Norwegian Air Shuttle ASA - Investor Presentation January 2020
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Norwegian Air Shuttle ASA Investor Presentation January 2020
Norwegian at a glance
150+
4th GLOBAL
DESTINATIONS
~10,000
LARGEST LOW- HARD WORKING STAFF
COST AIRLINE
IN EUROPE*
~36M
160+ PASSENGERS FLOWN
AIRCRAFT IN FLEET
500+
ROUTES
2
* Based on passengers in 2019, based on company traffic reports.
Set to leverage on scale
Local short-haul focus Global growth phase, long-haul focus Focus on profitability
Aircraft orders 42 6 15 15+3 222 19+8 30 2
New markets and other
key milestones Leading position
on Nordic short
haul
Number of Aircraft 164
10 156
787-8/9 Owned
787-8/9 Leased 144 11 Maturing long-
22
737 MAX 8 Owned 7 haul offering
737 MAX 8 Leased 14 26 with improving
737-800 Owned 14
116 6 margins
737-800 Leased 3 4
14
9
737-300 Owned 99 4
95 3
737-300 Leased 2
85 5
5
53 Solid platform
M80 Leased 1 52
2 40 and sufficient
68 64 scale to achieve
62 30 41 51
57 profitability
15 23
46 7
40 2
32 7 23
2
16
31 42 64 62
Top ranked by
22 5 61
5 35 42 both short-haul
5
13 2 22 40 40
8
11 23
5 and long-haul
6 20 23 22
6 8 11 13 8 5
11 5
5
5
5 5
passengers
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Europe’s Best Low-Cost Airline
World’s Best Low-Cost Long Haul Airline
3
Key pillars of our corporate strategy 2018-2022
KEY FOCUS AREAS
LONG TERM
“We shall be the leading long-haul low-cost airline • Reduce cost base
VISION
in Europe operating as the engine of global low- Competitive cost base • Sustainable unit cost position
cost alliance and dominating the Nordic short- • Cost control and automation
haul market”
• Focus is to capitalize on long haul
Profitable operations and
• Fortify position in the Nordics
global alliance
• Improve connectivity and feed
• Improve operational simplicity
Return to sustainable profitability Operational resilience • Develop resilient program
• Optimize technical & crew
OBJECTIVES
• Commercially-driven fleet plan
STRATEGIC
Be the preferred airline for customers seeking value Optimized asset
for money • Fleet renewal program
management
2022
• Maximize return on assets
• Deliver on the basics
Fortify position as the leading short-haul carrier in
Shared customer focus • One customer journey
the Nordics
• Personalization and Reward
• Standardize and reduce complexity
Build global low-cost alliance with our long-haul Improve digital and
• Strategic sourcing
operation as the backbone analytics capabilities
• Agile development processes
CORE
VALUES Innovation Teamwork Simplicity
4
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 route network based on 12-month
profitability criteria
Onboarded new aircraft and Divest aircraft not required for the
launched new routes company’s commercial needs
5
Changes to network and operations
Stable demand at key airports
TOTAL PASSENGERS
In million
2015 2016 2017 2018 LTM Q3 2019
60
50
40
30
20
10
0
Oslo Stockholm Copenhagen Gatwick Barcelona
7
Source: Avinor, Swedavia, Copenhagen Airports, Gatwick Airport and Aena.New strategy starting to show results
→ Profits in Q3 was the highest in the Company’s history
→ The planned capacity reduction supports higher unit revenue, better load
factor and increased punctuality
MONTHLY TRAFFIC DEVELOPMENT
ASK (12m rolling) Unit revenue growth y/y
120,000 30%
100,000 20%
80,000 10%
60,000 0%
40,000 -10%
20,000 -20%
0 -30%
2016 2017 2018 2019
8Exhaustive review of the short-haul operation
SUMMER 2020 AIRCRAFT ALLOCATION
Focus on Nordic core
Existing base
Restructured base
Closed base
() Versus same
season last year Short-haul network connectivity and density
NO TRD FI
40 (+1) SE 7 (-2)
14 (-3)
BGO OSL HEL Support long-haul feed, where appropriate
EDI ARN
0 (-1) SVG
CPH
DUB DUB EDI Closed down more than 70 routes, of which
2 (-5) DK
LGW 12 (0) more than 50 on short haul
LGW
7 (-4)
IT Reduce complexity
0 (-3)
BCN
ES FCO
20 (-6) MAD
PMI
ALC
TFS AGP Handle fleet deficit from MAX grounding
LPA
9Our long-haul business in context
Business Long haul, low cost mainly focused on connecting primary airport / city
model points
Value for money fares with quality inflight services, leveraging our
Product focus
award-winning brand
A fleet of 37 Boeing 787 Dreamliners
Fleet
Two-class configuration and high-density cabin
Geographic Connecting large catchment areas
focus Seek connectivity with the rest of the network where necessary
Finetuning network to improve operational resilience
Profitability
Focus on core EU and US markets
10Long haul developing according to strategy
SUMMER 2020 AIRCRAFT ALLOCATION TRAFFIC AND YIELD DEVELOPMENT
ASK, 12m rolling (million) Yield, 12m rolling (index; Q2 2013 = 100)
60,000 120
50,000 110
40,000 100
30,000 90
NO
787: 2 20,000 80
10,000 70
0 60
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
UK 2013 2014 2015 2016 2017 2018 2019
787: 13
US
787: 2
FR
LTM
787: 7 2017 2018
Q3 2019
IT Passengers (million) 3.0 5.4 6.0
ES 787: 4
787: 5
ASK (billion) 23.9 45.0 49.9
Legs 11,500 20,600 21,600
33 aircraft deployed on long-haul network Load factor 90% 87% 87%
11Largest foreign carrier in New York
and largest European carrier in Los Angeles
Connecting networks
to feed long haul
12Our young fleet is a key sustainability,
commercial and financial advantage
~20% more fuel efficient than
world average for airline
Lower fuel costs
Significantly improved environmental
friendliness
Newer and more sustainable aircraft
are preferred by travellers globally
13
Source: Planespotter.net, January 2019.
The International Council on Clean Transportation (ICCT) Working Paper 2019-16: CO2 emissions from commercial aviation, 2018.Our low-cost business model is one of the
most carbon efficient in the world
ONGOING INITIATIVES
Fleet renewal program
Advanced weather data from
Avtech
SkyBreathe app for pilots
14Disciplined low cost operating model
Cost development in 2018 and 2019 Cost level compares well to peers
Operating costs excl. fuel and ownership costs per ASK (NOK) Operating costs (EBIT level) per ASK (NOK)1
0.28 AirAsia X 0.27
0.25 0.25 WizzAir 0.32
0.24
0.23 0.23
0.22 Ryanair 0.35
Norwegian has the
0.43 youngest fleet
easyJet 0.56
Vueling 0.56
JetBlue 0.59
Southwest 0.59
Finnair 0.62
SAS 0.76
Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19
1 Based on 2018 annual reports or corresponding fiscal year.
• 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
• Other losses/(gains) are not included in the unit cost measure as it primarily contains hedge gains/losses offset under financial items, as well as other non-operational income 15
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).#FOCUS2019:
Raising full-year target to NOK 2.3 billion
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 key technical suppliers
408 924
costs
• Lower personnel costs due to improved planning and efficiency measures
Operating • Standardizing operational tools and consumables
efficiency • Improving disruption handling
237 582
• Processes to close operational bases announced
Procurement, • Stronger effects from renegotiated volume-driven agreements
administration • Consolidating office locations in Norway and Spain 68 177
and IT • Implemented new flight planning system
Commercial,
• Product offering optimization
marketing and
• Working with partners to release synergies
114 165
product offering
Total 827 1,848
16Continuing to deliver on strategic changes
Fuel is the largest variable expense and
accounted for 30 percent of costs in 2018
Jet fuel Brent
(USD/MT) Jet fuel price and effective fuel price including hedging1 (USD per BOE)
1200 140
120
1000
885
639 100
859
800 601
728 719 569
685
674 80
672 647
600 580 582 605
614
568
498 526 560 60
514
400
40
200
20
0 0
2
2014 2015 2016 2017 2018 2019 2020 2021
JET1NECC INDEX SAS easyJet Ryanair Norwegian Brent Brent forward
Hedging ratio 12m fwd at FY reporting
SAS 80 % 45 % 43 % 52 % 62 % n.a.
easyJet 83 % 81 % 75 % 65 % 68 % n.a.
Ryanair 90 % 95 % 90 % 90 % 90 % n.a.
Norwegian 50 % 52 % 25 % 35 % 00 % n.a.
18
1) Numbers presented are annualised numbers on a December year-end basis due to the different reporting standards of the peer companies
2) 2019 full year estimated with a forward fuel cost at 626 USD/MT as per 12.12.2019Impact of MAX grounding and engine issues Status and impact from MAX grounding 18 aircraft grounded 12 March 2019 16 new deliveries deferred Estimated negative impact on P&L of NOK 1 billion for 2019 Discussions on compensation and new delivery schedule Engine issues Dreamliners Estimated negative impact on P&L of NOK 300 million for 2019 Credit card acquirers Onboarded two new acquirers in Q4 plus a new account-to-account solution In discussions with existing acquirers
Significant actions to increase financial
headroom while transforming the business
#Focus2019 Sale of NOFI Partnership Joint Venture Sale of
Target achieved Completed sale of Letter of intent for Established joint Argentina
through continuous shares with final partnership with venture with CCBLI Sold Argentinian
cost focus and settlement in Q4 JetBlue reducing capex by subsidiary to
revised target to and cash release of NOK 13.7 billion JetSMART
NOK 2.3 billion NOK 0.9 billion
Deferring Bond maturity Sale of aircraft Capital raise
deliveries NOK 3.4 billion Concluded 24 AC Private placement of
Restructuring of extended with for 2019 and 2020 NOK 1.1 billion and CB
aircraft orders approx. 2 years with net liquidity of USD 150 million.
reducing capex by compared to effect of NOK 2.2 This comes on top of
NOK 22.0 billion for original maturity billion NOK 3 billion rights
2019 and 2020 dates issue in Q1 2019
Ongoing Aug Sept Oct Nov Dec
20
Based on exchange rate USD/NOK of 9.10.Sold a total 24 aircraft with net proceeds of
NOK 2.2 billion in 2019 and 2020
NUMBER OF AIRCRAFT BASED ON ANNOUNCED SALES
164 164 162 161
156 158
10 10 11 150 149 152
11
11 15
22 24 14 15 15
25 26
26 26
14 14 26 26
14 26 787-8/9 Owned
4 4 14
4 14 787-8/9 Leased
4
4 19 23 30
19 737 MAX 8 Owned
52 51 4 4 4 737 MAX 8 Leased
47 45 4
40
30 737-800 Owned
30 30 30
737-800 Leased
62 61 61 61 61 57 55 54 53
Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20
Fleet (2020 vs. 2018) Aircraft sales* Aircraft re-deliveries Aircraft deliveries Net development
Short haul 22 9 16 -15
Long haul 0 0 9 9
Total 22 9 25 -6
21
* In addition, the company sold two Airbus A320neo in Q1 2019 that were on external lease.NEXT steps
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