Your Christmas Flight on Norwegian Might Be Safe

(Bloomberg) -- Norwegian Air Shuttle ASA is closing in on a deal that would provide a potential $1 billion infusion of cash to help it navigate increasing fuel prices and the slow winter period, according to people familiar with the matter.

The Oslo-based carrier said Thursday that it is in “advanced discussions” with an unnamed partner to create a fleet joint venture that would take over cash obligations on its large aircraft order book. Norwegian didn’t identify a potential partner or specify how much the deal would be worth.

Included in any deal would be an initial 8 billion kroner ($960 million) injection to help cover Norwegian for payments it’s made for Boeing Co. and Airbus SE aircraft, the people said -- a factor that would ease a serious financial burden on the discount carrier. The talks are with an unidentified Chinese leasing firm and other interested parties, and cover ABOUT 132 Airbus A320neo family and next-generation Boeing 737 narrowbody aircraft, many of which are still on order, said one of the people, who asked not to be identified discussing private negotiations.

Norwegian upended transatlantic travel by using the latest generation of fuel-saving Boeing Co. and Airbus SE aircraft to offer heavily discounted fares. But the company has been hit by rising fuel prices while it’s still expanding, and persistent engine issues and delivery delays on new planes have added to the challenges. While the airline on Thursday reported decent third-quarter results for the busy summer travel season, its next test will be weathering the more difficult winter period when cash flows slow along with travel.

The new venture would take over ownership of the company’s incoming aircraft and some Boeing jets it already owns, one of the people said. It won’t replace Norwegian’s existing leasing company, according to Chief Executive Officer Bjorn Kjos. The airline would have have first right of refusal to lease any new planes, after which the venture would be allowed to find other customers, the people said -- providing added operational flexibility to Norwegian.

Kjos spoke of the plans after announcing the airline’s third-quarter results, during which fuel costs surged 85 percent. If fuel rises above $100 the company may need to consider raising additional equity, the CEO said in an interview.

 Your Christmas Flight on Norwegian Might Be Safe

Norwegian shares, which fell as much as 6.4 percent after the results, reversed course and were up 9 percent to 198.05 kroner as of 12:26 p.m. in Oslo. The stock is up 13 percent this year.

The JV would need sign-off from Airbus, though the the European planemaker would likely to agree to the ownership switch to help ensure deliveries of aircraft Norwegian currently has on order over the next few years.

©2018 Bloomberg L.P.