Loss-making Norwegian Air appoints new CEO to lead restructuring

[November 20, 2019]   By Terje Solsvik and Gwladys Fouche

OSLO (Reuters) - Loss-making Norwegian Air <NWC.OL> has appointed Jacob Schram as chief executive to take charge of the budget carrier's restructuring as it struggles with a low-cost, long-haul model in an overcrowded industry.

Schram, who does not have a background in aviation, joins Norwegian from McKinsey where he worked as an advisor, Norwegian's board said on Wednesday.

He replaces Bjoern Kjos, Norwegian's founder who stepped down in July having built the carrier into Europe's third-largest budget airline, shaking up the market for transatlantic travel with low fares to challenge traditional carriers such as IAG's <ICAG.L> British Airways.

Schram, 57, will be tasked with cutting costs and making the airline profitable again after the breakneck expansion left it with hefty losses and high debts, forcing it to repeatedly ask shareholders for new funds to stave off collapse.

"Norwegian has made aviation history and I am honored to take on the role as CEO ... my main focus will be to bring the company back to profitability and fortify (its) position as a strong international player," Schram said in a statement.

That will be no easy job in an industry plagued with overcapacity that has seen the grounding of several operators this year alone.

"(Schram's) extensive management experience from global companies, proven leadership skills, strong commercial consumer orientation and impressive track record of value creation will greatly benefit Norwegian as the company enters into a new phase," board Chairman Niels Smedegaard said in a statement.

In 2010, Schram led the process to list Statoil's petrol station business, Statoil Fuel and Retail, later acquired by Canada's Couche-Tard <ATDb.TO> to become Circle K.

Norwegian has prioritized profits over growth this year but it has been hampered by the global grounding of Boeing's <BA.N> 737 MAX aircraft and long-running technical problems with Rolls Royce <RR.L> engines on Boeing Dreamliners.

Disruptions to its fleet, such as leasing replacement aircraft for its 18 Boeing MAX, added around 300 million crowns ($32.7 million) to its costs in the third quarter.

Norwegian has been run on an interim basis since July by Chief Financial Officer Geir Karlsen, who has raised cash, postponed debt payments, sold off assets and cut unprofitable routes to keep the company aloft.

Karlsen will continue as CFO as well as deputy CEO.

Amid a flurry of deals to save Norwegian, Karlsen in October announced plans for a Chinese leasing firm to take stakes in its fleet, and partnered with U.S. carrier JetBlue <JBLU.O> to feed passengers into each others' network.

The company has a similar deal in Europe with Britain's easyJet <EZJ.L>.

Former CEO Kjos, who is Norwegian's largest shareholder and retains the title of president, on Tuesday told a conference in Berlin that the carrier aims to build further alliances.

Shares in Norwegian Air were trading down 1.4% at 1238 GMT.

(Editing by Kirsten Donovan)

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