Okay, let's start the session. Good morning, and welcome to the second quarter 2024 presentation for the Norwegian Group. 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-Jørgen Wibstad. It'll be followed by a Q&A from the audience and the web. Please go ahead, Geir.
Thank you. Welcome, everybody. Seems like it's a quiet Oslo sentrum in the morning on a Friday in July, so, but I know that some are following this online. So let's head on. The second quarter ended with earnings before tax of NOK 477 million, EBIT NOK 593 million, split on NOK 391 million on Norwegian and NOK 202 million from Widerøe. We are continuing to strengthen the liquidity position, and we have set aside, as we all know, NOK 823 million in a dividend fund that we hope to pay out to our dear shareholders as soon as possible. It is a fight against increasing costs in Norwegian. It has been for a while, and we are very happy to say that we on...
Compared to the last quarter, the second quarter last year, we actually reduced the CASK with 2% year-on-year. We have close to 300 or 450 routes for sale during this summer. We are continuing to focus on on-time performance as well as regularity. Very happy to see that we are the most punctual European airline in May, rated by Cirium. We are also having a high focus on the satisfaction by our customers, and we have reached a record high levels this quarter with an NPS of 53. But we have seen a quarter, the second quarter, that has had some softening in demand.
We have put a lot of capacity into the market, 19% compared to the same quarter last year, 66% more than what we flew in the first quarter of this year, and this has been done in a market that has seen some softening. We have, in the same period, been having tough negotiations with both our cabin crew, Denmark and Norway, and the pilots, not only the pilots in Norway but also the pilots in Spain and Denmark. Tough negotiations, we definitely had a risk of a dispute. We ended up in a dispute, but we did not end up in a strike. That has also had an impact on the bookings. Difficult to say how much, but we are happy that we reached an agreement.
We are happy that we avoided a strike, and then even if the results from the negotiations were not what we were hoping for. We have had a continuing weak local currency. We have had slightly higher fuel prices than what we anticipated, and we had also an impact from delays from Boeing. We were supposed to get deliveries during the quarter, which we did not get, and thereby we had to take in not much, but one to two, two lines of aircraft from the market, which also is adding cost. So that, in combination, led to the fact that we had to reduce the guiding for the 2024 as a whole. That said, I think, you know, we are very well prepared, and we have been very well prepared for the summer season.
Operationally, we are doing good, I would say, even, I would say even very good, these days, and the summer, the remaining part of the summer is looking good. So the focus now is actually on the coming winter as well as next summer, 2025. Very exciting to see that we are launching new routes to the Northern Norway, but also launching routes to other winter warm destinations. Among them is, for example, Dubai, where we plan to start flying now into the fall. The synergy project with Widerøe is continuing. We have already taken our synergies, but as we have said, the majority of the synergies will come through the coming winter and through 2025, when we are aligning the networks in a better way than what we are flying today.
The partnership with Strawberry is ongoing. It will be launched during the fourth quarter of this year. Passengers, as a group, 7.3 million passengers. Quite a growth, I would say, 30% compared to the same period last year. Load factor, 82.4%, and then very happy to see that the load factor at Widerøe is up by five point or five percentage points compared to the same period last year. As I said, 19% capacity growth into the quarter, and then regularity and punctuality, that is extremely important for us, and we are still doing fine. This shows the seasonality. This is a graph that I'm using, spending a little bit of time on every quarter. It shows the seasonality.
It shows that we have been putting one million seats into the market compared to the low season, for example, February. But at the same time, it shows the relatively weakening we saw during the quarter. April was expected to be weak, mostly due to the Easter effect. We were expecting May and June to become better than what we ended up with, no doubt about that, by the reasons I just mentioned. But then we have seen an improvement into the summer, as expected, and into July and August, that I will come back to. So the load factor is down 2%. Easter effect is included there. The yield is down 3%. However, we are flying 6% longer sector length, so it has to be taken into consideration.
And then again, we avoided, you know, a massive conflict with strikes throughout actually the network, and happy about that. And then the regularity, Boeing, et cetera, I will come back to it. Looking forward, the booking momentum, I would say, is stable. It has been for quite a while. We are happy to see that over the last, let's say, two to three weeks, we have seen a peak up, as you can see. Normally, when you're getting into July, you will see the bookings are coming off because people are traveling and going on holidays. But we have seen an uptick lately.
The uptick and the bookings we are seeing for the remaining part of the summer and into the Shoulder 2 season is across destinations, I would say, and also across travel months into the fall and into early winter. On the capacity that we have been putting into the market, the increased capacity, approximately 60% of that is increased frequency, meaning increased frequency on routes we are already flying. 40% is on new routes. We have done some investments as such into new routes, and it will take a little bit of time before those routes are kind of setting themselves into the markets. We have also, in 2024, started to fly non-Nordic routes. As an example, we are flying today from Riga in Latvia to Montenegro.
We are flying to Greece. We have also started an operation flying from Spain to Germany. And both these kind of areas are booking satisfactory, I would say. And this is something you will probably see more of into next year. On booked revenue, as you can see, a nice development, I would say. The capacity growth that we have had in the second quarter of 19% is coming down to 10% in the third quarter, which is okay. So you can say if you look at the bookings today on load, we are on par compared to similar period last year. On yield, we're also on par, so it's relatively flat compared to what you saw exactly at the same time last year.
That means that with increasing capacity, we have then sold more than 400,000 tickets more today than at the same period last year. Corporate side of the business, very important for us. We have been gaining market share for quite a while, and it continues. Looking at the graph to the right, you can see that... Let me first say that, you know, how is the corporate market in general doing in the industry? I would say that it is difficult to say. We are estimating that the corporate market is probably 80% back compared to prior to the pandemic.
But looking at our figures, we are 19% up on passengers from 2019, but we are more interestingly 28% up on passenger numbers from 2023, the second quarter of last year. Looking at the revenues from the corporate side, we are 38% up. Why are Norwegian more attractive for the corporate travelers today compared to earlier days? Well, I think on-time performance, regularity, very important. When we are talking to the corporates, and we are doing that all the time, more and more of these guys are saying that they are flying 50% or more now with Norwegian, even if they are, in general, flying less than before.
We have onboarded more than 1,400 corporates during the first half of this year, and we are very happy to see that a huge portion of that is actually coming in the Swedish market, where we are now doing a push in order to also take market share in Sweden. The Norwegian Armed Forces contract started; it's a 4-year contract. It started in first of February this year. It's booking very well, more and better than what we anticipated, which is all good. And I also think that the Norwegian Reward priority product that we put in place a while ago is starting to kind of feed into the market, and we are seeing that, you know, our corporate travelers and others are appreciating that as time goes.
Also, on the Widerøe side of the, of the company, they have a huge portion of corporate travelers as well as we know, and over time, meaning over the next 12-18 months, we will be able to offer a much better product also to these, where we are going to align the two networks in a better and different way than what we have doing, so far. So that is all for me for now. Hans- Jørgen, over to you.
Thank you, Geir, and good morning, everyone. I will go through the financial results for the second quarter of 2024 for Norwegian as normal, going a little bit more into detail on the specific figures. As Geir said, we have had a strong growth in the revenue side. We're up 36% to NOK 9.3 billion for the quarter, with Widerøe contributing NOK 1.8 billion. The growth on the Norwegian side is about 10%, so quite a significant growth. The unit revenue is lower for the reasons also mentioned earlier. We've had a significant capacity growth. We have an Easter effect, but also we've had a softening of the market, and that has resulted in a unit revenue coming down 5.6% compared with Q2 last year.
And that has a significant. I'll come back to that in a minute. It has a significant impact on our bottom- line results. We're happy to see that ancillary revenues is also coming up from 778 NOK per passenger last year to NOK 194 . Looking at the profits, the EBIT is NOK 593 million , and with Norwegian contributing NOK 391 million , and Widerøe with a very strong performance at NOK 402 million . So that is really impacting our figure, and we're, as we mentioned, very happy with the acquisition of Widerøe, which is going very well in all respects, also financially. We're also very happy to see that the cost performance is improving.
We're having a reduction in our CASK this quarter, quarter-over-quarter, with 1%-2%, which is quite good for us. That's also taking into account that we have a catch-up effect from the pilot renegotiations, where there were some refund of payments from... or salaries from 2023, and also Q1 2024, with that we've taken in the second quarter. And that represents about NOK 57 million of that number. So even with that, taking that into account, and also the somewhat weakening of the Norwegian krone versus the dollar, we're happy to see that result, and also that actual reduction in our CASK. Widerøe, again, a strong performance, and we'll come back to that later.
We're also seeing that our balance sheet is improving very well in this quarter. We're ending the quarter with a cash balance of NOK 11.5 billion, and we're also seeing that the net interest-bearing debt is reduced by NOK 1.4 billion to put it limited to NOK 4.4 billion, which is quite limited in the overall scheme of things. Equity ratio is flattish or slightly improved by one notch to 4.5%. And we've also set aside now, following the annual general meeting, the dividend fund relating to dividend payment that have been approved by the shareholders for 2022 and 2023, was established in May, as previously announced, and that amounts to NOK 823 million.
That is included in the cash, so that's just for information on that. Diving further into the revenue development, we're going from a revenue at the end of for Q2 2023 of NOK 6.9 billion, to revenue in Q2 2024 of NOK 9.4 billion, as you see here. This kind of sets out very clearly how... What is the impact of where how do we go from kind of due to this 36% increase? The volume effect is NOK 1.2 billion, approximately. Then we have the quite significant impact of the yield reduction of three øre, and also the load factor reduction of about two øre.
That, combined, represents about NOK 442 million reduction, purely as a result of kind of the softening of the market, the Easter effect, longer sectors, as the main reasons for that. Then we have just a small increase, sorry, decrease in other revenues, which is NOK 121 million. That is predominantly due to the void effect on the Norwegian Reward program, where there is no such impact in this quarter. And adding to that brings us to, for the Norwegian side, from a revenue growth of 10% to NOK 7.5 billion, and then adding Widerøe, NOK 1.8 billion, we come to NOK 9.347 billion.
Doing the same exercise on the EBIT, maybe equally important and important to understand. We say a bit of the same figures. We have a capacity positive effect from kind of on the EBIT are on, on the volume, higher capacity. Then we have the yield and load. We talked about that earlier, NOK 442 million. These are the load and yield combined, NOK 442 million. We have changes in other revenues, which is the void situation. Then we have actually fuel price improvement which has to do with the price of the fuel, as well as higher number of MAXs in our fleet, NOK 72 million. The CASK improvement represent NOK 95 million.
If we take into account the one-off impact of the salary negotiation, the pilot, the catch-up effect of that, you can theoretically add to the NOK 95 million, NOK 57 million, which is catch-up from Q4 2023 and Q1 2024. Then you have the other loss and gains, which is effectively mostly effects impact on our working capital. And then we have, of course, a higher fleet, going from 55 aircraft versus last year to 86 aircraft, representing 179. And then we add up with the Norwegian alone EBIT of NOK 391 million, and then adding Widerøe NOK 202 million, we get to an EBIT of NOK 593 million. So this is kind of the P&L set in a more traditional way.
I will not go through the same figures again, but clearly, 36% revenue increase, which is significant, out of which is Norwegian is 10%. Significant increase in personnel expenses, of course, because we're. You know, in this case, we're adding, just for information, Q2 2023 is only Norwegian, and Q2 2024 is Norwegian and Widerøe. So it's difficult to compare those particular columns, but still, it gives some sort of a picture. So, you know, personnel expenses up quite a bit, and as expected and as planned, with the exception of the, say, salary negotiations that ended up higher than we had anticipated. And then, of course, the EBIT coming down NOK 57 million, primarily, as we talked about, due to lower unit costs, offset by the positive results from Widerøe.
And then, the net profit is NOK 477 million, compared with NOK 538 million. Just to comment on the income tax, we're not recording any income tax expenses as we go forward, or at least over the next periods, because it's offset against non-booked tax loss carry-forwards. A few comments on the balance sheet. First of all, it's a robust balance sheet. We've strengthened our balance sheet in the quarter, and we're happy to see that. There are no material changes in the balance sheet between end of first quarter and end of second quarter. As you can see, total assets goes from NOK 38.1 billion to NOK 39.7 billion.
Our cash increases by NOK 1 billion due to the overall performance of the business. We're also seeing that the air traffic liabilities goes from NOK 7.4 billion to NOK 7.8 billion on the back of solid bookings into the second half of 2024. Then equity ratio moving up two notches, 0.2% to 14.5%. Extremely happy to see that our next net interest-bearing debt goes down by NOK 1.4 billion, driven primarily by improved cash balance. But also that we have repaid a total of about NOK 400 million of debt, representing part of that is aircraft financing debt, but also improved performance from Widerøe, and they've actually also reduced their overdraft with their bank.
So that is a good, good figure for us, and seeing that our kind of balance sheet remains stable and robust. 86 aircraft at the end of the quarter. We're still working to optimize and simplify the capital structure. That is an exercise we started last year with some repayment of debt. We introduced the dividend fund, and we'll continue to do that as we move through 2024 and 2025. As mentioned earlier, we've set aside 0.85 NOK as a dividend fund. That is put in a separate fund, but it's included in the cash, subject to approval from the bondholders. As we talked about, that may take some time, but this will be, should be payable at the latest, during 2026. And that...
And just to comment that the return on the investments is actually added to the fund. So kind of, setting aside money for the shareholders, and it's actually yielding, money while we're waiting for the approval to get it, get it paid, which we think is a good thing. Finally, robust cash flow. I talked about that quite a bit earlier today. Just to explain how, how are we going from 10.4 to 11.5 billion? A strong cash flow from operating activities, forward bookings, and also the results, representing NOK 2.3 billion. Limited investment activity, NOK 226 million. Just ordinary financing, repayments of debt, and the financing cost, NOK 1 billion, and that brings us to NOK 11.5 million.
Rate of return on our total money market funds is about 5.5%, so we're taking well care of our cash with a limited risk profile, though better than bank deposits. Also looking forward for the rest of the year with the Boeing situation, we have limited further prepayments to Boeing, and we've already prepaid NOK 3.3 billion of that order. All right? Thank you.
Okay. So, let's talk a little bit about Widerøe, just to make sure that you understand what a great company we have joined forces with. So what is Widerøe? Widerøe is an airline with 3,000 employees. They are flying 49 aircraft. Most of them is turboprops.
Stein Nilsen has decided to step down as the CEO. We have appointed a new CEO. The new CEO is Tore Jenssen. He's sitting here in the audience. Very happy by that, by the way. Tore has a vast experience from the airline industry, has been working for Norwegian for the last 17 years in different areas. And I'm 100% sure that he will do a great job to take Widerøe into the future. But Widerøe consists of a commercial network and what you call the PSO network, which is subsidized by the Norwegian government. Interestingly, you can see that actually 75% of the seat kilometers, the passenger seat kilometers they are flying, is actually on the commercial network.
Then the remaining part is the PSO routes, where they are flying in harsh, complex operations, short runways, and steep approaches. The new PSO tender given by the Norwegian government, government was kicking in first of April this year, and it will last for the next years. Also, a huge part of Widerøe is actually Widerøe Ground Handling. They have close to 1,700 employees.
... and they are serving, in addition to Widerøe and Norwegian, because we shifted over to Widerøe as a ground handler before we acquired them, in real terms. They're also serving more than 100 other customers throughout the market here in Norway. And then they are doing all the light and heavy maintenance, in-house. And I have to say, I'm impressed, I'm really impressed by the quality and the competence that they have in that organization in Widerøe.
So for Norwegian, together with Widerøe, the aim is to offer what we call a seamless travel, where you can book a trip in Norwegian, you can book it in Widerøe, and you can have a seamless travel between the two airlines. Looking at the interline traffic between the two companies since we took them over, it has increased with 73%. And it shows that what we anticipated would happen have actually started to happen big time. Even if we know that the vast majority of the synergies will happen through the coming winter and into 2025. Seasonality is, as we have discussed earlier today, a big factor.
Seasonality in Widerøe is one-fifth of what we have here in, in Norwegian, which is also a very good thing. The PSO tender, as I said, April 1, the Norwegian government has reduced the max fares with 50%, meaning that you know more passengers will fly, and more passengers will also then come from a Norwegian aircraft or end up in a Norwegian aircraft, going forward. So Widerøe, as Hans- Jørgen said, is performing very well operationally, also very well, financially. Better, better than what we anticipated when we acquired Widerøe, in the summer of 2023. Also on jet fuel, in Norwegian, we are in the 60% area, hedged for the remaining part of the 2024, also significantly hedged in 2025.
Widerøe is hedged 80% for 2024, and 45% for 2025. So, so by that, they have taken down the risk, and they have even done it at very attractive levels, on, on the fuel, price. Costs. Cost is extremely important, and we are working every day to try to make, both these airlines as efficient as absolutely possible, operationally and also cost-wise. This is some of the areas we, that we have set in focus in Norwegian, and which we... Are areas that we have been working on for quite a while, and we will continue to work on the same areas. I would just like to mention a couple of them, in this presentation. Handling and airports, for example. We have been renegotiated a lot of contracts during the last year on handling.
We have, as we said, insourced what we call front of house, which means that the customer-facing services at OSL, Gardermoen; we did that last year. We have done the same in Copenhagen this year from April 1. We have also insourced a couple of stations in Spain, Malaga and Alicante, and we are now starting to see the results of that, which also helps, let's say, on the on-time performance. On-time performance is, first of all, extremely important for our customers, but it's also very important when it comes to the efficiency of the airline, the cost levels of the airline, and so on. Another one is customer services. We are continuing to make sure that we are as efficient as possible.
We are at a point now where we are much better helping our customers when things go wrong, and they do go wrong at some times. So that is high, also a high focus area. The base structure is also very important, and as we have said before, we have established a base in Riga, Latvia this year. We have established a summer base in Palma de Mallorca. We have decided to keep the Barcelona base on a 12-month rolling basis, and we have also decided to establish a 12-month full-year base at the Canary Islands, starting from this fall. You will probably see us do another bases, more bases outside of the Nordics into 2025. So it's very important to focus on all these areas. On the fleet side, that is another story.
We are seeing delays from Boeing. We have been seeing delays for quite a while, and we expect to continue to see delays from Boeing. We were supposed to get deliveries in the second quarter of this year, which we didn't get, which led us also to have to take in capacity from the market, which adds cost to the company. But this is the best estimate that we have. So we have been having 81 aircraft in last summer. This summer, we are flying 86. We do anticipate that we can have 90, 91, 92 aircraft in the summer of 2025. If Boeing will be able to deliver. So that is the plan.
Then, you know, the big year is actually in 2026, when we have a lot of redeliveries. But at the same time, we have the flexibility here where we can extend the leases that we are currently flying. We started to do that actually in 2024. We have done it in 2023. We have done it in 2024, and we'll also do it in 2025. But the majority, you know, the big numbers of redeliveries is actually starting to happen from 2026.
That said, I mean, this means that there will be less capacity coming into the market, both from Boeing and actually also from Airbus, due to the engine issues that they have on the Pratt & Whitney engines, which means that there will be less capacity coming into the market this year, and then also probably next year, and maybe even in 2026. So that's on the fleet side. So you have some uncertainty here, but we have a huge portion of flexibility as well, where we can extend leases. And as Hans-Jørgen said, we have paid in NOK 3.3 billion to Boeing on the 50 aircraft order that we have.
So just to summarize, just to make it very precise, we are not happy with the second quarter results. We were anticipating a much better result, but due to the factors that we have seen, it is what it is, and that's why we have been forced to reduce the guiding. And then we have been trying to put in mitigating effects. We have been spending more on marketing. We have been running campaigns throughout the period where we saw the softening, and then we ended up with a result that we ended up with.
So, just to make that very precise, on when it comes to, when it comes to, the cost improvement or the cost focus, it will continue as hard as it has been over the last, you know, couple of years. At the same time, we have a lower growth coming into the current quarter, the third quarter, and then we have a growth in the fourth quarter, and that is partly a result of the bookings that we are seeing today, but also a learning that we did from last winter, where we could potentially actually have been flying with slightly higher capacity than what we did back then. And in the summer of 2025, 90 aircraft.
So looking at the bookings as we see now for the third quarter, it's flat on load, flat on yield. I would say on the relative, the Shoulder 2 is looking slightly better than what we saw a few weeks back. But at the same time, it is a slightly softer market that we are seeing. There's no doubt about that. But it also seems like it has kind of bottomed out a little bit through, let's say, the latter part of June and into July. And then for 2025, Widerøe performing very well. Widerøe will probably have one of its best years in 2022 historically. We are focusing on the operational side of the business, extremely important.
The mission side, we still stick with the target of 45% reduction. We are doing everything we can to get support for that, to get the different governments to put in place incentives, to get production going on SAF. By that, you know, we are relatively optimistic for the fall and for the remaining part of 2024. I think that's it. Yes, bye.
Okay. If I can have you here, and Hans- Jørgen here as well.
Let's go over there.
Yeah.
Okay. We will then open up for some questions. We'll start with questions from the audience. Hans Jørgen Elnæs?
Yes, congratulations, at least with having a good control on your cost in Q2. I have three questions, as we have so few people today. First, we see a lot of airlines now increasing their capacity up to northern Norway. Any thoughts on that? And, also can you elaborate more about how important the inbound market from point of sales Europe is for Norwegian and will be in the future, like the next... This year and next year? And, the second is about Boeing. Do you expect any kind of compensation due to the delayed delivery of the MAXs that you have ordered? And the last one is on the Widerøe integration.
Can you elaborate a bit more on your plans to integrate, you know, the booking system, so you can book Widerøe flights and connecting flights and so on from the Norwegian website, and help with the travel agents and so on? Thank you.
That was a lot of questions, Hans Jørgen. Inbound traffic. I mean, the inbound traffic into Norway, and actually to at least Sweden, and partly at least Sweden, is increasing. And as we have seen, as you correctly mentioned, you know, more and more airlines now wanting to fly to Tromsø. And I think you should probably start investing into hotels in Tromsø now, because I think that's going to be an issue if all these passengers are going to fly to Tromsø. And we have also put capacity into Tromsø. We started with that already last winter.
I think I've said it before, we are seeing that we are seeing 75% inbound traffic actually to, on, on, on the different routes that we have been flying, which is actually more than we anticipated. So, and then you can say: Will it be too much capacity going up north? I don't know. But we are for certainly, we are certainly very well placed to carry that capacity into Tromsø. And if they are going to go somewhere else, in the Tromsø area, we have another airline called Widerøe that can help us to take those passengers. So we feel that we are very well situated also to take that inbound traffic.
When it comes to the synergies with Widerøe and so on, you know, one of the issues that we have had in order not, let's say, that we couldn't, you know, properly integrate is the IT stack that we are running in Norwegian. We have been running a project now over the last year, and we are actually live with a new distribution platform now in a small little market called Holland. So if you log on to our website in Holland, you will see the new distribution front end. So we are expecting to go live with the all the other part, all the other markets during the fall, and that's when we can be able then to integrate properly with Widerøe, so that Widerøe can not only sell us, but we can also sell Widerøe.
What was the other question?
The last one was on Boeing and any kind of compensation-
Compensation. Yes
You can expect?
We have, you know, the, the ordinary, compensation, for late deliveries as, as everybody else. That will partly compensate for the losses that we have for the delays. And obviously, we will have, discussions with Boeing now going into 2025, where we would like to discuss other compensations in f- you know, in a, in a situation where they are not kind of able to deliver the aircraft in 2025. So that is a discussion we will have with Boeing early August in Seattle, and, and then it- we will see what, what we can, what we can achieve. But obviously, it's a very high frustration for us when we are supposed to get an, an, an aircraft, and then we are told a couple of weeks before delivery that you will not get the aircraft.
It's an unacceptable situation and not a situation that we can live with for the time to come.
Can I just add, is there any revenue from Boeing in this quarter related to that question?
Minor.
It's a very minor number.
Minor, yeah.
What is minor in your...? Is that, like, NOK 5 million?
It's less than, it's less than NOK 50--.
Yeah.
NOK 50 million. And, and we will get also some compensation in the second half, but it's less than our, our additional cost, as Geir says. We, we are not getting fully compensated for our additional cost in 2024, and then we'll see for, for 2025, how we can manage to reduce that, that gap.
Okay. Any further questions from the audience? Then we'll move on to some questions from the web. We'll start with Andrew Lobbenberg from Barclays. You learned that in Q2, high growth also comes with lower yields in what is a peak period. So why are you then still planning on 60% capacity growth for the fourth quarter?
I think I've actually answered that, and it's based on the learnings that we had from last year. It is also based on the new routes that we are going to fly into warmer winter destinations for the coming winter. And based on the bookings that we are seeing, we are definitely still sticking to that.
Okay. And also adding to that, there's a question from Stephen Furlong in Davy. More towards the 2026 side, there is also a significant ramp-up in the fleet. If Boeing can deliver those aircrafts, how are we confident that such a growth can be supported or the unit revenue can be supported by such a growth?
I would say that there's a lot of uncertainty when it comes to deliveries from Boeing, and in 2026, we have 18-19 redeliveries as well. So we have a massive flexibility here. I think that, you know, based on the contract that the delivery we have of Boeing aircraft in 2025 and 2026, I think we will see delays.
Okay.
I think we will see definitely delays for both those years. I'm not worried in reality because we have the flexibility we need to flex according to the market and the demand.
Okay. Moving on to some questions from Ole Martin Westgaard in DNB Markets. Can you comment on the competitive landscape in the Nordics? Have you noticed any changes since the first quarter?
Not really. If you look further back, you can say that, in Sweden, for example, you have an SAS that is not growing. You have a Ryanair that is pulling out domestically. You have Eurowings that has been there and then reduced again. So, and that's why we are doing a push in Sweden. I think that is important, and we are starting to fly more in Sweden. We will, for example, start to fly up to Skellefteå during this fall. We have been in touch with the corporate community in Skellefteå for a long time. Denmark is probably where most of the new capacity is coming in compared to a year ago.
You have Ryanair, you have EasyJet now coming in there, and that is... But it, at the same time, it's a market that works well. We have increased massively in Denmark, over the last 12 months, now flying both from Billund, Aarhus, and Aalborg, in addition to, to Kastrup. Very important market. In Finland, it seems like, Finnair has taken back, you know, some of the capacity that they have had, had, you know, leased out, meaning that we are seeing a more aggressive Finnair today compared to a few months back. So, but capacity-wise as such, it's, it's, it's not massive differences, really.
Okay. Okay. Next question from him: Are you considering your growth ambitions in Norway, given the significant cost increase for pilots in Norway after the new CBAs?
I would say that we are evaluating our network all the time, and we will put our aircraft in the markets where we feel is more, you know, mostly profitable. Do we have an effect from the pilots and the negotiations going forward? Yes, we are.
Mm-hmm.
And then time will show where we put the capacity. That's business as normal, I would say.
Okay. Then we move on to a question from Eirik Haavaldsen. Are you considering early redemptions of the outstanding bonds in the- ... especially the zero coupon bonds.
So, ever since, you know, 2023, we started to look at our balance sheet, how we kind of- how we can optimize the balance sheet, given our cash buildup and, and also kind of the strength of the, of the earnings, overall earnings. And we did some buyback of the bonds last year. We haven't done that this year. As we move forward towards the maturity of these bonds in 25 and 26, we will consider our options. If we get a fantastic deal, we might do it. But it, it needs to fit in with our overall scheme of things. We also have a large investment program coming up with our new aircrafts coming in.
So it's a kind of a fine balance to optimize the balance sheet for us. So no plans to buy back the bonds, but you know, at the same time, if we get a you know, a very good offer from the bondholders, we will of course consider that.
Okay. Moving on to a question from Petter Nystrøm at ABG. We have recently seen several tour operators talking about improved demand last week. Probably also given the nice weather. How are we seeing this impact our bookings? Are we expecting yield and loads slightly up for Q3?
I think we're guided on the yield and the load actually in Q3. This year is flat compared to last year. Is the good weather, as you call it, meaning-
Bad weather, yeah.
... bad weather good for us? Probably, yes.
Yeah.
I think so. Difficult to say how much-
Mm
... but, is that part of the reason why we have, we have seen some kind of uptake the last couple of weeks? Probably.
Okay. Okay. I think we'll go for one final question, and that comes from Achal Kumar at HSBC. Q4, seasonally weak. If the demand softening that we saw in Q2, how much of a capacity flexibility do we have towards Q3, Q4, when we are expecting 16% of capacity increase? What levers can we pull?
That's a difficult one to answer now. But what you can say is that, you know, over the low season, as we saw earlier today, we are flying probably as much as 40% less during the winter season than in the summer season. Do we have flexibility in the fourth quarter? Not that much, because it's already for sale. And unless something dramatic happens, you know, we will fly that capacity-
Mm
... because we believe it, it's the best thing to do.
Okay. Okay, final question from Nils.
Maybe more than one.
Yeah.
The question is, I wonder if you could give us some insight in the pilot negotiation, which I think if I'm correctly, and correct me if I'm wrong, started at the end of September, and it was settled one week before the vacation started. In hindsight, how is your view of that performance from your side?
I think it's a balance, Nils, between agreeing on a solution-
Mm
... and taking the company into a strike.
Mm.
Or even a lockout, that was the option. I think—I don't think we would like to go into details on it, Nils, but I think even in hindsight, the way the model works, the rights that, you know-
Mm
... the unions have in this country, I would even in hindsight have concluded the same way as we did, even if we don't like the result. And then you will have consequences of a solution like this, meaning the costs are going up. But that is business as normal, I would say. Where we would have to kind of put the capacity where we think it makes the most sense.
But my question, Geir, is more like you start negotiating in the fall.
Right.
And you keep negotiating.
Mm.
To me, it seems as the pilots have outsmarted Norwegian or you, in the sense that they get the maximum momentum and power in the negotiation by actually waiting until the last week before the vacation starts. Why didn't you take a conflict in January instead?
Because we're not able to do it, Nils.
You're not able to do that, okay.
No. Have in mind that, you know, we have been negotiating with 3 different pilot unions at the same time-
Yeah
... in Spain, in Denmark, and in Norway.
Yeah.
Then we ended up with a result as we did, Nils. Yes, we don't like it. We're not happy with it. But now we are here. There is no conflict, as we speak. We can go through the summer, and then we will see how we can get prepared for the next negotiation. Now, we have a 2-4-year agreement with the three different unions, and that's the situation.
So what kind of... How will this affect going forward? Because what I'm afraid of is that Norwegian is becoming a new SAS, because you have unions actually really don't understanding that without a profitable business, there's no place to work going into a new restructuring. So the question is, how do you affect that the pilot negotiation will affect the other workforce in Norwegian going forward? Because it seems that they can demand whatever they would like.
... Yeah, I think we have had, John. Think about it, we had three negotiations with the pilots. We have two cabin unions that we have also reached agreements with. We are within the model where we are setting salaries in this country, and that's just a fact. And then we will do whatever we can to make, you know, as good a deal as possible. This is what we ended up with. And yes, the costs will increase. But that's how it is, Nils. And will that of course force us, you know, to move capacity other places? Well, time will see.
We don't know, but this is the normal way of doing business in this industry, and even if it's frustrating to see that we are under a cost pressure.
Then you also mentioned LoyaltyCo was now finalized during the quarter. It was introduced one year ago. Is what was introduced one year ago the same as you have now concluded on LoyaltyCo forward? And what is the difference, if so?
I think the agreement that we have agreed today is much more flexible, I would say. More of the values in both reward systems are kept with the partners.
Yeah.
This is a much shorter agreement, and where it's much more flexible. It's a different solution than what we discussed, let's say, one year ago, the summer of 2023.
How does it impact cost going forward for Norwegian?
This is a loyalty program. It's supposed to be to take care of itself. So hopefully it will actually generate-
It will not increase cost?
Hmm?
The new program will not increase running cost?
We are investing into the program, obviously, so that has an investment cost. But as soon as absolutely possible, this program will take care of itself. That's the idea, and that's the plan.
Lastly, when you entered as CEO of the company, in ... after the restructuring-
Mm-hmm
... and I was a part of that restructuring, it was, it was clear that, cost, the ambition was to get the cost down and not up, right? And then there's a lot of inflation pressures. I'm aware of that. So in 2022, you were supposed to have a cost of NOK 39.5-NOK 42.5. It ended up NOK 44 because you had wet leases. Last year, no wet leases, it ended up at NOK 47, and now it seems it's going straight towards NOK 50. Is there any limit how much cost you can have in relation to your competitors?
Well, I think if you look at the competitors, everybody is guiding costs up these days, almost without exceptions. This quarter, we're actually reducing the cost compared to the same quarter last year. Since 2021, we have had a currency weakening with 25%. We have higher inflation, we have higher interest rates.
25% in this quarter?
No, no, since 2021. You mentioned 2021.
Yeah.
That is, you know, a huge effect on the cost side. So over these years to reduce the cost is completely unrealistic, even in hindsight, in my opinion.
So what kind of right-sizing measures have you implemented within Norwegian? Have you done anything, you mentioned the operational issues.
Mm-hmm.
Have you done any right, right-sizing of cost internally in your own organization in this period?
Yes.
So, for instance, head office, you've reduced costs at head office?
We have approximately the same number of employees in head office today running 90 aircraft, compared to in 2021, when we had 50 aircrafts.
Thank you. Okay, Jacob?
Yes, two questions. First, just a follow-up on this, LoyaltyCo question. The changes has been made, since you were supportive of the kind of initial agreement, and you now have a looser agreement, is it your view that this new agreement is not as good for Norwegian as the previous one?
When we launched it, as you know, Jacob, we said that we will, we would, book a gain of NOK 800 million in the P&L. Now we are not doing that, but that means that, you know, the agreement is different. I think, you know, the potential over time is probably the same. But at the same time, we have reduced the risk massively, I would say, in case this loyalty platform should not work. I think that's probably the reason. And the values are kept to a much larger extent with the partners today, compared to, you know, the discussion that we had a year ago.
Yeah. No, I think as a shareholder, we are very aware of risks, and I think the downward guidance is kind of... illustrates how high the risk is running an airline. So I think it's, like, extremely important to kind of minimize risk. So that's good. But going back to the guidance, you now incorporate Widerøe into the guidance as opposed to the previous guidance, and you're also telling me that Widerøe is going a lot better than previously anticipated. So kind of when you look at the guidance given earlier this year compared to the guidance now, it's kind of... Could you just elaborate a little? Because it's quite massive, kind of the... and you did some slides, and I appreciate those, but still, kind of, with such big swings in the guidance...
Kind of what does it say about your confidence in actually reaching it? And could it swing back or could it, like, is it more a guesstimate, even if it's a range or?
Well, maybe I can start a little bit on that. I think, first of all, I think, we are confident with the guidance we're giving now. I think there's a lot of work that has gone into that, and, and it's not easy to, to, to, to estimate. As you know, the leverage in an airline is, is significant. But what we saw during the second quarter was a gradual situation where we saw not only the, you know, from May into June, we saw that the yields and the loads were not as we had expected, as anticipated, not only for the second quarter, but also for the third and fourth quarter, so the guidance is for the whole year. So it's not only the second quarter.
On top of that was the Boeing situation, the pilot situation, the FX situation, and as mentioned here, which is kind of speculative, did actually the turmoil relating to the kind of potential of industrial action or strikes actually also impact our bookings. It's a gradual process. We put a lot of emphasis into this. We take it extremely seriously. This is... That's our best estimate at the moment. Based on what we see, flat yields, flat loads into the third quarter, as mentioned a couple of times.
Could that change, Jacob? Could it go up or could it go down? Absolutely, but that's how it looks today. And that's why we are telling you that it's a flat yield on the bookings we have booked and as well as a load.
Okay. There are no further questions, so I... Yeah, so let's end the session there. Thank you so much.
Thank you.