Ryanair Holdings PLC (RYAAY) 2005 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to today's Ryanair conference call. At this time all participants are in a listen-only mode. However, there will be an opportunity to ask questions later, and during the call at which time instructions will follow. I'd now like to hand you over to your Chairperson for Ryanair, Mr. Michael O'Leary. Please go ahead, sir.

Good afternoon, everybody. And welcome to the Ryanair half year results investor conference call. We're going to change the format today per your announcement. Apparently nobody wants to hear me read the press release. So I'll make remarks taking you through the investor relations, then we'll open up for questions and answers. I'm here in London. I have Howard Millar with me. Sean Coyle is on the phone from somewhere -- I can't remember where; apologies. Michael Cawley is in Toronto, and I don't think he'll be on the conference call at this time around.

So I hope you all have seen the results this morning. We think it's a very good set of results. And I think it reflects a couple of things we have been trying to demonstrate to investors over recent years. (A), this is the lowest fare airline in Europe and the lowest fares allowed -- the fact that we've got the lowest fares by some considerable distance allows us to continue to grow strongly, even during adverse market conditions. Such as, in the last six months we were unhedged with fuel and paying spot prices in the high $60 a barrel, yet we still could deliver 29% traffic growth, and more impressively an 18% increase in net profit aftertax pre-exceptionals. It's close to 20%, including the exceptionals as we deliver low or the lowest fares in Europe. We are well on track to hit our target of 35 million passengers plus this year. We continue to grow very strongly. We continue to deliver outstanding customer service delivery. Nobody matches our prices. Nobody matches our punctuality. And certainly, nobody can match our rate of fewest cancellations and lost bags.

Turning briefly to the financial highlights, and I deal with this from the half year period, as you can see past [two] numbers are up 29%. The lowest factor was down one point from 87 to 86% as we forecasted at the start of the year. What was unusual in the numbers though was that our average fares, instead of falling, which is our normal model day, they rose by 3%. This comes very much from our competitors policy of fuel surcharging throughout the summer. If you recollect we -- our model is to continue to be load factor active, but fare in yield passive. We'll essentially sell the seats at whatever price it takes to maintain a 90% load factor through the summer, 80% through the winter, and 85% year round load factor. And what we've discovered this summer as a result of the almost incessive fuel surcharges -- fuel surcharges by British Airways, Air France, low [pans] and others, passengers have been coming to us booking slightly further in advance, and paying a slightly higher online airfares as the fuel surcharges by the competition drives them in our direction. As a result the average fare rose by 3%.

Revenue per passenger was up 4% as the ancillary revenues kicked in or continued to [slightly] outperform the growth in passenger numbers and the growth in average fares. As a result total revenues were up 3 to 33% with a 29% increase in passenger numbers. Profit aftertax was up 18% to a new record of 237 million for the half year, 172 million for the quarter and our net margin continues to be a world record 26% aftertax for the six-month period. In terms of the balance sheet, this performance continues to deliver us very impressive numbers. Cash at the end of the sixth-month period rose to 1.8 billion Euros up from a 1.6 billion Euros at the end of March. Net debt, because we took delivery of very few aircrafts during the period, was actually reduced from 1.4 billion to 1.3 billion. As a result of which the net cash position; that is, the cash excess over the debt, rose from just under 200 million at the 31st of March to just under 450 million at the end of September.

In terms of our trading outlook. We believe we are well on target as these numbers demonstrate to deliver traffic growth of 27% to just over 35 million. We do believe the winter years in Bandeirante will be that bit more competitive. What we're seeing already with some of the flag-carrier airlines is not that they are giving back the fuel surcharges, but they are using -- maintaining the fuel surcharges and using them to fund some slightly lower fare price offerings -- or price offerings than before. British Airways, in particular, is offering some lower fares than it has before; lowest published fares. Although the combination of those fares and the fuel surcharges mean they are still actually having a fare increase over the equivalent fares in the winter period last year. Still a significant difference between their pricing and Ryanair's pricing, but we believe that will put some downward pressure on yields through the winter period. Our yields in the winter period will also be effected by the fact that Easter has now moved out. It was in Q4 last year. It won't be in Q4 this year. It will move to Q1 of next year. And we're also conscious that yields will be impacted as we switch to the seven -- to the nine remaining 737-200 series aircraft out of Dublin in the present quarter and replace them with nine 737-800s. That will see a 45% increase in seat capacity out of Dublin, primarily into the London and the U.K. provincial market. That's a big increase in seat capacity in that marketplace during the worst quarter of the year, and we'll also have a downward impact on fares and yields as we continue our price to fill that additional capacity.

The good news is unit costs will continue to decline, excluding fuels are down 7% in the first half, excluding fuel we said to be down 4% for the year; the full year. We're continuing to -- I expect to continue to see lower unit costs being delivered on -- from new aircraft deliveries which reduces the staff -- unit staff costs, unit maintenance costs, unit fuel consumption. We're adding in new airports, new bases, new destinations and new routes at existing airports all in return for lower costs, with the exception only at Dublin and Stansted where discounts are unwinding. We're paying higher costs at those two monopoly airports. But we're more than making that up by opening up new routes and bases to new airports where the airports are aggressively targeting Ryanair with low-cost bases to encourage us to grow there.

Competitors are continuing to withdraw capacity from head-to-head -- in markets where they go head-to-head with us. Most notable in this, in the last six months it has been British Airways' decision to significantly reduce the amount of European designations served by the -- from the Manchester base. That seems to us to be a direct response to our launch -- the launch of our base in Liverpool. And they have pooled routes from Manchester to Pisa, Rome, Venice, Shannon and Cork, all of which were direct competitors of our new base out of Liverpool. EasyJet in the winter schedule have also reduced capacity. They've withdrawn altogether from Gatwick, belonging to Gatwick Channel which compete with our services from Stansted. They've reduced capacity to the number of Spanish destinations, Almeria, Valencia, Albia, Asturias, and [Kelar;] Spanish and Italian designations, Cagliari, each of which compete with our services from Stansted. We haven't reduced our services. We have maintained them at the summer frequencies during the winter and expect to step up on some of these destinations next summer. There's also a little other route withdrawals that I won't bore you with, but they're in the investor presentation.

Ancillary revenues have continued to grow strongly. We are continuing to target Ryanair.com as a major distribution channel, not just for our flights, but for a range of ancillary services and also for a range of new services now. It [indiscernible] Ryanair.com remains the largest travel website in Europe, 15 million unique visitors a day. It's the fourth most popular brand or search by brand or by search inquiry on Goggle, which gives us an enormous kind of retailing power. What we've done with the existing ancillary revenue streams, the hotels, the cars, and travel insurance, is we have redone deals with those suppliers to increase the penetration each year for the next four or five years. So the supplier guarantees increase to penetration at the same time as we double the traffic, and therefore, we believe it underpins our objective with the ancillary revenues, which is that they will grow at a faster rate than scheduled rates new each year for the next five years.

We are also targeting new products. We have launched an online advertising. We are on the website, many of you will have seen advertising for [betting] companies, SKY, and that's all being sold by a third-party on our behalf. We're pushing activity breaks. See a lot of growth in other activities. Hostiles taking a share of car parking revenues in some of our new bases. Aircraft painting is continuing -- we're continuing to target that. We're also looking at some product potentially much more interesting impact revenue streams probably from things like putting -- allowing mobile phones to be used on board the aircraft in the mid point of next year. We will in the next six months launch an online -- our gambling site on through Ryanair.com that will be a vehicle for pushing ultimately -- and on our gambling and internet games back on board our aircraft once we have the capacity either through mobile phone technology or Bluetooth to be able to link that type of product to people that are using their own phones. Or we may start distributing BlackBerries on board the aircraft and allowing people to gamble or entertain themselves with games and stuff like that. However, I would caution the ancillary revenues are at 14% of total revenues. We expect that to rise to probably 20% over the next five years, 80% of the revenues will still come from sale of aircraft seats.

However, the cost discipline continues. Total unit costs in the half year increased by 8% year-to-date. Almost all of that increase is driven by our oil bill, which has more than doubled during the six months, and yet I think it's one of the strengths of today's half year numbers. Despite the fact that oil prices have doubled, despite the fact that we have gone through this six-month -- the [better] six-month of the year, effectively unhedged, and therefore, paying spot prices in the high 60s, and in some cases as high as $70 a barrel, we've still delivered 29% traffic growth. We've still increased our profits by 18% over the half year. And a lot of the reason for that is not that our yields have increased by 3% over the past year, but that we continued to -- with our cost [indiscernible] reduce unit costs. Unit costs year-to-date are down 7% excluding fuel. Excluding fuel we said, followed by 4% for the full year.

We are also continuing to target new low-cost agreements there. We've put them in place. The new Boeing deliveries are coming through. We get the first of the new aircraft deliveries in February -- the new [back-up] months from January and February of next year, these aircrafts come to us with the wing lift, the low -- the new low price, the five-year warranties. We're still adding low-cost airports and bases. We're also renegotiating existing deals of existing airports where the airport supplier is looking to us to deliver them, kind of a large step-up in growth. And, again, I would give you examples of Luton or in Liverpool and Nantes or in East Midland over the past 12 months. These are airports that already had a large low fare presence, whether it was EasyJet of Liverpool. It was EasyJet and bmibaby at Nottingham East Midlands Airport. Yet they have realized that there's a limited air traffic at the kind of high fares being charged by EasyJet and bmibaby. Whose average fare in [indiscernible] terms is about 66, 70, 75 pounds. There's a whole new range of traffic available to Ryanair's average fare, which is down to 28 and 30 pounds. And that's why I think they've been so aggressive in targeting markets with low-cost deals with efficient facilities and why we've been growing rapidly at those airports over the last 20 months.

As a result of the disciplined way we continue to grow the business and continue to manage the unit costs, we continue to maintain our industry leading margins. With the lowest revenue per passenger of any airline in Europe or the U.S., just EUR48 per passengers, we have by far the lowest cost -- unit cost per passenger just EUR39, and we're making a 20% net aftertax margin. The next best to us in the U.S. is Southwest, whose revenue and cost per passenger is almost 50% higher than Ryanair's and yet they make a 4% margin. And the best in Europe apart from us would be EasyJet whose average revenue is at EUR66 per passenger, almost matches their average cost of EUR63 per passenger. And [indiscernible] last numbers record the 3.8% aftertax margin.

Customer service delivery continues to be very strong here in Ryanair in the last six months. We have improved our on-time performance, it's now up to 92% of all flights. Lost bags continue to be reduced, we're down to losing half a bag per 1,000 passengers. And our completion given the reliability of the new aircraft of the 800s continue to improve. There is obviously a key cost savings for us as well with the new compensation regime in Europe where airlines are now being obliged to compensate passengers at fixed prices for things like delays, cancellations, things like that. These provisions will hit Ryanair the least because we cancelled the fewer flights and we have the fewest delays. I'm pleased, we were delighted with reaching a new milestone in terms of traffic growth [indiscernible] this year. Ryanair's European traffic out carried or we exceeded BA's worldwide traffic for the first time. Displacing, obviously, British Airway is the World's Favorite Airline. In terms of world, our international scheduled airlines, we expect this year -- we've now -- we're number two. And we expect by the end of this year, 35.5 million passengers to overtake Lufthansa, and become the world's largest international scheduled airline in terms of passenger numbers. A significant achievement for a small Irish airlines, such as, 20 years old.

But the key thing we point investors to is despite the fact that we have grown rapidly in the last five or 10 years, despite the fact that we're now Europe's largest airline in -- the world's largest airline in terms of international traffic, the growth is just beginning. We believe and we can point with confidence to the fact that we're going to double our traffic in size over the next five years. We're going to grow from 35 million passengers this year to 70 million passengers in five-year's time. We can do that because we've got the aircraft orders in place. The firm orders take us over the next five years or the year ended March 11th to 221 firm aircraft; this year we'll operate 107. It also gives the capacity to grow from 35 million passengers this year to 70 million passengers by 2011. We have -- or we're operating presently from 15 bases around Europe. We [could] need another 10 or 15 bases to be able to accommodate this doubling in size over the next five years. And we are presently in talks with more than 50 other bases around Europe -- or 50 other airports around Europe about selecting them as one of our base airports. We effectively have deals done with another four or five bases at the moment, and we are very close to completing deals with probably a further 10 or 15 on top of that.

And the proof of that has been demonstrated in the last three months where our 13th base was going to be handled by Luebeck, subject to [indiscernible] buying the airport, and being able to agree a runway extension. It's been hand-off to some local environment to protesters. The court case went the wrong way for them, which means the runway extension won't be in place by April next year when we had planned to launch the base. We have simply postponed that base launch. We believe that until we get -- will extend the runway, that the runway extension will go ahead and we will establish there, but we were able to swap that for barely nothing in the East Midlands airport because we had the deal already done. And in actual fact the cost base in Nottingham East Midlands is slightly cheaper than it was at Hamburg Luebeck.

So the key message here for investors the next five years, we're on the threshold of the period of amazing growth in Ryanair. We expect to double the airline in size from 35 to 70 million passenger. We expect to do that by continuing to lower unit costs at a time -- plus or minus fuel -- the unit cost reductions will come from adding these cheaper, larger aircraft that will reduce unit staff costs, unit maintenance costs. We're going to add in new airport deals of existing airports, new destination airports, new base airports, that will reduce the airport costs and the handling costs even with these further announced price increases at Dublin and Stansted. Remember that each year for the last two years we have been absorbing significantly higher costs at Dublin and Stansted, but have been able to absorb those higher costs at those monopoly airports by defraying a lot of that cost increase by having more, by generating most of the growth at new designations and new airports around Europe. And we're also going to continue to reduce our sales market distribution costs because we believe we continue to target increased revenues across Ryanair.com, the use of Ryanair.com and the -- it's like the scale of Ryanair's operations means we now -- when we open up a new base in Liverpool, in Nottingham East Midlands, or in Pisa as we did last month, we're already well-known in these countries. We're already very big at those airports. So we're leveraging off that large presence now, spending a lot less money than we used to in opening up and establishing new bases and reducing the costs.

The traffic will double in size in the next five years. The contribution from ancillary revenues will continue to increase over the next five years, and we're, therefore, constant plus or minus fuel that our profitability over the next five years will double as well. So today in Ryanair you'll continue to invest in what is Europe's lowest cost carrier and lowest cost win. Southwest has repeatedly demonstrated that in the airline industry in the U.S. And in other industries far whether it's Wal-Mart in the U.S., Tesco here in the U.K., IKEA all over the world, lowest cost wins in an economic upfront or an economic downturn the lowest cost carrier tends to be the more competitive one, and we're darn well demonstrating that in Europe.

Not alone we continue to lower fares in the next couple of years, but we believe our record margins will continue. We're very focused on continuing to provide industry-leading customer service delivery with punctuality that's way ahead of any of our competitors, particularly, any of those the so-called low-fare competitors. And the opportunity here is we plan to double traffic, and plan to double the profits within the next five years to the end of 2011. We have the new airports ready. We have the new bases ready. We have the new aircraft deal done with Boeing. As you have seen in the last couple of months we have confirmed a couple of options for 2007, that will replace the first, five of our older 737-800, which have now come off warranty. And we'll replace those in 2007 with five option aircrafts, that will have (A), they've got a lower sticker price, they've got a lower net purchase price. They'll have the benefit of the fuel -- of the wingless, which will reduce their fuel consumption. And they have a new five-year warranty period. So we'll be able to continue to reduce our -- continue to reduce those operating cost lines as the fleet expands. And, again, the formula which we have followed ever since we've [indiscernible] in 1997, is that Ryanair has the lowest cost. Nobody in Europe can compete with our prices. But our formula has lower costs allowing us to pass on lower fares and lower yields enables us to deliver very stable growth and profit margin for our investors.

Now, that's the end, I think of all of these remarks. For those of you who thought they would be shorter just because I wasn't reading the press release I send my apologies. But I do think it's important that we keep reiterating Ryanair's price leadership, our cost leadership, and the investment opportunity here that we're about -- we're on the dawn of a period of growth that will see us double this business in price and hopefully double the profitability in the next five years. That ends my opening remarks. We'll now open it up to questions and answers, and I'll try and hand as many questions around to Howard and Sean Coyle as I can. Now, if we can grab the moderator, please, to start the questions and answers.

Thank you very much, sir. [OPERATOR INSTRUCTIONS]. Our first question comes from Owen Gibbons. Please go ahead announcing your company name.

Afternoon gents, it's Owen Gibbons, with Cheuvreux. Two questions, the first one is hopefully fairly straightforward. But if you look at the employee numbers, the report is that the Q1 average was 2,764, Q2 was 2,876, and H1 was 2,987. I'm just wondering how the, sort of mathematics works behind that and how you get an average that's higher for the first half than either of the first two quarters? That's question one. Question two is just on Spain. In the course of the quarter, Iberia announced in his directo plan that he was going to substantially shrink the domestic business within Spain between now and 2008, and effectively [knock roll] the medium hole business. Has that changed your view on the attractiveness of the Spanish market in the last three or four months? That's it. Thanks.

Okay, thanks. I'll do the second part first. Yes, Iberia announced they're going to significantly shrink capacity in the Spanish domestic market. We think this is nothing more than a growing trend where the flight carriers around Europe accept that they can't compete with Ryanair. Can't compete with the low-fare carriers on the short tall markets, which calls us to open up a lot of domestic routes through Spain. No, frankly, in the short-term we're focused on growing our business. We presently serve over 10 Spanish airports, none of which are Madrid or the big charter destinations. But for business growing very rapidly in the secondary cities, the Sevilles, the Valencias, the Santiago De Compostela, we plan to link those up to other of our European bases over the next couple of years, as well as open up probably another three or four new airports at Spanish secondary cities. The possibility of the second Madrid airport coming along, but at the moment they are a bit on the pricey side. And we would not go to airports that are pricey even if they are in Madrid, or two hours away from Madrid.

So I think what you'll see as we will continue to expand pretty rapidly in Spain. Our Spanish traffic will grow at a slightly faster rate than total traffic, but most likely for the next year or two you will continue to see it be international routes from the European bases linking into the destination airports in Spain. We will start doing some domestic routes in Spain, but I think it will be when we have probably two or maybe three bases in Spain. I think we're close to doing a second base in Spain, but I would doubt -- just if I were -- at the moment I doubt if the second base would be in Spain next year. I think it's more likely to go to one of the other European countries. And the second part of the question, which was the average employee numbers.

I think you are referring to the Page 3 of the press release, is this it?

Yes. Yes, it's in the MD&A for the half year and the quarter and they don't quite add up.

Yes, I think what you -- the note at the end of the press release is a general note that's the one in the -- that's got the box around it. That's a general note that we would give out for our editors for our newspaper. The specific numbers, of course, are contained in the press -- in the MD&A. As you can see in Q1 -- or in the overall average is 2,987 for the six months and for the quarter, it was 2,876.

Yes, I'm just wondering then how the half year average -- in terms of how you work it out -- is higher than Q2 [multiple speakers].

Well, obviously, we have a different pattern there across the year. Our peak employment period would, obviously, be July and August.

It's also effective, that it depends on a quarterly basis -- and I would -- don't get to caught up on the quarterly numbers. It's more influenced on a quarterly basis by the number of contract staff we have, whether it's a contract handling staff or particularly a split between contractors and employees in flight, which tends to be quite variable between a quarter depending on resignations and recruitment.

Okay. Thanks for that.

But there's nothing insignificant or statistically concerning in it. Thanks, Owen.

Okay.

Thank you, sir. Your next question comes from Jim Parker of Raymond James. Please go ahead.

Good afternoon, Michael, Howard, Sean.

Hi, Jim.

Couple of questions, number one, there seems to be some softness in consumer spending in the U.K. and then you are adding a good bit of capacity out of Dublin to the U.K. where the 800s are replacing the 200s. And do you want to elaborate a bit on the extent of the softness?

Do you want to give me the direction of the questions, or do you want to go one by one?

Let's do the first question here.

Yes, I don't think -- at the moment we're -- we don't have kind of empirical numbers as to what the softness is in the U.K. I think we're airing something that's more of a concern generally for the second half of the year. I would argue we are actually going to be probably masters of our own softness here. We launched another seat sell last week, 2 million free seats available for travel in the U.K. and Europe during the months of November, December, and January. That's our second free seat sale this winter. We're trying to be out there ahead of the markets, like we've had a better-than-expected outturn on yields for the first half of the year. We want to be out there in the front for the second half of the year. The reason we're nervous or very conservative on yields for the fourth quarter as we have already identified is (A), Easter is not in this year's fourth quarter; (B), we do have a large increase in seat capacity in the Dublin/U.K. market by switching to nine, the 200s to the 800s. That will undoubtedly be reflected in lower yields, significantly lower yields in that market for that period. It will also be reflected by the way lower costs in that market place too. So it's not all a downside.

And we do believe that by the time we get to the middle of November, some of the fuel surcharges at the moment are going to be out there dumping prices. Because they're all -- we tend to be the first one into the marketplace all the time saying, "The fares are going to be lower. The fares are going to be lower." And we normally have to wait a month or two before some of the flag carriers and some of the other low-fare airlines who are desperately hoping that they won't be lowered realize that they will be. And then went around afterwards with the occasional profit warning. We like to be ahead of it. So there's a possibility it could be better than that in the fourth quarter. But we think we're better off to be moving into it with aggressive pricing. We know there's going to be significant capacity growth from our sales and allowing for the fact that we won't have Easter in there, which made it easier in the fourth quarter last year.

Okay, Michael, my second question has to do with the news story today that says, "Ryanair's CEO to Step-down in Four or Five Years." I'd like to know what that is all about? And did you not say the same thing four or five years ago?

I did but in case by wife is listening I had to reiterate it again this morning. It came up in the [indiscernible] press conference where somebody said, "Well you've always promised you would step-down when you got to be Europe's largest airline. You are Europe's largest airline now, is it time to step-down?" I said, "Well, I don't think so. I would like to do another couple of years. I would like to see us tackle and deal with the Stansted expansion issue. I would like to see us deal with the Dublin expansion issue." And I think -- so I'm saying I could see myself -- if I'm not sacked beforehand which is always a consideration that one should be careful of. I would see myself probably stepping down in another -- between three to five years. At that stage we'll be heading for 70 million passengers and I think it will need somebody more polished and more professional than me.

I think we have been well served by my approach to European bureaucrats and government tax error and government taxation and stuff like. Thus far, I think there's probably another couple of years in that. But we're going to have to recognize at some point in time in the future when Ryanair is by far Europe's largest airline. You'll need a different relationship with communist bureaucrats in Brussels, and incompetent governments around Europe. And I suspect that that would probably be one of the more professional competent people I presently work with me in Ryanair. It won't be me. But is there -- if you answer the question, "Have I some plan to be out in three to five years?" No, I don't. But I have promised by wife that I will be.

Okay. We'll wait and see.

All I can say is that parenthood is encouraging me to work longer hours at the moment.

Okay. Thanks.

Thanks, Jim.

Thank you. Your next question comes from [Pankash] Kumar of PetPal Limited Inquorate. Please go ahead.

Yes, hello.

Hello. [multiple speakers].

Your load factor has decreased over the last year -- from the last year. Do you expect it to continue to decrease or to remain the same or increase from now onwards?

I think we expected the -- if you remember last year the load factor jumped last year from 84% the previous year, to I think it was 87% last year for the full year. We have said that this year we expect it might -- [multiple speakers] -- it was up 1% last year. We have said this year we would expect it to come back 1%. And we're on target to do that. We don't see anything statistically significant in it. We aim to operate in about 85% for the full year and we're on target to do that. You see some monthly variations where we were down 1% on the traffic in September. We were down 2% -- as a matter of fact it was about 1.6% in October. I expect you'll see us down 1, maybe 1.5% in November. But we're very much -- we're on target and we're on track to deliver the numbers we told you we would this year.

Yes. Okay, thank you.

Thanks, Pankash.

Thank you. Your next question comes from Andrew Lobbenberg of ABN AMRO. Please go ahead.

Oh, hi, sorry, me again. Very quick question, you mentioned how these contractors could cause the employee numbers to ebb and flow. Can you just confirm which employees are included in your count? Do you include contract pilots or not? Do you include contract cabin crew or not?

Yes, sorry. No, we do include contract pilots. We do include contract -- I'm sorry, we do include contract cabin crew as well. But we only include them when the contract pilots are in from when they start training. The contract cabin crew only come on our books when they actually start flying with us.

Okay, grand. Thanks.

Thank you. [OPERATOR INSTRUCTIONS]. Okay, we have a question from Gerald Khoo of Oriel Securities. Please go ahead.

Hello. I was just wondering what your thoughts were on AirBerlin's decision to start U.K. domestic flights and offer connections via Stansted?

I think you would want to kind of put in contexts -- we saw the press release last week that AirBerlin was going to open up a base in Stansted and we were shocked by it given that there's no space in Stansted to open up a base. Stansted is full in the early morning peak, which now extends to almost 5:30 to nearly 9:30, and it's largely full in the evening peak as well. When you actually drill down and look at what they announced it's really nothing at all. They said they're going to connect Manchester and I think it was Glasgow into Stansted. The flights are going to arrive in mid-morning to connect with their very narrow network of flights from Stansted to Germany. And, frankly, we wouldn't notice this one way or the other.

Would it have any impact on our traffic on Stansted -- on Glasgow/Stansted? No. I doubt if we would even notice their market share in any of the market share figures on Glasgow/London route. [Mansford] is not a route we have any interest in. We don't fly Liverpool/Stansted; for example, where we do have two bases. And I think in reality if you look at AirBerlin their average fare is about -- I think it's 85 or GBP90. Ryanair's average fare is GBP28. It's one-third of AirBerlin. That's the kind of competition we welcome all over Europe.

Okay. Thanks.

Thanks very much, Gerald.

Thank you. Your next question comes from Derrick [Kleasion] of [Ardour] in Paris. Please go ahead.

Good afternoon. Two brief questions, if I may. The first one, could you give us more details on which market you are expecting more pressure over the winter, excluding the Dublin/U.K. and U.K. routes? And the second one, briefly, could you just remind me, how many aircraft will be [indiscernible] this winter?

Okay. I'm going to pass the first-time question to Howard because I didn't actually pick up the question I think he did.

Is that more pressure over the winter on which markets?

Yes.

Well, at the moment we see that; for example, that BA are reducing their fares. What we did mention later on was that one of the reasons for the decline in the fourth quarter is also the fact that the flag carriers will have to maintain the fuel surcharges. But it will be reducing their underlying fare craft. So we are seeing this not only being played out by BA, but the other flag carriers across Europe. So we would expect that there will be competition rise across Europe where we intend to be in the forefront of that by driving fares lower just as we have just done with the few million seats that we just launched last week. The second part of that question -- the second part is, "How many aircraft deliveries are we going to add this winter?" With 25 aircraft deliveries this winter.

Okay.

We just in total. We plan to push 10 of them into Dublin and then disperse the rest across the bases or routes that we have already announced. We have two aircraft going into Pisa, two into East Midlands, three into Stansted, one into Liverpool, one into Cork, and the remaining six aircrafts -- well, you'll have to wait for further announcements. [multiple speakers] It's still to be decided.

The reason the possibility, with the Boeing strike we are taking those deliveries they are now coming about a month later. So technically for those deliveries, we might slip in -- probably will slip into April. But maybe [authority] 21 and 25 in the fiscal year as opposed to the winter season.

Okay. Thank you.

Okay. Thanks very much.

Thank you. Your next question comes from Jonathan [Weber] of HSBC. Please go ahead, sir.

Thanks. Just on CapEx, the first half relatively low number. I'm guessing that the winter deliveries will consist of a hire number of acquired rather than leased aircraft. And, if so, can you give us any guidance on a full year CapEx number? And also flowing on from that, do you expect the cash balance of 1.8 billion to be lower by the end of the year or to be rising?

Jonathan, yes, just two -- we expect now, given that -- as Michael said, four aircraft will probably slip out of this financial year providing growth capital expenditure of 530 million to EUR550 million, including advance deposits for aircraft deliveries. We do expect to do four Japanese operating leases over this winter. They will be, obviously, on our balance sheet financing. And we would expect our cash balance to continue to rise above the private level. Obviously, we would love to gather up to the 2 billion level, but obviously that's dependent on yields pretty much in the fourth quarter. But certainly we would expect the cash balance to rise and still be in a net cash position by the end of the financial year, which is better than we would have predicted in June.

Okay. Thanks a lot.

Thanks, Jonathan.

Thanks, Jonathan.

Thanks you. [OPERATOR INSTRUCTIONS]. Thank you, gentlemen, it appears we have no further questions. So I would like to hand the conference back to you.

Okay. Ladies and gentlemen, again, thank you very much for joining us today. As you know we have six investor road show teams on the road for the rest of this week. Michael Cawley is in the States, Howard is flying over there midweek to do some Boston and the East Coast. You'll have the joy of meeting me in the U.K. and in Europe together with Sean Coyle, Ray Hernan, who are also doing the U.K. and Europe. I think our message for the next -- at this time is going to be looked. We're on the dawn of a period of enormous growth. We will double the airline in size in the next five years despite the fact that we're now Europe's largest international carrier. We're going to be enormous, and so in five year's time we're going to be doubling the size in traffic, double the size in terms of fleet, and we believe also double the size in terms of profitability.

For a couple of reasons, one, we're continuing to lower unit cost excluding fuel. A lot of those unit costs reductions are locked into new aircraft and new airports going forward. Two, we're continuing to increase the penetration of our ancillary products and we're continuing to target new ancillary products to which we can add to it. So we expect the growth in ancillary revenues to continue to outperform the growth in scheduled revenues for the coming four or five years. And we expect to deliver all of that in a very safe and disciplined manner. We're growing at about 20, 25% per annum. And it's the same management team who has delivered the growth in the last five years will deliver the growth in the next five years. And we hope that our efforts will be rewarded by doubling the profitability and if we do we hope that you will see some upside from this from a doubling of the share price.

And, again, thank you very much for participating today. We hope to get to see everybody during this week, if not, and if anybody at any stage wants to give us a call when we're back in Dublin or come over and see us in Dublin, please feel free. We would be more than welcome to see you. You would be more than welcome over the next couple of weeks and months. Many thanks, again, and looking forward to seeing you all this week. Cheerio. Bye-bye.

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