Wizz Air Holdings PLC
LSE:WIZZ
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
1 161
2 536
|
| Price Target |
|
We'll email you a reminder when the closing price reaches GBX.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Wizz Air Holdings PLC
Earnings Call Analysis
Q1-2024 Analysis
Wizz Air Holdings PLC
The executive team opened the discussion by noting significant improvements in operational areas such as fleet utilization, schedule completion, and ground productivity, marking a recovery phase with increased efficiency and reduced summer cancellations—a promising sign for investors looking for stability and growth.
Despite operational advancements, the company is experiencing disruption due to engine issues, particularly with the Pratt & Whitney GTF engines which have grounded approximately 10% of the global GTF fleet. This situation has resulted in a scarcity of engines, affecting the availability and inducting an additional 200 engines into the shops for checks by mid-September, leading to a 3% capacity reduction in the second half of the financial year.
On the strategic front, the company has confirmed a significant fleet expansion with 75 new aircraft to be inducted, banking on the economics of a desperate manufacturer's need for orders at the time of the deal. This puts them in a strong competitive position as aircraft pricing has since increased, and they have a substantial delivery pipeline secured for the next seven years.
The company is actively investing in sustainable initiatives, including the usage of sustainable aviation fuel, which stands in line with coming regulatory changes like the phase-out of emission trading allowances. This indication of future industry competitiveness and their position as a less advantaged airline could mean a leveled playing field and potential gain from these changes.
Despite reduced capacity growth, from 30% to 25% for the first half of the financial year due to the engine issue, the company is confident in their net profit guidance. They project a load factor rise to 94% for Q2 and expect it to remain above 90% for the financial year. Additionally, they anticipate a lower ex-fuel CASK (Cost per Available Seat Kilometer) than the previous year, suggesting efficient cost management and leaning on profits bolstered by the scarcity of capacity in an off-peak period to offset potential undelivered growth.
After historical disruptions, the company has invested heavily in operational infrastructure and automation to scale their services and mitigate problems, restoring trust in the market and maintaining financial performance, particularly in the UK, despite regulatory pressures. Their readiness and response to overcoming challenges may reinforce investor confidence in the company’s resilience and customer commitment.
Investing in crew and manpower has been part of the company’s strategy to increase resilience and reduce overall costs from disruptions. An important point for investors is that the fleet-to-staff ratio is expected to remain constant, barring fluctuations in fleet utilization, which suggests a stable operational base moving forward.
The company's outlook remains robust in terms of demand in the regions they operate, including aspirations to expand eastwards up to Abu Dhabi. Their commitment to market share gains, balanced capacity growth, and exploration of new opportunities exhibit an aggressive growth strategy that may be attractive to long-term growth-focused investors.
You don't have any saved screeners yet
All right. Good morning, everyone. Thank you for coming to this financial report Q1 fiscal '24 for Wizz Air and also welcome everyone on the phone. So just a few highlights upfront. We delivered EUR 61 million of net profit in the quarter on the back of records traffic over 15 million passengers. Operating profit was not around EUR 80 million in this period. And this is a major change versus the financial performance last year, you recall, we were going through a very difficult period that time, but we have been putting actions in place to make sure that we solidified financial performance. And here, you can see the results.
Summer has been going according to plan. It is an improved operating environment, not perfect, but improved, and we are a lot better prepared to do it bases of the supply chains shortcoming especially. We have full confidence in delivering the previously provided guidance for the financial year, which is a range of EUR 350 million to EUR 450 million despite some of the challenges we are seeing and we are talking about that.
Flight completion rate in the period was 99.2%. That is compared to 98.4% in the previous year. So we canceled hard flights versus that period. And I mean, you are seeing already some of the big performance which has reported July and, of course, we are tracking our performance in July, we are seeing a much robust improvement coming through the period.
Utilization is now reaching 12 hours, and we continue to build that utilization number. We were talking about that last time that this is fundamental to the delivery of the business model. We continue to benefit from a positive revenue environment. Unit revenue was up 21% year-on-year with rising load factors and rinsing fans.
The cost performance of the airline has also improved. Ex-fuel cost was down 4% and fuel was down 71%. You recall that we started hedging again, when I started our hedge coverage in line with historical standards, short-term being hedged up to 80%. If you take the next 12 months horizon, we have covered roughly around 60%.
Credibility has been up to EUR 1.8 billion. That's a move of roughly around EUR 0.3 billion relative to same period last year. And we continue to focus on being a sustainable aviation vector which we have been recognized by a number of organizations.
If you look at the key operating metrics of, you can see that seat capacity has grown. We are up 51% versus pre-pandemic capacity level. Accordingly, you see the rise of passenger numbers. The freight continues to be up. At the end of the period, we had 182 on hand. Again, underpinning undertows numbers, but we are reporting our seats and passengers and we have been expanding our presence in airports. So nearly 200 airports are in operations for Wizz Air. And that comes with more operating basis in in overall greater penetration of countries.
We have reached the 8,000 make employees. I mean this is now double versus the low point of pandemic period. So we were down to roughly around 4,000 at the lowest point. So obviously, that requires significant efforts in terms of recruiting, training and inducting people especially pilots and cabin crew. But all in all, we feel quite confident in our ability to recruit resources needed for delivery in the business. And with the innovation of the fleet, we continue to drive our emission footprint down, as you can see.
And with that, let me turn it over to Ian in regard to the numbers. Thank you.
Thank you, József. Thank you, everybody, for coming today. So revenue ended up at EUR 1.237 billion, 53% higher than last year's Q1 revenue figure, which was EUR 809 million and 78% higher than pre-pandemic Q1 revenue. If you compare our year-over-year ASK growth of 26.6% over the same period last year, we managed to grow revenue at almost double the pace, combining higher volumes with higher yields, higher load factors and improved operating performance.
Fuel costs reduced by 13% year-over-year, thanks to a combination of a lower jet fuel price and the impact of our risk management policies. While our nominal nonfuel costs only increased by 21.8%, which is 4.8 percentage points lower than the ASK growth rate, the impact at which you'll see when we dig into the ex-fuel unit costs. Ultimately, this means we generated EBITDA of EUR 236.7 million, operating profit of EUR 79.9 million and a net profit of EUR 61.1 million, which is in line with this year's guidance to a return to profitability.
Cash is building very well and grew to a June 30 balance of EUR 1.8 billion, and that balance continues to have grown to where we are today. RASK unit revenue ended up at EUR 4.19, 21% higher than this quarter last year and 9% higher than fiscal year '20 pre-pandemic levels, supported by both higher ticket and ancillary unit revenue. We expect strong unit revenues in Q2 as our load factors continue to build as evidenced by the July load factor figure of 94.9% that we announced yesterday, up from our Q1 load factor of 91.2%. Overall, demand in Q1 and Q2 remains strong.
Our booking curve is around 5 days longer than pre-pandemic and our machine learning pricing efforts are showing the results with our ancillary revenue per passenger amount continuing to grow more than our EUR 1 per year per passenger fare improvement target.
We continue to bring new products to market, including our subscription option pilot programs in Italy and in Poland called multipass as well as alternative new discount club tier levels.
As of June 30, our cash balance has grown, as I said to EUR 1.8 billion, driven by a combination of factors, including the underlying performance of the business, lower fuel costs and the deferred or unflown revenue from future bookings, which follows a normal buildup in this period. We've reduced the balance on our PDP facility by over EUR 100 million, and this is on track for a full repayment by the end of this fiscal year. Overall, our net debt balance stands at EUR 3.8 billion and with the return to positive EBITDA, we will see our leverage ratio return to target levels. We have scheduled engagements with the ratings agencies, and we look forward to reporting on those discussions after the release of our H1 results.
Restricted cash, as you can see on this chart, continues to reduce just like it did last quarter, as we released cash that was collateralizing letters of credit under expiring aircraft leases.
Fuel costs ended up 31% lower versus last year, helped by a lower fuel price environment and the impact of our hedging policy, which kicked in at the beginning of this fiscal year. Our hedge protection as of June 30 stood at 62% for this fiscal year for jet fuel and 53% for the currency portion of fuel consumption. Currently, where we stand, the fuel price and currency prices within our collars, which means that we either pay out under our hedges or pay or receive under our hedges simply pay the price of fuel, but there's no hedge gain or hedge profit or hedge cost or hedging expense -- on that portion, including the lower fuel cost is a 1% improvement due to energy efficiency measures.
Ex-fuel CASK came in at EUR 2.51, which is 4.1% lower than Q1 last year, contrary to some of the increases that we've seen from our peers. We expect this year-on-year reduction to continue throughout the fiscal year despite the inflationary pressures faced in the industry. Relative to last year, we are benefiting from higher utilization of 11 hours and 58 minutes versus the 11 hours and 47 minutes this quarter last year, lower flight disruptions and EC 261 costs, thanks to lower cancellation rates are benefiting from lower navigation costs, better activity and more economies of scale with Wizz being a larger airline.
And with that, I'll hand it back to Joe to talk about the trading update. Thank you.
So I would just like to take you through a few points here. So looking at operations, and I will give you some color as much as I can with regard to the situation. the recovering commercial positions, market positions, how the network is developing, what's happening to fleet, especially in light of the confirmation of the 75 aircraft to be inducted and a few sustainability and ETS allowances.
So with regard to operations, you may recall that we were talking about like triad of key priorities for operations, utilization, scheduled completion and group productivity. Now you are seeing the efforts and investments that we have made that now are bearing fruit. So you see fleet utilization is moving up quit significant plan on cancellations.
And it will be even more significant in the summer performance of the business, the peak solar performance, we are seeing like a fivefold less cancellation happening in summer what we were encountering last year. So I think the business is really improving from an operational perspective. It's not perfect. I think we are seeing 2 significant challenges still affecting the the ability of our teams to the airline. On the one hand, we are still seeing ATC being short of stop as a result imposing slots in the market affecting the on-time performance and to some extent, the cancellations and schedule completion of the industry.
But if you look at business position, especially from a perspective, Visa is now 1 of the 2 performing airlines in terms of scheduled completion, but out here to the rest of the industry. And the second issue, of course, is the present overall situation, which is not just the very latest announcement, but it's also the kind of preceding issues kind of creeping through the system. You may remember that we were talking about the kind of demand one of the GTF engine in Abu Dhabi to summer given the hot and same vitamin. And at that time, the OEM believed this was contained to a operating environment but would not affect the operation of the engine in a environment.
Now we have been learning that that's actually -- that was not the case and we started seeing significant issues already in benign operating environments to an extent that the industry has grown in roughly around 10% of the GTF fleet globally. And that includes North America, South America, Asia, et cetera, Europe included.
So we are not immune from the issue. This has nothing to do with the recording of 200 engines just recently announced. So already, that kind of a creeping issue resulted in scarcity of engines in the marketplace and significant pressure on engine removers and. And that affected the availability of the and that affected into it of the populations. And on top of that, now we are getting the engine removers imposed through service betting of, essentially mandating that by mid-September 200 engines, we have to be stopped in operation and we'll have to be inducted into shops for routine checks. And we have 12 engines of those operated by ourselves.
So it's actually that affects 6 lines of flying, and we are adjusting capacity accordingly. So we are moving 6 lines supplying as of mid-September. Now the good news is that that actually doesn't affect the performance of summer, but essentially, that affects the second half of the financial year. The overall capacity impact is estimated to be around 3%, which basically lowers our capacity in the current half year. So when we are guiding on capacity from 30% in H1 to 25%, this is partly the new engine inspection issue and partly the creep of the existing operations engine spare and scarcity and shop visit pressure in operations.
And in the second half, we maintained the guidance of 30% capacity increase despite the grounding of aircraft arising on the back of this engine issue because we were planning the second half more select, more reserves. So actually, we have the ability to stock some of these issues up without necessarily adjusting capacity. But this is only tranche 1 as. so tranche 1 means 200 engines globally mandated to be stored in operation by mid-September. We don't know exactly how much time this is going to take to recover the engines being to. This is still work in progress with the manufacturer to understand the scope of the inspection and the timing required and the capacity on their side available for spices. So I cannot give you more on this.
Our current assumption is that we are retaining that capacities throughout the whole winter. So we are not planning on any state diversity Union. Now there is tranche 2 that was already announced by by Pratt & Whitney, which is globally 1,000 engines. So this is like a 5x thing. Now this is going to be given a much longer period. We don't know exactly about the deadline. The only the current best estimate is that prove this is going to be sometime next year, maybe the first half of next year, but we don't know even. So I think this creates the opportunity for a more staggered approach. So this is not going to be shocked the industry, but you can stagger the process.
But again, we have to understand the issue. We have to understand the timing. We have to understand the scope of work that needs to be performed, and we have to come out with a plan how the best kind of schedule or these engine removals against those frames available to us. But there might be further changes, but understand all these issues, we will be back to you. But for the time being, we have accommodated issues, and we have been planning accordingly to what we understand today.
Moving on to the next slide. So this is the evolution of the business in terms of, as you can see that we continue to benefit from gauging confirming the fluid to A321. Now the average seat count per aircraft is 291. I mean, obviously, that drives significant economics and -- economic financial benefits for the business. And you can see the the recovery of load factors. We are still not back to pre-pandemic levels, but we are approaching. You probably saw the July report. So July was just shy of 95% of factor. So we are already coming back to historical performance levels.
The growth of the fleet. Obviously, we continue to benefit from market share gains in our markets. As you can see, -- it's been a continuous reinforcement of our leadership in Central East Europe, but also our positions in other countries in the UAE or in Western Europe.
Maybe a few words on freight because you were kind of missing this chart was. We added 75 aircraft upfront. But I think what you need to know about the 75 is that that 75 aircraft recently negotiated as part of the Dubai order. And the Dubai order was placed under the Indigo umbrella within circumstances that the manufacturer was desperate for aircraft order. And you can imagine the corresponding economics of manufacturer being desperate and it's actually signing they have the largest order at that time with an airline group.
And today, if you look at the situation, are pricing has gone up significantly given the scarcity of the asset. So we are hugely benefiting on into for order as because we are today up against have any different market versus that time. So this is not a new order. This is an old order option at that time, which is now converting into a firm order. So we carry the benefits of the economics of the deal from Dubai. And now that gives us 350 aircraft or so to be delivered in the next 7 years, which I think is also important because we are ambitious to try to figure out a fleet for your airline to grow your business. I mean you are not going to get much out of the OEMs because today don't have aircraft to offer to you. So you would need to go to the market and you can see this market really riding the benefits from their perspective by overcharging the airlines. So we are not subject to that.
Sustainability remain is important to the company. Now on the one hand, of course, we are benefiting from the innovation of the fleet and the investments that we have made into new technology engaging, but also we have now landed on the field of sustainability on field. We started flying actually sustainable aviation fuel, and we have made investments into sustainable aviation fuel, operations on the equity side. And we continue to look at various other initiatives, what we can engage with going forward. So we are not just sitting and taking advantage of the new aircraft, but we are also reactively looking for ways of creating a buzz for a more sustainable aviation operation beyond just relying on new. And of course, we are getting increasingly avoided and recognized with our efforts here.
There is an important change coming in the regulatory flavor. So emission trading allowances are getting phased out. That's a program over 3 years, starting next year, ending in 2026, this is a relative gain to this. It is a cost to the system, but it's a relative gain versus the rest of the industry. We are the most disadvantaged airline at this point in time, given the high growth of the business because the emission trading scheme is really rewarding those who are incumbent in the market. I think it actually goes back to like, I don't know, 15 years ago level of operation and airlines that are not really growing or slow-growing bikes of contain those sort of guys. But even if you look at road has a significant advantage over us when it comes to emission trading. Now this game is going to be phased out, eliminated and we lever playing field, and we will really competitive to benefit from that.
With regard to guidance, capacity has said already. We are reducing first half capacity grows from 30% to 25%. Again, this is the combination of spare engine scarcity in context of 10% global grounding of GTF engines and the latest patent recording of engines for inspections. H2, we continue to guide down 30% despite the capacity decrease, resulting from the GTF groundings, we can stock up that balance through the select reserves of the system.
Load factors. We continue to rise. We expect 94% for Q2 and certainly above 90% through the financial year.
Ex-fuel CASK. We are expecting to be lower than last year, we don't find a specific guide given all the issues that we are seeing. So we just need to come to the challenges and open fully understanding the exposure and fully understanding the plans, how we mitigate the exposure and be in a better position to guide on cost.
But with regard to net profit, actually we are very confident that net profit guidance remains solid in place because even if we have to reserve more cost on the system, actually, capacity scarcity in an offbeat period is at in a yield opportunities actually can yield the business up. So we don't feel uncomfortable with the profit guidance actually makes somewhat of a profit opportunity for the business. But first, we need to fully understand all the impacts before we can revise these estimates. But I just want to reiterate our confidence in the profit forecast.
And with that, let me just sum it up. So we remain focused on the operational KPIs with regard to completion, schedule completion, utility of the and productivity of the crew. We continue to invest into improvements with that regard. Now we are clearly seeing metrics through the network, resulting in better RASK performance that includes yield as well as vector performance.
Some of is in line with expectations. We are not seeing any issues coming. We are halfway through it, and so far, so good. And you can see that now we are a solid operator within that environment with solid revenue performance, unlike the situation last year. We are now protect on the macros through hedging. So we are not as naked as we were last year. So we reinstated our historical policy. Ex-fuel unit cost keeps reducing in line with expectations despite the challenges of the business in cost.
Our full commitment our fleet gives us the ability to lower our costs, certainly relative to the performance of the industry and also to to reduce our carbon footprint going forward. But engine issue is a disturbing factor. I think we have compares with tranche 1. We are trying to understand trance 2 and then as we fully understand that you're going to be able to develop our plans accordingly and guide you, especially on capacity, but we don't see any challenge to deliver we have guided already at this stage of the game. Thank you.
[Operator Instructions]
Jamie Rowbotham from Deutsche Bank. Three potentially quick ones. Cancellations have clearly improved. Will utilization get to where you want it to be in Q2? Or is that going to be a tough ask now? Secondly, just looking at the outlook comment, perhaps you could clarify. Is it fairs revenues per ASK that you expect to be up by a low double-digit percentage in Q2?
And finally, on GTF, insofar as your -- in so far as you might start to be inconvenienced how do you expect compensation to work? Will it be cash now or perhaps commercial discounts later on?
Thank you. With regard to completion rate versus utilization, but certainly, we have more confidence in the completion rate than in the utilization. Utilization Is affected by the engine performance, the engine removers, and this is not yet fully understood. But really, we have been improving, and we expect to continue to improve the extent of which I think is to be seen. And as I said, I would not be there to guide you on this at this stage of game before we fully understand the with exposure.
With regard to the double-digit revenue improvement, yes, that's unfair. So obviously, the RASK improvement comes on 2 lines, higher load factors and higher sales. GTF compensation. And obviously, this is a matter of commercial restructions with the meat, but putting things in perspective, that is the single largest customer of Pratt & Whitney. So in that regard, you should be expecting a treatment according to that status.
Harry Gowers from JPMorgan. A couple of questions, if I can. The first one, just on the 5% that's been taken out in H1. Could you maybe give us a bit more color on what parts of the network, in particular, that's coming out from? And I appreciate it's a little bit unknown on the impact in H2 at this stage on Phase 2 in particular, but have you done any worst case, best case scenario planning on capacity or just too early to to tell?
And then final one, just on the Q1 ex-fuel CASK was down about 4% year-on-year. So should we see that as kind of the lowest year-on-year run rate this year. So can it come down by more than 4% over the coming quarters?
Okay. Maybe I start with the capacity reduction. So I mean, this is fairly across the board to winners. So if you look at it cancellation of, we ended up with a little higher than targeted level, still pretty strong in the industry. I mean in this quarter, it is performing airlines in the European airline industry but somewhat higher rates on cancellation than that was one impact. And the order impact was Abu Dhabi where we are fleeting the Abu Dhabi operation from GTF to COB 2,500 operation taking of the issues we went through last year. But I would say that all in all, it's almost like barely equally spread across the network with a bit more on Abu Dhabi relatively versus the European operation.
In terms of H2 capacity scenario planning versus the witness exposure, of course, we have been doing a few scenarios. We just need to understand frist 2 things. What is the timing? Like on tranche 1, we have a mandate September 15. So that's fairly clear planned against that. The tranche 1 issue is still not fully understand in terms of scope. And in terms of and ability to induct engines and push them through the shops.
So we don't know being time to be exactly what is it. It is 30-day issue, is it a 100-day issue, is it 200-day issue, but essentially, we have taken the view that we have removed it from the balance of the financial year, so the next 8 months because in any event, tranche 2 is going to go back to back a bit tranche 1, but we don't fully understand tranche 2 because saying that in the best case scenario, they might be able to not be the designated shop program. So it wouldn't affect the current operations of the engine shops, but this is not yet fully confirmed. Maybe that is a faster procedure available to us, maybe not. So we don't know that. But our assumption is that whatever the completion of tranche is quite likely is going to go back to back talk to tranche 2.
And then on the third question on the ex-fuel CASK reduction of 4%, is that something that we can expect for the rest of the year? And this is precisely why last quarter we were reluctant to give a specific ex-fuel CASK guidance number because we don't know what's around the quarter. And clearly, what happened, what we're talking about now was unforeseen.
But with regards to overall ex-fuel CASK progression, I think you're going to see tension, right? We're improving in a lot of metrics. Certainly, utilization is going up. Completion rate is going down. We are delivering against those targets. But at the same time, we're seeing the impact of more frequent engine renewals, scarcity of engines because everyone is trying to secure supply. The longer shop as it turn times, that's affecting overall availability of aircraft and putting on the overall availability.
And so I think that you're going to continue to see pressure on ex-fuel CASK such that it's very difficult to give a particular number, even though we are committed to reducing that year-on-year. But there's going to be upside in the form of taking these aircraft out of the fleet in the winter period will allow us to focus on those routes where we can bring profitability and avoid negative contribution routes. And at the same time, yield up, right? So price up based upon that capacity reduction.
And so I think one of we're just focused on is the continued commitment to profitability. And now we maintain our confidence in the guidance is applying to focus on a particular ex-fuel CASK number. But overall, year-on-year, that's where we're bringing that down to.
It's Andrew Lob from Barclays. Can I ask about the removal of the aircraft and the capacity changes? I see that you said that you don't expect it to be detrimental to profitability. And I think all of us in the room appreciate that a bit less capacity means you can yield up and it's a good yield environment. But the capacity change you're making is 5 points in the first half of the year when you and the industry make a ton of money, and you're not actually reducing your capacity guide in the second half of the year when you and the industry lose money.
So conceptually, I'm kind of struggling to see why it doesn't end up pressuring your profitability? Because you're taking capacity out of the profitable first half and at the moment, changing your capacity in the second half, and you're telling us about how it's great you can remove weak capacity at week time of the year at capacity is not changing in the winter at the moment. So some words around that would be good.
Other question would be around the U.K. CAA announcement on the tight review, I think, of the repayment issues. Where do we see that or where will we see that in the P&L and in the cash flow going forward? And then otherwise, how do you see that issue playing out with your reputation in the U.K.? Because obviously, I guess that does feed through to unit revenues, and I fully appreciate that your performance in terms of disruption and on time is really good now. And unfortunately, you're getting this news flow relating to historic performance, but that's something for you guys to manage I guess.
All right. Maybe I'll start with the second one. The U.K. CAA. I mean I think it's fair to say that we got completely overwhelmed summer. We were just unprepared for the the magnitude of disruptions and issues folding out of it. And I think with infrastructure, we didn't have the manpower, we were just not set to the wide level of claims and consumer issuance. But I would caveat this whole problem that 90% of customers were created pretty much in line with policy and standards. So here, what we are talking about is more like a 10% issue.
Of course, this is the noisy of 10% which is blown out of proportion creating tension in the system, in the social field and with the regulatory framework. And this is the 10% when you buy a $50 ticket and you want to charge EUR 2,000 for staying in the 4 seasons kind of up. And also, these are the claims coming through the Ukraine factory, the lawyers waiting for you at the airport when the flight is late, 3 hours and mini and capturing. So this is kind of the category of issues.
Now what we have done, we have put in roughly around a good GBP 100 million into investments to increase infrastructure capacity, more operating 4x more bigger and larger cost capacity than last year. We have invested in manpower. We have globalized losses in the U.K. to be more focused on the U.K. issues. And we invested a lot into automation to make sure that we can systemically scale our operations up. This is history behind us. I mean it sounds like this is a new issue, but it's a history. There is nothing new coming out of this. Largely, all these issues have been absorbed financially. So you're not going to see anything really in terms of numbers coming out as a result of this.
I think the CAA, if I understand social pressure that they need to do something and wanted to act as a good content with that regard. But this is dealing with historic with future matters we are pretty beat the future. But first of all, we are one of the best talents in the U.K. in terms of the operating metrics. And two, we are robust in terms of infrastructure and manpower issues if anything goes on.
In terms of reputation, I don't how you measure that. I mean one of the things we all know that there is no shorter thing than people's memory. And if I look at the performance of the U.K. business, it is not an outlier at all. Actually, the U.K. is probably now outperformed in the corporate lines in terms of financial performance, profitability. So I'm not saying that we have a structural damage goes by that short term, we've affected. But as we are now approving those apps and we have been learning and we have been making the investments, I think we are earning the credit from the market the trust of the consumer.
With regard to the aircraft remover and how would that affect? Well, as a matter of fact, I think we were having various scenarios. So originally, we were planning on somewhat higher than 35% growth, but we were just not certain what that 35% growth would be fully delivered for various reasons. It can be a big market, and we wanted to have the provision to take some of the capacity out to the demand environment be weak, and we are not seeing it. So we are not seeing consumer demand holding to a period. I know that is not a set around pressure and recession coming consumer spending side, but we are not seeing any of that.
As a matter of fact, our moving sort up versus an open startup versus pre-pandemic levels, higher. So actually, we are seeing a robust environment in an environment continue to enforce going forward. But we wanted to have the provision. So if you want to pay it all the numbers, we were looking at potentially 35% growth, but we were guiding 30% because to have that reserve should we be making that adjustment.
Now we are not making this adjustment for that. We are making the adjustment for the engine issues and to the engine capacity. But we feel actually quite confident that this is, if anything, more than a yield potential for the business. But we're making a neutral position on this. So we are not banking on more yield or anything like that. I think it's more like if you are containing capacity in the current environment where demand is strong, then quite likely that gives you a yielding opportunity. And I think you should be pretty much expecting a very heavy compensation by the manufacturer on the cost side. So it should not be blowing or worst performance here because of that. I don't know if that is the question, Andrew?
I mean, I was really wondering and perhaps for Ian rather than for you, no disrespect. Thinking that it's mathematical, you are to the market, reducing your capacity in H1, you're not changing your capacity in H2. You make money in H1, you lose money in H2. Therefore, everything else being equal, your profit is down. .
But I think you need to create supply and demand in the marketplace overall. And we are not the sole in the market. So we are not in a. Your logic applies and you are a monopoly player, then essentially your own net is determining supply and demand. But I think what we are seeing is that quite likely, you're going to be seeing reduction of capacity by other. And certainly, what you are going to see is that all directors are not folding on the pressure. So the cost of the industry is going up or cost is coming down. So I think that kind of opens up the window for competitive advantage for us. And I think that we play into the strength of demand for us, which might be very different from the strength of the industry.
There are no further questions from the room. We can open up to questions online.
We'll go to from Bernstein.
from Bernstein. Just 2 for me, please, on the positioning. The first is in Saudi Arabia. Have you seen any progress in this regard? It's been really quite. I was just wondering what we currently standing? And then the second one is capacity growth on growth and dryer as well. And I'm wondering whether the market can be that much growth?
I think in Saudi Arabia, nothing fundamentally has changed since the last report. There is a process in place led by the Saudi Civilian facility, and we are been in the process, but no news yet. So we are status quo. But at the same time, we have put in quite significant involved capacity to penetrate the market, and we are seeing a continued strong consumer reaction to the proposition that we are bringing to.
With regard to Albania, Albania has been really an up and coming market for what we said and for whole industry. You recall that Airport used to be operated by operators pretty much overcharging for the airport, restraining the growth profile of the market. That changed. And a very different cost structure got imposed and that attracted Wizz Air, that attracted our directors, in the industry, and that dropped essentially in the market, stimulating a lot of demand building the franchise of flying in the country. We are not seeing any significant issues coming out of that market, but let's not overblow Albania, this is a country of 2.7 million people.
And we'll go to Satish Sivakumar from Citibank.
Yes. I've got 2 questions here. So first is around the staff issue. If you look at last Q1 versus Q1, we had gone up by 139 to 44 roughly around 13%. How much of this increase is actually related to some resiliency where do you see this ratio normalized given now you're actually taking some capacity out into the second quarter, we expect it to come down? .
And the second question is, we did in the presentation that booking curve slightly longer now given the leisure exposure Again, going into quarter 2, what is the booking a stance versus 2019 levels? And as you go into winter, obviously, into quarter 3 is going to be less of leisure. If the GFR still continues to be, do you think part actually do price stimulation to get back or back to normal booking levels?
So Satish, I think it was a little bit tricky to hear you, but I think you were asking about whether the fleet-to-staff ratio, which you indicate might be up 13%. Is that something that will continue to be like that and grow? Or is it expected to normalize, is that the question?
Yes, yes. Essentially, you cut capacity into quarter 2, should we expect that to actually just step down into quarter 2? Or is there 2 short motors to take some staff cost out?
I think this is a fairly mechanical mathematics to be honest, are talking about mathematics. I mean you you take number of crews required to operate the aircraft. And that's a fair set number roughly around 6 crews per aircraft. This is an A321. So one crew is 5 plus 5 crew and you just multiply. And that determines staffing of the aircraft. Obviously, the the greatest volatility that goes into this situation is the utilization of the whatever reason, the aircraft is not utilized, obviously, that inflates the crew number aircraft. But assuming a normal cycle of utilization, actually, that's a fairly constant way of applying, that is not changing. So I don't think there is any variability other than utilization coming through this line as far as I'm concerned.
So going into quarter 2, given that you get capacity now, so this number should even further go off, right?
Yes.
I mean it's not a cost that we're familiar with, but we've always been very clear through the last few morning cycles that one of the ways that we're planning on increasing our complete rate or reducing our cancellation rate is by ensuring that we have sufficient protecting the system with regards to crewing and spares -- and spare crews. And so that is a part of the investment that we made. And I think Joe mentioned the EUR 100 million earlier that is designed to help reduce the overall disruption costs that affect us, which we see as a greater magnitude. So that might be part of -- that's probably part of the effectuating there, Satish. But it's not something that we think is out of line on a structural basis going forward.
And with regard to the booking curve on VFR, yes, booking curve for VFR traffic to be fairly normal. I think actually, the booking curve for leisure is more and depending on the market. So if you take the U.K. as a market given that we have an island operating in the U.K., you said U.K. and that airline is increasingly focused on serving the U.K. customer, the U.K. market. So there is an increasing leisure component in the operation of the airline actually that extends the booking curve.
We'll go to Jarrod Castle at UBS.
Can you hear me?
We can.
Great. Three for me as well. Just coming back to the GTF. I mean how many planes are actually exposed? It looks like 93 in your fleet. But also, can you talk about the future exposure as you take deliveries or deliveries on the GTF? And also, like, how did you get to 12 planes, is it just based on the capacity that Pratt can service or the other planes? Can you just mean I know spoken a lot about this topic, but just color on those points, please?
And then just kind of thinking about how far east you actually prepare to expand? I see you've just gone further into Iraq. When -- how far will you expand? When do you start hitting kind of, I guess, some of the low-cost agent carriers on some of those routes? And then lastly, just talking about the Ukraine obviously recently announced a big push once it reopens, just to be interested to hear your plans. And also, if you do still have any of your fleet, which is still has to be brought back from Ukraine?
Okay. So let me take the reverse order on your questions. So Ukraine, you have one aircraft in Ukraine. Essentially, we used to have 4, we flew out. We got stopped 3 in. 2 aircraft. We bought out 2 aircraft essentially and we removed engines and some of the parts. We ship them back to Europe and we basically use them as parts for supporting the business. But we have 1 intact airplane still stuck in.
In terms of transport for Ukraine, well, maybe I'll just remind you that prior to the war actually, Visa Airbus, an airline basis in Ukraine being the only European airlines. Now there is a lot of chatter around, but different we're doing in Ukraine, whether it's still going Ukraine. And the market is closed regularly prohibited to operate. Of course, we are going to Ukraine. Ukraine as the only based on carrier in Ukraine prior to the pandemic. So we have full commitment for the country. But I don't think that current conditions are for operations.
Then how far east can we get to? I think we are as far as Abu Dhabi at this point in time. And like in the U.K., we are looking at the market in Abu Dhabi, we are understanding the interest of consumers flying into Abu Dhabi and out of Abu Dhabi or the broader UAE if you want to put it that way, and we are creating the infrastructure to penetrate those demand flows and those customer aspirations.
In terms of flying out of Abu Dhabi, of course, you can imagine the subcontinent, you can imagine a number of countries that create significant workflows for serving the UAE for kind of natural opportunities for investments in Abu Dhabi or in the broader UAE. I don't think we have any plan beyond that. So the, if you wish, will kind of extend out further risk in the future, subject to regulatory approvals and designations. But in terms of base operations, we are committed as far as Abu Dhabi at this stage of the game. And if the changes, we'll let you know.
With regard to the GTF issues. I mean, again, I have to say that you want to know more than what you do and believe me in the same position as you. But simply, we just don't know what we don't know at this point in time. We are not expecting to have any issues with future deliveries. These are issues that reflect on previously delivered engines, especially the first generation of GTF deliveries. But as said, even on Tranche 1, what we understand is the number of engines exposed, the timing, the mandate to stop the operation of the engine, but we steer on fully on an the implied on the engine and exactly how execution is going to take place through designated shops, so just going into the current system.
And we know even less on the second tranche. We don't know how many engines of ours are effected. We don't know the. We don't know the timing. We don't know the process. So anything that I can do is to speculate, but I don't hold it.
If I can just clarify, Jared. It's 12 engines, not 12 airplanes. And how we landed on that number is because we were revised by Pratt on the specific numbers, which then match against our engine. So it's 12 engines, which depending on the timing of the removals because somewhere schedule for removal could be up to 6 aircraft.
And we've got a question from Bank of America. I don't have Christian, your surname is by Kayani.
This is Muneeba Kayani from Bank of America. Can you hear me?
We can.
First question was just a clarification on the first question on the call on the RASK guidance. And to clarify, so in the first quarter, RASK ticket was 38.7% up and your guidance is for low double digit in the second quarter. So is that -- did I understand that correctly? And if you could clarify what's the stage length impact here and the kind of sequential slowdown? Is that just a base effect from last year's recovery?
Secondly, just to clarify, we've heard from your competitors about some softness including bookings. Have you seen any of that in your bookings? Thirdly, on the Middle East, how is that impacting the seasonality on your fares given the different timing of holidays there?
Sure. So you're right. So our ticket RASK Q1 was 38.7% higher year-on-year. In the RNS, we referenced double-digit increase on ticket revenue for Q2. What that translates to is that is ticket RASK again. And I would say we're in the lower end, so 10%, 11% would be a fair number for what we're seeing at this stage into Q, so 1 month in. You want to take office?
Yes. So I mean, we are not seeing any stoppers creeping in. We are seeing demand as towers, as you can imagine. I mean we are having that discussion like every 3 months. We are here that -- the market is telling us we understand you guys today, but was not happen in 3 months also as things happening 3 months or 6 months, and we are in anything coming in the next 3 to 6 months. So we stay confident in demand.
With regard to seasonality issues, actually, we like the profile of the Middle East when it comes to seasonality because it in summer, where you would be expecting the market to be off seasonal just because of the heat. Actually, you've got a lot of demand from residents of the Middle East to travel to Europe and as well. And in winter, you see a lot of involved as you go to the market. So actually, these markets are a lot less seasonal than even the European markets.
And we'll go to Mark Simpson from Goodbody.
Can you hear me?
We can.
Great. A couple of finance questions. So for Ian. In terms of the CapEx, I mean, if you just run through net CapEx for, well, definitely '24, '25 and even if you can for '26. Within that, on the financing side, there's quite a shift last year using GoCo rather than IFRS 16 leases. There's obviously about 160 basis points of financing advantage that we saw in that. Will we see something similar this year, again, the kind of 60-40 split in favor of GoCo and the?
And then finally, you mentioned the June liquidity position of EUR 1.8 billion and match that to the March EUR 1.5 billion. At the end of March, you had unearned revenues of EUR 761 million. I'm wondering what the unearned revenues were at the end of June?
Thanks, Mark. So in terms of CapEx, net CapEx in the outer years, we don't advise on that. But in terms of the financing profile, we run tenders through our fleet financing roughly for covering the next 12 months in advance. It's harder for less orders of financiers to really commit anything longer than that. And even at the other end of 12 months, we see people struggling just because of the volatility in the markets.
But when it comes to the choice and IFRS 16, you then have their benefits, ultimately like everything else we do in our business, we focus on lowest unit cost and lowest cost in general. And so we run these campaigns and compare them against all the options available. We have seen a lot of appetite from Far East in terms of our financing sources, but not exclusively. We've even seen some lessors from the European market come back into the game and be competitive. So we look at it really more as the overall total cost of ship or total cost of utilization at the end of the day because, obviously, they're not owned other than do have a feature to convert that. And the decisions based upon absolute cost. There's no rule of thought the market, whether it's 60-40 or some other percentage in terms of what we prefer at the end of the day.
With regards to the unearned revenue number, the number that -- we used to provide a waterfall, but we feel that that we have too much insight in the landscape. But I would not expect any -- I would not assume any deterioration in that number relative to other periods. So very healthy. No deviation compared to what you would have seen in prior periods.
And We'll go to Neil Glynn from AIR Control Tower.
Neil Glynn here. Just one question. Clearly, there's been a lot of discussion about GTF and capacity management. But the fact that fuel headwind are stepping up again if the same hasn't been touched on very much through the session. And I think it would be helpful to update us on how you feel about the stage of development of the capacity added since the pandemic, and you're going to need to price up on some of the newer routes around the network should not be necessary? Other fuel headwinds possibly is likely into FY '25 at the current fuel price?
Yes. I mean -- I mean, clearly, you've seen this kind of taking a strategic position on COVID. And we invested against the cycle, if you wish. And that will be only 50%, 60% larger airline than pre-pandemic versus an industry of not even using pre-pandemic capacity levels and the same rule applies every operation we perform must be profitable. I mean there is no better strategy than profitability. And this is the base of allocating capacity. This is the base of growing capacity. This is a turning capacity vulnerabilities. It is profitability.
And we are seeing a very equalized position and performance, of course, the geographies we operate in, we are seeing strong catch-up. In Western Europe, we are seeing very solid operations from a financial standpoint in a,and we are seeing the rising of our performance in Abu Dhabi released overall. So I think we feel very comfortable with with the investments that we have made and with the return of those investments and we don't really see outliers either maybe the need to be deficit.
What happens in a higher fuel price environment? I think what's going to happen is what it has been happening over the last years or decades that changing input cost flow through into the fare environment on capacity discipline, but it is a bridge. So it doesn't happen overnight. It takes 12 to 18 months. So if you what it means is that the capacity comes out of the market and we balance the supply and demand and fares will get increase when input costs start falling over time, you will see more capacity coming to the market. And basically, the takes fares down. This is ambitions throughout the decades. I've been in this business over the last 20 years. And I think this is exactly the same what you should be expecting.
And this is an industry game, okay? So I don't think that you have to translate it airline by because the other factor is that if you are a local carrier, your relative operative position will improve in the down cycle. So if you call it as a down cycle, you actually are better off a better competing force than in the upcycle. So what you see is this kind of a trading from micros to low cost of consumers. And if you look at the step change of the low-cost industry market share terms, that always happen in the down cycles when the customers fell under pressure and then the customer downgraded from highest cost to low cost. So actually down cycle, a high input cost environment in trading but that's a good thing for schedule.
And we'll go to Ruairi Cullinane from RBC Capital Markets.
Ruairi Cullinane, RBC. Two questions from me. Firstly, over the pandemic combined share of winner in Central and Eastern Europe has increased. Do you see that as a good thing? Is the market more consolidated a headwind because you're more often running up against a more formidable competitor? And perhaps linked to that from how Romania has performed in recent quarters given you backfilled some of Blue Air's capacity there. .
I mean, we have been competing with these guys in Central for 15 years. So I don't think anything new is happening. I don't think the question is what happens between these and Blue Air. Nothing is happening. The same is happening, that both airlines are growing. And of course they should be going because these are the airlines that actually stimulate the market and create traffic and can create demand for the industry reinvest what's happening to the other guys because they are going over. I mean you can see that either they go bust, they're going to be low by governments, but they are losing the relevance to the market.
And I think that will continue to happen is growing, you will see in a going and you will see the legacy industry thinking. And that transformation is quite impressive as a matter of fact, but it's also interesting to kind of observe how that actually takes place. So you go back to 2004, I'm just using 2004 because that was the year of the session of Central and Eastern Europe, and that was the year when we started flying coinciding with that.
If you look at the aggregate legacy capacity in Central and Eastern Europe today, it's pretty much exactly the same by the very seat than what it was in 2004 years ago. So the legacy industry has not been able to grow more single seat in Central and East Europe. But the airline industry is 3x the size of what it was in 2004 and that was all stimulated and created by Visa and the life softer. And I think that's really the way to look at Central East Europe as opposed to assuming that this is a dog fight between 2 airlines. Of course, we are growing. Of course, they are going. But that's not the question. The question is that this is a shaping that is not in the whole industry as a result.
The second one is Romania.
Romania, Well, I mean, long competitor is down. Blue Air much replaced well and we take it from here.
And we've got time for just one more question from Conor Dwyer from Morgan Stanley.
Just one question for me. I just clarification question because when I read the statement in the report, I understood it differently than I think it was answered just. Just could you clarify on the double-digit increase ticket revenue. Is that revenue per passenger or per RPK?
No, that's revenue. That's RASK, ticket RASK.
And I think that's all we've got time for. So back to you in the room.
All right. Thank you, ladies and gentlemen. Thank you for coming. Thank you for your appreciate it. See you next time. Thank you.