Hello, welcome to the Ryanair full-year results conference call. Throughout the call, all participants will be in a listen-only mode. Afterwards, there will be a question and answer session. Just to remind you, this conference call is being recorded. Today, I'm pleased to present Michael O'Leary, CEO. Please go ahead with your meeting.
Good morning, ladies and gentlemen. You're welcome to the full-year results conference call. You'll have all seen this morning we released the results at 7:00 A.M. together with a Q&A video with myself and Neil Sorahan, the Group CFO. We'll take a lot of this as read. I'm joined here in Dublin by the full team. I'm pleased to welcome Tracey McCann here, who's also been appointed in recent weeks as the CFO of Ryanair DAC. Tracey, you're welcome, and congratulations on the much-deserved appointment. Couple of quick thoughts on this. You're seeing today or this morning's numbers. We were heading for a terrific full year to the end of March 2020.
If March had not been disrupted by the COVID-19, it's likely we would have seen traffic grow to about 154 million passengers, and full-year net profits would be towards the upper end of the range, somewhere between EUR 1 billion and EUR 1,000,000,050. As it was, COVID and the government-mandated groundings of the fleet through from essentially mid-March meant that we carried 149 million passengers, up 4% on the previous year, and profits came in at the higher end of the current range at a tad over EUR 1 billion. Much, however, of what happened last year is obviously now historic, and so I won't dwell on it. Couple things on the COVID situation, just a couple of key thoughts. Clearly, we're grounded and expect to be grounded fully through April, May and June.
We're guiding that thanks to significant cost savings and cash preservation measures, we think there'll be a Q1 loss somewhere above EUR 200 million, but under EUR 300 million. We are already, though, have announced that we expect to go back to some level of flying from the 1st of July. We are promoting at the moment about 1,000 flights daily, which will be about 40% of our normal operations. We took considerable comfort from the evolving situation over the weekend where the Italians have returned or opened up the economy to tourism again from the 3rd of June. They have removed it in its entirety, this utterly ineffective and nonsensical 14-day isolation, which no government has yet been able to explain how it operates or how they would even police it.
We are pushing hard, though, for effective health measures. We think that comprises generally face masks in all public transport situations, in busy train stations, undergrounds, airport terminals, and on board aircraft. The face masks are effective at eliminating about 98.5% of the risk of the spread of COVID-19. It seems to me it's the only way you can allow most of our economies to recur to some kind of activity during the summer months. Already last week since we announced that, we've seen a significant spike up in bookings. I wouldn't want to get too excited. This weekend, for example, our bookings were up 60% over the previous weekend, but that was off a very small base.
We are seeing a significant number of hits and searches over the weekend, particularly, I think from families looking at going on the two-week summer holiday from Northern Europe to places in Italy, Spain, Portugal, et cetera. In all of those countries, we've seen the cases of COVID-19 are significantly lower in the beach and the resorts than they are in the heavily populated cities. We would hope that there will be a reasonable relaxation of restrictions and that they'll wipe out, that they'll completely remove the things like 14-day isolation, which are bonkers and unimplementable anyway, over the next couple of weeks, and that there would be a reasonable return to passenger movement from 1 July onwards. It's still six weeks away. We haven't yet begun to aggressively price promote it.
What we're doing at the moment from last week and this week is encouraging the health measures, health prevention measures, hand sanitization, and face masks. I think if you therefore put this in some context, clearly there's going to be a lot of short-term pain in the airline industry. We would be lucky, I think, if we see a 50% load factor through the second quarter. We are expecting maybe a 75% load factor in the winter, but we're guessing, and we're making this up as we go along. We are saying now that the traffic for the full year will be less than 80 million passengers, but we really can't put an accurate figure on at the moment.
Our gut instinct, though, it's something we share generally, is that once people begin to move, is that the traffic will return pretty quickly because there will be aggressive price stimulation both by the airlines, by the tourism providers, the resorts, the hotels across Spain, Portugal, Italy, and Greece. They will try to rescue what's left of their tourism season on the back of price. That also means that while we're looking at a reasonable return to traffic volumes, we think it will be on the back of much lower airfares and yields. We're really flying blind at the moment. We hope to be able to go back flying on the 1st of July. We think that's reasonable. We think that the traffic volumes will return pretty quickly, but on the back of pricing.
That's why, honestly, and I know the first 15 questions on this call are going to be what do we think the yield outturn will be for the year and the profit loss. We haven't a bull's notion, so please don't ask us. All we can give you is what we think we're doing on guidance. Over the medium term, we see this as a huge opportunity. Ryanair has entered this with a number of other airlines in a well-managed situation. We had EUR 3.8 billion in cash on the balance sheet at the end of March. We're up to EUR 4.1 billion of cash today, mainly most out of the GBP 600 million drawdown from the U.K. government and transparent loan scheme. Our cash burn is about EUR 60 million a week. About three quarters of that, so about EUR 45 million of that is the fuel hedge payments.
I've actually just stripped that out, and it will decline as we move through the year. In actual fact, the cash burn is down to almost zero. Not quite, but close to zero. We can continue in this environment for a year or two at this point in time. Obviously, we want to get the business back moving. We think as long as we can get to a 50% or 60% load factor on flights, we'd be operating close to break even. Again, that much depends on what assumptions you make on yield and on ancillary sales as we return to flying. Other than that, the big challenge though, over the medium term, there is a huge opportunity here. We're going to face into a number of years of trading where we'll have much lower oil prices.
Airports will be very aggressive because they've lost a huge amount of traffic. They will be introducing very significant discounts for growth. We're already in active negotiations with the airports on those stimulus measures. Our payroll bill will be a lot smaller. One of the tragedies of this is, I think it's inevitable, we are facing very significant job losses at the front end, pilots and cabin crews. We'll only carry 80 million passengers this year. That will be about 50% of our normal volume. There's simply no way that we can continue to employ the numbers of pilots and cabin crew we do, and there are going to be broad spread redundancies. Pilots and cabin crew in countries all over Europe, the U.K., Spain, Italy, and some of the other large countries, we've already initiated that process.
The unions as usual are kind of sticking their head in the sand and looking for more information. There isn't a lot more information you need. We're facing an existential crisis in the airline industry. There's going to be job losses and pay cuts. If we don't get agreement on pay cuts quickly, there will be even greater job losses. That will be accentuated later on this week when in Vienna, we've already announced that we will close the Vienna A320 base if the union and the ver.di union don't agree to revise Ts and Cs for pilots and cabin crew in Lauda. We don't expect them to, because at the moment, they represent about 6,000 members in Austrian Airlines. We had a first meeting with them last week, which was a shambles.
They wasted 40 minutes arguing and discussing why our proposals were in English language and not in the German language. We explained that we don't have time to be pissing about over languages. 300 job losses and a base closure, whether it's in English or in German, will still have the same impact on our crews, pilots and cabin crew in Vienna. We're pleased and in fact heartened by the support we've received from our pilots and cabin crew in Vienna. As of this weekend, over 95% of the pilots and more than 66%, more than two-thirds of the cabin crew have already signed up for these changes. The tragedy, though, is that the structure of labor agreements in Austria means unless it's signed up by the union, the pilots and cabin crew can't agree these changes.
We have massive and overwhelming support from the Lauda pilots and cabin crew with the changes, but an Austrian Airlines union can effectively block any of those concessions, which means, in our view, it is inevitable that the Vienna A320 base will close on the end of May. The decision will be made on Thursday when the ver.di union don't sign this agreement. The only reason it will close is because the ver.di union won't sign the agreement. Sorry, the Vida Union. My apologies to ver.di, who are their German cousins. The Vida Union won't sign the agreement. What will happen in that situation is we will not withdraw from Vienna. We have three Ryanair 737s based in Vienna.
When Vienna reopens, we will fly the base using the Ryanair aircraft, and we will backfill an awful lot of the routes and flights on Ryanair aircraft based elsewhere that will now fly to and serve Vienna. There will, in actual fact, which puts us in better shape to compete into the future with the state-aided Austrian Airlines. We'll be competing with them with a much lower cost Ryanair operation than the high-cost Lauda operation. We hope that even now the Vida Union in Austria will agree these changes, which will save the pilot and cabin crew jobs in Vienna. Back onto the fundamental issue is there is a medium-term huge opportunity here. We will have lower cost fuel, lower cost labor, lower cost aircraft. We are renegotiating aircraft leases for Lauda. We're also discussing with Boeing pushing back any deliveries on the MAX aircraft.
We'll probably extend some of our 737NG leases. Those discussions are continuing, but can't be finalized with Boeing until the MAX comes back to service. I think you're going to see enormous cost opportunities here for the next four or five years, and Ryanair are well poised to take advantage of them. The downside is we'll need to take advantage of those costs, though, because we are facing a massively distorted market across Europe, I think for the next four or five years. The strong well-run airlines like Ryanair and easyJet, BA, going into this crisis are going to emerge much more weakened and facing competition from state aid airlines. Massive state aid is being given to SAS, Alitalia, Air France, and Lufthansa.
Airlines who couldn't make any money before the crisis, but will now emerge out of COVID-19 vastly stronger with unlimited funds to engage in below-cost selling or M&A activity where they just buy out the competition in their domestic or regional markets. That I think is going to be a real challenge for us going forward. I think we're facing a very strong return to passenger volumes, but in a very weakened pricing marketplace. That's why it's critical that we work with the unions, we work with all of our other suppliers, airports, aircraft, et cetera, because there's going to be a fairly torrid pricing environment going forward for the next number of years. Alitalia this morning was approved. Alitalia, an airline, by the way that has never made money for 75 years, has been teetering on the edge of bankruptcy for the last three or four years.
Has not only been nationalized, but this morning received EUR 3 billion in state aid from the Italian government. To put that in some context, this morning the Italian government awarded EUR 1 billion of aid to the Italian education system. They seem to think that protecting the jobs in Alitalia is far more important than educating the children of Italy and shows how distorted this is going to be. Lufthansa, Air France, KLM. By the way, it's not that we are opposed to all forms of state aid. We accept and we hold our hands up. We have participated in job payroll support schemes for the last number of weeks. We're very grateful for those schemes across all EU countries. We've also drawn down the loan that we're entitled to in the U.K. Arm's length transaction.
We got GBP 600 million because we're a triple B-rated operator in the U.K. What's different with those supports is that they're transparent and they're available to everybody. What's manifestly unfair is, for example, in France, the French government issuing some edict that says they will refund the French taxes, aviation taxes, but only to French airlines. Air France receives back hundreds of billions of aviation taxes, whereas we, Ryanair, we're the third largest airline in France, easyJet and others are not only received nothing, but we're told we have to keep paying these aviation taxes. We have the bizarre edict coming out of Italy last week. Not only are the Italian government going to give Alitalia EUR 3 billion in state aid, but they're also now attempting to impose the Alitalia terms and conditions labor pay rates on all other airlines in Italy.
Massive distortion of the level playing field, a massive distortion of competition, and a flagrant abuse of this government of not just the state aid rules, but also breaching or tearing up the competition and the level playing field rules in Italy. We have no choice that we and other airlines would continue to oppose these kind of measures because they are going to distort the market for the next three or four years. Ryanair with EUR 4 billion in cash, a net weekly cash burn of about EUR 10 million to EUR 15 million a week excluding fuel surcharges. With a fleet of aircraft, we've got 350 aircraft entirely unencumbered, a value of about EUR 7 billion on the balance sheet. We're very strongly positioned to weather not just the COVID-19 pandemic, but also to emerge out of that pandemic stronger with a lower cost base with far more growth opportunities.
Those growth opportunities will be in a marketplace for the next year or two, where I think fares and yields will be significantly lower as we're forced to compete with state aid junkies like Air France, Lufthansa, and Alitalia, who will use this money on top of the payroll support schemes and the tax refunds they're already getting to engage in below-cost selling or in massive M&A activity. A quick touch on the Boeing MAX. As I said, we now expect Boeing to tell us now that the MAX return to service will take place in North America sometime in Q3. That is between sometime in August or September. We still think there's a reasonable prospect that they will be able to deliver some of our MAX aircraft to us in the calendar fourth quarter and the first quarter of next year. These are still great aircraft.
I mean, they have 4% more seats. They burn 16% less fuel. We are great fans of the Boeing, the MAX 200s. It will be critical, I think, as well to us being able to exploit growth opportunities into the summer of 2021 that we have additional aircraft deliveries. I think certainly David and the commercial team are in active negotiations with airports who are very concerned about the amount of traffic they're going to lose, either through failures or capacity cuts among the legacy carriers, and will create more opportunities for growth going forward. Other than that, again, as I said, for the remainder of this year, I'm afraid we can't give you any guidance on traffic. We can't give you any guidance on the full year outturn other than we expect a Q1 loss of about EUR 200 million.
Q2, based on our current assumptions, could be a break-even small loss. Again, that's really in the lap of the gods. The more we see European governments row back on restrictions in the next couple of weeks up to about the middle of June, and we believe that we'll see further developments with the Spanish, Portuguese, Greek governments not imposing 14-day isolation. We think the U.K. government will also be embarrassed into withdrawing their 14-day isolation. I mean, when they're asked questions like how do you ask international air passengers arriving into Heathrow and Gatwick to self-isolate for 14 days when the first thing they do is get an Underground train or a Gatwick Express into the center of London? Are you now going to ask all the passengers on the Gatwick Express and the London Underground to self-isolate for 14 days?
Of course, it completely falls apart. They generally move back onto it's all science-based until you ask them, well, what was the science that says the Irish and the French can be exempted from the 14-day lockdown? Now, we think the Irish are incredibly special, but even we can't find any science that would exempt the Irish from a 14-day lockdown. It's all just nonsense that's being made up on the hoof by the U.K. government. It's completely ineffective. The concern is they're using this to give the illusion or the fig leaf of taking some scientific action, when really the action that we're calling for and that would be effective is encouraging people using public transport, the London Underground, commuter trains, airports, and aircraft to wear face masks.
Widely used face masks would eliminate about 98.5% of the risk of the spread of COVID-19. We think that's the way forward, not just for mass transport, but also for retail, and for allowing people to move about more freely over the next couple of months. We're encouraging that and trying to discourage idiotic ideas like 14-day isolation, which are completely unimplementable, and the U.K. government can't even explain where the hell you'd isolate in the first place. I'm sorry. That went on a little longer than I thought. I'm going to hand over to Neil, who will give us a couple of quick thoughts or themes on the finances.
Thanks, Michael. As you said, a relatively good year last year. I'm not going to dwell too long on it. Up 13% profit after tax before exceptionals. The balance sheet's in very good shape with 330 unencumbered Boeing 737s with a book value of just over EUR 7 billion and a market value well in excess of that. Cash, very strong at EUR 4.1 billion. The work that we've been doing over the past number of months to get the cash burn down has seen us go from EUR 200 million per week, all expenses, including CapEx and everything else out the door, down to EUR 60 million per week currently going out the door on average. A slight clarification on the fuel figure. It's somewhere just under about EUR 25 million a week going out based on the mark to market and depending on the spot on an individual day. Hedge ineffectiveness.
We had hedged 90% of our fuel coming into FY 2021 pre-COVID-19, a big chunk of that has now gone ineffective as we're not going to use that fuel. We have an exceptional charge of about EUR 390 million on jet fuel offset by favorable currency primarily on delayed CapEx aircraft offsetting that, giving a net charge of about EUR 353 million in the FY 2020 accounts. There'll be a little bit of volatility on the P&L this year as we mark to market those ineffective hedges, but that will run off over the next number of months as the hedges settle. That's pretty much the key things I wanted to highlight, Michael.
Okay, great, Neil. Thank you very much. Julius, you want to say anything just on the Q&A before we open it up and head off a lot of questions on it?
Maybe just a word to add that we have been in touch with the European Commission for the last two months. We almost feel sorry for them facing pressure from capitals, Berlin, Paris, Rome, and so on, to bend existing rules and allow significant amounts of state aid to flag carrier airlines. We will be assisting the EU Commission with appeals of those decisions to the European Court and hoping that the Court will accept our requests to deal with these matters in an expedited manner.
Thanks, Juliusz. Just before we open up to questions, Eddie Wilson, the CEO of DAC, you want to give us a quick couple of thoughts?
Yeah, we've been working over the last two months on minimizing the payroll costs with the payroll supports. Now we're starting the discussions with the union, some more realistic than others. We have to get ahead of this. We announced 250 job losses in our offices in Dublin, Bratislava, and Madrid, and in Stansted as well, Friday last. We now get into the formal processes with each of the unions. We're going to have to deal with this. Some of them are already sticking their heads in the sand, as Michael has said. Some of them think it's just going to pass and it's all going to be over by July. It's not going to be over, and we're probably heading into a very, very deep winter in terms of cuts.
We hope that we will, I suppose, use the background in negotiations that we had in locking away most of the CLAs. We're also working on the airport deals, and some airports haven't come back to us yet, but we are getting real savings there. We're working on those where the savings are not up to what we would expect.
Okay, Eddie. Thank you. Okay, we'll open up now for Q&A. Can we please, everybody, we zip through the questions. We have to be gone around 11 o'clock. It's one or one and a half questions each. Please don't ask me any questions on traffic and yields and P&L for the rest of the year will be disbarred because we don't know.
Thank you. If you do wish to ask a question, please press zero one on your telephone keypad. If you wish to withdraw your question, you may do so by pressing zero two to cancel. Our first question comes from the line of Daniel Roeska from Bernstein. Please go ahead.
Hey, Daniel.
Hey, everybody. I hope you, everybody on the call, and the families are safe and well. I'll limit myself to one. I guess in principle, your commitment to buybacks is unchanged. I'd like to ask under which circumstances you would consider reinstating the buyback program. Can that happen while you're still restructuring? How are you thinking about that next year if there's a trade-off between possibly accelerating growth to capture that medium-term opportunity you highlighted and the buyback program on the other side, how you're thinking of capital allocation if you're faced with that question in a couple of months when we're closer back to normal?
Thanks, Daniel. As you've seen, we canceled the buyback in mid-March. We'd done about, what, EUR 550 million?
EUR 580 million.
EUR 580 million of the EUR 700 million buyback. We immediately canceled the remainder of the buyback. We had already signaled to the market that there wouldn't be a buyback in the next 12 months because our next big issue was we have a bond repayment coming up in June.
'21.
2021. What's that, about EUR 850 million?
850 million.
That was going to be our next usage of cash. Frankly, the issue of buybacks was off the table before we entered COVID-19. We would be very determined to pay down debt next year. We still think even with the impact of COVID, we will be able to repay that EUR 850 million bond in June of next year. Assuming some return to normality this winter and into the summer of 2021, cash flows are expected to be very strong. I would also, to the second part of your question, always be in favor of accelerating growth and exploiting opportunities to lower costs over share buybacks or distribution to shareholders. Shareholders, and I think I'm the fourth largest shareholder in the group, can wait in line while we either, one, work our way through what has been an unprecedented event in the airline industry.
To put it in some context, the attacks of 9/11 grounded flying for four days. COVID-19 has grounded flying for four months. This has been unprecedented. Shareholders understand that. That's why I think we've always generally favored share buybacks over dividends, because we can always pull back or suspend the share buyback program without annoying lots of shareholders. If there's an opportunity in the next year or two, and I believe there will be, we will be working closely with Boeing on the MAX delivery. I think certainly if you're looking around Europe at many of the other airlines who have announced very substantial aircraft deferrals, capacity cutbacks, failures of Thomas Cook, Flybe, and others, I think there is going to be significant opportunities into the summer of 2021 for Ryanair to grow strongly.
In fact, if anything, I would try to accelerate our growth into 2021 because there's just going to be opportunities there with airports. There's certainly going to be a huge surplus of available pilots and cabin crew all over Europe. Those pilots and cabin crew who we will be making redundant and whose jobs will be lost in Ryanair the next number of months, we would want to at least be able to offer those people the chance of coming back to employment in Ryanair maybe in the summer of 2021 or get them back working as quickly as possible if they want to come back to work. I'm not sure there's many other airlines will be offering people any new jobs for the next month or two or next year or two in Europe. Ryanair will.
For clear.
Next question, please.
The next question comes from the line of Savanthi Syth from Raymond James. Please go ahead.
Savanthi, hi.
Hi, good morning. Hey, maybe two half questions just on the cash burn. I know, Neil, that you mentioned everything's kind of included in there, I'm guessing including debt. I was just kind of curious what you're seeing in terms of refunds in there. Then just a follow-up on Michael, I know you mentioned that you were probably going to extend some of the Boeing NG leases. I'm kind of curious why that was given that you probably need less of a fleet, at least in the near term, and the MAX will probably come in time for next summer.
Okay.
I'm going to ask Neil to take the cash burn, and I'll do the aircraft situation.
Okay. Savanthi, as you said, the cash burn includes everything from OpEx to debt repayments to critical CapEx within the business.
Payroll top up.
Payroll top ups, et cetera. We have about EUR 300 million of refunds included since the start of this financial year. That would be a combination of refunds out the door, vouchers, and free changes. That's in the numbers that we have given there in the cash burn. On the aircraft, one, we will need all of the fleet of aircraft we have at the moment. Remember, we expected to carry 150 million passengers, Savvy, in the last 12 months. The growth opportunities that are out there at the moment will be, I think, almost once in a lifetime. We're looking at extending those aircraft that are coming off lease. You're talking about lease rates now that are down at EUR 150,000, EUR 175,000 a month. These will be very cheap aircraft if we decide to extend those leases. We're also looking at new aircraft.
I think if you take my view is that sadly the Vienna A320 base will be closed at the end of May. If that happens, I think it's inevitable we'll then start planning over the next four years to take the Airbus aircraft out of Laudamotion altogether, and we'll replace those aircraft as they come off lease with new MAX aircraft, which will be much lower cost, more seats, lower cost. I see nothing but opportunity here for accelerating fleet growth in the next year or two because there's going to be opportunities. If you take a look around the marketplace, Norwegian is clearly going to reemerge as a tiny domestic carrier up in Norway. It has a large presence in Ireland, Spain, Italy, Gatwick that is going to be gone. easyJet have already confirmed that they are deferring huge numbers of aircraft deliveries.
Lufthansa has significantly cut back, closed Germanwings. Even Alitalia with the benefit of EUR 3 billion of state aid still can't cover or serve the Italian market. There's going to be opportunities there for those airlines that have the lowest costs. I think it's going to be a race for growth in the next couple of years between the really low-cost airlines, of which there's only one in Europe, Ryanair. The airlines who have received $multi-billion worth of state aid subsidies. I think the problem with the state aid subsidies is they all come with- that will prevent those airlines from engaging in meaningful labor reform or productivity gains or efficiencies over the next number of years.
If you compare and contrast what Willie Walsh and the team in IAG are doing, taking out large numbers of jobs, driving efficiency gains, which is the right way forward, compared to what the subsidy junkies, Air France and Lufthansa are doing. They just take EUR billions of state aid, there'll be no labor reform, there'll be no productivity reform. Going forward, we as the lowest cost airline in Europe will need more aircraft if we're to get our pilots and cabin crew back into jobs and take advantage of these, I think what will be once in a lifetime airport discounts. Next question, please.
Thank you. The next question comes from the line of Duane Pfennigwerth from Evercore. Please go ahead.
Hey, thank you.
Duane, hi.
Hey. Can you talk a little bit, Michael, about the sequence of reopening in Europe and your network planning lead times? Which countries do you think will be the first to reopen aviation? Which will be the slower ones to reopen? How much lead time do you need to relaunch a market, including things like crew bidding lead times?
Thanks, Duane. It's really hard to tell. I think what's likely to happen, we see a lot of European countries over the last week, 10 days, reopening. Germany, Austria, the border has been lifted. Switzerland, Italy at the weekend. It almost becomes like a domino effect. The Spanish and the Portuguese are looking at the Italian tourism tourist destinations reopening. The Spanish hotels, Portuguese hotels, Greek hotels going, "Ooh, we'll lose our tourism if we don't do something similar." If you look across those countries, many of which the Italians and the Spanish were the first into the COVID crisis, and therefore emerging faster than other countries. I think I would be reasonably optimistic that there will be significant movements in relaxation of citizens' restrictions over the next two weeks, or certainly up to about the middle of June.
I think they'll largely be pan-European. Certainly the Commission is pushing for Schengen-wide, similar treatment across Schengen, similar treatments on movement of passengers. It's hard to come up with to restrict air travel when people can move by train, bus, and car across Europe anyway. We're kind of the view. We announced we were going back on the 1st of July, 10 days ago. That was based or predicated on the thought fact that we thought much of the movement restrictions eased across Europe in early June. We think we can stimulate an awful lot of bookings. Well, firstly, there's huge pent-up demand in there already anyway, for particularly families who want to go on the kind of two-week school holiday, July, August.
We think the business traffic might be a little bit slower to move, and certainly that's where these two-week restrictions really militate, not just against business traffic, but also normal commuting traffic. I made the example this morning, Boris Johnson's nurse who nursed him back to health was a Portuguese nurse from Porto. He gets to and from between London and Porto flying on Ryanair. If you want your health services to continue to operate, you're going to need to allow low-cost air travel within Europe to operate. To operate in a healthy basis, which is with face masks and temperature checks, not to have nonsensical two-week restrictions. The answer to the question is, we think once people start to move, that it will be largely pan-European on a Schengen basis.
The other countries will also move to similar kind of restrictions, which I think, if you're sensible, would be face masks, and move away from nonsensical restrictions like two-week isolations that are unimplementable and unpoliceable anyway. Are largely redundant when you get your isolation addressed by using London Underground or commuter trains in any event. The challenge for us is we've no idea what the load factors will be in July and August, and we've no idea what the yields will be. All we're trying to guide our shareholders with the lazy assumption from the usual journalists and those who wouldn't be the brightest in the sandwiches is that there'll be very low loads because people will be afraid to travel.
I think actually it'll be the opposite, is that there will be higher than expected loads because the pricing will be very aggressive and discounted. We'll have very low airfares. You'll have hoteliers in Spain, in Italy, in Portugal, in Greece, really trying to grasp hold of what's left of their summer 2020 season. You'll see huge discounted offers out there. I think that the volumes will be higher than we expect, but the pricing will be lower, and that's the message we're trying to communicate today.
That's really helpful.
Thanks, Duane.
Just for a quick follow-up, Michael. Obviously, the market's been totally focused on COVID, is there any progress going on behind the scenes on MAX return to service? Is there anything recently, from a technical or regulatory perspective that has increased your confidence? Thanks for taking the questions.
There is. I think we've worked closely with Boeing and with the EASA, the European Safety Agency. I think there is a much higher degree of confidence that the return to service will, I think, take place in August, September of this year. The information, the feedback we've had from the regulators has been much of most of the software issues, the return to service issues. That's not to say that it won't be bumpy. I think there's a reason. Boeing themselves, I think now are talking about going back into production, I think sometime at the end of the second quarter, maybe the early part of the third quarter. We know we have about 20, 25 of those aircraft already made and produced that are sitting on the ramp in Seattle waiting for delivery to Ryanair.
We want to take them. I am much more hopeful or optimistic now that we will see the Boeing return to service in the third quarter. Certainly that we will have a meaningful number of additional new Boeing MAX aircraft in advance of summer 2021, which is obviously our next deadline anyway. I think there's a reasonable prospect that we will see 20 or 30 of those aircraft flying for Ryanair in the summer of 2021. We will urgently need them both to replace a lot of the Airbus aircraft that we're not taking or that we're not taking delivery of, and to create that room for growth in the summer of 2021 when we think Europe will, certainly tourism Europe, will rebound strongly as long as there isn't any second wave outbreaks.
All the evidence in Asia at the moment suggests that there isn't much of a risk of a second wave outbreak, and that risk will be further diminished if we can persuade governments to introduce face masks for people traveling in mass transport, whether that's undergrounds, trains, or planes.
Thank you.
Next question, please. Thanks, Duane.
The next question comes from the line of Mark Simpson from Goodbody. Please go ahead.
Mark, hi.
Yeah. Morning. Just want to clarify just some comments you made. I think you said, and I know it's pure guidance at the moment, 50% load factor in Q2, 75% load factor in the winter. Did I hear that correctly?
You did. No. I don't want to be stuck on any number. Look, I think the number we're forecasting for the rest of the year is under 80 million . It's too early. We would be hopeful again we would get 50% traffic in the month of July, which is the first month back. I'm not guiding you into August or September yet. Second half of the year, I think we would be hopeful that the load factor would be significantly higher than 75%, but the yield would be weaker. I'm not getting into a forecast today where I'm guessing, you're guessing, we don't know.
Okay. Just to follow on.
I think the most reasonable number for the full year is going to be under 80 million . We're looking at a 50% reduction in traffic over this year.
Okay. Just to follow on, though.
Yeah.
I know, I say accept the fact that it's broad, you were indicating circa 20 million pax for Q2, 50% load factor. You're flying therefore 40 million seats, which is only down 12% year-over-year and saying break even possibly. That can only come with much better pricing. I'm not quite sure where your negative pricing commentary is coming from. Unless these are just throw the darts and put out some numbers out there.
We are throwing darts.
Okay. Final question. Exceptional restructuring charges, Neil, are these come in the quarters coming down the pipeline as you go through right-sizing the business?
Well, the exceptional costs are really going to be if there's any more ineffectiveness. I wouldn't anticipate a huge amount of restructuring costs. There may be some redundancies, but that's about the height of it. We would anticipate that we're going to see cost reductions on a unit labor basis going forward. Similarly, on the airports and handling charges, we'd anticipate unit savings coming in the next 12 months as we negotiate new deals at our airports. Equally, you're going to see unit reductions coming in as the MAX starts to deliver. There won't be hugely significant restructuring costs, Mark.
Remember, too, while again, I'd only get into too much optimism at the moment because the short term is bleak. By the time we get to the second half of the year, you have the prior year comp kicks in in March where we carried only half of our the passenger numbers this year. Like there is an upside at the back end of the year with some return to normality. What I'm trying to kind of urge everybody away from is specifics now on pricing, volumes, load factors over for the rest of the year. We really don't have any idea. We would hope to have some much better sense of it by the time we get to the Q1 results, which would be the first week in August. Then we'll have some sense of where we are.
It's impossible to predict at the moment other than I would be reasonably optimistic is that a lot of the lockdowns will have eased significantly over the next, I would say, reasonably two weeks. By the end of the first week of June, I think you're going to see a lot of the European economies saying the kids can go back to school. They've already been back to school in Denmark for four weeks. Kids are not the problem. They don't get it. They tend not to be the spreaders of it.
If the kids are allowed back to schools across Europe, retail is allowed to return, I think you're going to see almost a huge pent-up demand for people who have been locked up at home in their apartments and houses for the last 12 or 15 weeks going, "Fuck this, we're going to Spain, Portugal," or wherever it's going to be. All this nonsense about staycations. You don't have the capacity in Bognor Regis or Southend-on-Sea or Lahinch to be able to cope with the volumes of people who generally would be going to Spain, Italy, Portugal, elsewhere to get two weeks of sunshine. The risk of the spread of COVID-19 on a beach in 30 degrees of heat in Spain, Italy, or Portugal is practically zero, and it would be zero if you're all wearing face masks. Which?
might upset the tan line, but isn't going to upset your health. Next question, please.
The next question comes from the line of Stephen Furlong from Davy. Please go ahead.
Stephen, hey.
Yeah. Hi, Michael. Just on your questions on Boeing or comments on Boeing, would you see your negotiations, do you think the Boeing deal could be an even bigger number of aircraft, given you were talking about maybe taking out the Airbus. I'm assuming Airbus aren't in the race. Just maybe talk about Boeing versus Airbus. If I just ask one other thing, got some questions in terms of nothing that is being talked about would impede your ability to turn around the aircraft in 25 minutes? That's great, Michael. Thanks.
Okay, thanks. I'll work back on that, Steve. Yeah, 25-minute turnaround. Look, we see nothing impacting 25-minute turnarounds. In fact, if we're running at a 50%, 60% load factor through August and through July, and the load factor might be less than 50%. If it is, I think you'll see us, we'll go back in mid-June and take out some of the flights. We won't run empty flights where we can avoid it. 25-minute turnarounds will be no problem. The challenge here, again, we're pushing hard for temperature checks at the entry to the airport terminal and face masks. Nobody will be getting on board an aircraft without a face mask, certainly in July and August. I think those measures are important in building customer confidence. On Boeing pricing, look, there's an ongoing dialogue with Boeing, and I've said this publicly before, it's a three-phase discussion.
There's clearly a negotiation on compensation for the delayed deliveries. There's a negotiation around pricing on our MAX order, and there's a negotiation we're also talking to about a possibility of an order for the Boeing 10 aircraft. Those negotiations continue, but really they can't be concluded until we have some certainty on when the MAX will return to service and when we can get deliveries of our aircraft. In many respects, all three conversations are kind of interlinked. All I can say is, we are working closely with Boeing. We are very impressed with the new management team in Boeing and what they've done, particularly on the return to service project over the last number of months. There's been a lot less blind optimism coming out of Boeing, and there's a much more frank dealing with challenges, particularly with both customers and regulators.
I think from Boeing's perspective, they've seen the order book collapse. Leasing companies have canceled orders. Flaky airlines like Norwegian's orders I'm sure have gone up in smoke. They've all disappeared. That does help the return to service or at least eliminate some of the bugs. Yes, I think Airbus are nowhere at the moment. We have repeatedly used through Lauda tried to interact with Airbus. We're getting nowhere with them. I think the COVID-19 has kind of crystallized the decision-making here. We haven't been able to attract any significant offers from Airbus. It's likely now with the Lauda fleet, which this summer we'd originally expected to take delivery of up to 38 aircraft. We will not take at least eight of those aircraft. I think it'll finally be somewhere between 26 and 28.
At this point in time, while I said we haven't given up on Airbus entirely, I think we're not far away from just giving up on Airbus, who don't seem to be at the races in terms of pricing. Certainly not with the pricing we have on the A320. They're nowhere near close to where we are on the pricing on the MAX 200s. If that continues to be the case, then frankly, we still see a lot of value in Lauda, the slots in Vienna, their presence in the German and Austrian marketplace. I think that value will be enhanced by flipping out of Airbus aircraft into Boeing aircraft in the next number of years.
The big challenge facing Lauda, and it's one we have tried not to underestimate, is Lauda is in the teeth of If there was ever, Lauda feels like it's in a methadone treatment center at the moment in Germany and Austria. We'll be competing in Stuttgart and Dusseldorf with Lufthansa getting about EUR 9 billion of state aid from the German government. Austrian Airlines, which is owned by Lufthansa, is into the Austrian government, looks like for EUR 800 million of state aid. Lauda is in the teeth of both of that. Lauda won't get state aid from the German government or from the Austrian government. Even the German government, remarkably, in the last couple of weeks, had approved Lauda for the payroll support scheme in Germany, then four days ago withdrew the payroll support scheme. We're engaged in legal correspondence with the German government.
We have our Lauda pilots in Stuttgart and Dusseldorf who are paying their social taxes in Germany, are entitled to exactly the same payroll support as Lufthansa pilots, but somehow have been denied it at the stroke of a pen, having originally been approved. Maybe the only way forward for us, I think it's inevitable that the Austrian unions will refuse to sign the new pay deal in Vienna on Thursday this week, despite the fact that it's been signed now by 95% of the pilots and over two-thirds of the cabin crew. Therefore it's likely that we will have to go through the closure of the A320 base in Vienna. We'll have probably 14 or 15 spare A320 aircraft. They won't fly, certainly for the remainder of this summer.
We may deploy them to other countries for the winter, but we'd have to see what the employment situation is like or the approval situation is for recruiting and training Airbus pilots and cabin crew in other countries. I think going forward, if anything, this crisis will have taught us. No, we're not there yet with Boeing, but I think we're making much more progress with Boeing than we are with Airbus, that the future will lie on deepening the relationship with Boeing. I don't think at this stage we're looking at any increased orders for Boeing. That's not to say if they came up with very attractive pricing that we wouldn't look at taking more aircraft. Certainly, I think we have firm orders for 135 MAX 200s. That'll go over the next four years.
We clearly need to rework the delivery program with Boeing on those aircraft because they're all running 12 months late on the delivery. No, I think it would be optimistic. I don't see any rationale at the moment to increase the quantum of that order given that we're in the middle of the COVID-19 crisis. If there was a pricing incentive there for Boeing, it would be certainly something the board would look at.
Got it, Michael. Thank you.
Thanks, Stephen. Next question, please.
The next question comes from the line of Jarrod Castle from UBS. Please go ahead.
Jarrod, hi.
Hi. Good morning. Two questions. One, I think you've got seven planes available for sale. Just interested in terms of, is it realistic that you can sell them in this market in the next 12 months? Just secondly, just coming back to state aid and the legal action that you're taking. What would you hope to achieve? A reversal of the aid that's been given, penalties that you and others receive from these airlines or indeed governments? What would success look like for Ryanair in terms of the legal action?
Well, the seven aircraft for sale are like all of our aircraft. They're for sale subject to accessible pricing. We don't see accessible pricing, I think now for the next 12 or 18 months. I would be much happier to operate those aircraft. I thought we had seven more for sale.
No.
As I was saying, we've already sold those aircraft. They were forward sold. I don't see we'll be selling any more aircraft for the next maybe 12, possibly 18 months because we'll need those aircraft ourselves. The deliveries of the seven aircraft we've sold are later on in the autumn of this year.
Correct.
They're from October onwards anyway.
Correct.
Which again emphasizes why we will need more aircraft from Boeing just to be able even to stay at a steady state fleet into the summer of 2021. On the state aid side, what we would hope for is to encourage the commission. I was heartened by Madam Vestager's comments this morning where she's seriously concerned at the extent to which the French or the German government, the richer EU countries are massively distorting state aid. The German government alone accounts for 52% of approved state aid at the moment in Europe. The richest governments are the ones who are engaging in the most state aid doping. What's ironic is that it's usually the Germans and the Dutch telling everybody else to comply with the rules, unless it applies to them.
You're going to seriously distort not just the air transport market, but also many other industrial markets across Europe. If the Germans in a crisis can just ladle out state aid to their operators, whereas the Spanish, the Irish, the U.K., and the other countries are obeying by the rules and not participating in this illegal state aid. Again, the question is, why does Lufthansa need another EUR 12 billion on top of the payroll support schemes, on top of the aviation tax refund schemes? Really, if the German government was interested in the industry, what we're hoping would happen is that they would be transparent and non-discriminatory state aid to everybody. By all means to Germany, why don't you just refund or waive the environmental taxes on air travel for the next 12 months, 24 months?
The vast majority of that would go to Lufthansa, but it would also go equally to other airlines like easyJet and Ryanair operating in Germany. If the French government want to refund aviation taxes, do it to all airlines equally in France. Don't just do it to the French registered airlines. Give them payroll support schemes, and then lob another EUR 9 billion of state aid on top of it, just because it's Air France. Julius, do you want to add anything more we hope to achieve on the state aid side?
No. That's it.
Just to eliminate the illegal and discriminatory state aid. By all means, if you want to do something or if European governments want to do something, do it on a transparent and non-discriminatory basis. Use your aviation taxes, your payroll support schemes, or your environmental taxes on air travel. Let's face it, there's enough of them around Europe, anyway, between ETS, there's APD in the U.K. At least then you're applying the schemes equally to every airline. The first thing we as airlines will do will be to pass it on to our customers in the form of lower fares and get the tourism industry and employment back moving again.
Okay.
Next question, please.
The next question comes from the line of James Collins from Exane. Please go ahead.
James, hi.
Hi. Morning. It's more for Neil actually, just on the cash burn. As far as I'm hearing, you're doing EUR 60 million a week. Of EUR 25 million is fuel ineffective hedging cash going out the door. Then I think you said EUR 300 million financial year to date has gone out in refunds. According to my math, that leaves nothing left on other cash burn. I was wondering if you could maybe give more detail on how you've got it so low.
Yeah.
And then Michael-
It's very low.
I was wondering what.
Yeah.
Sorry. Michael, on the Lauda
Sorry, I was talking.
Go on. You answer, please.
No. It's a good question.
Give him the second half.
I was just wondering what odds you'd give on Lauda existing in 2021 if the unions don't sign up to the deal this month?
Okay. Neil, do you want to handle the cash burn piece?
Okay. On the cash burn, as I said earlier on, you have a EUR 25 million on average related to the fuel. We've got various other things going out like debt repayments, salaries, and other operating costs. On the refunds, approximately EUR 300 million settled so far. That's a combination of vouchers that have been accepted by customers, cash refunds, and of course, free flight changes across the business. It wasn't all cash out the door.
That's accepted vouchers. It's accepted vouchers and free moves. We've seen a significant surge in free moves over the last seven days, as people now realize that actually they can now travel in July and August, a lot of them are taking the free move options. We've tried to explain to the various consumer nitwits, like Which? magazine in the U.K. There is no restriction on if you want a cash refund from Ryanair, you get a cash refund. You must understand we're dealing with a historic backlog of refunds that have been imposed upon us by European governments. Basically three months of flying. Our refund team has been reduced by 75% because of social distancing and the office restrictions here in Madrid, Dublin, and in Wroclaw.
You will get your cash refund, but I'm afraid you'll have to be patient and wait for it. It's going to take some weeks and months to eliminate this backlog of refunds. On Lauda existing in 2021, Lauda will exist in 2021. I don't think it will exist in Vienna. I think it's inevitable that the Austrian Airlines union will close the Vienna base with the loss of over 300 pilot cabin crew jobs on Thursday. Lauda will still be operating in Stuttgart, in Düsseldorf and in Palma, and I see a future for Lauda into the future as probably as a Boeing 737 operator operating wet lease services for Ryanair, for Buzz and for Malta Air across different bases and countries.
I suspect the one country where Lauda will not be operating as a brand will be in Austria, where frankly, if the employment regulations and the labor structure is that daft, that people who want to vote for pay cuts and to preserve their jobs are told by a competitor's union that they don't care they're losing their jobs because the union won't sign the agreement, then frankly, we don't want to operate in a country that has such a corrupt labor market or labor legislation as Austria has at the moment. It is beyond my comprehension why people can't vote for themselves to save their own jobs, even if it means in the short term taking a pay cut. I feel enormous sympathy for Lauda's pilots and cabin crew who have voted in their overwhelming majority in favor of these pay cuts.
They recognize the crisis, yet the Austrian Airlines Union can simply at a stroke say, "No, we're not signing this agreement," and condemn those pilots and those cabin crew to long-term unemployment. It's quite clear that Austrian Airlines won't be creating any jobs for pilots and cabin crew for the very foreseeable future, despite the fact that they'll be getting EUR 800 million of aid from an Austrian government to a Lufthansa-owned and controlled subsidiary. Next question please.
The next question comes from the line of Jaime Rowbotham from Deutsche Bank. Please go ahead.
Morning, gents.
Hi.
Just one from me. Obviously you don't have a crystal ball, but it's helpful that you give a working scenario for your guests in the current fiscal year, the sub-80 million. Is there a working scenario for fiscal 2022? One of the reasons I ask is on slide 11, you tell us that you're 31% fuel hedged for fiscal 2022, which implies there's a denominator to that calculation. Just any working assumptions for your planning would be helpful.
I think at this point in time, we would be operating on a return to normal traffic volumes. That's less than, say, the aircraft that we sell. It depends on how many aircraft have come off lease that we can extend at the end of this year at reasonable terms. It depends how many aircraft Boeing can. On the assumption that we take between 20 and 30 Boeing MAX next year, I think that our numbers will return next year to kind of normality. It'll be north of 150 million passengers. That clearly assumes that COVID has been dealt with by the time you get to April of next year. I think next summer of 2021 will be incredibly strong for holiday traffic for people who this year have canceled their holidays or weren't able to get to go on holidays.
I think it would be incredibly strong. There will be a dramatic rebound in volumes. I caution again, all of that volume growth will be at lower or discounted prices. I've seen various numbers, but our projections here is that we will return to traffic volumes normality in our year at March 2022, so summer of 2021. I think that by summer of 2022 you'll be returning to kind of normal pricing as long as clearly there's no further return or second wave or third wave of COVID-19. That doesn't obviate the huge existential shock the industry has suffered in 2020. We're in discussion with unions where they're saying, "Yes, but you know your numbers will return to normal in 2021." saying, "Yes, they will, but they're not going to return to normal in the summer 2020 or the winter 2020.
We can't keep your pilots or your cabin crew on the payroll. In fact, even those we can keep on the payroll will be receiving 20% less because frankly, I think that our yields are going to fall. We'll be into really adverse pricing for the remainder of this year and the early part of next year, competing as we will be forced to with state-aided dopers like Lufthansa, Air France and Alitalia, who'll be able to just dump pricing. Let's face it, Alitalia's been engaged in below cost selling for the last 75 years. They've never made profit. Now they'll have EUR 3 billion to continue to engage in below cost selling for the next three to five years. They only account for 20% of the Italian market. We account for 35% of the Italian market.
It's no doubt that in Germany, in Austria, even in Belgium, where you're competing with Lufthansa subsidiaries who are running around hoovering up state aid. The bases in Charleroi and Zaventem are going to face really aggressive pricing from Brussels Airlines and others who have limitless cash resources at their disposal thanks to this crazy state aid doping. I think in terms of volumes for FY 2022, we are planning at the moment on normality in terms of volumes, but distorted pricing. Whereas for the rest of summer for FY 2021, radically reduced volumes and also reduced pricing. Next question, please.
The next question comes from the line of Muneeba Kayani from Bank of America. Please go ahead.
Go ahead.
Hi. For the July to September schedule, how should we be thinking about unit costs based on your capacity plans? If you could talk about that and the cash burn.
Yeah. Impossible to talk about. We've no idea what our unit costs will be, until we know what the volumes will be. As we've demonstrated in the last three months, we're incredibly flexible cost base here. We basically, with the exception of fuel hedging, collapsed the cost base to almost nothing. To be fair, a lot of that's been done on the back of payroll support schemes, which we're very grateful for. Will they will continue through July and August? The question is how much volumes can we restore and at what pricing? The unit cost will be what the unit cost will be. We can't give you any forecast prediction on that. I'm afraid whatever guess you make on your model will be as accurate as whatever we come up with. Next question, please.
Can I ask one more on ticket refunds then? The EUR 300 million that you've had, kind of cash refunds of vouchers. What about the rest?
We're working our way through the rest. I mean, like the challenge we face. I've tried to communicate something. We know on a normal month, we would refund about 10,000 tickets. We're geared up. We have staffing for about 10,000 tickets. At the moment, three-quarters of that staff can't even come to the office, and they must come to the office. These are cash refunds. It can't be automated. We get about 25%, 30% of bookings come through OTAs and third parties who are not the end. We cannot issue refunds unless we get a direct correspondence with the individual passenger. We're geared up for about 10,000 refunds a month. Currently, we're trying to process something of the order of 25 or 30 million refunds over the next couple of months.
The EUR 300 million that Neil has talked about, that's effectively about a quarter of the backlog of refunds we have at the moment for March, April, May into the first half of June. We will continue to process that. If we're allowed, and we are hoping that the offices will return to full staffing here from about the 1st of June onwards in Dublin. That will significantly increase our ability to process refunds. I think going forward, taking Neil's figure on the EUR 60 million. As we move through the summer and the fuel cash outflow declines, the refund cash outflow will increase. One will substitute for the other. If we get back to some kind of normal flying in July, even if it's only 40%, the cash flows then will begin to be very positive because of forward bookings into July, August, September, October.
We can handle those cash refunds. What we're trying to communicate with our customer base is just please be patient with us. We're not denying you a cash refund or trying to sit on it. We just can't process these numbers automatically. We can automate vouchers. That's easy because it's not cash out the door. We can automate free moves. We can't automate the payments or the cash refunds because a lot of the cash refunds would disappear into somebody else's bank account, like a travel agent, and not the end customer's account.
Thank you.
Next question, please.
The next question comes from the line of Gerald Khoo from Liberum. Please go ahead.
Morning, everyone. Two questions from me. Firstly, on the MAX deliveries, whenever they're due to arrive, I was just wondering whether you can clarify what finance you've arranged for those. Secondly, in terms of refunds to the extent that they are being fulfilled, can you give us a rough indication of the split by sort of method cash versus vouchers versus rebooking? I know that's probably a dynamic issue, but if you could give us a rough indication, please.
No, I wouldn't give you any indication on the refunds. At the moment, it's EUR 300 million. It includes cash refunds, vouchers, et cetera. Clearly, there's a lot more vouchers in there than cash refunds. As the cash refunds increase, the number of, I think, vouchers will decline. As we move back to flying, there'll be a much greater uptake, we think, of free moves anyway. We can't break it out and we can't predict where it's going to go. On the MAX delivery, interestingly, we haven't paid any PDPs since about the middle of last year. We still have quite a significant volume of PDPs already in place with Boeing. We would expect to fund certainly if there's 20 or 30 aircraft delivered by this side of next summer.
A lot of that funding is already in place with the PDPs that we've already paid. We have the cash reserves to be able to fund the balance of those deliveries. Obviously financing and the speed and rate of PDPs is one of the key elements of our ongoing negotiation with Boeing. Boeing, to be fair, have been very sympathetic. Well, have been very understanding of the need. I say Ryanair is one of the few airlines in the world talking to manufacturers about taking aircraft deliveries and if needs be ordering new aircraft at the moment. It's a reasonably easy discussion to have with Boeing. Boeing themselves have done a stellar job in the last couple of months.
They've raised, what is it, EUR 25 billion in the bond market without the need for government intervention, which would again mark them out against Airbus who I'm fairly sure will be on the French government breast in the not too distant future. Boeing have the cash, the easiest part of the discussion with Boeing actually is the financing and funding for the Summer 2021 deliveries. What we're really focused more on at the moment is their return to service date, then how many aircraft can they deliver to us. Remember, one of the great advantages of Ryanair is we actually have MAX simulators in place that we can manage the return to service with in-house ourselves on our own MAX simulators.
Yeah.
Any other thing you would add to that?
Yeah, the only thing I'd add to that, Gerald, is that we are triple B rated, high investment grade. The bond markets remain open, albeit at elevated levels. Indeed, we've received a number of sale and leaseback proposals, and we've received a number of unsolicited proposals for secured debt. We've got lots of options on how we finance ourselves going forward, if not from cash. Unlike some of our competitors, we don't take the profits from sale and leasebacks through the P&L or our other costs. At the moment, we have more than sufficient internal resources, cash, to take deliveries of those aircraft without the need for external financing. If we needed external financing on new deliveries of MAX, I think we would find it very easy in the current marketplace, although at elevated financing rates. Next question.
Okay, thanks.
The next question comes from the line of Carolina Dores from Morgan Stanley. Please go ahead.
Susan, hi.
Hi, good morning. I have two questions. The first one is, even though you may still be able to do quick turnarounds, there's probably higher hygienization and cleaning standards, which will probably slow down overnight turnaround of fleet. Do you think you can still operate or transport 150 million passengers with the same number of aircraft? Do you need to increase the number? The second question is, how much of your short-term payables is due to Boeing?
I think Neil answered the second half of it. Look, there's no effect on quick turnarounds at the moment. We've put in place extensive health measures for the return to service on the 1st of July. We're disinfecting all the aircraft, all aircraft surfaces nightly. The disinfectant is good or valid for more than 24 hours. We're not going to disinfect on turnaround. It's not possible. You don't have the cleaning staff or the supplies at airports to be able to disinfect on turnaround. Nor is it required where passengers and crews are wearing face masks. You've eliminated 98.5% of the risk of droplets occurring anywhere on board the aircraft. The aircraft will not be operating at 95% load factors. We think 50%-60% load factors in the first month or two were the best we will do.
We've already explained we will not get to 150 million passengers in the next 12 months. We think the number is somewhere under 80 million passengers. By the time we get to the summer of 2021, we do think it's reasonable to go back to 150 million passengers. At that point in time, we think a vaccine will have been found, and the treatments will be in place, or the COVID-19 pandemic will have disappeared altogether. We have two months of experience now in Asia, there has been no second wave of COVID-19. This mythical second wave at the moment hasn't yet occurred anywhere. It seems to be medics and scientists trying to frighten the local populace into believing that they should isolate somewhere for a two-week period. Caution, I think, is the right approach at the moment.
There will be no effect on turnarounds, particularly if we're operating with 50% or 60% load factor. Neil.
Yeah.
Finish.
On trade payables, the EUR 1.4 billion figure, just over EUR 1 billion of that is accrued up PDPs to Boeing.
Okay, thank you very much. Next question, please.
The next question comes from the line of Neil Glynn from Credit Suisse. Please go ahead.
Neil, hi.
Good morning. Just one quick one from me. On the airport and network strategy. You obviously highlight a once-in-a-lifetime opportunity. Interested in your take on, are you likely best served going big at larger hungry airports like a Gatwick, for example, where there's a hole opening up, or by dispersing freed-up aircraft more thinly around the network?
I might ask David O'Brien to take that since it's more logically in his area. David.
Yeah, that's going to depend on what those airports do. We've more than enough solicitations from over 200 airports to distribute them or to concentrate them. We've demonstrated we've the flexibility to do both. In the case of Lauda, there's going to be a 15-aircraft fleet out of Vienna available either in small increments at smaller airports or indeed at the opportunities you described. No, we'll be opportunistic on this.
I think it's fair to say that we're seeing the same kind of offers. In fact, if anything, better offers coming from the bigger airports who are facing a much more catastrophic loss of traffic than necessarily the smaller airports yet are. We're in dialogue with all of them. The real once-in-a-lifetime opportunities are going to come at the bigger airports. I'm not sure it would necessarily emerge at Gatwick. I don't really believe that IAG will close their Gatwick operation. I think it may well have closed as BA, but it might reemerge as a Vueling or an Aer Lingus or a lower-cost operation. The Norwegian operation will go at most of the airports in which they operate. You look across Germany, most of the German airports except that Germanwings is going to disappear and Lufthansa will cut back traffic.
Some of them are panicked and some of them are remarkably complacent. They just believe that the German state will provide and Lufthansa will be ordered to go back to their previous volumes. We don't think that's realistic. Certainly in the other bigger markets, in Italy and Spain, there's a very open dialogue with the airports there. Lots of airports are also in the same situation. They don't quite know what they're going to lose, what's going to come back, what they're going to lose. I think until we see that emerge over the next two or three months, and certainly into the winter of this year, it will be difficult to finalize those agreements. Certainly, if you look at easyJet as an obvious candidate where there's that ridiculous kind of dialogue with their largest shareholder about cutting back aircraft orders.
That can only result in significant cutbacks at certain of the easyJet bases across Europe in favor of, I would presume, Gatwick, maybe Berlin. I feel sorry for the easyJet management. Dealing with COVID-19 is hard enough without dealing with unreasonable demands from shareholders who recently received quite ginormous dividends. If they were that concerned about the future of easyJet, they could hand back. They would return the dividends and stop annoying the management. I suppose annoying shareholders is just one of the factors of life we all live with in the airline business.
Thanks, both of you.
Next question, please.
Next question comes from the line of Malte Schulz from Commerzbank. Please go ahead.
Hi, good morning. Also two questions from my side. First of all, I would like to know, you mentioned the 60% for a break-even operation. Is it just on variable cost basis or on a cash cost basis or on a general cost basis? My second question would be, if you use your unencumbered fleet as a collateral, how much discount does the banks currently ask for, given that the fleet at the moment is not sellable at the book value?
Look, don't confuse the numbers, Malte Schulz. I'm saying we're hoping to run with maybe a 50%, 60% load factor in the Q2. Based on a reasonable yield assumption, we think that at the moment, those numbers would suggest we would run in Q2 break even or a small loss. It's not going to be EUR 200 million-plus off in Q1. There's three moving variables in that. We can't give you any guidance into Q2. It isn't 60% will deliver a break even or 65% or 55% will or won't. At the moment, if the restrictions are lifted, there's no 14-day isolation, we think there would be a reasonable prospect of getting to a 50%, 60% load factor through July and August. The yields would be lower than we had previously predicted, but that's peak season yields.
The cost would certainly be materially lower than we would have been normally budgeting in July and August. If we get the 20% pay cuts done, they will all take effect from the 1st of July, or we will have a lot less labor. There's no number here that's a forecast or a prediction. We can't give you one into the second quarter. How much is the unencumbered fleet? Actually, the proposals we've had at the moment are reasonably, most of them are close to above our book value because of our aggressive depreciation policy and low purchase price on the fleet anyway. Most of the offers, though, come with a, as Neil said, elevated financing cost. It's not that someone would ask us to take a bath on the aircraft or the book value of the aircraft.
We've seen offers coming in at 4%, 5%, 6% rate of interest. Frankly, where we've been able to borrow in the bond market for the last number of years, that's down at 1%, where we don't need to raise any additional money. Frankly, I don't see any rationale in borrowing money at 4% or 5% or 6% at the moment. That's not to say that there couldn't be a downturn in the market, that there won't be some further unforeseen event in the second 6 months of this year into the first half. We don't know. Thankfully, with EUR 4 billion in cash and a net cash burn of under EUR 60 million a week, we don't have to worry about that for the moment. That doesn't mean that we're out of the woods yet. We are managing this business on a day-to-day basis.
We think there's a reasonable prospect of some return to business in July. I think the most key development in that was the Italian decision this weekend to dispense with the restrictions to allow the tourism industry to come back and to dispense with the kind of idiotic 14-day isolation, which militates against both business travel and tourism travel. We think most sensible European governments will mirror those kind of reasonable policies in the next couple of weeks. Next question, please. Guys, if anybody has conference call or one-on-one, please go. We'll keep the conference call going just so we may answer those questions as best we can.
The last question comes from the line of Alex Paterson from Peel Hunt. Please go ahead.
Good morning, everybody.
Alex, hi.
Hi there. Can I ask two quick clarifications, please? Firstly, on the pay cut, is that temporary or is that a permanent replacement? Secondly, on cash refunds, did you say passengers need to contact you directly, that you are not refunding through intermediaries like travel agents?
Firstly, on the pay cut. Clearly there's a dialogue going on with the unions. Let's be clear on it. What we've said is we will need up to 20% pay cuts. Obviously, there is a variable number in there. It's 20% for the higher paid people like the captains. It is down at around 10% for the lower paid cabin crew, et cetera. It's variable. If we don't get those pay cuts, we will be back for considerably more than 3,000 job losses at the end of June. We're not messing. Everybody knows there's an existential crisis going on in the industry. The obvious number, unions coming back at us, "Oh, we need further information." You don't need further information other than we were originally planning to carry 150 million passengers this year.
We will now be lucky to carry 80 million passengers this year. There's your further information. Get on with it. I think the pay cut will be between 10% and 20%. It's also our objective to try to restore those pay cuts over a three or four-year period as the industry recovers. We need lower pay through the remainder of FY 2021. If we're doing well in summer of 2021 into FY 2022 and FY 2023, the first people who will be sharing in this recovery will be our people. The pay cuts will be restored over a three or a four-year period. The job losses, we would hope to restore some, if not all of those job losses. It won't be the individual people. We're not going to give anybody the right that you'll be the first one back.
Clearly, we will favor rehiring those pilots and those cabin crew who lost their jobs through no fault of their own because the COVID-19 pandemic. On the cash refunds, the situation is, yes, we can't issue refunds, automate refunds, because part of the problem we have here is you have travel agents and OTAs. Generally speaking, we don't allow you to make bookings, but they are all operating with multiple, I don't know what the term is, but phantom credit cards, phantom addresses, and phantom emails. We can't, if I made a booking through Joe Blog's OTA or some of those scam artists like eDreams or eDreams in Spain, whoever the other scam artists in Germany and Italy, where they're levying handling fees. We would never dream of refunding customers' cash to those people, because I'm sure the customers would never see the cash back as well.
Our cash refund process is the individual customer communicates with us, we communicate with the individual customer. We ask them to fill in the refund form and where they want that refund sent to, and then they have to sign it off so that we have the authorization to make those cash refunds. Without those procedures, and they're required under our audit rules and consumer protection rules. We cannot just lash out money to some automated process to third-party intermediaries. It is the customer money the customer has paid us, and we have to make sure that we send that refund back, whether it's the customer's credit card, whether it's their, I don't know what the payment terms in Germany are, straight to the cash transfer into their bank account as well.
We require every customer who wants a cash refund to give us or to verify where they want the cash to go and that they sign off on the liability. Otherwise, we could be refunding money to intermediaries that our customers would never see.
Absolutely. Thank you very much.
Any other questions?
There are no further questions.
Okay. Ladies and gentlemen, thank you very much. I am sorry the conference call overran slightly. I think it is important given the COVID-19 crisis, we try and sit and answer it as best we can. I am sorry that we cannot give you any more material guidance into the second quarter or the full year. We are all in this same situation together. We are flying blind. I think there is a reasonable prospect of us returning to a reasonable level of flying in July, August into September. I think once people begin to fly, even if it is wearing face masks, confidence will be restored reasonably quickly. I think you will see a very dramatic restoration of passenger volumes, but on the back of discounted pricing and very aggressive pricing, both from the airlines and also from the holiday hotel and tourism providers.
That said, hopefully by the time we get to the first quarter results call in early August, we'll have a much better handle on the situation and we'll be able to give you something like more tangible guidance or directions for the second half of the year. Thank you for your patience. We sincerely appreciate the support you've all shown the business over the last three months. I know it's been an extraordinarily difficult time for investors as well. It's not pretty to see the share price go from wherever it was, EUR 15 down to EUR 9 or whatever it is. Rest assured, we are here on a daily basis making sensible decisions on cost, making very sensible decision on cash protection, and trying to make sensible decisions on an early return to flying in the healthiest fashion we can deliver for both our people and for our customers.
Thank you very much, ladies and gentlemen. We have an extensive virtual road show going on this week. We're now all going on investor calls here. If you'd like to have an individual meeting with Neil, myself, or anybody else in the team, please route the request back through Citi and Davy to Shane O'Toole, our Head of Investor Relations, and I'm sure we'll have a call with you later on in the week. Thanks very much, everybody. Good to talk to you, and look forward to seeing you again soon. Remember, keep flying and fly Ryanair, safest and the cheapest airline in Europe. God bless. Thanks, everybody. Bye-bye.
This now concludes our conference call. Thank you all for attending. You may now disconnect your lines.