The Norwegian government has sharply criticised the board and management of low-cost airline Norwegian Air Shuttle over the payment of bonuses to both its current and its recently fired chief executives.
Minister of trade and industry Iselin Nybo described the recent payments as “deeply disappointing”, a sign of “poor judgment”, and not showing solidarity with customers, workers and shareholders.
The storm surrounding the bonuses is threatening to sour Norwegian’s revival from near collapse, after a long struggle with the effects of a too-rapid expansion into long-haul flights and the crisis caused by the Covid-19 pandemic.
Retention bonus
Norwegian’s board and new shareholders – led by shipping magnate John Fredriksen – are trying to give the airline a new start, firing chief executive Jacob Schram last week and replacing him with finance director Geir Karlsen.
But Norwegian newspaper Dagens Naeringsliv subsequently reported that both Mr Karlsen and Mr Schram were to receive a retention bonus of NKr11 million (€1 million) for their work to save the airline.
“It shows poor judgment. The board and chief executive Geir Karlsen have a big job ahead of them to explain this and rebuild Norwegian’s reputation,” Ms Nybo said on Tuesday.
The Norwegian government gave Norwegian NKr3 billion in loan guarantees at the start of the pandemic, but last November refused to give it more aid, with Ms Nybo saying it was not a “sound use” of taxpayers’ money.
That pushed Norwegian to file for protection from creditors and launch a large-scale restructuring to cut its debt. It has also changed its strategy, refocusing on the Nordic region and jettisoning its loss-making long-haul plans. The government gave it a hybrid loan as part of its latest restructuring.
Norwegian, which did not immediately respond to a request for comment, answered the government through a letter from its lawyers in which it described its plight as “almost hopeless” at the end of 2020 and insisted it did not use any government support to pay the bonuses.
Key personnel
The board began examining a plan to pay retention bonuses in December, and finally agreed on them at a meeting on May 15th, shortly before Norwegian carried out a capital increase and ended its restructuring.
“Retaining key personnel was considered crucial during the reconstruction,” the lawyers wrote in the company’s response to the government. The cash part of the bonus was paid out on Friday, with more to come next month.
The lawyers said both Schram and Karlsen turned down the bonuses in March but the then board – the board has been much changed in recent weeks because of changes in shareholders because of the restructuring – pushed them through because of worries about losing the two men to rivals.
Former chair Niels Smedegaard has argued that Norwegian was essentially bankrupt and that Mr Schram played an important role in convincing people it had a future.
The new board said after firing Mr Schram that it had tried unsuccessfully to negotiate his pay-off down from the two years’ salary he was contractually entitled to. Mr Schram said he had been willing to negotiate but that talks broke down.
Unions at Norwegian have expressed anger and disappointment about the bonuses after hundreds of workers lost their jobs during the pandemic. – Copyright The Financial Times Limited 2021