Ryanair Holdings PLC (RYAAY) 2008 Q3 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the Ryanair Q3 results call.

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

Later we will conduct a question-and-answer session, and instructions will follow.

I would now like to hand over to the Chief Executive, Mr.

Michael O'Leary.

Please go ahead, sir.

Thank you, Stephen.

Good afternoon, ladies and gentlemen.

You are welcome to the Q3 investor conference call.

I'm here in London.

Howard Millar is actually in New York where he will shortly be conducting an analyst and investor briefing in about an hour immediately after this conference call.

We are joined in Dublin by Neil Sorahan, Jimmy Dempsey, David Broderick.

Michael Cawley sends his apologies.

He's on a flight back to Dublin at the moment.

We published -- excuse me, I have a bit of a head cold today -- but we published the Q3 results this morning.

As you can see, the traffic growth was 21%.

The net profits have fallen 27% to EUR35 million, which is in line with our guidance for the third quarter.

It reflects a 21% growth in traffic; a 4% decline in yields, including the baggage charges; flat unit costs; and a strong ancillary sales performance.

Whilst the unit costs were flat during the quarter, excluding the fuel hedges, they rose by 6%, largely due to the doubling of airport charges at Stansted, significantly higher charges at Dublin Airport, 7% longer sectors and the increase in the cabin crew staffing ratios, which won't be repeated in the following year.

We welcome the UK government's recent decision to ignore the CAA's proposal that Stansted Airport monopoly be de-designated.

Clearly in our view, if Stansted Airport continues to demonstrate and abuse its market's position and we're continuing to call on the UK government to break up the BAA Airport monopoly.

We're also opposed to Dublin Airport's plan to waste 800 million on a second terminal at Dublin, while that facility could easily be put in place for about 200 million, the same cost proposed by the BAA some in 2005 when they first proposed it.

Thankfully, at most other airports, costs are continuing to fall, and that's opening up further growth opportunities for Ryanair.

In the last couple months, we've opened up new bases in Alicante and Valencia in Spain, Belfast City and Bristol in the UK, and we've recently announced two new bases in Bournemouth and in Birmingham for the UK, and they have come about as a result of capacity withdrawals by competitor airlines.

We expect sometime in March/April to announce two more bases for which we'll start operating in the winter of 2008/2009 -- winter of 2008/2009.

Looking forward, in terms of whilst we had signaled strongly that there would be a fall in profits in the third and fourth quarters, the results for the nine -- cumulative results for the nine months show profit 17% ahead.

We're reaffirming our guidance this morning for the full year, which we now have good visibility on yields into the fourth quarter.

We expect a decline in average fares over the winter period to be of the order of about minus 5%, and therefore, we are able to confirm our previous guidance that we expect profit for the full year to rise by about 17.5% to about EUR470 million, and the recently completed share buybacks should add about another 3% to earnings per share for the full year.

Obviously, of more concern in this morning's release, we're giving some flavor of our outlook for next year.

It's important at this stage to say we're not in a position to make any accurate forecast because the markets, both in terms of yields and in terms of fuel costs, remain extremely volatile.

However, with spot oil prices remaining up at $90 a barrel and a significant likelihood of recession here in the UK or in Europe, we generally are taking a more pessimistic view of the next 12 months than presently any of our other competitors or, indeed, a significant number of analysts in the market.

We've seen a number of analysts make forecasts for Ryanair's earnings for next year.

That is FY '09.

Most are predicated on significantly higher oil prices, which we agree with, but there seems to be a general assumption that there will be higher fares and yields in the next 12 months and that higher fares and yields will pay for higher oil prices.

We're concerned at this stage, and all I want to do today is to highlight the fact that I think we think that's probably an optimistic assessment.

Our view presently is that oil prices will remain high for the coming 12 months.

As you know, we had started hedging some 10 months ago almost this time last year into the third quarter of the next year at $72 a barrel.

Not long after we started that hedging process, the oil prices moved away from us again, and we went up somewhere in the mid to high 90s for most of the last nine months with no opportunity to hedge at those kind of prices.

There was some recent weakening in oil prices on the back of fear of recession.

Although the Fed interest rate cuts of the last couple of weeks resulted in spot prices prior to that falling back to high 80s, but they've now rebounded back up into the low 90s again.

Our view for what it's worth is that we're probably -- our budgeting numbers is we are facing probably about $85 a barrel through the next -- for FY 2008/2009.

That will be about $20 a barrel higher than the $65 a barrel we have hedged most of this year's supply at, and every one dollar movement in the price of oil represents an adverse cost impact of about EUR14 million.

So, a $20 movement, 65 to 85 would add about EUR280 million to our cost base for next year.

Having said that, I think you've got to also take a view on yields.

Our view at the moment is that at its most optimistic, yields may be flat for the next 12 months.

At our most pessimistic, we think yields will fall by anything up to 5 percentage points.

Those are not guidance; those are not forecasts at this stage.

We just think we need to focus on next year's earnings.

This year's earnings I think are largely in the bag.

Next year you need to be more cautious, particularly with the yield outlook.

We are of the view that the UK and some of our European markets are entering or phasing into a recession.

Whether they go into recession or don't go into recession is pretty much immaterial.

The real issue is, most of our competitors out there seem to be assuming that higher fares will account for higher oil prices next year.

We think that is an overoptimistic assumption.

We think we're facing the possibility of a perfect storm in the next 12 months where you may have in our case significantly higher oil prices, maybe $85 a barrel, and weaker fares and yields.

So, unlike two years ago when higher yields accounted or helped us to pay for higher oil prices, we think in the next 12 months we may be looking at an outcome of higher oil prices and perhaps flat or slightly weaker yields, in which case the kind of range of estimates we are focusing people on is that our earnings next year given a combination of flat yields and oil prices falling back from $85 to $75 a barrel could see our earnings rise by a single digit percentage 6 or 8%.

Whereas the combination of the perfect storm of $85 a barrel of oil and a yield decline of 5% net over the year would see our profits fall by as much as [50%] to about EUR235 million.

Having said that, our general belief at the moment, we don't think it will be as bad as that conservative guidance.

We don't think it will be as good as our most optimistic guidance, but I think it's time to focus people on next year.

We may be heading for one of those cyclical five-year perfect storms that afflict this industry.

Having said that, in many ways we would welcome that kind of a downturn for a period of a year for a couple of reasons.

Firstly, we think if there is a recession in the UK and Europe, it would bring to an end all of this debate about putting more environmental taxes on air travel.

We would welcome that.

It would also I think put considerably more pressure on airport regulators that both the CAA here in the UK and Commission for Aviation Regulation in Ireland, both of whom in recent years have been abysmal at protecting the needs of the interests of airport users and both of whom who have followed a policy it seems to us or at least in my view of prioritizing the airport or the monopoly airports' returns over the needs or the requirements of users, airline and passenger users.

We think that would change in a recession.

Equally, there may well be a prospect if there is a recession that oil prices may trend downwards over the next 12 months.

All of which I think would be good for our medium and longer-term growth and the medium and long-term business model.

We continue to see opportunities that are rising as a result of competitors cutting back capacity.

We've highlighted examples, say, British Midland with British Airways with the sale of BA Connect to FlyBe has resulted in a significant downturn in capacity at Birmingham, has led Birmingham Airport to do a deal with Ryanair under which we would step in and guarantee them significant traffic growth and establish a base there as an airport where, frankly, we've been trying to establish a base for a number of years but the cost base was prohibitive.

We've also seen the opportunity arise in say Belfast City where just before Christmas, Air Berlin pulled out and left Belfast City with a significant gap in their operations.

The airport came to us, and we were happy to do a deal with them.

Again, to open up a base and guarantee them significant traffic growth at a reasonably low cost base for Ryanair.

And I think those opportunities will continue.

There's the prospect of considerable consolidation in the Spanish market.

At the moment the likes of [Whaling] and (inaudible) have said they canceled their growth plans.

They are now talking about merging together to try to come up with some kind of a profitable strategy.

Speculation now is that Iberia may be a bidder for Spanair.

In the Italian market, clearly Air France looks like they may be a bidder for Alitalia.

And even the German market in recent days, there's been speculation that the Germanwings and Hapag Lloyd Express may merge under some kind of Lufthansa subsidiary.

I think that process of consolidation will be speeded up if there is a recession or a downturn in the European industry here in Europe in the next 12 months.

I think would be good both for Ryanair's growth, and it also would be good for our cost base.

Because I think it will throw out more opportunities to reduce costs or to enter into new airports or new bases at significantly lower costs.

In the meantime, our own cost reduction plans continue to roll out.

Over the next 12 months, on a unit cost basis or on a passenger basis, we would expect to see many of the major cost items like staff costs, airport costs, aircraft ownership depreciation, sales and marketing grow at a slower rate than scheduled revenues.

Ancillary revenues will continue to grow at a faster rate than scheduled revenues, but the big bump there in the middle of all this is what happens to fuel costs, what happens to yields, and at the moment, we are not in a position to give you need any guidance on that.

As we said in the statement this morning, we had hoped to be in a position to give you some guidance on that probably by about the time of our annual results or around June of this year.

Those are kind of the themes of today's results.

That's as much guidance and color as I can give you at the moment.

For the sake of speed and because Howard is in New York and will be doing an analyst and investor briefing over there following the conference call, I am not going to ask him to read the MD&A.

I think we've taken it as read, and if people don't mind, we'll now open this up to questions and answers.

Stephen, if you could open up for questions please.

(Operator Instructions).

Stephen Furlong.

Michael, could you just tell me whether you are seeing any sign in bookings of any slowdown, particularly in terms of what's all being talked about in terms of the UK consumer?

Also, in that context maybe you could just talk about there's been a number of retailers in the UK and (inaudible) and [Dicksons], etc.

who have kind of warned, and what do you see with the Ryanair business model if it can outperform in those downturns, either because it has more inbound traffic in the UK or via for traffic or just the lower price point?

Thank you.

Thanks, Stephen.

I think in terms of booking outlook, the difficulty at the moment is we are in an unusual quarter in that Easter has moved into -- is in March of this year.

So, in actual, currently our forward booking profile, which would include February, March, and about the first half of April, is artificially strong because Easter is in March.

And I think it's fair to say we would see a relatively strong end to the current year, traffic will be in line with our previous guidance, and we expect yields to be in line with our previous guidance.

We don't see anything unusual.

I think it gets more difficult once you get beyond into April, May, June.

Clearly, we don't have Easter in this year's comparable, whereas it will have been in the prior year comparable.

And there is a possibility.

I mean it is hard to know yet.

We don't see any great sign at the moment of a downturn in UK in the bookings.

But where it would get reflective would be in yields.

Remember, we will maintain our traffic growth.

We expect to maintain our load factors within our range of guidance.

But, that will be at the expense of yields.

Therefore, it's a little bit early, yes.

Because we have Easter in March, the immediate forward bookings are strong out to the end of year, which is why we have a fair degree of confidence in the guidance for this year's profit figures up 17.5% over the previous years.

Next year is a lot more uncertain.

And I think a lot depends on what happens.

What impact do the interest rate costs have, the Fed interest rate costs in the states.

The prospect of Bank of England cuts over here.

My personal view is I don't think they will have that much impact.

We are heading in for a recession.

I may be overly pessimistic or bearish on that, but I may be wrong.

But at least if our forecast is wrong, the -- you'll get along -- the surprise will be on the upside.

I think a lot of our competitors at the moment in Europe are forecasting kind of higher fares next year to cover higher oil prices, and I think the room for surprise is there is probably on the downside.

In terms of UK retailers, we haven't seen it at the moment.

Do I think we will outperform the market if there is a recession?

Yes, I do.

We have in each of the last three big downturns, which was Gulf War I, 9/11 and the Iraq War.

In all cases, I mean if you remember back to 2002 immediately after the 9/11, we had our first ever profits warning and our only ever downturn in profitability.

We bounced back strongly the following year with a significant increase in profitability.

But, if this is -- there is a possibility that this next year could be one of those years where we have a downturn in profitability.

I think what we are trying to say now is to caution people that next year may be one of those years.

If it's not, I think the surprise would be on the upside.

I don't think it will be on the downside.

John Mattimoe.

John Mattimoe from Merrion Stockbrokers.

Michael, just a follow up there, just in relation to the consumer environment that you are referring too, is it just the UK you are particularly concerned about, or is it just broadly across Europe?

And then, just a second question then if Howard is on the line, just in relation to the nonfuel unit costs, can I just check to see what the dynamics are at play there?

You mentioned in the release this morning about the 5% increase in sector lands possible for the next financial year, and I just wanted to tie that in and whether that implies a reduction in unit costs or an increase given Michael was saying that the staff airport aircraft and sales and marketing costs will be growing at a lower rate than the scheduled revenues.

Thanks, John.

I think it's fair to say at this stage, we're kind of worried about this, you know, a slip into recession, not just in the UK but across Europe.

Clearly, the UK will be of more importance to us, given the profile of the new basis in the UK this year.

I think we will have an unusually high percentage of our growth will be in a UK basis -- Birmingham, Belfast City, Bristol, and Bournemouth.

And also, the recent weakness of Sterling may impact kind of the yield figures over the next 12 months.

We haven't seen a big downturn at the moment in UK bookings, nor have we seen it across the continent.

But we're concerned that if we slip into recession, which may happen immediately or quite suddenly and immediately after Easter and Easter is in March, it may affect bookings across our network, across Europe for us through April, May, June, and then we're not really sure where we are.

So, I think we have a general concern more than -- you have to take a view at the moment on next year.

The one thing that looks certain is, oil prices are going to be higher than $65 a barrel.

The thing that is uncertain is, can we get another 3 or 4% fare increase as we did two years ago when oil prices jumped.

Now, that may be driven by competitor fuel surcharges.

We would expect those to go up again.

I'm just not sure if there's a recession or a recession across Europe or a continuing weakness of consumer confidence in the UK that our competitors would be able to levy a further increase to fuel surcharges, in which case, we may not see our fares trend up behind us.

That process could be speeded up if consolidation speeds up and there's more capacity taken out of the market.

Then it will be more favorable for yields.

If there isn't as much consolidation as we expect at the moment, there will be further downward pressure on yield.

It's just too early to say.

But we think the general range of kind of analyst forecasts for next year at the moment are overly optimistic in assuming that there will be a yield increase in this environment to compensate for higher oil prices.

Howard, do you want to do the unit costs question?

Yes, Michael.

I suppose, John, at this stage we normally wouldn't come out with indications on the next year as we have not yet finalized all of our new routes and bases.

But to give you some general guidance, clearly, if sector link is increasing by 5%, that does have an a significant impact on quite a few cost lines.

I would think on staff costs, we seem to be fine.

We've absorbed the increase in the cabin crew ratios this year.

In the prior year, we obviously had the change in the flight crew ratios in terms then (inaudible) of 50% or so.

In terms of airport charges, we would think now that we've absorbed the doubling of charges than the higher charges at Dublin.

The way the route network is shaping up for this year that airport charges should grow at a slower rate than the growth in passenger volumes.

Including any aircraft sales, we would feel that ownership costs would also grow at a slower rate than the growth in passenger volumes.

So, that would seem to indicate to us that despite a 5% increase in sector links that excluding fuel, unit costs will be in and around a flattish territory.

But, as I said, we've not quite yet finalized how our new base and routes look like, but that would seem to be our general guidance at this point in time.

Jim Parker.

Jim Parker with Raymond James.

Just curious about your average fare down 4.3% in the December quarter.

That's far more than it has been since fiscal '04.

Is there some something, seasonality, or why is the average fare down so much?

What we think the reason is, as we said on the first quarter and the half-year results, we did expect more seasonality this year.

It was a strong yield performance in the first half of the year, strong profit growth in the first half of the year.

We thought that would be reflected in reduced yield performance.

Remember, the original guidance this winter was -5 to -10.

We are now closer to -5 for the half-year.

And I think that's a factor of a couple things.

One, we speeded up the the rate of new route development and brought it forward.

So, of the seven aircraft we grounded, it stands that we've used five of those aircraft to open up the bases in Bristol and in Belfast this year.

So, the new base development, instead of it happening in February and March, it began, if you like, in the back end of November and in early December.

So, you're seeing strong traffic growth but at the expense of yields.

That should be repaid to us when we get to Q1 and Q2.

Those bases are up and running earlier.

Their advanced bookings are stronger.

If you take the Belfast base, CAA produced December statistics last week.

Ryanair's kind of load factor in December on our routes out of Belfast City was almost 60%.

Aerolineas, admittedly December was their first month.

Their load factor was down I think around 40%.

So, we've speeded up the rate of new route and base growth or taken it earlier during the winter period, some of it immediately before Christmas, which is generally a bad time anyway.

And I think that's what led, if you like, to the lower yields.

They also been compounded by the weaker Sterling in the last month or two as well.

But it's well within, if you like, our range of previous guidance and also our previous guidance on the I think more pronounced seasonality, higher yields and profits during the summer, lower yields and lower profits during the winter.

Michael, second thing though -- this may be more of a comment than a question.

You have better reason this year with a recession possibly looming, but for the last three years, you all have issued a rather pessimistic forecast.

You usually do it in June, and the earnings have turned out in the first of those three years to be up like 37%, and the second is, this year when you may be up like 27%.

So --?

Well, let me put it this way to you.

It's not some deliberate policy that we're going to go out there with some kind of deliberately bearish sentiment.

We can only call it as we see it.

You know, we've been quite open.

We're hedged this year at $65 a barrel.

At the moment, we could forward by next year's oil at about $85 a barrel, and that's our kind of operating number for the next 12 months.

If we enter into a recession, I think there will be a downward pressure on oil price.

It might be a little bit lower than that.

But, we are concerned about the range of analysts forecasts for next year that simply assume that oil -- average fares will rise.

They may well do so.

There may be further consolidation.

We may -- the central banks may avert a recession.

But at the moment, I think there's significant crises of confidence, consumer confidence here in the UK and in Europe.

And as I say, if I think there's going to be an upside for our investors in the next 12 months, it may be on the upside.

I don't think it will be on the downside.

But I would hate to be in a position of promising you at this stage there will be higher oil prices, but don't worry about it because higher fares are going to cover the higher oil prices.

Then you really would get a big shock over the summer.

We can only give you our best guidance at any given point in time, and we -- I've always been concerned in Ryanair to give our shareholders the conservative guidance.

And I think that is the sensible thing to do, and that's what we're giving you today.

Now, we're giving it to you on a day where we're confirming third-quarter profits in line with expectations.

We're confirming full-year profits in line with expectations.

The previous share buyback will ensure that the EPS growth this year is about 20%, and the other upside to price today is we've announced another share buyback, which I think is some demonstration in our confidence that the medium to long-term outlook for Ryanair will do another share buyback despite, as I previously said, we wouldn't do another one for three years.

So I think we're stepping up to the plate, but I would not wish to be optimistic at this point in time.

I think we're better off to be conservative and pessimistic, and I hope that our conservatism and pessimism is overdone.

But I wouldn't actually be betting on it at the moment.

Joe Gill.

Joe Gill and Goodbody's.

Three points really.

First off, in terms of capacity plans for the next 12 months, you seem to be sticking to the 20% growth rate at a time when your profits will be under a bit of pressure.

Maybe just comment a little bit on why you're comfortable continuing with that pace of expansion?

And secondly, are you doing things next winter in terms of parking planes at Dublin and Stansted that that could affect that number ultimately?

Second, in relation to Ireland, could you just comment about the competitive issues going on there, and year on year, are you seeing any signs of a slowing Irish consumer demand affecting incremental demand for your services?

And finally, just in terms of where you stand now, how the quarterly breakdown might actually wash out in fiscal 2009?

Is it fair to argue that Q1 is going to be a tough quarter because of the Easter effect and the winter quarter is going to be pretty rough because of the (inaudible) comparisons?

So really is the Q2 quarter is probably going to be even more important this year than previous years.

Thanks.

Thanks, Joe.

Let me take those on the way back.

We haven't yet finalized the budget for next year.

So we're not in a position to give you kind of guidance yet on either the quarterly breakdowns or any more detail on that.

We are midway through the process.

We expect to have it finished I think within about the next month.

But so at this point, I don't want to get into the detail of the quarterly breakdowns of next year's estimates.

All we are really trying to do is to caution the analysts in particular that we think the general range of sort of the general assumption higher fares that pay for higher oil prices next year is a bit optimistic in our view at this time.

How is the Irish competitive issues?

I mean we are continuing to see consolidated -- well, not so much consolidation, but in the Irish market, it has characterized by not a lot of new route development and Aerolineas continuing to withdraw capacity.

Clearly, the big one was the Shannon-London withdrawal which took place in January.

We've seen an immediate transfer of traffic across to Ryanair, although it hasn't translated into yields, primarily because I think we put in the extra capacity.

We intend to keep the fares low at Shannon, and I think the only way Shannon works at this time of the year is on the back of very low fares.

But we're certainly taking much, if not all, of that traffic.

Irish consumer, we don't yet see any signs or indication of Irish consumer weakness.

But again, I think we're in this kind of strange period with Easter being in March, which is close to Paddy's Weekend.

You have all of that kind of Irish stuff coming in March.

So actually in the forward-bookings in the Irish market through to the visible bookings through the end of March are quite strong.

I think they may be considered somewhat weaker once we get into April/May, but no, we don't see weakness in the Irish market yet.

In terms of capacity plans the next 12 months, you are right, we don't think see any reason to restrain the rate of capacity expansion.

Part of that is because we can't.

We have to confirm our option aircraft two years out with Boeing.

We are continuing to dispose of aircraft.

But I suspect that if there's a downturn, the rate of aircraft disposals, which has been treated as an exceptional in today's numbers, will dry up.

It shouldn't affect our underlying profit.

In terms of expansion, if anything I think we could probably grow a little bit faster in the next 12 months if we had the additional aircraft capacity.

We don't.

What has happened the last three months is, opportunities have cropped up like Belfast City which we were able to move on straightaway.

Like Birmingham.

I mean, we weren't even talking to Birmingham before Christmas.

By the middle of January, we were announcing it as a new base sort of possible for up to eight or 10 aircraft over the next two-year period.

Now that has meant that some other bases that we were in discussion with at that stage had to take a slightly back seat, but these are opportunities that only crop during a downturn when people start to panic.

I do think next winter, by the way, in terms of the capacity expansion, I think next winter we believe that the cutback in capacity at Stansted this year has been successful for us in terms of reducing our exposure to a very high-cost airport during the weaker winter period.

I think we will look at probably a similar if not larger capacity reduction next winter at Stansted.

I think next winter at Dublin we will also be looking at a significant capacity reduction during the winter and taking that winter capacity and allocating it to new base and new route development.

So, I think at those two airports where that do not reflect current market trends and current market trends used toward reducing airport costs, airport and handling costs, delivering efficient facilities at both Stansted and Dublin which are regulated monopolies, they are still operating on the base of increasing charges and producing inefficient facilities.

I think we will look in future over the next year or two to significantly cut back capacity during the winter, reduce frequencies and limit our exposure to those airports during the winter.

But that shouldn't arrest the rate of traffic or capacity growth.

It would simply mean we would take those aircraft, and it will allow us to open up new bases earlier in the winter.

We expect to announce two new bases for next winter, sometime in March or April of this year, and we're presently -- two of those bases we are down to about five potential bases, and we should have the last round of negotiations with them over the coming weeks.

Where are they?

They are in generally -- you can take your pick.

They are in Continental Europe and the British Isles.

Thanks.

And the difficulty -- if you have asked me that question privately over 10 pints before Christmas, I would've told you where the next two bases were going to be.

By the middle of January, having announced Belfast City and Birmingham, you would have called me a liar.

Like it changes that quickly.

When we get an opportunity like Birmingham comes to us, because their entire market strategy has been transformed by British Airways and FlyBe causing bad capacity, you would be stupid not expand into that airport.

I mean you have an airport there with an attachment of 10 million people.

It has two terminals in effect.

It has two not very strong incumbent carriers in FlyBe and in bmibaby, and they want to work with us now to develop a really low fare base and to see the very rapid growth of low fare traffic out of Birmingham in the next 12 months or two years.

That will, however, have a negative impact on our existing successful base at East Midlands Airport.

So I think it will have a downward effect on some of the fares and yields we are getting out of East Midlands.

But over the medium to long-term, these are opportunities that really we shouldn't or we couldn't ignore.

And I think you're putting we're making investments now that would be very profitable for us over any three to five-year timeframe, even if the outlook on fuel and fares for the next 12 months looks a bit kind of poor.

Just one last point.

In relation to the comment on aircraft disposals, what should we take now as the total number you may sell, including the ones you've sold already?

I mean I think I will ask Howard because we have sold 20 already.

We're in active discussions at the moment to sell another 10 and two tranches of five.

But until those are done -- I mean if nothing really changes, I think we would probably have five more done in the fourth quarter and maybe five done in the first or second quarter next year.

But really the people we are talking to whilst we are looking at very -- we are looking at what I would think will be very good prices for those aircraft, they are very reluctant to finally commit until you get closer to their ability to deliver it to the customer airlines they are trying to deliver to.

There's a lot of nervousness out there now amongst the banks and the lessors.

And so, those offers, those discussions might dry up in a week or a month, or they may be successfully concluded with 10 disposals.

It's really a question of what happens in the financial markets and what consumer confidence is like, primarily in markets like India and China over the coming three to six months.

Howard, do you want to add anything on that?

No, Michael, other than I think we had originally talked to your about 46 aircraft.

Looking over the horizon, we have some leases maturing in 2011.

We probably won't extend those.

That means the bundle we are looking at now is probably 36, of which we've sold 20.

As Michael said, we are in pretty advancement negotiations on five, and the others will probably take a bit more time.

So, it looks like another 16 to go with five nearly done, and we'll have to take it as we see it over the coming months.

And, Howard, I think it's fair to say that the likely timing on those five would be in the fourth quarter?

I think it's fair to say we're very close to finalizing.

[Thomas Stern].

It's [Glen Greenburg].

Good morning.

Appreciate the sober outlook looking forward for the coming year.

I wonder if you could talk about how your major competitors who have very scant profit margins might -- what steps they might have to take in order to stay in business or to protect themselves in the event of this sober outlook coming to pass?

I think what's likely to happen, if you take our major competitor as being the BAs of this world, if you -- their guidance last week was that on the short, tall, nonpremium business was very difficult.

I think you'll see them if we do enter a recession over here, I think the speed at which they will contract their capacity in the shorthaul, nonpremium marketplace here in the UK and in Europe will speed up, most of our major competitors in Europe, the BAs, Air France and Lufthansas are focused on the development of premium long-haul traffic.

I think that will continue to be the focus of their growth and development in the coming months.

And if it gets worse economically than they presently expect, I think the clear signal is that they will continue to cut back capacity in those shortfall markets where presently they are losing money because they're not able to compete with the likes of Ryanair at Ryanair's fares.

Around the edges then, you have some smaller competitors who you know, but I don't want to name them on a conference call in Spain and in Germany talking about merging together, canceling aircraft orders.

There are some so-called low fares lossmaking airlines in Eastern Europe where presently they are now selling their aircraft deliveries as about the only way they can finance their way through to next summer.

So I think it's clear there that is going to continue to be capacity restraint if not capacity reductions in the shortfall European market over the next six to 12 months.

The difficultly is, it's too early yet to say how big or how dramatic will that capacity reduction be.

The obvious example is Alitalia Malpensa.

Alitalia are talking now about reducing their traffic in Malpensa in Milan by up to 5 million passengers next year.

If they go ahead with that, there is a debate in Italy -- it's a political decision.

Will that still go ahead if Air France buy Alitalia?

It's impossible to say.

But I think certainly we are looking at an outlook for the next 12 months where there's going to be significant -- or there's certainly going to be capacity restraint, maybe a capacity reduction.

I think that's opening up further opportunities for us along the lines of the Belfast City and the Birmingham developments in recent months.

Does that conclude your question?

Thanks, Glen.

Any more questions, Stephen?

(Operator Instructions).

[Brian Ross].

It's Brian Ross from [FFE].

Stansted is still by far your biggest base.

What do you think the outlook is for airport charges at Stansted over the medium-term?

And then a second question, I know strictly you said it wouldn't be Ryanair, but what is your current thinking on long-haul, and does the current economic climate encourage you to move faster on that or to move slower?

Well, let me give you the second one first, Brian.

There's nothing at the moment that will enable us or encourage us to move on the long-haul plan.

I mean nothing can happen on long-haul unless there is a fleet of very cheap long-haul aircraft available, but there aren't.

I don't think there will be for a year or two, even if we enter into a deep recession.

The Boeing and Airbus orderbooks are pretty full, and it would take some kind of I think seismic event, like a 9/11 or so or war, some kind of seismic event before long-haul aircraft are going to be parked in the desert.

And really, I see no prospect for long-haul low-cost airline unless you can pick up aircraft sitting in the desert somewhere.

In Stansted I think it's much more difficult to call.

I think all of this -- what's remarkable here is the failure of the regulatory regime here in the UK.

The purpose of the regulator and the regulator is the CAA has been notionally and under the law is to request or protect the reasonable requirements of users.

Remarkably, in recent years they seem to have taken the view that actually their primary function is to protect the returns of the monopoly airport in order to encourage the monopoly airport to continue to invest and to hell with what users have to pay.

So we have had a strange situation in Stansted in the last 12 months where Stansted Airport has doubled the charges last year and gotten away with it.

There is no greater evidence of market power or the ability to abuse your market power than that.

The CAA, nevertheless, recommends to the government that Stansted should be deregulated because it didn't have market power.

There is absolute unanimity amongst all the Stansted Airlines including Ryanair, Easyjet, British Airways, you name it, that this was a crazy idea, shouldn't be proceed.

Thankfully, the British government has seen the light of day and has recognized that proposal was insanity and has rejected the idea that Stansted should be de-designated.

However, in response to that, the CAA produced another discussion document last week, which forms the basis for the review of airport charges for the next five years from 2009 to 2014.

And at the heart of that again was this bizarre claim that Stansted hasn't got market power, and that in order to encourage [Ferrovia], the big Spanish utility to invest in Stansted, they should double the passenger charges again for the next five years.

Now, this is crazy stuff.

But particularly when the airline community at Stansted is opposed to this, particularly when the airline community at Stansted has called for opening up -- I mean a), break up the BA monopoly or b) at least allow there to be a competitive tender for the second term of Stansted.

Ryanair itself has offered to build and pay for the second term at Stansted.

It would cost us about 250 million.

The second runway would cost about 150 million.

So, we think we get it done for about 400 or 500 million, a saving of 3.5 billion over what Stansted are presently proposing to the CAA.

And yet the scandal of overspending continues.

And it has the consultation which will take place later this week with the Stansted Airlines, the CAA have now given us the documents and the BA, which shows -- the BA has now spent 135 million -- 135 million, almost the cost of a runway -- in the last 12 months on buying up properties for blight reasons and about 65 million on consultant fees.

We've asked to see copies of the consultants reports, but we've told that there aren't any reports.

That it was all verbal.

And they've managed to spend 65 million of our money getting verbal reports from architect and planning consultants.

It's just a scam.

And the problem is, until the CAA changes its spots or begins to act like a real regulator and do one of two things.

Either a) replicate what's going on in the airport industry across Europe, which is lowering airport charges or b) representing the real requirements of airport users, which is for efficient facilities at lower cost, then I would be pessimistic.

I think the BAA monopoly is going to continue to try to increase charges at Stansted because they have the power to do so.

I think we're going to continue to be engaged in legal process with the regulator here in the UK until such time as we can force them or encourage them to actually protect or advance the reasonable interest of users, particularly where those users have unanimity.

In the past at the London Airport, the BAA has always been able to buy off the major airline, which is BA, give them Terminal Five at Heathrow or give them the North Terminal at Gatwick.

Here at Stansted, they can't find any airline support for the BAA's plans.

But what they've come up with now is to just say, oh, well, consultation has broken down at Stansted, so we will now just make a decision, and we'll approve what the BAA want all on our own.

So, I think the regulatory regime has sadly failed here.

I think that's why we're calling for a breakup of the London Airports.

And what's going to happen in the meantime?

Honestly, Brian, I don't know is the answer.

Other than I think we're going to try to persuade the CAA that what we need is a low-cost second runway and a reasonably priced terminal facility at Stansted.

Stansted will continue to be the low-cost gateway for air travel to and from London, and we need low-cost efficient facilities that allow the low fare airlines like Ryanair and Easyjet to continue to develop and continue to provide a low fare choice for London and British tourism.

(Operator Instructions).

Okay, folks.

Thank you very much.

As I said, Howard is hosting an investor briefing in the states after the conference call.

We want to make sure we get in front of as many analysts and investors as we did one this morning in London.

Howard is doing one in New York this afternoon.

As I said, look, I think the message is, if I could give you a couple of messages from today's results release is as follows.

The third quarter is in line with guidance.

We now have a good degree of visibility over the fourth quarter, and therefore, we're confident in our guidance for the full year, which is for a 17.5% growth in profit.

We've already done a share buyback of about 3% of the ordinary share capital, which will give investors about a 20% growth in EPS this year.

Next year at the moment looks very uncertain.

We expect to be able to have to be able to put a bit more certainty on it as we move over the next two or three months, and we expect to be up to give you some kind of accurate guidance by the time we get to the full-year results in early June.

We have seen the share price under perform -- well perform in line with other Airlines, but certainly underperform or fall back significantly.

We think that's a sensible use there for shareholders monies to announce a further share buyback.

At present prices, it will enable us -- if we go ahead with it in the coming weeks to buy back about another 3% of shareholder equity, which we think will result in a decent return for shareholders next year even if we go through a period of a perfect storm of higher oil prices and weaker yields in Europe.

If we do, I think it will be temporary.

I believe that the Ryanair business model remains unchallenged in Europe.

Nobody has the kind of cost base we have.

Nobody has the pricing advantages we have.

I think we will continue to grow very strongly and in a disciplined fashion.

We will roll out the capacity.

I hope that the share buyback will enhance shareholder return, and hopefully if we are facing a perfect storm, if profits fall next year, they will be limited to a one-year phenomenon, and then we will then resume growing strongly, that profits and shareholder returns will continue to grow strongly to reflect the headline growth in traffic and in fleet.

That's all I have to say today.

Then if anybody wants to do any follow-up or come to us in Dublin, talk about the issue in more detail, we will be happy to see you over the coming weeks.

With that, Howard, is there anything else you want to add that?

No, that's fine, Michael.

Okay, folks.

Thank you very much today, and as I said, if anyone wants to come see us, we look forward to seeing you over the coming weeks and months.

Rest assured, we're going to focus all our energies on continuing to reduce costs, particularly if there's going to be a recession in the next couple of months and over the next couple of quarters.

Thank you very much everybody.

God bless and bye bye.

Ladies and gentlemen, thank you for your participation.

You may now disconnect your lines.

Thank you.