Ryanair Holdings plc (RYAAY) Q4 2022 Earnings Report, Transcript and Summary

Michael, thank you very much. So welcome, everybody, to the full year results presentation. As we've always said, we've got the lowest fares and lowest costs of any airline in Europe. And this year, we returned to growth with 165 million customers, up from 149 million pre-COVID. We remained #1 for customer service, on-time performance, 90% last year. And as Michael has already said in his lead-in, we've seen significant improvements in our ESG ratings with the CDP increasing our rating from B- to a B and indeed Sustainalytics giving us a very strong #1 EU, ESG rating. Balance sheet remains rock solid and it's this financial strength and lowest cost that makes us the long-term winner. We have the platform for growth in place with 89 bases and 225 airports across our network. And indeed, this summer, we're operating 15 new bases and 770 new routes. So this, coupled with the new Gamechanger orders, we'll see us grow to 225 million passengers by FY '26. We came into COVID with the lowest cost per passenger ex fuel. That gap is only widening between us and everybody else. So significant unit cost advantage ex fuel to all other players. On the year itself, we saw a significant recovery in traffic, a 253% increase to just over 97 million customers with an improved load factor of 82%. This, however, was stimulated through lower fares. We saw a 27% reduction, an average fare to just €27. But we did have a good performance on ancillary. And as a result, total revenue was up 193% to €4.8 billion. Operating costs despite a plus over 250% increase in traffic, only increased by 113% to just under €5.3 billion. So as a result, we saw a lower loss this year of €355 million, down from €1.02 billion last year. Balance sheet, very strong. And I think the key [Indiscernible] here is the reduction in net debt, which despite €1.2 billion in CapEx this year, reduced from €2.3 billion at the end of last year to €1.5 billion at the end of FY '22. And with that, I'll maybe ask Michael to run through current developments. Michael O’Leary: Okay. Thanks, Neil. So clearly, we see a very strong recovery of traffic into the summer of 2022. There's undoubtedly significant pent-up demand for both business and leisure travel. We're well positioned to capitalize on that recovery with -- we've taken delivery of over 70 Gamechanger aircraft for the peak of summer 2022. There's no doubt that traffic is recovering. We've seen in recent months stronger traffic, higher load factors. But most of that has been driven by lower fares. In Q1, our fares will be -- which is the June quarter, our fares will be below where they were in the June '19 quarter. But as recently as April, we've seen -- we've gone over 40 million passengers for the first time and load factor went over 90% for the first time since COVID, and we expect that to continue. There's a prospect that fares [Indiscernible] in the second quarter. That's a key September quarter. It could be ahead of pre-COVID numbers in summer 2019, but that recovery is fragile, and it remains very exposed or subject to being damaged quite significantly by adverse news flows as Christmas was damaged by the Omicron variant in the last week of November, and Easter was badly damaged by the Ukraine invasion. However, in Ryanair, we have very robust cost control. We remain one of -- we are Europe's lowest-cost carrier by a distance, and we have kept our costs down, and in many cases, lower than during COVID when many of our competitors have seen their cost rise and escalate. On fuel, we're very well hedged. We're 80% hedged out to March of 2023 at significantly lower prices than spot. And many of our competitors are significant -- are either not hedged at all and fully exposed to spot prices or have inferior quantities or percentage of hedging in place. One of the things we're committed to, though, is the gradual restoration of the pay cuts. We negotiated agreed pay cuts with our -- most of our people for the last 2 years. We've committed that we'll start the restoration of those pay cuts in July of this year, and it would be a 3-year restoration, July '23 and July '24. We're in negotiations with a number of our pilot and cabin crew units to accelerate those restoration in some cases, bring it forward to April or May of this year. We're also committing that if we get back to pre-COVID profitability in this year, financial year-end, March 2023, we then accelerate the year 2 and year 3, we will restore fully the pay cuts if our profitability gets back to pre-COVID numbers sometime around between April and July of 2023. For FY '23, the customer program has been launched. The CSAT or customer service scores are at record levels, and we want to maintain that significant progress. And generally, we have a cautious but I think, ambitious program for FY '23. We expect to carry 165 million passengers. We see strong traffic and load factor recovery, what we're not sure about is the fares and yields. And in particular, the damage that can be done to those fares and yields by adverse news events like COVID, like Omicron, like Ukraine. And that's why we're not able to give any sensible or rational profit guidance for the next 12 months. We're hoping for modest profitability, but we can't put a number on at this stage. To touch briefly on summer this year, so forward bookings, which were damaged by Omicron and Ukraine invasion, load factors are recovering but at lower fares. We will operate 115% of our S19 capacity in December 2022. We aim to get load factors back to 90%. We got there in April, and we hope to maintain that over the next 6 months of the summer. No other airline in Europe will deliver that volume of growth this year. Other airlines tend to be the fastest-growing airports or airlines in Europe, Ryanair is the fastest-growing airline in Europe. And even then we can't cope with the amount of growth opportunities we have. We do still expect airport and air traffic control staff shortages. We're seeing pinch points at airport security at ATZ, particularly as usual at weekends. And those staffing shortage or pinch points need to be fixed for the peak summer months of July, August and September. We are making very strong market share gains in big markets like Italy, Ireland, Austria, in Vienna, Hungary and in Poland. And I believe no other airline in Europe is as well positioned as Ryanair is to thrive through an economic downturn or a recession if one [Indiscernible] upon us in the winter 2022 or into 2023. In recessions, people get more price sensitive, they trade down to the lowest cost provider, whether that's IKEA, it's Lidl, it's Primark for clothes, it's Ryanair for air travel. People will continue to fly but you'll see a lot of trading down to Ryanair in an economic downturn. Neil, maybe you touch briefly on fuel hedging.

Thanks, Michael. Well, I think it's clear from this slide that Ryanair is the standout airline when it comes to hedging in Europe for this summer and indeed beyond. We've just broken out the numbers across the various [Indiscernible]. But you can see for the full year, we're 80% hedged on our jet requirements, 65% through jet swaps, about $63 a barrel or in metric ton, about 630 per metric ton, with 50% of our capacity hedged with caps. So again, about $77 a barrel or $770 per metric ton. And on carbon, we've got a massive advantage over everybody as well, where we're 85% hedged at €53 per credit, which compares very favorably to the €90 spot that we're seeing in the market at the moment. Strength of our balance sheet is why we've been able to hedge. The weaker carriers don't have the hedge lines. And I think that's very evident from the various statistics that you can see here at the bottom of the slide. Just on market share gains. Michael talked about the significant gains we've made. So you can see, for example, in Italy, we're now up at 40% market share from 30% pre-COVID. Poland is growing strongly under Buzz with a 35% market share at this point in time. Austria, as Michael already said, Vienna performing exceptionally well for us, and indeed Ireland, our largest ever schedule this summer with 33 aircraft. And so we've made good strides over the past 2 years. Michael, do you want to maybe talk about a recession? Michael O’Leary: Yes. So let's come back to the point I know because shareholders and investors are raising this issue with us in recent weeks, what happens to Ryanair during the recession. Remember, the -- your Economics 101. We'll do better in a recession than any other airline in Europe. Consumer spending would be curtailed. Consumers in a recession always turn to the lowest cost provider, whether that's Primark, it's Lidl, it's IKEA, in the airline space, it's Ryanair. People will still fly. They'll just be much more price sensitive about flying. I would expect Ryanair to grow faster in a recession, as we have done in the last 3 or 4, whether it was 9/11, Gulf War, [Indiscernible], we grow faster and do better because in a recession, price is king. Already, we're seeing competitors cut capacity in markets where we largely -- they're competing with us. BA has announced significant short-haul flight cuts out of the U.K. to particularly Italy and Spain. Now it's to deal with labor shortages [Indiscernible] to take its seats out of aircraft again, because of labor shortages, but also in markets where they are unable to compete with Ryanair's larger aircraft. And more notably, Wizz in recent weeks are now talking about expanding into places like Saudi Arabia and India, which markets where, thankfully, they don't have to compete with Ryanair because in markets where they do like Austria and Vienna and in Italy, they're in retreat. As Neil has said, we have very significant fuel hedge advantage over all of our competitors right out to the end of the next fiscal year. We are dealing with a huge number of airports who are competing aggressively against each other to try to recover their traffic or to capture what will be the scarce capacity growth we can offer over the next 2 or 3 years. The new Gamechanger aircraft are delivering us more passengers, but at lower cost, much more efficient fuel burning aircraft. And we expect to take delivery of another 55 -- at least 55 of these Gamechanger aircraft next winter, so that we can emerge in summer of 2023 with an ambitious growth target of that's north of 180 million passengers in FY '24. And all I can tell you is that if there's a recession or an economic downturn, that growth will be faster, and we will grow faster and more profitably than any other airline in Europe. And that, if you like [Indiscernible] the ambitious growth plans that we've already set out, which takes us to 225 million passengers over the next 5 years. To cope with this, we're already out in the market. We have an RFP out there for up to 50 second-hand aircraft. We're in advanced discussions with a number of lessors, both Airbus and Boeing for low-cost secondhand aircraft, and we're hoping to see Boeing finally kind of return to the table or put an offer on the table for because they need new aircraft orders, otherwise, Airbus is eating their lunch. But we are very excited about the growth opportunities that exist now for the next 5 years here in Europe. And maybe, Neil, if you turn to the ESG points and maybe wrap up the presentation.

I will, of course, thank you very much. We've made significant strides in the past year on our environmental credentials. The carbon disclosure project, upgraded us as a result of the good work that we've been doing to a B rating last December. Very pleased with that, particularly at a time when some of our other European airlines were being downgraded. Equally, in the last month, we saw Sustainalytics, one of the largest independent rating agencies for ESG in the world, ranked us the #1 European airline for ESG and indeed, the #2 airline globally, so a very strong position. But that said, we can't sit down and relax with those ratings behind us, there's an awful lot more to do. We've got very ambitious targets with our aviation or purpose plan to get to carbon neutrality by 2050. So we'll continue to execute on that plan. And you can see the kind of targets that we have here, we plan to reduce CO2 by 10% between now and 2030. We hope to improve our ratings with CDP to an A over the next couple of years, and we're working very hard, one, with the delivery of the Gamechangers coming in with a lower fuel burn, but equally with Trinity College in Dublin under Sustainable Aviation Research Center to research into the right blends of sustainable aviation fuels to use. We've already partnered with Neste and Amsterdam to take a 40% blend out of that airport for this year. And so I think we're moving well along the tracks in improving our environmental credentials. So just to summarize, there continues to be significant risks in the market, underpinned by the invasion of Ukraine and coal but particularly into the winter period. We would anticipate that we will grow to 165 million customers in the current financial year, but we will do that on a load active-yield passive basis. So low fares will drive that traffic recovery. In recent weeks, we have seen an improvement in bookings, but the curve remains still very close in and behind where we would typically have seen a pre-COVID in summer of 2019. So we think the market remains fragile, but we are hoping, cautiously optimistic that we'll deliver modest profitability in FY '23. As we look beyond that, we've put a phenomenal platform in place with 210 aircraft coming. That will see us grow to 225 million customers by FY '26. We've got a very solid balance sheet, which will underpin the fleet growth and the significant market share gains that we have. So as always, lowest cost and financial strength will be the absolute winner in this market. Thank you very much. Michael O’Leary: Thanks, Neil, well done. And now ladies and gentlemen, we'll move on to the Q&A, and we've asked Stephen Furlong, analyst from Davy to host that for us this year. So Stephen, over to you. So thank you, Neil, for that presentation. We've invited Stephen Furlong from Davy now to host a brief Q&A session with myself and Neil. So Stephen, you're welcome. And off you go.

Thanks, Michael. If you talk about your ESG and the environmental highlights from last year, I noticed you got a rating from Sustainalytics, for example. Michael O’Leary: Yes, we've made significant progress again this year. We launched our aviation with purpose document setting out our plan to get to net zero by 2050. We've taken delivery of 70 -- over 70 Gamechanger aircraft by the time we get to the summer peak this year. Those aircraft are carrying 4% more passengers, but burn 16% less fuel. We've also announced a very exciting partnership with Neste in the Netherlands to uplift 40% of our fuel uplift in Schipol will be with SAS, and we're very pleased that those efforts have been rewarded by the carbon disclosure project to increase our environmental rating from a B- to a B this year, which is the -- it makes us the industry-leading environmental airline in Europe.

And Neil, can I just ask you about in terms of kind of the social since we're on this topic, what's the plans in terms of adding employment and what you've done, for example, with the aviation training centers?

Sure. Well, the plan over the next 5 years, Stephen, is to grow the fleet near 620 aircraft. So that's going to create about 6,000 new jobs for highly skilled aviation professionals all across Europe. Some of that will also be achieved through promotions of our own people within Ryanair. You talked about our aviation training centers. We invested €50 million in the new training center in Dublin last autumn, state-of-the-art and we're going to churn out about 1,000 cadets a year to those training centers. And indeed, another 2, we earmarked over the next 5 years and investment for about €100 million. At this stage, we're looking at the Iberian Peninsula, somewhere in Central and Eastern Europe. And we've already put orders in place for about 8 simulators to fit those out of costs of about $80 million for that. And then on the maintenance side, we're continuing to invest heavily in our maintenance facilities all across Europe. Recently we announced the new hangar facility in Shannon, got another 1 in Lithuania in Kaunas, and we hope to do more over the next couple of years.

Michael, can you talk about how you've tried to up the ante in terms of improving [Indiscernible] and the initiatives? Michael O’Leary: Yes. I think the customer service is something we're investing heavily in. The new customer advisory panel had a second meeting in Madrid in April. We've taken their recommendations on board. You'll see a lot of those implemented over the coming months in both the [Indiscernible] on the website, but also on customer engagement points at airports. We continue to invest heavily in on-time performance. We're delighted that we take an OTP for the last 12 months has exceeded 90%. Some of that was by virtue of the fact that you know a lot of flights [Indiscernible] very few ATC delays last year because of COVID. And I think all of those efforts are reflected in record CSAT scores. Our customer service scores are running at record levels, high 80s with particularly positive feedback for both our checking people and our cabin crew on board.

Neil, what's the situation might be way in terms of the ownership of the shares, and how do you see that playing out?

Yes. We've made good strides on that, Stephen, over the course of the past year. We commenced the financial year with about 31% of our shareholders, albeit EU shareholders. That's increased significantly to 41% at the back end of FY '22, so March 2022. And we did a lot of work last year. We focused very heavily on European Investor Relations, we delisted from the London Stock Exchange. And indeed, we had to engage in #4 sell-downs. And so I think we'll continue to focus on EU shareholders over the next number of months and we'll also likely engage in some more sell-downs where necessary.

Mike, when we talk about the growth, the plans, I mean I know -- let's say, growth 50% over pre-COVID levels to 225 million passengers, not the end of the delivery current order book. You might have talked about how that's going to... Michael O’Leary: I think as we emerge out of COVID, the growth opportunity has never been stronger. I mean, this summer alone, we've announced 15 new bases across Europe. We will open -- over 770 new routes. We've taken delivery of over 70 of the 210 Gamechanger aircraft for order this summer. We're seeing extraordinary market share gains in some of the biggest markets in Europe and Spain, here in Ireland, in Spain, in Italy, in Poland and in Hungary are some of the more notable ones. And I think what we're seeing is we're tapping into that desire among airports across Europe who want to recover their traffic losses quickly, who want to put themselves back on a growth platform. And most notably that we've extended the long-term low-cost growth deals at the bigger base of Stansted, Brussels, Charleroi, Milan, Bergamo and others. And we have more growth deals available to us at the moment that we can manage. So we're looking forward not just in the 71 aircraft, 70-plus aircraft day this year, but in fact, the 55 aircraft that we need, and we're talking to Boeing about more aircraft for the summer of 2023.

Can I ask Neil, how is that -- the Boeing and A200 perform? But also, before you said you would have 65 aircraft in the summer. Now it looks like it's 70. Have Boeing added some aircraft into the schedule?

Yes, we're delighted to take the extra aircraft in. As we said, originally planned of 65, that's going to grow to just over 70 aircraft peak summer, which gives us more opportunities to grow this year and indeed work on our operational efficiencies. Boeing, we're keen for us to take more aircraft into the summer. We were happy to do so. And as Michael said, we'd like to accelerate some into the summer of 2023. On the performance of the Gamechanger, we're very pleased with the operational performance. It's exceeding our expectations on the likes of the fuel burn, although we're only just starting to get to the 90%-plus load factors as we did in April in the numbers we announced in the past few days, the crew and the customers alike are very complimentary of the aircraft.

Mike, can I ask, when we're talking about Boeing, there's been a lot of recent certainly, let's say, negative commentary about Boeing and issues with their other aircraft and their production line. Could you talk about the MAX 10 and where we are there, if any? Michael O’Leary: I mean look, I think it is no secret -- the management of Boeing are facing significant challenges. I think we've been disappointed by the responses we've received from Boeing over the last 12 months. We brought the negotiations on the MAX 10 order broke down last September, we walked away. In the intervening period, all we've seen is more Boeing customers signing up for Airbus aircraft. I think Boeing needs to fight back. It needs to win back some of that market share. However, they still produce very good aircraft. There are challenges with the aircraft deliveries. We are continuing to struggle to get the aircraft deliveries on time. As Neil said, we've taken some extra aircraft at Boeing to request this so -- and we have the growth opportunity to be able to handle that. But -- and I think what's important to emphasize is we don't need any new aircraft to hit our 225 million passenger target by 2026. But we remain open and available and looking for aircraft opportunities to cover the period from 2026 to 2030, we're in the market at the moment, we have a request out there for proposals for second-hand Airbus and for second-hand 737s. And we'll see what comes out of those discussions. But I think Boeing certainly on the commercial aircraft side needs to up its game. And we need to see more delivery from Boeing, particularly for the larger customers like Ryanair.

Maybe you could talk about the different airlines within the group and how that -- the aircraft is allocated between the airlines like Malta Air and Buzz?

Both. Yes. I mean they're performing well, Stephen. And as Michael said, they've been basically taking aircraft over the past number of months to get ready for the summer. So we now have Buzz who look after Central and Eastern European operations with about 60 aircraft in the fleet and they'll be operating another 1 of those on charters this summer to put 8 aircraft and charters for summer 2022. If we then move on to Malta Air, over 140 aircraft in their fleet, they look after Italy, Germany and other large markets for ourselves. Performing very well. Lauda have opened up new bases this summer in the likes of Stansted, in Zagreb and Zadar that are on top of their Palma and Vienna bases. And then, of course, our smallest airline in the group, Ryanair U.K. have grown from 1 aircraft last year to 8 aircraft this year, which puts them in a very good position, particularly with APD starting to reduce on domestic flying into the U.K. next year. They're well placed to capitalize on the opportunities that will be available there.

Maybe, Neil, can you talk about yes, sure, the summer update. And basically, where you see I guess people are looking compared to summer '19, summer '22 versus summer '19?

Yes. Well, we're -- unlike everybody else who seems to be pulling capacity out of the market, we're actually flying 115% of summer '19 capacity. This summer, we've already talked about having 70 additional Gamechangers in the fleet. We've worked very hard over the past 2 years to grow market share. And this year, you'll see us operating 40% market share in Italy, up from 30% at pre-COVID. We've got our largest ever summer schedule out of Dublin this year with 33 aircraft with a 55%, 56% market share in Ireland alone. Buzz, who we just talked about there with 60 aircraft in the fleet are now the #1 operator in the Polish market and indeed, the leader in Hungary. In Budapest, we now have 30% market share and leadership in that market. So we're making good strides on that front. We expect to grow traffic overall for the year to €165 million, which is an 11% increase and $149 million that we had pre-COVID. But I suppose we have to caution as well that we have seen shocks over the past number of months from the likes of the invasion of Ukraine and indeed, the Omicron variant. So it may not all be in straight lines. But as things stand, 115% capacity this summer.

And Michael, can you talk about the booking curve? I mean some other airlines [Indiscernible] the customer, and you said before booking later. Is that -- makes it difficult to budget? Or how do you see that playing out over the summer? Michael O’Leary: There's no doubt that the booking curve is much more close than it would have been pre-COVID. Now bookings are running very strong and have been running very strongly since Easter. I think the fact that we got through Easter, lots of families traveled. I think that has certainly delivered a significant confidence boost in the system. So since Easter, bookings have been strong, but forward bookings remain high single digits behind where they were pre-COVID. That means the situation remains fragile. As Neil has said, where we got a kind of surprise like Omicron at the end of November, that damaged Christmas, when the Ukraine invasion took place at the end of February, that damaged Easter. So while we're still trying to build or restore forward bookings, any adverse news flow is very damaging. I think it's fair to say, and we've been open about this in Q1, our June quarter, average fares are running behind where they were at pre-COVID, because we're driving -- using price, using our low -- our cost advantage to rebuild forward bookings. I think there's a reasonable prospect at this stage that fares in the second quarter, the September quarter will be ahead of where at the moment, they're tracking ahead of where they were pre-COVID. But adding negative news flow, and that will fall over again. So I'm a little concerned, there's been a bit too much competitors talking of the summer here. It looks good, the peak summer looks good, but it's fragile. And as we've seen before with both Ukraine and Omicron, relatively negative news will offset that significantly. But -- so allowing for the fragility, we are restoring the forward booking curve. It remains subject though to adverse news flows. And if there's -- we hope there'll be no adverse COVID news flows, we hope the Ukrainian situation would resolve. I think the second summer peak looks strong at the moment, but that takes us into the winter. And at the moment, we are facing into a winter late this winter where we're looking at possible adverse COVID news, possible adverse Ukraine news, and then a recession kind of customer confidence, the economic outlook looks very bearish. So we should just be cautious.

Okay. If we go back to the summer, Neil, and let's talk about any constraints in the system. Other airlines talk -- have had staffing issues and also just in the supply chain. The infrastructure issues, whether it's ATC or airports or ground handling, I might just talk about that because I think it brings a wider question about what capacity is going to be for the summer across this issue?

Sure, Stephen. Well, on Ryanair staffing, we're self-sufficient. We took a decision at [Indiscernible] keep our people current [Indiscernible] and they were able to come back fairly quickly when things ramped up last summer and indeed into this summer. So we're actually self-sufficient for [Indiscernible] we got ahead of the [Indiscernible] recruitment curve on the cabin crew with the aircraft coming in for the summer this year. There were a couple of pinch points. U.K. being an example, but that's well behind, no issues on that front. We've got very high retention within the airline. I'm particularly with the growth and the promotional opportunities that people are keen to grow within the Ryanair family, and we're generating about 1000 cadets a year. Outside of Ryanair, yes, there have been some issues. I mean we all recall the kind of security delays that we saw in Dublin and in Manchester at the start of that summer season. That's improving, and they've been recruiting up, and we would be hopeful that into the peak summer, those issues will have resolved themselves. I have some concerns on ATC despite the fact that we're looking at potentially 10% less capacity overall in the European short-haul market this year. Some of the ATC providers don't appear to have staffed up as well as they probably should have done. So there may be some pinch points there that would be the one concern I have at this point in time.

In terms of, Michael, the cost inflationary environment, there's a lot of commentary about this. How Ryanair prepared for this? A lot of companies are, I guess, worried about the cost inflationary environment. Michael O’Leary: I think it's going to be challenging. There's 2 obvious areas. As Neil has said, firstly, ATC and ASNP are looking to recover their lost income during COVID, they're all government-owned monopoly. So governments should be writing that check and not asking passengers and airlines to pay for services that we didn't receive over the last 2 years. So there's no doubt, I think ATC charges are going to rise significantly. Fuel has almost doubled since the Ukrainian invasion. Now that's -- so we still have -- we're 80% hedged. So we're well hedged out to March of 2023. That puts us in an incredibly strong position, far stronger than any of our airline competitors across Europe. But we still have 20% that's unhedged, and we will have to pay up to $100, $110 a barrel based on current spot rates, for that 20% unhedged. We do, however, have some kind of favorable win behind us. The MAX, when it would be operating more than 70 MAX this summer, they are burning 16%, in fact, they're burning 18% less fuel at the moment, they're really doing very well on fuel. The airport deals are still very strong. We are working with our people. We're trying -- we're committed to pay restoration as quickly as we can. This year in July is the first year of a 3-year pay restorations. We're in negotiation with some of the pilots and cabin crew unions [Indiscernible] bring that forward. We hope to see that brought in some cases, fall into May, some case into June. And in some cases, the unions are saying, COVID is over, give us all the money back. Well, it's not over yet, and we do need to see the restoration of our pre-COVID profitability. But we have committed with them that if we do get back to pre-COVID profitability over the next 12 months out to March to 2023, then we will bring forward years 2 and 3 of those restorations to July 2023. So there are cost challenges, but we have significant cost advantages over every other airline in Europe as well.

And in terms of -- just to mention about Ukraine, okay, capacity has been reallocated from there. It was a small amount of the overall network. Where was it reallocated? And how are those different regions performing -- would you say?

There was no difficulty, Steve, in reallocating the capacity. A lot of airports are very keen to get access to Ryanair recovery and growth. So we're able to drop [Indiscernible] and elsewhere. We had originally planned to put about 1 million customers into Ukraine. This summer with no base aircraft. So as you said, easy enough to reallocate elsewhere. We did see an initial impact on the bookings over a 2- to 3-week period. But again, with price stimulation recover that. So I suppose the big challenge remaining apart from the unknown is the fuel volatility at this point in time, fuel trading well over $100 a barrel. But as Michael has already said, we're relatively well hedged on that into this year with just 20% unhedged, but we have to manage that for the balance of the year now.

And I think in terms of where you allocate the aircraft more like Italy, Spain or Greece. I mean is every market performing uniformly? Or would you say there's any different between the different markets? Michael O’Leary: I [Indiscernible] pent-up demand out there. Central and Eastern Europe definitely took more stimulation in the early days after the Ukrainian invasion. But now at the moment, if you look into Italy, if you look into Spain and you look elsewhere, particularly in the second quarter of the year, there's good demand. Easter was damaged, as Michael already said, we didn't get the kind of yields that we would have hoped in there. We continue to stimulate May and into June, but thereafter. We think -- not only will the demand be there, and that was evidenced in the 14 million passengers that we had in April. But hopefully, the pricing will have improved into the second quarter as well.

Yes. Just talk about the results for a second to go back. I mean, you gave guidance at the start of April. I see that the pre-exceptional loss was in the range, maybe at the top end of the loss. But -- could you just talk about the loss you made at $355 million? Michael O’Leary: Yes. If you take kind of the main pillars of the performance last year, so traffic recovered strongly. We carried 97 million passengers, but that's still 50 million passengers behind our pre-COVID levels. The load factor was 82%, still 14 percentage points -- it was 96% pre-COVID. So we've seen a stronger traffic recovery than any other area in Europe, but we're still running a long way behind where we were pre-COVID. And some of that was the damage that was inflicted on us by, as I said, Omicron damaged Christmas, not just traffic but also yields because we lost all that late booking traffic. And Ukraine undoubtedly damaged Easter. Now some of that will be into Q1 of this year. But it shows the fragility of the recovery. While there is a strong recovery ongoing, it's fragile because we're still trying to build up forward bookings. And what's driving that recovery in traffic certainly in Ryanair is we've been very aggressive on pricing, average fares for the last 12 months are down 27% on where they were pre-COVID. This is a huge drop in pricing. So we're carrying people but at much better airfares. And that's also part of our investment in our recovery and recovery at airports. Ancillaries continue to perform strongly, priority boarding, reserve seating, the return of duty-free sales on all flights to and from the U.K., it's something where I think we'll see significant upside this year. Operating cost, though, have been well controlled. While revenues were up over 200%, operating costs were up only 115% for the last 12 months. But those lower costs are not sufficient to make up for still a significant loss of revenue as a result of carrying 1/3 less passengers than we did pre-COVID [Indiscernible].

You might just talk -- we touched on it earlier, but just talk more in detail maybe about the hedging position, particularly not just on fuel, but also say, on the carbon cost?

Yes. We're well hedged, Stephen, into next financial year, about 80% of our fuel hedged, that's kind of a split between jet swaps, about 65% of the fuel covers with jet swaps, about $630 a metric ton or about $63 a barrel. We're looking at about 15% true caps, again, about 770 a metric ton. And we have a little bit of cover into the summer of next year about 10%. On carbon, we're particularly well hedged. I don't think any other airline out there hedges carbon at this point in time. We've 85% of our carbon locked in at about €53 a credit compared to €90 spot pricing at this point in time. So I think the strong hedge position that we have is going to be a big competitive advantage as we grow significantly on traffic into this year.

Michael, you touched on earlier, like next winter, who knows, but a lot of people are calling out a recession. How are Ryanair positioned if there is a recession from a consumer perspective? Michael O’Leary: I think fundamentally, this is clearly an area for investors in recent weeks and months as well. We are better positioned than any other airline in Europe to thrive during a recession. In a recession, people get more price sensitive. You see that benefits the lowest cost producers, the Primark, the Lidl, the IKEA and in the airline space, it's Ryanair. We have lower cost than any other airline in Europe. We have lower fares, but people will still travel. They just become -- they want to travel in a more price-sensitive manner. We will still take another 55 aircraft from Boeing next winter. We will still grow from €165 million to €180 million over the next 2 years. We'll be operating aircraft that carry 4% more passengers, but burn 16% less fuel. We bought those aircraft from Boeing during COVID at an exceptional price. We've negotiated significant airport discounts for growth and recovery, and we will be able to pass on those savings to our customers in the form of lower airfares. So in a recession, people get more price sensitive, but the lowest cost wins. And the lowest cost by a distance in Europe is Ryanair. And I think we will not just do well. I think we'll thrive if there's a significant economic downturn or recession in Europe, particularly in those markets where we've seen enormous market share gain. Italy, we're now up over 40% market share. Ireland, we're close to 60% market share. Poland, we're over 30%. And even Budapest, where we compete with another so-called low-cost competitor, we've now overtaken them in their home airport. And we're now the #1 airline in Budapest and in Hungary. I think that demonstrates the kind of the power of the Ryanair model and the Ryanair brand in a downturn or recession, I think it would be very good for our business.

And Neil, [Indiscernible] questions on the balance sheet. So maybe talk about the balance sheet where you see the net debt position, where it's going and maybe talk about CapEx because that's always asked? And how you would finance the aircraft going forward, the 210 aircraft?

Okay. I suppose on the balance sheet itself, we finished the year in a very strong position. It's a [Indiscernible] we finished up the year with €3.6 billion in cash. And I'm particularly pleased that in the year where we had $1.2 billion CapEx. We saw our net debt position drop down from just under €2.3 billion to €1.45 billion. That said, we've increased the debt over the past couple of years through COVID, but our objective over the next year or 2 is going to be to get that back to a broadly net cash net debt position despite the fact that we're going to have gross CapEx for the next couple of years. So you're asking me there what are the figures. We're looking at this stage, and there's no change, about €2.3 billion CapEx in the current financial year FY '23. That's aircraft and maintenance CapEx. Drops back a little bit the year after that, we're going to be somewhere between about €2.1 billion and €2.2 billion on CapEx. And then thereafter, the aircraft CapEx are to drop back quite significantly. Now thanks to the balance sheet that we have and with 90% of the Boeing fleet unencumbered. We're in the happy position that we can be opportunistic in what we do on the financing side. We've got plenty of cash in the business, which we can use for predelivery payments or otherwise, we continue to great access to our EMTM program to the debt capital markets. Banks have no real exposure to us either on a secured or unsecured basis. And with the exception of the Lauda aircraft, lessors don't have any exposure to Ryanair, which is possibly why we've seen such a phenomenal response to the RFP that Michael talked about on NGs earlier on. So we'll be completely opportunistic. It's going to ultimately [Indiscernible] to what's the lowest cost and that's effectively how we finance the fleet.

I'll leave the last word to Michael. Maybe just talk about the -- again, maybe your views on the outlook and what are the issues for investors, risks or opportunities in the next 6 to 9 months? Michael O’Leary: I think as we look into the new year, I think the right word to use is we're cautious. We see a strong traffic recovery in Q1 but at much lower fares. At the moment, given the pent-up demand, Q2 looks like there will be a strong traffic recovery. And as a prospect of a pricing and fares being above where they were pre '19, but all of that can still be offset by adverse news flows on Ukraine and COVID. Into the second half of the year, the 2 winter quarters, I think we would be much more cautious at this point in time. It seems evident that we're going to have an economic downturn, if not a recession. I do believe that Ryanair will thrive through that recession, given our lower cost base and our ability to offer lower pricing than anybody else. But -- so I think we see a strong traffic recovery this year. It's impossible though to predict what the fare -- average fares will be like through the second half of the year. That's why we're saying today, look, we can't give anybody any accurate kind of profit guidance for the next 12 months or earnings guidance. It's too fragile. It's too -- there are too many moving parts. We think our costs are locked down. But we think there, as we've seen previously with both Omicron and with Ukraine, it's subject to being badly disrupted at short notice by adverse news flows, but there will be a strong traffic recovery, we'll do a very good cost performance over the next 12 months, but really any kind of profit outcome for the year. We think there's a prospect of modest profitability over the next 12 months. If everything goes right, it could be better than that if there's adverse news flows, particularly on COVID into next winter, recession and/or Ukraine, the profit -- I think it will still be profitable, but the profits will be significantly behind where they were pre-COVID, and really it's too early to say until we get I think towards the second half of the fiscal year, we really won't have any better guidance than that.

Okay. Thanks, Michael. Thank you, Neil. Michael O’Leary: Stephen, thank you. Good to see you again.