Ryanair Holdings plc

Hello and welcome to the Ryanair full-year results conference call. Throughout the call, all participants will be in a listen-only mode. Afterwards, there will be a question-and-answer session. And just to remind you, this conference call is being recorded. Today, I'm pleased to present Michael O'Leary, CEO. Please go ahead with your meeting.

Okay, good morning, ladies and gentlemen. You're welcome to the Full Year Results Conference call. You'll have all seen this morning we released the results at 7 a.m. together with a Q&A video with myself and Neil Saar in the group CFO. So we'll take it off. This is great. I'm joined here in Dublin by the full team and pleased to welcome Tracy McCann here, who's also been appointed in recent weeks as the CFO Brian Ayer-Dak. Tracy, you're welcome and congratulations on the much-deserved appointment. A couple of quick thoughts on this. You're seeing today or this morning's numbers, you know, we were heading for a terrific full year to the end of March 2020. Had March not been disrupted by the COVID-19, it's likely we would have seen traffic grow to about 154 million passengers and full year net profits would be towards the upper end of the range, somewhere between a billion and a billion fifty. As it was, COVID and the government mandated groundings of the fleet through from essentially mid-March. meant that we carried 149 million passengers, up 4% on the previous year, and profits came in at the higher end of the current rate, a tad over a billion euros. Much, however, of what happened last year is obviously now historic, and so I won't dwell on it. A couple of things on the COVID situation, just a couple of key thoughts. Clearly, we're grounded and expect to be grounded fully through April, May and June. We're guiding that they, you know, thanks to significant cost savings and cash preservation measures, we think there'll be a Q1 loss somewhere above 200 million, but under 300 million. We are already, though, have announced that we expect to go back to some level of flying from the 1st of July. We are promoting at the moment about 1,000 flights daily, which would be about 40% of our normal operations. We took considerable comfort from the evolving situation over the weekend where the Italians have returned or opened up the economy to tourism again from the 3rd of June. They have removed in its entirety this utterly ineffective and nonsensical 14-day isolation, which no government has yet been able to explain how it operates or how they would even police it. We are pushing hard, though, for effective health measures, and we think that comprises generally face masks in all public transport situations, in busy train stations, undergrounds, airport terminals, and onboard aircraft. Face masks are effective at eliminating about 98.5% of the risk of the spread of COVID-19, and it seems to me it's the only way you could allow most of our economies to recurrent some kind of activity during the summer months. Already last week, since we announced that, we've seen a significant spike up in bookings. Now, I wouldn't want to get too excited, but this weekend, for example, our bookings were up 60% over the previous weekend, but that was off a very small base. But we are seeing a significant number of hits and surges over the weekend, particularly, I think, from families looking at going on the two-week summer holiday from Northern Europe to places in Italy, Spain, Portugal, etc., And in all of those countries we've seen the cases of COVID-19 are significantly lower in the beach and the resorts than they are in the heavily populated cities. So we would hope that there will be a reasonable relaxation of restrictions and that they'll wipe out, that they'll completely remove the things like 14-day isolation, which are bonkers and unimplementable anyway. over the next couple of weeks and that there would be a reasonable return to passenger movement from 1 July onwards. It's still six weeks away. We haven't yet begun to aggressively price promoters. What we're doing at the moment from last week and this week is encouraging the health measures, health prevention measures, hand sanitization and face masks. The concern, I mean, I think if you put this in some context, clearly there's going to be a lot of short-term pain in the airline industry. We would be lucky, I think, if we see a 50% load factor through the second quarter. We are expecting maybe a 75% load factor in the winter, but we're guessing and we're making this up as we go along. We are saying now that the traffic for the 4U will be less than 80 million passengers, but we really can't put an accurate figure on at the moment. Our gut instinct, though, and it's something we share generally, is that once people begin to move, is that the traffic will return pretty quickly because there will be aggressive price stimulation both by the airlines, by the tourism providers, the resorts, the hotels across Spain, Portugal, Italy and Greece. They will try to rescue what's left of their tourism season on the back of price. But that also means that while we're looking at a reasonable return to traffic volumes, we think it will be on the back of much lower airfares and yields. We're really flying blind at the moment. We hope to be able to go back flying on the 1st of July. We think that's reasonable. We think that the traffic volumes will return pretty quickly, but on the back of pricing. And that's why, honestly, and I know the first 15 questions on this call are going to be, what do we think the yield downturn will be for the year and the profit loss? We have a deposed notion, so please don't ask us. But what we can give you is what we think we're doing on Kite. Over the medium term, we see this as a huge opportunity. Ryanair has entered this with a number of other airlines in a well-managed situation. We had 3.8 billion in cash on the balance sheet at the end of March. We're up to 4.1 billion of cash today. Admittedly, most of that was the 600 million drawdown from the UK government and transparent loan scheme. Our cash burn is about 60 million a week. About three quarters of that, about $45 million of that is the fuel hedge payment. So that actually, if you strip that out, it will decline as we move through the year. In actual fact, the cash burden is down to almost zero, not quite, but close to zero, which means we can continue this in this environment for a year or two at this point in time. Obviously, we want to get the business back moving. We think as long as we could get to a 50% or 60% load factor on flights, we'd be operating close to break-even. But again, that much depends on what assumptions you make on yield and on ancillary sales as we return to flight. Other than that, the big challenge though, so over the medium term, there's a huge opportunity here. We're going to face into a number of years of trading where we'll have much lower oil prices. Airports will be very aggressive because they've lost a huge amount of traffic. They will be introducing very significant discounts for growth. We're already in active negotiations with the airports on those stimulus measures. Our payroll bill will be a lot smaller. One of the tragedies of this is, I think it's inevitable, we are facing very significant job losses at the front end, pilots and cabin crew. We'll only carry 80 million masters this year. That would be about 50% of our normal volume. There's simply no way that we can continue to employ the numbers of pilots and cabin crew we do, and they are going to be broad spread redundancies, pilots and cabin crew in countries all over Europe, the UK, Spain, Italy, and Spain, Italy, and some of the other large countries who've already initiated that process. The unions, as usual, are kind of sticking their head in the sand and looking for more information There is a lot more information you need. We're facing an existential crisis in the airline industry. So there's going to be job losses and pay cuts. And if we don't get agreements on pay cuts quickly, there will be even greater job losses. That will be accentuated later on this week when in Vienna, we've already announced that we will close the Vienna A320 base if the union and the Verdi union don't agree to revise T's and C's for pilots and cabin crew in Lauda. We don't expect them to because at the moment they represent about 6,000 members in Austrian Airlines. We had a first meeting with them last week, which was a shambles. They wasted 40 minutes arguing and discussing why our proposals were in English language and not in the German language. So we explained that we don't have time to be pissing about over languages. 300 job losses and a base closure, whether it's in English or in German, but still have the same impact on our cruise pilots and cabin crew in Vienna. We're pleased and heartened by the support we've received from our pilots and cabin crew in Vienna. As of this weekend, over 95% of the pilots and more than 66%, more than two-thirds of the cabin crew, have already signed up for these changes. The tragedy, though, is that the structure of labour agreements in Austria means, unless it's signed up by the Union, the pilots and cabin crew can't agree to these changes. So we have massive and overwhelming support from the Lauda pilots and camp group for the changes. But an Austrian Airlines Union can effectively block any of those concessions, which means in our view it's inevitable that the NA820 base will close at the end of May. The decision will be made on Thursday when the Berlin Union don't sign this agreement. The only reason it was closed was because the Verdi Union won't sign the agreement. And, sorry, the Vita Union, my apologies to Verdi, who are their German cousins, the Vita Union won't sign the agreement. And what will happen in that situation is we will not withdraw from Vienna. Vienna will be, we still have three Ryanair 737s based in Vienna. When Vienna reopens, we will fly the base using the Ryanair aircraft. And we will backfill an awful lot of the routes and flights on Ryanair aircraft based elsewhere that will now fly to and serve Vienna. So they will, in actual fact, which puts us in better shape to compete into the future with the state-aided Austrian airlines. We'll be competing with them with a much lower cost Ryanair operation than the high cost Lauda operation. But we hope that even now the Vita Union in Austria will agree these changes, which will save the pilot and cabin crew jobs in Vienna. The fundamental issue is there is a medium-term huge opportunity here. We will have lower-cost fuel, lower-cost labor, lower-cost aircraft. We are renegotiating aircraft leases for Lauda. We're also discussing with Boeing pushing back any deliveries on the Max aircraft. We'll probably extend some of our 737NG leases. Those discussions are continuing, but can't be finalized at Boeing until the MAX comes back to service. But I think you're going to see enormous cost opportunities here for the next four or five years, and Ryanair well poised to take advantage of them. The downside is we'll need to take advantage of those costs, though, because we are facing a massively distorted market across Europe, I think, for the next four or five years. The strong, well-run airlines like Ryanair and ECJS BA going into this crisis are going to emerge much more weakened and facing competition from state aid airlines, massive state aid being given to SAS, Alitalia, Air France and LaPanza. Airlines who couldn't make any money before the crisis but will now emerge out of COVID-19 vastly stronger with unlimited funds to engage in below-cost selling or M&A activity where they just buy out the competition in their domestic or regional markets. And that, I think, is going to be a real challenge for us going forward. I think we're facing a very strong return to passenger volumes, but in a very weakened pricing marketplace. And that's why it's critical that we work with the unions, we work with all of our other suppliers, airports, aircraft, etc., because there's going to be a fairly torrid pricing environment going forward for the next number of years. Alitalia this morning was approved. Alitalia, an airline, by the way, that has never made money for 75 years, has been teetering on the edge of bankruptcy for the last three or four years, has not alone been nationalized, but this morning received 3 billion in state aid from the Italian government. And to put that in some context, this morning the Italian government awarded 1 billion of aid to the Italian education system. So they seem to think that protecting the jobs in Alitalia is far more important than educating the children of Italy and shows how distorted this is going to be. Lufthansa, Air France, KLM. And by the way, it's not that we are opposed to all forms of state aid. We accept and we hold our hands up. We have participated in job payroll support schemes for the last number of weeks. We're very grateful for those schemes across all EU countries. We've also drawn down the loan that we're entitled to in the UK, arm's length transaction. We got 600 million because we're a triple B rated operator in the UK. What's different with those supports is that they're transparent and they're available to everybody. What's manifestly unfair is, for example, in France, the French government issuing some edict that says they will refund the French taxes, aviation taxes, but only to French airlines. So Air France, receives back hundreds of billions of aviation taxes, whereas we, Ryanair, we're the third largest airline in France, ECGF and others, are not allowed to receive nothing, but we're told we have to keep paying these aviation taxes. We have the bizarre edict coming out of Italy last week. Not only are the Italian government going to give Alitalia three billion in state aid, but they're also now attempting to impose the Alitalia terms and conditions labor pay rates on all other airlines in Italy. massive distortion of the level playing field, a massive distortion of competition, and a flagrant abuse by the Italian government of not just the state aid rules, but also breaching or tearing up the competition of the level playing field rules in Italy. We have no choice that we and other airlines would continue to oppose these kind of measures because they are going to distort the market for the next three or four years. However, Ryanair with a 4 billion in cash, a net weekly cash burn of about 10 to 15 million a week, excluding fuel surcharges. With a fleet of aircraft, we've got 350 aircraft entirely unencumbered, a value of about 7 billion on the balance sheet. We're very strongly positioned to weather not just the COVID-19 pandemic, but also to emerge out of that pandemic stronger, with a lower cost base, with far more growth opportunities But those growth opportunities will be in a marketplace for the next year or two where I think fares and yields will be significantly lower as we're forced to compete with state aid junkies like Air France, Lufthansa and Alitalia who will use this money on top of the payroll support schemes and the tax refunds they're already getting to engage in below-cost selling or in massive M&A activity. A quick touch on the Boeing MAX, as I said, we now expect Boeing to tell us now that the MAX return to service will take place in North America sometime in Q3. That is between sometime in August or September. We still think there's a reasonable prospect that they would be able to deliver some of our MAX aircraft to us in the calendar fourth quarter or the first quarter of next year. These are still great aircraft. I mean, they have 4% more seats. They burn 16% less fuel. We are great fans of the Boeing MAX 200. It would be critical, I think, as well to us being able to exploit growth opportunities into the summer of 2021 that we have additional aircraft deliveries. And I think certainly David and the commercial team are in active negotiations with airports. who are very concerned about the amount of traffic they're going to lose either through failures or capacity cuts among the legacy carriers, and will create more opportunities for growth going forward. Other than that, again, as I said, for the remainder of this year, we can't give you any guidance on traffic. We can't give you any guidance on the full-year outturn, other than we expect a Q1 loss of about $200 million. Q2... based on our current assumptions, could be a break-even, small loss. But again, that's really in the lap of the gods. But the more we see European governments roll back on restrictions in the next couple of weeks, up to about the middle of June, and we believe that we'll see further developments with the Spanish, Portuguese, Greek governments not imposing 14-day isolation, we think the UK government will also be embarrassed into saying withdrawing their 14-day isolation. When they're asked questions like, how do you ask international air passengers arriving into Heathrow and Gatwick to self-isolate for 14 days when the first thing they do is get an underground train or a Gatwick Express into the centre of London? Are you now going to ask all the passengers on the Gatwick Express and the London Underground to self-isolate for 14 days? And of course, it completely falls apart. they generally move back on to it's all science-based until you ask them, well, what was the science that says the Irish and the French can be exempted from the 14-day lockdown? Now, we think the Irish are incredibly special, but even we can't find any science that would exempt the Irish from a 14-day lockdown. So it's all just nonsense that's being made up on the hoof by the UK government. It's completely ineffective. And the concern is they're using this give the illusion or fig leaf of taking some scientific action, when really the action that we're calling for and that would be effective is encouraging people using public transport, the London Underground, commuter trains, airports, and aircraft to wear face masks. Face masks, widely used face masks would eliminate about 98.5% of the risk of the spread of COVID-19, and we think that's the way forward, not just for mass transport, but also for retail and for allowing people to move about more freely over the next couple of months. So we're encouraging that and trying to discourage idiotic ideas like 14-day isolation, which are completely unimplementable, and the UK government can't even explain where the hell you'd isolate in the first place. Sorry, that went on a little longer than I thought. I'm going to hand over to Neil to give us a couple of quick thoughts and themes on the finances.

Thanks, Michael. As you said, a relatively good year last year. I'm not going to dwell too long on it. 13% profit after tax before exceptionals. The balance sheet in very good shape was 330 unencumbered Boeing 737s with a book value of just over 7 billion and the market value well in excess of that. Cash very strong at 4.1 billion, and the work that we've been doing over the past number of months to get the cash burn down has seen us go from 200 million per week, all expenses, including CapEx and everything else out the door, down to 60 million per week, currently going out the door on average. A slight clarification on the fuel figure, it's somewhere just under about 25 million a week going out based on the mark-to-mark and depending on the spots. on an individual day. Hedge ineffectiveness, because we had hedged 90% of our fuel coming into FY21 pre-COVID, a big chunk of that has now gone ineffective as we're not gonna use that fuel. So we have an exceptional charge of about 390 million on jet fuel offset by currency, favorable currency, primarily on delayed CapEx aircraft offsetting that, giving a net charge of about 353 million in the FY20 accounts. There will be a little bit of volatility on the P&L this year as we mark to market those ineffective hedges, but that will run off over the next number of months as the hedges settle. And that's pretty much the key things I wanted to highlight, Michael.

Okay, great, Liam. Thank you very much. Julius, do you want to say anything on this TV before we open it up and head off a lot of questions on it?

Just a word to add that we have been in touch with the European Commission for two months and we almost feel sorry for them facing pressure from capitals Berlin, Paris, Rome and so on to bend existing rules and allow significant amounts of state aid to flag carrier airlines. So we will be assisting the EU Commission with appeals of those decisions to the European Court and hoping that the Court will accept our request to deal with this matter in an expedited manner.

Thanks, Julius.

And just before we open to questions, Eddie Wilson, the CEO of DAX, you want to give us a quick couple of thoughts? Yeah, I mean, we've been working over the last number, the last two months, on minimizing the payroll costs with the payroll supports. And now we're starting the discussions with the union, some more realistic than others. But we have to get ahead of this. We announced 250 job losses in our offices in Dublin, Wroclaw, and Madrid, and in Stansted as well, a Friday last. And we now get into the sort of formal processes with each of the unions. And we're going to have to deal with this. Some of them are already sticking their heads in the sand, as Michael said, like that. Some of them think it's just going to pass and it's all going to be over by July. It's not going to be over. And we're probably heading into a very, very deep winter in terms of cuts, and we hope that we will, I suppose, use the background in negotiations that we had in locking away most of the CLAs. We're also working on the airport deals, and some airports haven't come back to us yet, but we are getting real savings there, and we're working on those where the savings are not up to what we would expect.

Okay, thank you. Okay, we'll open up now for Q&A. Can we please, everybody, we zip through the questions. We have to be gone around 11 o'clock. So it's one or one and a half questions each. And please don't ask me any questions on traffic and yields and perhaps P&L for the rest of the year will be disbarred because we don't know.

Thank you. If you do wish to ask a question, please press 01 on your telephone keypad. If you wish to withdraw your question, you may do so by pressing 02 to cancel. Our first question comes from the line of Daniel Roska from Bernstein. Please go ahead.

Good morning, everybody. I hope you, everybody on the call, and the families are safe and well. I'll limit myself to one then. I guess, in principle, your commitment to buybacks is unchanged, and I'd like to ask under which circumstances you would consider reinstating the buyback program. Can that happen while you're still restructuring And how are you thinking about that next year if there's a tradeoff between possibly accelerating growth to capture that medium-term opportunity you highlighted and the buyback program on the other side, kind of how you're thinking of capital allocation if you're faced with that question in a couple of months when we're closer back to normal?

Thanks, Daniel. As you've seen, we cancelled the buyback in mid-March. We've done about, what, 550 million? 580. 580 million is a 700 million buyback. We immediately cancelled the remainder of the buyback. We had already signalled to the market that there wouldn't be a buyback in the next 12 months because our next big issue was we have a one point, we have a bond repayment coming up in June. 21. 21. What's that, about 850 million? 850 million. So that was going to be our next uses of cash. So... Frankly, the issue of buybacks was off the table before we entered COVID-19. We would be very determined to pay down debt next year. We still think even with the impact of COVID, we will be able to repay that $850 million bond in June of next year. Assuming some return to normality this winter and into the summer of 2021, cash flows at that stage will be very strong. I would also, to the second part of your question, always be in favour of accelerating growth and exploiting opportunities at lower costs over share buybacks or distributions to shareholders. Shareholders, and I think I'm the fourth largest shareholder in the group, can wait in line while we either, one, work our way through what has been an unprecedented event in the air and industry and put in some contact. The 9-11, a taxi 9-11 grounded there flying for four days. COVID-19 has grounded it for four months, so this has been unprecedented. Shareholders understand that. That's why I think we've always generally favored share buybacks over dividends, because we can always pull back or suspend the share buyback program without annoying lots of shareholders. This is an opportunity in the next year or two, and I believe there will be. We will be working closely with Boeing on the MAX delivery. And I think, you know, certainly if you look around Europe at many of the other airlines who have announced very substantial aircraft deferrals, capacity cutbacks, failures of Thomas Cook, Flybe and others, I think there is going to be significant opportunities into the summer of 2021 for Ryanair to grow strongly. In fact, if anything, I would try to accelerate our growth into 2021 because there's just going to be opportunities there with airports, There's certainly going to be a huge surface of available pilots and cabin crew all over Europe. And those pilots and cabin crew whose, you know, we will be making redundant and whose jobs will be lost in Ryanair in the next, number of months, we would want to at least be able to offer those people the chance of coming back to employment in Ryanair, maybe in the summer of 2021, or get them back working as quickly as possible if they want to come back to work. And I'm not sure that many other airlines would be offering people any new jobs for the next month or two, or next year or two in Europe. Ryanair will. Thank you.

Next question, please. The next question comes from the line of Samantha Sift from Roma James. Please go ahead.

Hi, good morning. Hey, maybe two half questions. Just on the cash burn, I know, Neomet, you mentioned everything's kind of included in there, I'm guessing including debt. I was just kind of curious what you're seeing in terms of refunds in there. And then just to follow up on, Michael, I know you mentioned that you were probably going to extend kind of some of the Boeing NG leases. kind of curious, you know, why that was, given that you probably need less of a fleet, at least in the near term, and the MAX will probably come in time for next summer.

Okay. I'm going to take the cash flow and then I'll do the aircraft situation.

Okay, Sabi, as you said, the cash flow includes everything from OPEX to debt repayment to critical CAPEX within the business and payroll top-ups, etc. We have about 300 million of refunds included since the start of this financial year. That would be a combination of refunds out the door, vouchers and free changes. So that's in the numbers that we have given there in the cash firm.

And on the aircraft, I mean, one, we will need all of the fleet of aircraft we have at the moment. Remember, we expect to carry 150 million passengers, Avi, in the last 12 months. The growth opportunities that are out there at the moment will be, I think, almost once in a lifetime. We're looking at extending those aircraft that are coming off lease, but you're talking about lease rates now that are down at 150,000, 175,000 a month. These will be very cheap aircraft. if we decide to extend those leases. We're also looking at new aircraft. And I think, you know, if you take my view is that the, sadly, the DNA A320 base will be closed at the end of May. If that happens, I think it's inevitable we'll then start planning over the next four years to take the Airbus aircraft out of Lauda Motion altogether. And we'll replace those aircraft as they come off lease with new MAX aircraft, which will be much lower cost, mostly lower cost. I mean, I see nothing but opportunity here for accelerating fleet growth in the next year or two because there's going to be opportunities. I mean, if you take a look around the marketplace, you know, Norwegian is clearly going to reemerge as a tiny domestic carrier up in Norway. You know, it has a large presence in Ireland, Spain, Italy, Gatwick that is going to be gone. EasyJet have already confirmed that they're deferring huge numbers of aircraft deliveries Lufthansa has significantly cut back, closed German wings. And even Alitalia, with the benefit of 3 billion in state aid, still can't cover or serve the Italian market. So there's going to be opportunities there for an airline, those airlines that have the lowest costs. And I think it's going to be a race for growth in the next couple of years between the really low-cost airlines, of which there's only one in Europe, Ryanair, and then the airlines who have received multi-billion dollars worth of state aid subsidies. But I think the problem with the state aid subsidies is they all come with handcuffs on them that will prevent those airlines from engaging in meaningful labor reform or productivity gains or efficiencies over the next number of years. So if you compare and contrast what Willie Walsh and the team in IAG are doing, taking out large numbers of jobs driving efficiency gains, which is the right way forward compared to what the subsidy junkies Air France and Lausanne are doing. They just take billions of state aid, but there'll be no labor reform. There'll be no productivity reform. But going forward, we as the lowest cost airline in Europe will need more aircraft if we are to get our pilots and cabin crew back into jobs and take advantage of these, I think, once in a lifetime airport discounts. Next question, please.

Thanks. The next question comes from the line of Duane Fenningworth from Evercore. Please go ahead.

Hey, Duane. Hi. Hey. Can you talk a little bit, Michael, about the sequence of reopening in Europe and your network planning lead times? Which countries do you think will be the first to reopen aviation? Which will be the slower ones to reopen? And how much lead time do you need to relaunch a market, including things like crew bidding lead times?

Thanks, Wade. I mean, it's really hard to tell. I mean, I think what's likely to happen, we see a lot of European countries over the last week, 10 days, reopening. Germany, Austria, the borders have been lifted, Switzerland, Italy at the weekend. And it almost becomes like a domino effect. You know, the Spanish and the Portuguese are looking at the Italian tourist destinations reopening. And the Spanish hotels, Portuguese hotels, Greek hotels going, we'll lose our tourism if we don't do something similar. Also, if you look across those countries, many of which the Italians and the Spanish were the first into the COVID crisis and are therefore emerging faster than other countries. I think I would be reasonably optimistic that there will be significant movements in passenger, in relaxation of citizens' restrictions over the next two weeks, or certainly up to about the middle of June. I think they'll largely be pan-European, and certainly the Commission is pushing for Schengen-wide, similar treatment across Schengen, similar treatment on movement of passengers. It's so hard to come up with, to restrict air travel when people can move by train, bus and car across Europe's borders anyway. So we're kind of of the view, we announced we were going back on the 1st of July 10 days ago. That was based or predicated on the fact that we thought much of the movement restrictions would be eased across Europe in early to mid-June. we think we can stimulate an awful lot of bookings. Well, firstly, there's huge pent-up demand in there already anyway for particularly families who want to go on the kind of two-week school holiday, July, August. We think the business traffic might be a little bit slower to move, and certainly that's where these two-week restrictions really militate, not just against business traffic, but also, you know, normal commuting traffic. I made the example this morning, Boris Johnson's nurse who nursed him back to health with the Portuguese nurse from Porto. He gets to and from between London and Porto flying on Ryanair. So if you want your health services to continue to operate, you're going to need to allow low-cost air travel within Europe to operate, but to operate in a healthy basis, which is with face masks and temperature checks, not to have nonsensical two-week restrictions. So the answer to the question is, we think once people start to move, that it will be largely pan-European on a Schengen basis. And then that the other countries would also move to similar kind of restrictions, which I think, if you're sensible, would be face masks and move away from non-sensible restrictions like two-week isolations that are unimplementable and unpoliceable anyway, but are largely redundant when you get to your isolation address by using London Underground or commuter trains in any event. But the challenge for us is we've no idea what the load factors will be in July and August, and we've no idea what the yields will be. All we're trying to guide our shareholders with, the lazy assumption from the usual journalists and those who wouldn't be the brightest in the sandwiches, is that there'll be very low loads because people will be afraid to travel. I think actually it would be the opposite, is that there would be higher than expected loans because the pricing would be very aggressive and discounted. We'll have very low airfares. You'll have hoteliers in Spain, in Italy, in Portugal, in Greece, really trying to grasp hold of what's left of their summer 2020 season. So you'll see huge discounted offers out there. So I think that the volumes will be higher than we expect, but the pricing will be lower. And that's the message we're trying to communicate today.

That's really helpful, and just for a quick follow-up, Michael, obviously the market's been totally focused on COVID, but is there any progress going on behind the scenes on Mac's return to service? Is there anything recently, you know, from a technical or regulatory perspective that has increased your confidence? Thanks for taking the questions.

There is, yeah. I mean, I think, like, you know, we've worked closely with Boeing and with EASA, the European Safety Agency. I think there is a much higher degree of confidence now that the return to service will, I think, take place in August, September of this year. The information, the feedback we've had from the regulators has been much more positive. Boeing seems to have addressed much of most of the software issues, the return to service issues. And that's not to say that it won't be bumpy. But, you know, I think there's a reason, and Boeing themselves, I think now we're talking about going back into production, I think sometime, you know, at the end of the second quarter, maybe the early part of the third quarter. But, you know, we know we have about 20, 25 of those aircraft already made and produced or sitting on the ramp at Seattle waiting for delivery to Ryanair. We want to take them. But, you know, I am much more hopeful or optimistic now that we will see that Boeing return to service in the third quarter. Certainly that we will have a meaningful number of additional new Boeing MAX aircraft in advance of summer 2021, which is obviously our next deadline anyway. So I think there's a reasonable prospect that we will see 20 or 30 of those aircraft flying for Ryanair in the summer of 2021. And we will urgently need them both to replace the Airbus aircraft that we're not taking or that we're not taking delivery of and to create that room for growth in the summer of 2021 when we think Europe will, certainly tourism Europe, will rebound strongly as long as there isn't any second wave outbreaks. And, you know, all the evidence in Asia at the moment suggests that there isn't much of a risk of a second wave outbreak. And that risk could be further diminished if we can persuade governments to introduce face masks for people traveling in mass transport, whether that's underground, trains, or planes. Thank you.

Next question, please.

Thanks, Dwayne.

The next question comes from the line of Mark Simpson from Goodbody. Please go ahead.

Good night. Yeah, good night. I just want to clarify just some comments you made. I think you said, and I know it's pure guidance at the moment, 50% load factor in Q2, 75% load factor in the winter. Did I hear that correctly?

You did, no. I don't want to be stuck on any number. Look, I think the number we're forecasting for the rest of the year is under 80 million. You know, it's too early. We would be hopeful of getting, we would get 50% traffic in the month of July, which is the first month back. I'm not guiding you into August or September yet. Second half of the year, I think we would be hopeful that the load factor would be significantly higher than 75%, but the yield would be weaker. So I'm not getting into a forecast today where I'm guessing, you're guessing, we don't know. I think the reasonable number for the full year is going to be under 80 million. So we're looking at a 50% reduction in traffic over this year.

Okay. Just to follow on, though, and I know and accept the fact that it's abroad, but you were indicating circa 20 million packs for Q2, 50% load factor. You're flying, therefore, 40 million seats, which is only down 12% year on year, and saying break even, possibly. That can only come with much better pricing. So I'm not quite sure where your negative pricing commentary is coming from. Unless these are just throw the darts and put us the numbers out there.

We are throwing darts.

Okay. Final question. Exceptional restructuring charges, Neil, need to come in the quarters coming down the pipeline as we go through right-sizing the business.

Well, the exceptional costs are really going to be, if there's any more ineffectiveness, I wouldn't anticipate a huge amount of restructuring costs or maybe some redundancies, but that's about the height of it. We would anticipate that we're going to see cost reductions on a unit labour basis going forward. Similarly, on the airports and handling charges, we would anticipate unit savings coming in over the next 12 months as we negotiate new deals at our airports. And equally, you're going to see unit reductions coming in at the max starts to deliver. So there won't be hugely significant restructuring costs, Mark.

And remember, too, like at the end, you know, well, again, I don't want to get into too much optimism at the moment because the short term is bleak. By the time we get to the second half of the year, you know, you have the prior year of conflicts in March where, you know, we carried only half of the past numbers this year. So there is an upside at the back end of the year with some return to normality. But what I'm trying to kind of urge everybody away from is specifics now on pricing, volumes, load factors over the rest of the year. If we really don't have any idea, we would hope to have some much better sense of it by the time we get to the Q1 results, which will be the first week in August, and then we'll have some sense of where we are. It's impossible to predict at the moment other than I would be reasonably optimistic is that a lot of the lockdowns will have eased significantly over the next two weeks. By the end of the first week of June, I think you're going to see a lot of the European economies saying the kids can go back to school. They've already been back to school in Denmark for four weeks. Kids are not the problem. They don't get it. They tend not to be the spreaders of it. But if the kids are allowed back to school across Europe, Retail is allowed to return. I think you're going to see, I mean, almost a huge pent-up demand for people who've been locked up at home in their apartments and houses for the last 12 or 15 weeks going, fuck this, you know, we're heading for, we're going to Spain, Portugal, or wherever it's going to be. You know, and all this nonsense about staycations. You know, you don't have the capacity in Bognor Regis or Southend-on-Sea or La Hinch to be able to cope with the volumes of people who generally would be going to Spain, Italy, Portugal, and elsewhere to get two weeks of sunshine. And the risk of the spread of COVID-19 on a beach in 30 degrees of heat in Spain, Italy, or Portugal is practically zero. And it would be zero if you're all wearing face masks, which might upset the timeline, but isn't going to upset your health. Next question, please.

The next question comes from the line of Stephen Furlong from Davie. Please go ahead.

Stephen, hi. Yeah, hi, Michael. Just on your questions on Boeing or comments on Boeing, would you see your negotiations, do you think the Boeing deal could be an even bigger number of aircraft, given you were talking about maybe taking out the Airbus? I'm assuming Airbus aren't at the races. So just maybe just talk about Boeing versus Airbus. And then if I just ask one other thing, I've got some questions in terms of Nothing that is being talked about would impede your ability to turn around the aircraft in 25 minutes. That's great, Michael. Thanks.

Okay, thanks. I'll work back on that, Stephen. Yeah, 35-minute turnarounds. Look, we see nothing impacting 25-minute turnarounds. In fact, you know, if we're running at a 50%, 60% load factor through August, a huge line-out, and the load factor might be less than 50%. But if it is, I think you'll see us, we'll go back in in mid-June and take out some of those flights. We won't run empty flights where we can avoid it. 25-minute turns will be no problem. The challenge here, we're pushing hard for temperature checks at the entry to the airport terminal and face masks. Nobody will be getting on board an aircraft without a face mask, certainly in July and August. But I think those measures are important in building customer confidence. On Boeing pricing, look, there's an ongoing dialogue with Boeing, and I've said this probably before, it's a three-phase discussion. There's clearly a negotiation on compensation for the delayed deliveries. There's a negotiation around pricing on our max order, and there's negotiation, we're also talking to you about a possibility of the Boeing 10, an order for the Boeing 10 aircraft. Those negotiations continue. But really, they can't be concluded until we have some certainty on when the MAX will return to service and when we can get deliveries of our aircraft. And in many respects, all three conversations are kind of interlinked. But all I can say is we are working closely with Boeing. We are very impressed with the new management team at Boeing and what they've done, particularly on the return to service project over the last There's been a lot less blind optimism coming out of Boeing, and there's a much more frank dealing with challenges, particularly with both customers and regulators. I think from Boeing's perspective, they've seen the order book collapse. Leasing companies have cancelled orders. Flaky airlines like Norwegian's orders, I'm sure, have gone up to smoke. They've all disappeared. That does help the return to service, or at least eliminating some of the backlogs. And yes, I think Airbus are nowhere at the moment. We have repeatedly used it through Lauda trying to interact with Airbus. We're getting nowhere with them. And I think the COVID-19 has kind of, if anything, crystallized the decision-making here. We haven't been able to attract any significant offers from Airbus. It's likely now that the Lauda fleet, which this summer we'd originally expected to take delivery of up to 38 aircrafts, we will not take at least eight of those aircraft. I think the final would be something between 26 and 28. And at this point in time, you know, while I said we haven't given up on Airbus entirely, I think we're not far away from just giving up on Airbus. We don't seem to be at the races in terms of pricing, certainly not with the max or the pricing we have on the max 200s. They're nowhere near close to where we are on the pricing on the max 200s. And if that continues to be the case, then frankly, You know, we still see a lot of value in Lauda, the slots in Vienna, the presence in the German and Austrian marketplace. But, you know, I think that value will be enhanced by flipping out of Airbus aircraft into Boeing aircraft in the next number of years. The big challenge facing Lauda, and it's one, you know, we have tried not to underestimate, is, you know, Lauda is in the teeth of the, you know, if there was ever, you know, Lauda feels like it's in a methadone treatment center at the moment in Germany and Austria. We'll be competing in Stuttgart and Dusseldorf with Lufthansa getting about 9 billion of state aid for the German government. Austrian Airlines, which is owned by Lufthansa, is into the Austrian government, looks like for 800 million of state aid. And Lauda is in the teeth of both of that. Lauda won't get state aid for the German government or from the Austrian government. Even the German government, remarkably in the last couple of weeks, had approved Lauda for the payroll support scheme in Germany, and then four days later withdrew the payroll support scheme. So we're engaged in legal correspondence with the German government. We have our Lauda pilots in Stuttgart and Dusseldorf who are paying their social taxes in Germany, are entitled to exactly the same payroll support as the Panther pilots. but somehow I've been denied it at the stroke of a pen, having it originally been approved. So maybe the only way forward for us, I think it's inevitable that the Austrian unions will refuse to sign the new pay deal in Vienna on Thursday this week, despite the fact that it's been signed up by 95% of the pilots and over two-thirds of the cabin crew. And then therefore it's likely that we will have to go through with the closure of the E320 base in Vienna We'll have probably 15, 14 or 15 spare A320 aircraft. They won't fly certainly for the remainder of this summer. We may deploy them to other countries for the winter, but we'd have to see what the employment situation is like or the recruitment situation is for recruiting and training Airbus pilots and cabin crew in other countries. So I think going forward, if anything, this crisis would have taught us. No, we're not there yet with Boeing, but I think we're making much more progress with Boeing than we are with Airbus. that the future will lie on deepening the relationship with Boeing. I don't think at this stage we're looking at any increased orders for Boeing. And that's not to say they came up with very attractive pricing that we wouldn't look at taking more aircraft. But certainly, you know, we have firm orders for 135 MAX 200 cells over the next four years. we clearly need to rework the delivery program with Boeing on those aircraft because they're all running 12 months later on the deliveries. But no, I think it would be optimistic. I don't see any rationale at the moment to increase the quantum of that order given that we're in the middle of the COVID-19 crisis. But if there was a pricing incentive there for Boeing, we certainly, certainly the board would look at it. Got it, Michael. Thank you. Thanks, Stephen. Next question, please.

The next question comes from the line of Jared Castle from UBS.

Please go ahead. Jared, hi. Hi. Good morning. Two questions. One, I think you've got seven planes available for sale. So just interested in terms of is it realistic that you can sell them in this market in the next 12 months? And then just secondly, just coming back to state aid and the legal action that you're taking, What would you hope to achieve, a reversal of the aid that's been given, penalties that you and others receive from these airlines or indeed governments? So what would success look like for Ryanair in terms of the legal action?

Well, as I said, the second aircraft for sale, like all of our aircraft for sale, subject to acceptable pricing, we don't see acceptable pricing, I think, now for the next 12 or 18 months. and I would be much happier to operate those aircraft. I thought we were selling more for sale. We've already sold those aircraft, they were forward sold, but I don't think we'll be selling any more aircraft for the next maybe 12, possibly 18 months because we'll need those aircraft ourselves. And the deliveries of the seven aircraft we've sold are later on in the autumn of this year, so they're from October onwards anyway. Correct. Which again emphasizes why we will need more aircraft from Boeing just to be able even to stay in a steady state fleet into the summer of 2021. On the state aid side, I mean, what we would hope for is to encourage the commission. And I was heartened by Madam Vestager's comments this morning where she's seriously concerned at the extent to which the French and the German companies governments, the richer EU countries, are massively distorting state aid. The German government alone accounts for 52% of approved state aid at the moment in Europe. So the richest governments are the ones who are engaging in the most state aid doping. And what's ironic in that is it's usually the Germans and the Dutch telling everybody else to comply with the rules unless it applies to them. You're going to seriously distort not just the air transport market, but also many other industrial markets across Europe. If the Germans in a crisis can just ladle out state aid to their operators, whereas the Spanish, the Irish, the UK and the other countries are obeying by the rules and not participating in this illegal state aid. Again, the question is, why does the FANZA need another 12 billion on top of the payroll support schemes, on top of the aviation tax refund schemes. Like really if the German government was interested in the industry, what we're hoping would happen is that there would be transparent and non-discriminatory state aid to everybody. Like by all means in Germany, why don't you just refund or waive the environmental taxes on air travel for the next 12 months, 24 months, which the vast majority of that would go to Lufthansa, but it would also go equally to other airlines like EasyJet and Ryanair operating in Germany. if the French government want to refund aviation taxes, do it to all airlines equally in France. But don't just do it to the French registered airlines. Give them payroll support schemes and then lob another 9 billion of state aid on top of it just because it's Air France. Julius, do you want to add anything more we hope to achieve on the state aid side? No, absolutely. Just to eliminate the illegal and discriminatory state aid. And by all means, if you want to do something, if European governments want to do something, Do it on a transparent and non-discriminatory basis. Use your aviation taxes, your payroll support schemes, or your environmental taxes on air travel. I mean, let's face it, there's enough of them around Europe, I mean, between ETS, APD, and the UK. And at least then, you're applying the schemes equally to every airline. And the first thing we as airlines will do will be to pass it on to our customers in the form of lower fares and get the tourism industry and employment back moving again. Next question, please.

The next question comes from the line of James Collins from Exxon. Please go ahead.

James, hi. Hi, morning. It's one for Neil, actually, just on the cash burn. As far as I'm hearing, you're doing $60 million a week of $25 million is fuel ineffective hedging cash going out the door. And then I think you said $300 million financial year to date has gone out in refunds. According to my math, that leaves nothing left on other cash burners. I was wondering if you could maybe... give more detail on how you've got it so low. And then Michael, I was wondering what... Sorry, it's Michael on the louder... Go on, you can answer, please. No, no, we've got a second question. Yeah, and I was just wondering what odds you'd give on louder existing in 2021 if the unions don't sign up for the deal this month? Kate, Neil, you want to handle it?

Okay, I'll go to Cashburn as a failure on you. About 25 million on average related to the fuel. We've got various other things going out like debt repayments, salaries, and other operating costs. On the refunds, approximately 300 million settled so far. That's a combination of vouchers that have been accepted by customers, cash refunds, and of course, free flight changes across the business. So it wasn't all cash out the door.

And that's accepted vouchers. That's not just accepted vouchers and free moves. And actually, we've seen a significant surge in free moves over the last seven days as people now realize that actually they can now travel in July and August. A lot of them are taking the free move options. And we try to explain to the various consumer nitwits, like Twitch magazine in the UK, there is no restriction on if you want a cash refund for money, you get a cash refund. But you must understand we're dealing with a historic backlog of refunds that have been imposed upon us by European governments. I mean, basically three months of flying. Our refund team has been reduced by 75% because of social distancing in the office restrictions here in Madrid, Dublin, and in Wroclaw. So you will get your cash refund, but I'm afraid you'll have to be patient and wait for it. It's going to take some weeks and months to eliminate this backlog of refunds. On Lauda existing in 2021, Lauda will exist in 2021. I don't think it will exist in Vienna. I think it's inevitable that the Austrian Airlines Union will close the Vienna base with the loss of over 300 pilot camp crew jobs on Thursday. Lauda will still be operating in Stuttgart, in Dusseldorf and in Palma. And I see a future for Lauda into the future as probably a Boeing 737 operator. operating wet lead services for Ryanair, for Buzz and for Malta Air across different bases and countries. But I suspect the one country where Lausanne will not be operating as a brand will be in Austria, where, frankly, if the employment regulations and the labour structure is that daft, that people who want to vote for pay cuts to preserve their jobs are told by a competitor's union that they don't care, they're losing their jobs because the union won't sign the agreement, then frankly, we don't want to operate in a country that has such a corrupt labour market or labour legislation as Austria has at the moment. It is beyond my comprehension why people can't vote for themselves to save their own jobs, even if it means in the short term taking a pay cut. And, you know, I feel enormous sympathy for Laudis Pilots and Cabin Crew, who have voted in their overwhelming majority in favor of these pay cuts. They recognize the crisis. And yet, the Austrian-Ireland Union can simply at a stroke say, no, we're not signing this agreement, and condemn those pilots and those cabin crews to long-term unemployment. because it's quite clear that Austrian Airlines won't be creating any jobs for pilots and cabin crew for the very foreseeable future, despite the fact that they'll be getting 800 million of aid from an Austrian government to a Lufthansa-owned and controlled subsidiary. Next question, please.

The next question comes from the line of Jamie Rowbottom from Deutsche Bank. Please go ahead.

Morning, gents. Just one from me. Obviously you don't have a crystal ball, but it's helpful that you give a working scenario for your guests in the current fiscal year, the sub 80 million. Is there a working scenario for fiscal 22? And one of the reasons I ask is on slide 11, you tell us that you're 31% fuel hedged for fiscal 22, which implies there's a denominator to that calculation. So just any working assumptions for your planning would be helpful.

I think at this point in time, we would be operating on a return to normal traffic volume. Now, that's less to say the aircraft that we sell. It depends on how many aircraft that come off lease that we can extend at the end of this year at reasonable terms. It depends how many aircraft Boeing can. But on the assumption that we take between 20 and 30 Boeing MAX next year, I think that our numbers will return next year to kind of normality. I mean, it could be north of 150 million passengers. And now that clearly assumes that COVID has been dealt with by the time you get to April of next year. I think next summer of 2021 will be incredibly strong for holiday traffic for people who this year have canceled their holidays or weren't able to get to go on holidays. I think it will be incredibly strong. There will be a dramatic rebound in volumes. But I caution again, all of that volume growth will be at lower or discounted prices. I've seen various numbers. Our projections here is that we will return to traffic volumes normality in our year at March 22, so summer of 2021. And then I think that by summer of 22, you'll be returning to kind of normal pricing as long as clearly there's no further return or second wave or third wave of COVID-19. But that doesn't obviate the huge existential shock the industry has suffered in 2020. You know, we're in discussion with unions where they're saying, ah, yes, but you know, your numbers will return to normal in 2021. Some are saying, yes, they will, but they're not going to return to normal in the summer 2020 or the winter 2020. And we can't keep your pilots or your camera crew on the payroll. In fact, even those we can keep on the payroll will be receiving 20% less because, frankly, I think that our yields are going to fall We'll be into really adverse pricing for the remainder of this year and the early part of next year. Competing as we will be forced to with state-aided dopers like Lufthansa, Air France and Alitalia who will be able to just dump pricing. Let's face it, Alitalia has been engaged in below-cost selling for the last 75 years. They've never made profit. Now they'll have $3 billion to continue to engage in below-cost selling for the next three to five years. And they only account for 20% of the Italian market. We account for 35% of the Italian market. And it's no doubt that in Germany, in Austria, even in Belgium, where you're competing with Lufthansa subsidiaries who are running around hoovering up state aid, you know, the bases in Charlotte and Zambia are going to face really aggressive pricing from Brussels Airlines and others who, you know, have limitless cash resources at their disposal thanks to this crazy state aid doping. So, I think in terms of volumes, for FY22, we are planning at the moment on normality in terms of volumes, but distorted pricing. Whereas for the rest of summer for FY21, you know, radically reduced volumes and also reduced pricing. Next question, please.

The next question comes from the line of Muneeba Kayani from Bank of America. Please go ahead.

Go ahead. Yeah, hi. So for the July to September schedule, how should we be thinking about unit costs based on your capacity plans? Yeah, if you could talk about that and the cash burn.

Yeah, impossible to talk about it. We have no idea what our unit costs will be, you know, until we know what the volumes will be. As we've demonstrated in the last three months, we're incredibly flexible cost-based here We basically, with the exception of fuel hedging, collapsed the cost base to almost nothing. Now, to be fair, a lot of that's been done on the back of payroll support schemes, which we're very grateful for. They will continue through July and August. The question is how much volumes can we restore and at what pricing? But the volumes will be, the unit costs will be what the unit costs will be, We can't give you any forecast prediction on that. I'm afraid whatever guess you make on your model will be as accurate as whatever we come up with. Next question, please.

Can I ask one more on ticket refunds then? The $300 million that you've had kind of cash refunds of vouchers. So what about the rest?

We're working our way through the rest. I mean, the challenge we face... I've tried to communicate this properly. We know on a normal month, we would refund about 10,000 tickets. So, you know, we're geared up. We have staffing for about 10,000 tickets. At the moment, three-quarters of that staff can't even come to the office. And they must come to the office. These are cash refunds. It can't be automated. We get about 25%, 30% of bookings come through OTAs and third parties who are not the end. We cannot issue refunds unless we get a direct correspondence with the individual partners. So we're geared up for about 10,000 refunds a month. Currently we're trying to process something of the order of 25 or 30 million refunds over the next couple of months. So the 300 million that Neil has talked about, that's effectively about a quarter of the backlog of refunds we have at the moment for March, April, May into the first half of June. We will continue to process that. If we're allowed, and we are hoping that the offices will return to full staffing here from about the 1st of June onwards in Dublin, that will significantly increase our ability to process refunds. And I think going forward, taking Neil's figure on the 60 million, as we move through the summer and the fuel cash outflow declines, the refund cash outflow will increase. and you know one will substitute for the other but if we get back to some kind of normal flying in july even if it's only 40 the cash flows then will begin to be very positive because of forward bookings into july august september october and you know we can handle cash refunds but we're trying to communicate with our customer bases just please be patient with us we're not denying you a cash refund or trying to sit on it we just can't process these numbers automatically. We can automate vouchers, that's easy, because it's not cash out the door. We can automate free moves. We can't automate the payment or the cash refunds, because most of the cash, a lot of the cash refunds would disappear into somebody else's bank account, like a travel agent, and not the end customer's account.

Thank you.

Next question, please.

The next question comes from the line of Gerald Crew from Liberon. Please go ahead.

Morning everyone. Two questions for me. Firstly, on the max deliveries, whenever they're due to arrive, I was just wondering whether you can clarify what finance you've arranged for those. And secondly, in terms of refunds, do you accept that they are being fulfilled? Can you give us a rough indication of the split by sort of method, cash versus vouchers versus rebooking? I know that's probably a dynamic issue, but if you could give us a rough indication, please.

No, I wouldn't give you any indication on the refunds. At the moment, it's 300 million, and it includes cash refunds, vouchers, et cetera. Clearly, there's a lot more vouchers in there than cash refunds, but as the cash refunds increase, the number of, I think, vouchers will decline. But as we move back to flying, there'll be a much greater uptake. We think of three moves anyway, but we can't break it up. We can't predict where it's going to go. On the max deliveries, interestingly, we haven't paid any PDPs since about the middle of last year. So we still have quite a significant volume of PDPs already in place with Boeing. So we would expect to fund, certainly if there's 20 or 30 aircraft delivered by this side of next summer, a lot of that funding is already in place with the PDPs that we've already paid. We have the cash reserves to be able to fund the balance of those deliveries. But obviously financing and the speed and rate of PDPs is one of the key elements of our ongoing negotiation with Boeing. And Boeing, to be fair, have been very sympathetic, well, have been very understanding of the need. You know, I'd say Ryanair is one of the few airlines in the world talking to manufacturers about taking aircraft deliveries and it needs to be ordering new aircraft at the moment. So it's a reasonably easy discussion to have with Boeing. Boeing themselves have done a stellar job in the last couple of months. They've raised more than $25 billion in the bond market without the need for government intervention, which would again mark them out against Airbus, who I'm fairly sure would be on the French government's crest in the not-too-distant future. Boeing have the cash. And the easiest part to discuss with Boeing actually is the financing and funding for the summer 21 deliveries. What we're really focused more on at the moment is their return to service date and then how many aircraft can they deliver to us. And remember, one of the great advantages of Ryanair is we actually have MAX simulators in place so we can manage the return to service in-house ourselves on our own MAX simulators.

The only thing I'd add to that, Gerald, is that we are BBB rated, high investment grade. The bond markets remain open, albeit at elevated levels. We've received a number of sale and lease back proposals and indeed we've received a number of unsolicited proposals for secured debt. We've got lots of options on how we finance ourselves going forward, if not from cash.

And, you know, unlike some of our competitors, we don't take the profits from, say, the leasebacks through the P&L or our other costs. But at the moment, we have more than sufficient internal resources, cash, to take deliveries of those aircraft without the need for external financing. But if we needed external financing on new deliveries of MAX, I think we would find it very easy in the current marketplace, although at least at an elevated rate, at an elevated financing rate. Next question, thanks.

The next question comes from the line of Carol Doris from Morgan Stanley. Please go ahead. Hi, good morning.

I have two questions. The first one is even though you may still be able to do quick turnarounds, there's probably higher hygienization and cleaning standards which will probably slow down overnight and around the fleet. So do you think you can still operate or transport 150 million passengers with the same number of aircraft, or do you need to increase the number? And the second question is, how much of your short-term payables is due to Boeing?

Neil answers the second half of the question. Look, there's no effect on quick turnarounds at the moment. You know, we've put in place extensive health measures for the return to service on the 1st of July. We're disinfecting all the aircraft, all aircraft services nightly. The disinfectant is good or valid for more than 24 hours. We're not going to disinfect on turnarounds. It's not possible. You don't have the cleaning staff out of supplies at airports to be able to disinfect on turnarounds. Nor is it required where passengers and crews are wearing face masks because you've eliminated 98.5% of the risk of droplets occurring anywhere on board the aircraft. The aircraft will not be operating at 95%. Load factors, we think 50% to 60% load factors in the first month or two were the best we will do. And we've already explained where we will not get to 150 million passengers in the next 12 months. We need the number somewhere under 80 million passengers. By the time we get to the summer of 2021, we do think it's reasonable to go back to 150 million passengers. But at that point in time, we think, you know, vaccine will have been found, vaccine will have been found, and the treatments will be in place, or the COVID-19 pandemic will have disappeared altogether. There has been no, and we have two months of experience now in Asia, there has been no second wave of COVID-19. This mythical second wave at the moment hasn't yet occurred anywhere. And so it seems to be medics and scientists trying to frighten the local populace into believing that they should isolate somewhere for a two-week period. So caution, I think, is the right approach at the moment. But there will be no effect on turnarounds, particularly if we're operating with 50% or 60% load factor.

Neil? Yeah, on trade payables, the 1.4 billion figure, just over a billion of that is accrued of PDPs to Boeing. Okay, thank you very much. Next question, please.

The next question comes from the line of Neil Glenn from Credit Suisse. Please go ahead.

Good morning. Just one quick one for me. Just on the airport and network strategy, you obviously highlight a once-in-a-lifetime opportunity. Just interested in your take on are you likely best served going big at larger, hungry airports like at Gatwick, for example, where there's a hole opening up, or by dispersing freed-up aircraft more thinly around the network?

I might ask, did David O'Brien just say to take that since it's more logically in his area?

David? Yeah, that's going to depend on what those airports do. We've more than enough solicitations from over 200 airports to distribute them or to concentrate them, and we've demonstrated the flexibility to do both. In the case of Lagos, there's going to be a 15 aircraft fleet out of Vienna available either in small increments at smaller airports or indeed at the opportunities you described.

So, no, we'll be opportunistic on this. But I think it's fair to say that we're seeing the same kind of offers, in fact, if anything, better offers coming from the bigger airports who are facing a much more catastrophic loss of traffic than necessarily the smaller airports. We're in dialogue with all of them. But the real once-in-a-lifetime opportunities are going to come at the bigger airports. I'm not sure it would necessarily emerge at Gatwick. I don't really believe that IAG will close their Catholic operation. I think it may well close as BA, but it might reemerge as a whaling or an aerolingus or a lower cost operation. The Norwegian operation will go at most of the airports in which they operate. You look across Germany, most of the German airports accept that German wings is going to disappear and look, Pans will cut back traffic. But, you know, and some of them are and some of them are remarkably complacent. They just believe that, you know, the German state will provide and Lufthansa will be ordered to go back to their previous volumes. We don't think that's realistic. And certainly in the other bigger markets in Italy and Spain, you know, there's a very open dialogue with the airports there. Lots of airports are also in the same situation. They don't quite know what they're going to lose, what's going to come back, what they're going to lose. I think until we see that emerge over the next two or three months and certainly into the winter of this year, it will be difficult to finalize those agreements. I mean, certainly if you look at, you know, I've been looking at EasyJet as an obvious candidate where there's that ridiculous kind of dialogue with their largest shareholder about cutting back aircraft orders you know, that can only result in significant cutbacks at certain of the EasyJet bases across Europe in favor of, I would presume, Gatwick, maybe Berlin, but, you know, and I feel sorry for the EasyJet management, you know, dealing with COVID-19 is hard enough without dealing with You know, unreasonable demands from shareholders who recently received quite ginormous dividends. If they were that concerned about the future of ECG, they could hand back, they would return the dividends and stop annoying the management. But I suppose annoying shareholders is just one of the factors of life we all live within the airline business.

Thanks, both of you. Next question, please.

Next question comes from the line of Melda Schultz from Commerzbank. Please go ahead.

Hi, good morning. Also two questions from my side. First of all, I would like to know, you mentioned the 60% for a break-even operation. Is it just on variable cost base, so on a cash cost basis or on a general cost basis? And my second question would be, if you use your unencumbered fleet as a collateral, how much discount does the bank currently ask for, given that the fleet at the moment is not sellable at the book value?

Don't confuse the numbers. I'm saying we're hoping to run with maybe a 50-60% load factor in the Q2. Based on a reasonable yield assumption, we think that at the moment those numbers would suggest we would run in Q2, break even or a small loss. It's not going to be 200 million plus loss in Q1. There's three moving variables in that, so we can't give you any guidance into Q2. So it isn't 60% will deliver a break-even or 65% or 55% will or won't. At the moment, we think if the restrictions are lifted, there's no 40-day isolation, we think there will be a reasonable prospect of getting to a 50-60% load factor through July and August. The yields would be lower than we had previously predicted, but that's peak season yields. The cost would certainly be materially lower than we have predicted. would it be normally budgeting in July and August? But if we get 20% pay cuts done, they will all take effect from the 1st of July, or we will have a lot less labour. So there's no number here that's a forecast or a prediction. We can't give you one into the second quarter. How much is the unencumbered fleet? Actually, you know, we would, I mean, the proposals we've had at the moment are reasonably, most of them are close to above our book value because of our aggressive depreciation policy and low purchase price on the fleet anyways. Most of the offers, though, come with, as Neil said, elevated financing costs. So it's not that someone would ask us to take a bath on the aircraft or the book value of the aircraft. But, you know, I mean, we've seen offers coming in at 4%, 5%, 6% rate of interest. And, like, frankly, where we've been able to borrow in the bond market for the last number of years, that's down at 1%. where we don't need to raise any additional money. Frankly, I don't see any rationale in borrowing money at 5% or 4% or 5% or 6% at the moment. Now, that's not to say that there couldn't be a downturn in the market, that there won't be some further unforeseen events in the second six months of this year. We don't know. But thankfully, with $4 billion in cash and a net cash burn of under $60 million a week, we don't have to worry about that for the moment. But that doesn't mean that we're out of the woods yet. We are managing this business on a day-to-day basis. We think there's a reasonable prospect of some return to business in July. And I think the most key development to that was the Italian decision this weekend to dispense with the restrictions, to allow the tourism industry to come back, and to dispense with the kind of idiotic 14-day isolation, which, you know, militates against both business travel and tourism travel. And we think most sensible European governments will mirror those kind of reasonable policies in the next couple of weeks. Next question, please. Guys, if anybody has a conference call, please go. We'll keep the conference call going just as we've answered all the questions as best we can.

The last question comes from the line of Alex Patterson from Pure Hunt. Please go ahead.

Good morning, everybody. Hi there. Can I ask two quick clarifications, please? Firstly, on the pay cut, is that temporary or is that a permanent rebasement? And secondly, on cash refunds, did you say passengers need to contact you directly that you are not refunding through intermediaries like travel agencies.

Okay, yes. First of all, the pay cut. Look, I'm curious, there's a dialogue going on with the unions. Now, let's be clear on this. What we've said is we will need up to 20% pay cuts, and obviously there's a variable number in there. It's 20% for the higher paid people like the captains. It is down at around 10% for the lower paid cabin crew, et cetera, et cetera. So it's variable. but if we don't get those take-ups, we will be back for considerably more than 3,000 job losses at the end of June. You know, we're not messing, everybody knows there's an existential crisis going on in the industry and we, you know, the obvious number, you know, unions coming back asking, oh, we need further information. If you don't need further information other than we were originally planning to carry 150 million passes this year, we will now be lucky to carry 80 million passes this year. There's your further information. Get on with it. And, So I think the pay cut will be between 10 and 20%. It's also our objective to try to restore those pay cuts over a kind of three or four year period as the industry recovers. We need lower pay through the remainder of FY21. If we're doing well in summer of 21 into FY22 and FY23, the first people who will be sharing in this recovery will be our people. So the pay cuts will be restored over a three or four year period. The job losses, we would hope to restore some, if not all, of those job losses. Now, it won't be the individual people. We're not going to give anybody the right that you'll be the first one back. But clearly, we will favour rehiring those pilots and those cabin crew who lost their jobs to no fault of their own because of the COVID-19 pandemic. On the cash refunds, the situation is, yes, we can't issue refunds, automate refunds, where... Because part of the problem we have here is you have travel agents and OTAs. Generally speaking, we don't allow you to make bookings, but they are all operating with multiple, I don't know what the term is, but phantom credit cards, phantom addresses, and phantom emails. We can't, if I made a booking through Joe Glogg's OTA or some of those scam artists like eDreams or eDreams in Spain, whoever the other scam artists in Germany and Italy where they're levying handling fees. We would never dream of refunding cash, customers' cash to those people because I'm sure the customers would never see the cash back as well. Our cash refund process is, The individual customer communicates with us. We communicate with the individual customer. We ask them to fill in the refund form and where they want that refund sent to, and then they have to sign it off so that we have the authorization to make those cash refunds. Without those procedures, and they're required under our audit rules and consumer protection rules, we cannot just lash out money to some automated process to turn part of your intermediaries. It is a customer money, the customer has paid us, and we have to make sure that we send that refund back, whether it's the customer's credit card, whether it's their, I don't know what the payment terms in Germany are, straight to their cash transfer into their bank account as well. We require every customer who wants a cash refund to give us or to verify where they want the cash to go and that they sign off on that as a liability. Otherwise, we could be refunding money to intermediaries that our customers would never see.

Absolutely. Thank you very much.

Any other questions? No further questions.

Okay, Gemma, thank you very much. I'm sorry the conference got all over around slightly, but I think it's important, given the COVID-19 crisis, we try and sit and answer it as best we can. I'm sorry that we can't give you any more material guidance into the second quarter of the full year, but we're all in this same situation together. We're flying blind. But I think there's a reasonable prospect of us returning to a reasonable level of flying in July, August into September. And I think once people begin to fly, even if it's wearing face masks, confidence will be restored reasonably quickly. And then I think you'll see a very dramatic restoration of passenger volumes but on the back of discounted pricing and very aggressive pricing, both from the airlines and also from the holiday hotel and tourism providers. That said, hopefully by the time we get to the first quarter results call in early August, we'll have a much better handle on the situation and we'll be able to give you something like more tangible guidance or directions for the second half of the year. Thank you for your patience. We sincerely appreciate the support you've all shown the business over the last three months. I know it's been an extraordinarily difficult time for investors as well. It's not pretty to see the share price go from wherever it was, 15 euros down to nine euros or whatever it is, but rest assured, we are here on a daily basis making sensible decisions on cost, making very sensible decisions on cash protection, and trying to make sensible decisions on an early return to flying in the healthiest fashion we can deliver for both our people and for our customers. Thank you very much, ladies and gentlemen. We have an extensive roadshow, virtual roadshow going on this week. We're now all going on investor calls here. And if you'd like to have an individual meeting with Neil, myself, or anybody else in the team, please route the request back through Citibank and Davey to Shane O'Toole, our head of investor relations. And I'm sure we'll have a call with you later on the week. Thanks very much, everybody. Good to talk to you and look forward to seeing you again soon. Remember, keep flying and fly Ryanair. Safest and the cheapest airline in Europe. Thanks, everybody. Bye-bye.

This now concludes our conference call. Thank you all for attending. You may now disconnect your lines.