Wizz Air Holdings PLC
LSE:WIZZ
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Wizz Air Holdings PLC
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Hello, and welcome to the Wizz Air's Full Year 2020 Third Quarter Results. [Operator Instructions] I'd just remind you, this is being recorded. So today, I'm pleased to present József Váradi, CEO. Please begin.
Good morning, everyone. Thank you for joining this press conference. So we are reporting Q3 fiscal '20 results. So this is the October-December quarter 2019. I think we are reporting very solid set of results in this quarter, kind of similar to previous reports and quarters. Very importantly, we delivered 23% passenger growth in this quarter. But not only delivering that growth, we also increased unit revenue performance, which is a rare combination, especially at that level of growth. Our cost performance was very strong, so one of the fundamental drivers of profitability in the period. Ex-fuel costs came down by almost 6% in the quarter. And as a result of a -- an improved cost position and improved revenue position, our profitability went up by around EUR 21 million versus a breakeven result in the previous year. We continued to expand our business across our network by launching over 100 new routes what we've already announced for fiscal '20. We also made a significant announcement to establish Wizz Air Abu Dhabi, a Wizz airline subsidiary in joint venture, basically with the Abu Dhabi government, and we expect that initiative to take off towards the end of the year in the current calendar year. Also, we are raising our guidance from previous EUR 335 million, EUR 350 million band to EUR 350 million, EUR 355 million, and this is obviously a reflection of improving performance, what we've already delivered, and also, our view on what we are seeing for the remainder of the financial year. So moving on to the next slide. This is Page 3. You can see a summary of the business. So you can see that we delivered over 10 million passengers in the quarter. Our aircraft count went up to 120 aircrafts. That's 14 aircrafts more than in previous year.We kept adding airports to our franchise by opening 10 new airports. And of course, with the growth of capacity, we also grew the number of employees, and we are nearing 5,000 people in the company. We added one more country to the geography of what we cover. Our load factor performance was very strong. So we kept improving our load factor production, 92.5%, 1.1 percentage points more than a year before. And quite impressively, we increased utilization significantly to nearly 12 hours. That's a 5% improvement versus the same period last year. Regularity was unchanged. It's very high level, 99.8%. That's one of the highest in the industry. But importantly, we were able to increase on-time performance by almost 2 percentage points to 82.1%. As you recall, we have made a number of investments into improving our on-time performance. So we created more operational resilience ourselves. And as a result, we were able to improve the operating performance of the airline. And with these headlines, I will just turn it over to Iain, who will take you through the financial results.
Good morning, everybody. Moving on to Slide 4. So in terms of the financial performance of the 3 months ended December 31, 2019, as József highlighted, 14 extra aircrafts that created 22% additional seat growth. Load factors were healthily up by 1.1 percentage points to 92.5%. So that additional load factor on the seat growth meant passenger growth was a very healthy 23%, sort of way outstripping whatever you're seeing from the competition. A slightly higher stage length, around about 20 kilometers, meant ASK growth was around about 22%. In terms of financial numbers, that led to EUR 637.3 million of revenue for the year and a net profit of EUR 21.4 million for the quarter. When you look at the building blocks of our margin, it's pleasing to see that RASK was up 1.9%. Ex-fuel CASK was an impressive 5.6% lower. Fuel-CASK, 5% higher. We can talk about the guidance that we're giving, which is plus 7% for the full year, which meant all-in CASK was down 2%. So a very strong margin performance for those 3 months. Moving on to Slide 5. 47% of our revenue in the third quarter came from ancillaries. So very -- another very strong quarter in terms of ancillary revenue generation. The change in cabin bag policy, the year-on-year effect essentially ended in November. So the third quarter was the last lapping effect. Healthy to see that ancillary revenue per pax was up 11%, ticket per pax was down 6%, but overall revenue per pax was up 1.2%. So again, echoing József's comments that growing at 22%, 23% passenger growth and still delivering a plus 1.2% in revenue per pax is a very strong performance. A lot of you all will be asking, how that's going to be tracking going into the fourth quarter? The way I would model it is ticket revenue will continue around about the minus 4% level, but the ancillary continues to be healthy at around about 5%. So certainly, the EUR 1 per pax looks to be fairly straightforward to achieve in the fourth quarter. That will give us around about a 1% increase in RASK, about 0.5%, 1% increase in RASK in the fourth quarter. A little bit more color in terms of the ancillaries on to Slide 6. Again, up EUR 3 per pax, which is great to see. EUR 0.5 came from bags. Again, a trend that's great to see after a 5 or 6 years of declining bag revenues. The value-add was EUR 2.5, of which, around about 1/2 of it continues to come from the bundles, 1/2 of it continues to come from the priority boarding products. And again, when you look at the charts on the right, it's pleasing to see, yes, we made a decision to remove the large cabin bag over a year ago. You could see the negative drags that had on ancillary per pax, that is more than compensated once that policy was changed in November 2018. So good to see healthy ancillary revenue generation trending higher. And if you model for the next year, certainly, we feel confident of plus EUR 1 per pax for fiscal '21. Moving on to the most important slide. Again, József highlighted that ex-fuel CASK was down 5.6% to nearly 6%. So all-in CASK was down 2.1%, which is great for our margins. In terms of the breakdown of that, generally speaking, I would say a fairly strong performance across the board. Utilization in the quarter was up 5%. So when you're looking for the full year, we'll be looking to utilization up 4%, around about 12.5 hours. So good to get that metric back on track. The fuel CASK, you can see EUR 0.06 higher. We're guiding 7% increase in fuel CASK for the full year. Half of this is coming from carbon. So of that 7%, 3.5% is coming from carbon cost. Around about 2% is going to come from the dollar. So the dollar has strengthened. The dollar strengthened a couple of percent. So that's coming through as a headwind on the fuel cost. And the actual liquid that goes into the aircraft is up around about 1%. So that's how you get to the 7%. But overall, the increased utilizations really helped drive those unit costs lower, whether it was staff costs, whether it's airport and handling, whether it's depreciation. On the net financing charge, also, we benefit from interest income, which I previously highlighted, that we hold the majority of our cash now in dollars, and shareholders are benefiting from the interest income that's generated on that. So net-net, a very strong performance on the cost side of the equation. Moving on to Slide 8. Again, I think it's very helpful just to give you a flavor of what the future holds. The first point is that we have a fantastic aircraft order. That's going to be delivering significant cost savings going forward. It's fair to say there are challenges in the supply chain. So actually predicting to an aircraft delivery is a little bit difficult. In terms of fiscal '21, we have negotiated and contracted the delivery schedule. We will be taking a few more A320s. We would prefer to take A321s, but obviously, we need to deliver the seat growth. So when modeling for fiscal '21, I think 15% ASK growth is probably the right number. We would like to grow faster if we can secure more aircrafts, but that seems to be getting harder and harder as we get into fiscal '21. I think one thing I would highlight is that when we step change from -- in the seat count, if you look between fiscal '21 and '22, seat count with an A321 and the neos, goes from 47% to 59%. That we'll see a significant step change in our ex-fuel CASK, and that will flow-through in the margin performance. Moving on to Slide 9. So essentially, the guidance table. Not a huge change. So ex-fuel CASK, we're now saying minus 1% from slightly negative. So basically, that's an improvement, I would say, slightly negative would have been minus 0.5%. So we're saying minus 1%. Obviously, if we can do better, we will. But essentially, we're pretty much locked in now for the remainder of the financial year. In terms of the revenue per ASK, slightly positive. This has been fairly consistent. József might highlight some in terms of the revenue environment. But essentially, the revenue per ASK, what we saw at the beginning of the year seems to have delivered. So we're very pleased with that forecasting. The effective tax rate, I've indicated, with which U.K. has slightly higher tax environment. So the tax rate is starting to tick up a little bit. But with Abu Dhabi, there will be a negating effect on that. So in terms of modeling, maybe the step-up in tax rate is not as big as 1% per year, which is what I previously indicated. But the effective tax rate for fiscal '20 is up by around 0.5%. So up to -- close to 5%. And then in terms of the net profit range, yes, we have increased that. The way I would look at it is we sort of always highlight what could go wrong in the fourth quarter, whether it's disruption costs, whether it's competitive intensity, whether it's fuel spikes, whatever. So far so good. The first 9 months are in the bag. January is practically in the bag. It's a fairly mild winter. So from a cost perspective, we feel very confident, and that's given us the confidence to give that fairly tight range. If there is any outperformance, it will come through the revenue side. We'll have to see how that plays through in February and March. So with that guidance table, I'll pass it back over to József.
Thank you, Iain. So if you take Slide 10, you can see the capacity environment, how it's been changing over the years. I mean you clearly can see that the overall capacity environment has become increasingly benign going into fiscal '20, and we are expecting a similar picture going into fiscal '21. As a result, essentially, Wizz Air is delivering most of the growth in Central and Eastern Europe. While we used to be around 25% of the growth pattern until fiscal '19, we stepped up because overall capacity came down to around 60%. I think we clearly communicated that we were trying to take advantage of the situation, and we will need to make sure that we are growing more than what we would have planned otherwise. That's why we'd talked into the capacity growth. And we are now reporting 23% passenger growth in the third quarter and something similar will come out on the fourth quarter. So we are basically reinvesting our improved market position and improved profitability into further growth, which obviously, the business will benefit from going into the next financial year. So going on to Page 11. This is showing how we are growing this business. As usual, it is a low-risk growth profile. So 86% of the incremental capacity has been put on increasing frequencies of existing routes and joining the existing airports. And 14%, we are putting off for bringing new airports into the franchise. That profile has been fairly consistent over the years. In terms of markets to grow, Vienna continues to be a very important market from our standpoint. So we are delivering heavy growth. We are adding 4 aircrafts in fiscal '20 and fiscal '21. Poland is a very important market as well. So you can see, we are adding a total of 6 aircraft in Poland over these 2 years. And the Balkan region is also important for growth. So we are growing Moldova. We are growing Romania. We are growing Bulgaria, Macedonia. So that whole region has been a great source for growth in the current financial year and going into fiscal '21 as well, and we also grow Budapest, Hungary. So it is a balanced growth across a number of bases, so to say, a number of countries. And as a matter of fact, I would say that the business would be capable of growing more, should we have more access to new aircraft. But you all know the industrial situation with regards to new aircraft deliveries. So we are somewhat contained. But having said all of that, most of that issue has been mitigated by extending existing leases of aircraft. We also added one new country to the franchise. That's Armenia. And we are very pleased with the initial reactions of the market there. So moving on to the next slide, Slide 12. So with Abu Dhabi, we are extremely excited about. This is a joint venture investment with one of the flagship investment terms of the Abu Dhabi government, Abu Dhabi Developmental Holding Company. Wizz Air holds 70% of the economic interest, while Abu Dhabi holds 30% of the underlying economic interest. It is a seamless execution of the Wizz business model. So you would not notice any difference between Wizz Air Abu Dhabi and Wizz Air U.K. or Wizz Air Hungary. Same brand, same operating system as an airline. And I think the same service, how it comes across with the passengers. We expect the airline to take off towards the end of the year, around October, November time, subject to legal proceedings and licensing, but believe we are -- we believe we are on good track to deliver this initiative. Where we are at right now, we have signed a letter of intent, which we are now turning into firm legal documentations. We have received a government decree that declares Wizz Air Abu Dhabi as the national carrier of the UAE. So from a legal perspective, Wizz Air Abu Dhabi will have the same standing as Etihad, Emirates, Air Arabia or flydubai in the UAE. So we would be a national carrier of the UAE. And we are just going through the normal process to make sure that we have the airline up and running. So on the one hand, as I said, we are going through the documentation processes and slowly, but surely, we will start putting people on the ground in Abu Dhabi. And we will start building up the organization needed to start the airline towards the end of the year. Moving on to the next slide. Page 13. Vienna has been very topical in the industry. I mean, as I said, for decades, nothing happened in Vienna. And all of a sudden, everyone showed up. So we are now starting seeing the dust settling down. Some airlines have started contracting in a quite significant way. Eurowings, LEVEL, Vueling, easyJet, they are all in contraction mode in Vienna. And there are 3 airlines that keep pushing the lines louder, Austrian Airlines and ourselves. We firmly believe that Wizz Air is a structural winner in Vienna. Actually, we are the only airline not losing money in Vienna. We have been able to ramp up operations very quickly to quite a significant volume, just over 18 to 24 months, without losing money while all others are losing their shirts. I mean some numbers came out on Eurowings and Lauda. So they are losing tens of millions, if not, hundreds of millions by competing in Vienna. The reason we are not losing is that we're seeing that we have a proposition to the market which excels anyone else. We are flying an all A321 fleet. I mean the A321 is the most economically efficient aircraft type today versus a very mixed old fleet competition of both Lauda and Austrian Airlines. So we gained a lot of structural economic advantage coming through the fleet. As a result, with a significant margin, we are the lowest cost producer in the market in Vienna. And obviously, that makes us very resilient from a financial standpoint. While all others are losing, we are still breaking even on financial performance. And this is a heavy ramping of business. We ramped up capacity from nothing to 4 million seats in just over 18 months by launching 49 routes to 27 countries. I mean that's very significant. We've never done it in a magnitude like this before. And we have been very impressed by the market reaction and the financial results coming out of that. And also, very importantly, we are the lowest emitter amongst all the airlines in Vienna, and we're seeing that sustainability is an issue this industry needs to face and each of the airlines need to deal with. So we are very well positioned structurally to be in Vienna, not only short term but also the longer run. Moving on to the next slide, Page 14. We have communicated this, but I think it is worth reinforcing. Wizz Air is the greenest airline of all carriers in Europe, again with a significant margin. A few months ago, we started reporting our environmental footprint. You can see that we are leading the pack quite a big way versus the entire industry. The more legacy you are as a business, diverse you become with regard to the impact to the environment. We firmly believe that the industry should take certain actions to immediately effect the environmental footprints like vendoring business classes on short haul. And I was just taking a flight this morning, and 2 things happened on that flight. So I was flying Lufthansa from Munich to Eplatures. And business class was dead empty, not a single person. 8 rows were dedicated for business class. And there was not a single person sitting on business class. It was an A319 with around 140 seats, 22 passengers sat on the flight. I mean what's the sense of performing a flight like this? What's the sense of giving legroom and empty middle seats for business class? The way you affect the environment with that model is twice or 3x bigger than an economy class passenger we carry. So that was quite a horrific experience from that perspective. And if you look at our environmental performance, actually we have been on a continuous decline on our footprint. And we are expecting a further 30% CO2 reduction within the decade by 2030. But we are taking sustainability beyond environmental concerns. We are heavily focused on our impact on the economies. We have created a number of airports, and we have put those airports on the map of aviation, fundamentally reflecting the economic prospect, the cultural prospect, the connectivity prospect of those regions. I mean you can look at regional Poland, regional Romania and some of the other places, Wizz Air has become the economic engine of those areas. We are very keen on managing people and treat people appropriately. We are the only airline in Europe nonunionized, and believe it doesn't happen incidentally. It happens because we look after people, and we have a number of initiatives in place to make sure that people are engaged properly, and they see prospect in their life by engaging with Wizz.So that brings me to the last slide, Page 15, to give you some closing comments. As you can see through the presentation, it was a great quarter for Wizz. We delivered industry-leading growth and margins. Both the revenue side of the equation as well as the unit cost side of the equation performed very strongly. Despite the 23% passenger growth, we were able to improve unit revenues by 2% and we were able to cut actual unit costs by around 6%. As a result, we delivered significant improvement on profitability. We ended up with EUR 21 million net profit in the quarter. We made an announcement on a highly exciting initiative for Wizz Air Abu Dhabi, which essentially is going to shift the center of our aviation word from West to East, which we think is the right way to go for the long run. And we believe that Wizz Air, as a model, is a unique proposition in the industry to deliver significant shareholder value going forward, given the fleet order on hand, given the effectiveness and efficiency of the business model and the growth prospect of the business going forward. And as a result of this strong performance, we are increasing the guidance to EUR 350 million to EUR 355 million. Thank you.
[Operator Instructions] Our first question is over the line of Mark Simpson at Goodbody.
A couple of questions. First one on fuel. Your guidance remains at plus 7% unit cost, your run rate for the first 9 months is plus 5.3%, implying plus 12.5% in the Q4. I'm assuming there's a carbon cost component on that. But could you just give us a bit more detail around that Q4 unit cost picture? In terms of Vienna, obviously, ramp up there. Could you just give us an idea of where total capacity is? I think you were looking to push aircraft in there in order to secure the capacity available. But is that a maturing market in terms of future growth? And then finally, early days, I know, but what's the trend in terms of pricing into the summer? You've got the market-wide European capacity, obviously, looking favorable. Can you give us an idea of what you're seeing for your early bookings?
On the fuel CASK, and I'll pass the other 2 questions over to József, actually, what you're seeing in Q4, the real headwind is the dollar. So when you look at the full year, as I highlighted, it's plus 7%. 3.5% of that is coming from carbon, 2% of it's coming from dollar and around about 1%, 1.5% of it's coming purely from the fuel price or the hedged fuel price. The strong gains that we made on the -- our FX program would have been felt in the first half. It's the second half where we're less hedged and we're paying more of the 110 to 112 level. So that's really the reason why you're seeing the negative performance in the fourth quarter. But on an annual basis, plus 7%, as I highlighted, 1/2 of it is the carbon, 2% of it is dollar and 1%, 1.5% of it is the fuel price.
So with regard to Vienna capacity, the market is maturing, I'm not sure whether this is because of normal demand trends that's the nature of the market. I think this is more on the basis of administrative burden put in place by the airport. So now the airport is getting stocked with managing the growth and accommodating the growth of airlines. So there are some barriers coming into play that will limit airlines' ability to grow Vienna. I think we would like to put more growth into Vienna, I don't know whether we can, whether we have the slots available to do that. So with that regard, I think Vienna is going to be a maturing market. But again, I'm not sure that it is maturing on the right basis. It is going to be forced by airport capacity constraints. With regard to summer bookings, yes, actually, we are very upbeat with what we are seeing so far, but early days. So I wouldn't jump into conclusion. But clearly, we see that the overall capacity environment is fairly benign as a result and -- I think one more important thing is that many of the airlines, including ourselves, react to the shortage of new aircraft deliveries by extending older aircraft in operation. As a result, unit cost in the industry will creep up simply because there are more old aircraft being operated than otherwise planned. Since we are somewhat uniquely positioned in that game because we continue to take quite a number of new aircraft deliveries, so we will be able to reduce unit cost going further. And as a result, we are simply just becoming more competitive than what we used to be. So basically, our improved competitiveness and the overall decline of market growth in Central and Eastern Europe, we're seeing that the demand side of the equation is going to improve in summer 2020 versus last summer. And we are already seeing the first reflections of that through pricing. So we are seeing prices up 5% to 6%. But again, early stage. We don't have a lot of bookings in. But whatever we are seeing, that's better than expected with quite a margin.
That's very helpful. Can I just go back to just on the carbon cost? I mean could you just give us an idea of how far forward you hedge? How you manage that? Because I think you've been talking about another significant step-up in carbon costs for your next fiscal year.
Yes. So in terms of modeling, I would say the carbon build for fiscal '21, we're looking at it now is around about EUR 100 million, EUR 95 million to EUR 100 million. I mean that's a 1/4 of our profitability, which is pretty shocking. And you then have across Europe, a lot of these countries raising carbon taxes or eco-taxes, whether it's Germany, Austria, Switzerland or whatever. So quite where all this money is going we're not too sure. So in fiscal '21, around about EUR 100 million is the carbon cost. Two things that are happening next year. One is the CORSIA is still a bit of a question mark. So we have to see how that -- what CORSIA means as non-EU flights fall into scope. So that's an additional step-up in costs. That may or may not be implemented. So clearly, there's a little bit of upside if that's not implemented. But the carbon costs are tracking higher. In terms of forward hedging, I mean it's fairly similar to our current hedging program. We'll be around about 50% hedged for the next 12 months or for fiscal '21 at or around the current price, which is EUR 24, EUR 25.
So we're now over to the line of Ross Harvey from Davy.
Two questions from me. The first one is in relation to the slower growth that you spoke about from yourselves and across the industry into FY '21, how should we think about in terms of an impact on your own unit costs? And secondly, you've obviously got significant interest income coming in from the U.S. dollar deposits. What duration is that land tied us? And are you impacted by the lower yield curve versus what would have been last May when we originally spoke about this?
I think with regard to growth and unit cost, we are planning on delivering around 15% growth in fiscal '21. This is a little lower than what we delivered across the last few years, but it is in line with our long-term growth trajectory. I think we have been always talking about 15% growth for this business is capable of delivering on a structural basis. We talked it simply because we felt that we have more opportunities in the last few years, but I think around 15% growth is something that you can model. With regard to unit costs, as I said, we have some inflationary pressure on a few items. But given the continuing conversion into A321s and still bringing in quite a number of new aircraft, some of them will be A320s, we believe that we will continue to deliver a declining unit cost, ex-fuel unit cost performance in fiscal '21. So I think we would be targeting around 1 percentage point on that. So I think that's what I would model in your case.
On the interest income, in absolute terms, EUR 44 million is probably about the level I'd use this year and also next year. It's fair to say with -- I think there were 2 Fed cuts last year. So that was 0.5%. So essentially, we would have felt that. But the balances would be slightly higher. So in absolute terms, I would say, year-on-year, it will be the same at around about EUR 44 million.
The next question is from the line of Jarrod Castle at UBS.
Obviously, your fleet profile has been changing somewhat over each quarter in terms of the total number of planes, the mix of planes. Two questions related to that. I mean versus kind of previous expectations of ex-fuel unit cost control, how has that kind of impacted your thinking over the medium term? And then secondly, what does this mean for some form of compensation or offset from Airbus? Second kind of question. Just the recent news about LOT and Condor, how you think about it from a competitive position and kind of summer kind of initiatives? And then just lastly, congratulations on Abu Dhabi. But just looking ahead, in terms of the medium term, would you be looking to do further JVs outside of Europe? Could you look further afield, maybe like Africa or further East?
Okay. So let me take these questions. So with regard to the fleet profile, yes, it is changing because the circumstances are changing and the industry's ability to deliver aircraft is changing, so we have been recosting the order book with Airbus. Two significant impacts of that restructuring. One is that short term, we will take more A320s, simply because we have access to A320s, the Airbus is in better shape with regards to delivering A320s and A321s. And medium-longer term, we have converted all of our A320 positions into A321 positions. So what you are seeing is that short term, we are slowing a little bit on A321 conversion, but for sort of medium and longer term, so 3 years and more out, we are picking up the pace on A321 delivery program. I mean you can see structurally, we're going to be converting 80%, 85% of the fleet into A321. So essentially, Wizz Air will become an A321 airline and not an A320 airline. As we speak today, we are close to 50% of the seats flown on A321s. And as we have said, the A321 is hugely exciting to us because it delivers lower unit cost. And so far, we have been able to convert the business very successfully without losing traffic. As a matter of fact, our load factor has been constantly increasing despite the A321 conversion. With regard to compensation with Airbus, yes, I mean, we are getting compensation. But I don't think we are driven by this or driven for this. We would love to fly the aircraft. And I think we would be able to make more money by flying passengers than getting compensated by Airbus. So this is not exciting. I think this is some damage control in a way, but our motivation is to get the aircraft and fly the aircraft and grow the franchise of Wizz Air as opposed to betting on compensation. But yes, I mean, we are getting some compensation. But don't think of it like this is a significant driver of profitability. We would be making more money by flying the aircraft as opposed to just getting compensated. So LOT-Condor, yes, I mean I think these are 2 no-sense airlines. To be honest, I mean LOT has been on state aid and state sponsorship for years. You may recall that they received EUR 400 million of loan from the Polish government. And then Poland reorganized LOT and some other businesses into a holding company to make sure that they channel profitability into covering loss-making. And on that basis, they've started expanding the business. The EU is talking about market principles, when it comes to state aid, but it does very little to actually adhere countries to that. I mean just look at the recent trends. The U.K. bailing out Flybe, Germany bailing out Condor, LOT having been sponsored constantly by the state. Now Romania is bailing out Tarom. Alitalia is still flying, which is a bit of a joke. I mean, a few years ago, everyone believed that Alitalia was over. It's still flying. So I think the EU has kind of [ matched it ] down on some fundamental principles. And that creates some frustration in the system. So this is the low side of it. The [ counter side ] of it is that I don't understand why the German state intervened. I mean who needs Condor? I mean Germany is a competitive market. The market would have taken care of Condor. Now the German government decided to step in. So basically, what's happening now is that 2 kind of no-sense airlines are getting combined. None of them -- neither of them is basically capable of surviving on market merit. So they both are on state support. So I don't think this is going to be a great business. And I don't think this is the rise of a new formidable structural competitor here. It reminds me to what Swiss was doing a few decades ago and what Etihad was doing in -- over the last 3, 5 years, and you can see the results of each of those. Now with regard to Abu Dhabi, I think Abu Dhabi is a unique opportunity for Wizz. I mean, structurally, we are very excited about opportunities going further East and we are more excited going further East than going West. If you look at the West side of Europe, you see infrastructure constraints on airports on ATC. You see increasing tax burdens. You see increasing regulatory burdens. A lot of social pressure, supply chains and social pressure on kind of bending the infrastructure development, no new runways, new -- no new infrastructure developments in many areas. And at the same time, going East, you see that aviation is still seen as an economic engine, as a driver of society, as a driver of connectivity. And we are very excited about some of these opportunities. I mean just look at a few of them. So Abu Dhabi is advancing. We are now the largest international airline in Israel. Five years ago, that market was completely closed. We have a base in Ukraine. We have a base in Georgia. Now we are adding Armenia. There are talks between Ukraine and the EU that Ukraine may join European open skies within 6 months. We've just made announcements on St. Petersburg. It's partially opening as a market. And Central and Eastern Europe continues to remain the largest source of growth for the business. So we have plenty of growth opportunities. And at the moment, we are cherrypicking because we don't have enough capacity to tackle all those growth opportunities. So I can't predict exactly what the future brings. But certainly, I see more and more initiatives that favor our business model, that favor the growth of Wizz Air coming up in the East, and we are certainly monitoring those opportunities. And we are acting on those opportunities. Whether that means we would be doing more JVs, I don't know. I think time will tell us. But we are certainly very upbeat about the opportunities arising in the East.
Jarrod, maybe just a couple of other comments on your question on structural cost savings. I think it's fair to say, clearly, we would prefer to have the A321, but our fleet delivery schedule has essentially 4 legs of structural cost savings coming through. Obviously, it's the gauge. We would preferred to have the A321, but the A320 is still a larger aircraft, 186 seater. And it's a committed order. So in terms of a scarce supply, having an order of that magnitude is a huge asset for Wizz Air. But there are other 3 legs of cost savings, the engine, the GTF. So taking the A320neo is far superior than operating via the V2500-powered A320s. The price that we're currently paying for these aircraft is outstanding. It was part of the mega order that we did with the other Indigo group of airlines. So in terms of the price of the aircraft, we've got incredibly competitive pricing. And the last piece is, of course, the financing. Looking at the financing that we're able to achieve today, whether it's with JOLCO structures, whether it's through issuing a bond, whether it's through bilateral debt and many multiples lower than some of the existing aircraft in our fleet. So structurally, whether it's an A320 or an A321, we see significant structural cost savings coming through our fleet delivery schedule. We would like the A321s, maybe would like to grow a little bit faster. But I don't think there's any other airline out there that has the delivery schedule such as Wizz Air.
And Iain, what would you say is the differential in the ex-fuel unit cost of the 2 operating at Wizz?
So if we got the A321 rather than A320s, you're probably talking around about 0.75% improvement on ex-fuel CASK. So yes, I mean, we're running the budget now. If it was an entire A321s coming into the business, you're probably seeing close to another 1 -- minus 1%. That's why I'm sort of drawing your gauge to '22, '23, when we're taking a significant amount. Hopefully, Airbus will be able to deliver those, and then you will see a real step change.
So now over to Michael Kuhn at Societe Generale.
Three from my side as well. Firstly, on hedging. We obviously saw fuel prices coming down quite substantially over the past couple of days. I wonder whether you could give us a kind of real-time update on where you stand hedging wise for next year and whether you used that opportunity over the last couple of days. And then secondly, Iain, you mentioned that the Abu Dhabi entity will help bringing down the tax rate, which suggests it will be a consolidated entity. Maybe you could give us some details on how it will work? You're, let's say, the legal minority owner, the economic majority owner will be consolidated and once it's getting set up, what kind of capital contribution to set up the vehicle do you expect? And then last not least, with the recent discussions around the Coronavirus, obviously, you're not directly exposed to China. But do you have any numbers on Chinese or Asian passengers in your network? And what impact, let's say, Asians not coming to Europe anymore you could potentially see?
On the hedging, I think you'll see on one of the slides in the appendix that you're -- in terms of the hedge levels versus fiscal '20, it's around about 5% better. So that's certainly quite a comforting start to the financial year. Yes, we have been hedging. I'm sure other airlines have been hedging. So yes, the recent dip, we took the opportunity to add a little bit of hedging. But in terms of the way I would look at it, we're currently tracking on the hedge level versus fiscal '20, around about 5% improvement on the pure liquid. And again, the carbon cost is gobbling up on some of that game. On Abu Dhabi, I mean, I think the way I would probably look at it is Wizz U.K., I mean, you need a certain amount of liquidity in the early years. I mean the beauty about the airline industry is your forward bookings tends to finance the business. So from a capital commitment perspective, it doesn't really move the needle. I mean, with Wizz U.K., we needed EUR 15 million on day 1 just to appease the regulators that we're a liquid airline, but within a fairly short space of time, that loan was repaid. So with Air Abu Dhabi, we'll be in a fairly similar situation. So in terms of looking at the cash and in terms of where that cash is being deployed, you're probably looking around about EUR 25 million, EUR 30 million on day 1, but the business itself should start to be able to repay that in fairly short order.
Okay. Maybe on the Coronavirus, I mean we don't really have any exposure to the Asian market, certainly not to the Chinese market. And we hardly have any Asian travelers with us. I mean a few here or there. And so far, we have not been affected. Certainly, we are not seeing the spread of the virus on our numbers. It may come, and I just looked up what SARS did to our business back in those days. And what we saw at that time was that, obviously, it became a global epidemic, and it kind of hit the industry for a month. And it was a bit of a fall like a stone in the first month, but then it started recovering and after 4 months, basically, everything went back to normal and the whole event got forgotten. So probably, this is going to be a better controlled issue. So I would not expect the same kind of reaction of the market as it happened to SARS. But so far so good, so we are not yet seeing any impact.
We now go to the line of Robin Byde at Cantor Fitzgerald.
Just on the improvements to aircraft utilization. Can you talk about any changes that you've made or introduced to help lift that performance? Or is this a change in utilization just about flights and routes?
I mean, basically, we addressed some of the seasonality issues. First calendar quarter '19, we took capacity out quite significantly. That was our way of reacting to increasing input costs like fuel. Where this time around, as I said, we felt much more comfortable with our ability to perform. We saw incremental profitability coming in. So we decided to invest that incremental profitability in the form of winter capacity growth. So we deployed a lot more capacity this winter than what we did last winter. And that pushed utilization up significantly. Also, I think we just announced some fine-tuning of the operating model to make sure that we actually maximize utilization. We also did more kind of festive flying. We flew more in Christmas time, New Year time and those sort of things. So it is some refinement, but a fundamental move on utilization was winter flying into utilization.
Before going on to the next question, which is from the line of Najet El Kassir at Bank of America. [Operator Instructions]
Just 2 questions for me. First is on RASK. Why RASK continued to decline when other LCC have reported higher pricing in December quarter? And secondly is on staff cost, which continued to decline over the quarter, should we expect this to decline going forward further?
Sure. I mean on the RASK, I think we were the first airline back in May last year saying that we were seeing a constructive tone. I mean when we look at the future, we look at supply-demand dynamics. And based on sort of history, we can sort of derive where we feel that RASK is going to prevail. So we were saying, we were seeing a slightly positive RASK environment against all other airlines. As the year played out, other airlines downgraded their profit guidance, and then they flipped-flopped towards the end of the year when Thomas Cook went out of business, and all of a sudden, they had a big shot in the arm in places like, yes, vacant Manchester. So yes, you are seeing a couple of the U.K.-based airlines coming out and talking about a surprising bounce back on RASK, but that's more of a function of their inability to forecast and also maybe Thomas Cook going out of business giving them that shot in the arm. So when we look at the full year, the airline industry, there's a lot of volatility in this industry. And I look at the operating plan, it's quite scary how accurate our forecasting and our operating plan was this year. So from that respect, there hasn't really been any change from what we oversaw back in May going into the winter. So the other thing I would highlight is that if you're an airline and you're growing at 0% to 2%, by definition, your routes should be maturing and you should be printing money. So it doesn't come as a surprise that those airlines that can't deliver any growth are starting to see the yield increases. We're going to be delivering 26% growth in February. We're going to be delivering 25% growth in March. Now all of that -- all the benefits of that money invested in the fourth quarter will come through into the summer. So we're certainly setting ourselves up, I think, for a very strong fiscal '21. So again, I think you need to be a little bit skeptical and cynical on what's actually been happening over the past 12 months. But essentially, Wizz Air's basically delivered exactly what we said at the beginning of the year, which I think is pretty impressive on plus 20% growth. In terms of staff costs, what you have seen, there tends to be a little bit of pressure every 3 years or so. I mean, last year, we raised the pilot salary around about 16%. And we highlighted at the beginning of last year, we -- when we set up Wizz U.K., there's quite a few additional costs coming through the system in terms of out-of-base flying, additional training costs. Now that Wizz Air U.K. is fully embedded in the organization, I think it's fair to say that the operations team has done a fantastic job in terms of crew rostering, in terms of the crew cost. A321, by definition, you should be seeing a 17% unit cost reduction on crew. Simply put, you need 1 extra cabin crew member but you still need 2 pilots. So structurally, yes, we should always continue to see cost savings coming through because of our fleet. And that should continue. But it's fair to say that there is inflationary pressures. I mean wage inflation in Central and Eastern Europe, certainly for the cabin crew is ever present. So that does absorb some of the structural savings. So again, we're fairly uniquely placed, that we have the tools of the A321 to absorb some of the inflationary pressures. So looking forward to staff costs, I think we should be fairly set for a good performance in the next financial year.
Well, we have time for one final question and that final question for today is over to Jaime Rowbotham at Deutsche Bank.
It's actually 2 questions, if you have the time. The first one, can you just remind us what the initial fleet plans are for the Abu Dhabi venture? And is there an extent to which you might be able to smooth the seasonality of trading by shifting aircrafts to the Middle East during the European winter season? And then, secondly, another development in Q3 that hasn't been mentioned yet is the decision to appoint a new CFO. József, could you perhaps fill us in on the thinking behind the management change at Wizz, please?
Absolutely. Thank you. With regard to the Abu Dhabi fleet program, we have taken a few decisions already, that most importantly, that Wizz Abu Dhabi will only fly A321neo new aircraft. So that's a significant position. We think that this is a way to maximize our competitive advantages in the marketplace, and this is how to create the most shareholder value in Abu Dhabi. Initially, we're going to start with 2 aircraft, but fairly quickly, we are going to ramp that up subject to market developments and aircraft deliveries. And we would be looking at Abu Dhabi as a 50 aircraft opportunity over the first 10 years. I mean if you think about this, Wizz Air Hungary, so Wizz Air's EU arm, ramped up the business to around 100 aircraft over 15 years. We're saying that the Abu Dhabi opportunity is fairly similar to that. So which basically requires us to get to around 50 aircraft in 10 years and double it up in the following 5 years to 100 aircrafts. So that's kind of the trajectory and path that we are foreseeing for Abu Dhabi. Also, you know that we have an order book on the A321XLRs that will start coming in, in 2023. And we think that Abu Dhabi is one of the prospective markets for the A321XLR deployment. I mean simply because the market opportunities coming with range are very attractive. And certainly, we will consider Wizz Air Abu Dhabi to be a very strong candidate for the deployment of the A321XLRs as well. This is 3 years down the line, but I think time flies very quickly. So we will get there sooner than what we would think. With regards to the organizational announcement, a few things here. One is, we have decided to make an investment in the finance organization. Finance has been kind of left out. I mean if you look at our leadership structure, we have an EVP and 2 Commercial Officers in Commercial. We have an EVP and 2 officers for Operations, and we had 1 officer for Finance. And we think that because of the diversification of the business, some of the investments that we have made into subsidiaries and the investments coming up with regard to aircraft, we have a significant cash power that we need to deal with. So we're seeing that we need to take a more serious view on the finance function, and we felt that, that function also had to be brought in line with other functions in the company and in line with what the future requires us to deal with from a finance standpoint. I mean you know Iain, he has done a great job, and we are very appreciative. Iain is a fairly junior officer, and we decided to bring in an EVP to make sure that finance comes in par with Wizz Air function. And strengthen the financial disciplines in the business, not only what we have done so far, but also what we are going to do in the future. So -- and also, it creates a -- an opportunity for Iain to diversify his career path. And I'm personally very excited about his new assignment to become the company's Chief Investment Officer because we will have to invest a lot. I mean we are investing into markets. We are investing into assets. And we have significant liquidity resources we need to deal with. So yes, I think it's very exciting. And I think Iain himself is very excited about the new opportunity that the new assignment will bring to him. But Iain, you may want to have a few words?
I think -- no, absolutely. I mean on the exciting point, absolutely. I think it's -- I was sort of reflecting, I've done 60 month-end closes. And those month-end closes can be quite a painful process. I've sat in front and presented to you guys 20, 25x that's even pre-IPO. And I think when we look at the exciting opportunities ahead, business development is essentially going to be a very important pillar. So being able to sort the business in Abu Dhabi, in the U.K. and with the Hungary and looking at the optimal capital structure, getting the right financing vehicles, it's great that the investment has happened in finance, and I'm looking forward to a change. But make no mistake, I'll still be around causing trouble.
Okay. That was the final question, we've got time for this today. This now concludes our call. So thank you all very much for attending, and you can now disconnect.
Thank you very much.