Ryanair Holdings plc

Good morning, ladies and gentlemen, and welcome to the Ryanair full year results broadcast. I'm Michael O'Leary, the Group CEO of Ryanair. With me this morning is Neil Soren, the Group CFO. We're happy to communicate to you this morning our full year results for the year ended March 2022. Over the last 12 months, we reported a loss of €355 million, a significant improvement on the full year loss of just over €1 billion the previous year. All of these losses are substantially due to the impact of COVID on our business over the last two years. We've covered that in some detail in previous announcements. So what I'd like to do is to touch briefly on some key points, highlights of the last year, and obviously our guidance going forward for the next 12 months. So I think some highlights of last year. We're proud that our climate protection rating has improved from a B- to a B. That's part of a multi-year strategy to get to an A climate rating, which would make us the world leader in in environmental and sustainable air travel. Sustainalytics has recently ranked Ryanair the number one EU airline for environmental and social governance performance. Our traffic has recovered strongly to 97 million passengers, but that's still 35% behind, or almost 50 million passengers behind where we were pre-COVID. Average fares in the last 12 months have fallen by 27%, to just 27 euros, again due to the impact of COVID. and towards the back end of the year, Omicron and Ukraine. The business continues to be, while we're recovering, that recovering is fragile because of the impact on a much closer in booking profile, the impact of negative news flows on that booking profile. However, we continue to invest for the future. At the year end, we take in delivery of 61 737 Game Changer aircraft. These aircraft are carry 4% more passengers but burn 16% less fuel. And that's, I think, something that's going to be absolutely critical to our operating operations and to our costs going forward for the next couple of years, particularly as oil prices have risen post the Ukraine invasion to record levels. We have never seen so many growth opportunities out there. This summer we've announced 15 new bases across Europe and will operate more than 770 new routes. I'm pleased to say that our team, thanks to the efforts of our team, were very well hedged on fuel. We have about 80% of our fuel bought forward either through hedges or caps to March of 2023. and at prices of between $60, mid-$60 to mid-$70 per barrel that are significantly below current spot prices. And this gives us, Ryanair, a huge competitive advantage as we recover and grow across Europe over the next 12 months. This summer, thanks to the new Game Changer deliveries, we will be operating at about 115%. of our pre-COVID or our summer 2019 capacity. The load factors might still be slightly lower than they were pre-COVID and the fares might still be slightly lower. But there's no doubt that we are recovering strongly, we're growing strongly. But that growth is being delivered by lower pricing and the recovery is fragile. And as we saw both at Christmas and at Easter, where the recovery was damaged badly by the impact of Omicron and the Ukraine invasion, that recovery is fragile. We're continuing to invest heavily, as I said, in the environment. We're making a couple of notable things there, apart from the Game Changer aircraft. We recently announced a partnership with Neste in the Netherlands, where we'll be uplifting up to 40% of our fuel and Schiphol Airport will be with SAFs. We're investing heavily in customer service. The customer advisory panel met for the second time in Madrid in April. We've taken on board their recommendations and you're going to see those recommendations implemented both on the Day of Flight app online and at all the customer touchpoints, both at airports, at handling and in-flight. And I'm pleased to say that our customer service scores are running at record levels and we aim to continue and to maintain that. On EU ownership and control, we've made significant progress in the last year. From a starting point in Brexit on the 1st of January 2021, where the UK shareholders were treated as non-European, our EU share ownership was 32%. We have seen that rise to 41% over the last 15 months. We've been aggressive on delistings. We delisted from the London Stock Exchange. We've had a number of forced sell-downs of those non-EU shareholders who have wrongly purchased ordinary shares instead of the ADRs, and that will continue. And we believe we are on a path to restore our EU ownership to over 50% in the next 12 to 18 months. We have very exciting growth plans, as I said, the 15 new bases and over 770 new routes. And I think what's critical at the moment, while the outlook on earnings is shrouded in uncertainty because of the fragility of the recovery and the impact of negative news flows, there's no doubt we are taking very significant market share gains in some of the biggest travel markets in Europe. In Italy this year, we expect a market share of over 40%. In Vienna, we've seen a dramatic progress from 8% market share in the summer of 2019 to over 20% in the summer of 2022. In Budapest, the home airport of one of our so-called low-cost competitors, we've gone from over 18% market share to over 30% in the last year. two years, and market leadership. We're now the number one airline in the home airport of one of our competitors. And even in Ireland, where we've already been long established, we're seeing our market share jump in recent months from under around 48%. Currently, it's running in 55%, 56%. So these investments and these market share gains will continue. I will now turn with Neil. We'll take you through the slide presentation, the results, which will deal with most of the detailed Q&A and the financial numbers. So, Neil, over to you.

Michael, thank you very much. So welcome, everybody, to the full year results presentation. As we've always said, we've got the lowest fares and lowest costs of any airline in Europe. And this year we returned to growth with 165 million customers up from 149 million customers. Pre-COVID, we remained number one for customer service on time performance, 90% last year. And as Michael has already said in his lead-in, we've seen significant improvements in our ESG ratings with the CDP increasing our rating from a B- to a B, and indeed Sustainalytics giving us a very strong number one EU ESG rating. Balance sheet remains rock solid, and it's this financial strength and lowest cost that makes us the long-term winner. We have the platform for growth in place with 89 bases and 225 airports across our network, and indeed this summer we're operating 15 new bases and 770 new routes. So this, coupled with the new game-changer orders, will see us grow to 225 million passengers by FY26. We come into COVID with the lowest cost per passenger, ex-fuel. That gap is only widening between us and everybody else, so significant unit cost advantage, ex-fuel, to all other players. On the year itself, we saw significant recovery in traffic, 253% increase to just over 97 million customers with an improved load factor of 82%. This, however, was stimulated through lower fares. We saw a 27% reduction in average fare to just €27, but we did have a good performance on ancillary, and as a result, total revenue was up 193% to €4.8 billion. Operating costs, despite an over 250% increase in traffic, only increased by 113% to just under €5.3 billion. So as a result, we saw a lower loss this year of 355 million down from 1.02 billion last year. Balance sheet very strong, and I think the key call-out here is the reduction in net debt, which despite 1.2 billion in capex this year, reduced from 2.3 billion at the end of last year to 1.5 billion at the end of FY22. And with that, I'll maybe ask Michael to run through current developments.

Okay, thanks, Neil. So clearly we see a very strong recovery of traffic into the summer of 2022. There's undoubtedly significant pent-up demand for both business and leisure travel. We're well positioned to capitalise on that recovery. We've taken delivery of over 70 game-changer aircraft for the peak of summer 2022. There's no doubt that traffic is recovering. We've seen in recent months stronger traffic, higher load factors. But most of that has been driven by lower fares. In Q1, our fares will be below, which is the June quarter, our fares will be below where they were in the June 19 quarter. But as recently as April, we've seen we've gone over 14 million passengers for the first time and the load factor went over 90% for the first time since COVID. We expect that to continue. There's a prospect that fares in years in the second quarter. The key September quarter could be ahead of pre-COVID numbers in summer 2019. But that recovery is fragile and it remains very exposed or subject to being damaged quite significantly by adverse news flows as Christmas was damaged by the Omicron variant in the last week of November and Easter was badly damaged by the Ukraine invasion. However, in Rhino, we have very robust cost control. We remain one of Europe's lowest cost carrier by a distance and we have kept our costs down and in many cases lowered them during COVID when many of our competitors have seen their costs rise and escalate. On fuel, we're very well hedged. We're 80% hedged out to March of 2023. at significantly lower prices than spot and many of our competitors are either not hedged at all and fully exposed to spot prices or have inferior quantities or percentages of hedging in place. One of the things we're committed to though is the gradual restoration of the pay cuts. We negotiated agreed pay cuts with most of our people for the last two years. We've committed that we'll start the restoration of those pay cuts in July of this year and it will be a three-year restoration July 23 and July 24. We're in negotiations with a number of our pilot and cabin crew units to accelerate those restoration, in some cases bring it forward to April or May of this year. We're also committing that if we get back to pre-COVID profitability in this year, financial year end, March 2023, We will then accelerate the year two and year three. We will restore fully the pay cuts if our profitability gets back to pre-COVID numbers sometime around between April and July of 2023. For FY23, the customer program has been launched. Our customer service scores are at record levels, and we want to maintain that significant progress. And generally, we have a cautious but, you know, I think ambitious program for FY23. We expect to carry 165 million passengers. We see strong traffic and load factor recovery. What we're not sure about is the fares and yields, and in particular, The damage that can be done to those fares and yields by adverse news events like COVID or like Omicron, like Ukraine, and that's why we're not able to give any sensible or rational profit guidance for the next 12 months. We're hoping for modest profitability, but we can't put a number on it at this stage. And touch briefly on summer of this year. So forward bookings, which were damaged by Omicron and Ukraine invasions, load factors are recovering, but at lower fares. We will operate 115% of our S-19 capacity in the summer of 2022. We aim to get load factors back to 90%. We got there in April. We hope to maintain that over the next six months of the summer. Nobody, no other airline in Europe will deliver that volume of growth this year. Other airlines claim to be the fastest growing airline airports or airlines in Europe. Ryanair is the fastest growing airline in Europe. And even then we can't cope with the amount of growth opportunities we have. We do still expect airport and air traffic control staff shortages. We're seeing pinch points at airport security, at ATC, particularly as usual at weekends. And, you know, those staffing shortage or pinch points need to be fixed for the peak summer months of July, August and September. We are making very strong market share gains in big markets like Italy, Ireland, Austria, in Vienna, Hungary and in Poland. And I believe no other airline in Europe is as well positioned as Ryanair is to thrive through an economic downturn or a recession if one is visited upon us. in the winter of 2022 or into 2023. In recessions, people get more price sensitive. They trade down to the lowest cost provider, whether that's IKEA, it's Lidl, it's Primark for clothes, it's Ryanair for air travel. People will continue to fly, but you'll see a lot of trading down to Ryanair in an economic downturn. Neil, maybe you touch briefly on fuel hedging.

Thanks, Michael. Well, I think it's clear from this slide that Ryanair is the standout airline when it comes to hedging in Europe for this summer and indeed beyond. We've just broken out the numbers across the various halves, but you can see for the full year we're 80% hedged on our jet requirements, 65% through jet swaps at about $63 a barrel or in metric tonnes about $630 per metric tonne. We've 50% of our capacity hedged with caps. So again, about $77 a barrel or 770 per metric tonne. And on carbon, we've got a massive advantage over everybody as well, where we're 85% hedged at 53 euro per credit, which compares very favourably to the 90 euro spot that we're seeing in the market at the moment. The strength of our balance sheet is why we've been able to hedge. The weaker carriers don't have the hedge lines, and I think that's very evident from the various statistics that you can see here at the bottom of the slide. Just on market share gains, Michael talked about the significant gains we've made. So you can see, for example, in Italy, we're now up at 40% market share from 30% pre-COVID. Poland's growing strongly under buzz with a 35% market share at this point in time. Austria, as Michael already said, Vienna performing exceptionally well for us. and indeed Ireland, our largest ever schedule this summer with 33 aircraft. So we've made good strides over the past two years. Michael, do you want to maybe talk about recession?

Yes, so let's come back to the point. I know because shareholders and investors are raising this issue with us in recent weeks. What happens to Ryanair during a recession? Remember the Economics 101. We'll do better in a recession than any other airline in Europe. Consumer spending would be curtailed. Consumers in a recession always turn to the lowest cost provider, whether that's Primark, it's Lidl, it's Ikea. In the airline space, it's Ryanair. People will still fly. They'll just be much more price-sensitive about flying. I would expect Rhino to grow faster in a recession, as we have done in the last three or four, whether it was 9-11, Gulf War, Icelandic volcanoes. We grow faster and do better because in a recession, price is king. Already we're seeing competitors cut capacity in markets where, in large, they're competing with us. BA has announced significant short-haul flight cuts out of the UK to particularly Italy and Spain. Now it's to deal with labour shortages. EasyJet is taking seats out of aircraft, again because of labour shortages, but also in markets where they're unable to compete with Ryanair's larger aircraft. And more notably, Wizz in recent weeks are now talking about expanding into places like Saudi Arabia and India, which markets where thankfully they don't have to compete with Ryanair, because in markets where they do, like Austria or Vienna and in Italy, they're in retreat. As Neil has said, we have a very significant fuel hedge advantage over all of our competitors right out to the end of the next fiscal year. We are dealing with a huge number of airports who are competing aggressively against each other to try to recover their traffic or to capture what will be the scarce capacity growth we can offer over the next two or three years. The new game-changer aircraft are delivering us more passengers but at lower cost, much more efficient fuel-burning aircraft. And we expect to take delivery of another 55, at least 55, of these game-changer aircraft next winter so that we can emerge into the summer of 2023 with an ambitious growth target that's north of 180 million passengers in FY24. And all I can tell you is that if there's a recession or an economic downturn, that growth will be faster and we will grow faster and more profitably than any other airline in Europe. That, if you like, underlines the ambitious growth plans that we've already set out, which takes us to 225 million passengers over the next five years. To cope with this, we're already out in the market. We have an RFP out there for up to 50 second-hand aircraft. We're in advanced discussions with a number of lessors, both Airbus and Boeing, for low-cost second-hand aircraft. And we're hoping to see Boeing finally kind of return to the table soon. or put an offer on the table for, because they need new aircraft orders, otherwise Airbus is eating their lunch. But we are very excited by the growth opportunity that exists now for the next five years here in Europe. And maybe, Neil, if you'd turn to the ESG points and maybe wrap up the presentation.

I will, of course. Thank you very much. We've made significant strides in the past year on our environmental credentials. The carbon disclosure project upgraded us as a result of the good work that we've been doing to a B rating last December. Very pleased with that, particularly at a time when some of our other European airlines were being downgraded. Equally, in the last month, we saw Sustainalytics, one of the largest independent rating agencies for ESG in the world, rank us the number one European airline for ESG and, indeed, the number two airline globally. So a very strong position. But that said, we can't sit down and relax with those ratings behind us. There's an awful lot more to do. We've got very ambitious targets with our aviation, with purpose. plan to get to carbon neutrality by 2050. So we'll continue to execute on that plan. And you can see the kind of targets that we have here. We plan to reduce CO2 by 10% between now and 2030. We hope to improve our ratings with a CDP to an A over the next couple of years. And we're working very hard, one with the delivery of the game changers coming in with the lower fuel burn, but equally with Trinity College in Dublin under Sustainable Aviation Research Centre to research into the right blends of sustainable aviation fuels to use. We've already partnered with Neste in Amsterdam to take a 40% blend out of that airport for this year. And so, you know, I think we're moving well along the tracks in improving our environmental credentials. So just to summarize, you know, there continues to be significant risks in the market underpinned by the invasion of Ukraine and COVID, particularly into the winter period. We would anticipate that we will grow to 165 million customers in the current financial year, but we will do that on a load active, yield passive basis. So the low fares will drive that traffic recovery. In recent weeks, we have seen an improvement in bookings. But the curve remains still very close in and behind where we would typically have seen it pre-COVID in summer 2019. So, you know, we think the market remains fragile, but we are, you know, hoping, cautiously optimistic that we will deliver modest profitability in FY23. As we look beyond that, we've put a phenomenal platform in place with 210 aircraft coming in. That will see us grow to 225 million customers by FY26. We've got a very solid balance sheet, which will underpin the fleet growth and the significant market share gains that we have. So, as always, lowest costs and financial strength will be the absolute winner in this market. Thank you very much.

Thanks, Neil. Well done. And now, ladies and gentlemen, we'll move on to the Q&A. And we've asked Stephen Furlong, the airline analyst in Davies, to host that for us this year. So, Stephen, over to you. So thank you, Neil, for that presentation. We've invited Stephen Furlong from Davies now to host a brief Q&A session with myself and Neil. So, Stephen, you're welcome, and off you go. Thanks, Michael.

Could you talk about your ESG and the environmental highlights from last year? I noticed you got a rating from Sustainalytics, for example.

Yeah, we've made significant progress again this year. We launched our Aviation with Purpose document, setting out our plan to get to net zero by 2050. We've taken delivery of over 70 Game Changer aircraft by the time we get to the summer peak this year. Those aircraft are carrying 4% more passengers, but burn 16% less fuel. We've also announced a very exciting partnership with Neste in the Netherlands to uplift 40% of our fuel uplifts, and Schiphol will be SAF. And we're very pleased that those efforts have been rewarded by the Carbon Disclosure Project, who increased our environmental rating from a B- to a B this year, which makes us the industry-leading environmental airline in Europe.

Neil, can I just ask you about, in terms of the social, since we're on this topic, what's the plans in terms of adding employment and what you've done, for example, with the aviation training centres?

Sure. Well, the plan over the next five years, Stephen, is to grow the fleet to nearly 620 aircraft. So that's going to create about 6,000 new jobs for highly skilled aviation professionals all across Europe. Some of that will also be achieved through promotions of our own people within Ryanair. You talked about our aviation training centres. We invested 50 million in a new training centre in Dublin last autumn, state-of-the-art, and we're going to churn out about 1,000 cadets a year to those training centres, and indeed another two earmarked over the next five years in an investment of about 100 million. At this stage, we're looking at the Iberian Peninsula and somewhere in central and eastern Europe. And we've already put orders in place for about eight simulators to fit those out at costs of about $80 million for that. And then on the maintenance side, we're continuing to invest heavily in our maintenance facilities all across Europe. Recently, we announced a new hangar facility in Shannon. We've got another one in Lithuania in Kaunas, and we'd hope to do more over the next couple of years.

Okay, thanks. Michael, can you talk about how you've tried to up the ante in terms of proving customer perception and initiatives?

Yeah, I think the customer service is something we're investing heavily in. The new customer advisory panel had its second meeting in Madrid in April. We've taken their recommendations on board, and you'll see a lot of those implemented over the coming months in both the day-of-flight app on the website, but also on customer engagement points at airports. We continue to invest heavily in on-time performance. We're delighted that we've taken OTP for the last 12 months has exceeded 90%. Some of that was by virtue of the fact that, you know, a lot of flights, a lot of very few ATC delays last year because of COVID. And I think all of those efforts are reflected in record CSAT scores. Our customer service scores are running at record levels, high 80s, with particularly positive feedback for both our check-in people and our cabin crew on board.

Thanks. Neil, what's the situation, by the way, in terms of the ownership of the shares? And how do you see that playing out?

Yeah, we've made good strides in that, Stephen, over the course of the past year. We come into the financial year with about 31% of our shareholders held by EU shareholders. That's increased significantly to 41% at the back end of FY22, so March 2022. And we did a lot of work last year. We focused very heavily on European investor relations, we delisted from the London Stock Exchange and indeed we had to engage a number of forced sell-downs. So I think we'll continue to focus on EU shareholders over the next number of months and we'll also likely engage in some more sell-downs where necessary.

Thanks. Mike, can we talk about the growth of the plants? I mean, I know it's a let's say, grow 50% over pre-COVID levels to 225 million passengers by the end of the delivery, current order book. You might just talk about how that's going to...

I think as we emerge out of COVID, the growth opportunities have never been stronger. I mean, this summer alone, we've announced 15 new bases across Europe. We will open over 770 new routes. We've taken delivery of over 70 of the 210 game-changer aircraft order this summer. We're seeing extraordinary market share gains in some of the biggest markets in Europe and Spain. Here in Ireland and Spain, in Italy, in Poland and in Hungary are some of the more notable ones. And I think what we're seeing is we're tapping into that desire among airports across Europe who want to recover their traffic losses quickly, who want to put themselves back on a growth platform. And, you know, most notably of that, we've extended the long-term low-cost growth deals at the bigger bases, Stansted, Brussels, Charleroi, Milan, Bergamo, and others. And we have more...

growth deals available to us at the moment that we can manage so we're looking forward not just to the 71 aircraft 70 plus aircraft we take this year but in fact the 55 aircraft that we need and we're talking to boeing about more aircraft for the summer of 2023 yeah can i ask neil um how is that the boeing a200 performing but also i before you said you would have 65 aircraft this summer now it looks like it's 70 you know have boeing um added some aircraft into the schedule like

Yeah, we're delighted to take the extra aircraft in. As you said, originally planned to have 65. That's going to grow to just over 70 aircraft peak summer, which gives us more opportunities to grow this year and indeed work on our operational efficiencies. Boeing were keen for us to take more aircraft into the summer. We were happy to do so. And as Michael said, we'd like to accelerate some into the summer of 2023. On the performance of the Game Changer, we're very pleased with the operational performance. It's exceeding our expectations on the likes of the fuel burn, although we're only just starting to get to the 90% plus load factors as we did in April in the numbers we announced in the past few days. The crew and the customers alike are very complimentary of the aircraft.

Michael, can I ask, while we're talking about Boeing, there's been a lot of recent, certainly, let's say, negative commentary about Boeing and issues with their other aircraft and their production line. Could you talk about the MAX 10 and where we are there?

Look, I think there's no secret that management at Boeing are facing significant challenges. I think we've been disappointed by the responses we've received from Boeing over the last 12 months. The negotiations on the MAX 10 order broke down last September. We walked away. In the intervening period, all we've seen is more Boeing customers signing up for Airbus aircraft. I think Boeing needs to fight back. It needs to win back some of that market share. However, they still produce very good aircraft. There are challenges with the aircraft deliveries. We are continuing to struggle to get the aircraft deliveries on time. As Neela said, we've taken some extra aircraft at Boeing's request this summer, and we have the growth opportunities to be able to handle that. And I think what's important to emphasize is we don't need any new aircraft to hit our 225 million target by 2026. But we remain open and available and looking for aircraft opportunities to cover the period from 26 to 2030. We're in the market at the moment. We have a request out there for proposals for second-hand Airbus and for second-hand 737s. And we'll see what comes out of those discussions. But I think Boeing, certainly on the commercial aircraft side, needs to up its game. And we need to see more delivery from Boeing, particularly for the larger customers like Ryanair.

Maybe you could talk, Neil, about the different airlines within the group and how the aircraft is allocated between the airlines, like MultiAir and

Yeah, I mean, they're performing well, Stephen. And as Michael said, you know, they've been busy taking aircraft in over the past number of months to get ready for the summer. So we now have Buzz who look after our Central and Eastern European operations with about 60 aircraft in the fleet. And indeed, they'll be operating another one of those on charters this summer. So we'll put eight aircraft on charters for summer 2022. If we then move on to Malta Air, over 140 aircraft in their fleet, they look after Italy, Germany and a number of other large markets for ourselves. performing very well. Lauda have opened up new bases this summer in the likes of Stansted, in Zagreb and Cedar, on top of their Palma and Vienna bases. And then, of course, our smallest airline in the group, Reiner UK, have grown from one aircraft last year to eight aircraft this year, which puts them in a very good position, particularly with APD starting to reduce on domestic flying into the UK next year. They're well-placed to capitalise on the opportunities that will be available there.

Maybe Neil, can you talk about the summer update and basically where you see people are looking compared to summer 19, summer 22 versus summer 19?

Unlike everybody else who seems to be pulling capacity out of the market, we're actually flying 115% of summer 19 capacity. This summer, we've already talked about having 70 additional game changers in the fleet. We've worked very hard over the past two years to grow market share. And this year, you'll see us operating 40% market share in Italy, up from 30% pre-COVID. We've got our largest ever summer schedule out of Dublin this year with 33 aircraft, 55, 56%. market share in Ireland alone. Buzz, who we just talked about there with 60 aircraft in the fleet, are now the number one operator in the Polish market and indeed the leader in Hungary. In Budapest, we now have 30% market share and leadership in that market. So, you know, we're making good strides on that front. We expect to grow traffic overall for the year to 165 million, which is an 11% increase and 149% million that we had pre-COVID. But I suppose we have to caution as well that we have seen shocks over the past number of months from the likes of the invasion of Ukraine and indeed the Omicron variant. So it may not all be in straight lines, but as things stand, 115% capacity this summer.

Michael, can you talk about the booking curve? I mean, some other airlines or tour office talk about customer, you've said it before, booking later. Is that makes it difficult to budget or how do you see that playing out over the summer?

There's no doubt that the booking curve is much more close in than it would have been pre-COVID. Now, bookings are running very strong and have been running very strongly since Easter. I think the fact that we got through Easter, lots of families travelled, I think that has certainly delivered a significant confidence boost to the system. So since Easter, bookings have been strong, but forward bookings remain high single digits behind where they were pre-COVID. That means the situation remains fragile. As Neil has said, where we got a kind of surprise like Omicron at the end of November, that damaged Christmas. When the Ukraine invasion took place at the end of February, that damaged Easter. So while we're still trying to build or restore forward bookings, any adverse news flow is very damaging. I think it's fair to say, and we've been open about this, in Q1, our June quarter, average fares are running behind where they were pre-COVID because we're driving, using price, using our cost advantage to rebuild forward bookings. I think there's a reasonable prospect at this stage that fares and yields in the second quarter, the September quarter, will be ahead of where, at the moment they're tracking, ahead of where they were pre-COVID. But any negative news flow, and that will fall over again. So I'm a little concerned. There's been a bit too much competitors talking up the summer here. It looks good. The peak summer looks good, but it's fragile. And as we've seen before with both Ukraine and Omicron, relatively negative news will upset that significantly. So allowing for the fragility, we are restoring the forward booking curve. It remains subject, though, to adverse news flows. And if there's, you know, we hope there'll be no adverse COVID news flows. We hope the Ukrainian situation will resolve itself. I think the second summer peak looks strong at the moment, but that takes us into the winter. And at the moment, we're facing into a winter, this winter, where we're looking at possible adverse COVID news, possible adverse Ukraine news, and then a recession, you know, kind of customer confidence. The economic outlook looks very bearish. So we should just be cautious.

Okay. We go back to the summer, Neil, and let's talk about any constraints in the system. Other airlines have had staffing issues, also just in the supply chain, the infrastructure issues, whether it's ATC or airports or ground handling. You might just talk about that because I think it brings a wider question about what capacity is going to be for the summer across the system.

Sure, Stephen. Well, on Ryanair staffing, we're self-sufficient. We took a decision at the start of COVID to keep our people current. We hung on to them and they were able to come back fairly quickly when things ramped up last summer and indeed into this summer. So we're actually self-sufficient for captains this summer with First Officers being command upgraded. We got ahead of the recruitment curve on the cabin crew with the aircraft coming in for the summer this year. There were a couple of pinch points. UK being an example, but that's well behind. No issues on that front. We've got very high retention within the airline, particularly with the growth and the promotional opportunities that people are keen to grow within the Ryanair family, and we're generating about... 1,000 cadets a year. Outside of Reiner, yeah, there have been some issues. I mean, we all recall the kind of security delays that we saw in Dublin and, indeed, in Manchester at the start of the summer season. That's improving. They've been recruiting up, and we would be hopeful that into the peak summer those issues will have resolved themselves. I would have some concerns on ATC, despite the fact that we're looking at potentially 10% less capacity overall in the European short haul market this year. Some of the ATC providers don't appear to have staffed up as well as they probably should have done. So there may be some pinch point there. That would be the one concern I'd have at this point in time.

In terms of, Michael, the cost inflationary environment, there's a lot of commentary about this. How are Rhino prepared for this? A lot of companies are. I guess, worried about the cost inflationary environment?

I think it's going to be challenging. There's two obvious areas, as Neil has said. Firstly, ATC, the ANSPs, are looking to recover their lost income during COVID. They're all government-owned monopolies, so governments should be writing that check and not asking passengers and airlines to pay for services that we didn't receive over the last two years. So there's no doubt I think ATC charges are going to rise significantly. Fuel has almost doubled since the Ukrainian invasion. Now, So we're 80% hedged, so we're well hedged out to March of 2023. That puts us in an incredibly strong position, far stronger than any of our airline competitors across Europe. But we still have 20% that's unhedged, and we will have to pay up to $100, $110 a bar based on current spot rates. for that 20% unhedged. We do, however, have some kind of favorable win behind us. The MAX, we'll be operating more than 70 MAX this summer. They're burning 16, in fact, they're burning 18% less fuel at the moment. They're really doing very well on fuel. The airport deals are still very strong. We are working with our people. We're committed to pay restoration as quickly as we can. This year in July is the first year of a three-year pay restorations. We're in negotiations with some of the pilots and cabin crew around Europe to bring that forward. We hope to see that brought in some cases forward into May, some cases into June. And in some cases, the unions are saying, you know, COVID's over, give us all the money back. Well, it's not over yet, and we do need to see the restoration of our pre-COVID profitability. But we have committed with them that if we do get back to pre-COVID profitability over the next 12 months out to March of 2023, then we will bring forward years two and three of those restorations to July 2023. So there are cost challenges, but we have significant cost advantages over every other airline in Europe as well.

And in terms of, just you mentioned there, Neil, about Ukraine, okay, capacity is being reallocated from there. It was a small amount of the overall network. Where was it reallocated and how was those different regions performing, would you say?

Yeah, there was no difficulty, Stephen, reallocating the capacity. A lot of airports are very keen to get access to Ryanair recovery and growth. So we were able to drop some of it into Italy and elsewhere. We had originally planned to put about a million customers into the Ukraine this summer. We had no based aircraft, so as you said, easy enough to reallocate elsewhere. We did see an initial impact on the bookings over a two to three week period, but again with price stimulation. uh recovered that so i suppose that the big challenge remaining and apart from you know the unknown is the the fuel volatility at this point in time fuel trading well over a hundred dollars a barrel but as michael has already said we're relatively well hedged on that into this year with just 20 unhedged but we have to manage that for the the balance of the year now and you think that is in terms of where you allocated the aircraft more like italy spain or

Greece say? I mean, is every market performing uniformly or would you say there's any difference between the different markets?

Oh, there's a fair bit of pent-up demand out there. Central and Eastern Europe definitely took more stimulation in the early days after the Ukrainian invasion. But now at the moment, if you look into Italy, if you look into Spain, And you look elsewhere, particularly in the second quarter of the year, there's good demand. Easter was damaged, as Michael already said. We didn't get the kind of yields that we would have hoped in there. We continued to stimulate May and into June, but they were after. We think not only will the demand be there, and that was evidence in the 14 million passengers that we had in April, but hopefully the pricing will have improved into the second quarter as well.

Just talk about the results for a second and go back. You gave guidance at the start of April. I see that the preceptual loss was in the range, maybe at the top end of the loss. Could you just talk about the loss you made of 3.55 million?

Yeah, if you take the main pillars of the performance last year, so traffic recovered strongly. We carried 97 million passengers, but that's still 50 million passengers behind our pre-COVID levels. The load factor was 82%, still 14 percentage points, but it was 96% pre-COVID. So we've seen a stronger traffic recovery than any other airline in Europe, but we're still running a long way behind where we were pre-COVID. And some of that was the damage that was inflicted on us by, as I said, Omicron damaged Christmas, not just traffic but also yields because we lost all that late booking traffic. And Ukraine undoubtedly damaged Easter. Now, some of that will be into Q1 of this year. But it shows the fragility of the recovery. While there is a strong recovery ongoing, it's fragile because we're still trying to build up forward bookings. And what's driving that recovery in traffic, certainly in Ryanair, is we've been very aggressive on pricing. Average fares for the last 12 months are down 27 on where they were pre-COVID. This is a huge drop in pricing. So we're carrying people, but at much better airfares. And that's also part of our investment in our recovery and in the recovery at airports. Ancillaries continue to perform strongly, priority boarding, reserved seating. The return of duty-free sales on all flights to and from the UK is something where I think we'll see significant upside this year. Operating costs though have been well controlled. While revenues were up over 200%, operating costs were up only 115% for the last 12 months. But those lower costs are not sufficient to make up for, you know, still a significant loss of revenue as a result of carrying one third less passengers than we did pre-COVID and a significantly lower airfare.

You know, you might just talk, we touched on it earlier, but just talk more in detail maybe about the hedging position, particularly not just on fuel, but also, say, on the carbon costs.

Yeah, we're well hedged even into the next financial year, but 80% of our fuel hedged. That's kind of a split between jet swaps, about 65% of the fuel covers with jet swaps, about $630 a metric tonne or about $63 a barrel. We're looking at about 15% through caps, again about $770 a metric tonne, and we have a little bit of cover into the summer of next year, about 10%. On carbon, we're particularly well hedged. I don't think any other airline out there hedges carbon at this point in time. We've 85% of our carbon locked in at about €53 a credit compared to €90 spot pricing at this point in time. So I think the strong hedge position that we have is going to be a big competitive advantage as we grow significantly on traffic into this year.

Michael, you touched on earlier, like next winter, who knows, but a lot of people are calling out a recession. How are Ryanair positioned if there is a recession from a consumer perspective?

I think fundamentally this is clearly an area for investors in recent weeks and months as well. We are better positioned than any other airline in Europe to thrive during a recession. In a recession, people get more price-sensitive. You see that benefits the lowest-cost producers, the Primarks, the Liddell's, the Ikea's, and in the airline space, it's Ryanair. We have lower costs than any other airline in Europe. We have lower fares. And people will still travel. They want to travel in a more price-sensitive manner. We will still take another 55 aircraft from Boeing next winter. We will still grow from 165 million to 180 million over the next two years. We'll be operating aircraft that carry 4% more passengers but burn 16% less fuel. We've bought those aircraft from Boeing during COVID at an exceptional price. We've negotiated significant airport discounts for growth and recovery, and we will be able to pass on those savings to our customers in the form of lower airfares. So in a recession... people get more price sensitive, but the lowest cost wins. And the lowest cost by a distance in Europe is Ryanair. And I think we will not just do well, I think we'll thrive if there's a significant economic downturn or recession in Europe, particularly in those markets where we've seen enormous market share gain. Italy, we're now up over 40% market share. Ireland, we're close to 60% market share. Poland, we're over 30%. And even Budapest, where we compete with another so-called low-cost competitor. We've now overtaken them in their home airport, and we're now the number one airline in Budapest and in Hungary. I think that demonstrates the power of the Ryanair model and the Ryanair brand in a downturn or recession. I think it would be very good for our business.

Neil, can I just ask a CFO maybe a couple of questions on the balance sheet and talk about the balance sheet where you see the net debt position where it's going and maybe talk about CapEx because that's always asked. Sure. how you would finance the aircraft going forward, the 210 aircraft?

Okay, well, I suppose on the balance sheet itself, we finished the year in a very strong position. It's a BBB basis balance sheet by Fitch and S&P. We finished up the year with $3.6 billion in cash, and I'm particularly pleased that in a year where we had $1.2 billion capex, we saw our net debt position drop down from just under $2.3 billion to $1.45 billion. That said, we've increased the debt over the past couple of years through COVID, and our objective over the next year or two is going to be to get that back to a broadly net cash, net debt position, despite the fact that we're going to have gross capex for the next couple of years. So you were asking me there, what are the figures? We're looking at this stage, and there's no change, about 2.3 billion capex in the current financial year, FY23. That's aircraft and maintenance capex. Drops back a little bit the year after that. We're going to be somewhere between about 2.1 and 2.2 billion on CapEx. And then thereafter, the aircraft CapEx starts to drop back quite significantly. Now, thanks to the balance sheet that we have and with 90% of the Boeing fleet unencumbered, we're in the happy position that we can be opportunistic in what we do on the financing side. We've got plenty of cash available. in the business, which we can use for pre-delivery payments or otherwise. We continue to have great access to our EMTM program, to the debt capital markets. Banks have no real exposure to us, either on a secured or an unsecured basis. And with the exception of the Lauda Aircraft, less ores don't have any exposure to Rhino, which is possibly why we've seen such a phenomenal response to the RFP that Michael talked about on NGs earlier on. So we'll be completely opportunistic. It's going to ultimately boil down to what's the lowest cost, and that's effectively how we'll finance the fleet.

Thanks. I'll leave the last word to you, Michael. Maybe just talk about your views on the outlook and... What are the issues for investors, risks or opportunities in the next six, nine months?

I think, you know, as we look into the new, I think the right word to use is we're cautious. You know, we see a strong traffic recovery in Q1, but at much lower fares. At the moment, given the pent-up demand, Q2 looks like there'll be strong traffic recovery. And there's a prospect of pricing and fares being above where they were pre-19. But all of that can still be upset by adverse news flows on Ukraine, on COVID. Into the second half of the year, the two winter quarters, I think we would be much more cautious at this point in time. It seems evident that we're going to have an economic downturn, if not a recession. I do believe, though, that Ryanair will thrive through that recession, given our lower cost base and our ability to offer lower pricing than anybody else. So I think we'll see a strong traffic recovery this year. It's impossible, though, to predict what the average fares will be like through the second half of the year. That's why we're saying today, look, we can't give anybody any accurate kind of profit guidance for the next 12 months or earnings guidance. It's too fragile. There are too many moving parts. We think our costs are locked down, but we think they're, as we've seen previously with both Omicron and with Ukraine, it's subject to being badly disrupted at short notice by adverse news flows. But there will be a strong traffic recovery. We'll do a very good cost performance over the next 12 months. But really, any kind of profit outcome for the year, we think there's a prospect of modest profitability over the next 12 months. If everything goes right, it could be better than if there's adverse news flows, particularly on COVID into next winter recession and or Ukraine. the profit, you know, I think will still be profitable, but the profits will be significantly behind where they were pre-COVID. And really, it's too early to say until we get, I think, towards the second half of the fiscal year, we really won't have any better guidance than that. Okay.

Thanks, Michael.

Stephen, thank you. Good to see you again.