Ep 4: How Europe's three large LCCs are weathering a challenging environment

Ryanair recently published an impressive set of results for the past financial year and announced that it is nearly debt-free. Meanwhile, easyJet saw non-fuel cost inflation increase over the past six months. 

In this episode, John Strickland and Garth Lund review recent performance and outlook for Europe's three independent low-cost carriers. 

What we dive into:

• Ryanair's robust FY26 performance 
• Comparative fleet strategy: Ryanair waiting for Max-10 certification; easyJet phasing out the A319; Wizz Air continuing to upgrade to the A321neo
• Revenue outlook: shorter booking curves on the back of consumer uncertainty
• Importance of liquidity: all three airlines are in a good position to weather higher fuel prices

Transcript

SPEAKER_00 0:00

Welcome to the latest episode of Airline Insight, the new podcast series taking a look at the airline business with a European slant. I'm John Strickland. I've got over 40 years experience in the industry across different airline business models from network carrier to low cost.

SPEAKER_01 0:14

And I'm Goslund. I've spent the last 14 years in the industry, mostly on the low-cost side of the business.

SPEAKER_00 0:19

So we're going to give you a combined multi-decade set of experience, hopefully, as we take a look at today's topic. In this episode, we're going to round up major European low-cost carrier performance. We've had recent earnings for Ryanair, their year ending March 26, half-year figures for EasyJet also to the end of March. And we've had a trading update from Wizair similarly for the whole year up to the end of March. Their results will be coming out shortly. Quite different stories for each of them. So let's kick off with uh Ryanair. Perhaps not surprisingly, highly profitable. Their profits saw a substantial jump, 40% up year on year, 2.26 billion euros. Of course, they only caught the tail end of the outbreak of conflict uh in the Gulf region with the Iran war. But all the metrics were pretty positive, weren't they, Garth?

SPEAKER_01 1:10

Absolutely. I think it was a very impressive set of results from Ryanair operating margin up from 11% last year to 15% this year, which puts it among the very best in the industry. Profit after tax, as you say, up by 40%. So it was, I think, overall a really stellar performance from Ryanair in their last fiscal year.

SPEAKER_00 1:28

They seem as ever to be completely focused on what they do, and there's some elements of good fortune, but all the elements they would need to be able to weather the storm that the industry is currently facing are lined up in the right way. The stars are positively aligned. I mean, they're 80% hedged on fuel for the year ahead, right, through to next March. I mean, of course, the scale of their operation means still 20% of fuel unhedged is a lot of money to have to pay differentials on. But I think they're probably better than anybody else I can think of at the moment.

SPEAKER_01 1:59

I would say so. So they're 80% hedged, I think, at $668 per ton on jet fuel, which I think is helpful, particularly if they're also then managing the spread between crude oil and jet. They have a very high coverage stretching out over the next 12 months. So they are probably one of the best covered airlines in terms of their fuel exposure looking across the next year.

SPEAKER_00 2:21

And I think Reiner, Michael O'Leary in particular, has always expressed their philosophy about hedging. We're not experts in hedging itself, and I think I've said before, uh it's not a science, it's an art. But their philosophy is far more not about gaming the market, getting it at the lowest price, although they seem to have pretty well done that right now. It's about having certainty over one of their largest costs. Because if they have that, along with their religious focus on all other costs, it puts them in a much stronger and clearer position, particularly when they're using pricing, which of course they're they're not shy about doing at any time. So with this high level of hedging, it puts them in a much better, more secure position to not only manage their business, to adjust pricing as they see the need, but to put pressure on competitors as well, I guess.

SPEAKER_01 3:06

Yes, I think they are in a strong position. As you say, I think fuel hedging is not about trying to somehow get yourself a lower fuel price. It's really about giving yourself a horizon of certainty and being able to plan your operation accordingly, whether it's your fleet requirements, whether it's your crew, it's your the capacity you have on sale, and then execute against that. I think their the extent of their hedge coverage at the price that they have on the fuel per ton, it puts them in a very strong position. And uh probably coming out of the Iran conflict and its after effects, Ryanair will be one of the airlines that does the best during that period.

SPEAKER_00 3:42

Absolutely. And they've talked about expecting more failures as the year goes on and the fact that capacity is being taken out anyway. Now, this is maybe uh a kite which Michael Leary likes to fly quite often, but I I think he's got more than a 50% probability that that's gonna actually happen this time around. I mean, we know that there's marginal capacity being pulled out right now, but there are one or two uh weaker airlines around without naming names, that I guess as we get out of what is the peak season now, are going to find it increasingly challenging as the year goes on.

SPEAKER_01 4:13

The industry is quite Darwinian. The the strong will survive, the weak will uh fall by the wayside. Probably the current crisis will shake out some of the weaker players, and those who are left, like Orionair, for example, will be in an even stronger position than they were going into the crisis. I think we've seen that multiple times over recent decades, whether it's going through the global financial crisis or going through COVID, the airlines that survive do tend to come out of the other side stronger than when they went in.

SPEAKER_00 4:42

Yeah, and uh another factor in in relation to this conflict, you know, Ryan has now expressed uh very high confidence in their fuel supply for the summer program. They say we don't expect to cancel any flights. And if we remember, I think uh probably nearly a couple of months back, Michael Leary was saying we might have to cancel, I think, in the region of five or ten percent of flights in April, May, that didn't happen. And now we're approaching uh the peak of the season rapidly. So that's a great position to be in, given that they they can price to fill those aircraft.

SPEAKER_01 5:12

Yeah, and it looks like they are going to be relying on pricing to stimulate some demand. I think several airlines recently, or at least on the European side of the Atlantic, have commented that booking curves are compressed. People are booking later because there is a bit more uncertainty in the market. Perhaps people are feeling a bit more economic instability or they're seeing their own household finances under pressure from higher fuel prices.

SPEAKER_00 5:39

Yeah, and it's interesting as well, Garth, philosophically, that Ryanair always talks about uh load factor active revenue-passive approach. And I've seen one or two uh financial analysts comment about whether they will actually change that and go more for yield. I mean, that goes against the grain for me, emotionally thinking of some of my work in the past in revenue management. I think it's logical to try to fill your capacity as much as you can. So I don't really see them changing that philosophy. And not only do they want to fill the planes for the sake of filling them, but of course, you know, even if they they have to cut fares, as you described, which may be the case during the next quarter, ancillaries account for around about a quarter or more of Rhino's revenue. So even if you give the seat away for next to nothing and you drive a significant ancillary contribution, you're further ahead.

SPEAKER_01 6:26

Yeah, I can't really see them moving away from the load active, yield-passive approach. I think it makes sense. And as you say, when such a large portion of your revenue comes from the ancillaries, it usually makes sense to uh keep the aircraft as full as possible.

SPEAKER_00 6:38

And I think another factor for them that they are known as the masters of uh negotiating airport deals, and many of those uh widely known, of course, are based on volumes. So again, they want to push the volume through these airports because that drives lower unit costs for them. Many of their negotiations hinge on not necessarily guaranteeing, but uh undertaking with a high degree of certainty they will bring volumes to airports for which they expect to see uh a great deal of uh downward pressure on airport pricing.

SPEAKER_01 7:08

Yeah, absolutely.

SPEAKER_00 7:09

And uh another factor for the summer, they are now fully flushed with their fleet of Boeing 737 Max 8. So it seems amazing to me when we think about coming out of a pandemic, Boeing's problems with deliveries stopped and then moving ahead slowly, but they've now got 210 of these aircraft in the fleet. It's about a third of their total fleet. And of course, they burn around about 20% less fuel than the uh 737-800 and have more seats. So again, a uh unit cost reduction, more confident ability to operate in this uh tough cost environment for the industry.

SPEAKER_01 7:44

Yep. I mean it looks like their fleet is relatively set now until the Max 10 is certified and hopefully starts to come online next year, but they don't have any more deliveries before that. Uh in their results, they guided that they are looking to grow traffic or passenger traffic by about 4% in the coming year. That's relatively uh moderate, I would say. That's probably helpful for some of Ryanair's competitors, not to have too much new capacity from Ryanair coming on top of them at this time. And any network changes that Ryanair is making now are probably going to be relatively zero sum. If they want to grow somewhere, that capacity is going to have to come from somewhere else.

SPEAKER_00 8:24

Exactly. And I think that's going to be a key point again, knowing the readiness and toughness in negotiation, uh, airports are going to really have to pay attention to this uh kind of quite tight capacity position with their fleets, because as you said, there could be winners if they meet the you know the cost criteria for Ryanair in terms of putting capacity in, and that means uh as a corollary, there'll be uh losers as well. Those airports that Ryanair doesn't see as playing their game in terms of uh lowest cost levels. Interesting, as you you said there, they they expect to see um deliveries into next year of the first of their max tens. That's when the growth starts to pick up again. And this aircraft is not yet certified for commercial operations. Uh Boeing seemed to be still talking quite confidently about uh that actually happening. And Ryanair was saying again in their recent uh UN figures that they expect to get uh around about 15 of those aircraft from the spring of next year. And those aircraft again have more seats, lower unit operating costs, so they can drive more volume growth and lower unit costs.

SPEAKER_01 9:27

Yeah, I think it'll be a good aircraft for them, particularly as more of their competition is flying with the 321 NEO. You know, with, of course, the majority of the fleet is the 321 NEO platform. EasyJet as well is taking on more 321s. And I think in order to maintain their cost advantage, it probably makes sense for Ryanair as well to further upgauge their fleet, breaking past the kind of 200 seat per aircraft mark. So I think it's it's it will be a good aircraft and a good addition for them to their fleet.

SPEAKER_00 9:57

And I think perhaps one of the most interesting factors again that's come out just post-Ryanair results, they commented at a time, they were about to pay off their last bond. They've done that now, and again, uh told the market they are now debt-free. I mean, I think that's remarkable. Completely debt-free company. I I can't think of any other airline but is in that beautiful position. You know, many others are probably taking on more debt right now. And there's Ryanair completely free of that, and a pretty well unencumbered fleet of aircraft as well.

SPEAKER_01 10:26

It's really incredible, I think, to have a balance sheet that is so strong for any kind of company. It's impressive, but for an airline, it's seriously impressive. Debt-free and having 620 out of 647 aircraft completely unencumbered. Um, again, it's I think a testament to the strength of the business model over the last few decades, but also going forward puts them in a very strong position to weather the current crisis and take advantage of as opportunities as they come up because they have the balance sheet flexibility to do so.

SPEAKER_00 10:57

Absolutely. I do recall as well an interview I did with Michael O'Leary when I asked him about Ryanair's really zealous focus on costs, and he he said that was due not to his own background as an accountant, but due to having grown up on a farm, where he said that in winter, you know, obviously living on a farm, managing a farm is tough. You know, you sell when prices are high. If you can, you buy when prices are cheap, you batten down the hatches in the difficult winter months. And he said, We're like a bunch of farmers in Ryanair, which I think is very much manifest in how they behave. But in the same breath, he said, I abhor debt. He doesn't want debt, he doesn't want to be taking on loans, he doesn't want to be doing sale and lease backs on aircraft. And as you said, that puts him now in this incredibly strong position. Again, funding new aircraft tends to come from Ryanair's own cash flow, which uh any ever airline would just be uh delighted if he even could come close to doing. Yeah, absolutely. We'll move on now to um EasyJet, who they have an unusual financial year which uh begins in the autumn of the year. So they've just had their first half figures out. For them, a different story, acknowledging the different phasing, of course, in the accounting, but running from uh uh October through to the end of March, they had a massively expanded loss, the largest loss in their history, and a loss of £552 million before tax. Of course, it does reflect a winter period, which for them is normally loss making, but thinking of what we were just saying about Ryan there, quite a quite a contrast in performance, I would guess, Garth.

SPEAKER_01 12:30

My perspective was that the revenue performance was decent. Um, so revenue per ASK was up by 1%, helped a little bit by an earlier Easter compared to last year. But given that they grew also by 8% in terms of capacity, I think delivering unit revenue growth, you know, that's perfectly respectable. Where the challenges came in, I think, was on the expense side of the business. And perhaps, you know, slightly counterintuitively given the current fuel price environment, their fuel cask was actually down, but total cask was up by 5%, driven by an 8% increase in the non-fuel expense items. So there were a lot of their big cost lines, which grew well in excess of the 8% ASK growth. So, for example, their crew cost increased by 21% compared to last year, or navigation costs were up 17% compared to last year. Those are big chunky cost items. So despite the capacity growth, which normally should help to sort of amortize or defray some of the fixed costs, it does feel like there was quite a bit of cost inflation dragging things down.

SPEAKER_00 13:40

Yeah, I think you're right. And uh of course, their business model is different running into primary airports where they are less able to negotiate costs and they would prefer to see the upside of using those airports in uh average revenues. Nevertheless, it it is quite a contrast to Ryanair. And I think the uh the company made a number of points about cost management, but it's it's a different, I would say a very different mentality. And it's uh an observation I would make is we're talking about the three major low-cost airlines in Europe. It may, on the face of it, sound like they're all exactly the same, but the mentalities and the approach to business certainly are very different. So ECJE probably needs to push harder still on getting cost reductions to improve their position and uh avoid unnecessary deterioration. Because already, if you know, fuel price alone, as you said, the fuel cask was down up to the end of a half year, but uh while they are well hedged, they're not quite as well hedged as Ryanair. The fleet mix is such that uh you know that will still be a big factor. And where they could have been projected to make in the region of uh a billion pounds, maybe in the year ahead profit, that could be down to maybe around about a hundred million at the moment. That shows the impact of fuel alone on their result.

SPEAKER_01 14:55

Similar to Ryanair, they're seeing a shorter booking curve, but they also cited that load factor was 1% or 1% point behind last year, reflecting the shorter booking curve, and that uh RASC was down 4% versus the same time last year. So it could be that there is some uh, you know, they also need to stimulate demand with lower fares. On the other hand, they commented that uh once they're into the month itself, they are then seeing strength in the late market. So I think the question will be to what extent does the late market strength compensate for uncertainty with the customer sort of earlier or further out in the booking curve? So that remains to be seen, I think.

SPEAKER_00 15:36

It's a difficult one to judge because uh, as you said, I mean, at RASC down around about uh 4% in the current quarter. That's quite a significant uh negative uh differential. Uh they talked about the fact they have trimmed capacity marginally for the summer as a whole, but they intend to fly the program, which is published that capacity is down 0.3%. They they have pulled a number of uh marginal flights in April and May due to the higher fuel price. I would guess my betting would be on seeing in the autumn that EasyJet would pull more capacity on the same basis that they've done in April and May. Of course, they've got to be careful as well in terms of those airports for the slot constraint where they may not get alleviation. Just to say there, the UK government is being pretty pragmatic in allowing airlines to uh under deliver on the normal 80% required, but the EU is taking a very different view, far more hardboard, which I think is challenging for airlines in this situation, but uh definitely uh some issues there for EasyJet to manage. And I think also we're seeing overcapacity in some of the leisure markets. While some of them may be strong if we see a switch from uh some parts of the eastern Mediterranean to the west, others may have too much capacity. And then particularly as we move into the winter period, I was interested to see that EasyJet commented about uh redesigning their canary artists program. They didn't really elaborate, but that's an area where I see perhaps excess capacity coming in from the UK, particularly from London, where we have uh of course TUI as a big leisure operator. We have Jet2 now with a base in Gatwick, Wizair flying into some of these uh southerned points. So definitely a bit too much capacity there.

SPEAKER_01 17:14

Certainly there is more competition in those markets than perhaps a few years ago. As you say, Jet 2 has increasingly expanded its footprint in the UK towards the south. So entering the likes of um Stansted a few years ago or Gatwick this year, kind of encroaching on EasyJet's traditional London territory. And as you say, Wiz there launching more and more leisure services from both Luton and Gatwick. That probably also puts additional pressure on EasyJet's kind of traditional core markets.

SPEAKER_00 17:42

And you mentioned earlier about uh average aircraft size Garf, and we're talking about Ryan, they're awaiting their max tens next year. EasyJet surprised me in many ways for a long time in having a relatively uh cautious mix of its fleets. Still, the the largest individual component is the 319, and they they said a lot in the half-year results about phasing these aircraft out completely, but that's still going to take about another three years. They've only got really a relative handful, 20 or something, A321s at the moment, which of course leaves the uh 320 as a substantial part of the fleet. But does that surprise you if you think where you were before, Wizard really pushed very rapidly to go down on the 320s and move up to a 321 and 321 NEO dominated fleet?

SPEAKER_01 18:27

I would say it probably reflects some of the difference in philosophy that you alluded to earlier. So EasyJet historically has operated out of more primary airports. I think they've targeted the business customer to a greater extent. They probably had more need of a high frequency product to be able to do that and compete with um the likes of British Airways, for example, for a business customer. So the small gauge, I think historically has made sense, but you know, the 319 is not the most cost-friendly aircraft, or at least in terms of unit cost, it's not the most cost-friendly aircraft. And again, with competitors upgauging in order to remain competitive, probably have to play the same game and drive down the lower unit costs with a higher gauge fleet. So it looks like the the 319s will stay around for the next two, three years, being phased out during that period. But uh yes, they do certainly operate a smaller aircraft size compared to the average of Ryan Aero wizard.

SPEAKER_00 19:21

Yeah, as you say, it's going to take time, really. This transition as a as a 321 does become a more significant part of the fleet. They made again a lot a lot of uh noise, if you like, in the presentation of the half-year results about the big gains, as you said, there in unit seat costs from uh particularly 321 from 319, and and also, of course, from the uh 320. Another thing with EasyJet that is currently different to Rhino is of course they set up a holiday business, which seems to be growing profitability nicely. The figures on their own look impressive in terms of multi-millions, still a relatively small contribution to the group. How do you see that playing out, uh Garth?

SPEAKER_01 20:00

It looks like they've been developing positively over the last um few years on the holiday side of the business. Always strong and growing results reported on how the holidays are moving. I think they are also diversifying within the holidays business, offering the the same kind of product for city breaks now, for example. So I think we'll continue to see more and more focus from EasyJet on the package holidays, and particularly when the airline side of the business will be a bit more stressed with the higher um fuel price. It makes sense to have, I think, a more diverse set of revenue streams and be able to extract some more margin from the total trip expenditure of each customer.

SPEAKER_00 20:41

Yeah, and they always talk about uh share of wallet. I think their view is very much that uh they're getting the customer spending on the seat, so they may as well, for very marginal extra cost and effort, get the whole thing, get the whole package. And they've drawn a number of comparisons with Jet 2, who, to be honest, for me, uh surprised me for a number of years. Uh I I did tend to think the package holiday was over, but it definitely isn't. People want that certainty of a like to book everything in one place for flights for hotels, Nova Foods included, Nova are no tricky extras, especially in a difficult economic time like now. So EasyJet can probably move up the scale with their performance there. Yeah, definitely.

SPEAKER_01 21:22

I think uh Jet2's done very well for a number of years. They've continued growing, the business performs well, they have a strong brand, and they're expanding their footprint in the UK. And as you say, the package holiday remains alive and well in in certain markets, the UK being one of them. And so I think it makes sense for EasyJet to try to expand their presence in that market, which is complementary to their core flight offering.

SPEAKER_00 21:46

And it's certainly an area of competition that we'll have to keep our eye on in the months ahead because Gatwick in particular now has a you know a plethora of offer to customers, obviously the traditional holiday providers type TUI, but EasyJet, as we say, build. More and more, and Jet 2 having just opened a base in Catwick. So a bit of a crowded space, as we said, in relation to capacity earlier on. Let's turn our thoughts now to uh Wizair, the third of the uh large European low-cost carriers. They issued a trading update uh recently, and it looks like their year end to the uh to the end of March this year is going to be quite different to that for Ryanair. They look like they will most likely break even or deliver a pretty small profit. And I think their circumstances are really quite different to the other two. That would would undoubtedly be a bit of a disappointment because they've had a good run of profitability over recent years, even recovery coming out of a pandemic. But um they are in a in, I think, quite a different position to the other two.

SPEAKER_01 22:48

Yeah, so as you said, they announced that uh they expect to make a slight net profit for the end of the financial year in March. I think they also have, relative to most airlines globally, decent hedge coverage. So 70% covered uh at $720 per tonne for jet fuel. They also have a good kind of cash cushion to weather the crisis, so just over $2 billion in total cash, which puts them in a strong position and more flexible than many airlines. They do have a lot of growth coming up this summer, so 28% year-over-year growth for the summer season, uh, which is probably more than one would ideally want in the current fuel price environment. But part of that is not just new deliveries, but also the grounded aircraft coming back online. Um the 28% growth is perhaps not quite as high as it first seems, given that those aircraft are already on the books, and I assume already they've got lease costs and so on being paid. So that capacity isn't coming at the full fixed cost. It's really coming at its variable cost in a sense, plus the crew. They commented that uh bookings are 2% ahead of the same time last year, albeit with strategic use of promotional fares. So I would assume that we're just seeing a similar yield environment to what Ryanair and EasyJet have commented on.

SPEAKER_00 24:04

Yeah, it's interesting that turner for a strategic use of promotional fares uh as opposed to tactically or opportunistically using promotional fares, but certainly they need to do it. And I think it's a very important point you made there about a lot of the grounded capacity coming back. That's been one of their biggest headaches the past few years with the uh Pratt and Whitney GTF aircraft groundings, where they've had over 40. Uh, what they've said most recently is it's now around about 30, it's still a still a big number. And of course, they're taking deliveries of new aircraft as well, albeit a lot of those are delayed. And I think that they've had more than their the share they would wish of complexity as well, because they've made changes in network in recent years. If we think about the origins of Wiz as a VFR, you know, friends and family uh-driven airline from Eastern Europe to Western Europe or worker traffic east to west, then moving a little bit into Western Europe with uh leisure flows, particularly uh to and from the UK, but then making really big changes as they went into the uh Middle East region, specifically to Abu Dhabi, developing in Ukraine, which seemed a natural market to grow in, and then being hit by the Ukraine war, having to close down uh several bases there, finding that Abu Dhabi wasn't working in the way they'd hoped, and they didn't really get the local traction compared to other players like Air Arabia or Fly Dubai in the region, and having to redeploy capacity at relatively late notice. Even this summer, I think they didn't ask Israel as a base, and of course they're all better off on that at the moment. So a lot of aircraft have to be moved at late notice and therefore having a further impact on pricing to fill up capacity put somewhere else.

SPEAKER_01 25:41

From my perspective, there have been a lot of smart decisions, I would say, in the last 12 months. I think it's, you know, even before the Iran conflict, I think it was smart to close down the Abu Dhabi base and refocus that capacity on the core markets in Europe. I think slowing down the fleet growth in the coming years was a good decision. I think cutting the XLR order was also positive. So I think that puts them in in good stead. And as you say, the network has been kind of refocused on the traditional core plus uh Italy and plus the UK. You know, there is a lot of new, less mature capacity in the network now, but going forward in in the coming years, that capacity should mature at a higher rate of revenue growth than uh you know than longer-lived capacity. So I think that's the kind of the bull case. And also, if we see, I mean, hopefully we see Ukraine come online again once uh the the war there ends, hopefully at some point. And I imagine the Ukraine market post-war will be much bigger than it was uh for Wiz before the war. If Israel comes back online, I think that'll also be positive. So depending on how things progress geopolitically, I do think there is also upside for Wiz in terms of where their network can go.

SPEAKER_00 26:52

Yeah, as you said, they've taken some uh positive decisions over the last year. Maybe they were overly optimistic in their thinking that they talked about WIS uh 500 around about 2030, and then they've uh through actual delivery delays from Airbus, but conscious decision reduced that so that by 2030 now they'll have a little over 300 aircraft with a large number of deferrals, some of those moves out of their, if you like, their core competencies, that east-west uh flow in Europe into places like Abu Dhabi. In some ways, I'm surprised, surprised that didn't work out, or or that uh the some of the reasons that it didn't work out were not perhaps uh more apparent early on in their thinking. Uh, as you said, Ukraine could be a very strong opportunity, strong that it was before, uh, if we can get through this uh ongoing war that's now been with us for uh what four or five years. Um and the XLR is interesting because uh I know they spoke publicly recently, but we didn't really have the need for this now. Uh I think that suggests that they've had to have a big rethink. They saw they wanted this ultra-long aircraft long-range aircraft, and now they're more or less going to integrate them as any other neo-aircraft into a fleet. I think it was only a couple of routes maybe to Saudi Arabia where they're really using these. And I think they talked about opportunism and they scaled the order down anyway from about what 40 so I think 10 or 11.

SPEAKER_01 28:16

Yeah, I believe it's 11 now, which I think makes sense. And um I think uh the CCO had commented at routes that the the aircraft will, you know, it'll essentially be operated as a NEO, but it gives a bit more flexibility. For example, there might be some very long sectors, and if you have unexpectedly strong headwinds, you can perhaps respond to that better by deploying uh the XLR on those particular flights. Uh plus, as you mentioned, the the Saudi Arabia routes out of Catwick. But I think overall it's um, you know, it's sensible that that'll be a smaller part of the fleet than perhaps was envisaged.

SPEAKER_00 28:51

I'm interested as well that their philosophy in changing bases, uh particularly at Vienna, you know, they're closing the Vienna base. I can't remember who was first to get into Vienna. It became quite a scrum. The Wizair was in there, there was uh louder air picked up uh by by Ryanair for a time. You know, IEG group even had uh voiling operating there. They they seem to have realized it's uh it's uh an airport or a market that can't sustain that level of capacity, particularly the cost levels of that airport. And now the the focus in Wizair's case seems to be more towards uh Bratislava.

SPEAKER_01 29:24

Yeah, but so the uh the base launched in Bratislava this or the winter season just gone, I think kind of as a replacement to the Vienna market, which I think also reflects kind of a refocusing of the network on you know the traditional core of the Central and Eastern European markets, focusing on the lower airport costs. So I think you know that's also a Ryanair base, so it's probably not the necessarily the easiest market in the world either. But I think it makes sense as part of the overall strategy to really refocus on what works well for Wiz.

SPEAKER_00 29:55

Well, if we round off our look at these three carriers, uh Garth, uh, you know, Ryanair, as with everybody, is saying that the market is just too difficult or the trading conditions are too difficult to give any kind of guidance for the year ahead. Uh they hinted that maybe there could be marginal profit improvement. EasyJet's got to claw back a lot of the cost increases it's seeing against uh difficult trading. Uh its profitability will certainly be uh way, way down as this year comes to an end in September. Wiz Air, as we said, probably uh roundabout a break, even again, a challenging year ahead to get back to where they were before with sustainable high levels of profitability. Any other thoughts from you on those three, uh Garth, in that context?

SPEAKER_01 30:38

I think the only other thing I'd say is that they do all have strong liquidity. I mean, certainly Ryanair and EasyJet have um very strong balance sheets, both are in a net cash position. They are the two highest-rated airlines by SP for their credit rating. Wiz equally over 2 billion euros of cash on the balance sheet. So I think all of them are in a good position to weather any storms, but uh you know, they've probably each got their own challenge to deal with. Ryanair has relatively low feet growth, probably less than they would like ideally. EasyJet's got the cost challenges. Wiz, I think, is um, you know, refocusing the network. As we've discussed, I think you made a good point earlier that while some might see the three low-cost airlines in Europe as relatively much of a muchness, they actually do have quite distinct flavors between each of them.

SPEAKER_00 31:26

And we'll just think briefly about the three low-cost airlines within the legacy groupings, uh, which commented in the previous podcast that uh we had substantial losses in the winter period for uh Eurowings at Lufthansa. They've acknowledged a lot of restructuring as needed and cost cutting. Transavia too in Air France KLM produced a lot of red ink. And is even more complicated because there isn't just one Transavia, there are two in uh Holland and uh France. Uh a lot of work to do there, having gone for big fleet expansion, they may now be raining back. Just leaving Voiling, the only one of the three within a legacy family that is actually profitable, but again, focusing very much on what it does well, operating principally in and out of uh Barcelona, uh the Spanish domestic market, and a little bit of other peripheral activity.

SPEAKER_01 32:13

There's been a lot of commentary recently about the sustainability of the low-cost model going forward, particularly in light of Spirit's um failure. But uh when executed well, I think it really delivers results, as we see from the three independent low-cost airlines. It's more challenging, probably for those within the legacy groups because they don't have the same cost structure. And if you're a low-cost airline without low costs, it's certainly more challenging.

SPEAKER_00 32:39

Absolutely the essence there, Garth. Well, that's it for this episode. Do give us your feedback and let us know any topics you'd like us to discuss in future episodes, and we'll be back soon with the next edition of Headline Insights. So from me, John Strickland, yes goodbye.

SPEAKER_01 32:56

And from me, Garth.