December 10, 2018
Latest News

Norwegian Air may survive after all

 A view on Norwegian airlines Boeing 737-8JP at the Riga International Airport in Riga, Latvia, Aug. 8, 2018. EPA-EFE FILE/VALDA KALNINA

A view on Norwegian airlines Boeing 737-8JP at the Riga International Airport in Riga, Latvia, Aug. 8, 2018. EPA-EFE FILE/VALDA KALNINA

Madrid, Nov 12 (efe-epa).- Norwegian Air's chances of making it through the winter as an independent company have risen though, its stock remains an expensive gamble on a takeover that may not happen, according to a report from the Dow Jones Newswires made available to EFE on Monday.

Norwegian's breakneck expansion, designed to bring the short-haul low-cost model pioneered by Southwest and Ryanair to trans-Atlantic flights, has left it with a massive burden of debt and airplane leases. The company's bond covenants require a minimum 1.5 billion kroner ($177 million) of balance-sheet equity. Many analysts thought the company would crash through this level during the winter low season, likely causing a bankruptcy.

The shares have surged in recent weeks on hopes of a deal to offload some of these liabilities to a leasing company. This deal could even reignite the interest of International Airlines Group, which owns 4.6 percent of Norwegian and made two bids in the spring.

Yet there's another scenario that investors increasingly need to consider: Norwegian survives on its own.

One reason why this is now looking more likely is that third-quarter balance-sheet equity came in at 5.3 billion Norwegian kroner - a significant buffer. Another is oil prices, which have come back down to around $70 a barrel. The company previously said it would use any reprieve to hedge costs.

Finally, Norwegian's cash flows should soon look healthier as the company starts to receive some compensation from British jet-engine manufacturer Rolls-Royce Holdings for delayed deliveries of new Boeing 787s. The airline has booked the compensation in accounts receivable but hasn't yet got the cash. This quarter the payments and discounts will start flowing.

Norwegian's survival would be good for trans-Atlantic flyers, but won't necessarily make its stock a great investment.

A firm deal with a plane lessor before year end could halt speculation of a bankruptcy or dilutive share sale in 2019. The prospect of sharing the burden of Norwegian's huge plane orders could also bring IAG or another bidder - Lufthansa has admitted to running the math - back to the negotiating table.

At this point, however, such hopes seem a speculative leap too far. The outlook for airlines is more uncertain than it was when IAG made its first bid back in May, and IAG and Lufthansa may prefer to keep investing in their own low-cost long-haul brands, Level and Eurowings respectively. Unlike in the low-cost short-haul boom of the 1990s, legacy carriers aren't resting on their laurels while Norwegian tries to disrupt the trans-Atlantic market.

Without more solid indications of takeover interest, Norwegian's market value is simply too high for a company that, on its own, is probably destined to be a niche European player. Investors should keep an eye on the stock, but the time to buy isn't now.

By Jon Sindreu

News history
German railway service severely disrupted in pay dispute strike action

Berlin, Dec 10 (efe-epa).- German railway workers went on strike Monday, industrial action that is to severely disrupted the national train service...

Rioting in France cuts growth forecast

Paris, Dec 10 (efe-epa).- The French economy will grow more slowly than originally projected in the last quarter of the year due to the violent protests...

Ghosn, Nissan formally charged in financial misconduct case

Tokyo, Dec 10 (efe-epa).- Tokyo prosecutors indicted the former chairman of Nissan Motor on Monday for under-reporting his earnings over five years leading...

OPEC crude basket rises to $59.20

Vienna, Dec 10 (efe-epa).- The basket of crude oil used as a benchmark indicator by the Organization of Petroleum Exporting Countries increased to $59.20,...

Hong Kong stocks fall more than 1 percent

Beijing, Dec 10 (efe-epa).- The Hong Kong Stock Exchange's benchmark Hang Seng index on Monday fell 311.38 points, or 1.19 percent, to end at 25,752.38.

Property titan Xu Jiayin overtakes Alibaba's Jack Ma as China's richest man

Beijing, Dec 10 (efe-epa).- The owner of real estate company Evergrande Group has become the richest person in China with $36.7 billion net worth, official...

Shanghai stocks fall 0.82 percent

Shanghai, China, Dec 10 (efe-epa).- The Shanghai Stock Exchange's Composite index on Monday dropped 21.31 points, or 0.82 percent, to close at 2,584.58.

Seoul stocks close 1.06 percent down

Seoul, Dec 10 (efe-epa).- The Seoul stock exchange's benchmark KOSPI index closed on Monday with a decline of 21.99 points, or 1.06 percent, to stand at...

Tokyo stocks fall more than 2 percent

Tokyo, Dec 10 (efe-epa).- The benchmark Nikkei index of the Tokyo Stock Exchange closed on Monday with a decline of 459.18 points, or 2.12 percent, to stand...

China consumer inflation eases in November

Beijing, Dec 9 (efe-epa).- China's consumer inflation decelerated in November as food prices rose at a slower pace, official data showed Sunday, according...

China export growth slows sharply in November

Beijing, Dec 8 (efe-epa).- China's export growth slowed sharply in November, as effects of shipment frontloading due to trade tensions with the U.S. may...

Retirees in Panama protest president's veto of pension boost

Panama City, Dec 7 (epa-efe).- Dozens of retirees marched Friday in the Panamanian capital to demand an increase in pensions after President Juan Carlos...

Uruguay needs more private investment, economy minister says

Buenos Aires, Dec 7 (EFE).- Uruguay needs to encourage greater private investment, the country's minister of economy and finance said here Friday during a...

Organization of Petroleum Exporting Countries Meeting in Vienna

Vienna, Dec 7 (efe-epa).- The Organization of the Petroleum Exporting Countries and allied producers on Friday agreed to lower their production of crude oil...

Russian tech startup showcases flying taxi prototype in demonstration flight

Moscow, Dec 7 (efe-epa).- Technicians from a Russian technology startup on Friday demonstrated the features of its newest electric air taxi prototype, as...

US jobless rate unchanged at 3.7 pct. in November; 155,000 new jobs created

Washington, Dec 7 (efe-epa).- The United States' headline unemployment rate remained unchanged at 3.7 percent in November, its lowest level since 1969,...

Mergui's hidden paradise could revive Myanmar's fledgling tourism

Nga Khin Nyo Gyee, Myanmar, Dec 7 (efe-epa).- Hundreds of white, coral sand beaches with crystal clear waters, and lush vegetation, spread over some 800...

OPEC crude basket falls to $58.79

Vienna, Dec 7 (efe-epa).- The basket of crude oil used as a benchmark indicator by the Organization of Petroleum Exporting Countries dropped to $58.79, the...

Protest against extension of Martial Law in Mindanao

Manila, Dec 7 (efe-epa).- The President of the Philippines has requested Congress to extend martial law for the third time over the southern region of...

Hong Kong stocks close with losses of 0.35 percent

Beijing, Dec 7 (efe-epa).- The Hong Kong Stock Exchange's benchmark Hang Seng index ended Friday with a drop of 92.62 points, or 0.35 percent, to stand at...

China launches two Saudi Arabian reconnaissance satellites into space

Beijing, Dec 7 (efe-epa).- China launched two Saudi Arabian reconnaissance satellites on Friday from its Jiuquan base in the northwestern part of the...

Shanghai, Shenzhen stocks close almost unchanged

Shanghai, China, Dec 7 (efe-epa).- The Shanghai Stock Exchange's Composite Index was almost unchanged on Friday, with a minor increase of 0.71 points, or...

Seoul stocks close 0.34 percent up

Seoul, Dec 7 (efe-epa).- The Seoul stock exchange's benchmark Kospi index closed on Friday with a gain of 7.07 points, or 0.34 percent, to end at 2,075.76.

Japanese stocks rise 0.82 percent

Tokyo, Dec 7 (efe-epa).- The benchmark Nikkei index of the Tokyo Stock Exchange closed on Friday with a rise of 177.06 points, or 0.82 percent, to stand at...

I agree Welcome to news4europe.eu. We use cookies to improve your online experience. Find out more.