Norse Atlantic ASA

First Half Year 2022 Results

Key Financials

(in USD million)

H1 2022

H1 2021

Operating revenue

3.0

-

EBITDAR¹

17.5

1.8

Operating profit EBIT¹)

43.3

1.8

Net profit

51.3

0.7

Book equity¹

105.1

164.2

Total liquidity¹

105.6

150.3

Net cashflow from operations

17.8

1.4

Operational Overview

H1 2022

H1 2021

ASK¹ (millions)

53.6

-

RPK¹ (millions)

43.7

-

Number of passengers

6,633

-

Load factor¹

82%

-

¹ = Non-IFRS alternative measures are explained in the notes to the financial statements

Headlines H1 2022

Full Year

2021

-

7.6

8.0

7.2

156.4

134.3

6.2

Full Year

2021

-

-

-

-

  • Start of commercial flights, with inaugural flight on 14 June 2022 from Oslo to New York
  • Load factor of 82% achieved and 100% of scheduled flights flown
  • Operating revenues of USD 3.0 million recognized in June 2022
  • 11 of 15 aircrafts delivered to Norse as of 30 June 2022; 2 more delivered post-period end
  • All aircraft currently on power by the hour flexible lease terms
  • Agreed terms to sublease out four Dreamliners; two delivered in H1 2022 and two subsequently
  • Total liquidity at period end USD 105.6 million

The first half of 2022 marked a milestone in Norse Atlantic ASA's ("Norse", "Norse Atlantic Airways" or the "Company") short history as it flew its first commercial flight, just over a year after the Company was formed. Norse launched its ticket sales on 29 April 2022 and the first flight took off on 14 June 2022 from Oslo to New York, followed by flights to Fort Lauderdale and, post-quarter end, to London, Orlando, Los Angeles and Berlin.

Norse has secured a fleet of 15 modern, fuel-efficient and environmentally friendly Boeing 787 Dreamliners ("aircraft") at historically low pricing and favourable lease terms, including power by the

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hour payments for a minimum period of the first 12 months after aircraft deliveries. As of 30 June 2022, the Company had taken delivery of eleven Dreamliners and another two were delivered subsequent to the period end. The two final aircraft are expected to be delivered to Norse before the yearend. Norse has subleased out four of its aircraft for a duration of 18 months each. The total revenue from the aircraft sublease component is expected to be in excess of USD 40 million over the term of the subleases.

Outlook

Norse is currently operating commercial flights from seven different locations in Europe and the USA. Launching its commercial flights in Summer 2022, when the demand for international air transport had been on a rise post-pandemic, has enabled the Company to secure a healthy load factor on its initial routes. The Company recorded a load factor of 86% in July 2022, following on from 82% in June. The load factor in August 2022 was down to 69%, mostly linked to the launch of new routes in mid-August. Since Norse's first flight in June, the Company has achieved an aggregate load factor of 75% to end August and has successfully flown 100% scheduled flights.

With the backdrop of high inflation in Europe and the US, continued high fuel prices and a reduction in the pent-up travel demand post-Covid, the coming months are expected to be challenging for the global aviation industry. Norse will be cautious with regards to its winter 2022 program and is continuously evaluating all routes. The Company is well positioned to take a careful approach to activating more aircraft as it continues to enjoy the benefits of flexible aircraft lease terms, including power by the hour and low lease rates.

The connectivity partnerships entered into post-quarter end are expected to attract a larger customer base to the Company by connecting Norse's transatlantic flights with the domestic markets in Europe and the USA. The Company is actively pursuing collaborations with other industry service providers to expand its market reach and also to provide relevant ancillary services to its guests.

The cargo market remains strong and Norse continues to become a more attractive cargo provider in all current markets it operates in.

Financial Performance & Position

During the six months ended 30 June 2022 ("H1 2022" or "the Period"), the Company generated operating revenue of USD 3.0 million, consisting of USD 2.0 million in ticket sales and ancillary passenger revenue and USD 1.0 million in other revenues.

Operating expenses excluding depreciation, amortization and aircraft leases during H1 2022 totalled USD 20.4 million, consisting of USD 11.4 million in personnel expenses, USD 4.5 million in aircraft

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operating costs and USD 4.5 million in marketing and administrative costs. Variable aircraft lease expenses were USD 0.8 million. Norse recognized USD 25.0 million of depreciation and amortization in H1 2022, of which USD 24.9 million related to aircraft lease amortization.

Net financial expense for H1 2022 was USD 7.9 million, consisting of USD 3.3 million in lease interest costs and USD 4.7 million currency exchange losses. The Company reported a net loss after tax of USD 51.3 million for H1 2022.

As the Company started its commercial flight operations only during H1 2022, no reasonable comparison with prior periods is possible.

As of 30 June 2022, the carrying value of right-of-use assets related to the aircraft leases was USD

920.8 million and the corresponding lease liability was USD 907.9 million. All aircraft are currently on power by the hour flexible lease terms. The fixed lease payments on the first aircraft are scheduled to start from December 2022. During H1 2022 the Company has amortized USD 24.9 million from the aircraft right-of-use assets.

Cash Flow

During the six months ended 30 June 2022, the Company's net cash flow from operations was an outflow of USD 17.8 million.

Net cash used in investing activities was USD 30.5 million, mainly consisting of USD 25.0 million invested in US Treasury Inflation Protected Securities, an investment made to reduce the Company's exposure to inflation risk. Investment in aircraft related and other assets were USD 5.5 million.

Cash flow from financing activities was an outflow of USD 5.1 million, mainly consisting of a USD 5.0 million increase in restricted cash. Restricted cash held at the Period end was USD 5.0 million, in relation to a guarantee facility provided by Nordea Bank and used for certain payment guarantees provided to the Company's key suppliers.

The Company's net decrease in cash and cash equivalents during H1 2022 was USD 58.1 million, after a currency revaluation loss of USD 4.7 million, and following the USD 25.0 million investment in liquid securities. The Company's cash and cash equivalents as of 30 June 2022 was USD 76.1 million, in addition to USD 5.0 million restricted cash, giving total cash USD 81.1 million. Including the investment in liquid securities the Company's total liquidity was USD 105.6 million at the Period end.

Organization

As of 30 June 2022, the Company has employed a total 468 employees, of whom 323 are airborne crew and the remaining 145 are engineers, aircraft maintenance personnel and office-based employees. The Company has its headquarters in Arendal, Norway and has offices in Oslo Gardermoen, London Gatwick, Fort Lauderdale and Paris.

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Risks

The Company is exposed to normal risks that are associated with newly established enterprises, as well as to risks related to the airline industry. The impact of the COVID-19 pandemic on the aviation industry has eased over recent months and demand for air travel increased during the summer as pent-up demand was unwound. However, any adverse development in the pandemic situation may impact the Company's financial performance.

Future demand for air travel is subject to seasonal variations and can also be significantly impacted by macroeconomic factors, such as high inflation, that could have a negative impact on customers' spending behaviour. Further increases in aviation fuel price and any significant and prolonged adverse movements in currency exchange rates could impact the Company's earnings.

Norse is currently seeking certain additional regulatory approvals to expand its operations. Norse has secured landing rights at certain airports and may be reliant on securing and retaining additional airport landing rights in future.

Subsequent events

During July 2022, Norse took delivery of two more aircrafts and immediately subleased them out. Norse currently has taken delivery of thirteen aircrafts, of which four are subleased out.

As part of Norse's application for an Aircraft Operators Certificate in the UK ("UK AOC") it has capitalized its wholly owned UK subsidiary, Norse Atlantic UK Ltd ("Norse UK") with USD 41 million. This amount is ring fenced for operations undertaken by Norse UK.

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Norse Atlantic ASA published this content on 22 September 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 12 October 2022 12:51:10 UTC.