(Bloomberg) -- Norwegian Air Shuttle ASA won state backing for its slimmed-down restructuring plan, boosting the bankrupt carrier’s bid to attract new investors and exit insolvency proceedings.
The Norwegian government said Thursday that it will participate in a hybrid loan for the airline, provided enough outside capital is raised and the restructuring plan receives court approval.
The expression of support comes a day ahead of an Irish court hearing as part of the carrier’s examinership process. The government commitment significantly increases Norwegian Air’s chances of working through the crisis, the airline said in a separate statement.
“With a new business plan, and a participation from the government, we are confident we can attract investors and get through the examinership and reconstruction process,” Chief Executive Officer Jacob Schram said.
The shares surged as much as 18% in Oslo.
Norwegian Air, like most other airlines, suffered a body blow after the coronavirus pandemic grounded countless flights and plunged the industry into an historic crisis. The carrier had already been struggling after its aggressive push into the low-cost, long-haul market left it with too much debt.
The company cut thousands of jobs and reined in its network to save money as the outbreak stifled demand. But the government rejected Norwegian Air’s request for a second multi-billion krone rescue package on Nov. 9, partly because some of the aid would be used to fund the long-distance business focused on London’s Gatwick airport, and wouldn’t benefit Norway.
Norwegian Air filed for bankruptcy protection less than 10 days later. With the restructuring plan unveiled on Jan. 14, the carrier will give up the discount long-haul business, returning to its roots operating shorter European flights. About 2,100 jobs will be lost with the move, including 1,100 in the U.K.
The restructured airline would serve the Nordics and European destinations with about 50 narrow-body aircraft in 2021, rising to 70 planes next year. The carrier plans to raise up to 5 billion kroner ($590 million) through a rights issue, a private placement and the hybrid instrument.
The new business plan seems “more robust” than the one previously rejected by the government, Trade and Industry Minister Iselin Nybo said in the government’s statement. Provided Norwegian lives up to the new strategy, the government can contribute with a hybrid loan, she said, adding that the state has “no ambitions to become an owner.”
Click here to read the full terms set by Norway’s government.
Norwegian shares were up 12% as of 10:22 a.m. local time, having lost 98% of their last year.
“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 in the statement.
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