easyJet H2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
November 27, 2024

There are 14 speakers on the call.

Operator

Thanks so much for joining us here, both of you who are in this room and everybody who's watching this also from the live stream. Obviously, we're here to discuss the results for the company in the financial year ending September 30 here in 2024. With me here on stage, I have the company for the last time, CFO, Kenton Jarvis, and we are joined here by the phenomenal team here, VC Debt colleagues as well within the A and B And also the latest addition, Jan de Reymaker, who is the new CFO, who will take over after Kenton as well. And I think you're going to address and say a few words to everybody who's in here as well. And obviously, last but not least, also the company's Chairman, Sir Steven, who is here today as well.

Operator

So what we're going to do, we're going to, as usual, talk through the presentation and then give plenty of time for any questions that you may have and do make use of the opportunity to direct any questions that you feel you want to ask anybody of the team members here at DC Debt as well. And you should have been sent the slides alongside with the announcement that we did earlier this morning as well. And of course, they're all available also on the corporate website as usual as well. Now having said that, this is clearly also my last presentation to you being CEO of Easyjet as well. And I just wanted to say that what an absolute fantastic privilege it has been and is to lead this company with a phenomenal team of passionate people really across the network as well.

Operator

And I think also particularly in the light of the numbers that we're going to talk to you about today in the result we presented this morning. So if you go on to the next slide, it's just a little bit more actually than a year ago that we set out the medium term targets that we're now progressing towards as well. And basically, with the result that we achieved on PBT of SEK 610 million, which is a 34% profit uplift. And I think actually when I look through at least, and I'm sure somebody could contradict me, but I'm not sure that's the case. I think that's an outperformance from any other European airline that we've seen so far this year.

Operator

And actually, across all the metrics that we set out, and I'm not going to go through details each and every one of them, we have made really, really strong progress on that. And I think when we talk about what is underlying driving that, I think there are 3 main things about that. One is that we beat last year's record performance in the summer this summer and also we managed to reduce despite the challenging environment that we saw last winter, the winter losses. We reduced those in the airline and of course also the EasyJet holiday's contribution to the profits with a pretty phenomenal SEK 190,000,000 of profit this year. Those would be the 3 really key levers for that.

Operator

Now you know that we talk about that we want to be Europe's most loved airline for really 3 stakeholder groups, consumers, customers, shareholders and people. And if I bring out and we've done it here on the right hand side, some of the things that really speaks to each and every one of those stakeholder groups, we can see that from a customer point of view, with the CSATs that we have now, the customer satisfaction score is actually one of the highest that we've had in the last 10 years. So I think the last time we were hired, this was back in 2014, fourteen, 20 15. So it's been a good year for that, but there's plenty of more things we can do also within this area. When we're looking at the shareholder side, we are now proposing a dividend of 20%, that's a €92,000,000 distribution of these profits to shareholders, up from the 10% that we did last year.

Operator

And then also for the people who work in this company, we are rated as the number one airline at Glassdoor here in the UK, actually not only airline, but actually airline and travel company to work for. And ICD at holidays is ranked as the best travel company in the or actually the best company to work for in the big companies category. So however you cut this as well, it's a strong year, strong progress from where we've been. And also because I heard some competitors coming out here to talk about their leading positions of ESG, that is fake news. We are the undisputed leader when it comes to ESG on the rankings of this, whether you take MSCI, whether you take Semlytics or the CDP position in Israel.

Operator

So I think when you're looking at this overall strong progress in the year, so I feel also very proud on the fact that what we all achieved here, the company is in a very good state of that. But there are still many more things we can do, and that's what Kenton is going to talk about as well after he has gone through the numbers, which we'll do right now to take us towards that over sustainably making GBP 1,000,000,000 of profit for this company going forward. So over to you.

Speaker 1

Thank you, Johan. Yes. Before I do the numbers, I just want to say a few words for Johan. There's no present. I've worked with Johan for on and off now for 17 years, which I've really enjoyed doing.

Speaker 1

And his passion and commitment for work is really kind of infectious. And he also is able to have good humor in kind of some of the difficult times we've had. Johan has steered the company through the 7 years over the last 7 years through the pandemic. And together with the AMB colleagues, we've set a really clear strategy which is working for us and we're all very confident it's the right strategy. And I think it's showing that Easyjet has emerged a much stronger company than it was before.

Speaker 1

I think we can now all agree that the introduction of Easyjet Holidays was a very good idea. I know not everyone in the room thought that might be the case when it was first introduced. It's a brave decision, but it's a fantastic decision. And both Gary and Johan and Gary's team have executed it really well. So it's very exciting for me to take over.

Speaker 1

We've made great progress as we'll show you in what is year 1 of delivery against our medium term targets. But the exciting thing for me is I think there's much more to go for. But I wish Johan all the very best for your next adventure and all the best success. As Johan said, Jan de Rainmaker is joining us on January 20th. I think every business should have a Rainmaker.

Speaker 1

And I'm very glad to say that ours is here today. So Jan, I don't know if you want to say a few words to introduce yourself.

Speaker 2

Thank you, Kenson. So first of all, good morning to everybody. I'm happy to be here today and have the opportunity to meet you all and also get acquainted a little bit in my new job as a CFO. Now obviously, I'm not officially yet at Easyjet, so allow me not to comment anything about the full year results of 2024. I leave the honors to Kenton and the team to explain the results because in the end, they made the results.

Speaker 2

But if you don't mind, I will just give you a small introduction to who I am. So I'm Jan de Reimark. I'm 47 years old. I'm married. I have 3 children.

Speaker 2

I have the luck to have worked, lived and studied abroad. So I speak 6 languages, which I think an international company as Easyjet would definitely be helpful. Over the past almost 6 years, I've been working for Linias. Linias is the largest rail freight operator, where we managed an incredible turnaround in a very complex environment and also refinance. You need to know that rail sector is one of the only liberalized sectors, which is still dominated by heavily subsidized state owned companies.

Speaker 2

So there, we managed to turn around, and hopefully, the company will be, for the first time in history, next year, positive results. Before that, I worked for 12 years in the airline sector at Brussels Airlines, both directly and indirectly. For those who might know, the company was merged with Virgin Express, and that also explains why the company has some low cost DNA in its blood. And so worked there for 6 years as a CFO. And also there, we managed an important turnaround, repositioning the company, both commercially also from a cost position, reducing costs and also keeping the costs down, which allowed the company to profitably grow over the last years until, unfortunately, in 2016, if I don't recall well, there were the March 22 terror attacks.

Speaker 2

But so spend there almost 12 years. Now happy to be here. And after, I would say, 6 years of detour coming back to the airline sector, which is a sector once you've worked in the airline sector, you always dream of the airline sector and you want to come back. But I think I'm even more delighted to be able to join Easyjet because at the time when we were working at Brussels Ennis, we were always using Easyjet as a benchmark and also as an aspiration. So being able to work for a company that you have always used as an inspiration, I mean, what better can you dream of?

Speaker 2

And if you then look at the mission of Easyjet, making low cost travel easy, honestly, I mean, it's so simple, it's so clear and it's so inspiring. So really happy to be here. And I think, hence, very happy to be here and join Kenton and the team at this moment of Easyjet with a very clear strategy with all the opportunities which are still ahead and hopefully to be able to contribute to the great future. So very happy to be here, very happy to be here today and meet you all and listening now to Kenton and explanation of the results. Thank you very much.

Speaker 1

Thank you, Jan. Thank you. Okay. So let's begin with Slide 4, which outlines the key performance indicators for the full year. Total capacity rose by 8% compared to last year reaching 100,400,000 seats with passenger numbers increasing by 8% as well.

Speaker 1

Load factor and sector length was flat in the full year. The capacity growth has given us a head start on the 5% CAGR medium term growth target, which continues to be our aim from 2023 through to 2028. This year, we expect seat capacity growth to be 3% year on year with 9 aircraft deliveries expected from Airbus in full year 2025 alongside 3 wet leases that we're intending to do in Italy. These are being sourced from ITA and as we're the proposed short haul remedy taker for Milan, Donati and Rome, Fumencino slots. We will however be looking to increase the average sector length by circa 5% next year due to an increase in longer leisure routes as we deploy capacity to where demand and therefore returns are strongest.

Speaker 1

This means that ASK capacity will grow around 8% which will be similar to the ASK growth in full year 2024. And this should allow Easyjet to continue to drive better winter utilization and expect our already strong summer utilization to be maintained. Due to the sector length increase, we're going to move to providing cost and revenue guidance on an ASK basis. In full year 'twenty four, as the sector length was flat, both the per seat and the per ASK metrics are equivalent in their movements. We saw a 2% increase in pricing across the year with airline revenue per seat at £81.35 And once again, we managed our cost base well and the cost per seat ex fuel was broadly flat year on year.

Speaker 1

Easyjet Holidays continued its strong performance with a profit of £190,000,000 an increase of 56% year on year, driven by a customer growth of 36% as well as stronger margins. As a result of this performance, the group's profit before tax was £610,000,000 an increase of 34% or £155,000,000 year on year. Profit per seat increased to £6.08 an increase of 24%. And we're also very pleased with the ROCE progression to 16%, a 3 percentage point improvement in the year. And our headline earnings per share, it was 61.3p an increase of 35%.

Speaker 1

And our medium term ambition is to take this to 100p per share. So if we move on to the revenue per seat bridge. The airline revenue per seat increased by 2%, both at constant currency and at reported currency, alongside the 8% capacity growth. Demand for our primary network and maturing routes supported the ticket revenue growth with ancillary revenue growth increased by 4% as a result of pricing enhancements from our improved algorithms. Now let's move to the cost per seat bridge on Slide 6.

Speaker 1

So as I said when I stood here this time last year, our aim was to keep cost per seat ex fuel broadly flat. And I'm pleased to confirm that both cost per seat and CASK ex fuel has only increased 1% year on year. This is a good performance especially in the context of the macro environment and when we compare it to our peers. Airport and ground handling charges saw an increase of 54p due to inflationary pressures and increased labor costs. We actually expect those inflationary cost increases to slow down now in line with the current RPI and CPI movements as the majority of the airports we fly from are regulated.

Speaker 1

Load factor has some opportunity for growth though. And as a result will proportionately increase airport fees as these are predominantly charged on a per passenger basis. Cost efficiencies will be seen on the CASP basis as we spread the costs over longer sectors, which will go some way to offsetting the inflation. Crew costs increased by 0.62p per seat. We continue to support our crew along with all of our colleagues as they're critical to the successful execution of our strategy.

Speaker 1

Through the period, we see new labor deals being agreed and these have been set to ensure our crew are competitively paid in all our markets. Looking into full year 2025, a lower proportion of unions have labor deals expiring compared to the year just gone, but we will be annualizing the pay increases awarded during full year 2024. Maintenance costs increased by 0.19p due to increased inflationary pricing on spare parts and labor. We've now in sourced all of our U. K.

Speaker 1

And an increasing proportion of our European line and light based maintenance. And alongside this, up to a quarter of our heavy maintenance will be insourced following the purchase of this facility in Malta. This helps give us certainty of supply whilst also generating cost efficiencies, which will partly offset the continued inflationary pressures and rises in costs associated with increased utilization. These cost increases have been broadly offset by a reduction in other costs by 64p which includes the impact of a reduction in disruption events, modest supplier support and fixed costs being spread over higher flying volumes. We believe there are improvements to further improvements to be made within disruption and target a further decrease in full year 2025.

Speaker 1

Maintaining cost control in the current environment continues to be our focus. I expect cost to be well controlled throughout the first half of full year 2025 with CASK ex fuel expected to reduce slightly year on year as we increase productivity and utilization levels. Looking to the full year, we're again focused on doing everything we can to keep CASK ex fuel broadly flat. Moving on to fuel itself, this increased by 19p at constant currency with rising fuel prices in the first half of the year and a reduction in ETF free allowances partially being offset by lower CPS in the second half. Based on the hedge position shown on the slide in the appendix and the current spot rate, we expect H125 fuel CASK will improve by circa 10% year on year.

Speaker 1

Our continued fleet modernization and up gauging journey alongside our favorable hedge fuel prices more than mitigate the impact of free ETS allowances being phased out as well as the increase in the SAF mandate. This fuel tailwind will continue into the summer if forward fuel prices remain where they are helping our total cost position. Let's have a look at cash flow. During the year, our cash position increased by £536,000,000 taking our cash to £3,500,000,000. We saw an inflow of almost €400,000,000 from financing activities.

Speaker 1

This was driven by the repayment of a €500,000,000 bond at the start of the year in October and an issuance of an €850,000,000 bond in March, which pre funds the €500,000,000 bond, which matures next year in June 2025. In addition to our financing activities, we had a positive generation in cash from operations before dividends and FX of £308,000,000 This positive cash movement is mainly as a result of operating profit in the year of £1,400,000,000 and this inflow exceeds CapEx, which includes lease payments, pre delivery payments and the final delivery payments for 16 new A320neo aircraft that we took in the year. We'll look to build our liquidity reserves ahead of the ramp up in aircraft deliveries coming in the next few years as we renew the fleet and benefit from up gauging. We'll also pay a dividend in the period of £34,000,000 for the 2023 financial year. Moving on to slide 8 and the balance sheet.

Speaker 1

We continue to hold one of the best investment grade credit ratings in the industry. Standard and Poor Rate Easyjet with BBB and a positive outlook and Moody's rated Baa2 with a stable outlook. At the end of the year, our net cash position was £181,000,000 and this compares to a net cash position of £41,000,000 last year. If you remove the IFRS 16 liabilities, our true net cash position would be £1,400,000,000 Notable increases have been seen in our unearned revenue due to a higher level of forward bookings. You can also see an increase in our property, plant and equipment driven by an increase in our fleet size to 347 aircraft from 336 aircraft at September 23.

Speaker 1

On the balance sheet also worth pointing out is £650,000,000 of ETS allowances, which have been prepurchased ahead of the April surrender date for calendar year 2024, which we've 100% covered and for calendar year 2025, which we've already 96% covered. Moving on to our fleet slide. The industry is facing supply constraints with both OEMs struggling to meet their delivery schedules. Our fleet, as you know, is all Airbus A320 family aircraft powered by CFM engines. The orange line shows our current fleet plan for the next 4 years, aiming to grow our fleet to 395 aircraft by full year 28.

Speaker 1

This is based on our current understanding of likely aircraft deliveries. We have an order book out to 2,034 for an additional 299 A320neo family aircraft with a further 100 purchase rights on top of this. These deliveries will drive our up gauging journey and associated cost benefits as we move our current average gauge from 181 where it is today to the low 190s by 2028 and then into the low 200s by 2,033. As shown in the appendix, for every A319 that leaves the fleet, we see circa £10 cost per seat benefit if it's replaced by an A320neo or circa £16 cost per seat benefit if it's replaced by an A321neo. As a group, this will deliver over £3 of unit cost savings, which is one of the pillars to deliver our medium term targets.

Speaker 1

This is a unique journey for Easyjet as we retire the 82 remaining A319s, which obviously just have 156 fleets. We're working with Airbus to mitigate the impact of the notified delays in deliveries. We've been able to limit the impact to date through the A319 fleet that we have in service. In terms of deliveries, Easyjet received all expected 16 aircraft in 2024 and continues to expect all 9 aircraft deliveries this year. And we've had 4 of these already delivered and we'll get 2 more next month.

Speaker 1

We expect our gross capital expenditure to rise over the coming years, reflecting our updated expectation for aircraft deliveries. The CapEx increase is also driven by the step up in pre delivery payments in line with our delivery profile, increased investments into spares to ensure operational readiness and maintenance cost growth as this fleet expands. It's important to note that the CapEx shown in the chart is the gross CapEx position and doesn't account for any potential financing options available to us. We currently have 54% of the total fleet in ownership with 79% ownership when it comes to the younger NIO sub fleet. As set out in the capital allocation framework, we're looking to maintain the positions of NIOs we have in ownership at greater than 75% going forward.

Speaker 1

So assuming we take all the 2526 deliveries into ownership through operational cash flow, then the full year 20 27 net CapEx would reduce from £2,300,000,000 to £1,900,000,000 if we took 75 of those deliveries into ownership. If, however, we reset the total to 75% at that point in time, then that would further reduce the number to €1,500,000,000 for the CapEx in that year. If, however, we were to take all the deliveries up to and including full year 20 27 into ownership through a combination of free cash flow and balance sheet strength and then reset our total NIO ownership back to 75% at that point, that GBP 3,300,000,000 gross CapEx will become GBP 2,100,000,000 dollars We continue to so that's the position there. So now if we move through to the strategy update. Thanks a lot.

Speaker 1

As we said, making low cost travel easy is our purpose. And fundamentally that was the purpose that Easyjet was founded on almost 30 years ago when Stelios set up the company to democratize travel. His purpose is to make travel affordable and easy for everyone to access. And that is really important to us at Easyjet and it's important to me and it's important to the AMB. The 4 strategic focus areas that come across are what we consider and think about every day.

Speaker 1

And this helps us deliver our ambition of generating £1,000,000,000 profit before tax. With the first one, we continue to build our unrivaled European network of number 1 and number 2 positions in slot constrained airports. Our improved airline revenue generation alongside the asset light investment in Easyjet Holidays continues to drive improved returns whilst ensuring we are providing customers with the products and the services that they value. And the cost advantage we have over our major competitors in the airports that we operate from means we can be focused on margin generation throughout the network, effective focusing on effective pricing management and ancillaries to drive further revenue. All of this is underpinned by our purpose and ambition to be Europe's most loved airline, winning for our customers, shareholders and our people.

Speaker 1

Spending more time with my colleagues over the network over the last 3 months has really reinforced my belief that our people and everything that makes the difference at Easyjet. Our pilots, crew and all other staff consistently go over and beyond and they're central to the customers' experience and our success. Our commitment to supporting our people has been shown by both Easyjet and Easyjet Holidays being named as the Best Place to Work by Glassdoor and Sunday Times respectively. We continue to gather feedback from employees and importantly take actions to make improvements, so we remain an employer of choice. We've invested £8,000,000 into performance shares so that all of our people are shareholders and all our colleagues can now share in Easyjet's success and that's something I want to continue.

Speaker 1

Together, these measures help to keep attrition low and to retain talent and ensure our employees are invested in the future of Easyjet so we can all achieve our full potential. Johan's already talked you through the momentum we achieved in the year, which has enabled strong progress towards our medium term targets, but we still have so much to go for. Myself and the team are focused on the medium term plan and motivated to build on the success to date. Despite a challenging winter, the airline reduced winter losses year on year by €40,000,000 We've continued to take actions to improve productivity and utilization. As a result, in the future, I believe we have the potential to be profitable in the Q1.

Speaker 1

We're working hard to achieve this goal and I expect we'll make another step towards this in the current year with our loss in Q1 reducing significantly as we anniversary the impact of the Hamas attacks last year. The March quarter is, however, more challenging for all airlines due to the lack of peak holiday weeks and the need to ramp up the summer for the summer ahead. And this is especially true this year when Easter moves out of Q2. That said, I'm confident we'll be able to reduce H1 losses further this year despite the movement of Easter and remain convinced that a strong airline should make money in 3 quarters. Last year, the 16 aircraft deliveries moved our average gauge from 179 to 181, but we'll unlock limited efficiency benefits from up gauging in full year 2025 due to only receiving 9 aircraft and retaining all the A319s.

Speaker 1

But we expect to see the majority of the benefits coming through from full year 2026 and beyond when aircraft deliveries are expected to increase again. Holidays will continue its excellent journey this year where it plans to grow circa 25% in customers. In this cyclical industry, there will always be factors outside our control. However, there has been progress within other initiatives as well despite the geopolitical and fuel headwinds in the year. For example, in flight retail profit is now 68p per seat, an increase of 13% compared with full year 2023.

Speaker 1

Operational actions to deliver better on time performance and less disruption events have also delivered for us in the year despite a worsening ATC environment. And we continue to make investments in this important area. And there remain plenty of opportunities within the other category that have yet to been realized. Together, these are the building blocks of our ambition to sustainably deliver over £1,000,000,000 in profit. Turning to slide 14 and our focus on capital discipline.

Speaker 1

Making the highest returns from the metal that we deploy is our primary focus. We're relentless on allocating aircraft to the highest performing bases and routes whilst maintaining an optimal network. We're seeing this come through in the financial performance shown in the route return curve on the right hand side of the graph. The number of routes have increased by 8% to 1099. And as you can see, the curve has shifted upwards as ROCE has improved to 16% from 13% last year.

Speaker 1

Routes shown below the average ROCE of 16% are primarily new routes not yet at maturity and those with shorter sector lengths to provide productivity and utilization benefits. As you'd have seen before, alongside basing our aircraft in the right locations, I want to drive increased revenue generation on our assets. This is being achieved through Easyjet Holidays with its asset light model and in the airline with revenue management enhancements and continued ancillary growth. As we invest in new capital over the coming years to deliver on our growth targets, we'll continue to be disciplined with how we allocate these aircraft. We'll grow within our network through increased frequencies or adding new network points into existing bases and taking advantage of ad hoc opportunities as they arrive such as Milan and Rome slots.

Speaker 1

Up gauging will provide further growth on our existing routes without any additional slot requirements, whilst providing cost and sustainability benefits through reduced fuel burn and lower noise pollution. And as we bring new aircraft into the fleet, we'll see our unit costs of ownership remain broadly flat due to the attractive pricing with Airbus and the fact that our new owned aircraft do not have the engine shop visits capitalized until they're incurred. Let's have a look at the network slide. We continue to provide greater choice to our customers. And as you can see on the map, this year, we operated 30 bases and to 160 airports.

Speaker 1

We launched 158 new routes for full year 2024 as well as establishing our new bases in Birmingham and Alicante. These bases have been hugely successful for the airline holidays, delivering strong returns in their 1st year and with 17% of international seats at Birmingham sold to Easyjet Holidays customers. The expansion will continue into full year 2025 where we'll be launching our 10th U. K. Base in South End, further building on the U.

Speaker 1

K. Leisure network. And we're already seeing strong bookings at the airport for summer 25 with many customers choosing Easyjet Holidays. The key message here is that we're focused on bases with the higher returns, which is in line with our profitable growth strategy. And when we're not getting those returns, we have the flexibility to adapt.

Speaker 1

As mentioned earlier, we plan to open new bases at Milan, Leonardo and Rome from Encino next spring and are confident this will provide us with a great growth opportunity. We expect to hear from the commission in the coming weeks. Looking ahead in the first half of twenty twenty five, we expect seat capacity growth to be around 6%. Increased frequency and sector length will drive increased asset utilization leading to a 12% ASK growth. We'll be increasing volumes into North Africa and the Canary Islands serving strong winter sun demand.

Speaker 1

It's also worth highlighting that demand for city traffic and city breaks within Easyjet holidays continues to grow and we've added capacity in 2025 to destinations such as Athens and Zurich. All in all, we've continued to focus on optimizing our network to ensure capacity is deployed in the markets where we see the strongest demand and returns. We remain focused as well on driving the best returns and we've implemented a number of proactive initiatives to drive better attachment rates on ancillaries, increased conversion in the booking flow and to further optimize our yields. Here we spotlight 3 areas that support this: EasyJet Holidays, improved merchandising and in flight retail. As we've already discussed, EasyJet Holidays continues its excellent trajectory and is on track to achieve its medium term target.

Speaker 1

The profit growth and increased industry leading margins in the year coupled with excellent customer satisfaction scores once again proving that Easyjet Holidays is now a major player in the holidays market. The international attachment rates across the network is now 6%, demonstrating significant headroom for growth. In 2025, EasyJet Holidays plans to attract 700,000 more customers year on year, which is broadly the same growth as this year as we continue to grow, but now from a higher base. We'll continue to serve our customers growing demand for beach holidays, while enhancing our city break proposition, which make up nearly half of the airline's network. We include a 23 kilogram hold bag on all beach packages, but we've removed this within the core city brake product, making hold bags or cabin bags an available option as desired.

Speaker 1

And this works better for the customers and helps provide fantastic value. We continue to benefit as more hotels directly connect into our system, allowing additional room choice and availability. We will continue to launch more destinations for holidays customers. For example, we recently put on sale Cape Verde from the UK as well as having opened up Egypt and Tunisia to regional UK. We also plan further to further enhance revenue for the group from merchandising.

Speaker 1

We've re platformed the app and the website, which will improve e commerce functionality and user experience, while also enhancing the book flow. We expect this to increase conversion with their ancillaries as customers will have more visibility of the bundles available. Another example of increasing returns on our existing operation is in flight retail. We told you that our profit target per seat for in flight retail is £1 and that has now reached £0.68 per seat in full year 2024. We're well positioned to continue to build on this excellent trajectory through initiatives such as our recent partnership with Costa Coffee, which demonstrates our commitment to bring customers the products they want to buy.

Speaker 1

And there's still a lot more opportunity to build on this progress. Delivering ease and reliability is central to what we do. Our purpose is to make low cost travel easy, offering low fares to popular destinations delivered with a great customer experience. And our focus on the customer experience resulted in improved customer satisfaction scores across all touch points. Despite a worsening ATC environment across Europe, our on time performance improved year on year.

Speaker 1

ATC provisions have once again been really disappointing, so they must put in place adequate resources to handle next summer's European flying volumes. Our improvement in on time performance was driven by investments and the proactive actions we've taken to improve operational resilience. We took the decision to make changes to crew schedules, which resulted in earlier crew reporting times at our largest airport as well as maintaining scheduled gaps in the middle of the day to allow for catch up as needed. Our increased roster stability has helped to support our people while delivering operational resilience and we'll look to further invest in this area in summer 2025. We're now using scheduled simulation tools to optimize our on sale program.

Speaker 1

This enabled the team to pick up areas of high and low levels of predicted disruption and proactively manage the schedule accordingly, improving the travel experience for our customers. The significant investment we've made into spare parts, doubling the value held has meant that aircraft has spent less time out of action for maintenance and ensured we're able to mitigate the impact of supply chain challenges. We're also using AI and data to aid accurate and timely decision making to further enhance our operational performance. For example, more accurately predicting standby crew levels and locations to ensure efficiency is best in class. In addition, the automation of our customer communication processes has increased productivity by 46% with 68% of customer queries now served via live chat.

Speaker 1

We have a continuous focus on improving every aspect of the customer experience, working to deliver a seamless and digitally enabled customer journey at every stage. As you can see, we continue to have a cost advantage over the major competitors within the primary airport network. I've already discussed how our increased productivity and utilization delivered flat non fuel unit costs year on year, which is a development few of our peers have seen. There will be more to come in 2025 as we use data and drive efficiency. With ASK capacity growth of 8% expected in full year 2025, the same as we saw in full year 2024, our ambition is to keep our CASK ex fuel broadly flat this year.

Speaker 1

We'll continue to focus on our purpose of making low cost travel easy, while reducing the impact we have on the environment. Driving efficiency is key to our low cost model with sustainability embedded. As Johan said, we've heard a few airlines claiming this, but we're both very proud that Easyjet is now the number one ESG rated airline in Europe. The efficiencies which we have ahead of us will only strengthen this position from both a sustainability and a business model perspective. We've reduced carbon emission intensity year on year and we're tracking ahead of our net zero roadmap and benefiting our overall fuel costs, which are expected to further reduce in the coming year.

Speaker 1

So in summary, the outlook for 2025 is positive and we're making strong progress towards our ambitious medium term targets. We expect the number of seats to rise by 3% in full year 2025 with an increase of around 5% on sector length as we increase our longer leisure offering. This means ASK capacity growth will again be around 8%, helping us drive utilization across the fleet. We expect further productivity and utilization benefits to deliver a reduction in winter losses and a significant step forward is expected in Q1. However, we know that Q2 will be impacted by the timing of Easter.

Speaker 1

Easyjet Holidays is continuing to build on its strong trajectory and plans to increase customer numbers by circa 25%. There's no change to the aircraft deliveries in 2025 that we advised at half year with 9 additional neo aircraft expected to be delivered alongside 3 wet leases. Our results demonstrate that we have the right strategy and price focused on capital discipline and targeted capacity growth. Our investment grade balance sheet is one of the strongest in the industry and we now have 79% of Neos in ownership. And finally, the proposed increase in dividend to 20% of profit after tax reflects our confidence in the future.

Speaker 1

This leaves us well positioned to deliver our medium term targets, providing us with the building blocks to achieve our ambition of making a sustainable profit before tax of greater than £1,000,000,000 In summary, there's still much to go for. So thank you for listening and we'll go to questions.

Speaker 3

Good morning. It's James Hollins from BNP Paribas. Perhaps I'd like to kick off by wishing Johan all the best. Thank you for everything. It's been a genuine honor to get to know you last 7 years and we all wish you well.

Speaker 3

And indeed welcome Jan for already providing the easiest of research note titles. Thank you. Three questions, please. Probably 2 for Kenton. Very quick one on Q1, significant improvement in PBT.

Speaker 3

Perhaps you'd like to quantify that, give a range just to make life easier. And then in terms of making life easier, perhaps some feedback for you for any generous investors on the call, perhaps just running through the rationale for moving from RPS and CPS to RASK and CASK and maybe running through how simple the math is in reality? 3rd one probably for Gary, maybe Kenton. Just the holidays, obviously a decent performance or very strong performance, sorry, Gary, up 25% year on year. Do we assume profit the same or maybe perhaps some margin erosion coming through as you invest in the business?

Speaker 3

Thanks very much.

Speaker 1

Okay. Cheers, James. Q1 significant improvement. We're 80% sold, so we have decent visibility and we're 2 percentage points up in load factor. When we talk to significant, last year, our loss in Q1 was £126,000,000 and we expect to at least half that.

Speaker 1

So that will be my definition of a significant improvement. When we think to the whole of Easter though, in Q2, obviously, we have Easter moving out. And therefore, for the whole of H1, we still expect a slight improvement in results year on year despite the fact that Easter moves out and into Q3. The rationale for moving to ASK and well to ASKs and therefore RASK and CASK is because we are flying longer leisure flows now. And our sector length increase of 5% is reasonably significant in a year.

Speaker 1

So although we're increasing capacity by 3%, our ASKs are growing by 8%. And clearly, if you fly instead of flying from Belfast, you fly to Tunisia, you would expect not only to be charging more and therefore have higher revenues, but you'd also expect the cost to increase because of

Speaker 2

the

Speaker 1

full year spend and the pilot hours that you need to utilize and the time for the aircraft and the maintenance from the cycles and the navigation costs that you trip. So we think given the shift in sector length next year, it will be a good time to provide the analysis on ASKs, in which case it's RASK and CASK. But don't worry, in each announcement, we'll also be saying what the CPS and the RPS is because our goal is still to drive profits to be £7 to £10 per seat in terms of profit. So we will show both, but for clarity, we'll guide on ASKs. And to give you an indication, if you think about Q1, the guidance in here is for Q1 RAS to be broadly flat.

Speaker 1

So for the sake of math, let's assume that's 0 and sectors to increase by 6%. And therefore, you could infer that if we were still guiding on RPS, that would look like plus 6%, which on RASK looks like 0. Now for CASK, we said for the first half, we expect our CASK to slightly reduce year on year. And if we increase sector length by 6%, then it's going to increase, but to the kind of lower end of mid single digits or high low single digits type of thing. So that's the way to think about it.

Speaker 1

The sector length is driving a bunch of costs, but it's also driving an increased revenue opportunity. And that's the time we did it this year. Last year sector length was flat year on year. So the metrics would have been identical. For holidays, why don't I hand it over to Gary, if you can remember the question or I'll do it.

Speaker 4

Thanks, James. We'll continue to try to have a decent performance next year. On the margin, no, we don't expect at all the margin to be impacted on the 25%. The only thing that would impact the margin would be if there was a significant shift from beach into city, which we don't see. We see both of them very, very strong.

Speaker 4

And when we look at some of the expanded long leisure, they've got very good margin on them. Somewhere like Cape Verde, we see an ASP of about £1,000 a person. So that will be our highest ASP in a kind of mass destination. So we'd expect to be able to really maintain that margin. I think the other thing on margin is the 36% to 56%, that's largely been driven by the connectivity with the hotels and the increased room types where customers can upgrade their room type.

Speaker 4

And we're going to see more of that through 2025%. So that should give us the margin protection as well.

Speaker 5

Morning. It's Jamie Robotham from Deutsche Bank. 2 from me. Firstly, as ever in the last few weeks, there have been various developments on the positive side, the potential de escalation of the war in the Middle East. On the flip side, some potential higher U.

Speaker 5

K. And French taxes and a cabin bag fee challenge in Spain. So I just wondered how you see the impact of those on fiscal 'twenty five?

Speaker 1

Yes, sure.

Speaker 5

Second one, you focused on the hit to Q2 from the timing of Easter, but of course, Q2's loss will be Q3's gain. So could we get some early thoughts on next summer? I think you're planning on only growing the seats about 1% after 6% in winter. Sorry for sticking to seats, but we'll do that for now. That's quite modest.

Speaker 5

How do you see competitor capacity? And how do you see the prospects for the strong implied 6% rev per seat from Q1 sustaining throughout the fiscal year? Thanks.

Speaker 1

Perfect. Let's start with the what's happening in the Middle East. Obviously, this morning's news of the ceasefire is brilliant news from a humanitarian perspective. Great to hear. Currently, we're not flying to Tel Aviv in Israel, not flying to Jordan.

Speaker 1

We very much want to fly to Israel, but we'll follow the developments and obviously wait for the situation to settle. But it's clearly good news that there's a ceasefire with Hezbollah. Anyway, I think what's happening in France, if we deal with that one with the increase in APD or in their equivalent to the passenger tax, Clearly, very bad news for the consumer. Our view of that is it's a tax on the consumer and that's the way we'll treat it. So we will pass that on to the consumer and then see how that affects demand.

Speaker 1

I mean the good news in France, we are a low cost provider in the airports we operate from when we compare it to Air France or the KLM Group, the Air France KLM Group. So we have a great offering, but it's a tax on the consumer and we shouldn't think of it any other way. So we're looking to pass it on. I know Ryan and I are talking about withdrawing off the back of it, but these approaches more. Let's see what the reaction is to demand.

Speaker 1

The Spanish legal case, of course, will be appealing. That's not really founded in EU law. In fact, it contradicts EU law. The disappointing thing about this case EU law is consumer friendly. It allows the consumers to choose the products they want to pay for.

Speaker 1

About a third of our customers choose to fly with no ancillaries, just bringing on a small cabin bag. And what this law would imply is that we should be charging them for other people wanting to bring on say a whole bag or seating somewhere different on the plane or having an overhead cabin bag. And that doesn't feel just and that's why the EU law is what the EU law is. And therefore, obviously, we'll be appealing that. And I would expect that they will climb down at some stage, but that will be the aligned view of airlines, I would imagine.

Speaker 1

In terms of what we're seeing for growth, from an airline point of view, the visibility is largely obviously on H1. So we've got Q1 at 80% sold, Q2 is just slightly over 25% sold. But for both of them, with the growth being 6%, we're seeing a higher load factor. So that shows that we're seeing an increase in demand, which is very pleasing. We can see the kind of December peaks are selling well.

Speaker 1

We can see the same also true of Easter, which as you point out sits in Q3. So whilst it does impact H1, it obviously is a non event for the full year. And when we think of H2, we do have growth. So we have we're opening our 10th base in South End. We think we're very excited about that.

Speaker 1

We'll be adding more aircraft into Birmingham, into Edinburgh, into Manchester, into Liverpool. So we're continuing to grow in the UK where we're seeing strong leisure demand. And should the commission approve us as remedy taker, which we would expect to hear in the next week or 2, then that will see growth in Italy with 5 aircraft going into Lunata, which I think is perfect for our network and 3 into Rome, which is an important touristic city and therefore will be great for our city break proposition as well as the natural traffic that it has anyway. And we're looking to do longer leisure flows. So we're year rounding the growth we've got in the winter when it comes to Tunisia, when it comes to Morocco, when it comes to Egypt, we'll be year rounding that Cape Verde and then we move off and Turkey is growing.

Speaker 1

And actually we've got 6% growth I think into the Greek islands next summer. So we're placing growth where the customer wants it. And you've got to remember, we're responding to demand. So we will see some reduction in domestic traffic, particularly in the UK, a little bit of reduction there, which when the government starts announcing APD and then for domestic travel, it's both ends of the flight. That's not very pro growth.

Speaker 1

So that's the impact of that.

Speaker 6

Good morning. It's Harry Gowers from JPMorgan. Johan, best of luck for the future. I've got two questions. The first one, you have a small net cash position, profitability strong, CapEx does continue to get pushed to the right.

Speaker 6

So do you think there's maybe scope to think about share buybacks in 2025? Or is that quite far away in the thinking? And then the second one, just on the winter sun network. I mean, are the routes where the growth is going, so North Africa, Canaries, are they actually profitable versus the rest of the network in winter and the growth there is going to continue to drive the winter loss potentially down? Maybe you could just talk a little bit about that.

Speaker 1

Thanks a lot. I'll start with the second question because the answer is easy. Yes. They are more profitable. And they're good destinations to have in terms of utilization of the aircraft, but also in terms of a strong customer demand.

Speaker 1

There is a demand from our customers for these destinations and we see that when we put them on sale. Obviously, the destinations like Tel Aviv and like Jordan were also important for the winter and we shouldn't forget that and we're not flying there. And there aren't hundreds of places in the winter where there's strong natural demand. We're doing more on Christmas markets. We're doing more flights for instance for Northern Lights.

Speaker 1

We've opened up a couple of new destinations in Norway for instance. So we're building the network with a view to how we can improve that winter profitability. But yes, very much the flights to Tunisia and Egypt are good flights and in demand. So that's good. When it comes to the thinking around dividends and share buybacks, firstly, we're very pleased as a board to be proposing that we double our dividend and take it to 20%.

Speaker 1

The view there is that is a meaningful amount and sustainable through cycle. We are consciously taking more neos into ownership, which strengthens the balance sheet because they are obviously by far the younger aircraft in the fleet and therefore give a real strength to the balance sheet and it's good to do that because that gives us flexibility. We maintain a strong liquidity. We will always protect the customers' money that we have in terms of the revenue advance from the advanced bookings of the customer. So we'll protect that money with some security on top.

Speaker 1

And we need to prepare for the CapEx cycle, but we are staying close in contact with Airbus to see how that those deliveries develop. At the moment though, we're talking 4 to 5 months. So it doesn't really alter the major financing of a company if aircraft come 4 to 5 months later. So we'll be looking at the usual stuff, the macroeconomic position, our progress towards the medium term targets and what's happening with aircraft deliveries. I should say as a board, all forms of capital return will be considered.

Speaker 1

But we wanted to get a decent base dividend and then we can see how we're performing in terms of cash and we can see what's needed in terms of what's coming up for us. But yes, buybacks would be part of that armory of capital returns for sure.

Speaker 7

Hi, it's Andrew from Barclays. Johan, it's been a great pleasure. Thank you. In terms of questions, can you talk a little bit about the potential Italy expansion, which is meant to get should become clear in the coming days? Clearly, the strategic advantage of it is plain as day.

Speaker 7

But the issue of flying to the Lufthansa hubs from these cities in the short term looks plain as they as well and looks very challenging. So how do you think that will play in terms of profitability impact on you? And in particular, wet leasing airplanes, that's never the cheapest way to grow, is it? Second question, just picking up, I think you missed it from Jamie. The NIC increase in the U.

Speaker 7

K, so the tax burden in the U. K, how does that play on your costs? And then third question would be the LEAP engines. How are they behaving? Obviously, better to have them at the moment than a GTF, but they're not staying on wing as long as a normal engine.

Speaker 7

So yes, how well are they behaving and where do you see improvements coming from?

Speaker 1

Okay. Let's take those in the order there, Andrew. So Italy, where it's great opportunity to get into Lunate. And these opportunities don't come very often. And they'll only come from these kind of combinations and therefore remedy routes becoming available.

Speaker 1

In the short term, we will be running some routes that will be more painful than others, but it really will strengthen the network for the longer term. And that's what we're all interested in here because it's just a perfect network point for the Easyjet network. And therefore, we'll live with some of the impacts of running those routes. But we have a presence in Germany. We'll be we fly into Dusseldorf and other airports from various parts of our network, even if we only base aircraft in Berlin.

Speaker 1

So I think that will just help that network. But we're really looking forward to having those slots at Linate. The NIC increase and the minimum wage, we are not really affected by the minimum wage at Easyjet. We look to pay competitively and fair. So that's not per se an impact for us.

Speaker 1

The NIC is a bit of a cost of doing business in the U. K. It will be the same if you work at Nextdoor anywhere. It will just lift inflation a little bit. But for us, in terms of numbers, we it's half a year for us this year, something like $7,000,000 And then when fully annualized, something like $13,000,000 And I guess the cost base of the U.

Speaker 1

K. Will be so yes, it's an increase, but a cost of doing business in the UK. And then the LEAP engine, well, you kind of have 2 choices. You take the LEAP, which is 15% more fuel efficient. You can't keep taking the CFM.

Speaker 1

They're not going to be made forever or you take Pratt and Whitney, which spends longer time off wing. It is spending longer off wing than we would like. We have a spare engine pool that we operate with CFM and the efficiencies from this aircraft engine are fantastic. So it is the engine of the future. We just have to keep working with it.

Speaker 1

But it's the most reliable choice we have when it comes to flying short haul aircraft. I'm not sure when you go long haul, it gets much better with the trend.

Speaker 8

Hello. It's Jaina Mistry from Jefferies. Three questions, if I may. First one, could you walk us through the moving parts to caskets fuel being down in H1? And if you're aiming for broadly flat for the full year, which cost line should be inflecting positive in H2?

Speaker 8

And second question around pricing rationality in the market. Fuel is coming down in H1, could be down in H2. Is there a risk that you see certain competitors lower pricing in response? And then third question on holidays. We've seen a nice tailwind from ASPs in FY 'twenty four.

Speaker 8

Should we see a similar catch up to, say, your peers in terms of ASPs in FY 'twenty five as well?

Speaker 1

Perfect. Okay. Well, I will hand the holidays one to Gary. So I'll let him have some time to think about that. CASK ex fuel reducing, it's primarily due to the productivity that we're putting in.

Speaker 1

So this winter we're growing the capacity by 6%, but with 6% kind of average sector length. And therefore that's a 12% ASK growth and that drives productivity. So yes, you get a proportionate increase in costs when it comes to cabin crew, pilots, aircraft maintenance because they're driven by the flight hours you use or the block hours in production or the engine cycles. So they're quite linear with CAS. But the benefit you get will be around airport fees because it's just takeoff and landing and the benefit you get is around ground handling and obviously in the fixed overheads.

Speaker 1

So driving that kind of productivity does help us reduce our CASK even though it's an inflating environment out there. And then as we move into the summer, we annualize a lot of those winter routes, which drives some longer routes there. And we are kind of just we have a real increased focus and cadence at Easyjet when it comes to scrutinizing the costs. And we introduced that over the last 2, 3 years and we'll look at every cost position and we'll keep that focus to try and keep the cash flat because that's what our kind of goal is. And I think we've also achieved that by bringing in some of the more expensive outsourced activities.

Speaker 1

So where it makes sense to in source certain parts of maintenance for instance then we do that. We're in source some heavy maintenance, which will have that capability in 2025 that we didn't have in 2024. We've talked before about the Berlin hangar and the kind of quite sizable reduction that we see when we do an event in the Berlin hangar compared with when we went to for instance the Lufthansa Technics. So we're kind of strategic where we in source, we've got to focus on every cost position and we're driving productivity. That will be the 3 main levers.

Speaker 1

Pricing, let's see. We're kind of 15% sold for Q3, probably just over 5% for Q4. But we see on our network a stability in pricing. And that's what we saw in throughout full year 2024. Others saw prices move up and down in terms of their expectation.

Speaker 1

We were quite consistent. We said in Q3 about 1%, it was 1%. In Q4, we said about 1%, it's 1%. We think RAS flat in Q1 now. I wouldn't extend that into Q2.

Speaker 1

It's a softer period. We're ramping up and we have Easter disappearing from that. So soften your expectations for Q2, but I think winter itself will improve despite the fact that Easter moves forward. And summer, like you say, I mean, I think EasyJet Holidays is about 30% sold now for summer. So we get much better visibility with EasyJet Holidays.

Speaker 1

And because they're 30% sold for summer and probably 75% plus for the whole of winter, then they're kind of stated plan of growing by 25% is informed by the fact that we have the bookings we have. So you infer that that's what we're seeing as well, a continued strong demand for growth in Asia holidays.

Operator

What's that? On the ASP.

Speaker 1

Yes. On the average selling price for holidays, that's over to Gary.

Speaker 4

Yes. On the ASP, it's not a measure we slavishly look at. I mean, all of the costs are passed through to the customer, and we work on just a cost plus model. So when we look at the ASP on the 30% was sold for H2, it's positive. I mean, and that's mainly driven by mix, and it will be driven by customers choosing those higher room types.

Speaker 4

But unlike our competitors, if the Canaries becomes too expensive, then the customer will just move to a cheap alternative like Tunisia. And therefore, we will have the same cost plus on that. So we don't actually make less money. So the ASP isn't really something that's hugely important at an aggregate level. We'll look at a hotel level and at a destination level, but not aggregately.

Speaker 4

As long as we're hitting the margin and the volumes that we're looking to achieve, then we're quite happy.

Speaker 1

Thanks, Gary. And one slight build on that because the city brakes that we're doing isn't really a competed activity. I mean, Jet 2, we don't fly to any capital cities. So city breaks is at the moment, you buy your low cost fare, you go with booking.com or direct with the hotel. So when holidays grow city breaks, what you got to think about there is the average selling price is not the same as a beach destination.

Speaker 1

When we go to beach destination, people tend to spend 7 to 10 days and therefore the 7 to 10 days worth of accommodation costs that price when they go to a city destination, it's therefore the price is lower. And therefore the Easter holidays price will be a blend of those 2, whereas you said in TUI, it's all beach destination or Jet 2, it's all beach and they have long haul, which is a higher ticket price because it's a higher flight cost. So kind of hard to read across. We think and we from our research, we just know that we're cheaper 75% of the time, but it's not material material from the ASPs.

Speaker 9

Good morning. Joel Coo from Pammi OR Liberum. 3, if I can. Starting with other income, obviously, quite a big credit in that line in FY 'twenty four. What should we expect going into FY 'twenty five?

Speaker 9

And what's the sort of vague split between sort of supply compensation and the other items that get dumped into that line? Secondly, what are your thoughts on Jet 2 launching into Luton? And finally, you talked a bit about OTP improving, I think you said by 3 points. What's OTP actually in absolute terms? And how should we sort of benchmark that against, say, pre pandemic levels?

Speaker 1

Okay. Other income first. So we had there's a variety of things in other income. Part of it only is some support from the OEMs, which was broadly in line with the covering the incremental costs that we incur through extending leases, etcetera. We'll obviously have a very constructive relationship with Airbus.

Speaker 1

The next set of delays we'll be talking to them about support, but that is always going to be a confidential thing between us and Airbus. There were some other items around airport compensation that we got in some other bits and pieces. So that other income line, you would argue there's a part that's one off related to full year 2024, but I wouldn't be surprised to see other income in full year 2025 and for as long as we see delays in the Jet 2, I'll pass over to Sophie to give the answer on her view of Jet 2, but they're a great competitor and we compete with them throughout the UK. So

Speaker 10

Yes, just to build on that. So Jet 2 will be basing 2 aircraft in Lutert versus our 25 that we have there. I mean, as Kenton says, we compete with them across Europe across the UK quite strongly. In fact, in Birmingham this year, on the basis of the great launch we had last year of our base there, we're going to add another 2 aircraft next summer into Birmingham. And obviously, that's that will take our capacity significantly greater into Birmingham as well.

Speaker 10

So and then in all the other U. K. Airports, we're significantly bigger than them as well. In terms of the routes they're operating, all the routes they're operating, bar one that we don't operate at all, we will have significantly more capacity up to 12 times more frequencies a week. So we coexist with Jet 2.

Speaker 10

We don't have a problem with them coming in, and we welcome competition.

Speaker 1

And on the OTP, I mean, the ATC environment was truly crap. Last summer, they excelled themselves across Europe by beating the worst performance that they achieved the summer before. So it was a shocking performance and understaffing pretty consistently across the board. But despite that, our OTP improved by 3% and our CSAT improved by 3% because the resilience measures we invest in and we'll continue to invest in those resilient measures because whilst we ask for improvement, I'm not sure we're going to get it. So we will work off the assumption we don't.

Speaker 1

In terms of OTP, I think it would still be slightly below where it was pre pandemic because there's still 20% less airspace to operate in. And therefore, we're back largely at the same volumes as an industry almost that we were pre pandemic, but we're operating in less airspace. So we're slightly below, But for ourselves as an airline, we're seeing a strong improvement and we're getting very close to it. It also depends if you look at top 2 box, top 3 box and that kind of statistic, which we look at both and both saw a strong improvement. So we'll our focus, keep increasing OTP and keep operating the schedule.

Speaker 1

So what was it announced?

Operator

76. 76, yes.

Speaker 1

76.

Operator

76%. It's actually very much in line with 2019.

Speaker 11

Hi, there. It's Conroy Gaynor from Bloomberg Intelligence. So 2 from me, please. The first one, just on the reduction in the winter losses, you've given us detail already on some of the levers that you've already pulled such as the increase in utilization through longer stage lengths and more control of maintenance activities, etcetera. Apart from just the bigger planes, are there any further levers still left to pull on that?

Speaker 11

Or is it just a case of the levers that you have already pulled just maturing more? And then the second one on holidays. So given the comments you've made already about profitability and the customer growth this year, it probably seems reasonable that you might be within touching distance of your €250,000,000 target this year. So do you perhaps have some thoughts beyond, say, this year or 2026 on the potential size of the holidays business perhaps within the context of your overall GBP 1,000,000,000 company profit target? Okay.

Speaker 1

Winter losses, we said a couple of years ago, we need to drive productivity back there. Our winter capacity was low. And when we drive profitability back, there's more routes contributing to the fixed cost of the business. And I think that is one really important measure. It will be helpful when Israel, Jordan, destinations like this open.

Speaker 1

They are year round destinations, but a lot of VFR and touristic traffic happening in the winter, which clearly is not an open market for us. The kind of growth that we're seeing in North Africa is great. If you look at the in the appendix, we've got a kind of mix of business chart that we have. And pre pandemic, we had a far higher mix of city business. And then that reduced to about 47% in 2023.

Speaker 1

The good thing is it's 47% in 2023 despite the growth in between 2023 and 20 24, which is 8%, it's still 47% of mix. It's still going to be 47% of mix in 2025, by the way. So what's happening is city demand is coming back bit by bit and city is a much more year round profile of travel. We increased domestic travel a couple of years ago as we came out of the pandemic because it's pretty much the only travel you could do when you come out of it when you came out of the pandemic. That is maturing all the new volume we put on there, but there's no need to grow it.

Speaker 1

And actually in the UK and others we'll slightly reduce it, which leads to much more in demand longer leisure flows in the winter. So I think it's a combination of productivity, of working the network better. Obviously, there's a lot of great work that SAFE and the commercial team are doing around the pricing algorithms and the way we think about the elasticity of the booking curve. And those things will all generally help the full year, but winter as well. And Gauge will help because it just is £10 less per seat when we take an A319.

Speaker 1

A lot of that is just the fuel efficiency. So it is a far more fuel efficient aircraft. And then you get the natural efficiencies of so that's the main thing there. Holidays, I think we'll have to wait and see. I mean city growth and beach growth depends how they grow in the mix.

Speaker 1

25%, if you said there's no margin is the same, 25% on 190%, I guess is going to get you 235%, 237% something like that. But it depends on the mix we see whether that is achieved. But at the moment, we're seeing a great demand. I think as we start approaching that, Gary will tell you about his dreams and aspirations for the future. And that's obviously something we're looking at.

Speaker 1

Fundamentally, we said when we set the medium term targets, we had 5% market share in the UK and £122,000,000 in terms of profit. But to get to £250,000,000 that felt like 10% market share. We got to 7% market share with 190,000,000 profit going from 5% to 7%. If we grow in line with what we're talking about, that probably gets us close to 9%, which will be a little bit shy. So 10% is that.

Speaker 1

But I think, let's wait and see until we get closer to our target and then we earn the right to tell you what the next set of ambitions is for Easyjet Holidays. But our attachment rate in terms of people buying accommodation on our airline flying to those destinations, their international destinations is 6%. And it will be slightly higher obviously if you looked at beach, but still an awful lot of people traveling with us to say a Greek island and then choosing to buy their accommodation effectively through with the hotel. And we just need to grow the awareness that when you buy the accommodation with us, it's cheaper and more and more room types are appearing. So it's a really

Speaker 12

Conor Dwyer, can you hear me? Yes. From Morgan Stanley. First question is back to basically just general theme and demand. Obviously, given how quickly you're growing the ASKs into the December quarter with pricing to be broadly flat, I think some people could fairly assume that's an indication demand growth is accelerating.

Speaker 12

But I wonder how much of an impact basically on a comp basis from Middle East last year do we really have in there and maybe kind of dampen expectations a little bit there? And then in terms of the benefit from the upgauging of the aircraft, you talked about a GBP 25,000,000 I think benefit this year and then the next big benefit really to be in FY 'twenty six. Wondering, does FY 'twenty five look a bit more like this current year or perhaps a little bit less? Any kind of phasing indication there would be super helpful. Thank you.

Speaker 1

Okay. Well, let's start with the gauge. We said that the impact of exiting 82 A319 we have is worth in excess of £3 per seat. And that number is the fact and that's what will happen when they exit. Now I'd like them all to have exited by 28, but the reality is we're seeing delays in aircraft deliveries and therefore we're going to have to be more patient in the time it takes to exit the aircraft.

Speaker 1

And 2025 is the year where we're going to see little very little movement engage. I think the 181 we have today will still be 181 because we're retaining all the A319s in the fleet. Those have been extended so that we can maintain our capacity and we get 9 aircraft mix between A320 and A321, but 9 aircraft on a fleet of 350 isn't driving a massive difference. But then from 2026 to 2028 in those three years, there's 90 delivered, 9 0. And with those being delivered and let's see if Airbus do deliver them, but that's the current indication we've got from Airbus, then that does allow a sizable reduction even by 98 even by 2028 of that fleet and therefore capturing the up gauging potential plus sensible growth that we've put in, in terms of the orange line of the fleet.

Speaker 1

The question on productivity around winter, I'm not sure I entirely got it, but we do see that productivity. What we'll actually see because there is more capacity going into these longer destinations is there will be a bit of time to take that to maturity. And a lot of that capacity is coming into Q2, which is why I'm warning a bit about Q2 because it's the right thing to do. It's definitely driving productivity, but there's a little bit of time to mature that. But through by getting it in there towards the back of Q1 and then into Q2, it means we annualize that capacity through the summer and then have maturity for it the following winter.

Speaker 1

But I think did I get the question or is there a different one?

Speaker 12

Well, it was more basically around

Speaker 1

I mean, it's difficult for us to say that the demand is not there still for us because Q1, Q2 both up for the airline where there is visibility by 2%, having growing capacity by 6%. And as I said, the holidays business growing at 25% more, certainly with the bookings we've got today implying that it's at least is 25% of growth there. So that's encouraging. And we keep the growth focused on the areas where it is. We're seeing a little less demand for domestics, which is why we pulled it down because we're taking a little bit of demand off there and there's an anticipation that APD will impact it a little bit because you've got both ends of the flight.

Speaker 1

But like I say, city demand coming back, beach demand strong, very strong demand for kind of North African destinations that we're seeing growth of 40% in terms of those destinations. So pretty encouraging.

Operator

I just want to say also then to yourself as well, a big thank you for the loyal following on these sessions and throughout the years as well on behalf of myself as well. Look forward to see you at some point as well. Thank you so much for that. And I should also say congratulations to Kenton. You're going to have a fantastic time doing this job with his eminent team as well.

Operator

Kenton is an amazing leader. He's been a fantastic business partner to myself for many, many years. So I'll miss working with you and you. And also, I will miss working with you, Stephen. Stephen is the Chairman of the company.

Operator

We had a fantastic great working relationship as well. So thank you to you and the Board and thank you all.

Speaker 13

Well, thank you, Johan. Actually, I'll just talk here. I've got the graveyard shift, so I won't take very long. I was delighting in Johan staying quiet. I don't think I've heard him stay quiet for that long.

Operator

And you enjoyed that?

Speaker 13

And it was good to see him sort of battling with himself and wanting to hand over well. But in some ways, I think that choreography is a metaphor that is well known. It's not usual is I never felt that he

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Earnings Conference Call
easyJet H2 2024
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