Norwegian Air Shuttle Asa · OSL:NAS
Norwegian Air Shuttle Asa — Q4 2018 Earnings Presentation
34 slides from Norwegian Air Shuttle Asa's earnings presentation, Feb 7, 2019
Slide 1: Norwegian Air Shuttle ASA Q4 2018 Presentation
Norwegian Air Shuttle ASA Q4 2018 Presentation 7 February 2019
Slide 2: Disclaimer
Disclaimer This presentation (the "Presentation") has been prepared by Norwegian Air Shuttle ASA (the "Company") solely for information purposes in connection with the Company's financial report for Q4, 2018 and may not be copied or passed on, in whole or in part, or its contents reproduced, disclos
Slide 3: Key highlights
Key highlights 2018 CASK incl fuel and depreciation of 0.435 (latest guiding: 0.435-0.440) Q4 2018 Q4 EBITDA excl other losses/gains negative by NOK 1,290 million (Q4 2017: NOK -901 million) 9 million passengers in Q4 and 37 million passengers in 2018 Fully underwritten rights issue of NOK 3 billion
Slide 4: Norwegian offers more than 500 routes to over 150 destinations
Norwegian offers more than 500 routes to over 150 destinations
Slide 5: Q4 2018
Q4 2018
Slide 6: Highlights Q4 2018
Highlights Q4 2018 EBITDA excl other losses/gains negative by NOK 1,290 million (Q4 2017: NOK -901 million) CASK excl fuel decreased by 14 % y/y Added six 737 MAX 8s and one 787-9 to operations Reached agreement with Rolls-Royce regarding settlement of compensation Secured underwriting commitment fo
Slide 7: Available Seat KM (ASK)
Q4 load factor of 80.9 % partly offset by increased yield 32 % growth in capacity (ASK) 25 % growth in traffic (RPK) 35,000 ASK Load Factor 100% 85.8 % 85.3 % 90% 84.9 % 30,000 80.7 % 80.9 % 77.4 % 78.5 % 77.9 % 76.1 % 76.7 % 80% 25,000 70% 60% 20,000 50% 15,000 40% Available Seat KM (ASK) 30% 10,00
Slide 8: Passengers (million)
9 million passengers in Q4 (+12 %) 10 + 12 % 9 8 7 6 5 4 3 Passengers (million) 2 1 0 Q4 09 Q4 10 Q4 11 Q4 12 Q4 13 Q4 14 Q4 15 Q4 16 Q4 17 Q4 18 PAX (mill) 2.8 3.3 4.0 4.4 5.2 5.6 6.1 7.2 8.1 9.0 PAX 12 mos. rolling (mill) 10.8 13.0 15.7 17.7 20.7 24.0 25.7 29.3 33.2 37.3 8
Slide 9: Continued passenger growth at all key airports
Continued passenger growth at all key airports 9 Source: 12 month rolling passengers as reported by Avinor, Swedavia, Copenhagen Airports, Finavia, Gatwick Airport and Aena
Slide 10: Revenue per country
Revenue per country 14 % revenue growth in the Nordics in 2018 Most significant absolute growth in the US, both in Q4 and 2018 Growth in revenue by origin in 2018 (y/y): Revenue split by origin in 2018: 10
Slide 11: Fleet plan before further aircraft divestment
Fleet plan before further aircraft divestment Deliveries 787-9 Deliveries 737 MAX Re-delivery 737-800 2019: +1,690 seats +3,024 seats -186 seats Considering sale of additional aircraft at the right price 11
Slide 12: Financials
Financials
Slide 13: Profit and loss
Profit and loss NOK million Q4 2018 Q4 2017 FY 2018 FY 2017 Negative P&L effect of Passenger revenue 7,693 6,114 32,560 24,719 NOK 1,985 million from Ancillary passenger revenue 1,523 1,233 6,267 4,823 unrealized fuel hedge Other revenue 441 497 1,439 1,407 losses Total operating revenue 9,658 7,844
Slide 14: Q4 yield unchanged y/y
Q4 yield unchanged y/y Q4 unit passenger revenue (RASK) -4.9 % to 0.30 (-4.7 % in constant currency) Underlying RASK, adj. for currency and average distance, approx. -2.2 % Ancillary revenue per passenger increased by 10 % to NOK 169 Cargo revenue increased by 36 % to NOK 244 million + 23 % 10,000 8
Slide 15: Operating cost EBIT level per ASK
Unit cost excl fuel decreased by 14 % Unit cost incl fuel decreased by 5 % (decreased by 7 % in constant currency) Unit cost excl fuel decreased by 14 % (decreased by 15 % in constant currency) 0.60 CASK excl fuel and ownership cost 0.55 Ownership share of CASK 0.50 Fuel share of CASK 0.09 0.45 0.11
Slide 16: Disciplined low cost operating model
Disciplined low cost operating model Cost development in 2017 and 2018 Compares well to peers Operating costs excl fuel and ownership costs per ASK (NOK) Operating costs (EBIT level) per ASK (NOK) Air Asia 0.26 Wizz Air 0.30 0.29 0.29 0.28 0.28 Ryanair 0.31 0.26 0.25 0.24 0.23 0.43 Vueling 0.53 Easy
Slide 17: Reduction in majority of cost elements
Reduction in majority of cost elements Higher fuel cost (+25 % per ASK) driven by spot price (+14 %), a stronger USD vs NOK (+3 %), partly offset by efficiency gains Lower personnel cost (-10 % per ASK) caused by increased utilization of crew with higher aircraft utilization and abating growth Highe
Slide 18: Balance sheet
Balance sheet BALANCE SHEET NOK million Q4 2018 Q4 2017 Prepayment on aircraft constitutes 21% of Intangible assets 2,886 1,220 Prepayment on aircraft 8,561 5,219 tangible fixed assets Aircraft and aircraft parts 31,915 25,862 Other fixed assets 481 370 IFRS 16: The company has calculated that ROU T
Slide 19: Cash flow
Cash flow NOK million Q4 2018 Q4 2017 Other adjustments affected by unrealized Profit before tax -3,945 -1,226 losses on fuel hedge of NOK 1,985 million Paid taxes -8 4 Depreciation, amortization and impairment 497 374 The sale of five A320neos in Q4 2018 Changes in air traffic settlement liabilitie
Slide 20: Strategy: Building a strong financial position for the future
Strategy: Building a strong financial position for the future
Slide 21: Changing strategic focus from growth to profitability
Changing strategic focus from growth to profitability 2013 - 2018 2019 - Focus on growth Focus on profitability and cash flow Built up market position and scale Continuous efforts to reduce costs Optimization of the base structure Captured slots at constrained airports and the route network Onboarde
Slide 22: Financial position and cost base to be improved during 2019
Financial position and cost base to be improved during 2019 Liquidity impact in 2019 (million NOK) 2,000 1,700 7,700 1,000 3,000 1 Rights issue 2 Aircraft 3 Postponed 4 #Focus2019 Total 2019 liquidity impact divestments aircraft deliveries 1. Rights issue 2. Aircraft divestments 3. Postponed aircraf
Slide 23: Rights issue - transaction summary
1 Rights issue - transaction summary Fully underwritten rights issue of NOK 3 billion Increases financial flexibility and creates headroom to the covenants of the outstanding bonds Provides balance sheet for the next phase of the company’s development Underwriting consortium consisting of DNB Market
Slide 24: Divestment process of aircraft underway
2 Divestment process of aircraft underway Ongoing process of aircraft divestment The aircraft market Expect liquidity effect of NOK 1 billion in 2019 with Experience high demand for narrow body aircraft 13 aircraft divestments in 2019 Highly standardized fleet and configurations Currently announced
Slide 25: Capital expenditure and financing
3 Capital expenditure and financing Capital expenditures Postponing 12 B737 MAX deliveries from 2020 to 2023 and 2024 and four A321LRs from 2019 to 2020 Capital commitments (all aircraft incl PDP) 2019 Total contractual commitments USD 2.0 billion (previous estimate: USD 2.2 bn) Boeing 737 MAX 16 Bo
Slide 26: Operational improvements
4 Operational improvements Core cost Optimizing base Improving on-time Reducing exposure to reduction program structure performance engine issues Concrete, measurable cost Exhaustive review of the 737 Experienced challenges with Reached agreement with initiatives across the operation with the goal o
Slide 27: #FOCUS2019: Program and structure
4 #FOCUS2019: Program and structure Program organization and governance structure established Managed by: CFO Geir Karlsen Steering committee established, supported by working group of 35 employees Work streams established for all functional areas All work streams owned by Group Management members P
Slide 28: #FOCUS2019: Overview of initiatives
4 #FOCUS2019: Overview of initiatives Target Cost area Examples of cost initiatives (NOK) Airport, handling • Renegotiate contracts with airports, maintenance providers and suppliers and technical costs • Increase performance in the technical supply-chain ̴ 0.8bn • Reduce turnaround time and optimiz
Slide 29: #FOCUS2019: Status update as per Jan-19
4 #FOCUS2019: Status update as per Jan-19 One-off effects expected to be marginal Cost reductions with impact of NOK 100 million in Q4 2018 Expect total effect of approximately NOK 400 million in Q1 2019 Selected achievements so far: Successfully concluded negotiations with airports and handling a
Slide 30: Outlook and key take-aways
Outlook and key take-aways
Slide 31: Entering a phase of steadily slowing growth
Entering a phase of steadily slowing growth 90% 80% 70% 60% ASK growth y/y 50% 40% 30% 20% 10% 0% 2015 2016 2017 2018 2019e Narrow body Wide body Total Following several years of substantial growth – especially within the long-haul segment – the company will enter into a phase of lower growth Evalua
Slide 32: Estimated unit cost reduction of 5 %
Estimated unit cost reduction of 5 % Unit cost estimates 2019 NOK 0.295-0.300 incl ownership costs excl fuel NOK 0.4075-0.4125 incl ownership costs and fuel Assumptions: Fuel price of USD 613/mt, USD/NOK 8.18, EUR/NOK 9.55. Based on the current route portfolio and planned production Estimated produc
Slide 33: Going forward
Going forward Target 2019 Based on current forecast, the company targets a positive net profit in 2019 Subject to market conditions Markets and business Current bookings indicate a slight RASK decline in February Easter effect results in softer March and stronger April, but the aggregate current boo
Slide 34: Key take-aways
Key take-aways Changing Changing strategic focus from growth to profitability strategic Capitalizing on the market position and scale built up over the last years focus Targets positive net profit in 2019 Optimizing the base structure and the route network Improving Cost reduction target of minimum
Norwegian Air Shuttle — Q4 2018 Earnings Presentation on 6ix