Ryanair Holdings PLC (RYAAY) 2021 Q1 法說會逐字稿

Hello, and welcome to the Ryanair Q1 FY '21 Results Conference Call. (Operator Instructions) Just to remind you, this conference call is being recorded.

Today, I'm pleased to present Michael O'Leary, CEO. Please begin your meeting.

Okay. Good morning, ladies and gentlemen. You're all very welcome to the Ryanair Q1 conference call. I'm joined in Dublin with most of the team led by Eddie Wilson, the DAC CEO; Neil Sorahan; Shane; our new Head of Investor Relations, Peter Larkin; Michal and Juliusz joining us from Buzz in Warsaw; David O'Brien and Andreas Gruber from Vienna; and Diarmuid O’Conghaile from Malta Air.

And as you would have seen this morning, we released the quarterly results. There's a full detail of the quarterly results, the MD&A and a pre-record Q&A all online. So I propose not to go through all that again this morning.

I want to touch a couple of brief themes and then we'll open it up for the Q&A. Obviously, the COVID-19 situation has been extraordinarily challenging. We've never come across anything like this in our 30 years of operation. And we think we're recovering reasonably well from the lockdown. We started flying at the end of June. We've restored about 40% of the schedule in July. We expect that to rise to about 60% in August. Operationally, the return to service has gone very well. We expect to report just about a 70% load factor for July and August.

We are challenged, however, and we'll continue to be challenged with various I think outbreaks or spikes in COVID-19 and particular government measures. We draw attention to the fact that some countries, most notably Morocco, Jordan, continue to ban flights, generally speaking, at short notice. Therefore, we're continuing to suffer cancellations that are outside of our control. Israel continues to permit only Israeli citizens to travel to and from Israel, which means we continue to have an ongoing cancellation, refund issue for non-Israeli citizens there. Over the last couple of weeks, the Irish government has we believe mismanaged the return to service, not starting the return of the economy. We continue to call for the opening of flights and free movement of people between Ireland and the EU27 members plus the U.K. And the Irish government has instead produced a green list of 14 countries, 4 of them which had no flights from Ireland. And we don't believe there's any scientific basis for that. We'll be challenging that in the court later on this week.

Most of you will have seen over the weekend the -- we, for the last week, have been dealing with a more publicity, negative publicity around an outbreak or a spike in COVID around Barcelona and in the Catalonia region generally. There's been very little upward movement in COVID around the resort, the Balearics and the Canaries, and yet the U.K. government over the weekend panicked and reimposed a 14-day quarantine on all returning visitors from Spain. For a country that has already locked down Leicester seems to me to be a badly managed overreaction. They should have -- in my view, have controlled arrivals back in from maybe Catalonia or done it on a regional basis. But to do it on a national basis, there's no scientific basis for a national restriction on visitors coming back from Spain to the U.K. in much the same way that we wouldn't expect other EU countries to ban all or to impose quarantine on all U.K. business just because there's been a spike of it in Leicester. However, we have become used to the U.K. government mismanaging COVID, and it's something that we'll simply have to continue to deal with.

We've reduced the full year traffic guidance from -- we were originally running the figure around 70 million to 75 million. We now think it will be lower. We're guiding around 60 million because we think we'll continue to see occasional spikes and occasional -- and restrictions continuing I think throughout the September -- or throughout the summer and into the winter period. I think the biggest challenge for most European economies will be to manage -- or successfully manage the return of the schools in September. And to the extent that they successfully manage the return to schools, we think there will be some return to some level of normality of business travel. If that doesn't happen, then we think business travel will also be badly affected through September and October. And therefore, even the 60 million will be a challenging figure.

However, I think looking to the upside, I think what the last 3 or 4 months have demonstrated certainly in Ryanair's model is we have an extraordinary ability to manage our costs. We have done an exceptional job, I believe, in managing our cash flows. And despite the fact that we are spending a lot of money on passenger refunds, we now think we'll have almost eliminated -- in fact, we'll be up to about 90% of all cash refund requests from customers will have been processed by the end of July, which will be an extraordinary performance given that the offices were essentially closed until the 1st of June. We still have a large liability in vouchers out there. But increasingly, as we return to travel, we see more and more customers, both accepting vouchers or free moves, and that's reducing the volume and the burden on cash refunds.

Other than that, clearly, revenues were devastated for the last 3 months. We have done an amazing job I think at managing costs. The fact that we've brought the cash burn down to almost 0. And we -- as we reopen in July and into August, we are operating without any cash burn. In fact, it's a very small or modest cash inflows coming from steady sales as they increase. But again, that would be choppy I think over the next couple of months depending on what happens with various spikes and/or returns to restrictions of -- travel restrictions within the EU27.

And touching on a couple of other points. Boeing continued to make progress on the MAX return to service. They've completed the flight tests in North America, which seemed to have gone well. We are reviewing the data. There looks like there would be some delays though in the other regulators. The Canadians, the Europeans and the Brazilians are doing their flight tests mainly because of restrictions on travel to and from the U.S. We're still hopeful, but I would say hopeful more than confident that the MAX will return to service in -- at the end of September in North America. That would -- our most optimistic outcome, but then we get the first of our MAX deliveries before Christmas. If not, it will be after Christmas. And the difference between the 2 of those will be our ability to take we think deliveries of up to 40 aircraft. And if the first delivery is after Christmas, that may be reduced. We may only take 20 or 30 aircraft for summer 2021.

This is a great aircraft. We remain very committed supporter of the Boeing MAX aircraft. And there are extraordinary growth opportunities out there into summer 2021 across Europe. We've seen the collapse of a large number of EU airlines, including Flybe, Germanwings, Level in Austria, SunExpress in Germany. There will clearly be more. And we believe that there are extraordinary opportunities out there for those airlines. And Ryanair I think will be one of the very few airlines that will be able to grow assuming that there is some sort of recovery from COVID-19 by summer 2021. And that would depend on a successful vaccine being identified some time towards the end of this year or the early part of calendar 2021. We would then expect to return to some level of growth in summer 2021.

And we are one of the few airlines left that has any reasonable volume of aircraft deliveries through 2020, 2021 and into 2022. Most of our competitors -- Norwegian have canceled most of their orders. easyJet have pushed back a significant volume of theirs. Wizz don't have many orders through the next year or 2. And we think there would be very significant opportunities for us to grow and to grow profitably. But obviously, that all depends on how the COVID situation develops over the near term. And in the near term, I think we have to be more pessimistic than optimistic. But over the medium term, we've demonstrated I believe that we have a very flexible cost base. We have an exceptional ability to manage cash flows. And we are gearing up for a period I think of very strong growth in traffic and profitability, but only once we are through our -- identifiably through the COVID-19 pandemic. But at some -- if the COVID-19 pandemic continues, it is going to remain very difficult. We cannot rule out that there will be further pay cuts and/or job losses if things get worse this winter than better. We have gone -- I think we've made significant progress with our people across Europe negotiating pay cut as an alternative to job losses. But if the COVID-19 crisis continues into this winter and certainly into the summer of 2021, then we would have to revisit the job loss issue. I think our objective there was to minimize job losses by agreeing pay cuts with our people. And to that extent, I think we have done significant -- made significant progress in that respect.

Balance sheet remains very strong. We closed the quarter with almost EUR 4 billion in cash. We continue to own over 330 unencumbered 737s, book value of approximately EUR 7 billion. So we don't see any need or reason to look to raise order equity and nor are we seeking to do so, nor do we believe we need to raise any additional debt. And although we have some debt repayment challenges in the middle of summer of 2021, we have to repay the U.K. government the EUR 600 million loan and we have our first bond, we think we can meet all of that as long as there are no unforeseen further events relating to the COVID-19 and there's some modest or reasonable recovery in traffic this winter and, in particular, into summer 2021.

This year will continue to be a very challenging year for our group. Each of the individual airline is performing well and expanding its fleet. Lauda has had some cutbacks in its fleet in order to deal with the exceptional extraordinary situation in Austria and Germany. I think the big challenge for us in the next 12 or 24 months is going to be hopefully seeing then some level of economic recovery from COVID-21 (sic) [COVID-19]. But even as we see that recovery, we find ourselves competing with flag carrier airlines all over Europe with extraordinary amounts of state aid: Lufthansa, EUR 11 billion; Air France-KLM, almost EUR 11 billion -- EUR 10.6 billion; Alitalia, an airline that has never made a profit in 75 years, is receiving EUR 3.5 billion despite the fact it only accounts for 20% of the Italian traffic; TUI Group, nearly EUR 2 billion; and TAP, EUR 1.2 billion.

It's inevitable, in my view, that if or when we get through the COVID-19 pandemic, we will be facing below cost selling from a large number of those flag carrier airlines. In my view, that's probably good for our business model. And that means that traffic will return sooner rather than later because it will be -- but it will be stimulated by a very low pricing. That will mean further casualties within the European airline sector. But the strong that will emerge through that, particularly those airlines who are not dependent on state aid but who have a low cost base, will recover strongly, but that recovery could be 2 or 3 years away at the moment. I can't emphasize for obvious reasons that it's -- our biggest fear at the moment is a second wave of COVID-19 cases across Europe and how governments will respond to or try to manage that.

Given the current uncertainty, clearly, we cannot give you any guidance on FY '21 outturn. The best we can come up with at the moment is we think a 60 million passenger traffic is a reasonable expectation for the rest of the year, assuming that there's no other widespread lockdowns as a result of the second wave of COVID-19. We will make a small loss in Q2, but we have no idea what's going to happen in the winter or in the H2 yet. We will, however, emerge from the COVID-19 crisis with a much lower cost base. We will have a pipeline of low-cost aircraft from Boeing, which we believe will enable Ryanair to lead the recovery and certainly to take advantage of growth opportunities that will be there, but we will need lower cost base because we're going to be competing with a wide number of enormously state subsidized flag carriers who will be doing stupid things with government money as they always do for the next couple of years.

Other than that, Neil will give a couple of comments there and won't go through the MD&A, but maybe talk about the balance sheet and cash generation, please. And then we'll open it up to Q&A.

Yes. Thanks, Michael, for that. You covered off on the cost quite well.

The balance sheet, as Michael said, very strong EUR 3.9 billion in cash at the end of the quarter, which is up from EUR 3.8 billion at the year-end back in March; a very high number of unencumbered aircraft, 333 Boeing 737, with comparative book value of EUR 7 billion on the balance sheet. So lots of scope there if we want to do anything in relation to those, whether it's sale and leaseback, secured debt, although we don't need to look at that at the moment. The balance sheet remains with a high-investment grade, BBB in both Fitch and S&P. And cash burn in the business is well under control. As we ramped up operations, we're slightly better than breakeven cash flow at this point in time. So I think it's important to be aware of the cash preservation measures that we've put in place and the strength of the balance sheet because that EUR 3.9 billion will be important as we move into winter.

Michael, that's -- I think that's it on the balance sheet.

Okay. Thank you.

We'll open up the Q&A. (Operator Instructions) And please don't ask us what the outlook for fares are -- is going to be because we have no clue.

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

First one on unit costs. On Slide 5, you're at EUR 31 per pax right now. If you've had to set out a stretch goal, Michael, on unit costs for the organization to achieve in, let's say, 3 years, what amount of reduction would you personally consider an excellent job by that time?

And then the second one, maybe a little bit more on the group structure. How is managing the company right now different from the group structure compared to past crises, let's say, 2009, for example? What are the advantages and the improvement areas you've experienced over the past 3 months that would be interesting?

Okay. Thanks, Daniel. I'm not going into forecast on where I think unit costs will be in the next 2 years other than to say, if you look at each of the major lines, obviously, that side excludes fuel. Fuel, we think will be clearly down for the next number of years. There will be a significant oversupply and -- given the weakening demand. Staff costs will be lower. Aircraft and ownership costs will be lower. Airport costs will be lower. Sales and marketing costs will be lower. So we see a very strong rebase of the cost base going forward, but there's no way I'm going to put any numbers at this point in time.

How is managing the company different? It isn't hugely. We continue as we did before the COVID. We have a strong team of CEOs. They're delegated quite significant autonomy. Michal in Warsaw; Diarmuid in Malta; David and Andreas as joint CEOs in Vienna; and Eddie Wilson in Dublin. But I will have said most of the work of what would normally be the work of running the airline has been clearly distracted by the last number of months managing COVID.

And I think if you look at the dramatic cost reductions -- the dramatic cash preservation record that we've demonstrated over the last 3 months, I think it augurs very well for a successful group managing a number of disparate airlines well. I think I would point in particular to the unique challenges faced by Lauda during COVID. I mean it is competing in Germany and in Austria with Lufthansa and Austria -- and in Lufthansa -- and Lufthansa subsidiaries in Austria, both of them below cost selling. All of them getting extraordinary amounts of additional state aid from not just the German government, the Austrian government, the Belgian government, the Swiss government. And Lauda in order to rebate it costs closed the Vienna base on the 29th of May because it couldn't get agreement with the unions down there. Thankfully, the staff, the pilots and the cabin crew overruled the union, demonstrated publicly in Vienna and then finally agreed or forced the union to agree to the new terms and conditions, which has allowed the base to reopen on the 1st of July, but it is now a smaller base. It will have 30 aircraft this year instead of 38. Vienna will have 10 aircraft instead of 18. There are painful redundancies still being processed in Vienna. And traffic in out of this year will be 5 million instead of 10 million. And -- but they've done an exceptional job. So I think the managing the company is marginally more complex, but I think the record of what we've achieved in Q1 in a period with 0 sales and 0 revenues is an impressive one.

The next question comes from Duane Pfennigwerth of Evercore ISI.

A couple of questions from me. One is you assess the state aid that's been awarded to your competitors. Obviously, the headline numbers are catchy. But how much time do you think they've actually bought for themselves? And what do you think the appetite is for more state aid if they needed to get through the winter?

Okay. I think the issue with state aid, state aid is a poison pill. I mean what it ultimately means is that there will be very little reform of the cost base in Alitalia, Lufthansa, Austrian or the others. But it means that these guys, it's like giving monkeys machine guns. They will engage in very aggressive below cost selling for the next year or 2 for as long as the billion lasts. And I think ultimately, they would put intense pressure on Ryanair and other EU airlines. There will be -- we'll be facing unfair competition, which is why we think this state aid is entirely illegal. Most of it is being associated with dressed up environmental commitments that were already in place before they receive the state aid. So it's a complete ready up. And I think we've been very disappointed by the failure of the European Union, who are quite happy to pursue and torture American companies like Apple and Google and others. But when it comes to maintaining a level playing field in European aviation, they turn a blind eye every time. I take particular delight in the -- we have this frugal 4, which is the Dutch, the Austrian, the Swiss and the Danes, putting themselves forward -- certainly, at the European level, this frugal 4 carefully manage the economy's need for rigor and then compliance with EU law. And yet they were the first people over the barricade bailing billions into SAS, KLM Air-France and Austrian Airlines. I mean they are marketing about the Austrian government bailing out Austrian airlines, but it's a Lufthansa subsidiary, it's a German company, which must be surely the first time you've ever seen state aid in Europe to a nonnational operation. But they can't tell you that. I think, therefore, they will put intense pressure on not just Ryanair, but other airlines. I mean the one I feel sorry for most is IAG, who would be trying to compete in the long-haul recovery space with Air France and Lufthansa with its obscene amount of EUR 10 billion of state aid. But it would be equally difficult in the short-haul market as well. And that's why we'll be challenging in our terms all of the state aid gifts, illegal state aid donations in the European courts.

Pretty candid, as always. Just on the range of outcomes for summer 2022, calendar 2022, can you speak to how much bigger could the airline be if you get your MAXs? And even if you don't get your MAXs, how much bigger could the airline be relative to pre-COVID levels?

Do you mean summer '21, FY '22 there? Or do you mean summer '22, FY '23?

Correct. Sorry. Summer -- calendar '21, correct. Yes. Sorry.

Okay. I think given the uncertainties, at best, we will take about another 40 aircraft, 40 new aircraft from Boeing for summer of 2021. We have probably another 20, 25 aircraft that were coming off-lease or sale -- pre-sold aircraft that we have to deliver. So at best, I think you'll see a return to our pre-COVID volumes in summer '21, FY March '22. So we're looking at maybe 150 million at best. And I -- but I would caution that, that recovery -- and that is the best outcome. Recovery would be on the basis of much lower airfares, a lot of price stimulation and intense price competition with state aid competitors who would below cost selling. That would be the best outcome. I think it's more likely that the recovery -- and again, it depends on what the -- emerge as a vaccine. It's more likely to be worse than that. And that whatever happens this winter, there maybe have some flow-through into the summer of 2021. And therefore, you're talking -- I mean it's impossible to know somewhere within the range of 60 million to 150 million passengers. The sooner a vaccine, an effective vaccine is found and there's a return to some kind of economic normality, then the faster I think the volumes would recover. But we won't have much additional capacity. Even if we get 40 aircraft from Boeing, less 25, 30 redeliveries, we really won't have a lot of additional capacity into summer of 2021.

That comes from the line of Savi Syth of Raymond James.

Two questions from me. First, if I can ask Daniel's question in a slightly different manner. Just wondering as you kind of goes and attack your costs and have discussions with your partners and labors, what's the kind of world view that you're using to kind of get to certain targets? Just as demand stabilizes, what fares do you return to profitability or cash breakeven or maybe even get back to kind of double-digit margins?

And then just kind of second question. I was wondering if you could provide a little bit more color on your ATL in terms of the makeup of refunds in there versus credits versus new bookings.

Savi, remind me of the second one again. What's the ATL reinsurance is -- what's that?

Oh, air traffic liability.

Oh, so refunds.

Yes. Versus credit that would not -- of course, versus how much is new bookings.

Okay. The first half of the question, there's no absolute on costs. I mean as in all cases, we will try to reduce cost by as much as we can. I mean to give you a flavor, we are obviously in advanced discussions with Boeing about compensation for delayed deliveries of aircraft. We're also having discussions about repricing the MAX order. Now none of those are -- we're in the middle of those discussions, they're nowhere near concluded. In terms of labor, we have now about 75% of the pilots and cabin crew have agreed to pay cuts. That ranges from, say, 20% for the captains down to 5% for the junior cabin crew. So there's a range of numbers there, but the average is about 10%. There's been significant headcount attrition in the Dublin offices. We've all taken pay cuts. And we would expect there to be a material downward movement in airports, but mainly as a result of growth incentives, but they really won't emerge until the summer of 2021. And we think fuel will be materially lower for the next number of years. It's very hard to see oil prices rising back above $50 a barrel. In fact, I suspect that when there's some degree of economics with [CAPRI] and OPEC starts producing again and U.S. shales start producing again, we think oil will be modestly in somewhere around $40 a barrel for the next 2 or 3 years.

So there's going to be very significant cost savings. But again, I emphasize, we will need those cost savings because I think the -- while I think the traffic will recover strongly through '21 and into -- summer '21, summer '22, it will be on the back of very substantial price discounting as we compete with hugely subsidized state aid flag carriers in Europe.

On the refund situation, again, there's not that much more I can give you. We have a -- we had a significant backlog of customers' demanding cash refunds. We will have worked our way through 90% of those by the end of July. So in the end of the next week, there'd still be a significant volume of -- and I won't break it out, but people who are out there who have either accepted vouchers or are taking free moves. So the liability is still there.

And the only area where we will have -- still have a significant challenge is we have a reasonable ramp, maybe, I don't know, 10%, 15% of our passengers are out there who have booked through OTAs or these unlicensed screen scrapers, the Booking.coms, Kiwi.coms, all of these chancers. The difficulty we have there is we can't make refunds directly to those passengers because, in most cases, to protect the fact they've been overcharging and misleading consumers, the screen scrapers give us false e-mail addresses and fictitious payment details. So -- and we have the liability directly to the consumer, not to the unlicensed intermediary. So what we're trying to do is to set up a direct communications -- direct communication vehicle where individual consumer, many of whom don't even realize that they booked through -- or have been booked through or scammed by an unlicensed screen scraper and been overcharged by them, still think they're waiting for a refund from Ryanair, whereas in actual fact, we can't refund them until we get them to communicate directly with us. The legal liability we have is we can't and won't refund the screen...

Yes. You can't...

Yes?

Yes. You said -- the question that...

We won't refund the screen scraper.

Yes. And the question I have more is just you're cash breakeven right now, which is pretty impressive. And I'm just wondering how much of the new cash in is -- from your revenue standpoint, how much of it's being used for credits and things like that. Because does that mean cash should kind of continue to build because you're probably using up a lot of vouchers today?

As long as there is a reasonably uninterrupted recovery of air travel, and that's -- I know is a wide statement, but as long as they're here, we can suffer occasional interruptions like the Spanish quarantine in the U.K. is limited to 2 weeks and then lifted again. As long as there is a reasonable recovery of air travel, 40% in July, 60% in August, 70% September onwards, then we would expect our cash will continue to be flat or slightly build until we get to the middle of next year where we have the U.K. EUR 600 million to repay and the first of our own bonds. So it all depends on bookings and cash flow, the book -- the strength of bookings and a continuing increase of recovery in bookings.

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

Yes. Two, of course, from me. I'm not expecting you to give us a number, Michael, but I just want to ask you 2 things around pricing. One, if you're also experiencing kind of an inversion of the normal booking curve with most of the bookings happening in the last week or 2 and whether or not those tickets tend to still be more expensive than the far out bookings. And related to that, obviously, is kind of what you're doing on promotions as it currently relates to bookings.

And then the second question, and I don't know if it relates to you, but certainly, as implications is around the EU with the slot constrained rules around airport slots being basically abolished. And your view is on what it means over winter if the EU does or doesn't decide to carry on with that, how that will or won't impact Ryanair?

Okay. I mean on pricing, there's a degree of inversion. And I'd break it into 2. The recovery in July and August has been reasonably strong because July and August tend to have a lot of forward bookings in them. I mean, I think we are facing a -- and basically, I think we're confident to get to the 70% load factors in July and August. I would be much more wary and cautious at this point in time about September, October. Assuming the schools go back, the annual holidays are done, we would have less forward bookings in the system through September, October, November. And therefore, we are -- I think subject to that, we'll start to be pricing inversion. I wouldn't rule out that we would be taking out more short haul, more capacity if we think bookings will remain weak in order to preserve cash and reduce costs.

And yes, there is a degree of pricing inversion in there that is accentuated where you have things like the Irish green list or the Irish 14-day. I mean Ireland stands out as alone among the EU states. Most of the European states have allowed intra-EU travel to return. And Ireland still has this bizarre 14-day quarantine where in many respects, you're in more danger of catching COVID in Portlaoise than you are in many of the European countries. That will continue. And therefore, we are in the lap of the gods. That's why I think, again, I can't continue to caution. I think the volume recovery will be strong, but the pricing will be weak. And we will be aggressive in terms of price stimulation through September and October, November, if we need to be.

The EU slot rules I mean really doesn't matter that much to us. Remember, we still have this image that's outdated that we're some sort of secondary carrier at secondary and tertiary airports. We are operating at most of Europe's biggest airports. We have all the slots we need. I don't see there being any issue with getting additional slots. I do believe the European Union will extend the slot holiday, and they're waiving effectively the EU's -- and were loosening 80/20 rule through the summer of '21, that's likely to continue into the winter of '21. Whether they extend it to summer '22, it doesn't really matter. There will be airports who have lost significant capacity reductions who will be I think engaging in growth incentives to get someone like Ryanair to deliver them growth where others are cutting back. And I don't think slots will be a major issue or a challenge for us in that respect. There are huge gaps opening up. And I don't think the slot issues or slots will be a major challenge to that growth if or when we return to growth.

Juliusz, I don't know, you want to add anything more on the -- kind of on the regulatory side on the slot situation?

Michael, the only thing I would say is that there is a growing unease on the part of the European Union to extend the waiver of the 80/20 rule into summer '21. And I think that is probably sensible in the context of several airlines announcing that they will be smaller in '21 than they were in 2020 or 2019. The question arises, how long does this slot waiver need to last to accommodate Lufthansa's plan to only come back to their 2019 level in 2024 or 2025? It surely shouldn't last forever because it would deprive other airlines from -- of opportunities to grow. So we are also growing uneasy I think about the prospect of extending the waiver indefinitely.

And that's from Neil Glynn at Crédit Suisse.

I'll also ask a quick two. The first one, you've obviously talked plenty about staff costs and the labor deals you've done. But just interested, have those labor deals in the U.K. and Ireland and the ones that you're negotiating at the moment, any incremental flexibility contained with them to help you cope with the second wave and such an uncertain outlook over the next 12 months or so?

And then second question, just interested, to what extent have airports and local authorities been keenest around Europe to secure your traffic beyond the pandemic? And is there any obvious relationship between their appetite and state aid for the actual operator in certain countries?

Okay. Two good questions. I think that gives me an opportunity. And I'm going to ask Eddie Wilson to take the staff cost one, wearing the lead DAC hat, but also with the back coming from the people that is working closely with, the RUs. And then I might ask David O'Brien, who is no longer our Chief Commercial Officer but is closely involved in that, to take the -- give you a flavor of the discussion with the airport. So Eddie, staff costs, incremental flexibility.

Neil, Eddie here. Just on the staff cost, we are now covered for 85% of the pilots and 75% of the cabin crew. And those deals do give the additional flexibility because what we've been able to do is that the roster roles within those have been essentially suspended and there are additional sort of demarcation sort of inflexibility that we had previously that have been relaxed. So we're able to flex our rosters. We're able to spread the work that's available within those bases amongst the crews that are there. And all those deals are signed off. And like what has happened here is that like you look in a sort of a unit cost basis, the pay has come down by 20%, say, for the pilots and up to 10% for the cabin crew, but then we're able to flex the actual amount of people that are there in spreading the work around.

And do you want to mention the German situation?

Yes. I mean the German -- that's probably, Michael, with the -- when -- obviously, the German VC had rejected the deal last week, and we're not quite sure what was going on there. They set up the vote, but then they said it was a survey. But over the weekend, remarkably, they have changed their mind without the need for a ballot. So I don't know what that says about the rules of voting for pay deals in Germany or not. But anyway, they have signed up to the original deal that was put to them last week. So the pay adjustment downwards of 20% would go ahead in Germany as part of what's called the VTB agreement there and all the agreements. I think they came under huge pressure from the pilots. I mean when it comes down to it, the pilots realized that when you look at Lufthansa with 22,000 job losses, SunExpress gone, pilots demonstrating in the streets of Berlin over the last number of weeks. And here, we had a deal whereby we were going to flex down by the -- keep as many people in employment as possible, use redundancies as a last resort and the care of the people who wanted that in the VC were hope -- as the Executive Board were hopelessly out of touch and did a handbrake turn over the weekend and accepted the deal on behalf of the pilots who would have preferred the balance sheet.

That's God bless German democracy. Okay. David, do you want to start briefly on the airports?

Yes. First of all, there is no clear link between the state aid recipients and their associated airports and the airport appetite. If you take France, for example, part of the state aid in France actually requires Air France to do less flying into certain airports, particularly on domestic, which opens up opportunities then for us with the airports becoming more hungry for alternatives. So in the case of France, it could work -- it works in our favor. In the case of Germany, I mean Lufthansa have already declared that they're cutting back on capacity. I think until such time as they actually demonstrate which airports are taking that capacity from, we won't see as much movement as we will inevitably see from specific German airports. But already they're coming in our direction. Beyond that, airports are scrambling in the first instance to get as much of their share of a return to service as possible. So there are a lot of short-term deals out there and most certainly, the waiving of any sort of volume targets and so on. And discussions are now on into summer '21 where, as Michael said, our capacity growth is low. Even at its highest, it would be -- at highest potential, it's low, which means some airports will lose and some will gain, and those discussions are going on right now. And as you can imagine, they're becoming increasingly urgent from an airport point of view.

Yes. I think the only thing that I'd add to that is the -- well, the one negative in that is also the tendency of the European government to raise taxes in response to the -- while at the same time that the German government while they're throwing EUR 10 billion at Lufthansa are raising their environmental taxes. I think they're up 50%. The Austrian government has remarkably rebalanced its environmental taxes. It was EUR 12 on long-haul ticket and EUR 3 on a short-haul ticket. Now from September, it's going to be EUR 12 on every ticket despite the contradictory nature of that environment of treating a short-haul site as being as expensive as a long-haul site. But -- and it has never stopped European government making idiotic decisions on -- certainly when it comes to environmental taxation. But I think as we move through the winter, this winter and certainly into the summer 2021, as European airports begin to realize the scale and the extent of the capacity and traffic loss that they're facing, we think there's going to be very significant growth incentives out there. And that's why we would be -- it's not just the overall growth in fleet. We'll also be closing more bases into the summer of 2021 and reallocating aircraft to those airports where there are significant growth incentives and growth opportunities. So we will be very flexible and very opportunistic. And as Eddie has demonstrated over the weekend when the German pilots rejected the pay deal, we closed 3 German bases. Now there may be -- we look at that now, they've accepted the deal over the weekend, but we will continue to be very flexible in the way we deploy the fleet across the group airlines.

That comes from the line of Stephen Furlong at Davy.

Michael, just in terms of the network this winter and next summer, presumably you're operating a smaller schedule at winter. I'm just curious about the shape of the network. Presumably, it's like more weekday slots; and 2, things like that won't be operated, and it will be at, let's say, smaller frequency. And therefore, into the summer, obviously, it's dependent on the Boeing deals as well. But would you be mindful of what competitors are doing? I think there could be large-scale pullbacks, as you mentioned, in certain markets. Is that just on the network? And then just, finally, you might just talk about ancillary revenue because I think some of them like allocated seating or priority boarding will be doing well, but I assume bags or onboard sales are not enough. So...

Thanks, Steve. Yes. I think you're pretty much right on the network outlook. I mean what we tried to do with the return in July was to cover about 90% of the network, but with much reduced frequencies. And I think that will continue to be the -- now we'll be flexible through the winter. But again, we'll try to cover as much of the network as we can. But with the added flexibility that were -- for example, if some government include -- as the Moroccans and the Jordanian and the Israelis are doing, where they are imposing severe restrictions, we simply will withdraw capacity at reasonably short notice. We've pulled out of Eilat entirely. We're back just to Tel Aviv. I wouldn't rule out that we may significantly reduce the Tel Aviv this winter as well because there seems to be these kind of arbitrary decisions. Morocco continue to make arbitrary decisions of just banning everybody traveling to and from. But there will also be opportunities then that does give us the opportunity where some airports are incentivizing growth. We will try to deliver them growth. I think that would be -- continue to be the watchword for summer '21 as well. We have a very flexible model at the moment, as Eddie has explained. The new deal with the pilots and the cabin crew gives us additional flexibilities. And we will try -- there will be a lot of routes this winter, but we will probably only fly Thursday through Monday and move the roster so that we have people just working 5 days on, 2 days off and not operating the aircraft on things like Tuesdays and Wednesdays.

And on ancillaries, again, it's too early to say. Clearly, there's been a disruption to the in-flight sales, but in-flight sales are a tiny proportion of our overall ancillaries at the moment. And certainly in the recovery in the return in July and August, things like priority boarding, allocated seating and carry-on bags, the revenue there are strong, and we see no reason why that won't continue. But too early, probably too early to give you any kind of guidance or outlook on ancillaries for the remainder of the year as it is on the scheduled revenues as well. We certainly don't know what the underlying traffic will be, and we have no idea what the airfares will be.

That's from the line of Jaime Rowbotham at Deutsche Bank.

Michael, one for you, then one for Neil. The one for you, some smaller Eastern European carriers seem to be getting into trouble, unsurprisingly, I think most recently, Blue Air in Romania. Is that a good source of opportunity for you as well as Wizz, of course, at this time when COVID issues in core Western European markets is still proving a headache?

And second one for Neil. If you carry around 60 million passengers over the next 3 quarters with load factors broadly in line with your expectations, presumably, there shouldn't be much more by way of charges for fuel hedging effectiveness. And if that's fair with the price of almost all the fuel you'll use fixed by hedging, could you perhaps give us a rough steer as to what you think the fuel bill might be this year after just EUR 9 million in Q1?

Okay. Thanks, Jaime. I'll take the first one. And Neil, you do the second. On the smaller Eastern European, I mean it's no different in Eastern Europe than it is in Western Europe. There are extraordinary opportunities out there in both Western Europe and in Eastern and in Central Europe. And the difficulty at the moment is trying to work out where that capacity is going to be cut. And I'll give you a couple of examples. The AF/K -- Air France-KLM have already said they were going to reduce 2021 capacity by 20%. We just don't know where yet. Alitalia are talking -- or are focusing strongly on long-haul routes and severely cutting short-haul routes. Now I'm not sure if that is true. We don't know. easyJet, for example, now 51 less aircraft by September 2021. I mean I think eJet will actually see a traffic decline next year. They've reduced their Berlin fleet from 32 aircraft to 16 base aircraft. And we're seeing those. And whilst we're seeing smaller airlines like Wizz talk a lot about expansion, what they don't talk about is there's a huge amount of cutbacks in routes and bases in Central Europe and in a lot of countries where we're competing with them.

I think our response to that is we don't really care or concern ourselves about competitors where we're doing expansion. We are very aggressively or actively negotiating with airports. There's almost no airport that doesn't suffer a loss of traffic or a failure of the competitor that we're not on the phone to on the morning of. And we have far more opportunities at the moment that we know we can handle for certainly to summer '21 into summer 2022. I think what we're trying to do with almost all airports across Europe is explain to them, "Look, in your entire universe of airport -- airline customers, only 1 airline has an order book of 100 -- 200 aircraft over the next 5 years, which is the cost of another 50 million or 60 million passengers. We're the airline you need to be talking to if you're assuming it's about recovering your traffic loss or recovering or return to growth." And I think they all get that message, but it would be a very competitive airport environment for us. I think the summer '21 and certainly to '22 as long as or whenever a vaccine is identified that kind of finally puts a nail to the COVID-19 pandemic.

Neil, do you want to take the fuel question?

Yes. Of course. Jaime, if we assume 60 million traffic, and hopefully, we'll deliver that, then we would be looking at fuel bill approximately half of what it was last year. So you're looking at somewhere in the region of about EUR 1.2 billion to EUR 1.3 billion. Again, if we stay with 60 million passengers, then I wouldn't expect any additional fuel ineffectiveness. There will be some revaluations on mark-to-market on the ineffective hedges throughout the various quarters. We had a charge of about $10 million in the current quarter related to that. But if there was to be a major shock and traffic was significantly down, then we would be looking at more ineffectiveness out over the balance of the year.

That comes from the line of James Hollins at Exane.

The first one is on whether you've seen any spike in cancellations in the last 48 hours, given the Spanish move, both to and from Spain as well as other destinations.

And secondly, Spain and Italy, your 2 biggest markets. You talked about base closures in both. Perhaps give us a little bit more detail on whether you think the Spanish pilots and crew will ultimately accept your pay deals and those closures won't happen. And secondly, you talked on your video about Italy, and I probably should know this, but the Alitalia or linked to Alitalia pay restrictions, perhaps just run us through those details and where the closures are coming there.

Okay. Thanks. I think, again, to talk about the spikes in cancellations, we don't have cancellations. All our bookings are noncancelable. What we tend to see though, and I think what's new in the COVID system, is we see a jump in no shows. Now I think 2 things come, and we've seen this over the last week in the Spanish market. There's a dip in bookings into Spain for the next 2 or 3 weeks, and that's I think would be pronounced over the weekend. Particularly with the U.K., we're traveling well. We're not -- it's a bit early to say yet, but I suspect what we'll see is a drop in bookings, U.K., Spain bookings. You may see an uplift in Spain or U.K.-Portugal, U.K.-Italy or U.K.-Greece bookings, but too early to say. There will also be an uptick in no shows, but the fares are nonrefundable. And there will be -- and we will continue to offer some changes. So we have free changes or free moves during the month of July, August and September. So some British people who have booking at those dates can have the benefit of a free move into later on in August or September when hopefully the quarantine will be lifted. Many people will still fly, and it's only a 14-day quarantine. They will come back from their annual holiday and will simply quarantine in the U.K. or not quarantine as the case may be.

In terms of Italy, I think we are in advanced discussion with the Italian -- with the unions in Italy. We are -- would expect to arrive at the same outcome as we have in most other EU countries. To the extent that there will be Italian base closures, it is -- I mean had a choice. I mean it's not kind of a -- the choice has been in almost all countries between either you accept the pay cuts or there will have to be base closures and there will be job cuts. And I think it will be -- we've seen a growing acceptance of realization across Europe certainly among our pilots and our cabin crews that this is in the air is the sensible outcome. As Eddie has said, in Germany, last week, where our pilots and cabin crew clearly supported the pay cuts, but the unions didn't. The unions pretty quickly retreated from that position over the weekend. I think the unions were kind of trying to resist pay cuts for any airline in Germany, whereas our people supported them.

The other issue in Italy is the Italian government in addition to giving the Alitalia EUR 3.5 billion of state aid are also trying to impose Alitalia's pay rates and CLA on other airlines based in Italy. Now frankly, our pay in most cases and most greatly will be ahead of that of Alitalia because we pay better, but we get much better productivity. But it isn't indicative of government, the extent to which certain European governments are not concerned with just providing state aid for the sale of flag carriers, but they're also doing their utmost to try to damage competition and lower-cost carriers through a combination of rising taxes, whether that's environmental or airport taxes and/or trying to impose higher costs on more efficient competitors.

And again, I think the -- I'd take great comfort from the European court's ruling in the Apple case is that the European courts will not roll over in the way that the European Commission has on some of the more egregious examples of unnecessary state aid. Again, we'd point to Lufthansa in that case where even Carsten Spohr admitted that the EUR 10 billion was more than he was expecting with everything he asked for, and he didn't expect to get everything he asked for. One of the key elements of state aid for it to be legal is it has to be the minimum necessary. And it's quite to hear even Lufthansa have admitted that they've received far more than the -- than was necessary. So state aid will continue to be a challenge. We will challenge it legally. And I -- but in the meantime, we'll continue with the negotiations with the Italians on pay cut as an alternative to significant job losses.

And that comes from the line of Carolina Dores of Morgan Stanley.

Two questions from me. I guess, one, Michael, given your view of lower fuel, I guess you're looking into changing your hedging policy to reduce the level of hedging going forward.

And my second question is the European -- the Environmental Commission of the European Union has presented a consultation about how to deal with courts and ETS. So you'll have -- I know you are a critic of the ETS system, but do you have a view on whether codeshare will be on track to start in 2021? And what do you think will be the policy going forward?

Okay. Juliusz, can I ask you to maybe comment on the ETS and the second part of the question?

On the first part of the question, in the short term, no, we're not doing any hedging. I mean because there's just too much uncertainty out there. I would expect when -- again, my best guess is, if we have a vaccine sometime in around late 2020, early 2021, there will be some return-to-normal volumes by the summer of 2021. I would expect at that point in time to return to hedging. Again, not because we will beat the market, but hedging gives us cost certainty over a sort of a rolling 12-month budgetary cycle. But we would expect oil prices to remain reasonably constrained for the next 2 or 3 years as the world economy recovers. I'm not sure how much the OPEC plus countries will continue to constrain or fiscally continue to constrain production or -- and clearly, the U.S. shale producers who have significantly reduced their capacity with -- spool up again reasonably quickly.

But over the medium term, we would generally speaking be supportive of fuel hedging. I think what we might change, the learning from business in maybe instead of being 90% hedged going forward, we might be 80% hedged going forward. But we would still be fans of fuel hedging to give us cost certainty through a fiscal year. But we have no plan to reenter hedging I think until we're certain that we're clear of COVID-19 and that our traffic recovery will not be subject to further pandemics, lockdowns or cut backs.

Juliusz, on the European ETS side?

Thanks, Michael. So there is a technical issue there over using 2020 -- calendar 2020 as a baseline year for the new codeshare system, which clearly wouldn't be good for airlines because we would be measured up against a year that didn't truly reflect the shape of European aviation. So I think that the consultation that was referred to in the question is about that issue about using not 2020, but possibly 2018 or 2019 as the baseline year which we would support as the rest of the industry.

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

Michael, on yields so far, I think -- I realize it's early days and lots of uncertainty. But what are you seeing in terms of fares currently? And what's the competitive environment?

And secondly, going on, on fares, you talked about likely competitive fares going forward. How do ancillaries then fit into this? What's your strategy there? And do you have any tools to kind of incentivize spending on ancillaries?

I mean thank you. I'll resist the temptation to discuss fares currently I mean partly because fares currently are a mix of a lot of forward bookings into the month of July and August that predated the COVID case and were at the peak period. But lower fares from -- for chosen bookings where we're stimulating reasonably closing traffic. It is impossible to know going forward because I think again while we could do some stimulation and build forward bookings, I mean it is -- I think we'll take into in the Spanish market this week because of the U.K. lockdown, the U.K. -- the return of quarantine. Ireland, for example, if we could persuade the Irish government to add the EU27 to the green list, which is what they should have done last week, I think you'd see a recovery in traffic to and from Ireland. But -- so it's impossible to know. And anything I say would be -- I mean it would be -- I'd run the risk of misleading you on fares. Other than to say, in general terms, we expect when we pass through the COVID-19 crisis that volumes will recover strongly, but on the back of lower pricing and lower yields.

Ancillaries continue to perform strongly. In many respects, among the passengers who are traveling, if anything, there is a higher proportion or percent. I mean we're trying to actively encourage people to select their seats and to bring carry-on bags. I mean there is a -- I think a misadvice coming from some of the European countries led -- I'm -- I regret to say by EASA, who should know better, but recommending the passengers check-in bags -- an exercise to check-in bag passes through up to 8 different sets of hand and is therefore less safe, in our view, than carry-on luggage which you keep with you in your hands at all times. And so we would be actively encouraging carry-on baggage for health reasons as opposed to check-in bags despite that we make more money from check-in bags. But that would probably be helpful towards ancillary revenues. But again, there is no point enough at this time giving you any guidance or any insights on either fares in years or on ancillaries because it is so variable and it is so volatile and that we expect to continue to be volatile probably until the end of this calendar year until there is some reasonable expectation of an effective vaccine becoming available, hopefully, in the first quarter of next calendar year.

That comes from the line of Mark Simpson of Goodbody.

Two questions and one housekeeping. The housekeeping, can you just give us the specific number for the revenue earned in Q1 as opposed to the total revenue, which included revenues, for example, from no shows from the previous quarter? So I wonder if you could give us that breakdown.

The two questions. First off, just on the winter capacity, the change in passenger guidance, given where we are in the year, obviously, impacts that second half more substantially. Can you give us what as a percent of your previous schedule you expect to fly in Q3 and Q4? And the second question, talk about opportunities, markets opening, airports looking for growth. Can you talk about Gatwick? I mean what is the opportunity do you see there? And what level of appetite do you have to maybe develop Gatwick if slots are available as opposed to continuing to grow at Stansted?

Okay. Thanks, Mark. Housekeeping, no, we won't break out the percentage of the revenue earned in Q1. Two, on the passenger guidance for the second half of the year, I mean if you remember our last update -- or our last outing on this, we -- our general guidance was we were sort of hoping for 40% July, 60% August, 70% September, October and then we thought maybe 80% through normal winter capacity. I think at this point in time, we would be stepping that back to kind of 40% July, 60% August, 70% September and then maybe running 70% as being the operating number through the remainder of the year, but with huge flexibility and a lot of volatility. I mean the 60% -- the 60 million passenger figure for the year is a stab and a gift. It could be higher than that and it could be lower. I think what we've been focused on doing through that, number one, is having very flexible -- rostering very flexible pay deals with our people so that we can spool up and spool down as the case may be. But the 60 million figure is a very general target number rather than a kind of an accurate forecast or guidance.

On market opportunities, Gatwick is of limited interest to us. easyJet, I think our Norwegian, will clearly be much smaller in Gatwick, BA may be much smaller in Gatwick. Gatwick is an expensive airport that's heavily soft constrained and therefore reasonably inefficient. I think we would have a look at Gatwick as we always do. I think we're flying about 4 or 5 routes into Gatwick. Dublin is our biggest route and we do some certain stuff back in there middle of the day. I think we'll be much more interested in growth opportunities at Stansted where, for example, it looks like easyJet are closing their -- I think they have an aged aircraft base there. We're already talking to MAG about growth opportunities at Stansted and about extending out our -- I think we have a 10-year growth deal there and extending that out longer. And I would not also rule out there's a possibility easyJet also closing Southend Airport. Now Southend is of limited interest to us again. But at a price and at an incentive, there's always an opportunity, and we have certainly something we'd look at. Gatwick, I mean yes, if we got some reasonable offer from Gatwick, but we don't see that Gatwick will be very -- unless there is a real cutback by BA, and I don't think there will be. I think BA will talk about it, but not actually deliver. I think they'll put Vueling or somebody else in there instead of BA, [with big doors], they'll do. We don't see there will be huge opportunities in Gatwick. But certainly to the extent that there are -- that there's growth in Gatwick, there will be downward pricing in the London market generally in Gatwick. Certainly, we would be happy to aggressively grow again in Stansted and in Southend, but only if there's an appropriate incentive -- growth incentive in place.

David, I know that you are -- Eddie, maybe. I mean you want to add anything further on the Gatwick?

No. Not really. I mean like it will -- I think there have to be a big opening up there for us to actually consider anything. And I think you're right as well on Southend that easyJet are likely to go out of there. And it's still one of the bases for us that's under in fact the U.K. And Stansted has been -- with easyJet exiting, it looks like at Stansted that would probably give us a more seamless opportunity for growth there, depending, of course, on whether we can get this MAG deal extended.

I mean I think to add to that, there will be further opportunities, particularly in provincial U.K., where you've seen Flybe vehicle bought -- and in easyJet, we think will continue to -- I think easyJet will reduce capacity at some of the U.K. regional airports as they -- and some of the European airports, as they've already done in Berlin in order to protect their base or maybe expand in Gatwick and in Paris. And we would certainly be -- I think that would create further opportunities for us to grow in regional U.K. and elsewhere in Europe where easyJet will be I think reducing capacity. We're also looking at some of the airports, too, in Central Europe where Wizz is reducing capacity because underneath a lot of the noise of Wizz expansion is actually they're just moving dead shares around in a lot of cases to get away from competing with us, and we think that will continue.

That's from the line of Johannes Braun of MainFirst Bank.

Just two questions around cash burn, CapEx, free cash flow. Firstly, you previously said that cash burn might be breakeven or even slightly positive until mid next year. But shouldn't we expect that free cash flow and also cash burn will become quite negative going into the winter as you have to pay all the predelivery payments to Boeing that you have held back so far?

And then the second one. Can you just give us a rough CapEx guidance for the next years based on the current expectations for the MAX delivery schedule?

Okay. Now as to the CapEx, so I mean, obviously, the CapEx is heavily qualified by where we are with Boeing and on deliveries of the MAX. On the cash burn, again, let me -- I want to reemphasize the point, to the extent that we continue to see a recovery in traffic and volumes, we would expect the cash burn to be reasonably cash neutral going forward, even through the winter. I would factor out the Boeing PDP payments from that. That is part of the ongoing discussions -- of the continuing discussions with Boeing. We already have a significant PDP position in place with Boeing for aircraft that have been considerably delayed. So I think if there was a resumption of deliveries there with Boeing, we already have a significant PDP position in place. I would not expect there to be a -- we would not agree to any resumption of PDP payment that would adversely affect our cash flows I think for the next 12 months. But again, we would continue to work very much in partnership with Boeing on aircraft deliveries and restoring the PDP situation. And I wouldn't want to add any more to that. And then because -- and our big focus would be the 2 debt repayments in the early parts of next year, the U.K. government loan, which comes out in March; and the first bond payment in June of 2021.

And Neil, do you want to talk about CapEx, obviously, heavily qualified with the bond payment?

Yes. It still is actually highly qualified to -- we don't have a final delivery schedule from Boeing. We won't have a final delivery schedule from Boeing until such time as they returned to service and we've finalized our discussions with them. So Johannes, it's probably not realistic to give CapEx guidance at this point in time. Previously, we've guided to EUR 1 billion CapEx for FY '20, EUR 2 billion for '21. Clearly, they're not going to happen at this point in time. So I think it's better to come back and update on that when we've finalized our discussions with Boeing rather than putting meaningless numbers out at this point in time.

And the last question in queue so far comes from the line of Malte Schulz at Commerzbank.

Two questions from my side. In terms of your future positioning, do you plan to transition a little bit more like an easyJet strategy or let's focus on the main airports at each city and cut further bases in secondary airports as you have done now with Frankfurt Hahn?

And maybe the second question would be also on in terms of staff seniority where you have made cuts, did it affect your seniority? Do you have now a much more senior crew? Or is this the average notable change?

Okay. I'll try and deal with that. I mean I would hate to think at any point in the future we'll become more like easyJet. I can -- we will continue to be opportunistic. We are in most of -- there is almost none of the major airports that we're not in and a significant partner of now with the sole exception of Heathrow, Charles De Gaulle and all the -- we're in Frankfurt Main. We're in all of the main airports in Brussels, in Madrid, Barcelona, Rome, you name it, we're there. But our focus going forward will be to be opportunistic. We will be -- we will allocate very significant growth to those airports who need it most. They'll be the ones who we'll discount most. And I wouldn't exclude that, that will be at the main airports as well. I mean if you look at Zaventem, for example, in Belgium. If Brussels Airlines goes ahead with its plans to cut capacity by between 30% and 40%, there will be a huge hole in Zaventem. Would we still grow in Charles De Gaulle? Yes, we will, as long as there's incentive to grow there.

How much of the Alitalia short haul will get cut from Malpensa, Linate and Rome Fiumicino? The answer again is we don't know, but we will certainly be there to pick up that -- those opportunities. So our focus would not be -- I mean if I was to describing easyJet strategy, the easyJet strategy is to be big at heavily soft constrained airports because that's where they are least exposed to competition from Ryanair. But it's more a defensive strategy on their part. But easyJet has already now gone ex growth and is reducing the fleet, presumably so that it can startle off for the next year or 2. Our strategy would be exactly the opposite. I would accelerate aircraft deliveries as soon as Boeing can deliver us MAX aircraft. And I would then aggressively accelerate growth in the next year or 2 once we can see our way through to the end of the COVID pandemic. The opportunities are going to be I think extraordinary, and I would put them up on the same -- I think you will see same opportunities this time around that we saw after the 9/11 terrorist attacks in New York. The up -- and that's why we are doing so much work on the cost base so that we can take advantage of those kind of opportunities.

On the staff costs, no, there's really very little impact on seniority. We don't have a lot of seniority issues. I mean where we have negotiated pay cuts, they are across the board with the captain, the FOs, senior flight attendants and flight attendants. I think where we have had significant job losses, I would point, for example, to Laudamotion in Vienna. All the pilots and cabin crew who agreed to the new CLA, we're trying to keep them employed, and we will try to avoid job losses with all of that team. But any of the pilots and cabin crew who refused to accept the new CLA or the new terms and conditions document, they are being let go regardless of seniority because there's only going to be 1 roster and 1 pay terms in Vienna. And if you don't agree it, frankly, you're gone. And we're not that interested in how senior you were. I'm sure they will argue that on seniority basis, they should -- we should fire or we should let people go who were -- who have accepted the new CLA. But I think in the COVID-19 crisis where a new world adherent seniority is not something we would pay too much attention to.

Eddie, is that fair? I don't know if I was able to...

Yes. I mean -- no. Well, I mean like given that in most of the markets that we've been in, we haven't executed anything -- any of these sort of base closures just yet, we're still in a review phase. And it doesn't really -- we haven't gotten into a sort of a selection criteria to be in this area at all in terms of costs, getting average shares of the people that we have. So it's not material in the way it would be in some mainland airlines or some of the legacy airlines where you'd have hundreds of people and -- or you have stark differences between -- paying conditions between people who are there for 25 years and those who've joined in the last number of years. So I don't think -- it's not material.

As that was the last question in the queue, I'll hand back to Michael for the closing comments.

Okay. Thank you for that. I thought it was useful this morning if we let the -- I wanted to let it run on as long as we can, so with this -- everybody has the opportunity to ask questions.

Clearly, COVID will continue to be challenging. The message I would leave with you, though, is what the last 3 months or this morning's results demonstrate is we can manage these challenges. We are doing extraordinary work on the cost base. And it's not just labor, across all elements of the cost base. We are working actively with Boeing to take delivery of the MAX aircraft, which will in itself transform the cost base going forward. These are aircraft with 4% more seats and 16% lower fuel burn, 40% lower emission. So I think we will have to have a very robust, flexible platform going forward. The COVID crisis will pass. Whether it's in 6 months or 10 months or 12 months or 18 months, we don't know. But we will be one of the survivors, and we will be, by far and away, the most flexible lowest cost survivor coming out of this. And I believe when we do come out of it, we will rebound very strongly. But -- and the recovery will be -- in volume terms will be rapid and dramatic because we'll -- it will be stimulated by much lower prices. How long pricing will take to recover is anybody's guess, but I presume it will take 2 or 3 years. But when it does come, it will be strong and I would hope that Ryanair by making the right thing -- the right decision in its business is now to reduce costs to be flexible. We'll rebound very strongly. And you'll see that reflected, hopefully, in the next 3 or 4 years in a profit and share price recovery, even if the next I think 6 or 12 months are going to be grim and will remain challenging. But rest assured, with the new team in place, with the group airlines in place, we're doing everything we can to take advantage of this crisis and to position Ryanair for a very strong growth once we recover from the crisis.

Okay. Everybody, thank you very much for your time and attention this morning. As I said, if anybody has any follow-up questions, Neil and the team in Dublin, the Investor Relations team, is happy to take them. And if anybody wants an individual sort of one-on-one call going forward over the next week or 2, we'd be happy to facilitate that as well. Thanks very much, everybody. Thank you. Bye-bye.

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