Ryanair Holdings plc

Hello, and welcome to the Ryanair Q1 FY22 results conference call. Throughout the call, all participants will be in listen-only mode, and afterwards there'll be a question-and-answer session. During the Q&A, in the interest of time and fairness, please limit yourselves to a maximum of two questions per person. Just to remind you, this conference call is being recorded. Today, I am pleased to present Michael O'Leary, Ryanair Group CEO. Please begin your meeting.

Okay, good morning, ladies and gentlemen. Welcome to the Q1 results conference call. We have the whole team assembled at various locations on call today. We posted this morning the usual press release. Neil and myself have done a Q&A on the results and the investor slide presentation. I propose to spare you all that detail. Rather than going through the press release, I'll take that as read and give you a couple of themes. I think the three key themes in this morning's message, one is traffic recovery, two is the very strong performance on cost containment and how that would play out over the next two or three years, and then I think the extraordinary three is the extraordinary growth opportunity that's unfolding in front of us as we take delivery of over 200 MAX aircraft over the next four years at a time when we will see meaningful and sustained capacity cuts across Europe. So on scene one, traffic recovery. Q1 traffic was 8.1 million. A dramatic recovery within that with 1 million passengers in April, almost 2 million in May, but 5 million in June. That recovery has continued strongly into Q2. In July, we think we'll get to, in fact, we will just about, we'll just exceed 9 million passengers. I know last week we said almost. We'll just get over 9 million passengers. August, at the moment, we're on track to just get over 10 million passengers. And we'd be hopeful with a reasonably robust September that we get to about 28 million, maybe 29 million in that second quarter. So not alone that we have 8 million in Q1, but about 28, 29 million in Q2. All of this is obviously heavily qualified on there being no adverse COVID variant developments or returns and lockdowns. And we think we feel reasonably confident that's the case. We can't eliminate COVID. political mismanagement, particularly in the UK or in Ireland, which has been astonishingly poor at managing the recovery. But in general terms, we think we're headed for a very, very strong traffic recovery through the second quarter, and there's a reasonable prospect that that will be maintained into Q3 and Q4. We're seeing a much stronger recovery, I think, in Ryanair than any of the other LCCs. If you take those monthly figures in Q1, We carried five times the April traffic in the month of June. You've seen from the ETCS and WINS figures, they carried about three times their April traffic. Our load factor is also industry leading at mid-70%. In Q2, we expect to operate or offer more than 80% plus of our pre-COVID capacity. And with load factors in the mid to high 70s, we expect to deliver about 70% plus of our pre-COVID traffic. And then, as I said, if the vaccine rollout continues and the managed COVID reopening continues, particularly the schools will go back as normal in September, we see every reason to move the guidance as we have this morning up from previously the lower end of 80 to 120 million. Today, I think we're in a much narrower range of between 90 to 100 million. And I would, I think with no disruptions, We're at the upper end of that range rather than the lower end of that range as we stand here this morning. International development, then, we're seeing we're continuing to deliver a very impressive cost performance. I think we have, together with our union partners and our employees over the last 18 months, negotiated very reasonable and modest pay cuts. It ranges from 5% to 10% on cabin crew, 10% to 20% on pilots. But that was in return for keeping them all current and avoiding mass redundancies and layoffs. And that's one of the key reasons that we've been able to deliver such a strong and rapid traffic recovery. We've kept the crews current. We have the right people in the right places. And we've been able to unwind a very quick and rapid reopening. Airport and handling costs have been renegotiated. We've taken as at the end of July 11 of our first 12 of the MAX aircraft have been delivered. And I would like to say that the performance of the MAX in the first month of operation thus far has been spectacular. Admittedly, with slightly lower than normal load factors, the fuel performance has been well in excess of the 16% saving promised by Boeing. But there's been a uniquely, or I'd say an overwhelmingly positive response both from our crews, the pilots and cabin crew love operating the aircraft and from our passengers. We've been operating a system for the last month where any passenger getting on a MAX who wanted to offload could do so without any quibble and travel on the next available flight. Not one passenger has sought to offload off that aircraft yet. And the feedback from passengers traveling on the aircraft is it is particularly quiet, a very nice experience. And as we had, I think, long predicted that once we start flying the aircraft, passengers will love them. These aircraft enable us to tap into enormous growth opportunities. I don't think, certainly in my 30 years in this industry, post-9-11, post-Gulf War, there has never been a growth opportunity in front of Ryanair such as we have at the moment. Already this year, we've announced 10 new bases, multiple bases this summer up in Scandinavia, where both SAS and Norwegian are in chaos. We've opened bases in Belen, in Riga, in the Baltics, in Stockholm, Orlando, Two bases in Croatia, Zadar and Zagreb. We've extended and enhanced low-cost deals at Stansted, Bergamo, Brussels, Charlevoix that go out to the end of this decade. We've doubled our capacity in Rome, Fumicino, as Aditalia reduces its fleet. We've also announced new routes in Helsinki, new bases this autumn in Turin in Italy and Agadir in Morocco. And this is just, we've barely scratched the surface so far. there are extraordinary discussions and negotiations going on between our new route team and both existing airport partners of ours and also new airports across the entire piece of Europe and the neighboring states who are joining the European Open Skies. To put it in context, the growth opportunity that FATE confronts us, we over the next four years will take delivery of 210 max aircraft. It will take the fleet to north of 600 units. Over that same four-year period, who talk a lot about growth, will take delivery of 80 aircraft. Their total fleet will rise to about 230 aircraft. So we'll take more new aircraft delivery to the next four years, the equivalent of their total fleet. And in the case of EasyJet, there seems to be zero growth. In fact, the fleet has shrunk in the current year, and we see them pretend to mind or protect what they have. they certainly won't be a competitor for us on new route development or growth. And where we think the real opportunity, though, will be, as we've seen all the failures, Thomas Cook fly the German wings level. But there are much more meaningful and short-hauled capacity reductions in Portugal, where TAP have already announced a capacity reduction, short-hauled fleet reduction of 20%. We think that will finish up closer to 30%. And Italia is reducing its fleet by 25%. And again, we think that will be more And so there are enormous opportunities. We are seeing slots becoming available to us at airports where previously we couldn't get them. And I think if you have the aircraft deliveries in the next three or four years, we are going to secure space at airports, a once-in-a-lifetime opportunity to secure space at airports and expand our footprint from an airline today, which has 70% of our departures at primary airports and 30 at secondary airports, we see that rising to about 80% of departures at primary airports and 20% at secondary airports over the next four years. The one other issue we should touch on briefly is the EU announcement of Fit for 55. I would caution investors, again, it will have no impact on our cost base until FY24 onwards, so there's no impact for the least the next two years. It is, I think, a badly designed package which introduces not just double taxation on short-haul European flights, but triple taxation. Short-haul passengers, mainly EU consumers, will now be faced paying not just ETS payments, but also an aviation fuel tax, in addition to APD in many EU countries like Germany, Austria and others. It is bizarre and inexplicable that these taxes are only being levied on European short-haul flights. while designed by our friends in Holland, Germany and France, the long-haul operators in those countries get a free pass on these aviation taxis. We believe, however, that this program will be materially renegotiated and, I think, softened over the next two years. We see significant concerns being raised among EU peripheral states in Eastern Europe, Cyprus, Malta, Ireland, among others, particularly also in the tourism destination, Spain, the Canaries, Portugal, the Azores, the Greece, and the Greek islands, beginning to realize that what we have here is aviation tax proposals being designed by the Dutch, Germans, and French, largely aimed at aviation, where in most of those countries people have the alternative of train or motorway alternatives. In Ireland, in Portugal, in Greece... Certainly in Malta and Cyprus, we don't have an alternative. We can't simply transfer away from flying because there's no other way on and off these islands. And we think there will be a meaningful realization, particularly among the tourism nations and the peripheral nations, that the long haul is going to have to bear its fair share. The Dutch and the Germans and the French can't lecture the rest of Europe about more environmental flying while they give their long haul operators a free pass. But for the moment, I think it is in the medium term, and we would expect there to be significant pushback from some of the tourism and more peripheral states of Europe against these triple taxation proposals, and we would very much support that. I have nothing else I want to add in terms of the opening remarks, so with that, I'll hand over to the moderator, and Poole, open it up for Q&A, please.

Thank you. If you wish to ask a question, please dial 01 on your telephone keypad now to enter the queue. Once your name is announced, you can ask your question. If you find it's answered before it's your turn to speak, you can dial 02 to cancel. And as mentioned previously, please limit yourselves to two questions per person. Our first question comes from the line of Dwayne Fenninworth of Evercore ISI. Please go ahead. Your line is open.