Norway backed Norwegian Air’s survival plan on Thursday as Industry Minister Iselin Nyboe said that the government had no intention of being a shareholder but would stump up cash if private investors did too.
The heavily indebted budget carrier, which has been forced to ground all but six of its 138 aircraft due to the coronavirus crisis, asked the government for help last week.
Norwegian was granted bankruptcy protection by courts in Ireland and Norway last year as it seeks to shed much of its debt. It plans to end its long-haul service.
“The government’s support significantly increases our chances of raising new capital and getting us through the reconstruction process,” Norwegian Chief Executive Jacob Schram said in a statement.
Norwegian’s share price, which has plunged 98% in the last 12 months, were up 12% by 0932 GMT on Thursday.
The government’s participation, in the form of a hybrid loan, will be dependent on private investors taking part in a planned share issue, Nyboe said.
“The plan appears more robust than the one we rejected last October and we are therefore inclined to contribute,” she said, adding that the government does not aim to be a shareholder.
If its reconstruction succeeds, Norwegian has said it will initially cut its fleet to about 50 aircraft.
Norway’s change in policy came as a surprise but cannot be underestimated in an aviation market where state aid has been key to survival in 2020, Sydbank analysts said in a note.
“The support of the Norwegian government is an invaluable piece for the rescue of Norwegian,” Sydbank said. “With a magic wand, a Norwegian bankruptcy seems now, therefore, quite unlikely.”
The fleet could grow to 70 aircraft in 2022, depending on demand and potential travel restrictions, it has said.
“We still have a lot of work ahead of us, but a participation from the government underscores that we are heading in the right direction,” Schram said.
The plan depends on the company raising at least 4.5 billion Norwegian crowns ($532 million), primarily from institutional and strategic investors, and on the courts approving its restructuring, the government said.
It also depends on approval from Norway’s parliament. Several opposition parties have urged the government to help Norwegian weather the crisis.
(Reporting by Terje Solsvik; editing by Jason Neely and Alexander Smith)