Norwegian Air files for Irish equivalent of bankruptcy protection
Low-cost carrier Norwegian filed for the equivalent of Chapter 11 bankruptcy protection in Ireland late on Wednesday afternoon.
The carrier, which is based outside of Oslo, initiated an examinership process in Ireland for its Norwegian Air International (NAI) Limited and Arctic Aviation Assets (AAA) subsidiaries. The examinership process is the equivalent of Chapter 11 in the U.S.
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Having initiated the process, Norwegian is protected from creditor action in Ireland under the court-supervised rescue for up to 100 days.
The airline expects the process to take up to five months, though it said that it has enough cash to last through the period.
"The purpose of the process is to reduce debt, rightsize the fleet and secure new capital," the airline said in a press release. "This reorganisation process protects the assets of the Norwegian group while allowing the company to focus on the rightsizing of the group."
During the examinership process, Norwegian will continue to operate its already-limited network. Additionally, it will continue to be traded on the Oslo Stock Exchange.
For Norwegian Reward members, the airline said that it's continuing to honor earning and redeeming CashPoints.
Related: What should you do with your miles if an airline is going bankrupt?
The airline entered the protection period at a strategic time. Last week, the Norwegian government turned a request for additional support by the airline, which has long struggled with profitability.
In pre-coronavirus times, the future of the airline was uncertain. However, that issue has only been exacerbated by the COVID-19 pandemic, which has largely grounded air travel around the world.
Related: Coronavirus crisis raises questions about the survival of already-struggling airlines
As we head into the winter season — a period that industry experts believe will be bleak — the carrier is protected for the time being. If anything, it's afforded itself the time to rethink its strategy going forward.
"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," Norwegian CEO Jacob Schram said in a statement. "Our aim is to find solutions with our stakeholders that will allow us to emerge as a financially stronger and secure airline."
While the airline resumed some short-haul operations earlier this year, it's keeping long-haul operations — including transatlantic flights to the U.S. — off the table until at least mid-2021.
Related: Norwegian says most flights will be grounded until April 2021
Even if those flights resume, it's expected to be a long time before the airline industry sees the same level of demand as it did before the pandemic. In fact, the International Air Transport Association (IATA) doesn't expect global passenger traffic to return to pre-COVID-19 levels until 2024.
Norwegian is the latest airline to fall victim to the coronavirus since the start of the pandemic. In May, LATAM and Avianca filed for bankruptcy protection in the U.S., and in Australia, Virgin Australia filed for voluntary administration — though it has since been purchased by Bain Capital.
Related: Did Virgin Atlantic really file for bankruptcy? Not entirely…
The largest regional airline in the U.K. Flybe, which was set to be acquired by Virgin Atlantic, entered voluntary administration in March.
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