Norwegian Air Shuttle New

Good morning and welcome to the third quarter presentation for the Norwegian Group. My name is Jesper Hattleteit 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. The presentation will be followed by a Q&A from the audience and the web. Please go ahead, Geir. Thank you very much, Jesper.

Good morning to all of you. Good to see you. Also good morning to you listening in. on line. Let's start with some highlights for the quarter. The third quarter ended as a good quarter for the group, both for Norwegian and for Vidarø. We ended the quarter with an EBT of 2.891 billion, the EBIT of 3.071 billion for the group divided on Norwegian. with an EBIT of 2.797 billion, and Videre also contributing very well during the quarter with an EBIT of 274 million. This is a significant improvement compared to the same quarter last year, where we this year ended with a margin of 25.1% versus 18.4% last year. It's an historic high quarterly EBT and EBIT for the group. Also, unit cost excluding fuel, down 6% year on year. And Program X is really starting to deliver. We have done quite a few things on the fleet side, as you know. I'll come back to more details on Program X later in the presentation. We have had some tailwind on macros, not at least on the US dollar compared to the Norwegian krona. As mentioned, Viderø really delivering this quarter. passenger records in the third quarter with a 9% passenger growth compared to the same period last year. Vidra has also been having a solid operation during the quarter with a high on-time performance as well as a high regularity. EBIT up 82 million year-on-year and as such a really good quarter as well. Especially very nice to see that the commercial network in Videre is delivering well. And that has been something that we have been looking forward to. And now we are seeing a good performance. Finally, Videre is now a member of Norwegian Reward. And we do expect an effect from that as well in the weeks and months and years to come. Norwegian is also delivering well. on operations, very few cancellations, and we are still ranked among the top European airlines when it comes to operational excellence and on-time performance. Net promoter score is close to 50. That is a constant battle to make sure that we are offering a good service to our customers. This is also an opportunity to give a big thank you to all the flying crew, especially and our colleagues taking care of our aircraft during a very hectic high season during the year. We are still capturing market share on the corporate side of the business. SPEN is expanding with more activities, more members, and we are really looking forward to onboarding live the Reitan Group, which will hopefully happen by the end of this year and at the latest during the first quarter of 2026. We are continuing to receive awards. The latest one was as the best European airline at the Danish Travel Awards just a couple of weeks back. That shows that our customers are really appreciating the product that we are offering and the network that we are flying. We use the quarter as well to declare the 30 options that we have been talking about for quite a while. And we now have a firm order of 80 Boeing 737 MAX 8s that will deliver from now until the end of 2031. We have done some small amendments to the delivery schedule for these 80 aircraft, aligning it with the growth path we would like to have and aligning it better with the re-deliveries that we have of part of the current fleet that are leased. Boeing is really delivering aircraft these days. We have already taken 12 aircraft so far this year out of 13. The last one, the 13th, will be delivered during the very next few days. So it's really nice to see that the production line in Boeing is working well these days. And that is what we expect also for the months and the years to come. Balance sheet wise, we paid out our first dividend in history during the quarter of 0.9 NOK per share to our close to 75,000 shareholders. Very also nice to be able to pay down the legacy bond and good to see that the Norwegian government that really helped us through the pandemic has got back their money with a nice positive nominal return. We also used the quarter to buy back more aircraft. So this quarter we bought back three aircraft of the aircraft we are currently flying, booking a non-recurring gain as well as a recurring gain for the years to come. Looking at the traffic figures, 7.6 million passengers during the quarter between the two airlines. On load, the load is more or less on par with what we saw in the same quarter last year. But passenger-wise, we are up 3%. Again, very good to see the solid performance operationally by Idre, with a punctuality of 91.8% and a regularity of 98.2%. Normally, we are seeing in Norwegian a reduction in punctuality in the high season, which is very hectic. And it ended this quarter with 77.8%. It is actually up 3.6% compared to the same quarter last year. last year. Regularity 99.3 continues to stay strong and stay high. And that is also, you know, due to hard work from a lot of colleagues in in Norwegian. And with the traffic figures again, we have a 2 percent increase in capacity, record high unit revenue. As mentioned, we are up on yield and we are marginally up on load. And very nice to see the strong September with a load of 86.5% and the yield of 0.91. We are also seeing solid demand for the months to come into the winter season. A little bit of the same for Viderø, really strong quarter, 1.125 million passengers, 9% up compared to the same quarter last year. Very stable load with increase in number of passengers, as mentioned, and also a couple of records during the last months. One passenger record on a monthly basis in June, as you can see, which was actually beaten marginally, though, in September. We are continuing to see an increase in the interlining traffic between Norwegian and Videre. It's up 30% over the last 12 months, compared to the previous 12 months. And again, Vidre contributing with 274 million in EBIT, up 82 million year on year. What we have done this quarter, or this summer actually, is to align the two networks in a better way, meaning that Vidre has been flying more domestically compared to earlier years. freeing up 737s in norwegian so that we can put that capacity into the summer typical summer leisure destinations that is probably something we will also do going forward and to optimize the network between the two airlines in so in such a way also again finally part of norwegian reward we have an ongoing top tier status match between reader between norwegian reward the Strawberry Club, as well as, of course, Eurobonus. Booking figures. As you can see on the top right-hand side of the slide, this is the seven-day rolling sale figures on number of passengers. As you can see, the 2025 curve is more or less aligned with 2024, so we're seeing the same development. You're going into this winter with 5% less capacity than last year. So we feel that we have aligned now the capacity with how we are optimizing the networks. And we think that this is the right capacity going into what you can call a low season. As per today, we have sold more tickets compared to the same date last year. And as such, for all months from November to March, we are today higher on load. And we are also higher on yield. So the winter season, the low season, I would say, is looking comfortable. And then we will see how this is going to develop over the next few months. Hans-Jørgen.

Thank you, Geir. Good morning, everyone. Great to see you here. So I will go through the quarterly result in somewhat more detail, as usual, and also go through the balance sheet, where there has been quite a few changes during this quarter, both due to the aircraft acquisitions, but also things that we have done on the debt side and equity side. like uh we said so the group had a good uh revenue growth of six point uh at six of six percent to 12.3 billion uh during uh compared with last year and also we are contributing very nicely with 2.1 billion That is driven, obviously, by very good, strong traffic across the group, with both capacity up by 2%, total unit revenue up by 4%, which is a really important KPI, and I'll come back to that in a minute, and also it's marginally higher load. And as Gair said, the Vidor is delivering also a solid top-line development. The quarterly result is really strong this quarter, as many of you have noticed already, with a group EBIT of 3 billion and 71 million, which is an improvement from approximately 2.1 billion in the same quarter last year. So a really big lift there. And it's driven by a few things that I will revert to later in the presentation. operating margin to 25.1% and with Norwegian contributing approximately 2.8 billion versus 1.9 billion last year and also as was mentioned a very very strong contribution by Vidra delivering 274 million versus 192 million in the same quarter last year. So Vidra with a strong performance. Also, as we talked about earlier, a bit of a slow start on Vidura in the year, but have really picked up and delivering a solid result and actually improving quite a bit from the third quarter of last year. The aircraft fleet initiatives is really, we're leveraging on that this quarter. We acquired three additional aircraft, bringing the total number of aircraft that we have actually purchased this quarter, sorry, this year to 14, and bringing the total fleet to 17 aircraft that we own. So we started the year with four, and now we're at 17, and that's part of the strategy to... to own more aircraft. And I think we've been able to leverage that very nicely in the quarter, which also is contributing with a gain relating to the reversal of kind of lease liabilities in our balance in our P&L, which we also saw the same impact we saw also in the first quarter with the 10 first aircraft. Unit cost at 0.42 kroner, a reduction of 6%. Very happy with that as well. I think we're happy with the cost control. We have seen like Project X, we've seen the Program X, so we've also seen other initiatives which enables us to have very good cost control. And of course, with the aircraft fleet initiatives also contributing to the good unit cost level. It's a quarter with a lot of balance sheet changes, as we have talked about. But we're coming out of the quarter with a liquidity position of 10.5 billion. We've done the bond repayment. We've paid the dividend. And also, we've added five leased aircraft. And also, the aircraft that we have acquired also has an impact on the balance sheet. But the whole exercise is coming out just as planned. And we're coming out with a robust cash and liquidity position. As mentioned, very happy to finally announce then the dividend that we talked about during over several quarters that we were working to achieve, to get in that position. And we were able to do that through the repayment of the legacy bond. We call it the retained claim bonds. We repaid ordinary 1.5 billion and deposited the other one and a half billion. And then we were able to get ourselves into a dividend position. And that is hard work and good planning. And we're happy that that process, which we started at the beginning of the year, ended in a very good way. The first phase of that was obviously to retire the hybrid convertible bond in the second quarter. And then the last bit of that was obviously the retained claim bond and also the dividend payment that we ultimately did in August. Just a few more details on the top line. Obviously, we can see that it's a very nice increase in the Norwegian 5% driven by volume increase, yield increase of 3%, and then load factor marginally up by 0.3 percentage points and bringing us to 10.2 billion. And then with Vidra contributing with 2 billion driven by very strong growth figures on the on the passenger side and the total revenue then at 12.2 billion or 12.3 billion for the group. Going to the EBIT bridge that we normally go through, we can easily see here the contribution from the volume impact, the increase in yield and load for the quarter contributing a combined 361 million. Then a fuel price, obviously lower fuel price. lower US dollar, but countered by higher ETS cost and also on the SAF blending mandate, which has a negative impact. But overall, fuel price and fuel contributing positively. We have the normal kind of underlying inflation FX impact, 245 negative. other gains and losses, which is the balance sheet adjustment relating to the FX adjustment. And then we have the relatively large impact of 528 million on depreciation and conversational lease, which relates to the reversal of the lease liabilities on the 269 million on the three purchased aircraft. We have delay compensation relating to the delays that we've experienced with in the past. And also, finally, there are a number of other factors, including FX, wet lease, the fact that we now own more aircraft. So it's a combination. But in total, that is contributing 528 million positive, bringing Norwegian EBIT to 2.8 billion approximately. And then Vidra with a very nice increase, 82 million up from last quarter or same quarter last year to 274 million and then the total EBIT to 3 billion and 71 million. I will not repeat all the numbers on the P&L, because I think we've been through it all. For the most part, revenue up by 6%, obviously, to 12.252 billion. Personal expenses, not a big increase. Fuel obviously impacted, as I mentioned earlier, on the ETS allowance and also the SAF mandate. but at a pretty flattish level. Airport charges and ATC charges up 15%, quite a high increase. And we have talked about that in earlier quarters. We've been able to reduce that somewhat through smart routing and other measures. So it's good to see that this number was actually, the increase in the second quarter was higher than in the first quarter. Handling charges pretty much on par with last year. Technical maintenance actually down. Um, so in total, I think we're very quite happy with the cost control that we have this year. Uh, we're seeing that the developments are, uh, that our efforts in program X and other measures in the company is paying off. Um, on top of the, of course, uh, impact of the, uh, of the fact that we're buying aircrafts that, that we previously leased, um, So that's, I will not repeat the positive variation on the depreciation, but it says here clearly aircraft purchases, high share on aircraft effects and delay compensation. And then the EBIT of 3 billion and 71 net financial items slightly up due to higher share owned aircraft. We have our own financing for that. And we have also been able to finance in a very, very good way. The new additional three aircraft. So all the 13 aircraft that we've acquired has been financed on very favorable terms for us. But we're seeing that the net financial items increase a little bit because of that. And then we have a profit before tax of 2.9 billion. And then we, as we did in the second quarter, have started to have a tax expense of 342, bringing the net profit for the quarter to 2 billion, 549 million. Again, we're coming out to all the things that we have done in terms of preparing the balance sheet for the future. With all the exercises we've done, we're coming out with a robust balance sheet. We're seeing that the total asset goes up because we've taken more deliveries and also own the aircraft more. So that's going up by approximately 2.3 billion. We have the use of the cash to pay dividend, to repay the bond. And also, we've also done pre-delivery payments relating to the exercise of the options of nearly half a billion. That brings the cash down, but the total liquidity is at a very, very good level. And we're happy with that. And of course, you can argue that a couple of quarters ago, our cash was very, very high. We knew that what we were going into and what we're seeing now is exactly what we had planned to do. to happen. On the debt side, a bit of the same picture with additional of aircraft adding debt to the balance sheet, but also repaying the bond, which is helpful. We're seeing that the aircraft traffic settlement liabilities is down, which is seasonal, quite normal, but very happy to see that the aircraft traffic liabilities, which is the prepayment of of tickets is up 4% year over year compared with last year, which is kind of proof of the pudding that we have a good booking momentum compared with last year. Last point on the balance sheet is the equity ratio, which is healthy and going up from 13.4% last quarter to this quarter at 18.3%, a good development. On the net interest bearing debt, obviously going up by 3.5 billion driven by the dividend PDP and also the additional addition of aircraft, both own aircraft as well as IFRS or leased aircraft, but at the very manageable level. The corporate debt of the business is down a lot this year because we're about, so the remaining debt in the company effectively now is aircraft financing. Whereas we went into the air with both the convertible bond and we had the retained claim bond. Now we are essentially a debt-free company with exception of the aircraft financing, which is a good thing. And that has been our objective over the last couple of years to get in that position. Dividend, we talked about that. PDP, which is prepayment, impacting our net interest bearing debt and acquisition of the three aircraft. So a lot of things happening on the balance sheet, but all in a good and controlled way. And we're coming out of the quarter with a strong and solid balance sheet prepared for the future. Cash flow, no need to repeat everything we talked about earlier, but obviously seasonal. Ticket prepayments going down, 2.9 billion. Strong cash flow from operations. We have purchased the aircraft, the three aircraft, and also done the deposit on the bond, 2.9 billion. And also on the financing activities, we've repaid the bond, part, half of the bond. We have done the leasing. We paid the dividend. And also, finally, we have financed the three aircraft that we acquired earlier this summer at very attractive terms. So happy with that. Final comment on what's not on the balance sheet. The cash is ending at 7.9 billion approximately. What's recorded as financial investments now is a fixed income fund at 1.1 billion, effectively cash, but still recorded as financial investment and the deposit for the repayment. The prepayment, we're in a good position in terms of our commitments for repayment of PDPs going forward. Increased, as I mentioned, 468 million in the quarter relating to the exercise of the 30 options. And we have a very, very good position as we are remaining prepayments relating to the aircraft order. It's less than half a billion until the first quarter of 2028. And even going beyond that, it's a very solid position. So in terms of financing, of the order of 80 aircraft, we are in a good position and have prepaid most of what we need to do as we move forward. And the financing market for those aircraft is very good for us. So with that.