Q3 2021 Ryanair Holdings PLC Earnings Call
Yeah.
Hello, and welcome to the Ryanair Q3, FY 'twenty one results conference call.
Throughout the current participants will be of SMA tiny and afterwards there'll be a question answer session share.
And the Q&A and the interest of time and fairness. Please limit yourself to one question per passenger just to remind you. This conference call is being recorded today I'm pleased to present, the Michael O'leary, Brian that group for the year.
Please go ahead of your meetings.
Okay. Good morning, everybody Youre welcome to the Q3 average those conference call I'm here with the SRA and 80% and among others.
I don't propose the Goto the peak day depressed top and any great details on the tomo and website from seven o'clock. This morning.
Couple of quick points and as you'll see in Q3 traffic was down effectively almost 8% to 8 million passengers.
Instead of significantly more traffic than any of our competitors carried during the period we.
We finished the quarter the $3 5 billion of cash and we've extended the past the adult comp deal for four years as at the end of the title.
98, we've also secured the easyjet thoughts for seven to eight aircrafts and stuff and we would expect to take all of those op and SP.
And we're allowed to R&D cost of restrictions are removed and we continued to make significant progress and our environmental policies. We obtained the first ever rating from CDP, and B minus which makes us the highest weighted airlines and the world and.
We are pleased with the timing and also the modest price discount of the Boeing Max aircraft from the increase the order of 210 aircraft prior to Christmas fundamentally remember these aircraft for the U S 4% more seats for the lower on fuel consumption by 40% and will give us the maturity lower operating cost going forward.
And the next for five years and unlike many of our competitors, we continue to own over 90% of our fleet most unencumbered and the key issue always at the lowest in our industry for the next.
The period of time remains of COVID-19, the law.
Lockdowns and restrictions.
And has been exacerbated into Q4. So I was at the end of March we expect another significant drop in traffic to and that three months of the period, probably down something between two two and a half million passengers and that would take our full year and property down to a number of between 26% to 30 million passengers.
On the oxide however, we take great comfort from the stone.
Still the success of the UK vaccination program.
And you came back to the half million people on Saturday and on from there over the weekend.
They are on target to vaccinate and 50% of their entire population by the end of March and certainly all of the hybrid category everybody over 50, nursing homes hospitals et cetera, et cetera, and we.
And just the way out of the COVID-19 crisis widespread and effective vaccination, particularly the high risk groups way to remove the.
And the need for top of restrictions are and Lockdowns, particularly I think in Europe as we move into the summer there is no doubt that Europe has.
And Ron Paul of the behind the UK Europe, and the iron they need to get our finger revenue catch up.
And I suspect that there will be a more vaccines license between now and at the end of March and a significant spike upwards and the production of vaccines and we still expect Europe to catch up and have vaccinate. The happiest population by the end of June and.
And once all of those high risk groups or the other the are vaccinated and then.
We think there is a likelihood of a strong return all of our bad debt.
Repeat of the travel and restrictions, which will lead to a strong snapback I think and air travel and holidays, particularly in times of the school holidays and summer across Europe and.
And 93% of the day to.
To date and for Covid had been and the over 65 year category and <unk>.
And that group.
The vaccinated in the UK and the cost the rest of Europe, and we see a stronger charge of aircraft of this summer and.
And the different we're continuing to keep the pressure on particularly in countries of diehard and the wear and the Covid continues to be mismanaged by the government and the 80% of national or the National has serviced out of the National Agency.
And we're continuing on a daily basis and kind of.
Of the day of trading the misery of both cases and hospitalization. The studiously avoid any day mentioned the vaccinations.
And we want to know why they're not like the Danes for example, the Danish government announcing on a daily basis. The number of people who are vaccinated that day, how many of you received the <unk> vaccine dose and the second vaccine dose and the iron and should be following a similar of course, the all the way to out of this is not part of the Lockdowns at the W. H O confirm lockdowns will not.
And get rid of Corona virus and normal zero of Covid, which is of fans policy vaccination does the way out of this is the way to significantly reduce both debt hospitalizations and in this from Covid and we need and answer as to why our Chief Medical Officer, and Ireland and method.
Mismanaged almost every aspect of this crisis. The data is not on a daily basis, the holding of daily growth comps, they shouldnt be announcing the daily and the number of the vaccinations because that's the only way you embarrass the civil service and.
And into accelerating and.
And the vaccination program.
Looking out into the next year and I know, we get rid of the Q&A. Please don't ask us for forecast because we're not in a position to give you any and we have a wide range of traffic.
And that could at the low NBA Dominion passengers at the upper end of 120 million passengers and we think.
And that there will be a modest recovery and traffic into Q1 and that's the April may June.
Water a lot of that depends again on what the how many of the Europe travel restrictions are removed by European government wants their populations of the high risk populations become vaccinated with <unk> there'll be a very substantial profit of recovery into the July August September period, we're already seeing a significant spike upwards and bookings into that period for people.
Taking the channel and also taking advantage of our and no change fee policy, but taking a chance of making several holiday bookings on flights.
Particularly of the sub destinations of Europe.
We believe there will be of very strong recovery in short haul and European city break holidays current holidays, because mainly because of capacity reductions, but also because of the long haul will take much longer to recover and I think there'll be a much slower range of vaccination of the southern hemisphere and that way.
And need to state of the very high risk and the long haul travel and therefore people with holiday much closer to home.
Europe and.
And then in the third quarter for which will be the December quarter and the March quarter. We expect most if not all of the European populations have been vaccinated that stage or at least be down to the very youngest quartile, who are not that great risk of being suffering illness, our debt from COVID-19.
The bankruptcy as we move through credit <unk> more of the acceleration in the vaccine program, allowing for the various and competences.
And National Health services.
Remove restrictions and allow us to return to travel.
We do we are returning with the benefit of the new Boeing 737, Max much lower our lower operating cost thanks to the remarkably efficient engines for weeks at more seats and the modest discount as we negotiate with the Covid on that we're still waiting for the eight hundreds to be certified by the FAA we.
Hope that would take place sometime in mid February mid February yesterday, and we hope will license of the aircrafts sometime around may be early mid March and we will be there, but they should take our force deliveries towards the end of March.
We're in very active negotiations for the whole series of airports across Europe, and who are looking to us to.
And to add to give them more aircraft and give them more routes and more traffic.
We note the continuing of developments among competitors coating capacity building basis, I mean, we have the wonderful.
For example, last week of wins for example, the closing the tram time base and all of that they'd opened only six weeks previously.
And as a further indication of that.
And believe nobody will be able to compete with Ryanair is cost base or our operating efficiency and once we return and we are spending money at the moment and I would highlight that again, keeping trying some aircraft to keep the aircraft current to keep our pilots and cabin in the current we're stepping up the recruitment of carbon true very true.
We'll be the bottleneck to a rapid recovery and this summer we are training and recruiting many hundreds of cabin crew at the moment. We may have those on the payroll are we starting to have the trade some of them beyond the payroll and somewhat of a part of the schemes.
But we need them trained and licensed to be able to fly in order to underpin our ask com and rapid recovery through the.
And the summer of 'twenty, one and each of the oil for 'twenty one.
And that's all I have to say by way of instruction, Martha and you want to add on the MD&A on the finances, and so just a couple of small points of Ingalls.
For the fiscal quarter, but I was pleased with the performance and the costs, which were down 63% ancillary also performed relatively well for about 2% on the per passenger basis, driven by the priority boarding and the reserve so using the balance sheet strip will be races, and one of the strongest in the sector.
And as you said, Michael the 80% offset of the Boeing fees on encumbered the conservative value of just over $7 billion book value.
We also finished the quarter with the strong cash balance of $3 5 million and this was after more reforms and charge backs going out of $200 million and fuel swaps and some of the barrels from the spring and the summer being paid and so that's all of it.
Rather the good performance and.
And the quarter given all of the headwinds that we had and I think it might be used for just probably open up for Q&A and you wouldn't give you the quick flavor of the tenant negotiations of the airports and with the unions at the mall and how they've gone up and.
Coming off of in recent months just on the of the staff costs.
We continue to take advantage of the various payroll and furlough schemes and what we're recruiting cabin crew. We're mindful of some of those schemes delta that recruitment out of the payrolls at the moment. So it's just a balance dose book to try and have enough people ready debt. If we do have the snapback and pent up demand of the airports.
It is.
And as of the day the extension of the status of that deal are.
Low cost deal there for a further four years of 2028, and we continue to work at our largest basis. Some are moving more quickly at the end.
The other is but there is the gradual awakening debt thats going to be less capacity and so.
And the European market some of the airports are hiding behind where we'd wait and see what happens of course.
As we continue to make enhancements, we've made announcement and the attributes so a new base and both as open and running extra aircraft in Naples and so.
We are.
And we're moving along at a at a steady pace, but it's going to take a while for some of those airports and then maybe too late for them.
And because we're going to have to make decisions when we finalize the traffic for the summer and there will be less capacity there of those airports and step up of the plate would be rewarded and so we're making good progress of airport costs. Good okay. Thanks, and a great well open up for Q&A.
The warning and we can keep it has tightened the <unk> because we're going on investor calls from <unk>.
Onward.
Thank you if you wish to ask and over to your question. Please press zero, one and telephone keypad. If you wish to ask your question, you're making except for aircrafts and search for use of Ken. So once again, please press <unk>, one and the telephone keypad. If you wish to ask your question.
Our first question comes from Daniel from Bernstein. Please go ahead.
Good morning, gentlemen.
Limit myself and let's hope the question numbers go up as of the profits increased again.
Could you talk a bit about the state of your multi brand approach you removed the Lauder brand outside the flights of Oregon displayed as Ryanair logos with and operated by tag and so there is no sign of really of loud up because of our multi yet you're taking delivery of said this morning of brand of planes.
Of your plans for the publicly visible brands and is there any role for multi brand internally between the different of course.
Yes, there should be.
No great change and the strategy other than we're no longer selling loud as the public brand loud and we'll be doing it's doing sub service flying for other airlines within the group and when they return and with the Airbus aircraft. Hopefully later on this summer.
Most of the air we continue to sell.
Walter will take some aircraft that will be branded as Malta air some of the for six or eight of the due and deliveries from Boeing and would be brands and just Malta Air and Bose.
<unk> continues to expand and central and Eastern Europe, and now it's taken over most of the Ryanair basis, but again most of the selling is the other costs the ryanair dot com platform the.
The other group of airlines are providing lift to Ryanair Ryanair as the main brand Ryanair as the main.
And the website and selling vehicle and it makes sense growth effort to continue to promote.
Ryanair as the main sales brand, but with the operating capacity and the lift of being provided by other group Airlines and our case most of the air base and Malta, and both based in central and Eastern Europe, and and a post Brexit World Ryanair U K of rock will do the very small number of UK domestic and U K to non U.
New destinations and that will be flight.
The other than makes sense to kind of talk about profitability with the with the op growth because essentially the multiyear and both are just the wet leases into writer of DSC.
No. It doesn't demand frankly didn't take make more sense of what operating profit at the moment until we see the vaccines and the company out of Covid.
Thanks.
There will be some segmented reporting and the annual accounts.
And in reality, we want to maintain simplicity why is the are the.
Multi aoc strategy gives us more operating efficiency.
And operating cost benefits remember one of the key reasons for the multiyear at the multi brand strategy was sort of we could ask.
People employed in local and countries paint local taxes and moving away from the <unk>.
And the Irish and it.
And the case of lot of the motion of the Austrian and assistance that they want to ask everybody across Ireland Ireland.
Iron and across Europe in Ireland and Austria.
And just.
Just three questions.
And like you are finding for the Nexium and given the third what are the and update.
Thanks.
Good morning.
Right.
Look I just what's the why not pay for everything and Reiner then.
Because ultimately if I take everything and Ryanair I feel I have to fall back on the Irish government is this a packaging rights here for our pilots who are based in Italy, and Spain and Portugal the.
Unionization, we negotiated locally the pay deals they wanted the bulk of contracts and therefore, our local taxation and all of those countries and.
And therefore operating.
Efficiencies to having.
And I would say multi aoc and multi brands I've never been hugely impressed our stressed about branding, but having multi aoc debt is more efficient for example of our Italian pilots, who are now and.
Buoyed by Malta Air, but on the <unk>.
And the multi day Oc.
As a much more efficient because they qualify for the same allowances and tax benefits of that it's obvious pilots do and there is a significant benefit for our people and having those loans contracts and note the tax arrangements as well and.
And the operating cost savings of Ryanair, and having local pay and local taxation and those countries.
Got it thanks very much.
Thanks, Danielle next question. Please our next question comes from Duane <unk> from Evercore. Please go ahead.
Hi.
Hey, good morning.
Just given the more favorable aircraft economics, some of the airport deals you've highlighted and some of the staffing efficiencies could.
Could you could you give us a sense for what percent of your capacity would you be able to hit kind of your old unit cost profile, whether that's 70, 80, and 90% and then once you get back to a 100% how much of a tailwind.
Do you feel like you have locked in and how much lower could unit cost be.
I'm not trying to set the first half of the question, but you know of.
And if it is what's our capacity of recovery like this year or next year, you're one of the fastest we don't know, but we're operating I think something at the moment.
These are very move of the figures I think we're looking at maybe something like 20, 25% and Q1 could.
Could be between 50, and 70% and Q2 and that.
Indeed in the September quarter, and December March quarters, three and four of its probably something between 75, and maybe 90, possibly 100% you will move to the higher numbers of the faster and the more aggressive or more success of the vaccine rollout program as you move for the lower numbers. If there is delays and the vaccine licensing rollout.
And it's really very and move of blood and that's why we have such a wide guidance on the path into next year of besides of the between the 80 million to the $120 million compared to our 2019 number of the $150 million and then the following year. We think will go back into strong growth and to go from 80 to 120, we think up to EBITDA.
Something north of 150 could be $160 and $70 million.
When the operating costs be lower yes, they will buy how much I don't know and.
But the key drivers going forward for the next I think foreseen for the next two or three years, we have negotiated paid the use our pay cuts with our pass of our pilots and our cap and food and run this year and next year, then we give that back of we and promise of restore that over a three year period, which is I think fair and reasonable and that will give us lower salary cost.
We have much lower aircraft operating ownership and operating costs as we take more of the game change of aircraft will have significantly lower fuel cost because I think longer over the medium term oil prices will be much more stable something in the 40 and $50 per barrel, but our aircraft and reported 14% debt fuelled by carrying 4% more.
Passengers airport cost will be lower I think the ATC eurocontrol charges, but there will be less.
ATC delays because of significantly net capacity across Europe, and I think youre going to see many more European governments and airports rollout of recovery incentives.
In terms of the true the remainder of 'twenty one of these <unk> when they realize that Lufthansa and air France KLM of no intention of coming back with a lot of their originally the capacity.
And there will be a I think competition between states and airports and to try to participate and that recovery earn either so.
You go back to slide four of our presentation, which is our operating cost of light.
It shows how much lower our operating costs are and any other airline on a per passenger basis, we don't mentioned RASM and CASM because no passenger yet has ever bought the RASM or CASM ticket and.
Most of those operating cost and the gap between us and our competitors will get materially wider and you look at for example, the Easyjet from now have a very good for their fleet and I think the old about Turkey by over 40% of their fleet, we will and all of our aircraft they've been doing sale and leasebacks at distressed prices and higher financing costs, we have lower cost financing.
Same with wins for example, and we're adding these aircraft, but again, our expensive sale leasebacks and.
The only able to compete with us on price at any of the airports, where we compete with them and.
And we've seen more recently day retreat from primetime and.
I think it is indicative of that they've probably over expanded into markets, where frankly the air business.
And is unable to compete with the likes of Brian here. It appears the Trump time, and not even able to compete with Norwegian which has a fairly low bar.
But it is one of these and I think the critical thing is that our debt.
The price get the cost gap between us and every other airline in Europe will materially widened as we start to take delivery of a significant flow of the game changer for aircraft not just to sell for 'twenty, one 'twenty two and summer 'twenty three.
Thank you and Chris.
Alright.
Our next question comes from Savi <unk> from Raymond James. Please go ahead.
Hey, good morning, Michael and.
And I understand it's right and your position that vaccines for you replace testing and quarantine and other travel restrictions, but I was wondering if you know.
And where you have confidence that the countries are going to take that Samsung and if you have any.
Is there any country opportunities that stand out where maybe the government action is supportive of.
SaaS traffic recovery or range.
And more of the competitive capacity.
I think some and you know.
The person have you you know once you, but if you take the U K, who are certainly leading the word at the moment and the vaccine rollout program.
And with significant success I think you know and I've been very critical of the UK government and mismanaging of law for the Covid response, but they deserve credit for the success of the vaccine rollout program I think politically it would be very difficult for governments like the U K government.
Down the population beyond the end of March when they're able to announce the 50% of the population of been vaccinated and.
Including all of the high risk groups the over 50 of the nursing homes and the hospitals and Vaccinating those high risk groups means you have a significant decline.
And Morbidities hospitalizations debt and raised the thickness.
Yes, you may still have COVID-19 and the community, but if you have COVID-19, the passing around and young people, who typically do not suffer.
The significant deal and this are unlikely to be up and license certainly don't die from Covid.
<unk> as we move into the silver of period I think there is likely to be huge political pressure on those politicians to ease and.
Governments to ease the restrictions and Pete.
And we'll want to go back on holidays, and if you've been cooped up and hope for the last 12 months homeschooling with children and.
And you do not want to be locked up you want to go and book Silver holidays, and even the experienced last year before that was ever of vaccine and there was a significant recovery.
Holiday travel through June July and August when we return to flying haven't been complete the shutdown in April may and June.
And maybe Michael and the second part of that is there any kind of speaking of the countries, where you see the competitive capacity coming out more so or is it just generally across Europe.
I think it's been I mean.
And generally across Europe, and when you look at the UK for example, <unk> of gone plus 8 million seat Norwegian of completely disappeared and they had priority of about four five minutes each of the UK market. Thomas Cook is gone and booked in Germany. German wings has gone bust, but lufthansa has already reduced its short its capacity by 2030%.
Cross Europe, even the legacy Airlines, who will receive a huge amount of the state aid our maturity reducing their capacity both short haul and novel at the time it looks like it may be.
If he pays out again by the Italian government, but the the fleet is going to be cut by about 30%.
Huge capacity reductions and they create enormous opportunities for airlines like Ryanair to bridge the spaces and then he said we jumped on the Easyjet withdrawal from Venice and Naples.
Uh huh.
And the.
Norwegian withdraw and not so much from gasoline but.
Spain, and Italy has created huge opportunities that we are actively negotiating expansion of those airports and the most important one of all of those has been the four year extension of the low cost deals.
And that we now have of low cost of growth incentive scheme of bad debt rose up to 2028, and we would all of the forgot the COVID-19 by the time, we get the 2028, we will have materially nor airport and handling cost and faster than any other and I will have a capex already troll and.
Thanks to the agreement with Easyjet on their base of aircraft swaps, we will account for about 90% of the capacity start to the the overnight.
For the at Stansted Airport.
And with the material into our cost base that airlines will have a new GAAP record Heathrow and I think you will see the recovery and Gatwick and are at Gatwick and Heathrow It would be.
Meaning for the slower because of the absence of long haul traffic I think long haul is probably going to take two years to recover and partly because I think and in many cases of the southern hemisphere countries will not be as aggressive and rolling out of the vaccine and that.
Where you like to see more of these vaccine very insight the.
Presenting on the site.
The South Africa, and there'll be more of those and the southern hemisphere.
And thanks for having next question. Please thank you.
Our next question comes from Mark Simpson from Goodbody. Please go ahead.
Yeah morning.
Just want to pick up that Colin said, yeah. The ancillary was kind of a K a.
And I'm, sorry, if I got it.
Barely hear you.
Yes, Hi, sorry can you hear me now that's better yet.
Just on the ancillary fronts.
I mean, it was up two 2%.
Revenue per Pax in the quarter.
Which I think.
And they are described as okay.
So are you just pointing racine it up.
The double digits of this and the second quarter, and obviously being up mid teens through the the previous fourth quarters and just.
Wondering whether there was anything specific and sensor.
Annualized day some of the change.
Or can we expect that two rigs out of range going forward because as I say I didn't think it was that actually that spectacular this course of that performance.
Okay, Mark I think.
The data for which you on that and we're generating 20 euro of 40 per passenger and ancillary services up 2%.
The 12% on the nine months basis, and we continue to see.
The strong penetration on the likes of the reserved seating and the priority boarding.
Onboard spend which typically negotiate or what accounts for about $250 million.
And revenue is pretty much nonexistent at this point and time that will bounce back.
And in due course and.
The other products will bounce back with the very small customer volumes 8 million. So we're not getting the opportunities type of sale a number of the products that we would normally sales. So I'm quite pleased with the 2% per passenger increase of up to 20 Euro of 14.
I would just add to that as we emerge out of Covid day one.
Of the areas, that's going to open up again.
Judy for you on flights to and from the U K.
And you would account for one of our trading 25% of our volumes, we will see I think.
The reason.
The upward impact on ancillary as the result of being able to set of Judy.
And on board, our bias from the UK to and from the U K and Youll see that coming through while still.
Growing our penetration on things like reserve seat priority boarding and Covid has been very good for the indeed, the depressed the propensity.
Propensity of people to take up those ancillary services clearly with small passenger numbers inside sales for things like Tvs drinks and snacks has been down but that will recover strongly once we get vaccinated and we move into a post COVID-19 world.
Just.
So a photo and how are you going and manage the GC free would that be kind of.
Collect at the.
The other.
Arrival of sort of collect before boarding house, how do you manage that in terms of minimizing let's say.
The the.
The disruption from the process all the way to carrying on board on planes.
Yes.
The market's Eddie here and yes.
And don't forget we've been experimenting with preorder as well so we're still working through what will be the best way to sort of deliver that our board and.
And we would probably have smaller units as well of board so that to make it more attractive. So I don't think it's the net that you've got various solutions that people and people can order from the seats and some of the technology, we've been trialing as well. So I don't think we would have the same sort of logistical issues and just add the point as well of dairy are talking of.
And at the.
The ancillary don't forget that all of those subsidiaries as well that the key ones there going up much lower load factors, where you don't have people tapping into necessarily higher prices that you would see so I think that's.
And I think you will see our salaries as well sort of.
And I think it's quite an impressive performance given we didn't have high load factors as weapons.
Okay. Okay.
And when Youre looking at debt the Canary Islands of Spain, Portugal, and those are two and three of our base that we didn't see a significant role for inside sales on board those flights and where there is a reason of pending for people to buy.
Alcohol and things like that particularly with its due to the benefit for the doing so.
And next question. Please our next question comes from Stephen Furlong from Davy. Please go ahead, and it's even higher.
And Michael can you just talk and more.
Generally about Italy, and the Italian markets.
It seems to be a lot going on there with alitalia is shrinking and.
And obviously you have.
Your base of Dennis.
A couple of other places and.
And generally what the tourism authorities are sort of and European airports or say about at this summer that the useful because I think there must be of big opportunity and Italy. Thank you.
I think there's lots of uncertainty.
One of the challenges for a lot of the airports is you know they are being told by the incumbent legacy or don't worry all of the capacity will return when despite the by the state may have reduced our fleet by 25, and 30% and lot of that capacity will not return, but the.
We don't know quite how much theyre growing their airports are their copy is going to be damaged until probably summer of 2022.
But there are undoubtedly the more of kind of the the alert the airports and Italy, we're already and.
The new based on with the benefit of visa who are on towards even before you get to the announced I mean, they haven't closed the base there, but they've gone from six aircraft down the two Naples, and we were the first people they call once they got the smell of that easyjet for going to kind of fill.
And those the Naples basis, where that trend.
Continues across Europe, it's happening and Portugal, THP look like we're taking about 25% of their feet completely out.
And there's about four of 5 million passenger worth of problems now clarity farro portal are very exercised the.
As per the less so because again they are not quite sure what the APR going to do or not do and they're sort of heavily involved in.
And the mask protection of THP by vilified by the government and Portugal, but those opportunities, they're not going to go away and Theres no. Other airline out there taking delivery of 100 aircrafts for the next two years of 200 aircraft for the next five years.
And I think most of the the other airlines that are out there with the stroller to get most of their capacity back up and running even for some of our 2021, but the big challenge for a lot of the legacy Airlines is the long haul, it's clearly not going to recovery to summer of into 'twenty. One I think of lot of the won't even number of covered by 2022, and our non Florida there of shortfall.
Money is designed to feed our feed and into our from the long haul operations and now.
They can protect the slop.
Through the summer aided and abetted by the debt the Slough wafers, but all of that means it's just not going to fly those.
And the short haul aircraft out of the long haul aircraft. So.
I think we will see very we are already seeing very significant incentives with a lot of our airport partners for the summer 'twenty, one I think winter of 'twenty, One day, we'll get even better and I would be prepared to grow aggressively and the winter of 2021, even on the back of lower airfares, because frankly, we have much lower and lower.
And that will be able to sustain those lower airfares.
The way of it all.
All of those.
Boosting our capacity and our forward bookings into the silver and 22, we will emerge out of this where the much lower cost base and much lower than any of the rare and we should use that to lower prices to take as much market share as we can cope with and the recovery of December 'twenty, one and.
And were 22.
Got it thanks, Mike. Our next question comes from James Hollins from Exane BNP. Please go ahead of him.
Hi, Good morning, a question for Neil and I just.
Just wondering if you could quantify youll.
Q3, cash refunds as well as delayed year of control payments.
And how they might play out in Q4 bench of still.
Give us some sort of sphere and Q4 cash but thank you.
Okay.
And I'll give kind of high level numbers here, James we would've had over $300 million going out and refunds of about 200 million and fuel swaps and somewhere between 60 and $80 million and the barrels.
And in the quarter. So you can see that that accounts for a big chunk of the the 1 billion movement and cash.
And Q2 and Q3.
And am I right and you can do both.
No.
And.
And to into Q4.
Relatively small on the fuel swaps and we were looking at probably just about over $100 million and refunds, where we're caught up on.
And the refunds were caught up so we're literally as of as we're canceling flights. We're refunding within the the record number of days requires legislation and there'll be nothing significant on capex.
And so maintenance capex going through some debt repayments and that would be the key elements, where we're kind of burden of the cash levels and we were talking about back in the summer. So excluding any cash that we're generating and we're probably burning somewhere in the region about $50 million to $60 million of weak growth and payments.
Okay, and then any and into combating shortly.
Well, we hope to see the first aircraft coming in soon and I think there'll be some additional cash.
Cash coming in from Boeing and the fourth quarter and it'll be significantly less and we saw in the Q2.
Okay. Thanks very much.
Okay. Thanks, James next question please.
For any more questions.
And as many know umbrella.
Okay. Thanks James.
Yes.
And the moderator.
And our next question is from Leo Glenn from Credit Suisse. Please go ahead.
Hi, Good morning, just the one again on the subject of the airports apologies for the last week. There was mention of hub of our primary airports and western Europe reluctance to allocate slots to competitors to flag carriers.
And we're obviously appealing again.
The state aid.
Just wondering to what extent are you actually seeing this kind of impact today for us.
Is it simply more of you touched on but the airports have the necessary clarity and coming back should you make the decision.
I mean, that's what all the where that reported case would be of bridge rubbish and first of all the airports don't allocate sort of looking to do with the and the.
The floor are generally owned by the airlines, who either use the more lose them.
And there's a huge amount of slop, there that will be or have been freed up as a result of the closure of the likes of fly the Thomas Cook and burn in.
And there will be Aloha class of main legacy airport that will be back to the salt waiver program, but that's the.
And you hit the big pump control of an airport that we're not interested in lake Charles the goal skip all equal.
And there will be no call them and B I think in Gatwick and one of the reason why he was struggling to get into Gatwick is that there'll be very few sort of hand, it over and Gatwick and Easyjet look like they have successfully moved to get hold of the Norwegian soft and when a property and block of the most of that but I mean of any of the other airports where want to grow up and I'll give you the.
And by way of examples only Madrid, and Barcelona, and Rome, Fiumicino Stansted Dublin.
The.
Lisbon, we could do with the freeing up some of the THP slots, but if.
And we don't get them in the short term debt combo of entry, but other than that we will be expanding aggressively I suspect and farro, an and portal. So there is no airport slot restrictions add to our growth and expansion over the next year or two and we could happily allocate if I could get all of 200 aircraft from Boeing and the next three.
And so we can happily advocate all of those aircraft and the.
Next three to four months without any restrictions whatsoever.
But I think what is likely to happen at those main airports the Charlotte the goals the skip of heathrow's their retirement and recovery will be a lot of floor only because long haul will take the longer to recover.
And they will not be EBIT and the legacy airlines with the state on the slop tying up their problem, but if some of those big hub and spoke airports sulfur for another year or two it from.
We couldnt happen Tonight, and our people in the meantime, defensible or intelligent ones would already have done growth incentive agreements with ryanair and be returning to very strong growth.
Very clear thank you Michael.
Our next patient connect from Jamie Rowbotham from Deutsche Bank. Please go ahead.
Jamie Hi, good morning, Gents, Hi, I wanted to also focus on cash quickly obviously youll have the next two quarters might bring in some cash in the form of bookings if it doesn't.
Will you be happy letting the gross cash balance of the group moved down from three and a half to $2 billion with those debt repayments so of possibly lower I guess or might you then called upon the.
Unencumbered fleet that you regularly mentioned for some asset backed loans and <unk>.
And linked to that.
You'll have seen the partially government backed U K export finance loans extended to easy jet and British Airways and is there anything similar that Ryan that could or would ever look to explore thanks.
Yeah, Okay, Yeah, I think we're reasonably comfortable cash position at the moment for us.
The obviously the would we expect a strong recovery into the summer of this year.
Well the fire up the cash flow, so we will be getting receiving and the bookings and the cash flow bookings typically six to eight weeks prior to travel.
And the expenses don't go out for a month or two months after traveling but if that dozens of our I'm still I think we're sort of reasonably comfort with our cash position, we expect to repay the U K government loan of 600 million and in March we have of bond repayment of 850 in June and we would expect to comfortably repay debt from the current cash position.
I would be happy to see our cash flow down to 2 billion wouldn't have 2 billion I wouldn't want to see it go down below 1 billion, but we have numerous sources of additional financing out there open to us at the moment, if we wanted to tap into them, we have a huge unencumbered fleet and.
And the bond market is open to us at much lower rates than for example, we looked at the UK backed government loans and <unk>.
Yeah, and IAG of pig about 3% cost of all of the cost of financing on those loans it wouldn't be attractive to us, how many secure and as well, which I am having the cure.
We think we could read of that.
And I would say in the date, we are inundated with offers of people want you to lend us money, both on the secured and unsecured.
<unk> typically have those rates are less and we haven't drawn the down because frankly, we don't see the need to draw them down and I.
Thank you.
People need to look more of the medium term view of the vaccines are coming the rollout of these coming there will be more vaccines licensed and.
But nevertheless, we run kind of downside scenarios and delays scenarios and Theres nothing out there we can see at the moment that would require us to raise additional debt.
The debt at this year, but if we need to we can and we're confident we can and we will.
That's very helpful. Thanks, guys.
Thanks, Jay and the presentation comes from Alex Paterson from Peel Hunt seat go ahead.
And finally alright.
Just wondering if you can give a bit more color on size and the third quarter.
So they were down about a third on the prior year.
Big of declined and the previous quarter and stuff.
Because of the different booking profile or change of mix what type of messaging.
Please.
And fares of being down.
And the booking profile has got much laser.
And the third quarter Pizza roadie, making bookings, if they really needed and travel.
And over a reasonably short horizon and then we've got a lot more flying was being done on domestic routes and Spain, and Italy and in the.
And in the UK and and international crop, but also the December at for third quarter results appeared very historically of yields fall anyway, you don't youre not dealing with the high yielding somewhere of people going on holidays. Our school holidays, We also announced our peak Christmas.
And I am very short notice and the UK brought and those are many of your conscious brought and those UK restrictions of the 19% and 20 adult December.
We expect there to be a reasonably strong and robust recovery of fares into the summer of 'twenty 'twenty, one and if and again I keep going back to the vaccines rollout of people start moving again.
The yields would build slowly because clearly our forward bookings and silver.
Our lower than they would be historically at this time of the year, but we think they'll recover strongly as vaccines rollout and people are more comfortable that they can't go on holidays.
And during July August and September.
Absolutely. Thank you very much.
Thanks next question please.
Next question comes from the NIPA County from Bank of America. Please go ahead.
Yes.
Yeah, Hi, two questions Firstly can you kind.
And kind of quantify what percent of the fleet and to flight ready right now and then secondly in terms of the new aircraft and how are you thinking about it in terms of adding new features or new frequencies on existing debt.
Okay in relation of the police and the crew and hope to present to our current <unk>.
And we're operating as I've said and we've consistently taken the view through the pandemic EBIT or we don't have sufficient flight cycle and were entirely grounded in the June quarter last year, we were operating empty flights on a weekly basis to keep our Butler and the critical and keep the aircraft. The cart, we will not and we don't want the aircraft and losing.
Currency kind of got to go back in for maintenance and the way you put it back of the year. So each aircraft I think that's the fly once a week.
<unk> maintained we are maintaining all of our crew currency as well.
And so we're ready to pounce on any reopening and too.
Rapidly accelerating any reopening on new aircraft again, as always ready, but we would be opportunistic.
The first couple of claims will largely go to the main maintenance basis, So Dublin.
London stance debt, probably Milan, Bergamo, and I'd say both of them take the aircraft into cash.
And a beach, our two cracker work out of each of in Poland and <unk>.
<unk> and Poland, where we have substantial maintenance I think where the new aircraft type and we need to make sure that for the first couple of months were operating essentially from and to.
And maintenance basis, so any issues and our engineers can address it.
The Italy.
But all of the and that I think as we roll into next winter and we begin to spool up from the first day 20 of 25 deliveries to the second and 50 aircraft for the summer 'twenty 'twenty two of the aircraft will be allocated across the basis of those airports, who are coming up with the best growth incentives.
There are a number of airports to already attracted by the fact that these aircraft produced the noise envelope by 40% and so those airports that are under pressure I think from the environmental.
And also.
And incentivize the us too.
These aircraft are flying these aircraft of those airports.
But in general terms day of the aircraft will be based on the slide two of those airports, who are willing to incentivize the aircraft and the nature of the kind of discussions we're having the some of those airports as you know we won't be charged for the extra seats.
We would be and moving more towards the landing fee payment rather than a per passenger payment now it was still going to be of 4% of reduction, but all of these 4% reductions out of very quickly.
Next question please.
Our next question comes from the answer came from Wolfe Research. Please go ahead.
Hi, good morning, everybody.
I will drive the.
200 million passenger target by fiscal 'twenty six can you can you get there if the Max 10 is either canceled or delayed.
And we sort of kind of get the cancer, but I mean, you'll see the likelihood of being cancelled and like the Max was certified as return to flying in North America and December and there's been no issues with it it's the accomplishing many hundreds of other stuff.
The flight and taking on the wing in North America, and Brazil and Canada.
Has been released the return to service here by yes. The last week, we expect to see the first couple of flights on the Max aircraft here are the growth of aircraft return to service probably in February and March as the European travel restrictions are lifted.
But so assuming there is no significant interruptions and either.
The the Max the return to service of our the Max deliveries and no. We're very confident we'll get to 200 million passenger by 2026. If there is some unforeseen development of our delay in the eyes of the Max.
Air worthy of this are and the Max delivery, then, yes that the date might get pushed back.
No Michael I'm, sorry, the I'm talking about the Max 10, specifically.
Specifically the seven three of the matter of fact.
The Senate factored into our numbers for the $200 million.
And I'll turn that predicated on our existing orders and the Max eight 200.
And the two hundreds coming in and exiting some of the older aircraft from the fleet the market Tam would really be incremental growth from 2025 onwards.
And we are already in discussions with Boeing on the Max and now the Max 10 delivery has been pushed back because they have more issues to accomplish with the FAA and the assets that deliver the Max.
The Max 10 certified.
But as soon as they start making them and delivering them, we would certainly be theyre looking to all of us.
We think the Max 10 will give us yet another operating cost savings.
And on top of the already impressive operating cost savings delivered by the Max eight to owners of the game changers.
Thank you.
Thanks. The next question please.
The next question comes from Charles.
From the parent.
Moving on from the hotel.
Why is the range for them.
Passenger.
Passenger flow next year 80 to 100 tons of million I was just wondering what sort of load factor.
The assumption underpins that we'd be still talking about the 70% that you were targeting at the moment of getting towards the sort of like the simplicity and the normal.
Yeah.
Again, I mean, we're.
We're and loosely looking at kind of we try not to run any operating we don't have the 70% load factor, but it is kind of predicated around the 70% load factor and the first two quarters rising to maybe and 85% 90% of load factor and the second two quarters are the <unk>.
And have now we don't see ourselves going back straight away to 93% and 94% load factors, but we do expect the load factors to build and.
And we would still be reasonably I think effect of that.
Maintaining reached the be high load factor of the bank of the one figure I took from both the wins and the.
He should get numbers aspect of their loan pipeline fell to mid low 60, percents, we generally maintain the load factor above 70%.
And through the third quarter and.
We'll expect to do so again all of that might be a bit of a struggle in the fourth quarter, just because there's so few airplanes.
Right.
But yes, so I think we're operating general and 70% and each one growing to 85% 90% of <unk> two it could be little bit higher and that could be a little bit less and that.
Okay, great. Thanks for the model.
Thanks, Karen.
The question comes from.
From Evercore. Please go ahead.
Okay.
Wayne Wayne.
Okay.
And already I can with debt.
The other question yes.
Can you can you speak to the significant spike upward in bookings that you referenced earlier in the script can you put that in context or put any numbers to it relative to what you have been seeing.
No I wouldn't want to put any numbers right look I mean, there for significant spike upward, but all of the very low base.
Since we ran the javelin go advertising over Christmas into the new year, we've seen of significant uptake and holiday bookings out of the UK, and Germany, and Spain out of Ireland.
But as I said also we are running materially behind where we would normally have been this time of the year for fall of bookings into the summer holiday period, and so we have a bit of way to go to catch up.
Think that would be caught up for a quickly.
More confidence and the vaccine program and the removal of lockdown restrictions and proud of the restrictions we do.
Think of a snap back very strongly and I go back for the experience we had last summer when the U K.
Moving to the Canary Island and from there.
The guy that the lockdown restrictions there was a massive surge and bookings almost instantaneously not just onto our service, but most of the airlines airline operating between the UK and the generic I think youll see more of that but so I wouldn't want the over exit or mislead people. There has been a significant upward spike and books.
<unk>, but off of very low base since Christmas.
Our holiday travelers of Sun destinations in the summer, but we're still running well behind where we would have been this time last year for those destinations.
Thank you for.
Thanks for a net price debate.
Unfortunately, the for the questions, we have time for sabra and taxes because for any other questions.
Great. Okay. Thank you so acuity for.
Participating we have the number off of Investor calls and I and the number of group Investor calls and which we are.
The organizing today and tomorrow I mean of all of this we don't have much more information to give you we are somewhat and the half of the cloud and with.
And with the vaccine rollout program, but I think pretty quickly the narrative and in jewelry and the month of February is going to move away from Lockdowns and restrictions towards vaccinations and the removal of restrictions and I think the success of the UK broker and could you put enormous political pressure of the European submission and on European National governments to get their finger.
Out of their offices and.
And then accelerate the vaccine programs, yes, there'll be some production issues with larger and more vaccines and Jacob Johnson and Johnson vaccine when it get license and.
And that would be the issue and not so much be about production and supply and delivery logistics and delivery into the population of Europe.
But I would be read the the comps at this point and time that the success of the UK program will now be have to be mirrored across Europe and that we'll see a reasonable return to rent is the highest volume traveled in the our second quarter that key July August September quarter, first quarter will be disappointing because of the stock.
The the Lockdowns and the January April of January February March quarter, Easter would be a write off the net carrying forward into April and may will be slow.
Moving very quickly to exploit those opportunities and to get people and the tourism industry back to work and hopefully through the summer of 'twenty to 'twenty, one uncertainty before we get to the August 2021, all of our winter 2020 book, Okay folks. Thank you very much for participating and look forward to speaking to you over the next couple of days and if you want.
The call are enjoying one of the group growth and please contact Peter need of gear and the Investor relations team, we'd be glad to add you.
Pretty much everybody bye bye.
Yes.