Ryanair Holdings PLC (RYAAY) 2024 Q2 法說會逐字稿

Hello, and welcome to the Ryanair Holdings Plc H1 FY '24 Earnings Call. My name is Maxine, and I'll be coordinating the call today. (Operator Instructions) I will now hand you over to your host, Michael O'Leary, Group CEO, to begin. Michael, please go ahead when you are ready.

Okay. Good morning, everybody, and welcome to the Ryanair Half 1 Results Analyst Call. You have seen this morning on our website, we loaded the half 1 results. There's a full MD&A and a Q&A with myself and the CFO, Neil Sorahan. But just to focus on some highlight pieces. Obviously, we've had a very strong Easter and record summer traffic. That resulted in a very strong half year profit rising to EUR 2.18 billion. And we expect over the full year now that a profit after tax of about EUR 10 per passenger is likely to be achieved, and we've declared our first ordinary dividend. It's not a first dividend, but it's certainly our first ordinary dividend has been declared this morning. Highlights of the half 1 traffic grew 11% to EUR 105 million. We maintained a very strong 95% load factor through the summer period. Again, I keep coming back to the point there, we're operating in a constrained market in Europe, and that is good for traffic. It's good for load factors and it's certainly been good for average fares.

Revenue per passenger is up 17%. That's a combination of average fares up 24% and ancillary revenues of 3%. We opened 3 new bases and 194 new routes in summer 2023. We've now -- the fleet of game changers now up to 124 aircraft. The total fleet at the end of September is 563 aircraft. Our fuel bill rose sharply because we were so well hedged in the prior year. So in the half year, our fuel bill rose EUR 600 million. That's up 29% to EUR 2.8 billion. However, we've continued to judiciously extend our fuel hedging program. We remain 85% hedged for FY '24 at about $89 per barrel, well below the current spot. And -- but we're happy to report that we're now about 53% hedged for FY '25 at about $79 per barrel, locking in a saving of about $300 million on the first half of the fuel we need for FY '25.

Net cash at the half year-end stood at EUR 840 million. That was up from EUR 560 million at the 31st of March, despite the fact that we've repaid over EUR 1 billion in debt during the 6-month period. We remain committed to Boeing. The new 300 Boeing Max 10 order will, we believe, underpin low-fare profitable growth for a decade to 300 million passengers by FY '24. And this morning, the Board has announced a EUR 400 million made an ordinary dividend and is also rolled out a dividend policy, which I'll ask Neil just to comment on further in this call.

Turning briefly to growth in fleet this winter, we'll operate 6 new bases. Athens, Belfast, Copenhagen, Barcelona, Girona, Lanzarote and Tenerife . We're returning to base into the Canary Islands. We will operate over 60 new routes, including our first 17 routes to Tirana in Albania, which opened last week with some success, high load factors and strong customer impact. To date, over 90% of our summer '24 capacity is already on sale, including over 180 new routes. While Boeing are suffering delivery problems, particularly with their fuselage supplier spirits, we continue to work on them to minimize these delivery delays ahead of 2024. Boeing have contracted to deliver us 57 Boeing MAX aircraft between now and the end of April.

We're not sure they'll deliver all 57, but we're certainly confident that we get about 45 to 50 of those aircraft by the end of June, which will be in time for the summer peak in 2024. And that will be critical to our traffic growth next year. We continue to see a constrained supply situation across Europe. And I think that's fundamental not just Ryanair's strong results in this half year, but also very strong results reported by many of our competitors in recent weeks. Euro control have confirmed about Europe is operating short-haul Europe into Europe is operating about 94% of its pre-COVID capacity. We see no danger that it will return to 100% of its pre-COVID capacity for the next 2 or 3 years.

Consolidation continues to be a theme in Europe. We see Lufthansa closing in on the takeover of ITA. TAP in Portugal is now up for sale and the SAS refinancing our sale is already underway, and it looks like Air France-KLM will take a 20% stake in the refinance SAS, leaving fewer and fewer independent players out there.

I continue to believe that Europe is (inaudible) moving towards a situation that has prevailed in North America for the last decade of having probably 4 large airline groups, each of them capable of carrying about 200 million passengers a year. And 3 of the big legacy guys of Lufthansa, Air France-KLM and IAG and Ryanair being the large low-fare point-to-point carrier much like Southwestern states. Now added to that capacity constraints going with the continuing inability of the OEMs, the manufacturers both Airbus and Boeing to accelerate delivery. They remain challenged on their existing deliveries both Airbus and Boeing are running materially behind because of supply chain challenges, Boeing also with their production issues with Spirit. And I think also the Pratt & Whitney engine issue is a large and as yet, not well factored into capacity story for summer 2024. Europe is the home of A320. Ryanair is the only significant 737 operator across Europe and the fact on which the engine is fundamentally an A320 issue.

We expect there to be material groundings of competitor capacity through the summer of 2024, and we think that will run into 2025 as well due again because of the price on engine job. So we see very little prospect of Europe returning to its pre-COVID capacity between 2024 and 2026. And we think, therefore, that will continue to show -- to underpin strong pricing even if consumer demand is challenged, there will be less capacity than there was pre-COVID and I think the price of that capacity will be higher. We've certainly seen that in most of the legacy airlines in Europe, Lufthansa, Air France-KLM and IAG materially increasing airfares. They're already high airfares.

And that puts quite a high ceiling over which Ryanair is seeing passengers trade down towards Ryanair, but at higher fares. And that's reflected in our outlook and guidance where in the third quarter, for example, to the end of December, we are seeing average airfares currently running at mid-teen ahead of our prior year. We clearly growing strongly. We're carrying out of traffic. Costs are well under control and that takes the -- and our cash generation is strong. That means the Board has now begun to again look at capital allocation policy. We set it a clear policy since COVID but as we recovered from COVID, the first priority was pay restoration and multiyear pay increases for our people. That's now been done.

Secondly, we set out to pay down our remaining debt, and we paid down 2 bonds of over EUR 2 billion over the last 2 years. We have 2 bonds left in 2025 and 2026 of about EUR 2 billion, and we intend to pay those down in their entirety, which will make Ryanair remarkably a debt-free company in Europe in the next 2 years at a time when the higher for longer interest rates or bond yields looks like it's going through drive-up financing costs for our competitors, most of whom have very significant net debt positions in Europe. Once that's done, we also then want to continue to fund our aggressive CapEx program, and we're taking delivery of 50 -- we hope 57 aircraft between now and summer 2024 and that will lead then to another 30 aircraft in time for summer of 2025. The plan is to maintain a strong balance sheet and investment-grade rating.

The MAX 10 order book will deliver annual traffic growth to EUR 300 million. We think we'll do that largely out of the internally generated cash flows, but we will continue to be opportunistic. I think it's interesting that between FY '08 and FY '20, Ryanair has returned EUR 6.74 billion to shareholders via buybacks and special dividends, and we're turning now to an ordinary dividend policy as well as today returning to EUR 400 million by way of dividends to our shareholders, which is the EUR 400 million day invested in Ryanair during the peak of the COVID crisis. I'll ask Neil just to comment on the dividend policy in his remarks.

In terms of outlook, we continue to target approximately 183.5 million passengers in the year to March '24. That's up 9%. The final figure might vary a little bit. It depends on Boeing meeting some or most of this delivery commitments between now and the end of April, and they are running behind. We had hoped to have 20 of these aircraft delivery for Christmas. We are now thinking where -- it looks like we'll only get about 10 of them. As previously guided, ex-fuel unit costs will increase by about EUR 2 this year, but that still means that we will have a materially wider cost gap between Ryanair and competitive airlines across Europe. Forward bookings, both traffic and fares are robust over the late October midterm and into the peak Christmas travel period. And with the benefit of this constrained EU capacity this winter, your -- we currently expect average -- Q3 average fares to be ahead of the prior Q3 by about a mid-teens percent.

Unhedged fuel cost will be significantly higher, but that's only 15% of our fuel for the remainder of this year. As is now over this time of year, we have very limited Q4 visibility. Q4 is traditionally the weakest quarter, and this year will be impacted by the partial unwind of free ETS carbon credit from January, although it will benefit from the first half of the Easter period at the end of March. Despite uncertainty over Boeing deliveries, a significantly higher fuel bill, very limited Q4 visibility and the risk of weaker consumer spending over the coming months we now expect that full year '24 pre-COVID profit after tax will finish in a range of between EUR 1.85 billion to EUR 2.05 billion, assuming modest losses over the second half winter period.

This guidance obviously remains hugely dependent on the absence of unforeseen adverse events, for example, such as the war in Ukraine or in Gaza between now and the end of March 2024. As I said, I think we're on track to return to what we believe is our normal profit after tax of about EUR 10 per passenger carrying 183 million or 183.5 million passengers. This is a very strong performance. But while the number looks big, a profit of EUR 10 per passenger is reasonably modest, given the capital and the human resources that go into delivering an exceptional service to our customers, high on-time performance and a very low cost base which enables us to continue to pass on markedly lower airfare to our customers at a time by huge capacity constraints in Europe, our competitors are all pricing upwards very aggressively.

Neil, do you want to add some remarks on dividend and then take us through the MD&A, please.

Yes, sure. Thanks, Michael. Well, as you pointed out there, we're well along the road on our path to achieving all of our capital allocation priorities. The next step is to look at some form of a dividend in the past. As Michael said, we engaged in kind of ad hoc distributions, buybacks and ad hoc one-off dividends. We're now at a size and scale and I think a maturity where we can sustain an ongoing dividend policy, and the Board had this morning agreed that the first maiden dividend will be EUR 400 million, which is marginally above our long-term prior year payout ratio, but reflective of the EUR 400 million, which our shareholders contributors in the depths of COVID, which enabled us to raise that EUR 850 million bond and come out of COVID strongly. So that's approximately EUR 0.35 per share. Half of that will be paid in February as an interim dividend, the balance will be paid after our AGM in September.

And then when we look into next year FY '25 onwards, what we're looking at a payout ratio of approximately 25% prior year profit after tax again with roughly 50-50 interim final dividend in February or March of each year and after the AGM each year. So I think that underpins the Board's commitment to return funds to our shareholders, but they've also left the door open. So to the extent that we continue to have a very strong balance sheet, lots of liquidity, and we're meeting all of our other commitments if the reserve is cash, then the doors left open to look at other forms of distributions, be that buybacks and/or ad hoc dividend depending on where the market is out of that point in time.

Just to briefly build on a couple of the other points that Michael touched on, balance sheet is in phenomenal shape, BBB+ rates over 530 aircraft unencumbered at period end, which gives us huge flexibility in what we do. And importantly, thanks to the strong cash in the business, we're in a unique position where we're paying down debt rapidly. We paid down EUR 1 billion alone in August just gone a EUR 750 million maturing bond and EUR 260 million in our revolving credit facility. So that gives us a huge competitive advantage over everybody else when they're extending leases at high lease rate factors due to the Pratt & Whitney GTF issue and indeed refinancing themselves into rising interest rate environment, we're paying out of our own cash resources of balance sheets in great shape and as it enables the Board this morning to engage in that dividend policy. I have nothing further really to add, Michael.

Okay. Thanks, Neil. Maxine, we've got to over up to Q&A now. And if you can ask everybody to just combine themselves to 2 questions. And what I'll try and do is pass and/or either direct questions around to members of the team so we can get as many of the management team on the call.

(Operator Instructions) Our first question today comes from Jaime Rowbotham from Deutsche Bank.

Two questions. So very encouraging to hear that your third quarter sales could be up in the mid-teens. I know the visibility is limited for Q4, but could you give us a feel for the range of outcomes you've considered in coming up with the full year profit guide in terms of fourth quarter fares, please? And then on the nonfuel unit cost per passenger, which I calculate were up about EUR 2.5 in the quarter. I know this still leaves you a country mile below your peers, which is the critical thing. But could you perhaps just talk about where there might be any flex, any risks up or down to unit costs rising by around EUR 2 year-on-year in the second half, please?

Okay. Thanks, Jamie. As in the first part, Neil, you might do the nonfuel unit costs. It doesn't -- at this point in time, I think the very fact that we've given you full year guidance this morning separates us from the rest of the industry despite the fact that we're 6 months out. We are seeing strong pricing at the moment in Q3, but it's very fragile. That pricing is largely driven by a very strong midterm break at the start of October and strong forward bookings into Christmas. We are and have cut out significant midweek loss-making capacity. I think we are flexing that changes worked well for us in the last 2 years, and we continue again this year. It is just too early to focus on Q4. Our yield on patients are modest. We do expect that Q4 will be a loss. I think we lost about EUR 150 million in Q4 of last year, the prior year. And I think we're looking at something maybe similar, maybe slightly bigger.

We have the unwinding ETS will be a bit of a penalty in Q4. And the loss of Q4 will depend on the strength of the Easter traffic. We get the first half of Easter in the last 7 days of March. But if there are adverse developments in Ukraine, there are adverse developments in Gaza, the situation in the Middle East is very fragile, all of these forecasts could be thrown off kilter. So I think the very fact that we've given you a range of full year guidance is a strong signal today that we think we're in good shape for the winter, but we recognize that it could be thrown off by some adverse development. Neil, on fuel unit cost, do you want to take that?

Yes. We stuck fairly close to the EUR 2 guidance on a full year basis since we come out in May. Happy to stick with that despite the fact that we're going to be a few aircraft shy of where we thought we would have been to spread the costs over more passengers. Where are the risks -- but there's a risk that you could see higher spike ups in the likes of route charges in the first quarter of calendar 2024 than we're anticipating. There's a risk that we get left significantly shy on aircraft and then we're handling more crews over less aircraft. But I think we're comfortable with the EUR 2 that we have, I think we'll be, give or take, a couple of cents on either side close to that number on a full year basis. It's factored into the increase in crews that we would typically have in Q4 ahead of the peak summer.

It factors in the inflation we would have seen on some of the handling and maintenance -- sorry, the stuff over the course of the year. And then, of course, it factors in the lower-cost game changers coming into the fleet over the next number of months and the airport deal. So I'm fairly comfortable that will be close to that EUR 2 on a full year basis.

And Jaime, you recall from Slide 4 of our presentation, as you rightly say, it is a country mile ahead that the gap is getting ever wider between our competitors, many of whom are in a net debt situation and facing rising financing costs and writing aircraft leasing costs.

The next question comes from Jarrod Castle from UBS.

Michael, dare I say you sound rather proud of Ryanair's performance over the summer and indeed over the last few years. And you're now speaking about a small loss over winter, but if you made a small profit, I mean, effectively, you could achieve your incentive scheme target. Now I guess the side has been very incentivized by the share price. I mean, do you think the Board needs to then look at a new scheme? Or do you think existing schemes are set for purpose for yourself and senior management? And then just secondly, you spoke about new routes opening up over winter. Can you talk a little bit about how much of that's been impacted by thinking around your exposure to Mena, and moving capacity around given the current situation and potential for people to chase the winter sun elsewhere.

Okay. I'm going to ask Eddie Wilson, just to do the new route to the winter commentary. Just looking at the various share option schemes and the [LTIP] from winter, Jarrod, I'd come back and say, there's a possibility when you get close to the enhanced profit target this year. At the moment, I think we'll fall just short, but who knows. But I think those things are still appropriate, like -- even if we hit the target this year, myself and the rest of the senior management team still, we have to remain in full time and (inaudible) until I think it's 2028 (inaudible). I think it is important that some where -- I mean during the previous 5 years, the management team were unable to share options through the combination of COVID and the war in Ukraine. And it is important, I think, for management and not just be with the wider management team that we -- that they share options that are achievable.

They're working their (expletive) off to deliver these kind of numbers. And I think it's important that there's some -- we've said the Board has a very ambitious target, a profit after tax to EUR 2.2 billion or a share return price of EUR 24 but even if we hit those, management team will still have to remain in full-time employment until 2028 for those -- for them to benefit from it. So not alone is it involved they're achievable, but they also mean that we're tying into management, we get media long-term commitment from the senior management team to continue to deliver these impressive performance and results. Eddie, new routes for the winter, do you want to give a comment beyond kind of new routes and maybe Jason McGuinness might come in on that as well.

Yes. I mean, I think like our growth is demonstrated by the agility that we have in terms of what has happened in the Middle East. For example, we would have had just north of 100 weekly frequencies into Israel working very closely down there. I mean the aerospace is well managed. But obviously, tensions are the conflict has escalated there. So most of the European carriers aren't flying in there. But we're able to flip that out in terms of 95% of that capacity we can reallocate because it comes from 23 different bases. So it's relatively straightforward for us to do that. There is some softness in places like Jordan. But again, we've got the ability to flip that capacity around. But on the other side, of course, we continue to grow strongly in the Canaries. We have 2 new bases there from winter on winter. It's a new base, but we've had it there since summer of this year, both Lanzarote and in Tenerife, both going up by 1 aircraft.

And then you look at what we're doing in Morocco. You'll have seen in our recent release where we're meeting with the head of government down there who see Ryanair in terms of developing not just summer sun, but certainly year-round traffic into that market, which is a mixture of [VFR] and also winter sun. And we continue to grow strongly in Southern Europe where people still go to Malaga, Alicante, Seville, Southern Italy, Sicily and Sardinia. So we take a very conservative approach in terms of how we spread those routes, and we always have the ability, as supposed to reverse routes and reallocate capacity as we did at the start of the conflict in the Ukraine.

And Jason, we're opening 17 new routes into Savannah and Albania during in November and the winter that we [made].

So they started last week. They've all started very strongly. I think very surprised how quickly all the seats are filling, and we'll certainly be growing in Tirana in summer '24. I think we will be close to 2 million, 2.5 million passengers in Tirana over the next 12 months and it's certainly a base candidate over the next 12 to 18 months. I think Tirana is crying out for a low-cost carrier, and we've seen that in terms of reaction from consumers. But generally, across this winter demand is strong across CEE, Scandinavia, Italian domestics are very strong. And I think that's helped by what we've done in the schedule, as you alluded to earlier, 70% of our capacity now for winter '23 is at the weekend versus 65% last year and 60% prior to COVID. So there's been a lot of work done by the revenue and schedule team to deliver that and its paying dividends across Q3.

The next question comes from Stephen Furlong from Davy.

Two questions, please. Maybe Thomas is there, you can talk about any updates on SAS and also how the winglets are performing in terms of fuel efficiency. And then kind of in that vein, I just want to ask Neil about -- I know it's the first quarter in that Q4 is going to be the unwinding of the free allowances on ETS. And just -- can you just talk about that overall scheme? And obviously, you've been paid, yes, for 10 years, but the free allowances go over the next couple of years, that would be great.

Maybe that's Thomas take both of those questions.

Yes, Stephen, just on the SAS side. So obviously, in recent weeks, we've done some fuel with OMV and Vienna. We picked up some SAS, so it gives us more access to different feedstocks and we're working hard with another one of our field partners to hopefully sign an MOU with them to increase our target like our percentage target. We're at 9.5% today, with this -- if we get this MOU over the line, we'll be above 10% of our staff will be done through MOUs. On the winglets, we've been happy with what's installed today. We're seeing close to the 1.5% savings that we disclosed on the winglets. So yes, it's going well, and we hope to roll out another 100 over the winter to get to 130 by the end the maintenance season this year. So we'll see more of an impact come true as more on the aircraft.

On the ETS, so Stephen, so yes, as you said, they allowing to start rolling off in Q4, which is an impact. So like we have about 25% of our allowances compared to Q4 last year will be gone under ETS. This quarter, which will impact on Q4 profitability and also our hedge rate has gone up from about EUR 57 to EUR 80 quarter-on-quarter compared to FY '23 and FY '24, which will have -- which is the impact Neil and Michael have been talking about in the ETS in Q4.

But I would add into that, too, like you also do ETS allowances even unwinding for the legacy guys who have far more of their free -- their traffic covered by the free ETS. So I think, again, that's one of the reason why we're seeing such aggressive pricing from the legacy down sort all across Europe in a constrained marketplace, driving up the headline fares, particularly in counties Germany where Lufthansa has a near monopoly, Air France-KLM, same in the Holland and in France. And I think that's driving up our airfare, the extent to which competitors are dramatically increasing their airfares.

Next question comes from Dudley Shanley from Goodbody.

If I could ask two slightly longer-term questions. First of all, if we think about the Pratt & Whitney GTF issue coming on the top of the delivery delays from Airbus and Boeing, how do you see that playing out in terms of the outlook for fares over the medium term? And then switching to consolidation in Europe, which seems to have picked up recently. Obviously, there's a lot of deals going on. Which deals do you think will happen? How do you see the end game here? And how does Ryanair positioned to take advantage of it?

Let me say why we add that to -- instead of me -- I mean medium-term fairs, Eddie and Jason McGuinness might add on to that. And I'll come back to you on the consolidation. So Eddie, Jason, on medium-term fares.

Well, I mean, we've seen already that we've guided sort of for mid-teens in terms of Q3. But I think a lot of what's going to happen on a micro level with the GTS issue is going to be where some of our -- where our competitors are going to allocate that share, going to allocate that capacity in particular markets. And we've seen a lot of announcements of base aircraft that just don't add up to the total fleet with some of our competitors. We've seen a retreat in places like in the Italian domestics, which Jason said like where fares are actually becoming more robust.

I wouldn't like to sort of call it on a sort of a macro level where fare is to going to go to. But certainly, at a micro level, it's going to be where that capacity is allocated with our competitors, but with reduced capacity and no new aircraft coming online from the OEMs. I think we're still going to see -- I think we're going to see like affairs continuing to rise against that backdrop where economies continue to grow, and there isn't a capacity there to match it. So I think fares still in the -- like certainly over the next 12 months are going to continue to rise, be my color.

Jason?

Jason here. I think -- sorry, I just didn't hear you there, Michael.

You sort don't have a fair. So not in absolute trend but general trend over the next couple of years, 2, 3 years.

Yes. I think the general trend is upward over the next number of years, and that's entirely based on the capacity environment. Like if you look at this summer, the market was recovered to 94%, 95%, but that includes Ryanair growth. Without Ryanair growth, the market this summer has only recovered to 90%, and I think the market isn't going to recover our competitors that is much above 90% into '24 as we file for the issues we've outlined. So that leaves a market that hasn't grown for the last 4 years. And I think you're seeing that across certain countries, be it Austria, Germany, Belgium, which are all significantly below where they were prior to COVID, and that's all helping the pricing environment at the moment. And it is -- in terms of our growth then. We are growing in the likes of Italy, U.K. and Spain, which is delivering solid fares, and I think they will be solid over the next number of years.

Okay. Thanks. In terms of consolidation, I've long believed Europe is moving, it aims to be towards 4 large carriers. If you look at what's going on at the moment, the plans they look like they're going to acquire what's left of Alitalia in ISA. The Portuguese government has put TAP up for sale, Lufthansa, Air France-KLM and IAG, all are instant, I think longer term, it's probably below what fit better in IAG because of the Latin American kind of influence of IAG, but the port fees are always wary of the Spanish that they're somehow closed the TAP base and move to the trade.

I think if you look at what IAG has done with Aer Lingus, they've demonstrated they can continue to grow transplants to Heathrow and Dublin and [EASA] Successfully. SAS is a crop, but I suspect it is probably stuck together with Norwegian, and you have to a bigger [crop] in up in Scandinavia and Air France-KLM, they going to take a 20% stake in that refinancing.

That really leaves only 2 sort of smaller independent players left in Europe, which is easy to focus around Paris, Switzerland and Gatwick. I don't believe in the next 5 years, there'll be an independent there, I think they will be a subject to M&A activity and will probably a mix of Air France-KLM and our IAG and at least with, I would have said, Lufthansa would probably buy with and given the footprint back in Central Eastern Europe. Increasingly, I think as Wizz grows in the Middle East, perhaps it may be waves Middle East interest growth be able to acquire the Middle Eastern, and we'll be able to get access to aircraft. But I think if we return in 5 years' time, I think you're going to see a European market that looks remarkably similar to North America today, with 4 large substantial airline competitors, 3 legacy guys, Lufthansa, Air France-KLM IAG and 1 very large low-cost point-to-point.

Ryanair will be the Southwest of the U.S., except that Ryanair fares will be materially lower than those in Southwest after 10 years of consolidation in North America. Southwest average fare last year is about $140. Ryanair's average fare across Europe was about -- was under EUR 50, which does show we are materially lower -- cheaper and lower cost in the Southwest, but it gives us significant headroom for us to grow our business and, I think, modestly grow airfares in a consolidated capacity constrained market over the next 3 to 5 years in a manner that will enable us to pay down our debt, fund our aggressive CapEx and be able to continue to put in place multiyear paid deals property.

The next question comes from James Hollins from Exane BNP Paribas.

Just a couple for me. On the unit cost, I know you don't have work fully at '25. But Neil, perhaps the way you're thinking about unit cost, could you please give us some indications on trends. And I'd probably be mainly thinking about wages and whether the pilots in particular, start agitating for a bit more from their deals? And then secondly, what is it -- you know that the rest of the airlines don't know that everyone seems pretty sanguine about the Pratt & Whitney issues, but you're calling it out is very significant for them. Perhaps just run us through your thinking on why it's so much bigger than some of the airlines are letting on.

Okay. Neil, you take the first one on pilot unit cost and I might ask maybe Neal McMahon to comment on the -- what we give -- our update on what we think about the Pratt & Whitney issue.

Okay. James, it's a bit early to be talking about FY '25 unit costs and that we haven't done our budgets at this stage. But what I am sure about is that we'll continue to keep the gap that exists between ourselves and everybody else on the unit costs. We have multiyear agreements in place with our unions. There is modest inflation coming through on the back of those, but that's something that we will cover through other areas of the business. For example, we've already locked in about EUR 300 million worth of savings on our fuel bill based on the hedging that we have into next year. But it will be likely May before I start to give you color on unit cost for FY '25. I need to get the budget over the line with the Board first.

And Neal, when we go to the Pratt & Whitney issue (inaudible) Europe.

Yes. So we know that Pratt & Whitney have significant issues with the GTF engines which will affect over 20% for Wizz and kind of 10% to -- 5% to 10% for other carriers around Europe. The reason why we think this is significant is we know that MRO slots are already full for this winter. This is an unexpected issue that wasn't planned into the maintenance schedule for the engine shops and therefore, we're likely to see delays or our competitors are likely to see delays for engines to come out of the shops.

This will increase the lease costs. We already know engine lease costs have increased. So airlines who are looking to lease in engines are seeing prices soar because there's the scarcity of lease engines. And we think that this is going to have a significant impact on capacity for F '24. Might not be baked into other airlines numbers yet. But I think as we go through the winter, they're going to see that the turnaround times for engines are going to be significantly slower and not going to materially impact air capacity for F '24.

Yes. We take the view James, about there's anything between 5% and 10% of the European short-haul A320 fleet is going to get grounded through most of next summer, which again will further constrain capacity. Some competitors if you say like Wizz would be more affected than others, although they have some new deliveries -- some deliveries -- new aircraft deliveries this winter. So this is an issue that affects Lufthansa, Air France, IAG short-haul fleet. And if Europe is operating at 94% of pre-COVID capacity today, there's consolidation continuing, which will mean more capacity will be taken out. The OEMs are running behind both Airbus and Boeing are running behind on their deliveries.

I mean, Boeing is like to deliver up to 10 aircraft short of our 57 delivery this -- before the summer of 2024 and you had this Pratt & Whitney issue on top. Again, I think there's going to be a real challenge on intra-European capacity next summer. We will add maybe 40, 45, 47 aircraft but overall, there's no chance that Europe returning to its pre-COVID capacity next summer.

We will see more Asian visitors. I would hope next summer as well. I think that under -- gives us a reasonable prospect of another strong summer of traffic and pricing and I think that's already reflected a strong forward booking. Forward book is already best winter next and summer 2024, either this early days are running significantly ahead of where they were this time last year.

The next question comes from Alexander Irving from Bernstein.

Two for me, please. First, on capital structure. So how much liquidity do you see as required on an ongoing basis? Think about this as a reference to the announced dividend, which suggests your net cash position will continue to grow. Is that in line with your expectations? Second, drilling into cost a little bit more. So your airport and handling cost per passenger was up 11% year-on-year in Q1, 13% in Q2. What's driving that, please? And should we take the current levels per passenger as a rough indication of what's stable?

Thanks, Alex. Tracey, maybe you might take the second part of that question. As you look at capital structure and Neil will come in if there's anything you want to add? I mean I think historically, we want to be in a 0 net debt position as we paid down debt aggressively. I think the Board is of a view that we should keep a reasonably sizable chunk of cash for the inevitable crises at this industry and whenever we think we can do aircraft deals.

So I think moving forward over the next number of years, we want to keep EUR 3 billion to EUR 4 billion of gross cash on the balance sheet, which is the number we've been operating at for about the last 5 or 6 years. We will though pay down the last EUR 2 billion of debt in 2025 and '26. We have -- we're going to go through a 2- or 3-year period to '25, '26 and '27, where there's a material dip in CapEx because of the gap between the last of our MAX -- the game change delivery with the last of which is due in December of 2024 for summer '25.

And then the first of the MAX 10, which is not used to deliver until the spring of 2027. So there is likely to be a strong upward pressure on cash -- free cash flow over the next 2 or 3 years as long as trading isn't disrupted by adverse events, and again, I think our comment this morning is that we intend, firstly, use that to employee pay, secondly, pay down debt. Third, fund CapEx. And then anything that's fair or left over will be returned to shareholders. We're setting out this morning an ordinary dividend policy. That would be 25% of net profit after tax.

So for example, this year, we're now guiding somewhere just under EUR 2 billion in net profit. We would hope to be repairing a dividend of somewhere close just under EUR 500 million for next year. But if there's a surplus over that over the next 2 or 3 years, we'll be opportunistic. There might be special dividends. There might be share buybacks.

But we have to be conscious of the fact that we will start to get CapEx again through FY '20 -- into 2026 and the start of '27. Peak CapEx will be around -- on the MAX 10 order will be around '28, '29. But hopefully, traffic will continue to be strong profitability with very low cost base and widening cost gap between us and the competition will continue to be strong. I think capacity constraints in Europe mean that pricing will be strong and that should leave us in a position to be able to fund a modest reasonable shareholder returns. Tracey, would you just comment on the airport and handling costs, please?

Yes. So there's 2 things driving the airport and handling. So higher ATC costs, that's include in that. So local air traffic control costs at airport, we've seen an increase in them and we have the termination of some of the COVID relief that we were getting the benefit of last year. And probably the other driver in that is handling in that. So a little bit of labor inflation in the handling costs across Europe.

But I will share again that, that cost degree, Alex, is that is less than half of the airport and handling costs increase. Some of our competitors have been reporting recently. So there's materially more airport and handling cost inflation at the main airports that are being operated by our competitors. Therefore, widening the gap again.

Next question comes from Harry Gowers from JPMorgan.

Just 2 questions. I mean average fares up 15% in Q3 looks very strong. So I mean are you somewhat surprised by the strength of the fares given concerns over the health of the consumer more widely? And I was wondering if there was any potential one-off benefits in there in Q3, for example, from maybe the Rugby World Cup. And then just any comments as well on Q3 on where you expect the ancillaries per pax just in absolute terms or year-on-year.

Okay. Neil, I ask you to comment on the ancillaries. On repairs, Harry, they're strong in Q3. Again, I think that the critical driver of fares here is not individual events like the Rugby World Cup, which were nice, but not materially across we're carrying almost 500,000 passengers a day. The Rugby World Cup is that -- would make barely a blip on it. What's really driving aircraft here is the consolidation, capacity constrained story in Europe, the material -- the dramatic increase in pricing that is being leveraged by the life of competitors and the Air France-KLM and IAG, who are starting with average fares that are 4, 5 and 6x those of Ryanair, particularly if you take the German market where Lufthansa is (inaudible) the national champion has seen off a lot of capacity easyJet and ourselves have removed a lot of capacity from the German market in the last few years in the face of ludicrous airport cost increases, man, German, government taxation, security charges, et cetera.

Lufthansa -- the German market is the one that is weakest, it has recovered only about 80% pre-COVID. But short-haul airfares in Germany have more than doubled. And everywhere you go in Germany, people complaining about Lufthansa's pricing. But that's what you get when you get a national champion like Lufthansa , you get screwed. And I think that is going to continue to play itself out. Lufthansa, Air France-KLM, IAG, are going to -- are losing more in percentage terms. Their free ETF reduction from January next year is much more meaningful on their short-haul traffic than ours. There's much greater upward pressure on their cost and their ability to increase air fares. And this capacity-constrained story, which has largely been playing out in North America over the last decade is beginning to roll out across Europe again.

Europe is entering a period where airfares are going to be modestly higher, a combination of government imposing Ludacris environmental taxation. We have our own ETS transport minister in Ireland, has just nothing to push back and get the ETS. So nothing to push back against French ATC strike. Yet happily rings his hands despite the fact that we're in Ireland, the property of Europe. So airfares across Europe are moving, I think, upwards and the really dramatic but not well-understood capacity-constrained story, I think we'll continue to play that much as this is through December of 2024 and into December 2025 as well. We see no easement in these capacity constraints. And what really drives Ryanair fares is the extent with Lufthansa, Air France-KLM and IAG are driving up their airports, and they are driving up their efforts to an eye-watering extent at the moment.

And Neil, ancillary.

Yes. Harry, as we've been kind of saying all year, we expect on a full year basis, ancillaries are up kind of EUR 0.50, EUR 0.60 per passenger year-on-year. So you're probably looking at similar to the first half, about a 3% increase over the second half. And then thereafter, it's kind of 3% to 5% per annum growth area, depending on John sitting here beside me what he can do for me on dynamic pricing and other things. But we've had a phenomenal step up from EUR 19.70 per passenger pre-COVID to EUR 23.70 per passenger now, and it's growing at a relatively steady state of kind of 3% to 5%.

The next question comes from Savanthi Syth from Raymond James.

In terms of investing for resiliency, I would imagine that you're kind of keeping the buffers that you put in place currently. But as you kind of head into summer 2024, are you planning on kind of making any additional investments or additional buffers? And then secondly, just kind of curious on the MAX -- with the MAX delivery delays, I'm guessing you're not going to be able to take advantage of this. But what are the kind of the -- what does the NG pricing look like these days in case you wanted flexibility?

Sorry, Savanthi, you broke up at the start. It's the first half of that question and I missed that. The second half was MAX delivery delays , but I wasn't sure what the question was. Can you repeat it again, please?

Sorry. Yes. Just on the -- more so on kind of NG pricing. Like what are you seeing today if you want to take advantage of it, not that you probably can given the delays?

Sorry, the NG pricing? Is it?

Yes, I can take that, Michael.

Okay, Neil. Sorry, I didn't hear it again. If you heard her say, will you answer please, and the first half as well, probably about December, 2024.

Okay. Well, just on resilience, Savi, I don't think air traffic control are going to be more to improve, but I'll ask Eddie to deal with that. I'll talk about NGs first. I mean, the market for NG is very hot at the moment. The phone is ringing off the hook of people trying to buy NG of us, the leasing companies, lease rate factors have increased quite significantly. So it wouldn't be minded to go out and try and lease anything from them.

So I think we're very happy just to operate what we have and to continue to work with Boeing to accelerate and speed up the pace that we're getting the MAXs into the fleet. But yes, NG is holding values very well. I think Eddie is going to answer the question on resilience.

Yes. Just I think what, as Mark was saying on operational resilience is coming out post-COVID where we were just better prepared than all of our competitors by keeping everybody employed and keeping everyone current our crews and our aircraft current. And we've tried to work really, really hard to sustain that advantage. And you can see that, I think, in a lot of the recovery or lack of recovery from our competitors who appear reluctant to get back to full recovery. Some of that, I suspect, is driven by sort of meltdown days where ATC dropped everybody in it. And what we've tried to do is have additional crews built into the system and that gives us -- I mean, we're able to lean into that because we're still a growing airline as ATC hopefully will recover in terms of its capacity over the next number of years, we'll be able to pare back crewing levels to what you would need in a normal busy season.

But those of you who are at the Capital Markets Day will have seen what John's team, along with Neil's team and Darryl as well in terms of building IT solutions to make best use of those crews so that we can get through those parts of the -- like on meltdown days, that are happening more frequently. But it's something that we're not crowing about. There's a lot of hard paddling under the surface here to keep that operation going. And we've invested heavily in technology, heavily in manning not just in terms of crews per aircraft, but also in our ops control center. But we have to continue to invest. We're not being complacent in any way about that.

Eddie, just to clarify, so just the incremental investment won't be that much greater than what you're seeing today, right? I mean it's not going to be another big headwind into the next year.

No. I think what you're trying -- like we have to look at all of these things on a sort of a micro level, don't forget, we're spread over 93 separate basis, and there's always room for improvement as to how you grow that. And given the data that we have now, that will inform our decision. But I don't see a step up. But my instincts would be to have -- to increase that slightly, but I don't think it's anything material just because we're going to get into -- we're on a long-term growth trajectory here and that means then that you're going, oh, we sort of fine-tune your accruing ratios as you take delivery of aircraft as well. So it's -- I'd rather have slightly more than slightly less but not material.

Thanks, Eddie. Savi, I'm sorry, I couldn't hear the question probably.

Next question comes from Ruairi Cullinane from RBC Capital Markets.

It looks like relative to Q1, your hedging position on fuel is advanced, but not so much on FX. So I was just wondering if hedging was paused or it would drove that? And then secondly, a longer-term question. And you've got 2 years of slower fleet growth around 2025, 2026. Do you think that could be a more difficult period to restrain unit costs? And as a result, is there silver lining to Boeing delivery delay?

Neil, you want to take the question on hedging. I mean you or Thomas can do the hedging, and I'll do the 2 years of slower fleet growth.

Yes. On hedging, we're very pleased with the level of hedging that we have in place just under 89% for the second half of this year at about $890 a metric ton and well hedged into next year, over 50%, and in fact, close to about 56% in the first half of the year at savings of $790 a metric ton. What's changed in our hedging policy, not a huge loss. We're possibly not going out with a higher percentage as we would have done in the past, but that's a factor of our competitors' balance sheets not being as strong, and they've not been able to get access to hedging line. So that's why we had a number of options this year where we effectively capped out the worst-case scenario and then had a downside participation. So you may, over time, see us doing a little bit more on auctions. But we continue to have a kind of 12- to 18-month rolling policy.

We're well hedged out to now at the end of March 2025, and we'll continue just to build up on that over the next number of months. Similarly, on the currency side, we continue to run a very active OpEx book, we were hedged at $108, the current year in euro dollar, we're hedged at about $111, $112 into next year. And again, we'll continue to build that over time. So no, we're continuing to execute on us. We continue to have huge hedge lines with our counterparties and the treasury team have never been busier. So no, we're pushing on.

Okay. 2 years of slower fleet growth. I mean, if anything, we're facing almost 3 years of slower fleet growth, we will take -- if Boeing can meet their delivery commitment, we get 57 aircraft for summer '24. We get another 30 aircraft for summer '25. I think they'll miss some of the summer '24 and therefore, it will even itself out. We'll pick those up for summer '25. We will have nothing new for summer '26, very little for summer of '27. I think we take -- decided to take 18 now 17 aircraft from January to May of summer '27.

So it's not by choice, but I think the 2 or 3 years of slower fleet growth don't have -- it gives us a bit of a pause in the organization before we start a decade of aggressive growth. It does take some of the pressure off recruitment and training over that period of time. It may create some challenges, but I think we're facing challenges, I think, on the labor front anyway in the next year or a couple of years, I think we've reflected that in what has been the pay restoration and generous pay -- already generous pay agreements in place with [piles and Cameco] across Europe.

But that inevitably, the upside of the silver lining of that is it further constrains capacity. I mean the only airline delivery material capacity growth across Europe is summer of '22, summer '23, summer '24 is Ryanair. And we ourselves will be capacity constrained through the summer of '25, '26 and '27. Now I think we'll continue to see significant churn of our operations during that period. We will continue to do aggressive growth deals with ambitious airports. And therefore, we will churn more aircraft out of expensive airport at Dublin, for example, where, again, they're planning to build a waste EUR 250 million on a total to going nowhere is just, again, regulatory game playing. They just want to desperately weight CapEx on some of -- none of the airlines there. Neil is right. None of us want a stupid that only goes across to where the cargo aircraft are parked.

And even this, they're almost spending EUR 230 million out of time when they admit themselves, that Dublin Airport has a planning restriction of traffic cap of 32 million passengers. So the idiots on the Dublin Airport have done nothing about this planning cap for the last decade, while traffic is rising to 32 million passengers. And so Dublin is now capacity constrained. We may well have to take aircraft churn aircraft out of Dublin. But Dublin is kind of exploited by coming up, and they're looking for about a 17% cost increase over the next year or 2 in passenger charges.

So airports like that, that are badly run badly managed and are inflating on justifying the inflating cost, we'll see, I think we've churned some capacity out of places like Dublin and put them into other much more growth incentive markets like Spain, Italy, across Central Europe at the moment in Poland, Romania, Slovakia, Czech Republic, the Baltic states, we're seeing ambitious airports putting in place very enlightened discount schemes for growth.

Morocco, as Eddie said, Albania are going to be areas of significance. So there will be more churn in our business over those couple of years. And I think that's good for the business. It keeps us on our feet, it will keep us aggressive and it will also help us to keep -- put pressure on mismanaged airports like Dublin, who continue to exploit the regulatory regime to justifiably increased cost at a time where they should be lowering fees and trying to drive growth.

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

Two follow-up questions, please. The first one, just on the dividend for this year. Can you talk about why you have a EUR 400 million dividend instead of a payout for fiscal '24. And just to clarify, so in the scenario that you think there is surplus cash, could there be a specialty or share buyback even for next year? That's the first question. And then secondly, on your pricing comments for fiscal 3Q, do you think that your pricing trends are better than the overall market? Do you think the market is also seeing similar mid-teen pricing and/or you're benefiting from the trade down that you talked about earlier?

Okay. dividend this year for EUR 400 million. Well, if we paid out 25% of last year's profits, which were EUR 1.54 billion, it would have been about EUR 350 million, EUR 360 million. And the Board felt that it sent a strong signal to the market and also to shareholders. But if we rounded that up to EUR 400 million, it would repay the shareholders, including myself, I might add, who put her hands in our pockets during the depth of COVID and invested EUR 400 million at a time when nobody was able to raise equity in the airline industry. And I think that's an effective signal. The shareholders who stood by us during COVID and who wrote those difficult checks during the very difficult COVID period are seeing that return. Is there a prospect of special dividends or share buybacks next year. I mean the answer is yes, but it all depends on trading. It all depends on how the cash flows develop.

And it will depend on what the Board decides to do. I mean we will continue to be conservative and judicious, but you have our assurance is that excess cash will be returned to shareholders whenever we're confident that we can meet our payroll commitment, our debt repayment commitment and our CapEx commitment. Do I think Q3 will be better than the overall market? Yes. I think what's driving the overall market across Europe is very aggressive price increases by Lufthansa, Air France-KLM, IAG, easyJet and others and they're all pricing materially above Ryanair, and average airfares are in the case of easyJet double Ryanair in the case of the legacy, they're 3, 4, 5x higher than ours. And if they're going up, seeing average fares rise by a high single digit this winter, and I think they are because of the capacity constraints.

They are driving more and more people, more and more customers and their families in the direction of Ryanair taking low-fare air travel, and we're seeing strong forward bookings and strong pricing. And I think that's why off a much lower base we're seeing a strong -- and I think that would continue off a much lower base. We see stronger pricing in the Ryanair model as Europe consolidates or continues to consolidate over the next through 3, 4 years as capacity continues to be materially constrained. And I think in the summer '24, as many of our competitors will be grounding aircraft because they know probably with the engines operate them. I don't know, Eddie, you want to add anything on the Q3 better than -- is Air France better than the overall market?

Not really. I think you sort of covered it off there. I mean like it's what we've seen before where I hate to use the phrase but sort of trade down. But as people become more price sensitive, they -- I think you're quite wise on what you're saying, that migration of people. And in a lot of cases, given our size and scale, we have more frequencies and 2 more airports as well. That gives us that a little bit extra, I suppose, in terms of uplift. Yes, nothing really to add on that.

Yes. I continue to be amazed. I mean the amount of the handwringing going on, particularly in the analyst community, consumers under pressure, and they are under pressure, speaking very frankly. People don't stop flying. In other sectors, people trade down to little and all the -- they buy their furniture in IKEA not in some department store. And as there are very strong performance over the last 2 years, and we're now carrying 22%, 23% more traffic than we did pre-COVID in an industry across Europe, that's operating at about 94% pre-COVID capacity.

People are trading to the lowest cost provider, which in every market in Europe is Ryanair. We're also happen to be probably the best on-time performance. So we're delivering great service at lower prices. We're now doing that on aircraft like the Boeing MAX where we can carry more passengers but burning less fuel and delivering very material operating cost efficiency.

So I think this is now a time for our expansion. We were desperately working with Boeing to try to get as many of those 57 aircraft we can in time of September 2024 because if we don't keep that expansion going, then consumers across Europe really will be screwed by the Lufthansa, Air France and the high-fare national champion, all of whom received billions of subsidies during COVID from Europe taxpayers and they're -- and gratitudes these industries fine house scalping those taxpayers for extraordinary eye-watering airfares.

The next question comes from Sathish Sivakumar from Citi.

I got 2 questions here. So firstly, on the forward booking and you pointed out that saying it's actually much better than last year. How does it like evolved as we went into this quarter for the Christmas period as well as into the Easter next year. And then the second one, any update on the potential risk from the Italian government on the price gap, that will be helpful.

I missed -- I didn't get the second half of that, Sathish. I got the (inaudible), I'll deal with. Look, we see, at the moment, all of the forward bookings into the Christmas is strong, the February school midterm break. Ski is running -- bookings and fares are running ahead of the prior year, and we have the first half of Easter in the last week of March. So I think we remain reasonably optimistic on pricing for the second half of the year and into Q4, although we always have to qualify that we have availability to Q4 visibility. And I didn't get the second half of the question, if Neil or Eddie did, please feel free to answer it.

Yes, we might get Juliusz because he wants to answer this one on the price cap.

Thanks guys. Sathish, on the pricing -- I think I got your question, but you can correct me if I answer a different one. I think we've had pretty much pricing in Europe guaranteed an EU law since 1997 and all governments recognize that it's there and that it's an integral part of the success that European Aviation has enjoyed over the last nearly 4 decades. What the Italian government has done over the summer, I would not take it too seriously as a serious well-considered step. It was part of a decree, which was passed, I think, on the last day before the government checked out for the summer break. At the same decree talked about a tax on Italian banks, which the government then had to walk back from and some measures about the taxi industry, which apparently is a mass in Italy today. The European Commission, which we often criticize in those calls were maybe not being quick enough in terms of sorting out ATC in Europe or air traffic control strikes and so on.

It was actually incredibly helpful in the context of this Italian situation. They stepped in and put a lot of pressure on the Italian government to reverse that decree when it comes to attempted control prices between mainland Italy and the Italian Island. And I think this is a very good lesson for all the other governments that might have ideas of similar sorts feeding populous agendas, don't go there because you will end up before the EU court and not prosecuted by airlines by the European Commission.

The next question comes from Duane Pfennigwerth from Evercore ISI.

It's been a very comprehensive call. Just one for me. So air traffic control constraints are really not new in Europe. It's something you've been dealing with for several years even pre-COVID. We're hearing much more about these issues in the U.S. And so just curious, how do you design your network to achieve high utilization, low unit costs despite the constraints that you live with. I mean if there was a moment maybe 5, 10 years ago where you said, look, we have to operate differently because of this, what are the changes you made from a network design, network planning perspective?

I mean I think Duane, to answer that question, ATC has been a much greater problem challenge for the industry in Europe than it is in the U.S. Europe's ATCs are fundamentally mismanaged, underproductive and ridiculously expensive compared to North America. The biggest challenge continues to be not just the cost of that, but the environmental impact of site delays, long flight plan. We've been campaigning aggressively for now 2 or 3 years at least the simple issue is during ATC strikes, which you tend not to have in North America, in (inaudible) . But in Europe, we'll be dealing with particularly the French price 64 days of ATC strike this year so far. We're calling for the protection of overflight because of the geographic location of France, if they -- France uses minimum service legislation to protect its domestic flights and cancels all the overflights.

And we think it should be reversed the other way. Europe should be protecting the overflights that cancel French domestic flights. That one initiative would probably remove some 70%, 80% of the impact of ATC strike and not just [ET] strike and would have a very significant impact on the environmental impact or the environmental damage done by European ATC today. I think we're seeing some movements on that. Europe itself has spent billions over the last 30 years on a single European skies project. They have made not 1 millimeter of progress on it. It's a complete waste of time. I personally believe Europe could deregulate air to air traffic control each individual like they did with the airlines. They should allow the air traffic control providers to compete against each other to provide service. That will be a much more efficient way, force them to compete against each other.

But as long as very small ATC unions have a disproportionate power and you have weak European governments who are willing to stand up to these with the way Reagan did with the American aircraft at the (inaudible) day back in 1980, I think we will continue to be bedeviled by ATC delays, inefficiency and screwups in Europe. I don't know, Eddie, you want to add anything further on that or Neal, maybe on finance?

Go ahead, Neal.

Sorry, Eddie, just in terms of design, so there's been no fundamental change in design, but it has resulted in, we've had to increase resilience, so crew and resilient because we have to now factor in, there's going to be more ATC delays than there would have been 5, 10 years ago. And if we just use the example of the U.K., the NASS collapsed on the 28th of August, which resulted in the closure of U.K. airspace and widespread cancellations because of the increased resilience we had by -- that was on the Monday. And by lunchtime on Tuesday, our operation was fully back to normal despite having 20 aircraft in the wrong position the night before. So I think that's where we're seeing, there's an increased resilience, higher accruing ratios to factor in rather than an aerospace redesign or a network redesign.

The next question comes from Alex Paterson from Peel Hunt.

Two quick questions, please. Firstly, just on your October traffic, your load factor was slightly lower than the prior year. That's the first time year for a long time. Were there any anomalies in that month, anything to cause that? And secondly, just on the 737 MAX 10. Obviously, there's been delays to the back, there's been problems with various engines and so on. What if that is a certified belt delivered on time, what would you do run existing fleet for longer? Are there any other levers you can pull?

Okay. Thanks, Alex. October traffic was up 1%. It's a rounding issue, if there's nothing material in there, we could have engaged in seat sales that would have artificially driven it back up just for the sake of it. I think that's the wrong thing to do. We're happy to let a load factor block 1%, fall 1%. We hit our target for the month. The only thing I would point, though, is that there was a very steep falloff in load on the pipe to Jordan and also, obviously, the Israel, the situation, the Israeli Hamas conflict. At the start of the month, we were operating by school from interest, there was a dramatic increase in no shows and collapsing bookings, much the same way we had in into Central and Eastern Europe, when Russia illegally invaded Ukraine, in February of 2022. I know if there's anything untoward in that. There's nothing we would call out expect to -- we're running slightly ahead of where we are year-to-date on load factor and expect the full year load factor targets.

On the 737 MAX 10, remember, our first deliveries aren't until January 2027. It's -- Boeing expects the MAX 7 to be certified either this side of Christmas or early first quarter of 2024. We think that then rolls on the. They expect that will roll on with the FAA will certify, I think, the Max 10. Sometime towards the second half of 2024. It might slip into early '25. But we are a long way behind the lead customers on that. So I don't think there's any particular risk to our first deliveries of MAX 10 aircraft in January 2027, given that it will be 3 or 4 years behind the original education aircraft. What would happen, yes, we would simply -- I mean, again, it would further constrain capacity if there's any delays to our MAX 10 deliveries in 2027. It would further constrain capacity across Europe, where, again, Airbus and Boeing continues to be challenged on their delivery positions. But I would be reasonably confident that we can get those deliveries on time in the first half of 2027.

Neil, anything you want to add on the Boeing side?

We just add that if there was a delay, and I don't anticipate because as Michael said, they're on track to hopefully deliver the first 7 and 10 to the lead customers next year. But if there was a delay, we sell less of the NGs. We've penciled in 150 NGs due to exit the fleet as the 10s come in. So we just manage that within the business, but we've every expectation that we get in the 10s in an early 2027.

Next question comes from Gerald Khoo from Liberum.

Two for me, if I can. You talked about 90% of summer 2024 capacity being on sale. I was just wondering why is it 90%? Are you holding some back for potential Boeing delays? Or is there another reason for that? And secondly, there's a big gap between the increase in average fares and the increase in ancillary revenue per passenger. I was sort of wondering why you're taking so much of a current strength in demand in fares rather than ancillary revenue.

Okay. The summer '24, Jason, you might have added some comments on this, like we're at 20%. That's about normal this time of the year. In fact, it's more normal than we know anybody. 20% of summer '24. A couple of things happened there, what, we're not sure about the last of the Boeing 10 aircraft delivery. Those are still airport negotiations ongoing about new bases, new routes, and we're still paying off. So we haven't yet finalized those allocations of the existing fleet. But at 90% already on sale, that's higher than what it had been in previous year. And is there a big gap between average shares and ancillary? Yes. We're priced, half of load factor active, what's driving the round loading average there, the best in strong upward pricing that's being delivered by our creditor across Europe in a constrained market. And again, I would call to Lufthansa in Germany is going over to 80% of the pre-COVID and airfares are doubled.

The true or not the same considering we will tend to -- with a very well advanced ancillary revenue business, it does tend to clip up a couple of percentage points ahead of traffic growth. It's up 3% per passenger in the half year. But if it's going to far less pricing fluctuation and pricing volatility than underlying airfare. In price on a downturn, average airfare tied with (inaudible) will fall in a capacity constrain consolidated market like Europe will be I think the rest of the year underlying airport will rise. But ancillaries will continue to come along doing what they do, and it's a much more reliable source of income as long as we use the average price to make sure that we hit the low price and fill all our flights. And Jason, anything on the summer to a 90% of '24 on sale?

No. Like you covered it off there, 90% were actually ahead of where we would have been previously. So more capacity percentage-wise on sales for '24 than we would have previously. And like there's 2 other factors at play. There's a potential for 2 or 3 new bases next year, but that will depend on how the negotiations progress over the next number of weeks. And likewise, where we feel there's unjustified cost increases into 2024, we're keeping some of that capacity off-sale or we'll negotiate with airport, but we will not be accepting unjustified airport cost increases into next year. So that covers off the 10%, Gerald.

The next question comes from Conor Dwyer from Morgan Stanley.

So the first question is regarding the excess cash and how best to give it to shareholders. So before you've expressed the preference for the special dividends, but this morning seems to be a bit more of a balance between these and buybacks. So I'm just wondering if that is just because the decision hasn't been made officially yet? Or if cheap valuation is making a buyback a bit more attractive now?

And the second question is just around pricing growth. It's been very strong for this period and it sounds as though it's benefiting from the headroom you've built up over the last few years. So I'm just thinking do you think that can extend beyond this period and that you can probably pace market fare growth over the next few years because you're already talking about an overall market environment where fare growth should be pretty attractive.

You're might asking if the pricing growth over the next few years come back. I mean I think we are the Board, we had a meeting last week. I think we are slightly changing dynamic. I had expected we'd be looking to return surplus cash through special dividends for the next year or 2, we had surplus cash but the way our PE has derated -- historically, we've been on a 15x PE most but we're now down under 10 at 8 or 9, I look across the States and Southwest at 15x PE but with less profit, higher cost, less growth. But it is what it is. But I think if our multiple continues to be as is simple as it is to have derated over the last number of -- over the last 12 months. I think it's incumbent on the Board to reassess whether we return cash -- per cash by dividends or share buybacks.

And I would be very strongly in favor of restarting share buybacks if our PE multiple continues in single digits. I think we're vastly undervalued for the performance we're delivering in a market in Europe is consolidating. Maybe Neil, pricing for the next few years?

Yes. I think in fairness, Jason and Eddie covered it fairly well recently, but capacity is going to be the key driver of pricing for the next couple of years. The market remains constrained -- likely to remain constrained for various number of issues, including the Pratt & Whitney engines, the lack of availability of new orders this site of 2030 and the consolidation play. So look, I mean, nobody knows exactly what's going to happen, but I think there's more risk to the upside than the downside as we look out over the next year or 2.

Maxine, I think it's 20 past, we've done 1 hour and 20 minutes, and I go to a (inaudible) due in 10 minutes. So we'll do 2 more questions, please, and then cut it off.

That does conclude our Q&A session for today. So I'll hand back over to Michael for any closing remarks.

Okay. Thank you very much, everybody. I think we've done 1 hour and 20 minutes, which is very exhaustive coverage of their results. Thanks to the team for what I think has been a very strong 6-month performance. Thanks to our customers who continue to support Ryanair as we continue to do everything in our power to pass on lower (inaudible). And exceptional on-time performance in the European marketplace, which will continue to be challenged by capacity constraints for the next couple of years, consolidation, OEM, delivery delays. And I think the Pratt & Whitney engine will become a much bigger and more challenging issue for our competitors in the next summer 2025.

We have an extensive road show as I said, think about 12 or 14 different teams on the road. I'm in a States, Neil, I think is also in the States for the rest of the week. Eddie and the rest of the team were covering off Europe.

If you'd like a meeting, please feel free contract (inaudible) or city, and we'd be happy to try and fit in a meeting. And if anybody wants to come and see us in Dublin over the coming weeks, please feel free to do so. Peter Larkin, Head of Investor Relation I'd be happy to take the call to set that up.

With that, thank you very much, everybody, for joining us this morning. Look forward to seeing you over the next week. And let's hope that there will be a peaceful outcome of the current situation in Gaza and in the Ukraine and that we can all get back to carrying more passengers at lower fares than our competitors across Europe and hopefully, rewarding shareholders for their support during the very difficult COVID period. Thanks very much, everybody. I hope to see you later on this week. Thank you. Bye-bye.

Thank you. Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines.