Full Year 2022 Ryanair Holdings PLC Earnings Call
Hello, and welcome to the Ryanair FY 'twenty results conference call from Corn consequence will be in listen only mode and afterwards there'll be a question and answer session. During the Q&A in the interest of time and fairness. Please limit yourself to two questions per person.
Just to remind you. This conference call is being recorded today I'm pleased to present curtsy yet ancillary. Please go ahead.
Hey, good morning, ladies and gentlemen, you're very welcome to the Ryanair full year results Investor Conference call I'm here in London with the.
Most of our menu our teams Eddie Wilson, Neil Mcmahon, David O'brien, CEO of Malta Air a new Sarhan Tracy Mccann, Peter locking around from various different points and we have an extensive roadshow in place across Ireland, the U K Europe and.
In the state this week, so if you'd like a meeting please let us know content is through Peter locking in the investor team as we have.
Sorry.
Thank you.
You've seen we issued a press release this morning and is in a comprehensive Q&A up on the website. So I'd refer you all to Ryanair dot com and while you're there make a booking.
A couple.
Couple of quick themes for this morning.
I think we're a bit more cautious than may and many of other airline competitors they've been out in recent weeks.
There's no doubt that there is a strong recovery underway at the moment I would characterize that recovery.
Q1, we are back up at kind of 90% load factors, we hit 90% load factor in April for the first month since Covid that we got above 90%.
But pricing is a little bit softer into Q1 that is the April may June quarter, most of that I would blame on the Ukraine invasion of the Russian based in Ukraine in the last week of February Easter looked like it was going to be very strong and it kind of fell over.
Because bookings permitted for about four or five weeks following the Ukraine invasion that has affected pricing into April may.
A reasonable recovery to June, but nevertheless, pricing there'll be a strong traffic over in Q1, but pricing I think it would be down maybe modest single digit percent of where we were pre COVID-19 Q.
Q2 at the moment and where our forward bookings are running about 10% behind where they were at four eight for Q2 pre COVID-19, but pricing looks stronger we expect to see load factors returned to the low to mid 90% into Q2 that the July August September quarter pricing at this point in time it looks like.
It would be modest single digits above where it was pre COVID-19.
But we're slightly concerned at the risk that the risk is to the downside if theres any negative news flow either on COVID-19 around Ukraine, our Icelandic volcano volcanic ash.
That could fall over again, and we're kind of scarred with the experience we had with the omicron, which kind of damaged Christmas at short notice.
Ukraine, which damaged Easter at short notice generally speaking, we think the summer will be reasonably strong as long as there is no adverse news flow out of Covid are out of Ukraine.
We then they'll move forward into the two winter quarters in December and the March quarter, and we have very little visibility to those two quarters. There's a general view that there would be a significant economic downturn, if not recession across most of the U K and Europe in the second half of this year Ryanair is poised I believe to do very well.
If there is a recession, we are by some distance the lowest costs.
Producer and the lowest price offer our operator in Europe and in a recession, the low cost providers, whether it's prime Mark Ikea little into supermarkets of Ryanair and air travel will do better people will fly, but they would trade down for the higher cost providers to ryanair.
And so because we have so little visibility to the second half of the year, we're not willing to give a guide or our guidance on full year profitability. At this time, we said, we can say no more than we expect to be a modest profit recovery, we're not sure whether we'll get back to pre COVID-19 profitability, which will be something north of around 1 billion euros after tax.
We should have a reasonably strong first half of the year, but it all depends how much of what the losses would be in the second half of the year and those are the kind of fundamentals that those are the fundamental drivers of the business for the next 12 months around that we are taking delivery of just over 70, new game changer aircraft. This summer. Unlike almost every other airline we will operate at.
115% of our pre Covid capacity through this summer may.
Major expansions of capacity in markets in Dublin, where there's a COVID-19 recovery scheme in Italy, where non Italians reduce capacity in Portugal in Vienna, where we've seen off most of the other kind of low fare competitors in the last number of years, it's essentially.
Loud at Ryanair.
Ryanair and the Austrian Airways and in central and Eastern European markets, as well, where we're seeing very large market share gains in Hungary, and Poland, and Romania and in others.
We're also very fortunate that for the next 12 months, we're very well hedged on fuel.
Describe that more to dome look then.
Supremely intelligent management, but nevertheless, we have 80% of our few purchased forward out to March 2023 at less than $70 per barrel.
Our unhedged on the remaining 20% and that will be a cost challenge.
Through the next four quarters, but nevertheless, we're in a much stronger position on fuel hedging than any other airline in Europe . So we have a combination of new aircrafts capacity verdicts, 14% plus 16% less fuel.
Well hedged on a few on oil.
We have a lot of really good airport deals done, we're opening 50, new basis and more than 700 new routes.
And we believe that they we are poised to benefit the major beneficiary from the post COVID-19 recovery, but we caution at this stage that that recovery is fragile and it is exposed to adverse news flows.
We continued to perform well, we're very proud of our continued commitment to our environmental strategy. It also our social strategy on the environment. We're pleased that the climate disclosure project has increased our climate protection rating has improved from a b minus to a b, we're well on track, we believe to get to an a rating within the next two years.
We are industry, leading in terms of our a theres no other airline rated higher than a b in Europe , and we're very pleased with data sustained lytic recently upgraded Reiner. We're the number one ESG airlines in Europe number two in the world and we continue to invest heavily both in our environment not just in our environment.
Mental programs, but also we're not and in our.
Social.
And governance programs as well.
Labor has been an issue for a number of our competitors in recent months.
I think we are have been the beneficiary of some of the decision, making we made during COVID-19, we committed to all of our pilots and our cabin crew that we would not make them redundant jewelry COVID-19, we kept them employed.
We did participate.
Participating furlough schemes are in the kind of employment support schemes.
But what was critical is that we kept our pilots and cabin crew cards. So we kept them or finding at least once a month.
We kept them current we kept them employed and that means that we're not seeing the same employment pinch point, there's a number of our competitors here in the U K, who are short of cabin crew and are either cutting flights of our taking seats out of their aircraft and we have enough pilots and cabin crew to get us through the summer. It is tight in the U K because of the.
Yeah, Barry and flexible labor market post COVID-19, but we're in reasonably good shape and we expect to operate all of that capacity through the summer.
More flexible labor markets in Europe , and again, we have more than 1000 pilots being our cadet pilots being trained at the moment and more than 2000 cabin crew going through recruitment and training programs not just for the summer, but also into the winter.
We're looking forward next winter taking delivery of another 55, Boeing 737, Max aircraft as long as Boeing can deliver them in the jewelry is out on whether Boeing will be able to deliver those aircraft next winter that would gear us up well for growth to 185 million passengers through the summer of 2023.
I need to fiscal year end March 2024, I've seen a number of reports out recently from analysts who should know better.
Question in the business model and the exposure to higher oil prices into FY 'twenty four.
If oil prices remain at these elevated levels youre going to see fuel surcharges from your legacy Airlines. This year, you'll also see significant view our air fare increases from airlines around Europe , who are either old and hedged or who are few your hedge positions to ryanair.
A lot of those airlines that withdrawing capacity for where they compete with us that would be a last week announced 100 fewer daily flights mainly on Mark is short haul markets UK easily UK, Spain because of labor tightness, you know and I think that's an understandable and sensible move.
But it does play to our business.
Business strategy over the next 12 to 15 months, but to those analysts who are out there kind of a low well oil might be higher in the summer of 2023, It may well be higher December 'twenty, three but if it is airfares will be significantly higher as well and we are poised to be I think one of the pretty much one of the bead beneficiaries of higher airfares into.
Similar to 2023.
But I think for the more mature and vessel, we're investing heavily in our people. We've had significant progress as you know we engaged early and pay cuts without most of our pilots and cabin crew. We have made are scored some successes in recent weeks or the recent months we have been in.
Engage you can pay restoration negotiations with pilots and cabin crew I'd say at about one third or fourth a turkey or 40% of our.
<unk> markets, we've agreed pay restorations, where we're trying to bring forward.
Those pay cuts we are bringing forward both at the timing from July to April or May and also instead of restoring 20% pay cuts at the rate of.
Yeah.
66, 8% over the next three years, we're inverting as you're bringing it forward to 10%. This year, 6% next year, 4%. The following year with a commitment that if we get back to pre COVID-19 profitability. This year, we will combine that six 4% pay restoration over the next two years and bring it forward to July of 2023.
We remain committed to restoring the pay of our people as soon as our business returns to pre COVID-19 volumes and profitability. There are some unrealistic expectations out there around Europe.
Oh coverts over give us back our money Covid is not yet over it is not yet reflected in both our load factors and in our air fares I think for the foreseeable future, but we're very hopeful that there will be the industry will not.
So for any negative news flows and what we will see a strong post COVID-19 recovery, maybe over the next 12 or 15 months and we've committed in our negotiations with our people and our unions that if we recover to pre COVID-19 levels, we will restore that paid to pre COVID-19 levels, but only adds profitability is restored I think we've got a good ask Eddie Wilson just say.
The CEO of DAC, Eddie any additional comments you'd like to give us in terms of color and then Neil Hansen sovereign for something on the balance sheet and on the finances, Eddie Yeah, I think the big call out here is the growth in market shares and that's built off of leveraging our operational resilience because we kept all.
All of our pilots and cabin crew employed and we were able to open 15 basis. This year and again leveraging of the low cost yields and growth deals that we did at most of our major hubs, which actually puts us in a good puts us in a good position to grow and not only this summer but into next.
As well, we will continue to be opportunistic.
And we have no difficulty in terms of.
We've already sort of.
Inkjet, which exactly where those aircraft are going to go for next summer, obviously, we haven't communicated that to airports, but again it will be opportunistic.
And it is.
That'll be done off sort of low cost deals within but I mean, the real call. It and market share are places like Italy, where we're up at 40%.
Again, poor and sort of the incumbent carriers there in terms of ease of Spain has done, particularly well for us as well I think it's indicative of Ryanair really being the only show in town in terms of growth in particularly in tourism economies of Southern Europe . We were at a recent event in Spain with government ministers in attendance.
We're reiners contributing one 2% of Spanish GDP.
Contributing 15 billion in terms of tourist spend and increasingly we're seeing governments, who are trying to restore their tourist economies in particular only looking to ryanair. We're the only ones that have the aircraft coming in that are 55% next year as part of the 210 aircraft orders so.
Costs are in place at the airports micro has touched on the.
On the Union deals that we're doing at the moment security are people that have been through a lot of pain over the last two years.
But what has happened there is that at least we've kept everybody.
Employed and I think the difficulties that we saw at early stages of Covid, where we actually.
You keep people cards was a huge task when we were flying very few passengers. We can only imagine what our competitors are going through at the moment as they tried to use scares training resources web passenger numbers are.
Our buildings so.
We will continue to work with the unions and our people and restoring that pay and we hope that you know that.
We will get.
That will cross over in terms of profitability, returning and pay restoration. So okay. Thanks, Eddie and Neil you might just touch briefly on the balance sheet at an angle to Capex for the next 12 months because it did come up in the Q&A sure. Yes. It's an obvious question, yes, the balance sheet and we've had good progress over the course of the past year. We finished with three 6 billion in cash.
And despite a 1.2 billion capex in the year, just and this I'm very pleased that we saw our net debt position reduced from $2 3 billion, just under $1 5 billion.
Over the next couple of years, we're into peak Capex periods, we expect to have about $2 3 billion in capex in the current financial year.
Pardon me down to about 2.1 to $2 2 billion.
A year after that but our objective over the next two years will be to manage down the net debt position.
On the balance sheet to a broadly net cash net debt position over two year period.
Okay with that.
Thanks, Nate will open up for Q&A. Please.
Reasonably tight for time, because you've got to be out here at <unk>.
11, a talk show okay.
Two part question and then we keep it as happy as we can.
Thank you.
Once again, if you wish to ask a question. Please don't SER one on your telephone keypad and your final question is on so that you can counsel with series C and our first question comes from the line of Jamie Group Ultimate Deutsche Bank. Please go ahead your own monocytes, Jamie Hi, Good morning, Michael.
Last month at Airlines for Europe , you, hopefully I correctly quoted saying you'd be disappointed not to do somewhere north of 1 billion in profits in the next 12 months. It sounds like we should interpret today's outlook is more cautious is that simply because of all the macroeconomic warnings youll reading about or is it also due to tangible changes in the day, so you've started to see them.
The last four weeks.
Second one.
Would it be fair to say, you think better demand for semi beach destinations themselves to keep brakes and linked to that.
When we think about competition out stance that you think we're in the sort of environment, where the kind of package holidays that too can offer could start to be quite a material advantage to them.
And if I may just an observation on the CDP ranking third reason you leave off IAG, who I think have an a minus rating thanks very much.
Okay. Thanks.
Firstly.
For Mis quoted at the airline Brennan I think what what I hold foreign Huawei is not a forecast and nor is it guidance.
That was also what my.
Again, I would say it again today I hope in the next 12 months, we will see a restoration of profits back to pre COVID-19 levels that should be somewhere north of a billion, but what I hope for what I gave her two different things.
I think there's a reasonable prospect of strong profit recovery in the.
The first two quarters of this year, but that can I keep my word.
Coming back to the point it is fragile if there is negative news flow on Ukraine are our COVID-19 or anything else between now and.
June July at school holidays that falls over again as it did at Christmas and it did at Easter.
If we got a fair run we could well get back to pre COVID-19 levels of profitability, but I would also be you know I think there's a much greater risk of you know an adverse COVID-19 very into as we move into the winter.
You see the Covid situation in China is not if theres. Another variant out there that could be of a vaccine resistant variant.
We have to be very cautious about what the semi the second half of the year. It looks like we may also begin with a recession in the second half of the year.
And we are expanding our capacity meaningfully we're running out 15% capacity expansion. This summer and that will continue through the winter and in fact, we may step up our expansion during the winter to.
To take advantage of airports incentives that will be improved certainly during the winter period and the run into summer 2023.
So look I think it's reasonable and we've done our best this morning, we're saying you know what is our outlook on profitability for the next 12 months, we expect modest profitability it could be significantly better than that I don't think we're looking at a loss in the next 12 months.
But I think modest profitability the real challenge for US is could we give you a range of profitability outcomes that we would be able to willing to.
Stick to them and the honest answer is that.
It could be something significantly north of a billion it could be something significantly south of a $1 billion and the until we get through the first half of the year and have some better visibility into the second half of the year and that probably won't be up to the half year numbers at the end of October .
Is we really can't give you any accurate range.
Is demand better for the Beast in the cities no I mean, we've seen a very strong recovery of business traffic in the last short haul business traffic in recent months people repairing their supply chains are.
Focusing more on European supply.
There is no doubt in my mind that the beach demand for European beaches is very strongly in the second quarter, the only reason but.
If you take the city kind of traffic a lot of that is we have a very large domestic operation in Spain with very large domestic operation in Italy with a large domestic operation within the U K.
A lot of that just books up but not so much the U K, but largest Ireland U K a lot of that books later.
Was it booked two three months in advance so that marketplace is.
Still would still be running behind defied the average system might fall where bookings we do expected to book strongly at it was broke late and it will pay slightly more.
But it is also subject to falling over if there's as it did at the end of February I mean, we saw our bookings falloff by Neil We lost about 1 million bookings jewelry. The last week of February . The first couple of weeks of March just because of the Ukraine invasion, and it's very hard to recapture those bookings that people don't make those short term decisions to book well.
We don't see that.
So I think we're looking I mean again I think its a reasonably accurate guidance. We gave you traffic will be strong in Q1, but at prices that would be I think modest single digits behind pre COVID-19 pricing on traffic I think based on what we know, though it will be stronger in Q2 at prices that will be mid single digit above pre COVID-19 pricing and then we have no visible.
As you know Q3 and Q4.
Next question please.
Thank you.
Comes from the line of Savi <unk> with Raymond James. Please go ahead.
Right.
Hey, good morning.
Was wondering if you could talk about what youre seeing in terms of the uptake of the various ancillary revenue purchases, namely are you seeing any changes as demand picks up here.
What's your expectations are for at least the first half of this year.
And then for my second question, you mentioned, taking more Max aircraft in the summer and even though the winter, having a possibly an aggressive plan, but you're kind of passenger targets haven't changed is that just a reflection of the uncertainty or are you planning to retire more aircrafts than the aircraft is not that different.
Okay I'll ask Eddie just give you a quick insight on ancillary then I'll deal with the Max aircraft and passenger numbers Eddie Yeah, I think on ancillary revenues relate to the three main pillars, we have our own we've got the bundles we've got.
We've got seats.
We've got a priority boarding and bags. So we.
We are well advanced on him.
<unk> board in terms of dynamic pricing and we're still quite crude on some of the.
The other tools that we have in terms of managing bags in particular and the relationships within those and also the relationships within control groups would in different markets and different itinerary types. So I would say like it returned strongly as passenger numbers.
Retired them particular load factors.
Keep our priority boarding and I would see that getting more sophisticated so I think ancillary are quite strong.
And resilient and I think we're going to be able to we're going to be able to build on those as we put in dynamic pricing models. So I think there is some way still to go.
Don't forget to Judy free which is building two to three days or building on all of the UK routes to and from the U K.
I'm on Max aircrafts that were going to take $6 73, Max aircraft. This summer that's at Boeing actually delivered them to us, we're still struggling with boeing's delivery issues.
But at 73 aircraft against an original forecast of 65 aircrafts, so like Italy, there, maybe we would try to accelerate the timing of those deliveries over the next four or five years, but ultimately the order number it still 210 aircraft. It doesn't fundamentally alter the ambition, which is to grow traffic by 50% to 225 million passengers.
By FY 'twenty six.
And that stays in place, but there is no significant movement between the years in that.
We have been.
We've made no progress that Boeing on the a follow on Max order.
The management of Boeing and Seattle is very poor.
I would.
No some commentary for the leasing industry recently that Boeing and that.
That it was not entirely complementary of Boeing management on the civil aircraft site I would wholeheartedly endorse that.
I think they are losing market share hand over fist to Airbus and don't seem to be responding appropriately and moving the headquarters to our Virginia from Chicago, while it may be good for the defense side of the business doesn't fix the fundamental underlying problems on the civilian aircraft site in Seattle, and see absolute need to reboot that need to reboot quickly.
<unk>.
Nevertheless, we are out there, but we have an RFP out there for up to 50 secondhand aircraft. We're looking at secondhand Airbus and 787 aircrafts I think we've been impressed with the pricing that's available at the moment and we may.
<unk> tried to do something I think dish more at more aircraft over the next couple of years, we may look to the second half leasing market, where there's opportunities to do so and that might.
Around the edges accelerate traffic growth through FY.
FY 'twenty for FY 'twenty five if we can secure a package of between 30 and 50 additional secondhand aircraft that Boeing don't step up with some additional orders, but at the moment.
I think the bowling manage their ruling around take hedges chickens, not able to sell aircrafts and then even the aircraft are delivered we're not able to deliver to them. All the time, which is disappointing, but we keep working with them with their largest customer but.
They need to reboot.
Hope you are somewhere in Seattle.
And hopefully Calhoun will deliver.
Next question please.
That's from the line of Duane <unk> Evercore honestly Duane heightened.
Hey, Thanks, Good morning can you comment on the.
The capacity outlook, you see intra Europe and any surprises with fuel at these levels and how do you see this summer playing out from an industry capacity perspective.
We've long held the view that you know short haul EU capacity you'd be down between 10 and 15%. This summer I think I would hold to that it may be towards the lower end of that is closer to maybe 10% to 15%, but it's continuing to evolve we see huge capacity taken out of the headlines would be like Norwegian capacity is down.
About 60% of where it was pre Covid Alitalia is down 50% THP in Portugal down about 30%.
Thomas Cook Flybe, all those guys have disappeared.
There's also significant labor shortages in the U K I mean, we've seen that in recent weeks play out with <unk> announcing closing about 100 daily flights on its promise short haul flying program, mainly UK, Spain, and UK, Italy, where they tried to go where they're competing with Ryanair easy jet has come up with a remarkable initiative now taking seat.
<unk> tried to reduce the labor.
I tried to address labor shortages there.
And we'll continue to remove aircraft from Vienna, Central and Eastern Europe .
We noticed several recently they signed up a joint venture in Saudi Arabia, maybe theyre going to send their aircrafts in Saudi Arabia, where I would be reasonably confident they won't have to compete with ryanair. They can take more aircraft away from western Europe , where theyre not able to compete with Ryanair.
But I still think that's European shortfall is likely to be down I think a low double digit percentage this summer and into that market. We are growing by 15% over our pre COVID-19 volumes. So as Eddie said like we are seeing enormous market share growth in markets Big markets like Italy, Portugal, Spain.
Austria.
Buena past, we're going to remarkably overtake wages this year in their home markets.
Whereas the idea of when it's arriving in Dublin, and overtaking Ryan here would not would happen in this lifetime or any other lifetime.
I physically.
And I think that's what's driving what would appear to us to be reasonably strong pricing.
The second quarter of this year, how that sustained into the winter period, I don't know, but I would certainly I think we as a group of airlines would be.
Talking to our airport partners about aggressive capacity growth into the winter, where we have we're taking delivery of new aircraft from Boeing and a large number of those airports are incentivizing us to accelerate our capacity growth into the winter with.
Fairly significant deep winter discounts.
Because the airports want to recover our recapture their pre COVID-19 traffic.
Thanks, and then just just for my follow up.
Any commentary on your non fuel <unk>.
Unit cost, Michael specifically as we get back to pre COVID-19 capacity levels.
What sort of targets are you hoping for this year. Thanks, thanks for taking the questions.
Pleasure right, Neil you want to take that.
Yeah, I'll take that Michael Duane Good morning, how are you.
As you saw last year, we saw a good reduction in unit cost down to 35 Euro. This year, we're starting to get the factories back over 90% were taken into game changer. So I would be hopeful that we start to track down towards the kind of Turkey, one euro per passenger that we would've seen pre COVID-19. So we will start moving in.
That direction strongly hopefully over the next number of months.
Thank you.
Thanks, Nick next question please.
Itself and at Bernstein.
Alex Hi.
Two on later, please first on your own and then that new suppliers. So on your own labor I mean, you've been very clear that has any pay reductions will be restored to pre COVID-19 levels as profitability returns, but I'm wondering whether that will be enough as inflation rises.
Faced with the cost of living obviously, you pulled a lot of restructuring in the mix relative to your pre pandemic state too. So how should we think about that developing over the next couple of years. Please.
Second.
So players like us.
Capacity clearly you've kept your own pilots current but all of the airports and other service providers to Ryan.
<unk> seen reports of charges and hiring around the airport.
Particular, how worried are you about this thank you.
Okay. Thanks about I can give you what we see at the moment like the labor that the pay restoration has gone reasonably well we are willing and have advanced.
Advanced negotiations with a number of the unions that we've agreed D is that about I'd say 10, 12 of the EU countries, where we employ pilots and cabin crew in.
Some cases unions have moved faster in some cases, the unions move slower where do you need to move slower we are have made less progress.
Will it be enough I think it will.
Fundamentally we have reasonably high paid within Ryan here, both pilots and cabin crew and Theyre not kind of entry level pay we're not talking about retail or hospitality levels of pay their paid significantly more.
Don't have a lot of labor turnover at the moment either on pilot and cabin crew and we havent seen others trying to come try to pinch Dunbar cabin crew, particularly in the U K and while we've lost one or two.
Really people see much happier working for US now I think they are aware of the way that some of our competitor Airlines just dumped their people during COVID-19, whereas we didn't we kept them employed and module more importantly current.
And I think some of the deals we've already done to give you a flavor I mean, our pay cuts if you take the kind of.
The pilots are 20% it was 20% pay cuts for the last two years and then the restoration was going to be.
Six six at eight over the next three years, where we've done those pay restoration improvements. We've now agreed 10. This year, we're bringing that forward from July to April or may depending on how fast they unions get the deal done and it is now 10 six or so it is significantly accelerated with an understanding there that if we can.
Above pre Covid profitability are north of 1 billion in the next 12 months the fixed at four would be accelerated into next year. The 10%. So you could get 10 10 and full restoration over the period of the next 12 or 15 months and those are deals we're willing to do we want to restore people's pay as quickly as we possibly can as long as the business restores its.
Yes.
But I would put that in contrast that with the love none of our competitors who have restored all the pay cuts that they did during cold weather, but that's because there's a shortage of labor.
Hello to their people and can't get them to come back to work or can't get back to work at all so I think we're in a fundamentally better space across much of Europe , we are high pay employers in Spain, and Italy and Portugal.
Yes.
And almost no turnover of labor through our pinch points, there I wouldn't underestimate how difficult it is to hire people and train them in places like the U K for example, but again I would point to Stansted, which is an area, where we have reasonable labor stability and we are the largest employer in stansted and we kept our people employed jewelry, we did use photos.
But we did keep the employee during COVID-19, whereas competitors in Gatwick Gatwick and Heathrow seats, just fire everybody and then theyre kind of surprised that they can't get them all to come back immediately now that the that the market is recovering.
Supplier neighbor remains a challenge.
Seen pinch points security at Berlin Security Queues at Dublin Airport.
Check in security at Manchester.
I would also.
The people who are filling the inflight bars, the jewelry that kind of stuff, there, where you have kind of low labor rates and those kind of frontline areas. Yes. There are bid pinch points, there, but again I would point to we've worked collaboratively with the bigger airports costar bigger airports suppliers didn't sharla and Stan said in Bergamo in Dublin.
We are seeing less issues at those airports despite their very strong recovery and remember at those airports, where ryanair is operating they are now operating at a bulk pre COVID-19 traffic levels were at airports like Heathrow and Gatwick, they're still operating at below pre COVID-19 traffic levels.
So I think we and all of them, but I think as supplier labor will continue to be an issue I don't I think it could get resolved pretty quickly in Europe , because there's reasonable labor market flexibility and the ability to recruit people pretty quickly. The U K will continue to be very challenged.
The labor market is very inflexible post Brexit you can't bring in young Europeans I smile.
Although with some disappointment at the number of origin Brexit here, it's like Lord Woodson of next and Tim Martin in bucking.
Wetherspoons, who now are calling for a mass visa issue, so that they get higher staff to run their businesses.
I didn't think of that when they were campaigning for the FERC in Brexit two.
Two years ago, but we are where we are I think the U K will continue to be challenging, but the U K. While we are seeing modest traffic growth for us in the U K, mainly market share shift from U K competitors to Ryanair most of our growth is taking place in continental Europe , and in Ireland, where we still have reasonable labor flexibility and.
Our suppliers have reasonable labor flexibility as well.
<unk> you want to add to that yeah, I think just two points I mean.
First one is that where we have completed deals with unions. We've also at the <unk>.
Sensitive as well for them to deal with restoration is that we have agreed.
Modest pay increases beyond there as well in years going forward by years, four and five as well, which.
Which.
Give the incentive for some of the unions to actually complete deal. So they've got long term S. Dependency on pay and then the second thing I'd say is that anywhere where we have south handling operations in the U K, Poland and Spain. We've had no neighbor difficulties again that is redolent of what we did with pilots and cabin crew by we were planning for the return.
From the 17th or 18th of March back in 2020.
So we are seeing some labor shortages, but again they are entered party handlers.
And I would have somebody in to be fair to them I would have some sympathy for easyjet and <unk> and that it is very difficult I think they may have overdone the job cuts during COVID-19, but I would don't underestimate the extent of how difficult. It is to recruit people here in the U K given the.
In flexibility of the labor market post Brexit it will continue to be a challenge not just for the airline industry, but for all businesses in the UK for the next number of years until somebody in government wakes up to the fact that you're going to have to have our visas are beginning to attract more neighbor here in the U K.
You're going to keep consumer prices down and not add to the recessionary environment by having you know dramatically increased pay because it scares neighbor here in the U K, but it's just another one of those damaging dividends that have been delivered by Brexit.
And we expect more of them here in the U K thankfully in Continental Europe , I think the labor market is more flexible and more responsive.
Next question please.
It comes from the line of such a Super Kumar of Citigroup. Please go ahead.
Thanks.
Yes.
Sure so firstly on the <unk> and Apple.
Staff shortages, but did you see that actually the biggest challenges within your network.
And then the second one on the pent up demand.
What are the implications are for potential say somewhat holiday season extended beyond two late September and October do you see any like early signs in the bookings.
Okay.
Quick answer is the biggest challenge of the airports I think the biggest what is the one where we don't operate thankfully is at Heathrow.
The other ones in the U K, a would be Gatwick, Manchester and I think Bristow there are significant labor challenges there other than that we don't I think the rest of the airport system in the UK is in reasonable shape.
If Europe , we think pinch points at.
Berlin Airport has been a challenge.
Although they are labor remains a bit tight in Poland, because they might be economy is recovering so strongly.
On the entry level labor that would be can't do and baggage handling and checking is attracted to us that they read the property market is on fire in Poland at the moment as well, but generally speaking there's less issues around continental Europe , and they have a flexible labor supply of free movement of people across Europe , I think it would be addressed pretty quickly.
I think the UK would be much more difficult and inflexible.
And so I think the U K would be more challenging than within the U K, we matched or Gatwick Heathrow would be there, but there was a point too much.
Any chance that the summer holiday season be extended I don't really think so I mean, I think your ultimate gets driven by school holidays children go back to school in September .
I think there will be.
Probably I would like to hope that there will still be strong demand and constrained.
Capacity through September into October .
But it's too early to say yet we have very little visibility on bookings into October November December .
I think there will be people will continue to fly I think they will get more price sensitive in the second half of the year, particularly if there's a recession or economic downturn in the U K and inflation will continue to be a challenge, but I would believe that ryanair as the lowest cost lowest price provider certainly in the air travel space will continue to be.
A beneficiary of an economic downturn or a recession in much the same way that prime Mark later.
Ikea will continue to be a beneficiary of a recession.
In the UK and Europe over the next year or two.
Thanks, Michael.
Thanks very much next question please.
It's James Hollins at BNP Paribas. Please go ahead James.
Our morning at two for me. The first one is just on where you are seeing capacity reductions I think you've put out some capacity at Lisbon.
You put out of Frankfurt.
I was just wondering as.
As we look at sort of slow issues or pricing issues. Maybe this is for Randy are there any other sort of tier.
And even larger efforts where are the youre not getting deals done as you wanted and potentially we're looking at other capacity coming out.
The second one is on a little bit confused which isn't which isn't uncommon deloitte confused on that.
<unk> plans on when you're ripping into Boeing, which which is fair enough, but to me it looks slightly outperformed on deliveries ahead of the summer is there anything in particular, that's making you worried beyond this summer on deliveries and just.
For clarification is the 58 com the rfps that about accelerating the current guidance you have on the annual passenger numbers. They are in the presentation.
Okay are you guys thinking about five questions there, but let me come back quickly we have very few capacity costs anywhere other than there was three aircraft that we had in Lisbon for the winter, we couldnt get swapped for those for the summer because tap is allowed to block slots it won't use.
Our overall environment, that's nothing we reduced we close the Frankfurt main basis. It was down to 5455 based aircraft. There are some will redeploy to Frankfurt Hahn, which is not like for like development, but I think there has been a trend of increasing airport cost in the German market for the last year or two and we're very happy to redeploy those aircraft into markets like.
Italy, Poland, Slovakia, and Central Europe, where we're taking significant market share from competitors. Overall this summer will operate 115% pre COVID-19 capacity and if we could take more aircraft from Boeing we would move.
Moving onto Boeing Yes, we've got seven that we have got.
We increase I mean, the challenge with Boeing at the moment has been the delay in the deliveries. We did increase that we said to buoy Boeing wants to know early this year with if they could delivers more aircraft, which by the way remember they manufactured pre COVID-19 are before the Max was grounded if we could if they could deliver more aircraft would we take them the answer was yes.
The challenge for US as we wanted all of those aircraft delivered before the end of April and we will probably only get the last of those deliveries of June which it.
It doesn't sound like a big deal, except we already had those aircraft on sale in April in May and in June for the summer schedule and we've had to go back in because of really unexplained delivery delays for aircrafts that were manufactured fucking two years ago.
And we've had to go back in and take out two short haul capacity now you wouldn't notice the overall, but simply because Boeing learned David didn't fail to meet their delivery commitments at the end in mid April and mid May.
So we didn't take out a couple of hundred thousand seats out of our summer scheduled in April and in May and we have to go back in about a week or two ago and take them out in June as well, it's probably cost us about.
Six to 800000 seats in May and June , which is disappointing and still unexplained by Boeing.
I can understand why there may be various challenges manufacturing new aircraft, but aircraft that you built and made two years ago, which all you had to kind of do is perpetually number if I could fly them to Dublin.
Really I don't understand why its taking you.
We're taking two or three month delays on that but it is redolent of.
I think a very poor management performance in Seattle.
Both had competing for market share against Airbus I didn't just fucking honoring our commitments and delivering the planes you promised to deliver we are not the only area. That's been critical of Boeing delivery delays, there's a number of other airlines out we know our customers who are critical of what our own explained delivery delays now they would say well we are a people out with COVID-19.
We've all had people out with Covid, we were still able to deliver to the summer scheduled we proposed all you've got to do is deliver aircraft that you built two years ago.
It's been disappointing.
It's been very disappointed to see Boeing lose existing customer orders jet to have converted to Airbus Qantas on the short haul are converted to Airbus and.
Bullies should be winning that business volumes should be out there competing and.
There's a lot of I think.
Management speak coming out to Seattle, and not a lot of delivery and we need more delivery in Seattle.
Get their <expletive> together, we would be willing to take more aircraft for summer 'twenty three and some are 24, because we think there is.
There is growth there to be won and we're certainly willing to restart negotiation with them on the Max 10, but at the moment the Max 10 centers certified and if it doesn't get certified by the end of calendar 2023.
They have to go back for a redesign at the M cast the computer system and that could God knows how long that will delay the process. So.
But we need a management reboot in Seattle and.
Uh huh.
Either the existing management needs to open its game or they need to change the existing management will be our view of life.
It's up to Calhoun to meet those challenges, we're very happy to work with the existing management, but they need to bloody well improve on what they've been doing delivering to us over the last.
At 12 months.
So that's where we are with Boeing we are willing customer, but we're struggling with slow deliveries.
The ability to do a deal on new aircraft. Despite the number of white tails to have sitting on the fucking ground in Seattle.
You Wonder what the Hell their sales team have done for the last two years and frankly most of them seem to be sitting at home and therefore can Jim jams working from home instead of out there selling planes to customers.
Yes.
Thank you Michael for your question.
Thank you that's from the line of.
<unk> of Bank of America. Please go ahead your line of sight.
Yes, good morning.
For the bookings for this summer can you give us some color around kind of countries, where you're seeing the strongest demand and where.
Because.
And then just following up on.
Some are pricing of a single digit price increase if I remember correctly I think you had in April you had mentioned in the past that you were expecting something like a 5% to 10% price increase for the summit is that kind of how we should be thinking like high single digits.
Okay. Two good questions. There, let me take the summer bookings like it's very hard across the piece, we're still being across all you'll recall were strong whereas week generally speaking across the system certainly demand to the beaches the canaries balearics.
The Greek islands easily is all strong into the summer.
I was struck by the corporate and the area, where there's weakness, although clearly a lot of the bigger domestic operations.
The booking are are generally nature would they come through in strong volumes victoza in the only notable development was immediately following the Ukraine invasion, there was a falloff in bookings.
Into central and Eastern Europe , there was a significant decline of bookings into Poland, Romania.
If I can add.
The Baltic state until there was a kind of impression <expletive>, there's a war going on over there.
That has righted itself, but it's out doubted he took a hit there we see strong demand out of the central and eastern European countries into this suddenly the beaches of Bulgaria, Greece, Turkey, and also I hate to Spain, and Italy. During the summer. So really we are a very big Beast, and we stroke I would struggle to come up with any.
Any particular pockets of weakness compared to strength other.
Other than to point those examples week into central Eastern Europe in the immediate aftermath of Ukraine invasion and the summer to the European Summer Beach is a very strong.
Pricing in April I mean, we were talking about pricing in April yet, yes, we were looking to the first half of the year to being up between 5% to 10 percentage points again Q1 got hit by the invasion, Ukraine, and that's why I keep coming back to this point there is a strong recovery underway, but it is fragile.
Easter and Easter was largely the middle Eastern Ukraine.
Ukraine invasion, probably cost us anything upwards of about 800000 bookings in Easter and they took.
It took I would say the Q1 years would've been small marginally positive any went marginally negative because we had to respond quickly to maintain the Easter and the first half of May bookings.
June 2nd half of May and June are building nicely.
<unk> quarter July August temperate looks strong, but again, if there's any negative news flow emerges in the next couple of weeks.
They are all over again, so what we're trying to convey today is theres a very strong recovery underway. We are very confident that we get to a 115% traffic growth pre COVID-19 through the first two.
H one of the current year.
But we're not sure of where pricing would finish up it could be better and we expect if we get a reasonable new slow it could fall over again, if this negative news, though it is really very difficult to call. It.
But we know that we have the if you like we have the benefit of the luxury of being very well hedged on few competing with other competitors across Europe , who are either unhedged are less well hedged and we are so we have a huge cost advantage over them and if there is any downturn or negative news flow, we were simply open up on pricing maintain.
Our traffic growth, but open up on pricing, but that would then reflect itself in years and profitability going forward, which is why we are slightly uncertain today on both years of profitability into the second half of the year.
Next question please.
Thank you that's from the line of counting the Doris of Morgan Stanley . Please go ahead.
Hi, Hi, good morning.
Probably for Neal I guess sandeep on the hedging and exposure.
That you have.
Usually.
You should do just forward on jet fuel are there now and exposure to the crack spread so have you been hedging on oil or the exposure of the hedging continues to be purely on jet fuel.
And my second question on this on the RFP.
That youre doing.
Assuming that you did.
You could take care of Buzz would you consider would you buy those aircraft for Ya just leaves it for until you can get to the.
Enough points.
To make up the the fleet. Thank you.
Okay.
Sorry, Todd Fowler might be up a lot, but you've got to deal with the fuel hedge you can argue with you.
Yeah, Yeah, very happy to do with the Carolinas.
Carolina, There's obviously no exposure to the crack spreads were hedging as we've always done the underlying Jess.
Commodity.
Perfect perfect correlation.
In that perspective.
Mike If you want to do the RFP.
Okay on the RFP, we have an RFP out there for up to 50 short haul aircraft. We are willing me happy to look at Airbus and our 730 Sevens, we have Airbus and they allowed our fleet and seven series Evans all over both.
In Malta Air and Ryanair.
<unk>.
We're happy to buy or lease as long as you know whichever would come up with whichever one offers a better financial return.
I think the likelihood in the current marketplace, though is were probably looking at leasing anything between 30 to 50, new aircraft for delivery for summer of 'twenty three 'twenty four 'twenty five I would like to see that as an acceleration of growth over that period of time. In addition to the 50 aircraft deliveries we take both the Max aircraft, we take from Boeing assuming Boeing.
Can actually deliver those aircrafts.
And it could be Boeing or it could be Airbus are 780 sevens.
The Airbus market is undoubtedly tighter Airbus have been significantly more success with the Boeing over the last couple of years that selling the.
Niels that Boeing have with the Max aircraft, obviously, the Max delay of the Mac sales was disrupted by the grounding for two years, but we've been very disappointed at the rate and frequency at which Boeing has been signing up Max orders over the last 12 months when.
The Max had been on grounded.
Not only it up and selling up there not been doing deals they've been losing mcafee customers to Airbus competitor to Airbus competitors.
But we're open minded we would be happy to take so it's likely I think in the current market base, we're looking at probably.
Seven to test that seven to 10 year leases.
Read that the young secondhand Airbus are 737 said whichever would come out we might take a mix of both we could grow if we take additional Airbus.
In louder louder and.
Now to our multi are Lauder are.
Europe , which is based in Malta or 70, 37th we take through Ryanair are.
Multi air our buzz and it would be at.
Always would be opportunistic and who's to say like Boeing might get their <expletive> together have decided they want to sell some additional white tails that they have a lot of them sitting around parked up in that in the U S.
So we are as always opportunistic, but I think theres, an opportunity to add more low cost capacity into a marketplace, where there's going to be a over the medium term two to three years of strong.
Traffic in Gabon traffic recovery in Europe .
Next question please.
That's from the line of Gerrick Consulate UBS. Please go ahead.
Hi, good morning, Michael.
Just a question I guess for you.
I mean, nothing that's as much you can say on it but it was unclear different environment. When you kind of struck a deal for your 10 million option incentive program.
So I guess could we see the turns rate visits at all are you.
We're confident there's a fighting chance that you can deliver on the best and requirements before 2024.
And then secondly, also something you previously said I think at the half year results. Initially you said.
Possibly get to.
So 12 to 18 months that kind of thing that too.
24 months with the.
Three curious I guess, what what's trading update.
Could we see a situation where at the end of the March 2020 call because youre working capital seems very strong at the moment.
Sorry can you repeat the second half of the question you kind of broke up at the start what was the second.
Good question.
Well it was just.
Around your neck that kind of getting back to there I mean could we see it.
<unk> 2020, just just given that you kept us very strong working capital inflow and you're ramping up quite quickly now thanks.
Okay did you just say one first I mean, you could see net debt.
With a fair wind.
And are you an optimistic outcome you could see us returning to net zero sooner than the end of FY 'twenty four when we get there by FY 'twenty three I don't think so unless there's a.
Unless we start to make very significant honest profitability runs ahead of our expectations for the next 12 months is possible, but I think it's unlikely by FY 'twenty three I would be there Michael.
Yes.
Just so I mean Jared.
$4 5 billion worth of Capex.
Guidance into the market there at the start of this call. So you have to remember that $4 5 billion worth of Capex that has to be funded over the next couple of years.
So.
Reasonably happy that over that two year period that will come down I think would be reasonable to expect that.
We would have all of that covered out by the end of the current financial year.
Yeah.
I don't disagree, but I mean, I think we will we will certainly be at zero net debt sorry, basically every week and currently see we will be a zero net by the end of FY 'twenty four we might get there a little bit earlier, but it won't be by the end of FY 'twenty three on my end.
Contract I would point out by the way everybody continues to Miss it that I took a pay cut from a million to went down for a quarter or 250000 over the last two years during COVID-19, So and we have not yet hit any of the target for my 10 million.
Incentive.
And my confidence that we'll get there by 'twenty to 'twenty four.
No, but I'm cautiously optimistic that we will hit one of the two if not both targets that would be a net profit of $2 million 2 billion or a share price I think it's 'twenty or 'twenty, one euros I think there's a reasonable a fighting chance into a post COVID-19 recovery, we could get to one or other are both of those by FY 'twenty four but the gap is window is closed.
And if I don't get there whether that shareholders have had the benefit of my.
Leadership as a deeply discounted rate for the last three years.
I understand I won't starve, but nevertheless, it is a downside to these.
Share option schemes.
The company doesn't perform I would say in our defense it that wasn't the management failing, but none of us envisage trucking COVID-19 grounded the business for the last two years.
But undoubtedly bid the worst page CEO in the airline sector in Europe for the last two or three years, but that was part of the downside of the deal I did the upside is if we can hit the targets I do well out of share options. The downside if I don't hit them I take a hit on the underlying pace.
And I guess I would say don't Cry for me Argentina.
The truth.
Keep working away here trying to hit these ambitious targets on behalf of our shareholders and our people because if we get to those targets are people get the pay codes restore two without it is much more important to me than my share options over the next two years.
Thanks, Michael hopefully both happen.
Yeah next question please.
That's how he goes at J P. Morgan. Please go ahead.
Alright.
Good morning, Michael Thanks for taking out the quick so just some comments maybe if we do enter a recessionary environment.
Color on what you've seen previously when there has been a weak environment.
Could we see some trading down on the leisure side, but maybe I'm sorry, the corporate passenger side as well.
Yes, and in all of the last three or four recessions over the last 20 years right.
<unk> is the lowest cost provider growth faster generally and more profitably in recession.
What would be different this time around is if there's a recession this which are what happens to oil prices and energy is the real.
Kind of the all known quantity I mean I'm personally at the view I don't think it can sustain the kind of the war in Ukraine for another six 912 months that gets resolved before the end of this calendar year that means there's a much more kind of a so there's a I think there would be a significant fall in energy prices.
But I don't know what the timing of that would be.
We do run the risk that you could have a very deep recession into the winter of this year Allied to high energy prices as we move into the winter there still.
Scarce supply, but ultimately Roche in natural gas and oil will find it out at somewhere even if it's only eight China age as a commodity.
And the greatest cure far high oil prices these high oil prices and the shale U S shale production.
Iran, and others may be encouraged you to increase production.
Saudis might add the OPEC plus countries may add to production, but who knows.
All I do know is that if oil prices remain at these elevated levels you will see fuel surcharges. This summer in Europe .
Our competitors like ways, who are on hey, completely unhedged on Dol and easy jet are much less well hedged and we are into the winter will be under significant pressure to op airfares and we will have a significant.
Headroom.
Or are the difference in our airfares and competitor airfares to next winter and there will be both at the corporate side and on the laser side of the city break people will trade down to the lowest cost provider that will undoubtedly be ryanair. So.
I would be optimistic that we will grow stronger and more profitably. If there is a downturn or a recession. This winter into the summer 2023.
Alright, Thank you very much for folks.
Thank you and I would add to that we will be operating our fleet next year somewhere 23 of our 120 aircraft with carrying 4% more seats. It burning 16% less fuel so we would be much better positioned.
Position than any other airline in Europe to weather higher oil prices through a recession.
Next question please.
Thank you and that comes from the line of Mark Simpson Goodbody. Please go ahead.
Good morning, Thanks for hanging on for the last tools from questions tooth and nail actually.
FX policy I mean, you're hedging any charters FY 'twenty four you're well positioned for the current fiscal year.
And then just on the accrued expenses and other liabilities.
Revenue line at the end of March.
Okay.
As I said, we're well hedged on the currency in the current year at over $1 17.
Silver, but 65% of the currency on the Opex very well hedged on the Capex, where we've locked out the.
Aircraft order books at $1 24 in the Euro dollar the hedging on the dollar into 'twenty four would be reflective of the quantum of hedging that we have on the jet side, Mark and so we tend to do those more or less.
In parallel with each other so not a huge amount into FY 'twenty, four or the capex, which is well locked away and yes, your ROIC accrued expenses.
On earned income or affect the the big movement that you're seeing there there is a jump up obviously for increased activity in the business, but you're also seeing strong with Aaron's coming true in that number as well movement of about $1 7 billion year on year.
Thanks Neil.
That one seven is mainly the unearned revenue at that.
Year end, there's accruals in there is that there is a crude oil movements in there as well mark, but they're there to steal neurons.
That's a big chunk of that also.
That's great. Okay. Appreciate it thanks.
It's always the bulk market.
Yes.
Thanks, Mark next question please.
Currently we have no further questions in the queue.
Very good okay.
Thank you very much everybody participating the call if I could leave you with a couple of parting thoughts one there is a strong recovery underway. This summer Ryanair is poised to recover I think far more strongly than any other airline in Europe , we have lower costs, we have new aircraft capacity coming to us at lower prices. These aircraft are very few of them.
Efficient and we are very well hedged out to March of 'twenty two 'twenty three.
Share price is under significant pressure as the sector has been for the last couple of months.
This is a unique opportunity for those of you who are brave and look through any of the medium term to invest in ryanair.
Something under 14 euros per share I think there will be a very strong rebound. We just can't tell you whether the rebound will be this summer or next winter or summer after that but I think there will be a very strong rebound at the share price.
You are not a European holder, please do not buy our ordinaries. Please only by the ADR. The ordinaries, we will continue to disappoint franchise and if there are non EU shareholders appear on the share register or owning the ordinaries, We will force you to sell those shares so please <unk>.
And our soft produced so only if you are a European shareholder in the ordinaries and if youre non European Endy ADR program.
Anything else I'd ask maybe Eddie and then near tower in any parting thoughts.
Well just on the opportunities that are out there for growth.
Of the 15 basis that we opened this year and we've got strong demand from Air force for the allocation of aircraft for next summer so.
Costs, our costs are under control and the dose that we can control and.
Looking like we've got the aircraft we've got the people and we've got the airports. So looking forward not just at the end of the summer but into next into summer 'twenty three as well.
Near any parting thoughts.
Okay, just to remind everybody we have a rock solid balance sheet triple b races, with 90% of seats unencumbered. So that that gives us huge flexibility in what we do as Eddie said.
Costs are well under control and fuel is particularly well hedged.
For the next 12 to 15 months, so in a very strong competitive advantage from that perspective.
Okay. Thank you very much everybody, we haven't set an extensive roadshow underway for the remainder of this week. We have I think about 12 roadshow teams on the road. If you want a meeting with US. Please let us know either through city, our Davies and we'd be happy to facilitate it whether it's in Ireland U K Continental Europe or the U S. In the meeting.
We look forward to meet you all and thank you for your support over what it's been a very difficult last year or two and we hope you will see the benefit of that support over the next 12 or 18 months with Cigna.
Significantly improving.
Operational profit performance and share price performance.
Pretty much everybody I hope to see you soon bye bye.
This now concludes the conference. Thank you all very much for attending you may now disconnect your lines.
Okay.
[music].