Ryanair Holdings PLC (RYAAY) 2002 Q2 法說會逐字稿

Good morning and good afternoon ladies and gentlemen and welcome to the States (ph) Ryanair Q2 results conference call. At this time all participants are in a listen-only mode. Later, we will conduct a question and answer session and instructions will follow at that time. The participants require operator assistance throughout the conference call, please press star enter on your telephone touch pad. Just a reminder, participants, today's conference call is being recorded.

With that I welcome chief executive officer Mr. Michael O'Leary please, (inaudible) sir. I will be standing by.

OK, thank you. Good morning and welcome everybody to the Q2 results conference call. I am here with Howard Miller in London. Michael Cawley will be joining us shortly.

As you would have seen from our Web site www.ryanair.com, this morning we released financial results for the half year ended 30th of September, showing record profit and traffic growth while passing on fares that have been 12% lower than the equivalent period last year. Traffic for the six months grew by 45% to 11.3 million passengers. Average fares declined by 12% for the half year. Total revenues billed by 28%, operating costs rose by 32%, but after tax margin declined as predicted from 32% to 29% for the half year.

Adjusted net profit after tax rose by over 16% to a record 175.5 million euros. These result demonstrate another strong performance from our low fared model, which continues to grow profitably in adverse market conditions across Europe.

The sales of our traffic and profit growth as well as the exceptional margin once again proved our delivers long. At that with airlines improvement for over 30 years, the low fares model is property-implemented work. It delivers extraordinary role and exceptional profitability industry, more often characterized by losses.

During the period impacted by the war in Iraq, high oil prices and a depressed economic environment in Europe, Ryanair has taken delivery of 18 new Boeing Aircraft acquired, restructured and reloaded it's Boeing, opened two new bases in Milan, Bergamble (ph) and Stockholm, Scalta (ph) and launched over 50 new routes.

The increase is - in seek of December, by over 50% and launched so many new routes, it was inevitable that load factors would decline as we predicted from last year record levels. Most of these routes have performed extremely well and we are now really excited the ahead of our expectation of a 5% load back to declines as we predicted from last year record level.

Most the routes have performed extremely well and we are now slightly ahead of our expectation of 5% load package decline for the year. Although years continue to be faster than we had originally expected, we will continue to drive down shares in all market while offering more choice, better service and lowest ever prices to our customers.

Of our two new bases this year, Milan, Bagamo (ph) has as expected been the better performer then seller. Low prices at Stockholm, Scalsa (h) have been slightly lower, largely as a result of lower than expected loan packers on the three inter-Scandinavian routes always outlaw and pamperer.

I already discussed about our partners at Stockholm, Salsa airport, which will see aside and bring your performance these routes up to an acceptable low patent or alternatively replace them with new international debt nations in Stockholm. Some of our new rules and stances this summer, pertaining to the low countries and one or two French debt nations have also under-performed.

Unless there is an significant improvements in law factors through the winter then we will replace a small number of these with alternative destinations and services by selecting from some of the 15 new Airports we are currently in discussions with.

At the time when many (inaudible) announcing losses of the speed poles and profits, Ryanair, is continuing to grow profitably. This winter we will operate 13 new routes including the routes of Birmingham to Gerona and Marcia in Spain, Gerona, Frankfurt Al Cairo in Sardinia and Venice, plus go to Gottenburg in Sweden, Glasgow Milan, Glasgow Shannon, London (ph) Department (inaudible), which replace the trial bolt service, London race outside Barcelona, London pamperer in Finland, London by religion and Spain and Stockholm and Brussels. We continue to meet in defeat attempts by our high fare flying carrier competitors to limit Ryanair growth to block competition and lower sales in the regional markets.

In recent weeks, an efforts by SAS to block our operations have always been dismissed. Trains by Air Mediterranean that hit traffic had declined as a result of veneers' low-pressure services on the London pool route have been disproven by efficiency A traffic statistics.

Attempts by persons (inaudible) fans that the blast of loss carry nation for need of near Airport have been defeated and the Norwegian CA have also soon as complaints (inaudible) our cost base (inaudible).

We continue to release the final decision on the European Committee on the shadow of the investigation will remain confident that the committee will put in place that will encourage publicly owned airport such as to Salo-Salsa to compete in a level playing field, we are demanding privately owned airport towards Europe. These state owned secondary regional airports must be allowed to -and encouraged to participate in the low fare high growth traffic and towards near revolution.

At a time when the high fare flag carriers are entering into anti-consumer alliances around Europe we believe the Commission is extremely focussed on the five set development of the Europe division and competition air travel depends on the growth of direct low fare flights.

This is vital when the flight carriers are focussing on adding frequencies and increasing prices on connecting flights across a smaller congested held airports in Europe. To try to consumer of the air travel has recently been demonstrated by Breeze air, Air France's return to a monopoly sales on the (inaudible) London route with same day return fares that starts from a lowest price of 784 euros return from Strassburg. A fare that is over 40 times more expensive than the lowest fare on sales from Ryanair for (inaudible). As always our focus in Airline continues to be on cost reduction.

We are pleased to announce this morning new and lower cost financing to some of our new 737-800 series delivery. Going forward it will be Ryanair's policy to own (inaudible) majority of these aircrafts but it is an easy significant minority.

The ten aircraft that lived nearly 2004 the will now be find until the long term low cost operating leases expected from Ryanair's extremely low purchase price resulting in a highly competitive months lease rental. The financing of the significant portion of the Ryanair's new aircraft delivery is a bit over the coming years, we will significantly resulting in a highly competitive monthly lease rental.

The financing of a significant portion of Ryanair's new aircraft delivery over the coming years will significantly boost our cash flow and ensure that we continue to maintain a substantial net cash balance on our balance sheet allowing Ryanair to stay amongst the best, finest airlines in the world. We remained dismayed at the continuing inactivity of the Irish government in implementing its old election program to bring forward competition and low cost efficient facilities at the Irish airport.

Cost in three airports is not a material issue for Ryanair anymore we will setup up a right substance (ph) next year. as such compares to our delighted line to be Tokyo necessary price increases at a time when Irish tourism is crying out for new route for lower access there.

Its now over 12 months since the government received 13 expressions of interest from a wide range aviation companies to finance and play the most of the competing terminal of the Dublin airport.

I am experiencing no action whatsoever to introduce a desperate in needed competition. Its time the Irish government got real and proceeded with the stated policy of breaking the airport monopoly into 3 competing companies and expedite dividend of competing family of the Dublin airport.

Looking forward to the remainder of the fiscal year we remain confident that the traffic flows will continue to be strong. But cautious about fares and deals. We expect that average deals will continue to decline by between 10 and 15% compared to those last year.

And remained equally determined that Ryanair will continue to be the lowest fare airline in every market in which we operate. Accordingly we expect profits to grow materially as we continue to maintain our margins in excess of 20%. The one key difference between Ryanair and all of other low fare indicators here in Europe is that only one airline namely Ryanair offers a lower fare than has the lower cost. Ryanair will continue to drive down cost and prices and by doing so we will continue to replicate and price leader that the southwest, dale and Wal-mart and deliver superior returns to shareholders.

To celebrate these excellent results in traditional Ryanair fashion, we are offering 1 million seats for just 1000 each plus taxes and charges. Tickets are available on sale immediate on our Web site at www.ryanair.com on all routes from London with seats available everyday of the week during the month of November, December and January. Bookings mostly end at midnight on Thursday so book early as demand is bound to be very strong for this phenomenal offer. Don't give up the day job just take the one-time get away fares at Ryanair.

I will now hand over it to Howard who would take it to summary and q&a. Howard?

Thank you Mike and profit after tax increased by 12% to 168.9 million including the expenses cost and good will arriving from the both acquisition. This profit also includes an additional of the appreciation charge of 2.7 million euro. Relating to an adjustment of the ridiculed value of 5 Boeing 737-200 aircraft however retired earlier than planned.

Adjusted profit after tax excluding towards the exceptional cost of 2.7 million, good will of 1.2 million and the aircraft appreciation charge of 2.7 million increased by 16% to 175.5 million. But first is the NDNA (ph) discussion we will retract to the adjusted profit now excluding the exception items referred to above.

Profits after taxes have increased by 16% to 175.5 million incurred 150.9 million in the previous half year ended September 30,2002. Driven by some serious strong growth, half-year volumes and tight cost controls partially offset by lower fares. Operating margins have decreased by two points to 34%.

Although these factors operating profit increased by 35.8 million to 203.3 million compared to half year ended September 30, 2002. total operating revenues increased by 28% to 596.4 million while the quarterly numbers increased by 45% to a 11.3 million.

Scheduled passenger revenues increased by 27% to 523.5 by 27% to 523.5 million due to some part of volume growth offset by 12% decline in (inaudible) during the period. Until revenues increased by 36% to 72.8 million which is less than the growth in passenger volumes and reflect sound growth in non-flight (inaudible) revenue car hire and hotel revenue also participation of the charter program, as line in the place charted graffiti with scheduled therapists.

Excluding charted income and revenue grew by 62% a significant faster rate from the growth and passenger volume. Total operating expenses increased by 32% to 393.1 million due to increased costs associated with the high level of activity, primarily stop cost fuel recharges depreciation and airport and handling costs associated with the growth of the airlines. Operating costs continue to reflect the increase operation efficiencies arriving from the hyper portion of 73,800 aircrafts operations.

Ordering cum expansion declines in equity by 10.1 to a lower deposit interest rate and higher interest payable charges arriving from the equity level of debt. Debt margin is also (inaudible) declines from 32% to 29% while net profit increased by 16% to 175.5 million. Adjusted earnings per share has increased by 16% to 23.21 euro cents which is inline with the growth (inaudible) net profit.

One, the balance sheet, -- the balance sheet cuts and mixed resources have increased by a 100.9 million euro from 1 billion and sixty million euros at March 2003 to 1161.1 million euros at September 30 2003, the second increased taxes from the possible training performance during the period.

Eight additional aircraft's were delivered in this period and in addition to aircraft deposits paid, fees accounted of the 283.6 million incurred in capital expenditure. This is part from the (inaudible) as long term debt which increased measure repayments by 154.6 million during the period. Share holders firm that September 30 2003 have increased to 1.415 billion euros compared to 1.241 billion euros at march 31 2003. Thanks Michael.

Thanks Howard. OK, ladies and gentlemen, we now open to questions normal format at the moderate we will take care of what introduce the question.

Thank you ladies and gentlemen, to register your question at this time please press "1" on your telephone keypad. To cancel the question please press the "#" or the pound sign. Once again ladies and gentlemen that's number "1" on your telephone touch pad to register your question at this time.

The first question comes from the line of Chris Avery. Please go ahead with your question and also your company name.

JP Morgan. Good afternoon, two quick questions. As a glowing probability of some rising you came just right. Can you comment on what that might be in - if mortgage rates go up too demand for short breaks over the winter period and in my second question how -- What's the reason for the big increase in net interest payable is the overall net cash positions paid reasonably strong.

Well, let me take the first part. We think we wont have any impact. We are finding rising interest rates should be good for the business Chris as we continue to have net cash balances on the balance sheet. In terms of increasing mortgage interest rates here, having some negative effect on consumer concerns are spend it will be the same as the last three downturns we have experienced here in London.

People gravitate more towards low-cost airless for short weekend breaks, increasedly the weekend tour market is being blown apart by people organizing their own weekend breaks. City breaks sky party, ten party and an increase in trend of people either owning or renting their own property in place like France Spain Italy. So we would see increase in interest rate, here is being good for the top line in terms of revenue, goods business and very good to the bottom line in terms of deposits income.

How do you think Mike?

Yes, in terms of interest receivable, we would had a very strong cash balance over the six months. However we would have had a lot of cash on long-term deposit interest. As this has matured over the last six months, clearly interest rates decline significantly since last year. So according we are earning less deposit interest income on the fund.

The other side of the equation is interest payable. This has increased as leverage had increased and in the end you may highlight that we taken delivery on the inter craft during the period. So you have two effects, one, lower interest rates in terminal deposits and higher level of cash of because a higher level of interest payable.

But nothing else exceptional in their in terms, because its interest payable and similar charges, but there is not point of similar

we won't even think that some times include in there is a foreign exchange gains the losses, and it is implied away from the deposit base. Now you have almost 90% of our deposit base would be in euros. So from time to time we do lot of bit more turning but does not really exceptional and (inaudible) see the moment on the increase stack on the low level deposit interest.

so we would look on that Q2 net interest payable as a kind of run rate from here then.

yes, I think that would be a very good indication of what the therapies in the back end of the year look like.

Thanks very much.

Thanks Chris.

Thank you, the next question comes from Martin Borgetto. Please go ahead with the question stating your company name.

Morgan Stanley. Good after noon. Quick on the yields development, I mean you mention after the first quarter that the yield should be down - 10% to - 15% and you coming in not -10%. Is this signal also going forward where you getting again for to the -10% to -15% for the full year that we should more locate the -10%, and potentially better then that or is it the winter shaping up to be tougher then the current trading environment and the second question is regarding the 767200 retirement, I mean is the project number which you have, because you were not check all aircraft when you make the press release all these suspected aircraft with their scratches. Are they all taken out of service? Do you indirectly help. Solving the airport not that your basing 70 700 not 800 (inaudible) Dublin airport with regards to roof.

OK, wheels, as we said in the statement this morning, will be cautious through the winter not because of any adverse external circumstances. But we intend to continue to be very aggressive on price promotion while, but they are living off, they would not the meanings, one pound. I would be making predictions of north; I would have on the upper end of the range 10% to 15%. I think there is lot of area lines out there, totaling now its time to continue to keep the (inaudible) all of the competition where the aggressive pricing and we intend to continue to do that right through out the winter.

Aircraft retirement our plan remain to retire seven aircraft - at the end of this year, the market may remain next year. We haven't face the infection; they have sixty-day period window to the end of November to complete the inspection. We have a in space to the further to and at the moment there are OK. So there is left two inspect. This age we think that our maximize exposure looks like about seven aircraft in Coco, which is pretty much what we have planned for retire at the end with your any way.

Lastly, bear in mind that we have a total of 21200 and Dublin centred some radical change in the government policy. Dublin will continue to be predominantly a 200 theory base for the perceivable future press this winter has become an all 800 base down to four 800 and several mix of two 2's and two 4's and we have also taken some of the 200 out of sand set.

It makes more sensitive base by base rather than having a mix 3's and mix 2's in our particular base. But Dublin will be the last base to get a 100 and we will do everything in our power to ensure that won't be any capacity increase in Durban until the change in the government plan and the attitude of the airport monopoly there.

Alright, thanks.

Thanks Martin.

Thank you, the next question comes from Jim Parker. Please ask the question and also your company name.

Cawl, Raymond James, Michael good afternoon.

Hello James.

You mentioned that the results and loads in Scandinavia and across Scandinavia were underperforming. Can you elaborate on Mike?

Yes, I think should also be kind of cautionally on the conference call. We are presently operating on in 36 rooms, we are talking at the moment of 6 out of 136 rooms which by all high standards that are on the performing. We are talking load factor in the very low 70's instead of high 50- low 70's instead of low 80's. The free domestic rules in Scandinavia, one could argue we go there much schedule to give that the moment are only one to day services.

One might also argue that some of the airport total lend themselves to a (inaudible) one to day service or lend them (inaudible) the business topics. There is also couple of airports where we have stayed the low country than one or two french destinations. Nothing particularly wrong with the load, but we are sending our signal to a number of airports here where frankly their performance hasn't been up. We expect of an airport path that wants to get our finger doom.

Some one totally will someone totally want to those lose those root. We think the next number of months this is a (inaudible) last chance. Again I would caution, if you look back to the Straus berg experience in September we have 50 more new airport destination to have their tone (inaudible) this air craft and this capacity and all we are talking about to is calling forward some of the other destinations we have. The Scandinavian free domestic, Scandinavian route will be replaced with other flight from Stockholm (inaudible).

There are nine other routes from Stockholm (inaudible) as well are better than we had expected. So I think it is a quite -- that we are getting bigger, it was inevitably in a period when we opened up 54 new routes that one or two would be slightly weaker than we had thought. We are prepared to live with that for a period of time, but we are not prepared to live at airports who don't turn the planes round, who don't approach our business with the same degree of passion and efficiency that we do. If you don't book up they are going to lose out.

Michael a second question, in a worst case scenario if you had to lose from (inaudible) or a base like (inaudible) what would it cost? What do you have to lose?

There is a number difference that can either cause the (inaudible) and on again I go back to the Strauss Berg example. It cost us effectively a slightly lower load factor for the last 2 or 3 weeks about service and a slightly lower load by the --first league or two of the badden (ph) service. There are no penalty cost of leaving (inaudible) , there is no employment labor cost, the staff that can be transferred. It is not going to come together and got some pains again to -- want to reemphasize the people.

We are very confident of winning the (inaudible) the core decision of the (inaudible) case will not take our cost base with (inaudible). However even if it does we would appeal it to the European court which will suspend it for a number of years. Even if we loose it in the European Courts, there are a number of solutions still available to shallow up such as instead of giving us a significant discounts to the published rates, they say we reduced the public rate to the discounted rate and therefore, there is no element of discounting involved at all.

Another solution which has been discussed and already put forward by the Walloon government is that they would simply privatize Charleroi Airport and take it out of the state aid rules altogether. So, people are overdoing I think the caution or the concern, that the negative decision on the Charleroi case would hover on Ryanair. We have any number of alternative airports, we have a number of alternative strategies to remove Charleroi from the entire state aid regime in any event and so I think this is just put about by people who are analysts, who re-do the sand business or people who tried out short of Stock wood, something like that.

I agree, good response, Michael.

Thank you, the next question today comes from the line of Robin Horne. Go ahead with your question and answer your company name.

Hello, good afternoon gentlemen. Credit Suisse First Boston. Can you just tell us what you are doing with your folio gardens. That's my first question and secondly while they switch to operating leases and for modelling purpose, what should be used as a monthly lease charge?]

Robin, this is (inaudible). In terms of the first part of your question, operating leasing fee, we changed over to look at those, because it give us some credit flexibility. There's some one has been on our cost basis what I was good, obviously for confidential reasons, I can't go into that what the leaf shades would be. So, what was the other part of your question.

What are you doing with your Folio garden?

Folio garden, after the start of the rum, we guided a 10% increase in net profit before exceptional reached focus from 239 million to 263 million euros. We are now, which was a 10% increase, we are now guiding based on having done 16% in the first half, that we will more or less track about 10% in the second quarter. So, we are a causing an increase in full both full year guidance to 270 million euros, pretty exceptional.

Right, does that means you are upping your guidance for 7 million euros. Am I right in saying it?

Yes, 7 million euros, that's a full year of 13%.

Just given the fact that you beat half year estimates by 10 million euros, does this mean we are looking for slightly worse outlook in the second half of the year than you-

Yes, I think our view, we said that in the press release, you know we are very cautious and Michael referred to that Iran and (inaudible) into that kind for the year. Lot of these roots are in the first year of operations and you know, we advise a lot of caution in the second half. We are using that, you know, deLobbenbergrately you make Melvin start our calls per passenger decline by 9% during the first half of the year and we continue to be on a cost basis design into the second half and we intend to use that cost basis to continue to put a lot of pressure on some of our more weaker competitors as there.

Great, thanks very much.

Thank you, the next question today comes from the line of Jonathan Wisey. Please go ahead with your question and state your company name.

Yes, it's HSBC. Good afternoon, first to a three quick questions. First one is some might just seek to credit qualification on that guidance question, you talked about pretty exceptional, you have 2.7 million of aircraft time and cost in the third costs, are you still expecting 5 million for the full year.

Yes, we are.

And then the other two questions. Staff numbers, can you give us some guidance for the full year, what you expect those numbers will be getting?

And its just like just run through that pre exception of 270 million or 13%, pre exceptions and after the striving or scratching issue, 5 million down which we highlighted at the end of September that will you give an 11% increase. And in terms of stock numbers, stock numbers will start to increase as you move to the back end of the year with the recruitment that more staff depend Air craft and some of those are process of being recruited then we will be driving something like 2400 staff by the end of the year.

That's the year-end number not an average numbers?

Year-end number.

OK, and then the final question I had consider the ancillary revenues, can you get the still from what did the Charter element as was last year, it will great might be intersection --.

Charter is to send the (inaudible) 5.4 million for Q2 and the (inaudible) for the half year was 8.6 million and any government's pretty much there were some zone at the back half of the year may be (inaudible) at hand at the moment.

Right, for the gross rate in ancillary revenues for the second half of the year will that be more in line with passenger numbers?

We always matching the - we said in the end MG&A virtually 2% for the first six months and that's moving average for the year.

OK.

Expect something similar in the back half of the year and at half the rate on the golden passengers we did 45% in the first six months and I think it still by 62-36 something similar in the back half of the year.

OK, thanks very much.

Thanks Gentleman.

Thank you, our next question taker is from the line of Travis Anderson (ph), please pose your question and state your company name.

(inaudible) most of our questions have been answered but just one or two ask you to discuss comparative situation you mentioned that your Ryanair was the good time to put the blocks to the competition what is the most response (ph), or really what changes have you seen?

I think our changes recently we have seen force of withdrawal by competitors from specific markets specific (inaudible) pulled off a number of the London Cathy London city routes reduced capacity on Edinburgh, we have seen some retrenchment particularly in the German and Italian market where German wings (inaudible) express the withdrawal from news where youth competed Edwards, Biliary and Italy have don't compete similar and the indications that are considering for the route reduction where would they face competition from us I should say we weren't in the business, don't you know, driving down fare because we want to see of the competition.

We are driving down fares because the Copter continuing to fall driving down third under like our growth and it can be obviously as modeled where almost all of our competitors are desperately trying to see how ways they are how they can keep the fares up increase the yield or limit the yield erosion we can be driving on like juggernaut had intended to go away.

also with the equation now looking like we are not going to make a decision for another 30 40 days, can you comment on this, between now and then.

It is not our plan, We are in still active discussion with ;a number of base Airports parking has been put back by the price that the first site of the new deliveries the (inaudible) strings will be used to take out the lease aircraft (inaudible) aircraft we have been for the September , winter. Several base in the market aircraft. If we get a particularly good deal over concluded the really good deal we can bring it forward but I would say expected stage of the new base would probably be announced after Christmas, there is a possibility could be before Christmas.

We simply continue our and we will approach the market - we will see how we get on with the discussion. Putting this the longer the discussion continue the better the offers are becoming so we intend to keep going.

OK. Thanks

Thanks Travis.

Thank you once again ladies and gentlemen. To register your question at this time please press "1" on your telephone keypad and the hash or the pound sign to cancel. The next question today comes from Andrew Lobbenberg (ph). Please go ahead with the question an your company name.

Michael, hello, its Andrew from ABN. Couple of questions please. Pretty simple ones I think. Can you give us guidance on what the capacity growth is going to be for the third and fourth quarter and what its going to be now for next year in the light of the-you know changes in the aircraft. Could you speak a little bit about your attitude towards the US ruling on fines, cancellations and on time settlement because, despite your good on time performance I think you guys are fighting it. And then just finally there is plenty of color in your release about your relations with the Air Ryanta (ph) but I see popping in a route on with (inaudible). What's the thinking behind that.

Thanks Andrew. You are very welcome. The capacity growth third and fourth quarter would be I said where it is today, capacity growth for next year we expect would be around 20%. I would expect low factors right if a couple of percentage points as we pickup some of this years decline. So we are heading I think for tropicals next year of the order of 24-25%. Ruling on consumer rights we think, we don't think most of the legislation -- and I see (inaudible) up not because it will have much bit of effect on Ryanair. We are blue in the face, we are probably the only airline in Europe that doesn't overbook. We are also the number one airline in Europe for on time fewest delays, fewest lost bags, fewest cancellations.

So in financial terms this legislation will have almost no impact on Ryanair. However looking through the detail of the legislation if we have a lot of impact on most airlines anyway, there's a couple of problems that is one obviously that the airlines are not liable for an enormous number of delays and cancellations that are beyond the airlines control. Things that I gave traffic control delays, weather, and things like that strikes that you know Italian strikes, French strike etc. and that really accounts for an enormous proportion of these cancellation delays.

Secondly we think the airlines generally will challenge the legislation because its bizarre that they wouldn't institute legislation on these strikes against the airlines, but nowhere legislation's against competing forms of transport like the road, the rails, ferries, coach operators. I think its probably legal on those grounds. illegal under ageing law on those grounds alone.

Thirdly and also on the legislation its entirely impractical anyway, we draw you back to the, there's a various provisions that offer excellent rewards the airlines must provide people say knells, and after six hours of cancellation beginning free hotel rooms. I take you back to the PA strike in (inaudible) some months ago when 45000 people were stranded over three days, PA could not buy 45000 hotel rooms and nor there enough restaurant capacity lethal to fulfill that kind of stuff.

So we think its pretty badly drafted legislation mind you in most thing pretty about the draft legislation, its ineffective its also impractical but fundamentally its purely discriminatory on the EU competition law, much of that has to be relying on those. Man, I believe the airlines will successfully challenge us. Again focus on the fact that the legislation's, even on the present room, present committed plays until 2005. so I think we going to see an all sort of watering down. This is in legislation designed by politicians, to make politicians look as they are doing some thing.

One of them got as a worked in that.

One of them what?

One of them got as a book, that's why it will pick stuff.

Probably, you know I can't imagine what else, what are the reason that would be. Finally on the technique shalom (ph) issue. I would focus on that much more, we are not increasing --the routes or capacity into the Irish airport. They are owned by an airport, monopoly. They continue to be -- we continue to have significant problems with particularly in effectual inept prime minister in Ireland.(inaudible) making decision. And we are campaigning very aggressively because (inaudible) nobody is bullshit anymore. However --

Cost significantly?

Yes, (inaudible) still from advanced payments for the delivery, which are scheduled into the back end of 2004 and to the early part of 2005. However as we don't have operating leases. They wont be on the balance sheet and but also try and factor some CAPEX equipment in product.

OK. Thank you very much.

OK.

Thank you Ladies and gentleman. If you would like to ask a question at this time please do so by pressing the number 1 on your telephone keypad. To cancel your question please press the # or the "pound" sign. we have a question from Steven. Please go ahead with your question and announce your company name.

Hello, its Steven from Williams Brothers. I was just trying to get a better understanding of what you are doing with operating leases. Am I right in understanding some statements you will be selling those aircraft's at the price you paid for the, you are not booking any additional profit and just benefiting from the lower lease cost. And if that is so how much do we expect you to have coming in Ball Park if you are going to be taking that all as cash received?

The answer is yes. We are not going to book any profit on them. We are going to (inaudible) we get the significant deposit we put in place prior to delivery all come back in and clearly we are not funding. 15% of that purchase price as we are doing on the owned aircraft but as the number of consequences it should significantly boost cash balances over the next couple of years if we keep at least by the mix of 1/3,2/3. That will keep the company a significant net cash position with very very substantial cash reserve.

And thirdly looking at over the medium term it gives a some degree of flexibility. We want to be and (inaudible) we want to be in a situation in 7 year time on a rolling basis going forward of having some aircraft coming up to the end of an initial lease every year. We certainly in the middle of a heavy purchase program but with some aircraft coming off lease we will have the option of extending those leases of redelivering to the leasing company. It is in our interest to do so.

We also have the option of returning the (inaudible) with more aircraft purchases. It s been a greater flexibility into the fleet over the medium term. For example southwest has done very successfully over the last 20 years. They tend to have a balance of 50% of the fleet owned, 50% of the fleet on lease and building a significant fleet flexibility in the program. We intend to do the same.

And Joe (ph) will be taking (inaudible) a couple of 100 million Euros next year.

Well the (inaudible)

Well, I mean you paid in advance for most of those aircraft. Haven't you?

Yes. Well the deposit (inaudible) our deposits are in the aircraft fixed asset line and you will see them, effectively they will revolve through that line. We will receive back deposit on delivery but we will also be putting further deposit in place for future deliveries.

So.

We wont be booking (inaudible) the booking profits on these aircraft's. We are not getting into that kind of occupational accounting.

OK. Thank you.

Sure. Thanks Steve.

Thank you. Our next question comes from Edward, please go ahead with your question stating your company name.

Just pulling up on an earlier question. Could you just give some indication that its not too early as to what happened to your hedging for the next fiscal year hedging?

We (inaudible) September '03 sorry '04 pretty much the same rates as this year in and around 88 to 89 cents, 2003, sorry 2004, are pretty much the same as this year, in and around 88 to 99 cents per gallon US.

Thanks very much.

And I think we have time for the final question.

Yes, it's a part of the question from Andrew Lobbenberg (ph). Please go ahead.

Michael, hello, real quickly a thing you just answered in Steve's question, when you say long operating leases, that seven years, is that right?

We were looking at --as a general rule so with the moment for the part of the discussion, we are looking at seven years, we've-re-designed the re-delivery conditions of the end of that seven year period, that we know maintenance is their stage during the period, there will be no deposit and that kind of stuff. These are really leases designed by our far off taking advantage of our very low purchase price on the aircraft, there is very low interest rates available in the market at the moment and the substantial appetite that exists out there amongst the financial institutions to do business with an airline with Ryanair, it is growing quickly, growing profitably and has a very substantial and strong balance sheet.

Thanks.

And we would see obviously the next couple of years, primarily though the drive is to build-in flexibility in cost-term, they will be pretty much the same under differences our ownership's, but we would be able to get out of the market in six or seven years.

Any final questions.

We have a question from Shane Matthews, please go ahead with your question.

Could I just --Hello when you say there is no maintenance reserve, do you propose to expense the maintenance as it is incurred or will it be done in the normal, like what way are we looking at the on-going expense?

It would be clearing up on a hourly basis for the maintenance and like I suppose we used to do when we --before the closing part of exchange, so we do and a cool on a hourly basis but when the expenses incurred.

OK, thank you.

The key to this and in the normal operating lease is we would be keeping the cash on our balance sheet. If you were in normal circumstances entering an operating lease with one of the big operating network, you would be paying out to them security deposits, you would be paying monthly maintenance reserve and you will find that when you sketch to re-delivery, you will find it very difficult to get those maintenance reserves back from the leasing company. In this case, the opposite will be the case.

OK, thanks.

Thanks Shane.

At this time, sir there appear to be no further questions. I would now like to turn the conference back to yourself, any self remarks.

OK, ladies and gentlemen, thank you very much for participating today. I hope that we will see a lot of you as today's investor briefing in London. Howard will be in the US for the rest of this week and if there is any further questions, they want to put it, please free to call myself, Mike and Cawley, Shawn Corz (ph) will be back in Dublin and work tomorrow morning. Thank you very much and we will either meet or see you in the next couple of days. You can sign off now, thank you.

Thank you ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect your line.