Earnings Call: Q3 2021

Jul 20, 2021

Hello, and welcome to the Easyjet Analyst Call. My name is Molly, and I'll be your coordinator for today's event. Please note that this call is being recorded. And for the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask at the end of the call. I will now hand you over to your host, Johan Lundgren, to begin today's conference. Thank you. Thank you very much for that, and good morning, everyone, Thank you for joining us to discuss the Easyjet's Q3 2021 trading update. With me on the call are Kent and Jarvis, our CFO as well as Michael from our IR team And Peter and Sophie who's joining as well. You should have been sent a statement along with the slides, which are also available on our corporate website. I will talk through the presentation and then follow-up with time for your questions. So starting on Slide 2. Etigens has delivered in line Q3 financials with cash burn for the period ahead of expectations. Cash burn is improving With only GBP 55,000,000 total cash burn in the 3rd quarter, our liquidity balance remains strong at SEK 2,900,000,000. And this means that the net debt is stable at GBP 2,000,000,000 Our GBP 500,000,000 cost program for full year 2021 is delivering With full year 'twenty two actions underway, our navigation through the pandemic has been strong. We have raised GBP 5,500,000,000 in liquidity, Driven down costs and kept a relentless focus on positive contribution slide. We have proven ourselves adept Responding to rapidly changing market conditions, adding new capacity and pivoting our schedule to capitalize on shifts in demand. And as a result, Easyjet is emerging from the pandemic as a transformed airline. Our cost program is delivering around GBP 500,000,000 I'll save in this year with almost half being sustainable, and cost actions, as I said, in 2022 are well underway. We've built in unprecedented levels of scheduling and flexibility, which is allowing us to optimize our network for current trends, such as allocating more routes The Continental Europe and British domestic flights as well as launching new routes to Greek Island and capitalizing on continued strength across those markets. We're very pleased to see the easing of restrictions right across Continental Europe as well as the successful introduction of the new digital COVID certificate to help simplify our customers' travel plans. The flexibility we have built into our schedule is industry leading. And since the start of June, we have launched double the number of new routes compared to Ryanair Wind. That's more new routes than both Ryanair Wind combined. Our new ancillary products are driving a positive impact on margins for the future, and ECLS Holdings continues to gain momentum and is taking market share. In summary, our efficiency program with sustainable cost reductions baked in, combined with our fleet flexibility, strong positions at Europe's leading airports and agility To respond to this dynamic market means we are very well placed to emerge from the pandemic with renewed strength. While we know the recovery The pandemic isn't going to be a straight line. I can't wait. And so it's the same for my colleagues in this organization to compete using all these new constraints. And with that, I will hand you over to Kenton, who will walk you through the financials. Thank you, Johan. So starting on Slide 3, Let's have a look at some of the key performance indicators for the quarter. In Q3, we grew 4,500,000 seats compared to just 132,000 seats The same quarter last year when the first lockdown was being imposed and when Easterjet's fleet was grounded for all but 2 weeks. The 4,500,000 seats flown in Q3 is equivalent to 17% of the Q3 2019 program and slightly ahead of our expectations. This demonstrates that our capacity forecasting has been accurate and disciplined throughout the pandemic, and this has allowed us to deliver strong cost control. Passenger numbers increased to just under €3,000,000 with load factors improving throughout the quarter from 52% in April 68% in May and then 72% in June. The load factors have been strongest in Continental Europe and on domestic UK routes, With UK International load suffering from late changes in restrictions, total revenue increased to £213,000,000 The group headline costs increased to £531,000,000 as staff came off furlough and operations were ramped up in preparation for the summer. The group headline loss before tax was reduced by 8% year on year to GBP 318,000,000 As previously highlighted at H1, We've reclassified the foreign exchange gains or losses arising from retranslating the balance sheet positions as well as fair value movements after hedges have been marked as discontinued From non headline to headline. So for comparability, the group headline loss for Q3 'twenty has also been restated with a further $22,000,000 in costs. This is a pure reclassification from non headline to headline, so there's no change to the total was reported in Q3 2020. It's 1, there was no reclassification made as the impact was immaterial for the prior year. Moving on to Slide 4. We've remained focused on cash generative flying throughout the pandemic, shifting capacity to match demand. RPS has seen positive momentum through the quarter With Q3 revenue per seat at constant currency showing an increase versus the previous quarter of 27% to £45.89 This has been partly driven by the improving load factor from 60% in Q2 to an average 66% for Q3. Ancillary revenue is performing well, and it's driven by the take up for standard plus bundled fare product and the new cabin bag policy, which was launched in February this year. Phase 2 of the cabin bag policy will be implemented later this year. Our scheduling agility is allowing us to capture demand across the network Despite the constantly changing travel restrictions. On the cost side, cash burn in the quarter has been reduced and is ahead of expectations With Easyjet's cost out program having delivered savings throughout the period, Q3 cost per seat, excluding fuel at constant currency, Showed a sequential improvement versus Q2 2021 of 30% to £97.04 Moving on to cash management then on Slide 5. Easyjet has maintained a disciplined approach to capacity, Focusing flying on cash contributing routes and also on cash management, having achieved material savings from its major cost out program. Cash out on a fixed cost plus capital expenditure basis was GBP 34,000,000 per week in the Q3. This has been reduced to GBP 38,000,000 a week in Q2 And the £39,000,000 a week in Q1, and it's better than our guidance of £40,000,000 per week. It should be noted that this Q3 rate is not the weekly Run rate to project forward for Q4 as this will vary with the profile of capital expenditure, the timing of maintenance events and the ramp up of crude. And as such, we'll maintain the previous guidance of GBP 40,000,000 per week going forward. Working capital movements were positive in the quarter As booking momentum returned, particularly in Continental Europe, with unearned revenue growing to $955,000,000 which is $293,000,000 above the balance of Q2. Capital expense during the quarter was €79,000,000 primarily driven by lease payments and maintenance events. Cash refunds paid to customers during the Q3 totaled GBP 122,000,000 and we continue to process all refunds in another 7 days. Unlike many of our competitors, Easyjet sought to offer its customers industry leading flexibility and options during the pandemic, Including the choice of refunds and vouchers and the ability to move flights without fees up to 2 hours ahead of departure. The amount of flight vouchers currently in issuance is relatively low with a value of approximately £230,000,000 Total cash burn for the Q3 reduced to GBP 55,000,000 and that compares to GBP 469,000,000 in Q2 GBP 969,000,000 in Q1. And we finished the period with GBP 2,900,000,000 of available liquidity and GBP 2,000,000,000 of net debt, Both of which are broadly unchanged from H1. So moving on to our fleet on Slide 6. We retain flexibility within the current fleet plan to expand or contract the fleet based on our expectations of future demand. So just to explain the graph. The top dotted line on this chart illustrates the current maximum arrangements with Airbus as well as with current vessels. We'll not exercise an option to request early delivery of aircraft in affiliate 23 now that we've optimized the network with the removal of 17 aircraft from Berlin And rightsizing the less profitable regional basis in France and Italy. The lower gray line represents the contractual minimum fleet size, And the solid orange line represents our base plan and shows our fleet will grow growing to 317 aircraft by full year 'twenty two. This growth will enable Easyjet to meet the high level of pent up demand we expect in summer 2022 and also provide the flexibility to take advantage of opportunities Strengthen our network in a post pandemic market. It should be noted that the chart does not include any future potential opportunistic lease additions to the fleet. Each Jet is going to take delivery of 8 new aircraft in full year 2022, 7 in full year 2023 and 18 in full year 2024. These are all A320neo family aircraft, which burn 15% less fuel and generate 15% less carbon emissions than the aircraft they replace. In addition to generating 50% less noise footprint on takeoff and landing. In total, we have an order book of 101 neos At attractive pricing, with purchase orders for a further 20 aircraft and unexercised purchase rights for another 58. We retain ownership of 56% of the total fleet and 41% are unencumbered. I'll now hand you back to Johan. Thank you, Kjell. And moving on to Slide 7 now. And while it's been an extremely difficult period for all businesses, not Northern Airlines, I couldn't be prouder of How we have responded to the challenges that we've been facing? Not only have we navigated Eirna through the immediate crisis, reducing cash burn and bolster liquidity, But the very way we have approached the challenges that face us means we have adapted and built life stronger for the future. We didn't let the pandemic happen to us. We controlled and adapted And navigated the call throughout this. We did it through responding in ways our competitors don't or can't, Providing customers with the most flexible policies better than any other airlines, leading the industry, sticking up for our customers on key issues like the cost of testing, Becoming very adept at adding capacity, adding 3,800,000 seats often in a matter of hours and launching for this summer 116 new routes, Building our holiday business and taking market share. We also use our existing strengths like our network with renewed purpose, Shifting capacity to Europe, where we've seen the strongest demand. And don't forget that all of this is resting upon our proven business model Low fare's unrivaled network and brand trust, which will be crucial in the recovery. And our brilliant people are giving back to what we do best, Which is giving customers a great experience. Everything we have done will leave a long term positive imprint on the airline transformed Ready for the post pandemic era. On to Slide 8. The uneven pace of COVID travel Restrictions being eased by various governments means that we are seeing a distinct pattern in our markets where Europe is leading the way. And this is a great example of using ECGS' existing strengths like our network would renew purpose. Whilst in normal times, our network is split Roughly fifty-fifty between the UK and Europe, we're currently operating around 60% of our flights in Continental Europe having shifted capacity to the market And around 2 thirds of our current bookings are coming from Continental Europe. Travelscraft mushroom Continental Europe has reopened. And in some markets such as the Netherlands, we are already back to flying capacity levels above Those of 2019. That demand can be seen clearly in our forward bookings in Europe as we are around 53% sold for Q4 In 2021. For Q4, we expect it to fly up to 60% 2019 levels. And this is a significant ramp up from the 20 3% of 2019 capacity will be in June, and we expect it to build throughout the quarter we are in. In terms of forward bookings at the network level and at the group level, we are currently 49% sold for Q4 compared to 65% at this point in 2019. Moving on to Slide 9. The actions we have taken are delivering a transformed cost base. We achieved a 30% reduction in crew costs and agreed a wholesome new part time and seasonal contract to better match our cost base To the seasonality in our revenues, the destination basis we've opened take this one step further. We will effectively increase the fleet size by 1.7 I'll make comment by releasing spare aircraft, which we freed up through efficiencies in our engineering and our maintenance practices. And the new lower cost sustainable contracts we've signed with our ground handling partner are also delivering more value, quickly Generating additional ancillary revenue. Ancillary revenues will see a step change in the coming years. Our cabin bag policy was Testfully implemented in February, and the second phase of that project will launch later this year. Our bond fare 7 plus is also performing very well. The flexibility we have built into our schedule is industry leading with more routes launched Since the start of June, then both Ryanair and Wix combined as an example. And crucially, the scale and flexibility of our network provide us with the opportunity To realign capacity to take advantage of changes in the competitive landscape, we are pivoting capacity towards popular routes showing rising customer demand In order to capitalize on the strong passenger flows in Continental Europe, we've added further seats to our Continental European network, including increased line From Berlin and Amsterdam to beach destinations in Southern Europe, shifting flying from our destination base from the UK to the most popular routes in Europe with the And bolstering our domestic line in France and Italy as well as popping up capacity on 74 UK and Amber routes and maintaining our strong slot portfolios in Greece. We've also further built our UK domestic portfolio, including backfilling some of the capacity left by the failure of Stobardere on the 12th June. Our holidays business is in a prime position to appeal to customers who, as a result of the pandemic, are seeking more protection For the holiday arrangements and turning to package holidays. With a highly variable cost base of circa 95%, We can quickly and easily adapt our business model to react to changes in demand. We also maintain a continuous and sharp focus on COGS to ensure that the same holidays are We believe we get holidays 70% of the time on a like for like search basis versus our competitors. Flexibility and choice are key, which is why we have the most flexible customs policies in the market. We also have policies on sale Up until October 2022. This year we've been able to retain circa 60% of customers who've been affected by travel restrictions And increase the number of directly contracted hotels that were previously exclusive with other competitors, which now account for nearly 70% of our booking today Moving on to Slide 10 and the outlook. Based on the current Travel restrictions in the markets where we operate. We expect to fly up to 60% of our 2019 capacity levels in Q4. Late announcements of changes to travel restrictions will impact load factors due to the late capacity additions to meet surges in demand All cancellations when restrictions are added, driving an even later booking behavior. Inter European flying represents 60% of the current scheduled Absolutely. EZDET remains focused on cash generative flying as has been the case throughout the pandemic. And EZDET's cost out program is Expected to generate circa GBP 500,000,000 in savings in full year 2021, of which all half is sustainable and which will help to offset the expected headwinds in ownership cost navigation charges as well as help to grow our margins. At this stage, given the continued level of short term uncertainty, It will not be appropriate to provide any further financial guidance for the 2021 financial year. Customers and booking are booking closer to departure And visibility remains limited. So in summary, on Slide 11. We delivered Q3 financials in line with management expectations. Our liquidity balance remains strong in terms of GBP 2,900,000,000. Cash burn is improving with only GBP 55,000,000 total As per in the Q3, we have a stable net debt and an investment grade balance sheet. We successfully navigated our way through the pandemic, have already 5 £500,000,000 of liquidity, having delivered sustainable cost savings and keeping a relentless focus on positive contribution flying. We've shown ourselves to be adept at responding to rapidly changing market conditions, having developed industry leading agility to add new capacity And pivoting our schedule to capitalize on ships in demand. And as always, we have kept our customers at the heart of everything we do, From allowing fee free changes up to 2 hours prior to departure through to upholding all our commitments on sustainability throughout the pandemic. And as a result, Ipidec is emerging from the pandemic as a transformed airline. Cost program delivery on GBP 500,000,000 And cost actions are way underway also for 2022. We've built in unprecedented levels of schedule agility, which is allowing us to optimize our for the current trends such as the shift from the UK to Europe with industry leading flexibility. And civil revenues will see step change in coming years with The launch of our Cabin Bank policy and the second phase of that project launching later this year as well as the strong performance of our standard fare Stand up for the fair, Bob. NHT Jet Polys continue to surpass our expectations and grow momentum in its taking market share And with the most sustainable airline in European and Asia. And in summary, our efficiency program, together with sustainable cost reductions they've been combined with our fleet Strong positions at Europe's leading airport and agility to respond to the Panerlik market means we are very well placed in March from the pandemic With renewed strength. And we always said that the role of the recovery was from the pandemic wasn't going to be a straight line, But we will come out of this shampon and ready to capitalize on the opportunities that will come our way. So with that, thank you for listening. And we are Please note we will only take 2 questions per participant. The first question today comes from the line of Daniel I'm calling from Bernstein Research. Please go ahead. Good morning, gentlemen. Then 2, if I may. First one for Kenton, please. It looks possible to breakeven on cash during Q4. Kind of how are you thinking about what lies beyond? So your H1 'twenty To what's the required liquidity level? Are you kind of comfortable with liquidity going into winter? And what would prompt you to engage in some additional financing And then maybe, Johan, some longer term thoughts on your ancillaries and the ancillary targets because, of course, you've You implemented a whole bunch of new products driving ancillaries, maybe compared to where you were pre pandemic. But do you also have a feeling for the mix Change in your current numbers. So kind of are there just more passengers taking bags on your flights right now? So kind of what's the plus and minus If we were to think about where that ancillary level settles once we're out of business. Thanks. Yes. Okay. Daniel, thank you very much. In terms of the Q3 cash burn, yes, we were pleased with cash burn at 55 €1,000,000 for the quarter because it enabled us to maintain liquidity at access to liquidity at €2,900,000,000 And also the net debt at €2,000,000,000 Look, the cost program is delivering well, and that will give us €500,000,000 That benefits this year, half almost half of which will be sustainable going forward. But with as I said at half I'm undertaking a balance sheet review, and it's going well. We're basically modeling a number of 3 to 5 year plan scenarios Going forward, looking at the liquidity levels we want to maintain post pandemic and factoring in the fleet plan, the Airbus order And looking at how that impacts our debt levels and gearing ratios going forward. And as I said, half 1 We'll be complete by the year end, and we'll come back with the full picture. I think, unfortunately, summer hasn't helped rebuild the balance sheet. But as I said, I'm pleased that the liquidity is being maintained and the net debt is being maintained. But we'll have to wait and see how Q4 Plays forward because obviously, we still have some uncertainty, particularly in the UK, although Continental Europe is progressing better. Yes. And then along that ancillary is a really interesting piece as well. I mean we are clearly seeing that the share of the Total price the customer pays of ancillary is going up. We've been in that area around that 20%, and that is increasing As we speak and driven mostly by the cabinberg proposition as well as we get a good pickup on that. And it delivers also Operationally, into the fact that our on time performance is quite remarkable, I think, Because on one hand, you might say, well, your oil tanker point should be great because there's less flying and the load factors are getting less. But we see it now where we have Really high load factors would be similar to the pre pandemic levels. And in addition to all the checks, As you know, Dan, that we have to do prior to the boarding to check with the COVID document as well. In many cases, And Peter, we had yesterday, like in GAP, like 100 times 100 percent on time performance. And part of that is also driven by the proposition of the The cabin bag. And we will look also to make sure that there are more options that are coming out for our customers. So you are likely to expect to see that, that Share of the total price paid on ancillaries being greater going forward. And Phase 2 of the cabin bags goes live in the autumn, And that will give more opportunities for premium seat revenue as well. And we have a lot of work taking place on in flight retail propositions right now at the moment that will kick in for next summer. And we're also picking up a lot of more airport revenues at the moment than we expected, so that's ahead of budget. And that's just to add to Peter's comment, that Phase 2 of the cannabinoid means that you actually can buy this as separate product And a standalone product, which would be very welcome. Great. Thanks. The next question comes from the line of James Hollins calling from Exane BNP Paribas. Please go ahead. Hi, good morning, everyone. Just first up on the cost headwinds, Kent and you one of the things in the statement as well, maybe just Remind me or remind us of some of the detail on the cost headwinds and ideally quantify them. And obviously, what ideally Also what you're doing to sort of counter those direct cost headwinds. Secondly, just digging a bit deeper on these ancillaries, I think It's a pretty critical part of your margin story. If I frame Daniel's question slightly differently, I mean, your It looks like relative to sort of pre COVID, you've seen that as £6 per passenger increase in ancillaries Q3 'twenty one versus pre COVID, from £14 to £20 or so. I'm just wondering, I guess, similar to Damon's question, but looking for quantification, how much To that, potentially you could hold into post COVID, effectively splitting out what is maybe an exception on what is I'm holdable, thanks for the long term. Any more detail would be lovely. Thanks. Let me start with the last question. We're not giving any No specific guidance on what this could be. But you're absolutely right. I mean, the opportunities are there. There's a number of things that We hadn't been able to introduce previously for various reasons, systems being 1. And With the fact that we now can do the cabin bag, which is a big part, you would have seen what cabin bag is the effect that it has also On margins for other airlines, but this is just as much as also that it operationally also helps us to increase downtime performance, which reduces the cost and improves the customer Yes. And when we're looking through the pipeline, and Peter mentioned one of them, we're doing a big overhaul of the whole in flight Proposition as well that we also know it's going to yield benefit for ourselves and also for the customers. So I feel very And strong and excited about the products that we have in pipeline going forward for the next few years. But like I said, we haven't given any specific guidance on that. Okay. Yes, thanks, James. And on the headwinds, the majority of these are COVID driven impacts. I guess first would be the financing costs. Obviously, we're going to have an increase in interest payable from the GBP 5,500,000,000 of funding we've raised. And And our gross debt sits at €4,300,000,000 and that's what you've got to service because there's not a lot of Interest in from the cash we're holding. So that's financing costs. On ownership costs when it comes to aircraft, there are 2 impacts You have to be mindful of the first is the increase that we have in the mix of our leased aircraft. We did the 58 aircraft 7 leased program, Which raised a lot of valuable liquidity through the last year. But as we said, at half one, it's added about $140,000,000 to our headline costs. And the second impact is around the depreciation effect on our owned aircraft. Obviously, this is non cash accounting. But effectively, as the fleet ages with the deferral of the order book, so the so the depreciation increases. So to give you an example, When we capitalize our aircraft, we then depreciate them over 23 years down to their residual value. But as you come to the major maintenance events, And you capitalize those like engine shop visits and depreciate those going forward. The average age of our A320s is now about 7 years. And typically, the CFM engines on the A320s last 7 last 8 to 9 years on wind before the major shock that it comes along. So that means that a good portion of our fleet will now be coming to their 1st shop visit in the next 2 to 4 years. Those have been capitalized and then depreciated going forward. And the final headwind that everyone has coming out of COVID in the industry will be the impact on navigation charges when Eurocontrol Seek to recover some of their lost revenues in 2020 2021, but that will be faced by all European airlines, and we will all resist that As much as we're able to, but it'll be a similar surcharge that all airlines will get. On the cost program, it's developing very well to offset all this. So on track to deliver the €500,000,000 for this year, nearly half of which The big parts of that are around accruing, where we Well, the negotiations are going very well with the trade unions, and they're completed everywhere with the exception of Italy. A lot of rightsizing of establishment. We've introduced a lot of seasonal and part time contracts, which gives us more flexibility, productivity improvements on crewing levels And essentially a 30% reduction in crew with a 60% reduction in aircraft. And we've seen through engineering and maintenance efficiencies Matt, the management of spare aircraft will lead to more capacity in the system, about 1.7%, which is equivalent to 5 to 6 aircraft. And then Peter, do you want to add anything around ground handling and other things that have been progressing well? Yes. I think it's all about the execution of the ground handling. We've renegotiated the contracts we impact about 80% of our customers. But part of that actually is to incentivize the collection of the ancillary revenue. And that's all about execution for this year and next year. And overall, that's led us to a pretty good operational position at the moment Well, I think we're seeing progressively the cost coming out. And it's about putting in the discipline, the detail around that. Really, we're seeking Everywhere across the business on every cost line, if we can get 5 pence out over 100,000,000 passengers, it's another 5,000,000,000 and that's where we're seeking it. Like there are a lot of people traveling at the moment. We had booked yesterday nearly 140,000 people and 1,000 flights. We had 87 percent onetime performance across the network and actually 100% in Gasworks. So if you believe that If you please, sometimes it's what you read. You think there's nothing happening, but there's a hell of a lot of people on the move now. We'll be up to over 1400 flights a day in August. There's a lot of people booking very quickly. We have 40,000 up this weekend in GasLog alone. So it's really starting to wrap and roll. Yes. I mean just to talk about just on that cost side as well because it's an absolute Focus on line by line. It's not like it's okay, we got 1 project here, 2, 3 projects in here. These are hundreds of initiatives That's been happening within throughout the whole of the company. And Peter has been talking about some of them as well. And this is what I mean when we are Looking to come out of this transform, these are things that, to some extent, we've said was previously a structural disadvantage in terms of Some of this, that has been changed. And if you then take a look at the opportunities we continue to have on there then also back to Sudan Silvious. That's what I mean when we're talking about this being actually transformed there by coming out of this pandemic. Appreciate it. Thanks for the detail, Eiran, Chintan and Peter. Thanks, James. The next question comes from the line of Mark Simpson, please call it from Goodbody. Yes. Hi, good morning. Okay, a couple of questions. First off, I just wanted to Pick up the potential for an extended summer season. In the statement under forward bookings, you talked about being confident about demand Travel this summer and into autumn. And if you look at the kind of you're talking about 95% of your crew Being operational from mid July, bearing in mind that crew numbers are down circa 30%, I kind of suggest that the crewing is about 66.5% of your kind of comparative quarter. You're talking about 60% of capacity against the comparative quarter. So you're either kind of over crude and there's been some cost in that Or you're actually thinking that demand there is some scope to surprise the upside and extend into the October season. So I'm wondering if you can talk And then the other question is around, obviously, we had recently the EU Fit for 55 proposals. I'm wondering if you could give us any feel for the assessed impact of that on the assumption those proposals were actually So agreed unanimously by the European members. So kind of short term summer And proving sort of giving an indication of maybe surprise for the upside and then the longer term implication of sort of covering costs and tax on fuel. Yes. So starting on the summer. I mean, first of all, we do think that there is An opportunity for positive surprises. If you compare to normalized year on the relative in the end of the summer, so like September October as an example, because we know that there's a lot of people who've We've been waiting to book in books further out as vaccination levels are increasing in Europe and to get more clarity on what the situation is. And So it is true that we can see and there is an opportunity to be positive to surprise and where that's going to come. But it's still You know, limited visibility. That's why we can't give any further guidance on that whole thing. But I think that's something that we would be looking forward to doing. We watch that almost every minute in terms of the sales and the trends, How things are coming in, and that is something we would be keen to accommodate, of course. Did you on the crewing? So on the cruise, Mark, we're availing a deferral schemes in every country except the Netherlands. We're actually we've got more flights operating at the moment than we had in 2019. Some of those sort of schemes run out through to March 2022 and actually one country through to May 23. So we're getting all the crew back current trains in place for what I think actually will be a bumper to 2022. So we really needed to get everybody back trained, but we can offset the amount. For example, in Gatwick, we have pilots in Gatwick who were unfurning out for the whole month of August, But it might be back flying again for the month of September and so forth. And I think on that, the Fit for Fiscal Year 5, as you know, we've been supportive in the aim Of the plans that's been presented on that in its totality, I do think that we The views we've had and I've written into sort of on the laser then from Tim Hermann on the proposal that what it needs to do is to make sure That any taxation that is coming away needs to make sure that it really follows the principle of polluter pays, I. E, That the more efficient you are, the less you pay. And the more you admit, the more you pay. And that it also needs to take into account, of course, Long haul travel. I think it's an appalling suggestion that long haul travel would be excluded. Long haul travel consists of Single digits in terms of its flight, but over half of the total carbon emissions that's being emitted. So that is number 1. We're also calling out for, as you would expect, That carbon offsetting to the highest quality schemes that ECZET introduced as the 1st major in the world, we have since Followers throughout the world, we could do the same thing. That also needs to be recognized. But we're clearly supportive of The role of decarbonizing aviation, we believe that we're leading this and that nobody else is doing more than we're doing. And also don't forget about the recognition that I think we need to make that whatever taxation policies will be in place, that those revenues Would in majority go to prom this, the decarbonization in contrary to what many of the local tax That are in place, APD being 1, as an example, in the UK is happening. So we're in a very close dialogue With them, and like I said, we've been supportive of overall aim of this whole thing, but we need to make sure that following the principle of the polluter pays that, that needs to be recognized In a level playing field, really across the market with no exceptions on transit passengers and long haul as an example. That's great. Very helpful. Thanks. Thank you. The next question comes from the line of Neil Glynn calling from Credit Suisse. Please go ahead. Good morning, everybody. I'll also take 2, please. The first one on cash flow and specifically CapEx. Your 9 months CapEx is actually only about half your full year guidance. So just interested, are you likely to spend Half of your full year guidance on CapEx in the 4th quarter? Or is there the potential for us to see quite a lower level of CapEx for the year than guided? And then a second question looking towards 2022, and you're obviously quite confident in the summer for 2022. Can you give us some sense as to the scale that holidays may operate out in 2022? I don't know if Gary is on the call, but Some kind of a scale in terms of the amount of passengers, for example, you would expect to be booking holidays with you or something else substantive that helps you think about Whether holidays plays a meaningful role in second half twenty twenty two PBT? Yes. Thanks for that. I'll take the holidays Question. I don't know if you got Gary able to speak on the call, Michael. Okay. Okay. Well, you got it separately. Look, we haven't given Any guidance, also, on the specific numbers on that? But what is true is that as we're going through the pandemic, what we see is that our market It has an increase. And the way we look at that is just looking at the basically the actual numbers. We've been increasing our share more than I think anybody else has been doing it in the UK. And the other thing why we're saying that we're building this And it's going better than we expected it to do is, of course, that we've been able to now get access to a lot more of the exclusivity properties that we know are so Well in demand, and that also generates really good margins to ourselves. So that's something that we feel very pleased about. But I think we're also going to come back, I'm looking at Michael right now, to perhaps do a day where we spend more time also to talk about To give you a little bit more in-depth color on the opportunities that we have, and I'm sure you're going to be just Excited as we are as well because this is once again, as I said before as well, it's a very, very low risk proposition that you just benefit from Europe's largest leisure network built on a well known brand across Europe. So if I say across Europe, you recognize that our ambitions It's great. And then only the UK as an example. I'm looking for this, and we're looking for this to be one of the biggest pan European players here as we're coming out of The pandemic into the next few years. But like I said, we'll come back and do a day on that or whether it's forwarded in more detail. Yes. On CapEx, thanks, Neil. We're not making any change to the CapEx guidance. The CapEx is driven by Mainly our leased aircraft costs and maintenance. But we continue to focus on reducing all Then I'll just see the opportunity, but no change to guidance. The next question comes from the line of Maleva Kayani calling from Bank of America. Please go ahead. Good morning, everyone. First question around 4Q expectations in terms of pricing and load levels. How do you think we should be thinking about pricing? And kind of at what load level would you look to add or kind of reduce the capacity plans from the 60% that you've currently scheduled. And then secondly, just on the kind of longer term, Johan, I think you said that cost savings will help to grow margins. When you say that margin improvement compared to what period, and if you're talking about Higher carbon costs and jet fuel taxes, could those be passed on in ticket prices? Thank you. Yes. So let's start on this an obsessive part of the question. Perhaps I didn't answer on the cost of the carbon as well. I mean, The whole point why we are supportive of the principle of the polluter pays is, 1, it makes sense. That's number 1. And also remember that EVJet is one of the most fuel efficient airlines in Europe overall. And together With the possible also recognition that what we're doing on the carbon offsetting schemes, we will have an advantage from a Cost perspective, we believe versus the majority of our competitors, the late airline that is flying primarily twothree from From the head to head competition on where we are operating. And that makes absolutely sense to do. So that's number 1. I think that there's still into the carbon pricing, and it's also yet to be determined on what actually the cost of this will be. And then also, as we've been arguing, that any Taxation on the carbon that is going to be imposed throughout Europe would also mean That we would ask for and request that local taxes in the name of sustainers believe it will need to be removed Because otherwise, it becomes a question of double taxation. And that is something that is an argument that is well understood, I think, by the decision makers. But of course, it represents a challenge, as you know, for everybody for politicians to remove the tax once it's been introduced. But anyway, the whole principle of the polluter pays Makes sense for us. We think we're going to have a competitive advantage out of that one, which we should do because of our efficiencies on the Emissions of Professor Uclamater in the fuel burn and then also the carbon offsetting scheme that we have. And remember, when you're looking And of course, as an example, that is, in fact, an offset program. So we are well set and well positioned within the context of that. On the pricing, just remember that our whole point was always to fly an operating Absolutely. It was generating a positive contribution for the company. That was the key thing, and we have some very advanced and good Metrics around how we do that. And I think if you compare ourselves to competitors, we'd probably be the most accurate in estimating and telling you what Level of capacity that we will find and what we actually are delivering as well. So the load factor and the yield is a combination of those two things. But I think we've proven that we established very good processes and accuracy around that. Kenton, do you want to add anything? No, I mean the ticket yield is slightly softer than full year 2019 we're seeing. We're seeing some, as we discussed, the growth in the ancillary Uptake and the yields we're getting from that. But as Johan said, it's really a combination of yield and load factor. So the load factor built through Q3 up to about 72% in June. The any late changes in advice obviously doesn't help The load factor build and the load factor and the customers are booking closer too. In terms of margin growth, yes, we're looking To build the EBITDA margin growth moving forward. So yes, that's where we see the growth. To clarify, Zach, what's the 2019 margin? Yes, over time to move forward in 2019 margins, that's right. Thank you. The next question comes from the line of Jarrod Castle calling from UBS. Please go ahead. Thank you, and good morning, everyone. Firstly, just on the CapEx profile, you've revised the fleet numbers down certainly from The upside case, for instance, 2023, you had 3 55 planes. So it's now looking about 10% Lower, give or take, by then and obviously in 2024 as well. So you're talking about all this Costs coming out, the opportunity to take market share, and yes, you'll be up gauging. But the fleet profile is still, At best, in line with 2019 level. So why are you revising it down, firstly? And then just secondly, coming out of Q4 or going into your Q1, any indications from your Business travel and relationships with the corporates, what they're thinking as they go into Q4? Thanks. On the fleet, I think what we're growing the outline, we've given us scope to 317 for next summer. And we took out 16 aircraft out of Berlin. They weren't making the return we needed. We closed Stanstedt So then that was 11 aircraft and 3 in Newcastle. So there's a couple of 30 gone, and they just weren't making a return. So when you reverse it back out, that takes you down to around about 302 really. We've opened very successfully the new base Malaga and Farrell, they're kind of no brainers. And we go back up to 317. I'd say we're moving to from Exelmar to Easyjet's greatest hits, Volume 1, and I think it will go really, really well. I think we've got a great opportunity to make some serious money out of that. So I think on that one, it makes perfect sense. I mean, to add to that, thanks, Lisa. That's right. Obviously, you've got the up gauging of 319s retire in the 320s and 321s come in. I think Pete has mentioned the efficiency in engineering and maintenance, Which means we get the equivalent of 5 to 6 aircraft extra flying ability through the summer, which is about 1.7% extra seats. And we should remember that market aircraft are available at attractive prices. So we're not bound by the jaws. Should we say that, Greg? Yes. I'll turn it to him on. And remember, it's one of the things. When we talk about flexibility, we mean flexibility. We mean That we're going to take every opportunity that we see that makes a return for us to grow, and we see plenty of them. That's why we need the flexibility to do so. But it's also fair to say that nobody knows exactly How and when this recovery is going to play out? I mean, just look at our network right now. We have in Holland a situation where we're flying more We did in 2019 as an example. We have a situation in the UK that is not in the same place because of the restrictions that have been put in place. But given the fact that we can see that this is moving in the right directions and perhaps even more rapidly so, we're definitely on the journey of that recovery. Mean, our order book on the fleet, we got 101 aircraft on order. We got 78 rights and options on our way. And that should be noted. So when you hear other people scream about how many aircraft they're going to order and what they're going to do, Let's look at some facts behind this. We were placed on this. We launched more routes than with Ryanair in combined since June. And we're going to ready to take that opportunity also coming our way. We've taken opportunity to increase our presence In Italy, in Gatwick, we compete with head to head. We've seen ultra low cost carriers retract and cancel frequencies of flying where we meet up to them. And that's what we can expect going forward from ourselves. I'm so excited about that. I think there was another question It was just about business travel, if there's any indications when you're engaged with your corporate. Yes, exactly. Yes, absolutely. Because we yes, we do see that we whilst it is damp and then whilst there's nothing changes to the view that we've had earlier about Business travel coming back 1 to 2 years later. We definitely see that we are increasing our shares, and we're getting companies to travel with us We are not allowed to travel in business class on short haul anymore. And then we're looking for 2 things, value and also sustainability. And the carbon The program that we have is something that is really attractive and playing a part on how corporates now are choosing to fly with companies. So that is one thing that we feel very, very good about. And that's the same trend that we've seen in previous down But the carbon offset in Provenate is something that corporates really are attracted to. Great. Thanks, Evan. The next question comes from the line of Satish Sivakumar calling from Citigroup. Please go ahead. Thank you. I've got a couple of questions here. So firstly, in terms of the trends within your network, have you seen any meaningful impact on booking And then is there any market that you actually have to stimulate demand through aggressive pricing? So that's on the first one. The second one Satish, sorry, it's Michael here. Can you just speak up a little bit more? We can't really hear you very well. Okay. So in terms of the trends within your network, have you seen any meaningful impact from the bookings Because of the delta variant. And then if within your network, do you have to stimulate is there any market that you actually have to Stimulate demand through aggressive pricing. And then on the capacity side, say assuming that if you had to ramp up more than 60% of your capacity, How should one think about the ramp up cost associated with that additional capacity coming in Q4? Yes. So on the network, I mean, there's no specific evidence that you link demand towards the delta variant. Mean, the Delta variant is clearly the most prevalent here in the UK, which has then led, I think more to the more important point about the restrictions that Has been imposed by the UK government that we don't believe is correct. We see no reason whatsoever that you can Freely, as of now, go into a hugely crowded nightclub without any face masks, no vaccination And no testing requirement, but you can't slide down to a low risk destination Am I on the beach? That just doesn't make any sense at all. So it's not linked into the Delta variant in itself. And I think as an example, If you look at the inconsistency and the difficulties to understand it from a transparency point of view on what UK is introducing with this latest change To France, where they are quoting the beta variant, well, that is prevalent in La Union down in the Indian Ocean, which is about 6,000 miles away from the French mainland, it's difficult to see the link, how Prevalence of that in the island there is going to be impact on hospitalization. UK remains some of the highest With the highest cases of infections per population, per 100,000 in the world. And you could have most of Europe Coming on to that green list, and we would then also argue that science will back it up, and you don't need to have any restrictions at all For vaccinated people, if you're on to that ring list as well. So the reason why I go on about this is to say that there have been change. They will continue, I'm sure, to be changed if we are prepared for them. And that's why it's very important to have the flexibility in terms of what we are doing. I don't think that there's a need anywhere for us to stimulate the demand to that fact. The restrictions That are in the countries place a much, much broader part. It's not like people ultimately think to say, well, I will go if this costs me GBP 10 or GBP 10, but I won't go if it costs me GBP 50. It's more down to the fact that, look, what are the restrictions? Are there quarantines? Are there testing requirements that adds a lot of costs To that as well. But the pricing really across the market continues to be dynamic. Yes, we do see that there is very, very low fares Going around in certain parts of the year, and we're competing with some of them. But primarily, the objective for us is to look at a positive contribution to all the flying that we're doing. Yes. Thank you. In terms of the ramp up cost? Sorry? In terms of the second question around the ramp up costs, so assuming that if you had to go beyond 60% of No, really, the only main difference is really on variable costs and taking people off furlough. So it's very marginal. And we're able to adjust at very short notice. I think we've executed quite well over the last 18 months on these things. So It's just we can't actually put on with a few days notice extra capacity. And we may well do that at times in Gatwick on peak routes During the month of August. But it's been actually one of the key components when we looked at how to fly You know, line of sight is generating a positive contribution to the company. But I think now, if you look at the total cash burn, which was €55,000,000 for the quarter. The equivalent cash burn in last year's quarter would have been SEK 774,000,000. So it's a massive, massive improvement. And that also comes back to the fact that even if we only flew 17% of 2019 capacity in the quarter years gone by, We've been quite accurate to predict what is the optimal level of flying to make sure that the costs are Match up and optimize source of demand and the revenues we see. Got it. Yes. Thanks very much. That's super helpful. Thank you. The next question comes from the line of Andrew Lobbenberg calling from HSBC. Please go ahead. Morning, guys. Can I ask on the data leak? Because obviously, I think there's been a settlement with the British Airways data leak. And at least according to the stuff in the press, it sounds like the lawyers All enthusiastically chasing yours, and I can't log on to Twitter without seeing a lawyer advertising me to approach So it's them to try and get money out of you. So can you say a little bit about what's going on with that and remind us perhaps what has been provided for In the context of that. And then second question, I guess, would be around the political rulemaking. I mean, obviously, it's not here in the UK, we're watching what happens with deep frustration, as I know you are. But conversely, how successfully is The digital COVID certificate working across Europe and to what extent are you concerned about member states trying to impose Tighter restrictions within the EU as we occasionally see noises out of Germany trying to restrict Spain and the like. So yes, a bit more of the Positive perhaps views of policymaking in Europe as compared to here? Okay. Hi, Andrew. Yes. So I mean, I'll start with the data leak. First of all, I mean, we continue to, of course, to be in contact with IPO, but there's and that's an ongoing Discussion we're having with them, so there's nothing new to report on that. And in terms of the Our ability to keep lawyers busy on things like this, as you mentioned, I think it's fair to say that it's very different from the We've had a breach where travel information was compromised, but very, very little financial Information. Just if I can remember the numbers right now, 2,208 customers who Credit card information, financial information could have possibly been compromised, but that's very, very different numbers From what we've seen, and there's no evidence from what we have seen that nobody has been At the disadvantage of this as well. So this is first of all, we're engaging with the IPO on this whole thing. And then we just have You know, deal with the things as they come along, but it's a very different story from Blue Share Waste. And there's no provision in the books Sure, Eddie. It's fine. On the digital COVID certificate, Andrew, I think it's worked extremely well. In fact, I think the European Great job on that. And the execution by the government has been great. It's very easy for us operationally to look at it and scan it at the airport. So that's been a great success And as has the NHS app actually, which has been widely accepted by governments right across Europe. Border Force at the airports where we're at have done a really, really good job. They have automated the gates at a large number of locations. And even at the desks, They've managed to automate the scanning of the your data coming in at the forums that you're linked. So we're seeing transaction times of less than a minute of many airports. So we I'll say congratulations then. And all of this adds up to like we carry 40,000 vehicles through gastric at the weekend, 92% of them are on time, and that's even with all the checking. So I don't think people should be deterred from traveling. I think we'd see work in advance build up and people will see that, that it is possible to travel and it's not as big a hassle as That's great, guys. Thank you, and yes, good luck for the big summer. Thanks, Andrew. Thanks, Chris. The final question today comes from the line of Carolina Doris calling from Morgan Stanley. Please go ahead. Hi, good morning, everyone. My first question is what has been if we could cancel, what has been the strategy on CO2 credits And that you probably used glass in 2020 and we used glass in 2021 that you have in inventory. Have you sold this credit or hold on to it so you could use in 2022, 2023? My second Question, it's a bit more on competitive environment that you're seeing in the summer. We are hearing from some airlines that they are trying to simulate with land on lower yield. I guess you guys Have done a good job on keeping yields high. What are you seeing in your key markets such as France, U. K. In terms of behavior of different competitors. And do you think that has changed since pre COVID times? So I'll start on the carbon credits. I mean, obviously, each year, we get a number of free allowances, and then we have a rolling Hedging profile where we buy throughout the year. Due to the volume of flying, we will be carrying forward A number of carbon credits, we haven't sold any. So we'll be carrying those forward, which you can do. Yes. And on the competitive landscape, I mean, it's clearly moving and it's slightly different from market to market. But in general, you could say that Legacy Care are very clear that they are retrenching the removing capacity from a number of routes. We are watching this from a Really route by route basis, and we have taken the opportunity also to grow our presence, and we'll continue to do so. Our strategy is crystal clear, leading positions at the primary airport. And with the reset that we've had on the cost base, our Advantage that we've had has increased. So we're looking forward to compete with them. And that also includes Any legacy airlines so called low cost subsidiaries, we feel confident that Our cost program is giving us further advances there. And it's also it's reducing the gap to 1 or 2 other places where we might have a Might not have a cost advance on as well. That was all of what we wanted to do to make sure that we can Come closer to the ones who possibly have lower costs than we have based on their models. And that is, as far as we can tell, It's happening. There are some aggressive moves being made in certain parts of the market. Italy, as an example, we have We've been part of that and responded on that, and we've seen retrenchments and cancellation from some of the local scares and risks that we've been doing. And we will continue to do a combination of defense where it's necessary to do so, to improve, we can do that and then also be aggressive Well, it makes sense for us to do so. But overall, we will continue with the focus to new clients that generates a positive contribution. But we're also thinking about this in the mid- to long term That we are quite in position for us that we just strengthened our overall network. So that's, I think, the summary of that. Thank you. And that was it. Okay. So listen, thank you all so much for joining us here today. Look after yourself, And keep safe in the heat, and look forward to seeing you on a lease jet plane soon, I hope. Thank you all.