Ryanair Holdings plc (RYAAY) Q1 2022 Earnings Report, Transcript and Summary

Hello, and welcome to the Ryanair Q1 FY2022 Results Conference Call. Throughout the call, all participants will be in listen-only mode. And afterwards, there’ll be a question-and-answer session. [Operator Instructions] Just to remind you this conference call is being recorded. Today, I'm pleased to present, Michael O'Leary, Ryanair Group CEO. Please continue your meeting.

Okay. Good morning, ladies and gentlemen. Welcome to the Q1 results conference call. We have the whole team assembled at various locations on call today. We posted this morning the usual press release. We’ve done the – Neil and myself have done a Q&A on the results, and the investor slide presentation. I propose to spare you all that details. And rather than going through the press release, I'll take that as way as and give you a couple of themes. And I think the key one in this morning’s – the three key themes in this morning's metrics: one is traffic recovery, two is the very strong performance on cost containment and how that would play out over the next two or three years. And then I think the extraordinary three is the extraordinary growth opportunity that's unfolding in front of us as we take delivery of over 200 MAX aircraft over the next four years at a time when we will see meaningful and sustained capacity across Europe. So on theme one, traffic recovery. Q1 traffic was 8.1 million, that’s a dramatic recovery within 1 million passengers in April, almost 2 million in May, but 5 million in June. That recovery has continued strongly into Q2. In July, we think we will get to and, in fact, we will just about – we will just exceed 9 million passengers. I know, last week, we said almost – we just get over 9 million passengers. August, at the moment, we are on track to just get over 10 million passengers, and we'd be hopeful with the reasonably robust September that we get to about 28 million, maybe 29 million in the second quarter. So not alone that we have 8 million in Q1, but about 28 million, 29 million in Q2. All of this has obviously heavily qualified and there will be no adverse – and COVID theory and developments are returned to lockdowns, and we think – we feel we really need to be confident if that's the case. We can't eliminate political mismanagement, particularly in the UK or in Ireland, which has been astonishingly poor at managing the recovery. But in general terms, we think we are headed for a very, very strong traffic recovery through the second quarter, as there is a reasonable prospect of that will be maintained into Q3 and Q4. And we are seeing a much stronger recovery, I think in Ryanair than any of the other LCC's. If you take those monthly figures in Q1, we carry 5x the April traffic in the month of June. As you see from the EasyJet and Wizz, they carried about 3x their April traffic. Our load factor is also industry-leading at mid-70%. In Q2, we expect to operate our offer more than 80% plus of our pre-COVID capacity. And with load factors in the mid-to-high 70s, we expect to deliver about 70% plus of our pre-COVID traffic. And then as I said, if there's a – if the vaccine rollout continues and the COVID, where the managed COVID reopening continues, particularly in the schools, all go back as normal in September and we see every reason to move the guidance as we have this morning up from previously the lower end of 80 million to 120 million. Today, I think, we are in a much narrow range of between 90 million to 100 million. And I would – I think with no disruptions, we are at the upper end of that range towards the lower end of that range, as we stand here this morning. International developments then we are seeing, we are continuing to deliver a very impressive cost performance. I think we have, together with our union partners and our employees over the last 18 months, negotiated very reasonable and modest pay cuts. It ranges from 5% to 10% on cabin crew, 10% to 20% on pilots. But that was in return for keeping them all current and avoiding mass redundancies and layoff. And I think that's one of the key reasons that we've been able to deliver such a strong and rapid traffic recovery, which kept the crews current. We have the right people in the right places, and we've been able to unwind a very quick and rapid development of reopening airport and handling costs have been renegotiated. We've taken as of the end of July 11 of our first 12 of the MAX aircraft have been delivered. And I would like to say that the performance of the MAX in the first month of operations thus far has been spectacular admittedly with slightly lower-than-normal load factors. The fuel performance has been well in excess of the 16% saving promised by Boeing, but there has been a uniquely or I would say, an overwhelmingly positive response both from our crews, the pilots and cabin crew low operating the aircraft and from our passengers. We've been operating the system for the first – the last month where any passengers getting on a MAX who wanted to offload could do so without any Quidel and travel on the next available flight. Not one passenger has started to offload off that aircraft yet, and the feedback from passengers traveling on the aircraft is particularly quiet and a very nice experience, and as we had I think long predicted that once we start flying the aircraft, passengers will love them. These aircraft enable us to tap into enormous growth opportunities that I don't think in certainly in my 30 years in this industry post-9/11, post-Gulf War, there has never been a growth opportunity in front of Ryanair such as we have at the moment. Already this year, we've announced 10 new bases and multiple bases that’s somewhere up in Scandinavia, where both SAS and Norwegian are in chaos. We've opened bases in Billund, Riga, in the Baltics, in Stockholm, Arlanda. Two bases in Croatia, Zadar & Zagreb and we've extended and enhanced low-cost yields at Stansted, Bergamo, Brussels Charleroi that grow to the end of this decade. We've doubled our capacity in Rome Fiumicino as Alitalia reduces its fleet. We've also announced new routes in Helsinki, new bases this autumn in Turin, Italy and Agadir in Morocco. And this is just we've barely scratched the surface so far. There are extraordinary discussions and negotiations going on between our new route team and both existing airport partners of ours and also new airports across the entire piece of Europe and the neighboring states who are joining the European Open Skies. To put it in context, the growth opportunity that state confronts us, we over the next four years, we'll take delivery of 210 MAX aircraft. It will take the fleet to north of 600 units. Over that same four-year period, Wizz, who talk a lot about growth, will take delivery of 80 aircraft. Their total fleet will rise to about 230 aircraft. So we'll take more new aircraft deliveries in the next four years, the equivalent as their total fleet. And in the case of EasyJet, there seems to be zero growth, in fact, the fleet has shrunk in the current year and we see them plan to enter mind or protect what they have. They certainly won't be a competitor for us on new route development or growth. And where we think the real opportunity though will be as we’ve seen all the failures, Thomas Cook, Flybe, Germanwings, Level, but there are much more meaningful short-haul capacity reductions in countries like in Portugal, where TAP has already announced that capacity reduction – short-haul fleet reduction of 20%. We think that will finish up closer to 30%. Alitalia reduced its fleet by 25%, and again, we think that would be more. And so there are enormous opportunities. We are seeing slots are becoming available to us at airports, where previously we couldn't get them. And I think if you have the aircraft deliveries in the next three or four years, we are going to secure a space at airports once-in-a-lifetime opportunity to secure space airport, and expand our footprint from as an airline today, which has 70% of our departures at primary airports and currently at secondary airports. We see that rising to about 80% of departures at primary airports and 20% of secondary airports over the next four years. And the one other issue we should touch on briefly is that EU announced that Fit for 55, I would caution investors again, they will have no impact on our cost base until FY2024 onwards, so there are no impact for them at least the next two years. And it is I think a badly designed package, which introduces not just double taxation on short-haul European flights, but triple taxation. Short-haul passengers, maybe EU consumers will now be faced paying not just ETS payments, but also an aviation fuel tax in addition to EPD in many EU countries like Germany, Austria and others. It is bizarre and it is applicable that these taxes are only being levied on European short-haul flights, while designed by our friends in Holland, Germany and France, the long-haul operators in those countries get a free pass on these aviation taxes. We believe however that this program will be materially renegotiated, and I think softened over the next two years. We see a significant concerns being raised among EU peripheral states in Eastern Europe, Cyprus, Malta, Ireland among others, particularly also in the tourism destination, Spain, the Canaries; Portugal, the Azores; the Greece, Greek and Greek Island, and beginning to realize that what we have here is EU aviation tax proposals being designed by the Dutch, Germans and French largely aimed at aviation, where in most of those countries, people have the alternative of train or motorway alternatives. In Ireland, in Portugal, in Greece, certainly in Malta and Cyprus, they don't have – we don't have an alternative. We can simply transfer away from flying because there is no other way on and off these islands, and we think there will be a meaningful realization, particularly among the tourism industry at the tourism nations and the peripheral agent. The long-haul is going to have to bear its fair share and the Dutch and the Germans and the French can't lecture the rest of Europe about more environmental flying, while they give their long-haul operators a free pass. But for the moment, I think it is in the medium term and we would expect there to be a significant pushback from some of the tourism and more peripheral states of Europe against these triple taxation proposals, and we would very much support that. I had nothing else I want to add in terms of the opening remarks. So with that, I'll hand over to the moderator, and pool opened up for Q&A, please.

Thank you. [Operator Instructions] Our first question comes from the line of Duane Pfennigwerth of Evercore ISI. Please go ahead. Your line is open.

Duane, hi.

Hey, good morning. Thanks. Just wondering as you rebuild your network and kind of get back to some normalized capacity levels, what capacity level do you think you could get back to your fiscal 2020 €31 per passenger? Do you have to get back to 100% of what you used to fly or could you hit that level sooner?

Sorry, Duane, I'm not sure you asked your question about EUs…

No, no. Sorry, your non-fuel cost per passenger of €31 back in fiscal 2020, what percent of fiscal 2020 flying would you need to do to get back to that level?

I think we will be – if there is no adverse COVID development and we exit the pandemic this autumn, I would be confident that into FY2023, that is next year, effectively, summer 2022, we will be carrying more passengers than we did pre-COVID in FY2019, which is 147 million and change. And our unit cost per passenger will be significantly lower than they were in FY2019 with one exception and that is there is a kind of an uncontrolled escalation in ATC and ANSP charges, where most of these government monopolies around Europe are now talking about recovering last year loss of income and advancing, I think, ATC price versus next year up between 30% and 40% on the per passenger basis. It’s not a huge part of our overall cost base, but it is material. But other than that, I think you'd see, continue the meaningful cost reductions across all of the other lines, driven hugely by the fact that we would be operating more than 60 MAX – Boeing MAX aircraft next summer – summer 2022.

Yes. So if I would just add to that. I would say, Duane, you can start to see something with a trail from the next quarter a little bit closer to the mid kind of 30s. And then as Michael said, as we get into the summer of next year, we start to see critical mass on the MAX and the load factors are up, we start to get back to the €31 and then hopefully improve on that.

That's great. And then just for my follow-up on competitive capacity. I mean, you touched on it, but I wondered if you could put some numbers on it. As you assess the restructuring of European short-haul that's already occurred and that's continuing to occur, how much capacity would you say has gone versus pre-pandemic? And as you rebuild your own network, is there any numbers you could put on competitive capacity on your routes looking forward kind of Q2, Q3? Thanks for taking the questions.

Thanks, Duane. It's almost impossible at the moment to predict the competitor capacity because a lot of the – you have operators like Lufthansa, IAG, and Air France-KLM are sitting on class, but they're not using. Alitalia and TAP have already announced meaningful structural reductions in the fleet between 20% and 30%, and then you've seen the bankruptcy of level of carriers. I think that into 2022 and into 2023, you're looking at a – excluding out growth in meaningful, I would say, 20% reduction in short-haul capacity across Europe. It might be slightly softened into FY2022 because I think some long-haul aircraft will reappear on short-haul European routes because long-haul will take longer to recover. But there is a meaningful shortage of capacity out across Europe in short-haul for the next, I think, two or three summers. And if you look at the order profile of most of the other airlines, they have almost no short-haul aircraft on order. I think you're looking at a 20% reduction in short-haul capacity in summer 2022 and into summer 2023. Eddie, I don’t know whether you want to add anything to that. You'd be closer to that as well.

Yes. I mean, you can see like some of it has been, I suppose, muddied by the pace of recovery with your competitors as to where they're actually going to – where they're actually going to put that this winter. But I wouldn't disagree that the figure of that 20% is probably the more likely a reduction and certainly the one that we've been looking at. I mean, we can see it as well. And in some of our market shares as we grow, particularly into August because of the slow pace of recovery of our competitors. But 20%, I wouldn't disagree.

Thank you.

Thanks, Duane. Next question, please.

That's from the line of Daniel Roeska of Bernstein. Please go ahead. Your line is open.

Good morning, gentlemen. I'll follow Duane and ask the capacity question slightly differently. I mean, where are you seeing those planes leaving the market? Do you think there'll be a difference between smaller markets around TAP and Alitalia and the larger markets with the wider groups? Because on the sector level, there still are a lot of planes registered to European airlines at this point. And then secondly, on the EU 55, with the EU planning to add a lot more cost into this, and I acknowledged that we'll have to see what the final policy proposal will be, but do you think that adding carbon cost in whichever way impairs the sector's ability to grow as fast as it has over the past decade? And how should we think about Ryanair's opportunities amid as slower sector growth kind of in the 2020? Thanks.

Thanks, Daniel. Again, we go back to the capacity. I mean, the obvious ones are the failures, the Flybe, the Levels, Thomas Cook and others. But the more interesting, I think underbelly is the capacity – short-haul capacity has come up. Norwegian has collapsed. They've gone from a fleet of 120 to – go to 20 aircraft. SAS has got short-haul capacity. Alitalia has already announced 25% capacity reduction, but we suspect to do more and TAP is in a similar boat. Underneath that, then you have – the question is how much short-haul recovery is there? Do Lufthansa operate Air France and others. Now what drives a lot of that, I think it's summer 2022 and into summer 2023 as a huge amount of their short-haul capacity is there to feed into and to feed from their long-haul upper networks. And without the long-haul traffic, without the Chinese and the Asians wandering around Europe next summer, we see that – I think that there will be huge pressure on those legacy airlines or the subsidy junkies as we call them. I think they will keep short-haul capacity reasonably modest because they're under some pressure to repay debt and refund or repay state aid. The only two players out there at the moment with any significant short-haul orders over the next four years are Ryanair with over 210 aircraft on order and Wizz with about 80. And Wizz are in chaos at the moment. They did let go a lot of pilots and cabin crew. They're clearly struggling to reemploy them or they're not current. I mean, in the last couple of weeks, Wizz have been canceling hundreds of flights on a daily basis in Italy and across Central Europe. We've seen already in Vienna, where they compete with us, they cancelled 14 of their main trunk routes out of Vienna for the summer, July and August. They say, they're going to restart in September. We're not sure they will. And so they have enormous operational challenges. And I know there are some misguided analysts out there who believe Wizz will conquer the world despite the fact that they have a higher cost base than Ryanair and an inability to deliver in Western Europe. But we think that they are suffering enormous challenges at the moment, including wet-lease Romanian aircraft to prop up their pretty small Italian operation at a time when we are, I think our load cycles initially are about 70%-plus and there's a mid-50s. But the real focus I think for the next number of years will be the slow case of recovery, I think of the short-haul operations of the legacy carriers because they won't have the long-haul feed to or from their short-haul operations. In the meantime, the question is how long will they be able to fill the bed block slots at the major airports? Clearly, the EU is going to allow them to block them again until this winter, but they're getting down to 50-50. And I think we will have a major push on for summer of 2022 when it's going to become more lanes, but they don't want to use those slots, they have to lose them. And on EU Fit for 55, look, there's no doubt that the sector as a whole is going to face increasing environmental taxes in the next couple of years. What we would ask and demand that the environmental burden is shared fairly between long-haul operators in Europe at short-haul, we've been bearing an inequitable burden of environmental tax on short-haul, flying widely and connecting traffic. For example, the Dutch who talk a lot about environmental impact of aviation give KLM a complete free ride on all connecting traffic to and from [indiscernible]. Those kinds of environmental scams need to end particularly, when they're taking place in the countries who are most likely to lecture the rest of Europe on what – how we should behave environmentally, particularly with regards to air travels, tax your – put your own aviation house in order first before you start lecturing the peripheral countries or the tourism economies who are hugely dependent on intra-EU air travel. But I go back again to our – what has always been the contention. Taxes that are levied on a pro rata basis will not emit against the margin or the price difference or cost difference advantage we have over all other airlines in Europe, and therefore, people will – I think if anything is heightened, the growth that Ryanair will enjoy over the next number of years because if there's an overall ratcheting upwards of the cost of air travel and the lowest cost provider, which will be Ryanair in all markets and not Wizz or EasyJet or anybody else, and we'll do best and we'll recover stronger. We see that already borne out in this summer’s recovery. We've been able to deliver a much faster and stronger recovery than any of the low-cost competitors. Then if you look across to domestic USA, the recovery – post-pandemic recovery in domestic flying has been much more robust. They've gone back to pre or to above pre-COVID traffic levels and we think we will benefit from that over the next 12 or 18 months here in Europe. Next question, please.

Thank you. That comes from the line of Sathish Sivakumar of Citi. Please go ahead. Your line is open.

Thanks again. I've got a couple of questions. So firstly, on the ancillary revenue. Obviously, you've seen a big step up in ancillary revenues. Where are you seeing further additional opportunities in terms of new products and where do you see it normalizing from the current levels of €22? And the second one is around the hedging. What is your thoughts around the hedging of both for fuel and carbon as we move into FY2023 and beyond?

Okay. Eddie, why don't you take this question and I’ll let Neil to then to comment on the hedging and the carbon hedging questions?

Yes. I mean, ancillaries are strong there, but it’s primarily driven by priority boarding and seats. And I mean, how we feel, as I've indicated on the previous calls like for the last year, we've been working on a number of initiatives here in terms of the dynamic pricing with those products. But I would caution that we are in low load factors at the moment whereby selection of seats or whatever it may well be. I assume a lot of a premium, there's still more initiatives to call them and they're still some road on this, but particularly on the called ones of seats priority boarding and also on bags, how they're presented and how they are priced on individual routes, and we've been doing a lot work on that. But we're going to have to wait for load factors to return to see how effective that they are.

Okay. Just moving on to the…

To put that back, Eddie, would you expect ancillary revenue per passenger to rise faster or slightly slowly than passenger traffic recovery in the next few years?

Yes. I mean, I think I'd expect to rise. What I'm saying is that I wouldn't get carried away with things because the strong performance particularly in seat-on-seats of lower load factors you'd have to see whether that translates when load factors return because people may well have been conscious of where they pick seats during the COVID crisis, but there are lots of other initiatives that are coming that I am reasonably confident that we're going to see some growth on the core products and ancillary revenue.

Just to add to that, I think if we can retain the client €22 or slightly below that we've seen in passenger and traffic growth this year not to be a pretty good performance. And then we'd be hoping to improve on that into next year and beyond. Just on the hedging in the carbon, we're well hedged for this year, about 60% hedged at $565 a metric ton, which is below about 630 ton in the market today with 35% hedged into next year. At about $600 a ton, we would plan to potentially move that up over time to about 50% and possibly hold at our fashion that we're looking at some other structures on top of that. Carbon, well hedged, 100% hedged for the current year at 24-year old anyway, which is well below the 50, 52. And euro to the trading update and again about 25% hedge for next year. We've been holding off on hedging because we were waiting to see what was going to happen with UK ETS. That's been confirmed in the past couple of weeks. So we will start looking at adding a little bit to our hedging into FY2023 and beyond on the carbon.

Okay. Thanks. Next question, please. Thanks. Sathish.

Thank you. And our next question comes from the line of Muneeba Kayani of Bank of America Merrill Lynch. Please go ahead. Your line is open.

Hi, thanks for the call. I realized that heightened visibility is low. But could you indicate in your net profit guidance of small loss to breakeven, what sort of tightening environment is kind of baked into that guidance? And then secondly, operating cash flow recovery was very good in the quarter driven by bookings, how should we be thinking about operating cash flows in the second quarter as flight activity picks up? Thank you.

Okay. Thank you very much. I mean, as usual on these calls, we're not going anywhere near pricing guidance. It's completely too hard to call. We think we are reasonably accurate with our volume guidance. We think we'll continue to deliver a strong performance on ancillary revenues. But there's too much uncertainty over pricing. And I wouldn't add any color to that. I understand we have – I think the overall outline for the year is an improvement. We're into a small loss maybe even breakeven. But I wouldn't break down what that's breaks down. Operating cash flows, clearly second half of the year will be much more heavily impacted by CapEx. Now we begun to repay or we begun to pay once more pre-delivery payments to Boeing, and so I think it will flattened out from here and actually slightly decline as we get towards the end of the year and into much more peak CapEx. Neil, do you want to add anything there on the cash flows?

No. I think that’s fair enough. The first is where CapEx coming in Q2. We’ll have about 200 million and than over the course of the balance of the year, it's about 1.2 billion in CapEx. So you'll see that drop partly based toward the end of this quarter, and we would pay that as we get into the fourth quarter, hopefully more normalized bookings at that stage and you start to see that build up into the year-end, but with dropping back for the next number of months.

Thanks, Neil. And I would just again, conclude on the pricing guidance for all participants, while I don't want to get into any details. It is our philosophy here, and I think it has been clearly vindicated in the recovery in Q1 and Q2. We will be load factor, active, price passive. We are determined to recover traffic as quickly as we possibly can. And then I think over the second half of the year, we would expect to see load factors recover back up to high-80s, probably won't operate above 90% this year. And as we build back our forward bookings and load factors, then we would expect to see pricing recover on the back of that. Next question, please.

Thank you. Our next question comes from the line of Stephen Furlong with Davy. Please go ahead. Your line is open.

Hi, Michael. Can you just talk about as you build back of the improved environments, I mean, obviously you have – I saw this 2000 new pilots in the next five years, also it's been trained and things like that. And the second thing is I was just wondering with the 60 plus A200 aircraft coming next summer and presumably you're in discussions, I see with number of airports on that. I see you've launched new bases in Turin and Morocco. So you might just comment about that that would be good too.

Okay. And Eddie, I’d let you to answer the second half of that that the new base, the new route discussion. I mean in pilots and cabin crew environment, it has never been better, but there are enormous short-haul challenges. One of the challenges we have as an industry, not just Ryanair as we've been essentially grounded for the last 18 months. It has been very difficult to keep pilots and cabin crew current, a pilot has to fly once a month and cabin crew, I think, have to fly, I'll get this wrong, but if they do, correct me, once every 90 days, so about three months. So it’s been with a very curtail schedule, we've actually been flying empty aircraft up there to keep pilots current and cabin crew current because we knew that the recovery, when it came would be very strong, and we believe that's one of the reasons why EasyJet's recovery has been so slow that they have grounded a lot of aircraft, pilots and cabin crew, and therefore, they are daily facing currency problems. If you didn't keep them current, you to put pilots back into simulator, say for simulator training and cabin crew have to go back and do quite unproductive recurrency training courses again, and that's just difficult and it's a huge logistical nightmare. Yes. And I think, we've been vindicated in trying to keep everybody current because we thought that the recovery would be strong. As we emerge out of this, there is a huge surplus of pilots, particularly on 737s across Europe with a Norwegian collapse, and they were the only other significant 737 employer in Europe. Also the Gulf carriers have dumped huge numbers of pilots, not just cut them loose in the Middle East. They're backing essentially in Europe. And a lot of the Asian carriers have cut back, although in recent months they start to re-recruit again. They appear to be trying to re-recruit among Asian nationalities rather than European. So we also have restarted very aggressively our cadet training schemes, which have they kind of tried up and after our – we had to kind of piloting the rostering crisis in late 2017. Currently, we have more than 350 pilot cadets in training. They're paying us an average about €30,000 and they will flow through over the next 12, 18 months. We're opening up and have one of our partners refilled for very large new aviation pilot and cabin crew training centre in Dublin, which we will announce shortly. But there's a huge – on the cabin crew side, again, there's lots of availability out there, but there is a five-week training course from ab initio. So the challenge for us is we have enough pilots and cabin crew now to operate 90% of our pre-COVID air capacities through July and August. But it's tight. It's particularly being impacted to where you think like the UK pandemic, where people are beginning – despite the fact that they're double vaccinated, receiving, getting pinged and told to go to isolate for 10 days, which is a nonsense where you're doubling vaccinated, but it is what it is. There is a huge challenge of recruitment for us though into the next 12 months. We will be recruiting huge numbers of pilots and cabin crew this winter, just to crew up the 60 new aircraft we have for next year and also to handle the normal attrition. But again, I think the collapse of competition, the capacity cutbacks across Europe, and we have worked very closely and well with unions in the last two years to explain that look, it's better that our people take very modest pay cuts last year and this year, we start and to repay those or to restore those pay cuts over the next two or three years. We're in pretty good shape and we don't foresee any labor or staff shortages over the next two or three years. And just as important, we don't see any labor or staff inflation over the next two or three years. One of the other challenge that will be in the short-term in the next number of weeks though is airports and handling companies, we had a lot of problems at a lot of airports over this weekend, you've gone straight back into kind of the peak weekend handling companies who are short-staffed, airport check-in, short-staffed airport security, short-staffed – we saw our on-time performance fall from kind of 95% to 80% on Saturday and Sunday, mainly as a result of ATC staffing. So they’ve done nothing for 18 months. And then of course, as usual, the French and the Germans are generally short-staffed on Saturday mornings were there – and we've had airport issues as well. We worked our way through that, but it would be a bit painful over the next couple of weeks, and then I think we're in reasonably good shape in December of 2022, but there is a Herculean recruitment and training job to be done. Eddie, do you want to touch on the aircraft and [indiscernible].

Can I just clarify one point there, like on the pilot? I mean, our recruitment is exclusively on the cadet side because obviously, we have enough captains and everything for not only this summer and next winter, but next summer as well because we have all the people coming through a command to upgrade. So it's primarily focused on that. First option was on the particular cadets. And just on the sort of capacity allocation. You're looking at there that competitors retrenching and we've got the new aircraft that have come in. You've got airports now actively looking for the attributes of less than – 40% less noise emissions. And we've been able to exploit those opportunities. You look in particular, and the ones that I would call out are in Scandinavia, like Arlanda, I think we've been talking to them in the last 20 years and they realized the writing is on the wall there as SAS aren't growing and Norwegian all begun out of Arlanda and then we've also taken the opportunity within that for the Nordic region. We launched nine routes at Helsinki. Again, Norwegian gone out of there and Helsinki looking around as to where their growth is, and then we have. It's different from the last time we launched any sort of capacity in Scandinavia way back in 2003, 2004, where we’re flying from secondary airport to secondary airport. So we've got those – we've got the extra capacity going into the Gothenburg and place like that. And I see opportunities there for us to start to knit that network together in the face of reducing capacity from SAS and Norwegian. You look that in Italy now where most of the Italian airports are saying, where aren't the Ryanair base? And they're starting to – again, it took us some time to close that sort of Turin deal, but we've got like a very strong domestic network out of there. We've got still some announcements to do in Italy as we build out the network there. We are in Marco Polo. We've opened the base in Treviso. So we put extra capacity into Naples and into Fiumicino, where we actually canceled I think eight of the nine routes that they want. And then you see places like Morocco, where we were recently – where the government down there is anxious to say, where's the growth that come from there. And we have – they want to substantially increase our capacity there and part of that plan is to open the two base aircraft, and I could hear which will go particularly well, I think in the winter time. So again, airports are coming to us. We filled the long-term cost deals with our three, I suppose, major homes, which are, as Don said, Bergamo and Charleroi. And everyone was saying, how can we get a piece of that? And I think those opportunities are going to still present ourselves. Some places are still slow and think that it's all going to bounce back and there isn't going to be 20% reduction in intra European capacity, but we're certainly seeing it out there. And we are – in countries like, particularly, Italy, they say repeated, there's airport saying or their management or shareholders are saying, why don't we have a Ryanair base? Because it's the only route to growth.

Great. Thanks, Eddie. Thanks, Michael.

Okay. Thanks, Stephen. Next question, please.

Thank you. That's from the line of Mark Simpson of Goodbody. Please go ahead. Your line is open.

Thanks. Good morning. Two questions. One, the MAX is performing well, good reception from customers. Fuel burn, I think, has been indicated the surprising against previous guidance. Can you give us a broader feel for how you see the MAX performance? It seems like turnaround times, I know difficult in the circumstances of COVID rules, but it's interesting to hear a bit more about that. And then longer-term, you've talked about a goal of 12.5% SAS by 2030 well ahead of the Fit for 55 to a 5% target. What I'm interested there is how do you achieve that? I mean, SAS infrastructure issues are clearly going to be what are the roadblocks to achieving those targets. So do you have plans around your key basis, Dan said, Bergamo for some form of SAS infrastructure to help you achieve those targets.

Okay. Thanks, Mark. I’ll ask the Director of Sustainability, Thomas Fowler to answer the second half of the question. I'll take the MAX one and Neil, you can add and – you want to do. Look, I think the MAX performance in the first month has been extraordinary, but I would also caution, we're operating with a load factor in the last month, so it looks like it's kind of about 75%, 76% as opposed to normally in July or June, July, we'd be operating up around 90%, 92%. So we're flying slightly lighter plane where the turnarounds have been on effective 25 minutes. No great issue. Remember, it is only seven extra – it's only eight extra seats. And the turnaround, no issue at all, fuel performance has been meaningfully better close to 20% saving. But again, I suspect that as you get back up to more normal high-80, low-90 load factors, but I think we are very confident now that the aircraft will come in at 60% or slightly better than that on the fuel saving. The noise performance has been extraordinary. There's been meaningful kind of feedback from passengers and crew, how quite the aircraft are. Not probably we would ever go to kind of sales. We were worried at the start whether there would be a kind of pushback from passengers. We've gone to some considerable length to indicate that if you want to get off the aircraft, you can and not one passenger in the first five weeks of operation has wanted to offload off the aircraft. And there's lots of nervous passengers out there. So it has generally gone remarkably well, the pilot feedback is university positive, but the handling has been excellent, the performance of the aircraft has been excellent. They like shiny new toys at the best of times, but it has been very, very favorably received and the cabin crew like the aircraft, no issues with the new galleys, the new layouts. But again, slightly – all of the performance in the first five weeks is slightly in kind of artificially enhanced by the fact that we're operating at load factors to high 70s, instead of load factors in the low 90s. We think that's a good thing, though. It does mean, we plan to take our 12th aircraft in probably the first 10 days of August. The fact that we have 10 or 12 of those aircraft in the system through the summer when weather conditions are good, pilots and cabin crew rotating through the aircraft, everybody getting feel for – it is really – nice, slow introduction into the system. And then this winter, we take probably another 60 plus aircraft if Boeing can deliver them all and at a time when we're not under any great pressure. So from kind of a just an operational safety, it's good that we're able to introduce these aircraft at a time when we can allow the pilots, the cabin crew and the airport, the handlers to get used to them. So it has gone remarkably well, but the performance of the aircraft thus far – and certainly the one we care most about, which is fuel consumption has been exceptional and need to be better. We thought it would be because Boeing were willing to guarantee 16% fuel saving. And again, I think that will be key in our pushback on the Fit for 55 and taxing short-haul aircraft. Here, we are investing over 20 billion in a fleet of new aircraft that consumes considerably less fuel and is remarkably quieter than almost any aircraft operated in Europe. And that should be reflected in a future environmental taxation. And with that, Thomas, do you want to give us a quick run through on SAS and what we're doing to develop and improve supply of SAS for 2030?

Yes. No problem, Michael. And Mark, thanks for the question. I think obviously at the moment on the infrastructure, yes, the issue is that how you found the partnership with Trinity to try few weeks after the best to invest in and show our fuels suppliers, our key fuel suppliers which is the best one to invest in for the goal of the 12.5%. So we will be working with Trinity in the next 12 months, and then obviously with our key major suppliers and our key bases on what infrastructure needs to be put in, but try to meet that target, especially towards – that's where our main focus is in the next 12 and 24 months.

Yes. At the moment, the only key markets where we can pick up stock is Southern Scandinavia and we would hope to see that get rolled out over the next few years. But Thomas said significant investments and research needed to get the right blend in the right place.

It's also one of the pushback as well on the Fit for 55. They're announcing all the taxation, but there's been no allocation of these taxation revenue to developing sustained or high volume SAS. So they've set the target themselves, the 5% SAS for 2030, but the program is silent on how you get there and how you put the infrastructure in place at European airports. So we'll be calling for much more work from our Dutch friend, Mr. Tillman, and some of the other eco-warriors there in Europe. A start taxing your own Dutch Airline and B, tell us how you're – what you're going to do with all this money to actually help us to exceed these ambitious targets on SAS.

Next question, please. Thanks, Mark.

Next question comes from the line of Savi Syth at Raymond James. Please go ahead.

Savi, good morning.

Hey, good morning. The strong bookings in August and September, I was just kind of curious if you're seeing any signs that would return to office still feel uncertain in Europe if there's a – perhaps a higher floor to the usual seasonal drop-off in traffic that you're seeing based on current bookings. And then also just to follow-up on that, the near-term bottlenecks, you talked about Michael. You talked about crew and airports. I was wondering what you're seeing on the maintenance line side, and if there's any kind of a supply issue there. And in addition to route charges, what you're expecting, if you're expecting maintenance to be a headwind over the next couple of years?

Okay. Thanks, Savi. I’ll take the forward bookings and Neil, I might ask you to comment on the maintenance side. On the forward bookings, look, we’re all in the lab. It's like speculative here at the moment. Our focus for the last number of months has been to try to stimulate and ensure that we could provide for our operators a very strong recovery into Q2. 8 million, 9 million passenger, we did – 8 million passengers in June, 9 million in July, we might get just to 10 million in August. Our view of life then is that if 80% or 85% of [indiscernible] by the time we get to the end of August into early September, the schools go back to work or the schools go back. Most families have been able to travel in reasonable safety and confidence during July, August the peak autumn European holiday season. Then we think there's going to be a, we start to replicate what the U.S. has seen a very strong recovery of short-haul intra-EU air travel. Business travel gets back. Meeting suppliers, conferences, postponed events get refixed. We see if we get 10 million in August and again, there's no adverse kind of consequences. We see no reason why we wouldn't maintain maybe 10 million in September and then we're looking out into Q3 and I'd be hopeful of averaging 10 million passengers a month across Q3 as well. And it maybe even better than that, kike I think people who've been locked up for the last 18 months will want to go for weekend breaks away will want to go to the Christmas market. So there'll be a strong short-haul recovery in, I think business travels. There's a lot of talk about Zoom and the business travel. If you haven't met your suppliers for the last 18 months, you need to get back out and see them. You haven't made any sales calls. You're not going to do that on Zoom. So we think awful a lot of that, and then there'll be very strong rebound PFR, weddings that were postponed, Christian that were postponed, those family events that were postponed or people haven't seen. So we think – I'm not a believer and the people won’t return to the office, I think the officer, employers will want people back in the office. I think there's no doubt we are facing much more flexible working conditions into the future. But I mean, if you look at what we're doing in Ryanair, we're saying people we’re busy now back to the office. We are looking though at reaching agreements with our people that maybe you can do three days a week in the office, two days a week from home, there would be last for that kind of flexibility. But the idea that officers are going to close and people will not return, I think is absurd. I don't think socially younger people particularly want to work from office. That’s where they meet a lot of people. So we think it's coming back. And I think the best indication of that is the U.S., there were very strong recovery in U.S. domestic air travel. I think that would be replicated in European short-haul with the one exception is that we will still be missing the long-haul connecting traffic on which the legacy or the state junkies are so dependent upon for filling up their short-haul, that could lead to – they'll run all their short-haul capacity at just prices. We don't think that the balance sheets are there depends on state aid, allows them to do that. The time is already set. They're very focused on only flying what they can feel and repaying the state aid as quickly as they can, and we think most of the other airlines will operate on that basis. We will take up most of that short-haul slack with 60 new aircraft being delivered this autumn. And Neil then on the maintenance side?

Yes. Savi, thanks for the question there. With the exception offset just being a ramp-up in capacity and [indiscernible] no major increases coming through and in fact we've locked in better rates with our engine maintenance providers going forward. We've built up huge expertise on maintaining the aircraft ourselves over the years and we do a lot of our own maintenance in-house. There's no difficulty getting access to appropriately qualified engineers and the in fact, we’re taking in more mechanics and apprentices to allow for growth over the next few years. We've got new hangar capacity coming on train in places like Seville, and we're looking at building a couple of new hangars across Europe over the next year or two. One of the benefits of the MAX coming and sort of enables us now to exit some of the older more expensive to maintain aircraft from the fleet. I mean you'll see some sales over the next number of months and years. We've already handed back all of the leased 737s, which were a bit old than we would've like to delays and the aircraft coming in from Boeing. That's all been sorted out. So I don't see too many headwinds Savi on the maintenance side for the next few years.

And I would just add to that, we've been reasonably judicious over the last 12 months. We've invested, we've acquired a new office building beside ours at air site where we've opened up a new Ryanair Technical Center, where we've moved all of our engineering seat planning in there. It's about a 30,000 square foot building. As I said, majority announced that great view. We've invested about $10 million in a new aviation training center close to Dublin airport, four simulators, cabin crew training. It kind of quadrupled our training capacity in Dublin in addition to large kind of [indiscernible] Frankfurt and other. So we've kept investing judiciously through the crisis of the shutdown, and we now have those facilities and those resources coming on stream for both our pilot and cab crew and technical team. Thanks, Savi. Next question, please.

Thank you. That's from James Hollins at Exane BNP Paribas.

James, hi.

Hi. Good morning. Michael, Eddie, you sound like a couple of kids at Christmas when you talk about the growth opportunities in your excitement, you clearly singled out Italy, Scandinavia is good example. I'm just wondering if you sort of need to or even want to go off to some of the more established operators, the state aid junkies, your words, not mine in Western Europe or whether there's sufficient growth elsewhere? The second one, either for Thomas or Juliusz if he is on, just on the Fit for 55, you obviously – after flight took about this sort of [indiscernible] et cetera, just wondering what chance do you actually have of getting some changes to Fit for 55 and won't they just say of course see deals with long-haul?

Okay. I’ll ask Juliusz maybe to comment and Thomas to add on the second. And first half, yes, I think we will see more growth, particularly at primary airports. I mean, we're pushing hard, for example, for the release of flats in Italy and Portugal where TAP and Alitalia is sitting on slot, which everybody knows they won't use in the future because they've already announced they've already reduced the fleet. There will be further opportunities in Germany where there had been significant closures of Germanwings have deliberately reduced capacity. But again, we'll be opportunistic. I mean, I think most of our growth, if I was to look at the next two or three years, where would you place the 200 aircraft? The ones I would point to would be aid. And the first one will be those larger base airports where we've already rolled out significantly long-term lengthenings of our low-cost agreements at Stansted, Bergamo, Charleroi. And then I would say pivot, there will be a lot of new route development in Scandinavia and what we would call Central Eastern Europe, where we're seeing – pullbacks by Greece and others, they seem short of aircraft or they're moving aircraft further east into Dubai and elsewhere. Italy, Spain, Portugal continued to be very strong contenders for more capacity development, we're investing heavily in a new maintenance facility in Seville. France, we've opened up bases in Toulouse, I think they – and we have a base opening in Paris Beauvais. And the UK, there's also opportunity there, although they will be – I'm not sure how much more new base opportunities they'll do. We're talking to a number of UK airports. We've announced a new base in Newcastle there. And we are pushing, for example, even in Holland, where KLM is bed blocking [indiscernible], we continue to ask why [indiscernible] which is owned by KLM is not being opened. We ask [indiscernible] Lisbon, which is owned by ANA is not being opened, so that we can deliver further growth in those markets. So I mean, I have never seen in 30 years the amount of growth potential we have over the next four years. We could allocate the 200 new MAX aircraft twice over. I think in the next four years, we are not able to do that. So we will be judicious. We will also churn some of our own underperforming at airports and bases because there is more growth opportunities out there and/or growth in centers out there. Then we can, I would say, manage at the moment. Juliusz or maybe Thomas, do you want to talk on 50, 55 and how we pushed back?

Yes. I'll comment quickly. Juliusz here. Hi, everyone. Well there is no unanimity in the EU at the moment on fuel taxation and there has never been. This proposal generally emanate from countries in the old Central of Europe, in the Netherlands. You see some support forward in Belgium, in parts of Germany, parts of France. But those are countries which are very well connected by road and rail infrastructure. Their position is dramatically different from that of countries on the periphery of Europe from the Baltic states, from Scandinavia down to Greece, and then through the Mediterranean, the countries which are dependent on tourism. They are very concerned about increase in the cost of access that such success may bring. And we are in regular contact with governments in those countries as part of our lobbying efforts in Brussels. And we know that conversations in the Council of the European Union about the tax, will not be swift and they will not be easy. I think there will be a lot of upsets from some of the tourism dependent nations after the suggestion that cost of attrition may need to go up quite significantly over the next few years. So I think this is not over, and we will do our best to highlight those inequalities, which are being proposed by a taxation measure that only targets short-haul rather than the short-haul and long-haul.

And just on your point, James, on [indiscernible] offset credits, it’s offset, but not even a tax. At the moment, they're trading 3x less than the current EUA prices. So despite we have much short-haul and long-haul to do.

Okay. Thanks.

Okay. Thanks guys. Next question, please. We've got to end this call at 11, so we need to probably get through a couple as quick as we can in the last five minutes last question of this call.

Sure. The next one is from the line of Neil Glynn with Credit Suisse. Please go ahead. Your line is open.

Neil, hi.

Hi there. Just one of your related reputations with respect to appealing the navigation charge, increase prospect, and expectation on timing. And that the second question is just with respect to the longer term or as carbon consciousness continues to develop among consumers. Is there an opportunity or even a need to present your carbon footprint kind of to competitors in the booking process like people like Skyscanner do? Or how do you think about your communication back going forward Michael?

Okay. Neil, I didn't hear all that question, Neil is so speed. Neil, can you answer the first half on the NAB charge and maybe Thomas briefly answer the second on the carbon footprint as far as I could tell.

Okay. I'll pass the NAB charge question over to Juliusz. It was a bit hazy though. So Neil, could you maybe give that again? We just couldn't pick you up correctly on that.

Yes. Sure. Skyscanner for example will highlight your carbon footprint on a given route relative to competitors. Is that something right there should be doing to communicate most effectively with carbon conscious consumers gold and silver?

Yes. On the carbon side, in fact, in the last number of days, we've launched a carbon calculator, which enables our customers to fully offset their carbon footprint. That's very much open lights and we've already seen good pick up in relation to that. And we're continuously looking at different ways of differentiating ourselves. We're not shy and pointing out that as people switch to Ryanair, they can reduce our carbon footprint by 50% compared to the legacy carriers and do more comms like that going forward, it's not in the booking process. Yes, doesn't mean it won't be in at some stage in the future, but the carbon calculator is the most recent initiative and as said proven very popular.

Yes. I think there is take at asset level as well, Neil, an eco label where the airlines will feed into our information, like the Skyscanner. So at the moment, Skyscanner and calculations are very generic. I'm fully reflective of the actual numbers. And there is a bit of work on us on that at the moment at European level.

I think people are getting more aware of things like CDP as well and raising the mass and that will help drive decisions into the future. Okay. Thank you. Next question, please.

And that question comes from the line of Jarrod Castle with UBS. Please go ahead.

Jarrod, hi.

Hi, good morning. Moving more into the primary airports, you said from 70 to 80 and going back a decade, you were probably sub-50. Are you targeting a more affluent client base and at some point while we actually see the average fares rise, just given the experience, cumulatively over last few years that hasn't been the case? And then just secondly, Michael, any quick thoughts on the customer advisory panel is as part of always getting better and what kind of questions will you try to get them to answer the size, cheaper fares with better service or something like that?

Okay. Well, that's a tax question. I'll give that back to Eddie for just to close on the cost of the panels. Just in terms of yield, the movements in more basing – getting more – and basing more aircraft at time where airport is not as some kind of quest for an affluent client base. It's simply us being opportunistic. That's where the slots are available and that's where some of the better growth deals are at the moment because those airports are the ones suffering the greatest traffic into capacity lost through COVID and Wizz Air rise because we get a more affluent plant-based and we are happy to take more affluent customers are more ordinary customers, they all pay. And from the same fare classes, we don't discriminate. But I think it's inevitable that what will really, I think drive fare rates within the next two or three years will be shortage of intra-EU capacity. There is going to be meaningful shortages of capacity short-haul, EU capacity reductions. And I think that and a combination of that, and probably increased environmental taxation will undoubtedly put upward pressure on airfares and yields. And we will be poised I think, to be a significant beneficiary of that as we have rolled out 210 new aircraft at lower operating costs, but probably, if anything, a less intensely competitive environment in those markets where we were expanding. Eddie, do you want to touch briefly on the TAP customer panel?

Yes. I mean we have the first meeting of that in early September, but what's really behind that I suppose is building and our digital offerings, particularly from a customer service point of view, travel app, gate information, gate changes and on time information, et cetera, but there's a lot of other developments coming on that over the next number of months. And we'll just see from the customer and certainly from the panel as to what ideas they have. And some of the people on that panel already have sent in a really active in terms of the suggestions that they have. Also what we've learned through the whole COVID experience of refunds, dealing with disruptions of the day. We've got some – I say, this the last time, we'll have some announcements later this year on how we deal more efficiently with customer, destruction for the less than 1% of fights that we have disruptions on and how we actually get that information out to people in our 240 airports, so that people know exactly what's happening, how they get their refunds process, how we deal with EU 261 and deal with that in a much more efficient manner. That's going to be the focus of it. I mean, we are like – we still retain all the other initiatives that we've had over the – and getting better program up, the two bags on board and all that, we're going to continue to build on that. But it's really a – what we learned from disruption more leveraging our technology in terms of getting information out of it, close for us. So we're really looking forward to the first meeting with the seven people, I think, across the seven different markets. So we'll let you know on the next call.

Thanks, Eddie. I know we've gone over time, but we will have one last question and then we’ll probably close it down. If we've missed anybody, please route your questions through to me, Neil Sorahan and Peter in the Investor Relations panel. So let's take one last question moderator and then we wrap it up.

Thank you. We had a follow-up from Neil Glynn. We missed his second question. So Neil Glynn at Credit Suisse. Please hang up. So I will take the next question from Carolina Dores of Morgan Stanley. Please go ahead. Your line is open.

Hi. I’ll be bit quite quick. On the yield in this first quarter that has – that’s the first quarter 2022, is there a mix of routes effect on lowering yields, meaning more domestic or more really short routes that is taking the price down? Or is it just a really active price coming down? And my second question, if I may, is the supplier reimbursements that we got this quarter, the €140 million, is there more of these to come?

Well, firstly, I think no, there won't be more of the supplier reimbursements. At least I hope there won't be any more supplier reimbursements. We've negotiated now that we're entered the recovery phase, reimbursement as we negotiate with not just one, but a range of suppliers we think will come to an end. The lower fair in yields has been a function in Q1 of very much later traffic or booking curve. We would normally go into the summer with very strong advanced bookings. People already booked all their holidays. We had almost none of that in the system because of the huge COVID uncertainty. So as we went through and you look at the speed of the recovery from 1 million passengers in April, 2 million in May to 5 million in June, 9 million in July, that has all been built on very late, very close in aggressive pricing to capture that volume. And then we believe that that would begin to reflect itself in a marked rise in fairs and yield, probably towards the backend of the second quarter, but mainly into the third quarter once we get back to kind of post our pre-COVID norms. All of that pre-supposes that there's no adverse news flows, no further introduction of restrictions on passenger movements around Europe and schools reopened in September.

Okay. Ladies and gentlemen, thank you for your participation this morning. I'm sorry, we have to cut it short after an hour. As again, I hope we try to emphasize that the recovery is well underway. We are exploiting that recovery faster and I think much more operationally efficiently than any other airline in Europe. And I think if you look out over the medium term into the next two or three years, you have a unique opportunity with the delivery of 210 MAX aircraft, or with the first, which are now been delivered are operating exceptionally well. A huge new growth opportunity as existing primary and secondary airports, and you will see us, I think grab a significant wins on market share front across most Western, Central, Eastern European markets over the next three to four years. As long as we can safely say that by September of this year, the pandemic is behind us and there are no developments of vaccine resistant variants or the restoration of lockdowns. With that, I apologize if we missed anybody's questions or didn't get round to you, please call Neil and Peter in Dublin this morning. We'd be happy to speak to all of you individually. There's no road show for the Q1 as is normal. And with that, we look forward to speaking with, and hopefully meeting with you in person on the Q2 at the end of October. Thanks very much, everybody. Good to talk to you. Bye-bye.

This does conclude the conference. Thank you all very much for attending. You can now disconnect your lines.