Norwegian (NAS) Q3 2006 Bjørn Kjos (CEO) Oslo, 26 October 2006
Strong revenue growth in Q3 878 MNOK revenue in Q3 2006 Revenue growth of 49 % since Q3 2005 MNOK revenue 1000 900 800 700 600 500 400 300 200 100 0 Q3 03 Q3 04 Q3 05 Q3 06 Revenue 230 332 590 878 Earnings after tax -30-11 44 28 EPS 1,91-0,61 3,54 2,74 2
Profitable quarter EBITDA of 54 MNOK in Q3 2006 ( 64 MNOK ) Earnings after tax 28 MNOK ( 44 MNOK ) 120 100 80 60 EBITDA development ex Poland start up 77 Poland operation weakens margin by MNOK 23 40 20 0-20 Q3 03 Q3 04 Q3 05 Q3 06-40 Revenue 230 332 590 878 EBITDA MNOK -20-11 64 54 EBITDA margin % -12 % -3 % 11 % 6 % 3
Cash flow fluctuation due to seasonality Negative cash flow from operation of - 136 MNOK Cash and equivalents 387 MNOK ( +200 MNOK credit line) Investments related to IT-systems and upgrades on aircraft Operating activities MNOK 200 150 100 50 0-50 -100-150 -200 Q1 Q2 Q3 Q4 CASH FLOW (TNOK) Third quarter From: 2006 2005 Operating activites -136 733 37 524 Investments -11 311-5 636 Financial activities -15 686 Net change -148 043 16 202 Opening balance 535 501 233 431 Closing balance 387 456 249 633 2005 2006 4
Capacity growth on track 64 % increase in production from Q305 to Q306 Load factor leveling out at 85 % M ASK 2000 1800 1600 1400 1200 1000 800 600 400 Load factor 100 % 95 % 90 % 85 % 80 % 75 % 70 % 65 % 60 % 200 55 % 0 Q3 03 Q3 04 Q3 05 Q3 06 50 % Q3 03 Q3 04 Q3 05 Q3 06 5
Strong passenger growth 70 % passenger growth on international routes 1.5 million passengers last three months Thousand pax 1500 59 % 1300 1100 900 73 % 700 500 70 % 300 100 Q2 03 Q3 04 Q3 05 Q3 06 6 *Tickets sold for travel
Enhanced competitive position 38 % market share on key domestic routes, 7 pp growth Capacity increased by 64 % since Q305 % Market Share 45 % 40 % 35 % 30 % 25 % 31 % 39 % 34 % 42 % 28 % 35 % 29 % 34 % 20 % Bergen Trondheim Stavanger Tromsø Q3 05 Q3 06 7
Continued growth in business segment 83 % growth in business passengers since Q305 Adequate timetable and flexible tickets is attracting the business segment Business travellers Q3 04 Q3 05 Q3 06 8
Strong revenue growth, domestic and international Domestic turnover increased by 30 % since Q3 2005 International turnover increased by 85 % since Q3 2005 900 000 000 800 000 000 700 000 000 600 000 000 Poland UK Scandinavia Other Europe 500 000 000 400 000 000 Sothern Europe 300 000 000 200 000 000 Domestic 100 000 000 - Q305 Q306 9
Poland expansion on track Production adjustments made quickly after launch Load factor ranging from 63 to 73 % first 3 months, showing demand for low fare travel Stronger presumption than start up in Norway 80 % 75 % Load factor development 1,30 1,20 1,10 CASK development 70 % 1,00 65 % 0,90 0,80 60 % 0,70 55 % 0,60 50 % 0,50 0,40 45 % 0,30 40 % 0,20 Norwegian first 9 months Polen first 3 months Norwegian first 9 months Polen first 3 months 10
Still a guarantor for low fares Domestic prices are down 5 % Q306 compared to Q305 Implementation of a new revenue systems hampered yield during Q3 International prices are down from heavy expansion and introductionary pricing Norwegian's average ticket price - index (Q1 03 = 100) 100 80 60 40 Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q306 Domestic International 11
Cost development Unit cost of 0.49 NOK in Q3 06 Cost level affected by higher fuel prices and one offs CASK 0,52 0,48 0.51 0.49 0.01 One offs Wet lease Passenger service costs Termination cost on handling Extra crew costs 0.02 Fuel 0,44 0.46 0,4 Q305 Q306 12
Cost initiatives are materialising Getting closer to NOK 0,45 target set in 2004 CASK 0,52 0,48 Cost reducing initiatives : New handling contract Capacity increase Distribution costs Costs are down Average unit costs of 0.50 NOK in Q3 2004, down more than 30 % from Q3 2003 (0.75 NOK) Scale benefits from increased production and longer sector lengths, have been main drivers Cost effective distribution solutions, renegotiated supplier agreements and higher fleet and crew utilization, will bring costs even further down 0,44 NOK/ASK -33% 0,90 0,80 0,70 0,60 < 0,50 0,50 0,40 0,30 0,20 Q3 03 Q4 03 Q1 04 Q2 04 Q3 04 Q4 04 2005 Target < 0,45 2006 Target 0,4 Q305 Q306 10 13
Lower distribution costs Distribution costs per sold ticket of NOK 14.8, down from 21.4 NOK Joint partnership with Amadeus is proven efficient Distribution costs per sold ticket NOK pr pax 40,0 35,0 30,0 25,0 20,0 15,0 10,0 5,0-31 % Q3 04 Q3 05 Q3 06 14
Increased fleet and crew utilization Crew utilization of 794 block hours per crew per year, up 11 % from Q3 2005 (714) Aircraft utilization of 11,5 block hours per plane per day, up 16 % from Q3 2005 (9,9) Block hours/crew/year 900 800 700 600 500 Block hours/plane/day 11 10 9 8 7 400 Q3 04 Q3 05 Q3 06* 6 Q304 Q305 Q306 15 * Annualized
Lean organization Carrying approx 10,000* passengers per employee Approx 40 % growth since Q3 05 11000 Passenger per employee 10000 9000 8000 7000 6000 5000 12000 10000 8000 6000 4000 2000 4000 Q304 Q305 Q306 0 Ryan Air Easy Jet Norwegian Air Berlin Fly Me Sky Europe Pax pr employee* 2004 2005 Nas Q2 2006 16 * Annualized
Norwegian Student Academy Two years apprentice program in the tourist industry, supported by the Norwegian authorities Certificate of apprenticeship that leads to job opportunities ie in sales, marketing, station or cabin attendence 17 Foto Olav Stendal
Expectations for remaining 2006 Expected business environment: Increased competition on international routes Continued price competition on domestic northbound routes Expected results: Unit cost for 2006 in the area of NOK 0,54 At current fuel and currency levels, and flight program in Poland Guidance for improved margin vs 2005 removed due to slower yield development on new routes Increased effect from cost reducing initiatives Expected results Poland start up: Flight program will continuously be monitored in order to obtain profitable operation as soon as possible Warsaw base is not expected to be profitable in 2006 and H1 2007, due to start up costs and introductory pricing 18
Leading Scandinavian low fare airline 84 routes