Statement of comprehensive income

(NOK 1 000)

Net profit for the period

Available-for-sale financial assets

Exchange rate differences Group

Total comprehensive income for the period

Profit attributable to;

Owners of the company

442 852

The notes are an integral part of these consolidated financial statements.

Note 1

Summary of significant accounting policies

Norwegian Air Shuttle ASA and its subsidiaries (together ‘the Group’) is a low-fare airline incorporated in Norway and headquartered at Fornebu outside of Oslo. Norwegian Air Shuttle ASA is a public limited liability company and listed on the Oslo Stock Exchange.

The consolidated financial statements of Norwegian Air Shuttle ASA for the year ended 31 December 2009 were authorized for issue by the Board of Directors on 24 March 2010.

1.2 Basis of preparation

The consolidated financial statements of Norwegian Air Shuttle ASA have been prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the EU. The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets, financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss.

In order to prepare financial statements in conformity with IFRS, it is necessary to use certain critical accounting estimates. It also requires management to exercise its judgment when applying the Group’s accounting policies. The areas which implicate a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in paragraph 1.5.

1.2.1 Changes in accounting policy and disclosures

Standards, amendments and interpretations

- IFRS 2, Share-based payments (amendment)

- IFRS 7, Financial instruments – disclosures (amendment)

- IAS 1, Financial instruments (revised)

The following standards, amendments and interpretations are not effective at 31 December 2009 and have not been early adopted by the Group;

Effective for periods beginning on or after

- IFRS 2, Scope of IFRS 2 and IFRS 3 (revised)

1 July 2009

- IFRS 2, Group cash-settled and share-based payments transactions (amendment)

1 January 2010

- IFRS 3, Business combinations (revised)

1 July 2009

- IFRS 5, Measurement of non current assets classified as held-for-sale (amendment)

1 January 2010

- IFRS 5, Disclosures required in respect of non current assets

1 January 2010

- IFRS 8, Disclosure of information about segment assets

1 January 2010

- IAS 1, Current/non current classification of convertible instruments

1 January 2010

- IAS 7, Classification of expenditures on unrecognised assets

1 January 2010

- IAS 17, Classification of leases of land and buildings

1 January 2010

- IAS 27, Consolidated and separate financial statements (revised)

1 July 2009

- IAS 38, Intangible assets (amendment)

1 July 2009

- IAS 36, Unit of accounting goodwill impairment test

1 January 2010

- IAS 38, Additional consequential amendments arising from IFRS 3 (revised)

1 January 2010

- IAS 38, Measuring the fair value of an intangible asset acquired in a business combination

1 January 2010

- IAS 39, Treating loan prepayment penalties as closely related derivatives

1 January 2010

- IAS 39, Scope exemption for business combinations

1 January 2010

- IAS 39, Cash flow hedge accounting

1 January 2010

1 January 2010

- IFRIC 9, Reassessment of embedded derivatives and IAS 39 (amendment)

30 June 2009

- IFRIC 17, Distribution of non-cash assets to owners

1 July 2009

1 July 2009

1 July 2009

- IFRIC 16, Hedges of a net investment in a foreign operation

1 July 2009

These standards, amendments and interpretation are not expected to have material impact on the financial statements.

1.3 Basis of consolidation

The Group’s consolidated financial statements comprise Norwegian Air Shuttle ASA, and its fully owned subsidiaries Norwegian Air Shuttle Polska Sp.zo.o , Norwegian Air Shuttle Sweden AB, NAS Asset Management Ireland Ltd, NAS Asset Management Norway AS and Call Norwegian AS. Additionally, the Group controls a company in the United States, DY 1 Leasing LLC. This is a special purpose entity (SPE) established for aircraft financing purposes. The Group does not own the shares, but has all risks and rewards related to the assets, liabilities and operations in the SPE.

The financial statements of the subsidiaries and SPE’s are prepared for the same reporting period as the parent company, using consistent accounting policies.

The purchase method is applied when accounting for business combinations. Companies which have been purchased or sold during the year are included in the consolidated financial statements from the date when control is achieved and till the date when control is ceased.

The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired, is recorded as goodwill.

 

All intra Group balances, transactions, income and expense and profit and losses resulting from intra Group transactions that are recognized in assets and liabilities, are completely eliminated.

An associate is an entity in which the Group has a significant influence but does not control the management of its finances and operations (normally when the Group owns 20%-50% of the company). The consolidated financial statements include the Group’s share of the profits/losses from associates, accounted for using the equity method, from the date when a significant influence is achieved and till the date when such influence is ceased. The Group’s share of its associates’ post- acquisition profits or losses is recognized in the income statement, and its share of post-acquisition movements in reserves is recognized in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Dilution gains and losses arising in investments in associates are recognized in the income statement.

 

 

1.4 Foreign currency translation

The Group’s presentation currency is NOK. Norwegian Air Shuttle ASA’s functional currency is NOK. Each entity in the Group determines its own functional currency, and items included in the financial statements of each entity are measured in that functional currency. For consolidation purposes, the balance sheet figures in subsidiaries with a different functional currency than NOK are translated at the closing rate at the balance sheet date. Income and expenses for each income statement are translated at average exchange rate for the period, this being a reasonable approximation for actual rate. Exchange differences are recognized in comprehensive income and specified separately in equity.

Transactions in foreign currencies are initially recorded in the functional currency rate ruling at the date of transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the balance sheet date. All differences are recognized in profit or loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

1.5 Critical accounting estimates and judgments

In preparing the consolidated financial statements, management has to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities, income and expenses. The critical judgments and key sources of estimation uncertainty that have been made in preparing the consolidated financial statements are detailed below. These judgments involve assumptions or estimates in respect of future events which can vary from what is expected.

Deferred tax assets are recognized for all unused tax losses to the extent that it is probable that taxable profit will be generated. Significant management judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and level of future taxable profits together with future tax planning strategies. See note 9 for further details.

The cost of defined benefit pension plans is determined by using actuarial valuations. The actuarial valuation involves making assumptions about discount rates, expected rates of return on assets, future salary increases, mortality rates and future pension increases. Due to the long term nature of these plans, such estimates are subject to significant uncertainty. A sensitivity analysis is outlined in note 18.

The Group tests annually whether goodwill and other intangible assets with indefinite lives, have suffered any impairment in accordance with the accounting policy stated in note 1.8. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of estimates (see note 10).

Bad debt provisions for credit card receivables are based on actual historical loss percentage and actual withdrawal for payments from credit card companies.

Fair value of financial instruments is determined using fair value estimation techniques. Valuation techniques and details on financial instruments are outlined in note 20.

1.6 Tangible assets

Tangible assets are carried at historical cost, less accumulated depreciation and impairment losses. When assets are sold or disposed of, the gross carrying amount and accumulated depreciation and impairment losses are derecognized, and any gain or loss on the sale or disposal is recognized in the income statement.

The gross carrying amount of non-current assets is the purchase price, including duties/taxes and direct acquisition costs relating to making the non-current asset ready for its intended use. Subsequent costs, such as repair and maintenance costs, are normally recognized in profit or loss as incurred. When increased future economic benefits are the result of repair and maintenance work which can be verified, these costs will be recognized in the balance sheet as additions to non-current assets. Borrowing costs are capitalized on qualifying assets.

Non-current assets are depreciated on a straight-line basis or by airborne hours and cycles over the estimated useful life of the asset beginning when the asset is ready for its intended use. Expected residual value is assessed when estimating the depreciable amount of the asset and deducted from the depreciable amount.

Investments in leased aircraft including cabin interior modifications are depreciated over their useful lives, but not exceeding the remaining leasing period.

Rotable spare parts are carried as non current assets and depreciated over their useful lives.

Buildings are carried at acquisition cost, less accumulated depreciation.

The Group capitalizes prepayments on the purchase contract of 46 Boeing 737 aircraft. The prepayments are classified as tangible assets as presented at the face of the balance sheet. The prepayments include capitalized borrowing costs and gains/losses on qualifying fair value hedges. At the delivery of the aircraft, prepayments are included in acquisition cost of the aircraft and reclassified as aircraft in the balance sheet.

Financial lease assets are initially recognized at the lowest of acquisition cost and future minimum lease payments. The assets are carried as non current assets and depreciated on a straight-line basis over their expected useful lives.

The depreciation period and method are assessed each year to ensure that the method and period used reconcile with the substance of the non-current asset. The residual value is estimated at each year end and changes to the residual value are accounted for prospectively. Additional details on tangible assets are outlined in note 11.

1.7 Intangible assets

Computer software

Acquired computer software licenses are capitalized on the basis of the costs incurred to obtain and apply the specific software. These costs are amortized over their estimated useful life.

Goodwill and other intangible assets

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Other intangible assets are related to identifiable assets from business combinations and investments in other intangible assets.

Intangible assets that are determined to have indefinite economic lives, are not amortized, but subject for annual impairment testing. The determination of indefinite economic lives is based on management’s assessment that there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows for the entity.

See note 1.8 for details of impairment testing of non-financial assets and note 10 for additional details on intangible assets.

1.8 Impairment of non financial assets

Intangible assets that have an indefinite economic useful life are not subject to amortization and are tested annually for impairment. Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use.

For the purposes of impairment testing, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). The allocation is made to those cash-generating units that are expected to benefit from the assets. Management has assessed the Group as one segment and the total operations in the Group as its cash generating unit. The determination of cash generating units is based on how management operates and assesses the Group’s performance, profit and cash flow. The aircraft fleet is operated as one unit and the route portfolio is administered and diversified as one unit generating the Group's profit and cash flow; hence, goodwill and other non current assets are reallocated to the entire Group for the purpose of impairment testing.

Non current assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date. Impairment losses on goodwill are not reversed.

1.9 Financial assets

Financial assets are classified in the following categories; at fair value through profit or loss, held-to-maturity investments, loans and receivables and available-for-sale. The Group holds financial instruments that are classified at fair value through profit or loss, available-for-sale, and loans and receivables. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

Regular purchases and sales of financial assets are recognized on the trade-date; the date on which the Group commits to purchase or sell the asset. Investments are initially recognized at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss, are initially recognized at fair value and transaction costs are expensed in the income statement.

Financial assets are derecognized when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are carried at amortized cost using the effective interest method.

1.9.1 Impairment of financial assets

The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets are impaired. The fair values of quoted investments are based on current mid prices at the balance sheet date. If the market for a financial asset is not active (and for unlisted securities), the Group establishes fair value by using valuation techniques. The valuation hierarchy for financial assets is detailed in note 20 where the techniques are making maximum use of market inputs and relying as little as possible on entity-specific inputs.

Impairment losses of financial assets measured at amortized cost are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after initial recognition. Impairment losses are recognized in the consolidated income statement if the losses have had an impact on the estimated future cash flows and that the impact can be reliably estimated.

1.10 Derivative financial instruments and hedging activities

Derivatives are initially recognized at fair value on the transaction date and subsequently measured at their fair value. The method of recognizing the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. In 2008, the Group designated some of its derivatives as hedges of the fair value of a firm commitment (fair value hedge).

The fair values of various derivative instruments used for hedging purposes are disclosed in note 20. The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining hedged item is more than 12 months and as a current asset or liability when the remaining maturity of the hedged item is less than 12 months. Trading derivatives are classified as a current asset or liability.

Fair value hedge

Changes in fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement, together with any changes in the fair value of the hedged assets or liabilities that are attributable to the hedged risk. The Group only applies fair value hedge accounting for hedging foreign currency risk in unrecognized firm commitments. The gain or loss relating to the effective portion of forward foreign currency contracts, hedging foreign currency risk in unrecognized firm commitments, is recognized as capitalized costs on the recognized firm commitment in the balance sheet. The gain or loss relating to the ineffective portion is recognized in the income statement within financial items.

If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of the hedged item is depreciated over the useful life of the asset.

1.11 Inventory

Inventory of spare parts are carried at the lower of acquisition cost and net realizable value. Cost is determined using the first in – first out (FIFO) method. Obsolete inventory have been fully recognized as impairment losses. Inventory is consumed during maintenance and overhaul of the airplanes, and is expensed when consumed.

1.12 Trade receivables

Receivables from credit card companies are classified as trade receivables in the balance sheet.

1.13 Cash and cash equivalents

The Group holds investments in money market funds. These investments are classified as either cash equivalents or financial assets available-for-sale depending on the maturity of the investments.

1.14 Equity

Share capital comprises the number of shares multiplied by their nominal value, and are classified as equity.

Transaction costs directly attributable to an equity transaction are recognized in equity net of tax.

Acquisition of own shares are recognized in share capital and retained earnings. The number of shares purchased multiplied by the nominal value is deducted from outstanding share capital. The share premium paid is recognized in other equity. The sale of own shares is booked accordingly, with nominal value as increase of share capital, and share premium in other equity.

1.15 Borrowings

Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the income statement over the period of the borrowings using the effective interest method.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date. For details for capitalization of borrowing costs, see note 11.

1.16 Provisions

Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Where the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.

1.17 Employee benefits

Defined benefit plans

The Group operates a defined benefit pension plan which requires contributions to be made to a separately administered fund. In addition, the Group participates in an early retirement plan (AFP) for employments in Norway. The cost of providing benefits under the defined benefit plan is determined using the projected unit credit actuarial valuation method. Actuarial gains and losses are recognized as income or expense when the net cumulative unrecognized actuarial gains and losses, at the end of the previous reporting year, exceed 10% of the higher of the defined benefit obligation and the fair value of plan assets at that date. These gains or losses are recognized over the expected average remaining working lives of the employees participating in the plans.

The past service cost is recognized as an expense on a straight-line basis over the average period until the benefits are vested. If the benefits are already vested immediately following the introduction of or changes to a pension plan, past service cost is recognized immediately.

The defined benefit obligation is the aggregate of the present value of the defined benefit obligation and actuarial gains and losses not recognized reduced by past service costs not yet recognized and the fair value of plan assets out of which the obligations are to be settled directly. If such aggregate is negative, the asset is measured at the lower of such aggregate or the aggregate of cumulative unrecognized net actuarial losses and past service cost and the present value of any economic benefits available in the form of refunds from the plan or reductions in the future contributions to the plan.

Defined contribution plans

Share options

Employee share purchase savings program

Bonus shares and employer’s contribution are measured at fair value using Black and Scholes option pricing model. The bonus expenses for the company are included in personnel costs. The distribution of bonus shares is accounted for in accordance with IFRS 2, where the fair value of the share distribution is recognized as an expense over the expected period until settlement. Estimated employer’s contribution is recognized as an expense over the expected period until settlement. Changes in estimates affecting employer’s contribution are expensed over the remaining expected period. For further details see note 17.

1.18 Current and deferred income tax

Current income tax

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the balance sheet date.

Deferred income tax

Deferred income tax is determined by using the liability method on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognized for all taxable temporary differences. Deferred income tax assets are recognized for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized.

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized. Unrecognized deferred income tax assets are reassessed at each balance sheet date and are recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the when the liability is settled, based on tax rates (and tax laws) that have been enacted, or substantively enacted, at the balance sheet date.

Deferred income tax assets and deferred income tax liabilities are offset to the extent that:

- the Group has a legally enforceable right to offset the recognized amounts and

- deferred tax assets and tax liabilities relates to income tax from the same tax authorities and same taxable entity in the Group, or if different taxable entities in the Group intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

1.19 Contingent assets and liabilities

A contingent asset is not recognized in the annual financial statements, but disclosed in the notes where an inflow of economic benefits is probable.

Contingent liabilities are defined as possible obligations arising from past events whose existence depends on future events, or it is not probable that they will lead to an outflow of resources, or cannot be measured with sufficient reliability.

Contingent liabilities are not recognized in the annual financial statements, but significant contingent liabilities are disclosed in the notes to the financial statements, with the exception of contingent liabilities where the probability of the liability occurring is remote.

1.20 Revenue recognition

Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group’s activities. Revenue is shown net of value-added tax and discounts. The Group recognizes revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and when specific criteria have been met for each of the Group’s activities as described below

Passenger revenue

Passenger revenue is reported as traffic revenue when the air transport has been carried out. The value of tickets sold and still valid but not used at the balance sheet date (amounts sold in excess of revenue recognized) is reported as air traffic settlement liability. This liability is reduced either when the Group or another airline completes the transportation or when the passenger requests a refund.

Ancillary revenue

Ancillary revenue comprises sales of ticket-related products and services, e.g; excess baggage and fees. Some of the products and services are earned at the time when the transport has been carried out, and such revenue is recognized in the same manner as passenger revenue. Other products and services are earned at the time of purchase and immediately recognized in the income statement.

Amounts paid by ‘no show’ customers are recognized as revenue when the booked service is provided. ‘No show’ customers with low fare tickets are not entitled to change flights or seek refunds once a flight has departed.

Other revenue

Other revenue comprises third party revenue, such as wet-lease, cargo and revenue from business activities in subsidiaries which are not airlines.

Other airline revenue is recognized when the service has been rendered, fees are reliable measurable, collections are probable, and when other significant obligations have been fulfilled.

Revenue from sales of GSM and Broadband products and services comprises traffic fees and subscription, as well as telephone and PC products. Revenue from subscription fees are recognized over the subscription period while deliveries of other services are recognized as revenue at the time of actual use. Revenue from product sales are recognized when the equipment including related significant risks and rewards are transferred to the buyer and the entity no longer retains effective control over the products sold.

Customer loyalty program – Norwegian Reward

The Group has implemented a customer loyalty program. Customers earn cash points in the following circumstances;

- Corporate reward customer; 3% on all low fare tickets and 7% on all full flex tickets.

- Call Norwegian customer; 3% of all purchases.

Corporate customers gain cash points on all airfares. Private customers gain cash points on international flights only, as domestic flights in Norway are prohibited from cash points earning for private customers.

Customer cash points gained from purchasing airline tickets and purchases from Call Norwegian are recognized as a liability in the balance sheet and deducted from the value of the purchase at the date of purchase. The customer cash point liability is derecognized from the balance sheet and recognized as income when customers utilize their cash points.

Earned customer cash points on 1% reward from Bank Norwegian are recognized as a liability in the balance sheet and immediately expensed. When the customers utilize earned cash points, the liability is derecognized and cash payment on the Group’s services reduced.

Unutilized cash points are derecognized from the balance sheet after three years. The liability is classified as short term, as available statistics as of 31 December 2009 indicate that customer cash points are utilized within one year.

1.21 Leasing

To determine whether an arrangement is, or contains a lease, it is necessary to assess whether the fulfillment of the arrangement is dependent on the use of a specific asset and if the arrangement conveys a right to use the asset.

Deposits made at the inception of operating leases are carried at amortized cost. The difference between the nominal value of a deposit paid carried at less than market interest and its fair value is considered as additional rent payable to the lessor and is expensed on a straight-line basis over the lease term.

The Group leases tangible assets where the lease agreements transfer all material risks and rewards of the asset to the lessee at the end of the lease term. Such lease agreements are classified as financial leases. Financial leases are recognized at inception to the lowest of acquisition cost and the net present value of minimum lease payments. Financial lease assets are depreciated on a linear basis over the lease period if such is shorter than the economic useful life of the financial lease asset. Financial lease assets are included in the balance sheet as tangible assets.

Each lease payment under financial leases is split between the lease liability and finance cost to amortize the financial costs related to such leases over the lease period. The lease liability is classified as borrowings, see note 22 for details.

1.22 Segment reporting

1.23 Events after the balance sheet date

New information regarding the Group’s positions at the balance sheet date is taken into account in the preparation of the annual financial statements. Events which occur after the balance sheet date that do not affect the Group’s position at the balance sheet date, but which will affect the Group’s position in the future, are stated if significant.

Note 2

Financial risk

The Group’s activities expose it to a variety of financial risks; market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group’s financial performance. The Group uses derivative financial instruments to hedge certain risk exposures.

Risk management is carried out by a central treasury department (Group treasury) under policies approved by the Board of Directors. Group treasury identifies evaluates and hedges financial risk in close co-operation with the Group’s operating units. The Board provides principles for overall risk management such as foreign currency risk, interest rate risk, credit risk, use of derivative financial instruments and investment of excess liquidity.

Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, jet-fuel prices and interest rates will affect the Group’s income or value of its holdings of financial instruments.

Foreign Currency Risk

A substantial part of the Group’s expenses are denominated in foreign currency. The Group’s leases, aircraft borrowings, maintenance, jet-fuel and related expenses are mainly denominated in USD, and a share of airplane operation expenses are denominated in EUR. Foreign currency risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations. In order to reduce currency risk, the Group has a mandate to hedge up to 100% of its currency exposure over the next 12 months. The hedging consists of forward currency contracts and flexible forwards.

Occasionally the Group designates certain forward foreign currency contracts as hedging instruments to hedge the fair value of currency risk in unrecognised firm commitments.

By calculating sensitivity on foreign currency risk in USD using USD and jet-fuel prices as interdependent variables on operating income, a weakening/strengthening in NOK by 1% against USD dollar, pre-tax profit and pre-tax equity effect for 2009 would have been MNOK 28.7 (2008:MNOK 31) lower/higher. This calculation is based on estimated fuel consumption over the next 12 months, estimated net outflow of USD over the next 12 months, estimated average jet-fuel price and estimated average USD/NOK exchange rate.

The Group has investments in operations in Sweden and Poland, whose net assets are exposed to foreign currency translation risk. Currency exposure arising from the net assets of the Group’s foreign operations is regarded as immaterial for the Group, and currency variances are not hedged.

Interest rate risk

Jet-fuel prices

Expenses for jet-fuel represents a substantial part of the Group’s operating costs, and fluctuations in the jet-fuel prices influence the projected cash flows. The objective of the jet-fuel price risk management policy is to provide protection against significant and sudden increases in jet-fuel prices whilst retaining access to price reductions. The Group manages jet-fuel price risk using fuel derivatives. Management has a mandate to hedge up to 100 % of its expected consumption over the next 12 months with forward commodity contracts.

The Group holds forward commodity contracts to hedge jet-fuel price risk. Such derivative contracts affect the financial statements through unrealized gains/losses from jet-fuel prices. If jet-fuel price had increased/decreased by 1% with all other variables held constant, pre-tax profit for the year would have been MNOK 21.3 (2008: MNOK 2) higher/lower, as a result of unrealized gains/losses on price changes on forward commodity contracts held at the balance sheet date.

Credit risk

Credit risk is managed on group basis. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to travel agencies and commercial customers, including outstanding receivables and committed transactions. The utilisation of credit limits is regularly monitored. The Group’s policy is to maintain credit sales at a minimum level. Sales to private customers are settled in cash or using major credit card companies.

For a part of the Group’s sales, customers pay at the time of booking while Norwegian receive the actual payments from the credit card companies, or acquires, are received at a later point in time. Delayed payments from credit card companies vary between credit card brands. The risk arising from receivables on credit card companies or credit card acquires are monitored closely.

There are re-invoicing of maintenance costs on aircraft to leasing companies, and Norwegian regularly evaluates and assesses the value of these credits. See note 20 for further disclosure on credit risk.

Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions.

The management monitors rolling forecasts of the Group’s liquidity reserve, cash and cash equivalents (see note 24) on the basis of expected cash flow. This is generally carried out at the local level in the operating companies of the Group in accordance with practice and limits set by the Group. In addition, the Group's liquidity management policy involves projecting cash flows in major currencies and considering the level of liquid assets necessary to monitor balance sheet liquidity ratios against internal and external regulatory requirements and maintaining debt financing plans.

The table below analyses the maturity profile of the Group’s financial liabilities at the balance sheet date. The amounts disclosed are the contractual undiscounted cash flows;

At 31 December 2009 (NOK 1 000)

Less than 1 year

Between 1 and 2 years

Between 2 and 5 years

Over 5 years

Borrowings

Financial lease liability

Derivative contracts - payments

Trade and other payables

Interest on borrowings *)

Total financial liabilities

At 31 December 2008 (NOK 1 000)

Less than 1 year

Between 1 and 2 years

Between 2 and 5 years

Over 5 years

Borrowings

Derivative contracts - payments

Trade and other payables

Subordinated bond loan *)

Interest on borrowings **)

Total financial liabilities

Derivative contracts - receipts

Total

*) Subordinated bond loan issued to Bank Norwegian

**) Calculated interests on borrowings

Capital risk management

The Group’s capital management policy is to maintain a capital structure which meets the demands of operations, reducing cost of capital, risk factors in the industry, company specific risk and future investments planned by the Group. The Group will at all times adjust debt and equity to maintain and secure optimal capital structure by continuously monitoring the gearing ratio of the Group. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including current and non-current borrowings less cash and cash equivalents as shown in the consolidated balance sheet). Total capital is calculated as equity as shown in the consolidated balance sheet plus net debt.

The gearing ratios at 31 December 2009 and 2008 were as follows;

NOK 1 000

Total borrowings (note 22)

Cash and cash equvalents (note 24)

Net debt

Total equity

Total capital

Gearing ratio

9.8%

9.2%

Note 3

Fair value estimation

Financial instruments that are measured in the balance sheet at fair value, requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:

Level 1

The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available and represent actual and regularly occurring market transactions on an arm’s length basis.

Level 2

The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. Financial instruments in level 2 include forward contracts classified as derivatives. The fair values of forward foreign currency contracts and forward commodities contracts are determined using forward prices and rates at the balance sheet date, with the resulting value discounted back to present value.

Level 3

If one or more of the significant inputs are not based on observable market data, specific valuation techniques are used. Financial instruments included in the level 3 valuation technique relates to investment in unlisted shares in Silver Pensjonsforsikring classified as available-for-sale financial assets. See note 20 for additional details on available-for-sale financial assets.

The following table presents financial assets and liabilities measured at fair value at 31 December 2009;

(NOK 1 000)

Level 2

Level 3

Total

Assets

Financial assets at fair value through profit and loss

- Derivative financial instruments

Available-for-sale financial assets

Total assets

Liabilities

- Derivative financial liabilities

Total liabilities

There are no fair value calculations in level 1.

Note 4

Segment Information

Executive management reviews the Group’s internal reporting in order to assess performance and allocate resources. Management has determined the operating segment based on these reports. Executive management considers the business as one operational segment, which is low cost air passenger travel. The Group’s operating profit arises from airline-related activities and the main revenue generating assets of the Group is its aircraft fleet, which is employed flexibly across the Group's geographical segment which is Europe.

The table below shows revenues from low cost air passenger travel split between passenger revenue, ancillary revenue and other revenue. A split in revenue between domestic and international flights is also included;

NOK 1 000

By activity:

Passenger transport

Ancillary revenue

Other revenues

Total

By geographic market:

Norway

Other EU/EEA countries

Total

Note 5

Operational expenses

NOK 1 000

Sales and distribution expenses

Aviation fuel

Aircraft leases

Airport charges

Handling charges

Technical maintenance expenses

Other aircraft expenses

Total operational expenses

Note 5 a

Other operating expenses

Other operating expenses amount to MNOK 396.1 (2008:318.1). Other operating expenses are related to operating the systems, marketing, back office, consultants and other costs not directly attributable to the operation of the aircraft fleet and related airline specific costs.

Note 6

Payroll expenses and number of employees

NOK 1 000

Wages and salaries

Social security tax

Pension expenses

Employee stock options

Other benefits

Hired crew personnel

Total

Payroll expenses include hired crew personnel. The employees in Norway are members of the parent company’s defined benefit pension plan, while the employees in Sweden are members of a defined pension contribution plan. See note 18 for details.

Number of man-labour years *)

Norway

Sweden

Poland

Total

*) excluding man-labour years related to hired crew personnel

Note 7

Remuneration to the Board of Directors and Executive Management

Remuneration to the Board of Directors

Total remuneration paid to the Board in 2009 was MNOK 0.7. The Chairman of the Board, Bjørn Kise, received MNOK 0.2. There were no bonuses or other forms of compensation paid to the Board members in 2009.

Directive of remuneration to the CEO and the Executive Management

The principles for leadership remuneration in Norwegian Air Shuttle ASA are to stimulate a strong and lasting profit oriented culture. The total compensation level should be competitive, however, not market leading compared to similar organizations. The Board defines the remuneration to the CEO, and the guidelines for remuneration to the Executive Management. The remuneration to the Board and the Executive Management must not have negative effects for the Group, nor damage the reputation and standing of the Group in the public eye. There have been no changes in the guidelines or principles for management remuneration during the year. The actual remuneration in 2009 was consistent with the guidelines and principles.

Compensation to the Executive Management should primarily consist of fixed yearly salary with additional compensations such as a company car, free telephone, internet and newspapers, and standard pension and insurance plan. Executive Management is also a part of the Group’s stock option plan.

The CEO does not receive compensation in form of performance based salary or bonuses. The Executive Management can on an individual basis be awarded special compensation for profit enhancing projects.

The Executive Management is part of the Group’s collective pension plan for salary up to 12 G, which applies to all employees. Senior Management has no special rights in the event of termination of employment.

Total compensation year 2009

NOK 1 000

Fee

Salary

Bonus

Other benefits **)

Total Compensation

Pension expense ***)

The Board of Directors

Bjørn Kise (chairman)

Erik Gunnar Braathen (deputy chairman until 26.11.2009)

Liv Berstad

Ola Krohn-Fagervoll

Marianne Wergeland Jenssen

Halvor Vatnar*)

Sissel Gjelstad Vårum*)

Monika Johansen*)

Total board of directors

Executive Management

Bjørn Kjos (Chief Executive Officer)

a)

Frode Foss (Chief Financial Officer)

b)

Asgeir Nyseth (Chief Operating Officer)

c)

Hans-Petter Aanby (Chief IT Officer)

d)

Daniel Skjeldam (Chief Commercial Officer)

e)

Gunnar Martinsen (Senior Vice President HR and Organisation)

Anne-Sissel Skånvik (Senior Vice President Corporate Communications)

f)

Total executive management

*) For the employee representatives in the Board of Directors, only their fee for serving on the Board of Directors fee is stated.

**) Other benefits include company car, telephone, internet etc.

***) Pension expense reflects paid pension premium less employee contribution

a) Bjørn Kjos exercised share options in 2009 that has been reported as additional taxable income with NOK 466 830.

b) Frode Foss exercised share options in 2009 that has been reported as additional taxable income with NOK 384 039.

c) Asgeir Nyseth exercised share options in 2009 that has been reported as additional taxable income with NOK 385 894.

d) Hans-Petter Aanby exercised share options in 2009 that has been reported as additional taxable income with NOK 384 735.

e) Daniel Skjeldam exercised share options in 2009 that has been reported as additional taxable income with NOK 176 249.

f) Anne-Sissel Skånvik was appointed in 2009, replacing former Senior Vice President Corporate Communications.

Total compensation year 2008

NOK 1 000

Fee

Salary

Bonus

Other benefits **)

Total Compensation

Pension expense ***)

The Board of Directors

Erik Gunnar Braathen (chairman)

Bjørn Kise (deputy chairman)

Berit Slåtto Neerbye

Liv Berstad

Ola Krohn-Fagervoll

Halvor Vatnar*)

Sissel Gjelstad Vårum*)

Monika Johansen*)

Total board of directors

Executive Management

Bjørn Kjos (Chief Executive Officer)

Frode Foss (Chief Financial Officer)

Asgeir Nyseth (Chief Operating Officer)

Hans-Petter Aanby (Chief IT Officer)

Daniel Skjeldam (Chief Commercial Officer)

Gunnar Martinsen (Senior Vice President HR and Organisation)

Anne Grete Ellingsen (Senior Vice President Corporate Communications)

Total executive management

*) For the employee representatives in the Board of Directors, only their fee for serving on the Board of Directors fee is stated.

**) Other benefits include company car, telephone, internet etc.

***) Pension expense reflects paid pension premium less employee contribution

Shares and options owned by Senior Managers are presented in note 15.

There are no outstanding loans or guarantees made to the Board of Directors or the Executive Management.

Audit remuneration (excl VAT)

NOK 1 000

Audit fee

Other audit related services

Tax advisory

Other services

Total

Note 8

Net financial items

NOK 1 000

Interest income

Interest expense

Net foreign exchange (loss) or gain

Appreciation cash equivalents

Fair value adjustment long term deposits

Hedge inefficiency

Other financial items

Net financial items

Foreign exchange derivatives and fuel derivatives classified as financial assets or financial liabilities at fair value through profit or loss are measured at fair value at each balance sheet date with changes in fair value recognized as other gains and losses within operating expenses.

Non interest bearing deposits for aircraft leases are classified at fair value and a periodic interest income is calculated using the same interest rate as for fair value calculation, according to IAS 39.43.

The hedge inefficiency in 2008 is related to the foreign exchange hedge in USD on the purchase contract on 42 new Boeing 737-800. The arrangement was designated as fair value hedge accounting for a period, according to IAS 39 – Financial instruments. See note 20 for details.

Note 9

Tax

This year's tax expense consists of (NOK 1 000):

Tax payable

Tax paid in current year on current year income

Change in deferred tax

Income tax expense

Reconciliation from nominal to effective tax rate:

NOK 1 000

Profit before tax

Expected tax expense using nominal tax rate (28 %)

Tax effect of the following items:

Non deductible expenses

Adjustments from previous year

Tax rate outside Norway other than 28%

Other items

Tax expense

Effective tax rate

28.38%

26.10%

The following table details deferred tax assets and liabilities;

Deferred tax

Assets 2009

Liabilities 2009

Assets 2008

Liabilities 2008

Intangible assets

Tangible assets

Long term receivables and borrowings in foreign currency

Inventories

Receivables

Financial instruments

Derferred gains/losses

Other accruals

Pensions

Other temporary differences

Loss carried forward

Gross deferred tax assets and liabilities

Reconciliation of deferred tax assets and liabilities

Assets 2009

Liabilities 2009

Assets 2008

Liabilities 2008

Recognized at 1 January

Charged/credited to the income statement

Changes in tax rate in Sweden

Charged directly to equity

Translation differences

Recognized at 31 December

Note 10

Intangible assets

Other intangible assets

NOK 1 000

Software

Goodwill

Indefinite life

Definite life

Total

Acquisition costs 1 January 2008

Additions

Adjusted purchase price (note 25)

Translation differences

Acquisition costs 31 December 2008

Acquisition costs 1 January 2009

Additions

Translation differences

Acquisition costs 31 December 2009

Accumulated amortization 1 January 2008

Amortization

Impairment

Translation differences

Accumulated amortization 31 December 2008

Accumulated amortization 1 January 2009

Amortization

Translation differences

Accumulated amortization 31 December 2009

Book value at 31 December 2008

Book value at 31 December 2009

Useful life

3-5 years

Indefinite

Indefinite

See below

Amortization plan

Linear

None

None

Linear

Other intangible assets and goodwill are related to the purchase of Norwegian Air Shuttle Sweden AB on 31 July 2007. Other intangible assets from business combinations consist of estimated fair value of brand name, charter operations, slots and the Air Operating Certificate. Other intangible assets also consist of intellectual property rights which are related to purchases of internet domains. The Group has developed web portals in Norway, Sweden and Denmark.

Impairment testing of goodwill and intangible assets

The Group tests goodwill and assets with indefinite useful lives annually at year end for impairment. Intangible assets with definite lives are tested for impairment if indicators of impairment are identified.

The method used to estimate the recoverable amount is value in use, based on discounted cash flow analysis. The analysis reflects the cash flow projections in the financial business plan covering the next year approved by Senior Management. In addition, the calculation includes estimated cash flows for the next 5 years. Key assumptions used in the calculation are growth rates, operating costs, terminal value and discount rate. Cash flow beyond the 5 year period is extrapolated with a long term growth rate. Estimated cash flow and discount rate is after tax.

Discount rate

The discount rate used is 11.6% and is based on Weighted Average Cost of Capital (WACC). The cost of the Group's debt and equity capital, weighted accordingly to reflect its capital structure, gives its weighted average cost of capital. The WACC rates used to discount the future cash flows are based on market risk free interest rate adjusted for inflation differential and also take into account the debt premium, market risk premium, gearing corporate tax rate and asset beta. An increase of the discount rate by 1% will not result in impairment of goodwill.

Growth rates

The basis for determining future growth rate is next year management approved budget, and an estimated sales growth rate based on planned production increase, expansion of route portfolio and expected increase in market share.

Operating costs

The operating costs are estimated based on the budget period and on estimated future development. Consideration is taken to committed operations efficiency programs, and the planned operating expansion. Changes in the outcome of these initiatives may affect future estimated operating costs. A permanent increase of 1% of total costs, with all other assumptions remaining equal, will not result in impairment of assets.

Terminal value

A growth rate of 2% is used in determining cash flow beyond the 5 year period.

Sensitivity

At 31 December 2009, the value in use of the Group was significantly higher than the carrying amount of its goodwill and intangible assets. The impairment calculation is not particularly sensitive to changes in assumptions.

Note 11

Tangible assets

NOK 1 000

Buildings

Aircraft, parts and installations on leased aircraft

Prepayment Boeing contract

Equipment and fixtures

Financial lease

Total

Acquisition cost at 1 January 2008

Additions

Disposals

Acquisition cost at 31 December 2008

Acquisition cost at 1 January 2009

Additions

Disposals

Acquisition cost at 31 December 2009

Accumulated depreciation at 1 January 2008

Depreciation and impairment

Reversals

Accumulated depreciation at 31 December 2008

Accumulated depreciation at 1 January 2009

Depreciation and impairment

Reversals

Accumulated depreciation at 31 December 2009

Book value at 31 December 2008

Book value at 31 December 2009

Estimated useful life, depreciation plan and residual value is as follows:

Useful life

See below

See below

See below

3-9 years

4-20 years

Depreciation plan

See below

Linear

See below

Linear

Linear

Residual value

See below

See below

At 31 December 2009, the Group operated a total of 46 aircraft: 7 owned and 39 leased under operational leases. Operational leases are detailed in note 12.

Aircraft

The group acquired 2 Boeing 737-800 NG aircraft during 2009. Aircraft is decomposed and depreciated over the economic useful life of each component on a straight-line basis. The body of the aircraft is depreciated based on economic useful years, while other components are based on airborne hours and cycles.

The residual value is MNOK 206.1 in total for all owned aircraft and deducted from the depreciable amount of the body of the aircraft. The life expectancy of the body of the aircraft is 25 years on 737-800 and 30 years on 737-300, and the economic life of the owned aircraft is 25 or 30 years less the age of the aircraft at time of purchase.

Installations on leased aircraft

The installations on the leased aircraft include cabin interior modifications and other improvements to the aircraft after lease commencement. The capitalized value is depreciated over the remainder of the aircraft lease, which is between 1-8 years. Linear depreciation is applied and residual value is NOK 0. In 2009 several engines on the leased aircraft were in overhaul, and replacement costs for life limited parts were capitalized in the extent that the costs were improvements to the engines exceeding the requirements specified in the leasing contracts. These components are depreciated at a defined rate per engine cycle, limited to the remainder of the aircraft lease.

Spare parts

Spare parts consist of rotable and repairable parts for aircraft and are depreciated over their useful life. Useful life of spare parts is between 4-10 years. Linear depreciation is applied and 25% of the acquisition cost is calculated as residual value.

Buildings

Buildings consist of 3 apartments in Berlin, purchased in 2007 for the purpose of housing crew and trainees stationed in Berlin on temporary basis. The asset is carried at acquisition cost. The residual value is estimated to equal the acquisition cost.

Prepayments on Boeing contract

In 2007, the Group entered into a purchase contract on 42 new 737-800 aircraft with Boeing Corporation, with an option on 42 additional aircraft. Two aircraft have been delivered in 2009, and 6 purchase options have been exercised. 46 aircraft will be delivered i between 2010 and 2014. Until delivery of the aircraft, the Group will make prepayments to Boeing, following a defined prepayment schedule. The Group capitalizes borrowing costs incurred for the construction of qualifying assets during the period of time that is required to complete the aircraft. Borrowing costs of MNOK 33.5 (2008: MNOK 30.5) have been capitalized during the year. Average capitalization rate of 7.66% (2007: 8.21%) was used. The Group applied fair value hedge accounting of unrecognized firm commitment for the three first quarters of 2008. The hedging relationship was terminated at 16 October 2008. The remaining fair value of the unrecognized firm commitment of MNOK 8.7 at the date of termination was capitalized as a part of the prepayments. Prepayments are not depreciated until the aircraft is delivered and ready to use. The value of prepayments is tested for impairment annually.

Financial lease asset

In 2009, the Group entered into lease agreements related to de-ice equipment and electronic flight bag equipment. The lease agreements are classified as financial leases as all risks and rewards are transferred to the Group after the end of the lease agreement. The financial lease assets are depreciated over their economic useful lives. De-ice equipment is depreciated over 20 years, while electronic flight bag equipment is depreciated over 4 years. Residual value of financial lease assets is 0.

Impairment of tangible assets

In 2009 and 2008 the management determined that the total operations of the Group were its cash generating unit, and as such, there is only one operational segment in the Group. Impairment testing of tangible assets are covered by impairment testing on the whole Group, see note 10 for details.

No impairment losses have been recognized in 2009.

For information regarding assets pledged as collateral for debt, see note 23.

Note 12

Operating leases

The lease agreements for the Boeing 737 aircraft vary between 3 to 8 years with an option to prolong certain agreements. 6 of the aircraft were delivered in 2002, 2 aircraft in 2003, 4 aircraft in 2004, 2 aircraft in 2005, 6 aircraft in 2006, 2 aircraft in 2007, 8 aircraft in 2008 and 9 aircraft in 2009. Renegotiations have resulted in prolonging some of the short-term leases. The contracts for 5 of the aircraft expire in 2010 and for 8 of the aircraft in 2011. The remaining contracts expire in 2012 or later.

Leasing costs expensed on aircraft lease within operational expenses was MNOK 574.0 in 2009 (2008: MNOK 426.6)

In addition, the Group leases 13 cars, and 9 properties in Oslo, Stavanger, Stockholm, Copenhagen and Warsaw. Leasing costs related to cars and properties expensed in other operating expenses in 2009 was MNOK 21.2 (MNOK 19.1 in 2008)

Annual minimum rent on non-cancellable operating lease agreements:

Nominal value 2009

Nominal value 2008

NOK 1 000

Aircraft

Cars

Property

Total

Aircraft

Cars

Property

Total

Within one year

Between 1 and 5 years

After 5 years

The aircraft's minimum lease payments consist of ordinary lease payments, contractual payments for maintenance reserves and expensed deferred lease payments resulting from non interest bearing deposits paid at inception of lease agreement.

Note 13

Trade and other Receivables

Spesification of receivables

NOK 1 000

Trade receivables

Credit card receivables

Deposits

Deferred leasing costs

Prepaid costs

Public duty debt

Reimbursements claims maintenance costs

Other claims

Costs to be reinvoiced

Prepayments to employees

Prepaid rent

Total

Due dates

NOK 1 000

Within one year

After 1 year

Total

Currency (NOK 1 000)

DKK

EUR

GBP

NOK

USD

SEK

PLN

Fair value of trade and other receivables

NOK 1 000

Due within one year

After one year *)

Total

For receivables due within one year, fair value is equal to nominal value.

*) Discount rate 5.5 %

Provision for bad debt

NOK 1 000

Balance 1 January

Utilized

Accruals

Reversals

Balance 31 December

Changes in provision for bad debt is recognized as other operating expenses.

Overdue accounts receivables

NOK 1 000

Overdue less than 3 months

Overdue 3-6 months

Overdue over 6 months

Total

The majority of accounts receivable overdue is by reason of slow processing of accounts payable with some of our customers, and is not related to any problems with the ability or willingness to pay. Most of the overdue receivables are to handling agents which are also our suppliers.

The Group has deposits as collateral for the Group’s liabilities to suppliers. See note 24 for details on restricted cash.

Note 14

Inventories

NOK 1 000

Consumables

Modification equipment

Parts for heavy maintenance

Other inventory

Total

In 2009 and 2008 the Group bought parts removed from aircraft engines in relation to heavy maintenance. These parts are held for sale, and sold in secondary markets. Charges for obsolete product in 2009 were MNOK 4.6 (2008: MNOK 0).

Note 15

Equity and shareholder information

At 31 December 2009 the share capital consists of the following share classes;

Issued shares

Net Shares

There is only one class of shares, and all shares have equal rights. Par value per share is NOK 0.1

Number of shares (thousands)

Ordinary shares

Share premium

Total

01 January 2008

Share issue 5 August 2008

31 December 2008

Share issue 2 November 2009

Share issue 18 November 2009