Norwegian Air Shuttle New

Good morning and welcome to the third quarter presentation for the Norwegian Group. My name is Jesper Hatletveit and I am the VP of Investor Relations here at Norwegian. Today's presentation will be held by our CEO, Geir Karlsen, and our CFO, Hans-Joergen 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, everyone. Good to see you. Beautiful day in October in Oslo. Let's start with, and also good morning to everyone following online. So let's start with the highlights for the quarter. It turned out to be a strong third quarter for the Norwegian, with an EBT of 2.5 billion Norwegian kroner, translating to 2.7 billion in EBIT, divided by on 2.5 billion close to for Norwegian, and Vidre with an EBIT of 242 million. That translates into an EBIT margin of 21.4%. If you look at the third quarter results for 2026, it's more or less in line with the underlying result in the third quarter in 2025, because in the third quarter last year, it included gains from aircraft acquisitions, as well as compensations due to delays of deliveries of aircraft. We are continuing to focus on the cost side of the business and very happy to still keep the guiding on a flat cask for the full year compared to 2025. Operational excellence, as you all know, is extremely important for Norwegian and for Videre. And we have a punctuality of 80.7% in Norwegian and very impressive by Videre. I'll come back to more details on it of 93.5%. We have close to zero cancellations in Norwegian, and also a massive reduction in cancellations in Videre, although we had an impact of the ATC strike in August here in Norway. I'll talk a little bit about Videre later, as they are doing very well operationally. As we always say, why connect when you can fly direct? That is the slogan. and we do have the most direct routes from the Nordics to Europe as per today. Flying more than 500 routes in together with Videre. NPS score is very important for both companies. We are doing well. We have seen an increase in NPS scores on a 12-month rolling basis with a result over 50. That is a very good result regardless of who you compare us to. We are continuing the debate into the corporate markets and we do plan also to come with a better product offering for these corporate travelers in the weeks and months to come. Also happy to see that Norwegian Reward is surpassing 10 million members and we have also launched the tiers as we have seen during the last couple of months. We are continuing to work on the balance sheet. We have a liquidity position today of 11.2 or at the end of the quarter. That's up 700 million and that is after we have repaid the so-called retained claim bonds to the investors. Most of them, let's say the majority part of that is the Norwegian government. Equity ratio up to 20.6%. And we have a balance sheet today in a liquidity position of that makes us able to do investments like the NLT investments and I'll come back to the details on that as well. Talking about NLTG, this is an acquisition that we did during the summer. It is a complementary acquisition where we are going to add a product offering to the passengers that we are already flying, now also entering the package tour segment as well as hotels. We are in the process with the EU competition authorities and we have a target to close and have an approval by the end of this year. So, traffic figures. 8.8 million passengers in the quarter, together with Vidre, 4% up. We are 5% up in Norwegian, Vidre is 2% up on Ask. Load factors at good levels, I would say, 88.5% in Norwegian, Vidre at 76.1%. But punctuality is normally lower in the very busy summer season, but still it's up three percentage points in Norwegian to 80.7. And again, very impressive by the 93.5. Regularity is continuing to stay very high. It is very important. We don't cancel much. That is going to be the fact also for the weeks and months to come. Passenger growth. This is a graph that we are showing every quarter. It shows the number of passengers. It shows load factor and yield. And as you can see, when we entered into the second quarter this year, we saw a softening in the markets. That was after the Iran situation. And we had a lot of speculations in the media when it comes to availability of fuel. We entered into June when Norway did quite well in the World Cup in football. People were not traveling. I think that it had a huge effect. And we were quite concerned going into the third quarter. But then when we entered July and into July, August and September, we saw an aggressive rebound, I would say. And the demand really came back. And that's why you can see the increase both in load and in yield. During the third quarter. So I think the third quarter turned out to be actually better than how it looked when we entered into July this summer. We had a capacity growth of 5% in the Norwegian, load factor again up 0.2 marginally. We have had a little pressure on yield. The yield compared to the same quarter last year is down 1%, but have in mind that we have seen a strengthening of the Norwegian krona. That counts for a negative yield effect of 3%. So underlying, I would say that the yield is pretty okay. Looking at Videre, you are seeing that the load factors are coming off a little bit into the third quarter. That is normally what happens in Videre. That said, I think we are a little bit disappointed, especially about the corporate market in Videre after the summer into August. But we are seeing these days that this is picking up again. Capacity is up 2% year on year. But again, we are marginally down both on on load factor and the number of passengers. However, Avida is contributing with 242 million in EBIT for the quarter. And we are We are seeing a continuous increase on the transfer traffic between Vidre and Norwegian, and we are taking market share as we go. And we have actually taken market share since we took over Vidre a few years back. We have also continued to work on the synergies between Norwegian and Vidre. A lot of, a portion of that is obviously to try to optimize the two networks and Vidur is actually going to fly part of the capacity for Norwegian next summer, where we are using the E2s in our own Norwegian network and thereby freeing up 737s to fly to other destinations. But Vidur is in general doing very well. It's going to be another very good year. and Operational Excellence I will come back to. I promised Tore to give him a big hand on his Operational Excellence work and it's really starting to give results. This is how Vidur has been doing an on-time performance as you can see. It has increased from maybe 4.4% in the fourth quarter last year to 93.5% in this quarter. That is really, really impressive, I have to say. If you look at airlines flying more than 1500 flights a month, Vidur has been a global lead, I mean global lead, four out of the six last months. And that's the level that Vidur is at during the last six months. Also, when you are looking at the number of cancellations in Vidre, it's massively down. That has been an issue, but it's much better performance as per today. And why is it important with what we call operational excellence? Well, it's very important for the customers. If you look at the drivers for the MPS core, on-time performance is one of the absolute most important ones. Also for the transfer traffic, knowing that 50% of the passengers in Videre is in transfer, going to another airline, mostly now going to Norwegian. And as well, it is very expensive to not be on time, and we are also seeing a massive reduction in the so-called EU 261 costs in Videre. So it makes sense on all levels to be Very good on operations. Norwegian is also doing well operationally. We are top five on on-time performance in Europe in August and September. And that is a result I'm very happy about. And also, if you see it in combination with the high efficiency, we have both on aircraft and on crew. And the market-leading turnaround times that we have on different airports throughout the network we are flying. So a big hand to Vidre again. All right, so booking momentum. As you can see on the top left graph, that is seven-day rolling sales on number of passengers. As you can see, we had a relatively weak second quarter. but then heading into July you can see the red curve is moving away from 2025 and that has actually stayed throughout the fall and all the way into what we are seeing today. That means that there is nothing wrong with demand as we see it and that applies also for the periods of the months going forward. We are However, doing some adjustments to the winter production, winter production for us is November to March, and we are, during the next months, flying somewhere between 25% and 40% less than what we are flying in October. Also, in the first quarter of 2027, we have reduced the capacity with approximately 5% to 6%. Part of that is the Dubai production that we have cancelled by obvious reasons, but we have also done some other changes and some other reductions throughout the network. That is because of the high fuel prices we are seeing in today's market. But the momentum in booking is still very solid, I would say. Looking at the next months, we are ahead on load on all months for the winter production compared to the same period last year. Today, we have sold approximately 290,000 tickets more than the same day last year. That is on a capacity increase of 3%, but we have sold 15% more tickets. If you look at the load factors for the next 12 months, we are above on all months compared to the same period last year. So you could say that we have somewhat front-loading the sales and then the aim is then to yield up closer departure for every month going forward. Region rewards, I told you that we will come with some news during the third quarter and this is the news we have implemented and launched tiers. I think Norwegian Reward, even if we have surpassed 10 million members, and the levels that we previously had, especially on the top level, I think it has been undercommunicated, undersold. I think by implementing these levels, it's going to be much more easy to understand for our customers. Traveller, bronze, silver and gold. and as well on Videre is of course now onboarded into Norwegian Reward. The Spen community is developing very nicely. We had a successful launch when Rema Tusen came into the community during August and September. We are also seeing that when we are looking at the frequent travelers traveling with either Videre or or Norwegian, more and more of these travelers are now deciding to stay at strawberry hotels. That is a kind of evidence by the fact that now we are actually creating what I call real loyalty. And that has been the aim for establishing Spen all the way. Now we are starting to see the results. They're also planning to do some status match processes with other programs and we will share news on that as soon as absolutely possible. Also very happy to say that we are going to do the Christmas calendar this year in Norwegian Reward and that's going to be good fun. Hans-Joergen.

Thank you, Geir. Good morning, everyone. Really great to see you here. I will go through the third quarter results for Norwegian in some more detail in a quarter, which turned out to be a really good quarter for the business. As Geir said, delivering an EBIT of 2.7 billion and net results before tax of 2.5 billion. Group revenues came in at 12.7 billion, which is up a healthy 4% versus last year. Happy to see that the customers are there. We're seeing that load factors has been picking up and it's better than it was in the same period last year. So after a challenging Q2, without a doubt, Q3 also from a traffic point of view, also looking at our traffic reports every month, turned out to be a good quarter, which has a huge impact on the bottom line. The EBIT, 2.7 billion, with Vidro contributing 242 million. There is a one-off positive impact on the FX repricing on the maintenance reserves. But I'll come back to that in a minute. But if you look at the underlying, as Geir said, if you look at the underlying EBIT for the quarter, it's pretty close to where we were at the same time last year. And looking at the kind of overall rather challenging market environment, in particular relating to fuel, we think that is quite good. It's to a large extent driven by Good hedging positions, not only on the percentage-wise, but also we had very attractive pricing on our hedges going into the quarter and this kind of challenging macro environment when it comes to the fuel price, which is continuing. Also on the cost side, I think we have We have now consecutive quarters of very strong cost performance. We have our costs under control. And we're seeing that the underlying cost increase on the KASK versus last year is up 4%. So comparing with inflation, other factors, that is a good result. And as Geir was alluding to, we are guiding flat KASK year over year. I'm very happy to see that. Also coming out of the quarter, we have a very strong balance sheet. Another quarter with a good balance sheet. We're seeing a good liquidity position up year over year despite having repaid bonds as well as paid dividends. I'll come back to that in a minute. We have gotten three new aircraft this quarter. We're seeing that the deliveries from Boeing is going according to plan. We're happy to see that. And we're gradually eating into our backlog of 80 aircraft, which is on order, which originally were on order. Also, as Geir said, an LTG, we have a strong balance sheet to support the acquisition. We're planning for a bond issue of about 2.5 billion in the coming months. And I think what we will go forward with over the next few months is really a refinancing of existing bonds. So we're well-placed to have a successful execution of that bond placement. A little bit more on the revenue side. It's quite easy to understand. Top line is up by 4%. We're seeing that the volume is contributing 540 million. Yields a little bit down, 108 million. Load factor, happy to say again, load factor is coming up despite the increase in capacity. And then with Norwegian coming in at 10.7 billion. and Vidro contributing a nice 2 billion to 12.7 billion in total. Operating profit, I think quite easy to understand kind of the bridge between this quarter and last quarter for Norwegian, 310 million down. But I'll come back to that also a little bit later. There are a couple of adjustments there which are important to understand. One is the is the one-offs in third quarter last year, where we acquired a couple of aircrafts out of leases and also got compensation from Boeing. 269 million of the 432 million is purely relating to the acquisition of aircraft, as again, plus the Boeing compensation. And then you have the reclassification of aircraft Translation effect of the maintenance reserves at 244 million and other gains and losses coming there. Then you have somewhat higher operating costs at 347 million. And then on top of that, of course, the net impact of revenue increase and also rather limited impact of the fuel taking into account how much the fuel has really have gone up compared with last year again. Why is that? Two main reasons. The hedges that have been very attractive and has a huge impact in the third quarter. Second thing going in the other direction is the strengthening of the NOC, which is obviously makes a US dollar, fuel is paid in US dollars, so that makes it So overall a good position to be in. In summary, on the P&L side, we recognize the 4% that we talked about a few times, fuel price only going up by 7%, again, fuel, and also the effects having a positive impact, fuel price massively negative, but then again, our hedges. And then looking at the underlying earnings on the translation effect of the maintenance reserves having a positive effect, and then Also, the negative effect that relates to the one-offs in Q3 2025 on the purchase of the aircraft and delay compensation. On this particular round, this is kind of the normalized level. This is not the normalized level, obviously, based on kind of one-off impact of that. Which then leaves an EBIT of 202.5 billion, as we talked about. 2.7 billion and an EBT of 2.5 and a net profit after tax of 1.8 billion. Coming out of the report, again with the robust balance sheet, a few things just happened there. We talked about that. We have made our final repayment of the bond. So essentially now, Norwegian has only debt related to aircraft financing, which is A big difference from where we were only 18 months ago, when we still had 3 billion of retained claim bonds outstanding, as well as we hadn't retired the convertible bond that we partially repurchased in 2025. So that's a massive, or not a massive, but quite a significant change. And we're very happy to see that we're coming out of the corporate finally with a clean balance sheet, with no kind of unusual items in there, or let's say legacy debt. So that's really good. The other thing to make note of is that our air traffic liabilities is as a seasonal reduction, but kind of underlying that we have had good pre-sales during the quarter. It's up 8% year over year. So that's kind of a proof of the pudding that we have sold quite a lot more tickets than we did at the same time. That equity ratio takes into account the net value of our remaining hedges, which has also had an increase in its value in the quarter. Net interest bearing debt up just a little bit, 800 million. We can see that with the retained Finally in zero. We've been waiting for that quite a long time and we're happy that we actually executed on this plan that we started to work on basically three years ago on the total kind of redo and cleanup of the balance sheet. and with coming out with a healthy cash position and with the retirement of 3.9 billion out of which 1.5 billion in this quarter totaled 3.9 billion in the last 18 months, I think that sets the ground for a successful bond offering in the next few months. And again, three aircraft delivered in the quarter, impacting as well as own deals. And the turns that we've received both on the financing of the owned aircraft as well as on the sale leaseback are the best we've ever seen in the group, which is a fantastic starting point for what's ahead for Norwegian aircraft. To summarize the cash flow and also the cash balance going from 11 billion to 142 billion in the quarter. Ticket prepayments obviously seasonally down, but higher than it was last year. Sorry, yeah, at the same time last year. Strong underlying cash flow. We have investment activities. We repaid the The Bund. And so again, a healthy position to be in coming out of the quarter. We have placed the excess liquidity at attractive returns. We have a combination of bank deposits as well as money market instruments that has been a good balance for us. And it's also important looking out, we have already prepaid 3.6 billion into the order and the remaining prepayments before 2028 is limited to less than half a billion NOX. All right.