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Airline Norwegian quadruples losses in first half of 2020

Low-cost airline Norwegian Air Shuttle, which was struggling even before the Covid-19 pandemic paralysed the aviation industry, said Friday its losses quadrupled in the first half of 2020.

Published: 28 August 2020 14:19 CEST

Airline Norwegian quadruples losses in first half of 2020

Photo: AFP

With a 71 percent drop in passengers, 8,000 employees either furloughed or cut, and 140 planes grounded, Norwegian has been hit hard by the coronavirus crisis which forced it into an unwanted “hibernation”.

“This is the biggest crisis in the history of aviation since World War II and that has of course affected us,” chief executive Jacob Schram said as he presented the earnings report.

Europe's third-biggest no-frills airline posted a net loss of 5.4 billion kroner (515 million euros) for the first six months of the year, compared to a loss of 1.4 billion a year earlier. In the second quarter alone, the company lost 1.5 billion kroner.

Norwegian has avoided bankruptcy thanks to a rescue package allowing it to convert part of its large debt into new shares, thereby meeting the Norwegian government's condition for it to receive guarantees worth three billion kroner.

“There is no doubt that… we will need more help… to get through the winter,” Schram said.

Norwegian's share price was down by seven percent in midday trading. The share has lost 97 percent of its value since the beginning of the year.

The company has also launched a capital increase — for the fourth time in two years — cut costs, placed its Swedish and Danish subsidiaries in bankruptcy, sold off aircraft, and cancelled an order for 97 Boeing airplanes — 92 737 MAXs and five 787 Dreamliners.

Sales for the first half fell by 65 percent, to 7.14 billion kroner.

The company used only seven or eight planes for Norwegian domestic flights for several months during the height of the pandemic, but reopened 76 routes as of July 1st and 20 aircraft are now in use.

While the company said it plans to gradually increase traffic, it does not expect operations to return to normal until 2022.

READ ALSO: Norwegian to restart 76 routes from next month

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How is Denmark's economy handling inflation and rate rises?

The council, led by four university economics professors commonly referred to as “the wise men” or vismænd in Denmark, gave a much rosier picture of Denmark’s economy in its spring report, published on Tuesday, than it did in its autumn report last year.

“We, like many others, are surprised by how employment continues to rise despite inflation and higher interest rates,” the chair or ‘chief wise man’, Carl-Johan Dalgaard, said in a press release.

“A significant drop in energy prices and a very positive development in exports mean that things have gone better than feared, and as it looks now, the slowdown will therefore be more subdued than we estimated in the autumn.”

In the English summary of its report, the council noted that in the autumn, market expectations were that energy prices would remain at a high level, with “a real concern for energy supply shortages in the winter of 2022/23”.

That the slowdown has been more subdued, it continued was largely due to a significant drop in energy prices compared to the levels seen in late summer 2022, and compared to the market expectations for 2023.

The council now expects Denmark’s GDP growth to slow to 1 percent in 2023 rather than for the economy to shrink by 0.2 percent, as it predicted in the autumn.

In 2024, it expects the growth rate to remain the same as in 2003, with another year of 1 percent GDP growth. In its autumn report it expected weaker growth of 0.6 percent in 2024.

What is the outlook for employment?

In the autumn, the expert group estimated that employment in Denmark would decrease by 100,000 people towards the end of the 2023, with employment in 2024 about 1 percent below the estimated structural level.

Now, instead, it expects employment will fall by just 50,000 people by 2025.

What does the expert group’s outlook mean for interest rates and government spending?

Denmark’s finance minister Nikolai Wammen came in for some gentle criticism, with the experts judging that “the 2023 Finance Act, which was adopted in May, should have been tighter”. The current government’s fiscal policy, it concludes “has not contributed to countering domestic inflationary pressures”.

The experts expect inflation to stay above 2 percent in 2023 and 2024 and not to fall below 2 percent until 2025.

If the government decides to follow the council’s advice, the budget in 2024 will have to be at least as tight, if not tighter than that of 2023.

“Fiscal policy in 2024 should not contribute to increasing demand pressure, rather the opposite,” they write.

The council also questioned the evidence justifying abolishing the Great Prayer Day holiday, which Denmark’s government has claimed will permanently increase the labour supply by 8,500 full time workers.

“The council assumes that the abolition of Great Prayer Day will have a short-term positive effect on the labour supply, while there is no evidence of a long-term effect.”

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