Norwegian Air Shuttle New

Good morning and welcome to the second quarter 2024 presentation for the Norwegian Group. My name is Jasper Hartetegs and I am the VP of Investor Relations here at Norwegian Group. Today's presentation will be held by our CEO, Karsten, and our CFO, Anzio Gebibstad. It will be followed by a Q&A from the audience and the web. Please go ahead, Karsten.

Thank you. Welcome, everybody. It seems like it's a quiet Oslo centrum in the morning on a Friday in July, but I know that some are following this online. So let's head on. The second quarter ended with earnings before tax of 477 million, EBIT 593, split on 391 on Norwegian, and 202 from Vidre. We are continuing to strengthen the liquidity position. And we have set aside, as we all know, 823 million in a dividend fund that we hope to pay out to our dear shareholders as soon as possible. It is a fight against increasing costs in Norwegian. It has been for a while. And we are very happy to say that we, compared to the second quarter last year, we actually reduced the cost with 2% year on year. We have close to 350 routes for sale during this summer. We are continuing to focus on on-time performance as well as regularity. Very happy to see that we are the most punctual European airline in May, rated by Sirium. We are also having a high focus on the satisfaction by our customers and we have reached record high levels this quarter with an MPS of 53. But we have seen a quarter, the second quarter, that has had some softening in demand. We have put a lot of capacity into the market, 19% compared to the same quarter last year, 66% more than what we flew in the first quarter of this year. And this has been done in a market that has seen some softening. We have in the same period been having tough negotiations with both our cabin crew, Denmark and Norway, and the pilots. Not only the pilots in Norway, but also the pilots in Spain and Denmark. Tough negotiations. We definitely had a risk of a dispute. We ended up in a dispute, but we did not end up in a strike. That has also had an impact on the bookings. Difficult to say how much. But we are happy that we reached an agreement. We are happy that we avoided a strike. And then, even if the results from the negotiations were not what we were hoping for. We have had a continuing weak local currency. We have had slightly higher fuel prices than what we anticipated. And we have also an impact from delays from Boeing, where we were supposed to get deliveries during the quarter, which we did not get. and thereby we had to take in not much but one to two lines of aircraft from the market which also is adding costs. So that in combination led to the fact that we had to reduce the guiding for the 2024 as a whole. That said, I think we are very well prepared, and we have been very well prepared for the summer season. Operationally, we are doing good, I would say, even very good these days. And the summer, the remaining part of the summer is looking good. So the focus now is actually on the coming winter, as well as next summer, 2025. Very exciting to see that we are launching new routes to the Northern Norway, but also launching routes to other winter warm destinations among them is for example dubai where we plan to start flying now into the into the fall the synergy project with vidra is continuing we have already taken out synergies but as we have said the majority of the synergies will come through the coming winter and through 2025 when we are when we are aligning the networks in a better way than what we are flying today The partnership with Straubr is ongoing. It will be launched during the fourth quarter of this year. Passengers, as a group, 7.3 million passengers. Quite a growth, I would say, 30% compared to the same period last year. Load factor 82.4. And then very happy to see that the load factor at Videre is up by five percentage points compared to the same period last year. As I said, 19% capacity growth into the quarter. And then regularity and punctuality, that is extremely important for us. and we are still doing fine. This shows the seasonality. This is a graph that I'm using and spending a little bit of time on every quarter. It shows the seasonality. It shows that we have been putting one million seeds into the market compared to the low season, for example, February. But at the same time, it shows the relatively weakening we saw during the quarter. April was expected to be weak, mostly due to the Easter effect. We were expecting May and June to become better than what we ended up with. No doubt about that, by the reasons I just mentioned. um but then we have seen an improvement into the summer as expected and into july and august that i will come i will come back to so the load factor is down two percent uh easter effect is is included there the yield is down three percent however we are flying six percent longer sector length so it has to be taken into into consideration and then again we avoided you know a massive conflict with with with strikes throughout actually the network and and and and happy about that and then the regularity Boeing and cetera I will come back to it looking forward The booking momentum, I would say, is stable. It has been for quite a while. We are happy to see that over the last, let's say, two to three weeks, we have seen a peak up, as you can see. Normally, when you're getting into July, you will see workings are coming off because people are traveling and going on holidays. But we have seen an uptick lately. The uptick and the bookings we are seeing for the remaining part of the summer and into the shoulder to the season is across destinations, I would say, and also across travel months into the fall and into early winter. On the capacity that we have been putting into the market, the increased capacity, 60% approximately of that is increased frequency, meaning increased frequency on routes we are already flying. 40% is on new routes. We have done some investments as such. into new routes, and it will take a little bit of time before those routes are kind of setting themselves into the markets. We have also in 2024 started to fly non-Nordic routes. As an example, we are flying today from Riga in Latvia to Montenegro. We are flying to Greece. We have also started an operation flying from Spain to Germany. And both these kind of areas are booking satisfactory, I would say. And this is something you will probably see more of into next year. On booked revenue, as you can see, a nice development, I would say. The capacity growth that we have had in the second quarter of 19% is coming down to 10% in the third quarter. which is okay. So you can say if you look at the bookings today on load, we are on par compared to similar period last year. On yield, we're also on par. So it's relatively flat compared to what you saw exactly at the same time last year. That means that with increasing capacity we have, we have then sold more than 400,000 tickets more today than at the same period last year. Corporate side of the business, very important for us. We have been gaining market share for quite a while and it continues. Looking at the graph to the right, you can see that Let me first say that, how is the corporate market in general doing in the industry? I would say that it is difficult to say. We are estimating that the corporate market is probably 80% back compared to prior to the pandemic. But looking at our figures, we are 19% up on passengers from 2019. But we are more interestingly, 28% up on passenger numbers from 2023, the second quarter of last year. Looking at the revenues from the corporate side, we are 38% up. And why are Norwegian more attractive for the corporate travelers today compared to earlier days? Well, I think on-time performance, regularity, very important. When we are talking to the corporates and we are doing that all the time, more and more of these guys are saying that they are flying 50% or more now with Norwegian, even if they are in general flying less than before. We have onboarded more than 1400 corporates during the first half of this year. And we are very happy to see that a huge portion of that is actually coming in the Swedish markets, where we are now doing a push in order to also take market share in Sweden. The armed force contract started as a four-year contract. It started in the first of February this year. It's booking very well, more and better than what we anticipated. It is all good. And I also think that the Norwegian reward priority product that we put in place a while ago is starting to kind of feed into the market. And we are seeing that our corporate travelers and others are appreciating that as time goes. Also on the Vidra side of the company, they have a huge portion of corporate travelers as well as we know. And over time, meaning over the next 12 to 18 months, we will be able to offer much better products also to these where we are going to align the two networks in a better and different way than what we have doing so far. So that is all from me for now. I'll show again over to you.

Thank you, Geir, and good morning, everyone. I will go through the financial results for the second quarter 2024. For Norwegian, as normal, going a little bit more into detail on the specific figures. As Geir said, we have had a strong growth in the revenue side. We're up 36% to 9.3 billion for the quarter, with BIDRA contributing 1.8 billion. The growth on the Norwegian side is about 10%, so quite a significant growth. The unit revenue is lower for the reasons also mentioned earlier. We've had a significant capacity growth. We have an Easter effect, but also we've had a softening of the market, and that has resulted in a unit revenue coming down 5.6% compared with Q2 last year. And that has a significant... I'll come back to that in a minute. It has a significant impact on our bottom line results. We're happy to see that revenue is also coming up from 778 kronor per passenger last year to 194. Looking at the profits, the EBIT is 593 million and with Norwegian contributing 390 1 million and Vidra with a very strong performance at 402 million. So that is really impacting our figure. And as we mentioned, very happy with the acquisition of Vidra, which is going very well in all respects, also financially. We're also very happy to see that the cost performance is improving. We're having a reduction in our cost this quarter, quarter over quarter, with one euro or 2%, which is quite good for us. That's also taking into account that we have a catch-up effect from the pilot renegotiations where there were some refund of payments from or salaries from 2023 and also Q1 2024 with that we've taken in the in the second quarter and that represents about 57 million of of that number. So even with that, taking that into account and also with somewhat weakening of the Norwegian kronor versus a dollar, we're happy to see that result and also that actually reduction in our CASC. BIDRA, again, strong performance, and we'll come back to that later. We're also seeing that our balance sheet is improving very well in this quarter. We're ending the quarter with a cash balance of 11.5 billion, and we're also seeing that the net interest-bearing debt is reduced by 1.4 billion put it limited to 4.4 billion, which is quite limited in the overall scheme of things. Equity ratio is flat-ish or slightly improved by one notch to 14.5%. And we've also set aside now following the annual general meeting, the dividend fund relating to dividend payment that have been approved by the shareholders for 2022 and 2023. was established in may as previously announced and that amounts to 823 million that is included in the cash so that's just a just for information on that diving further into the revenue development we're going from a uh from a um from a revenue at the end of Q2 2023 of 6.9 billion to revenue in Q2 2024 of 9.4 billion, as you see here. This kind of sets out very clearly what is the impact of where, how do we go from kind of due to this 36% increase. uh the volume effect is 1.2 billion approximately then we have the quite significant impact of the yield reduction of three era and also the load factor reduction of about two that combined represents about 442 million reduction purely as a result of uh kind of the softening of the market the easter effect longer sectors um as as the main as the main reasons for that Then we have just a small decrease in other revenues, which is 121 million. That is predominantly due to the void effect on the Norwegian reward program, where there is no... no such impact in this quarter. And adding to that brings us to, for the Norwegian side, from a revenue growth of 10% to 7.5 billion, and then adding Vidra 1.8 billion, we come to 9.347 billion. Doing the same exercise on the EBIT, maybe equally important and important to understand. We say a bit of the same figures. We have a capacity, positive effect from kind of on the EBIT-R on the volume, higher capacity. Then we have the yield and load. We talked about that earlier, 442 million. These are the load and the yield combined, 442 million. We have changes in other revenues, which is the void situation. Then we have actually fuel price improvement, which has to do with the price of the fuel, as well as higher number of maxes in our fleet, 72 million. The COSC improvement represent 95 million. If we take into account the one-off impact of the salary negotiation, the pilot, the catch-up effect of that, you can theoretically add to the 95 million, 57 million, which is catch-up from Q4 2023 and Q1 2024. Then you have the other loss and gains, which is effectively mostly effects impact on our working capital. And then we have, of course, a higher fleet going from five aircrafts versus last year to 86 aircraft representing 179. and then we add up with the Norwegian alone EBIT of 391 million and then adding, we draw 202 million, we get to an EBIT of 593 million. So this is kind of the P&L set in a more traditional way. I will not go through the same figures again, but clearly 36% revenue increase, which is significant, out of which is Norwegian is 10%. Significant increase in personnel expenses, of course, because we're, you know, in this case, we're adding just for information, Q2 2023 is only Norwegian. and Q2 2024 is Norwegian and BIDRA. So it's difficult to compare those particular columns, but still, it gives some sort of a picture. So, you know, personnel expenses up quite a bit, and as expected and as planned, with the exception of the, say, salary negotiations that ended up higher than we'd anticipated. And then, of course, the EBIT coming down 57 million, primarily, as we talked about, due to lower unit costs, offset by the positive results from Vidura. And then the net profit is 477 million compared with 538 million. Just to comment on the income tax, we're not recording any income tax expenses as we go forward, or at least over the next periods, because it's offset against non-booked tax carry – tax loss carry forwards. A few comments on the balance sheet. First of all, it's a robust balance sheet. We have strengthened our balance sheet in the quarter, and we're happy to see that. There are no material changes in the balance sheet between end of first quarter and end of second quarter. As you can see, total assets goes from 38.1 billion to 39.7 billion. Our cash increases by 1 billion due to the overall performance of the business. And we're also seeing that the air traffic liabilities goes from 7.4 billion to 7.8 billion on the back of solid bookings into the second half of 2024. and then equity ratio moving up two notches, 0.2% to 14.5%. Extremely happy to see that our next net interest-bearing debt goes down by 1.4 billion, driven primarily by improved cash balance, but also that we have repaid a total of about 400 million of debt Representing part of that is aircraft financing debt, but also improved performance from VIDRA, and they've actually also reduced their overdraft with their bank. So that is a good figure for us, and seeing that our kind of balance sheet remains stable and robust. So 86 aircraft at the end of the quarter, we're still working to optimize and simplify the capital structure. That is an exercise we started last year with some repayment of debt. We introduced the dividend fund and we'll continue to do that as we move through 2024 and 2025. and as mentioned earlier we've set aside 0.85 kroner as a dividend fund that is put in a separate fund but it's included in the cash subject to approval from the bondholders as we talked about that may take some time but this will be should be payable at the latest during 2026. And just to comment that the return on the investments is actually added to the fund, so kind of setting aside money for the shareholders, and it's actually yielding money while we're waiting for the approvals to get it paid, which we think is a good thing. Finally, robust cash flow. I talked about that quite a bit earlier today, just to explain how are we going from 10.4 to 11.5 billion. A strong cash flow from operating activities, forward bookings, and also the results representing 2.3 billion. limited investment activity, 226 million, just ordinary financing, repayments of debt, and the financing cost 1 billion, and that brings us to 11.5 million. Rate of return on our total money market funds is about 5.5%, so we're taking well care of our cash with a limited risk profile, though better than bank deposits. And also looking forward for the rest of the year with the Boeing situation, we have limited further prepayments to Boeing, and we've already prepaid 3.3 billion of that order. All right, thank you.