Ryanair Holdings PLC

XMUN:RY4C

Okay. Thank you. Ladies and gentlemen, good morning. Welcome to the Ryanair H1 Analyst Call. As you see this morning, we released our half year results. So profits have fallen 15% to EUR 2.15 billion for the half year, primarily due to the cost of unhedged oil, which has doubled over our hedge price of EUR 67 per barrel. However, we delivered another strong operating performance. Traffic in the half year is up 6%, mainly by virtue of the fact that fares though have fallen 4% during the peak summer period. H1 fares fell, although some of that was also -- April didn't have a full Easter in it. But mainly, we think we attribute that to the Middle East conflict, which in the early part of the summer led to consumer hesitancy, later bookings, and we did need to price down to stimulate travel and volumes.

Operating costs in the half year have risen 10% to EUR 7.7 billion as the price of our 20% unhedged jet fuel doubled and supplier compensation ceased following the delivery of the final game changers last year. Our FY '27 jet fuel prices remain 80% hedged at $67 a barrel, that has insulated both our earnings and our passengers from the alarming spike upwards in oil price. It's also significantly widened our cost advantage over other EU competitors as well as boosting current year earnings. While oil prices remain volatile, we've taken advantage of recent dips to extend our FY '28 cover, which has now risen from 15% to 25% at an average price of $95 per barrel, but that will still be a 50% increase in our -- this year's hedge. The industry -- the balance sheet remains strong, industry-leading. It supports -- we paid down our bond debt.

The balance sheet is supported by an unencumbered fleet of 620 Boeing 737 aircraft and strong liquidity. Gross cash at the half year-end was EUR 2.6 billion, even after paying down $1.3 billion in debt, EUR 800 million of CapEx and $400 million of shareholder distributions. In September, you'll have seen we completed our latest EUR 750 million buyback. We've now retired over 40% of Ryanair's issued share capital since 2008. Board remains committed, however, to shareholder returns. And so in addition to an interim dividend of EUR 0.273 per share payable in late February 2027, the Board has decided to launch another EUR 800 million share buyback. That is timed to start next February, which is when our cash flows are strong. Cash flows are strongly positive from January onwards. And we expect that this latest buyback will run for about a 10-month period. So from February to the end of December 2027.

We see the current share price as a buying opportunity. And by extending the share buybacks, we think it can be accretive for shareholders over the medium to long term when the current oil disruption settles down.

On fleet, we warmly welcome the FAA's recent certification of the MAX A10. We expect and hope that the EASA will certify this before the end of December, which will enable Ryanair to take delivery of the first of our 16 MAX-10s in spring 2027. The first aircraft is due to deliver at the end of January with another 15 being delivered by the end of April. That will give us 16 new aircraft or capacity for about 3% traffic growth in FY '28. We'll see traffic rise from 214 million passengers this year to 220 million passengers next year.

However, in the short term, this winter, we have reduced the exposure to unhedged oil by cutting our current traffic target from 216 million to 214 million passengers. It means that our winter traffic from November to March will be broadly flat year-on-year. Next year, with the 16 new MAX-10s, we'll be able to grow just over 220 million passengers, but that is only 3% traffic growth, which for us is very slow capacity growth historically. We think that gives us an opportunity to price up meaningfully into the summer of next year. With that spare capacity, we are allocating that capacity and churning some of our existing capacity to those states, regions and airports who are cutting aviation taxes and lowering fees, and we highlight Albania, Italy, Morocco, Slovakia and Sweden who have abolished aviation taxes. The switches will move away from those countries like Austria, Belgium, Germany and regional Spain who are either maintaining high airport fees or raising taxes. Next summer, summer '27, the schedule is already on sale.

We have 126 new routes and 1 new base in Rimini. The outlook for FY '27 traffic, as I said, we expect to grow now slightly less 3% to 214 million passengers, although our cost leadership continues to widen with all other EU airlines. With 80% of jet fuel hedged at $67 a barrel out to March, this year's earnings and our winter traffic are well insulated from the current oil price volatility. However, the final FY '28 unit costs will depend on the price of -- the final price of the unhedged jet fuel for the second half of the year. Interestingly, particularly if you look at this morning's numbers, where traffic is up 6% for the half year, but summer fares were down 4%, Pricing has turned around in recent weeks. Since about the start of August, we've seen prices move upwards year-on-year Q3 demand, which runs out to December is strong, and fares are trending modestly ahead of the same quarter last year, which is a pretty startling change in pricing from the peak summer period. And I think that augurs well for price increases into the summer of 2027.

All the airlines around Europe are not well hedged to summer '27. They're all cutting capacity into the winter, and I think that will be a good platform for constrained capacity and higher prices into summer 2027. The booking window, however, remains close in. And while we have reasonable visibility into Q3, we have almost 0 Q4 visibility and therefore, too early to provide meaningful FY '28 profit guidance. I think it's appropriate, though we should address the fuel cost for FY '28. Based on what we see now, unless there's a swift resolution of the Middle East conflict, we expect jet fuel prices will remain elevated well into 2027. as our low-cost oil hedges roll off in March of next year, all EU airlines face significantly higher fuel bill. We believe European short-haul airfares will increase materially. We expect to see fuel surcharges from the legacy airlines on their short-haul operations next summer, which will drive up airfares on short-haul services across Europe next year.

With a EUR 2 billion increase in our fuel bill next year, we need about a 20% increase in airfares or about EUR 10 per passenger to fund all of that. And while I do think there will be a significant boost in airfares next year, I'm not sure we'll see 20%. And therefore, we do need to close that gap, we're going to have to be addressed costs. We're reviewing costs all across our group airlines. Particular focus on tax or persuading governments to abolish aviation taxes. We're accelerating the airport churn negotiations, particularly with the arrival of the fuel-efficient MAX-10 next year. Where there's maturing labor agreements in April next year, we're looking at temporary pay freezes unless those pay deals are done before the end of March next year. I'm not sure we'd be minded to agree any pay increases from April next year apart from those that are already in place.

We will see lower crewing ratios, but that is a function of having less aircraft deliveries for the next 2 years. We need to recruit and train fewer pilots. We're seeing almost 0 churn in pilots or cabin crew at the moment. And therefore, we're stepping back pilot recruitment and training courses. We're postponing those this winter and I think into the summer of 2027 with no attrition, nobody leaving, there's not much reason for us to recruit more pilots, particularly where we're only taking 16 aircraft next year. Those lower crewing ratios, increased use of AI, which is driving further operational back office and support functions will enable us to continue to deliver an exceptional performance on unit cost ex fuel next year. And that allied to, I think, what will be a large bump in airfares. I'm not sure we'll be able to repeat. I think the current guidance -- the market expects us to deliver profits of about EUR 1.7 billion, EUR 1.8 billion this year. I think there's a reasonable chance we'll maintain that into FY '28, but it's all heavily dependent on where fares go and where oil prices go.

And until we see -- until we see some certainty of that coming out of the U.S. midterms this week, we'd like to see an early resolution of the situation in the Middle East that would at least allow crude oil shipping -- shipments to restart. We maybe see crude oil trend back from Brent crude today at $117 a barrel. I think that's likely to drift downwards towards $80 a barrel into next year. The crack spreads, however, will remain elevated, and therefore, jet fuel, which is currently close to $170 a barrel. I think at best, that's going to trend down towards $120, $130 a barrel next year. I welcome that as a crisis point I think it will put a lot more capacity discipline on airlines in Europe. There will be more failures in Europe. Already BRA and airBaltic are in Chapter 11. I think you'll see more European airlines or flaky European airlines who are currently not profitable, but who have heavy debt will struggle to survive the winter.

And the possible consolidation in Europe will accelerate if oil prices remain higher for longer into that marketplace, we have been here before. I would caution, we've been here before. We've gone through 9/11, Gulf War 1, Gulf War 2, Putin's invasion of Ukraine. There's been a big bump up in oil prices, pressure on airline pricing for 6 to 12 months. And then Ryanair emerges out of that period with greater market share, customers more focused on price -- more price-sensitive customers trading down to Ryanair, which I think will happen next year. But the outcome will depend on where our pricing goes and where the final oil bill will be for FY '28.

I think this is a great time to do another share buyback, which is why the Board has agreed and why we're launching another EUR 800 million share buyback from February next year. This is one of those historic buying opportunities, and we don't want to let that opportunity pass. Neil, do you want to take us through the MD&A, and then I will ask Eddie to give us kind of a couple of words on current trading and Tracey McCann on costs.

Okay. Thanks, Michael. I don't have a huge amount to add other than, I suppose, focus again on the costs and the balance sheet. Costs, despite the fact that oil was -- the unhedged oil was up at $130 a barrel performed quite well, rising just 5%. I think that's a sign of the kind of airport deals and the cost discipline within the organization. Now I would caution that ex-fuel costs will be a little bit higher into the second half of the year due to, one, we're now spreading the costs over 214 million passengers instead of the 216 million passengers previously targeted at the start of the year. We'll also see more of those CLA deals going through, which will have an impact on the cost into the second half of the year and then the timing of maintenance. But I think the advantages that we have, particularly with the MAX-10 coming down the line, these aircraft, 20% more fuel efficient, 20% more seats, which means we'll be spreading more costs across more -- over more passengers and getting more economies and efficiencies. We'll equally get the benefit of warranties. That will drive significant savings and gap -- and widen the gap between ourselves and everybody else. And then further out, we've got the engine shops coming online, which will again give us a material advantage over everybody else. The balance sheet, fortress balance sheet, times like this, it comes into its own, effectively debt-free with 620 fully unencumbered Boeing 737s a BBB+ credit rating, which gives us huge flexibility and the confidence to be able to do that buyback that Michael talked about there, the EUR 800 million buyback, which will kick off in the spring time frame. And that's it, Michael. Thank you.

Okay. Thanks. Eddie, do you want to give us a couple of lines on current trading or markets that you're excited or pessimistic about?

Yes. I mean you've covered a lot of it off there. But I mean, like it's really a function out there of our own capacity, the mentioned capacity cuts, which had us flat for this winter. We see the market capacity has come down. It's going to grow by -- at the moment by just over 2.5%, but it's come back by 2% in the market itself. And I think more is going to come out of that and our competitors pricing up, and that's reflecting in those stronger fares. And -- but while the curve has moved in terms of more close-in bookings, we'll still have to wait and see how things go, particularly for the peak Christmas period. But as you said there, it is strong, and it is a change that, as I say, is a function of capacity constraints and competitors pricing up.

On the airport churn, you can see where we've opened new bases, we're growing strongly in Poland, growing strongly in Italy. We've got also in Albania, Slovakian, -- a new base in Rabat. And then on the opposite side of that, the Berlin base is closed, the Thessaloniki base is closed for the winter. And Austria, we've seen cutbacks there in Vienna. So you are seeing a move amongst airports, like airports that wouldn't have previously arrived with solutions to their problems because they are now seeing like what tails of what aircraft are going to fill in for those capacity -- increasingly the worry is that they're not going to be able to fill the capacity in their airports. And we continue to lock away longer-term deals out to 7, 8, in some cases, 10 years out. We know exactly what our cost base is going to be a significant proportion as we grow. So it's the biggest variable cost in the business and a lot of good work done on the airport. So it is surprised the way the fares have turned, but again, a function of capacity constraint and competitors pricing up.

Okay. Tracey, anything you want to highlight on the cost side?

So just what Neil said, just to reiterate cost for the winter, we do have to consider the 214 million passengers, and we are going into heavy maintenance season. And then just for next year to somewhat offset that EUR 2 billion fuel increase, we will have to look, as Michael said, airport churn, maturing labor agreements we may have considered temporary pay releases, look at ratios. AI will help the backup support. And then on the MAX-10 deliveries, we will see the benefits of 20 more seats at no additional fuel cost. The engine shops will come online, which will help somewhat widen the cost gap between us and our competitors on engine and maintenance costs.

Okay. Thanks Tracey. Okay Seb, let's open it up for Q&A, please.

Jamie, hi.

Thanks, Jamie. I'll take the first and let Neil do the second. How much that competitive capacity if it fails, if you take that was currently, for example, in Chapter 11, you have Volotea with A319 or Volotea, largely A319s, Baltic with 220s I don't think that capacity comes back into Europe. I don't see an operator there that will want to take that capacity and restart their kind of -- everybody wants to be out of the 319s. If you take Volotea who are big in regional Spain -- regional France and regional Spain, those are not growing marketplaces. I'm not sure there's anybody -- when we pulled out of -- we took a lot of capacity out of regional Spain last year in the broader arena. We moved that capacity into Mainland Spain.

So like we've added capacity in Madrid, Barcelona, Palma Malaga. Nobody else came in to take up that capacity despite the proclamations of the Transport Minister in Spain. They're way down in place like Valladolid, Santiago de Compostela, Jerez. And I think the same will apply up in the Baltic states. We're adding 4 aircraft up in the Baltic market this winter. It's one of the few areas where we are growing this winter, but we're growing in response to significant airport incentives. I mean the -- I think it is dawned now on the Baltic airports that they're about to lose a lot of their existing traffic. Even if I think Baltic reemerges out of Chapter 11, they will do so with a much smaller fleet. I don't think those aircraft will resurface the aircraft that they don't operate will get leased, I think, to other markets elsewhere. The lessors will put them into Asia, Latin America, maybe even the Middle East as well. There is a lot of demand for those aircraft. Airlines are short aircraft in Asia, Africa, Middle East and Latin America. That's where the demand is stronger. I don't see any of the airlines in Europe wanting to take those aircraft on secondary leases or re-leasing those aircraft back into Europe. The market in Europe is -- most of the airlines are losing money.

So I think there's almost no risk of seeing those aircraft reemerge into Europe. I mean the big issue will be what happens if some of the larger locals maybe Norwegian or Wizz fail this winter. I think there's a real possibility they may. And again, I think the lessors will be forced to take those aircraft and redeploy them elsewhere outside of Europe. I don't see any other European airlines wanting to take those aircraft at short notice. Certainly, not if you look at the very expensive lease rates that Norwegian and Wizz are paying, many having done sale leasebacks. I think there's no risk of those aircraft reappearing in Europe next year. Certainly, if you look at the way the European airlines are managing this winter schedule, they all -- including us, originally filed our winter schedules. We've since cut back that winter schedule in taking traffic down from 216 million to 214 million. And almost every other airline in Europe has followed us.

They're all taking out capacity. I think it's -- not many of them are as well hedged as we are. Some -- most of the European airlines are hedged up to the end of October at the end of December. And I think it is dawning on them that they're going to have to pay significantly higher prices for unhedged oil and they are cutting capacity accordingly. And I think that trend will continue. Neil, EUR 2 billion, if it -- you want to give us your view on how much of that will be taken up in fares and how much will be cost savings?

Sure. I suppose, first and foremost, the timing of when we're going to hedge, Jamie, it will very much depend on the opportunities in the market. It's a very volatile market at the moment, and it's not been driven really by supply and demand. It's been driven by events and news flow. So we'll opportunistically for the next couple of months, jump on dips as we already did to bring our cover from 15% up to 25%. We have to keep a very watchful eye on what's happening in the market as well with competitors who are relatively lightly hedged into next year. The key is that we're very well hedged out to the end of March, 81% cover at $670 a metric ton or $67 a barrel. If we look into next year, the average rate is somewhere close to $1,200 or $120 a barrel. So we look for dips to get in there.

But I think if we get into the spring or beyond Christmas, we'll probably have to do a bit more meaningful hedging based on what we can get. How do we cover it? Well, I think I agree with Michael insofar as I believe there will be double-digit fare increases next year. How high they will be remains to be seen. There was a good conversation there a couple of minutes ago around the timing of capacity coming out of the market. I think we also have to look at the M&A that's going on at the moment, so the likes of the Apollo, easyJet. I think we'll see metal coming out on the back of that as well. So I think capacity is going to be well out of the market into the summer of next year and beyond. That gives more pricing power whether that's 10% or 15% or higher in percentage terms remains to be seen. What will help on the cost side? Well, we get the first 16 MAX-10s in the spring.

It's not going to make as big a dent as having more of those in the fleet as I would like, but it's still at the start, 20% more fuel efficient, 20% more passengers and of course, all of the maintenance warranty. So we'll have to look at what we're doing on churning the capacity around. You'll have seen airports costs were already down on a per passenger basis. Jason and the team doing a good job there. But we'll have to do more of that into next year. We're broadly flat in capacity this winter. We're only growing by 3% into the summer and beyond of next year. And then, of course, every other cost as we get into our budget process, when we come back from the road, we'll be looked at in minute detail to see where we can shave costs out across the business. So will we recover all of the EUR 2 billion? I don't think so, but it all very much hinges on where fares go.

Yes. And I would be cautious. I mean, we ourselves -- while we've added to our fuel hedge for next year has gone up from 15% to 25% on recent dips. We're waiting for the outcome of the midterms to see what effect that has on the -- particularly the Middle East situation. But given the volatility, I don't think -- I think before we get to the end of the third quarter, December or early in the fourth quarter, I think we want to see our fuel cover next year probably up at around 50% or 50% for the first half of next year. We certainly wouldn't in the current volatile market, want to hedge 80%. I think the risk is that oil prices might roll off and we'd catch ourselves, we'd be out kind of the wrong side of the market.

But I think if we had about 50% of oil hedged in the run into next summer, I think I'd be happy enough to take a risk on the other 50% being unhedged because I think there's still on balance, it's more likely that oil crude prices will roll off from their current highs. And hopefully, jet prices will follow them. But there's no way it's going back down to the $67 a barrel, which we're hedged this year. One way or another, we're facing a very significant rise in oil prices next year, which is why consumers in Europe next year are facing dramatically higher airfares. And I would encourage them all to book early because the longer you wait, the higher fare you're going to pay. Next question, please. Thanks, Jamie.

Dudley, hi.

Okay. I'll take those briefly. MAX-10, I think we will get the 16 aircraft. Boeing wanted to give us extra aircraft. They don't have any additional spare capacity we tried. Boeing are still struggling to get production up. I mean there are challenges with wings and engines. but that's as good as we're going to get. We have tried to get more aircraft in the spring of '28 and Boeing just don't have them. There's a big backlog in their own orders. They've committed to meet our contracted delivery dates for spring '27, spring '28, spring '29, spring '30. And that is a pretty good position to be in because I think others are going to have to take delays on their aircraft.

So there's no chance to get more than those 16 aircraft. How confident am I getting to EUR 14 or EUR 15 [indiscernible] very, I think I still think by 2030, higher -- if oil prices, they stay higher for longer, you will accelerate the failures of the flaky Ponzi scheme airlines currently operating in Europe who don't make any money but covered up by doing mad sale and leasebacks and recognizing these kind of money in the P&L. There will be more failures. I think the higher -- if oil prices stay higher for longer, consolidation accelerates. And you can see that with Lufthansa doing TAP and Air France-KLM taking a majority ownership in SAS. Even the Apollo deal with easyJet, I mean, if you look at what their public pronouncements, they're going to load debt onto the easyJet balance sheet. Private equity will want to see a quick return. I think the only way they can do that is by selling some of the easyJet fleet or parts of the easyJet operation. And the faster Europe -- the more Europe consolidates, the more I think you're going to see pricing power, not unlike North America that the airlines having some degree of pricing power in the system.

So I think this is -- as we've been here before with oil price shocks, -- we come out of this usually typically after 12, 18 months. Ryanair comes out stronger than it went in. Our competitors come out weaker than they went in if they come out at all. And ultimately, the industry is moving towards higher fares in Europe. I mean it's remarkable in Europe for all of the waffle that the Commission goes on about being competitors. The only industry where Europe is more competitive than North America is air travel. And yet the industry that are loading taxes, environmental taxes on to. This is a very competitive industry in Europe, but airfares are probably a little bit too low in Europe for the value that we are providing, certainly compared to North America. Air pricing has been trending up in North America for the last 10 years, and I think we're entering a period of 5 or 10 years when airfares are going to trend up in Europe as well. Next question, please.

Jarrod, hi.

Juliusz, I ask maybe more appropriate, you give an update on the ENA update and what you think the likelihood of success is. Sizing of the buyback, look, we did a buyback last year, EUR 750 million. This year, we increased it slightly to EUR 800 million. The timing and the delayed timing is just -- it matches our cash flows. We are cash negative from October through December. We go strongly cash positive from January onwards. And therefore, it makes sense for us at this time of the year, announced the buyback, demonstrate our confidence. I think this is a real buying opportunity for us as a buyback. I think it will be significantly accretive for our shareholders. But from a cash flow point of view, it makes sense to time it to run from February through to December next year. Juliusz ENA Air France-KLM, Lufthansa attempt to limit competition and choice.

Hi Michael, thanks for the question, Jarrod. Yes, so Lufthansa and Air France are behind the case taken in the Irish High Court by one of the lobbying platforms called ENA or ENAA. The case has no merit, and I think everyone accepts that it will fail even Lufthansa and Air France themselves I think what is really interesting in this case and concerning is that 2 of our competitors decided that it was okay to get together and have conversations about our market capitalization relative to their own, our market position relative to their own or our commercial strengths and weaknesses in the market. It's just not okay under competition law. That kind of coordination in order to undermine a competitor is simply not permitted.

So we referred the matter to the European Commission about 2 weeks ago. We filed a formal complaint asking the commission to investigate what exactly went on in those meetings between Lufthansa and Air France and what information was exchanged. And if there's an infringement that's ongoing to bring that infringement to an end. So I don't think it means really anything for us or for other airlines in the market simply because the case has to fail. And I think if I were Lufthansa and Air France, I'd be more worried about the competition law implications of their actions.

Thanks Juliusz, for my pennyworth, I think it's remarkable that you see 2 hypocrite airlines, Lufthansa, Air France, who have bought over Sabena, SWISS, Austrian, ITA, TAP, SAS and KLM have managed to contort themselves to pretend that KLM is still a Dutch airline. So it maintained its third-party route rights. Lufthansa has retained the third-party route rights to non-EU points for Sabena, SWISS, Austrian, ITA, TAP, all by having this kind of notional sort of construct. Everybody knows these are not Belgian, Italian, Swiss or German, Swiss or Austrian airlines anymore. And yet, these are the guys who, when we get around the table in A4E agree that actually the ownership rules should be not controlled, but the ownership rules should be amended by the commission so that we ignore 1% or 2% holdings by U.K. or American pension or passive pension funds, which really have no impact at all. Reminder, we disbar them from voting. They're not allowed to attend the AGM. They have no shareholder rights whatsoever. And yet this is the platform that these 2 anticompetitive airlines want to fight on.

While they pretend that Sabena is still a Belgian airline and therefore, it can have it maintain it by its -- what you call that 2 country or the route rights from Brussels to Africa, Brussels to Asia and Brussels to America. But the Germans and the French have always had a view that Europe exists to serve their best interest. They're not really interested in competition. They want less competition, higher fares. They're the ones who are pushing this European or the national champion agenda at the moment, having received massive billions of state aid during COVID from their government. But as Juliusz says, we don't think this case has any merit and we don't think it will succeed. Next question, please.

Stephen, hi.

Yes. Thanks, Stephen. I never waste too much time worrying about the price elasticity of demand because it's a question I can never answer. I think what has always been the case here is where capacity is constrained in Europe fares rise. And there is no doubt this winter and into next summer capacity will be constrained. There's only one lunatic out there adding capacity, loss-making capacity in the marketplace, that's Wizz. They're all over the place. They withdraw of the Middle East last year. They said they were going to expand in Central and Eastern Europe. They're now actually withdrawing from Poland, Romania, Budapest -- they seem to be adding additional capacity into regional -- Italy and Spain where they have to compete with Ryanair and airline, they already -- that they have proven time and time again that they can't compete with.

And eventually, they run out of road or at least run out of banks to finance their sale and leasebacks as the debt rises ever higher. But I think there is going to be material capacity constraints in Europe next year. I think the big issue for us from a pricing point of view is with the legacies reimposed fuel surcharges on short haul, I think they will. Certainly, if jet remains up at $170, $160, $170 a barrel. And I don't think we'll even need people to trade down to us. I think we will fill -- we're only going to grow our own capacity by 3% next year, which historically for us is a very low figure. We're already churning a lot of that capacity into new markets in Sweden, Slovakia, Albania, regional Italy, where governments have realized that the way forward is to abolish aviation taxes, lower ATC fees and lower airport fees. And we will happily churn capacity away from countries like the U.K., France, Belgium, Germany, where governments are still raising taxes or have high taxes, airports are not lowering their already high cost. And -- but they will see declines.

I mean -- and I'll give you the example of Vienna in Austria. I mean the Austrians have this mad EUR 12 aviation tax. They raise less than EUR 150 million a year. This year, Vienna is going to see its traffic fall by about 10%. It's all going 1 hour up the road to Slovakia, Bratislava Airport whose traffic is growing by more than 200%. And even the governing party is now calling for the abolition of the aviation tax in Austria. But it takes a lot of these politicians a long time before they actually work out what needs to be done. Andy Burnham here in the U.K. has talked about growth in every postcode, but he's just delivered a budget that will deliver no growth. If you're serious about growth in every post code, the industry you should be incentivizing is aviation, which drives tourism and tourism drives economic activity and growth in every post code. And what did they do? They just went out -- they increased the APD, which Reeves already announced increase in APD from GBP 13 to GBP 15 per ticket on the 1st of April, and the budget has failed to roll that back. So until -- unless or until he rolls back that APD in the U.K., which is a scandalous and regressive tax on poor people traveling, there won't be growth in every post code. Thanks, Stephen. Next question, please.

Savi, hi.

Okay. Neil, do you want to take the CapEx out to '28?

Yes, sure. Savi, just I suppose somebody is going to ask about '27 as well. So FY '27, we're expecting to be fairly close to about 2 billion CapEx. And there's been no real change from what I've said on some of these previous calls in relates to FY '28. So we're still somewhere between about EUR 2.7 billion and EUR 3 billion into FY '28.

Great, Savi. On the second half of the question, the December quarter at the moment, we're about 50% sold for the December quarter. The March quarter at the moment, we're about 8% sold. So we have almost no visibility on the March quarter, reasonable visibility on the December quarter. And I think the real change in this morning's commentary is the fact that pricing has turned around. We are now looking at fares modestly up in Q3, having been down 6% in Q1 and down 2% in Q2. Thanks, Savi. Next question, please.

Conor, hi.

Jason, you on the call, give us your kind of an update on the capacity guide both this winter and 3% for next year. And then I might ask Eddie to give us a flavor of what's happening on the opportunities at the airport churn discussions where competitors are struggling or failing. Jason, over to you first on capacity.

Yes. So on the capacity guide, so in terms of market overall, as Eddie said earlier, it's about the market growing by just over 2%. We're flat. But what's interesting, Conor, when you look at the individual country markets are behind. So the likes of the Austria, Belgium, almost double digits down. then Germany, France, U.K., all capacity falling in all those markets. And where capacity is actually growing this winter is the markets Ryanair is growing in, the likes of Albania, Slovakia, Morocco and Poland are all growing by double digits this winter. We're adding aircraft into all of those markets. It's the first winter of our Tirana base. And also we're adding additional aircraft into Poland. When you look into next summer, like no one knows where capacity will be for next summer.

Our capacity will grow. We will add the 3% capacity into summer because we take -- we will use the MAX-10 aircraft. There is a huge demand for those aircraft at the moment. In terms of the market capacity, I think my own view is I think next summer, you're looking at broadly flat, maybe slightly down because I think as we said earlier, a lot of the flaky airlines will fall over this winter. And just before I hand over to Eddie, in terms of market opportunities, I think you'll see us growing where we've grown over the last 12 to 18 months. The countries are engaging with us to reduce airport charges and reduce taxes. And they, by and large, have been country, the Central and Eastern European countries and particularly the Italian regions working with us to reduce taxes. We have between 10, 12 airports every week coming to head office here to present growth plans.

I think actually, maybe give a flavor of what's in Dublin, where I think the Irish aviation the regulator deserves particular favorable commentary given that they're talking about reducing the Dublin airport fees -- high fees by 15% next year. What's our response to that?

So we're adding 2 million seats and 3 additional based aircraft into Dublin. You're right, the regulator came out with the interim decision 2 months ago. We expect the final decision within the next few weeks. And we will -- once that decision is confirmed, we'll grow in Dublin next summer. It's a sensible decision, and we're going to grow into it.

Good. Okay. Eddie, maybe on opportunities or what's happening with the airport, -- where do we see opportunities? Is it more growth at a discounting airports? Or are we going to go out and try and buy second cheap secondhand aircraft and do something with aircraft?

I know where I'd like to place my bet is on the airport rather than buy more cheap aircraft. I think what we -- I mean, if you look at, there's generally a combination of there are like they've got less options a lot of these airports and where to actually fill out the capacity they have. And as I'm saying earlier, place like Scandinavia, where Norwegian have substantially reduced and SAS have gone into Air France ownership out of Chapter 11. And you see that sort of migration out of Sweden in particular, and they responded with lower taxes, and we would hope that they would keep that up. And then some of that will obviously go into Copenhagen, but it won't be long before that migrates to Charles de Gaulle and you have Scandinavian airports that are particularly challenged and are now waking up to the fact that Italy, where ITA have pulled out wholesale out of regional airports.

And I think that's why you're seeing that sort of breaking wave of municipal tax that is spread right across the regions and may make its way hopefully to Rome at one stage because that's what's driving the traffic growth there. You can see in Spain with all of our PR down there on taxes, even though the regional airports are still hopelessly uncompetitive. -- there's been less of an increase down there, which, as you had alluded to earlier, Michael, that we're still growing at places like Malaga, Alicante, Palma and even where we can pick up slots from places like Madrid and Barcelona. And the U.K., where we've just completed a deal with Stansted. So like we're out there for the next 8 years, and it's the only airport in the London area for a short haul that's going to be able to grow and already off a low cost base. The work has already started there. I'm really confident about what we can grow out of the London area, like there's no possibility of anything coming from Gatwick in the short term.

There's no possibility of anything in terms of capacity coming out of Luton and Heathrow. I mean, like that's a long, long way away. Poland, we've locked out pretty much all the airports there. And then Morocco as well, we can see with the Rabat base opening, and there's a hunger down there for what Ryanair has delivered. We're doing domestics down there. And they've got the whole 2030 World Cup coming up in Spain and Portugal as well, where they're anxious to grab additional traffic from the only airline that they can -- like not just in Morocco, but everywhere they can see an airline that has the capacity coming, has the business model and keeps the promises that we make on capacity. So it's right across the piece. And you are seeing airports going in that we haven't heard of or would not normally come to us first and now have plans on, well, we're thinking of building this terminal, we're thinking of doing this for you, et cetera. Now it generally falls over on price until we get there. But you are seeing a change out there in airports that know that there aren't enough -- there aren't many options left out there, except Ryanair.

From my point of view, let me add in on the cheap secondhand aircraft. There aren't any cheap secondhand aircraft. If you take the airlines who are likely to fall over the fleet of Volotea is largely A319s. They'll finish up outside Europe. We have no interest in those aircraft. airBaltic operates the Airbus, the 220. Again, it's a kind of a unique aircraft and no interest -- no interest -- I'm not sure any airline would have any significant interest in that aircraft going forward. We don't see any significant opportunity on cheap aircraft, partly because there's still unsatisfied demand for the secondhand aircraft in Asia, Latin America, Middle East, Turkey or short aircraft.

I think that the chances are that secondhand aircraft are expensive and that they will reappear elsewhere outside of Europe. So I think the opportunity still come from -- and the reason we talk about other airlines failing is not because we don't wish them well. It's because their airports are coming to us now offering us more and more aggressive terms to get us to commit to actually switching some aircraft into those airports if or when they believe their incumbent airlines will fail. Next question, please.

James, hi.

Yes, pay freezes, look, I mean, what we're warning this morning is the situation is likely to get a lot worse. We've just done -- we've done pay deals that most of our pay agree -- almost all the pay agreements that came up for renewal this year have now been done. We've done multiyear pay deals. Those pay agreements will be honored. So if they have a pay increase agreed for next April, that will go ahead. But we have a number of pay deals next April, Dublin pilots, U.K. pilots, Spanish and Portuguese pilots who are coming up for renewal. We said now we're willing to do those pay deals early and go early. Some of them think they want to wait because the world is going to improve in their favor. I don't think it will. But if they go early and they get the deals done before March, April, they won't be subject to a pay freeze.

If they wait until April, I'm pretty certain they will be getting a pay freeze. If they were to go on strike, it would save us money in March, April next year. If oil is at $170 a barrel, it costs the Ryanair pilot typically 1 grand a day to go on strike. I wouldn't want to encourage strikes, but we have shown that we are happy -- perfectly willing to accept strikes. And if somebody wants to go on strike when the world is falling apart around them and they have no alternative jobs and any other, there's no -- our pilot attrition has fallen to almost 0 at this point in time. That's entirely they're entirely within their rights to do so. But it would be helpful to us if there were strikes, I think, in next April, May of next year, certainly from a financial point of view. But we're in discussion with those groups. if they're serious and they want to get on and do pay deals, advantageous pay deals such as the ones we've done recently in Italy, in Central Europe, in Sweden, in France last week, then by all means do it.

But if you want to wait and hang around, you risk getting caught and we would not be in the least bit -- sorry, if they want to go on strike, they're perfectly free to do so, and we'd be perfectly willing to accept strikes. In the short term, they would save us money. Starlink, look, again, my position on Starlink, we had big row with Elon Musk 18 months ago. Starlink is a very good system, but the technology has a 1.5% fuel drag. And with oil going to jet oil at $170 a barrel, the last thing I want to do is to install any system that has a 1.5% fuel penalty. We know easyJet have announced they're going to fit Starlink. It's not clear to us whether they're going to give it away for free. I understand the briefing is that they're going to charge passengers for it, which I say, well, good luck with that. We are pretty certain that if we charge -- ask Ryanair passengers to pay for Wi-Fi on board, they won't pay.

The average flight time is an hour 15 minutes. There isn't a lot of transaction time to charge people for the WiFi. And it simply will not pay for its cost. We have had extensive discussions with Starlink. They were willing to pay for the installation on board our aircraft. where the discussions broke down was they believe 60% of our passengers will pay for free WiFi, which we said you've obviously never met a Ryanair passenger in your life. I believe if it's free, some of our passengers will use it. Most of them are bringing their laptops on board and they're watching Netflix or whatever it is Disney Channel, I'm not sure. I think the demand for Wi-Fi on board short-haul flights is there, but only if it's free. And if it has to be paid for, there's no revenue model whatsoever.

I think in the other cases, I think in the case of Wizz, they're talking about putting on Starlink, but that the provider gets the income. They're not getting anything out of it at all apart from a kind of a gee-whiz, here's a passenger initiative. As always, we will be more disciplined. I do think the technology is continuing to innovate. And I think in the next year or 2, there will not be aerials on the outside of the fuselage. We'll be fitting aerials either in the nose cone or the baggage hold or the forward in the rear galley. And then we'd be quite happy to put Wi-Fi on board our aircraft as long as we get it free and we can pass it on to our customers free. Next Question please? Sorry. Neal, anything you want to add on the pay freezes or the risk of pay freeze? I'm just having Neal McMahon, Director of Ops, with me.

Look, we've done deals with the groups that are -- that had their pay agreements ending at the end of March '26. We've now got a bunch of groups that we're meeting. We have been meeting for the last number of months. And the message is quite clear. We have -- we are willing to do an agreement. But if they want to hold out into beyond April next year with the deteriorating market conditions with oil at $170 per jet fuel barrel, then we're not willing to -- and they want to take a chance on it, then we'll let them go. There is a risk that somebody will take us on. And if that's the case, we'll let them go on strike. But there is deals available, but they won't be there forever.

And Darrell Hughes, I know you're on the line, the Chief People Officer, do you want to add anything on that on possible pay freezes. I mean, it's just one of a number of cost things that we'll be looking at.

Yes. No, Michael. Look, it's been well covered there. As Neil said, we've got quite a few groups up next April. And by default, if they don't do a deal, then there's no pay increase. And we'll probably see a couple of groups go on strike next summer, and we'll just have to face that down.

Fine. Okay. Thanks very much. Next question, please.

Duane, hi.

I mean I think we've already seen the inflection point, Duane, in this morning's results. The Q1 this year, average fares were down 6%. Now some of that was that the first half of April -- of Easter moved into March. Q2, which is the peak summer, lots of demand, 94% load factor, average fares were down 2%. And the inflection point is as we move into Q3, which is traditionally the time when fares come under pressure, winter capacity, we've seen fares since about the first week of August have started moving meaningfully upwards. So fares into Q3, as we said this morning, have turned around. They're now up modestly, but it is growing week-on-week, modestly ahead of the same quarter last year.

That is the inflection point. And I think that's the start of it. It is driven by -- and on a daily basis, more of our competitors are taking out capacity in November, December, January, February, March. And I think that will run into the fourth quarter. The fourth quarter this year, I should say, is going to be slightly distorted because you both have the Easter in March. So the fourth quarter is going to look like a bumper quarter on yield only because Easter is in there. And then the following Q1 will be -- look like it's weak because you've no Easter at all in Q1 compared to half Easter last year. But I think we've already hit the inflection point. We are seeing meaningful movements in airfares at a time of the year when normally we're pricing down and having to increase the amount of or stimulate -- price stimulation we do. We're having to do less price stimulation and bookings are continuing to run strongly ahead. Jason, anything you want to add to that point?

Sorry, Michael, myself. Yes. Sorry, in terms of Q3, like we're coming off the midterm. We had a good midterm. November is positive. And I think we have -- look, we have, as you said, 50% booked for Q3. A lot will depend on how Christmas -- the final outturn for Christmas. But so far, it's looking strong. So I'm happy with what I'm seeing for Q3, early indications, although very early for Q4 also strong. But I do think this is being driven by our -- the capacity reductions that are coming out week-on-week from competitors across the market. As I say, like we've seen probably close to 8 million, 9 million seats come out of the market over the last 6, 7 weeks. And I think that's likely to continue. And I think what you will see is probably lots of close-in cancellations from our competitors as well over the next number of weeks.

Okay. All right. Thanks, Jason. Next question. Thanks, Duane. Next question, please.

Harry, hi.

Thanks, Harry. I'm going to ask Tracey McCann here to take the ancillaries question, and then Neil will give you the ex-fuel cost into FY '28. Tracey?

So ancillaries, we've seen flat for the half year. We'll probably see roughly 1% for the full year. We're probably really capped out. It's more about dynamically pricing now the PB and seats and trying to optimize the total revenue. So a lot done with AI on the dynamic pricing front with Labs. And then we have Order to Seat, which is doing well on board. So that's where you can order your food before you even get on the aircraft. So a small little few things around the edges, but no big dramatic change, I don't think.

And Neil, ex fuel cost? Next year?

Yes, I'd just add on the ancillaries, Harry, that as we've said before, just keep modeling with kind of 1% to 2% per passenger growth moving forward. You saw we were up 1% in the quarter just ended. On ex fuel, we're already seeing some of the benefits coming through just with the airport deals that we have in place. into the winter and into the spring and summer of next year. So that will feed into our numbers. But we'll get into more of the weeds when we come back on the road and start doing the budget process for next year. So there's a bit to go at this stage. And as I said, then we've got the first of the MAX's coming in as well.

Yeah. Okay. Thanks, Neil. Thanks, Harry. Next question, please.

Andrew, hi.

Okay. Maybe I'll do the churn, and I'll ask Neil, maybe you can come back in on fuel. I think don't get distracted by the churn, Andrew. Yes, we're not churning out of kind of mature routes into immature routes. In a lot of cases, we are churning into -- airports are doing deals with us to attract our growth incentive. But because they've either existing incumbents declining or cutting capacity or going bust. So while we are moving our capacity into those markets are churning into markets like Sweden, for example, in Arlanda, like Slovakia, regional Italy. These are markets that were either previously underserved but are strong markets for us anyway. So we're going into those markets. We're not taking any yield penalty, but we're getting a huge cost savings.

Again, I go back to Sweden where the government -- the new government there, really a very visionary transport minister has abolished the aviation taxes in the home of Greta Thunberg and flight shaming. That abolition and we're going in on mature routes in Arlanda, but there's not a lot of growth in Arlanda other than what we're delivering. So we're seeing a yield benefit and a cost benefit. Also remember that where we churn out of an airport, we have less capacity at the existing airport. Say, for example, Charleroi this winter, we're going down from -- I think we had 19 aircraft down to 12. Vienna, we went down from 20 aircraft this winter to 14. You see a big bump in fares on the remaining heavily constrained capacity in those markets as well. So there are significant compensatory effects of churning aircraft out of an existing airport where you're reducing.

Now we're not Berlin, obviously, when we close the base altogether. But we're still operating about 50% of our capacity into Berlin, but without morning and evening services, and we're seeing a bump up in airfares. So when you churn out into a lower-cost airport, yet you may -- at the moment, we don't have to take a pricing penalty and we get a pricing benefit on those airports that we churn out of, which is again why -- again, I come back to -- I think that the point that jumps out to me in this morning's press release is not the obvious one. It is that pricing has turned around in the third quarter. And having been down in Q1, down in Q2, suddenly it's up in the shittiest quarter of the year. That is, I think -- that's the one takeaway I would take from the press release this morning. The big question is, will it go up by 20% next year for the whole year, and I think that's a bit overly optimistic.

But I think we have a reasonable shot that it will go up by some double-digit number and we'll close off the rest with cost savings. And Neil, do you want to touch the fuel hedging, is it spread across the year or confined into quarters, anything you want to add on fuel hedging?

Sure. Andrew, I'm sure you've seen Slide 13 of our presentation where we're talking about 25% at $954 a tonne. That's spread pretty evenly across all 4 quarters. We have a slightly higher rate in H1, where we're about $980, slightly lower rate in H2, we're about $920 given the blended of $954. As Michael indicated earlier on, I think the next focus when we come back into the market will be on the first half of the year, where we'll probably, as indicated previously, try to get that up towards 50% before we get the peak summer period. The same on the FX as well. So the euro-dollar spread across the year at 1.19, just over 20%.

Tom Fowler, you're on the call, is there anything you want to add on fuel or fuel hedging?

No. I think Neil's covered it all off there, Michael. So we evenly hedge across every quarter. Typically, we don't tend to wait too much when we start our hedging.

Fine. But reasonable to say we're waiting for the outcome of the midterms before we make any further decisions, I think, between now and the end of the year on hedging cover.

Yes, we have the team in Dublin primed to go if there's any dips this week.

Fine. Okay, next question, please. Thanks, Andrew.

Yes. Okay. Look, I wouldn't want to add any more on fares. I think what we said this morning is that Q3 is now trending modestly up. I mean modestly would be, I think, mid-single digits. But we've only 50% of Q3 sold. Q3, it's usually driven by the final bookings in the run-up to Christmas, but I think it augurs well for continuing strong fare performance in Q3. Q4 will be up double-digit percent, but Q4 is artificial because you both halves of Easter in March next year, and therefore, it's a slightly distorted figure. So I wouldn't lose run of ourselves on that. But I think that does give us a good basis going into next summer. We and all the other European airlines. I think there will be more failures in Europe this winter. Some of the Ponzi schemes will finally blow themselves up. I think there will be real capacity constraint next year, and I think real upward pressure on pricing. My advice to all passengers will be to book early for next summer and secure your pricing. Neil, do you want to take the fuel question?

Yes. Axel, I wouldn't normally give you guidance on next year at this time. We're just going to get stuck into our budgets. We will be looking on a line-by-line basis as to where costs may go, but it's too early to get into details and guidance for FY '28 on unit costs.

But I think we're looking at FY '27 unit costs, we're still looking at ex-fuel up maybe 2%, 3% on the full year despite having cut back the traffic. We are -- that widens the cost gap between us and every other European airline on an ex-fuel basis. And that gap will get wider again in FY '28. I'm not sure, again, we have to wait until the outcome of the budget. But you see what some of the airlines or other airlines are doing on wage settlements, airport, I mean, complaining about the airport cost inflation, handling cost inflation, they are struggling. And then they have -- unlike Ryanair, they have huge increases in financing costs. The cost of debt is rising, the cost of aircraft leases are rising.

The dollar is strong at the moment. That cost gap is widening materially into FY '28, which puts almost further pressure on our competitors to get airfares up and they will drag our fares up behind. I mean I've seen some stupid analysis, I should say, when do you not see stupid analysis, but I've seen a lot of stupid analysis here that fuel cost rises for Ryanair will -- fuel is a higher percentage, and therefore, the rise in fuel will be a bigger impact on Ryanair. Like you don't seem to understand that if Lufthansa gets -- puts a EUR 10 fuel surcharge on next year, a EUR 10 increase in Lufthansa's average airfare is nothing, whereas the EUR 10 increase in Ryanair's average airfare next year is a 20% increase in fares and yields. So it's like-for-like. Yes, we have cost pressures, but we are under an awful lot less cost pressures given our margins than any other European airline is. They're under much more pressure to get pricing up. And to the extent they get pricing up, our price will move by a much bigger percentage, therefore, maintaining or widening our margins. Next question please.

Wonderful. Okay. Look, I think we've covered everything in some detail. Obviously, the big issue for the next 12 months is where fuel will be and where fares will be. And those are 2 moving variables that we can't give you any particular guidance. Your view is as good as ours today. I think the key kind of drivers will be the U.S. midterms this week and what's the outcome after the U.S. midterms. What impact does that have on the situation in Ukraine and the situation in the Middle East. Nevertheless, I go into, I think, calendar 2027, quite excited. We're really excited by the MAX-10 aircraft. These are going to be transformational.

We only get the first 16, but any aircraft that has 20% more seats and burns 20% less fuel is going to transform our economics. We have much bigger margins than any other airline in Europe. We can afford to pay higher oil costs for longer than any other airline in Europe. fares are already beginning to move upwards into the Q3, which is the worst quarter of the year. And I think you're going to see more failures and more capacity reductions in Europe this winter running through into next summer. As Jason said, he thinks at best capacity in Europe next summer will be flat. If some of the other loonies fail, it will be down year-on-year.

Pricing will be strong. And I think we will, as always, in a crisis, do better than any other airline because we have the lowest fares and the lowest cost. We think now is an ideal opportune time to buy. Clearly, I apologize the share price performance has not been good this year-to-date. We think that's the timing to announce another share buyback, and we lead in with another EUR 800 million share buyback next year. Personally, I hope the share price stays reasonably subdued until we complete that share buyback. But unfortunately, I'm not in control of the share price; the markets are. But I look forward with some considerable optimism. Has anything in the last 12 months altered my view that we are moving towards a period of consolidation in Europe or that our profit per passenger will rise to EUR 14, EUR 15 per passenger? No. I think the current crisis will accelerate that trend. But we'll just have to weather this crisis and come out the other end until people will see where the profitability falls. In the meantime, we will monitor capacity closely. We will certainly monitor our costs aggressively.

And I think you'll see us grow to 214 million passengers this year and just 220 million passengers next year. And I hope we'll do so profitably and in a manner that will deliver positive returns for our shareholders. We have a full roadshow of teams in every geography, Ireland, U.K., Europe, America, East, West Coast. If you want a meeting with us, please contact one of our brokers, Citi, Goodbody or Davy, we'd be happy to set it up. And if you can't make it this week, feel free to come to Dublin at any stage over the next -- between now and the end of the year, we'd be happy to see you in Dublin and show you the operation. Thank you very much, everybody. Look forward to either meeting you or just talking to you later on this week. Thank you, Seb. I think that's the end of the call.