Earnings Call: Q2 2021

Nov 5, 2020

Good morning, ladies and gentlemen. Welcome to this, report the ad reporting first half fiscal twenty which is a period ending March, 2021. I would start by saying a fee have been much focused on liquidity. I think as previously stated, they are managing this business for cash and liquidity. And as you can see, we've done quite well with debit card ending the period with 1,000,000,000 of cash And if you look at the relative cash burn, especially compared to the balance of the industry, we've been containing our liquidity very well. We burned million of cash in the first half of our financial year, which compares very favorably with the industry. And that's been our focus. We did quite well with regard to recovery in the summer period, in August, we reached around 80% of our last year's capacity level, but clearly, capacity is, is subject to restrictions prevailing at a time in Europe, in our markets and clearly see that following the 1st wave of the pandemic and corresponding restrictions imposed by governments, actually summer a better operating environment with less restrictions, but since the end of August, we have seen a new wave of this imposed by governments significantly under mining, demand and as a result, we keep adjusting capacity accordingly to market So it has become a rollercoaster and you may expect more capacity to be taken out should more restrictions come into play. But also, likewise, once these restrictions are getting used, we should be back in the air with capacity. Demand is incredibly sensitive to our jurisdictions. We are seeing it especially in the UK, that Banza County is removed from the travel corridor demand collapses pretty much overnight. And Banza market is put back into driver of corridor demand searches incredibly. We have continued to divers hire our business by enhancing our throughput footprint. During this period, we opened certain new operating base launched, 2 60 roles. We have been incredibly a child trying to take advantage of the situation of market vacuums led behind by our carriers and some of the commercial deals that have been made available by, by airports and attracted us with new capacity these are strategic investments. I mean, maybe not everybody's initiatives, we'll work out in the end, but I think most of it will and clearly that new capacity is also subject to the operating environment restrictions and demand So you can see the same kind of rollercoaster effect on that. But clearly once we are back into recovery, we will have a must in large geographical footprint to have a much more robust recovery at quicker pace than most of the others in the industry. We are very proud of our investment rate, following Moody's investment grade, just a few days ago, fixed ratings also reaffirmed our investment grade. We are one of the 4 airlines in the world with investment grade credit. I mean, obviously, this is a statement on our prospects, going forward. And you can imagine that these agencies, food scrutinized these are the current standing of the business as well as assumptions for the future and that's each of our assumptions with the worst case scenarios and they confirmed our investment case. So I think this is a great credit facility from the market. Well, as I said, a restriction aside, a part of our life at the moment and looking ahead, in the second half of the financial year, we're seeing that we will have to leave together with these restrictions and we have fundamentally effect capacity planning through demand and our ability to operate. And we follow the news and we are micromanaging the business to a large extent and the key for trusting capacity on a day by day basis depending on the state of restrictions. So I think in this winter period, the fundamental factor driving the business will be restrictions out there. There is a lot of talk around the testing to replace restrictions like, current teams or lockdowns, where we don't know, we have not seen any commitments made by governments going forward with that regard. But certainly, we are embracing the concept of testing to replace this hard measures, but which I see what's going to happen. I mean, one of the disappointments clearly is affecting the business that after the 1st day of of managing the pandemic situation by government, we would have hoped that, that would be a learning that to seek more European coordination, more orchestration, to make the whole system more effective, but none of it is happening. I mean, we are flying to 46 countries and there are no 2 countries that would apply the same sets of restrictions for measures. Which make Europe quite a zoo and quite an ineffective system for the purposes of managing the situation. And you can clearly see that lots of politics have been playing into this now so that the company is complicated. All in all, we believe that while a crisis obviously is testing and testifying, everyone involved, and we are not immune from that Nevertheless vis a vis emerging as a structure winner from the situation, given that the other lowest was producer. And we have a very resilient financial position to cope with the challenges and the situation. And post COVID-nineteen, we would certainly be stronger and much more formidable competing force coming out of the crisis. Moving on to the next slide, as you can see, this is sort of giving you, a snapshot of bad businesses at this point in time. I mean, what I would really read out of this chart is that we have continued to invest into our future. As said, we have been diversifying our markets by opening new markets countries, new operating basis, launching a significant number of new routes. But also, we have continued our active delivery program. In March 2020, we had a fleet of 120.1 aircraft. We are going to close financially here in March 21 with 137 aircraft, so 16 aircraft more. And in March 2022, we are expecting the fleet to be 159 fleets 159 act of 22 more than a year before. So we continue to invest into our free program. This is significant. I mean, you may think that short term, it doesn't make any sense. And indeed, it is it is somewhat assessing short term, but it is the right thing for the medium and longer run because technology will enable us to operate this fleet at much lower cost than our competitors who have been holding the lines by deferring act of deliveries or cancelling act of orders. So we'll have a significant competitive advantage arising from this on economics, but also once the industry gets more measured against sustainability, our fleet will deliver much better gains that sustainably the agenda given the much reduced economic footprint than other carriers. So keeping the long term in our mind remains an important issue Nevertheless, we are dealing with the crisis by managing the business day in day out. The next slide is showing how agile we have been and maybe you can argue that we've been a child up and down, we push quite significantly in the summer period when demand was less restricted by restrictions. And you can see that we managed to get up to around 80% capacity level in August. But since then, we've been capacity down as more restrictions came into play. And we might actually come below the industry numbers. And I think it's just showing financially responsible we are. I mean, you can see other airlines reporting that we have contained cash much better and we stay focused on cash much more than most of the other carriers. We've seen this is the time that we need to be very focused on liquidity on cash and investment. Forget that we are not planning on any government bailouts or anything like that. We're seeing we can serve sufficiently maneuver ourselves through disguises, but that requires us to be a child going up, but it also requires us to be a child and financially responsible going own brand, the market becomes restricted. And this is what we are expecting in the next few months. And with that headline, so I would like to hand it over to Riyali. Thank you, Dhio, and good morning, everyone. So on Slide 5, you will see that our half one revenue was down 72% with, quarterly revenue down 61%. Our reported loss was 2 EUR 43,000,000 in half 1, whilst the underlying loss for in half 1 was EUR 145,000,000. So the difference between reported an underlying loss was the EUR 98,000,000 exceptional expense, which relates to our discontinued fuel hedges You will recall that in F 2020, we recognized discontinued fuel hedges for the month of March, April, and May 2020, whereas now in half 1twenty 1. So the current half 1, we recognize discontinued hedges for the period of June 2020 all the way to March 2021. So it's a different approach, but it's obviously commensurate with the recovery pattern that we're seeing. On Slide 6, you can see that our costs in half 1, excluding the discontinued 2 hedges reduced 49% whereas the ASKs for the same period reduced 57%. So in net strong cost reduction on the total line with strong variability on obviously cost of airport, handling and on route, but also distribution costs, marketing costs, staff costs declined 38%, maintenance costs, 28%. And as you know, depreciation is mostly only declining 15%. On the next slide, Slide 7, we're outlining the strength of our ancillary revenue When you strip out the items which are more one off in nature, for example, the cargo flights we operated in April May, you will see that the underlying ancillary revenue is up per passenger in half 1. And equally, the ancillary revenue per passenger in the 2nd quarter was up strongly with EUR 1.7 per passenger increase year over year. So backs, bundles, flexibility products, they drove the strength of the ancillary And going forward, we continue to be focused on driving more conversion and implementing dynamic pricing. On Slide 8, a bit of focus, as you know, on cash, all things considered without the CCFF funding, we have burned 1,000,000 of cash in half 1, which is roughly EUR 44,000,000 per month. Our operations, including the cost of the leases, burn to EUR 108 5,000,000 and we cash settled on top of that EUR 110,000,000 worth of discontinued hedges in the first half. On the next slide, you will see that, again, we burned EUR 44,000,000 per month in half 1. In the last quarter, we almost broke burning only EUR 9,000,000 per month. This is obviously, as Joe said, the stark contrast with the burn rate of some of our competitors, our ramp up, especially over July up until mid August drove solid cash contribution with September obviously being a little bit weaker as we had to adjust for restrictions. In the environment because of COVID-nineteen. We're pretty much fully current with refunds within this cash balance. We only have 1,000,000 of refunds balance at end of September. We had obviously very strong cost and cash price across all P and L and balance sheet lines. And beyond cash, as Joe mentioned, we feel very proud to say that our credit rating was affirmed by Fitch. The press release went out last Monday. I'm sure you've seen this And as Joe said, we also had discussions with Moody's over the last month, and they're maintaining our investment grade rating as well. So we have both on liquidity resilience and we have the investment grade balance sheet, which obviously is very important. Now on the next slide, Slide 10, shifting gears to the second half of this fiscal year, it's clear that costs and cash remain our top priority especially with restrictions and lockdowns in an increasing number of our markets at least in the current period. We reiterate that in case of full grounding our average burn rate is around EUR 70,000,000 per month from an operational point of view. Given the seasonality of our business and the restricted operating environment, the cash contribution of our operation may be less significant in the next few months and the restricted level of activity could actually further unwind some of the balance positions like on flow and revenue or supplier payables. So, I hope that that is sufficient clarity on where we are on the cash side. In the current context, obviously, it's very difficult to give guidance on profit or loss after tax. Or even non capacity for that matter, our October capacity, as you've seen in the previous slides, was 45% year on year. November will be below given the restrictions on travel and the lockdowns imposed in the last week. And don't forget, as Joe said, only target to fly cash positive. So capacity of over the next month, if anybody's guess at this point in time, that the principle is very, very clear. As Joe said, our fleet remains our key strategic investment. Maybe this is not ideal in the short term, but without question, it's widening our competitive edge on costs on sustainability. And additionally, we're working to build in more flexibility, which will allow us, together with a strongly diverse network to respond even more swiftly to changes in the external environment. Joe, back to you. Thank you, Alex. I mean, moving on to page 11, I think we have demonstrated our activity with regard to leading the business through the crisis situation. We have moved around 20 percent of our capacity by trimming existing networks and reallocating that capacity for opening new basis, new markets, new routes. Clearly, it enhances our a geographical footprint in times when other airlines are withdrawing capacity from their markets. And clearly, it gives us significant leverage for the long term, not only for times and beyond, effectively preventing capacity, but much beyond on a structure basis, simply we're going to be able to by certain markets, which markets would not have been available to us before. At the same time, I think we've also been somewhat stick and we've gone by the flow when it comes to consumer demand. I mean, clearly, the structure of consumer demand has evolved. During these times. I mean, one of the, I think, remarkable moves what we have made is entering domestic markets in Europe simply because cross border travel has been locked down or usually restricted by the domestic travel has been more open, less subject to restrictions. And as a result, we entered 2 significant European domestic markets, Italy and Norway, now we are seeing that even the Italian domestic market is now under some pressure given the new restrictions imposed by the Italian government. Very importantly, we received AOC for, Visa Abu Dhabi. The airline is ready to fly. Is fully licensed, fully stopped. And now, we are an avoiding pattern, waiting for, lifting restrictions by the Abu Dhabi government and once that happens, then we would be putting the airline up in the air, which I see how the country is going to open up probably a phased approach. And we've got sufficient designations now and access to our to markets that become flexibly at our network program in accordance with the opening of the country. Moving on to the next slide, I mean, clearly you see that this edge duty to a significant market share gains, we are not in a market share business. But I think this is just demonstrating that should we go ahead, should we be seeing demand somewhat unconstrained from the perspective of restrictions, actually we can achieve quite a lot very quickly. And if you look at just our Central Eastern European positions, we had 16% market share in the region prior to COVID-nineteen that jumped up to 22% in the summer period But again, going into winter, we are in different times. I think we have to run the business for financial disciplines for cash contribution, positive flying. But once we are back again into time spend, demand is less restrictive by governments to seem to kind of ramp up very quickly and we we can certainly repeat what we have done before we even achieve more when it comes to taking market positions in various countries. Moving on to the next slide. This is a summary to demonstrate that we are absolutely ready and we are positioned for a swift recovery. And once the market conditions allow us to move quickly. We're going to move very quickly and very robustly. We are flying the youngest piece of aircraft in Europe around 5 years. That is significant from a cost perspective and it is also significant from a an ESG from a sustainability perspective. We are the lowest cost producer in Europe. So this is a commodity business, lowest cost perveyors. You can't be in much better position than that. Our customer profile is, is very adequate to the situation, business customer profile has been quite geared towards VFR traffic and VFR traffic prevails in current times. Today over 80% of our passengers travel for purposes of VFR travel. So we are certainly benefiting from our passenger profile with that regard. We are very positioned from a financial resilience liquidity perspective, having 1,000,000,000 on hand, that will take us through this crisis no matter how long this is going to drag they are very well positioned, especially relative to the balance of the industry. And quite importantly, we fly the youngest passengers compared to other airlines in Europe. That is significant because, again, from a recovery perspective, we're seeing that the younger generations will come back to the franchise quicker than the narrow degenerations. Once they are less impacted from a Hess perspective, secondly, this is empirical that, especially coming out of tighter situations, younger people tend to be more adventurous and more forthcoming and certainly our business will benefit from that as well. And we have a value appearing engagement form with our consumers, having or operating 1 of the largest airline websites in Europe, actually even globally. So we think we are really good to go and we are well positioned for recovery and once these restrictions fall away, we can have a very strong ride again, similar to what we achieved of summary, even more. Moving on to the next slide, you can see that we are taking advantage of the times and so to the setback of the industry and we are investing into our customers. We're seeing that it's not only that you need to manage your business for the short run, but you also need to continue to position yourself for the long run post COVID-nineteen. And we've talked about the young fleet and being the Greenhouse airline in euro, but we've actually initiated quite a few other things as well. We launched our voluntary carbon offset program. So now this is available to customers. So should you want to take personal responsibility for your environment footprint, then you can offset your footprint. We launched a unique interactive planner software, which helps you navigate, yourselves through the zoo of restrictions and COVID measures applied by countries. So I think this is a very good planning to understand what is going on in Europe, in our network. So should you want to have a driver plan can certainly better enable yourself by using this planning tool. And we deliberately want to have and operating platform as extended as possible within the framework of being financially responsible to provide as many rule connections as for people who want to unite and need to do essential trevers. So we try to maintain most of our routes only reducing frequencies for so long as this is rational to maintain connectivity in Europe. So we have never grounded the airline entirely. Obviously, we have taken capacity down quite significantly. The worst period was April this year when we were only operating 3% capacity, but we intend to operate always a network, a skeleton to make sure that activities is presumed. Moving on to the next slide, this is just to summarize this presentation today. As you can see, we are absolutely geared and focused on cash and cost liquidity is key. We are managing this business for cash and everything gas is secondary. We have taken advantage of the situation and expanded our network by diversifying capacity. That's been a significant move and we're seeing that positions us very well for damping up operations once the market conditions change and giving us a structural competitive advantage in the long run We remain financially disciplined agile and focused on our long term issues, not only managing depend on the short term basis. And we are really in competitive through the market diversification, through new act availability programs. And through preserving liquidity to enable ourselves to continue to invest into long term priorities. And we think that we took all of these, the Alvaro competitive advantage to win this game structurally and emerge from COVID-nineteen as a structural winner. Thank you. And I guess this is now your turn for questions. Thank you very If you find that your answer, a question has been answered, you can withdraw your question by simply pressing 2 to cancel. We'll have a brief pause. Our questions have been registered. And in fact, our first question is in from Daniel Roeska of Bernstein Research. Please go ahead. Thanks very much. Good morning, gentlemen. I'm free if I may, I'll be quick. Can you talk about the challenges of ramping up to 153 aircraft kind of at the end of next financial year, specifically when we're going through winter, which is a skeleton schedule. At what point would you really need to start hiring and increasing your schedule to make that 153 at the year end or at which point would you need to start talking to Airbus to rejig the deliveries? Number 2, you mentioned dynamic pricing on ancillaries and I was wondering if you could just share a little bit of color on that. One is kind of banding ancillaries it Ryanair, is it something more sophisticated like a revenue management? And is that homegrown or is that a tool you're using? And maybe a short comment, lastly, on the leasing market, kind of what you're seeing currently in terms of what letters are willing to offer And any color on the terms you have for your financing until November next year? Okay. Thank you. Maybe I will start with the ramp up. Well, as I said, next March, we're going to have 137 aircraft in our fleet and a year later, and this is March 2020 259 aircrafts. So we'll have substantial capacity. Currently, we are approved for around the 100 aircraft And this is a balance, but we haven't been fighting to make sure that we are addressing the current weakness of the market and capacity reduction. Of the flying program, but at the same time to maintain capacity for ramping up our operations again once the market reopens, So we will be very ready to go with 100, 120 aircraft and obviously you can stretch your resources to some extent in the initial period from our perspective, it takes us around 3 months to, to interact further personal resources needed for ramping capacity up, and we have a plan for that. And we're seeing that if market conditions permit, we could ramp up our entire capacity for summer. I don't know whether the market is going to be as good as but we don't think that it would be constrained with that regard either from an asset perspective or human resources perspective We are fully financed our activity program until mid-twenty 22. So I think we are in very good position. And we've got very attractive financing deals. I mean, again, we are an investment grade credit, I think the financing market has become more selective, but we are still benefiting from very, very effective financing these days. With regard to flexibility, we with Airbus, of course, we have an inherent degree of flexibility in the purchase order and we are looking at ways of a possibly deferring tax should the situation be dragging longer. It may not be as short term as you may think, but certainly beyond the industry or lead time like a year, I think we would have some level of flexibility, but we also have flexibility, it's not only on on the supply of new aircraft, but also on the, on the redelivery program because we have actually applied a lot of aircraft due for the deliveries in the next 2 to 3 years. And of course, lessors want us to, to retain their aircraft and continue to operate at very effective commercial deals, but we have a lever on hand that we actually can redeliver quite a few dozens of aircrafts should we wish to. And I think this is the size what we are putting ourselves through on a constant basis and we keep updating our assumptions to see how the market is evolving, how we see demand and what capacity is required to fulfill that demand and we would take capacity decisions on that basis. But actually, we have quite significant, flexibility, flexing free top down in the next 2 years. That. Yes. Daniel, on your second question, so, you're well aware that on tickets, there are certain parameters that could basically make pricing more dynamic like the booking window, the day of the week, the routes you fly, the load factor, We're just reapplying some of that logic, obviously, with different parameters on the ancillary. This is very much a homegrown approach. Something that we want to keep close to the airline. And in our experience, it typically beats some of the third party vendors in terms of performance. So, hope that's helpful. Thanks, guys. And with regard to the leasing market, with regard to the leasing market, housing, the leasing market is trying to be helpful to the see about air cost. I mean, what we are seeing is that the lessors are accommodating, liquidity from airlines deferring rent payments and those sort of things, but a significant loss. So we are not really taking advantage of that. I mean, cost an important issue for us and we want to make sure that we don't get indebted in this period as we are not taking government bailouts or anything like that, we don't want to go overboard on industry credit at a cost either. I mean, one of the things that we are clearly seeing is that the leasing community is very eager to retain the lack of with operators, with credit and expectations that they would be a survivor of this situation here. But again, I think that's our discretion to decide to continue to operate active to return act after the expiry of the lease and and this is exactly the exercise we are just going through as we speak. Thank you very much. The next person on the line is Bob Simpson of Goodbody. Please go right ahead. Yes, that's Mark. But, morning guys, just in case you're confused there. Just picking up that comment you just made about crude for about 100 aircraft. I mean, very roughly that 75% of your fleet, you're flying currently only about 30% of capacity. So just with a reference to maintenance and flying hours for your fleet and staff, how are you managing those to main current so that you can deploy capacity quickly as demand recovers. So managing the existing operation interested in that. And I wonder if we have an update on CapEx with regards progress paid especially in FY 'twenty three when the bulk of the delivery deferrals are being seen. Maybe, Mark, I would start with the revamp of capacity. I mean, let's not forget that back in April, we operated 3% of our capacity and in August, we operated 80% of our capacity. I think we have demonstrated ability to go incredibly quickly and very robustly on recovery. And here now we are in a slightly better position. I mean, speak, we are operating around 30 percent of our capacity and we shall see how good the market will be. But I think we can move very quickly on this And when I say that we have, a crew for about a 100 backup, I mean, that resource can be stressed to some extent. I mean, it can probably do more than a 100 aircraft with some heavier rostering in the initial period while we are accommodating onboarding of new crew. So I'm very confident that from a personal perspective, we don't have limitations here. We keep the act of current through the main program. I mean, we maintain aircraft maintenance is not as valuable as you would like it to be to be honest, but in a way, it is a good thing when it comes to recovery because essentially the maintenance arrangements we have in place, really keep the act of current and from a technical perspective, they would be ready to be, to be re inducted should we start flying more active in the coming period. With regards to a CapEx, so I mean, yes, the F23 progression is slightly lower than what we previously outlined, but obviously, the fleet growth still substantial. So you should really think in that way, as you look at the CapEx for pre delivery payments, But this set, I mean, as Joe said, we are trying to bring increased flexibility in the thinking on our fleet and this includes also delivery CapEx. Could you just give us a hard number in a sense of what CapEx looks like over the next few years? I mean, not at this point, I said, I mean, we keep working on this, with, with our partners. So, we'll refrain from giving a number here. Okay. So appreciate that. Thanks. My apologies to you, Ms. Dissen, for getting your name wrong. Our next caller is Ondal Lupender from HSBC. Please do go ahead. Hello. Hi, Joe. Hi, York. Can I ask you about what you plan to do with the UK government funding of the CCFS, do you expect to pay it back in March, or do you expect to roll it over? Can I ask, there's been some press reports that you guys operating an A330 in cargo formation for the Hungarian government? Is that right? And is getting you any cash, is it relevant in the accounts at all? And then can I just ask about the treat to Norway because the trade union environment in Norway is pretty intense? Do you think you can sustain a nonunion operation up there and get engagement with the Norwegian community? Thank you, Andrew. So on your first question, we do intend to, apply for the rollover of the CCFS fund. So, obviously given our position in the UK, we hope to also get a positive answer to that. As you know, as you know, it's an attractive program and we definitely want to be part of it for another year. With regard to the A330 operation, I mean, please don't look at it like a diversification of the business model, the hunger involvement, approached us with the initiative of trying to create capacity for the country for, cargo flying, learning from the COVID-nineteen experience and we are accommodating them and we are able to contract in AC30 operation on behalf of the government. So this is not on aircraft. We are just an operator of the aircraft It is no cash exposure to the business and it is no P and L exposure to the business. There is a principle agreement that, everything is paid by the government, and we do it as some with a margin. So this is more like an asset revenue opportunity, but it is a totally sideline from our perspective. So please don't get overly excited about this. I think we are just getting the involved here as an airline to operate on behalf of someone else. And this happens to be the Hungarian government. But with regard to Norway, Yes, I mean, the fact of the matter is that, half of the knowledge and workforce actually is nonunion and half of it is unionized. Yes, there is a strong push by unions. And to be honest, I think it is more of a a protectionism of the market. So we are the insertion controller in Norway and I think this is the competitive response what we are getting. This is just an angle to it, but I think this is really a response of competition or not wanting to compete with with The good news is that we are seeing quite a strong support by consumers. I mean, the take up is is as soon as we planned on. So clearly the market reacted very positively. And, yeah, I think that we're going to we will sustain our model, our culture, our organizational model here. Yes, it is under pressure there, but Again, half of the Norwegian workforce is nonunionized and I think, actually, it is not some of the stakeholders' decision about Devon, but it is our people's decision, what they want to fully respect the rights and regulations in every country, including Norway, but we would also expect these countries to respect the culture, what we are having, which has been very effective. And I think it has created a lot of bad being for our people and our stakeholders. The next caller on the line is Neil Glynn from Credit Suisse. Please go ahead. Good morning. If I can ask 2 questions, please. The first one, I think actually as this call was starting UK government have suggested it might be about to announce SMA for the sector. Just interested whether you've had any discussions on with the UK beyond the CCFS facility How much your expectations or understandings would be on any forthcoming UK government aid from whether it applies to you? And then the second question, just on the level of payables in your accounts in September, the 1,000,000 at period end. Is it possible to give us some understanding as to what proportion of that number, is indeed delayed or deferred at this and might be relevant to think about outflows or cash in the next few months? May I just start with the first question? I mean, if you look at our liquidity, we think we are good to go for 2 years, even if we don't operate single flight in the next 2 years. That's a fairly unusual scenario, but we have very strong liquidity. We have been have sufficient over the last 7 months and we think the VA remains sufficient going forward. So we are not betting on any stated matters. We are not betting on actually we would be deliberately avoiding any bailout programs affecting us. So we be difficult, we are not really interested in, in stated. Now obviously, to see whether that are genuine and general status schemes coming into play. I mean, the UK was actually quite strong on on a furlough scheme, but that was sector neutral. So that was not affecting aviation only, but I think it went much beyond that. And we are seeing a similar in other countries. So we try to understand each of these schemes whether they are sector or not and to see if we kind of fall into it. But if your question is that whether we would in-depth ourselves with government money or even include some equity measures, the answer is a definite no. If there are genuine schemes available to the industry or all indices, Yes, of course, we would look at them and we would take a position if we would want to subject ourselves to it or not. Only thing what we have done in the UK is, is really CCFF and as said, we intend to renew that program. We think it is a good insurance policy at low cost and it makes sense to take it, but beyond that, we have no plans in the UK or in other countries. On your second question, Neil, I mean, you rightfully pointed out So there's some what we call in the slightly other bucket that's helped us, 30,000,000 in the first half in terms of cash flow. Actually, there's a lot of moving pieces. As you point out, the payables and receivables were positive inflow in PDP was a positive inflow, but there are also a lot of negative outflows, the refunds, currency the up stone revenues. So all in all, I mean, with a lot of moving pieces, this was led to the million other that you see there. How to think about it looking forward. I mean, again, difficult to guide, but overall, if there will be lower activity over winter, It would not be unrealistic to expect a further outflow on payable than on when you over and above the operational cash Great. Thanks for the color. As we move along, the next quarter through is Ross Avery of Davy Research. Please go ahead. Hi, good morning. Joseph and Europe. Three questions me if I may. The first is on the network strategy and the increased focus on domestic traffic. And I'm thinking of Italy and Norway, It's interesting. Can you just describe the rationale behind it from a competitive perspective, on how it might or might not complement your gauge aircraft. And secondly, one for Europe, within the other expenses, you had a million year on year swing in terms of the spec gains, you had $5,000,000 swing in terms of OEM competition. What should we expect for H2 in terms of those items and will they continue to be a year on year tailwind? And finally, on the hedging side, I'm just wondering what level of two capacity was assumed when you calculated the fuel and effectiveness for these sets of accounts? With regard to network storage, I mean, it is very clear that in Europe, domestic travel is more resilient than international travel. I think this is the function of the lack of European coordination on the one hand. And secondly, I mean, obviously, that is a psychological effect on people, pretty much played by governments to discourage people from traveling abroad So as a result, we are seeing a much more resilient domestic market than international market. And we are very keen to add to our capacity program. I mean, I think this is all about the activity and agility, to go with the flow of the consumer. So if the consumer flying more domestic, but relatively more domestic than before. I think we ought to serve the consumer that way. So I think that part has made, domestic markets more attractive to us, but let's not forget that we are not coming out of the blue here. I mean, if you look at Italy, we have been operating to Italy for 17 years. We have been operating to Norway for 14 years, we are the largest international airline in Norway already or we were already prior to COVID-nineteen and we are one of the significant players, airlines in Italy as well. So I think this is a fairly logical next step with regard to enhancing our market presence in these countries. And this is just a timing matter that this is the right timing because what we are seeing is that there is a shift consumer preference on the one hand. And secondly, that is a weakness of competitors in the marketplace and I think that made us attractive, to this market. So This is a strategic rationale, and this is the tactical rationale, why this is happening now. But in terms of a strategic consideration, it is a fairly logical next step versus what we have been adopting this in this market over the last 10 to 20 years. On your second question, Ross, so the tailwind that you outlined is going to be much less for the second half. And then on hedging, I mean, this is calculated based on the strategy that we have guided earlier, which was around 50% for half 2. So you're right. I mean, if the restrictions that were recently able to continue for the next month. There could be some more effective hedges going forward until the end of the year. And obviously, that's also dependent on, on, in the end, the fuel price. Very helpful. Thanks. And just one more follow-up for me. Joseph, you mentioned dozens of returns over the coming years. Can you just specify a 1,000,000 of those coming up in FY 'twenty two that you have flexibility on? Between F21 and F23 we have in total 42 coming up that we could potentially, not extend We have the very large majority of those we plan to return. We still have around, as Joe said, a good delta to decide on. They're kind of split mostly between F 'twenty two and F 'twenty three. That's great. Thank you very much. The next caller on the line is Carolina Torres of Morgan Stanley. Hi, good morning, everyone. I have three questions. I guess first one with the opening of the 13 phases, I was wondering What is the cost if the incremental cost is included on your cash burn on the $70,000,000? Just trying to get a sense on how much cost cutting, you actually managed to achieve versus what you have been investing in growth. Second question is, if you could have, if you give us some color on what kind of deals the airports have been offering you, on any basis, if any, And the third question is, I appreciate the ample liquidity, but what is the minimal cash that you think you need to operate meaning I really do hope you don't need to be grounded for 2 years, but at what point within those 2 years of programming, you would need to touch the markets to make more cash? Thank you, Carolina. So on the 13 basis, I mean, the cost for us is relatively limited of opening these new bases because we use several principles I mean, we try to use, for example, crew within our network. As I said, we will operate those those flights in the current environment only when they're cash positive So the investment is rather limited. We have some cost of IT investment, etcetera, when you open a new base, but it's nothing too major. So we are being very disciplined on this one. With regards to the airport deals, I mean, you also we can use right there I think it was, there was a report out there that says around 200 regional airports that are on the brink of bankruptcy. So clearly when we move into new basis, we're trying to do a good deal and we're trying to do it for a multiyear contract. And so yes, we are getting some of those good deals on when we move into new places. And then on the liquidity question, we're kind of in the luxury position at this point in time to see what winter will bring. And then still be in a very good position in spring, and we'll see the environment is like in spring and summer. And then we can have a good discussion amongst ourselves what we need to do. But for the time being, I mean, we're relatively comfortable whilst we're being disciplined on managing the crisis. Our next question is from Alex Patson of Peel Hunt. Please go ahead. Good morning, everybody. I've just got two questions actually relating to your airports. You were just saying about, you were getting good deals new places. Can you say how long those agreements are? Is that a sort of longer term agreement? Is it seasonal and where you were previously flying for, have you also been able to make savings there and how long do they last? And then secondly, there's been some commentary recently about your potential interest of expanding at Gatwick. Could you just tell us what your, I think, about there, do you think you need to buy slots, or do you think that, they're not going to get flowing and that you could be awarded them? What should we expect a number of spec fleets? With regard to airport, I mean, you can imagine that we are not acting on the moment mean, we are taking advantage of the moment, but the deals are long lived, I mean, affecting our our post for 5 years or so. So we are only entering into structural DCF. And so we are somewhat opportunistic on the time, but we are certainly not opportunistic on the structure and the impact of these deals on our ability to operate on our cost base. So these are all long term days. And you can also imagine that we are reviewing every single contract, what we have with airports and other suppliers to see how to enhance our spending, to get better deals out of these, these suppliers, whether this is cost or payment terms, managing liquidity, are scrutinizing everything what we are doing as we speak. With regard to Gethic, I think it will be an interesting situation, as you know, that there is an effective store slot waiver out there at the moment until the end of March and that's the European initiative. It is becoming increasingly clear that this industry as a whole we'll not be able to recover to 2019 capacity levels anytime soon. I mean, you can debate whether this is going to take 3 years, 4 years or 10. But certainly, this is not going to be imminent. And I think this whole slot question will have to be fundamentally reviewed because, I think this is totally against the public interest, should the incumbent carriers be protected for years and years we even no intention to operate those stores. So I think we will have to see how the system evolves and what outcomes that evolution will produce. And we are looking at various options to expand that GAFIC and we have been in expanding at GAFIC. We just don't know how the system is going to unfold with that regard. But my personal expectation is that I think the is going to be reviewed and I would be very surprised if we are not seeing some of the slots being occupied today with no intention to be operated would not come back And I do apologize before, hon. The next caller through is from Kite Lake Capital. I believe, Mr. Bosky, please go ahead. Hey guys, thanks for taking my questions. 2 from my side. First one, you're saying your operational cash burn is $70,000,000 a month. Could you just let me know what is not included in there? I assume the fleet investment is not in, but is there anything else that's not in there? And then the second one is you say the winter cash contribution is minimal. So you're expecting to be after cash flow neutral over the next 6 months? Of the operational cash burn, what is included is or what is not included rather is indeed investing cash flow elements like CapEx for redelivery payments, but also working capital movements, like, if you would have an online for unflowing revenue are payable. So that is not included this time around. On the winter cash contribution, I think that you need to take into account. Sometimes people forget, I mean, airlines typically make more than 100% of their profits or their cash for that matter over summer. So this is going to be even more so in this season if you overlay that with all the slides we So we do the flights that we operate, we do target to operate them cash positive first with the burn rate. But given the environment we're in with the restrictions, etcetera, that cash contribution is not going to be as much as it was in summer, right? So I think you just need to take that into account and we wanted to be very transparent on that. Okay, that's helpful. Thank you very much. We have time, gentlemen, do we have time for one more question? Yes. Maybe last question. We have Ms. Sanjani from Barclays. You have the floor. Please go ahead. Hello, Mr. John, are you there from Barclays? You have the floor? Let's have another question. No, it doesn't seem like she's dead. There are no further questions in the queue at the moment. Okay. Thank you very much. Thank you, ladies and gentlemen, for your interest. Could or continued system, but these are the market conditions. We are in lots of volatility, lots of unpredictability, but we try to best deal with the situation as we can So, thanks for the interest. Bye bye.