Wizz Air Holdings Plc

Good morning, everyone. Thanks for coming to this presentation.

So we are reporting the first half of our financial year, fiscal '20. We believe that the business delivered very strong set of numbers.

A great result, I would even say, beyond our expectations. We delivered a record net profit of €372 million.

But essentially, when you look at the entire metrics, the financial metrics, we believe are record numbers. Passenger numbers grew 18% to €22 million in this period.

I believe we were the most growing airline in the whole industry in Europe at that growth rate. Our cost performance continued to be very strong.

Again, I think we are the only airline in Europe that records continuous unit cost decline, all other airlines say unit per scrip. And also, we've seen some very strong revenue performance coming out of the markets.

And again, this is against the backdrop of growing capacity or growing passenger numbers by 18%. So it's not only that we grew significantly, but actually, we were able to deliver profitable growth in the business.

Pretty much on the base of business as usual, we continue to expand our market presence by launching 76 new routes in our markets through 18 new aircraft. It is important to know that by now, we are flying around 50% of our seats on A321s.

That's a significant operational achievement. The A321 has flown on 230 seats on the Classic and 239 seats on the Neo.

And our average seat count per aircraft is 202 at the moment. And I think we are flying the most dense single live, aircraft fleet in Europe, certainly.

We also enhanced our sustainability approach. I mean, clearly, you can see that by far, Wizz Air is the greenest airline on the base of CO2 emissions per passenger kilometer.

We are emitting 56 grams, that's 15% lower than Ryanair and around 60%, 70% lower than the legacy carriers. So be a Air France, KLM out of India, a range of 90-plus grams, so you can own the numbers.

And very importantly, we continue to update and upgrade our fleet and with the induction of more and more A321neos, that number will continue to decrease, and we are expecting and targeting our CO2 emission to be down by 30% in 2030. As a result of these performance measures, we are now tightening the range to €335 million to €350 million.

And essentially, we are pointing at the top end of the original guidance. Also I would note that -- and I think we made it clear to the market before that we are reinvesting some of the incremental profitability of the business.

We have been recording in the first half into the second half in the form of growing capacity more than originally intended. We think it's a good thing from a strategic standpoint because, obviously, we're going to be gaining maturity earlier and the next financial year, fiscal '21 and beyond, the business will benefit from that early investment.

We are the leading airline in Central and Eastern Europe. Certainly, we are the leading autologous carrier in the region.

We carried 22 million passengers in the period, operated 119 aircraft at the end of the period. Today, we have 120 aircraft in operation.

Obviously, with the growth of the business, the entire organization and base setup has been growing. I would say that Central and Eastern Europe remains a very intact market.

GDPs continue to grow ahead of the Western European level. Clearly, Central and Eastern Europe is outperforming the Western European economies with that regard.

If we just look at some of the numbers on wage inflation. In some countries, we are seeing wage inflation more than 10% in a year, that's quite unheard of versus previous records.

But at the same time, that translates into disposable income and demand in the marketplace and the business benefits from that for sure. The U.K.

has been a good run for the company. We are now having 10 aircraft based in the United Kingdom, operated by Wizz Air U.K.

We have another airline in Luton, and as you can see, we've announced some expansions in other markets in the London area Southend, and also expanded capacity at London Gatwick. Vienna continues to be kind of an interesting place from an industry standpoint, still a better fit.

And I think we are the only airline that actually makes financial sense out of the business in Vienna. Everyone is losing a lot of money.

And the reason for that is that we are flying a highly efficient A321 brand-new fleet to backup. And that compares to quite a mix of -- and inefficient capacity, pretty much all others who came to the market.

But clearly, some consolidations have started in Vienna. We are seeing [indiscernible] level Eurowings contracting now.

And obviously, based on experience in other places, this is just a matter of time. When the dust settles down and you're going to see the structure revenues, and I believe that, as we said, it's going to be a structure of Vienna because simply, we are the lowest cost producer in the marketplace.

When you look at the operational metrics of the business. In the reporting period, we delivered a better operation than in previous year.

You remember that summer '18 was a tough period due to air traffic control issues, they were more stretched from an operational standpoint. As a result of that learning exercise, we built in more resilience into the operating model this time around.

And as you can see, actually, we delivered a better quality operation this summer, despite the fact that we carried 18% more passengers, we ended up with 25% fewer cancellations in the period. Load factors were growing.

Close to 95% in the period. Fleet utilization was growing almost 13.5 hours and regularity remained unchanged.

So it was a strong performance in terms of operations in this period. So with that, I will just hand it over to Iain, who's going to take you through the financial numbers, and I will take it back for the market reviews after.

Okay. Thanks, József.

Morning, everybody. So on to Slide 5.

Wizz Air had a very strong performance in the first half, as just echoing József's comments. We had a very strong commercial performance.

The operations team and the flight crew had a very good operational performance, and this will translates into a very strong financial performance. If you look at the left side of the chart.

We had 18 more units in terms of aircraft. That was actually 14 more aircraft in terms of capacity.

That led to 16.6% seat growth, 95% load factor is up 1 percentage point year-on-year, led to passenger growth of close to 18%, that's 22 million passengers in the first half. Stage length also crept higher, 1,630 kilometers on average stage length.

That translates into an ASK growth of over 18%. But that's a very fast growth rate when you compare it to the rest of the industry.

So even with this industry-leading growth rate, we delivered unit revenues up 2.7%. Our cost performance was also very encouraging, with unit costs down 2.8%.

So with improving unit revenues and improving unit costs, we saw margin expansion in the first half. I don't think any other airline can boast that.

This translated into €372 million of profits for the first 6 months. I'd also ask you to answer the free cash position.

Free cash position was up to nearly €0.5 billion in the first half driven through the profitability. The ULCC model is a very cash generative machine.

Also we have some improvements in working capital plus a business, which is 18% larger in terms of passengers carried. You can see that coming through in terms of the forward bookings.

So a very, very strong financial position. Moving on to Slide 6, the revenue side.

A couple of features I would highlight here. One of the pleasing things is ancillary now represents 43% of total revenue, this is up year-on-year.

Last year, it was 37%. We like ancillary revenue.

We like very low base fares, we like to see base fares reducing. That stimulates traffic.

That is key to our business model. So what's important is we saw a very strong continuation of the ancillary.

We saw ancillary up €4.9 in the first half. But on the trend -- on the other side, we saw the ticket revenue down 5.5%.

So again, that's a very good thing for stimulating traffic. Maybe a little bit more color on the ancillary.

Those who remember, we introduced or changed our cabin bag policy. The anniversary of that is November 7.

And what you can see is that we delivered €4.9 in the first half. That anniversary effect finishes in November, so we'll still see around about €3 per pax in the third quarter on ancillary.

What's even more pleasing is in the fourth quarter when you don't have the year-on-year lapping effect is that we still expect to track around about plus €1 per pax, which is the average for the long-term goal that we have. One of the other items is also very pleasing to see is on the bags.

I think every time I presented this slide, we've always seen bags for the past 4 years declining. So we actually saw a €0.5 per pax increase on the bag revenue.

So I think from that perspective, I think we found the right formula and the right balance on value-added versus bags. Going on to the most important slide.

And again, let's remember that whatever happens in the industry, whether it's competitive battles, whether it's economic downturns, it's the lowest cost producer that will always win. So this will always be a key pillar to our business model.

Cost is king. If you look -- if you want to look in terms of how that performance comes through, you can see the fuel cost is the largest driver of that, up €0.06, but that was absorbed through the rest of the business.

There has been some confusing translations in terms of IFRS 16, how that flows through. We can come on to that later if there's specific questions.

But ultimately, as I've always indicated, the impact of IFRS 16 doesn't really move the needle from a unit cost perspective. So it's great to see on unit costs we're down 2.8%, and we continue to drive that performance.

On particular line items, I would generally say that there's nothing unusual, a very strong performance on accruing. Last year, we took quite a few challenges on our sales, 17 aircraft in 17 weeks.

We set up with U.K., which required an awful lot of training. So that ramp-up of training and recruitment, this year, we didn't see that.

So when we look at the first half of this year, a very good operational performance, Joe highlighted, in terms of the cancellation rate. But in terms of the utilization, the rosters, the performance by our operational flight crew was exceptional.

Moving on to our fleet schedule, so Slide 9. What's very important here, and again, Joe highlighted 50% of our seats are now served by the A321 aircraft.

This is a 20% lower unit cost than the A320s. And as we drive through the seat count, you see structural savings.

So today, we do have the lowest unit costs out of any of our competitors. And that's a fact.

You can run the math, you can do the math. We have the lowest unit costs.

What's also important when you look at our ownership costs, because of our history, obviously it's a very young company, our ownership costs are significantly higher than the competitors. So as we refleet, as all of our aircraft go back to leasors and we bring in this brand-new A321neos, larger aircraft, more fuel efficient aircraft, finance that investment-grade credit ratings, that gap will disappear.

And if anything, it will go the other way. So the runway ahead in terms of structural cost savings coming through from our fleet can't be comparable to anybody else, certainly, in Europe.

And then moving on to the guidance slides. No real change.

I think if I reflect on the first half. The macro environment is fairly muted.

You may see slightly better performance on the fuel price, it's a touch down. Carbon is a touch up.

Dollar is a touch stronger. So when we look at the actual macro effect, there hasn't really been any change since we issued guidance back in May.

So the fuel CASK essentially unchanged at plus 7%. Capacity growth, plus 20%, that's essentially 18% in the first half, 22% in the second half.

The 2 changes are ex fuel, so we're pointing slightly negative. Just to clarify, that's a positive, so slightly negative means actually your CASK is down.

Somebody asked me earlier today, does slightly negative mean a positive or a negative. Anyway.

So maybe I'll clarify that. So that means ex fuel CASK will perform better.

The background of that, essentially, is as we're growing faster in the winter, there's high utilization, more ASKs, you're spreading those fixed costs over more ASKs, so that's why you'll see a slightly negative or better performance going into the second half. Revenue at per ASK slightly positive.

This is still positive. But obviously, as we're growing faster, I think, you're seeing a little bit of self-dilution going into the fares.

And an interesting statistic, if you look at the incremental seat growth going into our market in the winter, we are 50% of that. So in terms of when you look at the fares and saying, what are the supply-demand dynamics, Wizz Air is actually leading the supply charge with 50% of that capacity, which, I think, is the highest we've done so far.

Net profit in the range between €335 million to €350 million. That has been tightened by €15 million.

I think the question will be how do you outperform or how do you underperform? The outperformance will come through the revenues.

As we indicated, we're growing very fast in the second half. So if there is any outperformance it will come through the revenue environments.

And in terms of the bot -- the bottom of the range, it will be those factors that are outside our control, if there was a particularly severe winter. We saw that a couple of years ago.

There were 2 meters of snow in some of our airports. That created a lot of disruption.

So again, we're tracking today. We have October in the bag.

We've got good visibility on the next 6 weeks. So where we are today, as József highlighted, we're certainly tracking towards top end of that range.

So with that, I'll pass to Joe for the final few slides.

Thank you, Iain. So you can see that 56% of our business is actually in a leading position in terms of local competition in our markets.

We are the number 1 locals carrier in many of our countries. We are the number 1 carrier in Luton.

I mean, that's significant because this is the home of one of our competitors. And in many other countries, actually, we are not only the largest locals carrier, but we are the largest carrier of all carriers.

Countries like Hungary, Romania, Bulgaria, Macedonia, et cetera, we are a very significant factor in the marketplace. And certainly the driving force behind aviation in those countries.

But we are also in a good position in other markets, being number 2 or number 3. And obviously, we are aiming at pushing the lines forward.

I don't think we have a particular position on what we need to achieve in terms of market share. We are much more eager with regard to stimulating the market and being profitable in the marketplace, but we haven't found a better strategy than profitability.

But obviously, that translates into market share one way or another. If you look at where the growth focus has been in the current year and also somewhat looking ahead into fiscal '21, we are delivering a lot of growth in Vienna.

I mean, Vienna, as you all know, is a significant better fit. That airline has just gone from being half empty to sort coordinated in just over the course of 2 years, which is very significant, and it is a dramatic change of status quo happening in the marketplace.

It used to be a cozy one, operator of the Lufthansa group. It is now a very congested market with significant competition.

As I said before, you'll be seeing that we are well positioned to strategically win in this marketplace because we are the lowest cost producer, and we are building scale for that business model. We've also invested a lot, and we continue to invest in Poland; I mean, Poland is our very first market.

And after some turbulence in the marketplace, you see that we are clearly regaining strength. Krakow was and has been a very significant development.

It's not just the open to market, but we have been scaling it up fairly quickly and to a large scale. And Krakow -- Krakow is another airport, which is becoming sort coordinated, so it's going to be hard to grow from here.

And obviously, we do that because we see the prospect of the market, very strong going forward. And we want to continue to do that and we also want to benefit from that.

And we've done quite a lot of activities in terms of growth, India, the Baikal region. But I would say that, by and large, we've been growing in every single market we operate from.

We are seeing a lot of growth opportunities pretty much everywhere, and we are more constrained on the supply side of the capacity than on the [indiscernible] side of the market. We have already announced or put into operation 18 aircraft in the current financial year and into fiscal '21.

And you know that we are subject to OEMs delays on deliveries. So we all talk about the Boeing [indiscernible] issues, but believe me, there are issues all over the place with other OEMs.

So we are not getting the contracted deliveries as we contracted them. So we are seeing some delays there.

Nevertheless, we've been finding ways of overcoming that shortage of capacity by using existing aircraft for a longer period of time. So we've been extending leases.

And as you see, we've also pushed up on utilization to make sure that we are delivering the growth plan of the company. Talking about sustainability.

I think it's becoming increasingly topical in the whole of Europe, certainly here in the U.K. as well.

I don't think there is an airline better positioned for sustainability than Wizz Air, to be honest. I mean, if you look at the way we are affecting the environment, I mean, as said, by far, we are the lowest emitter to the environment.

This is the function of the aircraft we fly. This is the function of the age of the fleet we operate, it is the function of the efficiency, how we operate in terms of seat density, in terms of load factor, what we are delivering.

And you can see that we are significantly beating the industry. We are the greenest airline in Europe with 56 grams.

And that, I said before, compares to around 90, 90 plus on BA and Lufthansa. And I don't think that situation is going to change anytime soon.

I mean, this is reflecting both structural matters of airlines and the way they operate their fleet. I would also say that if you look at the operating model of Wizz Air, we are an old economy point-to-point airline.

Just look at business costs. Business costs is one of the diverse products you can bring to the market with regard to environmental impact.

I mean, a business passenger emits 2x or 3x more than an economy-class passenger. Look at connecting traffic compared to point-to-point.

When you connect, you're going to be taking 2 flights. So your impact on the environment is going to be at least twice as bad compared to a single flight, a point-to-point flight.

So we're seeing that it's not only that we are outperforming the industry today, but we are very well positioned to benefit from any sort of sustainability movements going forward, given the business model what we have. No business class, no connecting flights.

We have also looked at and elevated our standing when it comes to affecting the economies in our markets. I mean, obviously, we create a lot of infrastructure for Central and Eastern Europe.

But let's not forget, I mean, it's kind of easy to say from high ground investment in Europe that we need to start containing the market in terms of flying and let's push alternative most of transportation. The penetration level of Western Europe is 5x higher than the penetration level in Central and Eastern Europe.

So you guys here invested will fly 5x more, so you have a different starting point when it comes to the economic impact and the issues around sustainability in that regard. So in emerging markets, I think it is important that you actually set up an infrastructure, and you build that infrastructure, and you develop that infrastructure.

And also, that gives the option of mobility to people before they start constraining themselves. But again, 4x or 5x more to go before they get to the level of penetration here in Western Europe.

We have become a growth engine in most of the countries where we operate from. But it's not only the economic efficiency, what we are delivering to the market.

Lastly, we are also becoming a benchmark in a way of how to conduct business. We very quickly applied supplier code of conduct.

They are very strong on anti-corruption policies. And we are one of the very few businesses that has never laid people off.

We've never done through circus -- cycles and god knows what. We've never been laying people off.

And we try to do it like that, and we will try to continue it in that way. We are very keen on growing the business, but we are always growing the business with caution on people, and we want to make sure that we are a stable and predictable business with that regard, and we are a long-term profitably growing business as opposed to jumping ships time-to-time and just going with the momentum.

When you look at the people side of things, which is another very important aspect of sustainability. We have made a lot of investments into people.

We have a Wizz [indiscernible], so we are very keen on properly training our people and offering them the opportunity to progress their career in the company. We have a very strong ambassador program.

So we have people who are the ambassadors of the business, and they display the values of the company, the attributes of people, what we stand for. We are much engaged with the new generation of talents coming to the market through the VCU channels.

So we are attracting university students to tackle the challenges, we give them and they present themselves to the company. We are also trying to be helpful to people in need through different funds available to them.

And very importantly, we put a program in place to make sure that we are building diversity in the cockpit -- maybe the cockpit is the wrong word, but we see more and more females pilots coming on board -- will be served. So we are very cautious.

I mean, you notice we are the only airline nonunionized in the industry in Europe. And you can imagine that there is a reason for that.

And I think the reason is that we should care about people, and we invest into people, and there is no need for finding another way to represent that interest, they can represent that interest inside the company through normal channels. And that brings me to the closing remarks.

So again, we are delivering €372 million net profit on the back of 18% passenger growth in the first half. That's a record on pretty much every metric what we are reporting to the market.

That was achieved on the base of superior cost performance. I mean, certainly, there is one thing we stand out in the industry, this is our cost performance.

And I see no reason why that would change going forward. So we are expecting very strong unit cost performance going forward.

CEE has proven to be a superior market with regard to growth opportunities and also with regard to delivering those growth opportunities in a profitable way. So we've been able to expand our margins by growing the business 18% in this reporting period.

The A321 neo rollout is going to further strengthen our leading position. It will make us more cost-efficient, and I think it will make us more robust and more competitive in the marketplace relative to peers.

As said from a sustainability perspective, we are the best-performing airline, and we will continue to improve our performance, and we're seeing this is going to give us a structural advantage in the industry versus our competitors. And as a result of all those developments, we are tightening the range to €335 million to €350 million.

And as said, we are pointing at the top end of that range, and we are very confident that actually those numbers will get delivered because we stress tested the assumptions behind the numbers.

Operator, with that, we'll switch to Q&A.

Two questions, please. First of all, as you expand into some sort of slightly more exciting markets, how do you think about margins?

Do you think -- is there a view that essentially higher risks, the higher reward markets have to have higher margins to be interested in? And can you talk a little bit more about how you think about that process?

And then secondly, sort of turning to longer term, obviously, with lease rates where they are, you're building significant cash liquidity within the business. If you roll the clock forward 3 to 4 years, and that continues to build, what you do with that?

Are you -- would you become a more active participant in consolidation? Are you still very much so focused on organic growth?

On coming to new markets. I think we have always been extremely excited about bringing new markets into the franchise of Wizz.

I mean, we tend to be the carrier of the local flag wherever we go. I mean, we were pretty much the first airline to start flying Russia, Azerbaijan, Kazakhstan.

We are the only airline, European airline, a locus carrier flying into Dubai at this point in time. We were the first one trumping on Israel when the market opened up from a regulatory perspective.

And now we are the largest airline in -- international airline in Israel. So I think this is in our DNA.

This is in our blood, and we will continue to do that exploratory kind of way of expanding the market. I would just say that we have to take note of the fact that, especially when you try to expand your business eastward, those opportunities are subject to regulatory discussions and regulatory changes.

And with that regard, fairly opportunistic, and we don't fully predict the way how that unfolds, and we don't fully control that process. I don't know if there is such an opportunity that something is high, this kind of high margin.

I mean, we have not been really seeing together because what we are seeing is that if we penetrate the market and we show the potential of the market, we basically have 2 choices. If you start milking the market and you start making too much money, you're going to be attracting competition to the market.

So essentially, we always choose a second avenue that we become self-diluting to ourselves. So I don't think we have ever made extraordinary net profit just because of taking risks with the new market.

Our long-term strategic interest to fully explore the opportunity. And we want to be not on the base of monopolizing market opportunities, but we want to be on the base of structurally building competitive advantage that we can compete with our airlines and win on that basis.

Now with regard to how to use cash, 3, 4 years down the line. I mean, by that time we're going to be probably €3 billion.

If we do nothing with the cash, what we have on hand at the moment, I mean, just over the last year, we'll be at over €400 million of cash. So we are very cash generative as a business, which obviously is a good thing.

But we kind of say that airlines only have two problems in life, when they have no money and when they have money. But this is kind of a high liquidity problem what we are facing at the moment.

But not being funny. I think, it is important that we are not only competitive in terms of our costs and the products we bring to the market, but we are also perceived as formidable by our competitors.

And let's not forget, I mean, we are competing with very significant airlines with significant cash reserves on hand. Secondly, we have a huge undertaking and commitment for aircraft supply in the future.

We have 270 aircraft to be delivered in the next 7 years. And we don't know exactly how we would be financing those aircraft.

I mean, so far, we have been relying on the market when we were raising financing resources, but the market can change, and we may have to put in more from our own resources. So we just want to make sure that we have the [indiscernible] available to us.

And thirdly, yes, consolidation is going to take place. And I think it will continue to unfold in Europe.

It's not that predictable as many people would have thought, but it is happening. And why we are not interested really in buying businesses because that would just create complexity for the business, but we could be interested in buying certain assets.

And I mean, clearly, you see that Western Europe is becoming increasingly tight. Not only on euro control but also on accessibility to airports, roads, et cetera.

You see the Thomas Cook case recently. So we want to make sure that we can position ourselves versus those consolidation events, and we have sufficient resources to mobilize.

But again, please don't read it like we are looking at acquisition opportunities. We are not going to acquire anyone.

But some assets may become available which would be interesting to us. We did in case of Monarch, and we could do it in other places, and in other cases as well in the future.

But if your question whether we are looking at the moment to -- whether or not to pay dividend, the answer is no.

It's Jarrod Castle from UBS. And two as well.

You obviously raised the bottom end of your guidance range, but not the top end, even though very strong first half. So I guess, why the caution for 2H?

Were you expecting losses now? And then secondly, you spoke about the environment.

We've seen a number of airlines say they want to be CO2-neutral in the next three decades. Would that be something that you'd want to eventually achieve?

And related to that, while you kind of highlighted that there's a lot more growth to go on in Eastern Europe. What are you thinking in terms of kind of rising environmental taxes in Western Europe and the impact from so-called flight chaining in terms of destination markets that you're flying to?

Okay. Lots of questions.

Let me try to tackle the sustainability matters. I mean, it is clearly a topical line, and I think it's becoming increasingly important.

I think it's great when an airline like BA and KLM and Air France say that in 2050 -- I mean, we're going to be all dead by that time, maybe because we're neutral. I think this is such a great commitment.

I mean, you should be really giving a lot of credit to that. And let's not forget that if you look at their performance, I mean, these are the worst performing airlines.

And if you really look behind the issues, these guys are not profitable enough today, they don't have financial resources to sufficiently invest into technology to change the game. So yes, I mean, I can make whatever claim you want, what businesses are going to be able in 200 years from now.

But how credible it is? If you look at the current performance of the business, I mean, we beat these guys from left and right in terms of performance.

And we have 270 aircraft orders on hand, which are the most efficient airlines with regard to environmental impact, and they don't. So if there is an airline that is really, really committed to sustainability, I mean, that must be core.

This is not BA or Air France or KLM and those sort of guys. I think it's a bit of a joke what they are saying.

And then, again, just look at what they are doing, look at their business model. Inherently, their business model is environmentally polluting.

I mean, flying a lot of business class, flying a lot of connecting passengers, they are affecting the environment in a bad way. And so if you look at their aircraft, they tend to fly smaller aircraft.

They tend to fly the aircraft with lower load factor than what we are achieving and lower density seating. So on a per passenger basis, the impact on the environment is significantly more than ours.

And you see this in the numbers. So if you have fly chain, maybe you should have business class chain and you should have connecting fly chain as well.

Maybe we need to think about that. But with regard to Central and Eastern Europe, I mean, I think you need to put things in perspective because in Western Europe, roughly around 2.5 people -- 2.5 drivers per capita is the current penetration level, and that compares to around 0.5% in Central and Eastern Europe.

I mean -- and you fly 5x more. I mean, yes, you can but preach but maybe to yourself as opposed to the others.

I mean, you need to let those guys to accomplish what we have accomplished in terms of mobility and their ability to access the world and fulfill themselves before you start constraining them. I guess it's a bit the same as how you deal with China in terms of industrial development.

But again, putting that aside, I don't think there is a better airline than Wizz Air being here for any measures on any environmental impact and sustainability.

And maybe on the guidance point. I had a couple of questions on this today.

I think what's important to factor in is that we were the only airline back in May, raising our profits for the year. So last year, we did 292 or so on the top of our range of 350.

And we've always said we believe long-term shareholder value is we want to grow the business as fast as we possibly can to maintain margin performance. So if you think about that, that step-up of $60 million is a 20% increase in profitability on 20% growth.

So -- and that's exactly what we should be doing for shareholders. So again, Joe highlighted that we performed slightly better in the first half.

And as a result, we're growing even faster. So in the months of December and February, we're growing 26%.

So that will have a negative impact on the yield environment, but we are half of the capacity. So when you look at the long-term investment, that will all benefit and mature in the following summer.

So from a business long-term perspective, it's exactly the right thing to do. So too, if we slow the growth down to 10%.

Absolutely, we'll be able to do that. But again, you're then compromising your long-term growth profile.

So growing at 20%, delivering 20% profit increase, I think, is pretty punchy by any stretch of the imagination.

It's Rishika Savjani from Barclays. My first question is on the competitive environment.

Ryanair obviously, has a much more reinvigorated strategy into Western Europe with the relaunch of bots. Can you just maybe talk around how you think that might play out and how it affects yourself?

And then secondly, it sounds like you're very confident that the rate of ancillary growth will return to the trajectory of €1 per passenger once you kind of annualize the bag change, the bag quality changes. I guess, when that happens, given there's still continued pressure on the ticket, can you maybe just talk around how you think about how you're going to manage the whole revenue, kind of, unit revenue pool going forward?

And are you happy to see total unit revenues going down in order to, kind of, still stimulate demand?

Maybe I will just take the Ryanair question. I think what's happening to Ryanair, and I really don't want to comment too much on what competitors are doing, but we used to be competing with one operating model called Ryanair, now we are competing with 4 operating models called Ryanair bus, Lauda, and [indiscernible] and I've seen each of them in our territories in Central and Eastern Europe.

I mean, on the one hand, it may achieve lower operating costs in certain areas, especially on labor, I guess that's the primary driver. But at the same time, that creates significant complexities as well.

I mean, it is for AOCs to be managed and not one as we thought. And it has its own complexities and it has its own cost to the system.

Do I think it's fundamentally going to affect the competitive dynamics in Central and Eastern Europe, no, I don't think that it will. And look at our business model, we are very simple.

We are very focused, much concentrated on eliminating complexities in the system. And we are rolling out the A321.

So if you look at Ryanair, Ryanair is operating a fleet of 189 seats. We are operating a fleet of 202 seats and our number keeps going up.

Then, as we go up as fast to some extent because of the next induction, but we're going to be operating a much more efficient fleet. And I think that's the strategic competitive advantage that we are trying to build.

And clearly, Ryanair's unit cost has been creeping 20% over the last 3 years. Our unit cost has come down a few percentage points in the same period.

So that's why the pendulum just moved in our favor, and now we are the lowest cost producer in the industry. And looking at it going forward, I think we are going to expand on that margin, and we will become even more competitive.

On the -- I'd look at it slightly differently, and this is how we look at it. We bet on costs, we don't bet on revenue.

So we get up every day to make sure that we get structural cost savings. So as those costs come down, we expect -- because we're going to be stimulating traffic, we expect all-in yields to come down.

We don't mind falling yields as long as we maintain margins. So if you see a minus 2% on ex-fuel CASK, and you see a minus 2% on RASK, that's not a bad thing.

I think the competition can't compete. That's another interesting point is when you go into some of our markets, let's say, at Vienna, when you're delivering unit costs at 20% lower than the competition, we're having pretty strong financial performance when other airlines are hemorrhaging money.

So in terms of the outlook for the yields. The drivers that we have is cost, so making sure we get the cost down.

But also the ancillary, so again, trying to drive ancillary penetration. So obviously, we want to get as much ancillary as we possibly can.

And we always want to reinvest that improvement into the fares. So in terms of how this year is going to be looking, I think I highlighted on the ancillary.

We did plus 4.9% in the first half, that will be around about plus 3% in Q3. In Q4, it will be around about plus 1%, and we'll hopefully continue to go down that line.

Then when you're looking at the ticket side, we were minus 5.5% on the fares. That will probably be between minus 4% and minus 5%.

So again, outperformance in the second half will come through purely from the revenue environment. But again, we chase costs because that's what we can control.

We don't chase the yields.

I would just be in on this. I mean, I'd like us to be reminded that we are a cost-driven business, not a revenue-driven business.

And we think that especially when it comes to economic uncertainties, I think we talked about a lot of clouds in the skies, what would hit the economies and whether or not we're going to be facing a long downturn, German industrial production or globally so China, et cetera, et cetera. But when you are entering into an era of economic uncertainties, I think there is no better insurance policy than being the lowest cost producer in the industry.

And this is what we are really building on. And I think that's where we are gaining advantage versus the market, and that's where we outperform the industry in a structurally significantly way.

And we're seeing that this is the right strategy because in good times in the industry, sort of -- everyone looks good, but in bad times in the industry, it will start changing very quickly and very dramatically. And the lowest cost producer is the one who's going to be the [indiscernible] under those circumstances, and that's what we want to be.

Mark Simpson from Goodbody. Three questions.

The unit cost guidance change for FY '20. Is that just reflecting accelerated growth?

Or are there any new programs behind that shift. Ticket RASK Q2 was, obviously, notably weaker than Q1.

I'm just wondering if there's any specific areas of weakness behind that change? And then finally, the -- you used the term slot constrained for a number of airports in the CEE region.

That's the same case in Luton. I'm just wondering how that kind of directs your growth in the future.

Obviously, Ukraine looks exciting and further down the path, the XLR is going to open up new markets. But obviously, there is constraint to the airports.

So I'm wondering if you can just talk us through that.

Maybe I'll take the first two. Unit cost guidance, I would say generally a pretty good performance.

So at the beginning of the year, we set ourselves targets on every line item. My job is to make everyone hate me just that little bit if I do my job well.

So in terms of the unit cost, and I think a pretty good performance across the curve. But yes, you're right.

We accelerated or we're growing a bit faster. So by definition, more ASKs going into the second half certainly helps on our unit cost performance.

It's almost the opposite of last year. So last year, where we had a less good first half.

What we do is we slow the growth down. I think with the benefit of hindsight, maybe we wouldn't have tightened the growth that much.

But the downside of timing and the growth means you have less ASKs, and that's why you saw unit costs up 4% in the fourth quarter. That's not something we want to repeat.

So yes, to your point, there really is the growth side. But a generally good cost performance from every department in the organization.

On the Ticket RASK, there's the Easter effect. So the fact that we had an Easter in the first quarter that's why it had a strong performance.

But Q2 the revenue performance came pretty much bang in line with what our operating plan was.

Let's repeat the slot matters, maybe just putting things in context. We had been quite open about the strategy what we are pursuing as a business when it comes to markets and where the priorities go.

We continue to focus on Central and Eastern Europe. It seems that Central and Eastern Europe is the right kind of market for us, and we are the right kind of airline for Central and Eastern Europe.

We are the lowest cost producer. We have the most ability to stimulate the marketplace.

And the markets have to be stimulated because of the underpenetrated nature of them. The cost range have not yet reached the level in Central and Eastern Europe what you are seeing in the rest of Europe.

I think the whole system, the entire value chain has become far more constrained Western Europe. I mean, you are seeing ATC, you are seeing many of the airports going into slot coordination.

You are seeing tax burdens coming regulations -- more and more regulations affecting the marketplace. So I think it's fair to say that Western Europe is becoming more constrained, not only from a slot perspective but overall, from a business perspective.

I don't think you are talking about the same level of issues with that regard in Central and Eastern Europe. You are seeing an airport here and there [indiscernible] that are more constrained.

But overall, I think Central and Eastern Europe is an open market, and it continues to welcome growth from airlines. And we said that the focus is Central and Eastern Europe, and we're going to be opportunistic in Western Europe.

And I think that's how we have been acting. But we are also very keen on expanding the business further east.

As said, that expansion is subject to regulatory discussions and depending on how the regulatory regime evolves, we would react on that. But we are very keen on going east.

And given the constraints developing Western Europe, maybe we are increasingly eager and increasingly albeit about the opportunities East Europe can present to us. And also from a network design perspective, we are seeing more and more opportunities flying within Central and Eastern Europe as opposed to just flying east to west, which used to be the core of a network model.

So we still think that we have a lot of room to maneuver. So I don't think that we're going to be finding growth opportunities difficult in the coming years.

I mean, if I look at where we are today in 2019, 2020, '21, actually, we would like to deploy more capacity. We've seen that the opportunities would dictate more capacity to be deployed.

But simply, we can't because of the constraints coming from the supply side of the acquisition. So we are not yet running out of ideas.

We are not yet running out of growth opportunities. And we've seen that we shall stay on Central and Eastern Europe and we shall look at further east opportunities for the business.

And that's what we are doing.

Take one from the call, if you may operator.

I've noticed a number of changes to your expected fleet in the coming years, presumably related to delivery issues. In particular, FY '21 looks as though there will be 10 less aircraft.

I'm just wondering how does that change your growth profile and your cost profile into last year. And to what degree can you further flex on things like utilization?

No, you're right. So when you look at Slide 9, I think that's the slide you're referring to.

The last time it was presented, it was 145 versus 134. So you're still seeing a 13-unit increase.

I think Joe highlighted this, I think, we have a very good relationship with Airbus and making sure that we get our aircraft when we should get them. You'll see going into -- we highlighted last time that going into fiscal '21...

[Technical Difficulty] Sorry, Ross, technical problem. What we highlighted going into Q1 was that we were having challenges on getting all of the A321neos that we wanted.

As a result, we deferred 4 and took 6 A320neos. So there are levers within our delivery schedule that we can do.

We have been extending some leases, so I think the answer to your question is, definitely, we'll be able to continue to grow at the market level between 15% and 20%. I mean, that's what we want to be doing.

In terms of the cost base, yes, clearly, we would prefer to have the A321neo aircraft. It's a superior aircraft, and it's definitely giving the cost performance, and we're not seeing the yield problems that were highlighted at the beginning of the construction of those aircraft.

So the A321neo is by far and away the superior aircraft. Structural cost savings will continue to come through.

If we were to get those, you would expect to see ex fuel CASK down minus 2%, minus 3%, maybe it's more like minus 1.5%, minus 2%. So certainly, as you look at the structural cost savings coming through the fleet, there'll be some movement, certainly over the next couple of years, whilst those delivery schedule gets firmed up again from Airbus and their manufacturing capabilities.

But then I would say it's a short term issue, but we have more than enough levers to pull to deliver the seat growth.

Just following on from Ross' question about the evolution of the fleet plan. Previously, both József and Iain, you were evangelical that you had a really tight deal with Airbus and that they had really harsh penalties if they mucked you around and changed the delivery timings.

And here we are, those delivery timings have changed. So are you happy with the benefit you're getting?

Are we seeing those benefits in the P&L or the cash flow this year? Or will it sit in the future?

And then can I ask about P&L because some of your lovely competitors are explicit about the scale of losses that they are making in Vienna. So I'll invite you to clarify to us how much money you're making or losing in Vienna.

But in the plausible event you choose not to answer that, can you help us understand whether the profitability in Vienna is -- as it evolves, is that delivering us a tailwind this year to the total company profits as it improves? And how much tailwind might we anticipate for Vienna into next year into fiscal '21?

With regard to the Airbus deal, I mean, obviously, I'm not in a position to disclose the deal exactly. And yes, indeed, there are significant financial penalties should Airbus delay the deliveries of the aircraft.

So yes, we are benefiting from those penalties on the financial side of things. But this is tactical, and that's not our strategic interest.

Our strategic interest is to get the supply of capacity to be able to grow the business. That's what our interest is.

So yes, there is a one-off financial impact but this is -- I don't think it is that significant. I mean, these aircraft are delivered, not grounded.

So despite the severity of the financial penalties, but it's not going to change the P&L of the airline in the financial year. But yes, we are getting some money out of it.

But I would rather get the aircraft. I mean, we don't need money from Airbus for liquidity purposes.

I would make more money by flying the aircraft than just getting compensated for the delay. So with regard to Vienna.

Again, we've never commented market profitability and I'm not going to do that. But I think what we have said is still true that we are around the breakeven line in Vienna while everyone else is losing money.

I think the latest commentary from Lufthansa was that likely Austrian Airlines is going to fall back into that again. And I think Ryanair has made some quite explicit numbers available on their losses in Vienna.

But look at the underlying issues here. The underlying issues here are that we are on a commodity market.

And Vienna being the best place on the planet is still a commodity market when it comes to flying, especially when it comes to low-cost level. You have to deliver the cost base in the marketplace vis-à-vis your competitors to be able to succeed financially.

If you look at the Ryanair fleet, I mean, the Ryanair fleet is a very difficult fleet to get any economic efficiency out of it. I mean, our numbers suggest that Ryanair must be at least 25% higher unit cost than what we are in Vienna.

We have a very intact all A321 fleet in Vienna, brand-new aircraft. And the same applies for the rest of our competitors.

So we have a huge advantage on the cost side of the equation. So that's why we are able to hold the lines from a financial standpoint, not losing our shirt, and being able to expand our presence in the marketplace while all others are losing a lot of money, because simply they don't have the cost base to make money.

Would you expect Vienna to get to system average profitability? Would you aspire for it to beat system average profitability?

And this...

Yes. I mean, maybe even more because Vienna is going to become slot constrained.

And as a result, basically, supply is going to get constrained versus demand and if we [indiscernible] very quickly. So I mean, you can argue that it is smart at the moment to push capacity into Vienna at any cost because the revenue will be ramp up anyway because no growth will be available to airlines to deliver.

And as a result, you will recoup your profitability later. But I want to make sure that we don't lose money even short term.

And we deploy the economic efficiency and the operational efficiency needed to achieve that. But yes, I mean, I think Vienna is going to be a very profitable market going forward, especially taking the constraints into account which are developing now.

Honestly, you sound like easyJet, but anyway, no.

Well, this is not our business model. I'm just saying that we might be benefiting from it.

But that's not our business model.

Okay. That's the -- I think the last question.

Okay, I've been misinformed.

[Indiscernible]. I was just going back to the slot constraint issue that we discussed earlier, particularly around London.

Can you talk a bit about your start-up and expansion plans at the London Southend?

Okay. Right.

London is becoming more difficult, certainly from a capacity standpoint. So it's not only -- I mean, we know that Heathrow has been constrained forever, Gatwick became constrained after a while and now Luton is constrained.

And we don't know exactly how those constraints will be lifted. We understand that Gatwick Airport is working on a plan that they would be essentially launching new airport capacity to the market.

We know that Luton is negotiating with the municipality to relief some of the planning constraints. But we shall see.

I mean, we see how dragging such processes can be. So we don't have a full visibility when things release with that regard.

So we opened 1,000. I think so far so good, but early days, I mean, we just entered the marketplace.

Southend is certainly, kind of a way of escaping from all these constraints in the bigger airports in London. But I'm pretty sure that when it comes to London's capacity, the transient expansion of airports will play a role.

I also think consolidation is going to play a role and all of those things can get reshuffled, quite significant. I mean, we've seen it with Monarch, we are now seeing it with Thomas Cook.

I mean, there might be more to come. So we just want to make sure that we are appropriately positioned to these opportunities, whether this is new airport showing up like Southend or whether this is growth of existing airports or its sort of distressed capacity being reshuffled to other airlines.

We just want to make sure that we have a look at those opportunities. And we can measure ourselves against those opportunities.

Okay. And with that, thanks, everybody, for your time, and goodbye.

Thank you.