Norwegian Air Shuttle ASA Investor Presentation January 2020
Norwegian at a glance 150+ ~10,000 4 th GLOBAL DESTINATIONS HARD WORKING STAFF LARGEST LOW- COST AIRLINE IN EUROPE* ~36M 160+ PASSENGERS FLOWN 500+ AIRCRAFT IN FLEET ROUTES 2 * Based on passengers in 2019, based on company traffic reports.
Set to leverage on scale Local short-haul focus Global growth phase, long-haul focus Focus on profitability Aircraft orders 42 6 15 15+3 222 19+8 30 2 New markets and other Leading position key milestones on Nordic short haul Number of Aircraft 164 156 10 787-8/9 Owned Maturing long- 11 787-8/9 Leased 144 22 haul offering 737 MAX 8 Owned 7 26 with improving 737 MAX 8 Leased 14 14 737-800 Owned margins 116 6 4 3 737-800 Leased 14 9 737-300 Owned 99 4 95 3 737-300 Leased 2 5 Solid platform 85 5 53 52 M80 Leased 1 and sufficient 40 2 scale to achieve 68 64 62 41 30 51 profitability 57 23 15 7 46 40 2 23 32 7 16 Top ranked by 64 31 2 42 62 5 61 22 35 both short-haul 42 5 5 2 40 40 13 22 and long-haul 11 23 8 5 6 23 22 20 passengers 5 5 13 11 11 8 8 6 5 5 5 5 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Europe’s Best Low -Cost Airline World’s Best Low -Cost Long Haul Airline 3
Key pillars of our corporate strategy 2018-2022 KEY FOCUS AREAS LONG TERM “We shall be the leading long -haul low-cost airline • Reduce cost base VISION in Europe operating as the engine of global low- • Sustainable unit cost position Competitive cost base cost alliance and dominating the Nordic short- • Cost control and automation haul market” • Focus is to capitalize on long haul Profitable operations and • Fortify position in the Nordics global alliance • Improve connectivity and feed • Improve operational simplicity Return to sustainable profitability • Develop resilient program Operational resilience • Optimize technical & crew OBJECTIVES STRATEGIC • Commercially-driven fleet plan Be the preferred airline for customers seeking value Optimized asset • Fleet renewal program for money management 2022 • Maximize return on assets • Deliver on the basics Fortify position as the leading short-haul carrier in • One customer journey Shared customer focus the Nordics • Personalization and Reward • Standardize and reduce complexity Build global low-cost alliance with our long-haul Improve digital and • Strategic sourcing operation as the backbone analytics capabilities • Agile development processes CORE VALUES I nnovation T eamwork S implicity 4
Changing strategic focus from growth to profitability 2013 - 2018 2019 - Focus on growth Focus on profitability and cash flow Built up market position and scale Continuous efforts to reduce costs Optimization of the base structure Captured slots at constrained airports and route network based on 12-month profitability criteria Onboarded new aircraft and Divest aircraft not required for the company’s commercial needs launched new routes 5
Changes to network and operations
Stable demand at key airports TOTAL PASSENGERS In million 2015 2016 2017 2018 LTM Q3 2019 60 50 40 30 20 10 0 Oslo Stockholm Copenhagen Gatwick Barcelona 7 Source: Avinor, Swedavia, Copenhagen Airports, Gatwick Airport and Aena.
New strategy starting to show results → Profits in Q3 was the highest in the Company’s history → The planned capacity reduction supports higher unit revenue, better load factor and increased punctuality MONTHLY TRAFFIC DEVELOPMENT ASK (12m rolling) Unit revenue growth y/y 120,000 30% 100,000 20% 80,000 10% 60,000 0% 40,000 -10% 20,000 -20% 0 -30% 2016 2017 2018 2019 8
Exhaustive review of the short-haul operation SUMMER 2020 AIRCRAFT ALLOCATION Focus on Nordic core Existing base Restructured base Closed base Versus same ( ) Short-haul network connectivity and density season last year NO TRD FI 40 (+1) 7 (-2) SE 14 (-3) Support long-haul feed, where appropriate BGO OSL HEL ARN EDI SVG 0 (-1) CPH DUB EDI Closed down more than 70 routes, of which DUB DK 2 (-5) LGW more than 50 on short haul 12 (0) LGW 7 (-4) Reduce complexity IT 0 (-3) BCN ES FCO MAD 20 (-6) PMI ALC Handle fleet deficit from MAX grounding AGP TFS LPA 9
Our long-haul business in context Business Long haul, low cost mainly focused on connecting primary airport / city model points Value for money fares with quality inflight services, leveraging our Product focus award-winning brand A fleet of 37 Boeing 787 Dreamliners Fleet Two-class configuration and high-density cabin Connecting large catchment areas Geographic focus Seek connectivity with the rest of the network where necessary Finetuning network to improve operational resilience Profitability Focus on core EU and US markets 10
Long haul developing according to strategy SUMMER 2020 AIRCRAFT ALLOCATION TRAFFIC AND YIELD DEVELOPMENT ASK, 12m rolling (million) Yield, 12m rolling (index; Q2 2013 = 100) 60,000 120 50,000 110 40,000 100 30,000 90 NO 787: 2 20,000 80 10,000 70 0 60 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 UK 2013 2014 2015 2016 2017 2018 2019 787: 13 US 787: 2 FR LTM 2017 2018 787: 7 Q3 2019 IT Passengers (million) 3.0 5.4 6.0 ES 787: 4 787: 5 ASK (billion) 23.9 45.0 49.9 Legs 11,500 20,600 21,600 33 aircraft deployed on long-haul network Load factor 90% 87% 87% 11
Largest foreign carrier in New York and largest European carrier in Los Angeles Connecting networks to feed long haul 12
Our young fleet is a key sustainability, commercial and financial advantage ~20% more fuel efficient than world average for airline Lower fuel costs Significantly improved environmental friendliness Newer and more sustainable aircraft are preferred by travellers globally 13 Source: Planespotter.net, January 2019. The International Council on Clean Transportation (ICCT) Working Paper 2019-16: CO 2 emissions from commercial aviation, 2018.
Our low-cost business model is one of the most carbon efficient in the world ONGOING INITIATIVES Fleet renewal program Advanced weather data from Avtech SkyBreathe app for pilots 14
Disciplined low cost operating model Cost development in 2018 and 2019 Cost level compares well to peers Operating costs excl. fuel and ownership costs per ASK (NOK) Operating costs (EBIT level) per ASK (NOK) 1 AirAsia X 0.27 0.28 WizzAir 0.32 0.25 0.25 0.24 0.23 0.23 0.22 Ryanair 0.35 Norwegian has the 0.43 youngest fleet easyJet 0.56 Vueling 0.56 JetBlue 0.59 Southwest 0.59 Finnair 0.62 SAS 0.76 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 1 Based on 2018 annual reports or corresponding fiscal year. • 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 • Other losses/(gains) are not included in the unit cost measure as it primarily contains hedge gains/losses offset under fin ancial items, as well as other non-operational income 15 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).
#FOCUS2019: Raising full-year target to NOK 2.3 billion Actual Actual Q3 Cost area Completed cost initiatives YTD Q3 (NOK m) (NOK m) Airport, handling • High effect of airport- and handling-related cost initiatives during peak season 408 924 and technical • Progressing on several items with key technical suppliers costs • Lower personnel costs due to improved planning and efficiency measures • Standardizing operational tools and consumables Operating 237 582 • efficiency Improving disruption handling • Processes to close operational bases announced • Stronger effects from renegotiated volume-driven agreements Procurement, • 68 177 administration Consolidating office locations in Norway and Spain and IT • Implemented new flight planning system Commercial, • Product offering optimization 114 165 marketing and • Working with partners to release synergies product offering 827 1,848 Total 16
Continuing to deliver on strategic changes
Fuel is the largest variable expense and accounted for 30 percent of costs in 2018 Brent Jet fuel Jet fuel price and effective fuel price including hedging 1 (USD per BOE) (USD/MT) 1200 140 120 1000 885 100 639 859 800 601 728 569 719 685 80 674 672 647 582 600 580 605 614 568 560 526 498 60 514 400 40 200 20 0 0 2 2014 2015 2016 2017 2018 2019 2020 2021 JET1NECC INDEX SAS easyJet Ryanair Norwegian Brent Brent forward Hedging ratio 12m fwd at FY reporting SAS 80 % 45 % 43 % 52 % 62 % n.a. easyJet 83 % 81 % 75 % 65 % 68 % n.a. Ryanair 90 % 95 % 90 % 90 % 90 % n.a. 50 % 52 % 25 % 35 % 00 % n.a. Norwegian 18 1) Numbers presented are annualised numbers on a December year-end basis due to the different reporting standards of the peer companies 2) 2019 full year estimated with a forward fuel cost at 626 USD/MT as per 12.12.2019
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