Norwegian Air Shuttle ASA (NAS) Q4 2003 and FY 2003 24-26 February 2004
Agenda _ Introduction _ Financials Q4 2003 and FY 2003 _ Norwegian low-fare operation _ Going forward 2004 2
Agenda _ Introduction _ Financials Q4 2003 and FY 2003 _ Norwegian low-fare operation _ Going forward 2004 3
Management introduction Bjørn Kjos, CEO, founder _ Founded Norwegian Air Shuttle in 1993. _ Former managing partner of the law firm Vogt & Wiig. _ Aviation experience from RNOAF 334 squadron Frode E. Foss, CFO _ Ex. Ernst & Young and Arthur Andersen experience _ Masters in Business Administration Ola Krohn-Fagervoll, Deputy CEO _ Ex. Concordia, A.T. Kearney, Saga Petroleum and British Petroleum _ Masters in Business Administration 4
Highlights Financials Q4 2003 and FY 2003 _ NAS is becoming a pure low-fare airline _ The low-fare operation is turning profitable _ NAS overall profit margins have improved from FY 2002 to FY 2003 _ NAS has established a strong financial position Norwegian low-fare operation _ Revenue is up, partly offset by pressure on yield _ Growing passenger volume, mainly driven by price campaigns on the internet _ Costs are down from increased production and lower distribution costs Going forward 2004 _ Strong market position going forward _ Strong focus on top line growth and cost efficiency _ Yield and cost in first half 2004 lower from increased average sector length _ Continued high load factor expected for first half 2004 5
Agenda _ Introduction _ Financials Q4 2003 and FY 2003 _ Norwegian low-fare operation _ Going forward 2004 6
NAS is becoming a pure low-fare airline Highlights Q4 2003 Total revenue (Mill NOK) _ Total revenue increased 40 % to MNOK 276 300 compared to Q4 2002 (MNOK 197). Mill _ Total operating expense increased 21 % to 250 MNOK 265 compared to Q4 2002 (MNOK 219) 200 150 NAS (MNOK) Q4 2003 Q4 2002 100 EBITDAR 11 -22 50 EBITDA -10 -34 0 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter EBT -18 -36 2002 2003 Income after tax MNOK -12 -25 EBITDA (Mill NOK) _ Norwegian low-fare operation on track with break- even result in Q4 (EBITDA) 30 Mill _ Loss of MNOK 8.5 from discontinued Fokker F-50 20 commuter operation in Q4 2003 10 Special items Q4 2003 0 -10 _ Lower than expected revenues from discontinued Fokker F-50 operation -20 _ Write down of 3 Fokker F-50 financial leases with -30 MNOK 5 (Sale has taken longer than planned) -40 _ MNOK 1,5 cost allocated to reorg. compensation 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter _ Higher sales commission for low-fare operation due to higher than expected sales 2002 2003 7
The low-fare operation is turning profitable Revenue development (B-737) Total revenue (Mill NOK) 300 Mill _ The low-fare operation is becoming a 1 billion 74% 250 NOK business, with 258 MNOK in turnover for Q4 2003 200 _ High revenue growth throughout the period, 150 74% increase from Q4 2002 to Q4 2003 _ Growth in revenue mainly driven by rapid 100 capacity expansion and increased load factor 50 0 4th Quarter 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter EBITDA (Mill NOK) EBITDA development 40 Mill _ Low-fare operation was break-even 30 in Q4 (EBITDA) 20 _ Both October and November showed positive 10 EBITDA results, while December was 0 negative -10 -20 -30 -40 4th Quarter 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 8
NAS overall profit margins have improved from FY 2002 to FY 2003 P&L FY 2003 Norwegian Air Shuttle ASA (MNOK) (1) Q1 03 Q2 03 Q3 03 Q4 03 2003 2002 B-737 Revenues 152 507 196 155 212 260 257 187 818 109 185 628 EBITDA -33 982 -8 704 -13 052 -245 -55 183 -49 316 NAS TOTAL Revenues 238 719 214 873 230 035 274 986 958 613 386 483 EBITDA 17 981 -12 081 -19 619 -10 102 -23 822 -67 981 EBIT 15 134 -14 057 -41 368 -17 898 -58 190 -73 786 EBT 13 504 -13 893 -41 926 -16 702 -59 017 -71 749 AFTER TAX 9 723 -10 003 -30 187 -12 279 -42 746 -51 860 B-737 NAS TOTAL _ Total revenue increased 139 % _ Total revenue increased 342 % to MNOK 922 compared to 2002 to MNOK 818 compared to 2002 (adjusted for 36 MNOK in _ Improved EBITDA on an restructuring compensation) annualized basis _ Substantial improvement of EBITDA (1) 2002 = 4 months of B-737 operation 9
NAS has gained a strong financial position Balance Sheet FY 2003 Norwegian Air Shuttle ASA BALANCE SHEET _ Total Assets MNOK 524 – IPO MNOK 250 (MNOK 235) Q3 Pr 31.12 2003 2003 2002 – Equity ratio of 50 % FIXED ASSETS 52 093 62 861 32 418 Intangible assets 48 503 49 557 56 383 Tangible fixed asstes _ Cash 31.12.03 MNOK 314 14 166 14 038 14 354 Financial fixed assets 114 761 126 457 103 155 TOTAL FIXED ASSETS _ Positive working capital CURRENT ASSETS Material and consumables 1 042 2 435 8 823 – Receivables reduced MNOK 60 Receivables 143 708 81 439 45 159 – Prepaid tickets reduced MNOK 26 58 389 314 036 63 237 Cash at bank deposits 203 140 397 911 117 219 TOTAL CURRENT ASSETS _ Fokker F-50 valued at MNOK 25 317 901 524 367 220 374 TOTAL ASSETS – Long term debt of MNOK 21 EQUITY _ Provisions MNOK 43 71 157 306 583 71 157 Paid-in equity -30 467 -42 746 Retained earnings – Maintenance 40 690 263 837 71 157 TOTAL EQUITY – Pensions LIABILITIES Provisions 33 280 42 775 9 729 22 785 20 652 32 050 Other long-term liabilities 221 145 197 104 107 438 Current liabilities TOTAL LIABILITIES 277 211 260 531 149 216 317 901 524 367 220 374 TOTAL EQUITY AND LIABILITIES 79 021 18 085 230 79 021 No of shares 10 0,1 10 Nominal share value 10
Agenda _ Introduction _ Financials Q4 2003 and FY 2003 _ Norwegian low-fare operation _ Going forward 2004 11
Load factor is up, revenue growth dampened by pressure on Yield RPK/ASK Mill ASK Load factor development 400 80 % _ 2 more planes, 14 new routes and 350 70 % adjustments on established routes, brought 300 60 % total production (ASK) up 82% in Q4 2003, 250 50 % compared with Q4/02 200 40 % _ Passenger traffic (RPK) increased by 145 %, 150 30 % resulting in a load factor increase by 18 100 20 % percentage points up to 71% in Q4 2003, 50 compared with Q4/02 10 % 0 0 % _ Load factor seemingly “unaffected” by 4th Quarter 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter seasonality and approaching “low-fare carrier load factor RPK ASK range” Yield development Revenue / RPK Yield _ The average yield has gradually been falling 1,80 since the start-up, mainly due to new and longer routes and domestic price competition 1,50 _ A lower yield in Q3 is “normal” due to summer 1,20 vacation with longer flights and a substantially lower business volume 0,90 0,60 _ Yield improved in Q4 2003 0,30 0,00 4th Quarter 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 12
Growing passenger volume, mainly driven by price campaigns on the internet Passenger (PAX) development Passenger volume (1000) 170 (000) 150 _ In order to increase market penetration, 130 pricing campaigns has been executed for ”low 110 season” and off peak periods in November / 90 December and on specific routes 70 50 _ PAX volume has been steadily increasing 30 during Q4 with a ”natural” fall in desember 10 where business slows down before and -10 Sep okt Nov Des Jan Feb Mar Apr Mai Jun Jul Aug during the Christmas holidays 2003 - 2004 2002 - 2003 Distribution Channels Sales channels – volume distribution 100 % _ The distribution volume through www.norwegian.no reached an all time high 80 % with a 60 % share in January 2004 60 % _ Internet’s share of ”traffic” is three times higher than start-up Q4 2002 40 % _ 75% of total sales were direct sales in Q4 20 % 2003 (call-center constituted 15%) 0 % 4th Quarter 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter jan. 04 Internett CC TA 13
Costs are down from increased production and lower distribution costs Cost per ASK 1,00 Operational costs per ASK 23% 0,90 _ Unit cost down 23 % compared to Q4 2002 0,80 0,70 _ Q4 compared to Q3 2003 - slightly higher due 0,60 to: 0,50 – decreased production in December 0,40 – Increased maintenance costs due to shorter 0,30 sector lengths 0,20 – Deicing costs during winter season 4th Quarter 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Distribution costs per PAX Distribution cost per PAX 100 _ Distribution costs per passenger has gone 47% down with 47 % since Q4 2002 80 _ Distribution costs per passenger has mainly been reduced due to higher internet 60 penetration 40 20 4th Quarter 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 14
Agenda _ Introduction _ Financials Q4 2003 and FY 2003 _ Norwegian low-fare operation _ Going forward 2004 15
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