Wizz Air Holdings Plc (WIZZ) Earnings Call Transcript & Summary

Good morning, and welcome to the Wizz Air Q1 Results Call. [Operator Instructions] Please note this call is being live streamed or webcast for a wider audience and will be recorded. I would now like to hand over to Jozsef Varadi, Chief Executive Officer, to open the presentation. Please go ahead.

Good morning, everyone. Thank you for joining this presentation. So we are reporting the first quarter of fiscal '27, the April-June period. If I were going to title this quarter, I would say this is all about observing cost pressure and high growth. And I think we've done actually a pretty good job going through this period. We believe that what we are reporting is pretty much what we have said, what we have told you. So there shouldn't be any surprise. As far as we are concerned, this is totally in line with guidance we have provided to you previously. But let me pick a few highlights on the quarter. Well, first of all, capacity growth. This is a high-growth period. You recall, we told you a good year ago when we renegotiated the Airbus delivery agreement that this is the last period, the first half of fiscal '27, when we are still getting the originally scheduled aircraft deliveries. After that, this is all going to be moderated down to around 10% to 12% growth. This agreement is in place. So this is kind of last period in the first half, you are seeing fleet growth more delivering the 20% growth rate as opposed to the 10% growth rate. On top of that, we are -- and I think that's a good development for the company, we are tremendously increasing sector productivity as a result of our strategic decision to enter domestic markets, especially in Italy and later on, we will do that in Spain, too. That gives us a lot better platform, especially in terms of economic efficiency, the same asset delivering more seats to the market at lower cost at the end of the day. So you are seeing that coming through. So while ASK capacity is 15% up, seat capacity is more like 25% up. Obviously, this is a transition. It's not always going to be a deviation like this. But for so long as we are ramping up domestic production, you're going to see this kind of a distortion. But I think this is a very good thing for the company in terms of long-term economic efficiency. Then you look at load factor, load factor is flat. So you can certainly argue that we have been able to deliver this business for 25% growth at load factor neutral. So we have not been jeopardizing our load factor production. Of course, you get some penalty when you are creating that degree of new capacity through prematurity. So we have this 8% deficiency on fares effectively. Now if you put that in context, you look at the market in Europe, I mean, the market is suggesting that intra-European traffic is down probably 3% to 5%. So the 8% should be measured against that. But we are delivering 5, 6x higher growth than what the rest of the market is achieving. And I think that's a very good revenue resilience that we are seeing over here. We have been much focused on the cost side of the business. We think we have a very clear path to cost leadership in the industry in Europe. And as we previously elaborated on, we believe that a couple of years down the line, we are going to become the cost leader. And that cost leadership is essentially established us on 4 key pillars. One is the ungrounding of the GTF, we have made tremendous progress. A year ago, we had 41 aircraft on the ground. This time around 27. And we have a plan in place that is now pretty intact, and we believe it's going to get delivered by the end of calendar '27 when the entire GTF grounded fleet will be ungrounded. Secondly, we are in the process of returning the CEO fleet. That's a major change. Obviously, it comes with some cost penalty at the time of returning the fleet, putting the aircraft back into a retail condition. But once it is done, we will clearly and fully benefit from the economic efficiencies the unit cost advantages of the neo aircraft. And in the meantime, this is not only renewal of the aircraft, but also the upgauging of the aircraft. So -- and especially in a higher fuel price environment, we are seeing the benefit of fuel burn by being converted into that fleet type. So that is happening, and it will be done majorly in the next 2 years or so. Obviously, with all of that, we are ramping utilization back up to standards. We have made significant progress, but we got interfered by the war in Iran. We had to pull capacity out last minute, and we were unable to reallocate the capacity overnight. Obviously, that takes some time to allow lead time for sales. So we got a detrimental impact on that. But structurally speaking, utilization is improving in the company. And I think you're going to see some of it in Q2 and the rest of the financial year. Now we are back into growth, and that gives us leverage for lowering our airport costs. We have made significant progress on that. Airport cost is coming down. You may not see that in the numbers because at the same time, as we are putting navigation, handling and airports all together, monopoly infrastructure charges are up. So navigation charges are up, and they offset the good work and progress we have made on airports. Nevertheless, we are in a position now to leverage growth for lowering airport costs. Operational efficiency remains very strong in the company. We are at the top of the list of European airlines completing schedules. We actually fly what we sell, and we sell what we fly. And we are uniquely better than the rest of the industry. On-time performance has improved quite significantly. We are really in the kind of the upper pack of the airline industry in Europe. So it's a very solid operation, with a lot less disruption cost like EC261 than before, and we are clearly benefiting from that. And I also think that it kind of flows through into revenue resilience because you build a lot more confidence in the market with the customers to book this air. Cash remains very strong. Liquidity is, as we speak today, EUR 2.3 billion. So we are holding up the level very well that translates into close to 40% liquidity ratio. That's one of the strongest in the industry globally. So we are running the business with very high liquidity and with significant cash and we believe gives us an opportunity not just how to weather the storm of challenging circumstances arising from the war, spiking fuel price, et cetera, but also that gives us strategic opportunities should there be significant market opportunities arising, especially in the winter period when we're going to be seeing more capacity adjustments by other airlines. Maybe just a commentary on fuel. Hedge, we are well hedged. We continued our hedging activities during the past period, except for the very short term when fuel was hiked up. But for the interim period -- for the midterm period, we continue to place hedges both on fuel and FX. So we think we are well covered. And if this war continues to unfold for a longer period, we are well protected versus the rest of the industry. I would say that you probably have a lot of interest in what is happening in Q2. In terms of capacity, it is fairly similar to the Q1 situation with one change that by Iran war made us ground some capacity that was originally allocated to the Middle East. That capacity is entirely recycled either back into Israel, especially, or into other European markets. So we don't have grounded capacity as a result of that. So that's an improvement. And in terms of the trading environment, we are also seeing an improvement on fares. We are holding load factor. So I don't think you should be expecting any change. So we will continue to deliver the business at a flat load factor. But while we had 8% fall on fares in the Q1 period, we are only seeing low single digit in the Q2 period. So we're seeing that our resilience continues to hold. And effectively, some of the newly invested capacity matures very quickly, giving us a better room to maneuver against the market. So we are closing on the gap, notwithstanding that we are still delivering 25% seat growth in this period. And maybe with these remarks, I will just hand over to Veronika to comment on the financial performance. Thank you.

Thank you, Joe. Good morning, everybody. If we can go to the next page, please. And I would like to show and make a couple of points about our Q1 numbers, which are very much in line with what Joe has commented. I would also reiterate 3 points that have been in focus and that have been previously said. We are growing the capacity and deploying it across the key markets. And we see that supported in the numbers in the growth of the ASKs by 15% and by seating the passengers by the 25%. We also see the lower stage lines, which is as per deployment of the capacity. There is a focus on the cost and operational excellence and operational performance, which I will go through when we speak about the cost. And as said that we have delivered in Q1 the numbers as per guidance, as guided previously in terms of the capacity, in terms of the load factor, RASK, and we have delivered minus 2% of the ex-fuel cost. What I would like to point out on this slide, we are finishing the quarter with the profit after tax of negative EUR 198 million. As you can see, this is -- largely about EUR 100 million of impact of that is on the fuel cost and increase in the cost, which is impacting the whole industry. I would like to again point out that we have a hedging program in place, which is mitigating the fuel prices to a high extent. We have 82% of the Q2 fuel needs hedged, 62% of the H2 F '27, and we are already hedging into the F '28, where we have a 39% of the first half of the expected consumption covered. This is as per the hedging program, which we are implementing -- which we have implemented and we continue delivering on that. That would be on this page. If I can ask to move to the next page, please. Yes. And here, I would like to focus on some of the cost lines. You see, as I said previously, the fuel cost is up on the year-on-year basis, but we have seen the improvement of the ex-fuel costs. And I would say that this is attributed to the several factors. We can see the staff costs, which are going down, and this is in line with the crew efficiency. We are seeing improvement of the airport unit costs, which is also in line with the redeployment of the network -- of the capacity very, very efficiently. And what we see is an improvement of the other costs as well. Now when we take a look at the other costs, what I would like to point out is that the 2 factors which were quoted previously, we have a benefit of the sale and leaseback quarter 1 to quarter 1, '26 and '27. But if you can see this is basically offset by the decrease in credits and compensation. So really the improvement of the other cost and income is in delta attributed to the decrease of the disruption costs, which is in line with the improvement of the operational performance and the decrease on nonexistence of the leases. On the sale and leasebacks, what I would like to comment, we see a bigger benefit if we compare Q1 '26 and Q1 '27. On the full year basis, we expect a smaller benefit coming in this year than last year. Okay. And with that, I would turn to the next page, please. Okay. And on this slide, we can see that this quarter has resulted in the positive free cash flow combined of the use of components. On the net CapEx, what I would like to point out is that we have seen 7 aircraft and 8 engines, which were part of the SLB program this quarter as opposed to 7 aircraft only in the same period as the last year. This is what I was also commenting on the previous slide. Looking forward for the full year, we expect the about 21 aircraft and 19 engines to be under this program. So the forecast receipts will be around EUR 200 million, as I was also commenting based on the full year projection. What is important, as Joe has mentioned, we are ending the quarter with the with the EUR 2.2 billion of the cash and most recent figure is EUR 2.3 billion, which is bringing the liquidity ratio of 37%, which is one of the best in the industry and more than adequate in terms of the required liquidity levels. That would be on the nutshell on the financials. And I would like to turn to Ian to comment on the Q1 unit revenue.

Thank you very much, Veronika. Could we please go to the next slide? So in terms of the revenue performance this quarter, there was a lot that was happening in the period. I think it's important to put some of the issues on the table so you can understand the business in the medium term once these issues are resolved. We obviously have the fuel price, the maintenance cost and the depreciation costs that Veronika talked about. Those will diffuse when the fuel price comes down and the legacy fleet leaves the business. But in terms of the revenue side of things, we also have some, I would say, temporal factors that we're dealing with and dealing with it as best as we can. The last year's Q1 RASK was at EUR 4.41. And I think it's important to point out that the numbers this year are flattered by the shorter stage length. We increased -- sorry, we decreased stage length of roughly 8% year-on-year as a result of the reallocation of a lot of our capacity in March from the Middle East and Israel to our European strongholds. And we did so in very short -- in a short period of time. And that changes the shape of the network dramatically. We've never seen that dramatic of a shift in our network. Of course, we were compelled to under the circumstances. And so the numbers do enjoy a bit of flattery here from that stage length. The next impact then was the growth impact. So we're growing dramatically. We're growing 25% in ASK terms this quarter, and that growth will continue for the next few quarters. And that is what it is. I mean it's something that we have to do. It's something we knew was happening. The growth wind down -- got delayed a little bit by virtue of some of these impacts, but that too will subside. But we have to digest the growth, and we have to deploy it because the alternative of parking capacity is not acceptable because we're paying for the aircraft. And so we need to make sure that we deploy them properly. Growth has always been one of the strengths of this company. Growth equals value and growth today is value tomorrow. And so in terms of this, once we get through deploying it and deploying it sensibly, which is what we're in the process of doing, that will then allow immature capacity to convert into mature capacity. So to put it in perspective, last year, this time, we had roughly 70 to 80 routes that were less than 1-year-old. Now we have just under 300 routes that are less than 1-year-old. So 4x the number of routes that are new. Now some of them are new because of the reallocation from Middle Eastern capacity back to Europe. Some of them are new just due to organic growth. We've also embarked on some additional domestic flying in Italy and now with Spain coming online, that will, within less than a year, become more mature capacity, which means that you will see margin expansion coming from that. But there is a cost to putting that growth into the system, and that's what you see there in terms of Q1. Then you have the April impact. April was compounded by the fact that you had a shift in Easter plus you had the impact of basically full ramp-up of the 2026 Iran war. So we had a lot of uncertainty around fuel supplies. You can remember, there's a lot of consumer sentiment. There were people that were changing their travel plans. And in fact, we showed you a slide last period that talked about the change in behavior of the consumer from booking more in advance to booking last minute, waiting to see what was happening. We have seen that that trend was reversing when we did the last quarter's results and that we were going back to more normal patterns in May and June. However, we have seen now since as we get into peak summer that, that's shifting back. So June -- so July and August are seeing more late booking, and we're actually seeing some of that behavior come through our July and August numbers. So there's some encouragement here. But we still have the rest of August and September to get through for Q2. And then lastly, there's an element of market pricing having to stimulate again, driven by, I would say, competitive reaction into the region as we concentrate our capacity into our core Central Eastern European stronghold, our historical diaspora flows as well as moving into new markets where we can drive this productivity that Jozsef mentioned earlier. So what we're doing as a result of the shorter stage length is driving significantly more seats out of our assets. So we pay for the planes, whether we buy them or not. And so our ambition, my ambition is to create as many seats as possible out of those aircraft, so that we have more product to sell to give customers more choice, more options and ultimately become more of a preferred airline. We have a bunch of new initiatives that we put forward this quarter. We announced Starlink, as you know, just right before the last quarter, but then we have also added some interesting new winter options for the business that we haven't had to do before. So we've expanded our program to North Africa out of Poland, in particular. We've interested -- we've introduced some new opportunities for skiing in Northern Italy, which we encourage everyone to check out. And so ultimately, we're balancing this growth, which we still see and we will always see as an opportunity with sensibility around where we fly in the summer and where we fly in the winter. And that's how we're going to get through this period and get to that ultimate profitability perspective where you see the cost excellence coming through. In fact, the cost side, I think, is probably the easy part now because you can see the path to that. And the revenue side will come with that maturity that I talked about. So ultimately, that's how the medium term comes together. And I'll wrap up at this point and hand it back to Jozsef to talk about any final remarks and the outlook.

Thank you, Ian. Could you please move the slide? Okay. Thank you. So with regard to Q2 outlook, with regard to capacity, the period continues to be high growth. We are expecting to deliver around 20% ASK growth, higher seats as a result of stage length reduction. Load factor is expected to be flat year-on-year. RASK, as said, it's going to be slightly down on the back of this high-growth capacity. But at the same time, we are seeing quite a significant improvement to Q1. As you recall, Q1 was 8% down. We are really expecting only a couple of percentage points down here. With regard to cost for the period and H1 in total, we are expecting a slight increase on ex fuel cost. I think we are working hard to mitigate that and keep it flat. But to be on the safe side, that would be our best guidance to you today. So if I just wrap it up, I would say that you should really focus on 2 avenues here. One is the efforts of the company on the cost side of the business to get to cost leadership. I think we have a pathway. I think we've got the building blocks very clear, and we have associated actions to make sure that in the foreseeable future, next 18 to 24 months, indeed, Wizz Air becomes the cost leader of Europe. And those building blocks are around the GTF ungrounding, the CEO aircraft returns, leveraging airport cost and really ramping utilization, fleet utilization back up to previous standards. I think we are well underway, and this is what you are seeing in the improvements in ex fuel cost, which I think makes us already a positive outlier in the industry. And two, as we have been elaborating on the revenue side, this year is high capacity growth. And once we are through the year, you should be seeing a lot more moderated growth pattern coming through the business, benefiting from the negotiated act of delivery stream with Airbus, the ungrounding of GTF. So business becomes more normalized, a lot more palatable in terms of stretch to the business. But I would highlight that while you may feel a bit of a short-term pain delivering that capacity growth currently, but that is an investment into the future. And once you go through the maturity curve, you're going to see substantial benefits coming through that maturity. And we believe that we have adequate liquidity to do that to execute against that. Even beyond that, I think that we will see how the winter plays out in Europe, what happens to the industry and each of the players on the industry, but that period may represent more strategic opportunities for the company. And with that, I would turn it over to questions and answers. Thank you.

[Operator Instructions] The first question is from Harry Gowers at JPMorgan.

I've got 2 questions. First one, you talked about wanting to take advantage of market opportunities in the release. And I think that means if other airlines potentially cut back on capacity this winter. So do you know or have you done any kind of analysis on what percentage of your competitors are unhedged or what percentage of the capacity out there you're competing with is unhedged on fuel? And then the second question on a similar line, if the fuel price stays at current levels, would you still expect to deploy the same level of capacity growth this winter as compared to the summer, so sort of 25% to 30% seats growth? Or does fuel at the current level kind of change the equation in terms of deploying capacity?

Thank you. Maybe I'll start with the second question and leave the first one to Ian. So I think our baseline expectation is that fuel stays high because anything else is speculative. I mean we don't know. I mean the current reality is that there is a war dragging in Iran. It keeps wobbling. One day, it's peace; the other day, it's war. I mean God knows what's going to happen there. So we ought to assume that this is not going to get resolved anytime soon. If it gets resolved sooner, great, then we will take the benefits of that. But we are planning baseline on a prolonged war with continuous distress coming through the fuel pricing environment. And I think before you ask the question what we are going to do, I think you also need to look at the context of the industry. We have EUR 2.3 billion of liquidity that translates into close to 40% liquidity cover. I mean that stands probably the best of any airline in Europe and even globally or certainly amongst the best. You have a lot of other airlines with basically no liquidity, unhedged, on fuel, flying an old fleet of airplanes, burning fuel like hell. I mean, those airlines will get distressed in an off-peak demand environment like going into the winter period. So yes, I mean, you manage your own capacity on the one hand. But at the same time, you would also need to look at the market and see how opportunities arise from that. So I think this is to be seen. Of course, we are screening the industry. We are screening the performance of airlines. We have a pretty good understanding where the weak spots are, where the opportunities may arise. But I think you can never take it definite. We say that the entry barrier to the airline industry is high, but I think the exit barrier is probably 10x higher. Airlines tend to find money, good or bad, to continue to stay alive, to get built, either governments or private investors. So we don't know that exactly. But we think that given the scenario and a continuous distressed macro environment, that will force changes in the industry. And I think we want to be ready for the opportunities coming. As far as we are concerned, we are doing a lot of good work in terms of de-seasonalizing the business. Last year, last winter, we ground with capacity to make sure that we manage capacity adequately to demand to avoid cash negative flying. This time around, I think we try to be smarter, and we are adding capacity by bringing a set of network opportunities for the customer actually in line with their expectation where they want to fly. So that is the concept of winter sun, and I think that is very strong. And it has been gaining a lot of traction in Central and Eastern Europe, especially with the video creation, growing GDP. People have money to spend, not only in summer, but also in the winter period. Skiing is popular, and we think we can create opportunities for the network to serve the customer needs better. So we're going to be a lot more balanced seasonality-wise coming into this. And then you have this unknown at the moment, but I think that unknown will get clarified sooner or later what market opportunities we may have. So I think we are planning on operating the fleet. As we said, we fly what we sell, we sell what we fly. And I think we will be sticking to that even if it feels like a stretch at this point in time, but that will create tremendous benefits going into next year.

Yes. I think you covered that. I wouldn't read too closely into that statement, Harry. I mean we've always taken advantage of market opportunities for the company. We saw opportunities in the past when airlines had to reprioritize or repivot. That's how we entered into Romania, for example, a few years ago. There will be capacity allocation changes going into the winter, especially if the fuel price stays high. Our peer group in the low-cost space, as you well know, Harry, is hedged, but not everybody is or can. It requires a level of sophistication. It requires relationships with credit institutions. It requires cash to be able to collateralize in case you don't have the credit lines. And we also know that there's a lot of activity happening in this space in Europe. You have a transaction underway in Portugal. You know that ITA is now being absorbed into the Lufthansa Group and looking at long-haul South America. We're now the second largest airline in Italy. We see something happening tomorrow, right? We just don't know what tomorrow will bring, but we know that there will be change. And we are in a position where we have capacity to be able to take advantage of gaps. And where we operate right now, we still have 60-plus percent of our network uncontested where we have the ability to pass costs on to our -- into the fares. And as costs rise, we're going to have to do so. But what you can be sure with our cost leadership is that those increases will be lower with Wizz than anybody else. And that will create opportunity for customers to choose us based upon price. And we are in the process of delivering opportunities for customers to choose us based upon preference because we have a better aircraft. We have a newer aircraft. We have a more comfortable aircraft. It's more environmentally efficient. It's more silent. And we know that ultimately, that combination of experience as well as financial performance and operational performance is what will drive consumer preference.

The next question is from Jarrod Castle at UBS.

First question, you've obviously got very high levels of liquidity. But if you look at your net debt to EBITDA, I mean, you were making progress on that front. It's now kind of flat year-over-year. I guess the question is, what level would you get nervous? I mean is it 4.5? Is it 5? Over time, you want to get it down to 2. But just how you're thinking about that, given also seasonally, you would have got a lot of cash in at the back of the quarter. And then just coming back a little bit to kind of changes happening in terms of stage length and the adjustments of this year. But how should we think about it going forward for March '28? Is that a very much more normal year in terms of ASKs matching seats? Any color on that?

I would take the second one, and [indiscernible] the first one. So with regard to stage length, I think you should see it as a not necessarily like an overnight adjustment of the business, but you see the ramp-up of domestic operations. I mean we have reallocated a lot of long Middle Eastern capacity to shorter haul European capacity, that's not going to reverse meaningfully, maybe a little but not dramatically, and we will continue to expand domestic operations in Europe. But if you want to take kind of good planning assumption, I would say that if you assume 1,500 kilometers as the baseline for this once this capacity evolution gets consolidated. And I think in a good year from now, you will see a more consolidated platform and ASK and seat will get aligned again at around the 1,500 kilometer mark, that would be a good assumption. Obviously, there might be some variation to that, but it's not going to be that way. I mean we are deliberately descaling medium haul like Middle Eastern operation. Those are flights of thousands of kilometers. And we are deliberately scaling up domestic flying and they are a few hundreds of kilometers. So there is a rebalancing of stage. But I think -- I mean, I would plan on 1,500 fairly stable as of the next financial year, allowing some degree of variation, but not huge.

Jarrod, on the question to net debt to EBITDA, it's the same as it was Q1 '26. This is at the more -- slightly more elevated level than what it was at the last year. There are 2 factors. One is the new aircraft and the financing, which is relevant to that. We expect the net debt to EBITDA leverage to stay slightly elevated for this year and then going down from next year also with the redeliveries and also with the growth of the EBITDA.

Yes. If I might just quickly jump in on that point to clarify. So the net -- so the gross debt number, Jarrod and everyone is going to go up as the business grows. It's just simple mathematics based upon more aircraft coming, the total size of the fleet growing and the way that those aircraft get financed end up creating more debt. What didn't happen in this period is the EBITDA growth. But as we explained, we had a war where we were more exposed than others do, and we had a fuel price spike, which created a 21% increase in our unit costs on that. So I think it's important to point out that this debt does not have a sort of bullet maturity where we are facing a wall that we are going to run into. This debt matches the lease terms of our aircraft. We have a lot of recent aircraft lease growth happening, which means that we have 12 years to pay it off, the maturity profile of this on average, 10, 12 years in terms of our leases. So while the debt coming out of the balance sheet is instantaneous, the repayment profile is over 12 years. And so we do need to be able to recognize that there are going to be periods where things happen like a shock again, but that this business is resilient and will ride through this much like it has. So that number that you asked for is at what point do we get nervous. I mean, sure, we're monitoring and we're nervous about every financial metric of this company. But that number is going to be changing. It's going to be going down, not up. And so we're confident that as we continue to see this cost excellence and we get these routes matured and this capacity deployed and that we're able to build the presence and market share that we want in terms of profitable market share, that will then ultimately drive the EBITDA number up and that ratio down.

The next question is from Ruairi Cullinane at RBC Capital Markets.

First question is on other income in the full year, given you may have some visibility there. So should we expect other income to moderate from EUR 107 million in the first quarter? Would a range of EUR 300 million to EUR 400 million be a reasonable expectation? And then you show on Slide 8 the depreciation costs will fall in full year '28 due to CEO retirements. Should we expect that to continue into full year '29?

So I'll take it in the reverse order, if I may. The depreciation, yes, expected to fall down. And as we mentioned previously, the depreciation and in fact, also the maintenance line are elevated and are impacted by the redelivery of the CEO aircraft. What we have seen is that last year, we had 16 redeliveries. We expect 24 this year, and that has an impact on the depreciation and also on the maintenance for 2 factors is that the aircraft before it is returned, there is an increased maintenance, which is needed to be done. And also in the last stages of the -- basically of the aircraft before being redelivered, the depreciation is elevated. So these are the factors which are impacting the depreciation line this year as we will see the CEOs exiting the fleet. We expect a decline on the depreciation line. And on the other income, so what we expect, as mentioned on the sale and leaseback, there is an increased benefit in the Q1 '27, which is compared to Q1 '26 that -- on the full year basis, that will be lower than the last year because of the profile of the sale and leasebacks, especially in the fourth quarter where it was higher last year than what we expect this year. So it was around EUR 260 million last year. We expect that to be around EUR 200 million this year.

The next question is from Dudley Shanley at Goodbody.

Two questions, if I may. The first one is for Ian. It's just a clarification on the comments you made about the booking curve. I thought you said it was elongating previously and had shifted back a little bit, but maybe I picked it up the wrong way. So if we could just get a bit more detail on that. Then thinking longer term, you've mentioned investing in future growth today, sector productivity is increasing, utilization is increasing. As we look forward beyond the GTF issues, do you think you have a structurally stronger business now?

Let me take the second one first. So definitely, I mean, we have done quite a lot of analysis internally to understand how the business has been affected over the last few years and what drove those refractions. I mean the biggest -- single biggest issue is the GTF grounding. If you really think about the level of disruption to the business and to what extent it has been affected the financial performance on the cost side, on the revenue side, on the balance sheet, it's been hugely, hugely disruptive. And in 18 months from now, we are out of it. I think that one on its own merit will kind of reset the business back to where we used to be. And let's not forget that next year, next financial year, we're going to be hitting the 100 million mark on passenger numbers. I mean that will make us a very large scale business in Europe. This is pretty close to the current size of easyJet. This is a lot bigger than any of the legacy carriers. We are already bigger with that regard. So you have like the major disruption to the business eliminated by that time at a different scale versus when that happened and that started affecting the business. I think that will make us structurally a lot better airline than what we are today. And on top of that, I think you should also kind of appreciate what is happening in the fleet renewal side of the equation. So we are converting fully into Neo. We are upgauging pretty much fully into A321s with a few exceptions, but 95% of the fleet is going to be A321s. I mean those are huge structural benefits arising from the fleet side. And I think you can expect us and you should expect us to be able to ramp up the assets what we are dealing with, airplanes as well as labor to an optimum level of productivity, fleet utilization, group productivity, et cetera. So absolutely, we're going to be a lot better business structurally speaking. And yes, I mean, -- of course, at the moment, the revenue line is hit by the high level of capacity growth. But again, and this can be mathematically proven what you invest today is going to benefit you tomorrow through maturity, and you're going to see that maturity ramp-up happening very quickly going into the next financial years, which should also ramp up the revenue line. So you have like this elevation of your spending relative to the industry on the cost line to, we call it, a pathway to cost leadership. But at the same time, you will benefit from the metric of the revenues that you are investing into today. So yes, definitely.

And then Dudley, so on that booking curve comment, I was referring to the chart from last quarter, where we saw this shift postwar onset to short-term behavior. And then our numbers were indicating that it was shifting back following April. So May and June were showing more normal behavior similar to what we saw in January and February. What I said is that actually that has slipped again. And then going into July and now into August, we're seeing moderate short-term behavior. And we saw that with a bit of a pickup at the end of July, and we're seeing that that activity in August is still continuing. So I guess the way to read into that is that there's some late summer activity building for people doing their travels.

There are no further questions via the webinar. We will now move to written Q&A. The first 2 questions are from Conor Dwyer at Citi. The first one is, should we be modeling no grounding by end of FY '28? And if not, when? And the second question is no need to answer if already answered by point this is reached. CASK ex minus 2% in 1Q '27, H1 guides to be up [indiscernible]. Am I right this implies a run rate for Q2 back to plus [indiscernible]?

Yes. I think let me kick it off with the grounding question. So the current plan is to on ground the entire GTF forward fleet by the end of calendar year 2027. Now you also have to know that there is some yet minor degree of distress coming through the V2500 powered fleet. So the market is running dry on spare engines. So -- and of course, Pratt & Whitney is congested on maintenance work and shop capacity and parts availability with that regard. So -- but being the largest customer of Pratt & Whitney effectively, we're saying that the plans we are having in place to be fully on grounded on engines by the end of calendar '27 has been tracked accordingly to plan. So I don't think that the risk is huge to that plan, but you cannot guarantee it until you are through the cycle. And as of then, I think you should be pretty much expecting no grounding. There should be no reason to ground unless there is another event happening in the industry that -- or around the industry or geopolitically that would force you to ground. But I think that would come as temporary as opposed to structure. So structural grounding, we should be out in 18 months from now.