Ryanair Holdings PLC (RYAAY) 2003 Q4 法說會逐字稿

Thank you for waiting, ladies and gentlemen, and welcome to today's Ryanair full-year results conference call.

May I remind all participants they are currently in a listen only mode and there will be an opportunity to ask questions later in the call.

I will now hand you over to your host for today, Michael O'Leary.

Please go ahead, sir, and I'll be standing by for questions.

Good afternoon, ladies and gentlemen.

Welcome to the Ryanair results conference.

With me today are the usual suspect, except Michael Cawley is on a flight to the U.S. where he is doing the U.S. roadshow, so I have myself here in London.

Howard Millar and the other guys are in Dublin.

We'll take you through the official -- the normal presentation and open it up for questions and answers.

Ryanair today announced better-than-forecasted financial results for the full year ended 31 March, 2004.

Annual passenger traffic grew by a record 47 percent to over 23 million.

This growth was driven by significantly lower fares.

Yields declined by 14 percent during the full year and consequently, total revenues rose by 28 percent to over EUR1 billion for the first time.

Unit costs during the year were reduced by 6 percent with the results that total operating costs rose by 39 percent, significantly less than the rate of traffic growth.

Ryanair's adjusted after-tax profit margin fell from an exceptional 28 percent last year to an industry-leading 21 percent, and adjusted profits for the year have fallen by 5 percent to 226 million.

Contrary to our earlier fears, our adjusted profit in the final quarter marks our 28th consecutive quarter, profitable quarter since Ryanair first floated in May, '97.

These results demonstrate yet again what a superb job the 200,300 people of Ryanair do in both good times and bad.

This year was characterized by adverse market conditions, including Sterling weakness, the war in Iraq, the threat of terrorist attacks, significantly higher oil prices and intense price competition all over Europe from chronically (indiscernible) making flag and new entrance carriers, most of whom are losing money on an enormous scale.

Despite these challenges, Ryanair has significantly lowered fares for our customers, carried over 23 million passengers, still maintain the world-leading after-tax profit margin of over 20 percent and ended the year with over 1.25 billion in cash.

Our two new bases in Rome, Champignon and Barcelona/Gerona are performing extremely well and current bookings indicate that load factors at both bases will exceed 85 percent through the summer period.

Ryanair continues to be the lowest cost fare around in Europe but we will continue to exploit this enormous cost leadership to grow profitably while many of our competitors lose money and/or go out of business.

It remains our medium-term view that, similar to U.S. and similar to Southwest in the U.S., there will only be one or possibly two large low-fare airlines in Europe, and we are determined that the biggest and lowest costs of these carriers will be Ryanair.

Others who have higher-cost or higher-fare models will have to endure losses or switch capacity away from head-to-head competition with Ryanair, such as Easyjet on many of the (indiscernible) provincial routes and more recently, both BMI Baby and Easyjet on the East Midlands/ Barcelona route because their higher cost base makes them unable to compete head-to-head with Ryanair's low fares.

There will continue to be regulatory battles, such as those in Strasburg and (indiscernible), but these would prove to be temporary obstacles.

The growth of competition, choice and low-fare air travel in Europe is unstoppable.

As more and more airports compete to win our business, costs will continue to fall because the existing competition rules allow publicly owned airports to compete on a level playing field with privately owned airports.

We remain confident that we will ultimately win both of our appeals in the Strasburg and (indiscernible) cases.

The need for Ryanair's low fares has been highlighted by the damage done at Strasburg airport, where Air France's high fares has causes traffic on the London route to collapse from almost 20,000 passengers a month to just over 3,000 immediately following Ryanair's temporary withdrawal.

Much hysteria has been generated in recent weeks about higher oil prices.

We believe the growth of low-fair air travel will not be damaged or slowed by higher oil prices, which will only hasten the demise of some of the current wave of loss-making start-ups and high-fare flight carriers.

The recent decision by British Airways, Air France and KLM, among others, to impose fuel surcharges is typical of the anti-consumer mindset of high-fare airlines.

Whilst we are almost fully hedged to the end of Q2, we are largely unhedged thereafterwards, as it would be unwise to lock in at the current high forward rates.

Our view is that prices will fall either later this winter or next year, and only then will we hedge in order to benefit from such reductions.

Unlike some high fare carriers, Ryanair by contrast will absorb higher oil prices by making cost savings in other areas; we will not impose fuel surcharges on our passengers and have little doubt that our traffic will continue to thrive as a result of higher price differentials between Ryanair's low fares and those of our surcharging competitors.

The outlook for the coming 12 months remains very conservative.

We expect strong passenger traffic growth of about 20 percent.

Our seat capacity will rise by just 16 percent this year, as both Stanstead, our subsidiary, has been unable to agree reasonable lease terms with ILFC.

Due to this uncertainty, these aircraft, which are presently operated by Buss Stanstead under contract to Ryanair, have been removed from Ryanair's forthcoming winter schedule.

Current load factors are higher than this time last year, which confirms our view that we will have no problems filling our fleet of larger 189-seat aircraft once the exceptional capacity growth of last year returns to the more normal 20 percent rate.

We continue to expect yields to decline.

With almost 50 percent of the seats booked for the summer season, the yield attrition seems to be towards the lower -- i.e., lower end of our forecast range at minus 5 to minus 10 and lower in that case means towards minus 5 rather than minus 10.

But next winter, as many of our loss-making competitors don't price us to try to stay alive, we expect yield declines to increase to within a range of the upper end of the range between minus 10 and minus 20.

There will be more airline casualties next winter, a process that already started in recent months with the closures of four airlines and tour operators in Ireland, the UK and Scandinavia.

The European consumer has repeatedly shown over the past 20 years that they support Ryanair.

In every country and in every marketplace, Ryanair provides the lowest fair air travel with the best functionality, the best customer service upon brand new 727 series aircraft from uncongested easy-to-use local airports.

We intend, over the coming years, to lower prices further as we grow our traffic to over 50 million passengers per annum and in doing so making Ryanair Europe's largest international scheduled airline.

Over the past 12 months, over 23 million passengers saved an average of just over EUR100 each by choosing Ryanair over our competitors.

We look forward to doubling these savings for European consumers over the coming years.

Howard, will you do the MD&A, please?

Absolutely.

Thanks, Michael.

The introduction to the MD&A -- for the purpose of the MD&A, all figures or comments are by reference to the adjusted profit and loss account, excluding the non-recurring costs and goodwill referred to below.

Normal recurring costs consisted of the organization costs of 2.7 million net of tax, additional depreciation charges of 3.3 million relating to an adjustment to residual value of 6 Boeing 737 200 aircraft that were retired earlier than planned, which in turn gave rise to lease costs of 11.6 million net of tax.

Goodwill of 2.3 million arising from the Buzz acquisition was amortized during the period.

Total non-recurring costs of goodwill amounted to 19.9 million net of tax for the full year.

The adjusted net profit for the fourth quarter amounted to 3.5 million, reflecting a 22 percent reduction in average affairs.

This is summary for -- arising from that introduction the summary for the full year ended March 31, 2004.

Profit after taxes decreased by 5 percent to 226.6 million, compared to 239.4 million at the previous year, driven by continued, strong growth in passenger volumes and tight cost control offset by fares, which were, on average, 14 percent lower.

Operating margins for the year also decreased by 6 points to 25 percent.

However, despite this reduction, operating profit increased by 3 percent to EUR270.9 million compared to the year ended March 31, 2003.

Total operating revenues for the year grew by 28 percent to 1.74 billion whilst passenger volume decreased by 47 percent to 23.1 million.

Scheduled passenger revenues increased by 26 percent to 924.6 million due to strong passenger growth offset by a 14 percent decline in average fare during the year to EUR39.97.

Passenger volumes increased due to the launch of new routes and bases and increased capacity on our existing routes and the acquisition of Buzz, which was completed during April, 2003.

Passenger load factors decreased as expected by for percentage points from 85 percent to 81 percent.

Ancillary revenue increased by 35 percent to 149.7 million and reflects strong growth in non-flight schedule revenue, CAGR, and hotel revenue, offset by the cessation of the charter program as Ryanair replaced charter capacity with scheduled services.

Ancillary revenues were also negatively impacted by the strength of the Euro currency versus Sterling.

Sixty-five percent of ancillary revenues are denomination Sterling.

Ancillary revenue, excluding charges, increased by 52 percent, hard on the growth rate in passenger volumes and accounted for 14 percent of total revenues, compared to 13 percent in fiscal 2003.

Total operating expenses increased by 39 percent to 803.4 million due to the increased level of activity and the increased costs, primarily fuel, route charges and airport and hanging costs associated with growth of the airline.

Costs increased at a lower rate than the growth in passenger numbers, principally affecting the increased operation efficiencies arising from the higher proportion of 737 800 aircraft operated.

However, costs have increased at a faster rate than the growth in revenues due to the decline in fares as described above.

Other income expenses declined significantly by 21.5 million due to the combination of lower deposit interest rates and higher interest payable arising from the increased level of debt during the year.

Net profit margins have, as a result of the above, declined from 28 percent to 21 percent whilst net profit decreased by 5 percent to 226.6 million.

Adjusted earnings per share has decreased by 6 percent to EUR29.91 cent (ph).

Onto the balance sheet, cash and liquid resources have increased to 1.060 billion at March 31, 2003 to 1.257 billion at March 31, 2004, reflecting the increased cash flows from the profitable trading performance during the year, offset by expenditure in respect of the aircraft acquisition program.

Eighteen additional aircraft were delivered, nine in the last quarter.

Ten aircraft are financed under opening lease agreements and the remaining aircraft were financed via debt.

Aircraft purchases, in addition to aircraft deposits, accounted for the bulk of the 331.6 million incurred Capital Expenditure.

This was part funded by the drawdown of long-term debt in relation to aged aircraft, which increased net repayments by 115.8 million during the year.

Shareholders' funds at March 31, 2004 have increased to 1.455 billion, compared to 1.241 billion at March 31, 2003.

Over to you, Michael.

Okay, ladies and gentlemen, that concludes the formal part of the presentation.

We will now open it up for questions.

If the moderator could do it, we will try and answer all the questions; we try and stay here until we've exhausted all the questions.

I think, before we do so, Howard, do want to give some -- (indiscernible) the first question, some guidance on the range for next year?

For next year, we're giving guidance.

However, I should say this is very heavily caveated and we're giving guidance of a net profit of 200 million plus, but before that is taken into account, we must consider the four things we are caveating that by -- firstly, if there's any terrorism impact in Europe, we would have to take that into account; obviously, we would have to take Sterling -- Sterling has a significant impact on the business, as I just highlighted in the MD&A, so clearly a significant adverse movement in Sterling would cause us to reflect upon those numbers as well; thirdly, in relation to fuel costs, clearly we are working on current market rates or close-to-current market rates for fuel within that 200 million-plus guidance; and fourthly, the yields are based on our range of expectations as outlined in our press release that Michael discussed and on the basis that we don't see further irrational activity by other operators, particularly as we move through the winter period.

Okay, Howard, thank you for that.

Okay, let's open it up for questions.

Thank you. (OPERATOR INSTRUCTIONS).

Nick van der Brul.

It's Nick van der Brul from XM (ph) BNP Paribas.

I have two questions.

The first one is, in your current yield guidance, what is the estimated currency impact in there?

It was 4 percent (indiscernible) for the last year of the 14.

Are you expecting similar proportion, or is it lower this year?

Second question is the seasonality, the yield guidance indicates a much greater seasonality as do the results for last year.

Are there any measures you might take, in terms of the structure of the network, withdrawal of capacity in the winter season, etc., to improve the profitability of what is becoming the low winter season?

Thanks, Nick.

Howard, do you want to take currency impact?

We are assuming obviously the Sterling has strengthened against the Euro, particularly over since February of this year.

In terms of our guidance there, we are assuming that the current rate of Sterling -- exchange rate of Sterling to the Euro prevails for the remainder of the year.

We would see that would offset some of the decline.

Clearly, it's positive to us.

It was a third of the 14 percent decline last year, so in and around 3 to 4 percent, so we would see that benefit already factored into the numbers that we've given there.

In terms of seasonality, yes, clearly, given the results of the fourth quarter, the basis would appear to becoming somewhat more seasonal.

We're not sure that that reflects an ongoing trend; it may be a once-off, given the intense competition in capacity growth in the marketplace in the fourth quarter.

We still can't put our figure accurately on the reason for the precipitous decline in yields in the fourth quarter.

Looking forward, however, what disability we have for the next two quarters, the yield declines appear to be towards the lower end of our range of minus 5 to minus 10.

I think all we're doing at this point in time is saying, look, let's not get overly optimistic yet; let's just assume that, next winter, it's going to be at the upper end of that range.

Many factors can influence that.

I mean, the two things we're going to have is two radically different comparable quarters, the third quarter where the comparable yields will be relatively high in reference to the year just gone by and the fourth quarter is where the comparable yield figures will be relatively low as a result of the recent fourth quarter we've just had.

But much will depend on what happens in the competitive marketplace, what competitors got shaken out.

We will have significantly lower yields -- our capacity growth this time next year, compared to the 55 percent capacity growth we've had this year.

I think what we're saying in summary is, look, the first two quarters, which are clearly the most important ones look okay, but let's be ultra-cautious and conservative for next winter because we're going to keep driving the fares and the -- driving the prices and the fares at all of the competitors in all markets but with significantly less capacity growth next winter.

Thanks.

Chris Avery, please go ahead, stating your affiliation.

JP Morgan.

The costs of capacity is something that's going to becoming increasingly relevant this year I suspect, looking at the Q4 increases in depreciation in maintenance, in aircraft rentals and things like that.

I mean, if your capacity is going up -- (technical difficulty) -- 16 percent, I mean, would it be fair to think that your total operating cost is going to be going up by something similar or more in the sense we have run out of distribution as a source of saving and we re running towards the end of the 738 being a source of saving?

So, would it be reasonable to look at total operating costs rising, ex-fuel, rising by something like the capacity increase?

I would've have thought so.

I mean, one of the figures that distorts a lot of the aircraft depreciation, the maintenance figure there is still the lease aircraft in Buzz.

If they come out of the consolidated accounts for the six months of the comparable winter period next year -- and at this point in time, since we have no contract in place with Buzz from the end of October onwards, we, Ryanair, assume they do come out.

Clearly, Buzz is in ongoing dialogue with ILFC but some significant progress is made on those discussions, those aircraft will be going back.

I will be coming out of the numbers.

So at this point in time, a lot depends on what happens to those aircraft.

Other than that, we would expect that adding more new 800s -- we will still have efficiency gains on the operating cost side.

Is there anything else?

I mean, the discussion we've had over many years, you know, first it was distribution costs, then it was the 738s.

What is the next major area that's going to give rise to savings?

Have you identified it yet?

I think we have.

I mean, we may not have found some way of tapping into it yet.

There isn't going to be, in the next twelve months, there is no one single unique easy thing like, okay, let's just get rid of the travel agents and switch over to the Internet.

We're going to continue to see operating cost efficiencies coming from adding that new aircraft, fuel efficiency performance, maintenance performance, adding new lower-cost airports where, despite the (indiscernible) decision, we continue to receive offers from both public and privately owned airports that are lower again.

The staff costs are continuing to rise at a lower rate than revenues.

Much of that will be determined by how much yield attrition there is and what effect that has on revenues.

The next kind of significant ones we're looking at -- I think you're going to see continued, strong development of the ancillary sales and revenues next year; we've redone agreements with a lot of the ancillary products and services, increasing the penetration as traffic grows.

We're looking at in-flight entertainment very seriously; we would hope to be bringing forward something on that that could open up a whole new revenue stream for us, and still working on a way of tackling baggage or checked-in baggage as either a revenue source for those who arrive with it or a rebate back to customers or a refund back to customers for those who don't.

Good.

A final question, 732s, how many of them do you still have and how many will you have in a year's time?

Presumably none?

Fourteen -- we should be out of half of them in a year's time and (indiscernible) at the balance by December, '05 -- entirely gone by December, '05.

Edward Stanford.

Good afternoon.

Edward Stanford from Cazenove.

A couple of questions -- first of all, on the issue of the difficulty, the fare wars that you envisage next winter, clearly it seems to me you made a strategic decision to force the issue with some of the competitors to try and get them out of the market.

At what point do you stop and say that competition has stabilized?

Secondly, a more technical question, the lease costs for next year -- can you just help us sort of calculate this by letting us know what the costs of the nine 800s was in the fourth quarter and provide perhaps some guidance on what lease charges for the full year '05 will be?

Let me do the second part first.

The answer is no; we don't particularly want to give you guidance on what the lease charges will be.

I think we would keep that quiet for the moment.

Prices wars/ competition -- I think you are overstressing it.

We are not in something vendetta against the competition to drive them out of business.

We're simply growing very rapidly across a number of markets where we have increasing number of airports coming to us in the awareness that, as other competitors try to get (indiscernible) at high-cost, inefficient airports, we are the only show in town.

We have more and more opportunities than we know what to do with.

We have aircraft coming.

Our view of expansion has always been we're going to do what we're going to do and whatever competitors happen to be in the way have either a couple of choices; they can compete or get out of the way.

Increasingly, some of them appear to be getting out of the way.

But it's not so much that it -- I mean, if you look at, say, take example (indiscernible) the German market who shall be nameless, one of them was set up last year with a plan to lose 25 million in the first year, 25 million in the second year and breakeven in the third year, and they've managed to lose almost 80 million in the first year.

We don't actually compete with that airline on any individual routes but generally speaking around the German market and in the European market, there's overcapacity.

Some of these lately me-too are want-to-be Ryanairs -- simply are never going to make money and cannot survive.

Some of the larger low-fares airlines are not hugely profitable and find it very difficult to compete with Ryanair in direct head-to-head competition.

We have highlighted the example more recently where Ryanair, by establishing a base Barcelona, has put a route back into East Midlands airport.

East Midlands is a base for both BMI Baby and both -- and Easyjet and both it would appear couldn't wait to get the hell out of the way, because they canceled their Barcelona route out of East Midlands the minute we showed up.

Now, that's not to say that would be replicated in every marketplace but our growth plans are not determined by who the competition will be; our growth plans are determined by who come up with -- what airports come up with the next best deal; that's when the next growth is going to be.

But if we meet competition from a high-fares airline or a not-so-low fares airline on price, we're simply going to maul them.

I mean, there is a structural price war going on in the airline industry in Europe.

It happened before in the United States back in the late '80s when Southwest was competing with Continental (indiscernible) and shuttled by United and all these guys and everybody thought that was the end of the world as we knew it, and Southwest won.

The same thing is happening in Europe.

There may be some doubt out there in the marketplace as to who is going to win.

We are surprised there should be any doubt at all.

Lowest cost will win and that's us.

Whether that takes six months, twelve months or eighteen months to see it out, the airline that has the lowest cost with the biggest aircraft with biggest amount of cash is going to win this row and that's us.

Mike Powell.

Dresdner Bank.

A couple of quick questions -- within the guidance, what are you assuming re the Shawah (ph) ruling and its wider impact?

I.e., do you assume that the EU approves your revised deal at Shawah (ph) and that there are no changes to the rates you pay at any other airports?

Secondly, I was wondering if -- I probably missed it but if you could give us some guidance on your expectations of passenger volumes in the light of your 16 percent capacity growth plans?

Yes, the revised target for passenger volumes this year, Mike, are 27. -- just under 27.5 million, about 27.4 million passengers for the year, which is (indiscernible) just under 20 percent growth.

Shawah (ph) -- we have no impact -- there's no assumption on additional cost, the impact arising from the decision for a couple of reasons.

One, we've renegotiated the cost deal with the Waterloo (ph) authorities and with Shawah (ph).

We are both of the view that the revised deal, which has yet to be signed by the Belgian authorities, complies with, as far as we can tell, what guidelines that the EU decision appears to put in place.

Despite that, we are appealing the decision.

We feel confident the decision will be overturned like so many other EU competition decisions in the European court first instance.

But even if it isn't -- I mean if, for some reason, the downside scenario, we lose the appeal, the revised deal isn't satisfactory, the cost base at Shawah (ph) goes up -- in the two weeks after the negative decision in Shawah (ph), we received calls from six other potential base airports, all of whom we were in discussions with at the time, four privately owned, two publicly owned, all of whom offered to take Shawah's (ph) aircraft at a lower-cost base that Sharlawah (ph).

It we will have no ongoing impact on our costs primarily because we believe the decision will be overturned; secondarily because we've redone the deal with the Waterloo (ph) authorities at the same costs as before.

But even at that, we've also -- and they understand -- they are not getting any more aircraft or growth unless they are lower-cost for the new routes, going forward.

If all else fails, we've other airports that are only dying to take the aircraft at an even lower-cost than Sharlawah (ph), which again highlights just how stupid and wrong in the Brussels decision was, given that not alone do we have -- or had we cheaper deals than Sharlawah (ph) at the time we did the Sharlawah (ph) deal, we have cheaper deals than Sharlawah (ph) now.

Sorry, what's stopping the balloon (ph) government signing the revised deal?

Elections, they are in the midst of elections.

I think they take place in the next two weeks or so, which also appears to be stopping the Irish government making a long-awaited decision on breaking up the area and the monopoly and proceeding with the second terminal as well.

Although it might be just terminal diddering (ph) in the case of the Irish government rather than an election.

When should we hear from the EU?

I'm sorry, the court -- (multiple speakers)?

We filed the appeal last -- about two weeks ago.

I suspect it will take 18 months to get to court.

We expect that really not a lot will happen prior to the appeal being heard.

Great.

That's very much.

Jim Parker.

It's Jim Parker with Raymond James.

Good afternoon.

How are you going to get rid of the Buzz aircraft?

Just shut down the Buzz entity?

I need to be careful here.

It's not a decision for the management of Ryanair; it's a decision for the management and board of our subsidiary, Buzz Stanstead, who are presently attempting to reach agreement with ILFC.

We have a contract in place with Buzz Stanstead to lease those aircraft on a sublease up until the end of the current summer schedule, which ends in October.

We have also assured the management of Buzz Stanstead that we will meet the continuing losses up until that date.

Thereafter, however, we've told them we're not going to prepare to either lease the aircraft at these above-market rates beyond -- or into November, nor are we prepared to pick up any further losses in Buzz Stanstead.

Buzz Stanstead either reaches agreement with ILFC or it can't reach agreement with ILFC but one way or another -- or if it can't reach agreement with ILFC, I suspect that Buzz Stanstead will either have to find some other patsy to pay above-market lease rates or it will probably have to be closed down.

Okay.

Michael, with regard to Italy, you have a growing, substantial presence there and if Alitalia shuts down or merges with some other carrier, can you outline a bit of the cost structure that might prevail and how are you going to -- how quickly could you bring capacity in there?

Again, aren't the costs of operating in Italy a bit higher than the rest of Europe?

No.

I mean, the deals or the cost we have in Italy, they are significantly lower.

But I would describe t as more a rerun of the Sabina bankruptcy two years ago.

The Alitalia bankruptcy would offer up more opportunities for us in the Italian market -- would not -- we're not certainly going to turn around and start flying to and from (indiscernible) or to and from Fumichino and Rome, which would obviously be the two main Alitalia bases affected by a bankruptcy.

I think what would happen would be, if anything happened to Alitalia, the other flag carrier airlines would step in and increase their scheduled frequencies to Fumichino and to (indiscernible).

We would clearly increase our capacity by as much as we could manage at Rome, Champignon, and at Milan Bergamo, but it would be something similar to Sharlawah (ph).

We wouldn't certainly want to go to the expense of high-cost inefficient airports.

We would be quite happy for the high-fare guys to keep blowing their brains out at those airports.

We might, around the edges -- it might affect our capacity allocations through the remainder of this year but no more than that.

I think it's one of the key features we're noticing at the moment is it's quite extraordinary the number of airports we have coming to us who are presently bases.

Our home airports are other large, loss-making, low-fares or so-called low-fares airlines doing deals with us in the hope that we will step into the breach when -- and not if but when one or other of their low-fare customers goes bust.

I think -- (technical difficulty) -- caution on new base announcement this winter will be to see what happens with some of the kind of loss-making loonies who are out there at the moment, see where there may be opportunity to step into people, but we will only step into people's shoes where there is an efficient airport and a low-cost base in place, and that wouldn't ever be Rome, Fumichino, or Milan Lenatti (ph).

Michael, just one more question regarding Italy -- if you do intra-Italy flights, don't you have to base people in the aircraft there?

You do and we would have a base operation in Italy which would have some complications in terms of corporation tax, charging VAT on tickets and some other odds and sods (ph).

Again, I think it's overplayed, Jim, in Europe.

Every country we go to, the first question is when are you going to fly here?

The second question is, when are you going to do domestic routes?

If you look at the airlines presently operating domestic routes, like BA in the UK, Lufthansa in Germany -- well, Air France would be slightly different because it has much more monopoly control -- Alitalia in Italy, these are not the great profit-making airlines of all times.

The domestic routes around Europe seem to have a lot of traffic on them but they seem to be kind of chronically loss-making.

We're quite happy to continue to build our operations by flying to secondary airports to the main cities, or regional, secondary airports outside the country.

We have no particular plan to fly domestic routes, nor do we have any particular plan to fly international routes.

We just keep planning to fly the next route that has the lowest combination of airport costs between it, and that's the way we intend to continue to grow.

If that happens to be domestic in Italy, well and good; if it doesn't and it's an international route to and from Italy, well and good.

Okay, thanks.

Andrew Lodenberg (ph).

It's Andrew from ABN.

A quick question on cash flow, if I may?

The cash flow from operating activities seemed to go up by 100 million whilst your operating profit went sideways.

If you could explain that, I'd be grateful.

Andrew, obviously at this time last year, you may recall we were -- during the Gulf War, or Gulf War II, so one of the significant impacts is that we had a lower level of bookings in place at this time last year and so obviously, at the end of this year, given that we are 45 percent larger and we have a -- I suppose we've been working over the winter period in terms of extending our booking profile, we have a larger amount of bookings in-hand at this time compared to last year.

Okay, that's great.

If I can just do another one, Michael said that it's not obvious where the next cost-cutting advantage comes from but if I go looking on your Web site in the Korea section, because banking is not very secure for employment, cabin crew recruitment is coming or is being offered in I think Slovenia, Poland and Latvia on contract terms.

How quickly is it going to take for you to get Eastern European cabin crew onboard the aircraft?

How much cheaper are they going to be and what do you think the customer service implications might be?

Firstly, just to correct you, I didn't say that there isn't any other evidence cost savings; there's lots of them, I said but there's no one big single one that's going to arise.

We are making cost-savings still on an ongoing basis in most -- under most cost categories.

The Eastern Europeans are already onboard the aircraft.

They started flying with us on the first of June or was it the first of May?

The first of May.

We've had a Polish group and a Latvian group.

Cost savings -- none; they get exactly the same terms as everybody else.

Customer service -- excellent, excellent English-speakers, a very good-looking girls and boys.

We don't (indiscernible) our customers will be delighted with them.

It just expands the range I think but what id does, it expands the range of job applicants we have.

We continue and it's not just confined to cabin crew; we continue to be inundated with applications from pilots, potential pilots who want to come work for one of the fastest-expanding airlines in Europe where they can fly brand-new aircraft on high pay and get rapid promotions, and equally on the cabin crew sector.

Great, thanks very much.

Robin Horne, please go ahead.

Good afternoon, it's Credit Suisse First Boston.

Am I correct in saying that you said that your assumptions for your guidance of around 200 million is that fuel stays at the current levels where it is now?

That's my first question.

Secondly, I just wondered why you felt Ryanair suffers the most yield pressure out of all the air carriers we've seen reporting, despite having the lowest airfares in the market?

Thirdly, unit cost -- just how much do we expect them to fall this year?

Fourthly, what is your on-balance sheet CapEx spend over the next two years?

Thanks.

(technical difficulty) -- CapEx spend -- okay, fuel at the current levels, would -- as Howard has said, would include the hedging we already have in place for 80 percent of the fuel requirements up until the end of November allied to the fuel for the remainder of the year at something close to where we are presently in the spot market.

Why we got the most yield pressure?

Because we are expanding the fastest.

We are the ones creating the yield pressure, not alone for ourselves but also for all the airlines in Europe.

Who's leading the price war around Europe?

We are.

We grew traffic in the last 12 months by 47 percent; we grew capacity by 55 percent and even this year, as we cut it back, we still expect to drive traffic up by 20 percent this year and increase load factors again, so that's going to continue to keep downward pressure on yield and fares.

But you know, just look at the competition.

We were inundated with hopeless optimists in late January/early February, when we were warning that things were tough and we were going to make them tougher.

We were surrounded by a chorus of "We don't see it and we can't see it and we think the future is fine!"

What you have seen in the last two months is everybody certainly clambering onboard -- oh, they are now somewhat more cautiously optimistic than they were back in January/February.

We think that trend is going to continue in part because we are going to keep driving it forward.

Unit costs, the next 12 months, subject to no additional movement on fuel, we would expect those to decline by something of the order of just under 5 percent.

The balance sheet CapEx is far too complicated for me, so over to Howard.

I think, Michael, just to come back on unit costs there, excluding fuel and route charges, which are driven by increases in air traffic control charges across Europe, we would expect unit costs to decline by about 5 percent.

In terms of CapEx spend -- (multiple speakers) -- by 5 percent.

You said climb, sorry.

We would expect them to decline by 5 percent.

Sorry, I thought you said 'climb', sorry.

I hope not! (multiple speakers).

Moving onto CapEx, then, we would expect CapEx next year to be about EUR750 million.

We would expect to finance that.

Of the 27 deliveries we have this year, we would expect at least 20 would be via XM debt financing and the remaining seven we're still looking at options as to whether they will be some form of sale and leaseback or indeed some form of debt structure.

We will update as we move through the year on that.

I don't have the numbers to hand on the following year but given there will be 29 deliveries, it may be a tad lower than that because we would have a slightly lower level of advanced payments but something in that region will be sufficient for your model.

John Mattimoe, please go ahead.

Hi.

John Mattimoe from Merrion Capital.

I just want to know, Michael, in terms of the level of rational pricing that's going on in the market, is it something that might be a concern for you beyond this winter, that some of the more larger, recent new entrants to the market are backed by large parents who seem to have a large degree of willingness to keep throwing money at this business?

I think it's overrated.

If you go back -- I mean, if you change the cycle back two years, in the UK market, you had to go being backed by the bottomless pockets of British Airways and Buzz backed by the bottomless pockets of KLM.

When these guys start facing either 30 or 40 or 80 million or losses in the year, as some of the German guys are now, they suddenly get a lot less brave than they had been before.

No matter how much money they loose, their unit costs, their cost base and their average fares are still a multiple of Ryanair's costs based on Ryanair's prices.

They will find a way out, whether that BA selling Go (ph) or KLM selling Buzz or some might just could bust.

Some of their parents are not in as robust good health as they were this time a year ago and cannot afford to be racking up these losses.

The problem for them, I think a lot of them would engage in that if they thought the plan was use lose money Year One, lose money Year Two and then you become accepted fares and yields will rise to cover your costs.

What they are beginning to understand is you lose money in Year One, you lose a quantum of that in Year Two and in Year Three, the situation is utterly hopeless.

But expect all the time, as we do, for it to take longer and be harder and more painful than ever before, but at the end of that process, there is going to be the lowest-cost operator still standing twice the size it was at the start of that two or three year process.

For that process to progress, Michael, do you need to see the operators retrench a little bit at the margins, or is it a case you need to see maybe one or two of the larger players significantly reduce capacity, or is it a bit more nebulous than that?

These things tend to be lumpened (ph) steps, not marginal, rational steps.

Somebody goes bust, somebody gets taken over, somebody gets taken out.

They will be shock to the system when they happen but it won't be nice and planned and smooth; it will be messy and difficult.

You go back to the U.S. industry in the '70s and '80s and Braniff goes bust and Eastern goes bust, there's no -- you know, whereas at the same time, Continental (indiscernible) just got reabsorbed back into Continental, United by -- you know, Shuttle by United got reabsorbed back into United.

Then you roll the clock forward 15 years later and now Delta is launching Song and United is back with Ted.

It's a cyclical thing.

We are in that process at the moment, but we entered that process.

We keep trying to re-emphasize the strategic thrust of what we have been at here for the less 12 months.

This time last year, we produced steady results with a margin of 29 percent.

If you read our statement this time last year, we said these are extraordinary results; they will not be repeated; we will use these higher margins to drive down fares and drive markets or drive the competition into the ground.

That's what's happening, and the process is going to continue for at least another year, maybe two years, who knows?

Joe Gill.

It's Joe Gill of Goodbody's.

I just wanted to ask you a bit about your overall policy in terms of pricing tactics over the next sort of two to five years because in an interview this morning, you talked about envisaging taking fares down 5 percent a year for a number of years.

Where in the middle of all of that is growing the bottom line to fit into the model?

What do you see as the key drivers if operating cost gains are going to be more difficult to come by?

Where do you actually see the drivers to increase your profits year-on-year?

I think -- and we give that guidance very much on the back of sort of our medium term, which is a three to five-year plan, and that is starting from where we are today, we will reduce the fares and yields by 5 percent next year, reduce operating cost by 5 percent in the next year.

Again, it won't be smooth; there will be lumpy years in it and you highlight last year.

Profit growth last year was 59 percent; profit growth this year was minus 5.

We are still well above our kind of guideline of cumulative 25 percent per annum.

We have to set ourselves a target, and we set the target of reduce fares by 5 percent so that we force ourselves to try to reduce operating cost by 5 percent. (indiscernible) if we reduce operating costs by 5 percent, we're going to be well ahead of the competition, many -- most of whom's operating costs are rising.

It certainly gives us something to work to, Joe.

It's not set in stone.

If you look at it over the next 12 months, we think ancillary revenues are going to be slightly higher than that; we think the operating -- or the yield decline would be slightly above the 5 -- would be above 5 percent.

Our guidance, you know, to put not too fine a point on it, is stable at 225 down to 200, depending on where the yields fall.

If we get better than that, the profits will rise, but we're getting to a stage where we are in the lap of the yields' guards to an extent.

Okay.

Just on one other point, in relation to your 16 percent capacity growth and your target of 27.5 million passengers, how does that break half-over-half relative to the previous sort of -- we are looking at capacity growth of 18 percent and maybe 28 million passengers?

Where is the shortfall coming back from?

Is it (indiscernible) capacity growth in the second half or in the first half or over both?

It's the 737 300 show that we originally had factored into the equation to operate for the entire year.

We are now taking them out in November, subject to negotiations with ILFC, and replacing them with the 737-800s.

so your second-half capacity growth will be contracted then?

Is slightly lower by that factor, which I think is about 4 or 500,000 passengers.

Edward Stanford.

Edward Stanford from Cazenove again.

Just a follow-up question actually on the ancillary revenue -- can you just perhaps amplify a little bit how you've changed the on-board products, what your plans are to grow that in the future?

We've changed, I mean we've looked at the pricing, which was previously in Sterling; we've gone to Euro percentage pricing, as we have a bigger percentage of passengers now traveling euro-to-euro.

We are trying to -- we are playing with the mix but there's nothing fundamentally radical in the in-flight revenue side.

What our focus has been on is, in the last number of years, as we've delivered rapid traffic growth, some of the penetration of some of the ancillaries at the car hire (ph) and the insurance and some of those have lagged slightly behind the growth in traffic or the margin we are earning has lagged behind.

The new agreements we're putting in place with suppliers now are predicated upon increasing the penetration or the uptake per passenger basis, multiplied by the growth in passengers.

We will see the growth in ancillary continue to outperform.

We are looking at other creative things like, at this time last year, travel insurance was there as an option.

Midway through last year, we put in the travel insurance as a pop-up screen.

When you confirmed your ticket, you got offered the insurance.

Looking forward sometime next year, we will have travel insurance as an opt-out product in which you will automatically buy it unless you decide to opt out or not purchase the product.

Then we're looking at other features, such as in-flight entertainment, which is obviously readily available.

The trick for us is how do we simplify the payment process?

Clearly, on one-hour flights, we can't be running up and down the plane selling earmuffs or whatever it is, so we're looking at slicker, more passenger-orientated payment mechanisms such as swipe via credit card, swipe mechanisms in the back of the seats or in the arms.

We have a couple of other things on the in-flight side cooking away, which I wouldn't really want to get into too much detail on now.

What about the credit card, Michael, the rollout of the -- we've ruled out the MBNA credit card this year.

We're already up to 100,000-plus credit cards issued.

You are, in the next couple of weeks, launching another pan-European credit card with Barclaycard in the UK, which will, you know, enhance our revenues again.

Well, the MBNA card only applies in Ireland isn't it?

Ireland and the UK.

The Barclaycard will apply all over Europe, isn't it?

We're rolling it out in France, Germany and Spain and then up into Scandinavia.

So within about a year to year and a half, we will have a credit card that covers the entire part of Europe.

Again, I don't want to overstress it.

The ancillary revenues are kind of nice to have here.

The core operation is still going to be reducing unit operating costs and passenger yields.

(indiscernible) Berg (ph).

Gentlemen, that question appears to have been withdrawn.

Your next question comes from Michael (indiscernible).

Please go ahead.

That question also appears to have been withdrawn. (Operator Instructions).

Robin Horne.

Hi.

I just wondered how confident you are that the 800s are the (indiscernible) plane just for all the routes that you fly and just how flexible the Boeing order is to being rescheduled if you do decide to reschedule in your deliveries?

Then I just wondered -- I wanted some comment on your growth strategy ex-Dublin to Continental Europe, because it does seem to be that Aer Lingus is been very competitive in this respect.

Lingus -- the 800s, Robin are absolutely the right aircraft.

If you go on the Web site, we have the investor presentation out as a comparative or in the slides there.

Since we started adding the 800s, I know some of the competitors have been around talking nonsense in the recent weeks about the 800 being the wrong size of aircraft.

Since we adding the 800 six years ago, our load factor has risen every year from about 74, 75 percent in 2000 up -- (technical difficulty) -- 85 percent in 2003.

Yes, it dipped to 81 percent in 2004, probably an inevitable consequence of the capacity growth we had last year.

We expect that load factor to come up this year by a couple of percentage points.

In each year since we started adding the 800, our profit margin has never been lower 20 percent.

Those who would suggest that the 800 is a wrong-sized aircraft have never had a profit margin above 10 percent.

I mean, to reduce down to numbers, Howard came up with a very instant interesting calculation last week.

The 800 series - -if you take our break-even load factor at the moment, even with the 14 percent decline in yields last year, our break-even load factor is 59 percent.

In other words, we need to sell 111 seats on every 189-seat aircraft we fly in order to break even.

The nearest comparable to us would be Easyjet, who has, at the moment, about an 80 percent break-even load factor, needing to sell 125 seats on every 149-seat aircraft they operate.

It is the right aircraft because it gives us the lower unit cost per passenger; it gives us a far superior reliability.

I mean, our punctuality has I think for now about 78, maybe even 80 weeks in a row -- been better than that of Easyjet -- very high passenger acceptance, and we have a low-cost of very good operating numbers.

So you know, it's not an aircraft issue.

But then many who say it's an aircraft issue last year were suggesting that it's an airport issue and they were flying to the better airports and we were flying to the middle of nowhere.

Some of those more recently have now suggested that 40 of their 47 airports are too expensive and they would like to renegotiate them. (indiscernible) we wish them luck!

Boeing flexibility -- there's quite a degree of flexibility in the Boeing order.

More than two years out we can effectively roll orders forward or push them back or roll them forward.

We see no reason to do either at the moment.

We have confirmed most of options that have come up for a confirmation.

We are careful with the capacity growth, but I think what kind of unnerved people last year was 35 percent capacity growth last year was driven more by the acquisition of Buzz that anything else.

If you strip out Buzz, the capacity would have grown by something in the high 30s.

Yes, it was higher than our normal target but if you look at what we've done with it last year, we've established bases in Milan; we've established a base in Scandinavia; we established a base in Rome; and we established in Rome and in Barcelona.

During the same period, our nearest competitor established a base in Paris.

So, the European network we've established over the last 12 months I think will prove to be a long-term winner.

Dublin/Europe is a market that's going to happen at some point in time.

We are absolutely determined it's not going to happen until we get a low-cost terminal facility and preferably the break-up of the Dublin Airport monopoly.

We think that will come ultimately when the Irish government decides to make a decision instead of retreating in fear at the threat of every trade unionist in the country or every trade unionist at Dublin Airport.

But don't overdo the Aer Lingus.

In fairness to the guys at Aer Lingus, they've done an excellent job in the last year or two of copying most of the cost reductions that Ryanair introduced over recent years, but the most significant move they've made in the last two years has been pulling out of routes between Ireland and the UK where they faced direct competition from us and moving that capacity into routes between Ireland and Europe, where they don't face competition from us as yet.

At some point in time in the future, they will face competition from us on those Ireland-to-the-European routes, and when they do, it will be the exact same result as it was in the UK.

You know, we have a significantly lower cost base that Aer Lingus.

They themselves admit that their average fares in those markets are more than twice the average fares charged by Ryanair.

Whilst we wish them well with their cost reduction, we are not standing still at the moment either.

Our costs are going to continue to be significantly lower than theirs.

It's really a question of when the Irish government decides they want to introduce competition and create 5,000 new jobs at Dublin Airport.

One would think that the average government with even a modicum of intelligence would have worked out years ago that this should done but then clearly, we have politicians of a different ilk.

Thank you.

Can I just ask one more question?

Just related to your airports, and just when you establish yourself at a new airport, just what criteria do you typically look for?

Is it purely the deal -- in other words, the price you have to pay to fly that is the issue, or the other issues that you take into account?

No, I agree.

The number one is the priority here, bar-none, is efficiency -- 25 minute turnarounds.

Number one is not price.

Price is entirely secondary.

If Heathrow (indiscernible) the goal, Frankfurt (indiscernible) came to us tomorrow and said you could fly here for free and have as many slots as you like, we would say, thank you but no thank you, we're not going there.

There is absolutely no point, for example, trying to be a low-cost airline operating out of a place like Charles DeGaulle.

It takes you 25 minutes to get for from the runway to the bloody terminal -- (technical difficulty) -- turn the planes around in 25 minutes, and that costs you at least two flights per day per aircraft if not more.

We are entirely happy to compete with British Airways out of Heathrow, where it takes them an hour and 15 minutes to turn the plane around on a good day, because we get two more planes per day per aircraft.

We are entirely happy to compete with Air France and other high-cost airlines operating a Charles DeGaulle, where equally it takes them an hour, hour and a half on a good day to turn the planes around.

In - (technical difficulty) -- we are out and gone in 20 minutes.

So, it's efficiency first; thereafter, it's cost.

But efficiency is the number one driver bar everything else.

Thanks very much.

Mike Powell.

It's Dresdner Bank.

One point of clarification -- when you talk about unit costs, do you talk about cost per ASK or per passenger?

Per passenger.

Okay.

I was wondering if maybe you could say what competition if any you are seeing from Aer Lingus as a result of their staving off bankruptcy and also what kind of productivity gains do you expect from staff this year?

We see less competition from Aer Lingus.

I mean, they're pulling off routes quite cleverly.

They're pulling off routes where they compete with us.

I mean, I give you -- on the key trunk route, which is Dublin/London, in the last 12 months, our market share -- without any market share objective on our part, our market share has grown from 38 percent to 45 percent during a period when their marketshare has gone from 38 percent down to 30 percent.

They have withdrawn from London City; they've gone from Gatwick and I think they've reduced their Heathrow schedule by one a day.

Now, clearly their improved results is testament to the fact that they are following the right strategy, which is to get out of the way of Ryanair.

But in terms of increased competitors from Aer Lingus on -- (technical difficulty) -- because of their -- (technical difficulty) -- cost base -- you know, to put it in context, the good job and all that they're doing, they're still going to carry this year about 6.5 million passengers with about 4000 staff; we're going to carry 28 million passengers with about 2,500 staff so competitiveness is a relative term.

What was the other (indiscernible) question, Mike?

It was staff numbers.

Staff numbers -- we wouldn't expect enormous productivity gains this year, partly because we have so many 800s in the system now.

I mean, we are up to over 5800 in the fleet, so as we add more 800s, the productivity gains aren't enormous.

But we've increased productivity in the last two years from 9,500 passengers per employee to over 10,000 passengers per employee.

That's probably about as good as it's going to get.

To put that in some context, of those of our competitor airlines, Aer Lingus currently carries about 1,500 passengers per employee, Easyjet about 6,000 passengers per employee and renewed competitive airlines like British Airways carry 700 passengers per employee -- less than 1/10 of the productivity of our people.

Which is obviously very good but I guess you're not saying that your traffic -- your staff numbers need to go up as much as your passenger numbers this coming year?

We're not saying that.

No nut on a relative basis, we wouldn't expect our productivity figure of 10,000 passengers per employee to rise, say to 11 or 12,000.

We think we will keep them above 10,000.

Now, the productivity gains are adding more bigger aircraft become, in percentage terms, less and less.

Thank you very much.

A further question from Andrew Lodenberg (ph).

Just a quick follow-up -- what's happening to the no-show rate?

Is it stable or is it increasing as fares get cheaper?

It's been relatively stable, although it has declined around the -- I mean, it jumps up and down.

When we have ridiculously low fare promotions like freebies or one-pound seats, the no-show ratio tends to rise a bit, but the introduction of the change fees and the change facility on fares, names and tickets tend to bring it down around the edges.

Structurally, I think it's been relatively stable over the past year.

Howard, is that correct?

Yes, it's ranged between 7 and 8 percent.

It's really stuck in that range now at this stage.

As you said on some fare promotions, it has risen into the double-digit territory but overall, very, very stable.

Perfect.

Thanks.

A further question from Joe Gill.

Just to come back a little bit on next winter in terms of possible pricing and if oil prices stay where they are and the flag carriers in particular keep their fuel charges intact, the year-on-year price differential between them and yourselves will actually have widened without you doing anything.

Is that any import to your own pricing decisions next winter or is that irrelevant in terms of the people you're competing with?

I think it's relevant but it's one of the more blue-skies scenarios, if you like.

If fuel really goes crazy next winter, a lot of our loss-making competitors (indiscernible) fuel surcharges or reduced capacity and higher prices.

You may well see a period where our yields don't decline at all.

Now, I think it would be somewhat artificial, but there's lots of arguments to put forward as to why we might do better than this in our winter guidance.

I think what we're saying at this point in time is we don't have much visibility; we are little bit chastened by the fact that we got our own forecast for last winter or at least for the fourth quarter so wrong, and we're simply saying to everybody, you know, the results of this -- the last year were better than we expected, the summer looks not too bad, but let's not go overboard because we expect the winter to be worse.

I think we will have better guidance for you by the time we get to the half years in November but I realize that's difficult for somebody doing models but you are guessing as much as we are.

We have no better guidance than anybody else for next winter.

Okay, thanks.

One last thing, in terms of your (indiscernible) fares (indiscernible) is one way.

What about the argument that -- (technical difficulty) -- you know, you don't have as much room to move with as you did, say, two or three years ago.

You are down to absolute fare levels that are quite low.

What are you thoughts on that in terms of working (inaudible) the business?

I still remember the days when we had the first once never to be repeated seat sale of 59 quid to London about eight years ago and people thought it would never happen again.

That would now look like one of our bank holiday weekend (indiscernible) about 80 or EUR90.

You know, you go back to kind of markets like the supermarkets, telecommunications, the market is going to continually change and evolve; we are going to continue to find ways of reducing costs.

Clearly, some of the bigger cost reduction opportunities, going forward, are going to be airports.

Clearly there's enormous cost reduction opportunity in doing something radical with complete half (indiscernible) -- I get the wrong word now -- with complete -- with overpriced services like euro control, ATC charges, that kind of stuff.

Again, it's like peeling back the onion.

Five years ago, we were all building phone centers or call centers because we could switch 30 percent of the sales away from travel agents.

Two years after or five years later, we're selling 97 percent of seats through the Internet.

We can't identify where the next big easy cost gain is going to come from because if we could, we would have it made, but there will be others and as we keep paring back the operation, the onion we will keep finding additional layers.

I see no reason -- you know, like we keep stressing why in five years time the average fares wouldn't be 25 percent below where they are now.

The challenge for us is, how are the operating costs going to be 25 percent or more below where they are now in five years time?

Thanks.

Shane Matthews.

It's NCB Stockbrokers.

Michael, you indicated that you got the final quarter, you perhaps were overly pessimistic.

Is this a sign that some of the markets are performing better than you would have envisaged and that the competitors are acting in a more sane manner?

Can you give an indication of which markets they might be?

I don't overplay it, Shane.

You know, I mean, we were in the middle of January just two or three weeks after Christmas going, sh*t, we think the yield is going to fall.

It could be 25 to 30 percent for the next three months.

It only fell by 22 percent.

I wouldn't look to that as being any green shoots of recovery or the end of the fare wars or (indiscernible) or anything else.

I think we did a little better than we thought in the fourth quarter -- not a lot better; it was still 22 percent worse than we did in the same quarter this time last year.

Remember, this time last year was the quarter when the war in Iraq broke out.

You know, it has been a sh*t fourth quarter.

I wouldn't want to underplay it.

I just think that our reasons for caution is (sic) we don't really see, given the capacity growth we have, that Easyjet has, you know, the loonies, the other low-fare loonies adding capacity and racking up enormous losses.

It's hard to see where it ends except clearly it ends in some kind of convulsion in the not too distant future.

Because I get the sense that you're -- there's a bit more optimism about the summer trading obviously -- (multiple speakers).

No, I mean the one thing I don't want coming out of this conference is optimism, because it would be the wrong thing.

The time for optimism will be next November on the half-year if we think we have a good summer and we have good visibility into the winter.

I think we should all expect that the next year will be tough.

As Howard said at the start of the call, our guidance is for -- you know, the range would be profits level to profits down maybe nearly 10 percent, all driven by yields.

We think we have the costs relatively secure.

You know, but certainly internally we are not looking at green shoots of recovery or less intense price competition.

Everybody is expected to get much worse before it gets better.

That's why we've taken (indiscernible) costs out; that's why we are continuing to focus on efficiency and productivity, and that's where we are.

Shane, just add to that, like, we did get a 3 percent kicker from Sterling for the February and March bookings from the point where we were in January, so if we hadn't had gotten that, we actually would've been up at about 25 percent decline in average fare.

So I think just to kind of add to that, it is very difficult to really predict much beyond the next couple of months, and you know, we would echo the caution that Michael has indicated that -- (technical difficulty) -- until we ourselves -- (technical difficulty) -- even in eight weeks time when we come out with our first-quarter results -- (technical difficulty) -- we won't be any really much further than we are, so I think it is going to take a number of months before we see what's going on in the market and how we're going to shape up for the winter. (multiple speakers).

But equally, (indiscernible), before I get mis-quoted, I don't want you to be entirely pessimistic coming out of today's call either!

The only guidance we are prepared to give you at this point in time is we have pretty good visibility through the first two quarters, and that looks to be close to the lower end of the minus -- closer to the minus 5.

I know we said -- (technical difficulty) -- misinterpretation, which is the lower end of minus 5 to minus 10.

But you know, we are relatively -- that guidance is relatively good at this point in time.

That could still be disrupted.

You know, we think there's been -- there's a big problem in the UK charter market; we think they have a lot of unsold capacity.

If, for example, they suddenly start dumping prices and the competition and tickets and seats for the peak into the back end of June, July, August, then, yes, we could still be affected for the second quarter.

You know, we're not yet in a position to kind of be very definitive on the first half, but that's fairly good guidance at the moment based on the fact that we are in the first -- we have very good -- we are almost well into June.

But the second half is going to be a lottery, as far as we're concerned, be it competitors, shareholders, analysts, staff.

Bloodbath is the operative term; bloodbath is the operative word.

If it's any better than that, well and good.

Thanks, Michael.

Gentlemen, there appear to be no further questions.

I would now like to hand the conference back to you for any further or closing comments.

Everybody, thank you again for participating in the conference call today.

I said apologies Michael Cawley couldn't be on it but he had to catch a plane; he's in the States with -- (technical difficulty) -- (indiscernible) to roadshows going in the States.

Howard, myself, Sean Coyle, Ray Hearn (ph) (indiscernible) around roadshows around (indiscernible) Europe for the UK and Europe for the rest of the week, so doubtless we will be coming to a town near you.

If anybody has any other individual questions, please feel free to route them back to us through your brokers or come directly to the Company itself.

We will be out for the most of rest of this week and back in the office next Monday.

To say it again, the closing message is, yes, the fourth quarter was better than we had originally thought; the year ended a little better than we originally thought.

The summer looks a little better than we had once feared but you know, I would be cautiously resolute.

The bloodbath is coming; we are part responsible for it but if we started it, we are determined to finish it.

With that, I'll hand you back to the Chairman, say thank you very much, thanks, Howard.

I'll see you at end of the week.

Good luck, Michael.

God bless everyone.

Thank you, ladies and gentlemen.

That concludes today's conference call.

You may now disconnect your telephone lines.