Earnings Call: Q1 2020

Jul 25, 2019

Hello, and welcome to the Wizz Air 2020 Q1 results call. For the 1st part of today's call, All participants will be in a listen only mode. And afterwards, there will be a question and answer session. Please note that today's conference call is being recorded. I would now like to hand over to Joseph Arardi, CEO of Wizz Air. Please begin. Good morning, everyone. Thank you for attending this conference call. So we are recording Q1, fiscal 'twenty, for this year. As you can see, representation. We are reporting very strong set of, financial numbers and KPIs, for Q1. We are very encouraged also by the summer trading what we are seeing in front of us with regard to the expected performance on Q2. And as a result, we decided to up our capacity plan for the balance of the the financial year. From previously guided 16% to 20% now. So especially what we are doing, we are investing incremental profitability into further growth in the business, which I think is beneficial for the company strategically, especially in light of the overall industrial capacity situation and the act of supply situation, we are simply taking a strategic advantage of the situation. And obviously, whatever investments we are going to make in the on top of the financial year. They mature, for the next financial year, for next summer. So financially, they are going to benefit from, from that. So back to the, we delivered €72,400,000 of net profit. On the back of 20% passenger growth, which recorded as a ramp of 10,400,000. This is a record high ability, record high, passenger numbers. As, you announced, earlier this time that I'm OU, for 20 additional aircraft, AC31, a new XLR aircraft, which we're coming to pay in 2023. Throughout a period of 2 to 3 years, it should enable us to, to collect, more airports, longer flights, within our, within our geographies. I mean, help explain this at the moment. We are, able to fly over for a couple of 6 hours. Next gives us, 2 more hours so we can we can fly up to operate our, they are not necessarily searching for, for new markets, but we are looking at, doing more, you know, in geographical footprint. This also started reporting, our carbon footprint, as you might have noticed, the hazardous level, in the industry with 57.3 grams per passenger kilometer So that's, significantly lower than any of the airlines, certainly much lower, than the, than what the legacy carriers are limiting But importantly, we are reconfirming our profit guidance, for the the whole financial year. So again, what we are doing here is that on the back of the very strong first quarter results and the continuing expense in the second quarter. They actually decided to, to invest into growth, without affecting the profit guidance of the financial year. Moving on to, to page 3. This is our geographic footprint. This is largely unchanged versus what you have seen previously obviously, with the growth of the business, we have, also grown the, the aircraft column. Now we are replacing the fleet of 114 Actoft of which 4 are, AC is relying on, new aircraft, and, and obviously, the key growing, the number of airports, the number of employees, and we keep expanding the reach of the airline in, you know, geography. Moving on to page 4 This is, showing you about announcements we have made already for, deploying new aircraft in fiscal 2020. And let me just make a few comments here. We are, moving quite aggressively in, in Krakow. This is a new market in, in Poland, but we just opened up very quickly, yeah, ramping it to our 2 to 3 aircraft. That's quite a significant size, relative to the, to the scale of the market. We are very pleased with, with dealing with the reaction of of of of consumers, to our services and our network. And we are very encouraged by, by those desires and as an society, we see us doing more in trouble, and very likely you're going to be deploying further capacity in the marketplace. Laundered Newton is an interesting base. Obviously, the whole industry in the UK sort of complaining about Brexit and overcapacity and the big key environment. I think this is a relative to the to the performance of the of the many airlines. As far as we are concerned, you may, want to take note of the fact that throughout the last 2, 3 years, our unit cost, operated on our router network has changed very dramatically, dropped significantly as a result of of gauging AC20s to AC21. And also, nowadays introducing the AC21 neoad of on the on the router, which as a result, I think we have become much more formidable as a competing force in the in the UK. And, and on top of that, obviously, we have a more balanced customer mix in the, in the United Kingdom, a better balance between inbound and outbound traffic that makes us more resilient from, all sorts of Brexit issues. And as a result, we have grown our London business by 50% CSD, since the Brexit vote and we remain upbeat about the prospect of the of the UK market. So if we are to Vienna, another significant growth market for 4 weeks. As you know, there is a blood buzz going on in Vienna. It is also a matter of perspective who is suffering the pain, in the marketplace. They are one of the, growing airlines in Vienna. And we are the only airline which actually delivers financial assistance in the end at this point in time. We have made commentaries on this that, you know, our here, we are breaking on in Vienna, while all other, others are losing a lot of money. And also recently, we started observing physical capacity contractions by airlines, including Erowings, sea, jet, and level. The Barker markets remain a very strong source of growth for the company. As you can see, we continue to allocate a new act of capacity in that vision. This time around, we are building our network in Escoffier, Varna, and, and Krishna in, in, in, in, Georgia, has been maturing very nicely. They are very encouraged by the the results, what we've been able to deliver as a result, we are making a significant investment into the marketplace by essentially doubling the sizable business, that in a busy period, we've already launched 60 new routes for fiscal 2020, but we are a set at the start of the financial year. So more to come in the coming period. Moving on to the next slide. You can see that the way we are delivering growth is very safe. So we are deploying 87 percent of our capacity, in the form of increasing frequencies, on existing routes. Or joining existing airports. But at the same time, it remains important to the air to the business to continue to carry the flag of low cost and prior year new route openings, new market openings. So we wanna make sure that we also deploy capacity for that, purposes. Page 6 is showing our environmental footprint, which we started reporting. Clearly, this plan is the green skyline, in the whole of Europe, our, ecological footprint is, is is far more favorable than any of the other airlines, especially when you, compare the desired performance to, to legacy carriers on a legacy carriers emit 50% more than us on a per centimeter basis. It's not only that we are the green airline, but actually we are getting greener and greener every month. You can see that, our footprint has been much reduced over the period. And if they continue to reduce, going forward, giving the introduction of the new aircraft, which is an environmental environment or even friend of your aircraft carrier than the existing aircraft fleet owner. We continue to report on this, and I think you will see that, this ad is sending out in the European context, we have a very clear target of of actually reducing, our footprint by a third by 2030, which is a 5 more ambitious target that of any of the other airlines that are putting out. Moving on to page 7, this is showing you the the operational performance of the of the business. You may recall that, this time last year, we were hit hard by all sorts of issues in the operating environment, Abid, ABC airport congestions, weather issues clearly, this year, our operating model has become far more resilient, delivering a much improved set of KPIs operational KPIs across the board, especially our flight, regularity improved significantly, in in the period last year, we canceled 145 flights. This year, we only canceled 50 flights, and it is 8 percent more production. We also improved aircraft utilization, quite a bit. Significantly improved our load factor performers. And you can see that somewhat we've been able to improve our on-site performance as well. So the operating environment in Europe remains very challenging. ATC is not improving. As a matter of fact, I think it has further deteriorated. But if you look at our, operating performance. Actually, it has much improved because of the measures we put in place to make sure that we become more resilient against, all these all these issues affecting us. So we have a much better quality, of operations today than what we had, a year ago. And we did not have opportunity and I take you through the numbers. Good morning, everyone. Moving on to page 8. In the first quarter we've had was it had a record Q1, record numbers, passengers, record revenues, record profitability, and we continue to lower our ex fuel CASK even lower. In terms of the capacity and capacity traffic, seat growth was up 18.1%. Lofax, as Joseph highlighted, was up 1.1%, which leads to passenger growth of up 20.1%. We flew slightly further with Stanklink up 1.5 percent. So ASK growth was 19.9 percent or 20 percent ASK growth, which is fairly punchy. When you combine this growth with RASK, which was up 4.6%, we delivered 25.4 percent higher revenues of $691,200,000. If you look at the building blocks of the foot of the page, what you can see is that unit revenue growth outstrips total CASK. So unit revenue growth was up 4.6 percent outstrict total cash growth of 2%, which is driven by the fuel price, which gives us a margin expansion. So what you can see in terms of the net profit margin focusing on the 1 without foreign currency is up 1.8 percentage points. What's very favorable is when you look at the free cash flow, it's important that that the profitability drives cash. So our cash position year on year is up to 1,000,000 in total. We take into account restricted cash. We have 1,640,000,000 of free cash, and we continue to finance our deposits on our aircraft and have over $300,000,000 deposits with Airbus. IFRS 16, the following slide, if we move on to page 9, Now IFRS 16 is a new accounting standard for leasing. I think it's been in the pipeline for 15 years. Many people have been trying to get their heads around this. So this is related to leases. And given that the company's fleet is fully leased, in terms of the reporting, it has a significant impact in the way we present our numbers. But as we've highlighted, the net impact, the direct net impact of IFRS 16, I've indicated in the past, doesn't really move the needle. So if you look at the foot of the first table, the net impact on the first quarter was around about 1,000,000 negative in terms of the restatement. Per year. What IFRS 16 does, maybe I'll draw your attention to essentially four numbers in the middle column. The first number is aircraft rentals. We are no longer aircraft rentals, so that disappears. That's been replaced by 2 items depreciation of 56.6 in financial expense. So essentially the net of those three that really is essentially where we're getting to. There are different line items. The 4th item I would point you to is on the bottom table in terms of the balance sheet. So with, with IFRS 16 opening 1,000,000,000 worth of dollar denominated liabilities onto the balance sheet, This is what's driving the restated foreign currency number. So, April 16, we have adopted a full retrospective method means that we have to apply the transition method as if we've always been applying IFRS 16. So with that 1,000,000,000 liability, as at the beginning of the last financial year where the FX rate was 1.23. So you compare that to the FX rate at the end of the quarter of 1.17. That's what's driving this theoretical unrealized loss of 80,700,000. Now we didn't hedge that because the liability didn't exist. Hence that's why you have this volatility. Going forward, we've highlighted we will be we have changed our treasury strategy or our risk management policy for that exposure has been eliminated from our risk management strategy. So you won't see volatility coming through in Q2, Q3, Q4 and beyond. One item to highlight in Q1, which is specific, there was a, there was a, a $5,000,000 effort loss. A large proportion of that was a function of us moving our leases from with their hungry to with their UK. So 10 leases, will be, aren't being moved over there during the month of May. And that essentially takes those leases from a euro entity into a British pound entity. That was a point in time where British pound weakened by about 4%. And there was an unrealized FX loss on that. As of today, that's fully edged. So when you're looking at the clean number and trying to model Q2, Q3, Q4, we are assuming a neutral FX result for the numbers. So Q1, there was a loss there, which should not be repeated. Moving on to Page 10. This slide, I think, is, a great slide that demonstrates a ULCC business model working at its best. What you can see is that the ticket revenue, is is lower at 4%. This is really driving passenger growth. So the passenger growth is highly is driving the volume, and then we're making it up on the ancillary. So ancillary versus Q1 last year as a percentage of total revenue was 40% is now 45%. So the higher proportion we can get on the ancillary, the better it is for us, because it means we can get lower base ads into the market. We can stimulate stimulate more traffic. Our average ticket price now is EUR 36.5 or it was in the first quarter. One thing to highlight in terms of the 4.6% in RASK around about 3% of that related to Easter. So around about we always say around about 20,000,000 relates to the Easter. So that's about 3% of the remainder of remainder really is around about robust markets. The FX environment was fairly flat, so there's no constant currency, volumes going through. So the strong demand coming through really is driving the other 1.7%. Moving on to 11. So here is a we're sort of coming to the end of the story of changing our cabin policy. Ancillary revenue was 17.7 percent up year on year, a very strong performance pleasing is that the bags is starting to improve. So the check-in bags starting to add on the bags, we continue to decline on the bag revenues for a number of years now. What's driving that ancillary? Obviously now 34% of our customers are taking back related products, whether it's a priority boarding, related products and 30% of our passenger taking seat related products or allocated seat related products. And you believe there's further room to push those. Looking at the chart in terms of development, what should you expect? There are 2, I would say, moments in time that affect this number. In July of last year, well, maybe in November of the prior year, that's when we changed the policy. When you started to see the deterioration from fiscal 2018. We introduced a priority product in July of last year. That was around about therefore, you'll start to see this, this real step up sort of starting to normalize as of July. And the anniversary of the Chembag policy was November 7th. So going beyond that, what I would model is we're back on track to trying to deliver the plus 1 per pack per year. So essentially, what we can see is that the ancillary has recovered very well, we're really pleased with the product. And I think the answer, this is the new carbon dioxide policy, has also paid a very good big part in improving operational performance as well. Last year, we had a lot of challenges with bags, getting them actually on the aircraft slightly during the very busy summer period. Moving on to Page 12, as you know, my favorite slide, disciplined ultra low cost, but actually I would say very structural cost savings continue to come through. Business as usual, I would say, for the first quarter, maybe 3 items to draw to your attention. Fuel prices was up 9% year on year. Of that, 6.7% was the pure liquid for the pure fuel price and the dollar strength and 2.5% year on year. So that's sort of driving the large fuel piece. Start costs, up marginally in, in the first quarter, but this is the tail end, essentially of the, of, a 16% pay rise that we gave pilots right at the beginning of the last financial year. So we we raised the salaries in April and then all of the pilots that came on the books, signed up to that pay rise. In May. So looking forward, we would expect to see with the A321 effect, I. E. 50 extra seats or 59 extra seats was 52 pilots. We should start to see that, that on it, we should start to get negative. So for the full year, we're expecting free CASK to be negative. We'll be slightly up in the first quarter. We have also highlighted maintenance. Utilization was slightly softer or slightly lower in the 4th quarter because we slowed the growth down to protect yields. As a result, certain maintenance events jumped from Q4 into Q1. So there was a major maintenance program making up and getting those aircraft back into condition. Just in time for the busy summer period. So that's sort of why we saw Q1 maintenance numbers increase. I would flag that our aircraft, some of our aircraft gets getting a bit older. We're getting those aircraft back into transition to the lessors. So the one item for the year that I would highlight there'll be a bit of inflationary effects coming on the maintenance. It'll be absorbed by structural cost savings of A321 and cost savings elsewhere in the in the P and L. And in terms of the net financing charge, I think what's important is the with IFRS 16, we're stripping out essentially a third the quarter of our of the costs of the leases and that's putting them to financial expense. So that's why we believe if you want to look at the cost of actually producing seems the cost of producing ASKs is important to take the actual cash cost. Hence, that's why we're now improving the financing of those aircraft. The net fines for those aircraft in our CASK calculations. On Slide 13, we as of yesterday, we have 4 A321 neos in the fleet. We're very happy with these aircraft. As mentioned, these are driving and delivering 60% less fuel burn. Which, which in turn delivers, 15% less CO2. So it's certainly playing into our green footprint. The, the interesting one as well is that the sound of the noise solution coming out of these engines is significantly lower. So airport is getting more favorable taking delivery of these aircraft onto their airports and getting a lot of demand and a lot of requests from airports to take the neos. And flying further. So clearly with less fuel burn, you can potentially get a slightly extra stage length. So as we said before, that the difference between an A321neos and A320 CO is a 20% lower unit cost producing assets. So when flying to an airport like Vienna, where airlines are losing 10, 20% margins when you're flying a321 Neo, that's how Wither is able to break even in year 1. Moving on Slide 14. I would draw your attention to 20 to 21, there has been a lot of publicity about air, the air blast and the ability to do a ray free 21 neos in particular. We mentioned in October last year that we confirmed that our fiscal 2020 schedule. We're not seeing any material delays on our fiscal 2020 schedule. So fiscal 2020 was looking good. Fiscal 2021, a little bit of shuffling around has taken place. The ATB 21 NEO, there are some slight delays coming off, but we've secured that by essentially swapping some of our positions, delivery positions, and we've swapped 4 A321 neos with with 6 A320. Neos. So in terms of securing and maintaining the capacity growth in terms of seats, we have that secure. So looking ahead for the next fiscal 2020 2021. Also, we're looking for the pretty good. So with that, moving on to page 15, not a huge amount has changed since probably in terms of the macro environment is fairly similar to when we came to the market. Back in the back of the end of May. The only two items to change is the capacity growth. So as Joseph highlighted, I'm stepping up the capacity growth predominantly in the second half. To 20%. So when you look at the capacity for the full year, Q1, we delivered 20% ASK growth. Q2 is 18% and then H2 will be looking more like 22 3%. So on a full year, we're going to be delivering 20% growth. Now that's coming at the cost of yields. So when we move down to the RASK line item, we were we were guiding up low single digits, you can say 2 to 3%. But now we're doing slightly positive that's more like in the 1%. This is purely, a decision that we've taken with there is adding 40% of the incremental fleet into the CED in the winter period. So this is purely driven by Wizz Air. So other than that, no real change to any of the items. So the net profit guidance range is, as Joseph highlighted, remains unchanged at the €320,000,000 to €350,000,000 for the full year ended 31st March 2020. So with that, we'll open up for Q And A, please. Thank Our first question comes from the line of Jared Crossley from UBS. Please go ahead. Thanks. See you if I may. Firstly, just to get some extra cost items broadly flat. You increased the capacity guidance. A lot of the ex fuel, cost performance is related to, I guess, financial income expense, but it doesn't seem like there's any kind of operating leverage by by increasing tasks from 60% to 23%. So if you can just give some color on on on why there isn't. Secondly, just just to make sure, I mean, it's not like guidance for lower pricing is all linked to increased capacity. Is is there any, pricing weakness you're seeing in any of your markets? And, you know, in terms of expectations going forward, how how often the pricing's looking. And then, you're right before I kind of point out, carbon, and and how efficient you are. So can you give us an idea of your next carbon cost and how that has evolved, you know, in the last year or 2 and and how we should think about it going forward. Because obviously, the strong growth will partly offset the free allowances that you currently have. Thanks. Okay. Thank you very much. With regard to actually cost. Yeah, I mean, we we might be we might be getting some benefits from the, the increased scale, obviously. And you know, we we should see, but at the same time, you know, that that might also be, negative, negative issue in the, in the marketplace. So that's why we are somewhat somewhat reserved, but obviously, scaling of the business, you know, should be giving the sale average for lower operating cost. With regard to the pricing question, we don't really see, you know, pricing weakness in any of our markets. I mean, that's why we took the decision to up, capacity And that's pretty much across the board. I mean, this is not like we are focused on 1 or 2 markets, but we are focused on a few markets with regard to competing, on a formula basis, but in terms of revenue strengths and man know that with 3, very, very positive, and overall. I mean, let's not forget that The focus of our business is Central East Europe. And Central East Europe is a better quality market with regard to growth than the rest of Europe. I mean, you see GDPs of the of larger countries, Hungary, Poland, Romania, they are all, you know, India in the neighborhood of 3.5% to 4.5% the significant GDP growth guidance, going into 2020. I mean, that's uncomfortably higher than what Western Europe is is producing. And obviously all the GDP growth is translating into a disposable income and this we're spending of consumers. So we have a lot of underlying demand, and that is coincided by our improving relative cost position to the, to the industry. I mean, we have been, updating information 20 to AC 21, they are now already loaded, the AC 20, Avon AC3, neoplrogram. You know, taking or unit cost down relative to the to the industry. So simply we are just more competitive, than what we what we used to get. And as a result, I think our fabric is going to continue to stimulate the market. It's just it's just increasing. And this is what we are reacting to. Maybe on the 3rd question on carbon. Yes, so we were guiding, I guided about 1,000,000 of carbon cost. For the full year. The price today is something like so that's increased to about 1,000,000. That's sort of offset by probably slightly softer fuel prices. So we'll probably make it we'll probably making or saving about $15,000,000 on the fuel price, but we're giving it back on the top. So net net, when you look at the overall fuel CASK, it's unchanged. Thanks very much. And the next question comes from the line of Jamie Robasm from Deutsche Bank. Please go ahead. To what extent is your high capacity growth trying to capitalize on the 7 37 max issues? And what happens when the max comes back in at a later date? Secondly, if we put 77 max operators to one side, your competitors in in some of your key markets and routes are also being some issues on capacity growth. How much of today's decision is just by reaction to that versus, an actual demand improvement. If there are any of those to hear your point about strong demand, but that it would help us really for central and Eastern Europe so far. Are you actually seeing any demand improvements? And finally, you mentioned a few of flight cancellations in the quarter. Is it possible to quantify the benefits you got from that? I just wondered, to what extent the ex fuel CASK progression, what what it would look like without that benefit. Okay, maybe I will start it vigorously with regard to, the ops KPIs and the value they represent to the Azure business. Think the best way to really make first this issue is to look at the regulation 261 exposure, because obviously, if you, us and airline, are obliged to compensate passengers for long delays and cancellations. So when we improve this set of KPIs in operation, stages, especially, and, and improving long delays. Then, you know, we reduced the exposure on on a regulation to fix on. So that is a clear financial benefit. So we are seeking some benefits mean, obviously, the business is growing. So absolute terms, you probably look at the magnitude of around a couple of minutes per quarter So maybe on an annualized basis, you are talking about 1,000,000 to 1,000,000 of improvement. I think that is that is significant. It's not changing the profitability of the business, but I think it's an important period. Back to your, capacity, questions with regard to the, to the Max issue, I don't I don't see that we are, particularly reacting to the, to the next issue, I think they are reacting to the, to the performance of the industry. I mean, partly it is affected by the the mix is true and, and, you know, the supply chain, matter, but you are seeing European Airlines, somewhat wobbling with regard to financial results. I think that in that context, we outperformed the industry and we think that creates an opportunity for us to move strategically. On that opportunity. I mean, each I see when the max comes back and how actually this is going to be taken back. I mean, it's it's a bit like a Brexit issue. It's it's looming out there. We don't know exactly, what's gonna happen, when it's gonna happen, and how it's gonna happen. Mostly safe, I think we'll have a better answer to your question, how we would be reacting to it. I don't think we are overly focused on on this we are just focused on our own business and continue to continue this for ourselves to step change our competitive position. So we are reacting to competition or demand. I think demand is a bit of, perspective to be see that Vienna is probably the best marketplace for that. A lot of airlines completing in Vienna are complaining about you know, overcapacity and, and, the, youth environment. But it is from their perspective, because relative to the course, what they are bringing to the market, they can make financial assess out of what they are doing, but that's not the case for us. You know, we cleared our business from nothing to 5 aircraft over a year and we are breaking even financially. And it is because we are a very focused business, very low cost, and as a result, our ability to stimulate demand is much greater than theirs. And actually, we are so low cost that whatever year we are getting from the market, that should make financial sense to us. That's not the case for them. So it is, you know, a demand issue. It is a low yielding environment for our competitors because they don't have enough space to compete in a commodity business but that's not the case for us. And the next question comes from the line of Mark Simpson from Goodbody. Please go ahead. Good morning. 3 questions. First one, just on work capacity is growing. Obviously, you've identified 13% coming from new airports. Given that those are assumed to be rest time rooted in that start up phase, Can you indicate what the RASK performance is ex those new airports? 2nd question, Vienna. Breakeven now, I'm just wondering what the perceived path is to attending company average margins. How how you see that, developing over the next sort of 12 to 24 months. And then finally, you've talked about, feeding the vacuum as weaker airlines with draw capacity, X Vienna, airlines or markets would you identify within that trend? In terms of RASK, I can take the RASK on it. I think, I think we've said in previous times that, yes, if you look at that slide, The increasing frequency tends to be where you add your yield dilutive. So these are markets where we're actually making more money than we should be. And as a result, we self dilute by adding frequencies. So in terms of the RAS, new airports themselves doesn't necessarily doing now and the rest in terms of the contribution margins. We haven't previously split out the margins we make on all of these. So I can't give you the number to that. Okay. With regard to the situation in Vienna, I think you you have to recognize that there is a process here. You know, everyone jumped on Vienna, but nothing was happening in Vienna for decades. And all of a sudden, everyone joined the party. But now we are seeing kind of 6 to 12 months down the line that's actually a number of airlines, are contracting capacity. So Erowings is contracting. Lead is contracting, leverage contracting So the dust fee is settled down sooner or later. And obviously, this is a process that takes time. As far as we are concerned, we are looking at Vienna, over the horizon of around 3 years to continue to invest. So our objective is not to maximize profitability profitability in Vienna, but to, to give our presence to a skill, you know, that makes strategic sense over longer term. I think this is going to take us 3 years to, together. And once we are there, we will start focusing on, on maturing our margin performance. And so I would guess that, you know, in, you'll be starting a significant margin improvement in ERC, but really you're going to see it over a year or 4 year or 5, margins, what would match up in corporate performance. With regard to the weaker airlines, that's a difficult question because we all know that there is a significant degree of irrationality going into the, the airline industry, even from private investors, but certainly from, state factors so we are seeing, essentially already incumbent national carriers in Central Eastern a struggling King Way, but they are still hanging in. I mean, I look at the Olicario case. I mean, 2 years ago, it was now finally, Oditado has gone well. I mean, these guys are still hanging in and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and and clearly the EU is assisting to to that. So, it is it is it is very hard to predict, what exactly is going to happen we are clearly seeing is that, you know, look for the airlines, is now becoming, national. They are reducing capacity Problem Roman Airlines is reducing capacity. Ukraine International, is, is reducing capacity. So I think as the, the macro environment is haggling up on the airline industry, you see something personal behavior coming in as our market forces, you know, to affect the airline industry. But it's very hard to predict what exactly is going to happen. But again, I think as far as we are concerned, we stand ready. To flee the vacuum. And I think we've demonstrated a few times that whenever something happens in the marketplace, the active advocacy. That's how we did it in the UK. We acted on on the collapse of Monarch. That's how we did it in, Indiana, we acted on, on Air Berlin and fly Nikki, and he would be acting on situations, similar to, to these. Whether they are happy. But we are focused on on building our own business. Our business is not chasing market share. Our business is not necessarily trying to eat into the clicks of of others, oh, businesses to continue to stimulate the marketplace. I mean, they have a lot of markets to, to stimulate, you know, penetration airline penetration is still very low in Sanfonistero. And that's why we are soaking as Ian explained. To keep taking the fair levels down, to be able to reduce the anti value for consumers to come into the franchise and just stimulate the marketplace on that basis. I think airline failures are almost like a sort of side benefits to the business we would react on. But this is not core to our business model. This is not core to our ability to deliver growth in the future. That's great. Very good. Congratulations. Just just to circle back on 1, you talked about the 3 year program in Vienna. Can you just give us an idea of what kind of target for each you have? Do you have 5 now, where do you think that will go? Yeah, I think this should be landing on around 15 to 20 aircraft in the next 3 to 5 years. That's great. I appreciate that. And the next question comes the line of Andrew Lobbenberg from HSBC. Please go ahead. Hi there. Can I ask about the change in fleet composition in in 21? Just wondering whether there is any, compensation, from Airbus because, obviously, when we looked at the q4 at the end of last financial year. There were there were a few funnies looking around in the other other cost line. So anything anything to come from us or indeed anything else that would be peculiar to distort the, the CASK line as we go forward. Then can I ask on ancillaries? As the, you know, the turbo charging drops out into the winter, what matters do you expect to, deliver that run rate of of up 1 year over the passenger per year? What levers have you got to go to keep that pushing along? And then final question on the order of the 321 XLRs. What can I do with them? Okay. Maybe I would prefer the free, matters and and and see them here, answer your questions. But I think I think what we tried to accomplish, for next year, 2020, was first of all, we recognize the industry supply issues. Obviously, obviously, we don't like it. We are very disappointed with what's going on in industry. And clearly, there is an issue with the OEMs, with the liability to supply act of test, for directed. And this is across the board. It is a set of the manufacturers, engine manufacturers, parts suppliers, basically the entire a high chain of the industry. But I think we have a situation here and we try to react to the situation. And when you look at it from an Airbus perspective, there is a distinct difference between the Airbus A321neo assembly line and A6 and to your assembly line. The A6 and to your assembly line is not safer for the purposes of, delivering aircraft, as contacted then the AC 21, delivery line. The AC 21, the liquidity line has become volatile. There are dragging delays, affecting the entire industries. I think many airlines have commented on that. They are now seeing 6 forms delays, etcetera. And simply we just decided that we don't want to take this, the capacity. And it is strategically important for the business to secure capacity to secure extra units to be able to grow the business. That's why we decided to convert for A321, 4, 6 A320neo aircraft because we have the confidence and we've got assured by Airbus that those a CT act of the ability to go on time as contacted, and they and I think they they sufficiently demonstrated that delivery and capacity to do, to do so. So, you know, we got really motivated, by our objective of of bringing the supply of active units into the system, we need to deliver gross run of business. Next to it, we have also made decisions on extending existing leases again to secure supply of capacity. And also, we are looking at further leases, which we might be extending And those would be confirmed, in, in, in the near future. So we are very keen on making sure that we have the supplier capacity, what we need to meet demand and to meet the the needs of the, of the business. So I think that all these measures we put in place to feel, comfortable with our ability to deliver growth. So it was more of a securing, the growth trajectory, securing the supply of capacity to grow as opposed to chasing, compensation. Regard to the extra large, I think maybe the best way to put the extra large is that, if you look at sort of the 2 extremes, of our geographical footprint. So we are flying the UAE, and we are flying the kind of the islands of Spain. We are reaching the Canary Islands, from Budapest, for example, but we are not reaching the Canary Islands from Budapest because that's further east. They are reaching, Dubai from Budapest, but they are not reaching it, from Vienna because that's serverless. The XLR will give us the opportunity to add an additional 2 hours of range, to the fleet. And I know it's kind of exciting to seeing that, well, you know, it is, is it long call, low cost, or is it transatlantic That's not the purpose of the extra lot. The purpose of the extra lot is to, connect the dots within our existing geographies primarily. Of course, we would be looking at new market opportunities as we continue to look at new market opportunities in any event, but the prime objective of the extra large to do more of what they are doing within our existing geographies. And honestly, Ancillary, maybe the best way to demonstrate this. If you look at page 11, If you look at the fourth quarter of fiscal 2018, where we were EUR 2.9 short, that was a full quarter where we didn't have a policy. We compare that to the fourth quarter of fiscal 2019, which was plus call complete. You're seeing a delta of over 1,000,000. What that said is that we were able to compensate for the change in the policy but we also delivered more than euro on everything else. So whether it's conversion, whether it's new products. And I think so, so in terms of how we'll be delivering that that that additional 1 Euro, you know, the team is just working on those other 35 streams of making making them better. Implementing new data testing to make them more effective and improve conversion. So within the turbo charging, as you've described it, there's already that's being bought through on other revenue streams. Okay. That's good. Thank you. Can I just come back, because I mean, Joe made it clear that, you know, you you weren't making the fleet change to to chase compensation? It's it's just your capacity that's completely That is clear. As as as we assess your your unit costs and stuff, with the, with the history of that last Q4 having a very big unusual item in it, are we expecting? Will there be compensation impacts, in in your accounts this year? Compensation tends to happen if an aircraft is not delivered on time. When you're looking 18 months out or even 12 months out, compensation doesn't fit in. So for example, there was a 20 day delay on one aircraft, and I think someone mentioned on one of my calls earlier, in Kyiv for the 20 days, there will be some small amount of compensation, but not the multimillion that you're that you're thinking about. So it answered your question. Will there be compensation we don't know because I spoke last Wednesday, our aircraft are being delivered on time, and we want those aircraft. So in terms of the forecast, the answer is no. There is no meaningful compensation expected in our P and L this year. Okay, thanks. And if the aircraft aren't delivered, which we don't expect, then maybe there's $1,000,000 or $2,000,000 that would pop up. And the next question comes from the line of Ross Harvey from Davy. Please go ahead. Hi, good morning. I have two questions for me. Firstly, in relation to a just one from what degree have you gone to, price, manage some of your products, like, the priority boarding? And secondly, in relation capacity growth. Your winter capacity growth is a fair, correct, is looking around 22%, 23%. Can you just continue at that's definitely into somewhere 20 or a little bit closer towards that 15% longer term guide that you've given? I'll just take the capacity guidance. I'm afraid, maybe we would love to do, you know, 20%, 20% given the strength of the the business and the market conditions going into summer, we won't be able to do that because we won't have the capacity to support it. So I think you you, you know, you will you will be seeing us more like the 15% to be delivered in that period. And on the ANS3, we do I think we did a pretty good job on the ticket in terms of dynamically managing the the fares. A little bit more work to do on the Silly. We there are a number of streams that we are dynamically pricing and that's working quite well, but there's certainly a little bit more room. So in terms of how we're going to continue to improve our ancillary performance, definitely a little bit more dynamic pricing will come into the fall over the next year or 2. And the next question comes from the line of Michael Kuhn from Societe Generale. Please go ahead. Good morning guys. Also 2 or maybe 3 for me. Firstly, on load factor, was this yield you were more, let's say, yield driven in the winter. Now it looks like we have more load sector driven, is that kind of a more short term driven approach? Or have you changed your thinking there? Then listening to your comments on growth, and on on yields, it sounds a bit like you will generate most or even all of your projected, net income growth in the first half the year. Is that correct? And then lastly, a, another follow-up on ancillaries, maybe. With the tough comps in the second half to come now, but you still think you are able to grow at your your run rate or might it be a bit slower in the second half? Thank you. Maybe I would take the answer to the load factor, the lead material. I think with regard to the answer is yes, indeed, the pumps will be changed going into the second half. I think that we have already set consistently we are targeting €1,000,000, but, you may end up with something between half a euro to €2,000,000. So it'll be it's quite hard. I mean, if you see the numbers now, we are above 30 rows of passengers. We are 45% unless there is, of the total of the total revenue. So I think we've done, fairly well, to push Acillaries. It's a service. I know this is getting harder and harder. I don't think that is a feeling, but certainly you may expect something half 0 to by 0. Although I would caution you, and, and, and, and, and, and, and, please don't take ancillaries like, you know, this is revenue coming into the into the bottom line because, a significant portion of asset revenues cannibalize ticket, ticket revenues. But as ES said, strategically, all the interest is actually to try to forward everything into our service at the expense of 1st, you know, seeing lower interest is a good thing for the business because that improves our ability to, to stimulate the marketplace. Obviously, you need to compensate that to increase our best revenues. So this is the model we are in. So our strategic this is to see lower ticket cost with more revenue production. I think that's the model that we're going to continue to drive in the in the future. But with regard to load factor, I think we've always been, more load factor active and used, I don't think, we are as bad as some of our competitors like Ryan and I think we've been, overall, you know, focus on optimizing the total revenues. But we are certainly skewed towards, getting the act of, field. It's saying that the most expensive state is PMTC. So we are very active with driving, driving load factors. I mean, if you look at it, our load factor performance in the winter period is not significantly inferior to the load factor performance of summer. I mean, obviously, you know, given the seasonality of the of the European airline business, you know, you see, you know, significantly greater demands in summer time than in winter time, what we could need to focus on on film planes and achieving hydroelectricity in winter time as well. And the year is the outcome of the, of the process. I don't think that the approach has changed, fundamentally. And, you know, we we point to you to push our sector, but at the same time, you know, we are seeing that pretty sophisticated on year to managing capacity, probably one of the one of the better airlines globally with that regard. We have a proprietary system to to do that. And a lot of human and artificial intelligence going into this. So we are not taking it lightly. About primary. We are driving those factors. And on the, net income, is it right to assume it's it's gonna grow mostly in the in the first half and second half should be pretty much, pretty much neutral year on year? Yes, I mean, fairly consistent with is we make all our money in the summer and we invest it in the winter. So try not to try not to lose in the winter. So no no change to that profile. And the next question comes from the line of Catherine Bennett from Numis. Please go ahead. Hi. Good morning, everyone. Three very brief ones, I think. If that's okay, please. Firstly, could you just talk a little bit more, just about the FY21 expectations? I know you just mentioned that Obviously, you would like to go faster than 15% that you see summer 2020 as being a sort of 15% growth. Just trying to tally that with the fleet guidance you've given this morning, which shows aircraft, growth of sort of more like 18%. And obviously, within that mix, you're you are skewing towards the larger aircraft, even though you've changed the mix from the a321s into the 2020s slightly. We just whether you could talk about that a little bit more and clearly, with what's going on with the Max has as previously mentioned, I can see there's a cheaper rationale for going faster on that 15% next year. Secondly, you just comment on forward bookings, and some question you're seeing for q 2 and maybe q 3, I know it's early days, but just what before booking profile is doing year on year? Obviously, some crusters, particularly Western European focused ones are suffering a little bit on that. And then specifically on unionization, I know it's something that gets asked every call. Is whether you've seen any any changes to that, clearly, there's a few headlines in some of your competitors as we enter the summer months, across Western Europe. Thanks. Okay. Well, thank you. With regard to the, to the gross profile going into fiscal 2021, but we certainly, update the, the fleet program as well as we are now looking at, extending existing existing uses, to make sure that we protect our capacity plan, for the period taking the industry through into a contract in within months or so, we should be able to give you a proper update. But, you know, for the purposes of of modeling, we are looking at 15 to 17% capacity growth in fiscal 2021. With regard to forward bookings, So far so good. I mean, you know, this is why we are making the decision, evolving capacity for the balance of the financial year because we are confident but we have delivered in the same financial years a year and what we are seeing in front of us, as far as visibility, permits us to, to conclude anything. So so far, so good. We are, you know, ahead of of last year, and this is highly reactive, with capacity, adjustment. And, with regard to your, union matter, no change. I mean, I would, I would just want to emphasize the, The point is that I think we are a significantly different, company culture than than any of the other other airlines. I think we had been always working to talk, internally. We have not tried to alienate certain workforces inside the company. We have been building the spirit of being a team and we are, altogether into this. So we lock together and we try together, kind of, kind of spirit. We are very active to engage with the crew with pilots and, and cabin crew, we visit them on a very frequent basis. We have a 3 person council that's a a fairly newly institutionalized format, you know, heading the dialogue, to understand issues and opportunities and and to make sure that there is sufficient focus on all sides, to get things done and act on act on matters. So it is a very different culture, versus what what the others have. And as a result, this is not a question in the company. I think the question in the company is how to create a proposition of of beginning, for, for all parties. So how to create more shareholder value, how to become, more competitive, which think it's a little bit important for the long run. You know, we are directly going because we create a lot of opportunities. I think that's important, you know, for people's carrier. That they see the prospect of growth and they see the prospect of their individual eyes. In the industry. And, and I think we've been doing a fairly good job, with regard to delivering this and we remain very focused on, on the organization, on the culture and the dialogue with the people. So we invest a lot into our people and we do it proactively. So we are not to do that, but we to do it proactively. And that's not been naive. I mean, you know, we are not immune from the market. So if the market moves, for example on pay, you know, re remove on pay. I mean, Ian said that, you know, a good year ago, we decided to, to go with the market significantly increase the pay of, of pilots and, and, you know, should we see the market moving? Of course, it would be pretty much in the forefront of, of implementing, skill connections. So it's just, it's just, you know, a very different, a very proactive culture of what we have and you are able to stay like that and we want to continue to be the company on that basis. And that's great. Thank you. And just a quick follow-up, I think you mentioned this as last time, people count. So I just wondered, has that bought about any prizes, the the comments or the the issues that they've been addressable? Yeah, I mean, you know, this is a, an institution that is trying to bring various parties to the same table. The people console functions as such that, you know, people from different countries I represented that people from different functions, office, group, either it's coming through, etcetera, I represented that. You know, management is involved, in that And and, you know, that's an awkward forum. So this is not framed, for certain issues. So, you know, people can bring in whatever they wanna bring in and be discussed they try to narrow down, matters that actually make a real difference to, to people and they try to act on those. It's it's efficiently, you know, we're on process. So we meet, we meet very, very frequently on on on on on this matter. So I think, it is, it is a bad working, a function. Obviously, we're gonna make sure that you know, everybody's satisfied with the outcomes of that, of the process. So, yeah, I think we are on good track and, we continue to enhance the process and also the productivity of the outcomes. And thanks again. We're running out of time. So maybe one more question. Great. That draws us to close. Thanks everyone for your interest and thanks for calling in your questions and, have a good summer. This concludes our conference call. Thank you all for attending. You may now disconnect your lines.