We haven’t — we are going to go through a two or three year period through 2025, 2026, 2027, where there’s a material dip in CapEx because of the gap between the last of our max game changer deliveries with the last, which is due in December 2024 for summer 2025 and in the first of the [Mac10] (ph) is not used to deliver until the spring of 2027. So there’s likely to be a strong upward pressure on free cash flow over the next two or three years. As long as trading isn’t disrupted by adverse events and again, I think our comments this morning is that we intend firstly to use that to on employee pay, secondly pay down debt, third, fund CapEx. And then anything that’s fair or leftover will be returned to shareholders. We’re setting out this morning an ordinary dividend policy that would be 25% of net profit after tax.
So for example, this year, we’re now guiding somewhere just under $2 billion in net profit We would hope to be carrying a dividend of somewhere close just under $500 million for next year. But if there’s a surplus over that over the next two or three years will be opportunistic. There might be special dividends, there might be share buybacks, but we have to be conscious of the fact that we will start to reference CapEx again through FY 2025 into 2026 and the start of 2027. Peak CapEx will be around on the [Mac10] (ph) order will be around 28, 29, but hopefully traffic will continue to be strong. Profitability with very low cost base and widening cost gap between us and competition. We continue to be strong I think capacity constraints in Europe means that pricing will be strong.
And that should leave us in a position to be able to fund modest, a reasonable shareholder returns. Tracey, will you talk to in terms of airport and handling cost please?
Tracey McCann: Yes. So there’s two things right in the airport and handling. So higher ATC costs 72s and that so local air traffic control costs at airport, you’ve seen an increase. And after termination of some of the COVID reliefs that we were getting the benefit of last year and probably the other driver in that is handling in that. So a little bit of labor inflation in the handling costs across Europe.
Michael O’Leary: Cost degrees, Alex, is, so is less than half of the airport and handling cost increase. Some of our competitors have been reporting in recent weeks. So there’s materially more airport and handling cost inflation at the main airports that are being operated out by our competitors? Therefore, widening the gap again. Next question.
Operator: The next question comes from Harry Gowers from JP Morgan. Please go ahead Harry. Your line is now open.
Harry Gowers: Just two questions. I mean, average fares up 15% in Q3 looks very strong. So are you somewhat surprised by the strength of the fares given concerns over the health of the consumer more widely. And I was wondering if there was any potential one off benefits in there in Q3, for example, from maybe the Rugby World Cup. And then just any comments as well on Q3 on where you expect the ancillaries per pax just in absolute terms or year on year? Thanks a lot.
Michael O’Leary: Okay. Neil, I ask you to comment on the ancillaries. On repairs, Harry, they’re strong in Q3. Again, I think that the critical driver of fares here is not individual events like the Rugby World Cup, which were nice, but not materially across — we’re carrying almost 500,000 passengers a day. The Rugby World Cup is that [indiscernible]. What’s really driving air fares here is the consolidation, capacity constrained story in Europe, the material — the dramatic increase in pricing that is being leveraged by the life of competitors Like Lufthansa, Air France-KLM and IAG, who are starting with average fares that are 4, 5 and 6 times those of Ryanair, particularly if you take the German market where Lufthansa is [received] (ph) as the national champion has seen off a lot of capacity easyJet and ourselves have removed a lot of capacity from the German market in the last few years in the face of ludicrous airport cost increases, man, German, government taxation, security charges, et cetera.
Lufthansa — the German market is the one that is weakest, it has recovered only about 80% pre-COVID. But short-haul airfares in Germany have more than doubled. And everywhere you go in Germany, people complaining about Lufthansa’s pricing. But that’s what you get when you get a national champion like Lufthansa, you get screwed. And I think that is going to continue to play itself out. Lufthansa, Air France-KLM, IAG, are going to — are losing more in percentage terms. Their free ETF reduction from January next year is much more meaningful on their short-haul traffic than ours. There’s much greater upward pressure on their cost and their ability to increase air fares. And this capacity constrained story which has largely been playing out in North America over the last decade is beginning to roll out across Europe again.
Europe is entering a period where airfares are going to be modestly higher, the combination of government imposing ludicrous environmental taxation. We have our own ADS transport minister in Ireland, has just nothing to push back and get the ETS. So nothing to push back against French ATC strike. Yet happily rings his hands despite the fact that we’re in Ireland, the property of Europe. So airfares across Europe are moving, I think, upwards and the really dramatic but not well-understood capacity-constrained story, I think we’ll continue to play that much as this is through December of 2024 and into December 2025 as well. We see no easement in these capacity constraints. And what really drives Ryanair fares is the extent with Lufthansa, Air France-KLM and IAG are driving up their air fares, and they are driving up their air fares to an eye-watering extent at the moment.
And Neil, ancillary.
Neil Sorahan: Yes. Harry, as we’ve been kind of saying all year, we expect on a full year basis, ancillaries are up kind of EUR0.50, EUR0.60 per passenger year-on-year. So you’re probably looking at similar to the first half, about a 3% increase over the second half. And then thereafter, it’s kind of 3% to 5% per annum growth area, depending on John sitting here beside me what he can do for me on dynamic pricing and other things. But we’ve had a phenomenal step up from EUR19.70 per passenger pre-COVID to EUR23.70 per passenger now, and it’s growing at a relatively steady state of kind of 3% to 5%.
Harry Gowers: Okay. Thanks a lot.
Operator: The next question comes from Savanthi Syth from Raymond James. Please go ahead Savanthi.
Michael O’Leary: Savanthi hi.
Savanthi Syth: Hey, good morning. In terms of investing for resiliency, I would imagine that you’re kind of keeping the buffers that you put in place currently. But as you kind of head into summer 2024, are you planning on kind of making any additional investments or additional buffers? And then secondly, just kind of curious on the MAX – with the MAX delivery delays, I’m guessing you’re not going to be able to take advantage of this. But what are the kind of the — what does the NG pricing look like these days in case you wanted flexibility?
Michael O’Leary: Sorry, Savanthi, you broke up at the start. It’s the first half of that question and I missed the second half was MAX delivery delays but I wasn’t sure what the question was. Can you repeat it again, please?
Savanthi Syth: Sorry. Yes. Just on the — more so on kind of NG pricing. Like what are you seeing today if you want to take advantage of it, not that you probably can given the delays?
