Ryanair Holdings plc

Okay, good morning, ladies and gentlemen. Welcome to the Ryanair Q1 results conference call. I'm joined this morning by our Group CFO, Neil Sorohan, and we'll move straight through. As you'll have seen this morning, we released our Q1 results for the quarter ended the 30th of June. We reported a Q1 loss of 186 million compared to a Q1 profit of 243 million in the prior year. Traffic in the quarter fell by 99% as all of our fleet was essentially grounded from the middle of March until the end of June. Our Q1 traffic fell from 42 million passengers last year to just under half a million passengers this year. Cash preservation has been prioritised by the company in the last quarter and I'm pleased to report that our closing cash balance is 3.9 billion. This will be important going forward. Cost reduction measures are being successfully implemented across not just Ryanair but all of the group airlines. and we have initiated what we believe was a very successful return to flying at the end of June. We expect to accomplish about 40% of the normal July schedule during July. As I say, we plan to operate about 40% of the normal July schedule, We hope to grow that to about 60% of the schedule in August and then hopefully, subject to there being no spikes in COVID-19 across Europe, that we would get to 70% of the normal schedule in September. One of the biggest challenges posed to us by COVID-19, apart from the fleet grounding, has been dealing with customer service and a huge backlog of refunds caused by these government mandated groundings. I'm pleased to report that our customer service team are doing an extraordinary job and we expect to have about 90% of all of the cash refund requests from customers processed by the end of July. At this time we expect the full year traffic to fall by about 60%. We'll fall from 149 million passengers last year to at best 60 million passengers this year. That will be entirely contingent on there being no second wave of COVID-19 in the autumn or the winter. And obviously, we've seen some recent spikes in places like Barcelona, and that is impacting short-term bookings. However, over the medium term, we have seen the closure of a significant number of airlines. We've seen Flybe disappear, German wings close, Level in Austria has filed for insolvency, and Sun Express in Germany. However, going forward, the competition in Europe will be distorted by the wave of state aid subsidies, or subsidies being poured by some EU governments into their inefficient flag carriers, most notably Alitalia, Air France KLM, Lufthansa. and TAP, and that is going to pose a challenge over the medium term where we're going to be competing with these flag carrier subsidised airlines who will be engaged in below cost selling. However, this poses a significant opportunity for Ryanair, the Ryanair Group of Airlines and our airlines. We are lowering our costs. We will face lower fares and yields for the coming years, but we think we have the business model to sustain it. To touch briefly on the quarter, as I said, revenue fell by 95% from €2.2 billion last year to just €125 million this year. We've managed an 85% reduction in costs during Q1, but that clearly wasn't sufficient to make up for all the revenue loss, which is why we're reporting a quarterly loss of €185 million. Our cost leadership is where we've been focusing our energies over the last quarter, and that will be vital if our group airlines are to compete against these hugely subsidised flag carriers in Europe for the next number of years. And this is what underpins a lot of the cost reduction measures we've been negotiating lower cost pay deals, modest pay cuts with our pilots and cabin crew as a better alternative to widespread job losses. And that process continues successfully, I might add. We're talking to our aircraft lessors and also Boeing about lowering the cost of the new aircraft orders we're purchasing. We're in active negotiations, but with Boeing on compensation for the delay in aircraft. And the relationships we have with our aircraft lessors, we're renegotiating monthly aircraft lease rates to reflect the harsh environment and certainly the more competitive lease market environment caused by COVID-19. We remain a devoted or committed supporter of the Boeing MAX aircraft. We're pleased to see the recent progress that Boeing have made with the test flights of the MAX aircraft. And we are increasingly confident that Boeing will achieve their return to service date in North America sometime at the end of Q3. We hope that will be sufficient to allow us to take some deliveries of MAX aircraft before the end of calendar 2020. And if that's the case, then we would be hopeful of being able to take delivery of the first 40 of those aircraft in time for summer 21 and that would be key because in summer 21 we want to be able to offer our airport partners across Europe growth potential, work with them to reverse the significant and in some cases catastrophic traffic losses that they've suffered as a result of COVID-19 and we think there's opportunities to do so. The balance sheet in Ryanair remains strong. As I said, our year-end, our quarter-end cash balance is £3.9 billion. So we remain in good shape, but clearly we're facing into what would be a difficult winter. And cash preservation and paying down debt, both to the UK government and the first bond as it falls due in mid-2021, will remain key priorities. The challenge of Brexit hasn't gone away. The UK will leave the European Union in December of 2020. We continue to hope that this will be done in a managed or by agreement, certainly where air travel is concerned. I think the experience of the UK during the COVID-19 outbreak and the priority with which they gave the return of air bridges will hopefully serve as a lesson or a reminder that the UK needs to have open air access with the rest of the European Union and will spur at least a trade deal at least that will cover the air travel segment. However, if there is a hard Brexit, we have a series of airlines, most of which have European AOCs, and therefore we think we'll be far less impacted than UK AOC holders will be. In terms of outlook, I'm afraid it's too early to say. We really can't give any guidance for the full year. We think 60 million passengers for the full year at this point in time is an ambitious target. The risk to that is on the downside if there are spikes in COVID-19, particularly towards the end of the autumn or early winter as flu season. spreads across Europe, we may suffer some cutbacks on that. That traffic will only be delivered on the back of lower airfares and I'm convinced that in actual fact the way to get Europe air travel moving again is with lower fares and price stimulation and that's why it's utterly key that we negotiate lower costs across every cost line with our people, with our aircraft suppliers, with our maintenance providers and that process is underway. Those are the opening remarks. And I'm now going to take you through, myself and Niamh, take you through the quarterly side presentation. So unchanged in many respects, we are the lowest fare, lowest cost airline group in Europe. We're number one for traffic. While that meant 149 million passengers last year, we think we'll do well to carry 60 million passengers in the current year. We remain the number one airline for coverage across Europe, 240 airports, over 2,000 routes. We have, I think, delivered a very successful return to serve flight services from the 1st of July, but that return and that recovery of our flight schedules remains dependent upon the European government's continued to successfully combat the spread of COVID-19. We have a very strong triple B rated balance sheet and we believe our combination of financial strength and lowest costs will make Ryanair the long-term winner. As you're well aware, Ryanair offers the lowest fares. Our fares are lower than any other European airline and that's why we believe we will recover strongly coming out of the COVID-19 pandemic. Allied to those low fares, we have by far and away the lowest unit costs. Our unit costs per passenger excluding fuel is at least 26% below our nearest challenger in Europe and materially up to 71% or 100% lower than most of the other so-called low-cost airlines in Europe. Neil, you want to take the floor?

I will. It was a very challenging quarter for the Ryanair Group. We saw our fleet grounded for almost four months from the end of March until the back end of June and that meant the traffic dropped by 99% to just half a million customers within the quarter. Load factors were just over 60% compared to a 96% load factor last year and revenue was very heavily hit. We saw a 2.2 billion reduction in revenue to just 125 million. We did a lot of work on our costs which led to an 85% reduction in costs over the quarter but unfortunately that didn't offset the reduction in revenues and we recorded a net loss of 185 million in the quarter. As I look over to the balance sheet, we've got a very, very strong balance sheet, triple B plus rate by Fitch and S&P. Our cash was up in the quarter compared to year end. We had a cash balance of just over 3.9 billion compared to 3.8 billion at the end of the last financial year. We also have a very high number of unencumbered debt-free aircraft on the balance sheet, 333 Boeing 737s, with a conservative book value of about 7 billion, so market value somewhat higher than that. So one of the strongest balance sheets in the sector. Michael, back over to you.

So in terms of current developments, as you know, we returned to service in the 1st of July, 40% of our July capacity, covering about 90% of the network, but obviously with reduced frequencies. In August, we expect that to grow to about 60%, and in September, we're hopeful, particularly if there's a successful return of the schools across Europe, that we'll see about 70% of our normal September capacity. The big challenge facing us going forward is going to be the illegal state aid that has exploded all over Europe and those airlines engaged in the low cost selling to the damage of the level playing field in European aviation. We and Ryanair remains Europe's low cost leader, but even we are right-sizing our business now, right-sizing the cost base to reflect the lower fare environment we expect for the next couple of years. We are hopeful that the first MAX deliveries will take place in the winter of 2020. That is subject to the aircraft, the Boeing MAX aircraft successfully returning into service in North America at the end of Q3. I couldn't be more excited about the post-COVID-19 growth opportunities that will emerge all across Europe. We are in the initial discussions with airports, but some airports are losing enormous amounts of their existing traffic. and will have to respond competitively to that loss. The Brexit risk has intensified, but everybody's aware of that. Therefore, we think our outlook, really, we can't give you guidance on the full year in terms of profitability, but we think 60 million on traffic is a reasonable stab, but that could be impacted if there's any significant second wave of COVID-19, either across the continent of Europe this winter or spikes in different European countries. Just to briefly touch on the successful return to service on the 1st of July, we're running about 40% of the normal July schedule, covering 90% of the routes, but with much lower frequencies on those routes. And we're hopeful, we're on track, I think, to exceed a 70% load factor, whereas the initial guesstimate was that we'd do a 60% load factor. Some of that success has been delivered with the comprehensive health measures that we've rolled out for both our crews and our passengers on board. many eu governments are easing the lockdown restrictions in fact there's now largely free travel between most of the eu 27 members the only exception that has been ireland which has been slow and is not managing the the reopening of its economy particularly well they produced a green list in recent weeks which uh you know is very restrictive uh and we think not sensibly based and we will continue to call on the irish government to open up short-haul travel between Ireland and the other EU 27 member states. On-time performance has been excellent during July. We're running on-time performance of over 95%, combination of very good fleet reliability and also very good European ATC performance given the lower volumes of flights across Europe. We would expect, though, to continue to have a controlled return, controlling that capacity growth. And where we see outbreaks of COVID-19 or a dip in passenger bookings, we have the flexibility to sit those aircraft on the ground. So our capacity and our load factor will be controlled into H2, but may be kind of bumpy. Traffic is very heavily dependent on there being no material second wave of COVID-19 across Europe in the second half of the year. And that's why our passenger traffic figure of 60 million is very tentative. We will look where we see opportunities use seed sales to stimulate demand, to recover traffic, to try to build load factors and restore ancillary sales, because we think a good strong winter will actually gear the way or pave the way for hopefully a strong return to normality in the summer of 2021 but obviously much of that will depend on there being a successful vaccine emerging for COVID-19. Just a quick summary of where we are on the illegal state aid to the legacy carriers. Lufthansa has received combined almost 11 billion euros. Even Carsten Spohr has admitted that this is more money than they needed or wanted, but he's happy to take as much as he can get. Air France, KLM, Alitalia, an airline that has been bankrupt and should have been bankrupt, it has now received 3.5 billion euros from the Italian government. Ryanair remains the EU's cost leader, but we're taking advantage of the crisis to try to reduce costs wherever we can. We have rolled out significant pay deals with most of our pilots and cabin crews across Europe. Working with our people to lower pay, we're looking at pay cuts of up to 20% for the best paid pilots, down to as little as 5% for the lower paid cabin crew. That's a much better solution than just job losses or thousands of job losses. And our people, I think, are working with us on that. There will be headcount reductions, however, such as in Germany, where the pilots' union remarkably voted against this deal, and we've now announced the closure of three German bases in Tegel, Niederrhein-Wietze, and in Frankfurt-Hahn. We are in the early stage of discussions with airports around growth deals. We haven't made as much progress as I would like to have made at this stage but a lot of that is because the airports themselves aren't really sure of where they're going to suffer the biggest capacity cuts because the legacy carriers haven't laid them out yet. We're also working with our suppliers to improve terms on maintenance, marketing and almost every other cost line. Lauda and the management team in Lauda have done terrific work over the last two months. They faced down the closure. They had actually announced the closure of the Vienna base because the local Austrian unions wouldn't agree to the new CLA. Thanks to the heroic efforts of the pilots and the cabin crew in Lauda, that decision was reversed and the union was embarrassed, I think, into leaving. supporting the agreement that had already been supported by over 92% of Lauda's pilots and more than 67% of Lauda's cabin crew. However, the Lauda Stuttgart pilots voted against the deal in Stuttgart and as a result that base will close at the end of October. Lauda has also negotiated new lower aircraft lease rates and with the new pay deal and lower costs, we think Lauda in the next 12 months we hope will break even or will go very close to break even. the big driver for us in terms of costs going forward though is going to be the new lower cost max aircraft which we hope to take deliver of this winter this aircraft will deliver us 40 percent or sorry will deliver us four percent more seats per flight it will deliver a 16 percent lower fuel burn and also 40 reduction in emissions this aircraft is the key uh to a really seismic reduction in ryanair's unit operating costs for the next three or four years And we couldn't be more excited about the game changer aircraft or its deliveries, which hopefully will happen before the end of this year. In terms of the growth opportunities, as I said, there are huge gaps emerging across European aviation as a result of the failure of certain airlines, Flybe, Germanwings, Level, SunExpress and others. Competitors will retrench in some cases in return for the state aid. Air France, for example, has announced that its capacity will be cut by 20% in 2021. And similar capacity cuts have been announced by a number of the other EU flag carriers. We would hope to exploit those cuts. particularly where we were able to show our airport partners that we have up to 40 new aircraft coming for the summer of 2021 and that we can reverse or deliver them traffic growth in circumstances where some of their incumbent carriers are withdrawing from the marketplace. Touch briefly on Brexit. As I said already, we expect the UK is leaving the European Union at the end of December. We hope that some common sense will prevail and that they will see the benefit of Europe and the UK negotiating a trade deal that covers air travel. I think the impact on the UK economy of the grounding of the flights for the three months during the COVID period has been, I think, would have helped, I think, to firm up the political view that air travel is a necessity and they won't want to repeat the shock of that or have any interruption to flights. So we're hopeful that there will be a trade deal that will cover air travel and therefore there will be no impact on air travel at least of a no-deal Brexit. Neil?

Okay, just on the outlook, as Michael's already said, it's way too soon to put any kind of P&L guidance into the market. There's a huge amount of uncertainty around what may happen with COVID towards the autumn period. Equally, Brexit brings its own risks. At this stage, our best guess is that we will have 60 million customers in the current year, which is a 60% reduction on the 149 million that we carried last year. Significant work is being done within the airlines to get the cost base down further so that we right-size the business for the challenges that are going to lie ahead, particularly from state-aided carriers who are now going to be able to sell below cost. Our focus will be to keep the balance sheet strong, preserve cash, get the costs down, but we'll hopefully be in a better position to give you an update on the P&L portfolio when we meet again at the AGM in September or in the H1 or H2 results in November. You reported a loss of 185 million. Why? It was a very challenging quarter. We saw our feet ground for almost four months from the middle of March until the back end of June, which meant that our traffic was down 99% to just half a million customers compared to 42 million last year. Revenues more or less dried up completely in the early weeks of COVID. No bookings coming in the door and we saw a 2.2 billion reduction in revenue to just 125 million. While we did great work on costs throughout the quarter, we had an 85% reduction, but that unfortunately wasn't enough to offset the reduction in revenues, so we recorded the loss. Was there a fuel ineffectiveness charge in Q1?

There was. We had a small adverse market to market on ineffective hedges, but it was approximately €10 million in the first quarter. As the market's aware, most of the fuel ineffectiveness was front-loaded into the FY20 full-year results.

Could there be another exceptional charge in FY21? Yeah, it can't be ruled out. If we were to see more groundings of fleets across Europe, if there was a second wave of COVID-19, then yes, more fuel could go ineffective. Equally, if the Boeing MAX was to be delayed well into next year, then you could see some ineffectiveness on the cash flow edges there.

How are ancillary products performing? Well, clearly they were badly affected by the groundings in Q1. As passengers return in July, we're still seeing strong uptake on products like reserved seating, priority boarding. Clearly with the health measures where we're not selling teas and coffees at the moment, onboard sales will be impacted and therefore it's too early at this point in time to be able to give any guidance on ancillary revenues for the full year.

How is your cash position and balance sheet? It's strong. We saw our cash increase to 3.9 billion at the end of the quarter, up from 3.8 billion at year end. We've got a strong investment grade balance sheet, triple B for Oak Fitch and S&P, and that's underpinned by a very strong aircraft market. on the balance sheet, 333, unencumbered Boeing 737 with a conservative book value of just over 7 billion, significantly higher market value for it, so a very strong balance sheet. What is the group Cashburn running at since return to service?

It's reasonably break-even. We expect to run with a load factor of about 70% or just over 70% in July and it looks like something similar again in August. And on that basis, we think we're running on a properly break-even cash basis through both months. So there's been no diminution in cash balances through, we don't expect any through June, July and August.

What is the latest on refunds? We're getting through them. We've had an unprecedented number of claims due to four months of grounding of the fleet. Our customer service team with the help of labs will ensure that we'll have about 90% of our cash refund requests cleared by the end of this month. We're seeing a number of customers opting for free flight changes and accepting vouchers as well for future travel.

How are screenscrapers frustrating the refunds process? The refund issue has really exposed the kind of anti-consumer behaviour of these unlicensed screenscrapers. The big challenge we face is that the screenscrapers make bookings for third party passengers but they put in fictitious email addresses and falsify credit card or the payment details so we can't automate refunds to those people and we run the legal risk that if we issue a refund to an unlicensed screen scraper and they don't pay the consumer that the consumer ultimately will sue us so what we're trying to do is to open up a new mechanism whereby The end-of-line consumers can apply directly to us for their refunds, although clearly some of them are quite shocked when they find out how much they've been overcharged by the screen scraper when they receive our refunds. But it is a problem. We are continuing to call for policing and reform of these unlicensed intermediaries with the regulatory agencies, particularly the CAA in the UK and their equivalent opposite number here in Ireland.

How was operational performance on return to service? It's been very good. We put a lot of work in during the groundings to ensure we kept our people and our aircraft current. We were worried that there might be a spike in tech issues when we returned to service in late June, early July, but thankfully we haven't seen that. Air traffic control due to reduced volumes in the sky has also performed very well. We're seeing on-time performance in the mid-90% at the moment, which is excellent. What are your capacity plans for the remainder of FY21?

It's hard to say yet. I mean, as I said, we're looking to run about 60% of the normal August schedule, about 70% of the normal September schedule. We really need a better sense of where bookings would be, though, into September, October, before we make a final decision on the winter schedule. And that's why our full-year guidance of 60 million passengers is tentative at this point in time, and it could go lower. In the last week, for example, as there has been a spike in coronavirus cases around Barcelona, we've seen bookings to and from and within Spain being hit. And I think we'll see more of those kind of developments.

How are fares performing in Q2? As Michael said, we are seeing fluctuations in bookings as there are spikes in COVID in various different markets. There was a lot of pent-up demand coming into Q2 as lockdowns were relaxed. A number of people wanted to get out, get some some sun over the summer period, visiting friends and relations also has performed well. Business is a lot slower. I think we'll have to wait on people to get back to their offices in the autumn before we see an uptick in that. And it's inevitable that we're going to have to stimulate demand over the winter with lower fares, particularly as we try to take on the flag carriers who now have, what, 30 billion of illegal state aid, which will enable them to sell below cost.

What health measures did you apply when flights resumed? Yeah, we rolled out extensive health measures with extensive videos up on the website both for our crews and for our passengers and they consist of mandatory face masks, hand sanitisation, hand hygiene. We've limited the in-flight service, removed teas and coffees during the month of July. and really trying to do everything or follow most of the sensible guidelines that were published by both the European Centre for Disease Control and EASA on the 20th of May last. In many respects, the airlines have run ahead of most national governments in making face masks mandatory. In fact, Ireland, for example, only made the face mask mandatory in shops in the middle of July. we were many months ahead of them but and i think we've been encouraged i mean i thought we might have some customer resistance on face masks but today during july they our customers have been terrific our crews have been terrific and everybody has adjusted remarkably well to the the new face mask experience on board

What cash preservation and cost cooling did you implement in Q1? Well, it was hugely important that we moved quickly. When the groundings came in, we had 99% of the fleet grounded, which took a lot of variable costs out of the business. But we very quickly, to preserve cash, cancelled our share buyback programme. cancelled all non-essential capex within the business. We introduced recruitment freezes, 50% pay cuts for our people into April and May, and indeed we're continuing to negotiate pay cuts across the board at the moment. And we were lucky enough and able to participate in a lot of the government payroll support schemes across Europe, for which we're very grateful to have been given the opportunity to do that. But we're looking at every cost line, and have looked at every cost line.

How will you improve your cost base for the future? I think, as I said, by right-sizing our cost base. We're looking at every line. We've reduced some of our aircraft lease commitments. We're renegotiating the price of the aircraft with Boeing. We're talking to them about compensation for late deliveries. None of those can be finalized until we actually know when the aircraft will be delivered. We've engaged in extensive negotiation over the past number of months to reduce pay modestly and in, I think, a very fair way with pilots, cabin crew, They take the reductions up front and then those paid cuts are restored to the MoCA the next three or four years. The office team here have suffered significant pay cuts during April and May. We're also looking at lowering our maintenance costs. financing costs are going to be lower, fuel will be significantly lower going forward, and I think for the next two or three years. But those are all vital because we're going to have to continue to pass on those cost savings in the form of lower fares to stimulate a return to travel across Europe and also to be able to compete against these state-aided flag carrier airlines who will be below cost selling for a number of years into the future. And where are the union negotiations progressing?

As Michael said, we've got various pay and productivity negotiations ongoing. A lot of them have actually been put to bed at this point in time. Various other discussions ongoing. We would hope to get modest pay cuts in place so that we can minimise the amount of job losses and base closures. But I don't want to really get into specific deals as I know some are still ongoing at the moment.

Are group airlines closing bases? They are. In Ryanair, we have been unsuccessful in persuading German pilots to agree to pay cuts, so we've announced the closure of Stuttgart, Berlin-Tegel, Dusseldorf-Wietse and Frankfurt-Hahn. at the end of the summer schedule, Laude is closing its Stuttgart base. We're also looking I think at some base closures in Spain where at the moment the unions have not yet agreed to the pay cuts we need and there's a real risk to some of the regional bases in Italy where you have a combination of slow pace of negotiations with the unions but also the Italian government trying to impose Alitalia's pay rates and abysmal productivity on other airlines and other airports within the sector. If that leads to significant increases in cost, then I think it's inevitable that there will be closures of Italian regional bases as well. Michael, are you appealing your legal statement? We are. Thus far we have launched European Court appeal or European Court challenges to the state aid so far received by SAS, by Finnair, by Air France, by TAP in Portugal, the German FANSA one hasn't yet been published but will in due course. And I think we've been heartened by the success of Apple and the Irish government. in front of the European Court of Justice in recent weeks, overturning the challenge that was made to the Apple tax base here in Ireland. And I think it demonstrates that the European Court of Justice is willing to stand up for the European law, where I think the performance of the European Commission in rolling over on some of these egregious illegal state aid has been abysmal. I mean, the idea that Lufthansa has run around hoovering up state aid, not just in Germany, but in Austria, in Belgium and in Switzerland, And in fact, Karslispor was correct. He didn't expect to get that much state aid. He's receiving more than he actually needed, which in itself is in breach of the state aid rules. So I'd be reasonably confident that we will be successful in opposing these state aid grants. The challenge and the difficulty will be it will take us two or three years for these courts hearings and the appeals the inevitable appeals to be pursued to be kind of run their course in which case we would have suffered a number of years of below cost selling by Italia by Lufthansa and others and to the damage of Ryanair and our shareholders interests so yes we pursue the state-aid claims that we think will be successful but it'll take us some time there was a recent restructuring in Lowdow what did that involve

It was quite a significant and painful restructuring for the latter group, but they had to, in light of COVID-19, totally look at every cost item within the business, look at their growth plans for the future. They had hoped to grow to 38 A320s in their fleet this summer. That's now being capped at 30. They've also renegotiated a new CLA with their staff, their pilots and cabin crew in Vienna, which is leading to pay reductions. enhanced productivity and rosters. Unfortunately, their base in Stuttgart is going to have to close and that will go at the end of October. But what this means is that they are now going to make a positive contribution to the Ryanair Group as a wet lessor and have a good future, we believe, with William Ryanair. How are the unit group airlines developing? They're coming along well. They clearly had a difficult first quarter on the back of the groundings. Buzz, at the moment, have just under 50 aircraft in their fleet and they continue to take over operations for the Ryanair Group in Central and Eastern Europe and we hope to take on a couple more bases. This winter the charter market has been impacted over the summer and a number of traditional markets like Turkey are still not open and that will have an impact on them. Malta Air now have 120 Boeing 737s in their fleet and they're actively involved in cost negotiations with their people across the various markets that they operate in and we would again have hopes that Malta will take on more of our operations over the coming years and months. When is the latest update on the MAX?

Boeing successfully completed the return to flight tests with the FAA in early July. They expect to make significant progress with both the FAA, with the ASA, with the Canadian regulators before the end of the month. There's reasonable prospect I think at this point in time that the aircraft will be certified for return to commercial service by the end of Q3, we hope by the end of September. The Boeing MAX 200s that we've ordered are running probably about, it'll take about a two-month certification period. So we would be hopeful at this stage that we'll see the first of our MAX deliveries by maybe the end of this calendar year. And if that's the case, then I think there's a reasonable prospect that we'll be able to take up to 40 new aircraft deliveries between now and the summer of 2021 and that would put us in a very strong position to go around to Europe's airports to offer them growth or to offer them traffic recovery where they've lost traffic from other providers and I think that will kick off or enable us to kick off a range and a round of significant growth incentives and they will be much needed in this industry for the next number of years. Our bone compensation talks progressed.

They're still ongoing, we're making some progress but it won't be possible to conclude the discussions at such times as we do see a return to service of the max and we get a firm schedule of deliveries for ourselves and at that stage then we'll be in a position to hopefully close things out.

What are the group fleet plans? Well, as I said, we were hopefully getting 40 max aircraft for summer 2021. We're already committed to selling seven sales of the 737-800s. Those will be delivered this winter. That's the balance of the 10 aircraft deal we announced we'd sold in FY20. We're going to hold off any further sea sales because, frankly, we need the aircraft we have to exploit the kind of growth opportunities we see across Europe. There are 14 737 lease returns by May 2021. We are in discussions with the lessors on those aircraft and we'd certainly be willing to extend those leases as long as we could do so on competitive terms. The Lauda fleet, however, though, has been frozen at the moment. It was originally supposed to go to 38 aircraft for summer of 2021. Because of the impact of COVID-19, we have stopped its growth, which is limited to 30 aircraft, and we won't be adding any further aircraft to the Louda fleet, I think, for the foreseeable future, unless there's some significant pricing opportunities on the Airbus side. Michael, what is the latest update on Brexit? As I said, the UK leaves the European Union at the end of December. There is a significant risk of a no-deal Brexit. As everybody can see, the negotiations aren't going particularly well. We remain, however, hopeful that a trade deal will be done or negotiated that will cover air travel between the UK and the European Union. And I think the experience of the UK with the COVID-19 groundings should help that process. I think the UK was very keen in recent weeks to reopen air bridges and restore air travel between the UK and continental Europe, and we hope that that will give a significant impetus to, or at least to encourage, the concluding of a trade deal between the UK and Europe that will cover air travel. If it's not, and there is a hard deal, Brexit. Our group consists of four European airlines with European AOCs in Malta, Austria, Poland and in Ireland. We expect there will be no interruption on their flights to and from the uk there may be some disruption we operate three uk domestic routes and some uk routes to places like morocco or countries that are outside that might be affected if there was a no deal brexit but it's a tiny proportion of the overall business and it i think would be more than made up by opportunities that would emerge where uk registered airlines and aocs would be grounded uh in terms of flying intra-european um But we would like to see a trade deal done and there be the smoothest possible departure from the UK from the European Union.

What's the group's traffic and profit outlook for FY21? It's way too early to give any kind of P&L outlook at this point in time. There's too many unknowns in relation to what may or may not happen with COVID over the next number of months. Our best estimate at this stage is that we'll see traffic at about 60 million for the current financial year, which is a 60% reduction on the 149 million that we carried earlier. last year where we're actively working to right-size the cost base for a post-COVID environment where we'll have to compete against state-aided carriers. We've just been gifted over 30 billion in illegal state aid. So we think as we look into the winter we'll have to significantly stimulate demand with lower fares and indeed we'll need these lower fares to compete with the flag carriers. further out beyond that there are opportunities we're continuing to preserve cash in the business and to improve the balance sheet michael neil thank you thank you very much and we look forward to talking speaking with you all on the conference call later on this morning thank you