Norwegian Air Shuttle Asa · OSL:NAS
Norwegian Air Shuttle Asa — Debt Investor Presentation (April 2020)
66 slides from Norwegian Air Shuttle Asa's debt investor presentation, Apr 27, 2020
Slide 1: Norwegian Air Shuttle ASA – Presentation to bondholders
Norwegian Air Shuttle ASA Presentation to bondholders 27 April 2020
Slide 2: Disclaimer
Disclaimer THIS DOCUMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO OR FROM THE UNITED STATES OF AMERICA, ITS TERRITORIES OR POSSESSIONS, AUSTRALIA, CANADA, JAPAN, HONG KONG OR SOUTH AFRICA OR TO ANY RESIDENT THEREOF, OR ANY JURISDICTION
Slide 3: Disclaimer (continued)
Disclaimer (continued) The contents of this Presentation are not to be construed as financial, legal, business, tax or other professional advice. Each recipient should consult with its own professional advisors for any such matter and advice. By receiving this Presentation, you acknowledge that you
Slide 4: Summary of key risk factors
Summary of key risk factors The Group’s business, operations and financial performance have been adversely impacted by the outbreak of Coronavirus SARS-CoV-2 (COVID-19). In a very short time period, the Group has lost most of its revenues due to global travel restrictions. Given the rapidly evolving
Slide 5: Executive summary
Executive summary Backdrop and status Restructuring proposal Business plan New Norwegian COVID-19 with Liquidity runway through Managing the hibernation Norwegian should have a unprecedented impact for State Aid Package but phase and planning for a strong position in the future the airline industry
Slide 6: Agenda
Agenda Summary Backdrop and status Restructuring proposal Business plan New Norwegian Appendix Risk factors
Slide 7: Background for the restructuring
Background for the restructuring Norwegian was well on-track with changing the strategic focus from growth to profitability Optimized route network on short-haul and long-haul into focus on profitable routes Restructured aircraft orders reducing capex by NOK 22.0bn for 2019 and 2020 Established join
Slide 8: Overview of the State Aid Package
Overview of the State Aid Package BACKGROUND Following the recent outbreak of COVID-19, the Norwegian Government has proposed certain measures and state aid to mitigate the negative economic effects of the outbreak on the business The state aid includes inter alia a state guarantee scheme in the amo
Slide 9: Group structure
Group structure1 Creditors addressed in the Intercompany loans: restructuring proposal To NAS: NOK 0.2bn Bonds Various guarantees OneBoeing One Boing order orderisisguaranteed guaranteedby by • NAS07: EUR 253m4 AAA and one Boeing and Airbus order NAS • NAS08: SEK 1,012m4 Subsidiaries Pilot Services
Slide 10: Summary of the restructuring plan
Summary of the restructuring plan In order to fulfil the requirements and receive the State Aid Package, Norwegian is dependent upon a restructuring of its current debt and a new cash injection It is seen as key to further strengthen the Company’s financial position and liquidity to create a path to
Slide 11: Proposed timeline
Proposed timeline INDICATIVE TIMELINE Concluded Implementation step Timing Call for EGM 8 April Summons to bondholders' meetings 14 April Proposal details and public equity offering announced 27 April Bondholders' meeting 30 April Signing of agreement with lessors 3 May Announcement of proposed term
Slide 12: Agenda
Agenda Summary Backdrop and status Restructuring proposal Business plan New Norwegian Appendix Risk factors
Slide 13: Well underway with focus on profitability before COVID-19
Well underway with focus on profitability before COVID-19 MONTHLY TRAFFIC DEVELOPMENT Clean EBITDAR NOKbn (12m ASK (m, rolling) 12m rolling) Unit revenue growth y/y +2.5 9.0 120,000 30% 100,000 20% +3.3 6.5 80,000 10% 60,000 0% 3.2 40,000 -10% 20,000 -20% 0 -30% 2016 2017 2018 2019 2018A 2019A 2020B
Slide 14: The impact of COVID-19 on the airline industry is unprecedented
The impact of COVID-19 on the airline industry is unprecedented The crisis differs in abruptness and severity to any other crisis faced in modern times 9/11 SARS Great Recession COVID-19 2001 2003 2008 2020 GEOGRAPHICAL IMPACT GEOGRAPHICAL IMPACT GEOGRAPHICAL IMPACT GEOGRAPHICAL IMPACT Global Impact
Slide 15: 75% of the world's narrowbody and widebody fleets have been grounded
75% of the world’s narrowbody and widebody fleets have been grounded IN SERVICE FLEET DEVELOPMENT COMMENTS Global in-service fleet (wide- and narrowbody) Scheduled capacity has fallen 78% globally and 100% capacity cuts are already bleeding into airline’s highly lucrative summer schedules An estimat
Slide 16: 95% of Norwegian's flights are cancelled
95% of Norwegian’s flights are cancelled FLOWN VS SCHEDULED CAPACITY CANCELLATIONS 1 10/12 March % of flights 100% 3,000 flights cancelled 10 March in response to reduced booking demand due to the COVID-19 situation 1 90% (airspace suspended due to 4,000 flights cancelled 12 March following U.S. tra
Slide 17: Norwegian has taken significant action to date to preserve liquidity
Norwegian has taken significant action to date to preserve liquidity Temporary layoffs for around 7,650 employees, approximately 80% of the workforce Filed for bankruptcy for Norwegian's pilot and cabin crew companies in Sweden and Denmark to further reduce costs Staff Cancelled crew agreements with
Slide 18: Run rate operational expenses in the low season of NOK 100-300m per month
Run rate operational expenses in the low season of NOK 100-300m per month2 RUN RATE OPERATIONAL EXPENSES DETAILS ON COST SAVING MEASURES Total operating expenses excluding lease, depreciation, amortization and other G/L Significant reduction in other operating costs has been PER MONTH achieved throu
Slide 19: Agenda
Agenda Summary Backdrop and status Restructuring proposal Business plan New Norwegian Appendix Risk factors
Slide 20: Key objectives for the restructuring
Key objectives for the restructuring Access NOK 2.7bn of new liquidity through the State Aid Package to cover immediate liquidity needs and fund Secure liquidity by operations going forward mid May – Requirements for accessing the State Aid Package includes; access the i) strengthening the Company’s
Slide 21: Stakeholders prioritised near term due to timing
Stakeholders prioritised near term due to timing Creditor group Amount1 Security Assessment of value of security Contractual lease rates significantly higher than current market Aircraft lease rates NOK 33,278m Various aircraft leases Outstanding lease amounts higher than market value of aircraft fo
Slide 22: Summary of current fleet financing and rationale for treatment in the restructuring
Summary of current fleet financing and rationale for treatment in the restructuring Fleet as of Q1 2020 Owned Leased Fleet overview 32x 12x 11x 62x 4x 26x (# of aircraft) 737-800 737-8 787 737-800 737-8 787 33x 17x 5x Mix of operating leases Export credit / EETC / Loan / and sale-leasebacks Financin
Slide 23: Key terms of the restructuring
Key terms of the restructuring Lease obligations shall be reduced by at least USD 500m The NPV1 of the aggregate lease payment reductions to the lessors taking part in the conversion shall be converted to shares at a conversion price to be defined (the “Conversion Price”), subject to a minimum c
Slide 24: Status on other key stakeholder discussions
Status on other key stakeholder1 discussions Reached agreement with one party to terminate outstanding swap exposure – outstanding debt of USD ~20m In its liquidity budget, the Company has assumed that this will not be paid, and the Company is in dialogue with relevant counterparties to find sol
Slide 25: Summary of ask to lessors
Summary of ask to lessors OVERVIEW OF THE ASK BREAKDOWN OF TOTAL CLAIMS BASED ON ASK 1. Amounts in arrears: Non payment and forgiveness of all Lessor 10 Lessors 11-24 outstanding rents up to and including 30 June 2020 Lessor 9 4% Lessor 8 2% 2. Rental reduction: Commencing 1 July 2020, rent will be
Slide 26: Lessors to contribute with conversion of at least USD 500m of lease liabilities to equity
Lessors to contribute with conversion of at least USD 500m of lease liabilities to equity OVERVIEW OF PARTICIPATION FROM LESSORS1 USDm Cancellation of Waiver of rental New rates from PBH2 outstanding debt April-June July onwards Jul’20-Mar’21 Q2’20 closing Returned aircraft All due but unpaid Contra
Slide 27: High-level impact on capital structure and maturity profile
High-level impact on capital structure and maturity profile CAPITAL STRUCTURE AND HIGH-LEVEL IMPACT PRO FORMA DEBT REPAYMENT PROFILE NOKm. Excluding aircraft financing and lease liabilities Total book liabilities details State aid loan Secured bonds3 CB3 Q4 2019 Lessor conversion: reported 3,000 Una
Slide 28: Summary of proposed bond conversion and amendments
Summary of proposed bond conversion and amendments NAS07 NAS08 Convertible bond NAS09 Ranking Secured Secured Unsecured Secured N.A. Security Gatwick slots Gatwick slots OSL hangar (guarantee from AAA) Outstanding amount EUR 250m SEK 963.5m USD 150m NOK 250m Principal amount conversion 60% 60% 85% 0
Slide 29: Illustrative pro forma ownership after debt conversion
Illustrative pro forma ownership1 after debt conversion ILLUSTRATIVE PRO FORMA OWNERSHIP AFTER DEBT CONVERSION Assuming minimum lease conversion, and before the up to NOK 400m equity issue Lessors 53.1% Existing shareholders CB NAS07 20.0% NAS09 NAS08 6.7% NAS08 Bonds Lessors 41.7% NAS09 0.2% NAS07
Slide 30: Comparing the two key routes of action
Comparing the two key routes of action Creditor group Proposal | Contemplated restructuring Alternative | Norwegian bankruptcy proceedings Benefits Reservations1 Benefits Reservations Aircraft Leases Partial preservation of debt claim × Payment holiday Could recover fast if market × Alternative
Slide 31: Agenda
Agenda Summary Backdrop and status Restructuring proposal Business plan New Norwegian Appendix Risk factors
Slide 32: Norwegian to emerge from this crisis as a stronger aviation company
Norwegian to emerge from this crisis as a stronger aviation company = New Norwegian Phase 1 Phase 2 Phase 3 Crisis management Business restructuring Return to service Total shut down of the Secure funding, time and Emergence from the COVID- business opportunity to rightsize the 19 crisis balance she
Slide 33: Situation overview and new liquidity platform
Situation overview and new liquidity platform CURRENT OPERATIONAL STATUS LIQUIDITY AND MONTHLY USE OF CASH1 Strong outlook before COVID-19, record-high bookings for 2020 Total liquidity buffer2 ~NOK 3bn Estimated liquidity2 of approx. NOK 3bn as per Q2 20E, subject to the Material restructuring of r
Slide 34: Will take time before operations normalize, focus is on cash preservation
Will take time before operations normalize, focus is on cash preservation in the ramp-up phase 2020 2021 2022 M J J A S O N D J F M A M J J A S O N D J F M Operations ongoing at a minimum level Gradual ramp-up of routes Norwegian short haul 7 airplanes in operations Gradual normalization of core
Slide 35: Right-sizing, focus on profitable routes and impact of COVID-19 will affect the fleet count
Right-sizing, focus on profitable routes and impact of COVID-19 will affect the fleet count NUMBER OF AIRCRAFT 2020B PRE-COVID-19 NUMBER OF AIRCRAFT NEW NORWEGIAN Number of owned and leased aircraft Number of owned and leased aircraft, “new normal” Lay-up Active (Peak) 41 168 Fleet plan will be depe
Slide 36: Two demand scenarios considered towards a recovery
Two demand scenarios considered towards a recovery – our base case involves grounding until Q2 2021 BASE CASE Utilization1 – Slow recovery Utilization1 – Early recovery % of capacity in service Ramp-up % of capacity in service Ramp-up 100% 100% 90% 90% 80% 80% 70% 70% 60% 60% 50% 50% 40% 40% 30% 30%
Slide 37: Liquidity situation after recapitalisation – further funding likely required
Liquidity situation after recapitalisation – further funding likely required to return to normal RECOVERY SCENARIOS Grounding until Q2 2021 - gradual ramp-up throughout 2021 Likely need for additional liquidity beyond the NOK 3bn State Aid Package that assumed that COVID-19 travel restrictions last
Slide 38: Strong underlying development in recent years
Strong underlying development in recent years – 2020B credibly within reach prior to COVID-19 2018A 2019A 2020B1 +3.3bn 43.5 ~42bn 45,000 Revenues 43,000 41,000 40.3 39,000 NOKbn 37,000 - ~2.0bn 35,000 33,000 10,000 + ~ 2.5bn ~9bn 9,000 +3.3bn 8,000 6.5 EBITDA(R) 7,000 6,000 NOKbn 5,000 4,000 3.2 3,
Slide 39: Financial targets with normalized operations
Financial targets with normalized operations 2020 Target 2019 (pre-COVID- normalized (actual) 19 budget1) operations2 Lower production growth vs. budget ASK Optimising of fleet size, including disposal of aircraft no 100 ~87 (bn) Operational longer needed (both existing and future deliveries)
Slide 40: Agenda
Agenda Summary Backdrop and status Restructuring proposal Business plan New Norwegian Appendix Risk factors
Slide 41: New Norwegian will build on the strong platform and customer footprint
New Norwegian will build on the strong platform and customer footprint, with focus on profitability Strong market Strong market position in the Nordics which presently proves to be more resilient to the COVID-19 impact compared to other regions position in the Nordics Fortifying the Nordics is a cor
Slide 42: The success of New Norwegian is hinged on four key drivers
The success of New Norwegian is hinged on four key drivers 1 Network & fleet: 2 Crew & operations: 3 Customer, pricing & 4 Backbone: Economic rightsizing to a Agile and flexible product: Leveraging existing more profitable network cost-base Appropriate and resources and make flexible bundles priorit
Slide 43: Economic rightsizing to a more profitable network
1 Network & fleet Economic rightsizing to a more profitable network Reducing capacity to match demand Consolidated network and assuming ~40% lower production in a normalized period vs. 20201B, with implications on fleet size Improving route portfolio alone to drive a significant improvement in opera
Slide 44: Change in planned capacity to strengthen performance
1 Network & fleet Change in planned capacity to strengthen performance AVAILABLE SEAT KILOMETRES FULL YEAR SHORT HAUL CAPACITY B ASK 2020 Budget -9% 120 NN Steady-state 100 100 -4% 87 -70% 80 Nordic to EU Intra-Nordic Other SH 60 FULL YEAR LONG HAUL CAPACITY B ASK -48% 2020 Budget 40 NN S
Slide 45: Youngest fleet in the industry will secure leading operational cash flow break even
1 Network & fleet Youngest fleet in the industry will secure leading operational cash flow break even FLEET AVERAGE AGE IN YEARS BY COMPANY1 Higher fuel efficiency and lower fuel costs Significantly improved environmental friendliness Newer and more sustainable aircraft are preferred by travellers g
Slide 46: Agile and flexible cost-base
2 Crew & Operations Agile and flexible cost-base Underlying unit cost improvement driven by personnel and technical cost efficiencies Unit cost Shorter average stage length defines new unit cost-level overall To use a zero-base budget approach in ramp-up to tightly control cost and liquidity Opportu
Slide 47: Appropriate and flexible bundles
3 Customer, pricing & product Appropriate and flexible bundles New Norwegian will leverage strength of existing brand and consumer perception in primary markets Core customer will continue to be all those who seek an affordable alternative to the traditional legacy carriers Customer without compromi
Slide 48: Ancillary revenue target
3 Customer, pricing & product Ancillary revenue target CHANGE IN ANCILLARY REVENUE1 AS % OF TOTAL REVENUES (BENCHMARK FROM 2018) Ancillary % of total revenue 50% 42% 40% 35% 32% 30% +31% 21% 21% 20% 16% 16% 10% 0% Norwegian AerLingus easyJet New Norwegian Ryanair Volotea Wizz New Norwegian t
Slide 49: Leveraging existing resources and make prioritized investments
4 Backbone Leveraging existing resources and make prioritized investments Redesigned organization and management structure with a new executive team building on key performers and new talent – target 35 % reduction in overhead personnel costs Organization Professionalize business centers and develop
Slide 50: To further improve upon already disciplined low cost operating model
To further improve upon already disciplined low cost operating model when returning to service COST DEVELOPMENT COST LEVEL COMPARES WELL TO PEERS Operating costs excl. fuel and ownership costs per ASK (NOK) Operating costs (EBIT level) per ASK (NOK)1 Q4 2019 is negatively affected by FX effects and
Slide 51: Agenda
Agenda Summary Backdrop and status Restructuring proposal Business plan New Norwegian Appendix Risk factors
Slide 52: Business plan and liquidity forecast – basis for preparations
Business plan and liquidity forecast – basis for preparations BASIS FOR PREPARATIONS KEY ASSUMPTIONS FOR VARIOUS SCENARIOS Slow recovery The high-level financial guidance for 2022 Fast recovery (Base case) represents the first step to the operational State subsidized operations until platform of “
Slide 53: The following legal structure aligns with the Norwegian Group model
The following legal structure aligns with the Norwegian Group model (January 2020) = Delivers Shared Services to the Norwegian Group = AOC (or planned AOC in NAA) 100% = % of shares NAS = Companies with no current operation = Operative companies 100% 100% 100% 100% 100% AAA NAI NAN NUK NAR NTA NGH N
Slide 54: 2019 P&L
2019 P&L INCOME STATEMENT 2019 Full year Full year NOK million 2019 2018 Passenger revenue 35,216 32,560 Ancillary passenger revenue 6,651 6,267 Other revenue 1,654 1,439 8% revenue growth mainly driven by Total operating revenue 43,522 40,266 improving unit revenue and increasing ancillary per pass
Slide 55: 2019 balance sheet
2019 balance sheet BALANCE SHEET 31 DEC 31 DEC NOK million 2019 2018 Intangible assets 2,871 2,886 IFRS 16 transition effect at 1 January 2019: Tangible fixed assets 66,379 40,106 +NOK 32.8bn right-of-use assets Fixed asset investments 1,485 1,216 +NOK 32.8bn lease liabilities Total non-current asse
Slide 56: 2019 cash flow
2019 cash flow CASH FLOW Full year Full year NOK million 2019 2018 Profit before tax -1,688 -2,490 Paid taxes -38 -23 Depreciation, amortization and impairment 6,457 1,668 Changes in air traffic settlement liabilities -801 414 Changes in receivables -3,380 -2,548 Other adjustments 2,487 3,442 Net ca
Slide 57: Agenda
Agenda Summary Backdrop and status Restructuring proposal Business plan New Norwegian Appendix Risk factors
Slide 58: Risk factors
Risk factors RISKS RELATING TO THE GROUP'S BUSINESS AND FINANCIAL SITUATION COVID-19 Outbreak and Bankruptcy Risk The current outbreak of the Coronavirus SARS-CoV-2 (COVID-19), which was recognized as a pandemic by the World Health Organization in March 2020, has severely impacted companies and mark
Slide 59: Risk factors (continued)
Risk factors (continued) The conversion of the bonds is, among other things, subject to that the State Aid Package will be available to the Issuer following such conversion. The availability of the State Aid Package is subject to several conditions, and will, among other things, likely require that
Slide 60: Risk factors (continued)
Risk factors (continued) Operational difficulties may have a negative effect on the Group's operations (continued) The abovementioned issues can result in delays or cancellations of flights or a failure to deliver satisfactory services to the Group's customers. This can in turn have various negative
Slide 61: Risk factors (continued)
Risk factors (continued) Capacity constraints at airports or an inability to acquire and maintain airport slots or overflight rights may have a material adverse effect on the Group's business, financial condition or results of operations (continued) The price and availability of over-flight rights,
Slide 62: Risk factors (continued)
Risk factors (continued) The Group is exposed to tax related risks In March 2017 and June 2018, the Norwegian Tax Authorities made a reassessment pertaining to an EEC cross-border restructuring within the Group that took place in 2013 and 2014. The restructuring was carried out under the rules of co
Slide 63: Risk factors (continued)
Risk factors (continued) Reduction of growth may adversely affect short-term liquidity and profit and loss statement The Group is seeking to reduce growth and focusing on profitability and may through these activities incur short-term negative effects through e.g. increased restructuring costs which
Slide 64: Risk factors (continued)
Risk factors (continued) RISKS RELATING TO THE GROUP’S INDUSTRY The Group is exposed to volatile aviation fuel prices The Group's financial results are affected by the evolution of the market price of jet fuel, as fuel costs are the single largest cost item for the Group. Jet fuel costs represented
Slide 65: Risk factors (continued)
Risk factors (continued) The airline industry is exposed to extensive taxes and fees that can affect the demand (continued) The airline industry is also subject to extensive fees and costs such as taxes (including ticket tax, passenger tax and value added taxes), aviation and license fees, charges a
Slide 66: Fly Norwegian
Fly Norwegian Book tickets at Norwegian.com
Norwegian Air Shuttle — Debt Investor Presentation (April 2020) on 6ix