Ryanair Holdings plc

Okay, good morning, ladies and gentlemen. You're very welcome to the Ryanair H1 results presentation. I'm Michael O'Leary, the Group CEO, and I'm joined this morning by Neil Thorne, our Group CFO. As you'll have seen this morning on the Ryanair.com website, we've reported a H1 loss of €48 million, a significant improvement on the €411 million loss in the H1 prior year. In the first half of this year, we've seen a very strong rebound in traffic. It's up 128% from €17.1 million last year. to 39.1 million in this half year. We've taken delivery of the first of our 737 game changer aircraft. We finished the half year with a very strong cash balance of 4.24 billion. That's up from 3.15 million in March as we see the very strong recovery in bookings and forward cash flows. Net debt has fallen from 2.28 billion at the 31st of March to just 1.5 billion at the end of September. We've opened over 560 new routes and 14 new bases have been announced for this summer and next summer, as we again seek to recover very strongly from the COVID-19 pandemic. And we've set out at our recent AGM a very aggressive five-year growth strategy, which sees our growth, our traffic accelerating from 200 million to 225 million in the financial year ended March 2026. The key to all this is our commitment to our environment. Every passenger who switches to flying Ryanair from Legacy Airlines reduces their CO2 emissions by up to 50% per flight. However, we're adding to our fleet the new Boeing 737 Game Changer aircraft, which offer us 4% more seats per flight, but reduce fuel consumption by 16% and cut noise emissions by 40%. We continue to work to maximise sustainable aviation fuel use We're campaigning hard to accelerate the reform of the single European sky, which would minimize air traffic control delays, which would significantly lower fuel consumption and CO2 emissions, not just for Ryanair, but across Europe. We are committed to improving our CDP, our independent CDP climate rating from a B-, which is industry leading, to an A over the next two years. And we are working closely with Trinity College here in Dublin on developing sustainable aviation research centres so that we can maximise the production of and availability of sustainable aviation fuels by 30% when we set ourselves a very ambitious target of using about 12.5% of sustainable aviation fuels. All of this forms part of our commitment to help us achieve our target of cutting CO2 per passenger by a further 10% to just 60 grams per passenger kilometre by 2030. To touch briefly on COVID-19, obviously it has very badly disrupted the first quarter of this year, but the second quarter has seen a strong recovery. Thanks to the success of the EU digital travel search on the 1st of July, we've seen a very rapid recovery in bookings and travel. In June, we carried 5 million people. In August, that had more than doubled to over 10 million passengers. H1 bookings, however, have been mostly close in and have required continuous price stimulation. In recent weeks, we've seen a surge in very strong bookings and better yields for the October school midterm break, which took place last week, for Christmas breaks. And we think that kind of peak demand will continue out into Easter or the February midterm break, Easter and summer of 2022. We'll continue, though, to be very load factor active, yield passive. As we build, rebuild, we work hard to rebuild load factors quickly. We're already back up over 80% and have been for the last number of months. We see ourselves going back over 90% in the summer of 2022. But outside of these peak periods in November, the second half of January, the first half of February, yields will be tough. We will be doing engaging a lot of price discounting to get people back moving and to restore confidence in intra-EU air travel. Ryanair was, however, one of the very few airlines to use the COVID-19 crisis to place a very significant aircraft order in December of 2020 with Boeing, where we took the game changer order up from 135 to 210 firm aircraft. We have spent the last 18 months expanding our airport partnerships. We're securing lower operating costs so that we can pass on even lower fares post-COVID to our customers. We're leading Europe's traffic recovery and we plan to drive accelerated growth in both traffic and jobs over the next five years. None of this would be possible without Ryanair's very strong balance sheet, in fact, industry leading. We continue to maintain a BBB credit rating with both Standard & Poor's and Fitch. As I said, at the end of the half year, we had 4.2 billion in cash and almost 90% of our 737 fleet of over 400 aircraft is unencumbered. In May, we issued a new €1.25 billion five-year unsecured bond at a record low coupon of just under 0.9%. In June, the group repaid its 2014 maturing €850 million bond. And last week, I'm pleased to say the group repaid early our UK CCF loan of €600 million, five months early because we don't need the money and bookings have recovered strongly as so have cash flows. The strength of Ryanair's balance sheet ensures that the group can capitalise rapidly on the many growth opportunities that exist in Europe now for the post-COVID-19 recovery. It's inevitable, however, we will do so while still incurring losses in the current year. We expect a small loss in the year to the 31st of March 2022, but we expect to be leading what will be a very strong recovery in short haul intra-European air travel into the summer of 2022. Touch briefly on our outlook for pricing and yields for the winter of FY22 will remain challenging. With the booking curve remaining very close in, traffic recovery will require continuous price stimulation. This, coupled with rising costs for the very small element of our unhedged balance of fuel, means that earnings visibility for the remainder of FY22 is very limited. It's impossible at this stage to provide meaningful FY22 guidance. We believe, however, that traffic has improved probably to just over our current range of 90 to 100 million passengers. If we continue to build and recover at the rate we are, and there's no adverse COVID developments this winter, then it's possible we could get just over the 100 million passenger figure. But subject to winter fares, as I said, we expect to record a full year loss of between, reasonably small, between 100 to 200 million euros. Even this outcome, however, will be crucially dependent upon the continued rollout of vaccines across Europe and no adverse COVID-19 developments this winter. Just to touch on the overall strategy, however, subject to there being no adverse COVID developments this winter, we expect to continue to take deliveries of 65 game changes from Boeing before peak summer 2022. That's allowed Ryanair to uniquely accelerate growth into the post-COVID-19 recovery. These industries are delivering industry-lowest costs, lower emissions, incredible fuel efficiency, and they will enable us to exploit growth opportunities at both primary and secondary airports all over Europe, particularly where many legacy airlines have either failed or have significantly cut back their fleet as a result of the COVID-19 pandemic and their receipt of state aid. As we announced at our recent AGM, we set out a much more aggressive and accelerated growth path for the next five years, which will see Lion Air grow from 149 million passengers pre-COVID to a new target of 225 million passengers by FY26. Incredible growth of 50% from what is already Europe's largest airline over that five-year period. And we very much hope that you as shareholders will join us on that journey over the next five years as we see not just traffic recover, but hopefully in time profitability and the share price as well. Thank you.

Thank you, Michael. I'll just quickly run through the presentation and hand over to you for current developments. So Ryanair has the lowest fares and lowest costs of any airline in Europe. We're number one for traffic, as Michael just said, hopefully somewhere just above $400 million this year, number one for customer service and on-time performance. When it comes to the climate, we've got an industry-leading B- rating from CDP, and our balance sheet has a strong investment grade rating of BBB. So it's this financial strength and our lowest costs that makes us the long-term winner. We're starting to put down the platform for growth for the next five years. We've got 89 bases, 14 of which were announced this year and will roll into next summer as well. We've launched over 560 new routes, so I think we're well-placed with a new game-changer aircraft to achieve 225 million guests by FY26. We come into COVID with the lowest cost per passenger ex-fuel of any airline. And by the time we've taken delivery of our aircraft, we'll be significantly ahead of everybody else in the sector. On the half itself, we saw a significant recovery, particularly in Q2, on traffic following the release of the EU digital COVID certificates in July. So traffic up 128% to 39 million guests at a load factor of 79%. Revenue jumped 83% to just under 2.2 billion. However, costs remained in good shape, up 60% to 2.2 billion. So as a result, we saw a very good improvement in the year from the same half last year, where we recorded a loss of 48 million, down from 411 million last year. Our balance sheet remains extremely strong, as I said, triple B rated by both Fitch and S&P. Very strong cash balances of 4.24 billion at the end of the half, 90% of defeat unencumbered, and net debt at 1.5 billion. So this enabled us, thanks to the strong cash flows in the business, as Michael said, to repay £600 million to the UK CCFF last week, five months ahead of target. Michael, I might ask you to run through current developments, please.

Yeah, thanks, Neil. So, as I've already said, we've seen a very strong recovery into winter of 2021, much stronger than any other European scheduled airline. We see bumper bookings for the October school midterm break last week, and we think that will be repeated again at Christmas. We're continuing to maintain our industry-leading environmental, social government performance, and we're particularly proud of the fact that people switching to us are reducing their CO2 emissions by 50% over Europe's flag carrier airlines. In terms of traffic outlook, as I said, we're taking it up now above the 100 million range for the full year. Our cost leadership has widened with lower financing costs, airport costs, aircraft, and management and staff have also kicked in pay cuts for the next year. They will begin to restore from next year onwards and they will be well-earned. Fuel is hedged. We're hedged 80% for the fourth quarter of FY22. And we have eliminated the risk for about 80% of our fuel in H1 of 2023, about 60% is fuel swaps and 20% is caps. We have 65 game changers coming for summer 2022 from our 210 order book. And this has enabled us to accelerate our growth objectives, particularly post-COVID, to 225 guests by FY26. Touch briefly on the traffic recovery. So we remain low factor active, yield passive, Loads are already up over 80% for the last three, four months. In fact, we expect we'll go close to 84% for the month of October. We expect to announce those figures later on this morning. The majority of the UK NDU population is now vaccinated and we think that will eliminate a huge proportion of the risk to disruptions over the winter period. We've worked hard during COVID to keep our aircraft, our pilots and our cabin crew current. And that's why we've been able to engineer such a rapid recovery to our schedules, to our route network and to our traffic. As I said, very strong October and Christmas bookings. And we see our FY22 traffic moving to ahead of our current range of 90 to 100 million. Just to give you a flavour for that speed of Ryanair's recovery, these are the published Eurocontrol fees for the month of September, which is a good barometer of the number of flights being operated by Europe's major airlines. Comparing September 2019 pre-COVID with September 2021, you see Ryanair's essentially flight volume is down 9%. Most of the rest of the industry across Europe is still down around 40%. So we have recovered much faster, much quicker than most of other airlines. And I would point you at the bottom, you see Alitalia, who are down 67% in the month of September, which is one of the reasons that so much of our growth is taking place in the Italian market. We've used the COVID pandemic to continue to widen our cost leadership over all other EU airlines. We have agreed pay cuts with our pilots, cabin crew and our head office teams last year and this year. The pay begins to restore over the next two or three years. We're still negotiating significant recovery incentives with Europe's airports. We're continuing to work with our handlers to ensure that we're tackling or saving further on efficiency on costs. Route charges will probably rise over the next year or two. There's clearly price gouging going on by those European, the ANSPs, which are government controlled monopolies, protected from any impact of cyber competition or downturn from COVID. But we're continuing and I think the new order for game changer aircraft will significantly lower our aircraft costs for the next, not just five years, but for the next decade. We'll see huge efficiencies coming from the fact that they offer us 4% more seats, but burn 16% less fuel. We have better lease and maintenance terms. We're doing less outsourced maintenance. And our BBB rating means we're able to tap into cheaper finance. As we've shown, we've repaid a 2014 bond, which we were paying 1.875% per annum for and replaced it with a bond now, which we're paying less than 0.9 of 1% interest rate. And in terms of sale or other costs, labs are continuing to lower our marketing spend. Labs are continuing to displace other third-party systems internally. So we're taking a lot of that technology internally so that we're not alone to be controllers. We develop it and it is significantly cheaper for us. And don't forget fuel. As we move forward in the next year or two, the game changers will significantly lower our fuel burn for the next 5-10 years. And we're well hedged and are strongly hedged into what is a rising fuel market. Just in terms of game changers, we've covered this well before, but we have 65 coming, 4% more seats, 16% less fuel. The only negative development on aircraft in recent months was Boeing's attempt to increase prices for a potential follow-on MAX 10 order. We don't really know what Boeing are up to. We think they're deluded, particularly at a time when we've walked away from negotiations on a MAX 10 order. Other Boeing customers in Europe Jet 2 have signed up an order with Airbus aircraft and IAG have also walked away from Boeing discussions on narrowbody aircraft in favour of Airbus. We think Boeing needs to come back to the table. They need an order from Ryanair. But frankly, we have enough aircraft, more aircraft than we need for the next four or five years. We'll wait until Boeing get competitive on pricing again before we place another order. Growth is going to accelerate to 225 million guests. One of the key, I think, developments coming out of COVID has been the number of the extent to which competitors have either shrunk or failed. You look across and we've seen the failure of Thomas Cook, Flybe, Levels, Germanwings. Alitalia, for example, has now ceased trading, but it had a fleet of 110 aircraft. Ita, its replacement, has opened up with a fleet of only 55 aircraft. So the fleet has been cut in half. Norwegian, who before pre-COVID had a fleet of 120 aircraft, are now operating a fleet of probably just 25 or 30 aircraft. TAP has significantly reduced their fleet as well. So we see huge growth opportunities, not just in new bases, but also and working with those in large airports across Europe to replace the capacity that's been lost by their incumbent airlines. Airports recognize they need to recover quickly. They recognize that Ryanair is the only airline in Europe that can deliver that recovery and therefore we're seeing extended recovery and growth incentives at many of our bigger airports We've already touched on those long-term extensions of the growth deals at Stansted, Bergamo, Charlevoix and others. And you put our kind of long-term extensions at Stansted in some context, you see our competitor down the road Heathrow talking about a 50% increase in charges to passengers and to airlines at Heathrow, while we have a long-term low-cost agreement at Stansted. That's why I think You'll see Stansted's traffic recover very strongly. We think Stansted has the better vision for the future, whereas Heathrow is just price gouging its airlines and its passengers, aided and abetted by a capture regulator in the CAA, which allows them to continue to do so. We see the EU government becoming more active in stimulating recovery as well. Ireland in the recent budget has put together a 90 million package for the aviation recovery next year. And as a result of that package, we're going to switch more capacity into the Irish airports for summer 2022. So you'll see Ireland's traffic recovering much faster as a result of lower airport charges. And again, I would contrast that with what Heathrow are at, price gouging to reward its very rich shareholders, which is fundamentally the wrong strategy. We've announced 14 new bases for 2021. There's more than 560 new routes post-COVID. There's more routes coming, but more of that growth is taking place at existing bases than it is at new bases. And we've stepped up the FY26 traffic target to 225 million passengers. Here's a very interesting slide. Again, all I want to draw your attention to here is the fact that while we're opening 14 new bases next year, much more aircraft growth is going into existing bases. We're basing 11 new aircraft in Vienna next year, where both Austrian and Wizz are in retreat. Stansted, we bought the EasyJet base aircraft slots for seven aircraft, so we need to put those aircraft into Stansted. Manchester, where Thomas Cook failed, three new aircraft. In Italy, for example, we're going to base more than 20 new aircraft all across Italy this year and next, so that we step up and ensure that airfares in Italy and to and from Italy remain low, even as Alitalia has its capacity. We're also allocating aircraft to Portugal, to Poland, for example, where a lot are in significant difficulties, and we're very excited by the fact that Ukraine is joining the EU Open Skies next year. Ukraine is already a big market for Ryanair, but it's one where we'll be basing a significant number of aircraft over the next two or three years. Again, don't lose sight of the fact that, yes, there's 40 new bases, but there's much more growth taking place at existing bases as well. And that's why we're going to see a very accelerated recovery in traffic in Ryanair over the next five years, growing from 149 million passengers pre-COVID by 50% over the next five years, up to 225 million passengers. Not alone are we the biggest airline in Europe, but we are by some considerable distance the fastest growing airline in Europe and will remain so the next five years. All of this is being done in a very environmentally sensitive and conscious way. We continue to stick to our very ambitious environmental targets. We intend to reduce CO2 consumption by 10% by 2030. We have a very aggressive goal of powering 12.5% of our flights with sustainable aviation fuels and we are committed to improving our independent climate rating score from B minus to A over the next two years. We're investing very heavily in our people and in training. We recently opened a 50 million euro simulator training center in Dublin, six simulators with a capacity to train up to 500 pilots annually. We expect to open two more of those centers, one somewhere on the Iberian Peninsula and one somewhere in Eastern Europe, most likely Poland in the next two or three years. so that we internally can produce up to 1,000 pilots and more than 2,000 highly trained cabin crew each year. We're continuing to create 5,000 new jobs over the next five years. We're very excited by the fact that we'll promote more than 3,000 of our people in the next two years alone, mainly pilots and cabin crew. We're engaged in very extensive people engagement at all levels within the company. And that's being led by Róisín Brennan, our independent director for workforce engagement. And a very exciting development in September was the first meeting of our customer advisory panel. They came up with a series of initiatives which we've adopted and we're rolling out now in the form of to enhance our customer experience program for 2022. From that, you'll see new services where there's an app assistant, a day of travel app assistant providing real-life flight time information, live flight status and handling updates. And there is live off-center communication and videos during disruptions. All passengers carded with Ryanair will now have a Ryanair wallet. They can pay for services using that wallet if they want. We can offer them refunds through that within 24 hours. and while still maintaining the option to provide all passengers with cash refunds during the rare case of flight cancellations, cash refunds within five working days. These developments will allow passengers to engage in much more self-service, less need to wait or to interact with customer service centres during cases of disruption, and it will make the travel experience a much more seamless and, we hope, enjoyable experience For our customers, particularly as we grow those customers from 150 to 225 million passengers. So, ladies and gentlemen, we are embarked upon a very exciting five-year growth plan. I have never seen a time in the last 30 years in Ryanair where we have so many exciting growth opportunities. Traffic and load factor is recovering in the last five months. It is recovering at Ryanair much faster than any other EU airline. In fact, I don't know how they're going to be able to catch up. For FY22, we're pushing our traffic recovery ahead of our previous range, which was 90 to 100 million. We're somewhere now in the very low 100 million, 102, 103 million passengers. We still expect, unfortunately, a loss for the full year, but it's a reasonably modest loss of between 100 to 200 million euros, subject to low adverse COVID developments this winter and modest yield performance. Low fares, however, will drive a very strong recovery into Christmas, into Easter, and more importantly, into FY22, when we expect to see our load factors return to pre-COVID levels and also yields return to pre-COVID levels. We will see and will stimulate much faster pre-COVID growth, rising to 225 million guests by FY2026. We'll do that using our very strong BBB rated balance sheet. And we're using that balance sheet to invest heavily in fleet and market share gains. And we continue to believe that that combination of financial strength plus lowest industry costs will make Ryanair the long term winner. I think we should just touch briefly, given the topicality on fuel hedging. It's in the appendix of our presentation. So we've seen rising short term fuel prices in recent weeks. However, I'd point the fact that the market is still in significant backwardation. However, we didn't want to get into a situation whereby we would hedge 80%, 90% again in case there's some more adverse COVID developments. We don't want to be hedged to 90% again in the future and then find that we have to ground some of our aircraft or governments prevent us from flying. So what we've done is a combination of fuel swaps and caps to eliminate those kinds of risks. As you can see here for the second half of FY22, we're 50% fully hedged at fuel swaps at about $58 a barrel and about 20% fuel caps for about a further 20% taking us up to about 70% for the second half of the current year. The first half of FY23, again, we're 60% hedged at about $62 a barrel and we have a 20% and another further 20% of the risk locked away with caps at an average price of about just under $72 a barrel. And for the second half of FY23, we're 60% hedged at about $62 a barrel. All of that significantly below the recent spot prices, which are up in the mid $80 per barrel. I think going forward, you'll see us continue to use hedging to lock away the core of our fuel needs and then a modest use of caps so that actually we take our fuel coverage up to about 80%, but without committing to necessarily buying 80% into playing, just so we avoid what happened during the COVID crisis where we had bought forward 90% of our fuel on a rolling 12-month basis. and then found most of our flights and operations grounded by government fear. We don't want to run that risk again. Okay, with that, Neil and myself will take questions and answers now.