Norwegian Air lift on €222m sale of credit card firm

Norwegian Air has agreed to sell its stake in banking company Norwegian Finans Holding for €222m, boosting the loss-making airline’s finances and sending its shares sharply higher.

Norwegian Finans Holding owns Bank Norwegian, a credit card company originally set up by Norwegian Air.

The airline is selling its 17.5% stake to Cidron Xingu, indirectly controlled by Nordic Capital Fund IX and Sampo.

The deal will boost Norwegian Air’s cash holdings and lead to an accounting gain. European airlines have been struggling with overcapacity, leading some airlines to offer loss-making fares and a few smaller carriers to go bust.

The sale will help its airline operations “and focus on the transition from growth to profitability”, Norwegian Air’s acting chief executive Geir Karlsen said.

While the deal could help the airline refinance a €250m bond maturing in December, some analysts said the company may need to raise more cash from shareholders at a later time.

Norwegian late last year set out plans to slash costs at the expense of long-term growth but has been hampered by the worldwide grounding of the Boeing 737 Max aircraft, of which the company has 18 in its fleet.

Last week, its decision to pull all its direct transatlantic flights from Ireland into North America next month amid mounting costs put up to 134 crew and administrative jobs at risk.

It had already pulled its Cork and Shannon transatlantic services in March on the grounding of the 737 Max planes and said the costs of replacing aircraft for its remaining transatlantic routes out of Dublin were now “unsustainable”.

The airline’s earnings per passenger rose during the important early summer months, but the increase was smaller than most analysts had anticipated.

“Without an ongoing sustained improvement in the unit revenue position or unit cost position of the business, we struggle to see how the company can get through the next nine months without needing to return to capital markets for additional equity,” Bernstein analysts said.

Norwegian Air’s shares climbed by more than 4.5% in Oslo.

- Bloomberg. Additional reporting Irish Examiner