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China buys part of Norwegian Air, government aid secured

China and an Irish company are buying a large chunk of Norwegian Air’s debt, converting debt into equity for Norwegian, which means that the airline has met the Norwegian Government’s requirements for a bailout.

This is actually great news for Norwegian Air, for the country of Norway, and the airlines’ millions of flyers around the world. Norwegian’s brilliant leadership, led by its CEO Jacob Schram, has averted yet another crisis. The move should position the airline in the direction of not only survival but future profit as well. This regardless of the current coronavirus crisis, which affects all airlines.

Norwegian’s first B787-900 being assembled at Boeing in 2016. Video: Norwegian/YouTube.

China is buying into Norwegian Air

Norwegian Air’s new share ownership is deep-rooted in the Chinese government. BOC (Bank of China) now owns 12.67 percent of Norwegian Air. This translates to 389 Million shares of the airline, in exchange for debt forgiveness.

BOC has not previously owned any part of Norwegian. However, the Chinese government-owned company has acted as the aircraft leaseholder of four Norwegian Boeing 787 (B787) Dreamliner aircraft. That transaction took place in 2018 and 2019.

BOC Aviation’s ownership

BOC Aviation is owned by the People’s Republic of China, the Chinese government.

But how?

Here is how BOC is operated:

  • BOC is owned by Sky Splendor Limited, controlled by
  • the BOC Group Investment Limited, controlled by
  • BOC Limited, controlled by
  • Central Huijin Investment, LTD, controlled by
  • China Investment Corporation, which, in turn, is OWNED by
  • The People’s Republic of China.

Avolon Aircraft leasing

Another new owner of Norwegian Air shares is China’s Avalon Aircraft Leasing and the Japanese Orix Corporation. They now own 5.5 percent of the airline, with 169 Million shares being converted from debt to equity.

Irish-owned Aercap aircraft leasing company

Privately owned Irish company Aercap is one of the world’s largest aircraft leasing companies. Aercap owns at least 11 of the 26 B787 Dreamliners that Norwegian leases.

Aercap now owns 15.9 percent of the airline, owning 488 Million shares after converting Norwegian’s debt to them into shares.

Additionally, Aercap has the option of converting another 219 Million shares into equity in the future.

Total new foreign ownership percentage of Norwegian Air

  • BOC: 12.67% ownership.
  • Avolon: 5.5% ownership.
  • Aercap: 15.9% ownership

34.07 percent of Norwegian Air is now owned by the Chinese and the Irish.

Moratorium on the newly issued debt to equity issued Norwegian shares

The new shareholders of Norwegian Air cannot sell their shares until they are released for market sales. The following dates have been set for release if the shareholders decide:

  1. August 9, 2020.
  2. October 9, 2020.
  3. December 9, 2020.

A note on aircraft leasing companies

Aircraft leasing companies typically don’t invest in airline ownership. As a result, we could see the shareholders selling shares when the dated restrictions expire.

Delivery first 787-9, china buying norwegian air
Norwegian taking delivery of its first B787-900 in 2016. Photo: Norwegian.

Norwegian Air Press Release

The debt into equity transactions means that the Norwegian Government loan guarantee of NOK 3 Billion has been approved!

Norwegian CEO Jacob Schram said,

“I want to thank everyone who has supported the company during this unprecedented crisis that has affected the entire airline industry: The Government and Parliament; customers; employees: shareholders; leasing companies; creditors; bondholders, the travel industry and other Norwegian supporters. Now that we can access the state loan guarantee, we can continue to transform the company. Through this process, the belief in New Norwegian and the company’s strategy has been confirmed by shareholders, the market, bondholders, leasing companies, other creditors, and lenders. Nevertheless, the months ahead will remain challenging and with a high degree of uncertainty for the industry. Norwegian will still need to collaborate closely with a number of creditors as the company currently has limited revenues.”

Schram continued,

“In addition to securing that the company survives this crisis, our goal has been that Norwegian should have a strong position in the future airline industry, with a clear direction and strategy. This will ensure sustainable operations and a structure that will be to the benefit of both shareholders, customers and
colleagues.”

Norwegian has converted NOK 12.7 Billion of debt into equity, which has placed the airline in a good position for the post coronavirus crisis. However, the next months will still be challenging for the airline.

Do you have comments or questions about China (and Irish Aercap) buying part of Norwegian Air? Please contact us here.

Featured Image: Norwegian Air.

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