Ryanair - Earnings Call - Q2 2026

Transcript

Operator (participant)

Hello everyone, and welcome to the Ryanair Holdings H1 FY 2026 earnings release. My name is Nadia, and I'll be coordinating the call today. If you would like to ask a question, please press star followed by one on your telephone keypad. I will now hand over to your host, Michael O’Leary, Group CEO of Ryanair Holdings, to begin. Please go ahead.

Michael O’Leary (CEO)

Thank you, Nadia. Good morning, ladies and gentlemen. Welcome to the H1 results conference call. I'm joined by the entire team here in London and on other phone lines. We published the results this morning, and Neil and myself have done a 30-minute Q&A on the website, so I would direct you to the ryanair.com website for that. While you're there, book a low-fare flight. Quick couple of comments. One, as you'll see, I'd prefer to deal with Q2 because the H1 was distorted by the very ridiculously strong Q1 and the weak prior year comp. If you look at Q2, traffic is up 2% because of the Boeing delivery delays. They have improved in the last couple of months. We've now taken 23 of the 29 aircraft that they should have delivered to us at the start of the summer.

That gives a little bit of headroom to increase traffic growth this year from 206 to 207 million. We should get growth of about 3.5% this year. Fares in Q2 were up 7%, very strong recovery. That is the recovery of last year's 7% fare decline, and we think we will continue that through the remainder of the year. Of course, we do have slightly stronger prior year, or tougher prior year comps in the second half when we began to repair the OTA boycott, or the impact of the OTA boycott was less significant. The fare growth in the second half won't be as strong as it is in the first half, but overall on the year, we're pretty confident now we get back all of last year's 7% fare decline, maybe a little bit above that, but it won't be much.

Much more important, as always, unit costs well under control, only up 1% in the second quarter. Despite significant cost inflation on air traffic control and a little bit on the engineering side, clearly the lower hedge costs this year are playing a significant role in that. As a result, Q2 profits are up 20% to EUR 1.72 billion. Taking forward, the kind of themes I would give you that we want to cover in the call, Boeing are doing a much better job. I think they asked us could we take the aircraft through August, September, October. We said they were no use to us at that stage, but we would work with them. We would take those aircraft if they could deliver them. They've delivered 23 of the 29 aircraft in the last three months.

We get two more in November, and then the final four will be delivered in January, February of next year. We will have all 210 Gamechangers in the fleet by the end of March next year or in advance of summer 2026, which puts us well on track, I think, for traffic growth to 215-216 million passengers in FY 2027. That will be the first year since the MAX groundings that we're not dealing with Boeing delivery delays in the spring or disruptions to our summer schedule. We think that will lead to strong traffic growth and hopefully maintaining pricing and profit recovery into summer 2026. The good news this morning is we've taken advantage of our recent fuel weakness. As you know, we were 85% hedged out to March 2026, so for this year at $76 a barrel, down from $84 a barrel last year.

Today, we're able to announce that we're 80% hedged for FY 2027 at just under $67 a barrel. That will be a very significant 10% saving on our fuel bill. It will save us about EUR 600 million next year, which I think will enable us to incentivize and stimulate growth, but also fund what will be another painful increase in emissions, ETS taxes, and viral taxes in Europe, where Europe continues to damage its own competitors by taxing only intra-EU travel, whereas all the extra or the non-EU travel or people arriving to and from Europe are exempt from these egregious environmental taxes. Balance sheet continues to strengthen. We paid back the EUR 850 million bond in September. We have the final EUR 1.2 billion bond we will pay in May, and then we will be entirely debt-free with a fleet of 640 aircraft.

We have hedged, and I think the Treasury team has done a wonderful job. Start of this year, the dollar was about 1.08 to the euro. It weakened in recent months with some of the Trump spectaculars to 1.24, and we've now hedged the first 50 of our 150 firm MAX 10 aircraft orders at 1.24, which is about a 15% euro saving on CapEx on those first 50 aircraft. We're looking for opportunities to extend those CapEx hedges, and you can only do that with the kind of strong balance sheet Ryanair has. The real underlying, I think, story though is here that Europe's capacity continues to be constrained, and we will remain constrained out to 2030 because of manufacturer delivery delays, Airbus fleet still largely grounded, repairing engines, a program that won't be completed until 2028 or 2029.

Therefore, I think as we add capacity next year, there's a reasonable prospect that we will grow traffic, but we'll see modest fare increases coming through the system. The one negative in Europe is Europe is continuing to fail on competitiveness. We've had the Draghi report now, it's 14 months old. He pointed to a whole series of areas where Europe can and must be more competitive. Von der Leyen has committed herself to delivering on that competitiveness agenda and then done absolutely nothing for the last 14 months. All of Europe's airlines are calling for two competitive initiatives. One, move the ETS, Environmental Taxation Trading System, tax rates in line with CORSIA, which is what the non-European airlines are paying. It is indefensible that Europe is harming itself by having these excessive environmental taxes.

Move ETS in line with CORSIA, and it would result in dramatic improvements in competitiveness and also lower fares for consumers traveling on intra-EU air services. The second reform, Europe's broken ATC services. We need the protection of overflights during national ATC strikes. We cannot have a single market if it can be shut down every time some air traffic control union wants to go on strike. It is not much of an ask. The legal mechanism already exists because in Spain, if they increase, they already protect overflights during ATC strikes, and they ground the domestic flights. As we all know in France, they protect a disproportionate amount of the domestic flights and cancel all the overflights. This is unsustainable, and von der Leyen should take action. I think with what is a very impressive new Transport Commissioner, Tizé Costas.

He wants to reform, but everything dies in the dead hand of von der Leyen's office. She should stop talking about reform and competitiveness and start delivering it. Protect overflights and then fix staffing on the first wave. ATC staffing on the first wave of flights, which again, Germany, France, and NATS in the U.K. are inexplicably short-staffed. It is inexcusable. The airlines, we roster standby pilots and standby cabin crew. ATC, they just allowed the system to fall over, and they cut capacity. It is not acceptable. Air traffic control fees have gone up 14% this year, and we are still getting a shitty third-rate, third-world service. If von der Leyen cannot deliver competitiveness, frankly, she should leave and be replaced by somebody competent who can deliver competitiveness in Europe.

Other than that, I think the good news is we are seeing a sea change in environmental taxation at national levels. Governments in Sweden, Hungary, Italy, Slovakia, and regional Italy are all abolishing their environmental taxes, and we are switching an enormous amount of capacity away from high-tax economies like Germany, France, and the U.K., where Rachel Reeves is increasing APD by another GBP 2 in April, and moving that capacity to Sweden, Hungary, Italy, etc., where governments are getting it, they are abolishing the environmental taxes, and they are also incentivizing traffic growth. We want to reward those countries that are incentivizing growth and penalize those countries like Germany, France, and the U.K. who are incentivizing tax increases and damaging growth. That will continue.

I think the fact that countries like Sweden, the Holmenkrater, Thunberg, and flight-shaming five years ago have worked out they are abolishing the environmental taxes gives us hope, and I think some degree of optimism that the way forward is not penalizing Europeans. It is abolishing those taxes and allow airlines like Ryanair to invest heavily in new engine technology. Our new MAX 10s will carry 20% more passengers but burn 20% less fuel per flight, so a 40% reduction in fuel and emissions on a per-seat basis. Other than that, there's also some other government incompetencies. The Irish government, which was elected last year on a program to abolish the Dublin Airport cap, 12 months later, nothing done.

We have a do-nothing prime minister and a do-nothing deputy prime minister, both of whom have been sitting on the rafters for the last 12 months, talking about passing legislation despite the fact they have a 20-seat majority. They're now talking about legislation that might be moved by the end of 2026. Ireland and growth cannot wait for these do-nothing politicians. They have a 20-seat majority. They should pass the legislation scrapping the cap at Dublin Airport before the end of 2025 and allow Ryanair and the other airlines to get on with growing traffic at Dublin Airport the way we're growing, and we're adding aircraft in Shannon and Cork.

There is always some stupid government and some incompetent politician holding back the growth, but thankfully there are better politicians in Sweden, Italy, Hungary, Slovakia, all of whom are working closely with Ryanair to abolish taxes and allow us to grow strongly. I think we're looking forward, particularly with the improvements Boeing has made in the deliveries, the quality of the deliveries. Kelly Ortenberg and Stephanie Popper are doing a terrific job. They've gone up from rate 38 to rate 42 in October. We think the FAA will increase that to rate 46 in March, April next year. They are gradually catching up on the delivery delays.

They're pretty confident that they'll certify the MAX 7, even with the current government shutdown in Q2 next year, the MAX 10 in Q3, which will be about six months in advance of our first 15 MAX 10 deliveries in the spring of 2027. We have the 29 aircraft delivered this winter that enables us to grow to 215 million passengers in FY 2027. The first 15 MAX 10s coming in the spring of 2027 will enable us to grow to about 225 million passengers by FY 2028. We are off and running on what I believe will be an 8-10 year program to grow from 207 million passengers this year to over 300 million passengers by 2034. Currently, we're making a profit of approximately EUR 10 per passenger.

I think it's reasonable to suppose that that profit will rise from 10 towards 12 or 14, EUR 14 per passenger over the next 10 years. There will be one or two curveballs in the middle of that. We are a cyclical industry, but we have a strong balance sheet. We will have zero debt in May of next year, and I think we are poised for very strong growth, particularly if the European economies continue to lag in growth. People will get more and more price sensitive and will switch to Ryanair from high-fare competitors elsewhere. I have never been more excited about, I think, the growth outlook for the next four or five years.

I think we have a number of challenges in moving politicians to a competitiveness agenda, but within that, Ryanair is going to grow strongly and profitably, I think, for the next four years up to 2030. With that, Neil, I want to hand over to you. Anything you want to highlight in the P&L or on the balance sheet?

Neil Sorahan (CFO)

Yeah, I'll maybe just focus again on a couple of things in the quarter and in the half. Firstly, as you already pointed out, costs put in an excellent performance of just one on a per-passenger basis. That was down to our strong fuel hedging, which very much helped offset double-digit increases in ATC and environmental costs. We're still guiding modest unit cost inflation for the full year.

What's modest remains somewhere between 1% and 3% on a full-year basis, probably a little bit higher than the 1% that we had in the first half, in the second half of the year. We have extended our hedges into FY 2027, as Michael said. We've also extended our OPEX hedging into next year at 1.15 compared to 1.11 on the euro/dollar. We're locking in significant price savings next year, and that'll go a long way to help offset a jump up in our environmental ETS next year from somewhere from about EUR 1.1 billion this year to somewhere between EUR 1.4 billion-EUR 1.5 billion next year. Balance sheet rock-solid. BBB plus raises, 610 unencumbered aircraft, and in a very strong position now to be debt-free by May of next year, which I think is a great place to be. Also, we're locking in euro savings on our MAX 10.

CapEx moving forward with the 35% hedge in place where we've hedged 35% at a firm order. That's 150 aircraft at 1.24. Buyback moving along at a nice pace. We're pleased with the pace that the brokers are moving at. They managed it well through indexation. We're just over 35% of the way through that, and that'll run out to the back end of 2026. Finally, the last thing I'll point to, business as usual, but we've announced an interim dividend this morning of EUR 0.193, which, similar to last year, we paid at the end of February. That's all I wanted to touch on, Michael.

Michael O’Leary (CEO)

Okay, thanks, Neil. With that, Nadia, we'll open up to Q&A, please.

Operator (participant)

Great, thank you. If you would like to ask a question, please press star followed by one on your telephone keypad.

If you would like to remove your question, please press star followed by two. When we're preparing to ask your question, please ensure your phone is unmuted locally. We ask you, please answer yourself the two questions. The first question goes to Harry Gowers of J.P. Morgan. Please go ahead.

Harry Gowers (Analyst)

Hey, morning, Michael. Morning, Neil. First question, just on the. Good morning. Yeah, just on the Q3 fares, maybe you could provide us with what you're currently tracking for the quarter and if you've seen any changes, strengthening, or weakening around that number in the last few months. Then second question. On the online travel agents, clearly the fare comparatives are normalizing into the Q3 versus last year.

I was wondering if you think you're still getting any actual realizable uplift or specific tailwind from those official partnerships, or is this just fully past us now when we're back to a more regular kind of pricing cycle, just fully dependent on supply-demand in any quarter? Thanks a lot.

Michael O’Leary (CEO)

Yeah, thanks, Harry. I mean, I wouldn't want to split out where we think we are on Q3 fares because so much of it is dependent on the posting bookings at Christmas over the Christmas and New Year period. October is strong up on last year. November is a little bit weaker, slightly down on last year's fares, and Christmas at the moment is booking strong ahead of last year on fares.

I think all I'd want to go—I wouldn't want to go any further than give you the kind of—we have moved from being hopeful to being now confident that average fares will recover the full seven-year fare decline from last year in this year's numbers. We're up 13% average fares in the first half of the year. We have tougher prior-year comps in the second half of the year, so you won't see, I think, 7% fare increases in Q3 or in Q4. I think rounded out for the full year, we're pretty confident now we'll be up—average fares will be up 7%. Maybe we might get to 8% if we have a strong Christmas, but again, we need to see how those close-in figures book.

I think that is what leads us with a reasonable degree of confidence to see a strong profit recovery this year, but we can't put a number on it yet because it's so heavily driven by Christmas and the New Year holiday bookings. The new aircraft from Boeing gives us the capacity to add a few extras there over that Christmas-New Year period. That's why we've been able to bring the traffic up from 206 to 207 million this morning. On the OTAs, the big impact on us on the OTA boycott last year was through the first half of the year when you'd lots of people who I kind of complacently thought would be price-sensitive, therefore they'll book the holidays directly with us. They didn't. A lot of them moved to the tour operators last year to the Jet2s and the EasyJet holidays.

They've come back to us in the first half of this year. You see that reflected. We have weak prior-year comps and a strong H1. We see some of those kind of tour operators, EasyJet holidays, Jet2, talking about a bit more price sensitivity in their bookings through the first half of the year. I think it's because the OTAs have moved that traffic back to us. They need our low-fare access. That's not a key feature into the second half of the year. The OTAs are a lot less impactful in Q3 and Q4. Therefore, we didn't have the same decline in airfares in Q3 and Q4 last year. We have a much—well, we have a tougher prior-year comp, which is why we think, again, the second half of the year, you won't see 7% fare increases.

It would be a little bit less than that, but overall in the round, we'll come out at. Fares up about 7% on the full year. Eddie, do you want to add anything to that on the 1, 2, or OTAs?

Eddie Wilson (CEO of Ryanair DAC)

No, I mean. Like what was said there to cover that off about what has happened, slightly less in terms of fares in November, but the Christmas we're happy with how it's booking. Nothing really to add there at all. I think we are through that sort of tail end of the OTAs, and I don't think there's going to be any further uplift. I just think it's, as you say, much tougher for our competitors out there. On the prior-year comparable.

Michael O’Leary (CEO)

Thanks, Eddie. Thank you. Harry, next question, please, Nadia.

Operator (participant)

The next question goes to James Hollins of Exane BNP Paribas. Please go ahead.

Michael O’Leary (CEO)

James, hi.

James Hollins (Analyst)

Hi, Michael.

I'll start one for Neil, actually, just on the ex-fuel unit cost performance. It was only up 2%. I think noticeable was the EUR 30 million Q2 decline year-on-year marketing distribution and other. I'm assuming that's all lower distribution costs, sorry, lower disruption costs, or am I missing something else. Within that particular line? Secondly, Michael, clearly. Using this platform as ever to get your point across on. EU progress on overflights, etc., maybe just give us an update on what this new transport minister might be able to achieve, and secondly, whether there's any update on this sort of comedy baggage regulation they're looking at. Thanks.

Michael O’Leary (CEO)

Okay, James. I might have Tracey can come in after you.

Neil Sorahan (CFO)

Yeah, sure. On the marketing line, I think you're particularly referring to some of that's down to lower EU 261. Lots of disruptions, but we're keeping them below the three hours.

Equally, we've got up to 60 million people a week coming through on social, which is keeping our marketing costs way down. Some of it's a bit of timing. We'll do a bit more marketing over the Christmas period. Then offsetting that somewhat would be higher input costs for the onboard spend, which is going particularly well from an ancillary perspective.

Michael O’Leary (CEO)

Okay, thanks, Neil. On its commissioner to the costs, who's the transport commissioner, has had a really impressive start. One of the most notable things is they finally moved on the infringement proceedings against Spain over the crazy Spanish bag fines that were levied only on the low-fare airlines in Spain, but not on the high-fare airlines. It's clearly illegal. It's in breach of EU regulation 10082008, which guarantees the airlines' freedom to set prices free from government interference or regulation.

He does want to reform ATC, but like I think a lot of commissioners, he's frustrated. They've all expressed frustration at how little comes back out of Von der Leyen's office. There is a real dead hand of German incompetence at the top of the European Commission, and either she should deliver reform and deliver reform and competitiveness or go, preferably be replaced with someone who can actually do something. I would like to say we should get an Irish politician in there, given it was Peter Sutherland who originally deregulated air travel, but given the lack of action from the Irish politicians on the Dublin Airport MAD, Dublin Airport cap, I wouldn't be recommending any of our Irish politicians either.

The EU Parliament, as is its wont, is a—we elect a bunch of clowns, and we should be not surprised in a circus that they come out with crazy ideas. One of which is now that everybody should have the right to bring two free bags on board an aircraft. We have politely pointed out that there isn't room on board the aircraft for two free bags for 189 passengers. That does seem to be a detail that they've missed. We've also pointed out that actually, in fact, one of the greatest things here, that limiting people to bringing one free bag on board, and that was the whaling judgment, the ECJ judgment in 2014, we do allow half the passengers who have priority board to bring a second free carry-on bag. That's about as much capacity as the aircraft has.

What the European Parliament now, part of this is that the commission under Tizzi Kosas is looking for reform of EU 261. They're talking about bringing compensation up from three-hour delays to four-hour delays, which does make sense. The Parliament then pushes back with some ridiculous suggestion like two free bags on board. What that would do is create huge queues at Europe's airports as everybody starts struggling with two bags through airport security, a bit like you have in American airports where you take forever to get through security because they're all bringing five and six bags attached to their persons through the airport. It would also mean inevitable flight delays because bags that don't fit in the aircraft would have to be taken away at the gate and put in the hold of the aircraft.

You'd have more aircraft missing their slots, and you would just gum up the whole system. But of course, a bunch of lunatics elected to the European Parliament would not worry about the day-to-day details of how people move. They only work about three days a week anyway. They would not be all that sensitive, at the best of times, to efficiency. This is why. In America innovates, trying to replicate, and Europe fucking regulates. And why Draghi has pointed 14 months ago, we need to get more efficient in Europe. The starting point would be to stop issuing new bullshit regulations invented by idiots in the European Parliament and start making Europe more efficient. If you really want to deliver efficiency for consumers of air travel in Europe and competitiveness, abolish environmental taxes or at least bring them into line with CORSEA and fix air traffic control.

The European Parliament would be much better off spending its time reforming air traffic control or protecting overflights on a single market than they would designing new and hopelessly impractical and unimplementable regulations allowing passengers to bring two free bags on board an aircraft where there is not room for the bags and they do not fit. Thanks, James. Next question, please.

Operator (participant)

The next question goes to Jaime Rowbotham of Deutsche Bank. Jamie, please go ahead.

Michael O’Leary (CEO)

Jamie, hi.

Jaime Rowbotham (Analyst)

Hi, Michael. Two from me, both on growth. The first one on fares. Obviously, great to see you are making back what you lost from the OTA issues, but on an underlying basis, the pricing is broadly flat, and that is, I think, the scenario you are implicitly guiding to for this winter when the comps normalize.

As we look ahead to next summer, you will grow in Poland, Italy, Ireland, you will shrink in Spain, Germany, France, but overall, you will grow seats at about 4%. Looks like the industry will do 3%-4% again as well. That being the case, I was a bit surprised to hear you talking about modest fare increases coming through the system, especially as you hinted that Ryanair will likely be passing some of its fuel cost decline on to stimulate growth. Would it not pay for us to tread quite carefully when thinking about the direction of your pricing next summer? Second one, you have announced EUR 25 million of annual investment today to accelerate cadet and first officer recruitment for the next three years. You have also talked previously about setting up one or two in-house engine maintenance shops. Is there any update on that project?

Have you chosen the sites? Are there any other non-aircraft investments for growth that we should have on our radar? Thanks a lot.

Michael O’Leary (CEO)

Thanks, Jamie. I am going to ask Eddie to deal with the growth question. Then I might ask Tracey McCann to come in on the EUR 25 million on the first officer and on the engine shops update. Eddie, growth 2026.

Eddie Wilson (CEO of Ryanair DAC)

Yeah, I mean, if you look out into the summer of next year, I think just close to 75% of our growth will be in Italy, Poland, Albania, and the U.K. I mean, if you look what's happened in Italy, we've opened two new bases in Trapani. We've got a Carana base will open. We've got three additional aircraft on into Modlin, three additional aircraft on into Kraków. You see as we begin to, it's not good to say that we're not growing in Spain.

We're not growing in regional Spain. I mean, regional airports in Spain are underutilized by about 70%, but we continue to grow in Malaga and Alicante, where we will have probably 20 aircraft in both of those bases next year, and they'll be pretty much maxed out on early morning slots. We continue to grow in places like Madrid, though it is getting more patchy, and Barcelona is full. The way this is playing out in terms of, you look at our competitors and their sort of cost inflation, that's going to drive fares up while the gap between us and our competitors widens on a unit cost basis, and that gives us the opportunity to take advantage of what we believe will be fares at least rising to some extent. The bias is going to be towards that.

We continue to grow, as I say, 75% of it across Italy, the U.K., Poland, and Albania, and then a smattering of one aircraft increases across a wide range of bases where we're continuing to get low-cost deals. I could have allocated those 29 aircraft three times over based on the appetite that's out there for particularly the stability that Ryanair brings and the longevity into those markets.

Michael O’Leary (CEO)

I would just add to that point, I mean, if you look at the non-ex-fuel unit cost inflation in our competitors, whether it's EasyJet, Wizz Air, Lufthansa, Air France, KLM, they are really struggling to contain unit costs. That, I think, puts pressure on them next year to get fares up to cover these unit costs. The legacy carriers are also facing a much bigger penalty in terms of the withdrawal of the free Emissions Trading System allowances.

It has a much bigger impact on Lufthansa, Air France, and IAG. I think the pressure on fares is going to be upwards for the next year or two. We have a much better unit cost discipline, and I think our fares will trend up behind them despite the fact that we've already banked up to EUR 650 million in fuel cost savings next year. Tracey, do you want to touch on the first officer recruitment issue and the progress on engine shops?

Tracey McCann (CFO of Ryanair DAC)

Yeah. Tuition rates are probably at the lowest we've ever seen, so we probably slow down our recruitment this year of cadets probably to about 500. We should be up at about 1,000. Given the long lead time for promotion to captains, being about four to five years, we're commencing recruitment now for them peak years for the MAX 10 deliveries.

There will be a carry cost of about EUR 25 million per annum up to 2030.

Michael O’Leary (CEO)

Engine shop progress?

Tracey McCann (CFO of Ryanair DAC)

Just on the engine shops, we're close to selecting our first MRO shop. We will open two, so that will allow us to do 200 engines in each shop. The selection period is ongoing. There's nothing in our CapEx for this year, but we will probably start paying something out next year. We're close to announcing something on that very shortly.

Michael O’Leary (CEO)

We're in advanced discussions with GE and CFM on spares packages. We would hope to have announcements of those, if not before Christmas, maybe early in the new year. Next question. Thanks, Jamie.

Operator (participant)

The next question goes to Jared Castle of UBS. Jared, go ahead.

Jared Castle (Analyst)

Good morning, everyone.

Michael, I was quite interested to hear you say that you think the profit for PAX could go as high as EUR 14 at least over the next few years. You've given some commentary on pricing and costs, but just some color on what gives you that confidence, assuming we've got a stable GDP environment, there's no downturn, I guess. You've obviously spoken about a number of countries, Germany, France, and I saw some comments on the U.K., but it does look like you're still continuing to grow in the U.K., which I think is about a fifth of your capacity. If I'm not mistaken, you're going to grow in summer by the sounds of things. Why is it still attractive to you? What are your thoughts on the upcoming budget on the 26th? Thanks.

Michael O’Leary (CEO)

I'll maybe ask Eddie to do the second half of the question on U.K.

growth this year. Remember, the APD increase hasn't come in until April of 2026, so it's coming. Just on profit per passenger, if you go back to the kind of the broad brushes or my favorite back of the envelope, the real driver, I think, of our industry in Europe for the next four or five years is capacity constraint. We've gone through 25-30 years where there was new airlines being set up, low-fare airlines. The legacies were setting up low-fare subsidiaries. Everybody had new aircraft deliveries. There is very little capacity growth across Europe this year, next year, or for the next three or four years. Nobody has any significant aircraft orders, with the possible exception of Ryanair.

We've had some orders, and they're desperately trying to defer those orders now, which means their profits implode because all their profits come from mythical or Ponzi-like sale and lease-back profits being recognized in a P&L. That's an aside. I think the demand for air travel remains strong. Yes, there are economic challenges in countries like Germany, France, and the U.K. where the economies are not doing well, particularly the U.K. post-Brexit. But people are not willing to forgo the travel. The kids, midterms, we've just come through the midterm school break last week. Very strong traffic flows, very strong bookings and high yields. Easter, summer holidays, Christmas. We're seeing strong demand for travel. I think, if anything, strong demand for travel within Ryanair because we have such a pricing advantage over every other airline in Europe. Wherever we allocate the capacity, we are filling strongly.

I think that was reflected in this morning's bookings, even into the remainder of October, November, December, or November, December, where forward bookings are about almost 1% ahead of where they were this time last year. We see that continuing. I was asked earlier this morning in one of the interviews, if we save $650 million on fuel next year, will we pass that on in the form of lower fares? My answer was, I think we can, but I don't expect to have to because I don't see if you look at the kind of cost inflation, ex-fuel unit cost inflation in Wizz, EasyJet, Lufthansa, Air France, KLM, it's high single-digit load and mid-double digits in the case of Wizz. Those guys have no future unless they constrain capacity and get airfares up for the next year or two.

I think we will be the beneficiaries of that with a much more disciplined unit cost control. I keep going back to slide four in our presentation. If you look at the comparative unit cost advantage we have over every other airline in Europe, I think there's a reasonable prospect that we will see modest fare increases over the next two or three years, plus or minus any unforeseen events, but modest fare increases, mid-single digits. In Ryanair's case, most of that flowing through to the bottom line. Now, we will have labor cost inflation in the next couple of years. I think ATC will continue to be badly controlled by governments. Overall, we will be. We're moving into a decade where we're going to start taking aircraft that 20% more fees, that burn 20% less fuel per flight. We're looking at much more operating efficiencies coming through.

I think that justifies a reasonably modest growth in profit per passenger from 10 to 12 to 14, I think, over the next five years to 2030. But then I'm one of the hopeless optimists, which is why I'm employed in the airline industry. Eddie, U.K. growth impact of APD?

Eddie Wilson (CEO of Ryanair DAC)

Yeah. I mean, notwithstanding the sort of background of continuous APD growth in the U.K., the way we look at it in terms of route development is not just season by season, but it's a continuous carousel of airports that we do deals with. If you've got airports, even in a tough market like that, that are willing to share the investment with you in terms of lower cost, then we're going to reward that with extra capacity.

We've got extra aircraft going into places like Newcastle, which we've gone from zero to a two-aircraft base to a three-aircraft base now. Birmingham's got an extra aircraft. Liverpool's got an extra aircraft. Birmingham, Manchester, Stansted, all these places have extra aircraft going in because they're willing. We're in there for the long term. We're lowering costs. They're incentivized for additional traffic. It doesn't always go co-terminus with the market as you make those investments, and it's going to put even more pressure on our competitors.

Michael O’Leary (CEO)

Neil, anything you want to add there on U.K. growth or impact of APD?

Neil Sorahan (CFO)

Not particularly. I think Eddie and yourself have covered that off fairly well. On the profit per PAX, I suppose just to reiterate, it won't go in straight lines. There'll be years where we'll be up and years where we'll be slightly down.

Michael O’Leary (CEO)

Okay, thanks.

I'd be out of Michal Kaczmarzyk here as well, who's the CEO of BUZZ. I might just add, I think it's helpful to just give you maybe his insight into growth in Central Europe, Poland, and particularly the charter market in BUZZ. Michael, I think you want to add on growth.

Michal Kaczmarzyk (CEO BUZZ)

Yeah, okay. In those non-tax economies like Poland and Central Europe? There are good taxes. True. I mean, Poland and Central and Eastern Europe are performing very well. Demand is strong. We have now 80 aircraft allocated in the region. Poland is the biggest part of the market with 44, offering more or less 40 million seats. We have the most attractive destinations in Central Europe.

We have very strong brand recognition there at Ryanair, but also supported by our local structure, BUZZ, generating over 3,500 direct jobs in Central and Eastern Europe, supporting another 20,000 at airports, handling and so on. We make a lot of significant investments in the region through our hangars facility, but also crew training centers. We completed recently the biggest crew training center in Central and Eastern Europe with four full-motion simulators. It's located in Kraków. We'll be able to train over 300 crew per day. We developed also our Warsaw Ops Center, focusing now or covering Central and Eastern Europe, but also served as a backup for Dublin Ops Center. There is a lot of capacity still we can allocate in Central and Eastern Europe. The constraint is the number of aircraft we can allocate there.

We are in good shape to take a lot of market share in the next two to three years. We talked last year of Wizz moving aircraft back from the desert and basing aircraft in Central and Eastern Europe. Are you seeing much of Wizz in those markets? What's Albania, where we're opening a base in Tirana, which is currently a Wizz base? How's the Tirana expansion base going head-to-head with Wizz? No, the Wizz aircraft allocation from the desert to Central and Eastern Europe, I would say it's too late. I mean, after pre-COVID, we increased in Central and Eastern like 40%. Wizz took their capacity or even passed capacity from the region to the region. So now we are the biggest in Poland, the Baltics, Croatia, Slovakia. And we have the local structure there, so we are able to compete.

In terms of cost level, there is no cheaper airline than BUZZ now in the region. Also, with the highest fleet utilization ratio in the industry, over six sectors per aircraft per day. The new base launch next summer will be Tirana for us, with quite significant capacity of Wizz. What I mentioned, we are absolutely not afraid of that because our local structure there guarantees us the lowest cost. Once we deliver the lowest cost, we are able to deliver the lowest fares there as well.

Michael O’Leary (CEO)

Thanks, Michael. Eddie, anything you want to add on growth there? No, before we—I mean.

Eddie Wilson (CEO of Ryanair DAC)

Just touching on the point there, you talked about Wizz and what's happening out there, whether their policy or their growth strategy is to come back to Central and Eastern Europe.

Certainly, what we pick up from the airports is that those that are incentivizing us to grow is that we're there for the long term. You can see even cancellations in Dublin from Wizz before they've even started back there. Some of that has been replicated. You hear a lot of noise, but not a lot of action. That even extends down to places like Italy, where we're doing almost 1,200 frequencies a week, and you've got less than 100 frequencies a week from Wizz there. I think airports recognize Ryanair is in for the long term. Do a deal with Ryanair, get the cost down, and you'll have the traffic for the long term, rather than looking at these other short-term deals that are available in front of us.

Michael O’Leary (CEO)

Okay. Thanks, Eddie. Thanks, Jared. Next question, please.

Operator (participant)

The next question goes to Stephen Furlong of Davy.

Stephen, please go ahead.

Michael O’Leary (CEO)

Stephen, hi.

Stephen Furlong (Senior Equity Analyst)

Yeah, hi, Michael. Just on Boeing, last week, they had the results, and I thought they were pretty vague on the certification. They just said 2026 maybe the deliberative were for the MAX 10. I mean, a little bit more work on the 10 than the 7, and hardware and software modifications, although they did say it was pretty straightforward. Just might talk about that, what exactly they're telling you. Then you mentioned labor. Could you just remind us what's the timetable for CLAs? I think most of them are in 2027 and stuff. That'd be great, the contract labor agreements. Thank you.

Michael O’Leary (CEO)

Yeah. I mean, I think it's one of the things I give Boeing more credit. The new management team at Boeing much more credit.

The old management team would give you all sorts of pie in the sky, to be here tomorrow, next week, and then miss targets all over the place. The new guys are much more cautious. They do not want to make promises they cannot deliver. I think that is the sensible space for them to be in. You look at what they have delivered. They have got FAA approval to go from rate 38 to rate 42 in October. They are now talking about going to rate 46 in March, April next year. That does not really affect us. I mean, we will have finished the Gamechanger deliveries at the end of February. At least we have all 29 aircraft in for summer 2026. There is a risk at the moment with the government shutdown that certification, they are pretty confident talking to us.

Actually, we get this on the other side from talking to EASA, who are involved in certification. EASA are very impressed with the work that the Boeing management team and the work that they are doing. We get a lot of very positive feedback from EASA. I think they are right to be somewhat cautious to underpromise and overdeliver. We have a reasonable headroom there. At the moment, they are talking about MAX 7 being certified in Q2 next year, MAX 10 in Q3. That could slip to Q4 or to Q1 of 2027, and we would still get our 15 deliveries in the spring of 2027. Clearly, we would be one of the lead operators of the MAX 10. I would not have any issue with that. The sooner we can get them, the better.

They are telling us, and have gone in writing, that they will meet our delivery dates, the first 15 delivery dates, the first contracted 15 delivery dates in the spring of 2027, they will meet. That is what gave us the confidence in the treasury function to go out and start hedging the U.S. dollar on those firm deliveries. We are looking for more opportunities to extend those hedging. I think Boeing were right to be a little bit cautious in their public commentary. All of the delivery on the ground in terms of quality of what they are delivering to us and the timeliness of what they are delivering to us now has been nothing but impressive for the last three or four months. They clearly do not need any screw-ups along the way.

In Stephanie Pope, who is sitting on top of the production line in Seattle, there is somebody who is there every day. You can pick up the phone and call her. She gets back to you. She really is well on top of it. I would be very supportive of the work she has been doing. Maybe I would oversay it. Timetable on CLAs, Eddie, most of our labor contracts run out to our comp for renewal in April 2027. 2027.

Eddie Wilson (CEO of Ryanair DAC)

There is a couple of labor contracts that will be off, two or three on the pilot side, and again, a similar number on the cabin crew side. A lot of what we are—it is not always just about pay.

I mean, if you look at the disruption that has happened against the background of ATC and Ryanair's ability along with its people to actually deliver sort of a stable working environment under Boeing by the continuation of the 5-4 roster, which would be a key part of any discussions on a CLA. We have seen also over the last number of years, one of the dividends of doing local labor contracts is that people now not only are in the right place—most people are in the right place where they want to be—and it is relatively easy in terms of how they are paid, the local bureaucracy, administration. Labs have made a huge investment with that in terms of it is so much easier now. It is easier than it has ever been in Ryanair's history for people in far-flung bases to get the smart things done.

How do I get my time off? How do I get my payroll queries? That is all done through a sort of a platform called Ryanair Connect. There are lots of things like pilot and cabin crew, more than ever, value given the disruption that is driven by ATC to have a stable working environment. I mean, like this August, for example, we had our lowest cancellation level ever. Completely different from the previous season. A lot of that, again, is about recovering on the day. We will be talking with our union partners in terms of the renewal of agreements. We will try to do long-term stable agreements underpinned by superior working conditions that I think are increasingly becoming more valuable. It is not all just about one thing.

Michael O’Leary (CEO)

You spoke about just on the Spanish CLA?

Michal Kaczmarzyk (CEO BUZZ)

We just concluded the Spanish CLA for the cabin crew, which was one of the last ones post sort of unionization. There were some bumps in the road, but actually was signed there last week. Now we ratified by the local labor authority. That is for cabin crew. That is very well because that goes into 2030, into that deal. That sort of sets somewhat of a benchmark for where we are going to go with the new deals that are going to come up, particularly on the cabin crew side.

Michael O’Leary (CEO)

Darrell, does anyone want to add anything to that on the CLA side and key people, officer? Darrell? No. Darrell? Okay. Maybe Darrell is not on the line. Look, as you rightly say, Stephen, the labor contracts run out to April 2027. That will kind of is timed to meet the deliveries of the MAX 10s.

There is no doubt we are going to get a productivity gain out of those MAX 10 aircraft, not so much from the extra seats, but from the fuel consumption on the engines, which is dramatic. We are willing, I think, to share some of that productivity upside with our people. I think they say, but. Darrell and his team have started those kind of discussions around 2026 and 2027. We have, as Tracey has already said, record low attrition. I mean, we have almost no pilots and no cabin crew attrition at the moment. People are happy where they are. They're being well paid. They're in the bases they want to be in. Clearly, the Gulf carriers, which would historically have been a kind of a valve that would have recruited a lot of our pilots, they don't have any capacity growth either at the moment.

Things have never been more stable. I think we will be seeing productivity gains coming over the next couple of years. We are certainly minded to do deals with, as long as we can do sensible deals. Will we do unsensible deals? No, we won't. I mean, we've taken strikes in Belgium in the last 12 months. We've taken an occasional strike in Spain. We're happy to take strikes where people don't want to be stupid. We'll take strikes, and we will face them down. I think there is some upside coming in the next couple of years. Certainly, we would want our people to be at the front end of that.

If we can conclude new pay deals in the next either from April 2026 or for April 2027, and if that results in a step up in labor costs, it's something I think we'd be willing to fund and finance. Watch this space, and we would hope to make progress on that over the next six, nine, 12 months. Thanks, Stephen. Next question, please.

Operator (participant)

The next question goes to Alex Irving of Bernstein. Alex, please go ahead.

Michael O’Leary (CEO)

Alex, hi.

Alex Irving (Equity Research Analyst)

Hi. Good morning. Two from me, please. First on ancillaries, really good to see that robust growth continuing on from Q1. What's driving that? Is it product innovation? Is it pricing decompressing two years into one as you reinstate the OTAs and flat unit ancillaries this time of last year? And then related to that, what do you expect for unit ancillary sales over the coming years?

Same question is on CapEx. You've previously spoken about peak CapEx of around EUR 3 billion in fiscal year 2030-2031. You talk about locking in some of the dollar weakness and some of those gains into your future CapEx budget. What are your latest expectations for peak CapEx, when and how much, please?

Michael O’Leary (CEO)

Thanks, Alex. Maybe I'll ask Tracey McCann to take the ancillaries question. Neil, you might come in and do CapEx or peak CapEx. Tracey, ancillaries.

Tracey McCann (CFO of Ryanair DAC)

Okay. The ancillaries grow 3%. A lot of that is driven what we said from dynamic pricing. We're starting to get better pricing on seats, better pricing on bags. We also have our order-to-seat service, which is increasing our onboard spend. Probably fall back a little bit. You're going to be faced with the same thing on the comparables in the second half of the year.

Maybe not as strong as the first half and probably about 2% per annum, I would say, beyond this year. Again, a lot of it is driven by what the labs team are doing in-house and driving the increments we can get on pricing.

Michael O’Leary (CEO)

Okay. Neil, you want to touch on CapEx?

Neil Sorahan (CFO)

Yeah. Alex, there's not a lot to add at this stage. We're only 35% hedged on the firm, the 150 aircraft. We haven't done anything on the options yet. The CapEx that we've guided in the past doesn't include engine shops. It's a little bit premature to start changing numbers at this point in time. I'd prefer to wait until the engine shop's agreed and then come out and refresh the numbers at that point in time.

Michael O’Leary (CEO)

John Norton here, Head of Treasury.

John, do you want to add on? Sorry. Go ahead, Neil.

Neil Sorahan (CFO)

No, that's pretty much it.

Michael O’Leary (CEO)

John, do you want to add anything on CapEx and treasury or currencies?

John Norton (Group Treasurer)

Yeah. Hi, Michael. Yeah. No, look, we've got a nice layer in place there on the CapEx fees for the MAX 10. I mean, when you look at it at the start of the year, where your dollar levels were down at $1.02, $1.03 in January. And then when you also factor in when the contract was signed and it was at $1.08, we have that nice space in place now to take us forward. We'll just look for opportunities when we see them just where markets go going forward to build on that.

Michael O’Leary (CEO)

Right. Okay. Thanks, John. Alex, thanks for the question. Next question, please, Nadia.

Operator (participant)

The next question goes to Dudley Shanley of Goodbody. Please go ahead.

Michael O’Leary (CEO)

Dudley, hi.

Dudley Shanley (Research Analyst)

Morning. Thanks for taking my questions. Two questions.

The first one, Michael, you were on CNBC this morning. I think if I'm listening to you correctly, you said the consumers seem to be a little bit more price-sensitive at the moment. How are you seeing that coming through your business? Is that just a temporary thing? The second question was to do with capacity constraint. Just what are you watching on that kind of three to five-year view that it will remain as constrained? I know some people have been talking about the likes of aircraft from people like Spirit and things that have been shifted over to Europe. What do you watch? Thank you.

Michael O’Leary (CEO)

Okay. Thanks. I mean, where do we see consumer price sensitivity at the moment? I think it's the fact that forward bookings without any price promotion at the moment are running close to 1% ahead of where they were this time last year.

This time last year, we were actually coming off the kind of OTA pricing down 7%, lower fares. At the moment, fares are up in the first half of the year, 13%. We think that'll be a little less in the second half of the year. Yet, pricing is coming running against us. Our forward bookings are running against us. If anything, we're kind of slightly closing off cheaper seats to try to restrain forward bookings because clearly, we want to keep as much capacity as we can for the closer-in bookings, particularly as we run up against Christmas and the New Year. In markets where we are expanding capacity, regional Italy, very strong. A new thing we've identified recently in Italy is Alitalia's CRX-8A seems to have a number of their aircraft fleet grounded, particularly in the domestic market because they're short of spares.

We are expanding, seeing very strong loads. Okay. The prices are lower in domestic Italy, domestic Spain, that kind of stuff, but strong growth. I note there is clearly a bit of consumer price sensitivity there. I'm campaigning aggressively against Rachel Reeves putting up APD or doing any more damage to the U.K. economic growth. In a kind of slightly bizarre, screwed-up way, the more she damages economic growth and confidence in the U.K., the more people will switch away from paying higher fares to BA and others onto Ryanair. I think that all augurs well for our growth over the next couple of years. Capacity constraints, what do we look for? I mean, the only thing you could really look for is Boeing and Airbus orders. They are.

The most recent one was Turkish, which I think was kind of pre-announced by Trump when he was sitting with Erdogan at some meeting in Ankara. Even Turkish, which has announced an order for, I think, 200 or 250 narrowbody 737s, but they have no engines. They're now complaining that they can't get a deal out of the engine manufacturers. I mean, in our day, when we order aircraft here, Boeing, you go sort out the engines. We wouldn't order an aircraft unless it has engines attached. The market has moved so aggressively in favor of the engine manufacturers. People are now kind of ordering aircraft but with no engines and then kind of being price takers when they go to do deals on aircraft. Really, I don't see anything. If some of those aircraft appear out of Spirit, I think the chance of those appearing in Europe are zero.

Airlines in Asia, certainly in the Middle East, would be much more aggressive and willing to pay much higher lease rates than airlines in Europe. I see no demand among Lufthansa, Air France, KLM, IAG for capacity growth. They're all playing the same game. They've consolidated. They want to control capacity. If anything, I think they'll keep shaving capacity so they can get airfares up. Wizz has canceled or is desperately trying to, well, IndiGo, not Wizz, are desperately trying to postpone those Airbus orders into the mid-2030s, which by the time you've added five or six or ten years of escalation, those already expensive aircraft will be even more expensive. All EasyJet is doing is upgrading from an A319 to a 321 at their fortress airports, Gatwick, Paris, Switzerland. That makes sense. It's a sensible thing to do.

As we tramp across Europe, as Michael has said in Central Europe, we don't see Wizz anywhere. In fact, as Eddie has mentioned, most of the big incentives, growth incentives we're getting from airports are from Wizz customer airports who are shitting themselves that Wizz is going to go bust in the not-too-distant future. I think there's a reasonable prospect. And are getting Ryanair to come in there and kind of, if you like, almost as the insurance policy against a Wizz collapse. Now, I don't think Wizz will collapse, but I mean, as a competitor, we wouldn't pay any attention to them at all. I mean, the idea that they're going to close one of their desert bases in Abu Dhabi, noteworthy is they haven't closed the one in Riyadh. They're going to move that capacity back to Central and Eastern Europe. What would he do?

We haven't seen them yet. I think they've expanded their definition of Central and Eastern Europe to the -stans. Apparently, most of the -stans are now in Central and Eastern Europe if you go by the Wizz definition. Meanwhile, we're charging in on top of them in Albania. They were competing with us in Italy and in Austria two or three years ago. They've disappeared. We have a reasonably benign kind of map across Europe where most airports want us to grow there. Increasingly, countries want us to or are incentivizing us to grow by abolishing environmental taxes. That is Sweden, Albania. I don't go through the list again. One of the areas where airports are growing fastest next year would be in Bratislava, where we had a three-aircraft base.

An hour up the road, the Austrians have failed to abolish their stupid environmental tax, which raises less than EUR 160 million a year. Vienna has put up its fees by 30% since COVID. All of the airlines, including now Ryanair, are taking aircraft out of Vienna and putting them in Bratislava. We had already announced an increase in our Bratislava base to three to five aircraft next year. About three weeks later, Wizz announced they're going to open a two or three-aircraft base in Bratislava, which is wonderful. Because in order to be able to—the only thing we could do to respond to a Wizz arriving in Bratislava is put up our airfares there so they'd be somewhat competitive with Wizz. Who come in there with fares that are about 40%-50% more expensive than Ryanair.

The outcome would be exactly the same as it was previously in Vienna or in Italy. Wizz will lose. We'll win. The people of Bratislava will be left with the lowest fare airline, Ryanair, delivering all of that growth. In Slovakia, there is a new transport minister, a new government. They have abolished the environmental taxes. They have cut ATC fees by 50%. The airport is incentivizing growth. Meanwhile, Rachel Reeves is over here in the U.K. considering whether she further increases APD, taxes the rich, and follows the Marxist-Leninist North Korean growth model, which consists of taxing the shit out of everything that moves, with the result that nothing fucking moves in the end. To the extent that the U.K. economy suffers, I think more and more English people will start fleeing to Ryanair and away from high-fare airlines like EasyJet and BA. Thanks, Dudley. Next question, please.

Operator (participant)

The next question goes to Connor Dwyer of Citi. Please go ahead.

Michael O’Leary (CEO)

Connor, hi.

Connor Dwyer (Analyst)

Hey, thanks very much. The first question is for you, Michael. You were talking about how ETS credit prices should come in line with Corsia, which would obviously be quite material if that did happen. How much of this is hope and how much do you think this might actually change? Is there political will for this? The second question for Neil on the cost for practice. It was obviously up 1% in the first half of the year. You are talking about a bit of acceleration to the back half of the year, I think. You have got quite a strong fuel hedge position for that. I am just wondering, where are you expecting some non-fuel cost pressure in the back half of the year? Thanks very much.

Michael O’Leary (CEO)

Okay. Thanks, Connor.

I mean, talking about moving ETS to Corsia, somebody has to lead the campaign. We have been calling for this for about two years. We did not have the support of the flag carriers in A4E, Lufthansa, IAG, or Air France, KLM. They are now much more badly impacted by the withdrawal of free ETSs. Because they have not grown for the last 10 years, most of their traffic was covered by free ETS allowances. As Europe unwinds those free ETS allowances, they are getting much more hit, or the cost impact on them is much more severe. Lo and behold, they are all now campaigning for moving—if you are not going to abolish ETS altogether, at least move it in line with Corsia. It is utterly indefensible that Europe taxes the shit out of Europeans traveling within Europe.

Yet the Americans, the Gulf carriers, the Asian carriers, all land and take off in Europe. They account for 53% of European aviation CO2 emissions and yet pay nothing. I think the fact that A4E is now unanimous on this, I mean, how much of it is—I'm much more optimistic that we will see some movement on that. We still have the dead hand of Ursula von der Leyen to deal with. Ultimately, I think you can even embarrass an incompetent German into fucking actually doing something on competitiveness. The Draghi report is 14 months old. She's done absolutely nothing. I think if we build a head of steam there, there's a reasonable prospect that Europe, through the fog of failure, will ultimately want to do something other than spend hundreds of billions on defense, but to make its economy more efficient.

Air travel is clearly one of the ways of doing that. It would be material. It would result in a dramatic or a significant reduction in airfares. Remember, passengers are paying these ETSs. It would result in a significant reduction in airfares. At least it would mean that everybody in Europe is paying the same fair share as the non-Europeans. Whereas at the moment, you have the Europeans paying all of the taxes, the non-Europeans getting a completely free ride, and useless Europe in the middle of it, or useless von der Leyen sitting in the middle of it, terrified of Trump or taxing the non-Europeans. I think it's a call whose time has come. I also believe, and again, I'm one of life's great optimists, that actually we will embarrass her into doing something about air traffic control, or at least defending and protecting the single market.

She was the one who was singing most vociferously during the Brexit negotiations that the single market is sacrosanct. We will do everything to defend the single market, unless, of course, a couple of French air traffic controllers want to go on strike. I think ultimately, and I am much more motivated. Commissioner Sitze-Kostas is really a guy who wants to get things done. He wants to deliver change. I think he really does want to transform air travel in Europe. He's from Greece. Therefore, they're very sensitive to making air travel more efficient. I am very hopeful that him, together with the unanimity out of the A4E airlines, will see some movement in Europe on ETS in the next year or two. Neil, Conn, you want to call us for a passenger?

Neil Sorahan (CFO)

Yeah, sure. Connor, a couple of bits and pieces.

Firstly, I would expect that air traffic control charges will go up again in January this year. The service is just so abysmal that they have to put it up again. I think you'll see some of that marketing spend. I talked about some timing in there. Some of that will catch up into Christmas and into the stimulation for the advertising ahead of the summer. We're starting to see the Boeing compensation unwind. That'll have an impact on the maintenance line where some of those maintenance credits went. We have the heavy maintenance at the back end of the year. Tracey also talked about we're going to start recruiting up on the cadets. That will kick off probably in the January timeframe. We will be ramping up on the cadet side, but we will also be ramping up, as we always do, ahead of the summer of 2026.

That tends to be back-end costs in there, which is why I am kind of being. Keeping the 1%-3% unit cost inflation.

Connor Dwyer (Analyst)

Very helpful. Thanks, folks.

Michael O’Leary (CEO)

Thanks, Connor. Next question, please, Nadia.

Operator (participant)

The next question goes to Savanthi Syth of Raymond James. Please go ahead.

Michael O’Leary (CEO)

Savanthi.

Savanthi Syth (Senior Research Analyst)

Hey, good morning. Just on the first one, another question on the unit cost. Given that you have hedging in place for next year and clarity around the Boeing deliveries, I was wondering if you could provide any kind of early thoughts on how we should think about fiscal year 2027 unit costs. Maybe a second question, just on the debt side. Usually, airlines that even have kind of good balance sheets find some value in having debt and being involved in that side of the financial market.

I was curious, is the zero debt view just ahead of kind of you do have the MAX 10 CapEx, engine shop, other opportunities. Is that kind of a temporary zero debt view, or do you have a different kind of philosophy on the debt side?

Michael O’Leary (CEO)

Yeah, thanks, Savanthi. I mean, I think on the hedging, I will ask Neil to come back in and correct me if I get something wrong here. It is too early yet. We have not done the budgets for FY 2027. I would not get into unit cost at this stage other than we have banked EUR 650 million in fuel cost savings with the fuel hedging. That is a good, strong start.

I think the two critical elements on the hedging are we have hedged 80% of FY 2027 fuel at just under $67 a barrel. We have made good progress on the currency hedging on OpEx. I am going to ask John to come in, John Norton, to come in on where are we on the OpEx hedging for FY 2027.

John Norton (Group Treasurer)

Yeah. It is 80% on FY 2027 at a level of 1.50.

Michael O’Leary (CEO)

Where were we in the prior year?

John Norton (Group Treasurer)

We were 1.116 prior year.

Michael O’Leary (CEO)

We have hedged away OpEx and a little bit of saving as well. It is not material in FY 2027, but we have started to hedge the fixed orders on the MAX 10s. The hedging is locked down. We have the 29 aircraft that will be delivered by Boeing. I think that is much more critical here into FY 2027.

We have certainty now that we will be able to deliver the headline traffic growth. That is what drives ultimately the airfares and what drives the ancillary revenues. On the debt side, we are in this kind of artificial period. We have this kind of two-year interregnum from 2025 to 2027 where, in reality, we do not have a lot of CapEx. We could, and we are coming up to, in May next year, we have the EUR 1.2 billion bond. I mean, we raised that coming out of COVID at less than 1%. The cost of refinancing that bond currently would be somewhere close to or close to about 3%, which is not a lot of money, but we do not need it at the moment. Therefore, collectively, at the board, our view is we should demonstrate to the market that we can pay down these bonds.

When we start getting into 2026 or 2027, I think we would reserve the right to start. We would probably go back to the bond market as we get into the heavy CapEx again on the MAX 10s. We do so coming off with a strong balance sheet, BBB+ rated, and say, "Look, we have paid out back $4 billion worth of bonds post-COVID." We like the sense of we are not trying to be zero debt for some kind of bullshit philosophical reasons. We would expect to raise debt as long as we can raise debt cheaply, but only when we move into a period of heavy CapEx, which is where we will be in 2028, 2029. We only take 15 aircraft in 2027. We get another 15 aircraft in 2028, but then we move up towards closer to 50 aircraft in 2029 and 2030.

I would be of the view you will see us pay down the last bond in May. We will try to build up gross cash of somewhere between EUR 3 billion and EUR 4 billion out of that. Other than that, we will return the surplus cash to shareholders in dividends and buybacks. As we get into the heavier CapEx in 2027, 2028, 2029, I think you will see us go back to the bond market. There is nothing here. We have no principles here in terms of having debt or being debt-free. It is just because of this kind of slightly strange—it is the first time in 30 years we go through a kind of a two-year period with very little aircraft CapEx, pay down the debt, and then we can always refi again in 2028, 2029 from our position of strength.

I do not know whether you want to add anything on that on the debt?

Neil Sorahan (CFO)

Yeah, I would agree with that, Michael. I mean, it is very much down to a cost decision at the moment. The cheapest way to fund ourselves is out of our own cash resources. That is why we have decided to repay that bond out of our own cash. We have got nearly EUR 1 billion in dry powder in the form of our undrawn revolving credit facility. As we have done in the past, we will be opportunistic when we go back to the bond market. We'll go back at a time of our choosing and not just because there's a bond maturing and we have to roll it over. I think that's how we will lock in the lowest cost ultimately long-term for the group.

As Michael said, it's not just we have to be debt-free. It's just it's going to fall that way for a period of time. Then we'll be back in the markets again.

Michael O’Leary (CEO)

Again, I would draw the point as you look forward in terms of unit cost going forward FY 2027. You look at our competitor airlines across Europe, the so-called low-cost airlines, they have huge net debt on their balance sheets. Aircraft leasing costs, financing costs. Those costs are rising for the next year or two. We will have zero financing costs. We own 650 aircraft completely unencumbered. It is another point of difference between us and the competition. It's also one of the reasons why they need to get airfares up in the next year or two as their financing costs are rising and they have huge leasing obligations.

I think our underlying airfares may well rise into 2027 and 2028, whereas our unit costs will be well under control. Thanks for the question. Next question, please, Nadia.

Operator (participant)

The next question goes to James Goodall of Redburn. Please go ahead.

Michael O’Leary (CEO)

James.

James Goodall (Research Analyst)

Yeah, hi. Thanks for taking my questions. I've just got a couple of follow-ups. Firstly, just on the MAX 10 deliveries, do you know how many deliveries to other airlines are in front of you in the queue? I mean, it looks like various airlines like United, Alaska, they've been pushing back some MAX 10 deliveries from 2026 to 2027. I'm just trying to gauge the risk profile to you if the program gets pushed back any further, which I guess seems lower now given the performance from those airlines. We'd love your thoughts there.

Secondly, just following up from your comments around forward bookings being up one point in Q3, does that forward booked load factor level differ between the peak and the shoulder periods in Q3? What does the higher booked load factor level mean for you in terms of pricing strategy in the latest market? Cheers.

Michael O’Leary (CEO)

Okay. Thanks for that, James. Eddie will do the forward bookings. Let me touch on the MAX 10s. Yes, one of the reasons why we're growing increasingly confident we get our first 15 deliveries in 2027 is we're not delaying our MAX 10 orders. United, who were the lead customer, I think, has delayed. I won't say they were talking about canceling the MAX 10s. We offered to step in. We'd take any MAX 10s they wanted to cancel. It has helped, I think, Boeing to catch up with their production.

I understand there's about two airlines in front of us. I think WestJet is one. Alaska might be another who are still ahead of us in the queue. They're due deliveries in middle to late 2026. Not sure whether they'll get them or not around. I think there's a reasonable prospect that the lead customer is likely to get the first MAX 10 deliveries in probably Q3 or Q4 of 2026. We have about six months of headroom therefore before we get our first aircraft. And I would be reasonably confident we will take them. I don't think we'll be the lead operator. I don't think we'll get the first MAX 10 aircraft, but we might be second or third in the queue.

To those, to my mind, it made no sense for United or some of those others to postpone the MAX 10s because you postpone them into the late 2020s or early 2030s, you're just paying a couple of more years of escalation. I would rather take the aircraft as quickly as I can get them. We don't have escalated. Well, we've built in our price. The price is averaged over the lifetime of the deliveries between 2027 and 2034. I want those aircraft as soon as I can possibly get them. I would happily take any aircraft that has 20% more seats and burns 20% less fuel, will be an economically much more efficient and an environmentally much more efficient aircraft to operate here in Europe.

I would take as many as I can get as soon as I can get them, which is why we stepped in when United stupidly announced that they wouldn't maybe take theirs. I said, "We'll take anything that United want to cancel." They finished up not canceling and just postponing. I think we're about third or fourth in the queue, but it'll be a reasonably short queue. I think the first deliveries will take place in Q3 or Q4 of 2026, and our first 15 are in the spring of 2027. Eddie, do you want to talk about forward bookings through November, December, maybe into Q4?

Eddie Wilson (CEO of Ryanair DAC)

Yeah. I mean, it's Q4. We're only about 10% booked, so very little for Q4, so very little visibility there. If you look forward to, say, November has required some price stimulation, but we're happy with load factors.

If you look in December and January, I mean, we've learned as well from previous years in terms of trimming our schedules as well there, particularly as we get into the first 10 days of January and also doing some trimming around the early December as well. We're about 76%-77% booked for November. Our bookings are ahead of where they are, marginally ahead of where they've been for each of those months, both November, December, and January. Comfortable with what we're seeing, but November is the one that needed a little bit of needed price stimulation to get there. Look, we didn't have to dig too deep, but we're ahead. We are happy, but you do have limited visibility. With 10% of bookings for Q4, you have no real visibility whatsoever. Happy.

Michael O’Leary (CEO)

Thanks for that, James. Next question, please, Nadia.

Operator (participant)

The next question goes to Muneeba Kayani of Bank of America. Please go ahead.

Michael O’Leary (CEO)

Muneeba, hi.

Muneeba Kayani (Analyst)

Hi. I just wanted to follow up on your outlook for the fourth quarter. Why are you saying there is no Easter benefit? Because there is the earlier Easter, and a couple of days will fall into the end of that. I just wanted to understand your thinking around the base effects into the fourth quarter. And then just on your ETS, what sort of increase should we be expecting in fiscal 2027? Because it looks like hedging levels on that are just 11% right now, and the prices have gone up. How much of those fuel savings could be offset by the ETS cost going up? Thank you.

Michael O’Leary (CEO)

I will ask Thomas Fowler, who is the Director of Sustainability, maybe to take the ETS question for you, Muneeba.

Thomas Fowler (Director of Sustainability and Finance)

Let me deal with the outlook. Easter Sunday next year is on the 5th of April. The first weekend of the school holidays will fall into the last weekend in March. It is not significant. We will get a little bit of a bump, but I think at this point in time, we are better off just to say, "Look, there will be no Easter benefit in Q4." If we get a little bit in the last two days of March, great. Most of it will flow into April. It is really only when you get an Easter on the end of the 31st of March or 1st of April, you see the first, as we did two years ago, the first half of Easter was in the prior year Q4.

Almost all of the impact of Easter next year will be in Q1. There will be a couple of days in March. If we get a little bit of a benefit out of that, well and good. There is certainly no point in going out now going, "Ooh, we have two days of Easter in March next year. What can we do?" We have bugger all visibility in Q4. We will not have any until we get into the Q3 numbers in February. That is all we are trying to communicate now, Muneeba. Now I will turn to optimistic Tom for the ETS outlook for FY 2027. You want to touch on 20HS? There is a bundle in between now and then. I think, Muneeba, nearly a little bit at the start of the call, I do not know if you want to know.

We think the ETS and SAS costs go from EUR 1.1 billion this year to somewhere between EUR 1.4 billion-EUR 1.5 billion next year, depending on the outturn of where the pricing is. Obviously, it is higher. Prices are higher going into next year, and we have to unwind the final loss of the free allowances. Somewhere between 1.4 and 1.5 is where we think the thing will be for FY 2027.

Michael O’Leary (CEO)

Thomas, is it worth pointing out that's the last big step up as well that we're going to have?

Thomas Fowler (Director of Sustainability and Finance)

It's the last step up, the last of the allowances. Obviously, bar pricing changes, Neil. We hopefully won't see a step up at that level the following year until mandates increase on SAF in 2030.

We do see the mandates grow a bit in the U.K., literally for 2030, but obviously, given it's a portion of our business, we don't get the full impact of that through the line.

Michael O’Leary (CEO)

Okay. Again, sorry, go ahead.

Thomas Fowler (Director of Sustainability and Finance)

It calls into question, if you're serious about being competitive, this bullshit tax needs to be rolled back. We need to bring it in line with Corsia. It's one of the reasons this unwinding of the free ETS is why Lufthansa, Air France, IAG are now much more vocal about the need to have a fair and level playing field on environmental taxes in Europe. We can't just be taxing ourselves to death in Europe and exempting the Americans, the Gulf, the Asians, and everybody else. It's simply insane. Only the Europeans would sign something this stupid and self-defeating.

Therefore, I think the more we can't allow, the more and louder we campaign, the more likely we are to see some progressive reforms and pushing back on this bullshit.

Michael O’Leary (CEO)

Next question, please.

Operator (participant)

The last question goes to Rory Cullinan of Research RBC Capital Markets. Please go ahead.

Michael O’Leary (CEO)

Rory.

Rory Cullinan (Analyst)

Hi. Good morning. First question, follow-up on the previous one. It sounds like you're not focusing lobbying efforts on sustainable aviation fuel mandates. Would you like to see any changes there to rules in the U.K. or EU? I wondered if you'd be willing to comment on whether the U.K. has diverged at all from the Q2 fare trends you've reported or through Q booking trends. Thank you.

Michael O’Leary (CEO)

Sorry, Rory, just speak up. You're very faint there. I got the first half with the SAF. What's the second question?

Rory Cullinan (Analyst)

The second question on the U.K. Has the U.K.

diverged at all from the Q2 fare trends you've reported or Q3 booking trends that you've seen across the group? Thank you.

Michael O’Leary (CEO)

Okay. Look, SAF, I'm not a believer in—sorry, I'm a believer in SAF, but I mean, there is simply the volumes will not be there to meet the EU 6% mandate by 2030 or the U.K.'s insane 10% mandate. You have the oil majors at the moment rolling back from the production of SAF under pressure in the White House. I think I join and I support the call of all the A4E airlines in Europe. We need to move these mandates to the right. We may get to 6% or 10% by 2035, but I think there's no prospect of getting there in 2030. I would be surprised even if the oil majors do not produce the SAS, there's nothing we can do to supply it.

These are just another example of British and European lack of competitiveness. The environmental agenda, there's a war in Ukraine. You have Trump at the White House. There is no, I think, what is the word? I mean, there is no significant—if anything, Neil, the whole environmental agenda is moving backwards. We need competitiveness in Europe. If the Swedes, who were the home of the original environmental tax and flight saving and all, if they've worked out that Greta was wrong and they're abolishing their environmental tax, then surely the rest of the dodos in Europe will do likewise. I think there is, I think, very little prospect of those SAS mandates being met in 2030.

I do not think as an industry we should abandon SAS, but we do need a much more—either Europe and European governments should use some of the environmental taxation, this astonishing SAS or the astonishing ETS taxation to incentivize the production of SAS or move the SAS mandates to the right or further out into the 2030s. There's nothing we see divergent in the U.K. Sorry, I'll add that to 81 sides of that question. U.K., Q3, fares and yield?

Eddie Wilson (CEO of Ryanair DAC)

I mean, like I said, like in November, we required price stimulation. Even though if you look at U.K. and Asia, for us, is about a third of all of our seats out of the U.K., where we've got, you do see some price pressure there. Just in November, a lot of capacity has gone in there in the market.

I think it's causing a lot more pressure for our competitors. It's a very small part of it. If you look at the rest of the U.K., our city-to-city, our ethnic traffic to the U.K. and Ireland and all that, that's in line with the rest of the network. That's only a slight call out there in terms of U.K. measure, I would say. A lot of it would be focused in the region. A lot of capacity within post-COVID. Some of that went our competitors' way in terms of holidays last year. I think they're feeling more of the pain, but we're getting to those factors.

Rory Cullinan (Analyst)

Are you seeing any divergence in U.K. traffic in U3 compared to non-U.K. or EU traffic in U3?

Eddie Wilson (CEO of Ryanair DAC)

Yeah. The only call that I would have is some of U.K. measure in November. It's a very small part of our business.

The rest of the U.K. is as robust as the rest of the network Europe was.

Michael O’Leary (CEO)

Okay. Rory, does that answer the question?

Rory Cullinan (Analyst)

Yep. Thank you.

Michael O’Leary (CEO)

Good. Okay. Any other questions, Nadia?

Operator (participant)

We currently have no questions.

Michael O’Leary (CEO)

Okay. Listen, folks, thank you very much. I think we've done what, an hour and 25 minutes? We appreciate your time on the call. We have extensive road shows on the road, Ireland, U.K., Europe, and North America for the remainder of this week. If you'd like a meeting or a one-on-one, please contact us either through Jamie here, our Head of IR, or through the Citi Davys Goodbuddies. Thanks to Citi Davies and Goodbuddies for arranging and facilitating the road show. We look forward to meeting you all at some stage over the remainder of this week. If anybody wants to come visit us in Dublin after that, please feel free.

As long as you fly Ryanair, we'll be happy to meet you. Otherwise, I think we're reasonably cautiously optimistic on the outlook, if not for the next 12 months, but I think for the next four or five years. Keep focusing on the fundamentals. Capacity is going to remain constrained in Europe. We are doing much better deals with airports across Europe. Governments are increasingly reversing these environmental taxes. Therefore, I think there's a reasonable—I’d be reasonably cautious that we're going to see controlled growth, certainly to 250 million passengers by 2030, 300 million passengers by 2034. There's a prospect, plus or minus the occasional unforeseen event, that net profit per passenger will, over that period of time, although lumpily, move from 10 towards 12, towards 14 EUR per passenger.

We hope you'll all join us for the ride and see where it goes over the next four or five years. Thank you for your time. Look forward to meeting you this week. Thank you very much. We'll wrap it up there, Nadia, please. Thank you.

Operator (participant)

Thank you. This now concludes today's call. Thank you all for joining. You may now disconnect your lines.