Ryanair Holdings plc

Good morning, ladies and gentlemen, and welcome to the Ryanair Q3 results press conference call. I'm Michael O'Leary, Group CEO, and as always, I'm joined by Neil Soren, the Group CFO. This morning, as you'll see, Ryanair reported a Q3 profit after tax of €115 million, pre-exceptional, as traffic rose 6% and fares in Q3 rose 4%. An £85 million exceptional charge has been made in the accounts. It's a provision of approximately 33% for the utterly baseless Italian AGCM fine, which was announced on Christmas Eve and which both we and our Italian lawyers are confident will be overturned on appeal. The highlights of the third quarter include traffic growth of 6% to 47.5 million, revenue per passenger up 3%, very strong cost control as a result of which unit costs are flat in the quarter. We have 206 game changers in our 643 aircraft fleet on the 31st of December. The last four aircraft will be delivered in February. We have announced three new bases and 106 new routes for summer 26 and these are already on sale. Fuel is 80% hedged for FY27 at $67 a barrel, resulting in a very significant 10% saving in our fuel costs next year. And we'll touch briefly on the Italian AGCM baseless fine, which was levied and which we're confident will be overturned on appeal. I touched briefly on a couple of highlights. With almost all of our game changers now delivered, other income in Q3 dipped due to the absence of delivery delay compensation in the prior year Q3. For Q4 of FY26, our fuel is 84% hedged at about $77 a barrel, but we've now locked in hedging for FY27 with 80% of our jet fuel requirements hedged at $67 a barrel. This will deliver significant cost savings next year. Over the last three years, Reiner has generated a total shareholder return in excess of 150%, which puts Reiner comfortably in the top quartile of the stocks Europe 600 index TSR performers. I believe the group will continue to deliver disciplined and consistent capital allocation, and this is underpinned by our strong balance sheet as traffic grows to 300 million passengers by FY34, with the benefit of our 300 max 10 order. Touching briefly on fleet, we expect to receive the final four game changers, bringing the total number of game changers to 210 in the fleet before the end of February. Because we're getting these aircraft deliveries early, this facility is facilitating slightly higher traffic growth this year, and we're now raising this year's traffic to 208 million, what was previously 207 million. But it also means that we have all of the fleet in place in time for the summer schedule, and that will allow us, we think, to deliver 4% traffic growth to 260 million passengers next year, FY27. Boeing expect that the MAX 10 certification will take place this summer and they're increasingly confident. In fact, I would say very confident they'll meet their contract delivery dates to Ryanair for the first 15 MAXs in the spring of 2027. And that will be the first 15 of 300 of these very fuel-efficient aircraft which have 20% more seats but burn 20% less fuel and will enable us to grow profitably out to March 2034. This winter we've allocated Ryanair's scarce capacity to those regions, countries and airports who are cutting aviation taxes and incentivising traffic routes such as Albania, regional Italy, Morocco, Slovakia and Sweden. And we're switching flights and routes away from high-cost, uncompetitive markets where they have unjustified aviation taxes like Austria, Belgium, Germany and in regional Spain. This trend or this churn will continue into summer 2026 as we operate over 160 new routes on sale and we're opening three new bases in Rabat in Morocco, Tirana in Albania and Trapani in Italy. Touching briefly on Italy, in late December the Italian AGCM competition authority levied a baseless €256 million fine against Ryder for our direct distribution to consumers policy in Italy, a policy that we've adopted all over Europe. This fine, we believe, will be overturned on its appeal as it ignores and indeed contradicts the precedent Milan Court of Appeal ruling in January 2024, which ruled that Reiner's direct distribution model in Italy undoubtedly benefits consumers by leading to lower fares, is economically justified in terms of containing operating costs and eliminating costs associated with distribution and ticket sales, and the court ruled it contributes to a direct channel of communication for any possible need for information and updates on flights to consumers. And yet, the AGCM, 18 months later, comes up with this mythical fine alleging that Ryanair is abusing a dominant position when we're not dominant in Italy. Both we and our Italian lawyers are very confident that the Italian courts will overturn this manifestly wrong and baseless AGCM ruling on appeal and that's why unusually we normally provide 50% provision in our accounts for legal appeals. In this case, we have lowered that to 33% which we think is reasonable. In fact, we could just as easily provide nothing for this given our confidence that this ruling will be overturned. In terms of outlook, we now expect FY26 traffic to grow 4% to almost 208 million passengers due to strong demand and these earlier than expected Boeing deliveries. We continue to expect only modest full-year unit cost inflation as our Boeing game-changer deliveries, fuel hedging and effective cost control helps to offset the increases in ATC charges, higher enviro costs in Europe and the roll-off of last year's modest delivery delay compensation. While Q4 won't benefit from Easter, fares are trending modestly ahead of prior year, and we now believe that the full-year fares will exceed our previous plus 7% growth guidance by maybe another 1% or 2%, 8% or 9%. At this stage, we're cautiously guiding full-year profit after tax pre-exceptionals in a range of £2.13 billion to £2.23 billion. However, the final FY26 outcome will remain exposed to adverse internal developments in Q4, including conflict escalation in Ukraine or the Middle East, macroeconomic shocks and any further impact of repeated European ATC strikes and mismanagement. And with that, I'm going to ask Neil to take us through the side presentation. Neil, over to you.

Thank you, Michael, and good morning, everybody. Ryanair is the lowest fares and the lowest cost of any airline in Europe, and our cost gap advantage continues to widen. We're number one for traffic and are now increasing traffic targets to 208 million passengers this year, which is a 4% increase on last year. Thanks to our strong on-time performance and reliability, we've seen our customer satisfaction scores rise to 89% in the year to date, and we continue to be highly rated by all of the ESG rating agencies. With our 300 MAX 10 order book starting to come in from next year, this will underpin a decade of growth to 300 million passengers by FY34, and that, of course, as always, is underpinned by our financial strength, our lowest costs, and this makes us the long-term winner in our sector. This is a snapshot of where we stand at the moment, including three new bases for summer of 2026. So 208 million passengers in the current year, 300 million passengers by FY34. Our costs, as I already said, continue to improve, continue to get better with a strong performance in Q3. And over the next number of years, with 300 MAX 10s coming in with 20% more seats, 20% more fuel efficiency, this advantage is only going to get better. On the quarter itself, we saw traffic increase by 6% to 47.5 million passengers at flat 92% load factors. Average fare rose 4% thanks to a strong mid-term break in October, but more importantly, close-in bookings for Christmas and the New Year also were strong. Revenue as a result up 9% to €3.21 billion in the quarter to the end of December. On costs, excluding the AGCM provision, which Michael has gone into in some detail, we saw unit costs remain flat or total costs increased by 6% to €3.11 billion. And profit after tax, pretty exceptional, down 22%. primarily due to the absence of Boeing delivery compensation thanks to them catching up on their order book. So coming in at £115 million profit in the quarter and £30 million after that AGCM fine provision for the 33% that Michael referred to earlier on. Balance sheet remains rock solid, a fortress balance sheet, BBB plus a strong investment grade rating from Fitch and S&P. Uniquely, almost 620 Boeing 737s fully unencumbered on the balance sheet. Liquidity remains very strong with 2.4 billion gross cash and a billion net cash at the end of the quarter. And that puts us in a very, very strong position now as we move into the next financial year in April to pay down our final bonds the 1.2 billion maturing bond in May 2026 from our own cash resources, effectively making the Ryanair Group debt-free. I'd just like to briefly focus on our total shareholder return. Over the past three years, we've delivered a TSR of 153%, which puts us firmly in the upper quartile of the Euro stocks 600. In fact, we're in a small club of three companies in Europe, which can boast a net profit in excess of 15%, investment grade ratings, net cash, and TSR over 150% while at the same time investing in growth delivering consistent and disciplined returns to our shareholders and we expect this model to continue for the years to come. With that maybe Michael you'll take us through current developments please.

Thanks yeah so as we've said how we expect FY we're raising slightly FY26 traffic up four percent to 208 million thanks to the earlier Boeing deliveries and strong demand We are using our constrained capacity to engage in more churn, so we're switching scarce capacity to those airports and regions who cut taxes and fees to grow. Our full FY26 schedule is on sale from the end of March with three new bases and 106 new routes. Most exciting is the fact that we've hedged 80% of our fuel for FY27 at just $67 per barrel, a 10% saving. There's an interim given of just over 19 cents per share payable in late February. And as Neil has said, we've completed 46% of the 750 million buyback by the end of the third quarter. We are ready and have the resources to repay the final 1.2 billion bond in May. Thereafter, we're essentially debt free. And we are actively planning for the MAX 10 entry into service in the spring of 2027. And we now believe that Boeing will hit those delivery dates. And the critical thing about those aircraft is that they allow us to engage in a decade of low fare profitable growth of over 50% to 300 million passengers by FY34. In terms of the Boeing numbers, as I said, we've already covered this off with 206 game changers in the fleet, four more coming in February. Boeing expect the MAX 10 certification to take place in late summer of 2026. We expect now to get the first 15 MAX 10s in the spring of 2027. And that, as I said, gives us a decade of growth out of 2034. In terms of outlook, Neil, you want to finish on that?

Yeah, thank you, Michael. So as Michael said, traffic marginally ahead of where we previously guided. So 208 million passengers, 4% increase on last year, primarily due to the earlier delivery of those MAX A200 aircraft and strong demand in the business. Furs now look like we'll be ahead of the 7% fur growth that we previously guided. Possibly 1 or 2%, which is well ahead of the minus 7% fair decline that we suffered last year. So fully recovered and then some growth on top of that. Unit costs have performed well year to date, so we're sticking with our modest unit cost inflation for the current financial year. We'll continue to see the benefits of our fuel hedging offset, rising ATC, environmental, and indeed the unwind of the Boeing compensation, with no Boeing compensation in the second half of this year. So putting that all together, we're now cautiously guiding profit after tax pre-exceptionals for the full year in a range of £2.13 billion to £2.23 billion. Beyond that, we're now in a very strong position to deliver 216 million passengers next year. That's a 4% increase. We'll see the benefit of our fuel hedges, 10% savings coming through on the jet price, help offset some of the rising environmental costs. And importantly, with the MAX 10 now due to join the fleet in the spring of 2027, we're ramping up for a decade of growth to 300 million passengers over the next number of years. Thank you very much.

Michael, Neil, good morning. Starting with your results, Ryanair reported a Q3 PAT of £115 million pre-exceptional, down 22%. What were the key drivers?

We had a strong operating performance in the business. We did, however, not have any Boeing delay compensation in this quarter, having had it in the prior year of comp. That's down to Boeing catching up on the deliveries and effectively no need for compensation. But if we look at the operating performance, very strong traffic up 6% to 47.5 million passengers at 4% higher fares, driven by strong midterms in October and strong close-in bookings for Christmas and the New Year. Ancillaries, as has been the trend all year, put in another solid performance, rising 7% or up 1%. on a per passenger basis and I'm particularly happy with the cost performance where we delivered flat unit costs pre-exceptional charges in the quarter.

You provided for 33% or 85 million of the Italian AGCM fine. Will you provide for the balance of this fine in Q4?

No, in this case normally our policy is to provide about 50% for these kind of legal fines or when they're under appeal. However, in this case, with the benefit of the Milan Court of Appeal precedent ruling, which was just less than 18 months ago, our lawyers and ourselves in Italy are highly confident that this AGCM ruling will be overturned on appeal. In fact, we could, given the strength of the advice, we have not made any provision at all, but I think that would have been a bit too ambitious. It seems to me and the board that it's sensible to provide about 33% and we don't expect to be making any other provisions. In fact, we expect to be writing back that provision to the P&L sometime in the next year or two, which is how long we expect the appeal will take. Can you update on your hedging position?

Yeah, we continue to be very well hedged. In the current quarter to the end of March, we're about 84% hedged at $76 a barrel. But more importantly, when we look into next year, we're 80% hedged on our jet fuel at $67 a barrel. So that's about a 10% saving. On operating expenditure, the euro-dollar exposure, we're locked in now for next year at about 1.15, which compares favourably to 1.11 in the current year. And we recently jumped on dips, weakness in the dollar to extend our max 10 hedging from up to 40% on a euro-dollar rate of 1.24.

How's Q4 trading?

Demand is good. As I said with the earlier Boeing deliveries, we're seeing, you know, we expect traffic to be modestly rise slightly faster than we'd originally expected. So we expect to do 208 million passengers for the full year as opposed to previous 207 million. Pricing in Q4 is modestly ahead of the prior year, despite the absence of any impact of Easter on Q4. But nevertheless, as we've always said, the final outturn is heavily reliant on there being no disruptions as we move through February and March.

Can you give any colour on summer trading and F527 costs?

It's a bit too early for that. We're still working through our budget, so it'll be another month or two before the board sign off. What I can say at this stage, however, is with all of the game changers expected to be in the fleet by the end of February, we're now targeting traffic. next year 216 million so that's marginally up on the 215 that we had previously guided 4% increase and of course we'll see the benefit of our fuel hedges coming through next year as well.

Moving to the balance sheet, what are the main callouts of your strong balance sheet?

They're pretty much the same as they've always been so we've a BBB plus credit rating, we've an unencumbered fleet of almost 620 737 aircraft, strong liquidity 2.4 billion gross cash at the end of December almost 1 billion of net cash which leaves us very well positioned to repay the remaining bond debt in May this year from internal resources. And it's that financial flexibility that widens our cost gap with most of our competitors in Europe who are heavily exposed to ideas of aircraft leasing costs or financing expenses.

What's FY26 and FY27 CABEX guidance?

This stage, I think we'll finish FY26 with capex somewhere close to 2 billion. So that's marginally down on the 2.2 billion that we had previously guided, where we're seeing some timing issues with a couple of projects moving out one or two years. And then next year, not hugely different to what we had previously said. Now, it depends on the final budget. I think it will come in close to 2 billion, possibly just below 2 billion.

How will you finance the Max 10s? As we've always done, we'll use a strong balance sheet and be opportunistic. I would expect mostly it would be from internally generated cash, but we'll also use bond or bank markets when it's opportunistic or low cost to do so.

Shifting to shareholder returns, how is the 750 million buyback progressing?

Yeah, it's going well. I mean, this buyback is scheduled to run out to the end of the current year. So we're about 46% of the way through it at the end of December. Put that in context, that's about 13.1 million shares bought back at an average price of €26 per share. All of those shares cancelled, so about a €340 million spend up to the end of December.

When's the next dividend payable? There's an interim dividend of just over 19 cents per share. That's payable by the end of February.

Reuters' TSR performance is market leading. Has focus shifted from investing in growths to shareholder returns?

Well, you're right. It is. It's a phenomenal return of 150% over the past three years on putting us firmly in the upper echelons of the Eurostock 600 TSR index. But no, our focus hasn't shifted and we've no plans to shift our focus. We'll continue to invest in growth. The plans are to have 300 max tens in the fleet and 300 million passengers by FY34. We've got a very simple capital allocation policy in here. We will retain a strong investment grade. balance sheet. We'll continue to invest in growth, as I said, the max 10s, jumping on opportunities like we did last June, where we were able to buy 30 spare-leap engines at the right price. Good use of capital for our shareholders. And indeed, we will invest in engine shops over the next number of years to help widen Reiner's cost base. But at the same time, as we've done in the past, if there's surplus cash, we'll return that. We already have a 25% payout of prior PAT, regular dividend programme, and the board have and will continue likely to deliver buybacks and ad hoc dividends from time to time over the next number of years.

On fleet and groats, when will you receive your final game changers?

The final four game changers will deliver in February, well ahead of the end March launch of the summer 26 schedule. Kelly Ortenberg, Stephanie Pope and the team at Boyle are doing a great job at catching up those delivery delays, which is why we've seen a significant drop in supplier compensation in the Q3 numbers. But those earlier deliveries mean we can now facilitate 4% growth to 260 million passengers. in the year to March 2027. What's the latest update on Max 10 certification?

Yeah, Boeing are still talking about certification in the summer of 2026, possibly in Q3 calendar. So that's the July over September timeframe. And they're increasingly confident, as Michael already said, that we will be taking our first 15 Max 10s in the spring of next year.

What's your views on European short haul capacity? It'll continue to be very heavily constrained right out to at least 2030. The drivers are, you know, the huge backlog and delivery delays being faced by challenges being faced by Boeing and Airbus. The Pratt & Whitney engine repairs continue to bedevil the Airbus short-haul fleet here in Europe. That will run on through, our competitors say that will run on into 26 and 27 as well. And industry consolidation most recently left hands as acquisition of ETA and it looks like TAP will be next, which is causing capacity withdrawal, certainly in short-haul and domestic markets in Europe. as Lufthansa pivot the likes of Alitalia to feeding people into Munich and Frankfurt but away from keep competing with Ryanair in the short haul domestic and Italian domestic market. Where is Ryanair most focused on growing?

Yeah, we've been very clear. We've got limited growth. We're only growing by 4% this year. We only plan to grow by another 4% next year. And so we're very focused on rewarding and giving growth to regions that are reducing aviation taxes, airports that are stimulating growth. And if you look at our summer... The new bases are in places like Tehran in Albania, Trapani in Sicily as well, and Rabat in Morocco. At the same time, we're pulling capacity out of markets where they're actually increasing taxes, or at least not bringing them down, the likes of Austria, Belgium, Germany, regional Spain. And we'll continue to do so while capacity remains constrained.

What's the latest update on your engine shop project?

Going well. We expect to announce the first of two sites pretty soon. I'd say we'll make an announcement before the end of March or April. Negotiations for spare parts and tooling to fit out those engine shops are at advanced stages. In fact, again, we expect to be signing contracts on those before the end of, I would say, the first quarter or the end of April. And we hope and expect to have the first shop operational. overhauling or repairing Rhino engines by late 2028 early 2029 The second shop will be opened probably in the early 2030s and this will give us another point of cost differentiation between us and our competitors. While our competitors will be having their engines maintained in very scarce supply third-party engine maintenance facilities, we will have surplus capacity and I think a significant cost advantage in maintaining our engines over those of our competitors.

Lastly, on Outlook, what's the group's FY26 outlook?

Yeah, we expect traffic now to finish at about 208 million passengers, 4% growth on last year, thanks to the earlier delivery of the Boeing aircraft and strong demands. On fares, we think we're in a position where we'll recover quickly. Not only all of the 7% that we saw decline last year, but another 1 or 2% on top of that. So ahead of our previous guidance. On costs, performance has been good year to date. So we're sticking with our modest unit cost inflation for the full year where we see the benefit. of our fuel hedges, continuing to offset air traffic control charges, increasing environmental costs, and indeed the roll-off of bowling compensation, but no delayed compensation in the second half of this year. So putting all of that together, profit after tax, pretty exceptional, the AGCM fine provision, profit after tax should be somewhere in a range of about £2.13 billion to £2.23 billion. And then beyond that, 4% traffic growth again next year to 216 million passengers. You'll see the benefits of our lower fuel hedging coming through. And then, of course, with the MAX 10 aircraft starting to deliver from the start of 2027, we'll have another decade of growth to 300 million passengers by FY34.

Thanks, Neil. As you know, it's the Q3 results, so we're not having a formal roadshow, but there is an analyst call at 10 o'clock later this morning at 10 a.m. Dublin time. Everybody's welcome to dial in. And if you have any further follow up questions, please put them to us during that call or feed them into the IR team here led by Jamie Donovan or through Neil and the finance team. Thank you very much. We look forward to seeing you all again.