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.