Investor presentation January 2018

Transcription

1 Investor presentation January 2018

2 Disclaimer (1 / 2) About this Presentation We, Norwegian Air Shuttle ASA, have prepared this presentation, together with its enclosures and appendices (collectively, the Presentation"), to provide introductory information solely for use in connection with the contemplated offering of bonds ( Bonds ) issued by us and expected to be initiated in January 2018 (the Transaction ). We have retained Danske Bank, Norwegian Branch, Nordea Bank AB (publ) filial i Norge and Pareto Securities AS (the Managers ) as managers of the Transaction. This Presentation is not in itself an offer to sell or a solicitation of an offer to buy any securities. Accuracy of information and limitation of liability: Any decision to invest must only be made with careful consideration and not in reliance solely on the introductory information provided herein which does not purport to be complete. Any application to invest will be subject to a term sheet setting out the terms and conditions of the securities and an application form to which any investment will be subject to. Please do not hesitate to ask us any questions which would be relevant for your consideration and which are not contained herein. We have assimilated the information contained herein from various sources and unless stated the information is a result of our own activities. We have taken reasonable care to ensure that, and to the best of our knowledge as of 23 January 2018, material information contained herein is in accordance with the facts and contains no omission likely to affect its understanding. Please note that we make no assurance that the assumptions underlying forward-looking statements are free from errors. Readers should not place undue reliance on forward-looking information, which will depend on numerous factors, and any reader must make an independent assessment of such projections. If at any time prior to the pricing and application for the Bonds an event occurs which we, based on our knowledge, reasonably expect would affect the assessment of the Bonds, or as a result of which this Presentation would be misleading, include any untrue statement of any material fact or omit to state any material fact necessary to make the statements therein, we will promptly notify in sufficient detail, through the Managers, the potential applicants of the Bonds. The Managers have performed a limited review of our information which has consisted of a review of the financial statements including management accounts provided by us and which were audited last time on 31 December The Managers, their respective parent or subsidiary undertakings or affiliates or any such person s directors, officers, employees, advisors or representatives shall not have any liability whatsoever arising directly or indirectly from the use of this Presentation and to the extent an investment is made, such investment will be made subject to this limitation of liability. 2

3 Disclaimer (2 / 2) Risk factors: An investment in the Bonds involves a high level of risk. Several factors could cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements that may be expressed or implied by statements and information in this Presentation. There may also be a limited secondary market for the Bonds which may result in a substantial liquidity risk. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this Presentation. Please refer to slides for a description of certain risk factors associated with the Company and the Bonds. Selling and transfer restrictions: Neither this Presentation nor any copy of it nor the information contained herein is being provided, and nor may this Presentation nor any copy of it nor the information contained herein be distributed directly or indirectly to or into the United States of America (unless in accordance with an available exemption) or any other jurisdiction in which such distribution would be unlawful. No action has been taken or will be taken to allow the distribution of this Presentation in any jurisdiction where action would be required for such purposes. Nordea Bank AB (publ), filial i Norge is not registered with the U.S. Securities and Exchange Commission as a U.S. registered broker-dealer and will not offer or sell the Bonds within the United States. Neither we nor the Managers have authorized any offer to the public of securities, or has undertaken or plans to undertake any action to make an offer of securities to the public requiring the publication of an offering prospectus, in any member state of the European Economic Area which has implemented the EU Prospectus Directive 2003/71/EC. Please see the application form for further applicable selling and transfer restrictions. Manager s financial interests: The Managers and/or its employees may hold shares, bonds or other securities of the Company and may, as principal or agent, buy or sell such securities. The Manager may have other financial interests in transactions involving these securities. Confidentiality: This Presentation and its contents are strictly confidential and may not be reproduced, or redistributed in whole or in part, to any other person unless we have consented thereto in writing. By receiving this Presentation or receiving a review of this Presentation, you agree to be bound by this confidentiality obligation. Governing law and legal venue: By investing in our company, any dispute arising in respect of this Presentation is subject to Norwegian law and the exclusive jurisdiction of Norwegian courts. 3

4 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 A moderate single digit growth rate in short haul going forward Average age of fleet of 3.6 years Low fuel cost through a modern and fuel efficient fleet Continue to reduce unit cost and strengthen competitive advantage vs legacy peers Order book with 220+ aircraft on order (incl. operating leases on seven 787-9) Leasing option to third parties adds flexibility to growth rates Export credit financing (Ex-Im and ECA) and Insurance syndicate (AFIC) EETC (Enhanced Equipment Trust Certificates), Private Placements, Commercial Banks 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 with 787 Dreamliners has reached critical mass Build scalable organization and gained operating licenses for traffic rights Ramping up widebody operations to 32 aircraft by end 2018 (from 12 in 2016) Launch customer of 737 MAX 8 to operate new innovative Trans-Atlantic routes 4

5 Highlights Q Added one and two to operations Agreed with the Scandinavian pilot unions on a new three year agreement Got concessions for 153 routes in Argentina Financed the first aircraft with a combination of UKEF and JOLCO Successful placement of new secured bond (NOK 250 mill) Launched transatlantic routes from Amsterdam, Madrid and Milan Norwegian Reward celebrated 10 years Awarded best European low fare carrier by Airlineratings.com 5

6 The history of Norwegian NUK approved NAI by DoT approved by DoT 2 Long haul Caribbean Arctic Aviation Assets Ltd ATW Awards 6 Boeing SKY First-800 delivery Lavpris kalenderen New distributionsystem 6

7 Growth Western/Central Africa Growth Southern Africa Strategy : Maintain short haul within Europe, grow medium/long haul between Europe and the rest of the world & exploit new/underserved markets North America Asia Europe Core Large cities in U.S. & Europe Core Within Europe Core / Growth Mid-sized cities US & Europe / New markets Africa South America Growth Oceania Arg. & Chile Legend Short B737-8 B737-MAX Medium Long A320neo B787-8/9 B737-MAX 7

8 The co-existence of multiple AOCs within the Group provides a global platform for growth NORWAY-AOC only UK AOC only EU-AOC only UK AOC only EU-AOC only UK AOC only EU-AOC only NORWAY-AOC only EU-AOC only EU-AOC only NORWAY-AOC only EU-AOC only EU-AOC only 8

9 Dry Lease The future requires a flexible 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 9

10 Financials

11 Available Seat KM (ASK) Load Factor Stable load despite high ASK growth 25 % growth in capacity (ASK) and traffic (RPK) 80,000 75,000 70,000 65,000 60,000 55,000 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5, % 78.2 % 77.4 % ASK (12m) Load Factor (12m) Load -0.2 p.p % 78.5 % 78.3 % ASK (12m) 11,530 13,555 17,804 21,957 25,920 34,318 46,479 49,027 57,910 72,341 Load Factor (12m) 78.7 % 78.2 % 77.4 % 79.3 % 78.5 % 78.3 % 80.9 % 86.2 % 87.7 % 87.5 % 80.9 % 86.2 % 87.7 % 87.5 % Q4 08 Q4 09 Q4 10 Q4 11 Q4 12 Q4 13 Q4 14 Q4 15 Q4 16 Q % 80% 60% 40% 20% 0%

12 Flat unit revenue despite high ASK growth December traffic highlights: 32 % production growth (ASK) Cabin factor of 84.6 % 12 % passenger growth Average distance increased by 16 % Decem ber Dec-17 Dec-16 chg Internet bookings 79 % 78 % 1 p.p ASK (mill) 6,423 4, % RPK (mill) 5,435 4, % Load factor 84.6 % 84.6 % 0.0 p.p Passengers 2,402,005 2,145, % Traffic 12 m th rolling Dec-17 Dec-16 chg Internet bookings 75 % 75 % 0 p.p ASK (mill) 72,341 57, % RPK (mill) 63,320 50, % Load factor 87.5 % 87.7 % -0.2 p.p Passengers 33,149,555 29,301, % Flat unit revenue (RASK) y/y 12

13 NOK million NOK million Q3 EBT of NOK 1.4 billion Q3 17 Q3 16 Chg 12 mths rolling Q mths rolling Q3 16 Chg Revenue 10,074 8,331 1,743 29,131 25,243 3,887 EBITDAR 3,180 2, ,920 4, EBITDA 1,991 1, ,385 2, Pre-tax profit (EBT) 1,351 1, Net profit 1, ,500 1,250 1,000 10,074 8,331 1,743 29, ,243 3, osses/gains 1,505 1,904EBITDAR 12 mtebitdar ,495 1,415 1,080 Wetlea EBITDA 12 mthebitda EBT 12 m EBT development Q ,098 1,270 1,351 Q3 14 Q3 15 Q3 16 Q3 17 EBT margin 10 % 17 % 17 % 3 % 800 Q3 17 Q3 16 Chg Revenues 12 mrevenues 664-1, ,872 Write-d EBT 12 mths EBT Net profit 12 mnet Profit Q3 14 Q3 15 Q3 16 Q3 17 Other losseother losse EBT development Q3 12 mths rolling mths rolling Q mths rolling Q3 16 d 1,991 1, ,385 2, Passen Paid taxe Deprecia Changes Other adju Investing Q3 14 Q3 15 Q3 16 Q3 17 Financing EBT margin -4 % -2 % 2 % 2 % Net chang 664 Chg 13

14 EBITDA (ex. other losses/gains) bridge * Ex. other losses/gains 14

15 Comparison of unit cost incl. depreciation Sources: Based on official full-year 2016 annual reports 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. 15

16 YTD split of unit revenue and cost by currency Currency split gross RASK*: Currency split CASK: * Includes ancillary and other revenue in addition to passenger revenue 16

17 NOK million Net debt reduced by close to 3 billion YTD Added two 787-9s, six 737 MAXs and three 320neos on balance the last 12 months NOK 18.3 net debt (reduced from 19.3 bn in Q2 2017) 11 % equity ratio (10 %) 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5, ,573 6,583 2,109 3,405 2,233 Aircraft 22,649 Aircraft PDP 5,313 Other assets 1,877 Current assets 7,862 Cash 5,567 Q3 16 Q3 17 Aircraft financing 17,775 PDP and bonds 6,045 Other liabilities 7,717 16,145 4,777 5,284 Pre-sold tickets 6,895 5,111 Equity 4,826 3,587 Q3 17 Q

18 NOK million NOK 1.0 billion cash flow from operations in Q3 Highlights Cash development Q3 Strong liquidity with NOK 5.6 bn in cash at the end of Q3 6,000 5,000 5,567 Cash flow from operations of NOK 3.8 bn the last 12 months (2.6 bn) 4,000 3,000 Invested NOK 2.3 bn the last 12 months 2,000 2,297 2,233 1,000 1,431 - Q3 14 Q3 15 Q3 16 Q3 17 NOK million Q3 17 Q3 16 Chg 12 mths rolling Q mths rolling Q3 16 Chg Profit before tax 1,351 1, Paid taxes Depreciation ,025 1, Change air traffic settlement liabilities -2,143-2, , Change working capital 1, , Net cash flows from operating activities ,348 3,818 2,631 1,188 Net cash flows from investing activities ,748 1,049-2,327-6,075 3,748 Net cash flows from financial activities ,322-1,780 1,890 3,403-1,513 Net change in cash and cash equivalents , ,512 Cash and cash equivalents, end of period 5,567 2,233 3,334 5,567 2,233 3,334 18

19 A strong track record in attracting financing Main debt financing sources Comments Ex-Im guaranteed funding since ECA and AFIC in 2017 Long term aircraft financing Sale and lease-back of aircraft Commercial funding EETC and Private Placements in 2014, 2015 and 2016 Pre-delivery payment financing ( PDP ) Tenor: Matures at the delivery of each aircraft Bond financing Covenants: Minimum equity (NOK 1,500 mill) Minimum liquidity (NOK 500 mill) Dividend payments less than 35% of net profit NAS06 Size: 1,250 MNOK Coupon: 3mN+575bps Maturity: 22 May-18 NAS07 Size: 185 MEUR Coupon: 7.25% Maturity: 11 Dec-19 NAS08 Size: 1,000 MSEK Coupon: 3mS+500bps Maturity: 07 Aug-20 NAS09 Size: 250 MNOK Coupon: 3mN+395bps Maturity: 21 Nov-20 19

20 Financing on track Expected capex (all aircraft incl. PDP) USD 2.1 bn for 2018 PDP financing / liquidity SLB of a total s (the last two in 2018) Paid down unsecured bond in July 2017 (NOK 1 bn) Undrawn credit facility of NOK 325 million (of NOK 1 bn) Long-term financing Financing in place for all deliveries through Q Utilizing a mix of long-term financing for the deliveries in 2018 to 2020 with AFIC and export credits 20

21 Markets and routes

22 A portfolio of more than 60 intercontinental routes 22

23 ~17 % longer range to reach new markets 737 MAX 3,100 nm/5,741 km ,640 nm/4,889 km Standard Operational Rules 50% annual winds Airways and traffic allowances included includes optional winglets Source: Boeing 23

24 737 MAX advantage 13 % lower fuel consumption per seat per trip Boeing Boeing 737 MAX 8 4 % lower seat costs per trip 189 passengers (+3) Source: Boeing 24

25 Accelerating growth in the US 11 % passenger growth in the Nordics 79 % and 25 % growth in the US and Spain respectively Growth in number of passengers in Q3 17 (y/y): Split passengers by origin in Q3 17: 25

26 Continued growth at all key airports Source: 12 month rolling passengers as reported by Avinor, Swedavia, Copenhagen Airports, Finavia, Gatwick Airport and Aena 26

27 Fleet and expansion

28 Adding 25 new aircraft in : Deliveries ,724 seats Deliveries and 737 MAX +2,640 seats Re-deliveries seats 28

29 Youngest fleet among peers Norwegian Aeroflot Wizz Air Spirit Airlines Frontier Airlines Emirates Etihad Qatar Turkish Airlines Ryanair Vueling Easyjet Virgin America Eurowings Finnair JetBlue Flybe Group Iberia SAS American Airlines Southwest Air France KLM Lufthansa British Airways United Airlines Delta Airlines Widerøe Average fleet age Source: Planespotters.net, January

30 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 Ranking, 2014, ICCT (The International Council on Clean Transportation) published November

31 Outlook 31

32 Capacity adjusted forward bookings The graph shows booked and paid travels. Bookings per January 22, 2018 and January 23, 2017 (corresponding weekday). 32

33 Outlook for 2018 An estimated production growth (ASK) of 40 % Increasing distance driven by mix (long haul) Unit cost estimate of NOK ex. depreciation and incl. depreciation Assumptions: Fuel price of USD 575 per metric ton, USD/NOK 7.75, EUR/NOK 9.00 Based on the current route portfolio and planned production Fuel hedging 25 % of 2018 at USD new aircraft entering operations in 2018 Two s Twelve 737 MAXs Eleven Dreamliners (incl. six leased) 33

34 Summary of risk factors 34

35 Summary of risk factors (1 / 4) No investor should make any investment decision without having reviewed and understood the risk factors associated with investing in the Bonds. The order of appearance is not intended to indicate importance or likelihood of occurrence. References to the Company shall be read as the Issuer, its Subsidiaries and/or the Norwegian Air Shuttle group as a whole. Uncertain global economic and financial market conditions could adversely affect the Company s business, results of operations, financial condition, liquidity and capital resources. Changes in the general global or national economic and financial market situation or adverse market perception may affect the financial performance of the Company. The aviation industry is highly competitive, and new market entrants could disrupt the competitive environment and the Company may not be able to keep pace. The Company s operating results may be materially affected by fluctuations in the price and availability of jet fuel. Airline insurance may become too difficult or expensive to obtain, which could expose the Company to substantial loss and may have a material adverse effect on its business, financial condition and results of operations. The adoption of new regional, national and international regulations, or the revision of existing regulations, could have a material adverse effect on the Company's business, financial condition and results of operations. Fluctuations in foreign exchange rates may affect the Company s results of operations and financial position. The Company seeks to mitigate the effects of market fluctuations in currency, interest rate and jet fuel positions through the use of derivative instruments. In certain circumstances, the market price of the derivatives may change substantially and the Company may suffer substantial hedging losses. Currently, the Company s firm aircraft orders totals 221 aircraft. The Company s aircraft orders require substantial capital expenditures and are associated with risks relating to delays and malfunctions. There can be no assurance that the Company s capital resources will, at all times, be sufficient to satisfy its business and liquidity needs or that it will be able to successfully deploy new aircraft into operation. 35

36 Summary of risk factors (2 / 4) Outbreaks of epidemics, pandemics or natural disasters can adversely affect the demand for air travel and have a significant impact on the Company s operations. Military conflicts or the threat of such conflicts, as well as their aftermath, may have a materially adverse effect on the Company's business. The Company has in the past experienced extensive operational and technical problems relating to the delivery and phase-in of its new Dreamliner aircraft, which have led to extraordinary costs for the Company. There can be no guarantee that similar or other operational disruptions and interruptions will not influence the Company in the future. The Company is exposed to the risk of significant losses, directly or indirectly, from aviation accidents involving its operations, including plane crashes and other disasters. The Company s insurance or indemnities may not adequately cover all risks or expenses. Geopolitical tension, terrorist attack, or the threat of such attacks, could result in a significant reduction in passenger airline travel and hence have a material adverse effect on the Company s business, financial condition, results of operations. Seasonal fluctuations and cyclical changes may have a material adverse effect on the Company s business, financial condition, results of operations and future prospects. The Company s business, financial condition and results of operations may be affected by ability to secure new efficient aircraft deliveries in the future. Norwegian`s largest shareholder has the ability to exert significant influence over the Company s actions, even if it does not have decisive influence or formally exercises negative control. The Company requires a significant amount of cash to service its debt and sustain its operations, and the Company may incur more debt in the future. The Company s ability to generate sufficient cash depends on many factors beyond its control, and its ability to incur more debt may be restricted by debt covenants. There can be no assurance that the Company will be able to refinance any of the existing or future debt. Fluctuations in interest rates may affect the Company s results of operations and financial position. Capacity constraints at airports or an inability to acquire and maintain airport slots or overflight rights may have a material adverse effect on the Company s business, financial condition or results of operations. 36

37 Summary of risk factors (3 / 4) The Company s dependence on third-party suppliers has increased in recent years in line with the growth of the Company, exposing it to the risk of quality and availability issues and/or unexpected costs associated with third-party suppliers. The Company is exposed to the risk of strikes and other work-related disruptions. The Company s prior or present tax position may change as a result of the decisions of tax authorities or changes in laws and regulations, possibly with retroactive effect, which may have a material adverse effect on the Company s results of operations and financial position. The Company may not be successful in attracting, training and retaining sufficient skilled employees. The Company is dependent on the uninterrupted operation and security of information technology systems. Any deterioration in brand image or consumer confidence in its brand might adversely affect the Company s ability to market its services and attract and retain customers. The Company faces the risk of litigation, arbitration and other proceedings in relation to its business. The Company is exposed to the residual value risk and also to the impairment of the value of the aircraft it owns during the ownership period. A negative development in the Company's third party leasing operations might impair its ability to employ all its current and future aircraft, which again may have a material adverse effect on the Company. The Company is dependent on several public authorizations, hereunder relating to the operations of its aircraft and routes, and any cancellation of such authorizations might have a material adverse effect on the Company s business, financial condition and results of operations. The Company may incur additional costs as a result of the EU Court ruling on compensations for delayed flights. The EU Regulation on OTC derivatives, central counterparties and trade repositories may limit the ability of the Company to enter into derivatives transactions to manage its risk exposure. 37

38 Summary of risk factors (4 / 4) The Company may be subject to liability under both current and future environmental laws and regulations. The future development of the regulatory regime of member states in the European Union might have a material adverse effect on the Company s business, financial condition and results of operations. The Bonds may not be a suitable investment for all investors. Movements of the market interest rate can adversely affect the value of the Bonds and can lead to losses for the holders of Bonds if they sell their Bonds. The Bonds are not guaranteed or secured and will be subordinated to all secured creditors of the Company. Any assets remaining after repayment of the Company's secured debt may not be sufficient to repay all amounts owing under the Bonds. The Company's issuance of further debt or granting of security may reduce the amount recoverable by the holders upon the winding-up or insolvency of the Company. Although the occurrence of specific change of control events affecting the Company or of a de-listing event will permit the holders to require the Company to redeem the Bonds, the Company may not be able to do so. There is no existing trading market for the Bonds, a trading market that provides adequate liquidity may not develop, the Bonds may be subject to purchase and transfer restrictions and the trading price of the Bonds may be volatile. No market-maker agreement is entered into in relation to the Bonds. Resolutions passed at meetings of holders of Bonds can bind all holders, including holders who did not attend and vote at the relevant meeting and holders who voted in a manner contrary to the majority. The Bonds and the Company are subject to Norwegian law, and Norwegian law may not be as favorable to Bondholders as laws of other jurisdictions, and there are risks of changes to such laws. The investment activities of certain investors are subject to legal investment laws and regulations, or review or regulation by certain authorities. Materialization of any of the above or other risks may have a material adverse effect on the Company s business, financial condition, results of operations and future prospects and thereby, on the Issuer s ability to fulfill its obligations under the Bonds as well as the market price and value of the Bonds. 38

39 Norwegian offers more than 500 routes to over 150 destinations 39