Welcome to Norwegian's second quarter presentation. We'll do this the same way as the last few quarters, with questions after the presentation, both from the audience and from questions sent to investor.relations@norwegian.com. I will pass around a microphone that is only for the live stream, don't be stressed if you don't give any sound. We'll start with the presentation by CEO Bjørn Kjos and CFO Geir Karlsen.
Morning to everybody. Go straight into the presentation for the second quarter. We have successfully completed the subsequent offering of $200 million. We have taken in 5 aircraft this quarter, 3 Dreamliners and 2 MAXes. We ended up with an EBITDA result of NOK 538 million, up from NOK 59 million last year. One of the reasons why we have been able to get the cost down is high utilization. We have increased the utilization of the aircraft up to 12.7 hours, up from 11.5 hours last year. We have won a lot of awards this year. Especially, of course, we are thanks to those passengers that voted for us. Also the award from the American ambassador for the bilateral relations between U.S. and Norway, that we appreciate very much.
Our cabin attendants do a fantastic job with the passengers that we can read directly out of all the awards we get. We were, not least, voted for the most innovative company in Norway. Right into the figures. We have had a stable load in this quarter, we have had a very high growth rate this year, or this quarter, much higher than we actually had in our strategy. There is something behind that because we got, of course, a very good lease rates on some of the long-haul aircraft, some of the Dreamliners. We were able to put a lot of capacity in revenue. We can get very good, actually, rates and very good capacity adjusted with the costs, we will be able to drive the cost down.
We have now set this capacity, ended up with 48% growth and 46% growth in RPK. You will see a more stable situation going forward. It will not be much less the first coming quarters, it will gradually decrease up to where we should be. Flew 10 million passengers, up 16%. We are able to fill the airplanes, we have continued growth on all the airports. Slightly more than 1 million more passengers overall, with a stable market share of 43%. Largest increased market shares we have in actually in all the airports, mostly at Gatwick. Interesting to see where our revenues come from. 58% of our revenues now come from outside the Nordics. Even though we have a strong growth in the Nordics, 13%, our significant growth is now U.S.
As you see, the revenues from the U.S. is now the second-biggest revenue part in Norwegian. We have more revenues from Spain and Sweden than into the U.S., second-biggest after Norway. Network. More than 60 intercontinental routes. More routes than any European operator now. Going forward now, it is to set this network and to get it to work. We have done so by, so far, we have taken in nine Dreamliners this year. Two more to go. Taken in two NGs. That was number 99 and 100. Taken in 11 of the new MAXes that will, in due course, actually replace the NGs. We are starting to phase out older aircraft, especially the leased aircraft. Four of the leased aircraft is being phased out. Two has already left us, and two is leaving us right after the summer. We go over to the financials. Okay?
Yes. Thank you, Bjørn. I will jump straight into the P&L. If we look at the top line, it's NOK 10.2 billion for the quarter. It's actually the highest ever. We have ancillary revenue of NOK 1.6 billion, which has a nice increase in it. I will come back to the details. On other revenue, it includes cargo and then lease-out income on the HK Express aircraft. On the cost side, I think there's probably one item to mention, that is the technical maintenance expenses, which is low, I would say, compared to the last quarters. This is one of the items where we have achieved a cost saving on. I will come back to the details on that. We have an item, other losses, gains of NOK 455 million as an income. NOK 250 million of that is related to fuel hedges, profit on those.
We also had some effects on the FX on the working capital in the area of NOK 180 million. Takes us down to an EBITDA of NOK 538 million. Then EBITDA at NOK 154. Net financial items is actually positive this quarter. The main reason for that is really that we have had some good effects on currency on our debt portfolio. That consists of in the area of NOK 430 million to NOK 440 million. Interest expenses is in the area of NOK 270 million. Takes us down to NOK 370 million in EBT and a net profit of NOK 300 million. On the revenue side, total income increased by 32% compared to the same quarter last year. The unit revenue is down 11% compared to last year. Compared to the first quarter this year, it's up from NOK 0.28.
Ancillary is pretty stable compared to the first quarter this year at NOK 162 per passenger. Cargo is also pretty stable at around NOK 160 million for the quarter. On the cost side, very pleased to see that the cost has a decrease of 19% compared to the same quarter last year. It had some help on the currency side, not much, but a little bit. In constant currency, we also have a nice decrease. For this quarter, as you can see, we have a unit cost of NOK 0.41, which is a very good number. During the quarter, we have had some discussions with some of our suppliers, vendors. We have been evaluating and going through the contracts we have with these vendors. We have renegotiated a few of them, which should give us savings going forward with better terms.
We have achieved some compensations from a few of the vendors in this quarter relating to the contracts we have with them. We have been able to book a cost saving in the area of NOK 400 million in the quarter. That is taken then into the P&L as reduced costs. That reduced cost is not reflected in the cash as per today, but will be reflected going forward. We have a very strong focus on reducing costs in the company as we have told the market earlier. If you look at these different sections of cost, as you can see, we have a flat development or reducing development in all of them, except, of course, the fuel. The focus is definitely on reducing all of them going forward, and we hope to be able to show that development during the next quarters as well.
I'll come back to the fuel side and how we are hedged going forward. Over to the balance sheet. Intangible assets, that's pretty much unchanged from last quarter. It's the deferred tax asset as we have. Aircraft PDP and delivered aircraft is up by approximately NOK 5.5 billion and relates to the deliveries Bjørn mentioned. We have a fixed asset investment of close to NOK 1 billion. That is cash that we have put on deposit relating to the debt facilities we have. We have investments of NOK 3.265. That is our shareholdings in the Bank Norwegian. We had a TRS of 4.7 million shares maturing during the quarter. That has been rolled for six months until the end of the year. On the debt side, we have increased debt of approximately NOK 2.5 billion during the quarter.
We have an increase, as you can see, in current liabilities. We have an increase from last quarter in current liabilities. It stands at NOK 7.4 billion as per today. That includes a final delivery payment of the Dreamliner we took delivery of very late in June, and that was then paid very early in July. That is why that has increased to some extent. The equity is up to NOK 3.6 billion, up from approximately NOK 2.1 billion in the last quarter. Cash flow, not much to comment there really. We have principal repayments of NOK 1.7 billion. That includes the NOK 1.1 billion repayment we did on the unsecured bond. Obviously then we got in the majority part of the equity raise we did in the first quarter. We got that in this quarter of NOK 1 billion.
CapEx commitment going forward. As you can see, we have a reduction from last quarter on actually both 2018 and 2019. That relates to a few delays, as we can see it today, on deliveries of aircraft. The CapEx now for 2018 is NOK 1.75 billion, and for 2019 is down from NOK 2.6 billion to NOK 2.2 billion. That CapEx does not reflect a case where we are actually divesting aircraft, as we have told the market as well. This is on the basis that we will take delivery of all the aircraft we have ordered into our own balance sheet. On liquidity, as I mentioned, we have repaid the NOK 1.1 billion unsecured bond. We have finalized the equity raise, and we still have a close to NOK 300 million in undrawn credit facility. Long-term financing.
We have completed the financing for the two MAXes and one 787 during the quarter, at very good terms, I would say. As guided last quarter, we have done that on the basis of a so-called AFIC financing, which gives us a very low cost of capital, and which should also bring the cost of capital in the company as such down, going forward. We are also in the process of finalizing financing for the remaining deliveries in 2018, more or less with the same structures as we did on the first line there. That is the focus on doing financing going forward in the company. As Bjørn mentioned, we are now starting to redeliver the old leases, which has a pretty or a relatively high cost of capital.
Going forward, as long as we finance the aircraft we take delivery of, in the manner that we have done in the last periods, the cost of the debt in this company will come down in the quarters to come. Outlook. If you look at the booked volumes, let's say for the second half of 2018, what we are seeing today is that we have a marginally lower load compared to the same period last year, but the yield is marginally up. Pretty much in line with what we saw at this time last year. Production growth is still at 40%. We have taken it slightly down compared to last quarter for the remaining two quarters in 2018. That is due to the fact that we expect to take down the production slightly, as we are in the process of divesting a few of the aircraft this year.
On fuel hedging, we have hedged slightly more to date than we had done the last quarter. As for today, we have 22% at NOK 525 in 2018, and we have 7% for 2019. Spot price fuel today is around NOK 700, and we are able to hedge today for 2019 in the area of NOK 675, which we are looking into. Guiding on unit costs. We keep the guiding ex-fuel, compared to what we did last quarter. We keep the same. As for today, we are in the lower fraction of that window. Hopefully, in the next quarters to come, we can be able to take that a notch down. However, because of the increase in the fuel prices, we have had to take the guiding slightly up on unit costs, including fuel.
If you look at compared to last year, even with fuel included, we are guiding a 4% reduction and a 12% reduction in unit cost ex-fuel. Cost reduction is, as I mentioned, a very high focus in the company. We hope to be able to share good results on those initiatives in the quarters to come. Bjørn?
Going forward, we are committed to our long-term strategy. We are more or less set the routes that we are going to fly for the next two years. You will see us adding up more frequencies. We are satisfied with the routes that we have set so far. You will not see us taking in so many airplanes for the coming quarters. It will go down to a moderate growth phase. Our focus will be on cost reduction. As Geir explained to you, we expect to be able to drive the cost further down, especially when we have set the routes, and we do not have to front-load all the crew members and the pilots that we need, that we have already done and train them accordingly. That costs a lot. We do not have those costs to such an extent that we have experienced so far.
As I said, we will be skewed towards increased frequency on existing routes. That means it is much easier for us to increase the frequency than opening new routes. When it comes to Argentina, we are on the track. We expect to start flying there in the last quarter of this year. Finally, we have established long-haul base number 10, and this time in Copenhagen, in order to take care of flights in and out of Scandinavia. We expect that will also go into a lot of cost savings. All in all, yes, we managed to have a profitable quarter. Are we satisfied with it? Of course, we are not. We are on the right track, but it is not good enough.
Going forward, we expect that we can, of course, be able to when the routes are set, we normally see that we will be able to increase the yield. This summer, of course, we have had a lot of good weather. That is also hit us in the second quarter. There is enough to take into consideration going forward. What we see, as Geir mentioned, is that we are satisfied with the cost initiatives that we have entered into. Some of them you will see coming as to being further explored and actually being put into operation in the quarters going forward. Yes, we are finally set where most of the production now that we have, especially on the long haul. Very tough quarter for us. Actually, the first half year we have been very tough.
We have some more than 100% increase in the ASK on long haul, up to more than 14% out of some large cities in Europe and more than 200%, actually 250% out of London. The production is set. People are flying, and they are even paying. In that respect, yes, we are satisfied, but it is not good enough going forward. It is okay, but it is not good enough. I leave it to you to ask the questions.
Good morning. Karen Syversen, Pareto. If I may, the cost improvements you Is it recurring? You mentioned NOK 400 million during the quarter. Is it a one-time effect?
They seldom give donations. Of course, it's never donations. At the best is a reimbursement of part of the cost, obviously, we have had the more cost than we have got reimbursed. It's not a secret that with some engines on the fleets have come up for a lot of problems with the engine changes and so on. They are in the process of fixing it. Nevertheless, we have had to downsize a lot of our routes because the wet leases cannot take all the passengers that we have on the Dash 9. We are not able to get this new aircraft like the Dash 9. It's been a hassle for us and not at least for some of our passengers. I can assure you, we are not able to collect the cost that we are this having incurred.
You might have something to say to that, Geir.
Yeah. I would say that of the NOK 400, I would say the majority of that is a one-time effect this quarter. On the renegotiations we have done on contracts, that should give us savings, going forward as well.
Okay. Thank you. With the divestment, you mentioned up to 140 aircraft in Q1, and I see you expect to reach a conclusion now in Q3.
Could you just tell a little bit how growth could look? I guess you have a fairly wide range for 2019 in terms of growth, capacity growth. You could take growth massively down, or you could continue growing.
Our long-term strategy is to have a normal growth, slightly larger than the market, of course, especially on the long haul. Today, we did have a really big jump in 2009 out of several reasons. Going forward, it will be normalized. Yes, we will have growth, but not like you have seen this last half year at least, or this last year. We will divest the aircraft, but that's mainly older aircraft, and you have to remember that we get a lot of new aircrafts in next year and the year after. That will replace the NG as an example that we will phase out, we'll sell it off. Also part of the Airbus fleet that we are not going to use ourself, like we have done with the Hong Kong Express airplanes. You will see us divesting parts of it.
There has been a lot of interest in these aircraft.
Ole Martin from DNB. Can you please elaborate on the NOK 400 million cost savings in the quarter? How many vendors have you been able to renegotiate terms with? How much of this figure is related to compensation for the Rolls-Royce engine problems? Also, you mentioned a slight delay on the aircraft delivery schedule. Which aircraft is this delay related to?
I can take the last part first. The deliveries of the Airbus have been delayed because of the engines on the Airbus. On the cost savings side, naturally, we first go on the large partners, large contractors that we have, large vendors. We have gone all over. Geir, you can probably add something to that.
No, we have been going through the contracts with the main suppliers. We have had very good discussions with them. We have, with some of them, agreed the way going forward at better terms for Norwegian. We have reached deals with a few of them on where they are actually compensating us. That is a compensation of costs that Norwegian already has had. We are very happy that we reached a conclusion with a few of them during the quarter, which gives us the ability to take in close to NOK 400 million in a cost reduction. To share any further details on that is difficult.
The only thing I can say, they do not give donations. Obviously, needless to say, we have had more cost than this, we have to some degree been compensated.
One extra question from Ole Martin Westgaard, DNB. How should we think about maintenance costs going forward?
There have been one-offs, yes, on compensation. Scale is very important here as well. Going into the details, MRO worldwide has increased costs for everybody. It's difficult to reduce technical costs. The best actually is flying new aircraft. This, add something to that, Geir.
No, I think the unit cost of [1 or 0.24] this quarter, you should not expect to see that in the third quarter. That's just a fact. In that sense, you should actually rely on the guiding we are giving. Have in mind that we have a very strong focus on this going forward, and hopefully, we will be able to take that guiding down.
Håkon Tøsse Holta from Two questions. One about Russia. Is there any news about the flight possibilities over Russia? Any kind of discussions going on there? The second thing, of course, which I guess most of the audience is curious about is there any news to the market about the ownership discussions?
The first thing I can answer, we have waited 5 years now for being able to fly over Russia, Siberian Corridor. We appreciate all the efforts our prime minister is doing. There hasn't been any move in it, sorry to say. In these 5 years, nothing has happened except that we have 3,500 daily flights or yearly flights of Russian aircraft over Norwegian territory and none Norwegian over Russian territory. It's not a balanced agreement. That can everybody see. Losses, of course, thousands and thousands of jobs in the tourism industry and in our export industry. That's the waste. Well, to the last question, my job is to concentrate on running Norwegian, and I will concentrate on running Norwegian. We have had a lot of interest, and that means that, yes, we are on the right way, otherwise they wouldn't have had any interest in us.
They see that somebody doesn't like it, our strategy is I wouldn't have actually had that interest to so many of the large airline if we weren't on the right track. Otherwise, yes, we have had a lot of interest, but my job is concentrated on running Norwegian. It's the board that have to take care of those interesting parties.
Hans-Olav Gjøvik, WIN Airlines. Looking into your fuel consumption and fuel cost for Q2 and H1. Q2 was up 84%, and H1 is up 67%. Will you be more aggressive on hedging fuel in the future?
In hindsight, we should have, of course, taken it. We should have had 100%. We try to mitigate the risk, and what we have seen, I remember because I've been many years into this trade, and when it was $130 and everybody told us that it will go to $200. Those who hedged at $130, they went into bankruptcy except one airline. There is always a risk to one shouldn't underestimate the risk of hedging as well. With the turbulence happening in the world, will it go up or will it go down or will it stay? I don't know. Might go up like it did last time and then rumble down.
What we have seen that in order to mitigate the risk as much as possible, yes, we should have liked to hedge when it goes up, but probably around 50%, then you have both have the upside and the downside in the long term. It's in this world with all the trade barriers and all these things coming up, where is the industry going? I think our strategy is actually to take down the risk as much as possible. Yes, we hedged too little going forward.
Normally, I think if you look back, you can see that we have normally been hedged up to 50%, 12 months going forward. Now we are obviously lower. As Bjørn said, in hindsight, yes, we would have liked to be more hedged. On the other side, which is not giving us any comfort anyway, if you look at the development in USD NOK compared to the fuel price, it's pretty correlated. You can say that in, let's say, in a 1% increased fuel price, it will give us approximately one to 0.7, 0.75 strengthening of the USD NOK. In that case, you could say that you have kind of a natural hedge. What we have seen lately in this year is that you have had an increased oil price and actually a weakening NOK. Which is kind of a double effect negative.
We do expect that that spread will come in. Obviously, yes, we would have liked to be more hedged.
Any further questions? Yeah. One. A question from [Christian Laberg]. A lot of the legacy airlines are placing significant orders for Dreamliners. How will Norwegian compete with them long term when a big source of Norwegian's competitive advantage is lost?
First of all, in order to be in effect, if you already are a Dreamliner customer, it takes you 24 months. That will happen in 2021. I expect that at least in 2021, we will have set our volume. Another thing, they don't build any more runways. Even today, try to find slots in New York. It's not very easy. You can get slots, but not that you can fly in Europe because of the curfew. That one of the reason why we ramped up so much this year and concentrated on U.S., because we know that in the future there will not be many slots available.
Okay. Thank you.
Thank you. Have a good summer to everybody.