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Edited Transcript of RY4C.I earnings conference call or presentation 18-May-20 10:59am GMT

Full Year 2020 Ryanair Holdings PLC Earnings Pre-Recorded Presentation

Dublin May 23, 2020 (Thomson StreetEvents) -- Edited Transcript of Ryanair Holdings PLC earnings conference call or presentation Monday, May 18, 2020 at 10:59:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Michael O'Leary

Ryanair Holdings plc - Group CEO & Executive Director

* Neil Sorahan

Ryanair Holdings plc - Group CFO

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Presentation

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Michael O'Leary, Ryanair Holdings plc - Group CEO & Executive Director [1]

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Good morning, ladies and gentlemen. Welcome to the Ryanair Full Year Results Presentation for the Year Ended March 31, 2020. Obviously, these results are somewhat historic now given the dramatic and sudden, indeed unprecedented, impact of the COVID-19 pandemic on not just Ryanair but all Europe's airlines since the middle of March. But we'll run through the presentation and explain how we responded to the COVID-19 crisis.

You would have seen this morning, we published our results for the last 12 months for the year ended 31 march. It was a reasonably successful year. We reported a profit after tax of just over EUR 1 billion. It would have been slightly higher if the second half, we hadn't lost 5 million passengers due to aircraft grounding in the second half of March. But overall, a reasonably strong set of results, strong passenger growth, strong cost control, more importantly, strong revenue growth, particularly in the areas of ancillaries, but all of it has now been overtaken by the COVID-19 crisis.

I'm joined, as usual, by Neil Sorahan, our group CFO. I will now take you through a quick slide presentation, and then we will open up for our Q&A.

So as you've seen, Ryanair remains the lowest-cost airline group in Europe. We have the lowest fares, but also the lowest costs. We're #1 for traffic. We grew to 149 million guests in the last 12 months. That would have been about 154 million passengers but for the COVID-19 disruptions from the middle of March, the last month of the year. We offer more coverage than any other airline across Europe. But the big issue is that the COVID-19 pandemic has grounded our fleet since about the middle of March until, we think, July. Thankfully, Ryanair has a very strong balance sheet, and we believe our financial strength, combined with lowest cost, means not only will we recover strongly when the air traffic returns to normal but we'll be the long-term winner.

You know these slides reasonably well. Our average fare last year was just EUR 37, significantly cheaper than any other airline competing with us across Europe. We also have the lowest unit costs. Our unit costs last year were just EUR 31 per seat, excluding fuel, significantly lower than all of our airline competitors here in Europe.

Neil, do you want to take the results?

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Neil Sorahan, Ryanair Holdings plc - Group CFO [2]

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Well, Michael, thanks very much. As you said, a reasonably good year in FY '20. Our traffic was up 4% to EUR 149 million. And indeed, it would have been EUR 5 million ahead of that if it wasn't for the COVID groundings in March. Revenue per passenger, up 6% to EUR 57, and average fare grew by 2% to EUR 37. Ancillaries had a strong performance where we saw 20% growth in ancillaries to EUR 3 billion or 16% per passenger. Unit costs, up 4%, 2 points ahead of where we'd originally expected due to the lost passengers in March, and profit after tax before exceptional items, up 13%, just over EUR 1 billion profit in the year.

Balance sheet, one of the strongest in the industries. A BBB rated investment-grade balance sheet with very strong assets. We've got in excess of EUR 3.8 billion cash at year-end, and indeed, EUR 330 million unencumbered, debt-free Boeing 737s with a book value of just over EUR 7 billion, significantly higher on a market value. Cash burn has improved significantly, and we'll deal with the initiatives that drove that later on

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Michael O'Leary, Ryanair Holdings plc - Group CEO & Executive Director [3]

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Thanks, Neil. So let's touch on current developments. Obviously, the COVID-19 crisis has grounded 99% of our fleet from the middle of March until, we think, the -- until early July. The U.K. [CCFF], been drawn down to GBP 600 million loan under the U.K. government CCFF loan program. Very low cost, and we qualified for that because of our BBB credit rating. As a result, that has strengthened the balance sheet. Our year-end cash of EUR 3.8 million has now -- EUR 3.8 billion has grown to EUR 4.1 billion. And it's important to remember that we have 330 unencumbered Boeing 737s in our balance sheet at a book value of some EUR 7 billion, if we needed to raise extra cash. But thankfully, we don't.

Thanks to the tremendous work we've done on cost savings, the cash burn has been reduced from about EUR 200 million a week in March to just EUR 60 million per week at the moment. We're focused now on getting the business back and getting Europe flying again. We believe that it will be possible, subject to the lifting government restrictions by about the 1st of July. We expect to operate about 40% of our normal July schedule during that month. We still need the waiving of some of the government movement restrictions, and we're also pushing back against the -- some of the more absurd, ineffective and unpoliceable restrictions, such as 14-day isolation periods. But we are actively campaigning for effective measures, which are: face masks; temperature checks in public buildings, such as airports; terminals, which we think will be much more effective than 14-day isolation periods, which deliver nothing.

We are, as Neil said, focused on beginning to take the MAX aircraft deliveries, we hope sometime between the period from October this year to March next year, subject to Boeing achieving its September return-to-service date in North America. And we'll brief you now on some short term -- or some senior Board changes that will take place at the end of the month of May.

Just to give you an impact of how dramatic and sudden the COVID-19 pandemic has been in Europe, in both January and February, Ryanair Group delivered 3 points, that's 10.5 million passengers, marginally ahead of our budget in both months. Our budget traffic for March was 11.6 million passengers, we fell 5.9 million passengers short, almost just over 51% less than the budgeted number. And for April, May and June, we're looking to carry less than 1% of our normal targeted air traffic. So it has been unprecedented. It has been enormously disruptive. And to put it in some context, during the -- after the immediate 9/11 terrorist attack in New York, aircraft were grounded for 3 or 4 days, we're now being grounded for about 4 months. And so the impact on the aviation industry, particularly here in Europe, will be severe.

As I said, we think we can safely deliver a return to some flight services from July. We're hoping to operate about 40% of flight services in July, about 60% in August. We will be and have rolled out a video for customers and for our staff, effective health measures, which consist of masks, temperature checks, our aircraft are fitted with hospital-level air filters. Nevertheless, there will be lasting impact on the airline industry in Europe. Thousands of EU airline jobs are being lost. Seat sales will be necessary to stimulate demand. We think that will result in weaker yields for the rest of FY '21. One of the challenges we face is that EU governments are providing enormous sums of state aid, particularly to former flag-carrier airlines, both in breach of state aid rules and competition rules. And this, we believe, is going to allow these flag carrier airlines to put -- to engage in massive and widespread below-cost selling for the next couple of years, which will put downward pressure on our pricing and yields but deliver a stronger return to passenger volumes.

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Neil Sorahan, Ryanair Holdings plc - Group CFO [4]

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Okay. So just as we -- as Michael alluded to, we put a lot of work into preserving cash and cost-cutting over the past number of weeks. We've canceled our share buyback program. We've grounded over 99% of the fleet in all of Q1, and we expect to take a number of months before we're fully up and running again. We implemented 50% pay cuts in April and May, and that may go on for a longer period of time. We've had pay freezes, and we benefited from the government payroll support schemes across Europe. We've eliminated all discretionary spend from the business, including nonessential CapEx, and we've deferred a number of payments. And we're not just happy to end there, we've got a number of other initiatives ongoing.

We're currently looking at all of our bases across Europe. There may be some base closures this winter or indeed into the summer. There are potentially up to 3,000 job losses and further pay cuts, mainly in the pilots and the cabin crew. We're actively engaged in negotiating with all of our airports for future growth from the Ryanair Group as we get back to service later this summer. And of course, the game changer aircraft, the MAX, will hopefully start to come into the fleet in the autumn of this year, maybe around October, which will deliver significant savings, 16% unit cost savings on fuel, 4% extra seats and 40% less noise emissions. So it'll be absolutely a game changer.

At the same time, we're in detailed discussions with both Boeing and our A320 lessors in relation to our growth plans going forward. And all of this has helped us reduce our fuel burn -- sorry, to reduce our cash burn and conserve our cash. Back in February, we were spending somewhere in the region of about EUR 200 million a week. At the moment, we're spending about EUR 60 million a week. Now that may creep up slightly when we return to service, but I think we've done a very good job in holding on to the cash, and that will be what sees us through this crisis.

A number of people have been asking and will be asking what's the EUR 350 million hedge and effectiveness charge in the P&L at the year-end and what does it relate to? Well, coming into the COVID crisis, we had 90% of our FY '21 fuel hedged at pre-COVID prices and pre-COVID volumes. Michael has shown the drastic impact that COVID has had on our passenger numbers and on our requirements for fuel. We won't need to burn as much fuel this year, which means those fuel hedges have now gone ineffective, and we've taken a charge of EUR 350 million through to the P&L in the current year. This will lead to a little bit of volatility in the profit and loss as these hedges no longer enjoy hedge accounting and have to be mark-to-market on a quarterly basis, but they'll wash out over the course of the year. There may be some more ineffectiveness if the return to service is slower than we hope and expect.

Looking beyond this year, we've put in some hedges for FY '22. We're 31% hedged at $541, and we have some currency hedging in place as well.

Michael, back to yourself.

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Michael O'Leary, Ryanair Holdings plc - Group CEO & Executive Director [5]

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Thanks, Neil. So let's talk on state aid, which I think is going to be one of the huge challenges or certainly the most -- one of the big competition distortions we face for the next number of years. Remember, across Europe, most airlines are participating in payroll support schemes. Transparent state supports like the U.K. loan scheme is not state aid because it's transparent and it's available to all companies or all airlines equally. What is, however, illegal state aid is this kind of national largesse to former flag carriers, none of which is just by -- or even necessary given the payroll support schemes that are already in place. However, the Lufthansa group looks like it's going to receive about over EUR 12 billion of state aid; Air France-KLM, over EUR 10 billion of state aid; and Alitalia have now been cleared for EUR 3.5 billion of state aid from the Italian government, this to a company that has never made a profit in the last 75 years. This is illegal. It is in breach of the EU's own state aid rules, and it's also in breach of competition rules because it entirely distorts the level playing field.

The airlines who were strongest entering the COVID-19 crisis, the well-managed airlines like Ryanair, easyJet, BA will, in many respects, be the weaker airlines emerging out of the COVID-19 crisis because we're now facing Lufthansa, Air France and Alitalia who have enormous war chest of state aid, which they will use over the next number of years, firstly, to engage in below-cost selling to damage competitors like Ryanair; and secondly, they'll use it for M&A activity, which will allow Lufthansa, I suspect, to take over Condor or mop up other weaker competitors in their home markets. Ryanair will be opposing all of these -- this legal state aid in the European court. But sadly, that will take us a number of years to be -- or to win those cases. And that's why, unfortunately, we have to address this immediately.

We're now into negotiations with our unions across Europe. We need a minimum of 3,000 job losses from our pilots and cabin crew to reflect the fact that for the next 12 months, we'll be lucky to carry 50% of our normal passenger traffic. And even that we do carry, we'll be carrying at artificially lower fares because we'll be competing with these flight carriers selling seats at below cost. And the 3,000 job losses will be the minimum we need on the assumption that we can negotiate 20% pay cuts with the unions. If we can't secure those pay cuts, we will need more than 3,000 job losses. If we can secure those payouts, we're very hopeful that we can actually maybe reduce the 3,000 job losses, but we need urgent action from the unions quickly on these negotiations.

As Neil said, in relation to 737 MAX, we have 210 on order, 135 firms, 75 options. We're hopeful that Boeing will achieve a return to service in North America in September. We will still, therefore, be targeting some deliveries of the MAX aircraft between October of this year and March of 2021. It is a great aircraft. It offers 4% more seats with 16% lower -- less fuel burn. It also delivers significant environmental savings in terms of reduced emissions, reduced noise. And we think that the MAX aircraft will be key to Ryanair's ability to continue to drive down operating costs and, therefore, take EU market share from other high-cost EU carriers once we will recover out of the COVID-19 pandemic.

The Boeing talks, as Neil has said, are continuing. We are in discussions with them about compensation for delayed deliveries. We're also reviewing pricing with them. We have a third round of talks where we're looking at the possibility of a new MAX 10 order. But really, we can't conclude those negotiations until we have some certainty or some definition on when the aircraft will return to service in North America and when we can reasonably expect the deliveries of our aircraft. It's a great aircraft. We're believers in it. We think it will transform Ryanair's cost base for the next 10 years.

Just to touch briefly on the Board updates. Stan McCarthy will take over as Nonexecutive Chairman from the 1st of June in 2 weeks' time. Louise Phelan will replace Kyran McLaughlin as the Senior Independent Director. Sadly, David Bonderman and Kyran McLaughlin will leave the board on the 30th of May. I want to personally thank them on my own and on your behalf for the extraordinary commitment and service they've given to Ryanair over the last 20-plus years. We would not be Europe's largest and leading airline without the drive, the vision and the support that David and Kyran had given, not just to other Board colleagues but also to the management team, over the last 25 years.

Stan has done a review of the Board. We're very pleased that in terms of gender diversity, 40% of the Board from the 1st of June will be female. And we have and will shortly announce details of refreshed committees. The Audit Committee continues to be led by Dick Milliken. Julie O'Neill will replace Howard Miller as Chairman of the RemCo and Stan McCarthy himself will replace Michael Cawley as Chairman of the NomCo.

Outlook. For the next 12 months, it's obviously impossible for us today to give you any guidance on either traffic numbers or on profits for the next 12 months. What we know for pretty much certain is we're going to carry almost no passengers in the quarter ended 30th of June, and we're looking at a profit after tax loss in that quarter of something just over EUR 200 million. We would hope to be back flying a reasonable volume of passage in the second quarter. But even at that, we think in the second quarter, we're looking at probably a small loss, maybe breakeven or a small loss, but we have no idea because it's entirely subject to passenger numbers and yields and the lifting of government restrictions.

However, we're making -- taking appropriate steps to further reduce costs. We're in discussions. We're looking at base closures across Europe. We are looking at reducing our crew complement by about 3,000 pilots and cabin crew. We're talking about meaningful pay cuts in that area as well. And we've also reduced our head office numbers by almost 200 jobs during the period from March to June. Ryanair has a very strong liquidity, and we've taken extraordinary cash preservation measures, which have been reasonably successful. But we will need pay cuts, we need job losses, we need lower airport costs if we're going to rightsize the business and rightsize the cost base to compete with these European flag carriers who now have over EUR 30 billion of state aid to fund below-cost selling against Ryanair for the coming years.

We do expect lower airfares, though, to drive strong volume recovery once we get back flying and particularly into 2021. I think it will be 2022 or later before we see a recovery in pricing. State aid will continue to drive down air fares, and we have no doubt that Lufthansa, Air France, Alitalia will engage in low-cost selling. But that is the ground at which Ryanair is strongest. We have the lowest cost. We have the lowest fares. And wherever it is below-cost selling, we will price below the below-cost selling by the flag carrier airlines.

There is a unique medium- and long-term opportunity [at playing here]. Our competitors have either failed in the last 12 months or will significantly cut capacity post COVID-19, and Ryanair would hope to take those additional deliveries from Boeing and exploit the opportunities that will undoubtedly exist as a result of competitor failure or capacity cuts in recent months.

Neil, anything else?

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Neil Sorahan, Ryanair Holdings plc - Group CFO [6]

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No, I think that was very comprehensive. Thank you.

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Michael O'Leary, Ryanair Holdings plc - Group CEO & Executive Director [7]

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Okay. And now we'll open for questions and answers.

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Questions and Answers

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Unidentified Company Representative, [1]

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How did the airline perform in FY '20?

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Neil Sorahan, Ryanair Holdings plc - Group CFO [2]

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It was a really good performance. Profit after tax was up 13% to just over EUR 1 billion before exceptional license. Traffic grew by 4% to EUR 149 million, unfortunately, a bit lower than we expected due to 5 million lost passengers in March due to the COVID groundings.

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Unidentified Company Representative, [3]

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What drove the 10% revenue growth?

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Neil Sorahan, Ryanair Holdings plc - Group CFO [4]

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Well, we saw, as I said before, 4% increase in traffic in the year, coupled with a 2% increase in average fare. Ancillary revenue had a very strong performance, up 20% to just under EUR 3 billion. And the standouts for me on that were the reserved seating and the priority boarding, which did very well, along with the initiatives that our team and labs rolled out for the new personalized website in November.

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Unidentified Company Representative, [5]

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Why did [ex fuel] unit cost rise 4% when your guidance was up 2%?

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Neil Sorahan, Ryanair Holdings plc - Group CFO [6]

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Two points of that are due to the fact that we lost over 5.2 million passengers in March due to the COVID groundings. The other 2% was driven by higher staff costs as we annualized pilot pay increases and our crewing ratio increased due to resignations, pretty much dropping to 0. Our maintenance costs were also up in the year due to nondelivery of the MAX game-changer aircraft, and we were flying older aircraft than we would have -- originally had planned to do so.

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Unidentified Company Representative, [7]

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How is on-time performance in FY '20?

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Neil Sorahan, Ryanair Holdings plc - Group CFO [8]

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Very good. We had a 90% on-time performance, excluding ATC. And this is all down to the investments that the group put into our handling arrangements last year in the likes of Stansted, Poland and Spain.

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Unidentified Company Representative, [9]

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Please explain the EUR 350 million in exceptional charges.

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Neil Sorahan, Ryanair Holdings plc - Group CFO [10]

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This is mainly down to our fuel for FY '21 going ineffective. We have too much fuel hedged compared to what we're going to fly now due to the COVID groundings and the slow return to service. The other element of that is unfavorable mark-to-market on currency hedges for CapEx, which have also gone ineffective due to delays in the capital expenditure spend.

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Unidentified Company Representative, [11]

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Could there be another exceptional charge in FY '21?

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Neil Sorahan, Ryanair Holdings plc - Group CFO [12]

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It can't be ruled out. If, for example, return to service is slower than we'd expected, then we'll need less fuel, and that will go ineffective.

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Unidentified Company Representative, [13]

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Can you describe your balance sheet?

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Neil Sorahan, Ryanair Holdings plc - Group CFO [14]

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Balance sheet, one of the strongest in the industries. BBB-rated balance sheet. At year-end, we [had] EUR 3.8 billion cash. And thanks to drawing down GBP 600 million under the CCFF in the U.K., we have EUR 4.1 billion as of today. A very strong asset base as well. 90% of our fleet is owned, and of that, 75% or 330 Boeing 737s are unencumbered. So that's approximately EUR 7 billion of the book value on our balance sheet, significantly higher, bigger, if we were to take the market value.

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Unidentified Company Representative, [15]

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What cash preservation and cost-cutting measures have you implemented?

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Michael O'Leary, Ryanair Holdings plc - Group CEO & Executive Director [16]

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Well, we've grounded 99% of the aircraft fleet since the middle of March. We did imposed 50% pay cuts across the board in March and April and May. So far, we've deferred all nonessential CapEx. We ended the share buyback program. We canceled all recruitment and discretionary spending. We've accessed EU government payroll support schemes almost across the entire continent. And we're now in active negotiations with airports, with our unions and with aircraft lessors about further delivery cancellations and further cost cutting.

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Unidentified Company Representative, [17]

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What's your weekly cash burn?

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Neil Sorahan, Ryanair Holdings plc - Group CFO [18]

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We'll thanks to all of those initiatives that Michael just listed there, we've gone from spending approximately EUR 200 million a week back in February to just over EUR 60 million a week now.

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Unidentified Company Representative, [19]

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How are discussions going with the unions in relation to pay cuts and job losses?

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Michael O'Leary, Ryanair Holdings plc - Group CEO & Executive Director [20]

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Well, we initiated them in the last 4 weeks. The process is underway. Clearly, we can't give you any detail or color on those talks, but this is serious and urgent. We've already let go 200 of -- the last 200 of our very valuable team members at our offices in Dublin and Bratislava and Madrid over the last 3 months. And it's inevitable that payroll support schemes will run off in the next couple of months. So as we return to flying in July, we will need considerably fewer pilots and cabin crew. And I think the challenge for the unions is we're trying to minimize job losses but we can only achieve that if we get the 20% pay cuts we need.

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Unidentified Company Representative, [21]

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Are there opportunities for sale and leasebacks in the current market?

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Neil Sorahan, Ryanair Holdings plc - Group CFO [22]

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There's a lot of opportunities. We've already received a number of sale and leaseback proposals and, indeed, a number of secured debt proposals. But we don't need the cash at the moment. We've recently tapped the U.K. CCFF where we drew down GBP 600 million. So the balance sheet is in pretty good shape.

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Unidentified Company Representative, [23]

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When do you expect to return to service from the COVID [groundings]?

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Michael O'Leary, Ryanair Holdings plc - Group CEO & Executive Director [24]

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Well, we've already announced, we plan to operate about 40% of the schedule in July. We hope that will grow to 60% in August. This is subject to the easing of government flight restrictions and restoring some level of consumer demand. It will involve us in operating about 1,000 daily flights, but we'll try to cover up to 90% of the route network. We do expect significant price discounting, both by Ryanair to stimulate these travel volumes and also as we compete with the state-aided -- state aid junky flag carriers around Europe, all of whom will be engaged in below-cost selling, taking advantage of the enormous sums of state aid they have received in recent weeks.

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Unidentified Company Representative, [25]

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What health measures will you apply when flights resume?

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Neil Sorahan, Ryanair Holdings plc - Group CFO [26]

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We have a very good video and I encourage everyone to look at it, it is on ryanair.com. It sets out the various measures. But the likes of things you're going to see are face masks, face coverings, temperature checks in airports. Across Europe, we already have state-of-the-art HEPA filters onboard all of our aircraft. We have gone cashless for all of our onboard sales, and so we'd encourage our customers to use the Contact Us option. We don't agree and we're pleased to see that the middle seat being left empty will not be a requirement of return to service. We will do everything in our power to ensure that social distancing is observed in the airports, with onboard masks will be the key criteria.

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Unidentified Company Representative, [27]

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Do you expect strong demand from consumers when flights return?

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Michael O'Leary, Ryanair Holdings plc - Group CEO & Executive Director [28]

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We think demand will restore pretty quickly once government travel restrictions have been limited. We don't think that wearing a face mask -- in fact, we think that will encourage people to travel rather than make them nervous. But I think the critical thing is going to be deep price discounting, both by Ryanair and by our state-aided competitors, we think, will stimulate rapid volume growth once return to service is established over the period of July, August, September.

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Unidentified Company Representative, [29]

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Will you increase growth post-COVID?

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Michael O'Leary, Ryanair Holdings plc - Group CEO & Executive Director [30]

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We'll certainly look at opportunities. I mean it will depend on securing some aircraft deliveries from Boeing this winter. But we will return with as many aircraft as we can. And certainly, there's opportunities. We're already in active negotiations with a wide number of airports who are seeing either its incumbent carrier sale or we're seeing them cut capacity who are talking to us about the possibility of either entering their airports or taking up more slots at their airports and delivering them faster growth.

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Unidentified Company Representative, [31]

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Ryanair has been critical to state aids opening. Why?

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Michael O'Leary, Ryanair Holdings plc - Group CEO & Executive Director [32]

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We've been very critical because state aid -- illegal state aid distorts competition and it distorts the market to give an airline like Alitalia, which is only the #2 airline in Italy. Ryanair is by far 50% larger than Alitalia in the Italian market. But to give Alitalia $3 billion of state aid, which they will then go and waste without performing their cost base and will damage competition in Italy from Ryanair, easyJet and others because they'll engage in below-cost selling is not the way forward. We've given examples of Air France -- or the French government, who are refunding aviation taxes to Air France only, but requiring that Ryanair, easyJet, BA and others continue to pay these aviation taxes, which are then returned to Air France, is clearly in breach of not just state aid rules but also competition rules as well.

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Unidentified Company Representative, [33]

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How did the group airlines develop in FY '20?

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Neil Sorahan, Ryanair Holdings plc - Group CFO [34]

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Yes. The group (inaudible) down well during the year. Buzz in Its second year of operations saw its fleet grow to 45 Boeing 737s and it moved outside of Poland where it opened up new bases in Prague and Budapest. Our latest airline Malta Air, which we launched last summer, has grown rapidly to 120 Boeing 737s, and it now operates our French, German, Italian and Maltese bases for the group. Ryanair DAC saw Eddie Wilson appointed as the CEO last September, and he well and truly has his feet under the desk at this stage. They launched 5 new bases and just under 400 new routes last year, although their fleet did shrink to 275 Boeing 737s as Buzz and Malta grew their operations.

Lauda, while it had strong traffic, up to 6.5 million last year, unfortunately, underperformed. Most of this was to do with the fact that it was competing with competitors in Austria and Germany, who are selling below cost in their markets. So they are now looking at various cost-cutting initiatives in their business.

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Unidentified Company Representative, [35]

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Can you explain the Lauda restructure?

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Michael O'Leary, Ryanair Holdings plc - Group CEO & Executive Director [36]

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Yes. I mean, Lauda is facing -- as a result of the COVID-19 pandemic, Lauda is facing an existential crisis. There's a number of factors there. Firstly, Lauda was loss-making on the way in to the COVID-19 crisis. The entire Lauda fleet has been grounded in Germany and Austria since the middle of March. Lauda is -- when it returns will be facing competition from a Lufthansa subsidiary, Austrian Airlines, which will receive EUR 800 million in state aid from the Austrian government, whereas Lauda will receive not a penny. So the only way Lauda can survive is indeed restructuring of the Vienna operation. Those discussions are already underway. We've already canceled 8 of the aircraft deliveries we expected to take this year, and Lauda's fleet will cap out at 30. 15 of those aircraft are based in Vienna, but the Vienna base will close at the end of May if the Austrian unions don't agree to a new CLA with pay cuts and productivity increases for pilots and cabin grew because, frankly, it'll be cheaper for us to ground the Airbus aircraft in Vienna and not fly them than it will to continue to fly them within an ineffective and disastrous CLA.

The Lauda bases in Stuttgart, Dusseldorf and Palma will continue, but I think it's likely that the Vienna base will be closed at the end of May because we don't see the union, which, after all, represents mostly Austrian Airlines employees, agreeing to these reforms that are necessary in order to allow Lauda to survive. If they do agree, the Vienna base will survive, then it will thrive, but we don't think that's likely.

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Unidentified Company Representative, [37]

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Will you close other bases?

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Neil Sorahan, Ryanair Holdings plc - Group CFO [38]

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Yes. It's going to be up to 3,000 job losses, so it's inevitable that some other bases are going to close.

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Unidentified Company Representative, [39]

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Where will those be?

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Michael O'Leary, Ryanair Holdings plc - Group CEO & Executive Director [40]

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Our focus at the moment is on bases in the U.K., in Spain and also in Germany, which are loss-making. And -- but if we don't secure pay cuts in -- all across the board in Europe, other bases in Italy, in Belgium, in Central and Eastern Europe will also be up for closure.

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Unidentified Company Representative, [41]

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The MAX is delayed until Q3. Is there an update?

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Neil Sorahan, Ryanair Holdings plc - Group CFO [42]

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Yes. We're now over a year since we were due to take our first MAX into the fleet last April. Boeing are indicating at the moment that they hope to see a return to service at some stage in the late summer, maybe August and September. So if we see the aircraft coming back in, in the States in September, we would hope to potentially see our first aircraft sometime between October and March of next year. This is a phenomenal aircraft. We remain totally committed to it. We're big fans of the 16% fuel efficiency, the 4% extra seats, which will drive ancillaries and other opportunities within the business. We are, however, in discussions with Boeing. Those discussions will, as Michael said earlier on, remain until such time as we have certainty on when our aircraft will actually deliver and what the final delivery schedules are going to look like.

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Unidentified Company Representative, [43]

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Can you explain the senior Board changes announced this morning?

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Michael O'Leary, Ryanair Holdings plc - Group CEO & Executive Director [44]

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Well, we've already gone through the presentation. Stan McCarthy replaces David Bonderman as Chairman from the 1st of June. Louise Phelan replaces Kyran McLaughlin as the Senior Independent Director. Sadly, David and Kyran will leave the Board on the 30th of May after some 25 years of service. And by the time we publish the annual report, you will see that the various board committees have been refreshed as well.

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Unidentified Company Representative, [45]

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Is there any traffic or profit outlook for FY '21?

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Neil Sorahan, Ryanair Holdings plc - Group CFO [46]

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Well, it's very difficult to say. In fact, it's impossible to give full year profit guidance at this point in time due to the uncertainties around the COVID-19 groundings and what consumer demand is going to be like after we return to service. Closer in, having lost nearly all of our traffic in the first quarter, we would anticipate that we'll lose somewhere over EUR 200 million in the first quarter. Hopefully, a little bit less in the second quarter, which is our peak summer period. So at this stage, based on the return-to-service plans that we have, at best, we'll be seeing somewhere under 80 million customers this year, which, to put that in context, is almost 50% of the 149 million that we carried in the year just ended.

We think that pricing will be very depressed in the market, great opportunities for the customers. But due to all of the state aid that is in the market, there'll be significant below-cost selling. As we're the lowest-cost operator, we will clearly have the lowest fares in that market. And there will be opportunities on a kind of 2- to 3-year timeframe to participate with our new MAX aircraft, but it's going to be difficult out there in FY '21.

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Unidentified Company Representative, [47]

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Michael, Neil, thank you.

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Michael O'Leary, Ryanair Holdings plc - Group CEO & Executive Director [48]

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Thank you very much.