Norwegian Air Shuttle ASA (NWARF) CEO Bjorn Kjos on Q2 2019 Results - Earnings Call Transcript

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About: Norwegian Air Shuttle ASA (NWARF)
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Earning Call Audio

Norwegian Air Shuttle ASA (OTCPK:NWARF) Q2 2019 Earnings Conference Call July 11, 2019 2:30 AM ET

Company Participants

Anne-Sissel Sksnvik - Chief Communications Officer

Bjorn Kjos - CEO

Geir Karlsen - CFO & Interim CEO

Stine Klund - IR

Niels Smedegaard - Chairman

Conference Call Participants

Kenneth Sivertsen - Pareto

Hans Jorgen Elnaes - Winair

Anne-Sissel Sksnvik

Good morning, everyone, and welcome to Norwegian's presentations of the second quarter results and to the press conference about the change in top management, as we have -- that we have announced this morning. My name is Anne-Sissel Sksnvik. I'm the Chief Communications Officer.

As you will see from the agenda here, we will start with the presentation of the results presented by Bjorn Kjos and Geir Karlsen. Then we have a plenary session with Q&A to the figures only before we continue with the press conference.

Be aware that we -- both the quarter presentation and the press conference will be in English as we will stream it to the international audience. So -- and also, questions will be in English.

So now I hand over to you, Bjorn, for the presentation.

Bjorn Kjos

Thank you. Hopefully, my last presentation. If you think -- if they think I am sorry for that, I am not. Well, because I'm very overdue.

I'll just go straight ahead. I think we have reached a very good, this year If you look at what we have achieved here, we have actually doubled the result on the EBITDAR excluding other losses and gains from NOK1,164 million to NOK2,338 million. And that has happened by improving the unit revenue by 13%, and very good, it's primarily driven by long-haul. And of course, we have a positive Easter effect.

And we are on track because when we -- you will see later that when we take off the expansion, it's very easy that you will be killed by the cost, but we are on track with the cost, NOK554 million in cost reduction in second quarter. So we will definitely reach NOK1 billion year-to-date, and we are on track to reach our targets.

Improving punctuality, and despite 18 MAXs on the ground, that's a very good achievement by the people that runs the daily operation. And of course, we have, as always, got a lot of awards, the World's Best Low-Cost Long-Haul Airline by SkyTrax. That was very good. I think it was 5th year in a row and also voted by Europe's Leading Low-Cost Airline by World Travel Awards.

Yes, we have grounded several of the MAXs. And the number of deliveries, of course, have to come down because they are parked and cannot fly to U.S. So it will go down from 16 to -- we are not sure if it's 6 or 4, but obviously, that will take down the CapEx to a large extent. And then we have also signed an agreement for the sale of additional NGs, cash effect of $21 million, and depending on how many MAX NGs -- we sell it depending how many MAXs actually we get. So there's a huge appetite for the MAXs. And we have added 2 Dreamliners into our operation.

So the growth has come down from -- of course, last year, second quarter, we received a lot of Dreamliners so -- and we are finished with that now to a large extent. And so the growth have come down to 6% in, say, in this quarter and 7% of the RPK. And that gives us an 88% average on a rolling basis. And we had 91.6%, as you remember, load factor this last month. So it's still improving.

The -- what we are very happy of is, of course, we have seen very strong development of -- especially on the long-haul side and a 19% revenue growth on the flat passenger development, as you see. You will see, obviously, it's taken a hit by our grounding -- of the grounding of the MAXs because we don't have the same amount of wet leases that we have on the grounded MAX.

And of course, a lot of the MAXs don't have the same seat arrangement as we have. So that, of course, creates a problem for us. But nevertheless, we have been able to fly 10 million passengers this quarter. Market share is absolutely the largest carrier over all the sales, but it's more or less flat, as you will see, except for the long haul. There it's, [Technical Difficulty] something happened? Can you fix it? I think it's broken, I think.

Bjorn Kjos

One minute break.

[Break]

Yes. I was coming back to the cost of the long-haul. Long-haul is performing very well. You will see that on -- not everything is working here.

You can be here. I think because -- I don't trust this.

This is extremely interesting to see. If you see the transatlantic routes, that is actually key revenue driver in our second quarter. And if you on see the absolute revenue growth year-on-year in the second quarter, the U.S. is actually, this quarter, is actually performing incredibly well. It has increased with NOK800 million. So -- and that's very interesting. And if you see to the right, the revenue split by origin in second quarter of 2019, you will see that actually, the revenue from the U.S. side is now larger than the total revenue from the -- Norway.

So that is extremely interesting. And it's a clear indication that actually, our long-haul operation is now really starting to work. See, our long-haul operation, around 60 routes. Biggest carrier in -- European carrier into New York, Los Angeles, and that's actually incredible after 5 years. It's hard to believe that we are the biggest carrier into -- as we expanded into New York. So the long-haul now is really taking off.

The short-haul is stable, short-haul fleet. We have 6 remaining 787s for deliveries. How many MAXs we get here, that's hard -- actually hard to say. We will probably, in 2019, at a maximum get 6 MAXs -- or probably between 4 and 6. So that means that we will have -- you will see a decline here, but that's because we have sold off the NGs, and that's okay for the winter season.

So -- and then, of course, it -- they will have a hard time to pick up the deliveries into 2020 as well. So we anticipate this would be the number. And then you will see us selling off NGs. And of course, we also have redeliveries of inexpensive leased aircraft that we leased in the start-up phase, sustainability in the business, of course, high on our agenda. This is actually very interesting. We have managed to decrease our emission per passenger kilometer by 30% since 2008. So we are not greenwashing like a lot of other airlines just talking about it. But if you see -- and it's very interesting. If you really want a flatbed, you double your emission.

And obviously, the fuel savings, I'll come back to that later, that's the most important any airline can do as well on a new aircraft. And then if we have a biofuel transition, yes, we can obviously lower our emission considerably. So it's no problem to fly on 50-50 biofuel on this modern aircraft and if you add on new technology, very important to have high load factors, the lower load factors you have, the more emission you have for passenger. So have -- you should actually have a high-density seating. We don't have it, but we -- still we carry a lot of passengers.

And then you can do -- we can and we have looked at it many times, do carbon offsetting. The reason why we haven't done it before is actually, a lot of these sites where you actually purchase your carbon offsetting is no good. But we have found new sites that is UN-certified, so that will work. And needless to say, we paid NOK330 million into compensation for carbon offsetting each year. So actually, we are doing a lot of things there -- the airline business is doing a lot of things.

And if you look at the carbon emission, you will see that we are, by far, the best-in-class. Every passengers fly 44 kilometers compared to if they fly per liter biofuel, almost double of the length compared to, as an example, British Airways and Lufthansa and even SAS is way behind. So we are the ones doing it, not talking about it. So greenwashing, you should remember that -- because that's most of the industry actually are doing.

Geir, your turn.

Geir Karlsen

Is this on? On now? All right. Okay. So let's just jump into the P&L. As you can see, we have a top line of NOK12.2 billion. We have an EBITDAR of NOK2.2 billion, actually, the highest in -- highest EBITDAR ever. If you compare 2018 to 2019, you can say that in 2018, we had a few one-offs. We had some one-offs on the technical side due to a renegotiated technical contracts, which we haven't an effect of in 2019, and we also had a pretty high currency gain last year that we don't have today. So the Q2 results for '19 is more like a clean results, I would say, and with a profit of NOK111 million.

IFRS, as we have been talking about earlier, has an effect of NOK183 million negative in '19 and in the second quarter. If you look at the revenue side and the unit revenues. It's very good news for us that the RASK is up 13%. The revenue is up 19% due to -- and despite a kind of flat passenger number. And it's also very encouraging to see that this RASK development is actually dominantly taken by the long-haul, where we are actually having a yield increase of close to 20% from -- compared to last year. And the RASK is up 17%. So that is very encouraging to see on the long-haul part of the business.

On the cost side. Not very exciting to see that we're only reducing the cost with 1%, currency adjusted. Have in mind that we had a one-off in the second quarter of '18. So despite that, we are still able to take down the cost level in Norwegian. And if you look at the cost level quarter-by-quarter, it is having a positive trend, meaning that the cost level on the underlying business is coming down. We do expect that the underlying cost will continue to come down. I'll give you an update on the so-called #Focus2019 program a little bit later. But even the fact that we have 18 MAXs parked, we are still able to take down the cost level in the Company, and we will continue to reduce the cost.

I'm not going to go in detail here. A couple of comments. I mean on the technical side, again, it's due to the onetime effect last year so it is not as dramatic as it looks. And the airport charges, ATC costs, down 20%. That's a pure result of the Focus'19 program that we are running. Fuel cost is where they are, as you can see, and they're still at relatively high levels.

#Focus2019, our program. We are still on target. We have taken out NOK554 million in cost savings in the second quarter, taking us up to NOK1 billion for the, let's say, year-to-date. We are struggling a little bit on the crewing side, to take out the effects that we want to take out. That's mostly due to the MAX situation where we have kind of a disturbance in the planning.

On the technical side, we have had a good quarter when it comes to cost savings, and we have still a massive number of initiatives that we are working on. And we do still believe that we will reach the target of NOK2 billion also despite the fact that we are taking down the capacity compared to the planned capacity a few quarters ago. So that's still the plan. Total target is still above NOK2 billion, and so let's see when we get closer to Christmas on what we can achieve. This is just a bridge on how we calculate this NOK554 million for the second quarter and which takes us then to the NOK1 billion for the year-to-date.

Over to the balance sheet. A couple of comments there, we have investment, it's NOK2 billion. That's the shares that we have in Bank Norwegian. We have an accounts receivable of NOK12 billion. That is kind of at the peak level by the end of June. And that is the tickets sold that we will now get transferred into cash during the next 8 weeks, where we have burn down, as we call it, which means that we -- our passengers are now, these days, traveling for -- in the area of NOK1.6 billion to NOK1.7 billion a week.

So this is accounts receivable now sitting with the credit card acquirers, which will be transferred to cash over the July and August. And we are still in need of more credit card acquirer capacity, which we have been working on for the last months. We have on-boarded 2 of them, new of them. One is already up and running and another one is coming up running in late August. This is very important for us, obviously. And as the revenues are also increasing, over time, we need more capacity from these guys. But a huge number, huge portion of that NOK12.7 billion will be transferred into cash during the next weeks, meaning through July and August when we have the peak season, passenger-wise.

If we look at the current debt, I mean, the short-term portion of the debt. That includes the bond maturing later this year. It also includes debts related to the aircraft that we have already sold but not delivered to the new owners. And then that is -- and then it also includes then the IFRS effects on the outstanding portion of the leases, the principal outstanding portion on the leases that we have in the Company.

If -- I know there's a lot of you that is thinking about the bond maturing -- the bond maturity coming up now late this year. So I just thought that I'll give you some bullets. I'm not going to go in detail into this, but this is sources to liquidity, as we call it. So -- but the underlying -- the most important thing for Norwegian and which I hope you see is that the underlying focus is to make sure that the operational performance is getting better.

And I think, going out with the results today, I think it shows that we are on the right track. We have the best EBITDAR in Q2 ever, and I'm going to give you a little bit of a guiding as well for our EBITDAR figures that we are now looking forward to by end of the year. Obviously, we have factored in some losses due to the MAX situation. I'll come back to that. But in the P&L in Q2, we have a loss in the area of NOK400 million built into the P&L. So we do definitely have -- we are definitely affected by the MAX situation.

So going forward, not only in '19 but also in '20 and '21, the only focus that we have in the Company today is to make sure that the underlying operation of the Company is getting better and profitable, obviously. We are also on-boarding the acquirers these days, which means that the working capital should have a positive development going forward. The need for credit card acquirers is at the peak during the winter actually. So what we need to do now and what we are going to do is to bring new acquirers on-board to give us the capacity we need, first of all, into the winter season coming up.

We have a value in Bank Norwegian. It's a value that's approximately NOK2 billion. There is -- that is kind of close to liquidity for us. We don't necessarily need to own the shares in the bank. We are very bullish on the bank, so -- but it's liquidity regardless, should we need it. We are divesting aircraft that we don't need. We are taking down the capacity, the growth. And all the aircraft that we have sold so far has been sold either at booked or with a profit, and clearly, it frees up liquidity. We are still progressing on the so-called joint venture or partnership. I'll come back to that a little bit later.

And another factor that you might know, at least some of you, we have quite high values in our departure and arrival slots only in Gatwick, those are by third parties evaluated to in the area of $300 million to $400 million. Just food for thought for the one of you that are thinking about the bond. Cash flow, not that many comments to the cash flow. You can see that we have that purchases and proceeds. Most of that relates to the sale of 4 737 NGs. That is done, NOK950 million. On the principal repayments, 7 -- let's say, NOK650 million of that is -- relates to the debt associated to those 737 NGs that are sold. We have paid down NOK750 million in kind of regular debt repayments, and we have also then paid down NOK800 million on the lease debt as such.

CapEx, we are actually -- this time, it's actually by the reason of the MAX situation. So what we are seeing here now, that we have taken delivery of 4 Dreamliners so far this year. We have 1 remaining one coming up or delivering now very late in July. Other than that, we do expect to take delivery of approximately 46 MAXs. The thesis now is that the MAXs will, at the earliest, be back flying in October. It would potentially be even later. And that means that as it looks now, we will take delivery of 11 MAXs in 2020. We have 8 redeliveries of the old leases in 2020, so as such, we have a 3 aircraft net growth.

And then on the 787, as I said, we have 1 left this year in July, then the next one is coming in January. It's also likely that one of the 787s next year will be pushed out in time, and that will be the last one delivering into the summer next year. On the Airbus side, we have 5 deliveries coming up, 1 this year, 4 next year. All of them are going on very long leases to Hong Kong Express, as you know. On financing, we will -- going forward, focus on what I call, export credit-supported facilities with attractive terms and a relatively long repayment profiles.

Outlook. As I said, on the MAX situation, the thesis now, at least the working thesis in Norwegian is that this will be back at the earliest of -- in October. We have secured the capacity we need for the summer season, i.e., taking in wet leases, and then we are prepared to take 4 to 6 by the end of this year. And result impact in the second quarter is NOK400 million, which is built into the P&L. Despite that, we're still able to come out with a profitable quarter.

And on the basis that these aircraft will be back flying in October, we estimate taking another NOK300 million loss from 1st of July until they are back in the air. We are obviously having a good and constructive dialogue with Boeing on the whole situation as such. Guiding. Yes, as you can see, we are kind of forced to guide the cost side slightly up this quarter. This is mainly due to headwind on the currency side. So that's the price only, both the underlying and also including fuel.

The Focus'19 program is still, as I said, on target. And of course, it's -- when you are taking down the capacity, it makes it a little bit more difficult to take out NOK2 billion in nominal cost savings. But that is still the target, and we expect to reach that target as well by end of the year. The challenge is when you are taking down the capacity, as we are now doing, to keep up on that reduction also on the cost side. So you should expect that we are going to take steps in order to do something on the cost side, even outside the NOK2 billion cost savings.

Then on guiding. I think in order to give you a flavor of how the second half looks and -- but first of all, on joint venture, that is progressing. We are still having a dialogue with the same partner. We have progressed and we do expect to have clarity on this within weeks, not within months, but within weeks. There's no guarantee that this will materialize, but we are optimistic. I think that's what we can say.

We would also like to guide this time on the EBITDAR. And we're guiding between NOK6 billion and NOK7 billion in EBITDAR by the year-end. That is, well, potentially more than a double since last year, and it shows that this change of strategy, the change from growth to profitability is starting to kick in. We started that in the third, fourth quarter last year, takes time to -- for that -- for all those steps to have an effect. We are now starting to see it on the underlying operational side. We do expect also that this will yield results throughout the rest of the year. And that includes then -- the NOK6 billion to NOK7 billion also includes then a loss, P&L loss of NOK700 million due to the MAX situation.

Yes, I think that ends my presentation.

Stine Klund

We'll head over to the Q&A session. And as Anne-Sissel said in her introduction, we'll now take questions related to the Q2 presentation, and then we'll welcome questions related to the change in management after the press conference.

Question-and-Answer Session

Q - Kenneth Sivertsen

Kenneth Sivertsen, Pareto. Could you share some light on that booking into Q3? It seems like the -- this past booked ticket is flat year-on-year, and your capacity is still growing by some 5%. So how is the mix? Is Q3 still quite good? And then is it -- you're right about short booking being down now, so if you could...

Bjorn Kjos

I can start to answer. You can fill it in. The -- on the long haul, see, it looks very good on the second quarter. There's no change in that going into this third quarter. The problem is that when we have increased a lot of capacity in the long haul, it is in U.K., it's Paris, in Spain, and it's in Italy and also out of U.S., the booking horizon we have no -- actually no -- we couldn't see it from -- you can't see it from last year. And the booking horizon in these countries are very short actually in some places within the month. So that's why -- we don't have any history to look at, that's why it's difficult on the long haul. But we don't see any changes into that. So as we stand here, we don't see any change in that pattern for the third quarter.

On the short haul, as expected, Sweden is slightly down due to the taxes that was implemented and a weak Swedish krona against the euro. This makes it much more expensive for the Swedish families to travel. We see it's strong in Norway and also in Denmark and slightly weaker in Finland. But the battle here is actually where we have taken out capacity, is in the Mediterranean, and as an example, from Germany and south to Mediterranean. But we have taken down a lot of capacity.

We also see -- we have taken down the capacity out of U.K. into Mediterranean. We see that obviously, U.K. is influenced by Brexit. No doubt about that. But the good thing about it, it's very -- it's much cheaper for the Americans to fly into U.K. now. So actually, we are doing quite well, as you saw, that on -- where we have increased so much out of U.S. Obviously, that's -- it's good for us that the dollar is strong against the pound, and we see a reflection of that on the bookings. So we'll -- the bookings in the third quarter as it's -- I think the shortage shortfall on the short-haul operation will be filled up by the long-haul operation. That's what we see as we speak.

I don't know if you have more comments left, Geir.

Kenneth Sivertsen

Secondly, with the U.S. going so well on the long-haul side, essentially, I guess your currency mix will be more balanced. The top line, you're more U.S. dominated. So if you could just run us through how you think about that.

Geir Karlsen

Yes. As we saw on the one slide there, as we saw that, the highest revenue generated now is actually from the U.S. But I think it's getting more equalized on the U.S. dollar economy in the Company. But still a huge portion of the expenses as valued in the Company is U.S. dollars, obviously.

Kenneth Sivertsen

If you give us a new EBITDAR guidance range or a target range, whatever, how is long haul fitting in there?

Geir Karlsen

Well, we -- first of all, I mean, we would have liked to give a more narrow range on that guiding, NOK6 billion to NOK7 billion EBITDAR. But the fact is that due to the MAX situation and the unclarity, the lack of clarity on when these aircraft will be flying again, this is kind of the range that we can get. And as I said, I mean, if you look at the RASK increase that you are seeing, it is actually dominated by the long-haul side of the business with RASK at -- with an increase of 17% and a yield increase of 19%. And as blended, it's 13%. So then, you can assume what we are doing on the short-haul side of it.

Kenneth Sivertsen

Okay. And last and final, the JV, you said that it's a matter of weeks, but is -- if you'd just give us a little bit more color on this one, if you can.

Geir Karlsen

I think as I said last time, it is kind of a 3-party agreement, more or less. It's ourselves, it's the partner, it's also the owner/manufacturer of the aircraft. And now we are discussing a structure with the partner. We have restructured the whole order, the flight -- or the delivery order, as you know, with the first of all Airbus. And now it's down to whether we can materialize or execute on the structure. And we have progressed from last time, and so let's see. We are saying within weeks, so let's see if we can make it happen. But there's no guarantee, obviously. But we're optimistic.

Kenneth Sivertsen

Thank you. And good luck, Bjorn, with the new role.

Bjorn Kjos

Thank you.

Hans Jorgen Elnaes

Hans Jorgen Elnaes, Winair. The NOK700 million MAX on ground costs, does that include idling pilots and crew while the aircrafts are not flying?

Bjorn Kjos

We utilize the crew, of course, to a large extent on the short-haul on the NGs. They will -- the problem is what we have -- as an example, in Finland, we have only MAXs. Obviously, that makes a lot of problems because the crew -- we should -- I would like to have the crew may be on other places, and that incurs a cost outside all costs. But this is what we think the NOK700 million is, what we have calculated that will hit us.

Stine Klund

There is one question sent to the Investor Relations e-mail, Alexander Irving from Bernstein. How confident are you that Norwegian has enough equity to prevent a further rights issue? And what are the biggest risks to this?

Bjorn Kjos

We have no intention of raising more equity. As you see, we have -- we expect by the coming months now -- trust that people fly circa between NOK6 billion and NOK7 billion, trust coming in from people traveling so -- in the next 4 or 5 weeks. So we do not then trust the mix. We just gave examples of how -- actually how we could have access if we want to refinance the bond by collateral and switching out to collateral, et cetera. There's a bunch of levers that we can take. So -- but obviously, we will work on it going forward. But we haven't decided what levers we will take.

Geir Karlsen

I think what you are seeing now on the operational side is that we are performing better. We have a really good second quarter in my opinion. Third quarter looks good. We are guiding a doubling of the EBITDAR for the full year. The whole -- during the whole first half, we have been working very hard in order to make sure that the coming winter is not getting even close as bad as the winter that we have behind us, which is absolutely critical. We will have a cash -- kind of a burn down on the receivables over the coming months. That will give us fresh and a good liquidity.

And the capacity is taken down. As you have probably seen, we have pushed even more MAXs out in time, which has taken down the CapEx. So all -- what we are doing now is trying to make a room where we can get safely through the coming winter, including either refinancing whole or part of the bond. And then it will take us into early '20 in a very good position, and we will then turn this around to a profitable company. But obviously, there's a few things that needs to come into place the next 2 to 3 months in order to -- for us to be able to execute on those -- on that plan. That's clearly something -- that's clearly the only thing that we are working on these days.

Hans Jorgen Elnaes

Yes. One more question for me. That's regarding the bases in Las Palmas and Tenerife-South. And it says that you might keep those bases after all. And can you give some light on what would be the reason behind that to keep those bases instead of closing them down?

Bjorn Kjos

And this is what we -- all we do is we do it -- we calculate the effect of what we are doing here. And it might be as good as an effect if we take down the capacity in the summertime and move it going into some other places. And obviously, if we have the ability to do that, it might actually be better to ramp it up where we really need it in the wintertime. So that is the reason. It's been, Should we do it? Should we not do it? But if we can, say, if we can move parts of the capacity to other places in the summer season, that's actually better.

Stine Klund

I think that's it. And we'll now have a 2-minute break before we start the press conference. And for those of you who are staying, we ask you to please be seated.

Bjorn Kjos

And thank you, everybody, for attending this. This was my last presentation. You could be happy with that. You have a very good guy here taking after me.

Stine Klund

Today, we have announced that Bjorn will step down of the 17 years as CEO of Norwegian, and Geir Karlsen will be acting as until the board has appointed a new CEO. So now Chairman, Niels Smedegaard will come forward together with Bjorn and Geir to talk about the change, and of course, answer all the questions you may have. And as I said earlier, we will have all the questions in English because we're streaming it to the international audience.

So, NielsI, leave the floor to you.

Niels Smedegaard

Good morning, everybody, and also a warm welcome for me to all of you for showing up here today at this little press conference. My name as you heard is Niels Smedegaard, and I'm the new Chairman of Norwegian. The reason why we all here anticipation today is because of Bjorn Kjos has decided to step down as CEO of Norwegian. It's a wish that Bjorn has occasionally expressed during the last couple of years. So today's announcement is probably not coming as a huge surprise.

Since Bjorn Kjos and I met back in April and discussed the potential chairman we've rolled in Norwegian, this topic has been on the table for us. And I'm now something like two months into my tenure and in my new role. And I've spent a lot of time with the management team of Norwegian with people in and around Norwegian to try and get an understanding of what the situation is and what is happening there.

And I think, I have a fairly good understanding of the situation by now. So, we have together agreed that now is the right time for this change. As we all know, Norwegian has gone through an impressive development during the Norwegian past 10 years. It's actually a remarkable story not the least due to beyond vision and bold moves during this period.

The growth has been very ambitious in the past 2, 3 years and coupled with some of the external factors MAX and other things, which you've just heard Bjorn and Geir described. This has left Norwegian today in a somewhat challenged financial situation. This has traded as we also heard a partial strategy change from end of last year where, before, we focused a lot on future growth, to now a higher degree of focus on earnings in the Company.

That change, that needs to be intensified and obviously get back on track. So this element in combination with Bjorn risk to step down will result in a number of actions. First of all to expand the operational and the turnaround focus [Audio Gap] have challenges. It's normal in this business where it's probably one of the most ruthless businesses and toughest businesses in the world, but that's also why we like it to be associated with this business.

I'd also like to take this opportunity to congratulate you, Geir, with the new responsibilities. I have followed you firstly now for the past couple of months and I know you're up to this job given the situation when I cannot think of a better solution for Norwegian at this point in time. And I look very much forward to working with you and the rest of the management team to take Norwegian forward from this point.

Those with the words and with that, I would like to hand over to the man in the center position. That's you Bjorn. Come up here.

Bjorn Kjos

Thank you. And well, it's -- so, this is a Norwegian review. Here actually, you shouldn't leave the airline when you've passed 70s. That so I know, the way overdue to the retirement. It will not be a retirement. I think I can -- actually in coming forward, I think I have -- I'm not having the daily operational actually burden on your shoulders. I can concentrate more now on, on what I think will benefit Norwegian the most going forward. And that is actually to build up a large network.

We have been able to build up network in Europe with the easyJet. We lack the network in U.S. We lack the network then, if I say then we are going to the East, we'll just make it able. I know this is because we have started this process. I know we will be able to build up a tremendous network. And I can actually do better from Norwegian, taking back haul and concentrate on that and saying that I also know that I’ve been working for more than a year with the Geir. And there was no actually coincidence that I say that Geir that next in-charge with me.

And Geir is fully capable of running this business. He’s actually very good. So, we offer for us, I know this guy, he is incredible good. So, I have no doubt that we as a team, we’ll do much better for Norwegian. 17 years or something or somebody would say, isn’t it your baby? Well, it’s not my baby. It’s 11,000 people's baby, this Norwegian. I think today we have incredible good team running Norwegian, taking Norwegian forward, incredible good. And with that team going forward, I have no problem to say and let Geir take the responsibility for all this at through the MAXs. Now, no reason for that I think.

I think this is the right time. And we are looking back I know that you and I been working side by side for many, many years. And we decided actually a couple years ago, we talked about that it’s time actually to know to step aside. And I look -- and that you initialize that on the --. Then I also say that, yes I will stay as long as I needed the post. And we started actually to look for somebody that can take my role in a couple of years ago. And what it becomes hold up because we’ve got some interesting as interesting in acquiring Norwegian. And I had to step it up. We had to stop it and I know it's time to start all over again and next is coming in. And I know you're doing a tremendous job. So I'm either can build a good team and Geir in the front this will be extremely good time for me to set back.

So I’m yes I think we have this I’m in my tenure of around 50 or this session start we have earlier today. So it’s time for Geir to take such role. But thank you all for actually being part of Norwegian and supporting Norwegian as I know you're doing. Anne?

Stine Klund

Thank you, Bjorn. Geir will you join us here and perhaps you have something to add before we open up for questions.

Geir Karlsen

I can add.

Stine Klund

Or is everything good to you.

Geir Karlsen

Well, first of all, it has been a pleasure to work with you Bjorn for last year and two months, I think I’ve been in board now. And also with you Bjorn, it has been a challenging time as it has been very busy. And I would like to say that if you're thinking and run away now that that won't happen, Bjorn. So, we need you to stick around and I'm not sure we can continue to work good, work relationship that you've had since I came into the Company. You really hope different. You will or we will need you to stick around and that your amazing expertise and knowledge about the industry and obviously the Company.

Stine Klund

Good, thank you. Now we are ready to take your questions. Please wait for the microphone. As I said, we're streaming it. So, can’t see anyone.

Hans Jorgen Elnaes

Hans Jorgen Elnaes, Winair, again, if you look back on those 17 years Bjorn, what would you consider being the most challenging part of that period?

Bjorn Kjos

I think looking back it. I think when we started -- looking at what would happen actually in the world, how relatively compete with ultra low cost tariffs, where should we go and after doing a lot of calculations and talk, we -- if I am not -- the least competition is probably the long-haul operation and the recent anybody that’s actually serve in that area on the low-cost side that. There's a lot low-cost players chosen a rate to go that is enjoying up in aforementioned of area [indiscernible] say in area first.

So -- but, our first actually, we needed to have success in the larger cities in Europe. So -- when because Scandinavia is coming as good, but it's not big enough actually we have two new people here in Scandinavia to succeed in long-haul. So that was actually a gamble to start up the London operation into U.S. If that, if we haven't succeeded on that, we couldn’t do the long-haul operation. But if the area couldn’t succeed in that, that doesn’t would pay the roles all theme into Paris, Rome, Madrid, Barcelona and from besides the Nordic. And actually that move that was the most challenging part within Norwegian.

I know both start up phase, if you remember the [indiscernible] if all this, all these things whether they started up, maybe, they actually think that we should fly in new Dreamliners, sending up with all the reckless aircraft, [indiscernible] aircraft. So, there was lot of barriers, so of course that we hadn’t foreseen that. That was actually the thing that was that we really had to succeed another as we could never have made it on the long-haul operation. And as we see it move, you really get ask me predicted, you will get lot of competition on the short-haul going forward, more capacity coming in.

More we can come which is actually on the field operation and to say it all the legacy carriers, they're making them on -- they have loosing back-haul on the shortfall. We are at the short-haul and if we -- they have a very profitable long-haul operation and that is where we -- also will be. So that most actually where we -- we really have to succeed, that was when we started up in long-haul.

Anne-Sissel Sksnvik

No, questions?

Unidentified Analyst

[indiscernible] Martin Stenshall from Me24. Geir, if you were ask, would you be willing to take on the job as permanent CEO?

Geir Karlsen

I think for now, you have been asked by Niels and the board to take on this, take upon this role now for temporary or acting as we call it. And my focus is that, that's focused on having now and then trying to show who ends up thus the permanent CEO.

Bjorn Kjos

And I [indiscernible] Geir, definitely in my eyes, he's the guy that can run this business as forward.

Anne-Sissel Sksnvik

Okay, I can't see any more hands. Okay. Thank you to everybody for attending and have a nice summer.

Bjorn Kjos

Thank you.

Geir Karlsen

Thank you.