Norwegian. Investor Presentation. December 2003

Transcription

1 Norwegian Investor Presentation December 2003

2 Disclaimer All statements contained in this presentation that are not statements of historical facts, including statements on projected operating results, financial position, business strategy and other plans and objectives for future results, constitute forward-looking statements and are prediction of, or indicate, future events and future trends which do not relate to historical matters. No person should rely on these forward-looking statements because they involve known and unknown risks, uncertainties and other factors which are, in many cases, beyond Norwegian s control and may cause its actual results, performance or achievements to differ materially from anticipated future results, performance or achievements expressed or implied by the forward-looking statements and from past results, performance or achievements. These forward-looking statements are made as of the Date of this presentation and are not intended to give any assurance as to future results. None of Norwegian, its employees and representatives assumes any obligation to update these statements. This presentation includes historical and pro forma financial data. Your attention is directed to the notes to such data for a description of the accounting principles used to prepare historical data and the assumptions used to prepare the pro forma financial data. This presentation must be viewed only in connection with the separately distributed offering prospectus which include a number of risk factors investors must be aware of. 2

3 Agenda Introduction Company background First year of 737 operation Financial highlights Next steps Appendix 3

4 Transaction overview Norwegian Air Shuttle has applied for listing on the Oslo Stock Exchange New issue of NOK million Institutional Norwegian and international private placement Norwegian retail offering Subscription period: 9th - 17th December 2003 Expected listing 18th December 2003 Indicative price range: NOK per share Current shares outstanding: 10,272,730 Approx. pre-money equity value of NOK million Joint lead managers: ABG Sundal Collier and Enskilda Securities 4

5 Investment highlights Rapidly growing low-price airline carrier Strong market position and brand position established in first year of 737-operation Profitability on major routes Effective business model creates strong operational leverage 5

6 Management introduction Bjørn Kjos, CEO, founder Founded Norwegian Air Shuttle in Former managing partner of the law firm Vogt & Wiig. Aviation experience from RNOAF 334 squadron Frode Foss, CFO Ex. Ernst & Young and Arthur Andersen experience Master in Business Administration Ola Krohn-Fagervoll, EVP Ex. Concordia, A.T. Kearney, Saga Petroleum and British Petroleum Master in Business Administration F. Carl Størmer, SVP, Marketing Ex. StudentUniverse, Inc. and IBM Consulting Group Master in Arts Management 6

7 Agenda Introduction Company background First year of 737 operation Financial highlights Next steps Appendix 7

8 Norwegian is Norway's only low-fare carrier Eight leased B737 planes From 4 to 17 point-to-point routes Tromsø Tromsø Alta Evenes Bodø Trondheim Trondheim Molde Ålesund Bergen Bergen Stavanger Oslo Stockholm Oslo Stavanger London Far o Malaga Murcia 10 years experience Started as an airline in 1993 Low-fare carrier since September 2002 Proven business and growth experience Low-fare strategy Point-to-point only Targets Norwegian business and leisure customers 70% sales through own channels, 30% through travel agencies Rapid growth in one year Achieved 20% market share in Norway on key routes Low-fare revenues from zero to approx. NOK 1 billion (annualized) 8

9 Since September 2002, Norwegian has established a position for profitable growth* Sept. 02 Sept. 03 No of passengers % Revenues (mnok) % EBITDA 737-operation (mnok) (13.4) 7.0 n.a. No of airplanes % Airborne hours (ABH) % Avail. Seat Kilom. (ASK) (mill) % No of man years % Cabin factor (RPK/ASK) 51 % 64 % 27 % * Fokker 50 operation not included 9

10 Norwegian has developed a strong brand 58% of population associate brand with low price 1) A brand consisting of value for money, smart purchase, and a safe experience. Voted #2 after the Salvation Army as the most trusted brand in Norway in 2003 Best in class on customer value and price 58% 34% 21% 21% 7% 8% 5% 7% A company that gives you value for the money Has the lowest fares Norwegian SAS Braathens Widerøe 1) Interrra market research 2003 Omdømmeprisen 2003 Omdømmeprisen Norwegian deserves recognition for rapidly building a good brand without Norwegian deserves recognition for rapidly building a good brand without bashing its competitors as part of its promotion and marketing. On the contrary, bashing its competitors as part of its promotion and marketing. On the contrary, the company has entered an industry in crisis, and has done so with the company has entered an industry in crisis, and has done so with enthusiasm and empathy. A corageous feat as the company has successfully enthusiasm and empathy. A corageous feat as the company has successfully communicated its desire to facilitate consumers in their quest for air-travel. communicated its desire to facilitate consumers in their quest for air-travel. (Association of Norwegian PR consultants, comment by the jury when casting its vote for Norwegian). (Association of Norwegian PR consultants, comment by the jury when casting its vote for Norwegian). 10

11 Norwegian's position is a result of experience, timing and strategy Experience Timing Strategy Proven operational and business experience Good timing in an attractive market Disciplined execution of a focused low-fare strategy 11

12 The company has a solid base of necessary experience Experience Timing Strategy Operational experience In running an operational airline Started operation in 1993 with three F50 aircrafts, later expanded to six planes No major incidents Business experience In running a profitable business Showed profit every year as a supplier to Braathens Expanded in 2000 with Lufttransport acquisition Turned Lufttransport into Scandinavia's premier ambulance carrier - later demerged in 2002 Growth experience In adapting and growing Able to change course and start low-fare operation in September 2002 Rapid growth in passengers, planes, and airborne hours since 2002 Grew from virtually zero to close to almost NOK 1 billion in twelve months! 12

13 In 2002 an opportunity existed to establish a low-fare carrier in the domestic market Experience Timing Strategy Scandinavia s largest market SAS monopolist but vulnerable Frequent flyer programs eliminated by government to level the playing field High fares, little competition Norway well suited for a low-fare player Norwegians fly more than other Scandinavians Majority of travel point-to-point High internet penetration Buyers market in the aviation industry Oversupply of capacity led to favorable leases and supplier agreements Surplus of skilled people with local aviation expertise 13

14 Norwegian captured this opportunity with a feasible low-fare strategy by focusing on cost Experience Timing Strategy Focus on core-competence Experienced staff to handle rapid growth Competitive outsourced agreements with key suppliers Standardized fleet One type of aircraft to simplify maintenance, crew planning, revenue management and logistics Simple product and processes Simple No-frills point-to-point product Ticketless travel, online distribution and real-time revenue management 14

15 The company selected Norway's four most attractive point-to-point markets Started on the four major routes Development in domestic passenger volume (1) Initial routes in September 2002 Tromsø (in 1000 pax) ~ 50% Trondheim Oslo-Trondheim Oslo-Bergen Oslo-Stavanger Oslo-Tromsø Sum / Other Among the Nordic s top routes by volume (2) Bergen Oslo-Trondheim 1340 Stavanger Oslo Oslo-Bergen Stockholm-Gothenburg Stockholm-Malmö Oslo-Stavanger 1050 Stockholm-Luleå 870 Oslo-Tromsø 790 Bergen Stavanger 700 Stockholm-Umeå 700 Helsinki-Oulu Copehagen-Aalborg * Including Oslo-Trondheim, Oslo-Stavanger, Oslo-Tromsø and Oslo-Bergen (1) Source: Avinor / SSB (2) Source: Report from the Nordic competition authorities 1/2002

16 During the year 13 more routes were added to fly more passengers and reduce unit-cost New routes were added to increase passengers and... Tromsø Alta (passengers in 1000) +96% Evenes 100 Bodø Trondheim Molde Ålesund Sep 02 Oct 02 Nov 02 Dec 02 Jan 03 Feb 03 Mar 03 Key domestic routes* Apr 03 May 03 Jun 03 Other routes Sep 02 Oct 02 Nov 02 Dec 02 Jan 03 Feb 03 Mar 03 Apr 03 May 03 Jun 03 Jul 03 Aug 03 Sep 03 Jul 03 Aug 03 Sep 03 Oct 03 Bergen Stavanger Oslo Stockholm (NOK)... to reduce cost per ASK -17% London Faro Malaga Murcia * Including Oslo-Trondheim, Oslo-Stavanger, Oslo-Tromsø and Oslo-Bergen ASK: Available Seat Kilometers Cost per ASK 16

17 Agenda Introduction Company background First year of 737 operation Financial highlights Next steps Appendix 17

18 18 The low-fare operation is becoming profitable, led by the four major domestic routes Revenues (MNOK) ** EBITDA (MNOK) ** Key domestic routes * (5) (10) (15) (20) 737 operation * Including Oslo-Trondheim, Oslo-Stavanger, Oslo-Tromsø and Oslo-Bergen ** 3Q02 includes only one month of operation Sep 02 Oct 02 Nov 02 Dec 02 Jan 03 Feb 03 Mar 03 Apr 03 May 03 Jun 03 Jul 03 Aug 03 Sep Sep 02 Oct 02 Nov 02 Dec 02 Jan 03 Feb 03 Mar 03 Apr 03 May 03 Jun 03 Jul 03 Aug 03 Sep 03 Sep 02 Oct 02 Nov 02 Dec 02 Jan 03 Feb 03 Mar 03 Apr 03 May 03 Jun 03 Jul 03 Aug 03 Sep (5) (10) (15) (20) Sep 02 Oct 02 Nov 02 Dec 02 Jan 03 Feb 03 Mar 03 Apr 03 May 03 Jun 03 Jul 03 Aug 03 Sep 03

19 Yield affected by seasonality and introduction of new and longer routes 1.80 (NOK) 1.60 Key domestic routes* Sep 02 Oct 02 Nov 02 Dec 02 Jan 03 Sep 02 Feb 03 Oct operation Mar 03 Nov 02 Apr 03 Dec 02 May 03 Jan 03 Jun 03 Feb 03 Jul 03 Mar 03 Aug 03 Apr 03 Sep 03 May 03 Jun 03 Jul 03 Aug 03 Sep 03 Yield maintained in the domestic market, while cost per ASK has gradually been reduced Yield Cost per ASK Revenues per ASK (NOK) Reduction in Yield and ASK from April due to new and longer routes Yield Cost per ASK Revenues per ASK 19 * Including Oslo-Trondheim, Oslo-Stavanger, Oslo-Tromsø and Oslo-Bergen ASK: Available Seat Kilometers RPK: Revenue Passenger Kilometers Yield: Revenues / RPK

20 Norwegian is performing well on critical performance indicators Flying more seat kilometers With higher load-factor (RPK/ASK) (Million ASK) +108 % (ASK and RPK in million) (RPK/ASK) 80 % 70 % 60 % 50 % 40 % 30 % 20 % % % Sep 02 Oct 02 Nov 02 Dec 02 Jan 03 Feb 03 Mar 03 Apr 03 May 03 Jun 03 Jul 03 Aug 03 Sep 03 Sep 02 Oct 02 Nov 02 Dec 02 Jan 03 Feb 03 Mar 03 Apr 03 May 03 Jun 03 Jul 03 Aug 03 Sep 03 Oct 03 Key domestic routes* Other routes Cabin factor ASK RPK Lower cost per production unit (ASK) And employee productivity high (NOK per ASK) % Sep 02 Jan-Sep 03 Sep 03 BU (1-3Q03) Var. Sales Costs Var. Pass. Costs Freq. Based Flying Costs Time Based Flying Costs Interval Fixed Costs Overhead SK (1-3Q03) (Pax per employee) SAS KLM Easyjet Ryanair (Trailing 12 months) Norwegian (3Q03) 20 Source: TRL, September 2003, SAS 3Q Interim Report

21 Growing online sales: lower cost, customer ownership and new opportunities Online distribution is strategic Gives Norwegian customer ownership Facilitates ticketless travel the customer does the work! Creates potential upsell opportunities Rapid access to real-time demand data Internet is the fastest growing channel 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Sep 02 Oct 02 Nov 02 Dec 02 Jan 03 Feb 03 Mar 03 Apr 03 May 03 WEB CC TA Jun 03 Jul 03 Aug 03 Sep 03 Reduced distribution costs per PAX Oct 03 NOK Q 02 4Q 02 1Q 03 2Q 03 3Q 03 21

22 Ticketless travel: saving 50M NOK and gaining real-time business intelligence A fully digitized value-chain with real-time control Customer Customer completes transaction Brings receipt to airport Scan bar-code or Bizzi-card Board plane Norwegian Issue receipt with barcode via Automated accounting and auditing No physical ticket reduced cost and added convenience Improves customer experience and reduce processing cost Reduced processingcost, and real-time business intelligence to improve sense-andrespond capability 22

23 Prices are adjusted daily in order to maximize revenue per flight Observe Low sales in week 50? Orient Why is demand low? Review historic and competitive data Decide Change price, and/or increase promotion to fill seat or do nothing. BONO Back-office Norwegian 23

24 Price adjustments are implemented on short notice via appropriate channels and in-flight Observe Orient Decide Act Update revenue management database Publish and promote new fares via web, call-centre and other appropriate channels 24

25 The loop is completed by observing the daily market effect of the implemented price change Observe Orient Decide Act Observe How did market respond to previous price changes? Further changes required? 25

26 Agenda Introduction Company background First year of 737 operation Financial highlights Next steps Appendix 26

27 Income statement reveals a positive EBITDA development for the low-fare operation MNOK 4Q02 1Q03 2Q03 3Q03 LTM Total Revenues EBITDA (34.3) 18.0 (12.1) (19.6) (48.0) 737-operation Revenues EBITDA (35.9) (34.0) (8.7) (13.1) (91.6) EBITDA of NOK million in 3Q03, mainly caused by lack of historical data which led to excess capacity during July and August. In 1Q03, Norwegian received a compensation from Braathens related to the termination of the Braathens agreement (NOK 37.7 million included in total revenues) In 3Q03, Norwegian made a write-down of NOK 19.6 million related to its Fokker 50 operation (not included in EBITDA) 27

28 Balance sheet Figures in NOK Intangible assets Fixed assets Long-term financial assets Long-term assets Inventory Receivables Cash and bank deposits Sum current assets Total assets Equity Provisions Other long-term liabilities Sum Interest bearing short-term debt - - Other short-term liabilities Sum Total equity and liabilities

29 Agenda Introduction Company background First year of 737 operation Financial highlights Next steps Appendix 29 Confidential Draft

30 Next: Expand share in Norway by relentless focus on cost, utilization and optimized network Sep 2002 Sep 2003 Mar 2004 May routes 17 routes 25 routes Subject to change ~35 routes 30 Routes selection criteria Attractive volume? Low competition? Synergy with overall network?

31 Expanding the network leads to better utilisation, lower cost and more passengers Further reduction in cost per ASK (NOK) Q (A) Q (A) Apr 2004 (F) Q (F) Route expansion and plane additions in 2004 will nearly double production capacity compared to current level Longer flights and scale benefits will reduce cost per ASK significantly during Further growth in PAX per employee (Last 12 months) Q (A) Q (A) Apr 2004 (F) Q (F) Passenger volume already reached 1 million (annualized 3Q figures) New routes and increased frequency will contribute to further increase going forward Except for crew and cabin personnel, limited need for new manpower due to extensive outsourcing 31

32 Norwegian has captured the position as Norway s low-fare carrier Strong presence on all major domestic routes Prices on domestic routes have been reduced leaving the domestic market less attractive for new low-fare players Aggressive expansion of network to increase utilization and optimize contribution to fixed costs Extreme focus on low cost and high utilization to create permanent cost advantage 32

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34 Agenda Introduction Company background First year of 737 operation Financial highlights Next steps Appendix 34

35 Shareholder structure Shareholder Shares % Bjørn Kjos % Lufttransport % Torghatten Trafikkselskap % Ankerløkken Holding AS % Choice Hotels % Nor-Norsk Finans AS % OJADA AS % Svein Klev % NAS Hodling AS % Arne Eggan % Svein Eskedal % Bjørn Kise % Jacobsen & Sønner AS % Skagen Vekst % Øivind Hovengen % Nobuss Eiendommer AS % T.K. Brødvig AS % Westco AS % AS Kvale & Co % Arne Ribe % Sum top % Other shareholders % Total Shares % 35