Ryanair Holdings PLC (RYAAY) 2004 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen. Welcome to the Ryanair Q2 results conference call. [OPERATOR INSTRUCTIONS] I would now like to turn the conference over to the host for today, Mr. Michael OLeary. Please go ahead and I shall be standing by for questions.

Okay, thank you, ladies and gentlemen. Welcome to the Ryanair half year conference. I'm speaking to you from London. Michael Cawley is joining us from Dublin and Ray Hernan is in New York. Our President is on a flight to the West Coast, so won't be joining us today. We'll push straight on and then leave as much time -- maximum time for questions and answers.

Ryanair, Europe's number one low fares airline, today announced record half year profits of €201.3m. Traffic grew by 24% to 14.1 million passengers. Yields declined by 5% and consequently total revenues rose by 21% to €721.1m. Unit costs, excluding fuel and route charges, fell by 4% and including fuel and route charges, unit costs remained flat. As a result, the profit margin after tax declined by 1% with industry leading 28%.

These record traffic and profit figures show just how robust Ryanair lowest fares largely remain, even in a very difficult economic environment characterized by record fuel prices and intense price competition. Like Southwest, this is Ryanair's thirtieth consecutive quarter of unbroken profitability before exceptionals since we floated in May 1997.

Central to these records profits has been our continuing discipline route growth. Our 2 new bases in Barcelona and Rome have exceeded expectations, as the 41 other new routes launched this summer. Our expansion continues this winter with our Rome and Milan bases each getting 2 more aircraft. Frankfurt, Stockholm and Glasgow bases all welcomed 1 additional plane each, and our London Luton base rises from 1 737-200 to 4 737-800. This winter will also see Ryanair open 5 new destination airports with low fare flights to Riga in Latvia, Santander, Seville and Valencia in Spain, and Porto in Portugal.

Despite intense price competition and our own considerable growth, the yield decline of 5% for the last year was at the better end of our -5 to -10% guidance. We attribute this to a combination of slightly better peak summer yields, and the initial impact that the multiple fuel surcharges imposed by many of our high fare competitors, which has increased the price differential between their fares and our fares, making Ryanair's low fares even more attractive to consumers.

Unit costs remain flat for the first half due to higher fuel and route charges, which rose at a much faster rate than traffic growth. Excluding fuel and route charges, all other unit costs were reduced by 4%, thanks to the addition of more cost efficient Boeing 737-800s, new lower cost airport agreements and continuing tight control over other costs. We continue to aggressively attack our cost base, and have recently agreed the forward sale of our remaining 737-200 fleet for $10m as well as a new 10 year engine maintenance contract with General Electric, resulting in significant cost reduction in our engine maintenance cost.

Our focus on continually improving our number 1 customer service package remains relentless. We have, again, reduced Europe's lowest fares by 5%, whilst delivering passengers the best punctuality with the least cancellations and fewest lost bags in the industry. The UKCA recently released on-time statistics confirmed Ryanair as the number 1 on-time major airline operating to and from the main UK airports.

In addition, Ryanair customers are enjoying these benefits. With a fleet of brand new Boeing 737-800 aircraft with all leather seating through convenient local airports using Europe's largest travel website, Ryanair will shortly be the first low fares airline in the world to introduce an in-flight entertainment system for all passengers featuring latest Hollywood movies, chart topping music videos, kids cartoons, sitcoms and audio CDs. Ryanair's customer service offering is now superior to all of our high fare competitors and our rapid growth in traffic and market share testifies to this fact.

In Ireland, we regret that the Minister for Transport, who has spent 2 years trying to introduce real competition at the Government owned airport monopoly, was moved to a different portfolio. We hope the new Minister will move quickly to promote the development of competing independent terminals at Dublin Airport. October 31 last, marked the second anniversary of the Government's receipt of 13 separate offers to develop a competing second terminal at Dublin. Despite enormous support from the entire tourism industry, not 1 inch of progress has been made in 2 years to introduce competition to the Dublin airport monopoly. We are concerned that the new Dublin Airport Authority has taken over where the old monopoly left off with an unnecessarily proposal to build a second runway and waste €120m. The 2 existing runways at Dublin have just 16 million passengers annually, compared to the 40 million passenger traffic on the single runway at Gatwick. What Dublin needs is competing terminals, not Cartier cost runways.

The Dublin Airport Monopoly has repeatedly failed its customers and we urge the Government to fix this by introducing competing terminals at Dublin, which will revolutionize Irish tourism.

The enormous impact of record fuel prices on the oil industry will impact future guidance.

In November last year, during the run up to the Iraq war, when the cost per barrel surged we stopped our forward hedging policy. From November 2004, we are essentially unhedged and we continue to remain so until oil rates return toward their previous normal levels. As usual, much of the commentary on fuel prices in Ryanair has been hyperbolic. Ryanair can absorb much higher oil prices than its competitors and yet still offer the lowest air fares. We remain, by some considerable distance, the most profitable airline in Europe.

$50 a barrel for Brent crude for the remainder of this fiscal year will add some 55m to our total budgeted fuel cost for the fiscal year. However, the multiple fuel surcharging policy of our competitors has seen our rate of yield decline ease. These stronger than expected yields will partially offset our higher fuel costs for the remainder of this fiscal year. Furthermore, many of our competitor airlines who are losing money heroically when fuel was $25 a barrel are doomed in the longer term if it stays at $50. Our predictions of a bloodbath and airline casualties this winter may be accelerated by these record high oil prices, as well as the continuing irrational competition. Just 2 weeks ago, V-Bird in Germany closed and we believe it will be followed by other failures this winter and beyond.

Despite this environment, Ryanair's world record margins enable us to absorb higher fuel prices, without resorting to surcharges and still remain Europe's fastest growing most profitable airline.

We remain cautious in our outlook for the remainder of the fiscal year. We expect to achieve significant increases in passenger volume growth this fiscal year and increase load factors. We anticipate that yield attrition in Q3 and Q4 will now be better than our original -10 to -20% decline forecast and, based on current financial booking trends, should finish in the -5 to -10% range. This will help to partially offset higher fuel prices for the second half.

We anticipate that there will be further airline casualties as the perfect storm of declining fares and record high oil prices force loss making carriers out of the industry or to cut back capacity.

Despite increases in route charges and fuel prices, we continue to generate better margins than all of our competitors. With the lowest cost base, the lowest fares and industry leading customer service, we believe that Ryanair will continue to growth profitably for the benefit of our customers, our people and our shareholders.

I'll now ask Ray Hernan to take us through the summary of the MD&A. Ray.

Thank you, Michael. For the purposes of the MD&A, all figures and comments are by reference to the adjusted P&L account, excluding the non-recurring costs and goodwill referred to below.

Non-recurring costs consisted of Buzz re-organization costs of €2.7m net of tax and goodwill of €1.2m, amounting to €3.9m net of tax in the half year ended September 30, 2003. This is compared to the €1.2m of goodwill in the period ended September 30, 2004.

During last year, an additional amount of €2.7m was also charged in the period arising from the write down of the residual value of aircraft, which was necessitated by the scribing of 5 aircraft. There is further detail on this given in Note 4 to the MD&A.

The profit after tax increased by 18% to €200.1m during the 6 months compared to last year. The adjusted profit for the half year, excluding the above non-recurring costs and goodwill, increased by 15% to €201.3m.

Summary, profit after tax increased by 15% to €201.3m compared to €175.5m in the previous half year ended September 30, 2003.

These results where achieved by strong growth in passenger volumes and continued tight cost control. Total operating revenues increased by 21% to €721.1m, which is lower than the 24% growth in passenger volumes and reflected the competitive fare environment and the Company's objective of continuing to drive down average fares.

Average fares have, however, declined at the better end of the 5 to 10% range that we'd originally forecast. A combination of the lower fares, the successful launch of new routes and the slower rate of growth resulted in the passenger load factor increasing from 83 to 87% during the period.

Total operating expenses increased by 24% to €485.6m due to an increased level of activity and the increased costs, primarily fuel, route charges and airport and handlings costs associated with the growth of the airline. Operating expenses were also adversely impacted by the strengthening of the sterling to euro exchange rate.

Operating margins declined by 1% which, in turn, resulted in operating profit increasing by 16% from €203.3m to €235.5m.

Profit after tax has increased by 15%, slightly less than the growth in operating profits and reflects the higher net interest charge resulting, primarily, from the increased level of debt during the period.

Net margins declined by 1 point to 28% for the reasons outlined above.

The earnings per share has risen by 14% to 26.51 cents for the period.

The balance sheet, the strong profit growth continues to positively impact the balance sheet with cash and liquid resources growing despite funding an additional €145m in capital expenditure from internal resources.

Cash balances at September 30, 2004 were €1,421.7m, an increase of €164.4m from March 31, 2004.

6 aircraft were delivered in the period, which, in addition to aircraft deposits, accounted for the bulk of the €208.5m incurred in capital expenditure. An additional €90.9m of debt, net of repayments, was drawn-down to part fund these aircraft deliveries during the period.

Shareholders' funds at September 30, 2004, have increased to €1.655b, compared to €1.455b at March 31, 2004.

That's the end of the summary, Michael.

Okay, thanks Ray. Okay, folks. Let's open it up for the questions and answers.

Thank you. [OPERATOR INSTRUCTIONS] Our first question comes from Andrew Lodenberg from ABN Amro in London. Please go ahead with your question.

Michael, good afternoon.

Hi, Andrew.

I wanted to have a bit of discussion about what drove such a strong performance in the ancillary revenues. If you could talk to us about where that's coming from, I'd be grateful?

A few more questions, if I may. On airport charges, you've put money into an escrow fund for Charleroi and there's £9m being disputed by the BAA in terms of airport charges. I wanted to understand how they were being treated from an accounting perspective. Where they to be seen anywhere on the P&L or the balance sheet? And then, finally, with fuel costs at current levels, even if they come down a bit, and your statement is increasing, are you considering putting winglets on the planes?

Okay. Thanks, Andrew. The ancillary revenues, or the growth in ancillary revenues during the period, was -- has risen ahead of the rate of growth in scheduled traffic as we have guided in previous quarters. The total change for the half year ancillary revenues is up 65%. That is generally spread across the board, mainly, by virtue of the increase in penetration - as you know, we've redone some of the deals - increase in penetration and also increasing our penetration of our passengers and getting a slightly higher guaranteed contribution from those services. We think that's likely to continue for a year or 2 and, clearly, the in-flight entertainment, the launch of the in-flight entertainment, which went on all of our aircraft on Sunday on a trial basis, and sold remarkably well, we think is the next big thing for us, the in-flight entertainment.

So, our guidance is that we expect to continue to run slightly ahead of the growth in scheduled revenues or in traffic growth for at least the next 2 years, and it very much depends on how successful IFE is on that. It could be much better than that if IFE works as well we think it does.

On airport charges in relation to Charleroi, what we've done we've offered to transfer the €4m, which was the original amount that the Commission said we should repay the Leroi(ph) region into an escrow account pending the hearing of our appeal in the European Court in -- toward the middle -- probably third quarter of the coming year.

The reason we've done that is twofold. One, even if we win -- sorry, if it goes in the escrow account, it'd be an agreed escrow account with the Leroi region. If we lose the appeal, the money goes -- is released automatically to them. If we win the appeal, it's released -- re-released automatically back to us. We're not going to pay it directly to the Leroi region because, bizarrely, if we were to win the appeal there's actually no mechanism, apart from the goodwill of Leroi for us getting our money back and we have no intention of, therefore, losing €4m over this until the appeal has been tested.

We understand the regions are going to ask the Commission if that's accessible to them. If it is, well and good, we'll happily put the money in the account. If it's not, then they may proceed through the Irish courts to chase for further money, because -- but, our appeal will be heard long -- the European Court appeal will be heard long before the case gets to the Irish courts.

But, we wanted to do it this way because we really want to take the focus away from this issue of will Ryanair pay or not pay, is Ryanair just kind of thumbing its nose at the European Commission, because that's not the core issue here. We're quite happy to put the €4m into an escrow account so that we can all focus on speeding up the appeal on the core issue, and that is, is it correct for the Commission to claim as they did in their decision that no privately owned airports will enter into long term, low cost, discount arrangements with Ryanair in the way the Charleroi has done. We look forward to showing the European Court the long sequence of low cost, discount arrangements entered into by privately owned airports and some publicly owned airports with not just Ryanair, but many of the other low fare and high fare airlines around Europe, because we believe that the key contention in the European Commission, frankly, is just untrue. It's not supported by the evidence and many of the analysts on this call will know that. And, you know, don't take Ryanair's word for it, Easyjet, for example, originally agreed on a long term, low cost arrangement. It does have in Belfast as well. So, we believe we will succeed on the appeal.

But that money's still sitting on your balance sheet and nothing's gone through the P&L, right?

Correct. And with the BAA in relation to -- the BAA court case is proceeding. We understand that the BAA's accounting treatment now mirrors that of Ryanair. We haven't provided anything for the alleged repudiation of the contract claimed by the BAA and we understand, although I haven't seen the detail in their numbers this morning, they have accounted -- recognized the revenue, the gross revenue, without any discounts in revenues and provided fully in the accounts for our discounts. Therefore, the net net effect of that in their accounts is what we're actually paying them at the moment, which is continuation of the discounted arrangements that were originally agreed and run through to 2007. We haven't provided in our accounts for any extra amounts to the BAA. We believe there is no possibility of the BAA succeeding on their repudiation of contract claim, but I'm sure they're telling you exactly the opposite. But, we would take the fact that their providing for it mirrors our treatment as well.

That's 1 part of it, but the other part of it is the fuel levy that you've been withholding. How have you treated that?

Oh, the fuel levy that we've been withholding, we have offered to put the fuel levy -- we're putting the fuel levy into a separate escrow account. We'll continue to pay into that and we're quite happy to do that because we, at least now, get a decision from the Court on the fuel levy. Our difficulty in the initial -- in the discussions with the BAA Stansted is that they've been, to our mind and, obviously, this is our view, lying to us for some 10 years and refusing to deal with the issue. The correspondence certainly makes clear that they've been at least changing their story on the fuel levy and continuing to claim that the fuel levy simply is a recovery of their cost, whereas the accounts they filed with the -- the regulatory accounts they filed with the CAA shows them making or declaring an 80% profit margin on the fuel levy.

But, one way or another, the Court decides on the fuel levy and we're quite happy to abide by the court's decision on the fuel levy. That's about €1m a year, either way.

But, again, that money that's going into escrow it's sitting on your balance sheet and hasn't gone through the P&L at the moment?

No, the fuel levy is being put through the P&L account and always has been.

Okay.

But, the repudiation -- so, we're providing in full for the fuel levy. We're not providing for any additional fees at Stansted based on the repudiation claim.

That does sound like it's the same treatment as BAA, yes.

Okay, and on the issue of winglets, Andrew. Well, certainly, we've been talking to the winglets people for about 5 years. The costs portfolio continues to come down as our fleet size rises. So, we're still a long way from an agreed price and that's not going to be altered by higher fuel costs. It certainly makes the winglets look more cost efficient. It brings down the repayment period. But, frankly, we don't believe fuel is going to stay at $50 a barrel for the longer term and we're certainly not going to rush out and buy a bunch of winglets simple because fuel is at $50 a barrel. As these numbers make clear, we're still making 29% after tax without winglets and with fuel prices rising, and we'll continue to be profitable for the remainder of the year, although barely so, with fuel at $50 a barrel.

Cool.

There is a price, though, at which we would install winglets. It's just a price that has to reflect the fact that we have a very large fleet, and, frankly, I'm not too sure the provider -- the winglets manufacturer has many other sales prospects other than us.

Yes.

Thanks, Andrew. Who's next?

Thank you. Our next question comes from Jim Parker from Raymond James in Atlanta. Please go ahead with your question.

Michael, good afternoon.

Hi, Jim.

Couple of questions. 1, can you quantify the benefits of fuel hedges in the September quarter this year and a year ago in the same quarter?

I certainly can't off the top of my head. I don't know whether Ray or Mike will want to answer that, and if we don't know the numbers then let's say we just don't know the number. We can get back to Jim on it.

I think you should do that.

Yes, I don't have the exact detail, Jim. We would have had higher fuel costs basically, because, as you know, even a year ago, the fuel price that we would have been hedging at was higher than the previous 12 months. So, all I can say is that the increase in fuel prices that we've reflected in the Q2 quarter, it's just a reflection of the higher hedge fuel prices that we're automatically occurring in the previous year. But I'll certainly come back to you with the more accurate figures later.

Okay, that will be fine. Secondly, we've seen some capacity being removed in the low cost sector. You mentioned V-Bird. I think VolareWeb shut down. My Travel has retrenched. Has the capacity, has it been significant, or is this just a drop in the bucket?

I would argue it's still a drop in the bucket, Jim, but it's a pretty consistent trend. You know it's not confined to those who have gone bust. Easyjet, for example, have also been removing flights from routes out of Stansted where they compete with us. BA has been reducing some flights. Lufthansa's talking about reducing capacity next year. In almost all markets and in almost all segments, the competition seems to be either reducing capacity or withdrawing from routes where they compete directly, head to head, with us.

You understand Easyjet are, some time in next spring, going to bring some more high fares to the Irish or to the west of Ireland. But, in capacity terms, that's a lot less capacity than they've withdrawn from routes out of Stansted where they compete directly with us. And we love to see more high fares competitors entering the Irish market where they're in for a warmest of Irish welcomes and [indiscernible].

Okay, thanks.

Thanks, Jim.

Thank you. Your next question comes from Jonathan Webber from HSBC in London. Please go ahead with your question.

The number is -- small questions of detail which, hopefully, won't take too long. The first 1 is head count, where do you see that going by the year end and into next year?

Do you want to give them to me and I come through 1 by 1?

Okay, sure. Second question is can you give us the overall net impact of FX, for foreign exchange factors on the P&L in the first half?

Third one is can you explain a bit more about the depreciation charges. I know there's a number of issues going into maintenance, new maintenance and FX impact, but can you sort of detail those a bit more?

Thirdly, or fourthly, I can't remember what I'm up to now.

Four.

Fourth, okay, thanks, you say in the statement that the -- that fuel at $50 a -- or oil at $50 a barrel would add €55m to your total budgeted cost. Can you say what the assumption on crude or fuel prices was in your budget?

And, finally, you've given a revised guidance on winter yields. Have you got any thoughts about next summer's yields?

I knew someone was going to ask us that. On head count, Jonathan, at the period end we're up to 2,600 full-time employee equivalent from 2,300 the previous year. So, in line with our growth in fleet and we would expect, if you go forward another year, that the increase will be there, thereabouts the same.

On the net impact of FX on P&L in the half year, I don't have an answer to that. I'm not sure if we would want to quantify it on the cost.

The depreciation charge is fully explained in the MD&A, the detail of the MD&A, which is available on our website.

Oil is at $50 a barrel. That's our calculation for the rest of this year. I'd rather if we didn't get into specifying what the oil prices in the original budget for this year. That's the impact for the remainder of this year, and next summer's yield, frankly, we haven't a clue. Much depends on where oil goes between now and next summer. If there's more fuel [indiscernible], there's more surcharging amongst our competitors and then who survives this winter and in what market. Obviously, the V-Bird disappearing or if VolareWeb was to close it would have a not insignificant impact. If Alitalia was to disappear, it would have a major impact and it's just too hard to call at this stage.

So, you're not yet at the stage where you think you could say that it's reverting to whatever a trend rate of yield development would be. You're still at the, sort of -- the bloodbath is continuing, or could be continuing.

I think, first of all, when we said the bloodbath, we were really more a question of bloodbath to characterize the losses being made by our competitors, that the number of them that would to bust. We weren't really envisaging a bloodbath in terms of our own numbers, although, clearly, we didn't expect our profitability to grow. But the underlying message we're trying to convey to the market for the last number of quarters, and in this quarter, is if you look at the underlying delivery here of capacity growth, traffic growth, load factor growth, unit cost management, we are hitting all of our numbers. Okay, the yields declined a bit at the back end of the comp this year and we've had a bit of a run on fuel. But the underlying performance of this company remains by a country mile the best of any of the airlines in Europe, and we've -- that's our focus, on continuing to deliver on that.

Okay, thanks, very much.

Ray, just before I finish that, do you have a net impact figure of FX on the P&L in the first half, or you don't want to get into that?

I won't get into the specific values but, Michael, really, it's been -- we've seen a -- the sterling has strengthened again. It impacts at about 2% on yields. So, we're guiding 3% for Q -- when we got 3% for Q2, it would have been roughly 5% on a year-on-year basis, but that's been pretty much eroded away by the impact of sterling on the cost side as well in things like airport charges.

Okay.

So, is a rough balance, then?

Pretty close.

Okay, thanks

Okay, who's next?

Thank you. Our next question comes from John Mattimoe from Merrion Capital in Dublin. Please go ahead with your question.

Good afternoon. Michael, I just wanted to get a sense in relation to the Q4, just how comfortable you are with the outlook for Q4 given that traditionally that's been the quarter with a bit more visibility, and just -- I wanted to get the sense in just why you seem a bit more upbeat about Q4, particular now than you would have maybe a couple weeks or a couple of months ago?

I don't want to -- in the presentation that you have seen this morning for the analysts and for the investors as we go round, we've pretty very good visibility on Q3 at this stage. We don't have much visibility on Q4. We've about 15% of receipts in for January and February. But our guidance into Q3 and Q4 is -5 to -10 is heavily qualified by fuel at $50 a barrel, no adverse changes on currency and a continuation of what we've seen in the last, say, 2 to 3 months.

But we all remember that we called this one wrong this time last year. Had a very good Q3 where we had profits of about €40m and barely above breakeven in Q4. So, we think the guidance is more accurate. We're certainly more, we're certainly, I think, optimistic that we're not in the -10 to -20 range at the moment. We're a little bit better than that, but I wouldn't want to overplay it either. I think what you're going to see, we've have a very good first half. We've had very good profitability, very good margins. Last -- the third quarter, you're going to see a major drop in profitability compared to last year's high comparable, and in the fourth quarter you're going to see us maybe doing the same or a little bit better than last year against a really comparable in Q4 last year.

So, I think our guidance in the second half is breakeven or a little bit better than that, and we have some degree of confidence at this stage, certainly in quarter 3 that's doable, and we're optimistic that in quarter 4 the world won't get any worse than it is at the moment.

And has anything, say, changed compared to quarter 4 last year in terms of the level of irrational pricing going on in the market, or in terms of the seasonal impact of some of the French routes that you have that might help your more optimistic outlook for --

I think seasonality was pretty much the same, John, but there's been 3 developments that weren't there this time last year. Firstly, a lot of our competitors have 3 separate fuel surcharges out there and are desperately trying to impose, wherever they can, fuel surcharges, even on their short haul networks.

Secondly, we have a lot of lunatic fringe who were, last year, happily losing bundles of money because eventually the yields would rise and they'd be able to float their low fare airlines and make a fortune desperately scrambling now to trying to get yields up to cover the $50 a barrel oil prices. And, at a smaller level, we have, in almost all markets, airlines taking capacity away from direct head-to-head competition on routes with Ryanair or, in some case, indirect competition from adjoining airports where it seems that Ryanair's prices are just a little too low for them and maybe they can lose less money by taking some of that capacity away into the market. And we've had a slight impact by culling out some of our worst performing routes. This time last year, if you remember, we pulled things like the London/Charleroi, the London/Ostend, the London/Maastricht, which were poor performers at the time. That had an impact on improving our operational role as well.

We -- it's too early yet to see any major trends. We think it's still largely driven by fuel surcharging and also pressure on yields amongst the competition is having less of a downward pressure on our yields.

Michael, you're closer to the yields. So, do you want to add anything to that?

No. I think, insofar as you can read what happened thus far, Michael, the influence of the stronger yield in the half we're reporting on, John, I think those factors are going to continue plus what Michael talked about there. And if the surcharge has been one of the reasons for our better demand, our competitive edge, if you like, is heightened by the fact that British Airways and Lufthansa are charging more by virtually surcharges, well, that trend is certainly set to continue. And, thus far, in the third quarter, that's been the case, and what we can see of the fourth quarter that would appear to be affecting as well.

And the other 2 issues that Michael mentioned the culling of those routes is also a critical issues. We're going to, as we mentioned this morning, cull a few other routes ourselves. They won't have a significant impact this year. Just 2 or 3, but it's a continuation of the same trend last year, going towards better opportunities, if you like. Not that those routes are losing money, but we can do better with the capacity that's available to us.

Okay, now, and in all that reply, John, I want to emphasize to everybody, we're not somehow very optimistic for the second half of the year. This is going to continue to be a tough business. We're going to continue to be the lowest price offer provider. We're going to keep driving fares down. It's just that we think given a background where competitors are losing a fortune or imposing fuel surcharges, the early indications are we won't have to drive down fares as low as we once thought we would, but I don't want people to think that we're being overly optimistic, or all of a sudden there's blue skies out there. It's grey skies, but not quite as black as they were maybe 6 months ago.

And why you say they're not as black is do you think that the -- am I wrong in interpreting that you -- I'm getting a sense that you're a bit more comfortable with the outlook, as you're calling it.

I think it would be fair to say we're very -- we're pretty comfortable with Q3 as we were this time last year, but Q4 fell out of bed on us this time last year and we want to at least not make any stupid statements now that we'd have to correct when we get to January, or we begin to see by the middle end of January what Q4 looks like.

Okay, that's --

We've had one profit warning before and we're not having another one.

Okay, that's helpful. Thanks, Michael.

Thanks.

Thank you. Our next question comes from Robin Horne from Credit Suisse First Boston in London. Please go ahead, with your question.

Good afternoon, gentlemen, just 3 questions. Firstly, just looking at your revised and lower winter yield guidance, is this entirely due to the indirect benefits of other carriers fuel surcharges, or are you seeing a less aggressive competitive environment and some of the competition coming off your routes? That's question one.

The second question, I just wondered, a bit cheeky actually, I just wondered if I could push you a little bit further on Q3 yields. You said you've got good visibility on yields, is there anything more that you can say on the -5 to -10% yield decline? In other words, is it close to -5 or -10%?

And third question, you said some bases, i.e. Barcelona, Rome, exceeded expectations. Are there any underperformers out there? That's it, thanks.

Okay, thanks Robin. I think we've dealt with the winter yields pretty comprehensively already. Without having any analysis, it takes a couple of months here, we think it's a combination of competitors whacking on fuel surcharges, people -- loss making lunatics desperately trying to not lose their short winter trying to get the fairs up a little bit, a lot of the bigger low fares airline pulling capacity off routes where they compete head-to-head with us and us pulling out some of the worst performing routes last year.

We can't give you any further guidance on Q3. We think we're in -5 to -10%, and I think your best number there would be take -- we're in the middle of that range. We're not at the lower end, we're not at the higher end. We would still have -- we've a good bit of the Christmas bookings in already, but a lot of the Q3 yield does depend on the last 20% sales by the Christmas period coming it at numbers that we would look for -- where we're expect them to come in at and we gave an indication.

I think when we said that Rome and Barcelona were better than we had expected, in actual fact, it was more that on the traffic growth they were faster than we expected. There's no base, yet, is underperforming. There's no base it is worse than we originally thought. I think the only base that continues to be a bit -- it doesn't compete as well as the rest is Dublin where the costs are significantly higher and where, despite the fact that Aer Lingus has pretty much pulled off almost all of the routes where they compete with us in and out of the UK in an desperate attempt to find routes where they don't compete with Ryanair. We haven't seen any -- in fact, yields have continued to slide a bit back into Ireland from the UK and we ascribe a lot of that to the fact that there's just so much more choice out of the UK at low prices into continental Europe, mainly from Ryanair. That were essentially our Irish routes are competing with our other low costs, you know, Barcelona's, Rome's, Milan, and Ireland's coming off of a bit worse. So, we've let the competition into Ireland, but the fares are lower, the costs are higher and so unlike most of the other bases, I think the Irish routes are doing worse, which just goes to show how inaccurate the Easyjet analysis of the Irish market would be, but we look forward to re-educating them sometime in spring when they arrive.

Okay. Can I just -- 2 quick follow-ups. The maintenance contract is General Electric. Can you give us some indication of what cost reductions are expected from that, and what level would you go into the market and start hedging again?

We discussed amongst ourselves that we would answer that question and, of course, as with most things in Ryanair, there was 5 of us with 5 different answers. So, we agreed on a position that would say we're going to keep it under review. We will not be getting into a specific on price, but the range was -- we had a range of views internally that I would certainly be happy to go back here and start hedging at the low 30s, and we had some other less aggressive people than me who would have been happier to hedge somewhere in the high 30s or low 40s.

Frankly, I don't think it adds much to the issue. People overdo hedging, and we've been a strong pusher of hedging. Hedging has always been very effective for isolating yourself against short term spikes upwards or downwards in fuel prices. But if, as you've seen over the last 12 months, we have a medium change in market prices from middle to high 20s to mid 40s, no amount of hedging is going to protect you from that and any of the other airlines who claim to have hedges in place, those hedges are all have rising costs or they have hedged for a proportion of their requirements and will have to pay spot for the balance.

We still have the biggest margins in the business. We will not fuel surcharge, but there's every indication, at the moment, that as the competition engages in fuel surcharging, our yields will continue to cover a significant proportion of the increased cost of fuel and we're quite happy to take a lower margin in the short term if that's what it means to keep the prices down and the pressure on the competition and looking after our customers.

Good, just on the maintenance contract with GE.

The maintenance contract with GE will have a significant reduction. It's a double digit, but not a big double digit reduction in our engine maintenance costs. It will be significant going forward, but, obviously, it's confidential and we don't want to either embarrass ourselves or General Electric by specifying how much savings we're going to make. But we threw it in there as an example. Like, we've been relatively quiet in recent months, by our standards. Rest assured that we're going through our airport contracts, our handling contracts, our maintenance contracts on a daily/weekly basis and continuing to take out cost.

Good, that's great, thanks.

Thanks, Robin.

Thank you. Our next question comes from Joe Gill from Goodbody in Dublin. Please go ahead, with your question.

Good afternoon, I've got 3 points just to ask on. First of all, your operating costs per passenger are now down to about €33.50. Realistically, next, say, 3 years or so, taking out fuel, what do you think is a reasonable stab at a target for that?

Secondly, could you comment a little bit geographically on market conditions, particularly interested in conditions within the UK., Italy and France? The last point is just on the second half performance. The guidance today is somewhere around €200m net. Last year, you made €40m pre-tax in the second half. Is it fair to say that you're giving yourself as much protection as possible from oil prices, which are going for the moment, and that really we're looking at spot prices for oil from here over the rest of the 6 months to determine whether or not you're going to contribute to the bottom line there?

I don't know. Michael, do you want to take those?

1 or 2 of them, maybe. Maybe you want to deal with the last one yourself, Michael.

On the cost per passenger, Joe, some of our costs, to start with, are a function of our size. So, as we grow and something as simple, for example, as the replacement of the remaining 9 727-200s with 727-800s would have crossed a number of cost lines, fuel depreciation, maintenance and staff reduce the cost per passenger further. Even today in the first half year, the productivity per employee has risen by 7% again. So, don't ask me where it's going to finish. I don't know. Obviously, there's a limit to that, I suppose, but people said that in 1997 too in [indiscernible].

But, as Michael has said there, we have studiously, probably more studiously than before even, gone through every cost item in the profit and loss account. Had a very thorough budgeting process this year on costs, because we know the yields - we are yield passive, as you know - and that process is now virtually a continuous process in Ryanair. I know that Mikiki(ph) who's just concluded the maintenance -- the engine maintenance contract, announced that he was going after further substantial subcontract on another element of -- in this department, and we just revisit these issues and our size, in part, can give us economies of scale on the first point. But also give us clout with suppliers and airports to the extent that we, obviously, haven't encountered that before. So, that gives us a new opportunity every year.

The other issue, for example, on a regional basis, I explained this to you this morning, is that more and more airports now, if you look at the UK where largely Easyjet has pronounced it full from their point of view - of course, if you're selling seats at €62, it probably is full and the number of destinations you can fly to is complete. But we're now just going around those very same airports and they realize that between Easyjet's average fare of €62 and ours of €39, there's a whole new market for which, of course, we can get further reductions in our cost. Not just on our new business, but on our existing business, and this is an exercise that is already yielding us quite a considerable amount which will manifest itself as those routes are launched and flow on in due course, and you can see that we are peaking off in some of the new routes we've announced recently, some of those UK regions. That process is being applied right across Europe to existing and new airports and every -- you'll also note that some of our -- a lot of our bases got extra business this year. That was not just on the back of the existing contract, but further enhancement to it, either in terms of duration and/or a lower cost level.

So, right through the profit and loss account there are opportunities for us to reduce costs because of our size and because of the, if you like, strategic components that we now represent to many of our partners, whether they're airports or suppliers.

On the geographical question, the situation, I mentioned the UK. The profitability is for us in all of those airports or, rather, those countries at least, whether by dint of our existing size, as in the case of Italy where we're the second largest airline now, and with very fragile competition there, I would have thought we can't make a judgment as to what the eventual shape of Alitalia will be and whether people like Volare or VolareWeb or Air One will even survive. Alitalia will survive, but I'm sure it will be much smaller, throwing up much more opportunities for us. So, we're very pleased with our position there, and we continue to grow. Both our bases have 2 new, 2 extra aircraft each there this year going into next year, and we're in a pole position there to exploit anything that crops up from a competitive point of view. Meantime, our business goes very well there.

France has the highest costs in Europe at airports. The Government there continues in the complete -- completely contrary to what they should be doing. They're lumping taxes and charges in on top of an already very high regime of taxes and charges and that is inhibiting growth, and our business there, you'll notice, has grown least of all in any other country apart from Ireland in the last 2 years albeit with a very high presence there since our acquisition of Buzz. But I wouldn't see that growing significantly unless there's a seachange in the way that they price their air transport.

Michael, do you want to take the second half.

I think it maybe helpful to give an example of what the Danes did yesterday. It's not that the French can stand there -- the French government can stand isolated for ever more.

The Danes, you may or may not know this, Joe, but we fly to [indiscernible] in Ellsberg(ph) both from London, and they've been at it for a long, long time about new routes from other bases. A big inhibiting factor to that has been a 75 krona, Danish krona, which I think is about 8 or €9 euro tax. The equivalent is the passenger duty. The Danish government announced late last week that they were going to abolish that on all flights. A very positive trend. Now, they haven't decided on an implementation date yet, but I expect it to be in a matter of months, which will, certainly from our perspective, change our view completely of the growth in and out of Denmark. It's always been a fairly robust market, but with the high local costs, we've always been reluctant to expand there. But we'll certainly look at it in a new vein now. It literally more than halves the cost to us to put in airport -- government taxes as part of our cost structure, which it is, because we advertise tax inclusively in the UK. You've got to include that as part of the price. It's part of the 19.99 or the 9.99 that you advertise, and it's purely a cost to the passenger and, consequently, and inhibiting factor on passenger growth and we're delighted to see that very progressive growth and we'd encourage other countries, particularly France to do similarly. Like, it is in Denmark has a big competitive advantage now for growth. Not just from us, but I'm sure from other airlines as well.

Yes, thanks Michael. I think it's a helpful example. Joe, on second half performance, I don't think, what we've tried to do is to give everybody our best call on where fuel is. It's a $50, or well it was $50 a barrel at middle of last week when we were going live on these numbers, and the cost increase for the year end is €55m at $50 a barrel. I don't think that's an optimistic thing. I don't think we're covering ourselves. It's out best guess based on it being worse.

It's very easy to come up with a scenario that says fuel jumped to $60 a barrel for the next month or falls to $40 a barrel, but every dollar move does remind us on $50 a barrel will be about €2.5m plus or minus for us for the end of the year, and we're not trying to cover ourselves. That's where we think we are, but I think you can draw some comfort from the fact that if fuel price keeps increasing, the competition are under even more pressure in terms of yield and fuel surcharging and things to reduce the pressure on our yield. If yield falls significantly now and the year end, maybe some of the that pricing pressure, downward pricing pressure, on yields will be restored because fuel surcharges will be removed or there'd be more price competition, but you can bet that some of the flag carriers we complete with, it'll be a bit like the banks in terms of giving back the surcharges in a declining market. It will have to be prized off them, although I'm sure we'd get a further prizing it out of them. We'll be very aggressive about pricing, or aggressive as we have to be, to continue to maintain high load factors and world leading profitability.

Okay, thanks for that and just the last one. On Q3, in terms of generating the actual numbers for the quarter, I presume, in the quarter it's far more dependent on late-in bookings around the Christmas periods than other quarters would be, do you know what I mean, within the 3 month period? Is that fair and so, from that, is it still too early from your own point of view to have any call on Q3 as much as that?

I'd want to over do Christmas. We're now a much bigger pan-European airline. It's no longer dependent on the Irish hadge(ph) on the way home to Dublin for Christmas from London. The fact that there isn't a lot of them out there anymore anyway, but it's no longer -- Christmas is a good time for us, but the third quarter no longer rids on it. I think in many respects the October bank holiday weekend, it's more a question that the October bank holiday weekend, not having a November and Christmas being pretty much in line with previous years is about the summary of the third quarter. Now, clearly, we've the October bank holiday weekend done. November, we're still working on, but it doesn't look too bad and Christmas is building nicely, but there's a bit to go yet. I think in our guidance we said we had good visibility, not 20/20 for Q3, and we have low visibility for Q4, and that's as good as we can give you.

Thank you.

Thanks, Joe.

[OPERATOR INSTRUCTIONS] Our next question comes from Paul Butler from Merrill Lynch in London. Please go ahead with your question.

I was just wondering if you could comment on what you see the capacity growth being going forward?

I would, for us, Paul, I would take for the next 2 to 3 years, based on the firm orders and the options we've already confirmed, about 20% a year capacity growth and load factors relatively stable. So, I would say traffic growth, again, from next year and the year after, about 20%. As you remember, last year we had traffic capacity growth, load factor fell by about 4 points. This year, we're slightly slowing down the capacity growth. It's about 16%, 4% load factor growth back to 20% traffic load, and that should be continued for another 2 to 3 years.

And what ability do you have to flex that depending on conditions and so forth?

We could flex it pretty quickly but upwards, and I don't think we can flex it downwards. We could sit some aircraft on the ground though. We could lease them out temporarily, but we wouldn't be of the mind to want to flex it one way or the other. If you go back to our long-term guidance, it has always been 20 to 25% capacity growth, 5% yield decline, 5% unit cost decline, after tax margins steady at 20%. 2 years ago we jumped, with the acquisition of Buzz and the transfer switch from 200 to 800, that jumped to 55% capacity growth. This year is a return to normality and we'd expect normality for the next year too.

Okay, thank you very much.

Thanks.

Thank you. Our next question comes from Stephen Furlong from Davies Stockbrokers in Dublin. Please go ahead with your question.

In terms of expansion into next year and going forward, how would you rate Germany domestic growth, particularly picking Italy and Eastern Europe? Are they longer term aspirations, particularly domestic growth, and Eastern Europe?

Again, you go back to the model, Stephen. We don't read any geographic or sectoral growth at this stage. The growth -- we expect to announce a new base sometime in the next 2 or 3 weeks, the first of the 2 for next year. We're down to the last round of offers from 4 competing base airports. Four of them in 4 different countries, and it could go to any one of the 4 and, frankly, we don't care which of the 4 it goes to. But it goes to the one that comes up with the best package of cost and efficient facilities. If that results in us doing more domestic routes in a certain country or more international routes, we're indifferent.

It will always go with general terms to the next best offer and the airports know that, we know that and we won't be swayed by some geographical and certain national, whatever that my be, characteristics or something. We couldn't care less. The reality is going to be if we do the next lowest cost to next, we're ultimately going to get round to all of them. As Michael has rightly said, one of the interesting things has been with the kind of Easyjet retreat from hedge to hedge competition with us and certainly their attempts to stop growing out of a lot of the UK pay expect into charter destinations, remarkably, a lot of those UK pay airports are coming to us desperately trying to persuade us to go into some of those market places, and our response to them is we've more new places on the continent that we can handle, but make us an offer and if the offer is good enough, you'll get to go to the top of the queue.

Great.

Thank you. Our next question comes from Travis Anderson from Guilder Ganion & Howard in New Jersey. Please go ahead, with your question.

Hi, I was wondering if you could talk a little bit about the test that you've run on the in-flight entertainment and what sort of numbers those have resulted in so far? Will they run mostly on longer haul flights?

No, costs in -- we have 2 days of experience in this so far. 1 of which was a Sunday and the other was a Monday. We've deliberately run them -- there's 3 aircraft doing long sectors, but there's 2 of the 5 aircraft doing short 1 hour sectors because we want to test it as how do the kids cartoons and the half hour sitcoms work on the 1 hour sectors. I would be surprised to say that the first 2 days the uptake has been very impressive. Clearly, we sold out on a lot of the longer sectors. Less impressive on some of the shorter sectors, but we've no pattern yet in 2 days. We've also, as we expected, some confusion from the in-flight staff demonstrating. Some confusion, perhaps, just how it works, but if you go back to our recent guidance, we needed a 3% penetration to pay for it and we're way ahead of 3% penetration on the first 2 days and we think that will continue. But, I think give us the 3 months and we'll have a much better feel ourselves and much more credible numbers, but certainly the introduction has been a success based on 2 days and not a lot of flights over 5 aircraft over 2 day period.

Okay, and do you expect to have a couple of bases to announce by Christmas?

I say, well, we've 2 new bases for next year. We've 6 unallocated aircraft, which is probably 2 new bases with. I would think we would want to announce 1 before Christmas. 1 at least before Christmas that will start in maybe late February, early March, and 1 either immediately before Christmas or immediately or slightly later next Spring or early Summer.

Okay, thanks.

Thanks, Travis.

Michael, it's Ray here. I'm just going to have to go off this call now.

Okay, Ray. Thanks very much.

Talk to you again.

Bye. Anybody else?

Thank you. Our next question comes from Nick van der Brul from Exxan BNP Paribas. Please go ahead with your question.

Hi, I just wanted to clarify. On the extra costs of €55m at $50 a barrel, budgeted costs, my rough sums give me a 50% of that approximately coming from the yield improvement that you've indicated and the rest coming from cost cuts elsewhere. Would that be correct? That's the first question.

I wouldn't want to -- I don't want to guide you too closely on it, but it's going -- the fuel, the yield improvements will make up a significant portion of it, yes, and cost cuts elsewhere together with a slightly weaker dollar. Don't ask me the individuals, because it much depends on where the yield finishes up over the next 6 months.

Yes, okay.

Put it this way, I think we want to make everybody aware of, if the yields are -5 to -10%, that won't make up for all of the fuel increases if fuel stays at $50 a barrel. It will have some negative on the second half, but we still think we'll be to the lower end of our original guidance, which was 200 to 215, we'll still be somewhere in the low 200s.

Right, that's what I'm assuming, at that level. Then, to take the improvement the other way, you take the $2.5 barrel from $50 a barrel downwards, presumably, as a rough way of approaching it.

Yes.

The second question is on the ancillary revenues, it's increased as a percentage of total revenues to 14% from 12% last year. Do you see, obviously, they'd be a one-off increase, further increase, from in-flight, I would imagine, if that works well. Do you see a stabilization as a percent of revenues? Have you done any budgets on that over the next couple of years?

Yes, we think, our prices will run -- excluding the in-flight entertainment, it'll run ahead of the growth in revenues for about another year or 2 and then begin to follow it. In other words, that we don't think the penetration will go much higher than we can get it after another 12 or 24 months of pushing, unless a new product arrives along, a la, the in-flight entertainment, and we think the in-flight entertainment could be very big if it lives up to our expectations and, believe me, we're playing down our expectations at the moment, because if it works ultimately we think it takes us into gambling within the space of 2 or 3 years and then we could be into enormous ancillary revenues. But I think let's wait and see how it takes up to start with, particularly how it takes up on the shorter 1 hour sectors. So, for the moment, for the next year you can pencil a slightly faster ancillary revenue growth than scheduled revenue growth.

Okay, thanks. Then, 2 final questions on the potential cost side. Firstly, Iberia claiming that they've got a case in relation to the Spanish airport coming from the cost structure on some of the Spanish airports, the deals that have been offered to you. Is there any substance in that, or can that be written off? Obviously, they're putting it together according to them, a case. But I don't know whether it will have any substance or not, but maybe you could give us a view on that?

The second question is on the Pilot Association. Is there any risk of that turning into a pay negotiating structure at all, the Ryanair new Association of Pilots?

The Iberia case, clearly, although we would say this wouldn't we, the Iberia have no case whatsoever. We understand that the regional airports in Spain have been even more dismissive of the Iberia claims than Ryanair would normally be. Many of them have offered Iberia similar costs base. The cost base available to Iberia if they want to go there, and we understand that, in actual fact, they've been at the forefront of giving examples of Iberia subsidiaries who are in receipt of substantial just transfer from local government in Spain, which wouldn't surprise us overly.

But, we've always said we're going to be the subject of these kind of allegations from high fair carriers until the Charleroi appeal is heard, and the Charleroi appeal either deals with all of these, or ends all of these, insofar as publicly owned airports are concerned, and, frankly, I wouldn't waste too much time on anybody's accusations of did we get the appeal heard and either win or lose it.

The new Ryanair European Pilot's Association, we think this is a -- I think it is a very positive move. I think the more you see them issuing press releases about having meetings, about meetings, the less their actually -- I think it's tantamount to the fact that the less they're capable of doing anything about anything. It's quite remarkable that now that the freeze period in the UK, under UK legislation, has now gone. Balber(ph), for all their talk, are free to hold or demand a new vote on pilot recognition in the UK and, frankly, we'd say to them put up or shut up. If you think you can deliver the numbers, have a ballot and all we see is them meeting with their colleagues and the other high flag carriers, pilot unions around Europe, probably to assemble lists of redundant pilots from flag carriers who'd they'd encourage to advise the Ryanair for the high paid and secure jobs that we have.

Will it become a pay negotiating thing? No, never. We'll continue to deal with pay internally with our own pilot groups. There's no mechanism for any pan-European group of anything somehow getting a meeting with us, nor would they ever and the people who are putting it forward at the moment are basically an Aer Lingus pilot in Ireland, a BA pilot in the UK and a couple of other head bangers around Europe, and god be good to them, we wish them well with their meetings and their campaign, but we won't be paying a lot of notice of it.

Okay, thanks.

Thanks.

Thank you. Our next question comes from David Glamen(ph) from Panikos(ph) in New York. Please go ahead with your question.

Good afternoon, Michael, just 2 fast questions because I know you've had enough questions about third quarter expectations. So, this is more of a philosophical question. It looks like oil, during the third and fourth quarter, oil prices begin to drop significantly. Would that be an impetus for you to start increasing the pressure again on your competition in terms of driving yields back down?

Yes.

So, that's just philosophically if oil's not going to do it, you guys will do it yourself then?

No, I think it's not so much that we will philosophically be doing it, because, philosophically, we're doing it at the moment anyway.

Okay.

As far as we can see, most of the rest of the industry in Europe, and we take -- and I'll take you from the Easyjet all the way up to BA in this is desperately trying to get yields up by either taking capacity away from direct competition with us, or slapping on fuel surcharges. We're still driving fares down. If fuel was at $80 a barrel, we'd still be trying to drive yields down by 4 or 5%, because that's our plan for the next 12 months. But I would suspect that if fuel began to come significantly in the next 2 quarters, you'd see some of the other loonies out there who's business model doesn't work very well trying to use those fuel savings to lower prices to try to survive until next summer and that that would -- that would simply to have another round of price promotions, price reductions, fare reductions and that what we're seeing at the moment, being less pressure on our yields will begin to reverse itself again and opposition is [inaudible]. In all markets we would be the lowest fair provider regardless of who is in the market and at what price they're charging, we'd be lower.

Yes, I was just trying to get a sense of more of the aggressiveness. And then this is more of a housekeeping question, but in the strong growth that you guys had in the ancillary revenues, how much would you attribute that to passenger baggage charges as well as the change in credit card and debit card fees?

There's no great amount. I wouldn't; attribute any enormous thing there to passenger baggage charges. Remember, our passenger baggage -- we've done 2 things in the last 6 months to passenger baggage charges. Unfortunately, only 1 is reported and that is we've reduced the limit for the check-in luggage and we're being very aggressive about excess baggage fees above that. We're doing that not to drive revenue. We're doing that to drive down the amount of checked in luggage. That's got a lot of publicity in the European papers, which actually we quite welcome because the more people know that we're going to fine you if you show up with a lot of bags, the more likely it is that you won't show up with a lot of bags and, therefore, you won't suffer the fine. But we've also increased the carry on limit from 7 to 10 kilos, got no reporting whatsoever. So, what we're really trying to do is to speed up the turnaround, reduce our airport costs, and if we can take that all over the next year or 2, we will because we think it will have a major cost -- it'll be the next big cost reduction initiative we can enter into. So, there's nothing unique in the analysis of our ancillary revenues. It's generally a combination of traffic growth, increased penetration, some tweaking of the margins around the edges and just better management of it overall.

Okay, thank you.

Thanks

Thank you. We appear to have no further questions at this point. I'd like to hand back the conference for any further comments.

Michael, is there anything you want to add before we wind up?

No, Michael. No.

Okay, folks. Again, thank you very much. I hope we've answered all you questions. I think what the tone we're trying to convey and the roadshow over the next week business, we're continuing regardless of the share price, our concerns over oil. Ryanair is continuing to deliver on all of our numbers. Our load factors are excellent, our traffic growth is excellent, we're kicking the daylight out of the competition, our market shares are building, and when fuel prices settle down we'll still be there a bigger, more profitable, more well established airline in all of these markets in Europe, and we're going to continue to grow at 20% a year for the next couple of years and we believe, or we hope, that those of you who have soldiered with us through the last 12 months when clearly our share price performance hasn't been as good as the underlying performance of the Company, will see your faith in us vindicated by some kind of re-rating of the share price or the business model.

With that, I say, again, thank you to everybody for joining on the call. Howard and Ray Hernan are doing 2 roadshows in the US. I'm in London and Scotland this week. Michael's in London and in continental Europe as is Shaun Coil and Jimmy Dempsey.

So, I trust we'll get round to everybody this week. If anybody has any follow up questions, do please route them to Jimmy Dempsey or Howard's office in Dublin and we'll get back to you by the end of the week.

With that, again, thank you very much. Look forward to seeing you this week and we'll sign off now. Bye bye.

Thank you, ladies and gentlemen. That concludes today's conference. You may now disconnect your lines.