easyJet plc (EZJ) Earnings Call Transcript & Summary

Thanks so much for coming here today. This feels almost like another sign of normality that is coming. And just to say welcome to everybody who's joining, not only the people who are here in this room, but also who's joining in on the web links as well. So we're here to discuss easyJet's 2021 financial report, and I'll do that and talk you through the presentation together with Kenton Jarvis, who is our CFO. But we're going to talk you through the presentation and give plenty of time for questions that you might have, and you should have been have sent the slides and the material here earlier in the morning. You can also find it, of course, on the corporate website as well. But before I do so, I'm going to introduce you to some of my colleagues that are here today and in no particular order of importance. We're starting from left to right. We have Sophie Dekkers, who is here, who is our Chief Commercial Officer; Stuart Birrell, who is our CEO; Ella Bennett, who is our HR Director; Garry Wilson, who is the CEO of VC Holidays; Thomas Haagensen, who is our Director for Group Markets and Marketing; Peter Bellew, who is our COO; and then of course, Kenton, as I mentioned earlier; and last, but definitely not least, we also have -- and it's a great pleasure to me to have Stephen Hester, who is from tomorrow, starting to work in his official role as Chairman for the company, having joined the Board earlier in the year. I'm extraordinarily excited and pleased to have Stephen to come and join the company as well. And I think, Stephen, you're going to say a couple of opening remarks as well.

Yes. Thank you, Johan, very much for that introduction, and it's a pleasure to be here. I was wondering how many people would turn up in person versus watch us. I still don't know the balance, but it's nice to see some people here. And it's particularly nice for me to be able to stand up at one of these occasions and not have to present and be able to [ carp ] from the sidelines, which I should be doing for the rest of the morning. I am really excited about joining the team at easyJet. When the opportunity came along, it was a brand and a customer franchise I loved. And I've learned over many years, if you start with strength in customer demand, inherent demand, there's a lot you can work for. I met Johan, we got on really well, the whole management team are great. And so coming in, I was excited at the opportunity for this company to be a winner in the industry. And 3 months later, I've done quite a lot more due diligence, met many more of the team being out on the front line basis. And I can say that my going-in thesis is still intact, notwithstanding some of our news flow. And I do believe that this is a company with ambition and with the wherewithal to make that ambition pay off. Now of course, we're all very conscious that it has not been a good couple of years for airline investors in general. And what I can also report to you is that there is a very, very strong determination in the Boardroom with myself, but also in particular with Johan and the management team to put that right to the extent that is within our power and to have easyJet positioned and doing the things necessary to have a bounce back in shareholder value and an outperformance in the coming year. We believe this company can support that, and that's what we're focused on. At the same time, the news flow, of course, reminds us that it's a difficult industry from time to time to operate in and reminds us that there are other stakeholders that need to be serviced. I was involved in and highly supportive of the rights issue decision. I think we can see today how protecting your downside can be important in this industry, but also in some of the detail, which Johan will be going through, how we can use a stronger balance sheet to exploit upside opportunities as we move through the next few years, and so I strongly believe it was the right thing to do. At the same time, although quickly forgotten perhaps in terms of the COVID news flow, COP26 was a great reminder of other important stakeholders and issues for the airline industry. EasyJet is positioned, I think, as well as you can be here. We are a leader in terms of our offset programs. We're one of the first signers uppers to the race to 0 charter, and so it's simply a reminder we'll have a busy few years ahead. I'm confident that we can come out of it well. So I'm going to be available to shareholders, as you would expect, in the coming months and, indeed, years to actively engage where desired, but more particularly to marshall the Board in support of Johan, in support of the management team and on the mission to bounce back for shareholders and be winners in our industry. Thank you.

Very good. Thank you very much for that. And just to echo what Stephen said as well, I mean it's clear that this has been a tough ride for shareholders in the sectors, and there's no exceptions clearly of easyJet as well. And everything you will see that we're going to talk about today, every initiative that we do based on the strong financial platform that we have is here to deliver strong returns to our shareholders. That is the absolute focus, the most important thing that we are looking at now as we then go forward on this. Now I think it's also fair to say, and I would like to address this as well, that when we came out with targets earlier in the year, I know that in some quarters and some camps, it was almost regarded to be, to some extent, perhaps a little bit cautious, perhaps even that they were slightly to some extent, underwhelming. But let me be clear on this that look, we have clearly internal ambitions to deliver them faster than we have set out to do. That is what we are striving to achieve. That is what we want to achieve. But because of -- and I think you can just take the latest development on how the virus has evolved now, there is still a lack of the speed of the recovery and when that's going to come. And therefore, we think it is prudent to clearly to stick with those targets. But I can rest -- you can be sure of the fact that it's myself and Kenton's and the whole of the teams and the Board's ambition, clearly they want to deliver them as fast as we can and then be able to come up and give more clarity about further targets ahead. But that's not where we are today, but I just want to be clear on that. Now, okay, so let's just do a couple of minutes now then to talk about Omicron. I just did a lot of interviews here for media. And I said, Stephen, I've never done so many media on a full year where nobody has been really interested to talk about the numbers just gone by. They all wanted to hear what the effect is of the situation that we're in, and we might come back and talk about that also when we come into the Q&A. So clearly, this is very early stages, and it's difficult to tell to see what the impact will be. What we have seen previously at the time of the restrictions being introduced and negative news coming out, that it takes a time before it kind of sets us into a new level. We've seen that there has been a softening of new bookings coming in. Summer remains uninterrupted. There is no change into the bookings intake for the summer, and I'll come on and talk more about the summer a little bit later on. And what it is, is anything is really a transfer to some extent of bookings in the midterm, really specifically around this period up until the U.K. government has said that they're going to review this again into the early part of next year. We're seeing that beach is holding up better than city. And like I said, it is really mostly about the short term. But this is not a surprise. We always thought that this was how the virus could evolve through the variance of concerns. So we have prepared ourselves for a year that's really going to consist of 2 halves, where you're going to have more uncertainty and a tougher period outside the key booking periods in the winter before we're coming in then to a summer, where we expect in the later stages of the summer, we're going to be back very much closer to the 2019 levels of capacity. So with that in mind, let me head into the presentation and go to this slide. This is really 3 key buckets that I just want to talk to you about -- and then I will go through and -- me and Kenton will go through later in the presentation more specific evidence proof points about what we have been doing throughout the pandemic, where we stand right now and the opportunities that we still have ahead of ourselves. Because we have some really exciting proof points on how we can accelerate the growth that sits around ancillaries, as an example, which has really meant a step change for us, also some great and exciting additions to our slot portfolio in Gatwick, Linate, Porto, Lisbon as an example; and the fact that we have been, in many cases, transformed as a business. We have ruthlessly been looking at the way that how we allocate the aircraft on to bases that we know is delivering over and above the average of our contribution within the network. And we'll talk more about that, the expansion of seasonal basis as an example, the step change in the ancillaries and also on the cost. You know that we have delivered GBP 512 million of cost savings in the year gone by with almost half of that to be sustainable, but this is not a program that is stopping. In fact, this is actually not a program. This is hundreds of initiatives that sits along every single cost line in the company. And what we're doing now is continue to add them further savings that we're going to have, and not only taking the savings initiatives to be delivered within a year, but actually making sure also that in the midterm to long term, we can continue to improve and increase the competitive advantage that we have against legacy airlines. And in the cases where we have a gap and are over and above other low-cost carriers to see that we can reduce that gap and perhaps even, to some extent in certain parts, also perhaps close that out and then take advantage of the premium revenue experiences and proof points that we can demonstrate. And we're also doing this very much based on a strong financial platform that we have, which is a combination really about what we were, coming into this. As you know, we're one of the strongest airlines and the actions that we have also then taken throughout this pandemic with access to GBP 4.4 billion of unrestricted liquidity. I think we also can -- with probably the lower -- well, we have the lowest debt of any major airline in Europe right now. And that is there for partly the reasons that Stephen was mentioning earlier to give us the protection for further downside, but also to have the availability and the flexibility to capture growth opportunities and then also restore some of the credit metrics into our balance sheet. So we're going to talk about that, and we're also going to talk about some very encouraging signs that we see for summer, both for the airline and then also easyJet holidays, which, in fact, just coming on to the summer has actually booked more passengers for summer '22 than it had booked for the whole of the full year '19, as an example. And that's yet another sign of that strength in the recovery effect of next summer. So every action once again, it is there to deliver the returns to shareholders, to deliver strong returns to the shareholders. That is what the focus will be of myself and the team. And we certainly, as I said to you before as well, we have certainly a high degree of ambitions also internally to do a very strong and good job on that. Kenton, over to you to go through the numbers.

Thank you, Johan. And it really is good to be here in person and see so many of you. So starting on Slide 5, as the slides catch up. Okay. Travel restrictions across Europe and in the U.K. clearly impacted demand significantly throughout the whole of 2021. And this compares to the prior year where the first half of the prior year wasn't really impacted because the restrictions didn't come into force until about March 2020. And therefore, last year or 2020, it really impacted H2. In response to the reduced demand, and continually changing travel restrictions, easyJet maintained a flexible and disciplined approach to capacity planning, with flying focused on generating positive contribution. As you can see, our total capacity was reduced by 48.8% to 28.2 million seats. And the passenger numbers fell to GBP 20.4 million, a decrease of 57.6%. The average load factor for the year was 72.5%, which was down 14.7 percentage points on the previous year. We saw an average sector length increase by 4.6% as we flexed our route network to focus on a richer mix of beach destinations relative to city payers flown. Airline RPS decreased by 6.3% at constant currency, driven entirely by the reduced load factor as both ticket and ancillary yields were ahead of the prior year. Ticket yield per passenger was sold was up 2% and ancillary yield was up 44%. Headline CPS increased by 33% at constant currency driven by a reduction in capacity impacting our cost per seat metrics despite headline costs actually reducing by 33% in absolute terms on a reported basis. So on Slide 6, perfect. On Slide 6, we've broken out the key performance indicators into quarters. During the first half of the year, strict travel restrictions, including lockdowns were in place across much of Europe. In response to this, as I mentioned, we optimized our schedule to focus on flying, giving us a positive contribution. Our lowest point of flying was during Q2, at which point the U.K. was in full lockdown and international nonessential travel from the U.K. had been made illegal, alongside a third wave of the virus spreading across Europe. In the second half of the year, domestic travel in Continental Europe started to open up, although the U.K. continued to lag behind. As restrictions were eased, we utilized our network flexibility to ramp up our capacity and pivot this to where the demand was strongest. As you can see highlighted on the slide, Q4 demonstrates this as we ramped up capacity by over 280% from Q3. But even so, this was still only 48% of full year '19 levels, again with the U.K. lagging behind. Throughout the year, we've proactively managed our yields to ensure that easyJet remains price competitive on key routes whilst maintaining profitable flying on these routes where the demand has been more inelastic. Our revenue per seat is clearly impacted by lower load factors. However, you can see Q4 shows the positive signs when we see -- that we see continued into Q1 during the financial year. But the recent rise in rates of infection throughout Europe and the emergence of a new variant concern is, however, affecting demand again in the very short term. So moving on to the income statement on Slide 7. Total revenue decreased to just under GBP 1.46 billion during 2021, and that was broken down into GBP 1 billion from passenger revenue and GBP 458 million for ancillary revenue. Our headline costs, excluding fuel, decreased 29% to just over GBP 2.2 billion, and I'll provide more detail on cost per seat drivers in a moment. We recorded a GBP 9 million foreign exchange gain in the year arising from the retranslation of foreign currency denominated monetary assets and liabilities that were held on the balance sheet. This exchange gain was GBP 24 million at H1, so there's been a GBP 15 million loss on exchange during H2 as sterling has weakened relative to the dollar. Fuel costs decreased by 48.5% to GBP 371 million, which is broadly in line with the capacity reduction. As a result, easyJet delivered a headline loss before tax of GBP 1.136 billion, which is at the better end of the guidance we provided in the trading update. Nonheadline items were a credit of GBP 100 million in the year, and this was comprised of a GBP 65 million gain as a result from the sale and leaseback of 56 -- of 35 aircraft and 2 engines, a GBP 61 million credit in relation to releases from our restructuring provisions following constructive negotiations with our unions. These discussions have led to improved productivity, reduced crewing ratios and the introduction of seasonal and part-time contracts, which has allowed easyJet to minimize our compulsory redundancies. And these 2 credits are partly offset by a GBP 26 million net charge related to hedge discontinuation as we were significantly overhedged for both jet fuel and currency as a result of the reduced volumes in -- by COVID-19. And this charge is primarily incurred in H1, and the overhedge position has now been corrected. The results led to a total loss -- group loss before tax of GBP 1.036 billion compared to GBP 1.273 billion in the prior year. So if we move on to the revenue per seat bridge, which you can see on Slide 8. It should be noted that revenue per seat is significantly impacted by the reduced load factor year-on-year, but I'll walk you through the waterfall. Total revenue per seat decreased by 6% at constant currency, and it was driven by the following factors. The Thomas Cook's collapse in September 2019 created a strong prior year comparison. And if you strip that out, that would decrease RPS in the prior year by 92p a seat. Despite a 14.7% drop in load factor, ancillary revenue increased by GBP 2.64p per seat at constant currency, thanks to our transformed ancillary proposition with standard plus fare and the new baggage policies, providing a strong source of ancillary revenue. And this was demonstrated, if you look in the top left, by the yield, which was up GBP 6.37 per passenger. This is obviously really encouraging. We believe that customers traveling during the pandemic have had a higher propensity to spend and therefore purchase ancillary revenue. And in addition, due to the low level of the flying in the first 9 months, we've had an increase in the mix of leisure customers in between July and September on -- weighing on the average for the year. So because of that, I wouldn't necessarily extrapolate the GBP 6.37 in your model. But with that said, we are confident that there's been a step change in our ancillary revenue generation. And we continue to focus on this additional stream, and there are more products coming online. The major factor, though, affecting the RPS over the year is obviously the pandemic with a negative underlying impact of GBP 5.17p per seat. And this is due to the lower load factors on the reduced capacity flown and the competitive pricing environment. Finally, after including a 36p negative impact from currency, easyJet's reported revenue per seat for the year decreased by 7% to GBP 50.54. So now moving on to cost and cost per seat on Slide 9. As stated earlier, headline -- group headline costs in absolute terms were reduced by 33% on a reported basis. And this was driven by capacity reductions and savings achieved in the cost-out program, which touch most areas of the business. Analysis of -- on a cost per seat basis is not particularly meaningful when capacity is extremely low as it's impacted by the relative levels of fixed costs, which are spread against the lower volumes. And the mix of fixed to variable cost varies by airline, and that also makes comparability difficult but equally becomes less important as you start returning to a fuller flying program. And that's why we've highlighted at the top of the slide the absolute change in cost year-on-year in constant currency shown in percentage terms. I'll now walk you through each of the cost buckets in turn so we can highlight some of the great work that's been done on cost as well as point out some of the headwinds that are coming. Okay, starting with airport charges and ground handling. These were reduced by 53%, partly due to the reduced volumes, of course, but also due to a large number of contracts renegotiations, which have been completed across the network and delivering cost savings during the year. There will, however, be cost headwinds in our airport charges going forward, especially at regulated and slot-constrained airports, where charges are increasing as we see third parties attempting to recover underlying inflation and losses from the last 18 months. But these costs will be market-wide in the airports where easyJet operate, and therefore, we'll retain our competitive cost advantage in these slot-constrained airports. I should also point out, it's a similar situation with navigation charges. Crew costs were reduced by 21% due to the structural changes as a result of seasonal and part-time contracts being implemented following the successful conclusion of constructive negotiations with our unions, along with other productivity concessions. Significant savings during the year were also made through the use of furlough schemes across the network, which has now been stopped in the U.K. and are being progressively unwound through Europe. Maintenance is reduced by 20% on an absolute basis mainly due to the flying -- the lower flying hours resulting in reduced maintenance spend as we deferred events in order to focus on preserving cash but also due to savings on kind of line maintenance, which were in-sourced during the year. We continue to make structural cost savings during the year and have now in-sourced our line maintenance in London Gatwick, in Berlin, in Edinburgh, in Glasgow and also in Bristol. And these changes will not only save us cost but also improve our on-time performance. Now ownership costs have increased by 7% in the year on an absolute basis. As we emerge from the pandemic, we have a higher level of gross debt on the balance sheet, and therefore, an increased cost of servicing this debt. This effect has been partially offset by a lower depreciation charge in the year as the impact of sale and leaseback transactions and the revision of our aircraft depreciation policy has been more than offset by lower maintenance-related depreciation as a result of reduced flying program and the release in the maintenance provisions from discounting future maintenance reserves at higher underlying interest rates and also a reduction in our fleet size. Going forward, the charge for depreciation will increase as we get the full impact of the sale and leasebacks annually, combined with the annualized impact from the change to our useful economic life and residual value estimates, along with the impact of our aging fleet and a return to more normalized flying volumes. The average age of our A320ceo fleet is now almost 8 years, and so they'll be undergoing their first engine shop visit in the next 1 to 2 years, and those will be capitalized on the balance sheet and depreciated going forward. Naturally, the cost of those is included in our CapEx guidance. Other costs decreased by 23% due to the reduced flying volumes, lower disruption costs and lower sales and marketing spend and the cost-out program, which is in a line-by-line review of the entire cost base. There was a 49% reduction in fuel costs, which resulted in the cost per seat remaining broadly flat on the year despite a one-off credit taken in the 2020 financial year of GBP 55 million, which came from the sale of EU ETS credits. As you can see in the waterfall chart, the airline headline cost per seat at constant currency before balance sheet revaluations rose by 33% in the year, and the 2 bars on the right of the chart illustrate the net benefit from foreign exchange movements in the year of GBP 1.41p. And after taking all these factors into account, the net headline cost per seat was GBP 90.41. Moving on to Slide 10. This slide provides a little more detail on the impact of fuel prices, currency and hedging. The average market price for jet fuel for the year was $554 per metric ton, which is 4% lower than last year. After taking into account our commodity and currency hedging, the sterling cost of fuel per metric ton was GBP 469, also a 4% decrease compared to 2020. The average market rate for the U.S. dollar was GBP 1.37 -- was $1.37 to the pound, with easyJet's effective rate being $1.35, so $0.02 above the prior year. Net-net, there was a headline GBP 24 million positive impact from currency movements, which includes those in revenue, fuel and other cost lines. So moving on to Slide 11, which talks to cash management. Throughout the 2021 financial year, easyJet maintained a disciplined approach to capacity and cash management, which has enabled us to beat the guidance of GBP 40 million per week on a fixed cost, plus capital expenditure basis. We're now ramping up flying and restarting the deliveries of the NEO order book. So we'll not be reporting on this basis going forward. It provided a useful metric in the scenario when the fleet was fully grounded, but I hope with the advanced level of vaccine rollout that this will not be a relevant scenario again. We've taken the decisive action during the year to strengthen our liquidity position, which has resulted in GBP 4.4 billion of liquidity being held at the year-end, and our net debt has reduced to GBP 0.9 billion because obviously, we had the -- compared to GBP 2 billion at Q3 because of the effects of the rights issue. As at the 30th of September, we had received GBP 1.144 billion with a further GBP 90 million received in the first week of October after the year-end. Cash refunds to customers during the year were GBP 455 million. Unlike many competitors, easyJet sought to offer customers industry-leading booking flexibility and customer service during the pandemic. All our customer refunds are up to date, and they are paid within 7 days. The amount of flight vouchers currently in issuance is relatively low with an approximate value of GBP 203 million, and we look forward to honoring these in the coming financial year. As we came into Q4, demand picked up and flying increased. This, coupled with the momentum we saw in our forward bookings, helped us generate a positive cash movement in the quarter. Moving on to the cash flow bridge on Slide 12. During the first half of the year, our net cash position, including money market deposits, increased by GBP 19 million as a result of the GBP 1.57 billion of net proceeds from financing, offsetting the cash burn. easyJet continued to take decisive action on liquidity raising, raising a net GBP 1.17 billion during the second half of the year, predominantly funded by the rights issue. In contrast to the first half of the year, our cash burn reduced to just GBP 10 million, so we've had a net increase in cash of GBP 1.16 billion during the second half of the year. This leaves us with cash and money market deposits of over GBP 3.5 billion at the year-end, which underpins easyJet's excellent liquidity position and the strength of our balance sheet as we come out of the pandemic. As highlighted in the previous slide, our disciplined approach to cash has resulted in GBP 46 million of positive cash flow in the fourth quarter Okay. Looking at the debt maturity profile on Slide 13. Throughout the year, we've optimized our debt maturity profile by replacing the shorter-term RCF and term loans with longer-term facilities. The remaining GBP 300 million of the -- tranche of the CCFF shown in black has been repaid earlier in the month. So easyJet has no other debt maturities outstanding until full year '23, excluding, of course, the ongoing leases, which are shown in gray. We'll review the UKEF loan post Q2 when we'll have a clearer view of summer bookings. And depending on the outcome of that review, we may take the opportunity to accelerate our debt repayments and increase the number of unencumbered aircraft within the fleet as the repayment of this facility would increase the position from 44% to 59%. The UKEF is shown in the dark orange bar. So now moving on to the balance sheet. On Slide 14, we can see the balance sheet, which continues to be rated as one of the strongest in the sector. The significant change in derivative financial instruments is largely due to the maturing of derivatives and the increase in jet fuel prices. The sale and leasebacks, which have transacted on 35 aircraft and 2 engines over the year are reflected in the decrease in property, plant and equipment, which includes right-of-use assets and also the resulting increase in lease liabilities. Unearned revenue has increased from the same point last year as customers have been gaining confidence to book in advance. Although compared to pre-pandemic levels, the booking cycle still remains relatively close to departure. Trade and other payables have been increasing over the second half of the year as flying ramps up, bringing the balance within GBP 114 million of the prior year. On the 30th of September, we had net debt of GBP 910 million, which comprised of cash and cash equivalents of GBP 3.5 billion, borrowings of GBP 3.4 billion and GBP 1.1 billion of lease liabilities. At the close, our liquidity position was in excess of our new liquidity target of unearned revenue, plus GBP 500 million buffer. So moving on to Slide 15 and our fleet. This morning, we announced our agreement with Airbus for the firm commitment of a further 19 aircraft with deliveries between '25 and '28. We've increased our firm orders to 118 aircraft, having converted a further 14 purchase options and 5 purchase rights into firm orders. This still leaves 6 purchase orders and 53 purchase rights from our existing agreement. Whilst we retain the flexibility to downside the fleet if required, we're not constrained by the fleet numbers in this graph as we can look to externally source aircraft for the market. Just to explain the graph. The top dotted line on this chart illustrates the current maximum arrangements with Airbus and our lessors. The solid orange line represents our base plan to the end of 2022. And the lower gray line represents the contractual minimum fleet size. And as I just mentioned, it should be noted that the chart does not include any future opportunistic additions to the fleet. As the A319s are leaving the fleet, they're being progressively replaced by larger A320 and A321 aircraft, allowing the fleet to upgauge. 67% of the fleet are now A320 or A321 compared to 62% in 2019, and this proportion will continue to grow. In summer '22, we will have some wet lease aircraft, which will be used to service a portion of the additional slots that we've added at Gatwick. Due to the timing of these slots being added to our schedule, we decided to cover the slots with a combination of reallocating aircraft from the network and wet lease aircraft. This is just a temporary measure. And from summer '23 onwards, these slots will be flown on easyJet aircraft. So moving on to Slide 16, summarizing our gross capital expenditure projections for the next 3 years. This is the gross CapEx and doesn't take into account any sale and leasebacks that we may choose to do. In the year, as we constantly focused on preserving cash, we cut CapEx such that we've been able to reduce our spend levels. This has been achieved through reducing capital maintenance spend as we're able to defer maintenance events as a result of lower flight cycles this year, coupled with the reduced spend in other areas such as project CapEx. There were no new aircraft delivered in the year as we paused deliveries throughout the last 18 months, and these will now restart with 8 NEO aircraft in full year '22, all being delivered ahead of the summer. Gross CapEx for the full year '22 year is expected to be circa GBP 900 million, and this will grow over the next 3 years, in line with our aircraft deliveries, which will resume from '22 as we return to growth. All the deliveries of NEOs, which generate 15% less carbon emissions and 50% less noise on takeoff. And in the dark red, you can see the maintenance cost, which shows the engine shop visits coming through from our CEO fleet. Moving on to Slide 17 to talk about FX and fuel. easyJet continues to hedge contractual exposures on leases and CapEx. And as at the 30th of September, we were 55% hedged for fuel for the financial year ending 30 September '22 at a rate of $498 per metric ton. We've updated our hedging policy to be more -- to have more flexibility built in to react to changes in demand, and we'll now be hedged approximately 60% on average in year 1 and we'll shorten our hedging tenure from 24 months out to 18 months out. In the year, there's been a net charge of GBP 26 million in non-headline items related to hedge discontinuation with a subsequent GBP 7 million gain arising in headline from the fair value movements on discontinued hedges. EasyJet has continued to purchase carbon allowances for the year and our exposure, and we are now hedged 100% to the end of the calendar year to the 31st of December '21, which should be surrendered in April '22. We remain in a strong position with hedging we have in place, especially with fuel price volatility the way it is and some of our peers not being hedged. I'll now hand back over to Johan.

Good. Thank you very much for that, Kenton. So if we're switching on to the next slide, I'm not going to repeat what I briefed on, and I'm going to go into more details on the things that you're seeing later on, on the slide. But I just want to draw your attention really to the box that we're having here on the upper hand right side of the slide, which if I take you back and you would remember that we very much at the early start of the pandemic said that we only wanted to operate a flight that was generating a positive contribution for the company. And we did that because, clearly, we didn't have the extent about how long this situation was going to last. So you could also see that we started off having a very, very small amount of volumes into last winter. Only did about 17% coming into the Q3. And then when we saw that restrictions were being removed primarily in Europe, where the testing requirements went there from 1st of July, we saw a big pickup in the demand outside the U.K. while the U.K. still had the pre-departure test and the PCR test on day 2. So we had a big difference in terms of the recovery. And of course, us being more exposed to U.K., being U.K.'s largest airline, that also had an effect on the numbers that you saw from in terms of what we were flying. But what it showed was also the flexibility and the readiness we have to ramp up to be able to take on and act on short notices on restrictions that had an impact on the demand. And still, with flying that 17% and the 58% of 2019 levels, that was still made us the second largest airline in Europe for this winter. So we saw then that there was a good momentum coming into the first quarter, and now we're seeing and we're looking to be around 65% of 2019's capacity in the quarter that we are in. We're planning to have an estimate to have over 80% of the load factors, and we will scale that up also then coming into the second quarter with approximately 70% of that capacity levels before we're then hitting and coming in and ready to ramp up for Q3 and Q4. And at the end then of Q4, we're looking to be, as I said, in the similar position or close to the position on capacity that we had in 2019. So we're fully resourced and set up in order to do that with the flexibility that we can also react to short and quick changes into demand following the restrictions and the uncertainty that we are in. Now I just want to point out also that there is -- and it's clear that there is a challenge for some airline in this industry about attracting people to come and work for them, and we're seeing that when it comes to pressure when they are recruiting. We're also recruiting now. We're recruiting some 1,500 position across the network on cabin crew for the summer. And we've had over 11,000 people sending in their applications from that. So whatever pressure there is on labor, we're not seeing anything of that. And I think one testament of that is clearly the attractiveness we have as an employer. We were ranked the highest, most attractive employer in the Glassdoor rating. We had a score of 4.2 out of the scale of 5 in the whole of the travel hospitality sector in the U.K. And of course, that's not only a nice thing to have. It also helps immensely when you know that there might be pressure and shortages on labor and the ability that we have to attract people to come and work for us. So strong -- very strong, encouraging signs also for the summer ahead. We have more revenue booked for the airline in -- for the H2 in next year. As an example, the yields are higher compared to 2019, and I'll give you more information also about what we're seeing with easyJet holidays. So based on all of this as well, we believe that we have some great foundation to deliver really strong returns to our shareholders. Moving on to the next slide as well. It can't be underestimated the changes that we and Sophie primarily, who's leading this, has been doing to the network. I mean the changes to the network, I mean it is seismic in its proportion. We have moved and reallocated some 43 aircraft into the fleet. And if you take that 43 aircraft and you put it in the context of what we would normally do, it would all be about single digits. And just I confirm that number to say that what have we done previously before I also joined as well, it was always around 7, 8, 9 aircraft. 43 aircraft has been reallocated into basis and routes that is driving, and we can demonstrate that it's giving us an over above the average on the contribution for the company. That is absolutely massive for ourselves. Step change in ancillary, we shall talk more about as well. Up-gauging of the fleet as we're now starting to take deliveries of the 320s as an example and then 321s to come. And also easyJet holidays, we shall talk more about it. It's still early stages on that as well, but we've got some very strong encouraging signs on that. Also, this growth, this is the other thing. This comes into places where we have evidence and we've got a history that we know that is performing. And seasonal base has just been one example of that. Since we launched Palma, we've also added Malaga and Faro as an example. And we know that they have been successful in the previous seasons, and we're looking forward also to build and expand those bases as we go forward. And we set out very early on, and it was something we discussed a lot as a team at the early stage of this pandemic that what does success look like. Well, success looks like that the things that sits within your control, you're doing better than others. There are things and there are uncertainties in here that you can't control. But in terms of setting yourself up to make sure that you're going to come out of this better and more competitive than your competitors, whether that is legacy carriers, whether that is other low-cost carriers. That was always the point that we looked at very, very early on as well. And we believe that we have evidence to show that we are doing that, and we are progressing. And we've got more to come in order to do that. We're seeing that we have been able to transform the company a lot from a cost perspective. We're seeing a step change when you look in at the ancillaries. We have the foundation to capture growth on proven area with very low risk as well. And we know that others are facing both operational pressures as we speak. They're facing problems with labor cost that's going to come our way. And you can argue and say, well, that's cost that we have already had in our model. But that's something that's going to hit and hurt others, while we also have a huge amount of upside that others can't take on because you could all argue that they've already done them, ancillaries being one. And then we also have some unique propositions where we are taking a step change, introducing dynamic pricing on the ancillaries as well. So everything we're doing is really focused on, if I can have the next slide, please, on these 3 things. It's about the initiatives that's going to deliver strong returns delivered by what I believe is the best people in the industry with an absolute primary focus around safety, operational and digital safety as well. But it's these 6 initiatives that everything we are doing, our time is being spent on this. But the developing of the network strategy is about making the customer experience as good as we possibly can. I'll talk more about that a little bit later on as well. It's about looking at the product portfolio evolution. It is looking at what we're doing within easyJet Holidays, the cost and then -- the cost program and then also our approach to sustainability. So let's start to talk about the -- what we're doing at the airports. So I'm very pleased to be able to announce that we have reached an agreement on additional slots in Gatwick. We get a specific slide on that one as well. We're also adding to our slot portfolio a total aircraft worth of 5 if you're looking at the combination of the Linate slots and then also Porto and Lisbon. And these are slots that's coming in to a large extent to those slot-constrained airports, which will really always be the key and one of the core parameters of the success of easyJet. Building positions, Manchester, Malpensa pairs. With these places, we're going to be bigger than we have ever been before, proven basis for ourselves that we know are delivering and also the expansion of the seasonal bases. And this is big. We -- if you compare to where we were prior to the pandemic with 9 aircraft, we're adding up now to 21 aircraft in these bases, and we're looking to now identify more seasonal bases that can come. And we can do this because of the changes we have done in order to deal with seasonality, where we now have crew on seasonal contracts, so we can grow in the profitable summer seasons without taking on the correspondent losses that we had previously on the winter season. And that's a game changer because this has been with the company since really the start when it was founded. So that change into the way we look at the labor cost from a seasonality point of view and also the increased productivity are things that structurally has been addressed and being removed. So if you look at the next one, specifically to talk about Gatwick. You know that this is something we've been talking of quite for some time that we have been interested to expand the portfolio of slots in some of the core airports. And we're very pleased to say that since the start of the pandemic, we have now moved from 63 aircraft to what we estimate to be at least operating 79 aircraft in Gatwick from this summer. So this is a lease agreement that we have done together with British Airways. And if you take that into a combination of what we have previously done on slots that we achieved from other airlines as well, it gives us a position which means that more than half of the capacity from Gatwick will actually be orange, will be an easyJet flight for this coming summer. If you go on to the next slide, we have also looked at ways on how we can as -- we're going through this very, very rigorous process of allocating aircraft into destinations where we believe there's going to be most demand and we'll see higher yielding routes as well. We have ramped up also the capacity for the summer to Greece, to Canaries, to Turkey, to Egypt. In fact, we have never been bigger into these places as well. This is also very much reflecting and meeting up on the early signs of demand that we're seeing for the summer going forward. We also said that coming out of last year that we had a good momentum coming into the winter. And if we take the Omicron, which I'm sure we're going to perhaps come back to as well, there's been a strong underlying demand for the key booking periods over the winter, where we always said that there were going to be competitive pricing outside of that. And we have the, like I said, also still have the flexibility with the network and the changes we've done through our processes and procedures to adapt to quick changes in the demand that also can come. On to Slide 25. This is another thing that I think is really worthwhile spending some time on as well. We have always set out to know that whilst we've been adamant in terms of doing whatever we can to reduce our cash burn, transforming the cost base of the company, we also wanted to make sure that we looked after the customers to the extent we could throughout the pandemic. Because you know when you're coming into recovery, that's going to pay back. And if you're looking at the things we have been doing, we have leading policies around the flexibility for change. As an example, we're giving within the airline customers the opportunity to change your bookings up to 2 hours before departure without paying a change fee. Now we're doing that because we know that, that gives customers to -- the confidence to book. We're also extending -- we just announced the ability for customers to say that if their flight is impacted by travel bans, even if the flight continues to operate, they can make sure that they get cash refunds back and vouchers and other things. And we know that this matters because it gives customers the confidence to book. And it also -- once again, it underlines also the strength of the brand. We launched the COVID-19 travel hub, which is basically a one-stop shop where we are describing what is the latest in terms of travel restrictions. And as you can imagine, these people have been very busy because of the changes we've seen around the travel restrictions, but it's something that has actually been translated into 9 different languages. And what it has meant is that people have not had the same need to contact the contact center there was before. So it's a better customer experience, and also that means that we can be reducing cost in the previous setup that we had among the customer centers. We digitalized a lot of things in the business. We helped customers to self-service even more as well. And what we're seeing right now is that actually not only do we have the highest degree of returning customers to easyJet that we ever had, we also have higher customer satisfaction scores than we had in 2019, which I think is quite remarkable. We also did a study here with Kantar in September, where we asked consumers in our main core market how they rated us on the key core parameters that matter when customers choose their airline of preference. And on the key core parameters that we know matters the most, we came up as #1 almost in all our markets when it comes to the value that we deliver, the appreciation of the network and also one thing that is about how do they deliver in the shorter booking window in terms of your program and your prices. And this is a very, very important one because we have seen a change that the period from when people book to time today, the part has shrunk throughout this period. So clearly, to have a prominent and leading position in there is very, very important for ourselves. Also done a completely new change into the way we are engaging on social media that also have driven a lot of followers on to those places. So moving on to Slide 26 then. This is the slide where we're then setting out the changes we've seen from the ancillaries, and it's quite remarkable. I mean if you're looking now at the total of revenue that we've had in the previous year and the share out of that revenue that now consists of ancillaries, we're up to that 30%, where we -- before we were around that 21%, 22% mark as well. And this is driven by primarily 2 things. One is the number of bundles that we have come out with throughout the year, starting in January. The cabin bag proposition where you could buy that together with your premium seat in February, we launched in the second phase of that, just recently, where you can buy it as a stand-alone product in itself. And we also introduced a Leisure Fare, which is the standard seat base with a 23kg hold bag included as well. So -- and you can say, well, this is something that some other airlines have done before. Yes, you're absolutely right. That's why we have the upside ahead of us. And you can also tell by the -- what this has been doing from an RPS point of view and also from the mix point of view that this is very, very encouraging. And we've got more to come in this area. One of the things that we are first with that Sophie is driving very much in her team, it's actually now as the first airline, we're going to be able to dynamic pricing, price the ancillaries as well, not just by having some different bands in there, but actually that you can drive dynamic pricing on the ancillaries, just in the same thing that you would do with the fare. And we know that this is going to give us even greater opportunities to maximize the total value of the basket and the revenue. And we've got more things to come. We're going to launch a new in-flight retail proposition here before the summer, where we're going to do deals directly with suppliers and have a broader choice of options for the customers and better and more attractive prices from the suppliers. So we believe that is also going to be an upside. We're going to benefit more than others from the fact that we're seeing duty-free sales coming in strongly from the U.K. market following the Brexit as well. So there's more things that come from that. Just on this cabin bag because I think it's one of the things where you can say that it's kind of the dream of the activity you're looking for. Something that on one hand, it increases the revenue. At the same time, it's broadened the offer for the customer, and it actually drives also increased customer satisfaction. The cabin bag policy that we had previously was the single largest contributing factor to disruption that we had. So because of the fact that we had to offload cabin bags from a number of flights that we were in, and it was not great from a customer experience either. That factor has now been removed from where it was previously to constitute some 13% down to now to only 1.4%. So it gives us also a much better customer experience than what we had been doing apart from most of the additional revenue that we're seeing. And now when we throughout the winter are launching this also then with dynamic pricing, we expect further upside to come from that. To go on to the next slide, holidays. We set out earlier to you a road map where we believe that this can deliver a significant contribution for the company, plus GBP 100 million in the midterm. And we've had some very, very good start into the summer as an example. And just to put this a little bit into the context of what this really is all about. This is a low-risk way of capturing the strength of the brand on what is the most superior network on leisure travel in Europe. And one of the things we always said in the beginning when we saw this opportunity was that, look, easyjet.com has over 300 million of unique visitors to its website. If we can get some of those who usually just takes the flight and books their hotel accommodation somewhere else and transform that and convert it into our own model, that would represent a big opportunity. Today, out of what has already been booked right now, which is actually 40% of what we expect to sell for the full year, for the next year, means that we have had also 40% of those customers have come to us through easyJet.com, which means that the cost of acquisition for customers is also clearly very, very low because it's already customers that we're having. It's also been a point in time when this was set up and launched. And you would recall this, this was the end of 2019, just a couple of months after Thomas Cook have gone bust. Throughout this -- so we thought that was a good from point of view because we know that there was a need for other players into the market. But what we also saw happen throughout the pandemic that a number of those hotels, they're really the most in-demand hotels that were previously tied up in exclusivity arrangements with other tour operators became available to the market because of the pandemic because others were struggling and they had to focus on selling their own assets. So we have actually accelerated the journey to get to what we believe is Europe's most attractive hotel portfolio. All the hotels we're selling is 4- or 5-star on TripAdvisor rating. And it's also something that is unique about this that not only do we have a lot of, like others would do, fixed costs in this, this is really built up from mobile first. We have over 50% of the bookings that's coming in, today has come through the mobile. And that is extraordinary numbers, nobody would even be close to. So whilst this is early on for the next summer, this is a good and very encouraging start. And we, of course, look to do -- present this in more detail also on the continued, hopefully, progress on this as we go through towards next summer. So let's go on to one more slide, and let's talk about the cost. Like I said initially, the work on cost, it is not one program. It is hundreds of different initiatives where we have looked through line by line the things of how can we reduce cost in that area. If we can't reduce it in the short term, what can we set out to make sure that we stay even more competitive and efficient in the mid- to long term? And there's a huge number of activities that's been done, and we will continue to do more work on this. We've had, and I addressed this before as well, finally unlocked some of the seasonality issues that we've had. We improved productivity around the crew. Kenton was mentioning that we in-sourced some of the line maintenance in some of our big bases. We added a third bay in Gatwick that was done earlier in the year, in March, I think. We are now breaking ground on a 4-base hanger in Berlin as an example. And what this does is, of course, that it reduces cost and it gives us more control over the events of the maintenance that we are doing, and therefore, also driving better on-time performance. Peter have -- you -- we'll look through some numbers. You have renegotiated 132 different ground handling contracts, 132 different ground handling contracts has been reduced with lower cost, much more incentive to focus to get them also to collect and drive ancillaries and revenues and steer them also towards incentives and penalties unless on-time performance is being made. It's been a huge job being done in this area that is giving us opportunities and better cost performance going forward as well. Now Kenton talked about there will be cost and headwinds coming our way. And you can say that while certain costs would be things that's going to happen to everybody, there will be certain things that is exclusive to us in terms of ownership and sale leaseback transaction as well that we talked about. And there will be certain things that is a really conscious choice of the company, operating for more expensive airports when you know it makes sense because you can cover up in pre the revenue. But it's an ongoing work that we're doing to make sure that we stay as efficient. And the goal is really to make sure that the cost advantages that we currently have, and we have them, and remember also that the main competitors head-to-head are the legacy carriers. That are something that we're looking to enhance and widen the gap. And to the extent -- because we are able to compete with everybody and to the extent that we have a cost gap towards other low-cost carriers to our disadvantage, how do we reduce it, how do you mitigate it? How do we close it. And how close can we get to be there? That's what the aim is because what we have proven, and that will be the case, we can compete with any other airlines out there. We believe we have more upside to come. We believe there are more pressures on others to come as well, but we're not complacent about it, but that's why this is a focus on an ongoing basis to make sure we're going to continue to do more work within the cost areas. And then coming on to some of the last slides here before I sum up as well. And Stephen once mentioned this before, I think we have a clear advantage in our position when it comes to the approach we're taking in sustainability. We've been involved in about zero emissions technologies since 2015, together with our partnership that we have with Wright. We have reduced the carbon emission capacity kilometer since 2000, about over 30% of where we've been. And we continue to do a lot more as well. So we operate in now our first flight on SAFs as an example. We are doing a trial as we speak, in Bristol, where we're the first airline to work together with an airport where we're looking at how we can drive zero emission turnaround, which can reduce the -- and we've seen it being reduced with up to 97% of the carbon emission, primarily because we're using electric equipment on the ground. All the aircraft, we're now taking delivery on within the context of the deal we have with Airbus it's, of course, NEO Airbus with 15% more fuel efficiency as well. And also, we were the first major airline to offset the carbon emissions in 2019. Now it's an interesting point about this, and this was something that was debated very much when I was up at COP26 and represented both easyJet but also in my capacity as Chairman of Airlines for Europe that we know that there has been previously some criticism about carbon offsetting because of individual projects. But if you go into the highest quality of product that is out there, which we do, the ones that are VCFS and gold standard, you would find out that actually, there is not a single government, there's not a single company out there in their goal to reach net zero that doesn't rely on some form of carbon offsetting. Whether that is avoidance or whether that is removal of the offsetting pieces, there has to be offsetting at the end of the day for governments and for companies to reach the net zero in almost all the cases. So our argument is then to say, well, if that is the case, it also needs to be recognized. It also needs to be tax exempted as an example. It also needs to be recognized in the same way that other also measures that eases the impact on the environment should be. And we know that customers like this. We know that customers like this. When people are aware about our carbon offsetting program, they are 25% more likely, like-for-like, to choose easyJet over another airline, 25%. In normal times, we would be happy if we get 1% to 2% of this. You can always say, well, why is it low? Well, we haven't flown that much since we launched this program. But of course, as we're now starting to fly more, we're having cabin crew and the pilots are making announcements on this. We are using also the advertising space in the -- on the back of the seat to talk about this, and we're seeing an increasing ramp-up as we're now going through even more capacity as well. And we're committed to do more things. Carbon offsets is an interim measure. It's not a final part of any solution, but it's there before you get on to a zero emissions technology and also, slash, if you can see a greater supply of cost efficiency has to be available for the industry. We joined also, as Stephen mentioned, the race to net zero, and we're going to continue, and we're looking for in the first part of the year also to come out and talk more about what we're going to do with the net zero road map to 2050. So to summarize this now on the slide. Clearly, on the outlook, we're looking because of the uncertainties that exist that we can't really give much more now than the fact we estimate to fly around 65% of '19 capacity. We expect to have load factors that is over the 80% limit. We intend to scale that up to 70% coming into Q3 before we then get on to the Q3 and Q4, then there would be close to 2019 levels as well. So what we've been trying to talk about today is to set the context on the fact that we've got a strong financial platform where we are in right now. But we also have the opportunities to continue to drive a successful journey with an absolute focus on strong shareholder returns and also profitable growth as we continue throughout this next period. So with that, I think we're going to do questions.

Johan, on that whether maybe that involves some more base closures and where maybe you see some more opportunities. And the third one, I'm not sure if I'm allowed to ask your new Chairman a question so if someone else wants to take it, that's fine. But your statement and indeed Stephen's comments mentioned quite a lot of both growth and shareholder returns. Now shareholder returns clearly comes from earnings share price, and the other form clearly is dividends. Is the return to dividends a huge priority for easyJet? Or would it be largely about growth for the medium term?

So I'll do the first 2 and then you can do the third question. Look, I think you have to ask them if they negotiated and who they negotiated with. It was an agreement that we had in and discussions and negotiations with them on this. So this is something that we're very pleased about because this is something we set out all along that we want to do. It came up pretty late in the day. Hence, the reason why we don't do the wet leases on this. But like I said, this is something that is also adding to a significant position that we have in Gatwick. It's a midterm agreement in terms of the length of it, but also with the opportunity also to extend that, and we have to wait to see what happens on that. But it's -- whenever you can get a slot at the good times that these represent and the good slots, there's a difference between good slots and not so good slots, and whenever you can get good slots at places like this, this is something that we were pleased about. In terms of the fleet allocation, yes, it's been tremendous. You're sitting with the microphone there, so I'm going to hand over to you to answer that question then.

Yes, sure. Yes. So in terms of our plans for FY '22 as far as we are planning, that's it, but never say never, I think, as we can in this industry. Obviously, we'll look ahead, we'll look at the performance this year, and we'll look ahead into next year and decide. We're already starting that process now to look at what we do into '23. So we will continue to, if we need to close bases where they're not performing, reallocate aircraft where they're underperforming and look for those growth opportunities where we're seeing strong performance. The destination basis is a really clear example of that, and I think the strategy will be to continue in that direction. But also where we can get good slot opportunities at primary airports, we'd obviously focus on those as well. But in terms of FY '20 and our current plans, that's where we're at, at the moment.

And also, we'll keep clearly identifying potential opportunities on a more seasonal basis as an example as well.

Okay. So shareholder value and the focus there and then dividends. I mean the entire focus is really around increasing margins at the moment. So we are -- the -- we look across our network for the contribution per block hour. We do that at a market level, we do that at a base level, and we do that at a route level. And if things aren't performing acceptably, that's when we reallocate and that's what Sophie has been very kind of vigorous on doing over the recent times. And you can see that with the restructuring in Berlin. You can see that with the base closures and the growth in Gatwick, which does perform at the upper end of margins. So that's one point to rework the network we have in the existing metal. Secondly is then to look at kind of capital-light revenue streams. So really important to that is the work on ancillaries. It's great what we've seen in terms of take-up with -- for the standard fare and also for the cabin bags, which was only Phase 1 because that we were only able to sell for this financial year, those attached to premium or front row seats, which is about 1/3 of the aircraft, The development in November brings the other 2/3 of the aircraft available to be sold to cabin bags. Also, we've got leisure fares. We're looking at a new in-flight retail proposition in the second half, and duty-free should be a big opportunity as the U.K's. largest airline. So that's a very capital-light thing. As in fact, holiday bases. When we look at expanding holidays, it's 96% variable. We're not committing to hotels, not doing any commitments. We're not doing any prepayments. So it's a very variable cost base, and we're really just leveraging the leisure network that easyJet has, and we think we can drive strong incremental profit from that with a very light amount of capital around systems. And then, of course, reducing costs, that will all lead to the shareholder returns. And when we think about investment and growth to that part, again, we want to do that with the kind of hurdle rate on capital in mind. So fleets are most important cost, our biggest cost. And when we look to roll over the fleet, where you can think we've got 97 A319s. They've got 156 seats. So when we bring in the NEOs being 320s and 321s, we get a nice upgauge, which will drive down our unit costs as that comes through. And obviously, all 97 will be gone over the next 3 to 5 years because their average age is 13. And then on top of that, we get the benefit that these are more fuel efficient. So we're 15% more fuel efficient. So we'll be spending less on fuel and actually spending less on carbon as well because of that. So that's on the fleet side. And then the growth, as Sophie said, is really focused on those primary slot-constrained airports in our core markets. We know these markets. This is adding to existing traffic, so it's easier to grow. It's lower risk. It's not establishing necessarily brand-new bases and brand-new routes. It's competing where we compete. So that's how we're thinking of driving the shareholder value. The question on dividends, yes, we said at the time of the rights issue that we'll review how 2022 goes and then come back on the dividend policy at the end of the year. But we fully appreciate the importance of dividends to investors, and it's been a core part of easyJet's ethos. So it's still important to us, yes.

And just to add to that, James, on the shareholder value, like I said, this has been -- if you're looking at -- and one shouldn't comment on -- specifically on ones company's share price. But there's no doubt that you can have as many times discussions about, well, you have been exposed to, we have been exposed to a market who has been more restricted in terms of travel restrictions that has an impact in itself. But you want to focus on the things you can control. Hence, while we've been absolutely ruthless when it comes to how we allocate our aircraft and capital in the company to make sure that it does really drive the returns, and that is an absolute determination for myself and the whole team to maximize that opportunity going forward.

It's Andrew Lob from HSBC. Can I ask about the cost pressures that you're talking about in the context of airports? Because the dear old fellows at Schiphol have got quite some ambition to put charges up and that, I think, has been a successful place for you recently. And things are a bit more opaque, I guess, at Gatwick, but clearly, there's great ambition to put charges up at Heathrow. So to what extent might they slip stream up? Can I press you a little bit, Johan, on the new leases from BA? You said they were medium term. How long is medium term? And do they dribble back to the mothership or do they come out as a block just in terms of managing your relevant position? And then a final question might come around to the royalty agreement with the founder. And are there any plans to renegotiate it as the company becomes bigger? And are we clear whether the holidays revenues would form part of that royalty structure?

I'll start with the Gatwick and then I hand over to you, Sophie. Look, it's medium term is medium term. So we're not describing that in exact detail, but it's a phased approach in terms of when the aircraft come out. So it doesn't come out in a single block. So -- and like I said, you never know what's going to happen to slots. If you have access to them, that's a great thing. We've been having -- Sophie would tell you that we've been having slots within the portfolio that others been owning for, what, 15 years and some example as well. So very pleased about that. I'm not so sure that British Air would like to see us to have these slots for 15 years, but let's see.

So I've got the airport question. So thanks, Andrew, yes. Schiphol, definitely looking to increase their airport charges. That's the pleasure of regulated airports. We see that as well in other regulated airports like Geneva and Basel as well when we come to talk to them. The -- I guess the good thing there is the -- it's a consistent approach to all competitors because they are regulated airports, and we have a cost advantage in those slot-constrained regulated airports versus our competitors like KLM now or in Geneva and Basel. So it's the same for everyone there. You mentioned London Gatwick. So whilst not a regulated airport, we have a bilateral of a long-term agreement, which we're midway through. But we are in very constructive conversations with the team at Gatwick on a weekly basis now, and we're working together to find the right new, long-time deal to come out of the pandemic with. Because obviously, the one we have was pre-pandemic. A couple of years of dip, and then we've got different underlying targets to our current aspirations. So we're looking for the right combination to get a win-win contract. So that's ongoing as we speak that negotiation, but you're right to say we're partway through quite a long-term contract with them.

And there's no plan for renegotiation of the license agreements as well. It's valid for, some, I think it's 10 years, 40 years. So there's no plan on that. And then you would expect also [indiscernible], to be part of that agreement.

It's Jaime Rowbotham from Deutsche Bank. Kenton, you said don't extrapolate the GBP 6 increase on ancillaries per seat. What sort of spend might be sustainable now? And how has take-up been since you introduced the Phase 2 of the cabin bag policy a few weeks ago? Second one, I wonder if we could get a further update on the holidays, perhaps from Garry. Are people preferring ATOL protected package holidays due to COVID? And how soon do you think you could deliver the GBP 100 million PBT target? And then finally, Johan, in your opening remarks, you alluded to the fact that medium term and mid-teens EBITDA margin, less the higher D&A and finance costs you're guiding to from leasing more of the fleet implies potentially a slightly lesser PBT margin versus history versus your peers. You mentioned the determination internally to deliver those targets quicker. I'm not sure it's the speed of the delivery that concerns people as the virus will obviously dictate that, as you alluded to, but perhaps more the magnitude of what can be delivered. So now the rights issue's behind you, I wonder could you allow us to dare to dream a bit on a higher EBITDA margin medium term given all the restructuring and the very positive things you're doing to try to improve yields and unit costs?

Yes. Listen, I'll start from that part of the question to say that, look, we have to start somewhere. We've got to start somewhere. There was not at this point in time a lot of targets out there in the market, and we set out something that we believe were credible and given the fact that we knew there were uncertainty on that. And then, of course, you want to deliver that as soon as possible. And when you get transparency on that, you want to be in a position where you can upgrade also the numbers on to the next stage. But I think there was something also about, look, we want to be credible. We want to be also not taking the opportunity that I think some others might have taken in this uncertainty about filling a vacuum of talking big and loud about targets and what you're going to be and how big it's going to be. I get that people want to hear that, but I think we want to be looking that we are a credible company in the way we set our targets but not lacking ambitions. So I hear you and I recognize the point on that, but I'm not so sure that it would be entirely reasonable then to set out a very longer term on something that might people find, well, it's not really relevant because when is that going to come. And then I'm going to be responding to the same thing to say, well, it depends on how quick this picks up. Now we have some good, strong signs that for next summer as an example. And clearly, with the things that we talked about today and the initiatives and leading over to Kenton's point about, for instance, how much of the ancillaries will stick and how can we improve that, we don't feel anything then super confident about the initiatives what they can deliver and do for us. But let's come back to that and then hopefully be able to not dream but actually show you the credibility of what we're saying rather than anything else.

Should I pick up the others?

Yes.

In terms of ancillaries and how we should think about them, we were obviously extremely pleased with the take-up of standard plus fare, which at the end of the day is literally just adding up the component costs, not -- in entirety and presenting it as a very simple solution to buy a product with a single click, and that's what's been taken up so well. Also, the cabin bags has been exceptionally well taken up. We launched the second phase, which was opening up the rest of the aircraft. So you could -- with a seat, you could get a cabin bag, and it was initially launched on the mobile app. And immediately, bookings were very strong and also on the on the web now, and bookings have been very strong on that. So it continues to be really pleasing. October ran exactly the way we've seen through Q4, so it ran through. And now obviously, we're coming to the end of November. So we'll wait and see how that goes. I mean, clearly, in the mix, we haven't got as much city business, where people can travel lighter or business traffic that's coming back. That will have a mix effect, so we'll wait to see how that is. But all I can say is what we've seen and what we're delivering, very pleased and coming in very strong. On your very fair point around EBITDA margins and daring to dream, it was largely based on first getting back to '19 and then getting beyond that. '19 was a mid-teens. It was a 15% EBITDA margin. Now clearly, the network has been restructured since '19. We have 3 years' worth of inflationary pressures around some of the topics we talked around like regulated airports. But you can see from what I spoke about earlier that everything is focused on margin. So pushing forward this ancillary stream, looking at what we can do from holidays, restructuring the network is about preferring the higher contributing basis and what we can get out of cost. So the focus is there. And also, I'd like to say we're not -- I mean, yes, medium term, but really, I want to look at fixing the long term as well. We need to get out of those 97 through A319s. And when we do, that's a significant up gauge for us as a group because we have a relatively low gauge compared with our competitors at the moment, which is a cost disadvantage I'd suggest but one that's in front of us to change, and we're absolutely changing it.

Yes, on the holidays question, definitely, we've seen through the research we've done, research the industry has done that customers are looking for the reassurance and the protection -- the ATOL protection will give them. And we're certainly seeing that in the demand and the conversations we're having both with the travel agents and with the customers directly. And I think that when you think about us in the context of that piece with the debacle back in 2020 around refunds where 2 of the major players actually left Aptar as a result of that. I think they are in competitively a weaker position, and we've got a real opportunity to take market share there, where we do have the membership of Aptar and the ATOL protection. I think in terms of then the question of how quickly do we get to the GBP 100 million, I mean we will absolutely speed that up as quickly as we can and take every opportunity that the market presents. If you think about us versus some of the more traditional players, we have a significantly lower cost base, we've got significantly lower prices to customers and we make more margin. The opportunity there for us to scale is pretty big. And the over 1 million customers, that's a really important number for me because it's given us the opportunity within the first full year of operation to prove our business case to the hoteliers. The hoteliers gave us allocation, but they won't stick with those allocations unless you're producing for them. And that 63% of the direct hotels, that represents less than 10% of the hotels we work with. So each of those directly contracted hotels are getting several thousand customers from us, which means we're already a major player with them that gives us security that we'll be able to maintain those allocations as we go forward and as the market starts to ramp up. And as I say, with the market dynamics of us always being able to offer the hotels cheaper with the protection that there is no reason that we can't ramp that up as quickly as possible.

Yes, with the flexibility of the network that you're not tied into the 710 and the [ 14 Lite ] packages as an example.

Alex Irving from Bernstein. Can I zero in on cost a little bit, please? So we've talked a lot about some of the good work that's been done so far around layer productivity, around ground handling. You're also pointing to more opportunities going forward. Can you maybe please call out some of the more meaningful of those going forward, what we're looking for? And similarly, are there any where you're essentially done, where you're tapped out where the further upside from transformation on cost is maybe more limited? And then as a related point, you also talked about your unit cost versus legacy carriers in slot constrained airports being an advantage. But we are seeing them sometimes get more serious about their unit costs, thinking about the new BA, AOC, down at London Gatwick, think about Eurowings, the unit cost targets there. Does this constitute still a sustainable competitor advantage or a smaller one or maybe a larger one going forward? Sort of how you're thinking about those moving parts, please.

I mean just to stay there, I mean, one of the things that we're looking at other legacy carriers and what they're doing, first of all, you've seen partly sound bites coming through on what they are achieving. And we are measuring and we're looking at that and we're comparing that with ourselves. And it might be that there are cases where on one pocket of the business, they manage to do something that we haven't been able to actually expand our advantage on that. But we can then see that when we overlay what we've been doing in other places, we are still in a good position on that. But this is not about being complacent. You have to monitor this very carefully. And as we've said, I think that particularly the legacy carriers overall, you've been seeing that they've been retiring a lot of their fleet. You cannot really tell the difference between what is actually related into how they allocate the costs that was there from a long-haul perspective versus the short-haul perspective. But we have examples also within the cases of Air France, Transavia that is actually just a replacement of capacities, where actually the cost doesn't move up that much in the other point where they're actually mixing in changes of their fleet, which is something that we can address more in the midterm to the long term. So I do think that we stand every opportunity to widen the gap, particularly in the mid to the long term, when we're then addressing some of the issues around the 319s as an example. And I think against other low-cost carriers that are there in the market, we see, if anything, more opportunities because of the cost pressure that they are coming in on there as well.

And on costs, Alex, start with crew. There is more we can do on crew. We've got the potential to really reduce the crewing ratios that we have. But then when you come to reducing crewing ratios, you've always got that lovely trade-off between maximizing revenue from your commercial plan and going to the lowest crewing ratio. Right now, that's something we're working through, and I think there's tools that can better help us to really drive the most efficient crewing ratio without a kind of too big trade offset on the commercial side. Engineering, there's a lot of smart work now going on using more data enhanced work to look at the life cycle planning of the aircraft when life limited parts come on and off, and we have more potentials there that we want to work through. We have automation potential for us as a business. There's a lot of great work going on that Peter is championing on the self-service side of the app. So managing disruption yourself on the app. Managing -- you can now apply the vouchers through the app, and all this stuff allows us to make considerable savings in our contact centers because, I mean, that's a real win-win because it's much better for the customers. They don't want to ring a contact center and be hanging on the phone. We don't want to have stand up people 24/7 in a variety of countries for that reason. So that's a real big opportunity, and it's working very well. The other thing, as we look at those contracts we renegotiated with the ground handlers, et cetera, it's just going through the service level agreement and making sure that the service we're requiring is something that a customer will place value on. And we're not a little bit old school in what we want, but it's functioning level agreement. So it's kind of -- it's a bit more longer term and it's a bit more going into the detail, but that's what the kind of -- I'm not going to call it a second wave because it is genuinely ongoing. We're just now looking to see where we can keep taking costs out through being smarter without impacting the business. So those are some examples.

Peter, do you want to add something on that?

I think on the crew, we've managed to retain a lot of the seasonality that we had. So if you take the case, we're growing in Gatwick, but we've given that the crew the choices they came back from being 50% -- the balance of crew have chosen to go some 100%, some 75%, some stay 50%. So if we're still only operating in winter months relative to summer at 80-20, so the crew actually will be off in the winter and they're not getting paid. Where we've moved the aircraft around the network, the network piece, we've worked very closely with commercial. So 43 aircraft moved in the network, but all of those aircraft have actually moved to places where our costs on the crew side are about 20% lower than they were in Northern Europe, and they're seasonal in many locations. So there's a win-win for us on that. And that's grinding that out. That's also all internal systems. We are being much more efficient about getting productivity out of the crew. On the handling, it's kind of like in a number of levels. The costs are lower with many of the handling agents now, but they're incentivized to be on time. So that saves us cost as well. And more importantly, we've incentivized them to collect the ancillary revenue, which they've been doing -- they've done a fantastic job for us at the airports in collecting revenue, particularly on the bags. On the engineering, we've brought more in-house than probably we thought we would like to, but that's the industry has moved in that direction. I think even strategically, if we don't want to, some suppliers will drop out of the business. But every time we've done it in the last 2 years, the cost has been lower for us when we brought it in-house. And actually, the on-time performance has been better. But more importantly, I think for everybody in the organization, there's a fairly ruthless attitude to costs now. Elbows are out, and that really is on every single thing. It's like no. It just no is the answer, so rather than maybe. And that's translating into like -- we'll be getting back to 100 million passengers quite soon. And if we save even 5p here and there on different things, that's GBP 5 million, and that's the way we've got people thinking that 5p actually does matter and that has landed.

And it's also, I mean, a different approach that we're doing and Sophie is doing speaking about the airports. I mean we are negotiating currently a long-term agreement with Gatwick as an example. But the fact that Sophie is doing is that compared to previously, we are going to the airport and basically saying that, look, we got a choice here on how we are allocating aircraft. We moved 43 out here lately, and we will not sit back and disregard the fact and who can give us the incentive to do so. So that is something that we are being much more active with going forward as well that's going to help us clearly from the airport cost, which is a significant cost of clearly what we're doing.

It's Carolina Dores from Morgan Stanley. I have a question, one on cost and one of your decarbonization strategy. I guess on cost, it is a follow-up on Jaime because you want to be in 2022 to be on the EBITDA margin line where you were in 2019, but your capital costs are increasing quite significantly, right? We're talking about GBP 200 million. So how do you offset that? Is it -- do you think it's on maximizing revenue? Or do you have a plan on, I don't know, more owned versus lease fleet? How do you -- I guess how do you reach your cost per seat target? Let's say that 2019 was the target. And on the carbon offset, your carbon offset strategy, and so how do you monetize that? Do you -- are you going with corporate clients to flag your disadvantage, its advertisement to consumers? I guess a little bit more color on that. And GBP 3 per tonne is still a good -- from memory, was the cost that you had is still a good guidance for the offsets cost?

Good memory. So okay, I'll start with the carbon offset then. First of all, it's we have been working quite a lot towards the companies on this because many companies have been changing a lot of the travel policies to make sure that they will only allow their staff to travel on the choice that has the least impact on the environment. And I think that when we launched this in 2019 and we're also in the early stages before the pandemic came loose, we also were speaking to companies at that point in time. I think there was more of that uncertainty about the projects and can we really take this into account. Now there's -- like I said, there's not a single company who's trying to reach net zero who's not going to be dependent one way or the other on some type of offsetting mechanism. Same thing goes with the government. So there's a much bigger understanding of what this is. And as you can expect, when we launched this, our projects has been heavily, heavily scrutinized from NGOs, from media, and it shows that it's actually delivering exactly what it should do. So I think that, that is what's coming through also now when we're seeing that we are taking share from business travel. It's not only the fact that we see that -- there's a couple of reasons why we are growing faster on business travel than perhaps we anticipated and we know we're taking share. One is that we have a stronger mix of SMEs within our portfolio, small, medium-sized companies. They don't have the same type of travel restrictions as larger corporations have. So they have started and accelerated business travel much quicker. We also have a larger mix, for instance, of people who are physically has to go and do something. Engineering, they need to see power plants as well. And then you are starting to see now also the sustainability come into play. That 58% of people being aware about our carbon offsetting program, of course, that's too low. We want that to be 100% of our customers to know that, but I think the activities that we started to do that happened at the same time as actually the pandemic, and then we grounded the fleet for 11 weeks. And then as we're now picking up, we -- and you would have seen us here just recently that we are communicating this and we are represented at really all the major forums around this because we -- one, we feel very passionate about it. And it's actually not only -- it's not the carbon offsetting. It's actually the approach we're taking to sustainability that we believe that there's actually an opportunity in here for companies who adapt itself to new technologies if they are also not being punished to do so because the cost is prohibitive. And that's one of the arguments that I'm having with a lot of decision-makers in EU. I met with multiple commissioners here just a couple of weeks ago in Brussels to talk through these arguments. So we know that this is going to generate us also competitive advantage going forward. And the cost of this is also -- it's not quite that GBP 3. But the cost of it that we've protected now for a couple of more years on this in the agreement we made, it's important to see where this leads to. Because clearly, you need to work out what is the output you're getting from the money you're investing into something and what is the impact that, that has on the environment. And you take the discussion of SAFs as an example, I think that, that will be very useful once you start seeing that, particularly for long haul and medium haul that you're getting the quantities of supplies and the cost to be more like getting closer to the cost of what care seen is today. Today, it's not a commodity today. It costs 3, 4x more than that. And my argument is to say to all the decision makers to say that, look, you've got to make sure that the amount of money everyone spends on this, whether that is government public money or private money or company's money, does it relieve you with the pressure on the environment in the way that it's supposed to do? And what is the long-term/midterm view on how you're going to transition on to the new generation of fuels, as an example the synthetic fuels? Because I don't believe that the biofuel is going to be there as an alternative going forward at any particular scale. And then you need to get on to the zero emissions technology that exists there as well. So it's a very holistic approach we're taking on that. We're not wedded to the idea that it's only one methodology who's going to get to somewhere. There's a huge number of things that will need to happen for us to transition to the net zero that we look at to 2050. But we're going to talk more about that when we're coming out with the road map. This will be in the early part of the year.

Okay. And to pick up the very valid point on ownership costs and partly why I'm focused on EBITDA as a cash creation measure as well. So I mean the ownership costs fall into 2 big buckets, obviously. The first we have are our interest costs. And if you're comparing it to 2019, the kind of debt we had, excluding lease liabilities in 2019, was GBP 1.3 billion, and we've now got GBP 3.4 billion gross debt. And obviously, we've also lost GBP 2 billion over the last 2 years, so that's where the kind of the circle completes. So we have, what, GBP 3.4 billion debt compared with that GBP 1.3 billion debt and have cost of servicing relative to those GBP 2 billion. Now we have a cash position also in excess of where we are. And when we did the rights issue, we did it for 3 reasons: one, to give us the security should a further downturn come, should a variant concern come along that did prove a problem for the industry that we will be resilient for that. And we're confident, very confident that we are resilient for that. We did it to help us start restoring the balance sheet to take some of the steps and allow us to think about deleveraging. And we did it for the platform for growth so we would -- during this period of uncertainty, we're confident the slots would come up the way they are coming up, and we wanted to be able to be on a front foot. So I think the reasons were good reasons. And then so now what I'd say is around that GBP 2 billion increase, we will now look as we get to the end of Q2 how the turn of year has been, how the development of Omicron has come through. And if it is something that you don't really suffer much in terms of symptoms for and the world moves on again, because at some stage we have to, then we'll see the bookings, and it will allow us to think about some of deleveraging. And the UKEF will be the obvious candidate there because we've drawn down just over $1 billion associated with that, and it's also secured by aircraft. Our other debt isn't secured by aircraft, so that would naturally increase the amount of unencumbered aircraft in the fleet. The second bit on debt is the leases. So the 58 sale and leaseback program not only gives us a hidden depreciation, which you'll come on to, but also gives us an interest burden as well, which rolls up into that interest line of just over GBP 30 million. So that needs to be considered. That takes longer to unwind. Those leases are up to 10 years but gave us much needed liquidity. And the lease liability has gone from GBP 0.5 billion to just over GBP 1 billion through that program. So that's on the interest side. So there's stuff we can do about, we can look at our leverage, and we will look at our leverage because we're way above the liquidity threshold that we set ourselves, but we just want to make sure that the path out of this is -- starts becoming a little clearer. On depreciation, there are really 2 things. There's the cash relevant part of depreciation, and quite a bit is noncash. So the sale and leaseback will put out just over GBP 100 million through our depreciation line, and that clearly is cash because we've got sale and leaseback. We've got the leases that we're servicing and the maintenance on those leases that we're servicing that are running through depreciation. The rest, I'd argue, isn't. So the first -- the second piece is the accelerated depreciation charge we're taking on our CEO aircraft. Our CEO aircraft are less fuel efficient. And as we look at our fleet plan, we're looking to keep them up to a maximum even with the lease extensions we're doing of around 18 years. If you go beyond that, then you start having another significant maintenance event, and the economics don't really work. Now because of that and because of IAS 16, the accounting standard for depreciation, you need to set the useful economic life according to the intended use of the entity. And easyJet is the entity, and the intended use is 18 years. So I'm not going to comment on other airlines, but that's what you need to do. And therefore, by doing that, we've had constructive conversations with the valuers and then we need to sign what the residual value will be at that point. The upshot of that is that we need to do some accelerated depreciation charges to play catch-up on those CEO aircraft. And that's what we flagged in the prospectus, and that's what's going to come through annually at about GBP 47 million per annum. It's not cash. It's accelerating the depreciation charge from the past, and it will be interesting what others do in this space because there are fuel efficient aircraft that will last for 23 years in the fleet plan. The MAXs I'd argue and NEOs, and then you've got your NGs and the CEOs that people aren't going to keep for 23 years in their fleet plans. So that's the accelerated depreciation part. And the other part, I'd argue, that's in front of us driving a bit of depreciation is -- but it's not really cash, it's the fact that we -- that the aging fleet will go through engine shop visits. Now obviously, you pay for the engine shop visits, but everyone who owns an aircraft pays for an engine shop visit. It's just the way that it works on ownership means you capitalize that and depreciate those going forward. So it's those events that are going to come through a depreciation charge. But everyone with a fleet as they start hitting 9 years needs to take those shop visits through. And it's just how -- it's just pure accounting, whether you're accruing for them if they're leased or whether you're waiting for the event and depreciating afterwards if they're owned. So those are the things in ownership. So from a cash perspective, it's really the SLBs and the additional debt. We'll look at deleveraging that. In answer to how do we address that, absolutely, we keep doing the things on revenue. I think we have an opportunity to unlock greater value from our primary slot network, and we do that by preferring the better margins we've -- for a while, showed the chart, but we kind of obsess about it internally to make sure that we prefer -- when we're looking at the network, we prefer the higher contributing bases. So that's really important to us, and we've talked about ancillaries. Time will tell. I mean, I just think this is an open door we need to push on, so we'll see. And Garry has talked about holidays, and we'll see on that as well.

Muneeba Kayani from Bank of America. Just following up on the revenue opportunities. What sort of competitive environment are you seeing into summer '22? What do you think the industry will be? We've heard from some of your competitors that there could be something like 20% less capacity. Others have said, no. Kind of what's your outlook? And then secondly, on competition and maybe for Sophie here. Italy specifically, what are you seeing there? And Milan Malpensa, some of your competitors are adding quite a bit of capacity. So where do you see competition in Italy specifically? And what are your plans?

So Sophie was grabbing for the microphone to talk about Italy, which is very close to her. Can I just say in terms of the capacity in general? The truth is that unless we're seeing what will be published in the schedules at the end of January, February. Nobody knows exactly the number. That's true. Look, there's been exercises we've been trying to do, and I think some others trying to do in terms of looking at what fleet is leaving European airspace on short haul, and then trying to work backwards to see what that will actually mean. And we can see that there is a retrenchment of capacity from legacy airlines, which is then what we're doing, we're breaking down that on a route-by-route basis, and we can see that it's a pretty healthy environment for ourselves. Hence, otherwise, we wouldn't have been able to get on to the additions to the slot we're seeing. So the slot additions we talked about at the Gatwick and the Linate and Porto, Lisbon, and there are potentially more to come within that area is because that is taking place. Now whether that is something that is there for a shorter period of time or medium or it will stay, we can all sit there for 4 hours and speculate about. But what we're seeing on the network that we're having is that it's a pretty healthy environment for ourselves going forward for a number of years because we are operating in the slot constrained airports. And it's so much better for us to just -- with the changes into how we view the ruthlessness of how we're allocating our capital to go up 1 aircraft there, 2 aircraft there, 3 aircraft there because it's very, very little risk in terms of doing that. And at the same time, we know we're going to be able to not dilute the margins to that extent that you would recognize you could do if you did a big bang coming in somewhere. And also just to point out and to the extent that, that hasn't been noted, the -- Berlin is a massive change. We have 34 aircraft there. I don't think it's a secret that it was weighing quite heavy on the operating losses in '18 and '19 following the transaction in late '17. And we could argue and say, well, that would have matured over x number of years, but then came the pandemic. That's now been removed with 16 aircraft with a complete reschedule that Sophie has done focusing much more on the leisure side rather than the domestic side in there as well. And not to disclose exactly what those operating losses were, but that in itself is a big upside for us, and we can then use that when we're discussing with other airport on where we should place additional capacity coming through.

Can I make one quick comment on capacity. One of the things we do see is, as we've explained, NAV charges going up. And NAV charges go up in 2022 because Eurocontrol and the air traffic controllers make an assessment of what they think supply will be in the market and then spread their inflated cost base on it. And what that assessment is, is they're thinking there's going to be 15% of this capacity, and that's what they're putting their cost base on, and that's what's driving the increase in '22. So that's an opinion from another one. But as Johan said, we don't get true clarity until people are actually asked to step up to their slots and therefore they'll start handing back in January.

And if I can pick up on Italy specifically. So no, you're absolutely right. I think that's where we're seeing the biggest amount of growth in terms of head-to-head competition in the markets there. But at the same time, the majority of that head-to-head growth is actually on Ryanair routes rather than easyJet routes. And what we are seeing is where we are seeing new head-to-head competition coming in, we have more frequency on all of those head-to-head routes than Wizz does. And actually, our load factors on those routes are still strong. We're not seeing a softening in load factor on those. We're adding those 3 aircraft into Malpensa for next summer. We've got those new slots in Linate for this winter. So we've added the Amsterdam, the Paris CDG, extra daily rotations on those. We've just announced -- or are about to announce, I think we just announced that we're launching Barcelona Linate with additional winter slots that we've got for this winter as well. So -- and all of those network points are network points where we've got strong presence already. So Schiphol and CDG doesn't have that sort of low-cost competition. So we can really grow and continue to grow with Italy touching the rest of the network into those primary airports, which other competitors can't do because they don't have that primary network that we do so we can get that premium on those. And as I say, we're getting strong loads on those still, and we're looking at things from a revenue management perspective that we can do slightly differently to make sure that we are competitive on cost. So we are looking in terms of pricing and where we can be more aggressive than maybe we've ever been before at pricing because we know we're getting more ancillary upside than we've been able to do before as well. So I think we're kind of looking at it from a network perspective, a revenue perspective, and in terms of those slot opportunities at primary airports, which the other low-cost carriers don't have that opportunity. So yes, it is a busy market. But actually, we're seeing much more of the competitiveness being the EUR 5 fares you've got on head to head with Wizz and Ryanair that aren't really impacting us. And at the same time, we're actually seeing some retraction of Wizz capacity on some of our head-to-heads this quarter. So we've actually seen some retraction on some of those. They've either temporarily stopped those routes or completely canceled some head-to-head routes already. So that's a positive, I think that the signs of what we are doing seems to be working.

And on that note, I'm going to thank you so much for coming here, everybody to join us here physically and everybody who's on the call as well, and I hope to see you soon flying with us again. So thank you very much for joining. Thank you.