Wizz Air Holdings Plc

All right. Good morning, everyone.

Thank you for coming to this financial report Q1 fiscal '24 for Wizz Air and also welcome everyone on the phone. So just a few highlights upfront.

We delivered EUR 61 million of net profit in the quarter on the back of records traffic over 15 million passengers. Operating profit was roughly around EUR 80 million in this period.

And this is a major change versus the financial performance last year, you recall, we were going through a very difficult period that time, but we have been putting actions in place to make sure that we solidified financial performance. And here, you can see the results.

Summer has been going according to plan. It is an improved operating environment, not perfect, but improved, and we are a lot better prepared to deal with consequences of the supply chains shortcoming especially.

We have full confidence in delivering the previously provided guidance for the financial year, which is a range of EUR 350 million to EUR 450 million despite some of the challenges we are seeing and we'll talk about that. Flight completion rate in the period was 99.2%.

That is compared to 98.4% in the previous year. So we canceled half of the flights versus that period.

And I mean, you are seeing already some of the big summer performance which has reported July and, of course, we are tracking our performance in July, we are seeing a much robust improvement coming through the period. Utilization is now reaching 12 hours, and we continue to build that utilization number.

We were talking about that last time that this is fundamental to the delivery of the business model. We continue to benefit from a positive revenue environment.

Unit revenue was up 21% year-on-year with rising load factors and rising fares. The cost performance of the airline has also improved.

Ex-fuel CASK was down 4% and fuel was down 31%. You recall that we started hedging again, when reinstated started our hedge coverage in line with historical standards, short-term being hedged up to 80%.

But if you take the next 12 months horizon, we are covered roughly around 60%. Liquidity has been up to EUR 1.8 billion.

That's a move of roughly around EUR 0.3 billion relative to the same period last year. And we continue to focus on being a sustainable aviation vector which we have been recognized by a number of organizations.

If you look at the key operating metrics of Wizz Air, you can see that seat capacity has grown. We are up 51% versus pre-pandemic capacity level.

Accordingly, you see the rise of passenger numbers. The fleet continues to be up.

At the end of the period, we had 182 aircraft on hand. Again, underpinning kind of the gross numbers, but we are reporting on seats and passengers.

And we have been expanding our presence in airports. So nearly 200 airports are in operations for Wizz Air.

And that comes with more operating basis in overall greater penetration of countries. We have reached the 8,000 mark on employees.

I mean this is now double versus the low point of pandemic period. So we were down to roughly around 4,000 at the lowest point.

So obviously, that requires significant efforts in terms of recruiting, training and inducting people especially pilots and cabin crew. But all in all, we feel quite confident in our ability to recruit resources needed for delivery the business.

And with the innovation of the fleet, we continue to drive our emission footprint down, as you can see. And with that, let me turn it over to Ian with regard to the numbers.

Thank you.

Thank you, József. Thank you, everybody, for coming today.

So revenue ended up at EUR 1.237 billion, 53% higher than last year's Q1 revenue figure, which was EUR 809 million and 78% higher than pre-pandemic Q1 revenue. If you compare our year-over-year ASK growth of 26.6% over the same period last year, we managed to grow revenue at almost double the pace, combining higher volumes with higher yields, higher load factors and improved operating performance.

Fuel costs reduced by 13% year-over-year, thanks to a combination of a lower jet fuel price and the impact of our risk management policies. While our nominal -- nonfuel costs only increased by 21.8%, which is 4.8 percentage points lower than the ASK growth rate, the impact at which you'll see when we dig into the ex-fuel unit costs.

Ultimately, this means we generated EBITDA of EUR 236.7 million, operating profit of EUR 79.9 million and a net profit of EUR 61.1 million, which is in line with this year's guidance to a return to profitability. Cash is building very well and grew to a June 30 balance of EUR 1.8 billion, and that balance continues to have grown to where we are today.

RASK unit revenue ended up at EUR 0.419, 21% higher than this quarter last year and 9% higher than fiscal year '20 pre-pandemic levels, supported by both higher ticket and ancillary unit revenue. We expect strong unit revenues in Q2 as our load factors continue to build as evidenced by the July load factor figure of 94.9% that we announced yesterday, up from our Q1 load factor of 91.2%.

Overall, demand in Q1 and Q2 remains strong. Our booking curve is around 5 days longer than pre-pandemic and our machine learning pricing efforts are showing the results with our ancillary revenue per passenger amount continuing to grow more than our EUR 1 per year per passenger fare improvement target.

We continue to bring new products to market, including our subscription option pilot programs in Italy and in Poland called MultiPass as well as alternative new Discount Club tier levels. As of June 30, our cash balance has grown, as I said to EUR 1.8 billion, driven by a combination of factors, including the underlying performance of the business, lower fuel costs and the deferred or unflown revenue from future bookings, which follows a normal buildup in this period.

We've reduced the balance on our PDP facility by over EUR 100 million, and this is on track for a full repayment by the end of this fiscal year. Overall, our net debt balance stands at EUR 3.8 billion and with the return to positive EBITDA, we will see our leverage ratio return to target levels.

We have scheduled engagements with the ratings agencies, and we look forward to reporting on those discussions after the release of our H1 results. Restricted cash, as you can see on this chart, continues to reduce just like it did last quarter, as we released cash that was collateralizing letters of credit under expiring aircraft leases.

Fuel costs ended up 31% lower versus last year, helped by a lower fuel price environment and the impact of our hedging policy, which kicked in at the beginning of this fiscal year. Our hedge protection as of June 30 stood at 62% for this fiscal year for jet fuel and 53% for the currency portion of fuel consumption.

Currently, where we stand, the fuel price and currency prices within our collars, which means that we either pay out under our hedges or pay or receive under our hedges, we simply pay the price of fuel, but there's no hedge gain or hedge profit or hedge cost or hedging expense on that portion. Including the lower fuel cost is a 1% improvement due to energy efficiency measures.

Ex-fuel CASK came in at EUR 0.251, which is 4.1% lower than Q1 last year, contrary to some of the increases that we've seen from our peers. We expect this year-on-year reduction to continue throughout the fiscal year despite the inflationary pressures faced in the industry.

Relative to last year, we are benefiting from higher utilization of 11 hours and 58 minutes versus the 11 hours and 47 minutes this quarter last year, lower flight disruptions and EC 261 costs, thanks to lower cancellation rates are benefiting from lower navigation costs, better crew activity and more economies of scale with Wizz being a larger airline. And with that, I'll hand it back to Joe to talk about the trading update.

Thank you.

So I would just like to take you through a few points here. So looking at operations, and I will give you some color as much as I can with regard to the performance in operation.

The recovering commercial positions, market positions, how the network is developing, what's happening to fleet, especially in light of the autoconfirmation of the 75 aircraft to be inducted and a few sustainability and ETS allowances. So with regard to operations, you may recall that we were talking about like this triad of key priorities for operations, utilization, scheduled completion and crew productivity.

Now you are seeing the efforts and investments that we have made that now are bearing fruit. So you see fleet utilization is moving up quite significant plan on cancellations.

And it will be even more significant if you going to at the summer performance of the business, the peak summer performance, we are seeing like a fivefold less cancellation happening in summer what we were encountering last year. So I think the business is really improving from an operational perspective.

It's not perfect. I think we are seeing 2 significant challenges still affecting the ability of our teams to operate the airline.

On the one hand, we are still seeing ATC being short of slots as a result imposing slots in the market affecting the on-time performance and to some extent, the cancellations and schedule completion of the industry. But if you look at business position, especially from a U.K.

perspective, Wizz Air is now 1 of the 2 performing airlines in terms of scheduled completion, but out here to the rest of the industry. And the second issue, of course, is the present overall situation, which is not just the very latest announcement, but it's also the kind of preceding issues kind of creeping through the system.

You may remember that we were talking about the kind of demand that one of the GTF engine in Abu Dhabi last summer given the hot and sandy environment. And at that time, the OEM believed the issue was contained to severe operating environment but would not affect the operation of the engine in a benign environment.

Now we have been learning that has actually -- that was not the case and we started seeing significant issues already in benign operating environments. And to an extent that the industry has grown in roughly around 10% of the GTF fleet globally.

And that includes North America, South America, Asia, et cetera, Europe included. So we are not immune from the issue.

This has nothing to do with the recording of 200 engines just recently announced. So already, that kind of a creeping issue resulted in scarcity of engines in the marketplace and significant pressure on engine removers and showpiece it.

And that affected the availability of the aircraft and that affected eternity of the operations. And on top of that, now we are getting the engine removers imposed through service bulletin of Pratt & Whitney, essentially mandating that by mid-September 200 engines, we have to be stopped in operation and we'll have to be inducted into shops for routine checks.

And we have 12 engines of those operated by ourselves. So it's essentially that affects 6 lines of flying, and we are adjusting capacity accordingly.

So we are removing 6 lines supplying as of mid-September. Now the good news is that actually doesn't affect the performance of summer, but essentially, that affects the second half of the financial year.

The overall capacity impact is estimated to be around 3%, which basically lowers our capacity in the current half year. So when we are guiding on capacity from 30% in H1 to 25%, this is partly the new engine inspection issue and partly the creep of the existing operations engine -- spare engines and scarcity and shop visit pressure in operations.

And in the second half, we maintained the guidance of 30% capacity increase despite the grounding of aircraft arising on the back of this engine issue because we were planning the second half with more selects, more reserves. So actually, we have the ability to stock some of these issues up without necessarily adjusting capacity.

But this is only Tranche 1 as Pratt & Whitney calls it. So Tranche 1 means 200 engines globally mandated to be stored in operation by mid-September.

We don't know exactly how much time this is going to take to recover the engines wing to wing. This is still work in progress with the manufacturer to understand the scope of the inspection and the timing required and the capacity on their side available for showpieces.

So I cannot give you more on this. But our current assumption is that we are retaining that capacities throughout the whole winter.

So we are not planning or reinstate in that capacity during wintertime. Now there is Tranche 2 that was already announced by Pratt & Whitney, which is globally 1,000 engines.

So this is like a 5x thing. Now this is going to be given a much longer period.

We don't know exactly about the deadline. Will be about the current best estimate is that prove this is going to be sometime next year, maybe the first half of next year, but we don't know even.

So I think this creates the opportunity for a more staggered approach. So this is not going to be shocked the industry, but you can stagger the process.

But again, we have to understand the issue. We have to understand the timings.

We have to understand the scope of work that needs to be performed, and we have to come out with a plan how the best kind of schedule or these engine removals against those frames available to us. But there might be further changes, but once understand all these issues, we will be back to you.

But for the time being, we have accommodated Tranche 1 issues and we have been planning accordingly to what we understand today. Moving on to the next slide.

So this is the evolution of the business in terms of seat counts, as you can see that we continue to benefit from gauging converting A320 and the fluid to A321. Now the average seat count per aircraft is 221.

I mean, obviously, that drives significant economics and -- economic financial benefits for the business. And you can see the recovery of load factors.

We are still not back to pre-pandemic levels, but we are approaching. You probably saw the July report.

So July was just shy of 95% of load factor. So we are already coming back to historical performance levels.

The growth of the fleet. Obviously, we continue to benefit from market share gains in our markets.

As you can see, it's been a continuous reinforcement of our leadership in Central East Europe, but also our positions in other countries in the UAE or in Western Europe. Maybe a few words on fleet because you were kind of missing this chart first time around.

We added 75 aircraft upfront. But I think what you need to know about the 75 aircraft is that, that 75 aircraft recently negotiated as part of the Dubai order.

And the Dubai order was placed under the Indigo umbrella within circumstances that the manufacturer was desperate for aircraft order. And you can imagine the corresponding economics of manufacturer being desperate and it's actually signing they have the largest order at that time with an Airline group.

And today, if you look at the situation, aircraft have pricing has gone up significantly given the scarcity of the asset. So we are hugely benefiting from the conversion of options into a firm order as we speak because we are today up against have any different market versus that time.

So this is not a new order. This is an old order option at that time, which is now converting into a firm order.

So we carry the benefits of the economics of the deal from Dubai with that regard. And now that gives us 350 aircraft or so to be delivered in the next 7 years, which I think is also important because if we are ambitious to try to figure out a fleet for your airline to grow your business.

I mean you are not going to get much out of the OEMs because it seems today don't have aircraft to offer to you. So you would need to go to the market and you can see the lease market are really writing the benefits from their perspective by overcharging the Airlines.

So we are not subject to that. Sustainability remain is important to the company.

Now on the one hand, of course, we are benefiting from the innovation of the fleet and the investments that we have made into new technology engaging, but also we have now landed on the field of sustainability aviation fuel. We started flying actually sustainable aviation fuel, and we have made investments into sustainable aviation fuel, operations on the equity side.

And we continue to look at various other initiatives, what we can engage with going forward. So we are not just sitting and taking advantage of the new aircraft, but we are also proactively looking for ways of creating a buzz for a more sustainable aviation operation beyond just relying on new aircraft.

And of course, we are getting increasingly awarded and recognized for our efforts here. There is an important change coming in the regulatory frameworks.

So emission trading allowances are getting phased out. That's a program over 3 years, starting next year, ending in 2026, this is a relative gain to Wizz.

It is a cost to the system, but it's a relative gain versus the rest of the industry. We are the most disadvantaged airline at this point in time, given the high growth of the business because the emission trading scheme is really rewarding those who are incumbent in the market.

I think it actually goes back to like, I don't know, 15 years ago level of operation and Airlines that are not really growing or slow growing the like of Lufthansa and those sort of guys. But even if you look at Ryanair.

Ryanair has a significant advantage over us when it comes to emission trading. Now this game is going to be phased out, eliminated and we will create level playing field, and we will relatively competitive to benefit from that.

With regard to guidance, capacity has said already. We are reducing first half capacity grows from 30% to 25%.

Again, this is the combination of spare engine scarcity in context of 10% global grounding of GTF engines and the latest Pratt & Whitney recording of engines for inspections. H2, we continue to guide down 30% despite the capacity decrease, resulting from the GTF groundings, we can stock up that balance through the selects and reserves of the system.

Load factors. We continue to rise.

We expect 94% for Q2 and certainly above 90% throughout the financial year. Ex-fuel CASK.

We are expecting to be lower than last year, we don't find a specific guide given all the issues that we are seeing. So we just need to come to briefed with the challenges and open fully understanding the exposure and fully understanding the plans, how we mitigate the exposure and how can be in a better position to guide on cost.

But with regard to net profit, actually we are very confident that net profit guidance remains solid in place because even if we have to reserve more cost on the system, actually, capacity scarcity in an offpeak period results in a yield opportunities. So actually, we can yield the business up.

So we don't feel uncomfortable with the profit guidance actually maybe this is somewhat of a profit opportunity for the business. But first, we need to fully understand all the impacts before we can revise any of these estimates.

But I just want to reiterate our confidence in the profit forecast. And with that, let me just sum it up.

So we remain focused on the operational KPIs with regard to completion, schedule completion, utility of the aircraft and productivity of the crew. We continue to invest into improvements with that regard.

Now we are clearly seeing maturity through the network, resulting in better RASK performance that includes yield as well as load factor performance. Summer is in line with expectations.

We are not seeing any issues coming. We are halfway through it, and so far, so good.

And you can see that now we are a solid operator within that environment with solid revenue performance, unlike the situation last year. We are now protected on the macros through hedging.

So we are not as naked as we were last year. So we reinstated our historical policy.

Ex-fuel unit cost keeps reducing in line with expectations despite the challenges of the business encounters. Our further commitment our fleet gives us the ability to lower our costs, certainly relative to the performance of the industry and also to reduce our carbon footprint going forward.

The Pratt & Whitney engine issue is a disturbing factor. I think we have come to grips with Tranche 1.

We are trying to understand Tranche 2 and then once we fully understand that you're going to be able to develop our plans accordingly and guide you, especially on capacity, but we don't see any challenge to delivering profit as we have guided already at this stage of the game. Thank you.

I'm Jaime Rowbotham from Deutsche Bank. Three potentially quick ones.

Cancellations have clearly improved. Will utilization get to where you want it to be in Q2?

Or is that going to be a tough ask now? Secondly, just looking at the outlook comment, perhaps you could clarify.

Is it fairs revenues per ASK that you expect to be up by a low double-digit percentage in Q2? And finally, on GTF, in so far as your -- in so far as you might start to be inconvenienced.

How do you expect compensation to work? Will it be cash now or perhaps commercial discounts later on?

With regard to completion rate versus utilization, but certainly, we have more confidence in the completion rate than in the utilization. Because utilization is affected by the engine performance, the engine removers, and this is not yet fully understood.

But really, we have been improving, and we expect to continue to improve the extent of which I think is to be seen. And as I said, I would not be there to guide you on this at this stage of the game before we fully understand the Pratt & Whitney exposure.

With regard to the double-digit revenue improvement, yes, that's unfair. So obviously, the RASK improvement comes on 2 lines, higher load factors and higher fares.

GTF compensation, and obviously, this is a matter of commercial discussions with the manufacturer, but putting things in perspective, Wizz Air is the single largest customer of Pratt & Whitney. So with that regard, you should be expecting a treatment according to that status.

It's Harry Gowers from JPMorgan. A couple of questions, if I can.

The first one, just on the 5% that's been taken out in H1. Could you maybe give us a bit more color on what parts of the network, in particular, that's coming out from?

And I appreciate it's a little bit unknown on the impact in H2 at this stage on Phase 2 in particular, but have you done any worst-case, best-case scenario planning on capacity or just too early to tell? And then final one, just on the Q1 ex-fuel CASK was down about 4% year-on-year.

So should we see that as kind of the lowest year-on-year run rate this year. So can it come down by more than 4% over the coming quarters?

Okay. Maybe I start with the capacity reduction.

So I mean, this is fairly across the board to be honest. So if you look at cancellation rate, we ended up with a little higher than targeted level, still pretty strong in the industry.

I mean in this quarter, Wizz Air was one of the best performing airlines in the European Airline industry but somewhat higher rates on cancellation than what we expected, so that was one impact. And the order impact was Abu Dhabi where we are fleeting the Abu Dhabi operation from GTF to [ COV ] 2,500 operation taking of the issues we went through last year.

But I would say that all in all, it's almost like barely equally spread across the network with a bit more on Abu Dhabi relatively versus the European operation. In terms of H2 capacity scenario planning versus the Pratt & Whitney exposure, of course, we have been doing a few scenarios.

We just need to understand first two things. What is the timing?

Like on Tranche 1, we have a mandate September 15. So that's fairly clear and planned against that.

The Tranche 1 issue is still not fully understand in terms of scope. And in terms of Pratt & Whitney's ability to induct engines and push them through the shops.

So we don't know wing to wing time to be exactly what is it. Is it a 30-day issue, is it a 100-day issue, is it 200-day issue, but essentially, we have taken the view that we have removed that capacity from the balance of the financial year, so for next 8 months because in any event, Tranche 2 is going to go back to back with Tranche 1, but we don't fully understand Tranche 2, because Pratt & Whitney saying that in the best case scenario, they might be able to come up with designated shop program.

So it wouldn't affect the current operations of the engine shops, but this is not yet fully confirmed. Maybe that is a faster procedure available to us, maybe not.

So we don't know that. But our assumption is that whatever the completion of Tranche 1 is, quite likely is going to go back to back with Tranche 2 after that.

And then on the third question on the ex fuel CASK reduction of 4% and is that something that we can expect for the rest of the year, and this is precisely why last quarter we were reluctant to give a specific ex fuel CASK guidance number because we don't know what's around the quarter. And clearly, what happened, what we're talking about now was unforeseen.

But with regards to overall ex fuel CASK progression, I think you're going to see tension, right? We're improving on a lot of metrics.

Certainly, utilization is going up. [ Completion ] rate is going down.

We are delivering against those targets. But at the same time, we're seeing the impact of more frequent engine renewals, the scarcity of engines because everyone is trying to secure supply, the longer shop visit turn times.

That's then affecting overall availability of aircraft and then pulling down the overall availability. And so I think that you're going to continue to see pressure on ex fuel CASK such that it's very difficult to give a particular number, even though we are committed to reducing that year-on-year.

But there's going to be upside in the form of taking these aircraft out of the fleet in the winter period will allow us to focus on those routes where we can bring profitability and avoid negative contribution routes. And at the same time, yield up, right, so price up based upon that capacity reduction.

And so I think what we want to just focus on is the continued commitment to profitability. And that's why we maintain our confidence in the guidance as opposed to trying to focus on a particular ex fuel CASK number.

But overall, year-on-year, that's where we're bringing that down to.

It's Andrew Lobbenberg from Barclays. Can I ask about the removal of the aircraft and the capacity changes?

I see that you said that you don't expect it to be detrimental to profitability. And I think all of us in the room appreciate that a bit less capacity means you can yield up and it's a good yield environment.

But the capacity change you're making is 5 points in the first half of the year when you and the industry make a ton of money, and you're not actually reducing your capacity guide in the second half of the year when you and the industry lose money. So conceptually, I'm kind of struggling to see why it doesn't end up pressuring your profitability because you're taking capacity out of the profitable first half and at the moment, not changing your capacity in the second half.

And you're telling us about how it's great, you can remove [ weak capacity at weak time ] of the year. But actually, capacity is not changing in the winter at the moment.

So some words around that would be good. Other question would be around the U.K.

CAA announcement on the tight review, I think, of the repayment issues. Where do we see that or where will we see that in the P&L and in the cash flow going forward?

And then otherwise, how do you see that issue playing out with your reputation in the U.K.? Because obviously, I guess that does feed through to unit revenues, and I fully appreciate that your performance in terms of disruption and on time is really good now.

And unfortunately, you're getting this news flow relating to historic performance, but that's something for you guys to manage I guess.

All right. Maybe I'll start with the second one, the U.K.

CAA. I mean, look, I mean, I think it's fair to say that we got completely overwhelmed last summer.

We were just unprepared for the quantum, the magnitude of disruptions and issues falling out of it. And we didn't have the infrastructure.

We didn't have the manpower. We were just not set to deal with that level of claims and consumer issues.

But I would caveat this whole problem that 90% of customers were treated pretty much in line with policy and standards. So here, what we are talking about is more like the 10% issue.

Of course, this is the noisiest 10%, which is blown out of proportion, creating tension in the system, in the social field and with the regulatory framework. And this is the 10% when you buy a EUR 50 ticket and you're going to charge EUR 2,000 for staying in a Four Seasons kind of stuff.

And also, these are the claims coming through the claim factory, the lawyers waiting for you at the airport when the flight is late 3 hours and 1 minute and capture you. So this is kind of the category of issues.

Now what we have done, we have put in roughly around a good GBP 100 million into investments to increase infrastructure capacity, more call centers. I mean I think we are operating 4x more bigger, larger call center capacity than last year.

We have invested in manpower. We have localized resources in the U.K.

to be more focused on the U.K. issues.

And we invested a lot into automation to make sure that we can systemically scale our operations up. This is history behind us.

I mean it sounds like this is a new issue, but this is history. There is nothing new coming out of this.

Largely, all these issues have been absorbed financially. So you are not going to see anything really in terms of numbers coming out as a result of this.

I think the CAA fell under some social pressure that they needed to do something and wanted to act as a good countrymen with that regard. But this is dealing with history.

It's not with future matters. I think we are pretty well set for the future.

But first of all, we are one of the best airlines in the U.K. in terms of the operating metrics.

And two, we are a lot more robust in terms of infrastructure and manpower to deal with the issues if anything goes wrong. In terms of reputational damage, I don't know, Andrew, how you measure that.

I mean one of the things that we all know that there is no shorter thing than people's memory. And if I look at the performance of the U.K.

business, it is not an outlier at all. Actually, the U.K.

is probably now outperforming the corporate lines in terms of financial performance, profitability. So I'm not saying that we have a structural damage caused by that.

Yes, I think short term, we were affected. But as we are now proving ourselves and we have been learning and we have been making the investments, I think we are earning the credit from the market.

We are earning the trust of the consumer. With regard to the aircraft removal and how that affects us, I think -- well, as a matter of fact, I think we were having various scenarios.

So originally, we were planning on somewhat higher than 35% growth, but we were just not certain whether that 35% growth would be fully delivered for various reasons. It can be a weak market, and we wanted to have the provision to take some of the capacity out should the demand environment be weak and we are not seeing it.

So we are not seeing consumer demand falling going into the period. I know there is a lot of chatter around inflationary pressure and recession coming consumer spending side.

But we are not seeing any of that. As a matter of fact, our bookings are up versus last year.

Our bookings are up versus pre-pandemic levels, higher yield, higher load factor. So actually, we are seeing a robust environment in an environment continue to unfold going forward.

But we wanted to have the provision. So if you want to play it out the numbers, we were looking at potentially 35% growth.

But we were guiding 30% because -- to have that reserve should we be making that adjustment. Now we are not making the adjustment for that.

We are making the adjustment for the engine issues and to observe engine capacity. But we feel actually quite comfortable that this is, if anything, more of a yield potential for the business.

But we are taking a neutral position on this. So we are not banking on more yield or anything like that.

I think this is more like if you are containing capacity in the current environment where demand is strong, then quite likely that gives you a yielding opportunity. And I think you should be pretty much expecting a very heavy [ compensation ] by the manufacturer on the cost side.

So it should not be blowing our cost performance either because of that. I don't know if that [ deals ] with the question, Andrew.

I mean I was wondering just about that [indiscernible] really wondering. And perhaps for Ian rather than for you, no disrespect, thinking that it's mathematical.

You are, to the market, reducing your capacity in H1. You're not changing your capacity in H2.

You make money in H1. You lose money in H2.

Therefore, everything else being equal, your profit is down. Maths.

Well, but I think you need to create a context of supply and demand in the marketplace overall, and we are not the sole actor in the market. So we are not in a monopoly.

I think your logic applies when you are a monopoly player. Then essentially, your own act is determining supply and demand.

But I think what we are seeing is that quite likely, you're going to be seeing reduction of capacity by other actors. And certainly, what you are going to see is that other actors are [ falling on the demand/cost ] pressure.

So the cost of the industry is going up or cost is coming down. So I think that kind of opens up the window for competitive advantage for us.

And I think that we play into the strengths of demand for us, which might be very different from the strengths of demand for the industry.

There are no further questions from the room. We can open up to questions online.

This is Tobias from Bernstein. Just 2 for me, please, on the strategic positioning.

The first is in Saudi Arabia. Have you seen any progress in this regard?

It's been really quite. I was just wondering where we're currently standing.

And then the second one is on Albania. We've seen [ insane ] capacity growth from both you and Ryanair as well, and I was wondering whether the market can bear that much growth.

I think in Saudi Arabia, nothing fundamentally has changed since the last report. There is a process in place led by the Saudi civil aviation authority and we are within that process, but no news yet.

So we are on status quo. But at the same time, we have put in quite significant inbound capacity to penetrate the market, and we are seeing a continued strong consumer reaction to the proposition that we are bringing to Saudi.

With regard to Albania, well, Albania has been really an up and coming market for Wizz Air and for the whole industry. You recall that Tirana airport used to be operated by foreign operators pretty much overcharging for the airport, restraining the growth profile of the market.

That changed, and a very different cost structure got imposed. And that attracted Wizz Air.

That attracted other actors, like Ryanair, in the industry. And that dropped, essentially, fares in the market, stimulating a lot of demand, building the franchise of flying in the country.

We are not seeing any significant issues coming out of that market, but let's not overblow Albania. This is a country of 2.7 million people.

Yes. I've got 2 questions here.

So first is around the fleet to staff ratio. If I look at last Q1 versus this Q1, you had gone up by -- from 39 to 44, roughly around 13%.

How much of this increase is actually related to [ summer ] resiliency? And where do you see this ratio normalize given now you're actually taking some capacity out into the second quarter?

Do you expect it to come down? And the second question is you did flag in your presentation that booking curve is slightly longer now due to the leisure exposure.

Again, going into quarter 2, what is drive the booking curve [ stance ] versus 2019 levels? And as you go into winter, obviously, there will -- into quarter 3, there will be less of leisure in the mix.

If the VFR still continues to be weak, do you think that you need to actually [indiscernible] stimulation to get back to normal booking levels?

So Sathish, I think it was a little bit tricky to hear you, but I think you were asking about whether the fleet to staff ratio, which you indicate, might be up 13%. Is that something that will continue to be like that and grow?

Or is it expected to normalize? Was that the question?

Yes, Ian. Especially, you cut capacity into quarter 2.

Should we expect that to actually see a step down into quarter 2? Or it's just that it's too short notice to take some staff cost out?

I think this is a fairly mechanical mathematics, to be honest, if you are talking about mathematics. I mean you take an aircraft.

You take the number of crews required to operate the aircraft, and that's a fairly set number, roughly around 6 crews per aircraft. This is an A321.

So on crew is 2 pilots, 5 cabin crew and you just multiply, and that determines the staffing of the aircraft. Obviously, the greatest volatility that goes into this equation is the utilization of the aircraft because if for whatever reason the aircraft is not utilized, obviously, that inflates the crew number per aircraft.

But assuming a normal cycle of utilization, actually, that's a fairly constant way of applying mathematics. And that is not changing.

So I don't think that there is any variability other than utilization coming through this line, as far as I'm concerned.

So going into quarter 2, given that you cut capacity now, so this number should even further go up, right?

Yes.

I mean it's not an increase that we're familiar with. But we have always been very clear throughout the last few reporting cycles that one of the ways that we're planning on increasing our completion rate or reducing our cancellation rate is by ensuring that we have sufficient protection in the system with regards to crewing and spares -- and spare crews.

And so that is a part of the investment that we made. And I think Joe mentioned the 100 million earlier that is designed to help reduce the overall disruption costs that affect us, which we see as a greater magnitude.

So that might be part of the -- that's probably part of the effect that you're seeing there, Sathish. But it's not something that we think is out of line on a structural basis going forward.

And with regard to the booking curve on VFR, yes, the booking curve for VFR traffic tends to be fairly normal. I think actually booking curve for leisure is more extended and depending on the market.

So if, let's say, you take the U.K. as a market given that we have an airline operating in the U.K., Wizz Air U.K., and that airline is increasingly focused on serving the U.K.

customer, the U.K. market, so there is an increasing leisure component in the operation of that airline, actually, that extends the booking curve.

Can you hear me?

Great. Three for me as well.

Just coming back to the GTF. I mean how many planes are actually exposed?

It looks like 93 in your fleet. But also, can you talk about the future exposure as you take deliveries on the GTF?

And also, like how did you get to 12 planes? Is it just based on the capacity that Pratt can service, or the other planes are okay?

Can you just -- I mean, I know we've spoken a lot about this topic, but just color on those points, please. And then just kind of thinking about how far east you're actually prepared to expand?

I see you've just gone further into Iraq. When -- how far east will you expand?

And when do you start hitting kind of, I guess, some of the low-cost Asian carriers on some of those routes? And then lastly, just talking about Ukraine.

Ryanair has obviously recently announced a big push once it reopens. Just would be interested to hear your plans and also if you do still have any of your fleet which is -- still has to be brought back from Ukraine?

Okay. So let me take reverse order on your questions.

So Ukraine, we have one aircraft in Ukraine, essentially. We used to have 4.

We flew one out of Lviv. We got stuck with 3 in Kyiv.

2 aircraft are disassembled. We [ bought out ] 2 aircraft, essentially, and we removed engines and some other parts.

We shipped them back to Europe, and we basically used them as parts for supporting the business. But we have one intact airplane still stuck in Kyiv.

In terms of plans for Ukraine, well, maybe I will just remind you that prior to the war, actually, Wizz Air was an airline with bases in Ukraine, being the only European airline. Now there is a lot of chatter around what different airlines will do in Ukraine, whether there's still war in Ukraine.

And the market is closed, regulatory prohibited to operate. Of course, we are committed to Ukraine.

[ We really turn to ] Ukraine as the only based European carrier in Ukraine prior to the pandemic. So we have full commitment for the country, but I don't think that current conditions are prevailing for airline operations.

Then how far east can we get to? I think we are as far as Abu Dhabi at this point in time.

And like in the U.K., we are looking at the market in Abu Dhabi. We are understanding the interest of consumers flying in to Abu Dhabi and flying out of Abu Dhabi or the broader UAE, if you want to put it that way.

And we are creating the infrastructure to penetrate those demand flows and those customer aspirations. In terms of flying out of Abu Dhabi, of course, you can imagine the subcontinent.

You can imagine a number of countries that create significant workforce for serving the UAE or kind of leisure opportunities for residents in Abu Dhabi or in the broader UAE. I don't think we have any plan beyond that.

So the [ spokes ], if you wish, will kind of extend out further east in the future, subject to regulatory approvals and designations. But in terms of base operation, we are committed as far as Abu Dhabi at this stage of the game.

And if that changes, we'll let you know. With regard to the GTF issues, I mean, again, I appreciate that you want to know more than what you do.

And believe me, I'm in the same position as you. But simply, we just don't know what we don't know at this point in time.

We are not expecting to have any issues with future deliveries. These are issues that reflect on previously delivered engines, especially the first generation of GTF deliveries.

But as said, even on tranche 1, what we understand is the number of engines exposed, the timing, the mandate to stop the operation of the engine. But we still don't fully understand the [ verso ] implied on the engine and exactly how execution is going to take place, whether through designated shops or just going into the current system.

And we know even less on the second tranche. We don't know how many engines of ours are effected.

We don't know the scope. We don't know the timing.

We don't know the process. So anything that I can do is to speculate, but I don't want to do that.

And if I can just clarify, Jarrod. It's 12 engines, not 12 airplanes.

And how we landed on that number is because we were advised by Pratt on the specific serial numbers which then match against our engines. So it's 12 engines, which depending on the timing of the removals, because some were already scheduled for removal, could be up to 6 aircraft.

This is Muneeba Kayani from Bank of America. Can you hear me?

Great. First question was just a clarification on the first question on the call around the RASK guidance.

And to clarify, so in the first quarter, RASK ticket was 38.7% up and your guidance is for low double digit in the second quarter. So is that -- did I understand that correctly?

And if you could clarify what's the stage length impact here and the kind of sequential slowdown? Is that just a base effect from last year's recovery?

Secondly, just to clarify, we've heard from your competitor about some softness in close-in bookings. Have you seen any of that in your bookings?

Thirdly, on the Middle East, how is that impacting the seasonality on your fares given the different timing of holidays there?

Sure. So you're right.

So ticket RASK Q1 was 38.7% higher year-on-year. In the RNS, we referenced the double-digit increase on ticket revenue for Q2.

What that translates to is that is ticket RASK again, and I would say we'll be in the lower end. So 10%, 11% would be a fair number for what we're seeing at this stage into Q2, so one month in.

You want to take softness?

Yes. So I mean, we are not seeing any softness creeping in.

We are seeing demand as robust as you can imagine. I mean we are having that discussion like every 3 months.

We are here that -- the market is telling us, okay, we understand you guys today, but what's going to happen in 3 months? So [ it's not telling us what is ] happening in 3 months or 6 months, and we are not seeing anything coming in the next 3 to 6 months.

So we stay confident in demand. With regard to seasonality issues, actually, we like the profile of the Middle East when it comes to seasonality because if you really think about this, in summer where you would be expecting the market to be off-seasonal just because of the heat, actually, you've got a lot of demand from residents of the Middle East to travel to Europe and elsewhere.

And in winter, you see a lot of inbound traffic go into the market. So actually, these markets are a lot less seasonal than even the European markets.

Hello. Can you hear me?

Great. A couple of finance questions, so for Ian.

In terms of the CapEx, I wonder if we could just run through net CapEx for, well, definitely '24, '25 and even if you can, for '26. Within that, on the financing side, there was quite a shift last year using JOLCO rather than IFRS 16 leases.

There's obviously about 170 basis points of financing advantage that we saw in that. Will we see something similar this year, again, the kind of 60-40 split in favor of JOLCO and the French leases?

And then finally, you mentioned the end June liquidity position of EUR 1.8 billion and matched that to the March, EUR 1.5 billion. At the end of March, you had unearned revenues of EUR 761 million.

I'm wondering what the unearned revenues were at the end of June.

Thanks, Mark. So in terms of CapEx -- net CapEx in the outer years, we don't advise on that.

But in terms of the financing profile, we run tenders for our fleet financing roughly for covering the next 12 months in advance. It's harder for lessors or financiers to really commit anything longer than that.

And even at the outer end of 12 months, we see people struggling just because of the volatility in the markets. But when it comes to the choice between JOLCO and IFRS 16, each of them have their benefits.

Ultimately, like everything else we do in our business, we focus on lowest unit cost and lowest cost in general. And so we run these campaigns.

We compare them against all the options available. We have seen a lot of appetite from the Far East in terms of our financing sources but not exclusively.

We've even seen some lessors from the European markets come back into the game and be competitive. So we look at it really more as the overall total cost of ownership -- or total cost of utilization at the end of the day because, obviously, they're not owned, although the JOLCOs do have a feature to convert that, and make decisions based upon absolute cost.

There's no rule of thumb, Mark, whether it's 60-40 or some other percentage in terms of what we prefer at the end of the day. With regards to the unearned revenue number, the number that -- we used to provide a waterfall, but we feel that that's probably a bit too much insight in the competitive landscape.

But I would not expect any -- I would not assume any deterioration in that number relative to other periods. So very healthy.

No deviation compared to what you would have seen in prior periods.

Neil Glynn here. Just one question.

Clearly, there's been a lot of discussion about GTF and capacity management. But the fact that fuel headwinds are stepping up again [ as a theme ] hasn't been touched on very much through the session.

I think it would be helpful to update us on how you feel about the stage of development of the capacity added since the pandemic and your ability to price up on some of the newer routes around the network should that be necessary. Are the fuel headwinds possibly as likely into FY '25 at the current fuel price?

Yes. I mean, clearly, you've seen this kind of taking a strategic position on COVID, and we invested against the cycle, if you wish.

And now we are a 50%, 60% larger airline than pre-pandemic versus an industry of not even reaching pre-pandemic capacity levels. And the same rule applies across the board that every operation we perform must be profitable.

I mean there is no better strategy than profitability. And this is the base of allocating capacity.

This is the base of churning capacity, whatever it is. It is profitability.

And the good news is that I think we are seeing a fairly equalized position and performance across the geographies we operate in. We are seeing strong catch-up in Western Europe.

We are seeing very solid operations from a financial standpoint in Central and Eastern Europe. And we are seeing the rising of our performance in Abu Dhabi and the Middle East overall.

So I think we feel very comfortable with the investments that we have made and with the return of those investments, and we don't really see outliers either way with that regard. What happens in a higher fuel price environment?

I think what's going to happen is what -- it has been happening over the last years or decades that changing input cost flow through into the fare environment through capacity discipline. But it is a bridge, so it doesn't happen overnight.

It takes 12 to 18 months. So if input costs are rising, what it means is that capacity comes out of the market and we balance the supply and demand and fares will get increased.

When input costs start falling, over time, you will see more capacity coming to the market. And basically, the takes the fares down.

This is empirically evidenced throughout the decades. I've been in this business over the last 20 years, and I think this is exactly the same what you should be expecting.

And this is an industry game, okay? So I don't think that you have to translate it airline by airline because the other factor is that if you are a low-cost carrier, your relative competitive position will improve in the down cycle.

So if you call it as a down cycle, you actually are better off -- a better competing force than in the up cycle. So what you see is this kind of a [ threading ] from high cost to low cost of consumers.

And if you look at the step change of the low-cost industry market share terms, that always happen in the down cycles when the customer fell under pressure and then the customer downgraded from high cost to low cost. So actually, down cycle, a high input cost environment -- inflationary environment, that's a good thing for low-cost carrier.

Ruairi Cullinane, RBC. Two questions from me.

Firstly, over the pandemic, the combined share of Wizz Air and Ryanair in Central and Eastern Europe has increased. Do you see that as a good thing because the market is more consolidated, or a headwind because you're more often running up against a more formidable competitor?

And perhaps linked to that, perhaps you could touch on how Romania has performed in recent quarters given you backfilled some of Blue Air's capacity there.

I mean we have been competing with these guys in Central and Eastern Europe for 15 years. So I don't think anything new is happening.

I don't think -- the question is what happens between Wizz Air and Ryanair. Nothing is happening -- or the same is happening that both airlines are growing.

And of course, they should be growing because these are the airlines that can actually stimulate the market, can create traffic and can create demand for the industry. The real question was what's happening to the other guys because they are going nowhere.

I mean you can see that either they go bust, they got bailed out by governments, but they are losing relevance to the market. And I think that will continue to happen.

So you will see Wizz growing. You will see Ryanair growing.

And you will see the legacy industry shrinking. And that transformation is quite impressive, as a matter of fact.

But it's also interesting to kind of observe how that process actually takes place. So you go back to 2004 -- I'm just using 2004 because that was the year of [ EU accession ] of Central and Eastern Europe, and that was the year when we started flying, coinciding with that.

If you look at the aggregate legacy capacity in Central and Eastern Europe today, it's pretty much exactly the same by the [ very seat ] than what it was in 2004, 20 years ago. So the legacy industry has not been able to grow one single seat in Central and Eastern Europe.

But the airline industry is 3x the size of what it was in 2004, and that was all stimulated and created by Wizz Air and the likes of Wizz Air. And I think that's really the way to look at Central and Eastern Europe as opposed to assuming that this is a dog fight between 2 airlines.

Of course, we are growing. Of course, they are growing.

But that's not the question. The question is that this is a reshaping, a restructuring of the whole industry as a result.

The second one was...

Romania, Blue Air.

Romania. Well, I mean, one competitor is down.

Blue Air, we pretty much replaced Blue Air, and we take it from here.

Just one question for me. It's really just a clarification question because when I read the statement in the report, I understood it differently than I think it was answered just [ there ].

So just could you clarify, on the double-digit increase ticket revenue, is that revenue per passenger or per RPK?

No, that's revenue -- that's RASK, ticket RASK.

All right. Thank you.

Well, ladies and gentlemen, thank you for coming. Thank you for your interest.

We appreciate it. See you next time.

Thank you.