[FONT="]Flyr just announced a fully underwritten rights issue of NOK250m with an ambition to re-establish its financial buffer following significant losses since start of operations in June. We believe the announcement is a slight negative for Norwegian as Flyr will cover a couple of more months of cash-burn at distressed yield levels. However, on the positive side, it is a clear signal that Flyr’s business model is not working.[/FONT]
Flyr announced a full underwritten rights issue. Flyr just announced a fully underwritten rights issue of NOK250m at a TERP price 30% below the share price on the EGM date (December / January). The use of proceeds should be to re-establish the financial buffer after significant losses of NOK-142.7m on EBITDA and EBIT of NOK-162.3m in Q3 having operated only 15-16 flights per day (3 aircrafts). Total cash burns since start-up have now been NOK248m, of which cNOK94m was spent before the first flight. End Q3 cash position was NOK362.5m.
A business model not working saved by an improved market in October. Flyr’s load factor in Q3 was as low as 38% but have recovered to 61% in October. A positive trend has also been witnessed in yield which has recovered from NOK0.44 (NAS in Q3 0.53) to NOK0.61 (NAS NOK0.60) in October. However, comparing apple to apples on RASK, Norwegian had a RASK of NOK0.50 in October and NOK0.39 in Q3, vs. Flyr at NOK0.37 and NOK0.17, respectively. I.e. Norwegian has delivered a RASK which is c30—135% above Flyr, this despite an average flight distance which has been 20-30% above Flyr. CASK incl. Ownership in Q3 was NOK 0.83 for Flyr. vs Norwegian at NOK0.65.
Flyr is behind schedule relative to its IPO ambition. At its IPO Flyr promised average ticket price of NOK612 in its first year of operations and so far, they have delivered NOK461 (~25% below). Furthermore, ticket price for NAS was 20% above Flyr for October, and 57% above in Q3. Flyr Load factor YTD is at 44.7% vs. the initial promise of 67%. This despite having the traditionally loss-making winter season ahead. Flyr targets 5 aircraft by YE and 12-18 YE 2022. Flyr blames the weak results on Delta Covid-19 virus variant which had delayed the market recovery…
So what? We believe the announcement is a significant negative for Flyr. The weak result is an indication that the business model is not working and that the current cash position will not be sufficient to cover the losses expected once it ramps up capacity further. We struggle understand why someone would invest in this loss-making concept. For Norwegian and SAS we believe its slightly negative that Flyr most likely will continue to be in the market for some extra months.