Norwegian carrier Flyr, having audaciously started up in the midst of the pandemic, survived for fewer than 600 days before being forced into bankruptcy – the latest casualty of Scandinavia’s highly-competitive and often-unforgiving airline market.
Oslo’s stock exchange implemented a suspension of trading in the company’s shares on 1 February and Oslo district court has issued a bankruptcy order, naming Stine Snertingdalen, of commercial law firm Kvale, as the official receiver.
The first meeting of the airline’s creditors is scheduled to take place at the district court on 16 February, according to the Norwegian bankruptcy register.
Flyr commenced services at the end of June 2021, adopting a more employee-centric model rather than outsourcing to reduce costs.
It opened a network combining domestic routes with popular international city and resort destinations in Europe.
Over the first six months it built a fleet of five Boeing 737s, including the Max, with load factors at the end of 2021 reaching about 54%.
But the persistence of virus variants hampered air transport recovery and Flyr had to cope with heavy losses.
At the beginning of last year it embarked on fundraising measures, with a NKr250 million ($25 million) offering in January, followed by an investment from Norwegian media firm TV Gruppen, and a NKr250 million private share placement in May.
The airline continued to expand over the first half, doubling its fleet to 10 jets and extending its network to nearly 40 destinations.
But as recovery from the pandemic progressed, ramp-up costs for the summer season – with pressure from fuel prices and a strengthening US dollar – dragged on Flyr’s financial performance, even as load factors reached the 80-90% mark in mid-year.
Flyr attempted to raise another NKr75 million through another offering but abandoned it because the company’s stock price – which had lost over 70% of its value in the year since flights began – was not high enough.
The airline had aimed to take advantage of digital technology to simplify its customer bookings but experienced delays in integrating its systems with legacy distribution platforms, which obstructed its efforts to secure revenues from the business-travel sector.
It continued to make heavy losses in the peak summer months, and the nine-month net loss at the end of September 2022 exceeded NKr1 billion.
Flyr was also bleeding cash at an alarming rate. Over the third quarter its cash level halved from just over NKr300 million to around NKr150 million and, with fuel prices still high, and consumer spending tight, the airline took radical measures to stem the decline as the weak winter season approached.
It slashed its Norwegian domestic network and reduced its European services to a few key destinations.
Flyr’s fleet had reached 12 aircraft but the cuts effectively halved its capacity requirement, and the carrier started cutting back personnel to save its cash reserves – with ambitions to restore its growth trajectory once the winter had passed.
As the pressure on its finances increased, Flyr attempted another round of fundraising, seeking NKr530 million in early November to underpin its survival plan.
But the scheme – a combination of a private placement and a subsequent offering – failed to attract a full subscription, and the airline turned to an alternative proposal from investors.
This proposal lifted the funding target to NKr700 million, by combining a NKr250 million private placement with a NKr100 million subsequent offering to other shareholders, and giving flexible subscription rights for participants in each that would raise another NKr350 million.
But this plan carried substantial risk, because the private placement alone was insufficient and the other components needed to be implemented in order to provide buffer capital and pay European emissions-trading quotas.
Just two weeks after the plan was unveiled, Flyr underwent a sudden change of senior management with chief financial officer Brede Huser taking over as chief executive from Tonje Wikstrom Frislid, who had led the company since start-up.
Flyr embarked on several strategies to shore up its finances, seeking new charter and wet-lease opportunities, and looking longer-term at US capacity provision to help offset low-activity seasons.
But the risks attached to the NKr700 million financing plan began to show, as the airline’s shares continued to slide into virtual worthlessness, leaving no incentive for investors to pay a premium price for newly-offered stock.
Flyr acknowledged that the plan’s success was “increasingly unlikely”, which left it struggling to fund the cost of its envisioned operational ramp-up as well as the emission payments.
Critically, the failure of the financing plan also triggered the collapse of a provisional summer 2023 wet-lease for six of Flyr’s aircraft – half its fleet – an arrangement which, the carrier believes, would have diversified its income stream and substantially improved the company’s prospects.
Flyr had undone some of its winter cash-preservation efforts in order to pursue the wet-lease deal, and this exacerbated the financial problems at the airline. A last-ditch effort to arrange a NKr330 million share issue, with which to secure the wet-lease agreement, failed to attract sufficient underwriting commitments.
Investors were being “deterred” from committing capital as a result of market conditions and uncertainty over air travel, Flyr argued.
After a year-and-a-half of poor stock performance and financial pressure, the incentives of the wet-lease agreement and improving ticket sales were not enough to convince investors to continue pouring capital into Flyr.
Flyr’s fleet of a dozen aircraft is sourced primarily from US lessor Air Lease, which provided all six of its 737 Max jets and a 737-800, while other companies including Standard Chartered supplied the other five -800s.