Earnings Call: Q2 2020

Nov 13, 2019

Good morning, ladies and gentlemen. Welcome to the Wizz Air All Sierra Results Conference Call. I now hand over to the CEO, Joseph Verdi. Sir, please go ahead. Presentations. So we are reporting the first half of our financial year fiscal 'twenty. We believe that the business delivered very strong set of numbers. A great success, I would even say, beyond our expectations. Be delivered a record net profit of 1,000,000. But essentially when you look at the entire metrics, the financial metrics, we We delivered record numbers. Passenger numbers grew 18% to CHF 22,000,000 in this period. I believe we build the, the most growing airline in the whole industry in Europe with that, growth rate Our cost performance, continue to be very strong. Again, I think we are the only airline in Europe that records, continuous unit cost decline, all of the airlines see unit cost creep. And also we've seen somebody strong revenue performance coming out of the markets. And again, this is against the backdrop of growing capacity or growing passenger numbers by 18%. So It's not only that we grew significantly, but actually we were able to deliver profitable growth in the business. Pretty much on the base of business as usual, we continue to expand our market presence, by launching 76 new routes, in our markets, through 18, 18 new aircraft. It is important to know that By now, we are flying around 50 percent of our seats on A321s. That's a significant operational achievement. The AC 21 is flown on 230 seats. On the plastic and 2 139 seats on the on the Neo, and our average, seat count per aircraft is 202 at the moment, and I think we are flying the most as a single aisle aircraft fleet in Europe certainly. We also enhanced our, sustainability, approach. I mean, clearly, you can see that by far, Visa is the green star line on the base of CO2 emission per passenger kilometer We are emitting 56 grams that's, 15% lower than Ryanair, and around 60%, 70% lower than the legacy carriers. So BA, Air France K and M are in the range of 90 plus grams. So you you can on the numbers. And very importantly, we continue to update and upgrade our fleet and with the induction of of more and more AC21 neos, that number will continue to decrease. And we are expecting and targeting our as COT emission to be down by 30% in 2030. As a result of, these, performance, measures, we are now tightening the range to 335000000 to 350,000,000 euros and essentially, we are pointing at the, top end of the original, guidance. Also, I would know that, And I think we made it clear to the market before that, we are, they investing some of the incremental profitability of the business. We have been recording in the first half into the second half in the form of growing capacity more than, originally intended. We think it's a it's a good thing from a strategic standpoint because, obviously, if you're gonna be gaining maturity or deal and the next financial year, fiscal 2021 and beyond, the business will benefit from that early investment. We are the leading airline, in Central Eastern Europe, certainly, we are the leading autologous carrier in the region. We, carried 22,000,000 passengers in the period, operated 119 aircraft at the end of the period. Today, we have 120 aircraft in in operation. Obviously, with the growth of the business, the entire organization and base setup has been has been growing. I would say that, Century Sierra remains a very intact market. GDPs, continue to grow ahead of the divested European level. Clearly Centric Europe is out in the Western European, economies with, with that regard. If you just look at some numbers on wage inflation, in some countries, we we are seeing wage wage inflation more than 10% in a year that's quite unheard of, versus previous records. But at the same time, that says into disposable income and demand in the marketplace and the business benefits from that for sure. The UK has been a good run, for the company. We are now having 10 aircraft based in the United Kingdom operated by Besad UK. We had a number of an airline in in Luton. And as you can see, we've you know, some expansions in in other, markets in the in in the London area, south and then also ex expanded capacity at London Gatwick Vienna continues to be kind of an interesting place from an industry standpoint, still a battlefield And I think they are the only airline that actually makes financial sense out of the business and beyond everyone else is losing a lot of money And the reason for that is that we are flying a highly efficient a321, brand new free tobacco. And that compares to quite a mix of, and inefficient capacity of pretty much all others, who who who came to the market But clearly, some consolidations have started in Vienna. We are seeing usage at level, Eurowings, contracting now and and and, obviously, based on experience, you know, the places, this is just a matter of time when it does settled settled down and you're gonna see the structure revenues I believe that we said it's going to be a structure of it in Vienna because simply we are the lowest producer in the marketplace. When you look at, the operational metrics of the business, in the reporting period, we delivered a better operation than in previous year. You remember that summer 2018 was a tough period due to our SFE control issues. We were massaged an operational standpoint, as a result of that learning exercise, we beat it more resilient into the operating model this time around And as you can see, actually, we delivered a better quality operation, this, this summer, despite the fact that we carried 18% more passengers We ended up with 25% fewer cancellations in the in the period. Load factors were growing, close to, 95% in the period. Free utilization was growing, almost 13 a half hours and, a regularity, remained unchanged So it was a strong, performance in terms of operations in this period. So with that, I would just hand it over to Ian who gonna take us through the financial numbers and I will take it back for the market reviews after. Morning everybody. So on to Slide 5. Wizz Air had a very strong performance in the first half. As just echoing Jay's comments, we had a very strong commercial performance. The operations team and the flight crew had a very good operational performance. And this will translate into a very strong financial performance. If you look at the left side of the chart, we have 18 more units in terms of aircraft That was actually 14 more aircraft in terms of capacity. That led to 16.6% seat growth, 95% load factor, up 1 percentage point year on year. Led to passenger growth of close to 18%. That's 22,000,000 passengers in the first half. State length also creeped higher at 16,630 Kilometers on average stage length. That translates into an ASK growth of over 18%. Now that's a very fast growth rate when you compare the rest of the industry. So even with this industry leading growth rate, we delivered unit revenues up 2.7%. Our cost performance was also very encouraging. With unit costs down 2.8%. So with, with improving unit revenues and improving unit costs this we saw margin expansion in the first half. I don't think any other airline can boast that. This translated into EUR 372,000,000 or profits for the 1st 6 months. I'd also ask you to glance at the free cash position. Free cash position was up to clear nearly nearly 1,000,000,000 in the first half, driven through the profitability. The ULCC model is a very cash generative machine. Also, we had some improvements in working capital plus a business which is 18% larger in terms of passengers carried. You can see that coming through in terms of the forward booking. So a very, very strong financial position. Moving on to Slide 6, the revenue side. A couple of features I would highlight here. One of the pleasing things is Ancillary now represents 43% of total revenue. This is up year on year last year, it was 37%. We like ancillary revenue. We like very low base fares. We like to see base fares reducing. That stimulates traffic. That is key to our business model. So what's important is we saw a very strong continuation of the ancillary. We saw ancillary up in the first half. But on the trend on the other side, we saw ticket revenue down 5.5%. So again, that's a very good thing for stimulating traffic. Maybe a little bit more color on the ancillary. Those that remember we introduced or changed our cabin bag policy the anniversary of that is November 7th. And what you can see is that we delivered EUR 4.9 in the first half That anniversary effect finishes in November. So we'll still see around about 3 years per PAX in the third quarter on ancillary. What's even more pleasing is in the fourth quarter when you don't have the year on year lapping effect is that we still expect to, to track around about plus 1 year per PAX, which is our are, the average sort of long term goal that we have. One of the other items that's also very pleasing to see is on the bags. I think every time I presented this slide, we've always seen bags for the past 4 years declining. So we actually saw a 0.5 year per PAX increase on the bag revenue. So I think From that perspective, I think we found the right formula and the right balance on value added versus bags. Going on to the most important slide. And again, let's remember that whatever happens in the industry, whether it's competitive battles, whether it's economic downturns. It's the lowest cost producer that we'll always win. So this will always be the key pillar to our business model cost is King. If you look, if you want to look in terms of how that performance come through, you can see that the fuel cost is the largest driver of that, up 0.06. But that was absorbed through the rest of the business. There has been some confusing translations in terms of IFRS 16, how that flows through. We can come on to that later. There's specific questions. But ultimately, as I've always indicated, the impact of IFRS 16 doesn't really move the needle from a unit cost perspective. So it's great to see on unit costs were down 2.8% and we continue to drive that performance. On particular line items, I would generally say that there's nothing unusual, a very strong performance on accruing. Last year, we took up quite a few challenges on ourselves 17 aircraft and 17 weeks, we set up with UK, which required an awful lot of training. So that's ramp up of training and recruitment this year, we didn't see that. So when we look at the first half of this year, a very good operational performance, Joe highlighted in terms of the cancellation rate, but in terms of the utilization, the rosters, the performance by our operation of flight crew was exceptional. Moving on to our fleet schedule, so slide 9. What's very important here, and again, Joe highlighted 50 percent of our seats announced by the A321 aircraft. This is a 20% lower unit cost than the A320s. And as we drive through this seat count, you see structural savings So today, we do have the lowest unit costs out of any of our competitors. And that's a fact. You can run the math. You can do the math. We have the lowest unit costs What's also important when you look at our ownership costs, because of our history, obviously, as a very young company, our ownership costs are significantly higher than the competitors. So as we reflate, as all of our aircraft go back to lessors and we bring in this brand new A321 neos, larger aircraft, more fuel efficient aircraft, finance that investment grade credit ratings, that gap will disappear. And if anything, it will go the other way. So the runway ahead in terms structural cost savings coming through from our fleet can't be comparable to anybody else, certainly in Europe. And then moving on to the guidance slide, no real change. I think if I reflect on the first half, the macro environment is fairly muted. You may see slightly slightly better performance on the fuel price. It's a touchdown. Carbon is a touch up. Dollar is a touch stronger. So when we look at the actual macro effect, hasn't really been any change since we issued guidance back in May. So the fuel CASK essentially unchanged at +7 percent. Capacity growth plus 20 percent, that's essentially 18 in the first half, twenty two percent in the second half. The 2 changes are ex fuel. So we're pointing slightly negative. Just to clarify, that's a positive. So slightly negative means that your CASK is down. Somebody asked me earlier today, does slightly negative mean a positive or negative? Anyway. So maybe I'll clarify that. So that means ex fuel CASK will perform better. The background of that essentially is as we're growing faster in the winter, there's high utilization, more ASKs, you're spreading those fixed costs over more ASKs. So that's why you'll see a slightly negative or better performance going into the 2nd half. Revenue per ASK is slightly positive. This is still positive, but obviously as we're growing faster, I think you're seeing a little bit of self dilution going into the fares. And then an interesting statistic, if you look at the incremental seat growth going into our market, in the winter, we are 50% of that. So in terms of when you look at the fares and saying, what are the supply demand dynamics with air is actually leading the supply charge with 50% of that capacity, which I think is, is the highest we've done so far. Net profit in the range between $335,000,000 to $350,000,000, that's been tightened by $15,000,000. I think the question will be how do you outperform or how do you underperform the outperformance will come through the revenues, as we indicated, we're growing very fast in the second half. So if there is any outperformance, it will come through the revenue environment. And in terms of the bot towards the bottom of the range, it will be those factors that are outside our control. If there was a particularly severe winter. We saw that a couple of years ago. There were two meters of snow in some of our airports that created a lot of disruption. So Again, we're tracking today. We have October in the bag. We've got good visibility on the next 6 weeks. So where we are today, as Joseph highlighted, we're certainly tracking towards the top end of that range. So with that, I'll pass Joe to Joe for the final few slides. So you can see that, 56 percent of our business is actually, in a leading position in terms of local competition in our in our markets. We are the number one local carrier in many of our countries. We are the number 1, caribbean in Luton. I mean, that's significant because is the home of one of our competitors. And and in many of the countries, actually, we are not only the the largest local schedule, but we are the largest sale in a world of all carriers, countries like Hungary, Romania, Bulgaria, Macedonia, Macedonia, etcetera, we are a very significant sector in India, the marketplace. And certainly, the driving force behind, aviation in those countries. But we are also in good position in other markets, being number 2 or number 3. And obviously we are aiming at, pushing the lines forward. I don't think we have a particular, position on what we need to achieve in terms of market share, we are much more eager with regard to stimulating the market and being profitable in the marketplace. We haven't found a better strategy than profitability, but obviously, obviously, that translates into market share one way or another. If you look at where the growth focus has been, in the current year and also somewhat looking ahead into fiscal 2021, we added even a lot of growth in Vienna. I mean Vienna, as you want to is a significant, battlefield that airline has just gone from being half empty to a slot coordinated just over the course of 2 years, which is very significant and it is a dramatic change of status quo happening in the marketplace. It used to be a cozy monopoly of the Lufthansa Group. It is now a very contested market, with significant, competition. As I said before, be seeing that we are positioned to strategically be in this marketplace because we are the lowest cost producer and we are building scale for that business model. We've also invested a lot and we continue to invest in Poland I mean, Poland is our very 1st market. And after some turbulence in the marketplace, you see that we are clearly beginning a crop was and has been a a a very significant development. It's not just the open to market, but we have been scaling it off, Hickory, and, and and to a large scale, ClorCO is another, airport, which is becoming, so coordinated. So it's gonna be hard to grow from, from here. And obviously we do that because we see the prospect of the market very strong, going forward, and we want to contribute to that and we also want to benefit from that. And we've done quite a lot of activities in terms of growth in the, in the Barker region. But I would say that, by and large, we've been growing on every single market we operate from. We are seeing a lot of growth opportunities pretty much everywhere. And we are more constrained on the supply side of the capacity than on the dividend side, of the market. We have already announced, or put into operation 18 aircraft, in the current financial year and into into fiscal 2021. And you know that we are subject to OEMs, delays on, on deliveries. So we all talk about the the boring mocks issues, but believe me that there are issues all over the place with other OEMs at first. So we are not getting contracted deliveries as, we contracted them. So, we are seeing some delays that, nevertheless, you know, we've been finding ways of over copying that that shortage of capacity by using existing aircraft for a longer period of time. So we've been extending leases. And as you see, we've also pushed of on utilization to make sure that we are delivering the growth plan of the of the company. Talking about sustainability, I think it's becoming increasingly topical. In the whole of Europe certainly here in the UK as well. I don't think there is an airline better position for sustainability than bizzare to be honest. I mean, if you look at the way we are affecting the environment, I mean, as said by far, we are, the lowest emitter to the, to the environment. This is the function of the, the air traffic fly. This is the function of the age of the fleet, we operate. It is, the function of the, the efficiency how we operate in terms of seed density, in terms of load factor, what we are delivering and you can see that we are significantly beating the industry. We had a greener's airline in Europe at 56 grams, and that I said before, compares to around 1990 plus on, BA and, and Lufthansa. And I don't think that situation is going to change anytime soon. I mean, this is, reflecting both structural matters of of airlines and and and the way they operate their their their fleet. I would also say that if you look at the operating model of this Air, we are a old economy point to point airline. Just look at business costs. Business costs is one of the diverse products you can bring to the market with regard to environmental impact. I mean, a business class passenger image 2 or 3 times more than an economic class passenger look at connecting traffic compared to point to point when you connect, you're going to be taking 2 flights. So your impact on the environment is going to be at least twice as better. Compared to a, a single flight, a point to point in flight. So we think that it's not only that we are outperforming industry today, but we are very well positioned to benefit from any source of sustainability movements going forward given the business model, but we have no business for us, no connecting flights. We have also looked at and elevated our standing when it comes to affecting the economies, in our markets I mean, obviously, we create a lot of infrastructure for San Antonio, but let's not forget, I mean, it's kind of easy to say from high ground in Western Europe that, we need to start containing the market, in terms of flying and let's push alternative, modes of transportation The penetration level of SDRO is 5 times higher than the penetration level in Central East, Europe. So you guys see the invested of Fly 5 times more. So you have a different starting point, when it comes to, you know, the economic impact and, and and and and the issues around sustainability with that regard. So in emerging markets, I think it is important that you actually set up an infrastructure and you build that infrastructure and you develop that infrastructure and also that gives the optional mobility to, to people before they start constraining themselves. But again, 4 or 5 times, more to go before they get to, to to develop annotation here in, in Western Europe. We have become a growth engine in in most of the countries where we operate from but it's not only, the economic efficiency, but we are delivering to the market, but I think we are also becoming a benchmark in a way of how to conduct business. We very quickly applied supplier code of conduct. We are very strong on anti corruption, policies. And, and we are one of the very few businesses that has never laid people off we've never done through circus and psychos and god knows what. We've never been laying people off and we try to do it like that, and we try to continue it, in that way. We are on growing the business, but we are always growing the business with caution on, on on people, and we wanna make sure that we are a stable and predictable business with, with that regard. And we are a long term, profitably growing business as opposed to jumping ships time to time and just going, a bit of momentum. When you look at the people side of things, which is another very important aspect of sustainability, we have made a lot of investments in two people. We have a part of academics. So we are very keen on on properly training our people and offering them the opportunity to progress their career in the in the company. We have a very strong, ambassador program. So we have people who are the ambassadors of the business, and they display the, the values of the of of the company, the attributes of of people, what what what we stand for, we are much engaged with the new generation of, of talents coming to the market through the VC challenge. So we are reflecting university students, to tackle the challenges we give them and they present themselves to the, to the, to the company. We are also trying to be half full to people in need, through, different, funds available to them. And and very importantly, we put a program in place to, to make sure that we are, building diversity into cockpits as well, maybe the corporate is the wrong word. But we see more and more female pilots coming on board with, with, we'll be sad So we are very cautious. I mean, you know, that we are the only airline non unionized in, in the industry, in Europe, and you imagine that there is a reason for that. And I think the reason is that we actually care about people and we invest into people, and there is no need for finding another way to represent their interest. They can represent their interest inside the company through normal channels. And that brings me to the to the closing remarks. So again, we are delivering $372,000,000 to $72,000,000 net profit on the back of 18% passenger in growth in the first half. That's record on pretty much every, metric but we are reporting to the, to the market. That, was achieved, on the basis of superior cost performance. I mean, I mean, certainly that is one thing we stand out, in the industry. This is our cost performance. And I see no reason why that would change going forward. So we are expecting very strong unit cost performance going forward as well. CE has proven to be a superior market with regard to growth opportunities, and also with regard to delivering those growth opportunities in a profitable way, So we've been able to expand our margins by growing the business 18% in this reporting period. The AC21neo rollout is going to further strengthen our leading position. It will make us more cost efficient and I think it will make us more robust and more competitive in the marketplace relative to peers. As said, from a sustainability perspective, we are the best forming airline, and we'll continue to improve our performance, and we're seeing this is going to give us a structured advantage in the industry, versus our competitors. And that's the result of all those developments. We are tightening the, the range to 3,000,000 to 350,000,000. And as said, we are pointing at the top end of that range. And we are very confident that actually those numbers will get delivered because we, stress tested, the assumptions behind the numbers. Thank you. Operator, with that, we'll switch to Q And A if we may. If you wish to withdraw your question, you may do you may do so by pressing 02 to cancel. Please note that there will be a brief pause while questions are being registered. Thank you. Damian Brewer from RBC. Two questions, please. First of all, as you expanded to some sort of slightly more exciting markets, how do you think about margins? Do you think Is there a view that essentially higher risk but higher reward markets have to have high margins to be interested in Can you talk a little bit more about how you think about that process? And then secondly, sort of turning to longer term, obviously with lease rates where they are, you're building significant cash liquidity, within the business. If you roll the clock for 3 to 4 years and it continues to build. What do you do with that? You would you become a more active participant in consolidation are you still very much so focused on organic growth? When coming to new markets, I think we have always been extremely excited about bringing new markets into the franchise of obese. I mean, we tend to be the carrier of the local flag, wherever we go. I mean, we were pretty much the 1st airline to start flying Russia, Azerbaijan, Kazakhstan, Kazakhstan, we are the only airline, European airline, a local carrier flying to Dubai. At this point in time, we were the first one trumping on Israel when the market opened off from a regulatory perspective and now we are the largest airline in international airline in Israel. So I think this is in our DNA, this is in our blood, and we will continue to do that exploratory kind of way of expanding the market. I would just say that we have to take note of the fact that especially when you try to expand your business eastwards, those opportunities are subject to regulatory discussions and regulatory changes. And with that regard, fairly opportunistic and we don't fully predict, the way how that unfolds and we don't fully control that process. I don't know if that is such an opportunity that something is highly high margin. I mean, we have not been really seeing it to be honest because, what we are seeing is that if we penetrate the market and we show the potential of the market, we basically have 2 choices. If you start milking the market and you start making too much money, you're going to be affecting competition through the market So essentially, we always choose the 2nd avenue that we become self diluting to our staff. So I don't think we have ever made extraordinary net profit, just because of taking a risk with a new market or long term strategic industries to to fully exploit the opportunity. And we want to be not on the basis of monopolizing market opportunities, we want to be on the base of structurally building competitive advantage, that we can compete with our realized and win on that basis. Now with regard to how to use cash 3, 4 years down the line, I mean, by the time we're going to be probably 1,000,000,000, if we do nothing with the be to cash what we have on hand at the moment. I mean, just over the last year, we built over 1,000,000,000 of cash. So we are at a very cash generative as a business which obviously is a good thing. But we kind of say that airlines already have 2 problems in life when they have no money and when they have money, but this is kind of a high quality problem, but we are facing at the moment, but not being funny. I think it is important that we are not only competitive in terms of our costs and the product being to the market, but we are also perceived as formidable by our competitors. I mean, let's not forget. I mean, we are competing with very significant airlines with significant cash reserves on hand. Secondly, we have a huge undertaking and commitment for act of supply. In the future, we have 270 act of to be delivered in the next 7 years. And, and we don't know exactly how we would be financing those aircraft. I mean, so far, we have been relying on the market when we were raising, financing resources, what the market can change and we may have to put in more from our own resource So we just want to make sure that, you know, we have the option available to us. And and thirdly, yes, consolidation is is going to take place. And I think it will continue to offer it in Europe. It's not that predictable as many people would have would have sold, but what is happening and why we are not interested really in buying businesses because that would just create complexity for the business, but we could be interested in buying certain assets. And I mean, clearly, you see that Western Europe is becoming increasingly tight not only, on euro control, but also on accessibility to airports, slots, etcetera. You see the Thomas Cook case recently. So we want to make sure that we can position ourselves versus those consolidation events, and we have sufficient resources to, to mobilize. But again, please don't read it like we are looking at acquisition opportunities. We are we are not going to acquire anyone, but, you know, some platforms may become available, which could be interesting to us. And we did in case of Monarch, and, you know, we could do it in other places. And in other cases, I in the future. But if your question is that earlier looking at, at the moment, to whether or not to pay dividend, the answer is no. Jared Castle from UBS, too, as well. You obviously raised the bottom end of your guidance range, but not the top end, even though very strong first half. So I guess why the caution for 2H, where you're expecting losses now? And then secondly, you spoke about the environment seen a number of airlines say they wanna be CO2 neutral in the next 3 decades. Would would that be something that you'd want to eventually achieve? And related to that, while you kind of highlighted that there's a lot more growth to go on in Eastern Europe, what are you thinking terms of kind of rising environmental taxes in Western Europe, and, you know, the impact from so called flight shaming in terms of destination markets that you're flying to. Okay. Lots of questions. Let me tied to tackle the sustainability matters. I mean, it is clearly a topical, topical line, and I think it's becoming increasingly important. I think it's great when an airline like BA and KLM and Air France say that in 2050, I mean, we're going to be worried that by that time. You know, we will be carbon neutral. As this is such a great commitment. I mean, you should be really giving a lot of credit to that. And let's not forget that we you look at their performance, I mean, these are the worst performing airlines. And if you really look behind, these shoes, these guys are not profitably enough. They don't financial resources is sufficiently investing into technology to change the game. So, yeah, I mean, I can make whatever plan you want, but this business is going even in 200 years from now, but how credibility is. If you look at the current performance of the business, I mean, we beat these guys from left and right in terms of performance And we have 270 act of order on hand, which are the most traditional airlines with regard to environment repayment. They don't So, if there is an airline that is really, really committed to, to sustainability, I mean, that must be called this airline not BA or Air France or KLM and those sort of guys. Think it's a bit of a joke what they are saying. And then again, just look at look at what they are doing, look at their business model, inherently their business model, is environmentally polluting. I mean, flying a lot of business class, flying a lot of connecting passengers. They are affecting the environment in a bad way. And so if you look at their aircraft, they tend to fly smaller aircraft, they tend to fly, the aircraft with lower a load factor, than what we are achieving, and and lower density seating. So on a per passenger basis, the the impact on environment is significantly more than ours. And you see this in the numbers. So if you have flight chain, maybe you should have business flush chain, and you should have connecting flight chain as well. Maybe we need to, we need to think about that. But with with regard to Central Eastern Europe, I mean, I think you need to put, things in perspective because, in Western Europe, roughly around two and a half people or two and a half drivers per capita is the current penetration level and that compares to around 0.5 in Central Eastern Europe. I mean, when you fly 5 times more, I mean, yes, you can preach, but maybe to yourself, opposed to the others. I mean, you need to let those guys to accomplish what you have accomplished in terms of mobility and that ability drugs as the world and full feed themselves before you start, consigning them. I guess it's a bit the same as, you know, how you deal with China in terms of industrial development. But again, putting that aside, I don't think there is a better airline in Brazil being geared for any measures on an environmental impact and sustainability. And maybe maybe on the on the guidance point. I had a couple of questions on this, this today. I think what's what's important to factor in is that we were the only airline back in May raising our profits for the year. So last year, we did 292 or so. And the top of our range was 350. And we've always said we believe long term shareholder value is we want to grow the business as fast as we possibly can to maintain margin performance. So if you think about that, that step up 60,000,000 is a 20% increase in profitability on 20% growth. So, and that's exactly what we should be doing for shareholders. So again, Joe highlighted that we we performed slightly better in the first half. And as a result, we're growing even faster. So in the months of December February, we're growing 26%. So that will have a negative impact on the, on the yield environment, but we're half of the capacity. So when you look at the long term investment, that will all benefit and mature in the following summer. So from a from a business long term perspective, it's exactly the right thing to do. So to if we if we slowed the growth down to 10%, Absolutely, we'd be able to do that. But again, you're then compromising your long term growth profile. So growing at 20%, delivering 20% profit increase, I think is pretty, pretty, pretty punchy by any stretch of the imagination. Hi, good morning. It's Rishika from Barclays. My first question is on the competitive environment. Reiner obviously has a much more reinvigorated strategy in, Central Eastern Europe with the relaunch of buzz. Can you just maybe talk around how you think that might pay out and how it affects yourself. And then secondly, it sounds like you're very confident that the rate of ancillary growth will return to the to a 1 year per passenger once we kind of annualize the, the bag change, the bag policy changes. I guess when that happens and given, you know, there's still continued pressure on the ticket. Can you maybe just talk around how you think about how you're going to manage, you know, the whole revenue kind of unit revenue pool going forward? And are you happy total unit revenues going down in order to kind of still stimulate demand? Thank you. Maybe I would just take the Ryan Ed question. I think what's happening to Ryanair and, you know, I really don't want to comment too much on what competitors are doing, but You know, we used to be competing with 1 operating model called INA and now we are competing with 4 operating models called Ryanair boss, LOTA, and and Morton. I've seen each of them, in our territories in in Santa Monica. I mean, on the one hand, it may achieve lower operating cost in certain areas, especially our labor. I guess that's the primary driver. But at the same time, that creates significant complexities as well. I mean, it is for AOCs to be managed and not not one as as before, and it has its own complexities and it has its own cost to the system. Do I think it's fundamentally going to affect the competitive dynamics in San Antonio. No, I don't think it at all. And look at our business model, we are, very simple. We are very focused, much concentrated on, eliminating all complexities in the system, and we are rolling ODA C21. So if you look at Ryanair, Ryan is operating a fleet of 189C are operating a fleet of 202 seats, and our number keeps going up. The dash will go up as far to some extent be because of the max, induction. But we're we're gonna be operating a much more efficient fleet. And and that's the strategic competitive advantage that we are trying to build. And clearly, Ryan as unit cost has been creeping 20 percent over the last 3 years. Our unit cost has come down a few percentage points in the same period. So So that's why, you know, the pendulum just moved in our favor and now we are the lowest cost producer in the industry. And looking at it going forward, I think we are going to expand on that margin and we will become even more competitive. And on the other, I'd look at it slightly differently and this is how we look at it is we bet on costs. We don't bet on revenue. So we get up every day to make sure that we get structural cost savings as those costs come down, we expect because we're going to be stimulating traffic. We expect all in yields to come down. We don't mind falling yields as long as we maintain margins. So you see a minus 2% on ex fuel CASK and you see a minus 2% on RASK, that's not a bad thing. I think the competition can't compete. Another interesting point is when you go into some of our markets, let's say, at Vienna, when you're delivering unit costs at 20% lower than the competition, we're having pretty strong financial performance when other airlines are hemorrhaging money. So in terms of the outlook for the yields, the drivers that we have is cost making sure we get the cost down, but also the ancillary. So again, trying to drive ancillary penetration. So obviously, we want to get as much ancillaries as we possibly can. And we always want to reinvest that improvement into the fares. So, so I in terms of how this year is going to be looking, I think I highlighted on the ancillary. We did plus 4.9 in the first half that will be around about plus 3% in Q3. In Q4, it'll be around about plus 1%. And we'll hopefully continue to go down that line. Then when you're looking at the ticket side, we were minus 5.5% on the fares. That will probably be 2-4-5 percent. So again, outperformance in the second half through purely from the revenue run. But again, we chase costs because that's what we can control. We don't chase the, the yields. I would just, I would just be it on this, I mean, I'd like us to be reminded that we are a cost driven business, not a revenue driven business. And we're seeing that especially when it comes to economic uncertainty. I think we talk about clouds, in disguise, you know, what could hit the economies and whether or not we're going to be facing a downturn and, you know, the or global issues, China, etcetera, etcetera. But when you are entering into an era economic uncertainties. I think there is no better insurance policy than being the lowest cost producer in the industry and this is what we are really building on. And I think that's where we are gaining advantage versus the market. And that's where we outperformed the industry, in a structure and significant way. And we're seeing that this is the right strategy because in good times in the industry sort of where we won't lose good, but in bad times in the industry, it will start changing very quickly and very dramatically. The lowest cost producer is the one who's going to be the structure of either under those circumstances. And that's what we're going to be. Good morning. Mark Simpson from Goodbody three questions. The unit cost guidance change, for FY 2020. Is that just reflecting accelerated growth or are there any new programs behind that shift? Ticket RASQ2 was obviously notably weaker than Q1. I'm just wondering if there's any specific areas of weakness behind that change And then finally, you use the term slot constraint for a number of airports, in the CE region, the the same case in loosen. I'm just wondering how that kind of directs your growth in the future. Obviously, Ukraine looks exciting. And further down the path, the XLR is going to open up new markets. But obviously, there is some constraint to the airport. So I wonder if you can just talk us through that. Maybe I'll take, the first 2. Unit cost guidance, I would say generally a pretty good performance. So at the beginning of the year, we set ourselves targets on every line item. You know, my job is to make everyone hate me just that little bit, if I do my job well. So in terms of the unit cost, now I think a pretty good performance across curve. But yes, you're right. We accelerated all we're growing a bit faster. So by definition, more ASKs going into the 2nd half, that certainly helps on our unit cost performance. Almost the opposite of last year. So last year where we had a less good first half, what we do is we slowed the growth down. I think with the benefit of hindsight, maybe we wouldn't have tighten the growth that much. But the downside of timing and the growth means you have less ARS case and that's why you saw unit costs up 4% fourth quarter. That's not something we want to repeat. So yes, to your point there really is the growth side, but a generally good cost performance from every department in the organization. On the ticket RASK, there's the Easter effect. So the fact that we had an Easter in the first quarter why it had a strong performance, but Q2, the revenue performance came pretty much bang in line with what our operating plan was. Let me pick the slot matters. Maybe just putting things in context, we have been quite open about the, the strategy what we are pursuing as a business when it comes to, markets and where the priorities go. We continue to focus on San Antonio. We're seeing that San Antonio is the right kind of market for us and we are the right kind of airline Santonese Europe. We are the lowest producer. We have the most ability to stimulate the marketplace and the markets have to be stimulated because of the underpenetrated nature of The constraints have not yet reached the level, in Central Eastern Europe, what you are seeing in investing in Europe. I think, the whole system, the entire value chain has become far more constrained in investing in Europe, and you are seeing ATC, you are seeing many of the airports going into STOOD Coordination. You are seeing tax burdens coming regulations, more and more regulations affecting the market. So I think it's fair to say that 1st Europe is becoming more constrained not only from a slot perspective, but overall from a business perspective. I don't think you are talking about the same level of issues with that regard in St. Louis, you know, you are seeing an airport here and airport there that are more constrained. But overall, as in Central Eastern Europe is an open market and it continues to welcome growth from airlines. And you know, we said that the focus is Central East Europe and we're going to be opportunistic in Western Europe and I think that's how we have been acting But we are also very keen on expanding the business further east, as said, that expansion is check to regulatory discussions and depending on how the regulatory regime, evolves, we would, we would, react on that. But we are very keen on ongoing East. And given the constraints, developing Western Europe, maybe we are increasingly eager and increasingly upbeat about the, the opportunities, East Europe can, can represent to us? And also from a a network design perspective, you know, we are seeing more and more opportunities flying within Central East Europe as opposed to just flying east to west which used to be the core of the network model. So we're still seeing that we have a lot of room to maneuver. So I don't think that we're going to be finding growth opportunities are difficult, in the coming years. I mean, if I look at where we are today in 2019, 2021, actually we would like to deploy more capacity. We're seeing that the opportunities would dictate more capacity to be deployed, but simply we can't because of the constraints coming from the supply side of the equation. So we are not yet running out of ideas. We are not yet running out of growth opportunities. And we're seeing that we, we we share, stay on Century Europe and we share, look at, further opportunities for the business, and that's what we are doing. Take one from the call or call if you may, operator. Sir Ross Harvey from Davy. Please go ahead, sir. Hi, good morning. I've noticed a number of of changes to your expected fleet in the coming years, presumably related to delivery issues. In particular FY 2021 looks as though that we'll see 10 less aircraft. I'm just wondering how does that change your growth profile and your cost profile into that year? And to what degree can you further flex on things like utilization? Thanks. Yes. Hi, Ross. No, you're right. So when you look at Slide 9, I think that the slide you referred to, the last time it was presented, it was 45 versus 134. So you're still seeing a 13 unit increase. I think Joe highlighted this. I think we have a very good relationship with Airbus. Making sure that we get our aircraft when we should get them. You'll see going into we highlighted, last time that going into fiscal 2021, Sorry, what's the technical problem? What was what we highlighted going into, Q1s was that we were having challenges on getting all of the A321 we wanted. As a result, we deferred 4 and took 6 A320 neos. So there are levers within our delivery schedule that we can do. We have been extending some leases. So I think the answer to your question is definitely we'll be able to continue to grow the market level between 15 percent. I mean, that's what we want to be doing. In terms of the cost base, yes, clearly, we would prefer to have the A321neo aircraft. It's a superior aircraft. And it's definitely giving the cost performance, and we're not seeing the yield problems that were highlighted at the beginning of the, you know, the construction of this aircraft. So the A321neo is is by far and away the superior aircraft. Structural cost savings will continue to come through. If we were to get those, you would expect to see ex fuel cash down minus 2, minus 3%, maybe it's more like minus 1 0.5, minus 2%. So certainly, as you look at the structural cost savings coming through the fleet, there'll be some movement, certainly over the next couple of years whilst those delivery schedule gets firmed up from Airbus and their manufacturing capabilities, but I would say it's a short term issue, but we have more more more than enough levers to pull to deliver the C growth. Okay, thanks Ian. We have another question from Andrew Lobbenberg from HSBC. Please go ahead. Hi there. Just following on from Ross's question about the evolution of the fleet plan. Previously, both Joseph and Ian, you are evangelical that you had a really tight deal with Airbus. And that they had really harsh penalties if they mucked you around and changed the delivery timings. And here we are, those delivery timings have changed. So, are you happy with the benefits you're getting? Are we seeing those benefits in the P and L or the cash flow this year or will it sit in the future? And then can I ask about Vienna? Because some of your lovely competitors are explicit about the scale of losses that they are making in in Vienna. So I'll I'll invite you to clarify to us, how much money you're making or losing in Vienna. But in the in the plausible event, you choose not to answer that. Can you help us understand whether the profitability in Vienna is as it evolves. Is that delivering us a tailwind this year to the total company profits as it improves? And how much tailwind might we anticipate for Vienna into next year into fiscal 2021? Okay. Thank you. With regard to the Airbus deal, I mean, obviously, I'm I'm not in a position to disclose the deal exactly. And yes, indeed, there are significant financial penalties should Airbus delayed the deliveries of the aircraft. So yes, we are benefiting from those penalties on the financial side of things, but this is tactical, and that's not our strategic interest is our strategic interest is to to get the supply of capacity to be able to grow the business. That's what our industry is. So yes, that is a one off financial impact, but this is, no think it is that that's significant. I mean, these acts of custody, but not grounded So despite the severity of the, of the financial penalties, but it's not going to change the P and L of the airline in the financial year, but yes, we are getting some money out of it, but I would try to get the aircraft. I mean, we don't need money from Airbus for liquidity purposes. I would, I would make more money by flying the aircraft than just getting compensated for the, for the delay. So with regard to Vienna, again, we've never commented market profitability, and I'm not going to do that. But I think what we have said is still true that we are around the breakeven line, in Vienna while everyone else is losing money. I think the latest commentary from Lufthansa was that likely Ocean Airlines is going to forward back into that again. And I think Ryanair has made some quite explicit numbers available on their losses in Vienna. But look at the underlying issues here. The underlying issues here are that we are on a commodity market, and Vianna being the best place on the planet is still a commodity market when it comes to flying, especially when it comes to low cost level. You have to deliver the cost base in the marketplace vis a vis your competitors to be able to succeed financially. If you look at the Ryanair fleet, I mean, the Ryanair fleet is a very difficult fleet, to get any economic efficiency out of it. I mean, our numbers suggest that Ryanair must be at least 25% higher unit costs than what we are in Vienna. We have a very intact all AC21 fleet, in Vienna, brand new aircraft and the same applies for the rest of our competitors. So we have a huge advantage on the cost side of the equation. So that's why we are able to hold the lines from a financial standpoint, not losing our should and being able to expand our presence in the marketplace, why all others are losing a lot of money see if they don't have the cost base to make money. Would you expect Vienna to get to system average profitability would you aspire for it to beat system average profitability? Oh, yeah, I mean, yeah, I mean, maybe even more because Vienna is going to become constrained. And as a result, basically, supply is going to get constrained versus demand. And if we adopt very quickly, so I mean, you can argue that it is smart at the moment, to push capacity into Vienna at any cost because the revenue will ramp up anyway because no, no growth, will be available, to airlines to, to deliver and as a result, you will recoup your profitability later. But, you know, I want to make sure that, you know, we don't lose money even, even short term and, and, you know, we deploy the economic efficiency and the operational efficiency needed to achieve that. But yes, I mean, I think BN is going to be a very profitable market growing forward, especially taking the constraints into account which are developing now. Yeah, but this is not our business model. I'm just saying that, you know, we might be benefiting from it, but that's not our business model. Okay. That's the, I think the last question. I don't know. I think I've been misinformed. Good morning. Robin Bide from Cantor Fitzgerald. I'm just going back to the slot constraint issue that we discussed earlier, particularly around London. Can you talk a bit about your startup and expansion plans at London South Bend? How's it going? I guess. Right. Well, London is becoming more difficult certainly from a capacity standpoint. So it's not only, I mean, we know that HIFO has been constrained forever. Gatwick became constrained after the wire and now Luton constrained. And we don't know exactly how those constraints will be lifted. We understand that Gatwick Airport is working on a plan they would be essentially launching new airport capacity to the market. We know that Luton is negotiating with the municipality to live of the planning constraints, but we shall see, I mean, we see how dragging such processes can be So we don't have a full visibility when Sings release with that regard. So we opened a 1000. I think so the wood, but early days, I mean, we've just entered the marketplace. South end is certainly kind of a way of escaping from all these constraints in the bigger airports in London. But I'm pretty sure that when it comes to London capacity, the chain unit expansion of airports will play a role. I also think consolidation is going to play a role in honor. So things can get reshuffled, quite significant. I mean, we've seen it with Monarch. We we are now seeing it with with Thomas Cook coming. There might there might be more to come. So we just want to make sure that we are appropriately positioned, to these opportunities whether this is new effort showing up like salesman earlier this is growth of existing airports or it's, sort of distressed capacity being reshuffled to other airlines. We just wanna that we have a look at those opportunities and we can measure ourselves against those opportunities. Okay. And with that, thanks everybody for your time and, goodbye. Thank you. This now concludes our conference call. Thank you all for attending. 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