Ryanair Holdings PLC
OTC:RYAOF
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Earnings Call Analysis
Q1-2024 Analysis
Ryanair Holdings PLC
Ryanair opened its Q1 results conference showcasing a notable profit of EUR 663 million, a remarkable shift compared to the prior year's Q1 profit of EUR 170 million affected by the Ukraine crisis. This surge must be understood in the context of Q1 last year; the invasion led to a collapse in March traffic and aggressive fare reductions to boost numbers. Therefore, the leap is against 'weak prior comps' or comparisons to the previous year's troubled performance. The improvement can be owed to a strong Easter, increased demand and pricing, and ancillaries inching up, all leading to an 11% growth in traffic at 50 million passengers and a substantial increase in revenue per passenger by 27%.
The airline has been on an upward trajectory by operating 119 new Boeing 737s, taking its total fleet count to 558. It also inaugurated three new bases and 190 new routes, foreseeing summer '23 prospects. These operations are backed up with firm fuel strategy, with 75% of FY'24 hedged at $89 per barrel, and 27% of FY'25 at $74, potentially saving nearly EUR 1 billion in FY'25 earnings. Net cash is sturdy at just under EUR 1 billion. Such financial and operational strategies highlight Ryanair's focus on controlled growth and risk mitigation.
Ryanair's growth is augmented by the reduced post-COVID EU airline capacity; however, they urge caution for H2. Although Q2 bookings are robust with load factors expected around 95-96% and fares moderately higher than Q1, Ryanair anticipates the need for fare stimulation come the winter. The airline's summer performance is strong, but caution stems from high consumer price inflation in Europe and the absence of American and Asian tourists come H2. Hence, there's a tempered expectation that full-year profits will be only modestly ahead of the previous year. Guidance for FY'24 remains withheld until H1 results in November, reflecting a careful approach in unpredictable times.
Ryanair's operational costs are influenced by route charges and handling fees, which will likely increase this year, in part due to late aircraft deliveries. The resilience has improved, with no flight cancellations expected in the peak months. To combat ATC delays, more standby crews are in place, sacrificing unit costs for reliability. This approach, while generating short-term expenses, secures customer reliability and long-term market strength.
Looking forward, Ryanair is excited about opportunities in Albania and Ukraine, identifying these markets as ripe for growth post-conflict. The expansion is bolstered by a firm order of 300 MAX 10 aircraft aiming for 300 million passengers by FY'34, underpinning its future market position in Europe and nearby regions. Besides, the company's balance sheet is promising, with EUR 4.84 billion in gross cash post an aggressive CapEx of EUR 1 billion, including a $250 million signing fee for the MAX 10 order. Such strategic investments depict Ryanair's confidence in its expansive vision pushed by a strong growth profile.
Ryanair's sequence of cash utilization prioritizes staff welfare, debt reduction, and CapEx before shareholder returns. Dividend issuance may occur after fulfilling obligations, ideally matching the EUR 400 million the shareholders invested during COVID-19. Any speculation on the matter is reserved until the half-year assessment in November, illustrating a methodical and sequential approach to financial management and shareholder reward.
In preparation for winter, the airline will trim mid-week capacities while maintaining robust weekend operations—30% mid-week and 70% for weekends, similar to winter '22. This strategic capacity management aims to optimize load and maintain profitability, especially considering the effect of seasonality on travel demand and thus on Ryanair's performance and growth targets.
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Okay. Good morning, ladies and gentlemen. Welcome to the Ryanair Q1 results press conference. I'm joined this morning by Neil Sorahan, the Group CFO. And we have on our ryanair.com website placed this morning the press release, the Q&A and also the full detail of the Q1 numbers. We're pleased to report a Q1 profit of EUR 663 million this morning. Primarily, that was due to a very strong Easter period. There was a second U.K. bank holiday in May and -- but primarily, it's because of a very weak prior year comparisons. The Q1 of last year was heavily distorted by the Russian invasion of Ukraine, which started in February 2022, collapsed Easter, and we had to engage in very aggressive price stimulation in Q1 of last year. So the prior year comps are -- were badly affected by Ukraine, whereas thankfully, this year, the Q1 had no such adverse effects and we've enjoyed a strong quarter.
Traffic in the quarter rose 11% to 50.4 million. Revenue per passenger was up in the quarter by 27%. At the quarter end, we had 119 Gamechangers in the fleet. The total fleet was just under 560 aircraft. We opened 3 new bases in the quarter and 190 new routes. The 3 new bases are in Belfast, Lanzarote, and Tenerife. In fuel hedging, we are 75% covered for this fiscal year to March 24 at about $89 a barrel, slightly above current spot prices. We've also increased our hedging for FY '25 to 27% at about $74 a barrel, slightly below current spot prices. At the quarter end, the balance sheet has strengthened. We had net cash of just under EUR 1 billion. However, we need EUR 750 million of that to repay bond debt in August. And both Fitch and S&P have increased our rating from BBB to BBB+. And I think the most significant development in the quarter that was the 300 Boeing MAX-10 order in May, which will allow us both to renew our fleet and launch Ryanair on a decade of growth that will take us out to about 300 million passengers by 2034.
Just to touch on a couple of other highlights. We continue to benefit from EU capacity constraints. EUROCONTROL figures recently released suggest that short-haul European market is running at about 93% of its pre-COVID capacity through the summer of 2023. The market continues to be characterized by higher oil prices, aircraft shortages, shortages that won't be resolved because of OEM delivery delays. And we're also seeing the benefit, certainly in short-haul Europe this summer of a very strong U.S. inbound traffic and the reopening of Asia.
I think during Q1, traffic has been up 11% and average fares slightly distortedly with a weak prior year comp are up about 40%. Q2, we expect traffic to be up probably about another 11%, but the fares will be notably weaker in Q2. Q2 last year was very strong. We recorded a profit of EUR 170 million in Q1. But as a result of that price stimulation, we had a very strong snap-up in Q2 where we reported a profit of EUR 1.4 billion. Because we have a much stronger prior year comp in Q2, our performance in Q2 will not be as strong as it was in Q1. We do expect fares though to continue to be above the prior year comp, but we think it could be a low double-digit figure.
The EU airlines that continue to consolidate. We're seeing ITA and TAP have already begun consolidation talks. Lufthansa is the -- it looks they literally take over ITA and who knows who will take over TAP. But within that marketplace where we have seen consolidation and capacity constraint, Ryanair's unit cost advantage is widening materially. In terms of the fleet, as I said, we had 119 aircraft at the end of the quarter. We expect that to rise to 124 aircraft at the end of July. We are now confident that we get all those aircraft by the end of July.
The Boeing delivery dates won't thankfully stretch into August. We expect to take 86 more Gamechanger aircraft over the next 2 summers, so summer '24 and summer '25. But the big news is the new Boeing, 300 Boeing MAX-10 aircraft order. These aircraft will deliver to us between 2027 and 2033. They offer us 20% more seats, 228 seats as against 189 on the NGs, but they burn about 20% less fuel, 20% less CO2 emissions and 50 -- they're 50% quieter. So not alone are they going to dramatically lower our operating costs, but there are also going to be a significantly more environmentally efficient than our existing fleet.
And we think this order, not alone sets Ryanair on a path for a decade of growth but also will materially widen our cost advantage over all other airlines. In terms of the balance sheet, briefly, as I said, we have -- we closed the quarter with just under EUR 1 billion in cash. We have been upgraded to BBB+ by both Fitches and Standard & Poor's, and the balance sheet will continue to be the strongest in the industry. In terms of outlook, we're stepping back our traffic growth slightly this morning. We're moving it back from 185 million passengers for the full year to about 183.5 million. That's essentially due to the Boeing delivery delays both this spring.
It also looks like we're going to suffer delivery delays with Boeing in the autumn of 2023. We expect to take delivery of 51 aircraft between September and April of '24. It now looks like the last of those aircraft would be delayed into May, possibly June of 2024. And we're working closely with Boeing and spirit in which to try to ensure that we don't suffer any further delivery delays. So traffic will be slightly lower than we had originally anticipated. The cost gap continues to widen between us and our competitors. Our ex-fuel cost for the rest of the year will be slightly up due to Boeing delivery delays, the full year of pay restoration or full cost of pay restoration and the start of the pay increases. And Q2 bookings are strong.
We expect to be up -- traffic up about 11%, similar to they were in Q1, but the pricing will be materially softer. In fact, we've noticed in recent weeks, close-in bookings as we get to closer to the day of travel in both June and July have been a little bit softer than they had been in Q1. And the Q2 prior year comps are much stronger than they were in Q1 next year. So we expect to see a strong summer. The biggest area we have at the moment continues to be air traffic control delays and the strikes. So far this year, we've suffered 60 days of French air traffic control strikes.
In May, we submitted a petition signed by 1.1 million of our very fed-up customers to Ursula von der Leyen and the European Commission calling on them to protect overflights. It is, to my mind, unacceptable that the French authorities continue to use their minimum service legislation to protect long-haul and local domestic flights while disproportionately canceling overflights over France. This must end. We operate in a single European marketplace. We're calling on Ursula von der Leyen and the commission to take some action to protect overflights, protect air travel at a single market for air travel across Europe. And if the French want to go on strike, which is they're right and we recognize that right, protect overflights, cancel the French domestic flights.
With that, Neil, I'm going to hand it over to you to take us through the slide presentation.
Thank you very much, Mike, and good morning, everybody. Ryanair has the lowest fares and the lowest costs of any airline in Europe. We're #1 for traffic with 183.5 million this year, a 9% increase on the prior year and just over 120% of pre-COVID capacity. We've got the industry-leading on-time performance and reliability and invested heavily in resilience this summer again. Sustainalytics have ranked us the #1 airline in Europe for ESG. And our 300 aircraft order, the MAX-10s will see us grow for the next decade to 2034. This, of course, is underpinned by a very strong balance sheet and low unit costs, which make us the long-term winner in our sector. We've got 91 bases, and we're operating our largest schedule ever this summer. We've got a platform of growth, as you can see, which will enable us to grow to 225 million passengers, thanks to the Gamechanger order by FY '26 and now sustainable growth to 300 million passengers by FY 34, thanks to the new MAX-10 order.
Our unit cost's advantage over everybody else is supreme. We came into the COVID with the lowest costs of any airline in Europe. We came out in an even stronger position and the gap between ourselves on unit cost ex-fuel is widening, and we expect this to continue to be the case for many years to come, thanks to the competitive aircraft orders and the other deals that we've put in place. On the quarter itself, we saw an 11% increase in traffic to 50.4 million passengers at a very healthy 95% load factor. Revenues were up 40% to EUR 3.65 billion. This was helped by -- as Michael said in his introduction, a very strong Easter. The extra bank holiday in the U.K. due to the Coronation and of course, weak comps in the prior year Q1 due to the invasion of Ukraine. Operating costs increased by 23%, driven by a 30% increase in fuel, the annualization of pay restoration and investments in crew resilience this summer with higher crewing ratios and impacted by the Boeing delivery delays. But we're very pleased to announce a EUR 663 million profit this morning and indeed a strong growth in our earnings per share.
On the balance sheet, the industry-leading balance sheet at this point in time, we saw a gross cash of just over EUR 4.8 billion, and that was despite the fact that we paid an EUR 850 million bond last March and with EUR 1 billion CapEx in the quarter just ended. We saw our net cash increase to just under EUR 1 billion from EUR 600 million at the end of the prior year in March. And we now have nearly all of our 737s unencumbered, and this enables to Fitch and S&P to upgrade our ratings during the quarter to BBB+, something which I think was long overdue. And with that, Michael, I'll ask you maybe to run through current developments piece.
Okay. Thanks, Neil. So for the current quarter, we see robust summer '23 demand, certainly in terms of volumes. However, Q2 fares will be more modestly ahead of the prior year Q2 comp, and the prior year 2Q comp was very strong because of the impact of Ukraine invasion on Q1. A number of challenges remain. We -- industry continues to be bedeviled by ATC strikes and woeful underperformance by European ATCs we're seeing continuously now 15% to 20% of our flights on a daily basis being delayed by ATC capacity, which is basically understaffing essentially across Europe. It is unacceptable, and the European Commission should be taking steps to improve this shambolic service. We are facing higher fuel cost this year. Consumer inflation is very -- is running at high levels around Europe and also interest rates are rising. So we're a bit concerned that they will put kind of might dent to consumer confidence or consumer spending, particularly as we move to the second half of the year, where we have almost no visibility at the moment.
That strong summer '23. We're building operational resilience. We have materially increased our crewing ratios in the expectation. This summer will be difficult and ATC would -- service will be poor. We've doubled up our ops control capacity here in Dublin and also at our center in Warsaw. So we have materially more ops capacity and crewing capacity that we need to run the summer schedule, but that will be reflected in slightly higher operating costs for the half year. FY full year traffic will be about 183.5 million, down from 185 million due to Boeing delivery delays. We are still recording some very significant market share gains across most EU markets, and we're very excited by our new market, our entry into Albania in the winter of 2023, where we will provide competition, choice and significantly lower fares than the incumbent carrier.
We're excited by the new 300 Boeing MAX-10 aircraft order that gives a path, a decade of growth out to 2034 in a market in Europe that is capacity constrained, is consolidating and where very few other airlines are able to grow. And we're very proud of the fact that last week, we published our 2023 Aviation With Purpose, sustainability report setting out or building on the very ambitious targets we have to make flying more sustainable in Ryanair between now and 2030. Touch briefly on summer '23. So we're operating at about 125% of our pre-COVID capacity, 124 Gamechangers in the fleet by the 1st of August, which will mean a significantly more efficient, fuel-efficient operations. Short-haul intra-EU capacity is running at about 93% of pre-COVID according to Eurocontrol. That's related -- translating into robust demand, strong -- also helped by strong U.S. and Asian inbound traffic flows, strong Q1 fares, Q2 up but tougher prior year Q2 comps. And we are operating as near set a record summer '23 schedule, about 3,200 daily flights and we're hitting upwards of 600,000 passengers a day.
That is reflected. These are the Eurocontrol figures showing Ryanair by far and away the fastest-growing airline in Europe. In fact, one of the very few growing airlines in Europe. We're up 25% on a much higher base of traffic, significantly stronger growth than any other airline in Europe. But challenges remain. ATC strikes. We've had 6 of them since the 1st of January. We submitted, as I said, a 1.1 million our -- customer petition signed by 1 million of our customers. We're heavily investing in improved resilience in summer 2023, but we need action from the European Commission and from Ursula von der Leyen. It's no good talking about doing something for the single market or passengers. We need action, and that action should be to reflect in European wide legislation, the same protections that the Spanish, the Italians, the Greeks already do. During ATC strikes, they protect overflights. Europe should insist that France does likely.
There are remain -- and there remain significant H2 uncertainties. ATC strikes, higher oil prices, inflation and higher interest rates. But we believe Ryanair is best positioned to thrive in this more difficult and challenging environment in the second half of the year. We set out there very strong market share gains across almost all markets where we're now #1 or #2. And the fleet growth with the benefit of the MAX-10 orders sees us embark on a decade of both fleet and traffic growth that will take us, we believe, from 183 million passengers this year to about 300 million passengers annually by 2034. Neil, do you want to take the ESG update?
I will, Mike. As I said, we're very proud of the fact that we're now launching our 2023 Aviation With Purpose sustainability report this morning. Thanks to the 300 aircraft order, we've been able to set even more ambitious targets for ourselves in relation to ESG. We've now set a target of 50 grams of CO2 per passenger kilometer by 2031, which, you'll remember, is well down on the 60 grams that we've set for 2030. We've also now set out our transition plan to 1.5 degrees climate transition, which I think is a very important initiative.
We continue to invest very heavily in low tech -- in new technology aircraft which reduce our fuel burn. We're rolling out the scimitar winglets on our NGs, which reduce fuel by 1.5%. And we're very pleased with the fact that we've now increased our partnerships in relation to sustainable aviation fuel, where we signed an MOU with Repsol in the quarter, which locks a SAF availability, our Spanish operations. So we've now got approximately 9.5% of the 12.5% target that we've set for ourselves for 2030 available to us. So making great strides in relation to ESG.
Michael, do you want to run through the outlook?
Okay. So in terms of outlook, as I said earlier, we have slightly scaled back our traffic projections from 185 billion to 183.5 million. We are seeing a strong summer '23 demand, strong traffic demand, but Q2 fares will be much more modestly ahead of what was a very strong prior year Q2 comps -- the Q2 outcome will fundamentally depend on what the strength of close-in bookings during August and September. And we've seen a softening in terms of yields of the close-in bookings during June and July to date. We have no visibility on H2. We have tougher prior year comps for H2. And also, we are concerned about the impact of these macroeconomic trends, consumer price inflation, higher interest rates, higher mortgage rates might affect consumer spending in the second half of the year.
It is far too early for any accurate profit after tax guidance. We continue to expect modest growth over last year's PAT, but we can't put a number on it. the new Boeing MAX order means we're entering into a very exciting decade of growth for Ryanair in Europe, in a market where the market is consolidating where capacity remains constrained and will remain constrained for the next 4 or 5 years.
It means Ryanair is going to grow in new markets. We visited Ukraine last week, and we have discuss exciting plans with the Ukraine government to rapidly grow our traffic and restore traffic and tourism in Ukraine after the war ends, but that Boeing order, that MAX-10 order will not alone widen the cost gap over all of our competitors but sustain that growth to 300 million passengers. And so the Ryanair Group will, I believe, continue to deliver financial strength, a significant unit cost advantage over all other airlines in Europe, allowing us to deliver sustainable growth with more environmentally efficient aircraft in a profitable manner that will allow us to continue to reward our people, our passengers and our shareholders. Ryanair is and will, we believe, continue to be the long-term winner in European aviation.
Michael, Neil, -- let's begin by discussing ESG. What are Ryanair's Q1 highlights?
Well, as usual, a lot of happening on the ESG front during the quarter. We continue to invest heavily in high-tech aviation equipment. We saw 21 Gamechangers come into the fleet. As you know, these aircraft-s, 16% more fuel and CO2 efficient 40% quieter. So we had 119 of those aircraft at the end of the quarter. We also continue to increase our partnerships in relation to sustainable aviation fuels, signing an MOU with Repsol during the quarter. So we now have about 9.5% of our 12.5% aggressive target for 2030 secured at this point in time.
We delivered a petition to the EC Ursula von der Leyen in relation to protection of over flights during ATC strikes, this is an important initiative that we need to pursue more of. And then, of course, this morning, very proud to launch our 2023 sustainability report and we've set even more aggressive targets in relation to CO2 per passenger kilometer where we're now targeting 50 grams as opposed to 60 grams by 2031, and that's helped by our 300 MAX-10 aircraft order, which we announced in May, and we set out a 1.5-degree climate alignment plan as well. So lots going on.
You mentioned your petition. Why is urgent reform and protection of overflights needed?
Well, I think because ATC reform will be the most significant environmental initiative Ryanair can deliver in the near term. If we could eliminate ATC delays, that would eliminate about 90% of most EU airlines, flight delays. It would also significantly reduce flight times. It would cut fuel consumption and dramatically reduce CO2 emissions. In the first 6 months of this year, we've already suffered 60 days of French air traffic control strikes, and it is unacceptable that the French authorities use their minimum service legislation to protect long-haul arrivals and their short-haul domestic flights, they disproportionately cancel overflights, which disrupts flights going from the U.K. to Italy or from Ireland to Spain. It's manifestly unfair and we have submitted a petition to Ursula von der Leyen and the European Commission.
And it's about time we saw some action from these politicians who talk about delivering for the consumers of your but fail to do so. Here's a simple win for the European Commission. Protect overflights during ATC strikes, and that would eliminate probably 40% to 50% of the flight cancellations that EU airlines suffer every year.
Ryanair is operating its largest ever summer schedule. What are the key call outs?
Yes, a very busy schedule. We've got about 3,200 daily flights, and we're carrying close to 600,000, some days more than 600,000 passengers per day. We've increased the choice of routes and bases. We've now got 3 more bases, including 2 in the Canary Islands, 1 in Belfast, and we have 190 new routes in the summer schedule. So that builds nicely on the market share gains that we've put in place. We have #1 positions in the likes of Italy, Spain and Poland and indeed #2 in the U.K. We're catching up very quickly.
And then when we look beyond the summer, we've already laid out very exciting plans in Albania, this winter where we start flying in there and bringing more choice and reliability to customers in Central and Eastern Europe and that part of the world.
Are you concerned about operational resilience in summer '23.
We are. I mean for the obvious reasons, the 60 days of French air traffic control strikes have already caused us 1,800 flight cancellations. That's 325,000 Ryanair passengers have had their flights canceled solely because of these French ATC strikes. Many of those cancellations could have been avoided by protecting overflights and we're calling on the commission to do so. In the meantime, though, we've invested very heavily in our -- improving our ops resilience this summer. We have materially increased crewing ratios so that we have more standby pilots and cabin crews and more better on-time performance, and we've doubled up the size of our operations control centers here in Dublin and in Warsaw, so that we have kind of double rosters of ops controllers, of crew controllers and people who can respond during periods of operational disruption. And it is, I think, translating into very high for Ryanair on-time performance metrics and a significantly higher customer service satisfaction statistics as well.
And how is Q2 shaping up now?
It's shaping up well. As you know, we had a strong Q1. Q2 still benefits from the fact that capacity in Europe is below pre-COVID level. So demand remains robust. Q2 fares are running ahead of the prior year, but the comp is significantly more difficult given that we had a big spring back in the summer of 2022. So we would say that fares are probably going to be up low double digits on where they were last year. We did note at the back end of June into early July, a softening in close-in bookings. So we'll be watching that very closely as we go into August and September. And they're obviously going to be key to how the first half of the year actually pans out. But as things stand, bookings and fares are ahead of last year.
And looking forward to H2, will an economic downturn or recession impact Ryanair?
I think it will. We have ambitious growth targets. We're the only airline growing by 23% in Europe, that means we're trying to add about 30 million to 40 million passengers to our pre-COVID volumes. Last year, we had a particularly strong second half of the year. We had a bumper Christmas and new year season. Therefore, we have much tougher H2 comps. I'm not sure, but I expect that H2 will -- passengers will need some price stimulation as we try to maintain that 25% growth into the second half of the year, particularly, I think if customer spending gets nervous around issues like consumer price inflation, rising interest rates, rising mortgage rates.
But fundamentally, Ryanair has the cost advantage. It has the low -- it has a lower fares than any other airline. And even if there is a downturn in the second half of the year, I think it would be good for Ryanair's growth, good for Ryanair's model because people will keep flying. They just become more price sensitive, and therefore, more and more people will switch to flying Ryanair in every market across Europe.
What's your view on intra-European capacity over the next few years?
Well, I think we've seen a structural change in capacity over COVID with [indiscernible] airline failures and the amount of aircraft that have taken out of circulation. Airlines have weaker balance sheets, sort of being more disciplined on how they deploy that capacity. I think we'll also see more consolidation over the next 2 or 3 years. In Europe, we've already got the consolidation of data underway with Lufthansa, TAP. The sale process has started Air Europa as well advanced at this point in time. I think that will take even more capacity out of the market. At the same time, there's a shortage of available aircraft both secondhand and new with 500 aircraft trapped in Russia for the lessor is due to sanctions against Russia. And of course, the OEMs had significant supply chain issues. Their order books are now full to this side of 2030, indeed into the early 2030s, which, again, will keep capacity constrained for some time to come.
At the same time, we're taking another 90 Gamechangers over the next 2 summers, and we've got our MAX-10 order, which starts delivering from '27 to 2033. So we've got a decade of growth into a market where, I think, capacity will be constrained and there's huge opportunities for Ryanair to grow over the next few years.
And Michael, shifting to your Q1 results, you reported a path of EUR 663 million. What were the key highlights?
I covered them earlier in this presentation. Traffic was up 11% to 50.4 million. The load factor was 95%. Revenue per passenger was up 27% in the quarter. That was a mix of stronger average fares and also strong ancillary revenue growth. Operating costs increased 23% to 30% higher fuel. And as I said, higher crew rosters, crew ratios and ATC fees.
What's your current fuel hedging position?
We're well hedged with about 85% hedging in place for the current year at $89 a barrel, and 75% of that is with swaps. The rest is with cap. So we expect we got 25% floating for the year. As I look into FY '25, we've now got about 40% of the first half of FY '25 hedged at approximately $75 a barrel. And then, of course, carbon sits in the fuel line as well. So we're 90% hedged there at EUR 80 a credit for the current financial year.
And what about your currency hedging?
We've over 90% of our FY '24 OpEx is hedged at $1.08. About 60% of H1 FY '25 is hedged at $1.12 to the euro. And as you know, the CapEx on our entire Gamechanger order is fully hedged at $1.24 to the euro, which locks in extraordinary value and savings on this CapEx for the next 3 years.
And Neil, looking at your balance sheet, one of the strongest in the sector, what were the highlights in Q1?
Yes, very strong. We finished the quarter with EUR 4.8 billion in cash, and that was after having paid the EUR 850 million bond which matured last March, and of course, with EUR 1 billion in CapEx over the first quarter of this year. We saw our ratings improved, upgraded by both Fitch and S&P to BBB+. This is underpinned by a very highly unencumbered fleet. And by the end of July, all of our 737s will be unencumbered which gives us great flexibility. And we saw our net cash position increase margin from EUR 600 million at the end of March to just under EUR 1 billion. Michael previously said correctly that we have found a home for EUR 750 million of that already with a maturing bond coming up in August. But the balance sheet is in a very strong position.
What's your CapEx guidance for FY '24 and FY '25?
Well, we're in peak CapEx this year, which is FY '24. We expect it to be about EUR 2.8 billion because we're at the peak change -- not only at the peak Gamechanger CapEx, but we've also got the MAX-10 signing deposit. And next year, FY '25, CapEx will be lower at about EUR 1.3 billion, and the CapEx begins to ease off over the next 2 years as we come to the end of the Gamechanger deliveries.
And how will you fund the CapEx and the EUR 750 million maturing bond in August?
Well, there were consumption similar to the bond that we repaid back in March that we'll finance it out of our own cash resources. We're in a rising interest rate environment. So at this point in time, the cheapest form of finance is actually our own cash. We peak CapEx, as Michael already said, in FY '24. And of course, we've got bonds maturing over the next 3 years. We've got an EUR 850 million bond in 2025 and then a EUR 1.2 billion bonds in 2026.
But the key thing is that because of the high ratings that we have in Ryanair, BBB+, one of the highest-rated airlines in the world, thanks to the very highly unencumbered fleet, we can be very opportunistic in what we do and very flexible. So if we see cheaper pricing on bonds, we will issue a bond, the JOLCO market is looking good. We look at that equally sale and leaseback in the bank market. But at this point in time, as we already said, the lowest cost of financing is our own cash resources, and that's what we plan to use for the next couple of years.
And what's the Board's strategy on shareholder distributions?
Yes. The Board has set out its own strategy for cash generation over the coming years. First priority was to restore all the COVID pay cuts. And we were proud that in December of 2022, last year, we restored all pay cuts some 24 months earlier than had originally been scheduled. We're also now engaged or have agreed multiyear pay increases with our pilots, our cabin crew and almost all of our people. And I'm pleased in recent weeks, we've now agreed meaningful 2023 pay increases with our pilots, most of our pilot groups across Europe and their unions setting in place 3 or 4 years of agreed pay increases for pilots, for cabin crews, for engineers across Europe.
The second priority is to pay down debt as it matures. We paid down an EUR 850 million bond in March. We have another EUR 750 million bond in August. And that leaves us with 2 big debt repayments. We've got EUR 850 million to pay down in September of 2025. And then the last bond is a EUR 1.2 billion bond in May of '26, and that will take Ryanair then to being almost entirely debt-free at that period of time.
It's important we pay down these debts, particularly as interest rates are spiraling upwards from 1% towards 5% and 6%. And that would be an increasing cost advantage for Ryanair over most of our heavily indebted competitors in Europe in the next couple of years.
The next challenge, the third priority then would be to fund the ambitious aircraft CapEx over the next number of years. As I said, this is our peak year. Next year, we spend about EUR 1.3 billion in CapEx. And then we enter into a decade of investments in the MAX-10 aircraft order. And it's only once we get to the end or once we're able to see our way clearly through to funding all those large commitments, then I think the Board will address shareholder returns.
We are very conscious that our shareholders invested EUR 400 million in Ryanair during the worst of the COVID crisis. That enabled us to raise a further EUR 1.2 billion in debt. And the Board and the management are conscious that we need to repay our shareholders as we -- once we're in a position to do so. And the shareholder returns will recommence, but only once we have agreed to pay increase with our people, paid down our debt and can readily fund our ambitious CapEx from existing cash flows.
Neil, looking at your fleet, will the Gamechanger delivery disruptions impact your FY '24 schedule?
Unfortunately, yes. We're already 3 months behind in our deliveries. So I'm pleased that we'll have 124 Gamechangers in the fleet by the end of July, but they were meant to be with us by the end of April. Boeing, as we all know, had significant supply chain issues over the past year or so. They've also been hit recently by a strike by the manufacturers of their fuselages, and the supply route to Seattle has been damaged with a bridge collapse in Montana, which I hope will be -- we fix soon. But all of these are having an impact potentially on our deliveries into autumn and winter. We've meant to take up to almost 50 aircraft this side of April '24. There's already talk that somebody is maybe slipping into May or June of next year. So on the basis of that this morning, we've pulled back our traffic target marginally from 185 million this year to 183.5 million, which is a 9% increase year-on-year.
What are the details of the recent MAX-10 aircraft order?
Well, as you know, in May, we signed an order for 300 MAX-10 aircraft with Boeing in Virginia. The deliveries will take place between 2027 and 2033. The order is obviously subject to AGM approval in September of 2023. It's 150 firm aircraft, 150 option aircraft, but I would be pretty confident that we expect to take all of the 150 option aircraft based on everything we can see now.
Up to 50% of this order will replace older NGs. Therefore, keeping the fleet age, the average age of fleet young and also improving the -- it's -- the sustainability of the fleet. But 50% will enable us to continue or to enter into a decade of controlled growth, rising from 183 million passengers this year to about 300 million passengers by FY 2034.
The MAX-10 aircraft have 228 seats. That's 21% more than the NG fleet. They burn 20% less fuel on a per seat basis, 20% less CO2, and they are 50% quieter. So not alone are they -- will they enable us to significantly widen the cost advantage over every other airline in Europe, they will deliver materially lower operating costs for Ryanair, lower operating costs, which we will pass on in the form of lower airfreight to our customers, enabling our customers to travel in a more environmentally sustainable way on more environmentally sustainable aircraft. And these aircraft will not alone put Ryanair on a path for a decade of growth, but will materially and further widen Ryanair's unit cost advantage over every other EU airline for the next 20 years.
And lastly, Neil, what's the group's outlook for FY '24?
Moving parts, as we just discussed a couple of minutes ago, we think traffic now will be about 183.5 million, 9% year-on-year. So marginally slower than we'd anticipated. As previously guided back in May, unit cost ex-fuel was still the widest gap between ourselves and everybody else, will increase modestly due to pay increases and Boeing delivery delays to about EUR 33 capacity, or EUR 2 increase on that.
Our fuel bill is running about EUR 1 billion ahead of last year. But we had a very strong Q1. Bookings into Q2 are robust. Fares are running about low double digits ahead of last year, so a tougher comp into that. As is always the case at this time of the year, we don't have a huge amount of visibility into Q3, no visibility into Q4. And as Michael already discussed, there are the risks around consumers requiring and needing price stimulation after months of mortgage rate increases.
So I think in that kind of environment where there's so much uncertainty, it would be wrong to give a detailed guidance at this point in time. And what we do say is that we're cautiously optimistic that we think we will grow profits year-on-year, a modest increase on the prior year. And we would hope to be in a position to give a bit more detail when we come out with the half year numbers in November.
But I think the key thing is that we've got the lowest cost. We've got a really strong balance sheet. And as Michael has outlined, we've got a decade of growth now with the Gamechanger aircraft coming in. So we're by far, the winner in this sector for many years to come.
Okay. Thank you, Neil, and we look forward to speaking to you all on the investor call this morning as -- analyst call at 10 a.m. We're not doing a roadshow in the Q1. But if anybody wants to come and visit us here in at the office in Dublin in the next -- over the coming weeks to discuss the business and the outlook, we'll be very happy to welcome you to Dublin. Thank you very much, everybody.