(Reuters) – The Norwegian government will not provide additional financial support for pandemic-hit Norwegian Air (OL:NORR) the Industry Ministry and the Ministry of Transportation said on Monday, leaving the cash-strapped carrier in a precarious situation.
Norwegian Air, which has been hit hard by the coronavirus crisis and grounded most of its fleet, said in August it would run out of cash in the first quarter of 2021 unless it could secure fresh funds and has held talks with the government in the hope of winning support.
A pioneer in low-fare transatlantic air travel, Norwegian Air’s rapid expansion left it with debt of close to $8 billion by mid-2020, making it vulnerable to the fallout from the COVID-19 pandemic.
The government’s rejection leaves Norwegian in a “challenging situation”, the carrier said in a statement.
“That the government has decided to reject the request for funds is disappointing and feels like a punch in the gut for everyone at Norwegian,” Chief Executive Jacob Schram said.
The company’s shares have already plunged 98% this year.
The Industry Ministry and the Ministry of Transportation began a news conference on the airline industry at 0800 GMT.
Norwegian Air, which reports third-quarter results on Tuesday, said it will hold its own news conference at 0930 GMT.
Creditors and lessors took control of the airline in May with a financial rescue that allowed it to access state-guaranteed loans of 3 billion Norwegian crowns ($329 million) as the company sought to operate a slimmed-down service.
“Norwegian Air has asked for billions of crowns in additional support and the government has concluded that this would not be a responsible use of public funds,” said Industry Minister Iselin Nyboe.
Norwegian last month operated only 21 of its aircraft, leaving more than 100 grounded, including its entire fleet of 37 Boeing (NYSE:BA) 787 Dreamliners used for transatlantic journeys.
The airline industry is likely to provide sufficient services and will still see healthy competition in the time ahead, Nyboe said.
“Norwegian is evaluating the effects of the current situation with the aim of safeguarding the interest of all stakeholders,” the company said.
The company has said that more funding could come from the sale of aircraft, conversion of more debt to equity or from its owners and the Norwegian government, while declining to specify the amount it might seek.
The government also said it had rejected a request from a start-up carrier for public funds.
So far this year the government has provided an estimated 13 billion crowns in support for the airline industry including loans, guarantees and tax cuts, it said.