Ryanair Holdings PLC (RYAAY) 2005 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to today's Ryanair first quarter results conference call. [OPERATOR INSTRUCTIONS]

I would now like to hand over to the Chairperson for today, Mr. Michael O'Leary.

Please begin your meeting and I'll be standing by.

Good afternoon, ladies and gentlemen.

Welcome to the Ryanair Q1 results conference call.

I'm joined here by Ray Hernan and Jimmy Dempsey and Sean Coyle in Dublin.

Howard Millar is joining us from London, and Michael Cawley sends his apologies, but he's on a flight somewhere in Europe.

We today announced record profits of EUR64.4 million for the quarter ended 30th of June.

Traffic grew by 30% to 8.5 million passengers.

Yields increased by 3%, and as a result, total revenues rose by 35% to EUR404 million.

Unit cost increased by 6%.

Excluding fuel, they actually fell by 9%, as fuel cost rose by 112% to EUR110 million.

As a result, Ryanair's adjusted after-tax margin for the quarter fell by 2 points to 16%, as adjusted net profit increased by 21% to EUR64 million.

These record quarterly results reflect the discipline and the successful rollout of Ryanair's low fares model across Europe.

The increased profits during the quarter, despite the fact that Easter fell in the prior quarter last year, underlines the fundamental trend of the Ryanair low fares model, which continues to deliver profitable growth even during periods of intense competition and significantly higher oil prices.

Yields were 3% higher than last year, slightly better than we anticipated, despite a 30% increase in seat capacity.

These higher yields were primarily due to the multiple fuel surcharges imposed by the European flight carriers on their short haul passengers, with the latest round of increases imposed in June.

These surcharges continue to widen the gap between their high fares and Ryanair's low fares.

Both Ryanair's traffic growth and yields have significantly benefited from our commitment not to impose fuel surcharges on our passengers.

Bookings were down for number of days in the immediate aftermath of each of the two terrorist attacks in London on the 7th and 21st of July.

If there are no further such attacks in London, then we expect that our forward bookings will not be materially impacted.

However, if there are further incidents in London, both bookings and yields could be adversely impacted.

During the quarter, fuel cost rose by 112% to EUR110 million.

Fuel prices continue to be high and the market remains volatile.

We are unhedged for August, but have hedged 90% of our September volumes at $57 per barrel.

Thereafter, we're 90% hedged for the winter period, October through to March '06, at rates equivalent to $49 per barrel, and we continue to closely monitor forward prices with a view to hedging some or all of our requirements for the early part of summer, 2006.

Our new routes and bases have developed well over the summer.

Both our Luton and Liverpool bases are performing strongly and traffic at our Shannon base is running ahead of expectations, although yields continue to be slightly lower than expected there.

We recently announced our 14th European base at Pisa in Italy.

We will initially locate two aircraft there and have launched a further three new routes from Pisa to Alghero in Sardinia, Dublin and Eindhoven, bringing the total routes operated to and from Pisa to 10.

Our growth continues in the UK with two new routes from Stansted to Toulon in the South of France and Krakow in Poland.

We will have added a fifth aircraft to our Liverpool base in the end of September and will launch four new routes to Oslo and Norway, Riga in Latvia and Burgerac and Carcassonne in France.

From our Shannon base we have recently announced two new routes to Bristol in the UK and Nantes in Northwest France.

During the quarter we exercised 5 Boeing 737-800 options for delivery in 2007; one each, in February, March and April and 2 in May, as we continue to see many more growth opportunities across Europe.

The Boeing 737 aircraft offers Ryanair the lowest unit operating cost per seat, as well as the technical reliability to maintain our number one on-time performance of any major airline in Europe.

In Ireland, passengers at Dublin airport continue to endure third world facilities.

Despite this, the ineffective Regulator is proposing to allow airport charges to rise by up to 40%.

The Regulator has consistently failed to address the 50% efficiency gap he identified at Dublin airport over 4 years ago and is bizarrely proposing to approve capital expenditure for facilities, which do not have the support of the airline users at Dublin airport.

These expenditure proposals include the construction of a second runway, which is not required until Dublin's traffic reaches 35 million passengers per year, and is currently only at 17 million.

This government has also nominated the inefficient Dublin airport authority to build a second terminal, despite the unanimous support of airlines and passengers for an independent competing terminal.

Ryanair has initiated legal proceedings to force the Irish government to honor its commitments to open up this inefficient airport monopolies competition.

Our outlook for the remainder of the year is cautious, as we continue to budget for higher oil prices, but anticipate that these will be partly offset by a combination of other cost reductions and the current benign yield environment.

Our competitors' imposition of further fuel surcharges, up to 4 in the case of British Airways, on their passengers and their removal of capacity from market, is positive for our yield.

And we still plan to grow traffic by approximately 27%, to 35 million passengers this year.

However, further terrorist attacks in London could have a downward impact on passenger volumes and yield, although at this early stage we saw no reason to revise our guidance for the year.

We anticipate there will be continued intense competition and that there will be fewer low-fare carriers and high-fare carriers in the European market, as higher oil prices force loss making carriers out of the industry.

Ryanair's unique combination of the lowest cost to lowest fares and industry leading customer service will, we believe, ensure that Ryanair continues to grow profitably to the benefit of all our European passengers, our people and our shareholders.

And Howard, do you want to take the MD&A?

Yes, Michael.

For the purpose of the MD&A, all figures and comments are by reference to the adjusted income statement, excluding exceptional items referred to below.

Exceptional items for quarter ended June 30, 2005 consisted of a receipt of 5.2 million, net of tax, arising from the settlement of an insurance claim for the scribing of 6 Boeing 737-200 aircraft.

Profit after tax increased by 31% to 69.6 million, compared to 53.1 million in the previous quarter ended June 30, 2004.

The adjusted profit for the quarter, excluding exceptional items, increased by 21% to EUR64.4 million.

The results for the quarter and comparative year have been prepared in accordance with International Financial Reporting Standards (IFRS), accounting policies expected to be adopted in the annual financial statements for the year ended March 31, 2006, and a detailed explanation of the financial impact of the adoption of these policies is set out in a separate document issued with these quarterly financial results for the period to 30th of June, 2005.

A reconciliation between the Net Income and Shareholders equity under IFRS and Irish/UK GAAP is attached in Note 2 to this MD&A.

This is summary for the quarter.

Profit after tax increased by 21% to 64.4 million, compared to 53.1 million in the previous quarter ended June 30, 2004.

Total operating revenues increased by 35% to EUR404.6 million, which was faster than the 30% growth in passenger volumes, as average fares rose by 3% and ancillary revenues grew by 44% to EUR58.4 million.

Total revenue per passenger, as a result, increased by 4% whilst load factors remained constant at 83%.

Total operating expenses increased by 38% to EUR324.8 million, due to the increased level of activity, and the increased costs, primarily fuel, route charges and airport & handling costs associated with the growth of the airline.

Fuel, our largest cost item, increased by 112% to EUR109.9 million, due to substantial increases in the US dollar cost per gallon, partially offset by the strengthening of the Euro to the US dollar.

Due to the significantly higher fuel prices, operating margins declined by 2 points, to 20%, which in turn resulted in operating profit increasing by 23% to EUR79.9 million.

Profit before tax increased by 22%, which is less than the increase in operating profit, due to the higher net interest charges arising from the increased level of debt, partially offset by foreign exchange gains, which arose from the translation of foreign currency bank balances to Euro at the quarter end exchange rates.

Total unit costs increased by 6%, driven by the 112% increase in fuel costs to 109.9 million.

Excluding fuel costs, total unit costs fell by 9%.

Net Margins declined by 2 points, to 16% for the reasons outlined above and adjusted basic earnings per share increased by 21% to 8.47 cents for the quarter.

On to the balance sheet.

The Company’s increase in profitability continues to generate strong cash flows from operations, which for the quarter ended June 30, 2005, amounted to EUR213.7 million.

This cash flow funded additional aircraft deposits whilst the balance is reflected in the EUR180.8 million increase in total cash since March 31, 2005, and total cash now stands at EUR1.78 billion.

The Company had no material capital expenditure during the quarter, whilst Long Term Debt, net of repayments, reduced by EUR28.7 million.

Shareholders’ Funds at June 30, 2005, have reduced by 35.5 million, to [1,699 million], compared to March 31, 2005, reflecting the increase in profitability during the quarter of 64.4 million, offset by a reduction of 114.6 million, resulting from changes in the accounting treatment for derivative financial instruments following the adoption of IFRS.

With that, I'll hand you back to Michael.

Okay, thanks Howard.

With that, Anna, we'll open it up for questions and answers, please.

[OPERATOR INSTRUCTIONS] Stephen Furlong, Davy.

Ancillaries, why don't you just go through, Michael, where you saw the strong performance there, was it [car] higher insurance or across the range?

I noticed some accounting changes.

And where you see, maybe, potential going forward, like gaming or something like that?

Also, just on the cost side, or you might just talk about what's the situation with the pilots in Dublin?

Okay, on the ancillaries, performance has been spread across the ancillaries, generally as we've guided in the last number of quarters and couple of years.

We expect that the ancillary revenues will continue to grow slightly ahead of passenger numbers.

I wouldn't want to single out--we don't like to break down the quarterly basis, but they're all running ahead.

Well, the principal ones are running ahead.

The best performer I give you in the last quarter was travel insurance, but they're all--the hotels, car, all the big ones are running ahead or the revenue growth is running ahead of the growth in traffic.

Going forward, we expect that to continue for another couple of years.

We've said at least another 3 or 4.

But beyond a 5-year period we'd expect the growth in the current ancillaries to mirror the growth in traffic.

We are looking at other ancillary products.

We hope to be launching some day a couple of smaller ones in the next couple of weeks and months.

But longer term, gaming, which dittoed the first version [unintelligible] didn't work.

We will come back to gaming, because we do believe that gaming will be a successful product for us once we can solve the payment mechanism.

And anything else at the moment on that, no, that'll do for the moment.

On the cost side, what was the question on the cost side again?

Oh, on the pilots, yes.

There was an article appeared this morning in the Irish papers, wouldn't pay too much attention to it.

It's largely planted there by the pilot's unions the night before results.

Generally speaking, you could time your watch by them.

The situation at the moment with the Irish pilots--the Dublin pilots are the only ones who are still untrained on the 800s.

Now we do have two 800s based here and nine 200s.

The pilots who remain on the 200s would account for less than 10% of the total pilot numbers, so they're a very small minority.

We have been going through a process since about last November, of trying to get these guys to accept terms for conversion onto the 800.

The first 7 of them have thus far turned down or not accepted the first 6 offers of conversion onto the 800.

They presently have until the end of this week to accept another 5 different offers, some of which have a bond and conditions on the bond if we pay for the training.

One of the other alternatives is they can pay for the training themselves and then there's no bond and there's no conditions and they would have guarantees of a Dublin base.

This will be the last offer to those first 7.

If they don't accept by Friday they'll simply continue to fly the 200s until the 200s are taken out of service at the end of the year.

And we'll work our way down through the remaining 50 or 60-odd Dublin pilots.

But it's entirely up to them.

We can't force these guys to convert onto the 800, but they've known since 1998, that the 200s were going at the end of 2005.

But as they keep turning down the offer of conversion training onto the 800s, they can all stay flying the 200s and when the 200s go at the end of this year, there'll simply be no jobs for them.

We, for our part, will continue to encourage them to accept conversion training on the 800s.

We're indifferent as to which of the offers they accept, but put it this way, like all of the other Ryanair pilots, and most of the pilots around Europe, if you're converting onto a new type, you're doing it either you're paying for it or we, the Company, are happy to pay for it, but you're signing up to a bond.

Chris Avery, JP Morgan.

A revenue and a cost question.

On the revenue side, a great yield performance, obviously helped by the fuel price surcharges at the network majors, those have only increased again recently.

BAA's gone up to 8 pounds a sector.

Can the second quarter yield, the September quarter's yield, match that 3% Q1 growth, given the head of steam that's building up for the fuel price surcharges?

And the second one on the cost side, if you put together the aircraft costs, you aggregate depreciation and leases and compare year-over-year, that total cost is up 17%, yet the capacity in seats was up by 30%.

How are you managing to achieve, with new aircraft, such a small increase in your aircraft costs?

In relation to the yield that we're forecasting for Q2, we're going to maintain our guidance that we gave earlier in the year for the remaining quarters.

And that was that Q2 was going to be slightly up on last year, with Q3 slightly down and Q4 would be down as well, mainly due to the Easter impact.

In relation to the costs and on the depreciation specifically, [amalgamation] it was the lease charges.

You've seen on the lease line that the 300s, which were much more expensive leases, were taken out of that line in this quarter.

I suppose also what you're seeing is the benefit of the cheaper 800 aircraft coming through now, as a result of the strengthening of the Euro exchange rate against the dollar.

And certainly that's something that you'll continue to see as we go through the various quarters.

It's a stellar performance.

You get 30% more capacity and you're only paying 17% more.

You must have some very, very, very good aircraft deals.

Well, I think you also need to add to that the new Boeing deal, Chris.

And also the impact of the GE engine deal as well, which also has started to take an impact even though we signed it up towards the back end of 2004.

So, you're starting to see the cumulative benefit.

You've got the adjustments to take out the older ILFC aircraft and you're now starting to see the benefit of things that we were working on last year; lower-cost deals, stronger exchange rate and the impact now of the new GE engine deal as well.

And just one clarification on the GE deal.

The GE deal reduced your total maintenance cost over the life of the airplane, it wasn't just a case of loading it to the back of the aircraft life, it did reduce the total cost over the life?

It's a 10-year deal with a 10-year extension, so it's a 20-year deal.

And that's because GE's banking on the reliability of its engine to take the risk away from you?

Well, I can't comment what GE are betting on, but they ran a very competitive tender process and they've given us a very attractive low-cost maintenance deal.

I think they're very keen to work with Europe's largest airline as well, Chris.

Andrew Light, Citigroup.

Two question.

First of all, on ancillaries again, am I right in saying that the Other cost line, which only went up about 2 million year-on-year, is the cost of providing ancillary services, and if so, why has the margin for ancillaries increased so much year-on-year?

And then the second question, you're running a net cash position of about EUR400 million at the moment, yet paying a net interest of around 10.

What's stopping you from just reducing say the gross cash, such that you can just save 40 million a year pretax?

Just in terms of Other cost, what actually is in there Andrew, is just indirect operating expenses now.

Most of the costs, or most of our line items that related to ancillaries are now [net to] cost or nets off against the revenue generated, because we're mainly an agent for most of the items that we deal in on ancillaries.

However, there are a number of items that still go through in relation to ancillaries below the line, namely rail tickets, duty-free sales as well.

Because we're actually taking the exposure on those.

So, would you expect that other cost line to remain at roughly 20 million a quarter from now on?

No, it will continue to grow as the airline grows.

As Ray says, it has the cost of say the in-flight sales, rail tickets, that kind of stuff.

It will continue to grow, but more in line with traffic growth.

And on the net cash position, our general disposition has been, for the last number of years we've been looking at a net debt position sometime around now, we said we continue to manage the cash so that we remain in a small net debt position--or net cash position. 400 million is probably a little bit ahead of where we wanted to be, but we're not going to make short-term decisions on debt repayment at the moment.

We've been guiding everybody cash generation here is very strong.

We have long-term, low-cost financing in place, much of it fixed and we're simply waiting for interest rates to rise again and you'll see a lot of the debts being--the interest payable being fixed, but the interest receivable rising.

I suppose, Michael, we might just add to that as well is that capital expenditure is somewhat back ended this year, given that we have 25 deliveries between the 1st of September and the 31st of March.

The 4 aircraft that we took onboard--remember we have 17 aircraft on operating lease, which clearly you won't be factoring into that debt factor in the balance sheet, but obviously we've got to take that into account in terms of our total debt.

So, I think you've got a number of things running in place, Andrew.

One, a back-loadish capital expenditure program, some off-balance sheet financing and also the fact that we will continue to look at a mix of floating and fixed.

Most of our historical debt has been taken on as fixed debt.

We have, in the last couple of years, started to put down some more floating rate debt.

So I think you will start to see the benefits of having floating rate cash on your balance sheet, with floating rate debt, so the two will match off.

Edward Stanford, Cazenove.

Could you just refresh my memory in terms of what the average oil price you achieved was in the second quarter of last year and in the second half of last year, just to give us a scale of the sort or price increases you may be facing in the remainder of the year?

The answer to that is, I haven't bull's notion.

Let's deal with now and going forward.

I'm not sure we want to break it out on a quarterly basis for last year.

In the results we've given you what our price is going to be for the remainder of this year, the guidance and its impact on our numbers.

And that's enough for the moment.

I have no idea what our average oil price was on a quarterly basis last year.

Do you have an idea what it was on the full-year?

No, but we'll get back to you what it was for the full year.

Jimmy Dempsey will circle back to you after the conference call.

Maybe if we just want to deal with the quarter, Michael, which might be useful, our average price per gallon was up about 92% in the quarter.

Our volumes were up by 32%.

Our exchange rate was in our favor by 19% and that gave us 112% increase.

I think for the remainder of the year, you're still going to see an increase in and around that level, probably below 90%.

It'll be higher in the second quarter and lower in the third and fourth quarter.

But we'll get back to you with the exact details of that.

Jonathan Weber, HSBC.

Just firstly on route charges, the growth in route charges in the first quarter was below the ASK growth by some distance.

Can you just give your thoughts on how that growth will go in the future?

Will it get closer back to ASK growth?

And then just secondly, on guidance, just going back to the average fares question earlier on, because I've been reading various things on the newswires as well.

I just want to make sure that what's from the newswires is correct and consistent with the guidance that you've just stated.

What I'm reading is that you're expecting an increase of 1 or 2% in Q2, and over the full year a flat to 1% increase.

Well, dealing with the second base part, yes, that's presently where our guidance is on yields for the year, with heavy kind of qualifications over impact of any further terrorist attacks in London or any of the other major European capitals at the back end of Q2.

And obviously, the winter, which is up in the air.

We continue to see a developing bloodbath in Europe, with further bankruptcies, market withdrawals and consolidation.

So, at this point in time, we have good visibility on Q2 and very little visibility into Q3 and 4, but we'd be cautious into Q4, where obviously Easter was in the middle of Q4--at the end of Q4 last year.

It's not in this year.

And on the route charges--.

Well, I suppose, what we'll be seeing there, Jonathan, is that we flagged this up in the June results, that structurally, charges in Europe have come down in quite a few countries.

We suffered in the last couple of years with the recovery of Euro control of the reduction in charges arising from September 11, 2001.

So the rates have now been reset in quite a few countries.

So therefore, we would expect this year that route charges would grow at a slower rate than the growth in passenger volume.

Okay.

And just finally, in terms of your net profit guidance for the full year and just for clarity's sake, can you just restate what that number is?

We guided 295 in June and that was on the basis of a $47 cost per barrel of fuel.

Our average for the year, we now expect will be close to $51 per barrel, maybe slightly ahead of that.

We guided also at the same time for each $1 increase in the cost per barrel.

That would equate to EUR5 million of reduction in profitability.

So if you start off with 295, you take off 20 million, that gets you to 275.

We feel that slightly stronger revenues in the first quarter, a little bit better on ancillaries and also the benefit of the significant unit cost savings that we've made, pretty much [claw] most of that back.

So we're happy to leave our guidance at this point, taking into account what Michael said about quarters 3 and 4 and terrorist incidents, to bring it back up to 295 and leave it there for the moment.

Sam Panella, Raymond James.

You said in the press release, talking about seeing fewer low-fare carriers.

Can you give us more specifically what you're seeing from the capacity in Europe with respect to other low-fare competitors?

Sam, we've seen a number of withdrawals from direct head-to-head competition with ourselves.

It looks as if, for example, a number of carriers operating into the Shannon region are going to withdraw services this winter, like FlyBE, BMI Daily and a couple of other smaller carriers like Thompsonfly, [XUK] into Shannon are withdrawing services.

That should help the yield somewhat in the Shannon market.

Some of the other markets we've seen carriers withdraw direct head-to-head competition and move capacity around.

A lot of carriers now have their winter schedules on sale already and there's been no increases in capacity on any of the routes where they are head-to-head with us and in quite a few we've seen a reduction generally.

And then finally, EasyJet in the Irish market, don't seem to have yet loaded their routes for the winter schedule.

We're not clear as yet as to whether they want to continue operating those routes.

We've increased capacity from the UK to those three Irish cities; to Shannon, Cork and Knock, by between 30 and 50%, just for the winter schedule over the summer schedule.

And going on some of the, I suppose, that we have from the CAA in terms of market share statistics and load factors for EasyJet, given that they are some 20 points behind us on many routes, in terms of load factor, it's more than likely that they're going to lower those for the winter season.

But they haven't as yet confirmed that yet.

Let me just qualify that.

We still expect they will load the Irish routes for the winter, but they can expect a continuation of the very, very warm welcome that we've extended to them in the West of Ireland.

Okay.

And how many leased versus owned aircraft do you expect to have at the end of March '06?

We expect to do another 3 more, Sam, which would take us up to 20 leased aircraft.

[OPERATOR INSTRUCTIONS] Andrew Lobbenberg, ABN.

Three questions if I may.

Can you talk to us about the pilot market and how easy it is to recruit pilots.

Previously you told us there were lots [technical difficulty] pop up in Eastern Europe.

Are you looking elsewhere for them?

Second question, have you got any of the Winglets flying yet and how are they behaving, if you have?

And then finally, can you talk to me about ForEx.

You told us a lot about how Euro dollar has helped you, but as I understand it, the dollar's strengthening now.

How's your hedging looking to help through this strengthening of the dollar at the moment?

On the first one, pilot market, no problem with recruitment.

If anything, we probably have more numbers applying to us than we presently need.

We have--we did a review of it this morning, we have on our books at the moment applications from 27 Boeing 737 qualified pilots--or Captains that is, more than 60 Boeing qualified First Officers.

We've also extended--we offered contracts to, at the last counting, 34 of the 40 or 45 EUjet pilots who stopped flying with EUjet last week.

So there seems to be an ample supply in Europe and in Western Europe, never mind Eastern Europe.

We continue to have three-figure numbers of applications to us from outside the EU.

But I suspect we probably won't need any of those at the moment.

Much of that will be determined by whether the Dublin pilots want to convert onto the 800 or not.

If they want to convert onto the 800, we have more than sufficient pilots to crew the new aircraft we have coming in the Spring.

And if they don't want to convert onto the 800, we have more than sufficient pilots, both to replace them here in Dublin and to take on the new aircraft in Spring.

Winglets, we have no Winglets fixed yet.

The first new aircraft delivery with Winglets is coming on the 1st of January '06 delivery.

The reason we haven't yet retrofitted any of the existing aircraft, is there's still a couple of airports, principally Dublin, where there needs to be some--we're still trying to verify whether the spanned allocation plan or the distance between the aircraft stands is sufficient to accommodate the Winglets.

[That part has] been gone through at most of the bases.

We now have all of the other bases confirmed as ready for the 1st of January, with still a slight question mark over Dublin.

But I suspect that the first Winglet we take will be in January of 2006.

And at that point in time we'll then retrofit the 100 or so other aircraft as they come through a maintenance check.

It's about a 5 or 6-day thing to retrofit the Winglets, so we'll take them through as part of annual checks.

And on the borrowing section I'll ask Jimmy Dempsey to handle that.

It's actually foreign exchange.

In terms of the movement between sterling that the Euro on our yields, as you know, Andrew, that's 50% of our yields at the moment is in sterling.

And we had a 2% negative movement quarter-on-quarter in sterling, which impacted our yield.

In terms of the dollar rate, we've had a positive movement in the dollar rate quarter-on-quarter and historical improvement of about 19% on our dollar rate, resulting from our hedging over the last 18-months to 2 years.

In terms of going forward, for the remainder of this fiscal year, our dollar rate will be approximately 130 and the dollar/Euro rate will be approximately 130.

And out 18-months we have greater than 70% of our cover [out of] [unintelligible].

Joe Gil, Goodbody Stockbrokers.

Three questions.

First, on yield formation in the first quarter, is it reasonable to assume that May and June were the stronger months of the quarter and that April would have had Easter effects flowing through, and would the year-on-year increase in May and June then [as ever] 3%?

Second question, on Italian domestic routes, how are they performing and the decision to open Pisa-Alghero, is that a sign that the whole domestic [track] in Italy are really starting to work quite well for you?

And the third question is, can you give us an update on bases?

Do we take it as probable that Lubeck is not going to happen and having Pisa announced, can we expect [one] [unintelligible] two more in essence over the winter, or where are we on that?

Joe, just on the first issue there, the months really don't display any discernable difference from last year.

April [was a bit ] weaker, given than Easter wasn't in it, was May and June [into the head].

They're not any more particularly stronger or weaker than in previous years.

On domestic routes, in Italy, the domestic routes in Italy are performing pretty much to expectations.

Yields are a little bit weaker than expected.

While passenger numbers only get [into the head] where we expected, so we're reasonably happy with how the domestic routes have gone in the Pisa-Alghero route.

Initially shows good signs and encouraging booking levels.

Finally then, on the Lubeck base, it's [at most] 60% probable at this stage that the Lubeck base is not going to happen, given the recent court decision over there.

So we have plenty of other candidates lined up for alternative bases and we simply moved forward the Pisa announcement into that [new base for now] in terms of the timing of when [unintelligible] are going to be allocated to do it.

We simply brought the Pisa start date forward into the October start.

And we have plenty of opportunities lined up for January, February and March.

It's likely we'll make at least one more base announcement sometime in September, to commence operation sometime in January or February of '06.

Geoff Van Klaveren, Exane BNP Paribas.

Just a further question on yield.

You said that at Shannon yields were lower than expected.

And can you give an indication of how strong the yield was in the more established regions, because presumably there's a dilution effect from the new routes?

The load factors on the Shannon route, the principal established ones we had were Glasgow, London and routes into Paris and Charleroi, and the load factors on those has remained stable.

Yields have gone down slightly, but not significantly on those established routes in and out Shannon.

I meant [unintelligible] network wide, in general on the more established routes, are we seeing significant increases in average yield?

No, we don't fill-out the performance of routes between different parts of the network.

If you take 3% yield increase over the quarter, like it's a good performance, but it's not anything to be writing home about in terms of the yield dynamic across the network changing.

It is the early part of the summer.

We have a big European operation there now.

Our guidance generally on Shannon is, the traffic numbers, and it's more related to new routes, are ahead of expectations and the yields are affected below our expectations.

Our expectations are fairly low to start with anyway, so just a little bit lower.

We don't think it's anything statistically significant in it.

But if you look at something like a market like Shannon, any time you're opening up new routes into places in the west of Ireland where you have a very small population base and the yields have been historically low anyway, you shouldn't be surprised if you're going to be a bit disappointed with the yield development, particularly in the first couple of quarters.

I would contrast that with, if you know the more stupid statements that came out of EasyJet at the time when they announced the West of Ireland routes where the West of Ireland was a market where yields had remained stubbornly high.

I think it just goes to indicate how little they knew about the Irish market or the level of yields in the Irish market.

It also belies this kind of notion that Ireland is somehow this great profitable core business of Ryanair or this was somehow the mother load of profitability that falls with everything else.

If you look at the performance of Irish airlines in the Irish market in recent years, with the exception of Ryanair, it's been pretty disastrous.

You've seen JetMagic, EasyJet, a whole string of them, FlyBE, everybody else, you've just seen come and go.

It seems to be easy come, easy go.

But they learn eventually.

Shane Matthews, NCB.

Three questions, please, if I may, two of them on the cost line and then just one in general on trading.

In terms of marketing and distribution, you came in remarkably low.

Is that kind of the level that we should be looking at going forward in terms of percentage of sales?

The second question is regarding leasing.

I know it's a sensitive subject, but given that you're not expecting to do any more leases until later in the year, should that be the kind of level we're looking at for the next couple of quarters?

And then, can you give us a sense of where the orderbook is in terms of bookings for the quarter ahead?

I know you said that visibility into Q3 and 4 is low, but is it in line with what we've seen also in the past?

On the sales and marketing costs, Shane, no, I wouldn't take anything from the first quarter.

The first quarter benefits from the fact that we launched the bases, the Liverpool and Luton bases effectively, early in the quarter.

Most of the marketing on that was done in Q4 of last year.

And we don't expect to spend a lot of money going forward on sales and marketing, unless we have to.

There's no such thing as an advertising budget around here.

But if we need to make noise, we'll make as much noise as we can and as you know, we try to generate as much noise in PR and controversial ads as we can.

It prevents us spending a lot of money on it.

I would expect you won't see that kind of decline in sales and marketing cost into Q2, and in the winter it very much depends how the winter looks by the time we get there.

But clearly, in most of the European markets we're in now we already have a very big presence.

We're having a series of press conferences around some major European capitals tomorrow, talking about our pricing initiatives, seat sales and initiatives in other European markets.

So, we'll hope we try to make a lot of noise without having to buy it in the newspapers.

And leasing, I'll ask Ray Hernan to take that question and then Sean will deal with the orderbook question.

Shane, on the leasing side, there should be very little change for the next number of quarters until the next number of leases are coming in towards the end of the year.

And the three aircraft--of the extra leased aircraft were in April of this year, thus it will be a slight increase probably in Q2 to reflect that.

Just on forward sales there, Shane, the situation with every month between now and the end of the schedule, which we've loaded as far as March, is that each month is running at or fractionally ahead of where we were this time last year for percentage booked.

It's very, I suppose, loose in that the winter months are not statistically significant at this stage.

Though from October through to March we wouldn't have a very high proportion of bookings taken at this stage.

The months we have some visibility in, we're talking about August, September, October.

After that, not a lot.

And for those three months we're at or about where we were this time last year in terms of forward bookings.

Travis Anderson, [Goulder, Dregno & Howell].

I was just following up on the yield question.

Is there a way to look at apples-to-apples fares if you exclude all the new routes, exclude ones where you added significant capacity?

It's not an exercise we've done, Travis, and it would be almost impossible.

If you're to strip out the new routes, this year as against last, remember there was enormous growth this time last year as well.

It's not something we would--it's nothing we've ever done, because frankly, I don't think it would tell us anything.

We have as many new routes going into the system now as we had in the comparable quarter last year, so there shouldn't be anything statistically significant in it.

The main driver of the yields is still competitor surcharges all across Europe.

And I think if you took away the fuel surcharges, the underlying trend in yields would still be downward.

I have little doubt of it.

But it does, again, emphasize the strength of our model, where we have an enormous unit cost advantage over all airlines in Europe.

We have a huge pricing advantage over all airlines in Europe, including the so-called other low-fares airlines.

And that's been based on a model where the yields have declined every year for the last 8 or 9 years.

If this year is the year where yields don't decline, any stability in yields or a small increase over a 12-month period, has an enormous impact on our numbers.

Robert Ashcroft, UBS.

You had Easter working against you in the first quarter.

Do you have any estimate of what revenue would [technical difficulty].

Our guesstimate, it may be 5 to 10 million.

[OPERATOR INSTRUCTIONS] Mr. O'Leary, we appear to have no further questions at this time, so I'll hand the conference back to you for any closing comments.

Okay, thank you very much, everybody, for joining in today.

As I said, I think we've got a good set of results this morning.

They do indicate how robust the Ryanair model is in Europe, even at a time when in this quarter we didn't have Easter in it for the first quarter for a number of years.

We have significantly higher oil prices and we have intense competition all around the sector in Europe.

I think the strongest of the features, if there was anything I want you to take away from the conference call is that unit costs, excluding fuel, fell by 9 percentage points.

You have the confidence [of the near] in this airline remains.

And the fact is, we're able to accommodate a very substantial doubling in our oil bill over the quarter with a very small increase in yields, which we attribute mainly to the surcharging policy of our competitors allover Europe.

While oil, through the winter, if it stays up around $60 a barrel, we're hedged at $49 a barrel, and we would expect to continue to benefit from competitor surcharges on the yield side and to pick up some of the impact of fuel costs by other cost savings.

One kind of [unintelligible] warning on that though is the London situation obviously, is somewhat sensitive.

We believe and hope that we're at the end of that and that there won't be any further terrorist attacks on London.

But if there is, or if there is on some of the other larger European capitals, then clearly, it could affect our guidance for the remainder of the year.

With that, I'd like to thank everybody for pitching in.

Jimmy Dempsey is here in the Dublin office if anybody has any other points they'd like to raise in results at the conference call.

Please feel free to route them back to Jimmy and we'll get back to you straight away.

Thank you very much, everybody.

Ladies and gentlemen, thank you for your participation today.

This concludes the conference and you may now disconnect your lines.

Thank you.