Ryanair Holdings plc Q2 FY2026 earnings call

• Boeing has delivered 23 of 29 aircraft in the last 3 months, with plans to have all 210 Gamechangers by end of March next year, aiding traffic growth to 215-216 million in FY '27. • Fuel hedging for FY '27 at under $67 a barrel saves EUR 600 million. • Europe's ETS taxes are a concern as they only tax intra-EU travel while exempting non-EU. ATC services need reform. • Balance sheet will be debt-free by May next year. • Announced interim dividend of EUR 0.193. • EUR 25 million investment in cadet and first officer recruitment over 3 years. • Engine maintenance shop plans in progress.

In Q2, profits were up 20% to EUR 1.72 billion. Fares in Q2 were up 7%. Unit costs were only up 1% in Q2 despite cost inflation. Fuel hedging: 80% hedged for FY '27 at just under $67 a barrel, saving about EUR 600 million. Balance sheet is strengthening, with plans to be debt-free by May next year with a fleet of 640 aircraft.

• Traffic growth expected to 215-216 million in FY '27, 225 million in FY '28, and 300 million by 2034. • Fuel hedging saves EUR 600 million next year. • Aiming for profit per passenger to rise from EUR 10 towards EUR 12-14 over next 10 years. • Confident of recovering all last year's 7% fare decline, though second half comps tougher.

• Europe's ETS taxes not in line with CORSIA, harming competitiveness. • ATC services in disarray with strikes and understaffing. • Boeing certification risks if government shutdowns occur. • Labor contract negotiations could impact costs. • Potential economic downturn affecting travel demand.

Q: First question 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? And then second question on the online travel agents...

A: Yes. 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 close-in bookings at Christmas, over the Christmas and New Year period. But 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 want to -- 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 7-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. But I think rounded out for the full year, we're pretty confident now we will be up -- average shares 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. And 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 will 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 million 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 lost the 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 Jet 2s 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 Jet 2 (sic) [ Jet2 Holidays ] talking about a bit more price sensitivity in their bookings through the first half of the year. And it's because that traffic -- the OTAs have moved that traffic back to us. They need our low fare access. And so -- but that's not a key feature into the second half of the year. The OTAs are a lot less impactful in Q3 and 4. And therefore, we didn't have the same decline in airfares in Q3 and 4 last year. We've got much -- 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 will 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 Q1, Q2 or OTAs?

Q: Two from me, both on growth. The first one on fares. Obviously, great to see you're making back what you lost from the OTA issues. But on an underlying basis, the pricing is broadly flat. And that's, I think, the scenario you're implicitly guiding to for this winter when the comps normalize. So as we look ahead to next summer, you're growing in Poland, Italy, Ireland, you'll shrink in Spain, Germany, France. But overall, you'll grow seats at about 4%. It looks like the industry will do 3% to 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. So would it not pay for us to tread quite carefully when thinking about the direction of your pricing next summer? Second one, you've announced EUR 25 million of annual investment today to accelerate cadet and first officer recruitment for the next 3 years. You've also talked previously about setting up 1 or 2 in-house engine maintenance shops. Is there any update on that project? Have you chosen the sites? And are there any other non-aircraft investments for growth that we should have on our radar?

A: Thanks, Jaime. I'm going to ask Eddie to deal with the growth question. I might ask Tracey McCann to come in on -- Tracey will come in on the EUR 25 million, on the first officer and on the engine shops update. Eddie, growth in 2026.

Q: First question 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 '26 to '27. So 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 deferrals from those airlines, but I would love your thoughts there. And then secondly, just following up from your comments around forward bookings being up 1 point in Q3. Does that forward book load factor level differ between the peak and the shoulder periods in Q3? And I guess, what does the higher book load factor level mean for you in terms of pricing strategy in the late market?

A: Okay. Thanks, James. Eddie will do the forward bookings. Let me touch on the MAX 10s. I mean, yes, one of the reasons why we're growing increasingly confident we'll get our first 15 deliveries in '27 is we are not delaying our MAX 10 orders. United who were the lead customer, I think, has delayed them. One stage they were talking about canceling the MAX 10s. We offered to step in and we take any MAX 10s they wanted to cancel. But it has helped, I think, Boeing to catch up with their production. I understand there's about 2 airlines in front of us. I think WestJet is one, Alaska might be another who are still ahead of us in the queue. Their 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 '26. We have about 6 months of headroom there 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. And 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 20s or early 30s, 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 escalate -- well, we have -- we 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 an aircraft -- 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. And 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, well, we'll take anything that United wants to cancel. They finished up not canceling and just postponing. I think we're about third or fourth in the queue, but it will be a reasonably short queue. I think the first deliveries will take place in Q3 or Q4 of '26 and our first 15 are in the spring of '27. Eddie, do you want to talk about forward bookings through November, December, maybe into Q4?

Q: I just wanted to follow up on your outlook for the fourth quarter. Why are you saying there's no Easter benefit because there is the earlier Easter and a couple of days will fall into the end of that. So just wanted to understand your thinking around kind of the base effects into the fourth quarter. And then just on EU ETS, what sort of increase should we be expecting in fiscal '27? Because it looks like hedging levels on that are just 11% right now and the prices have gone up. So how much of those fuel savings could be offset by the ETS costs going up?

A: Okay. I'll ask Thomas Fowler, who's the Director of Sustainability, maybe take the ETS question for you, Muneeba. Let me deal with the outlook. I mean, yes, Easter Sunday next year is on the 5th of April. So the first weekend of the school holidays will fall into the last weekend in March. But it's not significant. We will get a little bit of a bump. But I think at this point, we're better off just to say, look, there will be no Easter benefit in Q4. If we get a little bit in the last 2 days of March, great. But really, most of it will flow into April. It's 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 2 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. And if we get a little bit of a benefit out of that well and good, but there's certainly no point in going out now, we have 2 days of Easter in March next year, what can you do? We bug all visibility in Q4, and we won't have any until we get out to the Q3 numbers in February. And we -- that's all we're trying to communicate now, Muneeba. And now I'll turn to optimistic Tom for the ETS outlook for FY '27, and you won't touch on '28 yet, unless we [ hear ] from Ursula von der Leyen in between now and then.

Q: First question, a follow-up on the previous one. So 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? And then 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 3Q booking trends?

A: Sorry, Ruairi. Just speak up, you're very faint there on the -- I got the first half with the SAF. What's the second question?

Q: Yes, 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?

A: Okay. Look, SAF, I'm not a believer -- 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 going back from the production of SAFs under pressure in the White House. I think the -- 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. And I would be surprised even if the oil majors don't produce the SAF, there's nothing we can do to supply it. These are just another example of European -- British and European lack of competitiveness. The environmental agenda, there's a war in Ukraine, Trump in the White House. There is no, I think -- what is the word, there is no significant where -- if anything, the whole environmental agenda is moving backwards. We need competitiveness in Europe. And if the Swedes who were the home of the original environmental tax and flight shaming and all, if they 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. So I think there is, I think, very little prospect of those SAF mandates being met in 2030. I don't think as an industry, we should abandon SAF, but we do need a much more either Europe and European governments should use some of the environmental taxation, this astonishing the SAF or the ETS taxation to incentivize the production of SAF or move the SAF mandates to the right or further out into 2030. There's nothing we see divergent in the U.K. Sorry, I'll let that to Eddie. Eddie wants to answer that question. U.K., Q3, fares and...