Ryanair Holdings PLC (RYAAY) 2010 Q1 法說會逐字稿

Good afternoon and welcome to Ryanair Q1 results conference call.

My name is Ina, and I will be your coordinator for today's conference.

(Operator Instructions).

I am now handing you over to Michael O'Leary to begin today's conference.

Thank you.

Good morning, ladies and gentlemen.

Welcome to the Q1 -- Ryanair Q1 results conference call.

As you have seen today, we announced a Q1 net profit of EUR136 million, which is a 550% increase over last year's Q1 figure.

Total revenues were flat due to an 11% rise in traffic being offset by a 13% decline in average fares.

Unit costs fell 26% due to lower fuel prices.

Excluding fuel, our unit costs fell by 5% and reductions in staff, airport and handling costs.

These results are distorted by a 42% reduction in fuel costs.

However, thanks to a 13% reduction in average fares we grew traffic by 11%, which I think was a strong performance in a deep recession when many competitors are cutting flights, losing traffic and reporting increased losses.

Our net profit margin rose to an industry-leading 18%.

And the balance sheet has been strengthened with cash at EUR2.5 billion at the quarter end.

Ancillary revenues slightly outpaced scheduled traffic growth, rising by 13% to EUR165 million.

Fuel costs in the quarter fell 42% to EUR214 million, as we reaped the benefit this year of not engaging in fuel hedging last year when oil prices were high.

Unit costs excluding fuel fell 5% as we continued to reduce costs in all other areas, as previously guided.

We recently extended the hedge program, so we're 90% hedged for the first three quarters of the current fiscal year at $620 per tonne, 60% hedge for Q4 at $610 per tonne.

And we hope to be able to close out the remainder of Q4 opportunistically at or below $620 a tonne.

If we do, it will represent a fuel cost saving in the current year of EUR460 million.

Most competitors have recently announced declining traffic following years of substantial losses, accelerating the pace of airline closures and consolidations, highlighted recently in recent weeks by both Sky Europe, and MyAir.

As I said, our traffic grew 11% to EUR16.6 million.

We have extended our traffic leadership over the other big three high fare fuel surcharging airlines.

And we continue to roll out new routes and new bases, which demonstrate the strength of our lowest fare model even during a deep recession.

The dramatic decline in Britain's traffic and tourism figures, which is directly due to the British government's insanely stupid GBP10 tourist tax, and the BAA's high airport charges.

In the first half of 2009 the BAA's UK airports saw traffic collapse 9%, a loss of almost 5 million passengers.

In the same period Ryanair grew by 10%, a growth of almost 3 million passengers, which emphasizes again that where people are putting up charges, you lose traffic.

And where you're lowering prices like Ryanair, you gain traffic.

Sadly the Irish government decided to follow this moronic policy and imposed a EUR10 tourist tax in April.

This has caused the Irish airports to suffer a calamitous 18% decline in visitors during the month of May alone.

And we expect those declines in visitor numbers to continue throughout the year, as the Irish government-owned airports increase prices, and the government continues with its crazy tourist tax on the last Island in Europe.

The contrast between the Irish and British governments failed policy of taxing tourists couldn't be more marked with other more sensible leads.

in recent months the Belgian and Dutch governments have scrapped their tourist taxes.

And the Greek and Spanish government have introduced a significant airport discount, in many cases to zero, for the coming winter.

We have announced our three new bases.

The two newest have been launched in Pescara and Trapani in Italy.

We'll open our 33rd European base at Porto in September.

We base two aircraft there and operate 11 routes.

We have also announced a major expansion in Oslo with seven routes from the new airport at Oslo-Rygge, and also four more routes from Oslo-Torp.

In Ireland the airlines and passengers continue to suffer at the hands at an either inept or incompetent aviation regulator, who should be removed.

Despite the recession and the traffic collapse this failed regulator has recently proposed yet further cost increases at Dublin Airport from January next year, at a time when competitor airports all over Europe are reducing charges in order to grow traffic.

This clueless regulator is completely out of touch with economic reality.

He is currently on holiday, which is not surprising.

He even admits that Dublin's latest price increases which are proposed in his draft determination are 18% higher than they would have been if Dublin Airport's traffic hadn't fallen.

In other words, Dublin Airport is being rewarded for its own bloody failure.

We don't understand why he is the rewarding Dublin Airport for traffic declines with an 18% price hike.

But if Dublin Airport's costs continue to increase, combined with the recent addition of a suicidal EUR10 tourist tax, it means that Irish passengers and tourism will continue to collapse in late 2009 and early 2010.

And we in the coming weeks will be announcing a major series of route, flight and traffic cuts at the main Irish airports, as we switch aircraft and flight to lower cost zero-tax economies elsewhere in Europe.

We recently announced plans to reduce winter capacity at Stansted by 40% to 16 aircraft, because of the BAA's unjustified increases in airport charges, and the damage done to UK tourism by the GBP10 APD tourist tax.

We would also switch a number of -- as I said, we will switch the number of aircraft from the Irish and UK airports this winter to other continental European bases where the governments has scrapped their tourist taxes, and the airports are rapidly reducing costs in order to attract Ryanair to fly and grow their airports.

Our outlook remains extremely cautious for the remainder of the fiscal year.

Traffic growth is strong, but at much lower weaker yields, partly due to the recession, but also due to the impact of tourist taxes, particularly in Ireland and the UK.

We have limited visibility beyond the next two months, but expect passengers to be very price sensitive for the remainder of the year.

This could also be impacted by swine flu, where there is presently an epidemic of nonsense, particularly in the UK media.

On Friday last, I think Lufthansa emphasized this point when a main Board member admitted they were facing crippling ticket price wars.

And that the economy traffic had sunk dramatically as it struggled to compete with Ryanair's low fares.

They also admitted that economy passengers in Germany were no longer traveling based on brand loyalty or frequent flyer, but were traveling solely on price, surprise, surprise.

In Ryanair we remain on track to deliver traffic growth of 15% to 67 million.

We continue to expect that unit costs, excluding fuel, will fall by at least 5%.

And also that our fuel cost for the remainder of this year will be substantially lower, thanks to our renewed hedging program.

We intend, as we previously guided, to use these fuel and other unit cost savings to fund continuous fare reductions.

As a result, we expect the Q2 yields will be significantly lower than last year at, or maybe even slightly above the minus 15% to minus 20% range previously guided.

Based on this yield performance in the first half we expect the full year yield decline will be at, or slightly more than minus 20%, which is slightly worse than our previous minus 15% to minus 20% guidance.

And our full-year net profit will therefore be towards the lower end of the EUR200 million to EUR300 million range previously guided.

As I said, much of this will depend on what the yield outturn is like for the winter, but I think we should be pessimistic rather than optimistic.

And I think we should seriously disregard some of the lunatic analysts who are out there coming up with forecasted yields where the yield fall will be significantly lower than that.

I don't know where they get the optimism from.

I think they are just idiots.

We continue to see enormous opportunities to grow the business.

We are besieged by European airports who realize that Ryanair is their only credible partner if they wish to reverse recent traffic decline.

And we're using that -- these opportunities to significantly lower our cost both at existing and at new airports.

Many of our competitors are guiding increased losses, most notably BAA, Air France, Lufthansa, declining traffic.

And in some cases, such as Aer Lingus, they refuse to give any guidance at all.

Ryanair will, we believe, be the only major airline to deliver passenger and profit growth in the current year.

The winners in this deep recession will always be those companies like Lidl, Aldi, McDonalds and Ryanair, who offer the lowest price and the best service to consumers.

And we are continuing to expand in a deep recession as others fail.

We will also continue to drive down our unit costs and pass these on in the form of lower fares right across Europe for the benefit of our 67 million passengers, our staff and our shareholders.

Howard, do you want to take us through the MD&A please.

Okay.

Thanks, Michael.

For the purpose of the MD&A, all figures and comments will referenced to the adjusted results, excluding the exceptional items.

Exceptional items in the quarter concerning June 2009 amounted to EUR13.5 million, reflecting an impairment of Aer Lingus shareholders.

In the previous year exceptional items amounted to EUR111.5 million, consisting of an impairment of the Aer Lingus shareholding of EUR93.6 million, and an accelerated appreciation charge of EUR17.9 million on aircraft disposed in financial years 2009, 2010.

Average adjusted profit after tax increased by EUR115.5 million to EUR136.5 million compared to EUR21 million in the quarter ended 30 June 2008, primarily due to a 42% decrease in fuel cost, partially offset by a 13% decline in average fares.

Total operating revenues remained almost flat at EUR775 million, despite an 11% growth in passenger volumes, as average fares declined by 13% due to recession, price promotions and weaker euro/sterling exchange rates.

Ancillary revenues grew by 13% to EUR165.3 million during the quarter.

Total revenue per passenger as a result decreased by 10%, while the load factor increased by 2 points to 83% during the quarter.

Total operating expenses fell by 18% to EUR620 million, primarily due to lower fuel prices, offset by the higher level of activity and increased operating costs associated with the growth of the airline.

Fuel, which represents 35% of total operating costs compared to 49% in the comparative quarter, decreased by 42% to EUR214 million due to the drop of the price per gallon paid, offset by the increase in the number of hours flown.

Unit costs, excluding fuel, fell by 5%, and including fuel they fell by 26%.

Operation -- operating margin increased by 17 points to 20%, whilst operating profit increased by EUR129 million to EUR154.7 million.

Net margin increased from 3% at 30 June 2008 to 18% in the current quarter, for the reasons I've just outlined above.

Adjusted earnings per share for the quarter was EUR0.0926 compared to EUR0.0142 in the quarter ended 30 June 2008.

On to the balance sheet.

Gross cash increased by EUR221.9 million to EUR2.5 billion.

The group generated cash from operating activities of EUR291.8 million, and a further EUR65.6 million from the sale or proceeds of three Boeing 737-800 aircraft, which together partly funded capital expenditure in the quarter.

Capital expenditure in total amounted to EUR348.6 million, largely consisting of advanced aircraft payments for future deliveries, and delivery of 18 new aircraft Boeing 737 during the quarter.

Long-term debt, net of repayments, increased by EUR206.5 million to EUR2.6 billion.

The group had net debt of EUR104.8 million at the quarter end, compared to net debt of EUR120 million at March 31, 2009.

With that, I will hand it back to Michael.

Thanks, Howard.

Okay, folks, let's open it up for questions and answers please.

(Operator Instructions).

Jim Parker, Raymond James.

If you visit Dublin Airport you see the huge new facilities they are building there.

And how are you going to avoid helping them finance this?

What is the future for Dublin Airport?

I've got to be careful, Jim, because we are in a consultation period with this idiot regulator at the moment.

We have to file our submission by Friday week.

I think generally speaking all of the -- everything we have predicted in the last two years is coming home to roost.

The Dublin Airport, whose traffic this year will fall from 24 million passengers last year to probably less than 20 million passengers this year -- the capacity did determine 27 million or 28 million passengers.

And yet these idiots have now wasted about EUR1 billion building a terminal with a capacity of another 20 million or 30 million passengers.

That is clearly going to be -- I would imagine -- it can only be resolved in the courts.

At the moment they may have no customer for that facility, unless -- although there is some indication that the Irish government may put some pressure on Aer Lingus to move into it.

Aer Lingus with 9 million passengers is clearly incapable of filling it, or even half filling that facility.

Ryanair will never darken the door of it.

And it will come down to, I suspect, a court case.

Where under the regulation -- regulatory rules in Europe you can't be forced to pay for something you don't use.

Although clearly the regulator being such an incompetent idiot in this country is gearing up for some sort of notional rubbish that would suggest something along the lines of every passenger using Terminal One will have such an improved experience, because Terminal One is now underused, that they won't -- that they should pay a double charge so that we can cross subsidize a couple of rich punters going through Terminal Two.

We have a much better solution.

That would be too mothball Terminal Two.

Rent it out either as a second Swords shopping center, or hire it out for weddings, bar mitzvahs and funerals, which is all it is fit for.

But it can come down to a regulatory issue.

I have no doubt the regulator will try to force all the passengers in Terminal One to cross subsidize it.

And I have no doubt we will finish up in either the Irish or the European courts, we and all of the other airlines in Dublin, with the possible exception of Aer Lingus, opposing it.

There is unanimity among the Dublin airline community that we don't want Terminal Two, nor do we wish to pay for it.

That has always been the case.

And clearly there is no requirement for Terminal Two at Dublin Airport.

Even Dublin Airport -- the DA's own traffic forecast, which shows the traffic rising to at best about 22 million passengers by 2014, shows no requirement for the second terminal.

Duane has a question as well.

Just in terms of your fare trends in the quarter, I assume you had some positive benefit from the Easter shift.

So could you talk qualitatively about year-to-year decline in fare exiting June versus the quarter average?

No, I think we guided on the full year roadshow that the yield guidance will be minus 15% to minus 20%.

It will be somewhat better than that in Q1, largely because of the impact of Easter.

It will be worse than that in Q2.

At the moment clearly we have very good visibility into Q2 for July and well into August, but not -- we are still only about less than 50% of the seats sold for September.

So there is every possibility that September, the yield could still move a little bit there.

I think that would largely give rise to our -- you know, people are -- in terms of feedback this morning that our guidance this morning is significantly worse than it was on the full year roadshow, I disagree.

I think our guidance is pretty similar.

But as we said, when we have some further updates on yield we will give it to you as we see it.

And we will be somewhat more pessimistic on yield into September and into the third quarter, a combination of impact of recession, these insanely stupid travel taxes in our Ireland and the UK, and possibility that swine flu could put people off traveling.

Although, on the other hand, we have seen a recent surge in bookings in the last week or two as the (expletive) weather in Ireland and the UK persuades people actually that they should be holidaying abroad instead of staying home in the monsoon countries of Ireland and Britain.

So it is fair then that the increased pessimism on yields is based on what you can't see beyond your current visibility?

If you look at July and August, we are a couple of percentage points behind where we thought we would be in early June.

Nothing that I would overly worry about at the moment.

But I think if you look at the kind of movement -- a lot depends on how much capacity gets taken out for the winter.

I mean, all of our guidance for the full year is heavily qualified by yield and fuel over the winter period.

I think you should take -- investors, certainly our shareholders, should take some comfort from this morning's guidance on three fronts.

One, quarter one is slightly better than we had previously expected.

Two, we have managed to extend the hedging program into Q4 at numbers that were slightly better than we were previously guiding.

And, three, we are bang on the nail on the unit -- non-fuel unit cost reduction.

Other than that, there is no significant difference in our yield guidance.

Our profit guidance for the year is still well within our EUR200 million to EUR300 million.

I think if we were giving you a little bit more color it would be at the lower end of that.

And the only people that are being disappointed are a couple of clowns of analysts who were out there last week saying, well, for some reason we think yields will only fall by 7% or 8%.

Don't know where they get it from, but I would like to be smoking some of whatever they are smoking.

Fair enough.

Thanks, Michael.

John Mattimoe, Merrion Capital.

Just a follow-up to that.

Just some of the previous questions covers some of the areas I wanted to ask.

Just in relation to the shift in your full year guidance from the minus 15% to minus 22% to the minus 20% or slightly worse, is it the July/August running a couple of percentage points lower than where you thought a couple of months ago causing the shift in that, or is it increased caution on the winter half?

I think we see July -- what we can see at the moment in July and August -- and remember the traffic growth, what is different about Ryanair and every other airline we are competing with, is we are still growing traffic very strongly.

But I think it is fair to say in July and August the yields are slightly lower than we could see -- the final yields are turning out slightly -- a couple of percentage points lower than what we could see in the first week of June.

We are still well within our guidance.

I would have said on the full year roadshow we are guiding for the full year, but most of that was based on zero visibility through the winter, which would be similar to minus 15% and minus 20%.

And I think we be slightly more cautionary now.

It is a couple of percentage points worse than that based on what we can see in July, August and the first half of September.

And your thoughts for the second half, are they similar to where you were in June or any difference?

Let me look.

They are exactly where we were in June.

We have no visibility for the second half.

We haven't a clue.

We are just expected to be worse than -- worse than the first half, but not materially so.

You really don't get a good -- we won't get a good flavor for the second half until, A., we see how much short-haul capacity is taken out of the system by the flags.

There is every indication now I think that you're going to see BAA, Air France and Lufthansa taking out more short-haul capacity.

A lot depends on how many more airlines either go bust or cut back significantly in October/November.

As you know, when we come out of summer and they run out of cash, I think what was unusual about the MyAir closure last week is it is very unusual for an airline to close in the last week of June.

That is normally when the cash flow is coming through strongly.

Looking here in Ireland, Aer Lingus is talking about taking out more capacity, both long-haul and short-term.

But I think the winter is going to be very difficult.

All I can say with some degree of confidence this winter is we are going to continue to grow strongly by double-digit rate.

And we're having a very significant impact on all competitors right across Europe.

I took great heart from the comment of the main -- Lufthansa's main Board of Director on Friday that their short-haul market was collapsing.

That the economy passenger -- that the economy traffic was facing significant declines.

That their passengers were no longer traveling on brand or on infrequent flyer, but were traveling solely on price.

And I expect that those trends, particularly the German market, as we continue to expand in Germany, will continue to accentuate.

And on your own capacity growth for the winter, I presume in aggregate it is unchanged, but it is just a question of where you will deploy it?

I think in aggregate it is unchanged.

We will continue -- and I think it is important -- I have seen a lot of rubbish in some of the UK and the Irish newspapers, oh, Ryanair cuts back capacity every winter.

You know, Ryanair never cuts back capacity in the winter.

We continuously grow year on year, season on season.

Our growth this winter, we will continue to grow this winter.

There will be a capacity and a traffic growth, but there will be a significant switch away from the UK and Irish airports, where you have two monopoly airport operators, the DAA and the BAA working on some 1950s Soviet-style business plan, supported by two hapless idiot regulators, and two governments who think that taxing tourists is the way forward.

I think Michael will be in Spain later this week, where there will be a major announcement on growth in the Spanish market this winter.

A lot of that capacity will have been switched out of Ireland and the UK.

And the contrast is in Stansted and in Dublin this winter the parking passenger is paying GBP15 to the airport, EUR15 to Dublin, and a EUR10 or GBP10 tax.

So it is GBP25 from Stansted or EUR25 from Dublin in November.

Or the alternative at some of the Spanish airports is a zero government -- a zero tourist tax.

And growth at the Spanish airports will be entirely free.

The government is going rebate the airport charges by 100%.

We leave it up to the traveling public, would you rather visit wet Essex or extremely damp Dublin in November, or would you like to go to Spain and pay GBP25 for the privilege, or would you like to go to Spain for free?

Eventually these morons will get the message.

Michael, on the unit cost reductions ex fuel, you rightly pointed out that the Q1 was in line with the 5% decline that you previously guided.

Are you still looking at minus 5% for the full year?

Yes.

And the fact is we might do slightly better than that, but it will be very -- it will be very small.

We might maybe get to 6%.

A lot depends on how much we switch out of high cost airports for the winter into very low cost airports, and how much traffic we can switch out of high tax economies in Britain and Ireland into low tax economies in Europe.

And on the ancillary revenues on a per passenger basis, would the trend in Q1 be representative of where you think it might end up for the full year?

I think so.

But remembering now, we are into -- I think for the next year we expect that schedule -- ancillary revenue will track scheduled traffic growth.

So there is every possibility.

I think we are forecasting what -- 13%, 14% traffic growth this year.

That is what we expect the ancillary revenue.

I think we have completed the four-year program, where ancillary revenues grew at a faster rate than scheduled revenues.

Okay.

My last question is a finance on, so Howard might want to take it.

Just on the net interest side, the net interest drops -- the net interest charge dropped significantly in Q1 from Q4.

I was just wondering, Howard, whether there is any timing issue going on there, or whether Q1's or Q4's run rate is representative of where you think it will run out for the remaining three quarters of this year?

We have had a shift to more defensive deposits over the last six months or so.

And obviously with interest rates falling as well, that has had a significantly drag on the interest income.

So it depends where interest rates go.

But just on the net figure I think you dropped from about EUR24 million of a net charge to something closer to EUR10 million, and from Q4 to Q1.

I was just wondering why -- what might have been the cause for that change?

Largely lower interest rates.

Okay.

On the debt side?

You had a reduction in interest rates on the debt side, but you've also had obviously a very significant drop-off in interest income.

Thanks, Howard.

Thanks, John, well done.

Andrew Light, Citi.

The 40% cut at Stansted, do you view that very much as a permanent cut?

And if the government was to reduce APD or shelve it altogether, how soon could you reintroduce that capacity?

Immediately.

The remarkable thing about the BAA stance is we sent them a proposal a couple of weeks before we announced the cut, offering them 50% traffic growth over the next five years.

Which would have meant we would have kept the full 48 aircraft in Stansted this winter and grown traffic out of the airport.

Of course, the BAA, who I think are engaged in a kind of a process at the moment of massaging their traffic declines to help their appeal against the Competition Commission's decision to break them up.

I think it suits the BAA to make Stansted traffic decline -- the bigger Stansted traffic decline, the more they can argue, oh, the timing is unfortunate, therefore we would like to delay the breakup of the sale.

We think the BAA are engaged in a process of actually -- of actively, if not encouraging traffic to decline in Stansted, they are certainly doing nothing to get up off their asses and reverse this traffic decline.

And you have to ask why an air regulated airport wants to see a traffic decline.

And it can only be, I think, the timing of the appeal of the Competition Commission's decision.

The same thing in Dublin, although we don't waste our breathe writing to Dublin Airport, offering them traffic growth.

It would simply be a waste of the paper.

But in Stansted -- the BAA Stansted could, had they so wish, accepted our proposal, which have seen not just the 40 aircraft continue through operating in Stansted this winter, but further and very rapid growth of Stansted next year and this next five years.

So would you expect those 16 planes to be permanently deployed elsewhere?

No, I would expect eventually Stansted -- or probably when it is owned by a competing operator to the BAA.

I think the first thing the new operator will do is talk to Ryanair, how can we grow the traffic at this airport rapidly very easily?

Let's have efficient facilities.

Remember our costs at Stansted were doubled just in May 2007, less than 18 months ago.

That has coincided with an enormous decline in the BAA and Stansted traffic.

So it is not difficult to work out how Stansted could resume growth.

Ryanair is growing like gangbusters all over Europe, but we are growing at low cost airports and in low tax countries.

Where we are not growing, in fact, where we are declining, is in high tax, high airport cost countries, which is primarily the UK and Ireland at the moment.

So not only are these cuts not permanent, they could be reversed tomorrow morning if either the BAA or a new airport in Stansted wants to return to the 2007 level of charges and work with Ryanair to grow their business.

We believe there is lots of press available in the London market and lots of growth available at Stansted, and we like to deliver it.

But we are not going to deliver it and pay a 100 -- twice or 100% penalty to the airport, and an insanely stupid tourist tax to the government for the privilege of doing it.

Thanks.

Just a question for Howard on the yield in the June quarter and the unit cost.

What percentage of each was due to stronger euro, weaker foreign currency?

We reckon that sterling counted for 3% of the 13% decline in yields.

And of the 5% decline in unit cost, about 2% was due to sterling.

Joe Gill, Bloxham.

Just three points.

Three questions, one on aircraft allocations this winter.

You have over 50 aircraft coming through.

How many of them are actually allocated at this stage?

And how many are there to go, and when will that process be complete?

Secondly, on aircraft financing, I think Howard was quoted this morning saying you are financing 55 aircraft through 2010.

Can you give us any comment in terms of the terms or the cost of money in that deal compared to previous financing, given what is happening in the credit markets.

And finally just on Aer Lingus, what is the carrying value of it now?

Thank you.

I will let Howard do the aircraft financing and the Aer Lingus.

The carrying value of Aer Lingus, Howard, it is down to what, about EUR80 million, is it?

I think it was --.

EUR73 million.

So the carrying value of Aer Lingus is down to what, EUR73 million?

EUR73 million, yes.

Okay, and continuing to fall.

We might get quite close to our target of writing it down to zero at the rate the Aer Lingus -- the progress Aer Lingus is making.

On the aircraft allocation, we take -- remember, we take 50 aircraft deliveries this winter, Joe, but there is -- a lot of those are skewed towards the back end.

They come in March, April, May of next year.

Of the -- I think we have about 30 or so -- I might get the numbers wrong -- but 30 or so for delivery between September and March.

And at the moment we only have names on about -- we have routes on what -- about 10 or 15 of those.

We have about 15 left to allocate.

But it is just that they are not yet announced.

We have deals done.

The reason they are not announced is because the deals keep improving on a daily basis.

But the kind of offers we are receiving from airports, both existing and new, are quite extraordinary at the moment.

We want to encourage that encourage that inter-airport competition, particularly I think over the next month, when they begin to realize how much of their existing traffic they are going to lose both from existing carriers.

Michael Cawley here.

Just done on a practical example of that.

Thursday afternoon here I got a call from Barry Airport to see would I would meet them in London the following morning -- like for obvious reasons, you know.

We hadn't allocated any aircraft to them certainly within the time schedule you are talking about.

But now -- because MyAir has gone out of business.

But we now have a proposal with them to accelerate aircraft, which were previously going to somebody else, for them.

So we want to stay flexible as much as possible, because I think the competitive environment could afford us opportunities.

Ones that we would have expected that reasonably, where NACC would take away your license, you are in pretty bad shape, given they have it taken it from Alitalia yet.

So we knew they were going.

But there must be others at the moment, which in the next three or four months would present opportunities for us, when they inevitably either decline or completely go out of business.

So we are keeping flexible, if you like.

Howard, the aircraft financing.

On the aircraft financing, I suppose one of the big benefits we have is that these aircraft, the 55 aircraft, will be financed under this US government export credit structure.

Which means that we can borrow at rates substantially below, for example, that the Irish government have entered to talk about either.

So the rates are higher than what we paid previously, but substantially below what is out there in the market for even sovereign debt.

That means we are piggybacking on the benefit of having this US government export credit.

However, when you take into account that interest rates are at historic lows, the net cost is actually -- this coming financing will be some of the cheapest form of financing we have ever done, because bank margins have been more than offset by the absolute decline in interest rates.

Jonathan Wober, Societe Generale.

I'm going to be a bit tedious and go back to the average fares questions, and the phasing through the year.

So Q1 was better than the new guidance for the full year.

Q2 you say will be worse.

And then the second half obviously the visibility is very poor.

But just looking at Q4 last year, if I am right, the yield fell by more than 20% in that quarter.

Representative: Yes.

Do you expect another 20% fall in Q4, or will Q4 just because of the mechanical effect of that year on year be better than the guidance for the year?

There is absolutely no point in my giving you some guidance for Q4.

My dog would have a better stab at guidance for Q4.

We have no idea.

There must be an assumption in the full year about each quarter.

Yes, there is.

The assumption is -- the assumption for the full year is that Q1 would be slightly better than 15%.

Q2 would be midway between -- will between 15% and 20%.

It is slightly worse than that, but by a couple of percentage points.

We would still, I think it is relatively fair to guidance in Q3 and Q4 in the second half of the year is between minus 15% and minus 20%.

But based on what we see at the moment into July and August, we are moving towards minus 20%.

And therefore the guidance for the full year is no longer minus 15%, minus 20%, and it is at minus 20% and might be slightly ahead of that.

You know, I have spent some -- I don't think the pandemic of stupidity over M1 flu or swine flu is going to amount to much.

But I would be much more concerned about if you have two competing influences, one, the impact of the recession, unemployment, all that on people -- people's income for the winter.

And secondly then, if you like, the positive impact of how many people -- our competitors are going to take capacity out of our way because they can't compete with us.

But looking -- there is no point in you coming to [LA] asking for -- can I have better color on the second half of the year.

We don't have it.

It is based on minus -- I would say it was based on minus 15%, minus 20%.

Now based on what we see for the next 2.5 months it is up at around minus 20%, maybe even fractionally ahead of that.

If I can then move on to some other questions please.

On employees, employees I think were up 10% in the quarter.

And there was a very positive differential between that and the increase in the employee cost, which was up only 2%.

Are those growth rates both in terms of employee numbers up 10% and employee costs up only 2%, a good indication of what we could expect for the full year?

I would be surprised that the employee numbers won't be up 10% for the full year.

So remember some of our recruitment is skewed towards the first quarter.

And then as we sit some aircraft on the ground over the winter, you will see the employee numbers will come back down again during the winter, as we will be letting some people go.

But, yes, you would expect -- for the full year you could expect employee numbers to be up by more than employee costs.

The unit employee cost would be falling.

Then just on to maintenance costs fees.

Can you just explain the high growth in maintenance costs for the quarter?

That is reflecting the fact we had some extra checks in the quarter.

It also reflects the fact that we had some aircraft, which we took in, or which are leased aircraft as well.

And obviously we accrue for the maintenance cost -- the hours we accumulate under the maintenance costs.

But it can be a bit lumpy from time to time, so there was some additional costs during the quarter.

Okay, so it wouldn't be a rate that we would expect to go through the year -- that 34% growth?

I think increasingly you need to look at -- if you take the depreciation and amortization, which is the owned aircraft and the maintenance costs, which -- where you get the reflection of the leased aircraft, if you look at the quarter you see the depreciation/amortization increased only by 17%.

Because more aircraft were taken on operating leases, which has driven up the maintenance costs by 34 -- a 21% increase in the number of operating leases.

There is nothing significant or untoward in there.

If you underline -- with the exception this year of EUR-controlled charges, as we previously guided, all the other unit costs will rise at a slower rate than scheduled traffic.

We are back into very tight control on unit costs.

Which I suspect will be unique amongst the European airlines again.

I know there are other mid fare airlines giving guidance later on this week, who are not growing.

Some like Aer Lingus who are actually -- their traffic is in decline.

You're going to see their unit costs bloody well explode.

Now they will waffle about average fares and yields and all the rest, but look at the unit costs.

It will strengthen what we are reporting today.

We have downed unit costs down 5% from Europe's biggest airlines.

I would imagine we would be the only airline reducing unit costs, while growing significantly.

Stephen Furlong, Davy.

Two questions.

Just firstly just on revenue, you might just talk about volumes.

I know you have been talking about yields.

You are happy with the booking curve, the usual 80/50 in terms of where your booking volumes are.

I think before you were saying you are moving slightly ahead to have a fuller booking pattern, but at weaker yield obviously.

So that is just the first thing.

And the second thing, you might just go through where you see changes in consumer behavior on the bags.

Obviously it is working whereby people are having less bags and therefore that is helping reduce the cost.

Is there any other knock on effects, for example, less excess baggage charges and these type of things?

Thanks a lot.

Yes, the booking pattern remains to consist of what we saw on the full year roadshow.

We are running with advanced bookings about 2% ahead of where they were this time last year.

We want to make sure that we are well -- we are booked strongly well in advance to allow shocks to the system.

And we are doing that -- we are driving the prices down in order to keep that that fare.

Now we are not -- the load factors aren't rising any, because we are closing it off closer in.

And probably making fewer cheap seats available closer in, once we have the guarantee that we are kind of [2] -- we entered the month 2% percentage points ahead of where we were this time last year.

Interesting, is one of the big -- I think it is one of the big impacts on the ancillary revenues is the extent to which people are avoiding checked-in baggage.

I think it is fair to say we are running significantly behind our budget numbers on checked-in baggage.

We are down to -- it will jump up in July and August -- but up until in month of April, May and June we were down as low as 30% of passengers traveling with checked-in bags.

Which is you lose the revenue, if you like, straightaway, and it will take some months for the costs to feed through.

We will see a lot of that -- some of those cost savings coming through during the winter period, when I suspect the baggage -- in some cases, the baggage -- check-in bags will be down below 20% of passengers.

(Operator Instructions).

[Ken Riskin], [St.

John].

I just had a question about traffic.

I guess, Michael, if you had been guiding to 15% traffic growth for the year, and I thought I heard you say earlier maybe 13% to 14%.

I just wanted to confirm that, and then I have another question.

No, there is no change in our traffic guidance.

It will be -- we'll go to -- it will be just over 67 million passengers, which is what, 15%, isn't it?

15%.

Sorry, my apologies.

Okay, great.

Then the other question is just looking at the September quarter, I assume there is going to be a pretty big acceleration in traffic from the June quarter.

I am wondering if that had any impact on the yield guidance that you're getting.

Let me -- there are two answers to the question.

One, yes, the traffic growth will be stronger.

But, two, we don't think that has any -- we don't think that the rate of traffic growth has any significant effect on the downward driving yield.

We think that the passengers are just more price sensitive at the moment.

It is taking -- while we are growing capacity strongly, we do have a lot of new base in new routes.

But I think the underlying trends are the impact of which we are clearly having to absorb some of the airport charges and the travel taxes in Ireland and the UK to drive these -- to drive the traffic forward during the summer, whereas we will switch a lot of capacity out of the UK and Ireland this winter.

Okay can you give a -- can you give forecast on traffic just over the next few -- for the rest of the fiscal year to see when it is coming in more or less (multiple speakers)?

No, we just guide to the year.

Okay.

You get the guidance that it would be 67 million passengers, and you see we report monthly then.

Great -- but you had 11% this quarter, so it is going to ramp up, I guess, throughout the year?

Yes, it is.

Remember that is because some of the aircraft deliveries were delayed with the Boeing strike into May/June.

In fact, we took the last two deliveries -- the last two pre-summer deliveries from Boeing on -- they came in on Friday night, which would be the -- what is it -- we are nearly at the end of July.

Those aircraft were originally due to deliver in May, so some of them are slightly skewed into the second quarter.

Okay, thank you.

Remember, the key thing to remember with Ryanair is the variable here is never the passengers.

We will hit the passenger numbers.

The variable is always the yield, where our load factor acts as price passive.

We will take whatever price -- whatever the yield will be, it will be, but we manage the business to ensure that we hit the traffic figures -- the traffic and the load factor targets.

Edward Stanford, Cazenove.

A couple of questions please.

First of all, coming back to your issue about Dublin and Stansted and the GBP10 tax, is it as simple as the removal of the tax, if ever that happened, or do you really need to see also a cut in airport charges before you resume growth at Stansted?

And secondly, are things sufficiently miserable for Boeing and Airbus for them to have a meaningful talk with you yet, or are you still sort of sitting and waiting?

I will deal with the second one first.

We have offers out to both.

We have proposals out to both Boeing and Airbus.

I think, given that they have just gone through their air show period and all that kind of stuff, I would expect there to be further dialogue with both of them towards the end of August or early September.

But I am relatively -- I think that there will be a deal done with one or other, either late this year or the first quarter of next year, when they start focusing on their delivery books into 2012 -- first quarter of 2012.

They are all working on their delivery orders.

Their orders for this year have largely held up.

I think the orders for next year are falling asunder.

But we will buy more aircraft if we can get them at the terms where we are looking for.

And if we don't get them at the terms you're looking for, they won't buy more aircraft.

It is not going to stop our growth between now and 2012.

And if that is worse, does it means do we start growing in 2012?

Hey, I just stopped growing in 2012.

We start managing the business for cash, which is the other alternative.

But I would remain -- I think, confident is too strong a word -- optimistic that both Airbus and Boeing will see that this is a unique opportunity to sign up for maybe 200 aircraft with Ryanair and to do it at the end of this year or early next year.

That is why AGC, again one of the strengths in today's number, we have EUR2.5 billion in cash sitting on the balance sheet, we are ready, willing and able to write the check.

I forgot the first half of the question.

Sorry.

It was -- growing again at Stansted and Dublin, are you saying that you need to see that the tax come off?

But is it also --

We are calling for the tax to come off in Ireland.

That would certainly reverse -- we would reverse our flight cuts at all airports, with the exception of Dublin.

Dublin is much more deep-seated.

There is no way -- it is the same bloody government, whether it is the tax or the DAA.

The DAA are going to have to reduce their charges before we are going to grow at Dublin again.

Stansted, I think is a little bit more flexible.

Certainly we want to see the Stansted cost come down, in which case we would be prepared to grow.

I think the campaign against the travel tax in the UK is much more difficult, simply because it generates just so much revenue for the UK government, whereas the Irish travel tax generates absolutely nothing in net net terms.

What they lose in visitor spend far outweighs the travel tax.

But I think at the other UK airports we would grow significantly at the UK provincial airports if the travel tax disappeared.

I think we would reverse the winter cuts at Stansted if the travel tax was gone, but I don't think we would grow at Stansted based on the current airport costs.

Here in Ireland if the travel tax is taken away, we would certainly grow at the non-Dublin Airport.

And I think Dublin, we would want to have a discussion with the government about significantly reducing the high and uncompetitive charges at Dublin Airport.

I don't know whether that is helpful in terms of giving you guidance or not, but --?

No, that is.

Thanks very much.

It is as close as I can get there.

Put it this way, I think if the tax went off we grow elsewhere in Ireland and the UK.

We would want some discount at Stansted to grow at Stansted.

And we want very deep discounts at Dublin.

But like Dublin has nowhere else to go.

Aer Lingus is cutting traffic.

Most other airlines have cut -- pulled out of Dublin.

They are in freefall.

But they are a regulated monopoly, so their hope is that they will get an idiot regulator to rubberstamp something like an 18%, 20% price increase to cover this year's traffic decline.

And then give them a 100% price increase at the end of 2010 to pay for the white elephant.

Travis Anderson, Gilder, Gagnon, Howe.

I was wondering if you could talk a little bit about your change in check-in policy and its effect on both ancillary revenues and your employee or airport costs?

I am not sure where that shows up in your line items.

Generally you see it is beginning to come through in our airport and handling costs.

We are moving -- remember, we move all passenger -- 100% of the passengers through to Web check-in on October 1.

At the moment through the summer it is a kind of a dual policy.

Anybody who booked before April can use the airport check-in.

Very positive feedback from customers on Web check-in, the idea that they can avoid check-in queues.

Some occasional glitches with the kiosks in Stansted, but we are working our way through those.

And generally speaking we think this is definitely the way -- it is clearly the way forward.

But we haven't taken -- we haven't yet taken it any further than that.

I would say I have radical plans next year, some of which are not entirely supported by the other senior managers here, to encouraged passengers to bring all their baggage down to the aircraft, which would again significantly reduce airport costs.

But I think our focus in the short term is to get 100% of the passengers over to Web check-in first.

And I think the passengers themselves are policing the check-in baggage, because it continues to plummet even well below where we thought it would be when we set the budget just four months ago.

So you have built in some of those savings into your estimate of falling non-fuel costs?

Yes.

Thanks.

What we hadn't built in though this winter was things like Spanish government reducing their airport costs to zero for growth.

At those kind of initiatives, where like we really push hard, I suspect we might get the unit cost up a fraction above 5% this winter.

But then some of that might be eaten up in further yield declines.

It is hard to know at this stage.

Robert Pickels, Manning & Napier.

Can you comment on any sort of historical precedent for these taxes at the various airports, and maybe in other airports throughout Europe?

Do they -- are they the type of things that the government put on and then subsequently removed or do they tend to stay in place?

Have these taxes been put in place in the past?

Just some history around the taxes?

Yes, the Irish government introduced travel tax about 10 years ago and withdrew it when we had a more enlightened Tourism Minister called Charlie McCreevy, which withdrew it five years ago, which set the Irish airports and tourism on a growth path for about four or five years.

The Belgian and the Dutch government are the two more recent examples.

The Belgian government announced a travel tax at the middle of last year.

At the time in fairness it was an environmental nonsense.

We will tax air travel, because it is bad for the bloody environment.

And then following the Dutch government, who had introduced a EUR12 eco-tax on air tickets.

Mind you it was only on the air tickets of the non-KLM Airlines, back in March of last year.

The Dutch then regretted the move and withdrew it in September, at which stage, the Belgians, who were due to introduce theirs in October and November announced they were going to repeal theirs before it came into play.

(inaudible) halved fares and then doubled them again, didn't they?

They halved it initially (inaudible).

In the UK, when the current Labour government came in first, 10 years ago, 11 years ago now I guess, they -- Gordon Brown halved it within a year or 18 months.

And then he doubled it about a year and a half ago.

It was GBP10 originally, he halved it to GBP5, and then he doubled it again.

And now it goes up by another 10%, at least for short-haul flights within Europe, our flights, on November 1.

So it is all over the place.

It depends on the revenue circumstances of the government and their orientation towards liberal taxation basically.

Thank you.

I think there is lots of precedent here.

I think the issue we've got -- you know, that chap -- our government Minister here last week -- this is the last island in Europe.

Tourism is, I think, our second-largest industry, apart from the overseas investment.

It is bigger than agriculture, bigger than financial services.

And yet they are probably introducing this insane tax because, well, the Brits introduced tax so we will introduce the (expletive) tax.

It just doesn't make any sense, because the British have a huge domestic holiday business, whereas the Irish don't.

But anything that is going to cost Ireland 3 million or 4 million passengers this year is simply insane.

And the sad thing is that tax -- it says it is only going to raise about EUR80 million a year.

They could have raised that and more by simply cutting down the advertising budgets of the various tourist boards in this country, which is what we have advocated instead.

Folks, we'll take one more question, because I'm afraid I've got a [4:00] flight to go to Germany.

Is there one other question there please?

Eamonn Hughes, Goodbody.

Just -- I know it has been beaten to death already in terms of the yield, but just maybe get a sense was August worse than July on the yield declines, first off?

No, both remarkably similar.

Just in terms of, maybe Howard might pick these up, just on the tax rate and CapEx.

The CapEx number, I think Howard you mentioned the last set of results went [about] EUR400 million possibly by the end of -- sorry, the net debt number.

I'm just wondering, given the CapEx plan, that is still very much intact, is it?

And just in terms of the tax rate, you said roundabout 10% for the year.

It came in a little bit below 8% in the first quarter.

I'm just wondering is that a new run rate or can we look at 10% for the rest of the year?

No, you can look at 10% for the full year.

Gross CapEx, we are talking for fiscal 2010 of about EUR1.2 billion.

(inaudible) the last big year, the following year, the March 2011, something similar, about EUR1.3 billion.

Net cash, although EUR100 million now at the moment, we have -- sorry -- net debt EUR100 million at the moment.

As we move through the winter with the bulk of deliveries coming across this winter period, we expect that gap to widen.

So probably EUR250 million net debt by March '10.

Thanks, Howard.

That's it.

Okay, folks, thank you very much.

As I said, if anybody has any further questions, Michael Cawley with Niles and David Broderick, we are all here in Dublin.

Howard is in London today covering the Investor Relations, headed back in Dublin tomorrow.

If anybody has any other questions, please feel free to call us either today or tomorrow.

Before we finish, can I end by inviting everybody -- we are having our Investor Day on the October 2 next.

It is a Friday, I think.

It is 8:30 to 1:00 in the London Hilton on Park Lane, gratefully sponsored by Davy and Morgan Stanley.

Invitations will issue in the next week.

But if anybody is around at -- in the first week of October, we look forward to seeing you.

We will give you -- realize at that stage we are going to give you much more color on the second quarter, and hopefully a bit of better guidance on yield.

As I said, don't get too panicked by today's numbers.

I think the only people who will really be upset are a couple of those non-Irish analysts who are out there with silly, optimistic yield forecast last week.

This is not a time for optimism, or not a time for silly forecasts.

We are well within our range of guidance to EUR200 million to EUR300 million.

The traffic is growing strongly.

The unit costs are falling.

Yes, we are a little bit unsure about what the yield looks like for the next 6 to 9 months.

But we will continue to deliver very strong traffic and profit growth in the current year.

And by the end of this year our position across Europe will be significantly enhanced, as all of our competitors continue to reduce flights and operations in those markets where they compete with us.

Thanks very much come everybody.

Talk to you soon.

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