Boeing’s biggest hit to date: Norwegian cancels 97 aircraft


The financial problems on Norwegian Air predate the coronavirus pandemic that caused a sharp drop in air travel and problems for airlines around the world. He was looking for a debt restructuring in September last year. Its shareholders approved a reorganization plan in May to convert nearly $ 1 billion of debt into equity, a move that allowed it to avoid bankruptcy.

Norwegian’s canceled orders represent all of its Boeing unfilled orders: 92 737 Max aircraft and five 787 Dreamliners.

There was a time when Norwegian, one of the world’s largest discount companies, was one of Boeing’s top customers. It was the first European airline to buy the 737 Max when it agreed in 2012 to buy 100 of the planned aircraft and an additional 22 from previous versions of the 737. At that time, Boeing set the purchase price of 122 aircraft at $ 11.5 billion. although with an order of that size there is no way Norwegian will pay the full list price.

Boeing released a statement suggesting it is still in talks with Norwegian about its order.

“We are not going to comment on business conversations with our customers,” the company said. “Norwegian Air is a long-standing Boeing customer. As with many operators facing a very difficult time, we are working on the way forward.”

In addition to Norwegian, Boeing had 322 aircraft orders canceled since the pandemic began affecting air travel in February, with 313 of those orders for the 737 Max. It has announced plans to cut 16,000 jobs and cut production rates in response to falling demand, but was still 4,744 orders late before this announcement.
Boeing is building the 737 Max again although it is not yet approved to fly
Norwegian was affected by the grounding of the 737 Max, and has been louder than most carriers about demanding compensation from Boeing for the 18 737 Max aircraft in its fleet that were not allowed to fly. Although Boeing has reached compensation agreements with many of its airline customers, Norwegian’s statement says it has not yet reached its own agreement with Boeing.

The terms have not been disclosed, but industry experts believe that most of the compensation Boeing has agreed to pay to airlines comes in the form of discounts on future purchases of aircraft, parts and services. But with these canceled orders, Norwegian has no future Boeing purchases planned.

Norwegian said that, in addition to the problems caused by grounding the 737 Max, it has had problems with the engines of the 787 Dreamliners it already owns and operates, saying “it affected reliability and resulted in premature maintenance and unplanned”. He also said he was terminating a lucrative service contract with Boeing.

Norwegian said that in addition to compensation, it is also seeking a refund of the deposits it paid Boeing for the 97 planes.

Norwegian has 37 of the Dreamliners in its fleet and 101 from an earlier version of the 737. But it was forced to land all but eight of its planes from April to June due to a lack of air travel, especially on transatlantic routes. Even with the restart of some international flights, it will only bring 12 additional aircraft into service starting Wednesday.

Actions of Boeing (licensed in letters), which gained 14% in trade on Monday by news of the FAA test flight, lost 6% in trade on Tuesday by Norwegian news.

.

Check Also

Trump keeps annual financial disclosures out of sight – for now – NPR

Trump keeps annual financial disclosures out of sight, for now NPR White House: Trump has …