Norwegian Air Shuttle ASA

Good morning everybody and welcome here to our Q3 Presentation. It is now 8:30 sharp here in Oslo and we welcome all of you.

My name is Niels Smedegaard. I'm the Chairman of Norwegian.

And I will together with the rest of the team, predominantly Geir Karlsen, our Acting CEO and CFO; but also our Head of Investor Relations, Tore Østby; our Communication Head, Sissel Skånvik, we will take you through the next roughly 45 minutes. The program for this morning is a Q3 presentation by Geir.

A lot of things have happened in this quarter and he will take you through those elements. And then I will take you into the future -- the near future, some of the things we have planned for 2020 and beyond.

As I said the quarter here, Q3 has been a pretty busy quarter for us. We have also had some success.

We will enlighten you on the much discussed joint venture and a number of other things which we have been pleased with. So, without further ado, I will hand over to you Geir to take us through Q3.

Thank you, Niels. I'll just start by going through some highlights and some on a big picture and what we are kind of working on as part of the new strategy for the company.

I mean I will go through the Focus2019 program a little bit more detail later. But as you have probably seen that we are delivering on targets -- actually a little bit above target and we are also increasing the guiding for this cost reduction program for the full year I'll come back to the details on that.

We are continuing to optimizing the route network. We have done a massive number of changes to the route network during the year, also starting out to have an effect into the winter.

You will also see that we have taken down the capacity during the coming winter pretty much compared to last winter. We are also reviewing and going through the kind of organizational structure for the company including the AOC structures, et cetera, which is now starting to give results -- or to show results for the company.

We are continuing to work on the capital expenditures going forward. I think we are close to finalize on that process now.

Of course we have some uncertainty still on the MAX situation but we have restructured now the Airbus order. We finally got an agreement on this joint venture.

And we are trying to create room to align the deliveries going forward with the actual need that we have into our network. We're also continuing the fleet renewal program, meaning that we are selling off assets and these will then be replaced.

This is first of all on short haul as you know and these aircraft will then be replaced with the MAXs. Ideally, we would have liked to sell off more of the NGs as per today, but we have to be a little bit careful and then looking at when the MAXs are back in the air.

So to Q3 and the highlights there, we are seeing 8% revenue growth compared to last -- or the same quarter last year. As I said on Focus2019 NOK827 million actual for the third quarter and then taking it up to close to or in the area of NOK1.8 billion for the full year year-to-date.

EBITDAR is improved by 49% year-on-year up to NOK4.4 billion. I think this is actually the best EBITDAR in the company's history at least so far.

And then again to create financial headroom as we have been working on quite a lot during the year, we sold off the Bank Norwegian shares earlier. We did a refinancing of the two maturing bonds; one was supposed to -- or was maturing by the end of this year and the other one next year.

They are pushed two years out approximately. We have entered into a joint venture with the CCB Leasing, China Construction Bank, I'll come back to the details on that.

And then we have further reduced the CapEx during the quarter for the 2019 as a whole. Most of that is related to the MAX situation and the fact that we are not planning or we are not expecting any deliveries of these aircraft this quarter meaning the fourth quarter.

We are continuing to sell off aircraft as I said creating enough liquidity effect of approximately $50 million and that process is ongoing and will continue. Going through the capacity, we are -- we have 3% growth in capacity compared to same quarter last year.

What we are seeing in general now for the company is that the load factors are developing nicely and so is the yield. And looking at the booking curves going forward that trend looks to continue on both those factors.

Looking at the total network, as for today, the U.S. is now kind of the largest market by revenue generating and has been passing Norway.

Interestingly now in September for example long haul is now pretty much exactly the same on capacity as the short haul in seat kilometers. That is an interesting observation as such.

Looking at the network, as you have probably seen during the last couple of weeks, we have now established a relationship with JetBlue and we are in the process now of linking kind of the IT systems together, also to develop an interlining agreement and we expect this to come into the action where you can then book tickets on both airlines with a pass-through during, let's call it, first and into the second quarter next year. Firmly believe that this will absolutely give us traffic into our long-haul business and we will obviously then also be able to offer flexibility on our long-haul passengers into the domestic market in the U.S.

Also interesting to see that the easyJet Corporation is starting to develop further, and easyJet passengers is now filling up more than agreed on a day out of London, Gatwick. Financials: Looking at the third quarter NOK 14.4 billion in revenues, it’s an 8% increase in revenues compared to last quarter, mainly driven by increase in unit revenue.

Ancillary is also increasing. Looking at the cost side, there is -- on the technical side, you can see there is a cost of NOK 748 million.

That is lower than I think many of you expected. We have a one-off effect there of approximately NOK 300 million.

That is part of a, let's call it, a negotiation with vendors as such. Taking us down to an EBITDAR of NOK 4.66 billion and down to then an EBT of NOK 2.2 billion.

IFRS effect here, IFRS 16 effect is NOK 285 million. So ex IFRS the EBT would have been close to NOK 2.5 billion.

When it comes to the MAX effect, I think last quarter we guided on NOK 700 million on the basis that the MAXs, which should be back in the air by say mid-October. As per Q3 that amount is approximately NOK 800 million and we expect that the total net loss on the MAX situation by year-end will be in the area of NOK 1 billion.

These figures are year-to-date included in the financial as such, meaning close to NOK 800 million in loss. Looking at the year-to-date figures.

NOK 34.6 billion, 13% revenue increase compared to last year. On handling charges, especially, I would like to mention that due to the issues on the MAXs and also on the 787s, we have booked care and compensation cost meaning EU261 in the area of NOK 675 million actual by the end of the third quarter.

EBITDAR of NOK 6 billion to NOK 9 billion, up from NOK 4.9 billion last year, so pretty nice increase there, and then an EBT of NOK 337 million. Worth to mention that in last year you had under net financial items, this -- as you know, non-cash event relating to the Bank Norwegian shares, which gave us as a positive of NOK 2 billion.

So such debt should be taken into consideration when you are comparing the two years. IFRS effect is approximately NOK 650 million.

So ex IFRS, the EBT would have been close to NOK 1 billion profit. Then over to the revenue side, I mean, the RASK is up 3%, as I said, a little bit help on the currency side, on the income side, the other way around on the cost side obviously, and that is on 3% increased average sector length.

Ancillary and cargo is still developing in the right way. And this is one of the areas that we are focusing a lot on these days in order for that to even improve more than what it shows as per today.

Focus2019, NOK 827 million. As I said, we had a one-off effect of NOK 300 million, as I mentioned in the P&L.

That is not included in these focused numbers. That comes in addition to that as such.

We are guiding now on NOK 2.3 billion for the year with the aim of maybe being able to surprise on the upside when we are here in February. This is a massive team effort throughout the whole organization.

And there's a lot of hard work behind this, and this hard work will continue throughout the year and not at least into next year by the way. Looking at the cost side, it's still improving, meaning it's coming down, 6% lower unit cost this quarter compared to last year same quarter, and then 9% in constant currency.

I mean, the strong dollar, strong euro is definitely having an effect here, but the underlying cost level in Norwegian is coming down and that we will do whatever we can in order for that trend to continue into 2020. I think there's a lot of capacity still to take out for the quarters to come.

If you look at a little bit more detail on the cost side, you can see that everything is moving in the right direction, except the depreciation which is only currency related. And you have also handling cost that is developing in the wrong direction that is all about the care and compensation that we have been paying out to our passengers and as a result of the situations on the -- both on the 787s and on the MAXs.

But underlying, the cost development is having a good trend. Balance sheet: You can see that asset is going up from NOK69 billion to NOK71.9 billion.

Most of that -- or a lot of that is related to currency. We have taken one delivery of 787 during the quarter but we also sold two 737s.

So it's all about the currency really. The currency is up 6.7% on the dollar against the NOK in Q3 4.6% year-to-date.

And then investment: That is the part of the Bank Norwegian shares that we still have that will be then sold during the current quarter, equities NOK5.2 billion as per today. You can also see that the current debt is going down due to the fact that we have refinanced the two bonds, which is now classified as long-term debt.

As you can see we have still pretty high receivables. That relates to partly the credit card acquirers.

We are in the process of onboarding a couple of new acquirers these days, which will be very helpful now through the winter and into the peak sales season that we all will enter during the next couple of months. Cash flow: Yeah you can see the traffic liabilities is coming down.

That is pretty normal due to the fact that we have a lot of passengers traveling through the summer and that is a higher portion than what we're actually selling, so pretty seasonal very normal. We have net investing activities of NOK2.8 billion positive.

That relates to the sale of the 737s. It relates to the sale of the Bank Norwegian shares and so on.

So it's a positive figure. Principal repayments: Part of that is repayment of debt on aircraft sold.

And it's also an IFRS effect where we are paying down on the lease debt of close to NOK900 million and then the regular one close to NOK600 million in repayment of debt. Also on the financing cost, IFRS effect there this quarter is in the area of NOK530 million.

And then it takes us down to net changes of NOK1.2 billion for the -- by the end of the quarter. Outlook: Looking at the fleet plan as you have seen during the -- at least two, three quarters, we are now -- we have taken down the growth.

We are guiding growth this -- by the end of 2019 at 0%. Last quarter we said 0% to 5%.

So it's continuing to come down. We expect by the end of this year to have 156 aircraft in our fleet and then it will increase by nine during next year.

So we're expecting to take four 787s next year. The fifth one will be pushed out in time.

We are expecting to take 16 MAXs. That's more or less the 16 MAXs that were scheduled to deliver this year.

We are planning the winter season without the MAXs being up in the air again. So by that we mean -- we think that we will at the earliest see MAXs flying during late March as it looks now.

That might change obviously. We have sold quite a few aircraft during the year, three of these will be delivered in Q1 2020.

And then we are -- we have eight redeliveries of leased aircraft during 2020. So all-in-all, we will increase by nine aircraft.

We have also taken down the CapEx as you can see on the left top side from -- in 2019 from NOK1.2 billion to NOK1 billion. And then we have a slight increase next year due to the fact that a lot of the MAXs will be pushed into next year.

Yeah, I think that's on the fleet side. And then on the environmental side, I mean, this is a high focus in Norwegian and has been for a while.

As you know we have a fleet or average fleet age of less than four years in our fleet. So we are definitely one of the most competitive ones on fuel burn.

So we are burning in the area of 20% less than the world average, even more than that on long haul. And on CO2 emissions per passengers we are very competitive.

And if we compare ourselves on -- with let's call it a local competitor, we are close to 30% lower than them, which is good. We're also running several projects these days on the environmental side.

And as you can see on the right-hand side there and one of them is what we call green landings where we are cooperating with airports especially Gardermoen in Oslo where we are cooperating with the aim of then reducing the fuel burn and making landings more efficient with regards to CO2 emissions. And then on the joint venture, I mean, we have been guiding on this now for a year.

And finally we can say that we have a concluded deal, which is really nice. And this is a relationship that we have been developing over the last year.

We have already done two transactions more on the financing side with the same company, but this is now a joint venture that is established. The Board is set with Directors.

And this will be a joint venture that will own – to start with at least 27 aircraft all Airbuses. The first delivery is scheduled to come already in January next year.

And Norwegian will have a 30% ownership in this company. CCB will finance 100% of all the aircraft including PDPs.

And by that, Norwegian will have a short-term cash effect. And then when we take delivery of these aircraft into Norwegian, we will turn around and sell it into the JV.

And then, this JV will have a marketing kind of responsibility meaning that we will place these aircraft into the market together. And then by this, we have kind of created a vehicle that gives us flexibility.

We could sell – I mean – and I think we will sell more aircraft into this company. We can even lease aircraft from this company into Norwegian which is not plan A though, but at least it gives us flexibility.

And I think this is – it is 27 aircraft as per today. And I think that this is – it will just be a start of a long-lasting strategic relationship with CCB.

On CapEx, we are taking out of our own kind of balance sheet close to $1.5 billion by doing this. And this will also take care of all the Airbus deliveries, up to the end of 2023.

Then a little bit on guiding, I mean, as I said, we are guiding ASK to be close to 0% in 2019. The unit cost remains unchanged at 31 – NOK 0.31.

But then we will have to increase it slightly on – including fuel due to the fuel cost and not at least on the currency side. Focus2019 NOK 2.3 billion for the year, up from NOK 2 billion and EBITDAR due to the kind of headwind on currency and fuel we're guiding that now down to NOK 6.1 billion to NOK 6.5 billion for the full year.

So just to summarize, I mean, what we have done during the last quarters very few quarters, or through the year. So Focus2019 is delivering NOK 1.8 billion year-to-date NOK 2.3 billion for the full year.

We have restructured most of our forward deliveries. We have reduced CapEx by NOK 22 billion isolated to 2019 and 2020.

We have sold off the Bank Norwegian shares. The remaining portion of that liquidity-wise will come in the fourth quarter.

We have refinanced the bond of the NOK 3.4 billion in total, with two years. We have signed an LOI with JetBlue, a relationship that will start off during the first half of 2020 firm believer of that one.

We have sold off aircraft 17 aircraft during the year giving us NOK 1.6 billion in liquidity. And then finally, the joint venture which will give us a vehicle going forward with a lot of flexibility and it takes down the CapEx.

This is – all this is kind of as part of giving us a financial headroom for the next 12 months to 24 months, in order for us to focus on what is the absolute most important in this company and that is to turn around the underlying business and the route network and to make sure that Norwegian on a 12-month rolling basis will be profitable. And by that, Niels, I will give the word over to you.

Thank you, Geir. As you've just heard, we have been quite busy.

Actually, Geir and his team have been quite busy throughout the third quarter and also giving the best ever results for Norwegian. And I'd like to use this opportunity to thank Geir and his team and the rest of the employees in Norwegian for their tremendous effort.

It has really been hard work, but I have to say the hard work is not over. We need to take pretty bold moves in order to realize the full earnings potential of Norwegian, and the efforts, which has been done with Focus2019 will be reinforced by some pretty bold action for Norwegian in the coming period.

We are not just talking about a one-year effort we are talking about a transformational journey we will embark on and that is not building on just some quick ideas, but we have systematically assessed the potential in Norwegian. We have during latter part of July all of August and September, invited in two, three handful of global airline experts having seen a wide range of airlines all over the world and have assisted them through the years match that team up with 30 of our own specialists in Norwegian, and then they have deep dive into all of the areas of our company.

And the good news is that we have found significant opportunities in order to improve the company. This is not to blame anybody or say it's wrong what has been done in the past.

Norwegian has been through a tremendous growth period. I think it's a unique story which has been created in Norwegian, but we are not the first airline or the first company for that matter who's forced to look at itself in a different manner when you've had growth like this.

So we have based on all of this work lots of discussions together created a plan we call a Program NEXT. And as I said, this is a transformational program which will last at least two to three years.

This is not driven by consultants. It is driven by the management team of Norwegian supported by the Board.

And we are starting right now. Actually we have started a couple of weeks ago with the implementation of this program.

And we are committed to make the necessary changes. And it will be a tough road for us.

And it will be a different Norwegian coming out of this but it will be a stronger Norwegian at the end of the day. What we are doing is we are changing the growth focus as has been demonstrated in the incredible years of 2015, 2016, 2017 and 2018 with these huge growth rates.

The company realized end of last year that it needed to change the direction focus on profitability. They implemented #Focus2019 with all of the significant effects you've just heard about.

Those were not to decline the effort but those were the low-hanging fruits. But what we now do is to go into the engine room of the company and we will have to fundamentally change how we work together, how we run and operate Norwegian.

There are three headlines. There is bold moves on the network and Geir has already alluded to some of the things which are impacting this year.

I'll come back to the size of these moves. It is to drive best-in-class RASK, focus on the top line and there's a number of things we can do better there.

And of course, we have to continue to focus really hard on the cost side of the company. Now this program has a significant potential and we have quantified that potential and I'm sharing it here today with you.

We are at the end of 2021 targeting a run rate of at least NOK 4 billion in run rate end of that year. So a significant impact and it's coming on top of what was just shown here on #Focus2019.

It will be on top of the NOK 2.3 billion we aim to deliver at the end of this year. It will come both from the top line, it will come from the cost side and the combination and doing things smarter and we will of course share much more around this program when we are back here in February with the Q4 results for 2019.

So do not go now back home and throw in NOK 4 billion for 2020. We will help you and assist you as we develop this plan and the timing of the various elements, when we come back in February.

Just to shed a little bit more light on what are we talking about here when we talk bold moves. We'll continue to reassess and optimize and fortify our network.

And the things we have in pipeline, the decisions we have made or are about to make will impact our ASK with 10%. We will move it 10% down for the year 2020.

So it will be as you can see a completely different scenario for Norwegian as what you have been used to. And this will have of course consequences throughout the company.

We'll also implement new digital tools and capabilities into the organization in order to improve our revenue. We think we can and we will take near-term actions both on how we price our products, the inventory, how we handle that and the product itself.

We are for various reasons leaving Norwegian kroner or dollars or euros on the table right now and we need to invest not only in aircraft but also in the right systems within Norwegian to optimize our top line. We'll of course also focus hard on the operation both for our customers, our passengers, so they get a better product higher reliability but also to drive our cost.

On-time performance, we will continue to be a measure but also how we schedule our flights, the tail numbers, how we pair it with the crew. All of those elements will be part of how we will drive out costs.

We need a better cooperation between the various areas within Norwegian. We have been geared to managing this incredible growth for a number of years.

And that tends to create decisions in silos that you are under such pressure to get places to fly your aircrafts, crew to manage, maintenance, catering, et cetera. So we have not always been as good and effective in coordinating between the various departments what we are doing and we believe there is a huge potential to drive out cost, if we do things a little bit differently.

And then of course, we need to rightsize our cost base like any other company. The main thrust here will be on the procurement side by professionalizing our vendor management and again improve the internal collaboration and processes we think we can drive out significant cost.

This is not something where we are targeting just one group or audience or stakeholder this will be everybody associated with Norwegian as a partner, as a supplier, it will be administration. It will be throughout the company.

We will have to take the necessary actions in order to improve the profitability of Norwegian and release this earnings potential we do have in the company. And of course, also a very important point strengthen the liquidity of the company.

So that was just a little bit of what we have started and what we will spend a tremendous amount of effort on in the years to come. We are committed to this change in the Board.

We have discussed with management. There is total alignment even though there will be tough decisions and we will be criticized for closing down routes or doing other things, but it is necessary for us.

And there is no way around it. And again, total commitment to this.

We look forward to updating you again in February. We will give indications what it means for 2020 and some of the steps and actions we have been taking and what we will take as we go forward.

So this concludes our presentation and we will now hand over to Q&A. And I think Tore, you will manage this session.

Thank you, Niels and then we open up for Q&A. [Operator Instructions].

Thank you. Kenneth Sivertsen from Pareto.

Two questions. It's difficult to keep it.

So there's many questions to ask, but let's start -- obviously Q3 was great and better than expected. Does it include other one-off items and maintenance you mentioned?

FX have you taken a gain there? That's the first question.

And second, if you could provide us a split on the investment that adds up to some NOK 2.7 billion. I just want to know what it includes?

That's the my two.

The answer on the first question is no, there's no more one-offs as such. On the NOK 2.7 billion, well we could take it off-line, but I'm happy to do it now.

It's related to one 787 NOK 749 million. It's two, sold 737s, which is NOK 457 million.

It's the sale of the Bank Norwegian shares NOK 1.3 billion and it is PDP over NOK 0.5 billion.

Karl-Johan Molnes, Norne Securities. Next week Boeing's CEO will be dragged before Congress.

His lobbyists and lawyers have been avoided that for two years. And they said that "Just wait until everything comes on the table and then you'll see we're clean."

And now, all the messages are coming out they're not clean. In this position, you are letting go of your Airbuses.

And there's a lack of planes in the U.S. Boeing -- Southwest Airlines that use only 737s he says "I don't know what to do now."

But American Airlines that also uses Dreamliners, they have a massive need of planes. Why can't you now sell planes to -- you've got four Dreamliners coming next year.

Why don't you sell them to American Airlines and realize the profit, because you got far too many planes. You would at least profitably align in the planet almost.

So you need to -- the bold action is right in front of you. It is never going to be a better market to sell Boeing planes in the U.S.

And you haven't mentioned it with one word yet.

Well, I don't think it's that easy to sell-off, especially 787s. I mean this is four aircraft.

But it's -- let's say we are -- we were scheduled to take five aircraft next year, we will take delivery of the four. The last one is not implemented yet, meaning that they haven't started to build it.

But the four others are -- they have started to build it. And in order for -- and we have our own seat configuration.

So if we're going to sell this to someone else, it needs to be reconfigurated. And the fact then -- and the market today is working in a way that in order to reconfigurate an aircraft like that it will take 18 to 24 months.

And it's extremely expensive. So that is part of the situation the complexity especially on the long-haul aircraft.

If it had been -- if you're talking short haul, it's just a completely different story. And also the market for selling off long-haul aircraft is much less liquid than on short haul.

So it's a little bit more complex than just turning around and selling four of these aircraft.

But if you have a buyer at a profit give us a call. We are I think in the same place as you.

But as Geir says, it is not that easy for the long-haul planes. So of course, we keep a very close eye on this.

[Indiscernible] I have a question about the joint venture with China, Chinese Bank. Do you think it's a risk based on some restriction in U.S.A.

during the trade war when you cooperate with China? And one question about the JetBlue, will it be possible to buy JetBlue tickets with cash points?

The first question, I mean, we don't anticipate that this will be a problem for us regarding the trade war. I mean this is aircraft coming out of Airbus, first of all, and we are still -- towards Airbus, we are still the buyer and this joint venture will be -- it will be an Irish company.

And then it will be just as a company that is having aircraft and being able to lease them out to go to the Chinese market that could also go to the international market as such.

Cash points?

Cash points, sorry. Well, first of all, now we will just develop an interlining agreement, meaning that we will -- you will be able to book tickets with JetBlue or Norwegian both ways.

We haven't got into the discussion yet on that -- on how to connect the reward program into this interlining agreement. So you have to come back to that.

We have a question from Ole Martin Westgaard at DNB over the web. Can you comment more on the equity gain on the JV and the impact on liquidity?

Well, as we are saying in the press release, we have a capital expenditure effect in the area of $1.5 billion and then that includes kind of an equity effect. We are not guiding on the equity effect per aircraft, but we are -- by saying that that we are selling these aircraft with a profit.

But for a few reasons, we're not able to guide on the exact effect. I think the liquidity effect, first of all, in the short term will be the fact that we -- that CCB will come in through the JV and finance -- PDP Finance as we call it all these deliveries.

So the liquidity effect to start will be the fact that we will get back the liquidity that we have already paid in to Airbus. And then we will -- at delivery of each aircraft, we will sell it into the JV and then realize the profit as such aircraft by aircraft over time.

On the long-haul side, it's the growth in -- or to the U.S. seems impressive.

And could you tell us something about profitability? It seems to me from outside that you have some real potential here as alluded to earlier, but how is 2019 turning out?

And how would you think on long-haul business going forward?

Well, you know that we are not guiding on what you're asking for here. But what we can say is that, if you're looking at the RASK development, it is definitely moving in the right direction and that is also what we are seeing now for the next coming months on both RASK and yields.

And I think we could also say that even if you compare the long-haul business to the short-haul business, relatively spoken, long-haul is now developing better. I think that is what we can say.

And one final for me, with the growth you're targeting, minus 10% next year, it should have some impact on the yields. I think the number of seats added to the Nordic market in the winters will be negative now.

And obviously, negative growth, less seats, perhaps prices should come up, but could you tell us something about your forward bookings now?

Well, I can say that the forward bookings are looking good. They are better than last year.

I think, the fact that we are guiding ASK down and despite the fact that we're actually taking delivery of all Dreamliners, it's also due to the fact that we do expect, especially on the long-haul side on this inspection regime that we have on the Dreamliners, that we will have aircraft parked throughout the year. We will have seven Dreamliners parked through the winter and that is part of, let's call it, a deal that we have with Rolls-Royce and we have been trying to stagger the maintenance cycles into the winter when we don't have that need for that capacity compared to the summer.

And I think also on the MAX side, I mean it's difficult to anticipate today when these MAXs are coming back again and we have to be very careful in that situation on how many aircraft we are selling off. We will continue to sell off a few more NGs in the short term, but that is a puzzle that we are trying to put together.

I think the easy part there is to take down the capacity by just taking down capacity. The challenging part is to make sure that we can take out the cost side associated with that capacity.

And that's the real challenge, both into this winter and definitely into 2020.

Hans Jørgen Elnæs, WinAir. The credit card acquirers still sit on a significant part in our cash flow.

Can you give some color on the negotiation going forward on the situation?

Well, I think, as we have said a few times and also we went into quite much detail on this when we refinanced the two bonds, I mean, we have been -- we have since February this year have been paying down in the area of NOK 4.5 billion to NOK 5 billion to these credit card acquirers. And as per today, we have a high holdback.

But at the same time, this kind of bottomed out during the summer as we see it. We are -- we have already -- just now, we have been onboarding our new credit card acquirers and we are in the process of onboarding two new credit card acquirers now towards the Christmas seasonal and into the winter when we have the peak sale.

But the credit card acquirers I mean that has been an issue for Norwegian. It still is an issue.

We need more capacity. We will get more capacity going forward, but that is obviously an area that we are putting a lot of efforts into in order to create more capacity.

We have a need for credit card capacity in the winter in the area of NOK 1 billion less than half during the summer, so that -- this is very critical for us. And -- but we're seeing a light in the tunnel and we have just recently signed up new agreements with new credit card acquirers.

And then, when we are coming out of third quarter with I will say relatively good results, not good enough, but it's relatively good, this will also help that situation. But that said, we have to be -- we are planning now to for -- let's say for the quarters to come on the basis that we will still have higher holdbacks than what we have had historically and that is part of the plan and also part of the reason that we are freeing up liquidity by the message that we ran through.

And obviously to look around and what happened with Thomas Cook and others, it doesn't help that situation. So the only thing we can do now is to make sure that we are getting into a profitable situation and then things will solve itself.

A question from James Hollins, BNP Paribas. Have you hedged any fuel for 2020 yet?

And the second question, can you confirm that the maintenance cost reduction in Q3 is due to a one-off? And how will that be going forward?

Well, the last one first. I mean the one-off that we are seeing -- well the cost reduction is a one-off.

I guided on approximately NOK 300 million. So it's a one-off.

And the guiding as such -- let's say the guiding going forward is what we have guided on CASK. What was the other question Tore?

Hedging?

Fuel hedging?

Sorry, yes. Today, we are not hedged for 2020 and we have very low hedge towards the end of the year.

We are considering this very carefully these days. Historically, Norwegian has been hedging let's say up to 50% of the capacity, 12 months going forward.

Today, you can hedge for 2020 in the area of $605, $610 a ton. That is -- and this is something we are looking very carefully into.

We have hedging lines and we can do it. Looking at the competitive -- our competitors they are -- most of them are hedged in the high $600s with a high percentage.

I think you might see us hedging -- starting -- start to hedge now for 2020 at least a portion of it.

And the final question from the web is from Jaakko Tyvainen, SEB. How are you cutting winter season capacity between long haul and short haul?

And which areas of the network will be most affected?

I don't think we want to get into this now. Of course, the teams are working hard on this and we'll make the appropriate choices here.

And as we make those decisions, we'll communicate it to the surrounding world. But until we are firm on that, we will not guide on any of this here.

So, if there are no more questions, then we will thank you all for coming here and hope to see you in February again.

Thank you.