Jan 27, 2022
József Váradi
Thank you. Good morning, everyone.
Thank you for coming to this meeting and I also on those who are online and virtually spectating the event. So this is reporting our Fiscal year 2022, our Q3 performance.
Let me just start with a few highlights upfront. This quarter demonstrated that we have been on track to recover the business.
If you look at capacity best inter numbers and revenue, we delivered around three times more of these than in previous year. And in certain peak periods we exceeded, too, the 19 capacity levels.
So we had clearly on the path of recovery and we'll continue to recover the business going forward. We are reporting €240 million of operating loss.
Obviously, this is greatly affected by the COVID challenges, the pandemic hits us, and the corresponding restrictions imposed by governments on travel and putting significant burden on consumers, especially when it comes to testing requirements. We ended the quarter, with very strong [Indiscernible] level having had €1.4 billion of cash on hand.
And since then we issued a new bond with 1% interest. We saw very strong market demand for the bond issuance, I think that's just underpinning the confidence of the market in Wizz Air and in the prospect of the business of the company.
We have maintained investment grade credit during the period. Those ratings are confirmed by both Fitch and Moody’s.
Despite a still difficult trading environment in the current quarter, and I think to be -- we've been trying to be clear with you on that throughout the whole COVID period. Certainly guiding for the second half of the current financial year that, we would not be expecting a great second half.
Because of a fuel thing. [Indiscernible] we are ramping up capacity for summer 2022.
So we inherently carry some inefficiencies in the -- in the operating model. We have more aircraft, we have more cruise down, but we are deploying right now.
But this is just the nature of the ramp up. You cannot ramp up an airline overnight.
Adding 50 aircraft and thousands of the cruise. Those assets and people have to be brought in, inducted, trained up, ready to fly, so that is a -- that is the process.
So that is a short term in having dent inefficiency in the system. Secondly, obviously, Omicron has dented our ability to operate, not necessarily just because of the pandemic effect on people from a harsh perspective, but more from the perspective of corresponding government restrictions.
But, what once we are ramping up operations, so obviously, you're going to be getting rid of the inefficiencies and we're going to be resuming our EBITDA due to property operate and property cost. The business and also the yard, are quite optimistic that some of that effect, a few months down the line, the whole COVID might have just been behind us, and we see a lot better market going into spring, summer 2022.
We are ready to deliver that ramp up we have invested into our network, our fleet, our people, our systems and processes. If you just look at the employment side of the company, today we are employing 5,550 employees, this is 40% more than a year ago.
So we have been clearly investing into this ramp up process. Looking at the network, we have been growing and further diversifying our network.
We have been adding aircraft to the fleet, so we have taken deliveries from airports on a continuous basis. We have been adding airports, and we've opened new bases during the period, and now we are serving more countries than before.
So clearly, as said, we have been investing into network, into markets, investing into aircraft, and investing into people to make sure that Wizz Air emerges, as a structure, a winner coming out of the COVID situation. And I think we are having some sights on that vision.
Looking at the ramp-up, as you can see, we have been ramping up capacity under certain points during the past year. Actually, we exceeded 2019 capacity levels.
Certainly, that was the case in operating slow to somewhere big, and also operating through the Christmas high season. And also with that, we have been able to ramp up our load factors.
Now, obviously the numbers are yet sub-optimal. We are not yet on 2019 and previous lower factor levers, 90% plus low factor levers, but significantly higher than where we were a year-ago.
And in terms of capacity, despite the fact that we have been growing the fleet and we have not been able to fully affect that growth into operation efficiency, but through market diversification, we have been able to ramp up our operations a lot better in the recent period than before. All those activities have been translating into strengths in the marketplace where we are focused.
You can see that in most of our markets actually we have been gaining market share. And we have been taking advantage of competitive weaknesses and market dynamics in the marketplace.
So actually we have been trying to use the period and the crisis for the benefits of the business. And I really think that once we are out of the woods and hopefully, we're going to be there in the next few months.
Wizz Air is going to be a lot better competitor, a much more formidable business is making a lot bigger impact on the -- on the industry than before. I mean clearly, our efforts view for all through, in terms of innovation in aircraft, up-gauging, act of delivering, not only operation efficiency about significantly more favorable economics and lower cost, relative to the market, relative to our competitors.
If you look at our business from the perspective of consumers, you can see that customer experience has been improving during the period have been further digitalized our introductions with customers beat EU digital COVID certificate or Amelia, our virtual assistant. We have been a lot more appealing to customers.
Very importantly, increasingly, the market is associating WIZZ with lowest price and good value for money. And as you might have seen recently, we have been putting out quite significant statements on sustainability because not only that we are able to bring the lowest fares to the market, but we're also seeing us able to bring a much greener operating model to the market.
So if you feel for the environment, certainly you should see Wizz delivering a better product of services than most of our competitors. And with that, let me just turn it over to Jourik.
Jourik Hooghe
Thank you, Joe. And good morning to all for my side.
Just few highlights on the financials for the quarter, starting with revenue. As Joe mentioned, revenue increased a 172% over obviously a quarter that was affected by COVID last year.
That was on the back of a very strong increase in ASKs, a 195% actually. ASKs for the quarter were almost in line with 2019, just 7% shy, despite let's say the Delta variant in the beginning of the quarter and the resurgence of the variant Omicron at the end of the quarter.
From a profit point of view, our operating loss point-of-view, as expected, we guided the Omicron at the $200 million loss and we're able to mitigate or manage the Omicron impact to $14 million since then. So we're obviously going to see something similar still happening for next quarter.
But if you look from a net loss point of view, there is a $30 million additional impact, which is predominantly driven behind the unrealized FX losses that we have because of the long dollar position on the balance sheet. Again, this is just an unrealized loss from the balance sheet.
Actually, it translates into cash gain. So for the company point of view, the depreciation of the dollar from a cash point of view was positive.
And talking about cash, total cash ended at $1.4 billion, as József said, and we'll come back to that in the next slide. Looking at the cost structure, I think there's two things here that you can see.
On the one hand, you'll see that the variable costs are in line, or slightly better even, than pre-COVID. But there's a certain element of cost that have a fixed cost component, for example, maintenance, crew, depreciation, and obviously because we do not fully utilize the fleet or our assets, we're still around 25% utilization gain that we can achieve.
Those costs are still higher, but we're very confident that as we go back to full utilization during spring and certainly as of summer next year that the cost structure, referred to the pre - Covid cost structure. Ex-fuel costs.
You can see it here, fuel costs were 1.24 Euro cents, which includes 75% about as the cost of the commodity. And then there's 10 points of ETF cost around 10 points of into-plane premium.
So clearly the commodity impact, you can see it here, but there's also some other things in that number. From a liquidity point of view, just to clarify, the €1.4 billion excludes the financing that we have mentioned, the €500 million bond that -- with a 1% coupon.
That will come in into January. It also excludes the repayment of CCFF.
That will be repaid on February the 2nd. So you'll see those effects coming through in the next quarter update.
We maintain our investment-grade credit rating, and you can see here as well, and we'll explain that also on the next slide, on slide 10, that the cash contribution of the operation has been minimal. So we have a variable contribution of the operation that is relatively limited obviously, to winter environment which is generally already difficult.
But then seasonally, obviously, with Omicron added on top, has impacted the contribution there. So what you're seeing here is basically the fixed cost coming through in the cash burn.
We also have €50 million worth of pre -delivery payments. And you can see that working capital, and as mentioned, FX was a slight positive on the cash for the quarter.
On ancillary performance, ancillary is now 60% of total revenue. That's obviously a high number, a good number, it's also reflective of some of the weakness in ticket revenue.
The weakness of ticket revenue is us basically continuing to stimulate the demand environment to a level where obviously it makes sense for us to lever where it's cash positive. But with that, we're attracting price sensitive new trial lists.
And those new trial lists generally consume less ancillary services. So this is why the ancillary has been a little bit lower than our guidance over our one-year target.
This is just linked to the current fact that we're really price-stimulating demand. And as prices will revert to normal, also the ancillary performance will normalize through that one-year target.
So we're very confident in the ancillary performance going forward. And with that, I hand it back to Jo.
József Váradi
Thanks, Jourik. I mean, obviously we are much focused on ramping up the business for the coming financial year, Fiscal '23.
This is all achieved on the basis of operating the best fleet in the industry. I will talk a bit more about that later.
We are ramping up a strong, more diversified, cost efficient network. But we have invested into slow all the COVID period.
Accruing is on track to deliver 50% more capacity in summer '22 versus '19 today. We have 5,550 people towards summer, we are bearing that organizational capacity to around 7,000, in excess of 7,000 people.
And with the innovation, we implement with the fleet a renewal program. We are just continuing to ride in our sustainability leadership position in the industry as well, which we think is going to be a big deal.
I mean, sustainability is going to be loom over the industry for sure, and we can position ourselves on that as again, be known in the industry and a [Indiscernible] leader in the industry. Looking at the fleet development, we have been very intact, in terms of our commitment to the fleet program.
I mean, we have been reshuffling deliveries back-and-forth. In certain periods, we took a few aircraft down, but in other periods, we actually added back up.
But all in all, the fleet program has survived the COVID period. And actually we use this time to invest and continue to innovate our fleet's structure and operating model.
We are becoming increasingly an AC21 operator, the current seat count -- every seat count is 211, by summer, we're going to be 250. So Wizz Air is the number one operator in the world, with the largest seat count of any local schedules and any narrow-body operators.
Obviously that translates into operational efficiency and economic efficiency. And of course, we are adding the Neo variant to the fleet.
With that technological advancement, we are building further economic efficiency for the business. And we're seeing that the A321neo is a game changer aircraft.
There is no any other aircraft, be it Airbus or Boeing that can compete with that aircraft when it comes to our economy efficiency and the airline's ability to deliver the lowest cost in the industry. If you look at our network expansion, I mean we have been ramping up to a 50% bigger capacity to be operated in summer '22.
And just to give you some of the highlights of that expansion, our core market, Central, East Europe, is growing, so we are adding capacity in the world business, and they are operating a larger fleet of aircraft going into summer and see than prior to our COVID times. Italy is a pure growth market, beyond toward Italy during the COVID period and ever since we have just been ramping that up and growing capacity.
Visitation, but also we are opening basis in Eritrea and the U.K. like, Doncaster and Cardiff.
Ukraine, despite all the political concerns in the country, has been performing us a very strong market, and we have been following that through with additional investment into the network and deployment of aircraft in the marketplace. Albania is a new market for Wizz.
Pretty much overnight, we became the market leader in the country. And in case of Abu Dhabi, now, Abu Dhabi is ramping up very strongly.
The are seeing very strong markets reaction as the government restrictions got lifted. And we are seeing a much better operating environment.
So talking about the UK, being here, you can see that our network has been substantially growing as a result of opening Doncaster, boosting our presence in Gatwick and Cardiff could be opened in the coming period. We are deploying more aircraft.
We are further diversifying our network, bringing new markets connected to the UK on that basis. We are seeing very strong reaction on the demand side to the easing restrictions by the government.
I mean, that is a very clear correlation between the levels of restrictions imposed on travel versus market demand. And now we are seeing the positive side of the development and we are very pleased with that.
And we're seeing that the UK, in essence is in front of the continental European countries. What we are seeing today in the UK, this is probably what we're going to be seeing in Continental Europe in the next four to six weeks.
And what we are seeing here is that falling restrictions by government and corresponding robust demand coming up as a result. Looking at Abu Dhabi, we have been making some very exciting announcements.
You see that our network is ramping up in Abu Dhabi as well. And we are very upbeat with regard to growing the business even further.
So are looking at doubling down on fleet this year. So we are increasing the fleet size from four to eight aircrafts by October 2022.
When we are talking about ramping up with the employment basis is critical, I mean, these are people you have to recruit, you have to induct, you have to train, you need to make sure that they are up and running and ready to fly. As said, versus last spring, we have added 40% more employees and we look at adding another 1,500 employees in the next six months.
And this is very significant, that's a big program. But we're seeing that this is creating the basis for Eritrea taking advantage of the COVID situation to be able to operate a much bigger airline with much greater impact on the markets, post COVID.
Talking about sustainability, asset sustainability, we think is a big deal. And we have to position ourselves for the sustainability agenda.
The good news is that, already today, Wizz Air is the most sustainable airline. The rating agencies have made a statement.
They ranked airlines in the world, and Wizz Air came out as the most sustainable airline in Europe, number three in the world. So we have a good starting point, but we remain committed to improve our sustainability impact to reduce our carbon footprint in the industry, and we'll achieve it by continuous innovation of the fleet, and also through the operating model, operating the fleet very efficiently.
If Europe was to adopt the Wizz Air business model, flying the same point-to-point model with the same aircraft, already emission would be down by 34%. So this is kind of giving you the competitive advantage, the magnitude of competitive advantage we have over the industry when it comes to sustainability.
With regard to outlook, as suggested before, Q4 remains a difficult period, greatly impacted by Omicron. Obviously, [Indiscernible] is largely behind us by now, but we're seeing there is still a significant impact on February, especially from a continental European prospective.
So the Q4 operating loss will be in the same ballpark as you see a slightly deeper, but in the same ballpark. But, we are a lot more upbeat and optimistic when it comes to the next period, fiscal '23.
I think, we're going to be seeing a very strong ramp up, not only capacity-wise, but also financial performance-wise. In Q1 and Q2 for sure, when we are getting the fleet back up to full utilization.
We have of course disadvantage at the moment by not being able to fully utilize the fleet and crews. So we don't get the full utility and productivity out of the system.
But in Q1, Q2, we're going to get there and we're going to be resuming the operating metrics similar to pre-COVID levels. As said, we are growing the crew, in accordance with the Fleet Department and the market's initiatives.
But we have been taking and they are totally on track and we feel very comfortable that we're going to be able to deliver on that. I mean, you also need to put that in context.
A lot of Airlines are crying at how difficult it is to retain people, to recruit people, to train people. I think WIZZ has come across as a superior proposition to the market, given our growth and carrier opportunities fueled by that growth.
So we remained still a very good protected place for people to join. We are very keen on reinstating the USCC principles, the USCC cost structure, and we'll get there fairly shortly as we are running the businesses for utility.
And I would also add that, given the fleet program, the new technology and the savings coming through the technology, the neo technology, as well as the up-gauging, they give us a competitive -- a significant competitive advantage versus the market, versus other airlines, that we continue to rely on operating an aging fleet of aircraft with no obligation. So we're seeing that we will see a lot more structural competitive advantages coming through in favor of Wizz Air relative to industry post - COVID than what we are seeing today.
We expect the commodity markets to be volatile going forward. But we also know based on empirical evidence that rising input costs feed through into the fare environment over time, over the leg of 6 to 12 months, and this is what we are expecting as well.
So in summary, Omicron has been a factor, a negative factor to our short-term performance. But we are actually very optimistic when we look at where the world is right now.
I say the world is in a lot better place today than what we have ever been since the breakout of COVID. It seems that there is an end to it.
And hopefully in a few months from now, this is all going to be behind us. We are actually quite optimistic looking at the prospects of our business in spring and summer ahead of us.
We have maintained strong liquidity during the period and we have been maintaining investment grade balance sheet in this period. As far, it's being a priority, we have been running this business for cash.
And I think we've been able to deliver a good job with that regard. We are coming out of the COVID situation as a structure of, you know, and it is not only just surviving the COVID times, but also we have been investing throughout the COVID times, investing into our fleet, investing into our network, investing into our people, and our cost structures.
Our ramp up percent is on track to deliver 50% higher capacity level going into summer '22 versus summer of '19. Consumers recognize the value of what service brings to the party, be it economic value, seeing us as the lowest cost producer, and the lowest fare provider for the market, as well as the credentials coming out of the operation from a sustainability perspective.
We're seeing that competitive gap in our favor, we will continue to widen going forward as we are becoming a more mature operator. But in stating out, [Indiscernible] principles and our fleet utility and productivity and crew, our productivity levers.
And that creates a basis for further opportunities in the future. Thank you.
So maybe I should give the floor to you over here for questions
Q - Unidentified Analyst
Hi. Good morning.
This is [Indiscernible], from Barclays. I think I'll ask three questions.
The first one is, you've mentioned in the slides and good kind of forward-looking comments on the U.K. Can you just give us an idea of where forward-looking are across the business more widely?
And also, just thinking about the summer, if you're going 30% to 50% over Q1 and Q2. What do you think your expectations are in terms of kind of load factor impact on the business?
Do you still think that you can deliver prepandemic low factors on that level of growth? My second question, around Gatwick.
There has been some feedback in the market that the Gatwick potentially won't be able to be at group level utilization, given the timings of the slots and so forth. So, can you maybe explain to us your thought process around how you're going to extract the best efficiency out of those Gatwick slots?
And then thirdly and finally, on fleet financing. Clearly, you've done the brunt in the last couple of weeks.
Good pricing there. So how are your thoughts changing around leasing versus cash purchases -- finance purchases of aircraft?
József Váradi
Looking at the coming period, once we are entering the next financial year, we're going to be seeing a lot better market with regards to operating conditions, and as a result, we are going to be able to restore most of the KPIs to pre -pandemic levels. But I think it's going to be a gradual process, so it may not happen overnight from one day to another.
We don't exactly know the looming effects of COVID’s sphere at that time. I mean, looking at life from a UK perspective, quite likely the UK is going a bit on the open market by that time, but we might see some lagging in other European territories.
But overall, we're seeing that once we are entering the next financial year at operating conditions, we'll be a lot better, or more pre -pandemic levels. As a result, we are going to be able to deliver KPIs like fleet utilization, crew productivity coming up to standards, to pre -pandemic levels.
Load factors, I think will be the subject of the market. We are load-factor active.
We are passive, so I think we're probably going to see more pressure on our year than our low factor short-term as we are ramping up the operation. I mean, we are already kind of bulking at 80% load factor levels.
Definite improvement versus where we were a year ago, so I think that's going to go further and if we continue to improve. But unit revenue may be under short-term pressure around the -- on the U.S.
side, depending on competitive capacity coming to the market. Personally, my expectation is that, you're probably going to see more capacity than needed short term.
Because all airlines here are going to be back in the market to reengage with the franchise. But over time, I think you will see some capacity consolidation are happening.
Some of it is going to be forced by the competitive market and some of it by increasing input costs. But it is a process.
I don't think this is going to happen overnight. In terms of financial performance, we are expecting a strong financial performance in the first half as we indicated before, we're seeing that fiscal '23 should be a good, profitable year for the Company, the extent of which, obviously, will depend on the operating market conditions.
With regard to Gatwick, indeed, as you say, we are looking at Gatwick as a home-based carrier, but we are also looking at Gatwick as capacity for inbound flying to get the full utility out of the stock portfolio of what we acquired. In essence, we are basing for additional aircraft in Gatwick.
We'll push the fleet from one aircraft to five aircraft s on that basis. And we have also launched a number of inbound routes to be operated by beside Hungary.
We're going to get 100% utility of the portfolio of what we acquired. I'm sorry.
What was the --
Jourik Hooghe
Financing [Indiscernible]
József Váradi
Of free financing.
Jourik Hooghe
So if you look at the -- we will have the next round of these still in these back RFP coming. The bonds are good because it gives us even better benchmark going forward also for the lessors.
So we will continue to see, to finance the fleet at best terms possible. Good to see how the markets expect.
These financing has been very good for getting a sharper benchmark out there. I'm sure where we've challenged right [Indiscernible]
Alex Irving
Hi. Alex Irving from Bernstein.
A three for me as well, please. First of all, on demand drivers.
So you've seen inflation up, energy costs up, cost of living rising. Can you maybe talk a little bit on the impact of that into demand in yield into summer?
And is it possible to price stimulate when the ticket is only one portion of a trip cost? Secondly, maybe following up on the question we just had, but as we look at summer, thinking about root maturity, so you're coming out of a period where you've got lots of new basis, lots of new routes, and we've had diminished activity in the last couple of years.
What impact will the immature routes have on kind of yields and loads into summer versus maybe a normal summer with a normal level of growth? And then finally, can I please ask a question on Ukraine?
I mean, clearly the situation there is very uncertain, but if you had to suspend operations, how big would the impact be? How quickly could you reallocate that capacity and anything else that we should bear in mind there, please?
Thanks.
József Váradi
We are pretty confident to know our ability to stimulate the marketplace under any circumstances. I mean, if you would really think about it, if there is pressure on the industry, I mean, being the lowest cost producer in commodities, those cost [Indiscernible], so we should be in a lot better position than our competitors.
If there is an upside in the marketplace, even though our cost base, it should be able to take this portion of shared of the tough side. Because of everything to stimulate the marketplace.
But I think either end, this would be meaning versus our competitors. Personally, I think you will see researching demand.
I think you will see a lot of promotion activities to stimulate traffic. Not already by the airline industry, but also by the hospitality industry.
Tourism agencies, etc. People will get bombarded by unreducible offers once the market opens up.
I know that many of the stakeholders in the hospitality and tourism industry are lined up to go with most circumstances to do. I'm very confident the demand will rebound very quickly, and probably more robustly than many of the people may think at this point in time, despite some of the other macro challenges like energy pricing, inflation, etc.
Maybe I will just take Ukraine. If you look at Ukraine, despite all the noise around the country, the market has remained totally intact from our perspective.
We're seeing [Indiscernible] customer markets and we continue investing in Ukraine. Either you are going to speculate what's going to happen in Ukraine.
But whatever happens in Ukraine, I think have the historical track record of moving capacity together with crews if needed. And by the way, Ukraine is a good demonstration of that because we have done it already, so Once geopolitics affected the [Indiscernible] already, we had to move aircraft and crews, and we were able to do that within days and weeks.
So at this point in time, as some of the effect, we are seeing a lot more demand for our services and products than capacity that we can make available. I mean, you can imagine that the industry is weak right now.
Many of the incumbent heavier are weak, not serving the market, and not committed to market as before. So all those airports are very keen on affecting your capacity and stimulate the market from that standpoint.
So we have become a very effective target. So we are very -- still active at the moment.
So if we have to pull our Ukraine in operation, I mean, in no time, we will be able to redeploy this capacity in other market. And the second question was?
Jourik Hooghe
They were of routes and profitability that we see. I mean, generally it's not a factor of how long you are in the market, it depends on the strength of your brand to competitive position as we outlined on the charts, right?
If the competitive landscape completely changes, for example, in markets like Ukraine, Albania, or in Italy, clearly it can get to much faster profitability than just to say, having to spend one, two, or three years in the market. But it's true that in some of our markets, for example, if you think about the Abu Dhabi operation, where we are more new to the market, it will take longer time than, for example, if you open a new route in Central Eastern Europe, where the brand is very, very strong.
That's how you should look at. And obviously, we strengthened a lot of core markets which gives us confidence to build back our profitability very far.
Jaime Rowbotham
Morning. Jaime Rowbotham from Deutsche Bank.
Three from me. Firstly, on the ancillaries, Jourik, you talked about these price sensitive new realists.
Won't quite a material proportion of your future new customers be precisely price sensitive new realists? Perhaps you could expand a bit on what you mean.
Secondly, slightly boring but book value of equity in the balance sheet at the half year, €800 million. Second half losses, probably €0.5 billion.
So that net book value of equities coming down to say €300 million, is that an issue? It's quite a low level.
And then third and finally, and certainly more interestingly, Slide 14 is obviously very helpful for sharing, is where you've tried to grow during the crisis. As we think about you now trying to grow the fleet, 2.5 times over the next six years, could you just provide us a reminder of how you see that growth?
How much of it you expect to be in Core CEE? How much of it in new markets, more in the UK, more in Italy, others and maybe how much in Abu Dhabi?
Anything? A bit of color, that would be great.
József Váradi
All right. Maybe I'll start with the first two.
On the ancillary, it is really more a consequence of the current structure of the market being impacted by Omicron, where we price-stimulate until it makes sense
Jourik Hooghe
Being cash neutral or slightly cash positive. Clearly, when restrictions lift, we know that price stimulation will be not needed to that extent, and clearly will be very different, and as such, the consumer base will follow.
It's really a capacity demand, dynamic and demand is very weak at this point in time because it can be very annoying if you get stuck in a quarantine in a foreign country. So the dynamics will completely change as the restrictions will lift, and we've seen that before.
On the book value of the equity, clearly if you look at it in the current year losses have obviously impacted that, as you rightly noted. But we're also confident on our ability to kind of go back to the pre-COVID profitability that has historically built up that book value of the equity.
So this is really where we're focused on and focus on next year to build our bank.
József Váradi
That we got seasonal update. [Indiscernible] assist us today.
We are an airline operating 150 aircraft s. And by the end of decade, we're going to be an airline operating 500 aircraft s.
An impression is shown at 500 aircraft operation would look like. The way we see it at this point in time, we are seeing half of it will be operated in Central and East Europe.
250 aircrafts. 100, to 125 aircraft s will be deployed in select markets, in Western Europe, like Italy or the United Kingdom, maybe more.
And the remaining [Indiscernible] 125 to 150 aircraft will be deployed, somewhere in these Abu Dhabi is one of the pillars of that, but likely more pillars will come in to play to deliver the growth.
Neil Glynn
Thanks. Neil Glynn from Credit Suisse.
I'll also ask three. The first one's just on the subject of inflation.
Can you give us a sense, the cabin crew maybe in particular, but also the pilots you're hiring today versus two years ago, how much more are you having to pay for those individuals? Second question on the subject of your growth.
If you think about Western Europe, UK, Italy, even Abu Dhabi actually to the east, you're clearly less well-known in those countries relative to the CEE market. Can you give us a feel for how much extra you're having to do in terms of marketing and the different approach to procuring passengers beyond, obviously, price if people go to the website you're using?
And then the third question on cash. The current $1.4 billion, it's about half the FY2020 revenue level.
As you grow, obviously, capacity growth will be higher this summer, but looking beyond into FY2023, FY2024, what's the optimal level of cash as a proportion of revenue? Or how will cash be managed beyond the pandemic?
Thank you.
József Váradi
All right. Thank you.
I started first two, so with regard to the inflation -- yesterday's inflation refresher on the business, and [Indiscernible] most on aviary patient, but not only the aviary patient, we see some of the infrastructure cost rising, especially monopoly post [Indiscernible] controls [Indiscernible] on the airport, so the average boost to the [Indiscernible] with regard to labor inflation, on the cabin crew side, we are seeing something between 5% to 10% in local currency. I mean, a lot of it is actually captured through the euro cessation via admission to be in euros, but this is not full exposure on the company.
But that is related to inflation. Next on pilots, to be honest, but more on the coming through.
But if you heard it from our standpoint, we are of gauging the acts of -- so we are gaining a lot on productivity. So when you look at personal, of course, labor costs on a unit cost basis, actually you are not really seeing much of an inflationary pressure, because an AC21 operation with 239 seats requires the same number of pilots [Indiscernible] eventually inflation with APCs.
And only one more cabin crew. So you can run the numbers that even if the agency stated the productivity gain offsets that inflation.
So with regard to brand of in new market. I think it's building very strongly.
We don't think that this is just a marketing game. I mean, obviously you have to invest into marketing, but you also I think can figure out very effective base of building your brand best and social media is clearly a new avenue versus historical kind of brand building exercises.
I'm still seeing that this is a commodity ending quality results for since Harsco to those provider, you spread the news very effectively to the market. So as the result of this expansion, we are not really seeing the marketing budget to be exploded.
But it just spend slightly differently with more focus on new markets. But also activating a lot of other channels, the channel available to us and they might not have been before.
So on the cash?
Jourik Hooghe
Indeed, the 50% level looks to be the right level. Also going forward, even if the revenue continues to expand, we'll obviously need to see and evaluate that going forward if it's more 45%, 40% or 50%.
But that's the level we want to maintain. Just one additional point on inflation.
I think growing our employee base is also very, very important for us to rejuvenate the mix of people, the salary mix of people. If you're not growing and you're stagnant, you maintain a more expensive headcount level.
The ability of having 40% accrual, or up to 50% by summer, clearly will help us also to rejuvenate the mix and get also salary mix benefit on top of what József outlined.
Carolina Dores
[Indiscernible] from Morgan Stanley. I have two questions as well.
First on the growth prospects. You're ramping up capacity.
Not only there are difficulties from ramping up post - COVID, but also with almost 50% more fleet. What are the biggest challenges that you see to deliver the fleet growth, not only for the summer but also for the next couple of years?
My second question is if you could help us. What will be peak capital expenses or cash expenses by 2024, 2025, if you take PDPs plus all the lease in interest payments?
And my final question, now looking more into summer because you mentioned going back to pre-COVID unit costs, what sort of load factor do you need given the competitive landscape that you expect for the summer?
József Váradi
All right. [Indiscernible] challenges to deliver growth, I mean, if you can grow some of you basically look at, perhaps forcing predominantly, look at your market that will deliver growth.
Look at the aircraft to get the right plane to actually get that done. People, you have [Indiscernible] placed and you need to look at your structures, process and their systems, to what extent they are scalable for a bigger operation.
With regard to market, some intravenous proved us the easiest part. At this point in time, we simply chose the overwhelming number of opportunities older And as I said, we actually have to be very selective of what we are doing and what we are not doing seems to be closer to some extent.
I mean, 50% growth is a lot to be delivered from an operational standpoint. But a 50% gross is not limited by market demand, it is limited by our own capacity and to what extent are we prepared to commit to deliver that goal, what we can execute technically with -- because I would not be worried about the market.
Obviously, the people side of it is challenging because it is a big volume of people. But I feel quite comfortable that we have the program in place to make sure that we are getting the right people at the right places at the right time when they are needed.
We have been learning some lessons during the last period, especially when we were trying to ramp up for summer of '21, and us in taking those lessons on board, we have become a lot more systemic and programmatic how to best deliver on this challenge. Maybe have to act of calling.
I think we are in a privileged position, I would say, that we have short, medium and long-term access to the best aircraft in the in the market place. If you were to order an A321neo aircraft, you go to Airbus, I think it would be towards that the first delivery will be around 2027.
So short-term, there is no aircraft available from the manufacturer. You can buy it on the market, but a lot more expensive aircraft than procuring it from the other manufacturers.
So I think they are in a very good position actually competitively advantageous position when it comes to aircraft deliveries, and we feel confident with that regard. Probably the single biggest challenge is moving to processes and structures and systems to make sure that we remain a scalable business.
I feel very good about the way how we are interacting with the consumers. Our consumer systems have been very scalable.
We got those systems created as such, that it would serve the purpose of an airline with [Indiscernible] size of the current business. The operational systems are more evaluative.
So you find a go with the flow. As the operational sizes is growing, you have to adjust the system supporting it.
What -- again, I feel confident that we understand the challenges. That we didn't collapsed.
I mean, many of the airlines collapsed at [Indiscernible] aircraft. I mean, if you see the kind of the history of the airline industry, then an airline reaches a size upon the aircraft basically milestone, that didn't happen to us.
So we must have been learning something to be more preventive. With that regard and clearly, I think we try to make sure that we effect those learnings on a going forward basis.
So I would say people and our own internal scalability are the most challenging ones, but we think we've come to bridge those positions. With regard to getting unit for spec in summer, what's really driving unit cost, I mean, unit cost is driven by fleet utilization and crew productivity.
So if you really look at the fundamental drivers of unit cost, those are the two issues. Load factor is driving unit revenue are much more than unit cost.
So in terms of delivering unit cost, I'm very confident that we're going to be able to do that. Possibly our full-year end up, you are going to get the unit retail of the fleet, we can split fixed cost and we're going to get the productivity out of the blue and still delivered its business at the lowest possible cost.
The question mark is more on the revenue side. How that capacity program translate into unit revenue and as the function of lowest factor and pricing in the marketplace again, we are a load factor active business.
So we are going to move load factor are much bigger than pricing. But I think it's a market driven issue.
So we see what the market gives us in terms of pricing. But I think we would be looking at the distorting 90% plus load factor levers going into summer.
Jourik Hooghe
In terms of peak Capex, you see a PDP outflow of $85 million in the next quarter. FY2023 you'll see a relatively limited outflow to be $25 million, and then there will be another $100 million in F2024, and that's the peak Capex linked, obviously, also through the progression of the other, let's say, the middle half of the decade.
From a lease point of view, you just need to take the current asset liability position and evolve it with the fleet progression to get an idea on what it would mean there.
Conor Dwyer
Hi, Conor Dwyer from Berenberg. Just as a follow-up to the question on load factors, do you guys expect or you've been magnitude on any load factor basically, impact from the upgrading of your fleet or do you expect any at all?
József Váradi
I have to say that we had some early concerns whether or not we're going to be able to move from 180 seater to a 239 seater without affecting load factor. But that's not been the case, so empirical evidence suggests that decisions for metro pricing and market stimulation.
And if you get the pricing right, you're going to get best insurers on the planes. So I'm not worried about the up-gauging.
I think it is more of a question of yield, what we can get out of the market depending on the overall demand environment and the capacity environment that about in terms of load factor items think of gauge is a denting factor. I mean, maybe the best way to look at it actually, to operate a 239 - seater Neo is almost the same seat cost in operating 180 - seater steel back up.
You are essentially getting 59 seats for free.
Jourik Hooghe
Any questions from the call?
Operator
Thank you. [Operator Instructions] Once your names announced, you can ask your question.
[Operator Instructions] Please limit yourselves to two questions per person in the interest of fairness. Our first question comes from the line of Jared Council at UBS.
Please go ahead. Your line is open.
Jarrod Castle
Thank you. And good morning, everyone.
Going to Slide 13, you want to be at about 500 planes by the end of the decade. And on that slide, by 28 you're on 380 planes.
So I mean effectively, can you actually take a 120 planes in the last two years or are you going to bring some of those fleet deliveries forward a bit so that you get to the 500? I think kind of related to that, where do you see your net debt peaking, on the back of what year?
And then in terms of competitive dynamics, can you talk a little bit about what's going on at the moment in Austria and Italy, especially with Ryanair? Thanks a lot.
József Váradi
Can we take 120 aircraft for two years? Yes, I think we can.
I mean, if you look at the run rate, I mean, we are taking roughly around 50 aircraft incremental each year as we keep growing the base. I think we can.
But also, this is the current fleet and I mean, obviously that fleet keeps moving dynamically and will get updated. I mean, we have a few levers here going forward.
I mean, we can always order aircraft for the outer period. We can retain existing aircraft for a longer period, for lease.
So we have flexibilities around moving the aircraft cone, but yes, by design, we can do 50 aircraft per year in the last two years. We got to competitive dynamics in the marketplace, especially in Austria and Italy.
Look, I mean, I think Ryanair is doing what Ryanair is supposed to be doing. I mean, they are the largest low-cost carrier in Europe.
It's an efficient business. COVID is an opportunity for Ryanair, too.
And of course they have to pursue that opportunity. Understanding the real question from our standpoint is about Ryanair is doing, the real question is how the industry is going to be shaken up as a result of the COVID crisis.
What's going to happen to other low-cost carriers, what's going to happen to legacy carriers? And how the market is going to be split or split up based on the new status quo.
I mean, what we control is our cost base. We're clearly seeing that we are coming out of the crisis as a lower cost operator vis -a - vis the market.
Given the scale gain, given the operational efficiency gain and the economics gain coming from the aircraft up gauging and modernized technology. And that gives us a significant competitive advantage to compete with the rest of the industry, including every player, even Ryanair.
And I think that logic will flow through in every one of the marketplaces where we compete in, including Italy and -- I would say, look at Italy, for
József Váradi
Example, we are now a well-established carrier in the country operating seven bases covering the whole of the country, inbound, down bound and domestic, so we build very strong footprint and a very strong backbone for the future in the country. Austria is a competitive marketplace and I think probably there's overcapacity in the market at this point in time and the dust is settled down at one point.
But again, we have the operating model that delivers the lowest cost in the country and I think structurally, it's got to be a winning formula going forward.
Jarrod Castle
Great -- On the -- yeah. Jarrod, sorry-- the Capex and net debt.
Sorry. You're probably going to answer now.
Sorry about that.
József Váradi
Yes. No worries, we're just switching mics here.
So on that debt, obviously, and absolutely, it's never an issue. It's also always relative to your EBITDA or through your operating cash flow.
Clearly, we are at a peak now because of the negative EBITDA and cash from operations. The peak or the tension point is now will soften during F23 and should be normalizing as of F24, where we see the leverage ratio going back to below 1.5.
So that's kind of where we see it.
Jarrod Castle
Great. Thanks very much.
Operator
Thank you. Our next question comes from the line of Anita Keyani of Bank of America.
Please go ahead. Your line is open.
Anita Keyani
Thank you. Just wanted to ask on summer bookings.
If you could give us some numbers on what percent of the summer is booked, and how average fares right now compare with summer of 2019? Secondly, if you could just go back to some of the questions on Italy and all the headlines around IPA.
How do you see that impacting competition, pricing, and your strategy for Italy over the next -- this summer and over the next few years? And then if you could just comment on consolidation and M&A in the sector s, what are you expecting?
Thank you.
József Váradi
Thanks for your question. So with regard to summer bookings, I mean, indeed, we are seeing very strong bookings coming through summer.
But I think it's more interesting to see how bookings build up in the interim period between now and summer, depending on how bad the world is going to be with regard to COVID. I think we are expecting a very strong Easter period in April and a strong interim period in between Easter and summer as well.
We have to know that the booking window has shortened and as a result of the COVID situation. So you don't have a full picture at this point in time, what I can tell you, is that summer bookings are a lot stronger, both in terms of volume and pricing than what we were able to achieve a summer before or same period last year or two years ago.
Regarding Italy, I don't think ITA makes any impact on us, on our ability to operate and expand, and deliver a profitable business in Italy. I mean, if you really look at what is going on there, I mean two airlines are trying to get together which were bailed out during the pandemic more than anyone else.
I mean, Alitalia, or the declamation of Alitalia is a business that has been bared out I don't know how many times by this guy or that guy, be it the government or a private player. I'm not sure anything has changed.
And I don't think we are really focused on what is happening there. And by the way, ITA, you say its own focus business, why we are going national in the country covering the whole of Italy.
And we are a point-to-point business, flying people inbound, outbound, and domestically as opposed to trying to play hub and spoke in one airport cauldron for them. With regard to consolidation, the COVID crisis will have the aftermath, and I think you will see more lines of consolidation happening in the marketplace.
Some airlines will go down, some airlines will be gobbled up, and some assets used by other airlines will be used by new carriers. And you will see a lot of organic growth.
Wizz Air has been growing on the base of organic growth, which is the most preferred way of growing our business. That does not compromise our USAC model, our ability to run this business without any complexities or minimizing complexities coming from scale.
So when we are talking about WIZZ 500, WIZZ 500 is a vision, built on organic growth, not on M&A. Having said that, we, of course, are interested in acquiring certain assets, and those assets would be included in our business, and we would roll over our operating model on those assets.
I think the best example is the recent acquisition of some Gatwick slots that does not compromise our model, that doesn't compromise our ability to avoid complexities. And that would not create cost as a result on a structural basis, I think that's the way we think about consolidation.
We want to be consolidated of assets as opposed to businesses. But, I believe the market will consolidate and you will see all sorts of forms of, of consolidation happening the next year or so.
Anita Keyani
Thank you.
Operator
Thank you. Our next question comes from the line of [Indiscernible] of Citigroup, please go ahead.
Your line is open.
Unidentified Analyst 2
Hi. A couple of questions from my side.
Given the rising fuel prices and the rising carbon offset prices, what do you think will be their impact in our FY2023 given you will be sliding capacity much higher than 2019? How will you be able to offset it?
Do you think you will be able to pass on the higher fuel cost as well as the higher [Indiscernible] it is for us the consumer? Second is on our PDPs.
Given your new order, what should we model in terms of PDP numbers for FY2023 and going forward? Thanks.
József Váradi
If I just may start with the fuel and the inflationary environment. I mean, it seems to be we are seeing issues like that.
We always get surprised, but that has been happening probably for the fifth or sixth time, trusting my carrier at least. Input costs commodities are very fickle.
You see these prices rising and you see these prices falling, depending on the period you are in. And the industry always settles down in the end on these matters, no matter which way to go.
When input costs arise, they tend to fit through into the fair environments, through capacity discipline. If the industry's input costs go up, over time, you will see capacity moderation in the marketplace to adjusting supply to demand.
And vice versa, when input costs fall, you see a lot more capacity coming to the market. We have gone through this cycle a number of times as said.
But this is a process with a lag, so that's not going to happen overnight. So it's not like today fewer countries open, tomorrow you see airline capacity to four.
That takes six to 12 months based on empirical evidence. Simply, this is a capacity discipline.
But the real question is that, how do you get out of this as a business? And as far as Visa is concerned, I mean, we should be winning on this game at either end.
So when commodity prices are up, obviously, the lowest cost operator will be in the best position to retain market position actually to gain market position vis -a - vis the high-cost operators. Because simply this is just going to be a lot more painful to those people.
And then input costs fall, the lowest cost operator should be in a lot better position than the rest of the industry because your ability to stimulate the market through pricing is just much greater than the rest. So I think at either side of the cycle, we are very confident that it will turn into our benefits.
By the way, we clearly see that when input costs are rising and capacity discipline comes into play that is also a migration of customers from high-cost to low-cost. Low-cost carriers stand to benefit from high input cost environment.
So I think we should be benefiting from a high input cost environment.
Jourik Hooghe
On PDP, as just referenced, so for the current fiscal, we'll see another outflow in Q4, 85 million, there will be an outflow in FY '23 of 25 million, roughly. And then around 100 million in FY '24.
So all-in-all, despite the significant order that we have ahead of us, it's a relatively modest cash outflow on PDP.
Unidentified Analyst 2
Thank you.
Operator
Our next question comes from the line of James Hollins at BNP Paribas. Please go ahead.
Your line is open.
James Hollins
Morning. Two for me, please.
First one is just on the Slide 5. I saw you lost market share in Hungary and Poland.
I'll pick on those because I think they're fairly important markets for you. Just wondering if you can comment on what your competitor activity has been there, whether it's just you moving mark -- moving capacity elsewhere, and so is the former how you intend to react to that, whether it doesn't matter to you.
And secondly, will you be profit able in Q1 fiscal '23? Thanks.
József Váradi
Alright. Well, with regard to Hungary and Poland, yes, indeed, we have been moving capacity around.
But I think what we are seeing in Hungary and Poland is the short-term effects so variable to model expected market share. Going into summer, you're going to be seeing bigger numbers.
So we are ramping up both Poland and Hungary. So I wouldn't worry too much about this.
But with regard to our first quarter profitability, I think depending on the circumstances, especially government restrictions, whether or not, they continue to prevail. I'm actually quite optimistic looking at the current situation that we should see a much better market to operate than become to the first quarter.
So depending on those conditions, I think we should be delivering strong corresponding performance, should the market be open and good.
Unidentified Analyst 2
Okay. Thank you.
Operator
Thank you. And we have time for one person.
And those questions come from the line of Ross Harvey at Davy. Please go ahead.
Your line is open.
Ross Harvey
Thanks very much. Just wondering, József, can you talk about London?
Obviously, you have five aircrafts based at Gatwick this summer. What are your thoughts on being able to increase that record as this last usage rose -- increased?
And secondly, if you were to compare your experiences at Gatwick so far with places like Lutton, to what degree does that confirm or not your determination to get into Gatwick more? Thanks.
József Váradi
I think the issue in London is not our desire or appetite to grow the business. I mean, yes, indeed, we have a hell of a desire and and a hell of an appetite to continue to grow our business in London.
You may recall that even during the Brexit times, certainly during the COVID times, Wizz Air has remained one of the most upbeat Carriers, remaining accommodate to the UK, to London in particular. And we have been building our business.
We have been investing in our business in the London market. The issue really is infrastructure available to our expansion, be it Luton, and be it Gatwick.
So we are running up to limits at both airports. So I think it has become quite challenging.
And indeed we have an interest to continue to elevate our presence in Luton, and continue to expand in Gatwick. But these ambitions remain subject to our ability to access the airport capacity given the slot constraints at both places.
This is what we are working on and we are looking at ways of getting more access through market transactions, or hopefully also through organic growth of the airports, providing us with more opportunities for the future. But
József Váradi
Absolutely we are interested. With that, I think we conclude the event.
Thank you very much for your interest.