Good morning, ladies and gentlemen. Welcome to the Ryanair full year results presentation for the year ended 31 March 2020. Obviously, these results are somewhat historic now given the dramatic and sudden, indeed unprecedented impact of the COVID-19 pandemic on not just Ryanair, but all of Europe's airlines since the middle of March. We'll run through the presentation and explain how we responded to the COVID-19 crisis. You'll have seen this morning we published our results for the last 12 months. For the year ended 31 March, it was a reasonably successful year. We reported a profit after tax of just over EUR 1 billion. It would have been slightly higher if the second half we hadn't lost 5 million passengers due to aircraft grounding in the second half of March.
Overall, a reasonably strong set of results, strong passenger growth, strong cost control, more importantly, strong revenue growth, particularly in the areas of ancillaries, but all of it has now been overtaken by the COVID-19 crisis. I'm joined as usual by Neil Sorahan, our Group CFO, and we'll now take you through a quick slide presentation, and then we will open it up for our Q&A. As you're seeing, Ryanair remains the lowest cost airline group in Europe. We have the lowest fares, but also the lowest costs. We're number one for traffic. We grew to 149 million guests in the last 12 months. That would have been about 154 million passengers but for the COVID-19 disruptions from the middle of March to the last month of the year. We offer more coverage than any other airline across Europe.
The big issue is that the COVID-19 pandemic has grounded our fleet since about the middle of March until, we think, July. Thankfully, Ryanair has a very strong balance sheet, and we believe our financial strength, combined with the lowest cost, means not only will we recover strongly when air traffic returns to normal, but we'll be the long-term winner. You know these slides reasonably well. Our average fare last year was just EUR 37, significantly cheaper than any other airline competing with us across Europe. We also have the lowest unit costs. Our unit costs last year were just EUR 31 per seat, excluding fuel, significantly lower than all of our airline competitors here in Europe. Neil, do you want to take the results?
I will, Michael. Thanks very much. As you said, a reasonably good year in FY 2020. Our traffic was up 4% to 149 million, and indeed, it would have been 5 million ahead of that if it wasn't for the COVID groundings in March. Revenue per passenger up 6% to EUR 57. Average fare grew by 2% to EUR 37. Ancillaries had a strong performance where we saw a 20% growth in ancillaries to EUR 3 billion or 16% per passenger. Unit costs up 4%, two points ahead of where we'd originally expected due to the lost passengers in March. Profit after tax before exceptional items up 13%, just over EUR 1 billion profit in the year. Balance sheet, one of the strongest in the industry, a BBB-rated investment grade balance sheet with very strong assets.
We've got in excess of EUR 3.8 billion cash at year-end, and indeed 330 unencumbered debt-free Boeing 737s with a book value of just over EUR 7 billion, significantly higher on a market value. Cash burn has improved significantly, and we'll deal with the initiatives that drove that later on.
Thanks, Niall. Let's touch on current developments. Obviously, the COVID-19 crisis has grounded 99% of our fleet from the middle of March until, we think, early July. The U.K. [is to be drawn down] a GBP 600 million loan under the U.K. government's CCFF loan program, very low cost, we qualify for that because of our BBB credit rating. As a result, that has strengthened the balance sheet. Our year-end cash at EUR 3.8 billion has grown to EUR 4.1 billion. It's important to remember that we have 330 unencumbered Boeing 737s in our balance sheet at a book value of some EUR 7 billion if we needed to raise extra cash, thankfully we don't. Thanks to the tremendous work we've done on cost savings, the cash burn has been reduced from about EUR 200 million a week in March to just EUR 60 million per week at the moment.
We're focused now on getting the business back and getting Europe flying again. We believe that to be possible subject to the lifting of government restrictions by about the 1st of July. We expect to operate about 40% of our normal July schedules during that month. We still need the waiving of some of the government movement restrictions, we're also pushing back against some of the more absurd, ineffective, and unbelievable restrictions such as 14-day isolation periods. We are actively campaigning for effective measures, which are face masks, temperature checks in public buildings such as airport terminals, which we think would be much more effective than 14-day isolation periods which deliver nothing. We are, as Neil said, focused on beginning to take the MAX aircraft deliveries.
We hope sometime between the period from October this year to March next year, subject to Boeing meeting a September return to service date in North America. We'll brief you now on some short-term or some senior board changes that will take place at the end of the month of May. Just to give you an impact on how dramatic and sudden the COVID-19 pandemic has been in Europe. In both January and February, Ryanair Group delivered just over 10.5 million passengers, marginally ahead of our budget in both months. Our budget traffic for March was 11.6 million passengers. We fell 5.9 million passengers short, almost just over 51% less than the budgeted number. For April, May, and June, we're looking to carry less than 1% of our normal targeted air traffic. It has been unprecedented. It has been enormously disruptive.
To put this in context, in 9/11 terrorist attack in New York, aircraft were grounded for three to four days. We're now being grounded for about four months. The impact on the aviation industry, particularly here in Europe, will be severe. As I said, we think we can safely deliver a return to some flight services from July. We're hoping to operate about 40% of flight services in July, about 60% in August. We will be, and have rolled out a video for customers and for our staff, effective health measures which consist of masks, temperature checks. Our aircraft are fitted with hospital-level air filters. Nevertheless, there will be lasting impact on the airline industry in Europe. Thousands of EU airline jobs are being lost. State aid will be necessary to stimulate demand. We think that will result in weaker yields for the rest of FY 2021.
One of the challenges we face is that EU governments are providing enormous sums of state aid, particularly to former flag carrier airlines, both in breach of state aid rules and competition rules. This, we believe, is going to allow these flag carrier airlines to engage in massive and widespread below cost selling for the next couple of years, which will put downward pressure on our pricing and yields, but deliver a stronger return to passenger volumes.
Okay. Just as Michael alluded to, we've put a lot of work into preserving cash and cost-cutting over the past number of weeks. We've canceled our share buyback program. We've grounded over 99% of the fleet in all of Q1, and we expect to take a number of months before we're fully up and running again. We implemented 50% pay cuts in April and May, and that may go on for a longer period of time. We've had pay freezes, and we've benefited from the government payroll support schemes across Europe. We've eliminated all discretionary spend from the business, including non-essential CapEx, and we've deferred a number of payments. We're not just happy to end there. We've got a number of other initiatives ongoing. We're currently looking at all of our bases across Europe. There may be some base closures this winter or indeed into the summer.
There are potentially up to 3,000 job losses and further pay cuts, mainly in the pilots and the cabin crew. We're actively engaged in negotiating with all of our airports for future growth from the Ryanair Group as we get back to service later this summer. Of course, the game changer aircraft, the MAX, will hopefully start to come into the fleet in the autumn of this year, maybe around October which will deliver significant savings, 16% unit cost savings on fuel, 4% extra seats and 40% less noise emission. It'll be absolutely a game changer. At the same time, we're in detailed discussions with both Boeing and our A320 lessors in relation to our growth plans going forward. All of this has helped us reduce our cash burn and conserve our cash.
Back in February, we were spending somewhere in the region of about EUR 200 million a week. At the moment, we're spending about EUR 60 million a week. That may creep up slightly when we return to service, but I think we've done a very good job in holding onto the cash, and that will be what sees us through this crisis. A number of people have been asking and will be asking, what's the EUR 350 million hedge ineffectiveness charge in the P&L at the year-end, and what does it relate to? Well, coming into the COVID crisis, we had 90% of our FY 2021 fuel hedged at pre-COVID prices and pre-COVID volumes. Michael has shown the drastic impact that COVID has had on our passenger numbers and on our requirements for fuel.
We won't need to burn as much fuel this year, which means those fuel hedges have now gone ineffective, and we've taken a charge of EUR 350 million through to the P&L in the current year. This will lead to a little bit of volatility in the profit and loss as these hedges no longer enjoy hedge accounting and will have to be marked to market on a quarterly basis, but they'll wash out over the course of the year. There may be some more ineffectiveness if the return to service is slower than we hope and expect. Looking beyond this year, we've put in some hedges for FY 2022. We're 31% hedged at 541, and we have some currency hedging in place as well. Michael, back to yourself.
Thanks, Neil. Let's focus on state aid, which I think is going to be one of the huge challenges, or certainly one of the big competition distortions we face for the next number of years. Remember, across Europe, most airlines are participating in payroll support schemes. Transparent state supports like the U.K. loan scheme is not state aid because it's transparent and it's available to all companies or all airlines equally. What is, however, illegal state aid is this kind of national largesse to former flag carriers, none of which is justified or even necessary given the payroll support schemes that are already in place. However, the Lufthansa Group looks like it's going to receive over $12 billion of state aid. Air France-KLM, over $10 billion of state aid, and Alitalia have now been cleared for $3.5 billion of state aid from the Italian government.
This to a company that has never made a profit in the last 75 years. This is illegal. It is in breach of the EU's own state aid rules. It's also in breach of competition rules because it entirely distorts the level playing field. The airlines who are strongest entering the COVID-19 crisis, the well-managed airlines like Ryanair, easyJet, BA, will in many respects be the weaker airlines emerging out of the COVID-19 crisis because we're now facing Lufthansa, Air France and Alitalia who have enormous war chests of state aid, which they would use over the next number of years. Firstly, to engage in below-cost selling to damage competitors like Ryanair. Secondly, they'll use it for M&A activity, which will allow Lufthansa, I suspect, to take over Condor and mop up other weaker competitors in their home markets.
Ryanair will be opposing all of this illegal state aid in the European courts. Sadly, that will take us a number of years to win those cases. That's why, unfortunately, we have to address this immediately. We're now into negotiations with our unions across Europe. We need a minimum of 3,000 job losses from our pilots and cabin crew to reflect the fact that for the next 12 months, we'd be lucky to carry 50% of our normal passenger traffic. Even that we do carry, we'll be carrying at artificially lower fares because we're competing with these flag carriers selling seats at below cost. The 3,000 job losses would be the minimum we need on the assumption that we can negotiate 20% pay cuts, particularly with the unions. If we can't secure those pay cuts, we will need more than 3,000 job losses.
If we can secure those pay cuts, we're very hopeful that we can actually maybe reduce to 3,000 job losses. We need urgent action from the unions quickly on these negotiations. As Neil said, in relation to 737 MAX, we have 210 on order, 135 firm, 75 options. We're hopeful that Boeing will achieve a return to service in North America in September. We will still, therefore, be targeting some deliveries of the MAX aircraft between October of this year and March of 2021. It is a great aircraft. It offers 4% more seats with 16% less fuel burn. It also delivers significant environmental savings in terms of reduced emissions, reduced noise.
We think that the MAX aircraft will be key to Ryanair's ability to continue to drive down operating costs and therefore take EU market share from other high-cost EU carriers once we recover out of the COVID-19 pandemic. The Boeing talks, as Neil said, are continuing. We're in discussions with them about compensation for delayed deliveries. We're also reviewing pricing with them. We have third round of talks where we're looking at the possibility of a new MAX-10 order. Really, we can't conclude those negotiations until we have some certainty or some definition on when the aircraft will return to service in North America and when we can reasonably expect the deliveries of our aircraft. It's a great aircraft, and we're believers in it. We think it will transform Ryanair's cost base for the next 10 years. Just to touch briefly on the board updates.
Stan McCarthy will take over as non-executive Chairman for the 1st of June in two weeks' time. Louise Phelan will replace Kyran McLaughlin as the Senior Independent Director. Sadly, David Bonderman and Kyran McLaughlin will leave the board on the 30th of May. I want to personally thank them on my own and on your behalf for the extraordinary commitment to the service they've given to Ryanair over the last 20-plus years. We would not be Europe's largest and leading airline without the drive, the vision, and the support that David and Kyran have given, not just to the other board colleagues, but also to the management team over the last 25 years. Stan has done a review of the board.
We're very pleased that in terms of gender diversity, 40% of the board from the 1st of June will be female, and we have and will shortly announce details of refreshed committees. The Audit Committee continues to be led by Dick Milliken. Julie O'Neill will replace Howard Millar as Chairman of the RemCo, and Stan McCarthy himself will replace Michael Cawley as Chairman of the NomCo. Outlook. For the next 12 months, it's obviously impossible for us today to give you any guidance on either traffic numbers or on profits for the next 12 months. What we know for pretty much certain is we're going to carry almost no passengers in the quarter ending 30th of June, and we're looking at a profit after tax loss in that quarter of something just over EUR 200 million.
We would hope to be back flying a reasonable volume of passengers in the second quarter. Even at that, we think the second quarter, we're looking at probably a small loss, maybe break even, a small loss. We have no idea because it's entirely subject to passenger numbers and yields and the lifting of government restrictions. However, we're taking appropriate steps to further reduce costs. We're in discussions. We're looking at base closures across Europe. We are looking at reducing our crew complement by about 3,000 pilots and cabin crew. We're talking about meaningful pay cuts in that area as well, and we've also reduced our head office numbers by almost 200 jobs during the period from March to June. Ryanair has a very strong liquidity, and we've taken extraordinary cash preservation measures, which have been reasonably successful.
We will need pay cuts, we need job losses, we need lower airport costs if we're going to right-size the business and right-size the cost base to compete with these European flag carriers who now have over EUR 30 billion of state aid to fund below-cost selling against Ryanair for the coming years. We do expect lower airfares, though, to drive strong volume recovery once we get back flying, and particularly into 2021. I think it will be 2022 or later before we see a recovery in pricing. State aid will continue to drive down airfares, and we have no doubt that Lufthansa, Air France, and Alitalia will engage in below-cost selling. That is the ground on which Ryanair is strongest. We have the lowest costs, we have the lowest fares, and wherever there's below-cost selling, we will price below the below-cost selling by the flag carrier airlines.
There is a unique medium to long-term opportunity at play here. Our competitors have either failed in the last 12 months or will significantly cut capacity post-COVID-19, and Ryanair would hope to take those additional deliveries from Boeing and exploit the opportunities that will undoubtedly exist as a result of competitor failure or capacity cuts in recent months. Yeah. Anything else?
No, I think that was very comprehensive. Thank you.
Okay. Now we're open for questions and answers.
How did the airline perform in FY 2020?
It was a relatively good performance. Profit after tax was up 13% to just over EUR 1 billion, before exceptional items. Traffic grew by 4%, to 149. Unfortunately, a bit lower than we'd expected due to 5 million lost passengers in March due to the COVID-19 groundings.
What drove the 10% revenue growth?
We saw, as I said before, 4% increase in traffic in the year, coupled with a 2% increase in average fare. Our revenue had a very strong performance, up 20% to just under EUR 3 billion. The standouts for me on that were the reserve seating and the priority boarding, which did very well, along with the initiatives that our team and Labs rolled out with the new personalized website in November.
Why did ex-fuel unit cost rise 4% when your guidance was up 2%?
The two points of that are due to the fact that we lost over 5.2 million passengers in March due to the COVID groundings. The other 2% was driven by higher staff costs as we annualized pilot pay increases, and our crewing ratio increased due to resignations pretty much dropping to zero. Our maintenance costs were also up in the year due to non-delivery of the MAX game-changing aircraft, and we were flying older aircraft than we would have originally had planned to do so.
How was on-time performance in FY 2020?
Very good. We had a 90% on-time performance excluding ATC. This is all down to the investment that the group put into our handling arrangements last year at the likes of Stansted, Poland and Spain.
Please explain the EUR 350 million exceptional charge?
This is mainly down to our fuel for FY21 going ineffective. We have too much fuel hedged compared to what we're going to fly now due to the COVID groundings and the slow return to service. The other element of that is some favorable mark to market on currency hedges for CapEx, which have also gone ineffective due to delays in the capital expenditure spend.
Could there be another exceptional charge in FY 2021?
It can't be ruled out. If, for example, return to service is slower than we'd expected, then we'll need less fuel and that will go ineffective.
Can you describe your balance sheet?
Balance sheet, one of the strongest in the industry. It's a BBB rated balance sheet. At year-end, we had EUR 3.8 billion cash, and thanks to drawing down 600 million GBP under the CCFF in the U.K., we had EUR 4.1 billion as of today. Very strong asset base as well. 90% of our fleet is owned, and of that, 75% or 330 Boeing 737s are unencumbered. That's approximately EUR 7 billion of the book value on our balance sheet, a significantly higher figure if we were to take the market value.
What cash preservation and cost-cutting measures have you implemented?
We've grounded 99% of the aircraft fleet since the middle of March. We've imposed 50% pay cuts across the board in March and April and May so far. We've deferred all non-essential CapEx. We ended the share buyback program. We canceled all recruitments [into treasury spending]. We've accessed EU government payroll support schemes almost across the entire continent, and we're now in active negotiation with airports, with our unions, and with aircraft lessors about further delivery cancellations and further cost cutting.
What's your weekly cash burn?
Well, thanks to all of those initiatives that Michael just listed there, we've gone from spending approximately EUR 200 million a week back in February to just over EUR 60 million a week now.
How are discussions going with the unions in relation to pay cuts and job losses?
Well, we initiated them in the last four weeks. The process is underway. We can't give you any detail or color on those talks, but this is serious and urgent. We've already let go 200 of our very valuable team members at our offices in Dublin, Bratislava, and Madrid over the past three months. It's inevitable that the payroll support schemes will run off in the next couple of months. As we return to flying in July, we will need considerably fewer pilots and cabin crew. I think the challenge for the unions is we're trying to minimize job losses, but we can only achieve that if we get the 20% pay cuts we need.
Are there opportunities for sale and leasebacks in the current market?
There's a lot of opportunities. We've already received a number of sale and leaseback proposals and indeed a number of secured debt proposals, but we don't need the cash at the moment. We recently tapped the U.K. CCFF, where we drew down GBP 600 million. The balance sheet's in pretty good shape.
When do you expect to return to service from the COVID groundings?
Well, we've already announced we plan to operate about 40% of the schedule in July. We hope that will grow to 60% in August. This is subject to the easing of government flag restrictions and restoring some level of consumer demand. It will involve us in operating about 1,000 daily flights. We'll try to cover up to 90% of the route network. We do expect significant price discounting, both by Ryanair to stimulate these travel volumes and also as we compete with the state aid junkie flight carriers around Europe, all of whom will be engaged in below-cost selling, taking advantage of the enormous sums of state aid they received in recent weeks.
What health measures will you apply when flights resume?
We have a very good video, and I encourage everyone to look at it. It's on ryanair.com, which sets out the various measures. The likes of things you're going to see are face masks, face coverings, temperature checks in airports across Europe. We already have state-of-the-art HEPA filters on board all of our aircraft. We have gone cashless for all of our onboard sales, so we'd encourage our customers to use the contactless option. We don't agree, and we were pleased to see that the middle seat being left empty will not be a requirement of return to service. We will do everything in our power to ensure that social distancing is observed in the airports. Onboard, masks will be the key criteria.
Do you expect strong demand from consumers when flights return?
We think demand will restore pretty quickly once government travel restrictions have been lifted. We don't think wearing a face mask is going to encourage people to travel rather than make them nervous. I think the critical thing is going to be deep price discounts, both by Ryanair and by our state-aided competitors, we think will stimulate rapid volume growth once return to service is established over the period of July, August, September.
Will you increase growth post-COVID?
We'll certainly look at opportunities. It will depend on securing some aircraft deliveries from Boeing this winter. We will return with as many aircraft as we can, and certainly there's opportunities. We're already in active negotiations with a wide number of airports who have seen either its incumbent carrier fail or have seen them cut capacity, who are talking to us about the possibility of either entering their airports or taking up more slots at their airports and delivering them faster growth.
Ryanair have been critical of state aid. Why?
We've been very critical because state aid distorts competition, and it distorts the market. To give an airline like Alitalia, which is only the number 2 airline in Italy, Ryanair is about 50% larger than Alitalia in the Italian market. To give Alitalia EUR 3 billion in state aid, which they will then go and waste without reforming their cost base, and will damage competition in Italy from Ryanair, easyJet and others because they'll engage in below cost selling, is not the way forward. We've given examples of the French government, who are refunding aviation taxes to Air France only, but requiring that Ryanair, easyJet, BA and others continue to pay these aviation taxes, which are then returned to Air France, is clearly in breach of not just state aid rules, but also competition rules as well.
How did the group airlines develop in FY 2020?
The group bedded down well during the year. Buzz in its second year of operation saw its fleet grow to 45 Boeing 737s. It moved outside of Poland where it opened up new bases in Prague and Budapest. Our latest airline, Malta Air, which we launched last summer, has grown rapidly to 120 Boeing 737s. It now operates our French, German, Italian and Maltese bases for the group. Ryanair DAC saw Eddie Wilson appointed as the CEO last September. He well and truly has his feet under the desk at this stage. They launched five new bases and just under 400 new routes last year, although their fleet did shrink to 275 Boeing 737s as Buzz and Malta grew their operations. Lauda, while it had strong traffic up to 6.5 million last year, unfortunately underperformed.
Most of this was to do with the fact that it was competing with competitors in Austria and Germany who are selling below cost in their markets. They're now looking at various cost-cutting initiatives in their business.
Can you explain the Lauda restructure?
Lauda is facing, as a result of the COVID-19 pandemic, an existential crisis. There's a number of factors there. Firstly, Lauda was loss-making all the way into the COVID-19 crisis. The entire Lauda fleet has been grounded in Germany and Austria since the middle of March. Lauda when it returns will be facing competition from the Lufthansa subsidiary Austrian Airlines, which will receive EUR 800 million in state aid from the Austrian government, whereas Lauda will receive not a penny. The only way Lauda can survive is a deep restructuring of the Vienna operation. Those discussions are already underway. We've already canceled eight of the aircraft deliveries we expected to take this year. Lauda's fleet will cap out at 30.
15 of those aircraft are based in Vienna, but the Vienna base will close at the end of May if the Austrian unions don't agree to a new CLA with pay cuts and productivity increases for pilots and cabin crew. Frankly, it would be cheaper for us to ground the Airbus aircraft in Vienna and not fly them, than it will to continue to fly them with an ineffective and disastrous CLA. The Lauda bases in Stuttgart, Dusseldorf and Palma will continue, but I think it's likely that the Vienna base will be closed at the end of May because we don't see the union, which after all represents mostly Austrian Airlines employees, agreeing to these reforms that are necessary in order to allow Lauda to survive. If they do agree, the Vienna base will survive, and it will thrive, but we don't think that's likely.
Will you close other bases?
Yes. There's going to be up to 3,000 jobs lost. It's inevitable that some other bases will have to close.
Where would this be?
At the moment our bases are in the U.K., in Spain and also in Germany, which are cost- making. If we don't secure pay cuts across the board in Europe, other bases in Italy, in Belgium, in Central and Eastern Europe will also be up for closure.
The MAX's delay until Q3, is there an update?
We're now over a year since we were due to take our first MAX into fleet last April. Boeing are indicating at the moment that they hope to see a return to service at some stage in the late summer, maybe August and September. If we see the aircraft coming back in the U.S. in September, we would hope to potentially see our first aircraft sometime between October and March of next year. This is a phenomenal aircraft. We remain totally committed to it and big fans of the 16% fuel efficiency, 4% extra seats which will drive ancillaries and other opportunities within the business. We are, however, in discussions with Boeing. Those discussions will, as Michael said earlier on, remain until such time as we have certainty on when our aircraft will actually deliver and what the final delivery schedules are going to look like.
Can you explain the senior board changes announced this morning?
We've already gone through them in the presentation. Stan McCarthy replaces David Bonderman as chairman from the 1st of June. Louise Phelan replaces Kyran McLaughlin as the senior independent director. David and Kyran will leave the board on the 30th of May after some 25 years of service. By the time we publish the annual report, you will see that the various board committees have been refreshed as well.
Is there any traffic or profit outlook for FY 2021?
It's very difficult. In fact, it's impossible to give full year profit guidance at this point in time due to the uncertainty around the COVID-19 groundings and what consumer demand is going to be like after a return to service. Closer in, having lost nearly all of our traffic in the first quarter, we would anticipate that we'll lose somewhere over EUR 200 million in the first quarter, hopefully a little bit less in the second quarter, which is our peak summer period. At this stage, based on the return to service plans that we have, at best, we'll be seeing somewhere under 80 million customers this year, which to put that in context, is almost 50% of the 149 million that we carried in the year just ended. We think that pricing will be very depressed in the market, great opportunities for the customers.
Due to all of the state aid that is in the market, there will be significantly below cost- selling. As we are the lowest cost operator, we will clearly have the lowest fares in that market, and there will be opportunities on a kind of two to three-year timeframe to participate with our new MAX aircraft. It is going to be difficult out there in FY 2021.
Michael, Neil, thank you.
Thank you very much.