Earnings Call: Q4 2020

Jun 3, 2020

Welcome to the Wizz Air 2020 Full Year Results Call. For our call, all participants will be in listen only mode. And afterwards there'll be a question and answer session. Just to remind you, this conference call is being recorded. Today, I am pleased to present Joseph Farradi, CEO and Euro cube CFO. Gentlemen, please begin your meeting. Good morning, everyone. This is Joseph. Thank you for joining this call. This is kind of an unprecedented format of delivering results. But these are the times we are in. As a matter of fact, we said, we will direct more revenue and net profit, maybe nobody's interested anymore, about the performance of the last financial year, but actually, we had a pretty good year. Revenue grew 20%, net profit grew 30%. And we expanded our margin performance. The improvement came in on the investor revenue growth. We grew as revenues by 14% per passenger and also on a very strong performance, exterior costs came down 1% and you record that this is a sort of the guidance that you have been given to the market that we would be expecting extra cost to decline. Obviously, we don't fully control what happens to, to fuel, but what we can control, actually we have performed very well. We are one of the very few airlines, maintaining investment grade. And maintaining the grade, but we used to have more restructuring confirmed our investment greater than overseas on the base of the prospect of the business on the very strong balance sheet, to better the storm, short term, and, we are very proud of it and we do everything, we can, to to maintain our positions to an extent, possible. We have taken a number of actions, during the course of the last few months, to minimize cash burn, essentially, there are many the business for cash. We have been always managed in the business for cash, but particularly given the times we are in, we are much more focused on cash and, we have taken all possible actions to minimize cost and, resulting cash burn We've acted on organizational matters. We've acted on business matters. We've acted on supplier payment terms. To make sure that we are in good position to value this storm. At the same time, we are very keen on, ramping the business up again. They are the airline, leaving the market lost and coming back first. And I think that's what you should be expecting, from a balance sheet, what we have. And you should be expecting it from the cost leader of the industry, where we are at right now. And we have some encouraging signs of demand, did we elaborate on that? But also we are seeing some significant, restrictions imposed by governments that are holding demand back With that, I would move to the next slide. And, this is just to give you some background on, how the business is doing as we speak. So we cost capacity already in March, by around 3rd. April was 1st months of the airline and history, 97% of our capacity was grounded. Some improvement in May the w w business was still 93% of our capacity was grounded. Obviously, as the rest of the industry or most of the industry, we also have, software from ineffective hedges, causing 1,000,000 of losses during the March May period. We have taken actions on optimization and liquidity. The grounding has decided in on productive stuff in the business. Even if we were to restore the schedule, in full completion, for the second half of the year, we would need less pilots and cabin crew simply because we have lost a lot of productivity in the first half of the year, through the grounding, but some of it can be gained back in the second half and we acted on this by, reducing the workforce by 19%. And also, we have got compensation by 14% on average, compensation of officers and the board of directors got caught by 22%. Having said that, do you remain quite positive with regard to the longer term outlook of the business and our ability to take advantage of the situation and to take advantage of market consolidation following COVID-nineteen. As a result, we have maintained our commitment to taking deliveries of of our order book with the Airbus. I think we must be, probably the own airline, but certainly one of the very few on the planet that point is to honor the the contextual commitment with Airbus. I'm going to do that for honoring contextual commitment. We do it because we're seeing that the following market consolidation deal, spring significant opportunities for Wizz Air, and we have already acted on some of those We have been also quite creative in this period and got into rescue flying and medical cargo flying altogether. We had performed around 130 flights. Over holiday flights, flying the medical cargo from China to Hungary, mainly, which is, of course, a irregular operation and we don't plan to maintain our cargo operations in the future, but we saw it was, a good way of helping our countries, helping our societies, contributing to the resolution of the, of the medical issues, the all are facing and at the same time remain operational, also we have done quite a number of, repatriation flights, even fly into the United States. Twice, with 3 aircraft which I would have never thought we would, we would do. We have an interest in ramping up operation, to an extent possible. And I would say that, we are pretty much operating, whatever we can. And, based on our demand sensing, we believe that the desire to fly, of customers is there. People want to move, if the shaft were having been looked down for 2 to 3 months, but it is more the, do these pictures imposed by governments that are the limiting factor to flying. So we're seeing that, as restrictions are getting eased, at least in certain countries, that should have us stimulate demand in a much more robust way versus we are able to achieve now and we will give you some guidance on what capacity, to see if we're going to be able to fly. So moving on to the next slide, this is giving you an overview on the current state of operation. So the, the footprint of the, of network We carried 40,000,000 passengers in the last financial year, with a fleet of 121. As of as we speak, today, we have 422 with 2 believe on aircraft a few days ago. We have an escrow of operating 2 55 airports across 25 bases in 45 countries, And just back to COVID nineteen, I can tell you that, one of the difficulties is the sheer complexity falling out of the various government restrictions in place. So in the 45 countries, we operate with, there are no two countries imposing the same restrictions And as a result, it's almost impossible to cost to this jungle of ever changing regulatory restrictions or easing to fully understand what is going on here. If you move on to the next slide, this is showing, the strengths of the business measured on market share and market positions. As a matter of fact, in the last financial year, we say it became a better airline, a stronger airline and more 4 meters of competing force. We've got 40% of the local airline capacity share in CE, which was an increase of 1 point. And as you can see in 65% of our markets, we are the leading local carrier in 45%. We are number 2 or number 3. And where we are, the leading local carriers, actually we are, in many cases, the single largest airline of the whole industry. So the business has been going from strength to strength. And even today, operating under very different circumstances, clearly, we have demonstrated our ability to be very resilient and still be focused on, on the purpose of of the business, flying people, flying pest interest to an extent possible, leading to cost that context of San Francisco, with that is the most operational airline, as said, we've been the first to come back to our two markets and lost to our to leave those markets when we had to. We had no other choices and we are very eager to have to restart in every one of our markets and ramp up operations to an extent possible. And with those headline side, we'll turn it over to Ariari who will take you through the financial results. Thanks, Joseph, and good morning, everyone. It's my pleasure to speak with most of you for the very first time. So on page 7, let me give some color on the financial highlights for fiscal 2020. You'll see that the company has delivered outstanding market leading results across all metrics. Starting with revenue, revenue increased 19%, reaching EUR 2,800,000,000, assets driven behind strong ASK growth as we expanded the fleet through the 120 aircraft as mentioned by Joe And that also resulted in 16% passenger growth. And what makes this even a stronger performance is that whilst we drive really capacity and passenger growth. Also, our unit's revenue increased 3%. Reported profit more than doubled to EUR 281,000,000 A big part of that, of course, is due to the changes caused by IFRS 16 in the base year in 2019. And to really see the underlying performance, we need to look at the underlying profit, which increased 30 percent to SEK 345,000,000 despite COVID impacting for a good month, resulting in an underlying profit margin of 12.5%. Now given that we didn't use the underlying profit term most recently, let me briefly explained that for F20, the difference between the underlying and statutory profit is only driven behind the $64,000,000 worth of ineffective few hedges that Joel also mentioned in the beginning, those hedges relate to the period of March, April, and May 2020. And they became ineffective, of course, because of COVID 19 as we no longer contracted that tonnage. The reason, of course, again, is the grounding. And I said that the delta in 2019 between underlying and reported is driven behind IFRS 16. From an operating point of view, both RASK and ex fuel costs were highly accretive and we'll talk about that later. And to close off the slide here, I mean, very importantly, in the current times, our total cash at the end of the year was SEK 1,500,000,000 Looking at the financial obligations of the company and the cash burn, which we'll talk later, this metric also here is putting us top of the airline industry and many industry for that matter, as we'll highlight later, and it will allow us to really come back strongly, as we engage in several opportunities in the wake of COVID-nineteen. Okay. So moving to Slide 8, you'll see a little bit more detail on our revenue performance. Which was asset not only driven behind the passenger growth, but also by the unit revenue growth. And the internals of that are really where we want them to be. A terrific performance on ancillary with a 14% growth per passenger, which allowed us to invest back in affordable ticket fares and to really stimulate the traffic. And that's really what we want. So, this makes travel, I said affordable for everyone And our load factors with that also continued to increase now at 94% for the year, up 70 basis points. On Slide 9, if you continue to peel that onion on the ancillary revenue, you can see that it's now at per passenger. It's a per passenger increase, which is higher than the point 5 to per passenger, mid to long term goal that we have every year. And 3 is now 45% of our total portfolio. In revenue. Bags obviously remain one of the key ancillary revenue product, and also in Bags we have some history, but you can see there's an encouraging increase here. And also the rest of the portfolio, the other 18% continues to grow very strongly with 15% growth, okay? Going to from ancillary to our cost, which is another key pillar of our model. As Joe highlighted, we we declined ex fuel CASK 1%. Fuel CASK increased 4.5% You can see that on ex fuel, I think we're pretty stable on pretty much most of the line items. We had a slight increase in the maintenance mostly driven behind the way we are in the lease term and the age of our fleet, which aged around 0 point 7 years. But utilization of the fleet was flat for the year at 12 hours, 12 hours 1 minute, and this is all despite the 10% drop in Q4 behind COVID-nineteen. So we had very good performance in the 1st 3 quarters unfortunately offset by COVID 19 in the last quarter. We traded over 2019 where we had some benefits on transactional gains on asset sales but most of that were offset by the decision that we took taken back in April 2019 to move up the majority of our cash into dollar deposits which helped our interest income. So all in all, given that we're already lowest cost provider in the industry, reducing a further 1% is simply a great performance, okay? On the fuel cost, were up 0.04 dollars, from $1.11 to $1.15. And for the avoidance of excludes any impact of the ineffective hedges that we mentioned before. On the next slide, we want to highlight once more the strength of our balance sheet. We remain investment graded as Joseph was mentioning with Moody's, and with Fitch. At a time where most of the industry is getting downgraded. These rating agencies, as Joe mentioned, they understand that F21 will be a little bit of of a stranger and off year in terms of meeting certain criteria, but they see the shorter, the midterm and the longer term horizon definitely in our business and they know that the liquidity position that we have helps us to carry through the short term and they believe in the model longer term. So on the next slide, you'll see that the different cash actions for the company were absolutely focused on this. We reported, and Joe mentioned, the cost savings programs of the company in terms of reductions and headcount reductions So we want to say that those are by and large executed now. In addition, we withdrew We drew down, sorry, the $300,000,000 facility as part of the CCFF front, and we added that to our cash balance. So we started April at 1,800,000,000 in cash, and we remain absolutely on track to stay in line with our burn rate of 1,000,000 per month for the next 6 months until, let's say, end of September, and they're onwards, with EUR 70,000,000 per month. And this is obviously in a scenario where we would operate absolutely not a single flight. So if you do the math, you'll understand that Wizz Air has liquidity well over 12 months and possibly double that in the same scenario of not flying a single aircraft. We also want to underline the last point here on the slide is that We operate the flights today in a cash, and in the contribution positive way. So that continues to lower our cash guard. Now, maybe enough about the past, looking forward, if you see on the next slide, I'll start maybe with some points on F21, and then I'll hand it over back to Joseph for some further and strategic business perspective as we look ahead. Mean, we're seeing strong demand as restrictions are getting lifted. And as just mentioned, our flights are contribution positive. You read and heard that we are taking charge of our own destiny, and we have the financial muscle to do this. And we are deploying the aircraft against significant new market opportunities. And this was pretty much all of the competitors are retiring parts of their capacity. We plan to grow the number of our seats in our fleet by roughly 10%. Those seats are even more efficient than what we had in S20. On average, we have now 303 seats per aircraft versus 201, in F Twenty 20. A321 aircraft will make up 49% of our fleet. Remember, the A321 has two thirty seats in the CEO version and 239 in the neo version. It burns, it burns significantly less fuel, 16%. In the neo version at the nitrogen oxide reduction is 50%, the noise reduction is 50%. All in all, a cost reduction of around 20% on the new versus the A320 field CEO version. So and we have more of those coming, not only in F 'twenty one, but also in F 'twenty two. So with all of this set, unfortunately, we cannot guide with any responsible level of accuracy on the loss that we'll make for S21 or on the cash levels for S21, I think you'll understand that in the current context. And now I just want to give it to Joe, which will give among standards. I'll be point some view on the capacity and how we'll carry, passengers and where we'll do that in the next slide. So Joe, back to you. Yes, thank you, Alex. So let's move on to page 15. I'd like to elaborate on, 4, very important matters when it comes to recovering the business from where we are today. Yari has elaborated on cash and cost measures. We have been putting in place that, which is highlight 2 aspects of that. So as I said, We have 2 years of liquidity, on hand. If you don't, operate a single flight, we don't carry a single passenger in the next 2 years. We are still in business. Without any, capital requirements from government or private investors. I think that's a very important statement, with regards to resilience of the of the company. Secondly, we remain, on investment grade credit that is important because we continue to finance aircraft. We continue to take deliveries of aircraft. So we are subject to the financing market and obviously our credit rating has a lot to assess capital at reasonable cost even under the current circumstances. But I also want to, elaborate on the 3 other aspects with regard to what protocol and what measures we have put in place, to reflect on the situation, but it comes to customers in our crews. What we are doing to recover demand and how much IVR does the business to take advantage of some of the opportunities arising from the current situation. So moving on to the next slide, page 16, we have actually done quite a bit with regard to addressing, consumer concerns, possibly over there. But maybe I should just start by saying that, flying remains very safe SFA of level. On a global basis, that isn't a single case. It would be a wrap up. That would prove that an infection would have taken place to go out of an aircraft. So no one has been infected by flying, or at least we are certainly not aware of that and some scientific studies have been carried out with that regard. With the same conclusion. So by design, flying an airplane is very safe from a Hess perspective. And having said that, we have announced our standing here by launching a new protocol and we are obliging the pairing of MOSF by our crews as well as our passengers to, to maximize the level of protection. We have eliminated most of the touch points, board of an aircraft. So payment is only possible by credit card. We have removed all tangible items, like in flight magazines. To create an even safer environment and we are distributing for free up charge, hand sanitizers, again, to up our standards when it comes to to personal health and safety matters. Another aspect of our approach to our customers is that we are truly the only airline in Europe. It's not the word, that, 2K I think a very fair reason to understand on, refunding, passengers of cancer flights. So should a passenger, choose, to get cash refund, the guarantee within within 30 days, we actually refund that, passenger and we have automated the whole process of, of refunds. So this is not no longer a discussion of the company or, it is not contract to workforce constraints, like it is the case in many other airlines. This is a totally automated process. So we made a here, but I think that gives a much fairer approach to the customer. Also, we encourage people to have to rebook or take a voucher and should they take a voucher, we up the value of the fair by 20%. So we hope for a pretty good year. And obviously what we are seeing today is 3rd of the passengers, rebook a cert, take credit and assert request refund, but we can handle each of these with, very fairly accretively of your store, customer group. We have a very young and mobile, customer group in average age of thirty six years. And as you can imagine, this will be the group that we recovered first, certainly much earlier than the other people. These people tend to be more adventurous, more agile, and they they they are seeking, more adventures and and they are naturally more on the move. So with that regard, I think we are very well positioned that, you're gonna you're gonna be seeing a quicker and more about recovery, with our customers. Another important matter in, you know, which we understand for demand sensing is that essential travel such as visiting friends and relatives, is very important and we expect actually quite a large number of people to, to start moving immediately as they can. 65% of 65%, 70% of people indicate that they would want to travel in the next 6 months and around 30% say that they would have to do that in the next month or 2, so pretty much, immediately. And clearly, what we are saying is that The issue is not the desire of clever by by customers. It is much more the restrictions in place limiting their movements. So actually, we are quite encouraged with regard to our position to be able to recover the trust of the of the consumer and actually start seeing more and more people flying. Moving on to the next slide, With regard to capacity planning, I need to say, that everything that I'm I'm gonna tell you now is kind of interesting, from a numerical perspective because you are getting some hints on numbers, but you can expect from us but this is hugely subject to government restrictions out there and this is something we don't control. And you can see a number of countries going, one direction and other countries going a different direction. So if you look at if you look at Europe as we speak today, we started seeing some easing, restrictions coming into play by quite a number of countries, much led by Germany. In a way and also by the Southern Countries opening up markets for tourism in summer, but at the same time, the UK is taking a reverse direction by imposing, quarantine in the coming days. And we are operating to 45 countries, and there are no two countries which same set of measures in place for the same interpretations of those measures. So it's a company to do, with, with, with that regard. So within that context, They are expecting to perform around 15% of our capacity in the first quarter. And this is the last month of the quarter going into peak summer. So it's September, we expect to see around a 60% ramp up and second half would be around 80% again. Subject to, government restrictions imposed. Now, the 60% going into the next quarter, you may think this is aspirational. It I think it is. It is a bit better based than than sort of that. We've already got a few countries, around 3 countries. That are at that level already. So, government restrictions have been, minimalized. And as a result, the market has become free and consumers are to move. And immediately, we are seeing a significant jump on demand. And, in terms of load factor, that should have quite pleased with our evidence to, to fill flights. We are at around 70% booked load factor at this point in time, but again, this has been in the contest of heavy restrictions in place. And we stated once those restrictions are are removed, did we see a significant jump on demand Nevertheless, of course, we expect demand to be, to be different in 2020 versus 2019. And that's why we are making, a different assumption on our ability to, to recover. But I guess this is, quite a positive picture relative to the balance of the, of the industry. If you look at May, this is the last one, so we were able to operate around 7% of our capacity, fares, up significantly by, by 22% and load factor as said, was around 65%, 70% in, in, in that month. A clear shift towards the late market while, previously we saw 50% of, of revenue coming in, in 30 to 40 days prior to Trevor. Now it is a 50% coming in in the last 10 days. That's a very significant shift in demand, but what obviously we have, we entrusted our pricing revenue management aggress to make sure that we follow through the new booking profile. And a very important principle, but we have been very consistent with that. We only operate a network that contribute positively to cash. So we don't fly for the sake of flying, but we fly for financial performance, clearly, even under the current circumstances. And the CRX said that the worst case scenario for us is that the entire fleet is totally grounded, but any flying, any operation, which was the adding to cash and which is we are into profitability of the business. So moving on to the next slide, we have taken a a very HIV on approaching the opportunities as they arise. I mean, we clearly see that and increasing number of airports are begging for capacity and we are one of the very few airlines that actually can deliver growth can deliver capacity to, to airport. And this is a sample of what we have done already. We have announced 4 new basis, Milan Marpanta, Larnaca, Ziva, Ukraine and Iranana, Albania, And if you look at the numbers, this is the announcement of, or set up announcements for 10 aircraft for new basis, And kind of the way we think about life is that, if you resize the existing network we're seeing, you need to trim capacity by around 20 5%. And by also taking UF of deliveries, we would be in position to redeploy around 30 to 35 aircraft across new markets, acting on rising new market opportunities. And we have started deploying capacity against these opportunities and more to come in the, in the future. And we're seeing that this is a a good way of addressing, a somewhat weakening demand through the existing network, but by also that into new market opportunities and, and taking advantage of the market consolidation. That way, by opening new lines of services and new basis. So just last week, we made announcements of 50 new routes through this for operating basis and opening some new destination markets as well. So we we have a constructive view on life. I think we're gonna look through, COVID nineteen. We need to go through it and, I think we've done, but, you should expect from a good business to do in terms of measures put in place on cost and cash. But also addressing the various issues of the pandemic and, and consumer concerns associated with, with that but also getting very focused on the future and looking at the opportunities as they arise and taking actions against them. I'd like to make a comment on VISTA Rabu Dhabi. On the next slide, Visata Abu Dhabi is well on track. To get the airline delivered before the end of June, we are planning on launching the airline for nursery. So we would start selling tickets for Mr. Algovy. A prior direction to it is that we are flying, starting to fly in bone. By desire in Hungary, to Abu Dhabi, during the course of June as soon as the market opens up, And they would still expect the airline to become operational sometime in October. And that's a matter of fact, we have been knocking our over game in Abu Dhabi, increasing the initial fleet size from 3x up to 6x up in the 1st 6 months because we're seeing that, the pronunciation actually brings, bigger and more opportunities to the airline than what we what we saw before, so we could be more agile and a bit more aggressive than auditioning plan. And we still have the plan to, to grow with 60 hours after over the course of the next 10 years. And just to slide to stand on ESE, we have not forgotten ESE. Maybe it has got out of sight a little bit, although, we are clearly seeing that some European governments are taking the opportunity, if I can put it that way, of providing liquidity to airlines or capital to airlines to address some of the ESG issues, especially on the, on the environmental measures. I just wanna report, to you that, we are quite upbeat and, and and and the child, what we're going to achieve here, with regard to, to to female representation in the company, we are targeting 25% of pilots to be, to be female, and 30% of senior management. We are not there yet, but we are on the way to, to achieve that. They put quite a number of actions in place to, to make sure that we will deliver this in the next 5 to 10 years. We have a permission to reduce our carbon footprint by passenger kilometer, by a cert, in, in Spanish circuit. And as you can see on the chart, they have been on a continuous decline on carbon emission, over the years and that will continue to be the case. And I would just know that by continuing taking, act of deliveries, these are going to benefit from new technology going forward, as Eric mentioned, and obviously that technology gives us the economic benefits of achieving lower unit costs versus aging fleets of our competitors with treating unit costs. So the CECL is going to open up in our favor. And this is the same, that we'll apply on, on the ecological footprint of the airline. So this simply will have a more modern, less, environmentally harmful operation and fleet relative to the rest of the the industry as a result. And we have put in place an oversight process that now, we renamed the audit poverty tailings and sustainably to poverty. So the board is engaged with ESG matters. So I think we are incorporating ERC as a core corporate governance, process. In our way of operating the business and the airline. And with that, I would just like to recap, the presentation. So, last financial year was the record year when it comes to revenue and and profit, and it was backed on the basis of a very strong and solid revenue performance as well as a further decline of our next, fuel cost. We maintained the investment grade, that is important. It is not only an outstanding position in the industry, but it was to enable us to continue to tap into a low capital cost financing options for us for new asset deliveries. We have taken a number of decisions needed to, to minimize cash burn. We have shifted focus significantly on managing this business for cash. Over CDR cutting costs to an extent possible and we are, preserving cash to an extent possible. Now, conditions remain challenging, given the cyber restrictions and government imposed restrictions in place, but we're seeing we're seeing that once those decisions are getting used and lifted, did we see, a a significant stronger demand becomes up into and certainly, you know, we know how to stimulate them and we have the business model to do so. So we certainly can be one of the structural winners and beneficiaries of post COVID-nineteen recovery. And we have already started acting on new market opportunities made a number of announcements on the new basis and new routes and just reconfirmed the plans for Abu Dhabi and with those comments, I would hand it over to to your questions. Thank Once your name is being announced, you can ask your question. So once again, that's 1 to ask a question or 2 if you need to cancel. Our first question comes from the line of Mark Simpson Goodbody. Please go ahead. Your line is open. Yes, good morning guys. Two questions. First off, on the ticket sales that you are seeing now, there's any difference to the ancillary component, of that, or is that tracking at sort of similar levels, either in terms of euro or percent of revenue. So just sort of interested in that ticket versus ancillary mix. A second question We've obviously seen the announcement found from the land, now, Pensa, also sort of the more flights coming out of Gatwick. Are we seeing a move into more primary airports in, in Western Europe as the crisis offers more opportunities? I'm wondering if that's an opportunistic or a structural shift that we're seeing in your planning. And then just a clarification, I assume that the revised fleet schedule remains ex Abu Dhabi in terms of, of the planes listed in in that, in that sheet. Okay. Mark, maybe I start. So on the ancillary, the ancillary growth, as you've seen, was 14% for the year. It was 8% for half 2 and 6% for the last quarter, which was already impacted by COVID-nineteen. So we continue to see the same trends in the last couple of weeks of booking. So for now, no change in those numbers. Okay. So with regard to, to Western European, operations, are we structurally shifting, focus off route or not? The remaining focus on Central Eastern Europe. And we expect that the future growth of the business, did it mostly happen in in Eastern Europe. So I would expect that at least 50% if not more of the growth capacity. We will deploy across the markets of Central Eastern Europe. But as we have said before, we would be somewhat opportunistic going west and we would be somewhat opportunistic going east. Good examples, historically, the opening of, of, DCPay, the dilution base and the Vienna base, go invest and now make commitment to the opening of the Visaraburabi going east. The vessel direction is largely motivated by, market consideration opportunities. The Eastern direction would be operated more the regulatory framework changes accessibility of market. So I don't think you should be expecting us to change dramatically or to shift the focus And I would also say that we are very keen on preserving and operating platform at low cost even going to to Western Europe. And clearly, you know, when airports become desperate for capacity, then most of their incumbent carriers contract capacity, this is the time to bargain if you wish and this is the time to secure a cost base, on a longer term sustainable basis that makes an operation of an airport in more effective, even if by design at that point would have been seen as a higher cost operation. So we are very measured on each of these opportunities. So as said, we are not going to fly Western Europe, for the sake of flying Western European. We have no market share targets. We have no county targets. We are totally opportunistic if there is an opportunity that presents itself, which makes sense for demand for competitive dynamics as well as preserving a sustained cost base from our perspective by being a U SCC carrier, we look at it, if not, we won't. So don't worry, we are not changing the fundamentals. We are not shifting the focus of the business. With regard to the fleet composition, or that actually includes Abu Dhabi. So we look at the group as a whole and we look at it seamlessly with the death regard. And, our fleet will continue to grow as, as a percentage here, actually, we will have, 9% larger fleet in terms of aircraft count at the end of the financial year and some of it will go to Abu Dhabi. Some of it will get deployed of course VCPA and this Hungary, but we managed to fleet on a group basis. Okay. Just circling back just on the ancillary component I just want you to clarify. In terms of the the tickets you are sending currently, you are still seeing kind of similar euro levels of ancillary. You're not discounting ancillary to to to help stimulate demands. So ancillary is still key component of your total revenue mix? Yes, I mean, that's correct. I mean, obviously, the volume of bookings in the last a couple of weeks is not very material, but our ancillary growth target is to be half a year to 1 Europe every year. Thank you. Our next question comes from the line of Daniel Rasker of Bernstein Research. Please go ahead. Your line is open. Gentlemen, good morning. 3 for me, please, if I may. Number 1, how how would you view the market disruption currently as an opportunity for further cost reduction on a structural basis? You already kind of commented on the opportunistic opportunities maybe with some of the airports, but where would you see the biggest opportunities for cost reduction outside of your fleet strategy? And then could you elaborate a bit more on your Abu Dhabi plans, kind of how they've changed in the past months? I'm certain you had some intense internal discussions whether to continue or post phoned the project in light of the recent developments and what were the most convincing arguments, to make you continue at the pace you presented today? And then lastly, maybe a little bit more medium term, a short discussion on medium haul and range. How are you thinking about expanding your average range also for the European operations, especially since you will have thought through some of the traditional obstacles like traffic rights or so? For the Abu Dhabi business case, kind of in the medium term, also for the European, to kind of see, could you see longer destinations in bilateral traffic markets as an option for you? Thanks. Okay. On the first question, I think if you look at it, I mean, we were operating in a market that across elements, by and large, was potentially constrained and inflationary. Think you need to almost go line item by line item to, to really understand the dynamics there. So there's a lot of airlines, unfortunately, having to reduce workforce that will play to our benefits, maintenance providers, suppliers, third parties, that pays to our benefit. Obviously, the big one is the commodity. We don't know what it's going to do. But so far, I mean, it's been been a lower cost. So I think you need to look at some of the bigger dynamics, where previously we did have inflation that today may actually be less inflationary than what we saw in the that will definitely play to our benefit. Okay. So I will take your question on the Abu Dhabi matters. But as a matter of fact, I don't think it has even crossed our mind that we should be a deferring the project. So that's not us. I think that's other initiatives, also targeting the UAE or Abu Dhabi. I think the look at Abu Dhabi with the view and perspective that likely the backtracking of the industry and the postgraduation of markets as well as a significant contraction of capacity, you know, actually off our game in Abu Dhabi and creates a bigger opportunity certainly for the start, but even on a longer term basis. So, we approached would not be more like, you know, how much more should we be doing to take advantage of the situation And, and we have been, supported all along, by our local partner, and, you know, we are having, the support and energy of the system in Abu Dhabi. So we are very encouraged by that. And I certainly think that the whole premises that Abu Dhabi has currently confirmed by all parties. I mean, Abu Dhabi is strategically diversifying its economy. We can contribute a lot to, to that diversification and strategy. So I don't think the fundamentals or anything, would have been challenged or questioned here, if, it's quite the opposite. The question was really asked, can we do bigger and quicker than additionally planned? So I think they are very encouraged by that. And and you will see that in a few weeks, we're going to be launching Abu Dhabi, commercially, and they're going to be bringing some very exciting markets, to the, to the franchise of is that, but looking at it from a consumer perspective, we said, Abu Dhabi is going to be completely seamless. I mean, you would not recognize the difference by flying a vis a vis a vis airplane or a vis a vis a vis the UK airplane. So we really remain very integral as a system. To minimize complexities and costs as a result and execute as simple as possible and that was to apply some visceraglodari. So, if anything, the plan has just got enhanced With regard to medium haul services, you know, over the years, our stage ranks has been increasing. I don't think we have any target here, or do we have any ambition here? I think this is just the, the way the end of it, with certain things. And probably it is because that, we have been focused on a center, geography, at the beginning of the, of the airline's existence. And now we are sort of pushing the boundaries east and west. And as a result, our stations is growing, but we don't have a target here. I think we look at the market we look at what consumers wants, where we see demand and we would source the demand with this capacity. It could be that, stations, we continue to increase to some extent. We are not trying to be a long call carrier. We are certainly not trying to be a loan for local carrier, but we are very keen on connecting the dots, bidding over a geographical footprint that need to think about it, we are applying from the Canary Islands, in Spain, to New Soutan, Kazakhstan. So there is a lot of landing between and quite a lot of distance in between, where we think we can join the dots and we can add substance to our network. So that's really our motivation here And with the arrival of the XLRX up in 2023, then we further elaborate on that concept, but we don't we don't have a target here, but likely, you know, we will do more. Yes, I think we have an interest in the bio sector market. But again, that interest is measured against the operating cost environment of the market, our liquidity scale and to be received through, efficient ways of stimulating demand in the places, but yes, we had a change in interest in exporting bilateral opportunities should do operating parameters, be right for the business model that we have. Thank you. Our next question comes from the line of James Hollins of Exane. Please go ahead. Your line is open. Yeah. Hi. Good morning. 2 for me, please. I was just wondering if your, data on the cash burn included, refunds and and also maybe give some detail on what sort of quantum of cash refunds you've been paying out And secondly, I was wondering if you had any interest or would have any interest in in the Lufthansa slots they're giving up at Frank for Munich. And on that point, whether you would go back into Frankfurt, if you get better slots and perhaps why you pulled out of Frankfurt, if you would like to discuss that, that'd be great. Great. So I'll take the first one. So on cash burn, the $90,000,000 includes, all the costs related to to crewing, to maintenance, to fuel, to the hedges. To your question specifically on the refunds, we have refunded around CHF 40,000,000 today, in line with what Joseph told earlier, given that most of the refunds actually more than 2 thirds, go to either rebookings or to risk credits. But with that, we're actually through the very large majority of our refunds. We have, like, $10,000,000 to $15,000,000 to go. So we're fully caught up with that, which we think is really important to restore confidence with our passengers. The impact of those actions, we've been able to largely mitigate with the cost and cash reductions that we've been talking earlier. So that will not impact the material unit burn rates that we've talked about. With regard to pounds of slots, I'll be interested. In principle, yes, we would have an interest, but need to put things in context. I mean, first of all, the magnitude of the remedy, but the EU wants to answer to to offer to the market is that after the remedy, Lufthansa would see it own, so to say 98% of strategic slots at Frankfurt And Munich and they would, give up around 2%. So what kind of that we're playing field is it. So I think we need to make an assessment, whether or not it makes any commercial sense. And certainly, you would need it from a longer term scalability perspective, what it really means. So I would almost say that, it needs it would need to be followed through with the scalability agreement or something similar that we should be able to get success to our to growth at the airport. I think that's issue number 1 issue number 2. Is the cost environment at those airports. If I look at the direct rates available to the market today, I mean, certainly we would have no interest in operating any of these outputs. And the reason we left Frankfurt was the outputs inability to to continue to provide reasonable costs for accessing airport capacity. So we are not going to chase high cost opportunity just because they, you know, they get freed up by airlines. But you know, we look at we look at this opportunity, I think our interest is, is significantly conditioned on scalability and cost If those issues can be addressed effectively, yes, maybe we would further look at it. If not, I think we would just walk away from this. Very clear. Thank you. Thank you. Our next question comes from the line of Jared Castle at UBS. Please go ahead. Your line is open. Thank you, and good morning. 3 if I may. I know, you gave a bit of color on 2 2Q in terms of 60% capacity. I'd just be interested to get a little bit of profile as we move through the month, how that would ramp up. You know, you're starting on 40 and then going to 60 and then going a little bit higher, maybe AC to kind of get to the 60 blended. Secondly, just looking at the appendix, your jet fuel, you've hedged 90%. And historically, you've tended to be more in the 55 60% range. Is that just more opportunistically that you think fuel prices are going up or have you and change the thinking about the fuel hedge itself. And then just overall, I mean, obviously, we've seen airlines get financial aid and, you know, some of the generally accepted structure of the industry has changed. How would you see the industry now in kind of 3, 4 years' time, developing now? Thanks. Let me start with the capacity to be honest, we don't know. And we would be responsible to give you a specific plan here. We're seeing that 60% is achievable based on some empirical evidence. I mean, as said, we have a few markets that have been ramped up already to, to go 60 percent of capacity. And, once restrictions are removed, I mean, clearly, you see demand coming back quite, quite strong. We're actually stronger than what you would believe or what we all would believe, at this point in time, but this is totally down to the discretion of the government. And we don't we don't control that. But we are assuming, here, that throughout summer, we will be facing a much better environment and much more normalized regulatory framework and most of the restrictions would be eased, especially when it comes to, to flight based, quarantine measures, and those sort of issues. But we don't have a specific plan here, but obviously at the front end of the process, it would be less at the back the process, it could be more, but this is really down to these restrictions. And maybe I would take a question how the industry would look 3 years to now. I think the way the industry looks today is almost like about the industry was 15 years ago. The nation state is getting inward again. You know, the state is no longer just the governance body, the body that says the regulatory framework, but they have actually actually interested in their allies. And we know what what it means that, that the playing level food gets distorted completely, there is a lot being done in favor of the national carrier when it comes to commercial terms, when it comes to putting up administrative barriers for, intruder, competitors. So this is not great. I mean, this is a significant step back, maybe a few steps backwards. So that's not gonna do, very well, to the industry. And the real issue here is that given the ease of financial aid, whether this is liquidity or capital provided by governments, essentially that preserves many of inefficiencies, faced by these national carriers. So I mean, look at it, I mean, These categories seem to be the last one to act on labor issues. They seem to be the last one to act on fleet issues as a matter of fact. They are deferring you know, the expansion of new technology, they caught aircraft orders. So they didn't have an aging fleet. A more commuting fleet, to the, to the environment. So many of the issues, leading to, to that financial distress on the difficult circumstances, be it trivial. So I don't think that these A's are achieving much on a structural basis over the long run. Certainly, these airlines will be kept alive. I mean, I would hope that one thing will be to achieve that at one point, because this is best failure's money. There would be some curtailment of management egos, and CEO ambitions of those airlines caught to some extent that you see these airlines expanding all over the place, basing a lot of money, with subsidy airlines, with the acquisition of new markets and hopefully this is going to be contained and hopefully this is going to be somewhat cut back, versus what we have seen in recent years. But structurally, this is not going to improve the state of the industry. And just to close on your question on the jet fuel and any policy changes. I just want to say that the coverage is a result of the contraction of the capacity that we fly rather than us adding in more hedges. In fact, we're quite cautious now, especially, in case there would be an occurrence of a W pattern in demand, we wouldn't want to have to pay what we're currently paying in terms of ineffective hedges. Thank you. Our next question comes from the line of Roshika Sichani of Barclays. Please go ahead. Your line is open. Hi, good morning. Thank you for the answers to your previous questions. A couple of follow ups. Could I get you to, comment on the competitive environment that you'll see particularly in in your Central Eastern European markets. So you know, our airlines in those markets, you know, shrinking by, you know, similar proportions to what we're seeing in Western Europe, it's the same amount of government aid being provided. I'm just interested and some more kind of specific sentiments in European color. On your on your comment earlier about, you know, the booking curve and 50% of bookies coming in the last 10 days, do you think that this is, you know, the the new profile for the rest of the summer? Do you expect that the season will continue to show in a very late booking or do you think that there will be a shift back to a normal, a more normal booking curve, as we progress through the season? Thanks very much. Okay, thank you. Well, with regard to the capacity environment in Central East Europe, I mean, there is that silence, to be honest. I mean, we haven't seen, any significant announcements made by, incumbent carriers in San Francisco, but there is a state anymore that provides these businesses would have been out of business by now. They were very fragile prior to COVID-nineteen. And they've just been losing cash ever since. But it seems to me that, governments are making it a an essential question to, to bail out the airlines and they cannot fail, as a political force to let the national carrier go under the circumstances. So my assumption is that these these airlines will, these survive, at least for some time. But they will have to restructure and they will have to cut capacity to significantly go simply. You know, San Antonio is probably not in a financial position to to flood, you know, uncounted money and capital into our into their airlines via at the same time these countries are struggling with the medical system of the country and all other major distribution systems. So probably, these, these countries will have to be somewhat more measured, will be difficult. But my personal expectation is that the, the income management carriers will be aided by governments, but they will restore significantly lower capacity than what they flew before. You have a bunch of private airlines. I think that, that clock is ticking. They would need to either get access to, to capital from, from governance, which is doubtful, or from private investors, which is doubtful to So I would expect that in the next 5 months or so, you should start seeing some significant number of casualties happening across the region, but also I think that could extend to Western Europe too. When you look at the booking profile, I don't think that this is the new the new black here. You know, clearly, this is an extraordinary outcome under extraordinary circumstances But let's not forget that this booking profile is the result of heavy restrictions imposed on people as these restrictions are going where I think people will slowly but surely move back to normal. So we will see the booking curve expanding towards what used to be normal, but it will take some time, I think, to reach, at the old normality. So I don't know how long this is going to take, but, but certainly, the 50% of revenue coming in at less than days is extraordinary and it's not going to be there forever. Thank you. Our next question comes from the line of Jamie Wrobotham of Japan. Please go ahead. Your line is open. Good morning gents. 3 quick ones from me. Firstly, Joe, would you mind sharing which are the countries where you are back at around 60% of previous levels? Clearly, that's something you're Western European competitors would be delighted to have at this point in time. So I just wondered if you could clarify. Secondly, to what extent are you monitoring developments with Alitalia in the context of your new base at Maltemza. Does the success or not of that base depend a bit on what happens next with Alitalia, or does it not really matter? And thirdly, one for Europe, perhaps, I think I saw an agreement on or around the 8th May with Bock Aviation where we're we're, doing a sale and leaseback of 6 A321neos. Are the terms of those sorts of deals proving to be somewhat less attractive than they were precrisis? Anything you could share would be much appreciated. To the first one, I mean, the best example we have is Bulgaria. I mean, they are at around 65% capacity. Bargadia has been operational throughout the whole period. In the 1st weeks, we were down to around 15, 20%. But now we have ramped down to, to 65%. I'll ask you some restrictions in place, but should those restrictions go away, we're seeing that actually, that you see people looking more to achieve that 65%. And that sort of gives us the proxy So by seeing how the elimination of these pictures, besides the the market demand and everything boils down to these restrictions. I mean, yes, I admit that that is going to be overall less demand because elderly people will be at travel less. I think business travel will, will come down, because of the recession and because of technology, you know, has been figured out for business contact, but, the fundamental desire of people to move and travel, I don't think they'll be courtyard for longer. Even I could argue that because of, of lockdown, you know, that's actually pushes people more to go now because they have been so much within four walls, that they've been a bit pressured and they've been above somewhere. And we are certainly sensing it, when we are looking at demand and the whole demand would be covered. So, with regards to it earlier, I think Aritalia is kind of the joke of the industry for quite long now for probably 10 years or even more. And there is always a new episode to the Aritalia story. First time, I'm a little tired of following it, to be honest, and I not really care what's happening to Alexandria. They have been making a total independent decision based on the market opportunity as it presently said to us, irrespective of what's going to happen to to our Italian. And and, by the way, whatever happens to our Italian today may not spend tomorrow and, you know, maybe something else that that's going to happen to our Natalia next day. So I think we stopped reading that storybook now, which is quite a bit of a fairy tale. And on your last question, I think You're right. If you look at the macro picture for the industry, there's obviously inflationary pressure on rates, but the industry, as I think today is the evidence of that is not a monolithic entity. We are different and we will walk away from terms that are not competitive. Thanks guys. Thank you. Our next question comes from the line of Andrew Rosenberg at HSBC C. Please go ahead. Your line is open. Hello. Morning. Can I ask, firstly, to Europe? What what what are the key issues, on your tray? I mean, obviously, we're we're managing through the crisis, but when you came before it did, and perhaps looking through it, how do you think that you can improve, the performance of the finance function within the company? Possibly related to this, you know, last year, the the cash power was moved over to dollars and that gave us a nice one off kicker to the interest income line, but now interest rates have come down in America. So should we expect that to go against you this year and indeed just what are you thinking about moving cash bars around the world? And then a final question and, forever, my typical one, how is the EU ownership and controlling and and, size And what is the UK within that and how are you thinking about that as as the chaotic Brexit process lumbers on? Yes, so first on the company, the finance function, I think my mission is if you looked at the first slide in the back, is to just continue what this team has been doing in an amazing way. So that that's my key focus, and I wanna keep everybody focused very much on that. And And I think today you've seen that the strategic opportunities that were there before the crisis are still exactly the same strategic opportunities that are out there. It's all about making sure that we can, really, really help the business to drive those as much as we can. So that's really the key focus for the function. And I wouldn't want to change that. I think that was well in place. On the rates, You're right. I mean, we did the rates are coming down. The U. S. Rates are still very attractive. So for the time being, that remains the right decision. And then on the ownership, the non EEA ownership, is a 44% just below 44%, today. So there's definitely a good margin there. And then within that, we have UK at 36%. Sorry, the UK is 36 percent of the ownership plan. I would just add to ownership and control because that's the ownership side it, but if you look at the controller side of it, they have just recomosed the board of directors to be in compliance post Brexit, governance expectations. So we have EEA, a major return on the board and the decision making governance have been adjusted in accordance with the new lines. Okay, thanks. Thank you. Our next question comes from the line of Ross Harvey at Davy. Please go ahead. Your line is open. Thanks, and good morning to both of you. Just a few questions on your fleet plans. Firstly, how much flexibility do you have to adjust the net increases in FY 'twenty one and FY 'twenty two. We'd like to see any changes. Secondly, how many aircraft will go into Wizz Air Abdabi over those 2 years. And finally, how many of the aircraft deliveries do you have financed already either with leases or best? Thanks. Oh, thank you. I mean, maybe just a matter of perspective. So we have been in direct relationship with Airbus for 15 years. And we have amended to deliver the schedule of our contracts more than forty times So I think you need to look at all these contracts and and deliver the schedules as quite an organic thing. That can change and can be adopted and can be accommodated based on the changing environment, And when remanding the phone times, it doesn't necessarily mean that, we are, we have been deferring active dealers actually many times, we have been advancing act of the act of deliveries. So, with that, with that in mind, actually we feel very comfortable with with 21, and, you know, we are also comfortable with 22, I mean, we shall see how the word is going to play out following the coronavirus, what recession impact we're going to be seeing how market consolidation is going to play out and what opportunities we could see as a result of that. But based on what we are seeing today and how we can charge the business, we actually seem quite comfortable with, with the contracted fleet plan, what we have in place with the Airbus. With regard to financing, we are just about to complete a few transactions. I mean, we are completing these as we speak, and that would finance the next, 12 months next 15 aircraft deliveries. So we would be fully financed until mid-twenty 21. Great. Thank you very much. Oh, sorry. And also with our Abu Dhabi and many aircraft do you expect to go in there? No, we had the original launch plan of CXUP and we kind of doubled down on that given the the situation and the opportunities we are seeing. So now we are looking at this at Abu Dhabi more like a 6 set of launch program. I mean, take it like for the 1st 6 months. So this is not on day 1, but kind of 1st 6 months. So that's kind of the magnitude of capacity, what we are what we look at deploying in would obviously, depending how that works out and what is asked, we are seeing, we're going to be evaluating the the growth trajectory going forward. But on a medium, long term basis, we feel quite comfortable with the with the basic proposition of delivering a fleet of 50 aircraft over 10 years. If you kind of look at what we said at Hungary, this last EU airline has achieved, in the 1st 15 years. So basically, it took us 15 years to get to holiday adopt by design. We think that the that the size and scale of the opportunity of Abu Dhabi is very similar to what we have achieved here in the Great. Thank you very much. Thank you. And our next question comes from the line of Najad Alco Tiia from Bank of America. Please go ahead. Your line is open. Good morning, everyone. Three questions for me, please. The first one is you would be adding pretty much the same number of aircraft. How much should we expect in terms of net cash cash outflow this year? Then on the unit cost and unit revenue of Abu Dhabi, are they similar to with UK or Hungary? And the last, maybe, are you seeing, have you been able to renegotiate your leases downwards on the back of COVID 19, please? Thank you. So on the first one, I mean, given that we finance our aircraft with sale and leaseback, I would say there's no capital expenditure on our side. So that doesn't impact our cash flows. And the financials of Abu Dhabi, they without disclosing too much detail by segments or by region, but by and large, They look attractive. They look to be at least in line with what we have for the rest of the network giving the maturity of the market and the projections that we're making. So that's it. And then on your last question on the leases, I would say no, we haven't renegotiated lease terms in general. Because, you know, those obviously contracts here are quite solid. We are working with letters to, to obtain, some some deferrals, but we do not really obviously to pay any cost for that. Just maybe one follow-up on the, on the cash outflow. What are the PDPs? I understand you totally selling this back, but what are the PDPs that you will you will be paying out, this year in fiscal year 'twenty. In fiscal 'twenty? The fiscal year 'twenty 1. Sorry. Okay. I mean, as Joe mentioned, we're one of the biggest clients now of Airbus. So it is important that We have a delivery schedule that works for us. And at the same time, that also works for them. So, as we're a very close partnership, we're making sure that we can work on the proposition that works for both sides on that. Thanks. Basically, if you look at the numbers today, we have around a 600,000,000 B2B line. I will stand with the Airbus, we would be able to see a temporary increase in the, in the coming period, let's say in the next 18 months or so and then we would start sort of resuming to normal, but this is something we are managing with Airbus as we speak. Thank you very much. Thank you. And our final question is from the line of Carolina Dice of Morgan Stanley. Please go ahead. Your line is open. Hi. Good morning. I have three questions. First, could you dispose on the ancillary revenues how much. It's food and beverage. And as a follow-up to that, are you seeing a change in the mix of of ancillary revenues, I'm assuming less food and beverage, beverage, and more prior to booking or bags. And my my final question is when we think about Abu Dhabi, how are you gonna report? Because it's the JV Are we gonna see ASKs and RPKs separated, incorporated as part of voice, or will it be just a align just below net income? Yes. Thank you, Carolina. I'm not sure I fully understood your first question because the line went, really crackly, but I think you were asking about the ancillary revenue. Composition between products going forward. We do not necessarily see a major shift in that for the time being or in in what we can project. So that should be relatively consistent and we hope to grow the full portfolio at similar quite similar rates. And then on your second question, and we will be consolidating, Abu Dhabi into the group numbers, and then there will be a partnership expense line, at the end of it. I mean, you may recall that we had a 70%, 70% interest in Digital Abu Dhabi. And ABQ, our RWW partner has 30% of the economic interest. Perfect. Thank you. Thank you. And as there are no further questions, I'll hand back to our speakers for the closing comments. Thank you. Thank you for your interest. I think you understand that you have a bit of a hard time here to to sort of cost through the jungle and fully understand, what's going on and what you can expect. What I can assure you is that visibility standing firm, in terms of going through the current prices and also standing ready and pretty much in full position to take advantage of what's coming up to COVID 19. And we're seeing that, there will be some degree of market consolidation and beside you to one of the structural winners are coming out of this. And with that, thank you for your attention and thank you for your interest. Bye bye. This now concludes the conference. Thank you all very much for attending. You may now disconnect.