Annual Report 2020
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NORWEGIAN AIR SHUTTLE ASA ANNUAL REPORT 2020 NORWEGIAN AIR SHUTTLE ASA NORWEGIAN AIR SHUTTLE – ANNUAL REPORT 2020 2 CONTENTS LETTER FROM THE CEO 3 BOARD OF DIRECTOR'S REPORT 5 FINANCIAL STATEMENTS 16 CONSOLIDATED 17 PARENT COMPANY 67 ANALYTICAL INFORMATION 89 CORPORATE RESPONSIBILITY 92 CORPORATE GOVERNANCE 98 DECLARATION FROM THE BOARD OF DIRECTORS AND CEO 103 AUDITOR'S REPORT 104 BOARD OF DIRECTORS 107 MANAGEMENT 111 DEFINITIONS AND ALTERNATIVE PERFORMANCE MEASURES 114 NORWEGIAN AIR SHUTTLE – ANNUAL REPORT 2020 3 LETTER FROM THE CEO The year began on a positive note as we The power and passion of the Norwegian were set to deliver a profitable 2020 thanks ‘voice’ has been heard over the last year to successful cost-saving initiatives and a and is a testament to the importance of our more efficient operation. 2020 also saw brand and the value that we bring to Nordic the highest summer bookings ever, but it economies through business and tourism. proved however to be a year like no other as travel effectively ground to a halt across I have had to make difficult decisions that all markets in which Norwegian operated have impacted dedicated colleagues across due to the pandemic and travel several business areas, however, on every restrictions. The impact has been occasion this has been a necessary step to profound, on both a financial and ensure the continued survival of the airline. operational front. Like all airlines we have By rightsizing the company at this crucial had to rapidly adapt in order to survive and time, we will be in a far better position to be in a position to capitalise on weather this storm that has still yet to pass. opportunities that will arise in the future as the world recovers from this pandemic. My executive team and colleagues throughout the company have worked Norwegian reported an operating loss of tirelessly to secure a strong future for NOK 23,768 million compared to an Norwegian. We accessed an initial loan operating profit of NOK 856 million in 2019. guarantee from the Norwegian government The company’s total revenue in 2020 was in May after meeting their stringent NOK 9,096 million, a decrease of 79 requirements. This was followed by the percent compared to a year earlier, driven creation of a more agile and lean by the dramatic reduction in operations. management structure across the airline to From April through to July, Norwegian 2020 – A FIGHT FOR SURVIVAL faced every challenge head on, we have ensure a greater employee and customer operated eight aircraft on domestic routes LEADING TO RENEWED sought long term solutions and most focus, more efficient operation and, not only. Throughout the summer, once travel importantly implemented decisions with least, an organisation that facilitates broad restrictions were lifted, the company STRENGTH decisive speed to achieve immediate cooperation across the business. In operated around 20 aircraft to 76 routes results. I have truly felt humbled by the November and December, the company across Europe. However, following continuous support and understanding initiated an Examinership and This last year has marked the most renewed travel restrictions introduced in from our shareholders, loyal customers and Reconstruction process in Ireland and challenging period in Norwegian’s history. November and the strained financial vendors who have equally fought hard to Norway respectively to reduce debt, We entered 2020 having already made huge situation, the operation was again reduced ensure the survival of this company. rightsize the fleet and secure new capital. strides in reducing our costs and optimising to only between eight and ten aircraft in Working together, we have overcome our route network as we sought to move order to dramatically reduce costs. obstacles and reached many milestones We will all look back at the events of 2020 from growth to profitability. Unfortunately, thanks to an open dialogue and and remember the sudden changes and time was not on our side as the effects of compromise. I would also like to thank our restrictions that have touched every aspect the pandemic soon took over every aspect dedicated Red Nose Warriors throughout of our lives, but we must also focus on the of our operations and our forward planning. the company who have bravely faced these strengths that these challenges have Yet throughout this turbulent year we have uncertain times with courage and strength. brought out in all of us. We have all learnt NORWEGIAN AIR SHUTTLE – ANNUAL REPORT 2020 4 to be agile, to cope with change, to seek Across the industry we had hoped that the leisure and business. Affordable and solutions and to remain focused on better effects of the pandemic, though deep, reliable air travel is an essential part of our times to come – this is no different for would be short lived. This has repeatedly lives. As customers look to reunite with Norwegian and we now look to the future proved to not be the case and there are still loved ones, friends and family as travel with renewed vigour and a revised hurdles to overcome before a return to restrictions are eased, we will be well proposition forming the backbone of a normality. There are many uncertainties positioned to offer a product and network profitable and financially secure company. facing every aspect of global travel, from that responds to their needs. government imposed travel restrictions to general demand in some markets being Compared to both new and old competitors BEYOND 2020 – A NEW impacted for many months if not years. in the market, a revitalized, more agile and lean Norwegian will be able to confront the NORWEGIAN – AGILE AND However, the accelerating pace of vaccinations across our key markets and industry challenges ahead with renewed FOCUSED the combined efforts of governments to strength, ensuring that we are the airline of reopen international travel in a safe and choice for customers seeking value and In January 2021, Norwegian announced a secure way gives me great optimism for the excellent service for many years to come. new plan that would strengthen the core future. Norwegian will continue to be synonymous profitable short-haul operation and cease with being at the forefront of sustainability, long-haul operations going forward. The Flying brings people together and is of great offering great value and providing uncertainties surrounding long-haul value to society. But flying also comes at an exceptional service – we are the customer’s passenger demand were clear and we took environmental cost that must be reduced. smart choice. the decision to focus on the Nordics In our environmental sustainability strategy business to create a robust and solid launched last year, we committed to company that will attract investors and reducing our emissions by 45 percent by continue to serve new and existing 2030, in line with the 1.5°C target set forth in the Paris Agreement. We have a good customers. We set ourselves an ambitious /s/ Jacob Schram starting point. Our low-cost model reduces yet achievable target to reduce debt Chief Executive Officer significantly to around NOK 20 billion and to fuel and resource consumption – cutting raise between NOK 4 and 5 billion in new costs, ticket prices and carbon emissions at capital through a combination of a rights the same time. The low-cost model is the issue to current shareholders, a private sustainability model in aviation, as it placement and a hybrid instrument. enables highly efficient energy and Subsequently, the Norwegian government resource management. However, we decided to support and contribute to the cannot rest on our laurels. We need to do airline’s funding of new capital pending more. Our targets and the direction of our certain conditions, and the Examinership environmental sustainability strategy and Reconstruction processes have remains and will be aligned with our new proceeded as planned. The capital raise business plan. have later been increased to between NOK 4.5 billion and NOK 6 billion. Our core focus on European operations means we will be ready to capitalise on the pent-up demand that we know has built up over the course of the pandemic as customers look to once again travel for NORWEGIAN AIR SHUTTLE – ANNUAL REPORT 2020 5 BOARD OF DIRECTORS' REPORT In the first two months of 2020 Norwegian factor of 11.4 percentage points to 75.2 NOK 300 million. In April, to further reduce Norwegian announced that it would focus reported higher unit revenue, record high percent. The on-time performance was 90 costs in light of the lack of significant solely on a strong and profitable short-haul punctuality and higher load factor after percent. The airline’s CO2 emissions per financial support from the Swedish and network allowing the company to build a taking significant actions in 2019 to passenger kilometre were also impacted Danish governments, the decision was robust and solid foundation that would optimize the route network, cut costs and negatively due to the drop in passenger taken to apply for bankruptcy for the pilot attract investors and continue to serve new create financial headroom. The strategy of demand and shorter flight distances when and cabin crew companies based in those and existing customers. As a result of this moving from growth to profitability had compared to the previous year. CO2- respective countries. In May the company decision all long-haul operations would gathered pace and was beginning to lay the emissions increased by 17 percent to 82 finalised a restructuring and cease. In light of the company’s new foundations for the company to deliver a grams CO2 per passenger kilometre. recapitalisation process that completed business plan and proposed structure the positive result in 2020.