Norwegian Air Shuttle ASA Q4 2015 Presentation 11 February 2016
Highlights Launched routes in Q4 to the Caribbean (Puerto Rico, St Croix, Martinique, Guadeloupe) and domestic Spain. New base in Italy in 2016 Added 10 new 737-800 aircraft and one 787-8 Dreamliner in 2015 Reached agreement with unions for pilots and cabin crew EBITDA ex other gains/losses improved to NOK 2 billion from a loss of NOK 79 million in 2014 2
6.1 million passengers in Q4 2015 (+9 %) 7 +9% 6 5 4 3 Passengers (million) 2 1 0 Q4 06 Q4 07 Q4 08 Q4 09 Q4 10 Q4 11 Q4 12 Q4 13 Q4 14 Q4 15 Pax (mill) 1,3 2,0 2,2 2,8 3,3 4,0 4,4 5,2 5,6 6,1 3
Market shares in key airports (last 12 months) Sources: Avinor, Swedavia, Copenhagen Airports, Finavia, Gatwick Airport, Aena 4
Q4 load factor increased to 85 % (+4 p.p.) 7 % growth in capacity (ASK) 12 % growth in traffic (RPK) Average flying distance increased by 4 % ASK 18 000 Load Factor Load +4 p.p. 100% 84,9 % 90% 17 000 16 000 15 000 14 000 77,6 % 76,2 % 76,1 % 77,4 % 78,5 % 76,7 % 77,9 % 80,7 % 80% 72,1 % 13 000 70% 12 000 11 000 60% 10 000 50% 9 000 40% 7 000 6 000 30% 5 000 4 000 20% 3 000 2 000 10% 1 000 0 0% Q4 06 Q4 07 Q4 08 Q4 09 Q4 10 Q4 11 Q4 12 Q4 13 Q4 14 Q4 15 ASK 1 420 2 122 2 783 3 432 4 516 5 461 6 517 9 176 11 142 11 909 Load Factor 72,1 % 77,6 % 76,2 % 76,1 % 77,4 % 78,5 % 76,7 % 77,9 % 80,7 % 84,9 % 5 Load Factor Available Seat KM (ASK) 8 000
Q4 revenue increased by 16 % 19 % growth in international revenue, + 5 % for domestic Scandinavia 6 000 +16 % 5 000 4 000 Domestic revenue 3 000 International revenue 2 000 Total Revenues NOK million 1 000 0 Q4 12 Q4 13 Q4 14 Q4 15 Revenues 3 106 3 786 4 602 5 319 Domestic revenue 1 097 1 116 1 201 1 256 % y.o.y. chg 16 % 2 % 8 % 5 % International revenue 2 008 2 670 3 401 4 063 % y.o.y. chg 26 % 33 % 27 % 19 % 6
Q4 unit revenue up by 7 % +1 % in local currency Unit Revenue (RASK) improvement driven by higher load factor and currency Growing share of revenue in USD, GBP and Euro Less exposure to Norwegian krone Q4 2014 (NOK 3.8 bn) Q4 2015 (NOK 4.3 bn) NOK 45 % USD 3 % EUR 14 % SEK 21 % NOK 40 % USD 6 % EUR 16 % SEK 19 % Other 1 % GBP 6 % DKK 10 % Other 1 % GBP 8 % DKK 10 % 7
Q4: 17 % growth in ancillary revenue 15 % share of Group revenue Per passenger: 14 % growth for LH and 2 % for SH driven by bundle and freedom to choose 8
Q4 EBITDA improved by NOK 603 million (NOK million) Q4 14 Q4 15 Change Revenue 4 602 5 319 EBITDA -869-266 603 EBIT -1 083-633 Pre-tax profit (EBT) -1 184-703 481 Net profit -978-373 EBITDA development Q4 EBT development Q4 9
Unit cost cut by 2 % in Q4, -1% for the full year CASK -2 % to NOK 0.43 on lower fuel cost offset by currency Operating cost EBITDA level per ASK (CASK) 0,55 0,50 0,45 0,40 0,35 0,30 0,25 0,20 0,15 0,10 0,05 0,00 0.15 CASK excl fuel 0,13 0,15 Fuel share of CASK 0,09 0,11 0,15 0,15 0,13 0,10 0,14 0,41 0,42 0,40 0,36 0,42 0,33 0,32 0,30 0,30 0,28 Q4 06 Q4 07 Q4 08 Q4 09 Q4 10 Q4 11 Q4 12 Q4 13 Q4 14 Q4 15 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. 10
2% reduction in unit cost ex fuel adj. for currency 8 % negative impact of currency Fuel share of opex reduced to 24 % 11
FY 2015 EBITDA improved by NOK 2.1 bn (NOK million) 2014 2015 Change Revenue 19 534 22 491 EBITDA -662 1 481 2 143 EBIT -1 411 348 Pre-tax profit (EBT) -1 627 75 1 702 Net profit -1 070 246 EBITDA development (full-year) EBT development (full-year) 12
EBITDA excl. unrealized hedging and one-offs NOK million 2014 2015 chg Revenue 19 540 22 491 2 951 EBITDA as reported -662 1 481 2 144 Unrealized fuel hedges marked to market -459-800 -341 EBITDA excl unrealized hedges -203 2 281 2 485 Non-recurring items: - strik e -101-110 - LH start-up IRR, wetlease -381-29 - Extra engine overhaul and maintenance - -118 - Writedown old aircraft for sale - -60 Sum non-recurring items -482-317 Clean EBITDA 279 2 598 2 320 Margin clean EBITDA 1,4 % 11,6 % 13
NOK 2.1 bn higher CF from operations in 2015 Invested NOK 5.2 bn in new aircraft EUR 125 million bond issue in Q4 NOK 2.5 billion in cash at the end of the year Q4 Q4 NOK million 2014 2015 2014 2015 Profit before tax -1 184-703 -1 627 75 Paid taxes -203 0-203 -44 Depreciation 212 367 748 1 133 Change working capital 282 59 1 369 1 193 Net cash flows from operating activities -892-278 287 2 357 Net cash flows from investing activities -1 306-657 -4 931-5 189 Net cash flows from financing activities 2 773 1 081 4 478 3 282 Net change in cash and cash equivalents 580 157-155 443 Cash and cash equivalents, end of period 2 011 2 454 2 011 2 454 14
Balance-Sheet expanded by currency (NOK 4bn) and new aircraft (NOK 5bn) Added ten new 737-800 and one 787 on balance + PDP s NOK 17 billion net debt and unchanged equity ratio of 9 % 33 000 30 000 NOK million 27 000 24 000 21 000 18 000 15 000 12 000 9 000 6 000 3 000 0 12 512 4 103 1 824 2256 2011 Aircraft 18 536 Aircraft PDP 5 939 Other assets 2 128 Receivables 2 657 Cash 2 454 Q4 14 Q4 15 Aircraft Financing 16 543 Aircraft PDP 3 041 Other liabilities 5 150 9953 3330 4349 Pre sold tickets 4 014 2965 Equity 2 965 2108 Q4 15 Q4 14 15
Aircraft financing on track Expected capex (all aircraft incl. PDP) USD 1.1 bn for 2016 (unchanged) USD 2 bn for 2017 USD 2 bn for 2018 PDP financing PDP financing with backstop lease B 737 800 (in 1H 2016) PDP Financing for 50 A320 Neo s in place Negotiating PDP financing for Boeing deliveries Long-term financing Commercial financing of 6 B 737 800 Ex-Im and ECA EETC to be considered 16
Fuel efficiency of the top 20 airlines on transatlantic routes Pax-km/L fuel Excess fuel/ Pax-km 1. Norwegian 40 --- 2. Airberlin 35 +14% 3. Aer Lingus 34 +20% 4. Air France 33 +22% 5. Turkish 33 +22% 6. Aeroflot 33 +22% 7. Air Canada 33 +22% 8. KLM 33 +22% 9. Icelandair 32 +26% 10. Delta 32 +26% 11. Alitalia 31 +30% 12. American 31 +30% 13. Iberia 31 +30% 14. United 30 +36% 15. Swiss 29 +38% 16. Virgin Atlantic 29 +38% 17. US Airways 29 +38% 18. SAS 28 +44% 19. Lufthansa 28 +44% 20. British Airways 27 +51% Industry Average Source: Transatlantic Airline Fuel Efficiency Rankin, 2014, ICCT (The International Council on Clean Transportation) published November 2015 17
New routes to the US and the Caribbean 18
Top modern fleet with an average age below 4 yr Extended lease agreements for three 737-800 (4 years) 160 140 B788/B789 Owned B788/B789 Leased A320neo owned B737 MAX 8 owned 153 7 14 120 100 80 60 40 20 0 8 8 11 13 2003 B738 owned B738 S&LB B738 leased B733 owned B733 leased M80 leased 11 13 2004 2005 22 2 20 2006 7 15 46 2 40 2 8 32 7 16 21 2 5 5 23 5 22 23 8 5 2007 2008 57 23 22 2009 2010 62 5 11 2011 68 23 10 25 85 12 13 29 5 5 5 5 2012 95 2 5 30 41 2013 13 29 5 2014 99 3 5 51 13 27 2015 120 3 9 4 68 13 23 2016 12 5 83 13 19 2017 19
Outlook for 2016 Markets and business Soft macro and passenger tax to be introduced in Norway, stronger competition in Denmark Stable in other key markets Positive momentum for long-haul Group bookings on par with last year, capacity adjusted The company expect a production growth (ASK) of 18 % Short-haul + 12 %, Long-haul + 40 % Increasing distance driven by mix (long-haul) Unit cost in the area of NOK 0.37 Assumptions: 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 25 aircraft scheduled for delivery in 2016 Seventeen direct buy B737-800 (returning five leased 737-800) Four leased B787-9 Dreamliners Four direct buy A320Neo (to be leased out) 20
Norwegian Group 2020: Long-haul to be more than 1.5x today s short-haul operation An average 20 % annual growth for the period (CAGR 10 % for SH, 40 % for LH) An estimated 130 billion ASK in 2020 2016-2020: 140 000 CAGR 20 % 120 000 Million seat-kilometres (ASK) 100 000 80 000 60 000 40 000 20 000 2005-2015: CAGR 30% - 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E Short Haul Long Haul Based on the current fleet plan. Aircraft replaced after 8 years. Excess capacity leased out or sold. 21
Summary Launching new bases and routes, starting with Rome Pending DoT approval for NAI and NUK Positive impact from historic low fuel cost Aiming for further unit cost reductions 22
Norwegian operates 439 routes to 132 destinations From bases in the USA & THAILAND From bases in SWEDEN DENMARK FINLAND From bases in NORWAY From bases in SPAIN From the UK base 23