Shares in Norwegian Air Shuttle lost more than a quarter of their value on Friday as investors worried about the airline’s ability to cope with a dramatic drop in travel demand as the coronavirus spreads around the globe, Trend reports with reference to Reuters.
On Friday, Pareto Securities cut its rating on the stock, saying it was concerned about the company’s weak cash reserves and the risk it may have to issue new shares to shore up its finances to survive the deepening chaos across the sector.
Analysts have warned that Norwegian, which has expanded the low-cost carrier model to long-haul flights, could be particularly vulnerable to a sudden drop in demand due to its high levels of debt.
On Thursday, Norwegian scrapped its 2020 earnings outlook and cut some transatlantic flights, blaming the coronavirus outbreak.
At 1133 GMT, Norwegian Air’s shares were down 25% at 11.89 Norwegian crowns ($1.28).
The stock has fallen almost 70% since the start of February, making it the hardest hit among European airlines, as the virus spread to Europe and the United States, forcing airlines to cut flights and costs and warn of a hit to earnings.
“For (Norwegian Air), the situation it is likely to wipe out a stellar start of the year and a prolonged crisis might require equity refill as the cash buffer is slim,” Pareto analyst Kenneth Sivertsen said in a note.
“With risks mounting, new equity might be required to stay afloat.”
He cut the stock to “hold” from “buy” and slashed its price target to 15 crowns from 50.
Norwegian Air declined to comment.