Earnings Call: Q4 2020

May 18, 2020

Hello, and welcome to the Ryanair Full Year Results Conference Call. Throughout the call, all participants will be in a listen only mode and afterwards, there will be a question and answer session. And 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 a results 7 am together with a Q and A video with myself Neil Thoren, the group's CFO. So we'll take along this as well. I'm joined here in Dublin by the full team and pleased Welcome, Tracy McCann here, who has also been appointed in recent weeks as the CFO of Ryanair DAC. Tracy, you're welcome and congratulations A couple of quick thoughts on this. You're seeing today or this morning's numbers, we were heading for a terrific But COVID-nineteen, it's likely we would have seen traffic grow to about 154,000,000 passengers and full year net profits It would be towards the upper end of the range, somewhere between $1,000,000,000 $1,050,000,000 As it was, COVID And the government mandated groundings of the fleet through from essentially mid March meant that we carried 149,000,000 passengers, up 4 on the previous year and profits came in at the higher end of the current rate at a tad over €1,000,000,000 Much, however, of what happened last year is obviously now historic, and so I won't dwell on it. Couple of things on the COVID situation, just a couple of Key thoughts, clearly, we're grounded and expect to be grounded fully through April, May June. We're guiding that they Thank you. Significant cost savings and cash preservation measures. We think there'll be Q1 loss somewhere above $200,000,000 but under $300,000,000 We are already though have announced that we expect to go back To some level of flying through the 1st July, we are promoting at the moment about 1,000 flights daily, which would be about 40 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 June. They have removed in its entirety this utterly ineffective And nonsensical 14 day isolation, which nobody has 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 and we think that surprises generally face masks In all public transport situations, in busy train stations, undergrounds, airport terminals and onboard aircraft, Face masks are effective at eliminating about 98.5% of the risk of the spread of COVID-nineteen. And it seems to me it's the only way you can allow Most of our economies are recurrent some kind of activity during the summer months. Already last week since we announced that, we've seen a Significant spike up in bookings. Now, I wouldn't want to get too excited, but this weekend, for example, our bookings were up 60% Over the previous weekend, but that was off a very small base. So we are seeing a significant number of hits and searches over the weekend, Particularly, I think, for families looking at going on the 2 week summer holiday from Northern Europe to places in Italy, Spain, Portugal, etcetera. And in all of those countries, we've seen the cases of COVID-nineteen are significantly lower in the beach and the resorts than they are in the heavily So 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 unimplemented, but anyway, over the next And that there would be a reasonable return to passenger movement from 1 July onwards. It's 6 weeks away. We haven't yet begun to aggressively price promoters. What we're doing at the moment from last week to this week is encouraging the Health measures, health prevention measures, hand sanitization and face mask. A concern, I mean, I think if we 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 In the winter, but we're guessing and we're making this up as we go along. We are saying now that the traffic The volume would be less than 80,000,000 passengers, but we really can't put an accurate figure on at the moment. Our gut instinct though is what it's Something we share generally is that once we begin people begin to move is that the traffic will return pretty quickly because there will be price stimulation both by the airlines, by the tourism providers, the resorts, the hotels across Spain, Portugal, Italy and Greece. They would try to rescue what's left of their tourism season on the back of price. But that also means that while we're looking at a reasonable return Traffic volumes, we think it will be on the back of much lower airfares and yield. So we're really flying blind at the moment. We hope to be able to go back flying on the first 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 outcome will be for the year and the profit loss. We have it a bold notion, so please don't ask us. But we can give you 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 $3,800,000,000 in cash on the balance sheet at the end of March. We're up to $4,100,000,000 of cash today. Immediately, most of that was the $6,100,000,000 drawdown from the U. 1,000,000 drawdown from the U. K. Government and transparent loan scheme. Our cash burn is about $60,000,000 a week. About three quarters of that, about $45,000,000 of that is the hedge fund, the fuel hedge payments. So that actually just stripped that out and We'll decline as we move through the year. In actual fact, the cash burn is down to almost 0, not quite, but close to 0, which means we can continue this In this environment for a year or 2 at this point in time. Obviously, we want to get the business back moving. We think as long as we could get to a 50% or 60% load factor on flights, we'd be operating close to breakeven. But again, that much depends on what assumptions you make on yield and on ancillary sales as we return to flight. Other than that, the big challenge though, so 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 are being 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 only carry 80,000,000 passengers this year. That would 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 they are going to be broad spread redundancies. Pilot And in countries all over Europe, the UK, Spain, Italy and 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 is a lot more information you need. We're facing an existential crisis in the airline industry. So there's going to be job losses And pay costs and if we don't get agreement on pay costs 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 base, the Vienna A320 base if the union and the union the Verde union don't agree to Revised T's and C's 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 In airlines, we had our 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 German language, so 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, we'll 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 And as of this weekend, over 95% of the pilots and more than 66% or 2 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 labor the individual the pilots and cabin crew can't agree these changes. So we have massive and overwhelming support from the Lauda pilots Can't believe the changes, but an Austrian Airlines union can effectively block any of those concessions, which means in our view, it's inevitable The Vienna A320 base will close on at the end of May. The decision will be made on Thursday When the Verdi Union don't sign this agreement, the only reason we closed is because the Verdi Union won't sign the agreement. And sorry, the VIDA My apologies to Ferdi, who are their German cousins. The Vida union won't sign the agreement. And what will happen in that Situation is we will not withdraw from Vienna. Vienna will be we still have 3 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 of flights on Ryanair aircraft base elsewhere that will now In airlines, we'll be competing with a much lower cost Ryanair operation than the high cost Lauda operation. But we hope that even now, The VIDA union in Austria will agree these changes, which will save the pilot and cam crew jobs in Vienna. That came up. So back on to 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 of Liberty's on the MAX aircraft. We'll probably extend some of our 737NG leases. And those discussions are continuing, but Can't be finalized at Boeing until the MAX goes back to service. But I think you're going to see enormous cost opportunities here for the next 4 or 5 years and Ryanair 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 4 or 5 years. The strong well run airlines like Ryanair, Easyjet, BA going into this crisis are going to emerge much more weakened And facing competition from state aid airlines, state massive state aid being given to SAS, Alitalia, Air France and Vastly stronger with unlimited funds to engage in below cost selling or M and A activity, whether just buy out the competition in their domestic Our regional market, and 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. And that's why it's critical that we work with the unions, we work with all of our other Buyers, airports, aircraft, etcetera, because there's going to be a fairly tolerant pricing environment going forward for the next number of years. And Italia this morning was approved. And it's only an airline by the way that has never made money for 75 years, has been teetering on the edge of bankruptcy for the last 3 or 4 years, It has not been a little bit nationalized, but this morning received $3,000,000,000 in state aid from the Italian government. And to put that in some context, this The Italian government awarded €1,000,000,000 of aid to the Italian education system. So they seem to think that protecting the jobs in that Italia 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 in all across all EU countries. We've also drawn down the loan that we're entitled to in the UK, arm's length transaction. We got the color in it because we're BBB 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 sub Egypt that says they will refund the French taxes, aviation tax, But only to French airlines. So Air France receives back 100 of 1,000,000,000 of aviation taxes, whereas we, Ryanair, we're the 3rd largest airline France, ECGS and others are not alone received nothing, but we are told we have to keep paying these aviation taxes. We have the bizarre edict coming out of Italy last Not long are the Italian government going to give that Alitalia $3,000,000,000 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 the government of not just rules, but also breaching or tearing up the competition and the level of paying fee 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 3 or 4 years. However, Ryanair, with a $4,000,000,000 in cash, a net weekly cash burn of about $10,000,000 to $15,000,000 a week, excluding fuel sur With a fleet of aircraft, we've got 3.50 aircraft entirely unencumbered, a value of about $7,000,000,000 on the balance sheet. We're very strongly positioned to weather not just the COVID-nineteen pandemic, but also to emerge out of that pandemic Stronger with a lower cost base with far more growth opportunities, but those growth opportunities will be in a marketplace for the next year or 2 where I think fair is about to be fair is the news that we 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 of the tax refunds they're already To engage in below cost selling or in massive M and A activity. A quick touch on the Boeing MAX. As I said, we now Boeing 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 said that there's a reasonable prospect that they would be able to deliver some of our MAX aircraft to us In the calendar Q4 and the Q1 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 200. It will be critical, I think, as well to our growth to us being able to exploit growth opportunities into the summer of 20 We 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, 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 200,000,000 Q2, based on our current assumptions, could be a breakeven small loss. But again, that's really in the lap of the golf. But the more we see European governments roll back on restrictions in the next couple of weeks up to about the middle of June, and we believe that we will see further developments With the Spanish, Portuguese, Greek government not imposing 14 day isolation, we think the UK 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 Are you now going to ask all the passengers on the Gathering Express, the London Underground to self isolate for 14 days? And of course, it completely falls apart. They generally move back on to it's all science based until you ask them, what was the science that says the Irish and the French can be exempted from the 14 day lockdown? So it's all just nonsense that's being made up on the hoof by the U. K. Government. It's completely ineffective. And the concern is They're using this to give the illusion or thinking of taking some scientific action, when really the action that we're calling for that would be effective It's encouraging people using public transport, the London Underground commuter trains, airports and aircraft to wear face masks. Face masks, widely used face masks would eliminate about 98.5% of the risk of the spread of COVID-nineteen and 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. So we're encouraging that and Discourage idiotic ideas like 14 day isolation, which are completely unimplementable and the U. K. Government can't even explain where the hell you isolate in the first 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 On the finances. Thanks, Michael. As you said, a relatively good year last year. I'm not going to dwell too long on it, 13% profit After tax before exceptionals, the balance sheet in very good shape was 330 unencumbered Boeing 737s With a book value of just over $7,000,000,000 and the market value well in excess of that cash, very strong at $4,100,000,000 and the work that we've been doing over the past number of months to get the cash burn down has seen us go from $200,000,000 per All expenses, including CapEx and everything else out the door, down to $60,000,000 per week currently going out the door on average. On the fuel figure, it's somewhere just under about €25,000,000 a week going out based on the Mark to mark and depending on the spot on an individual day. Hedge and effectiveness, because we had hedged 90% of our fuel Coming into FY 2021 pre COVID, a big chunk of that has now gone ineffective as we're not going to use that fuel. So we have an exceptional charge of about €390,000,000 on jet fuel offset by currency, Favorable currency, primarily on delayed CapEx aircraft, offsetting that giving a net charge of about 3 And $53,000,000 in the FY 2020 accounts. There will be a little bit of volatility on the P and L this year as we mark to market those ineffective hedges, but that will run off over the next number of months as the hedge is settled. And that's pretty much the key things I wanted to highlight, Michael. Okay. Great. Thank you very much. Julius, do you want to say anything on just on the TV before we open it up and head off a lot of questions on? Maybe just a word to add that we have been in touch with the European Commission 2 months, and we almost feel sorry for them facing pressure from capitals, Berlin, Paris, So we will be assisting the EU Commission with appeals of those decisions Thanks, Julius. And just following up the questions, Eddie Wilson, the CEO of TAC, will give us a quick couple of thoughts. Yes. I mean, we've been Working over the last number, the last 2 months on minimizing the payroll costs with the payroll supports. And now we're starting the discussions with the unions, some more realistic than others, but we have to get ahead of this. We We announced 250 job losses in our offices in Dublin, Braslav and Madrid and in Stansted as well at Friday And we now get into the sort of formal processes with each of the unions. And we're going to have to deal with this. Some of them are already sticking their heads And as Michael said, like that, some of the things 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 calls, and 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, some of the and we're working on those where the savings are not up to what we would expect. Okay. Thank you. Okay. We'll open up now for Q and A. Can we please, everybody, we zip through the questions. We have to be gone around 11 o'clock. So it's 1 or 1.5 questions each. And please don't ask me any questions on traffic Our first question comes from the line of Daniel Rosca from Bernstein. Please go ahead. Good morning, everybody. I hope you, everybody on the call, Families are safe and well. I'll limit myself to one then. I guess in principle, your commitment to buybacks is unchanged. And I'd like to ask under which circumstances you would consider reinstating the buyback program, kind of can that happen while you're still restructuring? And how are you thinking about that next year if there is a trade off between possibly accelerating growth to capture that medium term opportunity you highlighted And the buyback program on the other side, kind of how you're thinking of capital allocation, if you're faced with that question 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've done about $550,000,000 or $580,000,000 is a $700,000,000 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 2021. What's that about 850,000,000 So that was going to be our next uses of cash. So frankly, the issue of buybacks is off the table was off the table before we entered COVID-nineteen. 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 €850,000,000 bond in June of Assuming some return to normality this winter and into December of 2021, cash flows at that stage will 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 4th largest shareholder in the group, Can wait in line while we either, 1, work our way through what has been an unprecedented An unprecedented event in the year end industry. And to put in some context, the 911 attacks of 911 grounded flying for 4 days. COVID-nineteen has grounded the decline for 4 months. So this has been unprecedented. Shareholders understand that. That's why I think we've always generally favored fair share buyback over dividend because we can always pull back or suspend the share buyback program without annoying lots of shareholders. This is an opportunity in the next year or 2, and I believe there will be. We will be working closely with Boeing on the MAX delivery. And I think certainly if you're looking around Europe at many of the other airlines who have announced very substantial aircraft To Farrell's capacity cutbacks, failures of Thomas Cook Flybe and others, I think there is going to be significant opportunity into the summer of 20 1 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 in cabin crew all over Europe. And those pilots in cabin crew who we will be making And whose jobs will be lost in Ryanair in 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 December of 2020, we'll get them back working as quickly as possible, they want to come back to work. And I'm not sure there's many other airlines will be offering even any new jobs The next question comes from the line of Samantha Swift from Raymond James. Please go ahead. Mavi, hi. Hi, good morning. Hey, maybe two half questions. Just on the cash burn, I know, Neom, you mentioned everything's kind of included in there, I'm guessing, including debt. I was just kind of What you're seeing in terms of refunds in there? And then just a follow-up on Michael, I know you mentioned that you were probably going to extend kind of some of the Boeing and J leases, kind of curious what the 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. Neil, take the cash flow and I'll do the aircraft situation. Okay, Savi. As you said, the cash And includes everything from OpEx to debt repayments to critical CapEx within the business Payroll top ups. And then payroll top ups, etcetera. We have about $300,000,000 of refunds included since the start of this financial year, that will be a combination of refund out the door vouchers and free changes. So that's in the numbers that we have Given they're in the cash burn. And on the aircraft, I mean, one, we will need all of the fleet of aircraft we have at the moment. Remember, we expect to carry 150 passenger savvy in the last 12 months. The growth opportunities that are out there at the moment are will be, I think, almost once in a Lifetime. We will need we're looking at extending those aircraft that are coming off lease, but you're talking about lease rates Now that are down at like 150,000, 175,000 a month, these will be very cheap aircraft. If we decide to take those leases, we're also looking at new aircraft. And I think if you take my view is that the sadly the Vienna A320 base will be closed at the end If that happens, I think it's inevitable. We'll then start planning over the next 4 years to take the Airbus aircraft I would have liked emotion altogether. We'll replace those aircraft as they come off lease with new MAX aircraft. It will be much lower cost, more seats, lower cost. I mean, I see nothing but opportunity here for accelerating fleet growth in the next year or 2 Because there's going to be opportunities. If you look around the marketplace, Norwegian is clearly going to reemerge The tiny domestic carrier up in Norway, there's a large presence in Ireland, Spain, Italy, Gatwick It's gone. It's going to be gone. Easyjet have already confirmed that they're deferring huge numbers of aircraft deliveries. Lufthansa has significantly cut back closed German wings. So and Even at Italia with the benefit of $3,000,000,000 of state aid, still can't cover or serve the Italian market. So there's going to be opportunities there for an airline Those airlines that have the lowest cost. And I think it's going to be a race for growth in the next couple of years between the really low cost airlines, There's only one in Europe, Brian Air. And then the airlines who have received multi $1,000,000,000 worth of state aid subsidies. But I think the problem with the state aid subsidy They all come with handcuffs on them that will prevent those airlines from engaging in meaningful labor Form our productivity gains or efficiencies over the next number of years. So 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 Japan are doing, they Take billions of state aid, but there'll be no labor reform, there'll be no productivity reform. And so but going forward, We, as the lowest cost airline in Europe, will need more aircraft if we are to get our pilots and pilots and cabin crew back into jobs and take advantage of these Once I think it will be once in a lifetime airport discounts. Next question please. Thank you. The next question comes from the line of Duane Fenigwerth from Evercore. Please go ahead. Hey, Sven. 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 Including things like crew bidding lead times. Thanks, Sveen. I mean, it's really hard to tell. Like, I mean, I think what's likely to happen is we see a lot of European countries over the last week, 10 days reopening Germany, Austria, the board 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 And the Spanish hotels, Portuguese hotels, Greek hotels going, we'll lose our tours if we don't do something similar. Also, if you look across those countries, many of which the Italians and Spanish were the first into the COVID crisis and therefore emerging faster I think I would be reasonably optimistic that there will be significant movement in passenger in Relaxation of citizens restrictions over the next 2 weeks are certainly up to about the middle of June. I think they'll largely be pan European and certainly Commission is pushing for Schengen wide, similar treatment across Schengen, similar treatment on movement of passengers. And It's hard to come up with to restrict air travel when people move by train, both in time across Europe anyway. So we're kind of of the view. We announced we were going back on the 1st July 10 days ago. That was based or predicated on the thought that we thought much of the movement was really eased across Europe in early June. We think we can stimulate an awful lot of bookings. But first, it is huge pent up demand in there already anyway, for particularly families who want to go on the So want to go on the kind of 2 week school holiday, July, August. We think the business traffic might be a little bit slower to move. And certainly that's where These 2 week restrictions really militate not just to get business track, but also normal commuting traffic. I made the example this morning, Boris Johnson's nurse, Nursing back to health with the Portuguese nurse from Porto, he gets to and from between London and Porto flying on Ryanair. So if you want services to continue to operate. You're going to need to allow low cost air travel on within Europe to operate, but to operate in a healthy basis, which is with face mask and temperature Pan European on a Schengen basis. And then that the other countries would also move to similar kind of restrictions, which I think if you're would be face masks and move away from non sensible restrictions like 2 week isolations that are only implemented but unpleasable anyway, but Are largely redundant when you get to your isolation address by using on the underground or commuter trains in any But the challenge for us is we've no idea what the load factors will be in July August and we've no idea what the Years will be. All we're trying to guide our shareholders with the general the lazy assumption from the usual The 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 will be the opposite is that there will be higher than expected loads because the pricing will be very aggressively 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 is even so you'll see huge discounted offers out there. So I think that the volumes will be higher than we expect, but Pricing will be lower, and that's the message we're trying to communicate today. That's really helpful. And then just for a quick follow-up, Michael. Obviously, the market's been totally focused on COVID, but is there any progress going on behind the scenes On Mac's return to service, is there anything recently from a technical or regulatory perspective that has increased your confidence? Thanks for taking the questions. So, I mean, I think that we work closely with Boeing and with the asset, 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 more positive. Boeing seems to have addressed much of most The software issues, the return to service issues. But that's not to say that it won't be bumpy. But I think there's a reason And Boeing themselves, I think now we're talking about going back into production, I think, sometime in the end of the second quarter, maybe the early part of Q3. But we know we have about 20, 25 of those aircraft already made and produced are sitting on ramp and we actually waiting for delivery Ryanair, we want to take them. But I am much more hopeful or optimistic now We will see the Boeing return to service in the Q3. Certainly, that we will have a meaningful number of additional new Boeing MAX aircraft So I think there's a reasonable prospect that we will see 20 or 30 of those aircraft flying for Ryanair Summer of 2021. And we will urgently need them both to replace the Airbus aircraft that we're not taking or that we're not taking delivery of it Create that room for growth in the summer of 2021 when we think Europe will certainly, tourism will rebound Of a second wave outbreak and there would be certain that risk would be further diminished if we can persuade governments to introduce face masks The The next question comes from the line of Mark Simpson from Goodbody. Please go ahead. Mark, Mike. Yes. Good 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 know. I think 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 $80,000,000 It's too early. We will be hopeful again, we would get 50% traffic in the month of July, which is the 1st month back. I'm not guiding you into August or September yet. 2nd half of the year, I think we will be hoping that the load factor will be significantly 175%, but the yield will be weaker. So I'm not getting into a forecast today. We're guessing I'm guessing, you're guessing, we don't know. Okay. I think the most reasonable number for the full year is going to be under €80,000,000 which so we're looking at a 50% reduction in traffic over this year. Okay. Just to follow on though, Yes. I know except the fact that these are broad, but you were indicating circa 20,000,000 packs for Q2, 50% load So you're flying therefore 40,000,000 seats, which is only down 12% year on year and the same breakeven possibly. That can only come with much pricing. So I'm not quite sure where your negative pricing commentary is coming from, unless these are just throw the dots and put us the numbers out We are truly dark. Okay. Final question, exceptional restructuring charges, Neil, any to come in the Well, the exceptional costs are really going to be if there's Any more in effect on this, I wouldn't anticipate a huge amount of restructuring costs or maybe some redundancies, but that's about the height of it. We would anticipate that we're going to see reduction on a unit labor basis going forward. Similarly, on the airports and handling charges, we would anticipate unit savings Coming in the next 12 months as we negotiate new deals at our airports and equally you're going to see unit reductions coming in at the MAX So there won't be hugely significant restructuring costs, Mark. And remember too, like Well, again, I don't want to 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 We carry only half of our capacity numbers this year. So there is an upside in the back end of the year With some return to normality. But what I'm trying to kind of urge everybody away from is specifics now on pricing, volumes, load factors The rest of the year, we really don't have any idea. We would hope to have some much better sense by the time we get The Q1 results, which will be the 1st week in August, and 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 kind of the lockdowns will have eased significantly over the next, I'd say, reasonably 2 weeks. By the end of the 1st week of June, I think you're going to see a lot of the European economy saying, the kids can go back to school. They've already been back to school in Denmark for 4 weeks. Kids are not the problem. They don't get it. They tend not to be the spreaders of it. But if the kids are allowed back to schools across Europe, Retail is allowed to return. I think you're going to see, I mean, almost a huge pent up demand for people who've been locked up At home in their apartments and houses for the last 12 or 15 weeks going focused. We're heading We're going to Spain, Portugal or wherever it's going to be. And all this nonsense about staycations, you don't have the capacity in Bognor Regis Our South End of Sea are La Hague to be able to cope with the volumes of people who generally would be going to Spain, Italy, Portugal, elsewhere And the risk of the spread of COVID-nineteen on a beach in 30 degrees of heat in Spain, Italy or Portugal is Practically 0, and it would be 0 if you're all wearing face masks, which might upset the tan line, but isn't actually going to upset your health. The next question comes from the line of Stephen Furlong from Davy. Please go ahead. Yes. 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 aircrafts given you were talking about maybe taking out the Airbus. I'm assuming Airbus aren't racist. So just maybe talk about Boeing versus Airbus. And then if I just ask one other thing, one got some questions. In terms of nothing that is being talked about would impede your ability to Turnaround the aircraft in 25 minutes. That's great, Michael. Thanks. Okay. Thanks. I'll work back on that, Steve. Yes, 25 minute turnaround. Look, We see nothing impacting 25 minute turnarounds. In fact, if we're running at a 50%, 60% loan factor through August through July, and The level actually might be ahead of 50%. But if it is, I think you'll see us we'll go back in, in mid June to take out some of the flights. We won't run empty flights where we can avoid it. 25 minutes early will be no problem. The challenge here, we're pushing hard for temperature checks at the entry to the airport terminal And face mask, nobody will be getting onboard an aircraft without a face mask starting in July August. And 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 3 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 negotiation we're also talking about 10 an order for the Boeing 10 aircraft. Those negotiations continue, but really it's They can't be concluded until we have some certainty of when the MAX will return to service and when we can get deliveries of our In many respects, all three conversations are kind of interlinked. But 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. Yes, flaky airlines like Norwegian's orders, I'm sure, have gone up in smoke. They will disappear. That does help the return to service or at least eliminate And yes, I think Airbus are nowhere at the moment. We have repeatedly used it through loud and tried to interact with Airbus. We're getting nowhere with them. And I think the COVID-nineteen has kind of crystallized the decision making here. We haven't been able to attract any significant offers from Airbus. It's likely now been the Lauda fleet, which this summer was we'd originally take delivery of up to 38 aircrafts. We will not take at least 8 of those aircrafts. I think finally, we'll be somewhere between 26 28. And 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. We don't seem to be at the races in terms of pricing, certainly not with the MAX or the pricing we have on the MAX 200s. They're nowhere near close to where we are on the pricing on the MAX 200. And if that continues to be the case, then frankly, we still see a lot of value in Lauda, the slots in Vienna, The presence in the German and Austrian marketplace, but I think that value will be enhanced By slipping 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 underestimate is, Lauda is in the teeth of the 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 Dozenlorth with Lufthansa getting about €9,000,000,000 of state aid from the German government. Austrian Airlines, which is owned by Lufthansa, is linked to the Austrian government, looks like for $800,000,000 of state aid. And look, Lauda is in the teeth of both of that, Lauda will get won't get stated for 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 And then for the interim, we do the payroll support scheme. So we are 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 I've been denied this stroke of a pen having originally been approved. So 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 Despite the fact that it's been signed up by 95% of the pilots and over 2 thirds of the cabin crew. And then therefore, the It's likely that we will have to go through the closure of the A320 base in Vienna. We'll have probably 15, 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 have to see what the employment situation is like or the improvement So I think going forward, if I think this crisis would have told us no, we're not there yet with Boeing, but I think we're making much more promise That the future rely on deepening the relationship with Boeing. I don't think at this stage we're looking at any increased orders for Boeing. And that's not to say they came up with very attractive pricing that we wouldn't look at taking more aircraft. But certainly, We have firm orders for 135 MAX 200 that will go over the next 4 years. We clearly need to rework the delivery program with Boeing on those aircraft because they're all running 12 months later on the delivery. But 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-nineteen crisis, but if there was a pricing incentive there for Boeing, we certainly something certain the Board would look at. Got it, Michael. The next question comes from the line of Jarrod Castle from UBS. Please go ahead. Jarrod, hi. Hi, good morning. Two questions. 1, I think you've got 7 planes available for sale. So just interested In terms of, is it realistic that you can sell them in this market in the next 12 months? And then 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 Given penalties that you and others receive from these airlines or indeed governments. So what would success look like for Ryanair in terms of the legal action? Well, I'll answer that the 7 aircraft for sale, like all of our aircraft, they're for sale subject to acceptable pricing. We don't see a catch up price ending now for the next 12 or 18 months. And I would be much happier to operate those aircraft. I thought we said more for sale. No. We've already sold those aircraft. They were forward sold. But I don't think we'll be selling any more aircraft for the next maybe 12, possibly 18 months because we want We'll need those aircraft ourselves. And deliveries of the 7 aircraft we sold are later on in the autumn of this year, so they're from October onwards anyway. Correct. Which again emphasizes why we will need more aircraft from Boeing just to be able to even to stay at a steady state fleet into the summer of 2021. On the state aid side, I mean, what we would hope for is to encourage the commission. And I was heartened by Madam Betshager's comments morning where she's seriously concerned at the extent to which the French and the German government, the richer EU countries Our massively distorting state aid. The German government alone accounts for 52% of approved state aid at the moment in Europe. So the richest governments are the ones who are engaging in the most state aid doping. And what's ironic is that it's usually the Germans and the Dutch Telling everybody else to be to comply with the rules unless it applies to them. You're going to seriously Not just the air transport market, but also many other industrial markets across Europe. If the Germans Just to lay out state aid to their operators, whereas the Spanish, the Irish, the UK and the other countries Are being by the rules of not participating in this illegal state aid. Again, you go back again, the question is, why does Japan need another $12,000,000,000 on top of the payroll support schemes, On top of the aviation tax refund schemes, like really if the German government was interested in the industry, what we're hoping would happen is there would be The non discriminatory state aid to everybody, like by all means in Germany, why don't you just refund or waive the environmental taxes on air travel for the next 12 months, 24 months, which the vast majority of that would go to Lufthansa, but it would also go equally to other airlines like Guishev and Ryanair operating in Germany. If the French government want to refund aviation taxes, do it to all airlines equally in France. But don't just do it to the French registered airlines, Give the payroll support schemes and then we'll have another $9,000,000,000 at State Aid on top of it just because it's air frac. Julie, do you want to add anything more to what you want to achieve on the state aid side? No, that's it. Just to eliminate the illegal and discriminatory state aid. And by all means, if you want to do something, European governments want to do something, do it on a transparent and nondiscriminatory basis, Use your aviation taxes, your payroll support schemes or your environmental taxes on air travel. I mean, let's face it, there's enough around Europe, anywhere between ETS and APD in the UK. And at least then you're applying the schemes equally to every airline. And 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. The next question comes from the line of James Collins from Please go ahead. James, hi. Hi, good morning. It's one of Anil actually just on the cash burn. As far as I'm hearing, you're doing $60,000,000 a week of $25,000,000 Fuel ineffective hedging cash going out the door. And then I think you said $300,000,000 financial year to date has gone out in refunds. According to my math, that leaves nothing left On other cash flow, I was wondering if you could maybe give more detail on how you've got it so low. And then Michael, I was wondering what Sorry, it's Michael on the lounge. Go on, you can answer, please. No, no. You have second half. Yes. And I was just wondering what odds you'd given louder existing in 2021 if they don't the union don't sign up for the deal this month? Okay. On the cash burn, as I said earlier on, you have a $25,000,000 on average related Fuel, with various other things going out like debt repayments, salaries and other operating costs. On the refunds, approximately $300,000,000 settled so far. That's a combination of vouchers that have been accepted by customers, cash refunds and of course free flight changes across So it wasn't all cash out the door. And that's accepted vouchers. That's not just accepted vouchers And free moves. And I expect we see this significant surge in free moves over the last 7 days as people now realize that They can now travel in July and August. A lot of them are taking the pre move options. When we try to explain to the various consumer Like which magazine in the UK, we are there is no restriction on if you want a cash refund for money, you get a cash refund, but you must understand we're dealing with A historic backlog of refunds that have been imposed upon us by European governments, I mean, basically 3 months of flying, our refund team has been reduced by 75% Because of social distancing in the office restrictions here in Madrid, Dublin and in Brothlauk. So 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 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 unit will close the Vienna base with a loss of over 300 pilot camp crew jobs on Thursday. Lauda will still be operating in Stuttgart, in Dusseldorf and in Palma. And I see a future for Lauda into the future as Probably an Airbus Boeing 737 operator operating wet lease services for Ryanair, for Buzz and for Malta across different base of countries. But I suspect the one country where now we will not be operating as a brand We'll be in Austria, where frankly, if the employment regulations and the labor structure is at that 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 If 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 And vote for themselves to save their own jobs, even if it means in the short term taking a pay cut. And I feel enormous sympathy for Laudis, Pilots and cabin crew, Who have voted in their overwhelming majority in favor of these day because they recognize the crisis. And 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 Because 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 $800,000,000 of Aid from an Austrian government to a Lufthansa owned and controlled subsidiary. Next question, please. The next question comes from the line of Jamie Rowbottom from Deutsche Bank. Please go ahead. Good morning, gents. 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 €80,000,000 is there a working scenario for fiscal 2022? And 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 That calculation, so just any working assumptions that you're planning would be helpful. I think it's Rita, at this point in time, We will be operating on a return to normal traffic volumes. Now that's less, let's say, the aircraft that we sell, It depends on how many aircraft that come off lease that we can extend at the end of this year at reasonable terms. It depends how many aircraft Boeing can. But on the assumption that we take between 2030 Boeing MAX next year, I mean, I think that our numbers will Next year to kind of normality. I mean, it will be north of 150,000,000 passengers. And now that clearly assumes that COVID has been desperate by the time you get to April of next 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. But I caution again, all of that volume growth will be at lower or discounted prices. Yes, I think I see various number, but our projections here that we will return to traffic volumes normality In our year March 2022, so summer of 2021. And then I think that by summer of 'twenty two, 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-nineteen. But that doesn't obviate the huge existential shock the industry has suffered in 2020. We're in discussion with unions where they say, yes, but your numbers will return to normal in 2021. Some would Yes, they will, but they're not going to return to normal in summer 2020 or the winter 2020. We can't keep your pilots or your Cam 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 Anatolia will be able to just dope pricing. I mean, let's face it, Italia has been engaged in below cost selling for the last 75 years. They've never made profit. Now they'll have $3,000,000,000 to continue to below to engage in below cost selling for the next 3 to 5 years. And they only account for 20% of the Italian market. We account for 35% of the Italian market. And it's no doubt that in Germany, in Austria, Even in Belgium, where you're competing with Jotanda's subsidiaries who are running around hoovering of state aid, the bases in Charlotte and Samtember are going to face Really aggressive pricing from persons airlines and others who have limitless cash resources at their disposal, thanks to this This crazy state ain't doping. So I think in terms of volumes, for FY 'twenty two, you should be we planning at the moment on normality in terms of volumes, but distorted pricing, whereas for the rest of summer for FY 2021, Radically reduce volumes and also reduce pricing. Next question, please. The next question comes from the line of Muneeba Kiani from Bank of America. Please go ahead. Go ahead. Yes. Hi. So for the July to September schedule, how should we be thinking about unit cost based on your capacity plans? Yes, if you could talk about that and the cash burn. Yes, impossible to talk about it. We've no idea what our unit cost Until we know what the volumes will be. As we've demonstrated in the last 3 months, we're incredibly flexible cost base here. We basically, with the exception of fuel hedging, collapsed the cost base at almost nothing. And now to be fair, a lot of that's been done on the back of payroll board schemes, which we're very grateful for. And when they will continue through July August, the question is how much volumes can we restore And that's about pricing. But the volumes will be the unit cost will be what the unit cost will be, but 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 wherever we come Next question, Lee. Can I ask one more on ticket refunds then? The $300,000,000 that you've had kind of cash refunds of vouchers. So what about the rest? We're working our way through the rest. I mean, like the challenge we face, At Pratt's community, it's probably we know on a normal month we would refund about 10,000 tickets. So we're geared up, we have staffing for about 10,000 tickets. At the moment, 3 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 pastor. So we're geared up for about 10,000 refunds a month. Currently, we're trying to process something of the order of $25,000,000 or $30,000,000 refunds Over the next couple of months. So the $300,000,000 that Neel has talked about, that's effectively about a quarter of the backlog of refunds we have at 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 June onwards in Dublin. That will significantly increase our ability to process refunds. And I think going forward, if you take Neil's figure On the $60,000,000 as we move through December and the fuel hedge cash, the fuel cash outflow decline, The refund cash outflow will increase and one will substitute for the other. But 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 cash refunds, but 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 We can automate free moves. We can't automate the payments or the cash refunds because most of the cash, a lot of the cash refunds The next question comes from the line of Joel Qui from Liberum. Please go ahead. Good 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? And 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 rough indication, please. No, I wouldn't give you any indication on the refunds. At the moment, it's $300,000,000 and it includes cash refunds, vouchers, etcetera. Clearly, there's a lot more vouchers in there than cash refunds. But as the cash refund increase, the number of, I think, vouchers will decline. But as we move back to flying, there'll be a much greater uptake. We think there'll be free booze anyway. But We can't break it out and we can't predict where it's going to go. On the MAX delivery, instantly, we haven't paid any PDP since about the mid of last year. So we still have quite significant volume of PDPs already in place with Boeing. So we would expect to fund certainly if there's 20 or 30 aircraft delivered, but this side of next summer, A lot of that funding is already in place with the PDPs that we have already paid. We have the Cash reserves to be able to fund the balance of those deliveries. But obviously, financing and the Speed and rate of PDPs is one of the key elements of our ongoing negotiation with Boeing. And Boeing, to be fair, have been very sympathetic. Well, I have been very understanding of the need. I'd say Ryanair is one of the few airlines in the world talking to manufacturers about taking aircraft deliveries and it needs to be ordering new aircraft at the moment. So 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 more than €25,000,000,000 in the bond market without the need for government intervention, Which would again mark them out against Airbus, who I mean, we're very sure would be on the French government and Grest in the not too distant future. Boeing has the cash. And the easiest part to discuss with Boeing actually is the financing and funding for the next For the summer 2021 deliveries, what we're really focused more on at the moment is their return to service date and then how many aircraft can they deliver to us. Remember, one of the great advantages of Ryanair is we actually have Mac simulators in place that we can manage the return to service with in house ourselves on our old Mac simulators. Yes. The only thing I'd ask Gerald is that we are BBB rated as high investment grade. The bond market We've received a number of sale leaseback proposals and indeed we've received a number of unco visited Propose for secured debt, we've got lots of options on how we finance ourselves going forward, if not from cash. And Unlike some of our competitors, we don't take the profits from state of leasebacks through the P and L or our other costs. So But 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 least at elevated rate The next question comes from the line of Carol Dorris from Morgan Stanley. Please go ahead. Hi. Good morning. I have two questions. The first one is, even though you can you may still be able to do quick turnarounds, there's probably Higher hydrogenization and cleaning standards, which will probably slow down overnight and around the fleet. So do you think you can still operate For transport, 150,000,000 passengers with the same number of aircraft or do you need to increase that number? And the second question is how much of your New York short term payables is due to Boeing. I think Neil answers the second half of that. Look, No effect on quick turnaround at the moment. We've put in place extensive health measures for the return to service on the 1st July. We're disinfecting all the The whole aircraft sources nicely. 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 out of supplies at airports to anticipate turnaround, nor is it required where aircraft Aircraft is where passengers and crews are wearing face masks, because you've eliminated 98.5% of the risk Droplets occurring anywhere on board the aircraft. The aircraft will not be operating at 95% load prices. We think 50% to 60% load prices in the 1st month or 2 was the best we will do. And We've already explained we will not get to 150,000,000 passengers in the next 12 months. We need the number somewhere under 80,000,000 passengers. By the time we get to the summer of 2021, we do think it's reasonable to go back to 150,000,000 passengers. But at that point in time, we think Your vaccine will have been found, anti virus vaccine will be found and the treatments will be in place or the COVID-nineteen pandemic will have disappeared altogether. There has been no and we have 2 months of experience now in Asia. There has been no second wave of COVID-nineteen. This mythical second wave at the moment Doesn't hasn't yet occurred anywhere. And so it seems to be you and medics and scientists trying to The local populace is believing that they should isolate somewhere for a 2 week period. So Caution, I think, is the right approach at the moment, but there will be no effect on turnarounds, particularly if we're operating with 50% to 6% load factor. Neil? Yes. On trade tables, the $1,400,000,000 figure, just over $1,000,000,000 of that is accrued of PDPs The next question comes from the line of Neil Glynn from Credit Suisse. Please go ahead. Good morning. Just one quick one for me. Just on the airport and network strategy, you obviously highlighted 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 whole opening up or by dispersing freed up aircraft more thinly around the network. I mean, I'll ask David O'Brien to say Take that since it's more logical in the area, David? Yes, that's going to depend on what those airports do. We've more than enough solicitations from around From over 200 airports to distribute them or to concentrate them, but and we've demonstrated we've the flexibility to do both. In the case of Lager, 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 Right. So no, we'll be opportunistic on this. But I think it's fair to say that we're seeing the same kind of offers. In fact, if anything, better offer 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. But the real multi life opportunities are going to come at the bigger airports. I'm not sure if it necessarily emerged at Gatwick. Like 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 Whaling 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 accept that German means it's going to disappear and Lufthansa will cut back traffic. But and 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. And certainly, in the other bigger mountains in Italy and Spain, there's a very open dialogue with the airports there. But Lots of airports are also in the same situation. They don't quite know what's going 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 2 or 3 months and certainly into the winter of this year, it will be difficult to Finalize those agreements. I mean, 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, but and I feel sorry for the issues management. It's dealing with COVID-nineteen 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 Return the dividends and stop annoying the management. But I suppose annoying shareholders is just one of the factors of life we all live within the airline business. Thanks for all of you. Thanks, Christian, Pete. Next question comes from the line of Mehdi Schulz from Commerzbank. Please go ahead. Hi, good morning. I have two questions from my side. First of all, I would like to know, You mentioned the 60% for a breakeven operation. Is it just on variable cost base or on a cash cost basis or on a general cost basis? And my second question would be, if you use your unencumbered fleet as a collateral, how much discount does the banks currently ask Given that your fleet at the moment is not sellable at the book value? Yes. I mean, look, don't confuse the numbers, Ricky. Like I think we're hoping to run with maybe a 50%, 60% load factor in the second half in the Q2. Based on a reasonable yield assumption, we think that At the moment, those numbers will suggest we will run-in Q2 breakeven or a small loss. It's not going to be 200,000,000 5% or 55% will or won't. At the moment, we think there's a if the restrictions are lifted, there's no 40 day isolation. We think there will be a reasonable prospect to get into a 50%, 60% load factor through July August. The yields will be lower than we had previously predicted, but that's peak The cost would certainly be materially lower than we have would it be normally budgeting in July August. But if we get 20% pay cuts done, They will all take effect for the 1st July or we will have a lot less labor. So there's no number here that's a forecast or a prediction. We can't give you one in the second quarter. How would you the only company actually, we would I mean, 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 Nia said, Elevated financing costs. So it's not that someone would ask us to take a bath on the aircraft or the book value of the aircraft. But I mean, we've seen offers coming in at 4%, 5%, 6% rate of interest. And like 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 We've been borrowing money at 5% or 4% or 5% or 6% at the moment. Now that's not to say that there couldn't be a downturn in the market that there won't be some further Unforeseen events in the 2nd 6 months of this year is the first time. We don't know. But thankfully, with $4,000,000,000 in cash And a net cash burn of under €60,000,000 a week, we don't have to worry about that for the moment, but that doesn't mean that we're out of the woods yet. This is 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. And I think the most key development to 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. And we think most Sensible European governments will mirror those kind of reasonable policies in the next couple of weeks. Next question, please. The last question is from the line of Alex Patterson from Peel Hunt. Please go ahead. Good morning, everybody. Hi, there. Can I ask 2 quick clarifications, please? Firstly, on the pay cut, is that temporary or is that a permanent re basement? And secondly, On cash refunds, did you say passengers need to contact you directly that you are not refunding through intermediaries like travel agents? Okay. Yes. First of all, the pay cut, look, I mean, clearly, there's a dialogue going on with the unions. Now, let's be clear on it. What we said is we will need up to 20% pay cuts. And obviously, there is a variable number in there. It's 20% for the higher paid EBITDA at the captains. It is down at around 10% for the lower paid cabin crew, etcetera, etcetera. So it's variable. But if we don't get those takeouts, we will be back for considerably more than 3,000 job losses at the end of Yes, we're not mixing. Everybody knows there's an existential crisis going on in the industry. And we the obvious number, unions going back as though we need You don't need further information other than we were recently trying to carry 150,000,000 passes here. We will now be looking to carry 80,000,000 passes this year. There's your further information. Get on with it. So I think the pay code will be Between 10% 20%. It's also though our objective to try to restore those pay cuts over a kind of 3 4 year period as the industry recovers. We need lower pay through the remainder of FY 2021. If we're doing well in summer 2021 into FY2022 The first people who will be sharing in this recovery will be our people. So the pay cuts will be restored over a 3 or 4 year period. The job losses we would hope to restore some are not all of those job losses. Now it won't be the individual people. We're not going to give anybody the right that you could be the You'll be the first one back if but clearly, we will favor rehiring for those pilots that those cabin crew who lost their jobs Issue refunds, automate refunds where 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 Blogg's OTA or some of the scandals, those Scam artists like eDreams or eDreams in Spain, whoever the other scam artists In Germany, initially, where there is levy handling fees, we would never dream of refunding cash customers' cash to those people because I'm sure the customers would never see the back as well. Our cash refund process is the individual customer communicates with us. We communicate with the individual customer. We ask 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 those and they're required under our audit rules and consumer protection rules, We cannot just lash out money to some automated process to 3rd party intermediaries. It is the customer money. The customer has paid us 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 their 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, gentlemen. Thank you very much. I'm sorry the conference call over and slightly, but I think it's important given the COVID-nineteen crisis, we try and sit and answer it as best we can. I'm sorry that we can't give you any more material guidance into the Q2 or the full year, but we're all in this same situation together. We're flying blind. But I think there's a reasonable prospect of us returning to a reasonable level of flying in July, August into September. And I think once people begin to fly, even if it's wearing face mask, Confidence will be restored reasonably quickly. And then 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 provider. That said, hopefully, by the time we get to the Q1 results call in early August, we'll have a much better handle on the situation and will be able to give you something like more tangible calendar directions for the second half of the year. Thank you for your patience. We sincerely appreciate the support you've all shown in the business over the last 3 months. I know it's been an extraordinary difficult time for investors as well. It's not crazy to see the share price go from wherever it was €15 down to €9 or whatever it is. But rest assured, we are here on a daily 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 a 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 roadshow, virtual roadshow going on this week. We're now all going on investor calls here. And if you'd like to have an individual meeting with Neil, myself or anybody else in the team, please route the request back through Citibank and Davy to Jane O'Toole, our Head of Investor Relations, and I'm sure we'll have a call with you later on the week. Thanks very much, everybody. Good to talk to you and look forward to seeing you again soon. Remember, keep flying Fly Ryanair, safest and the cheapest airline in Europe. Thanks, everybody. Bye bye. This now concludes our conference call. Thank you all for attending. You may now disconnect your lines.