A stronger competitive position Q2 2004 Oslo London 25 - 26 - PowerPoint PPT Presentation

Norw egian Air Shuttle ASA (NAS) A stronger competitive position Q2 2004 Oslo – London 25 - 26 August 2004

A stronger competitive position ● Q2 results in line with expectations ● Strong financial position maintained ● Low-cost model confirmed ● Low-fare position strengthened ● Positive EBITDA outlook for H2 2

A stronger competitive position ● Q2 results in line with expectations ● Strong financial position maintained ● Low-cost model confirmed ● Low-fare position strengthened ● Positive EBITDA outlook for H2 3

Turnover up 45% from Q2 2003 ● 311 Mill NOK in turnover in Q2 2004, compared to 215 (196 from low-fare) in Q2 2003 ● Growth driven by increased production and higher passenger volumes ● Rapid expansion accomplished with continuously higher load-factor (61% in Q2 03 to 67% in Q2 04) Mill 350 45 % 300 250 200 150 100 50 0 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04 4

Aggressive pricing impacted result ● EBITDA result of -36 MNOK in Q2 2004, versus -8.7 MNOK in Q2 2003 (low-fare) ● EBITDA result mainly impacted by aggressive competitive pricing ● EBITDA result not satisfactory, but in line with management expectations Mill EBITDA level B-737 35 25 15 5 -5 -15 -25 -35 -45 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04 5

A stronger competitive position ● Q2 results in line with expectations ● Strong financial position maintained ● Low-cost model confirmed ● Low-fare position strengthened ● Positive EBITDA outlook for H2 6

Stable cash balance ● Cash-balance marginally down from Q1 2004 to 320.5 MNOK as of July 1. 2004 ● Positive cash flow from operations of 0.7 MNOK ● Good sales in Q2 Cash Flow statement Second Quarter 2003 2004 2003 Operating activities 738 -1 870 61 498 Investments -8 243 -7 481 -28 637 Financial activities 3 682 -3 252 217 938 Net change -3 824 -12 603 250 799 Cash balance per 31 March 324 407 88 016 63 237 Cash balance per 30 June 320 583 75 413 314 036 7

Strong financial position ● Total assets of 556 MNOK ● IPO proceeds of 235 MNOK ”still in the bank” ● Equity-share of 36% Second Quarter FIXED ASSETS 2004 2003 EQUITY 2004 2003 Intangible assets 91 336 37 478 Tangible fixed assets 28 688 62 764 Paid-in equity 267 214 71 157 Financial fixed assets 13 953 14 175 Retained earnings -67 460 -280 TOTAL FIXED ASSETS 133 977 114 417 TOTAL EQUITY 199 754 70 877 CURRENT ASSETS LIABILITIES Material and consumables 9 736 9 753 Provisions 51 616 23 214 Receivables 91 423 100 889 Other long-term liabilities 26 609 Cash and bank deposits 320 583 75 413 Current liabilities 304 349 179 772 TOTAL CURRENT ASSETS 421 742 186 055 TOTAL LIABILITIES 355 965 229 595 TOTAL ASSETS 555 719 300 472 TOTAL EQUITY AND LIABILITIES555 719 300 472 No of shares 18284570 79021 Nominal share value 0,1 13 8

A stronger competitive position ● Q2 results in line with expectations ● Strong financial position maintained ● Low-cost model confirmed ● Low-fare position strengthened ● Positive EBITDA outlook for H2 9

Costs are dow n as planned ● Average unit costs of 0.54 NOK in Q2 2004, down more than 30 % from Q2 2003 (0.78 NOK) ● Scale benefits from increased production and longer sector lengths, have been main drivers ● Cost effective distribution solutions, renegotiated supplier agreements and internal efficiency improvements, are expected to bring costs even further down Cost / ASK 0,85 - 31 % 0,80 0,75 0,70 0,65 0,60 0,55 0,50 0,45 0,40 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04 10

Scale benefits realized ● Annualized ABH per pilot was 573 in Q2 2004, up 19% from Q1 ● ABH per plane per day was 6,8 in Q2 2004, up 20% from Q1 Hrs Hrs Hrs Hrs Hrs pilots pilots pilots plane plane 1000 1000 1000 10 10 10 900 900 900 9 9 9 800 800 800 8 8 8 700 700 700 7 7 7 600 600 600 6 6 6 500 500 500 5 5 5 400 400 400 4 4 4 300 300 300 3 3 3 200 200 200 2 2 2 100 100 100 1 1 1 0 0 0 0 0 0 (F) (F) A A (F) Q1 04 Q1 04 Q1 04 Q2 04 Q2 04 Q2 04 Q3 04 Q3 04 Q3 04 Q4 04 Q4 04 Q4 04 Pilot utilization (ABH pr pliot) (1) Pilot utilization (ABH pr pliot) (1) Pilot utilization (ABH pr pliot) (1) Average ABH pr plane pr day Average ABH pr plane pr day Average ABH pr plane pr day 11

More effective distribution ● Distribution costs per sold seat is down with 25 % since Q2 2003 ● Higher internet penetration, currently 60% of sold volume, is a major driver ● New internet portals for business clients and travel agents combined with new distribution channels (SMS and Narvesen), should bring costs even further down Distribution cost per sold seat Distribution cost per sold seat NOK NOK 50 50 - 25 % - 25 % 40 40 30 30 20 20 Q2 03 Q2 03 Q3 03 Q3 03 Q4 03 Q4 03 Q1 04 Q1 04 Q2 04 Q2 04 12

A stronger competitive position ● Q2 results in line with expectations ● Strong financial position maintained ● Low-cost model confirmed ● Low-fare position strengthened ● Positive EBITDA outlook for H2 13

A demonstration of strength ● Increased fleet from 8 to 11 planes and started 18 new routes in Q2 2004 ● Production increased to 642 Mill km in Q204, an increase of 147% from Q203 (261 Mill km) ● Load factor increased to 67% in Q204, an increase of 6 %- points from Q203 (61%) ● Load factor in July was 79%, up 10 %-points from a year ago Mill km RPK / ASK 700 600 70 % 500 400 50 % 300 200 30 % 100 0 10 % Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04 load factor RPK ASK 14

Stronger domestic position ● Market share of 25 % and increasing on key domestic routes ● Market share maintained and somewhat increased from Q1 to Q2, in a period with aggressive competitive pricing ● Large business clients are showing renewed interest in our services. Recently closed deal with Telenor Market share domestic main routes Q203 vs. Q204 30 % 27 % 26 % 26 % 25 % 23 % 22 % 21 % 20 % 18 % 20 % Q2 03 15 % Q2 04 10 % 5 % 0 % Bergen Trondheim Stavanger Tromsø 15

A stronger competitive position ● Q2 results in line with expectations ● Strong financial position maintained ● Low-cost model confirmed ● Low-fare position strengthened ● Positive EBITDA outlook for H2 16

Yield hit by aggressive pricing ● An increase of 33% in average sector length from Q1 2004 to Q2 2004, impacted yield levels negatively in Q2 ● Aggressive price competition had a strong adverse affect on yield levels in Q2 ● The intensity of price rivalry has recently eased off, providing room for a positive yield development in H2 1,80 1,50 1,20 0,90 0,60 0,30 0,00 Q4 02 Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04 Yield Cost / ASK 17

The overall market is grow ing Total PAX volume OSL 2003/2004 1 500 000 1 300 000 1 100 000 900 000 700 000 500 000 300 000 y h y y e y r c l t r r r r i a l r a n s e e r u e e r a p M u u a u J b b b b u A g r M J m o m m r b u a t e e e c e A J O F t v c p o e e N D S International Domestic 2004 18

Positive EBITDA outlook for H2 ● Higher passenger volumes and continued yield pressure expected for Q3 and Q4 ● A materialized ”softening” of domestic price rivalry, may affect yield levels positively in the latter part of H2 ● Positive EBITDA outlook for H2 ● An overall negative result for 2004 is expected 19

Summary: ● Q2 results in line with expectations ● Strong financial position maintained ● Low-cost model confirmed ● Low-fare position strengthened ● Positive EBITDA outlook for H2