Presentation followed by Q&A, taking questions from the room first, then anyone who's on the line, aiming to wrap up at 10:30. With that, I will hand over to József Váradi.
All right. Good morning, everyone. Thank you for coming. This is the report of Fiscal 2026.
[inaudible]
Okay.
Okay.
Are we good now?
Thank you. Yeah.
Okay. Thank you. Just a few numbers to start with. Pre-tax profit is up to EUR 27 million. Profit after tax is positive break even. This is in line with the post-close statement we issued. EBITDA is up 16% year-on-year, we've seen that underlying terms, the business is moving in the right direction. We carried 70 million passengers. That's a 10% uplift on this metric.
We are over EUR 2 billion of cash, net debt is unchanged, leverage has come down from 4.4x to 3.7x. Again, I think that's showing that we are heading the right direction here. RECR ratio is one of the highest in the industry globally with 36%, that's an improvement year-on-year. Maybe a few highlights in terms of what is underpinning the business as we speak. We have a good growth momentum.
You recall that we had to halt growth due to the engine groundings around two years ago. We have started recovering from this situation. You see that the number of aircraft on the ground due to the engine inspections has been coming down, 42 last year, 30 this year. We also think that the market will be favorable for Wizz Air, especially going into the second half, because we know that under the circumstances, the market will become somewhat distressed.
The industry will come on its back foot. What happened during the COVID recovery, agility plays a role. At Wizz Air today we are double the size of what we were pre-COVID. This is to a large extent attributable to some market acquisition acts that we undertook at that time, we are possibly seeing similar opportunities here. As said, the GTF is still around.
This is an issue which we keep carrying on, we have 18 months to go with that regard. We have been on plan to deliver the uplifting targets, for 6 - 8 months the plan has not changed, we have growing confidence that this is going to get completed as anticipated before. We are still expecting that by the end of 2027, calendar 2027, all aircraft will be lifted and will be flying. Of course, there is going to be more technical backing to the GTF operation in the forms of spare engines, there won't be aircraft on the ground.
We are much focused on managing capacity and growth in the remainder of the summer period, as well as looking into the winter period, where we are not in a position to guide given all the uncertainties. With that regard, we are falling in line with the industry. When you look at growth, I think you should appreciate one nuance that ASK growth is quite different from C growth.
This is the result of long stage lengths capacity having been removed, that's Middle East, and reallocated in Europe, which is a lot shorter stage lengths producing more sectors. The good news is that when you are growing through sector productivity, effectively you are delivering that growth at around 30% lower cost, simply because you don't have to absorb fixed cost to that growth.
It may feel a high number, but a chunk of it is actually coming in at very low cost, a lot lower cost than otherwise. We are at around 25+% growth to be delivered on seats. If you break it down to ASK, you recall that we were guiding actually capacity of the first half of FY2027 to be around 20%. It is 15% in Q1, and it's going to be around 20% in Q2.
The lower number for Q1 is the grounding of the Middle Eastern capacity. In Q2, all that grounding has been uplifted and reallocated predominantly to Europe, and we have started reinstating 30% of the Tel Aviv capacity as well. Most of the Middle Eastern capacity is now flying in Europe. Let me just reiterate the medium-term expectations from the business.
We have been discussing this, I would like to reconfirm this. We are looking at 10%-5% medium-term growth. You recall we said that this year will still be high growth, we affected the aircraft delivery program with Airbus to get this moderated growth rate to kick in as of the next financial year. We are improving network densification.
That's relevant because especially if you look at where we are growing in Europe, we create more sectors, we create more dense products that attracts more business passengers, higher-yielding passengers. That also improves the revenue line, not just the network integrity and the operational metrics. We are coming to the end of the A320ceo cycle. We still have roughly around 20% of the fleet to be recycled. That will get completed over the course of next two years.
In a way, if really think about this, in 18-24 months, you will have the stars realigned again, having the whole fleet flying and having basically the whole fleet converted into new technology aircraft, A321neo, creating significant economic efficiency. Next slide, please. Let me just recap where we are on the strategic initiative. We were discussing the issue around some of the underperforming parts of the business.
We closed Abu Dhabi last year. We closed Vienna earlier this year. We are rigorously reviewing our performance in light of profitability as well as in light of cost of doing business, especially the high-cost airport environment. You may expect some more to come with that regard, we are clearly addressing these structural issues in the business. Airbus order book.
We have communicated that it is already set for accommodating the medium-term growth expectations that will kick in as of next financial year. We have shifted the delivery lines on the existing order book. We expect to have 335 aircraft by the end of fiscal 2030, so in good three years from now. That will deliver 7% fleet growth, around 11% [CASK] growth.
The difference, of course, is that we are lifting the grounded aircraft due to the GTFs. That creates growth capacity for the business. I think that is in line with our previous communications of how we are seeing the next few years to play out. XLR is over, to put it very simple. We are no longer pursuing an XLR soft fleet or an XLR network. Effectively, the 11 XLR aircraft are forwarded into the A321neo operations.
It is a little higher unit cost as a result of the weight of the aircraft, but still lower production than the A320ceo. This is not a bad aircraft. I mean, this is a good aircraft. It creates, as we said, operational contingencies for the business. Should we have airport closures and detouring and stuff like that, you don't have to land for fuel stop, but you can continue with an XLR because that gives you more range.
As such, XLR operation is over. We are not talking about XLR any longer. We are not talking about an XLR network or an XLR soft fleet or a specific operating model for XLR. It's all forwarded. You look at the network realignment. Quite a year behind us, and in front of us, we have made announcements of a number of new bases.
Eight bases that opened in Saint-Denis, Europe. New Italian bases were added to the system, like Turin and Palermo. We continue the densification of the network, delivering more sector productivity on the one hand, but also creating the opportunity for tapping into higher yield demand as discussed before. The GTF related on parking of aircraft, we are down from 42 last summer to 30 this year, due to the powder metal issue recall that all of a sudden started affecting the business good two years ago.
That's another 18 months to go through this cycle, and we are on track with where we were then. With regard to fleet technology, as you know, we are doing two things in parallel. We are renewing the fleet from ceo to neo on the one hand, and we are upgauging the fleet from A320ceo to A321neo.
Those two initiatives go hand in hand with each other, and in about three years from now, the fleet will get converted into A321neo effectively. With that, I would hand it over to Veronika, please.
Yes. Thank you, Joe. Good morning, everybody. For those I did not have a pleasure to meet yet, I'm Veronika Špaňárová. I'm CFO of Wizz Air. I have been four months into the job, which in the dynamic world of aviation seems much longer than that. But it's great. I am also glad that Ian is here.
Ian was in my seat for the past couple of years, has been promoted to the role of Chief Commercial Officer, but has been great help and support for me in my first weeks and months of the role. What I will do is, I would like to summarize the FY 2026 financials, and then Ian will talk about our commercial initiatives, and then we will be happy to take the questions. In a nutshell, what do we see in the FY 2026?
I think that there are two messages that we would like to point out. We continue execution on our strategy, which is the focus on the core markets in Central and Eastern Europe. I also believe that you do not see any surprises in the numbers. This is what we have communicated before. Couple of things to point out on this page. Solid revenue growth year-on-year by 8%.
This is a combination. We see the ASK increase of 8.5% and the seat capacity growth of 10.5%, and this is what József was alluding to as well. The difference between these two capacities show the impact of the higher gauge aircraft and also 1.8% reduction in our average stage lengths. Again, that goes back to the deliberate network refocus to densify the routes in our core Central and Eastern European markets.
RASK and the load factor were broadly flat year-on-year. This is in line with the outlook and with the guidance which we gave before. EBITDA margin increased by 1.6 points to 23.2%. This is highlighting the cash generative ability of the business. If we go to the next page, please.
Let me walk you through the main messages of the costs. Again, no surprises here, and we are being consistent with what we have communicated before. A couple of highlights which I would like to make. Total fuel costs. You see a decrease of the fuel cost and notably decrease in the fuel unit cost by almost 10%. It has two factors in that. We are talking comparison FY 2025, FY 2026.
The market prices decline in that period, also I would say very importantly, the increasing efficiency of our fleet and the resulting lower cash fuel burn as we are renewing our fleet. NEO aircraft is now accounting of 77% of our fleet. You see an increase in the maintenance costs. Here, I would like to point out that this is largely due to the fact of the EUR 83 million accrual reversal which we have seen in FY2025.
That is increasing the year-on-year comparison. If we look away from this accrual reversal, the maintenance costs would be about 3.2% up. Depreciation also was higher in the line with the expectation, and this is reflecting the re-deliveries of the CEO aircraft and the resulting capitalized costs. On the other costs, what I would like to mention, two things. We see the higher sale and leaseback year-over-year.
We saw in FY 2026, 33 aircraft and 18 engine sales versus 16 and 10 respectively in the FY 2025, and that is helping to offset the fall in the compensation cost as our aircraft are gradually ungrounded. What is positive, what I would like to point out here is the decrease in the disruption costs, which is reflecting very well on our operating performance. The next slide, please. With regards to FY 2026, we generated almost EUR 1 billion of the free cash flow.
This is a 22% increase year-over-year, and this is even after the repayment of the bond of EUR 500 million, which we did in January 2026. Net CapEx benefited from the adjusted PDP schedule and the timing of the sale and leaseback. You see the improved leverage with the net debt to EBITDA going to 3.7x from 4.4x.
Final point which I would like to make is around our hedging position, which, as you know, we have the hedging policy and program that we are executing on. At this point, as of May 29th, our first half FY 2027 jet fuel needs were hedged 84% with a cap of $826 per metric ton.
The winter hedge position for the second half of the year stands at 71% with a cap, $819. Apart from hedging the jet fuel cost, we are also hedging the FX exposure, which loan book is now hedged up to the 83% of the US dollar lease exposure. This would be the main highlights, and now I will pass over to Ian. Thank you.
Thank you, Veronika, and welcome. Good morning. On the next slide, we've spent a lot of time hearing people in the industry talk about what the change in consumer behavior has been following the Iran conflict, and people have said, "Oh, people are waiting and seeing and booking later."
I thought that that was rather anecdotal, so I wanted to pull some data just to see exactly what was happening and also to track that behavior going forward. You can see that in January, this is the shift in RASK generation. This is not changes in RASK. In absolute terms, RASK. This is when the RASK is generated through the booking curve.
In January, for example, you can see that in the dark blue bars, we were seeing almost 1% of people were booking earlier in the three - eight week period, and there was a decline of 3.3% of people booking in the last two weeks. People were booking earlier in January and February, which makes sense because people were coming out of winter and starting to think about what's happening in spring.
Because of the changes and the deliberate modifications of the network that we've been making over the last couple years, we're seeing a bigger segment of leisure, changing demographics of people flying with Wizz. Those people were booking sooner. Okay, you saw that this was happening January, February. Of course, at the end of February, early March, the Iran conflict happened, you saw that there was a flip in the numbers.
People are taking a much more pronounced wait and see approach. A lot of instability in March and April as well. There's other things happening as well during this period, such as Easter and other holidays, but you can see in general that there was a trend towards people booking later. May came along, and June's now 11 days into the month, and we're actually seeing June look similar to May, where people are going back to this planning phase.
They're no longer adjusting to the news cycle. They're regaining confidence and looking forward to planning. That means that for us, we no longer need to worry about the firefighting, which is what's happening as people's behaviors change, we're trying to predict and anticipate what's happening. We can go back to more deliberate and more measured and more strategic long-term postures.
That's a bit of backdrop that I wanted you to understand. If we believe, which we think that notwithstanding the yesterday's news and today's news and tomorrow's news, we think that people are taking a more planned approach, that gives us more confidence to be able to look forward and to think about how we're going to deploy this capacity that we have into this half into the next half.
Next slide, please. In terms of commercial initiatives and where we're putting our focus, we spend a lot of time talking about our network design and our grow better strategy. We pulled out of the Middle East, as József mentioned. We're looking at where we can focus on airports with the right cost base to comply with our ULCC structure.
We think about productivity in particular, how we can think about our overall network design and the KPIs that we're looking to unlock with the network. We're seeing more aircraft unparked than we anticipated last December. We're seeing more focus on sectors in Europe, more focus on markets that give us the profile that we want.
We've been very active in Italy in particular, deploying a lot of capacity there because it fits the model. We can be focusing on shorter stage lengths, generating more seats, focusing on better cost management, and we'll look at other markets within Europe that have that characteristic. We're hunting for those markets so we can deploy our capacity, not so much into exotic exploratory markets, but into markets where we can drive efficiency and start to think more about our customer segmentation. Who is our customer?
How are they being served, if at all? How can Wizz serve them better? Those are the sorts of questions we're asking so that we recognize the sheer scale of Wizz nowadays with 266,667 aircraft in the fleet, with what we've accomplished and what we've become, and how we can become less of a weekend alternative, but more of a daily choice.
The network design really is the core of the cost management and the cost delivery. I think you'll see that once we get through some of the challenges with retiring the A320ceo aircraft and the maintenance costs that come along with that and the higher depreciation that those aircraft carry, you'll start to see some of the improvements come through, as József mentioned, into next year. Reliability is also something that we should be acknowledging.
You can see that, I've pointed out what happened in May, I've also pointed out what's happened in this year's fiscal year to date. We're no longer low on the rankings. We're at the top. We're doing very well, and that's a combination of sheer discipline when it comes to our operations team. I want to recognize them for all the hard work that they put in there, and all the lessons that we've learned over the last couple of years.
That will help us on costs. You can see that come through on the cost line FY 2025 to FY 2026 in the form of lower disruption costs. While we're doing better in terms of keeping those costs down, what we're seeing is that there's a hangover. There's claims from prior years that are still affecting current years.
Once we eliminate the poor performance and stop generating new claim opportunities, and the legacy claims finally are processed, then we should see that number be even better. Reliability drives cost.
On top of the fact that the network design will help drive the cost because the network design gives us more opportunities to have standby crew, resources when it comes to maintenance, resources when it comes to aircraft, all that stuff will work together to deliver this lower cost base. Also, what I think that we need to recognize is that reliability also drives the revenue line. People will pay for performance.
People will pay for schedule quality, for convenience, for having more options, and that's really going back to the network, thinking about how I can grow better, have more density, provide more seats, more options, and become the first airline that people think of when it comes to flying on Wizz. Lastly, we pioneered something together with Starlink, with SpaceX, in the form of what's called Starlink Managed. It's a ULCC solution, and that is very exciting.
We just announced it on Monday. I'll pause because I'm sure people are going to want to ask lots of questions around that. I think it's important to point out that what it is, it's a product designed for ULCC principles. Under the traditional model that you're familiar with, Starlink is typically offered by airlines for free. That won't be the case. There will be a cost.
Starlink will be managing the sales. We think Starlink are experts in managing the sales of internet connectivity, not Wizz. We will be managing the ancillary opportunities that come with that. Any notion of OpEx cost that you have in whatever you've heard from other airlines, I think you should assume that those are overstated. Again, focus on the ULCC nature of this.
When it comes to CapEx, I'll stress, Wizz was part of the design of this product. We designed it in a way to work for us. When it comes to the fuel burn, I think people who have put forward estimates of fuel burn, they were wrong in their analysis. Simple as that. We've looked at it our way. We've collaborated with SpaceX. You can see on their website what the fuel burn estimate is, and you should rely on those numbers.
Thank you, Veronika.
All right. Let me take it back for the last. Next slide, please. This is what we are seeing for the first half of the financial year until the end of September. Capacity-wise, as we have commented on, we have Q1 with 15% ASK uplift, translating into 25% more seats. This is due to the grounding of aircraft and more European flights by design, irrespective of the Middle Eastern situation.
There is a bit of a catch-up in Q2, given that the Middle Eastern capacity gets reinstated there. ASKs are up 20%, and a 25+% seat growth is to be expected. At that point, 30% of Tel Aviv capacity is back, and the rest would be flown in Europe. With regard to RASK, please take into account the Easter effect in Q1. That's a significant distortion to the other numbers.
We are expecting Q1 RASK to be mid-single digit towards high down. We will see how exactly June is going to be completed. Q2 RASK is expected to be flat, around flattish performance. Load factors are expected to stick to last year's performance across the whole of the period.
With regard to costs, as Veronika said, we have most of our fuel requirements hedged for this period, we are expecting cost ex fuel to be flat, maybe a little up, but we are trying to do as best as we can to make sure that we contain that exposure. I think that closes the presentation. Now back to you for questions. This is the best seat.
That's what I choose.
Morning, it's Harry Gowers from J.P. Morgan. If I open with a Starlink question, if you could just talk about the economics around it. I don't know what the easiest way to talk about it is, maybe sort of cost per seat or cost per aircraft, then how you think about monetizing it or how much to charge for using it.
Second question, your capacity deceleration normalization, I think, has been pushed out by 6 - 8 months, as said on the outlook slide, from winter into next summer. Maybe first, how much capacity growth might we expect at the moment in winter year-over-year? Why has it shifted, and under what sort of environment or fuel price might you consider having to withdraw that growth? Thanks.
Maybe while Ian is thinking about the SpaceX issue, let me comment on capacity for winter. I would say that there are at least three factors affecting winter capacity. One factor is that we are expanding onshore sectors quite a lot. This is a matter of design. That flows through the winter period.
Generally, notwithstanding that whatever ASK growth we would be delivering, that would translate into more seats. The seat growth is inflated over ASK growth, just as a matter of designing the network, especially focused on short route, a lot of Italian domestic, also a lot of other short routes. That's one factor. Second factor is that now we have the confidence how we're going to be uplifting the grounded aircraft, and that will continue to happen through the winter period as well.
We have a very, I think, well pinned-down plan to make it as gradual as possible because we also have to manage our own maintenance capacity and crews in order to be able to take the aircraft back. You have to put the aircraft through maintenance, you have to crew the aircraft, and it is gradually spread across the remaining 18 months.
This is pre-programmed, and that is affecting winter capacity. The third thing, which is a bit of a flow over from last year, from last winter period, we cut capacity last winter. We felt that given the uncertainty around some of the market issues, we would be more prudent to cut capacity to avoid cash negative flying.
That capacity is now coming back, and we're seeing that we are able to churn the network as such that we are able to uplift our financial performance on that basis. These are the three sources. Winter will be a high growth environment. You, I think, also need to look at the flip side of the equation.
I see the flip side of the equation is that this year, 2026, is going to be a year of two halves. You see very different market behavior in the first half versus what you're going to be seeing going into the post-summer period. Post summer, you will see airlines forced to cut capacity and increase fares.
Depending on where you are at with regard to your exposure to cost, your exposure to fuel spike, and your ability to mitigate all of those with cash, hedges, and technology, you will come out differently here. We're seeing that second half of the financial year will represent significant strategic opportunities for the business. We expect market vacuums, we expect airline failures.
We expect significant opportunities to rise for Wizz, very similar to what happened in the COVID period in 2020 to 2021. Actually, those two things are getting aligned. Yes, we have high capacity growth, but I think it's going to go against high level of opportunities for the business, given the distress in the industry. Don't forget that from a ULCC standpoint, the bigger the crisis is, the better off we are.
Okay. In terms of Starlink, you can appreciate the terms are confidential, but it is so exciting and so unique. I think it's first important to recognize where the world is going. People, whether you like it or not, maybe if you're my age, you like it less, but you're going to be connected. We are an ever connected society. Recognizing that this is where the world's going is important.
Also, I think that from a differentiating perspective, having Internet when no one else does is also something for attracting the new generation of travelers, those who are going to have a much more higher propensity to travel. SpaceX really wanted to work with Wizz because of our seat production capabilities, because of our high utilization, because of our ubiquity, our potential to put them in front of passengers.
Obviously, SpaceX has other ambitions than just doing in-flight Wi-Fi. That's really appealing in creating this win-win environment that we could tailor the solution for. I'm not going to be able talk about cost per seat, but what I will be able to point out is that from a position of strength, what we do well is fly, is create ancillaries and create ancillary opportunities.
What SpaceX does well is provide the fastest Internet available in the sky. We wanted to make sure that we went with the best and that we were future-proofing this business for the next decade or so. We have a model where, like I mentioned, SpaceX is the vendor. SpaceX manages the portal. SpaceX deals with the sessions.
The model is designed to make sure that the cost for the passenger is affordable, just like our fares. While it may not be free like you now have seen what's happened in hotels and airports, it is designed to be affordable, and it is designed to put as many people as possible in front of the Internet. What that allows for us is an ultra-low-cost solution so that we don't have the traditional operational expenses.
We do not have the traditional CapEx profiles and hardware hurdles that come with the installation. What we are able to do is create ancillaries around that. I think everyone's now pretty accustomed to paying by phone, tapping by phone, and accessing payments through that platform.
Bringing that onto the plane allows us to do all sorts of things on the plane, whether it is processing credit cards in the sky that we otherwise couldn't do, exposing ourselves to fraud. Now we're no longer exposed because we can determine whether the customer has a balance in real time.
That allows us to lift the caps on in-flight sales, which means that we can sell more and reward our crews more in terms of what they're doing. We can run promotions in the sky, both on our own products and our own flights, also with partners, whether it comes through our hotel, options on our app, or whether it comes to destination marketing, destination transfers, excursions, things like that. We can do all sorts of new retail concepts.
We can also access a lot of the inventory that is spoiled the moment that the door has closed traditionally. If there's empty seats and you don't fancy your seatmate, you can automatically buy that seat while in flight and move. That was a revenue stream that we couldn't access in the past. There's all sorts of applications that we're in the process of designing.
One of the things we have right now is in-flight ordering now on our app. You can do that now without Wi-Fi. You can beat the galley cart and get your product, you still have to pay with the POS. Now we integrate the payments into that, it creates a lot more efficiency for the onboard experience as well as for the customer. That's where we're going with that is the ancillaries.
SpaceX wanted us to find a model that allowed us to maximize our ancillaries so that ultimately we're happy with the product, they're happy with the product. Installation should start across the fleet in the beginning of 2027 and roll out through that year, it'll ultimately affect the whole fleet as soon as we can get the installation schedule pinned down. I hope that answers your questions.
It's very much designed for ULCC. We very much designed it with our input to make sure it worked for us. It is not the free Wi-Fi model that other airlines, I think there's more than 30 now that have it. We're the only one that has this Starlink managed approach. We're thrilled to be able to announce this.
I would just add one more aspect that we are a fairly large airline for purposes of SpaceX, we're going to be closing out competition here, simply because our installation will occupy the capacity of SpaceX. Anyone else's ability to try to match or anything like that will be limited, at least for a certain period of time.
We're seeing that we are building a competitive advantage here. This is the same what we did with Airbus when we ordered back in those days, in Dubai. We blocked over 10% of Airbus's capacity, which I think creates difficulties for all others to try to come in and match.
You see that what happened in case of Airbus that we got our delivery stream, when they were talking about other airlines, they were really pushing back the delivery stream quite a bit. I think something similar you might be expecting here as well. I'm pretty sure that this model will not stay unique to us forever because I think it's a very good model.
It's very efficient from our standpoint. Some others will be smart enough to recognize that there is something in it. Their ability to implement will be limited, because simply we're just going to be blocking them out, as a result of our scale and implementation.
Thanks. Alex Irving from Bernstein. Two from me, please. First, I want to come back on the winter capacity plans. Just because we're up less than the grounded aircraft, just because we cut capacity last year doesn't mean you have to fly the planes this year in a higher fuel price environment. Of course, every marginal flight happens at spot fuel.
The question really is what metrics are you focusing on primarily to steer the capacity you're looking at? Is it getting cash down? Is it just cash contributing flying? Is it more of a long-term strategic positioning focus? Why is the capacity growth accelerating the right move here? Second question. Once upon a time you were keen to grow more and more in London Gatwick. We'll see the news on easyJet in the last couple of weeks.
If slots were to become available in Gatwick over the coming months or quarters, would you expect to be able to be the highest bidder for some of those? Is Gatwick too high cost now as an operation and the current strategic focus and no longer attractive for growth it was?
Yeah. Maybe I'll start with the second one first. I don't think the Gatwick would list too high on our priorities with regard to growth in the future, Gatwick has two issues in a way. One is that it's an incredibly high airport cost with constraints. That limits our ability to refine the operating model and get the maximum efficiency out of the operations at Gatwick.
I think that's one look. Two, now this historic with the APD charging thesis by the U.K. government, which is everything but too smart. I understand that the government wants to create funds for other purposes, but I'm not sure that this is the best way to achieve that. Whatever it is, this is not our decision of course, but we have to process the consequences of the decision.
With that, I don't think that Gatwick is going to be very high on our priority for any purposes, and whether anything or nothing is going to happen to the airline you mentioned, I don't know, but I don't think that's going to change our appetite for Gatwick.
With regard to capacity in the second half, I think it's a very good question, because you have to effectively contemplate two issues. One is manage the business for profitability on the one hand, but also manage the business for strategic opportunities on the other hand. Those two things may go hand in hand or may go against each other. This is something to be seen.
We will always have the right to be sufficiently opportunistic, if you want to put it this way, that if opportunities arise, then we want to be in position to act on those opportunities. Remember how we got to Italy in 2020. All of a sudden, because of the COVID circumstances, the entire industry moved backwards, created significant panic in Italy and that made some deals, airport deals attractive to us, which these wouldn't have presented themselves otherwise.
We felt that that was the right way to act on the opportunity against a very big bank competitive backdrop. We don't know how exactly the situation is going to play out this time around, as we have some expectations and of course you do some calculations and planning around those sort of matters.
I think we want to be sufficiently opportunistic to see what is happening and act on the basis of the facts as opposed to just intellectual contemplations. In terms of managing the business for profit, that's a very intact principle flowing through. What we are not seeing today, but I think we're going to be seeing it in a few months from now, that you will see more capacity discipline at industry level coming into play in the second half.
You will see airlines cutting capacity significantly. I think supply and demand will readjust to a new equilibrium, to a new balance, and that will push fares up. Then the question is how each of the airlines are affected. We are basically well hedged flying the latest technology, burning the least fuel on a unit basis, and we have significant cash on hand, what we can mobilize.
I think that should set us aside from most of the industry. I'm not saying that we are the only one in that position, but I think that should set us aside from many of the other players. In parallel, we should be able to raise fares as needed to cover the incremental cost, but also act strategically if opportunities arise. I think you have these two levers to play with.
Morning. Jaime Rowbotham from Deutsche Bank. Two from me. Firstly, Joe, the CEO of Airbus has been saying that.
Guillaume?
Pratt & Whitney has been so focused on the powder metal issue and the maintenance issues on GTF, that they're now at risk of not producing enough new ones quickly enough to then deliver their plans for ramping up A320neo production. Is that something you're keeping an eye on? Is that something that concerns you at all when you think about the path to having 100% NEO fleet?
Secondly, Veronika, I wondered if I could get a steer on maybe a couple of items. The first is sale and leaseback gains, so EUR 250 million in FY 2026. Looks like a similar-ish number of aircraft deliveries in FY 2027. I'm not sure where you are on the engines, but should we be expecting a headwind or a tailwind on that line item? Finally, CapEx. Joe, you just mentioned the significant cash on hand that Wizz has.
FY 2026 was an unusual year with a EUR 780 million credit on the net CapEx line. Should we be expecting something similar in FY 2027 on CapEx, given the various moving parts? Thanks.
Maybe I start it off with the GTF issue vis-à-vis Airbus. To be totally honest, our interest as Wizz is to get the existing fleet fixed before we embark on a new aircraft, because that would just incur additional capital cost to the actual business by grounding existing capital investment. If anything, we are pushing Pratt to the direction what Airbus may not like, but we do, because we think they have to fix their own issues before they move on to the next chapter on life.
Probably the good news is, from a Pratt & Whitney perspective, that the other guys are not doing much better either. This is quite a problematic supply chain as we speak. We want Pratt to fix our issues with the fleet on the ground right now before we start worrying about any other things.
Frankly, by the time we get to the end of 2027, largely our fleet will get converted into A321neo in any event. I think the conversion at that time will be probably 90%-plus. We probably will have another year to go to fully fledged the process of renewing the fleet from CEO to NEO. I have to say that personally, I'm not overly worried. We have our restated delivery stream with Airbus.
By and large, Airbus has been delivering against that stream, and we don't expect major issues coming out in the future either. You may have a few weeks of delays here and there, but this is not major, I don't see that this is going to jeopardize our ability to induct capacity as planned. I'm actually fairly relaxed by that, but I understand Guillaume's frustration.
Okay. A couple of points on the sale and leasebacks, which are in the other line. In this year, we expect the sale and leasebacks to be at a similar level year-on-year. We do expect the decrease of the compensation, which is in line with the ungrounding on the aircraft, and the disruption cost also to performing very well in line of the last years. On the net CapEx, yes, this was EUR 780 in FY 2026.
We expect a lower number this year due to the lower number of the aircraft deliveries. It was 39 in FY 2026. Will be 31 this year, and as such, the extent of the PDP rebates will be lower. This will be a lower impact in the FY 2027. As we said previously, over EUR 2.1 billion of the cash position, which is a comfortable level.
Thank you. It's Jarrod Castle for UBS. I'll probably limit it to one, just given the time. You've got your CMD coming up in September. It doesn't sound like, or maybe I'm wrong, there's going to be a change in how you finance between finance leases versus other forms. Can you talk a little bit about what topics maybe you're going to cover and especially looking forward, some of your competitors, easyJet's got a PBT target, [SOX Packs].
Ryanair, obviously, 12-14 net income target. How do you think you stack up in, let's say, a normal market by 2030? I don't know if there is a normal market for airlines, but where, in terms of your ambition, would you like to get to? I think somewhere around EUR 5 net income you've got to in the past.
Yeah, if you could just give any color on CMD and maybe thinking about future profitability per packs. Thanks.
Maybe I'll start it off, and please feel free to add. Just the last point you raised, I think we are looking at net income and net income margin as a primary metric to drive. We understand that due to all sorts of issues, we are not at the level where we would like to be, but we think we have a plan in place to get there.
We want to deliver double-digit net income margin as we used to be talking about before. I don't think that has changed. With regard to the CMD substance, I think we have a lot about kind of transitioning ourselves through the issues we have been facing. We are geopolitically affected, we are supply chain affected, and we are also fleet transition affected.
I think we want to clarify how exactly those issues we were about timeframe wise and economic impact on the business. I think we also have a lot to talk about markets that have been shifts around that. Going into COVID, we were a Central East European, pretty much pure Central East European business. Coming out of COVID, we became a lot more diversified. Some good decisions, some bad decisions.
If you want to put it face value, I would say that you certainly challenged our decision, but that's behind us. You certainly challenged the A321XLR decision, but that's behind us now. There might be a few other things you may challenge, and I think people want clarity how we are moving on those lines.
We also want to give you clarity on some of the other levers, which we think are fundamentally underpinning the ULCC delivery of the model like pre-utilization, like group productivity, like airport cost and what are happening and how the market evolution is kind of underpinning those ambitions to make sure that we are back to worst standard performance be that regard.
I think, the kind of how we are going through the transitionary matters, and how we are solidifying ourselves in terms of underpinning performance metrics. What matters in terms of some of the market issues and some of the underpinning ULCC deliveries.
Maybe I'll just comment on the sale and leaseback approach. I think that under the circumstances, with all the uncertainty that's going on and under volatility, that we'll probably be focusing on how we can best prepare the company to take advantage of the opportunities. Joe mentioned the fleet, right? We have capacity to deploy if we need to when those gaps that create them, they present themselves.
We want to make sure that we have cash and we're doing things that we're looking at all sorts of ways to be able to establish a war chest, to be able to go after the opportunities when they present themselves. That I think is the best focus right now. Also managing our leverage. You saw that our net leverage came down in the fourth quarter, and so that's something that we want to continue to strive towards.
Ultimately, we need to focus on what's right for the company in the particular circumstances. Right now, under the circumstances, we think that putting the company in a position of being able to act and deploy, especially with this growth that we have ahead of us in terms of seat growth, is probably going to be the focus for the CMD.
Will you give some financial targets over the medium term? I don't know if it's for you, József, or Veronika, or
Net profit and net profit margin.
Okay.
I think that's where we are focused on.
Great.
Muneeba Kayani from Bank of America. I actually wanted to go back to your leverage comment. You are at 3.7x now. I understand you have gross cash and most of the debt is lease liabilities, but how are you thinking about your balance sheet, where do you want to get to and how do you plan to get there?
On winter capacity, we have heard from other airlines as well. Everyone seems to think someone else will cut back on capacity. How do you think this will work out, and what are you hearing from the EU in terms of regulation around the slot rules? Will there be some flexibility on that front to allow airlines to cut capacity?
I am happy to pick up the second one. With regard to winter capacity, yeah, everyone's waiting for the order to bring, but I think there is more economic determination here than that. I don't think this is just a poker game. This is more than that. You have a lot of empirical evidence in previous circumstances how these things work out. What do we know?
We know that situations like this will make those airlines fall first on capacity or maybe as a whole, that don't have enough liquidity. They are exposed to the market, they are not hedge covered, and they fly old planes. When those airlines flying 15-, 20-year-old airplanes, they are very exposed because those airplanes are thirsty. They drink fuel like fish. Against the high fuel price environment, that's a significant exposure.
You can scan those airlines, how much money they have, how well hedged they are, and what kind of a fleet they fly. I think you can create your own categories who are most exposed. These airlines tend to be not backed by states. They tend to be small, under-capitalized private airlines.
They don't have credit ratings, they don't have access to capital, et cetera. That's the first category where you should be expecting some problems to arise. You have the state sponsored carriers, the big guys. Those are the first one who will run to the German government or French government or you name them. They will show hands that they need money to be bailed out, and they get bailed out.
We learned it during the COVID times that they get bailed out, but we also learned that they are forced to make some rational decisions. They will have to rationalize capacity. I think you should expect that category to act somewhat rationally, notwithstanding the fact that they will be helped by their government. You probably have probably not more than two airlines in Europe that will take the play that gets created as a result of that.
They will jump on these vacuums created, and they will gobble up the opportunities, and we are one of them. You look at our entire history, we step changed our positions during crisis times because there are two things happening in a crisis, and I think the second half of this year is going to be a crisis. Two things are happening.
One is that competition gets weak. Two, the customer downgrades from high cost to low cost. This is the opportunity that gets created for an airline like us, and we will be well-positioned for that. As said, we will have a purchase to be able to activate them.
Of course, the way we say it internally that when you wander in the forest and you bump into a grizzly bear, you don't have to outrun the grizzly. You have to run faster than the guy next to you. The grizzly is there, but we just have to run faster than the guy, and I say we are running faster than the guy next to us.
Well, that's me.
Our leverage.
Yeah. Yeah, that ties into the question from Jarrod, right? If we do switch the financing model, that'll drive leverage up, then that impacts our cost of debt and also our cash availability. At this point, look, we're trying to get the leverage down. Our ambition is to get it back to two so we can regain that investment grade because that makes a lot of things easier when it comes to talking to vendors and to describing the business and to presenting things to the market.
You just simply say, "Here's the rating, please focus on that," and it makes all of our lives easier so we can focus on running the business. Why did it go down? Well, we had a very healthy cash generation helped by certain things, but still a healthy cash generation, and our EBITDAs going up.
We can continue to deliver on the cash generation, which we will because we'll be growing and there'll be opportunities there in terms of forward sales. If we can continue to focus on the net debt number, then I think you'll see that progression. Yeah, there's all sorts of complications that have delayed the speed of reaching that, and now we have this next crisis to deal with.
For us, it's about making sure that we are able to take the market share, own the market share. We're number one and number two in all of our markets. We just took number two in Italy, and we'll be going into markets where we can quickly try and get to that positioning and deploy, most importantly, the productivity around that.
The productivity will ultimately generate profitability, efficiency and cash, and that should help the leverage at the end of the day.
Morning. Dudley Shanley from Goodbody, and just one question from me. Can I just ask about hedging? I notice now that you're hedged into FY 2028, whereas a lot of your competitors have said they're staying out of the market because of the elevated fuel price. Can you just talk us through your thoughts on that?
Sure. On the hedging, as you know, I think we shared that before. We have the hedging policy which has been in place for a couple of years, and to which we stick because this is the best way how to prevent the peaks and the downturns on the market.
What we do is that we gradually increase the percentages of the hedges, and we do it consistently with the policy. We have done it before the crisis. We have been doing that and taking advantage also of the downward sloping fuel curve during the spikes of the fuel prices, and we continue on that. For us, this is really a security. This is the insurance against the spikes and the movements.
I think, Dudley, if you're implying that other people are staying out of it, given the fuel price, that would then suggest that someone's speculating, and that's exactly why we have a policy, right? That we're not speculating. Yeah. Sorry.
It's Andrew Lobbenberg from Barclays. Can you give us a bit of a color around the guidance you've given for the second quarter RASK? How much advance loads have you got on the books, and how does that compare with what you saw last year? Related to that, really interesting slide showing the inflection of booking trends stretching out again when you got into May and June. Can you tell us a bit about whether that is across your whole network or whether that is more weighted to Eastern Europe and you're not seeing it in Western Europe or Italy? Yeah. How is that playing out?
Yeah. In terms of the guidance, you saw from the trading statement that we were building loads already. I think at that point we said something like 2% up year-on-year when we put the early May statement out. Where we are now for Q2 is close to 4% load factor buffer. Now is the time, especially in summer, to make sure that we manage the yields in order to deliver the RASK. We solve for RASK at the end of the day. That's the approach.
Sorry, that's the summer of Q2.
Yeah. That's to answer your question in terms of advanced loads. The guidance is supported by what we're seeing in Q2 at this point. Flattish I think is a fair number. There is a benefit, of course, of the shorter stage length, but ultimately that's the number that we put forward for the guidance. The second question was?
Eastern Europe.
Oh, right. That profile chart was for the whole network. I don't have the breakdown across markets available for you.
I don't think there is any.
Yeah
Fundamental difference between market geographies. I think it's pretty much the same what we are seeing. This is not unexpected, to be honest, because we reflect the same behavior when the war in Ukraine broke out, that when there is uncertainty out there, people become reflective on the uncertainty. They are not making decisions.
They don't know how this is going to play out on their life and what reserves they need to build or mobilize, et cetera. I think they need to become comfortable with the new set of circumstances. Once they reach that point, they will default back to the normal. It takes some time. It is typically two, three, four months, that period. Under significant crisis situations, you see the same thing happening.
With regard to the geographical differences, I think this war in Iran is not specific to Central and Eastern Europe. Maybe Ukraine was more specific to Central and Eastern Europe just because of the proximity. In terms of impact, this war is pretty much across everyone. Western Europe is not any better than Central and Eastern Europe.
Fuel's not cheaper in one market than the other.
Hey, Axel from Morgan Stanley. One question from my side in terms of free cash flow generation in 2027. If we listen to you guys, sort of fares should be still into negative two in H1, potentially positive in H2. CASK ex-fuel flat to up low single-digit in H1. CapEx lower year-over-year, still elevated. D&A is still elevated as well due to the retirements, high fuel cost. Haven't done the math, where should we end up with cash flow generation versus the EUR 1 billion that you guys delivered in 2026?
Well, as you can imagine, we have been doing all sorts of cash flow modeling and stress testing that cash flow modeling. We think that our cash will hold pretty much where it is at this point in time. We don't really see, even under the worst-case scenario, any significant deterioration. Let's not forget that cash is a complicated matter.
This is operating performance, financial performance of the business. It is also the inflows of significant cash streams or the outflows of significant cash streams. It is also the outflow revenue, so it matters whether you are growing the business or not. It's a complicated matter. We actually think that we have significant cash on hand, and we will remain in that position going through the year.
That's why we're seeing that the notion of building a war chest is important here because we are in a position, we will be in a position to mobilize resources against market opportunities arising. Cash remains fairly flat, I would say, over the next period, pretty much holding the same level where we are at right now.
I wouldn't be surprised if it's positive.
Maybe there is upside to it. Certainly not downside. I guess your question is more towards the downside, we don't see it.
No more questions.
All right. Thank you. You heard it is. Thanks for coming.
Thank you.