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. 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 a 21% fall in Q1 profits, EUR 243 million. The key element of that was a 6% decline in average fares, 11% stimulate 11% traffic growth to 42 million guests. Revenue per guest was flat at EUR 655 per passenger, largely due to a better than expected performance in ancillary revenues. We opened up 239 new routes and four new bases in Marseille, Bordeaux, Southend, and Berlin. Malta Air became the fourth group airline. The Lauda Airbus fleet has grown 20 A320s this year. We have redelivered to Lufthansa the very expensive nine operating leases we had with them last year.
The MAX deliveries are delayed, continue to be delayed and are a continuing concern. Ryanair has become the first E.U. airline to publish our monthly CO2 emissions, and we have completed in the quarter EUR 100 million of the EUR 700 million buyback. I think if there were a couple of key themes we would add to today, it is that revenues continue to be particularly the two weaker markets were Germany, where Lufthansa continues to engage in below cost selling through its Eurowings subsidiary where it loses money hand over fist, and the U.K. where Brexit concerns appear to weigh heavily on consumer confidence and spending. Nevertheless, as expected to our underlying airfares are down, the ancillaries driven by stronger priority boarding and preferred seats continued 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 into Q1 that were excluded from the prior year Q1 comp because they were treated as a special item. 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 pay deals we put in place as we concluded union negotiations across most of our major markets in Europe. Our FY 2020 fuel bill is 90% hedged at $71 per barrel. We've now hedged about 37% of our FY 2021 fuel position at about $63 per barrel.
On-time performances in Q1 and into the summer has seen a very dramatic improvement, both in terms of on-time performance. We've improved more than seven percentage points over Q1 last year. Excluding air traffic control delays, we are consistently recording over 90% on-time performance. We've significantly reduced the number of cancellations, so we would expect that to be translating to lower ATC EU261 costs going forward, and we hope that will be maintained, although we had a bad weekend this weekend with European ATC delays. On the Boeing 737, the first five MAX aircraft, which were due to be delivered in April, May, and 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 submitting the return to service software amendment now in October. That was previously September. I am concerned at the way the MAX return to service keeps slipping. If the MAX returns to service in September, we would expect to take the first of the MAX 200s, the Gamechangers, in about the end of February. If it moves to January, that's probably the end of March. We're now looking at only being able to take something between now 30, but that may be as little 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 would be down from the 58 we are originally scheduled to take in advance of summer 2020.
That would halve our summer 2020 growth rate from 7% - 3%, we'd carry about 157 million passengers or guests in FY 2021 as opposed to the original 162 million guests. We remain committed to the Gamechanger 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. 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 Ryanair to continue to grow strongly into the coming years with much lower fares and much lower costs 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 debt-free. The board approved a EUR 700 million share buyback program, and in Q1, we returned almost EUR 100 million of that to shareholders. In terms of the group structure, it's evolving this summer. In June, Malta Air begins the fourth aircraft in the group. That will take over our Maltese-based aircraft, six 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 cabin crew to pay their income taxes in Germany, our Italian pilots and cabin crew to pay their income taxes in Italy, and our French pilots and cabin crew to pay their income taxes in Italy. They already pay their social taxes in those countries, which is the countries where they reside. It's an important concession, I think, a commitment on the part of Ryanair as part of those union agreements that we move towards local income taxes as well as local contracts. In summer, Lauda is operating 20 lower-cost A321s.
They will help Lauda to significantly reduce its losses this summer. We expect Lauda will still be loss-making in the second year of operation, largely because of the very low fare environment in Germany and in the Austrian markets. We are happy to report that Buzz in Poland continues to grow. This summer it will have 7 charter aircraft, 17 scheduled aircraft, and it will grow its profitability in its second year of operation. Ryanair is and remains Europe's greenest airline. We are continuing to roll out environmental measures such as we have become the first airline to commit to and to publish monthly CO2 emission reports. In May, we launched our environmental partnerships where we are investing multi-million EUR per annum in carbon offset projects in output with carbon partners in Africa, Portugal, and Ireland.
It's important to reject this kind of mistaken assumption, particularly in Europe and among some of the environmental lobby groups, that airlines get a free ride. We don't. We paid over EUR 540 million in environmental taxes in 2018. That will rise to over EUR 630 million in 2019 and equates to It averages out at more than EUR 4 per passenger or more than a 10% rate of tax on revenues. Never mind on our fuel bill. In board succession, we're pleased to announce today that Louise Phelan has agreed to take over as the Senior Independent Director in summer 2020 when Kyran McLaughlin steps down from the board after some 20 years service, much of them as our SID. We're very grateful to Kyran for his leadership and guidance over that period. Looking forward into FY 2020 guidance, we continue to guide broadly flat PAT.
We haven't altered the range. It remains within a range of EUR 750 million-EUR 950 million. The current weak fare environment has continued into quarter two. We expect H1 fares to be down approximately 6%. We have almost zero H2 visibility. Our FY 2020 fare guidance is towards the lower end of our guide of -2% to +1% range for the full year. We do not share the kind of unbridled enthusiasm and optimism that was reported in recent weeks by Wizz and easyJet on their conference calls. We would remind everybody that back in January, there was also a share point of unbridled optimism about summer fares from both of those competitors, who within three months were slowly reigning back that unbridled optimism. We think we are cautious on pricing into the winter.
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 flights because we expect that the European Union and the British government who have put in place those interim arrangements, which we expect will last for a nine to 12-month period, will be restored or reissued. If there's a hard Brexit on 30th of October, we'll protect this winter's flights and probably next summer's flights. Thereafter, there will be material changes, I think in flight rights and in ownership rules. We already have had our ownership rules mitigation measures tested and approved by our regulators, so we're in pretty good shape. The U.K. crew would come under question. We have 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. That 30 may become 20, may become 10 if the MAX deliveries are further delayed. That is, I think we're going to initiate discussions with our people and the unions certainly over this week and the next couple of weeks about this winter schedule, where there will be material cutbacks and into next summer, where there will be material cutbacks. We would not rule out redundancies and job losses, which will be inevitable if the MAX delays are as presently envisaged or get worse. Having said that, ancillaries continue to support our revenue per passenger growth guidance of +2% to +3% for the full year.
Traffic, we expect this year will grow 7% to over 152 million passengers. It's slightly back off 153 million previously guided, mainly due to the MAX family delays. Costs will be slightly better than we had originally envisaged, even as the fuel bill grows by EUR 450 million. We expect ex-fuel unit costs 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.
We're coming in with a slight beat on the unit cost. However, all of this guidance remains very heavily dependent on closing Q2 fares, H2 prices, on which we have very limited visibility at the moment, the absence of significant security events, and no negative Brexit developments in H2, and which cannot be ruled out at this point in time. Neil, do you want to take us briefly through the MD&A, and then we'll open it up for 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 it's the first quarter that we had IFRS 16, the lease accounting standard. The impact, as expected, was fairly modest to the group. It impacted net debt by about EUR 220 million. That'll grow to about EUR 330 million as we take on more leases by year-end. The P&L impact was pretty much the minimum. The balance sheet continues to be in a very strong position which, as Michael said, over 60% of the fleet, debt-free. I think importantly, the cost guidance retained at just 2% shows that we continue to be very disciplined on the costs in the business. I think, Michael, you covered everything else, so we can go to Q&A.
Okay, thanks. We move to Q&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 the answer is we don't know. Other than that, we're going to restrict everybody to just two questions, please, per person. We'll zip through this as quickly as we can.
Thank you very much. Just to remind everyone, if you would like to ask a question, please presszero one on your telephone keypad. You can press zero two to cancel. As requested, please do limit your questions to two. Our first question comes from the line of Duane Pfennigwerth of Evercore. Please go ahead. Your line is open.
Duane. Hi.
Hey, good morning. Thanks.
Morning.
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 that you're talking about, risk, Brexit, et cetera? Is it something that you're not seeing from Boeing currently?
Okay, thank you. Duane, I'll answer two points to that. We've been very opportunistic. I think within Lauda we've gone from zero to a fleet of 30 very low-cost second-hand A320s for summer of 2020. That will be almost 10%, well, not far off 10% of the fleet next year. We're looking at other opportunities there for our low-cost operating lease A320 aircraft, particularly the older generations of CFMs, which 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 MAX aircraft back in service. Both Boeing and Airbus have long tailbacks or long tails in their order books that essentially run out to 2022, 2023.
We're not yet in a position where we've agreed anything on price with Boeing or indeed with Airbus. We've had discussions with them on deliveries past 2022, 2023. Airbus are pricing very aggressively at the moment. The world has moved in their favor given Boeing's production issues. 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.
Next question please.
Thank you. Then just on your-
Yeah. Go ahead.
Just on your margin level and defensibility. It wasn't 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 two or three periods in our history, usually as oil prices have taken off, which is what we've been facing last year and this year. I think we would have handled reasonably well the one-off step-up in salaries, pilot costs, and cabin crew costs. We're running through a two-year period where we've had very volatile and rising oil prices. This year we're in a year where we're paying $71 per barrel. That's up from just over $40 a barrel two years ago. If we have a stable oil price over a two- or three-year period, i.e. where a main constant of this business is and will continue to deliver 20% after-tax margins.
Next year, I would expect us to see some margin improvement if we can hedge out the remainder of the 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. We haven't seen them yet at the moment.
Thank you.
Thanks, Duane. Next question please.
Our next question comes on the line of Jarrod Castle of UBS. Please go ahead. Your line is open.
Hi. Good morning, gents. Two from me. I think two weeks ago you seemed to have a little bit of color as you heard about what the delay in the Boeing deals means for, one, put on your thinking on pricing next year, i.e. slower growth. Should that be better for pricing? Potentially just any color on what that means also for costs for 2021. The second question, or maybe it's the third. You can decide then. Any update on potential for summer staff disruption and what deals still need to be signed? Thanks.
Okay. It's very difficult to deal with the Boeing delay because they keep getting delayed further and further. It's only on middle of July, the 16th of July, we issued a press release saying we now no longer expect to be able to take delivery. Up until the middle 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 last week, Southwest moved the MAX out of their schedules until January 2020. There's a number of different ways you can look at it, but within the realms of speculation. I think there is going to be significantly less capacity in Europe in summer 2020. In part, because of the MAX delays, we will 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 know, for example, Norwegian are going to cut or close between six or eight bases in October, November of this year, almost all of which where they compete with us. There will be more failures this winter. There are some airlines out there who cannot sustain the losses they're taking with oil up at $65, $70 a barrel, who don't have a balance sheet. We understand that some of the credit card companies are already delaying release of payments to a number of our airline competitors at the moment in Europe. The timing of those failures, I don't know. 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, or cutting back their capacity growth. Most notably, Lufthansa and Eurowings, which continue to lose money hand over fist. Even Lufthansa, at some point in time, have to be able to demonstrate that buying everything that moves in Germany has some kind of underlying business competition, which they've manifestly failed to do thus far. If a larger, one of the larger airlines, say for example, a Norwegian fails in the next number of months, that would obviously have a transformative effect on capacity into summer 2020. I can't be specific. We are not very good at it.
We can guide you, but we can't give accurate forecasts as who fails and when. Cost in 2021 overall, at this stage, clearly oil looks like it will be somewhat benign environment. We would expect to be able to continue to hedge into FY 2021 at or below EUR 60 per barrel. I think it's instructive at the moment, given all the uncertainties in the Middle East and the Straits of Hormuz, that oil is still hovering only in the low 60s. I think that is because of the strength of U.S. shale production continues to be the major swing producer. 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 OPEC and the Russians can continue to cut production, given the fiscal constraints that they're facing at home, but who knows?
The other one, I missed the last question. Staff disruptions. I think as we 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. It seems to us that these are, even by the standards of some of these trade unions, chronically ill-timed and ill-judged, given that would be coincided with the period in the next number of weeks where we're going to be announcing base cuts, base closures, job cuts driven by MAX delivery delays. We are in active dialogue with all of these people.
While we don't expect strikes, we have continuously advised our investors that where we have unions, we can't run them out. We have demonstrated, certainly over last summer, that we're very good at managing our way around these strikes. I think at this point in time, where we have now announced a 21% decline in Q1 profits, we have significant MAX delays. We are now looking at base cuts and closures as early as October, and a significant number of pilot and cabin crew redundancies. If there are certain people who want to go on strike in the midst of that as against that backdrop, then frankly, God bless them, and we will manage our way around them.
We will not be making concessions at this point in time, either on pay increases or costs, where we are looking actively at job losses, pilots and cabin crew job losses, base cuts, and base closures.
Thanks very much.
Thank you. Next question, please.
Our next question comes from the line of Savi Syth of Raymond James. Please go ahead.
Savi, hi.
Hey, good morning, Michael. Just a couple questions from me. A bit of a follow-up on there is, given the MAX uncertainty, I wonder if you can kind of compare your position to the last time growth was stall, I think back in financial year 2012- 2014. Sort of implications for earnings. I think you alluded to this a little bit. Is there an ability to maybe grow the Airbus side to make up for it? The second question. I wonder if you could comment on Peter's exit here to what seems to be more of a parallel move for that easyJet. What it might mean for management roles at Ryanair.
Discussing the MAX, Savi. I mean the situation as we are today, we were originally expecting 58 aircraft for the summer 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 together pretty quickly with the regulators. 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, everything we do will be driven by ensuring that this aircraft is safe to fly when it is approved to do so by the American and the European authorities.
We will not take delivery of any MAX aircraft unless it is certified as safe to fly, and we are satisfied that the authorities have certified it to be safe to fly. While we will continue to be opportunistic on the Airbus side, we're not going to run out today and suddenly sign up another 50 Airbuses for next summer. There isn't that kind of availability, and we would simply start bidding up the cost of secondhand A320s. We have already committed to growing the Lauda fleet from 20 aircraft to 30, 32 aircraft for summer 2020. We have built that into if we can only take 30 MAX aircraft, that gets us another 10. 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. I think our best estimate at the moment is that the traffic growth next year, instead of 152 million into FY 2021, it will now be 157 million. That number could move lower. It could be 155 million, it could be 153 million, depending on the MAX aircraft being recertified to fly. Touching on Peter, Savi, obviously, for legal reasons, I cannot comment on any individual's contract or termination or anything else. All I will say is what we have said to investors last week and said 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 six months. 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.
I would not expect any senior manager in Ryanair to be moving to a competitor airline for a reasonably long period of time. That applies to me, it applies to all of the senior management team. I really can't comment other than that. We are in dialogue with Peter about his termination period, there will be no movement from us on what are reasonably extensive non-compete agreements after the termination period as well. Next question please.
Thank you. Our next question comes from the line of Daniel Roeska of Bernstein Research. Please go ahead.
Daniel, hi.
Hi, guys. I'll try and coax something out of you for the fares in H2 anyway.
You won't.
If I look at your RASK performance, kind of your guided tour, it looks challenging, right? Given your comments around the environment, I'm just wondering what I'm missing and how 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? Secondly on Buzz, I just was wondering if you could shed some light again on the key reasons for branding the Polish operator not as Ryanair. Will Buzz try out different product strategies, different ancillaries? Were there legal or labor reasons?
What are the key decisions around not branding it Ryanair, whereas you already have a sizable Ryanair presence in Poland, which I guess will now be rebranded to Buzz? Thanks.
Okay. Thanks, Daniel. Obviously, you're not going to squeeze any further detail out of me on H2 fares 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 three different influences. One, we have very weak prior year comparables on average fares into H2. Two, we're not quite sure yet how we factor in things like Norwegian closing six or eight bases this winter. Those bases are generally in the U.K., Spain, Italy. The Dublin base, for example, is going to be reduced from six to one aircraft, so it's effectively being closed. Quite how that plays across, we're really not sure yet, it must be reasonably helpful for H2 pricing.
I think the third issue we would see is that we're about to, in the next week or 2 weeks, roll out a number of base cuts, route closures, cutbacks ourselves, which are driven by the MAX delivery delays. Why that affects this winter is if we were feeding 58 aircraft next summer, we would have a lot of new routes and growth at certain bases. If we don't have that kind of momentum next summer, then it doesn't make sense to go through the winter suffering short-term losses at some of those winter bases. Those are the three kind of outsideGood 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 at the end of October.
It seems the U.K. government 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 issue for the European Union. 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 two. They have a history of making optimistic forecasts on average fares and yields, which they subsequently set to work back. We generally have a history of being more pessimistic. Sadly, in the last year or two, we've tended to be more right. It is where it is.
We don't have the visibility. We don't think it'll be any worse than we're guiding, and there may be some move to the upside. What would dramatically alter that? If Norwegian goes bust in September or October, which I think is a distinct possibility, I wouldn't put it any higher than that would transform pricing, costs, pilot supply, airport deals, et cetera. We are in a very challenging environment. Out of that challenging environment come lots of opportunities if you are the lowest cost operator, and we are the lowest cost operator. Moving to the Buzz brand in Poland, I think it's important as we move to a group structure. For a group structure to be effective, the individual airlines have to have a loyalty towards the individual airline. People who work for Lauda are proud to work for Lauda.
We want to have a separate identity in Poland, less so when it was a charter airline as a Ryanair Sun. Now as it has built that charter presence, and it's important that it does have a separate identity and presence in the Polish market. It now operates seven charter aircraft and 17 scheduled aircraft. We think and believe that the people who work for Buzz will be proud in the future to work for Buzz, as they may be a subsidiary of a greater Ryanair Group. We do want to encourage competition between the individual group airlines for the allocation of resources. We should encourage the individual airlines to compete aggressively against each other. I think IAG has demonstrated the effectiveness of that with separate brands. I mean, you can have separate brands even within Spain. They have Vueling, Iberia Express and Iberia.
I think Willie has done some excellent work in transforming the cost base of those Spanish airlines by using those multiple brands. There's no point in us moving to a group structure if all we're going to be is Ryanair, Buzz, Malta Air, and Lauda. We do actively want, and we intend to encourage those group airlines to compete against each other to help us lower costs and to improve efficiencies. Next question, please.
Our next question comes from the line of Stephen Furlong of Davy. Please go ahead.
Stephen, hi.
Hi, Michael. Two things. Just on Peter, can you talk about the different airlines in terms of management structures? I saw you had an advert there for the Ryanair DAC ops CEO job, just how that's progressing in general with the management teams at the different airlines. The second question, can you just maybe give some color on ancillaries and how you see that progressing, particularly with the work done and being done by Ryanair Labs in terms of personalization and things like that? Thank you.
I'll give the first. I might ask Kenny to just give you a flavor on the ancillary. Different airlines, the management structures are evolving very actually quickly. We have a good management team in Lauda, led by Andreas Gruber. We have a very good team in Buzz, trading profitably led by Michal Kaczmarzyk. My Polish pronunciation is not at its best. I'll call him Mikhail K. We have just appointed Diarmuid O'Conghaile here from Ireland as the new Chief Executive of Malta Air, and we have rolled out the advert for the CEO for Ryanair DAC, the Irish airline. The ad appeared last week. Applications will conclude by the end of July. We expect to do the interviews through August. The original timetable for having a new CEO for Ryanair DAC is the AGM in September, and we're well on track to do that.
We plan it, and Peter has announced he's stepping down. We used that opportunity to roll out applications for executive ops into the same ad. We would expect to have a replacement for Peter in place certainly before the end of September. The management structures are evolving well. I think we will give much more color and detail in that on the half-year results roadshow, which will be held at the end of October. On ancillaries, again, I'll ask Kenny just to give you a flavor, but the uptake continues to improve. Much of that is being driven by the two we highlighted, which is the reserved seating and the priority boarding. The work that John Hurley and the team in Ryanair Labs are doing is making these additional services much more customer-friendly and easier for customers to take them up, particularly on the mobile.
Kenny, do you want to give some flavor and color on that?
Yeah. As you said, looking back over the quarter, it's the priority boarding where we have made changes in terms of removing ticks, making it more targeted, just making it easier for customers to purchase. Stephen, over the next six months, it's really into the winter and the second part of the winter, so the new year, that we'll really be rolling out the stuff that we're now working on behind the scenes. That's a much more data-driven approach. Again, taking out clicks, making it more targeted in terms of the products that we're pushing in front of customers. The story and the plan hasn't changed there. As always, we're working it over the summer, and we will release it market by market, bit by bit, in actual active trip.
Starting with mobile and then coming onto desktop, but it's too early to say more than that. You'll see it coming in the months ahead.
Thanks, Kenny. Next question, please.
Our next question comes from the line of Mark Simpson from Goodbody. Please go ahead.
Mark, hi.
Good morning. Ex-fuel unit costs in the Q1 were +4.4%. If you strip out Lauda from that, can you tell us what the like-for-like trend was? Following on from that, what lines help you deliver that +2% overall for the year? Second question, you have in the past talked about Lauda losses in a range of EUR 20 million- EUR 50 million for this year. I wonder if you can update us on that range.
Okay. I might ask Neil just to comment on that. We're not stripping out the Lauda number from the like-for-like cost trend. Lauda this year, there's been no change to our general guidance. The losses will be in a range of between EUR 20 million and EUR 50 million for the second year of operation. Neil?
Yeah. As Michael said, we're not going to strip out the Lauda in the quarter. The 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 spending plus 2%. Looking at the likes of the various cuts that have happened over the winter period, that will help from a accruing ratio perspective. More importantly, we've invested quite heavily last year in our on-time performance in the EU261. We would anticipate over the second half of the year and indeed into quarter two, that we'd see savings coming through on the EU261. Some savings on the marketing, and then there's a couple of different 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, Neil. Next question, please.
Our next question comes from the line of Neil Glynn of Credit Suisse. Please go ahead.
Neil, hi.
Good morning. If I could ask two, please. I know you don't generally split out region-by-region pricing, but I wonder, given that you've highlighted the U.K. and Germany, Austria as being particularly weak, would it be possible to confirm whether you are seeing stability or even growth in any markets across your network? I think it's important context about the winter following on from the summer's underlying ex-U.K. and Germany. Second question, you've obviously touched upon the size of Lauda earlier, so I appreciate that. The 200 million guest guidance for FY 2024, 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 medium-term growth in that context.
Okay. Thanks, Neil. As you know, we never break out pricing by region, and we're not going to start now. The reason we're trying to give a flavor of which markets are weakest and why, and that's Germany and the U.K., and we've explained why they are weakest. We're not going to start detailing which region is doing better or which is best, which is strongest. It's not something we do, and it's because obviously it's commercially sensitive. We haven't altered the 200 million number for 2024, partly again, because of the MAX uncertainty. Also we're not quite sure as Lauda, we have a back of the envelope kind of guidance of growth for Lauda might grow to 20 aircraft in summer 2020, 40 aircraft in 2021, 50 in 2022. Really, it's opportunistic.
It's not going to be that significant that it would require a material alteration to the 200 million guest guidance. I've seen some analyst stuff there, usually on the sell side. The 200 million won't be met. I see no reason why the 200 million won't be met by 2024. 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 million. The bit that they have factored out is who's going to go bust this winter? That will fundamentally change and alter the dynamic of traffic growth in the next number of years. I continue to be of the view, strongly of the view, that by 2024 there will be four very large airlines in Europe.
My guess on that is going to be Lufthansa Group, IAG Group, the Air France-KLM Group, and Ryanair. I see that all of them will be running something of the order about between 150 million- 200 million passengers annually each. That between the four 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. I see no reason, subject to reasonably judicious management, why that won't continue to be the case. Really until we can, I think see a way through to the MAX back flying, how that affects the MAX production and delivery over the next certainly two years, we're not in a position to get to 200 million.
I would be reasonably confident, in fact I'd be pretty optimistic, that we will be carrying 200 million passengers annually by 2024, if not slightly more than that. Now is not the time to be giving you buoyant medium-term growth numbers.
Understood. Many thanks.
Thanks, Neil. Next question, please.
Our next question comes from the line of James Hollins of Exane. Please go ahead.
James, hi.
Hi. Morning. The first one's 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 only growing 3% next year.
Where Germany would play out in that. Is it still massive growth? Is it pared back, or is it just in line with everything else? The second one, just on the MAX issue, slightly 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 will always caution here with Ryanair. 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. Some of the explanations being produced by Carsten and the team are just laughable. It was apparently that Lufthansa is defending its home market. From what, I'm not quite sure. We're trying to move Lufthansa or Eurowings out of the German market. Nothing could be further from the truth. We have a reasonably small footprint in Germany. We have a significant number of bases there, but they're all reasonably small. Lauda in the last 12 months has expanded in Stuttgart, Düsseldorf, and Vienna. Now, Vienna will clearly, and that expansion will continue.
We have seen a retreat by LEVEL. Wizz are not growing as fast as they originally planned to grow in Vienna, but Austrian are shoveling as much capacity back into Vienna from the regional airports in Austria as fast as they can, presumably to try to block off slots. Every time we give you a forecast, I can't remember which forecast you're predicting, but in whatever market share we'll have in Germany in five or 10 years' time will always be subject to us moving capacity around opportunistically, because we get to all of these markets eventually. We're growing very strongly, for example, in Central and Eastern Europe at the moment, where we're finding we're undercutting Wizz and LOT and TAROM in those markets.
There are some airlines in those markets who keep promising that A321neos are going to give them a lower revenue or play a CASM than Ryanair sometime in the year 2030 or 2035. Every time we come up against them, they tend to retreat away because they are not able to compete with us on a price per seat or on airfares per seat. 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 one or two German base closures this winter. They will be driven by the short-term MAX delivery delays, not any change in our German strategy.
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 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, inspected, and everything else. We believe that once it returns to flying, passengers will have no fear about flying on it. It is a great aircraft. The interiors are superb. The performance is superb. The fares will be lower because it has 4% more seats at 16% lower fuel consumption. I believe that when it does return to flying, not unlike, I know the circumstances were somewhat different.
The 787 was grounded for a short period of time because of lithium-ion batteries, and the same question was asked about the 787. Two years later and many thousands of flights operating, the 787 is probably one of the most popular aircraft flying. Will we do any particular marketing on the MAX aircraft? No, we won't. Will we be able to tell passengers which is a MAX and which is an NG aircraft? No, we won't, because frankly, aircraft allocations are done on an overnight basis, not three or six months in advance. We don't believe there will be anything other than passengers will love the MAX aircraft, and they will be able to take great comfort from the fact that it has been approved and safe to fly after extensive testing and retesting by the safety authorities in the U.S. and in Europe.
Cool. Cheers.
Next question, please.
Our next question comes from the line of Damian Brewer of RBC. Please go ahead.
Damian, hi.
Good morning. How are you? Two questions, please. First of all, coming back to MAX, sorry, it seems to preoccupy the call. When you made the initial announcement, you suggested you'd come back and give us a better feel for what happens with CapEx with the MAX. If you've managed to rework that, could you give us an update on that? In particular, maybe just on the 28 frames less, what that does for your CapEx. Secondly, again, sorry to labor it, your outlook at least implies that average fares would be up about 3% in the second half.
Layering that into what you said about the mix and base closures or route cuts, could you give us a feel maybe for Q1, how much, if any, of the network lost money, and therefore, where you get a mix effect from helping us out will come from?
Okay. I'll ask it. Excuse me, the CapEx. Let me give this. The outlook or the implication for the average fare, we haven't given you an indication for average fares. We've given you the implication on revenue per passenger for the full year. I don't want to mislead people with 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. In that, I think we separate ourselves from what I thought was kind of somewhat optimistic upside being communicated by Wizz and easyJet in the recent number of weeks. I hope they're right. If they are, then we will all have a bumper winter.
To me, they seem to be unduly optimistic given the challenges that are out there. How would Q1 play into H2? It wouldn't. Q1 is generally a period where you're launching the summer schedules. We tend to have a lot of recruitment that's made there, and a lot of new bases and new routes are starting. Q3 is entirely different, and it all depends on what routes and bases get cut or closed 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 exclude them from this year altogether?
It's difficult, clearly, to put numbers on this, assuming we get the 30 MAXes in, we'd be looking at maybe a EUR 300 million positive move on the CapEx this year, which just gets timed into next year. It's extremely difficult to give exact figures given that we don't have exact delivery schedules, which impacts the timing of PDP and everything else. A best guess is that is EUR 300 million, there or thereabouts, based on what we're planning for at the moment of a positive impact. That'll change, clearly, if it goes to 20 deliveries or 10 between now and the year end.
Okay, thanks.
Thank you. Next question, please.
Our next question comes from the line of Kathryn Leonard of Numis Securities. Please go ahead.
Kathryn, please.
Hi. Morning. Two, please. Just in going back, I'm sorry, to the average fare outlook, I was thinking along similar lines to others, but in terms of forward booking, I know previously you touched that H1 sort of looking healthier 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. I think previously, you should be around 20%, 30% sold now. In terms of your Q3 visibility, does that then support this quite positive outlook you have? Secondly, just in terms of holidays, I wondered if that plays into the elements you've got in the pipeline and how you're feeling about that and what the prospects there might be.
Okay. Average fare, again, if I look in Q3 or the remainder of Q2 and Q3, bookings are materially ahead of where they were this time last year for Q2 and for Q3, but 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 note that, I think it was the one thing we took out of the easyJet conference call, that their forward bookings were materially behind ours. 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. We've picked a bit of that out of easyJet as well. 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 load factor to trend down. We're not. We are booking aggressively, 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. If you look at our average revenue per passenger guidance for the full year, it is moved slightly to the lower end of our current range. It was previously +2% to +4%. It's now +1% to +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. If Norwegian goes bust, you'll know as quickly as we'll know. That said, that I think now is the time for caution. Oh, holidays. Look, holidays is a market and a product. Again, despite some of the kind of nonsense you hear out of competitors, holidays has now replaced big data as the new sexy kind of thing that some people refer to.
I look around at TUI and Thomas Cook and all the other operators. 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, et cetera. We have a holidays product. It's reasonably small. We used to have a holidays product. We closed it. It was small and didn't go anywhere. It's not something that I would waste any more time on.
Okay. Thank you very much, Michael.
Thanks, Kathryn. Next question, please.
Our next question comes from the line of Malte Schulz of Commerzbank. Please go ahead.
Hi, Malte.
Hi, good morning, Michael. Two questions also from my side. First of all, on the MAX fleet, if you look at next year, how many can you fleet in during the next fiscal year? Is there any kind of restriction, or would you limit yourself to 10% growth, or will you pick up all the delays from this year, next fiscal year already? The second question would be on route fills. How important is the result optimization? Closing the most unprofitable routes with some strategic rationale, like pushing against U.K. airlines or pushing against Lufthansa in Germany [audio distortion] under a new market share?
Okay. The only real restriction we see with the MAX aircraft is clearly, we would not from a historically or from a safety point of view, want to take delivery of any more than between 6 - 8 aircraft a month. Historically, I think the most we ever did was about 8 aircraft a month. With the new variant, we would want the first month or two, maybe take 5 or 6, and then we'd get to 8 a month reasonably quickly. Obviously, we want to take those in the spring. We're operating at the moment, 30 aircraft would arrive in, it's something of the order of about 4 months at about 8 aircraft a month. That we would be able to take that kind of February, March, April, and May.
We wouldn't want to take a lot of aircraft into June or July because frankly, 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 eight aircraft a month, November, December, January, February into the following summer. It's an imprecise, non-scientific, what can we take in advance of June of 2020 for peak summer 2020, we're presently operating on 30 aircraft. 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, 28 + 50, 78 aircraft over that period of time? Yes, we could. That is at the outer envelope, giving us 10 months at eight aircraft a month, that we just about take about 80 aircraft.
Would we want to take them at that kind of speed? Again, it would depend on how fast Boeing can make them. They've said themselves, I think if the MAX delivery gets repeatedly delayed, it runs into their own production schedule. There's work to be done once the first aircraft get back flying, and like frankly, at this point in time, all you can focus on is summer 2020. We'll worry about the winter 2020 and the summer 2021 once we've 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.
Mostly what we will be looking at, I mean, practically almost exclusively be looking at 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? Thereafter, what loses most money during the winter period? We will be issuing notices, making notes to our own crews in the next week or two about some more bases that we will need to close and more routes that will need to be closed because discussions will have to be held with them in the next couple of weeks around that. Mainly the focus will be on those routes that lose most money over the winter or that are going nowhere into summer 2020.
An obvious one, to give you an example, an obvious one would be if there's a hard Brexit at the end of October. We have three U.K. domestic 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, I would want to protect some airports in Germany, some airports in Italy or Spain, where we have already have growth commitments and growth incentives that David and his team have already negotiated, where frankly, we don't have those growth incentives because we're not growing in places like Edinburgh or Glasgow or in Belfast.
There's a debate to be held, and there are different factors running across them, but mainly the decision will be made of which bases, routes lose the most amount of money during the winter period, and where do we have longer-term issues, and certainly a hard Brexit would be a longer-term issue for those U.K. bases, the Ryanair U.K. PLC. Next question, please.
Our last question comes from the line of Gerald Khoo of Liberum. Please go ahead.
Gerald, hi.
Yeah, thanks. I was thinking, 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, that that will actually be positive for pricing beyond the very short term? Why does the market not backfill the vacuum left by that competitor, just as it has in the case of Air Berlin?
Generally because Norwegian have a very small footprint. They have almost no footprint in the German or the Austrian market. It wouldn't affect it at all. Most of the base closures Norwegian have already announced in October are in Italy, Spain, the U.K., and Dublin. If Norwegian goes bust, which I think is a real prospect, 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 that Norwegian have a reasonable size footprint?
Obviously in Scandinavia.
Oh, sorry. Scandinavia, obviously. Now, would it be a rush to backfill that capacity? Frankly, I don't think so. Norwegian have accounted for a huge amount of the excess capacity in places like Spain and Italy in recent years. Where they've already announced those base closures, I think there's an attempt by them to reverse out some of that excess loss-making short-haul capacity that is losing money hand over fist. The one market that would have a big impact on would be the Austrian and German markets. The Austrian and German markets is largely driven at the moment by the kind of crazy Lufthansa bought Air Berlin. Instead of taking out 50% of Air Berlin's capacity, I think they were kind of petrified that everybody was going to run in and take up slots in German airports.
They have all this Air Berlin capacity, Condor capacity, flying around, losing money hand over fist. Ridiculous excuses coming out, such as like, "Laudamotion is putting undue is targeting Condor." I've never heard such nonsense given that Condor is essentially a long-haul airline. Lauda doesn't compete with it at all, but they blurt out all this nonsense on their investor calls that make no sense. Lauda is targeting Austrian, yes, because Lauda has a very significant presence in the Vienna marketplace. The response of Austrian has been a very Germanic one, which is quick collapse all the capacity at the regional Austrian airports, shoveled all that capacity back into Vienna, where I think the boss of Austrian said they will lose whatever amount of money it takes to defend the position in Vienna.
Which again, given that it's a dominant airline in Vienna, seems to be, again, more below-cost pricing. 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 it Eurowings, easyJet, Wizz, Austrian, et cetera, and lowest cost wins. It would be painful on pricing for a year or two, but if we have reduced the year one losses in Lauda from EUR 140 million in year one to something under EUR 50 million in year two, the trend is moving very dramatically in the right direction. That's why I'm reasonably confident over the medium term. I think until Lufthansa can explain to their investors how their quarter one profit last year of EUR 50 million returned to a loss of, was it EUR 250 million quarter one this year?
EUR 300 million swing. How are they going to turn that around? I understand this morning they're announcing they're moving to a group structure à la Ryanair. They'll need to do a lot more than that. Ultimately, there's too much capacity in Germany, but the sole author of that capacity excess in Germany is Lufthansa, not anybody else. Okay, folks, again, we'll take a couple of last questions. 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 government office for the remainder of the day. The next you will see some announcements coming out of us in the next week or two about base cuts and base closures.
These are being driven by the MAX delivery delays. As soon as we have any relevant information on the MAX aircraft, we'll try to keep you briefed and updated. 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 takeaways 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. On unit costs, we are doing marginally better than we had originally guided, despite the fact that we don't have the benefit of the MAX unit cost performance in the full 12 months.
On the industrial relations side, Eddie Wilson and his team are continuing the dialogue with the unions and our people. 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 the 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.
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