Ryanair Holdings PLC (RYAAY) 2007 Q4 法說會逐字稿

Good morning and good afternoon, ladies and gentlemen, and welcome to the Ryanair full-year results.

At this time all participants are in a listen-only mode.

(OPERATOR INSTRUCTIONS).

As a reminder, today's conference is being recorded.

I would now like to hand over to your host, Mr.

Michael O'Leary.

Please go ahead, sir.

Good afternoon, ladies and gentlemen.

You're welcome to the Ryanair full-year results conference call.

Apologies, we were on the line here, we just came through on a different PIN number.

I'm with Howard Millar here in London.

Michael Cawley is joining us from the U.S.

And the other members of the roadshow team, including Sean Coyle, Jimmy Dempsey are calling in from the other points in Europe and the U.S.

where they are today.

We'll try and run through this pretty quickly, since we've had the analysts' conference call that's been webcasted on the page, together with the results.

The press release and the detailed investor slide presentation are all on the website -- the Investor Relations page of the website.

So, anybody who hasn't got them, I'd urge you to go there.

You'll also find some more incredible fare offers from us.

We're delighted, today, to announce a record profit, EUR401m.

They're up 33% on the previous year due to traffic growth of 22%, a yield increase of 7%, as well as the unit costs increased 9%.

This is largely due to 50% increases in the fuel costs.

I think we've had another year of very significant achievement.

We're obviously very proud of the profit growth of 33% to EUR401m.

Traffic growth up 22%, maintaining that disciplined rate of growth we've established over many years.

We've acquired over the year 30 new aircraft.

We opened 153 new routes, including three new bases at Marseille, Madrid and Bremen.

And have still recorded record profits despite a 50% increase in the fuel bills to EUR693m.

As you've come to expect from us, we continue to deliver exceptional customer service.

Our punctuality has improved further as we retain our position as number one for pricing, punctuality, fewest complaints and fewest cancellations and fewest lost bags.

The price gap between Ryanair and the competition is getting wider, as most of our competitors in Europe increase fares and slap on fuel surcharges.

We purchased 25% of Aer Lingus and have made an offer, or wish to make an offer, for the balance subject to competition approval from the European Authorities.

And we've strengthened the balance sheet with year-end cash of EUR2.2b.

I don't have much more to add other than that on the current ones.

We are suffering significant cost increases this year, primarily as a result of the abject state of the regulatory -- airport regulatory regime here in the U.K.

and in Dublin.

In Stansted on April 1 the BAA airport monopoly doubled our effective airport charges at Stansted for Ryanair and most of the other Stansted airlines.

We think this is another clear demonstration of the failure of the regulatory regime -- airport regulatory regime here in the U.K.

The urgent need for the break up of the BAA monopoly will allow competition to improve facilities and lower prices where it's clear the CAA regulatory regime has blatantly failed.

A similar situation applies in Dublin.

We're continuing to oppose the Dublin Airport Authority's ludicrous plan to waste EUR800m on a second terminal, which we believe Frankfurt Hahn can build a similar-sized terminal for about EUR60m.

Ryanair has a plan to build a similar-sized terminal for about under EUR200m at Dublin.

And there is no justification for wasting this kind of money on a second terminal at Dublin other than, again, that the regulatory regime incentivizes these regulated monopolies to waste astonishing amounts of money on unnecessary CapEx, simply so they can increase the income stream from their inflated CapEx, inflated capital expenditure.

As you know, the European Commission's currently reviewing our proposed offer for Aer Lingus.

We now expect that in July they will prohibit Ryanair from making an offer for or acquiring Aer Lingus.

We think this will reverse 20 years of European airline consolidation.

It will fly in the face of the precedent decisions, where effectively the European Commission rubber stamped Air France's acquisitions of KLM, Lufthansa's acquisition of Swiss and Eurowings and, increasingly, domestic competition approval in the U.K., most recently for Fly BE's acquisition of BA Connect, in Germany for Air Berlin's acquisition of Deutsche BA and LTU.

And we're quite sure it will fly in the face of what will be the subsequent approval by Brussels for takeovers of Alitalia and Iberia.

The only thing that distinguishes the Ryanair offer is that it is opposed by the Irish government.

But we don't believe that this is a fair, reasonable ground for rejecting our offer.

There is absolutely no doubt in our mind that we think the case file is quite clearly demonstrating that there are no barriers to entry at Dublin Airport.

I think the very fact that Ryanair has doubled in size at Dublin Airport to 10, 20 aircraft over the last 18 months is conclusive proof of that.

Dublin Airport continues to expand its facilities.

And, again, as the case file evidence demonstrates that many other airlines - British Airways, Lufthansa, Air France, Easyjet - have all confirmed that there are no barriers to entry to Dublin Airport, there really is no ground for competition concerns where Ryanair acquires Aer Lingus, two airlines, which together will account for less than 5% of the intra-E.U.

traffic.

And the fact that if the Commission does rule or prohibit this takeover, it will in our eyes be a clearly political decision.

It certainly won't be a decision based on either competition grounds or on the consumer interests.

In an attempt to encourage the -- or to persuade the Commission to approve the bid, we've made very significant remedies offers, including guaranteeing to reduce Aer Lingus' average fares and fuel surcharges by EUR100m per annum.

We've offered to transfer Aer Lingus' slots, the most valuable in the world, to other airlines to enter the Dublin/Heathrow route, including British Airways and Air France.

And we've also uniquely offered to hand over a significant proportion of Aer Lingus and Ryanair's slots at Dublin Airport to allow for a new entrant airliner airline space, anything up to 10 new aircraft in Dublin, to offer competition with the merged entity.

And it appears that no matter what we offer, the European Commission is uninterested.

Despite the fact that there are clearly no barriers to entry, they seem determined to reject or turn down this offer which, again, in our minds flies in the face of the new E.U./U.S.

Open Skies treaty, and where many other competition authorities, both in Europe and domestically within Europe, have found that there is free entry and exit into the airline market, that there's a record of frequent entry and exit by airlines.

Yet, uniquely in Dublin, it appears that the two Irish airlines won't be allowed to merge where the E.U.

authorities seem to be approving airline mergers all over the rest of the Continent.

However, we expect a prohibition in July.

If we get -- if they attempt to prohibit the offer, we will refer that to the European Court and seek to overturn the decision in the European Court, where we believe we'd have a very strong case on the basis of the evidence that already exists in the case file.

As I have said, we have launched a -- the business model continues to be very strongly cash generative.

We have launched this morning a shareholder -- our share buyback program.

We've talked about it with many of you as investors over the last 18 months.

We've veered away from a decision on a dividend, simply because the business is cyclical and capital intensive.

We don't think that there is a reliable stream of income there to sustain a dividend.

We do believe, however, that by purchasing back up to EUR300m worth of shares at the present time we'll be strongly earnings generative for shareholders.

And by returning about 3% to (retiring --) canceling some 3% of the stock, the remaining shareholders will continue to see an enhancement in their -- in the earnings per share and hopefully in the price earnings multiple.

That buyback is not obligatory on us at the moment.

We intend, subject to the share price, probably to launch it any time after June 7.

But there's no requirement on us to complete within the open period.

We will buy up to, as I said, EUR300m worth of shares if we think it makes sense for our shareholders to do so.

If we don't, and for some reason the share price spikes upward, we may not do it this time round.

But we'll continue to keep it under review.

More significantly, as we indicated, the release of the airport traffic stats last month, the market suddenly got softer.

We were enjoying a strong traffic -- a strong growth in a benign -- relatively benign yield environment through January, February, March.

Looking out into April, May, things have begun to soften with both yields and load factors slightly down on our expectations.

We've responded aggressively over recent weeks with fare promotions, seat sales, free seat giveaways and, more recently, a few weeks ago, a unique, in Europe anyway, a unique lowest price guarantee.

If any passenger can find a lower fare than Ryanair's on any city pair in Europe where we fly, subject to certain terms and conditions, we will refund them double the difference.

I'd be pleased to say we've had to refund remarkably few passengers so far, simply because our fares are so much lower than the competition.

There is no doubt that in my mind some of these seat promotions and fare wars will be self-fulfilling.

And therefore, as you will see this morning in our guidance, we are pretty cautious for the coming year.

We're now guiding that yields will fall this year by about 5%.

If you remember, last year they rose by 7%.

So, a fall by about 5% -- sorry, by up to 5%, Howard (inaudible), by up to 5%.

If that is correct, we then expect that the profit growth for the next 12 months will be of the order of about 5% on this morning's record numbers.

I do, though -- it is important to put this in context.

The markets are softer than we expected.

There isn't any great collapse.

The traffic growth continues to be strong.

We released the May traffic figures this morning, which showed 17% traffic growth.

And we suspect that will continue to be the case through the summer peak.

But the more we engage in price cuts and price wars and price guarantees, the more it's inevitable that we'll force the competition to -- they can never match us, but at least to follow us.

And we saw it yesterday with Easyjet launching a remarkably ineffective price guarantee, where they're now effectively offering to refund double the difference to any passenger that can find a cheaper fare than Easyjet but on an airport pair basis.

So, whereas, for example, in the Ryanair price guarantee, if you can find a cheaper fare from any London airport to any Milan airport, we'll refund you double the difference.

With the Easyjet guarantee, if you can find a cheaper fare from Gatwick to Milan, I think it's Malpensa, I think they may well be the only airline on that route, although I stand to be corrected, they'll refund you double the difference.

But if they're the only airline on the route, you're unlikely to find a lower fare from any other airline operating the city airport pair route.

I think it's a good indication of the fact that prices are falling, yields are going to be softer.

Ryanair is leading the price war.

We're seeing significant bookings -- forward bookings from passengers.

Given particularly the coverage we're attracting from these new lower fares, free seats and the price guarantee, we expect that to continue through the summer.

Having said that, we would expect profits to continue to grow over the first two quarters compared to last year.

But where we really are concerned, where we are very cautious, is the two winter quarters.

We have no visibility on bookings or yields for the two winter quarters at this stage.

At the moment, we're guiding that they'll be breakeven but with very little movement on yields and fares they could be loss making, quarters three and four.

So, I think what you'll see within the -- our guidance of profit growth of 5% this year, effectively stronger profit growth in the first two quarters and a profit decline or maybe even losses in the two winter quarters.

Other than that, again, I'll remind you these are short term.

Historically, these have always been short-term market events.

We responded aggressively to them in the past.

We will continue to respond aggressively to them in the -- currently.

And we think we still remain confident that over the medium term, i.e.

the next 5 years, that our traffic and profits will double.

One of the other features you're going to see, and I'm sure we'll hear it on the conference call, is the unit costs over the next 12 months we expect to rise by something of the order of 6%, 7%.

That will match the growth in the sector length, which is about 7% for the coming year.

But there's an underlying cost problem there which we believe will be once off this year.

We have a doubling of Stansted Airport's charges here on April 1.

We are suffering as well the market being impacted by the doubling of APD, which is the Airport Departure Taxes here in the U.K.

Dublin airport charges are rising this year, unjustified given that there's very little CapEx going on in Dublin.

And the cabin crew, the Irish government introduced or applied the European Working Time Directive to all our cabin crew with effect by statutory (inaudible) with effects from January 1, 2007, a number of years earlier than they were obliged to do so.

And that will require us to increase the crewing ratio of cabin crew this year from four to five crews per aircraft.

That increase in crewing ratio, added to the growth in the aircraft, means we will be recruiting something of the order of 1,800 cabin crew over the next 12 months, as opposed to what would have been just to maintain for -- to account for the growth it would have been about half that figure.

Again, we expect unit costs to rise by about 7% this year, the sector length up around 7%, yield to fall by up to 5% and, accordingly, our guidance on profit, we expect over the next 12 months to rise by about 5%.

But put together with last year's stellar 30% increase in after-tax profits, we will still be strongly profitable over the two-year period.

Over the coming year, we'll increase the fleet by a net of 30 aircraft.

We'll commence the planned disposal program.

We've already sold five aircraft which were the first ones delivered in 1999.

We signed an MOU last week to deliver another 15 aircraft.

These will be very profitable disposals from a Ryanair point of view, but won't affect the profits because we will recognize this in two or three years as an exceptional item.

But it will have a significant impact on strengthening the balance sheet, in particular the cash balances on the balance sheet.

We have launched three new -- we will launch at least three new bases, more likely four, this winter.

Dusseldorf -- well, this year.

Dusseldorf Niederrhein started last week.

Bristol has already been announced and will start in November.

And I expect in the next month or two you'll see us announce one or maybe two more European bases which will be opened this winter.

We continue to aggressively stimulate traffic growth by promoting our -- Ryanair's lower-fare guarantee, which is unmatched by any other airline in Europe.

We'll continue to aggressively stimulate traffic by lowering fares, engaging in price promotions and, if needs be, giving away more free seats.

This remains an extremely volatile and cyclical business.

But over time, price leaders such as Southwest in the U.S., Tesco's or Wal-Mart in other industries and Ryanair in Europe, have repeatedly demonstrated that during such periods of adverse trading conditions the lowest-fare, lowest-cost carrier makes the greatest gains.

And that's why I said I think this is a buying opportunity.

Accordingly, Ryanair will continue to offer the lowest fares and the lowest costs in every market in which we operate, to the benefit of our passengers, our people and our shareholders.

I'll now ask Howard to take you briefly through a summary of the MD&A.

Howard?

Thank you, Michael.

I should point out there are two exceptional items arising, one in 2007 and the other in 2006.

In 2006 we had an exceptional item of EUR5.2m net of tax from the insurance claim arising from [describing] of some aircraft.

And in this year, we had a fair tax release of about EUR34.2m.

It's a once off and won't affect future tax rates, which will be in the order of 10%.

I'll just read you through the summary, then.

Profit after tax increased by 33% to EUR401.4m, compared to EUR301.5m in the previous year ended March 31, 2006.

These results reflect a 7% increase in average fares, including checked-in baggage revenues, very strong growth in ancillary revenues, offset by significantly higher fuel costs which increased by 50% to EUR693.3m and a one-off step-up in pilot crewing ratios which resulted in staff costs rising by 32% to EUR226.6m.

Total operating revenues increased by 32% to EUR2,236.9m, which was faster than the growth of 22% in passenger volumes.

Average fares rose by 7% and ancillary revenues grew by 40% to EUR362.1m.

Total revenue per passenger, as a result, increased by 8%, while passenger load factors increased by 1 point to 82% during the year.

Total operating revenues -- sorry, total operating expenses increased by 33% to EUR1.765b, due to the increased level of activity and the increased costs associated with the growth of the airline.

Fuel, which represents 39% of total operating costs compared to 35% last year, increased by 50% to EUR693.3m due to substantial increases in the U.S.

dollar cost per gallon, partially offset by a positive movement of the U.S.

dollar exchange rate against the euro and an average 3% reduction in fuel consumption resulting from the installation of Winglets on our entire Boeing 737-800 fleet.

The other costs, excluding fuel and start-up costs, remained flat.

The staff costs rose by 32%, reflecting an increase of pilot crewing ratios, primarily as a result of the ongoing increases in sector length.

As a result, operating margins decreased by 1 point to 21% whilst operating profit increased by 28% to EUR471.7m.

Net margin remained flat at 18%, for the reasons I've outlined above.

And adjusted earnings per share increased by 32% to EUR0.2599 per share for the year.

Moving onto the balance sheet, the strong growth in profitability continues to positively impact the balance sheet with total cash increasing by EUR226m to EUR2.2b, despite acquiring a 25.2% stake in Aer Lingus for EUR344.9m and funding an additional EUR489.2m in capital expenditure, largely from internal resources.

The -- this cash flow part funded the extensive aircraft (inaudible) program and additional aircraft advance payments.

Total debt, net repayments made during the year increased by EUR184.3m.

Shareholders' equity at March 31, 2007 has increased by EUR547.8m to EUR2.539b compared to last year, due to the EUR401.4m increase in profitability during the year, the exercise of share options which increased shareholders' funds by EUR11.2m, and the impact of IFRS accounting treatment for derivative financial instruments, financial assets, pensions and stock options which are accounted for within equity and which also increased shareholders' funds by a total of EUR99m.

With that, I'll pass you back to Michael for questions.

Thanks, Howard.

Okay, operator, we'll open up to questions, if I can.

We have on the webcast this morning the analysts, we've webcast on the website the analysts' presentation and briefing on which a lot of the key questions have already been answered.

So I think, please, when analysts are asking questions, if you could not double over or cover over the ground we've already covered this morning we'd appreciate it.

But other than that, please feel free to ask anything you want.

Thank you, sir.

(OPERATOR INSTRUCTIONS).

Our first question comes from the line of James Parker.

Please go ahead, announcing your company name.

Michael and Howard, good afternoon.

Hi, Jim.

I wanted to ask about ancillaries.

Your per passenger in the fourth quarter is EUR10.15, up 17% year to year.

What is the source of that?

Are second, third type bags in there, or what's the source of that substantial increase in ancillaries?

Well, Jim, this reflects things we've put in place over the last number of years.

Firstly, we're getting the increasing penetration rate from the car hire deal we did with Hertz some years ago.

We also have increased penetration from travel insurance, increased penetration -- penetration rate has risen over the year.

The other thing we're seeing, obviously, in there is excess baggage revenues.

The bag charge revenues themselves, Jim, were included in scheduled revenues but the excess baggage revenues are included in ancillaries and they've continued to grow quite strongly as well.

Generally, on board spend is up again on last year.

So, overall, a pretty strong performance across all sectors of the ancillary revenues.

Okay.

And a second question here regarding the airport fee increase at Stansted.

Hasn't that gone up for other airlines as well?

And what's happened with the competition fees at Stansted?

I think for the first time, Jim, since 1991, BAA at Stansted recorded their first decline in year-on-year growth in passenger volume.

So clearly the -- it doubled in April of 2007.

So clearly the doubling of charges, Easyjet's charge also grows as well, but I don't think to the same extent as ours did, has resulted in an impact on passenger volume.

So it is actually impacting the performance of other carriers at Stansted.

And, last question, and won't that cause some traffic to shift over to Ryanair because your fares after the increases are still sharply below others?

It probably will to an extent, Jim, but remember we have about 65% of the traffic at Stansted.

I think Easyjet would have something of the order of about 20%.

So if Stansted traffic in April, as it was, was down around 3 percentage points, we clearly account for a significant proportion of that.

We have cut back some of the midday flights out of Stansted in response to these increased charges.

That -- we think, that will continue.

There isn't anybody else there at Stansted who will spill to us in significant numbers to be able to account for the impact on the overall -- our traffic at Stansted of these kinds of swingeing airport charge increases or taxes here in the U.K.

Thanks.

Thanks, Jim.

(OPERATOR INSTRUCTIONS).

Our next question comes from the line of John Mattimoe.

Please go ahead, announcing your company name.

Hi.

John Mattimoe again from Merrion Stockbrokers.

Just a follow-up question from this morning.

Just in relation to the influence for the year ahead, could you give any sense on whether you expect the summer to be any better than the winter?

I'm sorry, John, I couldn't understand the question.

You said that the decline in the summer should be less than the decline in the winter?

The minus 5% that you're expecting for the full year, whether it will be broadly similar as the year unfolds or whether it'll be any greater or any less in the summer compared to winter.

I think at this stage, that figure has surprised us slightly.

We don't expect the yield through the first half of the year to fall by 5% but we do expect it to be significantly worse in the winter.

We do expect yields to fall in the first half of the year.

But we believe at this stage, and I say at this stage with no visibility on winter traffic or bookings, we think a decline of 5 -- of up to 5% is a reasonable estimate based on previous years.

But that decline will be smaller in the first half of the year and we, to be perfectly honest with you, have no idea what it'll be in the second half of the year.

Until we can get some feel for why there is this yield softness or what's causing this yield softness, we won't be able to accurately predict the yield outcome for the year.

Okay.

And in relation to the summer, then, if yields are likely to be down and costs are going up, does that imply that you have a margin squeeze of some amount during the summer and therefore profit growth might be a bit less than passenger growth?

I think, on the basis of our guidance for the year, John, that's a reasonable assumption.

We're talking about profit -- traffic growth this year of 22% and profit growth over the year of 5%.

There's clearly going to be a margin squeeze this year.

Now, we were talking about something similar this time last year and it didn't happen because the yield upturn was significantly better than we had predicted at this time last year, particularly for the winter.

But, yes, not to put too fine a point on it, we have what we believe are largely once-off big cost increases in two significant areas this year, that is staff costs with the cabin crew recruitment and airport costs with the significant cost increases at Stansted and higher than average airport charges in Madrid.

We don't expect those to be repeated next year, although I would have to qualify that and say that's subject to the outcome of the planning enquiries and the regulatory reviews at Dublin and at Stansted.

Okay.

Thanks again for that.

Thanks, John.

(OPERATOR INSTRUCTIONS).

Our next question comes from the line of [Manni Lashay].

Please go ahead, announcing your company name.

Hi, guys.

This is Manni Lashay from Delhi.

It's a tricky name all right.

Just a quick question for you.

In terms of the yield, you have been guiding on the baggage that it was going to contribute, I think, was it about EUR2?

Is that right or have you given any further guidance of what it will contribute?

I think, Manni, (inaudible) the guide on that.

It's obviously contained within the --

The actual yields, yes.

So the guidance we're giving is that 50% of the passengers have a bag and an average of EUR6 per bag, so there's about EUR3.60 or thereabouts in average fare this year.

I think the bag charge went up from EUR4.50 to EUR6 on March 1, so there is a higher average rate this year compared to last year.

That EUR2 you referred to was when we launched it.

Right.

About this time last year.

We felt that the conversion rate was something like 50% or 55% of EUR4.50, which gave you EUR2.50.

Okay.

So the EUR3.50, when you say for this year, is it this fiscal year or the year that's just ended?

We don't want to get into too much detail but it was a large proportion of the 7% yield increase last year.

In the guidance of the year decline it's up to 5% for this year.

It's difficult to break it out or to be accurate about the break out, because it does partly depend.

We're determined to keep reducing the amount of check-in baggage we carry over the next 12 months, partly by putting up the baggage fees.

And therefore we think it will decline, or there will be an element of decline in the yield per passenger over the full 12 months this year.

Does this mean that -- if you're guiding yields down by 5%, does this mean that there is huge passenger resistance, in that you have to give away yield to try and get them to fly?

I don't think so.

I think you may -- if you look at it, they've been in there for the whole of last, or almost all of last year.

All of last year, yes.

We did deliver 22% traffic growth and a 7% yield growth.

Now, the baggage charge accounted for much of that yield growth.

I think the difficulty, again, we may be wrong in this, but it's our gut instinct at the moment is the double whammy, particularly in the U.K.

market, of doubling of APD, the doubling of the Stansted charges, significant increases at Dublin, airport fees and charges from April, has all kind of come together and had a significant impact on our pricing and yield, pricing and bookings.

And that's why we're having now, going into the summer period, discount the bookings and charges.

We think it has more to do with the taxes and airport charge increases than any resistance on baggage.

To the extent there's resistance on baggage, we think what happens with resistance on baggage is not that people don't fly, it's that they fly with less baggage.

They travel with checked-on luggage.

When we introduced it last year, we were nearly at over 75% of passengers that checked in bags.

We're now down below 60%.

So I think that's the way resistance to the baggage fees emerges, not by reducing people that travel.

If you take this morning's traffic figures for May, were up 17%.

This is difficult to balance.

What we're trying to do is be cautious and conservative in the outlook.

We're still growing like bloody gangbusters, so I think the message we could leave with investors on this call is the business is still growing very strongly.

We've had a phenomenally profitable year last year.

We're very cautious and conservative into the next 12 months only because there's something going on at the moment in terms of market softness that we don't quite understand, although we can see it, and we don't know how long it's going to continue.

Does that conclude your questions, madam?

Yes, thank you very much.

Thank you.

Our next question comes from the line of [James Downie].

Please go ahead, announcing your company name.

Hello, gentlemen.

It's James Downie here from Chilton Investment Company.

There's an obvious relationship between load factors, ancillary revenues from -- ancillary revenues particularly from the new customers, as well as the costs associated with those new customers at airports.

And you're guiding to a load factor decline.

And I just wondered if you could elaborate on your thought process on yield declines versus load factor, keeping load factors flat or potentially improving them just to get the ancillary revenues up where obviously the margins are much higher.

If you could talk about that for a second.

Then, secondly, just on the new planes that you're launching, could you -- how many of those are due to be going into Stansted?

And what's the scope for you guys to shift them to Luton or else to use them better in a lower-cost airport?

Okay, thank you.

If I do the second one first, there's none of the new aircraft going to Stansted.

Stansted is largely maxed out at peak periods, morning and evening.

I think what you'll see at Stansted over the next year or two, though, is that we will continue to probably cull out some of the midday rotations.

We're switching a lot of the Stansted flights onto aircraft that are based at other bases.

That does give us some scope for new route development out of Stansted, but with no capacity increase at Stansted.

All of the new aircraft that are planned over the next 12 months are going to airports like Dublin, the new bases in Madrid, Marseille, Bremen, Niederrhein and Bristol.

There's nothing planned for Stansted.

We would expect Stansted traffic to continue, or certainly to be static and probably decline a little bit over the next 12 months, certainly if our plans are anything to go by.

We think there's no other way to demonstrate to the people, the regulator and the CAA, that their failure to regulate this monopoly in the interests of airport users is switching off passengers using Stansted.

On the earlier one, there's no causal relationship, although there has to be some kind of passive relationship, between our load factor and yield decline.

If you remember, the difference in the Ryanair business model is we manage the business to deliver load factor and traffic, and we tend to be price takers in order to maintain or to receive those load factors and those traffic volumes.

Last year, yields we grew by 22%.

The traffic grew by 22% and the yields rose by 7%.

Yields declined -- the load factor declined by 1 percentage point.

This year we're expecting again 20% traffic growth.

Yield, maybe a decline of 1%, maybe 2%, but the yields -- but that the yields will decline by, in our -- at this stage our best guess is up to 5%.

So there's no -- in our experience, tends not to be a direct relationship between our rate of traffic growth, or load factors, and yield.

The yield is much more heavily influenced by what's going on in the general marketplace.

Last year that was heavily driven by competitor price increases and fuel surcharges.

I think [coming out] at this moment that suggests in the airline industry you'll see two years of increasing yields.

You never get a third one.

This may be the third year and there won't be a third year of increasing yields anywhere in the industry in Europe.

But there's obviously an indirect relationship between traffic and loads and yields.

It's not direct and the two don't necessarily follow each other.

And what we're saying to the market today is, look, if the market's going to be softer we're responding aggressively.

Now, we will continue to respond aggressively.

If there's going to be a fare war, we will start it.

We will start it and we will finish it.

But we will maintain -- we will hit the load factors -- the load factor objective for the year.

We'll hit our traffic target of 52m passengers, partly because so much -- a lot of our business is generated, or is delivered, or a lot of our profits flow from the ancillary revenues.

So it makes sense for us, particularly on those routes where we have lower airport charges or per-passenger airport charges, to continue to see the traffic, even during off-peak periods, if needs be at free, with free flights and take them only on the ancillaries.

That would no longer apply at the bigger bases like Dublin and Stansted, where the incremental passenger charges, particularly in the U.K.

when you add in APD, are such an enormous part of our average fare now.

But those, I would caution again, we operate only at two regulated airports, Dublin and Stansted.

Most of the other airports we operate to live in a competitive environment.

They wouldn't ever even consider, or contemplate, building the kind of Taj Mahal that Dublin and Stansted are proposing, and nor would they consider doubling passenger charges because they couldn't get away with it.

It's really only these regulated monopolies where you have an inept or ineffective regulator, such as the CAA here in the U.K.

or the CAR in Dublin, which is probably more useless than the CAA, that you get this kind of regulatory gaming whereby the regulated monopoly blows ludicrous amounts of capital expenditure building facilities that are built at one-tenth of the cost elsewhere.

Okay.

Just a follow-up on that.

If your 6% to 7% cost increase is predicated on a, say, 2 percentage point decline in load factors, if your load factor was to be flat, what would your per-unit cost increase be?

It would be -- it wouldn't really impact our unit costs because obviously we've factored in that 2% decline.

I think if we had --

But some of the costs are --

If the load factor was marginally higher, you'd have the same costs spread across a higher number of passengers.

It would, clearly, the higher load factor would reduce the unit cost increase but not significantly because not many of the costs are directly related to passenger numbers.

For example, aircraft costs, fuel, they're largely fixed.

So there would be some reduction in unit costs, but not material.

Okay.

Thank you.

Thanks, James.

Mr.

O'Leary, that concludes the questions.

I'll hand it back to you for any closing remarks.

Okay.

Are we sure nobody has any more questions?

No further questions, sir.

Okay, everybody.

I'd like to thank everybody who joined the conference call today.

As I said, we did a fairly extensive, an hour and a half, analysts' briefing this morning, which is webcast.

It's on the Ryanair website.

And anybody who has, as I'm sure, if you have some questions but were too shy to ask them, I'm sure they've been put by the analysts this morning, you'll find them on the webcast.

In the meantime, as I say, the results, the press -- the results, the press release, the webcast are all on ryanair.com.

That's also where Europe's lowest fares and the only effective lower-fare guarantee is.

And other than that, we look forward to seeing everybody on the roadshow this week.

We have roadshows, six roadshows running in Ireland, the U.K., Europe and the U.S.

So if we didn't get to you or we didn't get to answer a question that you wanted, please feel free to either call us directly offline, you can get us through the usual numbers, or hopefully we'll see you at the one-to-one presentations between now and the end of the week.

Thank you again, very much, and I look forward to seeing you later in the week.

Bye, bye.

Thank you, ladies and gentlemen.

That concludes the conference.

You may now disconnect your lines.

Thank you.