Norwegian Air Shuttle ASA (NAS) Earnings Call Transcript & Summary

Welcome, everyone, to this first half year presentation of the Norwegian results. The picture on the screen, I think, says everything about the situation that we have had and all other airlines have had during the COVID-19 situation. It is the biggest crisis in airline history since the Second World War and that has, of course, also affected us. During this situation, we immediately went into crisis management in March, gathered in the war room and focused on getting the airplanes down at the ground. In this situation, we operated only 7 to 8 aircrafts in the domestic Norway from April to July. And I would say naturally, as a consequence of this, we had a 71% reduction in passengers year-on-year in the first half of 2020 compared to the year before. In this situation, we focused on 3 things: getting cost out, focus on liquidity and focus on the equity situation. We took a number of operational actions that I will come back to in a couple of pages. In addition, as you remember, we did a tremendous focus and job on our financial restructure, what we called phase 1, where we successfully converted debt-to-equity and public offering, and that, together, contributed with NOK 15.3 billion to the equity. In addition, we got the Norwegian state aid of NOK 3 billion in loan guarantees, plus NOK 330 million associated in loan from private banks. It is obvious in this extraordinary situation that it has a huge effect on results. We had, first half of the year, NOK 0.5 billion in loss from operations, EBITDAR, before other losses and gains. The good thing that we achieved through the financial restructuring phase was that net interest-bearing debt was reduced to NOK 47.7 billion from a level of 58.3% -- NOK 58.3 billion in quarter 4, 2019. If we look forward now, there is no doubt that -- I have also said that before, that we will -- still, we will need more help. We will still focus on cash flow going forward now into the fall, but we will need more help during the end of the year to come through the winter. If you look at trading, we see huge deviations depending on travel restrictions. When the country turned to red and government come out with their travel restrictions, it has huge effect on bookings and demand. So what we see is that especially routes from Norway to Europe goes down. The good thing, the positive thing is that we see exactly the opposite thing regarding the domestic flying in Norway. We have a lot of flexibility in the cost, especially in the crew cost, because we are only using Norwegian crew in this situation. And the reason why we only use Norwegian crew is because of the furlough system here in Norway is very flexible, very good in the COVID-19 situation. Also, the rules are expanded from 26 weeks to 52 weeks, which means that we can exploit this system all the way until end of March. And that gives us flexibility on the cost side when we either go up or down on the number of routes that we put in place. I also want to highlight that we have used the hibernation period, the period that we entered into in April, quite effectively. We used that period to build a solid business platform so we can emerge from this crisis as a stronger aviation company, and I will come back on this point later. We have taken extensive actions on the operation as the crisis escalated. We -- and first of all, I really want to praise all the Red Nose Warriors, both the flying people and the nonflying people, for the fast action that we did and also for the fighting spirit that we had through the crisis and still have in the company despite the extreme conditions that we are in. Some people have worked 200%, other people have worked 0%, but the fighting spirit has been extreme whether you did the one or the others. We grounded 140 aircrafts in April. That was a massive task in itself. We maintained the critical infrastructure in Norway with 7 to 8 aircraft in operations on government-funded routes. Over 80% of the employees was furloughed, and that's approximately 8,000 people. Unfortunately, we had to bankrupt the Swedish and Danish resourcing companies. And we see still a lot of employees from there that is still supporting us as Red Nose Warriors going forward. We are in-sourcing the Boeing GoldCare agreement, and we have terminated the purchase agreement with Boeing. We also agreed to divert with the OSM. We wanted a closer connection to our people. We wanted to reduce complexity. And we think in a new setup in the future, we can be more efficient. At the same time of all of this happening, we designed a new organizational structure. We have established a management team to -- and the new organizational structure is really to avoid silos and foster more collaboration. And then we have developed a comprehensive business platform that is adapted more to the new strategy that happened already in 2019, going from growth to profitability. And this should be a new platform for the Norwegian that we will see coming out after the crisis. And just to comment that platform shortly. This is the business platform. I will comment that more later. It is -- on the bottom part here, the fundament of the house is, of course, to have a sound financial platform, securing cash flow and rebuild our balance sheet is really the focus there. We want to have -- be much clearer on the mantra, who we are and what we want, and we will come back with that later, not in this presentation, but later. We have developed a new strategy. That is our internal compass. And we have designed a new structure of the organization, one logic and one simplified structure across the company. And then we have focused a lot on leaders and management. We want fewer leaders. We want the right leaders at the right places with the same leadership principles. And then we want to be very clear on the new leadership and operational arenas to avoid silos and foster collaboration. So I'll come back more on a couple of these areas. And then Geir will come into now the financial platform, what we did in the early start and all the way through EGM. The 4th of May is what we call the financial restructure phase 1. The work continued after that with a lot of financial restructuring activities all the way up until now. That's what we call phase 2. And then we know and have said all the time that we will need a third phase. And that's the period that we're going into now because we will need more cash to come through the winter, and that is what we call the financial restructure phase 3. Geir will now go through the first half year financial results and then also talk about the financial restructure that we have done and also a little bit about the structure going forward. And then I will revert with talking a little bit more on strategy and structure. So Geir?

Thank you, Jacob. I mean it's quite obvious that we've had a few busy months behind us, and it looks like it's going to be quite busy going forward as well into the new year. If you look at the fleet in Norwegian today, and we have 140 aircraft as per today. It's down from 156 last year. That is done by a combination of sales of aircraft, and we have also redelivered a few of the leased aircraft during the restructuring that we have now done so far. So as per today, we have 37, 787s Dreamliners in a combination of leased aircraft and owned. We have the 18, 73 MAXs (sic) [ 737 MAXs ] that is parked -- has been parked since last year. And then we have the 737 NGs that we are currently flying. On the MAX situation, we are not going to say that much about that, but we don't see any MAXs in the air in 2020. So we think that we will definitely see 2021 before any MAXs are up in the air again. If you look at the capacity, we have, during the period from March until -- let's say, until the end of the quarter -- second quarter, been flying 7, 8 NGs only. And the remaining part of the fleet has then been parked, as we know, and with a load factor in the area of 50%. So a massive reduction in capacity by reason we all know. Into the P&L. I mean we didn't publish a full Q1 2020 report, as we all know. And thereby, we are then going out with the first half report as per today as such. So this is for 6 months. I mean we have income of NOK 7.1 billion and NOK 1.6 billion loss on EBITDAR. We had other losses of NOK 1.146 billion, and majority of that is a loss on fuel or fuel hedge. As you know, we hedged a relatively small portion of the need early this year right before COVID-19 kicked in, and we have -- we are suffering a little bit on that and we have had to take losses during the year as we don't really burn that much fuel, as we all know, flying very low capacity. And so we are -- we will take care of the fuel hedges towards the end of this year. And for 2021, we are not hedged at all for the time being. We have -- so that takes us down to EBIT of NOK 5 billion for the 6 months. And then we have a positive net financial items of NOK 291 million. We have a P&L effect from the restructuring in the area of NOK 2.4 billion positive. I'm not going to go through the details on how that is put together, but I will refer to Note 9 in the report that we sent out this morning, and you can see how this is built up. We have a slight weakening of the Norwegian kroner since last -- since, let's say, new year, and the remaining part of that is really a currency loss, as such, in addition to the normal interest expenses. Due to the fact that we will have a lower capacity in the air in 2020, and as we see it, also in 2021, we have taken the opportunity now to do a write-down of the deferred tax assets that we have in the company. So thereby, we have taken down -- we have done a write-down in the area of $68 million in the deferred tax assets that we have in our Irish subsidiary. That takes us down then to NOK 5.4 million net loss for the half year. The balance sheet, not that much to comment, really. I mean you can see the intangible assets. That's the deferred tax assets. So that is coming down. Fixed asset investments, that's mostly liquidity, cash, very close to cash. Assets held for sale, we have one of the aircraft that we sold last year that is still not delivered. It will be delivered. So that's the one. And then on receivables, it's relatively high. I mean, when we entered into this COVID-19 situation, we went into a complete new situation for us and also for these credit card acquirers. So it's a lot of manual work done on both sides in order to figure out the transfer of liquidity between us and the customers and between the acquirers and us. And that is -- has been very painful. It still is. But we are getting there when we -- where we can refund the customers. Cash and cash equivalents, close to NOK 5 billion. That includes the support from the Norwegian government that we were able to attract. And it takes us down then to a total assets in the area of NOK 84 billion. The equity ratio as per this quarter is 14.6%, materially up due to the restructuring that we have done. And as Jacob said, we have converted debt into equity in the area of NOK 15.3 billion as such. And then the liabilities is also taken down by NOK 14.9 billion, and the difference is the NOK 400 million that we raised in fresh capital during the restructuring. A couple of comments on the cash flow. You can say that -- the sale of the 10 aircraft is included in what we call purchases, proceeds of NOK 2.7 billion. That is the sale of aircraft that we did actually mostly last year, delivered this year. Loan proceeds includes the support from the government. And then you have the principal repayments, including then the debt on the 10 sold aircrafts or actually 9 of them. And then we have a debt servicing on leases of NOK 2.3 billion. We have not paid that much lease higher during the second quarter. So most of this is related to the first quarter of this year. If you look at what we did during the second quarter. I think this is a pretty good summary. So what we did? We converted the outstanding bonds in the area of NOK 3.7 billion from debt to equity. With the leasing houses or the lessors, we converted NOK 11 billion from debt to equity. We raised, as we all know, NOK 400 million in fresh equity, and we have also then in the second quarter converted NOK 400 million of vendor debt into equity. That takes us to NOK 15.3 billion net, and then we have a guarantee from the government of NOK 3 billion that is also included. We continued this work during the summer. And as we are not flying any especially long-haul aircraft as per today, it was extremely important for us to negotiate what we call the power by the hour solution with the lessors, meaning that we are not going to -- or we don't have to pay them anything as long as we don't fly the aircraft. That means that we anticipate that we will have approximately $300 million, which is kind of the debt that will build over the next months. And that will then potentially be converted to equity during the spring next year. This brings -- this gives the company a huge flexibility where we can pay as if -- only if we fly these aircraft. If we start to fly the long-haul aircraft prior to Easter next year, this amount will come down, and that's how we are going to adjust that figure. We also continued with the lessors, and we have done NOK 300 million more on conversion. And we also have continued with the vendors, NOK 1.2 billion. And we just recently have negotiated with a group of banks, it's more than 25 of them in Norwegian, where we have deferred approximately $200 million of principles from this and next year. And this will then be repaid in the period from 2021 to 2031, which is also giving us a huge flexibility for the next, let's say, 18 months, which is crucial for us. And in total, you could say that we have reduced the debt in the company during these last months by close to NOK 17 billion. And in addition to that, we have NOK 2 billion of deferred principles so we have built a leeway. And -- but as Jacob said, we still need support and more liquidity into the company during the next, let's say, 6 to 7 months in order to get through an upcoming challenging winter. So the focus now is to try to find solution where we can rightsize the fleet. As we have said -- we have publicly said many times now that we see the long-haul fleet as a little bit too -- we have too many aircrafts. So we are working on solutions and have been working on that the last months to see how we can reduce the number of aircraft, especially on long haul. We have, as a result of not being able to negotiate an acceptable, I would say, deal with Boeing, decided to file a claim against Boeing. And that was done late June. And time will show now how this case is developing during the next weeks and months as such. So we -- and on the funding side, we are in constant dialogue with all the creditor classes in the company, as we speak. And we are building a plan that will kind of secure -- that we can come through the next upcoming winter. With vendors, we have a -- I think we have a really good dialogue with almost all vendors in the company, and we are kind of having constructive dialogue with, I would say, more or less all of them. And then the next months, we'll see how they can play a role in the plan going forward. And on the balance sheet, we will continue to do what we started in the second quarter and see how we can build kind of the company with the fleet that we are planning to fly going forward and then with the right level of debt as such for the, let's say, years to come as such. So this process is ongoing, and it will be ongoing for the next -- towards the end of the year. And then we will come back and update the market on, let's say, the plan and how we're going to execute on this when we meet next time in the third quarter. I think that's it. Jacob?

Thank you. And then explaining a little bit more on the business platform. We see 3 stages in our journey going forward also beyond COVID-19. Let me start with the one far out, which basically says that we want to compete in the future of mobility towards 2030. That is really an ambition because we think this business will be extremely exciting. But to do that, we need to be a good and profitable organization within the aviation industry in 2025. But first, it is really license to operate. And that means coming through the winter so we can come towards the summer next year, and then hopefully, then stand -- and then build the company and come up from the crisis. At that point of time, when we come to March, April, hopefully, wave 2 is over of COVID. And hopefully, there is no wave 3. Hopefully, we will see a vaccine coming during that year, and hopefully, we'll see a much better summer than we did this year. We don't anticipate the summer to be 100% like it was before COVID, but at least better than this year. And in our plans, we expect full production from 2022. Coming out of that winter, when we are in March and April, we need to be prepared and we need to have speed to go forward. And that's the reason why we -- in the period where we did all this financial restructuring to save the company, we also focused on what company do we want to be after the crisis. And that is to gain speed when the crisis is over so we don't start at that point because then, we will lose a lot. And that's why we have built this house, this business platform that I explained earlier in the presentation. I will tell you a little bit more about the strategy and the structure and comment a little bit on where we stand on leaders for the company. So when we entered into -- I take this slide first. When we entered into the hibernation phase, which was in April, we had 2 priorities. Number one priority was to do the financial restructure with, really, the aim of coming through the 4th of May on the extraordinary general meeting, which we did. And that was incredibly important. The second priority we had, and the work that started in parallel with the financial restructure, was to develop a strategy and business plan with a blank sheet approach to prepare for the new reality and to prepare for a company that is more rigged towards profitability than growth. We did that in 6 sprints of 14 days, and I picked 25 senior leaders to do that work, experienced leaders within the system. And that strategy that we can present here will serve as our internal compass going forward. And I'll shortly comment on the 8 components and some of the strategic actions. There's a lot of strategic actions, activities in each of them, but I'll comment on some of them. The first and most important in the middle is to create a profitable year-round network. And we said that will fortify the Nordics, and we will prove the long-haul model. We were really focused on the Nordics, but we also believe in the long-haul, low-cost model. We need to scale back and we need to rebuild that. We have a lot of profitable route in that model today, but we want to scale it back and then build it from there. So that's the first part on network. The second, the 2 other building blocks which is super important, if you want to succeed, is the people offer and the customer part. On the people offer, we want to build a new and flexible people offer. And 2 important activities there will be new CBAs, updated to the environment that we are now, updated to the new reality, which I think every airline is going through for the moment. And then the second one is to have a rightsized administrative support office, and that work is going on. On the customer side, it's really to have a sales-oriented, sustainable and personalized customer journey, much more sales-oriented than we have been. You have also seen that previously in our strategy. Ancillary income, we want to increase significantly. So 2 very important activities here is to understand the customer journey and find out really the excel points that we want to stand out, and then we want to build a business area called Airline Ecosystem that will serve as a sales platform. I will come a little bit back to that. On the blue parts in the bottom here is simplified and modernized operation. Extremely important to run an airline that we have a simplified structure and standardization. We think we can simplify that from where we are today. We have a complex structure with both an AOC structure and the group structure. We need to streamline that much more so that the AOC structure is more a legal structure, and the group structure is really what's driving the company on operation to avoid overlaps, et cetera, and have much more clear responsibilities. Another big thing is to in-source the GoldCare on the technical side from Boeing. We think we can do that more effectively ourselves. And then to build the fourth -- the fifth block, lean, professional backbone, which is really to be much clear on the support office structure, to implement a lean program and a lean culture. This is where we have the full cost base on IT, on procurement, on all the processes that goes around in the company to do that even more cost-effective and supportive to the business. So that's gathered now in one organizational unit. And then the sixth one, to establish a performance management platform and culture, which basically means business performance system and a people performance system. We can definitely improve on both of them. And the seventh one, restructure and strengthen the balance sheet. And I think we've already done a lot of things there with the restructuring phase 1 and phase 2, but also now going into the phase 3. And the eighth important building block is really the thing that ties everything together, institutionalize new leadership expectations, develop a leadership program for the top 150 leaders and really being much more clear on what are the leadership arenas, what are the operational arenas, et cetera, from a strategic point of view, from an execution point of view and from a people point of view. Then we will back this up with a structure, with much clearer roles and responsibilities. The structure is really set from the strategy and not the opposite way around. This structure should have more clear roles and responsibilities. It should drive more collaboration, take down silos in the organization. So people collaborate more, and I can see that already. What we have done here, to comment on that, is we have, what we call, 2 business areas, the 2 red one, down; 2 business drivers, the blue one across; and then 4 support functions, which sets the structure in the entire company. The 2 business areas is airline, which focus on core business where you have the network, the pricing, the local marketing on routes, and you also have planning towards operation. So that's a separate business areas in itself, focus on selling tickets, having the right network, the right pricing, et cetera, and only that. The other business area is what we call Airline Ecosystem, which we think -- having an airline and being in the travel business, we think we can expand the business more. We already have a very strong reward program. We think we can be even stronger there towards the B2B part. We think we can expand our business with destination products to where we go. We think we can develop e-commerce platforms, and we definitely think we can be even more proactive, sell more on the in-flight part. The in-flight part, in-flight sales is extremely important. And in my view, as an old retailer, I really think we should be more sales-oriented in this, strengthening our ancillary sales. So it's really about putting retail in the air. And I see a trolley in an airplane as a kiosk. I don't see it as a trolley. And if we count all the trolleys we have, we have 500 trolleys. So we are actually running a chain of 500 kiosks, and that's how we should act in terms of category management, in terms of pricing, in terms of how we sell, et cetera, et cetera. The business drivers. On the customer side, we have one unit now that will focus on the entire customer journey, understand it, what standard should we have, where should we be like all the other airlines, where should we really excel, how good are we, where are we lagging behind, where are we overachieving, et cetera. Brand and marketing will be there. Customer care will be there. Concept and product development will be there. And then operations. It goes without saying, a strong operations in airline is an absolutely must. That's where you gain the cost advantage. There are so many parts that are pieced together from ground operations, flight operations, to safety, security, compliance, technical, et cetera. So being really streamlined there, really good, every piece hanging together, that's where you can gain efficiency. That's where you can gain a cost advantage. And I think we can even improve there. So that's the business drivers that will work in the matrix towards the business areas. And then we have 4 support functions that is really oiling the engine room, and that is people. We now gathered everything with people, whether it's crew or admin in one unit, where we have everything from training to development, et cetera. And then we have, of course, the communication and public affairs. We have the IT, supply chain and process improvement. That's what I call with the one strategy called backbone. And then, of course, Geir's department on finance and control. This team is now complete. We have one interim in operation. Johan is doing a huge and very good job there. So he will continue for a while as an interim there. The rest of the organization is put together, a mix of Norwegian people, new people, et cetera. So that was ready early June. And now the next level, which I call top 50, was communicated the 5th of August. And I'm very pleased with those people in place, and now we're working with the level 3 and the rest of the organization. That will be ready end of October. So then we will have both the strategy, the structure and the top 150 leaders in place, plus the total organization regarding the admin at the end of October. So my last slide. To summarize this, the -- if we kind of see this half year, I would divide it into 3: crisis management, business restructuring, and preparing for the future, emerging from the crisis with a solid business platform. And everything has happened more or less at the same time. So on the crisis management, significant operational activities to reduce cost and survive the crisis. As an example, crew costs have been reduced with 83% from February to now, which is a huge achievement. And also the furlough rules have really helped us here. We have had, again, a successful financial restructuring, and we have secured a government guarantee, a loan of NOK 3 billion. And into this, like Geir pointed out, we have a lease holiday with the payer -- power by the hour agreement that goes to April 2021 for the planes that we don't fly. And then we have also secured sufficient cash for funding through this year. And I've been very clear all the time that we will need around more. If COVID continues, which it has done. We will need more financing to come through the winter, like we have talked about and like Geir has also mentioned. On the business restructuring side, we have developed a new strategy and business plan. I have given you some insight in that now. We have implemented a new organization, new management team, top 50, working now with L3 and rightsizing in place by the end of October, all of this while we were in crisis. We have agreed to part from OSM to reduce or to get -- first and foremost, to get our employees closer to ourselves. We believe people is a core strategic resource, and we want to have more control of that; secondly, to reduce complexity and then increase efficiency that we think we can do in the situation that we are now. We have canceled agreements with Boeing, and we have improved the lease rates by cutting that to an average of -- cutting that with an average of 20% and then permanently lowered the OpEx. Emerging from the crisis with a solid business platform. I talked about this house with 6 elements. We are preparing for ramp-up through 2021 towards 2022. We already started going, 1st of July, to 20 aircraft. I think, personally, the winter, we will be between 20 and 30 aircrafts. It's very hard to predict. It all depends on the travel restrictions from the government whether it's closer to 20 or closer to 30. And then we will have a gradually ramp-up through the summer towards 2021, again, of course, all depending on how wave 2 develops, vaccine, et cetera. But we are optimistic and believe that summer next year will be significantly better than this year, although not 100% like it was before the COVID. And then we will, during this fall, complete phase 3 of the financial restructuring. That will help us with the funding from 2021. So that's the summary for this first half presentation of the results in Norwegian. So Geir, if you then join me, and then we open for questions.

Thank you, Jacob. So we'll first start with questions from the audience here. And we'll start with the financial questions and take in media at the end. I will also take questions over the web. So if you have any questions from the web, then please send them by e-mail. Thanks. Let's start with you, Kenneth.

Kenneth Sivertsen from Pareto. Three questions, if I may. On the strategy side, it seems like you are moving a little bit away from the low-cost model. Is that correct? And if so, could you elaborate? Should I take all three?

Yes, take them.

Secondly, it's for Geir, I guess. On the cash burn side, based on your claim now you have liquidity for 6 to 7 months, it seems like your cash burn is in the high end of what you previously announced in the restructuring process, meaning that it's around NOK 0.5 billion a month. Or if you could elaborate there. And third and final, on prebooking for the winter, how -- could you give some comments about that?

I can start with the strategy part. No, we are not deviating from the low-cost model. We will continue to offer affordable tickets to most people. That's definitely the segment that we are in. They are more ultra-low-cost players than us and that has always been and will continue to be. We will not move into the legacy carrier part. I think the strategy, the activities that we're doing will take down costs from where we are now, and we will be even sharper on the customer part. We know that our customers really think we are a little bit unique in the low-cost model, offering good quality for affordable prices. And that's exactly the segment we want to be. We want to offer good quality for affordable prices in a smart way, and we will be more precise on how to do that going further on. But that is really the core. And same with the long haul. We believe in the model that was created with low-cost, long-haul, but we see that we need to scale it back to get profitability in it and start slower and build from there. But we believe in that concept and we want to prove it.

I think, Kenneth, on the cash burn side, I think there's -- as you know, there's many variables playing in here. But we came out of the second half close to NOK 5 billion in total liquidity. Part of that is restricted, as you know, and we are saying that we will need more capital inserted into the company before Easter next year. So it's kind of just to do the math. But I would say that -- you can say that we have during the last month been able to negotiate the deferrals on the principles, on the bank debt, on our own aircraft. But at the same time, you can say that you are probably flying less aircraft in the air now that -- compared to the plan a couple of months ago. So it's kind of a -- it's a plus and minus. But we have said earlier that we have a cash burn in the area of, let's say, between NOK 300 million and NOK 500 million a month, and we are still within that. And as you are correctly saying, that we are probably in the high end of that cash burn.

Third and final, with prebooking. If you could just comment on prebooking?

Well, it's a very special situation. And as Jacob said, we are seeing on the prebookings, we are seeing that it's very kind of linked to the travel restrictions. And when, for example, Spain turned into a green country, we saw it on bookings overnight massively. And at the same time, we saw that when Spain turned into a red country again, it was the opposite, and we saw a lot of cancellations. I mean the way we have been managing this is to make sure that the aircraft that we put in the air needs to generate what we call a positive DB 1.5 contribution, saying that it definitely needs to take care of all the variable cost. It needs to pay part of the other cost as well. And if we can even pay some interest, the expenses, that would be really helpful. So what we are seeing is that domestic -- actually, in Norway, the domestic is really good -- not really good, but relatively good. The same is actually both in Sweden and Denmark in domestic. But we are suffering kind of from the -- let's say, Nordic to Europe has been very fluctuating compared to the travel restrictions. So it's not like it's a long booking line now, not at all. So it's very short and -- but first of all, it is domestic really that is contributing to the numbers, as we speak. And today, we are flying 25 aircraft. And as Jacob said, we will probably be in the area of between 20 and 30 for the next 6 months.

Three questions from Ole Martin Westgaard, DNB. Can you give any flavor on how ramping up your production further affects your liquidity, cash burn rate? Do you have any dialogue with Boeing, and do you expect to reach a settlement? And third, what is the amount of overdue payables at the end of Q2?

Well, I think on the liquidity and the cash burn, I think we have probably covered that from the questions from the audience here. I think on Boeing, as I said in the presentation, we have been trying to reach an agreement with Boeing. Obviously, we haven't succeeded yet. That's why we took the decision during the summer to file a claim against Boeing, where we are actually terminating the whole order both on MAX and on the remaining 787s. And then -- so we still have a dialogue, but we have filed a claim. And then we will see during the next weeks and few months how this case issue develops.

There was a third question on overdue payables.

Well, as we said during the restructuring, we said that we have an overdue vendor debt. We have converted, as we said, quite significant portion of that vendor debt into equity. We have also made what we call payment plans with a bunch of vendors where this will have a liquidity effect now during the last -- during the next months. And I would say, compared to the backlog that we have during the restructuring, we have taken it down somewhat. And -- but at the same time, and which is important, is the fact that we have actually had -- we are having, I would say, a good dialogue with most of these vendors, and we have made agreements on how this is going to be taken care of for at least the majority of that backlog.

Hans Jørgen Elnæs, Winair AS. I understand that you were going to take over the Boeing Gold MRO for the 787s, and already, you made a contract with Lufthansa Technik for your 737 fleet. So that means that you will build your in-house maintenance on the 737 -- 787, I mean. Can you comment about that? And about reducing the 787 fleets, what would be your challenge there, to reduce on the leased ones or you're going to sell off your owned ones? And you defined your main market as the Nordics, and that means that you are trailing SAS. Will you follow the ramp-up of SAS that they're now trying to take advantage of your position?

I can start with the last one first. As I said in the strategy, we see the Nordics as a core area that we want to both continue to do as we have done, we have been -- have a good position there. We want to protect that and we want to grow there. At the same time, during this situation in COVID, we follow each routes very closely. And you will see a lot of situations where we will try out new routes, and if it don't succeed, then we will close them down again. So I think that will be natural. I think probably SAS will do the same. But the domestic Norwegian will be -- or the domestic Nordics will be -- we treat Nordics as a domestic area, and we will continue to drive there and continue to grow there based on how we see COVID-19 developing.

On the, let's say, on the GoldCare side, I mean, as you know, I mean, this is a complex thing to do, to exit the GoldCare program. And this will take a little bit of time to do. But at the same time, we have been communicating to Boeing that we don't feel it's, what should I say, attractive enough commercially and financially to use that services. And we -- but we -- I think you will see that we will still continue to use third parties for part of the fleet, definitely. And I think on the 737 side, it's probably easier to do it than doing it on the 787 internally in-house. So we will definitely continue to use vendors like Lufthansa and others. And it will take a little bit of time to actually do this transfer. But I think the dialogue that we have started with Boeing is good, very constructive. And I think we will find a way to solve it. And I guess -- you should have to ask Boeing about this, but I think it -- I would say it makes sense for both parties to find another solution on the maintenance part of these aircraft. When it comes to the 787s, as you mentioned, I mean, obviously, as you -- I'm sure you understand. That's a difficult task, at least in this market, to divest as -- maybe as many as 15, 16, 17 of these aircraft. We have 37 of them today, 26 of those are leased, 11 owned. And at the same time, we know -- as you know, we -- the owners of the leased ones are also the shareholders controlling the company. And we -- I'm not saying that they will, but I think coming from a situation where these guys has been kind of part of a problem because we have -- the fleet is too -- we have too many aircraft. We need to -- and we are already discussing alternatives with these guys where we have to find a solution to take down the capacity on long haul. It's not going to be easy. It's a very different market compared to the short-haul market with regards to liquidity and how easy it is to divest, but we just need to find a solution. We are on it.

We have 2 questions from the web from Daniel Roeska at Bernstein. One is related to the last one. Have you considered abandoning the long-haul business? And another one, how large is the funding requirements to ensure NAS is going concerned for the next 12 months?

Going concerned next 12 months, well, as we said, we are coming out with close to NOK 5 billion in cash out of the second quarter. You know what we have done on the lessor side. We have now communicated today what we have done on the banking side with deferrals. And I think we have been through the cash burn here. And I will say it all depends on how we are looking at the summer next year and whether -- how, I will say, how profitable that will be. And that will kind of then decide how much liquidity we need. I think the plan that we will -- that we are working on now for the company on, let's say, on the balance sheet, liquidity as such, is a plan that we are looking not only into 2021. We will actually look into 2022. So we -- because we have to build a plan now that takes us into 2022. Obviously, it's extremely complex to do assumptions on 2021. No one knows. And -- but we will try to build enough capacity liquidity-wise to take us into 2022. And I'm not going to comment on the specific figure that we will need as for now.

And then a question on long haul, if we're going to abandon long haul.

No, we are not. That's part of our strategy, as you saw and I presented on the network, we want to prove the long-haul, low-cost model. We want to scale back, as Geir has said, with getting fewer 787s. But we also see in the portfolio that we had before COVID-19 that we had several routes that are more than profitable. So we strongly believe in that model, but we want to do it in a smaller basis first and then build from there.

We have one final question from the web here. It's from Petter Nyström at ABG. Regarding accounts receivables, can you please elaborate the key issues regarding the holdback imposed by credit card acquirers?

Yes. I mean the accounts receivable, it is a combination of things, I would say, items. One is the credit card acquirers and how much liquidity that we have with them. Another one is part of the -- or the kind of issue that we have with Boeing also included in that amount. But the credit card acquirers, it's a new situation. I mean holdback in itself is not really the issue anymore because, obviously, we have been refunding customers more than NOK 5 billion over this period. And -- but a little bit of the issue is that we have offered our customers to -- when they are canceling or when we are canceling, to transfer those funds into cash points, for example. And that is one issue. And then the credit card acquirers, including the credit card companies like Visa and Mastercard, is kind of -- they have actually developed new regulations for this or new principles for this. So for example, Visa is saying that, "We can refund this liquidity, but we're not going to do it until 5 or 4 to 6 months after that ticket was supposed to be used." And Mastercard, for example, is saying that, "We will not refund you until this customer is actually using those cash points." And that's obviously a huge issue for us. And that had also resulted in the fact that these guys are holding that liquidity, waiting for the customer to use those cash points. And it's completely hopeless for us. And obviously, we are on the case. We have been on it for quite a while. And I think we will find a solution, but it's difficult. And it's also difficult for these credit card acquirers, but this situation is absolutely new for them as well, and even them are developing new systems internally in order to cope with this. So the holdback is high today as well, but not by the same reasons as we have been seeing earlier.

With that, we would like to thank you all for participating. And other questions might be directed to Investor Relations by e-mail. Thank you.