Thanks for coming to this meeting. Believe it or not, we are actually reporting a record half year in H1. We believe, importantly, that Wizz Air remains a structural winner in the industry. We are operating mostly from Central and Eastern Europe. Central and Eastern Europe gives us a disproportionate growth opportunity given the GDP growth and the market stimulus that our business model can apply in that market context. We are becoming the undisputed cost leader in the industry, and we are going to start seeing significant economic benefits flowing through the new aircraft delivery program, but we are going to start in a couple of months. Clearly, we have been encountering increasing fuel costs in the business. As you can see, we actually have reacted to that by trimming capacity.
Also we have made certain changes to our revenue production. All those have implied in an increasing year for the business going into the second half of the financial year. We went through, I don't think this is only down to this is industrial. We went through a very difficult summer from an operational standpoint. Now we are seeing operations being normalized. We are certainly back on track to an extent that in October and early November, our operational KPIs are now exceeding those of 2017. Our strong balance sheet with investment grade gave us success to lower-cost capital. We certainly can derive those benefits when it comes to aircraft financing. It is especially beneficial going into FY 2020, when we will start taking a bunch of A321neo aircraft.
Passenger number is up 20%, revenue is up 20%, load factor up 1%. Actually net profit for the reporting period is up over 1%. Obviously we are seeing another phase of consolidation in the marketplace resulting from high fuel prices, which I think is a good thing, especially from a Wizz Air perspective. All that consolidation in the European airline space is benefiting Wizz Air directly or indirectly. Certainly, it strengthens the LCC business model. It gives further opportunities for expanding our reach in the market. Nevertheless, taking all factors into account, we are guiding the market from a previous EUR 310 million-EUR 340 million to EUR 270 million-EUR 300 million. Maybe a little bit of color to the numbers.
If we see everything actually manifesting in a way as we are seeing them today, we think we're going to be landing at the upper end of the range. If a perfect storm develops, we may be pushed lower than that. I think we are coming with a guidance which we don't want to explain twice to the market. Looking at the first half, Wizz Air is the number one low-cost carrier in Central and Eastern Europe. We carried close to 19 million passengers, as I said, 30% more than a year before. Our fleet was grown to 104 aircraft. We newly opened 100 new routes in this period. We remain very active in the marketplace. We keep innovating the market. We keep bringing new routes, new opportunities to customers to enjoy low fares of Wizz Air.
Operationally, we delivered a lot of growth in this period. You may recall that we had a scheme of 17 aircraft over 17 weeks. On the one hand, that was stretchy from an implementation standpoint, but at the same time, that gave a lot of ground to deliver more capacity to the marketplace. All in all, if you look at the major KPIs, actually, the business was very intact, very high utilization, increasing load factor, and we maintained regularity of flights. The one KPI where we suffered severely was punctuality, and that was resulting from the difficult operating environment in the summer period. Talking about that operating environment, you can see that on-time performance dropped significantly in the summer months. Lots of ATC issues, ATC strikes, ATC slot constraints, a lot of congestion at airports. Those were the external factors.
Also internally, I think we were stretching ourselves with the 17 aircraft, 17 weeks concept, and also that coincided with the ramp-up of Wizz Air UK, especially from a training product perspective. That created an additional layer of distress on the system. You can look at the cancellation side of the equation. Clearly, the summer was very disrupted. As a result, we suffered long delays and kind of new heights on cancellations. We have been putting a number of actions in place to make sure that we are not falling into the same trap as far as we are concerned, or what we can control going into next summer. We are looking at the schedule design. We are looking at spare capacity to be more capable of recovering from operational disruptions.
Certainly, we are aiding this whole development by lowering our growth profile of the business. Maybe a little color to it. For the second half, we were guiding 18% growth. Now we're going to be taking it down to 14%. For FY 2020, we are looking at capacity growth of around 15%. Those who have been following us for a long time must remember that we have been always guiding the market, that we believe that Wizz Air is a structural 15% business annually. In better times, we may stretch it to a bigger number, maybe 20%, even more. In worse times, we may take it down to 10% or even lower. We have examples of both in our history. An underlying principle to growth is that we never grow this business for growth's sake.
We grow this business for financial performance, and growth is an output of that process. I think this is what you are seeing as the environment is getting a little tougher because of higher fuel prices. We are just moderating our growth, essentially, to fall in line with the structural model and the structural assumptions of the model. With that note, I would hand it over to Ian, who's going to take you through the numbers and the financial performance.
Thank you, József. I'll spend a little bit of time just giving you some of the building blocks of our first half numbers. For the first six months of the year, ended 30th September 2018, and also some of the flavor going forward into the second half. On slide six, as József highlighted, we actually had a record first half. There's not that many airlines, certainly in Europe, that can boast a record first half. 20% passenger growth, 20% revenue growth. Profits were actually up 1.2%. Again, I don't think there are many airlines that can boast profits were up in the first half. In the second quarter, profits were actually up 5%. We delivered a net profit of EUR 292.2 million. In terms of the building blocks of the margin, I'll come onto that in a few later slides.
Revenue growth, again, delivering 20% passenger growth and maintaining a flattish RASK, I think is a very good performance at the best of times. You can see that 20% in terms of the revenue. That's made up essentially of two pieces. The ancillary, I think we've been signaling for a while. Last year, we changed our bag policy, October last year. We have been seeing a deterioration of the bags. Actually, we've been seeing a deterioration of the bag revenues for a number of years now. For the past five years, we've been calling the bottom, but unfortunately, we didn't call it quite low enough. We changed that bag policy last year. As you've seen from press that we've reintroduced that. Going into the second half, there are going to be two positive impacts.
Number 1, first, the year-on-year effect will kick in in October, because that was when it was changed last year. Secondly, we've reintroduced a similar policy. For the past four weeks of sold revenue, we've been seeing a very positive reaction on the ancillary numbers. Looking at the revenue piece. The first half, we've seen strong passenger growth. We've seen a stable RASK environment that takes into account increasing load factors by 0.8, nearly one percentage point. We can see that the stimulating model is continuing to work, and we're getting even more people on our seats. Passenger numbers are 18.8 million, up 3.2 million from the previous year. One thing in terms of the negatives, often forgotten is that there's no Easter. We had a bit of a drag in the first quarter of having no Easter.
Going into next year, we'll certainly have the tailwind of the Easter. Sales currencies, we would never like to look at our numbers on a constant currency basis, but we did have around about a one percentage headwind in terms of the sales currencies. Again, we absorbed that in the RASK. Moving on to arguably the most important slide. The structural winner, especially when stimulating a market, has to be that airline that delivers seats at the lowest possible cost. We can claim that we can deliver seats at the industry lowest cost. What you can see on the blue bar, I think the important message here is Wizz Air has consistently been able to absorb the cost pressures that the business throws at us, whether it's a stronger dollar. If we look back at 2013, the dollar was something around about 140. 2011, it was 150.
Today it's $114. Crew salary, inflation, you're seeing shortage of pilots, that's creating inflationary pressures. Disruption costs, EU261 is now going to be around about a EUR 30 million cost for the business. I think what's very important when you look at that blue line, Wizz Air consistently delivers the lowest unit cost possible on our capacity. When you layer on the competition, certainly five years ago, we would be saying other European LCCs are delivering costs 35% higher than us. Now they're nearly double, and in some cases, nearly triple. I think from a structural winner basis, our cost base remains very much intact. In terms of the first half negatives, high fuel prices, maybe some numbers. In terms of the liquid, what we're seeing on the hedge level is up 22%. We're seeing carbon up 3%.
There is a slight improved dollar, you're seeing a little bit of a tailwind on dollar for about 2%. We take more and more A321s sharklet-fitted aircraft, you're seeing a 1% fuel consumption improvement. When you look at our CASK for the full year, we're saying around about a 22%. In terms of the disruption cost, József highlighted the operational challenges faced by all businesses. We incurred EUR 16.8 million. This is double the previous year. Essentially you're seeing around about another EUR 8 million of incremental costs through disruptions. Crew salary. I'll come onto the crew salary. The reality is that there was a pilot shortage last year. All airlines had to step up and increase pilot salaries. That was effective from the 1st of January.
The challenge is, maybe we bit a little bit more than we could chew with the 17 aircraft in 17 weeks, the opportunity for Wizz Air UK accelerated. Monarch Airlines went bankrupt last year. We picked up some stands. It was a fantastic opportunity, but of course that requires crewing and training. I think when I was here in May, we were guiding around about a 7%-9% CASK increase on the crew as a result of increased training requirements, slightly more expensive pilots in places like Vienna and the U.K. You're seeing probably that number's going to be more towards around about 13%-14% on a full year number. The positives, we are seeing a slightly weaker dollar, albeit marginally. We can come onto the aircraft gauge type in the future. Slipping onto page nine.
Really, I think there's only one or two messages to come out here. If you look at the bottom total CASK, essentially is up EUR 0.20, and you look at the fuel, it's up EUR 0.18. There's always going to be cost pressures coming from various line items. One year we'll invest in airports, another year we'll invest in maintenance. We always manage our cost base. You can see that we've been doing a pretty good job on depreciation. We knew that number was coming down, and therefore we could invest more in airports, such as the Viennas of this world. Aircraft rentals, the dollar has helped that one. I think the two pieces coming out of that, number of fuel costs, which we talked about, and then the disruption cost, this additional disruption cost coming through on the other expenses.
Other than that, our cost base remains very much intact. On to page 10. This is more of what we have coming. A very exciting chart. I'm sure you've got your models you can plug in. We've toned down our growth rates over the next one or two years, and you can see that the numbers are actually trailing down a little bit. At the end of 2020, we're 122 aircraft. Previously, it would've been 130. You can run those through your models to see how we are being very disciplined, very active, and that has all been negotiated with the manufacturer. I think it's very important when we look at the future, when we talk about the costs, we have a phenomenally priced aircraft order that's going to be flowing through the cost base. We have the largest aircraft, 239-seat NEOs coming on board.
Essentially that's 239 seats. There's around about 32% more seat capacity than the Airbus A320. You only need one extra cabin crew. Again, the gauge of the aircraft is going to be delivering significant cost savings. The NEO engine, well reported to be burning at least 16% less fuel, hopefully a little bit more once it's fine-tuned. With 10 aircraft, 10 NEOs coming next year, you'll be seeing between 1%-1.5% lower fuel burn coming through our lines. In an environment of very high fuel prices, the airlines that are going to succeed are the structural winners are those that are operating the most efficient technology, and we have one of the most efficient aircraft orders coming through. The last piece is the on balancing financing.
When you drill into our cost base, the one area where we've always been lagging the competition, basically because we've been a young company, starved of cash, is on our ownership cost. With our investment grade that we got at the beginning of the year, we are seeing some significant improvements on deals. If you were to ask me a few months ago, I would've said going to the bond market would've probably been the cheapest form of financing. That's not the case. We've secured, or we've got letters of intent for 10 aircraft coming next year at phenomenal prices. Maybe a bit of flavor on the outlook. There are two pieces to this. Maybe if you look at the top right. The starting point is high fuel prices, how airlines should be reacting in a disciplined way.
You can see that we are slowing the growth down in terms of the ASKs. How does that really look? I mean, the months of the Novembers and the Januaries and the Februaries, you'll be seeing high single digits. December, clearly you have the Christmas period, you'll be looking to grow as fast as you can. That's how that's flowing through there. How does that translate into the yield environment? I've got gross RPS. That doesn't take into account the stage length, arguably the fare environment. We're seeing a very strong performance on the fare environment. With a stage length up about 1.1%, that's how that's flowing through onto the RASK piece. Fundamentally, our market is incredibly robust. We now operate in 44 countries. We are seeing strong GDP growth across CEE, and that is the fundamental driver of our business.
We are seeing a recovery of the bag revenues. We changed our policy. We announced and put on sale our policy in October, as of the 1st of November, those sales. We've been very pleased with the recovery of those. That sort of gives us the optimism going forward. József highlighted slower growth. If you slow down your growth, your routes mature faster, and that also flows through. Some of the negatives, again, as mentioned, there's no Easter traffic in the fourth quarter, and the sales currency are a little bit of a headwind, but nothing to talk about. Ancillaries has been a hot topic for us. It remains an absolutely critical piece of our business model. I mean, the way you get the low fares into the market, the way you stimulate your traffic, is to have the lowest possible base fare.
Ancillary for us is absolutely critical. We have been struggling on the bags revenue. It's a combination of changing consumer behaviors, also a changing in the type of customers. We're taking more leisure passengers who tend to take smaller bags. Over the past five years, we have been seeing a gradual reduction on our bags. As a result, we changed our policy last year, essentially to try and stem that flow. It was a bad decision. Ultimately, what you could see, certainly on the right-hand side of the chart, is that we've been seeing ancillary per passengers, certainly in the fourth quarter of last year, Q1 and Q2, really deteriorating. As a result of changing that policy, essentially announced in October, we're starting to see a dramatic recovery. The good news, I think there's two good news.
One is the outlook, because we have now changed that policy. The year-on-year effect of the change in policy will also go through. I would also stress that there is a number of initiatives and a lot of efforts have always been put on the value add. In the first half, you're seeing value adds up to EUR 2.7 per pax, which clearly was not enough to absorb the minus EUR 4.6. What does that mean in practice? Essentially, what was happening is we were getting around about EUR 2 per pax on cabin bags for the previous policy. When we removed that, everybody turned up to the gate with their bags. We were suffering significantly on the checked-in bags, and that was essentially the area that we underestimated.
Now, that has all changed, and looking forward, the sold revenue since October and certainly the flown revenues from last week are very encouraging. On to the balance sheet. In terms of these numbers, we have an investment-grade balance sheet. You can see that our cash remains very healthy at EUR 1.336 billion. In terms of using that cash, we want to maintain an investment-grade balance sheet, I think if you start jeopardizing your investment-grade balance sheet, you'll then start jeopardizing your potential cost base. As a result of the strong balance sheet, we have seen significant cost savings already coming through on our aircraft ownership, and that's something we will maintain. In terms of where we look forward, we definitely want to be maintaining or lowering our leverage. With that, I'll pass over to József for some closing comments.
Thank you, Ian. Maybe just a little bit on the markets. We remain the number 1 airline, the leading local carrier in Central and Eastern Europe. We have around 39% of the market there. In most of the countries we operate from, we are number 1 or number 2. As I mentioned, Central and Eastern Europe is a market that continues to deliver significantly higher GDP growth than Western Europe. If you look at it from the standpoint of market penetration, while around half of the population fly in Western Europe, it is only 15%, around 15%-16% in Central and Eastern Europe. There is a long way to go in terms of penetrating the marketplace. Our business model remains focused on stimulating the marketplace as opposed to trying to get into dog fights with other carriers.
We believe that by being the lowest cost producer in the industry, this is the best way to position yourself for those growth opportunities in the future. In terms of delivering growth, the profile has not really changed. It's been fairly consistent over the last few years. Most of the incremental capacity is deployed on either increasing frequencies on existing routes or joining existing airports in the network. At the same time, it remains important to the company to carry the flag of low cost and continue to open up new airports, new countries in the business. We deployed around 7% of our capacity that way. Maybe just a few words on Wizz Air U.K. I think Wizz Air U.K. is a real success story for Wizz. Wizz Air U.K. is the new British airline.
It just received its operating license from the British Government, which is essentially recognizing Wizz Air U.K. as a British airline for the purposes of designations. Wizz Air U.K. is ramping up very quickly. At the moment, it operates a fleet of 7 aircraft, but within a few months, the fleet will grow to 10 aircraft. As you can see, obviously, with that, employment is also ramping up. A couple of weeks ago, we started operating Wizz Air U.K. under its own commercial code, W9. We continue to believe that the U.K. is a unique Western European opportunity for Wizz, and we want to use Wizz U.K. as an operating platform for expanding our reach in the marketplace.
On the one hand, this is a Brexit contingency, but on the other hand, we think Wizz U.K. actually can be a consolidating platform in the U.K., and there might be more turbulence coming, and we want to make sure that we have a position here in the U.K. to further expand our business. That doesn't mean buying airlines or other business. We are not going to buy any airlines, but we might be acquiring assets that we can forward into our operating platform. We continue to innovate our operating platform. We have been making a lot of investments. I think we have been talking about this. We have been making a lot of investments into training, crew training, pilot training, cabin crew training. We just started our fifth pilot academy program in Hungary, following Bulgaria, Poland, and Romania.
Just a few days ago, we opened up our new simulator center in Budapest, which gives us training capacity for the next 5 years by placing up to 5 simulators over time, essentially enabling us to technically train our entire crew of Wizz Air. This is a state-of-the-art facility, probably the most modern of its kind across the whole of Europe. Well, Ian was talking about ancillary revenues. Ancillary revenues indeed remain crucial to the business. It is well over 40% of our revenue production, and we believe it will keep rising. Bag-related revenues have been in focus in the period. Also, I think we've done pretty well on some of the other revenue streams. Non-bag-related revenues grew around EUR 2 per passenger. Really, the new cabin bag policy is giving us the opportunity to close the gap that we had arising from the previous policy.
We remain very upbeat about ancillary revenues, and this is certainly a strategy we will continue to pursue going forward. At the same time, we remain very consumer-focused. We are highly technologically driven. I think we have been presenting these numbers, broadly speaking, but we continue to innovate our app, we continue to innovate our website, we continue to innovate our interactions with the consumers. Again, I would just like to remind you that the average age of a Wizz Air customer is 27. We are seeing what's coming much more in advance than possibly the other airlines. As you can see, the new generations of customers are very technology-savvy, and we need to deal with this population accordingly.
I think that gives us an angle to innovate more and more efficiently than probably most of our rivals who are dealing with simply just different profile of customers. With regard to the guidance. Overall capacity growth is 17%, this is somewhat down, and that comes on the back of moderating capacity growth in the second half of the financial year, taking it down from previously guided 18% to 14%. Load factor continues to enhance. We are expecting around a one-point rise on load factor. We are obviously seeing fuel cost rising. We are expecting a rise of around 22%. Ex- fuel cost coming down 1%. Again, we will start taking deliveries of the new Airbus A321 aircraft in the last quarter of the financial year. We will see more of that benefit flowing through the numbers in FY 2020.
Again, it would be great to have the net benefit of such initiative, also we have inflationary pressure on some of the cost items. We are certainly good at offsetting those, and at the same time, we're seeing that in the aircraft is such a step change in terms of economics, aircraft economics, that we will see net benefits across the cost side of the company. Well, positively, and I think somewhat uniquely, we are seeing RASK going up significantly in the second half, reacting to, on the one hand, the ancillary revenue initiatives, but also the capacity discipline. We are expecting second half RASK going up 7%, so it will give us 3.5% increase over the financial year. With all that, we have come around on net profit guidance in a range of EUR 270 million-EUR 300 million.
As said, EUR 300 million is more what we are seeing at this point in time. EUR 270 is a disastrous scenario, which we hope won't happen. I would just reinforce our view that, yes, you are seeing headwinds flowing through the numbers here, but I think most of those headwinds are behind us, and we are seeing a set of developing tailwinds going forward on the back of the improved yield prospect of the business, on the back of cost advantages gained from the Airbus A321 delivery program. As far as FY 2020 is concerned, obviously we will benefit from the fall of Easter in that period. I think with that, I would turn it over to questions.
Okay. Damian Brewer from RBC. Can I ask three questions? First of all, in terms of sort of fuel cost input, what that does to margins and capacity. In Western Europe, most airlines do seem to be rational or forced to be rational. Do you think that actually holds for Eastern Europe? There's still a lot of state or quasi state-owned or somewhat opaque financed players. Do you think fuel actually makes much different to their aspirations, or do you think they keep going regardless? If that is the case, how does that translate into capacity changes and sort of rational pricing to recover fuel? Secondly, could you talk a little bit more about what you mentioned in the prepared remarks about summer 2019, in particular spare capacity and being more prepared for ATC and other disruption.
Can you just talk a little bit more about exactly what you're planning there? Then very finally, because it's a question that keeps popping up with investors, Ian, can you talk a little bit more about the accounting on gains you make on sale and leaseback, in particular, the capitalization of the gains into deferred income and then the release over the lease term of the aircraft, and what impact that made on the H1 numbers, please? Thank you.
Maybe I would just start with the first question, how increasing fuel cost affects the Central and Eastern European airline space, taking into account that many of the airlines are state-owned and somewhat irrational. As far as we are concerned, we don't really care what they are doing. First of all, Central and Eastern Europe is a hugely fragmented airline space, especially from the perspective of national carriers. A bunch of small countries, small national carriers. As said, our focus is not really the market share gain as stealing sort of passengers from them, but it is to stimulate the new market and get people into the franchise of flying. I think we are fairly unaffected, I would say, by these airlines. Probably they are less rational than the private airlines in Western Europe, simply just a different pressure applied on them.
I don't think it largely affects our business. Our principal competitor in Central and Eastern Europe is Ryanair. We have the most capacity overlap with Ryanair. Ryanair tends to be a fairly rational airline when it comes to managing their profitability and applying capacity discipline. Likewise, I think we are a rational airline, and as said, we are reacting to the high fuel price environment by lowering our growth and trimming capacity. I don't think we are greatly affected by the irrational nature of the incumbents in Central and Eastern Europe.
Sum 2019. Do you want to talk about Summer 2019? In terms of Summer 2019, I think there are a couple of key things. Firstly, with 17 aircraft in 17 weeks, you're putting a lot of pressure on the organizational operation. With Wizz UK and the ramping up of that and training everybody to UK CAA requirements, there was a lot of pressure for the team on that. You then add those two pressures on top of slot-constrained airports, highly congested airports, and ATC strikes. You sort of had three big headwinds. We look into next year, I think the first thing you can do is that, the Wizz UK thing is now up and running and going very well. We're not going to be taking 17 aircraft in 17 weeks. We learned that lesson. I think it was great for summer sales.
Our commercial team loved it, our operations team weren't that keen on it. We'll be looking to take more like one to two aircraft per month. That certainly adds a lot less pressure on the organization. ATC, you don't quite know. What we have done is we've added a few little fire breaks. The cost to that is utilization will come down a touch. Obviously we are a high-utilization organization, and we need to make sure that we maintain as high as possible. There are fire breaks. There's certain, maybe you'll have an hour extra break in the day on certain days to make sure that you can catch up if there is a strike that's happened. I think it's an assumption we have to go into next year that there will be the same problem.
Where people decide they want to strike is where it hurts consumers the most, and that's when it's the summer holiday. The working assumption is that will continue next year. Those things that we can do internally, that we have done the operation, we're set up for that. In terms of the spare aircraft capability, there'll probably be another spare aircraft around as well, to be able to absorb any sort of AOGs, bird strikes, all that sort of thing. In terms of the accounting, the gains, I think there's two answers to this. One is going with IFRS 16. Everything comes on balance sheet. A gain traditionally is amortized over that aircraft. I can't tell you the number because it's confidential, if I tell you what gains have been made and divide that by 12, then you can do your math.
We can't tell you that. What happens is that if you do a very large aircraft order, you get a very well-priced aircraft. You can sell that for a different price, and traditionally, that gets amortized over the life of the lease. That's exactly the same under IFRS 16 when it comes on. I think there may have been opportunities to take gains in previous years, but with IFRS 16, that's not the case. I think that's all I can answer on that question.
You had a third question.
That was it.
Morning, it's Alex Paterson from Investec. My three, please. On Wizz Tours, could you just say what went wrong or didn't go right? What has caused you to decide to shut that down? Secondly, can you just talk a little bit more about the sort of flexing of the fleet delivery and the spare capacity? Can you give any numbers around that? What's going to form your decision on that? Finally, just on ATC, could we be optimistic that we could have overfly over France next summer? Or is
The French are the French. It's not only the French. We have equal issues with the Germans. I think as a system, ATC is not as intact as it used to be. Certainly, I think European traffic has just grown to an extent that ATC was unprepared to deal with the traffic. I also think that they need to implement systemic changes in terms of separation, routing, and all those sort of things, to make sure that they actually can accommodate the growth of the industry. I know that they are working on it. We are in touch with ATC, and we are organizing high-level meetings with ATC to try to put pressure on them on the one hand, but also to try to help them in a way, how to move the direction of their business development.
I don't think there is a guarantee that next year is going to be any better than the previous one. I think, at least now they are recognizing that systemic changes are required to cope with the challenges. Back to Wizz Tours. I would say that, in a way, I'm actually quite happy to fail on Wizz Tours, because I think it kind of signals that we have entrepreneurial spirit in the company, and we are prepared to keep stretching our own boundaries, and we are prepared to take risks on certain business propositions. I think what it comes with is that some ideas will work out and some ideas don't work out, and we set up Wizz Tours as a very low-risk proposition, essentially just bundling up airline fares with hotel rooms.
We just couldn't push it to the margin, but we are able to achieve on the airline, certainly, structurally, we don't want to destroy shareholder value. We realized that in order to try to achieve the margin level what the airline can deliver, we would need to change the risk profile of the business fundamentally, i.e., we would need to acquire inventory ourselves and manage that inventory ourselves. Simply, we are just not in that business. We lost a few millions. We didn't lose a lot of money. We probably lost around 4 million EUR on this. In the magnitude of the big schemes, this is pretty much nothing. Simply, we are just refocusing ourselves on the core business and look at the next idea. I think that's Wizz Tours.
With regard to the flexibilities around the fleet, we have signed five purchase agreements with Airbus so far, and we have amended those agreements, I think, 50 times at least. I think it just shows sort of the relationship between the manufacturer and the operator that there is inherent flexibility in the relationship to adjust fleet deliveries according to demand, according to industrial issues. Clearly, what you are seeing is that both Boeing and Airbus have sold more aircraft than what actually they can deliver in 2019, 2020. They need to go back to the operating industry and renegotiate the deliveries. I think we did that. The new delivery stream, what we have is pretty firm. Certainly, it gets more skin available in the game, they better deliver.
We feel that that's better for us having somewhat less capacity on the one hand, but it's more certain capacity than running the risk of whether or not we're going to get delivered. When we were ordering the aircraft, actually, that was not a well-ironed, well-aligned delivery stream versus our demand, so it peaked up and dropped down. Basically, what we are doing is that we are ironing out the delivery stream, so we are getting around 15% growth each year from that delivery stream. Actually, we feel quite good about the outcome of that process.
One final comment on Wizz Tours. Essentially, we were looking for Wizz Tours to make about EUR 1 million this year. I think the additional EUR 4 million is going to come essentially from closing that business down, writing off some IT systems. We could have left it on life support until April and not booked it, but that's not the right thing for the business. When you look at the numbers, the forecast, our forecast assuming there will be a plus EUR 1 million, but actually we're delivering a minus EUR 5 million. That's just another factor when you look at the numbers and the building blocks of this year and going into next year, we won't have that drag on our profitability.
Hi, good morning. It's Ashika from Barclays. Just a couple more questions around the capacity growth, and the decisions you made with Airbus around the delivery schedule. If you're taking eight less aircraft next year, can you maybe just help us think about what that means for the unit cost trajectory next year? Because obviously, a lot of those eight aircraft or maybe all of those aircraft were neos and therefore more efficient on fuel and on gauge. Is there a scenario also whereby you cut the total order book? Is there any scenario in which that happens? Or is it simply just a case of moving things around, if the environment changes over the next few years? Then, just a final question on growth.
It looks like from your presentation, you've skewed the mix a little bit more towards the kind of existing airports, existing routes in the first half. As you think about the 15% growth next year, can we assume it sort of stays around that 90% mark on kind of the mature part of the network? Where the new growth comes from, if there is new growth? Thank you.
I'll take the cost question. This year we're going to be taking two neos, this is FY 2019. That represents 0.1% of our capacity, it doesn't move the needle for this year. Going into next year, the important thing with the neos is it's a 20% lower unit cost versus the CEOs. When you take into account the ownership cost on top of that, it's fairly significant. Next year we will be looking to be having a negative, whether it's minus one or minus two in terms of our ex-fuel CASK. The fuel CASK itself will be lower fuel burn. You'll be burning about one and a half percent less. We're not giving guidance yet, the reality is that we put in a phenomenally priced aircraft order.
We've financed them already, or the letters of intent have been signed for phenomenally financed aircraft. You have the seat count, you can certainly be expecting to see a negative number. The magnitude of that, obviously, we'll be firming up and communicating. Eight extra aircraft, yes, it would have been a slightly better number. Some of those eight aircraft were skewed towards the back end of the year. The summer performance isn't really going to be affected that much.
I would just want to put that in perspective. I don't know how much you are into this, when you look at the new engines, both as a Pratt & Whitney engine and the LEAP engine, they are not matured technology yet. They bring a lot of childhood diseases to the market and giving a lot of headache and disruptions to the operating airlines. There is a bit of a trade here as well. On the one hand, the underlying aircraft economics are hugely attractive, especially from our standpoint that we actually have very attractive acquisition cost and financing cost on the aircraft and the underlying whatever 10%, 15% improved unit cost. That comes with a lot of operational disruptions and a lot of incremental costs to deal with those childhood diseases.
There is a bit of a trade, we said that on the one hand, we are lowering our overall capacity for the reasons we were just explaining that we are applying capacity discipline on rising fuel price. At the same time, we are, to some extent, hedging all these operational disruptions. Again, we learned quite a few lessons going through this summer that we better be aware of these disruptions and we better be prepared to deal with them. I don't think this is necessarily a bad thing, what's happening to the business. We are actually quite pleased with the outcome. No way we are cutting orders. We are not cutting orders here.
We're seeing that this order book, or these order books are very precious assets of the business, we shall continue right on these arrangements. With regard to the airport mix, I think it's just the way it comes around. Should we be seeing new airport opportunities at attractive commercial terms, I think we would be certainly considering those. I don't think that we have an objective of, I don't know, deploying 90% of our capacity across existing airports and only 10% new airports. I think that's just the way it works out. Certainly, I think the way it works out is very safe from the perspective of delivering those. At the same time, we remain totally open-minded to keep carrying the flag of low cost and bring capacity to new airports should those airport opportunities arise. Recently, we don't see a lot of them.
We have a lot of discussions, we don't see a lot of them actually happening.
I think it's fair to say that the vast majority of our growth will continue to be in our existing network. If you look at this chart that we presented, for many years, it's around about 90% on the existing network. The new destination country, that's pretty much Austria. Austria and Estonia. New destination countries, given that there are very few white spots on the map, that tends to come and go. The reality is the vast majority of it will be in box number 1 and number 2.
Hi, it's Andrew Lobbenberg from HSBC. Can I just stay on the aircraft story, and the change in the order book? To what extent is this you trying to display capacity discipline and going to Airbus asking for fewer planes? To what extent is it them not being able to build them and coming to you? To that end, the planes that you have got scheduled to come this, and more particularly next financial year, how firm are you that they will actually come? Can I ask about the Western Europe to Western Europe flying out of Vienna, but also out of Luton. How profitable is that proving? If your network average is 100, how successful is this Western Europe flying and where are you going with that strategically? My final question would return to my evergreen hobby of Brexit.
Where are you on your ownership structure of EU, excluding the U.K.? What are your contingency plans if it proves necessary to maintain that above 50%? Thanks.
Okay. With regard to aircraft, essentially Airbus has to deal with their own problems of overselling their order book, not being able to deliver that order book. At the same time, we also have an interest in making sure that we only take adequate capacity, where the business can profitably deploy. I think that's, in a way, a joint interest, you might have missed that part of the presentation, but actually, what we made sure is that Airbus's skin is in the game heavily to deliver the new delivery agreement for calendar year 2019 and early 2020. I think they have a vested interest in delivering what they are committed to. If not, this is going to cost them a lot of money. I think this is fairly fixed. We are not the deliverer of the aircraft.
They deliver the aircraft, I think they will get that delivered. Western Europe to Western Europe. I think it's pretty much the same as flying Central Eastern Europe. Otherwise, we wouldn't be doing it. Why would we be eroding our profitability in Western Europe just for the sake of flying Western Europe? You can assume that we are applying the same discipline and the same return expectations on Western European flying. The strategy remains on Central Eastern Europe. I think we have said that fairly clearly that Western Europe is more of an opportunistic way of building the business for Wizz Air as opposed to having a strategic plan how to conquer Western Europe. We don't have that strategic plan. At the same time, if you look at it, let's say Luton, we are in the U.K.
We felt that the Monarch failure actually put an opportunity on the table, which we should be considering, we consider that opportunity. We acquired certain assets from Monarch, we folded those assets in our operating platform. As a result, we were expanding our reach in Luton. That manifested in the end in the establishment and the growth of Wizz Air U.K. Is this the right thing for the company, what we can do? It is absolutely. Is this delivering the profitability? What the corporate average is delivering? Yes, it does. I think so far so good, but we are not going to blow our mind on Western Europe. We will remain very measured on Western Europe, the core focus will remain on Central Eastern Europe. With regard to Brexit, we are not different from EasyJet, Ryanair, and IAG.
We are looking at the same things what those guys are looking at. We are looking at the same issues with regard to market access. We are looking at the same ownership and control matters, what they are looking at. I don't think there is anything unique to Wizz with this regard. Again, I don't think Brexit is yet something you can really act on. You can certainly plan on contingencies, and we have been planning on contingencies, and we have been looking at ownership and control. I think this is going to be the key point. We are more comfortable with market access. I think we are seeing the measures falling in place, and rights we are obtaining that will secure our ability to operate between the U.K. and Europe and even between the U.K. and third countries under any scenarios of Brexit.
The real question remains on ownership and control, and I can tell you that we are looking at the very same things, what the other guys are looking at.
Can I just quickly follow up on tax? Because obviously, for this financial year, the effective tax rate of 3% is a helpful development. As we look into next year, and we're going to have, I don't know, 10% of the operation with U.K. or bit less than that.
You just told us it's going to operate at network profitability. What does that mean for the corporate tax rate, which in the U.K. is well above 3% or 6%?
The U.K. business is taxed in the U.K. The rest of the business is taxed in Switzerland. The U.K. would be taxed on the U.K. corporate tax rate.
I think on the Q1 call, I think I highlighted, Andrew, that the tax rate will be trending towards 10% as a result of that. If it's higher, it means we're making more money in the U.K., which is a good thing.
It's Kathryn Leonard from Numis Securities. Morning, everyone. Just a couple of thoughts. Are you just able to say how much, what your percentage sold is for Q3 and Q4? Just thinking about those trends on RASK that you've reported this morning. Are you able to quantify what the impact of Easter is that you're obviously exceeding? Just on the leasing costs and ownership. Obviously, you've alluded to, well, you said in the statement this morning that the 10 Airbus A321s coming through at a 30% discount on leasing rates, and you're talking about the great deal you guys have with Airbus. Can you just give us some kind of feel on where that leasing cost will trend over time in terms of aircraft rentals over the next five years as the Airbus A321s ramp up and the NEOs?
Lastly, can you guys just confirm the portion of your leases that are currently on floating rate and where that might trend to as well? Thank you.
I'll start with the last one. We have around about 10% of our operating leases are floating. I think that was the question you were asking. I think when we look at it, basically, the way I would look at it is in terms of the embedded financing charge. IFRS 16 sort of distorts all of this. Lease rates or the lease line disappears from the face of the P&L. If you're looking to try a model going forward, I would look at the embedded financing charge because that's the best way to look at it. As we've said, the older leases that we've got on our books, around about 6%, the more recent ones, 2.5%-3%. If we issued a bond today, we'd be getting for five-year money around about 1.5% yield, maybe seven-year money around about 1.9%, maybe a touch better.
The LOIs that we've secured for the next 10 aircraft are not with bonds. That tells you that we've been given pricing which is even better than that. If someone wants to pay us, offer us financing that we don't quite understand, then I'm quite happy to take that. In terms of, I would look at it in that perspective. When you're trying to model it, just compare the 2.5% of the existing or the older CEOs leases versus something considerably better than that. That sort of gives you the magnitude of the number I think you were referring to. Sorry, what were the other questions?
The Q3, Q4 sales.
Essentially, I would say we're just slightly ahead in terms of load factors. The loads are, and this is what we're guiding, the loads are actually probably 1% ahead. We're generally traditionally done with about six weeks of forward booking.
What percentage of that are you for?
November, you're looking at 75%, December, you're looking around about 35%. Then you're probably tripling into about 15%. What I would flag is the growth rates that we're seeing in the January and the February, you can pretty much derive how that trend is going to continue. Are there any questions on the telephone?
Thank you. If you do wish to ask a question, please press 01 on your telephone keypad. Our first question comes from the line of Mark Simpson. Go ahead, your line is now open.
Yeah, good morning. I just want to touch on the network effect, because if you look at the winter season, I'm talking November to March, 60% of your RASK growth is accounted for by that Western Europe to Western Europe and Western Europe to Middle East. What I'm wondering on the RASK front, how much of your proposed RASK increases mix and how much is like for like price increase? The same thing with that increased exposure to Western Europe. You've guided minus 1% for ex-fuel CASK for the year. That implies you're going to have to hit 3.3% ex-fuel CASK decline in the second half. I'm just wondering how you're achieving that.
What are the key lines we should be looking at for what's a significant improvement in what is obviously a quieter period at a time when you're more exposed, you would have thought, to high-cost markets. I wonder if you could square those two circles. Finally, lease rates, as you've highlighted, are extremely attractive. Does that change your thinking in terms of, say, timing of acquisition of the NEOs, which was very much, I think, part of the perceived plan that you would move from a lease to a purchase policy as the NEOs became available?
Let me start with the network effect. I don't think Western Europe moves the dial with that regard. When you are looking at the unit revenue increase, it comes from two angles. One is essentially the bag revenue, what we are earning, and the enhancement of that revenue stream. The other is the overall fare increase on tickets. I think that correlates and corresponds with the capacity trim what we have put in place. As you say, the share of Western Europe is fairly marginal in the total. To be honest, I wouldn't say that Western Europe is particularly higher yielding business than our Central and Eastern European business now. It is not down to the network mix. It is purely down to the capacity discipline on the one hand, and the ancillary enhancement on the other.
I think you're right. Traditionally, if you look back, Q4 always tends to be the quarter where we turn the screws. In terms of specifics, the delivery schedule that József referred to, there'll be two aircraft. When we're dialing down the capacity in the fourth quarter, it doesn't mean the aircraft are sitting on the tarmac. Essentially, there are a couple of aircraft that will enter the fleet towards the back end of Q4. In terms of the lease line, you're seeing a little bit of upside on that. USD is still a little bit favorable, that's going to be coming through. If you look at and dial down again on the fleet and maybe the redeliveries, the maintenance line is also benefiting. You're seeing a little bit coming through on the maintenance line. I would say, fingers crossed on the disruptions.
We have seen a significant improvement as a result of these actions. You have more spare capacity coming through, the other cost items, one would hope that that number is going to be also significantly better. I think if you add all those together, keep your fingers crossed a little bit for de-icing. Let's see what happens there. Generally speaking, Q4, traditionally, we've got a pretty good track record of turning the screws and making sure we deliver those numbers. Onto the lease rates, a combination of two things. One, yes, we have a phenomenally priced aircraft, that will flow through to the lease rate factors. The investment-grade balance sheet, I think, is actually also the biggest driver.
It's great to go to lessors and their credit and say, "Well, we don't really need to do too much work because the work's already been done by the rating agencies." The combination of the investment-grade balance sheet, again, which is why it's very important to keep that fortress balance sheet. Also the very well-priced aircraft. If you think about the industry, there's a lot of lessors out there. There are a lot of financiers out there chasing pretty good aircraft. We just talked about the availability of aircraft from the manufacturers, therefore, those that have the aircraft are in demand. A combination of all those, Mark, is why we're seeing very good rates.
In terms of, say, your previous assumption about ownership, that gets pushed out by 12 to 24 months, given the rates that you enjoy.
Under IFRS 16, in theory, everything comes on balance sheet. It's apples and apples. In terms of which form of financing, we keep all our avenues open, whether it's German financing, French financing, JOLCO financing, sale and leaseback financing. Today, the sale and leaseback market is incredibly hot. In which case, we'd be foolish not to take advantage of that. You don't know what's going to happen next year. It's keeping our gunpowder dry in terms of actual bilateral debt or bond financing. It's nice to have that in the back pocket.
Great. In that case, appreciate that.
The next question comes from the line of Ross Harvey. Please go ahead. Your line is now open.
Hi. Good morning, guys. Two questions from me. The first is, I am just wondering how you think about your mid to long-term utilization rates, block hour utilization rates, just given the operational considerations of a higher gauge aircraft, maybe different airport mix and potentially some infrastructure issues in Europe, which have been mentioned recently by other airlines. Secondly, I am just wondering how we should think about the underlying labor cost per head in FY 2020 in the coming years, assuming some easing of disruption.
Okay. With regard to utilization, I think we are still looking at the mid-12 region, so around 12 and a half hours. It can be a little more, little less, but it should not be much less, and it should not be much more. I think if it is much more, and we have been learning it, I think if you are pushing it beyond 13 and a half hours, even on a seasonal basis, you create an avenue for disruptions. If you take it too much lower, then you will have an issue with unit cost, and you will not be able to put your fixed cost over a proper capacity measure. I think you should be expecting a fairly stable, around 12 and a half hours a day, average utilization coming through the system. I think that observes the Western European airport mix and also the gauging method.
The good news, from our perspective, is that actually our schedule can be incredibly flexible, so we are not chasing a particular customer type that cannot wake up before six o'clock and the first flight cannot go out before 7:30. We tend to start the schedule at 6:00, or even before 6:00, like 5:30, and we can tie down the fleet anytime we want. Our customer base is much more price sensitive as opposed to being schedule sensitive. With regard to the labor cost environment, I think labor cost is a cyclical matter. Depending on where you are in the cycle, I think that determines the pressure on labor cost in the business. As you are seeing at the moment, we are still in the up cycle with high growth. Obviously, that sucks up employment, and that creates a tight market in certain disciplines like pilots.
It is a tight pilot situation, obviously that puts pressure on airlines with regard to pay, but also with regard to the airline's ability to pass some of the infrastructure costs on to the employees, like training. You can see that when it's a high supply of pilots in the markets, airlines tend to put the training cost on the pilots. When it's a low supply of pilots, airlines tend to observe that cost. This is exactly what you are seeing. I think for so long as there is a high demand for pilots and less supply of pilots, you will see continuous pressure on cost. Once the tide turns, and we are going into another phase of the cycle, that can change very quickly, very dramatically.
I think, from a European perspective, probably it would only take a significant airline to go down, to significantly affect the pilot situation. At the moment, it is really the pilot tightness that is influencing the industry. Again, this is cyclical, and we are in a situation when supply and demand are not in balance. That can change.
That's great. Thanks for the detail.
The final question comes from the line of James Holmes. Please go ahead. Your line is now open.
Hi. Just a few quick ones. Firstly, can you just let us know what the carbon offset costs were as a proportion of your EUR 350 million in H1? Secondly, I don't think you answered Lobba's question about Vienna performance. I was wondering if Vienna is as much carnage as I think we think it is. If you've changed your capacity plan there. Finally, are you seeing any sort of hint of staff or unionization issues in any of your territories? I think LOT had a strike in Poland. I was wondering if you were seeing any signs of a bit of unrest. Thank you.
On the carbon, airlines tend to get their free carbon units in the second half. The way we book it is essentially on the average. Carbon, back in 2013, was a cost of EUR 1.5 million for us. This year it'll be around about EUR 27 million. It's an annoying cost that comes through. When the business grows, it doubles in size, yet carbon costs are up 20 times. It's a pressure that you have to take.
With regard to Vienna, certainly there's a big party going on there. Everyone joined. I don't think everyone is going to stay. We are one of the airlines which will stay. Let me just reinforce the basic premises why we are in Vienna and what we are doing in Vienna. Actually, from our perspective, Vienna is more of an extension of Central and Eastern Europe. A third of Hungary is better off going to Vienna to take that airport. As half of Slovakia is better off taking Vienna. A third of the Czech Republic is better off taking Vienna. From our perspective, Vienna is kind of part of Central and Eastern Europe. The reason why we only showed up in Vienna recently is that because the airport was simply not commercial before, and just didn't offer the commercial terms which would have been acceptable to us.
What we are doing in Vienna, we are delivering the lowest cost of any airlines in Vienna. We have a fleet of A321s to make sure that we stay the lowest cost in Vienna. We think that we bring in an angle to the market, which makes us very competitive, very formidable. Given that this is an extension of our Central and Eastern European strategy, you can expect us to stay in Vienna and grow in Vienna. Obviously, we're going to be rational. At the moment, I think the market is overdone. I don't think that you're going to be seeing the same players with the same capacity in a year from now. The dust will settle down, and you're going to see us staying, and you might see some of the others certainly reducing, if not going completely.
we had the last question on?
Unionization.
Unionization. No, we don't have unions in the company. We don't think that unionization is the way to run the company. I think we are making a lot of efforts in the company to recognize employee issues and enhance the dialogue with our bases, with our remote employees in the company. I think we have a culture which is much more collaborative and team-based, as opposed to kind of aggression- or conflict-based. We are not seeing any signs of unionization, and we want to make sure that the culture what we have remains intact. We have that open dialogue inside the company as opposed to trying to create kind of board lines inside the business. I don't think we are seeing anything developing at this moment.
Just one final comment on-
Sorry.
Just one final comment, James, on Vienna. It's back to one of my comments on the presentation, is if you look at our cost base with an Airbus A320, Airbus A321neo, it's 20% lower unit cost compared to our current fleet. If you look at the CASK of, I would say, the largest in terms of seat supply to that market, their CASK base is three times higher than ours. When the music stops, as József's described, guaranteed that we'll be sitting firmly on our chair and other airlines will be departing.
Okay. Thanks a lot.
I'm now handing back to József for concluding remarks.
Well, ladies and gentlemen, thank you for your interest, have a good day. Thank you.