Earnings call: Norwegian Air reports record EBIT, robust Q4 performance By Investing.com

Norwegian Air Shuttle ASA (NAS.OL) concluded the fourth quarter of 2023 with a robust financial performance, as detailed by CEO Geir Karlsen and CFO Hans-Jorgen Wibstad. The airline achieved a record EBIT of NOK2.2 billion for the year, underpinned by strong liquidity and operational improvements. With the acquisition of Wideroe, expansion of fleet and bases, and a focus on cost efficiency and customer satisfaction, Norwegian Air is well-positioned for continued growth in 2024.

Key Takeaways

• Norwegian Air achieved a record EBIT of NOK2.2 billion in 2023.
• Strong liquidity with NOK9.5 billion in the bank.
• Q4 operating profit reached NOK328 million, with unit revenue up by 17%.
• Ancillary revenue per passenger stood at NOK173.
• EBITDAR showed significant improvement, indicating a robust underlying business performance.
• The balance sheet remains strong, with a higher cash balance and an equity ratio just below 20%.
• Dividend proposed at 0.60 ore per share, totaling 820 million, set aside in a dividend fund pending bondholder approval.
• Expansion plans include flying 90 aircraft in summer, and opening new bases in Riga, Palma de Mallorca, and Barcelona.
• Acquisition of Wideroe and positive synergy forecasts above 300 million.
• 2024 outlook includes a 12% capacity increase and EBIT guidance of NOK 2.5-3.2 billion.
• Upgraded to a B rating for sustainability efforts.

Company Outlook

• Norwegian Air plans to increase capacity by 12% in 2024.
• EBIT guidance for 2024 is set at NOK 2.5-3.2 billion.
• Focus on cost management, particularly in on-time performance, ground handling, maintenance, customer service, and distribution costs.
• Continued efforts to reduce costs through operational improvements and automation.
• Optimistic about future growth and acquisitions.
• Sustainability efforts are ongoing with an upgrade to a B rating.

Bearish Highlights

• The competitive landscape in the Nordics shows reduced capacity among airlines.
• WIZZ and Ryanair have reduced capacity, impacting the market.
• Engine issues have affected aircraft availability.

Bullish Highlights

• Record EBIT and strong liquidity position the company for growth.
• Positive booking trends for 2024 with higher volume and yields.
• Gaining market share in the corporate market with new agreements.
• Strong underlying business performance as indicated by improved EBITDAR.

Misses

• Delivery costs for future orders may increase by 10-15% in 2025 dollars.
• Boeing (NYSE:) is delivering fewer aircraft than sold, leading to order book adjustments.

Q&A Highlights

• Discussed assumptions for jet fuel prices and tax implications.
• Bookings are slightly earlier, and working capital is stable.
• Synergy guidance for Wideroe was upgraded, potentially contributing to the 2024 guidance.
• Order book for new planes discussed, with potential savings in CapEx due to configuration changes.
• The company is 60% exposed to other currencies, with 40% in U.S. dollars.

In conclusion, Norwegian Air Shuttle’s Q4 earnings call painted a picture of a company on the ascent, with strategic acquisitions and operational efficiencies bolstering its financial performance. The airline’s leadership remains focused on sustainable growth and profitability as it navigates the competitive aviation market.

InvestingPro Insights

Norwegian Air Shuttle ASA (NWARF) has demonstrated a strong financial performance in the recent quarter, which is further supported by real-time data and analytics from InvestingPro. Here are some key metrics and tips that investors might find valuable:

InvestingPro Data:

• The company’s market capitalization stands at $1.52 billion USD, indicating its substantial presence in the market.

• Norwegian Air Shuttle is trading at a P/E ratio of 11.53, suggesting that the stock may be undervalued relative to its earnings.

• Revenue growth has been impressive, with a 43.68% increase over the last twelve months as of Q3 2023.

InvestingPro Tips:

• Analysts are optimistic about the company’s sales growth in the current year, aligning with the expansion plans and increased capacity outlined in the article.

• The stock is currently in overbought territory according to the RSI, which may interest traders looking for momentum in the market.

For those looking to delve deeper into Norwegian Air Shuttle’s financial health and future prospects, InvestingPro offers additional tips. There are 16 more InvestingPro Tips available for NWARF, each providing nuanced insights that could help investors make informed decisions.

Investors can take advantage of these insights by using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at https://www.investing.com/pro/NWARF. This offer could be particularly valuable for those seeking to understand the potential impact of Norwegian Air Shuttle’s recent acquisition of Wideroe and its operational improvements on the stock’s future performance.

Full transcript – Norwegian Air Shuttle OTC (NWARF) Q4 2023:

Jesper Hatletveit: Good morning and welcome to the Fourth Quarter Presentation for Norwegian Air Shuttle. My name is Jesper Hatletveit and I am the VP of Investor Relations here at Norwegian. Today’s presentation will be held by our CEO, Geir Karlsen, and our CFO, Hans-Jorgen Wibstad. It will be followed by a Q&A from the audience and the web. Please go ahead, Geir.

Geir Karlsen: Thank you. Good morning, everybody. Good to see you. I think this is a good day for Norwegian, and I think the picture we are seeing here is a really good one, representing the red team and the green team now joining forces. Also happy to see that Stein Nilsen, the CEO of Wideroe is here today to join us during the day. So if we go through the highlights for the quarter and also for 2023, we ended 2023 with NOK2.2 billion in EBIT. That is already guided, so it’s known for the market. But it is the best ever EBIT in the company, also the EBIT margin, and we are very pleased about that. Also, in the fourth quarter, we did NOK328 million in EBIT, in a quarter that is usually tough when it comes to seasonality as such. We are still having a strong liquidity position, NOK9.5 billion. Looking at the liquidity position today, it’s higher, even if we have done the transaction with Wideroe. We are putting aside a dividend provision of NOK0.6 per share. That is on top of what we already distributed or accrued or set aside late in 2023. I will go through the booking momentum more in detail, but it’s looking good. I would say very good. We are adding capacity. We are opening up new bases, and we are going to fly approximately 90 aircrafts during the coming summer as planned. We have 300 routes for sale for the summer. We are doing quite well on operation. We are among absolutely the top players in the industry in Europe on performance. I’ll go very much in detail back on that [technical difficulty] because it’s material for the cost level of the company, and not at least customer satisfaction. We had 82% functionality in Q4. That might seem low, but taking into consideration the value condition that we have seen over the last couple of months, we are quite pleased about it. We are continuing the work on sustainability. I’ll get back to that as well. We are very happy that we have finalized the acquisition of Wideroe. I can say that the enthusiasm in both companies is to really feel, and I’m very happy that we have got a really good start on that journey. This one is showing the seasonality that we are having in the markets that we are flying, and it shows that by reducing capacity over the seasons, we are able to keep a relatively high yield, and as well a relatively stable booking or load throughout the seasons and throughout the months. In January, we were at a low point when it comes to seats for sale, and we are already in February, the current month, upgrading and starting to ramp up into the summer. So, we’re adding — let’s say within the next couple of months, we are adding approximately 900,000 seats per month, then heading into the summer season. This is absolutely vital to be able to do this throughout the seasons in order to create a sustainable profitability on what I call a 12-month rolling basis. Looking at the bookings for 2024, we had a very successful New Year’s sale. We sold more than 1 million tickets. The fares are significantly up compared to last year and the years before. We are starting to see a little bit more visibility when it comes to the booking curves, so the passengers are booking slightly earlier than what we have seen over the last couple of years. We have a relatively stable load compared to the same period last year, but with a much higher volume, of course, because we are growing. We’re also seeing that the fares are significantly above 2023, which also applies then obviously to the yield. As you can see on the graph on the top right side here, this peak is kind of the New Year’s sale. But the good thing is that if you see on the continuation of that, the bookings are kept at a relatively high level and also at a higher yield than what we have seen in 2023. Also, on the bottom here, you can see that we have surpassed 2023 and we are now also on our way passing the 2019 curve. And have in mind that in 2019, we had 18% to 20% higher capacity. So — but even with that in mind, we are above the 2019 curve, which is really good news for us. We are also continuing to work on the customer satisfaction score. And the NPS score in January was 39.4, and that is 9% up from last year. This is very important and it shows how the customers, the passengers are appreciating the services that we are offering throughout the years and the months. I would like to spend a little bit of time on the cost side of the business. We are under pressure on the cost side due to many factors, also macro factors. What we have been trying to do through 2023 is really to work hard on on-time performance. Why? First of all, because we know that this is one of the most important issues for the passengers. And we are, as I said, among the top companies in Europe. We have been taking the on-time performance up 2%, two percentage points from last year. That might seem low, but it’s quite significant in real terms when you compare yourself with the others. And it has an effect on crew, on fuel, handling, ATC charges, EU261, et cetera. So, it has a massive impact when it comes to the cost side in the daily operation of the business. Crew efficiency is another area that is very important and that an area that we have been working on for the last couple of years. We have increased the efficiency by 7% during the last 12 months. If you look at the crew efficiency back in pre-pandemic until now, the figure is much higher, much higher. So, that is an area that we have been working on and that we will continue to push throughout 2024. Aircraft and crew availability is another big one. What we are trying to do is to do all the crew training during the low season. We are trying to do all the heavy maintenance on our aircraft into the low season in order to free up all the capacity in the peak season when we need all the aircraft in the air and all the fantastic crew as well in the air. That’s another big one. Baggage handling. We have been reducing the compensation to the passengers by more than 30%. This is also a big one and it saves us millions, tens of millions if we can do this the right way. Self-handling. That means that the customers can do more themselves. They don’t have to call us and they can do more at the airport. They can buy up — buy extra services at the airport, at the kiosks, et cetera. It’s another area we have been working on for quite a while. SkyBreathe is a technology that we are using in the cockpits in order to fly the most efficient as we can. This is a kind of an application that many airlines are using and we are rated on a monthly basis. And we are also on top on that ratings, month by month over the last year. This is very important in order to fly efficient and thereby then to have a fuel savings. On the macro side, however, we have had tailwind or headwind on the local currency. Obviously, we have high inflation that is hitting us as well. That’s why we are unfortunately seeing an increase in cost from 0.44 to 0.48. And one of the costs that are increasingly — increasing is the distribution cost. That is also as a result of the fact that we are doing better in the corporate market where the distribution costs are higher. We are trying to push whatever we can, all the sales into the direct distribution channels, meaning our own website, et cetera. But we have to realize that when we are kind of pushing towards the corporate market, we will have increased distribution costs. A fun fact here is really if we should measure ourselves in euro cent and take away the weak Norwegian krona, we will have a slightly decrease in CASK in reality from 2022 to 2023. So this is the main areas. There are many other areas that we have been focusing on during 2023, but I would say this is the main areas with a focus and with a high impact as well on the cost side. The corporate market. I think we have probably been pushing the corporate market more than we ever had done in Norwegian. And we are starting to see results from that over the last, I would say, 18 months. One huge factor is the operational excellence, as we call it in Norwegian, and the on-time performance. And as you can see, we have the two AOCs, then rated, let’s say, among the eight top performers in Europe. And in certain months, we have also been number one. You can also see on the regularity, meaning the number of flights we are flying compared to what we have for sale, we’re actually there number one in Europe in 2023. If you have taken out the difficult winter months, for example, January and February in 2023, we will have gone even higher up on the list as such. This is very important by all the reasons I have mentioned, and this is also very important on the corporate travelers. So what we are seeing that we — it’s difficult to see, to have a precise figure on how — on to what extent the corporate market is back. But looking at the Deloitte study, for example, which is one of many, we believe that the corporate market is probably back in the area of 80%. So taking that into consideration, we are seeing an increased number of passengers, and we are certainly seeing an increase in revenues on the right hand side here. So that clearly tells us that we are taking market share on the corporate side. It is a combination of the fact that we have more passengers and that the yield is higher as well. So it is a combination. We have launched a campaign, I think it’s probably 15 months ago, when it comes to signing up the small and mid-sized companies. We have been signing up 2,500 new agreements through 2023, which is then 62% off from the previous year. We have also renewed quite a few corporate agreements on the bigger corporates. And we are also very happy to see that we have now signed up large Nordic corporates that we have never had contracts with before. That shows that the services we are providing, the punctuality that we are providing, and not at least the price level we are offering is attractive. We have also started the new contract with the armed forces, where they are going to buy a significant amount of seats per year. And based on the bookings that we have seen so far, it’s just a few weeks, it shows that the run rate most likely will be higher than the minimum volume they will be buying. So with that, Hans-Jorgen.

Hans-Jorgen Wibstad: Thank you, Geir. Good morning, everyone. Good to be here and good to be able to present a good result for Norwegian for the fourth quarter 2023 as well as for the full year. So I’ll do a little bit of diving into the details. As you can see, the unit revenue is up 17% with the same quarter last year, reflecting a better market. Obviously down from Q3, but reflecting kind of the seasonality of the market. So that’s really good. We’re also seeing that the ancillary revenues is up to a good level of NOK173 per pax compared with NOK152 last year. Looking at the passenger traffic, obviously down from the third quarter, naturally due to season. But as Geir said, we are effectively adjusting our capacity to the market demand, thereby securing our profitability and the robustness of the business. So that’s really good. We’re delivering an operating profit of NOK328 million for the quarter. And as you know, NOK2.232 billion for the full year, which is higher than our guiding in after the third quarter, but according to our update to the financial markets in January. So we’re very happy with that. We’re also happy to see that we were able to be within the CASK guidance after the third quarter at 0.48. And that is kind of despite some of the macro headwinds and some of the challenges that Geir talked about, but also reflecting that we are in good control of our cost and that we have many, many good initiatives ongoing. I think one thing which is worth noting is on the EBITDAR. It’s kind of the best proxy maybe of the underlying earnings of the business. This improvement from Q4 2022 from 648 to 1,170, it’s an increase of more than 500 million, kind of underlying — kind of what is the underlying improvement. And looking at the full year, the underlying improvement on EBITDAR is NOK3.4 billion from 2022 to 2023. And we think that is a good proxy of the underlying improvement in the business. The balance sheet, as Geir also mentioned, remains robust. We have a slight improvement on the cash balance. We’re also seeing that our equity ratio is maintained at a good level, just below 20%. And we are well prepared for the acquisition of Wideroe, which took place in January. That was also mentioned earlier. And as Geir said, at the moment, our cash balance is actually higher than it was at the end of the quarter, despite the acquisition and the payment to the previous owners of Wideroe. Looking a little bit further into the key details. Our operating revenue is up 19% compared with the same quarter last year, which is really good, significantly higher than we ask. So that’s kind of reflecting improved yield and load. Our operating expenses are according to plan, as we hit well on our guiding at 0.48. We can see quite a significant increase in our personnel expenses. That is reflecting a higher number of FDEs. We have in-stores ground handling, and also ordinary salary adjustments. So that may look like a big figure, but it’s well explained by that. The other main items on the cost side is kind of as expected. Also partially reflecting the weak Norwegian kroner, which is impacting, obviously, on the cost where we have both euro and dollar denominated costs to a very large extent. Looking at the full year, strong increase in the revenue, 35% growth. That’s really significant, yield — based on higher capacity, as well as higher yields and load factor. Operating expenses, as I said, according to plan. Here you can clearly see the EBITDAR improvement from NOK2.4 billion to NOK5.8 billion. Very, very significant improvement. Of course, last year was impacted by the Boeing and the placement of the new orders that resulted in a reversal of NOK2 billion. And then we can see the bottom line going from NOK1 billion to NOK1.8 billion for the full year. On the balance sheet, not so much to say about the balance sheet as such. It’s kind of stable, solid. Things are going according to plan. It’s worth noting on the top line there that we have deferred tax assets, which are just below the NOK2 billion mark, meaning that we will in the next few years not pay taxes. And that is an important asset as well. And it’s worth noting that. But I’m talking then about, obviously, about tax payable. The other thing worth noting on this one is the reduction in holdback. That has been an issue over the last two years. As many of you may recall, we were at more than 100% coming down gradually. We were coming down to below 50%. Now it’s at 16%. That means that we have stabilized at the kind of normalized level on the holdback. That also means that we have — that is kind of a credit assessment by the credit card acquirers. And it really is a kind of a good recognition of the hard work and the quality of the balance sheet as we move forward. So that is an important thing. And it’s also partially one of the key things explaining why we, in a kind of a seasonally weak quarter, has been able to maintain a cash balance or slightly increase in the cash balance. The other thing worth noting is that the booking, the air traffic liabilities, is down from 3.9 billion to 3.2 billion from last quarter to this quarter. That is obviously explained by the seasonality in the booking. But it’s also worth noting that this number was 2.6 billion at the same time last year. So we’re talking about a 24% improvement in the air traffic liabilities from last year to this year. And that’s kind of also reflecting kind of the booking momentum and also the increasing yields that we have seen over — during this year and into 2024. So that is actually a good KPI despite kind of the seasonally drop in the particular figure. Equity ratio, as I mentioned, 18.9%. Stable at just below 20%. Net interest bearing debt, very stable at 4.8 — 4.5 billion, 4.6 billion. Just slightly going up. We’ve added three aircraft. On the other hand, the assets and liabilities denominated in dollars has come down, kind of countering that increase in aircraft liabilities. So that’s kind of stable. And other than that, it’s pretty stable. So that’s good. We have 87 aircraft at the end of the quarter. What we have been doing in 2023 is to work on the optimization of the balance sheet. We have retired 935 million of debt. So taking that into account also on the cash figure, it’s kind of a good reflection of how relatively robust or actually very robust the balance sheet is. And that is include — we have repaid or actually repurchased part of the retained claim bond and also retired in last 13 bond. Those are the big ticket items on that. Just to add a couple of words on the dividend that we have proposed, 0.60 ore per share equal to a payout ratio of about 35%, which we think is a decent level. And that’s adding to the 0.25, which was based on the 2022 figures. So in total, that is 820 million, which will be set aside for future dividend payment if we are not getting approval to pay a dividend from the bondholders. Now, we are in dialogue with bondholders on that, but kind of the latest time where this dividend should be able to be paid is in September 26. So — but we will set it aside unless we get that approval before the annual general meeting. And then we will establish a dividend fund where these kind of 820 million will be set aside and accumulated until such time as we’re able to pay that dividend and get the kind of approval from our debt holders. Just final few words on the cash flow. I think we talked quite a bit about that. A strong operating cash flow, NOK938 million, largely also reflecting the improved terms from the credit card acquirers. We’ve done some investment, including a LEAP engine, NOK270 million, repayment of aircraft leases, 541, and basically then ending up with about NOK9.5 billion at the end of the quarter and at the end of the year. All right. Thank you.

Geir Karlsen: Yes. Okay. So let’s look into 2024 and the rest of the year. I’m going to continue to talk about the costs in the company, and this is maybe the main areas that we are going to focus on now when it comes to the cost side in 2024. On-time performance and regularity, I’ve been through it already. That is absolutely vital. We are doing fine and we’re going to fight every single day to keep the same track record as we have been seeing over the last year. Ground handling and airports is another one. We are under pressure, especially on the airport side, I would say, where the fees are increasing throughout Europe. It applies to all the airlines. We have been renegotiating quite a few contracts with airports. We have been doing a massive work on the ground handling side where we have renegotiated contracts. We are moving away from one vendor to Wideroe here in Norway on the ground handling. Now we are part of the same family, which I expect then will give effects. Maintenance side on the engines, that’s a big one. That’s a big cost item in an airline. We have changed vendor from — we actually changed from Lufthansa to GE. We did that last year, but it’s starting — it will have a full effect now in 2024. We have implemented what I call self-service tools towards our own crew. That will give results when it comes to the crew efficiency, but it will also give our fantastic crew the tools available to make sure that they can actually manage things between themselves, meaning that they can have more flexibility, they can swap between each other. And by that, having a higher, what we call work-life balance, which is a high focus among the crew today. Customer service is another area where we are focusing a lot. It’s about the service level, but it is also about making sure that our passengers can do more themselves, meaning that they don’t have to contact us. We have achieved quite some results on that area as well. And then the distribution costs, as I mentioned earlier, we are trying to push sales through direct channels, and that is a work that will continue. Base structure, we are increasing the fleet. We are moving outside of the Nordics for the first time since pre-pandemic. We are opening up a base in Riga very soon, in April, and we’re also opening up a summer base for the time being at the Palma de Mallorca, and the Barcelona base will also be a 12-month base going forward. And by that, we have — and by growing the fleet, we are more able to optimize the fleet and the base structure, and by that turning the airline even into a more efficient place. Seasonal utilization is — I think we have managed quite well on that during the last couple of years. This is obviously an absolutely vital thing for us to manage between the seasons, and I believe that we will continue to do it the same way as we have done the last couple of years. Aircraft harmonization to make sure that all the aircraft are equal, I mean, then 100% equal if possible. And we have also done a study to do some amendments to the configuration of the new builds that we are taking delivery of for the years to come, and we are seeing a pretty significant reduction in CapEx by doing that work. So we will continue the work that we started on way back into 2024, because we are, as I said earlier, under the pressure on the cost side. Doing a benchmark between ourselves and our peers, we are not doing bad at all on the cost side, but there is more to work on many areas throughout the company. And that’s an upside. Just to give you an example of a couple of areas that we have been working on in 2023. For example, on the baggage delivery and the lost luggage or luggage coming late to the destination has been an area, and it’s a high cost for the company. So, we have been reducing that cost by 25% during the last year. That is — we measure it, how many bags do we lose per thousand. So in 2022, we had 4.3 bags. 2023, we have 2.9. So a reduction by more than 30%, and the target is two. And the cost associated with a lost bag or a bag that comes late is approximately NOL1,500 per bag. So it’s a factor when we, in 2024, will carry somewhere between 25 million and 28 million passengers. So it’s a cost item. Another one is the customers here. We have doubled the service level in 2023. 72% of all calls answered within three minutes is where we are at for the time being. In 2022, we had 36. Even more importantly, customer context is down 10%, meaning there is 10% less customers calling us, and that is in a situation where we have had 16% growth. Self-service options and automation, artificial intelligence, chatbots, that’s what we have implemented over the last year, and that is a work that will continue now also together with Wideroe that is also having a well-run customer services as we see it, and I think we will see synergies between the two companies on this area as well. We are measuring how many passengers can you treat among per customer service agent. In 2022, that was 80,000 customers per employee. 2023, 87,000, and the target for 2024 is 100,000. So, we are doing improvements on that area as well. This is just an example on how we are working on the different areas throughout the company. Wideroe, a fantastic airline, well-run, fantastic airline. That’s what it is. We acquired Wideroe for approximately NOK1.1 billion. The final price is not yet decided. It depends on certain conditions, and we will know probably later this year how we will end up, but plus minus, or at least it might be slightly lower, but let’s see. We have said that it implies a PE of between 3 and 3.5, including synergies. I think when we took the decision to acquire Wideroe back last summer, we had a business case where the performance of Wideroe for 2023 was estimated, and also the performance from 1 January to 1 April in 2024, until the new PSO tender kicks in, has become better. So, the business case we looked at last summer is looking better as for today than last summer. That also applies to the forward-looking bookings in Wideroe, where Wideroe is seeing the same signs as we are seeing. And I think looking at the PE of 3 to 3.5, including synergies, I think that’s conservative based on how the numbers look now today for 2024. So, we are very pleased to see that the strong market that we are seeing in Norwegian also applies for Wideroe. Another — so, the idea with Wideroe is to offer the customers more direct or more seamless travels to many more destinations. We see Wideroe as a complementary airline, and what we have been trying to explain also to the competition authorities, that we are not really competitors. But I think we can offer the passengers a much better product, seamless to the whole wide networks that we have on both sides of the two. On seasonality, we are also seeing that Wideroe has one-fifth of the seasonality that we are seeing. And a portion of, let’s say, the passengers in Wideroe flying 12 months a year, is also relatively high yielding corporate travelers. So, this is also a positive as we see it. So, we have been telling the capital market last year that we see synergies in the 200 to 300 million level. We are kind of upgrading that now, and we are seeing synergies now above 300 million on a yearly basis. Then we will see when those synergies will start to kick in with the run rate, with the run rate of more than 300. That will take a little bit of time, mainly due to the fact that the summer season for both networks are for sale, and we will see a period of, I guess, six to 12 months before we will start to see the real effects of the synergies on that site. But all in all, we are very happy with acquisition. We took them over just a few weeks back, and I think the enthusiasm, as I see — as I said earlier, on both sides are really good, and I’m very optimistic towards that process. On the fleet side, not many changes here. We are, as we said earlier, estimating to fly 90 aircraft into the summer, and then we will start to take our own aircraft in — from 2025 onwards as planned. We do, though, see that there is a risk of delays from Boeing. We have had delays in 2023. We will have delays in 2024. The mitigation that we can actually do for those delays is to maybe extend some of the NGs, the 737, 800s that we are currently flying. We did that in 2023. We have done a few in 2024, and that’s also something that we will consider into 2025. But all in all, this is the fleet plan. We have already paid in 3.2 billion in PVP. We have very limited CapEx in 2024. We have started the process of looking into financing of these aircrafts. I spent a week in China last week to meet 15, 16 banks, and I would have to say that the appetite to finance 737 MAXs is very, very promising, and even better at very good terms. So that is a process we have started now. Up to the 10th first aircraft is already financed, so we are now talking about, in practicality, for all practical purposes, deliveries starting from 2026. But I would like to highlight there is a risk of delays from Boeing, but I think we have mitigating actions that we can do, and that’s what we have done also throughout the last year. Sustainable — sustainability. Not much updates to give here, really. We have been rated over the last couple of years by the Carbon Disclosure Project. We now have an upgrade to B, which we are very happy with. We are now also the former co-owner of Norsk e-Fuel. That’s a company that will start a facility up in Mosjoen, to start to produce e-fuel. They expect to get the first liter out of the facility in late 2026 into 2027. Very promising. It’s not a huge investment for us, but it shows that we are walking the talk when we are working on sustainability, and also into all the regulatories here in Norway and in the rest of Europe. This is a work that we are spending a lot of time on. It’s very important. Also, looking into the EP quotas that is coming to zero by a very short time now, and it’s an important work. So, lastly, outlook. This is the outlook that we are seeing today, and the capacity, as you can see, 12% for 2024, divided on the different percentages throughout the year. As you can see, we are increasing capacity in the fourth quarter with 16%. That might seem high, but based on the quarter that we have behind us, Q4 in 2023, we are actually deciding to put a little bit more capacity into next winter, and that is a reflection of what we believe will be the right thing to do. EBIT, we are guiding NOK2.5 billion to NOK3.2 billion as per today. That excludes Wideroe, so that comes on top of it. And then on the unit cost, we are — it’s early in the year, so we are guiding now flat compared to 2023. That is on the basis of the assumptions that we have listed below, a jet fuel price of $870 per ton, euro/NOK 11.4, US$/NOK 10.5. And then I would also like to mention, as Hans-Jorgen said, that when it comes to the payable tax in this company, it’s not going to be a lot of that for the years to come, even if we are profitable. And that is due to the fact that we have a deferred tax asset of NOK1.9 billion. It’s just a note for the analysts, really. So with that, I think it’s questions, if any.

A – Jesper Hatletveit: Okay. We’ll start with some questions from the audience. Please state your name and where you’re from, and no need for a microphone today.

Geir Karlsen: Everything is crystal clear.

Jesper Hatletveit: Everything might be crystal clear. And then we might move on to some questions from the web, then. We’ll start with a question from Ole Martin Westgaard, DNB Markets. How do you see the competitive landscape in the Nordics? Any threat from European low-cost carriers?

Geir Karlsen: I think if you look at the capacity in the Nordics, let’s say in Scandinavia, first of all, Norway, Denmark, and Sweden, I think what we have seen in this, let’s say, winter, let’s say coming in from the fall into the winter, is actually that many of the airlines have reduced capacity. And that’s partly the reason we are seeing higher yields as well. So, what we have done is exactly that, as we showed earlier. So I think if you look at the competitive landscape, let’s say during the last six to eight months, it’s pretty unchanged, I would say. But if anything, lower capacity.

Jesper Hatletveit: An additional question from Ole Martin. How do you see underlying capacity growth in the market for the summer 2024 season? And do you see any impact of the engine issues for the Nordic market? I presume that he’s alluding to the pattern…

Geir Karlsen: Well, what you are seeing, let’s say in — let’s say, Scandinavia again, is that we are seeing WIZZ is reducing capacity, I would say almost throughout Scandinavia. We are seeing, as it looks, Ryanair leaving Sweden domestic, which is very interesting to see as well. I think on the GTF issues with the engines, first of all, on the 320s. The last thing I saw was they are estimating 600 aircraft parked the coming summer, maybe up to 1,000 aircraft parked during the winter, next winter. So, obviously that will have an impact. What kind of impact it will have in the Nordics is not that much. But I think, I don’t know if the fact that WIZZ is decreasing capacity is a result of that. I don’t know, but at least that’s what we are seeing.

Jesper Hatletveit: There’s a question from Achal Kumar at HSBC. Forward booking levels. Do you see that the window has expanded or is the booking curve still short and remains a bit squeezed?

Geir Karlsen: I would say that the booking curve is coming slightly out, meaning people are booking earlier. And that we are seeing that — because we are seeing that we have, as you know, yes, but we have the same load, but with a higher volume. So, it means that they are booking slightly earlier. Much earlier, no, but slightly.

Jesper Hatletveit: Okay. A final question from him, regarding working capital. How do you see this developing in 2024 and on the CapEx side?

Hans-Jorgen Wibstad: I think as we said, we have a pretty stable picture there. We have very limited PDPs. We have also limited other CapEx positions. So, I think the working capital will develop positively. We will set aside, let’s say, for the dividend fund during 2024 on the assumption that we will not get the approval from the bondholders, even though we will try to achieve that. So yeah, good, stable development on the working capital. That’s our assumption.

Jesper Hatletveit: Okay. Then we move on to a couple of questions from Eirik Rafdal from Carnegie. You’re upgrading the synergy guidance for Wideroe. How much of these NOK300 million plus is baked into the 2024 guidance? How much of the synergies do you see happening this year?

Hans-Jorgen Wibstad: That’s a difficult question. As I said — I think probably the main synergy we can have between the two companies is on the network side. And because we have our own network for sale for this summer, so has Wideroe, it will take a little bit of time, at least into the winter season this year, and then full effect into the summer season. As I said, also on the guiding that we gave from 2.5 to 3.2, that’s excluding Wideroe. So Wideroe will come on top of that. So I think it is a little bit — I mean, we joined forces just a few weeks back. So it’s a little bit early to give estimates on when the synergies will kick in.

Jesper Hatletveit: Okay. And just a final question for him. On the 2.5 to 3.2 billion EBIT guidance, what do you see as the two to three key drivers to be in the higher end of that scale or lower end of that scale?

Hans-Jorgen Wibstad: That’s the demand. As you saw that we are guiding a flat CASK, and that’s under assumption that, the inflation around us will be there, that — the U.S. dollar will stay at the levels that we described. And we have a — we are 60% exposed to other currencies, 40% is U.S. dollars. So we are hit by that as such. But first of all, it’s a very efficient operation of the airline, and then the demand and the market as such.

Jesper Hatletveit: No further questions from the web. Question from the audience there.

Unidentified Analyst: [Indiscernible] I have a question. Congratulations with a very good result, especially the operational issues. Very promising for the long-term. When it comes to the Wideroe acquisition, could you just explain how I should read your guidance? Is it like that you have the interval you’re suggesting? Do you then add on the contribution from Wideroe? Forget about the synergies. But like if you say P of three, it’s around 350 to 400 million. Should then your guidance implicitly be that in addition to what you are guiding?

Hans-Jorgen Wibstad: We are not that precise when we are giving the guidance, but your thinking is correct. If I may say like that, but I’m just saying that, the 3 to 3.5, which implies exactly what you said, looking at the forecast in Wideroe today. Hopefully, it’s a little bit conservative, meaning that it looks better for 2024 than those figures imply. So, we are here in the middle of February. It’s very early in the year. As for today, it looks promising.

Unidentified Analyst: Just so I can understand, that means that the synergies we’re talking about realizing over the next 12 months, if I understood you correctly. They are a kind of cream in the coffee in addition.

Hans-Jorgen Wibstad: Yes. And then, but you can say that the synergies, let’s say 300 plus might go into 2025 because before you have the run rate of it because of the networks that we have already foreseen. And it’s difficult to do a lot of amendments to that.

Unidentified Analyst: May I ask another question? And that will be my last question. So I just wonder when it comes to the order book of new planes, should we think of that in addition to — from the time you initiated the order, you actually elaborated earlier today that you’ve done some CapEx savings in relation to that by changing configuration, if I understood you correctly.

Hans-Jorgen Wibstad: Yes.

Unidentified Analyst: So what is the difference if you were to order today? What is actually the option value or the increased potential value of your order book? Is it zero? Is it plus? Is it minus? How do you look at that?

Hans-Jorgen Wibstad: If you think high level, I would say that — first of all, if you order A737 MAX 8 today, you’re probably — if you order 10, for example, you will probably get them in 2029. If you order A320 today, Airbus, the similar on the Airbus side, probably 2030, 2031. So that’s kind of the order book. And when it comes to the inflow or aircraft, you could say that, Boeing today is delivering 32, 33 aircraft per month, but they have sold probably closer to 50, maybe even more than 50. So they are short 13, 14 aircraft per month. So that should be adjusted when you look at the order book. When you look at — if you divide — if you buy a MAX today, delivery 2028, 2029, but if you take it in 2025 dollars, it’s probably 10% to 15% more expensive than what we are paying for the same delivery.

End of Q&A:

Jesper Hatletveit: Okay. There are no further questions. So thank you.

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