Why is Norwegian scrapping flights from the Nordics to the United States?

Low-cost airline Norwegian is stopping all its long-distance flights from Sweden and Denmark due to low profitability. What has forced the company into making the cutbacks?

Why is Norwegian scrapping flights from the Nordics to the United States?
A Norwegian aircraft at Copenhagen Airport in 2016. Photo: ricochet/Depositphotos

The airline announced on Wednesday morning that routes between Stockholm and Copenhagen to the US and Thailand will all be stopped from March 29th, 2020. Although flights from Oslo to the US will continue, routes from Norway to Asia are also set for the chop.

That means Norwegian’s departures from Copenhagen to Boston, Los Angeles, New York, San Francisco and several destinations in Florida will all be cut.

That also applies to routes from Stockholm to the same US destinations.

Services from Oslo to the United States will continue as before, according to Norwegian’s press statement on Wednesday.

The company has cited overall demand and commercial viability as well as ongoing operational issues with Rolls-Royce engines on its Dreamliner aircraft in the decision to discontinue the Scandinavian departures.

“The intercontinental market in and out of the Nordics is small compared to global cities such as New York, London, Los Angeles, Paris and Rome. The total passenger potential is not big enough to justify a big intercontinental operation out of both Oslo, Stockholm and Copenhagen,” the company said in a statement.

“We are experiencing increased demand on a series of well-performing routes. To meet this demand, we have added more frequencies on flights from London, Paris and Barcelona to several cities in the US, enabling even more choice and affordable fares to the flying public on both sides of the Atlantic,” the company said.

READ ALSO:Norwegian cuts long haul flights from Stockholm and Copenhagen

The move represents the second time this year that Norwegian has reduced its services.

In September, the company cut six routes from Ireland to the United States and Canada, calling the routes “no longer commercially viable” in a statement issued in August.

Meanwhile, Jacob Schram is to take over as the company’s CEO from January 1st 2020, taking over from Bjørn Kjos, who stepped down during the summer.

Norwegian has previously tried to raise money by selling aircraft and has also advised its shareholders that sales of new shares may be necessary.

The company also wants to operate fewer, but fuller departures, with an overall plan to put ten percent fewer tickets on sale next year.

In addition to its own problems, Norwegian has been affected by the fact that it has 18 Boeing 737-MAX aircraft, currently under a flight ban after two major aviation tragedies involving the model.

The various measures appear to have helped the company somewhat, having posted its best-ever quarterly results ever in the third quarter of this year, and has also secured enough money to operate for the rest of this year.

Aviation media Aerotime nevertheless reports a cumulative debt of 61.7 billion Norwegian kroner ($6.7 billion), in the company’s third-quarter results for 2019.

A period of huge growth up to the end of 2018 saw the company finish last year with a net debt of 31.9 billion kroner ($3.4 billion). That resulted in a strategy for 2019 of stabilization, reduction of costs and improved liquidity.

The company has since saved 1.84 billion kroner ($200 million) through scaling down, Aerotime reports.

“As Norwegian moves from growth to profitability, we take a strict approach to route management and constantly evaluate route performance to ensure we meet customer demand,” the company said.

The company insisted however that passengers still had options to get from Sweden and Denmark to the US with Norwegian.

“With several daily departures from Arlanda and Copenhagen to both London Gatwick and Oslo, our long-haul destinations continue to be easily accessible for Swedish and Danish travellers at affordable fares. Norwegian is serving 11 US destinations from London-Gatwick  and five US destinations from Oslo,” the statement said.

The company also said that 23 of its 80 technical staff at Copenhagen Airport will be affected by the cuts to routes out of the Danish capital, but did not confirm they would be let go.

“They could for example, work at another location such as Stockholm or Oslo,” Andreas Hjørnholm, head of communication for the company’s Danish arm, told the Ritzau news agency.

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Norwegian’s subsidiaries in Denmark and Sweden go bankrupt

The struggling low-cost airline Norwegian has reported its staffing subsidiaries in Denmark and Sweden have filed for bankruptcy, meaning roughly three quarters of its pilots and crew will lose their jobs.

Norwegian's subsidiaries in Denmark and Sweden go bankrupt
A Norwegian Air Shuttle plane: Photo: Norwegian

In a press release issued on Monday afternoon, the airline said that the financial support packages offered by the Swedish and Danish government had not been sufficiently generous to keep the subsidiaries which employ pilots and cabin crew in the two countries solvent. 

”The impact the Coronavirus has had on the airline industry is unprecedented. We have done everything we can to avoid making this last-resort decision and we have asked for access to government support in both Sweden and Denmark”, said Norwegian's chief executive Jacob Schram in the statement.  

“Our pilots and cabin crew are the core of our business and they have done a fantastic job for many years.”

“It is heart-breaking that our Swedish and Danish pilot and cabin crew subsidiaries now are forced to file for bankruptcy, and I’m truly sorry for the consequences this will have for our colleagues,”  Norwegian's chief executive Jacob Schram said in the statement.  

“We are working around the clock to get through this crisis and to return as a stronger Norwegian with the goal of bringing as many colleagues back in the air as possible.”

The company said it was also immediately ending staffing deals with the OSM Aviation, which supplies it with crew based in Spain, UK, Finland, Sweden and the US.

The company said that 1,571 pilots and 3,134 cabin crew would be affected by the move, with only the 700 pilots and 1,300 cabin crew based in Norway, France and Italy being kept on.

In the release, the company blamed the “the lack of significant financial support” from the Swedish and Danish governments, which it contrasted with that of Norway, which has agreed to pay “all salary related costs” while staff are furloughed. 

The companies declared bankrupt include: 
Norwegian Pilot Services Sweden AB
Norwegian Pilot Services Denmark ApS
Norwegian Cabin Services Denmark ApS
Norwegian Air Resources Denmark LH ApS