Airlines in a Crisis

Latest they accounted as income nearly 500 million nkr worth of unused and expired bonus points they had booked as expenses when customers earned them before the pandemic and before old Norwegian went bust. This comes in addition to the couple of billion nkr of future discounts Boeing gave them as repatriation for earlier problems old Norwegian had with the Boeing planes. New Norwegian also booked this in as income for 2022. In quarter 4 with twice as much income as the year before they managed to only loose about the same as the year before. Is that good, bad, nah or neither. It does point to that they still have problem with growing in a profitable way. Then we come to the the 7,8 billion nkr they say they have in cash. How much of this is unearned payments from future customers. The current CEO Karlsen used to count that as cash when he was just chief of finance in old Norwegian. That went bad in 2020 when they couldn't fly those customers, they all wanted refunds and no new mon...

An airline with less than 100 planes in their fleet are at constant risk of being taken over. A tempting proposal for shareholders knowing the risks associated with airline stocks and therefor suceptible to larger airlines wanting to quell sudden upstarts. More than 200 planes and you are becoming a real threat and can no longer hide your size. Unions beome focused and all of a sudden you are coming to the top of size statistics and a sharpened view from the established. Around 200 you are to large for a swept under the carpet buy out and can continue to play the I'm still catching up game without another airline going after every route you try. You are also still a manageable size where a small top managmenet team can have full control on all aspects and a CEO can get into the details and reach out to everyone where necessary. Ryanair have certainly not succeded profit wise with their expnsion. Their profit at 400 was hardly 20% more than when they had 200 planes. And in the m...

Not issuing refunds means airlines have been living on unearned revenue and were for all sense and purpose trading while technically bust even before this crisis. The longer they are allowed to go without paying back what they haven't earned, the longer they are in reality now trading on their passengers money as well as their other creditors. All this money should technically have been in a similar to escrow account until either the airline earned it or they refunded it. These airlines have been paying out dividends and share buybacks with money that wasn't theirs. I know large amount of cash sitting in bank accounts are very tempting but when one do a lot of advanced sales is it part of being an honest business. This goes also for they who don't normally issue refunds. The unexpected will always arrive. Hoping it won't arrive during your time at the helm is not an example of good leadership. Prudent is not a negative word in finances.

Airlines should the minute the lockdowns started have realised that all bookings made was on a diferent basis for a world no longer existing. They should then have cancelled all previous bookings, reset their systems and treated it as beginning of time and asked all previous and potential new customers to book again when a new schedule where made available. Only if refunds are made can new customers be convinced that the money they pay for new bookings will not disappear in the same voucher hole as their previous now cancelled bookings. Specially if some of the carefull reopenings are reversed and more flights are again cancelled. Problem is many airlines have been treating funds received for future bookings as a part of their cash reserves. Good accounting practices says they are unearned revenue and should be booked as such, only coming into the earned and profit accounts when travel happens. However many airlines have been tempted to see these amounts that can build up in their bi...