Earnings Call: Q3 2018

Jan 31, 2018

Hi. Welcome to the Wizz Air Third Quarter Results Conference Call. Just to remind you, this conference call is being recorded. Today, I'm pleased to present CEO, Joseph Ferardi. Please begin your meeting. Good morning, everyone. Thank you for joining this conference. So let me start sort of giving you a few highlights how, the quarter was developing and what's in front of us, going forward. So yet again, we are announcing a record quarter, a record passenger number 7,100,000 passengers and record revenue, €423,000,000. We continue to invest in growth. We delivered 24% passenger growth in the quarter. That's pretty high, at any any standard. Clearly, we are, putting capacity back into the market for the intended to given the off season and the low season period resulting from some of the consolidation events happening across Europe in the United Kingdom, but also in continental we remain disciplined on cost management. We delivered the ex fuel cost flat, despite a number of headwinds, clearly, on infrastructure costs on our labor, on fuel, we've we've seen, quite a bit of headwinds, but at the same time, the the roll out of the AC 21 aircraft has had us offset, at least some of it. And the AC twenty mile rollout is very important going forward as well. At the end of the financial year, in March, we'll have 33% of the capacity flown on AC21 a year later, March 2019, we had 44% of the receipts flown on AC21. We completed the transaction for our largest ever aircraft order 146, A321neo aircraft, we just issued a communication, yesterday, with regard to obtaining a shareholders approval for the, the transaction. So now the deal is unendusted. We made major announcements with regards to expanding our business in in London at London airport and entering the Vienna market, obviously taking advantage of the of the changing market circumstances to be acquired for Airport 9 stands at Luton from Monarch. And as a result, very quickly, we've been able to scale up our operations from an intended 3 aircraft, to 7 aircraft already going into summer period. And as you know, we are in the process of license Singapore UK Airlines beside UK, and we are expecting to, to receive the the necessary operating licenses, during the course of, of March in line with our plan. So essentially what we are doing in London, Luton, B, Avisalign operation. We also announced the the opening on Vienna, taking advantage of the, Air Berlin, Nikki situation, and, quite robustly, we're going to be starting our venture there with 3 aircraft opening 17. It was due to the course of 2018. Also importantly, we launched the VISTA pilot academy. Just for your perspective, we are expecting to hire over 300 pilots each year in the next 5 years and we are expecting to deliver around 150 credits, young pilots through the, the biggest pilot academy program when it scaled up, we've already inducted over 100 carats into this program, quite a lot of growth in front of us. So we are seeing, the remainder of the current financial year as well as fiscal 2019 as a continuation of our growth strategy, a similar level and we are just about to start our largest ever delivery program. We're going to be taking a delivery of 17 aircraft over 17 weeks starting on 1st March, but we're seeing beyond already operationally to also the process and in that order aircraft. If you take the next slide, we are the largest focus carrier in Central Eastern Europe. And obviously, the growth that we have delivered and we continue to deliver keeps, enhancing our leadership position that, as said, we are up 24% on passenger 7,100,000 We had a fleet of 88 aircraft currency in operation. This is 14 more than the same time last year. We continue to add airports to the network and opened up new countries, and we opened up basis also. We reshuffled basis, we first capacity. We've also made announcements on closing some of the smaller bases in order to our spring capacity for a bigger strategic play, as opportunities arose during the period. And obviously with that capacity growth, we keep building our organizational capacity. And, and, and, and, and we have, 3500 employees. I see as we speak. And despite delivering that high growth and moving on to the next slide, the performance metrics remained intact. We operated 18, 18% more flights. Utilization remained unchanged during the period, over several hours of utilization. Load factor increased over 1.4percentto89.4percent and the regulatory, and the punctuation matrix, slightly deteriorated, but largely remained the same as, in the period last year. And we were big time affected by better conditions in December, just in the United Kingdom. We had to cancel over Honda flights because, effective the country became unoperational. Almost for, for 2 days. So while in the period, we canceled, 50 seven flights last year, we were forced to transfer 209 flights, this year, precommitted, driven by, value factors. But I can also confirm it to you that It was not driven by a pilot shortage or anything like that. So with that note, I will just hand it over to Ian who's going to take you through the financial performance of the business. Thanks, Joseph. I think in the context of the growth that Joseph just described, we were very happy with the financial performance of the third quarter. The first half, if you remember, we delivered €282,000,000 of profit. We delivered €14,000,000 of profit in the third quarter, taking us to a €303,000,000 profit for the 9 months. This is a fantastic platform to essentially accelerate the growth, which as Joe described, and we'll give a little bit more color on the fleet later. So seat growth was up 22.4%, a slightly high allowed stage length to 1600 kilometers. ASK growth was up 22.6 percent. Load factors were also up, and passenger growth up 24%. All this flows through to higher revenue 24 percent, so delivering €422,900,000, in the 3rd quarter. Notwithstanding this growth, it is pleasing to report that costs remain very tidy controlled, so delivering on an ex fuel CASK flat is a good performance. We are guiding broadly flat cash for the full year. So you'll appreciate that we'll be looking for an even better performance going into the fourth quarter. So that number will start turning negative, negative performance in the fourth quarter, which on the back of the growth, again, I think will be a very, very good performance. We also guided slightly positive revenue environment to the RASK, as you can see in the third quarter, notwithstanding this growth profile we're able to deliver 1.3%, increase in the RAS performance. I think it's also very important to when you look at RASK and make some conclusion self is, is bear in mind that the CEE is at a very different state of evolution to that of Western Europe. So what we're seeing in the CEE, we can come onto later, is still a very strong economic backdrop, a serious amount of opportunities to continue the stimulation. So the revenue environment we want to grow this business fast as we possibly can, and maintain flat margins. So maintaining a flat CASK, driving those costs even lower through with the A321, So revenue is not, we're not revenue chasers or we're cost chasers. Maybe moving on to the next slide, just to highlight a couple of points. Within two years on the on the fleet side, over 50% to 54% of our of our fleet will be supplied A321s and bearing in mind, the A321 is delivering 10% of our unit costs. With the neos, our first neos will be coming Jan 19. We're very confident the delivery of that aircraft. The fuel savings on those aircraft, hopefully they'll be even better than our expectations. So the neos and the A321s will be will be driving, certainly our costs even lower on driving the revenue line higher. I think it's worth highlighting at this point on the ancillary. So maybe one of the negative notes of the quarter is the ancillary, a slight decline. If you remember the first half, we delivered a plus 1.8 euros per PAX, in the first half, this was a strong performance. In the third quarter in October, we changed our pay for cabin bag policy. We still need to refine that. Essentially, we've been having a bit of a challenge over the past few years in improving the cabin bags, basically people don't want to pay for bags. And the challenge of the industry, faces across all markets is that essentially these aircraft aren't structured to take one cabin or one bag per passenger. So an A320 can probably only take about 100 bags versus 180 seats. So I think this is a challenge the industry has. It's something that we will be improving on. I think the positive note is the value add was up two 0.6 sorry, the value add was up per PAX for the quarter. But the bag declined 2.6. So we delivered a minus 0.6. For the full year, though, we'll still be in positive territory. And I think for your models, the the target should always be 1 year per PAX per year. And that's the, that's what we'll be aiming for going into fiscal 2019. I think on the economic backdrop, it's also worth highlighting that in all of our markets, we're seeing strong growth In some markets, you're seeing GDP growth north of 6%. This is driving passenger traffic north of 10%. So in terms of the fundamentals of the business model, it remains strong. And this is one of the cornerstones of why we can grow at the pace that we're growing. Moving on to Slide 4. I've highlighted the opportunities with the A321, with the A3 with the neos coming in Jan 19, and we have a stronger balance sheet. We are actively looking at the options for financing those aircraft. So certainly, that'll be something that I would be looking at in more detail going forward. I think Joe highlighted the incredibly large order that we did with the aircraft. The price of which we've secured a competitively, competitive rates. So in terms of the aircraft, the price paid for those on the asset side of the equation, think we've ticked that box and created a fantastic platform for the next 10 years. On the challenges, Joe's highlighted in terms of labor costs, it's a fair to say that the labor environment is getting tighter. And when you're growing at 25%, that's a pressure on the organization. The team's in place. The organization structure's in place. We are confident that we have no issues going, certainly going into the summer. On that respect and all the initiatives in terms of the recruitment, the, the pilot academy, and we should be well set going into next year. Looking on to page 8. I think, again, a slide you've all seen before, it's very pleasing to see that there's always going to be headwinds and tailwinds, and our job is to make sure that we deliver, a very tight cost cost control. So we've delivered a flat CASK for the 3rd quarter and going into the 4th quarter that number will be turning negative. And with the A321 rollout, We had a bit of a blip going through with depreciation, which I highlighted. We're sort of we've gone through that now as we go into fiscal 2019. And I think I highlighted that the half year results we should start to see that negative trend returning. So it's certainly ex fuel CASK for us remains very tight, and we will start on the downward trajectory as we go into fiscal 2019. Moving on Slide 5. Cash generation remains very strong. We we, free cash is around about 30.6 percent leverage. This number can change by 0.1 percentage points depending on the rate of the dollar. The balance sheet is very strong. Moving pushing on to slide 10. Just two sort of tweaks onto the guidance, the fuel prices we've pushed that up from +3percentplus 5%, and the growth in terms of capacity was 23%. We've been able to successfully push that up to 24% capacity growth 25% passenger growth for the full year. The net profit guidance remains unchanged from the first half. With that, I'll pass to Joe's, give some flavor on the network and other developments. So obviously, the influx of new capacity. We continue to build our network, and fairly similarly to the profile of growth that we have delivered, you are seeing the same flowing through the the portal we are reporting here. We put over 80% of the gross capacity on routes or airports, which are familiar to us, 56% of the capacity went into increasing on existing services and 27% for joining the dots, joining existing airport. But we remain keen on carrying the flag of the USCC and bring the local smaller to our new markets, to new territories. And with that, spirit in mind, we continue to open up new airports as well, 17% of that capacity went into new airport. Looking at the next slide, Slide 12, you can see the expansion in Luton. I must say that this is step change versus our original plan, pretty much triggered by the monarch situation. We were able to secure for airport nightstand, enabling us to essentially move the operations from CAC up to 7 aircraft very quickly. Already operating through summer 2018. As said, we are expecting this UK to be licensed in March and we're going to be able to obviously at least to some extent address some of the Brexit concerns with regard to to the airline operating model by having essentially 2 airlines, 1 in the UK and the other in the European Union. I mean, all the CDC is the start of a journey. We have, a robust plans for the future, for, London. But already, with this expansion, we are coming up to 37% market share in London. So we are pretty much tied to number 1, number 2, there. But depending on spot and airport infrastructure availabilities, the remain committed to, to continue to build our network in, in Luton. Next slide slide, 13 is, is our new venture in Vienna. They are highly excited about this opportunity actually have been looking at Vienna for a long time, but this was a right moment for getting the right a commercial operating platform for actually entering the market. Let's not forget that the geographical proximity of Vienna is very favorable for our core markets. I mean, essentially quite a large number of Hungarian and still making us send checks. Are using the airport as their the preferred airport. And we are bearing on that halo effect obviously. And clearly, the constellation opportunity arising from the sale of Air Berlin and Nicky triggered us to, to essentially enter the market at this time, Ron, and fighter will cost entry with 70 new routes and 3 F of 10. And again, this is the start of the journey and you can expect us to do more, in the near future. Moving on to the next slide, We have now a very robust, delivery stream of aircraft coming down the line between now and 2026. A total of 288, 1 act of 2 delivered in this, in this period. You see the detailing of of how that actually the get executed. So we are still having a few acts of of the FCO, technical chase, expensive very bombs. To be delivered between now 2019. And already in January 2019, we will start taking delivery of the previously, confirmed 110, SD 21 order streams. You see that flows into, 2004, And in 2020, we will start taking, deliveries of the new aircraft, but we just confirmed this, if end is a321. Neos. Now the AC 21 is, obviously, a a very significant driver of the business. It is a 10% lower unit cost than the AC20. And the NEO technology is adding an additional 10% cost saving to the, to the business. So operating an AC 21 Neo acts as compared to today's AC 20 COX up gives us 20 percent unit cost saving, which is very significant and we make sure that we remain very competitive and and very formidable India in the marketplace. So just on the 146 second quarter, this is the largest order the company has ever placed. And we are part of an order, the Indigo portfolio order, over 4.50 aircraft, which essentially is one of the largest orders in the industry in in in in history. This represents over $17,000,000,000 of a financial commitment, at least twice, obviously, they are buying it at a lower price than this, and, and, and, strategically, it feeds into our strategic objective, to become the ultimate loss was produced in the industry and in Europe and certainly the second is going to have us achieve that. Moving on to the next slide, you are seeing the the revised fleet plan essentially they are upping, capacity compared to what you were presented about 6 months ago. So if you take fiscal 'nineteen, we will have a fleet of 112 aircraft compared to 106 what we previously communicated that pretty much comes, on the back of extending a number of acts of what we planned on returning. But given the market environment and the market opportunities, we decided to retain that capacity and further operate those aircraft in order to be able to supply the demanded capacity. And with that, the fiscal 'twenty number is changing to a 227 aircraft, at the end of financial year. And you can see below, 33% of the capacity have you been flown in AC21, in March, a year later, 43% 54% in March, 2020. So the A321 will become the core of the fleet, and and I think that's great news because we believe that this aircraft is unbeatable in terms of the aircraft economics compared to any other aircraft of any other manufacturers. So with that, I would just recap the presentation. So, another strong quarter, taking the, yeah, the 9 months of the financial year to a total of 303,000,000 net profit. They are quite encouraged by forward book what we are seeing, especially for Easter. We are hopping, capacity plan and the passenger growth plan We expect to deliver 25 percent growth on pest insurers, the 30,000,000 pecs in the financial year. That is significant expansions in, in London and Vienna, resulting from consolidation opportunities. We continue to invest into infrastructure and assets. We secured aircraft orders this will serve us, for quite a while with regard to the growth requirements of the business, but also we want to make sure that we control our own destiny when it comes to growing those aircraft and, by institutionalizing these pilot we make sure that we don't, remain just totally dependent on the market. But actually can also produce our own pilots. Our balance sheet has become stronger, quite a lot of liquidity has been created over the past year. And as I said, this growth, we're pointing you to, to take place, and we are just in front of our major delivery program, which we start on the 1st March, then wheels, day delivery, of 7th neck, October 17 weeks, which is fairly unprecedented not only for this but probably for the whole industry, but we remain very excited about the growth opportunities and the robustness of the model to actually deliver financial performance while we are growing the business 20 plus percent Thank you. Thank If you wish to withdraw your question, you may do so by pressing 02 to cancel. And there will be a brief pause whilst any questions are being registered. And our first question comes from the line of Christopher Combi from JP Morgan. Please go ahead, Christopher. Your line is now open. Good morning, guys. Just two questions for me. I saw a press interview, quote, this morning sitting that you expect no material changes in Fair Oaks in FY19. I just wanted to ask if that's if we should read that as your So the first take on on RAS guidance for next year, and in light of that, could you give us some sense of how you expect unit costs to develop in light of D and A normalization, and the rising share of 8 321s. Thanks. Okay. Yes, indeed, we don't necessarily see a dramatic change in the environment. I mean, you are seeing different factors affecting the fair environment. 1 is, certainly a very robust macroeconomic context of all markets for CN. Already commented on, we are seeing some of our markets, you know, with GDP grows over 6%, but even the slowest growing market is more than 3%. So it's it's very strong, economic sentiment overall. We are seeing a rising fuel price, which you know, based on empirical evidence, pricing input costs tend to feed through into a fair environment over time, but that's a longer term process. So it can take 12 to 18 months. So it's sort of pushing fares up. We are also seeing, you know, some capacity consolidation resulting failures of airlines. And obviously, they also have improved the fair environment, but at the same time, you are also seeing actually the back filling of that capacity electricity by airlines including the OSF. So, based on on on these factors, I don't think that is going to be a material change. Maybe there is some upside to Unit Avenue, but it's not going to be mind blowing. And if you look at the cost performance of the business, we expect to benefit from the AC21 rollout, definitely. I mean, this is going to affect over 10% of our capacity. So if you take 10% gain on 10% of your capacity. This is already giving you a company by 1% cost saving. There is headwinds and actually a number of headwinds, on labor cost. I mean, you are seeing a very clear labor cost inflation. Ultrasilope and some particular forces, are even more more affected like like pilots but but but clearly unemployment rates are down everywhere, and as a result, minimum salaries are increased by governments, especially in Central And we are seeing somewhere in the range of 5% to 10% wage inflation in in Central Europe, and we are not immune. So we need to react to those market forces and we need to make we need to make adjustments. And also you have the fuel, of course, a question how fewer goes, and we are expecting fuel to rise at some extent. But we're seeing that we are already in good position with the AC twenty one roll out. So certainly, we would expect, next year, of course, performance to be flat, slightly negative, and but overall cost probably is gonna gonna grow, slightly, because of the fuel component of that, but but we're seeing that, the revenue upside will be sufficient to offset that. So overall, we expect a fairly similar trading environment in terms of margin performance. That's clear. Thanks. And, just one last question. When we look to the order book, can you talk about the incremental benefits of ownership? How that may impact D and A and the finance costs on the margin going forward? Yes, I'll take that one. I think if you look at the as you know, all of our aircraft currently leased, on operating leases and the embedded financing charge on those can range from anywhere from today. 3, 4% to 7, 8% on the old leases. So, essentially, if you compare that to issuing a bond, I'm I won't give indicative prices. You you can see market what they're trading at, but you can certainly see there's a couple of percentage points, certainly on existing leasing deals. So by removing the lessor, will certainly be benefiting. I think it's probably worth highlighting on that point, IFRS 16. I think it's a hot topic. It's not something we're going to be out of the 1st April 2018. We've done the analysis. It doesn't really move the needle for who is there in terms of the numbers. So you can't I wouldn't expect any any big issues coming out of that. But then what's important is that the IFRS 16 will split out the ownership costs in terms of asset prices and depreciation. So the great deal that we've just done with Airbus, you'll see nice trends of depreciation, certainly for the long term. And then on the on the interest line, that will obviously be below a bit in the interest and the funding costs. So you'll see the existing funding costs. And so, when the, you know, whether it's on balance, you can find or even better lease prices, you'll start to see an improving trend. So IFRS 16 as a topic is actually quite helpful in giving a bit more transparency. Terms of ownership costs and funding costs. So I think I would model that. The timing though, Chris, I think you need to look a bit beyond mean, the first A320 was the the neos is Jan 19, you know, that we we still need to be convinced of buying the question on residual value. We're confident the aircraft are going to perform there in the air now, and the performance we see is excellent. So we're happy they're coming. But in terms of the next 12 months, it's not something I would put in your models. It's something more for fiscal 2020. Thank you. And our next question comes from the line of Damian Burrow from RBC. Please go ahead. Your line is now open. Good morning, everybody. Two questions from me too. First one, in terms of Q3 trading, obviously, slightly breathtaking to grow 24% and see unit revenues flat, almost slightly up. But within that, is there anything in the mix that you could call out as being particularly exceptional weaker and any feelings for what the reasons for that is and how that changes the way you evolve your growth strategy in terms of what you put the growth for this summer? And then the second question, and I'll give it to you all at once, it's just looking at your growth rates, when you've looked at other businesses that have grown at this faster rate, what have you learned from them in order to sort of avoid the pitfalls of any sort of overgrowth or over trading that we've seen in companies in the past. So you can just tell us what you think the risks are there and how you've addressed them? Thank you. Okay. With regard to QC, trading, I don't think that are big, big miracles, that simply simply we try to master operational excellence and sort of roll it out on a bigger scale. You know, many of the things, has become sort of a factory in, in our case, I mean, if you look at it, I mean, we are operating almost 28 basis in 16 countries. I mean, we know how to enter a new jurisdiction. We know how to set up a new base. You know, how to scale those operations. So I think the operating model is very intact and very well tested already. I mean, one of the challenges obviously is that we are seeing plenty of growth opportunities but we don't wanna overgrow, the business. So, I mean, you know, I I could even argue that, you know, we deliver 25% before we could have delivered 35% growth as well. If you kind of derive growth from market opportunities, but at the same time, you want to make sure that you actually can execute and you don't dilute the model of the of the airline. So we have been fearing these opportunities. And as a matter of fact, that forms of review you know, the business may be more rigorous than before. And we had been eliminating on the performing capacity. We had been intimidating on forming, basis. We we have an honest, a closer number of, small bases that we, we we set up, you know, a number of years back, just couldn't drive it to an extent, that, you know, they would classify as a scalable good businesses with, with good prospect for the future. So we took sort of the hard decisions on on those in order to make sure that, you know, we bring capacity that we have, a compelling opportunities. So I think we have been moving that kind of a portfolio to some extent But other than that, I think we've just been very focused on the, on the U. S. Eastern principles and we continue to seek those principles In terms of, learnings, I think it remains very important to us that we build a diversified portfolio of markets and we are further diversifying our business. Like 13, 14 years ago, we were totally reliant on 2 markets, Poland and Hungary, and we were quite vulnerable to, to external strokes, competitive incursions and all those sort of matters. Then we started diversifying across Central East. When I think we've got to another level of diversification now that you know, given the rising opportunities from consolidation investing in Europe on a very select basis. And some of the opportunities, I would say, you know, we are entering the Western European markets. Does it represent any shift from subsidy? Not at all. We remain focused and totally committed to Central Israel. And I would be expecting going forward that, the overwhelming nature of the growth we'll be deployed in, in actually, San Francisco. But, you know, as, we are a sizable airline and, and and we have been a significant presence in Western Europe as well. I mean, we are one of largest airlines in London. We are the largest airline in a number of Western Europe and airports. Obviously, we ought to look at those opportunities as they arise from consideration. But also, we are very keen on, on doing more further east 5 years ago, Israel was an onshore global market because of regulatory concerns. Now we are, the largest international airline in India, contributing to, to to 3 airports. So as those windows open up, we're gonna be there and we're gonna ferry the flag that effect. So I think you may expect us to do more in the east. You may expect us to do more in the west in the future, but the core we remain unchanged and we will be focused on Centurion, is 0. So I think the diversification method is, is certainly less than And the other lesson is that, we can push growth from a commercial perspective, but we need to take into account our capacity, you know, to execute that growth from an operational perspective. And, and and and we're seeing that, we probably got to the point now with this level of growth on a continuous basis. I mean, we have been delivering 20 plus percent growth for 3 years now, that probably this is how far how far we can go, and and rather than further stretching our sales operationally. We might have to be a bit more selective on the growth opportunities and also more rigorous on are reviewing the underperforming part of the business. Okay. Thank you. And just the, the Q3 trading, any, particular as to a better or weak in the average? No. I think at Joe's point, I mean, it's, it was fairly consistent across the board. I think December in particular, would say there was some operational challenges, so Joe highlighted conditions. I mean, Luton was shut for an entire day. We cancelled 77 flights. So essentially in Q3, we had nearly four times the amount of cancellations that we had in the Q3 fiscal 'seventeen. But in terms of the trading environment, on the back of a strong summer. That's sort of continued going through. It was pretty much in line with what we expected. Thank you. And our next question comes from the line of James Holland from Exane. Please go ahead James. Your line is now open. Hi, Manny. Thanks. Good morning. 2 quick ones for me. Just, I saw a couple of quotes this morning, which, to be clear, I haven't read, but can you just give us some clarification on how active you are on on the Alitalia auction, whether you've put in an offer or intern of the someone else and also how that would work for you. I think the one headline I did read is you're not interested in long haul, which is which is obviously Good idea. The second one is the your best unit cost performance, was also your your largest ex fuel cost line airport handling on route charges. So wondering if you could just, let us know if there's any particular detail on on why that was much better? Is it just scale, better airport deals, Am I missing something maybe on Forex? Thank you. Well, I mean, Oletalia is more, more smoke than fire. I mean, simply Italy is a significant market for us. Actually, it is the 2nd largest best in European market for for Giselle. So we hope to understand what's going on in Italy. We are very interested in Italian market, but not the Natalia Airlines, but given that there is this process, without Italia, we simply just want to understand the process and to see whether there are any opportunities resulting from that, but we have concluded nothing. So don't worry or don't get overly excited on that, but I mean, certainly, we have zero interest in anything, which is a long haul operation. We are assured for the airline flying point to point. It's a low cost model and we are speaking to the U SCC principles as I said. So, the only head interest in, in that model and with that operating platform. But I mean, you've seen a number of examples recently like, our ability to take over slots and, and airport stands, from from Monarch. You saw other airlines they, you know, taking certain assets over from feared businesses. So simply we just want to understand, you know, what's happening or what could happen we want to position ourselves for that, but that's it. And on the cost side of the equation, I think what's important to factor in is that we we have levers in our in our business essentially to manage costs. So where we see pressure on a particular line item, whether it's, whether it's labor costs or depreciation. You know, we have the leaders and the tools in the organization to move. So in the case of airports, you know, we always have a very strict policy in terms of, of making sure that if you go to an expensive airport, that's more than offset by a cheaper airport. And these are managing the mix and optimizing that mix can help you essentially deliver your cost performance, and it requires discipline. It's very easy Chase for expensive airports and chase yields, but that's not our business model. So if you look through our cost performance online items, there are levers in that next year, you know, moving into places like in into Vienna, Frankfurt. This may be an area where we've investing a little bit, but there will need to be other other line items that can essentially relieve that pressure. So I think when you look at our overall cost performance, I wouldn't point to a particular deal. Or particular volume. And I'd also add scale as well. I mean, I think as the bigger you get, the more volumes you get, the more passengers through an airport, you get, that certainly comes through. So the economies of scale comes through. The A321 itself doesn't actually benefit because that's on a per PAX rather than the aircraft itself. But there are things like turnaround. So you certainly do see a little bit of benefit coming to you on the A321 from, from that. But again, I think the way you should look at our cost base is not sort of single out particular line item, you know, we monitor and we look track trends. And if there is pressure on a particular area, the rest of the organization will need to absorb it in some form or another. Thanks very much. Thank you. And our next question comes from the line of Mark Simpson from Goodwood. Please go ahead, Mark. Your line is now open. Thank you. Good morning. A couple of questions. Just want to kind of understand the guidance for the year in terms of the implied Q4 loss of 23 mil. You've got an Easter effect which is a positive this year. I don't know if you could kind of give us a kind of quantification of how that, sort of falls in into the period. Or plus 10+15000000 maybe. And then that obviously suggests you've got, you know, greater cost coming in elsewhere. So I wonder if you can actually break that down particularly on the gearing up cost for the delivery of 17 aircraft over the Q1. So just understanding that, that Q4 loss that's implied in your guidance. And then just a question kind of Brexit related, obviously getting closer to the booking windows opening for post Brexit sales. What terms and conditions will there be in the printing you in your ticket sales post that March 2019 period. Okay, maybe I can take the guidance question. At a high level, there's no dark clouds on the horizon. I think that's what I would flag. I think what I would also say is that, again, if you've had a very strong platform with the first half going to grow faster. I mean, the 1st week of January as an example, we grew 31% in terms of capacity. These are months traditionally that you actually lose money. And I think we we had I mean, this is fundamental of our business. I mean, if you track back 12 months ago, where we were in a slightly different in market conditions, you can sit there and feel sorry for yourself, or you can grow through that and then have future benefit coming through into the summer. So if you you can scale back a little bit in, in Q4 and you can add a couple of 1,000,000 to your profitability, that's very easy. It's manageable but you're then sacrificing the profitability going through to the summer. I think if you track back to January last year, harsh operational conditions can deliver a 5,000,000 negative fairly easily and we saw that in December. We still have 2 months ahead of us. But I think fuel price is slightly higher. I think the dollar is sort of washing that, but I think there's a little bit of headwind coming through from the dollar. Taking 17 aircraft in 17 weeks, the lead time in terms of pilot recruitment, I mean, that's essentially started back in October. And before that. So there's a lot of the training centers that work in 20 fourseven, and opening up new bases as well where these aircraft are going to be going are adding some costs. With their UK as an example, will require some additional investments. The Class I transactions that we just concluded, that will cost a little bit of extra cost. So I think the general message is we've got we've had a very strong platform. There's no dark clouds on the horizon. And I think going forward, the pace of growth that we are pushing, I think it's sensible to leave the numbers as they are. Sorry to just change it out there, Joseph, but just in terms of the assessed Easter positive effect, what what do you, what number do you put on that? I wouldn't say that essentially it's half an Easter. So maybe if you go back to, there's always a bit of a sort of left pocket right pocket in terms of the Easter, It means you may have a slightly weaker February, so I wouldn't put a number on it, but if you go back to last year, it's around about half an Easter that you have this year. Okay. With regard to Brexit, I mean, you know, we should be pretty active in in the UK and to a large extent, this is all related to, to Brexit, but but also some of the things have their own merit, but we are setting up this at UK. I mean, let's say, an important contingency I mean, simply we don't know how Brexit is going to play out, but we want to make sure that, you know, we are planning for various scenarios and we're seeing that we position ourselves properly with having a UK airline as far as the European airline to deal with the situation. We remain very upbeat on London, especially. I mean, in 2017, we were growing 11% on passengers. And in 2018, we are growing 23 percent on capacity. So actually we are upping our capacity plan in London. Where we believe that essentially in difficult circumstances and Brexit could regarding difficult circumstances for the industry, lowest cost to be a prevail and win. And we're seeing that this is the position we should be taking in the UK and be ready for the situation and depending on how events sound forward, we could respond and we could react to those hurdles. In March 2019, at the start of the summer schedule deal have around 20% of all capacity designated to the UK. But in terms of terms and conditions, small printing, in the sales, any comment you can give us on that? No. I mean, I mean, you know, we are fairly transparent. I mean, if if we run a good business, then we grow that business. If we don't run a good business to shrink that business and we grow the business in London, that's such as that we are in good business. All right. Okay. Thanks. Thank And our next question comes from the line of Roshika Sarjani from Barclays. Please go ahead. Your line is now open. I just wanted to come back to the 17 aircraft in 17 weeks. As you very much said, Josephine, that's an unprecedented rate of delivery for both yourself and the industry. Can you maybe just talk around how you're managing execution risk associated with, you know, that program and what contingencies you have in place for the unexpected effectively? Thank you. Right. I mean, I mean, I think the largest execution of risk is the availability of Grew. For the, for the act. I mean, these 17 acts of dust pedicle or natural coming to gain, you know, we have a we have a a system of 28 operating basis across 16 countries. And this is really a sped, deep deployment, that helps us recruit, getting through and pilots and train them up to our to standard, as opposed to doing it in bond place. So I think just the shield diversification or delivery program helps us mitigate the execution of this. You know, we've already secured those other forces. I mean, you know, typical pilot training program is 6 6 months prior to, 2 operations. Typical cabin crew training program is around 3 months. So So, so, you know, all the crew needed to actually operate the aircraft, are in place already and they are under on the training and, you know, we continuously monitor head count and so far so good. So we are very confident that this is gonna get delivered. And let's not forget that some of the the other aspects of an airline operation like aircraft maintenance, which is another very significant, operating factor is an outsourced activity to, to Lufthansa, and Lufthansa is a large scale organization with good degree of diversification. And essentially, we kind of outsource the execution risk, but we just want to make sure that, you know, it is also a blue company who actually can deal with, such kind of an execution 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, and, and when it comes to supporting the expansion. Maybe to answer that, I think, touching on Mark's question earlier in terms of the ramp up. I mean, we need to have all of these crew essentially before the aircraft arrives. So there'll be a couple of months where there'll be would say a little bit of extra capacity, but of course, you have to pay for, take a pilot. So in terms of the sort of slight cost group, this is, I would say there's a longer training period So that's where there's a few 100,000 per month, which you'll be incurring of additional costs, but also the pilots are on your books, before those aircraft are being delivered. So sort of gives you a little bit of a flavor of why, why you're seeing a little bit of increase going into going into March, April time. Great. Thank you. Thank you. And our next question comes from the line of Manik Golad from Please go ahead, Monique. Your line is now open. Good morning, everyone. Just a couple of questions from me on the revenue environment. I may The first question on ticket revenues, obviously, we saw ticket revenues up 1.4% in the quarter. I was just wondering if you could give it a comment on the yield environment currently in the context of unit rising fuel prices and in some of the weaker likely unhedged competitors you have in the region. And then the second question was just on the ancillaries Ian, you're saying that value added and through revenue passenger are €2. The bags are driving negative 2.6. Maybe if you could just give a flavor of some of those value add ancillary revenues and, you know, what more you think you can do to offset some of that weakness from baggage. Sure. Maybe I'll start on the ancillary number. We introduced another suite of products essentially obviously geared to how to compensate. So whether it's the priority boarding or tweaking those products. So I would say, certainly the seating continues to improve, but we believe there's a lot further go on the seating. I think in terms of the baggage products, I think we were very nice when we introduced the policy. And I think, it takes a little bit of education certainly for our ground handler and our passengers to understand what what they should be checking in, what they should be paying for, what they can be bringing to the gate. Essentially, the last thing we want is to have to put 100 bags of the gate into the hole. So I think in terms of the bag fees, we need to do more work. We are doing more work, and that will be refined and certainly in terms of the implementation of that policy, but also refinements to make sure that we can start to see a reversal of that, that trend, which unfortunately has been going on now for a couple of years. But not for us, but for the entire industry, think in terms of the in terms of the revenue environment, I would categorize it as constructive. Fuel prices that are rising another bad thing. I think someone highlighted that we're exposed as an airline, a bit more than others given our very low cost base. We have a high proportion of fuel. Ultra low cost airlines don't mind high fuel prices. In fact, you have a lot of airlines that are actually starting to wobble now. And if it says sustain higher fuel prices, it gives us opportunities to to increase market share just simply by people disappearing off the face of the planet, which is nice from time to time. So I think I would categorize the revenue environment as constructive. If you look at a chart we we presented, I think, last May. Back then, we were contributing 16% of the seat capacity to our markets. This year, we're going to be doing 27% of the seat capacity. So certainly, we're a much larger feature in that. That does bring a certain element of pricing power, and also seeing our competition, whether it's challenges on crewing aircraft or whether it's simply higher fuel prices, the environment is constructed. There's still a lot of capacity coming to the market. And I think what's also very helpful is that in some of our markets, the demand is growing by north of 10%. So The markets themselves are absorbing the capacity. So that certainly gives a lifeline to to some of the weaker competitors. The higher fuel prices will certainly start to to have an impact. I mean, we've seen it trickle down the past couple of days. So who knows where the fuel price will go. Generally speaking, I would say that the revenue environment is constructed. And that's why we're growing at the pace that we're growing. Thank you. And our next question comes from the line of Andrew Lobbenberg from HSC. Please go ahead, Andrew. Your line is now open. Hi, Joseph. Hi, Ian. Can I just ask about brewing? You've been very clear that you're in good shape for this summer. And and into the future that the with pilot academy will be a good source of those offices, and and and that's clear. But how how confident are you about the ability to source captains? Because obviously when we look across at Ryanair, it's the experienced captains, which are particularly sought after. And as you grow very quickly, you need as many captains as first officers. A second question would relate to, the tax rate now. And and as you grow in the UK and as you set up with a UK, should we be imagining that your corporate tax rate, remains at the current Swiss oriented level, or or or will that face upward pressure? And just a third question fairly straightforwardly, are you able to tell us what your UK ownership on the share register? Thanks. Okay. Let's start. Let's start with growing. Yeah. I mean, the so so if if you if if you look at the kind of dynamism dynamics for the pilot force. So we are basing our subject on 3 pillars. So, to to develop our own cadets, through the the flight academic program, then to make sure that first officers are trained through properly to, to become ready to, to captain and promote to captain. And then to retain the pattern force, which is the most experienced part of the organization. So we are very confident that the the candidate program, with pilot academy and or training recruitment efforts will source the necessary number and necessary quality of pilots for for this. And we have a good system in place, that, trains of, 1st officers to, to, to captain, level fairly quickly. I mean, that's not forget that, you know, we are an airline with full, productivity. So we are getting very close to 900 hours. So approaching and extenders for captains takes us much, much shorter period of time than in case of our or most of our competitors And then we are very focused on retaining the, the tetanus. So I would be expecting that probably we can source 2 thirds of our capital departments in house internally, you know, based on promotions from within and we would be reliant on the market probably in the magnitude of 30 sense. Maybe we can do a little better than that, but I assume we won't do worse than that. We have not had issues with finding the necessary, and the right number of pilots for Puneet. I mean, we haven't been canceling for, you know, on availability of, of crew unlike some of our competitors and we are fairly confident that, you know, this program is going to take us where we need to do. Now if we account with some salary inflation, some pay inflation, and we are addressing that. So clearly, we need to we need to move in the market that helps managing gas station on the one hand, but also makes us attractive when we recruit for pilots. So that's that's that's the subject and, and looking at it for, 2018 early 2019, you know, where we have visibility we've seen the strategy works, it's going to cost us some money in terms of pay inflation. But all in all, we remain very competitive in the marketplace and we can secure the necessary resources needed to operate the airline, even the high growth state of the business. I mean, I'll take it from there. I mean, I think the other, the other thing to bear in mind is that wiz there is a place that people want to work for? Clearly, we need to make sure we're competitive in terms of pricing, but it's a very attractive proposition as an organization to work for. We have a great culture, and people like working working for Wizz Air. Onto the tax rate, I think Andrew is a safe assumption with Wizz UK as that business grows. Yes, the UK tax is gonna be slightly higher than Swiss tax rate. So in terms of your model, like, you know, you can assume that that number will be growing. In the early years, I mean, a magnitude, you're looking at nearly 350 people based in Newton in a fairly short period of time. So the startup cost, the initial cost, A lot of the routes will be new, so they'll be in there early years. So certainly for the short term, you know, 1 or 2 years, that number won't start to to creep up, but certainly that's something put in your models for the later years. The UK ownership at 29%. Lovely. Thanks. Thank you. And there will be a further brief pause for Any remaining questions are being registered. And assessing to be no more questions. I'll now hand back to your speakers. Q 3 tends to be slightly quieter. I think they were pretty solid numbers, pleased to stay, and we'll be back on the telephone lines with our full year results coming out in, in May. So thanks, everybody, for your time. And any questions, don't hesitate to contact myself or or ban it from, from the IR team. This now concludes our conference call. Thank you all for attending. You may now disconnect