Ryanair Holdings plc

Good morning and welcome to the Ryanair H1 Results School. My name is Adam and I'll be your operator for today. If you'd like to ask a question at the Q&A portion of today's call, you may do so by pressing star followed by one on your telephone keypad. I will now hand over to Ryanair Group CEO Michael O'Leary to begin, so please go ahead.

Good morning, ladies and gentlemen. Welcome to the Ryanair H1 Results Conference call. We're joined by all the members of the team from different parts of the globe and we will do a I'm going to run through quick highlights, ask Neil Thoroghan, our group CFO, as usual, to give you a comment on the financial highlights, and then we will maximize the time for Q&A. So you'll have seen this morning we reported H1 after-tax profits of $1.8 billion, 18% lower than the prior year H1 profit of $2.18 billion. Highlights of the half-year were traffic, strong growth, 9% to a record of $115 million. It would have been higher, but for the repeated Boeing delays. The key theme is average fares fell in the half year by 10%, but the trend is improving. We were down 15% in Q1, down 7% in Q2, and we'll turn to Q3 when we look at forward guidance. We have 170 737 game changers in a 608 aircraft fleet at the end of the half, and that had risen to 172 by the end of October. We have five new bases, 200 new routes opened this summer. The approved OTA partnerships now cover about over 90% of all OTAs. These protect consumers from being overcharged by OTAs. We give OTAs direct feed into the Ryanair.com website, but in return, they guarantee that the customer will get only the Ryanair prices. We also get the customer email, accurate customer email and accurate customer credit card, so we have a direct relationship with every customer now booking through approved OTAs. I think, again, our strong balance sheet has enabled us to take a very strong fuel position. We're 85% hedged for the second half of FY25 at $79 a barrel. We've jumped on recent points of weakness to increase our FY26 cover to 75% at $77 per barrel. We completed the $700 million share buyback in August, and as of today, we've done just over 30% of the $800 million follow-on share buyback We expect that buyback will continue, will probably run out until about April, May of 2025. And the board on Friday confirmed the interim dividend of 22.3 cents per dividend or dividend per share has been declared to be paid in February 2022. Looking back at the half year, ancillary revenues were resilient, rising 10% to 2.74 billion, slightly ahead of our 9% traffic growth. I think the key metric, though, is that operating costs perform well. They rose 8%, lagging behind the 9% traffic growth, as the fuel hedge savings offset higher staff and other costs due in part to Boeing delivery delays. We found ourselves gearing up for Boeing deliveries last summer, but being over-crewed, over-staffed, and then finishing about 5 million passengers short of where we were originally going to be. Yet, if you take the half year the operating costs rose slightly less than traffic. The balance sheet remained strong. Growth cash at the end of the half year was over €3.3 billion. Net cash was just €600 million at the 30th of September. And that is despite paying out €900 million in capex, €900 million in share buybacks, and a €200 million final dividend in H1. We own our entire Boeing 737 fleet. That's 580 aircraft. It's fully unencumbered. And this, I think, materially widens Reiner's cost advantage over our competitors in Europe, almost all of whom now are exposed to expensive financing costs and leasing costs. As I said, we expect a complete 800 million follow-on buyback program sometime in mid-2025. When we finish that, Reiner will have returned almost €9 billion, including dividends to shareholders since 2008. and we'll have bought back approximately 36% of our original issued share capital. In terms of fleet and growth, so at the end of October, we had 172 game changers in our fleet. We now expect the remaining nine Q3 deliveries after deliveries due in September or in October, November, December would be delayed into Q4. So we're hopeful we get those in January, February, March, if the Boeing strike settles reasonably quickly. However, There's no doubt that we're going to now miss some... When we take those nine aircraft in Q4, that leaves us with 29 more aircraft to take for summer 2025. We had originally penciled in to deliver those this winter. We now think it's reasonable, and we have no guidance on this, but to delay about half of those aircraft. So we think we get about 15 of those 29 aircraft prior to the end of June. In other words, in time for summer 2025, but half of them will be delayed into the winter of 2025-2026. And accordingly, that means, I think it's sensible now, we begin to walk back our original schedule of traffic. Originally, for FY25, we had expected to carry 205 million passengers. Because of the Boeing delays, we've had to walk that back to 200 million. In fact, I think we've come in a shade just under 200 million in the full year. The original target for FY26 was 215 million passengers. We're now going to have to walk that back, I think, to about 210, with the possibility that it may have to get shaved more. It might come back to 209, 208, entirely dependent on whenever Boeing settles a strike and then can give us some reasonably accurate update delivery on aircraft. We are working closely with Boeing. I speak to Stephanie Pope on a weekly basis. We spoke again on Friday. There is a Labour voting on the new pay deal today and hope we'll have a result tonight. I'm impressed, by the way, at the work that she and Kelly Orton-Burke have done. They're there. They're on the ground in Seattle. You can lift the phone. You can talk to somebody. That was something that wasn't there under the previous management. She is busting a gut to try to get us deliveries. In fact, even during the strike, they brought in management. We had two aircraft ready for delivery when the strike started. They brought in extra management and got those two aircraft out to us during October. So they're doing everything they can, and they have our full support. I think, though, this is a positive generally for the industry. We are going to be short aircraft ourselves for FY25. We're going to be more short aircraft in FY26. And looking forward, if the experience this year, we were surprised by the price softness. You know, we've come off two years in summer 23 and summer 24 of 20% price increases today. due to the post-COVID recovery. This year, we were a little bit surprised by the price softness. We think it's due to consumer spending tightness in Europe, certainly the impact of the OTAs, and the fact that we're 5 million passengers short on our original target growth. But if we're constrained in our deliveries next year, we know that the rest of the European industry is heavily constrained because of the Pratt & Whitney repairs, and the OEMs are struggling to increase production. I would be medium term very optimistic on where pricing is going to go because of these capacity constraints. I saw some of the coverage that today in Ireland and the UK, oh, a bit of a negative. Ryanair will be scaling back its growth ambitions. We will still get to our 300 million passengers by 2035 as long as Boeing get the MAX 10 certified, but we're going to have to grow a little bit slower in FY25, FY26 once we get the balance of the 29 outstanding aircraft, and that might be into summer of 2026, then we'll be back up to our target of 225, 230 million passengers. But I think these constraints should be positive for pricing into summer 25 and summer 26. As you're aware, the board is reviewing the airline ownership and control. We confirmed that over 49% of Ryanair-issued share capital is held by EU nationals in September. We think it's appropriate to review the potential variation of either the ownership restrictions, which prohibits non-EU nationals acquiring our ordinary shares, or the voting restrictions, which is how you exercise control. That process continues. We've consulted thus far with about 60% of our shareholders. We think it would take another three or four months, and the board would hope to make a decision on that, whether we are sensible to vary the ownership and or the control restrictions. sometime in the first half or the middle of 2025. Going to the key element then, which is outlook. So at this point in time, and I say this, we have about 70% of the bookings in the system for Q3. We have only about 11% of the bookings in the system for Q4. So we have very little visibility. However, we're pretty sure at this stage we're going to finish somewhere between about 198 to 200 million passengers. I think the midpoint, just over 199,000. up about 8% on the year, subject to no worsening of the current Boeing delivery delays. Unit costs are performing well, and we now expect full-year unit costs to be broadly flat, as our fuel hedge savings, strong interest income, and some modest aircraft delay compensation will largely offset ex-fuel cost inflation, most notably crew pay and productivity increases, higher handling and ATC costs, and the cost of inefficiency we suffered this year because of repeated Boeing 737 delays. Forward bookings into Q3 are strong, and the decline in pricing appears to be moderating. Again, what does that mean? Well, again, if I go back, Q1 pricing was down 15%, Q2 pricing is down 7%. Q3 pricing will be down by less than that, but it will be slightly down. So I think a small, single-digit decline, the trend, I think, is favourable. But then we get into Q4, and Q4, we will have a very challenging prior year comp because half of Easter was in last year's Q4. None of Easter is in this year's Q4. But at this point in time, Q3, the bookings are strong. Pricing is – the price declines are moderating, but we still have 30% of Q3's bookings to make, and those would be the key close-in Christmas and New Year bookings. We have zero Q4 visibility. and the quarter won't benefit from last year's early Easter. That will make the prior year Q4 comms challenging, and therefore I think it's too early this morning to provide any meaningful FY25 BAT guidance. The final outcome will be subject to avoiding adverse developments during the remaining five months of the year, especially with the risks of outbreak of the conflict in Ukraine and the Middle East, repeated ATC short-staffing and capacity restrictions, and our further buoyant delivery delays. Can I hand over to you with any comments, anything you'd like to throw out there for people's attention to on the balance sheet of the P&L?

Okay, thanks, Michael. You covered it fairly well, but I'll just reiterate, please, with how costs went in the first half of the year. The hedging that we locked in for the year is delivering good savings, but we're focusing across all of the other lines as well, and that's enabled us now to improve the guidance on the full-year unit cost to broadly Flask. Balance sheet rock solid, triple B plus investment grade rating, over 580 aircraft unencumbered, which gives us a massive advantage over everybody else. And another reason as to why the cost advantage and the cost gap between us and everyone else is widening is because we're financing ourselves through cash when everyone else is out there raising expensive leases and expensive debt. Distribution is going well. We're about one-third of the way through the $800 million buyback, as Michael said. That will hopefully get us out to the summer of next year. We've now locked in some modest savings on fuel hedging into next year, which is very important in this current very volatile oil market that we're in. And then on CapEx, while we're still guiding oil, 2.3 billion capex for this year, having spent about a billion in the first half of the year. The reality is that some of that is now likely to slip into next year when we've got greater visibility on where and when the aircraft are coming in from Boeing. We'll revisit that, but it's a timing issue more so than anything else. And I don't think really Michael has much more to add.