Ryanair Holdings plc

Okay, good morning ladies and gentlemen. My name is Michael O'Leary, the Group CEO of Ryanair Holdings. I'm joined this morning by Neil Sorin, our Group CFO. We're here to present to you the Q3 results for the Ryanair Holdings Group PLC. As you'll see this morning's results, there's a detailed results presentation, Q&A and a press release on the website and I would encourage you all, clearly you're on the ryanair.com website. Q3 has obviously been heavily influenced by the continuing COVID travel restrictions. We expected that things would continue to recover and improve through Q3. But in the week before Christmas, the emergence of the UK and South African variants led to further severe travel restrictions, particularly on flights to and from the UK. And that had an adverse impact on the Q3 numbers. I'm going to hand you over now to Neil Sauron, who will take us through the slide presentations. Thank you, Michael.

We've seen these slides, a number of these before, so I'll run through them relatively quickly. Ryanair has the lowest fares and the lowest costs of any airline. On-time performance continues to improve significantly with 96% within the quarter. Our balance sheet remains the strongest in the sector with a BBB rating from Fitch and S&P, and we improved our ESG credentials in the quarter with a strong B- rating from CDP. Importantly, we increased our Boeing order to 210 units in December, which will deliver 200 million passengers by FY26. So our financial strength and our lowest costs will make us the long-term winner. We continue to have a large footprint across Europe and we're already rolling out new bases with Treviso and Bovey announced for the summer. More to come as we increase frequencies across the likes of Naples and elsewhere. Our cost base coming into COVID was one of the strongest, the absolute strongest in Europe by a country mile. And we're improving on this and we'll continue to do so over the coming months. So the quarter itself was a difficult quarter. We saw our traffic drop by 78% to just over 8 million guests. This led to an 80% plus reduction in revenue down to just 340 million. And while we had a strong performance in our costs, down 63%, this unfortunately wasn't enough to offset the lost revenue, and we lost in excess of €300 million in the quarter. Our balance sheet, as I've already said, remains one of the strongest in the sector. We had €3.5 billion cash at the end of the quarter, and 80% of our Boeing fleet is unencumbered with a conservative book value of just over €7 billion. We're in a strong position to repay 1.5 billion debt, which matures over the next six months. And with that, I'll hand over to Michael for current developments.

So thank you, Neil. Let's touch briefly on what we see as the key current developments. Obviously, COVID-19 dominates everything. The uncertainty continues. But I think we should look to the medium term. Vaccines are coming. The rollout has been particularly successful in the UK, and we're calling on the EU to catch up. We're using this as an opportunity to lower Europe's lowest cost base, our lowest airline cost base. We're extending and renegotiating our contracts with staff, airports, aircraft and other suppliers. We're continuing to make significant and substantial environmental progress. We're now the first airline ever, we've received our first ever CDP rating of a B-, The 737 firm order extension we announced in December, it would be critical to the future of Ryanair. It allows us to cater for significant growth, but at lower costs going forward. And we do see unlimited post-COVID-19 growth opportunities. But as Neil said, our FY21 guidance is now a loss of 850 to 950 million net pre-exceptionals. Just touch briefly on some of these. Vaccinations started to roll out in the UK in December. I think we're heartened by the fact that the UK expects now to have vaccinated 50% of its population by the end of March. Europe, sadly, is lagging behind and expects only to have 10% of its population done by the end of March. That to us is not acceptable. Europe needs to get its act together and accelerate the vaccine rollout programme. Once 50% of the population is vaccinated, however, that eliminates all the high risk groups. We see no reason for a continuation of travel lockdowns or restrictions of any kind. And we would certainly hope that that would pave the way for a reasonable recovery of traffic through the summer of 2021 and into the winter of 2021 as well. Environmental terms, excuse me. As I said, we for the first time ever participated in the CDP environmental survey in 2020. We received a very strong first-time B-minus climate protection score. That's one of the highest scores of any airline in the world. We're particularly pleased that we received an A rating for our environmental corporate governance policies, and we're committed to improving those scores over the coming years. Critical to that environmental performance in the next couple of years will be the addition or taking delivery of the new Boeing 737 Game Changer aircraft with 4% more seats, 16% lower fuel burn. and a dramatic 40% reduction in noise. We've already covered in some detail for shareholders the new Boeing 737, the game-changer aircraft, and I keep going back to the key fundamentals here. We've extended the order, it's now a firm order, it's risen from 135 to 210 aircraft. We've done so thanks to a modest additional discount provided to us by Boeing. And it means that we can securely look to a rollout of additional capacity over the next five years of lower cost aircraft with 4% more seats that burn 16% less fuel on a perceived basis going forward. These will dramatically improve our efficiency, significantly lower our costs, and make us a greener, cleaner airline, putting us well on track, not just to achieve our environmental targets by 2030, but also giving us the capacity to grow to 200 million passengers a year by March 2026. It's impossible at this point in time to know how that growth will evolve over the next 12 months. We're operating now in a range that traffic for this year will be somewhere between 26 and 30 million passengers. We do expect to see a substantial recovery into FY22. A lot of that will be dependent upon the speed and success of the rollout of the vaccine programs, particularly in the UK, which is one of our biggest markets, but also across the other larger European markets, particularly those like Spain, Italy, Portugal and Greece who depend on tourism. I think at this point in time, we're looking, depending on the timing of that recovery, carrying between 80 to 120 million passengers over the next 12 months to March 2022. It's impossible to be any more accurate. And those numbers are also subject to change. But there are very significant growth opportunities post COVID-19. Eurocontrol has already predicted more airline failures in 2021. There are very steep and significant structural capacity cuts already announced by the European Airlines. Many of our competitors will have significant impairment on their balance sheets. And we are already seeing large traffic declines at major European airports leading to much more aggressive and much more innovative recovery growth incentive schemes. And we hope to be able to participate in those. Most notably, we've negotiated a four-year extension of our 10-year low-cost agreement at London Stansted Airport. And we're also pleased to have been able to secure EasyJet's Stansted slots, our Stansted slots for their seven base aircraft when they closed last the Stansted base this winter. That again gives us lots of room for growth and expansion in London, which will be one of the key markets in Europe, but also at one of London's lowest cost airports when most of our competitors will be operating at higher cost airports in Gatwick and Heathrow. And what's key to all of this is that our low cost 737 aircraft will facilitate significant growth and we expect that growth to start from Q1 of FY2022. I have nothing else to add to that, Neil. Anything else on your side? No, I think that's a fair synopsis. Okay, so we'll then start into the Q&A session. Thank you. Thank you.

Why did you report a Q3 loss of £306 million?

It was primarily due to a 78% reduction in our traffic down to £8 million due to the lockdowns and travel restrictions throughout the quarter. As a result, revenue was down over 80% and while we had a good performance in ancillaries and a significant reduction in costs down 63%. This unfortunately wasn't enough to offset the lost revenue and we reported the loss of just over 300 million in Q3.

Ancillary revenue per pax was up 2% in Q3. Why?

Well, the reserve seats and priority boarding performed strongly with those passengers who flew with us in the third quarter, but these and this offset weaker onboard sales, partly due to lower load factors as well.

Was there a fuel ineffectiveness charge in Q3?

Yes, there was. We had a 15 million exceptional charge in the quarter, primarily due to the reduced schedule into Q4, where we're taking out significant passengers and flights, slightly offset by delays on aircraft. Any update on your fuel hedging position for FY22?

No, there's been no change on the fuel hedge position into next year. We have approximately 40% of our fuel hedged for FY22 at around just over $50 per barrel, slightly lower than current spot prices.

How is your Q3 cash position and balance sheet?

Very strong cash position, 3.5 billion cash at the end of the quarter. We continue to have one of the strongest balance sheets in the sector. Triple B rated by Fitch and S&P. 80% of our fleet is unencumbered with a conservative book value of just over 7 billion. So we're well placed to pay down 1.5 billion debt over the next six months.

Gross cash fell by 1 billion since the end of H1. Why?

Well, cash generally falls in the third quarter, even in normal year. However, this year we've seen an acceleration of passenger refunds into the third quarter, particularly as more flights were short notice cancellation, particularly around the Christmas New Year period. Deferred route charges from Eurocontrol became payable and due in the quarter, and we're still continuing to fund ineffective fuel swaps, which were settled during the period. However, I think the key message is we still finished the quarter with a very strong cash balance of over €3.5 billion. I think that demonstrates the effectiveness of the cash management and cost reduction strategies we've been following since March 2020.

What cash preservation measures have you implemented?

Well, as Michael just said there, we've been working very hard on reducing costs within the business since the start of the pandemic. We've participated in the various government support schemes all across Europe. We've got rid of all non-essential capex, stopped the share buyback and tapped the capital markets back in September, where we raised 1.25 billion through a combination of a share placing and an 850 million euro bond.

Are you planning on raising additional capital or funding this year?

We see no reason or no rationale for additional capital or fundraising. But, you know, like all good company, well-managed companies, we keep all options under review all of the time. What are forward bookings looking like?

The booking curve is very close in at this point in time. It's primarily driven by news flow around the likes of lockdowns, quarantines, testing and, of course, the rollout of vaccines. And that will probably remain the case for the next while. What is your CapEx guidance?

It largely depends on the timing of the game-changer deliveries this year. We've already agreed deferrals for the FY21 deliveries, and the existing PDPs more than offset the near-term capex. We expect those to ramp up capex from the second half of FY22. Peak capex will be delayed until FY23, and we should be in a position to give shareholders more colour on capex at the full-year results roadshow in May.

What is your traffic forecast for FY21? Well, as we recently announced, we now expect traffic to be in a range of about 26 million to 30 million guests for the full year. I think the risk is more to the downside than the upside at this point in time. We're targeting 70 percent load factors. But the key issue for us is to keep our pilots, our cabin crew and our aircraft current. And we're working on that. So we're ready for a ramp up into the summer.

What are you doing to prepare for the summer 21 ramp up?

Well, we're finalising low-cost growth incentives with many of our airport bases. We're working hard, as Neil said, to keep the aircraft and crew current during the existing Q4 when we have very little flying due to COVID restrictions. We hope to take delivery of up to 25 game-changer aircraft before peak summer 2021, but that depends on EASA licensing the aircraft to return to service here in Europe. And we're continuing to invest in cabin crew training in Q4. This will increase staff costs in Q4 without having any flying for that staff, but that will enable us to capitalize on growth and recovery opportunities, we believe, in summer 21 and beyond.

Do you support pre-flight departure, PCR testing or travel quarantines?

No, we don't think any of those travel restrictions, A, are effective or B, are even implementable. I mean, we have yet to see any government in the UK or Ireland impose an effective warranty. It's clear to us that vaccines are the way forward and vaccines are the way out of the COVID crisis, not travel restrictions, particularly for intra-EU travel. We expect that to recover strongly in summer 21. One, as the main tourism economies will want to welcome visitors in Spain, Portugal, Italy and Greece. And two, because of the successful rollout of vaccines, for example, if 50% of the UK population are already vaccinated by the end of March, there's really no reason to lockdown or to quarantine UK visitors to those countries.

What are the growth opportunities post-COVID-19? Significant opportunities. We come into COVID with the lowest cost base of any airline in Europe. We'll have an even lower cost base coupled with a very strong balance sheet. So at a time when there's been significant airline failures, lots of capacity coming out of the market and indeed Eurocontrol predicting more failures. We've got airports clamouring to restore capacity and to grow over the next few years. And at the same time, we've increased our order with Boeing to 210 game changer units. So I think we're well placed to grow to 200 million customers and 600 aircrafts by FY26 and to capitalise on huge opportunities in the market.

What is the group doing to lower its cost base?

Well, as I said, we've paid deals, agreed with pilots, cabin crew and engineers. Pay cuts of between 5% to 20% over the next two years, which will then be restored over the following three years. Lauda has been restructured. It is now operating from Malta with the Maltese AOC. Growth discussions are ongoing with airports who are anxious to work with us to recover the traffic they've lost. The new Boeing aircraft deal will lower our new aircraft costs, particularly on aircraft that have 4% more seats and will burn 16% less fuel. and labs continue to do outstanding work to lower our costs, lower our admin and operating costs.

What is the current status of the state aid appeals? We've already had a couple of cases heard at this point in time and would be hopeful of getting decisions in the spring. Most recently we've appealed the unlawful state aid into Lufthansa and I think it's hugely important that these unlawful state aids grants don't go unchallenged because they're having a significant impact on levelling the playing field for competition in Europe. And this is something that we'll be working on for some time to come.

How are the other group airlines developing? I mean, they're developing well, but they're all struggling with the same COVID restrictions that Ryanair is. But Buzz, based in Poland, now operates 50 aircraft. Excuse me. Malta Air based in Malta is operating 120 aircraft. The Lauda fleet, now again based out of Maltese AOC, is operating at 29 A320s. And all group airlines continue to, on a daily basis, review costs and preserve cash.

You made good environmental progress in Q3. What are the highlights?

Yeah, we're very proud of our environmental achievements over the past quarter. We participated for the first time in the CDP, Climate Protection Survey, and were awarded a strong B-, which I think is a credit to what we're doing. We were particularly pleased that we were rated A for the environmental corporate governance within Ryanair. But, you know, there's a lot more to do, and we hope to improve on this rating over the next year or two, and indeed with the The new Game Changer aircraft is starting to come in with 16% lower fuel burn, lower CO2 and lower noise emissions. I think that will help us achieve our ambitious targets of reducing CO2 per passenger kilometre by 10% by 2030. We've also made significant strides in removing plastic from aboard the aircraft and 80% of consumables are now plastic free. So a lot done, a bit more to do. When are you expecting the first delivery of the Boeing Game Changer aircraft? All going well. We would hope to take the first aircraft into our fleet in Q4 with potentially up to 24 in advance of peak summer. We welcomed YAS's ungrounding of the MAX in Europe last week. And now the game changer is going through a certification process, which, as I said, will hopefully see 24 deliver pre-summer. Very keen to get these aircraft into the fleet with the phenomenal performance, 4%. Extra seats, 16% lower fuel burn, will be a key player in our growth over the next decade.

Where are you intending to position these new aircraft?

The first 24 aircraft are spread between Ryanair, Buzz and Malta Air at their bases across Europe. We're taking, I think, six aircraft painted the Buzz colours and five aircraft painted the Malta Air colours. But they'll be spread across their main bases this summer.

What are the group fleet plans?

Well, in the short term, we're hoping to take 24 game changers into the fleet for peak summer. This will help offset the 21 retirements of older aircraft before the end of this year. We already delivered seven aircraft for cargo conversion, part of a deal that we agreed in 2019 pre-Christmas, and we have 14 older leases maturing over the next number of weeks and months which will be exiting the fleet. We've capped out the A320 fleet of 29 aircraft. And thanks to the increased order with Boeing pre-Christmas, we've taken 210 game changers between now and the FY26. So that will grow the fleet to 600 aircraft at that period of time and 200 million customers per annum.

What are the schedule plans for summer 2021?

And they're very fluid at the moment as the COVID-19 restrictions are continuously changing. The schedule team are revising the summer 21 schedules on a weekly basis. As long as there's significant uncertainty over COVID-19 travel restrictions and the speed of the vaccine rollout in the UK and in Europe, there'll be high degree of uncertainty. The booking curve, as Nina previously explained, is very close in at the moment. We are way behind what we would normally have in forward bookings into summer 2021. But as we've demonstrated over the last nine months, we can flex our schedules pretty quickly up or down in response to changing demand conditions. I'm personally confident that as more vaccines are licensed, we'll see a much more aggressive and rapid rollout of vaccines in February and March. And I think there will be positive news in terms of this rate and speed of vaccine rollouts and reductions in travel restrictions, particularly for the peak summer months of 2021.

What's the group's guidance for FY21?

Well, this year is going to continue to be the most challenging in our 35 year history. As I've already said, we anticipate that our full year traffic will be in a range of 26 million to 30 million, although the risk is very much to the downside of that range with no visibility on yields and forward bookings. And with a huge amount of uncertainty in the market around lockdowns and the role of the vaccines, we're cautiously guiding a full year loss in the range of 850 million to 950 million pre-exceptional items. But I think when you look beyond the current COVID crisis, we're coming out of this with a very strong balance sheet and the lowest cost base. In Europe, we're taking the game changers at the right time and there's lots of growth opportunities for us.

Can you provide any traffic guidance for FY22?

It's almost impossible at the moment. We have a very wide range of traffic projections ranging currently from 80 million passengers to 120 million passengers. That's significantly down on what we would take on normal years, 150 million passengers. And we think the recovery will be slow into Q1, accelerate into Q2. And then we're hoping that with widespread vaccinations in place by September of next year, the Q3 and Q4 will be running at somewhere between 70 to 90 percent of normal. But that's why the traffic is. guidance at this stage is so wide and with such a wide traffic guidance it's impossible to give any uh accurate range of earnings guidance at this point in time we hope to be in a position to provide a much more uh much more accurate update or a better guesstimate at our full year results in may michael neil thank you thank you