Norse Atlantic As

Good morning and welcome to the quarterly presentation from North Atlantic ASA. Today we are presenting from our headquarters here in Arendelle. And with me I have our CFO, Anders Jormoss, and I'm the CEO, Bjorn Larsen. Just a quick look on the headlines for this quarter. It has been a quarter of great improvements in many fields. And we can start off with a load factor that is record high. We have a 95% load factor across the quarter. And that goes for both our scheduled flying and our chargers. We have an increased number of passengers from 304,000 to... correction from 201,000 to 304,000. So it's a 51% increase year on year. We have an average revenue increase by 23% in terms of our own network. And that excludes the gain of $28 million, but includes the charters, great increase on charters. And we do have good sales and good forward outlooks for our upcoming summer. So all the parameters has been possible. for us this quarter. We achieved a revenue of 125.3. That includes $28.7 million of one-offs from re-delivery of 3-8s we had. So it's up from $78 million last year. We have an EBITDA of positive $15 million, a net profit, which is a loss of 14.9 versus a $62.8 million loss same quarter last year. So all in all, it's a very good quarter for North Atlantic and in line with our previous outlook. We have executed on our commercial strategy, which is to shift part of our business into a charter operation during the next few years. It's a strong charter market, and we wanted to secure revenues for a significant portion of the fleet. So we have successfully completed now the signing of six long-term leases to the Indian airline Indigo, which is one of the leading airlines in the world. and we have started that contract with the first aircraft delivered in March. That secures the profitability for 50% of our fleet for a foreseeable future. It also reduces our market risk as we have sold more than 50% of our seats and it is a fuel hedge efficiently since we are not paying for the fuel on the ACMI charters. It also allows us to concentrate on the best performing part of our network. So in other words, when 50% of our fleet is now going into a charter operation, we're going to keep the 50% of the business of our own scheduled network that is performing the best. So in a way, it's a win-win. That is also part of our commercial overall, which is contributing greatly to the load factors and generally the numbers we have seen in Q1. We have a much better network than we had last year, and also we have a better way of approaching revenue management and sales with much more focus on technology. So that has proven well. Now the focus will be to reduce costs. We have started a process, as we communicated to the market last year, where we aim to reduce costs by about $40 million, in addition to our continuous strive for improved unit costs. And this is also going to pay off. We don't see the effect of that in Q1, but we are going to see it starting Q2 and onwards. The long-term charters, as I said, they improve our financial predictability. It's a profitable business and a part of the Indigo contract, which has commenced 1st of March and which is going to be increased, ramped up as we get into the fall with aircraft number two from September. And then it's going to be increased until the aircraft number six, which is going to be around January 1st. 26. Apart from that, we have also reason to believe that we will secure some additional charter business for both next winter and the winter beyond. So actually more than 50% of our seats are considered sold for the next two years. We do see good bookings going forward. There has been a lot of volatility in the market lately. Spares to U.S. in particular have dropped a bit, and we see a capacity, what should I say, a supply side that has been perhaps a bit excessive, but we have still been able to not only fill our aircraft, but also at prices that have been higher than what we achieved last year. Also going forward, we see some of the same. We are focusing more on markets like going to Asia and Africa in the winter, which has been very promising. But in the summer, the core market for us is still America, and the majority of our customers are American. So for all practical purposes, during summer, we are a New York-based or a Los Angeles-based airline flying to big cities in Europe. And you can see those numbers that both in Q2, Q3 and Q4, we will be at least so far hitting numbers that is way better than we were able to do last year at the same time. I said we are reducing costs and we have a plan to reduce costs by approximately 40 million dollars. in addition to the day-to-day cost savings. We haven't seen the result of those cost savings yet. And the reason for that is that we are building... What should I say? We are building new functions that will replace old ones. And for a period of time, there has been... a double cost space, but we are seeing that coming down quite quickly as we go into Q2 and forward. The two reasons why we are taking down cost mainly is SG&A, which is reduced or which will be reduced by about 50% when we have completed, and also the crew bases, which is in the future going to be better aligned with the network we're going to fly. So we can utilize our crew more efficiency than we have been able to in the past. So those two combined will contribute significantly to a reduced cost. And then we are obviously an airline that has a great value product, but we know that We are in a very competitive market, and we need the lowest cost in order to be able to have the lowest fares to fill our aircraft. So cost over time is extremely important for us to focus on. And even before these cost reduction programs, we see a good decrease on the last 12-month basis in our CASC, or cost per available seat kilometre, going from 465 Q1 last year to 4 now, and our aim is to get that to a level of about 3 on the long-term basis. Also, other metrics are pointing in the right direction. Last 12 months, we see revenues – on the last 12-month revenue basis, we see them going from last year $478 million to $635 million. This year, significant improvement that even without the redelivery gains of $28.7 million is a significant rise in revenues. So we think we haven't, you know, we still have quite some potential on the revenue side, but it is very much a great step forward. EBITDA, same thing, much better than last year, about $54 million. And also the free cash flow from operations is much improved. Now, it's easy for me to talk about all these things, but we do have a great machinery behind the people flying the aircraft up in the cockpit, the great crew we have in the cabin, who is our trademark and who our passengers love. but also, which most people don't see, our technicians and mechanics who work 24-7 to ensure that we have probably the best completion rate in the world. We completed 100% of our flights in Q1, and, well, you can't do better than that, obviously. But it's not an easy task. These aircraft are very complex. They are state-of-the-art, and it's not a typical sledgehammer aircraft. You really need great competence among the technical team, a passion and a determination to keep all aircraft in mint condition at any given time ready to fly. So I think also we have, honestly speaking, the best technical team in the world. They are superb. And they are contributing to the performance that we have seen as well. Punctuality has been hampered significantly. quite a bit by air traffic control and also to some extent by airport congestions and some weather in Q1. We expect improvement as we go on and our target is 85% departure 15 minutes on time, which we think in the big airports we are flying is pretty good. We are mainly flying to very big airports only and Whether we like it or not, there is always a queue to get out there. But it's something that we are seeing is improving as we go. The load factor of 95%, I think, is also world leading. I haven't been able to see anybody who has better load factor for Q1 than we have. So I'll be happy to hear if somebody has it, but it's a really good number. And also the number of passengers that we carried in Q1 is considerably up. revenues despite having increased load factors we we we didn't have to sacrifice ticket prices so we have actually a five percent higher ticket price in q1 than we had last price if you combined the regular fare and the unsealed revenues the ticket fare alone was up by the by $20. The ancillary revenue was down by five. The reason being that we have started to include hand-carry luggage as a standard feature for all our customers. So initially we were charging for hand-carried luggage. We decided, and we did pocket some money on that, we decided to decrease or to take that away to include hand-carried, and we saw the conversion rate in our sales went up. So it's an all-positive development, but that is the reason why the ancillary goes a little bit down, but the full fare goes up. Another way of looking into this is seeing our CASC versus the PRASC. PRASC is passenger revenue per available seat kilometre, and CASC is cost per available seat kilometre. So you can see we are 27% up on the revenues on the PRASC, and we are 10% down on the CASC.

Thank you, Bjorn Tore. Good morning, everybody. On behalf of Norris, it's very positive to be able to report revenues in this quarter of $125.3 million. And even when you disregard the gain, one-time gain on the redelivery of the Dash 8 aircraft of $28.7 million, this is an improvement of $18 million or up 23%. This is mainly driven by both increased number of passengers carried, increased fares, but also a significant growth in the charter and ACMI segment. Costs increased marginally by 4%, mainly driven by increased volume. But also we've had some tailwinds by a lower fuel price during the quarter, which has led us to a positive EBITDA of $15 million. Comparing to $27.4 million same quarter last year, a massive improvement. Bottom line. we report a loss of $14.9 million, comparing to 62.8 in the same quarter last year. Again, a massive improvement, which we are happy to report, massive improvement of $48 million compared to the same quarter last year. In the cash flow statement, I think the most important to note is the operating cash flow, which is positive of $30 million in this quarter. compared to $3 million in the same quarter last year. Again, an improvement of $27 million. Liquidity, available cash at the end of the quarter was $31.3 million. This is including an undrawn revolving credit facility of $6.3 million, which remains undrawn until today's date. In the balance sheet, the most important item to look out for is the credit card receivables. And this is basically what the credit card companies are holding back of our money in relation to tickets sold. And we've seen a very good sales during this winter. And therefore, the credit card receivables has increased from $100 million at the end of the year to $139 million, a very large amount, end of Q1. The book equity is negative $225 million. But again, I want to point out, which I've done on previous presentations before as well, keep in mind that the book equity reflects $168 million of accumulated non-cash lease accounting costs since the inception of the company. That was a very quick run-through of the key financial metrics of Norse for Q1. And Bjørn Tore, by that... I leave some concluding remarks to you.

Thank you very much, Anders. And just to be clear, we're also happy to take questions from online, from anybody who's watching. The conclusion is very simple and quite pleasant. We do have a great fill of our aircraft with a world-leading load factor and a strong growth in Q1. We are executing on our strategy. to ensure that we secure revenue for a long term period of time for a big portion of our fleet and thereby reduce risks and also our costs. And we are aiming to deliver a full year 2025 profitable year. So I think there are a lot of uncertainties in this business and we shall not underplay them because macroeconomic environment, There are some disruptions here and there in the world, certain uncertainties, there's capacity issues, etc. So we don't want to underplay that part of the picture. This is definitely a volatile market, but I think we have never seen such a strong outlook from our side as we are doing now. Despite seeing pressure on prices, we are seeing that compensated by higher load factors. So we think we are on a good track. We still have to deliver. One thing is having a plan and even seeing a good trend, but we need to execute. So we are every single day, focusing on executing and making sure that we both fill our aircraft and that we're able to take off and get our cost down. And by that, I'll be happy to take questions.

Yep, maybe you'll take the questions, Andersson. We have had an incoming question here. And the question is, is the Indigo contract reported in charter revenue and charter flights?

Well, we didn't have many flights for Indigo. We just started the contract 1st of March, and we've been flying actually, and Indigo flights will be long haul. They will be flying from India to Europe, to various destinations in Europe. But for the first four months, we are just flying one aircraft between Delhi and Bangkok on a daily basis. Those income, those are one aircraft reported for one month.

Exactly.

As we gradually deliver aircraft to Indigo, this will then increase as part of the revenue.

So the answer is yes, it is. included in the revenue. That's correct.

That was it? That was it. All right. Well, thank you very much for joining our presentation. And our investment or investor relation team is happy also to take questions that come after this presentation. Thank you very much.