Ryanair Holdings PLC
OTC:RYAOF
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Earnings Call Analysis
Q3-2024 Analysis
Ryanair Holdings PLC
Ryanair reported a remarkable 39% increase in its 9-month profit, reaching EUR 2.19 billion, with a modest EUR 15 million profit in Q3, reflecting a significant decline from the previous year's Q3 profit. This period saw a 7% rise in traffic to 41 million passengers and a notable 13% increase in average fares. Despite these positive metrics, the company faced a substantial EUR 320 million jump in its fuel bill, reaching EUR 1.2 billion. Ryanair's enhanced financial hedging strategy is noteworthy, as they've secured 65% of their FY March '25 fuel at $79 a barrel, realizing a saving of EUR 450 million for the next year. The company also announced an interim dividend of EUR 0.175 per share for the end of February.
Ryanair expects to expand its Gamechanger fleet to 174 by late June despite Boeing delivery setbacks, initially anticipating 57 but likely to receive 50. To address these delays, the airline debuted a robust summer '24 schedule with 169 new routes, including new domestic routes in Morocco and Albania. Despite Boeing's MAX-9 grounding issues underscoring the need for improved quality control, Ryanair expressed confidence in Boeing's management to rectify production standards and offered to take on any unwanted MAX orders from other airlines, emphasizing the aircraft's efficiency and environmental benefits. The carrier seeks to directly counter OTA piracy by forming partnerships like the ones with loveholidays and Kiwi.com to prevent customer overcharges and scams. Looking ahead, Ryanair remains optimistic for summer '24 pricing, foreseeing a slightly higher fare environment.
Ryanair enjoys a significant competitive edge with its low unit cost structure, both within Europe and internationally. Its balance sheet remains strong, with an industry-leading BBB rating, over EUR 2.9 billion in gross cash, and with full fleet ownership of 546 Boeing 737s, all unencumbered. This financial resilience translates to EUR 0.30 per passenger in interest income - a marker of its formidable position in the market. The airline's capital expenditures (CapEx) are projected at EUR 2.8 billion this year but will reduce significantly to EUR 1.3 billion next year, charting a path towards being debt-free by 2026. Concurrently, Ryanair has initiated returning cash to shareholders, with an interim dividend forthcoming.
Due to Boeing delivery delays and external market factors, Ryanair has reduced its FY '25 traffic forecast from 205 million to approximately 200 million passengers. This moderation accounts for the current state of the European capacity, which is expected to be slightly less than pre-COVID levels for summer '24. Ryanair sees these constraints as likely contributing to marginally higher airfares for that period. Supporting sustainability, the company is committed to its environmental mission, affirmed by an upgraded MSCI ESG rating to an A. Ryanair's focus is set on enhancing overall service quality, sustaining its low-cost competitive edge, and prudently managing its ambitious expansion to 800 aircraft and 300 million passengers by FY'34. With the revised full-year profit guidance at the lower end of EUR 1.85 billion to EUR 1.95 billion, the airline continues to strategize amidst Boeing's delivery delays and the evolving aviation landscape.
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Good morning, ladies and gentlemen. Welcome to the Ryanair Q3 profits presentation. I'm joined as usual by Neil Sorahan, our Group CEO -- our group CFO, even. This morning, as you'll see, we reported a 9-month profit up 39% to EUR 2.19 billion. We reported a profit in Q3 of EUR 15 million. It was significantly down on the Q3 profit in the prior year for the reasons we will set out in our presentation this morning.
Highlights in the third quarter, traffic grew 7% to 41 million passengers. Average fares were up 13% in the quarter. Ancillary revenues were up 2% per passenger. We're pleased to say that MSCI has raised our ESG rating from BBB to an A in the December quarter. The big challenge for us on the cost front was that fuel bill rose by EUR 320 million in the quarter to EUR 1.2 billion. The quarter end fleet was 136 737 Gamechangers. We're still in a total fleet of 574 aircraft.
Most notably, we've extended fuel hedging. We now have 65% of our FY March '25 fuel covered at $79 a barrel. We're hedged in the current year at $89 a barrel. So we've already banked a saving of EUR 450 million into next year's numbers. And shareholders will be aware, we have intended to pay our first interim dividend of EUR 0.175 per share, which will be payable to shareholders on the 28th of February.
Looking at just a couple of themes in the quarter. aircraft deliveries, we expect to have 174 aircraft -- to get Gamechanger aircraft in the fleet by late June. However, Boeing are running behind on deliveries. We originally expected to have 57 aircraft deliveries. We think we'll be at 50 and we've already therefore announced a bumper summer '24 schedule on sale. We have 169 new routes, including our first 11 domestic routes in Morocco and our first summer in Tirana in Albania with 23 routes. While we're growing strongly in Europe, even despite the fact that we're being held back slightly by Boeing delivery delays, I think the challenges being faced by our competitors, particularly with the A320 and the Pratt & Whitney engine-related groundings means that capacity will be challenged again in Europe this summer, and we would hope and expect that will result in marginally higher airfares through the summer period.
We continue to work closely with Boeing to minimize these delivery delays. We're pushing very hard with the entire Boeing team to ensure we get at least 50 aircraft by the end of June. The recent MAX-9 groundings was a disappointing setback in the work that Boeing and we have been doing in both Seattle and Wichita. It does highlight the need for Boeing to improve its quality control, both on oversight at Spirit in Wichita and its production quality in Seattle. Ryanair is investing heavily with Boeing. Neil was in Seattle in mid-January going through these issues, addressing these issues with them.
Boeing have committed to additional engineers on the shop floor in Seattle and Wichita to improve quality, and we are putting additional engineers in Seattle and Wichita to oversee that -- those quality improvements. Although and I think it's an important point to make, the last 12 aircraft we received before Christmas, we have no significantly improved quality on those delivery aircraft. We put these aircraft through 2 days of checks, and there has been a meaningful improvement in quality.
And I want today on behalf of Ryanair to extend my support to Dave Calhoun and Brian West, the CEO and CFO of Boeing. I know they're under attack from certain quarters. They are doing a good job. They are turning that company around. They are, I think safety is their #1 by word, and I have a lot of confidence, both personally and professionally in David Calhoun and in Brian West. And I hope they will see through the continuing turnaround of the quality in Boeing -- quality production in Boeing, and they certainly have Ryanair support.
I would also like to add, by the way, if I thought the comments from United Airlines last week weren't helpful. But if United Airlines wants to delay or cancel any of their MAX, you said Boeing 737 orders, Ryanair would be very happy to take them. This is a great aircraft. It has 20% more seats. It burns 20% less fuel. Customers are going to love, not just the operating efficiencies of these aircraft, but also the environmental efficiency of these aircraft. And if United don't want to take them, Ryanair certainly will.
One of the big challenges for us in the December quarter and something that did hit our short-term profits was the fact that our ongoing dispute with the OTA pirates, by -- so we were taken by surprise in the first week of December when many of these OTA pirates who have been illegally scraping our digital -- our website for many years, which we consider to be digital piracy. And then reselling and overcharging and scamming consumers with hidden add-ons or overcharges for Ryanair fares or ancillaries.
They took us off sale in the first week of December. We decided in December not to respond with aggressive pricing because Christmas was coming as we entered into the first or second week of January, though, we have opened up more cheap seats. We want to bring more and more of their customers directly to Ryanair so they can benefit the lowest airfares.
We've seen a marked change, though, in the attitude of some of these OTA pirates. We were approached by a number of the bigger ones. And already in early January, we signed a new approved OTA agreement with loveholidays, one of the biggest OTAs in the U.K. This is a momentous agreement for Ryanair and for our customers. We give loveholidays direct access to Ryanair website. They, in return, agreed they won't overcharge for our airfares. They won't overcharge for our ancillary services. The bookings will be made directly in ryanair.com. And jointly, Ryanair working with loveholidays.
Now we ensure that passengers are not going to be ripped off, not going to be overcharged, they are not going to be scammed. And we're talking to a number of other OTAs currently and expect to be signing similar agreements over the coming weeks. And I think the key thing with these partnership, OTA partnership agreements is, one, the customers are making their bookings directly in ryanair.com, which is what we've always wanted. And we are guaranteeing that those customers are not going to be overcharged for airfares or for our ancillary services.
And we are pleased to have agreed that OTA partnership with loveholidays, we on Friday evening signed one with Kiwi.com as well who are -- would be the largest OTA seller of seats, and we look forward to announcing more in the coming weeks and days. We're going to go through the detailed presentation here, so I won't go through it here. Just a couple of quick things in terms of outlook. So for the full year, we expect to carry about 183.5 million passengers. That is down from 185 million, primarily because of Boeing delivery delays and the disruption to our schedules since November through the cancellation of the small number of flights we operate to Tel Aviv, Jordan and the Middle East.
We will have slightly lower Q3 load factors as a result of the dispute with the OTAs in both December and in January. However, as a result of higher load factors -- lower load factors and higher productivity pay, we recently agreed productivity pay deals with pilot unions in Belgium, Italy and the U.K. to improve our operational resilience. We now expect our FY '24 ex-fuel unit cost to rise by approximately EUR 2.50. However, despite that rise, the gap between us and our unit cost -- between us and our main EU competitor airlines will widen significantly.
Looking forward into the Q4, Q4 is going to be strong because of the first half of Easter is at the end of March. However, these -- the stronger Easter or the benefit of Easter in the first half is not going to offset higher oil prices or the unwinding of free ETS credits in Q4. And therefore, our full year profit after tax guidance is going to narrow to the lower end of our current range between EUR 1.85 billion to EUR 1.95 billion. It was previously EUR 1.85 billion to EUR 2.05 billion. However, this guidance on the full year result, as you know, remains heavily dependent on avoiding unforeseen events in Q4, such as any adverse developments in Ukraine; Israeli-Hamas conflict are further unforeseen point of delivery delays in Q4.
And with that, Neil, maybe you take through the slide presentation, please.
Great. Thanks, Michael. Well, of course. Good morning, everybody. Ryanair has the lowest fares and the lowest costs of any airline in Europe. We're targeting 183.5 million passengers this year, a 9% increase on last year, making us again the #1 carrier for traffic, #1 for on-time performance and reliability, and we're continuing to see improvements in our ESG ratings, not only are we #1 with Sustainalytics in Europe for ESG, but we're now raised an A by MSCI. With 300 MAX-10s on order, which is going to underpin a decade of growth, 300 million passengers by FY '34. And our ongoing and continuing financial strength, coupled with our lowest cost makes us the long-term winner.
We now will have 94 bases operating this summer were 3,600 daily flights. And this platform will facilitate our growth to 800 aircraft and 300 million passengers by FY'34 unique network that nobody else has been able to replicate. This is probably one of the most important slides in the entire presentation. It shows that not only are we significantly lower on unit cost ex-fuel than our European competitors, but were significantly lower than any of the airlines on the other side of the Atlantic as well. I think interestingly, it's important to focus on the point that we have come out of COVID with very low costs, the gap between ourselves and everybody else has widened. But we're also now thanks to the strength of the balance sheet, the net cash that we have in the business.
We're generating EUR 0.30 per passenger in interest income. And this is at a time when we can see our competitors and other airlines refinancing themselves at very expensive levels and taking on very expensive leases. So that further widens the gap between ourselves and everybody else for the coming years. On the results themselves, we saw a 7% increase in traffic to just over 41.4 million at a 92% load factor. Revenue was up 17% to EUR 2.7 billion, where we saw traffic up 7%, but also a 13% increase in average fares and ancillary revenue of EUR 23 per passenger. Fuel, however, was up quite significantly. We had a EUR 6 per passenger headwind on fuel compared to last year. So we saw operating costs up 26%, just over EUR 2.7 billion. What we record as a profitable outcome in Q3 of EUR 15 million, albeit the comps in the prior year, were very tough given the low fuel and the bumper Christmas with everyone traveling for the first time post COVID.
I think the real number here to focus on is that really strong 9 months we've had of the year with a strong summer, positive contribution for Q3, and we're now seeing profits up 39% to just under EUR 2.2 billion in the first 9 months of the year. Balance sheet, industry-leading BBB rating, we had just over EUR 2.9 billion gross cash at the end of December. And to put that in context, that was after EUR 1.9 billion of CapEx and EUR 1.1 billion of debt repayments, including a big bond repayment back in the summer.
Uniquely, 546, all of our Boeing 737 fleet is unencumbered, which gives us huge flexibility and we retained our net cash position at the end of the quarter, which is over EUR 150 million, although this was flattered slightly by the late delivery of aircraft into Q4. Focusing a little bit more on the balance sheet. As you can see, we have no debt maturities this side of 2025. We have an EUR 850 million bond. We have a very manageable profile. And in fact, we expect to be debt-free by 2026 when we pay off that final bond.
CapEx which is guided at EUR 2.8 billion this year will fall quite significantly next year to EUR 1.3 billion. It will then drop down to about EUR 1 billion the year after that. And it's a couple of years before we start to see meaningful PEP and delivery payments coming through on the MAX-10. So our rising cash flows will enable us to fund our CapEx and our maturing debt. We will have a couple of years holidays as I've already indicated, on CapEx, and we'll start selling NGs from '27 onwards as we get the MAX-10s into the fleet. So I think this helps widen the competitive advantage that we have over everybody else. And of course, and Mike will elaborate on this more. We're now in a position where we're returning cash to our shareholders with an interim dividend coming next month.
With that, Michael, I might ask you to take us through current developments, please.
Yes. Thanks, Neil. I think the most significant development currently is with a sudden removal of the OTA pirates -- Ryanair for the OTA Pirates websites in December. We welcome that removal. It's something we have fought for many years. We believe it protects consumers they're not getting overcharged and scammed by these pirates who are digitally scraping -- illegally scraping our website. However, I think the new agreements recently signed up with loveholidays, Kiwi.com, now allows us to get those bookings directly in the ryanair.com website. We have the customer e-mails. We have the payment details, so we can communicate directly with customers. But critically, both we and the OTAs agree that customers will not be overcharged or scammed when they're purchasing Ryanair flights or ancillary services.
We've hedged 65% of our FY '25 fuel, already banked a EUR 450 million saving into next year's budget. We continue to see summer '24 EU capacity being constrained. Eurocontrol believed that summer '23 was about 93% of pre-COVID. We think summer '24 will be a little bit less than that, maybe 91%, 92%. And I would hope that we will see more of the recovery in the Asia into Europe market, which will fill up capacity. I think that leaves us reasonably optimistic for summer '24 pricing. I don't think that the prices will increase as strongly as they did in summer '23. But nevertheless, we expect to see slightly higher airfares being charged by passengers in a constrained environment in summer 2024.
Boeing delivery delays continue to be a real challenge. We welcome the on-grounding of the MAX-9s late last week. We think the sooner everybody gets back in the air and gets back to working, the better. Boeing are still making great aircraft. And -- but they do have to improve quality control and the quality of what they're delivering to their airline customers, and we support the efforts of Dave Calhoun and Brian West in that regard. We're looking forward to a record summer '24 schedule. We see seat capacity up 9%. We're going to operate about 2,600 routes, including our first 11 domestic routes in Morocco and our first summer with 23 routes in Albania, where we're growing very strongly and huge demand for Ryanair services.
We continue with our environmental mission. We welcome the ESG rating upgrade from MSCI, who now rate us an A. And we're pleased with the interim dividend of EUR 0.175 per share, which will be payable to shareholders in February, and we would expect a similar payment to them in September around the time of AGM.
Again, I won't spend any more on the OTA Pirate sites. It's been well aired, but what we've been campaigning for many years is to block the overcharging and prevent consumers being overcharged. We think the new agreements partner, OTA partner agreements now with loveholidays and with Kiwi, sorry, by the way forward because they prevent or they ensure that our customers are not going to be overcharged or scammed when they're buying Ryanair flights for ancillary services. I'll give you an example there of some of the kind of scam overcharges we continue to oppose. And we're calling on eDreams, Opodo, On the Beach, Lastminute.com and Booking.com to stop this scamming and overcharging of passengers. If you really want to sell -- offer your customers, Ryanair's low prices, you now have a mechanism to do so, and we would call on regulators to now intervene and stop this blatant overcharging and scamming of customers.
Capacity will remain constrained to summer '2024. The Boeing delivery delays remain a challenge. We are still hopeful but not confident that we get 50 of the 57 deliveries by the end of June. We won't take aircraft into July. So whatever we get by the end of June, that will be it for the summer. These delays have reduced our FY '25 traffic forecast. We've come down from 205 million to about 200 million. It could be 201 million, but we're somewhere in that territory. There's no certainty over further delays, but we hope there won't be any more issues there. But we are investing heavily in improving the quality in Seattle, and we believe Boeing are too.
ESG update have now covered. The MAX-10 order is vital to Ryanair's growth. And if United or any other airlines don't want to take their MAX-10 orders, we'll be happy to step in, talk to Boeing and take some of our MAX-10 deliveries earlier. This is a great aircraft. It is going to transform the cost of flying for consumers. And Boeing continue to make great aircraft, they make safe aircraft, and we would hope that what the learning that will come from the Alaskan MAX-9 event will be that Boeing need to ensure the quality control at all stages of production becomes -- or returns -- to becoming their #1 objective, which I believe it is under Dave Calhoun and Brian West.
Neil, do you want to take through the outlook?
Well, we're -- despite the lower Q3 load factors and the Boeing delivery delays, where we're sticking with our 183.5 million passenger target for this year, which is a 9% increase on last year, but down under 185 million that we'd hoped to have earlier on in the year. Due to the lower load factors and investment resilience, we recently agreed some productivity pay increases with pilots in some of our major markets. We're now guiding a slightly higher ex-fuel unit cost on a full year basis, so approximately EUR 2.50 increase. But the gap between ourselves is going to continue to remain very wide and offsetting that, of course, is the interest income coming through on the other side.
Well, we have Easter, half of Easter in March, we don't think that the extra revenue for that will be sufficient to offset the lower load factors and slightly softer fares that we had in Q3. So we're now narrowing the profit after tax guidance range to a new range of EUR 1.85 billion to EUR 1.95 billion PAT, which is in excess of our long-term target of tenure per passengers, but down from the previous range of EUR 1.85 billion to EUR 2.05 billion. As Michael has already said, we expect the capacity will be significantly constrained.
This summer, the OEMs are already running behind. But now we have the Pratt & Whitney engine issue, which is going to take significant sways of an A320 short-haul aircraft out of Europe. So we think capacity will actually be marginally down year-on-year in the summer of '24, which will, we think, be positive from a pricing perspective with only 50 additional Gamechangers in the fleet this summer instead of the 57 that we had previously hoped to receive. We're now bringing down our FY '25 traffic targets marginally from 205 million to 200 million passengers next year. And of course, we've got EUR 450 million worth of fuel savings locked in for FY '25. So I think our rock-solid balance sheet, the order book that we have will enable us to grow market shares and grow strongly over the next decade to 300 million passengers by FY '34.
Thanks, Neil. Well done. Okay. Now we'll do our -- we'll open up for Q&A.
What are Ryanair's Q3 ESG highlights?
I think the highlights continue to be the Sustainalytics ranks us the #1 in terms of European Airlines ESG performance. We're very pleased with the MSCI ESG upgrade from a BBB to an A-rated company. We took deliveries of 12 more Gamechangers during the quarter, freezes up at 136 aircraft. These aircraft carry 4% more passengers, burn 16% less fuel. And we continue to roll out the retrofitting of the scimitar winglets on the NG fleet, which delivers or yield us a 1.5% fuel saving for every one of the NGs that are retrofitted.
Looking ahead of your growth plans, Ryanair will operate a record summer '24 schedule. What are the key call-outs?
Yes, we're planning a very strong summer this year. We hope of another 50 Gamechangers in the fleet, which brings up to 174 aircraft for the peak summer period, albeit 7 shy of what we originally hoped. But that translates into a schedule, which is 9% larger than it was last year. We've never had more choice. We've got 169 new routes this summer, so 2,600 routes in the network, including exciting opportunities on domestic Morocco, where we have 11 new routes, and of course, in Albania, where we're growing for the first time in the summer in that market.
We think that demand is going to be very, very strong. We're seeing that in the bookings at the moment, but capacity is going to be constrained across European aviation this summer. And that is likely to be positive from a pricing perspective, and we clearly encourage our customers to book as early as possible, so they don't get disappointed.
And what's your view on intra-European capacity over the next few years?
Well, I think starting with summer 2024. We think European capacity is still going to be constrained at 92%, 93% of pre-COVID maybe 1% or 2% less than that. You see the COVID-19 failures, fleet cuts, consolidation continues, Lufthansa is trying to buy ITA, IAG buying Air Europa and TAP is for sale, although that sale has been postponed. I think the big move on capacity in Europe this year will be the Pratt & Whitney engine issue, which will ground about 10% of A320 capacity, most notably on some of our competitor airlines.
And there remains a large backlog, the OEM delivery delays, which affect both Airbus and Boeing, means there's no way really of fixing this of Europe returning to its pre-COVID short-haul capacity. I think certainly for 2024, 2025, it may be 2026 to 2027 before Europe gets back to its pre-COVID capacity. And that will, I believe, underpin strong passenger demand but also rising prices for the next couple of years.
What's the latest update on your Gamechanger deliveries?
We had 136 aircraft in the fleet at the end of December. And as I said a little while ago, we expect to have another 50 in the fleet. So 174 for peak summer this year. We then work on the basis that we take the balance of the 210 aircraft over the winter and into the spring of next year, so that we have all 210 available for the summer of 2025.
What impact was the recent MAX-9 grounding have?
None in Europe. I mean there's no MAX-9s in Europe. We at Ryanair operate the MAX-9 aircraft, but it's another disappointment and the setback for Boeing. We welcome the fact that the FAA on-grounded the MAX-9 last Thursday and the aircraft went back into service on Friday. I think what it shows is that Boeing clearly have more work to do to improve quality and reduce delivery delays. We support the initiatives being taken by Dave Calhoun and Brian West, in particular, to improve Boeing's performance, production and deliveries. But we don't expect that it will affect any of our deliveries this summer. There'll be any material impact on our deliveries, some of which we hope will still be at about 50 Gamechangers by the end of June this year.
When do you expect the MAX-10 to be certified?
Again, I spoke to Boeing as recently as late last week, they still expect the MAX-10 tend to be certified in the fourth quarter of 2024. First delivery is taking place to some of the American Airlines in quarter 1 in 2025. And we have told them if some of these American airlines don't want to take the MAX-10 aircraft, Ryanair will take those aircraft. We're very keen and very excited by the operational performance of those aircraft, 20% more seats, but burning 20% less fuel. We think they're going to be transformational. And Boeing are still making great aircraft, they always have and they always will. But quality does need to be improved.
And Neil, looking at your results, you reported Q3 profit of EUR 15 million. What were the highlights?
Yes. We had a bumper prior year comp, but we did comment, as you said, of the EUR 15 million profit after tax. We had a big headwind on fuel where we did additional EUR 6 per passenger that we have to cover. And airfares, were up 13% in the quarter and ancillaries performed well up 10% to EUR 950 million or EUR 23 per passenger. That wasn't sufficient to offset fully the fuel bill that we had. We also had the unexpected, but not unwelcome removal of Ryanair from any OTA pirate websites back in early December, that meant that we brought the load factor down by about 1 point in Q3, but we also had to stimulate close-in Christmas and New Year bookings, which meant first -- I mean slightly lower than we'd anticipated.
As I said, costs up, primarily to do with a higher fuel with 35% increase in our fuel bill. But we also have some staff costs going up in relation to investments in resilience, higher crewing ratios, higher productivity pay and some realigns with the market. And then there's a timing issue in there as well with some of our maintenance that we will typically do in Q4 move back into Q3 of this year. So that will unwind into the next quarter. But I think the key thing here is that the unit cost advantage between Ryanair and everybody else remains supreme and brought down further by the positive interest income, thanks to the strong balance sheet.
And what happened with the OTAs in early December?
I think it was a wide number of OTA. The larger OTA pirates took us on sale in early December. We're not quite sure why. It could have been pressure -- increasing pressure from consumer protection agencies across Europe. It could also in Ireland, Ryanair won a permanent injunction in the Irish High Court in late November against Flightbox, who are one of the illegal screen scraping service providers that allow this digital piracy to take place. Or it may have been that Ryanair, Know Your Passenger customer initiatives such as customer verification and credit card payments have made it more difficult for many of these pirates to make payments using fake credit cards or using fake e-mail addresses.
How does this affect Ryanair?
Well, cost is about 1 percentage point on the load factor in Q3 and then close-in bookings were soft over Christmas and the new year. Seeing that continue a little bit into the start of Q4 but starting to unwind itself now.
And do you have any relationship with the OTAs?
I mean it's important. We've always had a very good relationship with a number of the -- what I would call the honest or transparent OTAs like Google Flights. They show Ryanair -- they display Ryanair prices for price comparison purposes, but they send the customer if the customer wants to buy Ryanair, they stick through and they send the customer directly to Ryanair. Customer makes the booking in Ryanair, at the Ryanair fares and prices. But we have a problem with these OTA pirates who digitally scrape our -- who scape our website in an active digital piracy, which is now they, of course, are ruled to be unlawful.
And then turn that around, claim to be kind of honest on price comparison websites, but then use it to overcharge and scam customers for inflated airfares, inflated ancillaries. And increasingly are inventing new charges such as a flexible fair fee or a refund fee, none of which are possible on Ryanair. And so they're just inventing ways of scamming customers. I think -- that's why I think as Neil said, we welcome the removal of our Ryanair from these OTA pirate websites in early December.
Quite suddenly, over December and January, we've been approached by a number of these what were previously the OTA pirates, looking to reach similar agreements with Ryanair as we have with Google Flights. And we're very pleased to have announced the first 2 of these agreements last week and again this morning with loveholidays in the U.K. and now with Kiwi.com, a very large Czech online travel agent. In both of those cases, we now give -- will give those 2 OTAs a direct feed into the Ryanair website. Customers will see the Ryanair airfares, but they'll make the bookings directly in the Ryanair website.
And as part of that agreement, these OTA partners now agreed that they will not overcharge for Ryanair airfares. They will not overcharge for Ryanair ancillaries, and no [ miticular-invented ] fees will be levied. So we're protecting Ryanair's business model by always having the lowest airfares, but we're also protecting consumers. And we're happy to work with these OTAs or these partner OTAs, like loveholidays like Kiwi, who now, like Google Flights are going to provide an open and transparent price comparison service to their customers. And we call on the regulators to take action to outlaw the overcharging and scamming that is still being perpetrated on suspected consumers by other OTA pirates who we will continue to pursue until we stop this anti-consumer overcharging and scamming.
You might have addressed this. But what are the longer-term benefits of removing OTAs?
All right. Michael covered it very well. It's pro consumer. It means that people now get access to Ryanair's low fares when traveling across Europe and importantly, because we're not getting fake e-mails with details, payments, et cetera. In the rare offense when things go wrong, we'll now be able to look after the customer better than we were able to do before. It's good for our brand. It's good for the customer. And I think long term, it's good for the industry.
And back to the results, Michael, how is the group performing year-to-date?
I think very strongly, as you can see, the 9-month results, profit after tax is up 39% to just under EUR 2.2 billion. We've had a very strong summer in 2023. We've had -- unlike many of our competitors, we've reported a profit, albeit a small profit in Q3. That number would have been bigger in Q3 if it wasn't for the short-term impact of the Israeli-Hamas conflict, which significantly disrupted our Israeli flights. And also the impact of the OTA going offset in early December, which caused us to suffer a slightly lower load factor and slightly lower airfares in December and again in January. But we believe and are confident that's very short term.
Looking forward into Q4 and summer 2024, we see strong forward bookings, strong pricing, although at reasonably low numbers to date. But I would look forward to this summer with some degree of optimism.
What's your current fuel hedging position?
We're well hedged. When we look at the current financial quarter, Q4 FY '24, we're about 94% hedged at approximately $89 a barrel combination of jet swaps and options. But more importantly, we've now extended our FY '25 fuel hedging out to 65% and a significantly reduced cost per barrel of about $79 per barrel. So to put that in context, we're locking in EUR 450 million worth of savings on our fuel bill on the hedged fuel alone for next year.
And what about your OpEx currency hedging?
Yes, similar to suggest, very well hedged. So in Q4, we're just over 90% hedged at about 1.09 on the euro-dollar, an improvement into next year, where we're hedged 70% at 1.11, again, helping on the savings.
And is your carbon hedged?
Yes, very well hedged on carbon. As we always are, we're 100% hedged for the current financial year at about EUR 81 in EU-A. And we're seeing an improvement coming into next year, where we're also 100% hedged, but at a lower rate now of EUR 76 in EU-A. So some savings coming through on that side.
And just looking at your balance sheet, Neil, Ryanair obviously, has a very strong balance sheet. What are the Q3 highlights?
Yes, industry-leading balance sheet. We finished the quarter at 31st of December, with just over EUR 2.9 billion in gross cash, which was after EUR 1.9 billion of capital expenditure and EUR 1.1 billion of debt repayments, including a big bond back in the summer. That meant that we finished up with net cash of about just under EUR 150 million, although that was slightly flattered by the delayed timing of aircraft deliveries uniquely. We have all of our Boeing 737s unencumbered on the balance sheet, 546 of them. And that's why we're the most highly rated airline in the world, BBB+ rating from both S&P and Fitch, which gives the huge flexibility at the time when a competitor airlines are refinancing themselves at expansive levels, taking on expensive leases. We've got the ability to use a very low cost form of financing and using our own cash and indeed generating interest income in the meantime as well.
What is your CapEx guidance for the next 2 or 3 years?
We expect growth -- our total CapEx for FY '25 to fall to about EUR 1.3 billion, which is a very significant reduction on what we've been spending on CapEx in recent years. And then for FY '26, the number will fall to just under EUR 1 billion, which if profitability continues at current rate means we will be generating very significant free cash flow, which we will be using, obviously, to significantly fund our aircraft -- future aircraft orders.
And you kind of addressed it there, but how will you fund the Gamechanger and MAX-10 aircraft CapEx?
Similar as the last couple of years, the cheapest form of financing for us at the moment is the cash flow that we're generating in the business. And so the working assumption is that we'll continue to do that to not only fund our CapEx through repaying maturing debt. But thanks to the strong ratings that we have in the unencumbered fleet, we remain opportunistic. So lower cost opportunities arise in the bond markets, in sale and leaseback, [indiscernible] or indeed the bank market, we can look at that as well. It ultimately boils down to what's the lowest source of financing for us.
And Michael, the Board recently approved a new dividend policy. When is the first payment?
The first interim dividend of EUR 0.175 per share will be paid at the end of February. The second -- the final dividend of again, EUR 0.175 per share will be paid in September around the time of the AGM. And as you know, the Board has committed going forward that we'll return about 25% of our annual profit after tax to shareholders in the form of ordinary dividends.
Will the Board consider other distributions?
I think the Board has a policy over many years of returning surplus cash to shareholders. We have a proud record of special dividends and/or share buybacks. But only when we're certain that we have spare funding. We still have 2 large bonds coming out as I appreciate they're in '26 and '27, but we do have significant CapEx and debt repayments. I think the Board is conscious that we need to keep a prudent level of cash in the business. That's one of the reasons we've emerged out of the COVID experience so much stronger than every other airline. But if and when there's surplus cash, it would be returned to shareholders, either in the form of special dividends or share buybacks.
And Neil, looking forward, what's the group's FY '24 outlook?
Yes. Well, on traffic, we continue to target about 183.5 million passengers this year, which would be a 9% increase on last year, although a little bit lower than we'd originally hoped. We had an original target of 185 million. When I look at the likes of the load factors, that was impacted in Q3 due to the OTA removal of flights. So that lower load factor, coupled with recent productivity pay increases to improve the resilience of the business as we move into a busy summer 2024, now means that we're looking at slightly higher cost per passenger ex-fuel of about EUR 2.50. But the gap between ourselves continues to remain significantly wider than everybody else.
Ancillaries more or less in line with what we've guided before. We will have half of Easter in the second half of March. This, however, we think will not be sufficient to offset the slightly lower fares and lower load factors that we had in Q3. So as a result, at this stage, we're now narrowing the profit guidance range to a new range of EUR 1.85 billion to EUR 1.95 billion PAT, which, as I said in the presentation, is ahead of our long-term target of EUR 10 per passenger, but below the previous range of EUR 1.85 billion to EUR 2.05 billion. I suppose I have to strike a cautionary note that this is all very much dependent on the unexpected and adverse events this start of the 31st of March.
And lastly, any update on FY '25?
I think it's still too early to give any guidance for profit after tax for FY '25. Neil and the team are still finalizing budgets. However, there's a couple of clear themes emerging. Firstly, our traffic growth will be a little bit less than we had originally predicted because of Boeing delivery delays. We expect, I think, in '25 to carry 200 million passengers down from an original plan of 205 million. I think pricing is likely to be stronger, certainly till summer '24, primarily because of the impact of A320 groundings. Europe is essentially an A320 marketplace, while they address the Pratt & Whitney engine issue and the OEMs, Airbus and Boeing remain challenged in terms of deliveries.
We would, and therefore, encourage passengers to book early, particularly for school breaks or summer holidays in 2024 because we think demand will be strong and prices will be slightly higher than 2023. On costs, we've already banked about EUR 450 million in fuel savings, thanks to our very strong hedging platform and the [indiscernible] that the fuel team have done and put in place, but there will be some counterbalancing cost increases we have.
We are negotiating pay increases, productivity pay increases with most of our pilots and cabin crew through this year. So that EUR 430 million in fuel savings won't all fall through to the bottom line. However, longer term, we believe we have a very strong platform for growth. As long as Boeing can deliver us all of the aircraft that we're scheduled to take and those aircraft come to us with improved quality, then we believe we're set forward for a decade of strong profitable growth in a marketplace in Europe where competitors are either cost challenged or are capacity constrained. And we believe, therefore, that there's a high likelihood that Ryanair will be able to deliver on our medium or longer-term forecast of growing to 300 million passengers by 2034, 2035. And I see no reason why profitability won't rise in line with that traffic growth over that period of time.
Michael and Neil, thank you.
Thank you very much.