Norwegian Crisis Continues As Four Staffing Companies Go Bankrupt

Four of Norwegian Air's staffing companies in Sweden and Denmark are filing for bankruptcy as the coronavirus crisis continues its devastating effect on the airline industry.

Norwegian subsidiaries Pilot Services Sweden AB, Norwegian Pilot Services Denmark ApS, Norwegian Cabin Services Denmark ApS, and Norwegian Air Resources Denmark LH ApS are all filing for bankruptcy, according to the formal message to Oslo Stock Exchange. The decision was taken on Monday, and the formal process is now being managed by bankruptcy courts in the respective countries.

In addition to the four bankruptcies, Norwegian has severed many contracts with staffing agency OSM Aviation.

”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 CEO Jacob Schram.

Almost 5,000 staff impacted

A total of 1,571 pilots and 3,134 cabin crew based in Sweden, Denmark, Finland, Spain, the U.K. and the U.S. will be affected. However, pilots and cabin crew based in Norway, France and Italy are not affected.

The reason Norway-based staff are not affected by the decision appears to be the generous welfare program of the Norwegian government. Norwegian firms in financial trouble can temporarily layoff their staff allowing the state to pick up their full salaries. "There is not the equivalent coverage in Sweden or Denmark schemes," states Norwegian.

Norwegian took advantage of the "force majeure" provisions in the contract they have with OSM Aviation to terminate many crew agreements that will impact staff in Sweden, Finland, Spain, the U.K. and the U.S. Norwegian news outlet E24 previously reported that British employees were notified that neither OSM or Norwegian was in a position to pay salaries for April.

"No time to wait"

Norwegian has cut almost all of its routes because of the drop in demand and travel restrictions caused by the coronavirus crisis. The few exceptions are some routes from Norwegian airports due to a cooperation agreement they have with SAS and the Norwegian government to maintain a minimum air travel offer. While many countries are starting to relax coronavirus measures, most international travel restrictions are still in place. Schram, who had previously announced layoffs for up to 90% of staff, said there was "no time to wait" with the bankruptcies.

“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. 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,” Schram said.

Norwegian's management team is trying to persuade investors and creditors to accept a comprehensive restructuring package in a last-ditch attempt to save the company. Should investors accept the plans, their shareholdings will be severely diluted.