Okay, good morning, ladies and gentlemen, and welcome to Ryanair's Q3 results conference call. I'm joined this morning, as always, by Neil Sorahan, our Group CFO, and we want to take you briefly through this morning's Q3 numbers. These are published and now available on our website, ryanair.com, in the investor relations page. I don't propose to read through the press release, but just to focus on some of the significant highlights of the quarter. As you can see, we reported a net loss of EUR 96 million for the quarter, a significant improvement on the prior year Q3. During the quarter, the notable highlights is that our climate protection rating improved again from a B- to a B as independently determined by the Carbon Disclosure Project.
Q3 traffic bounced back very quickly, as the COVID restrictions rolled off in October, November, December, we saw traffic rebound by almost 300% from eight million to over 31 million passengers. A very strong load factor. We had an 84% load factor in the quarter, significantly ahead of any of the other EU airlines, despite flying a significantly larger and greater program. Close-in bookings and yields, however, were badly damaged by the emergence of the Omicron variant in December. It emerged in the last week of November at that critical time for building Christmas volumes and Christmas yields. We saw a collapse in close-in bookings with the result that our December traffic moved from 11 million passengers down to just over nine million passengers, and at weaker yields.
We also saw that continue into January, which is why on 22nd December, we cut back our January program by about 33%. This has the impact of reducing our January traffic. Originally, we were hoping to carry about 10.5 million passengers down to somewhere between six million and seven million. We get closer to seven million, it'll be at the upper end of that range, but nevertheless, a significant decline on the 10 million passengers we had hoped to carry. Also the yield was impacted. Now, we see that yield impact rolling on into February. While we're beginning to see a recovery in passenger bookings into February, the first half of February will be weak. The second half contains the schools' midterm break, Valentine's, et cetera.
We only see a strong recovery in bookings, albeit at lower fares in the second half of February. We think that will continue into March. Nevertheless, we continue to execute in a disciplined and sensible manner. We repaid the U.K. CCF loan during the quarter, five months earlier than necessary, a fact that we're very proud of. That was only possible thanks to the very strong cash generation the business delivered as a result of the strong recovery in bookings in the third quarter.
We've taken delivery of 41 new 737 Gamechanger aircraft prior to the quarter end, and that's allowed us over the period to announce 720 new routes and 50 new bases, largely for summer of 2022, when we expect there to be a very strong bounce back in traffic, albeit maybe at lower yields, as families who've been locked up for the last two years return to traveling and return to going on holidays. One of the critical advantages of Ryanair's business is we're extremely well-hedged on fuel with a mix of hedges and caps, and largely which means we're insulated for most of the next 12 months against the recent upward spike in Brent oil prices. Spot prices hit $90 a barrel last week.
With all of that in place, we've announced an accelerated five-year growth plan, which will take us from an end target of 200 million to 225 million passengers. That means we're delivering almost 50% traffic growth over the next five years. Nobody is going to grow faster, stronger, or more profitably than Ryanair. Our summer 2022 capacity is now on sale, and we expect that to run at about 115% of our pre-COVID summer 2019 capacity. Hopefully it will perform well and perform strongly. All of that depends on there being no more negative COVID developments.
You know, the Omicron variant was a very unwelcome development in December, and we would be wary and cautious that there will be other variants or challenges arising out of COVID, that we may have to address, not necessarily over the next 12 months, but over the next three-six months. I think being cautious is the sensible way forward. Neil, do you want to take us through the slide presentation?
Thank you very much. Ryanair has the lowest fares and the lowest costs of any airline in Europe. We're number one for traffic, and we'll deliver just under 100 million customers this year. A big increase from where we were last year, and indeed, we're on track for 225 million customers by FY 2026. We're number one for customer service, and our on-time performance was excellent at 90% in the quarter just ended. As Michael said, our climate disclosure rating was upgraded to a B from a B- in the quarter, and our balance sheet remains very strong with a BBB rating from Fitch and S&P. Our financial strength and lowest cost makes us the long-term winner. We have the platform in place to grow over the next years and months.
We already have 15 bases in place for summer of 2022, 720 new routes, and with the 210 Gamechangers coming in, we're well-placed to grow to 225 million guests by FY 2026. We have the lowest costs of any airline in Europe, 31 EUR ex-fuel coming into COVID. We expect the gap between us and everybody else to widen over the next number of years as we take delivery of 210 Gamechanger aircraft and add more low-cost airport deals. The quarter itself saw traffic increase by just under 300% to 31 million customers at a very high load factor of 84%.
Revenue was EUR 1.5 billion, a 330% increase, although this was adversely impacted by lower fares on close-in Christmas bookings due to the Omicron variant. Operating costs performed very strongly, only rising by 136%, primarily to do with the high variable costs in the business, and we reported a net loss of EUR 96 million as a result of all of the above. Balance sheet in very strong position. Just under EUR 3 billion in cash at the end of the quarter, and that was after the yearly repayment of the UK CCF of GBP 600 million sterling loan. Net debt marginally down despite the fact that we had over EUR 800 million of CapEx in the first half of the year at EUR 2.1 billion.
Michael will now take us through the current developments.
Thank you, Neil. As we said, very strong traffic recovery in the third quarter with load factors rising to 84%. However, the emergence of the Omicron restrictions across Europe badly damaged traffic and yields in December, and also this will carry into Q4. December traffic, for example, fell from an original target of 11 million to just over nine million passengers. January will fall from 10 million to we think somewhere between six million and seven million. We delisted from the London Stock Exchange in December as part of our Brexit response strategy where we continue to take moves to ensure that we are majority EU-owned. Our EU cost leadership has significantly widened over all other airlines in Europe. Fuel, we're very well hedged with jet swaps and caps as spot prices rise. Particularly as spot prices rise.
Last week they hit $90 a barrel. With 41 Gamechangers already delivered, we expect to take 65 of those aircraft now in advance of summer 2022, and we're very proud and pleased with the Carbon Disclosure Project upgrade to an industry-leading B climate rating, up from a B minus. We remain committed to achieving an A rating in the next two years. Traffic, we believe, will recover strongly, but I would again caution it will be subject to other COVID variants. Our EU cost leadership has significantly widened because during the COVID period we have continued to focus on staffing, efficiency, and productivity. We've committed to all of our crews and pilots. We'd keep them current.
That was one of the reasons why we were able to respond or recover so strongly from July last year when many other EU airlines either had aircraft or crews that were out of currency. We've renegotiated a significant number of airport and handling deals at a time when you look around and you see airports like Heathrow, for example, increasing passenger and airline charges by up to 50%. We have long-term low-cost deals at most of our airports, and most of our airports are working with us to recover traffic strongly and doing so by putting in place route incentives. We've made significant gains, I think, in our ownership and maintenance cost line, where with the new deal with Boeing and the delivery of the Gamechangers.
Clearly during COVID our on-time performance has been at industry highs, which means our EU261 claims have significantly fallen. Neil, do you want to touch on fuel hedging?
Yeah. As you said, Michael, we're very well hedged. We're probably the best hedged airline in Europe at this point in time. 100% of hedging in place for the current quarter, FY 2022 Q4 at levels well below spot, which is running about $800+ per metric ton. When we look into the Easter and peak summer period, again very well hedged, 80% cover in place, 60% through jet swaps with the balance through caps. For the winter period, the second half FY 2023, we've got 70% cover at $640 a metric ton. Carbon, which is now trading up near $ 90 per ton, is another area where we've got a massive advantage over everybody. 100% hedged for the current year at EUR 24 per EUA and EUR 45 per EUA, 80% cover in place for next year.
In a good position on that front, Michael.
As I said, looking, touching on the plan to get to 225 million guests, we see competitors across the board either failing or cutting back their capacity, particularly in markets where they're trying to compete with us. We've seen notable competitor cutbacks in places like Vienna, in Italy, in Portugal, and we're expanding our capacity at those airports to take advantage of those gains. Next year, for example, in Vienna, we will have about 21-22 based aircraft in Vienna. Wizz Air, for example, look like they'll only have about four or five and are unable to compete with us. The airports we're working with are offering recovery growth incentive schemes.
Many EU governments are also putting in place tourism and traffic recovery schemes, most notably the Irish government who come up with a very visionary plan which has, as a result, seen us announce our largest ever summer 2022 program here at Dublin, Cork, and Shannon, and we expect to deliver significant traffic growth here in Ireland, but only on the back of low fares. The EU slot waiver has been extended. It's now 64/36 rather than 80/20. I think this belies a number of the more optimistic analyst reports there that there'll be a huge traffic or capacity recovery in Europe this summer. There won't be. The long haul will be significantly constrained.
I think people will be holidaying more at home, but they have no doubt that the legacy airlines and some of the inferior low-cost carriers will not be able to operate their full pre-COVID capacity because either they don't have the passengers or they don't have the crews to be able to operate it. Into that void, we're opening up 15 new bases. We've already announced 720 new routes as well as significant capacity at existing bases and routes. The 210 low-cost Gamechanger deliveries over the next five years gives Ryanair an unbelievable platform for growth. Others talk about growth. We quietly get on and deliver it. As a result of that, we expect to carry about 225 million passengers per annum by FY 2026.
No airline will grow faster than Ryanair in passenger terms over the next five years in Europe. We set that out on the bar charts there. ESG, we remain absolutely committed to being Europe's leading or most environmentally sustainable airline. We have very ambitious environmental targets, cutting ECO2, use of SAFs, improving our independent carbon rating to an A over the next two years, and being net zero by 2050. Into that mix, we'll also create 6,000 new jobs over the next five years. We're investing heavily in new people and training. We've opened a EUR 50 million Dublin aviation training center.
Four full motion simulators, two fixed base simulators, cabin crew training facilities, and we expect to open two more of those, one somewhere in the Iberian Peninsula and one somewhere in Central Eastern Europe, in the next two or three years. We are committed over the next five years to training and recruiting thousands of very high-skilled, highly paid aviation professionals. We've also launched the 2022 customer program. The first of our customer panels met for the first time in September in Dublin, and we're looking forward to meeting with the panel again in March in Madrid. I think the benefits of all of that investment has been seen. Our customer satisfaction scores has improved to an all-time high of 89%. In summary, our 2022 traffic will be somewhere just under 100 million.
As you know, before Omicron, we thought we were going to get to just over. We'll now be just under because of the capacity cuts in December, January. The recovery, which was strong, was disrupted by Omicron in December and January. We expect a strong recovery to roll out into March, April, and May, but we're wary that there will be further Omicron disruptions. We are guiding still for an FY 2022 loss. The range is wider between EUR 250 million and EUR 450 million. We can see traffic recovering in February and March, but we remain nervous about what the yield is. We remain load factor active, yield passive. We will spend money to fill our planes in the near term, because that gives us the best platform for very strong performance through the summer of 2022.
We do see faster post-COVID growth. That's why we've increased our five-year traffic projection up to 225 million passengers. We're doing that off a very strong balance sheet, BBB rated, very strong, cash generation coming from the booking recovery, and we think that continues into the spring of 2022. That combination of financial strength, lowest cost makes Ryanair, the long-term winner here in Europe. Thank you.
Michael, Neil, good morning. Can we begin by discussing Ryanair's ESG strategy? What are the key highlights?
Yeah. Firstly, we're Europe's greenest, cleanest airline. Every passenger who switches to flying Ryanair from one of Europe's legacy airlines is already reducing their emissions, cutting their emissions of their trip by up to 50%. They're flying on a fleet of new, more efficient aircraft with high load factors, flying point to point and not connecting through inefficient hubs. We're investing up to $20 billion in a fleet of new 737 Gamechanger aircraft over the next five years. All of our growth will take place on aircraft that carry 4% more passengers but burn 16% less fuel, and reduce their noise emissions by 40%, making us a much better neighbor for our airports and these people who live and work in and around the environments of our airports across Europe.
We're very proud that the Carbon Disclosure Project have improved our carbon rating from a B-minus to a B. That is an industry-leading rating, but we're still committed to moving that rating forward to an A rating in the next two years.
What are your training and job creation plans for the next five years?
Well, we're gonna grow strongly over the next five years. We hope to have about 620 aircraft in the fleet, and with that, we'll see about 6,000 jobs created, high-paid jobs, high-trained jobs for pilots, cabin crew, and engineers. We've already started the process of building out our training infrastructure. Back in the autumn, we launched a EUR 50 million simulator and training center here in Dublin, state-of-the-art. We'd hope to build two more of those over the next couple of years at EUR 100 million investment. We're looking at the likes of Spain, Portugal, and Central Eastern Europe for that. We've ordered eight new simulators at a cost of over $80 million, again, to facilitate training and job creation in Ryanair.
What are the latest updates from your customer improvements program?
Yeah, it's making some very significant progress. We're very proud that our customer panel met for the first time in September 2021 here in Dublin. We've already implemented a whole series of improvements both in the in-flight experience and in the day of travel flight app that customers were recommending to us. The panel meets again in Madrid, and we look forward to continuing to work closely with that customer advisory team. I think that's reflected also in the very strong load factor recovery you saw in the third quarter. I mean, Ryanair was operating a schedule that was three, four times more than any other European airline, but at much higher load factors. We had an 84% load factor, and I note last week Wizz and easyJet reported 77% load factor, but with a much smaller operation.
Having said that, we're also committed to continue to improve our CSAT scores, and I'm pleased to say that we're in the third quarter. These were at their highest-ever rating of 89%. We hope to continue to build on that progress and continue to deliver our customers not just the lowest fares and the most on-time flights, but an ever-improving customer service and customer experience.
A shift in focus slightly, Neil. You recently accelerated your traffic target to 225 million pax by FY 2026. How will you achieve this?
Well, I suppose underpinning this is the 210 Gamechanger aircraft, which are gonna come in over the next five years. We've seen a lot of capacity come out of Europe, coming into COVID with the likes of Monarch and Thomas Cook Group. Equally throughout COVID, we've seen a number of airline failures. We've seen a lot of capacity taken out by the likes of Alitalia, TAP, and others all across Europe. We're getting huge opportunities to grow at this point in time. Airports are now very anxious to have traffic restoration where the incumbent airlines are no longer there. They're also eager to lock in growth for the future. Governments similarly keen to stimulate tourism.
This summer we'll operate our largest ever schedule out of Dublin with 33 aircraft, thanks to what the Irish government have done. The Moroccans very keen to grow tourism. Spain very keen to grow tourism. Over the past nine months, for example, we've launched 15 new bases, 720 new routes, and we'll deliver 165 million customers in the next financial year as we grow to 225 million over the next five years.
You referenced the Gamechanger aircraft. How many will be in your fleet this summer?
Well, we had 41 aircraft in the fleet at the end of the third quarter, the 31st of December. We take 24 more deliveries over the first four months of this year. We will have 65 Gamechangers in the fleet for peak summer 2022 by the end of April.
How are the 41 delivered to date performing?
Excellent. They've exceeded our operational criteria. We'd hope to achieve 16% fuel burn savings. We're seeing better than that. The noise is in line with the 40% that we'd hope for. Customers and crew alike are very, very positive on the aircraft.
What are the group fleet plans?
Well, as you know, we recently announced plans with shareholders. We're not gonna sell off any more of the second-hand NG's. We've set out a much more aggressive passenger growth target to get to 225 million passengers over the next five years. We expect the fleet, with the addition of 210 Gamechangers, to grow to something of the order of 620, 630+ aircraft over the next five years. We're not in talks at the moment with Boeing on new aircraft orders. We've been very disappointed with the response of Boeing. Disappointed for Boeing too that we've seen in the last six months a number of Boeing customers like Jet2 and others convert to Airbus aircraft. We think Boeing are missing a trick.
They need to be much more aggressive on the sales front, and they need to be doing a deal with Ryanair. Sadly, at the moment, they're not.
How are the other Ryanair group airlines developing?
Others very well bedded into group at this point in time. Continuing to work on their cost base and getting ready to take as many Gamechangers as they can into their fleet for the coming summer. Buzz at this point in time have got about 55 aircraft in their fleet, all Boeings. Malta, quite significant operation with 140. We have the A320s, 29 of those in Lauda at this point in time. Ryanair U.K., very small part of our operation. We're getting some opportunities into third country, so they're just under 10 aircraft at this point in time.
Shifting focus, Michael, to the short term, what does the booking curve look like?
I think the booking curve, as we know, has collapsed. It's a very close-in and very yield-sensitive booking curve. I think that's why Omicron variant and the restrictions that EU governments, the panic that was generated in early December did such damage to our December, January, and February traffic and yields. Nevertheless, we have seen a very strong bounce-back in booking over recent weeks as it's become evident that Omicron, while more transmissible, is far less virulent. We would remain cautious. I think, you know, we may not be out of the COVID woods yet.
As we are working hard using our load factor active yield passive philosophy to rebuild bookings, they remain very sensitive to any negative COVID news flow over the next three or four months. I think by the time we get to summer 2022, we should be in very good shape. Nevertheless, pricing will remain very sensitive to news flow, and to aggressively recover traffic, we're selling lower fares than we would have heretofore.
On the supply side, what capacity do you have on sale next summer versus summer 2019?
We're gonna have 65 extra Gamechangers in the fleet, so a big ramp up from where we were last summer, and we think we'll be somewhere in the region of about 114%-115% of pre-COVID capacity for this summer. That'll be helped by the 15 new bases and the 720 new routes that we've rolled out.
To achieve that capacity, Michael, do you see any staffing issues for that ramp up?
Generally not, but there are pockets. I mean, you know, firstly, we need to recruit and train. We're recruiting and training 1,000 new pilots as we speak at the moment through our cadetship program. We're recruiting upwards of 2,000 new cabin crew. I think the U.K. would certainly be an area of focus for us post-Brexit. There's a lot less labor flexibility in the U.K. The advantage we have in Ryanair is that we're a high pay for people in who want to fly to operate as cabin crew. We pay well above hospitality rates or general the retail environment. We're a reasonably high-paying employer, but we think that's the one area where there'll be pinch points. Having said that, on the upside, there has been almost no pilot attrition for the last two years.
We don't see there being much pilot attrition. There's a huge surplus of trained pilots, mainly people who have returned from the Middle East and from China during the COVID crisis. We're investing very heavily in training and in development. That's why we've opened a EUR 50 million cabin crew training center here in Dublin, and we expect to open two more across Europe, which will bring us to seven training centers in the next two years. We now have the capacity to train upwards of 1,000 pilots each year and something of the order of between 2,000-3,000 cabin crew. We think there's a good supply of labor in the marketplace.
The other issue is we're beginning the process of talking to our unions and to our people about restoring some of the pay cuts in an orderly fashion over the next two or three years. We're not there yet, but you know, as we see the initial phases of recovery, recovering our people's pay is uppermost in our mind.
Now let's turn to your Q3 results. You reported a loss of EUR 96 million. Why?
It was a quarter of two halves in many ways. It started off very well with a strong midterm break since October, and with load factors of 84% rising to 86% since November, albeit at slightly lower fares. But Omicron kind of came out of the blue the back end of November. There was a lot of hysteria around that which led to governments imposing restrictions, and that damaged our close-in Christmas and New Year bookings. We lost about 1.5-2 million of high-yielding fares. To put it in context, our average fare in the quarter was just EUR 25, which is about 24% below where it was in pre-COVID times. Ancillaries, however, performed very strongly. We generated about EUR 22 per passenger on ancillaries.
I'm very pleased with the performance that we had on the unit costs. If we look at unit cost ex-fuel, for example, we had just EUR 32 per passenger in the quarter. That was effectively the building blocks to the EUR 96 million loss.
On ancillaries, Michael, what's driving that EUR 22 per pax?
I mean, the key drivers have, as usual, during the COVID period, been priority boarding. The facility that allows you to bring a second carry-on bag on board. Reserve seating. Passengers have got used to the idea of selecting their own seats and don't mind paying a very modest premium for it. I know that many of our competitors who a year, a couple of years ago said they would never introduce these services are now replicating them as Ryanair leads the way as usual. Duty-free on all flights to and from the U.K. we think will be a very strong performer over the next 12 months. We would expect to begin to see the other smaller lines like car hire, hotel accommodation begin to recover as people begin to move again across Europe post-COVID.
Moving down to P&L, Neil. Fuel prices obviously are where they are right now. What is your current fuel and carbon credit hedging position?
Yeah. I think it's important, you know, the advantage that we have on fuel hedging and carbon hedge at this point in time. Brent trading over $90 a barrel last week. Similar levels on carbon. We're very well hedged. We're 100% hedged for the current quarter out to March 31. When we look into next year, with a combination of jet swaps and caps, we've locked in 80% of our exposure well below current spot levels for the first half of FY 2023. We're 70% hedged for the second half. On carbon, as I said, trading near EUR 90 in EUA. We're 100% hedged for the current year at EUR 24 , and into next year we're 80% hedged at EUR 45 .
Again, in a very good position, vis-à-vis, the rest of the competition.
Let's turn to your balance sheet. How is your cash position?
As you see, we had just under EUR 3 billion in cash on the balance sheet at the end of December. This was despite repaying the UK CCF loan of GBP 600 million five months early. We repaid it in October. We've seen a very strong recovery in cash flows. Nevertheless, even as that strong recovery in cash flows has taken place, we have spent more than $800 million dollars in the quarter on new aircraft orders. Despite that, we still were able to reduce our net debt, admittedly by a small amount, but from EUR 2.3 billion-EUR 2.1 billion at the end of the quarter. I think this is one of the key objectives we have over the next year or two.
You know, we went into the COVID crisis with a zero net debt position. Our net debt position is now just over EUR 2 billion, and we are absolutely committed to reducing that net debt position back to zero over the next two years.
What is your CapEx guidance for the remainder of FY 2022 and FY 2023?
Yeah. Our guidance hasn't changed. We still expect about EUR 1.2 billion including CapEx, maintenance, for current financial year, FY 2022. Peak CapEx next year, as we ramp up the aircraft deliveries, will be about EUR 2.3 billion all in. Therein, it starts to drop off over the next few years.
How will you finance this CapEx?
As you will see in the past, we've been opportunistic with our financing. A significant proportion of the financing comes from our own internally generated free cash flow, but we also tap the bond markets, the various tax Japanese operating leases. We'll continue to be opportunistic and put in place the lowest cost financing as we have done in the past. I think what makes it easier is that the new aircraft deliveries are coming to us at very low prices negotiated with Boeing during the COVID crisis. The fact that they deliver 4% more seats but burn 16% less fuel at a time when Brent spot prices have hit $90, a 70-year high last week, makes these a very compelling asset for the financing, the financial markets.
Finally, Neil, let's close the Q&A by discussing the group's outlook for FY 2022.
Sure. Well, there's no change to the traffic outlook to the one we put into the market just before Christmas. We're indicating traffic just below 100 million for the current financial year. The booking curve remains very close in. As we already discussed, there's a lot of uncertainty around what may happen with COVID or otherwise over the next couple of months. We continue to stimulate pricing. We're load active, yield passive. As a result of that we've got a relatively wide net loss range of EUR 250 million to EUR 450 million. I think when you look beyond COVID, we're in a very strong position. We've got the Gamechanger aircraft coming in. We've got very good cost deals in place with airports across Europe.
I think we're very well-placed to deliver on our traffic targets for the next five years growing to 225 million by FY 2026.
I think the strong fuel hedging position.
Absolutely
Over the next 12 months will be critical to that.
Absolutely.
Michael, Neil, thank you.
Thank you very much. Conference call's at 10:00 A.M. this morning. We look forward to speaking to you all then.