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Murdoughnut
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Re: Norwegian Puts 4 Subsidiaries Into Bankruptcy

Mon Apr 20, 2020 7:38 pm

Opus99 wrote:
Airlines are literally being exterminated everywhere


Yeah, but you can argue that we had too many airlines. An unusually friendly set of circumstances allowed carriers like Norwegian to operate without making a profit by poaching pax from other carriers and securing continuance financing. That was never sustainable when the economy turned tails.
 
Someone83
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Re: Norwegian Puts 4 Subsidiaries Into Bankruptcy

Mon Apr 20, 2020 8:08 pm

Dutchy wrote:

Well, Norwegian is owned by the Norwegian investment fund, which in turn is "owned" by the Norwegian government. So I guess it would be a "no".


This statement is a little inaccurate, but I’ll explain. You’re correct that a government owned fund is currently largest shareholder, after Kjos and his partner was [probably forced] to sell their share. Not sure about the exact amount but was about 8,5% at year end

However it should be noted a few things: this fund is basically a domestic pension fund set up by the government (OK, they also have a few Nordic investments) but is more or less acting as independent institutional investor. Which also happen to be the largest on the Oslo Stock Exchange. In most of the largest companies they usually have an ownership between 3% and 15%. Typically around 6-8%. While it does follow politically decided rules and regulations, it is not run as a political tool. Mainly exception is that they usually vote against things like «excess management pay» etc
 
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kjeld0d
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Re: Norwegian Puts 4 Subsidiaries Into Bankruptcy

Mon Apr 20, 2020 9:09 pm

flyby519 wrote:
PepeTheFrog wrote:
The second hand market will be flooded with 787s.


Do these staffing subsidiaries hold any actual assets like planes/slots/etc? It sounds like purely a staffing agency with pilots/FAs. What an insane structure, declare bankruptcy for your employees but the main corporate entity can continue (and re-hire with 1st year wages/salaries later)


It should have been illegal for them to operate this way in the first place. Taking advantage of "Flags of convenience" to undermine labour rules and standards just so that a ticket is "more affordable". Flying should not be cheap when you consider all the costs of operating.
 
marcogr12
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Re: Norwegian Puts 4 Subsidiaries Into Bankruptcy

Mon Apr 20, 2020 9:30 pm

Do furloughed employees receive some kind of compensation, like 80% of their monthly salary or will they just have to make do with their savings until the company calls them back to work?
Flying is breathing..no planes no life..
 
arcticcruiser
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Re: Norwegian Puts 4 Subsidiaries Into Bankruptcy

Mon Apr 20, 2020 10:02 pm

marcogr12 wrote:
Do furloughed employees receive some kind of compensation, like 80% of their monthly salary or will they just have to make do with their savings until the company calls them back to work?


No one is "furloughed" (a strictly american term) in the Norwegian maze. These companies are bankrupt. Perhaps they will get some pittance of their former salaries from some kind of social funds (if they are lucky) for a few months. Then on the dole. 80%? You´ve gotta be kidding.
 
gen2stew
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Re: Norwegian Puts 4 Subsidiaries Into Bankruptcy

Mon Apr 20, 2020 10:05 pm

kjeld0d wrote:
flyby519 wrote:
PepeTheFrog wrote:
The second hand market will be flooded with 787s.




It should have been illegal for them to operate this way in the first place. Taking advantage of "Flags of convenience" to undermine labour rules and standards just so that a ticket is "more affordable". Flying should not be cheap when you consider all the costs of operating.



NO TRUER WORDS HAVE BEEN PUT TO PRINT IN A LONG TIME. AMEN!
I don't know why blessings wear disguises. If I were a blessing, I'd run around nude!
 
marcogr12
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Re: Norwegian Puts 4 Subsidiaries Into Bankruptcy

Mon Apr 20, 2020 10:35 pm

arcticcruiser wrote:
marcogr12 wrote:
Do furloughed employees receive some kind of compensation, like 80% of their monthly salary or will they just have to make do with their savings until the company calls them back to work?


No one is "furloughed" (a strictly american term) in the Norwegian maze. These companies are bankrupt. Perhaps they will get some pittance of their former salaries from some kind of social funds (if they are lucky) for a few months. Then on the dole. 80%? You´ve gotta be kidding.
Someone83 wrote:
FLALEFTY wrote:
That said, furloughing most of their pilots, ground staffers, dispatchers and cabin crew seems like a pretty drastic move. This has to be even more disturbing to their many aircraft lessors, who must be in emergency meetings with their legal staff weighing their options. Given that they currently have only 6 aircraft operating across all their subsidiares must be cause for alarm for their creditors. It seems like this shell game of operating subsidiaries in a variety of countries is beginning to backfire on Norwegian in terms of obtaining government bailouts, much like is happening with the big operators in the cruise industry (one of the key models for their business plan).


Absolutely, but as their current operation just is a few aircraft operating domestically in Norway, they have at least to try to adjust the part of the cost base, they can influence. Thus most of their staff here in Norway are furloughed. They really don't have any option, and all the other carriers here in Norway have done more or less the same

And yes, it is disturbing for their lessors and creditors, and normally they would probably have tried to get their aircraft back. However, these days aren't normal, and today, it is more or less impossible to find a new lessee for the aircraft or for the creditors to get back much more than a few cents on the dollar. But this is a rather paradox these days, that this is actually one of the few remaining "cards" that Norwegian has left in their hands.


I didnt say it..It was mentioned in the previous posts as you can see by other members, for the norwegian branch..
Flying is breathing..no planes no life..
 
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FLALEFTY
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Re: Norwegian Puts 4 Subsidiaries Into Bankruptcy

Tue Apr 21, 2020 12:03 am

DDR wrote:
This is confusing. So, the airline did not file bankruptcy, rather a staffing company they own did? Does that mean the crew members who were employed by the staffing agency are laid off? Will this affect flights or will Norwegian just use other crews to operate flights?


Norwegian's business model is similar to the cruise industry. And one of the key tricks that keeps the cruise industry humming & profitable is to use independent staffing agencies to provide crews for their ships. This allows cruise lines to avoid Western labor laws, including limits on work week durations and the requirement to pay Western countries' minimum wage rates. Norwegian modified this to supply their airlines with positions such as pilots, dispatchers, mechanics, ground and cabin crew, hence the deals with "semi-independent" staffing firms. Given the nature of the airline business, these staffing firms probably have to deal more fairly with highly-skilled positions such as pilots, mechanics and dispatchers, but I imagine they still have employee-unfriendly tactics.

If you think about it, Norwegian functions more like an investment bank, than an airline company. They set up semi-autonomous subsidiaries, whose primary mission to the parent company is to provide "mother" Norwegian a profit check every quarter. This is not unusual in America either. One of my former aerospace employers was a semi-autonomous subsidiary of L3 Communications (since merged with Harris Corp. to form L3 Harris), which was a Wall Street-based investment bank dealing is small-to-medium aerospace and defense contractors.
 
CobaltScar
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Re: Norwegian Puts 4 Subsidiaries Into Bankruptcy

Tue Apr 21, 2020 12:47 am

https://www.afacwa.org/u_s_based_norweg ... orever_afa

Article says the USA based Norwegian crew ratified their contract and the same day (today??) the airline got rid of them all and closed the U.S. bases.

very slimy company
 
T4thH
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Re: Norwegian Puts 4 Subsidiaries Into Bankruptcy

Tue Apr 21, 2020 1:36 am

CobaltScar wrote:
https://www.afacwa.org/u_s_based_norwegian_flight_attendants_forever_afa

Article says the USA based Norwegian crew ratified their contract and the same day (today??) the airline got rid of them all and closed the U.S. bases.

very slimy company

Oh, this will not last for long. If Norwegian will not get any money/reconvert plan is accepted till end of Apr-2020, they will be finished. Than also the rest of the Norwegian staff will loose their jobs.

And till now, it seem, the banks/debtees do not believe in the rescue plan (Norwegian is planning to reconvert 4.3 billion $ debts into stocks). The stocks are already worthless, the market value of Norwegian was already 5 days ago down to 150 million $.
Source is in German: https://www.airliners.de/gewagte-umschuldung-norwegian-air/54841

So it seems, the US crews "just get a 11 days head start, to look for a new job opportunity"...If you see it in this way, it immediately sounds much better then: "You are fired...."
 
dcajet
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Re: Norwegian Puts 4 Subsidiaries Into Bankruptcy

Tue Apr 21, 2020 2:42 am

debonair wrote:
enilria wrote:
The reaper is closing in sadly.


Which airlines/AOCs are affected - if I am right in the moment active are:

Norwegian Air Shuttle ASA DY
Norwegian Air International D8
Norwegian Air UK Ltd DI
Norwegian Air Argentina S.A.U DN
Norwegian Air Sweden LE
Norwegian Air Norway DH


The Argentina operation has been sold to JetSmart Argentina.
Keep calm and wash your hands.
 
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LuxuryTravelled
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Re: Norwegian Puts 4 Subsidiaries Into Bankruptcy

Tue Apr 21, 2020 6:28 am

The reason for Norwegian doing this was because neither Sweden or Denmark are offering Job Retention Schemes, so none of the staff could be furloughed.
 
olle
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Re: Norwegian Puts 4 Subsidiaries Into Bankruptcy

Tue Apr 21, 2020 6:58 am

LuxuryTravelled wrote:
The reason for Norwegian doing this was because neither Sweden or Denmark are offering Job Retention Schemes, so none of the staff could be furloughed.


This is very strange..

Swedish governm,ent offers "permittering" instead of "friställd" furloughed meaning that the government handles 80% of the employee cost.

Norwegian must have been in such state that not evenm handling 20% was possible.

https://www.regeringen.se/artiklar/2020 ... mittering/


On April 2, Parliament voted in favor of the Government's proposal for a system for short-term permits. The new law comes into force on April 7, but the support can be approved retroactively from March 16. On April 14, the government announced that it will further strengthen the system so that working hours can be reduced by up to 80 percent.
 
Someone83
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Re: Norwegian Puts 4 Subsidiaries Into Bankruptcy

Tue Apr 21, 2020 7:21 am

olle wrote:
LuxuryTravelled wrote:
The reason for Norwegian doing this was because neither Sweden or Denmark are offering Job Retention Schemes, so none of the staff could be furloughed.


This is very strange..

Swedish governm,ent offers "permittering" instead of "friställd" furloughed meaning that the government handles 80% of the employee cost.

Norwegian must have been in such state that not evenm handling 20% was possible.

https://www.regeringen.se/artiklar/2020 ... mittering/


On April 2, Parliament voted in favor of the Government's proposal for a system for short-term permits. The new law comes into force on April 7, but the support can be approved retroactively from March 16. On April 14, the government announced that it will further strengthen the system so that working hours can be reduced by up to 80 percent.


The key here is «up to 80%», that doesn’t mean 80% for all. There is also a maximum wage limit which at least the pilots is above. Contrary to many beliefs Norwegians own pilots have a rather decent wage
 
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AAR
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Re: Norwegian Puts 4 Subsidiaries Into Bankruptcy

Tue Apr 21, 2020 7:23 am

Norwegian Air Shuttle must get out of the market, first they burned the shareholders money off, now they want to burn the tax payers money off - we got an over capacity in the market and some must disappear and fine if Norwegian go bust. Danish and Swedish tax payers shall not pay to a company which has not made profits for years. I feel sad for the pilots who will find it difficult to find a new job with over capacity world wide... but everyone knew Norwegian would do belly up.... to bring it down and short if a business has a higher CASK than RASK end of life will occur
 
olle
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Re: Norwegian Puts 4 Subsidiaries Into Bankruptcy

Tue Apr 21, 2020 7:41 am

AAR wrote:
Norwegian Air Shuttle must get out of the market, first they burned the shareholders money off, now they want to burn the tax payers money off - we got an over capacity in the market and some must disappear and fine if Norwegian go bust. Danish and Swedish tax payers shall not pay to a company which has not made profits for years. I feel sad for the pilots who will find it difficult to find a new job with over capacity world wide... but everyone knew Norwegian would do belly up.... to bring it down and short if a business has a higher CASK than RASK end of life will occur


But the swedish government offer 80% but Norwegian demands 100%..... The rest of business seems Ok with that...

I have a sensation that it might be a Norwegian vs Swedish danish culture problem here... Or it is as simple that Norwegian want a unique solution and Swedish government will never accept that.
 
Etika
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Re: Norwegian Puts 4 Subsidiaries Into Bankruptcy

Tue Apr 21, 2020 10:12 am

I have hard time seeing Norwegian getting the debtors to agree to convert to equity after this. These moves (including the ending of the agreement with OSM Aviation) means that about 2/3 of Norwegian's pilots are out. Even if the company somehow survives, it will be down to 1/3 of what it was and rebuilding will not be easy after this. Thus, the possible value of any equity is far less than before. And it is of course 0 if Norwegian ends up in bankruptcy after the conversion.

With the big downside risk and upside potential reduced by this move, the economical sense for agreeing to debt-to-equity swap seems even more shaky. I would not be surprised if the debtors feel that the best return of investment is try to recoup what is possible via liquidation even in the current situation rather than taking the risk of losing that, too.
 
Blerg
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Re: Norwegian Puts 4 Subsidiaries Into Bankruptcy

Tue Apr 21, 2020 10:30 am

Could it be that creditors have asked them to do this before they give them a lifeline? They might be forcing them to downsize to a more manageable level.
 
Someone83
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Re: Norwegian Puts 4 Subsidiaries Into Bankruptcy

Tue Apr 21, 2020 11:15 am

Blerg wrote:
Could it be that creditors have asked them to do this before they give them a lifeline? They might be forcing them to downsize to a more manageable level.


I think this is a valid assumption
 
Galore
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Re: Norwegian Puts 4 Subsidiaries Into Bankruptcy

Tue Apr 21, 2020 12:46 pm

WayexTDI wrote:
SRT75 wrote:
PepeTheFrog wrote:
The second hand market will be flooded with 787s.


Not sure. Public may want bigger planes with lower density for higher price. Remember the late 90s when "34 inches in coach" was the fad? Might be easier to sell a lower-density 787 with fewer frequencies than a jam-packed 321 or 737MAX flying trans-Atlantic with 31" pitch and people sitting on top of each other when everyone wants to keep their distance.

Unfortunately, not Norwegian's business model, but maybe the legacy carriers will pick that strategy up.

The vast majority of the public has shown in the past 15-20 years they only want one thing: cheap tickets.
Furthermore, with the economic crisis worldwide, even less people than before will be able and willing to afford higher priced tickets.


I don’t think it’s that clear cut. Some European cities have (had) -for example Vienna- a very cut throat LCC competitive environment that supports this argument. Here in Dallas, fares aren’t as cheap and planes are (were) still packed.

The problem is that no airline competes on quality except in premium cabins. In coach, they all, LCC and Full Service legacy, deteriorated service to a very low level - evidenced by the often expressed opinion that “flying sucks nowadays”.

The only steps lately to address this quality problem was “premium economy” on long haul. And that was always full when I flew. There’s also the odd-one our Spirit of all airlines that offers an option with their big front seats that is actually reasonable (for the customer - don’t know if that is economical for Spirit). And these are always booked when I fly.

What else are they trying? Charge $100 for 3” more legroom? Everything else the same (minimal) service? I (6ft, 180lbs) still fit in a 30” pitch coach seat. I never understood why the pitch is the issue unless one is much taller than 6ft. My problem is with seat width, not knee room. So on the legacies, I always go for the cheapest ticket because *they all have a uncomfortable product*. I need to pay 5x for first class if I want comfort. And that isn’t going to make sense for my budget. The 3” extra pitch for $100 one way still gives me a 17” narrow seat where I bump a stranger’s shoulder (or gut).

—> there is simply no widely available higher quality product for a reasonable price. It’s either cheap and terrible or super expensive and comfortable on domestic flights. When has an airline on a large scale really tried to compete on service and quality for a reasonable up charge in the USA? I don’t think this really has been tried.

People already pay 100% more in Dallas vs. Vienna for comparable distance flights. And these flights were full. So it can’t be just about the money.
 
Blerg
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Re: Norwegian Puts 4 Subsidiaries Into Bankruptcy

Tue Apr 21, 2020 1:13 pm

Their UK staff was told they will not receive April salaries because the airline doesn't have money to pay them.

https://www.theguardian.com/business/20 ... y-covid-19

Ouch.
 
WayexTDI
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Re: Norwegian Puts 4 Subsidiaries Into Bankruptcy

Tue Apr 21, 2020 2:27 pm

Galore wrote:
WayexTDI wrote:
SRT75 wrote:

Not sure. Public may want bigger planes with lower density for higher price. Remember the late 90s when "34 inches in coach" was the fad? Might be easier to sell a lower-density 787 with fewer frequencies than a jam-packed 321 or 737MAX flying trans-Atlantic with 31" pitch and people sitting on top of each other when everyone wants to keep their distance.

Unfortunately, not Norwegian's business model, but maybe the legacy carriers will pick that strategy up.

The vast majority of the public has shown in the past 15-20 years they only want one thing: cheap tickets.
Furthermore, with the economic crisis worldwide, even less people than before will be able and willing to afford higher priced tickets.


I don’t think it’s that clear cut. Some European cities have (had) -for example Vienna- a very cut throat LCC competitive environment that supports this argument. Here in Dallas, fares aren’t as cheap and planes are (were) still packed.

The problem is that no airline competes on quality except in premium cabins. In coach, they all, LCC and Full Service legacy, deteriorated service to a very low level - evidenced by the often expressed opinion that “flying sucks nowadays”.

The only steps lately to address this quality problem was “premium economy” on long haul. And that was always full when I flew. There’s also the odd-one our Spirit of all airlines that offers an option with their big front seats that is actually reasonable (for the customer - don’t know if that is economical for Spirit). And these are always booked when I fly.

What else are they trying? Charge $100 for 3” more legroom? Everything else the same (minimal) service? I (6ft, 180lbs) still fit in a 30” pitch coach seat. I never understood why the pitch is the issue unless one is much taller than 6ft. My problem is with seat width, not knee room. So on the legacies, I always go for the cheapest ticket because *they all have a uncomfortable product*. I need to pay 5x for first class if I want comfort. And that isn’t going to make sense for my budget. The 3” extra pitch for $100 one way still gives me a 17” narrow seat where I bump a stranger’s shoulder (or gut).

—> there is simply no widely available higher quality product for a reasonable price. It’s either cheap and terrible or super expensive and comfortable on domestic flights. When has an airline on a large scale really tried to compete on service and quality for a reasonable up charge in the USA? I don’t think this really has been tried.

People already pay 100% more in Dallas vs. Vienna for comparable distance flights. And these flights were full. So it can’t be just about the money.

That's because it's Economics-101: regardless of the price in Dallas vs Vienna, the planes are packed. That means the demand is on par with or higher than the supply, commanding higher prices. People pay that price because there's no cheaper alternatives.
 
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Revelation
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Re: Norwegian Puts 4 Subsidiaries Into Bankruptcy

Tue Apr 21, 2020 3:39 pm

kjeld0d wrote:
flyby519 wrote:
Do these staffing subsidiaries hold any actual assets like planes/slots/etc? It sounds like purely a staffing agency with pilots/FAs. What an insane structure, declare bankruptcy for your employees but the main corporate entity can continue (and re-hire with 1st year wages/salaries later)

It should have been illegal for them to operate this way in the first place. Taking advantage of "Flags of convenience" to undermine labour rules and standards just so that a ticket is "more affordable". Flying should not be cheap when you consider all the costs of operating.

Yet it wasn't then, and still isn't.

I fully expect someone to try it all over again, hopefully with a bit better management.

The current crisis is showing this kind of corporate structure is pretty resilient. The strategy of having "independent" subsidiaries that one can sacrifice in a crisis is "working". If Norwegian didn't have as much debt as it already has, it probably would be surviving the current crisis. The main problem is that Norwegian just got over its skis, grew faster than their market did, took on too much debt. Their leadership has admitted this. And, of course, there is no accounting for a global pandemic.

The legacies are leaving too much money on the table in the TATL market. Someone with a bit more discipline will make a business model similar to Norwegian's work, eventually. As for now, getting rid of Norwegian might make that happen sooner than later. The airplanes will be available, and people can learn lessons from what Norwegian did wrong and what they did right. Also, newer and perhaps more appropriate equipment such as A321XLR and A330NEO will be available. Of course this might not happen for another 3-5 years, but I am confident it will eventually happen.
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Wake now, discover that you are the song that the morning brings
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PatrickZ80
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Re: Norwegian Puts 4 Subsidiaries Into Bankruptcy

Tue Apr 21, 2020 4:24 pm

Revelation wrote:
Yet it wasn't then, and still isn't.

I fully expect someone to try it all over again, hopefully with a bit better management.

The current crisis is showing this kind of corporate structure is pretty resilient. The strategy of having "independent" subsidiaries that one can sacrifice in a crisis is "working". If Norwegian didn't have as much debt as it already has, it probably would be surviving the current crisis. The main problem is that Norwegian just got over its skis, grew faster than their market did, took on too much debt. Their leadership has admitted this. And, of course, there is no accounting for a global pandemic.

The legacies are leaving too much money on the table in the TATL market. Someone with a bit more discipline will make a business model similar to Norwegian's work, eventually. As for now, getting rid of Norwegian might make that happen sooner than later. The airplanes will be available, and people can learn lessons from what Norwegian did wrong and what they did right. Also, newer and perhaps more appropriate equipment such as A321XLR and A330NEO will be available. Of course this might not happen for another 3-5 years, but I am confident it will eventually happen.


I fully agree to that.

Talking about that debt, would it perhaps have been possible for Norwegian to spread their debt over their subsidiaries instead of on the main company? Then if the subsidiaries go belly-up, the debt is gone. I know this is kind of shady, but it happens. The decision to sacrifice the subsidiaries wasn't made overnight, they saw this coming. As such, they had plenty of time to "refinance" their debt.
 
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lightsaber
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Re: Norwegian Puts 4 Subsidiaries Into Bankruptcy

Tue Apr 21, 2020 9:50 pm

PatrickZ80 wrote:
Revelation wrote:
Yet it wasn't then, and still isn't.

I fully expect someone to try it all over again, hopefully with a bit better management.

The current crisis is showing this kind of corporate structure is pretty resilient. The strategy of having "independent" subsidiaries that one can sacrifice in a crisis is "working". If Norwegian didn't have as much debt as it already has, it probably would be surviving the current crisis. The main problem is that Norwegian just got over its skis, grew faster than their market did, took on too much debt. Their leadership has admitted this. And, of course, there is no accounting for a global pandemic.

The legacies are leaving too much money on the table in the TATL market. Someone with a bit more discipline will make a business model similar to Norwegian's work, eventually. As for now, getting rid of Norwegian might make that happen sooner than later. The airplanes will be available, and people can learn lessons from what Norwegian did wrong and what they did right. Also, newer and perhaps more appropriate equipment such as A321XLR and A330NEO will be available. Of course this might not happen for another 3-5 years, but I am confident it will eventually happen.


I fully agree to that.

Talking about that debt, would it perhaps have been possible for Norwegian to spread their debt over their subsidiaries instead of on the main company? Then if the subsidiaries go belly-up, the debt is gone. I know this is kind of shady, but it happens. The decision to sacrifice the subsidiaries wasn't made overnight, they saw this coming. As such, they had plenty of time to "refinance" their debt.

The companies loaning wouldn't have accepted the asset less subsidiaries being responsible for the debt.

I have friends who work large bank loans and credit lines. The due diligence is pretty extreme. Your debt scheme wouldn't have been agreed to.

Looking at the debt for equity, I doubt the lending companies will receive a better offer.

https://www.cnbc.com/amp/2020/04/20/nor ... -axed.html

I expect most aircraft to be repossessed. Norwegian will probably restart needing fewer pilots and crew than are on remaining staff. Ironically, this might leave them healthy. It is a bizarre bankruptcy.

Lightsaber
Winter is coming.
 
JayinKitsap
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Re: Norwegian Puts 4 Subsidiaries Into Bankruptcy

Wed Apr 22, 2020 6:17 am

lightsaber wrote:
PatrickZ80 wrote:
Revelation wrote:
Yet it wasn't then, and still isn't.

I fully expect someone to try it all over again, hopefully with a bit better management.

The current crisis is showing this kind of corporate structure is pretty resilient. The strategy of having "independent" subsidiaries that one can sacrifice in a crisis is "working". If Norwegian didn't have as much debt as it already has, it probably would be surviving the current crisis. The main problem is that Norwegian just got over its skis, grew faster than their market did, took on too much debt. Their leadership has admitted this. And, of course, there is no accounting for a global pandemic.

The legacies are leaving too much money on the table in the TATL market. Someone with a bit more discipline will make a business model similar to Norwegian's work, eventually. As for now, getting rid of Norwegian might make that happen sooner than later. The airplanes will be available, and people can learn lessons from what Norwegian did wrong and what they did right. Also, newer and perhaps more appropriate equipment such as A321XLR and A330NEO will be available. Of course this might not happen for another 3-5 years, but I am confident it will eventually happen.


I fully agree to that.

Talking about that debt, would it perhaps have been possible for Norwegian to spread their debt over their subsidiaries instead of on the main company? Then if the subsidiaries go belly-up, the debt is gone. I know this is kind of shady, but it happens. The decision to sacrifice the subsidiaries wasn't made overnight, they saw this coming. As such, they had plenty of time to "refinance" their debt.

The companies loaning wouldn't have accepted the asset less subsidiaries being responsible for the debt.

I have friends who work large bank loans and credit lines. The due diligence is pretty extreme. Your debt scheme wouldn't have been agreed to.

Looking at the debt for equity, I doubt the lending companies will receive a better offer.

https://www.cnbc.com/amp/2020/04/20/nor ... -axed.html

I expect most aircraft to be repossessed. Norwegian will probably restart needing fewer pilots and crew than are on remaining staff. Ironically, this might leave them healthy. It is a bizarre bankruptcy.

Lightsaber


A few years after the 2008 crash where 'liar' loans (stated income) cratered in the US home mortgages, I went to refinance, the appraiser took a picture and measured each closet, I had to finish 100 SF of siding to complete the house as they would not touch an unfinished house. I'm self employed and my business got the Procto exam. Commercial Real Estate and equipment financing is even more thorough. All of the banks, their insurer's that failed or were bailed out, had very tough terms for those bailouts. I can't remember the name but a huge Aircraft Leasing firm cratered then, and GE financial assets also bled tank cars of red ink.

As you noted, terms are tough - recall Jet's collapse last year, quite tough but India's banking system is still crazy. Any leased plane was getting seized if it landed in the EU, Australia, the US and many other countries.

The one hope that Norwegian has is that the lenders really really don't want the planes back, so a deal may be found.
 
jonas12345
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Re: DY Financial Discussion - 2020

Mon Apr 27, 2020 10:49 am

DY have released their plans for restructuring:

https://www.norwegian.com/globalassets/documents/other/norwegian-air-shuttle-asa_presentation-to-bondholders_27-april-2020.pdf

It looks brutal...holding lessors hostage
 
leghorn
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Re: DY Financial Discussion - 2020

Mon Apr 27, 2020 11:01 am

Competitor airlines can just entice the lessors away in a very targeted manner and collapse the.airline because no other lessor will do business with them.
If airplane EI-XXX is the plane that operates on a route which is undermining your yield on a certain overlapping route then just offer the lessor a lease for it and they'll happily take it.
 
jhz94
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Re: DY Financial Discussion - 2020

Mon Apr 27, 2020 11:13 am

Why would a lessor want to end up owning an airline with severe cash flow issues? I have a hard time seeing the red nose succeed with this.
Did you know that you can run diesel cars on Jet A1?
 
FluidFlow
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Re: DY Financial Discussion - 2020

Mon Apr 27, 2020 11:22 am

leghorn wrote:
Competitor airlines can just entice the lessors away in a very targeted manner and collapse the.airline because no other lessor will do business with them.
If airplane EI-XXX is the plane that operates on a route which is undermining your yield on a certain overlapping route then just offer the lessor a lease for it and they'll happily take it.


Norwegian would love that, easy shrink with no strings attached. But who in his right mind would take aircraft right now. I bet if Norwegian could, they would end them leasing contracts but one sided it will cost money Norwegian does not have. If leasing would be that easy to terminate, every single airline would have terminated all of them 4 weeks ago. So if Norwegian finds someone to take over, they would give you the key to the aircraft on a (fake) golden platter.
 
LJ
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Re: DY Financial Discussion - 2020

Mon Apr 27, 2020 11:25 am

jhz94 wrote:
Why would a lessor want to end up owning an airline with severe cash flow issues? I have a hard time seeing the red nose succeed with this.


Even worse, the acknowledge that they need more money in 2021 as they don't think that the current bail out is enough.

Anyway, AF/KL will be pleased to learn that DY isn't going to fly long haul much from CDG and AMS. We also know they don't pay their lessors and that they'll reduce their fleet by approx 50 aircraft. Moreover, they don't plan any aircraft delivery until 2Q 2021, thus those finisished MAXes will remain in the US for a year from now.
 
leghorn
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Re: DY Financial Discussion - 2020

Mon Apr 27, 2020 11:47 am

FluidFlow wrote:
leghorn wrote:
Competitor airlines can just entice the lessors away in a very targeted manner and collapse the.airline because no other lessor will do business with them.
If airplane EI-XXX is the plane that operates on a route which is undermining your yield on a certain overlapping route then just offer the lessor a lease for it and they'll happily take it.


Norwegian would love that, easy shrink with no strings attached. But who in his right mind would take aircraft right now. I bet if Norwegian could, they would end them leasing contracts but one sided it will cost money Norwegian does not have. If leasing would be that easy to terminate, every single airline would have terminated all of them 4 weeks ago. So if Norwegian finds someone to take over, they would give you the key to the aircraft on a (fake) golden platter.

I don't see Norwegian would love not being able to fly the routes which generate cashflow due to a lack of airframes.
If a lessor can make a break for the door early and secure cashflow for the next few years then they shoudl do it.
The pitch would go something like this: "Hey, we have this airframe which operates on this route which overlaps with your route. We could lease it to you, you can move on one of your older planes and when everything is netted out you will be making more money on the route when no longer being undercut by Norwegian. Perhaps draw down a bit of that no questions asked credit that your Government is offering you seeing as you have already drawn some down already".

It isn't old Q400s or other undesirable stuff that they are leasing out.
It is every man for himself now and you don't want to be left standing without a seat when the music stops.
 
MIflyer12
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Re: Norwegian Puts 4 Subsidiaries Into Bankruptcy

Mon Apr 27, 2020 11:51 am

Reuters on the debt for equity swap:

OSLO (Reuters) - Norwegian Air (NWC.OL) could run out of cash by mid-May unless its proposed financial rescue plan is approved by creditors and shareholders, the budget carrier warned on Monday.

If bondholders, leasing companies and shareholders give a green light, the plan may help Norwegian survive the coronavirus outbreak, which has grounded 95% of its fleet, leaving just seven aircraft in operation.

But the planned swap of up to $1.2 billion worth up debt into equity will hand majority ownership of 53.1% to the company’s lessors, while bondholders would own 41.7%, leaving current shareholders with just 5.2%, the airline said.


That's a pretty dramatic shareholder dilution.

There's a schedule for a series of votes starting 30 April.

But the plan requires backing from bondholders in each of four separate votes planned for April 30, from shareholders at an extraordinary general meeting scheduled for May 4, and from leasing firms.


https://www.reuters.com/article/us-heal ... 290JK?il=0
 
smartplane
Posts: 1532
Joined: Fri Aug 03, 2018 9:23 pm

Re: DY Financial Discussion - 2020

Mon Apr 27, 2020 11:54 am

jonas12345 wrote:
DY have released their plans for restructuring:

https://www.norwegian.com/globalassets/documents/other/norwegian-air-shuttle-asa_presentation-to-bondholders_27-april-2020.pdf

It looks brutal...holding lessors hostage

Do you think these discussions are unique? Virtually every OEM, airline, airport, lessor, creditor and bank with exposure to the civil aviation industry, is attempting a financial re-structure in some form.

Everyone has options, including lessors. Power by the hour deals (some cash better than no cash and storage fees), something Airbus is already conversant with on used aircraft are in vogue, including on new aircraft.

Lets see how those with real dollars in the game respond in the next 6 days.
 
jonas12345
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Re: DY Financial Discussion - 2020

Mon Apr 27, 2020 11:57 am

smartplane wrote:
jonas12345 wrote:
DY have released their plans for restructuring:

https://www.norwegian.com/globalassets/documents/other/norwegian-air-shuttle-asa_presentation-to-bondholders_27-april-2020.pdf

It looks brutal...holding lessors hostage

Do you think these discussions are unique? Virtually every OEM, airline, airport, lessor, creditor and bank with exposure to the civil aviation industry, is attempting a financial re-structure in some form.

Everyone has options, including lessors. Power by the hour deals (some cash better than no cash and storage fees), something Airbus is already conversant with on used aircraft are in vogue, including on new aircraft.

Lets see how those with real dollars in the game respond in the next 6 days.


yes i do think they are unique. I'm sure most airlines are asking for rent deferals etc. but not forcing lessors to take big haircuts and taking equity rather than cash, with the alternative being handing the aircraft back with no return penalties. It feels like they are opening themselves up to all sorts of lawsuits if they do make it through the next year or so
 
MIflyer12
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Re: DY Financial Discussion - 2020

Mon Apr 27, 2020 12:03 pm

jhz94 wrote:
Why would a lessor want to end up owning an airline with severe cash flow issues? I have a hard time seeing the red nose succeed with this.


Why? Because they thinks that's a better return than what they would get in liquidation.
 
FluidFlow
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Joined: Wed Apr 10, 2019 6:39 am

Re: DY Financial Discussion - 2020

Mon Apr 27, 2020 12:04 pm

leghorn wrote:
FluidFlow wrote:
leghorn wrote:
Competitor airlines can just entice the lessors away in a very targeted manner and collapse the.airline because no other lessor will do business with them.
If airplane EI-XXX is the plane that operates on a route which is undermining your yield on a certain overlapping route then just offer the lessor a lease for it and they'll happily take it.


Norwegian would love that, easy shrink with no strings attached. But who in his right mind would take aircraft right now. I bet if Norwegian could, they would end them leasing contracts but one sided it will cost money Norwegian does not have. If leasing would be that easy to terminate, every single airline would have terminated all of them 4 weeks ago. So if Norwegian finds someone to take over, they would give you the key to the aircraft on a (fake) golden platter.

I don't see Norwegian would love not being able to fly the routes which generate cashflow due to a lack of airframes.
If a lessor can make a break for the door early and secure cashflow for the next few years then they shoudl do it.
The pitch would go something like this: "Hey, we have this airframe which operates on this route which overlaps with your route. We could lease it to you, you can move on one of your older planes and when everything is netted out you will be making more money on the route when no longer being undercut by Norwegian. Perhaps draw down a bit of that no questions asked credit that your Government is offering you seeing as you have already drawn some down already".

It isn't old Q400s or other undesirable stuff that they are leasing out.
It is every man for himself now and you don't want to be left standing without a seat when the music stops.


They do own aircraft. So fly the owned ones on the most profitable routes and give back the leased ones (for free with your idea). Who would not do that trade in the current environment?
 
leghorn
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Re: DY Financial Discussion - 2020

Mon Apr 27, 2020 12:09 pm

Who other than the Insolvency specialists is going to get re-imbursed after they stop trading? The massive compensation you expect is predicated upon something being left.
If you believe in such fanciful things then there is a place waiting for you in Norwegian's Management Team. You'll also have to take a leap of faith and hope that your salary will be waiting for you in the bank at the end of each month...in spite of evidence to the contrary for other Norwegian employees.
It is a sinking ship.
 
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FlyCaledonian
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Re: Norwegian Puts 4 Subsidiaries Into Bankruptcy

Mon Apr 27, 2020 1:23 pm

I think people need to realise that the aviation market is going to go through a major recession like in the early 1980s, 1990s or 2000s again. A number of airlines will unfortunately fold; a number are going to downsize to various degrees; and there is going to be a long slog to get passenger numbers back up to 2019 levels.

Airlines will be deferring fleet renewals and/or keeping aircraft they may have planned to dispose of as they look to limit their exposure to capex commitments.
Let's Go British Caledonian!
 
JibberJim
Posts: 154
Joined: Tue Nov 08, 2016 1:33 pm

Re: Norwegian Puts 4 Subsidiaries Into Bankruptcy

Mon Apr 27, 2020 1:58 pm

That's quite interesting that it's mostly lessors, for me that increases the likelihood, since they aren't going to be able to place their aircraft elsewhere for any sort of price, so allowing Norwegian to fail will get them little to nothing for a long time.

It's possible that COVID has actually saved Norwegian
 
Etika
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Joined: Wed Mar 13, 2019 8:14 am

Re: Norwegian Puts 4 Subsidiaries Into Bankruptcy

Mon Apr 27, 2020 6:21 pm

The problem is that not allowing Norwegian to fail will get them little to nothing for a long time. Norwegian warned that the rescue package likely is not enough by itself and it is also attempting to raise money by issuing new shares. Which will, even at the best case, dilute the former-debtor-current-shareholders position. Worst case is that Norwegian would go bankrupt even with the deal, which would make them lose all of their claims.

Agreeing to the debt-to-equity swap is such a long shot that I would expect that it will only be agreed to if the debtors think that they would likely be getting practically nothing in bankruptcy, so that they really have nothing to lose.
 
davidjohnson6
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Re: Norwegian Puts 4 Subsidiaries Into Bankruptcy

Mon Apr 27, 2020 6:28 pm

I think people are ignoring one major factor - moral hazard.
How will other airlines perceive the leasing companies if they agree to a debt-for-equity swap with Norwegian. If other airlines which are in trouble see the leasing companies just agree to anything, then they will know the leasing companies are weak in negotiations, and thus other airlines will know they can play tough in any haggling. If a leasing company always agrees to a debt-for-equity swap with any airline, then no airline would feel a particular need to keep up the lease payments
If the leasing companies expect to gain very little value in the remains of Norwegian, it may perhaps be in their interest to just say NO and let Norwegian fold. Norwegian's problems are well known across the aviation industry - so I don't think it would particularly harm the reputation of a leasing company.
 
JibberJim
Posts: 154
Joined: Tue Nov 08, 2016 1:33 pm

Re: Norwegian Puts 4 Subsidiaries Into Bankruptcy

Mon Apr 27, 2020 6:39 pm

davidjohnson6 wrote:
If a leasing company always agrees to a debt-for-equity swap with any airline, then no airline would feel a particular need to keep up the lease payments


Whilst there's obviously quite a lot of merit in these views, a lease company isn't really in a place to be taken advantage of, surely as soon as an airline is past due most contracts are going to allow them to repossess? It's the cost of that repossession that provides some leeway surely?

I agree that it's still a lot of hope required, but the no-chance of survival pre-COVID is I still think higher now, the lessors aren't getting anything for those planes for years regardless now.
 
MIflyer12
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Re: Norwegian Puts 4 Subsidiaries Into Bankruptcy

Mon Apr 27, 2020 6:55 pm

davidjohnson6 wrote:
I think people are ignoring one major factor - moral hazard.
How will other airlines perceive the leasing companies if they agree to a debt-for-equity swap with Norwegian.


Debt-for-equity swaps are very common in restructurings. Firms don't dilute equity willy-nilly. The secondary practical effect is the same as issuing new shares - which this forum has seen calls for by Virgin Atlantic and Virgin Australia (Why doesn't the billionaire founder have to put up more money?), and which United has announced.

Virgin America was a practitioner of the debt-for-equity swap -- outside of administration.
 
Ryga
Posts: 91
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Re: DY Financial Discussion - 2020

Sat May 02, 2020 5:14 pm

Norwegian Air bondholders reject debt plan -

https://pendect.com/categories/business ... y-mid-may#


Don’t know the truth in it, posted 10 Hours ago on Twitter and a couple of other news agencies online posting the same thing?
AA AM BA BM BY DP DY EK MH PG RJ TK U2 VS Y2 ZB Z2 5J 9W

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Bostrom
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Re: DY Financial Discussion - 2020

Sat May 02, 2020 5:56 pm

Ryga wrote:
Norwegian Air bondholders reject debt plan -

https://pendect.com/categories/business ... y-mid-may#


Don’t know the truth in it, posted 10 Hours ago on Twitter and a couple of other news agencies online posting the same thing?


It's true. It was very close though so Norwegian is still negotiating with them to get the last ones to accept the plan.
 
RexBanner
Posts: 46
Joined: Sun Nov 04, 2007 11:37 am

Re: DY Financial Discussion - 2020

Sat May 02, 2020 7:54 pm

It’s not quite as close as you assume here, can still go either way. The Bondholders that did vote for did it on the condition that it went through overnight, they’re not now necessarily going to vote the same way as they’re no longer bound by that agreement. The lessors voted for on the condition that the bondholders voted in majority, which they didn't. In short it’s a mess still and will require some quite intensive talks.
 
Bostrom
Posts: 1004
Joined: Tue Feb 02, 2016 7:11 pm

Re: DY Financial Discussion - 2020

Sat May 02, 2020 8:50 pm

RexBanner wrote:
It’s not quite as close as you assume here, can still go either way. The Bondholders that did vote for did it on the condition that it went through overnight, they’re not now necessarily going to vote the same way as they’re no longer bound by that agreement. The lessors voted for on the condition that the bondholders voted in majority, which they didn't. In short it’s a mess still and will require some quite intensive talks.


Very close as in just a few percentage points in one of the bonds. If it had been 25% or so it would have been a lot worse. But it is certainly a mess and I'm glad it's not my job to solve it.
 
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Dahlgardo
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Re: DY Financial Discussion - 2020

Sun May 03, 2020 12:53 pm

Bostrom wrote:
Very close as in just a few percentage points in one of the bonds. If it had been 25% or so it would have been a lot worse. But it is certainly a mess and I'm glad it's not my job to solve it.


It is now reported, that Norwegian has reached an agreement with it's creditors about converting debt to equity.

In danish
https://ekstrabladet.dk/nyheder/erhvervsnyheder/norwegian-faar-groent-lys-til-redningsplan/8109321

Norwegian has had a rescue plan approved by all four of its bondholders, the company in difficulty said in a stock exchange announcement.

The four bondholders are all entitled to corporate bonds in Norwegian. A bond is a form of loan.

The rescue plan is approved after several weeks of Norwegian efforts to raise enough equity to receive state support from Norway.

A crucial part of the rescue plan has been to get the bondholders to accept that parts of the loan in the company be converted into shares.
leave your nines at home and bring your skills to the battle
 
Someone83
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Re: DY Financial Discussion - 2020

Mon May 04, 2020 8:15 am

After an agreement with the bondholders was reached during the weekend, they got approval from the leasing companies early this morning, and today the shareholders have voted yes for both the debt to equity transfer and the issues of new share. Thus Norwegian then should be approved to get the planned bank guarantees from the government. In addition they have significantly reduced their debt and interest and amortization payment the next year

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