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Norwegian Air appoints industry outsider as new CEO to lead restructuring

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By Reuters
Norwegian Air appoints industry outsider as new CEO to lead restructuring
Norwegian Air CEO Jacob Schram smiles during a news conference in Oslo, Norway November 20, 2019. REUTERS/Victoria Klesty   -   Copyright  STAFF(Reuters)

By Terje Solsvik and Victoria Klesty

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 management consulting company McKinsey and was previously a top executive in the petrol retail industry, 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.

In 2010, he 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.

“Petrol retailing is not the aviation industry, but it’s still a tough business that’s gone through restructuring,” Schram said at a news conference.

“There have been many cost cutting programmes, transformation programmes in Statoil Fuel and Retail and in McKinsey projects, so I’m used to working with that,” he later told Reuters, adding that he used to clean airplanes as a teenager at the old Oslo airport and was “fascinated” by the airline industry.

That industry is currently plagued by overcapacity which has led to the collapse of several airlines this year alone.

While Norwegian has prioritised profits over growth this year, 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 (£25 million pounds) 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.

“The two of them are a dream team to me,” Chairman Niels Smedegaard said of Schram and Karlsen.

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>.

Shares in Norwegian Air were trading 1.4% lower at 1430 GMT.

(Additional reporting by Gwladys Fouche; Editing by Kirsten Donovan)