Restructuring Norwegian Air to get government support
United posts $1.9 bln loss in pandemic-laden 4Q
COPENHAGEN, Denmark, Jan 21, (AP): Norway’s government said Thursday it will help ailing low-cost carrier Norwegian Air Shuttle - a Uturn from its previous refusal to do so - as long as the company manages to raise 4.5 billion kroner ($529 million) from other investors.
Trade Minister Iselin Nyboe said the government is now open to the idea of contributing money to a reconstructed Norwegian Air but expects private investors to pitch in as well.
“Norwegian’s new business plan involves strong interventions in the company’s debt structure and the inflow of 4 to 5 billion kroner in fresh capital. The plan appears more robust than the one we said no to in October,” she said.
The government said the support depended on the company receiving approval for its restructuring plan and noted that Norway’s Parliament had to clear any state aid.
Norwegian welcomed the move. Its CEO, Jacob Scram, said that “the government’s support significantly increases our chances of raising new capital and getting us through the reconstruction process we are currently in.”
Earlier this month, the airline said it will end its long-haul operations and instead focus on European destinations as it struggles with the fallout of the coronavirus pandemic and debt restructuring. The company presented a plan that cut its fleet from 140 aircraft to about 50.
In its plan, Norwegian wants to reduce its total debt to around 20 billion kroner ($2.36 billion), and plans to raise 4-5 billion kroner ($473 million-$590 million) in new capital, including through a rights issue and a private placement of shares.
The plan must be approved by a bankruptcy court in Ireland, where its planes are registered.
Like other airlines, its fleet is now mostly grounded as the pandemic has caused a near-total halt to global travel.
In May last year, the carrier got 3 billion kroner ($354 million) in loan guarantees from the Norwegian government as part of a restructuring plan. But a second call for aid was turned down on Nov. 9. The Norwegian government noted that the airline had been struggling financially even before the pandemic and said aid should be targeted first at healthy businesses.
Norwegian Air then announced it had to lay off another 1,600 staff.
“We believe a reconstructed Norwegian can be an important player in Norwegian aviation in the future, after the pandemic,” said Transport Minister Knut Arild Hareide.
NEW YORK, Jan 21, (AP): United Airlines said Wednesday that it finished one of the worst years in its history by losing $1.9 billion in the last three months of 2020, and it predicted more of the same in the first quarter of this year.
The loss was wider than analysts expected. The number of U.S. airline passengers had been building slowly since May but was hammered again when COVID-19 cases began surging in the fall, causing health experts to beg people to stay home.
United lost $7.1 billion in 2020, an amount exceeded only in 2005, when bankruptcy-related costs pushed the company to a $21 billion loss. Including debt and severance payments, the airline burned through $33 million in cash per day.
Revenue plunged 69% in the fourth quarter compared with a year earlier. United predicted a similar decrease - between 65% and 70% - in the first quarter of 2021, a slightly more pessimistic view than the one expressed by Delta Air Lines last week.
Analysts believe that Americans who have been cooped up since March are eager to travel again once it is safer.
But the slow pace of vaccinating Americans against COVID-19 and concern about new variants of the virus are hurting airline bookings.
Chicago-based United tried to reassure investors that it is laying the groundwork for a gradual recovery once the coronavirus outbreak is contained.
United said that it starting to cut $2 billion in annual structural costs from its operations. At the same time, the airline expressed confidence that crucial business travel will eventually bounce back, although not as quickly as leisure travel.
The combination will result in higher profit margins in 2023 than United saw in 2019, before the pandemic, the company predicted.
“Aggressively managing the challenges of 2020 depended on our innovation and fast-paced decision making,” CEO Scott Kirby said in a statement. “But, the truth is that COVID-19 has changed United Airlines forever.”
Peter McNally, an analyst for market-research firm Third Bridge, said United’s revenue forecast for the first quarter “is a little disappointing,” and he wants United to say more precisely when it might stop losing money. On the plus side, he noted that United has raised $26 billion from government and private sources and has nearly $20 billion in liquidity left to survive the pandemic.
“They are not running out of money,” McNally said. “There’s one thing we’ve learned from this crisis: The market doesn’t stop giving these airlines money.”
Excluding some one-time gains, United said its fourthquarter loss worked out to $7 per share. That was worse than the $6.62 per share loss predicted, on average, by 19 analysts in a FactSet survey. In the same quarter of 2019, United earned $641 million.
Revenue tumbled to $3.41 billion, nearly matching the $3.42 billion that was forecast by analysts. Revenue from international flights plunged 83%, compared with a 72% drop in domestic revenue.
About 56% of seats were sold on the average flight in the fourth quarter, and that was after United cut thousands of flights because of weak demand.
Cargo was a rare bright spot, with revenue up 77% from a year earlier, but cargo makes up a tiny part of United’s overall business.
The company scheduled a conference call with analysts on Thursday.
Shares of United Airlines Holdings Inc. rose 1% to $45.18 in regular trading before the financial results were released. During extended trading, they were down about 2%.