Hello, and welcome to the Ryanair H1 FY 2021 results conference call. Throughout the call, all participants will be in listen mode only, and afterwards there'll be a question and answer session. Just to remind you, this conference call is being recorded. Today, I'm pleased to present Michael O'Leary, Group CEO. Please go ahead with your meeting.
Okay. Good morning, ladies and gentlemen. Welcome to the Ryanair half year results conference call. You'll have seen this morning that we have released the half-year results on the website. There is a comprehensive slide presentation and a Q&A on the website. I would take all that as read or seen, and then I'll just give you some comments on top of that. As you've seen, the results this morning covered a six-month period to the end of September. A first quarter we were essentially grounded, successfully returned to service in the 1st of July. We've run with about 60% of that capacity through the summer season, following all the ECDC and IATA health measures, and that has been successfully implemented.
Conscious of the need to prioritize the balance sheet and cash, in September we raised EUR 1.25 billion, a EUR 400 million equity placing, which was led by the management team, and we've also raised an EUR 850 million bond. That means that today we've got the half year we've closing cash position just over EUR 4.5 billion. We will need that because in the next 12 months we have over EUR 1.5 billion of debt repayments due. The U.K. government EUR 600 million loan is due for repayment in March, and we have our 2014, the first of our commercial bonds, the 2014 EUR 850 million issue is due for repayment in June. Some of the key challenges over the last six months, the Ryanair customer service teams and labs have cleared an unprecedented backlog of customer flight changes, COVID-19 cancellations, refunds, and voucher issues.
All of that backlog has now been eliminated. We have refunded our vouchers, EUR 1.5 billion worth of bookings. We have no backlog in refunds now. If there are customers out there who still haven't received a refund, it's because they haven't requested it, or they're one of that small number that are stuck having moved and made bookings through screen scraper, unlicensed screen scrapers, where we have fake customer contact details and fake payment details, and we've set up a procedure whereby they can apply directly to us and bypass the overcharging scam artist screen scrapers and obtain their refund directly from us. COVID-19 crisis, though, has clearly caused the closure of a number of EU airlines. Huge long-term capacity reductions at many of Europe's legacy carriers who are receiving unbelievable quantums of state aid. Air France, KLM, Lufthansa receiving over EUR 10 billion each.
Alitalia, over EUR 3.5 billion, and similar sums or equivalent sums in SAS, TAP, and others. We believe this illegal state aid will distort competition for many years to come and allow those flag carriers, failed flag carriers, to engage in below-cost selling for many years. We have already initiated the first two legal cases in Europe against the SAS state aid and the French refund of aviation taxes, but only to French airlines. We expect to receive decisions on those cases this side of Christmas. However, I think it's important today we don't get stuck in the details of the short-term kind of details of the current situation with Europe moving back into second lockdowns. There is a bright future ahead. We have taken advantage of the COVID or used the period of the COVID-19 crisis to radically restructure our cost base.
We have now reached agreement, I'm pleased to say, with almost all of our pilots and cabin crew. That will involve painful pay cuts and productivity pay reductions through the winter period. It's a much better alternative than job losses. We have minimized the number of job losses we have. We can't rule out further job losses, particularly at some bases in Spain and Portugal where, and Belgium, where the cabin crew unions frankly have their head in the sand and are still trying to insist on not taking pay cuts or opposing pay cuts. In those circumstances, I think it's inevitable we will have job losses in some of those smaller countries. We're also in extensive negotiations with airports about growth incentives, returning or where we can return traffic quite quickly.
We took great comfort from the recent experience with the U.K. Canaries market. When the U.K. added the Canaries to their green list two weeks ago, our daily target of 2,000 bookings was exceeded by a 14-fold. We took 28,000 bookings in the first day, 25,000 in the second day. That, I think if anything, confirms our view that there will be a very strong snapback. There is huge pent-up demand for air travel across Europe, particularly short-haul European air travel. We think the long-haul recovery will take longer. The short-haul snapback will be strong, and it will be immediate, and we're well placed to cater to that.
We saw, for example, tour operators and charter airlines being slow to respond to that reopening of the Canaries, where we were able to add extras for Christmas travel almost immediately and responded strongly to that. A couple of other key themes. We are clearly in continuing dialogue with our partners, Boeing. We are now confident, as are they and the FAA and the EASA, that the MAX 8 will return to service probably sometime in late November, early December. That we believe will lead to our aircraft, the MAX 200, the Gamechanger, being certified probably in early 2021. We are hoping to take the first delivery of those aircraft at the end of sometime in February. That would allow us to take. We have a limited capacity to take new aircraft deliveries at about eight a month.
It would allow us to take something of the order of about 30 aircraft between February and early summer. That figure might fall to 25 or so, but it depends on when we can get the first ones. We have extensive MAX simulators up and running, and extensive training programs for our pilots. We say that this is a great aircraft. All of the pilots who have flown it and flown the sims think it's a terrific aircraft. Operationally, they understand it well. It flies and handles very well. From a financial perspective, it gives us 4% more seats and a compelling 16% lower fuel consumption per seat, as well as delivering 40% lower noise emissions. We think that the Gamechanger aircraft will be a key component of us significantly lowering our aircraft ownership cost base for the next number of years.
I contrast that with many of our competitors who are engaging in sale and leasebacks of their fleet at distressed prices, and paying high financing costs, which will significantly widen the cost gap between us and all other EU airlines over the next, I think, five or 10 years, widening the gap between Ryanair and our competitors across Europe. We will therefore, I think, respond or remerge out of the COVID-19 crisis with a lower cost base, with a compelling growth model, with significant incentives in place across many airports, many of whom want to recover their lost traffic quickly. Those that come up with the best incentives will recover that traffic faster than others.
In a market place in Europe where structurally a huge amount of capacity has been taken out and will not return, we aim, particularly with the Gamechanger aircraft order, to be able to fill those gaps, and deliver or restore traffic in many of Europe's airports. The risk of a no-deal Brexit remains high. We hope before the end of the transition period that the U.K. and Europe will at least agree a trade deal to cover air travel. They had a bilateral arrangement agreed before the end of 2019 which was at the first Brexit, but we believe that there will be a trade deal, at least one that will cover air travel that will allow the free movement of people and the deregulated airline market in the U.K. and Europe to continue. In terms of outlook, I know we'll have lots of questions.
It is impossible in the current climate to give you any kind of outlook for the remainder of this year. You would've seen over the weekend, the U.K. returning to a second lockdown. Ireland has already entered a second lockdown two weeks ago. We draw your attention to the fact that lockdowns are completely ineffective, and I would quote the WHO who have said governments should do everything possible to avoid brutal lockdowns because it doesn't actually get rid of the virus. We've already learned that from the first ineffective lockdown, and we'll learn it again from the second ineffective lockdown. I remain an optimist. I do take my lead from Dr. Fauci in the U.S. who has predicted that there will be one or more vaccines probably approved by the health authorities this side of Christmas.
The key issue then is when will there be commercially available or widespread availability of a vaccine, at least to cover the high-risk groups, the over 70s, the people who are working in the health service and in nursing homes. We would hope that that will be by the end of Q1 or Q2 of next year. That would allow us at least to rescue most, but not all of the summer peak travel period, and hopefully then we see finally leave the COVID-19 crisis behind us. At this point in time, as you know, our last guidance we gave out in October was for traffic of 38 million for the remainder of this year. I think that will probably get pared backwards, but not as a result of the second wave of lockdowns.
We've been asked frequently this morning, will we be canceling more flights to and from the U.K.? The answer is we don't expect to. We had already done severe surgery to our November and the first half of December flight schedules. It is likely though that we will not be able to run a 70% load factor through that period. We might see the load factor fall to 60%. There might be some judicious capacity culling within that. We're talking maybe a couple of million passengers below the 38 million. We will continue to manage that on a weekly basis. FY 2021 will continue to be hugely challenging, and it's for that reason, we can't provide any updated guidance. We do expect to still carry 38 million or slightly less. Maybe it's between 38 million and 35 million passengers in FY 2021.
A lot depends on how strong the Christmas is, and there is reasonable bookings there for Christmas, but it depends on whether European countries are out of lockdown at that point in time or not. We do need an end to these failed lockdowns. We are calling on European governments to be much more aggressive on test and tracing. For example, in Ireland, we're only testing, have a capacity to test 100,000 people a week. We should be testing 1 million people a week. That's what this government in Ireland should have done during the first lockdown back in the spring. Unfortunately in Ireland, we're being run by a bunch of doctors and not by a government here. The doctors continue to mismanage everything from nursing homes to meat factories to face masks as well as lockdowns.
Nevertheless, we are where we are and as an airline, we'll have to continue to try and manage our way around it. Our key objectives during this period have been to conserve cash, strengthen the balance sheet, preserve as many jobs as possible. Even if the price of that job preservation will be pay cuts for management, for our frontline people, less flying hours for our frontline people, it is better that they are less busy during this winter, but still in a job, so that together we can all respond aggressively and grow strongly once we emerge out of the COVID-19 pandemic. The Ryanair Group will emerge from this period with a lower cost base, a stronger balance sheet.
We will be able to fund lower fares and add new lower cost aircraft to capitalize on these growth opportunities, which will inevitably emerge once we emerge from the COVID-19 pandemic. Neil, is there anything you want to add on the MD&A?
I don't have a lot to add, Michael, other than to emphasize the work that we've done on the cost saving over the past number of months. I think that came through in the half, where we saw operating costs down 57%, albeit not enough to offset the 78% reduction in revenue. We worked very hard to improve what was already the lowest cost base of any airline in Europe. The balance sheet also underpinned by the equity raise and the euro bond that we did last month, put us in a relatively good position as we go over the next 12 months or so. All refinancing risk now removed. I would flag that there was some more hedge ineffectiveness in the quarter. We took an after-tax charge of EUR 214 million.
It was primarily due to the fact that we could pull back our winter capacity from 60% prior year to 40% prior year capacity. Effectively moving what would have been a charge in Q4 or Q3 into the first half of the year. We're probably coming near the end of the hedge ineffectiveness, particularly as we look into next year, where we're relatively under hedged. We wouldn't anticipate any hedge ineffectiveness next year. From a cash perspective, we've already settled about 70% of the adverse hedging this year. Balance sheet in good shape, cost base getting better, and MAX is hopefully coming next year. We should improve the cost base further.
Okay. Thanks for that, Neil. We'll open up now for Q&A please. We're going to restrict everybody to two questions. The first ones, which would be what will the yield be like or the traffic be like next year, is we don't know. Go ahead please.
Thank you. If you wish to ask an audio question, you may do so by pressing zero one on your telephone keypad. If you wish to withdraw your question, you may do so by pressing zero two to cancel. Once again, zero one on your telephone keypad if you wish to ask an audio question. We will have a brief pause while we are waiting for audio questions to be registered. Our first question comes from Jarrod Castle from UBS. Please go ahead with your question.
Jarrod, hi.
Thanks, good morning, both. Just kind of slightly nuances on some of the stuff you've already said on the Q&A on your website. You obviously had some good cash control over the summer, and obviously will burn through cash as you normally do over the winter. Can you potentially give some kind of range on what you're thinking this will do to the balance sheet as you progress through winter? I'm not asking for an exact number, but just any color that you can give, Neil, Michael. Secondly, just again, not asking on yields. Otherwise, I know you're going to get cross with me. In terms of your willingness to achieve a 60%-70% load factor, as you said, there's pent-up demand. Would you be prepared to cut aggressively on yields to achieve that load factor?
Is it a case of being conservative in the current environment at the moment and maybe some people you can't even motivate to fly given the current environment? Thanks.
Thanks, Jarrod. Two quick response on that. The difficulty part is it's impossible to give you any guidance on cash flows through this winter. The challenge there is in a normal year, we would have a huge surge of bookings and cash coming through in January, February, March as people make their Easter holiday bookings, their summer holiday bookings for that Christmas onwards period. We have just no idea. I think it will be strong, but we have no idea if there is a third lockdown going on in January or February. Will we see that normal surge of cash flow and summer bookings coming through? There is no doubt at the moment that the booking profile is incredibly late, which is why we think there will be very little impact on us from the government announcement over the weekend. November is already reasonably well booked.
I think it's a judgment issue there. Normally, what we've done through this crisis, and reasonably successfully, we said we will run with a 70% load factor, and if we don't think we can achieve 70% load factor, we'll cut the capacity. We will use pricing to deliver those. We're not giving away 19 EUR 1 airfares. We're not doing free travel. There's no point. The ancillaries are strong. Where there's reasonable pricing and we think there's a reasonable prospect of operating to a 70% load factor, we will do so. In fact, this week we'll announce our October traffic statistics. The load factor in October was 73%. The reason we do that is one, obviously to keep the aircraft, the pilots, and the cabin crew flying.
Two, it also means operating at those kind of load factors, we're about as close to break-even and as close to kind of cash neutral as it is possible to get in the current climate, mainly allowing for the fuel hedging effectiveness. That's a reasonable way to go forward. We've a decision to make in November, which is why I think we will let the load factor probably decline to about 60% in November, just because the bookings in November are so weak. We don't want to collapse the business entirely. We would like to keep those skeleton flights operating, and we are down to kind of skeleton flight levels across Europe. There is demand for those flights. People are moving for work reasons.
There are lots of people who work in the health services across Europe who are traveling to and who commute using Ryanair services. We think that will continue. Are we dumping prices to maintain a 70% load factor? No. We are clearly below our budgeted yields though for the months of September and October. It is reasonably sensible where we don't think we can get to that 70% load factor, we would take out that capacity. That's why we've already cut or we've already announced we're only doing 40% of our normal winter capacity. That is less in November. It's a bit higher around the Christmas period.
It is a very movable feast. The real challenge is we've no idea what will happen to the bookings over Christmas and into that January, February, which is normally one of the high points of the booking period. Our busiest week for bookings annually is always that second or third week of January, we just have no idea yet what that'll look like when we get there in January.
Okay.
Next question, please.
Thanks, Michael.
Thanks, Jarrod.
Our next question comes from Daniel Röska from Bernstein. Please go ahead with your question.
Hi.
Thanks very much. Good morning, gentlemen.
Hi.
Hey. In your comments this morning, you highlighted the opportunity for growth as other airlines retreat over the next couple of years. Why haven't you announced any new bases or specific growth plans yet, kind of compared to others? Staying on that topic of growth, could you comment how you're currently thinking about deploying that growth in the upcoming years? Is it more strengthening existing bases or new bases? If it's new bases, which geographic focus do you think can yield the most attractive return for you?
Okay. Thanks, Daniel. We have announced one new base, which is Beauvais outside Paris, opening in late January. It's only a two or three aircraft base. The reason we haven't announced more is because we haven't concluded negotiations with airports yet. There are extensive negotiations going on really across the piece across Europe. In a lot of cases, those airports don't know how much capacity they're actually going to lose. European airlines are allowed to hold onto their slots. The use them or lose them has been suspended for this winter. It will probably be suspended into summer 2021 as well. If you look at some of the legacy airlines like Lufthansa, KLM, Air France, who have retired a huge amount of their capacity, up 25%-30%, we think a lot of that won't reemerge or won't be restored. There will be enormous growth opportunities for us.
Clearly those airports who've already been most affected by closures, for example, the Flybe, Germanwings, LEVEL, they're already quite aggressive. There's more to do. How will we deploy the growth? The answer to that will be opportunistically. We will deploy the growth to those airports who want to grow or restore their traffic fastest. That will be from our largest airports at Dublin and Stansted, down to our smallest airports and many new airports where we presently don't fly. The more the airport works with us to have a return or an incentive, even if it's a short to medium-term incentive, that's where we will deploy that capacity. We will be opportunistic and entirely flexible, but it will spike back very quickly.
I think the experience we had with the Canaries traffic two weeks ago is an indication of the level of pent-up demand there is, particularly for short-haul European air travel. I think any people who have been locked up for the last nine, 12 months, there is an enormous desire for them to go traveling again or to bring the kids on holidays, go back to the beaches of Europe. I think that would be reflected in very strong travel patterns into next summer, as long as a number of vaccines are announced and there is some reasonable availability of vaccines by the end of Q1, Q2.
You talked about the hub-and-spoke carriers. In principle, is the hub or the spoke more interesting for you?
In principle, Daniel, what's more interesting to us is those airports who offer us the lowest cost base. We don't really care. We're at hub airports and we're at spoke airports, but we are very minded to grow back very rapidly. I give you an example. For example, you take Stansted, which is our largest airport. I feel no great compulsion to restore traffic growth very rapidly at Stansted if, for example, there's a unique opportunity in Spain or in Italy or in Germany, or particularly in the central and eastern European airports. Will we return and reopen in Stansted? Yes, of course, we will. Whether we snap back from where prior to the shutdown we were at nearly 30 million, close to 30 million passengers at Stansted. Whether we go back there, I use it only as an example.
This is not the nature of a discussion with Stansted. Whether we go back to 25 million passengers in the first year or just 15 million passengers in the first year will entirely depend on the nature of the discussions we have, not just with Stansted, but also with the other airports across the piece. We're certainly seeing quite aggressive negotiations or offers on the table to us from particularly central and eastern European airports who've been very badly devastated by much more autocratic cutbacks and lockdowns by their local governments.
Got it. Thanks very much.
Thanks, Daniel. Next question, please.
Our next question comes from Savi Syth from Raymond James. Please go ahead with your question.
Savi, hi.
Hey, good morning. Two questions. Assuming you get the 30 MAXes planned, just curious what your CapEx for kind of second half will be and maybe generally what the next couple of years might look like. Just given the near-term lower cost, and assuming you get the MAX as expected, just curious what level of operation you need to get back to in order to achieve the kind of EUR 30- EUR 31 per pax cost you achieved, prior to this crisis.
Well, I'll come back to Neil to answer the CapEx question after. I'm not particularly worried about it. There isn't an absolute number on cost per passenger at EUR 31. I think when we emerge out of this crisis, our cost per passenger will be meaningfully lower than it has been historically. We will have lower pay, lower wages. We will certainly have much lower fuel. We will have lower aircraft costs, lower airport costs. I think we'll have higher yield because there is no doubt that there will be constraints on capacity coming out of COVID-19. If there is a vaccine available Q1, Q2, there will be a very strong summer period next summer. I know that's a big if, there will be a very strong summer. The airlines across Europe would not be able to respond or restore that capacity quickly.
I go back to the example two weeks ago when the Canaries opened up. We were back there. It's incredible. We didn't even know. Before the Canaries, the government had announced that the Canaries was, we'd seen a huge spike upwards in bookings. We were adding extra flights into the Canaries for the Christmas period within 24 hours. Tour operators, charter airlines, and some of the legacy carriers were scrabbling around, not able to add flights. They've already cut their schedules. I think you will see us respond very quickly, I think pricing in a recovery environment will be much stronger than we have had historically because so much capacity has been taken out of the system. Is it 31 or 35 or 27? No idea. It will just be lower than we had in the past. Neil, CapEx?
Yeah. There won't be a huge amount of CapEx in the second half of this year. In fact, most of the CapEx will be really maintenance related, and even at that, where we're doing less flying, so less on the maintenance side. It's too soon to give numbers on what the Boeing CapEx might be because we haven't finalized delivery schedules. I'm not going to give CapEx for the next few years. Hopefully in the next few months, we'll come to some kind of conclusion with Boeing and we can start giving guidance at that stage.
Thanks, Neil. Next question please.
Thank you.
Our next question comes from Mark Simpson from Goodbody. Please go ahead with your question.
Mark, hi.
Yeah, morning. Two questions. You're obviously not giving firm guidance, but you have talked in the Q&A about a 50%-80% of summer 2019 capacity potentially being your targets for the summer 2021. I'm just wondering what the variables are between that range. Is 80% a max that we should assume? Then talking about MAX, obsessed by the idea of you taking MAX 10 in the future to further drive down your unit cost. Can you maybe comment around your view of the MAX 10 and what kind of ambitions you might have behind that? I'm sorry to squeeze one last quick clarification. Neil, CCFF, you've got it down as a March repayment, but is it likely that the government will roll that out for at least another year?
Okay. Neil will answer the last question. Let me do the first one. We're giving a very wide range, 50%- 80%. The real variable, what drives that is widespread availability of multiple effective vaccines and how that will impact governments' ability or willingness to lock down economies or reopen economies. There's clearly many of the continental European economies are hugely dependent on travel and tourism. Even Ireland, which is an island off the periphery of Europe, is hugely dependent on travel and tourism, but that hasn't stopped our government basically shutting the entire island down. It's easier to get out of North Korea at the moment than it is off the island of Ireland. The wide range of 50%- 80%, and that's over the full year.
We're talking something like 75 million passengers to maybe 100 million or 120 million passengers is entirely dependent upon the timing and availability of widespread vaccines in Q1 or Q2 of next year. Is 80% our max? We think so. We think even if there was a vaccine available by the end of Q1, we would still struggle. Just because of the obligation of recruitment and training, promoting pilots, having enough lines flying this winter to complete all the training we need to do. We think that it would be tough to get any higher than 80% of our 2019 max.
Now, we could over weekends add extras and things like that, but we don't think that there's any prospect next year that we would carry more than 120 million or maybe 130 million, 135 million passengers, if there was a vaccine widely available in the first quarter. Clearly, the earlier a vaccine is available, the higher that number would go. We're guessing. We're stabbing in the dark. That's all we can give you. On Boeing and the MAX 10, we continue our intensive discussions with Boeing around compensation, pricing of our existing MAX order. We are looking at additional aircraft orders. Most of it would focus around the MAX 200, the Gamechanger which will significantly lower our operating costs going forward for the next number of years. Boeing are not in a position to engage in discussions on the MAX 10 at the moment.
They have pushed back the production and deliveries of the MAX 10 by anything up to two years, I think, Neil, is it?
Yeah.
About two years. They're not really at a point where they can give us any deliveries of MAX 10 or discuss pricing. We have though, and we've agreed with Boeing, that we will be first in the queue when it comes to a discussion on MAX 10 availability and pricing, and it's certainly something we would be looking at going forward. We were already the lead operator, lead customer for the MAX 200. We have incredibly favorable pricing from Boeing as a lead customer of the MAX 200. The fact that they give us 4% more seats at no extra cost and 16% lower fuel will transform our cost base for the next number of years.
Competing as we will be with airlines who have been doing sales and lease backs, selling aircraft at distressed prices and leasing them back at what are very disadvantageous financing costs in the current climate. Neil, then on the CCFF.
Yeah. The CCFF. Mark, our intention at the moment is to pay that back in March, but you're right. We don't have to make that decision until we get into kind of the back end of March, and there is a possibility if we want to roll it over for a further one year.
Okay. That's great. Very clear. Thanks, guys.
Thanks, Mark. Next question, please.
Next question comes from Stephen Furlong from Davy. Please go ahead with your question.
Morning, guys. I presume revenue management systems are pretty redundant at the moment, but I was just wondering how the importance of Ryanair Labs and the work it's been doing during the crisis. I just might talk about that. Then maybe just go back on the competitive landscape into next year. It seems that there'll be a huge chunk of capacity permanently out of the market. I don't know if that's your view. Like the likes of Wizz may be growing Gatwick or domestic Norway maybe. Beyond that, would you agree that a lot of the capacity coming out would be permanent or do you think it would come back post-crisis? Thanks, Michael.
Okay. Eddie Wilson is here, the CEO of DAC. I'm going to ask him to just give his view on the revenue management systems and pricing. Just on the competitive landscape, if you look around the system, we think at best we'll only be able to operate 80% of our capacity through next summer. Air France-KLM who already announced 20% capacity cuts. Alitalia are focusing strongly on long-haul routes, massive short-haul capacity cuts. easyJet will have 51 less aircraft by September 2021, no growth thereafter to 2025. IAG, 68 less deliveries over the period 2022. Their winter capacity cut is 70%, and it's all across the piece. If you look across who has aircraft orders into next year, most have been deferred out of 2021 into 2022. Wizz, as far as we understand, have about 19 aircraft, so it's reasonably small compared to us.
We'll take delivery of something of the order of about 30 aircraft. We will be the airline with the largest additional or spare capacity into 2021. We are certainly, I think, the airline that most of the European airports are looking to for traffic restoration pretty quickly. We will be delivering that traffic restoration on meaningfully lower cost aircraft with much lower operating cost lines. I go back always to the slide if you're on our investor presentation on aircraft ownership costs. We keep hearing from Joe Varadi and Wizz that they'll have lower aircraft costs than Ryanair, yet every time he adds an aircraft, the gap between Wizz and Ryanair gets wider and wider. We will be taking lower cost aircraft. He's taking higher cost aircraft, the gap between us gets bigger and bigger.
Eddie, if you could briefly touch on revenue management systems and what's our philosophy in terms of pricing and bookings going forward?
Yeah. I think if you look just at, Stephen, you were talking there about labs before I get into that. Our ability to leverage labs during this crisis has been phenomenal, particularly on the customer service side and our business intelligence teams. They were able to sort of be very flexible in actually coming up and managing that amount of refunds and the ability to get vouchers and things like that out. Clearly the curves on the revenue side are completely different now. There's an awful lot more closer in bookings because people are concerned about whether there's going to be lockdowns or whether they can travel or not, and we are working with our revenue management people in labs on that as to how we're going to adapt that going forward.
It's going to be, particularly when bookings start to come back in, how they are traditional sort of curves won't necessarily be applicable. There's a lot of work going on that at the moment. The good news is that the ancillaries are still robust, particularly on seats and priority boarding, and less so on inflight. Having that amount of people here and being able to use them has been a real benefit for us. We're learning a lot from this as to how people are the different profiles of bookings.
To be fair, Ryanair Labs has done a remarkable job. We had a backlog of nearly EUR 1.5 billion of refunds. They have now eliminated that backlog. We've issued refunds, vouchers to all of the customers who were affected by COVID-19 cancellations. You will repeatedly hear quotes on the BBC talking about when we'll eliminate the backlog. It's done. The only people who are left out there are people who haven't applied to us directly for refunds. It's been done. Labs has done a remarkable job. John Hurley is here smiling furiously at me. They've done a terrific job. Going forward, as Eddie said, it is the nature of the beast. We now have a very narrow booking window. Typically about 28, 30 days out.
We are much more flexible in the way we can deploy the aircraft. If we think we're going to be below 70% load factor more than two weeks out, we take out flights. The challenge for us, in most cases, is actually one flight of the two flights that rotation will have a load factor of higher than 70%, and so it needs to operate. Next question, please.
Our next question comes from James Hollins from Exane BNP.
James, hi.
Please go ahead with your question.
Morning, yeah. Just wondering on redundancies themselves. I know you're talking about mainly focusing on pay cuts and 5%-20%. I was wondering, I think your staff base was 18,000, what we should be thinking about for, I guess, the end of this fiscal year. Secondly, probably for Neil, on the Boeing side of things. I know you're not talking about compensation, but obviously you've started that process, EUR 250 million coming in already. Is the best way to think about CapEx next year the same Southwest, who basically said it'd be net zero?
Okay.
On the CapEx, the discussions are ongoing. Some of that includes timing of cash flows. Until we're finished on that, it's very difficult to give you numbers. We'll be trying to keep as much cash in the business for as long as we can, James. I don't think there's much more color I can give you this side of announcing what we finalize with Boeing on that front.
On the headcount issue, I think it's not helpful to focus on job losses. Although, there is likely to be more job losses this winter at those number of bases or cabin crew bases in Portugal, Spain, and Belgium, where we haven't got agreement. Where we have reached agreements with all of the pilot bases across Europe, with the vast majority of cabin crew bases, we're reasonably confident there won't be any more job losses. We are participating in furlough schemes where they're available. In some cases, in the U.K., for example, the furlough scheme is punitive because the employer has to pay out on the first third of the salary, and we simply can't participate in those. We won't fund those kind of salaries. We are keeping pilots and cabin crew flying, admittedly, on the basis of paying them less.
That's better than sitting at home on the dole in the U.K. this winter. It's more helpful, I think, to look at it in the round. That is, in the half year, the staff cost decreased by 60%, which was due to flight hours, recruitment freeze, some job losses. More of the job losses have been in head office and in overhead functions rather than in pilots, cabin crew, and engineers, and participating in the government support schemes. I think that will continue to be the case. We are very conscious. If anything, our utmost priority here is to keep the aircraft fleet flying, even if the planes are only doing one or two flights a day through the winter.
Keep as many pilots and cabin crew current as we can, so that we can pounce on these growth opportunities and return quickly to more normal scheduled levels of flying as soon as there's a vaccine or we emerge out the end of this COVID-19 crisis. An awful lot of our competitors, for example, who have grounded aircraft for six, nine months, their pilots will have gone out of hours, their cabin crew will have gone out of hours. Their aircraft will need a heavy maintenance shop visit before those planes can go back in the air. Whereas we're keeping everything ticking over, while still delivering 60%-70% reductions in our total payroll cost. James, the answer to the question is, don't focus on the headcounts at the moment, f ocus on the payroll cost savings while still giving us a very flexible and keeping our pilots and cabin crew current.
Very clear, mate.
Next question, please.
Our next question comes from Jaime Rowbotham from Deutsche Bank. Please go ahead with your question.
Jaime, hi.
Hi, guys. Morning. You've alluded to the U.K. government, one minute it puts Canary Islands on the safe list and you take a load of bookings. The next, it imposes a national lockdown and tells people not to travel unless for business purposes. Is there anything more you can just say in terms of what you're going to have to do now to manage this latest development in Q3, in terms of capacity and also things like refunds? Second thing, a more simple, boring one. In terms of the Brexit-related risks you've highlighted, could you just remind us what percentage of your current shareholder base is U.K., please? Thanks.
We don't get that number. Yeah. Okay. Let me deal with the first one first. Q3, we'll manage it on a day-to-day basis. Yes, the U.K. government has whiplash from the numbers of U-turns they're performing, not just on COVID-19, but on Brexit as well. We think that the capacity, we've cut capacity to 40% of prior year. The close-in bookings are reasonably strong, but anything out six to eight weeks or more than that is weak. That means we don't have a big refund liability out there. It's not like we were back in March this year where we had lots of bookings through the summer, therefore, a huge contingent liability. We don't have that at the moment. There is a spike upwards in bookings at Christmas.
When they added the Canaries to the list, we saw a big surge in bookings to the Canaries, but it was largely for people who would normally go to the Canaries with their families at Christmas and New Year. There isn't a lot of people out there booking with holidays booked in the middle of November because the schools are open. What we have booked for November is largely business or essential travel anyway. We will expect most of that to travel. I would be perfectly open. The 38 million could fall to 36 million, it could fall to 35 million. We don't know. We're down at pretty much rock bottom levels of traffic and capacity at this point in time. If there's any kind of error or any changes, they would be changes to the slight downside.
On refunds, we have almost no refund liability left because we have no forward bookings out there. I've made clear this morning in the PR, whatever flights we're operating will operate. People do not have a refund entitlement on those flights. If the flight is operating and you don't travel, you don't get a refund, although you can take advantage of our change. We've waived the change fees for any of the bookings that have been made recently. That runs, I would say, to the end of January of this year, which is one of the reasons why we might have a slightly lower load factor in November. It might fall to, say, 60% from 70%. If it begins to fall any less, then that will take out some capacity. We have a very flexible cost base at the moment. We have a very flexible capacity base.
I think if you look at everything we've done since we went back flying on the 1st of July, Ryanair is the only airline that's delivered a 70% load factor every month since the 1st of July. We look at easyJet's load factor fell to 54%, Wizz's load factor down around 64% last month. We deliver exactly what we say we will, and we have a very flexible capacity and cost base going forward. On Brexit, who the hell knows? I mean, the best thing we can say is, look, there was a unilateral agreement to cover flying announced between the European Union and the U.K. government before December of last year. It obviously wasn't needed because there was a transition agreement.
We suspect there will be some kind of agreement that will be cobbled together because Johnson and Gove will U-turn again, having lied on just about every aspect of their Brexit policy. If there isn't, I think we don't factor in the EU. U.K. of the EU, non-EU is still running at about 54/46. We do have the provisions in place to remove the voting right from non-EU shareholders in a hard Brexit if there isn't a trade deal covering aviation. We expect to be well covered. We're not breaking out what our U.K. shareholding is. It's not a figure we've ever given out, and nor would we start now. I'm just going to say, Juliusz, I don't know if you want to add on the Brexit dimension. Juliusz Komorek, our group CLO.
Just one thing, perhaps, which is that if there was no deal between the U.K. and the EU 27 post January 21, we will activate our Brexit ownership and control solution, which Michael described. Essential element of which is dis application of voting rights for non-EU shareholders. That will protect our EU licenses, which we have in Ireland, Malta, Poland, and Austria at the moment. We would hope that dis application will be a temporary solution until the number of EU 27 shareholding exceeds 50% again.
Okay. Thanks for that, Juliusz. Next question, please.
Our next question comes from Muneeba Kayani from Bank of America. Please go ahead with your question.
Muneeba, hi.
Hi. Can you talk a little bit about how you're thinking about hedging? You said 40% for FY 2022. Kind of what's the base assumption for that 40%? Just a clarification on ticket refunds. The EUR 1.5 billion, was that largely all in 2Q?
Sorry, Muneeba, you broke up there at the end. Just repeat that last question. The EUR 1.5 billion refunds.
Yeah. The ticket refunds, the EUR 1.5 billion, was that almost all in 2Q, or was there a portion in 1 Q as well?
Okay, I'll ask Neil to answer the second part. Hedging at the moment, look, we would be reluctant to do any more hedging into next year, not because we don't fundamentally believe in hedging, but simply because the volatility in oil prices means we really should. I mean, I think we should hold out and hope that oil prices will remain reasonably low. We are about, what, 40% hedged into next year already.
Q2, which would be the upper end of our pax forecast.
Pardon me.
That would be based on the upper end of our pax forecast.
No, it wouldn't. 40% hedging? Our pax forecast is at 70% to 50% - 80%.
Correct. That's the upper end of that.
Well, no. Sorry. All right. We have got 40% of the fuel hedging. We don't see any circumstance in which we won't be operating above 40% of our capacity through next year. We're already operating about 40% this winter, despite the fact that there are more lockdowns in place. We certainly don't see any further fuel hedge ineffectiveness into next year. Would we be willing at this stage to increase that hedge position? No. One, because we don't want to take a risk. Two, the balance sheet, while strong, we don't want to put it under any further strain by extending our hedge lines. Three, frankly, I think when some economic activity resumes, we will see continued heavy oil supply, and hopefully that over the medium term, oil prices will remain reasonably low, which will allow the airline industry as a sector to recover.
On the second part, Neil, on the hedging into Q2 or the refunds into Q2?
Yeah. Most of that was into Q2. We got our people back in the office from the 1st of June, so we started processing the backlogs at that point in time, and we've done a huge amount of work, as we already said, with labs and the customer service team getting through that over the past three or four months.
Okay. Thanks, Muneeba. Next question, please. Hello?
Our next question comes from [Alessandra] from Kepler Cheuvreux. Please go ahead with your question.
[Alessandra], hi.
Good morning. Two questions, please. First, a follow-up on the airports, please. The bases that you closed this winter are primary airports. Beauvais is a smaller airport. With the weaker balance sheets and before the crisis, will you continue to focus on primary airports where you are in direct competition with airlines that have received huge state support? Do you expect, at least temporarily, to focus again on smaller airports? Second, I'm asking a lot of people, it might be a coincidence, but I do not know any person in Germany that asked to be reimbursed and has already been reimbursed for canceled Ryanair flights. You mentioned in the press statement this morning almost all non-OTA refund requests have now been dealt. Could you please be more specific on what you mean with almost all?
Is Germany a country where the refunding process has been slower than the rest of Europe? Considering the OTA refunds that still have to be done, how high do you estimate the total cash at risk to be reimbursed to passengers? Thank you very much.
Okay, thank you. Let me touch on the airports first. Again, don't get distracted by the primary or secondary split on airports. We have closed some airports, I would hope temporarily for the winter. Cork, Shannon, Toulouse. We've closed Stuttgart and well, I'd close Stuttgart and Dusseldorf, but they will be permanent closures. They're not reopening. We would expect Cork, Shannon, and Toulouse to reopen for next summer, but that all depends on whether Ireland has reopened its connectivity to the rest of the world, or whether we're still being strangled by a bunch of doctors mismanaging the economy here over the next period. Again, I go back to we are utterly indifferent as to whether our growth will be at primary or secondary airports. It will be at those airports who need the growth most because they'll be the airports who'll come up with the best deals.
We are utterly indifferent as to who the competition is at any of those airports. We have much lower cost base than all of them. Even Lufthansa and Air France-KLM. Yes, they all engage in below-cost selling, but we'll still be able to undercut their prices because we have a significantly lower cost base than they have. Eventually, they'll run out of their EUR 10 billion of state aid. In fact, I think they'll run out of the EUR 10 billion state aid pretty quickly anyway. Honestly, on the German situation, I have no idea where you get that. You need to get out more, Roxanne, or meet more people. We have refunded all of the German customers whose flights were canceled during the COVID have either received cash refunds if they requested them or they've received vouchers.
There may be some there who are expecting the refund to fall in the door to them, but if they have a voucher, it's up to them to either use the voucher or request the cash refund. There is no backlog at all of refunds in Germany or any other EU country at the moment. In fact, our current people who applied to us last week for refunds or their cash refunds requests that came in last week have already been processed. There is a small, and I would emphasize a small number of passengers out there who book through OTAs. I suspect it's probably a single-figure percentage of our total customer base.
The challenge we face with those is because the screen scrapers are scamming those customers by adding hidden handling fees or inflating the price of the Ryanair fares, they don't want the customer to be in direct contact with the airline. They don't want the airline to refund the money directly to the customer, even though under EU 261, that's what we're obliged to do. We have put in place a procedure where those customers can actually apply directly to us through the website, we will give them the refund directly to them. The reason we haven't done it so far is because we have a fake email address for that customer that usually sends the email directly to the OTA who sit on it, or we have a virtual credit card from the OTA, we won't issue refunds to a virtual OTA credit card.
We have littered with examples of where we've already processed refunds to people who we thought weren't OTAs, and you have these screen scrapers have been sitting on that cash for two or three months, keeping their business models going, whereas otherwise they would have gone bankrupt. If you have somebody in Germany waiting for a refund, ask them to send us an email straight away requesting the refund, and it'll get processed in the next four or five days. We have, as we said, processed over EUR 1.5 billion in refunds and vouchers, and there is no backlog left in the system, either in Germany or any other EU country.
Thank you.
Next question, please.
Our next question comes from Carolina Dores from Morgan Stanley. Please go ahead with your question.
Hi.
Hi. Good morning. Two questions. One, if you have to reduce your flights significantly, is the EUR 60 million cash burn guidance that you gave us at year-end results still a good estimate for your fixed cost base? My second question is, how are you thinking about minimum liquidity? You have EUR 4.5 billion. At what point would you look into raising more funds? Initially, you chose a mix through the summer of equity and debt. Would that be your preferred option, or you would look at leaseholds, I guess? What do you think it would be most attractive at this point?
Sorry, Carolina, could you just repeat the first question? I wasn't clear. You said a figure of EUR 60 million and something, but I didn't pick it up.
EUR 60 million per week of cash burn was the guidance during the first lockdown.
Oh, okay.
If you go into capacity going down significantly, is this your fixed cost base? Let's put it this way.
Okay. Let me come back on those points. Firstly, we have no idea. Again, the cash flow is impossible to foretell through the winter period because we have, generally speaking, you have very weak bookings in the run up to Christmas, very strong bookings usually after Christmas. We have no idea whether those strong bookings are going to emerge or not. Clearly, we'll be assisted, I think, strongly assisted if there's announcements of the vaccine licenses this side of Christmas. Without some kind of insight into what the spring booking season will be like, we have no idea what the cash flows will be. Minimum liquidity, I think you have to take a thought about based on what we've already done. We have EUR 4.5 billion in cash at the moment. We have about EUR 1.5 billion in debt refunds next year.
That gives us a minimum of EUR 3 billion at the moment. We're certainly not going to go below EUR 1 billion in sort of cash. It is very difficult to foresee that we would need to go back to the market for more equity or more debt, given where we are at the moment. Clearly, there's all sorts of scenarios. If there's no vaccine and COVID continues the next five years, we will have to go back to the marketplace. We don't think that's likely, and nor do any of the medical experts, from Dr. Fauci to most of the Europe, the ECDC. There seems to be a reasonable gazette. There are any number of vaccines already in phase III trials.
It looks like a number will be licensed pre-Christmas. The question is how widely available those vaccines will become in Q1 or Q2 next year. There was a third element. Oh, yes, on alternative aircraft financing. No. We have generally been always very conservative in aircraft financing. We, as you know, have about 80% of our fleet is unencumbered. We would continue to believe that we'll use a mix of equity and bond or low-cost bond debt financings to fund our aircraft orders. We have the backstop of EXIM out there as well, for a kind of a crisis eventuality. We also have some flexibility built into the order with Boeing that we can postpone deliveries if kind of COVID-19 continues. The price we're buying these aircraft at is well factored into our cost base.
As Neil has said, we have no cash outflows on CapEx between now and the end of March 2021, even despite the fact that we have, what, 30 or up to 30 aircraft deliveries in the first half of next year. Next question, please.
Our next question comes from Neil Glynn, Credit Suisse.
Neil, hi.
Please go ahead with your question.
Hi there. Good morning. If I can ask two, please, also. The first one, just following up from your last answer there based on aircraft financing. I guess based on that, given the leased aircraft that are due to go back to lessors, am I right in thinking that you might actually get to a point over the next 12 months where you don't actually have one operating lease at the moment or at that time? I just wanted to check that. This is quite interesting. The second point, I appreciate you don't have a crystal ball and I understand your point with respect to the Canary Islands demand.
Just interested in terms of how you think about the next few years on leisure travel to cities, the recovery of that segment of the market and how that might influence your network strategy over the next couple of years. Do you think that there might be a structural change there which may not happen, for example, in beach demand?
It's unlikely that we won't have some leased aircraft. We do have aircraft coming off lease in the next year or two. In all those cases, we're having discussions with the lessors. If there is a significant reduction in the lease rates or the monthly lease rate, we're happy to extend those leases. If there isn't or the lessor has some other use for the aircraft, we're happy to let the aircraft go back because we're now into the spring of next year, we're into the MAX 200 delivery. We are, again, opportunistic. Where there's an opportunity to significantly reduce lease costs, we would extend leases. Where there isn't, we would end or allow those leases to end. No, I think it's unlikely in the next 12 months we'll get a situation where we have no leased aircraft.
Over the next few years, again, you're getting into this with respect. I think you're making the same mistake is that it will be demand-led where our growth is never demand-led. Our growth is always opportunistic. It's where we see opportunities to where there's large growth incentives or where there's big discounts on published charges. That's where we place the capacity, and then we stimulate the demand. Clearly, we think there will be a huge return, I think, to the beaches of Europe short-haul in the summer of 2021. If we are emerging out of the COVID-19 crisis and there's a widespread vaccines available, city travel will continue to be strong. One, because that's where the business travel will start from and will go to. Secondly, a huge amount of kind of work-related travel, people commuting to jobs, commuting to work.
We've lots of people, examples of people who live in Dublin who work in London. That will return very quickly. Then I think into next autumn, you will see a very strong return, aided in no small part, I think, as you'll see lots of city-based hotels cutting hotel room rates, lots of advertising of Christmas markets and reasons to go to Amsterdam or Madrid. These cities are hugely dependent on tourism. They'll need to see the restaurants, the hotels, and their kind of leisure industries, concert venues, et cetera, recover their business. I think you will see significant price stimulation by hotels and tourism destinations, which is why I think the city traffic will return very strongly as well. I have no doubt. I listen to all this kind of SAGE analysis.
I don't mean SAGE in the U.K., these analysis, it'll take two years, four years, five years for travel to recover. Bullshit. It will recover very rapidly within about, I suspect, 12 months because of the huge price discounting that will go on by the hotels, the airlines, the providers. Pricing will stimulate a very rapid recovery. The question is how long then it will take. Is it two, three, four years for pricing to recover to 1990 levels? I think that is a much more likely outcome. There will be very rapid volume recovery very quickly, but it will be price driven. The advantage in the case of Ryanair is by that pricing will be driven by a materially lower cost base across all the major cost items: wages, fuel, aircraft costs, airport costs.
We will have materially lower costs going forward across those, which will enable us to fund very aggressive pricing strategies. I think then in terms of the city break market or the beach market, the hotel, the accommodation providers will actually also play their role because they will dump prices quickly to get the business back.
Thanks, Michael.
Next question, please. Thanks, Neil.
Next question comes from Alex Paterson from Peel Hunt. Please go ahead.
Alex, hi.
[audio distortion]
Hi. I'm not asking for a year forecast, just to be clear.
Good
Is there any color you can give on the impact of later booking patterns? Does that have a negative impact or actually given pent-up demand and lower capacity, will it make no difference or is it too early to tell? Just secondly, on the ineffectiveness charge, I think it was EUR 214 million. You say 70% is settled, which would be about EUR 150 million. On the cash flow it's showing as EUR 97 million. Are you saying EUR 53 million was paid out in the third quarter to date? When would you expect the rest to be paid out, please?
Okay. Thanks, Alex. I'll let Neil answer the ineffectiveness, the second question. Let me just deal with the late bookings issue. What we're doing at the moment, clearly we are pricing into and half price through September, October, November at lower than the budget and lower than we did in the previous September, October, November. We're not in desperation pricing. We've constantly taken the decision. We don't price down close in. Within 14 days, if we're getting a booking, people have to travel. We've seen some of our competitors. We've allowed them to price below us in certain markets where they're not well known. Like with, for example, Wizz were out doing EUR 1 airfares in Italy I think a week or two ago. It measures the desperation of Wizz who don't have much of a presence in the Italian market anyway.
We didn't bother matching it, and normally we would always match and undercut our competitors. The reason we're not matching it, because frankly, we have 70% load factors close in. If somebody's booking close in, there's a reason and they have to travel. We are still being reasonably aggressive on pricing. We're 30% off, 50% off. We're doing EUR 9.99 and EUR 14.99. That's all typically beyond two, three weeks out. We're not aggressive on pricing at the moment for Christmas because there's too much uncertainty. The advantage of late bookings is you're generally dealing with people who have to fly, and therefore we're not being that aggressive on pricing. Although we are considerably below where we would be pricing this time last year for those close-in bookings, because this time last year, the load factor was 92%, 93%, and currently it's at around 70%.
What we need to do with close in booking is to be very flexible in terms of capacity three and four weeks out. We need to be certain. If we're not going to get to that 70% load, take out a rotation or take out a flight. It's generally a rotation because taking out one flight would strand passengers. We continue to manage that judiciously. All I can again come back to the same point. We have managed a 70% load factor every month from July through to October, and no other airline has delivered that. Neil, the ineffectiveness charge.
Yeah. The EUR 214 million ineffectiveness charge, as I said earlier, Alex, that's just front-loading from Q4 and Q3 into the first half of the year. We've already paid about 70% of our mark -to-markets on hedges that have gone ineffective for the year to date. Not putting the exact figure out there, but we're well through at this point in time.
Thanks, Alex. Next question please.
Thank you. Just as a quick reminder, if you wish to ask an audio question, it is zero one on your telephone keypad. Our next question comes from James Goodall from Redburn. Please go ahead.
James, hi.
Morning, everyone. Two please. First on the renegotiation with employees. I am just sort of trying to get a gauge on how the share of variable and fixed pay has shifted. Are you able to give us a gauge on what percentage of staff costs are now variable? Secondly, on the MAX compensation from Boeing, how are you thinking about this? Are you looking to reinvest all of that into lower priced aircraft or are you potentially going to take some cash there? Cheers.
Okay, thanks. I'll do the second half first. Maybe Eddie just give you in general terms. We're not going to give you specifics. I will give you general terms on the employee compensation. In terms of MAX, look, we are obviously in discussions with Boeing about the MAX aircraft. Compensation is not uppermost in our minds. We are much more focused on the pricing of the aircraft order. We are talking to Boeing about additional orders. It is complicated. There are three elements to it. There is clearly compensation for the delayed deliveries, and we're now running 18 months behind. There is also some sort of the pricing of the existing order, and we're also looking at the possibility of adding to that order in the current environment.
Boeing need orders. We believe we have very strong growth prospects for the next two or three years where there will be, I think, a very sizable snapback in air travel post-COVID and not that many airlines in Europe who can actually have the capacity to be able to deliver that or to carry that traffic. Really I would postpone a lot of the discussion on MAX until such time as the MAX returns to service and we have a credible or realistic delivery schedule from Boeing. We really can't conclude those discussions, which are pretty advanced but not concluded. Eddie, do you want to give a flavor for the HR handoff?
Yeah. The key to this was that we were out very early with our people and also with the unions with a very clear message. Those deals were out there, and what we've got is that we've got a 20% reduction for our pilots and up to 10% for our cabin crew, and 100% of pilots are covered in that. The key as well was that there was pay restoration over the next five years. It was a simple message, and our people, I suppose, realized it is better to hedge their bets on job security in the long term and take the pain upfront. It is a measure of how they went about this.
It took a while for the message to sink in. Eventually it's about job security, reductions in pay restoration, and in other words, our pay rates are variable to our activity with the 20% reduction in the case of pilots. It's a good deal for our people in the longer term, I would say, and they have taken the pain of that. Credit to them.
I would contrast that if you take some of the legacy airlines around Europe, there's a real problem building in some of those legacy airlines where they have all of their pilots and cabin crew off on government furlough schemes.
Yeah.
Which is all fine until the government furlough scheme unwinds. I think when the vaccine emerges and governments no longer lock down, the governments are going to be under intense fiscal pressure to end furlough schemes. Then you're going to have these airlines, the Lufthansas, the Air France-KLMs going, "Oh, shit." The furlough scheme has ended. We now have to start paying these people, but we can't make them redundant because that's part of the terms of the state aid they get. They've not negotiated any pay cuts. We are in a very strong position going forward. It has been painful for our people. It has been painful for the entire management team. We've all taken deep pay cuts.
We will be much more flexible and much faster to reemerge from this with a restructured cost base at a time when we'll be competing with the Lufthansas and the Air France-KLMs and the Spanish airlines, all of whom are receiving these kind of job scheme furlough doping. That's going to come to an end very quickly because European governments can't afford it to continue ad infinitum.
Sure.
I think the challenge for those areas at that point in time will be, "Oh, now we need pay cuts." The unions are going to go, "Go to hell with your pay cuts. You've had furlough support." A lot of these furlough schemes are based on no pay cuts, no job cuts. We've restructured and most of our competition haven't. The notable exception to that would obviously be IAG, who have followed us, but we were out first and faster, and we have the deals done. Next question, please. Thanks, James.
Thank you. There appears to be no further questions, so I will hand back to the speakers for any other remarks.
Okay, everybody. Thank you very much for your attendance on the call. Clearly, this has been a very challenging six months for Ryanair. It's been a very challenging six months for the industry. I think it's important to finish on a more positive note. The coronavirus will end. Vaccines will be found. I hope it will be in time for a reasonably strong summer 2021. All I would assure you is that in the meantime, we have taken a lot of the painful decisions. We have restructured the cost base. We have a strong balance sheet. We are actively engaged with our partners, Boeing, in restructuring the aircraft order. I think there has never been a more exciting period or opportunity for growth, certainly in the European airline industry.
That's going to be the one market I think that's going to rebound very strongly with huge suppressed or pent-up demand. Ryanair will, in my view, be by far and away the best-positioned airline with the lowest cost base and with a new aircraft order coming through over the next couple of years to take up the challenge of that recovery, and it will lead to superior returns over the coming years. The next couple of months through up to Christmas and maybe after Christmas will be difficult and challenging, but Ryanair, we'll continue to manage it as best we can. Thank you very much, everybody. We have an extensive road show taking place over the next two or three days. We are cramming everybody into 30-minute meetings, which means we can get through huge numbers of investors over the next two days.
If you'd like a meeting or some kind of Zoom or online video meeting and haven't got one, please talk to Peter, to Davy, or to Citibank or to Citi, and we will set something up for you in the next couple of days. Thanks very much, everybody. Good to talk to you, and I hope to see you soon when we can all return to traveling and when the poor oppressed Norwegian people of Ireland will have been allowed on and off the island once more. Thank you. Bye-bye.
This now concludes our conference call. Thank you all for attending. You may now disconnect your lines.