Flynas Company (4264) Earnings Call Transcript & Summary

Hello, everybody. Thanks so much for joining the Flynas' Second Quarter Earnings Call. My name is Ricardo Rezende. I'm the Head of Transport Research and EMEA for Morgan Stanley. It's a pleasure to have the entire Flynas management team to talk about the results with us this afternoon. Before we proceed, just got to go through some of the disclaimers on our side. This webcast is intended for Morgan Stanley institutional and corporate clients as well for Morgan Stanley employees. It's not for members of the press. If you're a member of the press, please disconnect now and reach out separately. Please also note that it's not for [indiscernible] wealth management clients. For important disclosures, please see the Morgan Stanley research disclosures website at www.morganstanley.com/researchdisclosures. If you want to submit questions, you do have the question box. You can submit questions. We're going to go through them after the management presentation. And with that, I would like to pass the word to the CEO of Flynas, Mr. Bander Al-Mohanna. Bander, with you.

Thank you. Good afternoon, everyone, and thank you for joining us today. I'm pleased to welcome you to our first earnings call as a public company, a significant milestone in our journey. We are committed to maintaining an open and transparent dialogue with our shareholders, and we look forward to engaging with you regularly going forward. As many of you know, Flynas is a leading low-cost carrier in Saudi Arabia, focused on short to medium-haul route through an efficient, reliable and value-driven operating model. Before we turn to recent results, I'd like to briefly recap our full year 2024 performance, which provide helpful context for our growth strategy and future targets. In 2024, we increased our market share to 14.8%, up 1.9 percentage points year-on-year, supported by keen pricing, a growing network and a competitive product offering. We carried 14.7 million passengers last year, marking a 32% increase from 2023. This growth was achieved while also improving load factor to 85.6%, up 6.1 percentage points, reflecting a disciplined capacity planning and strong customer uptake. Our fleet reached 59 aircraft by the end of 2024 with an average age of just 3.7 years, one of the youngest in the region. This supports our operational efficiency and helps us manage direct costs more effectively. As a result of this solid operational performance, revenue for the year of 2024 rose to SAR 7.6 billion, up 19% year-on-year. 2024 EBITDA increased by 31% year-on-year and net profit reached SAR 434 million. We closed the year with a healthy cash balance of SAR 1.7 billion, which reflects the strength of our cash generation and overall financial position. Altogether, this performance highlights the resilience of our business model and positions us well for the next phase of growth. With that, let's turn to a closer look to our operating segment on the next slide. Flynas runs a scalable platform centered around our low-cost carrier operation, which remain the main driver of our growth. Just to remind you, here, we are looking at 2024 numbers to provide a full year view of the business before moving to the current year performance. In 2024, the low cost or the LCC segment accounted for nearly 90% of total revenue, supported by scheduled domestic and international routes. This core business continued to benefit from high aircraft utilization, a lean cost structure and the strong demand from price-sensitive travelers across the region. Seasonal hedge operations contributed about 8% of revenue in 2024. While this is a smaller part of the business, it has meaningful uplift during peak travel period and contribute to the company's profitability. Our General Aviation segment, which includes charter and private aviation services made up of around 2% of revenue last year. This is a niche business that provides charter and private aviation services to specific corporate and VIPs. Looking ahead, we remain focused on expanding our LCC and hedge segment, which will continue to be the primary engines of our growth. These segments also support our ability to scale efficiently and respond effectively to seasonal demand pattern. Now let's take a look at the Saudi market opportunity on the next slide. Before we turn to our financial and operational performance, I'd like to take a moment to highlight the broader market environment. Saudi Arabia remains one of the fastest-growing aviation market in the world. Demand for air travel continued to rise, supported by demographic growth, economic diversification and strong policy momentum. The market has actively recovered from the effect of COVID-19, surpassing 2019 levels in 2023 and continuing to grow. According to IATA, passenger traffic in the Kingdom is expected to more than triple pre-COVID level by the end of this decade, far ahead of global averages. Yet low-cost carriers currently represent just 39% of seat capacity in Saudi Arabia, still below more mature markets like India, Spain and Italy. This gives us significant room for growth, especially as the price-sensitive demand continue to expand. Vision 2030 is also creating strong momentum from rising tourism and religious travel to increase business activity and major infrastructure projects with a target of 120 million visitors each year and SAR 375 billion in land aviation investment, the market is entering a major growth phase. This backdrop supports our ability to expand the Flynas network, scale the fleet and capture share through a disciplined and sustainable approach. Let's now take a closer look at our strategy, network and fleet. Our strategic direction as a company hasn't changed. We remain focused on disciplined growth and efficient execution. We aim to lead the low-cost carrier space in MENA region for short- and medium-haul routes by offering affordable and reliable travel back by a young fleet and a growing network. The way we approach this comes down to 3 things: first, scaling in a smart and sustainable way, adding new aircraft and destinations where we see strong demand while keeping a close eye on utilization and load factors. Second, maintaining cost efficiency. The LCC model works best when we stay lean, and we are always looking at ways to run the business more efficiently without compromising on services. And third, we are well prepared to unlock additional growth driven by the transformation taking place across Saudi Arabia aviation sector under Vision 2030. As the markets grow, we see real opportunities in areas like religious travel, tourism and business demand. This focus puts us in a strong position to keep delivering in a short term while building long-term value. Now let's move in and take a look at our network. As you can see in this slide, our footprint continued to expand, supported by strong domestic demand and steady momentum in international markets. In the first half of 2025, we added 7 new destinations across 6 new countries, bringing our total network to 146 routes, 74 destinations in 34 countries. These additions are not just about adding volume. They reflect our strategy of targeted opportunity-led growth. We are focusing on underserved and unserved high potential markets that fit within our Blue Ocean approach. Our network is intentionally diversified and built around point-to-point model. Also, our network strategy is diversified across multiple bases, currently 4 and more in the future. That helps us avoid unnecessary complexity and preserve cost efficiently, which is a core to our low-cost positioning. It is a model that fits well with regional travel patterns, and we are seeing it deliver. Today, over half of our passengers travel within Saudi Arabia, giving us a strong scale and connectivity in the domestic market. At the same time, our international footprint continue to grow. And with our current fleet, we can already reach markets that connect us to nearly 6 billion people. That reach highlights our strategic advantage. From the Kingdom, we are connected to some of the world's most dynamic and fast-growing aviation corridors and we are just getting started. There is still significant room to grow, both in terms of network depth and breadth, especially as we continue to expand the fleet and drive higher aircraft utilization. With that, let's take a look at our fleet plan before we move into the results of the second quarter and first half of 2025. We are continuing to expand our fleet in a measured and balanced way, aligning aircraft addition with demand trends and operational priority. By the end of this year, we expect our operating fleet to reach 73 aircraft, a 25% increase from 59 at the end of last year. This includes 7 wet lease narrow-body aircraft to address a short-term challenge related to temporary aircraft grounding due to the worldwide delayed delivery of spare engine. This growth reflects recent delivery of the -- our Airbus 320neo and temporary addition of wet lease aircraft, which are supporting our network expansion as well as seasonal peak, including hedge operation. And looking ahead, we plan to grow our fleet to 167 aircraft by 2030, which translates to around 17% annual growth over the next 5 years. This plan is fully supported by our existing aircraft order and aligned with our network expansion and traffic target. Of course, it's not just about growing the fleet. It is about making sure it remains efficient and reliable. Our fleet is one of the youngest in the region, averaging less than 4 years for narrow-body aircraft and include a very high share of fuel-efficient models. This supports lower operating costs and helped reduce our environmental footprint. We are also investing in a wide-body capacity to better serve the growing demand for Hajj & Umrah travel. And to keep our fleet running efficiently as we scale, we have signed long-term engine maintenance agreement with CFM to support our cost reliability. Overall, fleet growth is a key enabler, helping us serve more market, grow our share and strengthen our position as a Saudi Arabia leading low-cost carrier. With that, I now hand over to Ramzi Zaroubi, our CFO, to walk you through the financials for the second quarter and first half.

Thank you, Bander. Good afternoon, everyone. My name is Ramzi Zaroubi, Flynas' CFO, and I'm very happy to present our first results as a public company. Let us start with a snapshot of our traffic trends in the second quarter. We carried 3.6 million passengers, representing a 3% increase year-on-year, driven by continued expansion of our network. This came alongside a 4% increase in available seat kilometers, reflecting ongoing fleet growth and new route launches. Importantly, we saw a meaningful ramp-up in our Hajj operations, carrying over 110,000 pilgrims in the quarter, up 41% year-on-year. This contributed to our diversified and seasonal revenue base and our profitability as well. As of the end of June, our operating fleet reached 71 aircraft, up 11 compared to the same time last year, and our average fleet age remains young at just below 4 years. Load factor softened slightly to 79.6%, which reflects the temporary headwinds from the early suspension of Saudi visit visas prior to start of the Hajj season and regional instability during the quarter. As a result of that, RASK was under pressure, declining 13% year-on-year. Here, I remind you that the RASK is the LCC RASK and does not include the Hajj revenue. While adjusted CASK improved by 9%, reflecting continued cost discipline, mainly due to lower fuel costs and lower airport and handling unit costs renegotiated in line with growth and scale of finance operations. Overall, the quarter demonstrates steady growth and improving cost structure. Let us now have a look at our financial highlights before going through our performance in more detail. Revenue for the second quarter totaled SAR 2.1 billion, down 1% year-on-year. This slight decline was primarily due to temporary headwinds mentioned earlier, partially offset by strong Hajj operations and continued network expansion. Adjusted EBITDA rose 16% year-on-year to SAR 736 million, with margin improving by more than 5 percentage points to reach 34.3%. This excludes gains from sale and leaseback transactions and one-off IPO-related costs. The growth in EBITDA and margin reflects the solid performance of our core business, supported by improved cost efficiency and a stronger revenue mix, particularly from Hajj season. Adjusted net profit came in at SAR 191 million, down 3% from last year, mainly impacted by higher depreciation costs. We ended the quarter with a cash balance of SAR 4.5 billion, which is more than 2.7x higher than year-end, driven by operational cash flows, additional funding and IPO proceeds. This also helped us improve our position on leverage with net debt to adjusted EBITDA declining to 1.4x from 2.2x at the end of 2024, providing greater flexibility to support our growth plans. Finally, adjusted return on invested capital for the quarter was 10.4%, reflecting the impact of IPO proceeds now included in the balance sheet. Over time, we expect return on invested capital to improve as we deploy capital into expanding the fleet and scaling operations. Let us now turn to a detailed look at the adjusted results. So here, I'd like to start with the deeper dive with an important point. Our underlying earnings in the second quarter were solid despite the impact of several one-off items. Let me walk you through the reconciliation to our adjusted earnings. As shown on the left-hand side of the slide, we reported an EBITDA loss of SAR 317 million in the second quarter. This includes nonrecurring items, nonoperational, which once adjusted, bring us to an adjusted EBITDA of SAR 736 million. The largest of these was one-off IPO costs consisting of an ESOP charge of SAR 982 million and IPO expense of SAR 101 million. Although the total cost was funded by existing pre-IPO shareholders, the correct accounting treatment is to [ write ] the cost through the income statement, which was offset in the balance sheet with no effect on retained earnings or net equity or on the underlying performance of Flynas. So it was accounted for in the income statement and reversed in the balance sheet. We also adjusted for the gain from sale and leaseback transactions, which was SAR 30 million in 2025 and SAR 100 million in 2024 as SLB is inherently variable depending on the number of aircraft financed through SLB. So for example, in year 1, you can have 2 aircrafts on SLB and on another year, you can have 8. Therefore, we adjusted for SLB to present comparable results. The same adjustments apply on the right-hand side, where we show the reconciliation to adjusted net profit. After adjusting for these items, our second quarter net profit came in at SAR 191 million. And with that context in place, let us now turn to a detailed look at the income statement. As shown in the table on the left side of the slide, revenue for the first half of 2025 reached nearly SAR 4 billion, making a 1% year-on-year increase. The second quarter revenue came in slightly lower than the same period last year. But as mentioned earlier, the comparison was impacted by temporary headwinds we faced in the quarter, which no longer exist. Importantly, the strong performance in the first quarter helped offset this effect, and we delivered positive top line growth for the half. First half gross profit rose 6% to SAR 866 million, reflecting continued focus on improving direct operating cost efficiency, which is lower unit cost based on scale of operations. This brought our gross margin to 21.8%. Also during the first half, we recorded IPO-related expenses totaling SAR 1 billion, as mentioned in the previous slide, primarily driven by the one-off charge of the employee share option plan of SAR 982 million and IPO fees of SAR 101 million. Both were funded by pre-IPO shareholders with no effect on retained earnings, net equity or the underlying performance of the business. As I mentioned, these items alongside sale and leaseback gains are excluded from our adjusted results to give a clearer view of the strength of core operations and our underlying performance. Adjusted EBITDA for the first half of 2025 grew 19% year-on-year to SAR 1.4 billion, with the margin expanding to 34%, adjusted net profit rose 22% to SAR 339 million with net margin improving to 8.5%. In summary, our first half results demonstrate a stable earning profile supported by a strong start to the year and strong Hajj performance and counterbalanced by temporary headwinds in the second quarter, which is totally phased out now. Let's now take a closer look at top line trends. Next slide. Let's begin with a look at the key revenue drivers from our LCC segment. Passenger volumes continued to grow in the second quarter with just over 3.5 million passengers carried, a 3% increase year-on-year. This brought our total for the first half to 7.2 million passengers, broadly in line with the prior year. On the supply side, available seat kilometers rose by 4% in the quarter and 2% over half year, reflecting fleet growth and network expansion. Load factor came in at 79.6% for the second quarter and 82.1% for the first half, both slightly lower than the same period last year. Overall, passenger trends remained resilient despite some short-term volatility across regional markets. Let us now turn to the next slide to take a closer look at the revenue mix and unit revenue trends. Looking at our revenue mix on the left, you will see the second quarter was shaped by a strong contribution from our Hajj operations, which helped offset some softness in the LCC segment. Total revenue in the second quarter reached SAR 2.1 billion, down just 1% year-on-year despite a decline in LCC revenue. Hajj and Umrah revenue rose 41% year-on-year, supported by higher Hajj volumes. General aviation remained steady and continues to play a complementary role in our portfolio. For the first half of the year, revenue increased 1% to reach SAR 4 billion. And on the right-hand side, you can see the RASK trends in our LCC segment. Unit revenue in the second quarter came in at SAR 24.5, down 13% year-on-year, mainly due to Q2 headwinds, which we touched on earlier. On a half year basis, the RASK decline was more moderate at 5% year-on-year, supported by the strong start of the year. As always, we remain focused on improving load factors, strengthening network profitability as we scale both fleet and network. Let us now take a closer look at our unit cost trends. As you can see on the chart to the left, in both the second quarter and the first half of 2025, cost of revenue remained broadly flat year-on-year despite low single-digit growth in supply of seats. Fuel remained the largest single cost component in the second quarter, accounting for 27% of our total direct cost. Fuel expense declined by 8% year-on-year, supported by lower average fuel prices. We'll cover that in more detail on the next slide. Handling and airport charges were down 7%, benefiting from the revised fee structure based on scale of operations. Staff costs were slightly lower year-on-year, while rental expenses rose by 24%, reflecting the short-term wet lease aircraft related to Hajj operations. Maintenance costs declined by 38%, mainly due to lower aircraft redelivery cost in 2025. All in all, our cost base held steady despite the growth in operations, which shows that our focus on efficiency is paying off. As a result of that, we also delivered a solid improvement in unit economics during the second quarter. Adjusted CASK in the second quarter of 2025 declined by 9% year-on-year to SAR 23.8. This is a meaningful achievement, especially as we continue to grow the network while managing inflationary pressures across the industry. For the first half, adjusted CASK stood at SAR 24.6, a 4% year-on-year improvement, reflecting the same consistent focus on cost control. Let us now take a closer look at fuel price dynamics. As mentioned on the previous slide, our fuel expense was down 8% year-on-year in the second quarter and 10% for the first half of 2025. The main driver was lower oil prices, which have been trending down since early this year as well as having 90% of our fleet made of Neo variant of the A320 aircraft with 15% lower fuel consumption. The chart here shows Brent prices. As you can see, prices declined steadily through the first 5 months with a moderate uptick in June due to rising geopolitical tensions in the region. Even with that increase, prices stayed well below our budgeted fuel price of $80 per barrel, which continues to give us some headroom. The market consensus for Brent is to stabilize at year-end at the lower range of $60 to $65 per barrel. We plan to start our hedging program, which we discussed earlier, 50% of our consumption and take positions at around the consensus prices. All in all, this fuel backdrop has supported our margin performance and helped keep overall cost in check during the first half of the year. Let us now turn to SG&A expenses. In SG&A expenses, we continue to take disciplined approach while selectively investing in areas that support our growth strategy. Starting with selling and marketing expenses, these increased by 13% year-on-year in the first half of the year. The rise was mainly driven by seasonal advertising and promotional activity tied to our new international route launches. These are targeted investments directly supporting revenue opportunities during key travel periods. In contrast, general and administrative costs declined by 10% year-on-year, reflecting lower professional and consultancy fees. Overall, when you combine cost of revenue with SG&A, total recurring expenses were flat year-on-year despite inflation and network expansion. Let us now turn to the next slide and take a look at our leverage and debt structure. As you can see on this slide, our balance sheet strengthened meaningfully following the IPO. Net debt declined to SAR 3.2 billion, supported by a sharp increase in cash and bank deposits, up 2.6x to SAR 4.6 billion, largely reflecting IPO proceeds and additional funding. At the same time, we saw an increase in bank debt to support ongoing growth initiatives such as flight simulator, maintenance hangar, along with a modest rise in lease liabilities tied to fleet expansion. Although Flynas cash and short-term investments as a percentage of annual revenue is in line with peer group, we expect reduction to lower levels in line with our growth plans. As a result, our net debt to adjusted EBITDA improved to 1.4x, down from 2.2x in the beginning of the year, which is the lowest level we have seen recently, giving us more financial flexibility moving forward. Let us now take a brief look at our cash flows before turning to guidance and our capital allocation. In the first half of 2025, Flynas generated SAR 1.2 billion in adjusted net operating cash flow, supported by stronger operating performance and improved working capital. This excludes the ESOP payment due on IPO. Net CapEx increased to SAR 621 million, in line with our fleet expansion plans, inclusive of aircraft spare engine and predelivery payments. On the financing side, net inflows of SAR 3 billion came mostly from the IPO and new debt raised to support growth, partially counterbalanced by repayment of lease liabilities and finance costs. As a result, our ending cash balances rose 2.6x to SAR 4.5 billion, reflecting our liquidity position. Adjusted return on invested capital remained solid at 10.6% for the first half, although it was mathematically affected by the increase in invested capital following the IPO. Adjusted free cash flow for the period was SAR 701 million, lower year-on-year due to higher CapEx. With that, I'll hand it back to Bander for an update on guidance, capital allocation and closing remarks.

And as you have seen from [indiscernible] half results, we are in a strong position to deliver another year of strong growth that's supported by continued network expansion and disciplined cost control. We are on track to achieve 2025 guidance, mainly revenue is projected to rise by 6% to 18%, reflecting both the additional capacity and continued momentum in international markets. Even with this, profitability should remain healthy. We are guiding for an EBITDA margin of 30% to 32% and the net margin of 6% to 6.5% supported by scale benefits and continued cost discipline. Net debt to EBITDA is expected to normalize at around 2x by year-end. We are confident in our ability to meet these targets as we scale efficiently and continue to improve earnings quality. Let me now say a few words about our capital allocation priorities before we wrap up. Our approach here remains disciplined and focused on supporting profitable growth while preserving balance sheet strength. We have 3 clear priorities. First, we continue to reinvest in fleet growth, scaling the network to capture demand while maintaining cost efficiency. Second, we are allocating capital to expand ancillary revenue stream through new products, partnerships and services that enhance margins and diversify revenue. And third, we maintain healthy leverage and strong liquidity to ensure we can fund growth without compromising financial flexibility. These priorities align with our long-term strategy and are key to supporting our performance as we scale. As we wrap up the presentation, I'd like to leave you with 3 key messages. Our business model is proven and resilient with a strong track record of growth and profitability, backed by operational discipline. We are well capitalized for the next phase of expansion with the IPO proceeds, strengthening our balance sheet and enabling continued investment in fleet and network. We are focused on execution with a clear strategy supported by a strong market momentum and additional tailwinds from Vision 2030. Thank you all. That concludes our presentation, and we would now be happy to take your questions.

[Operator Instructions] And I've seen that we already received quite a lot of questions. I'll try to consolidate them under the same topic. If I may start with one question. Since the IPO, we've had the announcement on Saudi Arabia launching a new LCC in Dammam. Would you mind just commenting on that? And how do you think that could impact your strategy for the coming years?

Well, we see, frankly, no material impact from this development. Flynas is already the largest airline in Dammam. We operate 35 routes to 11 destinations, which cover the most lucrative and high-demand sector from the city. Dammam represents about 10% of our ASK and making it our smallest space by share, but one with a huge growth potential. We have an excellent and deep relationship with Dammam ecosystem, including a strong partnership with [ Daku ]. And we welcome, frankly, efficient and rational competition from private sector. And we think this is like will add great value to the market. Our focus in Dammam and across the network is on profitable and sustainable expansion, not on chasing overly ambitious capacity target at the expense of retain. And as we mentioned a couple of times that the KSA market, aviation market is large and growing. So competition here is not a zero-sum game. Air Arabia license limits them to Dammam for their flight, origination and destination with no access to the direct international religious travel segment and no ability to base aircraft elsewhere in the Kingdom. So international competition in general is already strong in Dammam due to open sky bilateral, making our efficiency and diversified business model even more important. So our diversified network and the fleet strategy spanning scheduled LCC, Hajj & Umrah and private aviation plus widebody for religious segments means our overlap with Air Arabia will be minimal. So we'll expand to -- we'll continue to expand in Dammam where it makes commercial sense, while also executing our strategy of opening a new base in Saudi Arabia and around the Kingdom and the AOC is even outside the Kingdom to capture broader growth opportunity.

Great. And then when you look at revenue guidance, and I'm trying to consolidate a few of the questions under the same question. We are already passed on the first half of the year. And when you look at the guidance, the range for the full year, it implies quite a good acceleration in the second half. So if you could comment what the underlying assumptions for the revenue guidance for the full year? And how do you see the CFM impact on your guidance? What's embedded in there?

Yes.

This is Ramzi. On the revenue guidance for the second half, we will definitely make up for the lost ASKs during the first half. So with the wet lease aircraft that joined the fleet in June and with the higher -- the planned higher aircraft utilization on our own aircraft, we plan -- our ASKs in second half will be around 30% higher than the first half. So from that, you can deliver your assumptions on similar to the passenger growth. As for the second question on the CFM, the CFM is -- I'll just take the opportunity to explain a little bit around the CFM. We have an agreement with CFM that covers any -- all maintenance cost. The problem with the grounding of engines on CFM was basically due to engines requiring shop visits ahead of schedule. But we are totally hedged against this with CFM. CFM, they take over the shop visits, the shop visit costs. We just pay a rate by the hour. And while the engine is in shop visit, CFM provides us with a spare engine. This happened last year extensively. And CFM supplied Flynas with all what we needed in terms of spare engines, 20, 30 engines, whatever was that, it was provided by CFM. And we -- and as we discussed this several times during the IPO and explained that we have no cost exposure on engine-related issues. However, this year, in Q2, CFM spare engines started to be -- to come late. So they have -- CFM, they have a pressure on providing engines -- spare engines to all their customers, and we experienced delay. So then 2 very good things happened. First of all, CFM, they had the fix for the engines. So the -- all new engines now coming from CFM or the current engines in the shop, they're coming with a new blade, which hopefully resolve the situation. And second, we brought 7 additional wet lease aircraft to mitigate any possible -- any grounding. So therefore, our focus remains foremost on protecting growth. And to do that, we brought the additional wet lease. We expect from now until year-end, the full problem to be resolved. We will not have this problem next year. And in the interim, we have mitigated this risk. I hope this answered your question.

So we received 2 follow-ups on that one. If this issue remains for next year, how do you think that profitability could be impacted? And what's the extra cost of the wet leases that you had to do because of the CFM issues?

Yes. We carefully looked at the issue. We had several discussions between us and CFM and our engineering. Our knowledge is that next year, we will -- Flynas will not have a problem. So the engines are removed from the aircraft at a certain interval. And for us, we -- by this year, all our problems are peaked and the engines are replaced. And we don't foresee having this problem next year.

And to add also additional information. Right now, the engines stay on wing for 3,100 cycle. But with the new upgrade, it's going to extend it to more than 5,000 cycles. So there is a major like shift and major improvement in the engine performance.

We do have a few more questions on the competition. First question, when you look at the competition from GCC carriers and increased seat capacity by them, how do you think about your entry into new international routes? What's the criteria for choosing a new route? And then the second question, it's more about KSA. When you look about -- when you look into new entrants, Riyadh Air and Air Arabia, do you think that your slot distribution could be impacted by that or your flying rights?

Yes. So on the competition question, I mean, GCC carriers, competition has always been there. In fact, we have been the ones growing one of the fastest in the region in a way, we are the competition. So nothing significantly has changed on that front. And in terms of opportunities, there are significant opportunities to expand the network and also not to forget the investment in the current network, strengthening and consolidating the current network itself, there are significant opportunities. But just on the new opportunities, to take an example, we just announced last week our latest new destination and country, Nairobi, Kenya, starting in October. As you know, we started Russia from 1st of this month and of course, Syria in June. So lots of opportunities. Still, we follow -- we continue to follow the Blue Ocean approach of network expansion, and there are significant opportunities still untapped, whether it is underserved or unserved.

Also it is like the strategy of the civil aviation. The target is really to connect 250 destinations to Saudi Arabia. We are far away from that number. We -- or we identified already 165 destinations to be [indiscernible] by Flynas. We still -- we reach about 75 right now, and we still have many opportunities already been identified. So the market is really -- is open, and there is a huge opportunity for all players to add capacity and route to be connected to Saudi Arabia.

Then following up on the revenue side. There is one question on -- in the second quarter, SK grew 4% overall revenue is down 1%, which indicates RASK should be down mid-single digit, but the reported RASK is minus 13%. Can you explain the reason for this? Is this due to discounting and lower fares?

Well, first of all, if you look at -- if we look at the RASK, it's a low-cost carrier RASK. So it does not -- you have to take into account that you don't take -- the Hajj & Umrah revenue is not part of it. This is one. The second is the reduction in RASK in the second quarter, it came, of course, from the -- as we mentioned, the visa issues and the geopolitical situations. And we took advantage also of the lower fuel prices at that time, so to try to stimulate demand at that time, and that's the main reason why the RASK came lower in second quarter. Having said that, we have seen in the last week of June, a total rebound. Our load factors came back again. We were around 86%. I can say in July and August rebounded totally, and we're very much upbeat on the second half.

Okay. And just to confirm because we had a question on that as well. When you mentioned the load factor on the final days of June, you mentioned that it bottomed at 86%?

The last week of June was at 86%.

Okay. Great. Question on the guidance for the year. When you look at the net profit margin on the guidance at 6% to 6.5%, and you reported 8.5% for the first half. So there's a question on why do you expect net margins to be much lower if you compare the second half with the first half? And what Brent price that you're assuming for the full year guidance?

Yes, yes. We -- of course, we guided at 6% to 6.5%. And we -- I think we are comfortable with our guidance. We are still at the -- we still have a significant 4 months ahead of us. And we believe that we would like to maintain the guidance at 6.5%. In terms of fuel price, we budgeted at Brent $80. And so we have a significant headroom. But as I mentioned, we don't take that headroom into consideration as a total reduction because in such a situation, we passed a lot of it back to the passenger in terms of lower RASK and of course, the expected growth in the second half.

We have a follow-up question on the -- on the revenue growth. Based on what did you offer the 6% to 18% revenue growth, are you implying second half growth of 10% to 35%? If so, how given the recent trends in growth and seat factor utilization?

Yes. Yes, we mentioned earlier on the call that our plan for ASK growth in second half is around 30%. This is the -- it's on the back of 2 things, mainly we have 7 wet lease aircraft with us. That's number one. Second is higher aircraft utilization on our own aircraft and that will bring the 30%. It might be even better if we can have faster spare engines coming from CFM than some of the grounded aircraft will be also earning revenue as well.