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Norwegian cuts order cancellation deal with Airbus, stalemate continues with Boeing

written by Hannah Dowling | March 1, 2021
A Boeing-787 in Norwegian livery (Norwegian)

Norwegian Air has officially cancelled all 88 narrow-body jets it had on order from Airbus, mostly made up of A320neo and A321LR aircraft.

Under the agreement, Airbus will keep all deposits made on the purchased but as-yet undelivered aircraft, and is entitled to a further $850,000 from the embattled airline.

A deal was originally struck between Airbus and Norwegian in 2012 for 100 A320neos, of which 30 were subsequently converted to A321LRs as the airline prepared to take on trans-Atlantic routes.

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Of the deal, 88 aircraft were yet to be delivered, all of which have now been cancelled as the struggling airline refines its fleet and cuts back long-haul operations to survive insolvency.

Norwegian has been operating under bankruptcy protection in both Ireland and Norway, where much of its assets are held, since late last year. Restructuring negotiations are continuing.

Meanwhile, it appears unlikely that Norwegian Air and Boeing will come to an agreement over the airline’s cancellation of aircraft orders before the restructuring process is finalised, according to Norwegian chief financial officer Geir Karlsen.

“We don’t expect that we will have a deal with Boeing before we are out of this reconstruction, that much I can say,” Karlsen said.

The airline previously announced its intention to cancel 97 Boeing aircraft that it had on order, which includes 92 MAX aircraft.

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Amid the cancellation of said order, Norwegian is pursuing Boeing for US$1 billion over its MAX and Dreamliner orders that were impacted by the prolonged grounding and delayed deliveries of both aircraft.

Boeing has since requested the dismissal of the lawsuit, and has kept the cancelled orders on its books while it waits for the courts to weigh in.

On top of cancelling new orders, the airline intends to shrink its fleet by 78 aircraft, and focus on short-haul intra-European routes.

The cost of doing such has seen the airline take an impairment charge of US$93.5 million in the fourth quarter.

“We are doing everything we can to emerge as a more financially secure and competitive airline with an improved customer offering,” chief executive Jacob Schram said on Friday.

“As soon as Europe begins to reopen, we will be ready to welcome more customers on board.”

The airline has warned it is at risk of running out of cash by the end of March if restructuring negotiations do not come to fruition.

The company will present a detailed plan for its future next week.

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