Ryanair Holdings plc (RYA) Earnings Call Transcript & Summary

Hello. Welcome, everyone, to the Ryanair Holdings plc Q1 FY '25 Earnings Release. My name is Maxine and I'll be coordinating the call today. [Operator Instructions] I will now hand over to Michael O'Leary, Group CEO of Ryanair Holdings to begin. Michael, please go ahead.

Okay. Good morning ladies and gentlemen. Welcome to the Ryanair Q1 results conference call. You'll have seen this morning, we released our Q1 results, together with an MD&A and a slide presentation on the ryanair.com website. I, therefore, won't read the press release, but I'll touch on a couple of key themes. We reported Q1 profit of EUR 360 million. That's 46% down on last year's Q1 EUR 663 million. Despite strong traffic growth, traffic is up 10% in the quarter to 55.5 million customers. but this has been offset by weaker-than-expected airfares, some of which is impacted by the first half of Easter falling into the prior year Q4. Nevertheless, traffic growth is strong, up 10% to EUR 55 million, but it's only strong at a price and we are having to repeatedly stimulate fares and bookings and the close-in -- fares and performance and close-in bookings has been disappointing and materially weaker than we've expected, particularly on the way into the peak months of July, August and September. We have 156 Gamechangers in the fleet at the end of June. That is 20 aircraft less than we had originally budgeted. We are seeing record summer scheduled bookings but at lower prices. We are continuing to sign up multiple approved OTA partnerships, which would protect consumers and ensure that consumers get the lowest Ryanair's lowest airfares while we get the consumers' correct e-mail and payment details. We continue to extend our fuel hedges at attractive prices. We're now 75% hedged for FY '25 at about $79 a barrel, saving ourselves over EUR 450 million in the current year. And we are now extending our fuel hedges for FY '26 to 45% of our needs at about $78 a barrel. And as of Friday, we have completed just over half of the EUR 700 million share buyback. Touching briefly on our continuing environmental commitment, during Q1, we took delivery of 10 Boeing Gamechanger aircraft. These offers 4% more seats but burn 16% less fuel and have less CO2 emissions as well. And the retrofitting -- wing retrofit program on the NGs continues. We're on schedule to achieve our target of retrofitting the entire fleet of 409 NGs by 2026. These wings reduce fuel burn by 1.5% and noise by 6%. However, much of this excellent environmental work is being ongoing by the deteriorating performance of European ATC. Europe controls all numbers, this morning shows that whilst flight in July or up to July are 4% higher year-on-year than they were in 2023, it's still 3% less than the 2019 levels. Year-to-date, the number of flights across Europe is 5% below 2019 levels. And yet, we are suffering, as our all other airlines repeated inexplicable ATC capacity restrictions. These can only arise from material understaffing or short staffing mainly in the French, German and Hungarian ATC areas, and we are suffering horrendous ATC delays, particularly which is inexplicable on the first wave of morning flight departures. And this is -- they're blaming all sorts of things like adverse weather, et cetera, et cetera. But it is down to under staffing, and we are having our worst summer ever in terms of ATC delays and flight cancellations because as these delays roll through the day, we're having to cancel late evening like at curfew airports. We're continuing to call on the EU Commission presenters of underlay and the EU parliament to deliver their long delayed reform of Europe's hopelessly inefficient ATC services. In terms of fleet and growth, this summer we're operating our largest ever schedule. We have over 200 new routes in 5 new bases as we deliver as much low fare growth as possible for passengers and our airport partners in FY '25. To that end, Lauda has extended operating leases on 3 of its A320s out to 2028. And we will have agreed with Boeing will continue to take delivery of 737 Gamechangers through the peak months of August and September, all of these aircrafts will arrive too late to be able to [ service ] them for peak summer flights, we'll use them as backups and the spare aircraft through the remainder of August and September. We expect and it is real that European short-haul capacity will remain constrained for some years. As I said, EUROCONTROL's own figures suggest that year-to-date, we're 5% behind where we were in 2019 in terms of EU -- intra-EU capacity. A320 operators are grounding aircraft for [indiscernible] engine repairs. The manufacturers are continuing to struggle with delivering backlogs, more pronounced in Boeing, but also Airbus is failing to hit its delivery commitments. And airline consolidation continues. Most recently, the Lufthansa -- the EU approved the Lufthansa takeover ITA in Italy. We -- and I -- we believe IAG today take over Air Europa should also be accelerated. These capacity constraints, combined with our significant unit cost advantage and a strong balance sheet, low-cost aircraft orders and industry-leading on-time performance will, we believe, under payment decade of profitable growth to 300 million passengers by FY '34. To touch on shareholder returns. As I said, today, we've completed just over 50% of the program. When it's complete, Ryanair will have returned over EUR 7.8 billion to shareholders. We also expect a final dividend of EUR 200 million to be paid to shareholders in September, which will take the total shareholder returns to just over EUR 8 billion since 2008. Ryanair ADSs, following a recent board review, the Board has approved a change in the ADS ratios so that 1 ADS will equal 2 ordinary shares compared to currently a 1 to 5 ratio. We hope and expect that this will make the ADSs more attractive to new investors and will potentially increase ADS liquidity. Turning to the more important issue, which is the outlook. FY '25 traffic is expected to grow 8% and but somewhere between 198 million to 200 million passengers. We think we're edging closer towards 200 million than 198 million, subject to no worsening of Boeing delivery delays. We were supposed to take 7 aircraft from Boeing in July. That now is only going to be 5. Two of those have slipped into August. And we're supposed to get 10 aircraft in August, that's now down to 8 and probably heading towards 7. So we're still struggling even to get our delayed Boeing delivery as in on time. As previously guided, we expect unit cost to rise modestly this year as our ex fuel unit cost, most notably pay and productivity increases higher landing and ATC fees and the impact of multiple 737 delivery delays on our unit costs are substantially offset by our attractive fuel hedge savings and rising net interest income. These gains will significantly widen Ryanair's cost advantage over its competitors and allow us to continue to grow strongly, albeit at lower fares than we had expected this summer. While Q2 demand is strong, pricing remains softer than we expected, particularly the [ costing ] airfares. It is not pricing up the way it has for the last number of summers and we are repeatedly seeing price resistance as we try to close off cheaper seats and we're having to open up again close-in July and in August. We have only 34% of -- sorry, 34% of September already booked, and we expect this trend will continue. As a result, we now expect Q2 periods will be materially lower than last summer. We had previously expected them to be flat to modestly up. The final H1 outcome is, however, completely dependent on these close-in bookings and yields in August and September, and we think the trend is downwards not upward. As is normal at this time of the year, we have 0 visibility in Q3 and Q4, but we see no reason why Q3 and Q4 pricing won't be soft as well, and we will have to continue to stimulate through the second half of the year. Q3 -- Q4 would not benefit from last year's early Easter. And therefore, it's too early to provide meaningful full year profit after tax guidance, although we would hope to be able to give you some guidelines at our H1 results in November. The final 20 FY '25 outcome remains so to avoiding adverse developments during FY '25, particularly given the continuing conflict in Ukraine, the Middle East, repeated ATC short stopping and capacity restrictions, which is leading to a spike upwards in cancellations or further Boeing delivery to date. And with that, Neil, I'll turn it over to you for a quick run through the MD&A or highlights on the MD&A, please.

Yes, no problem. Thanks, Michael. I think I'll turn first to costs in the quarter. As previously guided, we saw costs modestly up as we saw the benefits of our fuel hedging offset much of the nonfuel inflation coming through the likes of the annualization of productivity pay increases and of course, the impact the Boeing delivery delays. Balance sheet's in very good shape. We finished the quarter with EUR 4.5 billion in gross cash. That was after EUR 0.5 billion of CapEx and we've spent about EUR 250 million on the buyback, which we all know started in May during the quarter. Net cash improved from EUR 1.4 billion to EUR 1.7 billion. And just on the buyback, as Michael said, we're now over halfway through the program at this stage. It's going very well, a little bit ahead of expectations on that. And Michael, I'll hand over to yourself.

Okay. Thank you. I think before I open up to questions, I'm going to deal with the first question, what does material mean? We don't know what material means. Although clearly, we think the pricing -- the minimum floor on price falls into Q2 is going to be above 5%. Could it get through double digits? It could. It is -- it doesn't look that way at the moment, but pricing on close-in bookings is getting weaker as we have moved through July -- we see no reason why that will change in August and certainly no reason why it would change in September. We are now going on a front foot aggressively, and we will continue to aggressively advertise low fare availability. We will maintain our targeted 95%, 96% load factors. We have a much lower cost base than any other airline. And if the fares are going to be materially lower this year, then that's what it's going to be. We repeatedly guide everyone that our fair guidance, to the extent, that we give fair guidance is always dependent upon close-in bookings. And the reality is that during June and also now into July and August, which is surprising given the capacity constraints close-in pricing is materially weaker. It is down on where it was prior year. Why? We don't know. We look around and we see the consumer spending under pressure all over Europe. There's no one market where we're seeing any material strength or weakness. We think the consumer is under significant pressure across Europe. Interest rates are materially higher. Mortgage loans, et cetera, are materially higher. Most consumer-facing operators are under pressure, and we believe that is being translated into air travel. People are traveling. We are growing strongly, although we're growing at a slower pace than we had originally budgeted to because of the Boeing aircraft deliveries but we are having to increasingly discount to fill our flights. We think that's good news for passengers, even if it means short-term pain for shareholders. I share your pain, obviously, but we're better off at the moment. If the consumer is under pressure and there has to be price discounting, then we will lead the price discounting, and we're going to continue to lead that price discounting through July, August and September. I will now open it up for questions, please.

[Operator Instructions] Our first question today comes from Stephen Furlong from Davy.

Michael, you talked about ATC there firstly. I seem to remember that they were recruiting or investing in Carl through, and I was just wondering if you heard anything from EUROCONTROL that maybe by next summer, things will have normalized? Or would you be not optimistic about that? And then the second thing, I was just wondering about cost inflation in the industry. Do you think that whether it's staffing or operations, it's sticky. And if it is and the pricing isn't, do you think that the industry, in theory, could have lower margins post-pandemic than pre?

Thanks, Steve. Yes, EUROCONTROL is a mess. And I think even EUROCONTROL are in denial, the figures they're producing shows that Europe -- I mean year-to-date, European flights are 5% below 2019. they're 3% below -- in the month of July, they're 3% below 2019. And yet we rail against EUROCONTROL about their performance and the performance of the ANSP, that keeps us all flow capacity is up 10%, 20% at record levels. We're not at record levels. We are putting a lot of pressure as are other airlines, by the way, when you really drill down into it, they compete. There are -- there is a marked increase in storms, thunderstorms over Europe this summer, but that would affect punctuality through the day. where we are highly critical of EUROCONTROL and the ANSP is we're typically having about 1 in 4 or 1 in 3 of our first wave departure flights early in the morning being delayed by capacity restrictions. When there's no aircraft up in the air, there's no reason why -- the only reason why first wave flights are being delayed is because they don't have enough staff deployed for the summer schedules. I talked over the weekend to other competitor airlines, and they're seeing exactly the same thing, in fact, worse. And so if the first wave of flights are delayed, it is because -- and we are aware that the French are materially understaffed on the first phase -- the German [indiscernible] of EUROCONTROL covering up this massive underperformance by the French, the Germans and the Hungarians in particular. And actually by the air traffic control this summer is much worse than it was last year. Last year, we had 53 days of French ATC strikes. In many respects, that was easier to manage. You just cancel the flights, everybody knows is a French ATC strike, okay, and you cancel the flights and you re-accommodate passengers. The problem we're having at the moment and all airlines are suffering this is across Europe, we're having massive [10-hour ] delays on the first wave of flights, no way of picking that up during the day and then you're running into cancellations on later flight that evening either because crews are running out of ours, or curfew airports won't let us in late, which we understand. And to give you just an example of that, over this weekend, now it was compromised by Friday's computer failure. Our -- ATC delayed more than 1 in 3 of every Ryanair flight this weekend. So ATC delayed 37% of our flights on Friday, 35% of our flights on Saturday and 35% of our flights on Sunday, and we're the largest airline in Europe. It is a shambles of understaffing, miss management and I would point to the fact that ATC fees have increased by 15% over the past 3 years since 2019. So we're being scammed for significantly higher ATC fees by these government monopoly ANSPs, who then don't property staff and recruit and staff for the schedules that we've already filed some 6 months ago. So it's getting worse. Cost inflation, look, I think there are areas -- I mean we're seeing among our competitors are seeing some material cost inflation. Labor is obviously one where a number of our competitors are out there now conceding significant pay increases. Much of that is to catch up, but the pay increases that Ryanair negotiated with our unions and our pilots 2, 3 years ago. Aer Lingus pilots haven't had an increase since 2019, whereas the Ryanair pilots have had increases in [indiscernible] 24' we also built in pay increases in '25 and '26. However, our pilots are flying larger aircraft. These aircraft are burning materially less fuel. So I would think on the labor side, while it's challenging out there, our pilots are materially more productive. We are seeing some airports where we operate where, particularly in Portugal, where you've airport monopolies like VINCI, who own ANA in Portugal, i.e are significantly increasing airport fees because they have a monopoly down there. We are negotiating though a lot of growth incentives at discounts for growth. I would point to Italy, in particular, where a number of the regions in Italy have scrapped the municipal tax, something that we certainly applaud and would welcome. So there's a balance. I mean I think there is -- as capacity will be constrained for the next 2 or 3 years, I think we are facing a period of cost inflation generally within the airline industry. But as capacity is constrained, I think that will be reflected in higher airfares, particularly among our high fare competitor airlines across Europe. It's just we're not seeing it this summer because the consumer, I think, is under pressure with higher interest rates and certainly average airfares are lower than they were in summer of 2024. Now we did -- in 2023, we did benefit from 2 years in summer '22 and summer 2023 of double-digit fare increases, maybe this year it's just a rebalancing. But ultimately, over the medium term, I think air fares will be higher in Europe. They're materially lower in Europe than they are in North America, and we do tend to trend up behind North America. Eddie, anything you want to say on airfares?

No. I mean like no more than what you said already in terms of that. The demand is there, but the consumer is reacting to pricing, and that is generally across the piece across -- generally across markets throughout Europe. So it's a question of you're trying to ratchet up fares, of course the consumer has reacted to generally a softness out there at the moment. Nothing else really.

The next question comes from Jarrod Castle from UBS.

I mean just on fares, I don't want to spend too much time on it because I think like a lot gets said. But I mean you're saying demand is there, but you're having to stimulate, which does suggest that not everything is well on demand front. And I mean I guess you've acknowledged that the consumer is feeling some pain at the moment as well. But I mean, I guess, has it surprised you just how quickly things have deteriorated because it seems still like in June, things might be okay. So has there been a step change, I guess, is the question around that. And then just coming back to costs as well. I mean, by far, you're the industry leader. I don't think it's even a question. But this is the second year of actually cost going up. I mean, when we look out, I guess, to March '26, do you see kind of inflation abating and I guess, extra cost being much more stable from here on out?

Thanks. Are we surprised at pricing? Yes. We did see a weaker Q1. Partly, that was the move of the first half of Easter into Q4. But at that point in time, we had about 30%, 40% of the Q2 bookings in. We were on target. But I mean Q2 was certainly softening like we were moving down -- if you go back to our original sort of expectations rather than guidance on pricing. We started off the year, we'll be up maybe 5% to 10%. That was an attempt on our part to walk back from up 20% last year. It won't be a third year 20%. In Q1, we're now saying, it won't be 5% to 10%. It will be maybe 0 to 5%, it's getting weaker. And I think we might have been -- so I think there was reasons to believe that the peak would be -- that the price would be strong into the peak, it hasn't been. And everything here is dependent upon the close-in bookings. And the close-in bookings, we are having to continue to stimulate close-in bookings. So volume is there. I mean we are growing, by far and away, the largest area in Europe, we are growing at about 8% to 10% above this time last year. June was the first month, for example, where we've ever carried more than 19 million scheduled passengers. We didn't even do that in August of last year. But the total in bookings are materially weaker. We have for each of the last 4 weekends attempted to close off some of the cheaper seats and drive people obviously come in -- and each weekend, we've been running 50,000, 100,000 bookings less than target, and we're opening up again on Monday, Tuesday. So it's not that we're not trying -- but ultimately, the consumer is king. And if the consumer won't pay those higher fares, we simply will accept that, that's the way the market is going to be this year. I look around the marketplace, Jarrod and there's carnage all over any of the consumer-facing stocks Ocado. Carpetright going into liquidation all the luxury goods, we're not necessarily luxury good, but the consumer is under pressure. And we have had 2 years of very strong price growth. We're not -- I thought we would have modest price growth this year. I mean what has surprised me is how weak pricing has been despite the fact that capacity still hasn't recovered to 2019. And that I think is the greatest surprise. But if close-in pricing is weaker than we expected, we live with that. We will respond and are responding immediately by opening up some cheaper seats close-in, which is why we're hitting our kind of target 95% load factor during the summer months. But we now accept that Q2 is going to be materially weaker on pricing. It is going to be above 5%. It could be 10%, it could be into a double-digit number. At the moment, it doesn't look like it, but the trend is downwards and weaker. So I would rule nothing out, and it could well be a double-digit decline in pricing in Q2 and then if it's double-digit price in Q2, all bets are off in Q3 and Q4. We will simply go into Q3 and Q4, load factor active, price passive. And that is the way it will be. In terms of cost, again, yes, there is a -- I mean our cost increase is modest. The unit cost increase. It would have been better if we had got all the aircraft deliveries from Boeing. We are 20 aircraft short of what Boeing and contracted deliver. We have recruited the pilots. We have recurred. We are over crewed on pilots and cabin crew. Mind you, given the amount of ATC disruption, we're in a reasonably fortunate position is that we have significantly better on-time performance than almost any other airline in Europe, but we are burning through huge amounts of crew hours both pilots and camera crew trying to deliver schedules where ATC are delivering -- yesterday, for example, we were looking at 2 and 3 hours staff delays through the middle of a Sunday in -- the second last Sunday in July. So will unit cost be slightly up? Yes. Do I believe that will continue out into 2026? I think it will moderate itself, but a lot of that depends on Boeing delivering those aircraft. And we're already now focused on our spring 2025 deliveries and as of our last conversation with Boeing on Friday, some of our spring 2025 deliveries are going to be delayed into the peak summer of 2025 again. Now the numbers will be a lot less. We will certainly have the benefit of the 20 delayed aircraft deliveries this summer, which we will get before the end of the year. But we will be -- we will have less capacity in December '25 than we are originally scheduled to have with our Boeing delivery. And then we're into 2 years of essentially no capacity growth at all. And if the consumer is going to be under pressure for the next year, 18 months, that might not be the worst place to be. But at this point in time, all we can see, and I caution here, as of today's date, we have 95% of July already sold. We've only 74% of August sold. So we have another 20%, 21% of the bookings to take in August we've only 40% of September sold. So we have -- when we go back here, we say -- we don't have visibility. We really don't have visibility. Our numbers are heavily dependent on the close-in bookings. And whereas, as is currently the case, close-in bookings are materially weaker in terms of price. That's what it will be, and that's where we're going. Thanks, Jarrod.

Next question comes from Alex Irving from Bernstein.

Thinking about the demand change is structural or cyclical, I don't ask what the fare is going to be next summer, but do recent demands in fare [ tradings ] change your own internal steady-state expectation of where net income of passenger is likely to be as we go into F '26, F '27 and beyond? And then second, on ancillaries, right, broadly flat per passenger year-over-year this quarter. Is that basically just Easter moving? Would you think that is slowing down too how should we think about the path of ancillaries for passenger going forward?

Neil, I might ask you to see ancillaries. Is demand structural or cyclical. Look, I think the price -- there's nothing wrong with demand. The pricing is cyclical, -- the consumer's under -- I mean our guess is the consumer is under pressure out there, and they're simply not willing to pay off even for close-in bookings. When we try to close off cheap -- some of the cheaper seats at the moment, bookings die. When we open up again, bookings recover. And we are still -- we'll grow this year from 183.5 million passenger last year towards 200 million. Do we think there's any longer-term change in the trend of people traveling across Europe? No, we don't. But it may -- if -- but I certainly am of the view they're going to be price sensitive for the remainder of this year and maybe into summer 2025, unless there's a material change in interest rates or consumer disposable income. And it seems to us that the consumer across Europe is under pressure at the moment, and that's -- they're going to be more price sensitive. That's good for our model. We do have a wider cost gap between us and every other airline in Europe. We are adding more aircraft if and when Boeing deliver them. We're adding more aircraft with more seats that burn materially less fuel. So not alone are we hedging better into FY '25 and FY '26 but we'll also have a higher proportion of the fleet will be burning materially less oil and carry more passengers. And we believe that the MAX 10s, if and when they get certified and delivered in 2027 onwards, will structurally lower our unit cost base. And so we believe we have material cost advantages going forward. Over the medium term, I see no alteration to the supply dynamics in the European sector. There will be less airlines operating in Europe. They will be offering less capacity. Nobody -- the A320 ground lease will continue for summer '24, summer '25. But at the moment, until the consumer spending begins to improve, I think we should be bearish on pricing and expect pricing will continue to be down year-on-year. Neil, ancillary?

Sure. Alex, how are you doing? On the ancillary side, as you saw, we were flat on a per passenger basis. different products doing different things. Seats are running ahead of budget and ahead of last year, as is onboard spend, the teas, the coffees, the duty free. Our early boarding is a little bit tougher this year. So it's not rising at the same extent. So I think now at this stage in Q2, we're probably looking at flattish ancillary again. And beyond that, it's too hard to call, but you're probably looking flattish with a fair wind marginally up, but no better than that.

The next question comes from Harry Gowers from JPMorgan.

Michael. First one, just on the weakness in Q2 fares. I mean, is this completely network-wide in terms of the weakness? Or is there any particular pockets, geographies or any particular passenger cohorts that you might be able to call out? And then second one, I mean, the buyback is obviously running well ahead of schedule, 50% done? Is it a base case for you guys that we might get another announcement or an extension in a few months' time?

Thanks, Harry. No, it's network-wide. Given our scale, and I think we're all through -- of that, wherever we are pricing -- if we're pricing aggressively, we tend to be pricing aggressively across piece. There's no one market where we're doing lots of 1999 seat sales, 20% off seat sales. -- is not one market where we're suddenly pricing upwards. So it is across the piece. It seems to be system-wide and no unique markets there. On the buybacks, as I said, we've indicated previously that the buyback, we expect to complete the EUR 700 million buyback by the September AGM. It is no secret that the Board is looking at maybe a top-up buyback, but that would be a decision that will be taken probably at the Board meeting at the AGM. And if we have something to announce it, we announced either at the AGM or the second quarter or the half year results in November.

The next question comes from Dudley Shanley from Goodbody.

Two questions for me, if I may. First of all, just on Boeing. I was wondering if you could give us an update on what's going on there? Because the last thing we heard from a lot of customers was that things are improving slowly. But they seem to have taken a little step back for you guys, based on what you said earlier. And then second of all, if we take a step back and think about the medium term, as the current order comes to an end and there'll be a gap before the MAX 10s arrive. How should we start thinking about network optimization in that scenario?

Okay. Thanks, Dudley. I think it's fair to say we believe the situation in Boeing has improved, but we're still running into glitches. We had thought we were going to get 7 aircrafts in July. That's now 5, we were going to get 10 aircraft in August, that's now 8. So cumulatively over those kind of 2 key months, we're going to be 5 aircraft short. The greater concern at the moment, but it's developed as recently as last Friday is our deliveries in 2025, we're originally supposed to get 29 deliveries between the end of February -- February to the end of May. They're now moving towards March to the end of July. and we don't yet have a handle. So we've said going back on Friday, please explain why these are moving. There's no reason why these should move. I think there is a risk of labor disruption in Boeing in October when the contracts come up for renew. But we're getting a little concerned. I don't want -- we can't have a second summer in' '25, what we've had this summer where we're constantly chopping and changing schedules because of Boeing aircraft delivering a week or 2 weeks later than they had originally promised. But overall, I think Stephanie Pope is doing a good job. There is at least management on the ground in Seattle where there's someone we can talk to. It's just the schedules are set and moving slightly backwards. The bigger issue there, if they leave us if we're 10 aircraft short for summer '25, it's not the end of the world, particularly in this softer pricing environment, we will still have probably the goods for 20 or 40 additional air of capacity growth for summer '25 over summer '24. The bigger issue now is getting the Boeing -- the MAX 7 certified in the first half of 2025. The MAX 10 certified in the second half of 2025 which would then mean we would not expect any delays in our -- the first 17 -- we've our first 17 MAX 10 deliveries in the spring of 2027. But it is important that Boeing hit those MAX certification dates and also that there are planned step up in production, both they and Airbus are planning steps up in production or Boeing has to recover back towards 36, 40 aircraft a month, that they achieve those dates, otherwise, we run into delays on our spring [indiscernible] '27 deliveries. But that's not really germane at the moment. I think where we are at the moment, we -- particularly in this softer consumer spend environment, I think we'd be reasonably relaxed to take the remaining 49 aircraft deliveries were due from the end of July this year. up to the end of July next year. And then no capacity -- very little capacity, no capacity growth in summer '26, very little in summer '27. That's probably the right place to be with no capacity growth in Europe as we would hope consumer spending will recover over the next 2 or 3 years in a marketplace where capacity remains constrained. Over the medium term, we are already -- we have always been engaged in network optimization. We are constantly churning our aircraft roots. I mean, we've had the example this week, our Bordeaux, who we have a 2 or 3 aircraft base in Bordeaux. -- they materially haven't -- what they -- basically [indiscernible] on our agreement the cost dramatically escalated. So we announced the closure of Bordeaux. Within a week, when we announced that closure, we had 6 other French airports on looking for those aircraft. Now it's likely those aircraft will churn outside of France elsewhere because we have better growth at better cost elsewhere. We had planned to put 3 aircraft into Dublin this summer. Again, we have this mad capacity cap at Dublin Airport and an incompetent green transport minister who won't do anything about it. So it'd be those 3 aircraft, 2 of them went into Italy where they're scrapping the municipal tax and 1 aircraft went to Poland. So we are continuously churning, but there will be -- and we are having more aggressive, more kind of aggressive discussions with a number of airport partners into the winter of '24, summer '25 because there is going to be a greater rate of churn, particularly of either underperforming airports or those airports where costs are increasing. Portugal is likely to be an area of focus there. We've already closed the Ponta Delgada base. I think it's likely, given the cost increases, the material base will close and -- whereas Italy, for example, where municipal tax is being rolled back and costs are falling, we'll see a greater allocation of aircrafts. Eddie, anything you want to add to that in terms of...

It's really sort of, I suppose, 2 phases. I mean like we've done a huge event of work over the last 2 to 3 seasons on utilization. Now it's looking at the quality then of the -- what frequencies we have on it, but that also feeds the cost. You've called out most of them there and if you look in places like Morocco, where we still have some element of utilization that goes, we tag on domestic, but the one other call out I would give that has a structural cost problem there is Germany. And so you're now having taxes or charges per passenger there and north of EUR 55, close to EUR 60 as they have what you would see as a secondary major airport in Germany. And they will be front and center along with Portugal, you should say, and other high-cost countries and regions in this churn. So the churn will be more than it has been in previous seasons because we're not growing as much and that there are less alternatives out there for airports. So there will be a big focus on that now over -- particularly over the next number of weeks for summer '25 and then beyond.

The next question comes from Jaime Rowbotham from Deutsche Bank.

Michael, 2 from me. First one, Obviously, you've talked again today about the constrained intra-European supply. But obviously, one could argue, stubbornly that at last year's price point is actually now oversupply rather than undersupply, which is why you're having to lower the fares to fill the planes. You touched on this earlier. How bad would it have to get to start practically moderating down the capacity growth for summer '25 rather than it coming organically by the Boeing delays? Or do you think the consumer just comes roaring back from whatever is weighing -- because you just mentioned growth in '25, then on in '26, '27. I just wonder whether there may come a point where the other way round starts to look like a better plan to allow the consumers some breathing space? Second one for Neil, maybe on the nonfuel unit costs in Q1. The maintenance line came in lower certainly than I expected. And you mentioned on Page 6 of the release of supplier credit in there, presumably from Boeing. Have you as I suspect you might have a fair bit of credit stored up, allowing that line to be lower than normal for the rest of the year? Or would there indeed need to be further delays for this not to go back to being higher maintenance cost in the coming quarters?

You broke up in the middle of that. But I mean if I understand the gist of the question is, would we -- if in a softer pricing environment, would we not -- I don't know, take delivery of or not deploy those aircraft for summer 2025. If that's the question, answer is, no. In a softer pricing environment, we will take the capacity, and we will fly it more if we can. We will take more market share from competitors given that we have a much lower unit cost base, we will accept lower margins and lower pricing. And if that means we push some more competitors out of our markets, then that's the way it will operate. We prefer periods of recession where consumers are under pressure because that's when we grow best and lay down the kind of market shares for improved medium-term kind of profitability, et cetera. So we will take those aircraft. I would take them as early -- as early as I can. In fact, we've already said to Boeing, United, ones you were talking -- walking away from MAX 10 in '25 or '26 is the data that we take them at our pricing. So no, if there's a consumer pricing is up, that's our marketplace, we will grow and try to grow faster in those markets at lower margin. We have a much lower cost base. The unit cost base, if we grow faster, will be slightly enhanced or improved -- but at the moment, the Boeing delivery delays are constraining our ability to grow and are also at the edges damaging our unit cost performance. But overall, our cost base is -- our cost advantage is widening over all of our competitors and they'll have to decide for themselves what they want to do in response to our lower pricing. And Neil, do you want to take the second half of that question?

I will do. Jaime, yes, you referred to the maintenance line there. There is a modest crates from Boeing into Q1, not material -- we have an agreement with them in relation to compensation. Again, confidential. They're very heavily motivated to get the aircraft in on time. So if aircrafts are coming in on time, then it won't really be a particularly material number. If there are significant delays, then that number could get bigger, but for the Q1s, it was totally immaterial.

The next question comes from James Hollins from BNP Paribas.

Just on the on the revenue, clearly, you very well flowed the consumer problems. I'm guessing 5 new bases see some route and maturity in there as well. I was wondering if we could lay any blame on your revenue management systems and maybe not building the load through the booking cycle as well as it should and if that's something you need to address? And the second one, 74% sold for August. Thank you for that number. wondering if you might put a number on what you've actually sold at and whether the guidance is all down to an assumption of late bookings weakness.

Yes. Okay. On the revenue management, no, I wouldn't put any blame on them -- in actual fact, they've done a terrific job in a -- they noticed that we pick up faster more not with anybody else that pricing is getting softer. When we were the first ones out in March, April, talking about pricing being softer than we had expected, we were the only ones everyone goes no, no, we're not seeing any, we're not seeing any. And then 2 or 3 months later, they're all seeing much the same thing. But I don't worry about what they generally they say. We -- at the moment in July, we went into July about 1.5% ahead of target where we were in target bookings, which is why we thought now, okay, let's turn off some of the cheaper seats and price up into July. Every time we've attempted to turn off. We have struggled to make sales that we failed to hit our either daily or our weekend volume targets, and we've had to open up again. So we went into July about 1.5% ahead of target. As of this morning, we're still 0.5% ahead of target. So we'll finish July just at or marginally ahead of targets. Now -- we have had a shed loaded cancellations during July over 400 this weekend, mainly due to the computer system and ATC delays over the last 3 days. But you will see us hit impressive load factors and traffic volumes in July. But at the moment, we're about 0.5% behind the target for August, and we're about 0.5% behind for September. We need to get that back towards being 0.5% ahead. We want to go into each of these months slightly ahead of target so that we have the availability to open up or -- close off or open up as we need. So no, the revenue management system is bang on where it needs to be. They have done everything they can to try to price up into the peak summer months. In fact, we've fallen 1% again target as we move through July, but we're still 0.5% ahead of target. They protested August and September, but we're 0.5% behind in August, September, we will close that up over the next couple of weeks. So Yes. No, I think the revenue management team are doing an excellent job. Our philosophy here is to be load factor active, yield passive. Now we get tried in the last couple of summers to be more yield active because we had such strong demand into the post-COVID recovery. I am surprised at the weakness of pricing, given that EUROCONTROL's own numbers confirmed this year. Yes, while capacity is up in July, it's 4% higher year-on-year, it's still 3% behind where it was in 2019. But there is no doubt that the consumer is more price sensitive. I've talked to one of the long-haul carriers a week ago and told me the transatlantic is softer this year than it was last year. Everything just points to the consumer spending being a little bit softer than we had expected. And I thought we'd originally been cautious in guiding this year that summer pricing fares would be -- it would be up 5% to 10% after 2 years above 20%. We weren't half cautious enough, but we have 0 visibility. What was the second part of the question? That was the revenue management system. Oh, yes, can I give any indication of what that pricing is in July and August. Given it through it this morning. It's in -- the pricing will be materially lower than it was in 2023. And I'm not willing to define what materially lower means, I've said it means above 5%, and it could be double digit. It's not double-digit yet, but I think the way it's trending, it could well be double-digit by the time we get to the end of September for Q2.

Next question comes from Sathish Sivakumar from Citi.

I've got 2 questions here. First is on the fleet to crewing ratio -- so obviously, yes, ATCs are impacting right now. But as we go into the winter, how should we think about that ratio? Would you see that turning back to 2019? And if at all, when do you get back to that level? And the second one is, given that you've got to do some price simulation now, what does it mean for will pick a path with -- Do you see some scope to optimize winter capacity again, both mid-weeks and weekends as well?

Okay. Thanks, going to ask Eddie to deal with the first half, which is the crew ratio, and then I'll do with the winter capacity.

Yes. I mean the crewing ratios are very strong. I mean, with both with pilot and cabin crew, in particular, pilots -- you've got to plan a full 18 months out. And we would have been -- like in previous years, we would have been down at 5, 5.2 crews per aircraft. We're now around 5.8 crews. Cabin crew are probably in a more healthy state -- and we have needed those for the disruption that we've had to run standby crews, particularly as the days -- if you've got delays and you have to call in standby crews in the late evening to do the final sector sometimes. And many of our competitors just don't have that resilience built in into their crewing, which means that there are substantial significantly more cancellations. But are we going to pair it back? We've always said that we will pair it back, but not until ATC is fixed. We've gone through all the other areas of resilience that we've bolstered up over the last number of seasons, both in our operations control center here by doubling the capacity there and the sort of physical footprint of it, along with a lot of new systems that are now critical for us in planning disaster days like last Friday, and I think we're significantly better at that. Yes, we would like to get crew levels back, but now is not the time to do that. We need those crews. But over time, yes, there's some headroom there for us to pull down.

In terms of winter capacity, Sathish, there's no change -- we have -- as you know, we're on track, we think, to get very close to 200 million passengers this year. That would be up about 8%, 9% year-on-year. Q1 traffic is up 10%. Q2 traffic, we think there might be a fraction below that. It could be 9%, 10%. Second half of the year, we expect it to be up kind of 8% to 10% as well. We are -- there are some pinch points there. Dublin, for example, because of the cap we may well not get slots for the extra flights we normally do at Christmas, but we will redeploy those aircraft to doing Christmas extras elsewhere. Our response to weaker pricing will be -- if it's going to be a weaker pricing this winter, we will accept weaker pricing, but we will deliver the traffic, we wouldn't and -- cut back the capacity growth. We wouldn't add it either. I mean if you take 20 aircrafts, we're expected to get from Boeing this winter, we don't plan to deploy those aircrafts. We will need them for next summer schedule, April, May and June, but it will be steady as she goes and we will take the pain on the pricing. Tracey, anything you want to add in there in terms of winter capacity.

Yes. So we just continue to do -- we always do a network optimization. We will reduce capacity in the [indiscernible] period, midweek in Jan and Feb and March, and with 3 new bases for the winter: Reggio, Tangier and Trieste. And then we continue with winter [indiscernible] and expansion in Central Eastern European market.

Okay. And Morocco, I think would also be a mark where we will grow meaningfully in Morocco this winter [indiscernible], but also a growing domestic presence in the Moroccan market. .

The next question comes from Savanthi Prelis-Syth from Raymond James. .

Just a question on -- another question on just the fare booking environment. Some of your competitors have talked about maybe the book -- summer booking season extending a bit further out. I wonder if you're seeing anything on that front. I know you mentioned September is only 34% book, so maybe too early, but -- and then on the second question, I was kind of curious what the significance of the win against the Bookings.com on Friday was.

Okay. So, actually you broke up a little bit. What did the first question -- the summer bookings are they likely to extend lumber, is this.....

You've had some competitors talk about maybe summer bookings extending longer than normal. So the peak may be being a little bit longer. I'm wondering if you're seeing any of that. .

Our monthly traffic at our -- our mostly traffic, we have our summer schedule runs through to the end of October. The traffic does dip down in September and October, but we would expect to see strong load factors. I would kind of slightly counter that is that we're in a weaker pricing environment. So I think we will see strong bookings through September and October. What we don't yet know is, what the pricing mechanism will be of October. As we stand today, we have less than 20% of the seats sold for October. So I wouldn't hold too much [indiscernible] the summer travel period is extending. We're a short-haul year-round operator. We do cut back, as Tracey said, capacity meaningfully in the winter. But during the summer, which will include, September, October, we keep going. But we keep going at weaker pricing. Currently, the pricing margin is materially weaker. The win over Booking.com last week, I think is seismic. We had 7 days or 5 days in front of a jury and courts in Delaware. We were -- and the verge of the jury is comprehensive. We won on almost every -- we lost only one of twelve points on our [indiscernible] against booking.com, which means we have now -- jury has now established that Booking.com were in breach of the U.S. Computer Fraud and Abuse Act. They also found that the [indiscernible], they were the deceptive trade -- that they had knowingly and with intention to -- an intent to defraud have been illegally screen scraping our website. We had so much evidence of Booking.com scamming consumers by overcharging them for Ryanair airfares and Ryanair ancillaries. Bookings.com with a battery of lawyers arrived in, they know we don't do that -- we don't do that. It was kind of [ trumpery ] in defense and the jury just shot it down. I thought also quite significant that the jury found in our favor on all of Bookings counter suit against us, which is that we had defamed Booking.com by calling them overcharging pirate, that we have somehow engaged in unfair competition against a [ 130 billion ] travel [indiscernible] and that we were engaged in deceptive trade practices. I mean, I was surprised that Booking.com allowed us to go into court given that the evidence against them of what the scamming that have been going on them -- illegally -- or illegally scraping our website and using it to overcharge customers for -- overcharge customers and then try to cover it up with the -- by giving us fake e-mail addresses and fake payment details. They came not to- I think what was notable is that Booking.com took us off sale about 4, 5 months ago in the run-up to this case. And they're kind of depends on -- we don't sell Ryanair anymore. No, but when you did, you were scanning them, I think it is -- what's interesting is, no, whether they appeal or not, we don't know. I'm not sure there are any grounds for appeal but that might not stop them anyway. But I think it will now be materially difficult for Booking.com to scrape any airline's website. Now other airlines who have higher fares may not mind working with Booking.com. We object to working with Booking.com on the basis that they are going to overcharge our customers for our airfares. Booking.com have the same opportunity as all the other now approved OTAs. If you want a direct access to the ryanair.com website, you can have it, but only if you agree that you will not scam and overcharge our passengers and you must show and display our real airfares and our real ancillary prices, and you must give us the genuine customer e-mails and payment details. Almost every other OTA has now signed up for that with 2 notable exceptions; Booking.com, who also have KAYAK in the States; and eDreams, Spanish pirates in Europe. But we think ultimately, their models are now ultimately flawed. It's fine for Booking.com, who do deliver meaningful distribution for hotels and accommodation, but they charge those hotels accommodation 16%, 20% for their services. It is not fine for them to try to insert themselves into the relationship between Ryanair and our customer, in what is clearly an attempt by them to grab a huge volume of our bookings and turn around and try to overcharge us or the consumer. The reason they've been overcharging consumers of Ryanair airfares because Ryanair won't agree to pay them a fee for their nonexisting services. We don't need Booking.com to sell Ryanair fares across Europe, and we have the lowest airfares. We're surprised that other airlines do, but that's a matter for them. But I think it means -- I think that the Booking.com ruling is now, I think, the death knell for OTAs illegally scraping the Ryanair website. And therefore, they will not be able to insert themselves into the relationship between us and our customer and then turn around and either charge the customer a fee, or turnaround and charge Ryanair fee. So I think it is pretty seismic. We abuse to see what other airlines do in North America, when in our view, they should turn out and tell Booking.com to stop overcharging their customers, but that's a matter for them. But we think the Booking.com model -- and as far as it relates to accommodation is valid, they've made huge multibillion fortunes out of it. But scamming customers for overcharged airfares is not going to work going forward after the Delaware ruling.

The next question comes from Duane Pfennigwerth from Evercore ISI.

Can you expand on the Board's decision to change the exchange ratio on the ADS. How do ADR holders navigate around the foreign ownership restrictions? And do you think this will help the ADS trade closer to parity with the locals from a valuation perspective?

Thanks, Duane. I mean, look, we're trying -- I've always been with -- the challenge we have even in our own present buyback is the ADSs have always been a reasonably illiquid there, closely held by a number of very large shareholders. And what we're trying to do is to make them a little bit more -- or create a bit more liquidity in the ADS program. We do believe if we can do that, that it may help ADS liquidity. . I'm not sure it will -- until we resolve the ownership and control restrictions here in Europe, where we are pushing hard together with a number of other areas that there should be controlled restrictions but not ownership restrictions. I'm not sure that the gap between the European ordinaries and the ADSs were closed. And maybe I might ask Neil for a comment to that, and I might ask Juliusz from a legal point of view to comment on it as well. Neil .

Yes, I think that's a fair comment in relation to the premium. There's quite a large premium at the moment on the ADS compared to the ordinary shares. We did look, Duane, as where our ADSs are trading in absolute terms versus other airlines and travel industry stocks, and it's ahead of by the way on considerable distance. So it makes sense to effectively realign to bring the price down close to [ 50 or 60 an ADS ], which is where kind of we'll get to following the split. And that may hopefully increase liquidity because we need that liquidity to not only finish the current buyback, but to also do future buybacks, so that we can get closer to 50% EU ownership and control and then see where we go from there. And now I'm sure Juliusz may have some color on that. .

Juliusz, I don't know if you want to add anything on the ADS issue? And maybe I might also ask you, since there was your team, have any commentary on the Booking.com ruling in Delaware. Sorry, I should have asked you to comment on that in response to Savi's question. So firstly, the ADS, and secondly, the Booking.com ruling.

The change of the ratio in ADS won't immediately have an impact on our [indiscernible] situation. We are still over 48% EU-owned at the moment and trending up slowly at this stage, but we think it is within sight that we will get over 50% at which stage the Board will be in a position to restore voting rights for non-EU shareholders. So it's helpful in that context. And in relation to Booking.com, I think one -- the only thing I would like to add to what Michael said before was that this is the fourth significant ruling in the last 2 years in our struggle against Screen Scraping. The first of those was against Lastminute in the Paris Court of Appeal in 2022, when the court said that screen scraping of our website is equivalent to free riding on our investment. This was the case against Lastminute. We then had a ruling in Ireland against Flightbox, a Polish provider of software for screen scraping. which essentially said the same thing that screen scraping is unlawful. And then the court of appeal of Milan, again, in the case taken against us by Lastminute, earlier this year, said that our objection to screen scraping does not amount to an abuse of dominance position. So it removed that hurdle. So now with the Booking.com ruling in the U.S., I think it is fairly clear -- it should be fairly clear to all, that screen scraping is unlawful and must not continue. So it really puts e-Dreams in a very difficult position as pretty much the last OTA that still continues to scrape our website.

Next question comes from Muneeba Kayani from Bank of America.

I just wanted to ask on, now that ITA and Lufthansa have the green light. What's your view on the Italian market? And any comments on the remedies that have been proposed, especially at Linate? And then secondly, for Neil, just if you could remind us on the CapEx outlook for this year and next year. And I know you are expecting the MAX 10 certification next year. But if there are delays on that, how should we be thinking about the CapEx profile? Like when would you -- when are you scheduled to start predelivery payments on the MAX 10 for now? .

Thanks, Muneeba. I mean, I'll touch on the Lufthansa ITA takeover. We welcome the ruling out of Europe. I think it's slightly depressing that Europe is still slow to approve what is the inevitable consolidation of the airline industry in Europe. We believe and have long supported Lufthansa purchasing ITA, the alternative is that the Italian taxpayer keep bailing out [ ITA ] every time it loses money, which is an annual event in ITA. So we think it is long overdue. Obviously, we don't think the remedies go far enough, although they are handing over slots in Linate, we are not interested in slots in Linate. We do think easyJet or somebody will take up those slots. But ultimately, it seems to us that the only way the light up ITA, TAP in Portugal, SAS up in Scandinavia are going to survive over the medium term. There is going to be some process of consolidation, whereby the high-fare legacy carriers gather or coalesce together. We will continue to expand across Europe with a much lower cost base than the other airline. And therefore, we think that, that consolidation process is ultimately good for our growth. We see strong growth in the Italian market. we do believe that ITA will do as they have done in every other merger that will be pivot ITA's capacity into feeding from Italy into the 2 big hubs in Germany, Munich and Frankfurt. There will be less capacity deployed doing O&D markets from Italy to Europe or Italy domestic, and we will certainly be adding more capacity into those marketplaces to ensure that Italians do not become the victim of Lufthansa's very high airfares as German consumers are currently struggling with. The German market is the least recovered market. In Europe, it's operating at about 82% or 83% of its 2019 capacity. And the Germans are now paying among the highest airfares in Europe as a result. But it is inevitable. I think that the consolidation process should continue. And we think there should be a much faster clearance process that should consist of handover slots at congested airports and get omitted. And Neil, you want to touch on capacity and also what will happen if the MAX 10 certification slips [indiscernible].

Yes. Well, on the CapEx, Muneeba, no change from the guidance that I gave back in May. So we're looking at about EUR 2.3 billion CapEx this year, although that's predicated on all of the aircraft coming in this side of March 31. Next year, we're looking at somewhere between EUR 1.1 billion and EUR 1.2 billion. So there could be a little bit of timing between this year and next year depending on Boeing deliveries. The MAX 10 doesn't really become meaningful from a PDP perspective or from a delivery perspective of actually 2027, there will be the first PDPs due within the next kind of 12 to 18 months. We'd be hopeful, as Michael said in his opening comments that the certification process will have moved on and that will be taking our first aircraft as planned in the first half of 2027. So it wouldn't have an impact. But if there was to be a move out, the first couple of years of PDPs are not that meaningful in any event.

The next question comes from Gerald Khoo from Liberum. .

Two for me, if I can. You talked at great length about the air traffic control delays. I was just wondering whether you might be able to quantify the cost in any way? And secondly, I think you mentioned that you extended the leases on some of the -- now the A320s. How much scope is -- how much more scope is there to extend further leases? Or have you extended everything that you can already.

Okay. Thanks, Gerald. I mean, impossible to quantify the cost of these ATC delays. We're coming into -- where -- we're now in the peak travel period. This time last year, we had 53 days of French ATC strikes. The strikes are easier in many ways to handle because you can't fill the flight. And while we have right to care obligation, we don't have compensation obligation. We are struggling over the last 2, 3 weeks with materially lower on-time performance. I mean, historically, our on-time performance this time last year was over 80%. At the moment, we're struggling to get to 65%, 66%. So 1/3 of our flights are being delayed. It is leading to some higher -- modest rate of cancellations of flights because of airport curfews. And we are therefore responsible for more compensation. So I think there's likely to be a modest uptick in our EU261 cost this year, but we haven't quantified it. We don't know how long this is going to last. And whether the situation will improve. I spoke to a number of the other airlines in the A4E Group, and they're all equally frustrated as we are with momentum of performance of ATC, and it will encourage us to lobby harder for some more effective ATC reform when you're able to deliver nothing. Ursula von der Leyen got reappointed President last week, promising competitiveness and improved competitiveness, despite 5 years of sitting on rocks doing nothing about air traffic control. But maybe this might inspire. We think the more -- if a few commissioners and parliamentarians have their flights delayed this summer because of ATC delays, we might see some action. The problem is most consumers just blame the airline. It's our thoughts. So they blame the airline for the delay, they get compensated for the delay, and yet, we're not allowed to recover our EU261 cost for ANSP or ATC providers because they're generally immune from prosecution across Europe. So it's just another lamentable failure in Europe's ATC infrastructure, we need real effective reform, privatization would be far and away the best thing you could do with that loss, ensuring that they're actually properly staffed and protecting overplays during national strike. On the A3 Lauda, we have extended 3 of the leased out [indiscernible] that we have about 25 or 26 is allowed to A3. [indiscernible]. We -- though are not minded to extend the leases beyond that date, although the aircraft is getting old. I'm sure we could if we want to. But it was very much part of our vision that the MAX 10 deliveries or alternative A320 deliveries would replace those aircraft in 2028, and that continues to be the case. If there was a material change in the outlook. I mean the reason I should say we extended those 3 is we were able to extend those 3 aircraft without any increase in the lease rate, which was a significant gain for Lauda and for our shareholders. Lease rates have doubled in the last 12 months over the rates we're paying for Lauda. But where that kind of value is available, we will be happy to take it. I think in all cases, the lessors want to keep Ryanair as a customer and see value in having Ryanair as a customer there. But aircraft leasing is not a big part of our operation. We own almost all of the Boeing 737 fleet. We have very little leasing left in place, and it's mainly on the Lauda A320 fleet. And we wouldn't see leasing as a way forward. Leasing has been -- the lessors that we see both just [indiscernible] in their overpriced offices and overpriced automobiles. The world has moved in their favor. The cost of engine leases, aircraft lease is now, I would say, a record high. And because I think that will widen or significantly increase the cost inflation many of our competitors are suffering for the next number of years, whereas we own all our aircraft. We're paying down the debt on those aircraft aggressively and all we have is a depreciation charge.

The next question comes from Alex Paterson from Peel Hunt LLP.

Two questions from me, please. Firstly, I just wondered if there's any regional variation in terms of the fair declines? Is it how stronger....

No, it's all [indiscernible] already. .

Sorry. And then on the load factors you said that you were 0.5% behind for August and September. That was behind plan. Was planned flat on last year, i.e., our bookings moving later. .

Yes. The plan is flat on last year. We said the -- sorry, the plan is flat on last year, but with 9% or 10% additional seats this year. So the plan is flat. We had aggressively priced into July. So we went to a 1.5% ahead of the target. The target moves on a daily basis. But we're running 1.5% ahead in July, and that's what we thought, right? We can now price up into July. And every time we try to price up, we may resist and we finished up opening up again. And as we've gone through July, we've moved from being 1.5% ahead of target. Today, we're 0.5% ahead of target. Now we're getting very close to the end of the month. So it's likely it would finish modestly ahead of target. But we're 0.5% behind for August and September. So our efforts to price upwards have failed. The close-in bookings there were meeting significant pricing resistance on close-in bookings and we're having to open up again. And I think that's reflected this morning in our commentary, which I accept is come as a surprise. I mean we've been surprised as well, but we're not seeing any -- we're not seeing the same kind of aggressive load factor build and pricing that we have seen in both of the last 2 summers, summer '22 and summer '23. When we were repeatedly closing off cheap seat close-in and bookings were running ahead of our daily targets. But it is against this time last year. So we would expect to hit the same load factors as last year. The traffic will be up about 9%, 10%. And but the material yields or the average fares will be materially lower in Q2, July, August and September.

Our final question today comes from Johannes Braun from Stifel.

Actually, just one left for me. And that would be on the free cash flow, which looks for Q1 actually pretty good despite the profits being down. I can see that it's largely because of lower CapEx given the delivery delays of Boeing, but there's also cash inflow from ticket prepayments, which are much stronger than last year, above EUR 600 million. And I just wonder how this fits with your warning of significantly lower yields in the summer. Is it just the volume growth that I can see there? Or is there anything else that I missed?

Neil, do you want to take that on the free cash flow .

Yes, Johannes. Bookings, traffic is strong. We're taking in. We're 0.5 million or more bookings, nice at this point in time. So the cash continues to flow very strongly. Your right, EUR 0.5 billion in CapEx or slightly lower in the first quarter. But I expect the cash to continue to remain strong over the course of the year. I think that's a factor of the volumes that are coming in and what they're paying for deferred. As far as are down, as Michael said, but yet they're open, we're already -- we're on a pre-[indiscernible] basis. And that's coming true in the numbers on the cash flow, EUR 4.5 billion in gross cash, EUR 1.7 billion net cash at the end of the quarter.

All right. So it's largely the volume element compensating price element. .

Yes. I mean there's a steady flow of cash in every day, yes.

Ladies and gentlemen, with no other questions, we'll wrap it up there. As I said, the -- we are surprised by the [indiscernible] pricing into the second quarter. It is heavily driven by close-in bookings and the close-in bookings we're having to open up rather than close off as we move into the peak summer period. We think that will continue. Nevertheless, traffic growth will be strong. Cash flow generation will be strong. We will continue to focus on returning cash -- surplus cash to shareholders. The Booking.com win last week was a momentous win. We think that is structurally significant for us going forward. And for us and for the industry going forward. And therefore, we will continue to deploy capacity. We'll continue to be load factor active, price passive. We will still have strong profitability this year, although clearly, profitability will not be as strong as we had originally hoped for the full year. But if pricing is where it is, and we will continue to aggressively price in all markets so that we hit our traffic load factor assumptions. . If anybody has any follow-up questions they want, Peter Larkin is here, Head of IR is here in Dublin. Neil is doing some investor meetings in London, I think, and Frankfurt to the next day or two. But other than that, we will see you all either here for the AGM in September or on the half year results roadshow in November. Thank you very much, everybody. Good to talk to you.

Thank you, everyone. This concludes today's call. Thank you for joining. You may now disconnect your lines.