Norwegian Air Shuttle New

Good morning and welcome to the third quarter 2024 presentation for the Norwegian Group. My name is Jens Bartletvedt and I'm 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. Welcome. Also, good morning to all of you that are following us online. The third quarter delivered an earnings before tax of 2 billion, the EBIT of 2.128 billion, divided on 1.9 billion for Norwegian and 192 million for Videre. Units cost is affected by the cost increases that we are seeing in general. And also some costs associated with the fact that we have late deliveries from Boeing. And we had to take in more capacity from the market, i.e. vet lease capacity, which is a generating cost. We think even if we had to take on that cost, it makes sense because We were able to fly all the good passengers and in a peak season that is in any way profitable for the company. We also saw some increases in maintenance costs. We had, I would say, some extraordinary items during the quarter in the peak season on some of our aircraft. We are also seeing as a factor of the fact that we are actually gaining market share and doing quite well in the corporate markets. We are seeing the distribution costs. are going up. We are doing whatever we can to compensate that on the top line, and I think we are actually doing quite well in doing that. Cash position, 11.5 billion. It's up 2.1 billion in the quarter, and that is after we have done an all-cash acquisition of Videre. Capacity-wise, increase of 10% year on year. Even doing that, the load factor is up compared to 2023, and 2023 third quarter was a very good quarter, record quarter for the company. And now we are as such on the record, and we are doing another record now on the unit revenue. Also, Vidre is performing well, load factor up 5.5 percentage points. Very happy to see that the commercial part of Vidre is performing well. That has been an issue over the last years in Vidre, where they have been actually loss-making. Now they are profitable. And it's also the first quarter ever where Vidre has been flying more than 1 million passengers. 450 routes divided on 350 in Norwegian and 100 in Vidre. Quite significant network. We are focusing on the operation of excellence, as we call it. I think we're doing well. We have seen a dip on on-time performance that is normal in the peak season. And we are seeing a good trend now going into the fall, where we are getting close to the levels that we would like to be. On regularity, however, we are doing fine. We are not cancelling much, close to zero. And that has also continued into the fall. We are talking to our customers all the time, so the net promoter scores is at high levels, and we are doing whatever we can to increase it. And even if we are looking at the traffic numbers in Norway actually being lower today compared to 2019 on short haul, we are seeing that both Norwegian and Vidra is now carrying more passengers than what we did in 2019. We are very much affected by the delays from Boeing. And Boeing is, as many of you know, on strike in the organization. I think they are into the seventh week of strike now. Before the strike happened, Boeing were, let's say, 11 to 13 months late on deliveries. Now, I think we can add at least three months, depending on when this strike is coming to an end. That means that we have had to kind of take down the growth into 2025. So coming from two years with a pretty decent growth, we are now going into a year where Norwegian is not growing that much due to the situation with Boeing. This is an industry wide situation, of course. And it means that there's going to be less capacity coming into the market in 2025, especially, but I think it's been lost into 2026 as well. We are doing whatever we can to work on all initiatives, both on the revenue side and definitely on the cost side to stay competitive. We have done some investments over the last year, year and a half, which we are now going to harvest from into 2025. I'll come back to the details. Also, the base structure kind of optimization is something we have been looking at in 2024 and into 2025. In addition to... number of cost reduction initiatives. Vidre is also a project that we have been working on since January when we joined forces with Vidre. We have already taken out quite a lot of synergies, but the majority of the synergies will come into effect throughout the next year and through 2025. Looking at the number of passengers, 8.2 million passengers in the quarter, 88% load in Norwegian. Very happy to see again that Vidre is increasing the load factors. 10% growth. Punctuality 74.2. Not happy with that. It has improved into the fall as expected. And then again, regularity we are doing fine. So... This is a graph that we use every quarter. It shows how we are kind of ramping up into the peak season, which we have done as well. Interesting to see that we are flying two and a half million passengers in July compared to 1.1. So it shows that the seasonality that we are exposed to and the fact that we are now going into a low season. But I have to say that September and also October is performing well. October, in my opinion, a little bit better than expectations. So even if we are increasing the capacity with 10%, the load factor is improving. Coming into the second quarter and third quarter, we have invested in quite many new routes. And it's very comforting to see that these routes are now performing better through the peak season and also into into the fall. To invest into new routes, it takes some time for the new routes to mature. And I'm happy to see that that is moving in the right direction. So unit revenue is up 2% and quite good unit revenue, I would say, in the third quarter. And again, October numbers is looking comforting. Looking at Videre, Also shows the steady increase in passengers through the year. Also interesting to see the counter seasonality that we have in Vidre compared to Norwegian, where Vidre is actually reducing the capacity in the summer, but this year keeping up a very high load and up close to 5% compared to last year's third quarter. Also very, again, comforting to see that A lot of this improvement is also on the commercial side of Vidre, meaning not only on the PSO route as such. And unit revenue up 20% year on year. And Vidre has one fifth of the seasonality that we have in Norwegian. So in that sense, it's good to see that even in a kind of low season for Vidre, they're performing well. One reason for acquiring Vidra was that we would like to have more of the internet or the connecting traffic in combination between the two airlines. And very happy to see that that has increased with 67% since we took them over. And that is in a situation where we expect the majority of that synergy actually to come when we can integrate even more the networks that will happen through 2025. And also in a situation where Norwegian will start to sell tickets on our own platform, which we are not doing today. Also good to see that the co-chair agreement with Lufthansa is starting to take effect, even if it's coming from low levels. The traffic has quadrupled since they started up that cooperation. Looking at the bookings forward, as you can see on the red line there, we are keeping the spread between 24 and 23. I think the new winter destination that we have put for sale is actually working and performing quite well, not at least through Dubai, and also the routes that we have put in place then from Europe to northern destinations. Very exciting to see what's happening in Tromsø. where Tromsø is now going this winter to have 37 international flights, direct flights out of Tromsø. I think it's 14, 15 airlines flying there. Let's see if that is potentially an overcapacity into this winter, but hopefully it's not. Looking at the bookings forward, it's also diversified both across different destinations and also on travel month. We are putting more capacity into the market this winter compared to last winter, as much as 30% in November, 19% in December. But be aware of the fact that if you count that as number of seats, it's only 11 to 12%. So due to the fact that the sector lengths are much longer, the number of seats are not increasing with those figures. Due to the fact that we are increasing the sector length at 15%, we are expecting a decline in yield, especially in November. But you have to look at those in combination. But it should improve the underlying profitability. So the additional capacity we are putting in, approximately 600,000 seats. As for today, we have sold close to 60% of those already. That is for the next three months. which counts for the 340,000 seats. Looking at, you know, we have, you know, less visibility, let's say, from January, February, compared to the closest months, but looking at the bookings that we currently have, it's looking like it's, you know, the good trend that we have seen in September, October is also continuing in then into the first quarter or next year. So, if you looked at the capacity reduction that we have last winter meaning the winter 23 24 where we reduced the capacity with as much as 25 to 40 depending on which month which weeks you look you looked at now we are reducing with 25 to 35 so you're flying more uh because we think it's uh it's more profitable as such with that answer again

Thank you, Guy. Good morning, everyone. Those here and those on the web. As usual, I will go through the quarterly results in some more detail. First, taking a look at the revenue and the revenue for the group increased to 11.6 billion for the quarter, which is up 32% for the group, taking into account that Vidra was not part of in Q3 of 23. The revenue increase on the Norwegian part is 11%. and with with NVIDIA contributing 1.9 billion NOx. As mentioned, capacity increases is quite a healthy 10% for Norwegian and we're very happy to see that that given also the significant capacity increase that has been absorbed in the market, And as mentioned, the unit revenue is up 2% and also with the load factor at the same time coming up, which is a bit different from the picture we saw in the second quarter, when we saw kind of a slower pickup on the loads and yields. But the third quarter, as mentioned, we've seen a good performance in the market, actually absorbing the capacity increase. Exterior revenues, a healthy increase from from 198 kronor to 211 kronor. That will be an important part as we move forward to improve that further. Operating profit or EBIT is 2.1 billion, as mentioned, with Norwegian contributing 1.9 billion and with Vidro contributing 192 million. It's also worth noting that this is the third quarter of Vidra and for the first nine months of 2024, actually Vidra is contributing with an EBIT of 371 million and on the back of an acquisition of about 1 billion. It's a very, very strong performance by Vidra and their team. As mentioned, the cost is a factor for us this quarter. It has been impacted by several factors, inflation, inflationary pressure, currency and wet lease on top, of course, of the of additional costs related to our salary and crew level. So which means that the unit cost excluding fuel is up 8% for the quarter or 3 EUR, which is quite significant, but it can largely be explained by these three factors, which is crew, It is a wet lease, it is technical and some additional maintenance cost. And on top of that, the foreign exchange rate, the weakening of the Norwegian kroner has had an impact in the quarter, which is quite significant. As mentioned also, the wet lease cost is 133 million for the quarter. On the back of the delays with Boeing, we had to have these kind of adjustments to enable us to service the important customers during the summer and delivering a strong operational performance for the third quarter. Strong cash position. We're coming out of the quarter with a good balance sheet, 11.5 billion in cash. We've been able to reduce the net interest paying debt by 0.5 billion or 500 million on the back of a flat cash balance and also reduced debt related to our leases. Equity ratio is on the rise at 19%, 4.5% higher than the previous quarter. And just to mention again, we've set aside money from the earnings from 2022 and 2023, and that dividend fund is now at 836 million. Initially it was 819 million, so it has yielded about 2% in the four month period, which is quite good. Taking a closer look at the revenue, bridged from Q3 23 to Q3 24. Comparing those quarters, the volume impact is 10% up. As mentioned, the yield impact of the improved yields and the loads is up 137 and 62 million respectively. And then we have a reduction on the expiry of cash points from the COVID, which has an impact of 121 million, which ends up then with an increase on the revenue side of Norwegian of 11% to 9.7 billion. On top of that is the healthy increase in contribution from Vidra, of 1.9 billion approximately, which ends up with a total revenue of 11.6 billion. Slightly more mixed picture sort of on the EBIT side. You can see the contribution from the just increased volume is 294 million. We call it the EBITR column. Then we have the combined yield and load impact of 198 million. We have the impact of the expiry of the cash points from the COVID, 121 million. We have a negative impact on the fuel combination of foreign exchange impact and other ETS and also fuel cost combination. 137 million. Then we have the CUSC, which is the combined impact of the higher crew cost and salary level, as well as some additional technical cost on the maintenance side, which is the negative 174 million. Other losses and gains is pretty neutral. And then on top of that, we have an increase on the depreciation and aircraft side. with 300 million, and that is largely, mostly explained by wet leases, but also, again, going back to some maintenance reserves and also a bigger fleet. So that brings us to EBIT contribution from the region of 1.9 billion, and a very healthy contribution from Vidra of 192 million, and that, which brings us for a total EBIT for the quarter of 2.1. 1 billion. This is just putting up the P&L in a traditional table. No big things to mention that other than that we're comparing Norwegian in the third quarter 2023, which without Widera and it's with Widera in the third quarter 2024. And so it's very hard to to compare those directly. But obviously, the impact of these kind of additional cost items is quite significant on the personnel expenses. Also, of course, on the aircraft lease and depreciation line, we see the impact of that. And also just a healthy comment on the net financial items. It is at the same level as last year, despite the growth, and that's partially due to good yields on our deposits and also money market instruments. So I'll come back to that in a minute. And then we're ending up with a net profit for the quarter of 2 billion and 4 million, which is very, very close to where we were in the same quarter last year. As mentioned, we're coming out of the quarter with a robust balance sheet where actually the total assets is down moderately by about 2 billion for the quarter. Cash balance, as mentioned, is at the same level and the equity ratio is at 19%, which is up from 14.5% previously. What's worth mentioning is that, of course, due to seasonality, the air traffic settlement liabilities is down from previous quarter and that has to do with the summer season. That number, by the way, last year was 3.9 billion. Out of the, this becomes a little bit technical, but out of the 5.2 billion, Vidra is half a billion of that. So that leaves 4.7 billion for Norwegian. And the comparable figure last year was 3.9. And that's kind of reflecting that we have good forward bookings for the fourth quarter and into 2025. So that's looking quite good, and that's kind of natural fluctuations, but it's good to see that we are kind of evidencing that we have good forward bookings, as mentioned by Geir in this particular line item. Looking at the net interest-bearing debt, very nice to see that our net interest-bearing debt is down by half a billion. And it's all purely explained by the reduction in aircraft financing, which are the leases on our books. And we're having 86 aircraft at the end of the quarter, which is unchanged from the previous quarter. I mentioned the dividend fund. We've set aside 0.85 kroner, which relates to the 2022 earnings and 2023 earnings. It cannot be distributed still, as has been the case in the previous quarters, because of restrictions in the bond agreements. And we are also investing the dividend fund in money market low risk investments that has been yielding about 2% over the last four months, which is quite good. That should be beneficial for the shareholder. at such time as we expect to pay dividend, which, as mentioned earlier, is at the latest in September 2026, when the last of these legacy bonds from the reconstruction matures. Last few comments on the balance sheet. We talked about the balance sheet quite a bit, I think, already. But seasonally reduction in the prepayments for tickets, of course, going through the low season. 2.2 billion cash flow from traditional operations of 3.3 billion positive. Investment activities of 385 million, out of which Vidra accounts for about half of that. And that will also be expected to be part of their investment programme going forward. Financing activities just as planned, 766 million, and then coming out with the same cash position as we were at the end of the second quarter. Excess liquidity, average return about 5.5%, which is the combined return from the bank deposits as well as money market instruments. We're quite pleased with that and kind of having a balanced portfolio on this side. And again, we have prepayments to date of the future deliveries of 3.2 billion on the balance sheet. And we will not be having any significant installments on the future deliveries from Boeing in 2025. Thank you.