Norwegian Air cuts flights, lays off staff amid survival concerns
European discounter Norwegian Air is slashing flights and staff amid new restrictions on travel between Europe and the U.S. and fears of the novel coronavirus pandemic.
The Oslo-based carrier is cancelling 4,000 flights through the end of May as it faces a dramatic drop in demand due to the spread of the disease COVID-19, Norwegian said Thursday. As part its cuts, the airline will temporarily layoff at least half its workforce and park 40% of its long-haul fleet.
The cuts at Norwegian follow the Trump administration's decision to severely restrict travel between Europe's Schengen Area, which does not include Ireland and the UK, and the U.S. for 30 days beginning Friday. The restrictions aim to slow the spread of COVID-19 in the U.S.
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Norwegian generated nearly a fifth of its revenue from U.S. flights in 2019.
"This is an unprecedented situation... the new restrictions imposed further pressure on an already difficult situation," Norwegian CEO Jacob Schram said in a statement. "We urge international governments to act now to ensure that the aviation industry can protect jobs and continue to be a vital part of the global economic recovery."
Schram's comments come as many question Norwegian's ability to withstand an extended coronavirus-related downturn.
Related: The new European travel restrictions will hit airlines hard
Raymond James analyst Savanthi Syth wrote on Thursday she believes the "abrupt" new travel restrictions imposed by the U.S. are "likely to further spur consolidation in the European industry with Norwegian's transatlantic markets (ex-U.K./Ireland) further stressing its already questionable going concern."
In a statement of investor confidence -- or lack thereof -- in Norwegian, the airline's market capitalization stood at 1.22 billion kroner ($123 million) after markets closed in Oslo on Thursday, according to Bloomberg data. This is less than the cost of one new Boeing 787, a jet that the airline operated 37 of at the end of 2019.
UK regional carrier Flybe has already shut down due to the drop in demand attributed to COVID-19 fears.
Related: UK's largest domestic airline Flybe collapses
One silver lining for Norwegian: the majority of its transatlantic flights originate from London Gatwick (LGW), which is not impacted by the latest travel restrictions. A plurality, or nearly 38%, of the airline's 8,650 flights to the U.S. departed from Gatwick in 2019, according to Cirium schedules.
Norwegian plans to continue its U.S. flights from London for the time being.
"Even with their low fares, it's going to be a challenge for Norwegian to convince people to travel," Atmosphere Research travel industry analyst and president Henry Harteveldt told TPG.
Related: European airlines slash US flight schedules amid new travel restrictions
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