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Is Norwegian Air on the Brink of Collapse? Recent Moves Raise Questions

Norwegian Air Trouble

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It’s a tough time to be a budget airline.

Primera Air closed up shop overnight earlier this year. WOW Air is a shell of its former self after halving its fleet and slashing routes as it tries to survive long enough to be acquired. And now, there are signs of trouble at Norwegian Air.

The ultra-low cost airline has recently made a series of moves to shore up its financial stability, according to Reuters. That includes tweaking the financing on one of its Boeing 787 planes, a $230 million cost savings program, and some undetermined cuts to routes that aren’t performing well.

While these changes aren’t earth shattering and may seem boring, it points to the trouble that Norwegian Air is in. Norwegian is among the best budget carriers flying across the Atlantic Ocean, with cheap flights to Europe from nearly 20 U.S. cities. While it certainly offers no frills, we found it to be a great way to fly to Europe.

But like other failed or troubled budget airlines, Norwegian has grown fast. Arguably too fast.

The airline got a bunch of new planes to shuttle leisure travelers between the U.S. (and other countries) and Europe, thriving when fuel prices were low. But those prices crept up and Norwegian suffered the widespread problems with some Rolls Royce engines. The airline is clearly struggling to make ends meet.

Norwegian batted down concerns that it was teetering on the brink of collapse, saying its recent moves were enough to satisfy investors and debtors. Norwegian is also getting an undisclosed payout from Rolls Royce.

“Combined, these measures should improve the financial performance from the start of 2019,” the airline said in a statement.

 

Our Analysis

There’s no reason to worry about Norwegian going the way of Primera Air and collapsing overnight. The airline is perhaps better suited than any of its low-cost competitors to survive. These recent moves underscore that.

So we wouldn’t caution flyers against booking with Norwegian. But these financial pressures aren’t going away, especially as winter settles in and travel to Europe takes a dive. And most importantly, this spells further trouble for the budget airlines that have helped drive down airfare prices.

We routinely see round-trip fares to Europe under $400 – and often under $300. That was unthinkable just a few years ago. And that’s due in large part to the rise of Norwegian Air, WOW air, and others.

These scrappy upstarts have taken it to legacy carriers like Delta, United, American, Lufthansa, and more. They’ve forced the major airlines to compete on price, and that’s a win for consumers.

If that competition continues to fizzle out, it’s only bad news for cheap travel.

 

Bottom Line

Norwegian isn’t going anywhere immediately. But bad news for Norwegian and its low-cost colleagues is bad news for those looking to score a great deal on a flight to Europe.
 

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Lead photo courtesy of Andrew Sieber via Flickr

Editorial Note: Any opinions, analyses, reviews, or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved, or otherwise endorsed by any card issuer.

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