Hello, and welcome to the Wizz Air full year 2020 third quarter results. For the first part of this, all participants will be in listen only mode. After, there'll be a question and answer session. I'd like to remind you this is being recorded. Today I'm pleased to introduce József Váradi, CEO. Please begin.
Good morning, everyone. Thank you for joining this press conference. We are reporting Q3 fiscal 2020 results. This is the October-December quarter, 2019. I think we are reporting very solid set of results in this quarter, kind of similar to previous reports and quarters. Very importantly, we delivered 23% passenger growth in this quarter. We are not only delivering that growth, we also increased unit revenue performance, which is a rare combination, especially at that level of growth. Cost performance was very strong, one of the fundamental drivers of profitability in the period. Ex-fuel costs came down by almost 6% in the quarter. As a result of an improved cost position and improved revenue position, our profitability went up by around EUR 21 million, versus a breakeven result in the previous year.
We continue to expand our business, our network by launching over 100 new routes, what we've already announced for fiscal 2020. We also made a significant announcement to establish Wizz Air Abu Dhabi, a Wizz Air air line subsidiary, in joint venture basically with the Abu Dhabi government. We expect that initiative to take off towards the end of the year in the current calendar year. Also we are raising our guidance from previous EUR 335 million-EUR 350 million band to EUR 350 million-EUR 355 million. This is obviously a reflection of improving performance, what we've already delivered and also our view on what we are seeing for the remainder of the financial year. Moving on to the next slide. This is page three. You can see a summary of the business. You can see that we delivered over 10 million passengers in the quarter.
Our aircraft count went up to 120 aircraft. That's 14 aircraft more than previous year. We kept adding airports to our franchise, by opening 10 new airports. Of course, with the growth of capacity, we also grew the number of employees, and we are nearing 5,000 people in the company. We added one more country to the geography what we cover. Load factor performance was very strong. We kept improving our load factor production, 92.5%, 1.1 percentage points more than a year before. Quite impressively, we increased utilization significantly to nearly 12 hours. That's a 5% improvement, versus the same period last year. Regulatory was unchanged. It's very high level, 99.8%. That's one of the highest in the industry. Importantly, we were able to increase on-time performance by almost two percentage points to 82 points.
If you recall, we have made a number of investments into improving our on-time performance. We created more operational resilience ourselves, and as a result, we were able to improve the operating performance of the airline. With these headlines, I will just turn it over to Ian, who will take us through the financial results.
Morning, everybody. Moving on to slide four. In terms of the financial performance of the three months ended 31st December 2019. As József highlighted, 14 extra aircraft. That created 22% additional seat growth. Load factors were healthily up by 1.1 percentage points to 92.5%. That additional load factor on the seat growth meant passenger growth was a very healthy 23%, sort of way outstripping whatever you're seeing from the competition. A slightly higher stage length, around about 20 km, but ASK growth was around about 22%. In terms of financial numbers, that led to EUR 637.3 million of revenue for the year, with a net profit of EUR 21.4 million for the quarter. When you look at the building blocks of our margin, it's pleasing to see that RASK was up 1.9%. Ex-fuel CASK was an impressive 5.6% lower. Fuel CASK, 5% higher.
We can talk about the guidance that we're giving, which is +7% for the full year, which meant all-in CASK was -2%. A very strong margin performance for those three months. Moving on to slide five. 47% of our revenue in the third quarter came from ancillary, so another very strong quarter in terms of ancillary revenue generation. The changing cabin bag policy, the year-on-year effect essentially ended in November. The third quarter was the last lapping effect. Healthy to see that ancillary revenue per pax was up 11%. Ticket per pax was -6%, but overall revenue per pax was +1.2%. Again, echoing József's comments, that growing at 22%, 23% passenger growth and still delivering a +1.2% in revenue per pax is a very strong performance.
A lot of you will be asking how that's going to be tracking going into the fourth quarter. The way I would model it is ticket revenue will continue around about the minus 4% level. The ancillary continues to be healthy, at around about 5% growth, and certainly the one EUR per pax looks to be fairly straightforward to achieve in the fourth quarter. That'll give us around about a 1% increase in RASK, about 0.5%, 1% increase in RASK in the fourth quarter. A little bit more color in terms of the ancillaries, onto slide six. Again, up three EUR per pax, which is great to see. Up EUR 0.5 came from bags. Again, a trend that is great to see after five or six years of declining bag revenues.
The value add was 2.5, of which around about half of it continues to come from the bundles, half of it continues to come from the priority boarding products. When you look at the chart on the right, it's pleasing to see, yes, we made a decision to remove the large cabin bag over a year ago. You can see the negative drag that had on ancillary per pax, but it was more than compensated once that policy was changed in November 2018. Good to see healthy ancillary revenue generation trending higher. If you model for next year, certainly we feel confident of plus 1 EUR per pax for fiscal 2021. Moving on to the most important slide. Again, József highlighted that ex-fuel CASK was down 5.6%, so nearly 6%. All-in CASK was down 2.1%, which is great for our margins.
In terms of the breakdown of that, generally speaking, I would say a fairly strong performance across the board. Utilization in the quarter was up 5%. When you're looking for the full year, we'll be looking at utilization up 4%, around about 12 and a half hours. Good to get that metric back on track. The fuel CASK, up you can see EUR 0.06 higher. We're guiding 7% increase in fuel CASK for the full year. Half of this is coming from carbon. Of that 7%, 3.5% is coming from carbon costs. Around about 2% is going to come from the U.S. dollar. The U.S. dollar has strengthened. The U.S. dollar strengthened a couple of percent. That's coming through as a headwind on fuel cost. The actual liquid that goes into the aircraft is up around about 1%. That's how you get to the 7%.
Overall, the increased utilization has really helped drive those unit costs low, whether it's staff costs, whether it's airport handling, whether it's depreciation. On the net financing charge, also we benefit from interest income, which I previously highlighted that we hold the majority of our cash now in dollar. It is benefiting from the interest income that's generated on that. Net-net, a very strong performance on the cost side of the equation. Moving on to slide eight. I think it's very helpful just to give you a flavor of what the future holds. The first point is that we have a fantastic aircraft order that's going to be delivering significant cost savings going forward. It's fair to say there are challenges in the supply chain. Actually predicting to an aircraft of delivery is a little bit difficult.
In terms of fiscal 2021, we have negotiated and contracted the delivery schedule. We will be taking a few more A320s. We would prefer to take A321s, but obviously, we need to deliver the seat growth. When modeling for fiscal 2021, I think 15% ASK growth is probably the right number. We would like to grow faster if we can secure more aircraft, but that seems to be getting harder and harder as we get into fiscal 2021. I think one thing I would highlight is that when we step change in the seat count, if you look between fiscal 2021 and 2022, seat count with an A321 and the NEOs goes from 47%- 59%, that will see a significant step change in our ex-fuel CASK, and that will flow through from the margin performance. Moving on to slide nine, so essentially the guidance table.
Not a huge change. Ex-fuel CASK, we're now saying -1% from slightly negative. Slightly negative, basically that's an improvement, I would say. Slightly negative would have been -0.5%. We're saying -1%. Obviously, if we can do better, we will. Essentially, we're pretty much locked in now for the remainder of the financial year. In terms of the revenue per ASK, slightly positive. This has been fairly consistent. József might highlight in terms of the revenue environment, but essentially, the revenue per ASK, what we saw at the beginning of the year seems to have delivered, so we're very pleased with that forecasting. The effective tax rate I've indicated with Wizz Air is slightly higher tax environment. The tax rate is starting to tick up a little bit. With Abu Dhabi, there will be a mitigating effect on that.
In terms of modeling, maybe the step-up in tax rate is not as big as 1% per year, which is what I previously indicated. Effective tax rate for fiscal 2020 is up around 0.5%, so up to close to 5%. Then in terms of the net profit range, yes, we have increased that. The way I would look at it is, we sort of always highlight what could go wrong in the fourth quarter, whether it's disruption costs, whether it's competitive intensity, whether it's fuel spikes, whatever. So far, so good. The first nine months are in the bag. January is practically in the bag. It's a fairly mild winter. From a cost perspective, we feel very confident, and that's given us the confidence to give that fairly tight range. If there is any outperformance, it will come through the revenue side.
We'll have to see how that plays through in February and March. With that guidance table, I'll pass back over to József.
Thank you, Ian. If you take slide 10, you can see the capacity environment, how it's been changing over the years. You clearly can see that the overall capacity environment has become increasingly benign going into fiscal 2020, and we are expecting a similar picture going into fiscal 2021. After Wizz Air, essentially, Wizz Air is delivering most of the growth in Central and Eastern Europe. While we used to be around 25% of the growth system until fiscal 2019, we stepped up because overall capacity came down to around 60%. I think we clearly communicated that we were trying to take advantage of the situation, and we will need to make sure that we are growing more than what we would have planned otherwise.
That's why we booked into capacity growth, and we are now reporting 23% passenger growth in the third quarter, and something similar will come out on the fourth quarter as we are basically reinvesting our improved market position and our improved profitability into further growth, which obviously the business will benefit from going into the next financial year. Going on to page 11, just showing how we are growing this business. As usual, it is a low-risk growth profile, so 86% of the incremental capacity has been put on increasing frequencies of existing routes and joining existing airports, and 14% we are putting up for bringing new airports into the franchise. That profile has been fairly consistent over the years. In terms of markets to grow, Vienna continues to be a very important market from our standpoint, so we are delivering heavy growth.
We are adding four aircraft in fiscal 2020 and fiscal 2021. Poland is a very important market as well. You can see we are adding there a total of six aircraft important over these two years. The Balkan region is also important for growth. We are growing Moldova, we are growing Romania, we are growing Bulgaria, Macedonia. The whole region has been a great source for growth in the current financial year and going into fiscal 2021 as well. We also grow Budapest, Hungary. It is a balanced growth across a number of bases, across a number of countries. As a matter of fact, I would say that the business would be capable of growing more should we have more access to new aircraft, but you all know the industrial situation with regard to new aircraft deliveries. We are somewhat contained.
Having said all of that, most of that issue has been mitigated by extending existing leases of aircraft. We also added one new country to the franchise, that's Armenia, and we are very pleased with the initial reactions of the market there. Moving on to the next slide, please. Wizz Air Abu Dhabi, we are extremely excited about. This is a joint venture investment with one of the flagship investment arms of the Abu Dhabi government, Abu Dhabi Developmental Holding Company. Wizz Air holds 70% of the economic interest, while Abu Dhabi holds 30% of the underlying economic interest. It is a seamless execution of the Wizz business model, so you would not notice any difference between Wizz Air Abu Dhabi and Wizz Air UK or Wizz Air Hungary.
Same brand, same operating system as an airline, I think same service, how it comes across with the passengers. We expect the airline to take off towards the end of the year, around October, November time, subject to legal proceedings and licensing. We believe we are on good track to deliver this initiative. Where we are at right now, we have signed a letter of intent, which we are now turning into firm legal documentations. We have received a government decree that declares Wizz Air Abu Dhabi as the national carrier of the UAE. From a legal perspective, Wizz Air Abu Dhabi will have the same standing as Etihad, Emirates, Air Arabia, or flydubai in the UAE. We would be a national carrier of the UAE.
We are just going through the normal process to make sure that we have the airline up and running. On the one hand, as said, we are going through the documentation processes, and slowly but surely, we will start putting people on the ground in Abu Dhabi, and we will start building up the organization needed to start the airline towards the end of the year. Moving on to the next slide, page 13. Vienna has been very topical in the industry. I mean, it's stayed for decades, nothing happened in Vienna, and all of a sudden everyone shook it up. I think we are now starting seeing the dust settling down. Some airlines have started contracting in a quite significant way. Eurowings, Level, Vueling, easyJet, they are all in contraction mode in Vienna.
There are three airlines that keep pushing the lines, Lauda, Austrian Airlines, and ourselves. We firmly believe that Wizz Air is a structural winner in Vienna. Actually, we are the only airline not losing money in Vienna. We have been able to ramp up operations very quickly to quite a significant volume just over 18- 24 months without losing money while all others are losing their shirt. I mean, some numbers came out on Eurowings and Lauda, so they are losing EUR tens of millions, if not EUR hundreds of millions, while competing in Vienna. The reason we are not losing is that we're seeing that we have a proposition to the market which excels anyone else. We are flying an all A321 fleet. I mean, the A321 is the most economically efficient aircraft type today versus a very mixed old fleet composition of both Lauda and Austrian Airlines.
We gain a lot of structural economic advantage coming through the fleet. As a result, with a significant margin, we are the lowest cost producer in the market in Vienna, and obviously that makes us very resilient from a financial standpoint. That's why all others are losing, we are still breaking even on financial performance, and this is a heavily ramping up business. We ramped up capacity from nothing to 4 million seats just over 18 months by launching 49 routes to 27 countries. That's very significant. We've never done it in a magnitude like this before, and we have been very impressed by the market reaction and the financial results coming out of that.
Also very importantly, we are the lowest emitter among all the airlines in Vienna, and we think that sustainability is an issue this industry needs to face and each of the airlines need to deal with. We are very well-positioned structurally to win Vienna, not only short term, but also the longer run. Moving on to the next slide, page 14. We have communicated this, I think it is worth reinforcing. Wizz Air is the greenest airline of all carriers in Europe, again, with a significant margin. A few months ago, we started reporting our environmental footprint. You can see that we are leading the pack quite a big way versus the entire industry. The more legacy you are as a business, the worse you become with regards to your impact to the environment.
We firmly believe that the industry should take certain actions to immediately affect the environmental footprint, like abandoning business class on short-haul. I was just taking a flight this morning, two things happened on that flight. I was flying Lufthansa from Munich to Toulouse, and business class was vacant. Not a single person. Eight rows were dedicated for business class, and there was not a single person sitting on business class. It was an A319 with around 140 seats, 22 passengers set on the flight. What's the sense of performing a flight like this? What's the sense of giving leg room and empty middle seats for business class? The way you affect the environment with that model is two or three times bigger than an economy class passenger we carry. That was quite a horrific experience from that perspective.
If you look at our environmental performance, actually, we have been on a continuous decline on our footprint, and we are expecting a further 30% CO2 reduction within the decade by 2030. We are taking sustainability beyond environmental concerns. We are heavily focused on our impact on the economies. We have created a number of airports, and we have those airports on the map of aviation, fundamentally affecting the economic prospect, departure prospect, the connectivity prospect of those regions. You can look at regional Poland, regional Romania, and some of the other places. Wizz Air has become the economic engine of those areas. We are very keen on managing people and treat people appropriately.
We are the only airline in Europe non-unionized, the reason that doesn't happen incidentally, it happens because we look after people, and we have a number of initiatives in place to make sure that people are engaged fully, and they see prospects in their life by engaging with Wizz. That brings me to the last slide, page 15, to give you some closing comments. As you can see through the presentation, it was a great quarter for Wizz. We delivered industry-leading growth and margins. Both the revenue side of the equation as well as the unit cost side of the equation performed very strongly. Despite the 23% passenger growth, we were able to improve unit revenues by 2%, and we were able to cut the ex-fuel unit cost by around 6%. As a result, we delivered significant improvement on profitability.
We ended up with EUR 21 million net profit in the quarter. We made an announcement on a highly exciting initiative for Wizz Air Abu Dhabi, which essentially is going to shift the center of our aviation world from west to east, which we think is the right way to go for the long run. We believe that Wizz Air as a model is a unique proposition in the industry to deliver significant shareholder value going forward, given the fleet order on hand, given the effectiveness and efficiency of the business model and the growth prospect of the business going forward. As a result of this strong performance, we are increasing the guidance to EUR 350 million-EUR 355 million. Thank you.
Okay. We will now open up the Q&A session. If you have a question and you haven't already, could you please press zero and then one on your phone keypad now in order to enter the queue. After I announce you, just ask that question. If you find that question has been answered before you can speak, just press zero and then two to cancel. There'll be a brief pause while all the questions are being registered. Our first question is over the line with Mark Simpson at Goodbody. Please go ahead. Your line is open.
Yeah. Morning, guys. Couple of questions. First one on fuel. Your guidance remains at + 7 unit cost. Your run rate for the first nine months is + 5.3, implying + 12.5% in the Q4. I'm assuming there's a carbon cost component on that. Could you just give us a bit more detail around that Q4 unit cost picture? In terms of Vienna, obviously ramp up there. Can you just give us an idea of where total capacity is? I think you were looking to push aircraft in there in order to secure the capacity available. Is that a maturing market in terms of future growth? Finally, early days I know, but what's the trend in terms of pricing into the summer? You've got the market-wide European capacity obviously looking favorable. Can you give us an idea of what you're seeing for your early bookings?
Morning, Mark. On the fuel price, I'll pass the other two questions over to József. Actually, what you're seeing in Q4, the real headwind is the dollar. When you look at the full year, as I highlighted, +7%, 3.5% of that's coming from carbon, 2% of it's coming from dollar, and around about 1%-1.5% of it's coming purely from the fuel price or the hedged fuel price. The strong gains that we made on our FX program would have been felt in the first half. It's the second half where we're less hedged, and we're paying more at the EUR 110, the EUR 112 level. That's really the reason why you're seeing the negative performance in the fourth quarter.
On an annual basis, + 7% as I highlighted, half of it is the carbon, 2% of it is the dollar, and 1.5% of it is the fuel price.
With regard to Vienna capacity, the market is maturing. I'm not sure whether this is because of normal demand trends that mature the market. I think this is more on the base of administrative burden put in place by the airport. Now the airport is getting stuck with managing the growth and accommodating the growth of airlines. There are some barriers coming into play that will limit airlines' ability to grow Vienna. I think we would like to put more growth into Vienna. I don't know whether we can, whether we will have the spots available to do that. With that regard, I think Vienna is going to be a maturing market. Again, I'm not sure that it is maturing on the right basis. It is going to be forced by airport capacity constraints.
With regard to summer bookings, actually, we are very upbeat with what we are seeing so far. Early days, so I wouldn't jump into conclusion. Clearly we see that the overall capacity environment is fairly benign as a result. I think one more important thing is that many of the airlines, including ourselves, react to the shortage of new airframe deliveries by expanding older aircraft in operation. As a result, unit cost in the industry will creep up simply because there are more older aircraft being operated than otherwise planned. I think we are somewhat uniquely positioned in that game because we continue to take quite a number of new airframe deliveries, so we will be able to reduce unit costs going further. As a result, we are simply just becoming more competitive than what we used to be.
Basically, our improved competitiveness and the overall decline of market growth in Central and Eastern Europe, we're seeing that the demand side of the equation is going to improve in summer 2020 versus last summer, we are already seeing the first reflections of that through pricing. We are seeing prices up 5%- 6%. Again, early stage, we don't have a lot of bookings in. What we are seeing, that's better than expected with quite a margin.
That's very helpful. Thanks. Could I just get back to just on the carbon cost? Can you just give us an idea of how far forward you hedge and how you manage that? I think you've been talking about another significant step up in carbon costs for the next fiscal year.
Yeah. In terms of modeling, I would say the carbon bill for fiscal 2021, we're looking at it now, is around about EUR 100 million, EUR 95 million- EUR 100 million. That's a quarter of our profitability, which is pretty shocking. You then have across Europe, a lot of these countries raising carbon taxes or eco taxes, whether it's Germany, Austria, Switzerland, or whatever. Quite where all this money is going, we're not too sure. In fiscal 2021, around about EUR 100 million is the carbon cost. Two things that are happening next year. One is that CORSIA is still a bit of a question mark, so we have to see how that. What CORSIA means is that there's non-EU flights fall into scope. That's an additional step up in costs that may or may not be implemented.
Clearly, there's a little bit of upside if that's not implemented. The carbon costs are tracking higher. In terms of forward hedging, it's fairly similar to our current hedging program. We'll be around about 50% hedge for the next 12 months or for fiscal 2021.
That's great. Thanks.
Around the current price, which is EUR 24, EUR 25.
Yeah.
Okay, we now go to the line of Ross Harvey from Davy Research . Go ahead. Your line is open.
Hi. Two questions from me. The first one is in relation to the slower growth that you spoke about from yourselves and across the industry into FY 2021. How should we think of that in terms of an impact on your own unit costs? Secondly, you've obviously got significant interesting components in the U.S. dollar deposits. What duration is that lent out at, and are you impacted by the lower yield curve versus what it would have been last May when we originally spoke about this? Thanks.
I think with regard to growth and unit costs, we are planning on delivering around 15% growth in fiscal 2021. This is a little lower than what we delivered in the last few years, but it is in line with our long-term growth trajectory. I think we have been always talking about 15% growth, what this business is capable of delivering on a structural basis. We took it simply because we felt that we had more opportunities in the last few years. I think around 15% growth is something that you can model. With regard to unit cost, as said, we have some inflationary pressure on a few items, but given the continuing conversion into A321s and still bringing in quite a number of new aircraft, some of them will be A320s.
We believe that we will continue to deliver a declining unit cost, ex-fuel unit cost performance in fiscal 2021. I think we will be targeting around a percentage point on that. I think that's what we would model in your case.
On the interest income, in absolute terms, $44 million is probably about the level I would use this year and also next year. It's fair to say I think there were two Fed cuts last year, that was half a percent. Essentially we would have felt that, but the balances would be slightly higher. In absolute terms, I would say year-on-year it would be the same at around about $44 million.
Great. Thank you very much.
Okay. The next question comes from the line of Jarrod Castle at UBS. Please go ahead, Jarrod. Your line is open.
Good morning. Obviously, your fleet profile has been changing somewhat over each quarter in terms of the total number of planes, the mix of planes. Two questions related to that. Versus kind of previous expectations of CASK unit cost control, how has that impacted your thinking over the medium term? Secondly, what does this mean for some form of compensation or offset from Airbus? Second question, just the recent news about LOT and Condor, how you think about it from a competitive position, and kind of summer initiatives. Lastly, congratulations on Abu Dhabi. Just looking ahead, in terms of the medium term, would you be looking to do further JVs outside of Europe? Could you look further afield, maybe like Africa or further east? Thanks.
Okay, let me take these questions. With regard to the fleet profile, yes, it is changing because the circumstances are changing and the industry's ability to deliver aircraft is changing. We have been re-costing the order book with Airbus. Two significant impacts of that restructuring. One is that short-term, we will take more A320s, simply because we have access to A320s. Airbus is in better shape with regard to delivering A320s than A321s. Medium longer-term, we have converted all of our A320 positions into A321 positions. What you are seeing is that short-term, we are slowing a little bit on A321 conversion, but for the medium longer-term, so three years and more out, we are picking up the pace on the A321 delivery program. You can see structurally, we're going to be converting 80%-85% of the fleet into A321.
Essentially, Wizz Air will become an A321 airline and not an A320 airline. As we speak today, we are close to 50% of the fleet are flown on A321s, and the A321 is hugely exciting to us because it delivers lower unit cost. So far, we have been able to convert the business very successfully without losing traffic. As a matter of fact, our load factor has been constantly increasing despite the A321 conversion. With regard to compensation with Airbus, we are getting compensation, but I don't think we are driven by this or driven for this. We would love to fly the aircraft, and I think we would be able to make more money by flying passengers than getting compensated by Airbus. This is not exciting.
I think this is some damage control in a way, but our motivation is to get the aircraft and fly the aircraft and grow the franchise of Wizz Air as opposed to getting on compensation. Yes, we are getting some compensation. Don't think of it like this is a significant driver of profitability. We would be making more money by flying the aircraft as opposed to just getting compensated. LOT Condor, I think these are two northern airlines, to be honest. LOT has been on state aid and state subsidy for years. You may recall that they received EUR 400 million of loan from the Polish government, and then Poland reorganized LOT and some of the businesses into a holding company to make sure that they channel profitability into covering LOT's loss-making, and on that basis, they started expanding the business.
The EU is talking about market principles when it comes to state aid, but it does very little to actually adhere countries to that. I mean, just look at the recent trends, the U.K. bailing out Flybe, Germany bailing out Condor, LOT having been supported constantly by the state. Romania is bailing out TAROM. Alitalia is still flying, which is a bit of a joke. I mean, a few years ago, everyone believed that Alitalia was over. It's still flying. I think the EU has kind of melted down on some fundamental principles. That creates some frustration in the system. This is the lost side of it. The Condor side of it is that I don't understand why the German state intervened. Who needs Condor? Germany is a competitive market. The market would have taken care of Condor. The German government decided to step in.
Basically what's happening now is that two kind of nonsense airlines are getting combined. None of them, neither of them is basically capable of surviving on market merit. They both are on state support. I don't think this is going to be a great business, and I don't think this is the rise of a new, formidable structural competitor here. It reminds me to what Swiss was doing a few decades ago and what Etihad was doing over the last three-five years, and you can see the results of each of those. Now, with regard to Abu Dhabi, I think Abu Dhabi is a unique opportunity for Wizz. Structurally, we are very excited about opportunities going further east, and we are more excited going further east than going west. If you look at the west side of Europe, you see infrastructure constraints on airports, on ATC.
You see increasing tax burdens. You see increasing regulatory burdens. A lot of social pressure, flight shaming and social pressure on kind of banning infrastructure development. No new runways, no new infrastructure developments in many areas. At the same time, going east, you see that aviation is still seen as an economic engine, as a driver of society, as a driver of connectivity. We are very excited about some of these opportunities. Just look at a few of them. Abu Dhabi is one thing. We are now the largest international airline in Israel. Five years ago, that market was completely closed. We have a base in Ukraine. We have a base in Georgia. Now we are adding Armenia. There are talks between Ukraine and we that Ukraine may join the European open skies within six months.
We've just made announcements on St. Petersburg as partially opening as a market. Central and Eastern Europe continues to remain the largest source of growth for the business. We have plenty of growth opportunities. At the moment, we are cherry-picking because we don't have enough capacity to take a lot of those growth opportunities. I can't predict exactly what the future brings, but certainly I see more and more initiatives that favor our business model, that favor the growth countries that are coming up in the east. We are certainly monitoring those opportunities, and we are acting on those opportunities. Whether that means we would be doing more JVs, I don't know. I think time will tell us. We are certainly very upbeat about the opportunities arising in the east.
Jarrod, maybe just a couple of other comments on your question on structural cost savings. I think it's fair to say, clearly we would prefer to have the A321. Our fleet delivery schedule has essentially four legs of structural cost savings coming through. Obviously, it's the gauge. We would prefer to have the A321, but the A320 is still a larger aircraft, 186-seater. It's a committed order. In terms of a scarce supply, having an order of that magnitude is a huge asset for Wizz Air. There are other three legs of cost savings, the engine, the GTF. Taking the A320neo is far superior than operating the V2500 powered A320s. The price that we're currently paying for these aircraft is outstanding. It was part of the mega order that we did with the other Indigo Partners of airlines.
In terms of the price of the aircraft, we got incredibly competitive pricing. The last piece is, of course, the financing. Looking at the financing that we're able to achieve today, whether it's with JOLCO structures, whether it's through issuing a bond, whether it's through bilateral debt, are many multiples lower than some of the existing aircraft in our fleet. Structurally, whether it's an A320 or an A321, we see significant structural cost savings coming through our fleet delivery schedule. We would like the A321s, maybe would like to grow a little bit faster, but I don't think there's any other airline out there that has the delivery schedule such as Wizz Air.
Ian, what would you say is the differential in the extra unit cost of the two operating at Wizz?
If we got the A321 rather than A320s, you're probably talking around about 0.75% improvement on extra unit cost. Yes, we're running the budget now. If it was an entire A321 coming into the business, you're probably seeing close to another one minus 1%. That's why I'm sort of drawing your gaze to 2022, 2023, when we're taking a significant amount. Hopefully Airbus will be able to deliver those, and then you will see a real step change.
Okay. Thanks very much.
Thanks.
Okay, we're now over to Michael Kuhn at Société Générale. Please go ahead, Michael. Your line is now open.
Good morning. Three from my side as well. Firstly, on hedging, we obviously saw fuel prices coming down quite substantially over the past couple of days. I wonder whether you could give us a kind of real-time update on where you stand, hedging-wise, for next year and whether you used that opportunity over the last couple of days. Secondly, Ian, you mentioned that the Abu Dhabi entity will help bringing down the tax rate, which suggests it will be a consolidated entity. Maybe you could give us some details on how it will work, your, let's say, the legal minority owner, the economic majority owner will be consolidated, and once it's getting set up, what kind of capital contribution to set up the vehicle do you expect?
Last but not least, with the recent discussions around the coronavirus, obviously you're not directly exposed to China, but do you have any numbers on?
Chinese or Asian passengers in your network, and what impacts, let's say, Asians not coming to Europe anymore, you potentially see. Thank you.
Morning, Michael. On the hedging, I think you'll see on one of the slides in the appendix that in terms of the hedge levels versus fiscal 2020, it's around about 5% better. That's certainly quite a comforting start to the financial year. Yes, we have been hedging. I'm sure other airlines have been hedging, yeah, the recent dip, which had the opportunity to add a little bit of hedging. In terms of the way I would look at it, we're currently tracking on the hedge level versus fiscal 2020 around about a 5% improvement on the pure liquid. Again, the carbon cost is gobbling up some of that gain. Abu Dhabi, I think the way I would probably look at it is with U.K., you need a certain amount of liquidity in the early years.
The beauty about the airline industry is your forward booking tends to finance the business. It doesn't really move the needle. With Wizz Air U.K., we needed EUR 15 million on day one just to appease the regulators that we're a liquid airline. Within a fairly short space of time, that loan was repaid. With Wizz Air Abu Dhabi, we'll be in a fairly similar situation. In terms of looking at the cash and in terms of where that cash is being deployed, you're probably looking around about EUR 25 million-EUR 30 million on day one, but the business itself should start to be able to repay that in fairly short order.
Okay. Maybe on the coronavirus. We don't really have any exposure to the Asian market, certainly not to the Chinese market, and we hardly have any Asian travelers with us. A few here or there. So far, we have not been affected. Certainly, we are not seeing the spread of the virus in our numbers. It may come, and I just looked up what SARS did to our business back in those days, and what we saw at that time was that obviously it became a global epidemic, and it kind of hit the industry for a month, and it was a bit of a fall like a stone in the first month. Then it started recovering and after four months, basically everything went back to normal and the whole event got forgotten.
Probably this is going to be a better-controlled issue, so I would not expect the same kind of reaction of the market as it happened to SARS. So far so good. We are not yet seeing any impact.
Okay, we now go to the line of Robin Byde at Cantor Fitzgerald. Please go ahead, Robin. Your line is now open.
Oh, yeah. Morning, guys. Thank you. Just on the improvements to aircraft utilization, can you talk about any changes that you've made or introduced to help with that performance? Is this change in utilization just about flights and routes? Thank you.
Basically, we addressed some of the seasonality issues. First calendar quarter 2019, we took capacity out quite significantly. That was our way of reacting to increasing input costs like fuel. This time around, as I said, we felt much more comfortable with our ability to perform. We saw incremental profitability coming in. We decided to invest that incremental profitability in the form of winter capacity growth. We deployed a lot more capacity this winter than what we did last winter. That pushed utilization up significantly. I think we just did some fine-tuning of the operating model to make sure that we actually maximize utilization. We also did more kind of festive flying. We flew more in Christmas time, New Year time, those sort of things. It is some refinement. The fundamental move on utilization was winter flying, winter utilization.
Great. Thank you.
Okay. Before going on to the next question, which is from the line of Aymeric J. Verdier at Bank of America, if anybody else has any further questions, please press zero and then one now. Aymeric, over to you.
Good morning, everyone. Just two question from me. First is on RASK, why RASK continue to decline when other LCC have reported higher pricing in December quarter. Secondly is on staff costs, which continue to decline over the quarter. Should we expect this to decline going forward further? Thank you very much.
Sure. On the RASK, I think we were the first airline back in May last year saying that we were seeing a constructive tone. When we look at the future, we look at supply-demand dynamics, and based on sort of history, we can derive where we feel that RASK is going to prevail. We were saying we were seeing a slightly positive RASK environment against all other airlines. As the year played out, other airlines downgraded their profit guidance, and then they flip-flopped towards the end of the year when Thomas Cook went out of business. All of a sudden they had a big shot in the arm in places like Gatwick and Manchester.
Yes, you are seeing a couple of U.K.-based airlines coming out and talking about a surprising bounce back on RASK, but that's more of a function of their inability to forecast and also maybe Thomas Cook going out of business, giving them that shot in the arm. When we look at the full year, the airline industry, there's a lot of volatility in this industry, and I look at the operating plan, it's quite scary how accurate our forecasting and our operating plan was this year. From that respect, there hasn't really been any change from what Wizz Air saw back in May going into the winter. The other thing I would highlight is that if you're an airline and you're growing at 0%- 2%, by definition, your route should be maturing, and you should be printing money.
It doesn't come as a surprise that those airlines that can't deliver any growth are starting to see all the yield increases. We're going to be delivering 26% growth in February. We're going to be delivering 25% growth in March. All the benefits of that money invested in the fourth quarter will come through into the summer. We're certainly setting ourselves up, I think, for a very strong financial 2021. Again, I think you need to be a little bit skeptical and cynical on what's actually been happening over the past 12 months. Essentially, Wizz has basically delivered exactly what we said at the beginning of the year, which I think is pretty impressive on plus 20% growth. In terms of staff costs, what you have seen, there tends to be a little bit of pressure every three years or so.
Last year, we raised up the pilots' salary around about 16%. We highlighted at the beginning of last year, when we set up Wizz Air UK, there was quite a few additional costs coming through the system in terms of out-of-base flying, additional training costs. Now that Wizz Air UK is fully embedded in the organization, I think it's fair to say that the operations team has done a fantastic job in terms of crew rostering, in terms of the crew costs. A321, by definition, you should be seeing a 17% unit cost reduction on crew. Simply put, you need one extra cabin crew member, but you still need two pilots. Structurally, yes, we should always continue to see cost savings coming through because of our fleet, and that should continue. It's fair to say that there is inflationary pressures.
Wage inflation in Central Eastern Europe, certainly for the cabin crew, is ever-present. That does absorb some of these structural savings. Again, we're fairly uniquely placed that we have the tools of the A321 to absorb some of the inflationary pressures. Looking forward to staff costs, I think we should be fairly set for a good performance in the next financial year.
Thank you.
Okay, well, we have time for one final question. That final question of today is over to Jaime Rowbotham at Deutsche Bank. Please go ahead, Jaime. Your line's now open.
Morning, gentlemen. It's actually two questions if you have the time. The first one, can you just remind us what the initial fleet plans are for the Abu Dhabi venture? Is there an extent to which you might be able to smooth the seasonality of trading by shifting aircraft to the Middle East during the European winter season? Secondly, another development in Q3 that hasn't been mentioned yet is the decision to appoint a new CFO. József, could you perhaps fill us in on the thinking behind the management change at Wizz, please? Thanks.
Absolutely. No, thank you. With regards to the Abu Dhabi fleet program, we have taken a few decisions already. Most importantly, that Wizz Air Abu Dhabi will only fly A321neo aircraft. That's a significant position. We're seeing that this is the way to maximize our competitive advantages in the marketplace, and this is how to create the most shareholder value in Abu Dhabi. Initially, we're going to start with just two aircraft, but fairly quickly, we are going to ramp that up subject to market developments and aircraft deliveries. We would be looking at Abu Dhabi as a 50 aircraft opportunity over the first 10 years. If you think about this, Wizz Air Hungary, so Wizz Air's EU arm ramped up the business to around 100 aircraft over 15 years. We're seeing that the Abu Dhabi opportunity is fairly similar to that.
This basically requires us to get to around 50 aircraft in 10 years and hopefully double in the following five years to 200 aircraft. That's kind of the trajectory and path what we are foreseeing for Abu Dhabi. Also, you know that we have an order book on the A321XLRs that will start coming in in 2023. We're seeing that Abu Dhabi is one of the prospective markets for the A321XLR deployment. Simply because the market opportunity is coming with range are very attractive and certainly we will consider Wizz Air Abu Dhabi to be a very strong candidate for the deployment of the A321XLR as well. This is three years down the line, but I think time flies very quickly, so we'll get there sooner than what you would think. With regard to the organization announcement, a few things here.
One is, we have decided to make an investment in the Finance organization. Finance has been kind of left out. If you look at our leadership structure, we have an EVP and two Commercial officers in Commercial. We have an EVP and two officers for Operations, and we had one officer for Finance. We're seeing that because of the diversification of the business, some of the investments what we have made into subsidiaries, and the investments coming up with regard to aircraft, we have a significant cash pile what we need to deal with. We're seeing that we need to take a more serious view on the Finance function, and we feel that that function also has to be brought in line with other functions in the company and in line with what the future requires us to deal with from a Finance standpoint.
You know Ian, he's done a great job. We are very appreciative. Ian is a fairly junior officer. We decided to bring in an EVP to make sure that finance comes in par with the other function. It strengthens the financial disciplines in the business, not only what we have done so far, but also what we are going to do in the future. Also it creates an opportunity for Ian to diversify his career path. I'm personally very excited about his new assignment to become the company's chief investment officer because we will have to invest a lot. We are investing into markets, we are investing into assets, and we have significant liquidity resources we need to deal with. Yeah, I think it's very exciting, and I think Ian himself is very excited about the new assignment we are giving to him.
Ian, you may want to have a few words.
No, absolutely. On the excitement point, absolutely. I was sort of reflecting, I've done 60 month-end close, and those that have done month-end closes, it can be quite a painful process. I've sat and presented to you guys 20, 25 times. That's even pre-IPO. I think when we look at the exciting opportunities ahead, business development is essentially going to be a very important pillar. Being able to sort the business from Abu Dhabi and the U.K. and Wizz Air Hungary, looking at the optimal capital structure, getting the right financing vehicles. It's great that the investment has happened in finance, and I'm looking forward to a change. Make no mistake, I'll still be around causing trouble.
Thanks, guys. Thanks, József, and best of luck, Ian.
Thank you.
Okay, that was the final question we've got time for today. This now concludes our call. Thank you all very much for attending, and you can now disconnect.