Earnings Call: Q1 2020

Jul 29, 2019

Hello, and welcome to the Ryanair Q1 Results Conference Call. Throughout the call, all participants will be in 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, the CEO. Please go ahead with your meeting. Okay. Good morning, ladies and gentlemen. Welcome to the Ryanair Q1 results conference call. Neil is joining us By phone from London, and then I have most of the rest of the team with me here in Dublin. As you have seen this morning, we reported 21% fall in Q1 profits of €3,000,000 The key element of that was a 6% decline in average fares, 11% debt stimulated, 11% traffic over 40 Yes. Revenue per guest was flat at €65 per passenger, largely due to a better than expected performance in ancillary revenues. We opened up 239 new routes and 4 new basins in Marseille, Bordeaux, Southend and Berlin. Malta Airlines became the 4th group airline. The Lauda Airbus fleet has sold 20 A320s this year. We have redelivered to Lufthansa the very expensive 9 operating leases we had within last year. The MAX deliveries are delayed continue to be delayed and are a continuing concern. Ryanair has become the 1st EU airline to focus our monthly CO2 emissions, and we have completed just over in the quarter, dollars 100,000,000 of the $700,000,000 buyback. I think if there were a couple of key themes we would add to today, it is that we continue revenues continue to be driven, particularly the 2 weaker markets For Germany, where Lufthansa continue to engage in below cost selling through its Eurowings subsidiary, it loses money handover. And the U. K. Where Brexit concerns appear to weigh heavily on consumer confidence and trending. Nevertheless, as expected Our underlying airfares are down, the ancillaries driven by stronger priority boarding and preferred seats continue to grow strongly. Fundamental to all this though remains Ryanair's cost leadership. Nothing has changed in the last quarter, in the last 12 months or the next 12 months that will alter Ryanair's position as the lowest unit cost airline in the European Union. In the quarter, unit cost ex fuel rose by 4%, mainly due to the consolidation of Lauda costs in the Q1. They were excluded from the prior year Q1 comp because of the they were treated as a conceptual item at Holland and a 21% increase in staff costs, which is the Flow through of the 20% increase in pilot pay we committed to at the start of 2018 and also the cabin crew paid deals we in place as we concluded union negotiations across most of our major markets in Europe. Our FY 'twenty fuel bill is 90% hedged at $71 Per barrel, we've now hedged about 37% of our FY 'twenty one fuel position at about $63 per barrel. On time performances in Q1 and into the summer has been a very dramatic improvement, both in terms of on time performance. We've improved more than 7 percentage points over Q1 last year. Excluding air traffic control delays, we are consistently recording over 90% of contract performance. We've significantly reduced the number of cancellations, so we would expect that to be translated to lower ATREU261 costs going forward. And we hope that will be maintained, although we've just recorded we had a bad weekend this weekend with European APC delays. On the Boeing 737, the first five MAX aircraft which were due to be delivered in April, May June have been delayed. We said in the press release, probably December, We would, in fact, over the weekend, probably move that now to January. The latest information from Boeing last Friday was that they expect to be The return to service software amendment now in October, that was previously September. And I am concerned at the way the MAX returns to service keeps slipping. If we if the MAX returns to service in December, We would expect to take the first of our the MAX 200, the game changers, in about the end of February. If it moves to January, that's probably the end of March. So we're now looking at only being able to take something between now 30, but that would be as big as 20 aircraft for summer 2020, which would significantly truncate our growth rate into summer 2021. On the basis that we could take delivery of 30 of the MAX aircraft That will be down from the 58% we are originally scheduled to take in advance of summer 2020. That would have our Summer 2020 growth rate from 7% to 3%. We carry about 127,000,000 passengers or guests in FY 2021 as opposed to the original on 162,000,000 guests. We remain committed to the game changer aircraft, But obviously, we won't take any deliveries until these have been fully certified as safe to fly by both the American and the European safety authorities. We believe when they return to flight, they will be the most certified, most audited aircraft, and they will continue to deliver 4% more seats per flight with 16% lower fuel consumption, and they will transform our cost and our business and enable riders continue to grow strongly into the coming years with lower fares and lower much lower fares and much lower cost than any other European airline. Put together with, say, for example, the Airbus A321 MAX 200 keeps them out of the park, particularly at the prices we've negotiated for these aircraft. The balance sheet remains strong. Over 60% of our fleet is jet free. The Board approved a €700,000,000 share buyback program. And in Q1, we've returned almost €100,000,000 of that to shareholders. In terms of the group structure, Evolving this summer in June, Monterey between the 4th aircraft in the group. That will take over our Maltese based aircraft, 6 aircraft currently. We'll also transfer most of our French, German and Italian aircraft. We'll move off the Irish AOC onto the Maltese AOC. This is to meet our obligations with our union agreements in those countries to move to local labor contracts, but also local taxation By moving the aircraft off the Irish AOC and onto the Maltese AOC, we allow our German pilots and German group to pay their income taxes in Germany, Our Italian pilots and German goods pay their income taxes in Italy and our French pilots and German goods to pay their income taxes in Italy. They already pay their social tax In those countries, which is the countries where they reside, there is an important concession, I think, commitment on the part of Ryanair as part of those unions agreements that we move towards local income taxes as well as local contracts. In summary, Lauda is operating The lower cost A321s, they will help Laudis to significantly reduce its losses this summer, but we It was simply loss making in the 2nd year of operation and largely because of the very low fare environment in Germany and in the Austrian markets. We're happy to report that Poland continues to grow. This summer's last 7 charter aircraft, Kevin being scheduled aircraft and will grow its profitability in its 2nd year of operation. Ryanair is and remains Europe's greenest, cleanest airline. We are continuing to roll out environmental measures such as we've become the 1st airline to commit to and to publish monthly CO2 emission reports. In May, we launched our environmental partnerships where we're investing at multi €1,000,000 per annum and offset projects with carbon partners in Africa, Portugal and Ireland. It's important to reject this kind of mistaken A function, particularly in Europe and among some of the environmental lobby groups that airlines get a free ride, we don't. And we paid over €540,000,000 in environmental taxes in 2018 that will rise to over €630,000,000 in 2019 and equates to more than on average, it averages out of more than €4 per Passenger are more than a 10% rate of tax on revenues, never mind on our fuel bill. In Board succession, we're pleased to announce Louise Sladen has agreed to take over as the Senior Independent Director in summer 2020 when Claire McLaughlin steps down from the Board For over 20 some 20 year service, much of them as our SI team were very grateful for security leadership and guidance over that period. Looking forward to December FY 2020 guidance, we continue to guide broadly flat PAT. We We haven't altered the range. It remains within the range of €750,000,000 to €950,000,000 As the current weak fare environment has continued into quarter 2, We expect H1 fares to be down approximately 6%. We have almost 0 H2 visibility, but our FY 2020 guidance is towards the lower end Our guided minus 2% to plus 1% range for the full year. We do not Shared kind of unbridled enthusiasm and optimism that was reported in recent weeks by with the DD Jet on their conference calls. We would remind everybody that back in January, there was also a chance of unbridled optimism about summer fares from both of those competitors Within 3 months, we're guiding down there, and it's only raining back on right and optimism. We think we are cautious on pricing into the winter. Brexit and the risk of a hard Brexit has significantly Materially increased, we think, with the new government in the U. K. We don't expect there will be a disruption to flight because we The European Union and the British government who have put in place those interim arrangements, which we expect will last for a 9 to 12 month period, will be Restored and reissued if there's a hard Brexit on Thursday October, we'll protect this winter We already have had our ownership rules mitigation measures tested and approved by our regulators. So we're in pretty good shape. And the U. K. Taxi crudes would come under question. We've set up the Ryanair UK AOC. There will be a program over the next number of weeks. We are working actively now on base cuts and possible base closures. We need to accommodate the possibility of taking 30 aircraft for summer 2020 instead of 58. 30, maybe come 20, maybe come 10 if the MAX deliveries are further delayed. And that is, I think, in the we're going to initiate Discussions with our people and the union, certainly over this week and next couple of weeks about this winter schedule, where there will be material cutbacks and into next Some are quite for material cutbacks, and we would not rule out redundancies and job losses, which will be inevitable if The MAX delays are presently envisaged or get worse. Having said that, the ancillaries We expect issue will grow 10% to over 152,000,000 passengers. It's slightly back off 153,000,000 previously guided mainly due to the maximum delays. Costs were doing slightly better than we had originally envisaged, even as the fuel bill grows by €450,000,000 In fact, ex fuel unit cost will rise by just 2% for the full year. We are sticking with that guidance despite the fact that originally much of that 2% rise was contingent upon operating some 50 MAX aircraft in the second half of the year. So we're coming in with a slight beat on the unit cost. However, all of this guidance remains very heavily dependent on sales in Q2 pairs. H2 prices on which we have very limited visibility at the moment, the absence of this security events and no negative Brexit development in H2 and which cannot be ruled out at this point in time. And Liam, do you want to take us through the MD and A and then we'll open up our questions, please? Sure. There's not a huge amount to add to what you've already said, Michael. I just, I suppose, point out that this is the Q1 that we had IFRS 16, the lease The impact, as expected, was fairly modest to the group. It impacted net debt by about $220,000,000 That will grow to about 3 €30,000,000 to take on more leases by year end and the P and L impact was pretty much de minimis. The balance sheet continues to be in a very strong position, which as Michael said, over 60% of the fleet debt free. And I think importantly, the cost guidance Just 2% shows that we continue to be very disciplined on the cost in the business. And I think, Michael, you covered everything else. So we can go to Q and A. Okay. Thanks. So we move to Q and A. Now for obvious reasons, please don't ask questions about what we think the yield will be in the second half of the year because we don't the answer We don't know. But other than that, I'm going to restrict everybody to just 2 questions, please, per person. I will get through this as quickly as we can. And our first question comes from the line of Wayne Seywirth of Evercore. So you've had a history of opportunistic Aircraft purchases in the past stepping up at a time of crisis for lack of a better word to lock in an aircraft ownership cost advantage in the future. I just wonder why you're not doing that now. Is it some of these uncertainties Are you talking about risk Brexit, etcetera? Or is it something that you're not seeing from Boeing currently? Okay. Duane, I'll answer 2 points to that. We've been very opportunistic. I think within Lauda, we've gone from 0 to a fleet of 30, Very low cost secondhand A320s or summer of 2020. That will be almost 10%, I will not far off 10% of the fleet next here. And we're looking at other opportunities there for our low cost operating lease A320 aircraft, particularly the older generation, the COS, They seem to have had their monthly lease rates devalued. We are in dialogue with Boeing about a new aircraft order, but obviously, The discussion with Boeing at the moment is hindered by their inability to get the aircraft, the best aircraft Back in service, Boeing and Airbus have long tailbacks or long tails in their order book that essentially run out to 'twenty two, 'twenty three. And we haven't we're not yet in a position where we've agreed anything on price. With Boeing R and D with Airbus, we've had discussions with them on delivery past 2022, 2023. Airbus are pricing very aggressively at the moment. The world has moved in their favor given Boeing's production issues. And Boeing, I think, are not yet at a point where we see value yet in a new aircraft order for the period from 2023 onwards. Thank you. And then just on your margin level and and the sensibility. Was that long ago we were in sort of low 20s. This year you'll be low double digits, maybe 11%. How do you think about the long term margin level of the business? And when do you see margins expanding again? Thank you. I think the long term margin of the business here is 20% after tax. It has been compressed over 2 or 3 periods in Usually, as oil prices have taken off, which is what we've been facing last year and this year, I think we would Handled reasonably well the one off step up in salaries, pilot costs and cabin crew costs. We're running through a period 2 year period where we've had very volatile and rising oil prices. This year, we're in a year where paid $71 per barrel, that's up from just over $40 a barrel 2 years ago. If we have a stable oil price over a 2 or 3 year period, I. E. Where a main concept of this business is and will continue to deliver 20% after tax margins. But we are next year, I would expect us to see some margin improvement if we can hedge out the remainder of a year at or below $60 per barrel. At the moment, we're 37% hedged at about $63 a barrel. We're looking for opportunities to continue to hedge at under $60 a barrel, but we haven't seen it yet at the moment. Thank you. Our next question comes from the line of Jarrod Castle of UBS. Hi, good morning, gents. 2 for me. I think 2 weeks ago, you said you could give a little bit of color if you heard about What the delay in the Boeing deals means for one that put on your thinking on pricing next year, I. E, slower growth? Should that be better for pricing? And then potentially just any color on what that means also for costs for 2021? And then the second question or maybe it's a third you can type in. Any update on potential for summer staff disruption and what deals still need to be signed? Okay. I mean, it's very difficult to deal with the Boeing today Because they keep getting delayed further and further. It's only on middle of July, the 15th July, we issued a press release saying we now no longer To be able to receive take up until the end of July, we were expecting the Boeing aircraft to be back flying in September, as did the rest of the industry. We're now saying it now looks like January next year as recently as Apergy Southwest moved to the MAX out of their schedules until January 2020. There's a number of different ways you can look at it, but when we run the speculation, I think there is going to be significantly less capacity in Europe in summer 2020. In part, because of the MAX delays, we would have less capacity growth ourselves. I think in major part because there's going to be some very significant and substantial airline failures this winter. We already No, for example, Norwegian are going to cut or close between 6 or 8 basis in October, November this year, almost all of which where they compete with us. So there will be more failures this winter. There are some airlines out there who cannot sustain the losses they're making with oil up at 65 dollars $70 a barrel who don't have a balance sheet. And we understand that some of the credit card companies are already Relaying the lease of payments to a number of our airline competitors at the moment in Europe. Now timing of those failures, I don't know. But and it depends on what happens to oil during the winter period. We expect that there will be significantly less capacity growth into the summer of 2020. I would, at this stage, be modestly optimistic about pricing into summer 2020, Given that we will have less capacity growth, most of our competitors are already announcing less are cutting back their capacity growth, most notably Lufthansa And Eurowings, which continue to lose money hand over fist and even Lufthansa at some point in time have to be able to demonstrate that buying everything is that moves in Germany Some kind of underlying business competition, which they've manifestly failed to do thus far. And if a larger one of the larger airlines, say, for example, in Norwegian Sales in the next number of months, that would obviously have a transformative effect on capacity into summer 2020. But I can't be specific. We are not very good at it. We can guide you, but we can't give accurate forecast as who fails and when. Costs in 2021 overall at this stage, clearly oil looks like it will be somewhat benign environments. We would expect to be able to Continue to hedge into FY 'twenty one at or below $60 per barrel. I think it's instructive at the moment given all the uncertainties in the Middle In the Middle East, in the Strait of Hormuz, that oil is still hovering only in the low 60s. And I think that is because of the strength of U. S. Shale production continues to be the major swing producer. And I think over the medium term, we are looking at a period of Sustainably more modest oil prices or lower oil prices because I don't believe that the one take in the Russians can continue to cut production given the fiscal constraints that they're facing at home, but who knows. And the other one, I missed the last question. Staff disruptions, I mean, we have we don't expect I just repeatedly tried to say, we don't expect Staff disruptions during the summer period. We have gotten through July and certainly the first half of August without staff disruptions. We have been surprised by a number of press releases that have been issued by unions in the U. K. And in Ireland talking about resumption of Threatened strike actions by pilots or cabin crew at the end of August or into September. I mean, it seems to us that these are, even by the standards of some of these trade unions, Chronically ill timed the deal judge given that that will be coincide with the period in the next number of weeks where we are going to be announcing base cuts, base closures, job cuts driven by max delivery delays. But we are in active we are in active dialogue with all of these people. And while we don't expect strikes, we have continuously advised our investors that where we have unions, we can't rule them out. But we have demonstrated certainly over last summer that we're very good at managing our way around these strikes. And I think in a At this point in time, when we have now announced a 21% decline in Q1 profits, we have significant MAX delays. We are now looking at Base costs and closures as early as October and a significant number of pilots and cabin crew redundancies. If there are certain people who want to go and strike in the midst of that against that backdrop, then frankly, God bless them, and we will manage our way around them. We will not be taking concessions at this point in time, either on the increases or costs where we are looking actively at job losses, pilot and cabin crew job losses, chase cuts and lease closures. Okay. Thanks very much. Our next question comes from the line of Savi Syth of Raymond James. Just a questions from me. Just a bit of a follow-up on, sir. Given making a maximum certainty, I wonder if you can I compare your position to the last time growth was stalled, I think, back in fiscal year 2014? Just kind of implications for earnings and I you alluded to this a little bit. Is there an ability to maybe grow the Airbus side to Timna Cup for it? And then just the second question, I wonder if you could comment on Peter, can I exit here to what seems to be more of a peril move for kind of that easyJet and just what it might mean for management roles at Ryanair? Okay. Look, it's very difficult to see. Discussing the MAX, Tavy, look, in the situation as we are today, We were originally expecting 58 aircraft for the fiscal 2020. That's now 30 at best. It may well move to 20, it could move to 10, and it could well move to 0 if Boeing don't get their shit together pretty quickly with the regulators. Now obviously, we are working actively with Boeing and the asset. Safety is our number one consideration. And as one of the airlines that has the MAX simulators in its hold, we are everything we do will be driven by ensuring that this aircraft Safe to fly when it is approved to do so by the American and the European authorities. And we will not take in the rear any MAX aircraft Unless it is certified, it's fit to fly. And we are satisfied that the authorities are certified to be fit to fly. So and while we will continue the opportunity with the on the Airbus side, we are not going to run out today and suddenly sign up another 15 Airbuses for next summer. We simply there aren't that kind of availability, and we would simply start feeding up the cost of secondhand A320s. But we have already committed to growing the Lauda fleet from 20 aircraft to 30, 32 aircraft for summer 2020. We have beaten that into if we can only take 30 Airbus or 30 MAX aircraft, that gets us another 10. Lauda, some of those aircraft in Lauda may well be charged with operating some Ryanair bases outside of Austria and outside of Germany in the summer of 2020. Those kind of opportunities are there. But we would not expect we will I think our best estimate at the moment is that the traffic growth Next year, we're now $152,000,000 into FY 'twenty one. It will now be $157,000,000 And that number could move lower. It could be $155,000,000 It could be 100 and 3, depending on the MAX aircraft being researched by supply. And Touching on Peter, tell you, obviously, I cannot for you, I cannot comment on anybody's any individual Contract or terminate trading, yes. And all I will say is what we have said to investors last week and say this week, All of the senior management in Ryanair have pretty long termination or notice periods in their contract. In Peter's case, that's currently 6 months. And thereafter, they have a pretty extensive non compete agreement, which arise from the share option schemes that they have agreed and received over a period of time. So I would not expect any senior manager in Ryanair to be moving to a competitor airline for a reasonably long period of time. And that applies to me. It applies to all of the senior management team. And I really can't comment. Other than that, there will be a We are in dialogue with Peter about the termination period, but there will be no movement from us on what our We would be extensive at non compete agreements after the termination period as well. Next question please. Thank you. Our next question comes from the line of Daniel Ruska of Bernstein Research. Please go ahead. Hi, guys. I'll try to coax something out of you for the FRS in H2 anyway. If you look at your RPP performance kind of you guided to, it looks Challenging, right? And given your current comments around the environment, I'm just wondering what I'm missing. And how do you could comment on what actions, decisions, projects you're putting in place that will benefit fares or ancillaries specifically in H2, kind of how are you thinking, what are you having the organization do right now to kind of bolster what you can for H2 on that performance? And then secondly on Buzz, I just was wondering if you could shed some light again on the key reasons for branding as Polish operator, not as Ryanair. Are you will Buzz try out different product strategies, different ancillaries? Were there legal or labor reasons? What are the key decisions around not branding it liner, whereas you already have a sizable liner presence in Poland, which I guess will now be rebranded to both. Okay. Thanks, Eileen. I mean, obviously, you're not going to squeeze any further detail out of me on H2 Fairs because, frankly, We have almost no visibility. I would give you a couple of themes, though, that we would focus on why we're not kind of Moving the H2 fares down or the revenue per passenger down for the full year. That is an amalgam of 3 different influences. 1, We have very weak prior year comparables on average fares into H2. We are but we're not quite sure yet how we factor in things like Norwegian closing 6 or 8 basis in this winter. Those places are generally in the U. K, Spain, Italy, the Dublin base, for example, is going to be reduced to 6 to 1 aircraft, so it's effectively being closed. Quite how that plays across, we're really not sure yet, but it must be reasonably helpful for H2 pricing. And I think the 3rd issue we would see is that we're about to the next week or 2 weeks roll out the number of base cuts, route closures, We are driven by the MAX delivery delays. And why that effect this winter is there's a number of If we were feeding 58 aircraft next summer, we would have a lot of new routes and growth at certain places. And if we don't have that kind of momentum next summer, And it doesn't make sense to go through the winter suffering losses, short term losses at some of those winter basis. Those are the 3 kind of upsides good for average fares in the second half of the year. Running against That and it should not be underestimated is the real risk now of a hard deal a hard Brexit in at the end of October. It seems the U. K. Governments are determined to leave without a deal. We don't believe there will be any move by the European Union to assist them or help them. If they're determined to leave without a no deal, we believe the European Union will say good luck because it is a political issue, not an economic for the European Union. So this is a time, I think, for great caution. It is why I would like to separate ourselves yet again from The more optimistic statements coming out of some of our competitor airlines in the last week or 2, they have a history of making To this week forecast on average fares and yields, which they subsequently said, I have to work back. We generally have a high history of being more pessimistic. Sadly, in the last year or 2, we've tended to be more right. But it is where it is. We don't have the visibility. We don't think it will be any worse than we're guiding, and there may be some moves to the upside. But We also that if Norwegian goes bust in September or October, which I think is a I think it's a possibility. I wouldn't put it any higher than that. That would transform pricing, Cost, pilot supply, airport deals, etcetera. So we are in a very challenging environment. And as challenging as there will come lots of opportunity if you are the lowest cost operator. We are the lowest cost operator. Moving to the Buzz brand in Poland. Think it's important as we move to a group structure. And for a group structure to be effective, the individual airlines Have to have the loyalty towards the individual airlines. People who work for Lauda are proud to work for Lauda. The people and we want to have it separate, Identity in Poland, less so when it was a charter airline as a Ryanair Sun, but now as it has built that charter presence And it's no, it's important that it does have a separate identity and presence in the Polish market. It now operates 7 charter And we think and believe that the people who work for Buzz will be proud in the future to work for Buzz. They may be a subsidiary of Greater Ryanair Group. But we do want to encourage Between the individual group airlines for the allocation of resources, and we should encourage the individual airlines to compete aggressively against each other. I think IAG has demonstrated the effectiveness of that with separate brands. We've got separate brands even within Spain. They have Whelan, Iberia Express and Iberia. I think Willie has done some excellent work in transforming the cost base of those Spanish airlines Using those multiple brands, and I see there's no point in us moving to a group structure. All we're going to be is Ryanair, Ryanair Poland, Ryanair Malta and Ryanair Austria, we do actively want and we intend to encourage those concerns to compete against each other to help us lower costs and improve efficiencies. Our next question comes from the line of Stephen Furlong of Davy. Structures. I saw you had an answer there for the Rynor Daphne ops CEO job and Zippresen progressing in general with the management teams at the different airlines. And the second question, can you just maybe give some color on ancillaries and how you see that progressing and particularly with the work done And being done by Reiner Labs in terms of personalization and things like that. Thank you. Okay. I'll give the first. I might ask Kenny just to give you a favor on the ancillary. So, Diplomat and Management Structures are evolving very Quickly, we have a good management team in Lauda, led by Andreas Gruber. We have a very good team in Buzz, Trading confidently led by Mikhail Kaczynski. I can never my Polish pronunciation is not at its best. Michel Kaye. We have just appointed Diomedo Canila here from Ireland as The new Chief Executive of Malta Air, and we have rolled out the advert for the CEO for Ryanair, Zach, the Irish Airline. As appeared last week, we expect to be conducting applications will conclude by the end of July. We expect to do interviews through August. The original timetable for having a new CEO for Reinhard Jack Wolf is the AGM in September, and we're well on track to do that. We love it. When Peter has announced he's stepping down, we use that opportunity to roll out applications for a center of ops into the same ad, And we will expect to have a replacement for Peter in Greece certainly before the end of September. So the management structures are evolving well. And I think we will give much more color and detail on that on the half year results roadshow, which will be held at the end of October. And on ancillaries, Again, I'll ask Kenny just to give you a flavor. But the uptake continues to improve, and much of that is being driven by the 2 we highlighted, which The reserves speaking in the priority boarding, the work that John Hurley and the team at Reiner Labs are doing has is making these Service is much more customer friendly and easy for customers to take them up digitally on the mobile. Jenny, do you want to give some flavor and color on that? Yes. As you said, Looking back over the quarter, it's season priority boarding where we have made changes in terms of removing ticks, making it more targeted, just making it easier for to purchase. Stephen, over the next 6 months, it's really into the winter and the second part of the winter, so the New Year, that we'll be rolling out the stuff that we're now working on behind the scenes. So that's a much more data driven approach, again, taking out clicks, making it more target in terms of the products that we're pushing in front of customers. So the story and the plan hasn't changed there. And as always, we're working it over the summer, and we will release it market by market, bit by bit And potential for an active trip, starting with mobile and then coming on the desktop, but it's too early to say more than that. You'll see it coming in a month Our next question comes from the line of Mark Simpson from Goodwillie. Good morning. And to ex fuel unit costs in the Q1 were plus 4.4%. Can you strip out louder from that? Can you tell us what the like for like trend was? And following on from that, what lines help you deliver that plus 2% overall for the year? And then second question, you have in the past talked about louder losses in the range of £250,000,000 for this year. I wonder if you can update us on that range. Okay. I'll ask I might ask And Neil, just to comment on that, but we won't be stripping out we're not stripping out the Lauda number from the like for like cost trend. And Lauda, this year, there's been no change to the our general guidance is that the losses will be in a range of between £50,000,000 for the 2nd year of operation. Yves? Yes. So as Michael said, we're not going to strip out the Lauda in the quarter. So if I look at the kind of movement in costs over the rest of the year and where we're getting some benefits to ensure that we're only paying plus 2%. Looking at the likes of the various cuts that happen over the winter periods. And that will help from a accruing ratio perspective. But more importantly, We've invested quite heavily last year in our on time performance in EU261. So we anticipate over the second half of the year and indeed into quarter 2 that we The savings coming through on the E261, some savings on the marketing and then there's a couple of bits and pieces that we're doing on the maintenance side, which will also come through in the back end of the year, Mark. All right. Thanks. Thanks, Ian. Next question, please. Our next question comes from the line of Neil Glynn of Credit Suisse. If I could ask you, please. 1st of all, I know you don't generally split out region by region pricing, but I wonder given that you've highlighted the UK and Germany, Austria as being particularly weak, Will it be possible to confirm whether you are seeing stability or even growth in any markets across your network? And just I think it's important context Think about the winter following on from the summers underlying ex U. K. And Germany. And then second question, You've obviously touched on the size of Lauda earlier, so I appreciate that. But just the €200,000,000 guest guidance for FY 'twenty four, You haven't actually updated that since you acquired Lauda. I'm just interested, should we expect this to be raised at some point? Or has there been a tempering of ex Lauda plans? I'm interested in how you think about media in terms of both in that context. Okay. Thanks, Neil. As you know, we Never break out pricing by region, and we're not going to start now. I mean, the reason we've specifically we're trying to give a flavor of where which markets are weakest and why. And that's Germany and the U. K, and we've explained why they are weakest, but we're not going to start detailing which regions are doing better, which is best, which strongest. It's not something we do, and it's because, obviously, it's commercially sensitive. We haven't ordered the 200,000,000 number for 2024, partly again because of the MAX uncertainty. And also, we're not quite sure And Lauda, we have a back of the envelope kind of guidance. Our growth for Lauda might grow to 40 aircraft in summer 20, 40 aircraft in 'twenty one, 'fifty and 'twenty two. Really, it's opportunistic. And we are it's not significant. It's not going to be They would require a material alteration to $200,000,000 guest guidance. I've seen some analysts elsewhere Usually on the sales side, the $200,000,000 won't be met. I see no reason why the $200,000,000 won't be met by 2024, but obviously, it is contingent upon the MAX Deliveries happening. I think the reason why I would disagree, I know Bernstein, for example, were quite negative on €200,000,000 I mean the bit that they have acted out is who's going to go bust this winter, and that will fundamentally change and alter the dynamic of traffic growth for the next number of years. I Continue to be of the view strongly of the view that by 2024, there will be 4 very large airlines in Europe. My guess on that is going to be Lufthansa Group, IAG Group, the Air France JLM Group and Ryanair. I see that all of them will be running something of the order about 2 between 150,000,000 to 200,000,000 passengers annually each. And that between the 4 of us, we will account for over 80% of the air travel, certainly short haul air travel within and to and from Europe. That is pretty much the same way consolidation has played out in North America 10 years ago. But I see no reason, Subject to reasonably judicious management, why that won't continue to be fixed. But really, until we can, I think, see a way through to The MAX back flying, how that affects the MAX delivery, production and delivery over the next certainly 2 years, We are not in a position to get to $200,000,000 but I would be reasonably confident that I'd be stronger than more Stronger than more recent? I'd be pretty optimistic that we will be carrying 200,000,000 taxes annually by Our next question comes from the line of James Hollins of Exane. Hi, morning. Yes, the first one is just on your German strategy. Clearly, you've posted numbers or ambitions in the past what your market share should be. I was just wondering given everything that's going on with Lufthansa, obviously the MAX issues and yourselves are growing 3% next year. What where Germany would play out now? Is it still massive growth? Is it paired back? Or is it just in line with everything else? The second one, just on the MAX Slightly sort of bigger existential question. Do you think there's a lot you need to do on marketing the MAX as and when it does come in terms of protecting the consumer perception of flying on it? Okay. I think our German ambitions are undimmed. But remember, I was always cautioned here with Ryanair. I mean, our ambitions, as stated, are usually always subject to negotiation and opportunity. I can't foresee any way Lufthansa will continue to sustain the level of losses that they are meeting in Germany. And some of the explanations being produced by Carsten The team are just laughable. As recently, it was apparently that Lufthansa defending its whole market. From what, I'm not quite sure. We're trying to move Panza, our Euro German Wink, out of the German market, nothing can be heard of the truth. We have a reasonably small footprint in Germany. We have a significant number of bases there, but they're all reasonably and look, Lauda in the last 12 months have expanded in Stuttgart, Kutzedorf and Vienna. Now Vienna was clearly that expansion will continue. We have seen a retreat by level. Whizz are not growing as fast as they originally planned to grow in Vienna. But Austrian are kind of shoveling as much capacity back into Vienna from the regional airports in Austria as fast as they can, presumably trying to block off slots. Every time we give you a forecast I know I can't tell which forecast you're predicting, but Whatever market share we have in Germany in 5 or 10 years' time, we'll always be subject to opportunity us moving capacity around opportunistically Because we get to all of these markets eventually. I mean, we're growing very strongly, for example, in Central and Eastern Europe at the moment, where We're finding we're undercutting Wizz and Loss and Tarim in those markets. Airlines there's some airlines in those markets who keep Promising that A321's neos are going to give them a lower revenue ARP, their CASM than Ryanair sometime in the year 30 from 35. But every time we come up against them, they tend to retreat away because they're not able to compete with us on a price per seat or on airfares per seat. So I mean, I think we will continue to see expansion in Germany. We would not rule out some There are some German airports, for example, that we are looking at cutting routes. We may even look at 1 or 2 German base closures this winter. They will be driven by the short term MAX delivery delays, not any change in our German strategy. And where we're able to add Some Airbus aircraft with Lauda, we will expect to continue to expand some of their German capacity as well. On the MAX, I mean, I think we take the view that once the MAX returns to flying, it will be very clearly signed off by the safety authorities in America, in Europe, in Canada and others. It will be the safest aircraft flying. It will certainly be the most audited, Expected and everything else. We believe that once it returns to flying, passengers will have very little will have No fear about flying on. It is a great aircraft. The interiors are superb. The performance is superb. And the fares will be lower because it has 4% more seats at 16% lower fuel consumption. And I believe that when it shows return to time, not unlike I mean, I know the circumstances were somewhat different. Yes, but the 787 was grounded for a short period of time because of lithium ion batteries and the same question was asked about the 787. 2 years later, many thousands of flights operate. The 787 is probably one of the most popular aircraft line. Will we do any particular marketing on the MAX aircraft? No, we won't. We will be able to tell passengers which is a MAX Which is an NG aircraft, which we won't because frankly aircraft allocations are done on an overnight basis, not kind of 3 or 6 months in advance. But we don't believe there will be anything other than passengers will love the MAX aircraft And they will be able to take a comfort from the fact that it has been approved and safely applied by after extensive testing and retesting by The safety authorities in the U. S. And in Europe. Next question, please. Our next question comes from the line of Damian Brewer of RBC. Please go ahead. Damian, hi. Good morning. Two questions, please. First of all, coming back to MAX, and sorry, I seem to preoccupy the call. But when you made a new announcement, you suggest you could come back and give us Better feel for what happens with CapEx with the MAX. So if you've managed to rework that, could you give us an update on that? And in particular, maybe just only 28 frames less, what that does on CapEx? And then secondly, and again, sorry to labor it, but Your outlook at least implies that the average fares would be up about 3% in the second half. Now layering that into what you said about the sort of mix Consider base closures or root cuts. Could you give us a feel maybe for Q1 what how much, if any, of the network lost money and therefore where you get a mixed effect from helping that out will come from? Okay. I'll ask it. Neil, if you do the CapEx, let me give this out. If you look at the implication of the average payment, I mean, I haven't given you an implication for average, where we give you The implication on revenue per passenger for the full year. And I don't want to mislead people with some of any indication or outlook on average fares. There are potential upsides in the second half of the year. There are also potential curveballs, not least of which is the no deal Brexit. I think our outlook at the moment should be reasonably cautious. I mean that, I think we separate ourselves from the What I thought was kind of somewhat optimistic upside being communicated by wind and Easyjet in the recent number of weeks. I mean, I hope you're right. If They are, then we will all have a bumper winter. But to me, they seem to be unduly optimistic given the challenges that are out there. And how would Q1 play into the second into H2? It wouldn't. I mean, Q1 is generally a period where you're launching The summer schedules, we tend to have a lot of recruitment and pay there and a lot of new bases and new routes are starting. The second, whereas Q3 is entirely different, and it all depends on what routes and bases they put or close within that period of time. Neil, you want to do a quick update on the CapEx, assuming no MAX aircraft until, say, February, March of this year or excluding from dated this year altogether? Yes. Jamie, it's difficult clearly to put the numbers on this, but assuming we get the 30 MAXs in, we'd be looking at maybe a 300,000,000 Positive move on the CapEx this year which will get timed into next year. But it's extremely difficult to give exact figures given that We don't have exactly every schedules, which impacts the timing of PDP and everything else. But our best guess That is kind of €300,000,000 thereabouts based on what we're planning for at the moment of a positive impact. That will change clearly if it goes to 20 deliveries or 10 between now and at year end. Our next question comes from the line of Catherine Leonard of Numis Securities. Please go ahead. Hi, good morning. 2, please. I'm just going back, I'm sorry, to the average fair outlook and I'm thinking along similar lines to others. But in terms of forward looking, I know previously you've touched that H1 sort of things had year on year. Just wondering where you are so far, maybe for Q3 year on year in terms of whether it's trending above the forward curve. And I think previously, you should be around 20% sold now. So in terms of your Q3 visibility, does that then support this positive outlook you have? And then secondly, just in terms of holidays, I wonder if that plays into the elements you've got in the pipeline and whether you How are you feeling about that and what the prospects there might be? Okay. Amish, I mean, again, I look into Q3 or the remainder of Q2 and Q3, bookings are materially ahead of where they were this time last year for Q2 and for Pricing is weaker. We have been more aggressive on forward pricing. We are materially ahead in terms of forward bookings of where we were this time last year. And we noticed that I think it was the one thing we took out of the easy conference calls, but therefore, bookings were materially behind ours. Now That has, in recent quarters, proven to be somewhat disadvantageous in that some competitors have arrived closer to the date of travel And have been opening up what would have been high prices closer in because they're badly booked and they panic. Last minute, particularly, The tour operators, the holiday operators, and we've distributed that out of each jet as well. And if we think maybe that was Some of the justification where they were talking about being better booked or higher fares is that they're allowing their look factor to trend down. We're not. We are booking aggressively, but and we're also pricing aggressively. If I've given any indication here that I have quite a positive outlook on pricing, I want to disabuse you of that notion straight away. I do not have quite a positive outlook on pricing. I have a very cautious outlook on pricing. I think we are my if you look at our annual revenue per pass through guidance for the full year, it has move slightly to the lower end of our current rate. It was previously plus 2 to plus 4. It's now plus 2 to plus well, plus 1 to plus 3. I can't understand how that could in any way be positive. I think we should be cautious. There are potentially positive events that could help pricing, but you'll see those as soon as we like. If Norwegian goes bust, You know as quickly as we'll know. But I've said that, I think now is the time for caution. The second part of the question, Holiday. Look, holidays is a shit market, a shit product against Some of the kind of nonsense you hear out of competitors, holidays. Holidays has now replaced big data as the new sexy kind of I think that some people kind of referred to. I look around at TUI and Thomas Cook and all the other operators and I can't see any great upside in holidays because Holidays and packages are being blown away by excess capacity and lower pricing on Low fare airlines into all of those big markets, Spain, Portugal, Italy, Greece, etcetera. We have a holidays product. It's reasonably small. It's hold on, sorry, we used to have a holiday, but we closed it. It was small and didn't go anywhere. And it's not something that I would waste any more time on. Our next question comes from the line of Monty Schultz of Commerzbank. Please go ahead. Two questions also from my side. First of all, on the MAX fleet for if you look at next year. I mean how many can you fleet in during the next fiscal year? Is there any kind of Would you limit yourself to 10% growth? Or will you pick up all the kind of delays from this year, next year? And the second question would be on route close? I mean, how important is the result optimization? So we're closing the most important routes or is it some strategic Rational like pushing against weaker Airlines or pushing against Lufthansa in Germany to really depend a little bit your spend on your market Okay. The only restriction we see with the MAX aircraft is clearly we would not from Historically, from a safety point of view, want to take delivery of any more than between 6 to 8 aircraft a month. Historically, I think the most we ever did was about Here, for the month. With a new variant, we would want the 1st month or 2 maybe take 5 or 6, and then we get to 8 a month reasonably quickly. Now obviously, that was also being we want to take those into spring. So we're operating at the moment, The first aircraft will arrive in something of the order of about 4 months at about 8 aircraft a month, So that we would be able to take that kind of February, March, April May. We wouldn't want to take a lot of aircraft into June or July Thank you. We're busy, and we haven't been able to sell them. Thereafter, we wouldn't want to take any aircraft in July, August, September, October, But we would clearly want to take 8 or after months, November, December, January, February into the following summer. So it's an imprecise, Non scientific, what should we take in advance of June of 2020 for peak summer 2020? We're presently operating on 30 aircrafts. That would leave us with 28 aircraft short, and we have about 50 aircraft to take in the winter of 2020 into the spring of 2021. Could we take, in other words, our 28 plus 50, 78 aircraft over that period of time? Yes, we could. That is at the outer envelope, just giving us 10 months at 8 aircraft a month. That's we just about take about 80 aircraft. Would we want to take that sort of speed? Again, it will depend on how fast Boeing can make it. Boeing's own production is going to if the MAX, They've said themselves, I think if the max delivery delays if the max deliveries would be delayed, it runs into their own production schedule. So There's work to be done once the first aircraft gets back flying. And like, frankly, at this point in time, all you can focus on is summer 2020. We'll work We'll worry about the winter 2020 and December 2021 once we sorted out summer 2020. In terms of route closures, we're having a review, in fact, this afternoon Based on the 30 aircraft, but possibly that might be 20 aircraft. Most of what we will be looking at and Obviously, clearly, we look at which what drives that is what growth commitments and new base commitments have we got for the summer of 2020 That we don't want to compromise. And thereafter, then what loses most money during the winter period. And we will be issuing notices, breaching notes to our own crews in the next week or 2 about So more bases than we will need to close and more routes that will need to be closed because then we'll have some discussions, we'll have to be held with them in the next couple of weeks around that. But mainly, the focus will be on those routes that lose most money over the winter or that are going nowhere into summer 2020. Yes. I mean, obvious one if you give me an example, an obvious one would be, this is a hard Brexit in at the end of October. You have 3 U. K. Routes, which we were originally going to protect using Ryanair UK, they would readily fall out straight away because While they make money during the winter, if there's a longer term question mark over those in a hard Brexit, well, We wouldn't really be I would want to protect some airports in Germany, some airports in, I don't know, in Italy or Spain where we have already had growth commitments And the growth incentives that David and his team have already negotiated. But frankly, we don't have those growth incentives because we're not growing in places like Edinburgh or Glasgow or in Belfast. So There's a debate to be held and there are different factors running across them, but mainly the decision will be made on which basis routes lose the most amount during the winter period? And where do we have longer term issues and certainly a hard Brexit will be a longer term issue for those UK basis, Our last question comes from the line of Gerald Khoo of Liberum. Yes, thanks. Firstly, given the challenging market conditions in Germany and Austria, why are you so confident that if there is a major competitor like Norwegian that disappears in the near future, but that will actually be positive for pricing beyond the very short term? And why does the market not backfill for vacuum left by that competitor just as in the case we're ever in? Well, it's generally because Norwegian have a very small footprint. They have almost no footprint of the German or the The market wouldn't affect it at all. I mean, most of the base closures Norwegian have already announced in October in Italy, Spain, the U. K. And Dublin. If Norwegian goes bust, we tend to give a real cost it's a potential prospect, not a probability. There will be a huge collapse in capacity in the Spanish, Italian, U. K, Irish markets. David, anywhere else? I know you've got a reason to size footprint. Obviously, it's Scandinavia. And Scandinavia, obviously. Now, would it be a rush to access that capacity? Actually, I don't think Because there's a they Norwegian have accounted for a huge amount of the excess capacity in places like Spain and Italy in recent years. And where they've already announced those case closures, I think it's an attempt by them to reverse out some of that excess loss Making short haul capacity, that is losing money handover kit. But the one market that would have a big impact on would be the Austrian and German market. I mean, if they obviously, the German market is largely driven at the moment by the kind of crazy the brands that bought Air Berlin, instead of taking 50% of Air Berlin capacity. I think they were kind of petrified that everybody was going to run-in and take up slots in German airport. So We have all this Air Berlin capacity, Condor capacity, flying around, losing money hand over fist, ridiculous excuses coming out. So it's like Laudamotion is putting undue targeting Condor. I mean, I've never heard such nonsense in that Condor is essentially a long haul airline. Lauda doesn't compete with it at all, but they kind of they blurt out all this nonsense on their kind of investor calls that make no sense. Lauda is targeting Austrian, yes, because Lauda has a very significant presence in the Vienna marketplace. But the response of Austrian has been a very Germanic one, that is quick collapse all the capacity at the regional Austrian airports, shove it all that capacity back into Vienna, where I think the boss of Austria said they will lose whatever amount of money it takes to get And the position in Vienna, which, again, given that it's the dominant airline in Vienna, seems to be, again, more below cost pricing. But it is what it is. The reason I'm confident in Germany and Austria is that the combination of Ryanair and Lauda has lower operating costs than any other airline, be Eurowings, Easyjet, Wizz, Austrian, etcetera, and lowest cost wins. It would be painful on pricing for a year or 2. But if we have reduced the year 1 losses in Lauda from £140,000,000 in year 1 to something £150,000,000 in year 2, The trend is moving very dramatically in the right direction, and that's why I have reasonably confident over the medium term. And I think on terms of cans that can explain to their investors how their quarter one profit last year of $50,000,000 returned to a loss of $250,000,000 quarter was issued, dollars 300,000,000 swing, how are they going to turn that around? I understand this morning, they're announcing a move into a group structure, a la Ryanair. They need to a lot more than that. Ultimately, there's too much capacity in Germany. But the slow Okay, folks. Again, I will conclude with my Question and thank you for the questions. Obviously, as usual, we've done a presentation on the website, Neil and myself. Shane O'Toole here, the Head of IR is here and available to take questions and answers at the Dublin office for the remainder of the day. The next you will see some announcement coming out of us in the next week or 2 about base cuts and base closures. These are being driven by the MAX delivery delays. And as soon as we have any relevant information on the MAX aircraft, we'll try to keep you brief and updated. But I think it is moving in the wrong direction at the moment rather than moving in the right direction from a summer 2020 point of view. Other than that, I think the key takeaway today are the airfares are not getting any worse, but it's a fairly grim environment out there. Ryanair is continuing to excel on ancillary revenues, which is kind of covering our revenue per passenger guidance. And on unit cost, we are doing marginally better than we had originally guided despite the fact that we don't have the benefit of the max unit performance in the full 12 months. And on the Investor Relations side, Eddie and Haig Wilson and his team are continuing the dialogue with and the unions and our people. But obviously, the nature of that dialogue has been constrained in the last number of weeks Because we were in a closed period and weren't able to divulge what our plans will be, we will be releasing more information to unions and to our own people about base cuts and closures and job losses and redundancies, which are coming regrettably at the end of October over the next number of weeks. Okay. Thanks very much, everybody. Talk to you soon. Bye bye. This now concludes our call. Thank you for attending. Participants, you may disconnect your lines.