Ryanair Holdings PLC (RYAAY) 2020 Q4 法說會逐字稿

Hello, and welcome to the Ryanair Full Year Results Conference Call.

(Operator Instructions) And just to remind you, this conference call is being recorded.

Today, I'm pleased to present Michael O'Leary, CEO.

Please go ahead with your meeting.

Okay.

Good morning, ladies and gentlemen, you're welcome to the full year results conference call.

You will have all seen this morning, we released the results, 7 a.m., together with a Q&A video with myself and Neil Sorahan, the group CFO, so we'll take a lot of this as read.

I'm joined here in Dublin by the full team and pleased to welcome Tracy McCann here, who's also been appointed in recent weeks as the -- as CFO of Ryanair DAC.

Tracy, you're welcome, and congratulations on the much-deserved appointment.

A couple of quick thoughts on this.

You're seeing today or this morning's numbers, we were heading for a terrific full year to the end of March 2020.

Had we not had -- March had not been disrupted by the COVID-19, it's likely we would have seen traffic grow to about 154 million passengers and full year net profits would be towards the upper end of the range, somewhere between EUR 1 billion and EUR 1.50 billion.

As it was, with COVID and the government-mandated grounding of the fleet through -- from essentially mid-March meant that we carried 149 million passengers, up 4% on the previous year, and profits came in at the higher end of the current range it had over EUR 1 billion.

Much, however, of what happened last year is obviously now historic, and so I won't dwell on it.

A couple of things on the COVID situation, just a couple of key thoughts.

Clearly, we're grounded and expect to be grounded fully through April, May and June.

We're guiding that a -- thanks to significant cost savings and cash-preservation measures, we think there'll be a Q1 loss somewhere above EUR 200 million, but under EUR 300 million.

We are, already though, have announced that we expect to go back to some level of flying through the 1st of July.

We are push promoting at the moment about 1,000 flights daily, which would be about 40% of our normal operations.

We took considerable comfort from the evolving situation over the weekend where the Italians have returned or opened up the economy to tourism again from the 3rd of June.

They have removed in its entirety, this overly ineffective and nonsensical 14-day isolation, which nobody has no comment and yet been able to explain how it operates or how they would even police it.

We are pushing hard though for effective health measures, and we think that surprise is generally face masks in all public transport situations, at busy train stations, undergrounds, airport terminals and onboard aircraft.

The face masks are effective at eliminating about 98.5% of the risk of the spread of COVID-19, and it seems to be the only way you can allow most of our economies to recur some kind of activity during the summer months.

Already last week, since we announced that, we've seen a significant spike up in bookings.

Now I wouldn't want to get too excited, but this weekend, for example, where our bookings were up 60% over the previous weekend, but that was off a very small base.

So we are seeing a significant number of hits and searches over the weekend, particularly, I think, from families, looking at going on the 2-week summer holiday from Northern Europe to places in Italy, Spain, Portugal, et cetera.

And in all of those countries, we've seen that the cases of the COVID-19 are significantly lower in the beach and the resorts than they are in the heavily populated cities.

So we would hope that there will be a reasonable relaxation of restrictions and that they'll wipe out, that they'll completely remove the things like 14-day isolation, which are bonkers and don't implement it.

But anyway, over the next couple of weeks and that there would be a reasonable return to a passenger movement from 1 July onwards, it's still 6 weeks away.

We haven't yet begun to aggressively price promoters.

What we're doing at the moment from last week and this week is encouraging aid, the health measures, health prevention measures, hand sanitization and face masks.

A concern but I think -- therefore, to put this in some context.

Clearly, there's going to be on a short-term pain in the airline industry.

We would be lucky, I think, if we see a 50% load factor through the second quarter.

We are expecting maybe a 75% load factor in the winter, but we're guessing and we're making this up as we go along.

We are saying now that the traffic for the full year will be less than 80 million passengers, but we really can't put an accurate finger on at the moment.

Our gut instinct, though, and it's what -- it's something we share generally, is that once we begin -- people begin to move, is that the traffic will return pretty quickly because there will be aggressive price stimulation both by the airlines, by the tourism providers, the resorts, the hotels across Spain, Portugal, Italy and Greece.

They would try to rescue what's left of their tourism season on the back of price.

But that's also means that while we're looking at a reasonable return to tracking volumes, we think it will be on the back of much lower airfares and yield.

So we're really flying blind at the moment.

We hope to be able to go back line on the 1st in July.

We think that's reasonable.

We think that the traffic volumes will return pretty quickly, put us on the back of pricing.

And that's why, honestly, and I know the first 15 questions on this call are going to be what do we think the yield downturn will be for the year at the profit loss.

We have a deposed notion, so please don't ask us.

But we can give you -- all we can give you is what we think we're doing on guidance.

Over the medium term, we see this as a huge opportunity.

Ryanair has entered this, with a number of other airlines, in a well-managed situation.

We had EUR 3.8 billion in cash on the balance sheet at the end of March.

We're up to EUR 4.1 billion of cash today, and mainly most out of the EUR 600 million drawdown from the U.K. government and transparent loan scheme.

Our cash burn is about EUR 60 million a week, about 3/4 of that or about EUR 45 million of that is the hedge fund -- the fuel hedge payments.

So that actually, if you strip that out, and it will decline as we move through the year.

In actual fact, the cash burn is down to almost 0, not quite, but close to 0, which means we can continue this in this environment for 1 year or 2 at this point in time.

Obviously we want to get the business back moving.

We think as long as we could get to a 50% or 60% load factor on flights, we'd be operating close to breakeven.

But again, if that must depend on what assumptions you make on yield and on ancillary sales as we return to flight.

Other than that, the big challenge though.

So over the medium term, there's a huge opportunity here.

We're going to face into a number of years of trading where we'll have much lower oil prices, airports are being -- will be very aggressive because they've lost a huge amount of traffic.

They will be introducing very significant discounts for growth.

We're already in active negotiations with the airports on those stimulus measures.

Our payroll bill will be a lot smaller.

One of the tragedies of this is -- I think it's inevitable, we are facing very significant job losses, at the front-end, pilots and cabin crews.

We'll only carry 80 million passengers this year.

That will be about 50% of our normal volume.

There's simply no way that we can continue to employ numbers of pilots and cabin crew we do, and they are going to be broad-spread redundancies, pilots and cabin crew in countries all over Europe, the U.K., Spain, Italy and some of the other large countries.

We've already initiated that process.

The unions, as usual, are kind of sticking their head in the sand and looking for more information.

There is a lot more information you need.

We're facing an existential crisis in the airline industry.

So there's going to be job losses and pay cuts, and if we don't get agreements on pay cuts quickly, there will be even greater job loss.

That will be accentuated later on this week when in Vienna, we've already announced that we will close the Vienna base, the Vienna A320 base.

If the union and the Verdi -- the union don't agree to revise Ts and Cs for piloted cabin crew in Lauda.

We don't expect them to because at the moment, they represent about 6,000 members in Austrian Airlines.

We had a first meeting with them last week, which was a shambles.

They wasted 40 minutes arguing, discussing it, why our proposals were in English language and not in the German language.

So we explained that we don't have time to be pissing about over languages.

300 job losses and a base closure, whether it's in English or in German, but still have the same impact on our crews, pilots and cabin crew in Vienna.

We're pleased and in fact, heartened by the support we've received from our pilots and cabin crew in Vienna.

As of this weekend, over 95% of pilots and more than 66%, more than 2/3 of the cabin crew, have already signed up for these changes.

The tragedy though is that the structure of labor agreements in Austria means unless it's signed up by the union, the labor -- the individual, the pilots, the cabin crew can't agree these changes.

So we have massive and overwhelming support from the Lauda pilots and cabin crew for the changes.

But an Austrian Airlines union can effectively block and in those concessions, which means, in our view, it's inevitable that the Vienna A320 base would close on at the end of May.

The decision would be made on Thursday when the Verdi union don't sign this agreement.

The only reason we're closed is because the Verdi union won't sign the agreement.

And -- oh sorry, the Vida unit, my apologies to Verdi, who are their German cousins.

The Vida union won't sign the agreement.

And what will happen in that situation is we will not withdraw from Vienna.

Vienna will be -- we still -- we have 3 Ryanair there, 737 space in Vienna.

When Vienna reopens, we will fly the base using the Ryanair aircraft.

And we will backfill an awful lot of the routes of flights on Ryanair aircraft base elsewhere that will now fly to and serve Vienna.

So there will -- in actual effect, which puts us in better shape to compete into the future, with the state-needed Austrian Airlines.

We'll be competing with a much lower-cost, Ryanair operation, than the high-cost Lauda operation.

But we hope that even now, the Vida union in Austria will agree these changes, which will save the pilot, cabin crew jobs in Vienna.

That taken up, so back on -- the fundamental issue is there is a medium term, huge opportunity here.

We will have lower-cost fuel, lower-cost labor, lower-cost aircraft.

We are renegotiating aircraft leases for Lauda.

We're also discussing with Boeing, pushing back any deliveries on the MAX aircraft.

We'll probably extend some of our 737-NG leases, and those discussions are continuing, but can't be finalized at Boeing until the MAX comes back to service.

But I think you're going to see enormous cost opportunities here for the next 4 or 5 years, and Ryanair, well-poised to take advantage of them.

The downside is we'll need to take advantage of those cost though because we are facing a massively distorted market across Europe, I think, for the next 4 or 5 years.

The strong well-run airlines like Ryanair and easyJet, BA, going into this crisis are going to emerge much more weakened and facing competition from state aid airlines.

Massive state aid being given to SAS, Alitalia, Air France and Lufthansa, airlines who couldn't make any money before the crisis, but will now emerge out of COVID-19, vastly stronger with unlimited funds to engage in below-cost selling or M&A activity where they just buyout the competition in their domestic or regional market.

And that I think is going to be a real challenge for us going forward.

I think we're facing a very strong return to passenger volumes but in a very weakened pricing marketplace.

And that's why it's critical that we work with the unions.

We work with all our other suppliers, airports, aircraft, et cetera because there's going to be a fairly tolerant pricing environment going forward for the next number of years.

Alitalia this morning was approved, an Italian airline, by the way, that has never made money for 75 years, has been teetering on the edge of bankruptcy for the last 3 or 4 years, has not at all been nationalized, but this morning, received EUR 3 billion in state aid from the Italian government.

And to put that in some context, this morning, the Italian government award EUR 1 billion of aid to the Italian education system.

So they seem to think that protecting the jobs in Alitalia is far more important than educating the children in Italy and shows how distorted this is going to be.

Lufthansa, Air France, KLM -- and by the way, it's not that we are opposed to all forms of state aid.

We accept and we hold our hands up.

We have participated in job payroll support schemes for the last number of weeks.

We're very grateful for those schemes in all -- across all EU countries.

We've also drawn down the loan that we're entitled to in the U.K. Arm's length transaction, we got EUR 600 million because we're BBB-rated operator in the U.K. While simply, what those supported is that they're transparent, they're available to everybody.

What's manifestly unfair is, for example, in France, the French government issuing some edict that says they would refund the French taxes, the aviation taxes but only to French airlines.

So Air France received back hundreds of millions of aviation taxes.

Whereas we, Ryanair, we're the third largest airline in France, easyJet and others are not allowed to received booking, but we're told we have to keep paying these aviation taxes.

We have the bizarre edict coming out of Italy last week, not alone are they -- Italian government going to give that Alitalia EUR 3 billion in state aid, but they're also now attending to impose the Alitalia terms and conditions, labor pay rates on all other airlines in Italy.

Massive distortion of the level playing field, a massive distortive of competition, and a flagrant abuse by the government of not just the state aid rules, but also breaching or tailoring up the competition and the level playing field rules in Italy.

We have no choice, that we and other airlines, but to continue to oppose these kind of measures because they are going to distort the market for the next 3 or 4 years.

However, Ryanair, with EUR 4 billion in cash; a net weekly cash burn of about EUR 10 million to EUR 15 million a week, excluding fuel surcharges; with a fleet of aircraft we have about 350 aircraft entirely unencumbered, a value of about EUR 7 billion on the balance sheet.

We're very strongly positioned to weather not just the COVID-19 pandemic, but also to emerge out of that pandemic stronger, with a lower-cost base with far more growth opportunities.

But those growth opportunities will be in a marketplace for the next year or 2 where I think fares are going to be -- fare in years will be significantly lower as we are force to compete with at state aid junkies like Air France, Lufthansa and Alitalia, who will use this money, on top of the payroll support schemes or the tax refunds they're already getting, to engage in below-cost selling or in massive M&A activity.

A quick, quick touch on the Boeing MAX.

As I said, we now expect Boeing (inaudible) the MAX.

Return to service will take place in North America sometime in Q3, that is between sometime in August or September.

We said that there's a reasonable prospect that they -- we -- they will be able to deliver some of our MAX aircraft to us in the calendar fourth quarter or the first quarter of next year.

These are still great aircraft.

I mean they have 4% more seats, they burn 16% less fuel.

We are great fans of the Boeing -- of the MAX 200.

It will be critical, I think, as well to our growth -- us being able to exploit growth opportunities into the summer of 2021 that we have additional aircraft deliveries.

And I think certainly, David and the team, the commercial team, are in active negotiations with airports who are still -- who are very concerned about the amount of traffic they're going to lose either through failures or capacity cuts, among the legacy carriers, and will create more opportunities for growth going forward.

And other than that -- again, as I said, if for the remainder of this year, we can't give you any guidance on traffic, we can't give you any guidance on the full year outturn other than we expect a Q1 loss of about EUR 200 million.

Q2, based on our current assumptions, could be a breakeven, small off.

But again, that's really in the lap of the gods.

But the more we see European governments roll back on restrictions in the next couple of weeks, up to about the middle of June, and we believe that we will see further developments with the Spanish, Portuguese, Greek governments not imposing 14-day isolation, we think the U.K. government will also be embarrassed into withdrawing their 14-day isolation.

I mean when they're asked questions like, "How do you ask an international air passengers arriving into Heathrow and Gatwick to self-isolate for 14 days, when the first thing they do is get on an underground train or a Gatwick Express into the center of London?" Are you now going to ask all the passengers on the Gatwick Express of London underground to self-isolate for 14 days?

And of course, it completely falls the part.

They generally move back on to -- it’s all science-based until you ask what was the science that says that the Irish and the French can be exempted from the 14-day lockdown.

Now we think the Irish are incredibly special, but even we cannot find any science that would exempt the Irish from a 14-day lockdown.

So it's all just nonsense that's being upon made on the hoof by the U.K. government.

It's completely ineffective.

And the concern is they're using this to give the illusion or the big leap of taking some scientific action, when really the action that we're calling for and that would be effective is encouraging people using public transport, the London Underground commuter trains, airports and aircraft to wear face masks.

Face masks, widely used face masks would eliminate about 98.5% of the risk of the spread of COVID-19, and we think that's the way forward, not just for mass transport but also for retail and for allowing people to move about more freely over the next couple of months.

So we're encouraging that and trying to discourage idiotic ideas like 14-day isolation, which are completely unimplementable and the U.K. government can't even explain where the hell you guys live in the first place.

Sorry, that was now a little longer than I thought.

I'm going to hand over to Neil, going to give us a couple of quick thoughts or themes on the finances.

Thanks, Michael.

As you said, a relatively good year last year.

I'm not going to dwell too long on us, up 13% profit after tax before exceptionals.

The balance sheet's in very good shape with 330 unencumbered Boeing 737s, with a book value of just over EUR 7 billion and a market value well in excess of that.

Cash, very strong at EUR 4.1 billion.

And the work that we've been doing over the past number of months to get the cash burn down have seen us go from EUR 200 million per week, all expenses, including CapEx and everything else out the door, down to EUR 60 million per week, currently going out the door on average.

A slight clarification on the fuel figure.

It's somewhere just under about EUR 25 million a week going out based on the mark-to-market and depending on the spots on an individual day.

Hedge and effectiveness.

Because we had hedged 90% of our fuel coming into FY '21 pre-COVID, a big chunk of that has now gone ineffective as we're not going to use that fuel.

So we have an exceptional charge of about EUR 319 million on jet fuel, offset by currency -- favorable currency, primarily on delayed CapEx, aircraft offsetting, that giving a net charge of about EUR 353 million in the FY '20 accounts.

There will be a little bit of volatility on the P&L this year as we mark-to-market those ineffective hedges, but that will run off over the next number of months as the hedges settle.

And that's pretty much the key things I wanted to highlight, Michael.

Okay.

Great, Neil, thank you very much.

Juliusz, you want to say anything just on state aid before we open it up and head off a lot questions on?

Maybe just a word or 2 that we have been in touch with the European Commission for 2 months.

And we almost feel sorry for them facing pressure from their capitals, Berlin, Paris, Rome and so on, to bend existing rules and allow significant amounts of state aids to flag carrier airlines.

So we will be assisting the EU Commission with appeals of those decisions to European Court and hoping that the court will accept our request to deal with these matters in an expedited manner.

Thanks, Juliusz.

And just before we open to questions, Eddie Wilson, the CEO of DAC, will give a quick couple of thoughts.

Yes.

I mean we've been working over the last number -- the last 2 months and minimizing the payroll cost with the payroll supports.

And now, we're starting the discussions with the unions, some more realistic than others but we have to get ahead of this.

We have -- we announced 250 job losses in our offices in Dublin, Braslav and Madrid, and in Stansted as well, Friday last.

And we now get into the sort of formal processes with each of the unions, and we're going to have to deal with this.

Some of them are already sticking their heads in the sand, as Michael have said like that.

Some of them think it's just going to pass and it's all going to be over by July.

It's not going to be over, and we're probably heading into a very, very deep winter in terms of cuts.

And we hope that we will, I suppose, use the background in negotiations that we had and locking away most of the CLAs.

We're also working on the airport deals.

And some airports haven't come back to us yet, but we are getting real savings there.

So -- and we're working on those where the savings are not up to what we will expect.

Okay.

Thank you.

Okay.

We'll open up now for Q&A.

Can we please, everybody, we zip through the questions.

We have to be gone around 11:00.

So it's 1 or 1.5 questions each.

And please don't ask any questions on traffic and yields and across P&L for the rest of the year will be disbarred because we don't know.

(Operator Instructions) Our first question comes from the line of Daniel Roeska from Bernstein.

I guess in principle, your commitment to buybacks is unchanged.

And I'd like to ask under which circumstances you would consider reinstating the buyback program, kind of, can that happen while you're still restructuring?

And how are you thinking about that next year if there's a trade-off between possibly accelerating growth to capture that medium-term opportunity you highlighted?

And the buyback program on the other side.

Kind of how you're thinking of capital allocation if you're faced with that question as a -- a couple of months when we're closer back to normal?

Thanks, Daniel.

Well, as you've seen, we canceled the buyback in mid-March.

We've done about, what, EUR 550 million...

EUR 580 million.

Or EUR 580 million of EUR 700 million buyback.

We immediately canceled the remainder of the buyback.

We had already signaled to the market that there wouldn't be a buyback in the next 12 months because our next big issue was we have a 1 point -- we've a bond we paid that's coming up in June...

'21.

'21 of, what, about EUR 850 million?

EUR 850 million.

So that was going to be our next uses of cash.

So frankly, the issue of buyback is off the table, was off the table before we entered COVID-19.

We would be very determined to pay down debt next year.

We still think even with the impact of COVID, we will be able to repay that EUR 850 million bond in June of next year, assuming some return to normality this winter, and into December of 2021, cash flows, let's say, will be very strong.

I would also, to the second part of your question, always be in favor of accelerating growth and exploiting opportunities to lower costs over share buybacks or distributions to shareholders.

Shareholders, and I think I'm the fourth largest shareholder in the group, can wait in line while we either: one, work our way through what has been an unprecedented event in the year and industry.

And put to it in some context, the 9/11 -- attacks of 9/11 grounded air flying for 4 days.

COVID-19 has grounded air flying for 4 months.

So this has been unprecedented.

Shareholders understand that, that's why I think we've always generally favored share buyback over dividend because we can always pull back or suspend the share buyback program, without annoying lots of shareholders.

But if this is an opportunity in the next year or 2, and I believe there will be, we will be working closely with Boeing on the MAX delivery.

And I think certainly, if you look around Europe and many of the other airlines who have announced very substantial aircraft deferrals, capacity cutbacks, failures of Thomas Cook, Flybe and others, I think there is going to be significant opportunities into December of 2021 for Ryanair to grow strongly.

In fact, if anything, I would try to accelerate our growth into 2021 because there's just going to be opportunities there with airports.

There's certainly going to be a huge surplus of available pilots and cabin crew all over Europe.

And those pilots and cabin crew who is -- we will be making redundant and whose jobs will be lost in Ryanair in the next number of months, we would want to at least be able to offer those people the chance of coming back to employment in Ryanair.

And maybe in December of 2021, we'll get them back working as quickly as possible if they want to come back work.

And I'm not sure there's many other airlines will be offering people any new jobs for the next month or 2 or next year or 2 in Europe, Ryanair will.

The next question comes from the line of Savanthi Syth from Raymond James.

Maybe 2 half questions.

Just on the cash burn, I know, Neil, that you mentioned everything is kind of included in there, I'm guessing including debt.

I was just kind of curious what you're seeing in terms of refunds in there?

And then just a follow-up on -- Michael, I know you mentioned that you were probably going to extend kind of some of the Boeing NG leases.

I'm kind of curious what the -- why that was, given that you probably need less of a fleet, at least in the near term, and the MAX will probably come in time for next summer.

Okay...

Neil will take the cash burn, and I'll do the aircraft situation.

Thanks, Savi.

As you said, the cash burn includes everything from OpEx to debt repayments to critical CapEx within the business, and then payroll's up, et cetera.

We have about EUR 300 million of refunds included since the start of this financial year.

That will be a combination of refunds out the door, vouchers and free changes.

So that's in the numbers that we have given there in the cash burn.

And on the aircraft.

I mean one, we will need all of the fleet of aircraft we have at the moment.

Remember, we expect to carry 150 million passengers, Savi, in the last 12 months.

The growth opportunities that are out there at the moment are -- will be, I think, almost once in a lifetime.

We will need -- we're looking at extending those aircraft that are coming off lease, but you're talking about lease rates now that are down at -- like EUR 150,000, EUR 175,000 a month.

These will be very cheap aircraft, if we decide to extend those leases.

We're also looking at new aircraft.

And I think if you take -- my view is that the -- sadly, the Vienna A320 base will be closed at the end of May.

If that happens, I think it's inevitable.

We will then start planning over the next 4 years to take the Airbus aircraft out of Lauda and motion altogether.

And we'll replace those aircraft as they come off lease with new MAX aircraft, which will be much lower cost, more seats, lower cost.

I mean I see nothing but opportunity here for accelerating fleet growth in the next year or 2 because there's going to be opportunities.

If you do get -- take a look around the marketplace, Norwegian is clearly going to reemerge as a tiny domestic carrier up in Norway.

There's -- it has a large presence in Ireland, Spain, Italy, Gatwick that is gone, is going to be gone.

easyJet have already confirmed that they're deferring huge numbers of aircraft deliveries.

Lufthansa has significantly cut back, closed German Wings.

So -- and even Alitalia with the benefit of EUR 3 billion of state aid, still can't cover or serve the Italian market.

So there's going to be opportunities there for an airline, those airlines that have the lowest cost.

And I think it's going to be a race for growth in the next couple of years between the really low-cost airlines, of which there's only one in Europe, Ryanair.

And then the airlines who have received multibillion dollars worth of state aid subsidies.

But I think there is a problem with the state aid subsidy, is they all come with [CAM] costs on them that will prevent those airlines from engaging in meaningful labor reform or productivity gains or efficiencies over the next number of years.

So if you compare and contrast what will (inaudible) to the team in IAG are doing, taking out a large numbers of jobs, driving efficiency gains, which is the right way forward, compared to what the subsidy junkies, Air France and Lufthansa are doing, they just take billions of state aid, but there'll be no labor reform, there'd be no productivity reform.

And so -- but going forward, we, as the lowest cost airline in Europe, will need more aircraft if we're to get our pilots -- some pilots and cabin crew back into jobs and take advantage of these once -- I think what will be once-in-a-lifetime airport discounts.

The next question comes from the line of Duane Pfennigwerth from Evercore.

Can you talk a little bit, Michael, about the sequence of reopening in Europe and your network planning lead times?

Which countries do you think will be the first to reopen aviation?

Which will be the slower ones to reopen?

And how much lead time do you need to relaunch a market, including things like crew bidding lead times?

Thanks, Duane.

I mean it's really hard to tell.

Like I mean I think what's likely to happen, we see a lot of European countries over the last week, 10 days, reopening Germany, Austria.

The board has been lifted, Switzerland, Italy at the weekend.

It almost becomes like a domino effect.

The Spanish and the Portuguese are looking at the Italian tourism -- tourist destinations reopening.

And the Spanish hotels, the Portuguese hotels, the Greek hotels go, "Ooh, we'll lose our tourism jig if don't do something similar."

Also, if you look across those countries, many of which the Italians and the Spanish were the first into the COVID crisis, therefore, emerging faster than other countries.

I think I would be reasonably optimistic that there will be significant movements in passenger mood -- in relaxation of citizens' restrictions over the next 2 weeks or certainly up to about the middle of June.

I think they'll largely be pan-European.

And certainly, the Commission is pushing for Schengen-wide similar treatments across Schengen, similar treatment on movement of passengers.

And (inaudible) hard to come up with -- to restrict air travel when people can move by train, bus and car across Europe borders anyway.

So we're kind of, of the view, we announced we were going back on the 1st of July 10 days ago.

That was based or predicated on the thought fact that we thought much of the movement restrictions will be eased across Europe in early to mid-June.

We think we can stimulate an awful lot of bookings.

But firstly, there's huge pent-up demand in there already anyway for -- particularly families who want to go on the kind of 2-week school holiday, July, August.

We think the business traffic might be a little bit slower to move.

And certainly, that's where these 2-week restrictions really militates not just to get business track, but also normal commuting traffic.

I made the example this morning.

Boris Johnson's nurse, who nursed him back to health, was Portuguese nurse from Porto.

He gets to and from between London and Porto flying on Ryanair.

So if you want your health services to continue to operate, you're going to need to allow low-cost air travel on a -- within Europe to operate, but to operate in a healthy basis, which is with face masks and temperature checks, not to have nonsensical 2-week restrictions.

So the answer to the question, we think once people start to move that it will be largely pan-European on a Schengen-basis.

And then that the other countries will also move to similar kind of restrictions, which I think, if you're sensible, would be face masks and move away from nonsensible restrictions like 2-week isolations that are only implementable and unpoliceable anyway.

But are largely redundant when you get to your isolation address by using underground or underground commuter trains in any event.

But the challenge for us is we have no idea how the load factors will be in July and August.

We have no idea what the yields will be.

All we're trying to (inaudible) guide our shareholders with, the general delays the assumption from the usual -- the journalists and those who wouldn't be the brightest in the sandwiches is that there'll be very low load because people will be afraid to travel.

I think, actually, it will be the opposite, is that there will be higher-than-expected loans because the pricing will be very aggressive and discounted.

We'll have very low airfares.

You'll have hoteliers in Spain, in Italy, in Portugal, in Greece really trying to grasp hold of what's left of their summer 2020 season, so you'll see huge discounted offers out there.

So I think that the volumes will be higher than we expect, but the pricing will be lower.

And that's the message we're trying to communicate today.

(inaudible)

That's really helpful.

Just for a quick follow-up, Michael.

Obviously the market's been totally focused on COVID, but is there any progress going on behind the scenes on MAX return to service?

Is there anything recently from a technical or regulatory perspective that has increased your confidence?

I mean I think, like we work closely with Boeing and with the ESA, the European Safety Agency.

I think there is a much higher degree of confidence that the return to service will, I think, take place in August, September of this year.

The information, the feedback we've had from the regulators has been much more positive.

Boeing seem to have addressed much or most of the software issues, the return to service issues.

And that's not to say that it won't be bumpy.

But I think there's a reasonable -- and Boeing themselves, I think, are now talking about going back into production, I think sometime in -- at the end of the second quarter, maybe the early part of the third quarter.

But we know we have about 20, 25 of those aircrafts already made and produced, sitting on the ramps, in fact, waiting for their delivery to Ryanair.

We want to take them.

But I am much more hopeful or optimistic now that we will see the Boeing return to service in the third quarter, certainly that we will have a meaningful number of additional new Boeing MAX aircraft, in advance of summer 2021, which is obviously our next deadline anyway.

So I think there's a reasonable prospect that we will see 20 or 30 of those aircrafts flying for Ryanair at the summer of 2021.

And we will urgently need them both to replace -- allow the Airbus aircraft that we're not taking or that we're not taking delivery of it, create that room for growth in the summer of 2021.

And we think Europe will -- certainly, tourism of Europe would rebound strongly as long as there isn't any second wave outbreaks.

And all the evidence and age at the moment suggests that there isn't much of a risk of a second wave outbreak.

And there would be certain -- that risk would be further diminished if we can persuade Goldman to introduce face masks for people traveling in mass transport, whether that's underground trains or planes.

The next question comes from the line of Mark Simpson from Goodbody.

Just want to clarify just some comments you made.

I think you said, and I know it's pure guidance at the moment, 50% load factor in Q2, 75% load factor in the winter.

Did I hear that correctly?

You did know.

I think you -- I don't want to be stuck on any number.

Look, I think the number we're forecasting for the rest of the year is under EUR 80 million.

It's too early.

We will be hopeful again, we would get 50% traffic in the month of July, which is the first month back.

I'm not guiding you into August or September yet.

Second half of the year, I think we would be hoping.

There's a load factor that will be significant, higher than 75%, but the yield would be weaker.

I mean so I'm not getting into a forecast today where I'm guessing, you're guessing, we don't know.

But I think the more reasonable number for the full year is going to be under EUR 80 million, which is so -- we're looking at a 50% -- 30% reduction in traffic over this year.

Okay.

Just to follow-on, though, if -- and I know, I take except the fact these are abroad, but you're indicating circa 20 million pax for Q2, 50% load factor, you're flying, therefore, 40 million seats, which is only down 12% year-on-year and the same breakeven, possibly.

That can only come with much better pricing.

So I'm not quite sure where your negative pricing commentary is coming from, unless these are just throw the darts and put out some numbers out there.

We are throwing darts.

Okay.

Final question.

Exceptional restructuring charges, Neil, these come in the quarters coming down the pipeline as we go through rightsizing the business?

Although the exceptional costs are really going to be -- if there's any more ineffectiveness, I wouldn't anticipate a huge amount of restructuring costs or maybe some redundancies, but that's about the height of it.

We would anticipate that we're going to see cost reductions on a unit labor basis going forward.

Similarly, on the airports and handling charges, we'd anticipate unit savings coming in over the next 12 months as we negotiate new deals at our airports.

And equally, you're going to see unit reductions coming in as the MAX starts to deliver.

So there won't be hugely significant restructuring costs, Mark.

And I remember too, (inaudible), Neil, I don't want to get into too much optimism at the moment because the short term is bleak.

By the time we get to the second half of the year, you have the prior year (inaudible) in March where we carried only half of our -- the passenger numbers this year.

So in fact, there is an upside in the back end of the year with some return to normality.

But what I'm trying to kind of urge everybody away from is specifics now on pricing volumes, load factors of the rest of the year.

We, too, we really don't have any idea.

We would hope to have some much better sense of it by the time we get to the Q1 results, which will be the first week in August, and then we'll have some sense of where we are.

It's impossible to predict at the moment other than -- I would be reasonably optimistic is that a lot of the -- kind of the lockdowns will have eased significantly over the next, I would say, reasonably 2 weeks.

By the end the first week of June, I think you're going to see a lot of the European economy saying, "The kids can go back-to-school." They've already been back in school in Denmark for 4 weeks.

Kids are not the problem.

They don't get it, they tend not to be the spreaders of it.

But if the kids are allowed back to schools across Europe, retail is allowed to return.

I think you're going to see -- I mean, almost a huge pent-up demand for people who have been locked up at home for -- in their apartments and houses for the last 12 or 15 weeks going -- of this, we're heading for -- we're going to Spain, Portugal, however, it's going to be, and all of this nonsense about staycations.

You don't have the capacity in (inaudible) or Southend-on-Sea or in a (inaudible) to be able to cope with the volumes of people who generally would be going to Spain, Italy, Portugal, elsewhere to get 2 weeks of sunshine.

And the risk of the spread of COVID-19 on a beach in 30 degrees of heat in Spain, Italy, Portugal is practically 0. And it would be 0 if you're all wearing face masks, which might upset the tan line, but isn't actually -- it won't upset your health.

The next question comes from the line of Stephen Furlong from Davy.

Just on your questions on Boeing or comments on Boeing.

Would you see your negotiations -- do you think the Boeing deal could be an even bigger number of aircraft given we're talking about maybe taking out the Airbus?

I'm assuming Airbus aren't out of the races.

So just maybe just talk about Boeing versus Airbus.

And then if I could just ask one other thing.

One -- we've got some questions in terms of nothing that is being talked about would impede your ability to turn around the aircraft in 25 minutes.

Okay.

Thanks.

I'll work back to that, Steve.

Yes, 25-minute turnaround, look, we see nothing impacting 25-minute turnarounds.

In fact, if we're running at a 50%, 60% load factor through August -- through July, the load factor might be less than 50%.

But if it is, I think you'll see us, we'll go back in, in middle of June and take out some of those flights.

We won't move empty flights where we can avoid it.

25-minute turns will be no problem.

The challenge here, and we're pushing hard for temperature checks at the entry to the airport terminal and face mask, nobody will be getting onboard an aircraft without a face mask, certainly in July and August.

But I think those measures are important in building customer confidence.

On Boeing pricing, look, there's an ongoing dialogue with Boeing, and I've said this publicly before, it's a 3-phased discussion.

There's clearly a negotiation on compensation for the delayed deliveries, there's a negotiation around pricing on our MAX order and there's negotiation -- we're also talking about a possibility of the (inaudible) 10 -- an order for the Boeing 10 aircraft.

Those negotiations continue.

But really, it's -- they can't be concluded until we have some certainty of when the -- when the MAX will return to service and when we can get deliveries of our aircraft.

And there's all -- in many respects, all 3 conversations are kind of interlinked.

But all I can say is we are working closely with Boeing.

We are very impressed with the new management team in Boeing and what they've done, particularly on the return to service project over the last number of months.

There's been a lot less blind optimism coming out of Boeing.

And there's a much more frank dealing with challenges, particularly with both customers and regulators.

I think from Boeing's perspective, they've seen the order book collapse.

Leasing companies have canceled orders, flaky airlines like Norwegian's orders, I'm sure have gone up in smoke.

They will disappear.

That does help the return to service or at least eliminating some of the [backlogs].

And yes, I think Airbus are lower at the moment.

We have repeatedly used it through Lauda and try to interact with Airbus.

We're getting nowhere with them.

And I think the COVID-19 has kind of, if anything, crystallized the decision-making here.

We haven't been able to attract any significant offers from Airbus.

It's likely now -- I mean, the Lauda fleet, which this summer was -- we'd originally expected to take delivery of up to 38 aircraft, we will not take at least 8 of those aircraft.

I think finally, it'll be something between 26 and 28.

And at this point in time, while I said we haven't given up on Airbus entirely, I think we're not far away from just giving up on Airbus.

And we don't seem to be at the races in terms of pricing, certainly not with the MAX, the pricing we have on the MAX 200.

They're nowhere near close to where we are on the pricing on the MAX 200s.

And if that continues to be the case, then frankly, we still see a lot of value in Lauda, the fluff in Vienna, the presence in the German and Austrian marketplace.

But I think that value will be enhanced by slipping out of Airbus aircraft into the 7 -- into Boeing aircraft in the next number of years.

The big challenge facing Lauda, and it's one we have tried not to underestimate is, Lauda is in the heat of the -- it was ever -- Lauda feels it's like in a methadone treatment center at the moment in Germany and Austria.

We've been competing in Stuttgart, Düsseldorf, with Lufthansa getting about EUR 9 billion of state aid for the German government.

Austrian airlines, which is owned by Lufthansa, is into the Austrian government, looks like for EUR 800 million of state aid.

And Lauda is in the teeth of both, that Lauda, we won't get state aid for the German government or from the Austrian government.

And even the German government, remarkably in the last couple of weeks, had approved Lauda for the payroll support scheme in Germany and then 4 days later withdrew the payroll support scheme, so we're engaged in legal correspondence with the German government.

We have our Lauda pilots in Stuttgart, in Düsseldorf who are paying their social taxes in Germany are entitled to exactly the same payroll support as Lufthansa pilots, but somehow have been denied this stroke of a pen having originally been approved.

So maybe the only way forward for us -- I think it's inevitable that the Austrian unions will refuse to sign the new pay deal in Vienna on Thursday this week despite the fact that it's been signed up by 95% of the pilots and over 2/3 of the cabin crew.

And then therefore, the -- it's likely that we will have to go through the closure of the A320 base in Vienna.

We'll have probably 15 -- 14 or 15 spare A320 aircraft.

They won't fly certainly for the remainder of this summer.

We may deploy them to other countries for the winter.

But we'd have to see what the employment situation is like or the flu situation is for rerouting and training Airbus pilots and cabin crew in other countries.

So I think going forward, if anything, this crisis would have taught us, no, we're not there yet with Boeing, but I think we're making much more promise at Boeing than we are with Airbus, that the future will lie on deepening the relationship with Boeing.

I don't think at this stage, we're looking at any increased orders for Boeing.

And that's not to say they came up with very attractive pricing that we wouldn't look at taking more aircraft.

But certainly, we have firm orders for 135 MAX 200s out over the next 4 years.

We clearly need to rework the delivery program with Boeing on those aircraft because they're all running 12 months late on the delivery.

But no, I think it'll be optimistic.

I don't see any rationale at the moment to increase the quantum of that order given that we're in the middle of the COVID-19 crisis.

But if there was a pricing incentive there for Boeing, we certainly -- it's something certain the Board would look at.

The next question the next question comes from the line of Jarrod Castle from UBS.

Two questions.

One, I think you've got 7 planes available for sale.

So just interested in terms of -- is it realistic that you can sell them in this market in the next 12 months?

And then just secondly, just coming back to state aid and the legal action that you're taking.

What would you hope to achieve, a reversal of the aid that's been given penalties that you and others received from these airlines or indeed government?

So what would success look like for Ryanair in terms of the legal action?

Well, to answer this, the 7 aircraft for sale, like all of our aircraft are for sale, are subject to acceptable pricing.

We don't see acceptable pricing now for the next 12 or 18 months.

And I would be much happier to operate those aircraft.

(inaudible).

I thought there'd be 7 more for sale.

No, (inaudible).

We've already sold those aircraft.

They were forward sold.

But I don't see we'll be selling any more aircraft for the next maybe 12, possibly 18 months because we want -- we'll need those aircraft ourselves.

And -- oh, the deliveries of the 7 aircraft we sold are later on in the autumn of this year.

So they're from October onwards anyway.

Correct.

Which again emphasizes why we will need more aircraft from Boeing just to be able to even to stay in a steady-state fleet into the summer of 2021.

On the state aid side, I mean, what we would hope for is to encourage the commission.

And I was heartened by Madam Vestager's comments this morning where she's seriously concerned at the extent to which the French and the German governments, the richer EU countries, are massively distorting state aid.

The German government alone accounts for 52% of approved state aid at the moment in Europe.

So the richest governments are the ones who were engaging in the most state aid doping.

And what's ironic is that it's usually the Germans and the Dutch telling everybody else to obey, to comply with the rules unless it applies to them.

You're going to seriously distort not just the air transport market, but also many other industrial markets across Europe.

If the Germans in a crisis can just ladle a state aid to their operators, whereas the Spanish, the Irish, the U.K. and the other countries are playing by the rules that are not participating in this illegal state aid, again, you go back -- again, the question is, why does Lufthansa need another EUR $12 billion on top of the payroll support schemes, on top of the aviation tax refund schemes?

Like, really, if the German government was interested in the industry, what we're hoping would happen is that there would be transparent and nondiscriminatory state aid to everybody.

Like, by all means, in Germany, why don't you just refund or waive the environmental taxes on air travel for the next 12 months, 24 months, which the vast majority of that would go to Lufthansa, but it would also go equally to other airlines like easyJet and Ryanair operating in Germany.

If the French government want to refund aviation taxes, do it to all airlines equally in France.

But don't just go into the French-registered airlines, give them payroll and support schemes and then lob another EUR 9 billion of state aid on top of it just because it's Air France.

So Neil, do you want to say anything we want to hope to achieve on the state aid side?

No, (inaudible)

Just to eliminate the illegal and discriminatory state aid, by all means, if you want to do something -- European governments want to do something, do it on a transparent and nondiscriminatory basis.

Use your aviation taxes, your payroll support schemes or your environmental taxes on air travel.

I mean let's face it, there's enough of them around Europe, between ETS and APD in the U.K. And at least then, you're applying schemes equally to every airline.

And the first thing we, as airliners will do will be to pass it on to our customers in the form of lower fares and get the tourism industry and employment back moving again.

The next question comes from the line of James Hollins from Exane.

Just one for Neil, actually, just on the cash burn.

As far as I'm hearing, you're doing EUR 60 million a week, of EUR 25 million is fuel and effective hedging cash going out the door.

And then I think you said EUR 300 million financial year-to-date is going out in refunds.

According to my math, there's nothing left on other cash burn.

I was wondering if you could maybe give more detail on how you've got it so low.

And then, Mike, just wondering what -- sorry, it's for Michael on the Lauda earnings.

Go on, you can answer, please?

No, no, we want the second question.

Give the second half.

Yes.

No.

I was just wondering what odds you'd give on Lauda existing in 2021 if they don't -- the unions don't sign up to deal this month?

Neil, do you want to handle it?

Okay.

On the cash burn, as I said earlier on, you have a EUR 25 million, on average, related to the fuel.

We've got various other things going out, like debt repayments, salaries and other operating costs.

On the refunds, approximately EUR 300 million settled so far.

That's a combination of vouchers that have been accepted by customers, cash refunds and, of course, free flight changes across the business.

So it wasn't all cash out the door.

And that's accepted vouchers.

That's not just accepted vouchers and free moves.

In actual fact, we've seen a significant surge in free moves over the last 7 days as people now realize that actually, they can now travel in July and August.

A lot of them are taking the free move options.

And we tried to explain to the various consumer nitwits like, which magazine in the U.K. We are -- there is no restriction on if you want a cash refund for money, you get a cash refund.

But you must understand, we're dealing with a historic backlog of refunds that have been imposed upon us by European governments have been basically 3 months of flying.

Our refund team has been reduced by 75% because of social distancing in the office restrictions here in Madrid, Dublin and in Wroclaw.

So you will get your cash refund, but I'm afraid you'll have to be patient and wait for it.

It's going to take some weeks and months to eliminate this backlog of refunds.

On Lauda existing in 2021, Lauda will exist in 2021.

I don't think it will exist in Vienna.

I think it's inevitable that the Austrian Airlines unit will close at Vienna base with a loss of over 300 pilot and cabin crew jobs on Thursday.

Lauda will still be operating in Stuttgart, in Düsseldorf and in Palma.

And I see a future for Lauda, (inaudible) the future as probably an -- as a Boeing 737 operator, operating wet lease services for Ryanair, for Buzz and for Malta Air across different bases and countries.

But I suspect the one country where Lauda will not be operating as a brand will be in Austria where, frankly, if the employment -- if the employment regulations and the labor structure is that daft, that people who want to vote for pay cuts and to preserve their jobs are told by a competitors union that they don't care if they're losing their jobs because the union won't sign the agreement, then frankly, we don't want to operate in a country that has such a corrupt labor market or labor legislation as Austria has at the moment.

It is beyond my comprehension why people can't vote themselves to save their own jobs, even if it means in the short term, taking a pay cut.

And I feel enormous sympathy for Lauda's pilots and cabin crew who have voted in their overwhelming majority in favor of these pay cuts, they recognize the crisis.

And yet the Austrian Airline Union can simply have a stroke, say, no, we're not finding this agreement and condemn those pilots and those cabin crews to long-term unemployment.

Because it's quite clear that Austrian Airlines won't be creating any job for pilots and cabin crew for the very foreseeable future despite the fact that they'll be getting EUR 800 million of aid from an Austrian government to a Lufthansa-owned and controlled subsidiary.

The next question comes from the line of Jaime Rowbotham from Deutsche Bank.

Just one from me.

Obviously, you don't have a crystal ball, but it's helpful that you give a working scenario for your guests in the current fiscal year, the sub-EUR 80 million.

Is there a working scenario for fiscal '22?

And one of the reasons I ask is on Slide 11, you tell us that your 31% fuel hedged for fiscal '22, which implies there's a denominator to that calculation.

So just any working assumptions for your planning would be helpful.

Yes.

I think it's at this point in time, we would be operating on a return to normal traffic volumes.

That's less to say, the aircraft that we sell -- it depends on how many aircraft have come off lease that we can extend at the end of this year at reasonable terms, it depends how many aircraft Boeing can -- but on the assumption that we take between 20 and 30 Boeing MAX next year, I think that our numbers will return next year to kind of normality.

I mean it will be north of 150 million passengers.

And now that clearly assumes that COVID has been dealt with by the time you get to April of next year.

I think next summer of 2020 will be incredibly strong for holiday traffic, for people who this year, have canceled their holidays or weren't able to get to go on holidays.

I think it will be incredibly strong.

There will be a dramatic rebound in volumes.

But I caution, again, all of that volume growth will be at lower or discounted prices.

I think I've seen various numbers.

But our projection here is that we will return to traffic volumes normality in our year at March '22, so summer of 2021.

And then I think that by summer of '22, you'd return to kind of normal pricing as long as clearly, there's no further return or second wave or third wave of COVID-19.

But that doesn't obviate the huge existential shock the industry has suffered in 2020.

We're in discussion with unions where they're saying, "Oh, yes, but your numbers will return to normal in 2021." So I say, "Yes, they will, but they're not going to return to normal summer 2020 or the winter 2020." We can't keep your pilots and your cabin crew on the payroll.

In fact, even those we can keep on the payroll will be receiving 20% less because, frankly, I think that our yields are going to fall.

We'll begin to really adverse pricing for the remainder of this year and the early part of next year, competing, as we will be forced to with state-aided dopers like Lufthansa, Air France and Alitalia who'll be able to just dump pricing.

I mean let's face it, Alitalia has been engaged in below-cost selling for the last 75 years.

They've never made profit.

Now they'll have EUR 3 billion to continue to below -- to engage in below-cost selling for the next 3 to 5 years.

And they only account for 20% of the Italian market.

We account for 35% of the Italian market.

And it's no doubt that in Germany, in Austria, even in Belgium, where you're competing with Lufthansa subsidiaries, who are running around hoovering up state aid, the bases in Charleroi and Brandenburg are going to face really aggressive pricing from process airlines and others who have limitless cash resources at their disposal, thanks to this crazy state aid doping.

So I think in terms of volumes, for FY '22, you should be -- we are planning at the moment of normality in terms of volumes, but to start in pricing whereas for the rest of the summer for FY '21, radically reduce volumes and also reduce pricing.

The next question comes from the line of Muneeba Kayani from Bank of America.

So for the July to September schedule, how should we be thinking about unit cost base on your capacity tons?

Yes, if you talk about that and the cash burn.

Yes.

Impossible to talk about it.

We have no idea what our unit cost would be until we know what the volumes will be.

We -- as we've demonstrated in the last three months, we are incredibly flexible cost base here.

We basically, with the exception of fuel hedging, collapsed the cost base to almost nothing.

Now to be fair, a lot of that has been done on the back of payroll and support schemes, which we're very grateful for.

And they will continue through July and August.

The question is how much volumes can we restore and at what pricing.

But the volumes will be -- the unit cost will be what the cost will be.

But we can't give you any forecast, prediction on that.

I'm afraid, whatever guess you make on your model will be the [factors] wherever we come up with.

Can I ask one more on ticket refunds then.

The EUR 300 million that you've had kind of cash refunds of vouchers.

So what about the rest?

We're working our way through the rest.

I mean, the challenge we face -- a fresh community, probably.

We know on a normal month, we would refund about 10,000 tickets.

So we're geared up.

We're stamping from about 10,000 tickets.

At the moment, 3/4 of that staff can't even come to the office and they must come to the office.

These are cash refunds.

It can't be automated.

We get about 25%, 30% of bookings come through OTAs and third parties who would not be in.

We cannot issue refunds unless we get a direct correspondence with the individual passengers.

So we're geared up for about 10,000 refunds a month.

Currently, we're trying to process something of the order of 25 million or 30 million refunds over the next couple of months.so the EUR 300 million that Neil has talked about, that's effectively about 1/4 of the backlog of refunds we have at the moment for March, April, May into June -- the first half of June.

And we will continue to process that.

If we're allowed, and we are hoping that the offices will return to full staffing here from the 1st of June onwards in Dublin, that will significantly increase our ability to process refunds.

And I think going forward, to take Neil's figure on the 60 million, as we move through the summer and the fuel hedge, fuel cash outflow declines, the refund cash outflow will increase and will substitute for the other.

But if we get back to some kind of normal flying in July, even if it's only 40%, the cash flow then will begin to be very positive because of forward-looking into July, August, September, October.

We can handle cash refunds.

But we're trying to communicate with our customer base, just please be patient with us.

We're not denying you a cash refund or trying to sit on it.

We just can't process these numbers automatically.

We can automate vouchers, that's easy because it's not cash out the door.

We can automate free moves.

We can't automate the payments or the cash refunds because most of the -- a lot of the cash refunds would disappear to somebody else's bank account like a travel agent and not the end customers' account.

The next question comes from the line of Gerald Khoo from Liberum.

Two questions from me.

Firstly, on the MAX deliveries, whenever they're due to arrive, I was just wondering whether you can clarify what finance you've arranged for those.

And secondly, in terms of refunds, to the extent that they are being fulfilled, can you give us a rough indication of the split by sort of method, cash versus vouchers versus rebooking?

I know that's probably a dynamic issue.

But if you could give us a rough indication, please?

No, I wouldn't give you any indication on the refund.

At the moment, it's EUR 300 million and includes cash refunds, vouchers, et cetera.

Clearly, there's a lot more vouchers in there than cash refunds.

But as the cash refunds increase, the number of, I think, vouchers will decline.

But as we move back to flying, there'll be a much greater uptake, we think of free moves anyway.

But we can't break it out, and we can't predict where it's going to go.

On the MAX deliveries, interestingly, we haven't paid any PDPs since about the middle of last year.

So we still have quite a significant volume of PDPs already in place at Boeing.

So we would expect to fund, certainly, if there's 20 or 30 aircraft delivered despite of next summer.

A lot of that funding is already in place with the PDPs that we have already paid.

We have the cash reserves to be able to fund the balance of those deliveries.

But obviously, financing and the speed and rate of PDP is just one of the key elements of our ongoing negotiation with Boeing.

And Boeing, to be fair, have been very sympathetic, have been a very understanding of the need.

I'd say Ryanair is one of the few airlines in the world talking to manufacturers about taking aircraft deliveries and it needs be ordering new aircraft at the moment.

So it's a reasonably easy discussion to have with Boeing.

Boeing themselves have done a stellar job in the last couple of months.

They've raised about $25 billion in the bond market without the need for government intervention, which would again, mark them out against Airbus, who we will be very sure will be on the French government breast in the not-too-distant future.

Boeing have the cash.

And I think the easiest part of the discussion with Boeing actually is the financing and funding for the next -- for the summer '21 deliveries.

What we're really focused more on at the moment is the return to service days and then how many aircraft can they deliver to us.

And remember, one of the great advantages of Ryanair is we actually have MAX simulators in place that we can manage the return to service with in-house ourselves on our own MAX simulators.

Yes.

The only thing I'd add to that, Gerald, is that we are BBB ratios, high investment-grade.

The bond markets remain open albeit at elevated levels.

We've received a number of sale and lease tax proposals.

And indeed, we've received a number of unsolicited proposals for secured debt.

So we've got lots of options on how we finance ourselves going forward, if not from cash.

And unlike some of our competitors, we don't take the profit from sale of lease tax through the P&L or our other costs so -- but at the moment, we have more than sufficient internal resources, cash to change deliveries of those aircraft without the need for external financing.

But if we needed external financing on new deliveries of MAX, I think we would find it very easily in the current marketplace, although these are at elevated rates -- elevated financing rates.

The next question comes from the line of Carol Dores from Morgan Stanley.

I have 2 questions.

The first one is even though you can -- you may still be able to do quick turnaround, there's probably higher hygienization and cleaning standards, which will probably slow down overnight and around the fleet.

So do you think you can still operate or transport 150 million passengers with the same number of aircraft?

Or do you need to increase that number?

And the second question is how much of your -- in your short-term payables is due to Boeing?

I'll let Neil answer the second half.

Look, there's no effect on quick turnarounds at the moment.

We put in place extensive health measures for the return to service on the first of July.

We're disinfecting all the aircraft.

All aircraft sources, nicely disinfected, this is good or bad, for more than 24 hours.

We're not going to disinfect on turnarounds.

It's not possible.

You don't have the cleaning staff out of supplies at airports to disinfect on turnaround, nor is it required where aircraft -- where passengers and crews are wearing face masks.

Because you've eliminated 98.5% of the risk of droplets occurring anywhere onboard the aircraft.

The aircraft will not be operating at 95% load factors.

We think 50% to 60% load factors in the first month or 2 was the best we will do.

And we've already explained, we will not get to 130 million passengers in the next 12 months.

We think the number is somewhere under 80 million passengers.

By the time we get to the summer of 2021, we do think it's reasonable to go back to 150 million passengers.

But at that point in time, we think vaccines will have been found, antivirus -- yes, vaccines will be found and the treatments will be in place or the COVID-19 pandemic will have disappeared altogether.

There has been no -- and we have 2 months of experience now in Asia, there has been no second wave of COVID-19.

This mythical second wave at the moment doesn't -- hasn't yet occurred anywhere.

And so it seems to be medics and scientists trying to frighten the local populace into believing that they should isolate somewhere for a 2-week period.

So look, caution, I think, is the right approach at the moment.

But there will be no effects on turnarounds, particularly where we're operating with 50% or 60% load factor.

Neil?

Yes.

On trade payables, the EUR 1.4 billion figure, just over EUR 1 billion of that is accrued of PDPs to Boeing.

The next question comes from the line of Neil Glynn from Crédit Suisse.

Just one quick one for me.

Just on the airport and network strategy.

You obviously highlighted a once in a lifetime opportunity.

Just interested in your take.

Are you likely best served going big at larger, hungry airports like at Gatwick, for example, where there's a hole opening up?

Or by dispersing freed of aircraft more thinly around the network?

I mean, David O'Brien, just say it, try to take that since it's more logically in his area.

David?

Yes.

That's going to depend on what those airports do.

We've more than enough solicitations from around -- from over 200 airports to distribute them or to concentrate them.

And we've demonstrated we have the flexibility to do both.

In the case of Lagos, it's going to be a 15 aircraft fleet out of Vienna, available either in small increments at smaller airports or indeed, the opportunities you described.

So no, we'll be opportunistic on this.

But I think it's fair to say that we're seeing the same kind of offers.

In fact, if anything, better offers coming from the bigger airports who are facing a much more catastrophic loss of traffic than necessarily the smaller airports yet are.

We're in dialogue with all.

But the real [elite] opportunity is going come with the bigger airports.

I'm not sure I would necessarily emerge at Gatwick, like I don't really believe that IAG will close their Gatwick operation.

I think it may well close at BA, but it might reemerge as a Vueling or an Aer Lingus or a lower-cost operation.

The Norwegian operation will go at most of the airports in which they operate.

And you look across Germany, in most of the German airports, except that Germanwings is going to disappear, Lufthansa will cut back traffic.

But -- and some of them are panicked.

And some of them are remarkably complacent.

They just believe that the German state will provide and Lufthansa will be ordered to go back to their previous volumes.

We don't think that's realistic.

And certainly, in the other bigger markets, in Italy and Spain, there's a very open dialogue with the airports there.

But lots of airports are also in the same situation.

So they don't quite know what's going -- what they're going to do, what's going to come back, what they're going to lose.

I think until we see that emerge over the next 2 or 3 months and certainly into the winter of this year, it will be difficult to finalize those agreements.

I mean certainly, if you look at -- if we look at easyJet as an obvious candidate where there's a ridiculous kind of dialogue with their largest shareholder about quoting back aircraft orders.

That can only result in significant cutbacks at certain of the easyJet bases across Europe, in favor of, I would presume, Gatwick, maybe Berlin.

But -- and I feel sorry, for the easyJet management.

It's dealing with COVID-19, it's hard enough without dealing with unreasonable demand from shareholders who recently received quite ginormous dividends.

If they were that concerned about the future of easyJet, they could hand back the -- return the dividends and stop annoying the management.

But I suppose annoying shareholders is just one of the facts of life we all live within the airline business.

Next question comes from the line of Malte Schulz from Commerzbank.

Also 2 questions from my side.

First of all, I would like to know, you mentioned the 60% for a breakeven operation.

Is it just on variable cost base on a cash cost basis or on a general cost basis?

And my second question would be, if you use your unencumbered fleet as a collateral, how much discount does the banks currently ask for given that your -- that the fleet at the moment is not sellable at the book value?

Yes.

I mean, look, I don't confuse the numbers.

I'm saying we're hoping to run with maybe a 50%, 60% load factor in the second half -- in the Q2.

Based on a reasonable yield assumption, we think that, at the moment, those numbers would suggest we would run in Q2 breakeven or a small loss.

It's not going to be EUR 200 million plus, up end, Q1.

All, there's 3 moving variables.

And so we can't give you any guidance into Q2.

So it isn't 60% will deliver a breakeven or 65% or 55% will or won't.

At the moment, we think there's a way.

If the restrictions are lifted, there's no 40-day isolation, we think there would be a reasonable prospect to get into a 50%, 60% load factor through July and August.

The yields would be lower than we had previously predicted, but that's peak season yields.

The cost would certainly be materially lower than we have would it be normally budgeting in July and August.

But if we get 20% pay cut done, they will all take effect from the 1st of July or we will have a lot less labor.

So there's no number here that's a forecast or a prediction.

We can't give you one into second quarter.

How much -- the unencumbered fleet, actually, we would -- I mean, the proposal we've had at the moment are reasonably -- most of them are close to above our book value because of our aggressive depreciation policy and low purchase price on the fleet anyway.

Most of the offers don't come with a, as Neil said, elevated financing costs.

So it's not that someone would ask us to take a bath on the aircraft or the book value of the aircraft.

But I mean we've seen offers coming in at 4% or 5%, 6% rate of interest.

And like frankly, where we've been able to borrow in the bond market for the last number of years, that's down 1% where we don't need to raise any additional money.

Frankly, I don't see any rationale in borrowing money at 5% or 4%, 5% or 6% at the moment.

Now that's not to say that there couldn't be a downturn in the market, that there won't be some further unforeseen events in the second 6 months of this year in the far side.

We don't know.

But thankfully, with EUR 4 billion in cash and a net cash burn of under EUR 60 million a week, we don't have to worry about that for the moment.

But that doesn't mean that we're out of the woods yet.

This is -- we are managing this business on a day-to-day basis.

We think there's a reasonable prospect of some return to business in July.

And I think the most key development in that was the Italian decision this weekend to dispense with the restrictions to allow the tourism industry to come back and has dispensed with the kind of idiotic 14-day isolation, which militate to get both business travel and tourism travel.

And we think most sensible European governments will mirror those kind of reasonable policies in the next couple of weeks.

Guys, if anybody has a conference call, please go.

We'll keep the conference call going just as we've answered all the questions as best we can.

The last question comes from the line of Alexander Paterson from Peel Hunt.

Can I ask 2 quick clarifications, please?

Firstly, on the pay cut.

Is that temporary or is that a permanent rebasement?

And secondly, on cash refunds.

Did you say, passengers need to contract you directly that you are not refunding through intermediaries like travel agents?

Okay.

Yes.

First on pay cut, look, I mean, clearly, a dialogue is going on with the unions.

Now let's be clear on this.

What we've said is we will need up to 20% pay cuts.

And obviously, there is a variable number in there, it's 20% for the higher paid people like the captains.

It is down at around 10% for the lower paid cabin crew, et cetera, et cetera.

So it's variable.

And -- but if we don't get those pay cuts, we will redact considerably more than 3,000 job losses at the end of June.

We're not maxing -- everybody knows there's an essential crisis going on in the industry.

And we -- the obvious number, unions going back (inaudible) we need further information.

If you don't need further information, then we were originally planing to carry 150 million passengers this year.

We will now be lucky to carry 80 million passengers this year.

There's your further information.

Get on with it.

So I think the pay cut will be between 20 -- 10% and 20%.

It's also though, our objective to try to restore those pay cuts over a kind of 3- or 4-year period as the industry recovers.

We need lower pays through the remainder of FY '21.

If we're doing well in summer of '21 -- into FY '21 and FY '20, the first people who will be sharing in this recovery will be our people.

So the pay cuts will be restored over a 3- or 4-year period.

The job losses, we would hope to restore some if not all of those job losses.

Now it won't be the individual people.

We're not going to give anybody the right that can be the -- you'll be the first one back if -- but clearly, we will favor rehiring those pilots and those cabin crews who lost their jobs through no fault of their own because of the COVID-19 pandemic.

On the cash refunds, the situation is, yes, we can issue refunds, automate refunds where -- because part of the problem we have here is, you have travel agents and OTAs.

Generally speaking, we don't allow you to make bookings, but they are all operating but multiple -- I don't know, what the term is, but phantom credit cards, phantom addresses and phantom emails.

We can't -- if I made a booking through Joe Blog's OTA or some of the those scam artists like e-Dreams in Spain, whoever the other scam artists in Germany and Italy, whether levying handling fees, we would never dream of refunding cash -- customers' cash to those people because I'm sure the customers would never see the cash back as well.

Our cash refund process is the individual customer communicates with us, we communicate with the individual customer, we ask them to fill in the refund form and where they want that refund sent to, and then they have to sign it off so that we have the authorization to make those cash refunds.

Without those procedures, and those -- and they're required under our audit rules and consumer protection rules, we cannot just lash out money to some automated process, to third-party intermediaries.

It is the customers' money.

The customer has paid us, and we have to make sure that we send that refund back, whether it's the customer’s credit card, whether it's their -- I don't know what the payment terms in Germany are, straight to there, the cash transfer into their bank account as well.

We require every customer who wants a cash refund to give us or to verify where they want the cash to go and that they sign off on their liability.

Otherwise, we could be refunding money to intermediaries that our customers would never see.

Any other questions?

There are no further questions.

Okay.

Thank you very much.

I'm sorry the conference call overran, but it's important given the COVID-19 crisis.

We try to fit and answer it all as best we can.

I'm sorry that we can't give you any more material guidance into the second quarter or the full year, but we're all in this same situation together.

We're flying blind.

But I think there's a reasonable prospect of us returning to a reasonable level of flying in July, August, into September.

And I think once people begin to fly, even if it's wearing face masks, confidence will be restored reasonably quickly.

And then I think you'll see a very dramatic restoration of passenger volumes but on the back of discounted pricing and very aggressive pricing, both from the airlines and also from the holiday hotel and tourism provider.

That said, hopefully, by the time we get to the first quarter results call in early August, we'll have a much better handle on situation, and we'll be able to give you something like more tangible capital direction for the second half of the year.

Thank you for your patience.

We clearly appreciate the support you've all shown the business over the last 3 months.

I know it's been an extraordinarily difficult time for investors as well.

It's not pretty to see the share price go from wherever it was, EUR 15 down to EUR 9 or whatever it is.

But rest assured, we are here on a daily basis, making sensible decisions on cost, making very sensible decisions on cash protection and trying to make sensible decisions on an early return to flying in a -- at the healthiest fashion we can deliver for both our people and for our customers.

Thank you very much, ladies and gentlemen.

We have an extensive road show, virtual road show going on this week.

We're now all going on investor calls here.

And if you'd like to have an individual meeting with Neil, myself or anybody else in the team, please route the request back through Citibank and Davy, to Shane O'toole, our Head of Investor Relations.

And I'm sure we'll have a call with you later on the week.

Thanks very much, everybody.

Good to talk to you, and look forward to see you again too.

Remember, keep flying and fly Ryanair, the safest and the cheapest airline in Europe.

Thanks, everybody.

Bye-bye.

This now concludes our conference call.

Thank you all for attending.

You may now disconnect your lines.