Norwegian Air Shuttle ASA
Q2 2016 Presentation
14 July 2016
Highlights Q2 2016
SkyTrax awards 2016 for:
World’s Best Low-Cost Long Haul Airline (2nd
time) and Europe’s Best Low-Cost Airline (4th
in a row)
New base at Palma de Mallorca, the 16th in
Europe and 20th overall
Added ten new 737-800 aircraft and two 7879 Dreamliners in first half 2016 (five 737 and
one 787 in Q2)
Clean EBITDA of NOK 1 billion (up from 0.8
million)
2
7.7 million passengers in Q2 2016 (+11 %)
9
+ 11 %
8
7
6
5
4
Passengers (million)
3
Pax (mill)
2
1
0
Q2 07
Q2 08
Q2 09
Q2 10
Q2 11
Q2 12
Q2 13
Q2 14
Q2 15
Q2 16
1,6
2,3
2,8
3,2
4,0
4,5
5,5
6,4
7,0
7,7
3
Q2 load factor up to 88 % (+3 pp.)
12 % growth in capacity (ASK)
16 % growth in traffic (RPK)
Average flying distance increased by 3 %
ASK
18 000
Load
+2.6 p.p.
Load Factor
17 000
85,2 %
16 000
15 000
79,4 %
78,4 %
78,3 %
14 000
75,4 %
78,3 %
76,5 %
76,9 %
100%
87,8 %
90%
79,6 %
80%
13 000
70%
12 000
11 000
60%
10 000
9 000
50%
40%
7 000
6 000
30%
5 000
4 000
20%
3 000
2 000
10%
1 000
0
Q2 07
Q2 08
Q2 09
Q2 10
Q2 11
Q2 12
Q2 13
Q2 14
Q2 15
Q2 16
ASK
1 763
2 974
3 469
4 449
5 518
6 357
8 541
12 012
12 919
14 512
Load Factor
79,4 %
78,4 %
78,3 %
75,4 %
78,3 %
76,5 %
76,9 %
79,6 %
85,2 %
87,8 %
0%
4
Load Factor
Available Seat KM (ASK)
8 000
Stable market shares in all key airports
(12m rolling)
12 000 000
+ 943,000 pax
42 % mkt share
10 000 000
8 000 000
+ 876,000 pax
+ 1,135,000 pax
22 % mkt share
6 000 000
4 % mkt share
+ 192,000 pax
17 % mkt share
+ 509,000 pax
10 % mkt share
4 000 000
+ 173,000 pax
12 % mkt share
2 000 000
0
Oslo
Arlanda
Copenhagen
Helsinki
Gatwick
Spanish bases
Mkt. Size:
25 mill
Mkt. Size:
23 mill
Mkt. Size:
27 mill
Mkt. Size:
17 mill
Mkt. Size:
41 mill
Mkt. Size:
138 mill
Q2 11
Q2 12
Q2 13
Q2 14
Q2 15
Q2 16
5
Sources: Avinor, Swedavia, Copenhagen Airports, Finavia, Gatwick Airport, Aena
13 % revenue growth in Q2
14 % growth in international revenue, + 9 % for domestic Scandinavia
Flat unit revenue (RASK). RASK in constant currency fell 4 %
3 p.p. higher load offset by 3 % lower yield and 3 % increased stage length
+ 13 %
7 000
6 000
5 000
Domestic revenue
4 000
International revenue
3 000
Total Revenues
NOK million
2 000
Revenues
Domes ti c revenue
% y.o.y. chg
Interna ti ona l revenue
% y.o.y. chg
1 000
0
Q2 13
Q2 14
Q2 15
Q2 16
4 012
1 192
5 043
1 173
5 861
1 362
6 632
1 490
17 %
-2 %
16 %
9%
2 820
3 871
4 498
5 142
31 %
37 %
16 %
14 %
6
18 % growth in total ancillary revenue in Q2
15 % share of Group revenue
Per passenger sales increased by 6 % to NOK 131
NOK 131
NOK 123
Flexibility/
modifications
Pre-sold
packages
(bundle)
Flexibility/
modifications
Pre-sold
packages
(bundle)
Optional
extras
Seating
Seating
Baggage
Baggage
Other Ancillary
Other Ancillary
Q2 15
Q2 16
7
Continued strong growth in the US and Spain
6 % growth in Scandinavia, stronger in Sweden and Denmark
Norway: 33 % of passengers (down from 35 % in Q1 2016)
Over 40 % of passengers booking from outside Scandinavia
Growth in number of passengers:
Passengers by origin:
Hungary
Italy
Poland
USA
Spain
Other
France
Germany
USA
Hungary
UK
Norway
Finland
Italy
Denmark
UK
Sweden
Poland
Denmark
Germany
Sweden
France
0%
10%
20%
30%
40%
50%
Spain
8
New base in Palma: a total seven bases in Spain
9
New charter agreement for the US market
Utilize capacity better in the European
low season
Three aircraft for winter 2016/17
Agreement with Apple Vacations and
Funjet, two leading US tour operators
Flights from Chicago/Rockford and
Milwaukee
More than 600 flights to multiple
destinations in Mexico, Jamaica and the
Dominican Republic
Winter operations with seven aircraft
Expanding Caribbean winter program
with FLL-Guadeloupe
Over-night connection from Europe to
French Caribbean through FLL, BOS and
JFK
Added frequency to JFK-Guadeloupe to
4 weekly
10
Growing long-haul in Europe and to/from USA
11
Scaling up the widebody fleet to 32 by 2018
Widebody aircraft
(delivered and firm orders)
Aircraft
Seats
Deliveries 787-8
Deliveries 787-9
(291 seats)
(344 seats)
2013
2014
2015
2016
2017
2018
3
873
7
2 037
8
2 328
12
3 704
21
6 800
32
10 584
12
Convert part of Airbus order to A321neo LR
Original order of 100 Airbus 320neo’s
for delivery in 2016-2021
30 of these orders will be converted to
the bigger A321neo LR
The A321neo LR will be operated by
Norwegian
Delivery schedule:
2019: 8 aircraft
2020: 11 aircraft
2021: 11 aircraft
13
Advantage of the A321neo LR vs. A320neo
+40
pax
3000 nm
A320neo
180
220
A321LR
3500 nm
40 more seats compared
to an A320neo
+500
nm
A321LR extended
range with ACTs
+15%
- 40%
Vs Widebody Vs A320neo
Vs Widebody Vs A320neo
A321LR
Cost trip
savings compared
to a widebody aircraft
- 40%
COST PER TRIP
Source: Airbus
- 15 %
- 5%
- 15%
Cost per seat
savings compared
to a widebody aircraft
COST PER SEAT
14
«Short long-haul»
500 nm wider range than A320neo (+17 %)
Source: Airbus
15
Top modern fleet with an average age of 3.6 years
Deliveries 787-9
+1376 seats
2016:
159
160
B788/B789 Owned
144
B788/B789 Leased
140
7
B737 MAX 8 owned
116
B738 S&LB
B738 leased
100
95
B733 owned
85
M80 leased
57
60
40
40
0
32
8
11
20
2
5
99
3
9
6
12
3
5
1
2
B733 leased
80
12
14
B738 owned
120
20
Re-deliveries 737-800
-744 seats
Deliveries 737-800
+3,162 seats
13
8
11
13
2003
year-end
2004
year-end
2005
year-end
22
2
2
22
7
5
23
20
2006
year-end
8
5
2007
year-end
2008
year-end
46
2
16
5
23
2009
year-end
7
2
21
5
22
2010
year-end
62
15
8
68
30
41
51
85
87
23
10
13
13
13
23
68
25
29
13
13
29
5
27
11
5
5
5
5
5
2011
year-end
2012
year-end
2013
year-end
2014
year-end
2015
year-end
13
23
19
15
2016
year-end
2017
year-end
2018
year-end
16
Unit cost comparison based on the latest
full-year results (in NOK)
0,90
0,80
0,82
0,77
0,70
0,67
Operating cost EBITDA level per ASK (CASK)
0,60
0,60
0,50
0,51
0,40
0,54
0,42
0,30
0,27
0,29
0,20
0,10
-
Sources: Based on official full-year 2015 annual report for Norwegian Air Shuttle, Finnair, Vueling, SAS Group (31.10.2015), Easyjet (30.09.2015), and full-year 2015 report for Ryanair and WizzAir (31.03.2016). Eurowings figures are from the “Eurowings Management Presentation” 10.06.2016.
• Cost per available seat kilometer is an industry-wide cost level indicator often referred to as “CASK”. Usually represented as operating expenses before depreciation and amortization (EBITDA level) over produced seat kilometers (ASK).
• Foreign exchange rates used are equivalent to the daily average rates corresponding to the reporting periods and as stated by the Central Bank of Norway
• Note: For some carriers the available financial data represents Group level data which may include cost items from activities that are unrelated to airline operations.
• Other losses / (gains) is not included in the CASK concept as it primarily contains hedge gains/losses offset under financial items* as well as other non-operational income and/or cost items such as gains on the sale of spare part inventory and unrealized foreign currency effects on receivables/payables
and (hedges of operational expenses).
*Norwegian hedges USD/NOK to counter foreign currency risk exposure on USD denominated borrowings translated to the prevailing currency rate at each balance sheet date. Hedge gains and losses are according to IFRS recognized under operating expenses (other losses/ (gains) while foreign
currency gains and losses from translation of USD denominated borrowings are recognized under financial items.
17
Financials
18
EBT improved to NOK 0.9 billion in Q2
(NOK million)
Q2 15
Q2 16
Change
Revenue
5 861
6 632
EBITDAR
1 285
1 965
681
EBITDA
765
1 324
559
Pre-tax profit (EBT)
456
930
474
Net profit
325
745
EBT development Q2
EBITDAR development Q2
1 000
2 500
930
750
2 000
1 500
NOK million
NOK million
1 965
1 285
1 000
500
456
250
277
878
0
563
500
-137
0
EBITDAR margin
-250
Q2 13
Q2 14
Q2 15
Q2 16
22 %
11 %
22 %
30 %
EBT margin
Q2 13
Q2 14
Q2 15
Q2 16
7%
-3 %
8%
14 %
19
Underlying EBITDA* increased to NOK 1 billion
NOK million
Q2 2015
Q2 2016
chg
5 861
765
100
665
6 632
1 324
460
864
771
559
360
199
- Additional mainenance exp. engine overhaul
- passenger compensation according to EU reg.
- wetlease
Sum non-recurring items
-84
-34
-11
-129
-81
-82
-163
Clean EBITDA
794
1 027
13,5 %
15,5 %
Revenue
EBITDA as reported
Other losses/gains
EBITDA excl other losses/gains
Non-recurring items:
Margin clean EBITDA
* Underlying (clean) EBITDA adj for other losses/gains and non-recurring items
233
20
Unit cost cut by 1 % to NOK 0.40
CASK ex fuel +7 % to NOK 0.31 (fuel cost per ASK -23 %)
4 % negative impact of currency
0,55
CASK excl fuel
0,50
Operating cost EBITDA level per ASK (CASK)
0,45
Fuel share of CASK
0,12
0,18
0.15
0,40
0,12
0,15
0,15
0,14
0,35
0,14
0,11
0,29
0,28
0,29
Q2 13
Q2 14
Q2 15
0,09
0,30
0,25
0,20
0,15
0,41
0,35
0,38
0,35
0,32
0,31
Q2 11
Q2 12
0,31
0,10
0,05
0,00
Q2 07
Q2 08
Q2 09
Q2 10
Q2 16
Other losses / (gains) is not included in the CASK concept as it primarily contains hedge gains/losses offset under financial items* as well as other non-operational income and/or
cost items such as gains on the sale of spare part inventory and unrealized foreign currency effects on receivables/payables and (hedges of operational expenses).
*Norwegian hedges USD/NOK to counter foreign currency risk exposure on USD denominated borrowings translated to the prevailing currency rate at each balance sheet date.
Hedge gains and losses are according to IFRS recognized under operating expenses
(other losses/ (gains) while foreign currency gains and losses from translation of USD denominated borrowings are recognized under financial items.
21
Full impact of lower fuel cost, fuel unit cost -23%
0,16
Sales/
distrib.
2%
Depr.
4%
0,14
Fuel
19 %
Other Flight
ops. exp.
4%
0,12
Fuel
Gen. and
adm. exp.
5%
Personnel
14 %
Technical
6%
0,10
0,08
Leasing
10 %
Handling
12 %
Airport & ATC
13 %
Personnel
Airport/ATC
0,06
Handling
Leasing
Other
0,04
Technical
Stable share of personnel cost at 14 %
Lower share of fuel cost - reduced to 19 %
Fuel hedging:
50 % of 2016 and 27 % of 2017
Depreciation
0,02
Sales &
Distribution
0,00
Q2 11
Q2 12
Q2 13
Q2 14
Q2 15
Q2 16
12 mths rolling 12 mths rolling 12 mths rolling 12 mths rolling 12 mths rolling 12 mths rolling
22
NOK 3.2bn cash-flow from operations in first half
Invested a net NOK 2 bn in new aircraft of which NOK 1.2 financed by own cash
A strong NOK 600m increase in pre-sold tickets in first half compared to 2015
NOK 3 billion in cash at the end of Q2
NOK million
Q2
2015
Q2
2016
Chg
H1
2015
H1
2016
Chg
Profit before tax
Depreciation
Change air traffic settlement liabilities
Change working capital
Net cash flows from operating activities
456
245
142
472
1 315
930
318
283
-308
1 223
474
73
141
-780
-92
-321
465
2 639
-473
2 310
-62
607
3 237
-551
3 231
259
142
598
-78
921
-1 092
1 224
-17
-1 986
625
-41
-894
-599
-24
-2 689
1 420
-7
-3 652
999
-22
-963
-421
-15
Net change in cash and cash equivalents
1 430
-179
-1 609
1 034
556
-478
Cash and cash equivalents, end of period
3 045
3 010
-35
3 045
3 010
-35
Net cash flows from investing activities
Net cash flows from financial activities
Foreign exchange effect on cash
23
Improving equity ratio in spite of adding 16
on-balance aircraft
Added sixteen new 737-800 on balance the last 12 months + PDP’s
NOK 17 bn net debt (NOK 16 bn in Q1)
Equity increased by NOK 580m (8 % equity ratio, 13 % incl. mv of Bank Norwegian)
36 000
33 000
30 000
27 000
Aircraft
20 914
24 000
21 000
PDP and bonds
3.769
NOK million
15 000
9 000
6 000
3 000
0
10 593
15 082
18 000
12 000
Aircraft
Financing
16 392
4 755
Aircraft PDP
5 449
Other
liabilities
4 843
5 081
4 328
Pre-sold
tickets
7 251
5 605
3 045
Other assets
2 311
Receivables
3 316
Cash
3 010
Equity
2 746
2 163
Q2 15
Q2 16
Q2 16
Q2 15
2 086
2 801
24
Outlook for 2016
Markets and business
Soft macro and passenger tax introduced in Norway
Monitoring demand in the UK post Brexit, limited changes to bookings
Bookings on par with last year, capacity adjusted
An estimated production growth (ASK) of 18 % (unchanged)
Short-haul + 12 %, Long-haul + 40 %
Increasing distance driven by mix (long-haul)
Unit cost in the area of NOK 0.38 (up from 0.37)
Impact of wetlease and cancellations
Assumptions: Fuel price of USD 350 per metric ton, USD/NOK 8.25, EUR/NOK 9.00
Based on the current route portfolio and planned production
21 new aircraft in 2016 (unchanged)
Seventeen direct buy 737-800
Four leased 787-9 Dreamliners
25
Summary
Stable markets and good momentum on
bookings
US Charter contracts and launched winter
routes to the French Caribbean, Mexico,
Jamaica and Dominican Republic
Converted 30 Airbus Neo orders to A321’s
Passengers voted Norwegian best in
SkyTrax awards for 2016
Financing on-track
Limited immediate direct impact of Brexit
Successful listing of Bank Norwegian on
OSE (ticker NOFI)
26
Norwegian operates 450 routes to 140 destinations
From bases in
SWEDEN
DENMARK
FINLAND
From bases in the
USA &
THAILAND
From bases in
NORWAY
From bases in
From the
SPAIN
UK base
27