Wizz Air Holdings Plc

Good morning, ladies and gentlemen. Welcome to this report. We are reporting first half fiscal 21, which is the period ending March 2021. I would start by saying that we have been most focused on liquidity. I think as previously stated, we are managing this business for cash and liquidity. And as you can see, we've done quite well with that regard. ending the period with 1.6 billion euros of cash. And if you look at the relative cash burn, especially compared to the balance of the industry, we've been containing our liquidity very well. We burned 265 million euros of cash in the first half of our financial year, which compares very favorably with the industry. And that's been our focus. We did quite well with regard to recovery. In the summer period, in August, we reached around 80% of our last year's capacity level. But clearly, capacity is subject to restrictions prevailing at the time in Europe, in our markets, and we see that following the first wave of the pandemic and corresponding restrictions imposed by governments, Actually, summer was a better operating environment with less restrictions, but since the end of August, we have seen a new wave of restrictions imposed by governments significantly undermining demand, and as a result, they keep adjusting capacity accordingly to market conditions. So it has become a rollercoaster, and you may expect more capacity to be taken out should more restrictions come into play. But also, likewise, once these restrictions are getting eased, we should be back in the air with capacity. Demand is incredibly sensitive to restrictions. We are seeing, especially in the UK, that once a country is removed from the travel corridor, demand collapses pretty much overnight. And once a market is put back into the travel corridor, demand surges incredibly. We have continued to diversify our business by enhancing our children's footprint. During this period, we opened 13 new operating bases, launched 260 routes. We have been incredibly agile trying to take advantage of the situation of market vacuums, led behind by auto carriers and some of the commercial deals that have been made available by airports and attracted us with new capacity. These are strategic investments. I mean, maybe not every one of these initiatives will work out in the end, but I think most of it will. And clearly that new capacity is also subject to the operating environment restrictions and demand. So you can see the same kind of rollercoaster effect on that. But clearly once we are back into recovery, we will have a much enlarged geographical footprint to have a much more robust recovery at a quicker pace than most of the others in the industry. We are very proud of our investment grade. Following Moody's investment grade just a few days ago, Fitch Ratings also reaffirmed our investment grade. We are one of the four airlines in the world with investment grade credit. I mean, obviously, this is a statement. on our prospects going forward and you can imagine that these agencies fully scrutinized the current standing of the business as well as assumptions for the future and stress tested each of our assumptions with the worst case scenarios and they confirmed our investment. So I think this is a great credit for QDC from the market. Well, as said, restrictions are a part of our life at the moment, and looking ahead in the second half of the financial year, we think that we will have to live together with these restrictions, and these restrictions will fundamentally affect capacity planning through demand and our ability to operate. And we follow the news, and we are micromanaging the business to a large extent, and they keep adjusting capacity on a day-by-day basis depending on the state of restrictions. So I think in this winter period, the fundamental factor driving the business will be restrictions out there. There is a lot of talk around testing to replace restrictions like quarantines or lockdowns, but we don't know. We have not seen any commitments made by any governments going forward with that regard, but certainly we are. embracing the concept of testing to replace these hard measures. But we shall see what's going to happen. I mean, one of the disappointments clearly is affecting the business that after the first wave of managing the pandemic situation by government, we would have hoped that there would be a learning there to seek more European coordination, more orchestration to make the whole system more effective. None of it is happening. I mean, We are flying to 46 countries and there are no two countries that would apply the same sets of restrictions or measures which make Europe quite a tool and quite an ineffective system for the purposes of managing the situation. And you can clearly see that lots of politics have been playing into this now, so it has become very complicated. All in all, we believe that... While a crisis obviously is testing and testifying everyone involved, and we are not immune from that, nevertheless, Wizz Air is emerging as a structural winner from the situation, given that we are the lowest cost producer, and we have a very resilient financial position to cope with the challenges and the situation. And post-COVID-19, we would certainly be a much stronger and much more formidable competing force coming out of this crisis. Moving on to the next slide, as you can see, this is sort of giving you a snapshot of where the business is at this point in time. I mean, what I would really read out of this chart is that we have continued to invest into our future. As said, we have been diversifying our markets by opening new markets, new countries, new operating bases, launching a significant number of new routes. But also, we have continued our aircraft delivery program. In March 2020, we had a fleet of 121 aircraft. We are going to close the financial year in March 2021 with 137 aircraft, so 16 aircraft more. And in March 2022, we are expecting the fleet to be 159 aircraft, 22 more than a year before. we continue to invest into our free program. This is significant. I mean, you may think that short term, it doesn't make any sense. And indeed, it is somewhat stressing short term, but it is the right thing for the medium and longer run because new technology will enable us to operate this free at much lower cost than our competitors who have been holding the lines by deferring act of deliveries or canceling act of orders. So we'll have a significant competitive advantage arising from this on economics, but also once the industry gets more measured against sustainability, our fleet will deliver much better against that sustainability agenda, given the much reduced ecological footprint than other carriers. So keeping the long term in our mind remains an important issue. Nevertheless, we are dealing with a crisis by managing the business day in, day out. The next slide is showing how agile we have been, and maybe you can argue that we've been agile up and down. We pushed quite significantly in the summer period when demand was less restricted by restrictions, and you can see that we managed to get up to around 80% capacity level in August. But since then, we've been adjusting our capacity down as more restrictions came into play, and we might actually come below the industry numbers. And I think it's just showing how financially responsible we are. I mean, you can see other airlines reporting that we have contained cash much better, and we stay focused on cash much more than most of the other carriers. We think this is the time that we need to be very focused on liquidity on, on cash, and let's not forget that we are not planning on any government bailouts or anything like that. We think that we can self-sufficiently maneuver ourselves through these cases, but that requires us to be agile going up, but it also requires us to be agile and financially responsible going down when the market becomes restricted, and this is what we are expecting in the next few months. And with that headline, I would like to hand it over to Jörg.

Thank you, Gero, and good morning, everyone. So on slide five, you will see that our half one revenue is down 72%, with quarter two revenue down 61%. Our reported loss was 243 million euro in half one, whilst the underlying loss for half one was 145 million euro. So the difference between reported and underlying loss was the 98 million euro exceptional expense, which relates to our discontinued fuel hedges, You will recall that in F20, we recognized discontinued fuel hedges for the month of March, April, and May 2020, whereas now in half one, 21, so the current half one, we recognize discontinued hedges for the periods of June 2020 all the way to March 2021. So it's a different approach, but it's obviously commensurate with the recovery pattern that we're seeing. On slide six, you can see that our costs in half one, excluding the discontinued fuel hedges, reduced 49%, whereas the ASKs for the same period reduced 57%. So in that strong cost reduction on the total line, with strong variability on obviously cost of airports, handling, and on routes, but also distribution costs, marketing costs, staff costs declined 38%, Maintenance costs 28%, and as you know, depreciation is mostly fixed, only declining 15%. On the next slide, slide 7, we're outlining the strength of our ancillary revenue. When you strip out the items which are more one-off in nature, for example, the cargo flights we operated in April and May, you will see that the underlying ancillary revenue is up 3.8 euro per passenger in half one. And equally, the ancillary revenue per passenger in the second quarter was up strongly with 1.7 euro per passenger increase year over year. So bags, bundles, flexibility products, they drove the strength of the ancillary. And going forward, we continue to be focused on driving more conversion and implementing dynamic pricing. On slide eight, a bit of focus, as you know, on cash. All things considered, without the CCFF funding, we have burned €265 million of cash in half one, which is roughly €44 million per month. Our operations, including the cost of the leases, burned €185 million, and we cash settled on top of that €110 million worth of discontinued hedges in the first half. On the next slide, you will see that Again, we burned 44 million euros per month in half one. In the last quarter, we almost broke even, burning only 9 million euros per month. This is obviously, as Joe said, a stark contrast with the burn rate of some of our competitors. Our ramp up, especially over July up until mid-August, drove solid cash contribution, with September obviously being a little bit weaker as we had to adjust for restrictions in the environment because of COVID-19. We're pretty much fully current with refunds within this cash balance. We only have 6 million euro refunds balance at the end of September. We had obviously very strong cost and cash rise across all P&L and balance sheet lines and beyond cash as Joe mentioned, We feel very proud to say that our credit rating was affirmed by Fitch. The press release went out last Monday. I'm sure you've seen this. And as Joe said, we also had discussions with Moody's over the last month and they're maintaining our investment grade rating as well. So we have both on liquidity resilience and we have the investment graded balance sheet, which obviously is very important. Now on the next slide, slide 10, shifting gears to the second half of this fiscal year, It's clear that cost and cash remain our top priority, especially with restrictions and lockdowns in an increasing number of our markets, at least in the current period. We reiterate that in case of full grounding, our average burn rate is around €70 million per month from an operational point of view. Given the seasonality of our business and the restricted operating environment, the cash contribution of our operation may be less significant in the next few months. and the restricted level of activity could actually further unwind some of the balance sheet positions like unflown revenue or supplier payable. So I hope that is sufficient clarity on where we are on the cash side. In the current context, obviously it's very difficult to give guidance on profit or loss after tax or even on capacity for that matter. Our October capacity as you've seen in the previous slides was 45% year-on-year. November will be below, given the restrictions on travel and the lockdowns imposed in the last week. And don't forget, as Joe said, we only target to fly cash products, so capacity over the next month is anybody's guess at this point in time. The principle is very, very clear. As Joe said, our fleet remains our key strategic investment. Maybe this is not ideal in the short term, but without question, it's widening our competitive edge on cost, on sustainability. And additionally, we're working to build in more flexibility, which will allow us, together with a strongly diverse network, to respond even more swiftly to changes in the external environment. Joe, back to you.

Moving on to page 11, I think we have demonstrated our agility with regard to leading the business through the crisis situation. We have moved around 20% of our capacity by trimming existing networks and reallocating that capacity for opening new bases, new markets, new routes. enhances our geographical footprint in times when other airlines are withdrawing capacity from their markets. And clearly, it gives us significant leverage for the long term, not only for times when we are effectively revamping capacity, but much beyond on a structural basis. Simply, we're going to be able to occupy certain markets which markets would not have been available to us before. At the same time, I think we've also been somewhat opportunistic and we've gone by the flow when it comes to consumer demand. I mean, clearly, the structure of consumer demand has evolved during these times. I mean, one of the, I think, remarkable moves that we have made is entering domestic markets in Europe simply because Cross-border travel has been locked down or usually restricted, while domestic travel has been more open, less subject to restrictions. And as a result, we entered two significant European domestic markets, Italy and Norway. But now we are seeing that even the Italian domestic market is now under some pressure, given the new restrictions imposed by the Italian government. Very importantly, we received AOC for Visa Abu Dhabi. The airline is ready to fly. It's fully licensed, fully stopped, and now we are on a holding pattern, waiting for lifting restrictions by the Abu Dhabi government, and once that happens, then we would be putting the airline up in the air. We shall see how the country is going to open up. Probably it's going to be a phased approach, and we've got sufficient designations now and access to markets that we can flexibly alter our network program in accordance with the opening of the country. Moving on to the next slide, I mean, clearly you see that this actually led to a significant market share gains. We are not in a market share business, but I think this is just demonstrating that should we go HI, should we be seeing demand somewhat unconstrained, from the perspective of decisions, actually we can achieve quite a lot very quickly. And if you look at just our Central East European positions, we had 16% market share in the region prior to COVID-19. That jumped up to 22% in the summer period. But again, going into winter, we are in different times. I think we have to run this business for financial disciplines for... cash contribution, positive flying, but once we are back again into time span, demand is less restricted administratively by governments. This simply can ramp up very quickly and we can certainly repeat what we have done before we even achieve more when it comes to taking market positions in various countries. Moving on to the next slide. This is a summary to to demonstrate that we are absolutely ready and well positioned for a swift recovery and once the market conditions allow us to move quickly, we're gonna move very quickly and very, very robustly. We are flying the youngest data aircraft in Europe around five years. That is significant from a cost perspective and it is also significant from a an ESG from a sustainability perspective. We are the lowest cost producer in Europe, so this is a commodity business, lowest cost prevails, so you can't be in much better position than that. Our customer profile is very adequate to the situation. Bizelle's customer profile has been quite geared towards VFR traffic and VFR traffic prevails in current times. Today, over 80% of our passengers travel for purposes of VFR travel, so we are certainly benefiting from our passenger profile with that regard. We are well positioned from a financial resilience liquidity perspective, having 1.6 billion euros on hand. That will take us through the skies, no matter how long this is going to drag. They are very well positioned, especially relative to the balance of the industry. And quite importantly, we fly the youngest passenger compared to other airlines in Europe. That is significant because, again, from a recovery perspective, we think that the younger generations will come back to the franchise quicker than elderly generations. Once they are less impacted from a health perspective, Secondly, this is empirical that especially coming out of crisis situations, younger people tend to be more adventurous and more forthcoming and certainly our business will benefit from that as well. And we have a very appealing engagement platform with our consumers having or operating one of the largest airline websites in Europe actually, even globally. So we think we are really good to go, and we are well positioned for recovery, and once these restrictions fall away, we can have a very strong ride, again, similar to what we achieved last summer, even more. Moving on to the next slide, you can see that we are taking advantage of the times, and sort of the setback of the industry, and we are investing into our customers, we're seeing that it's not only that you need to manage the business for the short term, but you also need to continue to position yourself for the long run post COVID-19. And we've talked about the young fleet and being the greenest airline in Europe, but we've actually initiated quite a few other things as well. We launched our bulletin carbon offset program, so now this is available to customers. So should you want to take personal responsibility for your environmental footprint, then you can offset your footprint. We launched a unique interactive planner software, which helps you navigate yourself through the zoo of restrictions and COVID measures applied by countries. So I think this is a very good planning tool to understand what is going on in Europe in our network. So should you want to have a travel plan, you can certainly better enable yourself by using this planning tool. And we deliberately want to have an operating platform as extended as possible within the framework of being financially responsible to provide as many route connections as possible for people who want to unite and need to do essential travel. So we try to maintain most of our routes, only reducing frequencies for so long as this is rational to maintain connectivity in Europe. So we have never grounded the airline entirely. Obviously, we have taken capacity down quite significantly. The worst period was April this year when we were only operating 3% capacity. But we intend to operate always a network, a skeleton to make sure that connectivity is presumed. Moving on to the next slide, this is just to summarize this presentation today. As you can see, we are absolutely geared and focused on cash and cost. Liquidity is key. We are managing this business for cash and Everson Gas is secondary. We have taken advantage of the situation and expanded our network by diversifying capacity. That's been a significant move and we're seeing that positions us very well ramping up operations once the market conditions change and giving us a structural competitive advantage in the long run. We remain financially disciplined, agile, and focused on long-term issues, not only managing the pandemic on a short-term basis. And we are building competitive advantages for us through the market diversification, through new active delivery programs, and through preserving liquidity to enable ourselves to continue to invest into long-term priorities. And we're seeing that with all of these, we are widening our competitive advantage to win this game structurally and emerge from COVID-19 as a structural winner. Thank you. And I guess this is now your turn for questions.