Presentation of third quarter 2023
2 November 2023
Highlights
Best-in-class operations during peak summer
- regularity close to 100% and highest in close to two years
- punctuality 80.1% with 97% arriving within one hour
- top three on-time European airline in Europe (Cirium)
Operating result (EBIT) NOK 2,170 million in the quarter – earnings (EBT) NOK 2,050 million
- strongest operating result in 21-year history after Q3 2019
- record high unit revenue
- CASK ex. fuel NOK 0.41 focusing on efficiency
- fuel cost hedged at levels considerably below current market
Preferred travel partner throughout Nordics
Delivering on record strong summer
- Delivering successful operations in busiest travel season – serving customers solely with attractive Norwegian product
- Strong load and record high unit revenue
- October traffic overall robust demand – accentuated by autumn holidays
Satisfactory booking momentum into winter season
Bookings stabilising after holiday season
- Momentum slightly lower, as expected into low season
- Satisfactory bookings from corporate travelling and Christmas holiday planning
- Booked fares remain significantly above previous years – avg. Nov-Dec fares 15-20% vs. same time last year
Booking visibility improved vs. last year
- Good visibility for rest of year, limited from January onwards
- Mindful of customers facing higher interest rates and inflation – budget friendly city destinations increasing in popularity
Preferred travel partner
- Brand most loved airline Norway and second in rest of Nordics1) – all-time high Brand Power Scores
- Strong and improving customer satisfaction (Net Promoter Score)
- Danish travel awards best low-cost airline
- Numerous awards for service, product and innovations
7-day rolling sales figures (abs) – All markets2)
Booked Revenue – travel rest of year (Nov.-Dec.)3)
2) Travel anytime, anywhere as of 31 October 2023 3) 2019 adjusted for comparable route network
Delivering market-leading operations
Top European airline
- Ranked top three most on-time airlines in Europe in Q3 (Cirium)
- Regularity close to 100%, the highest in almost two years
- Punctuality significantly improved from last year – 80.1% in busiest travel season, 97% arrival within one hour
- Red Handling improving operations at largest airport OSL – Widerøe Ground Handling (WGH) becomes new key ground handler
Operations is key for bottom-line
- Supporting brand perception and customer loyalty
- Reducing costs related to claims and compensation (EU261)
- Improved crew efficiency with fewer "time outs"
On-time performance key for business travellers
- Continues to capture market share in corporate market – PAX increasing and revenue significantly up from previous year
- Onboarded multi-country large corporates during the quarter
- Norwegian defence contract with start-up in Q1 2024 – re-establishing large presence in Bardufoss and Lakselv
|
On-Time
Ranking |
On-Time
Arrival |
Tracked
Flights |
Completion
Factor |
Total
Flights |
Summary of
Top Performers |
Norwegian Air
Shuttle (DY) |
|
87.98% |
96.60% |
99.74% |
7.932 |
|
| Austrian (OS) |
$\overline{a}$ |
85.47% |
100.00% |
99.25% |
11.104 |
Total On-Time Arrivals
81.70% |
| Iberia Express (I2) |
3 |
82.95% |
99.86% |
99.64% |
3.626 |
|
| Iberia (IB) |
$\boldsymbol{\Delta}$ |
82.95% |
98.70% |
99.08% |
14.939 |
|
| Finnair (AY) |
5 |
82.88% |
94.19% |
99.24% |
8.467 |
Total Tracked Flights |
| Vueling (VY) |
6 |
81.16% |
99.89% |
99.30% |
19,709 |
98.43% |
| Icelandair (FI) |
7 |
80.12% |
99.94% |
97.95% |
3.276 |
|
Norwegian Air
Sweden (D8) |
8 |
78.55% |
96.42% |
99.77% |
5.965 |
Total Flights |
LOT - Polish Airlines
(LO) |
9 |
77.66% |
98.77% |
99.02% |
8,613 |
89,303 |
| Air Europa (UX) |
10 |
77.27% |
99.93% |
99.86% |
5,672 |
|
Best-in-class operations driving market share
Financial results for Q3 2023
Quarterly financial highlights
Q3 earnings – Historically high operating profit
| NOK million |
Q3 2023 |
Q3 2022 |
Chng.
(YoY) |
|
| Passenger revenue |
7,229 |
5,936 |
|
|
| Ancillary passenger revenue |
1,285 |
1,047 |
|
|
| Other revenue |
261 |
133 |
|
|
| Total operating revenue |
8,776 |
7,116 |
+23% |
Unit revenue up 4%, capacity up 20% |
|
|
|
|
|
| Personnel expenses |
1,001 |
687 |
|
|
| Aviation fuel |
2,308 |
2,598 |
-11% |
Fuel price lower yoy
incl. hedging gain |
| Airport and ATC charges |
892 |
682 |
|
|
| Handling charges |
663 |
562 |
|
Cost items impacted by negative currency effects |
| Technical maintenance expenses |
170 |
162 |
|
and inflation |
| Other operating expenses |
591 |
515 |
|
|
| EBITDAR excl other losses/(gains) |
3,150 |
1,909 |
|
Significant improvement in underlying earnings |
| Other losses/(gains) |
9 |
43 |
|
|
| EBITDAR |
3,141 |
1,866 |
|
|
|
|
|
|
|
| Aircraft lease, depreciation and amortization |
971 |
835 |
|
|
| Operating profit (EBIT) |
2,170 |
1,032 |
+110% |
Operating margin 25% |
|
|
|
|
|
| Net financial items |
-121 |
-122 |
|
|
| Profit before tax (EBT) |
2,050 |
910 |
|
|
Robust balance sheet into winter season
|
30
Sep |
30
Jun |
Chng |
|
NOK
million |
2023 |
2023 |
(QoQ) |
|
Intangible
assets |
2
125
, |
2
113
, |
|
|
Tangible
assets |
14
765
, |
13
669
, |
|
|
Total
non-current
assets |
17
596
, |
16
450
, |
+7% |
Four new leased aircraft |
| Receivables |
4
305 |
4
322 |
|
Holdback 38% |
Cash
and
cash
equivalents |
,
9
391 |
,
9
349 |
|
|
Total
current
assets |
,
13
924
, |
,
13
870
, |
|
|
| Assets |
31
520
, |
30
320
, |
|
|
|
|
|
|
|
| Equity |
6
178
, |
3
707
, |
+67% |
|
|
|
|
|
|
Non-current
debt |
11
984
, |
11
185
, |
|
|
Other
liabilities
non-current |
3
215
, |
2
863
, |
|
|
Total
liabilities
non-current |
15
199
, |
14
048
, |
|
|
traffic
Air
settlement
liabilities |
3
888
, |
6
416
, |
-39% |
Bookings reflecting third |
Current
debt |
1
726
, |
1
832
, |
|
quarter seasonal low-point |
Other
liabilities
current |
4
529
, |
4
317
, |
|
|
Total
current
liabilities |
10
142
, |
12
565
, |
|
|
| Liabilities |
25
341
, |
26
613
, |
|
|
|
|
|
|
|
Equity
and
liabilities |
31
520
, |
30
320
, |
|
|
|
|
|
|
|
Equity
ratio
(%) |
19
6 |
12
2 |
7
p.p. |
Strong quarterly |
|
|
|
|
net profit |
| Net interest-bearing debt |
|
|
|
|
|
NOK
million |
30
Sep
2023 |
30
Jun
2023 |
Chng
(QoQ) |
|
|
Cash
&
equiv |
9
391
, |
9
349
, |
+42 |
|
|
Aircraft
financing |
11
036
, |
9
954
, |
+1
083
, |
|
|
| NAS13 |
0 |
441 |
-441 |
|
|
Other
IB
debt |
111 |
121 |
|
|
|
Retained
Claims
Bonds |
2
562
, |
2
502
, |
|
|
|
| NIBD |
4
318
, |
3
668
, |
+650 |
|
|
- NIBD increase with added lease obligations for four latest-technology aircraft
- 85 aircraft at quarter-end, up from 81 last quarter
- Optimising and simplifying capital structure
- redemption of NOK 450m NAS13 bond
- NOK 935m in principal bond repayments during 2023
Cash flow – improved liquidity position into winter
11
The way forward
Retaining cost focus amidst macro headwinds
Unit cost (CASK) excl. fuel
- USD costs: technical, leasing (in addition to fuel)
- EUR costs: airport, ATC, handling and crew – neutral P&L impact from EUR+DKK due to revenue effects
- Corporate market initiatives impacting unit cost – higher distribution cost, but significant positive P&L impact
- Inflationary cost headwinds are industry-wide
Costs are affected by FX and inflation Reducing capacity to minimise losses during winter
- 2023/24 winter capacity close to last year's – but even greater capacity reduction due to increased fleet
- Taking out associated variable operating expenses – approximately 70% of cost base
- Positive profit contribution from capacity reduction – estimate NOK 1.0 to 1.5 billion
Successful cost initiatives driving improvements in 2023
Operations
- On-time performance 6.5 p.p. improvement from Q3 last year – key to minimise cost related to crew, fuel, handling, ATC charges and EU261
- Crew efficiency enhanced block hours (BLH) up 6% vs last year
- Baggage handling compensation cost reduced more than 30%
- Spare engine lease with power-by-the-hour (PBH) agreement
- SkyBreathe pilots utilising latest technology to reduce fuel burn – top performer with 2% – 5% in fuel savings
Structural
- Self-handling at OSL improved customer offering and operations at key airport
- Swiftly adapting to market conditions by shifting capacity – capacity moved from lower to higher yielding routes
- Improving aircraft and crew availability – planned maintenance and training scheduled in low-season
- Fuel cost hedging currently hedged at favourable levels
Significant fuel savings with smart flying
Sustainable profitability through additional initiatives
Operations
- Continuously pushing for improved on-time performance and regularity
- New ground handling agreements at improved terms
- Heavy engine maintenance vendor change significant savings
- Modern self-service tools to improve crew efficiency
- Increasing customer self-service capabilities online and in airports
- Increase sales through direct channels reducing distribution cost
Structural
- Base structure expansion with cost optimisation potential
- Improve seasonal utilisation balancing of workforce
- Aircraft harmonisation i.e. 189 seats new standard (+3)
- Aircraft optimisation reducing weight by removing low-value add-ons and optimising aircraft spec. to reduce running OPEX
- Aircraft configuration significantly reducing CAPEX for own order
Adding new crew bases in 2024
Securing modern fleet for the long-term
Securing fleet for 2024
- Fleet increasing to appr. 90 aircraft next summer – extended leases for three 737 NGs in third quarter
- Limiting impact from Boeing 2024 delivery delays – mitigating initiatives include potential additional lease extension
- Compensation agreement in place for delayed aircraft deliveries
Replacing older generation aircraft
- Replacing with fuel-efficient aircraft with significant cost savings – above 14% reduced fuel-burn
- CFM LEAP-1B engine unrelated to P&W GTF engine issues
- Serving customers latest technology 40% noise reduction
Aircraft order delivery from 2025
- Order for 50 737 MAX 8 aircraft delivery 2025-2028
- Option for additional 30 aircraft delivery 2028-2030
- Attractive pricing and inflation protection
- Aircraft specification optimisation significant cost improvements
- NOK 3.2bn PDP paid-in
- Significant share to be owned –financing for up to ten aircraft secured
Outlook
|
Q4 2023 |
Q1 2024 |
Q2 2024 |
|
| Capacity growth1) |
c. 3% |
0% –
5% |
15% –
20% |
|
|
|
|
|
|
| FY 2023 |
|
|
FY 2023 |
|
| Operating profit (EBIT)2) |
|
2.0 billion3)
NOK 1.8 – |
|
|
\$
Unit cost excl. fuel2) |
|
0.47 –
0.48 |
|
|
1) Available seat kilometres (ASK) vs. same period last year 2) Assuming current market rates for period – Jet fuel 930 USD/mt, EURNOK 11.8, USDNOK 11.2 3) NOK 800 million realisation from loyalty programme new business venture now expected in Q1 2024
Summary
Strong brand loyalty and robust operations
- Leading operations vs. peers top on-time European airline and strong regularity
- Increasing market share in leisure and corporate market – continuing to sign new corporate agreements
Well prepared for winter season
- Bookings encouraging while macro environment remains uncertain
- Hedged 55% of fuel for rest of year and 35% for next year – favourable rates significantly below current market
- Capacity reduced by 30 to 40%
Positioning for 2024 and beyond
- Fleet increasing to approximately 90 aircraft to match increasing demand – limiting aircraft deliver delays through mitigating measures
- Strong ESG commitment reducing carbon efficiency by 45% by 2030 – introducing 100 fossil-free flights on Denmark's busiest routes
- Widerøe acquisition and loyalty programme ecosystem with partners
- Process to ensure capital structure fit-for-purpose
Fly Norwegian
Book tickets at Norwegian.com
Appendix
20 largest shareholders as of 30 September 2023*
|
Name |
Country |
|
Per cent |
|
| 1 |
Geveran Trading Company, Ltd. |
Cyprus |
Number of shares
134,010,512 |
13.9 % |
|
| 2 |
Sundt AS |
Norway |
88,892,265 |
9.2 % |
|
| 3 |
Folketrygdfondet |
Norway |
44,573,605 |
4.6 % |
|
| 4 |
Silver Point Capital, L.P. |
United States |
35,964,623 |
3.7 % |
|
| 5 |
Nordnet Bank AB. |
Norway |
31,996,328 |
3.3 % |
|
| 6 |
Ballyfin Aviation Limited |
Ireland |
31,472,703 |
3.3 % |
|
| 7 |
Avanza Bank AB |
Sweden |
23,213,134 |
2.4 % |
|
| 8 |
Handelsbanken Kapitalförvaltning AB |
Sweden |
19,037,471 |
2.0 % |
|
| 9 |
Svelland Capital (UK) Ltd |
United Kingdom |
15,881,790 |
1.7 % |
|
| 10 |
Keskinäinen eläkevakuutusyhtiö Varma |
Finland |
15,500,000 |
1.6 % |
|
| 11 |
KLP Fondsforvaltning AS |
Norway |
15,084,838 |
1.6 % |
|
| 12 |
DNB Asset Management AS |
Norway |
12,962,416 |
1.3 % |
|
| 13 |
Contrarian Capital Management, LLC |
United States |
10,312,451 |
1.1 % |
|
| 14 |
BlackRock Institutional Trust Company, N.A. |
United States |
10,041,327 |
1.0 % |
|
| 15 |
Brumm AS |
Norway |
10,010,480 |
0.9 % |
|
| 16 |
Swedbank AB |
Sweden |
8,511,572 |
0.9 % |
|
| 17 |
Nordea Funds Oy |
Finland |
8,037,591 |
0.8 % |
|
| 18 |
HSBC Trinkaus & Burkhardt AG |
Germany |
6,979,134 |
0.7 % |
|
| 19 |
Deutsche WertpapierService Bank AG |
Germany |
6,087,043 |
0.6 % |
|
| 20 |
UBS Switzerland AG |
Switzerland |
6,073,935 |
0.6 % |
|
|
Top 20 shareholders |
|
534,643,218 |
55.6 % |
|
|
Other shareholders |
|
426,920,476 |
44.4 % |
|
|
Total number of shares |
|
961,563,694 |
100.0 % |
|
*) The data is obtained through third-party analysis of beneficial ownership and fund manager information provided in replies to ownership notices issued to custodians. Reasonable efforts have been made to verify the data, however Norwegian Air Shuttle ASA cannot guarantee the accuracy of the analysis.
Disclaimer
Certain statements included in this presentation contain forward-looking statements, such as statements of future expectations. Although the statements provided are based on the best reasonable assumptions of management of Norwegian Air Shuttle ASA ("Norwegian"), the statements are based on a number of assumptions and forecasts that, by their nature, involve risks and uncertainties. No assurances can be given that the expectations provided in the forwardlooking statements will prove to be correct.
Various factors may cause the actual results of Norwegian to differ materially from those projected in forward-looking statements. These factors include, but are not limited to, (a) general economic conditions, (b) changes in the competitive climate, (c) fluctuations in the price of jet fuel, (d) fluctuations in currency exchange rates, (e) industrial actions, (f) contingencies and legal claims, and (g) legislative, regulatory and political factors.
Norwegian cautions readers of this presentation not to place undue reliance on the forward-looking statements in making an investment decision. Norwegian assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.