Corona crisis weighs on Norwegian Air Shuttle – company narrowly escapes bankruptcy
In the past few weeks and months, recovery has become noticeable – also for the Norwegian share
Russia-Ukraine conflict creates uncertainty again
Norwegian narrowly escapes bankruptcy during the Corona crisis
With the emergence and spread of the coronavirus and the associated restrictions, such as travel restrictions, 2020 was an extraordinarily difficult year, especially for the travel and tourism industry and thus also for the aviation industry. High debts and the additional effects of the Corona crisis caused major problems for Norwegian Air Shuttle – the Norwegian airline struggled to survive financially.
In 2021, the company announced that it wanted to make its way into the future with a realignment: the airline no longer wanted to offer long-haul flights in the future, focus on short-haul routes in Scandinavia and Europe, significantly reduce its debt and also order aircraft in the order of 85 billion crowns have been cancelled.
Norwegian Air Shuttle narrowly avoided impending bankruptcy last year after a month-long struggle and completed its reorganization. The company announced that the fundraising to rescue Norwegian Air Shuttle has ended. The company had procured part of the fresh capital by issuing new shares. Thanks to the new financial resources, the Norwegians had also met the restructuring requirements of the relevant Irish and Norwegian courts.
Last June, after turbulent months, there was a sudden change of management at Norwegian. Geir Karlsen, who had previously served as Chief Financial Officer and successfully led Norwegian’s financial restructuring, replaced CEO Jacob Schram, who had been Norwegian’s boss since November 2019.
Corona crisis weighs on Norwegian Air Shuttle shares
The turbulence was also felt on the stock market. While the Norwegian share was still trading at around 1,800 Norwegian kroner on the Oslo stock exchange in February 2020, it fell further and further over the course of the Corona year and was at times still around 14 Norwegian kroner in December. Although it recovered slightly by the end of 2020, it was still well below its pre-crisis level at 40.61 Norwegian kroner. Another slump followed last year: Norwegian Air Shuttle shares fell by around 73.5 percent and ended 2021 at 10.75 Norwegian kroner.
Norwegian is back in the black – CEO confident
For Norwegian, however, there have been signs of a gradual recovery in recent weeks and months. In October last year, the company announced its figures for the past third quarter of 2021. Norwegian Air Shuttle reported a net profit of NOK 169 million compared to a loss of NOK 980 million in the same period last year. According to the company, almost 2.5 million passengers traveled with Norwegian in the third quarter of 2021 – in the same period last year there were one million people. ASK (Available Seat Kilometers) increased by 130 percent and passenger traffic by 177 percent compared to the same quarter last year. The occupancy rate was 73.1 percent, which corresponds to an increase of 12.5 percent. “Continued cost control across the business combined with low cash burn has resulted in a strong financial position going into the winter period with NOK 7.6 billion in cash and cash equivalents,” Norwegian wrote in a press release accompanying the figures.
The number of passengers continued to develop positively. Earlier in the year, the Norwegians said they carried 931,917 passengers in December 2021, compared to 129,664 in December 2020. The load factor was 71.3 percent. However, the month of December was still severely affected by government measures and restrictions. According to the company, 637,376 passengers flew with Norwegian in January, which is traditionally quieter, which also means a significant increase compared to January 2021, with 74,224 passengers. The occupancy rate was 70 percent. According to Norwegian, the January numbers were also affected by the rapid spread of the omicron variant of the corona virus and the associated measures imposed by the government.
Norwegian CEO Geir Karlsen is nonetheless positive about the future: “We know there is a pent-up demand for travel, the recent international announcements about reopening society and lifting restrictions have had a positive impact on how customers plan their trips for the spring and plan and book for the summer. Norwegian is ready to adjust capacity to accommodate this increased future demand and we look forward to welcoming our loyal customers on board,” he said in a press release in early February.
Norwegian stock: Russia-Ukraine conflict interrupts uptrend
In the recent past, the price of the Nowegian share then recovered somewhat. From mid-December to early February, Norwegian Air Shuttle stock climbed more than 40 percent, at times exceeding NOK 13. Also in the new year, the Norwegian share can show a positive trend so far. Since the beginning of the year, the share has increased by around 15 percent to 11.78 Norwegian kroner (as of the closing price on February 17, 2022). In the past few weeks, Norwegian shares should benefit above all from the data regarding the omicron variant of the corona virus – which is more contagious but is usually associated with a milder course – and the easing of corona measures in some countries to have. However, in the last few days the Norwegian share has fallen again somewhat.
Currently, the Norwegian course may suffer somewhat from the conflict between Russia and Ukraine. According to a company spokeswoman, Norwegian Air Shuttle does not fly to any destinations in Ukraine directly, but the airline does fly through parts of Ukrainian airspace on some routes. Norwegian therefore decided at the beginning of the week to avoid Ukrainian airspace from now on in order to guarantee the safety of its passengers, as the Norwegian airline confirmed to the German Press Agency. Esben Tumen, Norwegian head of communications, had previously informed the Norwegian broadcaster TV2 that the decision to take this measure was made after a comprehensive safety assessment, reports the German Press Agency. Safety always comes first and in general, since the downing of Malaysia Airlines flight MH17 in 2014, the company has not frequently flown over Ukraine and most of the eastern parts of the country.
What’s next for Norwegian shares
After the Norwegian share fell by around 10 percent to 11.56 Norwegian kroner on the Oslo stock exchange at the beginning of the week when the situation in the Russia-Ukraine conflict came to a head, the paper was unable to recover over the course of the week .
Against the background of the tense geopolitical situation, investors should probably be cautious about investing in the airline sector, recommends finanztrends.de. Should the situation deteriorate again or even lead to war, another correction could be imminent.
Editorial office finanzen.net
This text is for informational purposes only and does not constitute an investment recommendation. finanzen.net GmbH excludes any claims for recourse.
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