Scandinavian budget carrier Norwegian’s Swedish division has been denied a credit guarantee by the Swedish national debt office.
The office states that it has “decided to reject” the application because guarantees can only be granted to airlines considered financially viable on 31 December 2019.
It says there was a “very high risk” at the time – even before the air transport downturn – that Norwegian would not be able to meet its financial obligations, and that it would not be able to manage further debt.
“Accordingly, Norwegian’s application has been denied,” the office says, adding that there is no opportunity to appeal.
Loss-making Norwegian has undergone an extensive debt-to-equity conversion programme as part of a broad restructuring, in order to obtain state funding from Norway’s government.
The airline is due to disclose its first-half financial results on 28 August, which will outline the full impact of the second quarter disruptions arising from the coronavirus crisis.
This follows a first quarter during which Norwegian’s operating loss deepened by more than 40% to more than NKr2 billion ($226 million) and its interest-bearing debt rose to nearly NKr67 billion.
Sweden’s debt office, the Riksgalden, is mandated by the government to issue credit guarantees for new loans to airlines which have a Swedish licence and their main operations domiciled in Sweden.
Norwegian’s Swedish operation operates a fleet of over 50 aircraft, a mix of Boeing 737 Max 8s and 737-800, although most are in storage as a result of the Max grounding and the air transport crisis.