Ryanair Holdings plc

welcome to the Ryanair Q3 FY22 results conference call. Throughout the call, all participants will be in listen-only mode, and afterwards there will be a question-and-answer session. During the Q&A, in the interest of time and fairness, please limit yourself to two questions per person. And just to remind you, this conference call is being recorded. I now hand the floor to Michael O'Leary. Please begin your meeting.

Thank you. Good morning, ladies and gentlemen. You're all welcome to our Q3 results conference call. You'll have seen a comprehensive release this morning on the Ryanair.com website of the Q3 numbers, the MD&A. We also released a video interview of myself and our CFO, Neil Thorne, which should have dealt with most of the major issues. A couple of quick themes. We take it as read that everybody's seen the results, so I think the strength of the numbers here with the recovery in traffic during the third quarter, up to 31.1 million passengers, that was significantly faster recovery than any other airline in Europe. Also, dramatically higher load factor than any of the other so-called loco airlines who all seem to have load factors in the mid-70s. We delivered an 84% load factor. that would have been significantly higher, as would the yield, if we hadn't had the sudden emergence of the Omicron variant in the last week of November and the first week of December. And I think we should be just a little bit cautious going forward. We were heading for a very, very strong Christmas in December last year. And as Omicron broke out and governments started imposing or reimposing travel restrictions, We got hit in, probably cost us about 2 million passengers in December, and also about 2 million passengers that people tended to book later. So it had an impact on both passenger volumes, we fell to 9.5 million in December, but also critically on yields. We took out about a third of our January capacity, again, because bookings just collapsed. We did hang on to some of that Christmas return traffic in the first week of January, but other than that, the rest of January was a washout. As we said, we would have originally expected to do about 10.5 million pastures for January. Taking out a third of the capacity, we reduced the pasture target to between 6 and 7 million. We've probably taken out about 15% of the February capacity as well. And so there's a misconception out there that These lockdowns just hit passenger volumes, they don't. They hit passenger volumes and they hit passenger yields and revenues. And we think therefore that the impact of Omicron was quite damaging on the December numbers and therefore in those, the Q3 numbers, despite the fact that we still did 31 million passengers and an 84% load factor, it'll also continue into Q4. As I said, January will be somewhere between six and seven million passengers. February will be down about 10%, 15% on what we would normally have expected. Again, I think we're heading for something over 8 million, about 8.5, something between 8 to 9 million passengers. And then March, we're hoping to maintain that very strong recovery, probably back up to something between 11, 12 million passengers. But if there are any more sort of surprising variants or anything else emerges, and governments again start to kind of panic as they did in early December, we will get hit for Easter. Easter's in the middle of April. All the indications are at the moment there will be a strong recovery into Easter and into summer 2022. But it is hugely uncertain if there is any other kind of COVID development. So with that as a backdrop, I think the highlights of the third quarter is we continue to invest heavily in our environmental efforts strategy, our climate disclosure project rating, an independent rating move from B- to B, which is industry-leading. Traffic rebounded very strongly in Q3, despite the impact of Omicron on the December traffic, but close-in bookings in the years of December and January into February were badly damaged by those Omicron restrictions, and we are spending, we are aggressive on pricing at the moment to recover traffic and load factors into February and into March. The balance sheet remains strong. We repaid the CCF 600 million loan in October, five months earlier than scheduled. At the end of December, we've taken 41 game-changer deliveries. We expect that to rise to 65 aircraft before the peak summer of 2022. To accommodate that additional capacity, we've announced 720 new routes and we're opening 15 new bases, all of which will operate in the summer of 2022. We are very well hedged on fuel. It's something that separates us from some of our competitors. We're very strongly hedged at prices that are a significant discount to the current spot. We see Brent crude open up this morning over $91 a barrel. We're very strongly hedged, 100% into Q4, 80% into H1 of FY23, and 70% into H2. of FY23. That's a mix of swaps and caps. And the reason we're using caps is that, you know, we don't want to take a risk. We don't want to commit to having kind of buying into playing for 80, 90% of our capacity in case there are further kind of repetitions of COVID restrictions or sort of the things that disrupt travel. We think we have a very good balance. Again, we see, I think it's hard to believe that we won't operate at 60% or 56% of our scheduled capacity through the summer of 22 and into the winter of 23. But the caps at least are a modest cost way of giving ourselves further insulation, taking us up to about 80%. And it means that for the remainder of this fiscal year and for much of the next fiscal year, we will benefit from significantly lower than spot price oil costs, and that will give us yet another significant cost advantage over all of our competitors in Europe. Our Summer 22 capacity is now on sale. We're offering 114% of our pre-COVID capacity. That's essentially the game-changer deliveries, less the couple of NG aircraft we've deleted over the off-lease, And we are committed to stepping up our five-year growth, which, as you'll be aware, has accelerated from an end target of 200 million passengers. It's now 225 million passengers because we think and expect there will be strong recovery post-COVID into summer of 2022. And certainly there is a huge gap in the market out there. I think we do not believe some of these analysts' reports who expect capacity will be flat in summer 2022 pre-COVID-19. It won't. It will be down. I think it will be down by a double-digit percentage, but maybe it will be a high single-figure percentage. When you see the legacy airlines out there desperately trying to hang on to the slot waivers, they're desperately trying to hang on to those slot waivers for a reason. They do not want to operate a large proportion of their short haul capacity. traffic, their short haul schedules. A lot of that is driven by the fact that about 50% of their short haul traffic is connecting to or from long haul. And there's no doubt that long haul will be slower to recover in summer 2022 and I think in summer 2023. So we think there will be meaningful, there will be a meaningful reduction in short haul capacity in Europe in summer 2022. We will be by far and away the fastest growing airline in terms of absolute traffic numbers and capacity in that marketplace. And we are deluged with airports and governments who are besieging us and also besieging us, trying to get us to allocate more aircraft to their markets. And we're doing very attractive COVID recovery or post-COVID recovery, traffic roads recovery deals with both airports and governments all over Europe. I don't want to add too much more to that. Neil, do you want to take us through MD&A?

We've covered the fuel already. We're equally well hedged on carbon as well for the next year. So we're about 100% hedged for FY22 at €24 an EUA. We're 80% hedged into FY23 at €45 an EUA compared to current prices of €90. The balance sheet remains in a very strong position with cash just under 3 billion at the end of December after having paid off the UK CCFF five months early. And indeed, net debt, despite 800 million of capex, is down modestly at 2.1 billion at the end of the quarter. There'll be a big focus on the balance sheet over the next couple of years to get that back to a broadly net cash, net debt position. And then the final thing that I was pleased with in the quarter was the unit cost ex-fuel development, where we saw unit costs get back to €32 per passenger.

Okay, thanks, Neil. We'll just open up to Q&A now. I said everybody's limited to two questions. Can I deal with the first question that comes from everybody? What will the years be like for summer of 2022? We don't know. Our focus, unlike most of our competitors, will be on recovering volumes quickly. and restoring loads to trying to get load factor back up to 90%. If there is no further Omicron or COVID restrictions, then we think there will be reasonably strong traffic recovery through the second half of February into March and certainly into April. But forward load factor, forward bookings are running significantly behind for summer of 2022, where they would have been on this day in advance of summer of 2019. And so while bookings have jumped, bookings have recovered very strongly in the last two or three weeks, that needs to continue uninterrupted, I think, for another eight, ten weeks, so that we can get not just April, which has Easter in it, but also the peak summer months, forward bookings back to the level where they would have been this time two years ago pre-COVID. We will, as always, remain load factor active, yield passive. I think that was demonstrated in the Q4 numbers where we delivered an 84% load factor. I smiled to myself as I listened to a number of our competitors last week claiming to be load factor active and yield passive, yet they only delivered a 77% load factor in COVID. in the Q3 compared to our 84%, and they were only delivering about 25% of our seat capacity. But nevertheless, lots of them claim to be Ryanair, while not actually delivering what Ryanair delivers. We don't know what the yield will be. We're not going to speculate on this morning's call as to what the yield will be. You're all big analysts out there. You can guess as well as we can and have a look at it yourselves. I think what we will see, though, is a very strong, if there is no more negative COVID developments, and I would be cautious on that front, you'll see very strong traffic recovery, not in February, because we've taken out about 15% of the capacity in February. You should see a very strong load factor recovery into March, and then Easter or April, which will be the first month of the new year, and in the new year, we're aiming for or targeting 165 million passengers. We would want and expect to see a very, very strong traffic and load factor recovery in April, and then that would set us up well for the summer. If, however, there is another Omicron variant that emerges in the middle or the end of March, then Easter will get wiped out the way Christmas got wiped out in December, and we will cut us back two or three months. So I think the sensible thing to do at the moment is to be cautious. I think we should expect some more COVID negative news flow somewhere. We don't know where it will come from, but I think it would be sensible just to be cautious, and I think that's what underlies our message here today. Okay, let's go ahead to the Q&A, please.

Thank you. Just as a reminder to participants, if you do wish to ask a question, please dial 01 on your telephone keypad now, and if you find your question is answered before it's your turn to speak, you can dial 02. And as mentioned before, please limit yourself to two questions per person. Our first question comes from the line of Mark Simpson at Goodbody. Please go ahead. Your line is open.

Good morning. Yes, two questions as allowed. First one, you mentioned in the preamble that you're going to pay down debt over the next two years in terms of the presentation on the website. I'm just wondering if there's an update on CapEx we can have behind that statement. And then secondly, whilst we're not looking... for specific overall guidance in the summer. There are two areas that kind of stand out in terms of competition. One is domestic Italy, the other is Vienna. I'm just wondering, can you give us an update on how you see the strategy of managing those markets, particularly where one of your competitors has put a statement down on the domestic Italian side with their increase commitment to capacity. So it's really between you and WIS being played out in Italy and Austria. Be interested to have your take on that. But first off, maybe a CapEx update from Neil.

Sure. Thanks. Just before I ask Neil to come to CapEx, and I might ask Eddie just to give his views on domestic. I think it's important, again, you know, there is a An unnatural view out there generally, maybe among, I think, some unions across Europe at Labour that, oh, we're out of COVID and we're recovering from it. It's all behind us. It isn't all behind us. We're still repairing load factors. We're still repairing bookings and we still need to get our forward bookings for the summer up to where they were before. Even when that does repair, we went into COVID essentially with a zero net debt position and we will emerge with a effectively a $2 billion net debt position. The foremost in the board's mind at the moment is returning that net debt position to zero as quickly as we possibly can. So our primary uses of cash in the next, I think, 18 months, 18, 24 months, will be pay down that debt to return it to a net zero debt position. Neil's net gain on CapEx.

Okay, on the CapEx market, no change from our previous guidance. So about 1.2 billion Euro CapEx in the current financial year to 31 March 22. That includes maintenance CapEx. That will increase to 2.3 billion next year, which is our peak year of CapEx. And then it starts to pull back, although the next year after that will start with a 2, and then you'll see a drop-off thereafter.

Okay, and Eddie, especially Italy and Vienna, are we noticing anything from, or do we even notice competitors in those markets other than Anitalia?

I think particularly on Italy, we've had a huge investment in Italy over the last 12 months. We've gone from, well, for the summer of this year, we go from 67 based aircraft to 92 based aircraft. We've got... three additional bases opened up, and we've got, just in comparison to, you know, there are gaps there that have been left by Alitalia and EasyJet as well, but we now have well over 100 domestic routes. We have got less than 30 routes there, and we have the frequencies, and we are, I mean, particularly as we flew pretty much our entire schedule down there throughout the whole sort of COVID crisis, we are the sort of go-to airline for domestics initially at the moment. And we know that some of our competitors down there are less than maximum sort of load factor, certainly in around the 50%, 60% mark, and sort of desperate fares there at the moment of $2.99 and $4.99. So we have grown by almost 40% in terms of base activity initially, and I'm pretty confident we are going to – more than confident that we're going to have the lion's share of the domestic traffic initially. On Vienna, again, we will have just close to 20 base aircraft there this summer, as against Wizz, which has gone sort of backwards there. They were going to do nine. They're back down to five, talking about going back up to six. And we've got significantly more capacity. They've recently cancelled 14 competed routes out of there. Notable ones will be Madrid, Cologne, and Warsaw. So I think we are certainly more than... grabbing market share and frequency build and on competing airlines or on competing routes, we see them pulling away from us.

And just a few words, do you think that your fuel hedging gives you a massive advantage this year in being able to actually take the competition in being able to manage your prices with a decent return, take that to an airline which is unhedged?

I don't think fuel would ever give us that. We don't hedge fuel here to maximize returns. I mean, the returns will very much depend on the speed and depth of the recovery. I think what's important with our fuel hedging strategy is that we can deliver cost certainty to our shareholders for the next 12, 18 months. I mean, we have seen some spectacular deviations by some of our so-called competitors arguing that they now will be unhedged because they've never made money hedging. Well, They're about to lose a shed load of money by not hedging, particularly with spot prices up at $91 a barrel. But, you know, to be fair, all we see from them in some of those, as Eddie said, in some of those markets that Italy, you know, they struggle for a 50% load factor, and we see desperation pricing in recent weeks. We've seen some seat sales of $2.99 and $4.99 in domestic Italy, although nobody in domestic Italy seems to notice them. You know, I think most of the other airlines, certainly EasyJet, the other well-run airlines, local airlines in Europe are hedging. You know, we don't always win on hedging, but hedging gives you cost certainty for your shareholder and investor base for the next 12 months. And it would, you know, it really takes a spectacular... I would say, leap of mismanagement to be looking at a post-COVID recovery where I think all of the pressure on oil will be to the upside on the back of economic recovery and also political uncertainty over Ukraine. We would want to be certainly, I think it is a sensible strategy to be hedged. The real challenge for us in hedging was, you know, would you kind of hedge up to 80, 90 percent? And we didn't think that was sensible, which is why we've got a I think a very clever and sensible mix of jet swaps and caps, which insulates us on the upside, but there's still some benefit from us with the caps on the downside if there was some kind of collapse in oil prices. But no, it won't affect the returns. It just gives our investors cost certainty. That's great. Much appreciated. Thanks, Mark. Next question, please.

Thank you. That comes from the line of Satish Sivakumar of Citigroup. Please go ahead. Your line's open.

Thanks, Michael. I've got a couple of questions here. So firstly, if you could actually give an update on the recent ICO report on MINIS regarding the Belarus space. And secondly, on the ancillary revenues, if you could actually share some color on the quarterly momentum that you are seeing on priority boarding and result seating. Are you already expected to normalize in the coming quarters? Thank you.

Okay, thanks. Good question, Satish. We welcome the ICAO report on the Minsk diversion in May of 2023. I think it is clearly, we think it could have gone further, but at least it has certainly highlighted that it was inappropriate state actors who essentially engaged in an act of modern-day aircraft piracy. I think we are calling on ICAO and on the aviation and the government authorities of Europe to ensure that there are appropriate undertakings given by certainly the Belarusian state. This will never happen again. It is fundamental to air travel going forward that both airlines and our passengers can expect to overfly even rogue states free from any interruption or dishonest diversion or piracy of aircraft. We certainly welcome and we fully support the action now being taken by the US Department of Justice against the four named officials in Belarusia. And we, as the airline involved, will be seeking to support any actions taken against those actors. I think it is fundamental to the future of air travel that we do not have a repetition of what to my mind was the first case since the Chicago Convention in 1945 of a state-sponsored act of international piracy. And we should not reopen the, there should be no overflights of Belarus unless appropriate guarantees are obtained from them that this won't recur. In the meantime, we continue to fly around the Belarusian state. It's generally on our north-south flights from the Baltic states down to Greece and those kind of destinations where we might overfly Belarusia. But we believe all the EU states should show solidarity and avoid Belarusia until appropriate assurances are given. Eddie, do you want to give us some core on ancillary revenue development?

Yeah, I mean, on ancillaries, I suppose the big call-outs really for us internally here are duty-free sales, reserve seizing, and priority boarding. And, you know, as we have been working our way through during the sort of shutdown on COVID-19 with our labs people over the last two years, we've been doing a lot of work. in terms of dynamic pricing, particularly on the priority boarding side, and that is continuing to show build. We've also put in some dynamic pricing in terms of the number of price points for baggage as well, but I think we'll only see that more close in as we get into the summer. But we still have some way to go, I think, on dynamic pricing on seats, which we have yet to tap in the way that we've done with priority boarding. So very pleased with what's happening there. And obviously on GP3 out of the UK, we're continuing to build on that. And again, into the summer, I think we really only see how solid that is when we get those volumes back up. So very pleased.

And roughly what proportion of our flights operate to and from the UK?

It's a bit just under 30%. Okay.

Okay. Thanks, Satish. Next question, please.

Thank you. That comes from the line of Savvy Sif, Raymond James. Please go ahead. Your line is open.

Hey, good morning, everyone. Just a few questions. Just on the non-field passenger performance, as Neil pointed out, it's a very strong showing there. I was curious if you expect that to slip here in the Cisco 4Q, given how much close-in capacity you've cut here in January and February, and And just in the early thoughts on, you know, where that can go in fiscal year 2023, just in terms of kind of upper and lower bounds, perhaps. And then for my second question, I'm curious, you know, if you can provide some color on how you're thinking about the opportunity in Germany relative to perhaps kind of what your ambitions were pre-COVID.

Thanks. Okay, without further ado, Tracy Malloy, you want to take that to non-fuel passenger cost developments and where we think that's going. And then I'll ask Eddie maybe to comment on the opportunity in Germany.

We've seen a very strong performance in the non-fuel costs in the quarter, 32 euro per passenger. That was driven by increased load factors, increased aircraft utilisation, a lot of work done on the variable costs, on renegotiation, a lot of our airport deals, and we continue to benefit from the staff pay reductions. Where we see it probably coming over the next year is, as we've said before, of course with start to see an increase in Euro control and ATC costs, which are pretty much out of our control. So that will probably give us about a Euro passenger, I'd say, next year. But we hope to get to the pre-COVID levels as we return to increased load factors.

Okay, and Eddie, you were talking about developments in Germany and particularly the closure of the Frankfurt main base.

Yeah, I think our view on Germany would be that there is a structural problem with airport costs in Germany. That's evidenced by what's happened in Frankfurt recently, where practically every other airport in Europe that we dealt with was closed. was looking to lower prices. And in Frankfurt, they were looking to not only higher prices, but to look for higher thresholds of passengers. And I suppose Germany is really a story of two types of airports. The secondary airports are still very competitive in terms of the smaller airports like Baden, Memmingen, Niederhain, places like that, where we've been able to sort of put additional capacity in there. But You know, Germany is the one country that we have significantly reduced base aircraft, if you compare it with summer 19, and it's all down to pricing, security taxes, and we didn't recover fully to the amount of base aircraft that we previously had in Berlin. But something needs to happen in Germany on pricing, particularly where you've got less less capacity in Europe, and you've got more choice with other airports, and Frankfurt was the big casualty there. What about Nuremberg and Hahn? Yeah, that's what I was saying, the more secondary airports. I mean, Hahn has its own difficulties at the moment being in administration. They're looking for a buyer at the moment, but Nuremberg came back with a published deal that was open to everyone on a non-discriminatory basis and made sense for us to go back in there. Originally, we went out of Nuremberg because of the non-delivery of the MAXs, But places, I say, like the smaller airports, the Badens, the Memminghams and the Niederhans and places like that are the only ones that are at least trying to lower costs when they know that the international competition for them on movable aircraft with LCCs is going to tend to go elsewhere.

Yeah, I think also for my piece, I think Germany is an example, again, of our cost discipline. As Eddie has said, Frankfurt, Maine, we're coming up with a ridiculous price increase into a post-COVID recovery. I think what's interesting is you see kind of essentially the big hub airports. I mean, Heathrow came up with a ludicrous, I think, £15 per departing passenger, £15 sterling per departing passenger. You know, one of the richest airports owned by the richest shareholders in the world. and their first response to a COVID, a catastrophe and the need to recover was to put up charges again. Frankfurt Main is doing the same because they can. They have a very large connecting hub there. We're happy to grow in Germany. We are growing at a number of smaller airports. But frankly, we have better uses of our aircraft this year, this summer and into 2023. And if an airport doesn't want to work with us, to stimulate or to be used priced to stimulate an aggressive traffic recovery, then frankly, we have 200 other airports elsewhere in Europe where our aircraft are better deployed and we'll deploy them elsewhere. We will not give up on Germany, but frankly, I think the German market is in for two or three years of difficult times for the airports where they're increasingly reliant upon the state-subsidized Lufthansa Group, Lufthansa have no interest in returning traffic volumes. They're leading the charge on slot waiver, on the waiver, the slot rules. And certainly the larger German airports are going to see a significant decline in traffic, materially higher airfares, while it becomes a kind of a Lufthansa monopoly. But there's kind of a mood in Germany there around supporting the national champion. It all seems to be about propping up Lufthansa, not just with $12 billion of state aid, but also eliminating competition. We think that will be a reasonably short-term phenomenon. But we're very happy to redeploy aircraft into growth markets in Central and Eastern Europe, where we're growing at a much more accelerated rate than any other airline. We have growth opportunities in Italy, in Spain, in France. Ireland and the UK. And if some German airport wants to put up fees, good luck. We'll see you when you change your mind in two or three years' time when you have about 20% less traffic than you do pre-COVID. Next question, please.

Thank you. That question comes from the line of Alex Irvine at Bernstein. Please go ahead. Your line is open.

Alex, hi.

Alex, if your phone's on mute, you'll need to unmute.

Okay, let's just move on to the next one.

Okay, so the next question comes from the line of Stephen Furlong at Davey. Please go ahead, your line is open.

Yeah, hi, Michael. So two questions, one for you, Michael, and then one for Neil. Michael, just might talk about what's going on with Boeing and obviously the performance of the new aircraft, but also in terms of MAX 10s and new orders beyond 2025, 2026. And then, Neil, I would like to talk about carbon credits and costs. I just haven't seen that much with other airlines where you actually hedge this, and you might just talk about how that came about in the market, because I think that's quite interesting. Thank you.

Okay. Well, I think the kind of key development with Boeing in the last four Q3s, we took delivery of, what, 25 aircraft in the quarter. We were up to 41 aircraft at the 31 December. I noted Boeing's results of last week, they delivered 99 aircraft in the quarter, so we accounted for one in every four Boeing aircraft deliveries in that quarter. We expect to take another 24 aircraft from them, six aircraft a month in January, February, March, and April, and that gets us up to our 65 aircraft for summer 2022. Performance of the MAX aircraft has been exceptional. I mean, admittedly, some of this is because we're operating with lower than normal load factors. We're operating with an 84% load factor in Q3 as opposed to more normal 90% load factors. But the fuel consumption is better than the original 16% promise. The noise performance has been noted by almost all passengers. They're exceptionally quiet aircraft on board. And I think our initial concern, which was that there would be crew or passenger reluctance to operate the aircraft, Absolutely none. We still, despite the fact we're offering to customers, you can offload off the aircraft and travel on the next NG if you want. Not one passenger has sought to offload. In fact, if anything, more and more people want to fly on the new quieter aircraft. On the MAX 10s, I think, you know, there's been disappointing. I think the sales operation in Boeing has been asleep. It's been, I think, disturbed. I think worrying from a kind of, as Boeing's largest customer outside of the USA, it's been worrying to see a trend in recent months of Boeing customers converting to Airbus. We saw Jet2 order Airbus, Qantas order Airbus, and even KLM, who for nearly 100 years have been operating short-hauled Boeing equipment, now look like they're moving towards Airbus as well. Certainly the Airbus sales team are performing very well. Boeing doing nothing. We haven't heard back from the sales team since I suspect about last October. Although they know where we are, but I think the good news is we don't need any aircraft deliveries or orders from Boeing until 27 or 28. For an OEM that's losing so many customers to its Airbus opposition, it's remarkable that they haven't been camped outside our offices here trying desperately to restart our discussions on the MAX 10, but we live and wait in hope. In the meantime, Neil, carbon credits.

Sure, Stephen. Carbon credits, where did that come about? Well, Michael talked about our desire for certainty on home fuel. Carbon is becoming a bigger cost than it has been for the last couple of years. So we took the decision to line up our counterparties and develop a forward market for EUAs. We're able to do that thanks to the triple B rated balance sheet that we have. And I think wisely locked in carbon exposures out to the end of FY23 in a market that is rising. I think it's boss trading at about €90 in EUA today. We're hedged out into next year at €45 for 80% of our requirements. And that boils down to our desire for certainty on the balance sheet that we have, which convinced counterparties to set up this market, which traditionally wasn't there. Okay, great.

Thank you.

Thanks, Stephen.

Next question, please.

Thank you. That's from the line of Muneeba Kayani at Bank of America. Please go ahead. Your line is open.

Thanks for the call. One follow-up question on Ukraine. What's your exposure there? You've added some new routes there and kind of What have you seen more recently with the political tensions? And then secondly, on the cost side, have you seen kind of salary pressure for cabin crew and pilots? And kind of how does that impact your strategy to get back to unit costs pre-crisis level?

Okay, on Ukraine, we have a reasonable size operation to Ukraine, but mostly it's centered on Kiev and airports in the west of Ukraine. We do have a plan this year to grow to about 1 million passengers last year. We go close to 4 million passengers to and from Ukraine this year. Again, I've said there being any sort of negative developments, we will continue to operate that plan. but we have no aircraft based in Ukraine. So, you know, if there was a Russian invasion or there was some kind of political disruption up there, we would pivot those aircraft away from Ukraine into the summer. We could fill those aircraft readily going to other destinations, any of the other 200 destinations we have across Europe. We remain committed to Ukraine as long as, you know, Ukraine is looking westwards. There are huge economic workflows, people traveling to and from Ukraine working in Central and Eastern Europe. There's a very large migrant workforce in Poland, in Germany, and we see no reason why Ukraine won't continue to grow. It is certainly one of the countries, absent if it's not invaded by Russia, it's a country we would expect to open a couple of bases in Ukraine sometime in the next, I would have said two or three years, subject to agreements on costs and prices. We did have the New Roots team visiting the Ukraine airport. Again, this is about our third or fourth visit in January. But I think it was understandable, really, that the Ukrainian authorities weren't in a position to discuss New Roots and bases. They were somewhat otherwise distracted. We hope the situation in Ukraine gets resolved diplomatically. And if it is, it remains a very exciting growth opportunity for us. I mean, it's the same situation population base as Poland, with the same kind of propensity for travel to and from the EU. Just on the cost of the salary pressure, I mean, we don't see much salary pressure at the moment. The vast majority of our people would be pilots and cabin crew. We are coming to the end of the second year of four- and five-year multi-year pay deals. I might ask Eddie just to give you some flavor out of it. This is the first year we're committed to starting the first of two or three years of pay restorations in July. We've begun to start having discussions with some of our unions and our people about maybe we'll bring that forward from July to April, or we may restore instead of three years of restorations, maybe do it over a two-year period. But we would want a year or two tacked on to the end of those agreements. if we're going to accelerate those kind of pay deals. We have to be careful because I think we still don't think we're out of the worst of the COVID. We think there is the potential for further negative COVID surprises. But if we do better over the next year or two, the first two things we want to do is pay down our $2 billion of net debt and two is to restore the pay of our people in a kind of sensible and sustainable fashion. However, the backdrop to that is, you know, there are literally thousands of unemployed pilots out there. We are, I think we, at last now, we have about 900 cadets coming through our cadet training program across the system. We have seen no shortage of pilots for the coming number of years. Again, similarly with cabin crew, we're running a lot of cabin crew training this year for the growth across Europe. There would be one mark, and the UK would still be, I think, an area where there are some pressure points. particularly on the cabin crew side. There's a lot less freedom of labour in the UK. I think we're in many sectors, particularly some of the people who are most vocal in supporting Brexit, who now want the government to issue work visas for bar staff, fruit pickers and God knows what else. But I think, you know, our cabin crew are relatively well-paid, certainly well above hospitality kind of supermarket workers or entry-level workers in the UK. But if there's going to be a pinch point on salaries, I think it would be likely to be in the UK and in certain spots in the UK around cabin crew. But other than that, we don't see much salary pressure, upward salary pressure. I should say, obviously, labs and IT is an area where there's an ongoing salary pressure there. But, you know, we have... Four centers across Madrid, Dublin, Wroclaw, and in Portugal, and, you know, we're continuing to attract very, you know, we're continuing to recruit very attractive graduates, but there is a high, a relatively high rate of turnover in the labs and IT area. Eddie, do you want to add, Julius, do you want to add something on the Ukraine side, and Eddie, give us some flavor on this, what you think on the salary pressure side. Julius, first, Ukraine.

Michael, you've covered Ukraine comprehensively. I mean, we hope that the conflict will not take place, that the standoff will be resolved diplomatically. We look forward to investing in Ukraine.

And Eddie? Yeah, I mean, I think you've covered most of it there, except to say that we tend to think of financial results, obviously, on a quarterly basis. But with the restoration of pay, I mean, you've got to look at not just this summer, but what's going to happen next winter and whether there's a reoccurrence next November. Sure. of some other sort of Omicron-type variants. So on that basis, like, this isn't over. We don't have a clean set of heels just yet, but we do want to, you know, clearly people made sacrifices here to keep the business on track. Pilots took a, agreed through their unions, a propane cut to 20%, the cabin crew largely around 10%. And we have to have an orderly way of doing that. And we're in negotiations at the moment to do that with a number of unions. And if we can do some of that earlier, we can do some of it earlier, but only on the basis that we've got cost certainty over a longer period of time.

Yeah. OK. Thanks, Eddie. Next question, please.

Thank you. And the next question, sorry, just one second. The next question comes from the line of Jared Castle at UBS. Please go ahead. Your line is open.

Hi. Good morning, everyone. Just coming back to growth over the next two to three years, the biggest markets at the moment are Italy, followed by Spain and the UK. If you look out two, three years' time, should we see more concentration in terms of revenue mix in those markets, or do you think we'll become more balanced And then just secondly, on summer, I mean, obviously, you know, the northern hemisphere is in winter, but, you know, there's been much publicized stoppages in the U.S., you know, not enough staff and people getting sick. How do you plan to kind of, you know, it will hopefully be a period where there's less people getting infected, but How do you plan to kind of manage something like that in summer? Should you see things spike in terms of, you know, planes at hand to fulfill schedules and staff shortages potentially if they arise due to people being unfit to travel?

Okay, touch briefly on both. I mean, growth over the next two years, again, in all cases, you know, for the last 35 years, growth here has always been opportunistic. You know, the growth will go wherever, you know, we see the best deals. I think we do comments because of the scale of the markets. You know, we're seeing very substantial growth opportunities in the UK, in Spain, and in Italy. But, you know, this summer we will grow from about 8 to 20 aircraft in Vienna. Budapest, for example, which is the home airport of one of our competitors, will see us this year grow to, is it 9 aircraft? 10. 8. We'll grow to 8 aircraft based in Budapest this year, which will be one more than Wales, who I think will be at seven aircraft this summer or this summer there. We are growing faster in many Central and Eastern European markets than the incumbent carriers. So our growth will always be opportunistic. It's not some Napoleonic invasion of Russia here. It is whoever comes up with the best deal will get the next four or five aircraft. And I think it's fair to say, you know, the New Roots team are absolutely inundated with requests for meetings, negotiations at airports. And, you know, one of those that I would drop into the business, you know, if we saw a resolution of the political uncertainty in Ukraine, Ukraine could take 15, 16, 20 aircraft at, you know, four, three, four, five base at five different airports over the next two or three years. I think the critical opportunity or the thing to focus on is not so much the actual, you know, the geographic areas. Focus more on the fact that Ryanair will take delivery of some 60 aircraft a year each year for the next, we're 65 in for the summer of 2022. There'll be another 60 for summer 23, another 60 for summer 24. We could allocate all of those aircraft this summer if we wanted to. to airports and governments who are engaged in, you know, putting in place very significant incentives. A good example of that would be the Irish government. I mean, we had no plans to grow in Ireland in summer 2022. In fact, we were going to cut the fleet. And the government have come up with a very innovative COVID recovery incentive scheme. I think the token value of the scheme is about 90, 100 million. which is passed by the government through the airports onto those airlines who are delivering growth. And as a result of that, we've gone from cutting our planned airport capacity, Dublin, Cork and Shannon, compared to pre-COVID, to now running our largest ever schedule out of Cork, Dublin and Shannon this summer, entirely in response to a very enlightened and innovative, I think, government plan COVID recovery program, which is available to all airlines who grow. It's not kind of just designed for Ryanair. But, you know, we have the flexibility to deliver far more growth than any other airline. So we will always be opportunistic. How will we handle staff? Again, I think we handled the staff situation better than any other airline in Europe during COVID. We kept all of our aircraft current. We kept all of our pilots and cabin crew current. And by the way, there's this myth out there that we operated lots of ghost flights to protect flocks. We have never in our lives operated a ghost flight. In fact, we're usually criticized for the opposite. Oh, we just canceled flights when we have low load factors. We don't do that either because we don't have low load factors. But we did operate flights during the 18 months of COVID where we sent a plane up there to keep the plane current, filled it full of pilots and cabin crew to keep them all current because they all had to operate one flight a month. So we didn't operate any empty flights. Some of the flights we operated were full of pilots and cabin crew to keep them all current. We are going to slightly over-recruit this summer, but I don't see us having the same issue in the U.S. with staff calling in sick. You know, there's a huge proportion of our staff are now vaccinated. There's a huge vaccination uptake across certainly Europe and continental Europe. I mean, some countries... Austria, Germany are talking about mandatory vaccinations. I'm not sure whether they'll be able to make it mandatory, but across most of Europe, you see very, very high in Italy, Spain, Ireland, UK, 90, 95% vaccination thresholds. There is much greater resistance in the US to vaccinations. You know, you have a very strong and idiotic anti-vax kind of group, which seems to be about 40, 45% of the population. We don't see that happening here in Europe. But, you know, our view of life is if you were, you know, we always roster and roster significant staffing pilots and cabin crew. We build in sickness and routine sickness into that. We have roster significant standbys on a daily basis. And we would expect us to continue to run through. We've had no difficulty with that in the last three or four months into what has been a very strong post-COVID recovery. The couple of page points we did see over Christmas was security staff at airports, at a number of airports, and handling staff at a number of airports. Strangely, some of the bigger airports, like Berlin and Frankfurt, where I think they were being opportunistic, but they were not showing up to work on Saturdays. They all seemed to be close contacts on a Saturday and Sunday, and then remarkably, they all returned to work on Mondays. You know, I think that will even itself out. We don't think that would be a significant issue into Easter or into summer, as long as there is no negative COVID development, if there is it. But, you know, I don't think we're out of the woods yet. We expect there to be other variants. You know, we hope that there won't be any other variants that will result in the kind of mass hysteria that was caused by Omicron in the first week or two of December, where European governments were closing down. Despite that, even then, the South Africans were telling people, look, you know, it does seem to be more verdant, but it's a lot less... more transmissible, but a lot less virulent. So staffing, I think we've managed well today. I think we will continue to manage it well. We don't believe, given the high rate of vaccinations in Europe, that we'll have similar kind of sicknesses as they have suffered in the US.

Thanks, Michael. Can I just add on to that on the labor side? I mean, we have absolutely no issue with the supply of pilots. And on the cabin crew side, as we have, don't forget, While we were flying all of our aircraft over the last two years, we kept up the wheels of recruiting in terms of the cabin crew side. So no issue with cabin crew. We may have some pockets in the UK, but if you look at it on a macro level of the amount of cabin crew, there isn't an issue for this summer given the sort of run rate that we have in terms of applications and the number of courses running. So we're not coming from behind at all. We are coming from a steady platform of training.

That's a good point. Even in the UK, our cabin crew generally are earning between $30,000 and $40,000. It's significantly ahead of hospitality. It's significantly ahead of retail. It's probably double or triple what the food pickers are earning now. I know that's a different issue. We don't expect to see any issues there. And I think, again, I come back to the point, I think the high rate of vaccinations will hopefully protect us from the experience of some of the U.S. carriers on labor shortages. Great. Thanks very much. Thanks.

Next question, please.

Thank you. That's from the line of Jamie Rowbottom of Deutsche Bank. Please go ahead. Your line is open.

Jamie, hi. Hi, Michael. First, you flagged your superior December quarter load factors versus peers. Provided there are no further COVID curveballs, and if the forward bookings curve continues to rally, what do you think is the best case for load factors in Easter and peak summer? Can you get back to pre-crisis type levels in the mid-90s? Secondly, your environmental targets are front and centre in today's statement. You hope to power 12.5% of flights using sustainable aviation fuel by 2030. What are the main constraints to achieving that, and will that level be quite consistent across the network, or will it be skewed perhaps depending on where the SAF is stored? Thanks.

Thanks, Jamie. I'm going to need Thomas Fowler, our Director of Sustainability, to address the environmental issue. Just to answer the load factor issue first, I mean, we would have gone, I think we would have had a load factor in the third quarter if we hadn't had Omicron that would have been in the high 80%. We won't get there in February and we won't get there in March. I would be hopeful that we will get close to 90% through April as long as there is no COVID negative developments. I'm not sure we get over 90%, but we're certainly, I think, our thinking going forward is that once we get into the peak summer months, and I would say June, July, August, September, that we would expect our load capacity back up over 90%. Now, word of caution, that's because we'll be load factor active, yield passive. We will drive load factors up over 90%, but maybe at the cost of yield. So we'll be aggressive on pricing, We're not expecting, and we're working on our budgets for FY23 at the moment. We don't expect to get back to kind of 95%, 96% load factors that we were at pre-COVID this year, but I think we are budgeting for a kind of low 90% load factor through the year, and we will take it on. If we have to be aggressive, we'll take the hit on yield rather than on the load factor. So I think close to 90% for Easter, April, And then I think over 90% into the peak summer months. And Thomas, environmental.

Yeah, thanks, Jamie. So obviously the 12.5% target is aggressive. But the biggest constraints we see today is the availability of SAF. So at the moment, less than 1% is produced in Europe today. Obviously, the current SIFR 55 proposal has put a mandate on fuel producers to produce 5% SAF by 2030. But we've seen some of the major oil companies come out with statements in the last few months to say 10% of their aviation production will be sapped by 2030. So that gives us confidence that we should meet the 12.5% target, but if not, we'll be very close to it in 2030. And then the price. So obviously the price is a lot higher today, but we think as production ramps up, the price comes down. And obviously we have been calling for some incentives to be given to producers to produce it. And regarding the pickup, I think there will probably be more pick-up at some of the main locations initially because that's where most of the fuel will be sent to. But over time, we see an even distribution across all airports in Europe under the mandate from Europe.

Okay, thanks, Hans. Thanks, Jamie. Next question, please.

Thank you. That's from the line of Neil Glynn at Credit Suisse. Please go ahead. Your line is open.

Morning all. Just following on from that question, firstly, just on Easter. I realise the forward booking curve is later these days, but can you give us some kind of a sense as to just what proportion of Easter bookings are actually in place this year versus 2019 to help us understand the increased reliance on late bookings towards Easter? And then a second question, maybe a bit more left field. Obviously, the subject of the 737 popularity has been topical and we're all clearly wondering about your future fleet plans. But the fewer non-Ryanair 737s that are actually operated in Europe following the recent decisions from KLM and Jet2, it prompts a question for me in terms of the availability of engineers, maintenance facilities, maybe even type-rated pilots to an extent. Is that something that's a concern for you or are you very much in control of that situation and it's irrelevant?

I think it's a good question. I mean, I'm not going to give you obviously a proportion of Easter in advance, but I mean, to give you a kind of flavor of what's normally happening here, pre-COVID we would enter into a month, on the first day of the month, we'd have about 80% of the bookings for that month or the expected targets that month already pre-booked. Currently at the moment, and it bounces up and down, Omicron did some damage. We're running at about 60% pre-booked. That's built strongly. It went up from 45 through 50, 55 as we went through August, September, October, November. And then it got a big hit. The road got pulled out from under it in December into January, which is why we took out 33% of the capacity in January and 15% of the capacity in February. So we would typically now expect to enter a month at the moment with about 60% of the final target in the bag. Some of that is also a reflection, too, though, that we now have a much bigger domestic operation in places like Italy and in Spain. So where they do and will book later, but we know they're going to book because that kind of domestic short holds up and generally books later. running about 20 behind we monitor it on a daily basis uh you know and we open up close off open up close off if we think you know uh if the weekend bookings are bookings on monday or bookings on tuesday and we do some tactical stuff like we ran a 24-hour 9.99 seat sale last i think it was wednesday uh with essentially the availability in the first half of february i mean there's no doubt that February, as we move into it, we're about 50% of the capacity cut. We're weaker in the first half of February. We have the school midterm in the third week of February. And then the fourth week of February is reasonably well booked as well. So it's, again, a question of growing back the bookings. And it's very hard to shift a lot of bookings in the first two weeks of February during the month of January when so much of the media was still focused on Omicron and developments and lockdowns and everything else. But it's getting there, and we think that will, if there is no negative COVID developments, it will repair very strongly into March. Easter and April will be critical in that there are no negative developments, and lots of people travel, families travel for the Easter holidays, Easter break, and it all goes well. And, you know, we don't have negative PCR requirements on returning back to Blighty or these guys. Then I think that would put a lot of confidence into summer. We'd see a big surge in summer bookings as well. So... But we keep making the point at the moment, not alone is it later than they're booking late, but it's very fragile. Any negative development, as we saw during December, will have an immediate and very damaging impact, not just on volumes, but also on yields as well. 737s, it's a very interesting situation. I think, if anything, they're... The lack of Boeing customers or the flight of Boeing customers in Europe to Airbus is indicative, firstly, of a sales failure on the part of Boeing. I mean, it's one thing not attracting new customers, but to lose your existing customers to your direct competitor, Airbus, seems to me to be a failure of your sales force. You could argue that KLM, Air France KLM, or the airlines who were receiving massive volumes of state aid were probably inevitably going to be nudged in the direction of Airbus. But to lose Jet 2, a reasonably well-run Boeing customer to Airbus, I don't know what the obstacle was. To lose one or two customers is probably careless, but to lose four or five of them is stupid. I forget what the quote is, but it's stupid. Blimey, stupid. What's interesting, though, is that we see going forward, and certainly for the next year or two, there's going to be very, I think, dramatic, I think there's going to be much more upward pressure on pay for Airbus pilots and Airbus engineers. You see people, you know, the likes of that, the lower end of the page here, the Valaris of this world, probably using some pilots to whiz and to easy jets. But then with an easy jet losing pilots to Airbus and Air France and all the Airbus operators who are paying more. So I think you're going to see a lot of, much more pay inflation on the Airbus pilot and Airbus engineer side. What's interesting on the 737s is there's a lot less demand and a lot less, I think, rotation or job opportunity for 737 pilots and engineers to jump ship across Europe. We're training upwards of about 1,000. We have almost 1,000 737 cadets in training at the moment. Interestingly, pre-COVID, when Norwegian were running around and doing all the maths that they were doing in 2017 and 2018 and causing a pinch point on pilots, they've now blown themselves up, as was inevitably going to happen. We've seen a lot of 737 pilots returning from Asia and from the Middle East. and yet we have reintroduced the payment for our cadets, are now paying us, what, about 25,000, 30,000 euros for their cadet training, and we have nearly 1,000 of those in cadet training at the moment. So I think we will, the job opportunities for 737 pilots across Europe in the next number of years will largely be confined to Ryanair. Now, we do pay well, and we are very productive in beneficial 5-4 rosters and stuff like that, But I think actually because we have such scale, that's why we're investing in new training facilities. We offered a 50 million training facility in Dublin. We'll operate another one somewhere in the Iberian Peninsula and probably somewhere in Eastern Europe in the next two or three years. But we have the capacity to train all of our own engineers, our own pilots, and our own cabin crew. But given the cost of trying to retrain a 737 pilot onto an Airbus, I think, if anything, there will be a lot less turnover of pilots here in Ryanair, certainly a lot less turnover of engineers because we will train our own, but we will essentially be the only significant, I would have said, 737 operator here in Europe in the next couple of years. So I would argue the convert or the counterfactual is that actually it's a strength to our cost model here in Europe, whereas I think All the Airbus operators, certainly if you look at the Volaris, EGJ, Suez, BA, Air France, KLM, there'll be a lot more turnover and stealing of each other's pilots because they're all Airbus qualified.

Great, thanks.

Thanks, Ian.

Thank you. The next question comes from the line of James Hollands at BNP Paribas. Please go ahead, your line is open.

Hi, morning. The first one's for Neil. I think in your last call you talked about H2 or fiscal H2 costs being about €35 per passenger. Obviously, Q3 you've done €32. I was wondering if you're beating that number or whether we should expect some pretty significant ramp-up costs. Obviously, most airlines are talking about that. The second one, now, I'd like to caveat this is not a question about summer yields, and I do recognise your load-active-yield-passive. But just following your comments, Michael, calling out effectively a lot of operators not having enough staff into the summer to operate full schedules, calling out us analysts as idiots for thinking that capacity might actually be quite high in true Europe. You've called it down maybe double-digit percentage. Just wondering how that plays into how brave your revenue management team would be at this stage of the year and sort of coming through the next couple of months as you call out that capacity outlook for the summer APS, Jim Bookings, et cetera. Thank you.

Neil, do you want to take the first one? Sure. James, there's no change. On a full year basis, we're expecting to come in somewhere around €35 for passenger ex-fuel. If you recall, we were well over €60 in the first quarter of this year, and that's been ramping down into Q2 and Q3. So we'll blend this to about €35 on a full year basis.

Well done. And on the second one, I mean, I perish at thought that I would ever call an analyst who we respect and value highly idiot. But I've seen some kind of pieces recently talking about, you know, we dispute Ryanair's view that there will be capacity with contract in Europe. I don't know how you dispute it. The legacy airlines have spent an inordinate amount of lobbying and resources trying to extend their slot waiver scheme. and expressing deep unhappiness that it's gone from 50-50 to 36-64. I know of no legacy airline that proposes to operate its full pre-COVID short haul operation this summer. They're all talking about cutting it back. Alitalia's fleet is 50% less than it was pre-COVID. TAP's fleet is about 35% less than it was pre-COVID. And if you look around the piece, even EasyJet's fleet is now less than it was pre-COVID. We are the only airline with significant additional capacity this summer, and to a lesser extent, Wizz have a bit of growth capacity. Because they have a much smaller base, it looks like a higher percentage. But, you know, in general terms, I cannot see where, and particularly when you don't have the long haul, the Asian trampling across Europe this summer, and they won't be. There are still travel restrictions on them. I think the U.S. will partially recover, but they'll be slow to travel outside of America again. there's going to be nobody to fill the short haul flights of Lufthansa Air France IAG Iberia you name it and that's why you know they could fill them I mean Lufthansa's out there whining on about operating ghost flights uh well you know to which we said well the obvious solution to your ghost flights was introduce some low fares and sell them to the traveling the people who've been giving you 10 or 13 billion of state aid they have no commitment to doing that um now you I would certainly um I wouldn't try to ditch over whether the declining capacity this year was going to be a high single-digit 7%, 8%, 9%, or whether it was going to be 12%, 13%, 14%, 15%. I don't think it matters that much. It is certain, in my view, that the capacity would be meaningful. Short-haul year would be meaningfully down this summer into a market place where oil prices, spot oil has gone above $90 a barrel at a seven-year high. And you have airports, most notably Heathrow, Frankfurt, Maine, and inevitably Gatwick will shortly follow with significant cost increases. Therefore, you know, it is, to my view, how brave would our revenue management team be into that? They wouldn't be brave at all. I mean, what we tell our revenue management team is you must hit the passenger traffic. Your load factor active yields pass it. Now, would we take a chance and hold out for a higher yield? We absolutely wouldn't. I would always give away yields here in return for more accelerated recovery and higher load factors. And you see that demonstrated in the third quarter. Both with an easy jet, with much smaller operations, delivered a 77% load factor, we delivered an 84% load factor, with 31 million passengers, that was almost three times higher than EastJet traffic and four times more than Wizz traffic in the quarter. So our revenue management team here don't have to be brave, they just have to hit, the only time they would get brave is if they failed and hit the passenger volumes of the load factors and then they'd have to be very brave. But I think it's inevitable that with less capacity in Europe, struggle to see, and certainly with a combination of less capacity, short oil, and higher oil prices, I struggle to see why, particularly with inflation running rampant across Europe in the short term, there won't be a strong pricing recovery, certainly into the peak summer months, as long as, and I keep going back to the point, as long as there is no negative COVID developments in the next couple of months, and we should be, we're expecting or worrying that there will be at least one or two more negative variants emerge I must answer the questions, James.

Yeah, I appreciate the thoughts. Thanks. Thanks. Next question, please.

And that's from the line of Alex Patterson at Peel Hunt. Please go ahead. Your line is open.

Hi. Morning, everyone. Two questions, please. Firstly, you've got a lot of new bases and routes coming through. should we expect those to perform as your existing do, or should we expect, and perhaps because you've got plans for big marketing spend and price stimulation, or should we expect them to perhaps mature over a season or two? And then secondly, carbon costs are clearly going to become quite significant in a couple of years' time when the hedging drops off, unless the carbon price falls. It's not obvious that there's a lot of costs that you can reduce to mitigate that should we therefore look at those being passed through to passengers or are you you know planning to perhaps have lower margins okay thanks guys i'm going to ask eddie just take the new base performance and then maybe thomas give us your view on carbon cost pass through and i'll ask neil maybe to sweep or come in with his you after thomas eddie yeah i know no is a simple answer because like largely when we open new bases

They are one or two aircraft bases, and we tend to reverse traffic into those which has already come from non-based activity. And even in bases that we hadn't been in previously, like places like Orlando, we've actually gone from two to four aircraft there. So we've been doing this for years, no different from in the COVID-19 times. You reverse the traffic in, you take less of a risk, and then you build from there.

Well done. And Thomas, Carbon costs and will we be able to pass them through?

On the carbon side, we've seen big increases in the last 12 months. I think this will run like fuel because we're load factor active and yield passive on the booking side. There'll probably be a 12-month lag between whether we recover the increased carbon costs and it'll run that way as we've seen with the fuel price previously. But obviously, all indications at the moment, carbon will remain at the level that it is today between 90 and 100 euros.

And Neil's ability to pass that through. Well, we're already seeing the likes of Air France who don't pick up any carbon at this point or any SAF at this point in time adding on surcharges for their customers. I think there will be an effort with the industry to try and pass this through. But I also think that, you know, aircraft are going to become more efficient where we're taking on more game changers, 16% lower fuel burn, 16% lower CO2s, which will help We're well-hedged for the next two years, as we already talked about. So it's really an issue from kind of FY24 onwards. But I think there will be an effort. It has always been the case in the past that the legacy guys will try and recover and we'll hopefully track up behind that.

Okay, thanks, Neil. Thanks, Alex. Next question, please.

Thank you. The next question comes from Alex Irvine at Van Tessin. Please go ahead. Your line is open.

Alex, hi. Hi, good morning, gentlemen. Two from me, please. First of all, on the strength of demand. So we've seen some increase in the cost of living, pushing how that affects fire net on the demand side. Think about, say, consumer budgeting, whether or not there's enough travel going on to benefit at the lower fare alternative. And then second, just want to follow up on some environmental initiatives, please. So could you maybe talk about where you think we are with the single European sky? Is this getting more likely, or do we still remain stuck as we have in the past? Thank you.

Thanks. Demand strength. You know, what we've seen, Alex, once the EU issued the digital COVID cert on the 1st of July last year, demand strength has been, you know, sorry, demand has been incredibly strong. I think there's huge pent-up demand. There's lots of people there, and we saw it particularly in the October bank holiday or the October midterm school break last year. Very strong demand at high yields. The British, the Irish, the Germans, all moving. and with their families. We thought that then again was good. That was going to build for a very strong Christmas. And if we had a very strong Christmas, frankly, we'd be back to pre-COVID volumes by into January, February, March, all the way back to normal. And then the road got pulled out from under us in the first week of December with the Omicron kind of panic and hysteria and coverage. So again, absent there being any negative development on COVID, we think there will be a very strong recovery into Easter in April and The schools, that's traditionally a time where lots of schools go on school tours. Families take the first of the kind of summer breaks. I think the other kind of just, and again, this is slightly sort of not based on fact, but I think an awful lot of families generally at Christmas and New Year are booking their summer holidays. And again, they sat at home over that Christmas, New Year period, worried about Omicron and restrictions and People have to have negative PCRs to get back, and could they go skiing? They couldn't go skiing. They could go, but they might not be able to get back if they had tested it. So huge uncertainty. We see that repairing itself now, but again, we need to have a strong Easter booking period and a good experience of travel over Easter. Then I think you'll see that kind of flood of Christmas or of summer booking. But we think the potential demand is very strong because of the pent-up demand and also... Remember, families and huge numbers of families have been sitting at home or working from home, haven't been able to spend money for the last two years. There are huge pent-up savings there. And one of the first things they'll spend that money on will be travel and holidays. And so, again, as long as there's no negative COVID developments, we think Easter will be strong. And if there's a strong Easter, that will lead to a very strong recovery in both load factor volumes and then hopefully yields. into the big summer months of June, July, August, September. Environmental, I've long given up on the single European sky. It is, I think, 20 or 30 years they've been talking about it. They never make any progress on it. The idea that the European Commission is going to override the very powerful National Air Traffic Control Union is a myth. It is never going to happen. But the technology has moved beyond the single European sky. I think what we should have now is simply deregulation of ATC across Europe. You have multiple national providers. And again, we keep making what Ireland could provide, for example, overflights over France on a day when the French AT, on those regular days when the French air traffic controllers go on strike. What it means is deregulation and breaking it up, not a 20-year failed project of a single European sky. We're never going to see a single European sky. The unions won't kind of bend to it. And these are very small but very powerful unions. But what tends to happen over time is very small and powerful unions like the typesetters and the print workers in Fleet Street, eventually the technology moves beyond them and the airlines should be freed up to purchase those air traffic control services from whichever national providers want to provide them. But what we need is a commitment from Europe to say you're not going to close the skies over Europe and if the French want to go on strike, somebody else can provide the ATC services that keep us moving. So I would be all in favor of deregulation and competition, which is what has delivered such benefits for consumers in the airline industry, and that needs to be applied to the air traffic control industry as well. Julius, you want to add anything on that?

Maybe just that we keep pushing, obviously, for reform, and the more environmental arguments we hear in Brussels Airlines, having to make an effort, the more obvious it becomes that governments and the European Commission are not doing enough. Various studies indicate that if European APC was reformed, between 10 and 15 percent of fuel could be saved. That is more than any of the commitments made by anyone in European aviation for the next five to ten years. And that could be fixed immediately with a little bit of goodwill. So we keep pushing for it. I kind of share Michael's pessimism as to chances of success, but we are not giving up.

Yeah, I think that's a good point. I mean, it's the environmental upside of reforming air traffic control. Remember, you'd eliminate 90% of flight delays if you had an effective air traffic control provision and with a huge reduction in fuel consumption, fuel costs, and also environmental waste. Next question, please. Thanks, Alex.

Currently, there are no further questions in the queue at this time.

Okay, folks, thank you very much for joining in the call. We're not doing a roadshow with the other Q3s. We generally don't. Neil and Peter are here in Dublin. If you have any follow-up questions or want to call, please plug me in. We'd be happy to talk to you individually. Other than that, I think, you know, looking forward, let's kind of keep being, I think, cautiously optimistic There is a strong recovery underway, but we need to get through Easter without there being any further negative COVID developments. In those circumstances, we think we would be set fair for a very strong summer recovery. Our costs are well under control. The fuel hedge position, I think, gives us a very strong cost base going forward. We have a much lower cost base than any other airline in Europe. But we will deploy that cost base over the next six months in a load factor active, yield passive manner that will put kind of traffic and load factor recovery ahead of short-term pricing advantage as we seek to rebuild. And the aim is to deliver 165 million passengers in the year to March 2023, which would be 14, 15% ahead of where what we carried in pre-code, the 149 million we carried in pre-COVID in the year to March 2019. Thank you again for your support. For those of you who have stuck loyally with us during the COVID, we hope to vindicate your judgment with superior returns over the next 12 months. And we look forward, hopefully, to seeing you all. We'll be doing a full year roadshow, our full year results at the end of May. Really, man, we'll do a full and extensive roadshow across Europe, the U.S. during that. So thank you very much, everybody. And if anyone wants a follow-up, please contact Neil or Peter here in Dublin. Good talk to you all. Bye-bye. Thank you.

Thank you. This now concludes the conference. Thank you all very much for attending. You may now disconnect your lines.