Norwegian Air Shuttle Asa · OSL:NAS
Norwegian Air Shuttle Asa — Q3 2019 Earnings Presentation
35 slides from Norwegian Air Shuttle Asa's earnings presentation, Oct 24, 2019
Slide 1: Norwegian Air Shuttle ASA Q3 2019 Presentation
Norwegian Air Shuttle ASA Q3 2019 Presentation 24 October 2019
Slide 2: Agenda
Agenda 1 Q3 2019 Presentation Geir Karlsen, Acting CEO 2 The Way Forward Niels Smedegaard, Chairman 3 Q&A Niels Smedegaard and Geir Karlsen 2
Slide 3: New strategy starting to show results
New strategy starting to show results Delivering above target on #Focus2019, our cost reduction program Continuing the process of moving from Optimization of route network and organizational structure growth to Reducing capital expenditures through restructuring of aircraft orders, JV profitabil
Slide 4: Highlights Q3 2019 and subsequent events
Highlights Q3 2019 and subsequent events 8 % revenue growth driven by improved unit revenue and growth in ancillary revenue per passenger Improved results #Focus2019: On track with NOK 827 million cost reduction in Q3 (NOK 1,848 million YTD) EBITDAR excl other losses/(gains) improved by 49 % yoy to
Slide 5: Strategy of lower growth resulting in higher load factor and increased yield
Strategy of lower growth resulting in higher load factor and increased yield 3 % growth in production (ASK), compared to 33 % in Q3 2018 4 % growth in traffic (RPK), compared to 32 % in Q3 2018 35,000 ASK (million) Load Factor 100% 90.7 % 91.3 % 91.7 % 90.5 % 91.2 % 90% 84.4 % 84.6 % 30,000 82.6 % 8
Slide 6: Long-haul continues to improve – mainly driven by US passenger demand
Long-haul continues to improve – mainly driven by US passenger demand Revenue growth yoy in Q3 2019: Revenue split by origin in Q3 2019: 21 % growth in revenue from the US Revenue from the US is the largest share of the Continued high growth in the key European markets company’s revenue in Q3 and YT
Slide 7: Largest foreign carrier in New York and largest European carrier in Los Angeles
Largest foreign carrier in New York and largest European carrier in Los Angeles 7
Slide 8: Largest foreign carrier in New York and largest European carrier in Los Angeles
Largest foreign carrier in New York and largest European carrier in Los Angeles Connecting networks to feed long haul 8
Slide 9: Financials
Financials
Slide 10: Income statement
Income statement NOK million Q3 2019 Q3 2018 Passenger revenue 11,837 11,062 Ancillary passenger revenue 2,067 1,919 Other revenue 500 406 8 % revenue growth driven by higher unit revenue Total operating revenue 14,404 13,387 and ancillary passenger revenue Personnel expenses 1,700 1,692 Aviation fu
Slide 11: Income statement YTD
Income statement YTD NOK million YTD 2019 YTD 2018 Passenger revenue 28,037 24,867 Ancillary passenger revenue 5,276 4,743 Other revenue 1,265 998 13 % revenue growth mainly driven by improving Total operating revenue 34,577 30,608 RASK Personnel expenses 5,122 4,899 Aviation fuel 9,885 9,142 Airpor
Slide 12: Increased unit revenue (RASK) by 3 %
Increased unit revenue (RASK) by 3 % Q3 unit revenue (RASK) +3 % to 0.42 (+1 % in constant currency) 3 % increased average sector length Ancillary revenue per passenger increased by 11 % to NOK 196 (177) 23 % growth in other revenue (Cargo and Reward) 16,000 16,000 + +8 8%% 14,000 14,000 12,000 12,0
Slide 13: #Focus2019: Delivering strong cost reductions of NOK 827 million in Q3
#Focus2019: Delivering strong cost reductions of NOK 827 million in Q3 Actual Actual Q3 Cost area Completed cost initiatives YTD Q3 (NOK m) (NOK m) Airport, handling • High effect of airport- and handling-related cost initiatives during peak season and technical • Progressing on several items with k
Slide 14: Operating cost EBIT level per ASK
6 % lower unit costs despite currency headwind 6 % lower unit cost yoy Unit cost excl fuel decreased by 9 % in constant currency Unit cost incl fuel decreased by 10 % in constant currency CASK excl leasing, depeciation and fuel 0.50 Leasing and depreciation Fuel 0.45 0.10 0.11 0.40 0.10 0.11 0.15 0.
Slide 15: Positive underlying cost performance
Positive underlying cost performance Lower fuel cost (-5 % per ASK) driven by lower fuel spot price (-11 %), stronger USD vs NOK (+8 %) and reductions in ETS cost Lower personnel cost (-3 % per ASK) despite currency headwind and lower utilization following the 737 MAX grounding Higher lease and depr
Slide 16: Balance sheet
Balance sheet 30 SEP 30 JUNE NOK million 2019 2019 Intangible assets 2,821 3,313 Tangible fixed assets 71,937 69,408 Fixed asset investments 1,410 1,303 Total n on-cu rrent ass ets 76,168 74,023 Inventory 189 162 Investments reduced by NOK 1,266 million related Investments 958 2,043 to sale of 9.97
Slide 17: Cash flow
Cash flow NOK million Q3 2019 Q3 2018 Profit before tax 2,203 1,600 Paid taxes -8 -1 Depreciation, amortization and impairment 1,660 451 Changes in air traffic settlement liabilities -4,613 -3,912 Changes in receivables 1,386 1,740 Other adjustments 1,512 368 Net cash flows from operating activities
Slide 18: Outlook
Outlook
Slide 19: Guidance on fleet plan and capital expenditure
Guidance on fleet plan and capital expenditure Capital commitments* Deliveries B737 MAX8 Deliveries B787-9 2019: USD 1.0 billion (previous estimate USD 1.2 billion) 0 5 2020: USD 1.4 billion (previous estimate USD 1.3 billion) 16 4 180 164 165 164 160 156 10 15 16 144 11 B787-8/B787-9 owned 140 7 22
Slide 20: Our business model is one of the most carbon efficient in the world
Our business model is one of the most carbon efficient in the world Status Q3 Ongoing projects ~20 % more fuel-efficient than world average for SkyBreathe airlines Potential to reduce entire fleet fuel consumption by World’s most fuel-efficient transatlantic airline, ~2 % p.a., equaling 44,000 tons
Slide 21: Established joint venture comprising 27 aircraft
Established joint venture comprising 27 aircraft Agreed to establish a joint venture (JV) with China Construction Bank Leasing (International) Corporation DAC ("CCBLI"), the leasing arm of the world’s second largest bank CCBLI to become the majority owner of the JV with 70 % share with Norwegian hol
Slide 22: Reduced growth in line with strategy
Reduced growth in line with strategy Estimated production growth (ASK) 0 % ASK growth in 2019 (previous estimate 0 % to 5 %) Unit cost estimates 2019 Approximately NOK 0.310 incl depreciation excl fuel (unchanged) on currency headwind and lower production Approximately NOK 0.435 incl depreciation an
Slide 23: Our actions are working… … and more to come
Our actions are working… #Focus2019 Sale of NOFI Partnership Joint Venture Target achieved Completed sale of Letter of intent for Established joint through continuous shares with final partnership with venture with CCBLI cost focus and settlement in Q4 and JetBlue reducing capex by revised target to
Slide 24: The Way Forward
The Way Forward
Slide 25: Looking forward to 2020 & beyond
Looking forward to 2020 & beyond Need bold actions to continue our return to profitability Systematically assessed operating model throughout Q3 Found significant opportunities across the business Scoped the impact and created a plan – Program NEXT NEXT is a 2-3 year transformational journey Managem
Slide 26: NEXT builds on our journey from growth to profitability
NEXT builds on our journey from growth to profitability Program NEXT A transformative cross-functional journey to increased value creation Make bold Continue Drive best in moves on CASK class RASK network improvement Return to profitability Growth 2015 2016 2017 2018 2019 2020 2021 Beyond 26
Slide 27: Our ambition over the next two years NOK 4 billion
Our ambition over the next two years Program NEXT has potential to generate significant impact NOK Impact will come on top of already realized #Focus19 effects 4 billion Run-rate EBITDAR Impact will combine both top line and cost improvements at the efficiencies to drive profitability end of 2021 We
Slide 28: Near term focus spans core parts of our business
Near term focus spans core parts of our business Continue to re-assess, optimize and fortify our network Planned 10 % ASK reductions in 2020 Implement new digital tools and capabilities to improve revenue Continue to Take near term actions on pricing, inventory and product increase profitability Imp
Slide 29: We fully believe in the potential of this plan
We fully believe in the potential of this plan We are committed to change and deliver value to our stakeholders This is the beginning of a multi-year journey We look forward to updating you on our overall program, its structure and targets at our Q4 reporting 29
Slide 30: Fly Norwegian
Fly Norwegian Book tickets at Norwegian.com
Slide 31: Extra Material
Extra Material 31
Slide 32: Passenger development at key airports
Passenger development at key airports 32 Source: 12 month rolling passengers as reported by Avinor, Swedavia, Copenhagen Airports, Finavia and Gatwick Airport
Slide 33: IFRS 16 income statement effects in Q3 2019
IFRS 16 income statement effects in Q3 2019 NOK million 33
Slide 34: Shareholding in NOFI
Shareholding in NOFI All shares sold, but proceeds required to finance negative cash flow in winter season Sale of NOFI shareholding Timing of cash flows (NOK million) 934 Agreement announced 19 August to sell entire shareholding in Norwegian Finans Holding ASA for NOK 2,218 million to a company ind
Slide 35: Norwegian's slots at London Gatwick Airport valued in excess of USD 380 million
Norwegian’s slots at London Gatwick Airport valued in excess of USD 380 million1 Norwegian’s slot portfolio at London Gatwick Airport (LGW)2 A slot is a permission given by a coordinator to use the full range of airport infrastructure necessary to operate an air service at a # of slots Mon Tue Wed T
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