Annual Report Air Greenland A/S 2020 1. januar 2020 - 31. december 2020
Annual Report Air Greenland A/S 2020 1 Januar 2020 - 31 December 2020
The annual report was presented and adopted at the Company’s Annual General Meeting on 18/5 2021
Peter Schriver Chair of the meeting
Air Greenland A/S CVR-nummer: 56 99 67 10 www.airgreenland.com Postboks 1012 3900 Nuuk Grønland The Group’s key figures and ratios (DKK mill.) 2016 2017 2018 2019 2020
Net revenue 1.3 07,1 1.304,8 1.401,3 1.397,7 1.129,5 Earnings before interest, taxes, depreciation and amortisation 226,9 217, 2 224,5 253,8 172,8 (EBITDA) Earnings before interest and tax (EBIT) 35,6 75,8 79,1 112,9 45,2
Profit or loss before tax 40,8 71,1 80,8 106,6 32,6
Profit or loss for the year 25,6 44,9 52,1 88,6 30,6
Tangible fixed assets 745,4 764,3 737, 2 688,4 824,7
Equity 683,6 700,7 717,9 488,8 506,8
Balance sheet total 1.121,7 1.170,2 1.244,1 1.130,2 1.177,6
Dividends for the financial year 37,0 22,5 - 461,0 -
Investments in tangible fixed assets 78,7 148,0 126,2 95,6 289,5
Number of employees (year-end) 621 614 631 637 544
Profit margin 2,7% 5,8% 5,6% 8,1% 4,0%
Return on invested capital after tax incl. goodwill 4,1% 9,4% 10,8% 11,2% 4,9%
Financial gearing -0,4 -0,2 -0,4 0,1 0,3
Operational gearing -1,2 -0,7 -1,2 0,2 0,9
Return on equity 3,2% 6,5% 7, 3% 14,7% 6,1%
Equity ratio 60,9% 59,9% 57,7% 43,3% 43,0%
Unit of Statistical information (DKK mill.) measurement 2016 2017 2018 2019 2020
Route network length Km 18.340 17.603 17.603 17.603 11.345
Number of towns serviced Byer 22 16 16 16 16
Flown km in regular traffic 1000 6.025 5.903 6.201 5.933 3.698
Flying hours in the air, total Timer 23.176 23.189 23.486 21.527 15.742
Flying hours in the air, regular Timer 13.911 12.648 13.064 12.845 8.271
Offered tonne-km, regular traffic 1000 81.369 85.233 91.793 88.989 54.329 Sold tonne-km, regular traffic 1000 54.713 56.922 58.971 59.792 29.765 Total load factor, regular traffic Procent 67, 2% 66,8% 64,2% 67, 2% 54,8%
Number of passengers 1000 426 419 431 438 246
Offered seats-km, regular traffic 1000 650.059 678.174 733.328 717.18 0 435.859
Sold seats-km, regular traffic 1000 523.656 548.252 568.316 579.841 258.892
Cabin factor, regular traffic Procent 80,6% 80,8% 77,5% 80,9% 59,4%
Average travel distance for regular traffic Km 1.229 1.310 1.319 1.323 1.054 Table of contents
Group profile 7 Preface 7 Highlights 2020 9 Financial development 11 Net revenue 12 Personnel and other external costs 12 Subsidiaries and associated companies 13 Risk management 16 Operational risks 17 Commercial risks 17 Financial risks 18 Fleet strategy and contracts 19 Service contracts until 2030 20 Search-And-Rescue (SAR) contract until 2032 20 Flight services to Thule Air Base 20 Emergency preparedness and Covid-19 21 Employee focus 22 Development – the good customer experience 23 Safety 23 LEAN 24 Ticket concept 25 Customer loyalty 26 Charter, mail and cargo 27 Other initiatives 28 Sustainability 29 Education in society 30 Diversitet 32 Expectations for 2021 33 Financial statements 43 Company information
Central Business Register (CVR) no.: 56996710 Ownership: Wholly owned by the Government of Greenland, Nuuk, Greenland Share capital: 24 mio. kr. Auditors: PricewaterhouseCoopers Grønlands Revision A/S Executive Board: Jacob Nitter Sørensen, Administrerende direktør
Statement of the Board of Directors and Executive Board
We have on this day presented the annual report for view of the Group and Parent Company’s assets, lia- the financial year 1 January – 31 December 2020 for bilities and financial position as at 31 December 2020 Air Greenland A/S. and of the result of the Group and Parent Company’s operating activities and cash flow in 2020. The annual report has been prepared in accordance with the Greenlandic Financial Statements Act. The annual report is recommended for adoption at the Annual General Meeting. We consider the accounting policies to be appropriate, such that the annual report provides a true and fair Nuuk, 23 March 2021
MANAGEMENT Jacob Nitter Sørensen Chief Executive Officer
BOARD OF Bodil Marie Damgaard Annette Pia Henrik Maule DIRECTORS Chairman of the Board Brøndholt Sørensen Steinbacher
Steen Jensen Peter Claus Grønvold Samuelsen Martin Motzfeldt
Jette Larsen Malik Peter Sam Grønvold Hegelund Olsen
1 The independent Auditor’s Report
To the owners of capital in Air Greenland A/S
Opinion In our opinion, the consolidated accounts and financial In addition, it is our responsibility to consider whether the statements provide a true and fair view of the Group and the Management’s Report contains the required information in Company’s assets, liabilities and financial position as of 31 accordance with the Greenlandic Financial Statements Act. December 2020, as well as the result of the Group and the Company’s activities and cash flow for the financial year 1 Based on our audit work, it is our opinion that the Manage- January – 31 December 2020, in accordance with the Green- ment’s Report is consistent with the consolidated accounts landic Financial Statements Act. and financial statements and has been prepared in accor- dance with the requirements of the Greenlandic Financial We have audited the consolidated accounts and financial Statements Act. We have not found any significant errors or statements of Air Greenland A/S for the financial year 1 misinformation in the Management’s Report. January - 31 December 2020, which comprise the income statement, balance sheet, statement of changes in equity, Management’s responsibility for the notes, including accounting policies, and cash flow state- financial statements ment for both the Group and the Company (“financial state- Management is responsible for the preparation of the ments”). consolidated accounts and financial statements that provide a true and fair view in accordance with the Greenlandic Basis for opinion Financial Statements Act. Furthermore, Management is We have conducted our audit in accordance with interna- responsible for those internal controls that it considers tional standards for audits and the additional requirements necessary to prepare financial statements that are free from that are applicable in Greenland. Our responsibility under material misstatement, whether due to fraud or error. these standards and requirements is further described in the section Auditor’s responsibility for auditing the financial With the preparation of the financial statements, Manage- statements. We are independent of the Group pursuant to ment is responsible for evaluating the Group and the Com- the international ethical rules for auditors (IESBA Code of pany’s ability to continue operating, to provide information Ethics) and the additional requirements that are applicable in concerning continued operations, where relevant, and to Greenland, just as we have fulfilled our other ethical obliga- prepare financial statements on the basis of the accounting tions in compliance with these standards and requirements. principle of continued operation, unless Management either It is our opinion that the audit evidence obtained is sufficient intends to liquidate the Group or the Company, cease opera- and suitable as a basis for our opinion. tions or does not have any realistic alternative other than to do this. Statement on the Management’s Report Management is responsible for the Management’s Report. Auditor’s responsibility for auditing the financial state- ments Our opinion regarding the financial statements does not Our aim is to achieve a high degree of certainty as to wheth- include the Management’s Report and we express no form er the financial statements as a whole are free from material of definitive opinion on the Management’s Report. misstatement, whether due to fraud or error, and to submit an audit report with an opinion. A high degree of certainty In connection with our audit of the financial statements, it is is a high level of certainty, but it is not a guarantee that an our responsibility to read the Management’s Report and in audit that is conducted in accordance with international stan- that regard consider whether the Management’s Report is dards for audits and the additional requirements that apply substantially inconsistent with the financial statements or in to Greenland will always reveal material misstatements any other way seems to contain significant misinformation. when such are present. Material misstatements can occur due to fraud or error and may be considered to be significant if they can reasonably be expected to have an influence, individually or collectively, on the financial decisions that are made by the users based on the financial statements.
As part of an audit conducted in accordance with internation-
2 al standards for audits and the additional requirements • We evaluate the total presentation, structure and that apply to Greenland, we undertake professional content of the financial statements, including in- evaluations and maintain professional scepticism dur- formation in the notes, and whether the financial ing the audit. In addition: statements reflect the underlying transactions and events in such a way that they present a true and fair view. • We identify and evaluate the risk for material mis- statements in the financial statements, regard- • We achieve sufficient and appropriate audit less of whether this is due to fraud or error, plan evidence regarding the financial information for and conduct audit procedures as a consequence the companies or business activities in the Group of these risks and obtain sufficient and suitable in order to express an opinion with regard to the evidence upon which to base our opinion. The risk consolidated accounts. It is our responsibility to of not discovering material misstatement result- lead, supervise and conduct an audit of the Group. ing from fraud is higher than with material mis- We are solely responsible for our audit opinion. statement resulting from error, since fraud may involve conspiracy, falsification, deliberate omis- sions, deception or breach of internal controls. We communicate with Senior Management regard- ing, among other things, the planned scope and date • We gain an understanding of the internal controls of the audit, as well as significant audit observations, relevant to the audit to design audit procedures including any significant deficiencies in internal controls that are appropriate in the circumstances, but not which we identify during our audit. to express an opinion on the effectiveness of the Group and Company’s internal controls. Hellerup, 23 March 2021
• We consider whether the accounting principles Pricewaterhouse Coopers adopted by Management are suitable and wheth- Partnership of State-Authorised Public Accountants er the accounting estimates and related informa- CVR-nr. 33 77 12 31 tion prepared by Management are reasonable. Thomas Wraae Holm State-Authorised Public Accountant • We evaluate whether Management’s prepara- mne30141 tion of the financial statements based on the accounting principle for continued operation is appropriate and whether, on the basis of the audit evidence acquired, there is significant uncertainty Grønlands Revision A/S associated with events or circumstances that State-Authorised Public Accountants could cause considerable doubt with regard to CVR-nr. 41 76 26 67 the Group and the Company’s ability to continue Per Jansen operations. If we conclude that there is significant State-Authorised Public Accountant uncertainty, in our Auditor’s Report we will draw mne21323 attention to information about this in the financial statements or, if this information is not sufficient, we will modify our opinion. Our opinion is based on the audit evidence that is obtained up to the date of our Auditor’s Report. Future events or cir- cumstances, however, may result in the Group or the Company being unable to continue operations
3 4 Bodil Marie Damgaard (Chairman of the Board) Profession and board positions CAO (Chief Administration Officer), Greenland Holding (2020)
Educational background Master of Arts in Communication Studies from Roskilde University Bachelor degree in Business Studies
Skills and experience Communication, marketing, HR, management and strategy
Steen Jensen (Vice chair) Profession and board positions Lawyer and partner, Bech-Bruun Board member, Ikano Property FE A/S
Educational background LLM, University of London Cand.jur., Københavns Universitet
Skills and experience Stock exchange and capital market, financing, regulatory matters, company law, strategy and good corporate governance
Jette Larsen Profession and board positions Board member
Educational background Board Leadership, Masterclass, CBS Advanced Business Leadership, CfL HK Ikast and Mommark Business College
Skills and experience Management, transport, aviation
Annette Pia Brøndholt Sørensen Profession and board positions Professional board member and investor (2014) Chairman of the Board, Syncorder Chairman of the Board, MapDiet Chairman of the Board, Offspring A/S (Wheat) Board member, Scandinavian Cosmetics Group Board member, SOS Children’s Villages DK
Educational background MBA, Business Administration, CBS (2011) Graduate Diploma in Business Administration – International Business, CBS (1988)
Skills and experience Management, strategy, economy, aviation
5 Peter Grønvold Samuelsen Profession and board positions CEO KNI A/S (2013)
Educational background eMBA, Business Institute Denmark (2019) Cand.scient.adm, University of Greenland (2010)
Skills and experience Operational- and organisational management, strategy
Malik Hegelund Olsen Profession and board positions Head of Sales, Royal Greenland A/S (2014) Board member, University of Greenland Employee-elected member of the board, Royal Greenland A/S
Educational background Graduate Diploma in Business Administration – Organisation, University of Greenland Production engineer, Copenhagen University College of Engineering
Skills and experience Economic exploitation, personnel management, project management
Claus Motzfeldt (employee-elected) Profession and board positions Chief Mechanic (1996)
Educational background Flight mechanic, Civil Aviation School in Dragør
Skills and experience Engineering, aviation, management and charter
Henrik Maule Steinbacher (employee-elected) Profession and board positions Pilot, Dash 8 (1997) Flight instructor (2004)
Educational background Pilot (1997)
Skills and experience Management and strategy, aviation, engineering
Sam Grønvold (employee-elected) Profession and board positions Traffic Assistant (2009) Souvenir shop Kangerlussuaq Chairman of the Board, SILAGIK (Air Greenland personnel association Kangerlussuaq) Chairman of the Board, KALIF (Kangerlussuaq sports club)
Educational background Traffic assistant Plumber (pipe fitter)
Skills and experience 6 Aviation and management Management’s report
Group profile Preface
Whichever way you look at it, 2020 will be remembered as the year in which the global Covid-19 pandemic gained a foothold, spread extensively and had a huge impact on individuals and their families, as well as governments and au- thorities, civil society and business and industry – and thus also Air Greenland.
Travel plummeted, with government authorities both within and outside Green- land regularly advising against all non-essential travel. Whereas ordinary ticket sales remained under severe pressure, the pandemic was also the catalyst for an intensive, cross-sector collaboration between Air Greenland and the coun- try’s authorities, including the health service, the police and of course the Gov- ernment of Greenland.
In collaboration with the Government of Greenland, the Company established a system of emergency preparedness. An air bridge between Greenland and Den- mark was implemented, transport of critical healthcare personnel was assured, whilst the maintenance of domestic air traffic ensured delivery of Covid-19 tests and other types of cargo. A more detailed description of this emergency pre- paredness can be found in the section on Operations and development.
It became even more apparent that Air Greenland is an essential part of Green- land’s infrastructure, and we have demonstrated that the Company – both internally within the organisation and in society as a whole – can collaborate on emergency preparedness. Not least has the intense collaboration with the Company’s owner, the Government of Greenland, been constructive, with the identification of the most beneficial solutions to society as a whole always taken as the point of departure.
In addition to the major challenges posed by Covid-19, the Company has per- severed with the work that had been commenced aimed at modernising and adapting its fleet to the needs of the coming years and the agreements that have been signed.
First and foremost, the Board of Directors has decided to carry out the biggest single investment in the Company’s history with the order of a brand new Air- bus 330-800neo, which is being built in Toulouse, France, and is expected to be put into service in Greenland at the end of 2022.
For the first time, the new service contract with the Government of Greenland is a 10-year agreement, which makes it possible to replace the seven B212 heli- copters, which have an average age in excess of 40 years, with six modern H155 helicopters, which will take over the service contract routes in south, north and central Greenland, as well as providing assistance in SAR operations.
7 The Search-And-Rescue (SAR) contract was entered into and flexibility of the employees, responsible Management for a period of four years, with the option of an extension that has exhibited a timely response to the new challenges, for up to a total of 12 years. This means that the Company including an adjustment of capacity at an early stage, a loy- has replaced its aging S61 helicopters with modern, well- al customer base in spite of falling demand, as well as the equipped H225 helicopters. The new SAR helicopters have continued focus on LEAN organisational culture, which has more efficient engines and a modern autopilot system, which resulted in lower costs and higher efficiency. will make a significant contribution to overall safety during difficult rescue missions. They have a large fuel capacity The Group’s value chain has been even more closely inter- with increased range and de-icing functions, which will en- linked in 2020. As a result of the Covid-19 pandemic and able them to be flown in areas where the formation of ice the related restrictions and recommendations from govern- constitutes a risk. ment authorities concerning travel to and from Greenland, special “staycation” packages and other attractive products The above agreements and investments mean that Air for domestic customers have been developed. This has had Greenland can now carry out the necessary replacement of a positive effect on traffic in the domestic market and, not its fleet. This has taken place at the same time as the Com- least, benefitted local communities and large and small busi- pany has faced significant challenges in terms of its activities nesses throughout the country. due to the Covid-19 pandemic. Despite this, a good financial result is presented, which is due not least to the adaptability
8 Highlights 2020
• Decision on the biggest investment in the company’s history: replacement of the Atlantic aircraft Airbus 330-200 with a brand new Airbus 330-800neo
• Long-term contracts for SAR and service contracts provide economic robustness and lead to the replacement of aging helicopter models with more modern and well-equipped models
• Two H225 AWSAR helicopters were purchased and introduced in a timely fashion
• Decision on the purchase of six H155 helicopters for replacement of the Company’s aging Bell 212 helicopters
• The Company has proved its determination and ability to play a decisive role in Greenland’s infrastructure with its close collaboration with the authorities during the Covid-19 pandemic, which has included an air bridge between Denmark and Greenland in order to assure the transport of individuals in critical functions, Covid-19 tests, mail, cargo, etc.
• A sustainability strategy has been drawn up that is based on the UN’s 17 Sustainable Development Goals and the ten principles of Global Compact. The strategy ensures that Air Greenland is dedicated to take into account balanced economic growth, corporate social responsibility and consideration of the environment in all of the companies within the Group
• Project Governance, which is a LEAN based approach to project management, is implemented for the Company’s strategic projects, which has boosted the Company’s ability to handle a large number of major projects simultaneously
• The employees throughout the Group have exhibited great willingness to protect the business when uncertainty during lockdown was at its height, by, among other things, agreeing to take voluntary holiday, freezing of salary and the temporary waiving of employee benefits
• 2020 was the year in which Air Greenland celebrated its 60th anniversary. As a result of Covid-19, the anniversary celebrations were somewhat more digital than physical, with a large-scale anniversary programme on KNR, Greenland’s national TV channel, a special edition of in-flight magazine Suluk, as well as a Facebook competition which provided a forum for its customers’ best memories of the last 60 years.
9 10 Økonomisk udvikling Economic development
Nettoomsætning
Pre-tax profits for the year are DKK 32.6 million, is DKK 268.6 million lower, with savings on other which proved to be lower than expectations for the external costs of DKK 155.0 million and personnel year – and some DKK 74.0 million lower than in costs of DKK 32.6 million having been achieved. 2019. The negative development in the result is related to the Covid-19 pandemic, which has had a The cost savings have been made possible through negative impact on the Company as a consequence a significant reduction of the timetable, less heli- of lower demand, restrictions and considerable un- copter activity and downsizing of the organisation, certainties in the market. which resulted in 93 fewer full-time employees as In relation to previous years, the total net revenue 2020 drew to a close.
11 Net revenue The Group’s net revenue has fallen by DKK 268.6 Personnel costs in the Group have been reduced by DKK million, with passenger revenue falling by DKK 328.0 32.6 million. Air Greenland saw 95 positions being axed million and charter revenue increasing by DKK 130.7 in May 2020, of which 35 positions were vacant. At the million, primarily as a result of the emergency pre- end of 2020 there were 93 fewer full-time employees paredness agreements entered into with the Govern- in the Group, corresponding to 15 % fewer employees ment of Greenland. than at the end of 2019. The reduction in the number of employees has been adapted to be able to handle the Cargo and mail revenue is DKK 6.3 million lower, with expected demand in 2021, which will also be affected this relatively small decrease due to the fact that it by restrictions and lower demand. has been possible to maintain a minimum timetable in which essential cargo was able to be delivered. Other external costs in the Group fell by DKK 155.0 mil- lion. A considerable portion of the decrease in costs is Income from hotel and ticket sales has seen a drop of related to lower activity, as well as through other cost DKK 80.8 million as a result of shortfalls in activity, in- reductions that have managed to reduce costs by 23 % cluding in Greenland Travel and Hotel Arctic. overall.
Other income has increased by DKK 6.8 million, which The high season normally relies on many employees can also be attributed to a number of the agreements on short-term contracts, and with production that lies entered into with the Government of Greenland. outside the airport’s opening hours and requires more overtime and wage variables. In 2020, the high season Personnel and other external costs saw a reduced timetable and no employees on short- Lower activity has led to 27 % fewer produced flying term contracts. This led to cheaper production and, in hours, which has resulted in a corresponding reduction turn, to the cost savings referred to earlier. in costs.
12 Subsidiaries and associated companies The many restrictions and lockdowns have had a negative impact on the earnings of the Group’s subsidiaries, with these subsidiaries having been affected to a greater extent by the lack of tourists travelling to and within Greenland.