Ryanair Holdings PLC (RYAAY) 2010 Q2 法說會逐字稿

Welcome to the Ryanair half-year results conference call.

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

For the duration of the call, you will be on listen-only.

However, at the end of the call, you will have the opportunity to ask questions.

(Operator Instructions).

I am now handing over to your host, Michael O'Leary, CEO, to begin today's conference.

Thank you.

Thank you, Sarah.

Good afternoon, ladies and gentlemen.

You are all very welcome to the Ryanair half-year results and phone conference.

I'm joined on the line -- at the moment we have Howard Millar, who is in a cupboard in Heathrow; and Neil Sorahan is in Dublin; and we are hoping Michael Cawley, Jimmy Dempsey and David Broderick, who are in various -- on the -- in airports, are traveling at the moment, will dial in as we move along.

And normal format.

You will have seen the results which we published this morning on the website at www.ryanair.com.

It's on the home page.

Half year profits up by 80%, EUR387 million.

Fares falling 17% in the half year as traffic grows 15% to 36 million.

And we are guiding with significantly lower yields in the third and fourth quarters, because there will be losses in Q3 and Q4, which leaves our full-year guidance unchanged at the lower end of the previously guided range, 200 -- EUR300 million.

Average fares in the half year down 17% to EUR39.

Traffic goes up 15%, 36 million passengers.

Net profit is up 80% to EUR387 million, although this figure is heavily distorted by a 42% fall in fuel costs.

We've restored our [best] industry-leading net profit margin 22% for the half year.

Ancillary revenues grew at a slower rate than traffic by 8%, but is at 20% of total revenues, which is at our kind -- at guidance, but down 20%.

Unit costs, excluding fuel, were still down 5% as we maintained very relentless cost discipline.

We've moved to 100% Web check-in from the first of October, eliminating forever check-in queues or airport queues on Ryanair.

And we've also extended our fuel hedging position to effectively 50% of next -- the next fiscal year -- or 50% of the first half of fiscal year ended March 2011 at an average weight of about USD700 per ton, about 15% increase -- to pay the average fuel rate we paid in the first half of this year.

I think the growth in the traffic and the profit has been impressive.

Obviously, the fall in the fuel cost has largely accounted for the jump in profitability.

We have passed on a lot of those fuel savings in the form of significantly lower fares, which have declined by 17%.

And that is what underpinned our continuing strong traffic growth and market share gains from a lot of our supply carrier competitors, BA, Air France and Lufthansa, all over Europe.

We expect average fares to decline by up to 20% during the third and fourth quarters, as well, which again should underpin very strong traffic growth, maintaining high load factors.

Both will have a downward impact on profitability, which is why we expect to make losses in the third and fourth quarter.

Recent weeks have seen the demise of SkyEurope and Seagle Air in Slovakia, MyAir in Italy.

That has opened up new airport opportunities for us, which we're capitalizing on now, having announced bases in Brindisi and Bari in southern Italy.

We also open up a new base in Leeds Bradford next March.

Market conditions in Ireland, the UK and Europe continue to be difficult, characterized by an absence of consumer confidence, continuing recession and specific market issues in Ireland and the UK, in particular, where the air travel and tourism markets are being devastated by misguided government tourist taxes, which apply for some reason strangely to air passengers but not to competing ferry or trains.

We continue to call campaign on the British and Irish governments to stop these stupid [trap] tourist taxes, and (inaudible) to the Irish government in particular, because this year you're bringing in less than EUR60 million in revenues, yet the loss of VAT receipts on visitor spend will be something about three times that, or somewhere north of EUR200 million.

(Inaudible) the Irish and British governments that they created in Holland, (inaudible) and Spain, but those governments have scrapped these silly passenger taxes or have reduced airport charges, in some cases to zero; for example, the Canary Islands, where Ryanair has responded by opening up 14 new routes to the Canary Islands this winter.

And we see ourselves continuing to switch capacity flights and routes away from Ireland and the UK, where air passenger and tourist traffic is in significant decline and the way into markets, such as Belgium and Spain and Italy, where a combination of lower taxes and lower airport costs means we can continue to expand, but benefiting from much lower costs going forward.

Our relentless focus on costs continues to deliver savings.

We have -- fuel remains volatile.

We continue to reduce airports and handling costs.

The 100% Web check-in initiative will continue that process through the winter.

Staff costs will continue to be tightly controlled.

We had pay freeze last year, and there'll be another pay freeze in the coming year, now on the back of losses in the third and fourth quarter.

However, at a time when many of our competitor airlines are cutting pay or cutting jobs, Ryanair remains one of -- probably the only secure employment in the European airline industry.

We are not planning any pay cuts or job cuts; as long as our people agree to another pay freeze, there won't be any pay cuts in Ryanair in the next 12 months.

Continue to campaign for the early breakup of the BAA and DAA airport monopolies.

We welcomed the recent sale of Gatwick for EUR41.5 billion.

We believe it should lead to the early sale of Stansted as well, but clearly the BAA monopoly is trying to delay the sale of Stansted for as long as (technical difficulty) appealing against the Competition Commission's decision to force the sale of Stansted on the bizarre grounds that selling Stansted would be bad for the financial performance of the monopoly.

That's the entire purpose of the Competition Commission in breaking up the BAA is to make -- to result in a better deal for consumers and competition and an inferior deal for the inefficient, high-cost monopoly.

Dublin Airport is an accident waiting to happen.

We're following -- they're following blindly the same sales model here in the UK of a regulated airport monopoly.

At a time when you could buy Gatwick Airport for EUR1.5 billion, the muttonheads who run Dublin Airport are wasting EUR1.2 billion building a second terminal, which will be opened with no traffic whatsoever some time later on in 2010, but will result in another significant jump in costs at Dublin Airport.

[Allied] to this crazy tourist tax in Ireland, it means, I think, that air traffic both at (inaudible) will continue to cut capacity, air traffic to and from Ireland will continue to fall, and the Dublin airport will be left with either one or two white elephant terminals next year, which is exactly what the Dublin airport monopoly deserve.

We regret the continuing [fate] of the government to break up the DAA monopoly.

I think it will inevitably come, simply because Ireland and certainly Irish tourism cannot afford a high-cost, inefficient, government-owned airport monopoly that wastes the entire value of Gatwick building a second terminal at Dublin that the airport neither wants nor needs.

The existing terminal now with the recent opening at Pier D has capacity for 30 million passengers a year at Dublin.

Traffic will have fallen this year from 24 million passengers to 20 million, and yet they are about to open up a second terminal, which will give Dublin Airport terminal capacity for 60 million passengers with no means of paying for it.

I regret to report we've made little progress in our discussions at Boeing for an order of 200 aircraft over the last number of months.

We won't continue these discussions indefinitely.

There is a relatively small gap between us and Boeing on pricing, but we now require (technical difficulty) need to make a decision.

We understand that Boeing has their own problems at the moment, both with the internal management changes and with (technical difficulty) problems on the 787 and the 747 program, but we don't think that should stop them (technical difficulty) an agreement as far as an order of at least 200 aircraft with Ryanair.

And hope (technical difficulty) end of the year.

If they don't, we will end those discussions, probably about the end of November, and announce a new, much slimmer growth plan for Ryanair for 2010, '11 and '12, with no growth after 2012.

In which case I think we will run airline much more aggressively for higher profits, bigger cash generation, as we plan to distribute the surplus cash to shareholders.

There is no point in us continuing to grow rapidly in a recession while having spent (technical difficulty) if Boeing don't share our vision that this is the way forward.

And all we are asking Boeing to do is to share a very small fraction of cost reductions and productivity gains they've made in recent years (technical difficulty) airport manufacturing (technical difficulty).

We don't expect Boeing to sell us aircraft cheaper (technical difficulty) that we bought them previously, but we do expect to buy (inaudible) now order the next round of aircraft at or slightly above (technical difficulty) paid Boeing in the past, particularly we've been buying -- wish to buy aircraft at a time when nobody else is buying aircraft.

Looking forward, it is appropriate that we remain very cautious and concerned in our guidance.

Our outlook for fiscal 2010 remains unchanged.

We expect traffic flow, particularly over the winter, to remain strong as our competitors across Europe cut capacity, particularly in the [short-term] market, with our strong (technical difficulty) declining average there.

The US continues to be negatively impacted by the weakness of sterling and the impact of tourist taxes in the UK and Ireland (technical difficulty) capacity in the Irish and UK markets as (inaudible).

Friday, we -- Shannon Airport rejected our offer to maintain a [full] aircraft based in Shannon.

We expect to reduce our capacity in Shannon by 75% from March next year, reducing the base aircraft number (technical difficulty) those aircraft would be switched to lower-cost airports and no-tax countries elsewhere in Europe away from Ireland.

We expect [yields] this winter will continue to fall by up to 20%, which will cause material losses in Q3 and Q4, and accordingly, the full-year net profit guidance remains unchanged at the lower end of the EUR200 million to EUR300 million net profit range we previously guided.

This winter will be a difficult one for the European airline industry.

However, Ryanair uniquely will continue to grow traffic, market share and profit in Europe this year.

We have the strongest balance sheet with EUR2.5 billion cash, and we continue to negotiate significant cost reductions with airports (technical difficulty), who are keen to continue or to share in our growth while many of their other customers consolidate, reduce capacity or collapse altogether.

Ryanair remains ideally positioned to return substantial profit growth as Europe emerges from this economic downturn over the next year or two, and we remain confident that our aggressive growth during the recession policy will continue to deliver substantial returns for our passengers, our people and our shareholders over the coming year or two.

Howard, will you take us through the MD&A, please?

(technical difficulty) MD&A, all figures and comments are referenced to the adjusted income statement excluding the items referred to below.

Exceptional items at the half year ended September 30, 2009 amounted to EUR30.5 million, reflecting an impairment of the Aer Lingus shareholding.

Exceptional items in the half year ended September 30, 2008 amounted to EUR119.3 million, consisting of an impairment of the Aer Lingus shareholding of EUR93.6 million and an accelerated appreciation charge of EUR25.7 million on aircraft disposed in financial years ended 2009 and 2010.

Adjusted profit after tax increased by 80% to EUR387 million compared to EUR214.6 million in the half year ended September 30, 2008, primarily due to a 42% decrease in fuel costs, partially offset by a 17% decline in average fares.

Total operating revenues declined by 2% to EUR1.766 billion, as average fares fell by 17% due to the recession, price promotions and the adverse impact of the movement in the euro-sterling exchange rates.

Ancillary revenues grew by 8% to EUR346.3 million, slower than the growth in passenger volumes due to a decline in average spend per passenger, primarily due to lower excess baggage revenues and a negative impact (inaudible) euro/sterling exchange rates.

Total revenue per passenger as a result decreased by 15%, whilst the load factor remained flat at 85% during the period.

Total operating expenses fell by 17% to EUR1.314 billion due to lower fuel prices, offset by the high level of activity and increased operating costs associated with the growth of the airline.

Fuel represented 35% of total operating costs compared to a 50% level in the comparative period, decreased by 42% to [EUR459.8] million due to the (inaudible) price per gallon paid, offset by an increase in the number of hours flown.

Unit costs excluding fuel fell by 5%, and including fuel, they fell by 27%.

The operating margin increased by 13 points to 26%, while operating profit increased by EUR216.2 million to EUR452.6 million.

Net margin increased to 22% from 12% at September 30, 2008 for the reasons I've just outlined above, and adjusted earnings per share for the period were EUR0.2623 per share compared to EUR0.1444 in the previous half year ended September 30, 2008.

On to the balance sheet.

Total cash and cash equivalents remained strong at EUR2.536 billion.

The group generated cash from operating activities of EUR382.8 million and a further EUR65.6 million was received from the delivery proceeds and the sale of three Boeing 737 800 aircraft, which together partially funded capital expenditure incurred during the period.

Capital expenditure during the periods amounted to EUR386.8 million, largely consisting of advanced aircraft payments for future deliveries and the expenditure associated with delivery of 24 new aircraft during the half year.

Total debt and net repayment increased by USD187.7 million to EUR2.586 billion during the period, and net debt at the period end fell to EUR49.2 million.

That is the end of the MD&A summary.

I will pass it back to Michael.

Thanks, Howard.

Okay, Sarah, let's open it up for questions, please.

(Operator Instructions) Jim Parker, Raymond James.

Good afternoon, Michael and Howard.

What was the impact (technical difficulty) fares of sterling -- of weakness in sterling in the quarter?

It was 3%, Jim.

About 3%.

Yes.

Okay.

And regarding ancillaries, you are down year-to-year, it looks like about 13%.

I'm curious what the outlook is from here.

I would expect for the next two quarters, Jim, that ancillary revenues will track behind the growth of scheduled traffic for the remainder of this year.

And next year will be more likely to track scheduled traffic growth, though the scheduled traffic growth will be slower, as we would maintain ancillary revenue at around 20% to total revenues.

And what are the factors that are causing ancillaries to trail passenger revenue?

Principally a change in (inaudible).

We don't have any new, if you like, killer ancillary revenue streams at the moment.

We are still fitting out the aircraft with the mobile telephony, but we've only got 50 of the 200 aircraft fitted at the moment.

It is growing, but we would like to get more of the fleet fitted.

Meanwhile, some of the other charges, where we have [reached] the increase, the baggage fees, the excess baggage fees, more and more customers are adopting their behaviors to travel, either with carry-on luggage or to travel with no excess baggage.

(inaudible) passengers much more careful, as we would wish, to travel with no excess baggage fees.

So the jump in ancillaries that we enjoyed last over the past two years as we introduced these new fees are now gradually working their way out of the system.

Okay.

Thank you.

John Mattimoe, Merrion Capital.

Good afternoon.

Just on -- related to the fuel side, could you give us any updated thoughts on where you are planning to go with the fuel hedging from now on?

Do you plan to have another bit of FY11 done by year-end?

I think we are likely.

I mean, we keep it under (inaudible) -- you can imagine under continuous review.

The plan, in general terms, is to try to have about 50% of next year hedges in place.

If we think that there is a short-term weakness in oil rates, we will increase that to 90%.

I think by the time we get to the end of this fiscal year, we would like to have 80% or 90% of next year's fuel fully hedged.

But if oil prices rise away from us, we might have less done, and if they fall, we might have more than that done.

I think the next focus will be 50% of the first two quarters done.

It will be (inaudible), I think, by the time we get the end of the calendar year to have 50% of quarters three and four done, or to have taken quarters one and two up to 90%.

Okay.

Just on the yield side, then, could I just -- apologies if this has been (inaudible) -- can I just ask for clarification just on the yield guidance of the fall of up to 20%.

Is that for the full-year yield or is that just for Q3 and Q4?

It is for Q3 and Q4.

Okay.

And looking at the Q3 and Q4, do you have any meaningful bookings in there at this stage that you're basing that on?

We have decent visibility, as you might imagine, at the moment into November.

We have some visibility for December, but limited.

But we have absolutely nothing into January, February and March.

I think you can take it that on the currency, our estimate on yield for the third quarter, it certainly won't be any worse than minus 20; it might be a little bit better.

But Q4, it could be -- I would say you are better off to work on a figure of minus 20 for the moment for modeling purposes.

Okay.

And looking back at Q2, was there any big variances in any of the three months to get to the minus 20 for the full quarter?

No, not particularly.

Okay.

That's it.

Thanks for that, Michael.

Johannes Braun, Commerzbank.

Good afternoon, everybody.

Just again on the yield guidance, at the end of Q1, you said that you expect yield for the full year to be at or slightly more than minus 20%.

Now you are saying for the winter you expect up to 20%; that comes after 70% for H1.

So is it fair to assume that you are a bit more positive on the full-year yield performance then?

You know, I don't think (inaudible).

A change in total from we expect 20% to we expect up to 20% isn't that significant.

But up to 20% is only for the winter yield, right?

Yes.

So it will play out at maybe 18%, 19% for the full year?

It depends on whether your glass is half empty or half full.

Like you know, we've done minus 17% for the first half of the year, and if we do 20% for the second half of the year, you will be at around minus 18% for the year.

I don't think there is anything -- put it this way.

We don't have a lot of visibility yet on the second half.

I don't think it is right to be changing the guidance.

But into the third quarter is marginally -- 1% or 2% percentage points -- better than we had originally expected.

But, I mean, the slightest economic shock or carriers (multiple speakers) -- or anything at all could upset that in the next month or two.

Also, we think fuel prices are a bit higher than they were when we had our first-quarter results in August.

So if it is slightly better than 20 for the full year, some of that difference will be absorbed by fuel prices, which have risen over the last couple of weeks.

In particular, we only hedge 90%, as you know, of our total exposures.

So that 10% still have to be bought at a higher rate.

So there is a plus on the one side, a minus on the other side; and overall the guidance is still unchanged.

All right, very clear.

Thank you.

I think it is fair to say we are leaving the guidance unchanged, but I think we are happy that it is not going to get any worse than this for the current year.

But (technical difficulty) we've lost (inaudible) most of the fuel.

(Inaudible) we still have no visibility on Q4 yield.

But we've done a little bit better in the second quarter than we had originally hoped, than we had originally expected.

So I don't think there is much change.

Okay.

Thank you.

There are currently no questions.

(Operator Instructions) [Michael Cast,] Baron Capital.

When I look at your presentation, where you go to your competitive position, pricing, etc., and there is obviously an enormous price difference between your average fare and the industry.

And I recognize that they may not be like-for-like comparisons directly.

But when you talk about the pricing pressure, could you just talk about competitively with a -- between a 700% -- seven times increase in average fare to the high-end British Airways or even easyJet at twice your level, to what extent is your pricing policy a function of the current environment, trying to drive more capacity out of the market, versus, actually, this is the maximum yield you can get in this environment?

I think we answered that question.

As you know, what drives our yield at the moment is our own capacity growth.

If you look at the presentation which is up, the slide presentation which is up on the website, I think the key difference between us and many other airlines -- and all other airlines in Europe is set out on page 13.

I mean, you see our capacity growth in the current year, we are up 17%.

EasyJet capacity, up 3%, Lufthansa, minus 5%; Air France minus 6%; BA minus 7%; Iberia minus 8%; SAS minus 17%; and Alitalia minus 23%.

The only thing driving down our yields -- sorry -- two things are driving down our yields at the moment.

By far and away the most significant of those is our capacity growth during a very deep recession across Europe.

And then to a certain extent (inaudible), as Howard had said, is the weakness of sterling, taking in about 3% of that.

And I think that is why we are trying to highlight to shareholders at the moment, look, we really almost don't care if we don't do a deal with Boeing between now and the end of the year, because I think if we decide we are going to slow down that growth rate significantly the next couple of years, if we don't reach agreement with Boeing, I think there's significant upside in terms of yield, profits and cash flow between now and 2012 and [virtually] into 2012, 2013, 2014.

So we are not trying to drive capacity out of the marketplace.

We are trying to drive our own capacity growth into the marketplace, which is what makes us so attractive for so many airports and countries around Europe.

There's an incredible queue of governments and airports who are presently negotiating with Ryanair, trying to get us to grow in their country, grow at their airport and grow their tourism.

The only two governments in Europe at the moment who do not seem to want to talk to us about growth are the UK government and the Irish government, which are sadly following failed economic policies of doom and gloom.

They get exactly what they deserve.

So I think our yield performance is very much a function of very rapid capacity growth during a recession here in Europe, but we are building out a footprint or a scale here -- or a market share across all the major European markets that I think could never be done during a period of strong economic growth, because these kind of opportunities simply wouldn't be available to us.

Okay.

Thank you.

[Ken Riskin], (Inaudible) Fund Management.

Just a quick question on the implementation of the 100% Web check-in, I guess by the end of last month -- beginning of last month.

What impact do you think that will have on ancillaries going forward over the next couple quarters?

I don't think it will have any effect on ancillaries going forward.

It's largely factored into the existing ancillary model.

People paid for their check-in bags.

Although I think the number of check-in bags will continue, we are probably down to a core of 25%, 30% of the passengers trying to check in bags.

As part of that, we recently announced we are now going to allow some of those passengers who travel with a second checked-in bag, for which they pay for, but we will double their allowance from 15 to 30 kilos.

So I think we are happy that we have the checked-in bags down to the kind of core people who really have to travel with checked-in bags.

And you couldn't go to 100% Web check-in without getting the checked-in bags down to 25% of passengers, because you simply wouldn't be able to handle the bags you drop -- you wouldn't be able to handle the volume at the bag drop.

So we are there now.

We'll continue to take out airport and handling costs, and that is the key to this whole move towards Web check-in.

And I think it will become much more an issue for us when the -- Stansted Airport is sold, as the new owners -- we'd want to sit down and talk to the new owners at Stansted about the possibility of very rapid traffic growth at Stansted on the back of a second terminal that will be designed -- or built to meet Ryanair's requirements, which will be much more simplified -- no baggage haul, much smaller scale -- but much easier access of passengers through the facility because there is no check-in desk anymore.

There will be a very small baggage drop arena, very small baggage reclaim area and lots more retailing.

So I think the opportunity now exists for Ryanair to lower our airport costs going forward by developing really low-cost, efficient terminal buildings, as we have recently in Charleroi, where they built a new terminal for just GBP25 million.

Or mp2 in Marseille, where they converted an old postal hangar into a terminal capable of handling about 3 million passengers a year for us.

Okay, so the at-airport check-in, when people just show up without having checked in online earlier, that was in some part of ancillaries before it was eliminated, right?

Yes, it was eliminated.

I mean, there is a way -- a boarding card -- we issue a fee, but that gets paid by a tiny number of passengers.

You really must now check in before you get to the airport.

If you don't, the fine is EUR40, and if that doesn't get rid of them all within a very short order, we double that fine to EUR100.

But it is not an ancillary revenue generation.

It's simply we don't want people showing up without the preprinted boarding card.

Okay.

Thank you.

We currently have no questions.

(Operator Instructions) Eamonn Hughes, Goodbody Stockbrokers.

Just a query just related to firstly, I think on the call this morning, on the Webcast, you mentioned possibly unit costs down around about 5% or so again next year.

Can we just take it that it is a lot of the same drivers again -- the airport handling charges and the staff are maybe the main drivers, just to firm that point?

And then secondly, just on the yield aside, we've had a little kid of structural growth in terms of ancillaries, which probably allowed the airline set to price down on yields a little bit more aggressively over the last while.

Given that we have seen ancillaries structurally probably starting to slow down, does that, A, put more pressure on yields going up in future?

I know again the rising oil prices are dynamic, but what would be your sense in terms of maybe moving to yields and getting to more neutral, if not even to positive territory, how you would see that play out over the next 12 to 18 months.

You have to be careful.

We haven't yet sat down to finalize the detailed budget for next year.

But if you go back to kind of the core model of Ryanair, it is to deliver kind of capacity growth every year, yields, underlying yields, excluding fuel, on the cost line and fuel surcharges on the revenue line.

So underlying yields falling about 5% and unit costs falling about 5%.

I think regardless whether we do it here with Boeing now before the end of the year, or don't, you are going to see us from 2010 onwards grow at a -- at a slower rate.

We will slow down the rate of capacity growth.

I think that will take a lot of the pressure off the yield declines.

I would expect to see our yield declines be no worse than 5% going forward, plus or minus fuel.

And unit costs, certainly for the next 12 months, fall by maybe another -- I think we are aiming for another 5%, and I would think some of those would come from the existing drivers.

Although I think there may be an opportunity for more significant cost reduction if we are successful in breaking up the Dublin Airport monopoly and the Stansted monopoly, where clearly an awful lot of our airport and handling costs and cost increases have been reflected in recent years.

On the yield side, again, I think the drivers for yield will be slower rate of capacity growth for the next couple of years up to 2012, and possibly no growth in capacity after 2012, if we don't reach agreement with Boeing, in which case then we'll look at much more significant reductions in yield growth between 2010 to 2012.

Michael, just in terms of, say, the next negotiation timing on the Stansted and Dublin, is that is within the next six to 12 months?

Have you any sort of timeline on those?

I think Stansted, the next negotiation can only be when they -- is when Stansted -- when the discussions for the sale of Stansted begin (inaudible).

I assume it must happen in the next 12 months.

I know the BAA are using various legal strategies (inaudible) delay the fare.

Bt I would think -- believe it is inevitable, and I hope it will happen in the early part of 2010.

I think we would want to be in discussions with any or all of the Consortia who want to look at buying Stansted.

I know there was kind of a negative piece in the (inaudible) recently that Ryanair would be a big blockage in the sale of Stansted.

I would argue the opposite.

I think actually we would underpin the sale of Stansted to a non-BAA consortium by showing them, look, I think Ryanair could double in size in Stansted.

This year, we do about 14 million -- well, 14 million passengers this year, we could grow that to 25 million, 30 million passengers a year over a five or a six-year period, if we have an agreement with Boeing on more aircraft.

Stansted could absorb at lot of growth, and it would be a very good investment for us out of a utility or one of these kind of infrastructure funds to build capacity in the London or the UK Southeast relatively cheaply, and work with an airline that can deliver traffic growth at very low cost, very low incremental cost.

Dublin, I think Dublin Airport is just going to blow up in the middle of 2010.

I mean, I can't see anything other than it is heading for a train wreck.

The traffic this year (inaudible) in 20 million.

The terminal capacity at Terminal 1 with the new Pier D is now 30 million passengers a year.

These fools -- is the best description I can come up with -- are going to open up Terminal 2 next year with another 30 million passenger capacity.

So you have a 60 million passenger capacity at Dublin airport, with about 20 million passengers.

The only way it could be paid for is to increase passenger charges.

That inevitably means that Aer Lingus and Ryanair will take more capacity out of Dublin.

You fall into this kind of self-fulfilling vortex of traffic declines less capacity.

And that is sustained under the regulated -- the absolutely crazy regulatory regime means that the charges go up every year for the following year as traffic falls.

They have ways that -- when you look at the -- in terms of scale, they recently sold Gatwick Airport, the second airport in London, for EUR1.5 billion.

Dublin Airport will manage to waste about EUR1.2 billion building a second terminal at Dublin Airport, which is a relatively small, regional peripheral airport in European terms, with nobody who wants that facility.

It is insane.

And yet they've gone ahead and done it, mainly because of the political incompetence of the Department of Transport, who (inaudible) to the regulator to allow them to go ahead and build T2, has recently in terms of the new (inaudible) decision to prioritize the financial viability of the bankrupt Dublin Airport organization (technical difficulty) users -- the (inaudible) users.

So costs are going to keep rising.

Traffic is going to keep falling.

And eventually, I think the Irish government is going to wake up and realize they completely (expletive) the Irish tourists by protecting a corrupt and incompetent Dublin Airport monopoly, and letting a tourist tax on the few remaining visitors coming to the only island left in Europe.

But the present government and (technical difficulty) certainly corrupts the Department of Transport and any corrupted sense of utterly (technical difficulty), as it deserves everything that is coming to it in the next 12 or 18 months.

Sorry for setting you off on that one.

I am full of optimism.

I think there is a bright future for Ireland, because we are finally going to expose the utter sheer incompetence of the Department of transport.

We are going to expose in the next 12 months that the Dublin Airport Authority is bankrupt.

And the Irish government and the trade unions are rapidly rolling Aer Lingus into the ground, where it will need to be rescued, probably by Ryanair in the next 12 to 18 months, as it runs out of cash, either with a new, big redundancy payoff or to fund a ludicrous [debit] on its pension scheme.

I am very optimistic for Ireland, though, in the medium term, because I think this government has completely (expletive) the industry and the airports in the last two or three years by not listening to Ryanair, the only competent airline management in the country.

Okay, Michael, just to clarify, on the volume guidance, can we take it that it is -- the 15, midteens percentage growth, if the Boeing deal gets done for the next two years, then it pares down to sort of 5%, 7%.

And if no deal is done, it immediately pares down to 7% to 8%, and then flat subsequently.

Is that (multiple speakers) --?

No, no (multiple speakers).

That's way too long.

I think all bets are off in our capacity growth for the next couple of years, until we get to the end of November and we understand whether we are going to do a deal with Boeing or not.

We will then come back to the market, I think, right about -- probably in the early part of next year, with a revised capacity growth for 2010, '11, '12 and thereafter, which could be slower growth between now and 2012, and much more modest growth after 2012, or slower capacity growth for 2012 and no growth thereafter.

And I think we are saying to Boeing, it is your decision, but the time for decision has now come.

So I'm not giving any guidance on capacity growth for the next couple of years until we get to the end of November and Boeing either makes a decision.

But if Boeing doesn't make a decision, then we are going to make decisions ourselves, and that will be canceling options, deferring deliveries and growing -- much slower growth between 2012 and 2012, and no growth after 2012.

Okay, thank you.

I think we'll come back to the market probably at the time of the third-quarter results in early February.

And I think everybody is just -- all we want to do is highlight at this stage we may well be coming to the end of the relationship with Boeing.

I hope not.

But frankly, it is Boeing's decision.

And we are going to be -- that decision will be made between now, I think, and the end of November.

Anybody else?

Robert Pickles, Manning & Napier.

Let's sort of imagine that scenario where you stop taking planes from Boeing and start running the business for cash.

What are some of the challenges you would envision as a management team in that scenario?

I'm guessing it would be not the easiest thing to do to go from a growth -- an airline that is growing, growing, growing, to one that is now running their business for cash.

So what are the challenges you see in that scenario, and how would you meet them?

Frankly, I think the biggest challenge in that scenario is what the hell do we do with the mountains of cash that suddenly begin to explode off the balance sheet between now and 2012 as the CapEx spend comes off.

I mean, most of the other unit costs are well tied down.

We would still have a lot of new routes and new airport development, but it would come from taking or reallocating aircraft assets away from high-tax, high airport cost markets in Ireland and the UK.

So I think you would have a couple of years of rebalancing the operation.

I don't see it -- if you look at where our cost control is coming from in recent years, it has all come from reengineering the way passengers behave, Web check-in, getting rid of travel agents.

We would also be able, I think, to take -- add more capacity.

We might fly the aircraft a bit longer during the days and over the weekends.

I think we would get a lot of organic efficiency into the system for a two- or three-year period.

I don't really see any other management challenges there.

Could the staff turn out or the union certainly turn around and look for they want some increased pay?

No -- (expletive).

You know, if our people aren't happy, they can always go and apply for a job with British Airways or somewhere else, but I don't see any jobs being created there.

So I think the issue -- but, other than that, I don't think it is helping to speculate on what happens at that stage.

All that happens is we build up cash very quickly and we have to kind of come up for a use for that cash.

And frankly, I can't think of one other than returning it to shareholders.

But that is a less desired course of action.

I really want to try to get a deal done with Boeing before the end of this year.

I stress -- and it is important -- because I don't want it to embarrass Boeing.

We are not looking -- there isn't a big gap between us and Boeing at the moment on pricing.

The gap is relatively small.

But it's for Boeing to close that gap, not for Ryanair.

And even if we do a deal, I've seen some speculation out there in the marketplace that we are looking for material price reductions on where -- what we paid Boeing the last time around, the last time we did an aircraft order.

It is not.

In actual fact, the prices we would pay Boeing, if they accept our offer, would be higher slightly than the prices we paid Boeing the last time around, immediately after 9/11.

So this is a win-win for Boeing, but really, Boeing has to make a decision.

I think they have a lot of their own internal problems and a lot of management changes.

There is a lot of focus on the 787 and all that kind of stuff.

And I just think the day-to-day business of (technical difficulty) narrowbody aircraft hasn't gotten the attention it deserves.

But we've wasted nine months of our lives on trying to do a deal with a Boeing, and we are coming to the end of the path.

If we can't get it done, then we are switching the strategy to one of much lower and then no growth.

And with [that] start for the next turn of the cycle, we just start sending cash out to shareholders.

Okay.

Any more questions, Sarah?

We have no other questions.

I'll hand back to your host for any closing remarks.

Okay, folks.

Thank you very much for that.

We will try to hold on here, because we have something unique (technical difficulty) way to get on an aircraft.

We'll see you all at some stage over the week.

We have six, I think, roadshow teams on the road.

If anybody hasn't got a meeting and would like one, please contact us through David Broderick in Dublin.

All of the details today, of the press release, the presentation and everything is on the website.

Please go there there, www.ryanair.com, and I hope we'll see you all before -- between now and the end of the week.

Thank you very much, everybody.

Bye-bye.

Bye.

Thank you for attending today's conference.

You may now replace your handset.