October 27, 2020

Norwegian loses height and pulls scissors to cut costs | Economy

Norwegian loses height and pulls scissors to cut costs | Economy



Norwegian does not live a good time. The Norwegian company, founded and commanded by Bjørn Kjos, aviator, lawyer and business tycoon, suffers the consequences of some turbulence caused by unflattering economic figures. In such a hard-fought sector, its closest competitors even speculate about the survival capacity of the jewel in the Nordic crown.

The results of 2018 They have disappointed the market. The company's annual sales grew by 30% to stand at 40,265 million Norwegian crowns (about 4,125 million euros). Although the losses for the year (150 million euros) were 19% lower than those of 2017, the last quarter of last year was especially bad with red numbers for 308 million euros. In addition, the increase in costs caused the group to lose at operational level (EBITDA) 223 million in all 2018 euros when a year earlier the operating profit was six million. Alfonso Claver, Norwegian spokesman in Spain attributed these figures "fundamentally to the tough competition of the sector, but also to the expansion of the fleet, the hiring of 2,000 employees and the opening of long-haul routes." He adds: "This, added to the rise in the price of fuel and problems in the Rolls Royce engines of their Boeing 737 Dreamliners, which caused an extra expense when leasing aircraft with crews to avoid delays and cancellations."

As the problems never come alone, to the weakness of the results, Norwegian has recently suffered another setback. The IAG group (integrated by Iberia, British Airways, Aer Lingus and Vueling) he got tired of waiting in his long procession to take over the company. In April 2018, IAG acquired shares equivalent to 4.61% of the capital and later probed twice the possibility of taking control, offers that were rejected by the Nordic group when they considered "that they were not up to par." These negatives cooled the operation and on January 24 IAG explained in a relevant fact that it no longer had "the intention of making any acquisition and that, in due time, it would sell its participation". Upon hearing the news, investors rewarded with a slight rise in the shares of IAG, while the Norwegian price was deflated (in 2019 the shares already recorded a fall of 7.6%). Had he made the acquisition, IAG would have allowed him to eliminate a direct competitor and face Lufthansa, which also showed interest in the Norwegian last year.

Capital increase

Another measure that Norwegian has in place to alleviate its unstable financial situation is a capital increase of 308 million euros (NOK 3,000 million); a figure lower than its market capitalization, which amounts to 496 million euros. An already subscribed issue that begins on February 22 and extends until March 8. The main shareholders of Norwegian, Bjørn Kjos, CEO, and Bjørn Kise, chairman of the board of directors, have committed to subscribe rights worth 35.26 million euros. Other large shareholders of the company support it with 27.45 million euros (267 million crowns). The rest of the expansion has John Fredriksen behind, one of the most important shipowners in the world.

In early February part of the mystery that had led Norwegian to reject IAG's offer was uncovered. According to Bjørn Kise, chairman of the board of directors, told the Norwegian newspaper E24 +, "in November we made the decision to sell [sin citar el nombre del comprador], but the sale was postponed, among other reasons, by the uncertainty of the Brexit. " For Iván San Félix, Renta4 analyst, the news of the departure of IAG is surprising. "The decision may be due, on the one hand, to the uncertainty of the Brexit, which is complicating the regulatory scenario for European companies or, on the other, to the confidence of the IAG board in continuing to develop Level, the new low-cost airline. and a long journey that began its activity in 2017 and which will now be the direct competition of the Norwegian company ". If Norwegian continues to lose momentum, believe San Felix, Level will be able to grow and be less aggressive in prices, with the consequent benefit for IAG. "We will have to see how Norwegian faces the future after having burned its box to cope with its growth", warns this expert.

cuts

Currently, Norwegian is immersed in a cost reduction plan with which it intends to return to profitability and reduce expenses by 204 million euros. "We have optimized our structure of operational bases and routes and we have divested and postponed aircraft deliveries. In addition, we have initiated an internal cost reduction program that will return us to profitability, "Kjos explained.

Among the most immediate measures is the sale of two Airbus, until now rented to a third party, for 23 million. The delivery of 16 aircraft has also been postponed. "The 12 Boeing 737, which were due to arrive in 2020, are delayed to 2023 and 2024. This supposes a positive cash effect in 2019, due to the prepayments associated with the acquisition. Although the bulk of the effect will be seen next year. For its part, the delivery of the four Airbus A321 LongRange, which should be ready in 2019, is postponed to 2020, "says Claver. At the same time, the company plans to create a joint venture with an Asian partner to cover the purchase of these devices.

But the plan goes further. Norwegian will also close its bases in Rome (Fiumicino) and Stewart and Providence, in the US. In Spain it will close three of its eight bases: Palma de Mallorca in April, and Gran Canaria and Tenerife in November. It maintains those of Madrid, two in Barcelona, ​​Malaga and Alicante. A measure "that has no reverse because these bases are not profitable throughout the year due to its seasonality. Of course, flights from these cities and their connections are maintained, except Tenerife South-Rome.

A situation that affects 250 cabin crew and 124 pilots and that has led to an announcement of stoppages if the company "does not demonstrate" the objective causes that justify the closure of these bases. "Why not look for other exits? Before, it was said that money was not Norwegian's problem, but now, yes. Why pressure the pilots to accept an unelected transfer? "Argues Pierre Dornes, Norwegian delegate of the SEPLA pilot union. Enrique Iglesias, representative of the cabin crew of the USO union airline, adds: "The company has offered the workers individual transfers without having a negotiating table and outside the protection of a possible collective dismissal process. February 15 has announced the beginning of negotiations, we will see what happens. But his notification does not cite economic reasons, only productive and organizational ".

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