Okay. Good morning, ladies and gentlemen. Welcome to the Ryanair Q1 results conference call. I'm joined this morning by our Group CFO, Neil Sorahan. We'll move straight through. As you'll have seen, this morning, we released our Q1 results for the quarter ending the 30th of June. We reported a Q1 loss of EUR 186 million, compared to a Q1 profit of EUR 243 million in the prior year. Traffic in the quarter fell by 99%, as all of our fleet was essentially grounded from the middle of March until the end of June. Our Q1 traffic fell from 42 million passengers last year to just under half a million passengers this year. Cash preservation has been prioritized by the company in the last quarter. I'm pleased to report that our closing cash balance is EUR 3.9 billion. This will be important going forward.
Cost reduction measures are being successfully implemented across not just Ryanair, but all of the group airlines. We have initiated what we believe was a very successful return to flying at the end of June. We expect to accomplish about 40% of the normal July schedule during July. As I say, we plan to operate about 40% of the normal July schedule. We hope to grow that to about 60% of the schedule in August, and then hopefully, subject to there being no spikes in COVID-19 across Europe, that we would get to 70% of the normal schedule in September. One of the biggest challenges posed to us by COVID-19, apart from the fleet grounding, has been dealing with customer service and a huge backlog of refunds caused by these government-mandated groundings.
I'm pleased to report that our customer service team are doing an extraordinary job, and we expect to have about 90% of all of the cash refund requests from customers processed by the end of July. At this time, we expect the full-year traffic to fall by about 60%. We'll fall from 149 million passengers last year to, at best, 60 million passengers this year. That will be entirely contingent on there being no second wave of COVID-19 in the autumn or the winter. Obviously, we've seen some recent spikes in places like Barcelona, and that is impacting short-term bookings. However, over the medium term, we have seen the closure of a significant number of airlines. We've seen Flybe disappear, Germanwings close, LEVEL in Austria has filed for insolvency, and SunExpress in Germany.
Going forward, the competition in Europe will be distorted by the wave of state aid subsidies being poured by some EU governments into their inefficient flag carriers, most notably Alitalia, Air France-KLM, Lufthansa, and TAP. That is going to pose a challenge over the medium term, where we're going to be competing with these flag carrier subsidized airlines who will be engaged in below-cost selling. This poses a significant opportunity for Ryanair, the Ryanair Group of Airlines and our airlines. We are lowering our costs. We will face lower fares and yields for the coming years, but we think we have the business model to sustain it. To touch briefly on the quarter, as I said, revenue fell by 95% from EUR 2.2 billion last year to just EUR 125 million this year.
We've managed an 85% reduction in cost during Q1, that clearly wasn't sufficient to make up for all the revenue loss, which is why we're reporting a quarterly loss of EUR 185 million. Our cost leadership is where we've been focusing our energies over the last quarter, that will be vital if our group airlines are to compete against these hugely subsidized flag carriers in Europe for the next number of years. This is what underpins a lot of the cost reduction measures we've been negotiating. Lower cost pay deals, modest pay cuts with our pilots and cabin crew as a better alternative to widespread job losses, that process continues successfully, I might add. We're talking to our aircraft lessors and also Boeing about lowering the cost of the new aircraft orders we're purchasing. We're in active negotiations with Boeing on compensation for the delay in aircraft.
The relationships we have with our aircraft lessors, we're renegotiating monthly aircraft lease rates to reflect the harsh environment and certainly the more competitive lease market environment caused by COVID-19. We remain a devoted or a committed supporter of the Boeing MAX aircraft. We're pleased to see the recent progress that Boeing have made with the test flights of the MAX aircraft. We are increasingly confident that Boeing will achieve their return to service date in North America sometime at the end of Q3. We hope that will be sufficient to allow us to take some deliveries of MAX aircraft before the end of calendar 2020. If that's the case, we would be hopeful of being able to take delivery of the first 40 of those aircraft in time for summer 2021.
That would be key, because in summer 2021, we want to be able to offer our airport partners across Europe growth potential, work with them to reverse the significant, and in some cases, catastrophic traffic losses that they've suffered as a result of COVID-19. We think there's opportunities to do so. The balance sheet in Ryanair remains strong. As I said, our quarter-end cash balance is EUR 3.9 billion. We remain in good shape. Clearly, we're facing into what will be a difficult winter, and cash preservation and paying down debt, both to the U.K. government and the first bond as it falls due in mid-2021, will remain key priorities. The challenge of Brexit hasn't gone away. The U.K. will leave the European Union in December of 2020.
We continue to hope that this will be done in a managed or by agreement, certainly where air travel is concerned. I think the experience of the U.K. during the COVID-19 outbreak and the priority with which they gave the return of air bridges will hopefully serve as a lesson or a reminder that the U.K. needs to have open air access with the rest of the European Union and will spur at least a trade deal that will cover the air travel segment. However, if there is a hard Brexit. We have a series of airlines, most of which have European AOCs, and therefore we think we'll be far less impacted than U.K. AOC holders will be. In terms of outlook, I'm afraid it's too early to say. We really can't give any guidance on for the full year.
We think 60 million passengers for the full year at this point in time is an ambitious target. The risk to that is on the downside, if there are spikes in COVID-19, particularly towards the end of the autumn or early winter as flu season spreads across Europe, we may suffer some cutbacks on that. That traffic will only be delivered on the back of lower airfares. I'm convinced that in actual fact, the way to get Europe air travel moving again is with lower fares and price stimulation. That's why it's utterly key that we negotiate lower costs across every cost line with our people, with our suppliers, with our maintenance providers, and that process is underway. Those are the opening remarks, and I'm now going to take you through, myself and Neil will take you through the quarterly slide presentation. Unchanged in many respects.
We are the lowest fare, lowest cost airline Group in Europe. We're number one for traffic. That meant 149 million passengers last year, we think we'll do well to carry 60 million passengers in the current year. We remain the number one airline for coverage across Europe, 240 airports, over 2,000 routes. We have, I think, delivered a very successful return to serve flight services from the 1st of July. That return and that recovery of our flight schedules remains dependent upon the European governments continue to successfully combat the spread of COVID-19. We have a very strong BBB-rated balance sheet, we believe on our combination of financial strength and lowest cost will make Ryanair the long-term winner. As you're well aware, Ryanair offers the lowest fares.
Our fares are lower than any other European airline, that's why we believe we will recover strongly coming out of the COVID-19 pandemic. Allied to those low fares, we have by far and away the lowest unit costs. Our unit costs per passenger, excluding fuel, is at least 26% below our nearest challenger in Europe, materially up to 71% or 100% lower than most of the other so-called low-cost airlines in Europe. Neil, do you want to take the
I will. It was a very challenging quarter for the Ryanair Group. We saw our fleet grounded for almost four months from within March until the back end of June. That meant the traffic dropped by 99% to just half a million customers within the quarter. Load factors were just over 60% compared to a 96% load factor last year. Revenue was very heavily hit. We saw a EUR 2.2 billion reduction in revenue to just EUR 125 million. We did a lot of work on our costs, which led to an 85% reduction in costs over the quarter. Unfortunately, that didn't offset the reduction in revenues. We recorded a net loss of EUR 185 million in the quarter. As I look over to the balance sheet, we've got a very strong balance sheet, BBB+ rated by Fitch and S&P.
Our cash was up in the quarter compared to year-end, where we had a cash balance of just over EUR 3.9 billion compared to EUR 3.8 billion at the end of the last financial year. We also have a very high number of unencumbered debt-free aircraft on the balance sheet, 333 Boeing 737s, with a conservative book value of about EUR 7 billion. Market value somewhat higher than that. One of the strongest balance sheets in the sector. Michael, back over to yourself.
In terms of current developments, as you know, we returned to service in the 1st of July, 40% of our July capacity, covering about 90% of the network, but obviously with reduced frequencies. In August, we expect that to grow to about 60%, and in September we're hopeful, particularly if there's a successful return of the schools across Europe, that we'll see about 70% of our normal September capacity. The big challenge facing us going forward is going to be the illegal state aid that has exploded all over Europe, and those airlines engaged in the low-cost selling to the damage of the level playing field in European aviation. We and Ryanair remains Europe's low-cost leader, but even we are rightsizing our business now to rightsizing the cost base to reflect the lower fare environment we expect for the next couple of years.
We are hopeful that the first MAX deliveries will take place in the winter of 2020. That is subject to the Boeing MAX aircraft successfully returning into service in North America at the end of Q3. I couldn't be more excited about the post-COVID-19 growth opportunities that will emerge all across Europe. We are in the initial discussions with airports. Some airports are losing enormous amounts of their existing traffic and will have to respond competitively to that loss. The Brexit risk has intensified. Everybody's aware of that. Therefore, Really, we can't give you guidance on the full year in terms of profitability, we think 60 million on traffic is a reasonable stab, that could be impacted if there's any significant second wave of COVID-19 either across the continent of Europe this winter or spikes in different European countries.
Just to briefly touch on the successful return to service on the 1st of July, we're running about 40% of the normal July schedule, covering 90% of the routes, with much lower frequencies on those routes. We're hopeful, we're on track, I think, to exceed a 70% load factor, whereas the initial guesstimate was that we'd do a 60% load factor. Some of that success has been delivered with the comprehensive health measures that we've rolled out for both our crews and our passengers on board. Many EU governments are easing the lockdown restrictions. In fact, there's now largely free travel between most of the EU 27 members. The only exception to that has been Ireland, which has been slow and is not managing the reopening of its economy particularly well.
They produced a green list in recent weeks which is very restrictive, and we think not sensibly based, and we will continue to call on the Irish government to open up short-haul travel between Ireland and the other EU 27 member states. On-time performance has been excellent during July. We're running on-time performance of over 95%, combination of very good fleet reliability and also very good European ATC performance, given the lower volumes of flights across Europe. We would expect though to continue to have a controlled return, controlling that capacity growth and where we see outbreaks of COVID-19 or a dip in passenger bookings, we have the flexibility to sit those aircraft on the ground. Our capacity and our load factor will be controlled into H2 but may be kind of bumpy.
Traffic is very heavily dependent on there being no material second wave of COVID-19 across Europe in the second half of the year, and that's why our passenger traffic figure of 60 million is very tentative. We will look where we see opportunities, use seat sales to stimulate demand, to recover traffic, to try to build load factors and restore ancillary sales, because we think a good strong winter will actually gear the way or pave the way for hopefully a strong return to normality in the summer of 2021, but obviously much of that will depend on there being a successful vaccine emerging for COVID-19. Just a quick summary of where we are on the illegal state aid to the legacy carriers. Lufthansa has received combined almost EUR 11 billion.
Even Carsten Spohr has admitted that this is more money than they needed or wanted, but he's happy to take as much as he can get. Air France-KLM, Alitalia, an airline that has been bankrupt and should have been bankrupt, it has now received three and a half billion EUR from the Italian government. Ryanair remains the EU's cost leader, but we're taking advantage of the crisis to try to reduce costs wherever we can. We have rolled out significant pay deals with most of our pilots and cabin crews across Europe. We think working with our people to lower pay, we're looking at pay cuts of up to 20% for the best paid pilots, down to a ridiculous 5% for the lower paid cabin crew. That's a much better solution than just job losses or thousands of job losses.
Our people, I think, are working with us on that. There will be headcount reductions, however, such as in Germany, where the pilots union remarkably voted against this deal, and we've now announced the closure of three German bases in Tegel, Niederrhein, Weeze, and in Frankfurt-Hahn. We are in the early stage of discussions with airports around growth deals. We haven't made as much progress as I would like to have made at this stage, but a lot of that because the airports themselves aren't really sure of where they're going to suffer the biggest capacity cuts, because the legacy carriers haven't laid them out yet. We're also working with our suppliers to improve terms of maintenance, marketing, and almost every other cost line. Lauda and the management team in Lauda have done terrific work over the last two months. They faced a downturn.
They had actually announced the closure of the Vienna base because the local Austrian unions wouldn't agree to the new CBA. Thanks to the heroic efforts of the pilots and the cabin crew in Lauda, that decision was reversed, and the union was embarrassed, I think, into supporting the agreement that had already been supported by over 92% of Lauda's pilots and more than 67% of Lauda's cabin crew. However, the Lauda Stuttgart pilots voted against the deal in Stuttgart, and as a result, that base will close at the end of October. Lauda has also negotiated new lower aircraft lease rates, and with the new pay deal and lower costs, we think Lauda in the next 12 months, we hope will break even or will go very close to break even.
The big driver for us in terms of costs going forward, is going to be the new lower cost MAX aircraft, which we hope to take delivery of this winter. This aircraft will deliver us 4% more seats per flight. It will deliver us 16% lower fuel burn and also a 14% reduction in emissions. This aircraft is the key to a really seismic reduction in Ryanair's unit operating costs for the next three or four years, and we couldn't be more excited about the Gamechanger aircraft or its deliveries, which hopefully will happen before the end of this year. In touch of the public, the growth opportunities, as I said, there are huge gaps emerging across European aviation as a result of the failure of certain airlines, Flybe, Germanwings, LEVEL, SunExpress, and others. Competitors will retrench in some cases in return for the state aid.
Air France, for example, has announced that its capacity will be cut by 20% in 2021. Similar capacity cuts have been announced by a number of the other EU flag carriers. We would hope to exploit those cuts, particularly where we were able to show our airport partners that we have up to 40 new aircraft coming for the summer of 2021, that we can reverse or deliver them traffic growth in circumstances where some of their incumbent carriers are withdrawing from the marketplace. Touch briefly on Brexit. As I said already, we expect the U.K. is leaving the European Union at the end of December. We hope that some common sense will prevail and that they will see the benefit of Europe and the U.K. negotiating a trade deal that covers air travel.
I think the impact on the U.K. economy of the grounding of the air flights for the three months during the COVID period would have helped, I think, to firm up the political view that air travel is a necessity, and they won't want to repeat the shock of that or have any interruption to flights. We're hopeful that there will be a trade deal that will cover air travel, and therefore, there will be no impact on air travel, at least of a no-deal Brexit.
Neil.
J ust on the output, as Michael's already said, it's way too soon to put any kind of P&L guidance into the market. There's a huge amount of uncertainty around what may happen with COVID towards the autumn period. Equally, Brexit brings its own risks. At this stage, our best guess is that we will have 60 million customers in the current year, which is a 60% reduction on 149 million that we carried last year. Significant work has been done within the airlines to get the cost base down further so we right-size the business for the challenges that are going to lie ahead, particularly from state-aided carriers who are now going to be able to sell below cost. Our focus will be to keep the balance sheet strong, preserve cash, get the cost down.
We'll hopefully be in a better position to give you an update on the P&L portfolio when we meet again at the AGM in September or in the year H2 results in November. You reported a loss of EUR 185 million. Why? It was a very challenging quarter. We saw our fleet grounded for almost four months from the middle of March until the back end of June, which meant that our traffic was down 99%, just half a million customers compared to 42 million last year. Revenues more or less dried up completely in the early weeks of COVID with no bookings coming in the door, we saw a EUR 2.2 billion reduction in revenue to just EUR 125 million.
While we did great work on costs throughout the quarter, we had an 85% reduction, but that unfortunately wasn't enough to offset the reduction in revenues, so we recorded the loss. Was there a fuel ineffectiveness charge in Q1?
We had a small adverse mark-to-market on the ineffective hedges, but it was approximately EUR 10 million in the first quarter. As the market's aware, most of the fuel ineffectiveness was front-loaded into the FY 2020 full year results.
Could there be another exceptional charge in FY 2021? Yeah, it can't be ruled out. If we were to see more groundings of fleets across Europe, if there was a second wave of COVID-19, yes, more fuel could go ineffective. Equally, if the Boeing MAX was to be delayed well into next year, we could see some ineffectiveness on the cash flow hedges there. How are ancillary products performing?
Well, clearly they were badly affected by the groundings in Q1. As passengers return in July, we're still seeing strong uptake on products like reserve seating, priority boarding. Clearly with the health measures where we're not selling teas and coffees at the moment, onboard sales will be impacted, and therefore, it's too early at this point in time to be able to give any guidance on ancillary revenues for the full year.
How is your cash position and balance sheet? It's strong. We saw our cash increase to EUR 3.9 billion at the end of the quarter up from EUR 3.8 billion at year-end. We've got a strong investment-grade balance sheet, BBB from both Fitch and S&P, and that's underpinned by very strong aircraft on the balance sheet, 333 unencumbered Boeing 737 with a conservative market value or a book value of just over EUR 7 billion, significantly higher market value for us. Very strong balance sheet. What is the group cash burn running at since return to service?
It's reasonably break even. We expect to run with a load factor of about 70% or just over 70% in July, and it looks like something similar again in August. On that basis, we think we're running on a properly a break-even cash basis through both months. There's been no diminution in cash balances through, and we don't expect any through June, July, and August.
What is the latest on refunds? We're getting through them. We've had an unprecedented number of claims due to 4 months of grounding of the fleet. Our customer service team, with the help of Lauda, will ensure that we'll have about 90% of our cash refund requests cleared by the end of this month. We're seeing a number of customers opting for free flight changes and accepting vouchers as well for future travel. How are screen scrapers frustrating the refunds process?
Yeah. The refund issue has really exposed the kind of anti-consumer behavior of these unlicensed screen scrapers. The big challenge we face is that the screen scrapers make bookings for third-party passengers, but they put in fictitious email addresses and falsify credit card or the payment details. We can't automate refunds to those people. We run the legal risk that if we issue a refund to an unlicensed screen scraper and they don't pay the consumer, that the consumer ultimately will sue us. What we're trying to do is to open up a new mechanism whereby the end-of-the-line consumers can apply directly to us for their refunds. Although clearly some of them are quite shocked when they find out that how much they've been overcharged by the screen scraper when they receive our refunds. It is a problem.
We are continuing to call for policing and reform of these unlicensed intermediaries with the regulatory agencies, particularly the CAA in the U.K. and their equivalent opposite number here in Ireland.
How is operational performance on return to service? It's been very good. We put a lot of work in during the groundings to ensure that we kept our people and our aircraft current. We were worried that there might be a spike in tech issues when we returned to service in late June, early July. Thankfully, we haven't seen that. Air traffic control due to reduced volumes in the sky has also performed very well. We're seeing on-time performance in the mid 90% at the moment, which is excellent. What are your capacity plans for the remainder of FY 2021?
It's hard to say yet. As I said, we're looking to run about 60% of the normal August schedule, about 70% of the normal September schedule. We really need a better sense of where bookings will be, though, into September, October before we make a final decision on the winter schedule. That's why our full year guidance of 60 million passengers is tentative at this point in time, and it could go lower. In the last week, for example, as there has been a spike in coronavirus cases around Barcelona, we've seen bookings to and from and within Spain being hit. I think we'll see more of those kind of developments.
How are fares performing in Q2? As Michael said, we are seeing fluctuations in bookings as there are spikes in COVID in various different markets. There was a lot of pent-up demand coming into Q2 as lockdowns were relaxed. A number of people wanted to get out, get some sun over the summer period, visiting friends and relations also has performed well. Business is a lot slower. I think we'll have to wait on people get back to their offices in the autumn before we see an uptick in that. It's inevitable that we're going to have to stimulate demand over the winter with lower fares, particularly as we try to take on the flag carriers who now have about EUR 30 billion of illegal state aid, which will enable them to sell below cost. What health measures did you apply when flights resumed?
Yeah, we rolled out extensive health measures with extensive videos up on the website both for our crews and for our passengers, and they consist of mandatory face masks, hand sanitization, hand hygiene. We've limited the in-flight service, removed teas and coffees during the month of July. We're really trying to do everything or follow most of the sensible guidelines that were published by both the European Centre for Disease Control and the EASA on the 20th of May last. In many respects, the airlines have got ahead of most national governments in making face masks mandatory. In fact, Ireland, for example, only made the face mask mandatory in shops in the middle of July. We were many months ahead of them. I think we've been encouraged. I thought we might have some customer resistance on face masks. To- date, during July, our customers have been terrific.
Our crews have been terrific, and everybody has adjusted remarkably well to the new face mask experience on board.
What cash preservation and cost-cutting did you implement in Q1? Well, it was hugely important that we moved quickly when the groundings came in. We had 99% of the fleet grounded, which took a lot of variable costs out of the business. We very quickly, to preserve cash, canceled our share buyback program, canceled all non-essential CapEx within the business. We introduced recruitment freezes, 50% pay cuts for our people into April and May, indeed, we're continuing to negotiate pay cuts across the board at the moment. We were lucky enough and able to participate in a lot of government payroll support schemes across Europe, for which we're very grateful to have been given the opportunity to do that. We're looking at every cost line and have looked at every cost line. How will you improve your cost base for the future?
I think we're, as I said, by right-sizing our cost base. We're looking at every line. We've reduced some of our aircraft lease commitments. We're renegotiating the price of the aircraft with Boeing. We're talking to them about compensation for late deliveries. None of those can be finalized until we actually know when the aircraft will be delivered. We've engaged in extensive negotiation over the past number of months to reduce pay modestly in I think a very fair way with pilots, cabin crew. They take the reductions up front and then those pay cuts are restored to them over the next three or four years. The office team here have suffered significant pay cuts during April and May. We're also looking at lowering our maintenance costs.
Financing costs are going to be lower f uel will be significantly lower going forward and I think for the next two or three years. Those are all vital because we're going to have to continue to pass on those cost savings in the form of lower fares to stimulate a return to travel across Europe and also to be able to compete against these state-aided flag carrier airlines who will be below cost selling for a number of years into the future.
How are the union negotiations progressing? As Michael said, we've got various pay and productivity negotiations ongoing. A lot of them have actually been put to bed at this point in time. Various other discussions ongoing, or we would hope to get modest pay cuts in place so that we can minimize the amount of job losses and base closures. I don't want to really get into specific deals, as a number of them are still ongoing at the moment. Are group airlines closing bases?
They are. Ryanair, we have been unsuccessful in persuading German pilots to agree to pay cuts. We've announced the closure of Berlin Tegel, Düsseldorf Weeze, and Frankfurt Hahn at the end of the summer schedule. Lauda closing its Stuttgart base. We're also looking, I think, at some base closures in Spain, where at the moment the unions have not yet agreed to the pay cuts we need. I think there's a real risk to some of the regional bases in Italy, where you've a combination of slow pace of negotiations with the unions, but also the Italian government trying to impose Alitalia's pay rates and abysmal productivity on other airlines at other airports within the sector. If that leads to significant increases in cost, I think it's inevitable that there will be closures of Italian regional bases as well.
Michael, are you appealing illegal state aid?
We are. Thus far, we've launched a European court appeal or European court challenges to the state aid so far received by SAS, by Finnair, by Air France, by TAP in Portugal. The Lufthansa one hasn't yet been published, but will in due course. I think we've been heartened by the success of Apple and the Irish government in front of the European Court of Justice in recent weeks, overturning the challenge that was made to the Apple tax base here in Ireland. I think it demonstrates that the European Court of Justice is willing to stand up for the European law, where I think the performance of the European Commission in rolling over on some of these egregious illegal state aid has been abysmal. The idea that Lufthansa has run around hoovering up state aid, not just in Germany, but in Austria, in Belgium, and in Switzerland.
In fact, Carsten Spohr was correct. He didn't expect to get that much state aid. He's receiving more than he actually needed, which in itself is in breach of the state aid rules. I'd be reasonably confident that we will be successful in opposing these state aid grants. The challenge and difficulty will be it will take us two or three years for these court hearings and the appeals, the inevitable appeals to run their course, in which case we will have suffered a number of years of below-cost selling by Alitalia, by Lufthansa, and others to the damage of Ryanair and our shareholders' interest. Yes, we pursue the state aid claims, and we think it'll be successful, but it'll take us some time.
There was a recent restructuring in Laudamotion. What did that involve? It was quite a significant and painful restructuring for the Lauda Group. They had to, in light of COVID-19, totally look at every cost item within the business, look at their growth plans for the future. They had hoped to grow to 38 A320s in their fleet this summer. That's now been capped at 30. They've also renegotiated a new CBA with their staff, their pilots and cabin crew in Vienna, which is leading to pay reductions, enhanced productivity and rosters. Unfortunately, their base in Stuttgart is going to have to close, and that will go at the end of October. What this means is that they are now going to make a positive contribution to Ryanair Group as a wet lessor and have a good future, we believe, within Ryanair.
How are the other group airlines developing? They're coming along well. They clearly had a difficult first quarter on the back of the groundings. Buzz at the moment have just under 50 aircraft in their fleet. They continue to take over operations for the Ryanair Group in Central and Eastern Europe. We'd hope to take on a couple more bases. This winter, the charter market has been impacted. Over the summer, a number of traditional markets like Turkey are still not open. That will have an impact on them. Malta Air now have 120 Boeing 737s in their fleet. They're actively involved in cost negotiations with their people across the various markets that they operate in. We would again have hopes that Malta will take on more of our operations over the coming years and months. When is the latest update on the MAX?
Well, Boeing successfully completed the return to flight tests with the FAA in early July. They expect to make significant progress with both the FAA, with the EASA, and with the Canadian regulators before the end of the month. There's reasonable prospect, I think, at this point in time that the aircraft will be certified for return to commercial service by the end of Q3. We hope by the end of September. The Boeing MAX 200s, which we've ordered, are running probably about, they're saying about a two-month certification period. We would be hopeful at this stage that we'll see the first of our MAX deliveries by maybe the end of this calendar year. If that's the case, then I think there's a reasonable prospect that we'll be able to take up to 40 new aircraft deliveries between now and the summer of 2021.
That will put us in a very strong position then to go around to Europe's airports to offer them growth or to offer them traffic recovery where they've lost traffic from other providers. I think that will enable us to kick off a range and a round of significant growth incentives, and they will be much needed in this industry for the next number of years.
How are Boeing compensation talks progressing? They're still ongoing. We're making some progress, but it won't be possible to conclude the discussions until such times as we do see a return to service of the MAX and we get a firm schedule of deliveries for ourselves. At that stage, we'll be in a position to hopefully close things out. What are the group's fleet plans?
Well, as I said, we were hopefully getting 40 MAX aircraft for summer 2021. We're already committed to selling seven. There are the seven sales of the 737-800s. Those will be delivered this winter. That's the balance of the 10 aircraft deal we announced we'd sold in FY 2020. We're going to hold off any further aircraft sales because frankly, we need the aircraft we have to exploit the kind of growth opportunities we see across Europe. There are 14 737 lease returns by May 2021. We are in discussions with the lessors on those aircraft, we'd certainly be willing to extend those leases as long as we could do so on competitive terms. The Lauda fleet, however, though, has been frozen at the moment. It was originally supposed to grow to 38 aircraft for summer of 2020.
Because of the impact of COVID-19, we have stopped its growth, so it's limited to 30 aircraft, and we won't be adding any further aircraft to the Lauda fleet, I think, for the foreseeable future, unless there's some significant pricing opportunities on the Airbus side.
Michael, what is the latest update on Brexit?
As said the U.K. leaves the European Union at the end of December. There is a significant risk of a no-deal Brexit. As everybody can see, the negotiations aren't going particularly well. We remain, however, hopeful that a trade deal will be done or negotiated that will cover air travel between the U.K. and the European Union. I think the experience of the U.K. with the COVID-19 groundings should help that process. I think the U.K. was very keen in recent weeks to reopen air bridges and restore air travel between the U.K. and continental Europe, and we hope that that will give a significant impetus to, or at least to encourage the concluding of a trade deal between the U.K. and Europe that will cover air travel.
If it's not, there is a hard-deal Brexit, our group consists of four Europe airlines with European AOC in Malta, Austria, Poland and in Ireland. We expect there will be no interruption on their flights to and from the U.K. There may be some disruption. We operate three U.K. domestic routes and some U.K. routes to places like Morocco or countries that are outside that might be affected if there was a no-deal Brexit, but it's a tiny proportion of the overall business. I think would be more than made up by opportunities that will emerge where U.K. registered airlines and AOCs would be grounded in terms of flying intra-European. We would like to see a trade deal done, and there be the smoothest possible departure from the U.K. from the European Union.
What's the group's traffic and profit outlook for FY 2021? Well, it's way too early to give any kind of P&L outlook at this point in time. There's too many unknowns in relation to what may or may not happen with COVID-19 over the next number of months. Our best estimate at this stage is that we'll see traffic at about 60 million for the current financial year, which is a 60% reduction on the 149 million that we carried last year, where we're actively working to right-size the cost base for a post-COVID-19 environment where we'll have to compete against state-aided carriers that have just been gifted over EUR 30 billion in illegal state aid. We think as we look into the winter, we'll have to significantly stimulate demand with lower fares, and indeed, we'll need these lower fares to compete with the flag carriers.
Further out beyond that, there are opportunities. We're continuing to preserve cash in the business and to improve the balance sheet. Michael, Neil, thank you.
Thank you very much. We look forward to speaking with you all on the conference call later on this morning. Thank you