Ryanair Holdings PLC (RYAAY) 2010 Q3 法說會逐字稿

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

My name is Dave 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 them over to Michael O'Leary, CEO, to begin today's conference.

Thank you.

Good morning or good afternoon, rather.

You are very welcome to the Q3 conference call.

The press release, slide presentation, and the MD&A is all up on the website, Ryanair.com.

Just click on to the investor relations page.

We kick off with the normal format.

Today we announce a Q3 loss of EUR11 million, down from a loss of EUR102 million in Q3 last year.

Revenues were up 1% to EUR612 million.

That is a 14% traffic growth largely offset by a 12% decline in average fare.

Unit costs fell by 23%.

Excluding fuel they fell by 4% despite a 3% increase in sector [lengths].

The Q3 loss of EUR11 million, while disappointing, was significantly better than last year's Q3 number.

The results are distorted by a 37% fall in fuel costs, which offset a 12% decline in average fares.

The yield fall of 12% was better than anticipated due to an improved mix of new routes and bases this winter and deep cuts in high-cost loss-making winter capacity -- winter capacity at high-cost airports, such as Dublin and Stansted.

Ancillary revenues grew by 6% in the quarter, slower than the growth of passenger volumes due to changes in consumer behavior.

Over the past few months we have witnessed a demise of a number of other flaky European airlines and we expect further casualties this winter.

We are increasing market share, particularly where we compete with the big three -- Air France, BEA, and Lufthansa.

Conditions remain difficult, although the increasing pace of consolidation closures across Europe, allied to Ryanair's continuing fleet expansion will lead to further significant market share gains this year where we are adding capacity, particularly in Italy, Scandinavia, Spain, and the UK.

Our commitment to lower costs has resulted in unit costs, excluding fuel, falling by 4% in the quarter despite a 3% increase in average sector length.

And underlying unit cost reduction of 7% which is a terrific performance and one we are very proud of.

Fuel costs fell by 37% to EUR207 million reflecting the benefit of lower oil prices.

We have recently extended our hedging for the next fiscal year with 90% in the first three quarters and 25% in Q4 as it is the first calendar quarter of 2011 now hedged at $720 per ton.

Capacity cuts by many of Europe's flight carriers has led to traffic falls at most EU airports.

This has created opportunities for us to grow as many of these airports compete vigorously against each other to persuade Ryanair to expand there.

This aggressive competition has resulted in our airport and handling costs per passenger falling by 11%.

This is a number which many other airlines claim is an uncontrollable cost, although we managed to reduce it by 11% despite a cost increase at Dublin and Stansted.

We will continue to launch more of these new low-cost routes at bases over the coming year.

Despite the recession, airport monopolies like the BAA and DAA continue to abuse their power.

The sale of Gatwick will lead to much-needed competition in the London market.

However, the recent decision by the UK Competition Appeals Tribunal will regrettably delay the sale of Stansted and one of the BAA Scottish airports.

These disposals, as recommended by the Competition Commission, are necessary and urgent in order to increase competition and ensure a better deal for consumers by lowering costs and delivering more efficient facilities at the London airports.

In particular where years of monopoly ownership and regulation by those hapless idiots in the CAA have repeatedly failed.

In Dublin, the total failure at the Irish government's transport policy, which now involves nothing other than protecting the DAA airport monopoly at all costs, is finally being exposed.

Last government (inaudible) the government imposed a EUR10 tourist tax on all prices from Ireland.

Traffic at Dublin Airport promptly collapsed by over 3 million passengers last year, a decline of over 13%, during a year in which Ryanair, Ireland's largest airline, grew traffic by 7 million.

This kind of nails the government's claim that it's an international phenomenon.

It isn't.

It's an Irish phenomenon and one of government mismanagement.

Instead of responding to this collapse in an intelligent way by scrapping tourist taxes and lowering airport costs as many other EU governments have, the Irish Department of Transport have responded by ordering -- yes, I know it's hard to believe, but they have actually ordered the supposedly independent aviation regulator to approve a 40% increase in Dublin Airport's price cap over the coming 12 months.

The DAA have last week announced their intention to price right up to this cap.

So in the middle of a recession with air traffic falling around their ears they are going to increase charges by 40% over the coming 12 months.

The Department of Transport seems to believe this cost increase during a deep recession will compensate their favored airport monopoly for its 13% traffic loss last year and will allow the incompetent Dublin Airport Authority to recover the EUR1.2 billion they have now wasted on terminal two and its associated facilities, which they had originally promised to deliver for between, quote, EUR170 million to EUR200 million.

This crazy policy of a tourist tax and a huge increase in airport fees at a time when airports all over Europe are reducing their fees will inevitably lead to another year of double-digit traffic collapse at the Irish airports in 2010.

As Ireland's tourism industry is devastated by this government policy of raising taxes and raising costs to protect a bankrupt airport monopoly, the combined capacity of terminal one at terminal two, when it's eventually opened in late 2010, will exceed 50 million passengers per annum which gives rise to excess capacity in Dublin of over 60% based on the DAA's own traffic forecast of some 20 million this year.

We are again calling on the government to mothball this white element which will at least eliminate the significant operating costs associated with the opening of T2.

However, the Irish government's crazy tourist tax must also be scrapped if Ireland ever wants to return to a year of tourism growth and low access costs.

We confirmed in December that we were terminating our discussions at Boeing for an order of up to 200 aircrafts.

Although we had agreed pricing and delivery dates, Boeing regrettably insisted on trying to change our delivery terms and conditions in a manner which wasn't acceptable to Ryanair.

We have no plans to reopen these discussions and nor are there any talks ongoing with Boeing.

If there is to be any future agreement on another aircraft order, which I wouldn't rule out, it would have to be on materially better terms than those we were discussing with them prior to Christmas.

We, however, are pursuing now our alternative strategy, which is to confirm the delivery of 112 aircraft between now and the end of 2012.

This allows us to increase our capacity by some 50% and grow traffic to just over 85 million passengers per annum.

As a result of this new plan, growth CapEx will fall significantly from EUR1.2 billion in the current fiscal year to about EUR100 million annually by the time we get to 2013, '14.

We expect to generate up to EUR1 billion of surplus cash by the end of calendar 2013, which would then be available for return to shareholders.

Our Q3 results are marginally ahead of expectations as a result of a better mix of new routes and bases, which meant that yields fell by 12% rather than the up to 20% we had previously feared.

We expect this slightly better yield performance to continue into Q4, and accordingly we now believe the full-year yield decline will be closer to 15% rather than a decline of 20% as we previously guided.

As a consequence, we have now increased our full-year net profit guidance EUR275 million from the previous target which was at the lower end of the range, EUR200 million to EUR300 million.

We remain uniquely positioned to benefit from the accelerating pace of airline consolidation and closures in Europe which has led to significant capacity reductions and particularly in the markets in which Ryanair operates.

We have announced an impressive array of new routes and bases which are already on sale for fiscal 2011 and expect to grow traffic by approximately 10% to 73 million as airports -- more and more airports recognize Ryanair's unique ability to deliver substantial and sustained traffic growth even during a downturn.

Despite the depth of the current recession, Ryanair will continue to grow traffic and profits over the next 12 months while most other airlines lose money.

All of it for the benefit of our passengers, our people, and our shareholders.

I will now hand you to Howard Millar who will take us through the MD&A, summary MD&A.

Howard?

Thanks, Michael.

On the details -- we have detailed analysis of the MD&A in the release.

I will just give you a summary for the quarter only.

There were no exceptional items in the quarter ended December 31, 2009.

There was, however, an exceptional item in the quarter ended December 31, 2008, which amounted to EUR17.3 million in relation to accelerated depreciation on aircraft to be disposed in financial years 2009 and 2010.

As a result, adjusted loss after tax decreased by EUR90 million to EUR10.9 million, primarily due to lower fuel costs partially offset by a 12% decline in average fares.

Total operating revenues increased by 1% to EUR611.9 million as average fares fell by 12% due to recession price promotions, the adverse impact of the movement of the euro sterling exchange rate, and a decline in our ancillary revenues per passenger which was offset by a 14% increase in passenger numbers.

Fuel, which represents 34% of total operating costs compared to 47% in the prior period comparative, decreased by 37% to EUR206.6 million due to the fall in the price per gallon paid offset by an increase in the number of hours flown.

Unit costs excluding fuel fell by 4%, despite a 3% increase in average sector lengths.

Including fuel they fell by 23%.

Operating margin as a result of (inaudible) book breaking even, which was an improvement of 15 points during the quarter, but operating profit increased by EUR93.3 million to EUR1.4 million.

Turning to the balance sheet, total cash and cash equivalents remained strong at EUR2.439 billion.

The group generated cash from operating activities of EUR409.2 million and a further EUR93.3 million delivering proceeds on the sale of four Boeing 737 aircraft and the sale of two spare engines which partly funded capital expenditure incurred during the period.

Capital expenditure amounted to EUR593.5 million and largely consisted of advanced aircraft payments for future aircraft deliveries and the delivery of 32 new Boeing 737-800 aircraft during the nine months.

Total debt net of repayments increased by EUR242.1 million during the period to EUR2.640 billion.

Net debt at period end was EUR200.8 million.

Shareholders' equity at December 31, 2009, increased by EUR370.7 million to EUR2.8 billion compared to the previous year-end at the March 31, due to the impact of IFR accounting treatment for derivative financial assets, stock-option grants, the profit of EUR362.6 million in the period, and the issue of new shares which amounted to EUR10.4 million.

So with the end of that I will pass it back to Michael.

Okay, Howard.

Thank you very much.

And we will open up to questions and answers now.

Before we do, if I can -- I know it's probably a forlorn hope, but I would like to focus on the Q3 numbers and also the guidance for the full year.

Please don't ask us what our view is on yields for next year or for the next five years, because we have no visibility beyond April and we don't know.

But we have good visibility now into Q4 and we have a fair handle on where we will be for the year, so I think you can take today's revised guidance with a high degree of confidence.

But there is no point in us speculating yet what is going to happen to yields into next year or the future years.

We are cutting back capacity at some of the higher-cost airports, Dublin in particular.

We are noticing a continuing trend of other competitors cutting capacity at airports where we operate.

In particular, more recently easyJet has now closed the East Midlands base.

It's cutting capacity at Luton where it's not able to compete with Ryanair.

Aer Lingus last week announced the 355th flip-flop over the last 16 years.

New management introducing the same old strategy, but its impact on us will be capacity cuts at Belfast which will be to our benefit, capacity cuts in Gatwick.

And they are now following the same hybrid strategy pioneered successfully over the years by people like British Midland and airberlin following this.

It's not a low-fare airline and it's not a high-service airline, it's in between.

It's an airline, but not as we know it.

Doomed to failure again, but God bless them and all who stayed with them.

So if we can confine the questions please to Q3 numbers and Q4 full-year guidance, I would approach it and we can get through this as quickly as we can.

Then when we get to the full-year road show, which will be at the full-year results in the first week of June, we will have a better handle on where we think years are going to be.

I think the general themes for next year is the sector lengths.

If you look at the spread of new bases, in particular this winter the Canary Islands, new bases in Malaga and Faro, I think you will see a slight creep in sector lengths over the next 12 months.

But that should have an upward impact on yields.

Yields will also be favorably impacted by the withdrawal of capacity by people like easyJet and Aer Lingus who can't compete with Ryanair on cost or on pricing.

But on the downside we will still be having a significant fleet expansion this year.

We are going for another 10% of traffic growth, which is still very strong growth from Europe's largest passenger airline.

So there is a balance between the two.

A lot of it will depend on the economic environment, the out turn, as it moves through summer.

But really we have no visibility so anything dealing with it at this stage is just guesswork.

Okay, anybody got any questions?

(Operator Instructions) Stephen Furlong, Davey.

Hi, Michael.

Just might ask you to comment please on sector lengths and particularly this winter with the Canaries routes.

Obviously the sector length went up there, obviously, so maybe that leads to higher costs but maybe they are more attractive, particularly in the winter from a revenue perspective.

And the second question, I remember about a year ago you -- T-minus-one months you moved up the percentage of bookings you had in place, I remember, from, say, 80% to 82%.

So you had more bookings in place presumably at weaker yields from -- I think normally you used to be at 80%.

And I was just wondering, would you go back to the 80% or do you find that the 82% is the way to be going forward?

Okay.

Thanks, Stephen.

I wasn't sure what the question was about sector length, but I think to the extent that if you look at this summer's allocation of bases -- the good news, by the way, is the Spanish government has now extended the 100% discount deal on the Canary Islands route for, I think, it's either two or three years.

Which means those routes which looked like they were going to be a winter only operation will now continue for a minimum period of two or three years, whatever is the extention that -- whatever ties into that extension and that deal.

I think you are likely to see in the next 12 months sector lengths probably grow by -- maybe 5% would be a useful kind of starting point.

Again, we still have, as the presentation demonstrates, we have 11 aircraft yet to allocate for the remainder of this summer peak.

And so a lot will depend, the final number will depend on where they get allocated either to existing bases or to new bases and where those new bases are.

There is still a number of airports bidding for them.

But I think, again, if there is one message that investors should take out of today's numbers, it's the fact that with a 3% increase in sector length last year we have still delivered -- excluding fuel which is kind of a once-off -- we have delivered a 4% reduction in unit costs, which is an amazing cost performance.

Particularly when you look around at competitors like easyJet -- and you wouldn't really call easyJet or Aer Lingus competitors of ours, but they claim to be low-cost airlines and their unit costs are rising.

Yet we, with a much lower unit cost and much lower price point, are taking 7% effectively -- if you adjust it for sector length, 7% of our unit cost.

In terms of bookings, yes, it has been our policy for the last 12 months to run with a slightly more aggressive forward-booking profile.

And that was just -- particularly as we moved into the winter, looking at the -- we didn't want to get caught under sold and find that there was some shock in the system.

I think our view as we move into the summer now would be to maybe let that pare back to 80% on a rolling basis.

There is a balance to be struck here between maintaining our growth, maintaining our load factors.

Our load factors have risen by 1% over the year; that wasn't our objective.

We may have slightly underpriced in the last 12 months.

And remember where we can exert some upward pressure on pricing in the next 12 months I think we will do it or try to do it, particularly out of Dublin where -- at the Irish airports where you have a crazy combination.

Even before we get paid we have to pay the government EUR10 departure tax and their bankrupt airport monopoly gets EUR15.

So basically, there is an Irish government tax of EUR25 before you leave the country or before we even get paid to allow you to leave the country.

But, again, in those markets where we are expanding capacity, and I would say Faro and Malaga, you will see a dramatic decline in fares out of those markets because for the first time, say, in the Irish marketplace we will be massively undercutting Aer Lingus' high fares on places like Faro, Malaga, and Alicante.

We will be doing the same to easyJet.

Some of those other markets where they have high affairs we wouldn't explode that.

But I would still say that the average fares in those markets will be, compared to Ryanair's average, higher than our average, but it will be significantly lower than the high affairs being charged by easyJet, Aer Lingus, and others in those markets.

Okay.

That is great, Mike.

And so presuming -- what I meant by on the sector length, presumably even though longer sectors perhaps lead to more cost, you are obviously because you considered the commercial opportunity is there in those markets?

I think there is a balance to be struck.

We are not doing it because we think there is some unique commercial opportunity.

Everybody at the time -- we keep eliciting this nonsense that there is mother load of gold, the golden goose is the Irish airports and we make so much money in the Irish airports that it (inaudible) everything else.

It's usually the opposite is the case.

The Irish routes are the least profitable routes we have because they are the highest cost to us.

This year we will overtake Iberia to become Spain's largest airline.

We have to have a presence, we believe, in airports like Malaga if we are going to continue to build out the footprint in Spain.

Portugal is an obvious area of expansion for us.

We have a very successful base now in the Porto.

The Portuguese Airport Authority, ANA, are delighted with the kind of the demonstration of what we can deliver to a small airport like Porto.

They now want us to deliver that in Faro as well.

So, again, as in all things, there are choices in selection of bases.

Not because we think we can get high yields in those bases.

The choice and this selection is based on where we have low airport costs, efficient operating facilities, and now in Spain and Portugal increasingly where we are allowed to self-handle so that we are not raped by the Iberia local handling monopoly or the TAP local handling monopoly.

That is great, Mike.

Thanks.

All of our expansion is always driven with a cost focus.

I have seen the presentations recently from easyJet and Aer Lingus waffling on about their yield management and how great their yields are.

But you look underneath it and it's all an excuse to cover up rising and uncontrollable costs.

I told you there is a laughable slide in the Aer Lingus thing where they claim that airport costs are uncontrollable.

I don't understand why.

We would never put up the white flag on airports.

We have been campaigning against Dublin Airport costs for 20 years.

Maybe Aer Lingus, because they are government controlled, can't campaign in the same vigorous way we can but maybe they should try.

They would be a bit more successful.

Thank you.

John Mattimoe, Merrion Stockbrokers.

Good afternoon.

Michael, could I just ask in relation to the winter yield performance in the current winter -- it's obviously coming in better than you previously guided or declining less than you previously guided.

How much of that variance do you think is down to the actions you have taken in terms of the routes and bases you have selected for launch this winter and the capacity reductions on the higher cost airports?

And how much of it might be attributed to maybe the consumer being less aggressively price sensitive than they had been, if at all, or is there any sign of any demand green shoots emerging?

[The revenues are subjective] here, John.

It's impossible for us to know how much of it is due to consumer sentiment.

I would ascribe most of the better than forecast yield performance to our decisions this year to significantly cut out capacity at Stansted and Dublin where you have very high costs at very -- but with very low fares and yields through the winter.

I think that has helped us no end to manage the yields and significantly reduce.

We are taking airport costs down 11%.

There is a -- new bases, particularly the Canary Islands this winter, have played a significant -- have had a significant impact on that, although their sector lengths are very long so they have a corresponding relatively high cost.

And I would put not much of it down to a better -- the economic environment or consumer sentiment.

It's only my subjective view; we have no empirical evidence for it.

I think the demand out there is still relatively weak.

I think consumer confidence remains low, but I think the real driver is -- the great thing about a recession and consumer confidence is everybody gets price focused or price obsessed, and Ryanair simply dominates the industry.

Any market where there is a price obsession we win.

I think that is reflected in easyJet's closure of the East Midland base, the Dortmund base, last year cutting back capacity at Luton.

They are just not able to compete with Ryanair's comps or our prices.

And the same you see happening with Aer Lingus, which is why I think you get more of these kind of belated lurch away from there is -- I think the phrase last week was, there is no future for low fares, which gives you all need to -- it tells you all you need to know about the management [facing] in Aer Lingus.

And God bless them, the more capacity they take out of our markets -- I think it's essential the strategy from their point of view.

They don't have the cost base to be able to compete with us so you are better off to run rather than stand and fight, because if you stand in place you will get killed.

Okay.

Thanks, Michael.

Just a second question was just in relation to the average sector lengths.

Just if it does run us plus 5%, say, in the next financial year, against that a backdrop would you be hopeful you can sustain your nonfuel unit costs declining at around 4% or 5%?

No.

4% or 5% that would be too aggressive.

I think if you strip out fuel next year -- if sector length goes up by 5%, I think we would be looking at maybe -- the unit cost length will probably be flat.

It might be slightly up; it could be.

But we will certainly be a couple of percentage points better than the sector length.

Okay.

If you follow.

So if sector length goes up 5% I think our unit cost target would be something zero to plus two.

Okay.

So it's kind of sector length minus two or three (inaudible)?

Yes, like-for-like we would still be taking -- unit costs we would still expect to fall 3% or maybe 4%.

Okay.

On a sector length adjusted basis?

On a sector length-adjusted, non-fuel basis.

Okay, that is great.

Thanks for that.

Jim Parker, Raymond James.

Michael and Howard, good afternoon.

Regarding ancillaries per passenger, of course they had been down, going forward I believe that you have your own debit card or credit card -- I think you were negatively impacted by the Visa electron.

Can you give us a bit of an update there on ancillaries per passenger, what the trend should be?

I think it's important not to -- it's very important but don't worry too much about ancillaries on a quarterly basis.

A, you are talking about a winter quarter where there is a general decline in hotels and car hire anyway.

Undoubtedly it's impacted by the recession and an impact on customer spend.

But overall, we had said and I think it's important to remind people, we have been in a five-year program to get ancillaries to 20% of revenues.

In the first half-- last year they ran about 22% of revenues.

They are leveling back out but I think that they will consistently run at or around 20%.

Don't worry too much about the (multiple speakers).

They are 23% in the quarter so people shouldn't get too hung up.

The ancillaries will continue to be strong.

I just think they will level out at the moment without some new kind of killer ancillary, inside entertainment, or gambling, or something like that, or my quest to charge for toilets.

I don't think there is going to be any significant movement in ancillary revenues.

I think the -- on a quarterly basis ancillary performance into Q1 and Q2 of next year -- the Q4 ancillary will be slightly better as will Q1 and Q2.

Easter is at the back end of Q4 and the front end of Q1.

That generally you see an upward spike in car hire and hotels anyway.

So while a 6% number looks weak in the quarter, don't get too hung up on the quarterly analysis because over the full year we are still ahead of our target for 20% of revenues.

All right.

One other question.

Can you tell us what your pre-delivery deposits are?

Well, we don't get into that figure.

We don't provide that [to each analyst.] It's a fairly significant number, Jim, as you can imagine.

We are at the peak of our CapEx this year and into next year, and then it starts to follow or tailback very dramatically.

Okay, thanks.

Joe Gill, Bloxham.

Thanks very much, guys.

Three questions; on easyJet they noted in the last set of numbers that they were taking a winter hit of about EUR16 million due to weather-related factors in quarter ended December and the quarter ending March.

Are you having any impact whatsoever and should we take that into account in terms of numbers you have actually produced and the full-year guidance?

Secondly, in relation to the FX impact in terms of both cost and revenues, could you give us some sense of what impact that had in Q3?

And, finally, the new CEO of Gatwick is quoted today saying that he wants to encourage other airlines into Gatwick.

Would you ever seriously consider having a serious tilt at Gatwick?

Thanks.

Okay, Jim.

Thanks.

First, on the winter, the (inaudible) option, I am not sure what happened.

We did suffer, obviously, as did many other airlines, significant snow disruption in Ireland and the UK.

For some reason though Stansted wasn't quite as badly affected as Gatwick, or certainly we got the impression that easyJet kind of threw in the towel, as did Aer Lingus, while we kept most of our operations going.

Now we have a small financial impact in the quarter but it's immaterial.

It's nothing out of the order of EUR16 million.

It wouldn't even be -- I doubt if it's even EUR1million or EUR2 million.

But we completed about 80% of our program anyway and maintain our number one punctuality.

So I think they may be just dressing up other cost problems and looking for excuses; we don't do that.

On the new CEO of Gatwick, yes -- and I think it bears out what we have been saying for a number of years on airport competition.

We were to the fore in leading for the breakup of the BAA monopoly.

A lot of so-called analysts and experts said it wouldn't make any difference.

It is already making a difference.

I think the new owners of Gatwick are determined to grow the business.

Would we look at Gatwick?

I think we would if we could get a significant number of morning slots.

They are not available at the moment.

And if there was a cost deal there that made it worth our while.

But at the moment the UK is not -- but with the exception of some of UKPs, London isn't a market for major growth for us.

It's equally as bad as Ireland with the UK APD up at GBP11 and the airport costs are high.

We do believe that Stansted, if the Competition Commission stands its ground and pushes forward the break up of Stansted and a Scottish airport, I think you will see -- we have already offered to double our traffic at Stansted if we get a new low-cost second terminal, which we would be happy to co-fund, and a long-term, low-cost arrangement.

So we think there is lots of growth there.

I would be suspicious -- unless someone like British Airways announced they were giving up on Gatwick and wanted to give us their slot so that we could go and beat the crap out of easyJet, I doubt that we will get a lot of slots at Gatwick.

We have grown the business in Gatwick over the last 12 months.

I think the new base in Faro and Alicante, Malaga you will see us connect a lot more flights back into Gatwick but it won't be those kind of that morning, the congested morning peak.

It will be in the afternoon and evenings when Gatwick is empty most of the time anyway.

So Gatwick is not -- I would far rather be expanding this summer into the Canary Islands and Faro and Malaga where you have a much bigger 10, 11 month of the year marketplace than Gatwick.

Where, yes, you could go in and blow up easyJet and Aer Lingus and some of these other mid-priced carriers, but it's not a big issue for us.

I think as long as Gatwick want to encourage us to grow with price incentives then we will growth there.

But I am not sure they really want us to go in and slaughterer easyJet, which I think would be the inevitable consequence of a rapid expansion by Ryanair at Gatwick.

Howard, what is the answer to the FX question?

Yes, on revenues about an impact of negative 2% but positive about 1.5% in unit costs.

Okay, thank you.

Wyn Ellis, Numis.

Just two quick questions from me.

Just on yield, could you split the 12% fall in the quarter?

How much do you think was due to the higher tourist taxes in Dublin?

How much do you think was due to the currency movement, which I guess that was just answered, but also then how much do you think was due to other factors?

Can you break it down?

The second question I had was just I guess to go in little bit further on the question of the FX impact on costs and revenues.

What proportion of your costs now are in euros, dollars, and in sterling?

And the same for revenue, what proportion comes from euro and what proportion is sterling?

Just to talk then on sterling, about 25% of our cost basis is in sterling.

In terms of revenues, it's closer to 30%, about 29% on sterling revenues.

Fuel, as you saw in our note, it represents about just under 40% of our cost base.

Obviously that is almost exclusively dollar-based.

We do have an element of other costs in dollars.

Obviously, the aircraft which we have hedged out would obviously be in.

So an element of depreciation and maintenance.

So I guess 45% of our cost base or probably slightly higher will be on dollars and about 25% on sterling, and then the balance in euros.

Okay.

It's impossible to split down the yield.

We could give you kind of -- there is three broad themes I would give you.

One, is our significant capacity reductions, particularly at Stansted and at Dublin where we have high flat per passenger costs during the winter and very low yields.

We took the Dublin capacity down by almost 40% from last summer and similar in Stansted.

The other thing I think, though, is the shift of some of that capacity into a new market, like the Canary Islands, which have been a fantastic success for us this winter.

Particularly because we only went in there when we got 100% rebate from the Spanish government.

So while it's our long sector length during the winter, they are high load factor, good deal, but with a terrific cost base.

One that we would hope to maintain out over the medium term.

And I think the other key feature has been the extent to which competitors' capacity has been cut, particularly in markets where they were trying to compete with us.

And that is a combination of the old string of airlines -- the SkyEuropes, Flyglobespan in Scotland going bust.

Air France, Alitalia, Lufthansa, SN Brussels, and BA-Iberia causing capacity in markets where they clearly don't want to compete with us anymore.

And also the easyJet and Aer Linguses of this world cutting the -- closing bases in East Midland, cutting capacity at Gatwick, in Belfast, places like that.

Charter impacts also.

And the charter capacity has been taken out of the market this winter.

We think that will continue.

One of the reasons we have announced another big cutback of flights in Dublin this summer, but we are going to increase -- take some of that capacity during the three peak summer months of June, July, and August.

And we are almost doubling up our capacity to summer sun destinations wherein previous years Aer Lingus have had a quasi-monopoly charging high fares to Faro, Malaga, Alicante, places like that.

We are going to go in and swamp those markets for the three months of the summer and make sure that Irish consumers aren't ripped off by Aer Lingus's high fares.

We will offer them low fares, although, sadly, they will get screwed by the Irish government tourist tax and the DAA's price increase.

But if you get down into how much in 12% is accounted for by the cutbacks in capacity at Dublin or the Irish track -- Ireland now accounts for less than 15% of our traffic.

So it would be any one thing like that would be a small figure.

It's really much more broad-brush market capacity cutbacks because of capacity cuts and bankruptcies.

Our pairing of high-cost capacity at Dublin and Stansted, our expansion into relatively good yielding, low-cost markets like the Canary Islands, and then the likes of easyJet and Aer Lingus raising the white flag following their hybrid, wonderful hybrid strategy getting out of the way.

Okay, thanks.

Jonathan Wober, Societe Generale.

Thanks very much.

Three questions, please.

Firstly, on your longer-term target double profits I noticed in your slide pack that you made a couple of significant changes.

It appears you have pushed it back a further year to FY '13.

Is it still 2007 as the base year and you have also added some conditions to it, some caveats, that it's subject to '07 fuel and yield levels.

Doesn't those conditions make it somewhat meaningless?

I mean, 10% per annum yield increases I think you would need to get back to 2007 yields.

That is the first question.

Second question is your guidance for unit costs ex-fuel for the current year still down 5%?

And, thirdly, and just maybe one for Howard, on working capital movement historically you have tended to go from the negative movement at the interim stage to a significant positive at the year-end.

Is that still the outlook for this year?

We checked the positives throughout the year, Jonathan, so I am not really sure what your question is.

Through the cash flow statement.

Certainly if you look at the half year there we generated EUR409 million from net cash from operating activities.

We would expect cash to continue to rise as we move towards the end of this year.

I am sorry, I am not talking about cash movement overall.

I am talking about these specific items that go into working capital.

Yes, but that is comprised of largely the movement on unearned which is the single-biggest mover within that category.

So if you take what we expect to happen by the end of this year, we expect that net-net cash will rise between now and the end of the year.

I think we have been talking about EUR2.7 billion or a shade over EUR2.7 billion as our cash position by the end of the year.

Our debt position, as we have said a couple of weeks ago, is likely to run slightly more negative than that and we would expect the EUR200 million that we have at this point to rise to about EUR250 million, maybe EUR275 million.

And that is really based on the fact that we have a lot of deliveries running into the fourth quarter.

Of course, as you quite rightly or I suppose I think you are trying to highlight, that obviously does effect some positive movement in terms of the unearned income.

I would expect to see that, particularly as we have Easter in the first quarter of next year, so that would help boost the working capital situation

In terms of unit cost --

Let me take it.

Unit costs -- the guidance on unit costs for the year is down 5%.

We could be at 5%; we could be at 4%.

At the moment we are a tad above 4%, it's a rounding thing.

We are unlikely, I think, at this stage to get to 5%.

It might be about 4.5% for the full year.

Some would be distorted again by the sector lengths on the Canary Islands operation during winter where we have opened up 43 new routes, all of them long sectors, into the Canaries this winter.

But that has been [replacing] slightly better than originally forecast yield performance.

So it certainly won't be worse than 4%.

It could be 5%, but we are hovering at the moment somewhere around 4.5%.

The target of doubled traffic and profit is -- there is a bit of confusion out there and I think that some of the analysts or some of our shareholders got a bit enthusiastic.

The target has been to double traffic and profits to calendar 2012, which is FY '13.

It's a target; it's not a forecast.

I know some investors would like us to make it a forecast.

It isn't.

It has always been subject to the fuel variable and the fares being similar to where they were in 2007.

And that is fuel at around just under $70 a barrel and yields up and around in the low 40%s.

Yes, it would require us to get yields up by about 10% a year for a couple of years, but in the context of a yield decline in the last 12 months of 15% we don't think it's an unreasonable target for the Company to aim at, but it is not a forecast.

It's a target.

We need to drive the Company forward on the basis of hitting targets and hope we get there.

If you look at -- and I think that is one of the reasons why people are surprised or they think we are just kind of -- with the Boeing discussions breaking down we are going to rapidly cut back the growth.

While this year there will be substantial capacity growth then it tails of very quickly over a two-year period.

And so the operating assumption will be that we -- we don't have a plan to raise prices this year, but by slowing down capacity this year, next year, and the year after that significantly we would expect to take a lot of the yield and the price pressure off our own growth.

In which case I think yields or fares might return to normal or some degree of equilibrium.

We see no reason why given a reasonable economic out turn that yields wouldn't creep back up by -- to somewhere in the low 40%s.

We don't think it's an unreasonable average yield for an airline carrying 85 million passengers a year.

But the target has been to double from 40 million passengers in 2007 to 85 million passengers by F2012 or, in other words, FY March 2013 and to double profits over that period from about EUR400 million in '07 to about EUR800 million by 2012.

To get there we need stable fuel and to get the yields back up, and that is pretty much what is driving both our capacity slowdown in the next three years and also the kind of rigorous nature with which we are pairing out capacity out of high-cost airports like Stansted and Dublin and reallocating capacity to low-cost airport bases -- Faro, Malaga, Leeds Bradford, Bari, Brindisi -- over the next 12 months.

Right.

So you are saying that there is no change to that target?

There has been no change to the target but it's important to emphasize that it's a target and not a forecast.

I accept it has always been a target, but it was always a target and my understanding it was FY '12.

No, it was calendar '12.

And where you hadn't previously put those conditions on it.

I am looking at presentation you gave two weeks ago and it doesn't have the same wording or the same time frame attached to it.

But I think you won't be -- where we originally set out the target about four years ago and it does refer to the same fuel and fares as 2007.

Anyway, that is what it is.

All right, thank you.

Neil Glynn, Credit Suisse.

Just a couple of questions on the revenue front to begin with, just talking about Q4.

Can you give a bit of flavor as to how the forward-booking profile is looking?

You have obviously got January in the bag, a lot of February, but are you seeing much into Easter?

And maybe you could give a bit of a sense as to how your Q4 implicit guidance breaks down month by month, even at a high level?

Then on the seasonality front, you have obviously just had the quarter two December.

Are you seeing much of a step change in terms of how the leisure demand environment has changed on a seasonal basis through the downturn?

Maybe you could give some thoughts on how that might proceed over the next couple of years.

Okay, Neil.

I didn't understand the second half of the question which is seasonality in the leisure and environment or whatever else it is.

We maintain an 81%, 82% load factor year round.

The seasonality is reflected in slightly stronger yield performance during the summer months, but we still deliver very strong traffic numbers during the winter months as well.

Yes, there is a little bit more seasonality in our numbers for the last probably two years but that is driven more by the fact that we have sat so much capacity on the ground in Stansted and Dublin, high-cost airports during the winter.

If either of those airports had a whit of intelligence or intellect they would do a deal with us to significantly reduce airport costs, particularly during the winter season, and then we would keep flying a lot of that capacity and have a win-win for both consumers and for the airports.

But then that would require intelligence in the Dublin Airport Authority, which is a qualification that would probably have you fired from the Dublin Airport Authority in the first place.

It might be helpful -- Michael Cawley, I don't know if you are on the line from London, do you want -- we won't break down obviously the Q4 yield by month but to give people a flavor of what you are seeing on Q4 and our guidance for Q4?

Is Michael on the call?

No, okay.

Sorry, I will do it myself then.

We have good visibility out there for Q4.

Q4 is a little bit distorted in that we days -- the run up to Easter is in the backend of March.

So the trends that we have seen in Q3 look like being repeated into Q4.

We are therefore a little bit more optimistic on the -- rather I should say, we are a little less pessimistic than we originally were.

If you remember, we were looking at minus 15 to minus 20.

We think we will come in in Q4 something probably just under (multiple speakers).

Yes, our guidance in Q4 will now be just under minus 10 so probably minus 8, minus 9.

Again and before everybody goes out and starts working the model for next year, remember there is a bit of Easter in the backend of March and that does make a big difference on a comparable basis.

But, overall, it is important, I think, to stress that the yield environment is better than we had originally expected.

But we originally expected it to be awful.

We are looking at a yield decline for the year of less than, just under minus 15 which would be our second-largest ever annual yield decline in 25 years.

So it's a little bit better than we forecast but it's still pretty tough out there.

And I would expect that to continue.

The summer should be a little bit better.

A lot depends on how much more capacity is taken out by competitors going bust and the [flags] causing back capacity.

Just speaking on capacity, just finally, you have touched on it earlier on but have you a sense, whether it's a route-per-route basis or even just city pairings, how capacity has fallen year on year against yourselves?

Remember we now operate something like 1,300 routes so there is a limit to the amount of -- or, sorry, just over 1,050 routes.

So there is a limit to the kind of aim level of detail on a route-by-route basis that we would either do or be interested in.

We are talking much more broad brush.

But there is no doubt, I think, across -- that one of the key features across Europe at the moment is the way that competitors are retreating from competition against us.

And that is not just the flags, it's easyJet, it's Aer Lingus, it's SkyEurope, it's Wizz Air.

Everybody is getting out of our way, which is a good, sensible strategy from their point of view because we are -- have an enormous cost advantage over everybody else.

I think if there is one message I would take out of the Q3 numbers today it that Ryanair, with the lowest unit costs in Europe, is still reducing unit costs on an adjusted for sector length, on an adjusted basis by more than 5% this year while almost every other airline in Europe is seeing unit costs rising and bleating on about how their costs are uncontrollable and that is why they are going to move to a better model and that the Ryanair model isn't sustainable.

We have been at this for 25 years so I don't want to be lectured by people who are in new jobs less than kind of six months or two years as to how our model isn't sustainable.

Funny enough, I think I am now on my -- I am at this now for 20 years in Ryanair.

I think I am on my 16th Aer Lingus chief executive.

I am probably heading for my fifth easyJet chief executive.

So I really lose -- I don't pay too much attention to these geniuses telling me how unsustainable the Ryanair model is.

It's remarkable how all -- if our model is unsustainable, how they are all desperately trying to get out of our way and not compete with us.

But they all have their crosses to bear.

I wouldn't want to work for the Irish government or (inaudible) either so they have to say something.

Right, thank you.

Eamonn Hughes, Goodbody Stockbrokers.

Yields just again from some of the immediate trends.

You have given a little bit of flavor there particularly seeing some of the mix in new routes in Spain and the capacity side and maybe Dublin and Stansted.

But if you could maybe just try and get a little more top-down flavor on sort of parts of Europe that you are starting to see a little bit more traction I suppose.

Partly if you have come in effectively from minus 20 guidance for the quarter and you have just performed at minus 12.

Was there anywhere else beyond the mix that maybe you are starting to see a little bit of traction economically that would have skewered the numbers a little bit?

And also just if you comment on -- again, at a time when the guidance is starting to improve over the last month or so we have seen the oil price weaken fairly considerably.

So we have got maybe a little disconnect here where the yield is going to be driven maybe a little bit more by the macro environment rather than the oil price which was the expectation only a few weeks ago, a few months ago?

Here is where I think we have to be careful.

The yield environment out there is, from Ryanair's perspective, great because it's awful.

We have done slightly better than our guidance on yield in third quarter and into the fourth quarter, but that does not mean that the world has changed and we are in recovery and everything is fantastic.

If you look around us airlines are going bust on a weekly basis.

Other competitors are cutting capacity.

It is really difficult out there.

We are doing remarkably well because this is the time lowest cost producer, when we just kick out of everybody else.

I would still be relatively-- and I think it's important -- I would still be very conservative about kind of outlook for next year and forecast for next year.

I don't see any material economic recovery in Europe.

There is an awful lot of quantitative easing or whatever else is going on there.

And when the bankers start to see inflation or economic recovery, I think they are going to start crippling people with interest rates.

Now thankfully, we won't be affected by that because we have lots of cash on deposit.

But I would be very reluctant to share in the outpourings of joy we heard from easyJet and Aer Lingus presentations going on about how yields are going to rise and don't worry our costs are rising but they will be covered by higher fares.

If you look out over a two- or three-year period, I think Ryanair -- by being the lowest cost, lowest fare provider in Europe and significantly cutting back our capacity growth we should certainly create an environment over the next two or three years where there will be a modest, I think, recovery in our yield.

I think we will get back to 15% yield reductions we have implemented this year to deliver 66 million passengers, but I wouldn't want to go much further than that.

Is this -- the trend we are seeing last quarter and into the fourth quarter is that going to be repeated or continued into the first, second, and third quarters next year?

Honestly, it's too early to say.

We don't have good visibility.

Easter is early in April.

I think we would have a better mix of routes and certainly the bases this summer because there is no doubt in my mind that bases like Faro, Malaga, Alicante, and the Canary Islands will do very well during the summer and will probably continue into the winter.

But a lot depends on what happens in other key markets, like the UK.

The have an election in May; the new government will have, I have got to say, enormous financial difficulties.

I think if they got rid of the APD it would have a major impact on UK tourism.

Clearly, in Ireland I think the tourism industry is facing long-term destruction unless the government gets rid of this stupid tourist tax and breaks up the DAA monopoly, which I think now becomes inevitable that the DAA will clearly go bankrupt in the next 12 or 18 months because you can't keep increasing the fees to finance or to fund a decline in traffic.

But that said, Ireland is a small market for us.

I think -- over the medium term I think there is every profit that we get back the 15% yield declines of the last 12 months.

I certainly don't see any more years of -- in the next one, two, or three years that there won't be anymore very significant yield declines because we will be slowing down our growth rates markedly.

But I wouldn't want to go too optimistic yet.

I think it's too early and I don't think we should be.

Let's be conservative in our outlook rather than optimistic.

Okay, Mike, and just in relation to some of the countries there that you talked about earlier in the MD&A, but market share gains.

I think it was [Scandia], Italy, and Spain, and I think it was the UK.

Similar trends, I presume, heading into FY '11 would be your sense or is there anywhere else that might be enough to just give it some of that consolidation or declines you have seen or airlines go under we have seen over the winter?

I think the reason we went to those markets is that those are the markets where we are opening up bases and adding a lot of capacity this year.

There is no doubt Spain is an amazing market for us at the moment.

Every other airline in Spain from Iberia, Vueling, Clickair, Spanair, easyJet are cutting capacity.

Spanair I don't think -- I would be surprised if they survive the next year or two unless some idiot comes along and gives them a massive financial infusion.

And I can't see why they would.

But even easyJet has seen its market share decimated by us in Madrid and in Barcelona.

We will overtake Iberia in Spain this year and become the number one airline.

We are also opening a few bases in Italy where again in Bari, Brindisi.

This year we will overtake Alitalia.

I think they carry about 22 million passengers a year.

Our traffic to and from Italy this year will be about 23 million so we are making major gains there.

Scandinavia we are opening up the base in Oslo, Rygge, the secondary (inaudible), which is a much closer airport to Oslo than our existing Torp airport.

That base, the advanced bookings are very strong and I think it's clear that we are -- SAS are weak and you have Norwegian, which is a relatively high fare airline up there.

I think we will do a lot of damage to volume and take a lot of traffic because there seems to be a lot of pent up demand in Norway for cheap fares.

In that base we will do well.

In the UK, we have significant expansion at those airports who are reducing costs.

We are opening up a base in Leeds Bradford in March.

We are adding significant capacity at Edinburgh Airport where, in fairness to the management of the BAA, the threat of breakup seems to have liberated them in no uncertain terms.

Very forward-looking, very aggressive on costs, and we are talking to them.

I think we might add a couple of -- we have already announced I think two more, three more aircraft at Edinburgh this year.

And they have responded very quickly to the bankruptcy of Flyglobespan.

They have encouraged us to put three more aircraft in there this summer, add lots of summer sun routes, and we have taken up a lot of those bookings are simply transferring to us that would have otherwise have gone to Flyglobespan and to a charter airline.

So I think it's not so much that we are seeing amazing economic recovery in Spain, Italy, Norway, and the UK.

It's just those are the countries where the airports have responded with the best deals.

The Spanish government have introduced 100% discounts.

The Belgians and the Dutch have scrapped tourist taxes altogether, and those kind of moves deserve to be rewarded.

Meanwhile governments like Ireland and the UK who are imposing tourist taxes and the utterly insane decision of the Irish government to instruct the independent regulator to approve a 40% increase in Dublin's airport charges at a time when Dublin Airport has just lost 3 million passengers in the last 12 months is just nuts and doomed to failure.

But, quite frankly, the sooner it fails the sooner they realize they have got to go back to working with Ryanair to make Ireland a low-fare tourist destination, low-cost tourist destination not a high-cost one.

Just picking up on a point there, Michael, you said obviously Spain has made a good impact in terms of reducing charges.

Have you kind of thoughts in terms of the number of bases over the medium term?

I think you had kind of spoken in the past around in the 15 or so bases in Spain and something similar in Italy.

Has that changed over the last few months in terms of your thoughts on those?

No.

If you look at those big European economies -- Spain, France, Germany, Scandinavia, and the UK could all have easily 12, 15 bases.

But again, it's important to stress that we don't have -- there is no geographical program of base expansion here.

We select a base based on which one comes up with the best package of low-cost and very efficient facilities.

Now that tends to reflect where they are most desperate for traffic.

And where Spain developed an awful lot of traffic in the last 12 months, the airport and the (inaudible) have got very competitive.

Portugal the same thing, Italy the same thing, and in Scandinavia, where SAS seems to be imploding again, the same thing.

Where you have a country that is run by a bunch of illiterate pygmies like Ireland, they follow a visionary strategy of taxing tourists and increasing airport charges during the recession by 40%.

But they will get their just desserts in the not-too-distant future what I suspect is a double-digit decline in tourism this year before they finally work out that they made -- and that backing or supporting the airport monopoly is the wrong way to go.

Okay, Michael.

Thanks very much.

Robert McAdoo, Avondale Partners.

Just a couple of questions, thank you.

You had earlier talked in earlier calls about how one of the purposes of increasing bag charges was to actually discourage people from checking any bags at all with the idea that that would offset, it would enable you to lower your cost structure.

And I noticed in this period you talk about how that is one of the behavioral changes is that we are seeing less checked bags.

I am wondering if you are starting to see costs reduced or places where you can in fact reduce the costs because of that.

The second question is in some of the aviation press this morning there is a statement that says Webjet stated it received an offer from Ryanair Holdings to acquire an undisclosed equity in the Brazilian airline.

Just curious if you had a comment on that and I can't even find Webjet as a Brazilian airline.

I was wondering if you had any comments.

My comments around the latter point are -- it's important here, we have an official policy we never comment on rumor or speculation, particularly where it concerns airlines that we have never heard of, couldn't find, don't know, can't even Google them.

So but our policy is we never comment on rumor or speculation.

In 25 years here we have never invested in an airline and some ill-begotten country outside of Europe, and it's not going to be happening now either.

But I think it's an easy way for somebody who wants to generate some money or some publicity, I have been talking to Ryanair.

I read the article.

It said they had received a written offer, something in writing from us.

No, they haven't because if they had, A, we have never heard of them and we wouldn't know where to send it anyway.

All I know about Brazil is they have gold down there.

It's very good low-fare airline.

I don't know why in the name of Jesus anybody or we would want to invest in anything in Brazil; we don't.

We intend to double in size here in Europe in the next five years and not get distracted, as we never have been, by getting involved in airlines we have never heard of and don't even know if they exist or not.

In terms of the bank, the policy continues to work very successfully.

I think we are down now to -- I mean, routinely we are running now at about 25% of checked-in bags.

During the summer that would rise to maybe 30%, 35%.

I think that is the core; that is kind of Ms.

O'Leary when she is traveling is incapable of traveling with hand luggage only.

So I accept that I will have to pay excess baggage check-in fees for the rest of my life.

But I think if you look at what happened, if you look at the airport cost fare, airport and handling, the cost is down 11% in the third quarter.

One of the real things we bring to airports now, both existing airports where we already operate and the new airports, is you need very little in terms of facilities to be able to handle our passengers.

They all check in on the website.

You don't need check-in desks and we have 100% of passengers checking in on the website.

Now you don't need check-in desks, only 25% of passengers will show up with bags.

You might need one bag drop off point; you need fewer baggage handlers.

So the demands we place on airports are infinitely less and simpler than the traditional airlines.

And I think airports are gradually responding to that, particularly again in more traditional markets like Spain and Italy.

They are realizing that actually it is much cheaper for them to handle a Ryanair flight than an Iberia flight or a charter flight.

Of course, and it would be remiss of me not to mention that Dublin Airport I see a different future.

As part of terminal two they have built an entirely separate building for deep queuing check-in spaces.

It has cost about another EUR200 million.

At a time when the world, even Aer Lingus, are moving to web check-in Dublin Airport are building a building for the deep queues associated with airport check-in.

But then that is what you get when you have a regulated monopoly.

They piss away as much money as they possibly can building facilities that will never be needed so that they can get their friendly local government department to order the independent regulator to give them 40% price increase and make sure that traffic falls by another couple of million this year.

But don't get me started on Dublin Airport.

So the baggage policy is working like a dream.

It has significantly reduced our handling and airport costs.

And, again, you go back to the silly comments coming out of Aer Lingus and easyJet and recently that Ryanair's unit costs are not sustainable.

It's a once-off thing.

We bought aircraft in 9/11.

Again, their insight into history is very limited.

We bought aircraft in 1997 before 9/11, in 1999 just before 9/11, just after 9/11 and again 2006, long after 9/11.

And we continue if -- you look at the unit fares, lower unit costs while our competitors are out there saying that our model is broken and they run away or scurry away as fast as their little legs will carry them.

So other than Mrs.

O'Leary we are carrying markedly few checked-in bags.

That is great.

Thanks a lot.

Jarrod Castle, UBS.

Good afternoon; just two quick ones.

One, just in terms of the environment to dispose of aircraft.

We are hearing that the financing market is starting to slowly open up.

Are you seeing any signs of kind of the ability or potential for purchasers to get the financing and buy fleet?

Secondly, if you are increasing your sector lengths generally, does that have any positive impact on the propensity to buy things on the flight?

Do you see a little bit of an increase happening in ancillary revenues when people have to sit on board a bit longer?

We had last week at the aviation finance conference in Dublin -- and I don't know who has been telling that but for aircraft leasing companies, the outlook is not very, very good.

A lot of them are -- some of them have no money.

Debt is very, very hard to come by; very, very expensive and there is no signs of any improvement in terms of aircraft prices.

In fact I would expect that that will probably get worse as we go through this year.

And so in terms of financing on a general scale, unless you are a Tier 1 airline like to Ryanair, Lufthansa, or Air France, there is no financing available.

A very large US bank commented to me that it was the first time that they could recall that aircraft leasing companies could only borrow more expensively than airlines.

So I expect that market, in terms of our own sale and leasebacks, I don't expect to be doing anything for at least 18 months.

And in terms of selling aircraft I think I would put that on a similar number timeline.

In terms of aircraft sector length, yes, that is generally helpful towards selling more things on board but really and truly is not going to materially move the dial in terms of lifting ancillaries.

We have recently launched a point-of-sale system which we have rolled out to our two largest bases.

But overall, I think we talked to [everyone] about where ancillaries were going to pan out.

I think we are comfortable that we will stay in and around 20%, certainly for the forthcoming year.

I should say, by the way, Michael Cawley is on the call but he couldn't -- for some reason he can speak, can't get in.

So he is on the call anyway.

Which Michael would you like me to unmute, sir?

If you can mute Michael Cawley, I think it's a very positive development.

(Operator Instructions) [Johannes Braun], Commerce Bank.

Just one question to double check on your CapEx spending.

You guide for EUR1.2 billion for the full year but after nine months your CapEx, your cash flow statements only state EUR600 million.

So I assume you expect another EUR600 million in Q4, is that right?

That is gross CapEx, Johannes, which is our total CapEx.

Obviously this year we have got a number of sale and leaseback transactions.

We have 24 deliveries between January and March, and overall we would expect that we should be north of EUR900 million in terms of on balance sheet CapEx.

Next year or if you see on the slide show it's on page 17, we have gross CapEx again of EUR1 billion.

I would expect we will probably do most of that given my comments recently on the previous question in terms of the lack of finance for people to do sale and leasebacks.

So I suspect most of that EUR1 billion will actually be on balance sheet CapEx.

All right.

So you expect EUR300 million for Q4 on balance sheet CapEx?

Correct.

(Operator Instructions)

Okay, it's -- what are we on -- twenty to four.

Okay, folks, I think we have covered all the questions and answers.

If anybody wants to talk to us individually, Dave Broderick is here at the office in Dublin.

We are not doing a road show obviously for the Q3, which is normal.

I am over speaking in New York on Thursday at Jim Parker's wonderful never-to-be-missed aviation investor conference in New York, so I hope to see some of you in New York on Thursday.

Other than that if anybody wants to chat to Howard, Michael Cawley, David Broderick or any of the rest of the guys, feel free to call us here at the office in Dublin.

In the meantime, again, thank you for participating in the call.

Remember the unit cost story, which I think is the compelling story coming out of today's numbers.

That and the flight of competitors away competing with us, hopefully, bodes well both for Q4 and into next year.

We will have a lot more detail and color on the next full-year guidance when we get to the full-year results road show which will be the first week of June.

Thanks, everybody.

God bless, bye bye.

Thank you for joining today's call.

You may now replace your handsets.