norwegian air shuttle asa...highlights q2 2016 skytrax awards 2016 for: world’s best low-cost long...
TRANSCRIPT
Norwegian Air Shuttle ASAQ2 2016 Presentation 14 July 2016
Highlights Q2 2016
SkyTrax awards 2016 for:
World’s Best Low-Cost Long Haul Airline (2nd
time) and Europe’s Best Low-Cost Airline (4th
in a row)
New base at Palma de Mallorca, the 16th in Europe and 20th overall
Added ten new 737-800 aircraft and two 787-9 Dreamliners in first half 2016 (five 737 and one 787 in Q2)
Clean EBITDA of NOK 1 billion (up from 0.8 million)
2
7.7 million passengers in Q2 2016 (+11 %)
3Pax (mill) 1,6 2,3 2,8 3,2 4,0 4,5 5,5 6,4 7,0 7,7
0
1
2
3
4
5
6
7
8
9
Q2 07 Q2 08 Q2 09 Q2 10 Q2 11 Q2 12 Q2 13 Q2 14 Q2 15 Q2 16
Pass
enge
rs (m
illio
n)
+ 11 %
Q2 load factor up to 88 % (+3 pp.)
4
ASK 1 763 2 974 3 469 4 449 5 518 6 357 8 541 12 012 12 919 14 512
Load Factor 79,4 % 78,4 % 78,3 % 75,4 % 78,3 % 76,5 % 76,9 % 79,6 % 85,2 % 87,8 %
79,4 % 78,4 % 78,3 %75,4 %
78,3 % 76,5 % 76,9 %79,6 %
85,2 %87,8 %
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
8 000
9 000
10 000
11 000
12 000
13 000
14 000
15 000
16 000
17 000
18 000
Q2 07 Q2 08 Q2 09 Q2 10 Q2 11 Q2 12 Q2 13 Q2 14 Q2 15 Q2 16
Load
Fact
or
Avai
labl
e Se
at K
M (A
SK)
ASK Load Factor Load+2.6 p.p.
12 % growth in capacity (ASK)
16 % growth in traffic (RPK)
Average flying distance increased by 3 %
Stable market shares in all key airports (12m rolling)
5
0
2 000 000
4 000 000
6 000 000
8 000 000
10 000 000
12 000 000
Oslo Arlanda Copenhagen Helsinki Gatwick Spanish bases
Q2 11 Q2 12 Q2 13 Q2 14 Q2 15 Q2 16
+ 943,000 pax 42 % mkt share
+ 1,135,000 pax22 % mkt share + 192,000 pax
17 % mkt share
+ 173,000 pax12 % mkt share
+ 509,000 pax10 % mkt share
+ 876,000 pax4 % mkt share
Mkt. Size:25 mill
Mkt. Size:23 mill
Mkt. Size:138 mill
Mkt. Size:41 mill
Mkt. Size:17 mill
Mkt. Size:27 mill
Sources: Avinor, Swedavia, Copenhagen Airports, Finavia, Gatwick Airport, Aena
13 % revenue growth in Q2
6
Revenues 4 012 5 043 5 861 6 632Domestic revenue 1 192 1 173 1 362 1 490% y.o.y. chg 17 % -2 % 16 % 9 %International revenue 2 820 3 871 4 498 5 142% y.o.y. chg 31 % 37 % 16 % 14 %
0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
Q2 13 Q2 14 Q2 15 Q2 16
NO
K m
illio
n
Domestic revenue
International revenue
Total Revenues
+ 13 %
14 % growth in international revenue, + 9 % for domestic Scandinavia
Flat unit revenue (RASK). RASK in constant currency fell 4 %
3 p.p. higher load offset by 3 % lower yield and 3 % increased stage length
18 % growth in total ancillary revenue in Q2
7
15 % share of Group revenue
Per passenger sales increased by 6 % to NOK 131
Other Ancillary Other Ancillary
Baggage Baggage
SeatingSeating
Pre-sold packages(bundle)
Pre-sold packages (bundle)
Flexibility/ modifications
Flexibility/ modifications
Q2 15 Q2 16
NOK 131
Optional extras
NOK 123
6 % growth in Scandinavia, stronger in Sweden and DenmarkNorway: 33 % of passengers (down from 35 % in Q1 2016)Over 40 % of passengers booking from outside Scandinavia
Growth in number of passengers: Passengers by origin:
Continued strong growth in the US and Spain
8
Norway
Sweden
Spain
Denmark
UK
Finland
USAGermany
France
ItalyPoland
Hungary Other
0% 10% 20% 30% 40% 50%
France
Germany
Poland
Sweden
Denmark
Italy
UK
Hungary
Spain
USA
New base in Palma: a total seven bases in Spain
9
New charter agreement for the US market
Utilize capacity better in the European low seasonThree aircraft for winter 2016/17Agreement with Apple Vacations and Funjet, two leading US tour operatorsFlights from Chicago/Rockford and MilwaukeeMore than 600 flights to multiple destinations in Mexico, Jamaica and the Dominican Republic
Winter operations with seven aircraftExpanding Caribbean winter program with FLL-GuadeloupeOver-night connection from Europe to French Caribbean through FLL, BOS and JFKAdded frequency to JFK-Guadeloupe to 4 weekly
10
Growing long-haul in Europe and to/from USA
11
Scaling up the widebody fleet to 32 by 2018
12
2013 2014 2015 2016 2017 2018
Aircraft 3 7 8 12 21 32Seats 873 2 037 2 328 3 704 6 800 10 584
Deliveries 787-8(291 seats)
Deliveries 787-9(344 seats)
Widebody aircraft (delivered and firm orders)
Convert part of Airbus order to A321neo LR
Original order of 100 Airbus 320neo’s for delivery in 2016-2021
30 of these orders will be converted to the bigger A321neo LR
The A321neo LR will be operated by Norwegian
Delivery schedule: 2019: 8 aircraft 2020: 11 aircraft2021: 11 aircraft
13
Advantage of the A321neo LR vs. A320neo
Source: Airbus 14
180220
3000 nm
3500 nm
+40pax
A320neo
A321LR+500nm
+15%
- 40%
A321LR
Vs A320neoVs Widebody
- 5%
- 15%
Vs A320neoVs Widebody
COST PER TRIP COST PER SEAT
- 40% - 15 %
Cost per seatsavings compared
to a widebody aircraft
Cost tripsavings compared
to a widebody aircraft
40 more seats comparedto an A320neo
A321LR extendedrange with ACTs
«Short long-haul» 500 nm wider range than A320neo (+17 %)
15Source: Airbus
Top modern fleet with an average age of 3.6 years
16
8 58 11 1320
22 2323 22
115 5
2
2 55 5
55 5
5
7 16 21
2325 29
2927 23 19 15
28
1013
13
1313
1313
2
7 15 23
30 41 5168
8587
6 12
2
55
9
14
20
1
23
3
7
12
8 11 1322
3240
46
5762
68
85
9599
116
144
159
0
20
40
60
80
100
120
140
160
2003year-end
2004year-end
2005year-end
2006year-end
2007year-end
2008year-end
2009year-end
2010year-end
2011year-end
2012year-end
2013year-end
2014year-end
2015year-end
2016year-end
2017year-end
2018year-end
B788/B789 Owned
B788/B789 Leased
B737 MAX 8 owned
B738 owned
B738 S&LB
B738 leased
B733 owned
B733 leased
M80 leased
Re-deliveries 737-800-744 seats
2016:Deliveries 737-800
+3,162 seatsDeliveries 787-9
+1376 seats
Unit cost comparison based on the latest full-year results (in NOK)
17
Sources: Based on official full-year 2015 annual report for Norwegian Air Shuttle, Finnair, Vueling, SAS Group (31.10.2015), Easyjet (30.09.2015), and full-year 2015 report for Ryanair and WizzAir (31.03.2016). Eurowings figures are from the “Eurowings Management Presentation” 10.06.2016.
• Cost per available seat kilometer is an industry-wide cost level indicator often referred to as “CASK”. Usually represented as operating expenses before depreciation and amortization (EBITDA level) over produced seat kilometers (ASK). • 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• Note: For some carriers the available financial data represents Group level data which may include cost items from activities that are unrelated to airline operations.• Other losses / (gains) is not included in the CASK concept as it primarily contains hedge gains/losses offset under financial items* as well as other non-operational income 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).
*Norwegian hedges USD/NOK to counter foreign currency risk exposure on USD denominated borrowings translated to the prevailing currency rate at each balance sheet date. Hedge gains and losses are according to IFRS recognized under operating expenses (other losses/ (gains) while foreign currency gains and losses from translation of USD denominated borrowings are recognized under financial items.
0,27 0,29
0,42
0,51 0,54
0,60
0,67
0,77
0,82
-
0,10
0,20
0,30
0,40
0,50
0,60
0,70
0,80
0,90
Ope
ratin
g co
st E
BITD
A le
vel p
er A
SK (C
ASK)
Financials
18
EBT improved to NOK 0.9 billion in Q2
19
Q2 13 Q2 14 Q2 15 Q2 16 Q2 13 Q2 14 Q2 15 Q2 16EBITDAR margin 22 % 11 % 22 % 30 % EBT margin 7 % -3 % 8 % 14 %
878
563
1 285
1 965
0
500
1 000
1 500
2 000
2 500
NO
K m
illio
n
277
-137
456
930
-250
0
250
500
750
1 000
NO
K m
illio
n
EBT development Q2EBITDAR development Q2
(NOK million) Q2 15 Q2 16 Change
Revenue 5 861 6 632
EBITDAR 1 285 1 965 681
EBITDA 765 1 324 559
Pre-tax profit (EBT) 456 930 474
Net profit 325 745
Underlying EBITDA* increased to NOK 1 billion
20* Underlying (clean) EBITDA adj for other losses/gains and non-recurring items
NOK million Q2 2015 Q2 2016 chg
Revenue 5 861 6 632 771 EBITDA as reported 765 1 324 559 Other losses/gains 100 460 360 EBITDA excl other losses/gains 665 864 199
Non-recurring items:- Additional mainenance exp. engine overhaul -84 - - passenger compensation according to EU reg. -34 -81 - wetlease -11 -82 Sum non-recurring items -129 -163
Clean EBITDA 794 1 027 233 Margin clean EBITDA 13,5 % 15,5 %
Unit cost cut by 1 % to NOK 0.40
CASK ex fuel +7 % to NOK 0.31 (fuel cost per ASK -23 %)
4 % negative impact of currency
21
0,410,35
0,380,35
0,32 0,310,29 0,28 0,29 0,31
0,12 0,18
0.15 0,12
0,15 0,15
0,14 0,14 0,11 0,09
0,00
0,05
0,10
0,15
0,20
0,25
0,30
0,35
0,40
0,45
0,50
0,55
Q2 07 Q2 08 Q2 09 Q2 10 Q2 11 Q2 12 Q2 13 Q2 14 Q2 15 Q2 16
Ope
ratin
g co
st E
BITD
A le
vel p
er A
SK (C
ASK)
CASK excl fuel
Fuel share of CASK
Other losses / (gains) is not included in the CASK concept as it primarily contains hedge gains/losses offset under financial items* as well as other non-operational income 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).*Norwegian hedges USD/NOK to counter foreign currency risk exposure on USD denominated borrowings translated to the prevailing currency rate at each balance sheet date. Hedge gains and losses are according to IFRS recognized under operating expenses (other losses/ (gains) while foreign currency gains and losses from translation of USD denominated borrowings are recognized under financial items.
Full impact of lower fuel cost, fuel unit cost -23%
Stable share of personnel cost at 14 %
Lower share of fuel cost - reduced to 19 %
Fuel hedging: 50 % of 2016 and 27 % of 2017
22
0,00
0,02
0,04
0,06
0,08
0,10
0,12
0,14
0,16
Q2 11 Q2 12 Q2 13 Q2 14 Q2 15 Q2 16
12 mths rolling 12 mths rolling 12 mths rolling 12 mths rolling 12 mths rolling 12 mths rolling
Personnel
Other
Technical
Airport/ATC
Leasing
Depreciation
Sales & Distribution
Handling
Fuel
Fuel19 %
Personnel14 %
Airport & ATC13 %Handling
12 %
Leasing10 %
Technical6 %
Gen. and adm. exp.
5 %
Other Flight ops. exp.
4 %
Depr.4 %
Sales/ distrib.
2 %
NOK 3.2bn cash-flow from operations in first half
23
Invested a net NOK 2 bn in new aircraft of which NOK 1.2 financed by own cash
A strong NOK 600m increase in pre-sold tickets in first half compared to 2015
NOK 3 billion in cash at the end of Q2
Q2 Q2 H1 H1NOK million 2015 2016 Chg 2015 2016 Chg
Profit before tax 456 930 474 -321 -62 259Depreciation 245 318 73 465 607 142Change air traffic settlement liabilities 142 283 141 2 639 3 237 598Change working capital 472 -308 -780 -473 -551 -78Net cash flows from operating activities 1 315 1 223 -92 2 310 3 231 921Net cash flows from investing activities -1 092 -1 986 -894 -2 689 -3 652 -963Net cash flows from financial activities 1 224 625 -599 1 420 999 -421Foreign exchange effect on cash -17 -41 -24 -7 -22 -15
Net change in cash and cash equivalents 1 430 -179 -1 609 1 034 556 -478
Cash and cash equivalents, end of period 3 045 3 010 -35 3 045 3 010 -35
Improving equity ratio in spite of adding 16 on-balance aircraft
24
Added sixteen new 737-800 on balance the last 12 months + PDP’s
NOK 17 bn net debt (NOK 16 bn in Q1)
Equity increased by NOK 580m (8 % equity ratio, 13 % incl. mv of Bank Norwegian)
3 045Cash3 010
2 801Receivables
3 316
2 086 Other assets
2 311
4 755 Aircraft PDP
5 449
15 082
Aircraft20 914
0
3 000
6 000
9 000
12 000
15 000
18 000
21 000
24 000
27 000
30 000
33 000
36 000
Q2 15 Q2 16
NO
K m
illio
n
Equity2 746 2 163
Pre-sold tickets7 251 5 605
Otherliabilities
4 8434 328
PDP and bonds3.769
5 081
Aircraft Financing
16 392
10 593
Q2 16 Q2 15
Outlook for 2016
Markets and business Soft macro and passenger tax introduced in NorwayMonitoring demand in the UK post Brexit, limited changes to bookingsBookings on par with last year, capacity adjusted
An estimated production growth (ASK) of 18 % (unchanged)Short-haul + 12 %, Long-haul + 40 %Increasing distance driven by mix (long-haul)
Unit cost in the area of NOK 0.38 (up from 0.37)Impact of wetlease and cancellationsAssumptions: Fuel price of USD 350 per metric ton, USD/NOK 8.25, EUR/NOK 9.00 Based on the current route portfolio and planned production
21 new aircraft in 2016 (unchanged)Seventeen direct buy 737-800Four leased 787-9 Dreamliners
25
Summary
Stable markets and good momentum on bookings
US Charter contracts and launched winter routes to the French Caribbean, Mexico, Jamaica and Dominican Republic
Converted 30 Airbus Neo orders to A321’s
Passengers voted Norwegian best in SkyTrax awards for 2016
Financing on-track
Limited immediate direct impact of Brexit
Successful listing of Bank Norwegian on OSE (ticker NOFI)
26
Norwegian operates 450 routes to 140 destinations
27
From bases in
SWEDEN DENMARK FINLAND
From the
UK base
From bases in
SPAIN
From bases in the
USA & THAILAND
From bases in
NORWAY