Hello, welcome to the Ryanair Q1 FY 2021 results conference call. Throughout the call, all participants will be in listen-only mode, and afterwards there'll be a question and answer session. Just to remind you, this conference call is being recorded. Today, I am pleased to present Michael O'Leary, CEO. Please begin your meeting.
Okay. Good morning, ladies and gentlemen. You're all very welcome to the Ryanair Q1 conference call. I'm joined in Dublin with most of the team, led by Eddie Wilson, the DAC CEO, Neil Sorahan and our new Head of Investor Relations, Peter Larkin. Michal and Juliusz joining us from both from Warsaw, David O'Brien and Andreas Gruber from Vienna, and Diarmuid O'Connell from Malta Air. As you'll have seen this morning, we released the quarterly results. There's the full detail of the quarterly results, the MD&A, and a pre-record Q&A all online, so I propose not to go through all that again this morning. I want to touch on a couple of brief themes, and we'll open it up for the Q&A. Obviously, the COVID-19 situation has been extraordinarily challenging. We've never come across anything like it in our 30 years of operation.
We think we're recovering reasonably well from the lockdown. We started flying at the end of June. We've restored about 40% of the schedule in July. We expect that to rise to about 60% in August. Operationally, the return to service has gone very well. We expect to report just about a 70% load factor for July and August. We are challenged, however, and will continue to be challenged with various outbreaks or spikes in COVID-19. Particularly government measures, we draw attention to the fact that some countries, most notably Morocco, Jordan, continue to ban flights, generally speaking at short notice. Therefore we continue to suffer cancellations that are outside of our control. Israel continues to permit only Israeli citizens to travel to and from Israel, which means we continue to have an ongoing cancellation refund issue for non-Israeli citizens there.
Over the last couple of weeks, the Irish government has, we believe, mismanaged the return to service, and has started the return of the economy. We continue to call for the opening of flights and free movement of people between Ireland and the EU 27 members plus the U.K. The Irish government has instead produced a green list of 14 countries, four of them which have no flights from Ireland. We don't believe there's any scientific basis for that. We'll be challenging that in the court later on this week. Most of you will have seen over the weekend, for the last week, have been dealing with more publicity, negative publicity around an outbreak or a spike in COVID around Barcelona and in the Catalonia region generally.
There's been very little upward movement in COVID around the resorts, the Balearics, and the Canaries. Yet, the U.K. government over the weekend panicked and re-imposed a 14-day quarantine on all returning visitors from Spain. For a country that has already locked down Leicester seems to me to be a badly managed overreaction. They should have, in my view, controlled arrivals back in from maybe Catalonia, done it on a regional basis. To do it on a national basis, there's no scientific basis for a national restriction on visitors coming back from Spain to the U.K., in much the same way that we wouldn't expect other EU countries to ban or to impose quarantine on all U.K. visitors just because there's been a spike upwards in Leicester.
However, we have become used to the U.K. government mismanaging COVID-19. It's something that we simply have to continue to deal with. We've reduced the full-year traffic guidance from we were originally running the figure of around 70 million to 75 million. We now think it'll be lower. We're guiding around 60 million because we think we'll continue to see occasional spikes and occasional restrictions continuing, I think, throughout the summer and into the winter period. I think the biggest challenge for most European economies will be to manage or successfully manage the return of the schools in September. To the extent they successfully manage the return to schools, we think there will be some return to some level of normality of business travel.
If that doesn't happen, then we think business travel will also be badly affected through September and October, and therefore even the 60 million will be a challenging figure. However, I think looking to the upside, I think what the last three months or four months have demonstrated certainly in Ryanair is an obvious we have an extraordinary ability to manage our costs. We have done an exceptional job, I believe, in managing our cash flows. Despite the fact that we are spending a lot of money on passenger refunds, we now think we'll have almost eliminated. In fact, we'll be up to about 90% of all cash refund requests from customers will have been processed by the end of July, which will be an extraordinary performance given that the offices were essentially closed until the 1st of June.
Increasingly as we return to travel, we see more and more customers both accepting vouchers or free moves, and that's reducing the volume and the burden on cash refunds. Other than that, clearly revenues were devastated for the last three months. We have done an amazing job, I think, of managing costs. The fact that we've brought the cash burn down to almost zero. As we reopen in July and into August, we are operating without any cash burn. In fact, it's a very small or modest in cash inflows coming from state aid as they increase. Again, that will be choppy, I think, over the next couple of months, depending on what happens with various spikes and/or returns to restrictions of travel restrictions within the EU 27. Touching a couple of other points.
Boeing continued to make progress on the MAX return to service. They completed the flight tests in North America, which seem to have gone well. The FAA are reviewing the data. There looks like there will be some delays, though, in the other regulators, the Canadians, the Europeans, and the Brazilians are doing their flight tests, mainly because of restrictions on travel to and from the U.S. We're still hopeful, and but I would say hopeful more than confident that the MAX will return to service in the end of September in North America. That would our most optimistic outcome, but then we'd get the first of our MAX deliveries before Christmas. If not, it will be after Christmas. The difference between the two of those will be our ability to take, we think, deliveries of up to 40 aircraft.
If they do the first delivery is after Christmas, that may be reduced. We may only take 20 or 30 aircraft for summer 2021. This is a great aircraft. We remain very committed supporters of Boeing MAX aircraft. There are extraordinary growth opportunities out there into summer 2021 across Europe. We've seen the collapse of a large number of EU airlines, including Flybe and Germanwings, LEVEL in Austria, SunExpress in Germany. There will clearly be more. We believe that there are extraordinary opportunities out there for those airlines. Ryanair, I think, will be one of the very few airlines that will be able to grow, assuming that there's some sort of recovery from COVID-19 by summer 2021, and that would depend on a successful vaccine being identified sometime towards the end of this year or the early part of calendar 2021.
We would expect to return to some level of growth in summer 2021. We are one of the few airlines left that has any reasonable volume of aircraft deliveries through 2020, 2021 into 2022. Most of our competitors, Norwegian have canceled most of their orders. easyJet have pushed back a significant volume of theirs. We don't have many orders through the next year or two. We think there would be very significant opportunities for us to grow and to grow profitably. But obviously, that all depends on how the COVID situation develops over the near term. In the near term, I think you'd have to be more pessimistic than optimistic. Over the medium term, we've demonstrated, I believe, that we have a very flexible cost base. We have an exceptional ability to manage cash flows.
We are gearing up for a period, I think, of very strong growth in traffic and profitability, but only once we're through or identified to be through the COVID-19 pandemic. For as long as the COVID-19 pandemic continues, it is going to remain very difficult. We cannot rule out that there will be further pay cuts and/or job losses if things get worse this winter than better. I think we've made significant progress with our people across Europe negotiating pay cuts as an alternative to job losses. If the COVID-19 crisis continues into this winter and certainly into the summer of 2021, then we would have to revisit the job loss issue. I think our objective there was to minimize job losses by agreeing pay cuts with our people. To that extent, I think we have made significant progress in that respect. Balance sheet remains very strong.
We closed the quarter with almost EUR 4 billion in cash. We continue to own over 330 unencumbered 737s, book value approximately EUR 7 billion. We don't see any need or reason to look to raise other equity, and nor are we seeking to do so, nor do we believe we need to raise any additional debt. Although we have some debt repayment challenges in the middle of summer of 2021. We have to repay the U.K. government the EUR 600 million loan, and we have our first bond. We think we can meet all of that as long as there are no unforeseen further events relating to the COVID-19, and there's some modest or reasonable recovery in traffic this winter and in particular into summer 2021.
This year will continue to be a very challenging year for our group. Each of the individual airlines is performing well and expanding its fleet.
Lauda have had some cutbacks in its fleet in order to deal with the exceptional extraordinary situation in Austria and Germany. I think the big challenge for us in the next 12 or 24 months is going to be hopefully seeing some level of economic recovery from COVID 2021. Even as we see that recovery, we find ourselves competing with flag carrier airlines all over Europe with extraordinary amounts of state aid. Lufthansa, $11 billion. Air France, KLM, almost $11 billion, $10.6 billion. Alitalia, an airline that's never made a profit in 75 years, is receiving $3.5 billion, despite the fact it only accounts for 20% of Italian traffic. TUI Group, nearly $2 billion, and TAP, $1.2 billion. It's inevitable, in my view, that if or when we get through the COVID-19 pandemic, we will be facing below cost selling from a large number of those flag carrier airlines.
In my view, that's probably good for our business model, and it means that traffic will return sooner rather than later because it'll be stimulated by very low pricing. That will mean further casualties within the European airline sector. But the strong, that will emerge through that, particularly those airlines who are not dependent on state aid, but who have a low cost base will recover strongly. That recovery could be two or three years away at the moment. I can't emphasize for obvious reasons, that our biggest fear at the moment is a second wave of COVID-19 cases across Europe, and how governments will respond to or try to manage that. Given the current uncertainties, clearly we cannot give you any guidance on FY 2021 outturns.
The best we can come up with at the moment is we think a 60-million-passenger traffic is a reasonable expectation for the rest of the year, assuming that there's no other widespread lockdowns as a result of a second wave of COVID-19. We will make a small loss in Q2, but we have no idea what's going to happen in the winter or the H2 yet. We will, however, emerge from the COVID-19 crisis with a much lower cost base. We will have a pipeline of low-cost aircraft from Boeing, which we believe will enable Ryanair to lead the recovery and certainly to take advantage of growth opportunities that will be there.
We will need that lower cost base because we're going to be competing with a wide number of enormously state-subsidized flag carriers who will be doing stupid things with government money, as they always do for the next couple of years. Other than that, Neil, there were a couple of comments there. I won't go through the MD&A, but maybe talk about the balance sheet and cash generation, please, and then we'll open up the Q&A.
Yeah. Thanks, Michael, for asking. You covered off on the cost quite well. The balance sheet, as Michael said, very strong. EUR 3.9 billion in cash at the end of the quarter, which is up from EUR 3.8 billion at the year-end back in March. A very high number of unencumbered aircraft, 333 Boeing 737, with a conservative book value of EUR 7 billion on the balance sheet. Lots of scope there if we want to do anything in relation to those, whether it's sale and leasebacks, secured debt, although we don't need to look at that at the moment. The balance sheet remains with a high investment grade BBB from both Fitch and S&P. Cash burn in the business is well under control. As we ramp up operations, we're slightly better than breakeven cash flow at this point in time.
I think it's important to be aware of the cash preservation measures that we've put in place and the strength of the balance sheet, because that EUR 3.9 billion will be important as we move into winter. Michael, I think that's it on the balance sheet.
Okay, thank you. We'll open up the Q&A, and as usual, we're going to limit everybody to no more than two questions. And please don't ask us what the outlook for fares is going to be, because we haven't a clue.
Thank you. If you wish to ask a question, please dial zero-one on your telephone keypads now to enter the queue. Once your name is announced, you can ask your question. If you find it answered before it's your turn to speak, you can dial zero-two to cancel. That's zero-one to ask a question or zero-two if you need to cancel. Our first question comes from the line of Daniel Roeska of Bernstein Research. Please go ahead. Your line is open.
Morning, gentlemen.
Daniel, hi.
Hi. First one on unit cost. On slide five, you're at EUR 31 per pax right now. If you had to set out a stretch goal, Michael, on unit cost for the organization to achieve in, let's say, three years, what amount of reduction would you personally consider an excellent job by that time? Then, the second one, maybe a little bit more on the group structure. How is managing the company right now different from the group structure compared to past crises, let's say 2009, for example? What are the advantages and improvement areas you've experienced over the past three months that would be interesting?
Okay. Thanks, Daniel. I'm not going into forecasts on where I think unit cost will be in the next two years other than to say if you look at each of the major lines, now obviously that slide excludes fuel. Fuel we think will be clearly down for the next number of years. There will be significant oversupply and weakening demand. Staff costs will be lower, aircraft and ownership costs will be lower, airport costs will be lower, sales and marketing costs will be lower. We see a very strong rebase of the cost base going forward, but there's no way I'm going to put any numbers on at this point in time. How is managing the company different? It isn't hugely. We continue as we did before the COVID-19. We have a strong team of CEOs. They're delegated quite significant autonomy.
Michal in Warsaw, Diarmuid in Malta, David and Andreas as joint CEOs in Vienna, Eddie Wilson in Dublin. But I would have said most of the work of what would normally be the work of running the airline has been clearly distracted by the last number of months managing COVID. I think if you look at the dramatic cost reductions, the dramatic cash preservation record that we've demonstrated over the last three months, I think it augurs very well for a successful group managing a number of disparate airlines well. I mean, I would point in particular to the unique challenges faced by Lauda during COVID. It is competing in Germany and in Austria with Lufthansa and Austrian and Lufthansa subsidiaries in Austria, both of them below cost selling.
All of them getting extraordinary amounts of additional state aid from not just the German government, the Austrian government, the Belgian government, the Swiss government. Lauda, in order to rebate its costs, closed the Vienna base on the 29th of May because it couldn't get agreement with the unions down there. Thankfully, the staff, the pilots, and the cabin crew overruled the union, demonstrated publicly in Vienna, and then finally agreed or forced the union to agree to the new terms and conditions, which has allowed the base to reopen on the 1st of July. It is now a smaller base. It will have 30 aircraft this year instead of 38 aircraft. Vienna will have 10 aircraft instead of 18. There are painful redundancies still being processed in Vienna, and traffic in Lauda this year will be 5 million instead of 10 million. They've done an exceptional job.
I think the managing the company is marginally more complex. I think the record of what we've achieved in Q1, in the period with zero sales and zero revenues, is an impressive one. Next question, please.
Thank you. The next question comes from Duane Pfennigwerth of Evercore ISI. Please go ahead. Your line is open.
Duane, hi.
Hey, good morning. A couple of questions from me. One is you assess the state aid that's been awarded to your competitors. Obviously, the headline numbers are catchy, but how much time do you think they've actually bought for themselves, and what do you think the appetite is for more state aid if they need it to get through the winter?
I think the issue with state aid, state aid is a poison pill. What it ultimately means is that there will be very little reform of the cost base in Alitalia, Lufthansa, Austrian, or the others. It means that these guys, it's like giving monkeys machine guns. They will engage in very aggressive below-cost selling for the next year or two, for as long as the billions last. I think ultimately they will put intense pressure on Ryanair and other EU airlines. So, we'll be facing unfair competition, which is why we think this state aid is entirely illegal. Most of it is being associated with dressed-up environmental commitments that were already in place before they received the state aid. It's a complete rip-off.
I think we've been very disappointed by the failure of the European Union who are quite happy to pursue and torture American companies like Apple and Google and others. When it comes to maintaining a level playing field in European aviation, they turn a blind eye every time. I take particular delight in We have these Frugal Four, which is the Dutch, the Austrians, the Swiss, and the Danes, putting themselves forward certainly at European level as this Frugal Four, careful management of economies, need for rigor and compliance with EU law. Yet they were the first people over the barricade bailing billions into SAS, KLM, Air France, and Austrian Airlines. The remarkable thing about the Austrian government bailing out Austrian Airlines is it's a Lufthansa subsidiary. It's a German company.
Which must be surely the first time you've ever seen state aid in Europe to a non-national operation. They can't help themselves.
Thanks for that.
I think therefore, they will put intense pressure on not just Ryanair, but other airlines. The one I feel sorry for most is IAG who will be trying to compete in the long-haul recovery space with Air France and Lufthansa with an obscene amount, EUR 10 billion of state aid. It will be equally difficult in the short-haul market as well, and that's why we'll be challenging and are challenging all of these state aid gifts, illegal state aid donations in the European courts.
Candid as always. Just on the range of outcomes for summer 2022, calendar 2022. Can you speak to how much bigger could the airline be if you get your MAX's? Even if you don't get your MAX's, how much bigger could the airline be relative to pre-COVID levels? Thanks for taking the questions.
Do you mean summer 2021, FY 2022 there, or do you mean summer 2022, FY 2023?
Correct. Sorry. Summer calendar 2021. Correct. Yeah, sorry.
I think given the uncertainties, at best, we'll take about another 40 aircraft, 40 new aircraft from Boeing for summer of 2021. We have probably another 20- 25 aircraft that were coming off lease or sale, pre-sold aircraft that we have to deliver. At best, I think you'll see a return to our pre-COVID volumes in summer 2021, FY March 2022. We're looking at maybe 150 million at best. I would caution that that recovery, and that is the best outcome, that recovery would be on the basis of much lower airfares, a lot of price stimulation, and intense price competition with state-aided competitors who would be below-cost selling. That would be the best outcome.
I think it's more likely that the recovery, and again, it depends on what the emergence of a vaccine, it's more likely to be worse than that, and that whatever happens this winter, they'll maybe have some flow-through into the summer of 2021. Therefore, you're talking, and it's impossible to know, somewhere within a range of 60 million-150 million passengers. The sooner a vaccine, an effective vaccine is found, and there's a return to some kind of economic normality. The faster I think the volumes will recover. We won't have much additional capacity. Even if we get 40 aircraft from Boeing, less 25- 30 redeliveries. We really won't have a lot of additional capacity into summer 2021.
Thank you.
Thanks. Next question, please.
Thank you. That comes from the line of Savi Syth of Raymond James. Please go ahead. Your line is open.
Savi, hi.
Hey, good morning. Two questions from me. First, if I can ask Daniel's question in a slightly different manner. Just wondering, as you kind of go and attack your costs and have discussions with your partners and laborers, what's the kind of world view that you're using to kind of get to certain targets? Just, as demand stabilizes, what fares do you return to profitability or cash breakeven or maybe even get back to kind of double-digit margins? Kind of second question, I was wondering if you could provide a little bit more color on your ATL in terms of the makeup of refunds in there versus credits versus new bookings.
Sorry, remind me of the second one again. What's the ATL insurances? What's that?
Oh, air traffic liability.
Oh, refunds.
Yes. Versus credits.
Okay.
That's another question. Versus how much is new bookings.
The first half of the question, there's no absolute on cost. I mean, as in all cases, we will try to reduce costs by as much as we can. I mean, to give you a flavor, we are obviously in advanced discussions with Boeing about compensation for delayed delivery of aircraft. We're also having discussions about repricing the MAX order. We're in the middle of those discussions. They're nowhere near concluded. In terms of labor, we have now about 75% of the pilots and cabin crew have agreed to pay cuts. That ranges from say, 20% for the captains down to 5% for the junior cabin crew. There's a range of numbers there, but the average is about 10%. There've been significant headcount attrition in the Dublin offices. We've all taken pay cuts.
We would expect there to be a material downward movement in airports, but mainly as a result of growth incentives. They really won't emerge until the summer of 2021. We think fuel will be materially lower for the next number of years. Very hard to see oil prices rising back above $50 a barrel. In fact, I suspect that when there's some degree of economic recovery and OPEC starts producing again and U.S. shale starts producing again, we think oil will be modestly in somewhere around $40 a barrel for the next two years or three years. There's going to be very significant cost savings.
Again, I emphasize we will need those cost savings because while I think the traffic will recover strongly through 2021 into summer 2021, summer 2022, it will be on the back of very substantial price discounting as we compete with hugely subsidized state aid flight carriers in Europe. On the refund situation, again, there's not that much more I can give you. We had a significant backlog of customers demanding cash refunds. We will have worked our way through 90% of those by the end of July, so the end of the next week. There would still be a significant volume of, and I won't break it out, but people who are out there who have either accepted vouchers or are taking free moves. The liability is still there.
The only area where we will still have a significant challenge is we have a reasonable rump, maybe, I don't know, 10%- 15% of our passengers are out there who have booked through OTAs of these unlicensed screen scrapers. The booking.coms, kiwi.coms, all of these chancers. The difficulty we have there is we can't make refunds directly to those passengers because in most cases, to protect the fact they've been overcharging and misleading consumers, the screen scrapers give us false email addresses and fictitious payment details. We have a liability directly to the consumer, not to the unlicensed intermediary. What we're trying to do is to set up a direct communication strategy, a direct communication vehicle where individual consumers, many of whom don't even realize that they've booked through a scammed by an unlicensed screen scraper and been overcharged by them.
They're waiting for a refund from Ryanair, whereas in actual fact, we can't refund them until we get them to communicate directly with us. The legal liability we have is we can't and won't refund them. Yes?
Yeah.
We won't refund the screen scraper.
The question I have more is.
Go on.
Your cash breakeven right now, which is pretty impressive. I'm just wondering how much of the new cash in is, from your revenue standpoint, how much of it's being used for credits and things like that? Does that mean that cash should kind of continue to build because you're probably using up a lot of vouchers today?
As long as there is a reasonably uninterrupted recovery of air travel, and that I know is a wide statement. We can suffer occasional interruptions like the Spanish quarantine in the U.K. is limited to two weeks and then lifted again. As long as there is a reasonable recovery of air travel, 40% in July, 60% in August, 70% September onwards, we will expect our cash will continue to be flat or slightly build until we get to the middle of next year where we have the U.K. EUR 600 million to repay and the first of our own bonds. So, it all depends on bookings and cash flow, the strength of bookings and a continuing increase, a recovery in bookings.
That's helpful. Thank you.
Next question, please.
Thank you. The next question comes from the line of Jarrod Castle at UBS. Please go ahead. Your line is open.
Jarrod, hi.
Hi. Good morning, everyone. Yeah, two, of course, from me. I'm not expecting you to give us a number, Michael, but I just want to ask you two things around pricing. One, if you're also experiencing kind of an inversion of the normal booking curve with most of the bookings happening in the last week or two and, whether or not those tickets tend to still be more expensive than the far-out bookings. Related to that, obviously is, kind of what you're doing on promotions, as it currently relates to bookings. The second question, and I don't know if it relates to you, but certainly has implications, is, around the EU with the slot constraint rules around airport slots being basically abolished.
Your views on what it means over winter if the EU does or doesn't decide to carry on with that, how that will or won't impact Ryanair. Thanks.
Okay, thanks. On pricing, there's a degree of inversion. I break it into two. The recovery in July and August has been reasonably strong because July and August tend to have a lot of forward bookings in them. I think we are chasing a, we think we're confident of getting the 70% load factors in July and August. I would be much more wary and cautious at this point in time, about September, October, assuming the schools go back, the annual holidays are done. We would have less forward bookings in the system through September, October, November, we are, I think, subject to there will certainly be pricing inversion. I wouldn't rule out that we would be taking out more short-haul, more capacity if we think bookings will remain weak in order to preserve cash and reduce costs.
Yes, there is a degree of pricing inversion in there that is accentuated where you have things like the Irish green list or the Irish 14-day. Ireland stands out as alone among the EU states. Most of the European states have allowed intra-EU travel to return. Ireland still has this bizarre 14-day quarantine where in many respects you're in more danger of catching COVID in Portlaoise than you are in many other European countries. That will continue, and therefore, we're in the lap of the gods. That's why I think, again, I can't continue to caution. I think the volume recovery will be strong, but the pricing will be weak, and we will be aggressive in terms of price stimulation through September and October, November if we need to be. The EU slot rules, it really doesn't matter that much to us.
Remember, we still have this image that's outdated, that we're some sort of secondary carrier at secondary and tertiary airports. We are operating at most of Europe's biggest airports. We have all the slots we need. I don't see there being any issue with getting additional slots. I do believe the European Union will extend the slot holiday, they're waiving effectively the use them or lose them 80/20 rules through the summer of 2021. That's likely to continue into the winter of 2021. Whether they extend into summer 2022 doesn't really matter. There will be airports who have lost significant capacity reductions, who will be, I think, engaging in growth incentives to get someone like Ryanair to deliver them growth where others are cutting back. I don't think slots will be a major issue or a challenge for us in that respect. There are huge gaps opening up.
I don't think the slot issues or slots will be a major challenge to that growth if or when we return to growth. Juliusz, I don't know if you want to add anything more on the regulatory side on the slot situation.
Michael, the only thing I would say is that there is a growing unease on the part of the European Union to extend the waiver of the 80/20 rule into summer 2021. I think that is probably sensible in the context of several airlines announcing that they will be smaller in 2021 than they were in 2020 or 2019. The question arises, how long does the slot waiver need to last to accommodate Lufthansa's plan to only come back to their 2019 level in 2024 or 2025? It surely shouldn't last forever because it would deprive other airlines of opportunities to grow. So, we are also growing uneasy, I think, about the prospect of extending the waiver indefinitely.
Okay. Thanks very much.
Thanks, Jarrod. Next question, please.
That's from Neil Glynn at Credit Suisse. Please go ahead.
Neil, hi.
Good morning, everybody. I'll also ask a quick two. The first one, you've obviously talked plenty about staff costs and the labor deals you've done, but just interested, have those labor deals in the U.K. and Ireland and the ones that you're negotiating at the moment, any incremental flexibility contained with them to help you cope with the second wave and such an uncertain outlook over the next 12 months or so? Then, second question, just interested, to what extent have airports and local authorities been keenest around Europe to secure your traffic beyond the pandemic? Is there any obvious relationship between their appetite and state aid for the actual operator in certain countries?
Okay, thank you. Two good questions. I think that gives me an opportunity. I'm going to ask Eddie Wilson to take the staff cost one, wearing both his DAC hat, but also with the back coming from the people that he's working closely with. I might ask David O'Brien, who's no longer our Chief Commercial Officer but is closely involved in that, to give you a flavor of the discussion with the airport. Eddie, staff cost incremental flexibility.
Good. Neil Glynn here. Just on the staff cost field, we are now covered for 85% of the pilots and 75% of the cabin crew. Those deals do give additional flexibility because what we've been able to do is that the roster rules within those have been essentially suspended, and there are additional demarcations or inflexibilities that we had previously that have been relaxed. We're able to flex our rosters. We're able to spread the work that's available within those bases amongst the crews that are there, and all those deals are signed off. What has happened here is that if you look at it on a unit cost basis, the pay has come down by 20%, say for the pilots, and up to 10% for the cabin crew. Then we're able to flex the actual amount of people that are there in spreading the work around.
Do you want to mention the German situation?
Yeah, the German one, that's probably Michael. Originally, the Germans, the VC had rejected the deal last week, and we're not quite sure what was going on there. They said it was a vote, they said it was a survey. Over the weekend, remarkably, they have changed their mind without the need for a ballot. I don't know what that says about the rules of voting for pay deals in Germany or not. They have signed up to the original deal that was put to them last week. The pay adjustment downwards of 20% would go ahead in Germany as part of what's called the MTV agreement there and all the agreements. I think they came under huge pressure from the pilots.
When it comes down to it, the pilots realized that when you look at Lufthansa with 22,000 job losses, SunExpress gone, pilots demonstrating in the streets of Berlin over the last number of weeks, and here we had a deal whereby we were going to flex down to keep as many people in employment as possible, use redundancies as a last resort. It was clear that people wanted that in the VC, where the executive board were hopelessly out of touch and did a handbrake turn over the weekend and accepted the deal on behalf of the pilots without the need for a further ballot.
It's called best German democracy. Okay, David, you want to tell us briefly on the airports?
Yeah. First of all, there is no clear link between the state aid recipients and their associated airports and the airport appetite. If you take France, for example, part of the state aid in France actually requires Air France to do less flying into certain airports, particularly on domestic, which opens up opportunities then for us with the airports becoming more hungry for alternatives. In the case of France, it works in our favor. In the case of Germany, Lufthansa have already declared that they're cutting back on capacity. I think until such time as they actually demonstrate which airports they're taking that capacity from, we won't see as much movement as we will inevitably see from specific German airports. Already they're coming in our direction.
Beyond that, airports are scrambling in the first instance to get as much of their share of a return to service as possible. There are a lot of short-term deals out there, most certainly the waiving of any sort of volume targets and so on. Discussions are now on into summer 2021, where, as Michael said, our capacity growth is low. Even at its highest potential, it's low, which means some airports will lose and some will gain. Those discussions are going on right now, and as you can imagine, they're becoming increasingly urgent from an airport point of view.
Okay. Thank you all. Yeah, I think the only thing I'd add to that is the one negative in that is also the tendency of European governments to raise taxes in response to the war at the same time. The German government, while they're throwing EUR 10 billion at Lufthansa, are raising their environmental taxes. I think they're up 50%. The Austrian government has remarkably rebalanced its environmental taxes. It was EUR 12 on a long-haul ticket and EUR 3 on a short-haul ticket, and now from September, it's going to be EUR 12 on every ticket, despite the kind of contradictory nature of that environmental treating a short-haul site as being as polluting as a long-haul site. It has never stopped European governments making idiotic decisions on, certainly when it comes to environmental taxation.
But I think as we move through this winter and certainly into the summer 2021, as European airports begin to realize the scale and the extent of the capacity of traffic loss that they're facing, we think there's going to be very significant growth incentives out there. That's why it's not just the overall broken fleet. We'll also be closing more bases into December 2021 and reallocating aircraft to those airports where there are significant growth incentives and growth opportunities. We will be very flexible and very opportunistic. As Eddie has demonstrated over the weekend when the German pilots rejected the pay deal last week, we closed three German bases. We may have to relook at that now that they've accepted the deal over the weekend, but we will continue to be very flexible in the way we deploy the fleet across the group airlines.
Next question, please.
That comes from the line of Stephen Furlong at Davy. Please go ahead. Your line's open.
Hi, Michael. Just on in terms of the network this winter, next summer. Presumably you're operating a smaller schedule this winter. I'm just curious about the shape of the network. Presumably, it's more weekday slots, Tuesdays and things like that won't be operated, and it will be, let's say, smaller frequency. Into the summer, obviously it's dependent on the Boeing deal as well, but will you be mindful of what competitors are doing? I think there could be large-scale pullbacks, as you mentioned, in certain markets. That's just on the network. Then just finally, you might just talk about ancillary revenues because I think some of them, like allocated seating or priority boarding, will be doing well, but I assume bags or onboard sales. Thanks, Michael.
Thanks, Stephen. Yeah, I think you're pretty much right on the network outlook. What we tried to do with the return in July was to cover about 90% of the network, but with much-reduced frequencies. We'll be flexible through the winter, but again, we'll try to cover as much of the network as we can. With the added flexibility that where, for example, if some government includes, as the Moroccans and the Jordanians and the Israelis are doing, where they are imposing severe restrictions, we simply will withdraw capacity at reasonably short notice. We pulled out of Eilat entirely, but back just to Tel Aviv. I wouldn't rule out that we may significantly reduce in Tel Aviv this winter as well, because there seems to be these kind of arbitrary decisions.
Morocco continues to make arbitrary decisions on just banning everybody traveling to and from. There will also be opportunities that give us the opportunity where some airports are incentivizing growth, we will try to deliver them growth. I think that would be continued to be the watchword for summer 2021 as well. We have a very flexible model at the moment, as Eddie has explained. The new deal with the pilots and the cabin crew gives us additional flexibilities. There will be a lot of routes this winter where we will probably only fly Thursday through Monday, and move the roster so that we have people just working five days on, two days off, and not operating the aircraft on things like Tuesdays and Wednesdays. On ancillaries, again, it is too early to say.
Clearly, there's been a disruption to the in-flight sales, but in-flight sales are a tiny proportion of our overall ancillaries at the moment. Certainly, in the recovery, in the return in July and August, things like priority boarding, allocated seating, and the carry-on bags, the revenue there are strong. Obviously, no reason why that won't continue. It is too early, far too early to give you any kind of guidance or outlook on ancillaries for the remainder of the year as it is on the scheduled revenues as well. We simply don't know what the underlying traffic will be, and we have no idea what the airfares will be.
Okay.
Next question please.
Thank you. That is from the line of Jaime Rowbotham at Deutsche Bank. Please go ahead.
Jaime, hey.
Hi, Michael. One for you, then one for Neil. The one for you, some smaller Eastern European carriers seem to be getting into trouble, unsurprisingly. I think most recently, Blue Air in Romania. Is that a good source of opportunity for you as well as Wizz, of course, at this time when COVID issues in core Western European markets are still proving a headache? Second one for Neil. If you carry around 60 million passengers over the next three quarters with load factors broadly in line with your expectations, presumably this shouldn't be much more by way of charges for fuel hedging effectiveness. If that's fair, with the price of almost all the fuel you'll use fixed by hedging, could you perhaps give us a rough steer as to what you think the fuel bill might be this year after just EUR 9 million in Q1? Thanks.
Okay. Thanks, Jaime. I'll take the first and let Neil do the second. On the smaller Eastern European carrier, it's no different in Eastern Europe than it is in Western Europe. There are extraordinary opportunities out there in both Western Europe and in Central Europe. The difficulty at the moment is trying to work out where that capacity is going to be cut. I'll give you a couple of examples. Air France-KLM have already said they're going to reduce 2021 capacity by 20%. We just don't know where yet. Alitalia are focusing strong on long-haul routes and severely cutting short-haul routes. How much of that is true, we don't know. easyJet, for example, now 51 less aircraft by September 2021. It means I think easyJet will actually see a traffic decline next year. They've reduced their Berlin fleet from 32 aircraft to 16 base aircraft. We're seeing those.
Whilst we're seeing smaller airlines like Wizz Air talk a lot about expansion, what they don't talk about is there's a huge amount of cutbacks in routes and bases in Central Europe and a lot of countries where we're competing with them. I think our response to that is we don't really care or concern ourselves about competitors where we're doing expansion. We are very aggressively or actively negotiating with airports. There's almost no airport that doesn't suffer a loss of traffic or a failure of a competitor that we're not on the phone to on the morning of. We have far more opportunities at the moment that we know can handle for certainly the summer of 2021, in December 2022.
I think what we're trying to do with almost all airports across Europe is explain to them, look. In your entire universe of airport airline customers, only one airline has an order book of about 200 aircraft over the next five years, which is the guts of another 50 million or 60 million passengers. We're the airline you need to be talking to if you're serious about recovering your traffic loss or recovering or returning to growth. I think we all get that message. It will be a very competitive airport environment for us, I think into summer 2021 and certainly into 2022 as long as or whenever a vaccine is identified that kind of finally puts a nail to the COVID-19 pandemic. Neil, do you want to take the fuel question?
Yeah. Of course. Jaime, good morning. If we assume 60 million traffic, and hopefully we deliver that, we would be looking at fuel bill approximately half of what it was last year. You're looking at somewhere in the region of about EUR 1.2 billion-EUR 1.3 billion. Again, if we stay with 60 million passengers, I wouldn't expect any additional fuel ineffectiveness. There will be some revaluation of the mark to market on the ineffective hedges throughout the various quarters. We had a charge of about EUR 10 million in the current quarter related to that. If there was to be a major shock and traffic was significantly down, we would be looking at more ineffectiveness out over the balance of the year.
Thanks, Neil. Next question, please.
Thank you. That comes from the line of James Hollins at Exane. Please go ahead. Your line's open.
James Hollins.
Hi.
Hey. The first one is on whether you've seen any spike in cancellations in the last 48 hours, given the Spanish move both to and from Spain as well as other destinations. Secondly, Spain and Italy are two biggest markets. You talked about base closures in both. Perhaps give us a little bit more detail on whether you think the Spanish pilots and crew will ultimately accept your pay deals and those closures won't happen. Secondly, you talked on your video about Italy. I probably should know this, to Alitalia or links to Alitalia pay restrictions, perhaps just run us through those details on whether closures are coming there. Thank you.
Okay. Thanks, James. I think, again, to talk about a spike in cancellations, we don't have cancellations. All our bookings are non-cancelable. What we tend to see, though, and I think what's new in the COVID system, is we see a jump in no-shows. Now, I think two things come, and we've seen this over the last week in the Spanish market. There's a drop in bookings into Spain for the next two or three weeks. That I think will be pronounced over the weekend, particularly when the U.K. was traveling well. It's a bit early to say yet, I suspect what we'll see is a drop in bookings, U.K.-Spain bookings. You may see an uplift in Spain or U.K.-Portugal, U.K.-Italy, or U.K.-Greece bookings. Too early to say. There'll also be an uptick in no-shows. The fares are non-refundable.
There will be, and we will continue to offer some changes. We have free changes or free moves during the month of July, August, and September. So, some British people who have bookings to Spain can have the benefit of a free move into later on in August or September, and hopefully the quarantine will be lifted. Many people will still fly, and it is only a 14-day quarantine. They will come back from their annual holiday and will simply quarantine in the U.K. or not quarantine as the case may be. In terms of Italy, I think we are in advanced discussion with the unions of Italy. We would expect to arrive at the same outcome as we have in most other EU countries. To the extent that there will be Italian-based closures.
The choice has been in almost all countries between either you accept the pay cuts or there will have to be base closures and there will be job cuts. I think we've seen a growing acceptance and realization across Europe, certainly among our pilots and our cabin crew, that this is the sensible outcome. As Eddie has said, in Germany last week where our pilots and cabin crew clearly supported the pay cuts, but the unions didn't. The unions pretty quickly retreated from that position over the weekend. I think the unions were kind of trying to resist pay cuts for any airline in Germany, whereas our people supported them. The other issue in Italy is the Italian government, in addition to giving the Alitalia EUR 3.5 billion of state aid, are also trying to impose Alitalia's pay rates and CLA on other airlines based in Italy.
Now, frankly, our pay in most cases, in most places in Italy would be ahead of that of Alitalia because we pay better, but we get much better productivity. But it is indicative of the extent to which certain European governments are not concerned with just providing state aid for the legacy carriers, but they're also doing their utmost to try to damage competition and low-cost carriers through a combination of rising taxes, whether that's environmental or airport taxes, and/or trying to impose higher costs on more efficient competitors. Again, I take great comfort from the European courts ruling in the Apple case, is that the European courts will not roll over in the way that the European Commission has on some of the more egregious examples of unnecessary state aid.
Again, we point to Lufthansa in that case, where even Carsten Spohr admitted but the EUR 10 billion was more than he was expecting, was everything he asked for, and he didn't expect to get everything he asked for. One of the key elements of state aid for it to be legal is it has to be the minimum necessary, and it's quite clear even Lufthansa have admitted that they've received far more than the minimum that was necessary. State aid will continue to be a challenge. We will challenge it legally. In the meantime, we'll continue with the negotiations with the Italians on pay cuts as an alternative to significant job losses. Next question, please.
That comes from the line of Carolina Dores of Morgan Stanley. Please go ahead. Your line is open.
Morning.
Hi. Good morning. Two questions from me. I guess one, Michael, given your view of lower fuel, are you looking into changing your hedging policy to reduce the level of hedging going forward? My second question is, the European Commission of the European Union has started a consultation about how to deal with CORSIA and ETS. I know you are a critic of the ETS system, do you have a view on whether CORSIA will be on track to start in 2021, and what do you think will be the policy going forward?
Okay. Juliusz, I'll ask you maybe comment on the ETS and the second part of the question. The first part of the question, the short-term, no, we're not doing any hedging, because there's just too much uncertainty out there. My best guess is, if we have a vaccine sometime in late 2020, early 2021, there will be some return to normal volumes by the summer of 2021. I would expect us at that point in time to return to hedging. Not because we'll beat the market, but hedging gives us cost certainty over a sort of a rolling 12-month budgetary cycle. We would expect oil prices to remain reasonably constrained for the next two or three years as the world economy recovers. I'm not sure how much the OPEC plus countries will continue to constrain or physically continue to constrain production.
Clearly, the U.S. shale producers who have significantly reduced their capacity will spool up again reasonably quickly. But over the medium term, we would, generally speaking, be supportive of fuel hedging. I think what we might change, the learning from this is that maybe instead of being 90% hedged going forward, we might be 80% hedged going forward, but we would still be fans of fuel hedging to give us cost certainty through a fiscal year. We have no plan to re-enter hedging, I think, until we're certain that we're clear of COVID-19 and that our traffic recovery will not be subject to further pandemics, lockdowns, or cutbacks. Juliusz, on the European ETS side?
Thanks, Michael. There is a technical issue there over using calendar 2020 as a baseline year for the new CORSIA system, which clearly wouldn't be good for airlines, because we would be measured up against a year that didn't truly reflect the shape of European aviation. I think that the consultation that was referred to in the question is about that issue, about using not 2020, but possibly 2018 or 2019 as the baseline year, which we would support, as does the rest of the industry.
Okay. Thanks for that, Juliusz. Next question, please.
Thank you. The next question comes from Muneeba Kayani of Bank of America. Please go ahead. Your line is open.
Hi, Michael.
Hi.
On yields so far, I realize it's early days and lots of uncertainty, but what are you seeing in terms of fares currently, and what's the competitive environment? Secondly, going on fares, you talked about likely competitive fares going forward. How do ancillaries then fit into this? What's your strategy there, and do you have any tools to kind of incentivize spending on ancillaries?
Thank you. I resist the temptation to discuss fares currently. Partly because fares currently are a mix of a lot of forward bookings into the month of July and August that predated the COVID-19 case and were at the peak period. Lower fares for close-in bookings where we're stimulating reasonably close-in traffic. It is impossible to know going forward. I think, again, while we can do some stimulation and build forward bookings, I think we'll take a hit in the Spanish market this week because of the U.K. lockdown, the return of quarantine. For example, Ireland, if we could persuade the Irish government to add the EU 27 to the green list, which is what they should have done last week, I think you'd see a recovery in traffic to and from Ireland.
It's impossible to know, and anything I say would be at the risk of misleading you on fares. Other than to say, in general terms, we expect when we pass through the COVID-19 crisis that the volumes will recover strongly, but on the back of lower pricing and lower yields. Ancillaries continue to perform strongly in many respects among the passengers who are traveling. If anything, there is a higher proportion or percent. I mean, we're trying to actively encourage people to select their seats and to bring carry-on bags. There is, I think, a mis-advice coming from some of the European countries, led, and I regret to say, by IATA, who should know better, but recommending that passengers check in bags.
In actual fact, a checked-in bag passes through up to eight different sets of hands and is therefore less safe, in our view, than carry-on luggage, which you keep with you in your hands at all times. We would be actively encouraging carry-on baggage, for health reasons, as opposed to checked-in bags, despite the fact that we make more money from checked-in bags. That would probably be helpful towards ancillary revenues.
Again, there is no point in us at this time giving you any guidance or any insights on either fares and yields or on ancillaries, because it is so variable, and it is so volatile, and that we expect it to continue to be variable and volatile probably until the end of this calendar year, until there is some reasonable expectation of an effective vaccine becoming available, hopefully in the first quarter of next calendar year. Next question, please.
That comes from the line of Mark Simpson at Goodbody. Please go ahead. Mark.
Morning. Two questions and one housekeeping. The housekeeping, can you just give us the specific number for the revenue earned in Q1 as opposed to the total revenue, which included revenues, for example, from those shows in the previous quarter? I wonder if you'd give us that breakdown. The two questions. First off, just on the winter capacity, the change in passenger guidance, given where we are in the year, obviously impacts that second half more substantially. Can you give us what, as a percent of your previous schedule, you expect to fly in Q3 and Q4? The second question, talking about opportunities, markets opening, airports looking for growth, can you talk about Gatwick? I mean, what is the opportunity do you see there?
What level of appetite do you have to maybe develop Gatwick if slots are available, as opposed to continuing to grow at Stansted?
Okay. Thanks for that, Mark. On the housekeeping, no, we won't break out the percentage of the revenue earned in Q1. Two, on the passenger guidance for the second half of the year, if you remember our last outing on this, our general guidance was we were sort of hoping for 40% July, 60% August, 70% September, October, then we thought maybe 80% through normal winter capacity. I think at this point in time, we would be stepping that back to kind of 40% July, 60% August, 70% September, then maybe running 70% as being the operating number through the remainder of the year. With huge flexibility and a lot of volatility. I mean, the 60 million passenger figure for the year is a stab and a guess. It could be higher than that, it could be lower.
I think what we've been focused on doing for the last number of months is having very flexible rostering, very flexible pay deals with our people so that we can spool up and spool down as the case may be. But the 60 million passenger figure is a very general target number rather than a kind of an accurate forecast or guidance. On market opportunities, Gatwick is of limited interest to us. easyJet, I think, or Norwegian will clearly be much smaller in Gatwick. BA may be much smaller in Gatwick. Gatwick is an expensive airport that's heavily slot-constrained and therefore reasonably inefficient. I think we would have a look at Gatwick, as we always do. I think we fly about four or five routes into Gatwick. Dublin is our biggest one. We do some sun stuff back in there, middle of the day.
I think we'll be much more interested in growth opportunities at Stansted, where, for example, it looks like easyJet are closing their I think they have an eight-aircraft base there. We're already talking to MAG about growth opportunities in Stansted and about extending out our, I think we have a 10-year growth deal there, extending that out longer. I would not also rule out there's a possibility easyJet are also closing Southend Airport. Southend is of limited interest to us again, but at a price and at an incentive, there's always an opportunity, and certainly something we'd look at. Gatwick, I mean, yes, if we got some reasonable offer from Gatwick, We don't see that Gatwick will be unless there is a real cutback by BA. I don't think there will be. I think BA will talk about it but not actually deliver.
I think they'll put Vueling or somebody else in there instead of BA, would be the worst they'll do. We don't see there'll be huge opportunities in Gatwick. Certainly to the extent that there's growth in Gatwick, there will be downward pricing in the London market generally in Gatwick. Certainly, we would be happy to aggressively grow again in Stansted and in Southend, but only if there's an appropriate incentive, growth incentive in place. David or Eddie, maybe. You want to add anything further on the Gatwick?
No, not really. I think there'd have to be a big opening up there for us to actually consider anything. I think you're right as well on Southend that easyJet are likely to go out of there, and it's still one of the bases for us that's under threat at the U.K. Stansted has been, with easyJet exiting, it looks like at Stansted that would probably give it a more seamless opportunity for growth there. Depending, of course, on whether we can get this night deal extended.
That's great. Thank you.
Yep.
I think, to add to that, there will be further opportunities, particularly in provincial U.K., where you've seen Flybe go bust, I think easyJet will reduce capacity at some of the U.K. regional airports and some of the European airports, as they've already done in Berlin, in order to protect their base or maybe expand in Gatwick and in Paris. I think that would create further opportunities for us to grow in regional U.K. and elsewhere in Europe, where easyJet will be, I think, reducing capacity. We're also looking at some of the airports, too, in Central Europe where Wizz are reducing capacity. Underneath a lot of the noise of Wizz expansion is actually they're just moving deck chairs around. This is to get away from competing with us, and we think that will continue. Next question, please.
That's from the line of Johannes Braun of MainFirst Bank. Please go ahead. Your line's open.
Johannes, hi.
Yes. Hi. Just two questions around cash burn, CapEx, free cash flow. Firstly, you previously said that cash burn might be break-even or even slightly positive until mid next year. Shouldn't we expect that free cash flow and also cash burn will become quite negative going into the winter as you have to pay all the pre-delivery payments to Boeing that you have held back so far? Then, the second one, can you just give us a rough CapEx guidance for the next years based on the current expectations for the MAX delivery schedule?
Okay. I'll speak to the CapEx. Obviously, the CapEx is heavily qualified by where we are with Boeing and on deliveries of the MAX. On the cash burn, again, I want to reemphasize the point. To the extent that we continue to see a recovery in traffic and volumes, we would expect the cash burn to be reasonably cash neutral going forward, even through the winter. I would factor out the Boeing PDP payments from that. That is part of the ongoing discussions or the continued discussions with Boeing. We already have a significant PDP position in place with Boeing for aircraft that have been considerably delayed. I think if there was a resumption of deliveries there with Boeing, we already have a significant PDP position in place.
We would not agree to any resumption of PDP payments that would adversely affect our cash flows, I think, for the next 12- months. We would continue to work very much in partnership with Boeing on aircraft deliveries and restoring the PDP situation. I wouldn't want to add any more to that. I mean, our big focus would be, as I said, the two debt repayments in the early part of next year, the U.K. government loan, which comes out in March, and the first bond payment in June of 2021. Neil, you want to talk about CapEx? Obviously heavily qualified with the Boeing delivery.
It does. Actually, highly qualified. We don't have a final delivery schedule from Boeing. We won't have a final delivery schedule from Boeing until such time as they return to service and we've finalized our discussions with them. Johannes, it's probably not realistic to give CapEx guidance at this point in time. Previously, we'd guided EUR 2 billion CapEx for FY 2020, EUR 2 billion for FY 2021. Clearly, they're not going to happen at this point in time. I think it's better to come back and update you on that when we've finalized our discussions with Boeing rather than putting meaningless numbers out at this point in time.
Okay. Fair enough. Yep. Thank you.
Okay. Thank you. Thanks, Johannes. Next question please.
The last question we've received so far comes from the line of Malte Schulz at Commerzbank. Please go ahead.
Malte, hi.
Hi. Good morning. Two questions from my side. In terms of your future positioning, do you plan to transition a little bit more like an easyJet strategy or let's focus on the main airport at each city and cut further bases in secondary airports as you have done now with Frankfurt-Hahn? Maybe the second question would be also on terms of staff seniority. Where you have made cuts, did it affect your seniority? Do you have now a much more senior crew, or does the average net not change?
Okay. I can deal with that. I would hate to think at any point in the future we'd become more like easyJet. We will continue to be opportunistic. There is almost none of the major airports that we're not in as a significant partner of now, with the sole exception of Heathrow. Charles de Gaulle and all. We're in Frankfurt Main. We're in all of the main airports in Brussels, in Madrid, Barcelona, Rome. You name it, we're there. Our focus going forward will be to be opportunistic. We will allocate very significant growth to those airports who need it most, and they'll be the ones who will discount the most. I wouldn't exclude that that would be at the main airports as well. If you look at Zaventem, for example, in Belgium.
Brussels Airlines goes ahead with its plans to cut capacity by between 30% and 40%, there will be a huge hole in Zaventem. Will we still grow in Charleroi? Yes, we will, as long as there's incentive to grow there. How much of the Alitalia shortfall will get cut from Malpensa, Linate, and Rome Fiumicino. The answer again is we don't know, but we will certainly be there to take up those opportunities. So, our focus would not be If I was to describe the easyJet strategy, the easyJet strategy is to be big at heavily cost-constrained airports because that's where they are least exposed to competition from Ryanair. It's more a defensive strategy on their part. easyJet has already now gone ex-growth and is reducing the fleet, presumably so that it can staunch losses for the next year or two. Our strategy would be exactly the opposite.
I would accelerate aircraft deliveries as soon as Boeing can deliver us MAX aircraft. I would aggressively accelerate growth in the next year or two once we can see our way through to the end of the COVID pandemic. The opportunities are going to be, I think, extraordinary, and I would put them up on the same. I think we'll see the same opportunities this time around that we saw after the 9/11 terrorist attacks in New York. That's why we are doing so much work on the cost base so that we can take advantage of those kind of opportunities. On the staff cost, no, there's really very little impact on seniority. We don't have a lot of seniority issues. Where we have negotiated pay cuts, they are across the board with the captains, FOs, senior first flight attendants, and flight attendants.
Where we have had significant job losses, I would point, for example, to Laudamotion in Vienna. All the pilots and cabin crew who agreed to the new CLA, we're trying to keep them all employed, and we will try to avoid job losses with all of that team. Any of the pilots and cabin crew who refuse to accept the new CLA or the new terms and conditions document, they are being let go regardless of seniority because there's only going to be one roster and one pay terms in Vienna, and if you don't agree it, frankly, you're gone, and we're not that interested in how senior you were. I'm sure they will argue that on seniority basis, we should let people go who've accepted the new CLA.
I think in the COVID-19 crisis, we're in a new world here, and seniority is not something we would pay too much attention to. Eddie, is that fair?
Yeah, I mean.
Hand on.
No. Well, given that in most of the markets that we've been in, we haven't executed any of the sort of base closures just yet. We're still in a review phase. We haven't got into a sort of a selection criteria. I don't see it as being material at all in terms of cost, given the average service of the people that we have. It's not material in the way it would be in some mainline airlines or one of the legacy airlines where you'd have hundreds of people and/or you'd have stark differences between paying conditions between people who are there for 25 years and those who've joined in the last number of years. It's not material.
Okay, thanks for that. Next question, please.
Thank you. That was the last question. If you all head back to Michael for the closing comments.
Okay. Thank you for that. I thought it was useful this morning. I wanted to let it run on as long as we can so everybody has the opportunity to ask questions. Clearly COVID will continue to be challenging. The message I would leave with you, though, is what the last three months and this morning's results demonstrate is we can manage these challenges. We are doing extraordinary work on the cost base, and it's not just labor, across all elements of the cost base. We are working actively with Boeing to take delivery of the MAX aircraft, which will in itself transform the cost base going forward. These are aircraft with 4% more seats and 16% lower fuel burn, 40% lower emissions. I think we will have a very robust, flexible platform going forward.
The COVID crisis will pass, whether it's in six months or 10 months or 12 months or 18 months, we don't know, but we will be one of the survivors, and we will be, by far and away, the most flexible, lowest-cost survivor coming out of it. I believe when we do come out of it, we will rebound very strongly. But the recovery will be, in volume terms, will be rapid and dramatic because it will be stimulated by much lower prices. How long pricing will take to recover is anybody's guess.
I presume it will take two years or three years, but when it does come, it will be strong, and I would hope that Ryanair, by making the right decisions and business cases now to reduce costs, to be flexible, will rebound very strongly, and you'll see that reflected hopefully in the next three or four years in a profit and share price recovery, even if the next, I think, six months or 12 months are going to be grim and will remain challenging. Rest assured, with the new deal in place, with the group airlines in place, we're doing everything we can to take advantage of this crisis and to position Ryanair for very strong growth once we recover from the crisis. Okay, everybody, thank you very much for your time and attention this morning.
As I said, if anybody has any follow-up questions, Neil and the team in Dublin, the Investor Relations team, happy to take them. If anybody wants an individual sort of one-on-one call going forward over the next week or two, we'd be happy to facilitate that as well. Thanks very much, everybody. Thank you. Bye-bye.
Thanks. That concludes the conference. Thank you all very much for attending. You may now disconnect your lines.