Norse Atlantic Airways AS - Through the Air Goes the Pilot's Way

[Pohjolan_Eka]

Norse Atlantic Airways AS (NORSE) is a transatlantic airline established on the ruins of the Norwegian carrier Norwegian Long Haul, which collapsed during the COVID crisis:

Norse is a Norwegian low-cost carrier that transports passengers and cargo (e.g., salmon) across the Atlantic Ocean. In the midst of the pandemic in 2021, the company signed historically favorable long-term leasing agreements for 15 Boeing 787 Dreamliners. These leasing agreements do not contain inflation or price escalation clauses, allowing Norse to fully benefit from global inflation.

According to the company’s own estimate, the fair value of these leasing agreements exceeds 300 MUSD, which is a massive sum of money relative to the company’s current market capitalization (150 MUSD).

Norse’s cost competitiveness is further enhanced by the fact that the lion’s share of the leased aircraft are Boeing 787-9 versions, which are completely superior in fuel consumption for long-haul flights:

From these starting points, the ramp-up of the aviation business has proceeded excellently, especially considering how difficult it is to establish an aircraft operator due to regulation alone. During the ramp-up phase, some of the aircraft are subleased out, and the goal is to increase the number of aircraft in own operation to 12 in 2024 and 15 in 2025:

(ASK = Available Seat Kilometres, RPK = Revenue Passenger Kilometres. RPK/ASK = Load factor)

Driven by a strong summer market, 23Q3 was Norse’s first profitable quarter, and 2024 is predicted to be the first profitable year. The Northern transatlantic flight market is seasonal, and as a counterweight to the high passenger volumes of summer, winter is a struggle for survival where a break-even result is an excellent achievement. This requires significant skill from management in rerouting aircraft to southbound flights and consumes a vast amount of working capital, as the entire year must be planned with the winter season in mind.

Financing has so far been raised through continuous share issues, the latest of which was carried out at the beginning of this year. If the company develops as planned, additional share issues may no longer be necessary.

Establishing and ramping up a new airline requires a lot of expertise from the CEO. Based on his biography, he is exactly the right kind of “doer” to lead the company at this crucial stage:

Bjørn Tore Larsen is the founder, CEO and main shareholder of Norse Atlantic Airways. Bjørn Tore has been passionate about aviation for as long as he can remember and holds several type approvals himself, including the Boeing 747.

Bjørn Tore has extensive experience in international shipping. Among other things, he co-founded and led OSM Maritime Group in 1989, a shipping company with more than 16,000 employees and head office in Norway, as well as ADS Maritime Holding, an Oslo-based company that is listed on the Euronext Growth Exchange. He is the main shareholder in OSM Flight Academy, which runs pilot training in the USA, Norway and Sweden. In addition, he is also the main shareholder in OSM Airtech, which offers maintenance services for aircraft in Norway and Sweden.

Bjørn Tore is a self-taught entrepreneur who spent a year at sea as a 16-year-old. When he returned to Norway to start high school, he decided to follow his dream of becoming a businessman. Already at the age of 18, he took over a travel agency near his current hometown, Arendal. Three years later, he founded OSM Maritime, which is now among the largest ship management companies in the world.

The CEO-founder owns just under 20% of Norse. Somewhat surprisingly, Scorpio Holdings has become the largest owner through the share issues; they are better known as a major shareholder in Scorpio Tankers (STNG). Their financial investment was secured thanks to the Norse CEO’s strong contacts in the shipping industry.

Operating aircraft is strongly linked to the development of the global economy. The COVID pandemic caused a deep rift in air travel, from which we are slowly recovering to pre-pandemic levels and beyond. Currently, the situation looks promising for air travel, but the situation can, of course, change if the global economy takes a hit for one reason or another.

A special situation is unfolding at Norse. The company’s valuable leasing agreements and the global need for airlines to acquire more 787 Dreamliners have led to at least two airlines approaching Norse to initiate strategic cooperation, which may include taking an ownership stake in the company or even buying Norse entirely off the exchange. In November 2023, Norse appointed the investment bank Seabury Securities to explore the best course of action in this situation.

In January 2024, the review was completed, and Norse has moved on to negotiating the implementation of strategic initiatives. It is therefore very likely that Norse’s story as a fully independent airline will end in the coming months, and since there are multiple suitors, this upcoming agreement is expected to be value-creative for shareholders.

https://corporate.flynorse.com/en-gb/investor-relations/report-presentations/

https://news.cision.com/norse-atlantic-airways-as

[Hades]

https://twitter.com/StockCompil/status/1759987527962812662/photo/1

Leading global aircraft lessors AerCap and Air Lease have communicated that 1) Airbus and Boeing’s order books are packed for years to come, 2) the production of new aircraft is seriously stalling, and 3) ready-to-use aircraft are currently highly valued due to strong demand. When you add Boeing aircraft turning into “convertibles” mid-ascent to the mix, a balance between supply and demand is unlikely to be reached anytime soon.

Interesting special situation. It remains to be seen what kind of appetite the main owners have for selling this soon—I have a feeling that a quick and probably lucrative exit wouldn’t be the worst outcome.

[Pika-Sissi]

I wonder a bit why, if/when a company has such exceptional advantages, there has been selling rather than buying pressure on the stock.

After all, it’s not like history hasn’t seen people being taken for a ride before…
Mainly, have you factually confirmed that this isn’t a scam?
The stock looks weak technically.

[Con4n]

Reading the news quickly, those approaches were about strategic cooperation. What exactly does this mean? My own first impressions:

1. If someone buys it out because of the leasing agreements and quick profits are expected → profit.

2. If someone makes a “strategic” investment to gain synergies etc. but the airline business continues, then it’s clearly less attractive to me. Especially considering the history of share issues.

Profits would be welcome, but I might not want to be stuck in such an early-stage airline, even if the outlook was quite good due to the strategic investment and a competitive fleet. The industry is, after all, known for frequently reaching into the owner’s pocket.

How do you rate the probabilities of these scenarios?

[Verneri_Pulkkinen]

Excellent opening and an interesting case.

The materials really do have an unusually high number of adjustments on top of adjustments, which makes this very difficult to evaluate. We’d need some aviation leasing expert to help out.

Even equity is turned positive with adjustments… I do understand that a leasing contract made a couple of years ago could well be more valuable today, but… that’s pretty much where my understanding ends.

Cash was over 40 MEUR at Q3 and cash flow is still negative. With a market cap of over a hundred, the dilution risk is real, unless this is sold under favorable terms somehow?

Addition: what kind of terms do those contracts have, e.g., can they be sold or if Norse is acquired, do they have to be renegotiated, etc.?

[Pohjolan_Eka]

@Hades

Interesting special situation. It remains to be seen what kind of desire the main owners have to sell this soon - somehow I feel that a quick and likely lucrative exit wouldn’t be the worst outcome.

In principle, the company is only ‘ready’ in 2025, which is when the best price could be fetched upon selling. Guessing the will of the major owners is always a bit murky if you don’t know them, but as I understand it, at least the largest owner, Scorpio Holdings, is extremely opportunistic and is in Norse purely as a financial investment, without any major desire to build an empire. The CEO/founder also seems to have his feet on the ground, so I consider a sale very possible if a potential buyer just lays enough cash on the table.

@Pika-Sissi

I’m wondering a bit that if/when the company has these exceptional advantages, why has the stock been subject to selling rather than buying pressure?

In history, it’s never happened that the ‘monkey gets swindled’…
Mainly, have you factually confirmed that this isn’t a hustle?
The stock looks weak technically.

This is a recently founded Norwegian micro-cap in a sector hated by investors, where understanding the investment opportunity requires expertise in the company’s balance sheet and noticing the special situation. How many investors in the world are even capable of finding companies with these criteria, let alone understanding them, when there’s no discussion about the firm even on Norwegian investor forums? My null hypothesis is that the market is inefficient regarding this stock and investors are foolish. Feel free to prove the hypothesis wrong if you can come up with valid arguments that the stock price corresponds to fair value

@Con4n

Reading the news quickly, those approaches were about strategic cooperation. What exactly does this mean? My first feelings are:

1. If someone buys it out because of the leasing agreements and quick wins are in sight → profit.
2. If someone makes a “strategic” investment to gain synergies etc. but the airline business continues, it’s clearly less attractive to me. Especially considering the past share issues.

I’d take the profits, but I wouldn’t necessarily want to be stuck in such an early-stage airline, even if the outlook were quite good due to the strategic investment and competitive fleet. However, the industry is known for frequently reaching into the owner’s pocket.

How do you see the probabilities of these scenarios?

I am unable to assign discrete probabilities to these scenarios, but I would consider an expensive strategic investment more likely at this point than an acquisition, because this is a cheaper way for a potential buyer to get the planes into their use. Of course, the most lucrative situation for an investor would probably be an acquisition offer with, say, a +70% premium, but it’s worth noting that Norse completely lacks narrow-body feeder lines for their own transatlantic flights. Thus, a well-executed strategic alliance with a larger player allows Norse to increase the load factor of its aircraft and improve business fundamentals compared to operating independently. Although an acquisition offer is probably a better option for the investor, regardless of how these negotiations turn out, the outcome is almost certainly positive for the shareholder.

@Verneri_Pulkkinen

The materials have an unusually high number of adjustments upon adjustments, which makes this really difficult to evaluate. There should be some aviation leasing expert helping out.

Even equity is turned positive with adjustments… I do understand that a leasing contract made a couple of years ago can very well be more valuable today but… that’s pretty much where my understanding ends.

That is further complicated especially by the exceptionally favorable Power By the Hour clause made by the company, where planes are paid for only based on usage, and which is why the first years of the leasing agreement are paid differently than the remaining years. Fortunately, we aren’t analysts, so we don’t have to spend the daylight hours thinking about useless minutiae, because in this case, the famous ‘return on brain damage’ is not sufficient. The value of the leasing agreements will, in fact, be unlocked over time either in an acquisition offer or in the profit generated by the company.

Norse has sub-leased 5 planes in 2023, which have generated Lease Rental Income of 8.264 MUSD per quarter on average. If we imagine that instead of business operations, all 15 planes were sub-leased out, the income would have been roughly 24.793 MUSD/Q, or 99.172 MUSD per year. 23Q3 Lease Payments were 15.781 MUSD, or roughly 63.124 MUSD per year.

This is a very rough way to look at the matter and it doesn’t take all variables into account, but for investment purposes, the accuracy is quite sufficient to state that there is significant positive fair value in the leasing agreements and that the 300 MUSD NPV (Net Present Value) estimated by management is not a number pulled out of thin air. What makes this particularly great is specifically that the costs of the agreements are fixed for the duration of the contract and there are no inflation clauses, so the difference to a market-priced leasing agreement grows ceteris paribus year by year. Unfortunately, the exact terms for the leases are not known, but it’s unlikely there’s a poison pill clause like the one you mentioned.

@Verneri_Pulkkinen

Cash was over 40 MEUR at the end of Q3 and cash flow was still negative. With a market cap over a hundred, dilution risk is real unless this is sold under some favorable terms?

Capital has been raised after Q3, so that figure is outdated and there is no longer an acute cash crisis.

Did you notice that Net operating cash flows before working capital movements was +34.479 MUSD in Q3 and cash flow ex working capital movements was clearly positive? Of course, this is the best quarter and the winter season will be tough, as the company gets the money into the cash register on average 60 days after the flight booking, and there are considerably fewer bookings in winter.

So yes, money will definitely start flowing towards the investor in 2024, provided the good momentum seen in the January preliminary data continues throughout the year and the global economy doesn’t collapse. For the summer of 2024, the number of aircraft available to the company will increase by +20% (+2 units) and load factors can seemingly be raised again this year, so I consider the need for new share issues very unlikely as long as we get through this winter.

[Sunsetrider]

I’ll have to add this to my watchlist. Interesting concept. Weak signals at least speak in favor of the potential profitability of the aircraft leasing business, although financial risks in aviation are always heavy. They are, regardless of whether we’re talking about airlines, aircraft manufacturers, or leasing companies.

This clearly taps into the long-term trend of airlines seeking to outsource fleet risks and making fleet management more flexible according to the current demand situation. A good example of changing fleet needs is what happened to the Airbus A380 during the pandemic, when many airlines, such as Lufthansa, were already prepared to send their fleets to be scrapped. Now, however, airlines have a need for them again, even though more economically sensible alternatives for long-haulers exist in the world.

Of course, in the case of such a leasing company, one must consider its own risks in a business cycle where, for example, there is insufficient demand for large wide-body aircraft. The COVID era was, of course, exceptional, but at the same time, it is worth keeping in mind the exceptional and crisis-prone times we are living through globally.

I do find this to be a more interesting business than airlines, but evaluating long-term profitability is too big a nut to crack for my non-existent head for math. Let’s kick the tires and see.

[Aili]

A well-started thread about the startup. Interesting read.

Before the pandemic, there was an interesting phenomenon with aircraft. Ready, operational planes could sometimes be more expensive to buy than new ones from the factory. The reason was that the ready plane was available immediately.

I understand well why the startup was born at that exact time.

Still, I feel like playing devil’s advocate a bit.

@Pohjolan_Eka

The COVID pandemic caused a deep rift in air travel, from which we are slowly recovering to pre-pandemic levels and beyond.

It would be interesting to get some more meat on the bones regarding data on how air traffic has generally recovered after the pandemic.

Though that might be poorly available on a global scale.

I took a quick look at other airlines’ announcements.

Air France-KLM was also quite satisfied with its capacity utilization and the growth in passenger numbers. They also operate transatlantic flights. 71.3 million at the end of the third quarter. The corresponding figure in 2019 was 79.6 million.

So, not bad.

Our own dear Finnair’s capacity, on the other hand, looks quite different.

Finnair’s passenger load factor in Q4/23 was 73%. In 2019, it was 83%. Flight capacity is about 81% compared to 2019, even when taking into account the wet leasing of aircraft (leasing out planes with crews).

If the full capacity of 2019 were in use, utilization would be under 60%.

Finnair specialized in Asian flights, which is why that capacity is what it is. I brought this up to make it clear that others are surely happy to lease out their capacity as well. And not everyone has succeeded yet.

It’s worth looking more broadly at other low-cost carriers too, but having sat on European flights, I can say for now that there is plenty of space.

The lovely COVID also paralyzed business travel. Extensive remote work changed attitudes toward face-to-face encounters and Teams meetings. It may be that business travel will never fully return to what it was, but rather a flight or two will be permanently missing from the process.

@Pohjolan_Eka

It is therefore very likely that Norse’s story as a fully independent airline will end in the coming months, and since there are several suitors, this soon-to-be-made agreement will presumably be value-creating for shareholders.

Companies strive to engage in all kinds of cooperation. This is unlikely to be an exception. Cooperation isn’t always about the aircraft; sometimes you just need to ensure maintenance and spare parts services, which they try to consolidate.

M&A sometimes goes well if a company or a part of it can be sold with a nice premium.

However, one doesn’t even have to look back very far to encounter a very common phenomenon.

Since the turn of last year, investors also started expecting deals for Lehto.

They then materialized in July.

This is how “happily” things have turned out for those who bought the company before and after the deals.

[Pohjolan_Eka]

Norse begins strategic cooperation with Nigeria’s Air Peace:

Norse Atlantic Airways and Air Peace Announce ACMI Charter Agreement

Norse Atlantic Airways is pleased to announce that it has entered into an agreement with Air Peace for an ACMI (Aircraft, Crew, Maintenance, and Insurance) charter service. This collaboration marks the beginning of a strategic partnership aimed at providing seamless air travel solutions between London and Lagos, Nigeria.

Commencing in April 2024, initially for a period of two months with the potential for a longer-term agreement, the ACMI charter will operate four times a week, offering travellers convenient and reliable transportation options between these key destinations.

Norse Atlantic Airways will be using slots at London Gatwick allocated to Air Peace to facilitate this new route.

"We are thrilled to be working with Air Peace to launch this ACMI charter service between London Gatwick and Lagos. This collaboration represents an exciting opportunity to leverage our expertise in charter operations to deliver a reliable and high-quality service to Air Peace and their customers,” said Bjørn Tore Larsen, CEO and Founder of Norse Atlantic Airways. "

“Air Peace is delighted to have signed this partnership deal with Norse Atlantic Airways for the commencement of our London service. As we make a foray into the European market, we are confident that this strategic partnership will further position us to surpass the expectations of our customers, offering them superior air travel experience while we continue to optimise our operations for more innovative service delivery”, stated Allen Onyema, Chairman/CEO, Air Peace.

Norse Atlantic and Air Peace will continue to discuss potential longer-term partnerships between the two airlines to explore avenues for further collaboration and expansion in the future.

Norse Atlantic Airways and Air Peace Announce ACMI Charter Agreement

These discussions were already known previously:

Nigeria's Air Peace eyes Norse Atlantic pact for Gatwick ops

[Pohjolan_Eka]

Norse Atlantic ASA: Q4 2023 Successful completion of first full year of operations, with continued growth and positive year on year figures

Revenue increased by 104% to USD 94.8 million in Q4 2023 compared to Q4 2022
230,489 passengers carried in Q4 2023, up 70% compared to Q4 2022

Revenue per passenger increased 42% to USD 340 in Q4 2023 compared to Q4 2022

ASK up by 81% in Q4 2023 compared to Q4 2022 as Norse brought more aircraft into production

Load factor increased by 12 percentage points to 70% in Q4 2023 compared to Q4 2022

Great operational performance as 100% of planned flights were completed during the quarter

Total cash held at end of quarter at USD 54.8 million

Generally, a heavy increase in production through second half of the year compared to the first half, with all Norse aircraft generating revenue since 1st July 2023

Carrying close to one million passengers across 4,000 flights over the full year

Improved service program allowing for greater fare potential introduced in Premium class

Strong CASK numbers proving that long-haul low-cost is working – more to prove on revenue side
New equity capital secured during quarter in a gross amount equalling USD 55 million

Strategic review identifying interesting strategic options to be pursued into next phase – Seabury Securities appointed to support the company as an investment banker

Norse sees positive signs for the summer season as sales year to date are up approximately 80% compared to the same period previous year. Furthermore, charter revenues booked and under negotiation far exceeds charter revenues achieved in 2023, and we now see a clear path to profitability on a year-round basis.

On 23 January 2024, the Company announced that it has formally appointed Seabury Securities as investment banker to support Norse in the execution of some of the strategic options identified under Seabury’s assignment as strategic advisor that was announced in November 2023.

Several options are being pursued, and in addition to possible investments from strategic investors, also commercial partnership options are of interest. Not all options are mutually exclusive, and therefore, potentially more than one initiative could be led into a final closing.

Bjorn Tore Larsen, CEO and Found Norse Atlantic Airways said: “Q4 marked the completion of Norse’s first full year of operations, in which the Company carried almost one million passengers across 4,000 flights. Our robust operational excellence was clearly demonstrated as more than 99.5% of all scheduled flights were completed as scheduled despite growth in both the summer and winter schedules compared to the previous year. In 2023, Norse achieved strong CASK numbers and demonstrated its ability to drive ancillary sales to become one of the industry’s leading airlines in ancillary revenue. In Q3, Norse delivered its first quarter of net profit demonstrating the validity of long-haul low-cost. In Q4 the Company introduced an improved service program and amenities for customers travelling in its Norse Premium cabin, allowing for an improved fare potential going forward. Seabury Securities were engaged by the Company to explore its strategic options, and in January Seabury were engaged for phase two allowing for these options to be pursued further.

When planning ahead for the winter and summer seasons in 2024 Norse has capitalized on lessons learnt in 2023. Among our priorities will be careful route selection, capturing unreleased fare potential, increasing load factor and developing further business opportunities within cargo and charter operations. The Company will also gradually develop its seasonal strategies as focus during the winter season will turn more and more towards pursuing opportunities in the charter market as a supplement to own scheduled flights. During the summer season the main focus will remain to serve Norse’s own network.”

Norse Atlantic ASA: Q4 2023 Successful completion of first full year of...

Presis:

8a658f4d58cff1cc.pdf

Rapsa:

2633893.pdf

Tammikuun luvut:

[Pohjolan_Eka]

February figures released:

https://news.cision.com/norse-atlantic-airways-as/r/72--load-factor-in-february-representing-strong-year-on-year-improvement-of-22-percentage-points,c3941247

I am also pleased to note that February represented a record month in regards to average bookings made per day. In addition, we have simplified and relaunched our website, flynorse.com, to improve the customer experience," said Bjorn Tore Larsen, CEO and Founder Norse Atlantic Airways.

A 72% load factor is already starting to reach a good level, even though there is still some way to go to the 80%+ range where it should be in a mature phase. Q1 losses will be in the same range as Q4, but with these figures, the company looks set to hold up without a new share issue. Now that bookings are starting to come in at a completely different pace than last year, the summer season should be wildly profitable.

[Pohjolan_Eka]

The global aircraft shortage is only worsening due to Boeing’s production problems. The impact is most pronounced in short- and medium-haul aircraft. Competitor Airbus is also unable to ramp up production:

Boeing’s pain spreads to travellers as airlines cut back on plans - The...

Some Norwegian investors are whispering that the number of potential suitors for Norse has grown from two to four this year. If the growth in air travel demand continues, I consider a takeover bid at a significant premium a certainty at these price levels, provided that Norse’s main owners are finally ready to sell.

[Pohjolan_Eka]

Uh, this is quite a frustrating stock. When I bought this about a month ago at around 13 NOK, I thought a takeover bid of around 20 NOK would be a relatively fair first offer, because even that would leave a lot of money on the table for the buyer, as a larger airline can free up that 50 MUSD+ in working capital right at the point of acquisition, which a smaller airline is simply forced to have tied up in its operations. Now that we touched the lowest support level at 7.5 NOK, I just had to add to my position hand over fist, especially since the CEO confirmed that the number of airlines interested in the company has grown from the two suitors mentioned in November to a higher number.

I’ve made many stupid and many risky investments and have often taken a beating, but when it comes to this investment case, the consensus among fellow investors seems exceptionally strong that it’s both a stupid and a risky investment. It’s even considered embarrassing that I’m “messing around” with small airlines, as some more impressionable investors might follow my lead. It may well be a legendarily bad sector for a fundamental investor, but it’s not some law of nature that an investor couldn’t still reasonably make good money with these. I’m channeling my inner Burry here, thinking that I might have been a bit early, but I’m not wrong.

[Pohjolan_Eka]

@Pohjolan_Eka

Ugh, this really is quite a frustrating stock. When I bought this about a month ago at around 13 NOK, I thought that a 20 NOK takeover bid would be relatively fair as a first offer, because even that would leave a huge amount of money on the table for the buyer, since a larger airline can release that 50 MUSD+ of working capital at the moment of purchase, which a smaller airline is simply forced to have tied up in the business.

I used AI to translate and listen to a Norwegian podcast where the fair value was estimated at 32 NOK per share. So my estimate didn’t necessarily go that far off the mark, since someone else has independently reached a similar valuation:

Still, my nerves are really being tested while waiting. It would be easier to own a winning company that makes a hell of a lot of money quarter after quarter

The feelings are exactly the same on the Norwegian forum

[Pohjolan_Eka]

March figures released. Load factor improved significantly!

Winter has now been survived without the feared rights issue, and from here on, things will only get better.

[Perttu_Hamalainen]

This looks good. The biggest risk will soon likely be a whole fleet of contraptions from a questionable aircraft manufacturer. Boeing is already starting to be a bit of a red flag for me (heh). I turn to Finnair for that reason alone when buying tickets, even though I’m not afraid of flying. I don’t know at what point people will actually start avoiding the company because of the aircraft types—maybe never, but the risk exists.

Another news item from a few days ago, and unfortunately, this isn’t positive either.

Boeingin koneessa epäilty moottoripalo Yhdysvalloissa

[Pohjolan_Eka]

I read through the annual report during my lunch break. Nothing earth-shattering was found, but the company expects cash flow to start improving as expected from April onwards:

Yesterday, they also secured the option to draw down a 20 MUSD short-term flexible loan from the major owners. In my opinion, we can now finally put to rest these talks about the financing situation and the need for an additional share issue.

That takeover bid could just come already…

https://mb.cision.com/Main/21212/3960632/2727976.pdf

[Pohjolan_Eka]

April looks good. Passenger numbers are now at the same level as in June 2023, so there is no doubt that this year will be profitable.

Unfortunately, a weak Q1 report is coming out tomorrow, which will hide the profitability.

[ValkoinenPeura]

The views presented in this thread regarding the company’s future as a whole and this year’s earnings performance seem, in my eyes, overly optimistic to say the least. Norse’s development so far is a continuation of the Norwegian long-haul shambles, and in my opinion, there is no sign that things will go any better this time than they did for Norwegian.

Norse strongly highlights the affordable leasing agreements for their B787 aircraft and their superior fuel efficiency. They undeniably secured good lease terms, but turning them into profit is not nearly as simple as Norse has led us to believe. Furthermore, 4 aircraft from Norwegian’s legacy remain parked and 2 have been scrapped, because there have been no takers despite the market’s aircraft shortage. The reason for this is the aircraft’s cabins, which lack a business class entirely. This also improves the aircraft’s calculated fuel efficiency per seat but eats into yields at the same time.

Q1 and Q2 are typically the best quarters for cash flow for European airlines, as money flows into the coffers from advance ticket sales for the summer season. Considering this, the capital injection from the main owners carried out a month ago at a very high interest rate does not look good either.

Norse will very likely post decent results between June and August, when all other airlines are also raking in money. However, three profitable months are not enough to cover nine months of losses or break-even performance. Come autumn, it will be time for another funding round, unless someone, for some strange reason, buys them out of the market.

[Pohjolan_Eka]

Great to get some challenge

Investors indeed have Norse’s spiritual predecessor, Norwegian long haul, on their minds, which notoriously went under while learning how the market works. The long-haul low-cost airline business is not among the easiest, but Norse has completely different prerequisites for success now that the company has expertise, a debt-free balance sheet, and favorable leasing agreements.

Your talk about parked and scrap planes comes as a complete surprise to me. According to Norse, only one plane is “parked in reserve” and all planes generate revenue through either scheduled flights, charter flights, or sub-leasing. What is this talk about scrap based on? Or are you talking about Norwegian now?

Norse is a new airline and therefore hasn’t received the same financing terms from credit card companies as established players during its startup years, so money is received with a delay and more working capital is tied up. Because of this, the company’s money-making quarters are currently Q2 and Q3. If you predict that the company will be profitable for only one quarter a year due to the tight cash situation in Q1, I believe you’re making a false assumption.