Norse Atlantic As

Very good morning, everyone, and welcome to this North Atlantic Airways Q3 presentation. My name is Bjorn Larsen, and together with our CFO, Anders Jomas, I'll take you through both what the Q3 2024 looks like and a little bit about how the future looks, in our opinion. Quick on to the Q3. We had a disappointing quarter, to be frank. getting lower revenues than we had expected. And hence, despite passenger numbers going up, the ticket fares were not at the level where we had anticipated. And subsequently, we ended up with a loss of $6 million. There are a number of underlying reasons for that, and we'll be happy to come back to it. But all things and straight to the bottom line, that was the result of Q3 2024. Passenger numbers went up by almost 20%, 80%. Load factors also went up in the quarter. And we had a revenue raise of 8%, up to $222 million. Very good morning, everyone, and welcome to this North Atlantic Airways Q3 presentation. My name is Bjorn Larsen, and together with our CFO, Anders Jomas, I'll take you through both what Q3 2024 looks like and a little bit about how the future looks, in our opinion. Quick on to the Q3. We had a disappointing quarter, to be frank. We were... getting lower revenues than we had expected. And hence, despite passenger numbers going up, the ticket fares were not at the level where we had anticipated. And subsequently, we ended up with a loss of $6 million. There are a number of underlying reasons for that, and we'll be happy to come back to it, but all things and straight to the bottom line, that was the result of Q3 2024. Passenger numbers went up by almost 20%, 80%. Load factors also went up in the quarter. And we had a revenue raise of 8%, up to $222 million, and an EBITDA of $27 million. We do not expect 2024 to be profitable, full year or the rest of the year, but we do expect 2025 to be profitable. Now, a bit about what we have worked with, because when we have been working space we have we have communicated earlier that we are in a transformational phase so we have spent the last few months transforming the company into something very different and what you will see is that north atlantic 2025 will be a much more balanced airlines in terms of own network selling tickets and chartering out our aircraft to other airlines And we have worked for a long time to secure both this winter, but even more so the long-term future. And we have signed just now an LOI for six aircraft that will go on a longer-term charter to another reputable and major international airline. At the same time, whilst we are taking 50% of our fleet into longer-term charters, we are keeping the network, and we are keeping, obviously, the best 50% part of the network. And not only that, we are able to, both because we are changing the business model, but also because Starvation is the mother of innovation, we are revamped. how we do things both commercially and operationally. So we have been able now to, and I'll come back to that in a second, we have been able to increase the load factors going forward and significantly increase revenues for the flights that we're going to fly as a scheduled airline. So it's actually a win-win. And on top of that, the cost that we will have both in our SG&A, but also in the operational in the OPEX for the aircraft will go significantly down in 2025. Couple of more items. I have been offered the opportunity to invest more in the company by the board. I have been grateful and appreciated that opportunity. So I'm investing another $8.7 million in equity. And I've also offered a loan of $6.3 million to the company. We will, however, give other shareholders the same opportunity to invest to make sure that it is a fair and balanced treatment. So there will be a repair offering. There is only so much I can say about the lease agreement, the long-term charter that we have signed an LOI for. And what you see on the screen behind me is exactly what we have agreed to say. I cannot give any more specifics than that, but it should give you an overview of the size of the contract, and it should also give you a feel for... the duration somehow. I'll be happy to go a bit more into details, but we can only be limited in our information right now because we have agreed that with our customer. So the transformation that we are talking about is first and foremost that we are going to charter out more of our capacity than we have done in the past. And in 2025, we will be up to six aircraft to one particular customer. And then we will be in... in the market for charters, for more charters in the winter time. So in the winter, we will be more a charter company than we are a scheduled airline. In the summertime, it will be, this summer is going to be a bit more than 50-50, but the summers forward, 26 onwards, it will be a 50-50 scheduled and long-term charter operation. The The other thing we have done, which has been very significant, is that we have revamped the entire commercial team. So we have approached commercial, or rather sales, pricing, revenue management, capacity management in a very different manner. And we have seen significant positive results in that. And as I said, Cost efficiency is extremely important. That's really the only parameter that we can control, at least to some extent. And whilst we have been able to reduce our cost a little bit compared to last year, which I think is fairly okay in a very inflationary environment, we have still been able to reduce the cost. Our ambition is to go even further. So comparing 24 to 25, we expect to see a roughly 50%, 5-0% reduction in our SDNA and also significant reduction in accruing cost, mainly because we are able to streamline the basis and match it more to where we will be flying in 2025 onwards. Now, this is kind of a repetition, but just to sort of underscore, 24 has been a transformational year where we have revamped our business model. 25 is the first year where we will see the results, both in terms of charters and in terms of lowering costs. And in 26, there will be a full 50-50 type of operation. I also mentioned that we have cracked the commercial code. And we have done that. I call it our secret weapon, Norse coders. They are approaching revenue management and commercial management with a very new mindset. totally unlike any legacy airline are approaching these issues and i'm very proud to say that we have achieved significant positive results in our commercial management both when it comes to load factors and when it comes to fares that we are able to get in the market And the proof of the pudding is really looking forward. Just looking at this quarter alone, and these are, the dates are from the 27th of November, so two days ago, we are already in Q4 of this year, significantly higher than we were for the entire Q4, last year, we are trending much better for Q1 next year and Q2 next year in our scheduled network. And the numbers basically speaks for themselves. And it's not only because we have a good revenue management team or because we have cracked the commercial code, but it's also because our customers love our product. We have affordable fares, great comfort, great quality product, and we see a lot of returning customers. And our best marketeers are not what you see on your social media or on other type of digital media. Our best marketeers are our customers. They are taken very well care of by our crew. We have the best crew in the world, and it shows. So we have a product that we know has gained popularity, and that is why we are filling the aircraft again and again, and very often with returning customers. In terms of efficiency, in terms of operational cost, we are on a good trajectory. We expect that we, through automation, through a different organization, because there is different skill set needed for the type of operation that we're going into, Through technology and not least through a very lean focus, we will be able to reduce our SG&A significantly. We started that process in October and it will carry on for the next six months. So we will see the full effect of that within six months from now, within first of May. The same goes for the crew bases. We started off being very Norway-centric when we started the airline, flying a lot to and from Oslo. Commercially, it wasn't the best strategy, and we have obviously adopted a strategy so that in summer now, we are, for all practical purposes, a New York-based airline, more than anything else. We are flying out of JFK to six different places in Europe, and we are flying... a lot of destinations from Los Angeles. So a lot of our customers are American, more than 70% during summertime. So we have revamped the network. And of course, When you fly from A to B, it is important that you have your crew bases close to where you are flying. So that has also been a change that is in process that will take down the cost. The crew will be paid the same, but we are able to utilize the available crew resources to a much better extent so that we can reduce costs simply by better efficiency. Anders, maybe you'll say a few words about the transaction.

Yes, I will. Thank you, Bjørn-Tore. As we have communicated this morning, we are raising another $15.15 million of new liquidity to the company. This is done through two things. Mainly, we're taking use of a proxy given from the EGM to the board to print another 15% of shares. This will raise another $8.7 million. This is done through a private placement directed towards BTL Co., a company controlled by Bjørn Tore Larsen. In addition, BTL Co. is providing a shareholder loan of $6.3 million, which has maturity end of next year, end of 2025. So in total, we are raising $15 million. As Guntur mentioned, we will make sure that all existing shareholders are offered to buy shares at the same term. So after New Year, we are planning a repair offering. And if that is subscribed fully, that will raise another $37 million. But that will depend on market conditions and several other features. In addition, we already have an existing shareholder loan of $20 million. We have then extended maturity from December this year until end of March 26. So that is really the most important now, raising another 15 and extending maturity on the existing shareholder loan. Currently, BTLK is 18.9% shareholder in the company, 18.88 to be correct. And following today's transaction, that shareholding will increase to 29.5%. That's it.

So going back to Q3, we had a good operational performance again. We have a great team that carries out our operation. And I think our dispatchability is second to none. We are probably among the top 5% in the business in terms of dispatching planned flight. And we have also fairly good punctuality. We always want to be on time every flight. There are a lot of factors outside our control as well. So 77% is deemed acceptable, but we want to see it higher. We had a strong growth in terms of passenger numbers. We had a growth in terms of load factor, although, as I said before, we are not happy with the load factor in July. July was a big disappointment to us, and I'd say we missed out quite a lot of money in that particular month. No excuses. It is what it is. We saw air prices or airfare softening a little bit as well. We think by better anticipating demand, we could probably have done a better job in securing revenues still for this particular summer. We don't do the same mistake twice, so I think you can expect to see. And as you have already seen from the other graphs, 2025 is going to be very different. Still, we are able to reduce our cost. Our cask is cost per available seat kilometer, so it's a little bit down, about 2%. It goes in the right direction, and particularly having in mind that it is an inflationary environment, and most of our competitors have actually seen cost increases. We have gone the other way. But we still think we have a long way to go to reach our full potential. And as I said, the PRASC, which is revenue or passenger revenue per available seat kilometer, went down by 7%. Ancillary is still OK. We are measured by, in terms of ancillary revenue per passenger, we are number one in the world. It's not always a fair comparison, because short-haul companies obviously have have a shorter hole, so shorter seed kilometers. But we think we are doing very well. We think we can do a little bit better there as well. But there is a limit to how much we can get in ancillary revenues. We still think there is room for another few percent this year. And that is mainly because we will have other and new services, not because we are pricing up the ancillaries.

Let's have a look at the detailed figures of Q3 and compared to last year. So we report revenues of $222 million. And that is up 8% year on year compared to quarter three last year. We increased the fleet capacity from 10 to 12 aircraft in that period, so a 20% increase. And the load factor increased up to 86%, as mentioned by Bjørn Tore. However, the fares reduced by 7%. Total costs increased by 19%. keeping in mind that the overall activity increased by 20%. So as Bjørntokko mentioned again, we are slightly reducing the cost compared to the activity level. We are reporting EBTA of $26.7 million and a bottom line loss of $6 million. Those of you who have followed us over time know that the accounting effect of the leasing cost is actually higher than we actually pay. And if we take that into account this quarter, the loss would have been $2 million. In terms of cash flow, we have positive operating cash flow of $28 million and positive working capital movements of $4 million. This is different from the same period last year and very much related to improved terms with the credit card companies, the acquirers, where we have during quarter three, we were able to secure better terms, which brought cash earlier to us than the same period last year. The net change in free cash in the quarter is $2.7 million and resulting in end of quarter cash of $25 million. Looking at the balance sheet and the credit card receivables here listed as $125 million is a very important feature of a balance sheet and one to look out for. That should then be compared to the deferred passenger revenue of $73 million. So again, those two numbers are important when you're looking at our balance sheet. Included in the other current liabilities is the shelter loan of $20 million with accrued interest, $21 million. And that results, the total picture here then results in a negative equity, which is now $185 million. But again, if you look at the effect of those non-cash lease accounting costs and look at those from inception of the company, those have now grown to $159 million, which you need to take into account when you look at the negative equity. So that's it for the numbers now. Happy to take questions later.

Thank you a lot. So to round it off... We have spent 24, and particularly the last half of 24, to transform the business, going more into a balanced long-term charter and own network. We are in the process of securing our revenue or our scheduled network for 25, and so far we are doing very well on that. And we are also in a painful but very important process to reduce our cost further. And this is work in progress. Started, as I said, full scale in October and is going on for the next six months. So with that, I'll be very happy to take any questions, either for Anders or for me. OK. I think it's no question. So with that, I'll thank everybody for joining us and welcome on board again. Thank you.