Ryanair Holdings plc

Hello and welcome to the Ryanair Q3 FY23 results conference call. Throughout the call, all participants will be in listen-only mode, and afterwards there'll be a question and answer session. During the Q&A, in the interest of time and fairness, please limit yourself to two questions per person. Just to remind you, this conference call is being recorded. Today, I am pleased to present Michael O'Leary. Please begin your meeting.

Okay, good morning, ladies and gentlemen. You're all very welcome to the Q3 results conference call. I'm Michael O'Neill with the usual team here in Dublin, and Neil is joining us from London where he's doing the media stuff this morning. I'm not going to deal with the press release. The slideshow and the management MD&A is largely dealt with. I'll take those as read and point you to the investor relations page on the website. A couple of quick comments on the Q3 numbers and the kind of outlook going forward. So we reported a very strong Q3, a profit of 211 million, which contrasts markedly with the other alleged low fare carriers in Europe, all of whom reported a significant Q3 loss. Our traffic was up 24% to 38.4 million. That's up 7% on the pre-COVID figures of FY20. We're still the only airline that has materially returned to strong growth over our pre-COVID traffic numbers. We saw a strong rise in Q3 fares, up 14% on the pre-COVID levels. That was mainly due to a very strong October school midterm and the Christmas and New Year kind of period. We saw very strong traffic at higher than expected airfares. That was why we went out on the 4th of January with the trading upgrade. And thankfully for a change, the Christmas trading wasn't disrupted by any adverse news flow on COVID or Ukraine. So we had a reasonably undisturbed but very strong Christmas and New Year period. We spent a lot of time agreeing with our union partners, agreeing the pay restorations. Not alone have we agreed to pay restoration with almost all of our pilot and cabin crews. The only people outstanding are some of the Belgians. But we've also put in place multi-year pay agreements. We've taxed multi-year pay agreements onto the back of those deals so that our crews can look forward to kind of guaranteed pay increases over the next four years or four or five years. depending on which agreements they've done. I think it's an example of how we continue to work well with our unions and with our people, both to preserve jobs during COVID, but also to reward them as we emerge out of COVID, when hopefully we'll continue to avoid any further Black Swan events. Year-to-date unit costs. And I think this is the compelling store message, one of the two compelling messages this morning. There's been an extraordinary widening of the unit cost gap between us and every other airline in Europe. I would point you to slide four of our industry presentation. Before COVID, we were already Europe's lowest cost airline with a total cost per passenger, excluding fuel, a big cost per passenger of €31. Over the past nine months, we've managed to maintain that. Actually, it's gone down very marginally to €30 per seat, excluding fuel. But every other competitor has seen very significant cost increases. Wizz, we calculate their unit cost of fuel up 18%, EasyJet up 42%, Southwestern Estates up 25%, and even the legacy carriers who were already ridiculously high cost, prior to COVID, we think Lufthansa have seen seed costs up 16% and IAG up 16%. And I think there's such a widening of that cost gap between us and every other airline. It's one of the reasons why we are continuing to grow so strongly, but also why profitability has rebounded strongly this year. And we're... And I think that'll be one of the themes of this morning's call. Thus far, we've taken delivery of 84 game changes up to the end of December. There are still some uncertainties as to whether we'll get all 51 aircraft that Boeing are scheduled to deliver to us by the end of May. At the moment, we think we're somewhere around 44, 45 aircraft, but it's a kind of a daily and weekly thing we worry about with Boeing, because obviously some of our growth into the summer of 2023 will be disrupted if we don't get those 51 aircraft out of Boeing. Nevertheless, we're seeing strong growth in all markets. We have 223 new routes announced for FY24. We're seeing very strong market share gains. I think one of the things that we constantly decided to do was to go after market share, grab market share gains in those markets where incumbents were withdrawing capacity. So we've seen very strong gains in Italy, where ETA or Alitalia has reduced capacity, in Portugal, where TAB has reduced capacity, in Poland, where WINS appeared to be taking capacity out, and also in Ireland and Spain, where the incumbents were very slow to recover their capacity as Europe emerged out of COVID. I think the other thing we point to this morning is that in H1, we've increased our fuel hedging now from 50% to 60% cover. We were able to take advantage of some weaker pricing there over recent weeks. We brought down the fuel hedging cost from $92 a barrel to $90 a barrel. That's for H1 FY24. We remain 50% hedged at $92 a barrel for the H2 of FY24. So we think we are in reasonably good shape. A couple of other themes then I just want to talk to you about. Looking forward into this summer, we still see seat capacity constrained in Europe. It is quite clear that some of the legacy carriers are not restoring their pre-COVID capacity. Obviously, in Italy and Portugal, TAP and Alitalia are capacity constrained. Alitalia's fleet is reduced by almost 50%, TAP by 40%. We're seeing Lufthansa in Germany being very slow to restore pre-COVID capacity. The German market is a very interesting one this year. Recent figures suggest that it's only operating at 70% of its pre-COVID capacity. And we think that's a conscious decision by Lufthansa to constrain capacity so they can drive up airfares. And airfares are seeing their highest increases in the German market. We have reduced some of our capacity in the German market or reallocated some of it where Frankfurt Main were increasing charges. We reallocate deployed capacity to Frankfurt Han. We've increased capacity in Niederrhein and Nuremberg and some of the smaller bases there. But I think the German market is going to be one where Lufthansa will, being the national champion, will do what they generally do where they have a quasi-monopoly. They'll constrain capacity. They will increase pricing quite significantly. And we will be the beneficiary of that, even though Germany is one of our smaller markets. The other thing we point to is wins are seem to be taking more and more capacity out of markets where they compete with us. Austria, Central and Eastern Europe and Italy, regional and Italy domestics. They seem to be, I would have said, a flight of capacity out of those markets where they compete with us. And a lot of that capacity appears to be moving into the Middle East. which it would appear to us to be whiz on a kind of campaign to find a market where they don't have to compete with Ryanair, which is a good sensible strategy from their point of view. So I think there's going to be meaningly less capacity, short haul capacity in those markets as a result of whiz pivoting some of their capacity away from intra-EU and off to the Middle East. Allied with that into this summer that we think there's going to be very strong transatlantic traffic. And there's the beginning of a recovery of Asian traffic. Now, with the movement in the COVID restrictions, the Asians will start returning to Europe this summer. They won't reach their pre-COVID levels. But any recovery of the Asian traffic will, we believe, fill up a lot of the short haul connecting and transfer flights of the legacy carriers, the Lufthansa's IAG's and Air France KLM. the transatlantic traffic will also play a role in that. And therefore, we think and believe that there will be meaningfully less available capacity on European short haul this summer. Europeans will continue to holiday at home. I think the strength of the dollar will militate against them going transatlantic. Asia is still effectively closed and not very welcoming for long haul journeys from Europe. And so the outlook, I think, is reasonably robust for summer 2023. We're already seeing that in our forward bookings. As we've reported in the last couple of weeks, we see very strong forward bookings, both volumes and pricing into the February midterm, into the Easter, which is in Q1 of next year, which is in the middle of April. and in summer 2023. At the moment, our bookings are running at or above where they were pre-COVID for some of the peak months of the summer. It doesn't run right through the summer. And fares at the moment are running above where they were last summer. Now, I think, therefore, everything is set fair for a reasonably strong Easter and a reasonably strong summer 2023. How strong will that be? We have no idea. And I can answer 90% of the follow-on question, which would be, where do I think yields will be this summer? I don't know. But it looks at this point in time that they will be stronger. I think it is reasonable at this stage to expect that they will be a kind of mid to high single digit up on where they were in summer of 2022. But it's too early to say. We haven't yet finalised the budgets and we don't have an outlook for next year yet. But absent there being any adverse news flow on COVID, any adverse news flow in Ukraine or any other unforeseen black swan events, I think it is very reasonable at this point in time to suspect that we will have a second summer of rising fares. We will need a second summer of rising fares because we will have materially higher oil prices. We were very well hedged last year into summer 2022. We're reasonably well hedged but at higher price levels into summer 2023. But the outlook on forward bookings, constrained capacity, strong return of transatlantic and Asian traffic to Europe and Europeans holidaying at home for the second year in a row means I think we will continue to see significant market share gains from Ryanair in those major markets where we're allocating capacity, Portugal, Spain, Italy, Greece and Central and Eastern Europe. We're also seeing strong growth in Ireland and the U.K., Flybees failure over the weekend is not unhelpful, even though they don't have a lot of capacity. The failure is taking place at airports where we tend to be going into Belfast. Birmingham, we're the largest airline. They're not big, but it's reasonably helpful and it will help our expansion this year. We have very low costs going forward. The unit cost gap between us and all other airlines has materially widened as a result of COVID and the work we've done during COVID, extending airport deals and taking delivery of low-cost aircraft for Boeing, working closely with our people and our union partners to restore pay, lock and agree pay increases for the next coming years. And that work continues. So we are on track this year, as I said, we've raised the guidance to a range of 1.325 billion to 1.425 billion. We think, again, absent any disruptions in February or March, we will get to our 168 million traffic figure. And again, subject to getting reasonably close to 51 aircraft deliveries from Boeing, we think we are on track to get to 185 million passengers in FY24. But we haven't yet finalized our budgets. We know that fuel will be higher. And I think there's a reasonable prospect that this summer, average fares will be up mid to high single digits. It could be more. But generally speaking, when things look optimistic in this industry, some curveball is sent to keep us all, to keep our feet on the ground. So outlook is reasonably robust. There are challenges. Fuel will continue to be a challenge. I would caution any irrational exuberance here. We are going to lose money in the fourth quarter. We don't have Easter in the fourth quarter. We are hiring a lot more and training a lot more pilots and cabin crew. We expect a lot less disruption at European airports this summer. We think the airports themselves, the handling agents and the other airlines will be appropriately staffed when we get to the summer schedule at the end of March. We do think ATC will be a shambles, particularly through Q1. So April, May, June will be very difficult. The French will be engaging in their kind of recreational striking. There will be frequent ATC strikes in France. There will be ATC staff shortages on Saturday mornings when the French will not turn up to work. German ATC will also be a real pinch point. A lot more flights are being routed over German ATC because of the NATO exercises in southern Poland, because Russia being closed. And German ATC is not staffed up or geared up to handle these kind of volumes. We're working closely with Eurocontrol and the flow managers to try to route flights around Germany as best we can. But we think certainly in the first quarter and through the first half of the summer, ATC will be a major challenge will cause a lot of flight delays and disruptions, and we're pushing very hard together with our other fellow members in A4E. There is a simple solution to a lot of this, and that is to separate the upper airspace for the Eurocontrol to take control of the overflights, because if you could protect overflights during periods of national strikes, as they already do in Italy and in Greece, that would be a solution that would solve a lot of these problems, and yet we continue... to hear the European Commission come up with all sorts of excuses why this can't be done. And it is another example of where the European Commission is absolutely useless. They've had 24 years of abject failure on the single European sky. And when you give them a simple solution, like protect the overflights during strikes, they won't take it. So we'll keep pushing for some solution on that. Well, that's all I have to add. Neil, you want to take us through MD&A or highlight some themes you want to raise?

Yeah, I will. You've dealt with the unit cost advantage very well. We're still on track for our full year guidance. FY23 of about €31 per passenger X fuel. So very pleased with the cost performance year to date. Hedging again, Michael pointed out that we've increased our hedging into the summer of FY24, about 60% hedging out over $90 a barrel. But the other big differentiator between ourselves and everybody else is the strength of our balance sheet. Our balance sheet, strong investment grade, BBB, positive outlook. We had 4.1 billion cash at the end of the quarter. That has actually increased to over 4.4 billion today. And importantly, net debt, which is 960 million, down from 1.45 billion at the end of last year. And that's despite 1.3 billion in CapEx. So we've got another 700 million in CapEx between now and the back end of March. And then over the next 12 to 15 months, we'd be very busy paying off maturing bonds of 1.6 billion out of cash resources and financing another 2.5 billion of CapEx next year and hopefully get the balance sheet back to a broadly net cash, net debt position by the back end of FY24. I have nothing further to add, Michael.

Yeah, I think that's another point we would want to emphasize that we might get through in the Q&A. Where our plan is this year, we're going to use those cash resources. We have to pay down. We have an $850 million bond to pay off in March. There's a $750 million bond to pay off in August. We will not refinance those bonds. We will pay them down. Where we try to refinance them, even with our investment-grade balance sheet, we'd be looking at financing costs of between 4.5% or 5% currently. We have the cash resources to pay down that debt, and we intend to use the cash to pay down that debt and to fund CapEx. And I think many of our competitors, though, who entered COVID, owning a considerable proportion of their fleet, have exited COVID, having done lots of sales and leasebacks, particularly, I think, with an EasyJet. Now, most of the fleet is operating leases, and the cost of those leases will be rising meaningfully through the remainder of this year. as interest rates and cost of funds rise. Whereas we'll be paying off debt, we own all of our fleet, about 98% of it, or 95-98% of it will be unencumbered. And that will be another very significant point of widening between us on the unit cost between us and everybody else. In reality, I think we're now entering a summer where our average fare is lower than any of our competitors' ex-fuel unit costs in Europe. And that probably explains why many of them are either so anxious to get out of our way or not, our withdrawing capacity from markets where they previously claimed to wish to compete with us, or in the case of Egypt, they don't grow at all and have retreated to kind of fortress airports where because of slot restrictions, they are reasonably isolated from competition with Ryanair. The reality is we have a much lower cost base than any other airline in Europe. We intend to continue to use that cost base to pass on low fares to our customers. By doing so, we'll take more market share from all of the higher cost incumbents, and we have a flow of low cost aircraft deliveries from Boeing for the next three years that will enable us to maintain this reasonably strong rate of growth. And in a market which we hope will be reasonably profitable, as certainly in summer 23, rising airfares will help us to pay for higher oil prices in a marketplace where our competitors are currently still losing money and therefore under much more pressure to get airfares up, constrained capacity to get airfares up to cover their higher costs. All right, Eddie, I might ask you just before we open up the Q&A, any themes you want to raise here from a kind of commercial point of view or market growth in Europe?

Well, I think I'll probably start off just on the operational side because we want to make sure that we are as resilient as we were last year. We've had a particular focus over the last number of months, not only with ensuring that we are fully resourced on our self-handling operations, but also have put a keen attention on third-party handlers, so we can minimize as many of the delays as possible. Our punctuality has picked up over the last number of weeks and months when there has been less capacity, but obviously we can only control what we can control. So we want to ensure that we are still going to be the most on-time and reliable airline in Europe this summer, and that's what we continue to focus on. On the commercial side, we continue to close out long-term deals with airports and they're in very good shape at the moment as we obviously try to drive down airport costs but environmental taxes are still a challenge which again are outside of our control. On the commercial side we are as you've alluded to already I mean we can't really see into what's going to happen next summer but we're happy by what we see in terms of we don't see any particular weakness in any of the markets that we're in. We had that as we thought it turned out to be a short-term blip in the UK market, which has now more than recovered. It looks like that was down to short-term perception issues with getting to and from airports, etc. So, operational resilience, we look in good shape airport cost-wise, and on the commercial side, while it's too early to say about the summer, we're happy with bookings and the booking curve.

Good. Okay. Thanks, Eddie. Okay, folks, we'll open it up to Q&A, please.

Thank you. If you wish to ask a question, please dial 01 on your telephone keypad now to enter the queue. Once your name is announced, you can ask a question. If you find your question is answered before it's your turn to speak, you can dial 02 to cancel. And as mentioned previously, please limit yourself to two questions per person. Our first question comes from the line of James Holland at B&B Paribas. Please go ahead. Your line is open. B&B.

Hi, morning, everyone. Yes, two for me, please. First of all, just on the far be it for me to annoy you by talking about summer yields, let's talk about summer capacity. You've talked about 125% of pre-COVID. Just for clarity, is that based on 124 max by then, or is it the 114 you talked about on your video, i.e. could it go higher, lower, depending on what Boeing do? And maybe just your views on what Boeing are up to at the moment. And the second one, You flagged quite a few times the U.S. and Asian traveler recovery. Just wondering if you could just maybe let us know what your normal year passenger proportion would be of those, or is it really just about those sort of filling the capacity of the networks? Thanks. Thanks, James.

Yeah, to our summer capacity, we're talking, that's based on us getting all 124 MAXs out of Boeing. That would be the MAX growth we'll deliver. I think at this point in time, but it's a weekly call where, you know, it's a daily and a weekly management issue with Boeing. We are due to get 51 aircraft. We think and we're reasonably sure at this point in time that we'll get 45 aircraft by the end of June. I'm not sure we'll get the last five or six aircraft. But to be fair to Boeing, deliveries have clipped up in January. They are doing better on the deliveries. We were struggling. Production was taking about 10 weeks. That looks like it's come down to nine and may come a little bit better, may improve to eight and a half. But we don't think we're going to get all 51 aircraft. Now, the challenge for us is if we don't get those aircraft by the end of June or we're not reasonably confident, we can't put them on sale. So we said to Boeing, we're not taking any aircraft. If you don't deliver aircraft by the end of June, we're not taking deliveries. We're too busy taking deliveries in July and August. that will not materially, if we get 45 in by the end of June, we will hit, I think, 185 million passengers. We may move slightly some of the growth out of Q2 and into Q3. We'll take a couple of extra aircraft in September. We might do a little bit of winter growth as well. But if we get to 45 aircraft, we're close enough that I would stick with 185. If we get all 51 aircraft, we could go a little bit over 185. Not meaningfully, it might be 186, 186 and a half or something, but I think that 45 aircraft and no major ATC screw-up strikes, you know, and those strikes are damaging the passenger numbers. You know, the French, we've taken two now. French had an ATC strike of the 19th. We had to cancel about 40 flights. Berlin had some handling strike. We had to cancel another 50 flights. You know, each of those cost us about 18,000 or 20,000 passengers on each of those dates. So, But it's based on those numbers. What are Boeing up to? Boeing are improving. They seem to be reducing the manufacturing time. Their target is about eight weeks. They're not at eight weeks yet, but we do think they'll remove or eliminate all of those backlogs during this summer peak period, June, July, August, and the situation will get better. we would be much more hopeful then that if we are left short a couple of aircraft this summer, we'll pick it up in the winter and we will have all of that plus the 50 new aircraft well in time for summer of 2024. The reason I think the US and Asian traffic is important is that, you know, in pre-COVID times, most of the legacy airlines would, I know certainly Lufthansa has said this publicly, 50% of their short haul traffic in Europe in the summer is long haul traffic, transatlantic and Asians connecting across Europe. And therefore, while we have a reasonably, I mean, you know, we would not see much Asian traffic. We do see, you know, I think transatlantic traffic is a high single digit percentage of our traffic in the summer. But it does fill up an awful lot of the legacy short haul traffic around Europe. And in a market where the legacies are either unwilling, as in the case of Lufthansa, or unable, as in the case of Alitalia, Air France, KLM, to restore pre-COVID capacity, if they're filling up what is a smaller capacity during the summer with a significant growth of transatlantic and a return of Asian traffic, it generally kind of, it adds to that kind of slightly net-net capacity down. Now, I know we'll come out of this and some analysts will do brilliant work researching all the slot filings for this year. No, no, capacity won't be down this year. It will be. The legacy guys are still filing for all the slots. But Lufthansa, TAP are running around and cancelling slots within kind of two weeks. scamming the slot system so that they're able to block competition from us particularly where we would go in and take up unused slots but we're not able to go in and take up those unused slots at one and two weeks notice we've complained to the European Commission about this particularly in the case of TAP who are doing it on a kind of structural weekly basis. But so capacity will be down pre-COVID. Demand, I think, for legacy short haul will be up and constrained because of the recovery of Transatlantic and Asian. And that will generally mean, I think... stronger bookings and higher airfares for the short-haul point-to-point carriers, and Ryanair dominates that marketplace and augurs well, I think, for this summer's traffic and pricing in a market where we'll be the only airline operating at 25% more than our pre-COVID capacity.

Thank you.

Yeah, no, no, there's always some ages out there that comes up. No, no, no, we've done a study and the capacity is up on fucking pre-COVID there is no appetite among the legacy guys to restore capacity. They seem to be very comfortable with constraining capacity, particularly Lufthansa in the German market, where the Germans are being screwed for very high fares in a marketplace where their great national champion is just screwing them all for much higher airfares and not restoring capacity. But Lufthansa can't help themselves. Next question, please.

Thank you. The next question is from Jared Castle at UBS. Please go ahead. Your line is open now.

Hi, good morning everyone. Just your, any thoughts, comments on FlyB, Michael, would be interesting. Is there anything for you? I don't really see it, but yeah, just some comments. And then secondly, you know, there's been some really good results being printed on the packaged holiday side. You know, we've had EasyJet holidays, Jet2. would it be something you would revisit, or are you just happy selling hotel rooms, flights, as you're currently doing? Thanks.

Thanks. Two good questions. I mean, Flybee is an interesting situation. Look, they're pretty small. I mean, what Flybee demonstrates is the incompetence of the CAA's regulatory function. I mean, Flybee should never have been allowed to get back in the air last year, you know, having originally gone bust. They were never properly financed. And the CAA, which is supposed to protect consumers by ensuring that you have airlines adequately financed in the UK, continues to demonstrate its own incompetence in exercising its regulatory function. However, it has gone. It is material. I mean, at a couple of the airports where we operate, like we're going into Belfast this year. To be fair, we're going into Belfast because the government has finally cut the domestic APD. Their second biggest airport is Birmingham, where we're the biggest airline there. We would certainly be in talks already with Birmingham about expanding. And I think there will be some additional slots that will come up in Manchester where I think we will continue to expand and are allocating more aircraft. But in structural terms, they're so small. It's not going to make a lot of difference. It's reasonably helpful to our entry into Belfast and our growth in places like Manchester, Birmingham. But a lot of what Flybe was doing was kind of domestic UK stuff. And that's not a big market for us, although, you know, it's not unhelpful. On the package holiday side, you know, I really don't pay much attention to the package holiday side. I think Jet2 is a good operation, well run. I remain hugely skeptical of EasyJet holiday, you know, holiday operation. I never believe any of the profit figures they declare. I think it's just a reallocation of yields into some, into their holiday operation. But, you know, Be that as it may, we're making enough money flying people around Europe, short haul, point to point, with a widening unit cost gap over everybody else. The last thing I need to be doing now is setting up an operation, negotiating for bedrooms and accommodation at all these places. It's a different marketplace. If you look at the performance of package holidays in Europe in the last number of years, TUI, Thomas Cook, they've all gone bust at various stages. They all need to be bailed out at various stages. the internet has completely disintermediated the package holiday business. There will always be a role for some element to package holidays. Buzz, for example, does very well in Poland where that market is growing and the polls are wedded to kind of package holidays. But over time, the demand for package holidays declines as you get more and more availability of low-cost point-to-point air travel and people just put together their own packages. That's not to say there isn't a role for the package holiday business, but I think it would just be a distraction to us continuing to execute our business plan, which is to grow our fleet, grow our traffic to 225 million passengers over the next four years and do so in a manner that widens our unit cost leadership over the likes of Wizz and EasyJet and all the others. and continues to take meaningful market share from everybody else. I think there's a role in certain niche markets for package holidays, but that's all it is. It's a niche market. Largely speaking, if you look at the kind of more mature market in the UK, Germany, the package holiday business is gradually eroding as the availability of low-cost point-to-point, as Ryanair expands and takes a huge proportion of the O&D market. Next question, please.

Thanks, Michael.

Thank you. Thank you.

That comes from the line of Alex Ervin at Bernstein.

Alex, hi.

Hi.

Morning, gentlemen. Two from me, please. First on staff costs. So you mentioned that you've restored the pay reductions and there are four or five-year pay deals in place in most cases. Can you please give us an idea of the typical profile of those and how we should expect your unit staff costs to evolve over the next four to five years? Second question is on your recently entry into the Amadeus GDS. I mean, clearly indirect distribution is something you've tried to avoid in the past. Is the decision here basically to target more corporate travel? And if so, how large do you think that opportunity is for you, please? Thanks.

Thanks, Alex. Okay, we've restored the pay deals, but most of those pay restorations, and they've all been voted and approved by the RPF crews and their unions, are allied to four or five-year pay deals over the next four or five years. In some cases, there's kind of annual pay increases of 2%, 3% a year, and that would be the profile. What do we think on the labour costs over the next number of years? I think labour costs will edge upwards. We'll have a combination of... We'll be promoting many more first officers to captains. We'll be promoting many more juniors to senior cabin crew. The rate of our headline rate of growth is slowing down. Even as we take these additional aircraft, the headline rate of growth, which last year was 10%, 10% this year will be 10%, then it'll begin to ease down towards 8%. And I think it's inevitable that within that we would want to continue to reward our people. And I think, therefore, that the unit staff unit costs will continue to rise, but in a managed way and not something that will disturb or affect margins going forward. But we are committed to working with our people and their unions. to raising pay where, you know, we think it's safe to do so. And we are continuing to work so that, you know, as we said, even before we've rewarded shareholders, we rewarded our people with pay restoration and pay increases. I wouldn't want to get into any more detail than profile, other than to say, by the way, you know, we're doing that in a marketplace where we've seen competitors with panicked pay restorations and panicked pay increases who a number of them seem to be short of staff at the moment, certainly Cruise, most notably Wizz, who seem to be running around not just Europe, but Latin America and other areas, desperately trying to hire pilots. We don't seem to have that issue, but then I think we're a much more stable employer than Wizz have proved to be during COVID. Eddie, do you want to give a quick flavor on why we've gone back into the GDSs and what the strategy will be?

Yeah, well, we were already with two GDSs with Travelport and Sabre, but I think we've increasingly seen with the profile of bases that we've opened across Europe and the connectivity that we've had and the growth in frequencies that business travelers want to access our fares and a lot of the corporates go through these systems whereby it manages their expenses. And that's primarily where we're going with Amadeus. It's primarily on the corporate business type customer who doesn't want to necessarily have the complication of going directly to Ryanair.com, but it's able to manage the expenses of their employees. So we will... That will be coming shortly. But we will look at any other distribution channels, and some of these are nationally based as well, whereby there's a direct feed into corporate expense management. Okay.

Thanks, Eddie. Next question, please. Thanks, Alex.

That's from the line of Savvy Sif and Raymond James.

Hey, good morning, everyone. Savvy, hi. The first question I thought, Hey, for the first question, I was wondering if you could talk a little bit about fuel efficiency, you know, in terms of either gallons per seat or some other metric. I was just curious, you know, what you're seeing today and your expectation as you kind of head into fiscal year 24 and maybe the next couple of years, given that you're getting the max aircraft in the fleet and what we could expect on that front. And then secondly, I was wondering if you could remind me on the leaf extensions on the Airbus and NG fleets and if, you know, there's any more that you're still working on.

Okay, sorry, thank you. I'm going to ask Thomas Fowler here, Director of Sustainability, just to talk about the fuel efficiency and what we're doing there. And Neil, maybe you might give an update on the lease situation on the, it's essentially the A320 fleet.

Just on the fuel efficiency on the MAX, I think as we've well flagged before, we're seeing slightly better than the 16% fuel efficiency saving on the longer sectors and at the 16% on the shorter sectors. So like it's, It's very hard to give you the exact per gallon when we've not finalised the budget yet on allocations, but somewhere around that 16% figure, as you see the max is coming in, is not unreasonable. And also, we're also retrofitting the Bumtree 7 NGs with the Scimitar winglets, which will be about 1.5% fuel save in a year. But most of that work will be done through the winter when we're doing our maintenance schedule. We won't see a big number this year, but we'll have a bit more colour going into next year as to how the maintenance even goes on that retrofit.

Okay. On the leases, Savvy, we extended 24 of the 29 A320 leases out as far as 2028. So that's very attractive lease rentals. And we've opportunistically now added a 737NG, a former sister ship, which became available again at attractive levels that come into our fleet. in December. But we're not usually interested or searching at this stage for secondhand aircraft with the Boeings coming in a more predictable fashion than before.

Got it. Thank you.

Good. Thanks, Tabby. I mean, I think it's fair to say, you know, we're not out looking for additional leased aircraft, but where we are, we are receiving offers. And if the offers are financially or opportunistically interesting, we follow up on them. At the moment, you know, we have more than 120 aircraft still to take from Boeing, 120 over the next three years. And therefore, all of the growth will take place on these low-cost aircraft that are really extraordinarily fuel efficient, given that they're carrying 4% more passengers. Thanks for the question, Xavi. Next question, please.

Thank you. That comes from the line of Jamie Robotham at Deutsche Bank. Jamie, hi.

Good morning. Just going back to staff, Michael, are competitors successfully pinching Ryanair pilots by offering higher pay? Or put another way, is pilot turnover any higher than normal? And if so, how are you addressing it? And then secondly, as Neil said, in terms of overall costs, Ex-Fuel-Per-Pax, you're on track for €31 this year. What about the year to March 24? Can you get back to fiscal 19 levels of just below 30, or do things like labour costs edging up start to make that tricky? Thanks.

OK, thanks. We're not seeing any competitors. I mean, I think it's a kind of a slightly, you know, a couple of issues. We operate 737s across Europe. Almost all of our competitors are operating Airbus aircraft. So if you like, the inflation of the pilot pinching seems to be within the Airbus fleet in general terms. We are seeing some pilots. There is certainly a restoration of the Gulf carriers out there looking to hire first officers who should know better but don't and are attracted out to the Middle East. But the numbers are small. And I put that in the context like we currently have almost 1,200 cadets coming through our system. We've been hiring and training cadets assiduously over the last... I would say over the last two years. And so we have far more pilots coming through our system then we have attrition. In extractive energy, we may be a little bit over-piloted for the next year or two, but we think that's the sensible place to be because we're expecting significant DTC disruptions, certainly through the first and possibly the second quarter of next year. But no, we see no pilot pinching. And, you know, I think to the extent there is pilot pinching, it's taking place between the Airbus operators, you know, BA pinching EasyJet, EasyJet pinching Wizzes, and Wizzes pinching Volaris, Generally. On ex-fuel unit costs, I mean, again, I think the issue for us is not so much what's going to happen to our unit costs over the next 12 months. I think we will have a unit cost of about €31 by the time we get to the end of this year. I think the real opportunity here for investors and analysts, though, is what's going to happen to Wizz and EasyJet and Lufthansa and IAG's unit costs over the next 12 months. They've exploded over the last two years of COVID, principally huge cost inflation on aircraft ownership and lease costs. And that's going to continue to rise. They're generally operating at airports where they are price takers of both airport fees and handling charges that are rising materially. And I think you're going to see that continue to widen. I think also you look at the way Wizz and, to a lesser extent, EasyJet have been out there panicking over pay levels and recruitment. There needs to be recruitment, Chas. I think their pay and staff costs will be rising at a faster level than ours, particularly when we are adding aircraft that carry 4% more passengers and burning 16% less fuel. I think the issue for investors and analysts is not so much will our 31 go to 32 or stay at 31 in FY24, but it's that the widening gap between our unit cost of 30 was currently at 46 and ECJ at 75. I think you're going to see that cost gap widen materially in the next year, particularly on aircraft and leasing and ownership side, where we're paying down debt and they're exposed to rising financing costs over the next 12 months. Thanks, Jamie. Next question, please.

Thank you. That comes from the line of Dwayne Fenninworth of Ivecore ISI. Please go ahead. Your line is open.

Hey, good morning. Thanks. I won't ask you another unit cost question, though I was tempted. Maybe just on the guidance update from early January, you noted some softening, I think, in UK point-of-sale demand, or sorry, on fares, UK point-of-sale and maybe Ireland demand. Can you just expand on that a little bit and have you seen any change or firming since the guidance update?

Yeah, thanks, Dwayne. When we came out with the upgrade on the 4th of March, there was certainly something going on in the UK. We saw weakness in UK outbound and Ireland UKP, which is quite a big market for us. We weren't sure at the time whether there was an awful lot of coverage of there was strikes and train strikes and health strikes and strikes all over the place in the UK. That didn't seem to last long. I mean, by the time we got to the middle of January, in actual fact, UK Outbound and Ireland UKP were one of our stronger booking markets. So it seemed to have been a kind of a sort of a temporary malaise, largely driven by kind of media coverage. Maybe the UK hadn't quite got back to work yet. And... the media coverage given to kind of transport strikes and difficulties getting with border force and trains. Now, we saw no impact on our daily, on our day-to-day load factors. People, if there were train strikes, were either driving to the airport, getting to the airport anyway. But I'm pleased to say that that has certainly disappeared through the remainder of January. We now see no market that we could point to as being, you know, weak. All markets are booking strongly into the February midterms, the Easter in the middle of April and through the summer. All markets look strong, booking robustly, booking strongly. I made the point publicly that we had a record. We did our record weekend. We took 2 million bookings in the second weekend in January, and we had a record week, 5 million. The first time in a week we've ever taken 5 million bookings. That won't happen every week, but bookings are stronger. Forward pricing is stronger. The kind of caution I would have at the moment is, you know, this won't continue. I generally tend to be a bit kind of nervous when things are going very well. There's usually a curveball sent somewhere to haunt us. It's the nature of this industry. But looking around and absent any adverse developments on Ukraine, COVID or some black swan event that we can't foresee, it all looks worryingly strong, I think, into April and into this summer, as long as French and German ATC don't fuck it all up in March, April, May. I think all operators in Europe will be positioned for a very strong summer of traffic and bookings and reasonable fare recovery. The difference between them and us is that we'll be doing with an enormous unit cost advantage over every other operator. I think the other operators who are currently loss making would probably be profitable this year. And we would hope to see into FY24 another reasonable bounce in our profitability because of a very strong unit cost position, a very strong balance sheet and considerable growth in our market shares in all markets across Europe.

That's great, Michael. And maybe just for my follow-up, on the aircraft constraint side and on the kind of delivery pacing side, you know, how much are you being held back, you know, into kind of calendar 23 here? So, you know, summer of 23, how much larger would you be? How much larger would these passenger targets be if you had no aircraft constraints? Thanks for taking the question. Yeah.

Yeah, really not. I mean, I think really not a lot. Like if Boeing can get a 45 aircraft yield, they were originally Boeing were to deliver 51 aircraft by the end of April. If we get 45 plus aircraft by the end of June, then there'll be no constraint at all. You know, we'll get to 185 million passengers. We would like to get to 51 aircraft, in which case we might get to 185.5 or 186. But really, you know, we have it all in there. As long as, if Boeing get us 45 aircraft by the end of June, that would be a dramatically better outlook than I think when we were doing the half-year numbers in November. You know, I was worried we could be down at around 35 aircraft and, you know, we'd be looking at maybe 178, 180 million passengers. So, To be fair to Boeing, who I have been, I think, rightly critical of in recent years, certainly the delivery and the production side has improved over the Christmas and into the New Year period. But, you know, it gets very tight and very fraught. Very little would... cause us to miss a delivery. You know, a couple of, three or four aircraft deliveries missed at the end of June means, you know, we're either cancelling flights in July or we can't put those flights on sale. And the critical thing is we need to know those aircraft are coming at the end of May so we can put them on sale through. If we can get them on sale with a four or six weeks notice, we'll fill them into July and August. If we can't get them on sale, we won't sell them. But it's really all big. Thanks, Dwayne. Next question, please.

Thank you. That's from Stephen Furlong at Daily. Please go ahead.

Stephen, hi. Can you just talk about future aircraft deals? I'm just thinking more about the size of plane. Do you think the optimal is the 197 or it looks like the MAX-10 may get, for example, certified, so 230 or whatever plus. Related to that, maybe it's for Neil, 20F as your average fleet age of eight years, is that kind of the optimal fleet age number to be younger or older? And I'm thinking of things like maintenance, capex, et cetera. Thanks a lot.

Okay, thanks, Dean. I'll ask you the second question. I mean, again, Steve, my response on the size of plane question is, again, it's a bit like, you know, which do you prefer, Airbus or Boeing? I prefer whichever is cheaper, which has got the cheaper seats. size of aircraft I would always take a bigger aircraft as long as I'm getting a cheaper seat per seat price now you know we are we broke off negotiations with Boeing I think it's fair to say we're back talking to Boeing again about new aircraft, but not in any serious way. I don't expect anything significant coming for the next number of months. Boeing have been distracted up until the end of December, whether they were going to get the max 10, the redesign of the max 10. Congress is going to approve that or extend that deadline, the guillotine deadline at the end of December. I would be of the view, we have been pleasantly surprised by the performance of the MAX 8200. The 197 seat is a perfect aircraft for us in terms of high frequency operation. We get 4% more seats and 16% less fuel consumption. I would be very willing to look at going up to the MAX 10 whenever the MAX 10 gets, still not certified, whenever it's certified and they're able to deliver it, as long as there's a reasonable discount for the additional 30 seats, because the additional 30 seats means you're going to start taking hits on yield, where you allocate that aircraft, and also probably going to take a kind of hit on turnaround. But I'm entirely, would be entirely opportunistic. Like, put it this way, If we got the extra 30 seats for free, we'll be ordering all MAX 10s going forward. Boeing will probably come up with some bullshit reason why you've got to pay extra for the extra 30 seats. And, you know, in which case then we would take all, we'd be looking at additional A200. So it's entirely down to pricing. Whichever aircraft gets us the cheaper per seat cost would be the aircraft that I would favor. Neil, you want to take the second question, please?

Yeah, sure, Stephen. Eight years, a relatively young fleet. In the past, we would have flipped out aircraft at eight years because we just had such big order books back in 2005, 2006, and we were running out of warranties. We've absolutely no difficulty running the fleet older. And in fact, the scimitar winglets, which reduce the fuel burn by one and a half percent, adds to the longevity of the aircraft. They do get more expensive to maintain, particularly when you're up at maybe 16, 17, 18 year checks. But we've got a lot of very young aircraft in the fleet, nowhere close to that, and under warranties for the next few years. So, no, eight years is good, but we'll happily let the fleet age a little bit over the next few years. Thanks, Neil. Thanks, Stephen. Next question, please.

Thank you. That comes from Muneeba Kiyani at Bank of America. Please go ahead.

Good morning. On Italy, you talked about your market share of 40%. How does Lufthansa potentially taking the stake in ETA impact the Italian market in your view? And then secondly, you talked about the fares in your comments. For the March quarter, should we expect a similar 14% increase that we saw in the December quarter? We've heard from EasyJet suggesting higher fare increase for the March quarter.

Yeah, okay. Let me do the first one first. Italy, our market share is actually, I think it's now above 4%. There's been a dramatic withdrawal, I think, in the Italian market of Wins, who this time last year were opening bases in Venice, in Catania, and Palermo. all of which they've now closed as a kind of cover for. Now, they have switched some of those aircraft into Milan and into Rome, where they appear to be now more intent on linking the two main cities in Italy with Riyadh, Kuwait City, Reykjavik, and all those other exciting medium-haul destinations that Italians never knew they wanted to go to. But, you know, I think there's probably reasonable growth for them in that, and it's a market where they don't have to compete with Ryanair. But there is dramatically less capacity on the Italian domestics. And we're actually continuing to grow in those markets. So we're adding extra flights into Sicily, we're into Venice, we're adding more aircraft in Naples. We recently were coming close to agreeing airport deal extensions with a number of Sicilian and southern Italian airports. And I think we'll see more growth by us in the Italian marketplaces. Lufthansa coming in and acquiring ITA, I think, will have no effect whatsoever on that. I think they'll do exactly what Lufthansa have done in every other acquisition of Sabina, Swiss, Austrian. They will run it to feed flights and traffic out of Italy into the two main hubs, Munich and Frankfurt. There will be no new route growth out of Italy to anywhere. And, you know, they will be very happy and content to put up prices and try to shovel lots of Italians and I think transatlantic and Asian visitors down into Italy using Munich and the hub. Frankfurt Hubs. I think what they will also try to do, though, is use their lobbying muscle, as they have in Germany, to try to impose restrictions or limit the way Italian airports can kind of grow. They'll do the usual lobbying games around trying to persuade the Italian government that some way should protect ETA or Lufthansa, have less competition, more slot restrictions, that all Italian airports should charge the same fees as Rome and Milan. which is something they've pushed hard at in the German market as well, which is one of the reasons why the German market has only recovered 70% of its pre-COVID traffic, and German consumers and visitors are paying much higher airfare. I think the only impact on the Italian market would be Lufthansa lobbying, but there certainly won't be any ITA growth out of that. And we are allocating another, I think we're putting another 15, 16 aircraft into the Italian market this year, continuing to grow the domestic markets. We're looking at more capacity in almost all of our Italian airports. And I think we will get to 50% market share in Italy within the next two years based on current trends. Tracey, do you want to give us a quick minute? Let's be cautious now. I don't think, I think we should be reasonably cautious on pricing up to March, but what are you seeing there on pricing up to the end of March, into the fourth quarter?

Yeah, I think based on what we've seen already in Q3, I think we see total revenue per passenger probably really up the same kind of percentage levels as they were pre-COVID, and I think it's on the basis of, you know, What we're seeing was a strong new year, which we pretty much, January is done. What we're seeing for February midterm looks good, but there's still a lot on what will happen and then close in midterm bookings, I think a lot is dependent on.

But I didn't understand, we've gone back to the same as we saw pre-COVID.

Same sort of percentage levels that we've seen in Q3 up on pre-COVID, so roughly 14%.

Okay, so we're seeing low double digits. Yes. Okay, and again, I would caution everybody that is subject to there being no adverse COVID, no adverse Ukraine. And, you know, as always, when things look this good, no fucking black swan events that arrive out of nowhere to haunt us. Thanks, Tracy. Next question, please.

Thank you. That comes from the line of Satish Sivakumar at SETI.

Please go ahead. Hi. Thanks again. I got two questions here. So firstly, on the load factor, if you look at December, came in at 92%. given the seasonality impact that we normally see in Q4 versus Q3. So do you expect the Q4 load factor to come in below Q3, or what is going to see that uptick into Q4, March quarter? And secondly, on the cost, what has been the initial discussion from ATC on proposed increase in charges for 2023? Those are my two questions. Thank you.

Okay, load factor, I wouldn't get into that kind of, you know, I would expect to see the load factor in Q4, maybe one or two percentage points behind where it was in Q3. Again, we've no Easter in April. Most of what drives the load factor in Q3 is you have a strong October, school midterms in October, and then most of Easter and New Year falls into December. But, you know, we would never get into a quarterly load factor kind of forecast there. ATC charges are going to be up this year. I'm not again. Should we be able to give us a figure on that?

Pretty much the same as last year. We'll probably see between route charges and ATC, which again, pretty much out of our control, probably close to a year old passenger.

Yeah. Okay. And what's that in percentage terms, roughly?

We have to be careful. Some of it goes into route charges, some of it goes into airport charges. The ATC part gets grouped with airport charges.

Okay. Thank you for that. Yeah, thank you, Michael. Thanks, Satish. Next question, please. Thank you.

That's from Connor Dwyer at Morgan Stanley. Please go ahead.

Thanks, guys. It might be slow to talk about this yet, but on shareholder returns, are you still talking about maybe splitting that between dividends and buybacks in terms of size? Should we use what you guys used to do in terms of relative free cash flow going forward? And in terms of timing, when you do get that net debt back down to about 0.5%, uh, should we kind of be modeling that to be starting pretty much immediately after that. And then also back on the fleet delivery. So, you know, you know, that you were talking to Boeing again, I just like to, you know, hear what are the material benefits of you having a max 10, you know, are the parts of suitability with the max eight still significant, um, you know, and would you consider an Airbus order or to your point, if there's pilot pinching in Europe as a result on the Airbus, um, Would that keep you away from going that way?

Cheers. Thanks, Conor. Welcome to the call. It's good to see Morgan Stanley back covering us and the sector again. Shareholder retards, look, we have huge draws on cash this year. We have a bond repayment of $850 million in March. There's $750 million in August. And we have, subject to Boeing deliveries, we think next year we're probably about $2.3, $2.4 billion in capex. So, I don't foresee any shareholder returns this year, but we do expect with reasonable trading this year to get to zero net debt by the end of this fiscal year. So if we're at zero net debt by March 2024, I think we will be looking at some shareholder returns at that time. I think shareholders who did put their hands in their pockets, unlike kind of Heathrow shareholders, Ryanair shareholders, we had raised 400 million from shareholders during COVID. That was critical to us raising additional bond financing and getting through COVID without any kind of state aid, unlike our competitors. And I think we're committed, firstly, to restoring the pay and agreeing pay increase with our people. Secondly, to keeping fares low for our customers. But then once all that's done and we can see a way clear to having a zero net debt position again on the balance sheet, then we will return to shareholder returns. But I think we're looking at probably the spring of 2024 before we start to consider that. I think in future, shareholder returns will be more modest. I don't think we'll do big buybacks. I think we're looking at modest dividends, hopefully on an annualized basis, if earnings and cash flows allow I think the one thing going forward is that we will have a no matter what happens, even if we do another order with Boeing, the rate of capex going forward will be smaller because the amount of aircraft, the net fleet additions will be smaller going forward in a period from FY27 onwards. I expect us to be growing in kind of 4% or 5% a year, not 10% a year. And hopefully that will allow us to have a more consistent dividend stream for shareholders. Also, we're in a rising interest rate environment. I think shareholders will welcome and appreciate a dividend stream from Ryanair, but I don't see us doing large share buybacks in the future. They've proven difficult in the past, and to make them effective, I think the much better way of giving our shareholders some reasonable return would be modest dividend stream going forward. Fleet deliveries going forward. Look, again, I think I've dealt with the Boeing side of the house. Would we look at an Airbus order? Yes, we would. Again, I've always been entirely opportunistic when it comes to aircraft. We would buy whichever aircraft is cheaper. Airbus, though, have a much longer order book than Boeing. Boeing have obviously been disrupted by the grounding of the MAX for a number of years. Airbus have capitalized on that. And the fact that, you know, due to the trade war between the Americans and the Chinese, Airbus is a beneficiary of Chinese aircraft orders at the moment. The Boeing order book is much weaker. Boeing does need to, I think, sign up a number of get some orders in the books for the next couple of years. So it's unlikely. I mean, everything we see at the moment is Airbus are pricing up materially. That's good for us in that most of our competitors in Europe are Airbus operators and paying much higher prices for aircraft than we are for our Boeing orders at the moment. But, you know, and again, looking at the kind of the second hand or the leasing opportunities, we jumped on the opportunity there to extend 24 of the louder leases from 2024 out to 2028. because they were cheap to do so. I couldn't care less whether we operate a Boeing or an Airbus aircraft. If there's a material cost advantage per seat, then we would order that aircraft. I don't believe that there would be much, you know, would that decision be affected by some pilot pinching within the Airbus fleets around Europe? Honestly, Europe, and I think, you know, I've been saying this for a number of years, the capacity growth in Europe is stabilizing over the next number of years. You don't have a lot of new entrants. There's no new entrants. There's not interest costs of financing arising. There will be no startup low fare carriers because I think Ryanair is the barrier to entry in most European airports. Consolidation, I think, and you see Lufthansa eyeing up ITER. I think IAG will do a deal with TAP before the year is out. And then I do believe that EasyJet and Wizz will get mocked up as well. And I think you're looking at a much more mature market for air travel in Europe in the next four or five years, where not unlike North America for the last 10 years, there's been reasonably stable capacity and a bit more pricing or upward pressure on pricing within that marketplace. Europe has been the beneficiary of 20 years of deregulation, very low cost airfares. I mean, the airfares across Europe, thanks to Ryanair, are generally significantly cheaper than train fares from the airports into the city centres. but I think that we're coming to the end of that kind of madcap capacity expansion and therefore a much more sensible industry outlook in Europe for the next number of years. But in that, I don't think it makes much difference whether it's Airbus or Boeing. There won't be a shortage of pilots around Europe for the next five, 10 years. And certainly, if you look at the kind of growth and training we've seen in our cadet programs over the last couple of years, there is no shortage of people willing to sign up to become pilots. Recognize that it's a very well-paid job. They are highly skilled, but they're certainly not overworked. uh, with, uh, you know, the kind of restrictions of, uh, 900 flight hours a year is still an average of 18 hours a week. Uh, but they're well-trained, they're well-paid and, uh, uh, we're very proud of the pilots, uh, the, the crews we have in Ryanair. Next question, please. Thanks, Connor. Cheers.

Thank you. That's from Mark Simpson at Good Body. Please go ahead.

Mark. Yeah. Hi, good morning. Uh, just to broaden the subject matter, um, ESG had a very successful conference in Dublin in December. Probably more question for Tom. Just wondering what sort of key developments we could expect this year to further that. Is that kind of additional SAP offtake agreements as an example? And then the second part, second question, are you as yet seeing cost benefits of this improvement in terms of negotiating with airports in order to kind of further embed your unit cost advantage or Or do you think that will become an increasing feature in future years?

Okay, Tom, do you want to take the first half and then give us an update on ESG and SAF?

Thanks, Mark. Yeah, look, I think, look, the one big thing we did in December and started is the retrofit of the winglets, 1.5% saving on the NG fleet. But I think, yeah, as we roll forward, looking at more SAF offtake MOUs in a couple of more key regions over this year. And obviously...

uh your game changer aircraft coming in as well as a benefit over the next 12 months but still be close to the retrofit of the wingless and the staff off-site agreements great and i think cost benefits of airports i mean look we are seeing across europe uh we are in active negotiation with a huge number of airports who have suffered dramatic uh traffic declines as a result of covet Either their incumbent carriers have failed or their incumbent carriers have cut capacity and are not restoring. I would point in particular to the airports in Italy, airports in Central Europe, where WIS are cutting capacity or not growing or cease growing. We have a huge number of WIS customer airports who are now talking to us, I think, recognizing that WIS are not growing or not able to grow their markets. The UK has been a particular source of growth as well. I mean, we've done very good extensions. The core deal, which is with Stansted, was done during COVID, now runs out to 2029. But across UKPs, we're seeing meaningful growth in markets like Birmingham, Manchester, Bristol, Belfast. Glasgow, Edinburgh, all of whom, you know, are struggling to recover their pre-COVID traffic and are turning to Ryanair to deliver that growth. And Spain as well, we've seen. Ed, do you want to add any?

Yeah, I mean, like if you see what's happening in Spain, particularly in post-recovery there, whereby the Spanish government is no doubt are leaning on IENA with their pushing down charges, you know, but like IENA has ever are already signaling that they're going to increase by 2027. But there are, when you look at what the Spanish government are saying, they're saying, look, Ryanair is particularly valuable in the regions, not just for tourism, but for connectivity. So you're having that pressure downwards. You see what's happened in Portugal, whereby you've had a sort of a, where the regulator intervened down there and we saw reductions in charges at Faro and Porto and Ryanair, we pitch up and put extra aircraft in those places. But also then you see, in places like Madeira and the Azores and in Lisbon, charges rising where there's no growth going into those. So I think it's happening not just at an airport level, but also at a national level. But you do see some outliers there in airports that are just hoping that things are going to bounce back and have no idea where that's going to come from because the legacy carriers are not coming back. EasyJet is not growing and Wizz has moved further east. So I think there's still a shakeout to come in some of those airports as well, whereby they'll realize that the traffic isn't coming back and they're going to have to stimulate or incentivize Ryanair to come in and fill those capacity gaps. Okay. Thanks, Eddie.

Next question, please. Thank you. That's from the line of Johannes Brown at Stiefel. Please go ahead. Johannes, hi.

Yes. Hi. Just one question from me. You mentioned those impressive market share gains in many European markets, Italy, Spain, UK, Ireland. Obviously, two of the largest markets in Europe are still missing in that list. That's France and Germany. I'm obviously totally aware that you allocate capacity in, let's say, opportunistic way. Those two markets are obviously high cost, but they are also high yielding markets. So especially in Germany with Lufthansa being so restrictive on capacity. I mean, you mentioned that. I'm still wondering when we are kind of nearing that tipping point when the high yield environment in those markets would compensate for the higher costs and therefore would make it worthwhile for you to start allocating more growth to those markets.

Yes, good question, Johannes. Two points I'd make on that. Firstly, we allocate capacity where the airports are in those airports who want it most, which is the airports who are going to kind of bid for it with efficient kind of growth incentive schemes. And at the moment, that's taking place in bigger markets like Italy, Austria, Poland, Ireland. To be fair to Dublin Airport, who I've been a long term critic of, had a very good COVID recovery scheme last year. And they're working on an extension of that into this year and in the UK as well. These are major markets where we're taking extraordinary lumps of market share gains. France, we're growing in, but, you know, France has always been a particularly peculiar market. It's a market that there isn't much outbound travel. We've increased the base in Beauvais, Marseille, Toulouse, but it's too small to put in there. And our market share gain, you know, while we're gaining market share, it's small. I have, you know, not that we've no huge desire. I think unless you do something significant in Paris or domestic France, you're not going to have a significant market share in the French market. And I have no desire to be in either Charles de Gaulle or Orly or in the French domestic marketplace. Germany is much more interesting. I mean, you know, we have, you see the kind of the outcome, what happens as a result of the lobbying might of Germany, the great German national champion, A recipient of 13 billion in state aid because there was a bit of a COVID crisis. So the German government immediately gives them everything they want. The competition rules are suspended for all German M&A. If Lufthansa want to buy something in Germany, they're way through phase one, no remedies, nothing at all. And what you get now is, in the last two years, the EasyJet has significantly reversed out of Berlin. We've reduced capacity in Berlin. We've closed the base in Frankfurt, Maine. And for no reason other than Frankfurt, Maine were unable to extend the five-year low-cost growth deal we had with them because they haven't managed to open the low-cost T3 in Frankfurt. I think what you'll see in Germany this year is traffic will remain at about 70, 75% to pre-COVID. A number of the bigger German airports with the notable extension of the two Lufthansa hubs, Munich and Frankfurt, will see meaningful traffic declines. And I think what will happen is after a year or 18 months of that, the German airports will finally, some German airports will wake up and realize that Lufthansa is never going to grow at their airport and they'll need someone like Ryanair in there to grow. They will come back to us with growth incentive schemes, but it is very difficult in Germany for airports to do that because German rules and regulations, which are largely written by Lufthansa, make it difficult for airports that are underserved to discount and to engage in low-cost or in growth incentive schemes. uh but you know it will come because the market will continue to uh suffer german consumers will continue to suffer because they're going to keep being screwed by lufthansa for extraordinarily high airfares but like if the germans suffer for a year 18 months that's not the worst thing in the world at that stage we'll have completed our growth in italy we'll have built out our growth in spain and others and we will have additional aircraft and we'll probably return to looking at growing in the german marketplace but For the moment, we're very happy to leave it to Lufthansa and allow Lufthansa to do what it does best, which is screw German consumers wherever they have a monopoly. And I think in 12 or 18 months time, that will encourage more German airports or a change in the German regulations that will be much more outward looking and a lot less about protecting Lufthansa as some kind of national champion of high fares. but there's lots of growth out there. And we certainly... Central Europe is a market that is growing very strongly for us. It did get disrupted, and it was the market that was most disrupted by the invasion of Ukraine. We are... very committed to returning to Ukraine as soon as it is safe to do so. We're hiring quite a number of Ukraine pilots and cabin crew specifically so that we can reopen, we can restore bases in Ukraine if or whenever it's safe to do so when hopefully the Russians are successfully repulsed from Ukraine but we have far more growth opportunities that we have in front of us the next four or five years we could readily deploy all of the 130 additional aircraft we're taking for Boeing over the next three years this summer if we needed to we don't obviously and where there's more and more airports coming to us looking are coming to Eddie and the new routes team looking for additional growth So France and Germany can wait. And while they're waiting, I think they will sow the seeds of a much more favorable growth environment for Ryanair expansion there in the next couple of years once they've had 12 or 18 months of stagnation or high fares. Thanks, Joanne. The next question will be... Thank you.

And we have time for one further question that comes from the line of Harry Gowes at J.P. Morgan. Please go ahead. Your line is open.

Hi, morning. Yeah, just a quick one on ancillaries, if I can. It obviously continues to go well. So any early thinking on how much year-on-year growth you can maybe squeeze out of ancillary per pax in year-end March 24? Thanks.

I wouldn't get into too much detail on it. I don't expect there'll be much additional growth in ancillaries on a per passenger basis. We expect ancillaries to continue to grow in line or maybe one or two percentage points ahead of traffic growth for the next year or two. We are still seeing customers switching into buying those services like reserved seats, priority boarding. We're certainly beginning to see the start of meaningful growth in duty-free sales on all the routes to and from the UK. I think that's been an area where a number of airports, too, are very focused on adding UK routes or connecting UK routes because the airports can get advantage of duty-free services. It's one of the things I'm always amazed at when an airport like Heathrow is there looking for further cost increases. John Holland Kay is very vocal on everything except the benefit he's deriving from his duty-free sales at the moment. But thankfully, Heathrow is not an airport at which we operate. But it's certainly, I think, going to be – so we would hope to see some additional growth in onboard duty-free sales on the 40% of routes we operate that operate to and from the UK. But other than that, I don't think there's anything significant in ancillaries for the next year. year or two, and certainly when we finalize the budget between now and the end of March, we would hope to see traffic grow 10% in the next 12 months, and ancillaries probably add another 1% or 2% on top of that. It would be a fairly modest budget for ancillary growth. Thanks, Eric. Next question, please.

Thank you. As there are no further questions, I'll hand back to Michael for the closing comments.

Okay, folks, so thank you very much for taking part in the call. Again, I think we've had a strong Q3. Q4 will be loss-making, you know, which is always helpful. I think we just take some of the irrational exuberance out of this. We are growing strongly. I think Easter and the summer look good. If I could leave you with any two-parting, one-parting thought, and that is I would refer you to the investor slide presentation we put up on the website. Look at page four. which is the unit cost gap between us and every other airline in Europe and how that has materially widened during COVID. I think that cost gap will widen further in the next 12 months, particularly as the competition are paying higher financing and lease costs for their operating leased aircraft. And the other slide to look at is slide nine, which is the very strong market share gains. We will continue, we think, to take significant market share. We're going to add between 45 and 51 aircraft in the summer of 2023 in a marketplace where nobody else is adding any capacity. Yes, Wales are taking some aircraft deliveries, but a majority of that is being diverted towards serving routes into the Middle East, which is a market in which we don't compete. And as long as there are no black swan events and there is a reasonably strong recovery of transatlantic traffic and Asian traffic into Europe in the summer of 2023, then I would be modestly hopeful that we will see a. strong first half of FY24. Easter will be in Q1. We would hope to see a reasonably strong trading environment into Q2, as long as it's not disrupted by French and German ATC. We will be continuing to add capacity. We will be continuing to keep fares low or significantly lower than any competitor because we're the airline delivering growth. And we would hope that that will result in a second year of strong... of strong... operating profits for Ryanair in the next 12 months. If it does, we will then be able to fund the pay increases we're committed to with our crews, our pilots and cabin crew. We will pay down the debt, the bonds in March and in August. We would hope to get very close to zero net debt by March 2024. And then you have my word, speaking as a large shareholder, that we'll be addressing shareholder returns in the spring of 2024 as our priority. Thank you very much, everybody. Neil is doing a couple of investor meetings in London. I think he's in London and Frankfurt and Paris the next three days. If anybody would like a meeting or to attend one of the group meetings that Citi and Davies are kindly hosting, please contact us through Citi or Davies and we'll try and fit you in. Otherwise, if anybody wants to come over here and meet with us in the next couple of months, we'd be happy to. to see you here in Dublin. And hopefully we can avoid any black swans or any disruption to trading, not just for us, but for the rest of the industry. I think after three years of COVID and then the Ukraine invasion, this is an industry that deserves one or two disruption-free trading years. Thanks very much, everybody. Hope to see you all soon. And thank you.

Thank you all very much for attending. You may now disconnect your lines.