Wizz Air Holdings Plc

Ladies and gentlemen, thank you for standing by. And welcome to WITS-A fiscal year 2022 results call. At this time, all participants are in listen-only mode. And after the speaker presentation, there will be a question and answer session. To ask a question, you need to press star and 1 on your telephone. We would like to receive just two questions per person per day. I would now like to end the conference over to the Wits Age CEO, Joseph Varady. Please go ahead, sir.

Thank you very much. Good morning, everyone. Thanks for coming. Thanks for joining. So this is to report the last financial year as we titled it Fiscal 22. So last year we had a very strong recovery, especially relative to Fiscal 21, 166% more passengers, carried by the airline. Obviously, we have largely extended our geographical footprint during this period by investing into our network. The results we are communicating today are pretty much in line with previous communications, so I don't think we are bringing any surprise to the party here. So we suffered 642 million euros of loss as previously guided. Obviously, this is the cost of ramping up the business under the circumstances that we ended up the financial year with strong liquidity, 1.4 billion euros, and we continue to be graded by Fitch and Moody's investment grade credit We have been investing into our fleet, our markets, as well as our people. So the fleet grew to 153 aircraft. Just for your perspective, since the breakout of the pandemic, we have been taking 45 brand new aircraft deliveries. And also, the organization has grown. We reached over 6,000 employees at the end of the financial year. At the peak, prior to the pandemic, we were at around 5,000 employees. We are seeing very strong summer demand emerging, and we are also seeing the airline to return to historical utilization and productivity levels as well as exterior cost performance. We are operating at significantly higher capacity as we speak versus 2019. We are up 30% in the first quarter of the current financial year, and we are expecting around 40% higher capacity in the summer quarter. So if you just look at the footprint of the airline, we have been growing across the board. As I said, 27 million passengers, nearly tripling down on passenger count relative to the previous financial year. The fleet kept growing, 153 aircraft, airports. I mean, we have been investing into a number of new markets, new countries, new airports, pursuing opportunities arising from the COVID situation. So a number of bases have been actually consolidated to some extent. You recall that when COVID broke out, We reallocated capacity to make sure that we keep the airline operation as much as possible. Some of it was strategic, some of it was more opportunistic, and now I think we have a more concentrated operation than before. Nonetheless, it is a largely extended geographical footprint. We have been much pursuing our sustainability targets as well. very aware of the need to deliver the L9 greener than before, and I think we have been leading the sustainability development of the industry with that regard, and we got recognized for that by various parties. It is important to note that if you look at the fleet footprint of Bizet, and I will elaborate on that later, We have a younger fleet of aircraft, a more efficient fleet of aircraft that is economically a better performing fleet than the fleet of the rest of the industry. And also environmentally, it is a more favorable footprint and a lower carbon emission level than the rest of the industry. And the fleet, we believe, remains a key source of competitive advantage for Bizel going forward. And with that highlight, let me just turn it over to Eric.

Thank you, Joseph. Good morning, everyone. On the next slide, page four, basically just closing on the F22 results. So Joseph was mentioning the increase in passenger traffic. You can see equally revenue doubled versus obviously the first year of COVID. You can see from an EBITDA profile, we've significantly reduced the loss, almost reaching a break-even EBITDA in the second year of COVID. But unfortunately, obviously, it still led to a significant reported loss. A big swing factor in the reported loss was the unrealized FX losses as the dollar strengthened. That's a swing of around $120 million, and it was a positive inflow in F21 of around $30 million and a negative of around $90 million in F22. So that does stain kind of the reported numbers, and you should always take that into account on our business, given the exposure to US dollar liabilities. Moving on to what's really crucial for the business, which is CASQ and XU-CASQ. You can see that, yes, XU-CASQ did improve versus F21 clearly to 2.81, but clearly it's still far off from where we want to be. We used to be at 2.27 areas. And as Joseph says, we want to go back there very soon. If you look at what really, really impacted the numbers, it's all of the fixed cost lines. I mean, utilization was at seven hours, 44 minutes. It's well below our 12 and a half hours, which we want to do for this year. And that impacts the lines like staff costs, it impacts your maintenance costs, it impacts your depreciation costs, and even to some extent your airport and handling costs. So there's nothing structurally wrong with the business, but we need to be able to operate it at full utilization, which is our prime focus. From a liquidity point of view, I mean, we keep maintaining very strong liquidity, around 1.4 billion. There's been a number of changes, as you know, in terms of how we funded the business. We raised half a billion. At 1% in January, we repaid the CCFF fund. We maintain a very strong balance sheet, the investment grade rating, with Fitch & Moody's for the company. If you look at the internals on the liquidity on page 7, you can clearly see what I mentioned just now on the bonds inflow and the repayment of the CCFF. We had a material investment in fleet, as Joseph mentioned. We took delivery of 45 aircrafts. But during the year, we also announced the supplemental order on fleet, which is obviously critical to continue to support our growth, our momentum into with 500. As we see the opportunities around our network in front of us. And then obviously, as we all know, the operation has been, if you include the lease cost, a big drain for the company during the second COVID year as well. working capital has started to flow in. Obviously, the unflown revenue during the year has improved versus March 2021 as the activity levels have started to increase, and there's obviously more to come where this came from. Last slide for me on ancillary. If you look at the ancillary progression here, very strong progression during F22, so in total up 3 euro per passenger over that time horizon. We continue to see that, and we'll talk about that a little bit when we talk maybe Q&A or further guidance, but the ancillary continues to be very strong we believe you can maintain or stretch target of one euro per passenger per year increase that's what we see in India first month also of the of the new fiscal year you know the drivers they haven't changed dynamic pricing the product portfolio that we're offering some of that dynamic pricing by the way we're now applying also on ticket fair so we can talk that a little bit later but clearly a very strong and fluidly revenue performance and that continues And with that, I hand it back to Joe.

Thank you. So let's just look into the trading performance of the airline. So I will take us through various angles of what we are focused on at the moment. So if you look at the operation of the business, you see that the number of flights has come up significantly. So we are operating the airline at a significantly higher capacity level than ever before. So roughly we are 135, 140% capacity versus the same period in 2019. The load factor has also been ramping up, not yet to the level of 2019 performance, but I think we are inching towards that level. If you look at sales, which I think gives you an indication of what the business is expecting in the near term, in the next three to four months, I mean, we are seeing sales levels of going to 150, 160% versus 2019 sales levels. So if you kind of reconcile it against capacity, that is going 35, 40%. I think that gives you an idea of the yield environment. and our ability to drive ROSC in the system. While we have been ramping up operations, I mean, obviously, fiscal 22 was a big step forward versus fiscal 21, which was the lowest year ever in terms of productivity and operational performance. You are seeing on the right side chart that actually on-time performance has come under pressure largely due to the industry supply chain challenges we are facing in the form of understaffed ATC and also understaffed airport security and, to a certain extent, ground handling at various airports. So we are suffering from those events. Nevertheless, we have been moving up with ramping up the operational side of the airline. We remain focused on the customers. We measure their satisfaction. Obviously, we have been digitalizing our interactions with the consumers, and that's one of the strategic lines going forward, digitalizing the interactions with the consumer on the one hand and also digitalizing the operating platform of the airline. Interestingly, we have been building brand awareness during this period. Not surprisingly, we have been one of the very few airlines in the world that continue to grow the business, while all the others were pretty much stepping back. And I think we are also benefiting from that when it comes to brand awareness, not only when it comes to growing the footprint of the airline. We have been talking about the war in Ukraine and the impact of that war. I think the most significant impact was the capacity at that time, what was allocated to Ukraine, Moldova, and Russia. I think that issue is behind us. By now, we removed that capacity. We allocated the capacity by opening up 32 new routes and increasing frequencies across the network, so that kind of a wave absorbed uh the ukraine russia uh capacity as well we still have four aircraft in uh in ukraine representing around two percent of the uh of the capacity uh but the entire crew got basically redeployed across the um uh the rest of the wizard network uh we have been um trying to be very supportive uh to an extent uh we can uh to ukrainians uh by offering 110 000 free tickets and rescue fast to make sure that those people who left the country can travel cost-efficiently or with no cost on the system of Wizz Air within Europe. Obviously, it is a very volatile environment we are dealing with, and we are trying to react to that volatility in different ways. We've got roughly 30% of our fewer requirements hedged until August. So we played insurance policy. We still hold the lines that structurally hedging is cost to the business as opposed to profit to the airline. No airline has ever made money on hedges. That's the bank. But given the volatility, obviously, that's an important issue, and that's why we decided to play insurance type of hedging here. And we continue to look at opportunities for hedging should market conditions be supportive to that. We converted dollar PDPs into Euro at favorable rate and also we acquired ETS coverage in the UK and the EU for the balance of the year. We are much focused, obviously, on the current financial year and push the business forward from here. And let me just take you through a few highlights here. So looking at the fleet, as I said, I believe the fleet remains probably the single most important source of competitive advantage for the airline. We are innovating the fleet. We are flying another younger fleet of aircraft. And we are upgaging the fleet. So the current fleet average seat count is 221. We started from 189 back a few years ago. And this is clearly the best in class in Europe, but probably even globally for narrow-body aircraft operators. Obviously, that makes the production very efficient. and economically beneficial, especially relative to competitors. The NEO component is increasing in the fleet, and obviously that benefits the business when it comes to operating costs, ex fuel, but it also benefits the business when it comes to fuel burn, as the new technology aircraft burns a lot less fuel, roughly around 20% less fuel than the older technology. And we have the fleet program in place. We have the aircraft orders on hand to make sure that we have access to capacity going forward. I think this is going to become an increasingly bigger issue in the industry. I mean, if you... We are talking about the supply chain issues. The supply chain issues are not limited to the very operation of the airline and the surroundings of the airlines, like ATC, ground handling, or airport security. But in a big way, it is also down to aircraft supply. If you look at... Airbus and Boeing. I mean, there are strains in the system. They have issues with their own supply chains. And as a result, it is becoming increasingly difficult to get access to a new aircraft for the next few years. And we have that access in the form of secured aircraft orders going forward. We are back into the game of utilization. I mean, you can see the trends here. So back in fiscal 20, the company delivered around 12 hours of fleet utilization. We are seeing the current financial year to exceed that level of utilization. So we are coming back to sort of best in class territories on fleet utilization. That's very important because obviously we are deploying high value assets and we need to make sure that we spread the fixed cost in the system as efficiently as possible. We have been much engaged with recruiting stuff, especially pilots and cabin crew, to make sure that our organizational capacity gets aligned to the act of capacity we are deploying in the marketplace. At the lowest point, we had 4,000 employees. Pre-pandemic level, we started with around 5,000 employees, and now we have exceeded the 6,000 mark, so we continuously recruit. I mean, obviously, we are in the business of delivering growth, So this is a continuous effort. And I just want to make sure that you understand that VISA actually is fully stuffed on pilots as well as cabin crew for normal operating circumstances. The issues we are dealing with right now are the abnormalities of the operating environment requiring a totally different level of stuffing and totally different level of disruption management. And that's the issue we are suffering from. For normalities, we are fully stocked and we are fully productive. If you look at some of the building blocks we are driving this year, we've made a number of announcements, a number of initiatives. We are establishing an airline in Malta. That airline will start operating in October. We are looking at expansion opportunities in Saudi Arabia. We signed an MOU with the government there. As I said, we continue to recruit. We've made investments in London, acquiring slots from Norwegian at London Gatwick and also from welding at London Luton. We have the new Airbus order being ramped up, providing additional capacity and access to new aircraft supply. And as I said, it is important because that's a key source of competitive advantage for the business. We continue to invest into our existing markets in Central and Eastern Europe, but at the same time, we also invested into new markets. You recall, we just launched an airline in the middle of the pandemic in January 2022, and we continue to follow through that investment and investing more into those markets. We are concerned by... sustainability and we take sustainability very seriously. We believe we have a situational advantage given the fleet we operate. It is not only the most efficient fleet from an economic standpoint, but it is also the most efficient fleet from an environmental standpoint. And we're seeing that that makes a lot of sense for the future, not only for the consumers, but also for the airport environment, for the infrastructure providers, And we continue to focus on this. Our 2030 target is to emit 43 grams of carbon dioxide. And that would compare to 60 grams of Ryanair. So you can see that we would be far ahead of the next best in the market. And obviously the legacy guys are far behind us. I think we are making very good progress. In terms of carbon footprint now, as the fleet is getting fully ramped up, we are back to the level of emission where we left a full-fledged operation in 2019. So environmentally, I think we will start making some real progress going forward. But it's not only the environment we have been focused on, but we also are focused on various other metrics of ECG, ESG, sorry. So we have been driving diversity in the business quite a big way. And we are coming to targets there. And also we have been obviously making significant impacts on the economic and social environment we are into. I mean, clearly Wizz Air has become much wanted by societies, by airports, by economic entities, by recognizing that we are one of the very few airlines actually growing and can create economic activities and social activities around the industry. That's been one of the reasons why we opened up new markets, but also we remain very attractive to our communities and our established markets. So talking about the outlook, going forward, so we are expecting a very strong summer, but we will be delivering operating loss for the first quarter of the financial year. I mean, we are operating in a lot higher, fewer price environment on the one hand, and we are really forcing the ramp up, and we are aggressively regaining the core KPIs of the business, such as productivity and utilization. And obviously that comes with an investment, and that's what's reflected in the loss in Q1. But we are seeing a lot better performance through a full-fledged, fully utilized airline going into the summer period. As said, 30% growth on capacity in the first quarter, expected 40% in the second quarter. We are seeing a strong demand environment. Bookings are strong, fares are up versus 2019 levels, and we are also seeing load factors recovering to coming closer to pre-pandemic levels. Crew recruitment is on track, but some of the operational performance is jeopardized by the issues in the industry supply chain as discussed. We are expecting utilization to be reinstated to a pre-pandemic level, actually exceeding pre-pandemic level, going beyond 12 hours a day for the financial year. We remain focused on consumer preferences to deliver this business at the lowest post, i.e. the lowest fares to the market, and execute it the greenest way possible in the airline industry. In terms of managing volatilities in in the business. We continue to look at hedge opportunities on an insurance cover basis, and we continue to do that going through the financial year. I mean, obviously, you see that it's an incredibly volatile environment at the moment. We are not providing financial guidance for the year. I think we just need to see ourselves through all these and destructive operational environments. So once the dust settles down, I think we'll have a better view on what we can do and what we are going to achieve. But you clearly see that this is going to be a big year for Wizz Air. We're going to be delivering a record number of passengers through a record operation in terms of fleet size. But we just need to see how the operating environment plays out on us. So just to close this off, we continue to invest. We invest into markets, invest into aircraft, invest into people and systems. We are delivering record numbers. And we are managing growth well based on historical KPIs in operation and in productivity. We believe that we are a structural winner in the industry. given the fleet composition of the business, the network footprint, what we have, and the cost base, what we can deliver, being the lowest cost producer or one of the lowest cost producers in the industry. We remain strong on liquidity, and as a result, we continue to benefit from investment grade from the market, especially when it comes to access to capital, access to active financing resources. We are on the consumer. The consumer wants the lowest price. and the consumer wants the greenest airline, and these are the factors what we said delivers. And going forward, given that we are now operating on the basis of a much younger aircraft fleet, while the rest of the industry relies on an aging fleet of aircraft, our competitive advantage will continue to widen up going forward. That may represent and certainly will represent further business opportunities in the future. Thank you.

Thanks very much. Alex Irving from Bernstein. Two from me, please, both on networks. So first of all, on the basis that you closed Oslo and Dortmund, what were your expectations when you first opened these? What changed? And then how does that influence potential locations for future bases in the network? Second question is on the Saudi memorandum of understanding. Appreciate this at an early stage, but Under what conditions could entering this market be attractive? And should we interpret the fact that we're looking at more operations in the Middle East as being that Abu Dhabi is going maybe better than expectations? Thank you.

Thank you for your questions. Maybe just coming back a little bit in time. So when COVID hit the industry and hit us, we were very keen on maintaining the highest level of possible operations of the airline. And we were, on the one hand, making strategic decisions, and on the other hand, we were also making some opportunistic decisions. And some of those opportunistic decisions didn't play out for the long run, but it was not really the intent. The intent at that time was to redeploy capacity, fly the aircraft, fly the crews. And I think in that category, I would put Oslo and Dortmund. So those markets kind of delivered a return with that regard. But the markets didn't stick for the long run, unlike some of the other moves we have made, like Italy. And if you look at Italy, it's not only that we entered the market, but ever since we have been significantly ramping up our presence in Italy. So I don't think that, you know, Dortmund and Oslo gave much of a lesson for the future because those were kind of extraordinary measures in extraordinary times reacting to the COVID situation. With regard to Saudi, yes, indeed, I think we are very excited about what we are seeing in the Gulf region. The consumer uptake is really picking up in Abu Dhabi. And let's not forget that we launched the airline in Abu Dhabi when the market was totally constrained and restricted, and Abu Dhabi really just opened up a few months ago, and we are seeing a very strong reaction of the market. So that increases the appetite. of ours, not only for expanding Abu Dhabi, but also looking at other opportunities in the region. And within that context, we think that Saudi is a great opportunity, you know, by understanding the country's ambition to really drive air travel in the country, to diversify their carbon economy to a more sustainable societal model. We think we can play into this. The conditions to confirm our interest and actually to operate, obviously, are the same as well. We need to have the right cost base for the business, and we need to see a reasonable prospect for returns of investment, what we are making there. We are quite confident with the second line, but we need to make sure that we create the right cost platform and right operating platform in the country first before we commit.

Morning, Jamie from Deutsche Bank. Apologies for focusing on base closures when you've obviously shown some very good growth recently versus pre-crisis levels, but I just wondered where you'd put the decision to exit Doncaster in the UK within those comments on closures, especially in the context of your slide showing improved brand awareness in the UK. Second question, Obviously, as you try and pass on material fuel cost headwinds, probably the last thing you needed was a 10 euros per pack surcharge in Hungary. When does that kick in, and what do you think will be the impact on demand from trying to pass that on in the current environment?

Thanks. With regard to Doncaster, I think unfortunately we ended up with a commercial debate with the airport, resulting in significantly... rising costs to the business, which we are not prepared to tolerate, certainly not in light of all the other challenges that we are having in a business like much higher fuel price. So that situation kind of forced us to act. So that's Doncaster. With regard to the Hungarian profit-win vortex, or whatever you call it, That's a government decision. I don't think it does any good to the market, to the demand environment in Hungary. I don't think that really delivers on the strategic objectives on the country. I mean, Budapest and Hungary need to be back into the tourism market. I mean, as opposed to putting more strains and more burden on the consumers, actually you should be taking some of that out. But that's politics. I think it will lower demand because simply the cost of travel would be rising. This is effective as of the 1st of July. So we are not yet seeing the impact. I mean, we will learn how much of it. I think it's a fairly significant cost to the system. But as far as we are concerned, if we are seeing less demand in Hungary, we're going to be moving capacity around and we're going to be putting capacity up against you know, markets that actually we see demand picking up.

Hello, Carolina . Two questions for me. First is you mentioned that you expect to go back to the 2.27 gas tax fuel. At some point, we are seeing a lot of disruption, inflation. Will this scale be enough to offset that already this summer in Q2, or this is a fiscal year 2024 target or beyond? My second question is, how do you think about capital structure and your investment grade? Because we don't know how 2023 will play out, so we could be a year uh of potential weakness and and because of aircraft delivery you're building up leaving that so as long as you keep uh high liquidity levels you think rating engines should be fine or or there's some capital strengthening measures that you could be forced to think about maybe i i also the actual and i would leave the capital structure to you um i think today the single biggest variable to actual uh performance is uh is disruptions and associated costs

And this is what we need to see, how we settle down. Now, personally, I think that summer might be difficult, to be honest, because of all these supply chain issues. But post-summer, I mean, we know that this is a fairly seasonal industry, so a lot of capacity is going to get removed post-summer just on a seasonal basis. And I also think that quite likely, if the the macro context of the business continues to prevail as it is today, high fuel prices, pressure on commodities, inflationary pressure, et cetera, that will force the weaker airlines to remove capacity. So the system, the supply chain, will become more capable of dealing with that level of capacity. So I don't think that the level of disruptions you are seeing today will continue through the entire year. I mean, it may continue for another few months, but I think it will turn around at one point for various reasons. for various reasons. And I think that is the time when we should be able to see actual performance coming back to pre-pandemic level. So again, I think in the first half of the financial year, we're going to be big time subject to industry supply chain performance and associated disruption costs. But post this period, in the second half of the financial year, you should be really starting seeing historical performance levels to be reinstated and recovered.

I think actually a nice segue to your second question. I think the cost performance of the business is the key to the investment grade rating because the competitive gap on cost has continued to widen. And as we are able to deploy full utilization, the newest feet at cost performance, will really, really help us. We're now maybe in the short term hit by the cycle, but the cycle will trade out. Prices will be more elevated or cost structure will be great. And then if you're on that higher revenue platform, get back to your margins, the operating profit, the operating cash flow immediately, you know, very quickly gets you back into the leverage criteria for the rating agencies. And that's really where we're focused on. So, yeah, nothing more to add there.

Hello, I'm Nicholas from LexCorp. Notice that you changed some A320s into A321s. Shall we read in there that the performance of the plane is a great plane on an Excel spreadsheet, but in real life it also takes longer time to empty it and rotate it and harder to get a high load factor. Should we read into this that it's actually performing in practice as well as you'd like and is that a sort of sign of that that you've converted the 320s to 321s? Maybe you can also touch on the XLR delays and how that impacts your plans and maybe also, you know, Ryan there for, you know, after a few years of not getting many new planes, he's now getting new planes, he's is growing again. They mentioned that they're doing well in Hungary, in Italy too, et cetera. So it seems that you guys are sort of more often moving head to head. So I'd love to comment on that too.

Thanks. All right. So with regard to the AC21 versus the AC20, I mean, a long time ago, we have opted for the AC21. AS PREFERENCE FOR THE BUSINESS. I MEAN, THE AC-21 IS A LOT LOWER UNIT COST THAN THE AC-20, AND WE DON'T HAVE ISSUES WITH REGARD TO FILLING THE PLANE, SO WE ARE VERY HAPPY WITH THE AC-21. I MEAN, AS YOU SAID, THE AC-21 OPERATES MORE SEATS, SIGNIFICANTLY MORE SEATS, MORE PASSENGERS AS A RESULT. the operational criteria may get affected. We are allowing more time for the turnaround of the AC21 than the AC20 to reflect on those. But we don't think that the AC21 is a totally different operating model than the AC20. So we are getting a very similar productivity out of the AC21. And clearly, if you look at the economics of the AC21, it's almost like you operate 60 seats for free So that's kind of the efficiency gain, especially when you compare the AC21neo to the AC20SEO. With regard to the XLR, I think we need to understand to what extent the XLR deliveries will get delayed by Airbus. We are excited about that aircraft, but we are not dependent on those aircraft. And actually we have an agreement with Airbus that should the XLR deliveries be delayed, that we would be getting AC21s, normal AC21s, so I don't think that this is going to affect the fleet plan of the airline. We would just be rolling out the XLR network a little later than planned, but the overall growth of the airline is secured and will be supported with aircraft deliveries. With regard to competing with Ryanair, I think competing with Ryanair is the fact of life, and we have been competing with Ryanair forever. I mean, for 15 years, and believe it or not, but we actually like competing with Ryanair. I think Ryanair makes us a better airline. They are very good, so they make us focused, and as a result, we benefit from that competition. I mean, we have been competing with Ryanair across the whole of central and eastern Europe for a long time. Yes, now we are competing more in Italy and other places, so be it. I don't think the real question is that when these two airlines compete, what's going to happen to one versus the other. The real question is what's going to happen to the other guys who are non-competitive. They don't have the liquidity. They don't have the cost base to compete. They don't have the efficiency, so that's a better question to see how that competition is going to affect the rest of the industry.

Hi, good morning. I had two questions as well, please. Just firstly on profitability and recovery of earnings, following on from Carolina's question, how quickly do you want to get to a positive result and are you willing to just aggressively proceed with your capacity growth plans to achieve the unit cost advantage and ultimately sustain losses for a bit longer until the revenue recovers. That's one. And then secondly, on the sustainability, appreciate the efficiency advantages, but have you thought at all about sustainable aviation fuel and do you have any targets of usage there? Thank you.

yeah so uh thanks alexa for the question so the um obviously i mean you see now we have previously reported on our principles to operate the aircraft so first and foremost um during the pandemic we have always uh attempted and i think succeeded in operating them on a variable cash contribution positive way uh clearly we're shifting that paradigm to profitability There may be periods in the year, it could be in winter, November, where we will need to go back to some of the principles, but clearly we think we can deploy the aircraft in a cash-positive way, and for that reason we're really, really focused on the profitability of the network, not only for summer, but also for winter, for any day of the week, basically. And that won't change. So here, again, key is the lowest unit cost that will allow you to deploy the aircraft profitably to another scum. On the efficiency, clearly first we will be in line with the blending mandates that are being proposed as part of the EU Fit for 55. We may not go beyond that. We believe that the efficiency on the fuel and carbon is really in the technology first and foremost. If you look at the self-supply chain, I mean, there is essentially no self-supply chain. And the supply chain that there is, the question is, if you look at the lifecycle assessment of what there is out there, it's really quite questionable based on the today's supply chain if that really, really delivers a benefit for the environment. So the best thing that we can do is to kind of push The technology that we have is everybody, and you know these statistics, if everybody would follow our business model, emissions would reduce 35% in terms of intensity, and we will reduce another 35% by 2035. So that's kind of a 70% reduction for the industry, which is kind of what we need to do to get into the climate scenario of 1.5 degrees, the global warming scenario. So that's clearly the focus area, but we are focused on SAF as well. We are trying to contract our requirements as of 2025, our RFPs. We're looking at startups in new technology, but if you look at the startups, typically they come on stream. I mean, they claim to come on stream by 2026, but in reality, most likely they will only come on stream by the end of the decade. But we're very focused on both angles, but technology in the short term is the right way forward.

Hi, guys. Conor Dwyer from Bernberg. You mentioned you were fully staffed, but the current environment, I think, needs abnormal levels of staffing. Could you just talk a little bit about what exactly that means, that just keeping cabin crew around a bit longer, and on that, how variable is the pay on these kind of workers? And then also, interested to hear your views on what the risk is to late-in booked revenues if the current disruptions at airports persist. Anecdotally, I've been speaking to a lot of people who basically say, I wouldn't book a holiday next month as a result of the current environment.

Thanks. Okay. Yes, we are fully stocked for operating the airline. properly under normal circumstances. And when you are dealing with the level of operational disruptions we are seeing at the moment, you have to keep two things in mind. That you might be running out of time in genuine terms. I mean, the day is still 24 hours. And if you get delayed and delayed and delayed, this is still within the framework of 24 hours. And two, you are running out of duty time because we are in a regulated industry, so people cannot be rostered for duty for an unlimited period. So that's all determined by regulations. uh... so uh... by doing with those issues uh... uh... basically what we are doing at the moment we are creating more uh... buffers and uh... reserves in our own system so we are eliminating a few flights to have fire breaks in the uh... in the schedule and also we are putting up more uh... buffer crews uh... standby crews to make sure that if we get disrupted we have a pool to use crews from pilots and cabin crew. But still, the day is 24 hours, so you cannot have full recovery on the basis of your own reserves. You still have to accept the fact that if you get over delayed by ATC, for example, at one point you will have to cancel. but we try to minimize cancellations to an extent possible. I think you also have to bear in mind that the UK, to some extent, is in a particular situation given the post-Brexit immigration policies you have in place. I mean, you exempted agriculture to pick the raspberries. Maybe the government should exempt aviation to get... the supply chain reinstated properly for operational purposes. You are a closed country. You cannot replenish the vacancies through the labor force elsewhere than the UK. And by the way, whoever is in the UK don't want to work And that's the issue I think systemically the government needs to look at. So while I would say that supply chain issues are affecting the operations of the industry across the board globally, but you are hit a lot harder in the UK than what we are seeing elsewhere. I mean, we don't really have this sort of issues in Central and Eastern Europe. We have some issues of this kind in Western Europe, but the UK is disproportionately hit given all these issues that we are seeing in the country. So when you look at the risk, whether or not this is going to jeopardize our ability to operate the airline at capacity levels, what we are planning on, I don't think that this is going to undermine our ability to grow and perform on a total system basis, but indeed we will have to watch out what's happening in the UK. But I would also say that if consumers decide not to book, then it would affect the capacity of the industry and it will get lowered by the airlines and that may have the recovery. But I don't think that this is going to be fundamentally affecting us when there is a distressed environment for the consumer. Typically what you see is that people downgrade from high-cost carriers to low-cost carriers. You pay a lot more for a BA ticket than for a Wizz Air ticket. The risk you undertake with BA is a lot greater than the risk with Wizz Air in terms of economic exposure from a consumer standpoint. So I think that's going to affect more kind of the premium end of the spectrum, the higher cost carriers than the low cost carriers. But I would really differentiate the UK for these purposes vis-a-vis the rest of the countries we are dealing with. It's a disproportionately blown issue in the UK.

Muneeba from Bank of America. I had a clarification on slide 11 where you show revenue versus pre-pandemic. Firstly, is that just ticket fares or does that include ancillary in that? And if it's at 160% and capacity would be at 40%, then that would imply ticket fares are more than single digit up. So can you help me just put those pieces together? And then kind of how are you thinking about the summer? Like what sort of a ticket fare increase do you need to break even?

Oh, I mean, maybe the best way to put this is that, yes, I mean, just to clarify the slide, it is total revenue. Yes, it implies more than single-digit improvement. Well, with regard to break-even, I think you look at two factors, obviously. One is how your unit revenue continues to develop, and yes, we are on double-digit territory. as we see it at the moment. And I don't think this is going to be fundamentally different for the rest of summer. We shall see how the winter season plays out, but you have to put it against the cost environment. And when you look at the cost environment, the two fundamental variables we are dealing with right now, obviously one, fuel, and two, disruption costs. And we need to moderate disruptions and disruption costs as a result to make sure that we keep this line under control.

the one small addition, you also see the lengthening of the booking window coming through in that revenue curve. So that's an additional impact to the ones Joseph is outlining.

Yeah. Morning, John. This is Harry Gowers from JP Morgan. First, I'm just following up on the Middle East. I mean, how do you assess the competitive environment there at the moment? Why could it support WIS and maybe be ripe for disruption? And then just on your USD liability exposure, have you taken or are you able to take any actions to maybe limit your exposure on the dollar? Thanks.

I think we are very competitive in whichever market we enter in the Middle East. I mean, we compete with all sorts of carriers, and those carriers tend to be varying market by market. But we are a very disciplined, very low-cost business, a lot lower cost than any of the other carriers, so we have a significant competitive advantage. And I think this is what we are learning in the marketplace, and that's how the market has reflected on us coming to those countries. Consumer needs are universal. This is a commodity. In commodities, lowest cost prevails, lowest cost wins, and whoever delivers the lowest cost will win that market, and we are the lowest cost producer in the industry there.

On the dollar liability, I mean, really the structural fixes are to get more euro-exposed lease liabilities, which is something that we're looking at, but we're not kind of overly obsessed by it. In the end, we want to have the best terms to finance the operation. And then there's some other things that we're doing, like what we've mentioned on PDP, et cetera. But clearly, as the cash builds back up in the business, we're also looking to rebuild back the dollar deposits over time. So those are really the two key things. Yeah, so if there's no further questions from the room, we will maybe operate or open the questions from the call.

Ladies and gentlemen, we now begin the question and answer session from the phone. If you wish to ask a question, please press star and one on your telephone. We have the first question from Mark Simpson from GoodBuddy. Please go ahead.

Yeah, thank you. Good morning. I just want to have one question. It's related to page 18 of the presentation. Your utilization target for FY23 suggests, and you can correct me on this, but suggests that your lock hours in the second half of this year will be up 60 plus percent over the FY20 comparative. And if you put in the up gauging over that period from FY20 of circa 9% on seats, your ASKs are obviously maybe going to be high 60, 70% higher in the second half. You've given us an indication of, say, Q1, Q2, and it's essentially fairly easy exercise to get the block hours. You know, take your average fleet that you've got there, 153, 182 aircraft, multiply that by the utilization, and then 365 days. And if you do that historically on the data you've given us on that page 18, is plus one, minus one percent, the actual block hours that you state in your important account. So it's a fairly good guidance you've given us, but I can't reconcile that assumption of fleet size and utilization with the idea that at that rate of growth, you can be anywhere profitable into the winter season in terms of your pricing. You've got to really have to be a price taker in that market. So can you take us through your thinking in terms of H2 capacity and how you're going to manage that?

Maybe just a headline on this, Mark. I mean, this is an industry that doesn't tend to make money in the second half, even under normal circumstances. So I don't think that the issue is... you know, how do you reconcile all that capacity growth to profitability? I mean, it is important from our standpoint that we continue to ramp up the business, that we continue to reinstate all the KPIs and efficiency factors needed to deliver the USEC model. And obviously, you try to do that with the best financial efforts in terms of outcomes. But I don't think we are looking at profitability for the second half of the year.

Of course not. Correct me if I should have said level of losses. But in that instance, first off, can you confirm... that your capacity forecast or expectations for the winter season 2022-2023 is 60 plus percent block out, 70 percent ASKs. Is that how the math now looks?

Yeah, it depends on the reference base because obviously I have a weird key for it in S20. But yes, I mean, we do plan to utilize the assets that we have that will lead to a plus 60% ASK growth over our fiscal 20. You know, we haven't given explicit guidance because there's a few factors there that we will need to see. We'll see deliveries be in time, et cetera, et cetera. So that's why we refrain from giving guidance. And clearly, yes, to Joseph's point, we, and I just reiterated the principles that we'll be using for the business, we try to get as profit-advocative as we can, but we know during winter that the focus is more and more, especially during given periods, given months, to make sure that we can operate them cash-positive. which may mean that they won't be profitable necessarily.

So that doesn't reconcile with your utilization data.

Well, we can separately talk this offline, Mark, and not have to do the math in front of 20 people.

Well, they probably would like you to do the math for us, because as I say, your guidance doesn't reconcile and that is concerning. Either that or you're going to have to dump pricing.

I mean, you guys will do it. But I think you also need to see the differences between the 2022 network versus the 2020 network. I mean, the two networks are very different from each other. I mean, if you look at the current network, I mean, we have a... largely expanded and expanded geographical footprint. If you just look at Abu Dhabi, we were talking about it. I mean, we are planning on substantial growth in Abu Dhabi. Actually, winter is the season in Abu Dhabi. That's where the industry's performance is actually better than in summer, which is the off-season there. Also, we are into markets like Italy, Albania, etc., where we had no presence back in uh 20 2019 so it is just a very different market and i i don't think that just the sheer numbers of uh of looking at um uh the indices uh we really give you the uh the sense of the the business and let's not forget that uh uh one months of the six months in uh fiscal 20 was totally distorted by kobe at that time i mean we became unoperational essentially in in during the course of march 2020, and we have a full operational month in the current year.

If you adjust for that, it's about 15,000 block hours in that Q4, if you go back to the FY20 comparison. It's obviously, I think sometimes the concern is that your fleet order and your ambitions are running into the headwinds that we can see across the market, and it just makes the returns profile pushes it out further than maybe we had been anticipating. Okay, we'll move on to the next question. Thanks.

Thanks, Mike.

Next question from Damien Burke from Mechanicart. Please go ahead.

Yes, good morning. I too have two questions. First of all, I just want to know how confident you are in achieving that 90% load factor in September. As another questioner has alluded to, do you have any leeway in there for loss of late bookings with the high yields as you approach September, given the very bad PR industry and indeed Wizz Air has been receiving? And then the second question, I want to pick you up on one of your responses. You mentioned there was a particularly UK problem with a normal summer. And yet, it appears from the data, if you look at Stansted, where there's a very sizable Ryanair operation, they don't seem to be running into any of these issues in any material way. And equally, Jet2 doesn't seem to have these issues. What do you think those airlines are doing differently than Wizz Air has done to allow them to get around this? Or is it simply a matter of fact that you plan your operations based on the blue sky summer every year for no abnormality. Can you expand a little bit on where you think you're different from where those two companies clearly aren't having the same kind of problems in the UK?

Well, I mean, maybe starting with the last one, I mean, we are operating from Luton and Gatwick in London. Ryanair is operating from Stansted. I mean, I think the particular distress is in Gatwick when it comes to the supply chain, especially from an air traffic perspective, air traffic management perspective, but also I would add airport security as well as ground handling. So Stansted has been a lot more ramped up on each of these supply chain elements and a lot more intact than Gatwick. So given that we invested into sourcing Gatwick, so we are now more exposed to Gatwick on our capacity. and we are disproportionately hit by the Gatwick issues relative to even Luton, certainly to Stansted. So I think there are significant differences in how each of these airports is operated from a supply chain perspective. So I think that explains most of the... most of the differences. I mean, we are equally stocked up, if not more, than any of these airlines you mentioned when it comes to cabin crew and pilots. So I don't think that there is a difference with that regard. I mean, simply, they benefit from a more intact operating platform of the airports, they are subject to their operations vis-a-vis our operations, especially when it comes to Gatwick. I mean, so I think... Can I pick you up on that?

Because, I mean, you know, I don't think anyone in the room or listening on this call would describe operating from Manchester as a sort of cakewalk. So to understand, I think the root of my question is, you know, when you plan summers and when you plan summer 2023 or summer 2024, are you equally going to plan it on the assumption of perfection, blue skies flying, in order to achieve your cost base, or are you going to have to put more cost in for the abnormalities that pre-COVID-19 did come with most European summers, whether it's ATC disruption, strikes, or similar issues? I'm just trying to square your planning versus your cost goals in that CAS question that we had earlier.

I mean, you can look at our historical actual cost performance and you can look at what is going on at this point in time. I think that there is a hiccup at the moment in the world and more in the U.K., I mean, simply the recovery and the ramp up of demand got totally underestimated by many of the stakeholders in the industry. I mean, look back a few months ago, IATA was talking about, you know, recovery in 2025, 2026, I don't know, 3,250. and stakeholders in that industry simply have just not acted according to what we are actually seeing in the market, that immediately once the government removed COVID restrictions, people got back into the franchise of flying. And probably I would say even more, because their freedom to travel was contained, and now they want to enjoy the benefits of being free again, and actually they have some savings that they can spend now. And I think that was underestimated and the supply chain was not ramping up against what is actually happening. We have been ramping up against it. I mean, we have been investing into fleet, into organization throughout the whole period. But when you say, well, maybe this is structural for the rest of our life, I would disagree with you on that. I mean, I think that there has got to be a learning process here for everyone. And I don't think this is a sustainable level of the operating environment. I think governments will have to act on this. I think all the other stakeholders of the supply chain will have to act. And they are acting on this, but it takes time. I mean, if you look at a controller, it takes some considerable time to train an air traffic controller. you know, getting the ramp agent put in place in each of the airports takes some time. But I don't think that what you are seeing today is necessarily a guidance for the rest of life, what's going to happen in five years from now. These issues will have to be fixed. And again, I think the issues are bigger here because of the total underestimation of the realities by the system. contained by your immigration policies here, that simply you are just cutting off one of your legs, that you are unable to react quickly to a situation like this because you cannot replenish labor.

Okay, so you're still confident you can make the 90% in September against this backdrop?

I don't know how you got this 90% in September. I don't think we were guiding any specific number on any specific months. We said that summer and summer goes beyond September. So summer is July, August, and September. And yes, we are confident in our ability to deliver 90%.

Okay, great. Thank you. So we'll look forward to this time to see how it works out. Thank you.

We've got the next question from Jace Goodall from Redbird. Please go ahead.

Yeah, morning, everyone. So a couple from me. Firstly, on the balance sheet, are you able to give us any moving parts on how you expect gross debt to evolve over the coming year? So thinking about any changes in lease liabilities per aircraft, potential debt repayments, that sort of thing. And then secondly, any color on gross or net capex this year would be very helpful. Thank you.

Yes, James. If you look at lease liabilities today, it's around $19 million per aircraft. We always say you should use the aircraft evolution as a good evolution to predict what will happen for the future. Obviously, our fleet is getting younger. It's five years now. It will go to four years, so maybe the 19 will move to 21 million or so, but that's kind of what you should be using. So you should be using the current ratio to project for the future. In terms of CAPEX for F23 or F24, for that matter, you should not assume any additional PDP payments. Recall, you just saw it also In the liquidity slide, we had a material outflow on PDP this year that actually during the year had increased because we took the supplemental order, but there's no further PDP, material PDP outflow or inflow in the next two years.

Brilliant. Thank you.

Thank you for your question. The next question is from Alex Peterson from Pihon. Please go ahead.

Good morning, everybody. Can I ask two questions, please? Firstly, apologies, I didn't quite catch what you were saying about the differential between your revenue, which was at 160%, and the capacity, which was up 30% or 40%. Would you mind just saying that again? And secondly, just on the sort of EU 261 charges, How should we think about that for this year? Should we scale up what happened last year or last summer, really, for the increase in capacity, or do you think it's going to be a lot worse than that? Thank you.

On the revenue, so as Joseph was highlighting and we were highlighting in the call, is that indeed it's a forward revenue. It's an all-in revenue. It's not only ancillary or ticket. It's combined, total fares. And it's a reflection of the higher fares and a lengthening of the booking window, right? The booking window used to be still very closed in. It extended to around 70 days. So it's kind of back at 80% of where it used to be pre-COVID. So that's obviously impacting the revenue, the sold revenue. On the EOT261, you should obviously... with the growth of the business. And it's true that in the past two weeks and probably in the current, let's say, the first 10 days of June, we will see additional use to 6-1 charges for the reasons we've just explained. But equally, with the interventions that we have taken in terms of additional agility, in how we crew, in how we have the network, and how we have the fleet available with what Joseph explained on fire breaks, etc., we're confident to trade out of that higher cost and go back to normal cost over summer. And obviously, if everybody goes on strike over summer and the fire breaks that we will have will need to be extended, we will need to potentially revise that number. But with the information we have today, that should normalize.

And do you think you can claim back many of those costs against airports if the problems lie with them.

Well, I think we've outlined the key reasons being ATC, etc., so it's quite hard. I mean, we've seen a lot of increases in charges and on-route and ATC charges, and to get this type of performance is quite disappointing, so we will try to claim back as always, but I'm not sure how successful we'll be.

Thank you.

Thank you for your question. As there are no more questions, I will now go back to with a CEO, Jose Varabi, for closing remarks.

Thank you very much for your presence, for your interest. We appreciate your questions, so please keep challenging us. That's good. That's a challenging environment, as you can see, but I hope that you are seeing all the key levers in this business that are out there to make sure that we structurally benefit actually from the current situation and we'll come out of this as a better business, a more formidable competing force going forward. Thanks again. Bye-bye.

That concludes the conference for today. Thank you for participating. You may all disconnect.