Norwegian Air Shuttle ASA Q1 2016 Presentation 21 April 2016
Highlights Q1 2016 Launched new routes to/from Paris and the USA (LAX, NYC and FLL) and a short haul base in Rome, Italy Norwegian Reward reached 4 million members Tentative approval of NAI by the US Department of Transportation (DoT) Added five new 737-800 aircraft and one 787-9 Dreamliner to the fleet Clean EBITDA improved by NOK 400 million 2
5.8 million passengers in Q1 2016 (+18 %) 7 + 18 % 6 5 4 3 Passengers (million) 2 1 0 Q1 07 Q1 08 Q1 09 Q1 10 Q1 11 Q1 12 Q1 13 Q1 14 Q1 15 Q1 16 Pax (mill) 1,3 2,0 2,1 2,7 3,1 3,6 3,9 4,9 4,9 5,8 3
Q1 load factor up to 85 % (+2 p.p.) 17 % growth in capacity (ASK) 21 % growth in traffic (RPK) Average flying distance increased by 4 % 18 000 17 000 16 000 15 000 14 000 74,8 % 77,2 % ASK 74,8 % 75,1 % 74,3 % Load Factor 77,2 % 76,1 % 77,3 % 83,0 % Load +2 p.p. 85,1 % 100% 90% 80% 13 000 12 000 70% 11 000 10 000 60% 9 000 50% Available Seat KM (ASK) 8 000 7 000 6 000 5 000 4 000 3 000 2 000 1 000 0 Q1 07 Q1 08 Q1 09 Q1 10 Q1 11 Q1 12 Q1 13 Q1 14 Q1 15 Q1 16 40% 30% 20% 10% 0% Load Factor ASK 1 342 2 183 2 674 3 507 4 498 5 266 6 378 9 421 10 056 11 803 Load Factor 74,8 % 77,2 % 74,8 % 75,1 % 74,3 % 77,2 % 76,1 % 77,3 % 83,0 % 85,1 % 4
Holding or growing market shares in all key airports (last 12 months) + 1,034,000 pax 41 % mkt share 10 000 000 8 000 000 6 000 000 + 715,000 pax 22 % mkt share + 398,000 pax 17 % mkt share + 566,000 pax 10 % mkt share + 680,000 pax 4 % mkt share 4 000 000 + 171,000 pax 13 % mkt share 2 000 000 0 Oslo Arlanda Copenhagen Helsinki Gatwick Spanish bases Mkt. Size: 25 mill Mkt. Size: 21 mill Mkt. Size: 27 mill Mkt. Size: 17 mill Mkt. Size: 40 mill Mkt. Size: 135 mill Sources: Avinor, Swedavia, Copenhagen Airports, Finavia, Gatwick Airport, Aena Q1 11 Q1 12 Q1 13 Q1 14 Q1 15 Q1 16 5
23 % revenue growth in Q1 25 % growth in international revenue, + 15 % for domestic Scandinavia Unit revenue up by 5 % driven by yield (+2 %) and load (+2 p.p) offset by increased stage length 6 000 + 23 % 5 000 4 000 Domestic revenue 3 000 International revenue 2 000 Total Revenues NOK million 1 000 0 Q1 13 Q1 14 Q1 15 Q1 16 Revenues 2 904 3 551 4 034 4 961 Domestic revenue 1 043 1 032 981 1 130 % y.o.y. chg 20 % -1 % -5 % 15 % International revenue 1 861 2 519 3 053 3 831 % y.o.y. chg 25 % 35 % 21 % 25 % 6
19 % growth in ancillary revenue in Q1 16 % share of Group revenue 1 % growth per passenger NOK 136 NOK 138 Flexibility/ modifications Flexibility/ modifications Pre-sold packages (bundle) Pre-sold packages (bundle) Seating Seating Optional extras Baggage Baggage Other Ancillary Other Ancillary Q1 15 Q1 16 7
Strongest growth in USA and Spain Growing share of revenue in USD, GBP and Euro Norway now reduced to 35 % of group passengers Over 40% of passengers booking from outside Scandinavia USA Spain Hungary France Finland Hungary France Italy Poland Germany USA Other Norway Sweden UK UK Norway Italy Denmark Denmark Finland 0% 10% 20% 30% 40% 50% 60% Spain Sweden 8
New corporate contracts boosting sales Revenue from corporate agreements Q1: Norway up by 22 % y-o-y Sweden up by 17 % y-o-y Corporate contracts signed in Q1 2016: Forsvaret (Norwegian army) Four year contract from February for 17,000 employees (Norwegian only) NAV (Norwegian Labour and Welfare Administration) Two year contract + option to extend 2 x 1 year, for 19,000 employees (Norwegian only) HINAS (Norwegian health care system) Three year contract from April, 13 domestic routes for employees and patients Change Retail 65 % Consultants 38 % Construction 24 % Health Care 18 % IT/Telecom 13 % Bank/Finace 13 % Public sector 10 % Industrials 9 % Media -2 % Oil/Offshore -4 % 9
Reported earnings: lower fuel offset by currency (NOK million) Q1 15 Q1 16 Change Revenue 4 034 4 961 EBITDAR 69 63-6 EBITDA -502-606 -104 Pre-tax profit (EBT) -776-992 -216 Net profit -538-800 EBITDAR development Q1 500 EBT development Q1 200 400 438-50 300-160 200-300 NOK million 100 0 69 63 NOK million -550-800 -813-776 -100-992 -200-215 -1 050-300 -1 300 Q1 13 Q1 14 Q1 15 Q1 16 Q1 13 Q1 14 Q1 15 Q1 16 EBITDAR margin 15 % -6 % 2 % 1 % EBT margin -6 % -23 % -19 % -20 % 10
Underlying EBITDA* up by NOK 400 million NOK million Q1 2015 Q1 2016 chg Revenue 4 034 4 961 926 EBITDA as reported -502-606 -104 Other losses/gains 3-528 -531 EBITDA excl other losses/gains -505-78 426 Non-recurring items: - strik e -110 - - wetlease -19-112 Sum non-recurring items -129-112 Clean EBITDA -376 34 409 Margin clean EBITDA -9,3 % 0,7 % * Underlying (clean) EBITDA adj for other losses/gains and non-recurring items 11
Unit cost cut by 5 % CASK ex fuel +1 % to NOK 0.35 on 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 0,16 CASK excl fuel 0,11 0.15 Fuel share of CASK 0,11 0,12 0,15 0,13 0,10 0,14 0,07 0,46 0,45 0,40 0,37 0,44 0,36 0,35 0,35 0,33 0,32 Q1 07 Q1 08 Q1 09 Q1 10 Q1 11 Q1 12 Q1 13 Q1 14 Q1 15 Q1 16 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. 12
Fuel share of opex reduced to 15 % (23% in Q115) 0,16 Depr. 4 % Sales/ distrib. 2 % Fuel 15 % 0,14 Other Flight ops. exp. 4 % Gen. and adm. exp. 5 % Personnel 16 % 0,12 0,10 Fuel Technical 7 % Leasing 12 % Handling 10 % Airport & ATC 12 % 0,08 0,06 Personnel Airport/ATC 7 % negative impact of currency Fuel hedging: 50 % of 2016 27 % of 2017 0,04 0,02 0,00 Q1 11 Q1 12 Q1 13 Q1 14 Q1 15 Q1 16 12 mths rolling 12 mths rolling 12 mths rolling 12 mths rolling 12 mths rolling 12 mths rolling Handling Leasing Other Technical Depreciation Sales & Distribution 13
NOK 1 bn higher cash-flow from operations Invested NOK 1.7 bn in new B737-800 aircraft NOK 3.2 billion in cash at the end of Q1 Q1 Q1 NOK million 2015 2016 Change Profit before tax -777-992 -215 Depreciation 220 288 68 Air traffic settlement liabilities 2 497 2 954 457 Change working capital -945-243 702 Net cash flows from operating activities 996 2 007 1 012 Net cash flows from investing activities -1 597-1 666-69 Net cash flows from financial activities 196 375 179 Foreign exchange effect on cash 10 20 10 Net change in cash and cash equivalents -396 736 1 132 Cash and cash equivalents, end of period 1 615 3 190 1 574 14
Net debt reduced by NOK 1 bn in the quarter Added five new 737-800 on balance + PDP s NOK 16 bn net debt (reduced from NOK 17bn at the end of 2015) Equity ratio of 6 % (11 % incl. market value of Bank Norwegian) 33 000 30 000 27 000 24 000 21 000 12 512 Aircraft 18 536 Aircraft Financing 12 994 10 028 NOK million 18 000 15 000 12 000 9 000 6 000 3 000 0 4 103 Aircraft PDP 5 939 5 134 2 998 1 615 Other assets 2 139 Receivables 3 180 Cash 3 190 Q1 15 Q1 16 PDP and bonds 6 104 Other liabilities 4 931 Pre-sold tickets 6 969 Equity 1 986 4 684 4 311 5 462 1 876 Q1 16 Q1 15 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 16
Top modern fleet with an average age of 3.6 years 2016: Deliveries 787-9 +1376 seats Deliveries 737-800 +3,162 seats Re-deliveries 737-800 -744 seats 160 156 7 140 120 100 80 60 40 20 0 8 8 11 13 2003 B788/B789 Owned B788/B789 Leased A320neo owned B737 MAX 8 owned 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 21 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 14 12 6 85 13 19 2017 17
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. 18
Summer 2016: 18 crew bases and 106 aircraft Short haul: 96 aircraft Long haul: 10 aircraft FLL JFK LGW BKK NO 738: 33 BGO SVG OSL TRD SE 738: 13 ARN FI 738: 5 HEL UK 738: 10 DK 738: 8 CPH LGW IT 738: 2 ES 738: 25 BCN FCO MAD AGP ALC TFS LPA 19
Launched new long haul routes to Paris 20
Outlook for 2016 Markets and business Soft macro and passenger tax to be introduced in Norway, strong competition in Denmark Stable in other key markets Positive momentum for long-haul Group bookings ahead of 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 0.37 (unchanged) 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 four leased 737-800) Four leased B787-9 Dreamliners Four direct buy A320Neo (to be leased out) 21
Summary Won several corporate agreements as businesses want to reduce travel expenses NAI has received tentative approval from DoT Bookings ahead of last year Financing on-track Unchanged guidance for 2016 on production and unit cost Bank Norwegian to be listed on OSE 22
Norwegian operates 447 routes to 138 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