Norwegian low-cost carrier Flyr plans to raise up to 530 million Norwegian krones (almost 51 million dollars) in new shares to ease a “very strained financial situation”, Reuters reported.
Flyr recently released its financial and operating results for the third quarter of the year. The company, which was born in 2021 with the aim of serving Norway’s consolidated domestic market demand, reported an operating loss of 231.7 million kronor on revenues of 610.4 million. Flyr commented that “it has taken longer than expected to win the loyalty of business travellers on Norwegian domestic routes”.
On 4 October, the airline announced that it would implement cost cuts to preserve its cash reserves during the autumn and winter season. This measure would include staff layoffs and the temporary cessation of operation of unprofitable routes.
The airline explained that staff availability after the reductions will be sufficient to operate only five to six aircraft, about half of Flyr’s fleet. The airline currently operates six Boeing 737-800 and six 737 MAX 8.
In addition, its network of connections will be significantly reduced from what was originally planned. As the company reported last month, the cuts will save up to 400 million kronor (about 37 million dollars) in cash costs.
In that context, the company’s new shares sold today a 0.01 kronor, 96% below yesterday’s closing price. The situation reflects short-term liquidity needs, difficult capital market conditions and investor reactions, according to Flyr.
Surviving the winter
“By implementing these measures, we will be well positioned to ramp-up with full force for the coming spring and summer”, said Erik Braathen, founder and CEO of Flyr. Braathen’s private investment company will invest ten million kronor in the share issue.
The CEO’s statement is in line with the seasonal and cyclical nature of the European airline market, which sees substantial differences between summer season activity (peak demand and revenue for operators) and winter, beyond the year-end peaks in passenger traffic.
Flyr also warned that it expects lower demand than usual during the coming winter, mainly due to rising inflation and other economic factors impacting on the purchasing power of its customers. Direct competition with Norwegian Air Shuttle and Scandinavian Airlines System (SAS) on the routes that Flyr will maintain will be another major factor deciding the company’s future.
See also: Analysis: in Norway, Flyr’s problems go beyond their network
