As Norwegian experiences the worst trading environment in its history, the budget airline is seeking protection from its creditors under Irish bankruptcy rules.

The move to “initiate an examinership process in Ireland”, where some of its fleet is registered, follows the refusal of the government in Oslo to pump in more cash to help Norwegian contend with the coronavirus pandemic. 

According to research by The Independent, 24 Boeing 737-800 aircraft are registered in Ireland. The total fleet comprises 128 aircraft.

The arrangement buys the airline time to restructure. It corresponds to US “Chapter 11” bankruptcy – known as “the carwash” in aviation circles.

It allows a company to secure new capital and implement a legally binding scheme for the settlement of debts.

The airline is believed to owe more than £5bn.

Norwegian’s chief executive, Jacob Schram, said: “Seeking protection to reorganise under Irish law is a decision that we have taken to secure the future of Norwegian for the benefit of our employees, customers and investors.

“We will emerge from this process as a more financially secure and competitive airline, with a new financial structure, a rightsized fleet and improved customer offering.”

Norwegian became Europe's third-largest budget airline after Ryanair and easyJet. Unlike its bigger rivals, it had an extensive long-haul operation, which briefly saw it become the largest foreign carrier serving New York.

In 2018, it rejected a £1bn bid from British Airways’ parent company, IAG. Since then, Norwegian has struggled. In 2019, before the coronavirus pandemic, it lost NOK1.61bn (£134m) – a loss of £3.70 for each of its 36 million passengers.

In the past year, Norwegian has carried only 11 million passengers. In October, Norwegian flew an average of 1,000 passengers a day – one-10th of the number in the corresponding month in 2019. Revenue has fared even worse, with a fall of 97 per cent.

Norwegian has a large base at Gatwick airport, where it was previously the third-largest airline behind easyJet and British Airways. It also flies from Edinburgh and Manchester. At present most of Norwegian’s UK operations are grounded. 

Were Norwegian to fold, it would be the biggest casualty so far among European airlines – and cost thousands of jobs in the UK and elsewhere.

Many thousands of customers are owed money for flights which did not take place, or have accepted vouchers for future trips.

Until the coronavirus pandemic, Norwegian faced challenges because of the grounding of the Boeing 737 Max, for which it is a leading customer. But it is currently a beneficiary of compensation from the aircraft manufacturer.