Pareto Nordic Corporate Bond Conference 7 March 2017 Tore Østby, VP IR

Transcription

1 Pareto Nordic Corporate Bond Conference 7 March 2017 Tore Østby, VP IR

2 Content 1. Investment case and strategy 2. Key figures, financing and outlook 3. Summary of risk factors 4. Appendix 2

3 Investment highlights 3 rd largest low cost airline in Europe Young fleet with low operational cost Financing flexibility and availability Strong footprint in the Nordic region and selected European markets 7 th largest overall airline in Europe 6 th largest low cost airline in the world Strong market position in key markets and highly scalable platform Average age of fleet of 3.6 years Low fuel cost through a modern and fuel efficient fleet Significant cost advantage relative to key competitors (legacy carriers) Flexible order book with ca 260 aircraft on order (incl. operating leases on ) Leasing to third parties to optimize fleet utilization and create options for exit plans Export financing (Ex-Im and ECA) EETC (Enhanced Equipment Trust Certificates) and Private placements Sale and leaseback (SLB) Bonds Manufacturer support Attractive assets with a liquid secondhand market First mover advantage in European low cost long haul Successful launch of long haul in UK/London, US, Paris and Scandinavia Reached critical mass and profitable operations Dreamliner program ensures commitment towards long term strategy 3

4 The history of Norwegian NAI approved by DoT Long haul Caribbean B788/B789 owned B788/B789 leased A320neo owned B738 owned B738 S&LB B738 leased B733 owned B733 leased M80 leased Lavpris kalenderen New distributionsystem First-800 delivery ATW Awards Boeing SKY Arctic Aviation Assets Ltd

5 Continued growth in production and improving load factor ASK Load Factor Load +1.5 p.p 100% 86,2% 87,7% 90% ,1% 78,7% 78,2% 77,4% 79,3% 78,5% 78,3% 80,9% 80% % 60% % 40% % % 10% % ASK Load 80.1% 78.7% 78.2% 77.4% 79.3% 78.5% 78.3% 80.9% 86.2% 87.7% Full-year figures according to traffic figures reported for December

6 Market shares in key airports (LTM) 12,000, ,096,000 pax 42 % mkt share 10,000,000 8,000, ,000 pax 21 % mkt share + 1,661,000 pax 5 % mkt share 6,000, ,000 pax 17 % mkt share + 657,000 pax 11 % mkt share 4,000, ,000 pax 14 % mkt share 2,000,000 0 Oslo Arlanda Copenhagen Helsinki Gatwick Spanish bases Mkt: 26 mill Mkt: 27 mill Mkt: 29 mill Mkt: 17 mill Mkt: 42 mill Mkt: 146 mill Q4 11 Q4 12 Q4 13 Q4 14 Q4 15 Q4 16 Strong market share in home markets and successful growth into the UK and Spain Source: Avinor, Swedavia, Copenhagen Airport, Finavia, Gatwick Airport, Aena 6

7 Top modern fleet with an average age of 3.6 years 2017: Deliveries seats Deliveries and 737Max +4,296 seats Re-deliveries seats B788/B789 owned B788/B789 leased B737 MAX 8 owned B738 owned B738 S&LB B738 leased B733 owned B733 leased M80 leased

8 Access to the most cost efficient aircraft through current order book Boeing Boeing 737 MAX8 19 undelivered Boeing undelivered Boeing 737 MAX8 Airbus 320neo and 321LR (Dreamliner) 70 undelivered Airbus 320neo and LR 30 undelivered Dreamliners purchase rights 8

9 Operations skewed towards high cost competitors Source: OAG Aviation Worldwide Schedules Analysis 9

10 Passenger bookings by country (FY 2016) Over 3.6 million passengers in Spain (+1.1 million) in FY 2016 Strongest passenger growth in Spain, US and UK 3 % passenger growth in Norway (adj. for the strike in 2015) Growth in number of passengers in 2016 (%): Split passengers by origin for 2016: 10

11 Lowest cost always wins 0,60 Norwegian has successfully cut costs over time 0,56 0,55 0,53 Unit Cost (CASK) (NOK) 0,50 0,45 0,40 0,49 0,46 0,46 0,45 0,43 0,42 0,42 0,35 0, Source: Based on official full-year 2014 annual report for Norwegian Air Shuttle, Finnair, Air Berlin, Vueling, SAS Group ( ), Easyjet ( ), and full year 2015 report for Ryanair and WizzAir ( ) 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. 11

12 Unit cost comparison based on the latest full-year results (in NOK) Sources: Based on official full-year 2015 annual report for Norwegian Air Shuttle, Finnair, Vueling, SAS Group ( ), Easyjet ( ), and full-year 2015 report for Ryanair and WizzAir ( ). Eurowings figures are from the Eurowings Management Presentation 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. 12

13 A total of 50 intercontinental routes in 2017 Adding USA - Barcelona and Copenhagen - San Francisco in 2017 More new routes to be announced and adding frequency to existing routes 13

14 Key figures and estimated Dreamliner growth Key figures Dreamliners ASK (million) 1,571 8,087 10,388 14,681 Load Factor 89 % 87 % 93 % 93 % Passengers 192, ,265 1,293,767 1,872,694 Legs 769 3,683 4,799 6,668 Forecast Dreamliners P 2018P ASK 14,681 23,500 47,000 growth 41 % 60 % 100 % Legs 6, ,400 19,500 growth 39 % 60 % 100 % 14

15 Scaling up the Dreamliner fleet to 32 by 2018 Widebody aircraft (delivered and firm orders) Deliveries (291 seats) Deliveries (344 seats) Aircraft Seats

16 Fuel efficiency of the top 20 airlines on transatlantic routes Pax-km/L fuel 1. Norwegian Airberlin % 3. Aer Lingus % 4. Air France % 5. Turkish % 6. Aeroflot % 7. Air Canada % 8. KLM % 9. Icelandair % 10. Delta % 11. Alitalia % 12. American % 13. Iberia % 14. United % 15. Swiss % 16. Virgin Atlantic % 17. US Airways % 18. SAS % 19. Lufthansa % 20. British Airways % Industry Average Excess fuel/ Pax-km Source: Transatlantic Airline Fuel Efficiency Rankin, 2014, ICCT (The International Council on Clean Transportation) published November

17 Implemented the new corporate structure Flexible corporate structure ensures appropriate platform to support international expansion Aircraft and leases assembled in Arctic Aviation Assets Ltd. enables ability to lease out aircraft not used in own operation, personnel and cost optimization across geographies Cash-flow from operations (ticket sales) controlled by Norwegian Air Shuttle ASA (Parent Company) Norwegian Air Shuttle ASA Parent Company Ancillary All activities not directly related to aircraft operations Resources National entities Terms and conditions in tune with social welfare systems and regulations in each individual country Aircraft Operations Norwegian & EU AOCs Securing traffic rights & expansion also outside Europe Asset / Financial Aircraft Financing Cluster Cape Town ECA support Leasing (Securing access to financing) Staff Dry Lease Dry Lease 17

18 Content 1. Investment case and strategy 2. Key figures, financing and outlook 3. Summary of risk factors 4. Appendix 18

19 Clean EBITDA* increased to NOK 3.2 bn NOK million Q4 16 Q4 15 Chg Chg Revenue 6,102 5, ,055 22,491 3,563 EBITDA as reported ,116 1,481 1,635 Other losses/gains , ,051 EBITDA ex. other losses/gains ,540 1, Non-recurring items: - industry action additional expense engine overhaul extra passenger compensation and refunds writedown assets for sale, gain SLB wetlease Sum non-recurring items Clean EBITDA ,157 2, Margin clean EBITDA -3.2 % 5.8 % 12.1 % 10.4 % * Clean EBITDA: Reported EBITDA adj. for other losses/gains and non-recurring items 19

20 Margin recovery following long haul build-up 25% 20% 15% 10% Financial crisis launched Long haul Fuel price drop 5% 0% -5% -10% EBITDAR-margin (12 months rolling) EBIT-margin (12 months rolling) 20

21 Hedging FX and fuel As international operations continue to grow, cost/income currency exposures decrease Hedging fuel when levels are deemed attractive Currently hedged 52 % for 2017 and 14 % for 1H 2018 at ca 50 USD/boe (Brent Blend) Split revenue and opex by currency Revenue - FY 2015 Opex - FY 2015 USD 6% NOK 40% EUR 16% NOK 42% USD 47% SEK 19% PLN; 1% GBP 8% DKK 10% Other 5% EUR 6% 21

22 Operating expenses potential to cut further Overview of operating expenses Development in operating expenses Gen. and adm. exp. 5 % Other flight ops. exp. 4 % Depr. 4 % Sales/ distrib. 2 % Fuel 22 % Technical 9 % 0.12 Leasing 10 % Personnel 16 % 0.10 Fuel Handling 12 % Airport & ATC 12 % 0.08 Personnel Key drivers to reduce unit costs: Replace older leased aircraft (Fuel, Tech, Handling, Airport/ATC & Personnel) Large scale (Overhead, Sales & Distribution, Personnel) Further automation (Overhead, Personnel, Handling, Sales & Distribution) Higher utilization (Leasing, Depreciation) Airport/ATC Handling Leasing Other Technical Depreciation Sales & Distribution Global operations (Personnel, Handling, Airport, Overhead) 0.00 Q4 11 Q4 12 Q4 13 Q4 14 Q4 15 Q mths rolling 12 mths rolling 12 mths rolling 12 mths rolling 12 mths rolling 12 mths rolling 22

23 NOK 3 bn cash-flow from operations in 2016 Invested NOK 6.5 bn in new aircraft of which NOK 3.2 bn financed by own cash NOK 2.3 bn in cash at the end of Q4 (+NOK 0.7 bn in undrawn facility) NOK million Q4 16 Q4 15 Chg Chg Profit before tax ,003 1, ,433 Paid taxes Depreciation ,296 1, Change air traffic settlement liabilities , Change working capital Net cash flows from operating activities ,047 2, Net cash flows from investing activities -1, ,512-5,189-1,323 Net cash flows from financial activities 981 1, ,303 3, Foreign exchange effect on cash Net change in cash and cash equivalents Cash and cash equivalents, end of period 2,324 2, ,324 2,

24 Equity improved by NOK 1.1 bn Added 13 new on balance the last 12 months + PDP s NOK 21 bn net debt (from 17 bn in 2015) 11 % equity ratio (9 %). 16 % when adding market value of Bank Norwegian (NOFI) 40,000 35,000 30,000 25,000 18,482 Aircraft 22,572 Aircraft financing 17,580 14,890 NOK million 20,000 15,000 10,000 5, ,939 2,102 2,657 2,454 Aircraft PDP 7,156 Other assets 2,241 Receivables 3,470 Cash 2,324 Q4 15 Q4 16 PDP and bonds 5,895 4,695 Other liabilities 5,573 5,070 Pre-sold tickets 4,666 4,014 Equity 4,049 2,965 Q4 16 Q

25 Balanced mix of funding 30 aircraft financed in US capital markets, 37 by export credits Debt mix: 3.7 % blended interest rate on longterm aircraft financing 95 % of aircraft financing on fixed rates Debt maturity profile: Number of aircraft: NOK million After 2020 Long-term financing PDP Bonds # aircraft B737 B787 A320 Export credits 34 3 EETC 10 Private placement/banks 20 2 SLB 17 Leasing 23 9 Total

26 Financing on track Expected capex (all aircraft incl. PDP) USD 1.8 bn for 2017 (reduced from USD 2.1 bn) USD 2.1 bn for 2018 (increased from USD 2.0 bn) PDP financing / liquidity PDP financing for neos in place New unsecured bond in January (SEK 800 million) New credit facility (NOK 1 bn) Long-term financing Ex-Im and ECA guaranteed financing EETC financing Private placements Sale leaseback (SLB) Banks 26

27 A strong track record in attracting financing Main debt financing sources Comments Ex-Im guaranteed funding since 2009 Long term Aircraft Financing Sale and lease-back of aircraft Commercial funding EETC and Ex-Im Bond in 2014, 2015 and 2016 Pre-delivery Payment Financing ( PDP ) January 2016: AAAL arranged for pre-delivery payment financing (PDP) of fifty Airbus 320 Neo aircraft scheduled for delivery in 2016 to the end of Tenor: Matures at the delivery of each aircraft Bond Financing NAS04 Size: 1,000 MNOK Coupon: 3mN+375bps Maturity: 3 Jul-17 NAS06 Size: 1,250 MNOK Coupon: 3mN+575bps Maturity: 20 May-18 NAS05 Size: 225 MNOK Coupon: 3mN+400bps Maturity: 21 Nov-17 NAS07 Size: 185 MEUR Coupon: 7.25% Maturity: 11 Dec-19 NAS08 Size: 800 MSEK Coupon: 3mS+500bps Maturity: 7 Aug-20 27

28 Outlook for 2017 Markets and business Negative impact from passenger tax in Norway Weaker demand in the UK post Brexit Booking volumes on par with last year, capacity adjusted An estimated production growth (ASK) of 30 % (unchanged) / 737 MAX +20 %, 787 Dreamliners +60 % Increasing distance driven by mix Unit cost target of NOK 0.39 to 0.40 (up from 0.38 to 0.39) Assumptions: Fuel price of USD 500 per metric ton, USD/NOK 8.25, EUR/NOK 9.00 Impact of SLB (leasing is included in CASK) and ramp-up of intercontinental operations Based on the current route portfolio and planned production 32 new aircraft entering operations in (returning four old leased aircraft) Six 737 MAX Nine Dreamliners (incl. five leased) Three 320neos to be leased out to HK Express (Seven neos delayed) 28

29 Content 1. Company overview 2. Key figures, financing and outlook 3. Summary of risk factors 4. Appendix 29

30 Content 1. Company overview 2. Key figures, financing and outlook 3. Summary of risk factors 4. Appendix 30

31 Key figures Financials (Amounts in NOK million) ) Operating revenue (MNOK) EBITDAR (MNOK) EBITDA (MNOK) EBIT/ Operating result (MNOK) EBT (MNOK) Net profit / loss (-) Basic earnings per share (NOK) Diluted earnings per share (NOK) Equity ratio 11% 9% 9% 19% 20% 22% 27% 32% 28% 22% 25% Cash and cash equivalents (MNOK) Unit cost (CASK) Unit cost (CASK) excluding fuel ASK (million) RPK (million) Load factor 87.7% 86.2% 80.9% 78.3% 78.5% 79.3% 77.4% 78.2% 78.7% 80.1% 79.0% Passengers (million) Internet sales 75% 77% 82% 80% 78% 82% 87% 88% 87% 86% 84% Number of routes (operated during the year) Number of destinations (at year end) Number of aircraft (at year end) ) Reported preliminary full-year figures for

32 Shareholders 31 December 2016 Overview of shareholders A/C TYPE SURNAME ADDRESS1 DIRECTORY OF POST OFFICES LAND HOLDING OF SHARES 1 HBK HOLDING AS c/o Adv Simonsen Vogt Wiig AS OSLO NORWAY 4,995, % 2 FOLKETRYGDFONDET Postboks 1845 VIKA OSLO NORWAY 3,259, % 3 HBK INVEST AS Postboks 1503, Vika OSLO NORWAY 2,252, % 4 SKAGEN VEKST C/O HANDELSBANKEN NORDIC CUSTODY OSLO NORWAY 1,300, % 5 FERD AS PB 484 LYSAKER NORWAY 1,300, % 6 DANSKE INVEST NORSKE INSTIT. II. POSTBOKS 1170, SENTRUM OSLO NORWAY 955, % 7 VERDIPAPIRFONDET DNB NORGE (IV) Dronning Eufemias gate 30 OSLO NORWAY 941, % 8 SKAGEN KON-TIKI C/O HANDELSBANKEN NORDIC CUSTODY OSLO NORWAY 700, % 9 VARMA MUTUAL PENSION INSURANCE THE NORTHERN TRUST CO LONDON, E14 5NT UNITED KINGDOM 650, % 10 VERDIPAPIRFONDET DNB NORGE SELEKTI Dronning Eufemias gate 30 OSLO NORWAY 587, % 11 KLP AKSJENORGE Dronning Eufemias gate 10 OSLO NORWAY 552, % 12 DATUM AS Postboks 1624 Vika OSLO NORWAY 500, % 13 DNB NOR MARKETS, AKSJEHAND/ANALYSE v/ DNB Markets Equity Derivatives OSLO NORWAY 497, % 14 DNB LIVSFORSIKRING ASA B-615 N Fremtidens Produkter BERGEN NORWAY 489, % 15 DANSKE INVEST NORSKE AKSJER INST POSTBOKS 1170, SENTRUM OSLO NORWAY 451, % 16 VERDIPAPIRFONDET PARETO INVESTMENT Postboks 1724 Vika OSLO NORWAY 410, % 17 VERDIPAPIRFONDET HANDELSBANKEN RÅDHUSGATAN 27 OSLO NORWAY 400, % 18 NOM CLEARSTREAM BANKING S.A. 42, AVENUE J.F. KENNEDY L-1855 LUXEMBOURG LUXEMBOURG 319, % 19 KOMMUNAL LANDSPENSJONSKASSE Dronning Eufemias gate 10 OSLO NORWAY 310, % 20 VERDIPAPIRFONDET ALFRED BERG NORGE Munkedamsveien 35 OSLO NORWAY 310, % 21 NORRON SICAV - TARGET P.O.BOX 487 L-2014 LUXEMBOURG LUXEMBOURG 215, % 22 VERDIPAPIRFONDET ALFRED BERG GAMBA Munkedamsveien 35 OSLO NORWAY 209, % 23 DANSKE INVEST NORGE II POSTBOKS 1170, SENTRUM OSLO NORWAY 201, % 24 STENSHAGEN INVEST AS Grindene 10 TRANBY NORWAY 189, % 25 VPF NORDEA KAPITAL NORDEA FONDENE NORGE AS OSLO NORWAY 185, % 26 NOM JPMORGAN CHASE BANK, N.A., LONDON JPMORGAN CHASE BANK BOURNEMOUTH, BH7 7DA UNITED KINGDOM 172, % 27 STOREBRAND NORGE I VERDIPAPIRFOND JPMORGAN CHASE BANK BOURNEMOUTH BH7 7DA UNITED KINGDOM 171, % 28 ULSVÅG INVEST AS SARAV 32 ALTA NORWAY 165, % 29 VERDIPAPIRFONDET PARETO NORDIC Postboks 1724 Vika OSLO NORWAY 156, % 30 NORDNET LIVSFORSIKRING AS Postboks 302Sentrum OSLO NORWAY 146, % 32

33 Norwegian operates 471 routes to 130 destinations Long Haul From bases in SWEDEN DENMARK FINLAND From bases in NORWAY From bases in SPAIN From the UK base 33