Ryanair Holdings plc (RYAAY) Q2 2022 Earnings Report, Transcript and Summary

Okay. Good morning, ladies and gentlemen. You're very welcome to the Ryanair H1 Results Presentation. I'm Michael O'Leary, the Group CEO, and I'm joined this morning by Neil Sorahan, our Group CFO. As you have seen this morning on the ryanair.com website, we've reported a H1 loss of €48 million, a significant improvement on the €411 million loss in the H1 prior year. In the first half of this year, we've seen a very strong rebound in traffic. It's up 128% from 17.1 million last year to 39.1 million in this half year. We've taken delivery of the first of our 737 Gamechanger aircraft. We finished the half year with a very strong cash balance of €4.24 billion, that's up from €3.15 billion in March as we see the very strong recovery in bookings and forward cash flows. Net debt has fallen from €2.28 billion at the 31st of March to just €1.5 billion at the end of September. We've opened over 560 new routes and 14 new bases have been announced for this summer and next summer as we again seek to recover very strongly from the COVID-19 pandemic. And we set out at our recent AGM a very aggressive five-year growth strategy, which sees our growth -- our traffic accelerating from 200 million to 225 million in the financial year ended March 2026. The key to all this is our commitment to our environment. Every passenger who switches to flying Ryanair from legacy airlines reduces their CO2 emissions by up to 50% per flight. However, we're adding to our fleet the new Boeing 737 Gamechanger aircraft, which offer us 4% more seats per flight, but reduced fuel consumption by 16% and cut noise emissions by 40%. We continue to work to maximize sustainable aviation fuel use. We're campaigning hard to accelerate the reform of the single European Sky, which would minimize air traffic control delays which would significantly lower fuel consumption and CO2 emissions not just for Ryanair, but across Europe. We are committed to improving our CDP, our independent CDP climate rating from a B-, which is industry-leading, to an A over the next two years. And we are working closely with Trinity College here in Dublin on developing Sustainable Aviation Research Center, so that we can maximize the production of an availability of sustainable aviation fuels by 30% when we set ourselves a very ambitious target of using about 12.5% of sustainable aviation fuels. All of this forms part of our commitment to help us achieve our target of cutting CO2 per passenger by a further 10% to just 60 grams per passenger kilometer by 2030. To touch briefly on COVID-19. Obviously, it has very badly disrupted the first quarter of this year, but the second quarter has seen a strong recovery. Thanks to the success of the EU digital travel certs on the 1st of July, we've seen a very rapid recovery in bookings and travel. In June, we carried 5 million people. In August, that had more than doubled to over 10 million passengers. H1 bookings, however, have been mostly closed in and have required continuous price simulation. In recent weeks, so we've seen a very -- a surge in very strong bookings and better yields for the October school midterm break, which took place last week, for Christmas breaks. And we think that kind of peak demand will continue for the -- out into Easter or the February midterm break, Easter and summer of 2022. We continue, though, to be very load factor active, yield passive. As we build -- rebuild -- we work hard to rebuild load factors quickly. We're already back up over 80% and have been for the last number of months. We see ourselves going back over 90% in the summer of 2022. But outside of these peak periods in November, the second half of January, the first half of February, yields will be tough. We will be doing engaging a lot of price discounting to get people back moving and to restore confidence and intra-EU air travel. Ryanair was, however, one of the very few airlines to use the COVID-19 crisis to place a very significant aircraft order in December 2020 with Boeing, where we took the Gamechanger order up from 135 to 210 firm aircraft. We have spent the last 18 months expanding our airport partnerships. We're securing lower operating costs, so that we can pass on even lower fares post-COVID to our customers. We're leading Europe's traffic recovery, and we plan to drive accelerated growth in both traffic and jobs over the next five years. None of this will be possible without Ryanair's very strong balance sheet, in fact, industry-leading. We continue to maintain a BBB credit rating with both Standard & Poor and Fitch. As I said, at the end of the half year, we had €4.2 billion in cash and almost 90% of our 737 fleet of over 400 aircraft is unencumbered. In May, we issued a new €1.25 billion five-year unsecured bond at a record low coupon of just under 0.9%. In June, the group repaid its 2014 maturing €850 million bond. And last week, I'm pleased to say the group repaid early our UK CCF loan of £600 million, five months early because we don't need the money and bookings have recovered strongly as so of cash flows. The strength of Ryanair's balance sheet ensures that the group can capitalize rapidly on the many growth opportunities that exist in Europe now for the post-COVID-19 recovery. It's inevitable; however, we will do so while still incurring losses in the current year. We expect a small loss in the year to 31st of March 2022, but we expect to be leading what will be a very strong recovery in short-haul intra-European air travel into the summer of 2022. Touch briefly on our outlook for pricing and yields for the winter of FY '22 will remain challenging. With the booking curve remaining very close in, traffic recovery will require continuous price stimulation. This, coupled with rising costs for the very small element of our unhedged balance of fuel, means that visibility - earnings visibility for the remainder of FY '22 is very limited. It's impossible at this stage to provide meaningful FY '22 guidance. We believe, however, the traffic has improved probably to just over our current range of 90 million to 100 million passengers. If we continue to build and recover at the rate we are, and there's no adverse COVID developments this winter, then it's possible we could get just over the 100 million passenger figure. But subject to winter fares, as I said, we expect to record a full year loss of between reasonably small of between €100 million and €200 million. This -- even this outcome, however, will be crucially dependent upon the continued rollout of vaccines across Europe and no adverse COVID-19 developments this winter. Just to touch on the overall strategy, however, subject to being no adverse COVID developments this winter, we expect to continue to take deliveries of 65 Gamechangers from Boeing before peak summer 2022. That's allowed Ryanair to uniquely accelerate growth into the post COVID-19 recovery. These industries are delivering industry lowest costs, lower emissions, incredible fuel efficiency, and they will enable us to exploit growth opportunities at both primary and secondary airports all over Europe, particularly where many legacy airlines have either failed or have significantly cut back their fleet as a result of the COVID-19 pandemic and the receipt of state aid. As we announced at our recent AGM, we set out a much more aggressive and accelerated growth path for the next five years, which you'll see Ryanair grow from 149 million passengers pre-COVID to a new target of 225 million passengers by FY '26, incredible growth of 50% from what is already Europe's largest airline over that five-year period. And we very much hope that you as shareholders will join us on that journey over the next five years as we see not just traffic recover, but hopefully, in time, profitability and the share price as well. Thank you. Neil?

Thank you, Michael. I'll just quickly run through the presentation and hand over to you for current developments. So Ryanair has the lowest fares and lowest costs of any airline in Europe. We're number one for traffic, as Michael just said, hopefully, somewhere just above 100 million this year, and number one for customer service and on-time performance. When it comes to the climate, we've got an industry leading B- rating from CDP, and our balance sheet has a strong investment-grade rating of BBB. So this financial strength and our lowest costs that makes us the long-term winner. We're starting to put down the platform for growth for the next five years. We've got 89 bases, 14 of which were announced this year, and we'll roll into next summer as well. We've launched over 560 new routes. So, I think we're well placed with the new Gamechanger aircraft to achieve 225 million guests by FY '26. We commenced the COVID with the lowest cost per passenger ex-fuel of any airline. And by the time we've taken delivery of our aircraft will be significantly ahead of everybody else in the sector. On the half itself, we saw a significant recovery, particularly in Q2 on traffic following the release of the EU digital COVID certificates in July, so traffic up 128% to 39 million guests at a load factor of 79%. Revenue jumped 83% to just under €2.2 billion. However, costs remain in good shape, up 60% to €2.2 billion. So as a result, we saw a very good improvement in the year from the same half last year where we recorded a loss of €48 million, down from €411 million last year. Our balance sheet remains extremely strong, as I said, BBB rated by both Fitch and S&P, very strong cash balances of €4.24 billion at the end of the half. 90% of the fleet unencumbered and net debt at €1.5 billion, so this enabled us, thanks to the strong cash flows in the business, as Michael said, to repay £600 million to the UK CCFF last week, five months ahead of target. Michael, I might ask you to run through current developments, please.

Yes. Thanks, Neil. So as I've already said, we've seen a very strong recovery into winter of 2021, much stronger than any other European scheduled airline. We see bumper bookings for the October school midterm break last week, and we think that will be repeated again at Christmas. We are continuing to maintain our industry-leading environmental social governance performance, and we're particularly proud of the fact that people switching to us are reducing their CO2 emissions by 50% over Europe's flag carrier airlines. In terms of traffic outlook, as I said, we're taking it up now above the 100 million range for the full year. Our cost leadership has widened with lower financing costs, airport cost, aircraft, and management and staff have also kicked in pay cuts for the next year. They will begin to restore from next year onwards, and they will be well earned. Fuel is hedged. We're hedged 80% for the fourth quarter of FY '22, and we have eliminated the risk for about 80% of our fuel in H1 of 2023, about 60% is fuel swaps and 20% is caps. We have 65 Gamechangers coming for summer 2022 from our 210 order book, and this has enabled us to accelerate our growth objectives, particularly post COVID to 225 guests by FY '26. Touch briefly on the traffic recovery. So we remain load-factor active, yield passive. Loads are already up over 80% for the last three, four months. In fact, we expect we go close to 84% for the month of October. We expect to announce those figures later on this morning. The majority of our UK -- the UK and EU population is now vaccinated. We think that will eliminate a huge proportion of the risk to disruptions over the winter period. We worked hard during COVID to keep our aircraft, our pilots and our cabin grew current, and that's why we've been able to engineer such a rapid recovery to our schedules to our route network and to our traffic. But as I said, very strong October and Christmas bookings, and we see our FY '22 traffic moving to ahead of our current range of 90 million to 100 million. Just to give you a flavor for that speed of Ryanair's recovery. These are the published Eurocontrol fees for the month of September, which is a good parameter of the number of flights being operated by Europe major airlines. Compared to September 2019 pre-COVID with September 2021, you see Ryanair's essentially flight volumes down 9%. Most of the rest of the industry across Europe is down, still down around 40%. So we have recovered much faster, much quicker than most of other Europe's other airlines. And I would point you at the bottom, you see Alitalia, who were down 67% in the month of September, which is one of the reasons that so much of our growth is taking place in the Italian market. We've used the COVID pandemic to continue to widen our cost leadership over all other EU airlines. We have agreed pay cuts with our pilots, cabin crew and our head office teams last year and this year. Those pay begins to restore over the next two or three years. We're still negotiating significant recovery incentives with Europe's airports. We're continuing to work with our handlers to ensure that we're tackling, saving further on efficiency on costs. Route charges will probably rise over the next year or two. There's clearly price gouging going on by those European, the ANSPs, which are government-controlled monopolies protected from any impact of the competition or downturn from COVID, but we're continuing, and I think the new order for Gamechanger aircraft will significantly lower our aircraft cost for the next, not just five years, but for the next decade. We'll see huge efficiencies coming from the fact that they offer us 4% more seats but burn 16% less fuel. We have better lease and maintenance terms. We're doing less outsourced maintenance. And our BBB rating means we are able to tap into cheaper finance as we've shown we've repaid the 2014 bond, which we were paying 1.875% per annum for and replace it with a bond now, which we're paying less than 0.9% of 1% interest rate. And in terms of our other costs, labs are continuing to lower our marketing spend. Labs is continuing to displace other third-party systems internally. So, we're taking a lot of that technology internally, so that we're not going to be controlled. We develop it and it is significantly cheaper for us. And don't forget fuel. As we move forward in the next year or two, the Gamechangers will significantly lower our fuel burn for the next 5, 10 years. And we're well hedged and have -- are strongly hedged into what is a rising fuel market. Just in terms of Gamechangers, we've covered this well before, but we have 65 coming, 4% more seats, 16% less fuel. The only negative development on aircraft in recent months was Boeing's attempt to increase prices for a potential follow-on MAX 10 order. We don't really know what Boeing are up to. We think they're deluded, particularly at a time when we walked away from negotiations on a MAX 10 order. Other Boeing customers in Europe, Jet2 have signed up an order with Airbus aircraft. And IAG have also walked away from Boeing discussions on narrow-body aircraft in favor of Airbus. So we think Boeing needs to come back to the table. They need an order from Ryanair. But frankly, we have enough aircraft, more aircraft than we need for the next four or four years. We'll wait until Boeing get competitive on pricing again before we place another order. Growth is going to accelerate to 225 million guests. One of the key, I think, developments coming out of COVID has been the number of the extent to which competitors have either shrink or failed. You look across and we've seen the failure of Thomas Cook, Flybe, Level, Germanwings. Alitalia, for example, has now ceased trading, but it had a fleet of 110 aircraft. It is replacement that's opened up with a fleet of only 55 aircraft. So the aircraft, the fleet has been cut in half. Norwegian before pre-COVID had a fleet of 120 aircraft are now operating a fleet of probably just 25 or 30 aircraft. TAP has significantly reduced their fleet as well. So we see huge growth opportunities, not just in new bases, but also -- and working with those large airports across Europe to replace the capacity that's been lost by their incumbent airlines. Airports recognize they need to recover quickly. They recognize that Ryanair is the only airline in Europe that can deliver that recovery. And therefore, we're seeing extended recovery and growth incentives at many of our bigger airports. And we've already touched on those long-term extensions of the growth deals at Stansted, Bergamo, Charlotte, others. And you put on our kind of long-term extension stance in some context, you see our competitor down the road Heathrow, talking about a 50% increase in charges to passengers and to airlines at Heathrow while we have a long-term low-cost agreement within Standsted. That's why I think you'll see Stansted's traffic recover very strongly. We think Stansted has a better vision for the future, whereas Heathrow is just price gouging its airlines and its passengers, aiding abetted by a captured regulator in the CAA, which allows them to continue to do so. We see the EU governments becoming more active in stimulating recovery as well. Ireland in the recent budget has put together a 90 million package for the aviation recovery next year. And as a result of that package, we're going to switch more capacity into the Irish airports for summer 2022. So you'll see Ireland's traffic recovering much faster as a result of lower airport charges. And again, I would contrast that with what Heathrow are at, price gouging to reward its very rich shareholders, which is fundamentally the wrong strategy. We've announced 14 new bases for 2021. There's more than 560 new routes post-COVID. There's more routes coming, but more of that growth is taking place at existing bases than it is a new bases. And we've stepped up the FY '26 traffic target to 22 million and 25 million passengers. Here is a very interesting slide. Again, all I want to draw your attention to here is the fact that while we're opening 14 new bases next year much more aircraft growth is going into existing bases. We're basing 11 new aircraft in Vienna next year where both Austrian and Wizz are in retreat. Stansted, we bought the easyJet's based aircraft slots for seven aircraft, so we need to put those aircraft into Stansted. Manchester with Thomas Cook failed, three new aircraft. In Italy for example, we're going to face more than 20 new aircraft all across Italy this year and next, so that we step up and ensure that airfares in Italy and to and from Italy remained low even as Alitalia has its capacity. We're also allocating aircraft to Portugal, to Poland, for example, where a lot on insignificant difficulties. And we're very excited by the fact that Ukraine is joining the EU Open Skies next year. Ukraine is already a big market for Ryanair, but it's one where we will be facing a significant number of aircraft over the next two or three years. So again, don't lose sight of the fact that we're -- yes, there are 14 new bases, but there's much more growth taking place at existing bases as well. And that's why we're going to see a very accelerated recovery in traffic in Ryanair over the next five years, growing from 149 million passengers pre-COVID by 50% over the next five years, up to 225 million passengers. I'm not alone or we're the biggest airline in Europe, but we are by some considerable distance the fastest-growing airline in Europe and will remain so for the next five years. All of this is being done in a very environmentally sensitive conscious way. We continue to stick to our very ambitious environmental targets. We intend to reduce CO2 consumption by 10% by 2030. We have a very aggressive goal of powering 12.5% of our flights with sustainable aviation fuels, and we are committed to improving our independent climate rating score from B- to A over the next two years. We're investing very heavily in our people and in training. We recently opened a €50 million simulator training center in Dublin, six simulators with the capacity to train up to 500 pilots annually. We expect to open two more of those centers, one somewhere in the Iberian Peninsula and one somewhere in Eastern Europe, most likely Poland in the next two or three years, so that we internally can produce up to 1,000 pilots and more than 2,000 highly trained cabin crew each year. We're continuing to create 5,000 new jobs over the next five years. We're very excited by the fact that we promote more than 3,000 of our people in the next two years alone, mainly pilots and cabin crew. We're engaged in very extensive people engagement at all levels within the Company, and that's being led by Roisin Brennan, our Independent Director for workforce engagement, and a very exciting development in September was the first meeting of our customer advisory panel. They came up with a series of initiatives, which we've adopted and we're rolling out now in the form of -- to enhance our customer experience program for 2022. From that, you'll see new services where there's an app assistant, a day of travel app assistant, provide real-life flight-time information, flight status and handling updates and there is live op center communication and videos during disruptions. All passengers charter with Ryanair will now have a Ryanair wallet. They can pay for services using that wallet if they want. Bu we can offer them refunds through that within 24 hours and while still maintaining the option to provide all passengers with cash refunds during the rare case of flight cancellations cash refunds within five working days. These developments will allow passengers to engage in much more self-service, less need to wait or to interact with kind of customer service centers when during cases of disruption, and it will make the travel experience a much more seamless and we hope enjoyable experience for our customers, particularly as we grow those customers from to 150 million to 225 million passengers. So ladies and gentlemen, we are embarked upon a very exciting five-year growth plan. I have never seen a time in the last 30 years in Ryanair where we have so many exciting growth opportunities. Traffic and load factor is recovering in the last five months. It is recovering at Ryanair much faster than any other EU airline. In fact, I don't know how they're going to be able to catch up. For FY '22, we're pushing our traffic recovery ahead of our previous range, which was 90 million to 100 million. We're somewhere now in the very low 100 million -- 102 million, and 103 million passengers. We still expect, unfortunately, a loss for the full year, but it's a reasonably modest loss of between €100 million and €200 million subject to no adverse COVID development this winter and modest yield performance. Low fares, however, will drive a very strong recovery into Christmas, into Easter and more importantly, into FY '22, when we expect to see our load factors return to pre-COVID levels and that also yields returned to pre-COVID levels. We will see and will stimulate much faster pre-COVID growth arising to 225 million guests by FY 2026. We'll do that using our very strong BBB rated balance sheet, and we're using that balance sheet to invest heavily in fleet and market share gains. And we continue to believe that, that combination of financial strength plus lowest industry costs will make Ryanair the long-term winner. I think we should just touch briefly, given the topicality on fuel hedging. It's in the appendix of our presentation, so we've seen rising short-term fuel prices in recent weeks. However, I'd point the fact that the market is still in significant backwardation. However, we didn't want to get into a situation whereby we would hedge 80%, 90% again in case there are some more adverse COVID developments. We don't want to be hedged to 90% again in the future and then find that we have to ground some of our aircraft or governments prevented from flying. So what we've done is a combination of fuel swaps and caps to eliminate those kind of risks. As you can see here for the second half of FY '22, we're 50% fully hedged. Fuel swaps at about $58 a barrel, and about 20% fuel caps for about a further 20% takes up to about 70% for the second half of the current year. The first half of FY '23, again, we're 60% hedged at about $62 a barrel, and we have a 20% -- another further 20% of the risk locked away with caps at an average price of about just under $72 a barrel. And for the second half of FY '23, we're 60% hedged at about $62 a barrel. All of that's significantly below the recent spot prices, which are up in the mid $80 per barrel. I think going forward, you'll see us continue to use hedging to lock away the core of our fuel needs and then a modest use of caps so that actually we take our fuel coverage up to about 80%. But without committing to necessarily buying 80% into plane, just so we avoid what happened during the COVID crisis where we had bought forward 90% of our fuel on a rolling 12-month basis and then found most of our flights and operations grounded by government fit. We don't want to run that risk again. Okay. With that, well, Neil and myself will take questions and answers now.

Michael, Neil, good morning. Can we begin by discussing Ryanair's ESG strategy? Any update in your environmental actions?

Sure. As you know, passengers switching to Ryanair from Europe's legacy airlines are already reducing their carbon footprint by 50%. But more importantly, we're investing over $20 billion in a fleet of new Boeing 737 Gamechanger aircraft, which allow us to carry 4% more passengers but with 16% lower fuel burn and then 40% cut in noise emissions. We set ourselves very ambitious environmental targets over the next five years. We want to cut CO2 per passenger kilometer by 10% in the next -- by 2030. We intend to be carbon-neutral by 2050. We set a goal of powering 12.5% of our flight using sustainable aviation fuels by 2030. We're committed to improving our climate disclosure project rating from B- to A over the next two years. And we are co-funding a Sustainable Aviation Research Center partnership with Trinity College Dublin here, which we hope will help us to accelerate, not just research into but also the production of, sustainable aviation fuels at our airports over the next five years.

What are you training and job creation plans for the next five years?

Well, thanks to the growth in the business with the 210 aircraft coming in, we'd expect to have 5,000 new jobs for pilots, cabin crew, engineers, not just about the job, the training is equally important. So we've just invested £50 million in the new high skills, training simulator center here in Dublin. And I would anticipate that we'll probably roll out about two more of those over the next five years as we take more simulators into Ryanair. At the moment, we're looking at places like Spain and Poland.

What are the latest updates from your customer improvements well done?

Yes. Well, again, I think one of the significant developments was the first meeting of the customer advisory panel here in Dublin in September. It was a two-day workshop with Ryanair customers. Very interesting feedback and we've used that feedback to tailor our customer experience improvement program for 2022. We've implemented almost all of their suggestions, particularly as they relate to customer information, day of travel assistance and speeding up the rate and pace at which refunds are processed, which was obviously a bugbear for most customers during the COVID-19 pandemic.

Now let's turn to our H1 results. You reported a €48 million loss. Why?

Well, you recall, we recorded a loss of €273 million in the first quarter. That was offset by a £225 million profit in the second quarter. Now Q1 was badly impacted by effect of the Easter traffic being ground restrictions been rolled out into May and June. But we saw a bounce in traffic as the COVID Digital Certificates were rolled out on the 1st of July. And as a result, traffic in the first half was over 120%, that's 39 million customers. Now bookings were relatively close in, so they required a fair bit of stimulation. And as a result, fares were down about 30%. But we had a strong performance in ancillaries would help to offset that where we generated about €22.50 per passenger in ancillary revenue.

And what was driving that €22.50?

Again, it continues to be a very strong conversion on priority boarding and reserved seat sales. And there is certainly a growing income stream now coming from the sale of duty-free products, mainly alcohol and cigarettes on flights to and from the UK, which has now exited the EU and we've seen the return of duty-free on in that marketplace.

Any update on your fuel and carbon credit hedge?

Yes, we're relatively well hedged on fuel for this year. We've got about 70% of our requirements into the second half of FY '22 hedged through a combination of swaps and caps. When we look into next year, we're 80% hedged in the first half and about 60% hedged in the second half FY '23. And then, of course, carbon becoming a bigger issue, we're in a particularly good place there, where we've got all of our EUAs hedged at about €24 in EUA for this year, about 65% next year at just under 40%, which compares very well to €60 in EUA in the market at the moment.

And have you changed your hedging policy?

We have slightly – well, one on the learnings from COVID, we don't want to buy forward up to 90% of our needs on a rolling 12-month basis, in case there's further COVID disruptions or flight cancellations. We don't expect them, but we have to be cautious. So what we've done, we've hedged up to 60% basically over the next 12 to 18 months within plain fuel swaps. Average price of those swaps is around $60 a barrel. And then to take away or eliminate more of that risk, we've added about 20% of caps, priced at just around 70, just low $70, $71, $72 a barrel, which means we have about 80% of coverage, but we're only committed to 60% of that forward fuel. And so, with spot prices currently up at around $85, $86 a barrel, we're very well insulated, certainly for the next 12 or 18 months. And the market is still in significant backwardation, where the market doesn't expect the recent short-term spike in prices to be maintained, and we hope it won't be either.

You recently accelerated your post-COVID growth projections. Why?

There's a lot of opportunities in the market at the moment. We've seen huge capacity come out of the market, some of them pre-COVID but a lot of it over the last 18 months. We expect more capacity to disappear from the market over the coming months. At the same time, airports are hungry for traffic restoration and growth. We're seeing governments in the likes of Ireland, Italy, Spain, Morocco and others trying to stimulate tourism and economies. And we've already, this year, launched 14 new bases and 560 new routes. So I think we're in a very strong position to now grow by about 50% from pre-COVID levels to 225 million guests. By FY '26, which is ahead of the 33% growth to €200 million that we previously targeted.

And shifting the focus more short-term, Michael, what does the booking curve look like?

Well, I mean, the booking curve is closer in. Forward bookings were obviously significantly damaged by COVID. People didn't have the conference to book 6, 9, 12 months out. We are seeing that beginning to recover fully. Now forward bookings in the summer 2022 now are running close to where they were at this time in 2019 or summer of 2020. But within that then, very strong forward bookings for peak periods, the October school midterm break, Christmas, Easter, all look very strong. But the rest of November, early December, the back end of January, early February are weak and will require further price stimulation. So the running to summer '22 is all about restoring our load factors. We've demonstrated an ability to recover that in recent months. We've run at over 80% load factor consistently from July onwards. We expect over the winter to see load factors continue to rise up towards 90%. But from summer 2022 onwards, we expect to be back at pre-COVID load factors, low 90% and hopefully back at pre-COVID yields, if not better. All is part of a five-year accelerated growth plan to take us to 225 million passage by FY 2026.

How has Ryanair widened its cost advantage over the last 18 months?

Well, we've been extremely busy over the past 18 months, as you just said there. I suppose one of the key standouts is the increase in the Gamechanger order from 135 firms to 210 aircraft last December at modest price reductions on top of what we'd already negotiated. Now these aircrafts are 16% more fuel efficient, 40% less noise and have 4% more seats. And so, I believe the gap between us and all competitors are going to widen significantly for the next decade. On the staff side of things, the negotiations modest pay reductions last year, but we'll see pay restoration over years three to five of multiyear agreements. As we've already discussed, airports very keen to get traffic restoration and growth deals, we've extended a number of our long-term growth based deals and the likes of Stansted, Bergamo, [indiscernible] and more recently in the East Midlands And Manchester, and that's on top of the 14 new bases that we've launched this year 560 new routes. On financing, debt has never been cheaper, which was evidenced by our 1.2 billion bond raised last May at 0.875%. And we have lots of other things going on in the business at the moment.

Do you see any cost headwinds in the current inflationary environment?

Certainly, there are some route charges, ATC charges, look like they're going to rise because these are government-owned monopolies who are allowed to recover their losses from their customers. So I think we are as an industry facing rising ATC charges next year. Fuel costs are clearly rising, but we are very well hedged probably better hedged than almost any other airline in Europe. And there's no doubt that the industry, in general, faces increasing environmental costs going forward. But none of those challenges will see -- will narrow the cost advantage Ryanair has over all other EU airlines. And therefore, I think even as the absolute cost of flying is likely to rise in Europe in the coming years it underlines how strong the growth position or how strong the growth opportunity that exists out there for Ryanair. And particularly with the Gamechanger aircraft, if you have higher fuel costs or rising environmental charges, we will suffer less than any other airline because of the extraordinary environmental performance of this new technology.

Shifting focus to the fleet, how many Gamechanger aircraft will be delivered this year?

We'll have just over 65 Gamechangers in the fleet for next summer.

And how is the aircraft performing to-date?

It's done remarkably well. I mean, obviously, firstly, our load factors are slightly lower in the 81%, 82% than normal, but we're seeing better than 16% fuel performance. Noise emissions do seem to be running at just over 40% as promised. But I think what's more important in this is that the feedback from both our passengers and our crews has been universally and has been universal approval. We've offered all passengers traveling on the Gamechangers. You have -- there were some nervous about them traveling on a MAX, they could offload with no quibble, travel on the next available flight. We still first started flying these aircraft in June, not one passenger has wanted to get off that aircraft. They enjoyed the aircraft. It's a much quieter flight experience and our crews, both pilots and cabin crew, the door of the aircraft, great performance and very positive customer feedback. Everybody is excited about flying on the new aircraft.

What are the group's fleet plans?

In the short term, we've recently agreed to dispose of 10 of the oldest NGs from the fleet. Two of those were delivered in September and the remaining eight will exit the fleet between now and the summer of next year. We have no immediate plans, no plans to sell any more NGs at this point in time. We've got 29 A320s in the fleet, the first of which is penciling to go back to lessors in the winter of next year. But with 210 Gamechangers that we bring over the next few years, and with the capacity that we already have, we're fairly comfortable that we'll have about 620 aircraft in fleet, delivering 225 million guests by FY '26.

Why did negotiations with Boeing on a MAX 10 order terminate?

It was very simple. Boeing, out of the blue, sought a significant substantial double-digit price increase. I don't understand the strategy. We think Boeing's approach to this is delusionary. We're the only significant customer Boeing has in Europe. Norwegian has canceled almost all their aircraft orders. JetBlue has switched from being a Boeing customer to now an Airbus customer, and even IAG, which had signed up an MOU for a significant number of MAX aircraft, has now invited Boeing or Airbus into tender for those aircraft Boeing is losing customers all over the place. And the one large customer they have outside of North America, Ryanair, was very close, I think, in active negotiations for a follow-on order for MAX 10. But Boeing walked away from the discussions, because they're looking for a price increase at a time when prices should be falling if one is going to recover its production.

How are the Ryanair Group Airlines developing?

They're performing very well. They ramped up their operations over the summer, delighted to get back to some form of normal flying. They continue to be very focused on their cost base and cash preservation. But more importantly, they're now integrating the Gamechanger aircraft into the fleet. Our Polish airline now has almost 60, Boeing 737s in their fleet. Malta Air just up at 130, and now to continue to operate its fleet of A320s.

Let's turn to your balance sheet. How is your cash position?

Our cash position has strengthened dramatically in recent months as bookings have recovered. And as you know, at the end of September, we had over €4.2 billion in cash balances at the quarter at the half year-end. We have a very solid BBB credit rating. 90% of our 737 fleet is unencumbered, and we have seen a dramatic reduction in net debt, down by almost €800 million over the six months since the 31st of March to the 30th of September, where now net debt now stands at €1.5 billion, thanks to that very strong cash flow. And that's enabled us in the last week to repay the UK CCFF loan of £600 million, 5 months early. We're very grateful to the UK government for those loans, but it's clear that as our balance sheet recovers, we don't need that loan funding anymore, and we're very proud to be one of the first airlines to repay the CCF debt early.

What is your CapEx guidance for FY '22 and FY '23?

We have about 65 aircraft delivering this year before the summer of next year, so CapEx will be somewhere in the region about €1.2 billion, including maintenance CapEx for the current financial year. Next year, we peak CapEx year. We expect it to rise to about €2.3 billion. And then thereafter, we will start to see it come back down again.

And how do you finance the A200 order?

I think most of it, as it has been in the past, will be funded from internally generated cash flows, but we use our strong balance sheet. We'll use our strong credit rating to be opportunistic about raising either bond finance, do a mix of sale and leasebacks or delcos. And all the time, the focus will be on how do we arrange the lowest cost financing for this CapEx over the next four or five years where many of our competitors already are engaged in sale and leaseback of their aircraft, which significantly provides a very significantly more expensive financing and aircraft costs.

Shifting focus slightly, why are you considering delisting from the LSE?

Well, like a lot of Irish corporates, we've noticed trading on the London line has decreased significantly in the past number of months. But I think in our case, it's probably been accentuated by the fact that from the 1st of January post Brexit, UK shareholders are now deemed to be non-EU and are no longer allowed to purchase Ryanair's ordinary shares. So the Board feels, it's timely to take a look at whether we get benefit from having a London listing. We already have a primary listing here in Dublin on Euronext, which has the highest levels of corporate governance. And we're quotas, our radios, are quoted on the NASDAQ in New York.

And finally, Michael, let's close the Q&A by discussing the group's outlook for FY '22.

Yes. Look, there's no doubt that the remainder of this fiscal year is going to be challenging. The winter will be tough. We're hoping that the high level of vaccinations across Europe will mean there'll be no more COVID disruptions. But outside of the peak periods of October midterm break, Christmas, February midterm break, there's no doubt we will have to be very load factor active, yield passive to maintain 80% load factors and deliver over 10 million passengers a month. I'm confident though we can do that, and that's why we're raising our full year traffic guidance to just above 100 million passengers. It sets us -- will set us up strongly, I think, for a very strong recovery in traffic, load factors and yield into the summer of 2022. But with limited pricing visibility for the remainder of this year, I think it's sensible that we guide the market for a small loss in the year between €100 million to €200 million. That would be a significant improvement on last year's number, which was a loss of €850 million. And as you can see, we're clearly set on a track to return to profitability, but profitability won't come back until the summer of 2022, which will be FY '23.