Ryanair Holdings plc

Hello and welcome to the Ryanair Holdings PLC Q1 FY24 earnings release call. My name is Maxine and I'll be coordinating the call today. If you would like to ask a question, you may do so by pressing the star followed by 1 on your telephone keypad. I will now hand over to your host, Michael O'Leary, Group CEO to begin. Michael, please go ahead when you are ready.

Okay, good morning, ladies and gentlemen. You're welcome to the Q1 results conference call. As usual this morning, we posted the results release, an extensive MD&A and a video Q&A with myself and Neil Sauron. That went up on the Reiner.com website at 7 o'clock this morning, so I refer you to that and I take it as read. I'll give you a couple of comments on the results and a few thoughts, and then we'll open it up. I'll ask Neil just to give his couple of comments on the MD&A, and then we'll open it up for Q&A. So you've seen this morning we reported a Q1 profit of $663 million. The number is materially distorted because it's compared to a Ukraine-affected prior year Q1 PAT of $170 million last year. Last year, you'll all recollect, Russia invaded Ukraine on the 24th of February. It caused a significant collapse in traffic through March and into Easter. And it also meant, if you recollect, we aggressively dumped prices in the Q1 of last year. Prices, we reported this time last year, average fares this time last year were down 4% on pre-COVID prices. as we were aggressively kind of trying to restore load factors through Q1 so that we could kind of underpin Q2. And I think that's important, and it's something I want to stress a couple of times today. So we very aggressively dumped prices in Q1 last year, and so the growth of $170 million to $663 million is a function of the very weak prior year comps. This year's Q1 was held by a very strong Easter, strong demand, good pricing. We had a second UK bank holiday in May, so we were the beneficiary of that. So over the quarter one, traffic rose 11% to 50 million passengers. Revenue per passenger was up 27%. Again, that kind of average fares were up 42%, but that's distorted by the fact that average fares were down 4% in the prior year Q1, and silly revenues were up 4% on a per passenger basis. At the end of the quarter, we're operating 119 Boeing 737-8200 game changers. The total fleet in June was 558 aircrafts. We've opened three new bases and 190 new routes for the summer 23. Three new bases in Belfast, Lanzarote and Tenerife, all of them performing well. We've extended our fuel hedging. We're 75% hedged for FY24 at $89 per barrel, a little bit above current spot rates. We're 27% hedged for FY25 at $74 a barrel. If we were able or willing to extend that hedges, if we could hedge all of FY25 at $74 a barrel, that would be a saving of almost €1 billion into next year's earnings, FY25 earnings. Net cash at the quarter end was strong at just under a billion euros, up from the half a billion euros at 31st of March. And again, thanks to the excellent work that Neil and the team have been doing, our rating has been upgraded by both Standard & Poor's and Fitch's from BBB to BBB+. The big development in the quarter was obviously the 300 MAX 10 aircraft order, which we signed with Boeing in May. This order gives us a decade of further growth in Europe in a marketplace where capacity is constrained. The industry is consolidating. Ryanair has access to another 400 very low-cost aircraft, another 100 game changers, and then 300 MAX 10s. which will enable us to renew the fleet, but also grow traffic at a more controlled rate to 300 million passengers by FY34. Just in terms of growth, again, I think we and the rest of our competitors continue to be a beneficiary of structural EU capacity reductions following COVID. There was numerous EU airline failures or fleet reductions during COVID. We continue this summer to see volatile oil prices and higher interest rates, which is discouraging weaker unhedged airlines from adding capacity. There is a shortage of aircraft, both new and leased. that I think will run on until the end of this decade, out to 2030. This summer in Europe, there's no doubt we're seeing the benefit of a very strong influx of American visitors to Europe, helped by the strong dollar. We're starting to see a meaningful return of Asian traffic to Europe, which means that European short-haul capacity remains constrained, but demand is high. And so through H1 this year, we're seeing strong demand, load factors high, airfares, which were very strong in Q1. They would be modestly up in Q2, but not by what we saw in Q1. Remember, Q2 last year, we had a very strong Q2. We reported after profit after tax in Q2 last year of 1.2 billion. And we expect average fares will be up, but it'll be a small double digit percent, something in the mid-teens. European Airlines will continue to consolidate over the next two or three years. Lufthansa are moving to take over ETA in Italy. The sale of TAP in Portugal is now actively underway. There's a large backlog of aircraft manufacturer, OEM aircraft deliveries, and we believe that's going to continue to constrain capacity growth in Europe for at least the next three or four years. and will assist us as we continue to expand our fleet, I think will mean we'll see growth with strong traffic demand, and I would hope to see modest airfare rises over the next two or three years. But I suspect they'll be modest compared to the very strong pricing we saw in Q1. The critical thing here is in Ryanair, our unit cost advantage over all EU competitors, our fuel hedging, our strong balance sheet and our low cost aircraft orders, which now will run out to 2020, 2033, a decade, coupled with our industry leading operational resilience will create very significant growth opportunities. And I think there'll be profitable growth opportunities for Ryanair over the coming years as we grow to 300 million passengers by FY2034. In terms of fleet, The Game Changer fleet stood at 119 aircraft at the quarter end. It will rise to 124 at the end of July. We've already taken the first four of those July deliveries. Boeing hopes to deliver the last aircraft either on the, we think, Friday the 27th or Monday the 31st of July. So we will just have all 51 aircraft in for the peak August travel period. Boeing has suffered multiple supply chain challenges, which has caused repeated delivery delays. We had hoped to be out of these at the end of July, but already we're seeing they've notified us of delivery delays in the autumn deliveries, which have been hit by the strike in spirit in Wichita, the collapse of the bridge over the Yellowstone River, etc. We already have agreed with Boeing that some deliveries will be delayed. Our last deliveries for FY20, for summer 24, which were to have been in April 24, will now be delayed to June 2024. But hopefully we can take all those aircraft by the end of June 24 and therefore benefit with that continuing growth through the peak months of July and August. In May, we signed the order with Boeing to purchase 300 Boeing MAX 10 aircraft. These aircraft are astonishingly efficient. The order is subject to shareholder approval at our September AGM, but these aircraft offer us 39 more seats, 228 seats versus 189 on the 737NG fleet, but deliver 20% lower fuel consumption, 20% less CO2 emissions, and they're 50% quieter. These aircraft will transform Ryanair's operating costs, will further widen our already considerable unit cost advantage over all competitor airlines in Europe, and will materially, I think, incentive, will materially improve our growth for the next decade. We think about half of this order will be used to replace older NGs, which will start hitting 24, 25 in 2028 and 2029. But half of the order will allow us to sustain controlled, although more modest growth into the early 2030s than we have delivered over the past 10 or 15 years. Just in terms of outlook, therefore, we expect FY24 traffic to grow to approximately 183.5 million passengers. We've had to step that down from the original 185 million forecast because of these point delivery delays through May and June. And what also looks like we're going to suffer some delivery delays in September and October as we start gearing up for maintenance. We'll be short some aircraft and we'll have to pare back some schedules. However, having said that, the cost gap between Ryanair and all of our competitors continues to widen materially in Europe. As previously guided, we expect to see a modest increase in our ex-fuel unit cost this year of about €2. This is due to the full year impact of annualised crew pay restoration. higher crew ratios, which is material this summer, where we are suffering the challenge of really lamentable ATC provision across Europe. We notice some competitors have already been cancelling flights through the peak travel months of July and August. We're not cancelling flights. We expect to complete our entire operation, but we need more standby crews to be able to make up the amount of ATC delays we're suffering. The route charges and the impact of the game-changer delivery delays will also impact unit costs this year. Q2 bookings are strong. We expect to run through Q2 with load factors of 95%, 96%. The fare increase in Q2 will be much lower than it was in Q1. The average fare in Q1 was up just over 40%. We expect in Q2 that it will be more modest because of a much tougher prior year Q2 pricing. We think low double digits, something in the low teens. And again, that's partly because peak summer travel snapped back very strongly in Q2 last year following the Ukraine invasion. We have noticed in the recent couple of weeks a slight softening in the close-in fares in late June and early July. Nothing that I would be overly worried about at the moment, but I think there's either a degree of customer resistance to the higher fares, but we are filling our aircraft at fares that are marginally higher than they were into Q2 last year. But the final H1 outcome, therefore, is highly dependent on the trends in close-in bookings for the remaining seats in August and September. As is usual this time of the year, we have no Q3 or Q4 visibility. We are cautious, though, that we enjoyed a bumper Christmas and New Year travel period last year. That was the first kind of full Christmas period that wasn't affected by COVID for three years. And we're conscious that this winter we're looking to grow. You know, we're operating at 125 percent of our pre-COVID capacity. And I would allow for the fact that we may have to engage in some price stimulation as we move into October, November. But we're not seeing that this summer, but we are expecting it later on this year. So I think we're trying to be cautious. We've had a very strong Q1. We think Q2 will be modestly ahead of where Q2 was last year. Therefore, we'll have a strong H1. But I would be cautious into the second half of the year. You know, consumers are facing challenges out there across Europe. Higher interest rates, higher mortgage payments. consumer price inflation is high. You won't have the benefit of the Asian and the American traffic in the second half of the year. And we are pushing 25% capacity growth in a market which this summer in Europe is operating at only 93% of pre-COVID capacity. We think that gets closer to 100% of pre-COVID capacity into the second half of the year. So I think we're right to be cautious. We are well crewed. We're getting through the summer well. Load factors are high, but pricing might just be at that kind of inflection point where it begins to soften a little bit. I would welcome softening in pricing. You know, we've had a very strong recovery over the last two summers. But with Ryanair's much lower cost base, I think you're going to see us continue to take market share from competitors. And we may need to do that this winter based on price. However, given the uncertainty we have over the H2 Boeing deliveries that have been accentuated by the collapse of the Yellowstone River Bridge in Montana, our significantly higher fuel bill this year, our fuel bill will be up a billion euros over last year, the continued volatility of unhedged oil prices, very limited H2 visibility, and our expectation that the risk of tighter consumer spending in the second half of the year We still remain cautiously optimistic that full-year profit after tax will be modestly ahead of last year. It is, however, still too early to provide any meaningful FY24 PDT guidance. We don't think that will change until we get to the H1 results in November. I would, two other, a couple of other closing points. I would look at the very strong growth profile we have here. We're very excited by our entry into the Albanian market this winter. Albania is a market that is, I think, ripe for exploitation. It's been hampered in recent years by only having one high fare carrier in the market. and I think our arrival into Turman and Albania to very low, materially lower fares than the incumbent carrier will mean pretty dramatic growth in that marketplace. We were pleased and delighted last week. Eddie Wilson, Jason McGuinness, our Director of Commerce and myself, we spent Wednesday, Thursday in Ukraine, where we met with all the main airports, Boryspil and Kiev, Lviv, Odessa. We were, I think, inspired was the right word by the state of readiness of those airports. They really have kept their people employed. The airports are ready to rock and roll the minute it is safe to do so. They're hoping to reopen some air routes into the main airports in Lviv and Kiev. Maybe by the end of this year, they're looking at a kind of Israeli type Iron Dome solution over Lviv and Kiev. And if they could achieve that, we'd be hopeful that the European authorities would allow a limited flight presumption. I think it's important for Ukraine and the people of Ukraine. I mean, we endured a 10-hour train journey from Poland into Ukraine, in and out. The one thing that's missing in Ukraine, Kiev, feels remarkably normal. But what they're missing is air travel. And we I think it's incumbent on all of us in Europe to support Ukraine as best we can. And I think the best way we can support Ukraine is by leading the return to air travel. So we continue to work closely with the EASA, the FAA to encourage them to reopen, at least even if it's only on a limited basis, the return of flights into Kiev and Lviv. Once the war ends, and we all hope it will be sooner rather than later, we will charge back into Ukraine. We've committed to basing up to 30 aircraft in Kiev, Lviv and Odessa. Kherson, Kharkiv will be later because those airports have suffered significant damage. But we intend to return back in there within four to six weeks of being allowed to do so. We expect to be connecting Kiev and Lviv with up to 25 or 30 European cities. Ukraine was a big and growing market for Ryanair prior to the invasion. And after they have successfully repulsed the Russians, we expect that Ryanair will be the number one airline in Ukraine. And in reasonably short order, we'll be the number one airline in Albania as well. I think this underscores the strength of the growth that is still ahead of us, in front of us in Ryanair, not just in Western Europe, but in Central and Eastern Europe, where the more we push into those markets, the more we take market share from our high fare competitors. One last thought. There is, I think, a slightly over-optimistic, we are looking forward to, we're holding a capital market day on the first week of September. The purpose that day is to take everybody through the MAX 10 aircraft order, a detailed drill down into the very exciting growth opportunities we have all over Europe for the next, and in those countries close to Europe for the next decade. We will not be updating profitability. We will not be discussing dividends or anything else. We really want to have a drill down into just the growth, the max 10 and what it will do for our costs. We will be sometime before the middle end of August issuing the Class 1 document together with the AGM notice for the max 10 order. And that will limit any commentary we will have between it and the AGM when we hope shareholders will back our vision and support the order for the MAX 10 aircraft. So I just want to make sure that we have punctured any irrational expectation that the capital markets, there will be some dramatic reveal it won't. But there will be very exciting, I think, news and communications on our decade of growth. which rolls out before us in a marketplace in Europe where capacity is constrained and where all of our incumbent competitors have seen are emerging out with COVID with materially higher unit costs than Ryanair is. I am astonished, never cease to be amazed. I looked at the numbers last week. Our PE multiple currently is 11. The PE multiples of Wizz and EasyJet who can neither match our profitability, our growth or our unit costs are also 10 and 11. So either they're materially overvalued or we're materially undervalued. But I'm sure the markets will work it out in due course. We look forward to seeing you all here at the Capital Markets Day in September. I think we have a very exciting story to tell on our new aircraft order and on growth for the next decade. But that will be the height of it on that day. Neil, you want to take us through the Q&A or any points you want to raise on cost of a handover?

I'll very briefly just run through, because in fairness, you covered off everything quite comprehensively. I think it's clear that we continue to have the unit cost advantage over everybody else, although there is a bit of price inflation coming through in the first quarter as we annualise the pay restoration and the pay increases that we've awarded our people. And as Michael said, we've invested very heavily in crewing ratios. This summer, we were operating up to about 5.8%. sets of crews per aircraft up from 5.4 sets of crews last year. So you're seeing that coming through. An increase in local ATC charges also coming through in the airport and handling line. So I think that that's apparent in the numbers this morning. The balance sheet in very good shape. We finished with 4.84 billion gross cash. And as Michael said, just under a billion in net cash, and that was after a billion in CapEx, including a $250 million signing fee on the Max 10, which we signed back in May. So we've got another $1.8 billion to go for the balance of this year. Our balance sheet became fully unencumbered last Friday when we paid off our final Ex-Im loan. So all of the 737, 800s, now fully unencumbered, which I think is unique. And that's reflected in the ratings that we got from Fitch and S&P up to BBB+. Hedging, again, as Michael said, very well hedged for the year, up just under 85% hedging, of which 75% is through swaps and the balance through options. So we've got about 25% of our fuel floating. And then as we look into next year, we've got about 40% of the first half of the year hedged out at approximately 75%. dollars a barrel and then some modest hedging into the second half of the year. Just some other bits and pieces, the Class 1 circular will be issued in the next couple of weeks and this morning we published our annual report for 2023 and our 2023 sustainability report on our website which sets out our ambitious targets for the next decade there as well and that's pretty much it for me Michael.

Okay, thanks, Neil. We'll open up to Q&A now. I'm joined here, we're in Dublin, we're Eddie Wilson, the DAX CEO, Tracy Malloy, Tom Fowler, Peter Larkin, Julius Comerick, and Neil is obviously joining us from London where he's doing the media. So we can open up to Q&A and I'll pass the questions around so we get everybody involved on the call. Thank you.

Thank you. If you do wish to ask a question, please press staff led by one on your telephone keypad. If you wish to withdraw your question, you may do so by pressing star flow by two to cancel. There will be a brief pause whilst questions are being registered. Our first question today comes from Savanthi Sy from Raymond James. Please go ahead. Your line is now open.

Savanthi, hi.

Hey, good morning.

If I might, on the sleep plan, it looks like there were some changes there, a little bit of MaxSense shifting around. I was wondering if that was kind of based on what Boeing is telling you or you're making some assumptions given what you're seeing today. And then just for my second question, I was kind of curious with the investments in the operational resilience. Does that get baked into the base and then we see kind of a more of a normalized growth on top of that? Or how should we think about some of the investments that are being made there?

and the impact on costs. Thank you. You broke up once or twice there, but if I picked it up, the only change in the fleet plan is just delayed deliveries from Boeing. And we've had to continue to be reasonably adaptive there. At one stage, we thought we might only get 35 aircraft for the peak summer this year. It now looks like, and I think credit to Boeing, they'll deliver all 51, but the last one will arrive on the 31st of July. So we are, that's cost us about three, 400,000 passengers through June, July. We've had to take about 200,000 passengers out of August. And we are moving back. We're going to be seven or eight aircraft short in September, October, because we start all the maintenance on the fleets. But other than that, there isn't any. And then we are moving some of the deliveries into summer of 2024, are moving back from February, March, April. They're moving into April, May, June. We're working closely with Spirit in Wichita and with Boeing to try to give us the most accurate figure we have on the fleet.

It looks like, Michael, your MAX 10 deliveries were a little bit delayed too, like different than what you had in May.

No, no, there's no change. There was some slight changes, just sadly, from the final experience and from the draft. There's nothing major in it, though, between the first three years.

Yes, the numbers are still the same per year. The investment operation resilience, you know, like, again, I'll give you the good, there's good news and bad news. The good news is that the airport, airport handling generally across Europe has been materially better this year than it was last year. Most airports, most handling companies are reasonably well staffed this summer. And so we're not seeing any significant changes. There's significant improvement over last year. The bad news is that ATC is a shambles. You know, they are short-staffed, particularly at weekends. You know, we have long complained about the 60 days of French ATC strikes, and the European Commission continues to sit on its hands doing nothing. I keep writing to Ursula von der Leyen. She keeps fobbing the correspondence off the DG move, which is a misdescription in terms of DG no move. Nothing is being done to Europe. The minimum we're calling for is protection of overflights during French ATC strikes. That hasn't been delivered. Most of the ATC providers, the Germans, the French, are short-staffed inexplicably and are incapable of providing the staffing that's necessary. Remember, Europe this year is only operating at 93% of its pre-COVID capacity. And yet ATCs have less staffing than they had in 2019 and 2020. It is a mismanagement shambles, but it's exactly what you expect from anything run by European governments and by the European Commission. But the continuing failure of the European Commission to take some action on this is inexplicable. I think it's inevitable that we will have to maintain that, I think, improved operation resilience for the next year or two until we see Europe take some action on air traffic control. You know, and we're still, we would expect it to be as bad this time next year. I expect next summer Europe to be operating at about 100% of its pre-COVID short haul capacity. And ATC will still be giving us capacity restrictions at weekends, short staffing, excuses piled upon excuses and nothing being done. So I think it is for the additional. Well, we've doubled up the operations capacity in Dublin and in Warsaw. But the additional crewing, I think it will be with us here for the next. summer or two. I don't think it's long term. I think ultimately something will be done about European ATC and the mismanagement of ATC but I wouldn't hold out any great hope that Ursula von der Leyen is going to do anything useful other than sit on her hands doing nothing.

Eddie, you want to add to that? I think the important thing is that what's within our control we are significantly better in terms of solving those issues so The two main call-outs that Michael touched on there was the increased crewing ratios, which you've got to be ahead of the curve of like six, 12 months ago to bring those people through. We're still training over 1,000 cadets a year, and we have significantly increased our cattle crew ratios. And quite rightly, as ATC is hopefully solved over the next number of years and we're growing, we can get crewing ratios. We can sort of lean into that. But more importantly, at the operations control center level, both here and in Bratislava, you know, labs has been particularly important to us in designing systems that allow us in this environment where you've got what would have been five, six years ago, meltdown days for us, and we're able to manage that in real time in optimizing the allocation of crews. That has been critical. not just piling extra bodies in, but the support and systems that we have here that are homegrown systems and are working very effectively this summer. I mean, it just, it makes you, you're able to get through without cancellations, unlike many of our competitors.

Thanks, Eddie. Thanks, Abby. Next question, please.

Thank you. The next question comes from Maniba Kayani from Bank of America.

Maniba, hi.

Please go ahead.

Good morning, Michael and Neil. So just on your comments on the softening in closing fares, is there anything you would call out in terms of specific geographies? Would you say there's a change in customer booking behavior maybe? And kind of what portion of the second quarter, fiscal second quarter is booked currently? And then a second question just on uses of cash. And in the video, you talked about a potential cash return to shareholders. What are you thinking at this point across like dividend or buyback and any metrics that we should think about in terms of a potential size in March this year, fiscal year?

Okay. Thanks, Praneepa. Again, I would draw your attention. I think it's important we say it. Partly this is, I think, is a function of, you know, the weak prior year comps in Q1 and the strong prior year comps in Q2. As we went through April, May and June, the close-in fares we were seeing continuously kind of booking up, your fares were significantly up ahead of budget expectations. As we move into Q2, the close-in fares are closer to our budget expectations. There's a kind of a levelling out. We're still running marginally ahead of our budget expectations. And, you know, low to mid-double digit ahead of Q2 last year. But I think what we're trying to communicate here is in the last number of weeks, the close-in stuff has softened. In some cases, we're now looking at very few seats left available to travel. We may have oversold Q2 a little bit ahead of schedule, but we're not seeing the same kind of jump up in close-in bookings that we saw in Q1. But I think that's more a factor in Q1. Our budget was kind of predicated on last year's week prior year comps, whereas in Q2 it's not. And again, I don't need to be worried about here, but I do want to communicate, you know, we've had a very, very strong Q1. Q2 will not be very strong. It will be good, but not this good. And I don't want any kind of irrational exuberance building up out there. No more than that. uses of cash, we've tried to be as transparent as we can. The board has set us kind of at four in sequential, the priorities in terms of cash and profitability. One, restore the pay cuts. We did that 24 months early in December of last year. We're agreeing pay increases with the pilots, cabin crews, our ground handlers across Europe. We've done deals with almost all the cabin crews. Most of the pilot groups are now largely done and we're working our way through the ground handlers as well. It's an ongoing process, but the board is committed. I think the first use of funds was pay restoration and rewarding the people who stood loyally with us through COVID with pay increases. The pay increase would be modest. You know, we are already... significantly adding to the headcount here. The crewing ratios are higher. But, you know, the pilots, cabin crew and ground hand, the people delivering the service deserve pay increases first. Second is debt reduction. We have bonds, which, you know, we're looking at bonds. We're repaying bonds here where we're paying an interest rate of 1, 1.25%. The refinancing cost of those bonds today would, even for us with a BBB plus rating, would be 4.5%, 5%. So we are committed to paying down that debt. As Neil said, we paid down the last of our exit debt last week. We have another bond of 750 million to pay in August of this year. And then we have two more bonds of about 2 billion, one of which is due in September 25 and one in May 26. And then we will be completely debt free at that point in time. The third use of funds is going to be CapEx. As Neil said, we're in peak CapEx this year. The CapEx does begin to run off as we run through the next two years, and we have that two-year gap between the last of the GameChanger deliveries and the first of the Mac10 deliveries. And only after we're confident that we can fund all of those commitments can we look at returning cash to shareholders. I think it's something we'll be focusing on at the end of this year. Maybe we'll see some light at the tunnel when we get to the half-year numbers in November, but it certainly won't be before that date. I think we've communicated clearly that it's more likely to be dividends than share buybacks. And if you read the press release... I mean, in terms of scale, I think we're conscious of the fact that during the worst of the COVID crisis, the shareholders invested 400 million in the company. That enabled us to access the bond markets. We raised 1.2 billion at the time during COVID at an annual interest rate of under 1%. I think our kind of starting position, if we're looking at a dividend, would be try to return as much, if not all of that, 400 million as we can. But we won't make any decisions on that, I think, until the half-year numbers in November are maybe in Q1 or at the end of this year or early next year.

Thank you.

Thanks, Moniba. Next question, please.

The next question comes from Harry Gowers from JP Morgan. Please go ahead. Your line is now open.

Harry, hi. Yeah, morning, gents. Just two questions, if I can. So the first one, just on the ex-fuel cost, something up to euros in March 24. And I think, Neil, you indicated previously you'd want to keep it flat in March 25 year-on-year. So is that still the case? And then, Michael, just on the trimming of the full-year PACS guidance, do you think there's a possibility you can actually make up

1.5 million over the rest of the year or is there probably a heightened risk server today is actually lowering that packs guidance further thanks okay neil you can take the extra unit costs and uh i'll ask tracy if she's any comments on that and then i'll deal with the uh the full year parks guidance okay um harry thanks thanks for the question uh on fy25 we would be hopeful that you know we'd be up at about just over 33 euro passenger at the end of this year on an ex-fuel basis. We would be hopeful that we would maintain something along those lines into the following year, where 5.8 sets of crews per aircraft. We would hope we wouldn't have to go any higher than that for operational resilience into the following year. We do have some modest pay freeze coming through, but I think we can observe that in the numbers that we have. So, yeah, I mean, the hope and the plan is that we'll be broadly in line with the 33 into FY25. Tracey, you want to add to that on the unit cost?

Yeah, probably what Neil has said, it's really the two main drivers are staff and then we see airport and handling. And, you know, staff is, you know, increased brewing ratio, pay restoration and modest pay increases and then airport and handling. As was previously indicated, it's increased state local ATC and then we're seeing some wage inflation on the self-handling and the handling side of things there. So they're really the two main drivers in that €2 cost increase.

Okay, and on the trimming of FY, we could, you know, if we were in the old days, I think we would have gone balls out. It's 185 million and we're just going to dump lots of capacity into the winter. I don't think the marketplace requires that now and nor would we. I think we operated quite successfully last winter by trimming out a lot of loss-making midweek capacity, but running the full schedule at weekends. That's the way the winter profile looks. except for those new markets like Albania and or Ukraine, if we can get in there this winter. But generally speaking, no, I would not be minded in current markets, particularly where there is capacity is still constrained in Europe to be artificially dumping prices or artificially growing midweek capacity during the winter season just to hit some target of 185 million. If as a result of the Boeing delivery delays, we only have capacity for 183.5 million, then, you know, I think we will aim for the 183.5 million. We'll try to manage the yields as best we can during the winter. The yields in the winter will be lower than they were in the summer. The narrative that the era of low fares is over and is never coming back is not a correct one. There is still lots of low fare availability. Our average fare in the first quarter was 49 euros, which I think by any measure means is a low fare in Europe. It's certainly far lower than any other airline in Europe can provide. But no, we will not run additional mid-week capacity this winter just to scrape in another 1.5 million additional passengers. Eddie, any else you would add on that commercial?

Yeah, I mean, I would agree there. I mean, as we look through to the winter, we've gone back again, like compared with winter 22 in terms of mid-week capacity, that's about 30%. And we're up to 70% for weekend. So that's evidence of that sort of trimming that's going on mid-week. in terms of the review of what happened last winter. Also looking at, I mean, Easter will be slightly earlier this year as well. And, you know, putting in Christmas extras and looking at sort of those traps and activity, you know, beyond the 10th of January as well. So we continue to do that at depth by the numbers. We've got to look at the bases that we opened this summer to make sure that they go through into the wintertime, you know, to give them the support. I mean, the canaries, again, are particularly strong, and leisure routes, again, into places like for winter sun into Morocco, Jordan, places like that. So that's where we'd be concentrating the efforts rather than chasing passenger numbers. So if you were to ask me, unlikely to make that up as we would have done in the old days.

Okay, thanks, Eddie. Next question, please.

Thank you. The next question comes from James Hollins from Exane B&P Paribas. Please go ahead, James, your line is now open.

Hi, Michael. Yeah, you're going to hate this question, but I'm going to come back on the pricing. You talked about low double digit, then you talked about mid-teens, and then it was low double to mid-teens. If you were lucky enough to be an analyst, would you be thinking about mid-teens is what you're currently sold at, but the management of Ryanair have been quite cautious on that close in? And then the second one is just on your pilots. Are you seeing any sort of, I think everywhere except the Belgians have done on contracts, are you seeing any of them sort of coming back and saying, look, performance is good, summer's good, we want a higher pay increase? Thanks.

I'll ask Eddie to come back on the pilot and negotiate. Sorry if I'm bad. I mean, I would have guarded mid-teens as low double digits. We expect that the yield number, the average fair in Q1 was up 42%. We expect at the moment, our best guess is that the yield performance in Q2 is going to be somewhere in between, I would have said 10% and 15%. At the moment, it's running at the upper end of that range, but I'm a little bit cautious. The close-in stuff has been a little bit weaker for the last four or five weeks. I don't see a reason why at the back end of August or the September bookies, the moment would be dramatically different. So I would be picking, if I was lucky enough to be an analyst, if I'd only worked harder in school and got a job as an analyst, I would be pitching it very much in that 10% to 15% range. It's still... will demonstrate a reasonably strong Q2. The H1 numbers will be strong for the year, given that last year's H2 was 1.2 billion PAT. But, you know, this is a long winter. And, you know, I'm slightly cautious about in that there is still significant pent-up demand for holiday bookies this summer. There's still constrained capacity supply. You still have lots of competitors who have much higher unit cost to try and drive up pricing. But into the winter, you know, the higher interest rates, higher mortgage rates, consumer price inflation, it has to feed back into air travel at a some point in time and you know i would be expecting that this winter so i'd be a little bit more bearish in the second half of the year um but we still do i mean we're heading for a very strong and very profitable year overall i would just be cautious into the second half of the year and then you know we're looking at next year where if oil prices continue as they are we could pick up anything up to a billion in terms of additional savings on uh our our numbers so you know the medium term outlook here is very strong uh the aircraft order means we can grow 300 million passengers within europe over the next decade i would just be cautious on you know we've had a very strong q1 q2 is not going to be that strong but then with a much tougher prior year comp and i would be cautious into the winter and that's the message we're communicating with our unions as well You know, there's lots of silly wage demands out there, you know, from ground handlers and airports. It's not that good out there. You know, people are... I think there was still a lot of pent-up travel demand this summer. I think capacity will rise again into next summer, mainly because Ryanair will add another 50 aircraft for next summer as well. I would just be cautious about... uh strong q1 reasonably good q2 and then i would hold my breath and see what happens the second half of the year eddie do you want to give us an update on where we are with the kind of uh the pilots or wage settlements uh into our rising uh kind of profits yeah i mean i'll just add just onto the fairs there that like don't forget like last year they're you know like after the ukraine uh invasion and uh by russia like

When we came into the summer, into Q2, there were exceptional close good affairs last year as well, which are not going to be repeated. Just on the pilots, yeah, I mean, our commitment was to stick with our people who were with us all the way through COVID when we were doing zero flying. And we put in emergency agreements at that stage. And we had pay reductions. Those pay reductions were restored early, you'll recall. towards the end of calendar year 22. In the case of pilots, it was the case with other groups, there was, with those extension of those deals, there was no pay increase in April and we had revisited that with a number of our pilot groups and those agreements are now, in some cases, extended with a pay increase this April. obviously, which is feeding into the restoration where a year was brought forward. So we look at those, I'd echo what Michael says there, outside of the sort of the pilot groups, particularly with third-party handlers, and particularly in the UK where you've got inflation is at much higher rates and hitting people on those lower salaries. So there has been some good news on inflation recently. But again, you know, we're growing and we will always look to our competitive position in the market. And we've reacted twice by doing restoration early. And also that flowed into April this year where we re-engaged with unions in the major markets and have come to agreements with them.

And I should say as well, you know, we did have a strike by, you know, I'd say about 60% of the Belgian pilots last weekend. We still ran about 60% of our Belgian operations through both days. Now, you know, we would have preferred not to if they hadn't gone on strike. But if they want to go on strike, they're free to go on strike. You know, it's important, I think, too, that they understand that we can still run about 60% of our Belgian operations on aircraft that are based outside of Belgium. We were heartened by the fact that about a third of the Belgian pilots turned up for work, and we ran a significant proportion of the Belgian base schedule. There was no strike this weekend. They've called another strike for next weekend. But as we've said to them all, you know, look, you can have exactly the same kind of increase that we've agreed with the Italian pilots, the Spanish pilots' unions, But, you know, you can't have something stupid and they, you know, seem to have a kind of view of life that it's Belgium and Belgium is somehow different. It isn't. We will and are doing our best to be fair and work with our union partners and our people, both pilots, cabin crew, engineers, ground handlers. But we're not minded and nor are we going to fall over and concede some ludicrous pay increases just because, you know, we've had a strong Q1. Q2 is OK and this winter could well be tough and challenging. So as we have always done, if we have to take strikes, we'll take them. We'll try to avoid them as best we can. but they get a disproportionate amount of kind of PR coverage. You know, I mean, a Belgian pilot strike is far less impactful to us than a French ATC strike. We cancel more flights on the day of a French ATC strike than we do on a Belgian pilot strike. So we are meeting with the Belgian pilot union again this week. We would hope to make some progress with them. But if we, you know, if they want to go on strike again next weekend, they can go on strike next weekend. We will work our way and manage our way around it. As we are, you know, with the, I should also say, with the fires in Rhodes, in Greece this weekend, it's important, again, to put that in some context. You know, there have been forest fires that were in the Algarve this time last year. Forest fires are a known phenomenon. They do appear to be getting worse. But in the case of roads there to the south of the island, most of the resorts and the airports are in the north of the island. We've seen no demand for passengers over the weekend seeking to cancel flights to roads. In fact, all of the passengers who were on roads, you know, have return flights scheduled today, tomorrow, Tuesday, Wednesday, Thursday. So the kind of stupidity you get out of some of the media this weekend, are you cancelling your flights to roads? No, of course we're not. A, because Rhodes Airport is open, and B, because we have lots of pastors who are in Rhodes who want to return from their holidays, and there are more pastors still going out to Rhodes. So, You know, it is the silly season. The media tend to latch on to pictures of forest fires. But when you're flying to 260 airports across Europe, are we seeing any changes in demand patterns? No. In fact, if anything, over the last two or three weeks, we've seen stronger demand ex-Ireland, ex-UK. People trying to get the hell away from the unseasonably high rainfall we've had in Ireland and the U.K., which, if anything, gives me even more confidence for sustained growth in Mediterranean holidays over the next fucking decade as we grow to 300 million passengers a year. John and James, I hope that answers the question. Next question, please.

Thank you. The next question comes from Gerard Castle from UBS.

Gerard, hi.

Your line is now open.

Hi, everyone. Morning. I just want to a question, firstly, on auxiliaries. You know, they were up 4% per pax. Obviously, inflation's running higher than that. So, you know, are you sacrificing volume? Is there a mix impact? Or, you know, you're just not pricing as aggressively as maybe you can at the moment? And I guess, you know, linked onto that, you've said something about, you know, fair pricing during the current quarter, anything on auxiliary pricing. And then just looking a little bit further ahead, you know, you've got a number of environmental headwinds coming under 55. You've obviously got the ETS step down in free credit next year. And then you've got SAF, of which, you know, I'd probably say you must be best of breed at 12.5% versus what the EU is saying by 2030. But I guess looking at that, are you worried about the cost advantage, especially given that you've also committed so much more than the EU is asking and even if it is the right thing to do for the environment. Thanks.

Thanks, Gerard. I'm going to ask Tracy to take the ancillary question. Neil, you might come in with some comments after. And then I'm going to ask Tom Fowler, our Director of Sustainability, to deal with the environmental measures So, Tracy, over to you on ancillaries.

Yeah, so we've seen ancillaries increase by 4% from passengers to just over €23. Pretty much, as we thought, we have done a lot. But the two main drivers is on seats and priority boarding, where we've done a lot of work with labs, where we've introduced dynamic pricing. So I think we're very happy with what we see at the moment. They're roughly about 32% of total revenue. So pretty much, we're obviously 50% to 60% increase in ancillaries on the year.

Neil, anything to add to that? No, just, Jared, we were quite clear. We'd made a big jump from €19 a passenger to just under €23 a passenger. We'd indicated 50, 60 cents increase, as Tracy just said there. We're pleased that we're achieving that. Some areas where we'd like to make a bit more, we're working further with labs on the pricing models around seating and priority boarding, see if there's more we can do there. We're looking. at a more detailed level on the odd board spend to see if there's more we can do on that. But we're pleased with how we're developing. It's in line with what we had indicated we would do. And this is growth on top of a significant step up over the past couple of years. And there's another year or two to go in the growth on ancillaries.

And Thomas, you touched on environmental measures and their impact over the next two to three years.

Yeah, look, obviously the ETS is the big one losing the free allowances, but it will impact everyone the same who flies into EU will lose their allowances, Gerard. But what we are doing, obviously, is taking in the current game-changer aircraft, which is 16% more fuel efficient. And we've also locked in the Max 10 deal, which will replace some of the 800 MGs and be 20% more fuel efficient. So I think on the ETS side, we'll obviously still give any... cost advantage won't leak because everyone will be hit the same with that who flies in through you. And then on the staff side, look, we've set the 12.5% target. It is aggressive. It's twice the European mandate. But the cost isn't unknown at the moment. We need to see production rise. And like what I'm talking to fuel suppliers, we won't see the premium we see today if we see production staff increase. So I don't think that the cost disadvantage will be that significant as you may look at it today. So it's just going to be as we see a follow-up to the production ramp-up.

Yeah, and I would add to that, just, you know, if you take the environmental measure impact, or James, or Jared, rather, sorry, over the next five years, you know, we'll take delivery of another 100 game-changers, 4% more seats, 20% less, 16% less fuel, And in that period, we've taken the first two years of deliveries of the max 10, 28 percent more seats and 20 percent less fuel. Like the technological revolution that's going on with the engines and their fuel consumption will more than fund any kind of environmental costs. The fuel savings here are gargantuan. particularly a marketplace in Europe where capacity will continue to be constrained over that four or five year period. I think the real underlying story here that we should keep tacking back to is that, you know, the market in Europe has changed. Capacity is now constrained. It will remain constrained for another four or five years, if not out to 2030. The reason I wouldn't be quite as, you know, if there'd be another crisis between now and 2030, I just don't know where, when or what it'll be and where it'll come from. But capacity is going to be meaningfully constrained. Europe is consolidating. Remember, that consolidation is being led by airlines like Lufthansa, IAG, whose average airfare is north of short haul airfare is 200 euros. We're still continuing to expand our capacity in a marketplace that's constrained with aircraft that burn between 16 to 20 percent less fuel per seat. with an average fare that in Q1 this year was only 49 euros. So I think we will, fares will continue, I think, to modestly rise for the next two or three years in a constrained capacity environment. Our competitors will be under considerably more cost pressure than we are. They will drive fares up harder and faster. You only need to look at the German market this year, where Germany is the market that has recovered least post-COVID. It's only operating at about 75% to 80% of pre-COVID capacity. And airfares have almost doubled in the German domestic marketplace, which is largely now a Lufthansa monopoly. So I think what we're seeing in North America, which has been, you know, five, 10 years of consolidated airlines with a reasonable pricing power and upward trend in fares is about to be repeated in Europe for the next decade. Next question, please.

Thank you. The next question comes from Satish. Go ahead. Your line is now open.

Satish, go ahead. Yeah, sorry. Thanks, Michael. I've got two questions here. So first is on the operational resilience. Obviously, you have invested in the resilience into the summer. So out of the KPLX sector per day compared to this year versus last year, and do you see further scope for improvement as we go into the rest of the summer? And then the second one is around the winter schedule. If I say you did flag that last year, you optimized the winter schedule with more weekends or taking some of the weekday bookings out. And would you expect a similar profile to be followed this year in terms of your winter schedule, excluding the new markets that you're likely to launch? Yeah, thank you.

You broke up the first one. So you want to come to a scope for improvement of on-time performance, is it?

No, it's more about the operational resilience. Do you see more, like, do you see further need to invest to improve, like in terms of sector per day term?

You mean, I'm asking, do we need to invest further in office resilience? Is that the question?

Yeah, yeah, that's right. Yeah, sorry. Yeah.

Yeah, OK. I mean, no, I don't. We have doubled up the ops control capacity in the two ops centres in Dublin and in Warsaw. We now think we have ops capacity here for close to 300 million passengers a year. That has been significantly helpful, particularly on those weekends when we've suffered significant delays. French ATC strikes or disruptions. We're able to recover much faster. We manage the crews much better. We call in the sandbys much better. So that has been significantly improved. I don't see any further requirement for operating in that, although I would come back to what I said in an earlier question. I think that those heightened crew ratios will remain with us certainly for the next two or three years until we see the European Commission take some action on improving ATC performance around Europe. And I would, you know, instead of that complete 20-year shambles of the single European sky, we need more competition between ATC providers. We should let the efficient ones provide services where the inefficient ones can't. I think maybe I'll ask Eddie to comment on the optimisation of the winter schedule and our plan for this year vis-à-vis last year. Eddie?

Yeah, I mean, if you look at the sort of proportion of what we did mid-week back in winter 19, it was 37%, and then 35% winter 22, and it'll be 30% this winter. So that's probably as far as you're going to go on that. But that can, you know, and we're still growing sort of capacity, just, you know, to be short of 10% there. But we continue to sort of shake out that mid-week capacity as we continuously review route profitability. And there's only so much you can optimize. You can't go much below 30% given the 5-4 roster that we have for pilots. But that's continuous dropping from 37% to 30% this winter.

I think the only exception would be obviously Albania, where we're going to be very aggressive on pricing and capacity additions there. We're working closely with the Albanian government and the Albanian airports, who I think feel a bit let down by the high fare incumbent who hasn't delivered any growth until we showed up. And then, obviously, if there's any opportunity or opportunity to return or reopen some air travel into Ukraine, that we would add that capacity to the wind. That's not in our current plans, but we would add that almost regardless of the airfares. We are determined to be first and back into Ukraine, and we will invest heavily in the recovery of Ukrainian air travel once it's safe to do so, declared safe to do so. Next question, please.

Thanks, Michael.

Thank you. The next question comes from Mark Simpson from Goodbody. Please go ahead, Mark.

Okay. Yeah, morning. Two questions. One for Neil on the balance sheet and managing the cash accumulation. I'm just wondering if you can take us through your thinking in terms of how you maximize returns or maybe match cash for future CapEx. And that's obviously going to be an increasing feature in the next couple of years. And then the other question for Tom, just on sustainability, you mentioned in the sustainability report the retrofitting of the 409 NG fleet. I'm just wondering how that is going in terms of the completion of that program. Okay, guys. Mark, can I start?

Yeah, well, Mark, as you rightly pointed out there, for the first time in a long time, our treasure has now become a, a profit center for us. We're operating net interest positive at the moment and like to do so on a full year basis. So last year I think we were negative about 34 million on interest this year. We'll be positive possibly up as high as 30 million on interest this year. So we're managing our cash in a very conservative basis. We don't put it anywhere where we're not going to have sleepless nights in relation to it. So very conservatively managed. We obviously found a home for 750 million off our cash in the middle of August where we're paying down a maturing bond and that will obviously go ahead in the next couple of weeks. CapEx with another 1.8 billion to go this year and again the assumption is that we will finance that out of our cash resources. Thereafter it depends really on what's the cheapest form of financing. for the group. I think for the next couple of years, cash will remain the cheapest form of financing, but we'll remain flexible, whether that's going back to the bond markets, whether it's doing some job codes, which we haven't done for a number of years, or visiting our friends in the unsecured or secured banking market. But cash is clearly the cheapest form of funding ourselves at the moment, and we're making a turn on the cash in the

Go on, Mark.

No, just saying, I think you have to go back to December 2002 for it to be a profit centre.

Yeah, that was before I joined, Mark.

Tom, sorry.

Tom. I'm just on the scimitar windlass, Mark. So we were just under 30 aircraft were installed with my year end, and the plan is we'll install another 70 this winter during our maintenance programme. So hopefully by the end of this year, 100 aircraft will have the scimitar windlass on them. I'm going to improve that again next winter. as we go through the maintenance. 30 at year end or quarter end? 30 at year end. So we do it through maintenance seasons, Mark, take a few days just to take it off and get it retrofitted and reinstalled. So the plan is definitely for this winter.

Okay. Thanks, Mark. Next question, please. Sorry, go on. Mark. No, he's gone. Okay. Maxine, next question, please.

The next question comes from Stephen Furlong from Davie. Please go ahead, your line is now open.

Hi, Michael. Most of my questions have been answered, but I just want to add two things quick. On SaaS, which seems to be important, I saw overnight IAG were investing in making an equity investment in a company. Would you consider vertically integrating or is it more just do deals or just work with your suppliers? That's the first question. I'll ask that one first.

Okay, honestly, the answer is no, but look, we would never say never. I mean, the problem with investing in one supplier in one geography is you've got to get the SAFs to the airports. And ultimately, that's why I'm still of the view that it'll be the oil majors will be the ones who will be the only ones who actually have the capacity to produce SAFs in meaningful volumes and then get it to the airports. There's no point in producing SAS in Tralee or SAS in fucking Newcastle if we needed 27 UK airports. But, you know, we would support IAG investing in somebody producing SAFs. But ultimately, we think the people who will supply SAFs in the appropriate volumes we need quickly and at the airports where we need it will be the oil companies, which is why we've signed up SAF supply agreements now with Shell, Neste, OMG and Repsol to cover specific geographies across Spain, Austria, Germany,

Where else? Holland, UK. UK, with Shell and France. So, you know, I think that Michael's point is key here. When you look at the investments, they're doing it close to Heathrow, their main hub, whereas we've got 91 bases around Europe trying to build supply chains there to keep the staff safe and just prove the challenge at this moment in time. So I think the MOUs are more important for us rather than an investment in a facility.

Yeah, but we would, you know, we would endorse and support IAG's strategy in doing it. Whatever accelerates and maximizes, A, the production of SAFs, and B, getting it to the airports, which is where we can, the only place we can uplift it is at airports, we would very much support and endorse. Second question, Stephen.

Yeah, I was just wondering with EU, are they doing anything in the context, it's more kind of regulatory stuff, but in, for example, I know you talked about overflight, but... things like either ownership rules or another thing would be the imbalance in terms of long-haul, short-haul, which obviously long-haul is not part of ETS. I know they have Corsia, but, I mean, do you see any chance that over the next couple of years there's any movement in those two items?

Julius, do you want to give us an update on the regulatory developments, please?

Yes. Thanks, Stephen. Hi, everyone. Steven, on ownership and control, my sense today is that we are not going to see a significant improvement in that area for the next 12 to 18 months. I think we need to wait for the new commission in Brussels in the autumn of 24, and then a further improvement in the relationship between the EU and the UK. On overflights, I see an increased appetite for action in this area. You may have seen in the media that Michael personally delivered over one million signatures under our petition to President of the European Commission, Ms. von der Leyen. Now, she unfortunately wasn't able to be in her office that morning, but maybe next time when we bring her the next million signatures, perhaps she will be there. But on the 1st of June, the day after the petition was delivered, there was a transport council in Brussels and transport ministers from Italy, Spain, and a few other countries spoke very strongly about the need to protect overflights, and clearly those comments were addressed at the representative of France, who didn't have much to say on the day, but that to me was a significant milestone in terms of that particular difficult issue. When it comes to other regulatory issues, I mean, obviously on the environment you've You have actually highlighted the significant imbalance in the treatment of short-haul versus long-haul operations. But it is important to remember that ETS is only restricted to intra-European flights until 2026. And after that, it automatically extends to flights that go outside of Europe. And a specific decision will be required of the European Parliament and the Council to continue the restriction to intra-EU. And I just can't imagine in the context of the environmental debate that's ongoing in Brussels that the Parliament, that the same Parliament which wants to be seen to be greener and greener every year, will continue to vote for the restriction of ETS to intra-European flights only. My sense is that ETS will have to, in the next few years, be extended to apply to extra EU flights also.

Thanks, Julius. Thanks, Julius.

Next question, please.

Thank you. The next question comes from Ruri Cullinane from RBC Capital Markets. Please go ahead. Your line is now open.

Ruri, hi. Good morning. Yes, I was wondering if there's anything you could share about your limited Q3 visibility in terms of how well you're booked in terms of loads, factors or fares. And then secondly, you made some interesting comments about... potential impacts of consolidation earlier in the call. Clearly, some parts of Europe have become more consolidated over the pandemic. So, are you seeing any better pricing power or anything like that in those markets now?

Okay, thanks. Your line wasn't great. Q3 visibility, look, we have very little. At the moment, our forward bookings in Q3 are between 10% and 15%. So, it's nothing. And that's through October, November, December. Q4 is less than 4%. So, we are where we are. We're at this stage every year. You know, it's a bit unfortunate that our year-end runs to the end of the winter season, but it is what it is. We have effectively zero Q3 visibility. And as I've said, repeated before, I would expect some, you know, the impact of rising interest rates, consumer price inflation to be hitting consumer spending And, you know, the kind of discretionary stuff, the city break, the Christmas markets might be a little bit weaker this winter. And again, that feeds back to why we won't blindly chase only 185 million passengers. We're going to cut the midweek capacities. We'll run the weekend stuff through the winter. And if we finish up at 183 million passengers or we finish up at 183.2 million passengers, it'll be what it'll be. The impact of consolidation, I think you're seeing pricing power around the piece generally. If you look at all of the reporting from the airlines, from the to Air France, to EasyJet last week, to us today, we're all seeing, you know, reporting a similar situation, strong Q1 pricing, although I would highlight that in our case, it was due to a very weak Q1 pricing last year. Q2 is well booked. We think Q2 fares are up by a double-digit percentage, although in my case, I think it'll be low double digits. That is a reflection of pricing power. Now, I think that's not so much consolidation. A lot of that is down to the fact that Alitalia emerged out of COVID with only 50% of the capacity they had going into it. TAP have only 60% of the capacity they had pre-COVID. Lufthansa are still only operating at about 85% of their pre-COVID capacity. So you have all of the legacy guys across Europe constraining short-haul capacity, and there is no doubt this summer that the transatlantic inbound has been very strong, and you're seeing the Asian traffic begin to recover. I think next summer. But, you know, in S24, we'll be closer to 100% of the pre-COVID short-haul capacity. But you'll still have another year of recovery of the age and inbound. Maybe the transatlantic won't be quite as strong in S24 as it was in S23. But generally speaking, it is very difficult not to foresee there continue to be constrained short-haul capacity in Europe. and some degree of meaningful pricing power in the system, particularly during the two peak, during the two summer quarters. I think the winter quarters will always be a bit more difficult and a bit hard to predict. But that consolidation will continue. I think when they've taken out what's left of ETA, when TAP has been consolidated, somebody will turn to, I think there's EasyJet is, clearly a target for, I would say, consolidation. The Scandinavian airlines, you know, which are heroically loss-making SAS and Norwegian, may well be a target for consolidation. And ultimately, then, you know, somebody will have a look at Wizz. If it's not Lufthansa re-establishing some eastward... operations you know their expansion into the middle east may well encourage an investment from middle east ownership who are all talking a big story about growth and airline growth but constrained by capacity where whiz at least has access to aircraft they're not very cheap and the pricing is very expensive but at least it does have access to aircraft and they would be far better deployed in the Middle East, where at least they're competing with similar high-fare airlines, rather than blowing their brains out trying to compete here in Europe or in Central or Eastern Europe with a really low-fare airline like Ryanair, whereas they only masquerade as a low-fare airline. Next question, please.

The next question comes from Conor Dwyer from Morgan Stanley. Please go ahead, your line is now open, Conor.

Hi guys, thanks very much. So the first question is back to the passenger numbers. Could you give some colour maybe on phasing of the seat growth that gets you back down to that 183.5? So schedule data has you growing seats in Q2 at about 11%, but that seems a bit high now. Maybe closer to high single digits in the September quarter, and then maybe down to mid to high single digits in the H2. Interested to get your thoughts on how you're trying to grow that there. And then secondly, lots of talk of M&A and obviously your own growing cash balance. So I'm just wondering, would you ever consider doing large M&A in the space? You know, you obviously always talk about, you know, growing organically, but it's quite a significant cash balance building up there over the next few years.

Thanks, Conor. I can't really help you. Look, we're going to take down the full year numbers from 185 to 183.5. You know, take a bit off every month for the next six or so to the end of the year. Most of that, we lost 300, 400,000 passengers in April, or in April, May and June, 300,000 in July. And then we'll have to shave a bit off September and October. But I'm not getting down to the monthly traffic numbers here. It's not a significant movement, but it is a movement. Large-scale M&A, I would say, is highly unlikely. We tend to avoid large-scale M&A. You're generally inheriting somebody else's problems. I can't foresee. And also, I think given our size, it is very easy for the legacy carriers like Lufthansa, Air France and BA to mobilize or to lobby against Ryanair M&A. And given that we, with the aircraft orders we have in place now, we can grow organically to 300 million passengers a year. Frankly, I don't really see why we would want to engage in M&A. We have in the past done two deals. We did Buzz originally back in Stansted in the early noughties, where they had access to about 10 or 15% of the slots in Stansted and we thought they were, we wanted access to the slots. And then we did a little bit with Lauda three or four years ago, pre-COVID in Vienna. Both of them were painful, bloody experiences, although, you know, they've been validated over the longer term by building up very strong positions in Stansted and in Vienna airport. But, you know, when you run a very efficient, highly profitable, low cost operation. we don't have management resources to deploy into large-scale M&A. We might do some smaller stuff, kind of add-ons, but they'll be very small and, I would say, insignificant. Neil, Eddie, anything you want to give your personal opinions on that going forward?

I would echo that. I'd much prefer to, on a personal level, grow organically for lots of reasons. But, yeah, I mean, I remember the Buzz integration, the original sort of KLM offshoot back in 2003, and now they're obviously to a lesser extent, but it takes significant management time. We have a large aircraft order. We have two years or 18 months to sort of be a gap between there to gear up for the next, and it's just better from a management perspective to be doing that in a linear fashion rather than employing resources.

But we would actually be encouraging it. competitors to keep consolidating because it's been the only... I mean, I think the real challenge, and they will all deny it, but the real challenge for EasyJet and Wiz and some of these others is actually as Ryanair continues to expand into those marketplaces, there's less and less of an ability for those guys to compete with us. And if you're not going to grow, you're going to have to find M&A as the only way forward. I mean, I... continue to believe that in the medium to longer term, Europe would consolidate into four very large airline groups, which would be Lufthansa, Air France, KLM, IAG and us. Neil, sorry, I cut across you.

I was just going to say that on the M&A, where we pay a role, Conor is effectively on the remedy. So as that consolidation that Michael's talking about takes place, we'll be in there where there's competition overlaps and we'll operate on that basis. As long as we can continue to buy aircraft at very attractive levels and we've locked away a decade of growth with our latest aircraft order, I think that's the best way for Ryanair to deliver value to our shareholders.

Tracy, any on passenger numbers?

Yeah, just on the passenger numbers, that question is probably more weighted towards the second half of the year because we've had significant growth in phase two last year.

Okay, thanks. Okay, next question, please. Thanks very much, all. Thanks, Conor.

The next question comes from Alex Patterson from Hill Hunt. Please go ahead, Alex. Your line is now open.

Alex, hi. Hi. Morning, everyone. Yeah, you won a lawsuit last week in Ireland against On The Beach. If I remember correctly, your objection to OTA selling seats has been running for many years. I think the legal cases date back to 2010 at least. But they continue to sell your seats now. So I don't know if you can say what's your sort of objective. Is it to stop them selling seats? Is it to only let them do so through a commercial agreement? And what are the financial implications for you of achieving that?

Eddie, maybe you might give a couple of examples of why we object to the non-licensed screen scrapers and we already licensed screen scrapers.

I mean, you have this sort of complete disconnect out there that screen scrapers are out there saying they're providing a service. All right, they're not providing any service. And what they do is that in the vast majority of cases, scrape our website, sell fares, and in a lot of cases, like huge markups, not just on the fares, but on ancillaries, then flip the payment methods and then flip the contact addresses, meaning that you know, we're not able to contact pastors, not able to process refunds, and then the OTAs disappear over the horizon, no customer service whatsoever, and people are caught in the middle. And they're caught in the middle because they're not able to access their bookings, because nowadays you need to have, even access your booking, you need your email address, you need your reference number. So, like, this is just, like, highway sort of robbery, abandonment of... of customers and the difficulty in trying to actually provide a service to them, particularly in times of disruption. And of course, it's the sharp end when it comes to disruption. So they don't provide a service at all and then sort of dump all the customer service fulfillment on without the customer having any information in order to access their booking. So we continuously, from a technological point of view, you know, try to find a way to identify these bookings in advance. so that they can't get through. But there is no agreement with them, so we're not running a charity anytime soon. And the only way that these companies remain in business is by putting on supplemental charges and then abandoning those customers.

I mean, it seems to be the only form of internet piracy that hasn't yet been tackled by the consumer agencies. And we're astonished. that the failure of the Italian consumer agency, the Spanish consumer agency, the UK consumer agencies will not tackle this issue. Their business models can only survive if they somehow scam a consumer for either a hidden charge or to persuade them into buying a handling fee or some sort of fee, other than that, just scraping our inventory. And we have a very good example of that last week. We have passengers now calling us up, asking about flights to roles. We don't know who they are. They have a booking made through some screen scraper. You have people in roads who are calling the airline. We don't have any of your details. We have a fake email address. We have a fake payment account. And the only reason we have a fake payment address and our email address and a fake payment account is because these internet pirates don't want us to communicate with the passenger because the passenger will find out that they've been overcharged will be overcharged. It is extraordinary that the consumer agencies continue to sit on their arses and fail to deal with it. If any airline behaved or priced or behaved the way these OTAs had, the consumer agencies would be all over them like a rat.

So you want to stop them selling your seats entirely?

No, no, no, no, no, no, no, no. We want them to stop mis-selling our seats entirely. We already licensed this. We licensed a significant number of OTAs or travel agents where they sign up an agreement in which they promise that they will only quote our affairs. The known affairs will be quoted. We'll have the correct customer emails. The booking will be made directly on Reiner.com, and we'll have direct access. What we're trying to stop is the mis-selling, the anti-consumer pricing, and, you know, the abandonment of the consumers, which is what happens with all these guys, when the shit hits the fan like it does in roads or it did during COVID.

Understood. And does this lawsuit win help you to do that? Yes. Julius, I want to add...

Yeah, look, this win last week was on a procedural issue on appeal, so the case is not over. The case will continue for another two years, maybe three with appeals. It was an important win, but it's not over.

I mean, we have numbers of cases where we get, we have an injunction, I'll probably get described, I won't name them, but we have an injunction against one OTA and they stop selling through, say, a Swedish kind of... And next day they open up an Austrian website. And then we go, we're basically against the Austrian website. And they open up a Polish website and claim that it's something different. Oh, no, that was the injunctions only against it. Like they are a bunch of fucking pirates. It wouldn't be tolerated in any other consumer facing industry. And yet the useless consumer agencies all across Europe and the European Commission, and we brought it, we have submitted a dossier of overcharging, of mis-selling, of mismanagement, and nothing happens. So we keep fighting. And Ryanair is the poster child for this because in most cases we have the lowest fares in every marketplace. So the reason they want to scrape our fares is that actually while they're levying a kind of a hidden handling fee or flipping the passenger at the point of payment for a higher fare than they've quoted, the package still looks reasonably cheap compared to the higher fares of other airlines. So it's us until we can get the consumer agencies to wake up and stop this internet piracy. These guys provide absolutely no service whatsoever. except mis-selling or charging people inflated airfares and hidden handling fees. Understood. Thank you. Next question, please, Maxime.

Sorry, Michael, I'm just going to cut in there. Neil here, I need to drop off at this stage. OK, thanks very much, everybody.

We'll keep going for another 10 or 15 minutes. I would just say we have three more questions, so let's take all those. Next question, please, Maxime. Thanks, Neil.

Thank you. The next question comes from Neil Glynn from Air Control Tower. Please go ahead, Neil. Your line is now open.

Good morning, everybody. If I could ask, firstly, on Ryanair Labs, I understand headcount has been growing strongly. I'm just interested in your take, Michael, on how you expect Ladin's contribution to evolve in helping ancillaries as well as operational performance over the next few years as you continue to grow. And then a second question is, Pre-pandemic, you obviously launched the multi-AOC, the multi-airline strategy. We're obviously quite some way along since then now. And I'm just interested in your take in terms of how that multi-AOC strategy is actually contributing today and what more we could expect from it in the future, because I don't think there's been too much mention of it over recent quarters, at least.

Okay, maybe Eddie, since you're kind of leading the labs contribution, you might take us through what you see with the labs, their contribution to date, and what the headcount will rise to. And then I'll deal with the multi-AOC strategy.

Yeah, I think we'll be heading towards a headcount of just short of 1,000 in labs. And if you look at just very broad brush figures, you know, like the most important part of what labs do is on infrastructure and security, cybersecurity, And when you take those people out on the what's left of their, in my mind, it's broadly broken into, you know, 50% of those working on scheduled revenue development and ancillary revenue development. And then you've got the other part of the business, particularly is going to come more in focus as we grow with the max 10 order. because we're not going to be able to add people on at a head office level to support that in a linear fashion. And what you have is that you've got labs that are developing all sorts of support systems for pilots, cabin crew, and engineers, you know, like things like E-Tech Log, where you take all that paper off the aircraft, where you've got flight planning iPads for pilots and devices for cabin crew, where you're communicating things that are happening during the day. So... So on an operational level, like they would have been supporting the operations control center here as well in running resilience on rosters so that when you do hit really bad days, they can do that in real time. And it takes that sort of China syndrome out of it where pilots and cabin crew and you've got sort of 15,000 people trying to contact a call center. You can never have that amount of people there. So you've got to solve the problems before they happen. And that's what that 50% are really going to be focused on over the next three to four years. So we won't have to do that. And then added on top of that, you've got sort of things like that are going to happen on generative AI, which will just be really on the sort of, primarily on the sort of the contact centers that we have. And there are obvious upsides on that. But it's infrastructure and security first, then it's supporting a scheduled and ancillary revenue, and then supporting... our staff on the front line with better comms, better technology, so we don't have to hire a large amount of people as we grow to 300 million passengers.

Yeah, I think that's the key point with labs. You know, like we bought a lot of kind of in the past, you'd buy bespoke systems from these big airlines like Lufthansa or Swissair or, you know, who at the time we were carrying four or five million passengers. They were doing 30 or 40 million passengers. The challenge for us going forward is, you know, the biggest airline in Europe, Group in Europe, other than us, is Lufthansa. It's only about 100 million passengers. So nobody has developed systems for an airline that now has nearly 200 million passengers with a plan to grow to 300 million passengers. So we have to do it ourselves. And you look at the successful way they've exploited ancillary revenues in recent years has been a really a visionary bringing that in-house. And developing those systems ourselves has been, I think, one of the great sea changes in our development over the last decade. If we were trying to do this now, it would be with, you know, providers. Did all these fucking IT consultants be in here taking your watch and charging you billions to tell you what the time was? You look at some of our competitors who struggle with matching all these, you know, tacked on systems that don't talk to each other. It creates very significant challenges for us. airline groupings, whereas in ours, the systems are much simpler. Multi-AOC strategy, you're right, it hasn't developed much. Remember, you go back to where we were in 2017, the reason for the multi-AOC strategy was originally to get people off the Irish AOC. The Irish government had this ridiculous taxing claim on all pilots, all cabin crew operating on Irish registered aircrafts. They were all paying high personal taxes here in Ireland. As we recognize the unions in 2017, the unions and our people wanted local taxation, local employment contracts, and the AOC facilitated that. Lauda was simply one that we had bought, an Austrian AOC. It was an Airbus operation. We did move it to Moscow, but it's a separate AOC. Buzz was set up as a charter airline in Poland. It needed the ability there for the benefit of a Polish AOC so it could fly outside of the European Union to places like Egypt and Turkey, places like that, which And so really the only significant development in that in the last number of years has been post-Brexit, they set up a Ryanair UK. So we today operate with five AOCs, Ryanair Dak on the Irish AOC, Malta Air on the Maltese AOC, Lauda on the Maltese AOC, Buzz on the Polish AOC and Ryanair UK with a UK AOC. It adds a little bit of complexity, particularly at the management side. But, you know, I think it's a sensible way forward. We run a similar type, well, not a similar, but we run a group of airlines in much the same way that Lufthansa operates a group of airlines that has a German AOC, an Austrian AOC, a Swiss AOC. a Belgian AOC, and shortly, I presume, an Italian AOC. And IAG, likewise, has a UK AOC, Spanish AOC, a couple of Spanish AOCs within the group. But it's not something that we would advocate. But I think if you're going to grow to 200, 300 million passengers, and increasingly, I think we'll want to fly to certain countries third-party countries like, for example, Morocco from the UK, you need to have those AOCs because they're not in open skies. Well, the UK is not yet in open skies. But it's not something I think we would have done by choice, but I think it was a practical response to a number of issues and challenges we were facing primarily post-unionization in 2017. Next question, please, Maxime.

Thank you. The next question comes from Johannes Braun from Stifel. Please go ahead. Your line is now open.

Johannes, hi. Johannes, go ahead, please. No. Next question, please, Maxine, if we have another one.

Our final question today comes from Dwayne Benningworth from Evercourt ISI. Please go ahead, your line is now open. Dwayne, hi.

Hey, good morning. Thanks for the extensive call here. Just on seasonality, you know, Europe has always had a more exaggerated peak leisure period than the U.S. I'm curious if there are any behavioral changes you guys are observing post-COVID, any changes you see in the underlying seasonality going forward, and then you know, certainly appreciate Ryanair is primarily a leisure airline, but how would you characterize the level of corporate recovery in Europe versus the 80, 85% recovered in the U S thank you.

And you want to take the seasonality and I'll come back on the leisure airline business trials.

Yeah. I mean, uh, as we've expanded into markets, we opened two bases in the Canaries and Spain continues to grow. Italy continues to grow, Greece continues to grow, Portugal. These are all, I suppose, leisure countries that extend. We've been particularly successful in extending the season in a lot of those countries. We now added on Morocco is growing strongly, Jordan is growing strongly. So that sort of leisure sort of characteristic is extending itself out as You get away from the normal perception of the sort of bucket and spade type holiday as opposed to sort of specialist interests of people going and traveling to those countries. It's not all about just going to the coast. So, like, we've been very judicious, as I say, in how we, which I've referred to in two previous questions, which was in cutting back some of that midweek capacity. It's in towards the weekends. But I've been very encouraged by what we can see. We were looking at this time last year where cities have recovered, domestics have recovered, ethnic traffic has recovered as well. But, you know, the standouts are still the leisure, which Michael will talk about now, and the canaries.

Yeah, I mean, I would don't overestimate the extent to which we're a leisure airline. You know, we've seen a very strong recovery in our business travel. Historically, we have 40 percent of our passengers were traveling for leisure reasons, about 30 percent was business and 30 percent was BFR. visiting friends and relatives. Business has recovered very strongly in our, we see business, the RLEO, very short stay out and back, same day or next day. We ascribe that to two things. One, the very significant push we made into the domestic markets in those big countries like Spain, Portugal, Italy. And as you have a bigger percentage in the domestic market, you tend to see more business travel. We've seen a lot of business travel into Central and Eastern Europe, Morocco, Portugal, people repairing kind of supply chains. There's been a lot of small and medium-sized businesses repairing supply chains or replacing Asian supply chains that were badly disrupted during COVID with supply chains that are based in lower-cost economies but closer to Europe, so Morocco, Portugal, Central Eastern Europe. We think that will be accentuated too if there's a reopening in Ukraine. There'll be a lot of business travel in and out of Ukraine as that economy recovers. So Don't get too distracted by, you know, we're all a bucket and spade operation. It's a charter and it isn't. We do have a large leisure component, but a very strong visiting friends and relative piece and a very strong and growing business piece as well. Okay, I think that's the end of all the questions we have today. Thank you, everybody, for participating in the call. Thanks to all the team here for what has been a strong Q1. As I said, our focus is on continuing to deliver excellent on-time performance during what is a challenging Q2. We're going to continue to mobilize and campaign for effective action on the ATC front. We expect shortly that our passenger petition will hit 1.5 million signatories. We'll be going back out to Brussels to represent that to Mrs. von der Leyen. I'm sure she'll be absent or missing on the day we manage to present the updated petition. But we're not stopping until we get some action out of the useless European Commission on ATC reform and protecting overflights. And then we will continue to campaign heavily for improved staffing at the national ATC providers so that hopefully next year we'll have a more reliable or at least an NATC service that's more fit for the capacity that Europe requires. I have nothing else to add other than we'll keep you updated with monthly traffic and load factor stats. Our next sort of big day will be the capital markets day here in the first week of September. We'll have the AGM in the third week of September, where hopefully our shareholders will approve our MAC-10 order. And then I think our minds will focus on the half-year results, which will be accompanied by an extensive roadshow. I think it's in the middle of November, end of November? Second week in November. Okay, everybody, thank you very much. Thanks, Maxine, for your help. Bye-bye.

Thank you. This now concludes our conference call. Thank you all for attending. You may now disconnect your lines.