Shares in Norwegian fell by more than a quarter on Friday amid investor fears over the airline’s resilience amid the coronavirus outbreak.
The sell-off came as analysts warned that the airline’s cash reserves were slim. On Thursday, shares had already tumbled as the budget carrier withdrew its profits forecasts from last month and cancelled 22 transatlantic flights in the spring due to reduced passenger demand.
Airlines slash international fares in bid to beat coronavirus downturn
The company said it had already reduced capacity by 15% this year, and had relatively low exposure to Italy and the business travel market, both of which have been hard-hit by the coronavirus outbreak. However, its share price has now dropped by more than 70% in less than a month.
Norwegian is the third largest low-cost carrier in Europe behind easyJet and Ryanair,
and a pioneer of low-cost long-haul flights.
While several analysts have viewed Norwegian as undervalued after it appeared to have got on to a firmer financial footing, on Friday morning the Oslo-based Pareto Securities cut its rating on the stock from buy to hold. Analyst Kenneth Sivertsen said: “The situation it is likely to wipe out [Norwegian’s] stellar start of the year and a prolonged crisis might require equity refill as the cash buffer is slim.”
Airlines worldwide have been hit hard by the coronavirus outbreak, with many implementing emergency cost-cutting measures and cutting back their flight schedules. The owners of Flybe said the coronavirus was the final blow that pushed Europe’s largest regional airline into administration this week.
According to the International Air Transport Association (Iata), the impact of the coronavirus could prompt passenger airlines to lose up to $113bn (£87bn) in revenues this year.
While Norwegian’s share price has dropped more than most, airlines have on average had around 25% wiped off their market value since the start of the outbreak in China.
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