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.

Dwayne, hi. Hey, good morning. Thanks. Just wondering, as you rebuild your network and kind of get back to some normalized capacity levels, what capacity level do you think you could get back to your fiscal 20, 31 euro per passenger? Do you have to get back to 100% of what you used to fly, or could you hit that level sooner? Sorry, Drew. I'm not sure you answered the question about yield. no, no, sorry, your non-fuel cost per passenger of 31 back in fiscal 20, what percent of fiscal 20 flying would you need to do to get back to that level?

I think we will be, if there is no adverse COVID development, you know, and we exit the pandemic this autumn, I would be confident that into FY23, that is next year, effectively summer 2022, we will be carrying more passengers than we did pre-COVID in FY19, which was 147 million and change. And our unit cost per passenger will be significantly lower than they were in FY2019, with one exception, and that is there is a kind of an uncontrolled escalation in ATC and ANSP charges, where most of these government monopolies around Europe are now talking about recovering last year's loss of income and advancing, I think, ATC price rises next year of between 30% and 40% on a per-passenger basis. Now, it's not a huge part of our overall cost base, but it is material. But other than that, I think you'd see continued meaningful cost reductions across all of the other lines, driven hugely by the fact that we'll be operating more than 60 Boeing MAX aircraft next summer, summer 2022.

Yeah, so if I can just add to that, I would say, Dwayne, you can start to see something with a trade in it from the next quarter, although it will be closer to the mid-30s, and then as Michael said, as we get into the summer of next year, we start to see a critical mass on the max and the load factors are up. We start to get back to the €31 and then hopefully improve on that.

That's great. And then just for my follow-up on competitive capacity, I mean, you touched on it. But I wondered if you could put some numbers on it. As you assess the restructuring of European short haul that's already occurred and that's continuing to occur, how much capacity would you say is gone versus pre-pandemic? And as you rebuild your own network, is there any numbers you could put on competitive capacity on your routes looking forward, kind of Q2, Q3? Thanks for taking the questions.

Thanks to it, it's almost impossible at the moment to predict the competitor capacity because you have operators like Lufthansa, IAG, Air France, KLM that are sitting on cloth that they're not using. Alitalia and TAP have already announced meaningful structural reductions in the fleet of between 20% and 30%, and then you've seen the bankruptcy of a lot of other carriers. I think... that into 2022 and into 2023, you're looking at, excluding our growth, a meaningful, I would say, 20% reduction in short-haul capacity across Europe. It might be slightly softened into FY22 because I think some long-haul aircraft will reappear on short-haul European routes because long-haul will take longer to recover. But there is a meaningful shortage of capacity out across Europe short-hauled for the next, I think, two or three summers and if you look at the order profile of most of the other airlines, they have almost no short-haul aircraft on order. I think you're looking at a 20% reduction in short-haul capacity into summer 22 and into summer 23. Eddie, I don't know whether you want to add anything to that. You'd be closer to that reference.

Yeah, I mean, you can see somebody's been, I suppose, muddied by the pace of recovery with your competitors as to where they're actually going to where they're actually going to put that this winter. But I wouldn't disagree that the figure of 20% is probably the more likely reduction and certainly the one that we've been looking at. I mean, we can see it as well in some of our market shares as we grow, particularly into August because of the slow pace of recovery of our competitors. But 20%, I wouldn't disagree.

Thank you.

Thanks, Dwayne. Next question, please.

That's from the line of Daniel Ruska of Bernstein. Please go ahead. Your line is open.

Good morning, gentlemen. I'll follow Dwayne and ask the question slightly differently. I mean, where are you seeing those planes leaving the market? And do you think there'll be a difference between smaller markets around TAP and Alitalia and the larger markets with the wider groups? Because on a sector level, there still are a lot of planes registered to European airlines at this point. And then secondly, on the EU55, You know, with the EU planning to add a lot more cost into this, and I acknowledge that we'll have to see what the final policy proposal will be, but do you think that adding carbon cost in whichever way impairs the sector's ability to grow as fast as it has over the past decade? And how should we think about Reiner's opportunities amid a slower sector growth kind of in the 2020s? Thanks.

Again, we go back to the capacity. I mean, the obvious ones are the failures, the Flybees, the Levels, Thomas Cook, and others. But the more interesting, I think, underbelly is the capacity, short-haul capacity has come out. Norwegian has collapsed. You know, they've gone from a fleet of 120 to 20 aircraft. SAS has cut short-haul capacity. Alitalia has already announced 25% capacity reduction, but we suspect they'll do more, and TAP is in a similar boat. Underneath that, then, you have the question, how much short-haul recovery is there? Do the Tans operate Air France and others? Now, what drives a lot of that, I think, into summer 22 and into summer 23 is a huge amount of their short-haul capacity is there to feed into and to feed from their long-haul opera networks. And without the long-haul traffic, without the Chinese and the Asians wandering around Europe next summer, we see that, you know, I think that there will be huge pressure on those legacy airlines, or the subsidy junkies, as we call them, I think they will keep short-haul capacity reasonably modest because they're under some pressure to repay debt and refund or repay state aid. The only two players out there at the moment with any significant short-haul orders over the next four years are Ryanair with over 210 aircraft on order and Wizz with about 80. And Wizz are in chaos at the moment. Now, you know, they did let go a lot of pilots and cabin crew. They're clearly struggling to re-employ them or they're not current. I mean... where in the last couple of weeks whiz have been cancelling hundreds of flights on a daily basis in italy and across central europe we've seen already in vienna where they compete with us they cancelled 14 of their main the main trunk routes out of vienna for the summer july and august they say they're going to restart in september we're not sure they will and so they have enormous operational challenges and i know there are some misguided analysts out there who believe whiz will conquer the world with despite the fact that they have a higher cost base than Ryanair and an inability to deliver in Western Europe. But we think that they are suffering enormous challenges at the moment, including wet leasing in Romanian aircraft to prop up their pretty small Italian operation at a time when we are, I think, our load factors in Italy are about 70% plus and theirs are mid-50s. But the real focus, I think, for the next number of years will be the slow pace of recovery, I think, of the short-haul operations of the legacy carriers because they won't have the long-haul feed to or from their short-haul operations in the meantime. The question is, how long will they be able to save the bed-block slots at the major airports? Clearly, the EU is going to allow them to block them again until the winter or this winter, but they're getting down to 50-50. And I think we'll have a major push on for summer of 2022, when it's going to become unanswerable, they don't want to use those slots, they have to lose them. And on EU 555, look, there's no doubt that the sector as a whole is going to face increasing environmental taxes in the next couple of years. What we would ask and demand is that the environmental burden is shared fairly between long-haul operators in Europe and short-haul. We've been bearing an inequitable burden of environmental taxes on short-haul flying while connecting traffic, for example, the Dutch, who talk a lot about environmental impact of aviation, give KLM a complete free ride on all connecting traffic to and from Schiphol. Those kind of environmental scams need to end, particularly when they're taking place in the countries who are most likely to lecture the rest of Europe on what or how we should behave environmentally, particularly with regards to air travel. Tax your own, put your own aviation house in order first before you start lecturing the peripheral countries or the tourism economies who are hugely dependent on intra-EU air travel. But I go back again to what has always been the article of contention. Taxes that are levied on a pro-rata basis will not diminish the margin or be quite different than the cost difference we have over all other airlines in Europe. And therefore people will, I think if anything, it heightens the growth that Ryanair will enjoy over the next number of years. Because if there's an overall ratcheting upwards of the cost of air travel, the lowest cost provider, which will be Ryanair in all markets and not Waze or EasyJet or anybody else, will do better and will recover stronger. We see that already borne out in this type of recovery. We've been able to deliver a much faster and stronger recovery than any of the low-cost competitors. And if you look across to domestic USAID, The post-pandemic recovery in domestic flying has been much more robust. They've gone back to above pre-COVID traffic levels, and we think we will benefit from that over the next 12-18 months here in Europe. Next question, please.

Thank you. That comes from the line of Satish Sivakumar of City. Please go ahead to your line.

Thanks again. I've got a couple of questions. Firstly, on the answer to revenue question, Obviously, you've seen a big step up in Ansberry revenues. Where are you seeing further additional opportunities in terms of new products, and where do you see it normalizing, say, from the current levels of €22? And the second one is around the edging. What is your thoughts around the edging of both for fuel and carbon as we move into FY23 and beyond?

Okay, Eddie, why don't you take it? question and then I'll have Neil to then come in on the hedging and the carbon hedging question.

Yeah, I mean, ancillaries are strong there, but it's primarily driven by priority boarding and seats. And we still have, you know, as I've indicated on previous calls, like for the last year, we've been working on a number of initiatives here in terms of dynamic pricing and that sort of stuff. But I would caution that we are in low, low, low factors at the moment whereby, you know, selection of seeds or whatever may well be at somewhat of a premium. But there's still more initiatives to come. There's still some road on this, but it's particularly on the core ones of seeds priority boarding and also on bags, how they're presented and how they're priced on individual routes. And we've been doing a lot of work on that. But we're going to have to wait for load factors to return to see how effective that they are.

Okay, just moving on. I just want to put that back, Eddie, but do you expect ancillary revenue per passenger to rise faster or slightly slower than passenger traffic recovery in the next few years?

Yeah, I mean, I think I'd expect it still to rise. What I'm saying is that I wouldn't get carried away with things because the strong performance, particularly on seats, of lower load factors, you'd have to see whether that translates when load factors return because people may well have been conscious of where they pick seats during the COVID crisis. But there are lots of other initiatives that are coming that I am reasonably confident that we're going to see some growth on the core products and ancillary revenue. Just to add to that, I think if you

If we can retain the kind of 22 euro or slightly below that we've seen as passenger and traffic growth this year, that'll be a pretty good performance and then we'd be hoping to improve on that into next year and beyond. Just on the hedging and the carbon, we're well hedged for this year, about 60% hedged at $565 a metric tonne, which is below about 630 tonne in the market today. We're 35% hedged into next year at about 600. We would plan to potentially move that up over time to about 50% and possibly hold it at that, although we're looking at some other structures on top of that. Carbon, well hedged, 100% hedged for the current year at €24 in EUA, which is well below the €50, €52 that it's trading at today. 35% hedge for next year. We've been holding off on hedging because we were waiting to see what was going to happen with the UK ETS. That's been confirmed in the past couple of weeks. So we'll start looking at adding a little bit to our hedging into FY23 and beyond on the carbon. Okay, thanks. Next question, please. Thanks, Anish.

Thank you. And our next question comes from the line of Muneeba Kayani of Bank of America Merrill Lynch. Please go ahead. Your line is open. Thank you.

Hi, thanks for the call. I realize that pricing visibility is low, but could you indicate in your net profit guidance of small loss to break even, what sort of pricing environment is kind of baked into that guidance? And then secondly, operating cash flow recovery was very good in the quarter driven by bookings. How should we be thinking about operating cash flows in the second quarter as flight activity picks up? Thank you.

Okay, thank you very much. As usual in these calls, we're not going anywhere near pricing guidance. It's completely too hard to call. We think we are reasonably accurate with our volume guidance. We think we'll continue to deliver strong performance on ancillary revenues, but there's too much demand. Uncertainty over pricing, and I wouldn't add any color to that. I understand we have, I think the overall outline for the year is an improvement. We're into a small loss, maybe even break even, but I wouldn't break down what that's based on. Operating cash flows, clearly the second half of the year will be much more heavily impacted by CapEx. We've now begun to pay once more. pre-delivery payments to Boeing, and so I think it will flatten out from here and actually slightly decline as we get towards the end of the year and into much more peak CapEx. Neil, do you want to add anything there on the cash flow?

Well, I think that's fair enough. We would start to see the first of the CapEx come in in Q2 with about $200 million, and then over the course of the balance of the year, It's about 1.2 billion in capex. So you'll see that drop back a bit towards the end of this quarter. And we would anticipate that as we get into the fourth quarter, hopefully more normalized bookings at that stage. And you'll start to see that build up into the year end. But we're dropping back for the next number of months.

Thanks, Neil. And I'm just, again, conclude on the pricing guidance for all participants. You know, while I don't want to get into any details, It is our philosophy here, and I think it has been clearly vindicated in the recovery in Q1 and Q2. We will be load factor active, price passive. We are determined to recover traffic as quickly as we possibly can. And then I think over the second half of the year, we would expect to see load factors recover back up to high 80s, probably won't operate above 90% this year. And as we build back our forward bookings and load factors, then we would expect to see pricing recover on the back of that. Next question, please.

Thank you. Our next question comes from the line of Stephen Furlong at Davey. Please go ahead. Your line is open.

Hi, Michael. Can you just talk about the, as you build back up, the app and crew environment? I mean, obviously, you have, I saw this, you know, 2,000 new pilots in the next five years. Also, it's in training and things like that. And the second thing is, I was just wondering with the 60-plus pilots A200 aircraft coming from next summer and presumably you're in discussions, I see you with a number of airports on that. I see you've launched new bases in Turin and Morocco, so you might just comment about that to be good too.

Okay, and Eddie, I'll ask you to do the second half of that, the new base, the new route discussion. I mean, in pilots and cabin crew environments, you know, it has never been better, but there are enormous short-haul challenges. You know, one of the challenges we have as an industry, not just Ryanair, is we've been essentially grounded for the last 18 months. It has been very difficult to keep pilots and cabin crew current. A pilot has to fly once a month, and cabin crew, I think, have to fly, I'll get this wrong, but if I do, correct me, once every 90 days, so about three months. So it's been With a very curtailed schedule, we've actually been flying empty aircraft up there to keep pilots current and cabin crew current because we knew that the recovery when it came would be very strong. We believe that's one of the reasons why EasyJet's recovery has been so slow, that they have grounded a lot of aircraft, pilots and cabin crew, and therefore they're facing currency problems. If you didn't keep them current, you'd have to put pilots back into simulator training and cabin crew have to go back and do... quite unproductive recurrency training courses again, and that's just difficult and it's a huge logistical nightmare. And I think we've been vindicated in trying to keep everybody current because we thought that the recovery would be strong. As we emerge out of this, there is a huge surplus of pilots, particularly on 737s across Europe with the Norwegian collapse. They were the only other significant 737 employer in Europe. Also, the Gulf carriers have dumped huge numbers of pilots, just cut them loose in the Middle East, and they're back essentially in Europe, and a lot of the Asian carriers have cut back, although in recent months they've started to re-recruit again. They appear to be trying to re-recruit among Asian nationalities rather than Europeans. We also have restarted very aggressively our cadet training schemes, which, as you know, they kind of dried up after we had been kind of piloting the rostering crisis in late 2017. Currently, we have more than 350 pilot cadets in training. They're paying us, I think, an average of about €30,000, and they will flow through over the next 12, 18 months. We're opening up and have one of our partners raise up a very large new aviation pilot and cabin crew training centre in Dublin which we'll announce shortly. But there's a huge, on the cabin crew side, again, there's lots of availability out there, but there is a five-week training course from Ab initio. So the challenge for us is we have enough pilots and cabin crew now to operate 90% of our pre-COVID capacities through July and August, but it's tight. It's particularly being impacted, too, where you think that the UK pandemic, where people are, you know, despite the fact that they're double vaccinated, receiving getting pinged and told you've got to isolate for 10 days which is a nonsense where you're double vaccinated but it is what it is there is a huge challenge of recruitment for us though into the next 12 months we will be recruiting huge numbers of pilots and cabin crew this winter just to crew up to 60 new aircraft we have for next year and also you know to handle normal attrition but again you know i think the collapse of competition the capacity cutbacks across europe and we have worked very closely and well with unions in the last two years to explain that, look, it's better that our people take very modest pay cuts last year and this year. We start then to repay those or to restore those pay cuts over the next two or three years. We're in pretty good shape and we don't foresee any labour or staff shortages over the next two or three years. And just as important, we don't see any labour or staff inflation over the next two or three years. One of the other challenges that will be in the short term in the next number of weeks, though, is airports and handling companies. We had a lot of problems at a lot of airports over this weekend. You know, you've gone straight back into kind of the peak weekends, handling companies who were short-staffed, airport check-ins short-staffed, airport security short-staffed. You know, we saw our on-time performance fall from kind of 95% to 80% on Saturday and Sunday, mainly as a result of ATC staffing. Sure, you know, they've done nothing for 18 months, And then, of course, as usual, the French and the Germans are generally short-staffed on Saturday mornings. And we've had airport issues as well. We'll work our way through that, but it'll be a bit painful over the next couple of weeks. And then I think we're in reasonably good shape in the summer of 2022, but there is a Herculean recruitment and training job to be done. Eddie, do you want to touch on the aircraft and how the new loose and those new things?

Can I just clarify one point there? On the pilot, I mean, our recruitment is exclusively on the cadet side because obviously we have enough captains and everything for not only this summer and next winter, but next summer as well because we have all the people coming through on command upgrades. So it's primarily focused on first officers and particular cadets. Just on the... like there are, on the sort of capacity allocation, you're looking at their competitors retrenching. We've got the new aircraft that have come in. You've got airports now actively looking for the attributes of 40% less noise emissions. And we've been able to, exploit those opportunities you look in particular the ones that i would call out are you know in scandinavian like orlando i think we've been talking to them for the last 20 years um and you know they realize the writing is on the wall there there's sass aren't growing and uh norwegian are all but gone out of orlando and then we've also taken the opportunity within that sort of nordic region of We launched nine routes out of Helsinki. Again, Norwegian gone out of there and Helsinki looking around as to where their growth is. It's different from the last time we launched any sort of capacity in Scandinavia way back in 2003, 2004, where we were flying from secondary airport to secondary airport. So we've got extra capacity going into Gothenburg and places like that, and I see opportunities there for us to sort of knit that network together. in the face of reducing capacity from SAS and Norwegian. You look down in Italy now where most of the Italian airports are saying, why aren't we Orion Air Base? Again, it took us some time to close out the Turin deal, but we've got a very strong domestic network out of there. We've got still some announcements to do initially as we fill out the network there. We are in Marco Polo. We've opened the base in Treviso. We've put extra capacity into Naples and into Fiumicino, where WIS actually have cancelled, I think, eight of the nine routes that they launched. So, and then you see places like Morocco, where we were recently, where the government down there is anxious to say, where's the growth going to come from there? And we have, they want to substantially increase our capacity there. And part of that plan is to open a two-base aircraft in Agadir, which will go particularly well, I think, in the wintertime. So, again, airports are coming to us. We've closed down long-term cost deals with our, three, I suppose, major hubs, which are Stansted, Bergamo and Charleroi. And everyone is saying, how can we get a piece of that? And I think those opportunities are going to still present themselves. Some places are still slow and think that it's all going to bounce back and there isn't going to be 20% reduction in intra-European capacity. but we're certainly seeing it out there, and we are, like in countries like particularly Italy, as they say repeatedly, there's airports saying, or their management, their shareholders are saying, why don't we have a Ryanair base? Because it's the only route to growth. That's great.

Thanks, Eddie. Thanks, Michael. Okay. Thanks, Stephen. Next question, please.

Thank you. That's from the line of Mark Simpson at Good Buddy. Please go ahead. Your line's open.

Good morning. Two questions. One, You've talked to the MAX as performing well, good reception from customers. Fuel burn, I think, has been indicated as surprising against previous guidance. Can you give us a broader feel for how you see the MAX performance? Things like turnaround times are no difficult in the circumstances of COVID rules, but it'd be interesting to hear a bit more about that. And then longer term, you've talked about a goal of 12.5% SAF by 2030, well ahead of the 55% to 5% target. What I'm interested in there is how do you achieve that? I mean, SAF infrastructure issues are clearly going to be one of the roadblocks to achieving those targets. So do you have plans around your key basis, Dan said Bergamo, for some form of SAF infrastructure to help you achieve those targets.

Okay, thanks, Mark. I will ask the Director of Sustainability, Thomas Fowler, maybe to answer the second half of the question. I'll take the Max one, and Neil, you can add anything you want to this. Look, I think the Max performance in the first month has been extraordinary. But I would also caution, you know, we're operating with a load factor in the last month that looks like it's kind of about 75, 76% as opposed to normally in July or June, July, we'd be operating up around 90, 92%. So we're flying slightly lighter planes where the turnarounds have been unaffected, 25 minutes, no great issue. Remember, it is only seven extra, it's only eight extra seats. The turnaround, no issue at all. Fuel performance has been meaningfully better, you know, close to 20% saving. But again, I suspect that as you get back up to more normal high 80, low 90 load factors, but I think we are very confident now that the aircraft will come in at 16% or slightly better than that on the fuel saving. The noise performance has been extraordinary. There's been meaningful kind of feedback from passengers and crew about how quiet the aircraft are. not something we would ever go to kind of sell. We were worried at the start that there would be a kind of pushback from passengers. We've gone to some considerable length to indicate that if you want to get off the aircraft, you can. Not one passenger in the first five weeks of operation has wanted to offload off the aircraft. There's lots of nervous passengers out there. It has generally gone remarkably well. The pilot feedback is universally positive, but The handling has been excellent. The performance of the aircraft has been excellent. They like shiny new toys at the best of times, but it has been very, very favourably received in the cabin crew. Like the aircraft, no issues with the new galleys, the new layouts. But again, all of the performance in the first five weeks is slightly artificially enhanced by the fact that we're operating at load factors in the high 70s instead of load factors in the low 90s. We think that's a good thing, though. It does mean we plan to take our 12th aircraft in probably the first 10 days of August. The fact that we have 10 or 12 of those aircraft in the system through the summer when weather conditions are good, pilots and cabin crew rotating through the aircraft, everybody getting a feel for it, it is a really fortuitous, nice, slow introduction into the system. And then this winter, we take probably another 50-plus aircraft if Boeing can deliver them all. at a time when we're not under any great pressure. So from a kind of just an operational safety, you know, it's good that we're able to introduce these aircraft at a time when we can allow the pilots, the cabin crew, the airport, the handlers to get used to them. So it has gone remarkably well, but the performance of the aircraft thus far, and certainly the one we care most about, which is fuel consumption, has been exceptional. Actually, to be fair, we thought it would be because Boeing were willing to guarantee 16% fuel savings. And again... I think that would be key in our pushback on the fit for 55 and taxing short haul aircraft. Here we are investing over 20 billion in a fleet of new aircraft that consumes considerably less fuel and is remarkably quieter than almost any aircraft operating in Europe. And that should be reflected in future environmental taxation. And with that, Thomas, do you want to give us a quick run through on SAFs and what we're doing to develop an improved supply of SAFs for 2030?

Yeah, no problem, Michael. Mark, thanks for the question. I think obviously at the moment on the infrastructure, yes, there's issues. That's why we've done the partnership with Trinity to try and see which staff are the best to invest in and show our fuel suppliers, our key fuel suppliers, which are the best ones to invest in for the goal of 12.5%. I think there's a bit of work to do with Trinity in the next 12 months and then obviously with our key major suppliers and our key bases on what infrastructure needs to be put in for that staff to meet the target in 2030. That's where our main focus is in the next 12 and 24 months.

Yeah, at the moment they're the only key markets where we can pick up staff that's up in Scandinavia and we would hope to see that get rolled out over the next few years. But as Thomas said, significant investments and research needed to get the right blends in the right places.

It's also one of the pushbacks as well on the FIT for 55. They're announcing all the taxation, but there's been no allocation of this taxation revenue to developing sustained or high-volume SAFs. So they've set a target themselves of 5% SAFs for 2030, but the program is silent on how you get there and how you put the infrastructure in place at European airports. So we'll be calling for much more work from our Dutch friend, Mr Tillemans, and some of the other eco-warriors there in Europe. you know, A, start taxing your own Dutch airline, and B, tell us what you're going to do with all this money to actually help us to exceed these ambitious targets on SES. Next question, please. Thanks, Mark.

Next question comes from the line of Savvy Sif at Raymond James. Please go ahead.

Hey, good morning. You know, you noted strong bookings in August and September. I was just kind of curious if you're seeing any signs that with return to office still uncertain in Europe, if there's a perhaps a higher floor to the usual seasonal drop-off in traffic that you're seeing based on current bookings. And then also just to follow up on the near-term bottlenecks you talked about, Michael, you talked about crew and airports. I was wondering what you're seeing on the maintenance line side and if there's any kind of a supply issue there. And if, you know, in addition to route charges, you know, what you're expecting, if you're expecting maintenance to be a headwind over the next couple of years.

Okay, thanks for that, Teddy. I'll take the forward bookings and Neil might ask you to come in on the maintenance side. On the forward bookings, look, we're all in the last, you know, in the last, it's quite speculative here at the moment. Our focus for the last number of months has been to try to stimulate and ensure that we could provide for our operator a very strong recovery into Q2, into Q2. you know, 8 million passengers in June, 9 million in July, we might get just to 10 million in August. Our view of life then is that, you know, if 80% or 85% of the European adult population is vaccinated, by the time we get to the end of August into early September, the schools go back to work, our schools go back. Most families have been able to travel in reasonable safety and confidence during July, August, the peak of European holiday season. Then we think there's going to be a – we start to replicate what the U.S. has seen, a very strong recovery of short-haul intra-EU air travel. Business travel gets back. Meeting suppliers, conferences, postponed events get refixed. We think – we see if we get 10 million in August, and again, there's no adverse kind of consequences – We see no reason why we wouldn't maintain maybe 10 million into September, and then we're looking out into Q3, and I'd be hopeful of averaging 10 million casters a month across Q3 as well. And it may be even better than that. I think people who've been locked up for the last 18 months will want to go for weekend breaks away, will want to go to the Christmas market. So there'll be a strong short-haul recovery in, I think, business travel, You know, if you haven't, or there's a lot of talk about Zoom ending business travel. You know, it won't. If you haven't met your suppliers for the last 18 months, you need to get back out and see them. If you haven't made any sales calls, you're not going to do that on Zoom. So we think an awful lot of that, and there'll be a very strong rebound in BFR, weddings that were postponed, christening that were postponed, those family events that were postponed or people haven't seen. We think, I'm not a believer in the people won't return to the office. I think the office employers will want people back in the office. I think there's no doubt we are facing much more flexible working conditions into the future. But I mean, if you look at what we're doing in Ryanair, we're saying people, we're busy now, back to the office. We are looking, though, at reaching agreements with our people that, you know, maybe you can do three days a week in the office, two days a week from home. There will be lots of that kind of flexibility, but the idea that offices are going to close and people will not return, I think, is absurd. I also think socially, people, younger people particularly, want to work from offices. It's where they meet a lot of people. So we think it's coming back, and I think the best indication of that is the U.S., the very strong recovery in U.S. domestic air travel. I think that will be replicated in European shortfall, with the one exception, is that we will still be missing the long-haul connecting traffic on which the legacy or the state aid junkies are so dependent upon for filling up their short-hauls. That could lead to they'll run all their short-haul capacity at just dump prices. We don't think that the balance sheets or their dependence on state aid allows them to do that. The Times has already said they're very focused on only flying what they can fill and repaying the state aid as quickly as they can, and we think most of the other airlines will operate on that basis. We will take up most of that short haul slack with 60 new aircraft being delivered this autumn. And Neil, on the maintenance side?

Yeah, Savi, thanks for the question there. With the exception of just being a ramp up in capacity and cycles that need to go through the shop, no major increase is coming through. In fact, we've locked in better rates with our engine maintenance providers going forward. We've built up huge expertise on maintaining the aircraft ourselves over the years, and we do a lot of our own maintenance in-house. There's no difficulty getting access to appropriately qualified engineers. In fact, we're taking in more mechanics and apprentices to allow for growth over the next few years. We've got new hangar capacity coming on train in places like Seville, and we're looking at building a couple of new hangars across Europe over the next year or two. One of the benefits of the MAX coming in is that it enables us now to exit some of the older, more expensive to maintain aircraft from the fleet. And you'll see some sales over the next number of months and years. We've already handed back all of the leased 737s, which were a bit older than we would have liked due to the delays in the aircraft coming in from Boeing. That's all been sorted out. So I don't see too many headwinds, Savvy, on the maintenance side for the next few years.

And I would just add to that, you know, we've been reasonably judicious over the last 12 months. We've invested, we've acquired a new office building beside ours at the air site where we've opened up a new Ryanair Technical Centre where we've moved all of our engineering, fleet planning in there. It's about a 30,000 square foot building. We, as I said, will shortly announce a great new, we've invested about $10 million in a new aviation training centre close to Dublin Airport for simulators, cabin crew training, it kind of quadruples our training capacity in Dublin, in addition to large kind of crew, Frankfurt and others. So we've kept investing judiciously through the crisis and the shutdown, and we now have those facilities and those resources coming on stream for both our pilot and camp crew and our technical team. Thanks, Daddy. Next question, please.

Thank you. That's from James Hollins at Exxon B&P Paribas.

James, hi. Hi, morning. Michael, Eddie, you sound like a couple of kids at Christmas when you talk about the growth opportunities and your excitement. You clearly think about Italy, Scandinavia as good examples. I'm just wondering if you sort of need to or even want to go after some of the more established operators, the state junkies, your words, not mine, in Western Europe, or whether there's sufficient growth elsewhere. The second one, either for Thomas or Julius, if he's on. Just on this fit for 55, you're obviously apoplectic about this sort of kerosene tax and it won't work, etc. Just wondering what chance you actually have of getting some changes to fit for 55. And won't they just say Corsair deals with long haul?

Okay, I'll ask Julius maybe to comment, Thomas to Adam in a second. At first half, you know, yes, I think we will see more growth, particularly at primary airports. I mean, we're pushing hard, for example, for further release of sloths in Italy and Portugal, where TAP and Anatolia are still sitting on sloths, which everybody knows they won't use in the future because they've already announced, they've already reduced the fleet. There will be further opportunities in Germany where there have been significant closures of German wings, have significantly reduced capacity. But, you know, again, we'll be opportunistic. I mean, I think most of our growth, if I was to look at the next two or three years, where will you place the 200 aircraft? The ones I would point to would be A, and the first one would be B. Those larger base airports where we've already rolled out significant long-term lengthenings of our low-cost agreements and stands at Bergamo, Charlevoix. Then I would say pivot. There will still be a lot of new route development in Scandinavia and what we would call Central and Eastern Europe, where we're seeing pullbacks by Guiz and others. They seem short of aircraft, so they're moving aircraft further east into Dubai and elsewhere. Italy, Spain, Portugal continue to be very strong contenders for more capacity development. We're investing heavily in a new maintenance facility in Seville. France, we've opened up bases in Toulouse. I think they have a base opening in Paris-Bouvet. And the UK, there's also opportunities there, although they would be, I'm not sure how much more new base opportunities, although we're talking to a number of UK airports. We've announced a new base in Newcastle. There's And we are pushing, for example, even in Holland, where KLM is bed-blocking slots in Schiphol, we continue to ask why Lelystad, which is owned by KLM, is not being opened. We ask why Montijo, beside Lisbon, which is owned by ANA, is not being opened, so that we can deliver further growth in those markets. I have never seen in 30 years the amount of growth potential we have over the next four years We could allocate the 200 new MAX aircraft twice over, I think, in the next four years. We're not able to do that. So we will be judicious. We will also churn some of our own underperforming airports and bases because there is more growth opportunities out there and more growth incentives out there than we can, I would say, manage at the moment. Julius and maybe Thomas, do you want to talk on Fit for 55 and how we push back?

Yeah, I'll come in quickly. Julius here. Hi, everyone. Well, there is no unanimity in the EU at the moment on fuel taxation, and there has never been. This proposal generally emanates from countries in the old central Europe, in the Netherlands. You see some support for it in Belgium, in parts of Germany, parts of France, but those are countries which are very well connected by road and rail infrastructure. and their position is dramatically different from that of countries on the peripheries of Europe, from the Baltic states, from Scandinavia down to Greece, and then through the Mediterranean. The countries which are dependent on tourism, they are very concerned about the increase in the cost of access that such taxes may bring. We are in regular contact with government in those countries as part of our lobbying efforts in Brussels and we know that conversations in the Council of the European Union about this tax will not be swift and they will not be easy. I think there will be a lot of upset from some of the tourism dependent nations at the suggestion that cost of access may need to go up quite significantly over the next few years. So I think this is not over and we will do our best to highlight those inequalities which are being proposed by a taxation measure that only targets short-haul rather than short-haul and long-haul.

And just on your point, James, on Corsia, the Corsia offset credit is an offset program rather than a tax. And at the moment, they're trading three times less than the current EUA prices. So there's a disparity here between what short-haul and long-haul will do.

Okay, thanks.

Okay, thanks, guys. Next question, please, guys. We've got to end this call at 11, so we need to get through a couple as quick as we can in the last five minutes of this call.

Sure. The next one's from the line of Neil Glenn of Credit Suisse. Please go ahead. Your line's open.

Hi there. Quick coverage for you. Just one of your latest expectations with respect to appealing the navigation charge increase prospect, and expectations on timings. And then the second question, just with respect to the longer term and carbon consciousness continues to develop among consumers, is there an opportunity or even a need to present your carbon footprint relative to competitors in the booking process like people like Skyscanner do? Or how do you think about your communication of that going forward, Michael?

Okay, Neil, I didn't hear all that question, but it needs to speed. Neil, can you answer the first half on the nav charge, and maybe Thomas briefly answer the second on the carbon footprint, as far as I could tell?

Okay, I'll pass the nav charge question over to Julius. It was a bit hazy, though, so, Neil, could you maybe give that again? We just couldn't pick up correctly on that.

Yeah, sure. So, SkyScatter, for example, will highlight your carbon footprint on a given route relative to competitors. Is that something Ryler should be doing to communicate most effectively with carbon-conscious consumers going forward?

Yeah, on the carbon side, in fact, in the last number of days, we've launched a carbon calculator, which enables our customers to fully offset their carbon footprint. That's very much up in lights, and we've already seen good pick-up in relation to that. We're continuously looking at different ways of differentiating ourselves You know, we're not shy in pointing out that if people switch to Rhino, they can reduce their carbon footprint by 50% compared to the legacy carriers and do more comms like that going forward. It's not in the booking process yet. It doesn't mean it won't be in it at some stage in the future, but the carbon calculator was the most recent initiative, and as I said, proving very popular.

Yeah, and I think, look, there is talk at EASA level as well, Neil, about an eco-label where the airlines will feed in their information, like the Skyscanner side of things. At the moment, Skyscanner and Google calculations are very generic. They aren't fully reflective. of the actual numbers, and there is a bit of work going on on that at the moment at European level.

I think people are getting more aware of things like CDP as well and ratings on that, and that will help drive decisions into the future.

Okay, thanks, everybody. Next question, please.

And that question comes from the line of Jared Castle at UBS. Please go ahead.

Thanks. Hi, good morning. You're moving more into the primary airports, you said, from 70 to 80, and going back a decade, you were probably sub-50, are you targeting a more affluent client base? And, you know, at some point, will we actually see the average fares rise, just given the experience, you know, cumulatively of the last few years that hasn't been the case? And then just secondly, Michael, any quick thoughts on the customer advisory panel? Is this part of always getting better? And, you know, what kind of questions will you try to get them to answer besides cheaper fares with, you know, better service or something like that?

Okay, well, since that's a dark question, I'll give that back to Eddie if I just close on the cluster panel. Just in general, Neil, the move into more basing, getting more slots and basing more aircraft at primary airports is not some kind of quest for an affluent client base. It's simply us being opportunistic. That's where the slots are available and that's where some of the better growth deals are at the moment because those airports are the ones suffering the greatest traffic and capacity loss through COVID. Will fares rise because we get a more affluent client base? No. We are happy to take more affluent customers or more ordinary customers. They all pay from the same fare classes. We don't discriminate. But I think it's inevitable that what will really, I think, drive fare rises in the next two or three years will be shortage of intra-EU capacity. you know, there is going to be meaningful shortages of capacity, short-haul EU capacity reductions. And I think that and a combination of that and probably increased environmental taxation will undoubtedly put upward pressure on airfares and yields. And we will be poised, I think, to be a significant beneficiary of that as we have to roll out 210 new aircraft, lower operating costs, but probably, if anything, a less intensely competitive environment in those markets where we're expanding. Eddie, do you want to touch briefly on the PAC customer panel?

Yeah, I mean, we have the first meeting of that in early September, but what's really behind that, I suppose, is building on... our digital offering, particularly from a customer service point of view, day of travel app with gate information, gate changes, on-time information, et cetera. But there's a lot of other developments coming on that over the next number of months. And we'll just see from the panel as to what ideas they have. And some of the people on that panel already have sent in a really active in terms of the suggestions that they have. Also, what we've learned through the whole COVID pandemic and experience of refunds dealing with disruptions on the day. We've got some, you know, I signaled this the last time, we'll have some announcements later this year on how we deal more efficiently with customer disruption for the, you know, the less than 1% of flights that we have disruptions on and how we actually get that information out to people in our 240 airports so that people know exactly what's happening, how they get their refunds processed, how we deal with EU 261 and deal with that in a much more efficient manner. That's going to be the focus of it. I mean, we are... Like, we still retain all the, you know, all the other initiatives that we've had over the Always Getting Better program of, you know, the two bags on board and all that. We're going to continue to build on that. But it's really about what we learned from disruption, more leveraging of technology in terms of getting information out to our customers. So we're really looking forward to the first meeting with the seven people, I think, across seven different markets. So we'll let you know on the next call.

Great. Thanks, Eddie. I know we've gone over time, but we'll ask one last question and then we'll close it down. If we've missed anybody, please route your questions through to me, to Neil Zorn and Neil and Peter in the investor relations panel. So let's take one last question.

Thank you. We had a follow-up from Neil Glynn. I believe we've missed his second question. So Neil Glynn at Credit Suisse. He's hung up. So I will take the next question from Carolina Doris of Morgan Stanley. Please go ahead. Your line is open.

Hi. A little bit quite quick. On the yields in this first quarter that has passed, the first quarter of 22, is there a mix of routes effect on lowering yields, meaning more domestic or more really short routes that is taking the price down, or is it just a really active price coming down? And my second question, if I may, is the supplier reimbursement that we got this quarter, the $140 million, Eros, is there more of these to come?

Well, firstly, I think, no, there won't be more of the supplier reimbursements. At least I hope there won't be any more supplier reimbursements we've negotiated. Now that we're into the recovery phase, reimbursements we've negotiated with not just one, but a range of suppliers we think will come to an end. The lower fare and yield has been a function in Q1 of very much later traffic or booking curves. You know, we would normally go into the summer with very strong advanced bookings. People already booked all their holidays. We had almost none of that in the system because of the huge COVID uncertainty. So as we went through and you look at the speed of the recovery from 1 million pastors in April, 2 million in May to 5 million in June, 9 million in July. That has all been built on very late, very close in, aggressive pricing to capture that volume. And then we believe that that will begin to reflect itself in a marked rise in fares and yields, probably towards the back end of the second quarter, but mainly into the third quarter, once we get back to kind of post our pre-COVID norms. All of that presupposes that there's no adverse news flows, no further introduction of restrictions on passenger movements around Europe and schools reopen in September. Okay, ladies and gentlemen, thank you for your participation this morning. I'm sorry we took a cut in short after an hour. As again, I hope we try to emphasize that the recovery is well underway. We are exploiting that recovery faster and I think much more operationally efficiently than any other airline in Europe. And I think if you look out over the medium term into the next two or three years, you have a unique opportunity with the delivery of 200 MAX, 210 MAX aircraft, all of which, the first of which have now been delivered are operating exceptionally well. huge new growth opportunities at existing primary and secondary airports. And you'll see us, I think, grab a significant wind on market share front across most Western, Central and Eastern European markets over the next three to four years, as long as we can safely say that by September of this year, the pandemic is behind us and there are no developments of vaccine-resistant variants or the restoration of lockdowns. With that said, I apologize if we missed anybody's questions or didn't get around to you. Please call Neil and Peter in Dublin this morning. We'd be happy to speak to all of you individually. There's no roadshow for the Q1s as is normal. And with that, we look forward to speaking with and hopefully meeting with you in person on the Q2s at the end of October. Thanks very much, everybody.

Good to talk to you. Bye-bye.