Okay. Good morning, ladies and gentlemen, welcome to the Ryanair full-year results presentation. I am Michael O'Leary, Chief Executive of Ryanair, with me is Neil Sorahan, our CFO. Morning. This morning we released full-year results with profits down 29% to just over EUR 1 billion, on the back of lower fares. As previously guided, short-haul capacity and the absence of Easter in Q4 led to a 6% decline in fares. This, in turn, generated substantial traffic, stimulated traffic growth of 7% to over 139 million passengers in Ryanair, 142 million guests including Lauda. Ancillary sales performed strongly, jumping 19% to EUR 2.4 million. The highlights of the 12 months included average fares, traffic growth of 9% to 142 million, ancillary revenues jumping 19% to EUR 2.4 million. The year-end fleet grew to 455 Boeing aircraft and 19 A320s.
Ryanair Sun, which we have renamed Buzz, has traded profitably in its first year. The purchase of Lauda was completed in January 2019. It has suffered an exceptional one-year loss, our year-one loss, of EUR 139 million. Over the year, we have concluded union agreements with pilots and cabin crew in most of our major markets. Just to touch on a couple of brief themes in terms of revenues. Traffic growth is strong. Pricing, underlying pricing is weak. Our ancillary division, powered by Ryanair Labs, continues to perform admirably and grow strongly. In terms of costs, Ryanair remains the cost leader, particularly among the low-fare EU airlines. Highlights of that would continue to be our airport costs are significantly lower than competitors. Over the last year, fuel costs have jumped by EUR 460 million.
Ex-fuel costs rose by 5%, principally due to a EUR 200 million higher staff cost that included 20% pilot pay increases, which were agreed with our pilots and cabin crew at the early part of 2018. A EUR 50 million jump in our EU261 cost, primarily because of repeated ATC staff shortages and strikes through the summer of 2018. In terms of the group airlines, Ryanair Sun, now rebranded Buzz, started last year with five aircraft in the Polish charter market. In its second year of operation, or in winter 2018 rather, Buzz took over all of Ryanair's scheduled bases in Poland. This summer is operating a fleet of 25 aircraft, seven of which will be in charters. The Buzz management team successfully delivered a small profit in its first year of operation. We expect that profitability to grow in year two.
In the case of Laudamotion, they have endured a very difficult first year. Most of the losses arose as a result of the very late delivery and release of the aircraft and its schedules for summer 2018. We had to supplement their operations by leasing them 10 of our aircraft so that they could take up the slots that they were entitled to in both Germany and in Palma de Mallorca. Lauda enters its second year, however, with a restructured operation. This summer it is operating 23 lower-cost operating lease A320 aircraft. They have returned the nine very expensive lease aircraft to Lufthansa at the end of June. We expect Lauda in its second year will grow to carry over 6 million guests.
They have already signed agreements to increase the fleet to 34 aircraft for summer 2020, which will see them growing to carry over 8 million passengers a year and will be trading profitably. In the current year or year two, we expect losses in Lauda to fall significantly, mainly driven by very low prices in the German market, and particularly in the Germany to Palma de Mallorca market. Higher oil prices and lower fares have seen a wave of airline failures and sales in the recent six months, and we expect that that trend will continue and in fact will pick up in the winter of 2019, particularly among those airlines who are trading unprofitably and particularly those who are unhedged on fuel as spot oil prices rise back over $70 a barrel. We have taken some pain in the last 12 months.
We have closed unprofitable bases in Bremen and Eindhoven. We have reduced capacity at others, most notably in Niederrhein, Frankfurt-Hahn, and the Canary Islands. Other competitors from Norwegian to principally who have announced the closure of multiple bases, many of them where they compete directly with us. Other competitors, Wizz, Lufthansa, easyJet, have all announced either base closures or base reductions. The Boeing 737 MAX, we were due to take the first five aircraft in April, May, and June of this year. It's now clear that they won't be delivered. We've taken them off sale for the remainder of our entire summer schedule out to the end of October. We are in continuing dialogue with both Boeing and the regulatory authority, EASA. We do expect the MAX aircraft to return to flying probably in July or August of this year.
We won't take deliveries of the aircraft until I think October or November of this year, but we expect them to be operating successfully in the winter schedule. We continue to have the utmost confidence in these aircraft, which have 4% more seats and are 16% more fuel efficient and will generate significantly lower noise emissions. We believe the aircraft will return to flying in the North America, probably in July or August. It may be returned to flying in Europe in September or October, and we expect to be operating the aircraft in our winter schedule from November onwards. There will be some delays to our original schedule of 43 deliveries this winter, but we'll be working our way through that in negotiations and discussions with Boeing over the coming months.
In terms of our balance sheet, we remain very strongly financed with one of the best balance sheets in the industry. Almost 95% of our 455 aircraft are owned, and almost 65% of that fleet is entirely debt-free. At year-end, the group had over EUR 3 billion in gross cash. We generated over almost EUR 2 billion from operations. We're now the years of peak CapEx. In the last year, we spent EUR 1.5 billion on CapEx. We've returned EUR 560 million to shareholders via buybacks, and we've repaid more than EUR 400 million in debt. Our year-end net debt rose slightly to about EUR 450 million. We're pleased to announce that this morning, the board of Ryanair has approved a EUR 700 million share buyback, which will commence later this week, and we expect to run over the next nine to 12 months.
The board has decided to allocate that buyback to about EUR 500 million into the ADR program and about EUR 200 million in ordinaries, which will, in the run-up to any Brexit situation later this year, again, significantly reduce the quantum of our non-EU ownership. In terms of guidance for the next year, we will be including the Lauda results as part of our consolidated group results rather than separately. We expect broadly, we remain very cautious on pricing through the summer, where we have some visibility and into next winter, where we presently have none. We expect revenue per passenger to rise this year between a range of about 2%-4%. That would put us in a profit range of between EUR 750 million-EUR 950 million. Broadly flat profits for the year on the assumption that average revenue per passenger rises by 3%.
H1 bookings are slightly ahead of last year at this stage, but at weaker prices. As I said, we have zero H2 visibility. Costs this year will suffer, particularly on the fuel side. Our fuel bill this year will jump by another EUR 460 million. We are hedged, 90% hedged for the remainder of the fiscal year at about just under $71 per barrel. Spot of Brent is a little bit higher than that at the moment. Our ex-fuel costs will rise by about 2%, principally due to stronger sterling. The absence of Lauda costs for most of the H1 prior year comparable and the delayed delivery of the Boeing MAX aircraft, which we believe will deliver significant cost savings, but now only commencing in the year to March 2021.
This guidance of flat profits for the next 12 months is heavily dependent on our close-in peak summer airfares, prices for the second half of the year, and the absence of any unforeseen security events and no negative Brexit outcomes during the remainder of the year. Neil, do you want to take us through the presentation?
Actually, Michael will let you do the presentation.
No.
Okay. Yeah.
One brief piece of it. To the presentation. Our competing competitive position remains unchanged. We are the lowest fare, lowest cost carrier in Europe. We're number one for traffic. We expect to grow to 153 million guests over the next year, up 8%. We are number one for coverage. We expect to continue to benefit, particularly this winter, as there's further airline failures and airline sales accelerate. Average fares in the last year have fallen 6% to EUR 37, which has driven that strong traffic growth. We have strong ancillaries performance last year, but this was offset by higher fuel. The message, as always, is that lowest cost wins. In terms of airfares, nobody competes with Ryanair on price. The competing message, however, is that nobody competes with us in Europe on costs either.
There have been some significant concerns, I think last year that unionization would lead to a loss of cost competitiveness. Nothing could be further from the truth. Yes, our staff costs have risen, jumped materially in the year, but so have the staff costs of all of our competitors across Europe. We continue to be one of the most efficient, most productive teams of aviation professionals in Europe. On all the cost lines, however, we beat everybody else hands down. Our airport and handling costs are lower. Our ownership and maintenance costs are lower than our competitors. In terms of coverage, this summer, we'll offer 87 bases, 234 airports, over 2,000 routes. Significant developments this summer are three new bases, our first three in France, in Marseille, Bordeaux, and Toulouse.
We've opened a base in Southend in London, also in Berlin, Tegel in Germany. We are opening new country markets in Ukraine and Turkey. As I said earlier, we expect to grow to 153 million passengers this year. We're well on track to hit our target of 200 million passengers annually over the next five years. Our market share in all markets are growing. We are the number one or number two carrier in most of Europe's major markets.
On results, which excludes Lauda, we saw our guests increase by 7% last year to 139 million. Average fare, however, was down 6% to just EUR 37, which stimulated that strong growth in passenger numbers. Ancillaries had a very strong performance driven by the likes of our priority boarding and reserved seating, and as a result, were up 11% per guest to EUR 17. Unit costs performed slightly better than the +6 that we guided, so up 5% to EUR 29. As a result, profit was in our guided range of EUR 1.02 billion, a drop of 29%. This excludes an exceptional 139 million startup loss in Lauda in their first year of operations.
In terms of current developments, we see lower fares and higher fuel driving a wave of airline failures and sales. Ryanair continues, and Ryanair Labs in particular, continues to deliver very good ancillary progress, and we have relaunched our customer care charter and a range of customer care improvements for the next 12 months. The group structure is developing. Lauda, the fleet of both Lauda and Buzz and the management teams are growing strongly. The Boeing 737 MAX, the first deliveries will be delayed until winter 2019, and there will be some backup in the winter deliveries. But we expect to be operating at least 50 of these aircraft for summer 2020. Ryanair is Europe's greenest, cleanest airline. Customers flying with us have the smallest environmental impact of any air passengers in Europe.
We continue to see a weak summer fare outlook, and therefore that drives our cautious flat full-year guidance. Within that, however, the board has demonstrated its confidence by approving a EUR 700 million share buyback, which will take place over the next 6-9 months. And we believe that there is a short-term price weakness driven around excess capacity in Europe, but higher oil prices will see that and all that overcapacity shaken out this winter, and Ryanair will continue to be the structural winner. We've set a list there of the airline failures and sale and airlines that have failed and sold over the last 12 months. We believe that process and that trend will continue, particularly as we move out of the summer of 2019 into winter 2019.
In terms of ancillaries, strong performance on priority boarding and assigned seats as our customers opt to or choose to purchase these attractive services. Our new baggage policy, which is essentially limiting two carry-on bags to about 50% of the priority boarding customers, has significantly improved on-time performance and has had a small impact in improving our baggage revenues by rolling out the new 10 kg baggage product. We have replaced poor handling performers at Stansted, in Spain, and in Poland, and already in the first four months of this year, we've seen significantly improved, better on-time performance. We exceeded 90% in both March and April and expect that to continue, although there is a spike up in ATC disruptions, particularly strikes in France and Belgium, during May. The new customer care charter was rolled out by Kenny and the team in February.
Key features of that include 24/7 support, faster responses to customers, more FAQs and chat services online, and industry-leading turnaround times on EU261 claims. Our digital platform continues to improve. The Fare Finder, the Help Center, have all moved online and are offering our guests faster and better services. Later this year, we will roll out Ryanair Choice. We are developing into a strong airline group. This summer, Ryanair will operate a fleet of 430 Boeing 737s. Buzz, rather, will operate 25 of our 737s this summer, but that will increase to 48 aircraft in summer 2020. Lauda this summer will operate 23 low-cost Airbus aircraft and already have signed heads of terms to take that fleet to 35 aircraft for summer 2020.
The purpose of the group will be to develop each of these low-cost brands in their separate markets, Lauda focusing on Vienna and Palma in particular, Buzz focusing on Poland and Central Europe, and Ryanair focusing on everywhere else in Europe. We will drive them forward with efficient capital allocations and efficient aircraft purchases, timely and efficient aircraft purchases. We believe that by operating low-cost Airbus and low-cost Boeing subsidiaries, that will facilitate competition divestments, which are inevitable over the coming years as Europe's consolidation and the process of European consolidation continues. I have signed up as Group CEO for the next five years. We expect to be appointing a replacement Chief Executive of Ryanair between now and the end of the year.
I am pleased to say that Stan McCarthy has now accepted the position of Deputy Chairman and will replace David Bonderman as Non-Executive Chairman by the time of the September 2020 AGM. In terms of the MAX, clearly it has been a very difficult period for Boeing. The MAX has been grounded. We were due to take five aircraft for the summer of 2019. We have now taken and removed them entirely from sale for the winter. That will cost us about 1 million passengers this summer. We do expect those aircraft to be back flying in North America and in Europe by July, August, or September. We expect to be flying them from November onwards. We have 42 aircraft due for delivery over winter 2019, and we expect to take all of those aircraft and to be operating them efficiently and effectively in the summer 2020 schedule.
We are in continuing, almost daily dialogue with Boeing and with the European regulators, EASA. We are reasonably confident that the aircraft will be approved to return to service sometime later in July or August of this year. We have frozen all predelivery payments to Boeing since the aircraft grounding. We will resume the predelivery payments once we have some certainty from Boeing on when these deliveries will take place. We do expect that Boeing will cover the lost profits from the five aircraft that we have not operated this summer, but it is not a material number and will form part of our return to service dialogue with Boeing. These aircraft are phenomenal airplanes. We have the utmost confidence in both the safety of the aircraft and in Boeing's technical expertise to get the return of these aircraft to flying.
When they return to flying, we think, A, our customers will love them. They have new interiors, more seats, more legroom, and offer a better, quieter flying experience. From a shareholder perspective, they offer us 4% more seats, but with 16% lower fuel consumption. These aircraft will drive the next generation of price reductions here in Europe and enable Ryanair to continue to grow by delivering unit cost reductions for the next number of years as we move to take delivery of 200 of these aircraft. They're also the aircraft that will enable us to grow to 200 million guests by 2024. Ryanair's commitment to the environment is unparalleled and unmatched by any other airline in Europe. We continue to cut our fuel consumption and noise emissions. We have in almost every independent third-party survey, we are the cleanest.
Ranked as Europe's greenest, cleanest airline, principally because we operate one of the youngest fleets with the highest load factors. Therefore, passengers flying with Ryanair are exercising their choice or to reduce their impact on the environment. In addition to that, we're adding new aircraft, which will have 4% more seats, but will burn 16% less fuel and will deliver 40% less noise emissions. We've successfully run Europe's first voluntary carbon offset program as part of the fare booking, and in the last 12 months, that has generated more than EUR 1 million in carbon offsets from our customers, and we are distributing those funds to environmental partners in Portugal, where there are reforestation programs in Portugal, the Irish Whale and Dolphin Group, First Climate, who are investing in wood-burning stoves in Africa, and the Native Woodland Trust here in Ireland.
We expect that that campaign or our support for these climate partners will continue and step up over the coming years. In addition to this, however, Ryanair has also committed itself to be plastic-free within 5 years, and we're well on target. In fact, we think we will beat that 5-year target. Guidance. Neil?
Okay. Just looking into the guidance for next year. We're cautious. Very limited visibility at this time of year, as is always the case. However, the guidance, which is for the entire Ryanair Group, including all of our airline subsidiaries, we see our guests increase by 8% to 153 million. Revenue per passenger will be up, we believe, in a range of about 2%-4%. Fares remain soft, particularly into the summer, and therefore we're guiding fares in a range of -2% to +1%. Costs will increase next year. Our fuel bill will be up EUR 460 million. We're at 90% hedged, and this assumes that spot prices remain where they are for the remaining 10%. Ex-fuel costs will be up in a range of about 2% for next year.
As a result, we think that profits will be broadly flat on a full-year basis in a range of EUR 750 million to EUR 950 million. This, of course, carries the usual health warning in relation to winter fares, which with no visibility close in summer peak bookings and ATC and Brexit developments.
Okay. We're now going to do our question and answer session. I'm pleased to say we're joined this morning by Stephen Furlong of our brokers Davy who's going to grill us on the numbers and the presentation for the full year. Stephen?
Thanks, Michael. Thanks, Neil. Okay. Can we just talk about the revenue environment first? Why did the revenue per pax fall by 1% in the last fiscal year?
There's a number of moving parts, Stephen, in there. Firstly, we saw average fares down 6% to just EUR 37 per customer, primarily due to the overcapacity that we're seeing in Europe at the moment, and of course, the absence of Easter in Q4. This, however, drove a strong passenger growth of 7% to 139 million guests, or indeed, if we add Lauda, 142 million. Then ancillaries had a very strong performance. We saw an 11% increase in spend to EUR 17 per guest, which was driven by the likes of our priority boarding and reserve seating, which had a strong performance last year.
Okay. What is your outlook for fares for this year?
I think our outlook is cautious. We expect the fare environment, we've been consistent in this throughout the year, that the fare environment will be weak. It's driven principally by two of our major markets, which is the U.K., where there's consumer nervousness about uncertainty over Brexit. There's a later booking pattern, and we're having to stimulate bookings with lower air fares. Add to that, there appears to be significant overcapacity in the German market in particular. Lufthansa is engaged in below-cost selling with its Germanwings subsidiary, and Laudamotion is in that marketplace, as is Ryanair. We expect weaker prices in the U.K. and weaker prices out of Germany, and that will continue for the remainder of the year. We're guiding, as Neil said, prices this year flattish to slightly down.
The range we believe of average fares for the year will be from -2%, a fall of 2% to possibly up 1%. Much of that will be driven by close-in summer bookings, where we would hope to see some strength coming out of the U.K. as people finally make decisions on holiday bookings and the second half of fares for the second half of the year.
Will the strong performance in ancillary revenues continue?
Yeah, I think ancillaries will continue to be a strong performer, although probably not growing at the same pace as it did in the year just ended. Priority boarding will continue to perform strongly, particularly for the next six months. The comps get a little bit more difficult as we get into the winter, where it starts to overlap the introduction of the new bag policy in November. Lauda are now starting to roll out ancillaries across their business as well. Last year, for example, they weren't generating any revenue from their onboard sales. This year, they've taken that in-house, and it's performing very well. We'd expect to see some benefits coming through there on the ancillary side as well.
Can you just give us an update on car hire?
Yeah. The car hire market is difficult. The car hire companies have been challenged by the Ubers and some of these other models. We are currently in the process of re-tendering our car hire contract for the next five years. We expect to select or choose our car hire partner sometime over the next month or two. It may well be the existing provider, CarTrawler. It could be some new provider. We'd expect to have or be rolling out that new partner or that new contract from October
This year.
Okay. Let's just talk about costs, maybe. I see costs were a little better than we thought for the full year. You might just talk about that.
They were, Stephen. They were up 5% on the full year base, which, as you said, was better than the 6% previously guided. Like everybody else, we saw our staff costs increase over the course of last year. Staff up about 28% in total as we rolled out pilot pay increases, increased our crewing ratios, and took on more pilots for the growth in the airline over the next few years. EU261 jumped by about EUR 50 million on the back of all the ATC disruptions that we saw last winter. Of course, our maintenance was up as well by about 19%, driven by the timing of leasehandbacks, but also higher maintenance on some of the older aircraft in the fleet.
Okay. Ex-fuel costs are going to increase again in FY '20. You might go through that, Michael.
Yeah. Bear in mind, it's a much smaller jump in FY '20. It was up 5% this year, ex-fuel. Ex-fuel's up 5%. Next year, it'll be up 2%. Most of that is stronger sterling, not having the Lauda costs in the prior year comp for most of the first half of the year, and cost savings that we would have generated by taking delivery of the Boeing MAX aircraft have been delivered on time. I would point to the fact that we're returning now to reasonable cost discipline in Ryanair, particularly at a time when most of our competitors are seeing their unit cost rise by significantly more than the 2% we're predicting.
Could you talk about where Ryanair, I mean, there's been some cost inflation for the last two years, but I think the emphasis at Ryanair is the lowest cost airline in Europe and where the cost savings could come going forward.
Well, at EUR 29 per passenger last year, we're streets ahead of everybody else when it comes to unit cost, Stephen. That's going to remain the case. With all the consolidations and failures that we're seeing in Europe, airports are clamoring to get Ryanair capacity into them, and that's one of the reasons why we have advantage on our unit cost for airport and handling over our next nearest competitor and multiples of that when you look beyond that competitor. Handling, we believe will start to drop over the next year or two and help drive our EU261 compensation claims as we've invested very heavily in new handling facilities in the likes of Stansted, Spain and into Poland. We're already seeing benefits on on-time performance as a result of that, which will have a positive impact.
Then, of course, the big saving coming down the tracks in the next year or two will be the delivery of the MAX aircraft. Phenomenal aircraft with 4% extra seats, 16% fuel burn efficiency over what we're seeing at the moment, and 40% less noise emissions. We're also continuing to work with Lauda and the team to reduce their costs within their business. We've got a lot going on, which we'll see that leadership on costs remain for the foreseeable future and beyond.
Just talk about fuel hedging, maybe.
Yeah. We're 90% hedged for the remainder for this fiscal year at just under $71 a barrel. That still means a jump in the fuel bill this year of about EUR 460 million, and some of that is ETS, some of that is volume increase as well. We have begun hedging into the following year, which is FY March 21. We're 35% hedged this morning for the first quarter of that year at about $61 per barrel. About a 5% cost saving into Q1 of the following year.
That also factors in carbon credit increases.
Factors in carbon credits and ETS payments, yeah.
Yeah. In terms of EU261 costs, they were up obviously a lot last year. Do you see this further rising in FY 2020?
This is a factor of the level of disruptions that we see in ATC over the course of the summer. Hopefully, it won't be worse than last year, but we've put a lot of time and effort into improving our handling arrangements. We put a lot of extra spare parts around the network, and our on-time performance has improved as a result of that. Hopefully, we'll actually see some reductions in the right to care costs, but we can't rule out disruptions at an ATC level.
Do you see airlines doing something about it or in terms of trying to improve the ATC disruptions?
I think all the European airlines, particularly our partners in Airlines for Europe, are campaigning hard. I think the rate and scale of the disruptions means that the European Commission and European politicians are beginning to listen. We welcome the recent publication of the Wise Persons Group report on ATC reform that was published, which would give Eurocontrol more control over the flow management, and would also put further pressure on the ATC providers, particularly in France, Germany, and the U.K., to staff up. They have been understaffing relative to the traffic growth, and that has to stop.
Just talk about the group structure. Michael, can you just give an update on where we're on that?
Yeah. I think we've made very good progress in the last 12 months. You can see now both Buzz and Laudamotion on a clear growth trajectory. Buzz was profitable in year one, will be profitable again in year two as it takes over most of Ryanair's scheduled flying in Poland and in Central Europe. They have suffered exceptional year one startup losses of EUR 140 million. Already, we see our way through in year two in what is a very weak environment in Germany and the German-Spanish market in particular, where Lauda was one of the main players. Yet the losses will be significantly and substantially reduced. We don't think it'll get to breakeven in year two, but they have signed up for to increase the fleet to 34 aircraft for summer of 2020.
At that point in time, they will be operating, carrying over eight million passengers.
One of the very substantial, the second-largest airline at Vienna Airport, a very big presence in Palma, and probably one other new base somewhere in Central Europe. They have good management teams. We are rolling forward, I think, the group structure. I've signed up to be the group CEO for the next five years. I think once we have the results out of the way, we'll begin the process of recruiting and appointing a replacement CEO for me within Ryanair. Then we will have the three airlines reporting into me as the group CEO on a weekly basis. I believe We'll be able to leverage the strengths of Ryanair's model, but also the advantages of different brands in both Laudamotion and also within Laudamotion, being an Airbus operator.
We see ourselves now being well-positioned, particularly if there is further competition divestments, which I think is inevitable as IAG, Lufthansa, and possibly Air France-KLM look to participate in more consolidation. You look at the Lufthansa, for example, at the moment, are interested in Condor or Thomas Cook.
It's inevitable that there will have to be significant competition consolidations coming out of that kind of a merger if it were to take place. We now can do and participate in those mergers, A, because we're unionized, which I think would previously have been a blockage, and B, because we are both an Airbus operator and a Boeing operator.
You talked about Lauda a lot. In terms of Buzz, that's expected to ramp up quite a lot in terms of growth over the next couple of years.
Buzz started off last year with five aircraft in the fleet, primarily charters. That's now increased to seven charters this summer. Last winter, they took on schedule flying for the Ryanair Group of 25 aircraft in the fleet. That'll easily double over the next few years. As Michael said, modestly profitable in the first year and will continue to be profitable for the foreseeable future. The management team are doing a good job there, keeping the costs down and performing well.
Just in terms of the group structure, just talk about the board changes.
I mean, they've now been rolled out. We have announced the board succession plan to shareholders. Stan McCarthy has become Deputy Chairman of the board from April of this year. He will take over as Chairman in the summer of 2020. This September 2019 AGM will be David Bonderman's last as Non-Executive Chairman and Kyran McLaughlin's last as Senior Independent Director. I hope at the AGM, shareholders will recognize the enormous contribution David and Kyran have made to the successful growth and development of Ryanair over the last 20 years. We've been very fortunate to have both of them, and we will miss them when they're gone.
In terms of-- You talked about consolidation. In terms of growth for 2020, where is the plan for growth? In what markets?
There's lots of opportunities, Stephen, over 40% of our growth this year is going to come in the big markets, the likes of the Italys, the Spain, into the U.K. We're adding new markets in France. We've got three new bases in Marseille, Bordeaux, and Toulouse. We've opened up a new base in Southend in the U.K., and we're already flying to Exeter as well. Of course, there's new markets being added all the time, the likes of the Ukraine, Turkey, Bosnia and Herzegovina, and now we're doing a lot down in Jordan and Israel as well. There continues to be lots of opportunities for Ryanair's growth over the next few years.
What about Scandinavia?
Scandinavia is a very difficult market at the moment, particularly with the Swedish and Norwegian governments in particular hiking unjustified aviation taxes. Both of the main airlines up there, Norwegian and SAS, are loss-making. We think it's inevitable that Norwegian will either fail or be sold this winter. That may lead to some opportunities up there. I would be a reluctant entrant into the Scandinavian market at the moment, where airport costs are high and governments are kind of vindictively taxing air travel, which is rich, particularly from a country like Norwegian, whose principal export is oil. Nevertheless, it is what it is. We have much more attractive, as Neil has said, growth opportunities, I think in France in particular, now that we're unionized and we're dealing with the French unions and those new countries, Jordan, Israel, and Ukraine, which I think we're particularly excited about.
Neil, can I just ask you about the balance sheet and talk about the new IFRS 16 that's been?
The leasing standard, which is coming in. Yeah, it's going to have a fairly modest impact on us, Stephen. Only 6% of our fleet is leased at this point in time. The impact will be as we take the future lease rentals onto the balance sheet as debt. We'll have an adjustment in Q1 of about EUR 140 million to debt. However, as we add more Lauda leases in advance of summer 2020, that figure will increase. About EUR 330 million impact on gross debt. For the P&L, rentals won't really be the kind of figure that you've seen in the past. This now gets split out between depreciation and interest. It'll be a broadly similar figure when you look at the two of them. Maybe modestly positive to the P&L, nothing significant.
You did some recent debt finance deals.
We did. We took advantage of very low pricing to do a club deal with our core relationship banks. We've just raised EUR 750 million. It's a 5-year unsecured facility, which we'll use for general corporate purposes, including the likes of our peak CapEx of EUR 2 billion this year and the repayment of more expensive maturing secured debt within the airline.
There's been a lot of talk, Michael, daily, basically, on the Boeing MAX. Where do Ryanair see it?
Well, firstly, we have the utmost confidence in the aircraft. It's a great aircraft, 4% more seats, 16% lower fuel consumption. It has been flying already in North America for over 12 months without any incident. We believe the aircraft will be certified to return to flying in North America probably in July or August. In Europe, maybe a month or two later than that. We've taken the first 5 aircraft, which we were supposed to take for summer 2019. We've removed them from sale for the full year, for the full summer. That'll cost us about 1 million passengers this year. We've frozen all the PDP payments to Boeing, but we are working on a daily and weekly basis with Boeing and with EASA, the European Union Aviation Safety Agency, on a return to service.
When it returns to service, we would expect to delay our delivery of the first 5 aircraft probably to October, so that we will be operating with the winter schedule. We then have 42 aircraft to take over the winter. We think they will be slightly backed up, but we would expect to have all 48 or 50 aircraft in service for summer 2020, delivering a better customer experience, lower costs, and enabling us to pass on lower airfares.
What's the situation in terms of the simulators for MAX in Europe?
Very limited number of simulators in Europe at the moment. There's about 20 in the world in total. We took our first MAX simulator a couple of months ago. We've another two simulators to deliver between now and the end of this year, so the end of December 2019, which puts us in a very strong position. As is always the case, we tend to have more spare parts and more simulators than anyone else.
In terms of aircraft, there's a plan to sell older 737-800s.
Yeah. We're moving forward in that. We're very close to an agreement to sell the first 10 or 10 of our oldest aircraft. Price will be something just over EUR 170 million for the first 10 aircraft. We believe, subject to the MAX deliveries, that they will be delivered to the purchasers by the end of March 2020. We'll move on to further packages of aircraft sales of slightly younger aircraft over the coming years.
Just to follow up there, the market for second-hand aircraft, do you think it's strong? Also maybe just talk about the lease market, because you're obviously leasing Airbus aircraft.
Yeah. The market is strong, particularly for the 737-800NG. Most of the strongest bids came from purchasers who want to convert the aircraft for the cargo market in China. They want between 15 and 18-year-old aircraft, and they're paying us what we think is attractive prices. The lease market at the moment is slightly strange. Particularly in the case of Lauda, for example. You have very high prices for new Airbus. New aircraft prices have rocketed, particularly on the back of the Boeing MAX difficulties. Yet we have seen extraordinary value out there in the second-hand lease market for Lauda. Lauda has, for this summer, signed up 23 aircraft on five-year operating leases. Average lease rental is well below EUR 200,000 a month. They've added to that another. They're going to take a fleet of the 34 aircraft for the summer 2020.
Those heads of terms are already done. Again, young seven, nine-year-old aircraft at lease rentals of under EUR 200,000 a month. We'd be very keen to continue to grow Lauda, if we can find that kind of value in the operating lease market. If we don't, we are in dialogue with Airbus for new aircraft. Frankly, at the moment, with both Boeing and Airbus, the order books are full out to 2021, 2022, and pricing is high. We'd rather wait until the pricing cycle weakens.
What about buybacks?
Well, our board just signed off on the EUR 700 million share buyback, which will start in the next couple of days. We get into the open period. This will run for probably 9-12 months and will be skewed in favor of the ADRs, where we'll allocate about EUR 500 million towards ADR buybacks and EUR 200 million towards ordinaries, although the board have certain flexibility in relation to that. We indicated that we would come back. This will help our ownership position in a hard Brexit scenario as well. When this is complete, Stephen, that brings up to almost EUR 7 billion, the amounts that we've returned since our first distribution back in 2008.
I think the share buyback at this time is a sign of the board's confidence in the business model. The short-term pricing environment is weak, our cost leadership continues, we are very happy to use our balance sheet to purchase back shares at a time when we think share prices are low.
Can I just ask about just on the labor front in terms of union progress, where do you see that? Do you see any disruptions? Maybe just also just talk about how you see the supply-demand scenario in terms of pilots going forward.
I think the team led by Eddie Wilson, the Head of Personnel, have made remarkable progress in the last 12 months. People wondered whether we would be able to deal with unions, whether the costs would explode. What we've demonstrated in the last 12 months, we've signed agreements with most of the pilots and cabin crew unions across most of the major markets. We're moving from recognition agreements now into CLAs that have been voted, many of which have been voted on and approved by our people. It has led to a significant cost inflation last year, we think that was a one-off step up. The backdrop, I think, is more favorable this year.
You've seen huge numbers of airline failures, a large supply of trained pilots and cabin crews, many of whom are coming to Ryanair from the Germanias, Primera Air, in those major markets, looking for jobs either on the 737 with Ryanair or on the A320s with Lauda. We have not only filled our recruitment process for summer 2019, but we've also filled our entire recruitment needs for pilots and cabin crew for summer 2020 as well. I think that environment or the environment for pilots will certainly get worse this winter because I think there will be more airline failures and consolidations. However, we're very happy where we are with our people. They are well paid. They have the best rosters in the industry.
In fact, we take some comfort from some of the commentary from pilot unions, in particular in the U.K. in recent months, where they were looking for or recommending their members take one year unpaid leave from Norwegian and Cathay Pacific or suggesting pay freezes within Jet2 for pilots who are already less well paid in Ryanair.
Then also in terms of disruptions, you see you're not really, I guess.
Yeah. Look, we don't expect disruptions through the summer of 2019. We have agreements in place with most of our pilots and cabin crew in most major markets. We're now a unionized company, and when you're unionized, you can never rule out disruptions. We think they will be the exception rather than the kind of the eight we suffered in 2019. We don't expect that to be repeated this year.
Neil, can you talk about the guidance?
Sure, Stephen. The guidance this year is on a full group basis as opposed to splitting out the subsidiaries. We think that profits will be broadly flat. Clearly depending on where fares end up, we'll be in a range of about EUR 750 million-EUR 950 million. Guests will increase by about 8% to 153 million customers. Fares, we think, will be somewhere between -2% and +1%. Ancillaries will continue to perform strongly and drive total revenue per passenger, which we think will be up about 2%-4%. Cost level, we will suffer from a higher fuel bill. Fuel will be up to EUR 460 million in the financial year. Unit costs, ex fuel, we believe will rise by about 2%.
This, of course, is based on very limited visibility on close-in summer bookings, zero visibility on H2 fares, and hopefully we won't see any untoward events on Brexit or elsewhere.
Okay. Finally, Michael, maybe can you just talk, do you think the European market's going to play out a bit like the U.S. in terms of consolidation? We've seen it the last couple of years, maybe as oil prices have risen, there's been a lot of pain out there, but some of the capacity and some of the failures have been backfilled. Do you think, the market's clearly tough in terms of oil price rising, weak demand in certain markets? Do you expect more failures and consolidation as we go forward?
I do. I think we're in that process. Consolidation will continue. In fact, I think it'll accelerate in the winter of 2019, particularly if oil prices remain above $70 a barrel. Remember, some airlines survived last winter only because spot prices fell from $80 down to $50 between November and March. Hopefully oil prices will remain up above $70 per barrel, particularly where we are hedged at $70 a barrel. I think that will lead to more consolidation. You're right that consolidation plays out slightly differently here in Europe. It's remarkable that Lufthansa is allowed to buy everything, in many cases almost without any kind of competition or application of competition rules. They bought Eurowings, they are plainly below cost-selling within Eurowings. If that's the market we're in, that's the market we're in.
Frankly, if we're in a period where there's going to be attritional fare wars for a year or two, that's good for Ryanair's business because ultimately we have the lowest cost base and we have the lowest prices. We will fill our planes as we're doing now. Profits will suffer for a year or two, and I think that's what our shareholders should expect. However, it is clear in my mind that within the next four to five years, you are seeing the emergence of four or five large European airline groups led by Ryanair as the biggest, Lufthansa, BA-IAG, Air France-KLM, then a question mark over whether easyJet will survive as an independent carrier or not. I think on balance, they probably will.
Most of the others, from Wizz, Norwegian, Alitalia, and TAP in Portugal will, I think, over the next number of years, either merge with or be acquired by one or other of those groups. I think at that point in time, you'll see Europe emerge in much the same way North America has in recent years. Four or five strong airline groups, much more capacity discipline, although there will be capacity growth, but at a slower rate than heretofore, and some upward pressure on pricing. Frankly, the rate at the level of airfares in Europe are typically about 25% of the level of airfares being charged in North America at the moment. Now, I don't think airfares in Europe will get to the North American levels, they will certainly begin to rise again, because they are artificially low at the moment.
Thanks, Michael. Thanks, Neil.
Thanks, Stephen.
Stephen, thank you.
Next few years you two see.
The level of airfares in Europe are typically about 25% of the level of airfares being charged in North America at the moment. Now, I don't think airfares in Europe will get to the North American levels, but they will certainly begin to rise again, because they are artificially low at the moment.
Thanks, Michael. Thanks, Neil.
Thanks, Stephen.
Stephen, thank you.