Earnings Call: H1 2019

May 17, 2019

Right. Inside the cockpit. How many of you watched the inside the cockpit episode yesterday? Very good. There's a career in aviation also. We are looking for pilots. So if anybody feel like a career choice, contact me afterwards. Listen, first of all, thank you very much for coming here today, and good morning to everyone, and to our half year twenty nineteen results I'm here together with Andrew, Kingler's CFO as well as members of the airline management board who sits here. Also take the opportunity if you want to speak to any of them, after the presentation, I'm sure they would be more than happy to have a discussion with you on anything that you'd like to ask about within the company. I'm pleased to say that we have delivered a first half was in line with our previous expectations whilst recognizing that we have incurred a significant loss in the first period. That a number of headwinds such as the impact of new accounting standards and the shift of Easter into the second half. However, underlying revenue per seat was positive. We have responded by bringing more focus on delivery of our plants in the second half, accelerating and increasing a number of customer revenue, operations and cost initiatives, which now underpin our outlook for the rest of the year. The progress on the operational resilience program that we initiated last year is extremely encouraging and is on track to ensure that we deliver our improved cost target for the year, including major cost improvement in the second half despite a worsening ATC environment. In the meantime, we are continuing to invest to deliver our strategy focus around our plan, which through targeted sustainable growth will drive higher profit proceeds, returns and cash. Our 3 strategic initiatives are going well, and I will highlight the holiday's proposition later in the presentation. These are all underpinned by our investment in data, which has continued to drive significant benefits, and you will see that as we go through the presentation. As a result, our outlook remains unchanged and in line with current market expectations. And with that, I will pass you on to Andrew to approve the numbers. Thank you, Johan, and good morning, everyone. Starting off with some key stats in the half, our capacity growth capacity grew broadly in line with plan, up 14.5%. Passenger numbers reached 1,000,000, up 13.3% This resulted in a load factor of 90.1%, down 1% in the first half of FY 'eighteen, which reflects the lower load factor we reported in the first quarter. On a reported basis, 1st half revenue per seat was down 6.3% while at constant currency, RPS decreased by 7.4% in line with guidance. Our headline cost per seat increased by 3.9% in the half, while increasing by 2.5% at constant currency. Our constant currency headline cost per seat, ex fuel, was up 1.3% of the half, which is in line with expectations. Moving on to the income statement, to be helpful, we have included the impact of IFRS 15 and 16 accounting standards, which are mainly phasing impacts. Highlighted by the gray shaded sales. I'll give you more details of the IFRS adjustments later. Total reported revenue increased by 1,000,000 for the half, which reflects a combination of our capacity growth and the strengthening euro. Total headline costs excluding fuel increased by 1,000,000, which was mainly driven by our 14.5% capacity increase in the half. I'll provide more details on our cost per seat drivers in a moment. Fuel costs were up GBP 141,000,000 in the half, which reflects the impact of an increasing fuel price and weaker sterling through the period, which drove a 25% increase in the effective post hedge fuel price to GBP 493 per metric ton. As a result, Easyjet has delivered a headline loss before tax of 1,000,000. In terms of non headline costs, we invested 1,000,000 in ensuring we are well prepared for any Brexit outcome and the accounting interest associated with the sale and leaseback of 10 A319 aircraft in the period delivered a GBP 2,000,000 profit which is slightly better than we highlighted at our pre close on the 1st April. Moving on to the detail of our revenue per seat performance, Total revenue per seat decreased by 7.4 percent at constant currency in line with expectations. This overall outcome is built up as follows: The movement of Eastern to April impacted RPS by 96p or 1.8% on a per seat basis. The one off benefits we reported last year from the bankruptcy of Monarch and the Ryanair winter schedule cancellations combined to have a 2.8% negative impact on RPS in the half. As expected, significant year on year capacity growth in the first half in Berlin Teagle has been RPS dilutive. We reached our 1st anniversary in January, and the schedule is still being optimized. In total, this had a negative 2.3 percentage point impact on RPS, the half, but will improve as we go through the summer period. As a result, underlying revenue per seat increased by 1.8% in due to a strong focus on revenue maximization as well as the continued growth in ancillary revenue proceed through the better bag and allocated seed pricing and sales. The instruction of IFRS 15 negatively impacted half 1 revenue per seat by 2.3% as booking and admin fees are now accounted for when flown, not when the booking is made. And finally, when including the positive impact of ForEx, ECS reported revenue per seat for the half decreased by 6.3%. So moving on to cost per seat, in summary, headline cost seat increased by 2.5% at constant currency. This was driven by a 1.3% increase in cost per seat ex fuel, the components of which are shown on the graph. Starting from the left hand side, there was a net 14p increase in Airports and ground handling costs, primarily by annualized increase in charges at regulated airports and the mix effect of Teagle. These were partially offset by lower than expected DI lower than expected de icing costs and continued airport procurement activity. The increase in crew costs are 43p, reflecting inflation linked crew pay deals, investment in resilience ahead of a busy summer, winter period and significantly better crew retention rates than expected, which impacted productivity. Higher depreciation charges due to the new aircraft in the fleet, plus the net impact of the instruction of IFRS 16, drove ownership costs up by around GBP 1.15. The first green column highlights a 67 pence decrease in overheads and other costs per seat. This saving includes a year on year reduction in wet leasing costs at Tigall Airport lower disruption costs despite the Gatwick drone incident as well as compensation payments from Airbus due to aircraft delivery delays. The decrease in euro control fees resulted in a 30p reduction in navigation charges. And despite an underlying uplift in heavy maintenance costs, due to the age of some of our aircraft, overall maintenance costs were down 21p due to the impact of IFRS 16 and movement of costs into depreciation. The full impact of IFRS 15 and 16 on the income statement is provided in the next slide. Finally, an increasing oil price and weaker sterling drove increasing cost per seat of 81p and 78p, respectively. This slide runs through the details of the impact of both IFRS 1516 had on the income statement in the first half. There are a number of allowable methods to adopt these new standards. He has adopted IFRS 15, 16, and 9 on a prospective basis, and as such, the prior year income statement has not been restated. IFRS 15 has had a net 1,000,000 adverse impact on half one revenue reporting, primarily due to the timing of revenue recognition from certain revenue streams, principally admin and change fees now being recognized on the date of flight run the data booking. In addition, we are now required to offset part of the EU261 compensation against revenue first which is a movement from the cost line and has no profit impact. Moving down the slide, the adoption of IFRS 16 means we recognize leased aircraft now as assets on the balance sheet with an associated lease liability. This is seen a movement of expense items mainly from leasing and maintenance to ownership in the form of depreciation, but overall, this has had no material impact on net profit The total P and L impact from these changes to accounting standards during the first half has been 1,000,000. As a reminder, all guidance incorporates the anticipated impact of these changes. Now for more detail on the impact of fuel prices, currency and hedging, the average market price for jet fuel for the half was $6650 per metric down. After taking into account our commodity and currency hedging, the sterling cost fuel per metric ton was £493, which is a £100 or 25% increase compared to half 1 last year. Despite the increased fuel price, we expect to continue to be advantaged compared to a lot of our competitors over the next 12 months based on our current hedge position. Moving on to foreign exchange, the euro rate fluctuates between 10% and 17% during the half. Net net there was a headline 9,000,000 negative impact currency movements, which includes those within revenue, fuel and cost lines. Egypt continues to generate strong sustainable cash flows with with operating cash flow reaching 1,000,000, which funded the return of 1,000,000 to shareholders through the payment of the 2018 ordinary dividend, Investing and financing activities include the generation of GBP 121,000,000 by the sale leaseback of 10 HV19 aircraft. This contributed towards 1,000,000 of capital investments in the half, primarily on new aircraft. Our liquidity is supported by 2 revolving credit facilities, $1500,000,000 and GBP 250,000,000 facility, both have no covenants or draw stops. Also, as a reminder, an innovative policy has been written with Munich Reed to provide business interruption insurance of GBP 150,000,000 to cover large short term shock events, which also supports our liquidity buffer. Pricing is competitive with other sources of funding and frees up cash for use in the business. As of 31st March, our liquidity position was 1,000,000 by seats with some minimum liquidity target of 1,000,000 by 100 seats. At BAA1 and BBB plus, we to you to have 1 of the strongest balance sheets in aviation, which provides resilience flexibility and access to cheaper unsecured debt. Supporting the strength is our fleet. And at the end of the period, 221 aircraft were unencumbered which is 69% of the total fleet. Primarily as a result of the introduction of IFRS 16, the shape of the balance sheet has changed. As highlighted earlier, we now recognize operating lease aircraft as assets on the balance sheet with an associated lease liability. Previously, this liability would have been reflected in our adjusted net debt calculation, which have included a 7 times multiple of annual lease costs IFRS 16 requires a more accurate calculation based on a discounted operating lease cash flows and is now reflected on the balance sheet. This impacts our calculation of return on capital employed, which is now shown in the appendix on Slide 38. It is worth also mentioning at this point that the economics and cash flows have not changed and our rating agencies have been taken through the changes. As I described earlier, the P and L impact is that these now have an associated depreciation charge and an element goes through the interest line with no overall impact on income or PBT or cost per seat. The increase in unearned revenue reflects the timing of Easter the deferral of admin fee revenue into the second half of the year under IFRS 15 and seek capacity growth. This slide summarizes our forward jet and currency hedge positions, although recent increase in fuel price will impact us in the short term, Based on the hedging disclosures of our competitors, we expect to be advantaged over the next 12 months as a result of our current hedge position. We're going to fleet. Since the last time, we provided this information, there have been some changes made driven by Airbus delivery delays However, as you can see, we have retained a significant flexibility in our plan, which allows us to manage any market conditions more recently adapting to short term opportunities, while continuing to plan for the longer term. You have seen this with our strategic growth over the last couple of years in airports like Berlin, Amsterdam, Basil, Leon, Luton and Manchester, which all fit clearly within our strategic framework for establishing and maintaining number 1 and number 2 positions in primary airports. We constantly maintain strong capital discipline and are always looking to maximize our returns, profit receipt and cash generation. While ensuring we have the ability to target growth as and when we need to. This chart summarize our gross CapEx over the next 4 years and our current fleet plan. Just to note, this graph now includes the impact of IFRS 16, as you can see in gray, the elements of the graph, which now reflects what would have previously been recognized as lease payments. Our policy is is to begin hedging aircraft purchases once they become committed we are currently hedged for circa 88 percent of the financial year 2019 aircraft delivery payments. Moving on to forward bookings for the remainder of 2019. 72% of our Q3 seats have now been booked which is 3 percentage points less than same time last year and 34% of our seats in Q4, which is in line with last year. This slide shows the expected capacity growth across the European short haul network through the summer. As you can see, total short haul capacity is expected to grow by around 2.4% in the half with each jet growing around 7%. In terms of competitors in our markets, are expecting a 3.6% increase in capacity. In addition to the previous slide I've added this chart, which gives a breakdown of the 7 percent East Jet growth for the summer, starting from the left 2.3 percent of growth reflects the annualization of route capacity from financial year 'eighteen, the continued investment in building our number 1 and number 2 positions at Primary Airports, which Johan will talk about later as well as expanding our network to airports and routes that deliver margin accretive returns. Upgaging represents 1.3% uplift finally, the strategic investments in Manchester where we are consolidating a strong position following the demise of Monarch in Nantes, where we've just recently opened a base to further strong position in regional France and finally Teagle where last summer, we were still ramping up our operations and is therefore annualizing out. We are also in the process of finalizing our schedules for the winter based on the high levels of winter growth of almost 25% for the last 2 years, We are planning to use the fleet flexibility I highlighted earlier to grow in financial year 2020 at a rate that is the lower end of historic growth rates. This ensures that we continue to concentrate on maximizing profitability whilst continuing to enhance our strong positions in Primary Airports across Europe. So moving on to more detailed line by line outlook slide, before I get to the details, I'd first like to point out that FY 'nineteen PBT expectations haven't changed. From where we last updated the market and have in line with the consent of the market from those analysts who have recently updated. 2019 capacity for full year is expected to increase by circa 10%, which is no change from previous guidance. Regarding half 2 revenue per seat, the soft yield environment has continued, and we now expect RPS to be slightly down. As Yohan will discuss, we have been delivering initiatives that are helping offset this softness and will continue to do so through the summer. Some of the initiatives we are delivering are part of our operational resilience program have delivered savings that I have led to an update to our cost guidance. Full year headline cost per seat excluding fuel and the constant currency is now expected to be down subject to normal levels of summer disruption. Moving on to FX And Fuel. Based on the hedging rates highlighted, we expect a headline 10,000,000 pound per year on year positive impacts for the full year. Full year unit fuel costs are expected to be £25,000,000 to £60,000,000 year on year adverse. With an expected total fuel cost of 1,000,000,000. Please note that this includes the impact of ETF's carbon scheme prices which continued to remain high with a current price of circa Thank you very much for that. Based on the update that Andrew just provided, I thought it would be a good opportunity to start off by highlighting the initiatives that the team are currently delivering that are helping us in the short term, but also will provide longer term structural improvements. These initiatives are improving our customer, revenue, operational and cost performance. For our customers, we have now rolled out auto backdrop to another 5 air ports around Europe, making 17 airports in total and representing over 34,000,000 of our passengers, which is 30 percent of our annual passengers, and we are seeing customer satisfaction scores in those airports outperforming the network average. We have implemented a new contactless payment system on board that improves transaction times and available inventory on board which will drive increased sales and an improved 4 a half minutes, which was a very big improvement compared to Easter last year. We're also processing claims significantly quicker than in the past So for example, over the peak Easter period, we were processing claims in just 2 days. We're also driving higher customer satisfaction on board, where the customer satisfaction with the crew is at an all time high, but also shorter queuing times and a strong recent brand scores across all the markets where we are operating. In revenue, our programs have improved the revenue management system algorithms and ancillary offers we have increased the number of allocated seating events to increase the customer choice. As a result, we have seen some late deal benefits in April and ancillary revenues continues to perform well. We will continue to launch programs through the rest of the year, such as the new business bundle, and adding further bandwidth allocated seating offer. And finally, our operation resilience program is going very well so far despite a worsening air traffic environment. Using data to analyze and improve our schedules, air quarter route assumption in crude deployment as well as doubling the standby aircraft availability, we have with that delivered one of our best Easter weekends ever with an average on time performance of 86% despite flying a schedule of over 1800 slides a day, that compares very much to one of our busiest days of last summers. These are all the things that are already delivering benefits this year, but we'll continue to deliver in the long term. Despite the tougher current trading environment, it's important to note that structural demand for travel is resilient. On the one hand, talking to our customers recently, we have heard that over 30% of them were being influenced in the travel plans by concerns over Brexit and consumer confidence remains muted across Europe. But the same service said that demand for leisure travel was important, and we have seen this reflected also in other studies such as the annual HSBC consumer study. 63 percent of customers indicated that travel for leisure was a major priority for them, an increase of 4 percentage points compared to 2017. So in a cyclical market, underlying demand remain high and easyJet is well placed to be the go to airline for our customers when they do book their flights. This is clearly demonstrated by the 13% growth in the first half. In the markets we operate, Europeans say we are their 1st choice airline more than any other airline. And they also say we offer an experience worth more than the price paid at any other airline. And of course, we are well established as the number one low carries in the UK, France and Switzerland. And again, this was validated in a recent consumer study by UBS, where Easyjet's rankings against other local carriers had widened, while also scoring very well compared to legacy airlines. I'll now take you through some of the initiatives that we expect will underpin the out look for the remainder of the year. We continue to invest in the business to drive value and have delivered across all parts of our plans in the first half. Our investment in the network means that we are now number 1 in Berlin. We opened a new base in NAND recently, and we now have 20 7 airports with a number one position, up 9 from 2017. 54% of our capacity is now flown from a number 1 off constrained airport, an increase of 6 percentage points from full year 2017. From a customer perspective, we are the number airline in Europe for value and our customer's loyalty remains high at 76%, which represents an increase of 7,500,000 customers to CHF 71,000,000 on a rolling 12 month basis. We also won the award for best business airline, beating airlines like Singapore Airlines, Lufthansa and Etihad. We have delivered cost savings of 1,000,000 so far this year through our strategic cost program and expect to save 1,000,000 in total this year. The investment in resilience had already seen a 54% fewer cancellations in H1, despite that compared to 2018, despite the 43% increase, in air traffic delay minutes and the impact of the drones in Gatwick in December. This means that around 250,000 fewer customers were impacted compared to last year. As I mentioned earlier, Easter on time performance was 86%, one of our best ever displaying despite flying the most sectors ever. Our people remain well engaged with Easyjet's outstanding crew, driving our best ever customer feedback and satisfaction and pilot and crew retention are high at around 5.5%. And finally, our data team is developing well with nearly 4 team members working on projects across the business, and we will now bring this team together with the ITA team to drive greater scale and product development speed. Our network on strong positions in Prime Airport is our biggest asset, in particularly with our slots constrained, and we have continued to invest in this during the period. We have ramped up our operations in Berlin having only started operations there on the 5th January last year, and have now established ourselves as the number one airline in Europe 2nd biggest city. We have grown by over 50% in the 1st 6 months, and we now have over 40 end market share. Like in the rest of Europe, we are focused on delivering a great customer experience, which is shown in the good brand scores Awareness of our brand has driven saliency up five percentage points year on year and as customers increasingly get to LaVista and our brand that affinity with the improvements in Berlin is in line with other large scale investments that we've made in the past such as slot purchases and Gatwick and organic growth at Skippel. Elsewhere, we have invested in regional France recently opening our new base in Nantes, and we are now the number one airline in Lyon. Bordeaux, Nantes, Grenoville and Nil as well as No. 2 in Paris and Toulouse. And as stated earlier, we also continue to consolidate our positions around the rest of the network where our market leading positions gives us the opportunity to strengthen our positions same time driving profitability. With 54 percent of our capacity, which is over 50,000,000 seats, in slot constrained airports, this held drive our long term increase in returns, which have increased by 20% over the last 5 years. Winning our customers' loyalty is an area of continuous investment for Easyjet, which is highlighted by the 76 percent returning customers that we saw in H1 this year. Today, Easyjet has a great offer and a great brand that drives customer loyalty, and loyal customers are much more valuable to us with returning customers buying twice as many flight per year as first timers. They are attracted by the network of over 1000 routes, great value, players compared to our competitors in those primary approach continual innovation in our offers, such as the rollout of auto bag drop and the new bag sizer on the app and our great customer service delivering by an amazing group of people. You see this in our brand scores that show that we are rated the best low cost airline across our key markets in Europe with a number of awards this year that reflects this. Over 2 thirds of consumers within key European markets state that they would seriously consider flying ECjet over any other airline. While serious consideration in the UK market was at an all time high, in Q2. We will continue to invest in involving the customer experience and leveraging our brand in strong markets with the aim of retaining and growing our customer base and increasing spend per passenger. We'll continue to build on strong foundations of our core business leverage our existing customer base and build on our strong brand with investments in holiday, business and loyalty. As I said, at our, at our full year results in November, this gives us a huge opportunity to drive significant returns over the next 5 years. We'll come back to you in November with news on business and loyalty, but for now, I would like to give you an update on EasyF Holidays. As I previously said, our objective is to become a major player in the European holidays market. Firstly, let me remind you of the opportunity that we have. The total European package holiday market is worth about 1,000,000,000 per year, and this is growing by 6% each year. The UK alone is a 1,000,000,000 pounds market. And as we said previously, around 20,000,000 customers fly with EZF on our top 29 routes by capacity, but only around 500,000 of those books acclimitation with us. In fact, our total network will have flown over 100,000,000 seats this year giving us the scale and the network that differentiates us from all other holiday providers. Therefore, as these customers are always flying with us, It's now our job to get them to book their entire holiday with Easyjet, and our feedback says that over 90% of our customers would consider buying a holiday from us. With our holidays business now being in house, we will be able to build and price holidays using EasyJet seats and direct contracts with Europe's most loved hotels powered by the best in class travel technology, and they're through a brand new ECD Autologize website. Customers will be able to personally customize each of the elements of their holiday with a proposition that is built around our network and with great value. Frogas has been very strong. Gary Wilson, our CEO of EasyF holidays, has pulled together a highly experienced management team, including external and internal appointment, but I think it says something very powerful about the fact that we're getting a very high profile experienced people to come and join us for for this opportunity that we have at ECS, leaving very established players. Relationships with some of Eurus will Cyriable Hotels are building well, and we're expecting to have 500 direct relationships established for summer 2020. We have also appointed Atkore as our Holidays technology provider, giving us the capability as we have started to build, sell and yield managed holidays through the new Easyjet, holiday's website. Adcourse advanced competencies around pricing Contracting a search will ensure that we're building an industry leading website on top of the ASCO platform, whilst also giving us the scale we need to grow the holiday business over the coming years. Our current ECDS dot com website provider, Velvetech, has also been appointed as our holiday's website provider, building on their expertise, as our partner over many years. In terms of the launch date, we expect to have the summer 2020 for holidays available by the end of this calendar year. Our next priority is valued by efficiency. Our strategic cost savings programs and operational efficiency program continue to drive both short term efficiencies and longer term structural cost savings across all layers of the business, leveraging our scale and helping to ensure that the cost advantage versus our main competitors remains. The cost program has been able to deliver large and sustainable savings, 1,000,000 saved in the first half with an expectation of saving over 1,000,000 for the full year. 545,000,000 and systems and processes that drive operational excellence, supporting reliable decision making, reducing complexity, using data to make better decisions faster. I will go into more detail regarding our operational efficiency program in the next slide. In addition, we are also investing in highly efficient next generation aircraft that will deliver future incremental margin improvements specifically through application benefits of around 1% cost per seat per year, flying our customers more efficiently than legacy carriers. 15% fuel savings compared to prior generation aircraft and 50% less noise. Easyjet's ambition is to become one of Europe's most sustainable and fuel efficient airlines, which our business model of high load factors, a new generation aircraft will help us to achieve. Our effort to reduce CO2 emissions and reduce noise is recognized by a number of airports and rewarded by our customers Our current emissions levels of 78.46 grams per passenger kilometer puts us significantly ahead against most European airlines and, in particularly, the legacy carriers. As a reminder, our operation resilience program is focused on 3 strategies to build to execute and to recover. Build being to invest in Telangi in our scheduled aircraft and crew to deliver a more resilient operation, execute focus on delivering a robust operation through a combination of data driven predictive tools, including automation and optimization. And recover focus on improving the customer experience during disruption, minimizing impact and preserving the customer satisfaction. The initiatives we have been investing in so far include modifying schedules to improve overall resilience, including adding breaks during the day, and changing schedules to avoid late flight into curfew Airport. Proactively splitting the crew pairing to ensure standby crew are in the right place at the right time, doubling the number of standby aircraft compared to last summer, while strategically deploying them throughout the network to ensure best impact. Introducing a tactical flight planning team to update scheduled operations for near term factors, focusing on the first way to minimize delay minutes as the day progresses. We built 8 automation and data tools to drive decision making across all areas of operations, including a non time the former simulator and an ATC slot predictor. The result that the implementation of these initiatives have delivered already are very, very encouraging. For example, costs are percent on time performance and no cancellation despite schedules that are ambitious to deliver an improved customer experience as well as reducing costs with an expectation that disruption costs through the summer will be coming down. Moving on to our people. We are investing significantly in people to make sure we have the right people to take the business forward. In a recent update to our employer listening to Pecon are in year net promoter scores 25, which is a strong result and which is also reflected in the high customer satisfaction scores that we have on board our aircraft. And our 4.2 star Glassdoor rated was Easyjet in the top 50, places to work in the UK as voted by our own people and the best airline. We have great employee retention at 6% turnover for the whole business and only 5% and 7% turnover through cabin crew and pilots, respectively, and this compares very well to other airlines. When it comes to recruiting, we're successfully targeting and attracting key skills that we need to take the business forward such as we have talked about in holidays data as well across the rest of the business. Having the right people is critical to achieve our plan. And finally, the priority that underpinned everything that I've been talking to you to you about so far is innovating with data. We are putting data at the heart of every area of the business. On one hand, it is supporting the customer innovation and revenue initiatives such as inflow product availability, development of fare bundles and driving ancillary revenue opportunities. And on the other hand, it's core to many of the operation resilient projects from scheduled buildings, crew rostering to pre tactical planning and the on the day delivery. This has delivered revenue benefits in form of underlying positive pattern and ancillary revenue as well as the recent late yields improvements in April. And it has also delivered cost benefits from the lower disruption cost and better management of the operations in a worsening external air traffic environment. We continue to recruit into the team and have now decided to bring IT and data together to increase the total resource available and accelerate the delivery of data projects and their customer, revenue, operational and cost benefits. So to summarize, we're responding to the short term challenges and their acceleration of our initiatives is underpinning our outlook for the rest of the year, which remains unchanged. At the same time, we are confident that the work we are doing through our plan will deliver sustainable shareholder value. Our network is unrivaled across Europe's main markets and through innovation and crew engagement, we are winning our customers' loyalty. We remain incredibly focused on cost, and we are creating value by efficiency because great people in this business where we have new skills needed. We are attracting talented and experienced people to come and work for each of them. And we continue to invest in data, which, as I said, will drive enormous benefits across the airline. Bringing these together will enable us to drive profit proceeds, returns and cash for our shareholders. Thanks. Good morning, all. It's James Collins from Exane. Three questions, please. First one is probably for Robert or if the German head is here, is on Teagle. I'm just wondering if you could perhaps in some detail run through operational issues you face and perhaps more importantly, what you think there's still to do going forward in terms of having the right gates, route network, all those sorts of things, a bit more detail would be very useful. And specifically whether you think you'll still make losses in full year 'twenty? Secondly, I was running for you, probably Johan, if you had any just in Thomas Cook, whether it be the UK operations, German operations or just your thoughts on that. And the third one, obviously a better cost per seat performance guided today for this year. If we assume capacity is only up about 3% or 4% next year, full year 'twenty, know that's an extraordinarily long term outlook for an airline, but do you think you can do cost per seat ex fuel down next year as well? Rebert, do you want to talk about Teagle in Berlin? Yes, good morning. On TEGL specifically, I think, as we've spoken about before, we're very happy with the development of how TEGL has been coming along. From an operational perspective, we continue to have very strong operational performance, customer satisfaction and customer uptake with our product and reception in the market seems to be very strong. I think, as we've discussed before, it's been a very competitive environment for the last year. On the one hand and as well, I think, you know, some of our network improvements have been slightly slower than maybe we initially anticipated coming in. That said, it is as Johan mentioned earlier, developing exactly in line with typical progression we see for a large scale new base opening very much in line with what we've historically seen with any one of our bases, Amsterdam, or even large scale acquisitions, in Gatwick. So think it's progressing very well. We're very excited, to have 3 new overnight parking positions that we've really used this summer to, re optimize our product for the local Berlin passenger. And so we expect continued performance to come from there. Think on the question on Thomas Cook, there's nothing really specifically to comment on that. We wouldn't comment on it in any situation when it comes to companies on that. I think it's a we have a very strong model that we feel very confident about with the positions we have at the primary and portion the, all time high satisfaction we have with our crew, the ability we have also to now, to go into holidays. I think it's actually a great opportunity. That this provides us to do with the network and the competitive advantage we have. And also with the team we have in place, I think it's a good opportunity for us to do something in that market. Want to do, Dave? Yes. So on costs, you're absolutely right. Our guidance, our long term guidance on capacity has been between 3% 8% so based on this guidance, at the lower end of that range. I think it's early doors, on given cost guidance for the RT years at this point in time. We're very focused on its financial year, we're going to land this financial year, and the drives of that will be, operational resilience and disruption management We've got a number of other cost initiatives this year to land, and we'll give guidance at the appropriate time for next year. Damian Brewer. So or about the Yeah. Thanks, Damien. So so yes, you have the you know, our our relationship with Airbus is is is is is good, very flexible. So as you know, as a result of some of the Airbus delays, delivery delays last year. We negotiated an even more favorable 1 was to reset the flexibility in our contract. And it's fair to say that we have almost rolling monthly, deferral rights on a fair portion of our fleet. So think on Slide 14 shows the flexibility we have. The majority of that flexibility is a result of those deferral rights. The the fact we can extend, leases or not the case may be. I think for the purposes of of guidance we've given on CapEx, the, the uplift that we saw you've seen based on previous guidance has been as a result of the IFRS 16 adjustment, but if you take that away, I think it's fair to say that there's a fair there's quite a fair proportion of that CapEx that's still to be, determined. I think this is a best guess or best estimate of what we think we're going to do based on our latest plan And as you said, as I say that we look at this regularly, as a board, and we adjust accordingly based on those, those deferral rights that we've got. So I think it's fair to say that off the back of the 2 years of growth that we've seen for, the, the 2 years of winter periods, of 25, yeah, cumulative 25 percent growth. We definitely won't be seeing anything like that unless something else changes in the market, the world that got no plans on that either. So I think for the point of view of CapEx, it's our best estimate as we stand. We'll finalize, near at the end of the year exactly what our CapEx will be for the following year and so on and we'll carry on reviewing that as we go forward. It's Jarrod Castle from UBS. 3 as well. Can you just talk a bit about, the forward bookings, and, you know, just I guess in kind of, the current quarter, there's a deterioration and you've obviously had Easter. So if you give a bit of color there, but, you know, it does look like going into summer, you know, the booking profile is in line with, last year. And then just coming back a bit to pricing, can you give a bit of color in terms of, near term pricing versus the early booking pricing, if you're seeing any improvement, year over year in terms of the later bookings, And then lastly, you know, obviously, the the shares have been under a lot of pressure. I mean, I guess because of the ownership rules, you can't really do that much, but is there any consideration or potential buybacks or the likes? I mean, in terms of forward bookings, you see in the Q3 that we're behind some 3% on the load factor and then we're flat in the Q4 and then 2% behind on the half 2. I think we got to remember also that at the time last year in Q3, we still have the effects of the the situation with monarch had gone bankrupt in the fall of 2017. We had Ryanair cancellations as well. So I think that in the winters of that, had a spillover effect, I think, on the bookings that we saw then in the Q3. And are you right to point out if you're looking at the Easter, which is then the mood in between the Q2 and Q3, you could have said, well, I should have an uptick on the load factor. But load factor is, as you know, is one part of how we manages, we're looking to try to get the most out of both the yield and the load factor. And I think that, you know, the work we're doing now, you know, particularly within the initiatives within the trading and yield team. We are really trying to optimize that as much as possible. Going forward into the, to the later part of the season, we've actually for the summer, we booked 3% more passengers that we had versus last year, but it is tough for environment out there when you're looking at the pricing. There's no no doubt about that. And, like I said, we do a mix between the yield and the load factor to try to optimize the results, on that. No, really, when you're looking at the near term bookings versus the long term pricing, I think that the initiatives that we have launched that they were driving through sit at this moment being quite focused on the near term pricing, but they are also in there to help improve the has to go through the remainder of the year. But we have guided today that there is a we look at RPS to be slightly down for the year. And I think that is a reflection of the overall environment. Yes. And, now we've got a very clear cash return policy via dividend, and as you know, that we've got, a target to get to that 50% EU ownership, we're at 49.6 percent of the cusp of doing that. So we're very clear. We've reviewed exactly what we want to do from the point of view of the shareholders move and get comfortable with the term policy that we've got. Hey, it's Daniel for Bernstein morning. And 3,000,000, number 1, on the fleet flexibility, again, maybe slightly different angle. What conditions in the market would prompt you to decide to go for the minimum level? And I think you already commented on the achievability. So it's probably a mix of leases and deferrals in in that way. Number 2, on your number one airport position, Castle and Motes strategy, this, of course, seems to be implying better yields in those airports where you have a number one position. Could you discuss a little bit or comment on it whether it's your position or the overall constraints ness of that individual airport that actually drives your position and where you're seeing that did any of the additional markets you've added to the number one positions do you actually see yield uplift happening? And lastly, a little bit off topic on the emissions on the cost side of it. Could you comment on basically your view on the EPS cost for, let's say, the next couple of years? So thinking about your allowances and the cap and trade mechanism, what would you expect ETS cost to do to your fuel bill? And maybe just a short comment on the risk and opportunity balance for Easyjet on the back of the discussions for fuel tax. How do you see that? Yes, on, so I'll talk about it. So in our planning, what we do is very clear. So we're balancing cash flow proper seats and returns and growth and opportunities that we have. And that's affected the fundamental, as you know, of any kind of good planning. From our perspective, we've we have triggered some deferrals in the past, as you know, and we've used that we've flexed those and, back in November last year, off the back of the deferrals, and we got a good deal out of Airbus for doing that, but it's an ongoing process. For us, it's all about getting maximizing those returns. Making sure we have the flexibility to go into those airports where we can get those those returns, and balancing off of the growth and growing in the appropriate way. So if you look at this financial year, although we've grown significantly, the growth that we've put in place have been very, very specific. We've talked about Manchester getting our getting in, after model exited to really solidify our position there. You've talked about France, and we're now number 1 in a large number of those French regional airports. And our post to half year, we've went into non, so that kind of nicely rounds off our domestic proposition. And as a result of that, you've seen the news from, from, Air France. So I think for us, it really is around making sure that we've got out flexibility both on the up and the downwind. When it comes to what we would have to see to get to that minimum I don't we haven't got a specific number or specific target or specific trigger. We're constantly reviewing as we go along to see exactly what's the best use of our asset. Now things change, as you know, in this, what is a changing environment and changing, capacity environment and changing competitive environment, the number of, airport airlines that have gone under recently significant we've got to make sure we keep that flexibility and it's important to us. But it's one of the things that we work on with Roberta and the strategy team and the fleet team very closely to balance those things out. But it's all about maximizing those returns, but making sure we're flee to foot and with Teagle and what we did there proves that we've got the ability to both flex our dry leases get wet leases and, and flex owned aircraft at the same time to land that proposition. I think just on that point of the position versus the slot constraint and you're absolutely right. I mean, you're going to take this things into consideration. I mean, we are very targeted in the growth. I think that's important when you're looking through the growth that we've had in the winter, the growth that we're now having in the summer and going forward, it is very much allocated into those positions where we think that one we can get into that number 1 and number 2 position where mostly and often, most of the time, that gives the decide to create the efficiency in the model. Our model doesn't work really that well when we are number 4 and number 5, sometimes in there. So one is getting to into that efficiency with the scale that that number 1 and number 2 position often gives. The other point is about the slot constrained airport. It's really about making sure that we are there in those primary airport when things tighten up because we know that there's a big time delay before some of these airports will then expand their structures, and we want to basically be there. And that is, some positive characteristics around that as well. So we're looking at both these things, but it's very, very targeted on how we're actually allocating our air across coming in. Based on where we can get into those position and also what is lost constraint. So with you said to ETS, you know, it's very clear that, you know, it has been volatile. We hedge our our ETS exposure, as you'd expect, But given the new global regime on Carbon Management And Carbon Credit is coming in in 2020, which isn't clear yet exactly what that's what that's going to look like. We're effectively lobbying and keeping a close eye with the environment agencies now. Obviously, the DFT, etcetera, to ensure that we are, have, clear visibility of what that will look like. Good news is that we are effectively pretty much break it ready. So we switched the switch to operator our airline as though we are in a Brexit scenario, and we've managed to secure the ETS credits in those 2 ASC jurisdictions. So from that perspective, it's a good place as you say, there's a lot of discussion around, ETS And Carbon, and we are having those conversations as you'd expect, we would do. I don't know if you'll add anything on that. I mean, the 5 that all the work we did, I think it was pretty clear that we were preparing earlier than most other airlines and more in-depth into the details. So but at 11 pm on 29th March, we were ready for that, no deal, Brexit because we knew that they had moved the protection of the traffic rights were legislated within the EU Commission that was reciprocated by the U. K, albeit on, I think, just a week before. But so we're today. Flying with the, with, really, as there was a no deal Brexit. I think that the only exception is that today, we can use the different airlines to cover up in terms of if we have option to move aircraft and crew realm, which we clearly what it looks like in the new world post Brexit will not be able to do. But that's why we then have moved over aircraft and pilot licenses and currently crew up the stations to the appropriate airlines within the group. Morning, Jamie Roethan from Deutsche Bank. Just one on, costs in the context of you guiding, costs for CX fuel down this year. On the operational resilience, I wanted to explore the year to date summer disruption costs down 30%. Obviously, I'm conscious it's early in the summer, conscious that there were strikes in France last week, but is that at all to do with the having actually been a bit less disruption or is it all thanks to your initiatives and perhaps there's other stats you could give us, like, year to date summer delay minutes or something like that? Thanks. Yeah. No, I mean, I'm pleased to say that there's a lot of those, initiatives that have delivered those savings. I mean, The air traffic management disruption itself was 44% worse during Easter. This is clear that the external environment is getting worse. I think Euro Control predicts it to be 15% worse for the for the summer. And Eurocontrollers is also doing, I think, what it can in terms of rerouting some of the the flights to avoid the hotspots of culture and, master ish as an example. But the work we started on in last summer has been, you know, really, really focused on getting this in place for the summer. So, I completely agree with that. This is early on. But what is good about Easter is that Easter almost is replicating what summer is. The difference will be that coming into the summer, you're going to have the bigger tour operators who's loading on more capacity and putting more restraint on that external environment. It also has given us that opportunity to try and test this. I mean, you take the ATC slot predictor, which is an algorithm that we develop ourselves, which basically collects ATC slot data identifying constraints that have been put on flight historically. So we can use that to identify the hot spots within the network. And then when we choose our then route planning, the flight planning, we can take that into consideration as we would take fuel burn and navigation charges as well. The on time performance simulated that works really well when we're looking at this from a first wave point of view to simulate on actually what are the changes we should do depending on the performance of the first wave at the later part of the day. You take the firebreaks that we put into the schedule with 54,000 changes to our summer program. And it's actually not so much increasing the amounts of through using the data into where it matters. So if you're looking at our summer performance now and we get a report twice report on this per day, we are all, everyone in the team is looking at, whereas previously, you could see that, okay, if you were off in the first wave, your chances of recovering throughout the day, I mean, they were slim. Now you can see that if you're having something that happens from an air traffic control point of view in the first way, you can actually hold on and actually pick up at the remainder of the day. So it doesn't drive inefficiencies in the program. It's just a much, much smart way of allocating those fiber. Of course, the standby aircraft helps. But once again, it's the way we have decided where to allocate them, making sure we're splitting up the crew duties so we get people available also to fly them. So at the one hand, it is early on, but we said we got to put in this as the biggest focus from our operation point of view for our customer's sake and also to drive down costs and so far it's delivering for Hi. It's Andrew Lob from HSBC. I think Daniel asked about the potential taxation of fuel that's out there. And equally, we've got the Dutch government who are planning their own aviation tax and pushing for a pan European aviation tax. And equally in the UK, we've got a proposed tax, for bankruptcy to cover bankruptcies. So how are you guys thinking about that impacting your business or lobbying against it. Can I ask, on the Easyjet holidays side? Obviously, you don't want to talk about guidance for profitability for next year, but how should we be thinking about because we've got costs this year, but not a material uptick in revenue, Next year, we should have a running functioning business, which is going to be gloriously profitable. So how big an inflection should we be anticipating in that context. And just the last one, if I can be greedy, staying in Berlin, How are you thinking about your planning as potentially you don't want to get overly optimistic, but maybe they're going to open that damn airport? You've been given a terminal, how is that impacting your planning in terms of your network and your operations and your customer proposition, which is not optimal, I think, at Tango, but it's presumably quite hard to invest in if they're about to close it. Right. So on the cost, I mean, we we are of the view, which we are engaging with local authorities and governments on this as well to say that taxation for all taxation has not proven to do anything for the environment. Whether you have called that APD or whatever you called it in this environment, it's been a revenue income for the government. We keep reminding people also that innovation is one of the few means transport actually pays for its own infrastructure. Now the fact is that this, nothing shy away from the fact that sustainability is extraordinary important and the industry needs to take the series. We are taking that series by the investments we're doing within our fleet. We're taking it seriously in the investments we're doing with the technology, our business model, I think that what needs to happen from both airports and governments that they are also starting to recognize who are the companies here who does and invest in something that has less impact on the or drives less carbon efficiency. I have no enthusiasm to go out there and defend the industry as a whole when I'm competing against, carriers who runs 20 22 year old aircraft with find 70% load factor. It's a choice they've done. We've done a different choice. So I don't want innovation to be caught up that everybody is the same because we're not. And that's a debate that we are having, and I'm having personally with, with people from the governments. And I think that there's a recognition for that, but I'd like to see that there are incentives for those companies who have chosen to take those decisions. Longer term, I do think that aviation needs to reinvent itself. I do think that whether that is through like we have in relationship where we're exploring the opportunities around electric and hybrid technology. And that is something that will be intensified and rightly should it. I, and I think from our point of view, clearly, people will have choices in their means on how they're transporting themselves. And so should they completely understand and accept that, but if people are flying, they're going to fly east yet. So that's the approach that we're taking. We've got to do what we can to make sure that we continue to be efficient in terms of this. But taxation in its own right, I haven't seen any evidence that this will work. I only see damages when this has been brought into the picture, but I'd like to see more targeted ways for companies such announced such sales get incentivized for the decisions we take. Holidays, I mean, the cost is not significant. It's mainly about people that we're doing this year. And we had chosen the provided for the systems. We're not buying or building any system, which was part of the alternatives we had. We had also the opportunity to buy companies. We said that this is the root we want to go down to. So we got the technology now. We're starting to build up the team. We are not going to give any specific targets on this. We say that we will be a major player in this market, and we know we can be that because we have the network, we fly to more leisure destinations than any other airline, both on beach and on city. And we do it with a fantastic cost base The biggest hurdle for many companies to succeed in this place is to actually get their flying sorted out, which I think you've seen recent examples of here in the past weeks. That is something that we already have. And that's something that we're going to build on. So, we're looking to make your launch out of this later in the calendar year, and then we'll come back and continue to update you on the progress in there. Berlin, I think, I mean, on the Berlin, look, this remains and it's a great opportunity for ourselves I think we talked about before that, you know, the optimization of the schedules that we've had, I think it's fair to say that we're somewhere about 50%. Done in what we can slower in the process, but you know what? We have been focusing on getting ourselves Brexit ready. We've been focusing on focus on the operation resilience piece. To make sure that we can set ourselves up for a good summer. And I think that that has, to some extent, we use the same resources that we have available to focus on these things. We know we can improve the performance in there, and there's nothing that says that this won't deliver in line the other big scale investments that we've done in our network. And in terms of the airport, when it's going to open, You were in Berlin? Yes. They are as expect they're very confident. We've got a working team, Thomas is sponsoring it. So we've got a working team working very closely with them. As you can see, we've been allocation of terminal been confirmed. We pretty much know exactly where we're going to be in that terminal, what our offer looks like. And, we're we're absolutely on it. It's a it's a something that we know how to do well. And we've got a good working relationship with the, the FBB team out there to get it landed in a very smooth way when the terminal opens. Last question. Thank you. Two questions, please. Actually, just for clarification on the the cost per seat outlook being slightly down. In terms of the disruption, are you saying if Euro control is right and there's a 15% worsening over the summer that you're going to be able to achieve that target because of your fire rates or you need the market disruption to be the same level as last year or lower than last year. And then secondly, just on the revenue per seat, obviously, we've seen a slight deterioration in the last 6 or 7 weeks relative to your expectations of the trading in April, is how has that changed over the period? Is it, is it, it's just steadily undershot what you're looking for? Has it worsened more recently? And why would you be confident that it's not going to change further? Thank you. I think on the cost receipt and also the operation resilience. We have assumed that the environment will get worse about 15%, but we are targeting to be slightly below disruption costs that we had last year. That's what is in the numbers. I think when we say normal, when you have big adverse one off events. That's when it's more complex, but if there's a, we've assumed a general worsening of that, that 15% Also, revenue, where we proceed to expectation? Yes. So, look, it's one of the things that we see that the revenue proceed in the market. It's tougher out there. It has an effect. And whether that is Brexit or uncertainty because of macroeconomic factors that sits in there or combination or if it's a delayed pattern or if it is just all of these together, it is tough for out there. We're optimizing it the way we can. And, it's interesting when you're looking at the initiatives that we're driving, the algorithms that we're working on for the late, they do have an effect, but in the scheme of things of the overall environment, it is something that makes it more challenging this summer. And that's what others have seen, and that's what we have seen. But we feel very comfortable about the initiatives that we're driving. And we still have many more things to do. If you think about it, we our value for money proposition. The people regard us more than any other airline of delivering value and worth That gives us also the opportunity to probably do more in terms of how we're optimizing our pricing on the products and offers we had. We've delivered now, improved algorithms to, to, for our ancillaries. On a bag pricing as an example that we're working with the price in a much more dynamic way. So there's a number of things we can do in there. But we it's appropriate at the moment as we have guided in here to, take that revenue proceed down slightly from where it was. So thanks very much. We'll all be outside for the next 15 to Thank you.