Norwegian Air shares surge on Airbus fleet deal
Leasing agreement part of debt-troubled airline’s salvage plan
Shares in Norwegian Air rose by more than 20 per cent after CCB Leasing agreed to jointly finance 27 Airbus aircraft, Reuters reports.
Norwegian already had the planes on order for delivery from 2020 to 2023. The deal with CCB, a wholly-owned subsidiary of China Construction Bank, will help it address its debt issues.
Norwegian has gained a reputation for shaking up the long-haul market with cut-price transatlantic fares. It has also just announced a partnership with the US carrier JetBlue to widen its US appeal, as reported here.
However, it recently announced a two-year cost-cutting programme after its rapid expansion led to hefty losses. The cash-strapped carrier has for months said it aimed to find a partner to take ownership of the Airbus fleet.
CCB Leasing will own 70 per cent of the venture, with the rest held by Norwegian Air’s Arctic Aviation. “This agreement will contribute significantly to reducing our current and future capital expenditure,” acting Norwegian Air CEO Geir Karlsen said.
Norwegian said the venture would reduce its capital expenditure by about $1.5bn (£1.16bn).The airline added that it aimed to improve its annual run-rate (before interest, taxes, depreciation, amortisation and restructuring) by another 4 billion crowns ($43m, £34m) by the end of 2021.
Last month, bondholders accepted a company request to postpone repayment of $380m (£295m) by up to two years, providing some financial relief.
In another major deal, Airbus sold 100 jets to budget to American budget airline Spirit, doing so with competition from Boeing.