Nov 7, 2021
Operator
Welcome to Wizz Air F 2022 Half Year Results. [Operator Instructions] Just to remind you that this conference call is being recorded.
Today I am pleased to present Wizz Air CEO, József Váradi; Wizz Air Executive Vice President and Group CFO, Jourik Hooghe. Begin your meeting.
József Váradi
Thank you very much. So again, good morning, everyone.
Thank you for coming. Really appreciate your presence and good to see you as human beings around us.
Good to be back in life, in business. So this is to report the first half of our financial year called fiscal '22.
So maybe I would start with a quick wrap up upfront. So in summer, just behind us, we ramped up operations pretty much at '19 capacity levels.
This is one of the highest in the industry in Europe. We did pretty well on that.
It was a profitable quarter in terms of operating profit. So we were clearly seeing a ramp up of the financial metrics as well during this period.
We delivered positive cash flow in this period, liquidity reaching €1.7 billion at the end of September. Importantly, both Fitch and Moody's reconfirmed our credit rating investment grade credit rating.
That obviously is a very important matter to us, given our exposure to -- through capital markets, especially when it comes to act of financing. Short-term, we are seeing a number of temporary challenges the business is facing.
I will talk about this later. But just headlines, we are seeing a few of our markets that are underestimated relative to the Western European levers.
Obviously, that is affecting short-term demand. We are seeing a significant ramp up of our capacity to 170x of next year versus 419.
At the breakout of the pandemic that's a significant growth. Obviously, that carries some level of inefficiency in -- at the moment with regard to aircraft utilization and crew productivity.
But once we are fully ramped up, we will -- to our historical operational levels. And also we are seeing the macro environment playing against us on commodities when it comes to fuel pricing and FX.
We are much focused on executing against the WIZZ 500 agenda that is strategically important to us. We continue to invest in our fleet, in our network and our people.
Just to give you some numbers asset, we are going up to 170 aircraft operations number next year. This is roughly 50% capacity in Greece versus the breakout of COVID in March.
We are hiring people. We are looking at having 6,700 employees in the company at that time in September.
That compares to 5,000 at the breakout of COVID-19 and 4,000 at the low end during the pandemic. We've been investing a lot into diversifying our markets.
We opened up a lot of new countries, new operating basis and new routes. And you see how that investment has been flowing through.
If you look at the current snapshot of our business metrics asset, we have been back into 2019 level on capacity and to a large extent also in terms of passenger traffic and number of airports, aircraft and operating basis. So, we are now having 44 operating basis in operations or [indiscernible] compared to 26 in March 2020.
If you look at the route network, we have a total network of 1,155 routes, of which 440 were opened during the pandemic. So we greatly diversifying our network during this period.
So if you look at capacity levers, you are seeing that this is the calendar year from week 13 to week 44. We are in week -- in 44 today, so this is tracking on to week 43.
You are seeing that our capacity level is pretty much on to CASK [ph] level. Load factor is also ramping up.
We have not reached the level of operational efficiency that the business delivered in 2019, but we are certainly underway to achieve that. So it's still a weaker demand environment.
But relative to the industry, relative to our competitors, we have been performing quite well, showing how effective we've been in ramping up operations. Market share gain and the market share gain given the period, the audience, and this is a deliberate choice of ours.
If you look back into 2019, 2010, we did exactly the same thing. We took advantage of the weak market, we took advantage of the weakness of our competitors.
And we invested into those markets by gaining market shares. That's exactly the same what's happening at this point in time, you can see that pretty much in every one of [indiscernible].
We are building our market positions, we are grabbing significant market share. Just to name a few countries, if you look at Albania, out of the blue, we became the largest carrier in the country.
We stepped up in Italy in a big way to be putting our presence in the market going from 3% to 9%. But even on our existing markets like Romania, we've been able to step up taking advantage of the situation, the weakness of our competitor.
So this is a deliberate investment into markets, which we believe will benefit us on the medium haul and the long-term, irrespective of some of the short-term challenges that we facing right now. And with that note, let me hand it over to Jourik.
Jourik Hooghe
Thanks, József and good morning also from my side. It's great to see some of you face-to-face.
Let me give something on the financial performance. So looking at the key KPIs, starting with revenue, you see that the revenue for the first half increased 87%.
Revenue for the quarter increased 80%. So very strong performance.
Obviously, the base was still very low. But as explained, we're nearing the ASK levels of 2019, which is very strong.
Looking at the profit side, the operating profit for the year -- sorry, for the first half of the year was minus 50. The operating profits for the quarter, as József said, was €57 million positive.
So returning a positive from the operating profit, from a total net income for the first half, we're at minus 120, which basically implies a minus €6 million operating -- sorry, net income loss for the quarter. There's a big difference between this positive €57 million, operating profit under €6 million loss And that difference is essentially explained by the unrealized FX losses that we have.
As you know, [indiscernible] along on U.S dollar liabilities on the balance sheet. And as the dollar strengthened during the last 2 weeks of September, basically we -- we've kind of had to recognize this unrealized loss.
But this has nothing to do with operational performance. This is, let's say purely related to the devaluation of the balance sheet liabilities.
We'll talk a little bit more about cash in a few slides. Looking at the cash performance, you'll see that the first half delivered a cash performance of €2.75.
The quarter delivered a performance of €2.43 for quarter two. That is around 12% above the quarter pre-COVID.
So we're getting closer to our cash performance. But we're not fully there yet.
As József highlighted, we're continuing to carry a little bit of inefficiency, because of utilization on fleet and on crew. So if you look at the fleet line here, depreciation line, you'll see there's a significant inefficiency still.
Here it's about close to €0.30 cents. And then also in the crew line, you can see that the balance of those two lines basically add up almost to €0.40 of inefficiency in the first half.
And we'll continue to carry that and so we really, really fully ramped up. Remember, we at this point in time, we have 20% more capacity than we operate, but that gap is going to close by next spring.
And then obviously, the normal regular cost structure, pre-COVID cost structure will be fully back and may even have potential to do better. Obviously, we have invested a lot not only in fleet, but in better fleet and that should come and translate back into the cost structure.
Moving on to cash. You can see that we have gradually maintained and even built our cash position or liquidity position.
We remain at €1.7 billion. Our balance sheet remains investment graded with Fitch and Moody's as József mentioned.
Fitch revised the outlook in a report last week which may have seen from negative to stable as they look at -- as they basically revise the outlook for the for next summer, where we see obviously stronger vaccination rates giving more confidence for travel to return to pre COVID and above levels. We continue to have a short booking window, which you actually see in the next slide when we unpack the cash performance into the different drivers.
So if you look at cash from an operating point of view, given the cost structure, which I said was around 12%, higher on the ex-fuel CASK, but also giving the pricing environment which is still 25% below pre-COVID from RASK point of view in the last quarter. Obviously, the operating profit was positive, was not where it used to be, right?
So clearly, we have ways to go. As confidence comes back as restrictions fully lift, that pricing performance will return.
So that should happen by next spring, next summer, and that operating cash flow will obviously continue to increase. Working capital was a positive change.
There's two components to that. I mean, we had a higher volume of activity.
So payables contributed to working capital, but we're in front of a lower volume quarter from a revenue point of view seasonally speaking, winter is slower than, let's say summer. So ancillary revenue has declined.
But those two combinations together to [indiscernible] this €36 million contribution from a working capital point of view. Currencies, whereas a hurt on the P&L, were a help on cash because of the U.S dollar deposits.
And then lastly, as we've always guided PDP payments, this quarter will be relatively elevated. For the year, we have around €120 million pre-delivery payments, most of that came this quarter, the balance -- the €40 million balance is coming in the second half.
So, all in all, very strong cash performance. If you look at ancillary, that continues to be a stronghold for us, and for reason, the first half were up €5 per passenger versus F20, so €2.5 per year.
That's kind of well ahead of our target of €1 per passenger per year increase. The quarter was a bit lower than the €5.
In Q2, we have €3 per passenger increase versus F20. So it's slowing down a little bit.
Continue in Half 2. And the reason for that is obviously the market is more price sensitive, more price elastic, I would say and that also means that you luring or you get basically passengers which are more price sensitive, and they would also buy less ancillary services over the summer quarter.
And that may continue to some extent over half too, but as pricing will restore next year, that obviously will also restore further distinct on ancillary. So all in all, we're well on track to deliver our targets for the full year also in ancillary performance.
And with that, I hand it back to József.
József Váradi
Thank you, Jourik. I think it is very important that you fully understand what we are doing here with regard to investing into our future with much focus on fiscal '23.
Distinct fiscal '23 is going to be a year in which you'll be able to see our financial metrics largely restore to historical levels. So our investment has been going through a three line, essentially.
We have strengthened our fleet [indiscernible]. I will talk about that in a moment.
It's not only that we are ramping up our existing markets, but we have been adding a number of new markets and we are starting to see some maturity coming through those early investments during the pandemic. And I said before, we have been substantially hiring people just over the last 3 months we hired over 1,000 people.
I mean that relates to 4,000 at the bottom of the pandemic. So, versus that level, we have been hiring 25% new employees in the company for getting ready for next spring.
If you look at vaccination, we’re seeing that there is a very clear correspondence between vaccination rates and travel restrictions. So European travel has been evolving around the concept of vaccination rollout.
Vaccinated people can travel, non-vaccinated people cannot travel or facing -- they're facing significant restrictions. And you see how these lines have been evolving.
So clearly, vaccinated people are now pretty much free to move around Europe, but non-vaccinated people are getting increasingly restricted, essentially [indiscernible] as to speak now. That poses some short-term challenges as I said on our network because [indiscernible] is less vaccinated than western Europe.
And it's playing catch up having said that the rate of improvement is, is pretty enormous, I would say, look at a country like Romania, Romania is vaccinated at around 30% level and it's expected to reach 75% by February. I mean, obviously, events in the country are tragic and people are acting on it by fear.
But that is a very clear improvement. So, we are going to be seeing medium term beyond the next 3 to 6 months.
A significant kind of settling on this issue in some of the market today we are negatively affected. So we think vaccination is a key issue and vaccination will be driving travel demand and people's ability to fly.
Another way of looking at vaccination. So today -- but on 20% of our capacity is placed in markets, but at least 70% vaccination level has been achieved.
And that rate is going to improve immensely in the coming period. So when we come to the end of the winter period, March 2022, it's going to be over 50% of our margin this 70% plus vaccination level.
And you see that going through the summer, that is expected to further improve beyond 80% and getting into winter, next winter 2022. We are going to be basically fully vaccinated.
And I would also say that those people who are not vaccinated are probably not our travelers at that time in our event. So we're on summer, we're going to be seeing a travelling public we are targeting being fully west.
So that is giving us the confidence that 2023 has got to be a very different period for the airline sector for Wizz Air. In terms of our ability to perform properly, not only in capacity, but also financially speaking, because simply we are going to be carrying a fully vaccinated travelling public.
Talking about the fleet, that's one of the key issues we have been focused and we are still focusing on. This chart is showing to you that if you look at the blue line and the red line, that -- we -- essentially are upping the game and we are adding more capacity, we are planning on more growth.
We are acting on some of the newly rising market opportunities happening recently. I mean, some airlines are struggling, contracting capacity, opening up opportunities for us.
We are seeing Ukraine signing an open sky agreement with the EU giving us access to serve the market. So essentially, we have been adding capacity, we have been adding more growth to the system as we speak [indiscernible] what we sought just 3 months ago.
And we are delivering it on the basis of expanding some of the aircraft we have in [indiscernible] and we are also trying to advance some of the new aircraft deliveries. The other line which I think is also important is to see the gauge of the aircraft.
Last year we were operated a fleet with average seat count of around 200. And that is going to go to 225 in 2 years from now.
I mean this is a significant improvement because the gauge of the aircraft corresponds directly with the unit cost for the bigger the aircraft the lower the unit cost will become. And it's not only the gauging effect, but also the age effect which benefits us that right now we have a fleet age of around 5 years and that will go down to around 4.4 in the next 2 to 3 years, which will also yield significant financial benefits on the operational metrics.
So we’ve seen that we will get a lot of competitive advantage out of the fleet. That's why we are continuing to invest into that area going forward.
And this is against the backdrop of the industry that you will see airlines flying an ageing fleet of aircraft, which will end up with a significantly higher unit cost versus the fleet what we're going to be flying with much lower unit costs coming from innovation, fleet age and technology. But we are using, I mean, all the new aircraft.
We are taking delivery is a 20% [technical difficulty] than the previous aircraft. So the A321neo delivers 20% lower unit cost and the A320ceo aircraft.
And if you look at the market, we continue to add capacity pretty much in each of our markets. So starting with Core CEE, we are adding aircraft and we are delivering through this market.
So it's not only that we are just ramping our operations back off to 2019 lever, but actually we are growing our presence in San Antonio. But at the same time, we have been opening a number of new markets like Italy, U.K.
Wizz UK continues to strengthen its presence. We continue to invest in the United Kingdom.
Ukraine, I just said on the backdrop of the Open Skies agreement with the EU. We are seeing a lot more access to markets.
Albania is a very new market. And also we are ramping up Abu Dhabi in this period.
And at the same time, you are now seeing some changes in the market regarding consolidation. A few airlines are now going down or getting totally distressed.
We are seeing airlines contracting capacity not only in winter, but beyond winter, based on published schedules. We are seeing a lot less capacity committed for next summer.
And that's the opportunity what we are chasing. We are growing our workforce and we are investing into our people, [indiscernible] people over the last 3 months.
We are building our organization for 170 aircraft operation in summer 2022, requiring 6,700 People. Jourik was talking about the inefficiency, the key is getting the red line is showing you the organizational requirement of the existing fleet.
And how that's ramping up. And the blue line is showing actual utility of the workforce.
So you are seeing that we are clearly underutilizing all workforce, our fleet at this point in time. But by Spring 2022, we're going to be fully ramped up and fully utilized and we're going to be able to restore our historical operational metrics.
And that comes on a newer fleet on an [indiscernible] fleet, on a newer technology fleet, which will yield significant financial benefits versus our historical performance, but certainly versus the market versus other airlines. With regard to sustainability, we are very committed to sustainability.
We don't think there is a greener airline than Wizz Air. So if you are really serious about being green, you should all fly Wizz Air.
If you were to apply the Wizz Air operating models in Europe, operated with Wizz Air aircraft, Europe's emission would come down by 34%. This is the operational efficiency what we are bringing to the market versus the rest of the industry.
And we tend to be the most innovative airline bringing technology to the market. As said, we have been adding 37 brand new aircraft during the pandemic, not many airlines have done this.
And the new aircraft we are bringing is far more ecologically efficient than previous technology. And we believe that [indiscernible] day, if this industry is serious about being green and serious about sustainability, it's all about [indiscernible], it's all about the operational efficiency, how that technology is going to be used and I believe to be have been demonstrating that we are in the forefront of those developments.
Obviously, we are also trying to address the short-term and medium-term issues and bringing ourselves through that period. We are investing a lot into our people, asset and we take our employees very seriously.
We have been restoring the dialogue in person with people. I think people are very supportive of the company's strategy.
They have been supportive in the downturn and obviously they are supportive in the upturn they are going through right now. And we are getting some more credits from the market with regard to our ESG efforts.
Wizz Air is now linked by Sustainalytics number eight in the word out of 70 rated airlines which is quite a good ranking and we are taking other steps not only to address study, but also to improve our standing on diversity especially at Board level and senior leadership level. So just to recap, the presentation, so summer H2 in total was strong in terms of rebuilding capacity, in terms of recapturing travel demand.
At the same time, we are seeing that the high demand period -- periods are very strong, but the off periods are somewhat muted. Q3 capacity will be at around 2019 level going forward.
And in Q4, it's going to be probably somewhat more than Q4 '20 -- fiscal 2020. We are going to be exceeding that capacity level.
So, I would say that in terms of operated capacity in the market, we are pretty much back in the game. Ready to invest, we will continue to invest in our fleet, in our network and our people.
And we are looking at Spring '22 as the time period that we can be fully ramped up, and our operational efficiency and financial metrics maybe resumed and we [indiscernible] at that point. And this is all under backdrop on improving vaccination rates across all markets.
And we believe that we are going to be in great position to demand, given our improved fleet and our improved economics, we will be in the forefront of being able to capture the rising market opportunities coming out of the [indiscernible]. Nonetheless, short-term, we are expecting some turbulences.
The commodity market remains volatile, including fewer as well as FX [indiscernible] this play out. We are expecting loss in Q3,given the investment we keep making and some of the issues temporary business is facing like under vaccinated countries, the commodities.
But we believe that these issues are short-term lived, and in a few months towards the end of the winter period, early spring, these issues will largely be behind us. So Q4 is an uncertain period with [indiscernible] issues continue to prevail at that point.
As said, fiscal '22, we see as a transitional year into fiscal '23. And we are full time focused on fiscal '23 to make sure that we are delivering a 50% growth versus pre-pandemic times and we are fully ramped up for that growth in terms of markets in terms of fleet and in terms of the organizational requirements of our people.
I would close this presentation and would hand over to the floor for any questions you may have.
Q - Jaime Rowbotham
Morning, gentlemen. Jaime Rowbotham from Deutsche Bank.
I've got three, please. On fuel, learned this week that Ryanair had splashed out on some fuel caps as a bit of an insurance.
Is that not something that appeals to within the absence of any hedging? Second one is on maintenance.
The 2Q maintenance costs very low. I think it's €17 million, down from €42 million in Q1.
I think that has something to do with lease extensions, but perhaps you could clarify. And the last one is pricing.
Any comment on fares versus pre-crisis summer? Sorry to mention them again.
But Ryanair said plus 5%, or be on low volumes earlier this week. So any comment there would be great.
József Váradi
Okay. So I hope you can hear me well.
On the caps, I mean, they also come with a price. So nothing is for free in this world.
You typically look at a percent of the underlying commodity that you're hedging. So if you look at it, I mean, the prices are actually trading lower probably than the caps that they have put on.
So, we've committed to a no hedge policy, it's a bit difficult in an inflationary cycle. But you need to see through the full cycle.
We need to see what the industry is doing when the cycle goes the other way. It is painful in the short-term, but -- and then long-term, we don't pay the fees to the bank.
We know that the drivers of the hedge decision was really linked to the fact that we have reached our sole operating and the power that we may have to adjust pricing if needed. And obviously we have strength on the balance sheet to see through, let's say, the short-term painfulness or inconvenience, if I may call it like that.
So clearly, we've looked at it, but we've decided not to do it. On maintenance, it's true the lease extensions have helped the maintenance line in the quarter.
I mean, maintenance is always an ebb and flow, of course. I mean, this year we have 14 redeliveries for example.
They come across. We didn't have any redeliveries in 2019 or in 2020 in the calendar year.
So, you will see some fluctuations as we go. But yes, this quarter you've been helped by the lease extensions.
And then lastly on the fares, I mean, I think we are booked 1% for next summer. I don't know what quantum of data people need to guide on to be statistically relevant.
But probably we wouldn't be guiding on the basis of 1% of bookings.
Jourik Hooghe
I may just want to add to the pricing environment. I mean, there are few trends, if you're going to be observing going into summer.
One is that rising input costs to the feed through into the trading environment. I mean, we know it.
I mean, this is empirical, we have seen it a lot of times and then substantial changes that happen into input costs that those feeds through into the trade environment, possibly with a 6 months time. At least, this is empirical evidence.
So I think that is one trend. The other trend is that quite likely the industry will be facing significant inflationary pressure coming from various directions, like monopoly charges, possibly fuel and possibly increased cost of indebtedness of the industry.
So I think that's going to push the industry towards higher price. Same time, I think we're also going to be seeing some other factors like potential overcapacity.
We will see how the competitive environment will play out at that time, that'd vary depending on the market, depending on the competitive dynamics. But that can -- that might be a balancing act.
As far as we are concerned, as we said, we think, we would be in a unique position relative to the industry, because we will have a significant fleet to operate versus a deteriorating fleet of over other airlines, ageing fleet, less efficient fleet. And at the same time, as said, we're going to be flying a younger fleet of aircraft up gauged fleet, newer technology, giving us a significant strategic advantage.
So we can play a slightly different game in the market versus other airlines. I think we can invest more into stimulating the market and not necessarily by raising family benefits from the overall market and through the pricing environment improved.
But at the same time, given our improving cost base coming on the platform of technology, we will have room to maneuver.
Jarrod Castle
Good morning, gentlemen. It's Jared Castle from UBS.
Three, if I may. Probably more medium term focused.
You've obviously got this ambition to get to 500 planes, circa maybe 200 at the moment. Just any comments in terms of conversations to secure another order and your view on maybe M&A to kind of quiet planes.
Then just secondly, you've obviously got a very favorable tax rate. Obviously, there's a lot of pressure globally to increase tax rates.
We've just been interested in your views over the medium term, how you see that potentially impact? And then just any further comments in [indiscernible], you did touch on it, but be interested just to kind of get a bit more color.
Thanks.
József Váradi
Let me start with the 500 aircraft question. 500 aircraft -- Wizz 500 [indiscernible] is established on the basis of organic growth not on M&As.
If you look at the history of Wizz, we have been growing organically. Of course, we are interested in [indiscernible], we have been looking at it more from the perspective of acquiring assets, especially airport slots, and that will be the prevailing focus going forward.
When you break it down by market, if you kind of portray 500 aircraft in a year towards the end of the decade, I would expect half of it to be deployed in our Central and Eastern European core markets that basically require to double down versus where we are today. Delivering that level of growth over 9 years would translate into around the 7%, 8% CAGR.
We think we can deliver it. We have been growing in Central and Eastern Europe with double-digit growth rate over the years.
So we think it's very doable. Another quarter of the 500 aircraft would come from select markets in Western Europe.
We have made three commitment today. The United Kingdom, Italy and [indiscernible] continue to enhance our presence in those markets and we will continue to invest.
We think we are strategically well-positioned to win in each of these markets and we will follow through our initial investments there. And the remaining quarter of the 500 aircraft shall come out of our go East strategy.
Abu Dhabi is the first pillar of that. Now you are seeing us stepping up in Ukraine.
And there might be further initiative during the course 9 years to enhance that line. So that's sort of how we are seeing 500 aircraft coming together over the course of the next 9 years.
In terms of aircraft order, indeed, at some point, we will have to place an aircraft order to make sure that we have the supply of aircraft. But I just don't want to speculate on them in due course, we'll take care of that issue.
Jourik Hooghe
Just on tax rate, I mean, [indiscernible] so we've seen USD agreement to 15% tax rate as of 2023, likely who probably would at least a year delay as of when it would be implemented in, let's say, all the respective countries. And then there's obviously a question that we have once the tax will be published in terms of the carve outs that have been negotiated.
Carve outs for asset investments, for employment. It could be that there are exceptions and rules.
And so we will need to really understand that. But I think over time, it is prudent to plot a higher tax rate than what we're currently enjoying if you look at the overall trends in the market, but it may not be all the way to 15% and it may not be all the way as of Jan 1, 2023.
József Váradi
Abu Dhabi is now moving. Abu Dhabi used to be highly restricted by government imposed measures.
They be relaxed. Recently, a number of markets opened up as a result and we are ramping capacity up against those new operating conditions.
We have four aircraft base in Abu Dhabi, [indiscernible] going to be fully operational with full utilization towards the beginning of next calendar year 2022. And of course, we take it from there as we are seeing further opportunities, access to our other markets on the basis of bilateral designations, we will continue to follow-up that investment.
But I don't think anything has changed with regard to our strategic views on Abu Dhabi. Short-term, maybe the start has been a bit more difficult given the restrictions prevailing.
But now we are indeed coming out of the boots. And I would even say that COVID-19 might be just accelerating our plans in Abu Dhabi, given the reset of some of the other airlines, I mean you see that Etihad is restructuring its business, probably giving us more opportunities than what we would have sold before.
James Hollins
It's James Hollins from BNP Paribas. A few for me, please.
Just a couple of follow-ups in your comments, József. I think the world and [indiscernible] is talking about a decent market on capacity next summer.
It's usually a bit of backpedalling on that and you've talked about overcapacity. I was just wondering if you could call it any particular markets you're concerned about.
And obviously your own capacity is increasing quite considerably. Secondly, another comment you made was talking about looking to acquire slots.
I was wondering if you are going to likely to have any success of getting into Gatwick for summer season 2022 if that's still top of your agenda. And then the third one, obviously, József, you have your I guess juicy long-term contract.
If we talk about the degree of that, you've talked about full year fiscal '22 is transitioned. The Slide 13 was rather scary to me in terms of that vaccination rate.
Should we be thinking about fiscal '23 as you are growing 50% a lot more recruitment, getting through that vaccination process and then the kind of the profit delivery the returns on everything you were doing come through in fiscal '24. Those are the three, thanks.
József Váradi
All right. Well, we were two to capacity.
I mean, I think the history is telling us that, especially in peak periods, the industry has a tendency to overdo capacity. And we shall see how capacity discipline is going to play into the summer.
A lot of state aid has been injected into the industry, which I think takes away the incentive from those legacy carriers to rationalize it. So simply, we should just see how it's going to play out.
[Indiscernible] that depending on how the store regulations were called for next summer that may be driving some unnecessary capacity in the market if airlines would have to fight for their incombustible positions, and they will decide to operate capacity not needed for the market that may result in over capacity. So we shall see.
So I don't know. But given the tendencies we have been observing before, I don't think this is such a straight line that necessarily we should be concluding that it's going to be capacity discipline going into summer.
With regard to slots, in Gatwick, I don't think I can report anything new versus what we have said. Yes, we are interested in expanding Gatwick.
Yes, we are interested in acquiring slots. But at the moment, we have no possession of any further slots at Gatwick.
We need to understand the slot regulatory framework continues to evolve. What it really means for next summer, and what impact that's going to make on existing players and what they want to do with the slot portfolio, what they have.
For the time being, I cannot really report anything new. With regard to 2023 versus 2024, I think I'm very confident in 2023.
2023 is going to be underpinned with the improving, I mean, obviously, there is no guarantee that the world is not going to be put upside down by something. But putting that kind of a black swan scenario aside, looking at it from a COVID-19 perspective, looking at it from an intention to travel perspective, people want to go, people want to travel.
They have the financial capacity to do that, and there every [indiscernible] has been much more corresponding with government imposed restrictions as opposed to [indiscernible]. And I think we are just going to be in a much better situation.
I mean, you look at look at London today, compared to what it was just even a few months ago, I mean, it has become a Freeland, again versus a very restricted territory before and I think we're going to be seeing that happening in many more places as the U.K. is 85% vaccinated, again, compared to Romania's 30% vaccinated, but Romania is going to be 75% vaccinated by February.
So in very, very quickly, the issue is not the availability of vaccines, the issue has been a people's willingness to get vaccinated. But I think that's all changing, the attitude is changing, given the recent events.
So I think that backdrop is very critical to the resumption of travel. And we are seeing that backdrop improving significantly creating the framework for air travel.
And there is no other airline in better position than Wizz Air to take advantage of that demand in the marketplace. We are the lowest cost operator.
We're going to be improving our competitive advantages. We are liquid, and on that basis, we should be able to do well, significantly better than the rest of the industry.
So if your question is whether I think the industry is going to be back to normal in fiscal '23, my answer is definitely no. The industry is not going to be back to normal in 2023.
If your question is that, is Wizz going to be back to pretty much normal? Or we will be approaching the [indiscernible] fiscal '23?
My answer is yes. Simply because we are in a better position than the rest of the industry.
Andrew Lobbenberg
Hi. It's Andrew Lobbenberg from HSBC.
I think in the presentation remarks, you spoke of some of the new markets starting to show signs of maturity. So, yes, could you give us a bit of color on which of the markets are behaving?
And then can I ask about ATC costs among the inflationary pressures. You didn't put that up the flagpole whereas most people have done?
So to what extent is that a concern? And then at home in Budapest, I think there's an ongoing battle to try and nationalize the airport.
Does that come with threat for you or opportunities?
József Váradi
Okay. Thank you, Andrew.
With regard to ATC, yes, I think ATC is a concern. We're seeing monopoly charges really increase increasing ATC.
We shall see to what extent this is going to affect the business. And in theory, we are seeing headwinds as far as share gains in the business going into fiscal '23.
One of the headwinds actually is Wizz. Whole monopoly airports, monopoly service providers really impose costs on the industry.
But again, at the same time, they're going to be gaining significantly on the aircraft, younger aircraft or Geisha aircraft. They're going to be gaining on crew productivity, I mean, just think about it like operating a Honda and ATC [indiscernible] 2 pilots and then operating a 239 seater aircraft with the same 2 pilots, that's going to give us a lot of productivity gain and of course gain.
With that because I think it's going to be a mixed bag. So we see some issues, fuel monopolies, some labor inflation, but at the same time, we also going to have an honorable setting [indiscernible] like gauge, like age of the aircraft and technology improvement and productivity improvement coming out of it.
I think it's kind of hard to predict the exact balance between the two lines, but it's asking it's going to be a balanced matter. With regard to Budapest Airport, personally would not expect any major change no matter who owns the airport.
I mean, airport ownership is one issue. Airport operation is another.
Budapest Airport has been a bad operated airport from our standpoint. And we are seeing actually some positive changes here [indiscernible] when the airport gets nationalized.
So Albania might be a good example. Albania used to be owned by a foreign [indiscernible] than it was renationalized and the [indiscernible] airport became far more commercial.
And actually, that gave us a significant entry to the market. So if there is any change, quite likely, it's going to be positive with that regard.
But it's kind of hard to predict the airport, it's [indiscernible] nationalized and it has not been communicated anyways, how commercially the position of the airport would change, if that would change at all. With regard to our metro markets, maybe just a few example.
Clearly, we started seeing some early VNC [ph] in Italy, in summer, some of the early Italian investments we have made deliberate profit. Albania, quite quickly matured.
And also the U.K during the summer, did very well. So when the markets were restricted, we did very well.
But obviously we kind of fell off the cliff got closed off by the government. But again, we are seeing a reopening.
And again, the real issue from our standpoint is less the market demand or people's intention to travel or people's intention take upon Wizz, this is much more the volatility around restrictions. But we're seeing that those volatile measures should be largely phased out with the improving vaccination rates going into next financial year.
Neil Glynn
Thank you. Neil Glynn from Credit Suisse.
If I could also grab three, please. The first one back to the fuel hedging topic.
I guess one of the most important aspects here is how it impacts competitive dynamics in the market. And Ryanair, obviously isn't your only competitor, but you have an awareness or a decent understanding of how your CEE competitors to fly carriers in that market are hedged or not at the moment, because I would expect the airing on pricing for next year.
Then the second and the third question both kind of slightly Indigo related. Back to the potential next aircraft order, it's not likely to come via Indigo or come via Wizz Air or is that something that's possible to help us understand at this point?
And then a third question, it might feel a bit random, but your -- I guess sister company JetSmart has recently had an investment from American Airlines, which I assume will eventually have some kind of an open partnership. Is that kind of venture in any way on Wizz Air's agenda or does that just simply not make sense because of the potential complexity if you were to do anything with any other long haul oriented carrier for example?
Jourik Hooghe
Maybe I take the first one. So generally what you see is that the bigger well funded players are to some extent hedged, but the smaller airlines are typically not hedged.
I mean, it's not only in Wizz, particularly in the way that some other Scandinavian Airlines, etcetera. So, yes, clearly this will also help us in our region, of course, given that most of the competitive backdrop there hasn't really hedged.
And [indiscernible] on equal level playing field, because we are hedged to the technology and better consumption, efficiency than they are.
József Váradi
For being legally correct, that is no such thing as an Indigo aircraft order. There has never been.
Aircraft orders have been placed by airlines. Wizz signed agreement with Airbus and whichever aircraft order is going to be placed in the future is going to be a Wizz aircraft order with [indiscernible] We used the Indigo framework as a negotiating platform, but legally speaking, each of the airlines make commitments on the aircraft order to Airbus.
So I think it's been a good formula, and we quite likely will apply the formula going. It is extended beyond aircraft orders, and they are doing it on many other fields, buying parts, services, products in various fields.
With regard to JetSmart, actually I'm on the Board of JetSmart, so I'm kind of close to the fire [ph] with regards to the American Airlines investment. I think it shall be seen as a unique proposition for JetSmart in South America by American, and not as a pattern that may become applicable for Wizz Air, since we are on a very different path.
We are in a very different stage of development of our business. And we are just operating on very different markets with that regard, and we don't look at it as a model to be reapplied.
Alex Irving
Hi. Thanks.
Alex Irving from Bernstein. Three from me please, all on labor.
So first of all, on what have you been talking about Wizz Air having to cancel number of flights in the last quarter, just not having enough crew to pilot those. Can you please speak to the truth of this, how large of a problem is it and kind of what's the real story on there?
Secondly, as we ramp up into kind of Spring 2022 and you're talking about full utilization, it looks like your FTE numbers index at 2020 are below where they are -- all below to the fleet ramp up despite the fact that one larger aircraft to carry more cabin crew per flight. What gives you the confidence again ramp up the [indiscernible] the rostering issues that may be dogged some of your [indiscernible] SPOs they've ramped up in recent months.
And then finally on just labor cost pressures. What are you seeing with regards to pilots and cabin crew in the market at the moment, please?
Thank you.
József Váradi
All right. So maybe I take these questions.
With regard to flight cancellations, turbulences etcetera, we had a few days actually then became under pressure and it was the result of market opening on the one hand, which attracted us to deploy more capacity against those and utilizing market opportunities. But at the same time, we underestimated the rusty nature of the industry with regard to the supply chain and suffer significantly vehicle operating performance, especially on time performance, distressing the rostering of the crew and kind of resulting in issues on crew headcount.
We quickly -- I think we quickly resolve those issues first by taking a few [indiscernible] backup from the market. But we phase those [indiscernible] out after a few weeks of operation.
So now we are fully in control of our own destiny for a long time. We haven't cancelled any flights for any crew purposes or crucial issue.
So we think that we are controlling the operational performance of the airline, but indeed we had a few weeks of turbulences. So -- but I think you need to relate it to almost to like one of events of sudden demand rise and kind of sudden breakdown of the supply chain, but the supply chain has been improving.
I think we are better planning on the issues and we are not seeing that -- those issues recurring, coming back in the business. So I think events have passed with that regard.
Our competitors like talking about this, but we are definitely in a much better shape than some of the U.S peers like Southwest or American Airlines, who will be constantly struggling with the resources, getting crews, getting the rosters going through. With regard to ramping up and ensuring roster stability, investing a lot for that we think roster stability is one of the key issues in the industry, not only in terms of operability of the airline, but also in terms of engagement with our staff, with our employees.
That's where things can go wrong. And we are much focused on that.
And we understand that it requires a constant effort and with regard to that issue also some investment creating more standbys, more reserves, more buffers in the system. And this is how we are ramping our operations up.
I think we are taking full note of the challenge and the issues we have been learning from and what we might be expecting going forward and we are trying to address those upfront. I'm fairly confident that based on the plans what we have in place, we should not be distressing ourselves.
But it's a work having been done and it's a work still to be done with that regard, but we are fully aware of what we need to do there. In terms of inflation [indiscernible], yes, it's happening.
Interestingly, we are seeing more challenges due to cabin crew [indiscernible] than pilot. This is the result of cabin crew being lower paid than pilots, but also having more alternatives, carrier alternatives than pilots.
So we are seeing a lot more retention issues, and a lot more issues with regard to being able to attract a large number of interest from the market. Some of it is going to be shunned once the industry is back in its feet.
We're going to be seeing that kind of attractiveness to be reinstated. Despite all these issues, we hired around 800 cabin crew just over the last few weeks, few months.
So I'm confident that we're going to be able to deal with this challenge, but we are seeing a lot more inflationary pressure on cabin crew. With regard to pilots, as in this is still a volatile market, we have been very clear with our pilots [indiscernible].
We try to protect their jobs during the bad times. Based on that they've been very supportive to the company going through the crisis.
And I think they are also very supportive today, when it comes to ramping up operations. So we have a good engagement with the pilot force.
And we don't necessarily see a huge inflationary pressure coming from there. It's a bigger issue with the cabin crew.
Alex Irving
Can I just follow-up on the pilot [indiscernible] protection job to the crisis?
József Váradi
Its developed on the pilot point. So it's about protecting the job, obviously the crisis.
Can you give us a sense how many pilots you had pre-crisis, how many was at the trough and how many have now today, please.
József Váradi
Yes. So basically we implemented an early layoff in around April time, April 2020.
When we laid off 20% of the pilot force, 20% of the cabin crew, 20% of the office. So it was fair and equitable with that regard.
So we ran ourselves into around 4,000 employees in the company at that time. With regard to the pilot force specifically, that affected roughly speaking 300 pilots.
We have reinstated over 70% of them, that was a temporary layoff and we went back to those people and 70% are now back. And beyond the reinstatement, we started hiring new pilots as well and we are putting training programs etcetera.
So I think we have totally reinstated our engagement with the pilot force and even we have gone beyond that.
Conor Dwyer
Hi, guys. Conor Dwyer here from Berenberg.
Just a quick follow-up on the last question about inflationary pressures on wages, and talking about going into markets like if they do think there's any risk that we might see more unionization as a result of perhaps going into more Western markets, so a bit more medium term?
József Váradi
Our engagement models remains intact. We have developed a model which we think is a better alternative for the work force than unions.
We had a high growth business. Even we are going to have high growth businesses going forward in the next few years offering significant career opportunities for people.
If people have alternatives and can sort of own their own destiny in terms of managing their carriers and managing their well-being on the basis, I think they would be voting for that option. Unionization is more of a threat in businesses which don't prosper.
They don't develop, they don't grow and then people are looking for ways of protecting themselves in that environment. But Wizz has been a high growth business.
We remain a high growth business in the foreseeable future. So we don't think that it should be posing significant challenges to the engagement model, but we have our people.
Indeed, unionization may be a bigger scheme in some of the countries we are entering. But at the same time, I also think that we are capable of implementing our model, which is based on dialogue with people understanding their issues, being proactive on their issues or the opportunities what they see.
And most importantly, being able to offer carrier opportunities and with that significant pay opportunities to people. All right.
So I think that concludes the Q&A on the floor. So -- oh, sorry, one more here.
Harleen Teja
Harleen Teja from Citi. Just two really quick ones for me, please.
Of the bookings where -- are they currently in relation to pre-COVID levels? Should we be thinking about how should we be thinking about overall loads and pricing for the third quarter?
And then secondly, guidance for Q3, you've guided to an operating loss of €200 million. Last year that was €142 million.
So what are the moving parts of that? Is it a factor of lower pricing or higher costs, please?
Jourik Hooghe
Yes. So if you look at bookings versus pre-COVID [indiscernible] like 90% of revenue in the span of 3 months.
There's a bit of a difference here with Christmas, but typically, we have around 90% of revenue in the full month. So that that's still the booking window, it's still very short.
The Christmas period it maybe 25% of books at this point in time, which is maybe a little bit of an aberration versus what we've seen over the last couple of weeks, but it's a very short booking window as we speak. If you look at Q3, loads and pricing, well if you look at the past quarter pricing, as mentioned, the RASK was down 25% lowest as you've seen around 80% load factor for the quarter.
Probably that will be more or less similar for the next quarter, we'll continue to see very strong price stimulation to basically attract the passenger into our service. And loads, it's obviously a different season than the summer season, maybe some 75% and 80% [indiscernible] what happens.
If you look at the drivers of the Q3 loss, there's basically three drivers, three big drivers. The single largest driver is really the overall trading environment.
Because we need to price stimulate the demand, that's actually leading to the lower RASK. And if you would do the math on that, that's the single biggest driver of the €200 million.
The two other drivers are, as mentioned are the commodities that we're seeing, and the, say the suboptimal productivity that we have on our assets with fleet assets or crew assets that lead to the higher ex-fuel CASK on those two specific lines as we've seen for the half year results. So those are really the three drivers.
We think those drivers will still be around for Q4, but the quantum of those drivers may be different. But at this point in time, it's kind of hard to call.
But it's most important to say that those drivers are temporary. They will be kind of subsiding by spring next year.
I mean, obviously we don't know when commodities, what will remain, but obviously in a post winter environment and an environment where supply chains will have been able to recover to some extent, one could say that, that should also be a better environment. And we have, as József mentioned, really, really worked and invested during that period to have a structural cost advantage and that will fully come to fruition as of next spring.
József Váradi
This concludes the Q&A on the ground. So now we are taking questions from people online.
Operator
Thank you. [Operator Instructions] Our first question is from Mark Simpson of Goodbody.
Please go ahead. Your line is open.
Mark Simpson
Yes, thanks. Morning, József and Jourik.
Couple of questions. One, just peak summer '22, and that you are referencing load factors there, Ryanair talking about being into the kind of 93%, 94%.
I think that’s an opportunity to drive pricing. In terms of your view into next summer, are you targeting similar levels and equally, I mean, one of the impressive announcements this morning was the hire of [indiscernible] with an incredible CV in the AI world.
Can you take that and talk about the dynamic pricing approach that can be applied once you get those factors back up to historical highs. And then just on the cash front, I mean, clearly, we've seen significant movements in the FX -- on the FX front, reflecting U.S dollar volatility on leases.
It seems to be now more euro than U.S dollar, but is there an argument for actually having a natural hedge and moving cash balances back into 2 years dollar deposits.
József Váradi
So, thank you, Mark. So regard to the summer trading environment, indeed, it shall be a lot better trading environment than what we have seen over the last two summers.
And as said before, we should be able to restore our historical operating efficiency metrics, including load factors. So indeed, we would be looking at sort of dose historic numbers to be achieved available 90%.
And once you are full, then it gives you a different pricing power and as [indiscernible] alluded to, we have significant portions of our network where we operate ourselves. So our price is much greater than some of the competing markets.
But even when you look at our ability to pricing competing markets, as said, we're going to have a lot lower operating unit costs relative to our competitors going into summer. So our pricing ability will significantly improve relative to competitors.
And as also said that given the some of the inflationary pressure we are seeing in industry and some of the input costs, so the feedings through into the fare environment, we should be seeing a lot of cost pressure pushing allies to price up along that pressure giving us an opportunity to compete effectively and improve margins at the same time. So, yes, I think summer should be a very strong period for Wizz.
Anna is a great addition to the Board. I should have commented on her.
She brings in a lot of entrepreneur spirit to the Board. That's what we need and that's one of the Board dynamics we are much focused on to make sure that we remain entrepreneur business as opposed to getting followed by the corporate bureaucracy of the FTSE system.
And I think she will do very well with that regard. She is very well educated, and she comes from Italy and Italy important market for us.
I'm pretty sure that she is going to be able to bring in significant insights. And with that, I will just turn it over to Jourik.
Jourik Hooghe
Thanks, József. On the cash side, Mark, you're right.
I mean, any excess euro or other currency that we have is immediately converted into a dollar balance already since a large number of months. So, this is how we operate and will continue to operate under if the market conditions remain as they are today.
Mark Simpson
Okay. Just getting back on dynamic pricing of the application of AI, I mean I would just say the new appointment very much helps to drive that forward.
Can you just give us a feel for where you secure as a business in rolling out new algos on that to help you?
József Váradi
We are going highly sophisticated on this matter. If you really look at how we have been operating, I made the best example to use this when we started this business back in 2004, I had six people working on pricing and revenue management.
Today we are million times bigger as a business and I have six people on pricing and revenue management working on this business. So it just gives you the sense of automation and technology being used for pricing.
And we are taking it above versus where we used to be by applying artificial intelligence and data science. And we are looking at dynamic pricing in a much broader scale.
We used to be focused on ticket pricing, base pricing, but now we are expanding that approach across our ancillary revenue streams increasingly. So we are a lot more dynamic than ever before and we will become even more dynamic going forward.
And we are applying machine learnings as a methodology we have an [indiscernible] team working on all these aspects and we are seeing significant improvements basically initiative by initiative implying and kind of further refining our dynamic pricing approach to various revenue streams, including tickets as well as non-ticket items.
Mark Simpson
[Indiscernible] greater impact of that FY '23, '24 will return to stability in the market.
József Váradi
Yes.
Mark Simpson
Yes. Excellent.
Thanks. Thanks for your time.
Operator
Thank you. Our Final question is from Ross Harvey of Davy.
Please go ahead. Your line is open.
Ross Harvey
Thanks, and good morning. I just want to revert to the fuel hedging question.
I'm just wondering, can you run us through again, just the general rationale for that zero Hedge policy in a post-COVID world. And I'm just wondering without a kind of a suggestion from management or from the Board or from your shareholders, and just your commitment to that in the medium term with the continued commodity price escalation?
And second question is in terms of summer 2022 and fiscal '23, as a whole, obviously, József, you've spoken about the exceptional opportunity there strong language. And clearly, Wrath is too hard to call.
What would exceptional look like on ex-fuel CASK line would have been getting back to pre-COVID levels? Or do you think you can go below that in fiscal '23?
Thank you.
Jourik Hooghe
So on fuel hedging if you look through the cycle, and if you look historically. So first, starting historically, fuel hedging is not a profit center, it's quite the opposite with an increasing volatile world.
The company has actually lost a lot of money on fuel hedging. We didn't want to repeat [indiscernible].
So we obviously critically looked at a few hedging. The fact is that, as I said, it's not a profit center looking forward, it is paying fees to people that are more expert in fuel hedging than the company itself.
And we have a strong balance sheet that would allow us to get through, let's say, the short-term disadvantages that you may have, if you're in inflationary cycle. And obviously, you get [indiscernible] cycle.
So we'll need to see this through. I think it will be interesting to see what the industry will do.
As let's say prices are at the level of today, will they continue to layer on the hedges for the future? Or will they stop hedging?
Because if you look at it, in theory, hedging only makes sense if you hedge at the bottom quartile of the historic pricing, and hold them for a long enough time, and not if the prices are high. So I think the jury is out.
We'll see how the actors are going to behave in the future. This is market, if Europe is going to become like the U.S., or Europe will remain Europe because of other dynamics in the industry.
On the -- how exceptional could look like on F23? I mean, look, we've always said that we wanted to keep costs flat, if you look over the longer term, in the past 10 years, our ex-fuel costs has been flat against I would say a lot and against other dynamics you have seen in the industry.
I mean, even Reiner has seen significant inflation on cost of pre-COVID in the 2 to 3 years of their cost. So there's a lot of headwinds coming as we know on ex-fuel cost.
But we have invested in the right infrastructure in the light-asset base to counter some of these headwinds, how these things will weigh one to the other. I mean, one day, I would say we could be better one day I would say we could be flat.
We'll need to see how it all goes down. There's a lot of volatility drivers, but for as exceptional, we'll definitely be targeting to get better than that.
József Váradi
Okay, thank you. I think this concludes the event.
Thank you very much. Maybe just a few words to summarize it.
I hope you see our efforts as investments going into post-COVID markets into post-COVID position of design and we think that should be much longer than what it is today. Certainly, it was prior to COVID-19.
COVID-19 is giving us an opportunity to step change our presence to become a more formidable competing force. We are investing into aircraft, going from $119 million to $170 aircraft by summer next year.
We are investing into markets from 26 operating basis in March 2020 to 44 for next summer. And we are investing into people.
5,000 people prior to COVID 6,700 in summer. And those investments will make us a better business, a lower cost operator and more formidable competing force to take advantage of the recovery of the industry.
And with that, thank you for your interest and thank you for coming. Thank you.
This now concludes our conference call. Thank you all for attending.
You may now disconnect your lines.