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Hello, and welcome to the easyJet analyst call. My name is Molly, and I'll be your coordinator for today's event. Please note that this call is being recorded. [Operator Instructions] I will now hand you over to your host, Johan Lundgren, to begin today's conference. Thank you.
Thank you very much for that, and good morning, everyone, and thank you for joining us to discuss easyJet's Q3 2021 Trading Update. With me on the call are Kenton Jarvis, our CFO; as well as Michael from our IR team and Peter and Sophie who's joining as well. You should have been sent the statement along with the slides, which are also available on our corporate website. I will talk through the presentation and then follow up with time for your questions.So starting on Slide 2. easyJet has delivered in line with Q3 financials with cash burn for the period ahead of expectations. Cash burn is improving with only GBP 55 million total cash burn in the third quarter. Our liquidity balance remained strong at circa GBP 2.9 billion. And this means that the net debt is stable at GBP 2 billion. Our GBP 500 million cost program for full year is delivering with full year '22 actions are high.Our navigation through pandemic has been awesome. We have raised GBP 5.5 billion in liquidity, driven down costs and kept a relentless focus on positive contribution flying. We have proven ourselves adept at responding to rapidly changing market conditions, adding new capacity and pivoting our schedule to capitalize on shifts in demand. And as a result, easyJet is emerging from the pandemic as a transformed airline. Our cost program is delivering around GBP 500 million of savings this year with almost half being sustainable. And cost structures as of [ Feb 2022 ] are well underway. We've built in unprecedented levels of scheduling flexibility, which is allowing us to optimize our network for current trends, such as allocating more routes to Continental Europe and British domestic flights as well as launching new routes to Greek Islands and capitalizing on continued strength across those markets.We're very pleased to see the easing of restrictions right across Continental Europe as well as the successful introduction of The EU Digital COVID Certificate to help simplify our customers' travel plans. The flexibility we have built into our schedule is industry-leading. And since the start of June, we have launched double the number of new routes compared to Ryanair and Wizz. That's more new routes than both Ryanair and Wizz combined. Our new ancillary products are driving a positive impact on margins for the future. And easyJet Holidays continues to gain momentum and is taking market share. In summary, our efficiency program with sustainable cost reductions baked in, combined with our fleet flexibility, strong positions at Europe's leading airports and agility to respond to this dynamic market means we are very well placed to emerge from the pandemic with renewed strength. While we know the recovery from the pandemic isn't going to be a straight line, I can't wait, and so it's the same for my colleagues in this organization to compete using all these newfound strength.And with that, I will hand you over to Kenton, who will walk you through the financials.
Thank you, Johan. So starting on Slide 3, let's have a look at some of the key performance indicators for the quarter. In Q3, we grew 4.5 million seats compared to just 132,000 seats in the same quarter last year when the first lockdown was being imposed and when easyJet fleet was grounded for over 2 weeks. The 4.5 million seats flow in Q3 is equivalent to 17% of the Q3 2019 program and slightly ahead of our expectations. This demonstrates that our capacity forecasting has been accurate and discipline throughout the pandemic, and this has allowed us to deliver strong cost control. Passenger numbers increased to just under 3 million, with load factors improving throughout the quarter from 52% in April to 68% in May and then 72% in June. The load factors have been strongest in Continental Europe and on domestic U.K. routes, with U.K. international loads suffering from late changes in restrictions.Total revenue increased to GBP 213 million, and group headline costs increased to GBP 531 million as staff came off further and operations were ramped up in preparation for the summer. The group headline loss before taxes reduced by 8% year-on-year to GBP 318 million. As previously highlighted at H1, we've reclassified the foreign exchange gains or losses arising from retranslating the balance sheet positions as well as fair value movements on hedges have been marked as discontinued from nonheadline to headlines. So for comparability, the group headline loss for Q3 '20 has also been restated with a further GBP 22 million in costs. This is a pure reclassification from nonheadline to headline, so there's no change to the total loss reported in Q3 2020. In H1, there was no reclassification made as some impact was immaterial for the prior year.Moving on to Slide 4. We've remained focused on cash-generative flying throughout the pandemic, shifting capacity to match demand. RPS has seen positive momentum through the quarter with Q3 revenue per seat at constant currency showing an increase versus the previous quarter of 27% to GBP 45.89. This has been partly driven by the improving load factor from 60% in Q2 to an average of 66% for Q3. Ancillary revenue is performing well, and it's driven by the take-up for standard plus bundled fare product and the new cabin bag policy, which was launched in February this year. Phase 2 of the cabin bag policy will be implemented later this year. Our surging agility is allowing us to capture demand across the network despite the constantly changing travel restrictions.On the cost side, cash flow in the quarter has been reduced and is ahead of expectations, with easyJet's cost-out program having delivered savings throughout the period. Q3 cost per seat excluding fuel at constant currency showed a sequential improvement in Q2 '21 of 30% to GBP 97.04.Moving on to cash management then on Slide 5. easyJet has maintained a disciplined approach to capacity, focusing flying on cash contributing routes and also on cash management, having achieved material savings in its major cost-out program. Cash-out on a fixed cost plus capital expenditure basis was GBP 34 million per week in the third quarter. This has been reduced to GBP 38 million a week in Q2 and then GBP 39 million a week in Q1 and is better than our guidance of GBP 40 million per week. It should be noted that this Q3 rate is not the weekly run rate to project forward for Q4 as this will vary with the profile of capital exposure, the timing of maintenance events and the ramp-up of crew. And as such, we'll maintain the previous guidance of GBP 40 million per week going forward.Working capital movements were positive in the quarter as booking momentum returned particularly in Continental Europe with unearned revenue growing to GBP 955 million, which is GBP 293 million above the balance of Q2. Capital expenditure in the quarter was GBP 79 million, primarily driven by lease payments and maintenance events.Cash refunds paid to customers during the third quarter totaled GBP 122 million. And we continue to process all refunds in under 7 days. Unlike many of our competitors, easyJet sought to offer its customers industry-leading flexibility and options during the pandemic, including the choice of refund and vouchers and the ability to move flight without fees up to 2 hours ahead of departure. The amount of flight vouchers currently in issuance is relatively low with a value of approximately GBP 230 million. Total cash burn for the third quarter reduced to GBP 55 million, and that compares to GBP 469 million in Q2 and GBP 969 million in Q1. And we finished the period with GBP 2.9 billion of available liquidity and GBP 2 billion of net debt, both of which are broadly unchanged from H1.So moving on to our fleet on Slide 6. We retain flexibility within the current fleet plan to expand or contract fleet based on our expectations of future demand. So just to explain the graph, the top dotted line on this chart illustrates the current maximum arrangements with Airbus as well as with current vessels. We will not exercise an option to request early delivery of aircraft in full year '23 now that we've optimized the network with the removal of 17 aircraft from Berlin and rightsizing the less profitable regional bases in France and Italy.The lower gray line represents a contractual minimum fleet side, and the solid orange line represents our base plan and shows our fleet will growing to 317 aircraft by full year '22. This growth will enable easyJet to meet the high level of pent-up demand we expect in summer '22 and also provide the flexibility to take advantage of opportunities to strengthen our network in the post-pandemic market. It should be noted that the chart does not include any future potential opportunistic lease additions to the fleet. easyJet is going to take delivery of 8 new aircraft in full year '22, 7 in full year '23 and 18 in full year '24. These are all A320neo family aircraft, which burns 15% less fuel and generate 15% less carbon emissions than the aircraft they replace, in addition to generating 50% less noise footprint on takeoff and landing.In total, we have an order book of 101 neos at attractive pricing with purchase orders for a further 20 aircraft and unexercised purchase rights for another 58. We retained ownership of 56% of the total fleet, and 41% are unencumbered.I'll now hand you back to Johan.
Thank you, Kenton. And moving on to Slide 7 now. While it's been an extremely difficult period for all businesses none more than airlines, I couldn't be prouder of how we have responded to the challenges that we've been facing. Not only have we navigated Airbus through the immediate crisis, reducing cash burn and both from liquidity, but the very way we have approved the challenges that we have faced, that means we have adapted and built like stronger for the future. We didn't let the pandemic happen to us. We controlled and adapted and navigated the course throughout this. We did it through responding in ways our competitors don't or can't, providing customers with the most flexible policies better than any other airlines, leading the industry, sticking up for our customers on key issues like the cost of testing, becoming very adept at adding capacity, adding 3.8 million seats often in a matter of hours and launching for this summer, 160 new routes, building our Holidays business and taking market share.We also used our existing strengths like our network with the renewed partners, shifting capacity to Europe, where we've seen the strongest demand. And don't forget that all of this is resting upon our proven business model with low fares, unrivaled network and brand trust, which will be crucial in the recovery. And our brilliant people are getting back to what we do best, which is giving customers a great experience. Everything we have done will leave a long-term positive imprint on the airline, transform ready for the post-pandemic era. On to Slide 8. The uneven pace of COVID travel restrictions being eased by various government means that we are seeing a distinct pattern in our markets where Europe is leading the way. And this is a great example of using easyJet's existing strengths like our network with renewed purpose. Whilst in normal times, our network is split roughly 50-50 between the U.K. and Europe, we are currently operating around 60% of our flights in Continental Europe, having shifted capacity to the market with the strongest demand.And around 2/3 of our current bookings are coming from Continental Europe. Travel in Continental Europe has reopened. And in some markets such as the Netherlands, we are already back to flying capacity levels above those of 2019. That demand can be seen clearly in our forward bookings in Europe as we are around 53% sold for Q4 in '21. For Q4, we expect it to fly up to 60% 2019 levels. And this is a significant ramp-up from the 23% of 2019 capacity which we flew in June. And we expect it to build throughout the quarter we are in. In terms of forward bookings at the network level and at the group level, we are currently 49% sold for Q4 compared to 65% at this point in 2019.Moving on to Slide 9. The actions we have taken are delivering a transformed cost base. We have achieved a 30% reduction in crew costs and agreed a wholesome new part-time and seasonal contracts to better match our cost base to the seasonality in our revenues. The destination basis, we've opened take this one step further. We will effectively increase the fleet size by 1.7% next summer by releasing spare aircraft, which we've freed up through efficiencies in our engineering and on maintenance practices.And the new lower cost sustainable contracts we've signed with our ground handling partner are also delivering more value, quickly generating additional ancillary revenue. Ancillary revenues will see a step change in the coming years. Our cabin bag policy was successfully implemented in February. And the second phase of that project will launch later this year. Our bundle fare standard plus is also performing very well.The flexibility we have built into our schedule is industry leading with more routes launched since the start of June than both Ryanair and Wizz combined as an example. And crucially, the scale and flexibility of our network provides us with the opportunity to realign capacity to take advantage of changes in the competitive landscape. We are pivoting capacity towards popular routes showing the rising customer demand in order to capitalize on the strong passenger flows in Continental Europe. We've added further fleets in our Continental European network, including increased flying from Berlin and Amsterdam to beach destinations in Southern Europe, shifting flying from our destination basis from the U.K. to the most popular routes in Europe with the strongest demand and bolstering our domestic flying in France and Italy, as well as popping up capacity on 74 UK and Amber routes and maintaining our strong slot portfolio in Greece. We've also further built our U.K. domestic leisure portfolio, including backfilling some of the capacity left by the failure of Stobart Air on the 12th of June. Our Holidays business is in a prime position to appeal to customers who, as a result of the pandemic, are seeking more protection for the holiday arrangement and turning to packaged holidays. With a highly variable cost base of circa 95%, we can quickly and easily adapt our business model to react to changes in demand. We also maintain a continuous and sharp focus on costs to ensure that the same holidays are cheaper with easyJet Holidays 70% of the time on a like-for-like search basis versus our competitors.Flexibility and choice are key, which is why we have the most flexible customer policies in the market. We also have holidays on sale up until October 2022. This year, we've been able to retain circa 60% of the customers who have been affected by travel restrictions and increased the number of directly contracted hotels that were previously exclusive without a competitor, which now account for nearly 70% of our bookings to-date and offer significantly enhanced margins.Moving on to Slide 10 and the outlook. Based on the current travel restrictions in the markets where we operate, we expect to fly up to 60% of our 2019 capacity levels in Q4. Late announcement of changes to travel restrictions will impact load factors due to the late capacity additions to meet surges in demand or cancellations when restrictions are added, driving an even later booking behavior. Intra-European client represents 60% of currently scheduled capacity. easyJet remains focused on cash-generative flying, as has been the case throughout the pandemic. And easyJet cost-out program is expected to generate circa GBP 500 million of savings in full year '21 of which almost half is sustainable and which will help to offset the expected headwinds and ownership costs and navigation charges as well as help to grow our margins. At this stage, given the continued level of short-term uncertainty, it will not be appropriate to provide any further financial guidance for the 2021 financial year. Customers are booking closer to departure and visibility remains limited.So in summary on Slide 11. We've delivered Q3 finances in line with management expectations. Our liquidity balance remained strong at circa GBP 2.9 billion. Cash burn is improving with only GBP 55 million total cash burn in the third quarter. And we have a stable net debt and an investment-grade balance sheet. We've successfully navigated our way through the pandemic, having raised GBP 5.5 billion of liquidity, having delivered sustainable cost savings and keeping a relentless focus on positive contribution flying. We showed ourselves to be adept to responding to rapidly changing market conditions, having developed industry-leading agility to add new capacity and pivoting our schedule to capitalize on shifts in demand. And as always, we have kept our customers at the heart of everything we do from allowing fee-free changes up to 2 hours prior to departure through to upholding all our commitments on sustainability throughout the pandemic.And as a result, easyJet is emerging from the pandemic as a transformed airline. Cost program is delivering GBP 500 million, and cost actions are way underway also for 2022. We've built an unprecedented levels of schedule agility, which is allowing us to optimize our network for the current trends, such as the shift from U.K. to Europe with industry-leading flexibility. And similar revenues will be a step change in coming years with the successful launch of our cabin bag policy and the second phase of that project launch in later this year as well as the strong performance of our standard plus fare model.And easyJet Holidays continue to surpass our expectations and grow momentum and is taking market share. And we're the most sustainable airline in Europe and Asia. And in summary, our efficiency program, together with sustainable cost reductions baked in, combined with our fleet flexibility, strong positions at Europe's leading airport and agility to respond to the dynamic market, means we are very well placed to emerge from the pandemic with renewed strength.And we always said that the road on the recovery from pandemic wasn't going to be a straight line, but we will come out of this transformed and ready to capitalize on the opportunities that will come our way.So with that, thank you for listening, and we are now ready to take questions you may have.
[Operator Instructions] The first question comes from the line of Daniel Roeska calling from Bernstein Research.
Two, if I may. First one for Kenton, please. It looks possible to break even on cash during Q4 kind of how are you thinking about what lies beyond? So your H1 '22, what's the required liquidity level? Are you kind of comfortable with liquidity going into winter? And what would prompt you to engage in some additional financing actions here?And then maybe, Johan, some longer-term thoughts on your ancillaries and the ancillary targets because, of course, you've implemented a whole bunch of new products driving ancillaries maybe compared to where you were prepandemic. But do you also have a feeling for the mix change in your current numbers? So kind of are there just more passengers taking bags on your flights right now? So kind of what's the plus and minus if we were to think about where that ancillary level settles once we're out of this mess?
Yes. Okay. Daniel, thank you very much. In terms of the Q3 cash burn, yes, we were pleased with cash burn at GBP 55 million for the quarter because it enabled us to maintain liquidity at GBP 2.9 billion and also the net debt at GBP 2 billion. Look, the cost program is delivering well, and that will give us GBP 500 million benefits this year, half -- almost half of which will be sustainable going forward. But we're -- as I said at half 1, I'm taking a balance sheet review, and it's going well. We're basically modeling a number of 3- to 5-year planned scenarios going forward, looking at the liquidity levels we want to maintain post-pandemic. And factoring in the fleet plan, the Airbus order and looking at how that impacts our debt levels and gearing ratios going forward. And as I said, half 1 will be complete by the year-end, and we'll come back with the full picture.I think unfortunately, summer hasn't helped rebuild the balance sheet. But as I said, I'm pleased that the liquidity has been maintained and the net debt has been maintained. But we'll have to wait and see how Q4 plays forward because, obviously, we still have some uncertainty particularly in the U.K., although Continental Europe is progressing better.
Yes. And Daniel, on that ancillary, there's a really interesting piece as well. I mean we are clearly seeing that the share of the total price the customer pay of ancillary is going up. We've been in that area around that 20%, and that is increasing as we speak and driven mostly by the cabin bag proposition as well as we get a pick up on that. And it delivers also operationally into the fact that our on-time performance is quite remarkable, I think, because, on one hand, you might say, well, your on-time performance should be great because it's less flying and the load factors are generally less. But we see that now where we have really high load factors that would be similar to the prepenamic levels. And in addition to all the checks, as you know, Daniel, we have to do prior to the boarding to check with the COVID document as well, in many cases, and we had yesterday like 100% on-time performance. And part of that is also driven by the proposition of the cabin bag. And we look also to make sure that there are more options coming out for our customers. So you are likely to expect to see that, that share of the total price paid on ancillaries being greater going forward.
Phase 2 of the cabin bag goes live in the autumn, and that will give more opportunities for premium seats revenue as well. And we've a lot of work taking place on in-flight retail propositions right now at the moment thatwill kick in for next summer. And we're also picking up a lot of more airport revenues at the moment than we expect that's ahead of budget.
And that, just to add to Peter's comments, that's Phase 2 of the cabin bag means that you actually can buy this as a separate product and a standalone product, which would be very welcome.
The next question comes from the line of James Hollins calling from Exane BNP Paribas.
Just first up, on the cost headwinds, Kenton, I want to take statement as well, maybe just remind me or remind us of some of the detail on the cost savings and ideally quantify them. And obviously, what ideally also, what you're doing to counter those direct cost headwinds.Secondly, just digging a bit deeper on these ancillaries, I think it's a pretty critical part of your margin story. If I phrase Daniel's question slightly differently, I mean your -- it looks like relative to some pre-COVID, you've seen GBP 6 per passenger increase in ancillaries, Q3 '21 versus pre-COVID from GBP 14 to GBP 20 or so. I'm just wondering, I guess similar to Daniel's question, but looking for quantification, how much of that potential you could hold into post-COVID, effectively splitting out what is maybe an exception on what is holdable into the long term? Any more detail would be lovely.
Let me start with the last question. We're not giving any specific guidance on what this is to be. But you're absolutely right. I mean the opportunities are there. There's a number of things that we hadn't been able to introduce previously for various reasons, systems being one. And with the fact that we now can do the cabin bag, which is a big part you would have seen with cabin bags, the effect that, that has had also on margins for other airlines. But this is just as much as also that it operationally also helps us to increase on-time performance, which reduces the cost and improve the customer experience.And when we're looking through the pipeline, and Peter mentioned one of them, we're doing a big overhaul of the whole in-flight proposition as well, but we also know it's going to yield benefit for ourselves and also for the customers. I feel very passionate and strong and excited about the products that we have in pipeline going forward for the next few years. But like I said, we haven't given any specific guidance on that.
Okay. Yes. Thanks, James. And on the headwinds, the majority of these are COVID-driven impacts. I guess first would be the financing cost. Obviously, you're going to have an increase in interest payable from the GBP 5.5 billion of funding we've raised. And our gross -- our net debt is GBP 2 billion. Our gross debt sits at GBP 4.3 billion, and that's what you got to service because there's not a lot of interest in from the cash we are holding. So that's financing costs. On ownership costs when it comes to aircraft, there are 2 impacts that you have to be mindful of. The first is the increase that we have in the midst of our leased aircraft. We did the 58 aircraft, 7 lease programs, which raised a lot of valuable liquidity through the last year. But as we said, half 1 has added about GBP 140 million to our headline costs.And the second impact is around the depreciation effect on our owned aircraft. Obviously, this is noncash accounting. But effectively, as the fleet ages, the deferral of the order book, so the depreciation increases. So to give you an example, when we capitalize our aircraft, we then depreciate them over 23 years now to the residual value. But as you come into the major maintenance events, then you capitalize those like engine shop visits and depreciate those going forward.The average age of our A320s is now about 7 years. And typically, the CFM engines on the A320s last 7 -- last 8 to 9 years on wing before the major shop list comes along. So that means that a good proportion of our fleet will now be coming to their first shop visit in the next 2 to 4 years. Those will be capitalized and then depreciated going forward.And the final headwind that everyone has coming out of COVID in the industry will be the impact on navigation charges when Euro Control seek to recover some of their lost revenues in '20 and '21. But that will be faced by all European airlines, and we will all resist that as much as we're able to, but it will be a similar surcharge that all airlines will get.On the cost program, it's developing very well to offset on this. So on track to deliver the GBP 500 million for this year, nearly half of which will be sustainable. The big parts of that are around crewing, where we -- where the negotiations are going very well with the trade unions, and they're completed everywhere with the exception of Italy, a lot of rightsizing of establishment. We've introduced a lot of seasonal and part-time contracts, which gives us more flexibility, productivity improvements on crewing levels and essentially a 30% reduction in crew with a 6% reduction in aircraft. And we've seen through engineering and maintenance efficiences that the management of spare aircraft-s will lead to more capacity in the system, about 1.7%, which is equivalent to 5 to 6 aircraft.I don't know, Peter, if you want to add anything around ground handling and other things that have been progressing well.
Yes, I think it's all about the execution on the ground handling. We've renegotiated the contracts that have impacted about 80% of our customers. But part of that actually is to incentivize the collection of the ancillary revenue. And that's all about execution for this year and next year. And overall, that's led us to a pretty good operational position at the moment, where I think we're seeing progressively the cost coming out. And it's about putting in the discipline, the detail around that, really we're seeking everywhere across the business on every cost line. If we can get GBP 0.05 out over 100 million passengers, it's another GBP 5 million, and that's what we're seeking.Like there are a lot of people traveling at the moment. We have booked yesterday nearly 140,000 people, 11,000 flights. We had 87% on-time performance across the network and actually 100% in Gatwick. So if you believe sometimes what you read, you think there's nothing happening, but there's a hell of a lot of people on the move, and we'll be up to over 1400 flights a day in August. There's a lot of people booking very quickly. We had 40,000 this weekend in Gatwick alone, so it's really starting to rock and roll.
Yes, I mean just to talk about just on the cost side as well because it's an absolute focus on line by line. It's not like it's, okay, we got 1 project here, 2, 3 projects in here. These are hundreds of initiatives that's been happening within -- throughout the whole of the company. And Peter has been talking about some of them as well. And this is what I mean when we are looking to come out of this transform. These are things that, to some extent, we said was previously a structural disadvantage in terms of some of the steps, that has been changed. And if you then take a look at the opportunities we continue to have on there and then also back to [ fill in ], that's what I mean when we're talking about this being actually transformed airline coming out of this pandemic.
The next question comes from the line of Mark Simpson calling from Goodbody.
A couple of questions. First off, I just wanted to pick up the potential for an extended summer season. In the statement under forward bookings, you talked about being confident about demand of travel this summer and into autumn. And if you look at the kind of -- you're talking about 95% of your crew being operational from mid-July, bearing in mind that crew numbers are down circa 30%, that kind of suggests that the crewing is about 66.5% of your kind of comparative quarter. You're talking about 60% of capacity against the comparative quarter. So you're either kind of overcrewed, and there's been some cost in that or you're actually thinking that demand -- there is some scope to surprise the upside and extend into the October season. So I'm wondering if you can talk around that.And then the other question is around, obviously, we had recently the EU Fit for 55 proposals. I'm wondering if you could give us any feel for the assessed impact of that on the assumption those proposals were actually sort of agreed unanimously by the European members. So kind of short-term summer and crewing, sort of giving an indication of maybe a surprise to the upside and then the longer-term implication of sort of carbon costs and tax on fuel.
Yes. So starting on the summer, I mean first of all, we do think that there is an opportunity for positive surprises. If you compare to normalize here on the relatively scale the end of the summer, so like September and October as an example, because we know that there's a lot of people who've been waiting to book and book further out as vaccination levels are increased in Europe, and they get more clear on what the situation is. And so it is true that we can't see and there is an opportunity to be positively surprising where that's going to come. But it's still limited visibility. That's why we can't give any further guidance on that whole thing. But I think that's something that we would be looking forward to doing and watch that almost every minute in terms of the sales and the trends, how things are coming in. And that is something we would be keen to accommodate, of course. Peter, on the crewing?
So on the crewing marks, we're availing at the furlough schemes in every country, except the Netherlands. Or actually, we've got more flights operating at the moment than we had in 2019. Some of those furlough schemes run now through to March '22 and actually one country through to May '23. So we're getting all the crew back current trained in place for what I think actually will be a bumper 2022. So we really needed to get everybody back trained, but we can offset them out. For example, in Gatwick, we have pilots in Gatwick who are on a furlough now for the whole month of August, but might be back signing in for the month of September and so forth.
And I think on that Fit for 55, as you know, we've been supportive in the aim of the plans that's been presented on that in its totality. I do think that we -- the views we've had, and I've written into a sort of on the label and some key [ memento ] on the proposal that what needs to do is to make sure that any taxation that is coming way needs to make sure that it really follows the principle of polluter pay i.e., that the more efficient you are, the less you pay; and the more you emit, the more you pay.And that it also needs to take into account, of course, long-haul travel. I think it's a appalling suggestion that long-haul travel would be excluded. Long-haul travel consists of single digits in terms of its flight but over half of the total carbon emissions that's being emitted. So that is number one. We're also calling out for, as you would expect, that the carbon offset into the highest-quality schemes that easyJet introduced as the first major airline in the world. We have since followers throughout the world to do the same thing. That also needs to be recognized. But we're clearly supportive of the road of decarbonizing aviation. We believe that we're leading this and nobody else is doing more than we are doing.And also to get about the mission that I think we need to make, that whatever taxation policies will be in place, that those revenues would, in majority, go to projects, the decarbonized aviation. In contrary to what many of the local taxes that are in place, APD being one as an example in the U.K., is happening. So we're in very close dialogue with them. And like I said, we've been supportive of our overall aim of this whole thing, but we need to make sure that following the principle of the polluter pay, that needs to be recognized in a level playing field and really across the market with no exceptions on transfer passengers and long haul, as an example.
Your next question comes from the line of Neil Glynn calling from Credit Suisse.
I'll also take 2, please. The first one on cash flow and specifically CapEx, your 9-month CapEx is actually only about half your full year guidance. So just interested, are you likely to spend half of your full year guidance on CapEx in the fourth quarter? Or is there the potential for us to see quite a lower level of CapEx for the year than guided?And then the second question, looking towards 2022, and you're obviously quite confident in the summer for 2022, can you give us some sense as to the scale that holidays may operate at in 2022? I don't know if Garry's is on the call, but some kind of a scale in terms of the amount of passengers, for example, you would expect to be booking holidays with you or something else substantive that helps to think about whether holidays plays a meaningful role in second half 2022 PBT.
Yes, thanks for that. I'll take the holidays question. I don't know if we got Garry able to speak on the call. Okay. Okay. You got to settle with me. Look, we haven't given any guidance also on the specific numbers on that. But what is true is that as we're going through the pandemic, what we see is that our market share hasn't increased. And the way we look at that is just looking at the basic [indiscernible] numbers. We've been increasing our share more than I think anybody else has been doing in the U.K. And the other thing why we're saying that we're building this and it's going better than we expected it to do is because we've been able to now get access to a lot more of the exclusivity properties that we know are so well in demand and that also generates really good margins to ourselves. So that's something that we feel very pleased about. But I think we're also going to come back, I'm looking at Michael right now, perhaps to do a day where we spend more time also to talk about holidays in detail, to give you a little bit more in-depth color on the opportunities that we have. And I'm sure you're going to be just as excited as we are as well. But this is -- once again, as I said before as well, it's a very, very low risk proposition that can just benefit from Europe's largest leisure network built on a well-known brand across Europe. So if I say across Europe, you recognize that our ambition is great. And then only the U.K. as an example. I'm looking for this, and we're looking for this to be one of the biggest pan-European players here as we're coming out of the pandemic into the next few years. But like I said, we'll come back and do a day on that where we'll explore that in more detail.
Kenton, on...
Yes. On CapEx, thanks, Neil. We're not making any change to the CapEx guidance. The CapEx is driven by mainly our leased aircraft costs and maintenance, but we continue to focus on reducing all spend as we see the opportunity, but no change to guidance.
The next question comes from the line of Muneeba Kayani calling from Bank of America.
First question around 4Q expectations in terms of pricing and load levels, how do you think we should be thinking about pricing? And kind of at what load level would you look to add or kind of reduce the capacity plans from the 60% that you've currently scheduled? And then secondly, just on the kind of longer term, Johan, I think you said that cost savings will help to grow margins. When you say that kind of a margin improvement compared to what period? And if you're talking about higher carbon costs and jet fuel, taxes, could those be passed on in ticket prices?
Yes. So let's start on this, and it's actually part of the question. Perhaps I didn't answer on the cost of the carbon as well. I mean the whole point why we are supportive of the principle of the polluter pay is, one, it makes sense, step number one. And also remember that easyJet is one of the most fuel-efficient airline in Europe overall. And together with the possible also recognition that what we're doing on the carbon offsetting schemes, we will have an advantage from a cost perspective, we believe, versus the majority of our competitors airlines that is flying primarily 2/3 from the head-to-head competition and where we are operating, And that makes absolutely sense to do. So that's number one.I think that there's still fluctuations into the carbon pricing, and it's also yet to be determined on what actually the cost of this will be. And then also as we've been arguing that any taxation on carbon that is going to be imposed throughout Europe would also mean that we would ask for and requested local taxes in the name of sustainability to be removed because, otherwise, it becomes a question of double taxation. And that is something that is an argument that is well understood, I think, by the decision makers. But of course, it represents a challenge, as you know, for everybody, for the politicians to remove the tax once it's been introduced.But anyway, the whole principle of the polluter pay makes sense for us. We think we're going to have a competitive advantage out of that one, which we should do because of our efficiencies on the emissions per passenger kilometer in the fuel burn and then also the carbon offsetting theme that we have.And remember, when you're looking at CORSIA as an example, that is, in fact, an offset program. So we are well set and well positioned within the context of that. On the pricing, just remember that our whole point was always to fly and operate capacity that was generating a positive contribution for the company. That was the key thing. And we have some very advanced and good metrics around how we do that. And I think if we compare ourself to competitors, we'd probably be the most accurate in estimating and telling you what level of capacity we will find and what we actually aren't delivering as well. So the load factor and the yield is the combination of those 2 things. But I think we've proven that we established very good processes and accuracy around that. Kenton, do you want to add anything?
No, I mean the ticket yield is slightly softer than the full year '19 we're seeing. We're seeing some -- as we discussed, the growth in the ancillary uptake and the yields we're getting from that. But as Johan said, it's really a combination of yield and load factor. So the load factor built through Q3 up to about 72% in June. The -- any late changes in [ advisers ] didn't help the load factor build and load factor and the customers are booking closer too. In terms of margin growth, yes, we're looking to build the EBITDA margin growth moving forward. So yes, that's where we see the growth.
To clarify, is that versus 2019 margins?
Yes, over time, to move forward to 2019 margin, that's right.
The next question comes from the line of Jarrod Castle calling from UBS.
Firstly, just on the CapEx profile, you've revised the fleet numbers down certainly from the upside case. For instance, 2023, you had 355 planes, so it's now looking about 10% lower, give or take, by then and obviously in 2024 as well. So you're talking about all this costs coming out, the opportunity to take market share, and yes, you'll be upgauging. But the fleet profile is still at best in line with 2019 levels. So why are you revising it down, firstly?And then just secondly, coming out of Q4 going into your Q1, any indications from your business travel relationships with the corporates, what they're thinking as they go into Q4?
On the fleet, I think we're growing, at the time we've given this to go to 317 for next summer. And we took out 16 aircraft out of Berlin, they weren't making the return we needed. We closed Stansted southend, that was 11 aircraft and 3 in Newcastle. So there's [indiscernible], and they just weren't making a return. So when you reverse it back out, that takes you down to around about 302 really. We've opened very successfully the new bases in Malaga and Faro. They're kind of no-brainers, and we go back up to 317. I'd say we're moving to -- for next summer to easyJet's greatest hits volume one. And I think it'll go really, really well. I think we've got a great opportunity to make some serious money out of that. So I think on that one, it makes perfect sense.
I mean to add to that -- thanks, Peter, that's right. Obviously, you've got the upgauging as 319s retire and the 320s and 321s come in. I think Peter has mentioned the efficiency in engineering and maintenance, which means we get the equivalent of 5 to 6 aircraft extra flying ability through the summer, which is about 1.7% extra seats. And we should remember that market aircrafts are available at attractive prices. We're not bound by the [ jewels ], should we see that great turn of demand. And remember, it's one of the things. When we talked about flexibility, we mean flexibility. We mean that we're going to take every opportunity that we see, that makes the return for us to grow, and we see plenty of them. And that's why we need to have the flexibility to do so. But it's also fair to say that nobody knows exactly how and when this recovery is going to play out.I mean just look at our network right now. We have in Holland a situation where we're flying more than we did in 2019, as an example. We have a situation in the U.K. that is not in the same place because of the restrictions that are being put in place. But given the fact that we can see that this moving in the right direction and perhaps even more rapidly so, we're definitely on the journey of that recovery. I mean our order book on the fleet, we got 101 aircraft on order. We got 78 rights and options on our way. And that should be noted. So when you hear how the people scream about how many aircraft they're going to order and what they're going to do, let's look at some facts behind this. We're well placed on this. We launched more routes than Wizz and Ryanair in combined since June. And we're going to ready to take that opportunity also coming our way. We've taken the opportunity to increase our presence in Italy. In Gatwick, we competed head to head. We've seen all the low-cost carriers retract and cancel frequencies of flying where we meet up to them, and that's what you can expect going forward from ourselves.I was so excited about that, I forgot there was another question that I missed, or did I cover it?
It was just about business travel, if there's any indications when you...
Yes, sorry. Yes, exactly. Yes, absolutely. Because yes, we do see that we -- whilst it is dampened and whilst there's nothing changes to the view that we've had earlier about business travel coming back 1 to 2 years later, we definitely see that we are increasing our shares, and we get a company to travel with us because they are not allowed to travel in business class on short-haul anymore. And they've been looking for 2 things: value and also sustainability. And the carbon offsetting program that we have is something that is really attractive and playing a part on how corporates now are choosing to fly with companies. So that is one thing that we feel very, very good about. And that's the same trend that we've seen in previous downturns as well. But the carbon offsetting program is something that corporates really are attracted to.
The next question comes from the line of Sathish Sivakumar calling from Citigroup.
I've got a couple of questions here. So firstly, in terms of the trends within your network, have you seen any meaningful impact on bookings from the delta variant? And then is there any market that you actually have to stimulate demand through aggressive pricing? So that's on the first one. The second one...
Sathish, sorry, it's Michael here. Can you just speak up a little bit more. We can't really hear you very well.
Okay. So in terms of the trends within your network, have you seen any meaningful impact from the bookings because of the delta variant? And then within your network you have to stimulate -- is there any market that you actually have to stimulate demand through aggressive pricing?And then on the capacity side, assuming that if you have to ramp up more than 60% of your capacity, how should one think about the ramp-up costs associated with that additional capacity coming in Q4?
Yes. So on the network, I mean there's no specific evidence that you link demand towards the delta variant. I mean the delta variant is clearly the most prevalent here in the U.K. which have then led, I think, more to -- the more important point about the restrictions that have been imposed by the U.K. government that we don't believe is correct. We see no reason whatsoever that you can freely as and now go into a huge crowd and nightclub without any face masks, no vaccination and no testing requirement. But you can't slide down to low-risk destinations on the beach. That just doesn't make any sense at all. So it's not linked into delta variant in itself.And I think as an example, if you look at the inconsistency and the difficulties to understand it from a transparency point of view, on what U.K. is introducing with this latest change to France, where they are quoting the beta variant. Well, that is prevalent in [ Lyon ] and down in the Indian Ocean, which is about 6,000 miles away from the French mainland. It is difficult to see the link how prevalence of that in that island there is going to be impact on hospitalization. U.K. remains some of the highest -- with the highest cases of infections per population per 100,000 in the world. And you could have most of Europe coming on to that Green list. And we would then also argue that France will back it up, and you don't need to have any restrictions at all for vaccinated people if you're on that Green list as well. So the reason why I go on about this is to say that there have been changes. There will continue, I'm sure, to be changes. We are prepared for them. And that's why it's so important to have the flexibility in terms of what we are doing. I don't think that there's a need anywhere for us to stimulate the demand to that fact. The restrictions that are in the countries play a much, much broader part. It's not like people ultimately think to say, well, I will go if this cost me GBP 10 or EUR 10, but I won't go if it will cost me GBP 50. It's more down to the fact that, look, what are the restrictions? Are there quarantines, are there testing requirements that adds a lot of cost to that as well? But the pricing really across the market continues to be dynamic.Yes, we do see that there is very, very low fares going around in certain parts of the year, and we're competing with some of them. But primarily, the objective for us is to look at a positive contribution to all the flying that we're doing.
In terms of the event of cost?
Sorry?
In terms of the second question around the ramp-up cost, so assuming that if you had to go beyond 60% of capacity and fuel cost.
No. Really, the only main difference is really on variable costs and taking people off furlough. So it's very marginal. And we're able to adjust at very short notice. I think we've executed quite well over the last 18 months on these things. So it's just -- we can't actually put on with a few days notice extra capacity. And we may well do that at times in Gatwick on peak groups during the month of August.
But it's been actually one of the key components when we looked at how to fly -- lines of flying that is generating a positive contribution to the company. But I think now if you look at the total cash burn, which was GBP 55 million for the quarter, the equivalent cash burn in last year's quarter would have been GBP 774 million. So it's a massive, massive improvement, but that also comes back to the fact that even if we only flew 17% of 2019 capacity in the quarter just gone by, that we've been quite accurate to predict what is the optimal level of flying to make sure that the costs are matched up and optimized towards the demand and the revenues we're seeing.
The next question comes from the line of Andrew Lobbenberg calling from HSBC.
Can I ask on the data leak because, obviously, I think there's been a settlement with the British Airways data leak. And at least according to the stuff in the press, it sounds like the lawyers are all enthusiastically chasing yours, and I can't log on to Twitter without seeing a lawyer advertising me to approach them to try and get money out of you. So can you say a little bit about what's going on with that and remind us perhaps what has been provided for in the context of that?And then second question, I guess, would be around the political rulemaking. I mean, obviously, not here in the U.K., we're watching what happens with deep frustration as I know you are. But conversely, how successfully is the digital COVID certificate working across Europe? And to what extent are you concerned about member states trying to impose tighter restrictions within the EU as we occasionally see noises out of Germany trying to restrict Spain and the like? So yes, a bit more of the positive perhaps use of policymaking in Europe as compared to here.
Okay. Andrew, yes, so I mean I'll start with the data leak. First of all, I mean, we continue to, of course, be in contact with IPO, but there's -- and that's an ongoing discussion we're having with them. So there's nothing new to report on that. And in terms of the -- our ability to keep lawyers busy on things like this, as you mentioned, I think it's fair to say that it's very different from the BA. We've had a breach where travel information was compromised but very, very little financial information. It was just, if I can remember the numbers right now, 2,208 customers whose credit card information, financial information could have possibly been compromised. But that's very, very different numbers from what we've seen, and there's no evidence from, what we have seen, that nobody has been at a disadvantage on this as well. So this is -- first of all, we're engaging with the IPO on this whole thing, and then we just have to deal with the things as they come along. But it's a very different story from British Airways.
And there's no provision in the books for any time.
On the digital COVID certificate, Andrew, I think it's worked extremely well. I think the European Commission has done a great job on that and the execution by the government has been great. It's very easy for us operationally to look at it and scan at the airport. So that's been a great success, as has the NHS app actually, which has been widely accepted by governments right across Europe. Border force of the airports where we're at have done a really, really good job. They have automated the gates at a large number of locations. And even at the desks, they've managed to automate the scanning of the -- your data coming on the forms that are linked. So we're seeing transaction times of less than a minute of many airports. We want to say congratulations to them. And all of this adds up to like -- we carried 40,000 people through Gatwick at the weekend, 92% of them were on time, and that's even with all the checking. So I don't think people should be scared from traveling. I'd think we see [indiscernible] buildup and people will see that it is possible to travel, and it's not as big of a hassle as you may think.
Final question today comes from the line of Carolina Dores calling from Morgan Stanley.
My first question is what has been the strategy on CO2 credit given that you probably utilized in 2020 and will utilize in 2021 that you have in inventory. Have you sold this credit or hold on to it, so you could use in 2022, 2023?My second question, it's a bit more on competitive environment that you're seeing in the summer. We are hearing from some airlines that are trying to simulate, remained on lower yield. I guess you guys have done a good job on keeping yields high. What are you seeing in your key markets such as France, U.K. in terms of behavior of different competitors? And do you think that has changed since pre-COVID times?
So I'll start on the carbon credit. I mean, obviously, here we get a number of free allowances, and then we have a rolling hedging profile where we buy throughout the year. Due to the volume of flying, we will be carrying forward a number of carbon credits. We haven't sold any, so we'll be carrying those forward, which we can do.
Yes. And then on the competitive landscape, I mean it's clearly moving, and it's slightly different from market to market. But in general, you could say that legacy carriers are very clear that they are retrenching the moving capacity from a number of routes. We are watching this from a really route-by-route basis, and we have taken the opportunity to grow our presence and we'll continue to do. Our strategy crystal-clear, leading positions at the primary airport. And with the reset that we've had on the cost base, our advantage that we've had has increased. So we're looking forward to compete with them. And that also includes any legacy airlines, low -- so-called low-cost subsidiaries. We feel confident that our cost program is giving us further advantages there.And it also is reducing the gap to 1 or 2 other players that where we might have a -- might not have a cost advantage on as well. That is all as well what we wanted to do to make sure that we can come closer to the ones who possibly have a lower cost than we have, based on their models and that is as far as we can tell is happening. There are some aggressive moves being made in certain parts of the market. Italy, as an example, we have been part of that and responded on that. And we've seen retrenchment and cancellation from some of the local scares in routes that we've been doing. And we will continue to do a combination of defend, where it's necessary to do so, we prove we can do that and then also be aggressive when it makes sense for us to do so. But overall, we will continue with the focus to do flying to generate a positive contribution. But we're also thinking about this in the mid- to long term that we are placed in position for us that would just strengthened our overall network. So that's I think the summary of that.And that was it. Okay. So listen, thank you all so much for joining us here today. Look after yourself, and keep safe in the heat, and look forward to seeing you on an easyJet plane soon, I hope. Thank you all.
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