Norwegian Air Shuttle New

Good morning and welcome to the first quarter presentation on Norwegian Air Shuttle. My name is Jesper Hotterteit and I am the VP of Investor Relations here at Norwegian. Today's presentation will be held by our CEO, Geir Karlsson, and our CFO, Hans-Jürgen Wibstad. It will be followed by a Q&A from the audience and the web. Please go ahead, Geir. Thank you.

Good morning, everyone, and also good morning to the guys listening in. I think... First of all, we are very happy that we are now out of the so-called low season and we're now heading in full speed into what will hopefully be a new record summer season for Norwegian. But let's have a look at the first quarter of 2024. It ended with 763 million loss on EBITs. We are never happy with a loss in Norwegian, but it is the low season, and I think it is an expected loss. If you look a couple of months back, maybe two, three months back, we were actually expecting a higher loss than what we ended up with, which means that the market, the demand, has been actually better than what we anticipated. We have a significant higher capacity in the market this quarter compared to last year. The revenues are up by 55% compared to the same quarter last year. We are keeping a very comfortable cash position. Very happy to see that the cash position has actually increased through the quarter. So we are... At the end of the quarter, 10.4 billion NOK. Today, the cash position is higher than that. We are continuing to push on the cost side of the business. I'll get back to that in much more detail. 340 routes, more than 100 routes in Vidre. So we are expanding the network as we have been promising. We are doing very well, in my opinion, operationally. We can always do better, but we are doing very well. And I will also get back to that. We have also updated or upgraded the visual profile of the company, including a new logo. This is in kind of the way we are doing it in Norwegian, in a very efficient and cost-efficient way. And this will then be implemented throughout the company over a period of time. Very happy to conclude the Videre transaction. We joined forces with Vidre in January. I have to say Vidre is a great company led by Stein Nilsson sitting here. And I'm very, very optimistic on the way forward together with Vidre and what we will do together. So this is the first quarter that we are together with Vidre. The ramp up for the summer season has been going on for quite a while. It has been going well. We have been onboarding 650 new colleagues into the company. It has been a massive demand of people that want to work for Norwegian. And this year, the ramp-up has taken place earlier than last year, which means that most of the costs associated with the ramp-up is included in the first quarter. That was more in the second quarter last year, so if you're doing the comparisons. And then on the fleet side, I'll get back to it in more detail. That's a concern, the delays in deliveries from Boeing. But we have measures to mitigate that as I will go through. We are continuing to push on the corporate markets. We are double-digit growth growing, both on revenues and on passengers. Very promising to see. The defense contract started up. February 1, it's also according to plan, slightly better actually. And also on the corporate side, we think it's exciting to see then that more than 40% of the passengers traveling with Vidro is actually corporate travelers. So it also helps kind of the corporate value proposition that we have been working on for a while. Looking at some numbers, Close to 5 million passengers in the quarter. Load factor up 4% both in Norwegian and in Videre compared to the same quarter last year. We have been increasing the capacity. We have 15 aircraft more in the first quarter this year compared to last year. So 87 in 2024 against 72 aircraft in 2022. But we are only increasing the capacity in the quarter with 3%. That means that we have reduced the capacity seasonality-wise even more in 2024 compared to 2023. So in periods in the first quarter of this year, we had a 40% capacity reduction compared to what we were flying back in the third quarter of 2023. Punctuality. extremely important. We are doing well on time. We have had a tough winter, actually, especially January, half February, where we were struggling because of all the weather issues that we have in this region. In March, when we are getting back to a more spring type of climate, we are up at the level where we need to be, at 85 to 87 percent as a minimum. We've all just tried to push for higher numbers. But now we are back on the list, top five in Europe, top three if you look at all the global low-cost carriers. This is extremely important for Norwegian going forward. And it is also very positive for, you know, of course, for all the passengers that are flying with us. Looking at this one, and it shows, again, the seasonality that we are... that we are having in Norwegian. And you can see that we are taking down capacity from October 2023 throughout the winter. And now we are into a ramp up position again. If you look at the first quarter, we are 17% up on RAS compared to last year. But we had the Easter in March this year. Ideally, we would like to have Easter in April every year. We know that that's not possible, but it's better for the airline. That also means that you will probably see a softer April in 2024 compared to last year because of the Easter effect. The ramp up is, as I said, really going on. Looking at the February seeds for sale compared to April, we have put close to a million seeds into the market over the last two months. So we are now ready and really heading into a summer season that is looking promising. As I said, regularity, close to 100%. Again, we have a customer promise that the network that we have for sale will be flown, and we are all the way up there on punctuality as well. But this shows how you will see us flexing between the seasons. We have done quite well, in my opinion, the last two years, and we will do the same thing going forward in order then to minimize the losses in low season, and then full speed ahead into into the summer season. If you look ahead a little bit on bookings, on the left side, you can see the seven-day rolling sales. It came up over New Year, as you can see, and it has been keeping on that level throughout the first quarter and then also into the start of the second quarter. And looking at the bookings, it's very diversified. It's booking all over the network, all over the months, the summer months, first of all, from May to August to September. We have also, as you have probably seen, been opening up new bases throughout the network. We're opening up a base in Riga, in Latvia. And this is kind of the first base where we will actually touch, you know, destinations outside of the Nordics. This is the first kind of first move outside of the Nordics since the pandemic. The bookings out of Latvia to Montenegro and to Greece is looking comfortable, good into the summer. We have also opened up a route from Germany to Spain, you know, taken care of by our Spanish bases, also looking very promising. And most likely, as we see today, something that we will be able to build on going forward. Looking at the growth that we are putting into the market in 2024, we are growing in all segments. That means beach, city, and domestic. And we are also growing in all the four Nordic countries. Percentage-wise, we are growing mostly in Denmark this year, but we are also growing in the other three Nordic countries, which is promising because we are growing out of a situation where we are profitable on all four Nordic countries. Now we can start to build on that for the months and years to come. to come. Capacity-wise, we're up 15% if you look at May to August compared to last year. We have a load factor today very much in line with the same situation last year. That means that we have been selling between 3 and 350,000 tickets more as per today compared to the same time last year. On the yield side, we are seeing low single-digit increase from the record summer that we had last year in 2023. On the revenue side, we have passed, as you can see on the right-hand side here, we have passed. This is comparable networks, also back to 2019, so we have passed the 2019 line, which we should do, by the way, but it's showing a very promising development. into what seems to be another good summer for the company. I will get back to more details, you know, looking ahead or looking forward a little bit later.

Thank you, Guy. And good morning, everyone. I will, as usual, go through some deep dive into some numbers for the first quarter. We're very happy to see that the unit revenue was increasing from the first quarter of last year to the first quarter of this year from 0.63 to 0.73. It's a very significant increase of 17%, and you've seen that also in the traffic figures. So that's a strong improvement. We're also seeing, luckily or fortunately, also that the auxiliary revenues are coming up quite nicely from last year, from 158 to 173 kroner per passenger. On the RPK, it's interesting to note, of course, that it's coming down from the fourth quarter. But at the same time, despite an US crease of only 3%, we're actually increasing the RPK by 8%, driven by a higher load factor, which, as Guy says, has been a key item for the improvement in our financial results. Also very happy to see on the column below there that the EBITDA has a significant increase. And then we're taking out actually the other losses and gains, which is a balance sheet adjustment to our working capital positions, which accounted for 126 million. So as you can see, it's a It's not directly related to our operating performance. And that actually goes from a minus 124 million to a plus 427 million, which is a significant 551 million improvement from the level of 2020. Of course, that includes VIDRA, which plays into that. So, it's good to both look at the EBITR, but also look at the EBIT, because that then, of course, brings in the depreciation and other elements from VIDRA. CUSC is at 0.61. As mentioned, we are on plan with our cost program and our cost expectations for 2024. As we will come back to in a minute, our guidance is kept at the same level, but it's slightly up from the level of Q1 2023. And that's driven by a couple of things, and I'll come back to that. But it's partially also driven by the fact that our business has grown, but we're keeping the capacity down, which is good for the bottom line, but it obviously has an impact on the cask. But we're happy with that level, and it's spot on with our plans. Balance sheet, as mentioned, a robust balance sheet. We're seeing that the cash goes up by about one billion during the quarter, a little less than a billion, and that is kind of despite us having paid one billion as consideration for Vidra and for those that Of course, you will remember that the whole Videra business was paid in cash. So we're happy with that. And that's partially driven by good pre-sale or sales activities during the first quarter, which is driving that. And I will come back to that also in a minute to show you the transition from 9.5 to 10.4 billion. A little bit more of a deep dive into the revenue development. And it's really nice to see that we're having actually a revenue increase from quarter to quarter, as Gary mentioned, of 55%. That's quite a significant number. But it's partially driven, of course, by our own revenue growth. But it's also driven, of course, by the inclusion of Vidra. And it's also important to note that Vidro, while Norwegian has significant seasonal fluctuation, Vidro also has significant seasonal fluctuation, but less so. They have a more stable business model and less variability in the revenues than what is the case for Norwegian. Very happy to see that the revenue increase for Norwegian alone is 17%, which is a strong number. And it's driven by really the three main factors that is driving our business and the improvement in our business. One, what's bringing the smallest contribution is the increase in the ask, which is quite limited, which adds 107 million. The yield improvement is 451 million, and that's a significant number, and that's driven, of course, by, just as I mentioned earlier, an improvement in our yield of about nine öre, comparing the quarters, so that's a significant improvement. The other factor is, as mentioned, the load factor and being able to keep the load factor as high as we have during the low season has been a key factor for the improvement. So that's contributing 209 million. And then we have a net effect on the other revenue, which on the Norwegian side, which is impacted by the cash point and actually less void of the cash point. which we had quite a bit of during 2023 and 2022 because of the COVID cash point, and that's not impacting the revenue this quarter. And then EBITDA is contributing nearly 1.5 billion. Also, a further deep dive to understand the EBIT development. Very nice to see kind of the revenue, which we went through there, contributing 679 million. Then we have a fuel impact, which is mostly driven by lower fuel prices compared with the same quarter last year, partially offset by a somewhat higher US dollar rate. but overall a net positive impact on the fuel. Then we have the operating expenses, which has a negative impact of 312 million. About half of that relates to the ramp up, cost related to the ramp up of the crew. As I said, we're having a kind of a bigger business at the same time as we're keeping capacity down. So about half of the 312 million is related to training or crew for hopefully what will be a strong summer season. And the remaining part is about 20% is related to FX and also kind of a general inflationary level. But as mentioned earlier, we're holding on to our cost guidance and we're right on target when it comes to our CASC plans for 2021. Then we have the other losses and gains that I mentioned that is impacting our result relative to Q1 23 with 98 million. And then of course, as we are building our business, we have higher depreciation and also the depreciation is impacted by higher US dollar rate as these are US dollar denominated figures. So, and then lastly, Vidra, as I said, more stable business. We are very optimistic about their performance for the year. That is looking good, but actually, as with Norwegian, a loss in Q1, but a moderate loss of only 23 million, which is really also a signal that it's a more kind of stable situation or stable, less seasonality in Vidra than what is the case in Norwegian. So these are kind of the total group figures on the P&L side. Strong operating revenue increase, 55 million. The EBITDA plus 551 million. And then we have the operating result, which is 154 million after the other losses and gains. And then at the bottom line, we have 904 million versus last year of 993 million. So that's then, of course, including the figures from VIDRA. One thing to note, which is maybe a bit technical, but on the net financial items, there is about 25 million also, which is negative FX impact from the VIDRA, the nominated debt in US dollar. So that is also an impact of the weakening of the Norwegian kroner. A few words on the balance sheet. I'm very happy to see that the cash balance is growing as expected. The inclusion of VIDRA is there as well. We're seeing that the aircraft settlement liability is increasing nicely. It's driven by the good pre-sales. The equity ratio is kind of seasonally down from 18.9 to 14.3%, but it's still a very robust balance sheet situation. On the net interest bearing debt, we're seeing that that is changing quite a bit. Of course, the cash is improving, which is good, but also the aircraft financing is increasing by 2.2 billion. Out of the 2.2 billion, about 1.5 billion of that is related to BIDRA, and the remaining part is, for the most part, revaluation of our own in US dollars. But still a very manageable situation for the business. We're continuing to optimize the capital structure. We started that work in 2023. And we also, so during the quarter, we paid down a little bit more than 100 million on one of the loans from the reconstruction, which were provided by Norwegian institutions. So kind of that work is ongoing. And then, as you know, the board has proposed to the annual general meeting to pay a dividend in 2023. four of 0.60 kroner. However, as you all know, that is subject to approval from holders of our debt, our bondholders. that process is ongoing. And I think we can, you know, the latest time that should be payable will be when the last of the older bonds mature, which is 2026. But we're also at the same time continuing to look into that. And we think that is a good level for the business in terms of or paying a reasonable dividend given the solid balance sheet position of the company. And then lastly, the cash flow, as I said, growing by nearly 1 billion, very strong cash flow from operating activities, 3.1 billion positive. That is mostly driven by strong sales in the business, where we're kind of building cash from sales opportunities. and also a very low holdback. The holdback is no longer an issue for Norwegian. We are at the normal level between 10 and 20 percent, which is really effectively the processing time of getting most of these payments done. So that's a good situation. Investment activity is 1.3 billion, out of which 1 billion is is the payment for the VIDRA, so that's in good process, and then we have the traditional financing activities. So ending up then with a, And in cash bonds of 10.4 billion, which since this was reported has grown somewhat. So we are still on a good footing. And I think overall, from a pure financial point of view, we are on plan on most of our KPIs when it comes to our financial performance. And we think overall it's a good and robust quarter for Norwegian.