Norwegian Air Shuttle ASA Q4 2016 Presentation 16 February 2017 - - PowerPoint PPT Presentation

Norwegian Air Shuttle ASA

Q4 2016 Presentation 16 February 2017

Highlights Q4 2016

Final approval for NAI by the US Department of Transportation (DOT) Reported EBITDA of NOK 673 million (-266) Q4 load factor up 1 p.p. to 86 % Added three new Boeing 737-800, one 787-9 Dreamliner and the first two Airbus 320neos Started 15 new routes in Q4 Norwegian.com voted best low-cost airline website at The World Travel Awards Norwegian Reward reached 5 million members

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Highlights FY 2016

Reported EBITDA of NOK 3.1 bn (1.5) Full-year load factor up 2 p.p. to 88 % Added 17 new 737-800, four 787-9 Dreamliners and two 320neos 34 new routes, including nine new intercontinental routes Launched new crew bases in Rome and Palma Start-up of routes between several US cities and Paris SkyTrax awards for World’s Best Long Haul Low-Cost Airline (second time) and Europe’s Best Low-Cost Airline (fourth year in a row)

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7 million passengers in Q4 2016 (+17 %)

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Pax (mill) 2.0 2.2 2.8 3.3 4.0 4.4 5.2 5.6 6.1 7.2

1 2 3 4 5 6 7 8

Q4 07 Q4 08 Q4 09 Q4 10 Q4 11 Q4 12 Q4 13 Q4 14 Q4 15 Q4 16

Passengers (million)

+ 17 %

Q4 load factor of 86 % (85 %)

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ASK 2,122 2,783 3,432 4,516 5,461 6,517 9,176 11,142 11,909 15,109 Load Factor 77.6 % 76.2 % 76.1 % 77.4 % 78.5 % 76.7 % 77.9 % 80.7 % 84.9 % 85.8 % 77.6 % 76.2 % 76.1 % 77.4 % 78.5 % 76.7 % 77.9 % 80.7 % 84.9 % 85.8 %

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 11,000 12,000 13,000 14,000 15,000 16,000 17,000 18,000 19,000 20,000

Q4 07 Q4 08 Q4 09 Q4 10 Q4 11 Q4 12 Q4 13 Q4 14 Q4 15 Q4 16

Load Factor Available Seat KM (ASK)

ASK Load Factor

Load +0.9 p.p.

27 % growth in capacity (ASK) 28 % growth in traffic (RPK) Average flying distance increased by 8 %

Market share up at all key airports

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2,000,000 4,000,000 6,000,000 8,000,000 10,000,000 12,000,000

Oslo Arlanda Copenhagen Helsinki Gatwick Spanish bases

Q4 11 Q4 12 Q4 13 Q4 14 Q4 15 Q4 16 + 1,096,000 pax

42 % mkt share

+ 495,000 pax

21 % mkt share

+ 486,000 pax

17 % mkt share

+ 185,000 pax

14 % mkt share

+ 657,000 pax

11 % mkt share

+ 1,661,000 pax

5 % mkt share

Mkt: 26 mill Mkt: 27 mill Mkt: 146 mill Mkt: 42 mill Mkt: 17 mill Mkt: 29 mill

Source: 12 month rolling passengers as reported by Avinor, Swedavia, Copenhagen Airports, Finavia, Gatwick Airport, Aena

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:

More than 1 million new passengers in Spain

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Key revenue drivers: More customers, new ancillary products and Reward Q4 unit passenger revenue -13 % to 0.32 (-8 % in constant currency) An average 18 % revenue growth over the last five years

15 % revenue growth in Q4

Total revenue 3,106 3,786 4,602 5,319 6,102 Passenger 2,709 3,187 3,768 4,324 4,796 % y.o.y. chg

23 % 18 % 18 % 15 % 11 %

Ancillary 340 458 663 774 927 % y.o.y. chg

16 % 35 % 45 % 17 % 20 %

Other 57 140 172 220 379 % y.o.y. chg

14 % 145 % 23 % 28 % 72 %

1,000 2,000 3,000 4,000 5,000 6,000 7,000

Q4 12 Q4 13 Q4 14 Q4 15 Q4 16

NOK million

Other Ancillary Passenger Total revenue

+ 15 %

20 % growth in total ancillary revenue in Q4

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Per passenger sales increased by 2 % to NOK 129 in Q4 Seasonal variation Full-year 2016 per passenger of NOK 134 (+5 %)

Split by category:

A total of 50 intercontinental routes in 2017

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Adding USA - Barcelona and Copenhagen - San Francisco in 2017 More new routes to be announced and adding frequency to existing routes

Scaling up the Dreamliner fleet to 32 by 2018

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2013 2014 2015 2016 2017 2018 Aircraft 3 7 8 12 21 32 Seats 873 2 037 2 328 3 704 6 800 10 584 Deliveries 787-8

(291 seats)

Deliveries 787-9

(344 seats)

Widebody aircraft

(delivered and firm orders)

Key figures and estimated Dreamliner growth

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2013 2014 2015 2016 ASK (million) 1,571 8,087 10,388 14,681 Load Factor 89 % 87 % 93 % 93 % Passengers 192,579 941,265 1,293,767 1,872,694 Legs 769 3,683 4,799 6,668 2016 2017P 2018P ASK 14 681 23 500 47 000 growth 41 % 60 % 100 % Legs 6 668 10 400 19 500 growth 39 % 60 % 100 % 2016 2017P 2018P ASK 14,681 23,500 47,000 growth 41 % 60 % 100 % Legs 6,668 10,400 19,500 growth 39 % 60 % 100 %

Forecast Dreamliners Key figures Dreamliners

Adding 32 new aircraft in 2017

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8 5 8 11 13 20 22 23 23 22 11 5 5 2 2 5 5 5 5 5 5 5 7 16 21 23 25 29 29 27 23 19 15 2 8 10 13 13 13 17 19 19 2 7 15 23 30 41 51 64 79 81

6 16

2 5 5 9 14 20 1 2 3 3 7 12

8 11 13 22 32 40 46 57 62 68 85 95 99 116 144 163

20 40 60 80 100 120 140 160 2003 year-end 2004 year-end 2005 year-end 2006 year-end 2007 year-end 2008 year-end 2009 year-end 2010 year-end 2011 year-end 2012 year-end 2013 year-end 2014 year-end 2015 year-end 2016 year-end 2017 year-end 2018 year-end

B788/B789 owned B788/B789 leased B737 MAX 8 owned B738 owned B738 S&LB B738 leased B733 owned B733 leased M80 leased

2017: Deliveries 787-9 +3096 seats Deliveries 737-800 and 737Max +4,296 seats Re-deliveries 737-800

• 744 seats

Unit cost comparison based on the latest full-year results (in NOK)

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• 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.

Financials

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EBITDA improved to NOK 673 million in Q4

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Q4 13 Q4 14 Q4 15 Q4 16 Q4 13 Q4 14 Q4 15 Q4 16 EBITDA margin

• 1 %
• 19 %
• 5 %

11 % EBT margin

• 7 %
• 26 %
• 13 %

5 %

• 41
• 869
• 266

673

• 1,000
• 800
• 600
• 400
• 200

200 400 600 800 NOK million

• 283
• 1,185
• 703

300

• 1,500
• 1,250
• 1,000
• 750
• 500
• 250

250 500 NOK million

EBT development Q4 EBITDA development Q4

(NOK million) Q4 16 Q4 15

Chg

2016 2015

Chg

Revenue 6,102 5,319

783

26,055 22,491

3,564

EBITDAR 1,357 295

1,062

5,958 3,694

2,264

EBITDA 673 (266)

940

3,116 1,481

1,635

Pre-tax profit (EBT) 300 (703)

1,003

1,508 75

1,433

Net profit 197 (373)

571

1,135 246

889

Clean EBITDA* increased to NOK 3.2 bn

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* Clean EBITDA: Reported EBITDA adj. for other losses/gains and non-recurring items

NOK million Q4 16 Q4 15

Chg

2016 2015

Chg

Revenue 6,102 5,319

783

26,055 22,491

3,563

EBITDA as reported 673

• 266

940

3,116 1,481

1,635

Other losses/gains 852

• 515

1,367

577

• 474

1,051

EBITDA ex. other losses/gains

• 179

249

• 427

2,540 1,955

584

Non-recurring items:

• industry action
• 110
• additional expense engine overhaul
• 118
• extra passenger compensation and refunds
• 192
• writedown assets for sale, gain SLB

75

• 60

104

• 60
• wetlease
• 60
• 529
• 105

Sum non-recurring items 15

• 60
• 617
• 393

Clean EBITDA

• 194

309

• 502

3,157 2,348

808 Margin clean EBITDA

• 3.2 %

5.8 % 12.1 % 10.4 %

Margin recovery following long haul build-up

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• 10%
• 5%

0% 5% 10% 15% 20% 25% EBITDAR-margin (12 months rolling) EBIT-margin (12 months rolling)

Financial crisis Fuel price drop launched Long haul

Q4 unit cost cut by 2 % to NOK 0.42

1 % lower unit cost in constant currency Unit cost ex. fuel decreased 1 % to NOK 0.32 (flat in constant currency)

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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.

Cost per ASK (CASK) NOK 0.56 0.63 0.49 0.47 0.48 0.45 0.42 0.43 0.43 0.42 CASK ex. fuel 0.41 0.42 0.40 0.36 0.33 0.30 0.28 0.30 0.32 0.32 0.41 0.42 0.40 0.36 0.33 0.30 0.28 0.30 0.32 0.32 0.15 0.21 0.15 0.11 0.15 0.15 0.14 0.13 0.10 0.10

0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35 0.40 0.45 0.50 0.55 Q4 07 Q4 08 Q4 09 Q4 10 Q4 11 Q4 12 Q4 13 Q4 14 Q4 15 Q4 16

Operating cost EBITDA level per ASK (CASK)

CASK ex. fuel Fuel share of CASK

Cost per ASK (CASK) (NOK) 0.53 0.56 0.49 0.46 0.46 0.45 0.42 0.42 0.42 0.41 CASK ex. fuel 0.40 0.37 0.38 0.34 0.32 0.31 0.29 0.29 0.31 0.32 0.40 0.37 0.38 0.34 0.32 0.31 0.29 0.29 0.31 0.32 0.13 0.19 0.15 0.12 0.14 0.14 0.14 0.14 0.11 0.09

0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35 0.40 0.45 0.50 0.55 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Operating cost EBITDA level per ASK (CASK)

CASK ex. fuel Fuel share of CASK

Full-year unit cost cut by 3 % to NOK 0.41

6 % lower unit cost in constant currency Unit cost ex. fuel increased 2 % to NOK 0.32 (-1 % in constant currency)

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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.

Full impact of lower fuel cost

Stable personnel cost at 16 % Fuel cost share reduced to 22 % Status on fuel hedging:

52 % of 2017 at USD 494 14 % of 1H 2018 at USD 497

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0.00 0.02 0.04 0.06 0.08 0.10 0.12 0.14 0.16 Q4 11 Q4 12 Q4 13 Q4 14 Q4 15 Q4 16 12 mths rolling 12 mths rolling 12 mths rolling 12 mths rolling 12 mths rolling 12 mths rolling

Personnel Other Technical Airport/ATC Leasing Depreciation Sales & Distribution Handling Fuel

Fuel 22 % Personnel 16 % Airport & ATC 12 % Handling 12 % Leasing 10 % Technical 9 %

• Gen. and
• adm. exp.

5 % Other flight

• ps. exp.

4 % Depr. 4 % Sales/ distrib. 2 %

NOK 3 bn cash-flow from operations in 2016

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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

2016 2015

Chg

Profit before tax 300

• 703

1,003

1,508 75

1,433

Paid taxes

• 29
• 44

16

Depreciation 338 367

• 29

1,296 1,133

163

Change air traffic settlement liabilities

• 445
• 186
• 259

652 1,049

• 397

Change working capital 13 245

• 231
• 381

143

• 524

Net cash flows from operating activities 206

• 278

483

3,047 2,357

690

Net cash flows from investing activities

• 1,112
• 657
• 455
• 6,512
• 5,189
• 1,323

Net cash flows from financial activities 981 1,081

• 100

3,303 3,282

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Foreign exchange effect on cash 16 11

5

33

• 7

40

Net change in cash and cash equivalents 90 158

• 67
• 131

443

• 574

Cash and cash equivalents, end of period 2,324 2,454

• 131

2,324 2,454

• 131

2,454 Cash 2,324 2,657 Receivables 3,470 2,102 Other assets 2,241 5,939 Aircraft PDP 7,156 18,482 Aircraft 22,572

5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 Q4 15 Q4 16

NOK million

Equity 4,049 2,965 Pre-sold tickets 4,666 4,014 Other liabilities 5,573 5,070 PDP and bonds 5,895 4,695 Aircraft financing 17,580 14,890

Q4 16 Q4 15

Equity improved by NOK 1.1 bn

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Added 13 new 737-800 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)

Debt mix: Number of aircraft:

1 000 2 000 3 000 4 000 5 000 6 000 7 000 8 000 9 000 10 000

2017 2018 2019 2020 After 2020

NOK million

Long-term financing PDP Bonds

Balanced mix of funding

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30 aircraft financed in US capital markets, 37 by export credits 3.7 % average interest rate on long- term aircraft financing 95 % of AC financing on fixed rates

# aircraft B737 B787 A320 Export credits 34 3 EETC 10 Private placement/banks 20 2 SLB 17 Leasing 23 9 Total 104 12 2

Debt maturity profile:

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 50 320neos 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

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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)

737-800 / 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 2017

17 737-800 (returning four old leased aircraft) Six 737 MAX Nine 787-9 Dreamliners (incl. five leased)

Three 320neos to be leased out to HK Express (Seven neos delayed)

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Summary

Strongest full-year result in the history of Norwegian Building load factor Continued passenger growth Preparing for global expansion Launch of new intercontinental routes with the 737 MAX in 2017 Financing on track

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Norwegian operates 471 routes to 130 destinations

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From bases in

SWEDEN DENMARK FINLAND

From the

UK base

From bases in

SPAIN Intercontinental

From bases in

NORWAY