Earnings Call Transcript - RYAAY Q1 2022

Operator, Operator

Hello, and welcome to the Ryanair Q1 FY2022 Results Conference Call. Throughout the call, all participants will be in listen-only mode. And afterwards, there’ll be a question-and-answer session. Just to remind you this conference call is being recorded. Today, I'm pleased to present, Michael O'Leary, Ryanair Group CEO. Please continue your meeting.

Michael O'Leary, CEO

Okay. Good morning, ladies and gentlemen. Welcome to the Q1 results conference call. We have the whole team assembled at various locations on call today. We posted this morning the usual press release. We’ve done a Q&A on the results, and the investor slide presentation. I propose to spare you all that details and rather than going through the press release, I'll take that as way as and give you a couple of themes. I think the key one in this morning’s metrics: one is traffic recovery, two is the very strong performance on cost containment and how that would play out over the next two or three years. And then the extraordinary growth opportunity that's unfolding in front of us as we take delivery of over 200 MAX aircraft over the next four years at a time when we will see meaningful and sustained capacity across Europe. So on theme one, traffic recovery. Q1 traffic was 8.1 million, that’s a dramatic recovery within 1 million passengers in April, almost 2 million in May, but 5 million in June. That recovery has continued strongly into Q2. In July, we think we will get to and, in fact, we will just exceed 9 million passengers. I know, last week, we said almost – we just get over 9 million passengers. August, at the moment, we are on track to just get over 10 million passengers, and we'd be hopeful with the reasonably robust September that we get to about 28 million, maybe 29 million in the second quarter. So not alone that we have 8 million in Q1, but about 28 million, 29 million in Q2. All of this has obviously heavily qualified and there will be no adverse COVID developments that return to lockdowns, and we feel we really need to be confident if that's the case. We can't eliminate political mismanagement, particularly in the UK or in Ireland, which has been astonishingly poor at managing the recovery. But in general terms, we think we are headed for a very, very strong traffic recovery through the second quarter, as there is a reasonable prospect that this will be maintained into Q3 and Q4. We are seeing a much stronger recovery, I think, in Ryanair than any of the other low-cost carriers (LCCs). If you take those monthly figures in Q1, we carried 5 times the April traffic in the month of June. As you see from EasyJet and Wizz, they carried about 3 times their April traffic. Our load factor is also industry-leading at mid-70%. In Q2, we expect to operate at more than 80% of our pre-COVID capacity. With load factors in the mid-to-high 70s, we expect to deliver about 70% of our pre-COVID traffic. And then as I said, if there's a – if the vaccine rollout continues and the COVID reopening continues, particularly in the schools, all go back as normal in September, we have every reason to move the guidance as we have this morning from previously the lower end of 80 million to 120 million. Today, I think we are in a much narrower range of between 90 million to 100 million. I would think with no disruptions, we are at the upper end of that range. International developments then we are seeing, we are continuing to deliver a very impressive cost performance. I think we have, together with our union partners and employees over the last 18 months, negotiated very reasonable and modest pay cuts. It ranges from 5% to 10% for cabin crew, 10% to 20% for pilots. But that was in return for keeping them all current and avoiding mass redundancies and layoffs. I think that's one of the key reasons that we've been able to deliver such a strong and rapid traffic recovery while keeping the crews current. We have the right people in the right places, and we've been able to unwind a very quick and rapid development of reopening airport and handling costs which have been renegotiated. As of the end of July, 11 of the first 12 of the MAX aircraft have been delivered. I would like to say that the performance of the MAX in the first month of operations has been spectacular admittedly with slightly lower-than-normal load factors. The fuel performance has been well in excess of the 16% saving promised by Boeing, and there has been an overwhelmingly positive response both from our crews, the pilots, and cabin crew operating the aircraft and from our passengers. We've been operating our system for the first month where any passengers getting on a MAX who wanted to offload could do so without any concerns and travel on the next available flight. Not one passenger has yet wanted to offload from that aircraft, and the feedback from passengers traveling on the aircraft has been particularly positive, highlighting how quiet it is and how nice an experience it is. As we had long predicted, once we start flying the aircraft, passengers will love them. These aircraft enable us to tap into enormous growth opportunities that I don't think in certainly in my 30 years in this industry, post-9/11, post-Gulf War, there has never been a growth opportunity in front of Ryanair such as we have at the moment. Already this year, we've announced 10 new bases and multiple new bases, somewhere up in Scandinavia, where both SAS and Norwegian are in chaos. We've opened bases in Billund, Riga, in the Baltics, in Stockholm, Arlanda. Two bases in Croatia, Zadar and Zagreb, and we've extended and enhanced low-cost yields at Stansted, Bergamo, and Brussels Charleroi that are projected to grow to the end of this decade. We've doubled our capacity in Rome Fiumicino as Alitalia reduces its fleet. We've also announced new routes in Helsinki, new bases this autumn in Turin, Italy, and Agadir in Morocco. This is just the beginning; we've barely scratched the surface so far. There are extraordinary discussions and negotiations ongoing between our new route team and both existing airport partners and new airports across entire Europe and the neighboring states who are joining the European Open Skies. To put it in context, the growth opportunity that lies ahead of us, we will take delivery of 210 MAX aircraft over the next four years. It will take our fleet to over 600 units. Over that same four-year period, Wizz, who talks a lot about growth, will take delivery of 80 aircraft. Their total fleet will rise to about 230 aircraft. So we will take more new aircraft deliveries over the next four years than Wizz's total fleet. In the case of EasyJet, there seems to be zero growth; in fact, their fleet has shrunk in the current year, and we see them planning to just maintain or protect what they have. They certainly won't be a competitor for us in new route development or growth. The real opportunity, though, will arise from the many failures we’ve seen such as Thomas Cook, Flybe, Germanwings, and Level, but there are much more meaningful short-haul capacity reductions in countries like Portugal, where TAP has already announced that they will reduce their short-haul fleet by 20%. We think that will finish at closer to 30%. Alitalia reduced its fleet by 25%, and we think that will be more. Therefore, enormous opportunities await us, and we are seeing slots becoming available at airports where previously we couldn't get them. Over the next three or four years, we anticipate securing a once-in-a-lifetime opportunity to expand our footprint from an airline which today has 70% of our departures at primary airports and currently at secondary airports. We see that rising to about 80% of departures at primary airports and 20% at secondary airports over the next four years. The one other issue I should touch on briefly is the EU announcement regarding Fit for 55. I would caution investors again that there will be no impact on our cost base until FY2024 onwards. For the next two years, this will not affect us. I believe it is a badly designed package which introduces not just double taxation on short-haul European flights, but triple taxation. Short-haul passengers, particularly EU consumers, will now face paying not just ETS payments, but also an aviation fuel tax in addition to EPD in many EU countries like Germany, Austria, and others. It is bizarre and unacceptable that these taxes are being levied only on European short-haul flights. Designed by our counterparts in Holland, Germany, and France, long-haul operators in those countries get a free pass on these aviation taxes. We believe, however, that this program will be materially renegotiated, and I think softened over the next two years. We see significant concerns being raised among EU peripheral states, particularly in Eastern Europe, Cyprus, Malta, and Ireland, and among other tourism destinations, Spain, the Canaries; Portugal, the Azores; and Greece. These countries are beginning to realize that we have EU aviation tax proposals being designed by the Dutch, Germans, and French that largely ignore the context of countries like Ireland, Portugal, and Greece, where alternatives do not exist. We cannot simply transfer away from flying because there is no other way on and off these islands, and we think there will be a meaningful realization, particularly among the tourism industry in peripheral regions of Europe against these triple taxation proposals. I support that view strongly. I have nothing else I want to add in terms of the opening remarks. So with that, I'll hand over to the moderator, and I will open it up for Q&A, please.

Operator, Operator

Thank you. Our first question comes from the line of Duane Pfennigwerth of Evercore ISI. Please go ahead. Your line is open.

Michael O'Leary, CEO

Duane, hi.

Duane Pfennigwerth, Analyst

Hey, good morning. Thanks. Just wondering as you rebuild your network and kind of get back to some normalized capacity levels, what capacity level do you think you could get back to your fiscal 2020 €31 per passenger? Do you have to get back to 100% of what you used to fly or could you hit that level sooner?

Michael O'Leary, CEO

Sorry, Duane, I'm not sure you asked your question about the EU...

Duane Pfennigwerth, Analyst

No, no. Sorry, your non-fuel cost per passenger of €31 back in fiscal 2020, what percent of fiscal 2020 flying would you need to do to get back to that level?

Michael O'Leary, CEO

I think we will be – if there is no adverse COVID development and we exit the pandemic this autumn, I would be confident that into FY2023, effectively summer 2022, we will be carrying more passengers than we did pre-COVID in FY2019, which is 147 million. Our unit cost per passenger will be significantly lower than they were in FY2019 with one exception, and that is there is a kind of uncontrolled escalation in ATC and ANSP charges. Most of these government monopolies around Europe are now talking about recovering last year's loss of income and advancing ATC prices by 30% to 40% on a per passenger basis. It’s not a huge part of our overall cost base, but it is material. Other than that, I think you'll see continued meaningful cost reductions across all of the other lines, driven hugely by the fact that we would be operating more than 60 MAX Boeing aircraft next summer – summer 2022.

Neil Sorahan, CFO

Yes. If I would just add to that, I would say, Duane, you can start to see something with a trail from the next quarter a little bit closer to the mid kind of 30s. As Michael said, as we get into the summer of next year, we expect to see critical mass on the MAX and the load factors are up, we start to get back to the €31 and then hopefully improve on that.

Duane Pfennigwerth, Analyst

That's great. And then just for my follow-up on competitive capacity. I mean, you touched on it, but I wondered if you could put some numbers on it. As you assess the restructuring of European short-haul that's already occurred and that's continuing to occur, how much capacity would you say has gone versus pre-pandemic? And as you rebuild your own network, is there any numbers you could put on competitive capacity on your routes looking forward kind of Q2, Q3? Thanks for taking the questions.

Michael O'Leary, CEO

Thanks, Duane. It's almost impossible at the moment to predict the competitor capacity because a lot of the – you have operators like Lufthansa, IAG, and Air France-KLM are sitting on capacity, but they're not utilizing it. Alitalia and TAP have already announced meaningful structural reductions in the fleet between 20% and 30%, and you’ve seen the bankruptcy of several carriers. I think that into 2022 and into 2023, you're looking at a meaningful, I would say, 20% reduction in short-haul capacity across Europe. It might be slightly softened into FY2022 because I think some long-haul aircraft will reappear on short-haul European routes since long-haul will take longer to recover. There is a meaningful shortage of short-haul capacity across Europe for the next two or three summers. If you look at the order profile of most of the other airlines, they have almost no short-haul aircraft on order. I think you're looking at a 20% reduction in short-haul capacity for summer 2022 and into summer 2023.

Edward Wilson, CFO

Yes. I mean, you can see like some of it has been, I suppose, muddied by the pace of recovery with your competitors as to where they're actually going to put that this winter. But I wouldn't disagree that the figure of that 20% is probably the more likely reduction and certainly the one that we've been looking at. I mean, we can see it as well. And in some of our market shares as we grow, particularly into August because of the slow pace of recovery of our competitors. But 20%, I wouldn't disagree.

Duane Pfennigwerth, Analyst

Thank you.

Michael O'Leary, CEO

Thanks, Duane. Next question, please.

Operator, Operator

That's from the line of Daniel Roeska of Bernstein. Please go ahead. Your line is open.

Daniel Roeska, Analyst

Good morning, gentlemen. I'll follow Duane and ask the capacity question slightly differently. Where are you seeing those planes leaving the market? Do you think there'll be a difference between smaller markets around TAP and Alitalia and the larger markets with the wider groups? Because on the sector level, there still are a lot of planes registered to European airlines at this point. And then secondly, on the EU 55, with the EU planning to add a lot more costs into this, and I acknowledged that we'll have to see what the final policy proposal will be, but do you think that adding carbon cost in whichever way impairs the sector's ability to grow as fast as it has over the past decade? And how should we think about Ryanair's opportunities amid a slower sector growth kind of in the 2020? Thanks.

Michael O'Leary, CEO

Thanks, Daniel. Again, we go back to the capacity. I mean, the obvious ones are the failures: Flybe, Level, Thomas Cook, and others. But the more interesting underbelly is that the short-haul capacity has come from Norwegian, which has gone from a fleet of 120 to around 20 aircraft. SAS has got short-haul capacity restrictions, and Alitalia has already announced a 25% capacity reduction, but we suspect they will do more, and TAP is in a similar boat. The question now is how much short-haul recovery will there be from Lufthansa, Air France, and others. A huge amount of their short-haul capacity has been there to feed their long-haul networks, and without the long-haul traffic and the Chinese and Asian tourists around Europe next summer, I foresee that there will be huge pressure on those legacy airlines or the subsidy junkies as we call them. They will likely keep short-haul capacity reasonably modest because they're under some pressure to refund state aid. The only two players out there at the moment with significant short-haul orders over the next four years are Ryanair, with over 210 aircraft on order, and Wizz with about 80. Wizz is in chaos at the moment; they let go of numerous pilots and cabin crew. They're clearly struggling to re-employ them or are not current with staff. In recent weeks, Wizz has been canceling hundreds of flights on a daily basis in Italy and across Central Europe. We've already seen in Vienna where they compete with us, gone 14 of their main trunk routes out of Vienna for the summer, July, and August. They say they're going to restart in September, but we're not sure if they will. They have enormous operational challenges. The focus for the next number of years will genuinely be on the slow recovery of the short-haul operations of the legacy carriers because they will not have the long-haul feed to or from their short-haul operations. Meanwhile, the question is how long they can fill the block slots at major airports. The EU is, of course, allowing them to block them until this winter. But they must begin to get down by a 50-50 ratio soon. I think we will push for summer of 2022 when it will become ever more critical for them to either use these slots or lose them. And on EU Fit for 55, look, there's no doubt that the sector will face increasing environmental taxes in the next few years. What we would demand is to ensure that this environmental burden is shared fairly between long-haul operators and short-haul. We've been bearing an inequitable burden of environmental tax on short-haul flights, particularly connecting traffic. For example, the Dutch who talk a lot about the environmental impact of aviation give KLM a complete free ride on all their connecting traffic. Those kinds of environmental issues need to end, particularly when they are taking place in the countries that are most likely to lecture the rest of Europe on how we should behave environmentally. Particularly, when it comes to air travel, tax your own aviation house before you start lecturing the peripheral countries or the tourism economies that are heavily reliant on intra-EU air travel. I go back to our contention that taxes levied on a pro-rata basis will not impede the margin or the price difference advantage we have over all other airlines in Europe. Therefore, people will – I think the pricing environment will only enhance the growth that Ryanair will enjoy over the next couple of years, particularly as the cost of air travel rises and we remain the lowest cost provider. We will recover faster and more robustly. We see this proven out in this summer’s recovery, delivering a much faster and stronger rebound than any of the low-cost competitors. And comparing our situation to domestic USA, where the post-pandemic recovery in domestic flying is far more robust with traffic returning to pre-COVID levels and we anticipate benefiting from that across Europe in the next 12 or 18 months. Next question, please.

Operator, Operator

Thank you. That comes from the line of Sathish Sivakumar of Citi. Please go ahead. Your line is open.

Sathish Sivakumar, Analyst

Thanks again. I've got a couple of questions. So firstly, on the ancillary revenue. Obviously, you've seen a big step up in ancillary revenues. Where are you seeing further additional opportunities in terms of new products and where do you see it normalizing from the current levels of €22? And the second one is around the hedging. What are your thoughts around hedging for both fuel and carbon as we move into FY2023 and beyond?

Michael O'Leary, CEO

Okay. Eddie, why don't you take this question and I’ll let Neil to then to comment on the hedging and the carbon hedging questions?

Edward Wilson, CFO

Yes. Ancillaries are strong; primarily driven by priority boarding and seats. As I've indicated on the previous calls for the last year, we've been working on a number of initiatives here in terms of the dynamic pricing with those products. But I would caution that we are in low load factors at the moment whereby selection of seats or whatever it may well be. I assume a lot of people may have premium, but there's still more initiatives to roll out and some road ahead on this, particularly on the core ones of seats, priority boarding, and also on bags – how they're presented and how they are priced on individual routes. We've been doing a lot of work on that. But we're going to have to wait for load factors to return to see how effective those initiatives are.

Michael O'Leary, CEO

Just moving on to the...

Sathish Sivakumar, Analyst

To put that back, Eddie, would you expect ancillary revenue per passenger to rise faster or slightly slower than passenger traffic recovery in the next few years?

Edward Wilson, CFO

Yes. I think I'd expect to rise. What I'm saying is that I wouldn't get carried away with things because the strong performance particularly in seat selection during lower load factors. You'd have to see if that translates when load factors return because people may well have been selective about where they pick seats during the COVID crisis, but there are lots of other initiatives that are coming. I'm reasonably confident that we're going to see some growth on the core products and ancillary revenue.

Neil Sorahan, CFO

Just to add to that, I think if we can retain the €22 or slightly below that we've seen in passenger and traffic growth this year, that would be a pretty good performance. Then we'd be hoping to improve on that into next year and beyond. Just on the hedging in the carbon, we're well hedged for this year, about 60% hedged at $565 a metric ton, which is below the current market rate of about $630 ton. We have 35% hedged into next year at about $600 a ton. We plan to potentially move that up over time to about 50% and possibly hold at that target while we look at some other structures on top of that. Carbon is well hedged, 100% hedged for the current year at around $24 per ton, well below the market rate of $50-52. We have about 25% hedged for next year. We've been holding off on hedging because we were waiting to see what was going to happen with the UK ETS, which has recently been confirmed. We will start looking at adding a little bit to our hedging into FY2023 and beyond regarding carbon.

Michael O'Leary, CEO

Okay. Thanks. Next question, please. Thanks, Sathish.

Operator, Operator

Thank you. Our next question comes from the line of Muneeba Kayani of Bank of America Merrill Lynch. Please go ahead. Your line is open.

Muneeba Kayani, Analyst

Hi, thanks for the call. I realized that heightened visibility is low. But could you indicate in your net profit guidance of small loss to breakeven, what sort of tightening environment is kind of baked into that guidance? And then secondly, operating cash flow recovery was very good in the quarter driven by bookings; how should we be thinking about operating cash flows in the second quarter as flight activity picks up? Thank you.

Michael O'Leary, CEO

Okay. Thank you very much. As usual on these calls, we're not going anywhere near pricing guidance. It's completely too hard to call. We think we are reasonably accurate with our volume guidance. We think we'll continue to deliver a strong performance on ancillary revenues. But there's too much uncertainty over pricing. I wouldn't add any color to that. I understand we have the overall outline for the year is an improvement. We're into a small loss maybe even breakeven. But I wouldn't break down what that breaks down into. Operating cash flows, clearly the second half of the year will be much more heavily impacted by CapEx. We have begun to repay or we have begun to pay once more pre-delivery payments to Boeing, and I think it will flatten out from here and actually slightly decline as we get towards the end of the year and into much more peak CapEx. Neil, do you want to add anything there on the cash flows?

Neil Sorahan, CFO

No. I think that's fair enough. At the start of Q2, we will have about 200 million and over the course of the balance of the year, it's about 1.2 billion in CapEx. So you'll see that drop partly towards the end of this quarter, and we would pay that as we get into the fourth quarter, hopefully more normalized bookings at that stage, and you start to see that build up into the year-end but will be dropping back for the next number of months.

Michael O'Leary, CEO

Thanks, Neil. I would again conclude on the pricing guidance for all participants while I don't want to go into any details. It is our philosophy that has been clearly vindicated in the recovery in Q1 and Q2. We will be load factor active and price passive. We are determined to recover traffic as quickly as we possibly can. Over the second half of the year, we would expect to see load factors recover back up to the high 80s, probably not operate above 90% this year. As we build back our forward bookings and load factors, we expect to see pricing recover on the back of that. Next question, please.

Operator, Operator

Thank you. Our next question comes from the line of Stephen Furlong with Davy. Please go ahead. Your line is open.

Stephen Furlong, Analyst

Hi, Michael. Can you just talk about as you build back of the improved environments, I mean, obviously you have – I saw this 2000 new pilots in the next five years, also it's been trained and things like that. The second thing is I was just wondering with the 60 plus A200 aircraft coming next summer and presumably you're in discussions, I see with a number of airports on that. I see you've launched new bases in Turin and Morocco. So you might just comment about that; that would be good too.

Michael O'Leary, CEO

Okay. Eddie, I’ll let you answer the second half of that about new bases and route discussions. In terms of pilots and cabin crew, it's never been a better environment; but there are enormous short-haul challenges. One of the challenges we have as an industry, not just Ryanair, is that we've essentially been grounded for the last 18 months. It has been very difficult to keep pilots and cabin crew current; a pilot must fly once a month and cabin crew must usually fly about once every 90 days, just under three months. It’s been a challenge with such a curtailed schedule, so we’ve been flying empty aircraft to keep pilots and cabin crew current because we anticipated that the recovery when it came would be robust. We've been vindicated in that approach because we thought that the recovery would be strong. There is currently a surplus of pilots, particularly on 737s across Europe in light of Norwegian's collapse, which was the only other significant 737 employer in Europe. Also, the Gulf carriers have let go of a huge number of pilots, not just letting them go in the Middle East, but they are returning to Europe. A lot of the Asian carriers have cut back, although they are beginning to re-recruit again. They appear to be trying to recruit primarily among Asian nationalities rather than European. We have also restarted our cadet training schemes, which had run dry after we faced a pilot rostering crisis in late 2017. Currently, we have over 350 pilot cadets in training. They are paying us an average of about €30,000, and they will flow through over the next 12 to 18 months. We are opening up a large new aviation training center in Dublin, which we soon will announce. We are also establishing a new facility to handle cabin crew recruitment. We have enough pilots and cabin crew now to operate about 90% of our pre-COVID air capacities through July and August, but it's a tight fit. It's particularly impacted where you think like the UK reopening where people are being pinged and told to isolate for 10 days despite having been double vaccinated; it is an issue that needs addressing. Overall, we don't foresee significant labor shortages over the next couple of years, and we do not anticipate labor inflation either. One challenge we will face in the short term over the next number of weeks will be airport handling companies. We have seen lots of problems at many airports this weekend, going back into a peak handling scenario, which are short-staffed, airport check-in being short-staffed, and security being short-staffed. Our on-time performance fell from around 95% to 80% on Saturday and Sunday, mainly due to ATC staffing issues. They have not hired due to the pandemic freeze, and of course, as usual, the French and Germans are generally short-staffed on Saturday mornings. We've been working through that, but it will be a bit painful in the coming weeks before we are in reasonably good shape come December of 2022. There is a Herculean recruitment and training job that needs to be done. Eddie, would you touch on the aircraft discussion?

Edward Wilson, CFO

Can I just clarify one point there, like on the pilots? Our recruitment is exclusively on the cadet side because obviously, we have enough captains and everything for not only this summer and next winter, but next summer as well because we have all the people coming through command to upgrade. So it's primarily focused on that. The first option was on the particular cadets. Just on the capacity allocation, you're looking there at competitors retrenching and we've got the new aircraft that have come in. You've got airports now actively looking for the attributes of less than 40% less noise emissions. We've been able to exploit those opportunities. You look particularly at the Nordic region, where we've launched nine routes at Helsinki. Again, with Norwegian gone, Helsinki is looking for growth. It has changed from the last time we launched any capacity in Scandinavia back in 2003-2004, where we were flying from secondary to secondary airports. So we’ve got better capacity now into Gothenburg and places like that. We see opportunities start to knit that network together in the face of reduced capacity from SAS and Norwegian. In Italy, most of the airports are saying, where aren’t the Ryanair bases? It has taken some time to close that sort of Turin deal, but we've achieved a very strong domestic network out of there. We still have other announcements to make in Italy as we bolster our network there.

Michael O'Leary, CEO

Okay, thanks, Eddie. Overall, I think with all the new routes being introduced and the airports wanting to partner with us, it will lead to significant growth in the years ahead. With that said, can we move on to the next question, please?

Operator, Operator

Thank you. That's from the line of Mark Simpson of Goodbody. Please go ahead. Your line is open.

Mark Simpson, Analyst

Thanks. Good morning. Two questions. One, the MAX is performing well, and there’s a good reception from customers. The fuel burn, I think, has been indicated as surprising against previous guidance. Can you give us a broader feel for how you see the MAX performance? It seems like turnaround times, I know difficult in the circumstances of COVID rules, but it's interesting to hear a bit more about that. And then longer-term, you've talked about a goal of a 12.5% SAS by 2030 well ahead of the Fit for 55 two to a 5% target. What I'm interested in is how do you achieve that? I mean, SAS infrastructure issues are clearly going to be what the roadblocks to achieving those targets. So do you have plans around your key bases, Dan said, Bergamo for some form of SAS infrastructure to help you achieve those targets?

Michael O'Leary, CEO

Okay. Thanks, Mark. I’ll ask the Director of Sustainability, Thomas Fowler, to address the second part of your question. I’ll take the first. Look, I think the MAX performance in the first month has been extraordinary, but I would also caution that we're operating with a load factor in the last month of around 75-76% instead of the normal 90-92%. We are flying slightly lighter planes at the moment and the turnarounds have been effective around 25 minutes. There have been no issues at all. It is only 8 extra seats. Fuel performance has been meaningfully better, around 20% savings. But again, I suspect that as you return to a more normal high load factors, we plan to appreciate better fuel performance in the future. The noise performances have been extraordinary; the feedback from passengers has been overwhelmingly positive regarding how quiet the aircraft is. Importantly, we have gone to considerable lengths to indicate that passengers wishing to get off the aircraft can do so at any time. Not one single passenger in the first five weeks of operation has wanted to offload from the aircraft. Flight operations overall are performing excellently and this is especially true for the pilots operating the new galleys and layouts. The performance of the aircraft has gone remarkably well up to this point. I think in the next few weeks, we should see our 12th MAX aircraft coming on board in approximately the first 10 days of August. The fact that we have 10 or 12 of these aircraft in our operation during the summer, while the weather is good, will allow pilots and cabin crews to gain familiarity with them. This is a very nice slow introduction into the system. Overall, it has been remarkably successful thus far; hence we will likely take another 60 plus aircraft this winter, Boeing permitting. It is a great operational safety plan and serves well for the introduction of the pilots in the company. Over the past few weeks, we have seen a strong performance from the MAX, and I believe that time will show we are making the necessary strides towards being ahead of the competition in efficient air travel. Thomas, do you want to run through SAS and what we’re doing to improve supply for 2030?

Thomas Fowler, Director of Sustainability

Yes. Mark, thanks for the question. On the infrastructure, the issues surrounding how we found partnerships moving forward, there are areas like Bergamo that are being targeted for investment that will allow us to meet our SAS goals, specifically towards 2030. There will be no one-solution-fits-all; we must assess markets on a case-by-case basis. The goal behind the carbon reduction plans is to have businesses and airports onboard to assist in addressing infrastructure capacity needs in the nearby future.

Neil Sorahan, CFO

It's also part of the pushback on Fit for 55. They're announcing all the taxation, but there's been no allocation of these taxation revenues to developing sustainable or high-volume suppliers. While they've set the target themselves, the 5% SAS for 2030, the program is silent on how to achieve those targets and how to implement infrastructure at European airports. We’ll be calling for much more work from our Dutch colleagues and some of the other nations implementing taxes.

Michael O'Leary, CEO

Okay, thanks, Mark. Next question please.

Operator, Operator

Next question comes from the line of Savi Syth at Raymond James. Please go ahead.

Savanthi Syth, Analyst

Hey, good morning. The strong bookings in August and September, I was just kind of curious if you're seeing any signs that would suggest a return to office is still uncertain in Europe; if there's perhaps a higher floor to the usual seasonal drop-off in traffic that you're seeing based on current bookings. And then also just to follow up on that, the near-term bottlenecks, you talked about, Michael. You talked about crew and airports. I was wondering what you're seeing on the maintenance line side, and if there's any supply issue there. In addition to route charges, what you're expecting if you're expecting maintenance to be a headwind over the next couple of years?

Michael O'Leary, CEO

Okay. Thanks, Savi. I’ll take the forward bookings, and Neil, I might ask you to comment on maintenance. On the forward bookings, we’re all in speculative territory here at the moment. Our focus for the last number of months has been to try to stimulate and ensure that we could provide a strong recovery into Q2. We had 8 million passengers in June, 9 million in July; we see ourselves getting to just about 10 million in August. Our view is that if we do achieve 80% or 85% capacity by the end of August and early September, the schools will go back into operation, families will travel safely, and confidently during July, August and into September for the peak holiday in Europe. Then I believe that we will replicate what the U.S. has seen in terms of strong recovery in short-haul intra-EU travel. Business travel will also get back to normal; meeting suppliers, conferences, and postponed events will be re-scheduled. We predict under no adverse consequence that we should maintain close to 10 million passenger numbers. Our expectation for Q3 is to average 10 million passengers a month as well. It may even be better than this, as many people have been locked up for the last 18 months, so they will want to go away for weekend breaks or Christmas markets. Business travel requires getting back into the office; and while there is a lot of chatter about Zoom, businesses will need to meet your clients face to face. Our expectation is that travel behavior will very much return to pre-COVID levels. The balance sheets of competitors will continue to be strained. What I worry about is that many of them will be reliant on state aid levels, which will reduce their ability to fly aggressively at price points. That being noted, there are signs of a robust recovery in intra-EU traffic while maintaining a solid forecast for future bookings. Neil, any thoughts about maintenance?

Neil Sorahan, CFO

Yes. Savi, thanks for the question. There is no fundamental increase on the maintenance side. The only short-term concern is arising from the ramp-up in capacity in the newer markets, but no major disturbances are expected moving forward. In fact, we have locked in much better rates with our engines and maintenance providers going forward. We have built up huge expertise on maintaining our aircraft in-house, and we are adding more mechanics and apprentices to allow for that growth over the next few years. We have new hangar capacity coming on stream in places like Seville, and we're looking at building additional hangars across Europe in the coming year or two. With the MAX coming in, we can now exit some of the older and more maintenance-heavy aircraft from the fleet, you will see some sales over the next months and years. We have already handed back all of the leased 737s, which were older than we would’ve liked. The issues surrounding Boeing deliveries are now resolved overall, so I don't foresee maintenance as a significant headwind around production in the years to come.

Michael O'Leary, CEO

I would just add, we’ve been reasonably judicious over the last 12 months. In our new headquarters at our site, we have opened up a 30,000 square-foot building where we can house our engineering and planning departments. This allows us full flexibility in our operations. We’ve invested about $10 million in our aviation training center near Dublin Airport that includes four simulators for pilot training and expanded cabin crew training. Overall, I think we have kept our training capacity there at the forefront during the COVID crisis, and we are in a much better position today to keep investing in our people and technology. Thanks, Savi. Next question, please.

Operator, Operator

Thank you. That's from James Hollins at Exane BNP Paribas.

James Hollins, Analyst

Hi. Good morning. Michael, Eddie, you sound like a couple of kids at Christmas when you talk about growth opportunities. It's exciting, and you clearly singled out Italy and Scandinavia as good examples. I'm just wondering if you sort of need to or even want to go off to some of the more established operators, the state aid junkies, your words, not mine, in Western Europe, or whether there's sufficient growth elsewhere. The second one, either for Thomas or Juliusz if he is on, just on the Fit for 55; you obviously - after flight talked about this sort of nature of some changes to be made. Just wondering how likely you think it is and what would give you the confidence that that might be amendable, won't they just simply stick with long-haul?

Michael O'Leary, CEO

Okay. I’ll ask Juliusz maybe to comment on the last question and Thomas to add something there. Overall, yes, I think we will see more growth, particularly at primary airports. We are pushing hard, for example, for the release of slots in Italy and Portugal where TAP and Alitalia are sitting on slots which they won't use, given their current situation. There will be further opportunities in Germany, where Germanwings and others have reduced capacity. But again, we will be opportunistic. If I look over the next two or three years, our growth will mainly occur in larger base airports where we've rolled out significantly long-term low-cost agreements at Stansted, Bergamo, and Brussels Charleroi. I think there is a significant new route development opportunity in Scandinavia and what we would call Central Eastern Europe; this will be beneficial and consistent with our leadership in this region. There are opportunities across Italy, Spain, and Portugal to carve out more capacity as we are investing heavily in our new maintenance facility in Seville. France is steady, and the UK provides challenges — but I see options available as we look forward. I have never seen such growth potential in my 30 years in aviation as I do now, and I believe we can allocate 200 new MAX aircraft in the next four years to serve that growth.

Juliusz Komorek, Chief Legal Officer

Yes. I’ll comment quickly. Juliusz here. Hi, everyone. As of now, there isn't any unanimity on fuel taxation within the EU. This proposal predominantly comes from countries that are located in the old Central Europe, primarily the Netherlands. You will find some support in Belgium, parts of Germany, and parts of France. However, these nations possess a vastly different transportation framework compared to peripheral countries like the Baltic states, Scandinavia, and down into Greece. They are very dependent on tourism. They are genuinely concerned about the accessibility costs to these areas and are aware that harmful decisions may be imposed without reflection on those forecasts. We are in constant communication with governments in these nations as part of our lobbying efforts in Brussels, and they are ardently aware of this inequality before any taxation measures are finalized.

Michael O'Leary, CEO

The industry is each consumer is tuning into the overall carbon impact their travel choices may create. As it pertains to offset credits, they’re at a fraction of the current EUA prices. So there is that awareness building broadly; we'll have to maximize our competitive advantage within that.

James Hollins, Analyst

Okay. Thanks.

Michael O'Leary, CEO

Thanks, James. Next question, please. We've got to end this call at 11, so we need to get through a few questions as quickly as we can in the last few minutes.

Operator, Operator

Sure. The next question is from the line of Neil Glynn with Credit Suisse. Please go ahead. Your line is open.

Neil Glynn, Analyst

Just one of your related reputations with respect to appealing the navigation charge increase prospect, and expectation on timing. And the second question is just with respect to the longer term or as carbon consciousness continues to develop. Is there an opportunity or even a need to present your carbon footprint kind of to competitors in the booking process like people like Skyscanner do? Or how do you think about your communication back going forward, Michael?

Michael O'Leary, CEO

Okay. Neil, I didn't hear all of that question. There were some issues there. Neil, could you repeat the first part regarding NAB charges, and then we can give that answer?

Neil Glynn, Analyst

Sure. Skyscanner for example will highlight your carbon footprint on a given route relative to competitors. Is that something right there should be doing to communicate most effectively with carbon-conscious consumers, gold and silver?

Neil Sorahan, CFO

Yes. On the carbon side, in fact, in the last number of days, we've launched a carbon calculator, which enables our customers to fully offset their carbon footprint. That's very much open lights and we've already seen good pick up in relation to that. We're continuously looking at different ways of differentiating ourselves. We're not shy and pointing out that as people switch to Ryanair, they can reduce their carbon footprint by up to 50% compared to the legacy carriers, and we will increase our messaging on that going forward. The carbon calculator is the most recent initiative, and it has proven to be very popular.

Juliusz Komorek, Chief Legal Officer

Yes. I think there is an inquiry at the asset level as well, an eco-label where the airlines will feed into our information, like the Skyscanner program. At the moment, Skyscanner's calculations are very generic and do not reflect the actual numbers accurately. There is a fair bit of work to be done at the European level to improve our metrics going forward.

Michael O'Leary, CEO

I think people are becoming more aware of concepts like CDP. This will be influential in driving decisions in the future.

Operator, Operator

And that question comes from the line of Jarrod Castle with UBS. Please go ahead.

Jarrod Castle, Analyst

Hi, good morning. Moving more into the primary airports, you said from 70% to 80%, and going back a decade, you were probably sub-50%. Are you targeting a more affluent client base? At some point, will we actually see the average fares rise, given the experience, cumulatively over the last few years that hasn't been the case? And then just secondly, Michael, any quick thoughts on the customer advisory panel as part of always getting better, what kind of questions will you try to get them to answer, like cheaper fares with better service or something like that?

Michael O'Leary, CEO

That's a tax question. I'll give that back to Eddie for just to close on the cost of the panels. The revenue movements on basing more aircraft at airports are not solely a quest for affluent clientele. It is a matter of acting on open slots and the best growth deals available now. Those airports are the ones suffering the most significant traffic losses as a result of COVID, and Wizz Air continues to let them down. We are willing to take on members of other classes who can all pay, regardless of socioeconomic background. It is against that backdrop that I feel it is likely there will be a shortage of intra-EU capacity. Our current thinking supplies that will lend upward pressure towards ticket fares and yields in the coming years. Overall, we believe our market positioning will lend us an advantage. Eddie, would you briefly comment on the customer advisory panel?

Edward Wilson, CFO

Yes. I mean, the first meeting of that is set for early September, but what's primarily behind this is enhancing our digital offerings, particularly from a customer service standpoint: travel apps to improve gate information, change notifications, and punctuality information. There are more developments on the horizon in this area. We'll also be soliciting insights from the customer panel to see what ideas they have. Some individuals on that panel have previously rendered significant suggestions already. Additionally, what we've learned in the COVID experience about refunds and handling disruptions due to low performance will be critical. We shall announce our enhancements regarding customer and operation disruptions soon, especially addressing the less than 1% that do occur. We want to ensure prompt communication in our 240 airports so that patrons know the status of their flights, refunds, and how we handle EU261, processing it more efficiently in the future.

Michael O'Leary, CEO

Thank you. We've gone over time. We will take one last question, and then we will conclude the call. If we missed anyone's questions, please direct them to me, Neil Sorahan, or Peter in Investor Relations. So let's take one last question, moderator, and then we will wrap this up.

Operator, Operator

Thank you. We had a follow-up from Neil Glynn. We missed his second question. So Neil Glynn at Credit Suisse.

Carolina Dores, Analyst

Hi. I’ll be quite quick. On the yield in this first quarter, is there a mix of route effects lowering yields, meaning more domestic or more really short routes that is taking the price down? Or is it just a really active price coming down? And my second question, if I may, is the supplier reimbursements that we got this quarter, the €140 million, is there more of these to come?

Michael O'Leary, CEO

Well, firstly, I think no, there won’t be more of the supplier reimbursements. I hope there won't be. We've negotiated now that we're entering the recovery phase, reimbursements and negotiations with not just one, but a range of suppliers have come to an end. The lower fare in yields has been a function in Q1 of very much later traffic or booking curves. We would normally head into the summer with very strong advanced bookings, but we had almost none of that in our system due to COVID uncertainty affecting travelers. As we observed the recovery from 1 million passengers in April to 2 million in May to 5 million in June, we have built traffic based on late booking cycles and aggressively priced offers to capture that volume. We believe that will lead to an increase in fares and yield towards the end of Q2 and primarily into Q3 once we revert back to pre-COVID norms. Okay, ladies and gentlemen, thank you for your participation this morning. I’m sorry we have to conclude after an hour. I hope we managed to emphasize that the recovery is well underway. We are exploiting that recovery faster and much more efficiently combining operations than any other airline in Europe. Looking ahead, across the medium term over the next two to three years, you have a unique opportunity with the delivery of 210 MAX aircraft, of which the first are already operating exceptionally well. The growth of Ryanair will continue as existing primary and secondary airports welcome our expansion that will solidify our strong market position across most Western, Central, and Eastern European markets over the coming years. As long as we can safely say that by September of this year, the pandemic is behind us and there are no further adverse developments concerning vaccine-resistant variants or restrictions. Thank you very much; I apologize if we missed anybody's questions. Please call Neil and Peter in Dublin this morning; we'd be happy to speak to you individually. There’s no road show for Q1 this year as is normal. We look forward to talking with and hopefully meeting you in person for Q2 at the end of October. Thanks very much, everyone. Good to talk to you.

Operator, Operator

This does conclude the conference. Thank you all very much for attending. You can now disconnect your lines.