Norwegian Air Shuttle New

Good morning and welcome to the second quarter presentation for the Norwegian Group. My name is Jasper Hartlutveit 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. As this is a very significant day for Norwegian, we will also hear some opening remarks from our Chair of the Board, Svein Harald Egal. The presentation will be followed by a Q&A from the audience and the web. Please go ahead, Svein Harald.

thank you good morning as you said this is a quite a special day and therefore i decided to join and present two pages first and even take on my red tie on the warmest day in oslo this year why is it a special day well it's because it's the end of the first leg of the post restructuring journey of norwegian and the start of the second leg There's an important number to note, which is 5.8 billion Norwegian kroner. First, a bit shortly on where we are. We have laid the basis basically for a sustainable, profitable airline. We are best in all the four Nordic countries. among the leading airlines measured by value for money, basically providing value to our customer at a low cost, which of course is the core of the vision of Norwegian. We are leading in Europe on on-time performance with close to zero cancellations. We are high on customer satisfaction and brand recognition across all four large Nordic countries. We capture market shares for corporate travel, which of course is an important value driver for the airline. And we have expanded Norwegian Reward into a very attractive loyalty program with attractive benefits. We are centred on the root profitability. No big moves, but a step by step approach that basically builds profitability in a sustainable manner. We will fill the market with necessary capacity, basically providing whatever capacity is needed across the four Nordic countries. And we add profitable roots one by one. We have, as Guy will talk through, numerous initiatives to lower cost and manage seasonality, which of course is a key driver for the Norwegian and an area of major differentiation compared to the situation in the past. We see that we are actually among the global leaders in aviation measured by EBITDA margins, basically the operating margins from our activity. But we have had way too much leakage in the high ownership cost of our airplanes, which basically leads to a high EBITDA margin, but not similarly high EBIT margin. This is something that we have addressed now through a number of initiatives. Those initiatives and their delivery is not by coincidence, but it is a result of a deliberate effort by the management to take charge and basically do whatever is possible to lower our ownership cost, basically the cost of the airplane, including the capital charges. And we see further initiatives working closely together with the leasing companies, of course, also leveraging the strength of the balance sheet that we now have in Norwegian. We have also grown through complementary business ventures. We acquired Vidre, the regional airline in the Nordics, in 2024 in 100% cash acquisition at the price-earning ratio of around two. It's a strong customer proposition with seamless interlining, And we see a lot of potential also using this as a way to drive increased inbound travel, which of course is incredibly important for Norway, for the tourism and for the regional part of Norway. This business combination only gets better on a day by day basis. So there's no doubt at all that this was an important move for Norwegian that really took us a big step forward. A bit surprising to some, but really something that has paid off in the big way and that will pay off further in the future. Similarly, with Spen, it was a big investment by Norwegian to spend the time on developing a completely innovative loyalty program close to Nordics. It was a big investment and also basically stepping a bit outside the normal remit of an airline. But again, we see a huge upside potential, more to come in the years that follow. We already have strong partners in the Nordic hotel chain, Strawberry, and of course, one of the largest Nordic retailers, Reitan Retail. Up on the right hand side, we see the group revenue with quite a remarkable growth since 2022. The second chart basically shows that this has been achieved in a profitable way. So basically modest profitability pre-pandemic, huge losses, of course, in the years of the pandemic, and then sustainable profitability the years thereafter. And based on consensus for 2025, the black box on the right will get much larger. The fleet has also grown, of course, grown through organic growth in the legacy Norwegian fleet and also through the Vidre acquisition. Then to the chart that indicates why this is a special day. We are, as I said, at the end of the first leg of the journey, starting on the second. In 2021, in the pandemic, we emerged from reconstruction. First, we paid 825 million NOK in claims to various creditors. In 2022, we paid down on what's called a retained claim bond, basically a bond that reflects the claim, again, of the creditors. We paid down another 35 in 23, and also we did a full repayment of a specific Norwegian bond called NAS13 for around 450 million NOK. Then in 24, we went on and did a new repayment. And then what we are now doing is a major step. First, we spend 90 million NOK to buy back the so-called hybrid bond, which then helped us to avoid a major dilution of the shareholder value. And we have also now announced and we will execute on that in August that we will set aside around 3.1 billion NOK in a deposit that basically reflects the remaining claims from the refinancing, which take us to my number of 5.8 billion, which is basically the money that Norwegian has earned over the last years, that has been used to repay the debt in Norwegian, Gamle Moro, from the pre-restructuring years. It's a debt of honor that we now have fully honored, and that, of course, by doing this, we are at the end of that journey. We will then start on our next journey, basically doing the payment of the inaugural dividend and also of course introduced a policy of annual dividends from Norwegian. The dividend today that will be paid out in August is the first ever in the history of the airline. This is quite remarkable. The airline industry of course has a tradition of Some airlines receiving a lot of support from governments. The Norwegian government did provide a crucial rescue loan to Norwegian in the pandemic. We did not get any subsidies or support as others. We got a debt instrument. We are very grateful for that. And of course, it helped to save Norwegian, to save the workplaces and to save the Norwegian aviation industry. This contribution from the government has actually yielded, which is extremely rare, a positive nominal return. Basically, the government got this money back. They were able to participate in the business upside efforts of management through the convertible loan mechanism. They realized a profit as this was then converted and furthermore, as they sold shares in the market. They have a remaining creditor position which is now secured with a deposit of 3.1 billion NOK where they are the largest holder that we will again pay into a closed account in August. This was the sole state funding ever received in the company history of Norwegian and it has now been repaid in full. And I would like to make that crystal clear with all the commentators that comment on government support to aviation. This marks a shift as dividend now can be delivered. We'll have a capital structure that's fit for purpose, basically through the call and the buyback of the convertible bond and the deposits of the outstanding amount, as I mentioned. We will then distribute the money that we set aside in the dividend fund around basically 90 euro, 0.9 NOK per share in dividend. This will of course be positive in addition to the gains for the shareholders by the reduced dilution as we brought back some of the hybrid loans. The payment of the dividend will happen as soon as possible. And it's targeted for August 2025. With that, I'll end my part of the session. And of course, give the word to Guy, who leads the effort. And of course, management of Norwegian has done a tremendous job in these years. So it's a good way to celebrate the effort. And I will give the word to you. Thank you, Guy.

Thank you for the kind words. Good morning to everybody. Also to the guys listening in online. So let's focus on the second quarter of 2025. And EBT of 1 billion and 55 million NOK. EBIT of 1.25 billion divided on 1 billion and 25 million for Norwegian and 225 million for Videre. This is a significant improvement from last year on EBT, which is up 577 million year on year. Operating margin this quarter at 12.2%, which is up Again, from 6.4% last year. We are impacted by cost increases on several areas, especially on ATC, air traffic control fees, as well as airport tariffs throughout the network where we are flying. Despite that, we are this quarter guiding the cost for the full year down a step. I will come back to the details on that. Record Q2 unit revenue capacity growth is coming down to only 1% in the quarter compared to the same quarter last year. And the low factor is up 3% year on year. Videre is delivering very well this quarter, load factor up 4% and an all time high quarter with regards to number of passengers, close to 1.1 million passengers. Dune especially delivered well with a record monthly revenue in the company's 92 years history. Operational excellence is very important, as we all know, and we are doing quite well on that area. On-time performance, 86%, up five percentage points year on year. Regularity, 99.7%, which means that we are not cancelling. We have said all the time, we have a network for sale, we will fly the network, and we will not cancel, and we will be, to a very large extent, on time. We are working on a daily basis with our customers, the passengers. We have a so-called MPS score, which is high. We are now at the 50 level, which is high regardless of who you compare us to. And we are very focused in it. And we are working very hard to even move even higher than the 50. We are the airline in the Nordics with most direct routes. And as we say in Norwegian, why? Connect when you can fly direct. Corporate market share, I will come back to in more detail. We are gaining market share. And as Svein Harald said, it's very promising to see how SPEN is developing, onboarding new partners as well as new members. And we are also on schedule when it comes to the Reitan Group getting on board. As it looks today, a couple of the brands within the Reitan Retail Group will come online and live during 2025. We are working on the fleet and the asset side. We have, during the quarter, acquired 11 spare engines. This is the latest technology from CFM, the LEAP-1B engine that will be used on a MAX 8 aircraft. Deliveries in 2027 and 2028. And this is for us to secure the capacity needed and to take down the costs on actually having spare capacity when we have to take engines off the wing for maintenance for years to come. We have also, as Harald said, purchased three additional aircraft. This is aircraft we are flying and this is aircraft where we have been flying since they were new. And we are going to book again on that acquisition of 260 million in the third quarter. If you add in the 10 aircraft that you bought in the first quarter, we are talking about the cost saving on an annual basis for years to come in the area of 225 million a year. Liquidity increased during the quarter close to 14 billion. We have financed the 10 aircraft we bought in Q1. It's all done. It's all finalized. It's all completed. And that reflects also the cash position of close to 14 billion. We have called and partly bought back and converted the convertible bond, as mentioned. And we are also then depositing the so-called outstanding amount on the retained claim bonds, 3.1 billion. That takes us into a position where we can pay dividend, which we will do. And we are today declaring 0.9 NOK per share in dividend that we plan to pay out to our dear shareholders. in August this year. Traffic figures, 7.6 million passengers, 4% up year on year. Load factor 85.2 in Norwegian, 3 percentage points up. Very good to see that Vidre is also delivering on load, 73.9%. That is four percentage points up from the same period last year. Functionality, 86%. We are happy with that. We are very happy with it, actually. We were beaten by Vidre, 89.3%. Very impressive. And then on regularity, as I said, 99.7%. And Vidre also at very high levels at 96.7%. Looking at the traffic figures, I think we have been planning the high season very well when it comes to the availability of aircraft as well as availability of crews. Now it's all about executing the high season. And so far it has gone very well, I have to say. As you can see on the red line there, we are still filling our aircraft with between 80 and 95%. Very happy to see the 88.4% in June, followed by one in yield, which is kind of showing the strength in the market. And I will come back to how it looks going forward. The yield is also up 6% year on year. Obviously, you have an effect on the Easter effect, as we call it. But we have the highest June load since the pandemic, which is really, really promising. Looking at the Videre figures, it's the same story, really, that we see in Norwegian. Closely 1.1 million passengers during the quarter, 8% up, and the highest ever. Very promising to see. Load factor up, increased to 74%. And as I mentioned, June, record high passenger numbers, as well as revenue. We are following very closely, obviously, between the two airlines, the interlining traffic or the connecting traffic, the traffic that touches both airlines. That is one of the reasons we actually acquired Videre, and we are seeing that on an annual basis, this traffic flow has increased by close to 40%. We have just been taking live our new distribution platform, the new booking engines, as you all can see when you book tickets with Norwegian Today. This is also giving us the ability to interline, meaning that we can connect to Videre, we can start selling Videre tickets on our own website, and we can offer a much better product to our passengers, where we can do a seamless travel and you can have one ticket and then travel between the two airlines. We think that this will give us an effect on traffic flows and it's actually a much better product as well for our customers. This is coming live during this quarter, meaning the third quarter of 2025. This is also a milestone and ends kind of the project where we are shifting out the distribution platform in Norwegian. EBIT of 229 million and up 27 million from the same period last year. Looking at the bookings going forward, as you can see on the top left side there, you can see the blue line that shows the softening that we saw in the market last year when we entered into the second half of May and into the rest of June before it started to pick up again. Looking at the red line, you can see that that didn't happen this year. We were kind of a little bit worried when we came into May whether we would see the same slowdown. which we definitely did not see. That's why we ended up with a very good June, both in Norwegian and in Videre. That level has actually continued through July and for the coming months as well. This applies to the whole network, really, both on travel months and on the different destinations. But again, we are coming from a quarter with 16% growth. Now in this quarter, we have only 1% growth. And now we can harvest on the investments that we have been doing, building up the capacity. And now we can take out the full effect of it during the high season of 2025. Looking at the right side, you can see the red line, which shows the book revenue for travel from July to October this year. You can see that we have surpassed 2024 and we have massively now surpassed what we saw in 2019. So as per today, we have sold close to 10% more tickets for travel during these months. which means that we are coming into July, August, September, October with a higher load than how it looked last year. And even more promising, we are also up on yields. If you remember the last quarter where we stood there a few months back, we guided a flat yield for the coming months. Now we are guiding a yield that is up. So the bookings heading into the rest of the summer season and into the fall is looking very promising, I have to say. Corporate travel. When we are reading the Avinu figures, they are telling us that the corporate travel domestically in Norway is 11% below what it was in 2019. International travel, 15% below. If you look at the graph here on the right-hand side, you can see that we have been growing the number of passengers in the corporate market with 22% since 2023. If we had shown the revenue increase for the same periods, the increase would have been even more. So we are for sure taking market share, we have been taking market share, and this graph shows that we are actually keeping the market share as well. We are talking to the travel agents all the time. They are telling us these days that the corporate market has been growing 4% ish during 2025 so far. But they're also telling us that Norwegian is growing more than double of that, which means again that we are taking market share. And more and more of these agents are saying that, you know, people are traveling more than 50%. with norwegian in the corporate market why well i think we have a an attractive product we are on time we have the necessary frequency in our network we have a high regularity and we actually have a pretty good product that that is attractive and is getting even more attractive as we as we go We have also been focusing a lot on the so-called small and mid-sized corporates. We have signed up more than 1,200 new contracts so far this year, and that applies to a growth in all sales channels. Also very happy to share that we have signed up a contract with the Swedish state, so-called Kammarkollegiet, which is a four-year contract and will cover domestic travel. for the next years in Sweden. Also on the interlining project, the distribution platform will be coming online Q3. It will for certain give an effect. And we have also launched a project called Fuel Choice, where corporates, typically large corporates, can invest into being more sustainable, where they're actually buying SAF, sustainable aviation fuel, and we have just the last month been signing up four contracts with huge large corporates that is investing into this product this comes on top of the contract that we have with the norwegian defense and i would urge other large corporates in scandinavia and the nordics to also invest in this and this is a small step in actually us being uh you know being a more sustainable airline and and And we are quite eager, as you all know, to be more sustainable for the months and years to come. With that, Hans-Jørgen.