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.