Q2 2020 Earnings Call

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The conference is now being recorded wed be lucky if the aircraft. The returned to service decided Christmas. It now looks like average hard to service I think in North America, maybe just after Christmas that means we're not expecting our four snacks 200 until March on Baby April of next year.

The real challenge and that is it means weve no further reduced our summer 2020 our growth expectation for next year. We now expect to take just 20 aircraft instead of the original 30 aircraft. We're predicting three months ago. It may well be zero aircraft. If it news further two day right and we're not able to take aircraft.

We will take aircraft through July and August of next year. So if we can't get the main in March and April may or June and maybe the early week of June we won't take any aircraft at all.

That need says means that there will be less capacity growth in Europe next year, probably reasonably good outturn for fares average fares and use into the summer of next year with the demise Thomas Coke Ages Youre Andrea in Slovenia, having gone, but certainly helps the growth outlook for low day in Vienna.

Also has the supply of Airbus pilots.

But over the average it going over a year or two we still have the challenge and of taking these a delayed deliveries for Boeing we are still very proud to be a customer the Max aircraft. It is a great aircraft.

We put all of where do you only airline in Europe that has a Mac simulator, we put all of our senior pilots they achieved by the training by that through the same eight are they all speak very highly of the aircraft of the M. caste system. Once you know what it does it's a great aircraft you this 4% more seats. It burns, 16% less fuel it will underpin Ryanair unit cost leadership going forward not.

Just for this year next year, but for the next decade in market based in Europe that I think we'll be continue to be characterized by consolidation at less capacity additions and probably a slightly better outward over the medium term on fares.

The other thing I'd point to is lower cost viewed into next year. We have struggled this year with a high reasonably high fuel hedge AUD $71 barrel, we're now 63% hedged into next year if why.

21 at about $61 apparel, and I think all the indications are that oil will continue to at oil prices absent any unforeseen event will.

Continued to have or somewhere near me below $60 per barrel on spot and I think there'll be opportunities there for us in the next year to roll forward with making savings on oil continues to deliver unit cost savings as we add Max to the fleet into every 21.

And continue to serve more and more markets across Europe , where airports are increasingly coming to us as their incumbence either cut capacity. Our go bust and looking towards are looking to reiner to deliver growth deal anything you want to add to that on the cost side.

On the cost side strong performance on the likes of the two six want compensation well downtime right.

In the year and as you said, we're retaining that the plus 2% unit cost ex fuel guidance quite the fact that we don't have any benefits from the Max I just touch briefly on the balance sheet as well.

Tends to be very very strong 70% of the fleece.

Is that free and the impact of the new lease accounting standard only for Essex and it very limited impact on us.

Accounted for just over 220 million after 460 million net debt at the end of the period.

Okay. Thanks, the and then I think maybe before we open it up I go to ask Eddie will fit the new Chief Executive DAC, maybe give you a few words on water pleasures is too.

In Harris, My manual and what a privilege. It is to work for with me and learn from be over recent weeks Eddie.

What kind of.

When you consider that we've rolled out.

I mean like this and his new role as as Ray privilege for me to add to that follow and Michaels footsteps and I mean, it's not a bit personalities, it's better business model and my focus is certainly going to continue to be.

Cost control and operational efficiency and I've got the background not only of the people side, but on the upside down on the ancillary revenue side, so I'm going to be working hard.

In the Montana.

Good okay. Thanks, Eddie Okay with that we go to open up two questions. If you don't mind at the interest that we're going to live in heavy to one question at a time, so we get through it as fast as we can.

So if you open it up one question at the time of please don't ask US what we think is going to happen to yields over the next 12 months, because we don't know.

Thank you if you wish to ask the question placed all see very warm on your telephone keypad is now.

First question comes from the line of Tanya Rush of Bernstein Research. Please go ahead. Your line is I can.

And your line more Demarco high.

Could you talk a little bit about how you're thinking about evolving the holding level now that you're getting into that job are you considering changes for functions that benefit multiple operators. So we'll labs in Kenya and so on.

Continue to report into any.

As right or do you see CEO or how do you think about kind of those functions that span across the group going forward.

Yes, no I mean, I think looking forward.

We think the senior managers in DAC and that continues to be by far and away head and shoulders. The largest shared I will remain within DAC reporting directly to 80 that would be Kenny Davy, John Hurley and others and actually the group function will be can find and I knew I have always admired the Willie Walsh modern Agee, you keep a very small.

At group function, which is essentially myself at Neal as C. As group CFO Julius Conrad's group.

See chief legal officer.

We would draw on the skill set of the senior management intact clearly David on the commercial side, New route development, therefore contract Kenny on the digital marketing side, John Hurley in particular labs, which is a division of DAC will continue to add drives the the website and more proceeding the mobile app for the group.

Going forward.

They will remain within a those are the Dell line folks will remain within DAC reporting directly to 80 will add but the other group companies louder Bose and moral to air we'll be able to draw on those resources and we're setting up a structure now where there's a weekly group meeting as well where each of the Ceos.

We get together in Dublin Vienna.

War, so and in Malta myself the.

Chief legal achieve technique, our chief legal chief.

Financial and the individual airline Ceos get together and kind of tried to benefit from each other's experience, particularly in where we can drive costs down and increase efficiencies.

Very clear thanks.

Thanks, Daniel next question please.

Thank you next question comes from the line of Mark Simpson Company. Please go ahead honestly.

Yeah morning, actually one for Neil.

One of the things that.

Coins scheduled in the presentation is the fuel hedging.

And the suggestion of owning 120 million euros saving.

On the Rebase hundred 57 million guest for 21.

If you take the capacity growth and then the new hedge positions ready that should be circa 260 minutes I'm. Just wondering you telling us that 740 billion loss to increase at Orlando areas, you're looking purely at the price I've added in volume Ats and everything else. We just get deficit of 120, if you were to strip out.

The volume growth and just purely look at prices the over 200 million.

So so each yet essentially youre, giving us a water 60% increase in that cost.

Give me was there on what the actual absolute growth in the fuel costs will be next year, which will be a saving of over under $20 million if fuel stays where it is the market is in backwardation at the moment now it may it may go the other way and but I can I can.

Agree with your numbers were talk impurity about the as the price. However, when you take in the volume.

Yes, you are looking out at 120 million saving plus the sterling or sorry, plus dollar hedging that we put in place.

Alright, okay. Thanks.

Thanks, Mark next question please.

Thank you. Our next question comes from the line of Duane Pfennigwerth Evercore. Please go ahead, Sir your line insane height.

Hey, good morning.

So just on the.

Obviously, there is a lot of in the year about the Max in the pacing of those deliveries, but an early thoughts on your growth rate in 21, and if you can sustain this call. It you know sub sub 2% level, one on fuel cost and any thoughts on your non fuel cost trajectory into into next year.

Well I have you told me 21 fiscal 2001 or calendar 21.

Fiscal.

Okay, Thats basically summer 20.

The reality is we will have very few Max aircraft are not sufficient Max aircraft in the fleet in summer of 2025.

Whether thats 20 or 30 at this stage there out of a core fleet of nearly 500 aircraft, it's going to have not much impact.

Early cost saves won't have much impact I think it's as we move into what will be the summer of 21 or fytwenty to where we will I would imagine be operating between 50 80 those aircraft you'll begin to see meaningful impact on our unit costs. I think however, our unit cost story is reasonably stable going forward.

We have I think reached a I think a d. and Daryl you at our user base of on the parts have done a very good job dealing with the unions over the last six months. We have undoubtedly been helped by you know what has been a very adverse backdrop economically for pilots, particularly an airline bankruptcies in Europe , we had bad but for example, calling.

Seven days, a pilot strikes in Europe , looking for 100% pay increase almost lapped out of it by our UK pilots on no day had the anything more than 4% of support from our UK pilots, we didnt cancel one flight we didnt delay one flight during each of those seven days so I.

I think it's important to for a company like that that is as you noted in his.

Be gone unionization is that the units have to understand we will face down the strikes not by choice, we'd like to avoid the but if you're going to treat a behavioral reasonably then off your goal, which are striking we'll work our way rounded we've already showed to be Irish pilot strikes will have no effect on this the UK buys writes about no effect on us.

But we have made very good progress with the in our discussions with unions in Germany, and Italy, and Spain, and Portugal, we're even in active discussions in Ireland in the UK as well.

I think they're coming round to a much more sensible.

As a sense the level of discussions if thats true no MD Eightys go disagree with me here going I mean, given your fundamentals on pay conditions for pilot is very good compared with the market. That's the reality of you have to go through a period of change.

As we went through each of the sets of negotiations.

The money is right. The rosters are great and the job security is much better everywhere else as a question of how you deal with that it's the same market. It's the same airframe. It's the same airline that's not going account because you've got unionization. We're ahead of the market seven from several low cost market and our pay and negotiations positions with our strategy will.

And would reflect that but I think the key thing is we're prepared to put up it strikes where lot of our company. Some of our competitive airlines have never had a straight to just keep rolling over and conceding our cost increases I think one of the challenge as far as this winter is we are now over crude we have a higher than expected crewing ratio, just because pilot even the budget rate of attrition we.

Had four we've always lost young captains in their mid Thirty's, one of often fly in the goal for fly for long haul airlines those opportunities no longer exists and increasingly shortfall airline DAC shortfall airline pilots are becoming available as their airlines go bankrupt in Europe . So I.

I think we are doing good work, we are I think at coming to the end of the discussions with unions across Europe , where in most cases the deals already donor will shortly be completed but frankly, if somebody wants to be unreasonable lobbing, 100% pay increase off you go which are strikes, but the strikes will be on successful.

Very good and then just just for my follow up if these God forbid. These these delays persist at what point do you think about to open the order book more towards Athree hundred Twentyneos.

We don't I mean, you talked Airbus or almost on manageable at what would you talk to Airbus at the moment of the or if they come talk to you is 2025, I mean, I don't think I mean look we have no concerns over the safety our the operating additional performance of the Max aircraft clearly Boeing have worked to do with the regulators in the FAA and the asset to get these aircraft back at the Sky.

But the regulator themselves will tell you that theres no. The aircraft are perfectly safe, but the regulators X or expect Boeing too.

Answer all the queries answer all the questions and.

Filling the blanks or the got any gaps there may be and we expect point do that as well. These aircraft aspect will slide the question I think certainly we back in the year before next summer.

But because we boarded a variant of the Max aircraft were running probably two or three months behind the the return to service Boeing will always have a backlog of deliveries when they do start returned to service and it's just it's actually it's a timeframe issue that we may run out of road been touched by the time, we get to the peak of some of the in December 22.

20, having said that we're stepping up the growth in louder for example, in Austria, where you are they moved quickly and race and the team. They got three of the aircraft that were freed up as the result of the Thomas Cook failure, but was more important Thomas Cook failures, they were able to get more Airbus pilots captains and first officers became available than would have really been the plan. So.

We have we're also postponing some of our own secondhand aircraft sales were extending some of our leases that would otherwise had been returned to the less ours next year.

So we will still have growth next summer, even if we don't get any our Max aircraft, but I think a reasonable presumption is days would be about 20, Max aircraft and that should enable us to deliver four or 5 million passenger growth next year that is much smaller grow slower growth than we've ever to different before but if we finish up in that environment I think there will be more.

Before I think the yield environment for the airlines and for shareholders will be better next summer, whereas this summer clearly has been better for our customers and we generally prefer to yield environment is better for our customers because it's worse for our competitors.

Okay. Thank you made next question please.

Our next question comes from the line or Jarrod Castle.

Jared height.

Hi, Michael morning, can you give us sort of color on louder in terms of your thinking now on.

The scale of the losses, and how you're going to mitigate that going into 2021 way you'll be.

At close to breakeven thanks.

Yes.

Yeah.

The losses allowed have been higher than we had originally expected we thought we get a 100 below 130 million year, one we'd get to 50 billion year to breakeven year three what has fundamentally changed however, it's been the growth opportunity allowed theres a land grab going on in Vienna, with low days now winning hands down level Everbridge are taking aircraft out.

Vienna.

German wings of now taken announced they're taking their seven aircraft as we enter for next summer.

Ways are still there what about six or eight aircraft, but not growing at anything like speed at louder and louder. Meanwhile has grown from major aircraft last summer 12 aircraft. This winter, it's going to 18 aircraft next summer in Vienna, which were close out Vienna now will be the sheer number two the German market, particularly in Germany, Spain last year was very tough on pricing.

Largely the result of Lufthansa buying air Berlin, instead of taking out some of its loss, making capacity they've operated all that capacity, losing money heroically.

But that's not sustainable model going forward. So I think we will see.

The rapid growth next year will probably be postponed the profitability of load by maybe a year.

But we're not far away I mean, if you take loudest current.

Traffic if they were trying if they were earning four euros more per passenger they'd be break it would be at breakeven.

We are willing to invest that money to continue to grow load a rapidly.

Particularly where we're able to jump on you know very cheap second hand, Athree hundred Twentys seals and has been a real opportunity. The marketplace. There were leasing these aircraft five year leases no maintenance reserves tpd lease rentals of over 180000 or less per month am assets building a really good operation.

I think what physically full of confidence in louder is that you know the load factors over 96% ancillary revenues are growing strongly some of the comps were a bit out of kilter at airports handling they were overstaffed in terms of you know in some of their raw string policies were a bit crazy, but we have straight and all that out so.

So on an operational and commercial level load is doing very well.

But it's growing very rapidly it's the one area, we have all of our rapid traffic growth and if that means we have to soak up low fares are losses for a year or two more than we originally planned then we're happy to do it.

I think it's still the numbers are all consolidated into our overall numbers and you can see this morning, our overall numbers, even with higher than expected losses in louder our sales flat.

In terms of profitability.

So the rest of the business is doing a little bit better.

Okay. Thanks very much.

Thanks, Karen next question. Please. Thank you next question comes from no grant.

Clean at Credit Suisse. Please go ahead.

Good morning, moving from I guess the into Germany, just interested in your take on your own capacity plans on your strategy and Germany going forward.

The data that I see it looks like your capacity is down 3% of Germany certainly in this current quarter under seems like there's a decent Swiss switch going from the like a Frankfurt Cologne into places like scorecards are you I guess happy with the current footprint or do you expect Germany to evolve over the next few years as you try to.

That in an expanded network.

Well I give you a couple of thoughts and I'm asked David do O'brien for his view on it yet we are cutting back some capacity in Germany, although it's a bit but mix one of the challenge facing us. This winter is we are short of Max aircraft for next summer, we're still opening new bases.

This year into lose Bordeaux, Omar say as south end and.

There is one of the Red forgotten I'll start my head and and to do that though because we both of those aircraft. The makeover next summer we have to close some base. This winter. So we're closing bases. This winter in the the three Canary Islands. Each of those bases will close in January hamburgers closed were causing capacity at least Bradford east millions.

As under threat your own a looks like getting close as well in January so.

But a lot of that focus has been in the German market in the short term the German market is lossmaking.

For most of the players entity he had ourselves and Lufthansa I think until the Panther sort of what they're going to do with the air Berlin Euro wing capacity, which is heavily loss making.

They have too much capacity in that marketplace, we're very happy with our president the German market, we're still growing with low day in Stuttgart and in that doesn't door Ryanair itself is growing interest in Berlin with our base in both Jonah field and Tagle APA, Germany is not one of the markets that we would be see for huge.

Future growth and if we have to pare back at anybody capacity in the this year into next year and because we need that capacity, we have other more profitable markets as for where we can allocate get then we'll do it.

What do you what's your view on the German market.

I'm going to be one of the weaker markets. This summer as we've mentioned this in Germany into Spain, and Portugal. So some of our trimming back is in the in that space as is I should say Lufthansa Youre wings.

Oh, even more than we have in Germany.

Is.

Creates for a better environment also Germany is home to some very very expensive airports, who have yet to learn.

What that means so Hamburg is a very very expensive airports and it doesn't have earned the right to bid on expenses and Humber, We're closing our pace there would reduce our traffic by about 50%.

Disney I'd say that the frankfurt's new terminal is slower onstream than it was originally plan.

Impact growth there and when that term comes on stream. So it's not particularly significant if we're going to take traffic away.

German leisure.

Some of the higher cost German airports are natural candidates for costs.

And we also have the Congress has the German government is also planning another crazy environmental tanks on air travel from April of next year.

In a market that already has said the second highest environmental tax in Europe behind UK Apds. So.

We we were right to be cautious in Germany, but it's more driven by the scarcity are the shortage of Max aircraft is what's driving our capacity allocations.

This winter with an eye on next summer on the story and I assume if there were if there were a fair floor that would accelerate your your.

Your your flight in your need for flexibility.

It was a fair floor.

Yes, as being proposed sort of these moves by parts of German government.

Joe might that this is generally are bullshit suggest you come out Lupines suggestion last year was the German government should.

Block or growth the German airports because of Germany, Tc couldn't handling capacity like look.

The times accounts as themselves when they get to a monopoly the German market. They want to know a growth to be outlawed and they want minimum fair as you know anything below 300 euros to be outlawed as well.

Nonsense, but that's what you get from Lufthansa on a regular basis.

Thanks.

Thanks very much the next question.

That's from Jamie very perform at Deutsche Bank. Please go ahead.

Hi, Michael.

From a starts come back the Max but just quickly for next summer if that 20 Max's goes to zero.

What do you think you can do on capacity somewhere between zero and 3%, presumably priority would be helpful and secondly.

Going from the German market to the French you highlight the base openings in boat I must say to lose et cetera.

This is another market, where the government seems quite keen on introducing ecotaxes is that.

Good thing is that changing your approach you talk to that market is it further encouraging you are putting you off the great to hear a couple of comments. Thanks.

Yes. Thank you I mean look it's very difficult. This stage to give you sort of accurate guidance on the Max aircraft I mean, all we can really gave you at this stage is themes.

I thought originally we get 30 aircraft for next summer, we're now down to 20 aircraft. It could move slightly for is the right.

If that's the case then I think we're looking at flat capacity next summer no growth at all we would then those still be taste aren't taking some capacity in the winter we'd have some like so.

Really until we have a better handle on when the first aircraft to go to be delivered there's not much pointing us repeatedly change in the guidance for traffic our firm capacity next summer I think it's still reasonable to look at kind of a plus 20 ish plus 30 aircraft for the summer being a midpoint of traffic next year about a one.

5715, 8 million on top of one phase 3 million this year, but it's moving and.

There's not much we can more we can tell you I mean, we would have a much better handle this but can we get to the Q3 s in February .

And on to the French look I don't hold to Alex you too many lossmaking flag carrier Airlines around Europe . The one erred on the can't afford Ecotaxes Air France, the French a great for talking about ecotaxes, but as you'll have seen with the myosure own protests cyno. They did does allow many a slip between Copa lip any posing ecotaxes there.

No justification for further eco taxes on air travel, we as an airline issue will pay 604 30 million in eco taxes in the UK, Germany.

Yes in Europe , there cost VTS is rising rapidly add this is the tax on low fare air travel and get the environmental justification disappears for the exempt the most economic most of the least environmentally friendly languages. The transfer traffic people take into place to get to destinations that a one is exempted whereas the.

If the environment efficient point to point flying is packed.

So I can we talk about it is politically there certainly politically expedient ines over the medium term I mean, we I think the airlines are very conscious in fact, we need to push back against is because we're an industry that accounts for 2% of Europe's cotwo emissions, whereas marine transport cancer, 5%. So if you really want to improve the environment you should tax the.

Verizon not the airlines.

But it's a challenge I don't think it would affect our discussions at the moment with the freight Youre, France is a market, where we will grow in but it's a market. We will grow slowly in your we had three basis now to lose smart say Bordeaux, we have not much interest in Paris, we've noticed in Charles de Gaulle are already we might do something in Beauvais conditions are right, but.

You know a France will not be I mean, we're already the third largest era in France, we flights I think over 20 fringe airports, but as I as I as a country, where there'll be a lot of bases. There in the next couple of years no. We will have most of our growth will continue to be in countries outside of France across Europe will still be growth in Ireland, the UK, Spain, Portugal.

So easily Jeremy Central Europe are growing very strongly where youre. The only competition essentially with who are generally charging higher fares and also in most markets. So it's reasonably easy growth for us at France, nice to have but not not have to have.

Thanks, Michael.

Thanks, Jamie next question please.

Thats from James Holland, and some please go ahead Jim site.

Mark This once we just took falling from Jamie's question I think if you take this environment, where you yourself to current industry flattish capacity in a in summer 2020 , an obvious usone haulage availability will more than.

You are in most of your fleet you can get access new aircraft from Thomas Cook, which you've seen doing louder.

I think if I get about historically this is sort of on where more clearly been known as in growing just as fast as we possibly could you just know possible given aircraft availability, obviously, there's a mix issue or you'd have you sort of you knew management team, it's not the philosophically changed how you approach to growth.

No I will be growing now like gang busters that I could there be pushing Norwegian over the bloody edge, if I could if I could get 50, Max aircraft with 4% more seats and 60% lower fuel I would be trying to get 50 67 dealer.

The reality is I can't get them because they are grounded and there is going to be a backlog even boeing even once they go back flying is going take Boeing many months to deliver the backlog get them back in the air service them et cetera et cetera.

The challenge.

You got to be careful to even if you take the aircraft coming out of Thomas Coke like.

The World a short of aircraft the Max haven't delivered now for nearly 12 months airlines are out there paying over the odds to less hours for even for secondhand aircraft and so I'm I'm up for taking second add aircraft, but only if they are cheap.

We have turned down loss of offers a Thomas Cook aircraft for example, where less stores were looking for six and seven year commitment letters were looking for monthly lease rates of 200, 5300 320000, the month maintenance reserves being paid all the rest of it so.

I would never compromise our cost base, our our rigid cost discipline for in Fabry short term growth that's something that's the model at Norwegian have been pioneering for a number of years now.

Grow like Fourq domain, the cough and it'll all workout alright, it won't go bankrupt yourself and but.

If I'm stuck in a marketplace for the next 12 months, where there's very limited capacity growth and for a year, we have to take it on fares and yields you know it would be one of those rare years in every decade, where shareholders do better they reiner shareholder to better than reiner customers, but it wouldn't be our choice, we would still be working actively with Boeing any asset to get.

The Max aircraft delivered honestly these Max aircraft will be game changers.

Never in my 30 years is industry come across the play that had 4% more seats important 16% lower fuel and weird lead customer. So we have them at very low prices one of things that gives me nothing boards.

Optimism for the future for Ryanair is positioned in the future in Europe is our discussions with Airbus, where you are they talk completely insane numbers on aircraft values and pricing of aircraft.

Because it thats, what our competitors are paying for their aircraft I now understand why every time wins grows there aircraft costs right fastener traffic growth.

They're paying too much for airplane, so I wish my competitors, well I hope they all play expensive Airbus more and more expensive Airbus, while we're flying lower cost great Boeing Air Max airplane.

Okay. Thanks very much.

Thanks, James Exquisitely.

Thank you Thats from Stephen settlement I think please go ahead.

Steve and Hi, Michael.

Could you talk about both things might see are up to 24 aircraft in six probably spaces, but it also mentioned in the release that.

Look at other centrally countries. So just how you think both developing on your plan. Thank you.

Yes, both developing very well very good management team there a more so I think what we see in both as an opportunity though year to expand the model that some of the central European basis.

Rob part of our Max kind of.

Issue that we are closing some of our base this winter in central European.

Airports in price tag in Sofia.

Imposes opening up bases in those markets. So.

Poses a better brand I think for growing in those central European markets. It has more it has.

More lower cost.

In pilot and cabin crew, then Ryanair has and it enables us I think those to be very competitive on the labor side against ways.

Taking advantage of local taxation, which we're able to deliver within goals, which were not able to deliver in ryanair.

With that adding more of the 77 eight owners to the both fleet going forward. There I think it'll be one of the areas, where both will be able to deliver us lower operating cost and Ryanair DAC can deliver partly because we had this arcane utilize our.

Well two seven be tax issue in Ireland, where we have to tax all the pilots and Campbell, who are paying Irish tax, which I know wired and has a reputation as a tax haven, but only for a company if you're an individual Ireland is a penal.

Our country in which to the well paid in so and new part of our commitment in the union discussions with many of our pilots and chemicals will add allow them or will find ways to put them on to local contract local taxation.

We are in many of those countries in Hungary are in the central European countries. The rate of taxation is lower parcel points view the disease by in Ireland.

Hey that already can continue to go I would I would see if huge where bowls will be the vehicle for growth for Ryanair in most of the central European countries. Although the sales will still be done across the Ryanair dotcom website. It will still sell as Ryanair dot com, but both will be doing the the flying for us on a wet lease.

Basis.

Understood. Thanks, Michael Banks, even next question please.

From covenants at Nima Securities. Please go ahead, Katherine Knight, Hi, good morning, and sometimes the cost guidance.

This morning, Axiall plus 2%.

Can you give a little bit more color on obviously in second quarter, Hi, My numbers right excellent.

Negative.

And and you also talk about that back to the Max and assets.

Benefit could you also maybe just perhaps give us because I see add on what the Max would have done that number what it would have been contributing to give us a sales hello. Thanks, Mike. Thank you.

Neil as is I do want to give some color on the second half.

Cost without obviously speculating on what the Max might have done we'll do that only when we get the Maxine in what to do a next year, yes for the second half of your having had a 2% increase in unit cost six feel for first half.

The marginally higher so just just over 2% in the second half, which gives the blended to for full year.

On the Max it's going to have a number of positive for US first and foremost aircraft are hedged at 124 on the Euro dollar, which will have a positive impact immediately on the depreciation.

But but more importantly will enable us to exit some of the older aircraft that we've now extend this.

Obviously, the likes of seven of our 10 aircraft. We've sold are now extended out for a number with an expensive 70 near checks on those.

So majorly enable us to get the maintenance on the amortization line down.

Clearly help also spread to golar fixed costs.

No.

I think that's the question from Yokohama.

Fire alarm there.

Sorry about that as a number of positive but.

Michael said, we don't have enough visibility on how many max's will be operating into the summer and what we've taken Oakland stage.

I can't give you too much guidance other than to say, it's going to be a game changer on the cost going forward, we'll be working on the budget over the next few months. It will give you more color and when we come back out with the Q trees and Q4 s.

Okay. Thank you and just if I might this boat and have the Kathryn.

In terms of the question asked earlier about the Mac, sorry about that Jonathan different way you actually not change your guidance morning Conference that 20, Acoff magazine because of that since you've made.

Laying the sales playback often sentence, but maybe just mentioned is that more you can do on that I mean, if we see validly does that then results in that please go into what was the other thing company today.

No what I've tried to communicate like way. There's no point you is changing the number every time, we have a call here until we get some certainty I mean, I think we're still looking at north of 30 aircraft for next summer. It is a combination of lease deferrals sale postponement, hoping we'll still get 2025 aircraft from Boeing and taking some additional.

Air both Ceos within louder.

The one phase 7158 number which is our debt the guidance into Fytwenty, one could move slightly upwards I don't think it will move backwards, but.

Because at some point.

Even if we don't get them in time for the summer peak next year, we will still take some of those aircraft over the following winter and we will do so winter growth, although that will surely be less remunerative. So.

Honestly that you'd go Matt we would go notes that we were trying to I wanted.

Every conference call give you the accuracy position with Boeing because we don't have an accurate presumably if we don't really have an accurate number into air flight 21 year has Neal said once we get to the budget and we make some assumption I think will that we will be in a position to give you more accurate figure in February at that but for the moment take it we moved it back from Turkey to 20, and we Havent.

Page the number next year, if I 21 on traffic, which is about one phase 7158.

Okay. That's very helpful. Thanks, guys.

Thanks CASM next question please.

That's from Yannis Brown Mainfirst. Please go ahead panel site.

Yes, hi, sorry to ask another question on the Max.

Certainly with Pemex delays.

Since that.

Slide 21 winter of Fytwenty summer.

We'll have a lot of deliveries catch up on the late deliveries and you also take on that killed deliveries.

How do you have to think about controls in this particular period.

So there'll be a lot of growth.

It can happen decremental effect on sale. So would you try to mitigate that slide.

Delaying some deliveries so by phasing out older aircraft.

Okay.

I think thats a discussion that's ongoing air handlers with Boeing I mean, we made it clear to Boeing that you know because a couple of things we want to take all these aircraft, but we're not taking more than eight amount, which is the Max we think we can safely delivers eight month, we're not taken aircraft in January in July August September either because frankly, we don't need.

But we will I mean, if you take we get to next summer I'd say, we've only taken 20 of our 60 aircraft.

The following winter, where do you. Another 50 aircraft, so where are we going to take 90 aircraft in winter no. We're not we will pursue those some of those aircraft deliveries into the following winter so but some of that will depend on how fast Boeing can actually deliver and our produced these aircraft anyway.

There is an enormous amount of work that needs to be done, but Boeing and its customers. Once these aircraft or our open flying you are the backlog is now five 600 aircraft between year, they're producing 40 amongst stale so.

There's a discussion to be had with Boeing and Thats really and we can't have that we we have an ongoing dialogue with the when we're going to get our first aircraft Winter force aircraft use the delivery program in advance of summer, but really nobody is focused on what happens into the winter of 20, Springer 21, yet either.

I would think though and again.

I would be I would certainly be of a mind that it if we went through a summary, and 2020 , where there will not much capacity growth in Europe and fared environment recently positive. We only grew by 5 million passengers from 153 to 1578 ish I would certainly be mind to try to crank catch up.

Some of that grow that missed growth in the following year. So maybe a grow from 1.71 fiveeighty shouldn't be trying grow by.

10, or 12 million passers. The following year. So we go from one phase them, one fivea to may be 170 ish.

Again, I'll give you back at the envelope numbers here, but we're not suddenly going to grow by 20 million in the following year, because Boeing wants to take delivery of 100 aircraft.

So thats a detailed discussion we still have to have with Boeing we will try to smooth out that.

They did the capacity growth, but yes, David will indicate there are we have far more airports and far more markets, who want growth and we want our aircraft at that stage Norwegian I think we'll have disappeared.

Yes, which will create opportunities in Scandinavia in Spain, and Italy in gastric or that we don't bookings to gasoline.

Yes, there will be opportunities out there and other airlines will have gone boasts are been taken over or as the consolidation process continues.

Michael you're the only other thing I would add in there just as the counter balances that you analysts.

We would also like at this stage to be further down the process in selling aircraft, we have been delayed on us and so when we start to get a flow of Maxim spiky and again that will enable us to go back to the cargo guys.

And on start selling some of the older aircraft sales. Please.

How many across your selling this year.

Well, we have to where we have 10 that we've already so trey will be delivered in this financial year and seven are now delayed into the winter of open up next year. So for 21, we would love to get back to that market, but we can't we certainly on the Max.

Anything you want to add on the growth in that on the Max aircraft side.

No I mean.

Quite well.

Okay.

It's actually going to happen.

We can't make those plans.

No point.

Over engineer wonderful.

Okay bag and fair to say, we would want to restore David and they do you feel free we would want to restore the lost growth as quickly as we could without shooting ours without overdoing, it or without doing anything crazy on the capacity or growth side.

That's fair, Yes, I think another audits dimension is this is growing realization as national level in certain.

Pretty big markets that overreliance on the intrinsic tour market is a mistake Thomas Cook is so big lessons there.

There will be more opportunities as that market begins to.

Disassembled essentially.

Okay next question. Please thank goodness.

That's from the line of many of the Piani. Thanks America. Please go ahead.

Hi, I wanted to ask about ancillary to happen in assisting Kurt staff and the priority boarding and preferred services.

With that kind of the yet any benefit coming to an owned by the end.

Calendar year.

The ancillary revenues going forward.

I think we'll continue to see modest growth in ancillary revenue certainly for the next year or two I think what will be penetration Max's out and certainly of some of the bigger items I'd be answered the priority boarding see revenue, we you'll see us continue to yield manage those over the next I will say a year or two so why would expire.

Considering revenues to continue to grow at a faster rate than shed drill traffic growth, but we won't do a double digit Scania you won't see ancillary revenues go at 16% per passenger as we've delivered in the first half of this year at they will lap each other in second half of the year anyway, but I think it's more a re is certainly I would be disappointed next year, if we don't deliver.

Three or 4% traffic growth and ancillary revenue growing in a high single digit percentage.

As we focus on continued penetration and some yield management to some of those services, which.

And are very attracted to our customers as demonstrated by the the rate of which they're converting presently.

Thank you.

Thank you very much next question please.

That's from the line of more to showcase Commerce Bank. Please go ahead.

Hi, good morning, Michael.

Please update us.

A little bit on the cost different within your airlines I mean, if it says that particularly buffer for significant cost advantage over Brian that back or and and how do you expect it to develop over the next ensign will that narrow or is it sustainable cost benefit.

Hi, Thanks, Amitabh I give you get general guidance I would say dash at the moment intimate point on the unit cost side Bowls has lower unit cost then DAC loud has higher unit costs and may or motors to small yet to kind of be relevant but the cost base in louder is coming down.

At towards the back towards the DAC kind of median.

Imposed continues to outperform an attack, but that is some of that because DAC kind of shoulders. Some of the overhead of the the entire group Jack still has commercial it has labs it has.

Leer beta is doing a lot of the you to the customer service side as well so.

It's a little bit distorted I think really the opportunity is to grow both as a little bit faster because it has lower unit cost, particularly on the layout more efficient on the labor side and continue to challenge the management in allowed that to continue to deliver improved operating cost efficiencies and lower.

Costs.

Despite the fact way when the freedom operating lease aircraft it probably will never quite get to the Ryanair unit cost base I pretty should get much closer to the next year too.

And is that they.

I mean, I think we get to stays where it will have much more sophistication in terms of allocated costs.

Tacked on to the airlines as a as a.

So next summer.

Yes.

Okay next question please.

Thank you. The next question comes from the line off Damian Brewer RBC. Please go ahead.

Right.

Hi, good morning.

Right.

Good.

Two questions. Please.

I'm, sorry to revisit the Max but maybe just one final one on it could you sounded a bit more about anything to the bordering thinking about about compensation from Boeing.

Given the sort of kind of desk something we've heard from some other ceos on that.

Holders should carry the cost to this.

This is Ron I thinking about the if indeed, you can say anything and then secondly, just.

More generally.

That does seem to be sort of a shift of gravity from the growth of one competitor that way towards eastern Europe .

With bars and some of the other rooting out since you've made further east.

Could you give us a broad feel about what central Eastern Europe would look like as a percentage of summer 2000 seats versus last summer. Please.

Okay, Let me start of the first one.

Other maxell look there's a dialogue with ongoing with Boeing adding this an acceptance by Boeing that exists as cost to impose real costs on some of their larger customers like Ryanair I don't that you and that dialogue. We continue I think there will be an agreement on idling compensation is the right phrasing.

But I do think they will.

There is a dialogue about them.

Just recovering what are obvious consequential cost from them, but thats a dialogue around the can't really be completed until we can until we are ones that we know when this aircrafts good return to service and when we can actually expect to get these aircraft over say the next two years when we can return to our original growth plans.

So I would say no more than the dialogue continues Boeing is clearly made very substantial provisions and their accounts lot of which is I think just for reimbursing customer costs I am more instant getting these aircraft back flying and delivering the cost unit cost savings that into game changer aircraft will deliver the Miami, having a talk.

Just a discussion with Boeing overcompensation, let's get the cost recovered, let's get the aircraft by flying let's get on with lowering our costs and.

Using the by that the game changer aircraft to transform not just our business, but aviate air travel and you are generally.

Growth in the central Eastern Europe , Yes, Theres more I mean, I'd be cautious here I look.

The underlying kind of their philosophy of Ryanair is our growth is opportunistic we are growth will always be where we get the best kind of within large match, where we get the best airport deals, where we have the lowest cost handling and those economies, where the governments are not worried about taxing air travel out of existence. So.

As a more with areas a lot of growth taking place in central and eastern Europe , but it's not some geographical strategy, it's an opportunistic strategy.

That we tend to follow now not always I mean, obviously, where the growth in Vienna for example, which is very rapid is.

Not based on day to be entering particularly low cost, although they do have quite a good AG a growth incentive scheme and facing the ended that we are taking advantage of pirquitas, a land grab going on in Vienna, and where theres or if there's a competition or land grab we're going to grab more than anybody else, where I am so.

Trying not to look at our growth as a kind of a geographical expansion has done some kind of Napoleonic campaign. It is we will move the aircraft around based on wherever we see it being most advantageous and both profitable for us to do so which if I go back to an earlier question is why we are causing closing bases. For example, this winter in the Canaries in Spain in some of the.

German bases at David Another you would add anything on that.

Except to agree but.

Absolute terms.

There is a shift in our growth because there are.

Capacity allocation because those deals in our emerging the biggest airports this winter our Vienna.

Budapest's.

Track all of which are comparatively lower costs and the German for example, German.

Equivalents.

All the Spanish.

And to be fair.

One of the more interesting things has been the closures of these based in outflows is based in Spain, I think as brought about a realization I think among when the Spanish gobank combination of our based soldiers the Thomas Cook failure, among others as broader a realization that.

In the Spanish government that actually maybe they need to relook at the cost structure over there at their own.

The way they encourage I think roof and tours of growth in Spain. These to be reassessed and we're part of that dialogue with the Spanish government at the moment.

We would want to encourage it.

Thanks, very much Michael per interesting given the Rick to review about happen. Thank you now we'll never keeping the put Napoleonic.

Sure.

Hi preferred Wellington he was higher it was Irish anyone.

That's the key thank you.

Next question base.

Thank you. The final question then the keys I phone comes from the line of James crew Revpor. Please go ahead. Your line is I can James type.

Just a quick one for me on winter given the way we are most of the way through the quarter is there any color you can give us on the expected progression of but as an ancillary for Q3.

And then I guess any detail on Q4 would be great. Thanks.

Yes, the answer that has no.

Yes, it in our full year guidance, we don't get into these kind of give additional color on a per quarter basis. So I think theres, a reasonable prospect and without being discourteous is a reasonable prospect I think this winter of modest fair growth, but more as a function of how off of the fare environment was this time last year.

Sure.

And synergies will continue to perform grow at tightly.

On a per passenger base this winter, but by less than in the first half of the year simply because of the it begins as they some of the services the priority boarding and the and the.

Theres CD will begin to lap itself in the second half the year and on the cost side deals already covered it'd be marginally above the 2%, but well still a very good cost performance given that a huge amount of the winter costs.

Forecast or in the budget was predicated on having you know certainly Max aircraft in the operating and flying for most of the winter schedule, we won't have those aircraft by individual and yet other cost savings most notably you know some of the on the crew efficiency side some of the base closures.

I, we're making particular are seeing some significant savings on the you Twosix one cost, which this time last year were horrendous, whereas a AG one of the things as a team were most proud of is that intact. We brought the on time performance. This summer backup over 90% despite quite significant DTC disruptions.

And that has had a huge impact on.

Ooh Twosix on cost savings.

And we expect those continue through the winter.

So we won't if you don't mind, James where I'm not going to give you color on Q3 year Q4 hours into point to the general annual trends that are built into the annualized numbers.

Hi, Thanks.

Like any other questions before we wrap up.

No further questions so far ones going into our any final questions placed on Siri warm on your telephone keypad is now okay nears like ask you do a quick wrap up don't ask Eddie Wilson here give you some wrap up and then we'll call it today.

Okay, well I think the key points to take away is that the cost bases and very good shape.

The ancillaries are performing well, although there will be a little bit slower into the second half of the year on we've given a little bit more clarity on the guidance insofar as we've narrowed the range. This morning had to 800 to 900 million.

And obviously, we will be majoring.

Most people on the road this week and we will answer as many questions as we can.

And any any final thoughts I mean, as I said at the start and I see the winter in particular as.

Time to renew our emphasis on cost control and efficiency and and also for the tasking.

Particularly ancillary side with Kenny and job and how we can better.

Develop the products because like labs is really just coming into its own I mean, it's in there for about four or five years, rather not having the labs people has come up with the ancillary.

Solutions, we now have those people coming over to solutions themselves and the work that we've done there in terms of AB testing has been particularly fruitful over the last number of months under three there's there's still some.

Wait to go on that and David as well on the on what we can do on yields side, but it's really for me is going to be about costs and efficiencies because surface accrues at the moment, we're going to have two that's going to be particularly complicated for us. If there is going to be a delay a further delay in the Max aircraft, where we would hope through in the discussions that we've had with the.

Union State. So far is that if we can keep a large amount of those crews and organize on pay the than annually. So that we don't have any interruption in the supply, but we've got a further interruption the Max aircraft as can be challenging and how we deal with that in the next six months.

Okay and from my point of view, where I think where there's a reasonable set of results out. This morning, rather than focus on Q3 in Q4, I would kind of encourage everyone to look out over the next kind of.

Two to five years the industry the market Europe is going to consolidate it's going to consolidate around four or five large players ryanair will be the largest so those players the unique opportunity or is that Ryan year, we'll have a huge unit cost and a pricing advantage over the other four players in the consolidated space and as I've consolidation story places.

Well, both I think you will see see a return to pricing.

But with a very strong or with good management in each of the five major airlines good control over costs and I think.

In much the same with the industry in North America has over the last four or five years, you'll see a year the delivery of reasonable returns at an industry that certainly in Europe for the last 2030 years have been characterized by overcapacity. The emergence of low fare airlines some of it to add a lot of which has now disappeared.

I think we're returning to a much more sensible industry, where you have an opportunity now to invest in Ryanair, which will be front and center of a a much more sensibly well run industry, but with a huge cost and price advantage over everybody else.

With that I'd say, thank you very for joined this morning, we have an extensive rojo program on the road, Ireland UK Europe , North America shape, you haven't got to meet you'd like to join wonder whether the groupies or get a one to one please speed it through city go as city, our Davy, our our own Investor relations team headed by chain or too and we'll.

Forward to meet you at some stage on the road over the next week.

Thanks, very much everybody talk you soon bye bye.

That concludes the conference. Thank you very much fruits and then you may now disconnect your lines.