Norwegian is aiming to strengthen its balance sheet by raising three billion NOK (approximately £268 million) in a share issue to increase its financial flexibility.
The airline announced it’s plans of “strengthening its balance sheet through a fully underwritten rights issue of three billion NOK in order to increase its financial flexibility and create headroom to the covenants of its outstanding bonds.”
After a period of rapid growth, the airline is changing its focus to one of profitability, it said: “The company has during the past years made considerable investments in new aircraft and launched a wide range of new routes, not least intercontinentally. The growth will now abate and the profitability increase.”
The airline has recently implemented a cost-reduction programme in efforts to improve profitability and reduce costs in 2019.
“Norwegian has been through a period of significant growth. Going forward we will see an increased focus on cost savings and CAPEX reductions,” said CEO Bjørn Kjos of Norwegian. “We will now get in place a strengthened balance sheet that supports the further development of the company. We are very pleased to see that our main shareholders offer strong support in a time where the market is still challenging. With the strengthened balance sheet, the organisation can now devote all its attention to further development of the company.”
In moves to improve profitability, the airline recently confirmed plans to optimise its route network and close several of its bases in Spain, Italy and the US in 2019.
Other cost-saving initiatives include aircraft divestments, establishing a joint venture for aircraft ownership and the postponement of aircraft deliveries. The airline has also formed an agreement with Rolls Royce related to compensation for operational disruptions that affected its long-haul operations.
The airline said its cost-reduction programme, #Focus2019, will contribute to an estimated reduction of minimum NOK 2 billion in 2019.
The news comes after an announcement last week from International Airlines Group (IAG) confirming that it does not intend to make an offer for the low-fare, long-haul airline and will be selling its 3.93% shares in the airline.
Norwegian received two separate conditional proposals from IAG Group last year but rejected both on the grounds that they “undervalued” the airline.
The airline is now hoping to strengthen its balance sheet, and suggests this will increase its competitiveness and financial strength.