Norwegian Air Shuttle ASA (NWARF) Q1 2023 Earnings Call Transcript
Q – Hans-Erik Jacobsen
Hans-Erik Jacobsen, Nordea. It seems like traffic is picking up quite significantly during the summer, not only for our Norwegian but for the entire market. Could you comment a little bit on how you view the market balancing now, which is important in order for you to continue to increase the yield and fill up the planes? And also comment on the competitive situation compared to what you experienced before COVID-19?
I think if you look at the markets we are flying, I think — and what we have been mostly concerned about over the last couple of months, it is city segment, the big cities. And that is from, I would say, at least from Norway, Denmark and Sweden. That market has come up. And that’s probably what we are most satisfied with over the last, let’s say, two months.
Going down to — from the Nordics down to the Mediterranean, first of all, Spain is working great, I have to say. And so you could say that the market performing on the negative side, compared to what we would like it to be, is probably domestic. Domestic Norway, partly, domestic Sweden, even more. If you look at Finland, for example, we have reduced capacity in Finland, especially on the domestic side, but that has actually increased the performance in Finland. So Finland today for us is actually okay. It’s not great, but it’s okay. So I should say that the market that has probably come back the most is actually the city segment over the last couple of months.
If you look at the competitive side, we are seeing that our main competitor, SAS is flying with more capacity than what we had been doing through the winter. And that is putting a pressure actually on the yield, even if the yield is good, actually. Other than that, if you look at the competitive situation, let’s say, from September last year until now, it’s relatively unchanged, I would say. I mean, what we’re actually seeing now, for example, is that — if you look at Eurowings out of Arlanda for example, it seems like they are actually reducing capacity into the winter season. Ryanair is relatively active domestically in Sweden, maybe putting in an extra tail from four to five, which is something that we just have to handle. But I think if I should move capacity today from 1 part of the market to another one, I will probably fly more south from all the Nordic countries. I don’t know if that was announced.
Yes. Thank you very much.
Thank you. Petter, ABG Sundal Collier. Three questions from me, I’ll start with the first one here. How do you see the risk of, call it, any operational issues entering now the peak season, which then obviously could hit your profitability aircraft, crew issues, resulting in potential wet lease, you mentioned it previously? Any challenges on different airports. How do you see that?
There will definitely be challenges into the summer as it is every year. As I mentioned earlier, I think on the crew side, we’re very comfortable. We have the crew we need in place. If we have any issues on the crew side, we might have — you might be sorry, we are just comfortable on the crew side. On the wet lease, we are not planning to do any wet leases. Why are we saying that? Well, it is because we are now — we are lacking one aircraft only that is coming directly from Boeing. It will be delivered in May. So we have the aircraft we need as well. We don’t anticipate any ID issues as we had last year on more than 150 crew. That is all taken care of. There is no issues there either.
On the airport side, though, we have issues. One is in Paris as we speak. That is a mess and is the option it is a stretch factor and for all of us. How long will that continue? I don’t know. But that is one factor. Another airport that is an issue today is Copenhagen, where you have an issue with the air traffic control with Naviair. And that is a concern that might actually last throughout the summer season. We have delays there now in general at the airport. And we are kind of looking into what we can do to mitigate.
We are discussing internally just to be very open about it, should be considered to fight the moments that for part of the production in case this escalates. Right now, it’s — we can handle it, but the capacity is increasing in general in Copenhagen into the next month. So that’s probably the biggest concern.
Perfect. Thank you. So the next question, you’re guiding unit cost down up to 5%. Will you be able to deliver on that already in Q2? Or is this something that we should see as more back-end loaded?
I think if you look at Q2 and Q3, let’s say, if you look at the absolutely peak, which is typically July, we should have a cost below NOK0.40. If you look at Q2 and Q3, that’s the target, as you mentioned.
And then finally, on the holdbacks, down to 32%, how much more able to push this down?
I think we’ve been through a very positive journey of building trust based on our performance and getting pressed from the acquirers, which are financial institutions. This has been gradually coming down to, as you said, to the 32% level. We will continue to work on that. We have established a very strong relationship with these acquirers that we’re working on. So the [Technical Difficulty] objective is clearly to drive that down further, but it will not go as fast as we’ve seen in the last 12-months. But our objective is to drive it further down.
Is there a limit there? How far you can get it down?
Zero is, of course, the limit if we were absolutely top-notch AAA credit level or maybe 5% kind of on average. But yes, we could — we are objective midway to drive it slowly further towards to figure first, 25%, maybe down to 20%. But yes, so it’s something we have some goals to achieve.
Hans Jørgen Elnæs
Hans Jørgen Elnæs, Winair. Can you put some color on the booking pattern that you see today compared to last year? Two things, advanced booking, how much earlier are the passenger booking? And do you see any changes in the travel pattern, in particular in the midweek days that is declining, something we see in United States and some parts of Europe too?
If you look at — and I think it applies to all the markets we are flying in. I think if you look at the booking pattern, let’s say, you compare 2019 to 2022, for example, in 2022 the booking curve was much shorter. If you look at 2023, it’s approximately in the middle between 2019 and 2022. So it’s getting closer to 2019, meaning that the booking curve is actually spreading out a little bit, I think it applies to all markets.
When it comes to weekdays, weekend, as we have been saying before, the weekends has been stretched out, because probably because our ability to work-from-home and all that. So a weekend, it’s not Friday to Sunday anymore. It’s Thursday to Sunday. It could be Friday to Tuesday. So that is definitely an effect we are seeing. But I think you should say that yes, the booking curve is spreading out a little bit, a little bit back to closer to ‘19. At the same time, we don’t have — as I said earlier, we don’t have the load today for the summer season as we had in 2019.
Why is that? Because I just said it has been spreading out. Well, I think we have a better discipline now where we are more patient and where we are not that aggressive trying to push out tickets through the winter at a low yield, as a too low yield that’s kind of the balance that we have. We are trying to find.
Okay. We then open up for a couple of questions from the web. We’ll start with Kenneth Sivertsen from Pareto Securities. Unit cost, I assume this is impacted by lower capacity any indications for 2024 targets?
On the first one, yes, it’s impacted by weaker currency and definitely a lower capacity. No, we’re not guiding anything for 2024, okay?
Okay. I actually think we’ll stop there. So thank you for coming, and have a lovely day.