Wizz Air Holdings Plc ($WIZZ)

[Audio Gap] presentation followed by Q&A, taking questions from the room first and then anyone who's on the line, aiming to wrap up at 10:30. And with that, I will hand over to József Váradi.

All right. Good morning, everyone. Thank you for coming. So this is the report of fiscal '26 -- are we good now? Okay. Thank you. So just a few numbers to start with. Pretax profit is up to EUR 27 million. Profit after tax is positive breakeven. This is in line with the post-close statement. We issued EBITDA is up 16% year-on-year. So we've seen that underlying terms, the business is moving in the right direction. We carried 70 million passengers. That's a 10% uplift on this metric. We are over EUR 2 billion of cash and net debt is unchanged, but leverage has come down from 4.4% to 3.7%, again, I think that showing that we are having the right direction here. [indiscernible] ratio is one of the highest in the industry globally with 36%, and that's an improvement year-on-year. Maybe a few highlights in terms of what is underpinning the business as we speak. We see we have a good growth momentum. You report that we had to hold growth due to the engine endings around 2 years ago. We have started recovering from the situation -- you see that the number of aircraft on the ground due to the engine inspections has been coming down on 42 last year, this year. And we're also seeing that the market will be favorable for [indiscernible], especially going into the second half because we know that under the circumstances, the market will become somebody distressed the industry will come on its back [ foot ]. And what happened during the COVID recovery, actually plays a role in is today, we cover the size of what we were pre-COVID and we see to a large extent, point you to go to some market acquisition ex what we undertook at that time, and we had possibly be seeing similar opportunities here. As said, the GTF is still around. This is an issue, which we keep carrying on, but we have kind of 18 months to go with that regard. We have been on plan to deliver the uplifting targets. And for 6 to 8 months, the plan has not changed. So we have growing confidence that this is going to get completed anticipated before. So we are still expecting that by the end of 2027, Canada '27, all aircraft, we believe will be flying. Of course, there is going to be more technical backing to the GTF operation in the forms of spare engines, but there won't be a cut on the underground. We are much focused on managing capacity and growth in the remainder of the summer period as well as looking into the winter period, where we are not in a position to guide given all the uncertainties and we are falling in line with the industry. But when you look at growth, I think you should appreciate one nuance that ASK growth is quite different from [indiscernible] growth. And this is the result of long stage length capacity having been removed that's Middle East and we allocated in Europe, which is a lot shorter stage lens, producing more sectors. Now the good news is that when you are growing through sector productivity, effectively, you are delivering that growth at around 30% lower cost, simply because you don't have to absorb fixed cost to that growth. So it may feel a high number, but a chunk of it is actually coming in at very low cost, a lot lower cost than otherwise. And we are at around 25, 25-plus percent growth to be delivered -- our seats. So if you kind of break it down to ASK, you recall that we were guiding actually capacity of the first half of fiscal '27 to be around 20%. It is 53% in Q1, and it's going to be around 12%, 20% in Q2. The lower number for Q1 is the grounding of the Middle Eastern capacity. But in Q2, order grounding has been uplifted and reallocated predominantly to euro. And we have started in [indiscernible] 30% of the Tel Aviv capacity as variable but most of the Middle Eastern capacity is now flying in Europe. Let me just reiterate the medium-term expectations from the business we have been discussing this, but I would like to reconfirm this. We are looking at 10% to 5% medium-term growth. You recall, we said that this year, we will still be high growth, but we've affected the aircraft delivery program with [indiscernible] to get this moderating growth rate to kick in as of the next financial year. We are improving network densification. That's relevant because especially if you look at where we are growing in Europe, we create more sectors. We create more dense products that attracts more business passengers, high-yielding passengers, that also improves the revenue line, not just the network into it and the operational metrics. And we are coming to the end of the [indiscernible] CEO, cycle. We still have roughly around 30% of the fleet to be recycled. That will get completed over the course of the next 2 years. So in a way, if you really think about this in 18 to 24 months, you will have the stars realigned again, having the whole fleet flying and having basically the whole fleet converted into new technology aircraft, A321, creating significant economic efficiency. So next slide, please. Let me just recap where we are on the strategic initiatives. So we were discussing this around some of the underperforming parts of the business. We closed Abu Dhabi last year. We closed Vienna earlier this year and we are rigorously reviewing our performance in light of profitability as well as in light of cost of doing business, especially the high cost airport environment. So you may expect some more to come. Be that in that regard, but we are clearly addressing these structural issues in the business. Airbus order book, we have communicated that, that it is already set for accommodating the medium-term growth expectations that will kick in as of next financial year. We have shifted the delivery lines on the existing order book. We expect to have EUR 335 back by the end of fiscal '30. So in both 3 years from now, that will deliver 7% fleet growth, around 11% [indiscernible] growth. Now the difference, of course, is that we are lifting the audit attribute with GTFs that creates growth capacity for the business. And I think that is in line with our previous communications, how we are seeing the next few years to play out. [ SLR ] is over, to put it very simple. We are not [indiscernible] we're pursuing an [ X ] softly the next network, effectively the 11 extra aircraft into the AC21 operations. It is a little higher unit cost as a result of the weight of the era, but still lower production than the A320. So this is not like a bad, it is a good aircraft. And it creates, as we said, operational contingencies for the business. So should we have airport closures and retooling and stuff like that, you don't have to land for fewer stock, but you can continue with the next slide because that gives you more range. But as such, [indiscernible] operation is over. So we are not talking about [indiscernible] any longer. We are not talking about an axle work with an [indiscernible] or a specific operating model for [indiscernible]. Then you look at the network realignment, quite a year behind us and kind of in front of us, we have made announcements of a number of new bases. A [ basis ] of -- new Italian basis were ready to the system like [ Torino ] and Palermo. And we continue the densification of the network, delivering more secular productivity on the one hand, but we're also creating the opportunity for tapping into higher yield demand as discussed before. The [indiscernible] related on parking of aircraft, we are down from 42 or somewhere to 30 this year due to the [ Polymetal ] issue, recall that all of a sudden started affecting the business 2 years ago and that another 18 months to go to go [indiscernible] cycle and alter very relevant. And with regard to free technology. As you know, we are doing 2 things in parallel. We are renewing the fleet from CEO to [indiscernible]. On the one hand, we are gauging the fleet from [ 2021 ]. Those 2 initiatives go hand-in-hand with each other and it was 3 years from now, the fleet we get converted into A321neo effectively. And with that, I will hand it over to Veronika.

Good morning, everybody. For those I did not have a pleasure to meet her. I'm Veronika Spanarova, I'm CFO of Wizz. I have been 4 months into the job, which in the dynamic world of aviation seems much longer than that, but it's great. I'm also glad that Ian is here again was in my seat for the past couple of years, has been promoted to the role of Chief Commercial Officer, but has been great help and support for me in my first weeks and months of the role. So what I will do is I would like to summarize the F '26 financials, and then Ian will talk about our commercial initiatives, and then we'll be happy to take the questions. So in the nutshell, what do we see in the F '26? I think that there are 2 messages that we would like to point out. We continue execution on our strategy, which is the focus on the core markets in the Central and Eastern Europe. And I also believe that you do not see any surprises in the numbers. This is what we have communicated before. A couple of things to point out on this page, solid revenue growth year-on-year by 8%. This is a combination. We see the ASK increase of 8.5% and the seat capacity growth of 10.5%. And this is what József was alluding to as well, the difference between these 2 capacities show the impact of the higher gauge aircraft and also 1.8% reduction in our average stage length. And again, that goes back to the deliberate network refocus to densify the routes in our core Central and Eastern European markets. RASK and the load factor were broadly flat year-on-year. This is in line with the outlook and with the guidance, which we gave before and EBITDA margin increased by 1.6 points to 23.2%. With this, this is highlighting the cash generative ability of the business. If we go to the next page, please. I'll be talking -- let me walk you through the main messages of the costs. Again, no surprises here, and we are being consistent with what we have communicated before. A couple of highlights, which I would like to make. Total fuel costs, you see a decrease of the fuel costs and notably a decrease in the fuel unit cost by almost 10% and it has 2 factors in that. We are talking comparison F '25, F '26. The market prices declined in that period, but also, I would say, very importantly, the increasing efficiency of our fleet and the resulting lower cash fuel burn as we are renewing our fleet, NEO aircraft is now accounting of 77% of our fleet. You see an increase in the maintenance costs. Here, I would like to point out that this is largely due to the fact of the EUR 83 million accrual reversal, which we have seen in F '25. So that's increasing the year-on-year comparison. If we look away from this from this accrual reversal, the maintenance cost would be about 3.2% up. Depreciation was also higher in the line with the expectation, and this is reflecting the redeliveries of the [ CO ] aircraft and the resulting capitalized costs. On the other costs, what I would like to mention 2 things. We see the higher sale and leaseback year-over-year. We saw in F '26, 33 aircraft and 18 engine sales versus 16 and 10, respectively, in the F '25 and that is helping to offset the fall in the compensation cost as our aircraft are gradually ungrounded. What is positive? What I would like to point out here is the decrease in the disruption costs which is reflecting very well on our operating performance. And the next slide, please. So with regards to F '26, we generated almost EUR 1 billion of the free cash flow. This is 22 -- this is a 22% increase year-on-year. And this is even after the repayment of the bond of EUR 500 million, which we did in January 2026. Net CapEx benefited from the adjusted [ PDP ] schedule and the timing of the sales and leaseback. You see the improved leverage with the net debt to EBITDA going through from 4.4%. Final point, which I would like to make is around our hedging position, which, as you know, we have the hedging policy and program that we are executing on. At this point, as of May 29, our first half F '27 jet fuel needs were hedged 84% with a cap of $826 per metric ton and the winter hedge position for the second half of the year was -- spent at 71%, with a cap $819. Also, apart from hedging the jet fuel costs, we are also hedging the FX exposure, which is now -- loan book is now hedged up to the 83% of the U.S. dollar [ list ] exposure. So this would be the main highlights. And now I will pass over to Ian. Thank you.

Thank you, Veronika, and welcome. Good morning. On the next slide, we've spent a lot of time hearing people in the industry talk about what the change in consumer behavior has been following the Iran conflict. And people have said, people are waiting and seeing and booking later. And I thought that, that was rather anecdotal. So I wanted to put some data just to see exactly what was happening and also to track that behavior going forward. So you can see that in January, this is a shift in RASK generation. This is not changes in RASK in absolute terms, RASK. This is when the RASK is generated through the booking curve. So in January, for example, you can see that in the dark blue bars, we were seeing almost 1% of people were booking earlier in the 3 to 8 week period and fewer people, less than 3 -- the decline of 3.3% of people booking in the last 2 weeks. So people were booking earlier in January and February, which makes sense because people were coming out of winter and starting to think about what's happening in spring. And because of the changes and the deliberate modifications of the network that we've been making over the year -- over the last couple of years. We're seeing a bigger segment of leisure, changing demographics of people find with Wizz, those people were booking sooner, okay? So you saw that this was happening in January, February, then of course, at the end of February, early March, the Iran conflict happened, and you saw that there was a flip in the numbers. So now people are taking a much more pronounced wait-and-see approach, a lot of instability in March and April as well. Now there's other things happening as well during this period, such as Easter and other holidays, but you can see in general, that there was a trend towards people booking later, but then May came along. And June is now 11 days into the month. And then we're actually seeing June look similar to May, where people are going back to this planning phase. They're no longer adjusting to the new cycle, regaining confidence and looking forward to planning. So that means that for us, we can no longer -- no longer need to worry about the firefighting, which is kind of what's happening as people's behaviors change. We're trying to predict and anticipate what's happening. We can go back to a more deliberate and more measured and more strategic long-term postures. And so that's a bit of backdrop that I wanted you to understand. And so if we believe -- which we think that notwithstanding the yesterday's news and today's news and tomorrow's news, we think that people are taking a more planned approach, then that gives us more confidence to be able to look forward and to think about how we're going to deploy this capacity that we have into this half into the next half. Next slide, please. And so in terms of commercial initiatives and where we're putting our focus, we spend a lot of time talking about our network design and our grow better strategy. So we pulled out of the Middle East, as József mentioned. We're looking at where we can focus on airports with the right cost base to comply with our ULCC structure. We think about productivity, in particular, how we can think about our overall network design and the KPIs that we're looking to unlock with the network. So we're seeing that -- we're seeing more aircraft on part than we anticipated last December. We're seeing more focus on [ Centuries ] and Europe, more focused on markets that give us the profile that we want. And so we've been very active in Italy, in particular, deploying a lot of capacity there because it fits the model, we can be focusing on shorter stage lengths, generating more seats, focusing on better cost management and we'll look at other markets in Europe that have that characteristic. So we're looking -- we're hunting for those markets, and we can deploy our capacity not so much into exotic exploratory markets but into markets where we can drive efficiency and start to think more about our customer segmentation. So who is our customer? How are they being served, if at all? How can we serve them better. And those are the sorts of questions we're asking so that we recognize the sheer of is nowadays with 266, 267 aircraft in the fleet with what we've accomplished and what we've become and how we can become less of a weekend alternative, but more of a daily choice. And so the mere design really is the core of the cost management and the cost delivery. And I think you'll see that once we get through some of the challenges with retiring the CEO aircraft and the maintenance costs that come along with that and the higher depreciation that those aircraft carry you'll start to see some of the improvements come through, as József mentioned, into next year. But reliability is also something that we should be acknowledging. So you can see that I pointed out what happened in May, but I also pointed out what happened in this year's fiscal year-to-date. We're no longer low on the rankings. We're at the top. We're doing very well, and that's a combination of sheer discipline when it comes to our operations team. So I want to recognize them for all the hard work that they put in there and all the lessons that we've learned over the last couple of years. That will help us on costs. You can see that come through on the cost line F '25 to F '26 in the form of lower disruption costs. While we're doing better in terms of keeping those costs down, what we're seeing is that there's a hangover, there's claims from prior years that are still affecting current years. And so once we eliminate the poor performance and stop generating new claim opportunities and we -- and the legacy claims finally processed, then we should see that number be better. So reliability drives cost. On top of the fact that the network design will help drive the cost because the network design gives us more opportunities to have standby crew, resources when it comes to maintenance, resources when it comes to aircraft, all that stuff we'll work together to deliver this lower cost base. But also, I think that we need to recognize is that reliability also drives the revenue line. People will pay for performance. People will pay for schedule quality for convenience for having more options. And that's really going back to the network, thinking about how I can grow better, have more density, provide more seats, more options and become the first airline that people think of when it comes to flying out Wizz. And then lastly, we pioneered something together with Starlink with [indiscernible], in the form of what's called StarLink managed. It's a ULCC solution. And that is very exciting. We just announced it on Monday. And I'll pause because I'm sure people are going to want to ask lots of questions around that. And so I think it's important to point out that what it is, is it's a product design for ULCC principles, right? So under the traditional model that you're familiar with, Starlink is typically offered by [ Alliance ] for free. That will be the case. There will be a cost. Starlink will be managing the sales we think StarLink are experts in managing the sales of Internet connectivity, not Wizz. We will be managing the ancillary opportunities that come with that. The -- any notion of OpEx cost that you have in your -- in whatever you've heard from other airlines, I think you should assume that those are overstated. Again, focus on the ULCC nature of this. And when it comes to CapEx, I mean, I'll stress Wizz was part of the design of this product. So we designed it in a way to work for us. And then when it comes to the fuel burn, I think people who have put forward estimates of fuel burn have -- they were wrong in their analysis. As simple as that. We've looked at it our way. We've collaborated with SpaceX. You can see on their website with the fuel burn estimate is, and you should rely on those numbers.

So let me take advantage of the last -- next slide, please. Okay. So this is what we are seeing for the first half of the financial year until the end of September. Capacity-wise, as we have commented on, we have with 15% ASK uplift translating to 25% more seats. And this is due to the grounding of a backdrop and more European and flights by this time in respect to the recent situation. There's a bit of a catch-up in Q2, given that the Mideastern capacity I guess we stated there. So ASKs are up 20% and a 25-plus percent see those is to be expected. At that point, 30% of Tel Aviv capacity is back and the rest would be flown in Europe. With regard to RASK, please take into account the Easter effect in Q1. So that's a significant distortion to the other numbers. So we are expecting Q1 to be mid-single digit towards higher down. I mean we see was actually June is going to be completed. Q2 RASK is expected to be flat or flattish performance load factors are expected to stick to last year's performance across the whole of the period. With regard to the cost, as Veronika said, we have most of our fuel requirements hedged for this period. And we are expecting cost ex fuel to be flat, maybe a little of what we are trying to do as best as we can to have to make sure that we contain that exposure. And I think that closes the presentation. So now back to you for questions.

It's Harry Gowers from JPMorgan. Maybe if I open with a Starlink question. And if you could just talk about the economics around that. I don't know what the easiest way to talk about it is, but maybe sort of cost per seat or cost per aircraft and then how you think about monetizing it or how much to charge for using it? And then second question, your kind of capacity deceleration normalization, I think, has been pushed out by 6 to 8 months, as said on the outlook slide from winter into next summer. So the first how much capacity growth might we expect at the moment in winter year-over-year? And then why has it shifted? And under what sort of inventor fuel price might you consider having to withdraw that growth?

Maybe by Ian is thinking about the [ space ] issue. Let me comment on capacity for winter. So I would say that there are at least 3 factors affecting winter capacity. One factor is that we are expanding onshore sectors, quite a lot. This is a matter of design, and that flows through the winter period. So January, notwithstanding that whatever ASK growth, we would be delivering that would translate into more seats, so to see growth is inflated over ASK growth just as a matter of designing the network, especially focused on short not beaten the domestic, but also a lot other short route. So that's one factor. Second factor is that now we have the confidence how we're going to be uplifting the grounded aircraft and that will continue to happen through the winter period as well. So we have a very [indiscernible] plan to make it as much as possible because we also have to manage our own maintenance capacity and crews in order to be able to take the [indiscernible] for back. I mean you have to put the low maintenance and you have to grow the then it is gradually kind of spread across the remaining 18 months. So that this is pre program, and that is affecting the winter capacity. And the searching, which is a bit of a flow over from last year from last winter period, we cut capacity loss in -- we've had that given the uncertainty around some of the market issues, we will be more prudent to cut capacity to avoid cash negative flying. That capacity is now coming back. And we're seeing that we are able to turn the network as such, that we are able to uplift our financial performance on that basis. So these are the 3 sources. So winter will be a high-growth environment. But you think also need to look at the flip side of the equation. As the flip side of the acquisition is that this year 2026 is going to be a year of 2 halves. You see very different market behavior in the first half versus what you're going to be seeing going into the fourth summer period. As summer, you will see airlines sports to cut capacity and increase that. And depending on where you are at with regard to your exposure to cost or exposure to fuel pain you were able to mitigate all of those with cash hedges and technology, you will come out differently here. We're seeing that the second half of the financial year, we have represent significant strategic opportunities for the business. We expect market vacuums. We expect airline failures. We expect significant to rise for this very similar to what happened in the COVID period in 2020, 2021. So actually, those 2 things are getting the line. So yes, we have high capacity growth, but I think it's going to go against kind of high level of opportunities for the business given the distaste in the industry. Don't forget that from a U.S. standpoint, the bigger the crisis is, the better we are.

Okay. So in terms of Starlink, like you can appreciate the terms are confidential, but it is so exciting and so unique. I think it's first important to recognize where the world is going. People whether you like it or not, maybe if you're my age, you like it less, but you're going to be connected. We are [indiscernible] connected society. So recognizing that this is where the world is going is important. But also I think from a differentiation perspective, having Internet no one else does is also something for attracting the new generation of travelers, those who are going to have a much more higher propensity to travel. SpaceX really wanted to work with Wizz because of our seat production capabilities because of our high utilization because of our ubiquity, our potential to put them in front of passengers. And obviously, SpaceX has other ambitions in just doing in-flight WiFi. And so that's really appealing and creating this win-win environment that we could tailor the solution for. I'm not going to really talk about cost per seat. But what I will be able to point out is that from a position of strength, what we do well is fly is create ancillaries ancillary opportunities. And what's basic as well is provide the fastest Internet available in the sky. And so we want to make sure that we went with the best and that we were future-proofing this business for the next decade or so. And so we have a model where, like I mentioned, SpaceX is the vendor. SpaceX manages the portal. SpaceX deals with the sessions. But the model is designed to make sure that the cost for the passenger is affordable, just like our affairs. And so while it may not be free, like you now have seen what's happened in hotels and airports, it is designed to be affordable and is designed to put as many people as possible in front of the Internet. What that allows for us is a low-cost, ultra-low-cost solution so that we don't have the traditional operational expenses. We do not have the traditional CapEx profiles and hardware hurdles that come with the installation. What we are able to do is create ancillaries around that. And so I think everyone is now pretty accustomed to paying by phone, tapping by phone and accessing payments through that platform, bringing that onto the plane, allows us to do all sorts of things on the plane, whether it is processing credit cards in the sky that we otherwise couldn't do and exposing ourselves to fraud. Now we're no longer exposed because we can determine whether the customer has a balance in real time. That allows us to lift the caps on in-flight sales, which means that we can sell more and reward our crews more in terms of what they're doing, we and loan promotions on the -- in the sky, both on our own products and our own flights, but also with partners, whether it comes to our hotel bill options on our app or whether it comes to destination marketing, the innovation transfers, excursion, things like that. We can do all sorts of new retail concepts. We can also access a lot of the inventory that is spoiled, the moment that the door has closed traditionally. So if there's empty seats and you don't fancy your seat mate, you can automatically buy that seat while in flight and move. And so that was a revenue stream that we couldn't -- couldn't access in the past. So there's all sorts of applications that we're in the process of designing. Even we have -- one of the things we have right now is in flight order now on our app, you can do that now without WiFi. You can eat the galley cart and get your product, but you still have to pay with the POS now we integrate the payments into that, and it creates a lot more efficiency for the onboard experience as well as well as for the customer. So that's where we're going with that is the ancillaries. SpaceX wanted us to find a model that allowed us to maximize our ancillaries so that ultimately, we're happy with the product, they're happy with the product and installations should start across the fleet in the beginning of 2027 and roll out through that year, and it will ultimately affect the whole fleet as soon as we can get the installation schedule turn down. So I hope that answers your questions. It's very much designed for ULCC. We very much designed it with our input to make sure it works for us. It does not -- the free WiFi that other airlines, I think, is more than 30 now that have. We're the only one that has this Starlink managed approach. And we're thrilled to be able to announce this.

I would just add one with ASK, but we are a fairly large airline for purposes of SpaceX. So we're going to be closing our competition here simply because all the installation were occupied the capacity of SpaceX. So anyone else's ability to try to match or anything like that we be limited at least for a certain period of time. So we've seen that we are building a competitive advantage here. And this is kind of the same what we did with was we ordered back in those days in Dubai, we blocked over 10% of Airbus' capacity which creates difficulties for all others to try to come in and match. And you see that what happened in case of Airbus that we got our delivery stream and then when they were talking about other airlines, they were really pushing back to delivery stream quite a bit. And asking something similar you might be expecting here as well. I'm pretty sure that this model will not stay unique to us forever because I think it's a very good model. It's very efficient from our standpoint. So some others will be smart enough to recognize that, that is something but they are able to treat well with it because simply, we're just going to be blocking them out as a result of our scale and implementation.

Alex Irving from Bernstein. Two from me, please. First, I want to come back on the winter capacity plans. Just because we're less in the grounded aircraft, which is using cut capacity last year, doesn't mean the you have to fly the planes this year with a higher fuel price environment. Of course, every marginal flight happens at spot fuel. The question really is what metrics are you focusing on primarily to steer of the capacity you're looking at? Is it getting cash down? Is it just cash contributing flying? Is it more of a long-term huge positioning focus? Why is the capacity growth accelerating the right move here? Second question, once upon a time, you were keen to grow more and more in London, Gatwick. So we'll see the news on [ easyJet ] in the last couple of weeks. If slots were to become available in Gatwick over the coming months or quarters, would you expect to be able to be the highest bidder for some of those? Or is Gatwick too high cost now as an operation and the current strategic focus are no longer attractive for growth of Wizz?

Yes. So maybe I'll start with the second one first. So I don't think the gap would [ list ] too high on our priorities with regard to growth in the future because 2 issues in a way. I mean one is that it's an incredibly higher would cost a bit constraints. So that limits our ability to refine the operating model and get the maximum efficiency out of the operations at Gatwick. So I think that's one look and two, now this is top with the ABD charging business by the U.K. government, which is everything that does not -- and I understand that the government wants to rate funds for other purposes, but I'm not sure that this is the best way to achieve that. But whatever it is, this is not our decision, of course, but we have to cross [indiscernible] of the decision. So with that, I don't think that Gatwick is going to be high on our priority for any purposes. And whether anything or nothing is going to happen to [indiscernible] you mentioned, I don't know, but I don't think that's going to change our appetite for Gatwick. So with regard to capacity in the second half, I think it's a very good question because you have to effectively contemplate at 2 issues. One is manage the business for profitability on the one hand, but also management business for strategic fortunes on the other hand, and those 2 things may go hand-in-hand or may go against each other. And this is something to be seen. And [indiscernible] to be sufficiently opportunistic. If you want to display that if opportunities arise, then we're going to be in a position to act on those opportunities. Remember how we got to Italy in 2020. So all of a sudden because of the COVID circumstances, the entire industry move backwards created significant panic in Italy. And that made some peers, airport is attractive to us, which these wouldn't have present in ourselves or [indiscernible] and we found that, that was a right to act on the opportunity against a very weak kind of a competitive backdrop. So we don't know how exactly the situation is going to play out this time that we have some expectations, and of course, do some corporations and planning around those sort of matters. But I think we want to be sufficient opportunistic to see what is happening and act on the basis of the factors as opposed to just intellectual contemplation. But in terms of managing the business for profit, I mean that's a very intact principle flowing through. But we are not seeing today, but I think we're going to be seeing it in a few months from now that you see more capacity discipline at industry level coming into play in the second half. You will see allies cutting capacity significantly. I think supply and demand video adjust to a new equilibrium, the new bars. And that will push fares up. And then the question is how each of the airlines are affected. We are basically well hedged flying latest technology, burning to these fuel on a unit basis, and we have significant cash on hand that we can mobilize. I think that should set us aside from most of the industry. I'm not saying that we are the only one in that position. But as investors see aside from many of the other players. And in [indiscernible], we should be able to raise is needed to cover the incremental cost but also as strategic efforts rise. So I think you have this kind of 2 levers to play with.

Jaime Rowbotham from Deutsche Bank. Two from me. Firstly, Joe, the CEO of Airbus has been saying that [ Pratt and Gil ] has been so focused on the [ panda metal ] issue and the maintenance views on GTF that they're now at risk of not producing enough new ones quickly enough to then deliver their plans for ramping up A320neo production. Is that something you're keeping an eye on? Is that something that concerns you at all when you think about the path to having 100% neo fleet? And then secondly, Veronika, I wondered if I could get a steer on maybe a couple of items. The first is sale and leaseback gains. So EUR 250 million in fiscal looks like a similar-ish number of aircraft deliveries in '27. I'm not sure where you are on the engines, but should we be expecting a headwind or a tailwind on that line item? And then finally, CapEx Joe, you just mentioned the significant cash on hand that we have, fiscal '26 was an unusual year with a EUR 780 million credit on the net CapEx line. Should we be expecting something similar in fiscal '27 on CapEx given the various moving parts?

So maybe I'll start it off with [indiscernible] vis-a-vis Airbus. To be told [indiscernible] us, our interest is to get the existing fleet fixed before we embark on a new aircraft because that would just incur capital cost, additional capital cost to the business by grounding existing capital investments. So that's -- I mean, if anything, we are pushing at the direction what Airbus may not like. But we do and because we think they have to fix their own issues before they move on to the next chapter online. Now prove good news is from a [ planarity ] perspective that the other guys are not doing much better either. So this is quite a problematic supply chain as we speak. But we want [indiscernible] to fix our issues in the fleet, on the ground right now before we start [indiscernible] about any other things. But frankly, by the time we get to the end of 2027, I mean, largely, our fleet, we get converted into A321neo. The conversion at that time will be grow 90-plus percent. We probably will have like a year to go to a fully fleshed [ here ] the process of renewing the fleet from [ CO ] to neo. I have to say that, personally, I'm not overly good it. We have our ever stated delivery stream with be by and large, Airbus has been delivering against that stream, and we don't expect major issues coming out in the future either. You may have a few weeks of delays here and there, but it's not major. So I don't say that this is going to jeopardize our ability to -- in that capacity as planned time actually fare like by that. But I understand [indiscernible] frustration.

Okay. A couple of points on the sale and leasebacks, which are in the other line. In this year, we expect the sale and leasebacks to be at a similar level year-on-year. We do expect the decrease of the compensation, which is in line with the ungrounding on the aircraft and the disruption cost also to performing very well in line of the last years. On the net CapEx, yes, this was EUR 780 in F '26. We expect a lower number this year due to the lower number of the aircraft deliveries, it was 39 in F '26, will be 31 this year. And as such, the extent of the [ BDP ] rebates and will be lower. So this is -- this will be a lower impact in the as we said previously, over EUR 2.1 billion of the cash position, which is a comfortable level.

It's Jarrod Castle for UBS. I'll probably limit it to one just given the time. You've got your CMD coming up in September. It doesn't sound like -- or maybe I'm wrong, but there's going to be a change in how you finance between finance leases versus other forms. But can you talk a little bit about what topics maybe you're going to cover? And especially looking forward, your -- some of your competitors, [ easyJet's ] got a PBT target packs, [ Ryanair ], obviously, 12% to 14% net income target. How do you think you stack up in, let's say, normal market by 2030? I mean, I don't know if there is a normal market for airlines. But where in terms of your ambition would you like to get to? I think somewhere around [ 5 million ] of net income you've got in the past, but yes, if you could just give any color on CMD and maybe thinking about future profitability per pax.

Maybe I'll start it off, and please be free to add. I mean just the last point you raised, I think we are looking at net income and net income for margin as a primary metric to drive. And we understand that due to worse [indiscernible] issues, we are not at a level that we would like to be, but we've seen we have the plan in place to get there. So we're going to deliver double-digit net income margin as we used to be talking about before so I don't think that has changed. So with regard to the CMD substance, I think we have a lot talk about it kind of transitioning our steps through issues we have been facing. I mean we are geopolitically affected, we are supply chain affected and we are also fleet transition affected. And I think we will not clarify how exactly those issues were about time frame-wise and economic impact on the business. I think we also have a lot to talk about markets that have been [ shipped ] surround that going into [indiscernible], we were Central East European, pretty much pure [ Centers ] European business. Coming out of COVID, we became a lot more diversified, some good decisions, some bad decisions. And if you want to put a face value, I would say that you certainly challenge the decision, but that's behind us. You certainly changed the [indiscernible] decision, but it's behind us now. There might be a few other things. You make challenges, and I think to go at how we are belong those lines. We also want to give you clarity on some of the other levers, which we think are fundamentally underpinning the U.S. You see delivery of the motor like fleet utilization like title airport cost are happening and how the market evolution is kind of underpinning those ambitions to make sure that we are back to [indiscernible] standard performance with [indiscernible]. So I think the kind of how we are going through the transitionary matters and how we are solidifying ourselves in terms of underpinning performance metrics. But at in terms of some of the market issues and some of the underpinning U.S. deliveries.

Maybe coming on the sale leaseback of [indiscernible]. I think I think that under the circumstances with all the uncertainty that's going on under volatility that we'll probably be focusing on how we can best prepare the company to take advantage of the opportunities. So Joe mentioned the fleet right? We have capacity to deploy if we need to when there's gaps that create the present themselves. We want to make sure that we have cash and we're doing things that are -- we're looking at also to ways to be able to establish the award chest to be able to go after the opportunities and they put it themselves. That, I think, is the best focus right now and also managing our leverage. You saw that our net leverage came down in the fourth quarter. And so that's something that we want to continue to strive towards, but ultimately, we need to focus on what's right for the company in the particular circumstances. And right now, under the circumstances, we think that they're putting the company in a position of being able to act and deploy especially with this growth that we have ahead of us in terms of seat capacity, it's probably going to be the focus for the CMD.

And will you give like some financial targets over the medium term? I don't know what you use for [indiscernible]?

Net profit and net profit margin. I think that's why we are focused on.

Muneeba Kayani from Bank of America. I actually wanted to go back to your leverage comment. And you're at 3.7% now, I understand your gross cash and most of the debt is lease liabilities. But how are you thinking about your balance sheet? And where do you want to get to? And how do you plan to get there? And then on winter capacity. So we've heard from other airlines as well. Everyone seems to think and someone else will cut back on capacity. How do you think this will kind of work out? And what are you hearing from the EU in terms of regulation around the slots? So will there be kind some flexibility on that front to allow airlines to get capacity?

I have to pick up the second one. So with regard to the inter capacity, yes, I mean everyone is waiting for the order to bring, but I think there is more economic determination here than that. I don't think this is just a poker game. This is more than that. And you have a lot of [indiscernible] in previous circumstances, how these things kind of work out. So what do we know? We know that situations like this will make the those are lines for first on capacity or maybe as a whole that don't have enough lucidity they are exposed to the market, so they are not hedged covered and they fly wood plans. When those airlines flying 15, 20 [indiscernible] airplanes, they are very exposed because those airplanes are [indiscernible]. They drink feel like fish and against the high fuel price environment, that's a significant exposure. So you can scan those airlines, how much money they have, how well as they are and what kind of fleet they fly us and you can create your own categories who are most exposed. And these airlines tend to be not made by [ states ]. They tend to be small and capitalized private airlines. They don't have credit ratings, they don't access to capital, et cetera, et cetera. So that's the first category value. You should be expecting some problems to arise. Then you have the state-sponsored carriers, the big guys. Those are the first one who we run to the German government or French government that you name them. and they will show hands that they need money to be built out, and they get built out. We learn during the COVID times that they get [indiscernible]. But we also learned that they are forced to make some rational decisions. So they will have to rationalize capacity. So I think you should expect that category to add somewhat rationally, notwithstanding the fact that they will be [ had ] by their government. And then you probably have proven not more than 2 airlines in Europe that we take to play that gets created as a result of that. And they will jump on these vacuums created, and they will gobble up the opportunities and we are one of them. And you look at our entire history, we step changed our positions during crisis times because there are 2 things happening in a crisis. And I think the second half of this year is going to be a crisis. Two things are happening. One is that competition as [indiscernible] to the customer downgrades from high cost logos. And this is the opportunity that gets created for an airline like us. And we want to be well positioned for that. As I said, we will have a purchase to be able to activate. But of course, I mean, kind of the way we say it internally, that when you wonder in the forest, then you bump into aggressive. You don't have outrun the [indiscernible], you have to run faster than the guy next to you. So the reason is there, but we just have to run faster than the guy. And I think we are running faster than the guy next to us.

Yes. So that ties into the question from [ Jerry ], right? Like if we do switch the financing model that will drive leverage up and then that impacts our cost of debt and also our cash availability. So at this point, look, we're trying to get the leverage down. Our ambition is to get it back to 2, so we can regain that investment-grade because that makes a lot of things easier when it comes to talking to vendors and to describing the business [indiscernible] presenting things to the market. You simply say, here's the rating please focus on that and then makes all of our lives easier, so we can focus on running the business. Why did it go down? Well, we had a very help cash generation helped to buy certain things but still a healthy cash generation and our EBITDA is going up. So we can continue to deliver on the cash generation, which we will because we a growing and there'll be opportunities there in terms of forward sales. But if we can continue to focus on the net debt number, then I think you'll see that progression and yes, there's also some complications that have delayed the speed of reaching that and how we have this next crisis to deal with. But for us, it's about making sure that we are able to take the market share, own the market share. We're #1 and #2 in all of our markets. We just took #2 in Italy. And we'll be going into markets where we can quickly try and get to that positioning and deploy, most importantly, the productivity around that. The productivity will ultimately generate profitability, efficiency and cash and that should have to leverage at the end of the day.

Dudley Shanley from Goodbody. And just one question for me. Can I just ask about hedging? I noticed now that you're hedged into FY '28 with a lot of competitors so they're staying out of the market because of the elevated fuel price. Can you just talk us through your thoughts on that?

Sure. So on the hedging, as you know, I think we shared that before. We have the hedging policy which has been in place for a couple of years into which we are -- which we stick because this is the best way how to prevent the peaks and the downturn on the market. So what we do is that we gradually increase the percentages of the hedges. And we do it consistently with the policy. We have done it before the crisis. We have been doing that and taking advantage also of the downward sloping fuel curve during the spikes of the fuel prices, and we continue on that for us. This is really a security. This is the insurance against the spikes and the movements.

[indiscernible] if you're implying the other people are staying out of it and given the fuel price, that would then suggest that someone is speculating. And that's exactly why we have a policy, right, so that we're not speculating. So yes, sorry.

It's Andrew Lobbenberg from Barclays. Can you give us a bit of color around the guidance you've given for the second quarter RASK? So how much advanced load you got on the books? And how does that compare with what you saw last year? And related to that, a really interesting slide showing the inflection of booking trends, stretching out again when you go into May and June. Can you tell us a bit about whether that is across your whole network or whether that is more weighted to Eastern Europe and you're not seeing it in Western Europe or Italy Yes. So how is that playing out?

Okay. So in terms of the guidance, we're -- you saw from the trading statement that we were building loads already. I think at that point, we said something like 2% up year-on-year when we put the early May statement out. And where we are now for Q2 is close to 4%, [ load ] factor buffer. And so now is the time, especially in the summer to make sure that we manage the yields in order to deliver the RASK. We saw for RASK at the end of the day, and so that's the approach and so...

[indiscernible]?

That's Q2. That's Q2. So yes, so that's the answer your question in terms of advanced loads. The guidance is supported by what we're seeing in Q2 at this point. And so flattish, I think, is a fair number. There is a benefit, of course, of the shorter stage that, I think, but ultimately, that's the number that we put forward for the guidance. And then the second question was?

Eastern Europe.

Right. So that profile that was for the whole network. And I don't have the breakdown across markets available for you.

But I don't think there is a fundamental difference between market geographies. So I think it'd be much the same what we are seeing. But this is not unexpected to be ones because we like the same behavior of [ Andemori-Ukraine ] brought out that when there is uncertainty out there, people become kind of reflective on the uncertainty. They are not taking decisions. They don't know how this is going to play out on their life and what reserves they need to build or mobilize, et cetera. I think they need to become comfortable with a new set of circumstances and once they reach that point, then they will [indiscernible] back to the normal. And it takes some time. It is typically 2, 3, 4 months, that kind of a period. And under significant crisis situations, you see the same thing happening. And with regard to the geographical differences. As seen this word in Iran is not specific to Central and East Europe, maybe Ukraine was more specific to Central East just because of the proximity. But in terms of impact, this war is pretty much across everyone. I mean West Europe is not any better than [indiscernible] Europe.

Fuel's not cheaper in one market than the other.

Axel from Morgan Stanley. One question from my side in terms of free cash flow generation in 2027. So if we listen to you guys sort of fair should be still into negative [ 22% ] in H1, potentially positive in H2, CASK ex fuel flat to up low single digit in H1, CapEx lower year-over-year, but still elevated. D&A is still elevated as well due to the retirement, higher fuel cost, haven't done the math, but where should we end up with the cash flow generation versus the EUR 1 billion that you guys delivered in 2026?

I mean, as you can imagine, we have been doing more sort of cash flow modeling and stress testing the cash flow modeling. So we -- we think that our cash will hold pretty much where it is at this point in time. I mean we don't really see even under the worst case scenario and any significant deterioration. I mean doesn't forget that cash is a complicated matter is operating performance, financial performance of the business. It is also the inflows of significant cash streams or the outflows of significant cash streams. It is also the onflow revenue. So it matters whether you are growing the business or not. So it's a complicated matter. But we're actually seeing that -- we have significant cash on hand and we will remain in that position going through the year. And that's why we're seeing that in order notional building a war [ chest ] is important here because we are in a position -- we are in a position to mobilize resources against market opportunities arising. So cash remains fairly flat, I would say, over the next period pretty much holding the same level where we are at right now.

I wouldn't be surprised if it's positive.

Maybe there is upside to it, but certainly not downside, I guess, versus doing motor goes downside, but we don't see that.

No more questions.

All right. Thank you. You are released.

Thank you.