Norwegian Air Really Needs Cash — $350 Million, to Be Exact
Norwegian Air is looking for cash.
On the heels of a weak preliminary 2018 earnings report that showed an operating loss of 3.8 billion Swedish krona (about $419 million USD), the low-cost carrier said Tuesday it wants to raise $353 million in a share sale to shore up its shaky financial situation, Reuters reported.
Following the announcement, the airline's stock plummeted 30%, the most ever on record, according to Bloomberg.
Norwegian, well-known and beloved among flyers (even some TPG staffers) for its low transatlantic fares and relatively enjoyable inflight experience, has been on precarious financial footing after a period of rapid expansion that included unexpected engine trouble with its Dreamliners, rising fuel bills, fierce competition and a strong dollar. The carrier has been the fastest-growing low-cost carrier to date and, at the end of 2018, it said it would be slowing its expansion to shore up its financial situation.
In a statement on Tuesday, the airline's CEO, Bjørn Kjos, echoed the fact that Norwegian is shifting away from growth and toward cutting costs.
"We will now get in place a strengthened balance sheet that supports the further development of the company," Kjos said, according to the BBC. This strategy, he said, would "increase its competitiveness and stand-alone financial strength."
The shares sale, officially called a rights issue, is an opportunity for current shareholders to buy additional shares at a special price. Details like price and the amount of shares available will be announced on or around Feb. 18. Underwriting Norwegian's share sale are Kjos, the airline's chairman Bjørn H. Kise and shipping magnate John Fredriksen, the richest man in Norway.
Additionally, the airline reportedly said on a conference call that, to help significantly lower its spending, Norwegian is still working on a plan from last year to find a joint venture partner to share the ownership of its aircraft fleet, according to Reuters.
The search for cash comes days after British Airways' parent company, IAG, officially withdrew from a months-long bidding process to buy the budget airline. IAG had submitted two failed bids for the carrier in 2018, which would've provided a nearly critical cash infusion for the operation. Norwegian, however, rejected the bids because they were too low.
"Norwegian is in a race against time," BBC's Theo Leggett wrote. "It needs to become consistently profitable, before the money runs out."
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