Good day, and thank you for standing by. Welcome to the Wizz Air Holdings Plc H1 FY 2023 results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star-one-one on your telephone. You will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Wizz Air CEO, József Váradi. Please go ahead. Thank you very much. Welcome everyone. You ladies and gentlemen who are on the ground and also those who joined this conference over video. First of all, let me introduce Ian Malin to you, new CFO of the company. Welcome Ian. This is reporting the first half of financial year 2023. The financial year started on 1st April. Let me just take you through the key highlights first. In the last quarter, the summer quarter revenue was up by 40% versus the same period pre-pandemic, fiscal 2020. Overall, H1 was up 30% versus the comparable period prior to the pandemic. It's not only that we recovered from the pandemic, but we delivered significant growth of the business. Probably for the first time in our history, unit revenue also grew despite a very high capacity growth by 11% in Q2, and that compares to actually -10% in the first quarter of the financial year. You recall that in the first quarter, we were really pushing hard in terms of COVID recovery on the one hand, and adding capacity to especially our new market activities. EBITDA performance in the second quarter was EUR 374 million positive despite significantly higher input costs. With that, the H1 EBITDA came out as EUR 218 million. Obviously, we got hit hard by rising fuel costs. Our fuel CASK went up 84% versus the same period pre-pandemic. You recall that we were quite light on hedges relative to our competitors and the market, so we got disproportionately hit by the rising fuel price. Disruption was another phenomenon flowing through this period, putting significant cost pressure on the business as a result. Ex- fuel costs went up 18%, largely driven by disruption costs dealing with the underperformance of the supply chain, and also that affected our ability to operate our completion rate and made significant financial damage to the business. At the same time, liquidity improved in the period and closed the period with EUR 1.6 to EUR 3 billion of cash on hand, resulting from the strong summer operation. Fitch reaffirmed our investment-grade credit. I think that's great news given the state of the industry and the challenges that we have been encountering, especially in the recent period. We are very pleased with that outcome. The good news is that we continue to access very low-cost capital when it comes to aircraft financing. You recall that we take quite significant volume of aircraft deliveries, and we are subjected to aircraft financing, and we are still seeing very high demand for our assets based on our credit that we are bringing to the party. When you look at the key business metrics, our fleet grew 17% to 168 aircraft versus the previous financial year. Obviously, passenger number is up 3x given that we are out of the pandemic due to the very strong ramp-up and additional growth what we delivered. Clearly, coming out of the pandemic, we became a more robust, larger business with bigger impact on the market, certainly on our market. Demonstrating that you look at the market share positions of the airline, on a total fee basis, our market share went up from 17% to 23%, compared to pre-pandemic level performance. You can see that market share growth has been fairly consistent across our incumbent market. We managed to add new markets to the franchise. Albania has been a very successful market acquisition. But also if you look at Italy, we tripled our presence in Italy over the last two years, taking advantage of the COVID situation and some of the market turbulence in the country. Fairly consistently, we have been growing our impact on every one of our markets. With that, let me hand it over to Ian, and I will take it back after. Thank you, József. Good morning, and thank you for the opportunity to introduce myself. My name is Ian Malin, and I joined as Chief Financial Officer on October 1st. I'd like to thank this audience for the opportunity to present, and I also want to thank my predecessor, Jourik Hooghe, for his service to Wizz Air. We saw strong performance across several indicators this summer, with revenue coming in at EUR 2.2 billion for the first half of the year, 2.5x for the same period last year, and 31% higher than the same period pre-COVID. This was generated by revenue per available seat kilometer of EUR 0.0448 for the half year, 32% higher than last year and 2% higher than pre-COVID levels, driven by the dramatic improvement in second quarter RASK, up 11% versus -10% in Q1, both measured against pre-COVID levels. EBITDA came in at EUR 218 million for the half year, 33% higher than last year. The half-year EBITDA results were helped by Q2 EBITDA of EUR 373.7 million, which was more than double last year's Q2 figure of EUR 182 million. We reported a net loss for the half year, and again, a large part of that was due to foreign exchange losses of EUR 269 million, of which EUR 285 million was unrealized, driven by a strengthening dollar. Cost per available seat kilometer was higher than pre-COVID levels, and this is attributable to dramatically higher fuel costs as well as continued disruptions in the second quarter, although at a reduced level versus what we reported in the June results. Ex-fuel costs decreased compared to the same period last year, and we expect that trend to continue as we have stabilized the operations and are no longer incurring the same level of expensive disruption costs as we gradually return to historical utilization levels by the end of this fiscal year. In order to get our cost structure back in line with FY 2020, the two focused areas we have as a company, aside from relentlessly driving our low-cost culture, are, one, reducing disruptions to within target KPIs, which, as you can see in the other expense line, increased to 0.01 cents versus FY 2020, and two, returning to historical levels of utilization, which means higher ASKs while maintaining almost the same fixed cost, which will benefit a number of these line items, crew costs, airport costs, en route charges, maintenance, depreciation costs, and overhead costs. Liquidity was strong during the period as cash grew from around EUR 1.4 billion to EUR 1.6 billion, despite the usual unflown revenue unwind that happens in the summer. The drivers for this almost EUR 250 million cash increase in the first half was a strong business performance in Q2, including improvements in working capital as we scale the business. We also had modest returns of predelivery payments, which generated a small inflow in the first half. When looking at our revenue composition, here you can see the breakdown of ticket revenue and ancillary revenue, with ancillary 18% higher than pre-COVID levels on a per-passenger basis at EUR 38 per passenger, or around EUR 60 per pax, which is well ahead of our EUR 1 per passenger per annum growth target. Ticket revenue per passenger has also exceeded pre-COVID levels and notably has rebounded 35% when compared to last year in the same period. We continue to see opportunity in both categories for upside. Now back to József. Thank you. Thank you. Thank you, Ian. I would like to take you through some of the key initiatives and focus areas of the company going forward. I think that's important for your understanding of what we are expecting from this business to deliver in the next six months and beyond in the next financial year. First of all, if you look at the operating environment, I mean, clearly, I hope you can read this, but the last period, especially the summer period, was full of events. Much of it was generated by ATC activities, strikes here or there. First, Italians went out, and then the French and Italians again. It's been a complete zoo in that regard, majorly affecting the ability of airlines to operate. Also, we had the famous runway meltdown in Luton, which was an event never heard of before, but we had to deal with that, too. As a result, we suffered a profound impact in terms of financial damage to the business, our ability to complete the flight. Now, the good news is that if you look at the performance in October, other than the Italians deciding to go out again, we are back to normalized levels, so no more extraordinary disruptions. I also think that our model is becoming increasingly resilient, given some of the changes we were discussing last time. No more disruptions affecting the business in October, and we hope that this can be sustained and the old norm is also the new norm going forward. That's a significant event because if you look at our cost exposure during the summer period, that was largely driven by disruption-related exposures. Utilization is the other issue we are dealing with. Coming out of COVID on the one hand and dealing with all the disruptions arising from the dysfunctional supply chain forced us to lower utilization. We had to cancel flights last minute, but also we had to adjust capacity to be able to deal with the environment. This summer, we operated and achieved utilization of roughly 11 hours and 49 minutes, and that kind of compares to historical performance of 13 hours in the period. You can see that utilization came out suboptimal. Certainly, completion rate 95.5% compared to 99.5% at historical level. That was the magnitude of issues we were dealing with. We operated suboptimal utilization level during this period, and that obviously creates the upside going forward. We continue to fleet renew our program. We continue to take new aircraft deliveries, also phase out older aircraft. The fleet age keeps improving, the fleet is getting younger and the average seat count is increasing as a result of upgauging. That creates significant economic upsides for the business. Obviously, that kind of a cost upside are there to offset some of the headwinds that we are facing in the industry, especially coming through cost inflation imposed by various labor-related activities like ground handling on the one hand, but also state monopoly charges like ATC. We continue to benefit from very effective financing deals available to us. We are much into Asia for financing aircraft on the Japanese market and Chinese market. 2/3 of our financing is coming through Japan, a third from China. We are seeing actually increased interest and activities for our assets. I mean, let's not forget that Wizz Air brings through the best asset to the market, the A321neo aircraft, and being an investment-grade, only very few airlines have that credit rating in the world create unique opportunities for us to tap into low-cost capital. Importantly, we are allocating aircraft financing increasingly towards euro financing. That's a way of hedging our dollar exposure, obviously. We are getting more and more euro financing for fleet financing, and at the same time we are phasing out all dollar-financed aircraft. We are rapidly improving the euro exposure with that regard. Also very importantly, given the unfavorable interest rate environment that 94% of our existing fleet are subject to fixed interest rates, we are unaffected on those financings by the changing interest rate environment. Also important that we secured, based on a commitment, EUR 300 million PDP-backed financing facility, which obviously creates an additional layer of liquidity for the business should we need it. We feel comfortable with our liquidity position not only today, but also on a going-forward basis. We're seeing that given the uncertainties and the volatilities of the market, it's better to have more financial buffer in the system. Our network has become further diversified during this period. We continue to develop our core Central, Eastern European markets. We stepped up in Romania after the failure of Blue Air. By now, we are the third-largest airline in Italy, and we continue to push that market. Quite some activities in the Middle East by launching routes into Saudi Arabia, growing the Wizz Air Abu Dhabi operation and entering some other markets. These markets tend to be counter-seasonal versus the European market. We are much focused on cost to make sure that we always operate from the lower cost operating base when we are connecting base to base. If you look at the profile of growth, actually 97% of our growth is delivered through existing airports. Only 3% are coming through new airport activities. If you look at the growth of the business from the perspective of what markets we are growing, I mean, clearly you can see that we have recovered our incumbent markets. If you look at the markets which we operated back in summer 2019, pre-pandemic times, versus how much capacity we are allocating to these markets and nowadays you see that we have basically fully recovered, a slight growth from 95 to 99 aircraft in those markets. Most of the growth of the company actually came through the expansion activities, new market activities during the COVID times. We only had 11 aircraft on those markets, and that got ramped up to and grown up to 50 aircraft by now. A lot of new market activities taking advantage of the COVID distress of the industry, but also recovered on the incumbent markets. Just a quick note on Romania. You know that one of our local competitors, Blue Air, went down a few months ago, leaving a significant market vacuum behind, and we stepped up to backfill that vacuum. That's actually the kind of growth what we like because that's organic, it doesn't compromise our operating platform, and we have demonstrated a number of times how [agile] we are and how quickly we can move capacity around depending on the changes in the market place or changes in the operating environment. Blue Air went down, and we stepped up with adding five aircraft in Romania, and we have further aircraft going in the summer next year. Essentially we are taking over that market. Obviously, we are just further enhancing our market leadership position in the country now to 59% in winter coming from 41% before. Going east is a significant layer of growth for the airline. We discussed it before. It's not only that we are expanding the activities of Wizz Air Abu Dhabi, but we significantly stepped up on Saudi Arabia by launching 20 further routes from Europe into the country next to the Abu Dhabi operations. We are seeing very strong market reaction to our activities, to our expansion in Saudi Arabia. That's sort of phase one to expand ourselves as an inbound carrier, and we are now looking at and focused on phase II. You may recall that we announced a memorandum of understanding signed with the Ministry of Tourism in the country. On that basis, we have been exploring greater investment opportunities in the country. We are still on track on that and hope to release some news on that front in the near future. Saudi is a very significant market. The country came up with, they call it Vision 2030, a highly ambitious agenda for building aviation in the country, tripling passenger traffic in the next decade. We are looking at adding value to that vision, to that agenda. If you look at the market today, there is a significant gap between the capacity of the industry in Saudi versus the aim for the industry in the next period. We're seeing that we can put capacity against that gap and benefit from that drive in the country. Sustainability remains a very important agenda item for the company. I think it's interesting to see that when you look at 2030 targets of Wizz Air relative to Ryanair's target is a greater footprint than what we are delivering, Wizz Air is delivering today. Today, we are delivering 57 grams of carbon dioxide and Ryanair is only targeting 60 in eight years from now. Obviously, we are a lot more ambitious than that. Wizz Air will continue to lead the pack on sustainability and carbon footprint in the future. A lot of it comes through the fleet renewal program. We will have a more efficient, technologically more advanced fleet and an up-gauged fleet to operate. But also we are looking at a number of SAF initiatives, sustainable aviation fuel initiatives, not only on a commercial basis, but also on an equity basis. We are looking at ways of possibly investing equity into SAF development to secure better commercial terms for us in the future, but also to drive the agenda of the industry with regard to flying green in the future. What are we expecting from the current half year H2 of fiscal 2023? We are expecting to deliver 35% capacity growth. That's in line with the capacity growth what we delivered through all the first half of the financial year. At the same time, we maintain flexibility with capacity depending on demand. I think so far, so good. We are seeing demand being robust. We are not seeing any kind of falling off the cliff syndromes what many might have expected before. We are quite confident in consumer demand for our product. Maybe other segments of the industry get affected differently than Wizz Air, but we're seeing that travel intent continues to prevail. People wanna travel. They may trade from high-cost to low-cost, but that should be on our benefit at the end of the day. We are looking at delivering 11 hours of fleet utilization. This is still somewhat behind historical performance levels. It tends to be more like 12 hours in this period. We are still somewhat inferior on utilization, but clearly we are improving, and we are further closing on the gap going forward. We are expecting RASK to improve in the second half of the financial year. We are looking at improvement of mid-single digits relative to pre-pandemic comparable period. In terms of fuel cost, in terms of ex-fuel cost in the second half of the financial year, we expect single digit increase. That compares to 18% increase in the first half. Again, we are closing the gap on ex-fuel cost exposure compared to fiscal 2020. We're gonna be eliminating the current competitive disadvantage to the market on fuel. I mean, we'll see how fuel price goes, but we're gonna be hedged at comparable levels to our competitors. As from April next year, we're gonna be seeing level playing field with Wizz Air. Moving on to the next financial year, fiscal 2024, we are expecting ex-fuel cost and utilization to be fully recovered. In that financial year, we are expecting to perform pre-pandemic ex-fuel cost and pre-pandemic utilization. Obviously, the two are greatly interrelated. While we are expecting loss for the remainder of the financial year, we expect to return to profit in the next financial year. Let me just summarize the presentation. We believe U.S. ultra-low- cost carrier model continues to prevail, probably even more than before, given the tougher environment, the tougher macro and economic environment as the evidence historically. We believe that actually the low cost, the ULCC m odel is especially benefiting from the economic hardship because consumers trade from high cost to low cost. The COVID recovery in the current financial year will continue to flow through into fiscal 2024, fiscal 2025. We believe that we will continue to benefit from new market acquisitions, capacity growth on the one hand, and also we will be reinstated on our cost performance in the going into the next financial year and the key efficiency metrics like utilization and group productivity at that time. We are confident in our pricing ability that we are able to price up versus the inflationary pressure on the cost side as evidenced in the second quarter of the financial year. We are seeing the trend flowing through the remainder of our financial year, and we believe that will continue to take place in the next financial year as well. We will benefit from the maturity of our investments into new networks. As you can see that, most of our growth is delivered through new market activities. They are yet premature investments, and as they mature, we will take financial benefits out of it. As said, the cost platform will get reinstated in the next financial year. Ex-fuel cost will be back to historical normals. On fuel cost, obviously that's subject to a higher fuel cost environment, but we're gonna be level playing field versus our competitors, which is not the case at this point in time in the current financial year. The fleet growth will continue to enhance our competitive positions in the market. We are converting into larger aircraft and more efficient aircraft given the technology that will continue to fuel our competitive advantage for the airline relative to our competitors. As said, we are seeing high interest and very attractive financing opportunities for those aircraft. Also our expected strong operational cash flow will allow us to start deleveraging through the next financial year. With that note, thank you, and I will hand it over to questions to you. Thank you. Hi, good morning. Thanks for the presentation. Alexander Irving from Bernstein. Two from me, please. First on ancillaries. In the current quarter, it looks to be about more than EUR 7 a passenger ahead of 2019, clearly quite ahead of your existing guidance of EUR 1 per passenger per year. How much of that is comprised of one-off factors in the quarter, and to what extent does this represent a sustainable level, please? Second question on unit costs. We're seeing CASK ex in fiscal Q2, I think identical to CASK ex in fiscal Q1. Why is that as we are restoring productivity, and do you expect some of those cost setups to persist? Thanks. Yeah. Let me start with the cost side. If you look at the business on the basis of unit cost ex-fuel, basically summer was affected by two major factors pushing costs up. One is disruptions, and that was a huge impact, a very significant financial damage to the business. I mean, we got forced to cancel more than 5% of our flights and also, you know, all the associated financial consequences like EU261 exposure, et cetera, drove a lot of costs in the system. The second issue in summer was the suboptimal level of fleet utilization and crew productivity, simply because in the operating environment, we were unable to operate with full schedule, and we had to adjust capacity prior to going into the summer period. We left significant revenue opportunities, and we left significant financial upsides on the table as a result of that. Now, if you look at where we are today, let's say this is winter 2022/2023, we believe that operational disruptions are behind us. Now we are running a normalized operation. Our completion rate is back to historical levels, so we are above 99.5%. With that regard in October, we're seeing that given all the changes we have been making to our operating model to achieve more and more robust operational efficiency enable us to sustain that kind of an operating platform. We are still behind on utilization and productivity, because that's part of the resilience to be honest what we are creating, so we are creating more buffers in the system not to fall in the same trap on operational reliability as we ended up in summer. No disruptions, but still sub-optimal utilization and productivity, so that's a drag. You know, we were up 18% on unit cost in summer. We're gonna be mid-single digits this year, so we are closing on the gap. Going into the next financial year, we are expecting full utilization and productivity to be reinstated. We are expecting a lot more resilient operating model versus supply chain deficiencies. We think there will be issues in the supply chain going into summer, but we should be able to a lot better cope with those issues than last summer. With that regard, I would consider summer to be normalized. With that, as we are reinstating all these efficiency elements, we believe that, you know, our cost performance should come in line with the cost performance of the business prior to the pandemic. Even you can argue that given the aging and given the renewal of the fleet, we should be seeing some upsides coming through the cost line, and that's probably true with that regard. At the same time, we are also seeing significant inflationary pressure on labor-related elements of the business and also monopoly charging, especially through airports and ATC. There is a bit of an offset there. In terms of our relative cost position versus the industry, I mean, we're gonna be in a, you know, in a lot better place next year than where we are today. As said on fuel, we are basically equalized to competitors. To answer your question on the ancillaries. We continue to see increased demand to that segment. As we match that demand, we also are trying out new products. Some of that involves new categories like a 26-kilogram bag, better flexibility in terms of seat selection, pick who you wanna sit with, things like that. On top of that, we're deploying technology to do A/B testing to see what generates more popularity, as well as machine learning to find out how we should be pricing that, as well as keeping a very close eye in terms of benchmarking, in terms of what other carriers around the globe are doing in terms of that category. It was actually EUR 6 higher on ancillary. That's well in excess of our target of EUR 1 per year annual growth. Hello, it's James Goodall from BNP Paribas. A few for me, please. Just following from Alex's question on the H2 RASK guidance. Perhaps you could split that out between yield and ancillaries, or at least directionally would be great. Second one is on Gatwick. I was wondering how confident, I know you have a U.K. head here, how confident you would be on getting more Gatwick slots for next summer, if that's the plan. Perhaps run us through your summer performance at Gatwick. Obviously, a big expansion for you. The third one is, you talk about 61% future allocation of leasing euros. Is the current fleet 100% dollars and is it all unhedged? Thanks. Maybe I would start with Gatwick. I mean, obviously we had a very harsh operation at Gatwick this summer, largely driven by ATC and to some extent airport. I think we were as bad as all the others at Gatwick, if you're gonna put it that way. We hope to see more operational resilience and more investments coming through Gatwick, especially on the ATC and airport side. Hopefully the situation will improve for next summer. Commercially speaking, we are very confident in the Gatwick platform. We've got a great reception for our products at Gatwick with strong financial outcomes despite all these operational issues at the airport. Now with regard to our ability to acquire more slots, I think that's something to be seen, how the industry and the airline sector is developing, with that regard, how resilient they are and to what extent slots may become available. I think we have a continuous interest in expanding our business in Gatwick. That interest is clearly subject to our ability to access capacity and to acquire slots, and that's something to be seen. At this point in time, I don't think I'm in a position to announce anything, but we have an ongoing interest for expanding our business at Gatwick. To your question on the RASK growth and the guidance there, we're not guiding on yield. In terms of the split between ticket and ancillary, the first half of the year was around 54% ticket versus ancillary. We would expect that mix to continue. When it comes to the remaining half of the year, it took some capacity out of the system for a number of reasons. One is we are in a weaker seasonality period as you'd expect with the winter season. That is because we wanna focus at this point on our pricing and making sure that we maintain that RASK growth. That when we return next summer to a competitive cost position, both in terms of fuel and ex-fuel, and the utilization increase and the up gauging of the fleet, it puts the airline in a better position for continued growth. With regard to currency hedges, I'm not sure we have an appetite to hedge the dollar at historical highs to the euro. I think we just need to hold our breath and see the market turning over time. We are a lot more focused on creating natural hedges in the system. Essentially the 61% euro financing is delivering a natural hedge to make sure that we are bringing our dollar exposure more in line, or dollar spend more in line with dollar revenues or at least eliminating that kind of a gap to any extent possible. Yes, I think at this stage of the game, we are focused on creating natural hedges as opposed to upfront hedges. Gents, Jaime Rowbotham from Deutsche Bank. Could I also ask about the RASK guidance just in terms of the phasing over Q3 and Q4? Do you see it a bit better than the mid-single digit% in Q3 and then a bit below in Q4, or do you see it similar throughout the second half? Secondly, József, are there any other situations you're monitoring where airlines might be about to fall over like Blue Air? Perhaps you could talk by geography if you don't wanna name names. Finally, Ian, welcome. A highly predictable first question, but you inherit a balance sheet that's in negative equity. You've got net debt that at EUR 3.5 billion is about 4.5x the pre-crisis EBITDA. Early days, but do you think it might be prudent to recapitalize given some of the macroeconomic clouds that are gathering going into 2023? Thanks. I think with regard to revenue and RASK, I mean, we don't have full visibility for the remainder of the period, but we have, I think, a fairly good visibility for the rest of the current calendar year, so next two to three months. We feel very comfortable with the market. I think we are kind of seeing the low season, how it comes in, and that's kind of November, early December. We are seeing the high season, how it comes in, that's the Christmas peak. We are seeing that kind of single digit RASK upside coming through the system. Again, let's not forget that this is again the context of growing the business by 35%. With regard to the last fiscal quarter, January-March, I mean, we don't have that level of visibility, but at the moment we are not seeing any breakdown of trends. I would be reasonably expecting the trends to continue. I think there is this kind of intellectual debate of what's gonna happen to the consumer given, you know, the high gas price and inflationary pressure overall. Really what we are seeing so far is that people want to travel and the trade-off doesn't come as they stop traveling. The trade comes as maybe they lower kind of the standards of travel or the expenditure of travel by kind of trading from high cost to low cost on airfares, on hotels, maybe spending less time on vacations than before. We think, and this is what we are experiencing, travel intent remains intact. In terms of the balance sheet, we generated a small profit for the quarter, and so that's a start towards reversing the negative equity position. We expect that trend will continue in FY 2024 in a way that doesn't require us to raise additional outside equity. The benefit of our business is that we are nimble. We are able to capture opportunities as we see them, and we're able to deploy capacity or retract capacity as necessary. We see that culture, that flexibility apply to all elements of the business. We would certainly not say that, you know, these measures are off the table, but we see no need for that, based upon our liquidity and based upon the return to profitability that we forecast next year. Then maybe just to make clear, I mean, there is no appetite for raising equity. We are having a strong liquidity position. We are confident in the profitability of the business going into the next financial year by improving the efficiency KPIs of the business. Yes, we understand the current leverage, but I think we will start significantly de-leveraging the business going forward. With regard to your question of market consolidation and what we are expecting, I think it's hard to say to be honest. I mean, we kind of say that the entry barrier to the airline industry is high, but the exit barrier is probably ten times higher. I mean, God knows what happens to our two airlines. We don't know how governments act, we don't know how irrational private equity may play in. I mean, we have seen, you know, lots of movements with that regard. To be honest, our business plan is not relying on market consolidation. If there is a consolidation opportunity happening, obviously, we would consider that, not necessarily in the form of M&As, but more in what kind of further organic opportunities, you know, that consolidation creates, like the Blue Air, the airline goes down. In a very [agile] way, we immediately move capacity against that opportunity, you know, then slot opportunities arose at Gatwick, we pursued those opportunities right away. I think we would be very interested in those sort of consolidation drives. Again, I think market consolidation is highly unpredictable, especially in Europe. Just one more point on the leverage. As you know, we reaffirmed our Fitch rating investment grade. That was one of the topics that they drilled into, and we were able to, with a number of scenarios, convince them that that return to a more balanced leverage ratio was in fact achievable, and that was on which they formed their decision. Hey, good morning. Harry Gowers from J.P. Morgan. I've got a few. I mean, clearly seeing demand intact across the piece. Maybe if you can give more color on whether you're seeing any weakening in demand across any segments or markets in particular. Then I think 90% of the aircraft financing is on fixed rate structures, is that actually going down over time? Are you having to enter into more variable leases on the new fleet? As well, I think you mentioned this morning that consumer demand will decide the extent of your expansion going forward. How much flexibility or what mechanisms do you have to dial back fleet growth with Airbus? Thanks. I maybe start from the back with the Airbus. I mean, I think you also have to see kind of supply chain issues affecting other segments of the industry, not only the airline sector, but also kind of the supply of aircraft both Airbus and Boeing, but I guess the whole manufacturing industry are subject to their own supply chain matters. Clearly, those supply chain issues have been putting pressure on the manufacturer's ability to deliver aircraft as ordered and as contracted. We are seeing systemic delays across the board when it comes to aircraft deliveries. Now, when you put that in context, we are taking 30-40 aircraft deliveries a year, as we speak, and maybe 20% of those deliveries are affected. We are still getting, you know, the bulk of those aircraft deliveries, and we might be suffering a few months of delays on a portion of those aircraft. Quite likely, that will roll over into the next period in the next financial years as well, depending how quickly the industry is gonna be able to fix its supply chain issues. Given the current geopolitical environment, it's not overly favorable when it comes to supply chain management because of the economic interdependencies across regions and across countries. We shall see. With regard to our own flexibilities, well, we have contractual flexibilities, so we can defer aircraft should we think that is the right course of action. But frankly speaking, I mean, if I look at the business today, we are still, I think, in a position when we see a lot more opportunities than capacity, but we have to execute. We are still going very selective on the opportunities, and we are leaving actually quite some opportunities behind simply because we don't have capacity. We are on the course that we are deploying the aircraft deliveries as they come. We don't necessarily wanna go beyond that, because it could just be probably too much in terms of overall growth. At the same time, we are not yet seeing the need of deferring ourselves, you know, given the demand of the market. Also, you may wanna see that in context of our lot more diversified geographical footprint. If you look at Wizz Air today, we have presence in Western Europe, we have presence in Central and Eastern Europe, that's our core presence, and we have an increasing presence going east. I mean, the eastern markets are a lot more upbeat in terms of economic prospects going forward, and probably in terms of consumer dynamics as well, than Western Europe, for example. Now we have the ability to actually move capacity around within our system without necessarily relying on taking measures like, you know, deferring or canceling aircraft. I think our own diversification is quite critical in creating those flexibilities internally inside our system, but also we can rely on some external flexibilities and contractual rights. In terms of fleet financing, I spend most of my career on the other side, being on the asset finance side of the business. In order to lock in fixed interest rates, someone's gotta bear the cost. We look at this from an airline perspective as, you know, what is the benefit of having that interest rate and the currency locked in by someone else versus using our own tools to look at that. In the run up to what we've seen, obviously, in terms of interest rate hikes, we've been focusing on fixing our rates to protect against future swings. However, as you know, later on today, there's another announcement on Federal Reserve, and, you know, we may see some slowdown in terms of what's happening there. We continue to monitor the situation and look at the overall portfolio. Not all of our portfolio is financed just by pure operating leases. We do have about 13% of our fleet financed by Japanese Operating Lease and French tax leases. Those technically do allow, in certain cases, for us to take ownership down the road if we wanted to. We look at the blend overall and try and balance that just with in mind with our overall hedging policy. It really comes down to the cost and the benefit. At this point, we need to look at the market and figure out where that is likely to go. Well, I mean, personally, I think Western Europe is gonna be the most difficult market. Central, Eastern Europe continues to converge economically, and we are seeing robust demand, especially in certain areas where we went live historically, like Albania. Now, we are picking up the pace, so we see that market reacting very well. I mean, Romania, we talked about is a significant opportunity for the airline. I think we're gonna have kind of hyper demand going east. I mean, clearly those markets grew pretty much immediately, and we are just seeing increasing demand there. This is really what I meant on being able to manoeuvre, you know, within the boundaries of our own geographical footprint, possibly, you know, diverting growth from west to east if that's what we have to do. Even looking at Western Europe, I mean, we are not seeing any fall of demand in Western Europe. Hi, c an I just ask a couple of follow-ups? Firstly, on financing, can you give us some color on where lease rate factors are today versus what you were getting in the market this time last year? Second one's just on cost and disruption. Given that sort of ATC strikes are clearly outside of the control of airlines, and there's been underinvestment in the ATC system as a whole, what are you doing internally that gives you confidence that you can reduce disruption costs and also increase asset utilization if the operating environment doesn't improve? Because clearly the most sort of standard way to defend against disruption is to put firebreaks into the system, which then decreases your asset utilization. Thank you. Maybe I will start with the ATC, especially operating environment, challenges. I don't think ATC is gonna be in a dramatically better position next summer than it was last summer. I mean, let's not forget that if the fundamental issue is lack of staff, the training cycle of a controller is two to three years, so they are not going to fix it overnight. I think we are exposed with regard to ATC staffing going into next summer. The other disruptive factor for ATC is obviously the war in Ukraine because a part of the European airspace is closed off and traffic is redirected. As a result, wherever the corridor is, the new corridor, and actually that's kind of a southern corridor, that has to process a huge incremental workload, which they are unable to to really process. My expectation is that ATC will crumble going into next summer. The question is how we ourselves can create more resilience against that environment. This summer, we operated our schedule based on highly optimized rostering. There is always a daily legal limit what you can put on your crews, how much they can fly, and we kind of maxed out on that. We only allowed, I don't know, let's say half an hour buffer versus reaching the legal limit. Now, putting that model into the operating environment, what we went through, basically already, even before you start the rostering pattern, quite likely you knew that the last flight would be canceled because you're gonna be running out of the legal limit. Now we are changing that model to create a lot longer buffer in the system. As opposed to relying on a few minutes, we would be putting in hours of buffers, breaking of the rostering, et cetera, to make sure that we are just a lot more resilient against that. That will require somewhat more staffing, quite likely. In terms of design, we would be a lot more resilient than what we were this summer. I don't think that we are waiting for miracles to happen and just hoping that the environment is going to improve. We are actually resetting, if you wanna put it that way, to make sure that our model remains intact and robust and operationally efficient, given the challenges we are facing. In terms of fleet financing, we actually offer a pretty attractive product to the market. We have an investment-grade airline. Combined with one of the most newest technology clean burning aircraft with efficient engines that have ever been produced. So that right there drives a lot of competition when it comes to our fleet financing RFPs. In terms of the overall lease rates, obviously, what's been financed has been financed. This isn't affected by interest rate movement, unless of course there's floating rate agreements. In terms of going forward, we are not seeing lease. Well, obviously with the base rate increasing, the overall cost increases, but in terms of the margins or what's factored into the lease rate factors, we're not seeing dramatically, we're seeing the lower increase compared to the overall market in terms of what rates are doing. What's happening is that a lot of that cost is being passed on to the lessor. However, we are seeing the shift of lessor appetite or the ability of lessors to be able to finance at those levels shift from Western to Eastern markets. As per Joe's slide, we had a majority of Chinese and Japanese investors step in at that point, and that's due to the fact that there's more expansionary monetary policies in those jurisdictions, and they have a different appetite for this sort of asset and this sort of credit. I guess now we can take questions from the audience on video. Thank you. As a reminder, to ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. We will now take the first question, which is coming from the line of Stephen Furlong from Davy. Please go ahead, your line is open. Hello. Morning. Ian, you might just give me some more flavor in terms of discussions with the rating agency, Fitch, in terms of, I presume they look through more cycles and, you know, the next 12, 18 months, free cash flow and those type of metrics. The second thing, I was just wondering about the Go East strategy. Do you think, József, from preliminary budgeting that that type of business is a similar type of margin type of business to Western Europe or Central and Eastern Europe, or does it have, I guess maybe higher unit revenue potential, but also higher costs? I'm thinking of things like engine maintenance and things like that through the desert and stuff like that, or is it kind of similar? I'm basically just getting a handle on the KPIs of those types of businesses versus your existing operation. Thank you. Thank you, Joe. So in terms of the Fitch process, we work off of a set of forecasts and they look at both liquidity and the leveraging of the business, and particularly the de-leveraging of the business. As we stated in today's guidance, we expect to return to profitability in 2024, and that profitability then rolls forward and does in fact delever the business, bringing profitability up, and the leveraging into acceptable levels, which allowed them to form their own conclusion. Liquidity was one of the topics, but not the focus. It was the business' ability to delever, and that was what gave them the comfort. With regard to recent expansion, I mean, just put things in perspective. I mean, at this point in time, around 6%-7% of our capacity is deployed in the East, so we are not overly exposed with that regard. With that, obviously we are also learning the market. I think so far so good. In terms of margin expectations, they would be very similar to what we are achieving in Europe. I don't think there is any discrepancy with that regard. Certainly it is a different operating environment. You can argue with, especially from an engine perspective, it's a harsh operating environment relative to a benign European operating environment. We are looking at ways of best setting those assets up for the operational challenges. To be honest, when you look at the business from a financial perspective, the real drivers of your business are around fleet utilization and crew productivity. I think we should be able to achieve, and we are achieving already, but we should be sustainably achieve similar levels of utilization and productivity flowing through those operations as what we are achieving in Europe. I think that would be the fundamental driver of the business from a financial standpoint. Okay. Thanks, Ian. József, thank you. Thank you. We will now take the next question. It comes from the line of Muneeba Kayani from Bank of America. Please go ahead, your line is open. Muneeba Kayani, please, your line is open. Can you check your telephone is muted? Sorry. We will proceed to the next question. We'll take the question from Jarrod Castle from UBS. Please go ahead, your line is open. Great. Thanks. Morning, everyone. Three from me. I'm just interested in kind of relations with staff now and, you know, with cost of living crisis, is there any increased pressure on unionization in terms of the commentary from there? You know, obviously expecting a loss in the second half. I mean, historically, you've been anywhere between flat and EUR 100 million of losses in the second half. I mean, to give directionally, I mean, I take it you're expecting more than EUR 100 million of losses just given the building blocks. And then just also on EU Fit for 55 measures. You spoke a lot about sustainability, but where are things now in terms of the proposals? Thanks. I'll take the second question on losses. We're not guiding anything more specific than what we've said so far, which is that we expect for the full year to end up in a loss position. Okay. Starting with the employee engagement and various other issues affecting people's life, I would say that obviously we went through a difficult summer, and that affected the lifestyle of everyone in this industry, given the challenges of the operating environment, the issues with the supply chain. Now we are a lot more settled with this regard. In terms of pay and reacting to inflation pressure of our employees, I think Wizz Air has done probably outstanding relative to the industry. First of all, we were the very first airline reinstating pre-COVID salary levels for both the pilot community and the cabin crew community. Same for the office. We actually just launched kind of a solidarity bonus across the entire organization. All the employees are affected other than senior management that we are paying out a bonus of EUR 1,000 to address kind of the high energy bills coming to the employees. I think we are very sensitive to people's matters. We are very sensitive to the adverse impacts coming from the environment and how that could affect, you know, the lifestyle and the spending ability of our employees. You know, we really display this kind of a value of solidarity and try to be as helpful as we can be as a company. I think we definitely are quite unique. I mean, I'm not aware of similar initiatives implemented by other airlines trying to help out employees with regard to the current circumstances. I think we remain very focused on employee welfare, understanding the issues of our employees. We remain very engaged. We periodically visit our bases. I periodically visit our bases twice a year to meet our remotely based people to create the opportunity for them to speak up and also to create the opportunity for management to directly interact with our people. We have a very strong people council institution, which is like an alternative channel of communication between management and our people on the ground to make sure that people really have the opportunities to say what they have to say. I think we have a very dialogue-based and solidarity-driven culture in the company, and I think this is much appreciated. I mean, let me just give you one example. I mean, you know, the whole Italy event, crazy, protesting in the airline industry and our people refrained from taking part of that event, despite you can imagine all the push coming from external parties that would have been interested in creating mess inside Wizz Air. Our people resisted completely and didn't get involved, and we were the only airline unaffected with that regard. Thank you. We will now take the next question. I think we need to go back to his one last question from Bank of America. They will have to press star one one again. If that's okay, we will proceed with Mark Simpson from Goodbody. Please go ahead. Yeah. Yeah. Hi, good morning. Thanks for taking the questions. Q3 as usual. First off, I just want to clarify Q1 versus Q2 fleet program. It looks like you've pulled back your numbers a little bit over the next couple of years. Circa a 4% reduction in capacity in FY2025 target fleet. That kind of gets you back to kind of 15% growth rate year-on-year. Is that what we should be kind of looking for thereafter? Is there any kind of reasoning behind that slight change? It looks to be really the mix in terms of A320neo or standard engines A320s. Equally, on the 23% implied growth for FY 2024, can you tell us where that capacity will be deployed, if there's any continuation of the same, particularly basing to Italy? In addition to that, disruption costs, apologies if I missed this, have you given a specific number that you think are disruption costs incurred this year that won't be repeated into next? Finally, on financing, you've talked obviously about leasing and the further reliance on the Far East in terms of leasing capital providers. The bond program that you've been involved in before, do you think the interest rates where they are at the moment precludes you issuing a further bond? Does that suggest you will continue just to seek financing via lessors? Maybe I would start, Mark, with the fleet program. I mean, to be honest, this is somewhat outside of our control. This is what we are getting from Airbus. All the adjustments that you are seeing is not our own initiative. This is the revision of Airbus's deliveries. We will see how that line is going to develop in the future. I mean, we have, of course, opportunities to affect the capacity ourselves. I mean, we could extend existing leases, and we could lift leases from the market. The problems with that either option would drive costs up quite significantly. When you extend an existing lease, obviously you would be extending an older technology, which would be operated at higher cost than new technology. I think we are very keen on innovating the fleet because of economic efficiencies coming through that and because of environmental efficiencies coming through that, as opposed to sort of extending our run on existing technology. What you are seeing is really the adjustments that Airbus has made to the delivery program as opposed to our own initiatives. We are holding the lines with that regard. Of course, we continue to evaluate all options available to us, but we are much driven by reducing the cost of operating the business, and that can be a lot better achieved with newer technology than older technology. I'll talk about the disruption cost question. In Q1, we had disruption charges and compensation exceeding EUR 60 million. In Q2, that came down to EUR 30 million, and we'd expect that trend to continue for Q3 and onward into the end of the year. Obviously, if you look at our target of single digit ex-fuel CASK growth for the year, and if you look at our CASK breakdown on slide six, the disruption costs land in what's titled the Other Expense row. In order to achieve that sort of CASK target, we're gonna have to work on eliminating that everywhere possible. We do believe that is achievable based upon the performance that we've seen in October and the operational improvements currently underway for the rest of the year. In raw number terms, I mean, that's EUR 100 million deal. EUR 100 million for the year is what we're looking at. For the year. Yeah. That's extremely helpful. Just on the bonds program. We do have the capacity under the bond program, so it's not a matter of if, it's a matter of if, not whether we can do it or not. At this point, we think self-financing as well as accessing other financing sources, like similar to what we've done in terms of putting a PDP facility in place and trading out of it, is a better course of action than with issuing more expensive debt in this environment. Yeah. I mean, I think. That's great. I think it's important to say that we feel quite comfortable with our liquidity position, certainly liquidity position going forward. Once profitability is reinstated and we continue to grow the business, I mean this becomes a significant driver of operating cash flow in the business. As said, we secured commitments for EUR 300 million facility through possible PDP financing, which you can take as an insurance policy or you take it as effective cash for the business. We don't necessarily see further needs to take liquidity measures. We certainly don't see a need for taking equity measures with that regard. Much appreciated. Really helpful, responses. Thank you. We will now take the next question. As a reminder, it will be star one one on your telephone to ask a question. The next question comes from the line of Manikandan Subbaraman from Citi. Please go ahead. Your line is open. Hi, everyone. My first question is on the PDP facility that you had mentioned in the presentation. You had mentioned that you have a commitment of $300 million. Can you please give some color on the terms of the arrangement? My second question is on the liquid assets under net debt. At what level of net debt to EBITDA you'll be comfortable going forward to maintain your investment grade rating? Yeah, thanks. Okay. There was a bit of interference on the line, but I believe the first question was on PDP financing, and the second one was on the investment grade. Yeah, the source of PDP. Yes. The source of PDP. Financing was the result of a competitive tender where we had both bank and non-bank, so insurance-backed sources, bidding for the facility. In the end, we selected a single counterpart who's prepared to do the whole deal without underwriting. What's interesting typically with PDP financing is a lot of times it's tied to lessor activities. This is a standalone counterpart and someone that we have an existing relationship and someone that in particular I have a relationship going historically. We know them well, and we know that they have the ability to commit to deliver and so that is, as Joe said, additional insurance in times where we don't feel we need it, but it's nice to have. Sorry? The other question was on the ratings process, right? Could you please repeat the second question just to make sure we're answering it properly? Mm-hmm. We're not exactly sure what the level of debt is in order to meet each of their models. But we believe it's something around low twos in order to maintain a net debt to FFO, funds from operations ratio. But I don't think the process works as such that there is a definite number, and you either hit it or you miss it, and you're gonna have the investment grade, or you lose the investment grade. I don't think that's the way it works. I think this is more of a trend-driven approach to understand where the business is heading as opposed to really specifically targeting a value number. I mean, obviously, the numbers are indicative of the delivery of the trends, but I think the trend is probably more important than the very number itself. Thank you. I would like to hand back over to Joe for final remarks. Well, ladies and gentlemen, first of all, thank you for your interest. Secondly, I just wanna wrap it up like, you know, we understand all the issues we have been encountering in the business, especially in summer and this year, notably the heavy operational disruptions affecting our ability to properly operate and the financial damage coming with that. Also, our exposure relative to our competitors on the hedges, especially on fuel. Those matters basically drove two issues. One is higher cost of operations of the airline, and two is a competitive disadvantage in the current year. Now, we are moving past these issues on all fronts, as we are approaching the next financial year. We are seeing operating cost unit cost ex-fuel to come back to historical levels. Probably we're gonna be one of the very few airlines in the world actually being able to operate at pre-pandemic ex-fuel cost levels. We are seeing that happening through the fleet renewal program, being able to absorb the headwinds. At the same time we're gonna be at level playing field vis-à-vis our competitors when it comes to the fuel exposure. All that comes with we believe a robust market, and certainly a lot more diversified geographical footprint what we are having right now, being able to maneuver inside that footprint to address various market dynamics should they become problematic or should they represent opportunities for the company. We're seeing that the fundamentals are getting restated on the one hand and the market flexibilities and market opportunities are over there to make sure that we continue to build our business, continue to deliver growth at a expected level of profitability. Thank you. That does conclude our conference for today. Thank you for participating. You may all disconnect.