Can Norwegian Air’s new CEO turn the struggling airline around?
The graph of Norwegian Air’s share price resembles the kind of landing most of its flyers would like to avoid.
First, as International Airlines Group, the owner of British Airways, announced an ultimately unsuccessful takeover bid, there was some excited, rising turbulence. Then, as disappointment after disappointment befell the airline—the grounding of the Boeing 737 Max, poor earnings, significant problems with its Rolls Royce engines, and the departure of longtime CEO Bjorn Kjos earlier this year—a long, sharp turn downward. In April 2018, the share price hit a high of $38.20. Today, at $4.31, it is barely off the ground.
Jacob Schram, the new CEO announced today, seeks to change that. The former chief executive of Statoil Fuel & Retail has no airline experience to speak of, and was instead chosen for his management background, leadership skills, and “impressive track record of value creation,” according to a statement from Norwegian Air chairman Niels Smedegaard. He will take the reins starting Jan. 1.
Schram will have his work cut out for him to revive the fortunes of the airline which tried to establish itself as the budget alternative for transatlantic flights. Since Geir Karlsen, the chief financial officer, became interim CEO earlier this year, the airline has prioritized a return to profitability, by halting expansion, slashing routes and jobs, selling off assets, and postponing debt payments. It reported record third-quarter profits, far exceeding analyst’s expectations, though the share price barely moved. Last month, the airline announced a new arrangement with Chinese leasing firm CCB Leasing, where the two would co-own its forthcoming Airbus fleet, as well as a code-share partnership with US carrier JetBlue.
Under its new leadership, alliances of this sort will continue, Kjos, who remains as company president, said earlier this week. The airline that fended off takeover-bid after takeover-bid is now looking to share the load. Karlsen’s moves to slim down operations are likely just the beginning: Schram, who also spent five years at consulting firm McKinsey & Co., should have the management chops to make some hard choices in the months ahead.
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