easyJet plc (EZJ) Earnings Call Transcript & Summary

Okay. Very good. Excellent. Well, listen, good morning, everyone, and thank you very much for joining us here today and everybody who's watching this as well to discuss easyJet's full year 2023 results. And with me, as usual, I have Kenton Jarvis who's the company's CFO. And I'm also pleased to welcome the whole of my airline management Board team who are here today. In addition to that, we have also the company's Chairman, Stephen Hester, are here today. And I really like to encourage you. I mean we are here for you. So do take the time after the Q&A, if you want to speak to each and every one of ourselves individually, that you do approach us and ask any questions you might have. But we're going to go through clearly the presentations and also leave plenty of time for questions that you may have as well. So you should have been sent the. slides, I think, alongside with the announcement this morning, and everything is available also on the corporate website. But before I go in and I'm going to hand over to Kenton to go through the numbers in more detail. So I just want to tell you a little bit about what we're going to talk about today. I will give kind of a key message and set some broader context on the results that we have for 2023. Kenton will talk through the numbers there, and then we will talk a little bit more about the outlook, what are we seeing for the year that we are currently in both near term and then also into next summer. And then we will then also then conclude and summarize this and set out really where we think we are to this point in time as well. So moving on to the next slide as well. And just to do that a little bit of context on the year that we just reported on as well. It was a very strong year. The finish offer is strong for us in December. We delivered GBP 455 million PBT on the full year. That included the record performance in the summer of GBP 865 million. But [indiscernible] full year performance in there, we see that holidays of GBP 122 million. Now think of this that this is only really in its fourth year of operation, whereas 2 of those years were then heavily restricted by the travel restrictions following from the pandemic. So it's been an outstanding year for the holiday business, and more to come on that. And we also then, as a Board, we decided to reinstate the dividends in here, so we are paying 10% out of the profit after tax. And we are looking for that to be increased to 20% in the year that we are currently in as well. So it gives you an idea about the confidence that we have because we really believe that we are on a good journey here to provide strong shareholder value. If you're looking through where we then stand today, we started off with the same momentum really that we saw at the end of the summer into October. So October delivered a significant profit improvement. We had a 12% revenue per seat uptick in there. And we are also seeing within this quarter, we're going to have a positive RPS despite the fact that we have, as you know, paused flying into Israel and then also Jordan. So there has been a short-term effect of the conflict in the Middle East in here. But it was never even from the first part of the first week and 2 weeks, there was never really any impact at all to the peak periods into the next year and particularly into the summer, as an example. So all positive in RPS for all the quarters ahead as well. And I think easyJet Holidays, who is a really good early barometer of the demand is off really to flying start into the next summer, which will support its ambition to deliver a capacity growth of over 35% for the summer. And this makes us feel very confident about the ability we have to achieve the medium term targets within the time frame that we set out. And just to remind everybody about what those targets were. We set out the ambition to achieve over GBP 1 billion of profit sustainably in this company, and that is reflected in the GBP 7 to GBP 10 pounds per passenger per seat of group PBT, high-teen ROCE, continue to build on the success of easyJet Holidays to deliver over GBP 250 million of sustainable profits in that business. And we also have a growth plan, a disciplined growth plan with flexibility. Kenton will come back and talk about that when we're looking at the fleet graft and the jaws we have in there. But I think really that capacity, we'll talk more about that when we come on about the outlook, is something that is going to be a really important part of when you're looking at this industry because there certainly are constraints for those customers out there among the industry who are using Pratt & Whitney engine and who are struggling with deliveries. So with tighter supply definitely in the next few years to come as well. And we will have a CAGR of the growth that would be pretty much equivalent to what we've seen historically in this company, albeit with all the flexibility that we're going to need. And everything we do, everything that we set ourselves to do is really there to make sure that we structurally are a more profitable company than we have ever historically been. That's the -- what all the initiatives and all the priorities on the strategies that intends to deliver. So with that, I'm going to hand over to Kenton to talk us through 2023.

Thanks, Johan. I pulled my back at the weekend, if you're wondering. Okay. So we'll kick off with Slide 6 outlining the key performance indicators for the year. Financially, this marks -- this year marks a significant step forward, following 3 years of pandemic-impacted results. It's good to see a return to profit levels above those achieved in 2019, as the benefits from the initiatives we've implemented over the last few years start to come through. Total capacity rose by 14% compared to last year, totaling 92.6 million seats. And passenger numbers increased by 19% to reach 82.8 million seats, benefiting from the 3 percentage point improvement in load factor. The average sector length saw a 3% year-on-year increase or an 11% rise compared with full year '19. This growth is attributed to our ongoing focus on longer leisure flows where demand continues to be healthy. Revenue performance for both ticket and the ancillary income was exceptionally strong throughout the year, as evidenced by the 18% year-on-year increase in RASK. Our continued focus on costs delivered a flat CASK ex fuel development for the year, despite the challenging operating environment and the persistently high inflation impacting the industry. As a result of this performance, the group's profit before tax per seat reached GBP 4.91. This is an encouraging initial step on our road map towards achieving the GBP 7 to GBP 10 group PBT per seat in the medium-term targets. EasyJet Holidays continued its rapid growth in 2023, providing accommodation for 77% more customers year-on-year and more impressively increasing its PBT by 221% to GBP 122 million. This equates to a group PBT per seat contribution of GBP 1.32. In the light of the group's financial performance in full year '23 and easyJet's robust liquidity position, the Board intends to pay a dividend of 10% of headline profit after tax, which is the equivalent to 4.5p per share, and this will be payable in early 2024. We expect the payout ratio to increase to 20% of headline profit after tax on full year '24's results, and any further growth in payout ratio will be evaluated over the coming years. So if we turn to the income statement on Slide 7. Passenger and ancillary revenue both increased by 37% year-on-year on the back of the 14% increase in capacity, driven by the improved load factor and the stronger yields. This helped generate revenue of GBP 8.2 billion, broken down into GBP 5.2 billion from passenger income GBP 2.2 billion from ancillary revenue and a contribution of GBP 0.8 billion from easyJet Holidays. The airline EBITDA expenses, excluding fuel, saw a 21% increase to slightly above GBP 0.3 billion. And I'll talk in more detail on the cost per seat movements on a later slide. Our fuel costs increased by 59% to just over GBP 2 billion, driven by an increase in capacity and a rise in fuel rates. The effective dollar price per metric tonne of fuel increased 23% year-on-year, and this was further compounded by a stronger U.S. dollar exchange rate, leading to a 31% annual increase in the sterling cost of fuel per metric tonne. The Holidays' EBITDA margin increased from 11.7% last year to 14.8% this year, helping to double the group EBITDA result to just over GBP 1.1 billion. A breakdown of the P&L for easyJet Holidays can be found in the appendix. Airline depreciation, amortization and dry leasing costs saw a 15% increase year-on-year, which aligns closely to the increase in capacity. The group's net interest costs and other charges have reduced by 59% when compared to last year. EasyJet's focus on deleveraging has helped reduce gross debt by GBP 1.2 billion this year, with cash of GBP 2.9 billion held at the year-end. We recorded a GBP 27 million noncash, nonoperating foreign exchange gain resulting from the retranslation of foreign currency-denominated monetary assets and liabilities that we hold on the balance sheet. And this all culminated in easyJet making a headline group profit before tax of GBP 455 million, a GBP 633 million improvement year-on-year. Now if we move on to Slide 8 to show the revenue per seat bridge. Total revenue per seat increased by 19% at constant currency. The underlying RPS increased by GBP 8.68, driven by easyJet's continued network optimization and the increase in load factor during the year. Our ancillary revenue per seat increased GBP 3.69 as a result of our enhanced ancillary offering, driving higher conversion and yield boosted by the increased load factor. When we look at the yields on the left we achieved in the period, you can see that total yields have been strong with a 15% uplift year-on-year. It's also good to see our ancillary yields continuing to rise in line with ticket price. Let's now move on to the cost per seat bridge on Slide 9. The headline cost per seat ex fuel at constant currency increased 2% year-on-year for the airline. And given the average sector length growth by 3%, this means our CASK ex fuel was successfully held flat year-on-year. Airport and ground handling charges saw an increase of GBP 1.29 per seat year-on-year, in part due to the improved load factors, which impact airport and security fees as these are levered per passenger, not per seat flow. Alongside the load factor improvement, there's been inflationary cost pressure, particularly at the slot-constrained and regulated airports. And these airports account for around 80% of easyJet's flying with contracts either linked to CPI or RPI inflation rates. As we move forward, we anticipate inflation will continue to be felt by all airlines operating from these regulated and slot-constrained airports. Navigation costs increased by 30p, following a rise in euro control rates. The longer sector length will also have impacted these charges, but this has been more than offset by the increase in RPS. Crew cost per seat rose by 58p, primarily due to labor agreements and the additional investment in resilience for this summer. And this is partially offset by fixed payroll costs being spread over higher flying capacity. Moving forward, we'll continue to invest to counter the challenged external environment, although the costs we expect will be largely offset by improved productivity. Ownership costs decreased 73p year-on-year. This favorable variance has been driven by fixed costs being spread over a higher capacity and a 15% improvement in aircraft utilization year-on-year. Productivity and utilization will continue to improve throughout full year '24. Other cost per seat decreased by 26p, as fixed costs were spread over a higher capacity, partially offset by general wage inflation and a higher number of disrupted events compared to last year. And fuel increased by GBP 4.88 at constant currency. This movement is primarily driven by the effective price of fuel being USD 867 per tonne in the period compared to USD 705 in the prior year. And the bar on the right of the chart illustrates the net loss from foreign exchange movements in the year of GBP 2.11. And I should note that the majority of this relates to the U.S. dollar movement on the fuel bill. After taking account of all these factors, the net headline cost per seat for the year was GBP 76.25. As we look forward, the suspension of flights to Tel Aviv and Jordan, alongside filling actions taken across the schedule will naturally impact ASKs flow and therefore, ex fuel unit costs this winter. However, we still expect our H1 '24 cost per seat ex fuel to remain broadly flat year-on-year. So Slide 10 on the hedging. As you can see on this slide, we've continued to build a strong hedge position. The spot price of fuel has come down over the past month along with the forward curve. However, our fuel hedges remain in the money. U.S. dollar lease payments are hedged for the next 3 years at a very favorable rate of 129, and CapEx is hedged for the next 12 months in the underlying currency. Carbon obligations, including free allowances, are fully covered for the calendar year 2023, at EUR 42 per metric tonne and 86% covered for calendar year '24 at EUR 41 per metric tonne. As you're all aware, the free credits are being phased out over the coming years. U.K. ETS allowances will be removed 100% in calendar year 2026 with no advanced tapering down. EU ETS, on the other hand, will be phased out with 75% of the current credits being available in calendar year '24, 50% in '25, and then like the U.K., fully removed in '26. And the chart at the bottom of the slide shows the impact of this for easyJet. Our continued fleet modernization and upgauging journey will help mitigate the impact of these credits reducing. So moving on to the cash flow bridge on Slide 11. During full year '23, our cash position, including money market deposits, reduced GBP 715 million, taking our cash deposit balance to GBP 2.9 billion. This movement resulted from an outflow of GBP 1.1 billion from financing activity as we retired GBP 1.2 billion of gross debt during the year. In addition to repaying a EUR 500 million bond in February, we further reduced our interest cost by repaying $950 million drawn under the existing U.K. facility and replaced it with a new facility, which is now undrawn. This has allowed us to maintain our strong liquidity position whilst reducing the cost of carrying cash in the business. This also leaves the fleet unencumbered, the owned fleet unencumbered. We've since repaid 1/3 of the EUR 500 million of gross debt through retiring a eurobond in October, and our next bond maturity is in June 2025. Our net outflow from finance activities was offset by positive cash generation from operations of GBP 569 million. As you can see on the chart, the positive cash movement is mainly as a result of the operating profit in the year of GBP 1.1 billion and forward booking momentum. The unearned revenue benefiting from the increase in capacity alongside pricing strength and the growth of easyJet holidays. This inflow offsets the other working capital movement and CapEx, which includes lease payments and the delivery of 10 new A320neo family aircraft, which were all taken direct into ownership. After other movements in FX, we held cash and money market deposits of GBP 2.9 billion at the end of the financial year, which underpins easyJet's liquidity position of GBP 4.7 billion. We'll further strengthen the balance sheet as we plan to take the full year '24 deliveries of neo aircraft straight into ownership. We'll then look to build our liquidity reserves ahead of the ramp-up in aircraft deliveries coming in the next few years as we renew the fleet and benefit from upgauging and the resulting fuel efficiency. So moving on to Slide 12 and the balance sheet. We've seen a reduction of GBP 269 million in our derivative financial instruments over the year, although we still have an asset relating to our hedge positions of GBP 153 million. The decrease is primarily due to cost of our fuel hedges relative to the movement in the market price of fuel. EasyJet still enjoys a strong forward hedge position relative to our competitors. Notable increases have been seen in both the unearned revenue and also the property, plant and equipment. These increments are due to a higher level of forward bookings with strong pricing and the growth in easyJet Holidays and also the increase in our fleet size to 336 aircrafts from 320 in the prior year. As of 30th of September 2023, our net cash position was GBP 41 million compared to a net debt position of GBP 670 million last year. The net cash position comprised of cash and cash equivalents of GBP 2.9 billion, borrowings of GBP 1.9 billion, and then lease liabilities, as defined under IFRS 16, of GBP 1 billion. We continue to hold investment-grade credit ratings with both Moody's and Standard & Poor, both of which have us on a positive outlooks. Okay. So if we go to Slide 13, we can see the flexibility we maintain when it comes to our fleet. The orange line through the middle of this graph represents our current base fleet plan for full year '24, '25 and '26 as we look to grow the fleet to 370 aircraft over the next 3 years. Importantly, we continue to have flexibility above and below this depending on the operating environment we see and the opportunities that exist. We have an existing order book of 158 A320neo family aircraft to be delivered up to full year '29. And this will drive our upgauging story as we move our average gauge from 179 and into the low 190s by 2028. Alongside this, we've a proposed aircraft order with Airbus for deliveries in the 2029 to 2034 window, which we put to a shareholder vote in December. Many of our competitors are suffering due to supply constraints with both OEMs struggling to meet their delivery schedules. EasyJet, however, is planning to grow capacity by 8% in H2 summer '24, supported by confirmed delivery positions from Airbus. We continue to operate a 100% CFM engine powered fleet. And so we're unaffected by the Pratt & Whitney challenges, we're restricting other airlines abilities to grow next summer. This backdrop to supply alongside continued consumer sentiment on prioritizing travel and the forward fuel curve trending down gives us confidence for a strong summer as we look ahead into the 2024 financial year. Finally, let's look at gross CapEx, and the projection is here on Slide 14. We expect our gross CapEx to rise over the next 3 years, reflecting an increase in our scheduled aircraft deliveries alongside an increase in maintenance costs for our existing CEO fleet. All of the deliveries scheduled for the 2024 financial year are planned to be taken into ownership through cash generated from operations. It's important to clarify that the CapEx shown in this chart is the gross CapEx position and doesn't account for any potential sale and leaseback proceeds. It's also worth noting that we'll continue to manage the residual value of our CEO fleet by executing sale and leaseback transactions over the older aircraft as part of our risk management strategy. Currently, 54% of our fleet is owned and all are unencumbered. But when we look at the neo ownership, we're at 74%. And this is our primary focus as this is where value in the fleet lies. As I set out in the capital allocation framework, we're looking to maintain the proportion of neos of having ownership at greater than 75%. To help give some context into what net CapEx might look like in full year '26. If we were to take 75% of these 27 deliveries into ownership, alongside the residual management of our older aircraft, the net CapEx would drop to GBP 1.5 billion from the GBP 1.9 billion there. If we are to build our neo ownership percentage by taking both the '24 and '25 deliveries direct into ownership, then that would mean 83% of our new fleet will be in ownership as we enter full year '26. So if we wanted to return to the 75% ratio in full year 2016, as set out in our framework, we could further reduce our net CapEx down to GBP 1.1 billion in '26. So you can see on that slide as well that we have a number of options open to us when it comes to financing the fleet. I'll now pass back to Johan.

For that, Kenton. So I'm going to talk you through now each and every 1 of the key strategic priorities that we have in the company. But before I do that, just to remind everybody about on the platform that we are really working from. We have an investment-grade, industry-leading balance sheet that really allows us to take the opportunities as they come along, particularly when we're looking through the network, which I'll talk more a little bit later. Continue to monetize that, seeing the routes that we have invested with starting to mature as well, and that we're also winning some very competitive battles in there is something very pleased about the progress we saw in 2023. . The transformation that we've been doing on the revenue side, alongside with easyJet Holiday, which is probably the biggest change if you're looking at this company now in 2023 and going forward compared to what this was in 2019 has really delivered for us and we have more potential to come in this area. Continue to invest in a great customer experience and then also underpinned by the low-cost model where we're delivering really sustainable savings to continue to offer great value for our customers and at the same time, also a strong return for the shareholders. So you take that and then in addition, the fact that we have decided to reinstate the dividends to shareholders and at the same time, also, we have a new proposed fleet order to take to the shareholders for a vote here on the 19th of December. That really sets out also the next phase of the growth journey with both replacement of the existing fleet, but also ability and opportunity to grow from '29 over to 2034. That means that we feel very, very confident about the ability to deliver returns that is good value for shareholders. But let me start with then the network. One of the great things about the network, and you know this, we talked about this before when we met. We have moved around significant amount of aircraft within the networks in 2019. I think close to 50 aircraft that actually been reallocated into routes that are much more in demand and then at the same time, also then reducing losses in some of the other routes. And I think it's really 2 things that set this network apart because we generally believe that this is Europe's best network. One, from a consumer point of view, from a customer's point of view, and I think it's been very apparent when you're looking at in 2023, where we added more than 80 new routes there. It offers choice. It offers frequency. So it's kind of a go-to for many customers who live within the close proximity of one of Europe's primary port. And we see also then the second part of why this gives us benefit. It's also that it's very difficult to compete with us on this network. And we have had some significant wins by the fact that we have really put a lot of focus also to keep developing this network. We've seen the head-to-head competition on a number of our routes across the network being -- becoming less competitive than they were. We have removed some 20% of the head-to-head routes in the summer period. We've seen Air France remove 6% of the head-to-head competition in the network. And we don't see that this is coming back. This is not something we were looking at the schedules now, all we see in other airlines cloud that this is actually coming back to us in there. And I just think it demonstrates the fact that we have such a strong position, and it is difficult to compete with. One -- and Kenton mentioned this as well. One of the most important factors is when we're looking at the industry supply constraints that we're seeing driven by the Pratt & Whitney issue and then also the OEM issues that when we're looking through to the summer where we're planning with an 8% capacity growth in there, I don't think -- and when we've gone through the work so within the team, we don't think that there's any other airline network that has grown to that extent. And if you take that, coupled with the early strong demand that we're seeing, that puts us in a pretty good position for the summer. We will continue to see the improvement on the routes that we have invested in. And we talked about this before, the challenges we've seen in Berlin. Berlin is now coming up to that network average when you're looking at the contribution per block hour 83% year-on-year improvement, Italy, 45% year-on-year improvement. And we got further benefits to expect then from the investments we've done in Portland and in Lisbon. So for '24, we keep focus on this. We keep doing the changes in order to monetize its network even more. We're adding 3 more aircraft into what is an over and above network contributing part of the network into Switzerland, 2 into Geneva, 1 into Basel. We're actually adding 4 aircrafts here in the U.K., 1 aircraft in Manchester, 1 in Bristol, Belfast and Glasgow. And we're also then launching, as you know, the year round base in Birmingham, and we're off to a very good start with the early sales in Birmingham, both for easyJet Holidays and also then for the airline in addition to the seasonal base that we launched and we announced earlier also in Alicante. So all in all, it's over and above 90 new routes being introduced in there as well. So those 3 things great improvement on the network that they had, further opportunities in the year coming ahead and the tight industry supply and a strong early demand for the summer bodes really well for ourselves. I talked about the transformation of the revenue. So if you can see on the next slide, we know that one of the biggest changes we've seen has been the impact that ancillary has had for us. But it's not only ancillaries. We've also seen the changes that Sophie and his team has been doing when it comes to the pricing. And we had actually -- we had a discussion before this session about whether we should do a separate slide on all the AI initiatives that we're doing. But actually, most of the initiatives that we're doing now, particularly when it comes to in the commercial area is underpinned by 1 part of AI model or another. We go on to the journey on data, as you know, for quite some time and using external data sources now with the algorithms of self-learning and machine learning, is really what sits at the heart of many of the initiatives that is being introduced now. We've done it in the commercial area for quite some time. We now also expand that into really all parts of the business. It doesn't sit just with 1 department here and there. It is actually everybody who is using this into a lesser and larger extent and will provide greater benefit for us also than going forward. But if you're looking at the ancillaries a part of it, we see now that it sits pretty firmly just below that 30% of the total revenue that is there. And the ambition we had that we want is to increase in line with what we're seeing the ticket fares increasing. It's actually demonstrated what we did here in '23. So it's a 20%, 21% increase, both in the fares and also in the ancillaries. And we got more initiatives also then being launched in for this year for 2024. We have, as an example, what we're doing on the pricing to optimize the pricing between the cabin bag and the whole bags. So we're basically trying to maximize the [indiscernible] speaking to each other. We have introduced that about 16% of the network. We intend to roll that out to all of the network and all the prices that we do. It's currently delivering a 43p per seat uptick. So there will be further benefits when we get that across the whole of the network. And that's just one of the initiatives. And I'm sure Sophie can talk a little bit more about the Q&A about other initiatives we do to get to that total basket optimization that we've been on for some time. Further opportunities and results is to be expected from the in-flight retail. Last time we met on 12th of October, we reiterated the medium-term target we have for GBP 1 per seat in terms of what inflight retail can do. We had 60p in the year gone by. The targets we're having for this year, it sits at 88p. We round it off to 90p, perhaps even GBP 1 before we're done on that, but it's partly driven by making sure we have the right supply to sell at the right routes in time, and we also then can optimize also the pricing on that. We have something called gauge optimization. I'm not quite sure, actually we have talked about this one before. But this is actually an AI-driven tool, where we're looking and simulating the demand that we're seeing, for instance, now for the summer, so we can optimize what aircraft type we will have on each and every one of the routes that is there between the 319 and the 320 and the 321. So we can allocate those aircrafts in advance. And we see that order right now, we get a 24p benefit on that on a very small scale that's going to give us further opportunities as we are progressing through this year. And then obviously, also more things to expect within digitalization. Robert and his team are starting to work to deliver out a more advanced CRM system that's going to come into play in this year as well, which will then do 2 things. It will drive more traffic into the site and to the app and then also then increasing conversion. So there's plenty of things still here to go up within this area. Going to the next slide and to have a slide here on Holidays specifically. And I think we are going to come back -- for those of you who want also in January, where Garry and his team is going to talk you through a little bit more in depth about the opportunities that we have ahead of us also on this business. But it's been an absolute phenomenal success in this year, GBP 122 million as well. And we see its way to go way over the GBP 250 million mark that we set out as a medium-term target. And it's a great job by Garry and the team has been doing that. But the point is in here, and the reason why this is so fascinated about this, and I know we talked about this before. But it's almost impossible to replicate because it builds on the network that the airline has. We are the largest airline to leisure and beach destinations from the primary airports. It builds on the quality of the brand, the attraction to the brand. And we know now that it lends itself easily to provide for really good 4- and 5-star accommodations around Europe. So the network and the brand executed then with great supplier relationships and pricing that means that in 75% of the time we are cheaper than the comparable competitors because it is a digitally enabled model that delivers less than 4% of its fixed cost base. You will not find that anywhere else among any of the competitors. And that's why this is so exciting. And from an airline point of view, and I was asked a question here on some press calls we had earlier. They said, well, there looks to be a lot of capacity on the leisure market from tour operators here in the U.K. in December and when you're looking through that capacity where that comes from, that is tour operator buying the seats from easyJet. So we are quite happy to also support them by selling seats to them. At the same time, we are also then getting the conversion also for people to make the bookings with easyJet Holidays as well. So we are very pleased about that. And I must say -- and like I said, Garry will come back and talk about this, that when you're looking forward into '24, we expect to grow more than 35%, we expect to take a couple of more percentage of the share in there. We launched the Switzerland market. We have a leading network from Geneva, from Basel to Balearic, to the Canaries to Greece. We're launching Germany. We're launching France because we have this multi-tech platform, which means that on the currency basis, we can sell this by just doing translation of the website that we have. But the key thing will still continue to be U.K., that is the engine for us in order to get over and above that GBP 250 million that is in there. One thing that is really important step for us is that we're now getting access to over 1,000 hotels from the live inventory. The reason why this matters so much that when you do traditional contracting, you would normally contract 5 rooms here in that room category, 10 rooms there in that room category. But when you sold that out you basically go and stop sell. You have nothing available to sell. By having this direct connectivity into that live inventory to the dynamic inventory that the hotel's at, you basically have a free sale on all that inventory that is available. And I think also from the pricing point of view, it's much more effective because the hotels are then pricing according to demand as well. So that's something that we're going to roll out here in '24. And then also, we still have the journey ahead in this business when it comes to the sales of ancillaries and more things to do. So really strong start into the summer. We've sold 30% of the planned capacity now into December '24 with pricing that looks really good for ourselves. Moving on to the next slide. We continue to invest in making sure we deliver a great customer experience. And David and his team has been doing a huge amount of work to really to make sure that now we're set up in the best possible way into the next summer. Despite the external challenges that we saw in the summer gone by, we executed on our plan. We were #1 and #2 at the major airlines in the top 10 airports we were in terms of on-time performance. And the investments we're doing in this area and it goes into 2 buckets really. One is the bucket where we are saying that, look, these are the things we can control ourselves. That would be, for instance, having the right crew numbers at the airport, having the right setup in the office as well. We are very much on track to do that. We're ahead actually when it comes to the recruitment of people in '24. But also the other bucket is really to try to mitigate the things you can't control. And we have a number of initiatives that we use once again, data and AI to learn from what's been in the past simulating what the schedule, what the congestions will be going forward into '24 because we don't believe and we don't expect that the external challenges when you come in to ATC, as an example, will be less in the next summer. But we have more data now, and we can take the actions right now, for instance, to make sure that we have the schedule that can cope with the blocks of congestions that is most likely to happen in part of the network. So that means in sometimes where we do a 35 minutes turnaround, we can extend part of that. We can extend some of the fire breaks that we put into the system in this summer into next year. And the investments in doing so is actually net beneficial for us because it reduces the disruption cost that has been significant. So a greater customer experience, less disruption costs and smoother operations is actually what this is all about. And we got a number of other things also in here, that particularly data will do for us to help us support the operation going forward. On the customer experience, 1 number to point out in here is that, that is 79% -- I think it's actually 80% now people do self-service on customer queries. That was 40% in 2019. That's a big difference on how it made it actually easier for customers to do, and at the same time, it reduced the cost for us. Last time when we spoke on the half year result last year, that set at 70%, so that's one of the great work that Robert and the team is doing that will make sure that we can actually get the customers to self-service themselves to get a much accurate, much quicker way of dealing with the changes that they want to do on their web and on the app. So that's something we will continue to do. If you're -- moving on to the next slide on sustainability. We have -- and there's not much change in this since we last spoke on the 12th of October, but we have improved or maintained all the ESG ratings really, and we continue to focus on that. We're ahead of our journey to the road map on the net zero. It's still early on in there. But we're also then seeing that in a number of areas, particularly around when you come into the advances within the technology as well, it is moving much faster than actually some part of the policy framework, the work around the infrastructure, the supply of SaaS and the supply of green hydro, as an example, is taking place. So one of the things that we've been doing when we launched the hydrogen in aviation, where we were one of the founding members of, and I'm sure the share of that was actually to highlight for governments the work that needs to be done within those 3 areas: infrastructure, supply and policies because the advances that we're seeing both in hydrogen and also SaaS. I think Virgin had this flight where -- that flew with 100% SaaS, was it yesterday or -- It's important milestone. And it just demonstrates that the industry now have answers on how to decarbonize. And now we just need to make sure that the investment goes into the right place, to make this come alive, to make this happen also in reality. So this is something that we will continue to focus on. And we're very pleased about those ESG ratings, and we look for further improvements within this area also then within this year. So moving then to the next slide. Underpinning this is clearly the low-cost model that we have. This is one of the things that I have repeated, I said to you before as well that one of the aims that we have, what we wanted to do was really to come out of this, and look at this in a way where we could see that the cost advantage that we have against the ones where we are already ahead, already better positioned on the cost, and that is the primary competition that we have, the legacy and the flagship carriers on the network, that those have been even further increased. And we've taken a big step, I think, in '23 to demonstrate that. Also, for those low-cost airlines that, on average, have a lower cost base than we do because they primarily are flying from different airports. We wanted to start closing that gap. And when you're going through the cost performances in the '23 versus the '22, you can see that we have improved our competitiveness against any airline that is out there, which I think is a really, really good and important step for us because that means that we can continue to deliver great value for our customers, but at the same time also then allowing for strong results. A number of things going on here, fuel saving initiatives, that the same profile optimization now is giving us some [indiscernible] savings on fuel on every flight. Those are significant, those numbers, because of the scale that we're having. We now fully completed the in-sourcing of the line maintenance here in the U.K. and the Berlin transactions on the visit that is there, it is significantly cheaper than it was in the outsourcing model. And we got more opportunities to come on this as well, which means that as Kenton reiterated early as well, that we're looking to be flat over this winter, excluding fuel on the cost per seat. So that means that this leads us to looking at this outlook then for full year '24. So we had a very strong start of the year. October was a strong improvement in profit. We delivered revenue per seat growth of 12%. And when you're looking at the impact there on the Middle East as well, 4% of the plant capacity, higher when you're looking at the average seat kilometers, so what they're flying into those regions, [indiscernible] Jordan and Egypt. We have passed the flying into Israel and to Jordan. I think we paused now until the beginning of January. And we're looking obviously to see that as soon as the situation there stabilizes, and we all hope for all the reasons in the world that it does, that we will obviously regain and restart flying in there. But it's interesting when you're looking at the demand pattern, what happened there from the seventh of October, we're now some 7 weeks and a couple of days after that. And it almost follows identically the pattern that we saw when Russia invaded Ukraine, a hit across the network and remind you also that when it comes to Ukraine, we didn't even fly into Ukraine, but it had the same effect really across the network. So hit on the network in there. But then from week 5 and 6 is starting to really gradually improve. So if we're looking at the trading now on a daily basis, it's actually very strong, even in the very, very near term. And it never had an effect really into the peak periods of 2024. So this is the way where we take some confidence about this that was never impacting any of the peak periods into 2024, and they follow really the same demand pattern and booking pattern that we saw in by the invasion of Ukraine. So we're expecting basically when we stand today that we might not improve on the losses in this quarter. But this is where we currently stand. If I'm looking and we're looking at the daily trading and believe me, we're looking more than often on the daily trading as well. We see that this has come back strongly, but we're sold about 65% now in January. So it's still too early to tell exactly where this will be. And for Q2, we sold about 25% at this moment in time. Very positive outlook for '24 though, we talked about the limited competitive growth, we don't think that anybody will grow as much as we when you're looking at the profitable summer period, we have 8% planned capacity growth in there. And we're only 10% sold of the program in there, 30% -- over 30% sold for easyJet Holidays as an example, which is an early barometer. So both sales are good in there and the pricing is also very healthy for us. And with that, we feel very positive about what we see for this summer. So -- then just concluding on this slide, we talked about the outlook, 9% increases in capacities. All quarters are RPS positive in here. Tight supplies we expect into the summer as well. We have a clear strategy. We demonstrated that the strategy from the record results that we see over the summer is really working. We are executing on that strategy, where we have well-defined capital allocation framework that we talked you through. The confidence we have reinstated the dividend, new proposed fleet order to take to the shareholders here at the end of December and then well progressing towards those medium-term target that we set out to you in October 12 means that we're -- we feel very confident about our ability to execute and deliver those midterm target that we set out. So with that, I'm going to finish there and we'll get on to Q&A. We got a moderator there.

It's James Hollins from BNP Paribas. I'll spread my few questions around, if that's okay. First one, I think, would be for Sophie. Just wondering if you could perhaps quantify your H2 or summer seats or ASKs impacted potentially by Israel, Jordan, Egypt and maybe what you're doing and your team on scheduling as you look at potentially some disruption there? And maybe more specifically on any changes you've made due to the GTF issues, I guess I'm talking largely what's happening with you against Wizz. Second one for Garry. I've always got a question for Garry. The trend change in holidays. I was wondering if you could maybe provide a little bit more on how forward bookings have played out through I guess, as Johan was saying the sort of past 7 weeks. And maybe on those trend changes, whether you're seeing into your -- I don't know what number of summer it is, but a more summer on Hotel Stars, length of holiday regions in real focus. And the third and final one for Kenton. First of all, Kenton, I hope your back's okay. It might be time to give up on those 300-yard drives. But the question would be could you sort of directly quantify the Middle East, maybe on lost revenue or higher cost to give you that sort of cadence on the year-on-year Q1 losses? And maybe give a small guide on where Q2 losses could come down year-on-year as we see it at the moment.

Thank you. In terms of what we're seeing for Tel Aviv and Jordan into the summer. I mean relative -- at the moment, I mean, it represents a relatively amount of our network into the summer, and we don't plan to change what we do in the summer. It's one of those markets, which will come back very quickly as soon as there is a ceasefire that's held, we've seen that before from Israel. I would say just in terms of what we've done in the short term, though, so we've canceled up to the eighth of January, as Johan mentioned. Just to give you a flavor of some of the replacements, so we've topped up in the U.K. on a number of routes, to be honest. We've put some city routes in, so I could go into lots of detail, I'll try not to. But we put some city routes into some more top-ups into Gatwick on to CDG. So Tenerife on a Thursday, Arrecife on a Sunday, so putting some canaries in. The same on Luton, same in Manchester. We've put canaries and some longer leisure into there. So in the shorter term, we started to sort of backfill that capacity. Obviously, you've got -- you need to have a selling window. So we normally allow like a 3-week selling window to put that capacity in. And then within Europe because we had quite a few routes into Tel Aviv from Europe, again, top-ups all across into kind of different routes and a whole mix of routes, but certainly been able to use that capacity to fill the gaps. But we will keep sort of rolling view on Tel Aviv and our operation into Tel Aviv, but as I say, what we don't want to do -- at the moment, we've got slot alleviation for the whole of the winter into Tel Aviv. But what we don't want to do is to preempt anything for the summer because as I say, as soon as there is stability there, it will come back really quickly. It's a very strong VFR market. So it's much more resilient than perhaps a long leisure where people have more choice about where they're going to fly. So we think it will bounce back quickly when it does. In terms of the GTF engine issues and the impact of that capacity, I guess, I mean, Wizz now is a lower percentage head-to-head with us anyway. It's 10% head-to-head capacity with us. We saw in the presentation, the reductions that we've got there. It was around a 14% head-to-head capacity with us previously. So that's going down. And so we won't change our network plans based on the GTF engine issues. I think we're also hearing there is going to be potentially quite a lot of wet leasing in the market because people will be trying to backfill, that will obviously affect their cost base. So we might not see all of the capacity coming out. There will be a rush, I think, for wet leasing, which will impact their cost base, as I mentioned. But we're not going to make any significant changes on our network as we say, in the summer, it's a relatively low head-to-head capacity anyway for us. But that should be positive for us. And the Airbus deliveries we're getting on time. We're getting some early coming in this year as well. So we're not -- we don't seem to be impacted in the same way as other carriers are. I think that answers my question. So I think, Garry, you're next.

Thanks, Sophie. Yes, so I'll start with the last 7 weeks. What we found after October 7. Because of the dynamic inventory that Johan talked about, the hoteliers that we work with were able to change their prices immediately. So by the 10th of October, in Egypt, for example, all of the hoteliers had reduced their price by 50%. So we didn't really see the impact that the airlines saw because it was very much price driven and the hoteliers were reacting directly. So we've had pretty consistent trading over the last 7 weeks. I think it's fair to say that the -- I think I talked the last time about how late the market was for holidays, that not only were we picking sustained demand, but very late, the demand was coming in as well, and that's continued to happen. So we're seeing decent sales into December and into January at the moment, which you normally wouldn't see so late. So that's been encouraging. And when we look at next summer, as I say, there's -- on the 35% growth, we're 30% sold, which is a couple of percentage ahead of where we would normally think we would be at the moment. Black Friday is a really good barometer for how the turn of year is going to play out. And we've actually come out of Black Friday quite strong. It did what we hoped it would do in terms of the traffic, the demand and the types of products that we were selling. So that's given us confidence on the actions that we're taking for turn of year to really drive that volume through January and February. And then in terms of what was selling, there's no great surprises. I mean it's the same destinations that we're selling winter, the canaries are very, very strong. Egypt is actually very strong at the moment, but that's very much price driven. And then when we go into summer, the best-selling destinations, our Balearic, Greece and Turkey, as it was last summer. Same kind of board basis, same kind of star rating we're selling and where about high-single digits in terms of our selling price up at the moment. So we're very comfortable with where it is.

Thank you, Garry. And as Garry pointed out about Egypt, that's one of the advantages of having an asset-light model because the tour operator competitors that may have -- that may own their own hotels in Egypt or be heavily committed into Egypt, have to fill those hotels. And therefore, it leaves the rest of the hotels looking for partners that can help fill them. And that's a very useful role that easyJet Holidays can play. So H1, yes. I mean as Johan said, a really strong start to October. We would have been almost 80% sold when October 7 happened. And therefore, the 12% increase in RPS actually kind of improved the trend we've seen at the end of peak season where we had run just between 9% and 10%. Then there was obviously the immediate impact to the area itself, and we ceased the flying to or paused the flying to Jordan and Israel as an airline saw some of the impact to Egypt. And then as Johan said, it then started playing very similar -- in a similar way to what we -- the experience we had in the Ukraine, and that's just Google searches for flights dropped for a period of about 6 weeks. And now we're about 7 weeks past, we can see a bit of a tick up. But obviously, just as October would have been 80% sold, so November would have been 60%, so December would have been 40%. And therefore, for November and December, the rest of that book build was done during the time when Google searches dropped, and that's why even though we remain committed to keeping the CPS ex fuel or flat or maybe even get it down a little bit in Q1 because the fuel itself will be going up 18% in Q1, then we don't expect to improve on the winter losses of last year. But we do expect to have a small RPS improvement in Q1. Now Q2 is different. We are 25% sold for Q2. That's kind of normal. We're slightly better sold than we were last year. And therefore, as we start to see this recovery that we're seeing now, we obviously have a lot more of Q2 ahead of us. Fuel is slightly different as well. It will be up 2% to 3%, not the 18% that we're seeing in the first quarter. So yes, we'll have to see about the speed of recovery in Q2. And then I think we're all very much looking forward to the summer because it's kind of -- we're not seeing much ability for competitors to grow with what's happening with the Pratt & Whitney engines and the length of time they're going to take to go through the shops and there's going to be a huge kind of tightness in terms of getting MRO capacity for those engines. So we're seeing that capacity looks pretty flat really for the summer, but fuel is trending down. So I think we're pretty encouraged by what we see for the summer.

Jaime Rowbotham from Deutsche Bank. Two quick ones from me. I was going to ask about those first half unit costs, but perhaps I'll ask you to remind us instead about how you see the second half of the year on the nonfuel unit costs, Kenton. And then the second one, when we saw you around a month ago, those 16 aircraft deliveries in fiscal '24 were going to be one 320neo and the rest, I think 320neo. Is that still the planned split? Could that change? Could you get a few more 321s potentially?

Okay. In reverse order, that's still the planned split. We can influence the neos 24 months out. And that's what we did when we went into negotiations with Airbus around the proposed order. We bought 35 A320s into A321s, but the real pickup for A321 starts in '25. So you're right. In '20, we get 1 compared with the other 15 being A320neos. And as Sophie says, the conversations we're having with Airbus on those 16 deliveries, they still remain committed to us getting them. In fact, I think the only thing we've seen is an improvement of about a month in terms of delivery time. So I think for easyJet being Airbus' most important customer in Europe and having CFM engines. I think that -- that means we're pretty comfortable with the deliveries we've scheduled for 2024. H2, we're always going to target now to be flat in terms of our CPS ex fuel. At the moment, we've drawn up the budget. We're not quite there. So there's work to be done. There will be some inflationary linked contracts naturally in the airport space, which will see inflation is a bit stickier than we'd like, so that will start playing through there. We also want to be improving our load factor as we go forward into the summer, and that has an adverse impact on CPS, but a very much positive impact for the P&L as a whole. So the target is to be flat. But at the moment, we're probably looking at a couple of percent increase in CPS ex fuel and obviously fuel itself despite the carbon headwind of the first 25% of the EU ETS unwind is very much looking like including that, it should still be flat or down. So that's the lookout we have, and we've obviously got just over 50% of the fuel hedged and the dollars hedged for the summer.

It's Harry Gowers from JPMorgan. I've got 2 questions as well. First one is a bit of a 2 parter. So I mean, on this quarter, a rule of the weaker RPS trends coming from the Middle East conflicts? Or do you sense any kind of wider impact on the underlying consumer, so ex the weakness from the Middle East. And then I mean, it does feel maybe a bit heightened from a geopolitical perspective in the region at the moment. So do you think there could be more of a structural impact on travel to there, that last longer than just the short term, 7 to 8 weeks or so? And how would you mitigate that or reallocate? And then second one on Q2, I mean, you said RPS is ahead year-over-year. Maybe you could try and quantify that exactly on the 25%, which is sold?

I mean I'll cherry pick here. But look, I don't think that there is any reason to believe that there will be any structural change into the booking pattern or demand that we're seeing because it -- and like I said, we're following this daily, and we're mapping it over what we see with the Russian invasion. And it's almost like identical in terms of what's happening. And also remind you that there was no impact whatsoever when you came out into 2024's peak periods throughout this. In addition to that, we did a consumer survey that was done here since the conflict started. And 3/4 of British people say that they will spend more on holidays and travel in '24. It's firmer than ever that this is more prioritized as the top thing people want to do when it comes to the discretionary one that they have. So if there ever was something like your revenge travel or tourism, we certainly at easyJet hasn't seen the end of that. So I don't think it's going to change anything. I think Sophie's point is very good as well. This region has a tendency that when things happens and travel can resume again, it picks up very quickly, very quickly compared to some of the other destinations that is there.

On the kind of strength of the bookings, what I'd say is for Q2, we're adding about 9% capacity. So we've got about 11% up for winter. That's 13% in Q1, about 9% in Q2. And on that 9% increased capacity, our load factor is slightly ahead year-on-year. So bookings are up. Yield is also ahead for Q2. It started strongly. And then during the period where Google searches dropped, it needed a bit more encouragement with yield. But RPS is still ahead. And as we said, now we're seeing the start of the recovery, the kind of booking momentum needs less incentivizing, should we say. So we're starting to see on the current bookings as well, RPS going back ahead year-on-year, having had a little dip for 6 weeks. But cumulatively, yield ahead, load factor ahead and that's on a 9% growth in capacity. And H2, that didn't really need any stimulation during even the general drop was more H1 specific. The summer has been strong really all the way through. But that is just under 10%, which is normal, but yield up, load factor up and capacity up about 8%. So bookings obviously well ahead.

I think just to add also when you're looking at the demand pattern and the booking segment, if you compare it to last winter, last winter was very strong on domestics across the network. And we were finding it more challenged with winter sun and leisure destinations and we're sitting kind of in the middle. City is still recovering, but it's almost reversed now. But I'm talking about year-on-year comparisons. We see strong demand continuing into the winter sun and those destinations there, and then compare to year more challenges on the domestic side. But it still contributes on the contribution for [indiscernible] as we expected to do, but that's a mix in what we've seen.

It's Andrew Lob from Barclays. Can I ask on the holidays how it's going with the opening in Switzerland and what the time line is and progress and hopes for the expansion into France and Germany. On the network side, can I ask about what's happening at Gatwick, how many slot going back to the world's favorite and whether you can hope to pick up any slots anywhere else? And then politically, are you in any way concerned by the government's excitement about protecting poor consumers from evil airlines and their drip pricing?

Let me start with the first before the microphone gets -- I'll do that protecting the customer from the evil airline. Look, this is -- there is already legislation in this area. As you know, this is the difference. I think this idea originated from a trip that was done over in the U.S. where they don't have and legislation in this area. 91% of customers wants to pay for what they get, which is the whole point of the fact that you have ancillaries and the growth we've seen around ancillaries is really driven by demand. People want more of what we've been offering. Now 1/3 of our customers don't buy any ancillaries at all so when it comes to bags or even allocation of the seat. So one of the things that we have engaged with the government about is to say, and by the way, we don't drip price. We show all the nonavoidable cost upfront. And the rest are choices that the consumers have. And I think we all would agree that people should pay for the choices they choose to do. And 1 of the things that we're very clear with the government on and which we do understand is that you got to be careful that you don't enter into something that has the unwanted consequences that you now suddenly are increasing the cost, and therefore, the prices for those who chooses not to buy certain elements of what we are offering. So we are engaging with them, as you would expect, quite heavily on this. And like I said, it's very different from how this has been managed by companies also in other parts of the world.

Yes, on Gatwick. So on Gatwick, we've applied for over 90,000 slots for this summer. That's 3 aircrafts' worth are going back to BA as part of the agreement, and, that's around 6,000 slots -- sorry, about 3,000 slots and then 6,000 slots we've also built in for resilience as well. So based on what we saw this summer, I think you're aware, we took some capacity out in the middle of the summer due to air traffic control issues and congestion over the southern Med, we recognize from Eurocontrol stats that's not going to improve next year. And so let's be on the front foot and build that into the schedule from the start of June rather than waiting for the peak summer. So in terms of what we're going to hold next summer, we're going to hold over 90,000 slots in Gatwick. We are only giving back, as I say, 3 aircrafts' worth of slots into back to BA as part of the agreement. So that will take us from 81 down to 78 aircraft. We originally had 32 aircraft in Gatwick. They went down to 16 aircraft. We picked up 8 aircrafts' worth of slots, I believe the rest went to Vueling and within the IAG Group. So we yet to see whether those 3 aircraft go back into BA or whether they redeployed within the IAG group at Gatwick, but that's obviously for them to decide. But that's the agreement we've got and the structure we've got, and then more aircraft will be returned in the next couple of years as well.

And before we go to Garry, I think, on Switzerland, 1 other update on London Gatwick. We were in a 7-year deal that was due to end in April 2024. And yesterday, we signed a new long-term deal with Gatwick that we're very pleased with and secure as easyJet as an anchor partner for Gatwick. So we've got a deal agreed now that moves us forward for the next 6 years. Garry?

Yes. On Switzerland, we launched a few weeks or a few months back now. And it's working as it should. So the systems work and the hotels are working well. The customers are coming in. We've got France and Germany on test at the moment, and that's looking good. So we'll probably launch France and Germany just before turn of year and get those markets out. But in terms of the focus, I mean, I think one thing we've done well in holidays is of a really disciplined focus on where we think we can make the biggest difference. And when we look at things like, say, Birmingham or some of the regions that we've put new routes into, they're selling incredibly well, really, really well. And there's about 3.5 million tour operator capacity gone into beach roots for next summer. So I'm really keen that the team focus on the U.K. for turn of the year and really do as well as we can on the U.K. And we will learn about what the demand looks like for France, Germany and Switzerland, the types of hotels that customers are looking for, how we can drive more volume, I think, as we go through turn of year, it's going to be a marketing play there. So how much do we want to invest for how much we can get back. We don't really need to invest anything in the U.K. regions at turn of year because the marketing is all there already. So the big focus, I think, for us is going to be U.K. region is getting turn away -- turn of year away in the U.K. That's what makes up the GBP 250 million. And then we will decide by, I suppose, spring time, just how much we want to invest in France, Germany and Switzerland, once we've seen the kind of opportunity there.

Just one thing I think I forgot when I did the presentation. It was on the slide there. But we negotiated for quite some time, traffic-wise between Germany and Turkey. When we looked at that 83% year-on-year improvement contribution for [indiscernible], 1 of the things that's really going to drive a further improvement and will obviously also help the holiday business is that we now can start flying. So we fly between Berlin and Antalya and [indiscernible]. And this is a big, big market. I mean there's 7 million Turkish people living in Germany today. There's 3 million German nationals that goes to Turkey every year. So I think it represents the biggest flow outside the domestic market that's in there. So not only will we see further improvement into the airline, but it will also be a key component also to drive the German [indiscernible] business there. And by the way, that traffic right things. We're looking to expand and get more of those also coming in because we are underrepresented in some of these areas, particularly in North Africa. So that's something we're speaking to the relevant authorities about an ongoing basis.

Alex Irving from Bernstein. A couple from me, please. So first of all, you spoke earlier on about the advantages of a capacity-constrained market in Europe. There an advantage to extending the leases to extend the life of some of your old A319s previously planned for retirement, how you're thinking about that. And then some for Garry. So we saw a couple of weeks ago one of your U.K. listed package holiday peers pointing to booking softness. It sounds like you're not seeing that in the easyJet Holidays business. Wondering what's driving that difference, please. And then as we go into 2024, as you talked about 35% or more than 35% increasing customers year-on-year. But written down on the slide, you're saying U.K. from 5% to 7% market share, that's 40% growth plus Switzerland, plus France, plus Germany. Is 35% sort of a worst case scenario or a low end? How should we think about the achievable growth in customers into 2024, please?

On the extension of leases, look, we have flexibility in what we do. That's one of the key components when you're looking at that fleet growth as well. But I think we have the opportunity to grow in line with the demand, and that's what we're certainly doing now for the summer. We got the deliveries in there. We can, if we want to. But at the moment in time, I think the key for us is to maintain flexibility, and that's what we can do by extending leases if that was needed to do as well. .

On the growth of our dear competitor. Yes, I think that when you look at the numbers from both JAK2, and JAK2 was the one who went out with the announcement a few weeks ago, I think they're up to nearly 80% of their seats are attached with Holidays. So of course, when they put on those big, big increases, they're being very, very directed in terms of where they're putting that capacity into what destinations and to what hotels. And I think as Johan said earlier, they need to get that right because there is nowhere else to put that capacity into because you're taking all of your seats up. So I think one of the advantage that we've got and why we may not be seeing the softness that they may be seeing is that we've got those 100 destinations. We're only 4% of the seats. So the customer will decide where the customer wants to go. We won't be forcing them into specific destinations or specific hotels, which the 2 big traditional tour operators have to do. And I think that's probably driving the difference there. In terms of that capacity and how we're looking at and thinking about it, I mean, 35%, it could be anything according to the demand. We're 4%, we're not constrained. So if we see the demands there, then we have the hotel beds through the dynamic inventory, and we will just price accordingly and get the demand away. So at this moment in time, we're kind of comfortable that 35% seems the right number. That's what we're talking around. But yes, once we go through turn of year and when I come to see you in January, we'll probably be in a much stronger position to understand what that number should look like by the end of the summer.

Joel Ku from Liberum. Three for me, if I can. You talked about how holidays is currently well last year was 4% of total seats. Where could that go in the long term? And where does it need to get to hit the GBP 250 million profit target? Secondly, what percentage of your seats do you sell to other tour operators? And what are the pros and cons of cutting them off and making easyJet Holidays to be exclusive package holiday provider? And finally, I think you talked about being 10% sold for the second half. How does that compare with where you would have been at this time last year pre pandemic?

Yes, we're ahead a couple of points in for where we were at this point in time last year. So it is a stronger start onto that. I think that that's 4% of what we do from the airline seat capacity. There's really nothing that stops that because we have that flexibility. So we will grow in line where we see the demand is coming in. So it still represents a very small part of the airline, and it's driven by the network that we have.

I mean the math is like 4% of the airline is driving 5% market share for easyJet Holidays today. We need about 10% market share of the U.K. to make the GBP 250 million. So that would infer 8% of the airline. But with the airline intended to grow, maybe 7%.

Yes, that was the second part of the question, which is around how much do we sell through other tour operators. In terms of the other tour operators, I mean, relatively, it's still a very small percentage. And actually, we prioritize markets where we don't have a strong easyJet Holidays presence, so we sell a lot more to tour operators within Europe. We don't cut them off in any market. We actually see it as a great opportunity because people that maybe have flown with the tour operator previously that may have been using either their own airline or using another third party and then experiencing easyJet and might not have experienced easyJet. So it's a fantastic way for them to experience easyJet and the service we offer, and then we can convert them to easyJet Holidays going forward. So we are actually, we see it as a positive for the airline. And so we work proactively with the tour operators to offer seat. And we still got 100 million seats to sell. So there's plenty of space for everyone.

But I'd just add, we're happy to support anyone who wants to book a seat with ourselves as well. We're not in the need to having to optimize anything between the Holiday business or the airline. We're quite confident that the holiday business can live and will live on its own merits as well. So we're quite happy to support any other holiday company who also wants to buy a seat from us also going forward. .

I mean it's a good marketing activity because obviously, that customer of the other tour operator gets to sit for 3 hours looking at a seat back telling them they could have got it cheaper.

This is Sathish from Citigroup. I got questions here. In terms of the load factor evolution in October and November, any color on that would be helpful. And then the second one is around the cost. Where did you actually ended up on a disruption cost? Obviously, you don't quantify it, but at least directionally where we were versus last year. And where did you end up in FY '23? And one of your appendix slide, you point out the labor inflation. Is it driven by wage deals that are ongoing? Or is it just a function of deals that have been struck previously?

Okay. Pick up crew first. So we have a number of union negotiations right throughout Europe because obviously, that covers the cabin crew and the pilots, and we individually negotiate market by market. So in any given year, we will always be negotiating 2 to 3 deals. Looking forward, what we've said and we guide in the appendix, we expect that the inflation that there is will be offset by the increase in productivity. So for '24, for example, we're expecting that crew costs are pretty stable year-on-year when it comes to CPS. Regarding the kind of October, November load factors. October was slightly ahead, November slightly behind year-on-year. But that's because November was more exposed and therefore, we had some initial kind of cancellations or some initial drop in bookings that we've talked to already. So I mean that's the kind of position in Q1. But overall, in Q1, we expect to be -- to have RPS, which obviously includes load factor slightly ahead year-on-year.

Okay. Listen, I think that was it. And please stay only if you'd like to chat with anyone of us there, and thank you all very much for coming. Thank you.