Ryanair Hldgs (NASDAQ:RYAAY) held its first-quarter earnings conference call on Monday. Below is the complete transcript from the call.

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The full earnings call is available at https://www.investis-live.com/ryanair/6a32ca0f9f22d3000ededfd2/mecfr

Summary

Ryanair Holdings PLC reported a Q1 FY27 profit after tax of €538 million, a 34% decline from the previous year's Q1, primarily due to a spike in oil prices and the timing of the Easter holiday.

Traffic grew by 6% to 61.3 million, but revenue per passenger fell 5% and average fares were down 6%. The company maintained a strong balance sheet with a €2.8 billion gross cash position and an impressive 80% jet fuel hedge at $67 per barrel for FY27.

Strategically, Ryanair is opening three new bases and over 130 new routes this summer, and is closing the Berlin base and reducing capacity in high-cost markets.

The company is focused on cost control, with unit costs rising only 5%, and is advancing its fleet strategy with the anticipated delivery of Boeing Max 10 aircraft in 2027, which offer significant fuel efficiency and capacity advantages.

Ryanair is navigating regulatory challenges and market conditions, expecting soft pricing due to geopolitical tensions and economic uncertainty, but remains confident in its long-term growth prospects, targeting over 300 million passengers by 2034.

Full Transcript

Drew, OPERATOR

Hello and welcome everyone to Ryanair Holdings PLC Q1 FY27 earnings release. My name is Drew and I'll be the coordinator for the call today. If you would like to ask a question, you may do so by pressing star followed by one on your telephone keypad. Please limit yourself to two questions. I will now hand you over to Michael O'Leary, Group CEO of Ryanair Holdings, to begin. Michael, please go ahead when you are ready.

Michael O'Leary, Group CEO

Okay. Good morning, everybody. Welcome to the Q1 results call. You'll have seen the results issued this morning. Q1 profit after tax of 538 million euros. That's a 34% decline on last year's Q1 of 820 million, primarily due to the impact of the large spike on oil prices on our 20% unhedged, and also the fact that the first half of Easter moved in. Easter holiday fell into the prior year. Q1 highlights include traffic growth on track, grew 6% to 61.3 million.

Revenue per passenger fell 5%. Average fares were down 6%. Ancillary revenues were flat. Unit costs rose 5%, which is an impressive number. At the unhedged Q1, jet fuel prices doubled to $151 per barrel. FY27 jet fuel remains 80% hedged at $67 a barrel, a development in recent weeks as we took advantage of some price weakness on the forward rates. And we're now 15% hedged for the entirety of FY28 at about $85 a barrel. The underlying growth into the summer continues.

We are operating three new bases this summer: Rabat in Morocco, Tirana in Albania, Trapani in southern Italy. And in total, over 130 new routes. And we're pleased that the final 1.2 billion bond was repaid in full out of internally generated cash flow, leaving the group essentially debt-free. Touching briefly on a couple of points before I hand over to Neil, schedule revenue dipped 1% in Q1 to 2.91 billion as traffic grew 6%, but at 6% lower fares.

Q1 fares, which benefited from a full Easter during April 2025, required stimulation as the Middle East conflict led to consumer hesitancy, concerns about EU jet fuel shortages, economic uncertainty, and later bookings. However, our conservative hedging policy means with 80% of our fuel hedges at $67 a barrel, the group's earnings are largely insulated from periods of extreme volatile oil prices as currently, and this will materially widen our cost advantage over all of our other EU competitors.

As I said, we recently extended those fuel hedges for the first time into FY28, now 15% hedged at $85 a barrel, having repaid the 1.2 billion bond in May. At the quarter end, gross cash was just over 2.8 billion, again an impressive figure after 1.3 billion of debt repayments and half a billion in capex. Liquidity is further boosted by the group's 1.1 billion revolving credit facility which is mostly undrawn. A sensible strategy at this time of the year when cash flows are strong.

We're now 90% through the 750 million share buyback program. The average price is €26.35 per share. However, over the coming year, following the May repayment of our last bond, our funding priorities are one, the Max 10 aircraft. CapEx and the first 15 of those aircraft are coming in the spring of 2027. Shareholder dividends, the completion of the current buyback program, which we think will run out until around the AGM in September, while rebuilding gross cash back to 4 billion, which is where we were when we entered COVID, and we believe that's a sensible number to help us cope with unforeseen eventualities such as COVID or the current war in the Middle East. In terms of touching on fleet, Boeing continues to expect the Max 10 certification in late summer 2026. I spoke to them about two weeks ago and they expect the Max 7 to be certified in the coming weeks and they're reasonably confident that the Max 10 will be certified either in late September or mid-October. They have protected our first 15 delivery slots in the spring of 2027. So we are growing increasingly confident that we will have the first of those aircraft in advance of summer 2027.

And with 300 of these super fuel-efficient aircraft, remember 20% less fuel, but offering 20% more seats per flight due to deliver by March 2034, it leaves us in very good shape long term for cost-efficient growth and we believe profitable growth. As I said, this summer we're growing head top line growth is strong. Three new bases in Rabat, Tirana, and Trapani. But with only 4% of FY27 traffic growth, our scarce capacity is being switched away to those states, regions, and airports cutting aviation taxes, lowering fees to incentivize growth.

The example we've given are Albania, Morocco, Regional Italy, Slovakia, and Sweden. And we are withdrawing material capacity flights and traffic away from high tax, high-cost markets like Vienna in Austria, Dublin here in Ireland, where costs have gone up 10% this year, Germany, we're closing the Berlin base at the end of the summer, and regional Spain. Over the medium term, we expect European short-haul capacity to remain constrained until at least 2030, principally as the two main manufacturers remain well behind on aircraft delivery.

Those industry capacity constraints, combined with our very widening cost advantage, our strong balance sheet, low-cost, fuel-efficient aircraft order book, and industry-leading ops resilience will, we believe, facilitate Ryanair's sustainable profitable growth to over 300 million passengers by 2034. In terms of outlook, FY27 traffic remains on track to grow 4% to 216 million passengers. Much of that growth is front-ended, so in H1 we expect to grow by 6%.

We will cut back our schedules into the winter and we expect to deliver only 2% traffic growth in the second half of the year. Our unit cost leadership continues to widen. We have seen the results reported by many competitors in recent weeks who have seen unit cost increases of high single digit, low double digit. We're this morning reporting low single digit cost inflation. Jet fuel remains 80% hedged to March 27 at $67 a barrel and that helps us to offset a 300 million increase this year in EU and payroll taxes, significant crew pay increases under new multi-year CLAs and higher maintenance costs.

While summer 26 volumes are strong, the booking window remains closer in than last year, which further reduces visibility. Despite a recent slight uptick in volumes and less price stimulation, Q2 pricing is trending modestly down year on year. That is a decline from where we were on the full year results. And we were hoping that Q2 pricing would be general, would be flattish year on year. They're now trending modestly down low to mid single digits and the final H1 fare outcome remains heavily dependent on the strength of close in bookings in August and September.

But they will not be sufficient to make up for what will now be a fair decline in the second quarter, as is normal this year with 0H2 visibility. And so there's no point in trying to provide any meaningful guidance for full year profit after tax guidance at this time. And with that, I'm going to hand over to Neil Saurhan, CFO. Neil, take us through the key points of the MDA, please.

Neil Saurhan, CFO

Okay, thanks Michael. Not a huge amount to add to what you've already said there, other than to guide people back to the fortress balance sheet that we have, you know, quite uniquely 620 fully unencumbered Boeing 737s on the balance sheet. Very pleased at going debt-free back in May. So a rock-solid balance sheet which puts us in a very strong position over the next number of years to capitalize on every opportunity that comes to us. Hedging again well insulated for the current financial year. 80% hedging at $67 a barrel. The key swing factor as was the case in Q1 for the rest of the year is going to be where the 20% unhedged fuel goes. Otherwise, unit cost strong. And I would guide people to slide 4 in our presentation. You can see the gap between ourselves with EasyJet and everybody else is only getting wider. And I'd expect that to continue to be the case particularly as we start to take in the Max 10 aircraft. 20% more seats, 20% more fuel efficient from next year.

So good, good cost control in the business. Some of that was down to having the extra aircraft. You recall we were left short last so we better productivity as a result of having all those aircraft in there equally grew by 6% so we were spreading the costs over more passengers. So it might take up slightly into the second half. We're only growing for 2% but expect very strong cost control on a full year basis. Ancillary solid grew pretty much in line with traffic.

So 24 Euro per passenger delivered in the quarter and the buyback as Michael said, progressing very well. Thanks Michael.

Michael O'Leary, Group CEO

Thanks, Neil. Just before we open up the Q and A, I want to touch on a couple of more recent news events. I want to touch on the Thessaloniki aircraft where we had the fan blade issue and a depressurization event last Friday, 10 days ago. The NTSB is now in charge of the investigation. They have released the aircraft to us yesterday. So we're now engaged in replacing the engine and repairing the skin of the aircraft. That was a dramatic event, particularly for passengers on board.

Depressurization is always a frightening event, particularly when all the masks come down. However, it took place in the climb of the aircraft. All passengers and cabin crew were belted in at the time. So some of the more salacious reports that one passenger was halfway out the window, head out the window, nobody was out any window. They were all belted in. One passenger did suffer minor injuries. One pregnant lady was taken to hospital. They both have since been released.

And we are actively supporting the NTSB investigation into what happened in that aircraft. Initial indications would suggest it looks like foreign object damage to the engine on takeoff out of Thessaloniki. But we don't have, I can't say that definitively. There will be a draft report issued in about 28 days and then a more detailed report. The US NTSB has done a couple of these before. Two of them took place in Southwest, and we think they're the best people to investigate and report on the issue.

The aircraft was 18 years old. It has nothing to do with aging aircraft. The engine had been fully serviced and overhauled, I think, within the last two years. So, you know, there's nothing to do with either age of aircraft or engines. We welcome, in the last week, the Irish government has finally, 18 months after the program for government, passed the legislation enabling the Minister for Transport to lift the Dublin Airport cap. We welcome that it is badly needed given that the cap was 32 million in traffic at Dublin Airport this year is heading for 37 million.

We now call on the Minister to actually lift the cap. Abolish the cap. We do not want it raised as 40 million or 42 million and have to go back to all this nonsense again. Abolish the cap. There is a physical limit on traffic at Dublin Airport. Two runways give you capacity for about 60 million passengers. That should be what the cap is at, 60 million passengers. And we should now get on with growing traffic at Dublin Airport, growing tourism and economic activity on and off the island of Ireland using its main gateway.

We also welcomed the IAEA's provisional recommendations last week. They recommended that Dublin Airport fees be cut from summer 27 onwards on the basis that traffic is ahead of the DAA's projections. Surprise, surprise. Their capital expenditure is way behind what they had included in the previous projections. And we believe that all airlines will commit to growing at Dublin Airport if the high fees at Dublin are reduced. We've already stepped forward our commitment.

We add 2 million seats at Dublin next year. Some of those aircraft will be churned away from higher cost airports like Vienna, like Berlin. But there's no doubt in our mind that Dublin and Ireland is set for a period of rapid new route and traffic growth led by Ryanair. If the IAEA recommendations are implemented in their final report, which we think is due in September. October pricing this summer is softer than we had hoped for. We had hoped that the closed-in bookings would dramatically recover.

Close-in bookings remain strong, but they're not sufficient to make up for the amount of price discounting we've done through, we've had to do in the first half of the year. So we think pricing will continue to be soft. If I were guiding you, I'd be moving to low to middle mid single digit decline certainly through in the second quarter. We don't see any significant fall off. But the resumption of hostilities in the Middle East doesn't help the situation.

Clearly, oil prices have taken off again, but it also creates consumer hesitancy, that nervousness about people traveling and booking. We think the rest of Q2 would be strong, but you know, the second half of the year will need more discounting. Although we expect a lot of capacity to be taken out of the system in the European system in the second half of this year, particularly by our competitors who are losing money hand over fist, are copiously losing money and can't compete with us at these low prices.

But nevertheless, it will be what it would be. The one little bit of upside I would give you on second half pricing is both halves of Easter will fall into March. Easter is very early next year, so we'll have almost all of Easter in March, so Easter will come into this year's Q4, which should be positive for pricing in the second half of the year. And lastly, it wouldn't be a quarterly set of results without some more utterly useless regulation out of the European Union.

The European Parliament, the European Union last week are considering amendments to the ETS legislation which will bizarrely extend the damaging, harmful and discriminatory ETS to places like Morocco, Turkey, and Greece, but not to the middle Morocco, Turkey, and Albania which currently are exempt. They, of course, they don't have the bottle to exempt. It extended out to American, Asian, and other carriers landing and taking off in Europe who still account for the majority of Europe's CO2 emissions.

The one way to fix this utter discrimination of Europeans is to abolish ETS or at least move it into line with Corsia. But no, that would be, that would improve the competitiveness of European aviation and the European economy. And useless. Von der Leyen couldn't come up with anything that would actually improve the competitiveness of European, of the European economy other than giving speeches about it. There's also a missile by the European Parliament.

They are introducing new legislation again which makes European airlines less competitive in order to eliminate, to bring into their family seating and family pricing they now want, or sorry, not the final seating, the carry-on bags. So you've had the lunatics in the European Parliament running around trying to assert the right of passengers to carry two free carry-on bags. Despite that they don't like the minor quibble that they don't, there isn't enough space on board the aircraft for them.

The solution of these geniuses is that we'll now change the advertising so that airlines in Europe in about the next 12 or 18 months will now have to advertise a price that includes the two free carry-on bags, despite the fact that more than 50% of our passengers don't pay and don't want two free carry-on bags. But Europe's airlines will now have to advertise a higher fare than the lowest available airfares. And more than 50% of passengers we know will opt out of those higher airfares by opting out of the second or the free carry-on bag.

So we have yet more useless regulation coming out of Europe. Instead of making Europe more competitive, they now have required the airlines to advertise fares that are higher than the lowest available fares in the system. And we will be extending ETS instead of abolishing it or bringing it into line with Corsia. The Parliament are overselling this as everybody would be entitled to bring two free cabins on board. You won't. Airlines, if we're advertising fares, will have to advertise fares that include the second three or the second carry-on bag.

But we continue to believe that more than 50% of passengers will still opt out of the pre-second carry-on bag because they want the lowest airfares, which is we will no longer be allowed to advertise because those geniuses in the European Parliament would prefer that we advertise higher fares than are available in the system. Welcome to Europe where things never get more competitive, they just get further more regulated. And more useless regulation getting in the way of actually offering people the lowest available airfares.

This is a solution to a problem that doesn't exist. More than 50% of 99% of passengers want the lowest airfare. And there's been no complaints from passengers who want to pay for a, if they wish to bring a second carry-on bag, they're happy to pay for it. But that wouldn't stop the clowns in the European Parliament from inventing a regulation. Anyway, that's my quarterly rant over. We'll now move on to the Q and A session and as everybody says, as we have already said, limit yourself to two questions and we sift through this as quickly as possible.

Back to the moderator please, for the Q and A.

Drew, OPERATOR

Thank you. If you would like to ask a question, you may do so by pressing star followed by one on your telephone keypad. Now, if you do change your mind, please press star followed by two. When preparing to ask your question, please ensure your line is unmuted locally and please limit yourself to two questions. Our first question today comes from Jamie Rowbotham from Deutsche Bank. Your line is now open. Please go ahead.

Jamie Rowbotham, Deutsche Bank

Hi, Michael. Two from me. So, just coming back on the unit revenues for the September quarter. When I read that you'd seen an uptick in volumes and less price stimulation, I thought the guide for summer fares might be nudging up. You've seen the need to downgrade it from broadly flat to modestly down. Can you just explain the apparent disconnect there? What's changed exactly? It seems like better trends but inferior guidance. And then on the unit costs in the June quarter, maybe for Neil, obviously fuel is what it is.

Airport and handling and staff look very well controlled. Maintenance is up. Bless you. That's partly the non-repeat of the supplier compensation, but I want to talk about ownership. It's up about 15% on a per passenger basis. Are there any material one-offs in the DNA that you'd care to pull out? I saw there was a comment about increased NG maintenance and a provision for midlife leap engine shop visits. Thank you.

Michael O'Leary, Group CEO

Okay, thanks Jamie. I'll deal with the revenues and ask Neil then to deal with the cost. Couple of things on the revenue side. Yeah, look, we have been saying all from the start of the year, we started before the war kicked off in Iran at the end of February. Pricing into the summer looked like it was going to be up mid single digits. Pricing in Q1 was always going to be slightly down, partly because the first half of Easter moving out, but prices weakened once the war in Iran started in February, March, nothing significant, but we've had to open up or keep stimulating forward bookings.

Close in bookings and the booking pattern is moving later. The people are making up their mind to travel slightly later and then pay slightly higher fares. But it's not sufficient to make up the discounting we've had to do or the discounting we do well in advance. We go into every month typically with about between 75 or 80% of the seats sold on the first day of the month. Therefore we have only 20% of the seats left to sell during the month. When we came out, when we had this 60 day ceasefire about a month ago, we did notice and now that part of that is also we're moving into the summer schedule.

We did notice a little bit stronger on the close end bookings. The pricing is a little bit better on the close in bookings but it's not sufficient to make up for the high bar. The Volume of discounting. We've done well in advance. We did say at the end the full year results in May, we were hopeful that Q2 would be flattish. It's now moving down low to mid single digits. I would personally think it's moving closer to mid single digits to low single digits.

I would. If it's going to be weak, it's going to be weak. We're now well into the peak period of July and August and I think it is trending weaker rather than stronger. The ceasefire has broken down. The US has run seven or eight nights of bombing in Iran. We are where we are. I think the people, you know, largely the decisions on summer holidays have been made. The one other one that runs across that is the World cup does have an influence on things as it has had before.

And, you know, I think there will probably be an uptick now that it's over. People do tend to slightly postpone their travel arrangements until those competitions are done and out of the way. But again, I don't see any recovery in Q2 pricing now. I think it is heading for down mid single digits on last year and if it is, it is and we just get on with it. I would not be optimistic for the second half of the year with the two. You know, I think pricing is going to be weak.

It will need more price stimulation. The only two things that change that are there are going to be meaningful capacity costs coming out of competitors. Aer Lingus, for example, last week announced significant fleet reductions that they're going to take their capacity down by 6% from the winter. You have the Easyjet M and a situation going on and at the valuations that they're currently talking about there, there will have to be some meaningful, you know, I would say capacity constant easyjet if whoever acquires it at those kind of valuations.

And then we are waiting to see what Wiz do apart from losing money heroically. But given that neither EasyJet nor Wiz have any, are not particularly well hedged, once you get into the third and our third and fourth quarters of the year again, we expect meaningful capacity cutbacks. And then you have all of Easter at the end of Q4, which will give Q4 at the back end of the year a little bit of a lift. But I would be bearish now on pricing and we will simply revert back.

There's a war going on in the world, there's a lot of uncertainty and therefore it's going to be price passive load factor active. We will hit the traffic targets of up 4% on the year. And the pricing would be whatever the pricing will be. We are much more focused during these periods on taking out more costs. The airport churn negotiations are going particularly well. We're looking forward to delivery of the Max Tens, which now we are more optimistic about in the spring of next year.

And those aircraft will give us some capacity additions in the summer of 27. But on aircraft that are 20% more seats and burn 20% less fuel. Neil, you want to take the unit cost, please?

Neil Saurhan, CFO

Yeah, sure. Good morning, Jamie. I think you're happy enough with the staff and the airports and all of those costs which before particularly well over the first quarter, the unit cost ex fuel just up 2% on the ownership. Nothing that we didn't flag with the full year numbers in May. We flagged at that stage that we're starting to accrue up to the amortization for the leap on the A200 midlife hospital visits. And so you're seeing the start of that coming true. Equally just given that the NGs are a bit older, the duration between checks is more frequent. So just reflective of that. And then of course, we've 29 additional aircraft in the fleet this summer that we didn't have at the same time last year. Do I expect it to continue at this pace for the rest of the year? No, it'll slow down a bit as we go out over the balance of the year.

Drew, OPERATOR

Okay, thanks, Neil. Thanks, Jamie. Next question, please. Our next question comes from James Hollands from BNB Paribas. Your line is now open. Please. Go ahead, James.

James Hollands, BNB Paribas

Thanks very much, Michael. Just giving you an opportunity for another rant. We didn't have much comment on the airport queues. I think they've been quite widely published in the media on that. Do you think there's any sign that it might be okay for the rest of the summer? Is there. Are there any countries lifting or pausing the EES regulations which might help? And I guess I'm asking, do you surmise there's some weakness around that in terms of the bookings as well?

And then. And on Neil, just to follow Jaime's question, do I mean he did less than around about 2% ex fuel cost per passenger in Q1, you say it's upticking a little bit in H2 is around 2 to 3%, a sensible number for the full year? Thank you.

Michael O'Leary, Group CEO

Thanks, James. I don't think airport queues are really that. That significant. Certainly in the second quarter, we have identified about 15 airports, mainly in Portugal, Spain and some Italy where the border control are understaffed and there are significant queues. All of the European countries have the power to de. Suspend these EES requirements until October, which is a more sensible time to implement them. The Europeans misdesigned this system.

It should have been done online. You know, when you're processing all this online, only the Europeans would invent shit like this where you need border guards doing one finger typing into systems at airports coming into the summer period. So it's another European screw up. But is it going to stop people traveling through the peak summer? No, it isn't. And then will the queues ease off once you get out into the third and fourth quarter? Yes, they will.

But the EEs, if they really want to control this, this is a system should be moved online. The airlines have all the passport details, we have all that information, you know, and it should be something that. Not beyond the wit of man or mankind. But again it's just another example of where Europe under useless von der Leyen can't organize a piss up in a brewery, are hopelessly inefficient and you know, we'll talk all day and all night about being competitive while really introducing more regulation to make us less competitive.

But no. So airport queues are frustration, it's not something that is unheard of in Europe at this time of the year. And the alternative meters are stuck in Dover for longer isn't going to make any difference either. Second half of the question, Neil.

Neil Saurhan, CFO

Yeah, James, good morning. Yes, it will tick up a bit in the second half of the year, particularly as we get towards the back end and we're getting ready for the summer of 2020. We didn't give a guide other than I said at the May numbers. You know, it should be marginally below mid single digits if you want to be prudent in your. In your numbers. Probably 3, 4 is a better guide than 2 3, but it won't be above mid single digits.

Drew, OPERATOR

Thanks, Neil. Thanks, James. Next question please. Our next question comes from Alex Irving from Bernstein. Your line's now open, Please proceed.

Alex Irving, Bernstein

Alex, hi, good morning. Two from me, please. First is on winter capacity. How do you see that evolving for the sector and how do you see the probability that we get a meaningful capacity reduction at competitors? Second one, I want to come back on easyjet where you talked about the likelihood of capacity cuts. If there were any parts of EasyJet that were to become available for sale. Would there be any elements, say slots or an Airbus sub fleet that might be of interest to Ryanair.

Thank you.

Michael O'Leary, Group CEO

Okay. I think it's an opportunity to ask Eddie Wilson, Ryanair DAC's CEO. Eddie, do you want to give us an overview on winter capacity and likely competitor cuts?

Eddie Wilson, Chief Executive Officer

Yeah, I mean you're looking at the moment there of you look at the market that it'll just be winter capacity would be up at about 5%. We don't think that's realistic. I think that's likely to be pared back significantly. Ryanair, we will be growing by around 2% this winter and we've some of that has been driven by the fact we'll have two, we'll have two aircraft just due timing that will still be, will be in maintenance. We'll have two less aircraft actually this winter. So it's what we do. We do expect to see our competitors pull back that we can't see any way that the market is going to grow by 5%. We will continue how we allocate capacity during the winter as we've had in previous years, as we have pared back capacity in the shoulders in November and in late January and then sort of micromanaged the capacity growth in close to Christmas and the October bank holiday.

Michael O'Leary, Group CEO

Yeah, so I mean we are flexing our capacity expanded this winter. I mean some of that is because 20% of our fuel is unhedged anyway. But we're still going to deliver 4% traffic growth for the full year. Just to touch on like, you know, the EasyJet valuation is a fairly, you know, I think they, the board of management done a good job with the valuations that are currently on offer. But if VC money comes in and pays that kind of money for EasyJet, I think it's inevitable that they will want to do something to monetize some of the fleet or the order book or they certainly want to be get.

They'll have to be getting airfares up at their fortress airports if they're going to get any kind of VCR return on. Currently the market cap is about 5.5 billion sterling whiz will just blow their brains out this winter. They don't have any fuel, significant fuel hedging in place. They have expanded capacity far too much this summer. You know, some of that is driven by, you know, the only way you can keep the Ponzi scheme afloat is to keep taking aircraft and then doing stated lease packs and recognizing that through the P and L, you know, in the full year results they reported a profit of a million.

But with 630 or 640 million of sale and Leaseback profits, supplier compensation and forex gains. Anything else you could think of? The underlying business therefore lost 640 million the full year when oil prices were $70 a barrel. God bless them when oil is up at $130 or $140 a barrel. So we think it is inevitable. Air Baltic are floundering around in Eastern Europe, may or may not survive. We think the government will keep them alive. There's elections coming up in Latvia in October, November, I think.

They were out this morning saying that they're talking to a number of investors. We do think Airbaltic will probably be acquired by Lufthansa who already own 10% of it. But the consolidation process will play itself out and I think we have to look today on the quarter numbers. The immediate short term outlook is weak, pricing is weak. We see that as an opportunity to take out unit costs and to materially widen the unit gap between us and competitors on unit costs.

But over the medium term, our growth and our market share gains are accelerating and that growth will take place on aircraft that will be materially more profitable for us. What bits would be of any interest in e bits of EasyJet came up for sale? No. It would be the simple answer if you take the various bits, you know, EasyJet aircraft orders. No, their Airbuses wouldn't be. They wouldn't be particularly cheap either, so it wouldn't be attractive to us.

Ejet holidays came up for sale. No, we're not believers in that holiday model, but really the holiday model is just stuck onto, you know, easyJet Fortress basis. What else is there? I ultimately believe if EastJet is bought by, you know, kind of a VC by a VC entity, the only way they will finance over time would be to sell off the order books, monetize the fleet, there'll be more sale of leasebacks and then in time, I believe the EasyJet business will be sold off to legacy carriers in Europe.

Certainly Air France, KLM would be very interested in the EasyJet base operations in Paris, Schiphol and Switzerland. And I think the Gatwick operation would be of great interest to the likes of IAG or Jet2 or somebody else. I think if EasyJet does get done, it will kick off another round of. I think the M and A will bring people like Jet2 and Wiz more clearly into view for the MA businesses and ultimately will speed up the inevitable consolidation of European airlines into four large carriers.

Lufthansa family, the BA family, Air France family and Ryanair. And we intend to grow organically, not By M and A. Thanks, Alex. Next question please.

Drew, OPERATOR

Our next question comes from Savanti Sith. From Raymond James, your line's now open.

Savanti Sith, Raymond James

Please go ahead, Savannah. Hi.

Savannah

Hey, good morning. Two questions. Maybe on the EU passenger rights update you mentioned, just curious if there are any technology changes that you kind of need to make to be able to show maybe both fares on your webpage and just if you expect any kind of demand impact from having to show the higher fare and then on the EU ETS changes, just curious, if it was to be in place this year, how much more of a step up would you see versus the 300 million you were expecting? Thanks.

Michael O'Leary, Group CEO

Okay. On the passenger rights, I mean at the moment the way the legislation is framed is there's nothing we could do about it. The airlines now have to advertise a fare that includes two carry on bags. Even though that's a fare that will apply to less than 50% of passengers booking on board our flights. Passengers 99.9% will still get on go on our website. What's the cheapest airfare they'll see? We will put lots of banners up on those airfares. So we'll advertise a fare that has two free checked in bags. But click here and you can take €60 off your fare by opting out of the checked in bag. The idea that those morons in the EU parliament would have Europe's airlines advertising not advertising our lowest available airfares is just the kind of stupidity that you get in Europe. But that is what the regulation says. Of course it's being missold by idiot parliamentarians out there. Oh you cannot.

You're all allowed to bring two free can bags on board a plane. Now two free gambies do not fit on board a plane and certainly not a 737 or an A320. And never mind the turboprops around Europe. So it's just again, more idiot regulation that makes Europe less competitive. And you want an example of what makes European air travel less competitive? ETS is right up there. We are the only economic block in the world where we are penalizing our own citizens with these ridiculous environmental taxes. The Americans don't do it. The Asians don't do it. The Gulf carriers don't do it. The Africans don't do it. Latin Americas don't do it. But the Europeans do.

And you know, while Useless von der Leyen is wandering around the world giving speeches about making Europe more competitive while the Draghi report continues to gather dust two years after its publication with not one recommendation implemented. The only thing they've managed to do now is to consider. They don't like the idea that Albania, Turkey or Morocco and neighboring countries don't charge Etsy, so they'll extend ETS to Albania, Morocco. I suspect they'll have trouble extended to Turkey, particularly with NATO. So I think even this mightn't get off the ground. The real way to fix both of this, the stupidity of only taxing the Europeans. If you're not going to extend those taxes to the Americans and the. And by the way, I have no difficulty with. We should extend it to them, you know, if you want to be.

If you're really concerned about climate change and flying, everybody who lands and takes off in Europe should pay their fair share. But of course, the Europeans design a system that only the Europeans pay an unfair share and the Americans, the Gulfs and the Asians pay nothing at all. We exempt them. But if you're going to exempt them, then you should also exempt the Europeans. We believe the better way is to move everybody on to Corsia. Corsia is about 85% cheaper than ETS. And then at least you would be reducing the cost of air travel for Europe's citizens, for families going on holidays in Europe, and you'd have a more level playing field in Europe. But that would confuse the European Commission, who'd be too busy giving speeches about competitiveness while doing absolutely no. In fact, they go the opposite way and make Europe less competitive with these bullshit changes on how what airlines can advertise at their lowest fares and the bullshit extension of ETS to neighboring countries as well. They've drawn a line where in 5,000 square 5,000 kilometers from Frankfurt, which conveniently excludes Asia, America, everywhere else, but catches borough, Turkey, Albania, Morocco and maybe Egypt as well, you know. So congratulations.

Another complete up by the European Union. When Mrs. Von der Leyen is promising competitiveness, all we get is more. More idiot regulation. Next question, please.

Drew, OPERATOR

Thank you. Our next question comes from Harry Gowers, from J.P. Morgan. Your lines now, please. Go ahead.

Harry Gowers, J.P. Morgan

Yeah, morning, Michael. Morning, everyone. First question, maybe you could just give us a little bit of an update on the CLA's with the unions. How to think about modeling that on the staff cost line. And was there already some impacts from that in the Q1 or it doesn't really hit the P and L staff costs yet. And then second question, just coming back on those baggage rules coming into place from the EU on the carry ons, which, you know, Michael, you covered quite eloquently already.

But just from your perspective, do you expect actually any financial impact on Ryanair from that, whether it's on the revenue line or more kind of operational drag from. Yeah, trying to sort the bags out. Thanks a lot.

Michael O'Leary, Group CEO

Okay, I'm going to ask Eddie maybe give you Update in the CLA. And then Tracy McCann the likely impact of the baggage rule.

Eddie Wilson, Chief Executive Officer

Yeah, good morning, Harry. Yeah, on the CLA negotiations, you know, we're almost through the summer now, and the largest markets, like on Italy, for example, was completed earlier this year, both for pilots and cabin crew and subsequently the other. There's a number of other jurisdictions where their deals expired in April. So two of those were completed in Romania and also in Denmark, and they extended both the pilots and cabin crew. And there are two then that are still in negotiations but are reasonably well advanced, one on the pilot side and one on the union or one on the cabin crew side, one of those currently under ballot at the moment. So there are other.

The vast majority of the CLA's will mature next April, April 27, but there's already a number of unions that are looking at feeling out as to whether they could potentially go early and we would be minded to engage in negotiations on that. So it's gone. You can never say never in terms of industrial action. But I mean, like, we're almost into August now for. And we're still in negotiations for the last two. And as I said, the cabin crew. One has got that one. I don't want to comment on the individual. One has gone to ballot. The other one is still on the pilot side, is still involved in negotiations. And so we will. So the cost of those have actually come through. And earlier this year as well, we would have done the Spanish cabin crew as well, but that was from a previous round as well. So I think there's a lot of realism out there as well at the moment.

You know, like there are, you know, pretty much no opportunities in places like the Middle East. Mind you, there are a small number in Riyadh Air where they don't actually have aircraft. So that's particularly attractive for a small group of people who want to be paid and don't fly. But there is, you know, when you see the M and A activity that's going on in places like EasyJet as well, and what's likely to emerge this winter, there's probably more of a focus on, you know, people really valuing what they have here in terms of promotional opportunities and also the sort of the security of employment on, you know, a. Well capitalized airline and people know exactly what's happening in terms of deliveries that are coming over the next number of years.

Michael O'Leary, Group CEO

Okay, thanks Eddie. Tracey, we think the new baggage rules, how will it impact revenues?

Tracey McCann

So we pretty much think it's going to be revenue neutral. We've already seen it in Italy and it's had no impact. So revenue neutral for us. And just to add probably on Eddie, on the staff costs, as Neil said earlier, we will see some of the CLAs coming through later in the year. What's already been done is in the costs and furthermore as we do the CLA for the remainder of the year we will see some staff cost increase.

Michael O'Leary, Group CEO

I should say on that we are some of the discussion. There have been some delays in some of those clashes with unions looking for backdated to the 1st of April. We will backdate nothing. Our principle is always you do the deal. Whenever you do the deal, we'll implement it. But you're not getting backdating. You know, we close the accounts for the first quarter that date just on the baggage rules. I think it will change probably the way we advertise.

We probably won't do as much price advertising because not much point in having a, you know what would now be our kind of €29 seat sale if thanks to the idiots in the European Parliament we now have to include the second checked-in bag. Our €29 seat sale would now become an €89 seat sale which doesn't sound particularly cheap in European terms. So I think you'll see us doing much more advertising, not focusing on price but finding other ways to deliver value.

And the website will, all the website displays will show this mad pricing with the second carry-on but with big banners you can opt out of €60 of this fare. Feel free to opt out. Actually, we think more and more people will opt out, but the same numbers or more will opt out when they think they can save €60 and therefore we think no impact whatsoever. There will be some disappointment among consumers where in some cases they've been promised by parliamentarians or some of the more misguided consumer journalists that oh, you're going to be allowed to bring two free bags on board.

You're not because they won't fit. There is an interesting what happens actually when you know the plane is now more than half full. Do we still advertise price? The answer is probably no because you know, if in theory that the first 50% of people had booked the fare that had included the last 50% of people couldn't get on that plane with the bringing a free second carry-on flight because there isn't room for them but detail or factual detail that has never bothered parliamentarians when they're reviewing EU261.

It's always here just invent some new bullshit regulation that passengers don't need and are not interested in, but which put up the advertised cost of air travel around Europe. Congratulations to the European Parliament. Another fucked up regulation making Europe less competitive instead of more. Julius, any you want to answer that? On the insightful presentation of our friends and colleagues in Europe in the parliament on the commission, it's hard to top this.

Julius

But I think that advertising true prices is going to become the norm in the industry. So I think as you go through the booking process and you see your flight, I think you'll be shown two prices. One with the bag, the other one without the bag. And then when the airline sells all the space in the overhead lockers on a particular flight, it's going to have to be the lowest fare that's going to be advertised. So there'll be no impact as.

Michael O'Leary, Group CEO

Okay, thanks. Thanks, Julius. Next question please.

Drew, OPERATOR

Our next question comes from Stephen Furlong from Davie. Your line's now open. Please proceed.

Stephen Furlong (Equity Analyst)

Hi Michael. Maybe it's Farnborough just the day that's in it, but just comments about Boeing and Airbus talking about looking by 2030 to fund the new jet program. Just I know you talked about the Max 10, just general comments about that. And second thing then just while I'm talking about the supply chain, maybe just talk about the engine shops and where we're at on that. Thank you.

Michael O'Leary, Group CEO

Okay, touching briefly, new jet program. Look, it's all nonsense, you know, but that's what they talk. A lot of nonsense gets talked at rubbish gets talked at air shows. You know, Boeing and Airbus, you know, basically they're at the foot in the foothills of delivering the A3, the 23, 21neos. Boeing haven't even certified the Max 7 and the Max 10. These are dramatic technological revolutions in air travel. I mean these are aircraft that carry 20% more seats and burn 20% less fuel.

So from a climate, environmental, operating efficiency, everything there, these are brilliant aircraft. These are the aircraft that are going to fund the next 20 years of air travel. There will not be a need for new jet program for probably another, I think probably the end of the 2000-40s. You might be heading for 2050. Boeing and Airbus need to actually monetize these. They put a huge amount of R and D into these. Boeing's balance sheet, you know, has suffered from the years of the max grounding, etc. Etc. They need to rebuild their balance sheets. Both Boeing and Airbus. The technology now I think is what we will have for the next 15 or 20 years. And you know, the challenge is going to be the engines, not the airframe. You know, all this nonsense about hydrogen aircraft and electric fucking propulsion systems and all that, it is just air show rubbish. It will not be there in my lifetime and I expect to live well beyond 2050. But I think what we should be very happy with is that the next generation of aircraft, the Airbus 3, the Airbus NEOS and the Boeing Maxs, will I think make those surviving or consolidated airlines that are still standing in the early 2030 very profitable for the next 15 or 20 years. And the last thing we need is Boeing and Airbus blowing their brains out developing new engine, new aircraft, new jet programs, make money for the next 15 to 20 years. Repair your balance sheets, improve the quality of production, certainly invested and improve the engine technology because as an industry we do need to decarbonize, but we don't have any alternative to jet kerosene. So.

But let's have more engines that carry, you know, more propulsion systems that will enable us to carry more passengers while burning less carbon. Engines are going to be a real challenge or certainly engine maintenance, engine costs are going to be a real challenge for the next five or ten years. So GE producing bumper results again over the weekend. Margins rising into the mid 20% in Q1, about 2.5 billion of net profits. Engines are also going to be a real area of competitive advantage or disadvantage in the air and industry.

Those airlines like Ryanair, who will in the next two years have our own in house MROs will have a significant advantage over the rapidly escalating cost of third party engine maintenance and third party engine spares and power. And again, it's one of the reasons why we don't need a new engine. New aircraft, new jet programs, engine cost of engine maintenance and engine overalls is escalating rapidly. There is a worldwide shortage of capacity in that sector, partly to do with the Pratt and Whitney repairs, but just because both the manufacturers are not willing to spool up MRO capacity to meet demand, they want to increase prices of that MRO capacity.

We're very happy where we are. We are making significant progress on our two engine MRO shops. We've put in place a supply contract with CFM who we are essentially partnering with on our two MROs. They want us to set up these two MROs. They know we won't compete with them. We're not going to do third party engine maintenance for anybody else. But we will have a material cost advantage by doing our engine maintenance in house in the same way that we've had a material cost advantage by doing all our airframes in house for the last 10 or 15 years.

And that will continue. So I realize it is Farnborough this week. I realize everybody would be talking a lot of shite about new propulsion systems. Da, da, da, da, da. Until somebody gets to Star Trek travel and you start beaming people around the world. Beaming people instead of flying them. I think we're dealing with 737 Maxs and A3 Airbusneos for the next 10 to 15 years. And these are going to have be transformative certainly of Ryanair's P and L and our balance sheet.

Next question, please.

Drew, OPERATOR

Our next question comes from Jared Castle from UBS. Your line's now open. Please proceed.

Jared Castle (Equity Analyst)

Thank you. Morning, everyone. Michael. Neil, you've hedged 15% of full year 28 now. So I gather it's not a stop process anymore for 28, or is it still a little bit of a start stop, depending what fuel's doing. If you could give any color in terms of maybe the 28 view on hedging. And then another potentially contentious topic. But Michael, have you changed your views on Wi-Fi on board and Starlink given, you know, another low-cost airline? Wiz has decided to put it on board.

And you know, I guess the way they've looked at things from an economic perspective.

Michael O'Leary, Group CEO

Thanks, Jared. We could be here for a very long time agreeing or discussing whether fucking Wiz is a low-cost airline. There aren't any other low-cost airlines in Europe. There's only Ryanair. Nevertheless, I'll come on to that. Fuel. Look, fuel prices are going to be very volatile for the next, I think right up to the November midterms. We are going to. My view is we'll dip in and out. We thought when it got down, fall rates got down to $85 a barrel.

It was a sensible place to start. We hoped we would see it drift further down below $80 a barrel. But obviously to no great surprise, the ceasefire broke down. And fall rates into FY28 this morning are above about $91, $92 a barrel. So I think would expect us to be opportunistic, dip in and out. I don't expect that by 28 we'll be able to get down to $67 a barrel, which is where we are this year. But we'll be opportunistic. I'm going to ask Tom Fowler just to give you director of fuel and sustainability give you some his view on that and then just Wi-Fi on board.

Jared again we believe Wi-Fi on board will be a significant benefit for consumers but only when it's free and we are the current technology militates against it being free. You have to kind of put there's a 1 or 2% fuel drag. It comes as no surprise to us that someone like Wiz would be offering free Wi-Fi on board. It'll just be another loss making right away and part of the deal is they've given away all the revenue to the supplier of the Wi-Fi.

So it's just another stupid PR kind of stunt by them, you know. But people in drowning shower people going down on the fucking Titanic were still playing violin as well. I wouldn't. We would not be rushing to copy anything Wiz do. In fact we probably do exactly the opposite. We do think starting system is very good. I also think the Vodafone system there are a number of very good systems out there but I would wait until the technology they can fit the areas either in the nose cone, the baggage hold or the forward galley or the rear galley or something.

When there is the fuel penalty then I think we will be honest and we will be keeping the revenue that will or the revenue opportunity that will arise from Wi-Fi and there will be revenue opportunities even when it's free. But would we be copying some of our competitors who can't shoot or walk straight and chew gum? No. Thomas, Fuel give us a view on your general outlook and yeah, look, I

Tom Fowler

I tend to agree with Michael. Like I think we'll be more opportunistic in the hedging Jared like we'll go in when we think the price makes sense, like when we see talk to ceasefires. I think it is going to be volatile over the next few months. They're going to be a deal or they're not going to be a deal and we just will be ready to go in and do the hedging as we see fit as we did in the last few weeks by doing 15% of each quarter for FY28. So I think that's the way we're going to manage it for the next couple of months that we see some normality in the oil market. It's just a very volatile market at the moment.

Michael O'Leary, Group CEO

Tracey, you want to add any on that?

Tracey McCann

No, probably the only other thing is to say we have hedged some of the OPEX forward to cover ourselves as well. So we've about 18% of FY28 OPEX hedged as well at 120.

Michael O'Leary, Group CEO

Okay, thanks, Jared. Thanks, Tracey. Next question, please.

Drew, OPERATOR

Our next question comes from Maneba Kyani from Bank of America. Your line's now waving.

Maneba Kyani (Equity Analyst)

Yes, I wanted to ask firstly around jet fuel supply. I think Neil was on TV saying there's no shortage but given the re With the escalation in the conflict, how are you thinking around jet fuel supply and any learnings from the last couple of months here on that? And then just wanted to go back on your comments earlier, Michael, around bookings. Could you give us a sense of what portion of August and September is booked right now to understand the visibility on your guidance of this modest decline year on year on fares for the second quarter and into the second half?

Why are you expecting pricing to decline and price stimulation if airlines start cutting capacity? Wouldn't that be good from a pricing perspective?

Michael O'Leary, Group CEO

Thanks, Maneva. I'm going to hand over the first section to Tom Fowler and then I will deal with the bookings. Tom, jet fuel supplies, do we think there's any issues?

Tom Fowler

No, look, we haven't seen any issues today. I think as Neil would have said this morning, like we have good visibility now out into the end of August in most locations and in some other countries out to the end of the year. And I think that supply situation, okay, what's escalated but supply starts to fall off towards the end of September. Our demand starts to fall off towards the end of September as we get into the winter program. So would be hopeful to see reserves fill back up providing it doesn't escalate any further in the Middle East.

But at the moment we don't see any issues neither coming our way in. Most locations aren't usual pockets of stuff we see that hasn't impacted anywhere. And if you remember many of the previous conference call, remember the vast majority of Europe's jet fuel doesn't come through the Gulf. You know that supplies Asians. It applies the Asian markets. All of Europe's jet fuel is coming from the Americas, West Africa, Norway and even Russian imports as well.

So see no disruption on supplies bookings.

Michael O'Leary, Group CEO

Look, August today we're at about 75% already. 75% of our final number is already in the system. September we're only about 40% and I expect fares will continue to decline. But there will be upside. That's because, you know, we haven't yet seen what competitors are going to take out of the system in the second half of the year. If spot oil remains up at around $130 a barrel, they're going to be taking out significantly more, you know, so I think it is unrealistic not to expect at this point in time.

If everybody maintains the capacity they're maintaining and we will be growing our capacity by 2% in second half of the year, I think pricing will fall with the one caveat that we have. Easter comes into Q4, which we give and the Q4, Q4 prior year comps are weak, so that will give the ticker there anyway. But I think there could well be meaningful upgrades on that kind of pricing outlook depending on how much capacity is taken out of the system, depending on if an Air Baltic or a Wizard fail going into this winter, they would clearly be very significant alternative.

As I give you the example there. Ingas, for example are already talking now about a 6% capacity reduction. Some of that is long haul, some are short haul going into the winter. So it's too early to give you any definitive outlook for winter pricing, except I think we should expect it to be down low to mid single digits with the prospect as capacity comes out, if oil prices remain higher for longer, that pricing will move back towards flat or maybe even up a little bit certainly and get a boost from Eastern Q4.

But there's too much uncertainty over capacity. Next question please.

Drew, OPERATOR

Our next question is from Conor Dwyer from Citi. Your line's now open, please go in.

Conor Dwyer (Equity Analyst)

Hey Michael, first question is just around a bit more medium term. Just thinking about growth this year is at 4% and obviously fares are touched soft so far in the year. And I guess the concern for investors stepping back and thinking about €14 per passenger net profit is that it needs pricing strength. But obviously your growth is going to hit about 6 to 7% by the end of the decade. And kind of thinking about like what gives you the confidence that fares can be strong into that while that growth is accelerating. And then the second question is primarily for Neil just around obviously the staff unit costs were quite strong in the quarter, just gone and that was somewhat helped by potentially more claims in the fleet.

But one of the features over the last few years has been elevated current ratios and I'm just wondering how much more is there to go on that over the next few years in terms of that coming down given obviously disruption. Costs are obviously doing quite well. It feels like the overall system is somewhat better set up for flying. So thank you very much.

Michael O'Leary, Group CEO

Thanks Connor. I'll take the first time look, medium term, I don't see any change in our outlook. And in fact what drives that medium term outlook is every time our competitors produce a set of half year or quarterly numbers and their unit costs are up 8%, 10%, 12% and this is ex fuel, you know, they can't control their costs, their costs are escalating wildly and the gap, cost gap between us, our slide 4 is getting wider and wider. Now there's only one thing they can do at that is a cut capacity to get airfares up to pay for the air hire unit costs, or B, materially take a lot of capacity out or go bust, which I think is inevitable in a case of a couple of our competitors. And then you have the consolidation plays itself out.

If somebody comes over the hill and pays 5.5 billion sterling for EasyJet, they're going to want a return on that and they're going to take I think much more sort of dramatic action or structural action on and like what you can't do with EasyJet is move it out of gasping or move it out of Charles the goal or move it out of skip all to where, like Stanford full, Luton full, you know, so it is inevitable to my mind, you're going to see very significant capacity constraints imposed on the likes of an Ejet going forward.

I think they will. If you look at the two candidates looking at EasyJet, they're both experienced in the aircraft leasing market. I think they would see certain. There's no doubt the EasyJet order book and the EasyJet fleet is an attractive asset, but that asset will get monetized. And so I think what's going to happen is the biggest upside on our is not that consolidation will take place in Europe in the year next four or five years, which it will.

It is that our competitors are struggling with unit costs and the only way therefore they can manage those unit costs is to pass it on in the form of higher air fares. We are much better managing unit costs, but our fares will trend upwards behind price increases by our competitors and therefore I think that gets us over the medium term. You know, take this year as one of those aberrations as a war in the Middle East, Trump in the White House spot, oil prices all over the place and there's a bit of consumer hesitancy that will dissipate.

The Middle east will get resolved, people will go back to some degree of normality and we will accept that we'll have taken another 5 or 10 points of market share off everybody else in the middle of all of that and then add to that if something happens to an Air Baltic or a Wiz or, you know, the people who can't shoot straight, it'll be nothing but upside in terms of capacity restriction and better pricing in Europe. Neil, you want to take on the cost question or the staff cost question? Connor Reid.

Neil Saurhan, CFO

Yeah, sure. Connor, good morning. Firstly, as you rightly said, we were carrying too many staff last summer as a result of being left short 25 aircraft. So we're getting better productivity this year from those staff. Now that we've got the full complement of the max A2 hundreds in the fleet. We have front loaded some of the pay in the clas this year, so it'll be slower into next year. Importantly, with the max 10 starting to come, that will obviously drive even more productivity with 20% more passengers on board. But in the near term, as we flagged some time ago, we'll continue to take in high levels of cadets and apprentice engineers so that we've spooled up for when peak delivery start to come along. We'll be self sufficient for first officers and captains, but you know, I don't expect anything much beyond that.

So we'll be slightly elevated on the crewing ratios. ATC continues to be a problem, so you wouldn't want to cut back too severely heading forward. But I think staff costs are relatively under control and the productivity from the max 10s is going to have a big impact.

Drew, OPERATOR

Okay, thanks Neil. Thanks, Connor. Next question please. Our next question comes from Dudley Shanley from Goodbody. Your line is now open. Please proceed.

Dudley Shanley (Equity Analyst)

Just a couple of questions. First of all on airport deals, I'm just wondering in the current environment where you're talking about capacity in court in the winter, whether you're starting to see any airports come to you with better deals or is it just too early for that? And then the second question, just to follow up on Connor's question. Are you still as confident that you can reach the €12 to €14 net income per passenger range over the medium term? Thanks.

Michael O'Leary, Group CEO

Okay, I go, maybe I'll ask Eddie to deal with the airport deals. Are they getting better? Well, obviously without naming names, but in general terms, what's happening?

Eddie Wilson, Chief Executive Officer

Yeah, like totally. I don't think you even have to wait until the winter time. I mean, because we've seen a sort of a marked change over, particularly over the last number of months where a lot of airports are getting very nervous about some of their anchor tenants to what's going to happen. They can see little prospect, they can see little prospect for growth. And when things happen like when we make announcements like the closure of Berlin or the five aircraft that are going to come out this winter out of Charleroi because taxes are going up, you can see, you can see airports that the board lights up here for the commercial department with others saying but we can take those, we can do an improvement on the deal that we have all volume related. And you can see things happening that we haven't seen for a long time. Where Dublin airport costs are actually coming back this year. You can see in Spain where there's growing momentum, particularly at regional airports, where there's nobody coming to save those airports and you know those airports that are nimble and know that they have to attract traffic don't just do these are always back onto us about improving deals continuously.

Especially when you see those, when they see those aircraft, when they see aircraft coming up free from other bases. So you know, it's a different place to be where airports are competing that aggressively. I haven't seen it in a number of years.

Michael O'Leary, Group CEO

Do you want to just. There's a number of the EasyJet airports have been on just recently.

Eddie Wilson, Chief Executive Officer

Yeah, I mean like you have places that are overexposed there. Where you've got say Luton, you've got airports particularly, you know, if you, if you look at this sort of in a macro level like EasyJet have been gradually retreating from southern Italy up into northern Italy and understandably a lot of the airports there are wondering when are they going to go back over the Alps or not or are they going to stay there in some of those key airports. But also you see as well with, with Wiz as well where number of airports are, where they see themselves being overexposed and that there's uncertainty. And you have Ryanair that's got the 300 aircraft delivery coming. They just have to do it on our terms.

Michael O'Leary, Group CEO

I'll give you one example. In the month of June, Vienna, where we reduced our capacity by some 10% in the last two years due to high costs. And there's a mad €12 aviation tax that raises less than €140 million for the Austrian government. Meanwhile, over the border in Slovakia, the government has eliminated the aviation tax, cut ATC fees by 50%. And Bratislava, the capital city airport in Slovakia, has introduced very imaginative growth incentive schemes.

In the month of June, Vienna's traffic fell by 6%. Bratislava's traffic was up over 120% year on year, you know, huge growth at low cost, you know, and we are moving, switching aircraft around. Taking away from Berlin this year, for example, we had originally planned to grow traffic in Dublin by 10%. We abandoned that plan. We started, we moved three aircraft out of Dublin. Dublin, our profit this year is flattish, I think, in Dublin, but because Dublin put fees up by 10% because they're a regulated monopoly.

And good. If the IAA's draft proposal, which is to cut Dublin airport fees by 15% in the summer of '27, we will charge in there with another 2 million seats. That would be 10% growth delivered just by Ryanair. This is in an airport that has a capacity cap. But while Aer Lingus are talking about reducing capacity by 6%, we'd be charging in there next year with 2 million more seats. So delivering very dramatic growth. So don't underestimate the extent to which we can churn those aircraft where a number of our competitors are still good fortress airports like Gatwick or Charles de Gaulle, they can't because they'd lose the slots.

They can't kind of move aircraft out of those. Whereas most of our airports, we don't have slots. Not too worried about them. We chop and churn all over the place to encourage, and that's not to kind of penalize high-cost airports, but it's to encourage those other airports who want to grow aggressively to be aggressive with growth incentives. Towards the second part, which is getting to €12 to €14. Look, I've given you my view in relation to the second half or answering Connor's question, I'm going to ask Tracey maybe to give you a more independent and rational view of how that will develop over the next five years.

Tracey, do you think we'll get to €12 or €14 profit per passenger?

Tracey McCann

I think if you look at last year, I suppose we were just under €11. And a lot of this comes down to the, you know, the deals we've secured on costs. You know, Eddie just spoke about the airport deals that are available out there. We're ready to, you know, open our engine shops in 2029, which again will give us cost advantage. And we've got a deal with CFM advantage of the Max 10, so we'll have 20% more seats. So again, 20% upsell on ancillaries revenue opportunities with no real incremental cost.

We'll have the fuel benefit of the Max 10 order, 20% more fuel efficient. It's how we finance them aircraft. So probably finance them out of cash or take low-cost opportunities to finance them if we get them. And CLA deals that are ongoing at the moment improve productivity on crewing. And I think that all the steps are in place to actually get us there. So I think it's a cost story, cost advantage story, as well as the opportunities we'll get with capacity coming out of the market.

Eddie Wilson, Chief Executive Officer

Yeah. And remember, you know, we're competing across Europe mainly with legacy airlines whose unit costs are four and five times higher than ours. You have the likes of Wizz, for example, doing more sale and leaseback of their fleet, which is the only profit that they recognize in their P&L. But that means they have much more expensive aircraft and ownership costs going forward for the next number of years, if they survive that long. And then I think if EasyJet are the subject of M&A, there is no doubt in my mind that, you know, the financing cost of that M&A will be passed on to EasyJet.

They will have to get airfares up. And I, you know, our strategy or our kind of contention. The last year of profit movement trials towards €14 to €15 a passenger is that most of it will take place on the yield pricing line. And I would still be confident that would be the case. But as Tracey identified, there's also significant and widening cost advantages on the cost line as well. Next question, please. Thanks, Dudley.

Drew, OPERATOR

Our next question comes from Ruari Cullenane from LBC. Your line's now open. Please proceed.

Ruari Cullenane (Equity Analyst)

Rory, how are you?

Rory

Yeah, good morning. Your first question on ancillaries have been quite flattish on a revenue capacity basis for a few quarters now. Are you seeing less take-up of some of your ancillary products? And then secondly on fare trends, have there been any sort of notable areas of weakness across markets in H1? Thank you.

Michael O'Leary, Group CEO

Okay, maybe I'll do ancillary. Tracey, you want to take it? And Eddie, maybe do the fare trends.

Tracey McCann

Yes, ancillary, pretty much as we said, so flat in this quarter, but some of that is the Easter impact. So we saw significant growth in the same quarter last year we were up 3% to 2308. We're still on track to see ancillary grow about 1 to 2% for the remainder of the year and continue to. Do you know what we said? It's about growing the total revenue now at the moment and starting to price between bag seats and bags. So it's optimizing the price and dynamically across all them products that we're in control of.

Eddie Wilson, Chief Executive Officer

Thanks, Tracey. Fair trends, obviously we're not naming particular. Yeah, I know. I mean like the only. I mean, if you look at it, I mean it is a general story of I suppose, the what's happening in the Gulf at the moment and consumer sort of sentiment and you know, been uncertainty, you know, which we saw earlier in the sort of in the booking season which was around fuel supply concerns. And then we could see the whole uncertainty as, you know, the war going on and World Cup and that.

But there's no real call outs, you know, except, you know, like obviously you'll have places that you've got a lot more capacity going into, which would be into Central and Eastern Europe and to a lesser extent into the UK where some of that may be driven by capacity, but there's no real call outs on a geographic basis.

Drew, OPERATOR

Okay, thanks, Eddie. Next question, please. Our next question comes from Andrew Lobenberg from Barclays. Your line is now open. Please proceed.

Andrew Lobenberg (Equity Analyst)

Andrew, how are you? Hi, thanks. Classic call, this one. Can you tell us what's going on with the EU ownership stake? And you know, I think the ADR premium's been rising of late. So is there anything to say on the ownership and control situation? And then just another short, simple question. You mentioned that the RCF is mostly undrawn with suggested it is a little bit undrained, but given that you've got pots and pots of money, why have you needed to draw it at all?

Michael O'Leary, Group CEO

Okay, thanks Andrew, I got Julius, maybe take the ADR question, EU ownership and ADR, give you the update and maybe. Neil, I'll go back to you. Why is the RCF mostly undrawn in the middle of the summer?

Julius

Hi Andrew. So our EU ownership last reported is 30%. Next report will be at the end of September. We'll give that in November with the H1 results. We have seen Europeans buying ADRs over the last few months and this is a new development quite welcome. And that could be behind the rising premium.

Andrew Lobenberg (Equity Analyst)

Okay, any control?

Julius

No, I mean there will be a revision of the law in Europe that deals with ownership and control rules. That is due to start later this year and it will take about two years to go through the EU Parliament and the Council. It is still expected that EU261 that ownership and control will be dealt with in that revision. So that some changes will be proposed to modernize the rules to make them more suitable to the capital markets as we know them today, where European money may well be managed by someone in the United States or the United Kingdom and the other way around.

But we just have to wait and see what comes out of the European Commission and then when it goes through the Parliament and the Council, as we've seen with EU261, anything might happen, you know, so we just watch that closely and keep pushing for more sensible set of rules that we have today.

Michael O'Leary, Group CEO

Okay, thanks, Julius. Neil, the RCF, why is it undrawn?

Neil Saurhan, CFO

Yeah, Andrew, good morning. Yeah, we've about 40 million undrawn under the, or, sorry, drawn under the RCF. We have a big pool of banks and we like to let them leave a little bit of money on the table just to feel involved. No other reason that we could have paid it off. We decided to leave that sliver there for the banks.

Michael O'Leary, Group CEO

And I would add to that, you know, we do expect we will, as we move into the September, December quarter, we will draw down on the RCF. Now, you know, certainly we won't need all of it, but bear in mind, you know, we think the kind of comfort base we should be in terms of cash on the balance sheet is around 4 billion as of today. We have gross cash ourselves about 2.7, 2.8 the RCF would take us if we were to draw it all, that would take us up to 3.8.

But there's no point. We don't need the cash during the bumper summer period when cash flow is strong. But once you get towards September and the inboard cash is the winter bookings but you still have a rump of the summer payments, we go cash negative in the September and December quarter we will draw down the RCF. I would not want us to go down to kind of 2 billion or below 2 billion gross cash and then have something untoward happen. This is a capital intensive cyclical business that is subject to extreme shocks such as war in the Middle East, oil prices go mad and bookings weaken.

Putin invades Ukraine, Covid. So it is a sensible strategy, I think, to have a reasonably sizable RCF there in place. As we've said in terms of our funding objectives for the next 12 months it is to fund the Max 10 capex out of internally generated cash flow, fund the engine shops fund, the balance of the share buyback fund, there's a dividend, another share of dividend coming in September and then rebuild gross cash back up towards about 4 billion a year.

That would take us at least another year. But our discipline with the RCF is drawdown during the winter period when you go cash negative, pay it back as you get into the summer period when we're cash flow positive. Next question please.

Drew, OPERATOR

Our next question comes from Mark Zeck from Kepler Chevreau. Your line's now open. Please go ahead.

Mark Zeck (Equity Analyst)

Good morning. Thank you for taking my questions too. If I may. And just maybe just short one on the ETS. Do you mind sharing what percentage of kind of revenues the passengers is now newly affected by the 5,000 kilometer radius from Frankton wasn't before. The second question would be on the recent heat waves. And I recognize that the quarter was unusual due to Iran, but do you feel the extended heat period has also weighted maybe somewhat on maybe yields.

So you need to. Need to stimulate. And what would you expect your impact from let's say more often more heater heat waves in the future say UK becomes a beach destination. What's. Yeah, what's the impact on your operation? Thank you.

Michael O'Leary, Group CEO

Okay, the first one and invite Neil or Tracy to come in. I mean, look, the extension of the ETS would now mean we'd be charging ETS on EU traffic to Albania, Morocco. We have very little or almost nothing going to Turkey apart from some charter stuff. But the tour operators will be paying that, so it would have minor impacts on us. You know, the fundamental impact on us and all the rest of European aviation is Europe has this mad system where we're taxing the European citizens traveling within Europe and then exempting all the Americans, Gulf, Asians arriving in Europe, leaving Europe despite that they generate more than 50% of European Aviation CO2 emissions. It is a mad, discriminatory, indefensible system, and the Europeans should grow some vertebrae and either have a fair system that taxes everybody arriving in or leaving Europe or stop taxing the Europeans altogether. But you know, expecting von der Leyen to come up with anything that would improve the competitiveness of European aviation is a... You know, we'd be around for a long time. She's useless and there will be nothing. As the Draghi report gathers even further dust in Europe, there's been no reform on ATC, there's been no reform on ETS, and Europe continues to be a hopelessly uncompetitive market despite the fact that air travel is one of the few areas where Europe wipes the floor with the Americans. They're ahead of us in AI, they're ahead of us in energy security areas. We wipe the floor with America when it comes to air travel. And yet Europe keeps inventing new regulations to make us either less competitive with ETS or make us look less competitive with the new mad advertising regulations. Has the heat wave had any impact on us? Not really. As someone who put his wife and children on flights to Portugal yesterday, despite a prolonged heat wave here in Ireland, the Europeans are all still going to the beaches of Portugal, Spain, Italy, Greece, etc. I don't see that changing. You hear occasional stuff that the French and all the others are going to come, keep coming to Ireland to get away from. No sign of it, I don't think. Look, one summer is not going to make any huge difference. I don't see that it makes any significant impact at all. It allows newspapers to fill up rubbish during the quiet. During this kind of... When the parliaments are all closed, they'll all start raising shite. And I'm sure Sky and all the others will be doing features, daily features now on global climate change and all the rest of it, most of which will be nonsense.

But no, we don't see any change to travel patterns. Eddie, any heat wave travel patterns?

Eddie Wilson, Chief Executive Officer

No, no, I haven't. We haven't. We haven't seen anything. I mean, like, obviously like things like the World Cup and that. I think you will see some. You'll see a bump. All right, I've seen that in previous tournaments as well, but I don't think there's any systemic change in booking patterns.

Michael O'Leary, Group CEO

And Julius, you think the Poles are going to stay at home during the summer or keep heading for the beaches of Bulgaria, Greece and God knows where else?

Julius

Keep going to Denmark.

Michael O'Leary, Group CEO

Okay, thanks, Mark. Next question, please.

Drew, OPERATOR

Our final question comes from Axel Stassi from Morgan Stanley. Your line's now open. Please proceed.

Axel Stassi (Equity Analyst)

Hey. Thanks for taking my question to you on my side, please. Could you maybe just reiterate how much we should look at CapEx for 28 and 29, considering the maintenance drop and the delivery of the Boeings. And second question on the buyback beyond the 750 million. Almost done. Conscious, you said you wanted to focus on aircraft, CapEx, DVs and the 4 billion gross cash level. But what kind of gearing should we look at to understand the leeway here on the potential buyback? Is it, you know, 0.5 times 1 times just to have an understanding. Thank you.

Michael O'Leary, Group CEO

Okay, thanks, Axel. Neil, you want to take the CapEx and I'll do the buyback?

Neil Saurhan, CFO

Yeah, sure, no problem. Good morning, Axel. CapEx current year FY27, unchanged from what we previously guided. So somewhere close to 2 billion. If I look into the next year, we're probably somewhere in a range of 2.7 billion to 3 billion. And I wouldn't go beyond that in any kind of guidance at this stage.

Michael O'Leary, Group CEO

Thanks, Neil. Buybacks actually look, we've been quite upfront. We've said there won't be another buyback this year. We'll finish the buyback probably around the time of the AGM in September. The AGM will get approval to continue buybacks but we will not look at another buyback I'd say until the spring of 2027. We do go cash negative in the September and December quarter this year. We've already paid back a bond of 1.2 billion, we'll have funded dividends of 400 million this year and we'll have completed the 750 billion buyback.

So shareholders have done well this year. They'll just have to wait. I think we will look at it again once we get a better handle on what the CapEx looks like through the middle of 2027 and that is when we'll be into the heavy engine shop CapEx then I think we will reassess. I would be, you know, I think we will continue to do buybacks. There just won't be another one. There won't be a follow on or there won't be a follow on one this in 2026 when we complete the 750.

You'll have to wait I think until either March or the full year results next year in May and then we'll have a more definitive position.

Neil Saurhan, CFO

Can I just add to that Michael, just on the specific gearing question. Look, we keep it very simple. We're going to build a cash back up towards 4 billion then to the extent of surplus cash that likely go back to the shareholders. Whether we take debt on or not will principally be driven by the cost of that debt. And we don't have any targets one way or another as to whether it's two, three, four, five or six times gearing on the balance sheet. We'll keep it very simple and opportunistic.

Michael O'Leary, Group CEO

Okay, thanks Axel. Ladies and gentlemen, thank you very much for participating in the conference call again. I think, you know, I wouldn't get too upset over the weak near-term outlook. It is what it is. There's a war in the Middle East. We see this, the period of opportunity. We are aggressively churning airports. There are a number of airports who are very concerned out there by the financial challenges faced by some of their incumbent carriers and are doing more aggressive deals with us.

There is a lot of upside in the system over the next year or two. Things like the Dublin airport cap being lifted, the IAA bringing in price reductions here at Dublin pricing will be a little bit weaker than we had originally hoped this year. Fine. If it is, it is. We think the pricing will recover strongly in 27-28 onwards because the underlying fundamentals is our competitors' unit costs are rising rapidly and they have no choice but to either constrain capacity or leave certain markets where they're unable to compete with us if they're going to get their airfares up.

And in the meantime, all we'll have to do then is manage nonsensical or idiotic EU regulation where they'll continue to invent new regulations that make air travel in Europe either less competitive or make it look like it's less competitive. But Ryanair will continue to find its way around those regulations and continue to take significant market share from our competitors as we move into a winter period where we expect a number of failures among those competitors.

Okay, we're not, obviously Q1 results. We don't do a roadshow. Neil is meeting some investors in London. I think he's going to switch Switzerland tomorrow to try and drum up some more European interest. And if anybody wants to do a follow-up meeting or come to Dublin and see us at any stage over the next couple of weeks, please feel free. Jamie, who's head of IR, would be happy to set something up. Thank you very much, everybody. Look forward to seeing you in the future.

Have a good remainder of the summer. Enjoy yourselves. God bless. Bye bye.

Drew, OPERATOR

Thank you for joining. That concludes today's call. You may now disconnect your line.

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