Airlines in a Crisis

 There are always some Norwegians willing to buy small amounts of shares just because its an airline and its name is Norwegian. But not that manry and they are not that flush with cash that it will make a difference.  The current majority shareholders, the lease owners, are unvoluntering shareowners and its doubtfull if thwy will go for the same stunt again. And they have expressed that they don't want to own airlines. If they let the floodgates open there could be many other airline in financial need that would pay for their leased aircraft in shares instead of readies. A trade sale or trade investor is always a possibility. If the share price should fall to let#'s say 10 ore or 1 penny the whole share capital could be bought for 300 million nkr or 30 million euro. An investment instead of lets say 50 million nd nulling of the old shares would get you a solid foothold in the Scandinavian market including Scandinavia to the sun/med. Other airlines have done similar investments

If one as the Norwegian party Senterpartiet (Centrist) suggested had given the airline Norwegian 20 billion nkr, the future for the company would have been less rosy than one would think. As opposite to the future of the many who would have filled their pockets. Management would have rewarded themselves well with some exuberant, for Norway to be, bonuses for saving the company. As Gustafson of SAS did after persuading staff to so deep cuts in their terms and renumerations some years ago. The lease- and bondholders would see to that all past and future rents and payments would be paid well in advance, as the big shareholders they are. All the unions would then come in and fight hard to see to that their members got their share of the cake and more, plus lay paid to any demands for performance improvements. Nobody would fight for neither future profits or any streamlining of the company into something that would be anything else than a future drain and per passeenger loss busines. None o

Now when the main subject of my last article has taken the consequences and partly thrown in the towel we can speculate on if Norwegian have a future as an independent airline. CityJet might have come out of its protction as a leaner and stronger ailine, maybe, but they where a very small airline, a shadow of their former self already, with a well connected Irish businessman founder/leader and some guaranteed income wetleas contracts in their pocket. They came out of the process as an airline that no longer sell seats or fly scheduled routes under their own name. Surprised O'Leary  haven't made an appearance regarding Norwegian going lets call a spade a spade, bust. Ireland has a very small and concentrated aviation environment and those leasing companies that have planes at Norwegian have a lot more at Ryanair. In addition to that most of them grew out of the Ryanair original owner Tony Ryan's own leasing company. And many in the circuit including overseers onece worked fo

 Is an airline that is living on the cash prepaid for cancelled flights technically in breach of the law. Why is governments letting airline that have depleted their assets to such a degree that debt far outweighs any assets, so in reality a negative balance sheet, continue on running as long as they have cash to pay some of their bills. Not only refusing to refund customers whos flights didn't happen but also handing out worthless pieces of paper and calling them points. Taking even more money from more customers running up even bigger piles of debth. The boards of these airlines must be in jeopardy risking both business quarantines and teoretically time in the slammer. There is no way any accountancy firm is going to sign off on any of their accounts when that time comes. Which may be why some of them are running for the hills. They who pay far in advance for tickets with these outfits are taking a huge risk and in some countries both travel insurance companies and banks have war

There is things surfacing that indicate the financial expertise within Norwegian was more in getting financing and avoid paying leases rather than in cost control. It sems like different stakeholders have through the years done their besst to milk the company dry thus stopping it from building up profits for a rainy day fund. There are talk about pilots being well paid, sometimes double tariff for working on days off, which indicates that operations and crew control was not too well managed either.  These are growth pains that comes to light in many companies, including Ryanair with their well known roster screw up a couple of years ago. But Ryanair could afford it and have been busy ever since getting out of the union deals the problems led them into, finally mostly resolved by using the CoVid19 crisis to get low low and long term 5 year deals with their staff. In Norwegian on the other hand they who should keep an eye on the bottom line have instead concentrated on getting more finan

The airline business has always been a cyclical roller coaster of ups and down and its sesoned participants would do well in remembering that after 7 fat years comes 7 meagre ones, not always on that schedule. How you handle it is different from country to country and sometimes from company to company.  American airlines sway from one crisis to the next paying out all they cane to management, share- and other stakeholders in the good times. Always relying on that their government will see them as critical infrastructure and always bail them out. Privatise profits and socialise losses. The top management of Ryanair on the other hand remembers 9/11 very well and have ever since insisted on holding on to as much cash and building up as much equity in the company as possible. They are a large company in a small and not very rich economy so they know they have to handle any coming crisis on their own.  Norwegian fell into it because their current top management have minimal experience from

Braathen and his suited team didn't get his 1/5 billion nkr from the Nowegian government but there is about 100 million USD available together with the Norwegian name for a company that is willing to commit taking some new planes from Boeing.  As a manufacturer they care more about how many new airlines the can sell than how many of the older planes get parked. Norwegian never got to an agreement for how much the problems with their new ExMax and Dreamliner planes was goeing to cost the manufacturer because Beoing prefer to pay that sort of money in discounts rather than cash.  A new-Norwegian without most of the commitments and liabilities of the Schram-Norwegian could make a deal and have a fleet partially financed. That would also give them a good base for getting a good deal with the banks so any ticket sales will end up in the airline instead of being kept by the card issuers and banks for security against future refund claims.   

Norwegian did not spend the time well since the last injection of government loans. Too much concentration on finding finance too little on what makes an airline a viable business.  They could have gone for doing more cargo. If they by now transported halve of the Norwegian international post and a large portion of its exportable airfreight products if would have given the Norwegian government a reason for why the company needed saving.  They could have marked them out as bringing something extra to the CoVid19 table by, as the only airline in Europe, offering to transport the nervous in a socially distancing environment by at least offering the option of middle seat free in parts of the cabin. For 50% extra on the ticketprice off course. Then the politicians could have said look what Norwegian brings to the table, we need that, lets give them a helping hand.  Instead they decided to spend all their effort and most of their time in scouring for finance. Not easy to come by when y

There is little new and inovative thinking when Norwegian goes hat in hand to the government and asks for money. Its the traditional story of more loans, more shares, business plan and selling stuff other than seats, which is what an airline should live of. What is needed is a new aproach instead of the same as every other business on the planet. Airlines are different. They sell something even civil servants are interested in performing their work, travel. Not that we expected anything innovative or airline related from the newbie to the aviation world that the CEO of the airline Norwegian in reality is. Norwegian should go the the government and say we need 3 to 4 billion Nkr now for forward ticket sales that the civil servants can use for travel over the coming years. Preferably after normal forward sales volumes have been reestablished. As a caveat it should promise to use some of that to refund outstanding claims from customers that didn't travel due to lockdowns. Who will

What is Norwegian doing. They have only managed to fly 10% of the number they flew last year. Ryanair on the other hand have flown 50% on 2/3 of the amount of flights they flew last year. That is about 72% of seats on every flight sold compared to 97% for same period last year. This lead to that Ryanair had no problem getting in an extra 400 million cash from sale of new shares. This is about twice what Norwegian says they need to get through the next 6 months. But who is going to invest in a company that already this year have burnt their shareholders. In fact a  company that has made a habit of doing it nearly every year. Not without getting in some new brooms rather than the one that after just a few months in the job abandoned them alltogether. Fact is in the airplane business there is always some crisis going. 9/11, oil price above USD 100 and whole fleets grounded. One can't just hibernate and wait them out but need to produce whatever one can no matter what the circums

An unprecedented amount of planes having been stored for 3 or more months some wiht minimal serviceing, have led to issues coming to the fore as planes are being taken out of storae and put bsck into service. It could be a risky business at the beginning as new and earlier unforseeen problems are cropping up. The most is the air check valve which due to corrosion might stick in the open position resulting in compressor stalls, double engine failure and inability to restert either engine. Airlines might have been better circulating all their planes into service regularly, sample a different plane each day, than parking most and only actively utilizing the same select few, like Norwegian. Or at least flying the unused for passenger service planes regularly on small test, like Ryanair. Pennies (relatively) saved can quickly become dollars needed, or worse. There is a reason planes are stored long term in desert like conditions and not just on any airport that is cheap and have space.

The language in their lawsuit against Boeing in connection with their termination of the contracts for ExMax and Dreampliner deliveries is not sparing the expetives. A company in such a precarius position should be more careful when it comes to handling its in reality only supplier that it for a good while into the future still will be dependant on for the maintenance and value of its entire existing fleet. Could it be that top management of Norwegian do not really know what it entails to change from Boeing to Airbus, or the risk of going Chinese or Russian. After all they are lacking indepth airline experience between them, coming more from a finance and retail background. The pilot retraining and dual engineering maintenance and double parts storge costs alone would stop the company from being a Low Cost. And a Low Fares airline without corresponding Low Costs will be a loss making business no matter how many routes you cut or how much you shrink, or how many extra candybars you s

A single airline could completely dominate a reopened Rygge airport. Think all the slots just for itself with the whole airport designed around its own needs. Including passenger sluicing and offices. All available relatively reasonable since its closed at the moment with no reopening in site without an  anchor airline. It could certainly become a hub and an easy & smooth airport to connect through. We are thinking a transatlantic hub with incoming connections plus feeding and drawing from the Oslo east and Swedish market. Remember Oslo east is seen as the lesser part of Oslo with a lot of suburban somewhat high rise sprawl and even more OBOS. The last is the social way of financing your housing needs where only part of the loan is yours and part is a joint with the other apartment owners. This for they who don't have the financial strength to obtain the full mortgage themselves. Parking could be made much cheaper at Rygge than OSL where prices are on the expensive side and

Now when we have argued that an airline should be based near an airport to not only remember what its all about but also have some commonality so that management can be closer to the action, and office space can be co-used with operational staff, where would Norwegian with time move to. We have already established that Oslo Fornebu closed years ago as an airport and since all the land is sold off for building offices and housing it is not coming back. This means that Norwegian's current office has become so city center near that its prime real estate, and in the expensive Oslo southwest as well so a quick property developer financed buy and flip makes sense, leaving money over for somewhere else. The most likely new location would be somewhere near the OSL Oslo Airport. That is after all Norwegian's main base, where they retracted to for the pandemic lockdown, and where their headoffice management and staff have to go anyway if they want to travel anywhere within its network

Its presentation to the annual general meeting today showed a future where it is planning to be an "enterprise within future mobility". Never mind whether that is planning to be "great", but few shareholders like to ambitious diversifications within an enterprise. Not only does it divert managments attention away from the core, but shareholders think they are the best judges of their investments and if they want to invest in other modes of transport they do that separately. Norwegian managments shorter timeframe plan is to be just a "good organisation within the aviation industry". Good means mediocre in this context. Nobody has an ambition of that. Best in its field and revolutionise is words more used in future plans about ambitions. This lack of airline focus shows also in the new organisational chart. Operations is twice removed from the CEO below not only a large stab and a separate airline chief but also a customer chief. Far from the Low Cost m

This is what happens when an international airline get a top chief that have no experience from managing an airline. No experience from any other parts than a bit of consulting. Just thinks its about selling a ticket plus whatever extra you can add onto the purchase. You don't make a Low Fares airline by lowering prices. You make the basis for it by keeping your costs low. And a key part of that is the single type of plane. But you need to spend time in engineering and ops to understand why that is so important. Just 1 set of spares and 1 type of engineer for all the planes, just 1 type of pilot so you don't have to double up on simulators and standbys, and the ability to swap any plane in on any route depending on what is available on the day. Did the company bosses visit other airlines that has done before the type of company they wanted to be. O'Leary of Ryanair did do a study visit to Southwest before forming his vision.  If you want to play with the big boys and sou

More of the fictive crew rental straw companies that Norwegian created are being declared bankrupt. Reasons given; client (= Norwegian) won't pay their bills. And this time it is really closing in on them being in their neighbouring countries Denmark and Sweden. This is going to end in tears. The management of Norwegian haven't solved neither the company finances nor its problems. They have just pushed them into the future. No other airline have tried to solve their CoVid19 problems by abandoning their legal responsibilities towards their employees. Whether they where hired directly or through fictive agencies. Fictive = the agency only supply staff to 1 company which is also the owner (or part owner) of said employment agency. Others have tried to abandoned their crew at other times. But those companies always had the financial strength to pay themselves out of trouble when it went legally tits up. Norwegian do not have the money to pay out if different countries start tak

Looks like some airline systems are not suited to quick adjustments in the necessary flexibility of the schedule. As CoVid19 fears lightens the careful comeback steps of airlines are being overtaken by a surge in customer demands as a result of constant new re-openings of borders. Prices are going up without airlines responding quickly with additional flights. Sample the prices close in for the 1 hour Oslo to Copenhagen route lay above Euro 500.- It used to be in the 120.- range and have been sold as low as35.- Many airlines are used to a long time perspective looking at the forward bookings weeks and months in advance. That is no good in what is more like a suddenly emerging market. When customers in addition are vary about booking long in advance due to sudden and the airlines lack of immediate refunds for previous  flight cancellations, they therefore book only for next week or the week after. Then you need to add flights in that time perspective. It is not a difficult operatio

Constantly newer planes with better engines are not enough when one do both short haul and long haul and can't compete in the investments race. But Norwegian could become the most environmentally green combination airline by lightning the load and stuffing them in. If one think the smallest fuel burn per passenger kilometer lightning the seats are one way. Get writhe of the heavy business class seats and fill the plane with the lightest seats you can find. But something that still don't feel like church pews to sit on. And no business class means no extra heavy crockery or bottles of drink, or double set of trollies. The single class system would also add seats for 12 or more extra passengers in long haul meaning more heads to divide the fuel burn on. If you don't hand out newspapers and magazines you don't need seat pockets either. Away with them and even more weight saved, plus a bit of extra legroom or alternatively maybe even an extra row of seats. You are al

Last years plan of decorating the edges of the accounts with removing a few new non profitable routes seems like the equivalent of putting lipstick on a pig. Much more needs doing and I doubt the current management are the ones to do it, except for some financial tinkering. They certainly do not  seem to have the airline experience needed, or from the right airlines, to know what makes a Low Fares carrier a Low Cost. Neither do the new ones added to the management team recently, who have absolutely no airline experience whatsoever. Are they trying to make Norwegian into a shopping mall or think the website rather than actually flying passengers and stuff is what will make the company profitable. There are certainly many steps the airline can do to make it more like the model of the industry Southwest. Where the principle of Low Fares Low Cost was first modelled and who have been profitable in nearly all of the years since, with very little industrial strife to boot. Take the best