this information available.

When we reached out to Norwegian Air for information regarding potential cutbacks or route terminations, we were directed to a late-November press release highlighting a planned expansion. However, the airline’s most recent press release posted Monday mentions “adjusting capacity” and “divesting aircraft”. Norwegian confirmed that two of its aircraft will exit the fleet in early 2019.

Map from late November showing an US expansion (Image via Norwegian Air)

While little is known about what this means for passengers other than the likelihood of capacity and route cuts, there does appear to be a light at the end of the tunnel for the struggling budget carrier and its passengers. Norwegian Air also confirmed that talks of a joint venture for aircraft ownership “also continues with full force.”

Speculation of Norwegian Air’s imminent collapse came as it transpired that the airline would likely not be able to maintain a minimum of $171 million USD in book equity. Book equity “in its simplest terms, is the net worth of the company, or the total amount of capital that could be disbursed to investors if the company should liquidate all assets and pay all debts.” Norwegian Air’s new cost-cutting strategy dubbed “#Focus2019” appears to have accomplished the airline’s goal of maintaining that $171 million in book equity.

For now, Norwegian Air will live to see another year. Passengers booked on Norwegian Air flights in the coming months should continue to plan accordingly — it’s unikely the airline will park its planes in the immediate future.

Featured image by Zach Honig/TPG

Delta SkyMiles® Platinum American Express Card

Earn 90,000 bonus miles after you spend $3,000 in purchases within the first three months of card membership. Plus, earn a $200 statement credit after your first Delta purchase within the first three months. Offer ends 7/28/21.

With Status Boost™, earn 10,000 Medallion Qualification Miles (MQMs) after you spend $25,000 in purchases on your Card in a calendar year, up to two times per year getting you closer to Medallion Status. Earn 3X Miles on Delta purchases and purchases made directly with hotels, 2X Miles at restaurants and at U.S. supermarkets and earn 1X Mile on all other eligible purchases. Terms Apply.

Apply Now
More Things to Know
  • Limited Time Offer: Earn 90,000 Bonus Miles after spending $3,000 in purchases on your new Card in your first 3 months and a $200 statement credit after you make a Delta purchase with your new Card within your first 3 months. Offer expires 7/28/2021.
  • Limited Time Offer: Plus, get a 0% intro APR on purchases for 12 months from the date of account opening, then a variable 15.74%-24.74%. Offer expires 7/28/2021.
  • Accelerate your path to Medallion Status, with Status Boost®. Plus, in 2021 you can earn even more bonus Medallion® Qualification Miles (MQMs) to help you reach Medallion Status.
  • Earn 3X Miles on Delta purchases and purchases made directly with hotels.
  • Earn 2X Miles at restaurants worldwide, including takeout and delivery and at U.S. supermarkets.
  • Receive a Domestic Main Cabin round-trip companion certificate each year upon renewal of your Card. *Payment of the government imposed taxes and fees of no more than $75 for roundtrip domestic flights (for itineraries with up to four flight segments) is required. Baggage charges and other restrictions apply. See terms and conditions for details.
  • Enjoy your first checked bag free on Delta flights.
  • Fee Credit for Global Entry or TSA Pre✓®.
  • Enjoy an exclusive rate of $39 per person per visit to enter the Delta Sky Club® for you and up to two guests when traveling on a Delta flight.
  • No Foreign Transaction Fees.
  • $250 Annual Fee.
  • Terms Apply.
  • See Rates & Fees
Intro APR on Purchases
0% on purchases for 12 months
Regular APR
15.74%-24.74% Variable
Annual Fee
$250
Balance Transfer Fee
N/A
Recommended Credit
Excellent/Good
Terms and restrictions apply. See rates & fees.

Editorial Disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

Disclaimer: The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.