Earnings call transcript: Norse Atlantic Q1 2025 sees revenue rise 23%

North Atlantic ASA reported a strong financial performance for the first quarter of 2025, with revenue increasing by 23% year-on-year, reaching $125.3 million. Despite a net loss of $14.9 million, the company showed significant improvement from the previous year’s loss of $62.8 million. The stock price reacted positively, rising by 1.85% to $6.62. According to InvestingPro analysis, the company’s valuation currently implies a strong free cash flow yield, suggesting potential upside opportunity. The stock has shown remarkable momentum, delivering a 78% return over the past six months.

Key Takeaways

• Revenue increased by 23% year-on-year, bolstered by a one-time gain.
• Net loss narrowed significantly compared to the previous year.
• Stock price rose by 1.85% following the earnings report.
• Passenger numbers increased by 51%, achieving a record load factor of 95%.
• Positive operating cash flow of $30 million, up from $3 million.

Company Performance

Norse Atlantic ASA demonstrated robust performance in Q1 2025, driven by strategic initiatives and operational efficiencies. The company capitalized on a one-time gain from aircraft redelivery, contributing $28.7 million to its revenue. The airline’s focus on route expansion and competitive pricing has paid off, with a 51% increase in passenger numbers and a record high load factor of 95%.

Financial Highlights

• Revenue: $125.3 million, up 23% year-on-year.
• EBITDAR: Positive $15 million.
• Net Loss: $14.9 million, improved from a $62.8 million loss last year.
• Operating Cash Flow: Positive $30 million, up from $3 million.
• Liquidity: $31.3 million in available cash.

Outlook & Guidance

The company is targeting profitability in 2025, with projected 12-month revenue expected to increase to $635 million. Norse Atlantic plans to reduce its cost per available seat kilometer (CASK) to around 3 and is expanding its contract with Indigo Airlines through January 2026. The airline also anticipates additional charter business for the next two winters.

Executive Commentary

CEO Bjorn Torre Larsen expressed optimism about the company’s future, stating, "We have never seen such a strong outlook from our side as we are doing now." He emphasized the company’s strategic focus, noting, "We are executing on our strategy to ensure that we secure revenue for a long-term period of time."

Risks and Challenges

• Market Volatility: The airline industry faces capacity challenges and price pressures.
• Cost Management: Achieving targeted cost reductions remains crucial.
• Competitive Landscape: Maintaining competitive pricing and load factors is essential.
• Economic Conditions: Global economic uncertainties could impact travel demand.

Norse Atlantic ASA’s Q1 2025 performance highlights its strategic execution and operational efficiency, setting a positive tone for the year ahead.

Full transcript - Norse Atlantic ASA (NORSE) Q1 2025:

Bjorn Torre Larsen, CEO, North Atlantic ASA: Good morning, and welcome to the quarterly presentation from North Atlantic ASA. Today, we are presenting from our headquarters here in Arendal. And with me, I have our CFO, Anders Jomos, and I’m the CEO, Larsen. Just a quick look on the headlines for this quarter. It has been a quarter of great improvements in many fields, and we can start off with a load factor that is record high.

We have a 95% load factor across the quarter, and that goes for both our scheduled flying and our charters. We have an increase in number of passengers from 304,000 to correction, from 201,000 to 304,000. So it’s a 51% increase year on year. We have an average revenue increase by 23% in terms of our own network. And that excludes the gain of $28,000,000 but includes the charters, great increase on charters.

And we do have good sales and good forward outlooks for our upcoming summer. So all the parameters has been positive for us this quarter. We achieved a revenue of 125,300,000.0 That includes $28,700,000 of one offs from redelivery of three Dash 8s we had. So it’s up from $78,000,000 last year. We have an EBITDAR of positive $15,000,000 a net profit, which is a loss of 14,900,000 versus a $62,800,000 loss same quarter last year.

So all in all, it’s a very good quarter for North Atlantic and in line with our previous outlook. We have executed on our commercial strategy, which is to shift part of our business into a charter operation during the next few years. It’s a strong charter market and we wanted to secure revenues for a significant portion of the fleet. So we have successfully completed now the signing of six leases, long term leases to the Indian airline Indigo, which is one of the leading airlines in the world. And we have started that contract with the first aircraft delivered in March.

That secures the profitability for 50% of our fleet for a foreseeable future. It also reduces our market risk as we have sold more than 50% of our seats. And it is a fuel hedge efficiency since we are not paying for the fuel on the ACMI charters. It also allows us to concentrate on the best performing part of our network. So in other words, when 50% of our fleet is now going into a charter operation, we’re going to keep the 50% of the business of our own scheduled network that is performing the best.

So in a way, it’s a win win. That is also part of our commercial overhaul, where we have which is contributing greatly to the load factors and generally the numbers we have seen in Q1. We have a much better network than we had last year. And also, we have a better way of approaching revenue management and sales with much more focus on technology. So that has proven well.

Now the focus will be to reduce costs. We have started a process, as we communicated to the market last year, where we aim to reduce costs by about $40,000,000 in addition to our continuous strive for improved unit costs. This is also going to pay off. We don’t see the effect of that in Q1, but we are going to see it starting Q2 and onwards. The long term charters, as I said, they improve our financial predictability.

It’s a profitable business and are part of the Indigo contract, which has commenced March 1, and which is going to be increased, ramped up as we get into the fall with a number aircraft, aircraft number two from September, and then it’s going to be increased until the aircraft number six, which is going to be around January 26. Apart of that, we have also reason to believe that we will secure some additional charter business for both next winter and the winter beyond. So actually more than 50% of our seats are considered sold for the next two years. We do see good bookings going forward. There has been a lot of volatility in the market lately.

Pairs to U. S. In particular have dropped a bit and we see a capacity, what should I say, a supply side that has been perhaps a bit excessive, but we have still been able to not only fill our aircraft, but also at prices that have been higher than what we achieved last year. Also going forward, we see some of the same. We are focusing more on markets going to Asia and Africa in the winter, which has been very promising.

But in the summer, core market for us is still America, and the majority of our customers are American. So for all practical purposes during winter sorry, during summer, we are a New York based or a Los Angeles based airline flying to big cities in Europe. And you can see those numbers that both in Q2, Q3 and Q4, we will be at least so far hitting numbers that are that is way better than we were able to do last year at the same time. I said we are reducing costs, and we have a plan to reduce costs by approximately $40,000,000 in addition to the day to day cost savings. We haven’t seen the result of those cost savings yet.

And the reason for that is that we are building what should I say, we are building new functions that will replace old ones. And for a period of time, there has been a double cost base, but we are seeing that coming down quite quickly as we go into Q2 and forward. The two reasons why we are taking down costs mainly is SG and A, which is reduced or which will be reduced by about 50% when we have completed. And also the crew basis, which is in the future going to be better aligned with the network we’re going to fly. So we can utilize our crew and more crew efficiency than we had been able to in the past.

So those two combined will contribute significantly to a reduced cost. And then we are obviously an airline that has a great value product, but we know that we are in a very competitive market, and we need the lowest cost in order to be able to have the lowest fares to fill our aircraft. So cost over time is extremely important for us to focus on. And even before these cost reduction programs, we see a good decrease on the last twelve month basis in our CASK or cost per available seat kilometer going from four sixty five Q1 last year to four now. And our aim is to get that to a level of about three on the long term basis.

Also other metrics are pointing in the right direction. Last twelve months, we see revenues on the last twelve months revenue basis, we see them going from last year, dollars $478,000,000 to $635,000,000 This year, significant improvement that even without the redelivery gains of $28,700,000 is a significant rise in revenues. So we think we haven’t we still have quite some potential on the revenue side, but it is very much a step a great step forward. EBITA, same thing, much better than last year, about 64 sorry, 54,000,000. And also the free cash flow from operations is much improved.

Now it’s easy to for me to to talk about all these things, but we we do have a great machinery behind. The people flying the aircraft up in the cock cockpit, the the great crew we have in in the cabin who is our trademark and who our passengers love, but also which most people don’t see our technicians and mechanics who work twenty four seven to ensure that we have probably the best completion rate in the world. We completed 100% of our flights in q one, and, well, you can’t do better than that, obviously. But it’s it’s it’s not an easy task. These aircraft are very complex.

They are state of the art, and and it’s not a typical sledgehammer aircraft. You really need great competent competence among the technical team, a passion and a determination to keep all aircraft in mint condition at any given time ready to fly. So I think also we have, honestly speaking, the best technical team in the world. They are they are superb. And and they are contributing to to the performance that we have seen as well.

Punctuality has been hampered quite a bit by air traffic control and also to some extent by airport congestions and some weather in Q1. We expect improvement as we go on, and our target is 85% departure fifteen minutes on time, which we think in the big airports we are flying is pretty good. We are mainly flying to very big airport airports only. And whether we like it or not, there is always a queue to get out there. But it’s it’s something that we are seeing is is improving as we go.

The load factor of 95%, I think, is also world leading. I have been able to or I haven’t been able to see anybody who has better load factor for Q1 than we have. So I’ll be happy to hear if somebody has it, but it’s a really good number. And also the number of passengers that we carried in Q1 is considerably up. The revenues, despite having increased load factors, we didn’t have to sacrifice ticket prices, so we have actually a 5% higher ticket price in Q1 than we had last price if you combined the regular fare and the ancillary revenues.

The ticket fare alone was up by $20 The ancillary revenue was down by $5 The reason being that we have started to include hand carry luggage as a standard feature for all our customers. So initially, we were charging for hand carried luggage. We decided and we did pocket some money on that. We decided to decrease or to take that away to include hand carry, and we saw the conversion rate in our sales went up. So it’s an all positive development, but that is the reason why the ancillary goes a little bit down, but full fare goes up.

Another way of looking into this is seeing our CASK and versus the PRASK. PRASK is passenger revenue per available seat kilometer and CASK is cost per available seat kilometer. So you can see we are 27% up on the revenues on the Prask, and we are 10% down on the CASK.

Anders Jomos, CFO, North Atlantic ASA: I leave it to Anders. Thank you, Bjorn Torre. Good morning, everybody. On behalf of NORS, it’s very positive to be able to report revenues in this quarter of one hundred and twenty five point three million dollars And even when you disregard the gain onetime gain on redelivery of the Dash eight aircraft of $28,700,000 this is an improvement of $18,000,000 or up 23%. This is mainly driven by both increased number of passengers carried, increased fares, but also a significant growth in the charter and ASMI segment.

Costs increased marginally by 4%, mainly driven by increased volume, but also we’ve had some tailwinds by lower fuel price during the quarter, which has led us to a positive EBITDAR of $15,000,000 comparing to $27,400,000 same quarter last year, a massive improvement. Bottom line, we have a we report a loss of $14,900,000 comparing to $62,800,000 in the same quarter last year, again, a massive improvement, which we are happy to report, massive improvement of $48,000,000 compared to same quarter last year. In the cash flow statement, I think the most important to note is the operating cash flow, which is positive of $30,000,000 in this quarter compared to $3,000,000 in the same quarter last year. Again, an improvement of $27,000,000 Liquidity available cash at the end of the quarter was $31,300,000 This is including an undrawn revolving credit facility of $6,300,000 which remains undrawn until today’s date. In the balance sheet, the most important item to look out for is the credit card receivables.

And this is basically what the credit card companies are holding back of our money in relation to tickets sold. And we’ve seen a very good sales during this winter, and therefore, the credit card receivables has increased from $100,000,000 at the end of the year to $139,000,000 a very large amount end of Q1. The book equity is negative $225,000,000 But again, I want to point out, which I’ve done on previous presentation before as well, keep in mind that the book equity reflects $168,000,000 of accumulated noncash lease accounting costs since the inception of the company. That was a very quick run through of key financial metrics of NORS for Q1. And Bjorn Tore, by that, I leave some concluding remarks to you.

Bjorn Torre Larsen, CEO, North Atlantic ASA: Thank you very much, Anders. And just to be clear, we are also happy to take questions from online from anybody who’s watching. The conclusion is very simple and quite pleasant. We do have a great fill of our aircraft with a world leading load factor and a strong growth in Q1. We are executing on our strategy to ensure that we secure revenue for a long term period of time for a big portion of our fleet, and thereby reduce risks and also our costs.

And we are aiming to deliver a full year 2025 profitable year. So I think, you know, there there are a lot of uncertainties in this business, and we shall not underplay them because macroeconomic environment, there there are, you know, some disruptions here and there in the world, certain uncertainties, there’s capacity issues, etcetera. So we don’t want to underplay that part of the picture. This is definitely a volatile market. But I think we have never seen such a strong outlook from our side as we are doing now, Despite seeing pressure on prices, we are seeing that compensated by higher load factors.

So we think we are on a good track. We still have to deliver. One thing is having a plan and even seeing a good trend, but we need to execute. So we are every single day focusing on executing and making sure that we both fill our aircraft and that we’re able to take off and get our cost out. And by that, I’ll be happy to take questions.

Anders Jomos, CFO, North Atlantic ASA: Yep. Maybe you’ll take the question, Anders? Yep. We have had an incoming question here. And the question is, is the Indigo contract reported in charter revenue and charter flights?

Bjorn Torre Larsen, CEO, North Atlantic ASA: Well, we didn’t have many flights for Indigo. We just started the contract March 1, and we’ve been flying actually and the Indigo flights will be long haul. They will be flying from India to Europe, to to various destinations in Europe. But for the first four months, we are just flying one aircraft between Delhi and Bangkok on a daily basis. Those income those are for one aircraft reported for one month.

Anders Jomos, CFO, North Atlantic ASA: Exactly. And as we gradually deliver aircraft to Indigo, this will then increase as part of the revenue. So the answer is yes, it is included in the revenue. That’s correct. That was it.

That was it.

Bjorn Torre Larsen, CEO, North Atlantic ASA: All right. Well, thank you very much for joining our presentation. And our investment or Investor Relation team is happy also to take questions that come after this presentation. Thank you very much.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.