Wizz Air Holdings Plc

Good morning, everyone. Welcome to this conference for the Q3 fiscal 2021 results. Maybe I would just start it by outlining a few sorts of fronts that are important to the presentation, obviously, to the going of the business. Q3 is a period which was severely impacted by travel restrictions imposed by governments across our markets. As you know, we are operating to 47 markets, and I would say that not even two countries applied the same restrictions. So it's not only the restrictions, but also the complexities coming out of the restrictions across markets that impacted our business and largely the industry. We ended with very strong cash balance. 1.2 billion euros at the end of December. As we said before, we are a very resilient business. And even if we don't operate a single flight, we are still good to go for another two years with the current level of liquidity. But of course, we are doing better than that by operating at least part of the fleet. And that 1.2 billion does not include the 500 million euros bond, what we just raised in early January. And we think that the bond issuance was a statement by the market. We were able to assess liquidity at very competitive cost level, and we wanted to take advantage of the market. We are really looking at this liquidity as an insurance policy. We don't want to touch this money, but we think that given the uncertainties in front of us, it's better to have more cash than less cash. You never know, but based on our projection, quite likely we won't need to touch on this bond proceeds. Our investment grade got reconfirmed by both Moody's and Fitch. As you know, there are only four airlines in the world at the moment that are investment grade credits, and we are one of them. And obviously, that makes us very strong when it comes to accessing low-cost capital in the market. And let's not forget that we need it because we continue to take active deliveries. It's not only that we have been managing the business on the basis of liquidity, and minimizing cost and cash burn in the business, but also we have continued to invest into our future. And at least three lines are important here to mention. One is that we are one of the very few airlines in the world that has continued to take new aircraft deliveries. As you can see in the chart coming that our fleet was actually growing quite significantly year on year, 17 aircraft. And we will continue to take deliveries in the coming months and years. That is important because it is improving our structural cost once we are developing operations and also it's going to reduce our carbon footprint. So simply this innovative fleet will give us a structural competitive advantage versus other airlines that are relying on an aging fleet. Our network has been expanded and that enables us not only to have a greater geographical footprint, but also to have a faster restart once we are approaching the recovery phase. Obviously, it all depends on the restrictions out there and how those restrictions will get eased. We also made investments into leadership capacity and capabilities by hiring executives coming in, in executive management and also upping the capacity of the board of directors. And obviously we had been making all these investments in lights of positioning with that in the post pandemic market in that period. Moving on to the next slide, giving you an overview on the current state of the business. We have been very agile since the very beginning of the pandemic. In that period, we opened up 260 new routes, opened up 14 new bases, and now our route network is getting close to 1,000 routes. Obviously, the operation of that network is subject to prevailing restrictions, but it is a greatly diversified network and it has been further diversified during the pandemic period. As said, our fleet was growing from 120 to 137 acts during this period and with that we entered into new markets, new countries. Two significant recognitions I would mention. We received the The airline of the year was from ATW for 2020, and we became the very first airline in history to be under the limit of EASA from a regulatory perspective. Now the operating AOC of the airline is oversighted by EASA, which obviously ups our standards, regulatory standards, and we got closer to a fire because EASA is essentially the rule maker in the industry. So moving on to the next slide, page four. This is really trying to demonstrate how agile we have been moving this business up and down as required by the circumstances. In a less restricted period, especially in summer, in August we were able to deliver 80% of our capacity. And then you can see that now we are in a dip given the restrictions out there. We took capacity down. We are applying a fairly simple principle that we are flying a cash contributing network. And basically what it means is that depending on the restrictions out there and to what extent those restrictions affect underlying demand, we would be varying capacity in according to the principle of delivering cash contribution positive flying. And you can see how low factors have been corresponding during this period. I would just note that December was a somewhat special period. We saw some one-directional traffic here or there, but we were able to balance it with higher fares. So overall, I think we are satisfied with the performance of December with Deltagard, but all in the context of the pandemic and prevailing restrictions. We believe that people's willingness to fly remains intact. people would want to go. The issue is the restrictions and obviously with that people's ability to actually travel is greatly curtailed when you are subject to quarantine rules, testing rules, hotels, restaurants and bars are closed obviously discretionary travel becomes impossible. But we are seeing a core of essential travel still happening under any restrictions pretty much and and that quote is very loyal to this and basically this is what makes us operate, the capacity that we are operating at this point in time. And with that, I would hand it over to Eric.

Thanks, Joseph. Good morning to all. From my side, just a few key financial highlights for the quarter. On page five, you'll see that the revenue for the quarter was down 76%, reflective of the low capacity flow that Joseph mentioned in light of the continued travel restrictions linked to COVID-19. We reported a loss of €116 million for the quarter and an underlying loss almost the same, €114 million. The small difference between those two numbers is the loss related to discontinued fuel hedges. Recall most of those were recognized in our half-one results. On page 6, you will see that the total costs were reduced by half and the ex-fuel cask by 37% versus the same period in last year. Recall our ASKs are down around 70% for the period. Costs that are almost fully variable were obviously fuel and airport charges. And then you see that we've done a good job on the variability of staff costs. Recall we do not meaningfully benefit from furlough schemes, but we're also not dependent on them. And then the cost buckets that were much more rigid were, for example, maintenance. for the reasons that are well known. I mean, we recurred some maintenance events that we had pushed out from half one into half two. We obviously keep our aircraft air-worthy, even if we don't fly them, and we have also started to re-deliver aircraft, incurring some costs. And then the other rigid cost in the overview is depreciation, where lower depreciation behind lower utilization was offset by some higher amortization as we terminated two leases early. And obviously we also had some more infrastructure versus the prior year. So all in all, we continue to have very strong cost plans, not only in the quarter that closed, but also for the next month to come, where we continue to see material restrictions on the business. On page 7, we're outlining our Anceli revenue performance, growing a very, very strong 20% from €30 per pack to €36. And Serbia is, again, now more than 50% of our total revenue. And it's motor 3D by our core products, where we have driven material conversion increases, be it on the bundles, like with Go or with Plus, or on the flexibility products, like with Flex, or the loyalty program with discount. And salaried continues to have a lot of potential, which is obviously important for us, as we will use ticket fares post-COVID-19 to drive penetration where we see a responsive market. So on page 8, you will have a look at liquidity, obviously critically important. We had outlined at the time of the half-year result that this would be a quarter where we would see a larger cash burn, as we anticipated that we would have limited contribution on the limited flying that we would do given the season we're in the winter season and this is what you see here with an operational cash burn of 194 billion if you add the first two gray columns there for three months or 64 million euro per month so just below our guidance of 70 million in case of full grounding additionally as we have guided we have invested in aircraft deposits during the quarter A part of these deposits will return as a cash inflow in next quarter. And we have also seen, as we have guided, a level of unwind on the balance sheet accounts, as we had materially lower activity during the last quarter than during the summer quarter, which, for example, impacts the unflown revenue balance. Now, the liquidity potential of this business continues to be very strong for Wizz Air as the aircraft deposits will come back in part as mentioned. But even more importantly, the rewind of the balance sheet positions will happen. I mean, these positions are now at a low point in our history. For example, if you take unflown revenue, we have a position of around 60 million. In normal times, this can be close to half a billion. So this will obviously rewind as the restrictions will go away. So on page 9, we reiterate some of the key points. Low cash burn at 64 million euro per month. You'll recall the guidance of 70 million euro, and we maintain that guidance also for Q4, given the trading environment, the restriction environment may be relatively similar to the quarter we just passed. I mean, who knows what will happen with the restrictions, especially during the back half of Feb and March. Our burn rate in the quarter took into account €20 million per month of fuel hedge costs, and obviously this amount will decline month-on-month as we stop hedging once COVID-19 hits. Refunds are current, so we're at levels similar to pre-COVID. We just have €1 million balance of refunds left, so almost nothing. And as mentioned, we issued into our EMTM program a first-time bond issuance for the company of €500 million, 3-year note at 1.35%. So very favorable cost of debt, well-timed, and of course strongly supported by the strength of our business model and the investment-graded balance sheet. So with that, Joseph, back to you.

Thank you, Jarek. So moving on to page 10, this is the outline of the key priorities and focus areas for the current and the coming financial years. We remain focused on cost management and cash burn, I think we've been running this business in a very disciplined way. Could you please move the slide? And we'll continue to do that going forward. We are only operating capacity that contributes to cash. That's been a principle since the beginning of the pandemic and that continues to be the case going forward. I mean, interestingly, even in a very distressed period like where we are today, we are contributing to cash through our flying program. We have diversified our network and we'll continue to diversify it going forward, but not only that, we are also very cautious and very focused on the integrity of our supply chain to make sure that we can ramp this business up very quickly once we are in position to do so. We have maintained investment-grade credit by both Moody's and Fitch, and obviously this is very important because we continue to access the capital market for aircraft finance, so our credit standing feeds into the cost of capital that we are able to achieve. Now, Abu Dhabi is airborne, and we are looking at scaling that operation. Obviously, Abu Dhabi is also affected by restrictions. But the country is doing quite a good job in moving ahead with the vaccination program. So we are expecting some easing or lifting restrictions coming into play in the future. And obviously we're going to be well positioned for that. We have invested into various digital platforms in the business when it comes to consumer interaction, consumer interface, as well as the operations of the business. And also our fleet renewal will continuously reduce costs and our carbon footprint going forward. As said, we are building managerial capacity and leadership capacity at both leadership team and board levels. And sustainability is a key focus area for us. We think that we are extremely well positioned to win on that. So it's not only that we come out of this business as an economically more competitive platform, but also a sustainability-wise more competitive platform going forward due to our fleet program and the way we are operating our fleet. So moving on to the next slide, page 11, it is showing you the way we have diversified our network. As said, today we are operating 39 bases, 14 more than prior to the pandemic, and you can see how we have invested capacity across markets in Europe and beyond. Some of the investments, new investments, went into the Western European markets, some into the core Central and Eastern European markets, and also, as said, we opened up with Abu Dhabi, and now we have a Abu Dhabi-based operation. And it's interesting to put that against our competitors. We are the one airline of the three large low-cost carriers in Europe, that actually has been expanding its geographical footprint. The other two have actually been reducing their market footprint. So I think that we are clearly building a competitive advantage here. Moving on to the next slide, page 12. As said, Visar Abu Dhabi is now airborne. We took off on the 15th of January. And now we are looking at expanding that operation. The operation of Visar Abu Dhabi remains subject to prevailing restrictions in Abu Dhabi as well as the destination markets. But we're seeing that given the progress the UAE is making on vaccination, quite likely in the foreseeable future we will see a more open market environment for Abu Dhabi. And we are adapting our network accordingly to... to market opening as a result. And now we have a team on the ground and we have the fleet on the ground. We have four aircraft based in Abu Dhabi. So I think we are ready now to scale this operation up to an extent possible in the context of restrictions. Moving on, page 13, our fleet program remains essential to the business and core to building competitive advantage in the marketplace. As you know, we are upgaging our fleet from A320 to A321neo operation. It is a 20% lower-cost production, so this is a very fundamental pillar of the business. We have been maintaining our fleet program largely intact. There has been some reshuffling of capacity, not in a large extent, but obviously we had to take note of the fact that The COVID-19 situation is probably more dragging than expected before, and we just wanted to make sure that we are adequately timing the deliveries of the fleet. But the fleet program is largely intact, as said. And if you look at the fleet growth, we closed the year with 137 aircraft in the fleet. A year later, we're going to have 152, so we'll continue to take new aircraft deliveries, actually more than the fleet growth. because also we are retiring and returning some existing leases. So this free program is not only giving us economic efficiency, but also it enhances our environmental standing by reducing our footprint. We are committed to reduce our CO2 emission by a third by 2030. So it is a very important matter to us and we think we are well positioned to win in the market. If you look at the evolution of the seat count, you can see that today we are at around 205 average seat per aircraft, making us the largest singular aircraft operator in Europe, and that will grow to close to 230 over the course of the next five to six years, building a significant economic advantage. I mean, aircraft economics clearly correspond with seat count. Moving on to the next slide, this is showing how we are building value for the business across different lines. I think it's interesting to see the evolution of fares and the evolution of unit revenue over the course of the last three years, quarter on quarter. You can see that we've been able to reduce our ticket fares That is very essential to the business for stimulating demand, stimulating the consumer franchise. But at the same time, through the enhancement of revenue production, we've been able to actually achieve higher unit revenue. So we continue to unbundle. I think we continue to appear to various travel groups, those as well who are very budget constrained. as well as those who are more comfort-driven. And we are offering the choice to everyone to really tailor their travel experience the way they wish. Mobile is really now returning the dollars we invested. We are approaching half of the revenue obtained through the mobile app. That's very significant. We must be one of the leading airlines with that regard and we are very pleased with the development that we continue to push the mobile platform because we think that this is simply the most efficient platform we could have and this is probably the most accessible platform in any event because that's in the hands of every existing or potential prospective consumer. The brand has gained a lot of strength during this period. Obviously, we are measuring brand awareness and essentially every core market we have upped our gain and we have been benefiting from the pandemic situation when it comes to brand awareness and in some countries in a very significant way, very quickly, very significant gains on the brand. Obviously, this is very important for the recovery and the overall strength of the business going forward. As Jarek mentioned, we are basically refund-free. We have refunded all customers and we have been keeping that refund line pretty current for a long time now. So we are not building liquidity by taking credit from consumers. I think it is a key issue for us that we don't want to disappoint consumers with credit issues. So if we have to cancel because of restrictions imposed on us, we are promptly refunding consumers. So moving on to the next slide, I mentioned sustainability as one of the key focus areas of the business, and indeed we are looking at ESG as a matter of sustainability on the one hand, but also looking at people matters as well as our impact on economies. We have a bunch of initiatives when it comes to managing sustainability. I think it is getting increasingly recognized by various rating agencies that we are enhancing our standing on sustainability. I mean, clearly we are the greenest airline of any European airline, given the fact of the aircraft, the age of the fleet, and the way we are operating the aircraft, the gauge of the aircraft, And as a result, our carbon footprint is by far the lowest in the industry in Europe. We have been making a lot of efforts in people matters. As you know, we have been talking about this before. We have a number of programs in place, moving cabin crew to the office or moving cabin crew to captains. We have programs in place. And we are supporting these initiatives also from a financial standpoint. We are much focused on gender diversity at all levels in the company, whether this comes to the board leadership or managerial levels or even flight crew levels. We think it is an important issue. And with market diversity, we are gaining a lot of strength to think that gender diversity is also a source of competitive advantage for the business. Page 16, the next slide. As we communicated the market, we have hired a number of new directors in the board and we have hired a number of new executives in executive management. We are very pleased with these recruitments. Each of these individuals is bringing considerable value to the business given the stage of development where we are. and the priorities in front of us both at board and executive levels. And we think this is much needed given the challenges and given the growth plans in front of us for the next few years. And by closing, and this is the next slide, I would just want to wrap it up. As you probably take note out of the presentation, We remain absolutely focused on cost, on cash, on cash burn to make sure that we are maintaining liquidity. We are running this business for cash as before, and I don't think this is going to change in the near future. But once we are seeing an easing of operating conditions, obviously we're going to be upping our game by expanding our network. to make sure that we are capturing the resurgence of demand. By diversifying our network, we're seeing that we are actually very well positioned for recovery because we have a greater geographical footprint. We are much driven by VFR traffic and young people's demographic. That is important because we are expecting those people to come back into flying considerably once the markets open up. I mean, as we speak, the backbone of our current operations is driven by the loyal VFR traffic that we are carrying for essential cyber purposes. We continue to invest into our business when it comes to network, fleet and organizational capabilities. that is important because it's not only that we maneuver ourselves through this crisis as effectively as possible, but also we position ourselves for the future in the post-pandemic times. And with that, we believe that we are building a competitive advantage. As a matter of fact, we are widening our competitive advantage to win structurally, and not only from an economic standpoint, but also from a sustainability standpoint. And with that, I would close the presentation and opening up for questions and answers. Thank you.