Jet2 plc (JET2.L) Earnings Call Transcript & Summary

Good morning, everyone. Welcome to our investor and analyst conference call, our first audiocast. I'm Steve Heapy, CEO of Jet2 plc, and I'm joined today by Gary Brown, our Group CFO. We're going to take you through the highlights of the results and then talk about the financial performance of the group and then give you an update on our strategy. And then we'll open up the floor to questions from people both in the room and remotely. So record passenger numbers, record revenue and record profitability, another year of record results, very happy and very proud of them. Passengers, nearly 20 million at 12% up. Revenue, GBP 7.2 billion, that was 15% up and profits -- record profits, again, 11% up. Group PBT pre-FX and tax, GBP 578 million. We've made a lot of investments during the year. We opened Liverpool base last year, 4 aircraft. That's increased to 5 aircraft for this summer, performing well. We've launched Bournemouth middle of February this year, and we launched Luton on the 1st of April. So that's 3 new bases in the last 14 months, all performing to expectations. We've been able to do that because of our continued investment in the fleet. We have 14 A321neos in the fleet. The A321neo with the CFM engine variant is a very economical, very green and quiet aircraft. We've got 146 on order and 9 leased aircraft. That's a total of 155, 14 in the fleet with another 10 to arrive during this year. Financial resilience, very strong balance sheet. We ended the year with GBP 1.1 billion of our own cash. That's total cash net customer cash because, of course, customer cash isn't ours. And we posted earnings per share of 213.1p per share. Shareholder returns, we've announced a dividend of 12.1p, final dividend, and that's an increase of 13% on the previous year. During the year, we also did a share buyback to offset future dilution from the EBT, and we did a repurchase of the convertible bond, GBP 384 million. So I think to summarize, we think that's a very strong set of results. And I'll talk you through at a high level, our growth strategy. So that's the next slide. Growth of both flight-only and package holidays. Both products have grown. Liverpool, very successful. Bournemouth and Luton, also a successful start. We cancel very few flights, and this is a big difference with us. We canceled only 0.05% of our flights. The air traffic control issues last year -- last week saw airlines canceling many, many flights. We didn't cancel any. We bring our customers home, and we take them on holiday. When people book a holiday or a flight with us, we make it our priority to make sure they get to or from their destination. Net promoter score still in the mid-60s. We have a 61% repeat booking rate with our customers and over 7 million myJet2 members. We know that loyalty with myJet2 members is higher and conversion is higher also so we're continuing to grow that channel. Sustainability, good progress against our targets. Obviously, the new aircraft are a big part of that, the 14 neos that are in the fleet, but we've also got a number of other measures to reduce our carbon intensity, which I'll go through in a later slide. The retail operations center is performing well and has started paying dividends and more on that later. So that's pretty much where we are at a very high level on our growth strategy. We'll go into that in more detail following the financial update from Gary. So if I may, I'll hand you over to Gary, who will take you through the financials.

Thanks, Steve. Good morning, everybody. Just on to Page 6 of the presentation, I think this chart, it's important from our perspective, not to pat ourselves on the back, but to briefly reflect on the last decade and how we've got to where we are today because many of the fundamentals that were in play back in 2015 are still very much as relevant today. The resilience of the holiday market, I think, is self-evident per that chart. And our business is now much stronger than it was 10 years ago in terms of revenue, in terms of profitability, in terms of market share and also in terms of the fleet order -- the firm fleet order that we have today. Over the last 10 years, we've seen package holiday customers grow from 1 million to 6.6 million in 2025. And also, we've seen our flight-only passengers grow from 4 million to 6.6 million as well. However, I think it's important to stress that we've not chased growth at the expense of returns. You can see the healthy operating profit per sector seat at the bottom of the chart and the fact that our long-term ROCE has been in or around 17% as well. There's a lot of reasons for that. Number one, we've got a fully integrated operating and financial model, and that provides us with inordinate flexibility to be able to optimize our profitability. And I'll talk a little bit about that in the context of FY '25 results in a couple of minutes. Secondly, our differentiated end-to-end customer service offering, which helps drive margin expansion through added value. We're selling a holiday product here. We're not selling a commodity, and it's important that we create positive memories for our customers such that they keep returning again and again and again. Thirdly, there is the enduring appeal of a holiday for customers. People find it hard to understand why people go on holiday regularly. I think listening to the gloom and doom in the media today, and secondly, the fact that the majority of our people earn average wage, they need something to look forward to, and they do, and they look to go away year-on-year-on-year. And if done well, it supports incredible loyalty. And Steve mentioned the 61% repeat booking rate before. And that for me as the CFO means a good quality of recurring revenue and profitability. In turn, if you provide a great product, word of mouth is incredibly important, plus obviously, data-driven marketing in terms of driving new customers, and Steve will touch upon that a little bit later on. So the compound annual growth rate of 19% revenue and 27% for PBT, we think underscores the effectiveness of Jet2's business strategy. It's very much about creating memories. We're not selling a commodity. We're selling dreams. And if you create memories, customers come back again and again and again. So moving on to Page 7 in terms of the results themselves. And we've started deliberately with the key performance indicators because there's been a lot of commentary in the past about, well, what's load factor doing, what's pricing doing, what's mix doing, what's non-ticket revenue doing? And in terms of our model, it's very much that we will try and balance across all of those indicators to achieve the optimum profitability for the business. So it's not about just maximizing load factor as some of our competitors do. It's very much how do we maneuver the business through our flexible integrated operating model to get to the right profitability overall. In the year, capacity increased by 13% and 4% of that was in terms of our new bases at Liverpool and Bournemouth. Liverpool, as Steve said, has done very well. Its load factor was just 1 percentage point down on the company average across the year, but its package holiday mix was 75%, so a lot higher than the average. So we're very pleased with that. And on the basis of that, we put a fifth aircraft in there for summer '25. It was a later booking profile during the course of the year, and that has continued into the current year we're now in. And what tends to happen with a later booking profile is that demand for the more price-sensitive shorter lead time flight-only passengers tends to be a little bit stronger. Now you can read that in 2 ways. I'd like to read it in terms of very positively in the fact that because we have 2 products, because we're very flexible, because we're in many different channels of distribution, we're able to capitalize on whatever market presents itself to us, and that's what we did last year. In turn, though, higher absolute margin per passenger, package holidays did very well, growing 8% to 6.6 million customers. Pricing was resilient on the holiday side of the business as supply-led cost increases were passed on. Flight-only ticket yield per passenger, it did soften by 2%, reflecting a slightly more promotional environment, but you have to read that in the context of 18% increase in flight-only passengers. And then finally, non-ticket revenue was up by 6%. We were pleased with that performance because the retail operations center, which we invested in was the driver of most of that increase, and that was due to increased stock availability on our aircraft. The availability averaged 99% during the course of the year and also through a better product mix. And that's the first sort of signs that, that investment is paying back, and there's more of that to come in the coming years. On into Page 8 and the numbers. Listen, we -- as Steve said, we were very pleased with the overall performance with a 15% growth in revenue. Operating expenses were also up by about 15%. As I've said in previous meetings, the inflation running through that P&L during the course of the year was about 5%. The other 10% was due to volume or activity. In general, the cost base was well controlled. I'm just giving you a flavor of the big movers. Hotel accommodation costs, they were up by 21%, 8% in terms of volume, but there was quite a lot of supply-led inflation in there, particularly in the areas of wages, food, energy, also alongside an increased mix of customers choosing higher star rated accommodation. Fuel costs were up by 6%. We saw a 14% increase in flying hours, and that was offset by reductions in the average hedge rates plus the fact that, obviously, we have more new A321neo aircraft in our fleet. And then finally, in terms of our colleague costs, they grew to GBP 841 million. We awarded 5.5% pay award. We also had the ROC, the retail operations center in its first full year of operations. We made investments ahead of time to support the summer '25 flying program. And we also took pilots on slightly earlier as a function of the training plan for our new Airbus fleet. So overall, the operating profit was up by 4%, which we were pleased with, particularly considering that there was also new -- there was also investment in terms of the new bases at Luton and Bournemouth in the year. Our higher cash balances year-on-year and higher average interest rates led to an increase in terms of our net finance income, and that led us to the bottom line PBT and a flat PBTFX per sector seat tax rate, 25%. And as Steve said, the earnings per share was up 15% to 213.1p. On into cash generation, which is Slide 9. Obviously, the strong trading performance generated a very healthy EBITDA, which was up by 9% year-on-year. And that gives us confidence that we can support the capital expenditure, the debt repayments and our future growth and also returning value to shareholders moving forward. The CapEx, as you would expect, represented largely balance payments for new aircraft, predelivery payments, et cetera, also long-term investment in our existing fleet in terms of C checks and engine overhauls. But we also invested in the construction of the second engineering hangar at Manchester Airport to make sure that we control our own destiny in terms of aircraft maintenance and the installation of leading-edge automating equipment at the retail operations center, which is in the process of being commissioned. In addition, with sustainability in mind, we invested quite a lot of money in terms of ground equipment, electric ground vehicles, et cetera. And as Steve mentioned in the opening slide, our finance repayments included the early repayment of the convertible bond, and we also bought shares through the employee benefit trust to take future dilution from share options off the table. And I think all of these actions represent a proactive use of our balance sheet and are consistent with our capital allocation framework. We ended the year with a very healthy cash balance and a 22% reduction in our debt pile. And as Steve said, of the GBP 3.2 billion, GBP 2.1 billion was customer monies, which left us with GBP 1.1 billion of own cash and a reduction year-on-year, which is leading through to our midterm ambition to end the year with GBP 600 million to GBP 700 million of customer cash moving forward. On to Page 10, on to the balance sheet. It's very flexible. It's very strong. We have ample liquidity. A lot of the points on there are regurgitated from the prior slide, but it's important to also note that we renewed our RCF on improved commercial terms. We increased it by GBP 200 million to GBP 500 million, and that facility will run until 31st of October 2029. It is undrawn, and we do have an option to extend it by a further 2 years. Our return on capital employed over the past 3 years is a very healthy 17% and our long-term average is in or around the same number. And I think that, again, serves to underpin what I said earlier on that we haven't been growing at the expense of returns to the business. Finally, the capital allocation framework. It's simple and straightforward. That's how we like to run it. It's very much about investing in the business, and we've done that in terms of the retail operations center, in terms of new bases, in terms of aircraft fleet. It's about being able to satisfy our CapEx and debt obligations in a manageable way. And as part of that, we would like in the medium term to have 65% of our aircraft fleet unencumbered, which would mean about 50% of the Airbus fleet being bought through own cash over time. We want to reduce the cost of debt, which we have and ultimately make returns to shareholders. And I think in terms of the dividend that we've announced and the buyback that we've also announced that we are adhering to the framework in front of you. I'll now hand back to Steve, who will give you an update now in terms of our strategy.

Thanks very much, Gary, for going through. What I'm sure you'll agree is a very strong set of results. So on to our investment case. I think this clearly demonstrates why Jet2 is still an attractive prospect for investors both today and for the future. We're in a growing market. Capacity to beach destinations is up for summer '25. People very much still want to go on a holiday. The latest Mintel stats showed that 51% of people intend going on a holiday in the last 12 months. That's increased from the last survey, which was 48%. Holidays is still seen very much as a discretionary item that is essential. People want to go on holiday and they prioritize that above streaming services, lottery tickets, meals out, et cetera. So it's still a very important purchase for people. Size and scope of the offer, we've got a network of highly attractive bases. 85% of the U.K. population lives within a 90-minute drive. That's 58 million people. And we've added Bournemouth and Luton recently, which brings more of the population in the South and the Southeast to our bases and there too can experience Jet2holidays. We've got a fully integrated operating model. We're in control of our own seat supply. We handle our own aircraft at many airports. We've got our own engineering and training facilities. And of course, we've launched our retail operations center, the ROC, where we're in total control of our onboard stock, and that's resulted in significantly increased stock levels and also more of the stock that our customers want. We are the #1 tour operator in the U.K. and the #3 airline, and we're continuing to adapt our product range to current trends and trading environments. We have a customer-first approach. We always have and we'll continue to do that. We've got a 61% rebooking rate and our Net promoter score is in the mid-60s. It's stayed there for a number of years. Sustainability, still very strong. We are delivering against our commitments in the second version of our strategy, the second version having tougher targets than the first. We're receiving new aircraft, and we're doing a lot of things to further reduce our carbon intensity. We'll give a bit more on that later on. So we've got a clear path to growth. We've got our aircraft on order, and we have a strong balance sheet to enable us to continue to invest in the future of the company so that's an overview. If we go on to the more specific points. Our growth agenda. First, we are defending and strengthening the core. We've got our aircraft order, which will help us to both renew the fleet in the next few years and also provide aircraft for growth at our 13 bases. Some of those bases are more mature, and we consider 4 at the newer end of the scale. We had Bristol, which was launched after the pandemic, and we've obviously got Liverpool in its second year of operation and Bournemouth and Luton in its first year of operation. There's a lot to do there. We've got great coverage across the U.K. As I said, 85% of the U.K. population within a 90-minute drive, and we are attracting new customers, both flight-only and package holidays. And when customers experience our customer service, our customer-led approach, they tend to rebook, 61% rebook rates, and we are hopeful that these customers will continue to book. We are also investing in our products. We've got new product. I'll talk about that later on. We are constantly innovating and doing things to entice our customers and react to current market trends. We're leveraging technology. We are progressing with the upgrade of our revenue management system. We're harnessing the power of AI, and we have a machine learning model that will price our flights and then our holidays according to multiple data inputs. And that will be integrated with our marketing systems, customer data platform, content management system, et cetera, and that will help us market to our customers in the right way at the right time, with the right price, the right promotion, the right content, et cetera. Proof of concepts scheduled for later this year, and we look forward to seeing the results of that at the end of this year and from early next year. The other part of our strategy is to extend our reach and diversify. We've seen diversification of U.K. bases of overseas destinations and of products, and we will continue to innovate over the coming years. We are looking at extending our reach of customers. We currently over-index in the older demographic and the more affluent demographic, which is great. It's provided a great protection for us in financial downturns, et cetera. And we are undertaking a project to bring more people in from the younger and less affluent demographics so we'll be broadening our coverage then. And in the coming slides, I'll talk a little bit more about these things and tell you what we're doing to attract these customers. So on to the next slide, fleet growth. We're committed to growing and replenishing our fleet, and this will support our growth agenda over the coming years. We retired our remaining 757-200 aircraft back in January, a very sad day. They've been great aircraft for the company. We retired them, and we've replaced those with our Airbus A321neo aircraft, a much quieter and more fuel-efficient aircraft. You can see from the chart by summer '31, we'll have a total fleet of about 159 aircraft and 116 of these will be A321 aircraft powered by the CFM engine. This is what we think is the best narrow-body aircraft in its class, quieter, more fuel efficient than its equivalent. The average seat gauge will increase from summer '25, 197 to 221 in summer '31 as the proportion of 230 seat aircraft -- 232 seat aircraft, 321 increases. This will give us an annual compound growth rate of about 4.7% over the period. You can see from the chart that there is some flexibility. There's the upper dotted line and the line below that, which shows how we can flex the fleet to respond to market conditions. We will have the ability to take more aircraft if required in the short-term lease market, and we can accelerate retirements, et cetera, if the need arises. So we have a lot of flexibility in our fleet going forward. That will help us to respond to market conditions accordingly. On to the next slide. A little bit more about the Airbus A321neo aircraft. I think it's important to recognize the significant benefits this will bring to the fleet. Our current mainstay of the fleet, the 800 can seat 189 passengers, the 321 seats 232 passengers. That's 23% more seats, but 20% fuel and carbon reductions. It's half as noisy as our current fleet, which makes it a much more attractive proposition for many airports. Many airports have noise limits now and will only accept new generation aircraft, and this makes it a very attractive proposition. It will result in average cost savings per seat of about GBP 10. And this aircraft is a vital component of our climate transition and carbon intensity reduction plan. It will be a very important lever going forward. So it will help us to reduce carbon. It helps us to reduce noise. It will make a more efficient means of transport because it's carrying more passengers per flight, and it will result in cost savings per seat across the fleet. So a very, very important strategic move for the company going forward. Size and scope of offering. So you can see from the map, we have increased the number of U.K. bases and have excellent coverage across the U.K., but we also have excellent coverage across the Mediterranean, the Canaries and European leisure cities. We have a very diversified model, which is very important. So you are able to react to market trends. And if some destinations are doing better than others, you have diversification, and that gives you protection. We've got diversification of U.K. bases of overseas destinations, diversification of brands. We've got our beach cities, villas, indulgent escapes, our vibe product. We've got diversification of product. We've got many hotels over 5,500, 2-star to 5-star, self-catering to all-inclusive that caters for all of our customers. We fully -- we pioneered the fully flexible package holiday. If you remember many years ago, you could go for 7 or 14 nights. We pioneered the flexible duration holiday. People can go for any duration from 2 nights up to 500 nights if they want. How nice would that be? And we offer people the ability to do what they want, truly flexible holidays. We've launched a number of new destinations, Agadir, Marrakech in Morocco, Jerez in Spain, Pula in Croatia, the Isrian Riviera. We have announced Samos, Greek Island. So we're constantly innovating, looking at where our customers want to go, speaking to our customers and reacting accordingly and putting capacity on to these destinations. The new destinations have sold really well. It shows that customers do want to go to different places. They want to tick off the boxes of places they want to go to, and we are reacting accordingly. We've not only done expansion in beach destinations, we've added Murcia and Braga for Summer Sun City destinations, Tallinn, Geneva, Salzburg for the winter. We have full control over our seat supply. We don't buy seats from third parties like other tour operators might. Every seat is on our own aircraft, controlled by us. And we are, according to Tripadvisor, the best airline in the U.K., the best airline in Europe and the fifth best airline in the world. So why would we want to buy seats with anyone else. So a compelling offering, lots of diversification in the scope of our offering, and you'll see further diversification, further new destinations and further new products in the coming years. Building loyalty. So you can see from the chart that we have optimized our model to build a cycle of customer acquisition and try to drive long-term sustainable growth and importantly, shareholder value. Awareness and consideration, it's ensuring we're top of choice for both new and existing customers, and we'll talk a little bit about marketing in the next slide. We want to make sure we are front and center of mind, and that's why diversification is important because we want to be able to offer something for everyone. We're not a niche operator. We are a package holiday and airline company that offers something for everyone. We're seeing growth from new and existing customers. We've got a multitude of channels, web, app, call center and independent travel agents. Independent travel agency is very important to us. Still many, many people want to book through the high street. The call center is still a very important channel. Some companies don't have call centers. It's all automated now. We have one because our customers want one. They very much still feel the need to speak to one of our expert travel advisers that will help find them holiday, to help inspire and excite them and find the right one. And also when there is something the customer wants to change, something they want to ask a question on, our travel experts are available. The app is growing in popularity, particularly for myJet2 customers. We know more about them. We can market through the app in a much more efficient way, and we can further tailor our products to our customers' needs. Bearing in mind, we know more about them. We've got industry-leading customer experience. You've seen the awards we won only 2 days ago. We were announced by the U.K. Institute of Customer Service, Jet2holidays being the 12th best company in the U.K., Jet2.com being the 19th best company in the U.K., once again, the only airline and tour operator placed in the top 50. We consistently score above our competitors. Net promoter score in the mid-50s, rebook rate of 61%. Our package holidays are all about the experience, building excitement and creating memories for our customers. It's such an important part. We don't just put people on a plane and then forget about them. We are there holding their hand throughout the journey and providing great customer service. We have our Red Team in resort 24/7 customer outline, and we are available in customers -- if customers need us. We had a lot of worried customers last week when the air traffic control strikes were on. They said, "Are you doing like the other airlines canceling your flights and abandoning us because I can't find anywhere to stay." And the answer, of course, was no. We continued flying during the air traffic control strikes, brought our customers home and took our customers on holiday. That's what we do. We go over and above to give our customers a memorable experience. Branding, very important to us. I don't know if you're aware, but we have a song associated with our brand with -- it's a triple platinum selling chart-topping song. And if any of you don't know what that is, we'd be very happy to play it at the end of this presentation. But it's something we're very happy with. People hear that song and associate with Jet2holidays. It's part of our branding. We have very strong visuals. We have television and radio campaigns, and we like to keep them simple. It's all about trying to provide inspiration to our customers. It's showing our customers what they can do on holiday. And hopefully, they'll put themselves in those adverts and think that could be me. We have a long-term and consistent approach to building brand equity, strong visual and sonic branding. We are highlighting the difference in our adverts to our customers in terms of the experience that they will have on holiday. We are #1 for awareness, #1 for branding, #1 for ad recall and #1 for consideration, 82% awareness from people of our brand and it's because of our very, very strong branding. Go to one of our airports, you'll see our Red Team, you'll see our branding. And the Red Team will be there to welcome you, to help you, to carry your suitcase, to the check-in desk, to give you advice. This is what we do. It's about customer service. MyJet2 is very important. We've got over 7 million members now in the myJet2 scheme, and these are a very loyal set of customers. They love Jet2. They want to go on flights and holidays with us. They understand the difference of our customer service, and they have a higher rebook rate, higher retention and are more loyal. 90% of our bookings now are with myJet2 members. We know more about them. We can tailor our products more effectively to their needs. Database has continued growing every year, 9% since financial year 2001. And we are providing more relevant marketing campaigns to our customers. I mentioned earlier some of the technological advancements, our revenue system, our marketing systems will be integrated using AI and machine learning. And this, given the data that we have on our customers and what we know about them will enable us to provide individually procured marketing campaigns to all our customers. We've got 10.6 million people on our database. We will be able to effectively execute 10.6 million individually tailored and procured marketing campaigns for our customers. There's many opportunities to widen our customer base. I'm on the next slide now. You can see that we over-index in the more affluent and older demographic. Now this has provided us with an incredible amount of protection and resilience over the last few years in terms of financial downturns, et cetera. It's given us a lot of protection. And this is one area of the database that continues to grow. It's a very loyal part of the database, and we are continuing to nurture that element of our customers. We do see a big opportunity going forward in the less affluent and the younger demographics. We under-index in those demographics at the moment, and it's one area that we are working very hard to increase. There's a lot to do there. We've started our programs of attracting these people through pricing, through product enhancements, through our marketing strategies doing more on social media that will attract these type of people. So you will see over the next few months and years that we will be attracting more people from these demographics, the younger demographic and the less affluent demographic. So again, we'll be widening our customer base. We'll be providing more diversification to our business in addition to product, destination base, brand diversification. We will achieve more customer diversification. That will help us reach more new customers and attract a higher rebook rate with our customers. On the next slide, customer care. I think we talk about this every year. We have 11,400 customer-facing colleagues. Our Take Me There values are running through the DNA of all our staff. 94% of our customers can quote these Take Me There values and all work to provide these. They are, of course, be present, take responsibility, work as one team. If we get those 3 things right, we will create memories for our customers. And our colleagues, who are incredibly engaged, 88% agree that the work they do makes a real difference to the success of Jet2 and the happiness of our customers and 84% feel very proud to work for Jet2. These values are extremely important to our company. They're not just things that we print on to stickers and put them on the wall in the business. Our colleagues very much try to live and breathe these because if we get this right, we will improve the products that we provide to our customers. We'll improve the experience that they have. We'll create memories, and we will, of course, increase the rebook and retention rate with our customers. Customer care is everything to us. And I won't talk you through all the awards we win. You all know these by now, our Which? awards, the Tripadvisor awards, awards with travel agents, U.K. Institute of Customer Service and everything our company does makes us be seen as the company that provides the best customer service. And of course, that results in higher retention rates. In terms of the next slide, creating memories, again, this is a little more color on what we do. We have a call center. We have an app. The countdown begins on booking. We send our customers enticing information, provide them with information that helps build the excitement and anticipation. It can't just be seen as a transaction that customers do. This is the biggest annual purchase that customers make, and it's our job to make sure that they have a memorable experience, not only when they start going on holiday, but from the time they book. Go to one of our airports. I know many of you have flown with Jet2 before. You will see our Red Team waiting to greet you. Look at some other check-in desk, there's hardly anyone there. Our Red Team are there to give you the best experience and to help you with any queries that you have. Our service in the sky is unrivaled. Our friendly happy, helpful cabin crew will give you a great experience. Our carts on board are full. Now we have our retail operations center. Our stock availability has gone over 99%. We have more of the stock that our customers want. That means happy customers because they have what they want, happy cabin crew because they are able to serve our customers and happy us and happy shareholders because that feeds through to margin. When you touch down, you have, of course, our Red team at the other end of the journey and then you have our famous customer helpers in hotels, helping people. Hardly anyone has customer helpers anymore. Some people thought they're all fashioned. We don't. They think they're an important part of the holiday experience. And that's not just what we think our customers think that also. They see it as a very important part of the holiday, particularly when there are issues in resort, when they need something, when there's air traffic control strikes, when there's issues, they go to our customer helpers, and we are able to give them what they want and to help them accordingly. If they don't want to speak to one of our customer helpers, they can contact us via the app or via our call center. So the service we give, as you all know, is unparalleled in the U.K. leisure travel industry. Our metrics, customer service, net promoter scores, rebook rate have stayed very consistent over the last few years and for company that has grown like we have, you could say that was quite unusual. Very often when companies grow quickly, they lose touch with the customer and customer service falls away. That has not been the case with Jet2. So I think we're on the last slide now before questions, outlook for summer '25. Bookings for summer '25 continue to be made closer to the departure date. It's clear, however, that customers' eagerness to get away to enjoy a relaxing holiday is very strong. I went through the Mintel stats before. Customers are keener than ever to get away. 51% said they're going to go on holiday in the next 12 months compared to 48% the prior year. The Barclays customer spending review showed that travel spend was up 9.7% in May, up from April. We're satisfied with the progress so far for financial year '26, and we're currently trading in line with market expectations. Our fully integrated business model is providing very enticing to our customers, and we're continuing to balance load factor, pricing and product mix to maximize overall profitability. We're fully hedged for fuel and FX for the season and over 90% for the full financial year. Our carbon emissions are fully hedged. This gives us important cost certainty going forward. So as we said in the announcement, the peak summer months of July, August and September are yet to complete and the majority of winter. And we will provide further updates at our AGM on the 4th of September. To summarize, we believe that the proposition we have underpinned by our people, service profits philosophy means we're poised for an exciting future, and we remain very happy with our results, and we're satisfied with our trading so far. So that's an overview of our strategy, et cetera. I hope that was useful for everyone. I think we're now going to move on to Q&A, if that's okay.

Yes, absolutely. Jarrod?

It's Jarrod Castle from UBS. I think you said stick to one topic, so I'll let someone else ask about pricing into [ neos ]. I'm going to ask something more about the medium term. You're talking about kind of targeting the less affluent, the younger customer. I'd imagine that means a lower revenue per package holiday to target them, that means a lower profit per customer. In that respect, I mean, why not consider going for more affluent customers further afield in Continental Europe? Or what is the thinking around that?

It doesn't necessarily mean lower profit per customer. We've put a tremendous amount of effort into sourcing more accommodation at the lower star rating end. Now we don't just sell any old hotel at any star rating. Like you may say on some websites, we have very strict quality controls. And of course, every one of our hotels is fully health and safety check. So unless it meets minimum standards for health and safety and quality, it doesn't get through. But in saying that, we are adding, as we speak, more 2- and 3-star properties, more self-catering properties, et cetera, into our portfolio. In cities, we've started offering hostels. They may not be the product that you might associate with hostels. They are very good quality accommodation that provide a cheaper product for people to go with. The fact we're going for these demographics doesn't mean we're not trying to grow other demographics as well, our more affluent customers. Of course, we're growing that area as well. But our strategy is proportionally. We will increase the number of low demographic and younger people. Is there anything else to add to that, Gary?

No.

No? Thank you.

It's Damian from Canaccord. I want to ask about sort of quality and service. I mean, our research, and you may disagree that, suggest that your pricing is still up 1% to 3% this summer. So clearly, the passion Steve talked about, about the product and looking after customers is coming through. But where is the sweet spot in terms of NPS? Clearly, there will be a point where there are diminishing returns, where the investment doesn't pay off. And are you at that? Or is there a little bit more to go?

I think in terms of the NPS, obviously, we're giving you an average. But when we look at NPS, we're effectively through CSQs, which are in some ways linked. We're looking at each stage of the customer journey. And if we find that there is a hotspot for customers that we know we can improve on with pragmatic investment, we will. But to your point, Damian, trying to get to 80% for argument's sake, that would not make sense because it would just cost far too much money. I think we are a long way ahead of our competitors. And actually, in terms of our NPS generally, it's one of the highest rated in the consumer industry anyway. I think our challenge will be as we continue to grow that we maintain those standards actually, whilst looking, as I said, to tweak where necessary in terms of the customer journey. One of the areas that we last year had a little bit of, I won't say negativity, but slightly lower ratings was the inbound transfer service from the hotel back to the airport. And we are trialing now in terms of being able to give people real time in terms of where their transfer coaches, which has gone down very, very well. So these little tweaks we can make without spending a great deal of money, which, again, just improves our quality and ultimately will improve the NPS.

It's Alex Paterson from Peel Hunt. Can I slightly ignore your previous message on one topic and ask 3, obviously, at the risk that you ignore some of my questions. But the things I was just going to ask were, you were talking about the revenue management, the AI, the systems integration and that optimizing your ability to sell the right product, right price and so on. Well, looking at your results, you're not 1 million miles off that anyway. So is the benefit of this really revenue increments? Or is it actually other cost savings that can be had because you need smaller teams to do that? Secondly, just on the ROC, your non-ticket revenue per sector was up 6%. How much of that can you ascribe to the ROC? Is that a significant contributor to that, would you say? And then finally, just on the new bases at Luton and Bournemouth, are they shaping up very much as you would expect and on the sort of similar track to other bases in their maturity, ability to sort of grow customers and so on?

Do you want to answer the first one? I will do the other two.

Yes. Well, I'll do the third one if that's all right. That's -- well, they're all easy, to be honest. But Bournemouth and Luton performing in line with expectations. It's early days. They went on sale quite late. I mean Luton only went on last quarter last year, so we had less time to sell that. But that aside, we're seeing customers being attracted to our brand and our products, and we're happy with how sales have gone so far. We're happy with the operation. We're doing a very good operation there. It will take time to mature. We'll probably see a higher mix of flight-only people early on, and then we will hopefully cross-sell those to become holiday customers and attract more. But the 2 bases are performing in line with expectations. And as Gary said earlier, Liverpool is doing well. It's slightly below on load factor above on holidays mix. We've increased capacity by 25% for this year. And we're very encouraged by all 3 bases. It's added a lot of potential customers to our catchment area. And as we become better known, people experience our product and tell other people will continue to grow. So on to the first one, now our revenue management system. It's sort of state-of-the-art technology using machine learning, artificial intelligence. And the thing is, yes, I mean, we are doing well now, but this will be a solution that will be able to receive many, many data points from external sources and read economic factors, weather, whatever you want can be read into there. And we'll be able to reprice as often as it wants. It will be able to do testing of prices within the market to see what happens, work out the best promotional strategy that once it's linked with our marketing systems, will enable, as I said earlier, individually procured marketing campaigns, sent to the right person at the right time with the right content, the right creative, the right price, the right promotion, et cetera, et cetera. These things take time to bed in as the name suggests, machine learning, and it will take time for this to bed in. And it will have obviously a lot of oversight from our revenue team, but it should make obviously, benefits to the bottom line, but it should also make us more efficient going forward in that. Obviously, when you have a system like that, you shouldn't need to bring in lots of extra people as capacity grows.

Just to give you a bit more color on that, just very briefly. At any one time, we've got over 200,000 flights on sale and 250 million holidays in terms of permutations combinations. So you can imagine in terms of marginal gains, what that could look like. And with the best will in the world, our systems are 2010, '11, '12 and human beings cannot get to all of those permutations combinations. So if we do this right and it works the way we hope it will, then to Steve's point, we would expect there to be incremental benefit to the bottom line. In terms of the non-ticket revenue, which was up 6%. 4.5% of the 6% was down to the retail operations center.

Richard from Deutsche Numis. Can I just maybe do 2 topics, so not quite as greedy. In terms of the package holiday mix, I think -- it was the first time in a while, I think it's come down slightly. Given all the capacity which is coming on board, do you expect that to be sort of broadly the same or even sort of drift down a little bit further? And associated with that, could you say what proportion of your flight-only are taken up by OTAs? And the second topic is just the later booking profile. Do you expect that to reverse? And is there anything you can do to kind of to derisk that profile? Or do you think that's here to stay for many years?

Okay. Which do you want...

In terms of the package holiday mix, I think we're on record of saying if we're anywhere between 65% and 75% for a summer season, that's fine. And if we're between 65% and 70% for the full year, then that's fine. But there are guardrails at the end of the day. And as you can see, you've talked about the late booking market. The market changes quite dramatically from summer to summer to summer. And therefore, you've got to be flexible within those guardrails. I think in the market we're in at the moment, the 65% to 75% for summer will be in that range. But I think in terms of the full year, if this late booking trajectory continues, I would imagine that the package holiday mix will be somewhere in the region of 63%, 64%. Is that a problem for us? No. The point is and the point we keep making is that it's a fully integrated flexible business. We have 2 products for a reason, and it's to reflect the fact that at different points in the cycle, the market will look different. And therefore, we've got to be able to tap into that and provide a great offer, whether it's flight only or package holidays. The other positive is, from a flight-only perspective, we get a great opportunity to cross-sell. And the market won't always be like this moving forward. I'll let Steve talk about it in a minute. And therefore, that stands us in very good stead.

And on the last point...

The flight-only from OTAs.

Yes. The late booking profile?

Yes.

Yes, the market is a cyclical market, as we know. And it's been a late booking market for about a year now. We are doing what we can to try and promote early bookings. I talked about our 10.6 million database and over 7 million myJet2 members. We know more about those customers than ever before, and we can interact with them in a way that will entice them to book early. And we're comfortable with winter '25, '26 and summer '26 at the moment, and we're bringing in earlier bookings. At some stage, the market will change and the market will become earlier. We're in a cyclical industry, and it happens. So at the moment, we're continuing to get business in later, but still cultivate our bookings earlier. And I think at some stage, the market may come earlier. When that is, we don't know, but we are doing what we can and being successful in getting bookings in earlier.

You asked about flight-only from the OTAs. What I would say is that the proportion is very similar year-on-year.