Ryanair Holdings PLC (RYAAY) 2002 Q1 法說會逐字稿

Good day, everyone, and welcome to the Ryanair Q1 conference call. As a reminder, this call is being recorded.

At this time, for opening remarks, I would like to turn the call over to your host, Mr. Mike O'Leary.

Please go ahead, sir.

Hi. Good afternoon, ladies and gentlemen. Welcome to the Ryanair Q1 conference call. With me here in Dublin today are Michael Cawley, Howard Millar, Ray Hernan, and Shawn Coyle.

We propose we'll have two opening statements, one from myself, one from Michael Cawley, and then we'll open it up to questions and answers in the normal fashion.

Ryanair, Europe's largest low-fares airline, today announced its biggest increase in Q1 profits for the period ended 30th of June, 2002. Passenger traffic during the quarter rose by 38% to 3.54 million. This is the first quarter when we've carried over a million passengers each month. [inaudible] to a further [inaudible] in average air fares. Total revenues grew by 29% to 194 million Euros. However, operating expenses rose by only 22%, to 149 million Euros, with the result that profits rose significantly ahead of expectations, by 68% to 39 million Euros.

This record increase in Ryanair's quarterly profits is a direct result of the key elements of our unique low fares model. Firstly, very strong traffic growth in all of our new and existing markets. Secondly, extremely disciplined cost management. And thirdly, using these lower costs to drive down air fares for our customers.

Our traffic growth during Q1 was outstanding, with high load factors on all 10 routes to and from our new German base at Frankfurt Hahn and our eight new routes to and from London Stansted. Existing markets have also grown strongly where we have been able to allocate bigger aircraft or increase frequencies. Average load factors for the quarter rose from 77% to 83% system-wide.

Despite this strong growth, Ryanair continues to deliver impressive cost discipline. Operating expenses increased at a considerably lower rate, 22%, than revenues, up 29%. The fact, for example, that marketing and distribution costs declined by 11% during a quarter when we were still promoting our new German base and over 20 new routes highlights the strength of Ryanair's unique low fares formula in Continental Europe. Despite the protestations of Lufthansa, who continue to predict, by the way, that low fares won't work in Germany, Ryanair enjoyed load factors of over 80% on our 10 routes to and from Frankfurt Hahn. We will continue to expand in this market where Ryanair is now Germany's largest low fares airline.

There is no doubt that tumultuous events in the airline industry over the past 12 months have created huge new growth opportunities. Ryanair leads the low fares market in Europe by some considerable distance as our average fares are over 50% lower than those of the [Easy Jet] and [Gold] combine. Our strong organic growth continues, and we enjoy a surface of new routes and new base opportunities. We expect to open at least one new base in Europe each year for the next three or four years as we grow at a disciplined and controlled rate to the benefit of our customers, our shareholders, and our staff.

In view of these increased opportunities, Ryanair has agreed with Boeing to convert three of our rolling 50 option aircraft into firm deliveries during spring of next year, 2003. This will make a total of 13 new aircraft to be delivered between now and summer 2003. These additional firm orders will enable Ryanair to grow at the slightly faster rate of 30% for the next two years, to just under 20 million passengers next year, '03/'04. With these new deliveries, Ryanair will also start to retire our older Boeing 737-200 series aircraft one year earlier than planned, starting in 2003, and the balance will be retired over a four-year period to 2006, at which date Ryanair will have the youngest fleet of aircraft in Europe.

We welcome the initiative of the new minister of transport in Ireland to proceed with the construction of a temporary low-cost terminal facility at Dublin for summer 2003, whilst at the same time inviting proposals for a second and hopefully more competing terminals at Dublin airport. This initiative will finally introduce competition in the Irish airport sector, and this will result in lower prices and better facilities for Irish consumers and visitors.

If the minister proceeds to introduce such competition, then Ryanair envisages launching a wide range of new very low fare routes between Ireland and Continental Europe, an initiative that has the capacity to create thousands of new jobs as well bring millions of new visitors to Ireland on a year-round basis.

Ryanair's continuing success would not be possible without the outstanding performance and contribution of our 1700 people. We are the most productive airline group in Europe, and we continue to deliver outstanding customer service in a friendly and efficient way, which is why we continue to enjoy such high levels of repeat business and cut traffic growth. I want to say a sincere thank you to each and every one of you for another outstanding performance over the past quarter.

Finally, a note of caution. Whilst we've enjoyed a very strong first quarter, much of this exceptional profit growth is due to the impact of the launch costs of many of the new routes in the corresponding Q1 last year, whereas this year most of this launch activity was expended in the preceding quarter. In other words, Quarter 4 during January, February, and March this year, which is Quarter 4 of FY March '02.

We will not repeat a 68% growth in net profits in Q2, and going forward we expect to see profit growth running in line with previous guidance for the remainder of the year. It is my policy, as always, to advise investors and analysts to remember sensible in their outlook for Ryanair as we ourselves will continue to be.

And with that, I'll ask Michael Cawley to take you through the - briefly through the MD and A. Michael?

Thanks, Michael. Just looking at the profit and loss, profit after taxes increased by 68% to 39 million Euro compared to 23.2 million in the previous quarter ended June 30th, 2001.

These results were achieved by strong growth in passenger volumes and continued cost - continued tight cost control. Total operating revenues increased by 29% to 194.3 million, which is slower than the growth in passenger volumes of 38% and highlights the company's objective of driving down average fares.

The combination of lower fares and the successful launch of new routes resulted in the passenger load factor increasing from 77% to 83% during the period.

Total operating expenses increased by 22%, to 148.9 million Euro, due to the increased level of activity and the increased costs, primarily fuel, staff, route charges, and airport and handling costs associated with the growth of the airline.

Marketing and distribution costs have continued to decline, due to the increased level of direct bookings on Ryanair.com that are currently on average 90% of total bookings of the operating margin has, as a result, increased by 4% to 23%, compared to last quarter, whilst operating profit has increased by 58% to 45.3 million Euro. Profit after tax has increased by 68% reflecting the strong trading performance and also the impact of the decline on the headline corporation tax rate in Ireland. For the reasons outlined, that margin - the net margin has increased from 15 to 20% in the quarter.

Earnings per share has risen by 61%, to 5.16 Euro cent, lower than the growth in profit due to an increased number of issues on the balance sheet side, cash and liquid resources have increased from 899.3 million Euro at March 31, 2002, to 986.6 million Euro at June 30th, 2002, reflecting the increased cash flows from the strong trading performance during the period.

An additional two aircraft were delivered in the quarter, which in addition to aircraft deposits accounted for the bulk of the 74.1 million Euro incurred in capital expenditure. This was part funded by the drawn-down of long-term debt which increased net of repayments by 46.5 million Euro during the period. Finally, shareholders funds at June 30th, 2002, have increased to 1,041,000,000.2 Euro compared to 1,002,000,000.3 at 31st of March 2002.

Okay. Thank you, Michael. That concludes the formal presentation, but we'll now open up the call to questions and answers. 00:08:44

Thank you, Mr. O'Leary. The question and answer session will be conducted electronically. If you would like to ask a question, please press the star or asterisk key followed by the digit 1 on your telephone keypad. We will take questions in the order received, and we'll take as many questions as time permits.

Again, please press star 1 to ask a question.

Our first question today comes from Mr. Chris Avery from J. P. Morgan. Please go ahead, Mr. Avery.

Good afternoon, gentlemen.

Chris, hi.

In true U.S. style, let's say congratulations on a great set of figures. Two questions. On financing and cost of deliveries going forward, in principle, do you wish to buy, finance or operating lease or a mix of all three, and can you talk us through in the near term how you want to expand at Dublin?

Okay. I think, Chris, our structure at the moment, we envisage that we'll buy all of the aircraft directly ourselves. The financing model is well set down now where we put 15% of the net purchase price - we fund that ourselves from our own cash resources and clearly the balance sheet, we already have those cash resources in place.

The other 85% of the net purchase price, we fund on 12-year mortgage instruments, which with the exit guarantee AAA rates and we now have that interest rate fixed on -

Until March 2005.

- until March 2005 on the next 33 aircraft deliveries. So we're in very good shape there. However, we do see a period of time - you know, don't ask us when, but at some point in time in the future, when it wouldn't make sense and it won't necessarily be efficient for us to own all the aircraft on our own balance sheet, but I think even then, the structure will be that we'll pay for the aircraft on delivery, take the best of all the deposits, and then we may enter into maybe either some operating leases, some finance leases, but at the moment we propose that to do that on the basis of the low net purchase price that we have. So we're not hugely hung up on - we don't have to own them all, nor do we necessarily - we're not going to get into kind of, you know, doing say the leasebacks either. But whatever we believe over time is the most efficient means of operating the fleet, that's what we'll do. But certainly for the next number of deliveries, the plan will be to continue to do what we've done heretofore.

On the second issue, the - which is the Dublin thing, whilst we welcome the minister's initiative of last week, at this point in time he's only called for invitations or proposals. Now, we do predict that will be swamped with proposals both from we think that other international airport groups will also be submitting proposals, and there's another invested - or interested grouping here at the edge of Dublin airport who have some land who want to develop something as well. We'll be pushing the minister very hard, though, to develop our lease permitted development of two, three, and four terminals in time over Dublin, but we don't want to see is the emergence of a kind of duopoly where there's a big bidding war for just a second terminal and then the second terminal works hand in glove with the first one. So we'll be pushing hard for a third and fourth terminal. We'll certainly be submitting a proposal. However, we have no great hangups as to whether we build the terminal here ourselves or operate the terminal. We're quite happy to use somebody else's as long as it's, (a), low-cost, (b), efficient, and (c), gives us the aircraft parking stand capacity to put, you know, upwards to 10 additional aircraft into Dublin here over perhaps the next two or three years. We see significant growth opportunities in Ireland, Irish tourism, which is struggling for the last two years, badly needs that kind of growth, and clearly we can deliver it.

So, you know, we'll be pushing the minister hard to make sure that it proceeds. I think generally, the - there's been an almost unanimous welcome for his initiative from the tourist industry, most of the - in fact, nearly all the media, because I think people are now - now, you know, are - recognize the need for competition instead of monopoly as the model for developing Dublin airport. So I'd caution, I wouldn't get too hung up on it. It's something we'll be pushing very hard but bear in mind, even if it happens, it will still only account for a small proportion of Ryanair's growth each year for the next couple of years. We will still be opening up new bases in Continental Europe. We will still be adding new routes to existing bases. It's just that Dublin will then become a more significant base for us in the next couple of years. But it certainly won't take care of all of our growth.

Complementary on that, but the 13 aircraft you're taking this winter for the summer '03 season, where will the bulk of them be going? It clearly won't be Dublin. Are they going to mainly Frankfurt Hahn or are they scattered over the system?

Well, no, at this point in time, the plan is that there will be a temporary low cost facility here in Dublin for summer 2003. Now, whilst we're talking about taking 13 aircraft now for next summer, and don't hold me to the numbers, three or four of those will be replacement for retiring 200s, so the net growth will be maybe nine or 10 aircraft. And of that, maybe four or five could be based in Dublin. Certainly three or four will be based at our new base in Continental Europe, and we're not sure yet where that will be. And that will leave one or two other aircraft for supplementing at existing bases for - you know, to continue opening up new routes at existing bases or increasing frequencies at existing bases.

Great. Thanks very much.

That's the general plan at the moment, and so what you're looking at next year will be growth - net growth, incremental growth, of nine aircraft on top of - what did we do this year? How many aircraft did we add this year? Five. Five aircraft.

Well, it's eight.

So we had eight last year. It will be nine ex-inner.

Very good. Thanks.

Thanks, Chris.

Our next question will come from Mr. James Parker, from Raymond James.

Michael, good afternoon.

Good afternoon, Jim.

Just a couple of questions here. One is you reported load factor for July that was 93%.

Yes.

Now, I understand that includes no-shows.

Yes.

Is there any double counting of no-show seats in that you would sell the seat if no one shows up?

No.

Okay. So this is - the 93% is no double counting in that at all?

No, there isn't.

Okay. Second question - and a question investors often ask me, seeing your very favorable results - how difficult would it be for others to start up low fare airlines in Europe? Can you kind of assess that situation as to how difficult, how much capital would be required? What is the likelihood that we see investors come and do a Jet Blue, put in, say, 130 million in he can quit and try and start up a low fare airline?

I think there's two different parts. I mean at the moment, if you look around Europe, increasingly certainly it won't happen in Ireland. That, I can promise you. In the U.K., I would believe that, you know, the market, which is dominated out of London, is now dominated by Ryanair and [Easy Jet]. It's very hard to see where there's an opportunity in terms of airport capacity or low-cost aircraft to do kind of replicated Jet Blue type of strategy, so I don't see it there.

And then if you try to do it somewhere in one of the Continental European countries, you're fundamentally trying to take on in Germany, Lufthansa, in France Air France, Italy Al Italia or even Ryanair. I just don't see there being that kind of an opportunity to do it in a big scale way in the way that jet blew has done it. Now, clearly there are some other smaller low fare airlines in operating to and from the U.K. You have British Midland subsidiary, BMI baby, not particularly low fare but growing rapidly, buzz, which is the KLM subsidiary, they're talking about amalgamating that with [Bassek] in Holland. I mean you have a couple of other kind of operations on the continent which are not really low fares airlines but they try to describe themselves as low fares airlines, so I think largely for the moment, unless we collect - unless we do something very stupid, I think [Easy Jet] and Ryanair will dominate the low fares market in Europe for the next foreseeable future, three to five years. Ryanair being the dominant low fares model, following the kind of Southwest discipline of secondary airports, high-frequency services, never beaten on price. And [Easy Jet] increasingly developing a model that will be not necessarily low fare but maybe middle fare, competing with the main airlines at - with slots at their - the main airports, which has been doing successfully many years in Europe but I think - and I see - and I find it very hard to see there being a gap for any other low fares niche model in between what we do and what [Easy Jet] does.

Okay. Sounds good. Thanks.

You want to answer that? Thanks, Jim.

Yeah.

Okay. Our next question will come from Travis Anderson from guilder God man hoe. Please go ahead, Mr. Anderson.

Thank you. The one number that jumped out at me on the expense line was the big increase in maintenance costs sequentially from the fourth quarter, the March quarter. Was there anything behind that? I would have thought that -

Well, a couple of factors. One, we had a significant increase in the number of [inaudible] travelers. The other impact in that is we provided some un-scheduled maintenance as well, so they were the two primary factors. If you look at the numbers, its up to 9 million Euros, and so pretty much growing in light with the increase in flight hours. Flight hours were up nearly 26%, so it's pretty much as we would have expected.

With a good number of those hours, an increase on the new plains, that it would have been less.

Well, it isn't on the new lines.

This is for both line maintenance, consumables, and other items [inaudible] that were paid for on a per hour basis.

Okay. Thanks.

Okay.

Thanks, Andrew.

Okay. Our next question will come from Andrew lies. Go ahead Mr. Lies, thank you.

Yeah. Hi, everyone. A couple of questions. Firstly, following on, first of all, from the load factor question, you had a record 93% in July. How do you propose to move on from here? Is that a sustainable level? Do you feel that your average price expectation going forward of minus 4 to 5% per year is - could probably be a lot lower than that? And secondly, there's been some media talk in London about, you know, potential disruption amongst baggage handlers. Is that an issue facing Ryanair at all in any way?

Yeah. Thanks for that, Andrew. [inaudible] is the load factor 93% sustainable from July? No. We believe it's sustainable, though, through the peak summer months. See no reason why it won't be something similar to that in August and maybe in September as well.

A lot of that is driven by us continuing - I mean, there's no fundamental reason, competitive reason out there why we should be driving down air fares. This is very much us plowing our own furrow alone. I was struck by BA's numbers last Friday where, you know, all the talk was of the impact of September the 11th and how the traffic was down 14%, but kind of hidden in the middle of it was an average fare that had risen by 5%. We're out there aggressively driving down fares, aggressively stimulating growth, driving up load factors, and we continue to see that as our model going forward.

But we believe that, you know, the load factor for the quarter, up from 77 to 83 is probably more sustainable number over the medium term. We'd expect to keep the load factors in the low 80s now. Hard to get it much higher than that.

On the baggage handling situation, I need to say a couple of things. We changed over our baggage handlers in Stansted from Service Air to Ground Star on the 1st of April. We did so because we weren't happy with the Service Air service, and believed that Ground Star would be able to deliver us a better service at check-in and on the ramp. It has not been a great success for the last number of months for various different reasons, which included management changes, transfer of undertake - transfer of undertaking provisions in the U.K. which allowed a lot of Service Air staff to elect to transfer across [inaudible]. So we've been struggling with a couple of issues in Stansted for the last couple of years. Months was the shortage of staff at check-in and on the ramp. That's now been addressed.

Secondly, inexperienced staff, which is being addressed. Thirdly, Stansted itself, and where we are in our own facilities, though, we're struggling with the volumes of bags and the volumes of passengers reporting through Stansted. Remember in June [inaudible] total traffic at Stansted. The bag bandage belt, for example, at peek periods, which can be the first wave of flights in the morning, are proving unreliable or finding it difficult to cope with the volume of bags so we're suffering baggage break-downs. And that has led to flight delays and it's also led to short shipped bags. Now [inaudible] the short shipped bags is still running at less than 1% of bags carried but we have had a progress for the last number of months. We've installed our own management team there now to, if you like, shadow and supervise the new management team that's been put in place by the contractor. We're already seeing significant improvement in recent days from that investment, and we expect that to continue.

We'll be investing a lot of management team and resources in that as we come through September, October, November, to bring it up to the standard of the rest of the system.

We're also suffering a little bit this summer our on-times, particularly to and from Stansted with the difficulties with air traffic control in London, where on a daily basis now, air traffic control has staff shortages, which is manifesting itself in slot delays, us not receiving our scheduled slots, so our on-time performance out of Stansted this summer is down a couple of points over where it was in previous years. Our on-time performance and service pressures at our other bases, Dublin, Glasgow, Frankfort and are significantly up on previous years, and our - one of our objectives the next couple of months now will be to bring establish stead up to the high system-wide service measures we have at the other bases.

All right. Just on the - on the load factor -

Yes.

- at 93% , do you feel that you're losing potential kind of last-minute high-yielding traffic at all or is it -

Yes. And have. But we're going to continue to lose it for the moment, too. I mean, I think we're - it's something we're testing ourselves. Remember, we're still in our first year of selling one-way fares. We have been selling out flights, particularly at peak periods, early. We have found ourselves in situations whereby on our, you know, sites have peaked out on Fridays and Mondays will be sold out a couple of days in advance, but we're going to keep going - doing that for the moment. As opposed to trying to keep the last couple of seats and gouging people for much higher fares.

Now, there's a balance to be struck but our yield people will be working on that over the coming weeks and months. But the focus and the strategy will continue to be for the foreseeable future on passenger numbers and higher - you know, high load factors, because our big risks this year in switching over into more than half in seats was that the load factor would drop [inaudible] has jumped despite the fact that we have switched across into a majority of the seats now with the bigger aircraft.

All right. Excellent. Thanks very much indeed for that.

Thanks, Andrew.

Okay. Our next question will come from Mr. Robin horn. Please go ahead, Mr. Horn, from [inaudible]. Thank you.

Good afternoon. Two quick questions. Firstly, during Q1, you had 91% of your bookings were web based, and I just wondered how much further we can go on this, and at what level do you expect the web-based bookings to settle on a sustainable basis.

The second question is, you appear surprised by the success of your startup at Hahn, and can you contrast this and compare it to shawl what you and are there any key positives that you'll be taking away from Hahn and applying to your next base?

Michael Cawley here, Robert. The situation on the internet is that, you know, everything that's happened on the internet has surprised us in terms of the speed and the volume, and the - the share it took and speed at which it took that share, but we really sincerely think that we've peaked out at this stage, at 91, 92%. On the issue of Hahn, certainly it was a - an operational and commercially much more successful than Charleroi. I think to be fair, we had benefits of the experience of Charleroi going into Hahn, which Hahn benefitted from. There are also, I think, commercially the routes that we launched were - were probably more promising to start with.

We've launched a number of routes in Charleroi this year. They both now have 3737800 basis there and we would view most both of them commercially as, you know, equally promising from a commercial point of vow view. Sadly, however, we're constrained in Charleroi for the next two years because the terminal is effectively full, and we could contemplate perhaps one more based aircraft there, at a real stretch, or a number of other flights coming in from other bases, perhaps. But the - the - until the new terminal is built in 2000 - late 2004. And the prospects, however, are immediate in Hahn and we will certainly very likely be increasing our presence there substantially next year, and we have lots of route potential growth, not just in new routes but on extra frequencies on existing routes. We're gaining substantially, for example, market share on the London route, where we have four frequencies a day, but none between 8 o'clock in the morning and 6 o'clock in the afternoon, so there's a big gap there in the middle of the day which we need to fill up and get up to six or seven frequencies a day and really challenge Lufthansa on this primary route of theirs.

So, you know, Charleroi year round is as good commercially as Hahn was, but - as Hahn is now, but starting off certainly Hahn was better and we have some experience from there which undoubtedly we'll be applying in - to new bases going forward. But we're pleased with both of them, I would have to say, and they're both candidates for further expansion.

Thank you very much.

Thanks, Michael. Thanks, Robert.

Our next question will come from Mr. Steven fur long from Dave apologies stockbrokers. Please go ahead Mr. Fur long.

Hi Michael. Two questions. The first one, I was wondering if Howard could update us in terms of the hedging policy and strategy in terms of fuel and currency and the second I was just wondering in routes where you would consider British airways a competitor, I think you alluded to this earlier on, but where you are aware that they have implemented their so-called short-haul new pricing strategy, have you seen any change in terms of booking patterns or anything like this?

Okay. In terms of fuel, the current status is that we're still running with the cover out to - full cover out to the end of fiscal quarter 12003, which will be to June 2003. We have put a small amount of cover in place for the second quarter, to we're keeping, you know, our rolling 12-month hedge in place.

Pricing is very little changed from the last guidance we gave. Still in and around 80 cents for the small portion of the second quarter of 2003/2004 we've completed.

In terms of British airways, we haven't noticed anything. In fact, we think it's been another show of shooting themselves in the foot by British airways. They announced that only 50,000 seats were only available in this offer, and if you look, we carried 3-and-a-half millions in the seats. Compared to the number of seats even they have capable, it's minuscule. They're 80% down of a reduction on - then you find the 80% reduced fare is still a hundred pounds to our equivalent is less than 50, so we don't think it's going to have any impact because it's the same old story, lack of availability.

Yeah. I mean I think it's amazing how people seem to be taken in, particularly in the press, every time BA issues a press release about lower phase. You know, they talk - the 80% usually refers, in our experience, to 80% of BA's top price on that route. It's never 80% of their previous lowest price and I think their lowest is on London glass depot is 59 pounds Sterling. That's still six times [inaudible]. You know, these guys just don't get within a million miles of our fares. But what we do notice is that every time BA announces a fair initiative or some big seat sale is that our bookings go up because of what it seems to do is it tends to focus the market's mind on price. Probably go check BA's website, or whatever it is, first, find they can't get it, and then - but they are directed towards Ryanair so I think our bookings spike every time BA does a big fair promotion, so we would wish them God speed and many more successful fare promotions.

That's great. Thanks.

Thanks, Steven.

Our next question will come from Mr. Martin Burr ghetto from Morgan Stanley. Please go ahead, Mr. Burr ghetto, thank you.

Yes. Good afternoon, guys. Hello.

Hi, Martin.

A quick one. On the 737-200 decision, to sort of pull the three aircraft earlier than expected, what is behind this? I mean, do the economics of the aircraft deteriorate as we speak ahead of sort of expectations or, you know, is the 737-800 just such a better aircraft, and the - the second question is regarding, again, sort of coming back to Frankfurt Hahn, there are now sort of Euro wings, virgin express, they're trying to build a base on a low-cost basis at cologne airport and we also have a couple of Charter carriers around here in Europe who are building low-cost operations. Does that dent or hamper your expansion efforts first in the German market and in a general European context.

Thanks, Martin. I'll take the first one first. I mean, yes, the 737-800 is a significantly better aircraft. More because it has substantially a 45% seats, and we have a demonstrative ability to fill those extra seats.

But I think, you know, there's no fundamental pressure on us. There's certainly no financial pressure on us to take out a 200 next year. It's more of a question of, you know, Boeing wanted to us take a couple of additional aircraft [inaudible] part of our partnership agreement with them is that we'll try and help them out when they are trying to move a few deliveries. We're quite happy to do so. But we don't want to jump into, you know, we've taken eight aircraft this year. We don't want to step it up to 13 net aircraft next year, so we think it's an ideal opportunity to take out a couple of the older 200s. We will have - we're starting to run down some of the older aircraft, only so that, you know, we're taking more short-term decision on, say, engine overhauls, release flights of 1,000, 2,000 hours instead of having them released for 7 to 8,000 hours, so there are significant savings to be made around the edge of the fleet of 21 aircraft by taking some short-term decisions like that.

But we would still be of the view we'd probably sit them on the ground. We'll use them more as backup aircraft. Like we're not in a selling mode, for example. We're not going to get out of the 2 hundreds, but I think, you know, a lot of what you see in our numbers continues to be derived from a very disciplined approach to growth and we just think that 13 - net 13 aircraft next year is too fast too quickly and that's more the reason why we decided to retire 3 or maybe 4 of those aircraft next year.

In the German market, again, I would caution against, you know, people who issue a press release - issuing a press release doesn't make you a low fares airline. You know, where - where there's virgin express or it's Euro wings or something like - you know, anybody that looks at Euro wings' cost base, it is a million miles Friday from Ryanair's cost base. And [inaudible] in Germany doesn't actually make you a low fares airline. There is only one really low fares airline in Europe and it's called Ryanair. However, I don't think it's a bad thing that there's necessarily some other me too type of competitors in the marketplace in Germany. Undoubtedly Ryanair has growth in the U.K. [inaudible of [Easy Jet] and then go and then buzz. You know, the more and more there are low-fares airlines or some not so low fares airlines out there, competing with will you have, distracting will you have, the better it will be for Ryanair's growth in sheer nanny, but when push comes to shove, you know, when we get to the various markets around Germany, I wouldn't worry overly about an Euro wings presence or a have you ever virgin express Prince. They're not able to compete with our fares [inaudible] but we would nevertheless welcome their presence in that market as simply, again, continuing to focus the consumer attention on low fares, price of air travel, availability of cheap alternatives to Lufthansa. Do you want to add anything? Okay.

Thank you.

Thanks, Martin.

Thank you.

Your next question will come from Mr. Peter Hyde from Credit Suisse First Boston. Go ahead, Mr. Height.

Hi. Just a couple of questions. Firstly, on capacity or people carried, just to clarify something, I think if you try to go for 20 million people by March '04, that sort of just suggesting that the growth is going to be slightly quicker than 30% per annum given that you carried 11.1 million people last year. Just wonder if you could give a bit of a flavor for trying to reconcile this 30% growth per annum together with the fact of 20 million people by what I assume is March '04.

Yes.

Second point is really on ancillary revenue. If you could just give us either a breakdown or talk about how the hotels and car rental stuff is going.

And then just a very sort of slight third point, which I don't know whether you've got at hand, is I just wonder if you've got the average fare in the second quarter last year as a comparative, because obviously you've sort of restated your figures to include no shows and I just wonder if you've got that average fare in Q2 last year so that we can start thinking about, you know, where it was and where it might be.

I don't think that we - I'm not sure - actually we haven't focused on the average fare figure for Q2 last year, Peter, so to hand, we don't have it.

Okay.

But it's something we can get back to you on, with a like for like comparison.

On the first part of your question, I think it all depends on what your definition of just under is. If you look in the statement, the figure - we say we're just under 20 million. Yet there's every possibility at the moment - you know, we expect our traffic figure this year will be 14.6, 14.8 million passengers. The growth next year will be 30% plus of that, so you're not a million miles away from 20 million. I don't want to get caught up too much on it being 20 million, because if it's 19.2 or 19.6, it doesn't much matter. It's still a long way away from the 11 million where we were last year.

I'll let Howard detail the ancillary revenue question or answer the ancillary revenue question.

Yes. On the ancillary revenues, they've continued to grow at a faster than the growth in passenger [inaudible]. As we said in our MD and A, we have been restricting the growth of our Charter operation by continuing to focus on increasing our scheduled operation, which is included in the ancillary revenues. If you take out the Charter, the amount we had for Charter revenues during the period, ancillaries would have grown by close to 50%. So it's a very, very strong performance with, you know, very strong growth, 130% growth on hotels alone during the quarter, very, very strong growth on car [inaudible] as well.

Yes, I'll come back to you, Peter, on the average air fare. Maybe we just maybe will send that out to the general analysts community in terms of what we'll have for the - the adjusted average fare including no shows.

Yeah. Okay. Thanks.

Thanks, Peter.

Our next question will come from Mr. Anthony boar from Merrill Lynch. Please go ahead, Mr. Boar.

Good afternoon. Just two questions, if I may.

Firstly, I wonder if you could just talk a bit about the outlook for the marketing and distribution costs, given that you saw yet another absolute decline in this quarter, how that might look going forward.

And then you identified this issue of the timing of the launch costs last year versus this year and I'm just wondering if you could put a bit more detail on that in terms of quantifying the effect on the quarter.

Launch costs details. Do you want to do it or do I -

On the sales and marketing costs, Anthony, the - obviously the incremental effect of the Ryanair.com is almost finished.

Yeah.

There are, however, in new markets in particular, in Continental Europe, huge savings to be got from the situation where, you know, we enter a market clearly in every direction, buying all the space we can get and paying, you know, in a - in a hurry necessary paying over the odds what we can pay subsequently and we've done that. Now, if you look for example, at our unit costs on marketing and distribution in a place like Belgium, for example, a year on, it's a fraction of what we were paying last year. Same applies in Germany, as we are beginning to learn and spend much more in the market. We're getting much greater value for our money. So that impact on the one hand is draining it down, while the impact of having to communicate with a greater number of routes with a larger number of passengers is driving it up on the other side.

I think it's going to go up, but it's going to - it's going to lag passenger numbers because of this better - better value for money phenomenon that we're getting. And I think that - you know, the impact of as I say Ryanair.com has pretty well peaked pout at this stage but those other two are the main ones where we're going to have growth but lagging passenger numbers.

Okay.

Yeah. The other phenomenon, by the way, helping there will be, for example, if we do a city like month tell yea, which is - has already a route to Stansted and then we give it a route to Frankfurt, it's now costing us the same to two routes as it was essentially to do one and as you can well imagine, with more and more bases throughout Europe, that phenomenon is becoming more and more the case. For example, Pisa has three products to Charleroi, Frankfurt and London, and in time, more elsewhere, as will many of the other cities, and that gives us essentially an economy of scale effect in each of those destinations in terms of advertising.

Okay.

That's something you've seen with Southwest in the past too that as they grew with more bases - one of the advantages of having more bases and more destinations is there's more opportunities within that operation for linking up the [inaudible] which gives you very cheap growth in terms of, you know, the additional spend in marketing and distribution [inaudible] with our motorings. The launch costs going forward in New Year's, I didn't quite catch the second part.

Yes. Just that you identified this issue for this quarter of the timing of launch costs last year versus this year and the extent to which it flattered Q1 this year.

Yes.

And I was just wondering if you could help with a bit of quantification on the effect year over year that it had on the quarter.

I'd rather not, because some of that is somewhat sensitive. I mean, I wouldn't want to overestimate this. Or I don't want to overplay it either. Remember, Q4, which took some of the launch costs, was - a very good performance, again, against Q4 the previous year. Like, it's significant but it's not some massive amount of money that's moving through the numbers.

Sure.

But we don't want to tell the competitors too much.

Fair enough. Thank you.

Thanks, Anthony.

Your next question will come from Damian brewer from she have raw.

Dame run who.

Brewer.

Brewer. Okay.

Good morning - good afternoon, sorry. Could you just give us, perhaps, or talk us through a breakdown between your more mature islands like U.K. Ireland [inaudible] in terms of load factor and also yield development in the quarter if you're able to, and also action as a follow-on from that, just maybe gives give us some indication as to how the yield has looked for July and how the bookings in terms of yield are looking for August and September into Q2.

Okay. This is a [inaudible] that comes up on a regular basis, Damien. I'm not sure that we have anything that we would describe as a more maturity route because as the route gets mature here, we bang more capacity onto it, and render it immature again. Remember, the growth in the last quarter and through the year is coming on the new routes from the new basis in Frankfurt Hahn, new routes in basic bases, Dublin [inaudible]. But also from increased frequencies on existing routes. So the profile of load factor and yield is pretty similar across the network. Because wherever we see, you know, yields being strong or load factors being particularly strong, that's where we try and allocate increased capacity in that marketplace in the next schedule.

One - you know, within those numbers there in Q1, you're seeing double digit growth, for example, on - in the Irish-U.K. marketplace in terms of traffic as well. You know, so I don't - we're not in that stage yet where we have mature routes in that sense anywhere in the network.

Without wishing to get into any great forecasts, I think, you know, we try to be fairly sensible at the bottom end of the statement. In July into August/September, we continue to see average fare declines of I would guess you're somewhere in the territory around 7% is not an unreasonable figure, as you've seen there in the early - in the Q1. The July numbers were out yesterday. Traffic was up 41%. I don't think that's - it won't up 41% in August and September, because again, this is partly to do with the timing of aircraft deliveries and the aircraft are in slightly earlier this year than they were last year. So we'd expect traffic growth to be mid-30s again by August/September, and I would urge you all very strongly, in working on the models, to resist the temptation to do anything except factor in our previous guidance to you on Q2, Q3, and Q4.

Okay.

Our next question will come from Mr. James [inaudible]

Yeah. Sorry. Just to go back on that, just to stage what our guidance is now, we previously, at the - at the - in the end of June, for our full-year results, we were guiding at market 190 million, a range of 187 to 190. We've now changed that guidance up to 200 million for the full year.

Which is, in essence, the improved performance in Q1 added to the unchanged guidance on 2, 3, and 4. Sorry, we interrupted somebody that was about to ask another question there.

Our next question is from Mr. James Forbes from good body stockbrokers. Please go ahead, Mr. Forbes.

Hi, guys. Most of my questions have already been answered at this stage but just one. Just looking at the very significant increase in net cash inflows during the quarter, would I be right in assuming that a lot of that is to do with working capital and is that due to greater visibility of forward bookings at this stage of the season?

We have obviously given our size and scale of operation, the fact that our new routes have been launched earlier, we have - and the - you know, the - this is one of the other impacts of the changeover to one-way pricing of what Michael talked about earlier about selling out a bit earlier. That's meant that our booking profile has got slightly longer, which has enhanced, if you like, short-term working capital by getting more money in advance. It also reflects the underlying, obviously, trading performance from the year end, as well, I think which I think would be fair to say, and also we took delivery of two aircraft during the period that would have - because we advanced funds for these deliveries, we actually get money back when we actually receive a delivery, and so there's about two or three implications but I think mainly strong possible trading on a slightly longer passenger booking.

Okay. Thank you.

Thanks, James.

Nick Anderson, Lehman Brothers. Go ahead.

Thank you. Sorry, we can barely here you.

Mr. Nick Anderson is our next speaker from Lehman Brothers. Please go ahead Mr. Anderson. Thank you.

[inaudible] U.S. GAAP. Could you tell me what the option - if you'd expensed your ops program, what the cost of that would have been on a basis because you normally give that as a footnote in the full year statement but if you can give us any guidance on that, that would be helpful.

Nick, we haven't - obviously, we do this as part of our annual report on 20F.

Yeah.

I think we did it for last year. If I remember, the number was something like using the Black Shoals valuation model and calculating the implicit fair value of the share options granted. My memory is that the charge to last year's - the previous year's financial numbers were something like eight or nine million Euro, but we will come out with the same numbers again as we're already in the process of preparing the annual report and the 20F, but to hand, we don't have those calculations available.

Okay. But broadly similar?

I don't see any material change.

Okay.

Obviously, the question - next question is, you know, are you going to adopt a new standard. We really - we really haven't considered - we don't do what a lot of the U.S. corporations do, which is they issue shares as a discount to the market price under and there's some confusion as to, you know, as to how that's accounted for. And we have only done that ever once before and actually that was an at a time [inaudible]. We've expensed all the costs of that and we then have adopted the current accounting standard in relation to share options. So by don't really see any changes -

All of which are issued at market -

All of which are issued only at market price and under this Black Shoals valuation we calculate this [inaudible] charge balanced the charge be to profit and loss if we had used that valuation. So we don't see it really as any significant number.

Okay. Great. Thanks very much for that. And just finally, something that's just not been material before, and in reconciliation [inaudible] to U.S. GAAP - you make reference to the unrealized losses on derivative instruments.

Yeah.

Is that a non-transaction.

That's a non-cash - that's precisely correct and obviously we've entered into long-term interest rate swaps in relation to the first 33 aircraft to be delivered between 2005. Under U.S. GAAP accounting, even though they're not a cash item, we are required to make this adjustment to shareholders funds, which we've done and the number is something like, I think, 19 million Euros for the - or 17.4 million Euros, adjustment in the quarter, and this will obviously either increase or decrease as a notional adjustment as we move forward over the remaining quarters, to when we actually draw down and settle the swap.

Great. And so basically over the period, it neither out to zero.

It nets out to zero but ultimately you've got to take the [inaudible] and we only hedge for those actual deliveries that we've contracted for so when the aircraft come in, we've locked in the interest rate. This will become part of the long-term costs of financing the aircraft. If you like, they're perfectly matched hedges.

Thanks very much.

Thanks, Nick.

Mr. Shay ma cease from NCB stockbrokers has our next question. Please go ahead, Mr. Shane Matthews.

Good afternoon. Just on the route charges, they obviously rose quite sharply. Is this something that we should expect to continue or have you finalized where the charges - the outlook for charges are.

Well, unfortunately, Shane, this is part of the problem of maps and the whole problem in the U.K. U.K. charges are increasing. Also, there have been some general increases across a lot of Continental Europe, and one of the other elements that people - is not only driven by the additional of sectors that we've flown is that we now have a higher proportion of the fleet 727-800s, they obviously have a higher rate and therefore you can expect a higher level of charge. So there's two elements, if you like, to the route charge increase and some increases in actual basis costs and I would highlight U.K. which seems to have a lot of problems there.

Is this kind of a - should we expect it to outpace passenger growth to the same extent going forward?

Well, I think this quarter, you know, particularly with the number of deliveries we've had, I think it will start to flatten out and expect to be growing at a slightly lower rate than the increase in passenger volume.

Okay. Thank you.

Thanks, Shane.

As a reminder, please press star 1 to ask a question. Our next question is from Andrew Stanford from Cass a Nova. Please go ahead, Mr. Stanford.

Hi. It's Edward Stanford from [inaudible]. One, just to clarify on the guidance, presumably the 2 million is an after tax profit.

Yes.

And secondly, could you - are you prepared to give any clarification as to the timing of the announcement of any new bases and what particular bases might be in the frame for consideration at the moment?

I think we're looking at this stage, Andrew, sometime after the half year results in November and we genuinely have no idea yet what it's likely to be. We are talking to more than 8 new bases. We're also talking to 40 new destination airports. But, for example, you know, to show you how live it is, we were surprised ourselves by the minister's announcement here in Dublin last Friday, so where Dublin would not have been one of those 8 new bases, Edward, we're now up to 9 new base - potential bases for next year. Although, again, I caution whatever we do in Dublin will be in addition to at least one of the Continental European bases. So it - the situation is very live. We're continuing to negotiate actively with a number of different airports. We're looking at very good offers on the table to us. You know, and we continue to be in a situation whereby we have more opportunities than we can handle at any given time, which is why we keep coming back and harping on about this disciplined growth. It will take us two or three years to realize these ambitions, but, you know, that's why coming back to Peter's question earlier, you know, we'll be somewhere up around 14-and-a-half passengers this year and somewhere just south of 20 million passengers next year and the following year, you can - you know, we're heading at 25 million. We already have the bases and the airports and the aircraft in place to deliver that, as long as we keep it rolling it out in a safe, disciplined, and profitable manner.

Thanks very much.

Thanks, Edward.

Our next question will come from Mr. John mass I mow from Marion capital. Please go ahead, Mr. Mass I mow.

Good afternoon, guys. Just a quick question on the options.

This is the first time you're exercising options under the most recent fleet deal. Presumably going into next year with the retirements you're probably unlikely to do anything on the flexibility side, but it looks like the options will give you flexibility to increase capacity growth further, if you wanted to, but looking further out, is it fair to say that you can use the options now as a tactical weapon to put on extra increments of capacity growth if you feel the marketing conditions are strong enough for the route or base opportunities or attractive enough for you to do it?

John, the flexibility that you refer to there is - it was a two-way thing. You know, flexibility, obviously, to take options forward or not, and what we're using in this instance, as Michael said earlier on, is we're essentially facilitating Boeing and you can well emergency that their manufacturing is, I won't say in turmoil but certainly probably to do with people like ourselves, who are able to assist them from time to time and that's essentially what we're doing here.

And our plan is to retire three 200s, and while I guess there are incremental seats in a 800, to that extent there's further growth, but not in terms of numbers of aircraft that we originally planned to put in on an extra basis into the fleet next year.

And over time, obviously that process will continue out to 2006, when we expect to be out of 200s completely and replace them with 800s.

The extent to which any further acceleration will take place obviously will depend upon our perception of the market, but always governed by, as Michael said, the safe disciplined approach to growing the business. That has been the hallmark of our success, and while, you know, you may suddenly lose our - you know, or be tempted to lose the run, we must also exercise caution in terms of what's possible operationally, particularly when we're spanked all the time off a larger and larger base. I mean the reality and what is hopefully a sure - reassuring for you is that the - the fact that Ryanair doesn't accelerate its growth hugely does not in any way mean that the opportunities we have at many of these airports will go away. In fact, we still have the scenario where we're essentially the only low-fares airline or indeed, high-fares airline that's talking to many of the airports that we're in discussions with.

So it's not that we're rejecting opportunities or leaving them open to others. But essentially, it is we are deferring them and using that deferral process, if you like, hopefully to sharpen up the agreements that we have with them and their appetite for the growth in the meantime. the plan, essentially, is to take the first 20 of the 50 options to retire the 200s, and as we are accelerating three of those next year, as I said, the only net effect on growth essentially is the incremental seats on the 800, the three 800s, over the three 200s that will be retired.

So Michael, can I just double-check on something there. Are you saying that the 200s are likely to be retired and replaced by options rather than being replaced by the -

Exactly. In case of the first 20, yeah.

Okay. So it looks at this stage, assuming things go to plan, you're looking at taking in 120 aircraft under the - under the present deal?

Yes.

Okay. That's fine. And would it be fair to say in the short term, the timing of - if you have some discretion over the timing of the retirement of the 200s, that that gives you a little bit of flexibility, say, within a short window of time of what you can do with capacity growth?

Well, we have plenty of flexibility. But the next year - and we're only giving the outlook for next year at this stage. There won't be any increase in capacity over what we originally planned, other than the fact that we're dealing now with three larger aircraft in lieu of three smaller ones.

Okay. So it will still be around -

It has a fairly small effect on the increase.

So it will still be around 30, 32%.

Exactly, exactly, yes.

Okay. That's fair enough. And beyond that, is there any point -

Beyond that, we're not saying at this sustaining other than we're saying that we expect the options to be exercised to replace the 200s and whatever effect that will have in the next three or four years and thereafter then we look at the other option.

Okay. So we can plug in options to offset retirements and then tie that in with the firm orders that we have and that's the best guideline for us to work on.

That's the best guideline at the moment.

Okay. Fair enough. Thanks a lot, Michael.

Ms. Elaine Morrison has our next question from Gifford. Please go ahead, Ms. Morrison.

Hello. I have two questions. One on the numbers, firstly, if you can give us guidance for what the full-year tax rate should be. Should we extrapolate the 10%. And a longer term tackle the German domestic market.

Guiding on taxes, we expect it to be gee.

Stay about 10%.

- stay '10% for the next 12 months. Don't get too caught up on tackling the German domestic market either. I mean the strategy to be in the general sense, we want to service about four or five more German airports in addition to Hamburg, Frankfurt and Friedrichshafen at the moment. That could be done as early as next year. That could also incorporates establishing a second base in Germany but it may not incorporate establishing a second base in Germany but we would like to have six, seven, eight airports in Germany before we start flying domestically, but we don't see [inaudible] to flying short haul international to and from Germany. The competition is still Lufthansa. We've proven now with 10 routes that we're more than capable of dealing with Lufthansa, so we don't see much of a difference. Germany will continue to be a strong growth market for us. We can't say yes, whether there will be more international routes or there will be some domestic routes, but both of them are coming. It's a question of whether it's one to two years or two to three years and we genuinely have no idea at the moment. It just depends on how the airport negotiations continue between now and, say, October/November.

Okay. And is it not fair to say that the real network is [inaudible].

No. I people really get all really caught up on rail networks at the moment because it seems to be, you know, the last thing out there. You know, with the rail network in the U.K., which most people slide off as not being very good but it is very cheap. If you look at most the rail networks around Europe, okay, they're very good but they tend to be incredibly expensive. I mean I would lose mostly competing with the TGF in France or the rail network in Germany at the kind of prices they charge. Same applies in Italy. And so, you know, rail is not going to be something that will worry us that much. We believe that our entry into any of those markets will substantially increase traffic and travel generally, will substantially reduce the price of travel, and we will capture the overwhelming majority of that growth.

Okay. Thanks very much.

Thanks.

Mr. Roger [Tugwani] from Cafe Financial has our next question. Please go ahead, Mr. [Tugwani].

Yeah. Good afternoon, guys. Just got a couple of questions. Firstly, I mean without getting caught up on the German domestic market, do you think your plans or your timing might change if the [Easy Jet] DBA deals goes ahead?

No. This issue on domestic routes in the - in Germany, just to verify what Michael said, the - our local intelligence, particularly the people at airports, are saying that internal German routes will not in any way be affected by rail links. I mean, not in any way is probably an overstatement, but it's a completely different market they see and market potential because there are huge incumbent air fares there still driving a lot of point to point Germany, not interline traffic into [inaudible].

The thing about [Easy Jet] and Deutsche and BA is we've established ourselves there. We haven't done anything other than begin to investigate a very high fare unprofitable operation that exists there at the moment. Operating at, you know, very slot congested expensive airports and good luck to them in terms of taking that one other. Our policy will continue, irregardless. We see Germany exactly as it is, the largest market in Europe, the hoist income per capita in the EU, you know, huge travelers if they weren't retarded by very high heir fares that they already have with Lufthansa, and as a result, a massively fertile market for Europe for Ryanair as is proven by the success of Frankfurt Hahn and we continue to do that. We continue to such for other opportunities there and undoubtedly they'll come in due course.

On the - on the routes, can you just remind us how many - how many routes you started, both in Q1 and in Q4 2002, and into which period did those startup costs go?

I mean you should really take it that we've effectively launched all of the routes in Q4 of last year. Although physically we didn't - whilst we started flying most of them, more than half were - we started in February and March. There was another five launched on the second of April and then there was about four launched at the end of April. But we were in the process of advertising, promoting, spending money in Q4, and, you know, we're taking a tactical view into Q1 here was that, you know, when load factors were up in the high 80s, mid-80s to high 80s, there wasn't a need to spend a lot more money on advertising. Now, you can take markets in Germany where Lufthansa was generating so much free publicity for us, it didn't make sense for us to be doing a lot of advertising so in some cases we got lucky in certain markets but mainly it was in Q4 with a small runover into Q1.

Okay. Just a couple more quick ones. Michael you mentioned this morning that sort of business passengers are around about the 40% market.

Yes.

And just as how would you define business passengers and also, where does that figure stand in relation to, say, a year ago and how do you see that going forward?

We define business passengers as passengers who tell the airports and servers they're traveling on business or on leisure, and no more sophisticated a measure than that.

We believe and, you know, but it's largely anecdotal evidence for this, that this - over the last 12 months but certainly since the 11th of September, there's been a significant amount of increase of businesspeople traveling with us and businesses encouraging their people now to fly low fares airlines. Partly for price, but also partly for avoiding the congested airports point to point services.

Now, obviously on some routes where we're now up to four lights a day on London Frankfurt, we have very high business percentage. Again, this is anecdotal observation. I'm sure on the one a day to [New Key] in August, we have [inaudible] on business or maybe it just depends on what they define their business as but it is increasing and I think as we build up frequencies, particularly on our bigger products - remember, you know, on our trunk routes, Dublin Glasgow, Frankfurt, we provide more - Brussels, we provide more efficiency, say, than [Easy Jet] would do on their busy routes, so that combination of new aircraft, frequency, low fares, good on time performance is encouraging more and more businesspeople fly with us.

And just the last one, I actually missed the point on the development of marketing costs. Can you just repeat where you said and where they're going to go going forward?

We see them lagging behind the growth in passenger refuse annuities but, now beginning to increase again, you know, because of the - (a), we have got the insight up to where we think it's going to be over the longer term and (b), some of the - there will be less marketing involved in some of the new route developments now since we'll be linking up another points so it's just another one of those operating markets for the next couple of years that will lag with the growth in revenues but you won't see the absolute declines that you've been seeing for the last number of quarters.

Okay. That's great. Thanks very much.

Thank you.

You have a further question from Mr. Damien brewer from Shapiro raw. Please, go ahead, Mr. Brewer.

Yeah. Three very quick questions. First of all, on tax, while you're down to 10%, is that effectively the [inaudible].

Secondly. On the 737-200s, are there any actual withdrawal costs in terms of pulling those aircraft out earlier or are those the fully depreciated aircraft that are going. And finally, in the U.S., from April next year interest introduction of a higher employer's national insurance on staff, will that change your view of staffing from the U.K. as opposed to other markets to service some routes servicing the U.K.?

Okay. The tax rate at 10%, it could go a percent or two lower. The headline rate tax will fall in Ireland for another year. We'll be adding in more aircraft. But I wouldn't be -

It won't have any impact. You know, capital allowances and, you know, that's - that's a timing as opposed to a charge issue, so we don't really see a very significant change in the level of, you know, 10%. It's probably not far off the bottom of it. And in terms of the 200s, we don't see any impact - there's no impact in terms of getting rid of these aircraft. We don't really - you know, we've already fully depreciated them. We have them written in for a million dollars on breakup value, there's probably some up side on it, but we don't really see any downside involved in the equation.

It's important to let you know we're not at this point in time talking about, you know, necessarily withdrawing them. I think what we would perceive for '03 and '04 is sitting some more of those aircraft on the ground, they then becoming the spare, backup aircraft, of which obviously we would have - we've had three backup aircraft this year. Next year that figure might be as high as five or six. But they're fully written off. There's no withdrawal costs. And there may actually be opportunities for - you know, we might lease them out for summer - one or two out for a summer period for a short term leases. There will be those kind of opportunities there. So the [inaudible] higher national insurance in the U.K. I wouldn't worry about it. Remember, you know the staff productivity here is rising rapidly now that we're adding in bigger aircraft with 45% more seats, but the same two pilots and same kind of - well, four cabin crew instead of three cabin crew. But the passenger per staff ratio is improving very significantly, and that will continue now as we add in - as we add in more aircraft. In the last quarter, for example, the passenger per employee is up 29% from 1,600 to 2,000 passengers per employee and we see that increasing productivity being maintained. And by the way, if you just - while I know that sounds a big multiple, by four quarters you're up at 8,000 per year per employee. Okay. Any more questions?

Yes. Our next question is from Mr. Johnson billberg from Deutsche Banc. Please go ahead Mr. Bill Burr.

Thanks very much. Actually, pretty much all of my questions have been asked now but there is just one I'm left with. Has there been any change in the nonEU ownership since you last updated on that?

Yes. We haven't updated on it, Johnson, and we won't until the half year but we know there is has been a significant - or a material movement [inaudible] in a way from - pardon me? Oh, sorry. The next time we do the update will be March, so, you know, the EU ownership is now significantly over 50%. The nonEU ownership is somewhere between 40 and 50%. We don't know what it is, but it's moving in the right direction, so it's no longer an issue for us.

Okay. Thanks.

Thank you.

As a reminder, please press star 1 to ask a question. Please press star 1 to ask a question. Thank you. Newer our next question is once again from Mr. Shane Matthews from NCB stockbrokers. Please go ahead, Mr. Matthews.

Sorry.

It's more or less been answered. I just wanted to clarify that you hadn't done a deal with Boeing to return the older aircraft or anything like that when you said you were helping them out, perhaps they'd agreed to help you but from the sounds of it, that's not an issue.

No. And nowhere it would not be something we'd want to do. Like we still see value in the older aircraft, we still see opportunities for using them as backup, maybe some leasing. Eventually I think we'll sell them out into the maybe market, but we would not want to cloud what is a very good deal with Boeing but, you know, introducing well, we want you to take back some of the old 200s, given that we've been fully written off, it would take a lot of 200s to pay for one of the new 800s anyway, so that's not really an issue.

Thanks.

Okay. Folks. I think we've probably exhausted most of the questions and we have to do a couple of other interviews here ourselves, so if you don't mind, I think we'll bring the conference call to a close at this stage, say thank you very much for everybody who participated today. Can I again just be - in case we may have got the answers wrong, there is no hint of a profit warning, by the way, in the last half paragraph of my statement we are just very keen that nobody goes nuts or a little bit looses the run of themselves. Business continues to be good. It's continuing, we're continuing to grow very strongly, we're continuing to grow on the backs of lower fares. Cost per passengers are falling a little bit faster than average fares and we see no reason why that won't continue for the remainder of this year, but we would again urge you to look at our guidance on quarters 2, 3, and 4. That's where we think we'll be, and as Howard has said earlier on the call, our guidance for the year is now up from 185 million to 200 after tax in Euros.

If anybody has any individual questions or any follow-up, please feel free to talk directly to Howard or Shawn Coyle and Howard who are here today and tomorrow and for the remainder of the week and with that, I'll hand you back to the conference call manager and say thank you again to everybody for participating.

That will conclude today's conference. Thank you for your participation.

Thanks, everybody.