For those who are interested, Q4 earnings came out today. Highlights and observations from the printed report and the video presentation:
- Cash on hand at the end of Q4 2019 (3.1 billion NOK) is better than at the end of Q4 2018 (1.9 billion NOK) but still not great, especially considering Norwegian sold multiple assets this year to raise cash AND raised cash from investors in Q4. The company still seems to be burning through quite a bit of money, and liquidity is still a bit of an issue. At least it kicked its Q1 bond payment down the road a couple of years, so that is not hanging over its head.
- Receivables remain high (10.1 billion NOK at the end of 2019 Q4 vs 6.8 billion NOK at the end of 2018 Q4), indicating credit card holdbacks remain high (credit card companies are holding money from purchases until flights are flown so they are not left holding the bag if the airline goes belly up).
- Norwegian has been talking about bringing more credit card acquirers (who will make funds available more quickly for a fee) on board since the Q2 presentation, but none are online yet due to "delays." There is a promise that one will be online by the end of Q1, "which will give liquidity effect immediately."
- One billion NOK in liquidity will come in Q1 from the sale of 10 aircraft.
- Norwegian's loss for the year (EBT) was 1.69 billion NOK.
- It booked a 1 billion NOK loss due to 737 MAX issues and a 750 million NOK loss due to Rolls Royce engine issues on its Dreamliners. Eighteen MAX's and around 12 Dreamliners are currently parked, the latter for engine issues.
- Norwegian is and will continue to negotiate with Boeing regarding compensation for the MAX grounding. As for Dreamliner engine issues, "We have found a solution with [Rolls Royce] with regards to compensation. It's not a fantastic solution, but it's a solution we can live with."
- It is refreshing (and hopeful for Norwegian's future) that CFO Geir Karlsen is commenting on things like Norwegian consolidating all long-haul routes to the Nordic countries at Oslo instead of spreading them across Oslo, Copenhagen, and Stockholm because it enhances profitability.
- The company is guiding a net profit for 2020, assuming (1) the MAX aircraft return in September, (2) fuel prices stay at current relatively low levels (unlikely), and (3) agreements are reached with Boeing and Rolls Royce for compensation.
- The goal for the Jet Blue relationship is an interline agreement, which would allow a seamless flying experience with bags checked from departure city all the way through to final destination.
- New CEO Jacob Schram has a background in retail and is new to the airline business. He has been on the job about 6 weeks and acknowledged that long-haul operations are not profitable. "I don't have the answer on what turns long haul profitable. I just see what Norwegian has done is interesting. Trying to get low costs succeeding on long haul, nobody [has] proven that business model yet, but I see a lot of opportunities that we can do on short term, but then we also need, of course, to think long term, what kind of strategy will bring this to profitability."
Find the report/presentation here: https://www.norwegian.com/us/about/company/investor-relations/reports-and-presentations/