Norwegian Air announced on Monday that four of its Swedish and Danish subsidiaries had filed for bankruptcy and that the airline had ended its workforce deals in Europe and the US, placing around 4,700 staff at risk of becoming jobless.
Norwegian Air is seeking to convert its debt to equity, money from stakeholders and Norwegian government guarantees in an effort to survive the ongoing global health nightmare.
Also on Monday, Virgin Atlantic said it would only survive the crisis if the UK government will come to its rescue, while Virgin Australia is poised to enter voluntary administration, sources said.
The struggling low-cost carrier disclosed that the four subsidiary businesses will close. An estimated 1,571 pilots and 3,134 cabin crew who are under the four subsidiaries' employ will now lose their jobs.
In a statement, Norwegian said that there are efficient furlough opportunities in Norway, and that means "the government pays for all wage-related expenses throughout the duration of the furlough period." Unfortunately, Norwegian added, there is not the equivalent coverage in Denmark and Sweden.
Nearly all of the airlines' flight activities have been suspended, while operational costs for air crew are still in place. Pilots and cabin crew in Scandinavia are employed by the subsidiaries under the Norwegian Group, the carrier's press release, read.
The Norwegian Group explained that the measures already carried out by the airline were not enough as the lack of crticial financial support, from the Danish and Swedish governments, has left the company with no other alternative.
Norwegian has been on the brink of liquidation for many months. Until in 2019, when it focused exclusively on growth instead of profitability, as it appeared like the airline was attempting to become an attractive acquisition goal.
While its competitor, British Airways, showed interested a few years earlier, Norwegian overplayed its hand, and the group has been on a downtrend since then.
The carrier has made many tough choices and is generally on course in the right path, although considering the current scenario it may be a little bit too late.
In the stock market, Norwegian's shares were down on the latest development, and plunged 3.5 percent at 12:30 GMT. The company's stock has lost 85 percent of its market value, year to date.
The airline has risen aggressively in the last 10 years to emerge as the third biggest low-cost airline in Europe, and the largest foreign carrier plying the New York route and other key US cities but the company also incurred debt of almost $8 billion.
