Ryanair Holdings plc (RYA) Earnings Call Transcript & Summary

Hello, and welcome, everyone, to Ryanair Holdings plc Q1 FY '27 Earnings Release. My name is Jen. I'll be the coordinator for the call today. [Operator Instructions]. I will now hand you over to Michael O'Leary, Group CEO of Ryanair Holdings to begin. Michael, please go ahead when you are ready.

Okay. Good morning, everybody. Welcome to the Q1 results call. You'll have seen the results issued this morning, Q1 profit after tax of EUR 538 million. That's a 34% decline on last year's Q1 of EUR 820 million, primarily due to the impact of the large spike on oil prices on our 20% unhedged and also the fact that the first half of the Easter moved -- in Easter holiday fell into prior year Q4. Q1 highlights include traffic growth on track, grew 6% to EUR 61.3 million. Revenue per passenger fell 5%. Average fares were down 6%. Ancillary revenues were flat. Unit cost rose 5%, which is an impressive number at the unhedged Q1 jet fuel prices doubled to $151 per barrel. FY '27 jet fuel remains 80% hedged at $67 a barrel. Development in recent weeks as we took advantage of some price weakness on the forward rates are now 15% hedged for the entirety of FY '28 at about $85 a barrel. The underlying growth into the summer continues. We are operating 3 new bases this summer [indiscernible] in [ Morocco Tarana in Albania, Trapani ] and Southern Italy and in total, over 130 new routes. And we're pleased that the final $1.2 billion bond was repaid in full out of internally generated cash flow, leaving the group essentially debt-free. Touching briefly on a couple of points and then before I hand over to Neil. Scheduled revenue dipped 1% in Q1 to $2.91 billion as traffic grew 6%, but at 6% lower fares. Q1 fares, which benefited from a full Easter during April 2025, required stimulation as the Middle East contract led to consumer hesitancy, concerns about EU jet fuel shortages, economic uncertainty and later bookings. However, our conservative hedging policy means with 80% of our fuel hedge at $67 a barrel, the group's earnings are largely insulated from periods of extreme volatile oil prices as currently and this will materially widen our cost advantage over all of our other EU competitors. As I said, we've recently extended those fuel hedges for the first time into FY '28, now 15% hedged at $85 a barrel. Having repaid the EUR 1.2 billion bond in May, at the quarter end, gross cash was just over EUR 2.8 billion, again, an impressive figure after EUR 1.3 billion of debt repayments and EUR 0.5 billion in CapEx. Liquidity is further boosted by the group's EUR 1.1 billion revolving credit facility, which is mostly undrawn a sensible strategy at this time of the year when we're generally -- when cash flows are strong. We're now 90% through the EUR 750 million share buyback program. The average price is EUR 26.35 per share. However, over the coming year, following the main repayment of our bond, our funding priorities are: one, the MAX 10 aircraft CapEx and the first 15 of those aircraft are coming in the spring of 2027. Shareholder dividends, the completion of the current buyback program, which we think will run out until around the AGM in September, while rebuilding gross cash back to EUR 4 billion, which is where we were when we entered the COVID and that we believe that's a sensible number to help us cope with unforeseen eventualities, such as COVID or the current war in the Middle East. In terms of [indiscernible] fleet, Boeing continues to expect the MAX 10 certification in late summer 2026. I spoke about 2 weeks ago, and they expect the MAX 7 to be certified in the coming weeks. And they're reasonably confident that the MAX 10 will be certified either in late September or mid-October. They have protected our [ 415 ] delivery slots in the spring of 2027. So we are growing increasingly confident that we will have the first of those aircraft in advance of summer '27. And with 300 of these super fuel-efficient aircraft, remember, 20% less fuel, but offering 20% more seats per flight, due to deliver by March '30, '34, it leaves us in very good shape long term for cost efficiency or cost efficient growth and we believe profitable growth. As I said, this summer, we're growing top line growth is strong, 3 new bases in [indiscernible], but with only 4% of FY '27 traffic growth, our scarce capacity is being switched away to those states, regions and airports, cutting aviation taxes, lowering fees to incentivize growth. The example we've given are Albania, Morocco, regional Italy, Slovakia and Sweden, and we are withdrawing material capacity, flights and traffic away from high tax, high cost markets like Vienna, in Austria, Dublin here in Ireland where costs have gone up 10% this year. Germany, we're closing the Berlin base at the end of the summer and region of Spain. Over the medium term, we expect European short-haul capacity to remain constrained until at least 2030, principally as the 2 main manufacturers remain well behind on aircraft deliveries. Those industry capacity constraints combined with our very widening cost advantage, our strong balance sheet low-cost fuel-efficient aircraft order book and industry-leading of resilience will, we believe, facilitate Ryanair's sustainable, profitable growth to over 300 million passengers by 2034. In terms of outlook, FY '27 traffic remains on track to grow 4% to 216 million passengers. Much of that growth is front ended. So in H1, we expect to grow by 6%. We will cut back our schedules into the winter, and we expect to deliver only 2% traffic growth in the second half of the year. Our unit cost leadership continues to widen. We've seen the results reported by many competitors in recent weeks who have seen unit cost increases of high single digit, low double-digit we're this morning reporting low single-digit cost inflation. Jet fuel remains 80% hedged to March '27 at $67 a barrel, and that helps us to offset a [ 300 million ] increase this year in EU and barrel taxes significant crew pay increases on new multiyear CLAs and higher maintenance costs. While summer '26 volumes are strong, the booking window remains closer in than last year, which further reduces visibility. Despite the recent slight uptick in volumes and less price simulation, Q2 pricing is trending modestly down year-on-year, that is a decline from where we were in the full year results, and we were hoping that Q2 pricing would be -- generally would be flattish year-on-year. They're now trending modestly down low to mid-single digits. And the final H1 fare outcome remains heavily dependent on the strength of close-in bookings in August and September, but they will not be sufficient to make up for what will now be a fair decline in the second quarter. As is normal this year, with 0 H2 visibility, and so there's no point in trying to provide any meaningful guidance for full year profit after tax guidance at this time. And with that, I'm going to hand over to Neil Sorahan Toran, CFO, Neil to take us through the key points of the MD&A, please.

Okay, Michael. Not a huge amount to add to what you've already said. They're other than to guide people back to the [ Fortis ] balance sheet that we have quite uniquely, 620 fully unencumbered Boeing 737 on the balance sheet, very pleased at going debt-free back in May. So a rock-solid balance sheet would put us in a very strong position over the next number of years to capitalize on every opportunity that comes to us. Hedging again, well insulated for the current financial year, 80% hedging at $67 a barrel. The key swing factor was a for the rest of the year is going to be where the 20% unhedged fuel goes. Otherwise, unit cost strong, and I would guide people to Slide 4 in our presentation. You can see the gap between ourselves, with easyJet and everybody else is only getting wider. And I would expect that to continue to be the case, particularly as we start to take in the MAX 10 aircraft, 20% more seats, 20% more fuel efficient from next year. So good cost control in the business. Some of that was down to having the extra aircraft. You recall, we were left short last summer, and so with better productivity as a result of having all those aircraft in there equally grew by 6%. So we were spreading the cost over more passengers. So it might tick up slightly into the second half, we're only growing by 2%, but expect very strong cost control on a full year basis. Ancillary solid grew pretty much in line with traffic. So EUR 24 per passenger delivered in the quarter, and the buyback, as Michael said, progressing very well. Thanks, Michael.

Thanks, Neil. Just before we open up to Q&A, I want to touch on a couple of sort of more recent news events, which I want to touch on. The [ Tessalon ] aircraft, where we had the fan blade issue and depressurization event last -- or Friday, 2 days ago. we welcome the NTSB is now in charge of the investigation. They have released the aircraft to us yesterday. So we're now engaged in repairing the -- replacing the engine and repairing the skin of the aircraft. That was a dramatic event, particularly for passengers on board. Depressurization is always a frightening event, particularly when all the [ maths ] come down. However, it took place in the climb of the aircraft, all passengers and cabin crew were belted in at the time. So some of the more salacious reports that somebody -- one passenger was halfway out the window, out the window, head out the window, nobody without any window. They were all betted in. One passenger did suffer minor injuries. One pregnant lady was taken to a hospital. They both have been released. And we are actively supporting the NTSB investigation into what happened in that aircraft. Initial indications suggest that may look foreign object damage to the engine on takeoff but we don't have that [indiscernible]. I can't say that definitively. There will be a draft report, it should be in about 28 days and then more detailed report. The U.S. NTSB has done a couple of these before the 2 of them took place in Southwest. And we think they're the best people to investigate and report on the issue. The aircraft was 18 years old, it has nothing to do with aging aircraft. The engine had been fully serviced and overhaul, I think within the last 2 years, so there's nothing to do with either age of aircraft or engines. We welcome in the last week, the Irish government has finally 18 months after the program for government has passed the legislation enabling the Minister of Transport to lift the Dublin Airport cap. We're not -- we welcome that. It is badly needed, given that the capital is EUR 32 million in traffic at Dublin Airport this year is heading for EUR 37 million. We now call on the minister to actually lift the -- abolish the cap. We do not want to raise the EUR 40 million or EUR 42 million and have to go back to all this nonsense again. Abolish the cap. There is a physical limit on traffic at Dublin Airport. Two runways gives you capacity for about 60 million passengers. That should be what the cap is at 60 million passengers. And we should now get on with growing traffic at Dublin Airport, growing tourism and economic activity on and off the island of Ireland using its main gateway. We also welcome the [ IA ] provisional recommendations last week. They recommended that Dublin airport fees because from summer '27 onwards on the basis, the traffic is ahead of the DA's projections. Surprised to price their capital expenditure is way behind what we had included in the previous projections. And we believe that all airlines will commit to growing at Dublin Airport if the high fees at Dublin are reduced. We've already stepped forward with our commitment, we will add 2 million seats at Dublin next year. Some of those aircraft will be churned away from higher-cost airports like Vienna, like Berlin, but there's no doubt in our mind that Dublin and Ireland is set for a period of rapid new route and traffic growth led by Ryanair if the IEA recommendations are implemented in their final report, which we think is June, September, October. Pricing this summer is softer than we had hoped for. We had hoped that the closed-in bookings would dramatically recover. Closing bookings remain strong, but they're not sufficient to make up for the amount of price discounting we've done through -- we've had to do in the first half of the year. So we think pricing will continue to be soft. If I will guide you, I'd be moving to low to mid-single-digit decline, certainly through in the second quarter. We don't see any significant falloff. But the resumption of hostilities in the Middle East don't help the situation. Clearly, oil prices have taken off again. But it also creates a consumer hesitancy, that nervousness about people traveling and booking. We think the rest of Q2 would be strong. But the second half of the year, we'll need more discounting, although we expect a lot of capacity to be taken out of the system, the European system in the second half of this year, particularly by our competitors who are losing money hand over faced are [ copiously ] losing money and can't compete with us at these low prices. But nevertheless, it would be what it would be. The one little bit of upside, I would give you on second half pricing is both halves of Easter will fall into March. Easter is very early next year. So we'll have almost all of Easter in March. And so Easter will come into this year's which should be positive for pricing in the second half of the year. And lastly, it wouldn't be a quarterly set of results without some more auto useless regulation out of the European Union, the European Parliament, the European Union last week are considering amendments to the ETS legislation, which will desire extend the damaging on discriminatory ETF to places like Morocco, Turkey and Greece, but not to the middle -- sorry, Morocco, Turkey and Albania which currently are exempt. Of course, they don't have the [indiscernible] to -- it extended out to American, Asian and other carriers landing and taking off in Europe, who still account for the majority of Europe's CO2 emissions. The win wage [indiscernible] auto discrimination of Europeans is to abolish ETS or at least move it into line with [ CORSIA], but no -- that would be -- that would improve the competitiveness of European aviation and the European economy and useless pondered in couldn't come up with anything that would actually improve the competitors of European -- the European economy other than giving speeches about it. And there's also a mis-sell by the European Parliament. They are introducing new legislation, again, which makes European airlines less competitive. In order to eliminate the -- or to bring into -- they're family seating and family pricing. They now want -- or sorry, not family seating -- carry on [ bikes]. So you've had the [indiscernible] in the European apartment running around, trying to assert the right of fasteners to carry to pre carry on bikes despite that they don't buy the minor equivalent that they don't -- there isn't enough space to onboard the aircraft for them. The solution of these geniuses is that we'll now change the advertising. So that airlines in Europe in about the next 12 to 18 months, will now have to advertise a price that includes the 2 free carry-on bags. Despite the fact that more than 50% of our passengers don't pay and don't want to bring carry-on bags. But Europe's airlines will now have to advertise a higher fare than the lowest available airfares. And more than 50% of passengers we know will opt out of those higher aircraft by opting out of the second or the free carry on bag. So we have yet more [ bull sheet ] uses regulation coming out of Europe. Instead of making Europe more competitive. They now have required airlines to advertise fares that are higher than the lowest available fares in the system. And we will be extending ETS instead of abolishing it or bringing it into line with the [indiscernible]. The parliament or over selling this as everybody would be entitled to bring 2 free carry-on bags on board, you won't. Airlines for advertising payers will have to advertise fares that include the second or the second carry-on bag. But we believe continue to be that more than well still opt out of the pre-second carry on because they want the lowest airfares, which is we will no longer be allowed to advertise because those geniuses in the European parliament would prefer that we advertise higher fares than our availability in the system. Welcome to Europe, where things never get more competitive. They just get further more regulated and more bullish regulation getting in the way of actually offering people the lowest available airfares. This is a solution to a problem that doesn't exist more than 50%. 99% of passengers wants the lowest airfare. And there's been no complaints for ambassadors who want to pay for -- if they wish to bring a second carry-on bag, they're happy to pay for it. But that wouldn't stop cloud in the European Parliament from inventing a regulation. Anyway, that's my quarterly rant over. We'll now move on to the Q&A session. And as everybody says, we have already said limited to 2 questions that we sit to this as quickly as possible. Back to the moderator, please for the Q&A.

[Operator Instructions]. Our first question today comes from Jaime Rowbotham from Deutsche Bank.

Michael, 2 for me. So just coming back on the unit revenues for the September quarter, when I read that you've seen an uptick involved and less price stimulation, I thought the guide that some affairs might be nudging up you've seen the need to downgrade it from broadly flat to modestly down. Can you just explain the apparent disconnect there? What's changed exactly? It seems like better trends, but inferior guidance? And then on the unit costs in the June quarter, maybe for Neil, obviously, fuel is what it is. Airport and handling and staff look very well controlled. Maintenance is up -- that's partly the nonrepeat of the supply compensation. But I wanted to ask about ownership. It's up about 15% on a per passenger basis. Are there any material one-offs in the DNA that you'd care to pull out. I thought there was a comment about increased [ NG ] maintenance and a provision for midlife LEAP engine shop visits.

Okay. Thanks, Jamie. I think about the revenues at last, the Neil [indiscernible]. Couple of things on the revenue side. Yes, look, we have been saying all -- from the start of the year, we started before the war kicked off in Iran at the end of February, pricing into the summer looked like it was going to be up mid-single digits. Pricing in Q1 was always going to be slightly down, partly because of the first half of Easter moving out. But prices weakened once the war in Iran started in February, March. Nothing significant, but we've had to open up or keep stimulating forward bookings. Close-in bookings and the booking pattern is moving later. The people are making up their mind to travel slightly later and then pay slightly higher fares. But it's not sufficient to make up the discounting we've had to do at -- the discounting we do well than that. We go into every month typically with about between 75% or 80% of the seats sold on the first day of the month. Therefore, we have only 20% of the seats left to sell during the month. When we came out -- when we had this the 60-day lease fire about a month ago, we did notice and out that part of that is also moving into the summer schedule. We did notice a little bit stronger on the close-in bookings. The pricing is a little bit better on the close-in bookings, but it's not sufficient to make up for the high -- or the volume of discounting we've done well in advance. We did say at the end of the full year results in May. We were hopeful that Q2 would be flattish. It's now moving down low to mid-single digits I would personally think it's moving it closer to mid-single digits to low single digits. I would -- if it's going to be weak, it's going to be weak. We're now well into the peak period of July and August. And I think it is trending weaker rather than stronger. The ceasefire has broken down. The U.S. has run, what say, 7 or 8 nights of bombing in Iran, we are where we are. I think the people -- largely the decisions on summer holidays have been made. The one other one that runs across that is the World Cup does have an influence on things as it has had before. And I think there will probably be an uptake now that it's over. People do tend to slightly postpone their [indiscernible] arrangements until those competitions are done and out of the way. But again, I don't see any recovery in Q2 pricing now. I think it is heading for down mid-single digits on last year. And if it is, it is, then we just get [indiscernible]. I would not be optimistic for the second half of the year with the -- I think pricing is going to be weak. It will need more price simulation. The only 2 things that change that there are going to be meaningful capacity costs coming out of competitors. [indiscernible], for example, last week announced significant fleet reductions that they're going to take their capacity down by 6% from the winter. You have the easyJet M&A situation going on, at the valuations that they're currently talking about there, there will have to be some meaningful I would say capacity cost in easyJet if whoever acquires those kind of valuations -- and then we are waiting to see what we'll do apart from losing money heroically. But given that neither easy yet nor ways have any are not particularly well hedged once you get into the third -- our third and fourth quarters of the year. Again, we expect meaningful capacity cutbacks. And then you have all of Easter at the end of Q4, which will give Q4 at the back end of the year, a little bit of a lift. But I would be [indiscernible] now on pricing, and we will simply revert back, there's a war going on in the world. There's a lot of uncertainty, and therefore, it's going to be price passive, load factor active, we will hit the traffic target of 4% on the year. And the pricing would be whatever the pricing will be. We are much more focused during these periods on taking out more cost the airport churn negotiations are going particularly well. We're looking forward to delivery of the MAX 10s, which now we are more optimistic about in the spring of next year, and those aircraft will give us some capacity additions in the summer '27, but on an aircraft at a 20% more season 20% less fuel. Neil, do you want to take the unit cost, please?

Jamie, I think you're happy enough with the staff and the airports and all of those costs, which performed particularly well over the first quarter, the unit cost ex fuel just up 2%. On the ownership, nothing that we didn't flag with the full year numbers. In May, we flagged at that stage that we're starting to accrue up to the utilization for the LEAP on the A200 mid-life hospital visits. And so you're seeing the start of that coming through. Equally, just given that the NGs are a bit older, the duration between [ Jack ] is more frequent. So just reflective of that. And then, of course, we have 29 additional aircraft in the fleet this summer that we didn't have at the same time last year. Do I expect it to continue at this pace for the rest of the year? No, it will slow down a bit as we go out over the balance of the year.

Our next question comes from James Hollins from BNB Paribas.

Michael, just giving you an opportunity for another rant. Didn't have much comment on the airport cues. I think you've been quite widely published in media on that. Do think there's any sign that might be okay for the rest of the summer? Is there -- are there any countries lifting or pausing the EES regulations, which might help. And I guess I'm asking, do you surmise there's some weakness around that in terms of the bookings as well? And then on Neil, just to follow Jaime's question, do you -- I mean you did less than or around about 2% ex fuel cost per passenger in Q1. You say it's upticking a little bit in H2, is around 2% to 3% a sensible number for the full year?

Thanks, James. I don't think airport [ queues ] are really that significant certainly in the second quarter. We have identified about 15 airports mainly in Portugal, Spain and some Italy where the border controller understaffed and there are significant dues. All of the European countries have an out [indiscernible] to send the EES requirements until October, which is a more sensible time to implement them. The European mis-designed this system. It should have been done online. When you're pricing all this online, only the Europeans would invent ship like this where you need border yards doing one thing or typing into systems and airports coming into the summer period. it's another European screw up, but is it going to stop people traveling through the peak summer? No, it isn't. And then will the [indiscernible] wants to get out into the third and fourth quarter? Yes, they will. But the EES, if they really want to control this system should be moved online. The airlines have all the [ passport ] details. We have all that information. And it should be something that not beyond the wit of man or mankind. But again, it's just another example of where Europe under useless one lane can't organize a piece of in a brewery, are hopelessly inefficient. And we'll talk all day and all night about being competitive while really introducing more regulations make us less competitive. But no. So [ Air 4Q ] is our frustration. It's not something that is unheard of in Europe at this time of the year. And the alternatives meters are stuck in over for longer is going to make any difference either. Second half of the question, Neil.

Yes, James. Yes, it will tick up a bit in the second half of the year, particularly as we get towards the back end, and we're getting ready for the summer of 2028. We didn't give a guide and I said at the May numbers, it should be margin below mid-single digits. If you want to be prudent in your numbers, probably 3, 4 is a better guide than to trade. It won't be above mid-single digits.

Our next question comes from Alex Irving from Bernstein.

Two for me, please. First one is on winter capacity. How do you see that evolving for the sector and how do you see the probability that they get a meaningful capacity reduction at competitors? Second one, I want to come back on easyJet, where you talked about the likelihood of capacity cuts. If there were any parts of the easyJet that were to become available for sale? Would there be any elements, say, slots or an Airbus sub fleet that might be of interest to Ryanair?

Okay. I think it's an opportunity. I ask Eddie Wilson, Ryanair [ Doc ] CEO. Eddie, do you want to give us an overview on winter capacity and likely competitor [indiscernible]?

Yes. I mean, you're looking at the moment there of -- if you look at the market that it will just be winter capacity would be about 5%. We don't think that's realistic. I think that's likely to be pared back significantly. Ryanair, we will be growing by around 2% this winter. And some of that has been driven by the fact we'll have -- we'll have 2 aircraft, just a few timing that will be will be in maintenance. We'll have 2 less aircraft actually this winter. So it's -- but we do expect to see our competitors pull back that we can't see any way that the market is going to grow by 5%. We will continue how we allocate capacity during the winter as we've had in previous years as we have pared back capacity in the shoulders in November and in late January and then sort of micro manage the capacity growth in close to Christmas and the October bank holiday.

Yes. So I mean we are flexing our capacity expanded this winter. I mean, some of that is because 20% of our fuel is unhedged anyway, but we are still going to deliver 4% traffic growth for the full year. Just to touch on the easyJet valuation is a fairly -- I think they -- the Board and management have done a good job with the valuations that they're currently on offer. But if [indiscernible] money comes in and pay that kind of money for easyJet, I think it's inevitable that they will want to do something to monetize some of the fleet or the order book or they certainly want to get, they'll have to be getting airfares up at their [ Fortress ] airports. If they're going to get any kind of [ BC ] or return on currently, the market cap is about EUR 5.5 billion. with will continue ways will just blow their brains out this winter. They don't have any few significant fuel hedging in place. They have expanded capacity far too much this summer. Some of that is driven by the only way you can keep the policy scheme of float is to keep taking aircraft and then doing sale and leasebacks and recognizing that through the P&L, the full year results, they reported a profit of EUR 1 million, but with EUR 630 million or EUR 640 million of sale leaseback profit, supplier compensation and ForEx gains. And you can think of the underlying business, therefore, lost EUR 640 million, the full year when oil prices were $70 a barrel, got less than when oil is up at $130 or $140 a barrel. So we think it is inevitable. [ airBaltic ] are floundering around in Eastern Europe, may or may not survive. We think the government will keep the elections coming up in last year in October, November. I think they were out this morning saying that they're talking to a number of investors. We do think [ Air Baltic ] will probably be acquired by [ Lufthansa ] that already own 10% of it. But the consolidation process will play itself out. And I think we have to look today on the quarter numbers. The immediate short-term outlook is weak, pricing is weak. We see that as an opportunity to take out unit costs and to materially widen the unit gap between us and competitors on unit costs -- but over the medium term, our growth and our market share gains are accelerating, and that growth will take place on aircraft that will be materially more profitable for us. What it would be [indiscernible] bits of easyJet came up for sale? No, it would be the simple answer. If you take the various bids easy to get aircraft orders, no, their Airbus they wouldn't be particularly cheap either, so it wouldn't be attractive to us. easyJet holidays came up for sale? No. We're not believers in that holiday model. But really, the holiday model is just stuck on to easiest fortress basis. What else is there? I ultimately believe if easyJet is bought by -- kind of by [ VC ] entity, the only way they were financed over time will be to sell off the order books monetize the fleet, there'll be more sale on leasebacks. And then in time, I believe the easyJet business will be sold off to legacy carriers in Europe. Certainly [ Air France KLM ] would be very interested in the easyJet based operations in Paris, [ Skip ] and Switzerland. And I think the [ Gatwick ] operation will be of great interest to the likes of [ IAG ] or [ Jet2 ] or somebody else. I think if those get done, it will kick off another round of I think the M&A will bring people like Jet2 and with more clearly interview for the M&A businesses and ultimately, will speed up the inevitable consolidation of European airlines into to 4 large carriers, [ Los Hansa ] family, the [ BA family AirFrame ] family and Ryanair and we intend to grow organically, not by M&A.

Our next question comes from Savanthi Syth from Raymond James.

Two questions. Maybe on the EU passenger [indiscernible] rice update, you mentioned. Just curious if there are any technology changes that you kind of need to make to be able to show maybe both fares on your web page. And just if you expect any kind of demand impact from having to show the higher fare. And then on the EU ETS changes, just curious if it was to be in place this year, how much more of a step up would you see versus the 300 million you were expecting?

Okay. On the passenger rights, I mean, like at the moment, the way the legislation is framed, there's nothing we could do about it. The airlines now have to advertise a fair that includes 2 carry-on bags. Even though that's a fare that will apply to less than 50% of passengers booking onboard our flights. Passengers 99.9% will still get on -- go on our website, what's the cheapest airfare they'll see -- we will put lots of banners up on those airfares. So we'll advertise a fair that has 2 free check-in bags. But click here and you can take EUR 60 off your fare by opting out of the checked-in bag. The idea that those morons in the EU parliament would have Europe's airlines advertising, not advertising or lowest ovarial airfares is just the kind of stupidity that you get in Europe. But that is what the regulation says. Of course, it's being missold by idiot parliamentarians are out there. You're all allowed to bring 2 [indiscernible] on board a plane now. Two free [indiscernible] do not fit on board the plane and certainly not a 737 or A320 and never mind the turbo [ props ] around Europe. So it's just, again, more in regulation that makes Europe less competitive. And as an example of what makes European air travel less competitive. [indiscernible] is right up there. We are the only economic block in the world where we are penalizing our own citizens with these ridiculous environmental taxes. The Americans don't do it, the Asians don't do it. The [indiscernible], don't do it. The Africans don't do it. Latin Americas don't do it, but the Europeans do. And while you see founders wandering around the world, giving speeches about making Europe more competitive by the drag report continues to gather just 2 years after its publication, with not one recommendation implemented. The only thing they managed to do now is to consider -- they don't like the idea that be Turkey or Morocco and neighboring countries don't charge ETS. So they'll extend to Albania and Morocco. I suspect [ Eletrobras ] extended to Turkey, particularly with NATO. So even this mightn't get off the ground. Like the really way to fix both of this, the stupidity of only taxing the European. If you're not going to extend those taxes to the Americans and to build -- and by the way, I have no difficulty with -- we should extend it to them. If you want to -- if you're really concerned about the climate change and flying, everybody who lands and takes off in Europe should pay their fair share. But of course, the European designer system that only the Europeans pay an unfair share and the Americans, the Gulf and the Asian pay noting at all, we exempt them. But if you're going to exempt them, then you should also extend the Europeans. We believe the better way is to move everybody onto [ CORSIA]. [indiscernible] is about 85% cheaper than and then at least you would be reducing the cost of air travel for Europe citizens, for families going on holidays in Europe, and you have a more level playing field in Europe. But that would confuse the European Commission who would be too busy given speeches about competitiveness while doing absolutely -- in fact, they go the opposite way and make Europe less competitive with these bulls*** changes on now what airlines can advertise at their lowest fares and the bulls*** extension of ETFs to neighboring countries as well. They've drawn a line well in 5,000 square [indiscernible] -- 1,000 kilometers from Frankfurt which conveniently excludes Asia, America, everywhere [indiscernible], Turkey, Albania, Morocco and maybe Egypt as well. So congratulations. Another complete f*** up by the European Union when Mr. [indiscernible] is promising competitiveness, all we get is more idiot regulation.

Our next question comes from Harry Gowers from JPMorgan.

First question, maybe you could just give us a little bit of an update on the CLAs with the unions, how to think about modeling that on the staff cost line. And was there already some impact from that in the Q1 or it doesn't really hit the P&L staff costs yet? And then second question, just coming back on those baggage rules coming into place from the EU and the carry on, which Michael, you covered quite eloquently already. But just from your perspective, do you expect actually any financial impact on Ryanair from that, whether it's on the revenue line or more kind of operational drag from trying to sort the bags out.

Okay. I'm going to ask Eddie maybe give you update on the CLA and then Tracey McCann will give the impact of the baggage rules.

Yes. Yes, on the CLA negotiations, we're almost through the summer now and the largest markets like Italy, for example, was completed earlier this year, both for pilots and cabin crew and subsequently, the other -- there's a number of other jurisdictions where their deals expired in April. So two of those were completed with -- in Romania and also in Denmark, and they extended both the pilots and cabin crew. And there are 2 then that are still in negotiations, but are reasonably well advanced, one on the pilot side and one on the unions are one on the cabin crew side, one of those currently under ballot at the moment. So -- and there are other -- the vast majority of the CLAs will mature next April, April '27, but there's already a number of unions that are looking at filling out as to whether they could potentially go early, and we would be minded to engage in negotiations on that. So it's gone -- we -- you can never say never in terms of industrial action. But I mean, like we're almost into August and we're still in negotiations for the last 2. And as I said, the cabin crew one has got that one. I don't want to comment on the individual when has gone to pallet and the other one is still on the pilot side is still involved in negotiations. And so we will -- so the cost of bills have actually come through. And earlier this year as well, we would have done the Spanish cabin crew as well, but that was from a previous round as well. So I think there's a lot of realism out there as well at the moment, like there are pretty much no opportunities in places like the Middle East. Mind you, they are a small number in Riyadh where they don't actually have aircraft. So that's particularly attractive for us. Well, people who want to be paid and don't fly. And so -- but there is -- when you see the M&A activity that's going on in places like easyJet as well and what's likely to emerge this winter. There's probably more of a focus on people really valuing what they have here in terms of promotional opportunities and also the -- sort of the security of employment on a well-capitalized airline and people know exactly what's happened in terms of deliveries that are coming over the next number of years.

Okay. Thanks, Eddie. Tracey, we think the new baggage rules, how will it impact revenues?

So we pretty much think it's going to be revenue news, what we've already seen in Italy and the [indiscernible], revenue neutral for us. And just to add, probably on Eddie, on the staff costs, as Neil said earlier, we will see some of the CLAs coming through later in the year. What's already been done is in the costs. And furthermore, as we do the CLA for the remainder of the year, we will see some staff cost increase.

I should say, that we are -- some of the discussions, there has been some delays in some of those [indiscernible] with us looking for [indiscernible] the first of April, we will back take nothing. Our principle is always, you do the deal, whenever you do the deal, we'll implement it, but you're not getting backdating. We closed the accounts for the first quarter that date. Just on the baggage rule, I think it will change probably the way we advertise. We probably won't do as much price advertising. There's not much point in having a -- what would now be our kind of EUR 29 seat sale if thanks to the idiots in the European parliament, we now have to include the second check-in bag. Our EUR 29 seat sale would now become an EUR 89 seat sale, which doesn't sound particularly cheap by in European terms. So I think you'll see us doing much more advertising, not focusing on price, but ending other ways to deliver value. And the website will -- all the website displays will show this mad pricing with the second carry-on bag. But with big banners, you can opt out of EUR 60 of this fare and you can say you -- feel free to opt out. Actually, we think more and more people opt out of it. But the same numbers are more will opt out where they think they can save EUR 60. And therefore, we think there are no impact whatsoever. There will be some disappointment among consumers where, in some cases, they've been promised by parent areas are some of the more misguided consumer journalists that, oh, you're going to [indiscernible] and allow to bring 2 free bags on board, you're not because they won't fit. There is an interesting what happened actually when the plane is now more than half full. Do we still advertise price -- the answer is probably no because if the first 50% of people had booked the fare that has included the last 50% people couldn't get on that plan with the -- bringing a free second carry on that because there isn't room for them. But detail or factual detail that has never bothered parliament when they're reviewing [ EU261 ]. It's always here just [indiscernible] of new bulls*** regulation that passengers don't need and not interested in, but we put up the advertising cost of airtime around Europe. Congratulations to the European parliament. Another f***** up regulation, making Europe less competitive instead of more. Juliusz, do you want to add to that, how many insightful [indiscernible] of our frames and the colleagues in Europe in the parliament commission?

It's hard to top this. But I think that advertising to prices is going to become the norm in the industry. So I think as we go through the booking process and you see your flight I think you'll be shown 2 prices: one with the bank, the other one without the bank and then when the airline sales of the space in the overhead lockers on a particular flight, it's going to have to be the lowest fare count to be advertised. So there will be no impact at [indiscernible].

Our next question comes from Stephen Furlong from Davy.

Michael, maybe it's [indiscernible] just the day that's in it, but just comments about Boeing and [ Airbus ] talking about looking by 2030 to fund the new Jet program. Just -- I know you talked about the MAX 10, just general comments about that? Or -- and second thing then, just while I'm talking about the supply chain, maybe just talk about the engine shops and where we're at on that.

Okay. Touching renew jet program, look, it's all nonsense, but that's what they talk a lot of nonsense get talked as rubbish get to [indiscernible]. Boeing and Airbus have -- basically, they're in the forte of delivering the A3, the 2321neos, Boeing haven't even certified the MAX 7 and the MAX 10. These are dramatic technological revolutions in air travel. I mean these are aircraft that carry 20% more seats than born 20% less fuel. So from a climate environmental operating efficiency, everything there, these are brilliant aircraft. These are the aircraft that are going to fund the next 20 years of air travel. There will not be a need for new jet program for probably another -- I think probably the end of the 2040s you might be [indiscernible] 2050. Boeing and Airbus need to actually monetize these -- they put a huge amount of R&D into these. Boeing's balance sheet has suffered from the years of the MAX grounding et cetera, et cetera. They need to rebuild their balance sheet, both Boeing and Airbus. The technology now, I think, is what we will have for the next 15 or 20 years. And the challenge is going to be the engine, not the airframe. So all these [indiscernible] about hydrogen aircraft and electric [ booking ] propulsion systems and all that. He's just airshow rubbish. It will not be there in my lifetime, and I expect to live well beyond 2050. But I think what we should be very happy with is that the next generation of aircraft, the Airbus -- the Airbus neo and the Boeing MAXs will, I think, make to surviving our consolidated airlines that are still standing in the early 2030, it's very profitable for the next 15 or 20 years. And the last thing we need is Boeing and Airbus blowing their brains out, developing new engine, new aircraft, new jet programs, make money for the next 15 to 20 years. Repair your balance sheet, improve the quality of production, certainly invested and improve the engine technology because as an industry, we do need to decarbonize. But we don't have any alternative to jet kerosene. So -- but let's have more engines that carry more propulsion systems will enable us to carry more [indiscernible] while burning less carbon. Engines are going to be a real challenge or certain engine maintenance engine cost going to be a real challenge for the next 5 or 10 years. So GE producing bumper results again over the weekend, margins rising into the mid-20% in Q1, about 2.5 billion of net profit, net profit. Engines are also going to be a real area of competitive advantage or disadvantage in the airline industry. Those airlines like Ryanair, who will in the next 2 years, have our own in-house MROs will have a significant advantage over the rapidly escalating cost of third-party engine maintenance and third-party engine spares and parts. And again, it's one of the reasons why we don't need a new engine, new aircraft, our -- new jet programs. Engine -- cost of engine maintenance and engine overall is escalating rapidly. There is a worldwide shortage of capacity in that sector, partly to do with the [ Brand & Whitney ] repairs, but just because the -- both the manufacturers are not willing to spool up MRO capacity to meet demand, they want to increase prices of that MRO capacity. We're very happy with where we are. We are making significant progress on our 2 engine MRO shops. We've put in place a supply contract with [ CF ] who we are essentially partnering with on our 2 MROs, they want us to set up these 2 MROs. They know we won't compete with them. We're not going to do third-party engine maintenance for anybody else. But we will have a material cost advantage by doing our agent maintenance in-house in the same way that we've had a material constant advantage by doing all our airframes in-house for the last 10 or 15 years, and that will continue. So I realize it is [ farmer ] this week. I realize everybody will be talking a lot s**** about new propulsion systems [indiscernible] until somebody gets a [indiscernible] travel and you start beaming people around the world beaming people instead of flying them. I think we're dealing with 737 MAX at A3 or Airbus neo for the next 10 to 15 years. And these are going to have -- be transformative certainly of Ryanair's P&L and our balance sheet. Next question, please.

Our next question comes from Jarrod Castle from UBS.

Michael, Neil, you've hedged 15% of full year '28 now. So I gather, it's not a stop process anymore for '28? Or is it still a little bit of a start-stop depending what fuel is doing? If you could give any color in terms of maybe the '28 view on hedging. And then another potentially contentious topic. But Michael, have you changed your views on Wi-Fi on board and styling given another low-cost airline was -- has decided to put it on board and I guess, the way they've looked at things from an economic perspective.

Jarrod, we could be here for a very long time agreeing or discussing whether [indiscernible] a low-cost airline. There aren't new low-cost airlines in Europe, there's only Ryanair. Never that I'll come on to that fuel. Look, fuel prices are going to be very volatile for the next, I think, right up to the November midterms. We are going to -- my view is we'll dip in and out -- we thought when it got down risk got down to $85 a barrel. It's a sensible place to start. We hoped we would see it drift further down below $80 a barrel. But obviously, to no great surprise, the ceasefire broke down and forward rates into FY '28 this morning are above about $92 a barrel. So I think would expect us to be opportunistic, dip in and out. I don't expect in FY '28, we'll be able to get to $67 a barrel, which where we are this year, but we'll be opportunistic. I'm going to ask Tom Fowler, just to give you a Director of fuel and sustainability, give you some his view on that. And then just WiFi on board, Jarrod, again, we believe WiFi on board will be a significant benefit for consumers, but only when it's free. And we are -- the current technology militates against it being free you have to get but there's a 1% or 2% fuel drag. It comes as no surprise to us that someone like [indiscernible] would be offering free Wi-Fi on board. It is just the loss making -- right way, and part of the deal is they've given away all the revenue to the supplier of the WiFi. So it's just another stupid PR kind of stunt to them, but people in -- drowning people going down on the f****** Titanic were still playing violin as well. I wouldn't -- we would not be rushing to copy anything with [indiscernible]. In fact, we probably do exactly the opposite. We do think starting system is very good. I also think the Vodafone system, there are a number of very good systems out there. But I would wait until the technology they can fit the areas either in the nose cone, the baggage hold or the forward galley or the rear galley or something, where there is the dual penalty, then I think we will be honest -- and we will be keeping the revenue that will -- or the revenue opportunity will arise from WiFi. And there will be revenue opportunities even when it's free -- but would we be copying some of our competitors who can't shoot walks, trade and [indiscernible], no. Thomas, fuel gives a view on your general outlook and --

Yes. Look, [indiscernible] molecule like I think we'll be more opportunistic in the hedge and [indiscernible] will go in and we think the product made sense like when we see talk to ceasefire, I think it is going to be volatile over the next few months. They are going to be a dealer, they're not going to be a deal, and we just will be ready to go in and do the hedge as we see as we did in the last few weeks by doing 15% of each quarter for FY '28. So I think that's the way we're going to manage it for the next couple of months that we see some normality in the oil market. It's just a very volatile market at the moment.

Okay. [indiscernible], do you want to add anything on that?

No. Probably the only other thing is to say we have hedged some of the OpEx for it to cover ourselves as well. So we have about 18% of FY '28 OpEx hedged as well at [ 120 ].

Our next question comes from Muneeba Kayani from Bank of America.

Yes. I wanted to ask firstly around jet fuel supply, I think Neil was on TV saying that there's no shortage, but given the reescalation in the conflict, how are you thinking around jet fuel supply and any learnings from the last couple of months here on that? And then just wanted to go back on your comments earlier, Michael, around bookings. Could you give us a sense of what proportion of August and September is booked right now to understand the visibility on your guidance of this modest decline year-on-year on fairs for the second quarter? And into the second half, why are you expecting pricing to decline and price stimulation if airlines start cutting capacity wouldn't that be good from a pricing perspective?

Thanks, Muneeba. I'm going to hand over the first section to Tom Fowler and then I'll deal with the bookings. Tom, Jet fuel supply, do we think there's any issues?

No. Look, we haven't seen any issues today. I think as Neil what I said this morning, like we have good visibility now out into the end of August in most locations and in some of our countries out to the end of the year. And I think that [indiscernible] situation, okay, we escalated for supply starts to fall off towards the end of September. Our demand that follow towards the end of September to the winter program. So would be hopeful to see reserves fill back up providing, it doesn't escalate any further in the Middle East. But at the moment, we don't see any issues maybe coming our way in most patients are usual pockets of stuff we see that has an impact anywhere.

And if you remember, I mean, in the previous conference call, remember, the vast majority of Europe's jet fuel doesn't come through the Gulf. That supplies Asian -- the Asian market, all of Europe's jet fuel is coming from the Americas, West Africa, Norway and even Russian imports as well. So see no disruption on supplies. Bookings, look, August today, we're at about 75% already -- or 75% of our final number is already in the system. September, we're running about 40%. I expect fares will continue to decline, but there will be upside. That's because we haven't yet seen what competitors are going to take out of the system in the second half of the year. if spot oil remains up at around $130 a barrel, they're going to be taking out significantly more. So I think it is unrealistic not to expect at this point in time, if everybody maintains the capacity they're maintaining, and we will be growing our capacity by 2% in the second half of the year, I think pricing will fall. With the one caveat that we have Easter comes into Q4, which we give and Q4 prior year comps are weak. So that can give the kicker there anyway. But I think there could well be meaningful upgrades on that kind of pricing outlook, depending on how much capacity is taken out of the system. Depending on an [indiscernible] with their fail going into this winter, there would clearly be very significant alternative and we give you that [indiscernible], for example, are already talking now about a 6% capacity reduction. Some of that is long-haul, some of it is short-haul going into the winter. So it's too early to give you any definitive outlook, [indiscernible] for winter pricing, except I think we should expect it to be down low to mid-single digits with the prospect as capacity comes out if oil prices remain higher for longer, that pricing will move back towards flat or maybe even up a little bit, certainly and get a boost from Easter in Q4. But there's too much uncertainty over capacity. Next question.