easyJet plc (EZJ) Earnings Call Transcript & Summary

Okay. Well, thank you for joining us for the easyJet's half 1 results for the period up to the 31st of March 2025. I'm joined today by my full management Board, sat on the front row. I particularly like to welcome Ellie, Opal and, of course, Jan, who are joining us for the first time, having joined easyJet and the leadership team earlier this year. And of course, I'd like to welcome our Chairman, Stephen Hester. We recorded a kind of prerecording, if you like, of the results presentation and loaded it to the website first thing this morning. So hopefully, you've all had a chance to have a look at that. But for those of you who haven't, then I'll just summarize some of the key points, and then we'll go into the majority of the morning on Q&A. So we're making good progress against our ambitious strategy as we continue to drive efficiency and enhance the customer experience, both in the sky and on the ground. In the first half, the group loss was GBP 394 million, which was in line with consensus and slightly ahead of last year when you factor in the timing of Easter. And you'll notice we've put the value of Easter at GBP 50 million because we've now closed the books on March. So we've seen the impact it's had there. And we've also closed the book in April and seen that the full amount has come back, and that's why we've upgraded the number there to GBP 50 million. In Q1, we saw a good performance. We improved the performance by GBP 65 million, more than halving our losses in this quarter. And we remain very focused on taking this quarter into profit. This is something we think we can do because of the longer summers for the couples markets into October. We're looking to add more capacity into the Christmas peaks, and we see this quarter having a good potential. Now when you move to the second quarter, we saw losses slightly increase, and this is always a loss-making quarter for airlines. We have to do a lot of preparation work for the summer ahead. We recruit all the pilots and cabin crew extra that we'll need. We train all the new recruits plus recurrent training for the existing ones. And of course, it's an important time to maintain from an engineering perspective, the whole fleet. SAT will always run through this quarter, which is an important fact. We also added some important capacity investments into this quarter with the purpose of driving productivity. And we saw those come through. So we added 8% seats into the quarter, flew longer sectors, so increased our ASKs by 14%. And for the half, that helped us improve crew productivity by 6%, improved aircraft utilization by 5% and most importantly, brought our unit costs, our CASK ex fuel down by 4%. And with what's happening with fuel at the moment, we saw our fuel costs reduced by 8%, and we expect that to continue into the second half. And then from a revenue perspective, when you add these additional new routes, we expect the revenue benefits to come through next winter and beyond, and that's something consistent that we've seen when we put new routes in the past because you get maturity benefits in kind of years 2 and 3 of establishing the new routes. But probably what's important to remember is if you look at the 4 quarters, Q1, 3 and 4 are now above the pre-pandemic levels of production. But even post this capacity investment, Q2 is still about 6% lower than pre-pandemic in terms of seats. So this is an important investment. It will structurally help us as we move forward for future winters. But obviously, a bit of price stimulation needed in the first time of adding this capacity. Now as you move through to the summer, capacity is more constrained. It's well publicized the delays from the OEMs, from Airbus and Boeing and that's moved a lot of deliveries to the right-hand side. We are adding 1% extra seat capacity this summer. We're flying longer sectors, but it's 1% extra seats. And we're seeing, say, 2% extra seats when we look at the market for our city peers and only really 3% in general in the market. So it is a more constrained market as we come into the summer. And the demand has been positive. We're ahead on Q3, which is 80% sold now slightly ahead when it comes to that quarter and the all-important fourth quarter, July to September, we're 42% sold. So still a long way to go, but the bookings are positive, we're ahead 2.2% in terms of load factor, which on 42% is more like a 5% increase in bookings relative to the position we were last year. So that remains positive. And when we think to easyJet holidays, that stays on its excellent growth trajectory. We're still expecting a 25% increase in passengers there. We're confident for an early delivery of the medium-term targets of over GBP 250 million. And we'll talk about more what the next targets might look like when we come together at the year-end. And with an attachment rate on international flights, i.e., when we exclude domestic of 6.4%, there's still some road map in front of the holidays business. We took 9 neos into ownership, 9 of the A320 family neos into ownership, but retired none of the A319s in the fleet. So our average seat gauge increased by 1% to 181. But the great thing here is that the real benefits are in front of us, the GBP 3 per seat benefits, the vast majority of those are in front of us because we journey from 181 seats to 191 seats by full year '28, and that's what unlocks the cost benefit because we expect 90 deliveries in that period, and that will help us retire a good majority of A319s when it comes to the fleet. And in addition, we remain very focused on capital allocation, making sure that the assets we deploy meet our desired return on capital of kind of high-teen ROCE. So when you roll all that together, we feel we're still very much on track for delivery of the medium-term targets. If we go to the next slide here, this one you've seen before, and I make no apologies for it. Our purpose is to make low-cost travel easy. And when easyJet was founded, it was founded with the purpose of democratizing travel, making it easy, accessible for affordable for all. And the thing we're already proud of is that purpose is as true today as it was 30 years ago when the airline was founded and we execute against that purpose with looking at the 4 pillars that we have up there. And we believe focusing on those 4 key pillars of our strategic imperatives will help us deliver the medium-term targets. And of course, this is only possible with our fantastic people. We genuinely think that our people here at easyJet, both in the sky and on the ground are the key differentiator for easyJet. But looking at the 4 pillars, and starting with building Europe's best network, we continue to add targeted growth this year. We've added growth into the longer leisure flows. We're restoring some of the city traffic and we're consolidating some of our domestic flights. We've opened 3 new bases. We've opened the base in Milan Linate and Rome Fiumicino and, of course, here in the U.K. the South end, and that's our 10th base. And we're very excited that next year, next summer, we'll be opening Newcastle, which we're announcing today. And we think that will be an excellent addition to the U.K. We're not -- we haven't got great service for the communities in the Northeast. So that will give better route connectivity and great affordable fares in the Northeast of England, and we're very excited that we're able to open that base back up in Newcastle. And we remain focused on capital allocation, ensuring our capital is deployed to the markets where we see the strongest demand and therefore, the strongest returns. And if we're not getting those returns, we'll act decisively and reallocate the aircraft away from those bases as we did in Toulouse and as we did in Venice. So now thinking about strengthening revenue. Our digital improvement program is focused on enhancing the products and the services that our customers want. On top of that, we continue to work aggressively with our algorithms, looking to improve the way they work with ticket revenue and ancillary revenue. And also included in this pillar is our -- is the low-cost model of easyJet holidays, which continues its excellent trajectory. With delivering ease and reliability, this is very important to us and we're very focused on building resilience into the program to reduce the number of disruptive events. And we're pleased with the performance we've seen in the first half. Our on-time performance improved by 1%. It then went on to improve by 2% in April. The 4 key days of the Easter break actually improved by an amazing 13%. We had almost no disruption in the entire program and we continue to see that development through May. And this is really important because, unfortunately, the same can't be said of the air traffic control suppliers. It has actually somehow deteriorated year-on-year in the year-to-date. But we've set up, unfortunately, expecting a poor service from those coordinators. And we very much ask governments to lean into that and make sure that they keep an uninterrupted service for the summer ahead. We pride ourselves on having the warmest welcome in the sky and always have done, but we've extended that focus now to include the warmest welcome on the ground. We're putting more boots on the ground and it's really good to see that investment coming through in a strengthened customer service appreciation. We're seeing our CSAT scores when we look specifically at the airport experience improving year-on-year. So we're very pleased with that. And the other thing we're focused on was -- there is, is our fully owned and now replatformed app. And the benefit of having that replatformed is we're able to now bring new features into the market at a greater pace. And those features will be focused on enhancing the customer experience. So more to come in that space. And finally, but of course, not at all least, is focusing on our low-cost model. We saw H1 CASK ex fuel reduced by 4%. We expect to carry on with a strong focus on cost. And for the full year we're kind of guiding to a broadly flat CASK ex fuel. The fuel line itself is going down by about 8% as we journey through the year. But if you look at that flat CASK ex fuel, if we're able to deliver that by the end of this year, that will be 24 months of stable unit costs, which you don't see in many other airlines at the moment. So that's helping us close the gap or expand the gap if we're measuring ourselves against flag carriers. And that's an important focus for us, so we can make sure we can keep offering attractive and affordable fares. But the great thing is, and Jan will tell you a little bit more, there's still a lot to do. We have AI, we have data efficiencies in front of us. We're continuing to look at productivity. As I said, we're still 6% behind where we were this time last year in Q2. So there's opportunities for greater productivity and finessing the routes as they mature. And of course, we've got all of the GBP 3 per seat benefit on up-gauging in front of us when we retire the A319 subfleet. So in summary, the near-term outlook for easyJet is positive, with the current book position supportive of where consensus sits. And this would deliver another positive step forward towards our medium-term target sustainably generating over GBP 1 billion in profit. And this is focused on executing against our strategy, and it's supported by a disciplined approach on capital allocation making sure we deploy our capacity where we can make a high-teen ROCE return. This is all underpinned by our investment-grade balance sheet, which is one of the strongest in the industry. We've now taken 82% of our neos into ownership and the book value of our assets sits at GBP 4.6 billion, and we expect that to grow by 60% over the next few years, such that -- so that it has done by full year '28. And of course, we paid a dividend of 20% of profit after tax in the half relating to the full year '24 performance. All this means we're on track to deliver against our medium-term targets. And we've got the right building blocks to generate sustainable profit of more than GBP 1 billion PBT that we're wanting to do. I remain, and I'm confident the management team remain very confident of easyJet's prospects in the near term and we're all very excited about the future. So with that, I think I'll hand over to Q&A.

This is James Hollins from BNP Paribas. I think we're only allowed 2 questions, so I'll keep it to that. The first one is on near term and the second one is longer term. The first one on perhaps just a little bit more detail, please, on how the Easter impact moved from GBP 30 million to GBP 50 million. Is it just a manifestation of what you're seeing in the strength of April or anything you'd like to add? And linked to that, on the short term, perhaps just discuss in any which way you want RASK, RPS yield, whatever you like on summer pricing. Clearly, there's been a bit of a lack of discussion around summer pricing. So maybe just whichever metric you want to choose on that one. And secondly, longer term, I mean, clearly, the statement is full of discussion on earnings growth, which is great. If I start to think about full year '26, obviously, a light year away from '26, some of important period, what we can perhaps discuss is the winter losses, clearly a core part of your strategy. And maybe bringing Sophie into this as well around just really discussing the sort of considerable nature of those network changes through this winter. You've talked about maturation of new routes over sort of a 2- to 3-year period, perhaps how we should think about the maturity of the winter routes in winter '25, '26 and how that might start to impact winter losses and bring those down?

Thank goodness, we restricted the number of questions you could ask. I don't know whether we'd have had enough time. Happy birthday, by the way. It's James' 50th birthday yesterday. Let's start with -- should I say the number? 50 is ironically a good number to link to -- yes, we can link from that to the Easter losses, that were 50 as well. So Easter we've closed the books in March and we've closed the books in April. And what we saw was the impact that we're anticipating in January was slightly deeper in March. But the good news was the strength of Easter was also stronger than anticipated. I think the position was a couple of factors. Firstly, as you know, all airlines switch capacity away from Tel Aviv. That was done fairly late in the booking cycle and a lot of the capacity from ourselves and other airlines went to the canaries. These are always thick routes anyway in the winter. And I think what we saw and what I understand everyone saw is that those canaries routes, in particular, needed some extra price stimulation. But we were very pleased that April saw a particularly strong demand for Easter, which can be the case when it sits at the end of April. And that's why when we're thinking about summer and the fare position in summer, we've decided to get ahead on some of the thicker routes. The load factor for Q4 is up 2.2%. Fuel is coming down. The market feels relatively constrained and therefore very much all to play for, but we were keen to get ahead of ourselves when it came to load factor. The other thing I think unlike recent announcements from competitors, should I say, we had a very good year last year. We had an excellent year last year. So our full year result improved by 34% last year, and that year ended with Summer '24 and the full inclusion of Summer '24, and that powered the results of last year. So we're anniversarying a strong performance. But myself and the management team are very focused on repeating this and with a bit of extra flying, which does give some potential for some maturity. But I'll let Sophie talk about what we see when we put new routes on and how long it takes.

Yes, sure. Okay. Yes. So building on what Kenton said in terms of what we're seeing. So last winter, we added the windfall as we added about 30% capacity on to U.K. domestics, for example. And actually, in year 2, this winter just gone U.K. domestics were really maturing very strongly. So they were some of our strongest routes. So the first year is always the heaviest hit and we always talk about a 3-year maturity curve to get to at least network average performance, which is what we target. So all of that growth we added this winter will be maturing into year 2 next year as part of that journey. But as Kenton said, with Rome and Linate and Southend those will be new aircraft into their first winter. So that will obviously still need to build as we go through. It's interesting kind of reflecting back on the first half, we put a lot of capacity from the U.K. into beach & non-EU. And so that required quite a bit of stimulation. But we know that will mature into next year. Interestingly, the capacity we added from Europe into non-EU, we added 39% capacity into non-EU, A lot of that was France into North Africa. That actually performed really well in the first winter. And so we expect that to build on there. But certainly, there is price stimulation that was needed in the first half of this year, but we'll continue to grow into that North African flows because they do particularly well from Europe because you've got your VFR traffic, which is counter seasonal. So there'll be more growth into there. And then as we say, the annualization of the growth aircraft this summer going into winter will be the focus for next winter rather than kind of growth on existing capacity.

Gerald Khoo from Panmure Liberum. A couple if I can. Firstly, could you talk a bit about how the new bases are performing? I think you've tried Rome Fiumicino in the past, admittedly in a given distant past, what's different about it this time? And secondly, what proportion of seats are actually sold through sort of third-party channels rather than direct. I think -- you charge I think it's a GBP 12 each way markup on those third-party sales. That seems to be more than your competitors charge. How sustainable is that? Why is it a fixed charge to everyone? Why wouldn't you vary it to different providers?

Thank you, Gerald. I'll start on the new bases, and then that feels like something that Sophie will be able to add an awful lot more color than I could. So on the new bases, I mean, let's start in Southend, that has done extremely well immediately. And 25% of the traffic is coming from easyJet holidays. So it really was something that people like flying from their local airport, and that is clearly a good catchment area for easyJet and a very good start. When it comes to Milan Linate and Rome Fiumicino, I mean Linate is a fantastic airport, and we wanted to get into it for a long time. It's only come about because of the consolidation with -- into Lufthansa. In the U.K., when slots come up, you buy them. So you might spend a few tens of millions to be able to place 5 aircraft into Linate, that's not the case in Europe. The penalty, if you like, is that you have to fly some remedy routes for a period of time before you then can remix the portfolio of routes to something that suits your overall network better. So there will be an investment this summer, next winter as we fly those routes and establish traffic. Also, the competition authority, as is there, won't tend to take a long time to come to the eventual conclusion, which meant we went on sale later than we would have ordinarily liked, so you have less of a booking window. But very excited to be there in Milano Linate's great airport with fabulous connectivity into the center. And when you this about Rome Fiumicino, this has always been an important network point for us. I think Rome will be a great city destination for the holidays business as well when it comes to leisure breaks. And before we based aircraft with a deal that came about with Lufthansa, it was our third most important network point anyway. So we were flying a lot into Rome. Now we base aircraft, we can complete the schedule and give better timings for more business traffic and some of the other flows as well. But Sophie, any color on that and perhaps pick up the third-party distribution point?

Yes, sure. So interestingly, on Rome as well, we're seeing Wizz have dropped 4 routes that were head-to-head with us, Rome already. So they've dropped Hamburg, Basel, Lyon and Berlin. So they've dropped 14 head-to-head routes. This summer will be interesting for them. Rome, that should certainly help with the Rome performance. So that's giving us -- that's supporting the trading. I think with both Rome and Linate, the decision was made very late, so we had quite a short selling window. So the early sales have taken a bit of stimulation. But as Kent said, we expect that to mature going forward. If I look at distribution, in terms of distribution, so we're still seeing growth of distribution through the OTAs as we are with easyJet holidays as well. To give you a bit feel, on U.K. beach routes and non-EU routes, those are the kind of ones where you get a bigger proportion of indirect sales. But to give you an idea of scale, on U.K. beach routes for the first half, about 65% came direct, 18% is indirect and 17% is easyJet holidays. So that gives you an idea of the kind of mix. And that is still representing a growth of the OTAs of about 3% year-on-year on beach routes. And if I take U.K., non-EU, for example, about 40% is direct, 35% indirect, 25% is on easyJet holidays and that's a 37% growth on indirect through the OTA. So even with the point-of-sale charge, they can see that we offer the right schedule, the great fares, and we offer access to certain destinations that they can't access otherwise. So we have a really positive relationship with the OTAs. It's a constructive relationship. We offer them direct connect through the API, and that's how they access it. So we're still seeing growth. So we're not seeing an impact of the point-of-sale fee, and we keep that under review in terms of the levels and so on, too.

Conor Dwyer, here from Morgan Stanley. So you spoke firstly about kind of wanting to get out ahead of things on the load factor into the kind of peak summer. I guess now that you're a bit more confident about how bookings are actually developing, do you see value and basically slowing things down a little bit there, kind of trying to eke out a little bit more via yields going forward? And then the second question is actually for Garry. We haven't seen a massive change this morning in terms of what you're targeting for the volume growth, but it does seem like things are developing quite well in terms of how booked you are. How realistic is it that you actually do, do GBP 250 million this year?

Okay. On the kind of yield question, then that is the kind of the work of the commercial department, and you've described it perfectly. That's their daily job to look at the trade-off between yield and load. We have a sophisticated algorithm working in the background that looks at traffic coming in and demand and helps make the recommendations when it comes to pricing. So we wanted to get in that position. We're in that position, and now we will see where the market runs in that respect. But yes, we're looking obviously to optimize the performance this summer and are focused on another record summer. Garry, how are you feeling about this summer?

Thank you for that one. Yes, for this year, I think I mean our excitement in holiday is that there's nothing really very exciting. It's all come in and as we expected and as we've been talking about since the beginning. I think that if you look at the 25% growth and just kind of straight line that, we're not seeing necessarily any degradation of margin because we're a cost-plus business. So we're getting that 25% growth with the margin that we're expecting, which kind of gets you up there or thereabout. And really, at the moment, we're as much focusing on holidays as H1 '26 as we are in H2 '25. So that's really starting to build now for us. So where we're really kind of focusing on is getting past the GBP 250 million, what is the next medium-term target, and how do we then start building that? And that's something that we'll come to you in the next couple of months on. But with the GBP 250 million, it's not kind of if it's when. But I think what's more exciting is what's beyond that.

Alex Irving from Bernstein. Two from me, please. First of all, looking at your calendar Q2, calendar Q3 schedules, it looks like you're cutting significant numbers of flights at Amsterdam and Charles de Gaulle. Is this true? If so, why? Are you surging any slot sequences here or sticking just to the right side of the 80/20 rule? Second question, a bit more long term. How do you think about loyalty? Is there any value in a normal frequent flyer program with points, status tiers, credit cards, things like some of the legacy airlines have?

Okay. With Amsterdam and Charles de Gaulle, part of flying longer sectors means that the aircraft are away longer from the base. We have those first wave slots. And if you're talking about Amsterdam, we've got 8 aircraft based there. If they fly away for 45 minutes, they're back doing a second slot. If they fly away for 2.5 hours, they're back and you'll consume less slots through the day. So that's probably a little bit of what you're seeing there, but both are very important bases to us. And both we're looking to make the offering that is right for the consumer. I mean, Amsterdam, they are making it hellishly expensive. So longer flights is not the worst thing, you can amortize more, but it's still an important city destination. It's one of the top city break destinations that we have. So it remains, obviously, and always will do a very important place to fly into and out of. And with Charles de Gaulle, the bit of the drop there will be that we had an opportunity to move an aircraft to Orly. Orly is another good base, obviously, in Paris, and therefore, we'll take opportunities as they present in Orly, which has got more of a flag carrier mix and kind of a richer revenue stream behind it. When it comes to loyalty, that's really incredibly important to us. The working and to generate more loyalty from our customer base. We have easyJet Plus. It is a successful offering. We have I don't know, 130,000, 160,000 members, something like that; that membership is growing. Holidays have partnered with Tesco's Clubcard, giving us access to 23 million households for the holidays customers. That's really important to us. The developments I was talking about on the app, we're very keen to take a more app-centric approach here at easyJet. That gives you a certain degree of intimacy with the customer and allows a deeper relationship. But would it make sense to easyJet do a loyalty scheme? I think it could. It has a brand that can do that, and that's something we would naturally look at, but there's no plans to introduce that this year or early next year.

It's Harry Gowers from JPMorgan. First question, if I can, maybe I could ask more broadly on demand. Since all the tariff liberation day uncertainty and noise, have you seen any hesitancy at all in terms of customer things? Or does it just feel like underlying demand is unchanged and solid on short haul versus 2 months ago? And then second question, maybe I can ask about cash returns to shareholders, and you could lay out in what scenario under what framework you would maybe consider doing a share buyback over the coming years? Or is that just completely off the table given the CapEx requirements, which are upcoming?

Let's start with tariffs. I mean they change every day, don't they? And we're yet to see if aviation is carved out of them. But I mean, the headline effect we're seeing is supportive for the industry. It's come with lower fuel drop in the price of the barrel of oil, which has come through to jet aviation fuel, and that is benefiting the industry. The dollar has weakened. We have a lot of dollar purchases in our sector. So that is a net benefit. The supply chains are quite complex, and we're working with the suppliers to understand if and where those impacts are. But I think to be fair, they're working as well to understand where those impacts might be. I mean we have an all Airbus fleet and we buy Airbus from a European manufacturer that produces in France and Germany. And therefore, that is a good position to be in and tariffs are really in no one's interest if they start interfering with trade. But at the moment, we're not seeing anything that would move us away from the cost guidance I've talked about earlier. Transatlantic demand, we don't fly transatlantic. So it's hard for us to see kind of the primary impact of that. I guess the secondary impact should there be one, will be positive for easyJet. And we're seeing our book position for Q3 and Q4 ahead, and holidays can be a bit of a canary in the mine. And let's see. I mean it's well booked. It's probably already 70% booked for the summer. But if there is that shift of more European holidays, then we'll benefit from that. Share buybacks?

Yes. Well, from a cash perspective, we're obviously happy with how cash is developing. We have a GBP 3.6 billion cash balance at the moment, which is GBP 161 million better than the beginning of the fiscal year, which also means if you look at all the RCF that we still have available, our total liquidity is GBP 5.3 billion, which is GBP 1.8 billion in excess of what our policy is, which is 1 year of unearned revenues and GBP 500 million extra. I would say this is a comfortable position, but I think it's an important position because if you look at the CapEx that we still have in front of us, we have an order book of 291 aircraft to re-fleet 319 aircraft, but also the 320 aircraft. It means that we have GBP 7.5 billion CapEx in front of us. And so keeping excess liquidity to be able to prefinance that CapEx, we believe, is important. The GBP 1.8 billion excess is 60% of the 2-year CapEx that we have in front of us and 30% of the 3-year in front of us. Considering that our target and reaching the GBP 1 billion PBT is really one of the key, most important parameters we are looking at, and that the upgauging and the modernization of our fleet is a very important component of it. We want to materially derisk our capacity to invest in that fleet. And that's where at the moment, we are comfortable with that excess liquidity. However, we are keeping our dividend policy. So we're still keeping the 20% dividend on the profit every year. We believe this is meaningful and also sustainable through cycle. Of course, if results would evolve in a positive way and ahead of that. We're obviously willing to look at any other to give more of that cash back to our shareholders. But at the moment, we're concentrating on the GBP 1 billion and making sure we can get those aircraft in.

It's Jaime Rowbotham from Deutsche Bank. I have a couple of questions on cost. So firstly, depreciation and maintenance costs came in a bit lower than I expected. You mentioned in the release updates to the leased aircraft maintenance provision as well as contributions from lessors for maintenance undertaken on aircraft leased mid-life. Could you just clarify the changes there and whether there will be any impact on H2? Secondly, pleasing to see your other costs coming down on a per seat basis in H1. Jan, I'm sure you've been benchmarking easyJet's operating metrics against the peers since arriving. You probably found that high other costs seems to be partly responsible for some of the margin differential. Is that something you think you can address further going forward?

Okay. So coming back to your first question in terms of -- well, if you look at our overall CASK development, you will have seen that we have had a positive CASK development in H1 with a 4% improvement versus last year on an ex fuel CASK basis across all lines, which is positive and mainly driven in the first quarter -- in the first half of the year because of the additional capacity that we have flow. And so that is what you're finding back everywhere whether it's an airport, crew, navigation, et cetera. Maintenance is a little bit different. So there, we have a slight increase of cost. That's mainly linked because of the fact that, one, because of the delays of Airbus, we had to prolong some of the leases of older aircraft, which means a higher number of findings and hence, higher costs. And of course, we're not immune to the inflation, which everybody is encountering. So that probably is going to continue in the second half and probably also in 2026. However, as I said earlier, the big benefit of our cost saving plan is still in front of us with the bigger fleet with a big part of the savings coming from upgauging of the 319 to neo aircraft. So I would say that that's the most important element. Maybe just one on the depreciation. One of the reasons why it went down, but one of the positive effect is also linked to the fact that we have taken one 320 back into ownership on 320neo, which was one of the aircraft which we sell and lease back at the time of the pandemic. We had the opportunity to take it back. But by taking it back, we also had the opportunity to release some of the maintenance provisions we have built that. So that's one of the explanations. We're looking into two other opportunities of these, what we call, jolt costs. And so that also will have an impact in H2 on two aircraft. When benchmarking with our other companies, I mean, having been out of the sector for a couple of years and having used easyJet back as a benchmark back in the time. It's obvious, if you look from 2010 to 2018, probably we have lost a little bit of the edge in that period. I think during the last 4, 5 years, I think we're getting back on track, and we are closing the gap. But I think there is still a gap to go because we are, at the moment, not yet at top quartile in terms of a benchmark, neither in terms of profitability nor in terms of cost position. So I'm convinced there's still opportunities to go whether it is in terms of capital allocation, making sure we base our aircraft where we make most money, optimizing our asset productivity, optimizing the efficiency of the organization, benefiting from all the investments in the digital space we're doing today. And overall profitability improvement, we can do both in the commercial and operational domains. So I think we've done a lot of good things, but I think there's still some to go and I'm convinced there are still a lot of opportunities and especially GBP 1 billion target is reachable.

It's Andrew Lobbenberg from Barclays. Can I ask about ancillaries, please, and how you can expect to drive them forward. They didn't look too chip up in 2Q. And at the same time, we've got the Spanish government and some Belgians as well trying to rule out wheelie bag fees, which are filthy and disgraceful. So yes, how scared are you about that challenge? And how do you get these things moving in the right direction? And then my second question, I think that's what we're allowed. We've spoken quite a bit about U.K. demand and U.K. consumer, I think. What about Continental Europe and the health of demand there. Do we sounded rather nervous about German consumers. Obviously, it's not enormous fee, but Berlin matters, but the same in Switzerland as well as the Deutschland. Otherwise, how is the consumer for you in France?

Okay. I'll start with the Spanish fine question and then ask Sophie to think about the ancillaries, how that is developing and we can talk ab bit about the demand in the EU versus the U.K. On the Spanish bag fine, like all other airlines, we're appealing it. We think it's got a basis in law. It actually contravenes EU law and it's a particularly consumer unfriendly thing to do. At easyJet, we are very keen that we allow the customers to buy the services and products they want to buy. And 1/3 of our customers choose not to buy an ancillary, to choose to sit potentially towards the rear of the aircraft, bring the free bag allowance on. And a law that would encourage us to charge them more just so that someone who sits at the front gets a cabin bag or a hold luggage can pay less, doesn't feel very equitable. And that's what we are really keen for. So we will always defend the consumers' rights. I think it's a ridiculous charge that they're talking about. But fortunately, there's no legal basis to it. So we'll let the courts do that one. Before I hand over to Sophie, on the broad strokes of EU, U.K. demand, it looks identical. So if you're looking at the 80% load factor and the slide ahead, that will be the case in the EU. That will be the case in the U.K., both are at about 80%, both are slightly ahead for Q3. When you look to Q4, both are slightly ahead. So we see strength in the U.K., but we see a good position as well in Europe, but maybe want to unpack more the ancillary elements of the question and anything you see in Germany in particular, I think the question was.

Yes, sure. So from an ancillary perspective, I mean the other point to add to the ancillary narrative is, before we introduce the charge for cabin bags, we're offloading 7 million cabin bags a year, which impacted the operation in terms of on-time performance and impacted customer satisfaction. So the charge is there to make sure that we can manage the amount of capacity that we have onboard, and actually ultimately benefits the customer because you're not having that issue of having to offload so many passengers' bags and impact the operation, which we know on-time performance has the closest correlation with CSAT. So that was the action that we took there. In terms of ancillary conversion, conversion is still as strong as it has been. We're working a lot on the algorithms between the hold bag and cabin bag and getting the pricing right. We're also introducing new tiers of pricing within allocated seating as well and getting more sophisticated in that space, too. In-flight retail is actually doing really, really well for us as well. So the introduction of Costa Coffee last year has really gained traction. And actually, we're well on our way to hit our targets. So pre-pandemic, we're about 42p per seat profit. We're hoping this year to hit well above 80p per seat profit, and are on our way to get to the GBP 1. So in-flight retail seems to be going really strongly for us. And in terms of demand, as Kenton said, if we look at our load factor for EU versus U.K., both are ahead pretty much equally. And we're not seeing the same sort of softness that others have talked about in terms of specific markets within Europe. They're all seem to be performing quite well. Obviously, as you say, the Rome and the Linate, new bases, load factor is slightly softer than the rest of the network because we're building it from a very short selling window, but that's probably the only space and that's as expected in the business plan. So it's not unexpected for us. So yes, I think at the moment, we're seeing a strong Europe trading performance for the summer as well.

Kumar Gautam here from Bloomberg Intelligence. First one from me. Clearly, price stimulation was a big part of the fiscal 2Q story. And I think it's logical to infer that maybe it becomes less of a story by next winter. But perhaps you could comment on what the shape of that tapering off of price stimulation may look like? Should we still expect a reasonable amount in some markets in 3Q? And then the second question is on just keen to learn if you have a particular view on the outlook for hotel bed supply in some of the various new longer route markets?

Okay. I'll let Garry do the hotel bed suppliers in kind of North Africa capability and the longer markets as you say. Q2 price stimulation was quite a March phenomenon. That was the month we saw the softest area and it was focused around the canaries as I said. As you move into Q3, so having -- out of 8%, as you move into Q3 and Q4, capacity increase definitely moderates. You're looking at 1% extra. And we are ahead, so it won't be our goal to have to be using price stimulation. We'll be doing the trade-off referred to in an earlier question to get the rate if at all in the appropriate place to end up with healthy load factors that we would normally expect to end up in Q3 and Q4. The one standout being potentially Linate and Rome, which came on sale late and therefore, didn't have the advantage of an extra 6 months on sale that they missed out on through the lateness of approval from the competition authority. Garry, do you want to talk about hotel beds and longer destinations?

Yes. On bed supply, we're actually really positive about it, and we're seeing some really positive noises from hoteliers, I think, driven by a couple of things. With the growth that we're seeing, clearly, the hoteliers are seeing us filling the beds that they're giving us, and that's really important to them. And also because I think we've talked previously about our seasons being flatter than some of the traditional operators. They're seeing good occupancy in the low and mid season as well as the high season. I think the other thing that's really positive for next year and we'll see into '27 is on some of the competitors you'll have heard that maybe their expectations on the numbers they were expecting on packages hasn't been as high, and they've switched into flight only. Now clearly, they would have bought the beds in order to fill those packages. So there's some disappointed hoteliers out there who are coming to us and saying, "Look, would you want to take these beds," and we're more than happy to do that. So we've actually found a lot more approaches from hoteliers certainly in the last 6 months to increase those beds that we've got. And the last thing I'd say, without getting too technical is that I think I talked to before about the connectivity that we have with hoteliers, that's rolled out almost to all of them. So the hoteliers are able to load their inventory directly into our system and price that inventory themselves, and they will see that flowing through into the price, and that's a really attractive tool for them. And we're seeing increasing share coming from that channel as well. So that just constantly keeps those beds in play from the hoteliers, and we see that as being a way that we can continue to scale as we go into further years.

Well, thank you very much for coming today. Hopefully, the new format works for you. Hopefully, you had a chance to look at the video. And it's shorter than when we stand up and do it. I think we've got it under half an hour. We'll keep working on that. Someone once said, if I had more time, I'd be shorter. So we'll work on that. And thanks for all the questions. Very good. Have a great day.