Ryanair Holdings plc (RYAAY) Q3 2023 Earnings Report, Transcript and Summary

Hello, and welcome to the Ryanair Q3 FY '23 Results Conference Call. Throughout the call, all participants will be in listen-only mode. And afterwards, there will be a question-and-answer session. [Operator Instructions] Just to remind you, this conference call is being recorded. Today, I am pleased to present Michael O'Leary. Please begin your meeting.

Okay. Good morning, ladies and gentlemen. You're all very welcome to the Q3 results conference call. I'm Michael O'Leary with the usual team here in Dublin. And Neil is joining us from London, where he's doing the media stuff this morning. I take the -- I'm not going to deal with the press release. The slide show and the management MD&A is largely dealt with. I'll take those as read and point you to the Investor Relations page on the website. A couple of quick comments on the Q3 numbers and the kind of outlook going forward. So we reported a very strong Q3, a profit of EUR211 million, which contrasts markedly with the other alleged low fare carriers in Europe, all of whom reported a significant Q3 loss. Our traffic was up 24% to EUR38.4 million, that's up 7% on the pre-COVID figures of FY '20. We're still the only airline that has materially returned to strong growth over our pre-COVID traffic numbers. We saw a strong rise in Q3 fares, up 14% of the pre-COVID levels. That was mainly due to a very strong October school mid-term and the Christmas and New Year kind of period. We saw very strong traffic at higher than expected airfares. That was why we had went out on the 4th of January with the trading upgrade. And thankfully, for a change, the Christmas trading wasn't disrupted by any adverse news flow on COVID or Ukraine. So we had a reasonably undisturbed but very strong Christmas and New Year period. We spent a lot of time, I agree with our union partners agreeing the pay restoration. Not alone have we agreed to pay restoration with almost all of our pilots and cabin crews, the only people outstanding are some of the Belgians. But we've also put in place a multiyear pay agreements, we take multiyear pay agreements onto the back of those deals, so that our crews can look forward to kind of guaranteed pay increases over the next four years -- four or five years, depending on which agreements they've done. I think, it's an example of how we continue to work well with our unions and with our people, both to preserve jobs during COVID, but also to reward them as we emerge out of COVID when, hopefully, we'll continue to avoid any further black swan events. Year-to-date unit cost, and I think this is the compelling store message, one of the two compelling messages this morning. There's been an extraordinary widening of the unit cost gap between us and every other airline in Europe. I would point you to Slide 4 of our industry presentation. Before COVID, we were already Europe's lowest cost airline on -- with a total cost per passenger, excluding fuel, assess seat cost per passenger of EUR31. Over the past nine months, that has -- we've managed to maintain that. Actually, it's gone down very marginally to EUR30 per seat, excluding fuel. But every other competitor has seen very significant cost increases, whereas we calculate their unit cost actually up 18%, EasyJet 42%, and Southwest in the states up 25%. And even the legacy carriers, who were already ridiculously high cost prior to COVID, we think Lufthansa have seen seat costs up 16% and IAG up 16%. And I think there's such a widening of that cost gap between us and every other airline. It's one of the reasons why we are continuing to grow so strongly, but also while profitability has rebounded strongly this year. And we are -- and I think that will be one of the themes of this morning's call. Thus far, we've taken delivery of 84 game changes up to the end of December. There are still some uncertainties as to whether we'll get all 51 aircraft that Boeing are scheduled to deliver to us by the end of May. At the moment, we think we're somewhere around 44, 45 aircraft. But it's a kind of a daily and weekly thing we worry about with Boeing because obviously, some of our growth into the summer of 2023 will be disrupted if we don't get those 51 aircraft out of Boeing. Nevertheless, we're seeing strong growth in all markets with 223 new routes announced for FY '24. We're seeing very strong market share gains. I think one of the things that we constantly decided to do with to go after market share, grab market share gains in those markets where incumbents were withdrawing capacity. So we've seen very strong gains in Italy, where ITA or Alitalia has reduced capacity in Portugal, where TAP has reduced capacity; in Poland, where Weeze appear to be taking capacity out; and also in Ireland and Spain, where the incumbents were very slow to recover their capacity as Europe emerged out of COVID. And I think the other thing we'd point to you this morning is that in H1, we've increased our fuel hedging now from 50% to 60% cover. We were able to take advantage of some weaker pricing there over recent weeks. We brought down the fuel hedging cost from $92 a barrel to $90 a barrel, that's for H1 FY '24. We remain 50% hedged at $92 a barrel for the H2 of FY '24. So we think we are in reasonably good shape. A couple of other themes then. I just want to talk to you about looking forward into this summer, we still see seat capacity constrained in Europe. It is quite clear that some of the legacy carriers are not restoring their pre-COVID capacity. Obviously, in Italy and Portugal, TAP and Alitalia are capacity constrained. Alitalia's fleet has reduced by almost 50%, TAP by 40%. We're seeing Lufthansa in Germany being very slow to restore pre-COVID capacity. The German market is a very interesting one this year. Recent figures suggest that it's only operating at 70% of its pre-COVID capacity. And we think that's a conscious decision by Lufthansa to constrain capacity, so they can drive up airfares, and airfares are seeing their highest increases in the German market. We have reduced some of our capacity in the German market or reallocated some of it where Frankfurt Main were increasing charges. We reallocate deployed capacity to Frankfurt-Hahn. We've increased capacity in Niederrhein and Nuremberg and some of the smaller bases there. But I think the German market is going to be one where Lufthansa will, being the national champion, will do what they generally do where they have a quasi-monopoly. They'll constrain capacity. They will increase pricing quite significantly, and we would be the beneficiary of that, even though Germany is one of our smaller markets. The other thing we point to is Weeze seem to be taking more and more capacity out of markets where they compete with us, Austria, Central and Eastern Europe and Italy regional and Italy domestic. There seem to be, I would have said, a flight of capacity out of those markets where they compete with us. And a lot of that capacity appears to be moving into the Middle East, which it would appear to us to be Weeze on a kind of campaign to find a market where they don't have to compete with Ryanair, which is a good sense of the strategy from their point of view. So I think there's going to be meaningly less capacity, short-haul capacity in those markets as a result of Weeze pivoting some of their capacity away from intra-EU and after the Middle East. Allied with that is, it is somewhere that we think there's going to be very strong transatlantic traffic, and there's the beginning of a recovery of Asian traffic. Now with the risk movement in the pre-COVID restrictions, the Asians will start returning to Europe this summer. They won’t reach their pre-COVID levels. But any recovery of the Asian traffic will, we believe, fill up a lot of the short-haul connecting and transfer flights of the legacy carriers, the Lufthansa, IAG and Air France KLM. The transatlantic traffic will also play a role in that. And therefore, we think and believe that there will be meaningfully less available capacity on European short-haul this summer. Europeans will continue to holiday at home. I think the strength of the dollar will militate against them going transatlantic. Asia is still effectively closed and not very welcoming for long-haul majorities from Europe. And so the outlook, I think, is reasonably robust for summer 2023. We're already seeing that in our forward bookings. As we've reported in the last couple of weeks, we see very strong forward bookings, both volumes and pricing into the February mid-term, into the Easter, which is in Q1 of next year, which is in the middle of April, and in summer 2023. At the moment, our bookings are running at or above where they were pre-COVID for the -- some of the peak months of the summer doesn't run right through the summer. And fares at the moment are running above where they were last summer. Now I think, therefore, everything is set fair for a reasonably strong Easter and a reasonably strong summer 2023. How strong will that be? We have no idea. And I can answer that 90% of the follow-on pricing, which would be, where do I think yields will be this summer? I don't know. But it looks at this point in time that they will be stronger. I think it is reasonable at this stage to expect that there will be a kind of mid- to high-single digit up on where they were in summer of 2022, but it's too early to say. We haven't yet finalized the budgets and we don't have an outlook for next year yet. But absent there being any adverse news flow on COVID, any adverse news flow on Ukraine or any other unforeseen black swan event. I think it is very reasonable at this point in time to suspect that we will have a second summer of rising fares. We will lead a second summer of rising fares because we will have materially higher oil prices. We were very well hedged last year into summer 2022. We're reasonably well hedged, but at higher price levels in December 2023. But the outlook on forward bookings, constrained capacity, strong return of transatlantic and Asian traffic to Europe and European holiday at home for the second year in a row means I think we will continue to see significant market share gains from Ryanair in those major markets where we're allocating capacity, Portugal, Spain, Italy, Greece and Central and Eastern Europe. We're also seeing strong growth in Ireland and the U.K. Fly Bs failure over the weekend is not unhelpful. Even though they don't have a lot of capacity, the failure is taking place at airports where we tend to be the -- we're going into Belfast, Birmingham, we're the largest airline. They're not big, but it's reasonably helpful and it will help our expansion this year. So we have very low cost going forward. The unit cost gap between us and all other airlines has materially widened as a result of COVID. And the work we've done during COVID, extending airport deals and working closely with our people and our union partners to restore, pay, lock and agree pay increases for the next coming years and that work continues. So we are on track this year. As I said, we raised the guidance to a range of EUR1.325 billion to EUR1.425 billion. We think, again, absent any disruptions in February or March, we will get to our 168 million traffic figure. And again, subject to getting reasonably close to 51 aircraft deliveries from Boeing, we think we are on track to get to 185 million passengers in FY '24. But we haven't yet finalized our budgets, we know that fuel will be higher. And I think there's a reasonable prospect that this summer, average fares will be up mid to high-single digits. It could be more. But generally speaking, when things look optimistic in this industry, some curveball is sent to keep all to keep our feet on the ground. So outlook is reasonably robust. There are challenges. Fuel will continue to be a challenge. I would caution the any irrational exuberance here. We are going to lose money in the fourth quarter. We don't have Easter in the fourth quarter. We are hiring a lot more and training a lot more pilots and cabin crew. We expect a lot less disruption at European airports this summer. We think the airports themselves, the handling agents and the other airlines will be appropriately staffed when we get to the summer schedule at the end of March. We do think ATC will be a shamble, particularly through Q1. So April, May, June will be very difficult. The French will be engaging in their kind of recreational striking. There will be frequent ATC strikes in France, where there will be HDC staff shortage on Saturday mornings, where the French will not turn up to work. German ATC will also be a real pinch point. A lot more flights are being rooted over German HTC because of the NATO exercise in Southern Poland because Russia being close. And German ATC is not staffed up or geared up to handle these kind of volumes. We're working closely with EUROCONTROL, the flow managers to try to route flights around Germany as best we can. But we think, certainly, in the first quarter and through the first half of the summer, ATC would be a major challenge will cause a lot of the flight delays and disruptions, and we're pushing very hard together with our other fellow members in A4E. There is a simple solution to a lot of this, and that is to separate the upper air space for the EUROCONTROL to take control of the overflights because if you could protect overflights during periods of national strikes. As they already do in Italy and in Greece, that would be a solution that would solve a lot of these problems. And yet we continue to hear the European Commission come up with all sorts of excuses why this can't be done. And it is another example where the European Commission is absolutely useless. They've had 24 years of abject failure on the single European sky. And when you give them a simple solution like protect the overflights during strikes, they won't take it. So we'll keep pushing for some solution on that. Well, that's all I have to add. Neil, do you want to take us through MD&A or highlight some things you want to raise?

Yeah, I will. You deal with the unit cost advantage very well. We're still on track for our full year guidance. FY '23 is about EUR31 per passenger ex-fuel. So very pleased with the cost performance year-to-date. Hedging, again, Michael pointed out that we've increased our hedging into the summer of FY '24, about 60% hedging out to over $90 a barrel. But the other big differentiator between ourselves and everybody else is the strength of our balance sheet. Our balance sheet, strong investment grade, BBB positive outlook. We had EUR4.1 billion cash at the end of the quarter. That has actually increased to EUR4.4 billion today. And importantly, net debt, which is EUR960 million, down from EUR1.45 billion at the end of last year. And that's despite EUR1.3 billion in CapEx. So we've got another EUR700 million in CapEx between now at the back end of March. And then over the next 12 months to 15 months, we'll be very busy paying off maturing bonds of EUR1.6 billion out of cash resources and financing another EUR2.5 billion of CapEx next year and hopefully get the balance sheet back to a broadly net cash, net debt position by the back end of FY '24. I have nothing for it to add, Michael.

Yeah. I think that's a little point we would want to emphasize. We might get to the Q&A. We are planning is this year, we're going to use those cash resources we have to pay down. We have an EUR850 million bond to pay off in March. There's a EUR750 million bond to pay off in August. We will not refinance those bonds. We will pay them down. Where we try to refinance them, even with our investment-grade balance sheet, we'd be looking at financing cost of between 4.5% or 5% currently. We have the cash resource to pay down that debt, and we intend to use the cash to pay down that debt and to fund CapEx. And I think many of our competitors, though, who entered COVID owning a considerable proportion of their fleet have exited COVID, having done lots to sales leaseback. Particularly, I think Weeze and EasyJet. But now most of the fleet is on operating leases. And the cost of those leases will be rising meaningfully through the remainder of this year as interest rates and cost of funds rise, whereas we'll be paying off debt. We own all of our fleet, about 98% or 95%, 98% of it will be unencumbered. And that will be another very significant point of widening between us and the unit cost between us and everybody else. In reality, I think we are now entering a summer where our average fare is lower than any of our competitors' ex-fuel unit costs in Europe. And that is probably explains why many of them are either so anxious to get out of our way or not or withdrawing capacity from markets where they previously claimed to wish to compete with us or in the case of EasyJet, they don't grow at all and have retreated to kind of fortress airports where because of slot restrictions, they are reasonably isolated from competition with Ryanair. The reality is, we are -- have a much lower cost base than any other airline in Europe. We intend to continue to use that cost base to pass on low fares to our customers. By doing so, we'll take more market share from all of the higher cost incumbents, and we have a flow of low cost aircraft deliveries from Boeing for the next three years that will enable us to maintain this reasonably strong rate of growth. And in a market, which we hope will be reasonably profitable as certainly in summer '23, rising airfares will help us to pay for higher oil prices in a marketplace where our competitors are currently still losing money and therefore, under much more pressure to get airfares up. Constrained capacity get airfares up to cover their higher cost. All right. Eddie, I might ask you just before we open up to Q&A, any themes you want to raise here from a kind of commercial point of view or market growth in Europe.

But I think I'll probably start off just on the operational side because we want to make sure that we are as resilient as we were. Last year, we've had a particular focus over the last number of months, not only with our -- ensuring that we are fully resourced on our sales handling operations, but also have kind of a keen attention on third-party handlers so we can minimize as many of the delays as possible. Our punctuality has picked up so that we can -- over the last number of weeks and months, when there has been less capacity. But obviously, we can only control what we can control. So we want to ensure that we have, we are still going to be the most on-time and reliable airline in Europe this summer and that we continue to focus on. On the commercial side, we continue to close out long term deals with airports, and they're in very good shape at the moment, as we obviously try to drive down airport costs, where environmental taxes are still a challenge, which again are outside of our control. On the commercial side, we are, as you've alluded to already, I mean, we can't really see into what's going to happen next summer. But we're happy by what we see in terms of we don't see any particular weakness or any -- in any of the markets that we're in. We had that as we thought was a -- it turns out it's been a short-term blip in the U.K. market, which has now more than recovered. It looks like that was down to short-term perception issues with getting to and from airports, et cetera. So continued operational resilience. We look in a good shape airport cost-wise. And on the commercial side, while it's too early to say about the summer, we're happy with bookings on the booking curve.

Good. Okay. Thanks, Eddie. Okay. Folks, we'll open it up to Q&A, please.

Thank you. [Operator Instructions] And our first question comes from the line of James Hollins at BNP Paribas. Please go ahead. Your line is open.

Hi. Good morning, everyone. Yes, two for me, please. First of all, just on the -- for bare for me to annoy you by talking about some of yields. So let's talk about some capacity. You've talked about 125% of pre-COVID. Just for clarity, is that based on 124 max by then or is it the 114 you talked about on your video? I.e., could it go higher or lower depending on what Boeing do and maybe just your views on what going are up to at the moment? And the second one, you flagged quite a few times the U.S. and Asian traveler recovery. Just wondering if you could just maybe let us know what your normal year passenger proportion would be a base or is it really just about those sort of filling the capacity of the networks? Thanks.

Thanks, James. Yeah. To our summer capacity, we're talking -- that's based on us getting all 124 MAXs out of Boeing, that would be the max growth we deliver. I think at this point in time, but it's a weekly call where it's a daily and a weekly management issue with Boeing. We are due to get 51 aircraft. We think and we're reasonably sure at this point in time that we'll get 45 aircraft by the end of June. I'm not sure we'll get the last five or six aircraft. But to be fair to Boeing, deliveries have clipped up in January. They are doing better on the deliveries that per day. We were struggling. Production was taking about 10 weeks. That looks like it's come down to nine and may come a little bit better may improve to 8.5. But we don't think we're going to get all 51 aircraft. Now the challenge for us is, if we don't get those aircraft by the end of June, we're not reasonably constant. We can’t put them on sales. So we said to Boeing, we're not taking any aircraft. If you don't deliver aircraft by the end of June, we're not taking deliveries. We're too busy, take deliveries in July and August. That will not materially -- if we get 45 in by the end of June, we will hit, I think, 185 million passengers. We may move slightly some of the growth out of Q2 and into Q3. We'll take a couple of extra aircraft to temper, we might do a little bit of a winter growth as well. But if we get to 45 aircraft, we're close enough that I think we'll stick to 185. If we get all 51 aircraft, we could go a little bit over 185, not meaning there may be 186, 186.5 or something. But I think that 45 aircraft and no major ATC screw-up strikes. And those strikes are damaging to passenger numbers. The French we've taken two now, French had a [indiscernible] of 90, with the cancel about 40 flights. Berlin had some handling strike we canceled other 50 flights. Each of those cost us about 18,000 or 20,000 passengers on each of those days. So -- but it's based on those numbers. What are Boeing up to? Boeing are improving. They are -- they seem to have reducing the manufacturing time. Their target is about eight weeks. They're not at eight weeks yet. But we do think they'll remove or eliminate all of those backlogs during this summer peak period, June, July, August, and the situation will get better. We will be much more hopeful than if we are left short a couple of aircraft this summer. We'll pick it up in the winter. And we will have all of the -- that plus the 50 new aircraft well in time for summer of 2024. The reason I think the U.S. and Asian traffic is important is that in pre-COVID times, most of the legacy airlines would -- and I know certainly Lufthansa has said this publicly. 50% of their short-haul traffic in Europe in the summer is long-haul traffic transatlantic and Asians connecting across Europe. And therefore, while we have a reasonably -- I mean, we would not see much Asian traffic. We do see -- I think the transatlantic traffic is a high-single-digit percentage of our traffic in the summer. But it does fill up an awful lot of the legacy short-haul traffic around Europe and in a market where the legacies are either unwilling as in the case of Lufthansa, or unable as in the case of Alitalia, Air France, KLM to restore pre-COVID capacity. If they're filling up what is a smaller capacity during the summer with a significant growth of transatlantic and a return of Asian traffic. It generally kind of -- it adds to that kind of slightly net-net capacity down. Now, I know we'll come out of this and some analysts will do brilliant work researching all the slot filings for this year, say, no, no, capacity won't be down this year. It will be. The legacy guys are still filing for all the slots. But, Lufthansa, TAP are running around and canceling slot within kind of two-week scanning this last system so that they're able to block competition from us, particularly where we would go in and take up on new slots. But we're not able to go and take up those new slots more than two weeks' notice. We've complained to the European Commission about this, particularly in the case of TAP, who are doing it on a kind of structural weekly basis. But so capacity will be down pre-COVID. Demand, I think, for legacy short haul will be up and constrained because of the recovery of transatlantic in Asia. And that will generally mean I think stronger bookings and higher airfares for the short-haul point-to-point carriers, and Ryanair dominate that marketplace. And all goes well, I think, for this summer's traffic and pricing in a market where we will be the only air in operating at 25% more than our pre-COVID.

[Multiple Speakers] yes.

Yeah. No. There's always some issues out there that comes up. No, no, no, we've done a study in the capacity is open on pre-COVID. It won't be. There is no appetite among the legacy guys to restore capacity. They seem to be very comfortable with constraining capacity, particularly in Lufthansa in the German market where the Germans are being screwed for very high fares in a marketplace where they're a great national champion is just screwing them all for much higher airfares and not restoring capacity. But Lufthansa can't help themselves. Next question, please.

Thank you. The next question is from Jarrod Castle at UBS. Please go ahead. Your line is open.

Hi. Good morning, everyone. Just your -- any thoughts, comments on Fly BE, Michael, would be interesting is there anything for you? Don't really see it, but yes, just some comments. And then secondly, there's been some really good results being printed on the packaged holiday side. We've had EasyJet holidays, too. Would it be something you would revisit or are you just happy selling hotel rooms, flights as you're currently doing? Thanks.

Thanks. Two good questions here. I think, slightly it is an interesting situation. Look, they're pretty small. I mean what slightly demonstrate is the incompetence of the CAA's regulatory function. I mean Fly BE should never have been allowed to get back in the air last year, having originally gone cost. They were never properly financed and the CAA, which is supposed to protect consumers by ensuring that you have airlines adequately financed in the UK, continues to demonstrate its own competence in exercising its regulatory bump. However, it has gone. It is material. I mean, as a couple of the airports where we operate, like we're going into Belfast this year to be fair, we're going into Belfast because the government has finally cut the domestic or domestic APD. Their second biggest airport is Birmingham, where we are the biggest airline there, and we will certainly be in talks already with Birmingham about expanding. And I think there will be some additional slots that will come up in Manchester, where I think we will continue to expand and are allocating more aircrafts. But in structural terms, they're so small. It's not going to make a lot of difference. It's reasonably helpful to our entry into Belfast and our growth in places like Manchester, Birmingham. But a lot of what Fly BE was doing was kind of domestic U.K. stuff. And that's not a big market for us, although it's not on help. On the package holiday side, I really don't pay much attention to the package holiday side. I think Jet 2 is a good operation well run. I remain hugely skeptical of EasyJet’s holiday operation. I never believe any of the profit figures they declare. I think it's just a reallocation of yields into some -- into their holiday operation. But be that as it may, I don't -- we're making enough money flying people around Europe short-haul, point-to-point, with a widening unit cost gap over everybody else. The last thing I need to be doing now is setting up an operation, negotiating for bedrooms and accommodation at all these places. It's a different marketplace. If you look at the performance of package holidays in Europe in the last number of years, TUI (ph), Thomas Cook, they've all gone posted various days. They've all need to be bailed out of various ages -- the Internet has completely disintermediated the package holiday business. There will always be a role for some element of package holidays. But for example does very well in Poland, where that market is growing, and the Poles are wedded to kind of package holidays. But over time, the demand for packaged holidays declines as you get more and more availability of low cost point-to-point air travel. And people just put together their own packages. That's not to say there isn't a role for the package holiday business. But I think it would just be a distraction to us continue to execute our business plan, which is to grow our fleet, grow our traffic to 225 million passengers over the next four years and do so in a manner that widens our unit cost leadership over the likes of Weeze and EasyJet and all the others and continue to take meaningful market share from everybody else. I think there's a role in certain niche markets for packaged holidays, but that's all as is. It's a niche market. Largely speaking, if you look at the kind of more mature market in the U.K., Germany, the package holiday business is gradually eroding as the availability of low cost point-to-point, why the -- as Ryanair expands and takes a huge proportion of the O&D market. Next question, please.

Thanks, Michael.

Thank you.

Thank you. That comes from the line of Alex Irving at Bernstein.

Alex, hi.

Hi. Good morning, gentlemen. Two from me, please. First, on staff costs. So you mentioned that you've restored the pay reductions and there four or five year pay deals in place in most cases. Can you please give us an idea of clinical profile of those? And how we should expect your unit staff cost to evolve over the next four to five years? Second question is on your recent reentry into the Amadeus GDS. I mean, clearly, indirect distribution is something you've tried to avoid in the past. Is the decision here basically to target more corporate travel? And if so, how large do you think that opportunity is for you, please? Thanks.

Thanks, Alex. Okay. We've restored to pay deals, but most of those pay restorations and they've all bolded and approved by the [indiscernible] and their unions our ally to four or five year pay deals over the next four or five years. In some cases, there's kind of pay, annual pay increases of 2%, 3% a year, and that would be the profile. What do we think on the labor cost over the next number of years? I think labor costs will edge upwards. We'll have a combination of -- we'll be promoting many more first officers to captains. We've been promoting many more junior to senior cabin crew. The rate of our headline rate growth is slowing down. Even as we take these additional aircraft, the headline rate of growth, which last year was 10% this year, we're 10% then. They begin to ease down towards 8%, 7%, 6%. And I think it's inevitable that within that, we would want to continue to reward our people. And I think, therefore, that the unit -- that unit cost will continue to rise but in a managed way and not something that will disturb our affect margins going forward. But we are committed to working with our people and their unions to raising pay where we think it is weak, it's safe to do so and we are continuing to work so that as we said even before we've rewarded shareholders, we rewarded our people with pay restoration and pay increases. I wouldn't want to get into any more detail not other than profile, other than to say, by the way, we're doing that in a marketplace where we've seen competitors with panicked pay restorations and panic pay increases, who a number of them seem to be short of staff at the moment, certainly crews. Most notably Weeze, who seem to be running around not just Europe or Latin America and other areas just be trying to hire pilots. We don't think to have that issue, but then I think we're a much more stable employer than Weeze proved to be during COVID. Eddie, do you want to give a quick flavor on why we've gone back into the GDSs and what the strategy will be?

Yeah. Well, we were already with two GDSs with Travelport and Sabre. But I think we've increasingly seen with the profile of bases that we've opened across Europe and the connectivity that we've had and the growth in frequencies that business travelers want to access our fares. And a lot of the corporates go through these systems, whereby it manages their expenses. And that's primarily where we're going with Amadeus. It's primarily on the corporate business type customer who doesn't want to necessarily have the complication of going directly to ryanair.com, when it's able to manage the expenses of their employees. So we will -- that will be coming shortly. But we will look at any other distribution channels and some of these are nationally based as well where -- why there's a direct feed into corporate expense management.

Okay. Thanks, Eddie. Next question, please. Thanks, Alex.

That's from the line of Savi Syth at Raymond James.

Hey. Good morning, everyone.

Savi, hi.

Hey. So the first question, I was wondering if you could talk a little bit about fuel efficiency in terms of the gallon proceeds or some of the metrics. I was just curious what you're seeing today and your expectation as you kind of head into fiscal year '24 and maybe the next couple of years, given that you're getting the MAX aircraft in the fleet and what we could expect on that front? And then secondly, I was just wondering if you could remind me on the lease extensions on the Airbus and NG fleet. And if there's any more that you're still working on?

Okay, Savi. Thank you. I'm going to ask Thomas Fowler here as Director of Sustainability, just to talk about the fuel efficiency and what we're doing there. And Neil, maybe you might give an update on the lease situation on -- it's essentially the A320 fleet.

Yeah. So Savi, just on the fuel efficiency on the markets like, I think as we well flagged before. We're seeing slightly better than the 16% fuel efficiency saving on the longer sectors and at the 16% on the shorter sector. So like, it's very hard to give you the exact per [indiscernible] and budget and allocation for like somewhere around that 16% figure as you see the MAXs coming in is not unreasonable. And also, we're also retrofitting the [indiscernible] 737 NGs with the scimitar winglets, which will be about 1.5% fuel save in a year. But most of that work will be done through the winter, when we're doing our maintenance schedule. So we won't see a big number this year, but we'll have a bit more color going into next year is how the maintenance season goes on that retrofit.

Okay. And on the leases savvy, we extended 24 of the 29 A320 leases out as far as 2028. So that's very attractive lease rentals. And we've opportunistically now added a 737 NG former sister ship, which became available again at attractive levels that can mean to our fleet in December. But we're not usually interested or searching at this stage for secondhand aircrafts with the Boeing's coming in a more predictable fashion than before.

Okay. Thank you.

Good. Thanks, Savi. I mean, I think it's fair to say, we're not out looking for additional lease aircraft, but where we are receiving offers. And if the offers are financially are opportunities interesting, we follow up on them. At the moment, we have more than 120 aircraft to 100 aircraft is take from Boeing or 120 over the next three years. And therefore, all of the growth will take place on these low-cost aircraft that are really extraordinarily fuel-efficient given that they're carrying 4% more passengers. Thanks for the question, Savi. Next question, please.

Thank you. That comes from the line of Jaime Rowbotham from Deutsche Bank.

Jaime, hi.

Good morning. Just going back to staff, Michael, are competitors successfully pinching Ryanair pilots by offering higher pay or put another way, is pilot turnover any higher than normal? And if so, how are you addressing it? And then secondly, as Neil said, in terms of overall costs ex-fuel per pack, you're on track for EUR31 this year. What about the year to March '24? Can you get back to fiscal '19 levels of just below EUR30 or do things like labor costs hedging up start to make that tricky? Thanks.

Okay. Thanks. We're not seeing any competitors. I mean, like I think it's kind of a side. A, there's a couple of issues. We operate 737s across Europe, almost all of our competitors are operating Airbus aircraft. So if you like, the inflation of the pilot pinching seems to be within the Airbus fleet in general terms. We are seeing some pilots say that there is certainly a restoration of the Gulf carriers out there looking to hire first officers who should know better, but don't and are attracted out to the Middle East. But the numbers are small And I put that in the context, like we currently have almost 1,200 cadets coming through our system. We've been hiring and training cadets assiduously over the last -- I would say, over the last two years, and so we have far more pilots coming through our system, then we have attrition. In expedited value, we may be a little bit over piloted for the next year or two. But we think that's a sensible place to be because we're expecting significant ATC disruptions, certainly through the first and possibly the second quarter of next year. But no, we see no pilot pinching. And I think to the extent there is pilot pinching is taking place between the Airbus operators. PA Pinching; EasyJet, EasyJet pinching. Weeze and Weeze's pitching. Valaris generally. On ex-fuel unit costs, I mean, again, I think the issue for us is not so much what's going to happen to our unit cost over the next 12 months. I think we will have a unit cost of about EUR31 by the time we get to the end of this year. I think the real opportunity here for investors and analysts, though, is what's going to happen to Weeze and EasyJet and Lufthansa and IAG's unit costs over the next 12 months. They've exploded over the last two years of COVID, principally huge cost inflation on aircraft ownership and lease costs, and that's going to continue to rise. They're generally operating and have airports where they are price takers of both airport fees and the handling charges that are rising materially, and I think you're going to see that continue to widen. I think also if you look at the way Weeze and to a lesser extent, where EasyJet has been out there, panicking over pay levels and recruitment seem to be recruitment changes. I think there pay and staff costs would be rising at a faster level than ours, particularly when we are adding aircraft that carry 4% more passengers and burning 14% or 16% less fuel. So I think the issue for our investors and analysts is not so much will our EUR31 go to EUR32 or stay at EUR31 in FY '24. But it's that the widening gap between our unit cost of EUR30. Weeze currently at EUR46 and EasyJet at EUR75. I think you're going to see that cost gap widen materially in the next year, particularly on aircraft and leasing and ownership side, where we're paying down debt and they're exposed to rising financing costs over the next 12 months. Thanks, Jaime. Next question, please?

Thank you. That comes from the line of Duane Pfennigwerth of Evercore ISI. Please go ahead. Your line is open.

Duane, hi.

Hey. Good morning. I won't ask you another unit cost question though I was tempted. Maybe just on the guidance update from early January, you noted some softening, I think, in U.K. point of sale -- or sorry, on fairs, U.K. point of sale and maybe Ireland. Can you just expand on that a little bit? And have you seen any change or firming since the guidance update?

Yes. Thanks, Duane. We thought -- I mean when we came out with the upgrade on the 4th of March, there was certainly something going on in the U.K. We saw weakness in U.K. outbound and Ireland UKP, which is quite a big market for us. We weren't sure at the time whether there was an awful lot of kind of coverage of -- there were strikes and train strikes and head strikes all over the place in the U.K. That didn't seem to last long. I mean, by the time we got to the middle of January in actual fact, U.K. outbound in Ireland UKP were one of our stronger booking markets. So it seems to have been a kind of a sort of a temporary malaise largely driven by kind of media. Maybe the U.K. hasn't quite got back to work yet, and the media coverage given to kind of transport strikes and difficulties to get in with border force and trained. Now we saw no impact on our daily both -- on our day-to-day load factors. People if there were train strikes for either driving to the airport into the airport anyway. But I'm pleased to say that, that has certainly disappeared through the remainder of January. We now see no market that we could point to as being weak. All markets are booking strongly into the February midterms, the Easter in the middle of April and through the summer, all markets look strong, booking robustly, booking strongly. I made the point publicly that we had a record -- we did our record weekend. We took 2 million bookings in the second weekend in January. And we had a record week 5 million. But first time in a week, we've ever take 5 million -- we've ever taken 5 million bookings. That won't happen every week. But bookings are stronger. Forward pricing is stronger. The kind of caution I would have at the moment is this won't continue. I generally tend to be a bit kind of nervous. When things are going very well, there's usually a curveball and somewhere to haunt us the nature of this industry. But looking around and absent any adverse development on Ukraine, COVID or some black swan event that we can't foresee, it all looks worryingly strong, I think, into April and into this summer, as long as French and German ATC don't [indiscernible] it all up in March, April, May, I think all operators in Europe will be positioned for a very strong summer of traffic and bookings and reasonable fair recovery. The difference between them and us, is that we'll be doing with an enormous unit cost advantage over where we other operate, right? The other operators who are currently loss making would probably be profitable this year. And we would hope to see into FY '24 another reasonable bounce in our profitability because of a very strong unit cost position, a very strong balance sheet and considerable growth in our market shares in all markets all markets across Europe.

That's great, Michael. And maybe just for my follow-up. On the aircraft constraint side and on the kind of delivery pacing side, how much are you being held back into kind of calendar '23 here? So summer of '23 , how much larger would you be, how much larger would these passenger targets be if you had no aircraft constraints? Thanks for taking the question.

Yeah. Really not. I mean I think really not a lot. Like if Boeing can get a 45 aircraft yield, they were originally going on to deliver 51 aircraft by the end of April. If we get 45-plus aircraft by the end of June, then there will be no constraint at all. We'll get to 185 million passengers. We would like to get to 51 aircraft, in which case, we might get to 185.5 million or 186 million. But really, we have it all in there. As long as if Boeing gets forced by aircraft by the end of June, that will be a dramatically better outlook than I think when we were doing the half year numbers in November, I was worried we could be down at around 35 aircraft, and we'd be looking at maybe 178 million, 180 million passengers. So to be fair to Boeing, we have been writing rightly critical of in recent years, certainly, the delivery and the production side has improved over the Christmas and into the New Year period. But it gets very tight and very fraud, very little would cause us to miss the delivery a couple of -- three or four aircraft deliveries missed at the end of June, means we're either canceling flights in July or we can't put those prices on sales. And the critical thing is we need to know those aircraft are coming at the end of May, so we can put them on sales through. If we can get them on sale with four or six weeks’ notice, we'll fill them into July and August. If we can't get them on sale, we won't sell them. But it's really a big FY '25. Thanks, Duane. Next question, please?

Thank you. That's from Stephen Furlong at Davy. Please go ahead.

Stephen, hi.

Yes. Good morning, everyone. Hi, Michael. Can you just talk about future aircraft deals? I'm just thinking more about size of plane. I mean do you think the optimal is the 197 or it looks like the MAX 10 may get, for example, certified, so 230 or whatever plus? And then kind of related to that, I see that maybe it’s for Neil. 20 F as your average lead age of eight years. Is that kind of the optimal fleet age number to be younger or older? And I'm thinking of things like maintenance CapEx, et cetera. Thanks a lot.

Okay. Thanks. I ask you to the second question. I mean, again, Stephen, my response on the size of playing questions, again, it's a bit like we wish do you prefer Airbus or Boeing. I prefer whichever cheaper, which has got the cheaper seat. Size of aircraft, I would always take a bigger aircraft as long as I'm getting a cheaper seats per our per seat price. Now we are -- we broke off negotiations with Boeing. I think it's fair to say they have -- we're back talking to Boeing again about new aircraft, but not in any serious way. I don't expect anything significant coming for the next number of months. Boeing have been distracted up until the end of December where they were going to get the MAX the redesign of the Max 10. Can Congress are going to approve that or extend that deadline that the guillotine deadline at the end of December? I would be of the view we have been surprised -- pleasantly surprised by the performance of the MAX A200. The 197 seat is a perfect aircraft for us in terms of high frequency operation. We get 4% more seats than 18% less or 16% less fuel consumption. I would be very willing to look at going up to the MAX 10, whenever the MAX 10 gets still not certified, whenever it's certified and they're able to deliver it, as long as there's a reasonable discount for the additional 30 seats because the additional 30 seats means we're going to start taking hits on yield where you allocate that aircraft and also probably going to take a kind of hit on turnaround. But I'm entirely -- would be entirely opportunistic. I put it this way, if we got the extra 30 seats for free, I would -- we'll be ordering all MAX 10s going forward. Boeing will probably come some busted a reason why you've got to pay extra for the extra 30 seats and in which case then we would take all we'd be looking at additional A200. So it's entirely down to pricing. Whichever aircraft gets us the cheaper per seat cost would be the aircraft that I would favor. Neil, do you want to take the second question, please?

Yeah. Sure, Stephen. Eight years is a relatively young fleet. In the past, we would have flipped out aircraft at eight years because we just had such big order books back in 2005, 2006, and we were running out of warranties. We're absolutely no difficulty running the fleet older. And in fact, the scimitar winglets, which reduced the fuel for about 1.5%, adds to the longevity of the aircraft. They do get more expensive to maintain, particularly when you're up to maybe 16, 17, 18-year checks. But we've got a lot of very young aircraft in the fleet, nowhere close to that and on the warranties for the next few years. So no, eight years is good, and we're happy to let the fleet age a little bit over the next few years.

Got it.

Thanks, Neil. Thanks, Stephen. Next question, please.

Thank you. That comes from Muneeba Kayani at Bank of America. Please go ahead.

Good morning. On Italy, you talked about your market share of 40%. How does Lufthansa potentially taking the stake in ITA impact the Italian market in your view? And then secondly, you talked about the fares in your comments. For the March quarter, should we expect a similar 14% increase that we saw in the December quarter. We've heard from EasyJet suggesting higher fare increase for the March quarter.

Yeah. Okay. Let me do the first one first. Italy, our market share is actually, I think, is now above [indiscernible]. There's been a dramatic withdrawal, I think, in the Italian market of Weeze through this time last year. We're opening bases in Venice, in Wastania (ph), and one basin Palermo, all of which they've now closed as a kind of cover for. Now they have switched some of those aircraft into Milan and into Rome, where they appear to be now more intent on linking those the two main cities initially with Riyadh, Kuwait City, Reykjavik and all those other exciting medium haul destinations that Italians never knew they want to go to. But I think there's probably a reasonable growth for them in that and it's a market where they don't have to compete with Ryanair. But there is dramatically less capacity on the Italian domestic. And we are actually continuing to grow in those markets. We have this -- so we're adding extra flights into Castilian. We're into Venice. We're adding more aircraft in Naples, in -- we recently -- we're coming close to agreeing airport deal extensions with a number of Castilian and Southern Italian airports, and I think we'll see more growth by us in the Italian marketplace. Lufthansa coming in and acquiring ITA, I think, will have no effect whatsoever on that. I think they'll do exactly what Lufthansa have done in every other acquisition of Sabina, Swiss, Austrian, they will run Asia to feed flights and traffic out of Italy into the two main hubs, Munich and Frankfurt. There will be no new route growth out of Italy to anywhere. And they will be very happy and content to put up prices and shovels loss of Italians. And I think transatlantic and Asian visitors down into Italy using Munich and the Frankfurt hub. I think what they will also try to do, though, is use their lobbying muscle as they have in Germany to try to imposed restrictions or limit the way Italian airports can kind of grow and try to -- they do the usual lobbying games around trying to persuade the Italian government in some way should protect Asia or Lufthansa, have less competition, more slot restrictions, that all Italian airports should charge the same fees as Rome and Milan which is something they pushed hard after the German market as well, which is one of the reasons why the German market has only recovered 70% of its pre-COVID traffic, and German consumers and business are paying much higher airfares. So I think the only impact on the Italian market would be Lufthansa lobbying, but there certainly won't be any ITA growth out of that. And we are allocating another, I think we're probably another 15, 16 aircraft into the Italian market this year, continue to grow the domestic markets. We're looking at more capacity in almost all of our Italian airports. And I think we will get to 50% market share in Italy within the next two years based on current trends. Maybe please, do you want to give us a question let's be cautious now. I don't think -- I think we should be reasonably cautious on pricing up to March. But what are you seeing there on pricing up to the end of the fourth quarter?

Yeah. I think based on what we've seen already in Q3, I think we see total revenue per passenger coming really hope the same kind of percentage levels as they were in pre-COVID I think it's on the basis of what we've seen was a strong new year, which we pretty much January don't what we're seeing for February mid-term looks good, but it's still a lot on what will happen and the close in mid-term book because I think a lot is dependent on.

I didn't understand. We've gone back to the same as we saw pre-COVID.

The same short percentage levels that we've seen in Q3 of [indiscernible].

Okay. So we think low double digits.

Yeah.

Okay. And again, I would caution everybody that is subject to there being no adverse COVID, no adverse Ukraine. And as always, when things look is good, no [indiscernible] Black Swan event that arrive out and over to haunt us. Thanks, Tracy. Next question, please.

Thank you. That comes from the line of Sathish Sivakumar at Citi. Please go ahead.

Hi. Thanks, Michael. Thanks, again. I got two questions here. So firstly, on the load factor, if you look at December came at 92%. Given the seasonality impact that we normally see in Q4 versus Q3, could we expect the Q4 load factor to come in below Q or what is going to see that uptick into Q4, March quarter? And secondly, on the cost, what has been the initial discussions from ATC on proposed increase in charges for 2023? Those are my two questions. Thank you.

Okay. Load factor, I wouldn't get into that kind of -- I would expect to see the load factor in Q4 maybe 1 percentage points or 2 percentage points behind where it was in Q3. Again, we know Easter in April. Most of what drives the load factor in Q3 is you have a strong October, school midterms in October and then most of Eastern New Year falls into December. But we would never get into a quarterly load factor kind of forecast there. ATC charges are going to be up this year. I'm not again – Tracy, do you want to give us a figure on that?

It's pretty much the same as last year. We'll probably see between route charges and ATC, which can pretty much out of our control, is probably close to the overall passenger.

Okay. Now what's that in percentage terms roughly? High-single digit...

We have to care for some of it goes into route chart, some of it goes into airport charges, the ATC forecast will do their port charges.

Okay. Thank you for that.

Yeah. Thank you, Michael.

Thanks, Sathish. Next question, please.

Thank you. That's from Conor Dwyer at Morgan Stanley. Please go ahead.

Thanks, guys. You might will be slow to talk about this yet, but on shareholder returns, are you still kind of talking about maybe splitting that between dividends and buybacks in terms of size, should we use what you guys used to do in terms of relative to free cash flow going forward? And in terms of timing, when you do get that net debt back down to zero, should we kind of be modeling that to be starting pretty much immediately after that? And then also back on the fleet delivery. So you noted you were talking to Boeing again. And I'd just like to hear what are the material benefits that you having in MAX 10, are the part suitably with MAX 8 still significant? And would you consider an Airbus order or to your points, if there's pilot pinching in Europe as a result of the Airbus? Would that keep you away from that going that way? Cheers.

Thanks, Conor. Welcome to the call. Good to see Morgan Stanley back covering both of the sector again. Shareholder returns. Look, we have huge draws on cash this year. We have a bond repaying of EUR850 million in March. There's a EUR750 million in August, and we have subject to Boeing deliveries, we think next year, we're probably about EUR2.3 billion, EUR2.4 billion in CapEx. So I don't foresee any shareholder returns this year. But we do expect with reasonable trading this year to get to zero net debt by the end of this fiscal year. So we're at zero net debt by March 2024. I think we will be looking at some shareholder returns at that time. I think shareholders who did put their hands in their pockets unlike kind of Heathrow shareholders, Ryanair shareholders, we had raised EUR400 million from shareholders during COVID that was critical to what raising additional bond financing, getting through COVID without any kind of state aid unlike our competitors. And I think we're committed firstly, to restoring the pay and agreeing pay increase with our people. Secondly, to keeping fares low for our customers. But then once all that's done and we can see a way clear to having a zero net debt position again on the balance sheet, then we will return to shareholder returns. But it will be -- we're looking at probably the spring of 2024 before we start to consider that. I think in future shareholder returns, we'll be more modest. I don't think we'll do big buyback. I think we're looking at modest dividends on, hopefully, on an annualized basis. If earnings and cash flows allow, I think, the one thing going forward is that we will have a -- no matter what happens, even if we do another order with Boeing, the rate of CapEx going forward will be smaller because the amount of aircraft, the net fleet additions will be smaller going forward in a period from FY '27 onwards. I expect us to be growing at kind of 4% or 5% a year, not 10% a year. And hopefully, that will allow us to have a more consistent dividend stream for our shareholders. Also, we're in a rising interest rate environment, I think shareholders will welcome and appreciate a dividend stream from Ryanair, but I don't see us doing large share buybacks in the future. They've proven difficult in the past. And to make them effective, I think the much better way of returning some -- giving our shareholders some reasonable return would be modest dividend stream going forward. Fleet deliveries going forward. Look, again, I think I've dealt with the Boeing side of the house we look at an air force order, yes, we would, again, like I've always been entirely opportunistic when it comes to aircraft. We would buy whichever aircraft is cheaper Airbus though have a much longer order book than Boeing. Boeing have obviously been disrupted by the grounding of the MAX for a number of years. Airbus have capitalized on that and the fact that due to the trade war between the Americans and the Chinese, Airbus is a beneficiary of Chinese aircraft orders at the moment. The Boeing order book is much weaker. Boeing does need to, I think, signed up a number of -- get some orders in the books for the next couple of years. So it's unlikely. I mean, everything we see at the moment is Airbus are pricing not materially. That's good for us and that most of our competitors in Europe are Airbus operators and paying much higher prices for aircraft than we are for our Boeing orders at the moment. But again, looking at the kind of the second hand or the leasing opportunities, we jumped on the opportunity there to extend '24, the louder leases from 2024 to 2028 because they were fee to do so. I couldn't care less whether we operate a Boeing or an Airbus aircraft, if there's a material cost advantage per seat, then we would order that aircraft. I don't believe that there would be -- would that decision be affected by some pilot plant within the Airbus fleet around Europe. Honestly, Europe, and I think I've been saying this for a number of years, the capacity growth in Europe is stabilizing over the next number of years. You don't have a lot of new entrees, there is no new entrants. There's no interest cost of financing arising -- there will be no startup low-fare carriers because I think Ryanair is the barrier to entry in most European airports. Consolidation, I think you see Lufthansa eyeing up ITA. I think IAG will do a deal with TAP before the year is out. And then I do believe that EasyJet and Weeze, we get marked up as well. And I think you're looking at a much more mature market for air travel in Europe in the next four or five years, where not unlike North America for the last 10 years, it's been reasonably stable capacity and a bit more pricing or upward pressure on pricing within that marketplace. Europe has been the beneficiary of 20 years of deregulation, very low-cost airfares. I mean the airfares across Europe, thanks to Ryanair, are generally significantly cheaper than trading fares from the airports into the city centers. But I think that we're coming to the end of that kind of mad cap capacity expansion and therefore, a much more sensible industry outlook in Europe for the next number of years. But in that, I don't think it makes much difference whether it's Airbus or Boeing. There won't be a shortage of pilots around Europe for the next five, 10 years. And certainly, if you look at the kind of growth in trading we've seen in our cadet programs over the last couple of years, there is no shortage of people willing to sign up to become pilots, recognize that it's a very well-paid job. They do -- they are highly skilled, but they're certainly not overworked with the kind of restrictions of 900 flight hours a year. It's still an average of 18 hours a week. They're well trained. They're well paid, and we're very proud of the pilots, the crews we have in Ryanair. Next question, please. Thanks, Conor.

Sure.

That's from Mark Simpson at Goodbody. Please go ahead.

Mark, good.

Yeah. Hi. Good morning. Just one broader subject in matter. ESG had a very successful conference in Dublin in December, probably more a question for Tom. Just wondering what sort of key developments we could expect this year to further that? Is that kind of additional staff offtake agreement as an example? And then a second part, a second question. Are you as yet seeing cost benefits of this improvement in terms of negotiation with airports in order to kind of further embed your unit cost advantage or do you think that will become an increasing feature in future years.

Okay. Tom, do you want to take the first half? I give an update on our ESG and [indiscernible].

Thanks, Mike. Yeah. Look, I think the one big thing we did December in fac that retrofit of the winglet 1.5% saving on the NG fleet. But I think as we roll forward, looking at more staff offtake MOUs in a couple of more key regions over this year. And obviously, game changer aircraft coming in as well. There's a benefit over the next 12 months, but to be close to the retrofit of the winglets and the safe [indiscernible].

Great. I think cost benefit efforts, I mean, look, we are seeing across Europe, we are in active negotiations with a huge number of airports who have suffered dramatic traffic declines as a result of COVID, either their incumbent carriers that failed or their incumbent carriers that cut capacity and are not restoring. I would point in particular to the airports in Italy, airports in Central Europe where with are coating capacity or not growing [indiscernible] is growing. We have a huge number of Weeze customer airports who are now talking to us, I think recognizing that Weeze are not growing or not able to grow in their markets. The U.K. has been a particular source of growth as well. I mean, we've done very good extension. The core deal, which is with Lufthansa, was done during COVID now runs out to 2029. But across UKPs, we're seeing meaningful growth in markets in Birmingham, Manchester, Bristol, Belfast, Glasgow, Edinburgh, all of whom are struggling to recover their pre-COVID traffic and are turning to Ryanair to deliver that growth. In Spain as well, we've seen a – Ed, do you want to add any...

I mean, like if you see what's happening in Spain, particularly in post recovery there, whereby the Spanish government, there's no doubt are leaning on AENA (ph), with their pushing then charges. But like AENA as ever, are already signaling that they're going to increase them by 2027. But there are -- when you look at what the Spanish government are saying, they're saying, look, Ryanair is potentially valuable in the regions. Not just for tourism, but for connectivity. So you having that pressure downwards. You see what's happened in Portugal, whereby we have had a sort of a -- where the regulator intervened on there. And we saw reductions in charges at Faroe and Porto and Ryanair, we pitch and put extra aircraft in those places, but also then you see in places like Madera and the Azores and Lisbon charges rising where there's no growth going into those. So I think it's happening at not just at an airport level, but also at a national level. But you do see some outliers there in airports that are just hoping that things are going to bounce back and have no idea where that's going to come from because the legacy carriers are not coming back. EasyJet is not growing and it has moved further east. So I think there's still a shakeout to come on some of those airports as well, whereby they'll realize that the traffic is coming back, and they're going to have to stimulate or incentivize Ryanair to come in and fill those capacity gaps.

Okay. Thanks, Eddie. Next question, please.

Thank you. That's from the line of Johannes Braun at Stifel. Please go ahead.

Yes. Hi. Just one question from me. You mentioned those impressive market share gains in many European markets, Italy, Spain, U.K., Ireland. Obviously, two of the largest markets in Europe are still missing in that business, France and Germany. And obviously, totally aware that you allocate capacity in, let's say, opportunistic way. Those two markets are obviously high cost, but they are also high-yielding markets. So especially in Germany with Lufthansa being so restrictive on capacity. I mean, you mentioned that. I'm still wondering when we are kind of nearing that tipping point when the high yield environment in those markets would compensate for the higher costs. And therefore, it would make it worthwhile for you to start allocating more growth to those markets.

Yeah. Good question, Johannes. Two points I'd make on that. Firstly, we allocate capacity where the airports are in those airports who want most, which is the airports who are going to kind of bid for it with efficient growth incentive schemes. And at the moment, that's taking place in bigger markets like Italy, Austria, Poland, Ireland, to be fair to Dublin Airport, who I've been a long-term critical, I had a very good COVID recovery scheme last year, and they're working on an extension of that into this year. And in the U.K. as well, these are major markets where we are taking extraordinary lump sum market share gain. France, we're growing in, but France has always been a particularly peculiar market. It's a market that there isn't much outbound travel. We have increased pasta-based in Beauvais, Marseille to Toulouse. But it's too small to put in there. And our market share gain, while we're gaining market share, it's small. Not back -- we've no huge desire. I think unless you do something significant in Paris or domestic France, you're not going to have a significant market share in the French market. And I have no desire to be in either charge to goal or orally or in the French domestic marketplace. Germany is much more interesting. I mean, we have -- you see the kind of the outgo date, what happens as a result of the lobbying might of Germany, the great German National Champion recipient of EUR13 billion in stage eight, because there was a bit of a COVID crisis. So the German government immediately gives them everything they want. The competition rules are suspended for all German M&A. If Lufthansa wants to buy something in Germany, they're way through Phase 1, no remedies nothing at all. And what you get now is, in the last two years, the EasyJet has significantly reversed out of Berlin. We reduced capacity in Berlin. We closed the base in Frankfurt, Main. And for no reason then Frankfurt Main were unable to extend the five year low-cost growth deal we had with them because they haven't managed to open the low-cost T3 in Frankfurt. I think what you'll see in Germany this year is traffic will remain at about 70%, 75% pre-COVID. A number of the bigger German airports with a notable extension of the tool of [indiscernible] Munich and Frankfurt will see meaningful traffic declines. And I think what will happen is after a year or 18 months of that, the German airports will finally -- some German airports will wake up and realize that Lufthansa is never going to grow at their airport and they'll need someone like Ryanair in there to grow. They will come back to us with growth incentive fees.. But it is very difficult in Germany for airports to do that because German rules and regulations, which are largely written by Lufthansa, make it difficult for airports that are underserved to discount and to engage in low cost or in growth incentive schemes. But it will come because the market will continue to suffer. German consumers will continue to suffer because we've got to keep being screwed by Lufthansa for extraordinarily high airfares. But like if the German suffer for one year or 18 months, that's not the worst thing in the world. At that stage, we'll have completed our growth in Italy. We'll have based on our growth in Spain and others, and we will have additional aircraft. And we'll probably return to looking at growing in the German marketplace. But for the moment, we're very happy to leave it to Lufthansa and Lufthansa to do what it does best, which is crew German consumers wherever they have a monopoly. And I think in 12 or 18 months' time, that will encourage more German airports or a change in the German regulations that will be much more outward looking and a lot less about protecting Lufthansa at some kind of national champion of high fares. But there's lots of growth out there. And we certainly -- Central Europe is a market that is growing very strongly for us. It did get disrupted, and it was the market that was most disrupted by the – invasion of Ukraine. We are very committed to returning to Ukraine as soon as it is safe to do so. We're hiring quite a number of Ukraine pilots and cabin crews specifically so that we can reopen -- we can restore basis in Ukraine if or whenever it's safe to do so when hopefully, the Russians are successfully repulsed from Ukraine. But we have far more growth opportunities that we have in front of us the next four or five years. We could readily deploy all of the 130 additional aircraft we are taking from Boeing over the next three years this summer if we needed to. We don't, obviously. And where there's more and more airports coming to us looking or coming to Eddie on the new routes team, looking for additional growth. So France and Germany can wait. And while they're waiting, I think they will sow the seeds of a much more favorable growth environment for Ryanair expansion there in the next couple of years once they've had 12 or 18 months of stagnation or high fares.

Thanks, Johannes. Next question, please.

Thank you. We have time for one further question that comes from the line of Harry Gowers at JPMorgan. Please go ahead. Your line is open.

Good morning, Harry.

Hi. Good morning. Yeah. Just a quick one on ancillaries, if I can. So obviously, it continues to go well. So any early thinking on how much year-on-year growth, if you can maybe squeeze out of ancillary per pax in year-end to March '24? Thanks.

Yeah, I wouldn't get in too much detail on it. I don't expect there'll be much additional growth in ancillaries on a per passenger basis. We expect ancillaries to continue to grow in line or maybe 1 percentage points or 2 percentage points ahead of traffic growth for the next year or two. We are still seeing customers switching into buying those services like the reserved seats priority boarding. We're certainly beginning to see the start of meaningful growth in duty-free sales on all the routes to and from the U.K. I think that's been an area where a number of airports who are very focused on adding U.K. routes or connecting U.K. routes because the airports can get advantage of duty free. It's one thing I'm always made that when an airport like Heathrow is there looking for further cost increases. John Holland Kaye is very vocal on everything except the benefit Heathrow from these Duty Free sales at the moment. But thankfully, Heathrow is not an airport which we operate. But it's certainly, I think, going to be -- so we would hope to see some additional growth in onboard Duty Free sales on the 40% routes we operate that operate to and from the U.K. But other that, I don't think there's anything significant in ancillaries for the next year or two. And certainly, when we finalize the budget between now and the end of March, we would hope to see traffic grow 10% in the next 12 months and ancillaries probably add another 1% or 2% on top of that. It will be a fairly modest budget for ancillary growth. Thanks, Harry. Next question, please.

Thank you. As there are no further questions, I'll hand back to Michael for the closing comments.

Okay, folks. So thank you very much for taking part of the call. Again, I think we've had a strong Q3. Q4 will be loss-making, which is always helpful. I think we just take some of the irrational exuberance out of this. We are growing strongly. I think Easter and the summer looks good. If I could leave you with any two parting, one parting thought. And that is I would refer you to the slide -- investor slide presentation. We put them on the website. Look at Page 4, which is the unit cost gap between us and every other airline in Europe and how that has materially widened during COVID. I think that widening -- that cost cap will widen further in the next 12 months, particularly as the competition are paying higher financing and lease costs for their operating leased aircraft. And the other side to look at is Slide 9, which is the very strong market share gains. We will continue, we think, to take significant market share. We're going to add between 45 and 51 aircraft in the summer of 2023 in a marketplace where nobody else is adding any capacity. Yes, Weeze are taking some aircraft deliveries. But more -- a majority of that is being diverted towards serving routes into the Middle East, which is a market in which we don't compete. And as long as there are no black swan events and there is a reasonably strong recovery or transatlantic traffic and Asian traffic into Europe in the summer of 2023, then I would be modestly hopeful that we will see a strong first half of FY '24. Easter will be in Q1. We would hope to see a reasonably strong trading environment into Q2. As long as it's not disrupted by French and German ATC, we will be continuing to add capacity. We'll be continuing to keep fares low or significantly lower than any competitor because we're the airline delivering growth. And we would hope that, that will result in a second year of strong operating profit for Ryanair in the next 12 months. If it does, we will then be able to fund the pay increases we're committed to with our crews, our pilots and cabin crew. We will pay down the debt at, the bonds in March and in August. We would hope to get very close to zero net debt by March 2024. And then you have my word speaking as a large shareholder, that we will be addressing shareholder returns in the spring of 2024 as our priority. Thank you very much, everybody. And Neil is doing a couple of investor meetings in London. I think he's in London and Frankfurt and Paris in the next three days. If anybody would like a meeting or to attend one of the group meetings that Sydney and Davies are kindly hosting, please contact us through Sydney or Davies that we try and put you in. Otherwise, anybody wants to come over here and meet with us in the next couple of months, we'll be happy to see you here in Dublin. And hopefully, we can avoid any black swans or any disruption to trading, not just for us, but for the rest of the industry, I think after two years of COVID and then the Ukraine invasion, this is an industry that deserves one or two disruption-free trading years. Thanks very much, everybody. Hope to see you all soon, and thank you.

This now concludes the conference. Thank you all very much for attending. You may now disconnect your lines.