Ryanair Holdings PLC (RYAAY) 2011 Q4 法說會逐字稿

Okay, good morning, ladies and gentlemen.

Sorry we're running slightly late but CNN were delayed on the media stuff earlier, so we'll hand out copies of the presentation and then we'll kick straight on.

Are we okay to go?

Are we?

Great, okay.

So welcome, everybody, to our full-year results presentation, this is the Analysts Briefing.

I hope you all got the results this morning, a very good set of results given the year that it covered; profits up 26% to EUR401m, average fares up 12%, traffic growth at 8%.

And remember this covers a year where we suffered enormous volcanic ash disruption in April/May last year, enormous or frequent 15 days of national air traffic control strikes last summer and another two months of disruptions through December and early January with snow closing many of Europe's airports.

Despite that, as you can see, we continued to grow strongly, strong traffic growth, very strong profit growth and I think it demonstrates, yet again, how robust the Ryanair model is and how it continues to be the preeminent airline model in Europe, low-fares airline model in Europe.

So we'll run briefly through the presentation, as you can see the philosophy hasn't changed much, we're still the lowest fair, lowest seat cost in Europe.

More coverage than any other airline, 27th year of strong growth in traffic and profitability.

In terms of fares, last year the average fare was EUR39; that was up 12%.

The key driver in the fare increase has been our longer sector lengths, sector lengths last year were up 10% but also the lack of capacity across Europe which has is leading many of our competitors either to raise fares to cover rising costs, that is particular evident currently with increasing fuel surcharges among many competitors.

Traffic growth, again, strong traffic growth last year, up 8% to 72m.

As we cautioned last year we're beginning to slow down that rate of capacity and traffic growth, still maintaining very high load factors but, and again, we believe that our slowing rate of capacity growth will enable us to exercise some upward momentum in pricing.

We're the largest airline, international airline in the world.

And in terms of coverage, 44 bases, 160 airports, 27 countries.

We're operating more than 1,500 daily departures across 1,300 routes, with a fleet at the year end of 272 Boeing 737 aircraft.

The financial highlights, as we said, traffic up 8%, average fare up 12% and that includes the bag charges.

The number of people checking in bags continues to decline as we continue to change passenger behavior.

Total revenue per passenger up 12% from EUR45 to EUR50, and profit after tax up 26%.

Highlights for the balance sheet, strong cash generation continues, as I said, we have low-cost aircraft.

Despite paying out a dividend of EUR500m in October we still closed the year up almost EUR100m in cash at a fraction under EUR3b.

And I think that shows just how strong the cash generation in this business model is, and that should continue over the next year or two as the funding of aircraft orders declines.

In terms of the highlights then, so profits up 26%, traffic up 8%, 40 new aircraft, 8 new bases, over 300 new routes launched.

Unit costs excluding fuel were up 3% but with a sector length growth of 10%, adjusted for sector length unit costs were down 7% year on year.

No other airline is lowering unit costs at the current time.

Despite that we continue to be the most on-time major airline in Europe, and we paid out a EUR500m in October.

Outlook, more consolidation, more closures, particularly at these —- at current oil prices.

This year, we're going to slow down the traffic growth, slow it down significantly, slow it down much faster than heretofore.

We expect to grow by only 4% this year and that will be characterized by traffic growth of 10% in the first half, up to the end of September and then we're actually going to cut traffic and capacity this winter.

We'll see traffic declines of 4% from October -- or from November onwards as we introduce the winter schedule.

And that's a decision we've consciously made, we take delivery of 50 more aircraft from Boeing this winter, instead of running out during the winter and finding new bases and new routes for those to operate we're going to ground almost all of them, as well as grounding 30 of our own aircraft.

So we'll have about 80 aircraft on the ground this winter and that is a decision that we didn't want to go out and be paying, we're paying significantly higher oil prices in Q3 and Q4, we don't want to launch new routes and new bases paying those high oil prices and lose money stupidly during the winter.

So we're going to cut capacity and traffic this winter, try and make as much money as we can in the first half of the year and then try and give as little of that back as we can during the winter.

So the capacity cuts will be principally due to higher cost oil.

Now we still have flexibility built into the model so if, for example, the Irish Government comes up with the deal that we're looking for on airport charges at the Irish, we could take 10, 15 of those aircraft and suddenly start growing rapidly out of Ireland this winter, but absent somebody making it worth our while in terms of significantly lower airport costs we do not intend to grow capacity this winter, we intend to cut capacity this winter.

Overall for the year we expect yields to rise by about 10%, 12%.

Remember our average fare is still only EUR35, so we're not talking about a large growth in air fares.

Most of that we expect to see in the first half of the year; we already have higher fuel surcharges out there with most of the flag carriers across Europe.

We see that in bookings through Q1 and a little bit of visibility we have in Q2 at the moment.

Clearly we've no visibility for the winter, but the objective will be make as much money as we can in the first half and then lose as little as we can manage in the second half.

Overall given the capacity growth, higher oil prices were hedged out at about $82 (sic - see slide presentation) per barrel to the end of next March, 90% hedged.

We expect the total fuel bill to rise this year by about EUR350m.

Ex fuel, cost discipline continues, adjusted for sector length we expect unit costs will rise this year just fractionally, 2%.

Most of that will be significantly higher euro control charges as usual rising far faster than inflation.

And also we've had to pay -- there'll be staff costs growth this year because we've got a small pay increase after two years of pay freezes.

Overall, however, I think we're relatively modestly optimistic.

Instead of many of our competitors who are now seeing cuts in earnings we expect flat earnings for the next 12 months, we believe if yields rise by 12% that will cover the higher fuel bills, then earnings will be flat at EUR400m.

If the yield growth is a little bit more than 12% then there could be some small growth in profitability this year, but I think EUR400m or unchanged profitability is a reasonably conservative outlook for the year.

Just in terms of consolidation, we'll skip through that.

Hedges extended, as you can see, and here's where we are, we're now 90% hedged at about $820 per barrel, but it rises significantly through the year, we're hedged into Q1 at $690 a barrel -- or $770, sorry, but it rises up to $800 (sic - see slide presentation) and $970 in Q3 and Q4.

So you can see why we really don't want to fly, we want to minimize our flying during those quarters when we have those kind of very high oil prices, and that's why we've decided to sit more aircraft on the ground this winter.

Capacity cuts, so as you can see, here's how --- the path for the year.

In Q1 we'll have traffic growth of about 18%, remember that's slightly distorted because you had the volcanic ash cancellations in Q1 of last year, you have Easter in Q1 this year as well, so the underlying growth is about 10%.

Q2 you see we expect traffic growth of about 4% and then we cut into Q3, Q4, minus 2% and minus 5%.

We expect to make more of the profits obviously in the first half of the year, partly because of the easier comparables last year with the volcanic ash disruptions, and the yield growth that we're already seeing in Q1 and into Q2.

We expect more loss in the second half of the year which is why on the back of higher oil prices we're cutting capacity and overall we expect that the capacity cuts in Q2 will limit our losses and protect full-year profitability.

Ryanair remains by some distance the industry cost leader, our total cost per passenger excluding fuel in the last 12 months is about EUR27.

EasyJet, which would be the closest comparable to us, although clearly not very close, about EUR48 per passenger.

And you can see across every single line, Ryanair is much more efficient, much lower cost, which is why I think partly why EasyJet are out there prattling on about trying to attract business traffic, it's because they can't compete with Ryanair for either the economy traffic or for the business traffic, they desperately need to get the air fares up to cover their rising costs.

And that's good, we think, for our formula for the next 12 months where that combination of competitor fuel surcharges and the airlines like EasyJet and Vueling in Spain raising fares should give us plenty of coverage for the yield guidance.

In summary, we'll remain Europe's only lowest-cost, lowest-fare operator.

We're still the number international scheduled airline in the world.

Despite the somewhat bearish economic outlook we still expect to grow traffic and yields in the next 12 months.

We have many new airports and bases ready.

I think this is the key for us, we are now getting more offers from more airports than frankly we can handle, even with 50 aircraft deliveries this winter, but we're going to be much more disciplined about the timing of the rollout of those aircraft and where they get flown, because the higher oil prices means that we're clearly not going to do as much loss-making developmental work over the next 12 months as we would have done in the past.

We do intend to return further cash to shareholders, not this year, but as CapEx falls the guidance continues to be sometime towards the end of FR'13, if we have not done another big aircraft order or an acquisition in the meantime.

And the formula of Lowest Cost Always Wins continues.

We've a couple of Appendix slides to take you roughly through at -- back.

You have the bases, there's the 44 bases together with the route profile.

We've stuck in two slides as well just on the UK, the OFT.

We have the appeal coming, we expect a decision from the appeals panel sometime in the next couple of weeks on the OFT's application to be allowed to enter or to investigate Ryanair's 29% stake in Aer Lingus.

We think this thing is a joke, the legislation is quite clear, the OFT had four months from October 2007 to investigate this thing, they decided at that time not to investigate it and yet then they come along five years later after the EU process has finished and say, oh well, now we want to investigate.

It's ludicrous.

It also will set a very bad precedent, I think, for mergers activity here in the UK generally if the OFT can have a sort of unlimited deadline to intervene in these matters after the EU has had a look at it, the mergers and processes in the UK will we think be significantly damaged.

The EU prohibited the Ryanair takeover, the first Ryanair takeover offer in June 2007.

We withdrew the offer at that stage.

The EU Commission confirmed that since Ryanair is not in a position to exert either de jure or de facto control over Aer Lingus the Commission was not in a position to require Ryanair to divest its minority shareholding, which is, by the way, not a controlling stake.

The OFT investigation was launched only in September 2010, some four years later.

The OFT has clearly missed the four-month deadline from June 2007 to launch its investigation.

The investigation has been suspended since October 2010 pending the outcome of this out-of-time issue.

We expect the Competition Appeals Tribunal to rule sometime in the next couple of weeks.

Clearly we would hope they'll rule that the OFT is time-barred, in which case, however, we expect that Aer Lingus will appeal the decision.

And if the tribunal rules that the OFT isn't time-barred then we'll be appealing the decision.

So this kind of nonsense means we're going to delay the process, one way or another this matter is going to be appealed for another year or two years.

We believe, in any event, even if the OFT does investigate, what would be different in this case is that there've been effectively five years of behavioral evidence which clearly establishes that Ryanair has no influence or control, we clearly have no control, we don't have any influence over Aer Lingus either.

We have attempted to intervene, we think, in shareholders' best interest a couple of time in recent years by calling EGMs on the stupid decision to close the Shannon base.

Despite the fact that we're legally entitled to call in EGM as a holder of more than 3%, Aer Lingus refused to hold the EGM.

Surprise, surprise, after 18 months they reopened the Shannon base recognizing the decision.

We also tried to table a couple of motions at the recent AGM, principally to ensure or to ask why there was no dividend for shareholders at a time where Aer Lingus in the last 12 months has wasted some EUR70m of its own --- of our cash.

Firstly in paying off the ESOT which was struggling with its bank loans, the ESOT was set up by the unions and the employees to hold 15% of the company, and when they got into trouble Aer Lingus just bailed them out, which has been one of the problems with Aer Lingus historically is every time the workers and the unions get into trouble they just come and rifle the tail in Aer Lingus.

We also called for a motion, we were looking for a motion that there'd be no increase in the funding to the Aer Lingus employee pension schemes, a good, again, another sensible measure in our view, and even that was thrown out.

Although the Chairman of Aer Lingus did say that they had no plans to increase the funding rates, we don't believe him, because the evidence of the behavior of Aer Lingus in recent years is that every time the employees come calling they rifle the shareholder cash fund in Aer Lingus and they just pay off or waste millions buying off the unions.

We've also called in the past for Aer Lingus to dispense with fuel surcharges.

Sadly, they have not taken our advice and continue to levy fuel surcharges, particularly in the long-haul market where they continue to lose traffic.

We believe it's clear also over the intervening four years that instead of there being a reduction in competition, which is what the OFT will be investigating, there's actually been an increase in competition, remarkably with Aer Lingus reopening the Shannon base competing against Ryanair, opening up a base in Belfast competing against Ryanair and more recently opening up a base in Gatwick competing against Ryanair.

Now, obviously the fact that Aer Lingus' new bases in Belfast and Gatwick have been financial loss makers means that they've been reversed, but it does, we believe, indicate that the OFT has no grounds, apart from being out of time, there's clearly no evidence that Ryanair has any influence or control over Aer Lingus, which sadly continues to be influenced and controlled primarily by the Irish Government and the trade unions which is why it continues to lose money, lose traffic and destroy shareholder value.

If you go forward, Aer Lingus, they produced some kind of nonsense slide on their last road show saying Ryanair was Air Lingus's biggest competitor and therefore the OFT should clearly intervene.

If you look at our route network of where we allocate our capacity, Aer Lingus is amongst our smallest competitors, they're not in the top five of our competitors on any of our networks.

They compete with Ryanair on less than 10% of the Ryanair network and since, as I said, 2006, competition between Ryanair and Aer Lingus has increased not declined with new bases in Belfast, Gatwick and Shannon.

I do believe, however, and I think it's inevitable as the IMF begins to influence Irish Government policy, the government's 25% stake in Aer Lingus will get sold.

It probably won't get sold to Ryanair but if it doesn't we're very happy it be sold to somebody else, whether it's British Airway, Air France, Lufthansa.

I think it's inevitable then that Aer Lingus gets broken up.

Most of them would want Aer Lingus for nothing other than the Heathrow slots, I think they'd be very happy to take the Heathrow slots out of Aer Lingus, and then they'll probably turn around and flip what's left back to us.

So no matter what they do I suspect even in trying to prevent Ryanair acquiring Aer Lingus the Irish Government will probably, if they sell the 25% stake, result in Aer Lingus being broken up, wrongly in my view, but the rump of it will probably be given or gifted to Ryanair anyway.

I think we're the only people who can run Aer Lingus sensibly, profitably and with a lower cost base.

Our commitments are that we would grow the business and lower the fares of Aer Lingus but nobody believes us, so fine, let's wait and see what happens.

Anyway, as you know, it continues to be a very small part of our overall operation so I don't want to dwell to long on it other than I do think there will be developments in it over the next 12 or 18 months.

In terms of our growth we continue, we take delivery of another 50 aircraft over the next -- well, net 25 this winter, so we expect to continue with 75m passengers this year.

That will grow by another 5% to probably about 79m passengers up to FY2013.

As I said, that number is changeable, we are still talking to a number of airports even this winter about much lower cost deals in return for growth.

We're looking at deals generally across Europe of between five and 10 years, where airports or countries are trying to encourage Ryanair to add capacity and traffic growth in their airports or in their countries.

In most cases for the delivery of that growth we're seeing 100% discounts over five or 10 years and that would be the starting point, and that's very much part of our debate with the Irish Government at the moment who are desperately trying to stimulate growth.

We've said, look if you want to be competitive the charges at the Irish airports have to be discounted by 100%, but only for the growth piece.

We'll continue to pay the ludicrously uncompetitive high airport charges to the DAA monopoly for the traffic we presently have, but if you want growth we want a competitive cost base and that's 100% discount, at least for five years.

The fare fuel surcharges, you've seen the kind of fuel surcharges going on all over Europe, they're just a joke.

I mean at time where Ryanair's lead-in fare is EUR9.99 or GBP12, GBP15, you've British Airways, Iberia, Lufthansa, Air France, KLM, levying fuel surcharges, and this is on their short haul flights around Europe, starting at EUR14, in some cases in Germany EUR30.

That's, I think, why our traffic growth is so strong and also why, unusually for us, we're fairly optimistic on the yield outlook for the next 12 months.

That's it.

Howard, anything you want to add?

No, okay, let's open it up for questions.

And if you might just identify for those watching.

Hi, it's Neil Glynn from Credit Suisse.

Three from me please.

First, on the average fare outlook, obviously you've got the quirk in Easter timing for your first quarter, can you clarify as to what we might expect in the first quarter relative to the second in terms of that 12% average fare guidance?

Second of all, sector length obviously can be a key moving part in both the fare on the unit cost side of things, what are you expecting on the summer there?

Then finally those 80 aircraft that will be grounded for the winter, I guess give or take, depending on what happens with airport deals that may become the new norm if fuel prices remain where they are?

Is there a better way to redeploy those aircraft that you're maybe considering or should we expect that to happen for the foreseeable future?

Okay, in terms of average fare, we'd expect average fare to rise probably for the half year more or less at 12%, maybe slightly below and maybe a little bit faster in the second half.

Q1 will be, obviously, a little bit quicker but overall we feel about 12% for the first half.

On profitability however, there won't be a significant jump in Q1 profitability because we had very low cost fuel hedges in Q1 last year so that's why we're kind of anxious not to get into too much Q1 to Q2 stuff here, it would be easier we look at it in terms of Half One and Half Two.

Yes.

Of our EUR350m increase, about 40% of that is in Q1, so really what Michael is saying there is that we would expect profits to be up slightly in Q1 so the bulk of the profits for the year will be made in Q2 which we think will be very strong.

In terms of unit costs, unit costs are quite consistent across the year.

Sector-length adjusted we expect 2%, 7% gross.

This year, as you know, we were looking at 4% and we actually came in at below 3% so we would hope to beat that but that's the kind of guidance we'd be giving.

It would be slightly, I suppose, given the fact that we have 80 aircraft sat on the ground for the winter period, obviously there is a little bit of drag because we have the ownership costs on the balance sheet so that should be slightly better in the summer period although Q1 is a little bit quirky for quite a few different reasons.

So we would see Q1 at maybe 7% -- at maybe 6%,7%, and maybe a little bit higher in the second half of the year.

Okay and in terms of using the aircraft, no, frankly, I don't think there's a better use for the aircraft other than sitting them on the ground.

What we would have done in the more recent years is we take the deliveries, we start taking the deliveries from Boeing around September, October, we start opening up new bases, new routes, in October, November, December and into January.

We generally lose money doing that because you're opening or adding the capacity at the wrong time of the year.

I think that's acceptable when oil prices are reasonably modest but when you're facing kind of $900 a barrel -- or $90 a barrel stuff, frankly I'd rather buy less oil in the winter and don't fly the aircraft.

We have a lot of airports around the piece where we don't pay parking charges, we are very flexible in terms of employee costs, so there'll be a lot of people furloughed for the winter, we may actually start letting some people go next winter and then hire more cabin crew and pilots into the spring of the following year.

But I think that, I hear lots of other airlines talking about, well, we'll lease them to some southern hemisphere airline that only wants the aircraft for four months of the year, but we've yet ever to find a southern hemisphere airline that only wants its aircraft for four months of the year.

So I think we're better off to ground them.

We can tactically, and it's a tactical decision on our part, I don't think that if oil prices are relatively stable or lower next winter we'd fly many more of them, but it makes sense I think this year, make as much money as we can in the first half, lose as little money as we can in the second half, and we have those aircraft ready to rock and roll then come next March, April.

We open up more bases, more new routes, but you're doing it at a time when you're coming into the summer, hopefully oil prices will have stabilized by then, and if they haven't and oil prices are still high then I think the competitor fuel surcharges will have gone even higher giving us more kind of yield coverage.

I think the big story here for the last 12 months with us, and we've been trying to educate the market, look, our capacity growth is slowing down very dramatically, we believe as we slow down our capacity growth you're going to see yields rise so we're going to get some pricing power into our model because there's nobody else to compete with us.

I think today's results, if you look through it, given a year when you had so much crap over the volcanic ash, the ATC strikes, (inaudible), we still banged up the, the average fares went up 12%, earnings up 26%.

There's no reason why we can't repeat that again next year but with much higher oil prices we're not going to take the risk of adding a lot of capacity during the winter.

And just to follow up on the 80 aircraft, to think about the incremental 40, where should we think about those aircraft being taken out of?

I think, at the moment, you'll see a good number taken out of Spain in the winter where we're having a lot of problems with the Spanish airport monopoly AENA and the government introducing ludicrous regulation.

AENA in Alicante opened up a new shiny terminal building; they're following the DAA model of going bankrupt building shiny buildings, but forcing us to move to the new terminal and forcing us to use air bridges.

Now air bridges, apart from the fact they force us to pay for them as well when we don't want them but they slow down the turnaround because we can only now offload people through one door instead of doing front and back.

So I think we will have significant traffic cuts at some of the Spanish airports this winter while AENA begin to understand actually working with Ryanair is slightly different to than just telling Iberia what to do, we don't operate that way.

We also have, there'll be some further cuts at the Irish airports this winter where unless the government can manage to break up the DAA monopoly we intend to cut traffic very significantly again this winter.

A combination of higher oil prices and the DAA, despite the fact they've suffered a traffic decline of 33% over the last three years, they've cranked up the fees by 40% in Dublin last October, and in Shannon where there's really only sheep on the runway these days, they actually increased the fees by 33% on the November 1 to celebrate the start of Shannon's, I don't know, winter schedule.

Sheep fair.

Yes, sheep fair.

It's ludicrous stuff.

Only -- I think the last country to try this kind of cranking up the prices as demand imploded was North Korea -- the North Korean food industry and Russia and it didn't work.

Lenin tried it and it didn't work there either.

So I think that the Irish airports are well on their way to implosion.

We're very hopeful that the new government will be able to persuade them as to the error of their ways but unless there's a breakup of that airport monopoly and a real commitment towards returning Irish airports to competitive costs then they're going to face continued traffic cuts.

Thank you.

Okay, Stephen Furlong's next and then we'll go to you.

Yes, Stephen.

Stephen Furlong from Davy.

I just was wondering on your overall view generally of new aircraft and where you see the market right now in terms of financing and Boeing, a lot of them seem to be ordering aircraft, Boeing, Airbus, Chinese, Russians, how would you see that developing?

Or is has anything really changed?

Very little has changed, I think, in the last 12 months except I think the Boeing and Airbus have got a little bit more nervous about their order book.

Actually if you look around we have seen very few orders in the last 12 months, lots of prancing around by Boeing and Airbus talking about how full the order book is, but you look at their order book and I think it's very weak, it's full of leasing companies, some Middle Eastern carriers who've actually cancelled short-haul aircraft orders, and then lots of bankrupt, formerly low-fares airlines.

I think the most interesting development has been the emergence of Comac, the Chinese manufacturer, I think clearly that's put the wind up both Airbus and Boeing.

And you can see Airbus and Boeing both talking about very significant ramp-ups in production despite the fact there doesn't seem to be any demand for the aircraft, certainly not with oil at GBP110 a barrel, but I think there's a concerted attempt by Boeing and Airbus to try to block out the Chinese or prevent the Chinese getting up off the ground by ramping up production very significantly.

Now frankly, whether they do or they don't we're really not that concerned, at the end of the day we've said to all of them we continue to be very cost disciplined, we will order a very large number of aircraft when we get a very large discount or an incentive to do so, and if we don't we're very happy with where we are for the next number of years.

I think we will order, we have no aircraft deliveries planned beyond the end of FR'13, I have no difficulty going into FR'14 and FR'15 taking no aircraft deliveries, the cash would be exploding off the balance sheet.

We'll still be able to grown, open up new routes and new bases but by taking aircraft away from, if you take the bottom 10% of routes and bases, if the Spanish airports are still mistreating us at that stage they'll be losing even more aircraft.

So a year or two of us switching around capacity I think would be a very good cost discipline for Ryanair.

We've been growing very rapidly for 20 years now.

I see a lot of upside in us not growing for a year or two, at least not growing at the top line, but still going in an churning over underperforming bases, underperforming airports, much as we've done, for example, at the Irish airports in the last three or four years.

At the Irish airports where the traffic has declined by, they've gone from 30m passengers to 20m passengers, we account for the vast majority of that cut and it demonstrates, again, our cost discipline.

If you put the prices up we will move capacity away from you, we'll also work with those countries that are scrapping travel taxes or airports that are lowering air fares.

The Greek government, God be good to them, have realized actually one of the few sensible things they can do is introduce 100% discount for airport charges and grow tourism.

The Irish government would like to grow tourism, the Spanish last year recognized that the travel tax wasn't very sensible, but even AENA have recognized that the way to grow rapidly has been to introduce quite steep discounts for growth.

And we'll continue, I think, to be beneficiary of that.

At the other end of the piece then we have competitors EasyJet, who are desperately trying to get the fares up, waffling on about business passengers, these mythical business passengers that EasyJet hopes to attract with their uniquely brilliant business model, whatever the hell that is, because the costs are exploding in EasyJet.

The costs are not exploding in Ryanair, you look at the unit cost level and adjust for sector length growth, we continue to be by far and away the most disciplined airline, which is why, I think we'll continue to do very well for the next couple of years.

But the next couple of years is all now about profit maximization.

We've done 15, 20 years of growth, we've been promising the market that you're going to see us demonstrate or prove that we have some pricing power built into the model and I think the next couple of years is when we have to demonstrate that.

Yes, sir.

Good morning, it's Jarrod Castle from UBS.

Three questions.

First of all, what is your game plan with your Aer Lingus stake?

It doesn't look like you can take over the company, it seems like you don't really highly regard the company frankly.

Why not sell it, wait for the bust up, as you kind of put it, and buy the assets at a later date?

Or do you think that frankly there's some value in the share price?

Secondly, just going back to the question on fleet, I guess in 2015 we've got the A320 NEO, how do you think that would stack up relative to the current fleet you're running?

And then thirdly, was there any, I guess it would have been a small impact, but was there any impact from North Africa?

Thanks.

Thank you.

On the Aer Lingus stake, the one thing that's not going to happen to Aer Lingus at least for the foreseeable future is it's not going to go bust.

After the flotation in 2006 they had about EUR1.3b in cash on the balance sheet, now in five years they've eroded that down to I think about EUR800m of net cash, so they're working their way through a cash pile pretty successfully, it's about the one thing they seem to be good at, is giving away the money, usually every time the unions are unhappy they buy them off.

So they're not going to go bust.

Yes, we're very unhappy, we think it's not a very well-run company and that's not a criticism of the management, I think that Mueller and the managers are not bad, but the Board is complete rubbish because it's all a bunch of political hacks and trade union representatives who undermine the management at every hand turn.

We learn at the AGM last month that the Head of the Irish Trade Unions who sits on the Board of Aer Lingus for clearly his airline wisdom and expertise, managed to absent himself from the Board meetings when they were discussing the cabin crew disputes at the earlier part of this year, and then when management were out there going toe to toe with the cabin crew he was running around with his mates in the unions introducing compromise solutions that, surprise, surprise, meant that Aer Lingus didn't get the changes they were looking for.

The cabin crew now only have to volunteer the changes and if they volunteer the changes they get paid more for them, like mad stuff.

So what's our strategy with Aer Lingus?

Our strategy with Aer Lingus is wait and see; we have no particular, I think it's inevitable that the government will sell the 25% stake.

I think if they sit down in the light of day and look at who of the four parties that look like they might buy it, Ryanair wants to buy it, we want to grow Aer Lingus, we want to lower its fares and we want to run it as a two airline strategy within Ryanair.

I think Aer Lingus if we significantly lowered its costs, which we would, would make a very good competitor for us with the likes of EasyJet and Vueling at some of the bigger, the more expensive airports that as Ryanair we never want to fly to, Charles de Gaulle, Brussels Zaventem, Copenhagen.

And I think we could do a lot of damage to the so-called business airlines, EasyJet and others at those airports.

But will we ever make it a Ryanair?

No, we won't, it never will be a Ryanair.

But, fine, if the government decides not to sell it to us, if you could give it away to British Airways or to Air France or Lufthansa, what do you think they'll do with it?

I know what BA will do with it; they'll grab the Heathrow slots and try and find somebody to take the rest of it, maybe shovel it into Flybe, another great regional -- brilliant regional airline, and it gets broken up.

So the government, in its efforts to assuage the trade unions in recent years by not selling Aer Lingus to Ryanair, has probably managed to ruin or destroy Aer Lingus.

It has no prospect of an independent future.

And now I think it either -- if it doesn't get sold to Ryanair, it gets broken up.

Either way, I don't think it makes any difference to us.

We're very happy, if someone wants to come along and buy the government's 25% stake in Aer Lingus, to sit down with them.

And we would be very reasonable; we would be very happy to sell our 29% stake, if the right offer was on the table.

If not, we're very happy to sit on our 29% stake.

I think it's well protected by the fact that they have in their cash pile of EUR800m.

At their current rate of attrition it'll take them about another eight or nine years to work their way back down to zero, although with the trade unions on the board and the government, you never know, they might get there faster.

So we have no particular strategy any more.

The original strategy was to buy it, grow it, build it and have a -- and to increase the amount of competition between Ryanair and Aer Lingus off the island of Ireland, because it's a tiny market for Ryanair.

Ireland accounts for less than 10% of our traffic.

So we're very happy to consider any reasonable offer for our stake in Aer Lingus; we'll sell it.

Or if the government change its mind and decides actually that they'd like Aer Lingus in future to be owned and controlled and managed by somebody living in Ireland, paying taxes in Ireland, then I'd be very happy to talk to them.

On the second issue, the fleet, the A320s.

Yes, we wait to see, as I said, we have tried to talk to Airbus in recent years about an aircraft delivery.

They don't see us as a credible Airbus customer, wrongly, in my view.

I think it would have been one of the interesting things if we had successfully acquired Aer Lingus, is we would be an Airbus customer as well as being a Boeing customer in Ryanair.

And I'm not sure that Airbus can continue to ignore us.

But that's their choice, and we have no interest in buying aircraft from somebody who doesn't want to sell it to us.

We are talking to Boeing, but those talks haven't gotten anywhere.

So -- and we're now in serious negotiations with Comac, the Chinese and in negotiation with the Russians.

The problem with those is that their deliveries are looking 2018, 2019, maybe 2020.

So they might be a little late.

But if that's the case, we could always buy some second-hand aircraft or lease some aircraft for a few years through, say, '16, '17, '18, if we want some aircraft capacity.

So again, the plan is to be flexible.

I think we're in a great position.

We have EUR3b in cash.

We expect that to rise to probably 4b over the next two years.

And the primary objective for that cash is to write me a very large check to be the deposit for another aircraft order so that we can continue to grow at 4%, 5% a year from 2016, '17, onwards.

North Africa.

North Africa.

Yes, we didn't see much impact on North Africa.

If anything, it was probably positive, certainly when the problem's gone on Egypt.

We saw a lot of people switching from trans-Egypt at that point that time they started flying with us to Morocco or went to Spain or Italy with us instead.

We have a growing business in Morocco.

But in our overall -- in the overall it's still relatively small.

It's less than 3% or 4% of our traffic travels to or from North Africa.

So really it would have very little impact on us.

But I think to the extent that there is political uncertainty in places like Egypt, Tunisia, some of those tourist destinations, it's probably around the edges, benign or good for our forward bookings to places like Spain, like Canary Islands for winter sun, like our base in Malta.

We're opening up some routes in Greece, where again the government and the airports are giving us 100% discounts for that kind of growth.

So around[ this], I wouldn't say -- I don't think it's a big feature.

Thank you.

Who's next?

John.

At the back.

Peter Hyde.

Peter Hyde, hi, from Liberum.

Just a couple of questions.

On airports, can you just give us a bit more of a feel for how you think -- can I say medium-term negotiations are going?

You talk about the fact that they're becoming more realistic.

You talk about the fact that you're getting a longer list, and yet you're sitting there saying that we don't want to put any more capacity in in the winter.

Is that symptomatic of the fact that they still need to bring their prices down on a three- to five-year view?

Or is it just simply because the oil price is too high?

Where do you think you are in the list of how many airports want to attract you?

And then just secondly, very quickly, what percentage of bookings have you got in Q2?

Or can you just remind us what percentage of people have already booked to travel in Q2 this year?

Thanks.

Q2 -- I'll do the second one first.

Q2, we've got 50% bookings in the system already now for July, August, September with decent visibility on the years, on bookings and years which again underpins our 12% yield guidance for the year.

As I said, we've no visibility in the second half of the year.

So -- but we would plan to try to make out as much as we can in the first half and then lose as little we can in the second half, which takes us back to the airport discussion.

Airports, I think if anything it's getting easier.

We do have a lot of offers on the table, new bases, one or two even new countries, and also a lot of offers for growth at existing airports.

The UK, Spain and Italy, Scandinavia, funnily enough, is one too where we're seeing some significant, I think, increase in the attractiveness of the offers from airports, where I think they believe SAS is going to cut back very significantly in the next 12 months, and I think they will.

So we have far more growth opportunities than we can handle.

We can easily take the 50 aircraft we're getting from Boeing this winter, this year, and fly them.

But the yields in the winter are weak.

And the oil price at $900 -- $90 a barrel in Q3 and Q4, it's -- we're going to lose a lot of money if we do that.

We could go back to those airports and say look, we want you to subsidize the oil price for this, for three, six months.

It's -- I don't think it's worth it, frankly.

We're more concerned to -- we're still negotiating with a lot of other airports.

And by giving an example of our discussion with the Irish government as well, we have an offer in to the Irish government to grow 5m passengers annually over five years at the three main Irish airports, starting with 2m passengers, that growth --- that would start in September of 2011, but only if we get 100% discount for the growth.

If we have to pay their favorite airport monopoly anything for the privilege of bringing them additional traffic growth during the winter months, then they're not going to get it, because frankly we've got lower deals elsewhere.

But I think the real driver this winter is fuel.

We will have no difficulty, of the 80 aircraft that we grounded this winter, they will all be back flying by the end of March or April of 2012.

We have far more route opportunities than we need.

And that allows us to go back, even with some of the airports where we have 100% discounts, we're back already looking for more for next year, particularly if they want us -- in discussion with the Spanish airports as well, will get more interesting this winter.

Alicante, we're going to cut the Alicante by about 80%, starting in October over the air bridges issue.

And the Spanish, we're dealing with the Spanish -- oh, there should be negotiations, we need compromise, let's have a talk about it, say like (expletive deleted) off.

Where were you when we wanted to talk about the air bridges last March at Alicante?

So -- but it takes a while for the -- some of these Mediterranean countries to understand dealing with Ryanair is not like dealing with your local government or flag carrier airline.

We will burn you, if you think you're going to turn around and screw us around, we will burn you.

And we will not be too shy about doing it.

So they're having a debate in the Spanish media at the moment as to whether Ryanair is blackmailing the Spanish government.

If you think you're going to be running around, get us into your country, and then you're going to screw us around, forcing us to use facilities that screw up our 25 minute turnarounds, or just introducing ludicrous charges -- like the Spanish government two months ago, as you know, Ryanair's famous for its one carryon bag rule.

The Spanish government introduced a regulation, just by the way, no, passengers are now allowed to bring two bags on board an airline.

Well, they may in your local Spanish airline, mate, but they're not getting on board Ryanair.

And so then the regulatory authorities start fining us.

We got a fine of 80,000 for some peasant somewhere in Spain who wanted to bring two bags on board an aircraft where we've an agreement with that passenger you're only bringing one bag.

We'll see you in court over the fines.

But they just -- it takes a while.

We had this previously in Italy where it took us a while for the Italians to understand the Irish, and the Irish to understand the Italians.

And now it's all nice and sensible and we're growing rapidly in Italy.

We're going through the same process now in Spain, because these guys just need to understand we're someone -- we're different, we're special, and unless you treat us as different and special then we're going to -- you're going to get hurt.

Can I just ask one [line] on that?

Yes.

What you're really saying is, the hike in price is equivalent to saying (technical difficulty) fuel price (technical difficulty)

No, no.

The fuel price won't change this winter because we're hedged.

So it is what it is.

Now, that's not to say, and grounding 80 aircraft means we're going to take probably another 20 aircraft out of some of the Spanish airports this winter where there's going to be a -- let's go to -- we're going toe-to-toe with AENA until they begin to get the message.

Now if there's a change in AENA's strategy between now and next November, and I suspect there probably will be about August time, when they realize what's going to happen at some of their airports, if the Irish government gets -- manages to persuade the airport which they own, actually instead of poisoning traffic growth you should actually be delivering some traffic growth, then we can change some of this.

But the guidance for the moment is we're going to ground the aircraft.

We're going to cut capacity, traffic will fall for us in the winter by 4 or 5 percentage points.

But there will only be upside on that.

If we get better deals for somebody who really wants us to start growing in the winter, we can do that.

But in principle we're going to ground 80 aircraft.

And max- -- sorry, minimize the losses through the winter period, having hopefully maxed out the profits in the first half of the year.

And I think for the next year or two, profit maximization is where it's at.

We don't want to go out and just crack up the fares.

But we're not going to be flying a lot of people around losing a lot of money in the winter when our competitors obviously will be prioritizing their business product and trying to encourage all the business passengers to fly with them.

I think it might be useful just to mention there, if we go back to that fuel slide, that the price we have in the fourth quarter, $970 per ton, is a weighted average, because we have already hedged 50% at a much lower price.

And we filled out the balance then recently.

Our prices have got an average of a bit over $110 -- close to $110 per barrel.

So every incremental gallon that we use, or barrel that we buy, is going to be our current market rate.

We're talking about rates for next year, something like $105 per barrel.

So just flying that extra plane at $105 for every flight just doesn't make sense.

This is what Michael said about the airport charges.

John?

Thank you.

It's Jonathan Wober from Societe Generale.

Firstly, just can you talk a bit more about your average fares guidance, the 12%?

You've indicated it's based on the outlook of forward bookings into Q1/Q2.

But presumably there's a range of outcomes.

Can you talk about what might be the best case scenario, for example?

And then the second question is just can you confirm that previous guidance you've given on CapEx over the years to, I think, 2014, remains the same, subject to no further aircraft order?

And then finally, have you got any initial comments on the possible impact of this new volcano in Iceland?

Let me deal with the fares.

No, and this happens at every roadshow, can you tell us what your fares are going to be for the next 12 months.

No.

I think our best guess, based on the visibility we have at the moment, I think 12% is a reasonably accurate guide to where we think they'll be.

Certainly in the first half there might be a little bit more than that.

Q2 looks like it could be bumper.

But (expletive deleted) happens.

As you say, the volcano, if the regulators make a mess of the volcano again, that could affect the second quarter.

I think 12% is pretty accurate.

What we don't know is what the yields are going to look like next winter.

But we think by cutting capacity quite significantly we give ourselves the best opportunity of maximizing the yield at a -- at the quiet time of the year.

Just touching on the volcano.

I think what's different this year, at least I hope what's different this year; I've been in close dialog with the regulators there, most since Saturday, Sunday.

Last year they made a complete balls of it, because it was, oh, there's a volcano, and there's a huge, big black cloud all over Europe, Continental Europe, the Canaries, Spain, you can't see -- the sun is blotted out all over Europe, which of course is bloody nonsense.

Volcanoes are a frequent occurrence in many other parts of the world; Alaska, Asia, and the way they deal with it in those countries where they're used to it is have a no-fly zone 100 miles, fly around it.

And that's fine.

And that's what we're calling for.

And it looks like that's -- they've moved that procedure now in Europe, allowing for the fact that the Met Office and the CAA both, people get very nervous when the politicians see volcanic ash pictures on Sky, these big volcanoes spewing out clouds and think that's what you're going to have over Scotland in Tuesday; you won't.

By the time it gets to Scotland, our experience last year was so well dispersed, there was no evidence of any -- well, there was one, we had one flight that was affected.

There was never any evidence of volcanic ash over Spain.

There has never been any volcanic ash over the Canary Islands, 5,000 kilometers away from Iceland.

And so I think the more pressure we can put on the regulators this time around to be sensible, let the airlines fly, if we see something we fly around it, if we don't see something and we will land, we will increase in the rate of inspections on landing, so that if we do see or notice some dust, fine, there's a procedure there for cleaning it, washing engines, [everything], that's the way to deal with it.

And clearly, if we see a big spume of volcanic dust over a volcano in Iceland, we promise not to fly through it, though.

But once you see politicians on Sky News on the morning responding to big volcanic ash clouds, remember this is a re-run of -- you can see global warming, it was only became evident when they paid the -- when the TV could show you the contrails of an aircraft taking off and you could see the globe warming behind the aircraft -- oh, there it is.

So we've got to be very careful.

But I think the airlines, the industry and the regulators, are a little bit more sensible than they were this time last year.

I think you see that already in some of the coverage over the weekend.

This is now a heavier cloud, so actually the stuff will fall before it gets -- it'll -- so we will be cautiously optimistic that they won't balls it up again this year.

But it does bring back into context our calls for reform of the U261, which is a slightly different issue.

I would hope there won't be any airspace closures, there shouldn't be, and certainly not over any country where we're flying.

And Howard, maybe you too to take the CapEx?

Yes, CapEx this year was EUR800m and just shy of EUR800m next year.

We see that just below EUR500m.

(fire alarm)

It's the volcano.

There's dust over London.

Don't breathe, anybody.

EUR800m?

EUR800m -- just under EUR500m this year.

Which does mean the cash generation will continue to be very strong over the (multiple speakers).

I think on the net debt side, with net debt at about just over EUR700m, we shouldn't be -- we should be less than EUR200m, about EUR150m to EUR200m net debt by the end of this year.

And the CapEx guidance that you'd previously given out, the (multiple speakers), is still the same?

Yes.

Okay, thank you.

Can I just come back to that; what could change?

We talked about surcharges.

Could that be a positive surprise if the networks put on more fuel surcharges?

Is that the flex?

There's a number of things can flex.

On the upside you can have more competitor fuel surcharges.

Remember, there is no capacity growth in Europe this year.

EasyJet could put their fares up.

EasyJet -- the plan might actually work; they might actually get the fares up to cover their costs, in which case the gap between them and Ryanair's price will get even wider.

That would drag up, I think, Ryanair's prices behind that.

We might also by being very -- having these very aggressive capacity cuts in the winter, have more pricing power during the winter months.

So everything is positioned for there to be a -- if there's going to be a variation on the yields, then we hope it'll be on the upside, or -- rather than on the downside.

But that's not to say there aren't downside risks.

If the volcanic ash thing goes mad, the regulators start closing airspace, it will upset -- the real problem for us with the volcano last year was not the immediate impact in April and May.

That was very difficult, cost about GBP30m.

But it was actually, it was the dent that bookings took into June, into June, July, even into a bit of August.

We really discounted, had to heavily discount fares and prices June and July last year to keep numbers, people traveling.

That should make for an easier comparable this year, which is again why we're expecting quite good second quarter.

But if, God forbid, the idiots in the Met Office start producing charts that show us big, black, dark clouds over London, it might put people off.

Hopefully Obama's visit will move the volcanic ash pay, the volcanic pictures off Sky News by tomorrow.

It's a very dynamic thing.

Air traffic controllers seem to be a little less strike-prone this year, particularly the Spanish.

They're now out camping on the main square in Madrid, which is a far better use of most of the Spanish air traffic controllers than having them just going on strike every Friday and Saturday as they did for most of last summer.

There's a bit more of that.

Other than that, I'd be generally -- I would be cautiously optimistic, which for us, giving the annual guidance is unusually upbeat.

Normally we're depressed with the guidance.

Enough?

Edward Stanford from Oriel.

Just a quick question.

You mentioned you thought SAS might be cutting back this summer.

Do you see --

It's more winter.

Summer is already done.

But do you see an opportunity to do what you've done in Italy there?

Is there -- how do you see that market developing?

I think if you take a three- to five-year view on Scandinavia, I think there's going to be a huge opportunity in Scandinavia.

I think it's inevitable Lufthansa will -- as SAS continues to make horrendous losses, they will have to cut capacity.

I think Lufthansa will take an increasing stake in SAS; they will cut capacity even faster.

There's so much rubbish up in Scandinavia that where Lufthansa just charge outrageous air fares, pays outrageously high airport costs, and there's going to be significant growth opportunities up there.

But again, I wouldn't want to rush up there either.

We have a lot of growth opportunities elsewhere in Europe, and it's up to the Scandinavian airports now to get more competitive.

Unfortunately, they tend to be all government-owned, so it takes them a long time to respond to market realities.

But I think there's going to be a real opportunity in Scandinavia as Lufthansa, as SAS restructures and gets significantly smaller, and the government-owned airports, I would hope, would ultimately be broken up or privatized, they'll get a lot more competitive than they have been heretofore.

And yet the way the industry is moving, particularly for the short-haul stuff, Ryanair -- the typical Ryanair passenger now needs very little airport infrastructure.

They don't travel with carryon or check in bags.

They're checking in the way I've said.

They're arriving at the airport, 40 minutes before departure, going straight through security and onto the aircraft.

So we no longer need these five-story marble palaces that Dublin Airport or AENA in Spain have specialized in for many years.

Fine, there should be airport retailing.

But it now means it can be done on -- one-story buildings that are essentially very cheap to construct and very easy to operate.

Because I think the days of the regulatory monopoly are over.

The BAA will no longer build ludicrous facilities like T5, which cost, what was it, [12b or 13b], just madness.

Or the DAA, we've seen EUR1.2b on a terminal that should have cost about EUR150m.

So there's a lot of upside in the Ryanair model for the airports.

You can work with us, we can deliver you growth very easily, very quickly, and we need very few of your facilities.

So cut us a deal, and we'll deliver you growth rapidly.

If you want to work with the SAS model of high costs and high churn and high air fares, it's doomed.

Who's next?

Tim Marshall from Redburn.

I think about 12 months ago I asked you about austerity in Europe and cuts, and you thought it was brilliant news for Ryanair, given the market share shift.

And I just wondered if you could update us on the view on that?

And then just secondly on the change to the website, and whether that's part of this profit maximization, making it easier for customers to book, and how that's been received by customers generally.

In general, during recessions we've done very well.

And you can see our average fare's going to rise again this year, despite austerity measures, so-called, in Italy, Greece, Spain, Portugal, and Ireland.

So we think it's very good for business.

We've been through many recessions.

We're actually going to see the average fare rise this year.

We're going to see the gap between us and our competitors rise.

So we generally welcome austerity measures, given we have the lowest product, lowest price.

And there was some comment in the press release this morning suggesting that some of your caution was around the austerity was your reaction --

We're setting the backdrop there.

So far we haven't seen any impact on our business.

But we can't ignore that austerity measures are out there, that in certain -- consumer confidence, even in the UK market, is not what it was.

We have to set out is the backdrop for our assumptions in terms of what yields will be for this year.

Remember, when we do the annual guidance, we're always very cautious.

Potentially this year we've been very cautious, and forecasting 12% growth in average fares, so that's about as cautious as we can afford to be.

On the -- what was the other thing?

On the website.

We've only put in a couple of weeks, we have improved certainly ease of use.

It looks a lot better, presentation, it's a bit clearer.

We haven't really received many comments one way or the other really at this stage.

More bookings.

It certainly is helping bookings.

That would be our general perception; people can move through and also try and buy other ancillary products.

And again, this year, we would be expecting ancillary revenues to continue to move ahead of passenger volumes, which I think speaks volumes.

And moving, for example, last year we moved Hertz into the booking process.

We've looked now to add -- certainly we're looking to add hotels as well, which will be positive for that in terms of conversion rate.

So all these things are incremental and positive.

Thanks, Tim.

Joe?

Joe Gill of Bloxham.

Just three points, please.

First on dollar hedging.

Can you talk a little bit about what you've been doing vis-a-vis dollars, particularly into 2012?

And you don't seem to have done any oil for summer 2012.

So where does oil need to move to, compared to your FX hedging, to get yourselves broadly similar to where you are in summer '11?

Secondly, on ancillary revenues, can you talk a little bit about that and your comment on 12% yield growth for the next year?

Is that unit revenue, total unit revenue, or just the fares?

And finally, on sector length, what is your average sector length change going to be, do you think, over the next 12 months?

Yes, we've extended our dollar hedging.

So we have all our CapEx covered to the end of 2012 at an average rate of about 143.

And similarly, we've also hedged out all of our oil for this year, and about 50% of what we estimate our requirement is for the first nine months of 2011.

So we're pretty much well hedged out towards the end of (technical difficulty).

So I'll just recap on that.

It's all the CapEx is covered to the end of the delivery program at 143.

And almost a similar rate then for operating expenditure.

So fully hedged out for this year, and next year about 50% of oil -- our estimated oil bill is already covered already.

So that will give us several -- 4% improvement in pricing.

So if you took, say, an average of $103 per day, we take you somewhere down to about the equivalent of $96 per barrel, adjusted for the movement of the euro.

Ancillary revenues, continue to expect -- as we've guided for the last year, do we expect them to grow in line with scheduled revenues, faster than traffic growth.

That's demonstrated in the full-year numbers, the ancillary revenue's up 21%, traffic growth up 8%.

Well spread across the piece.

We've done better in in-flight sales, things like the Lottery cards, our scratch cards continue to do very well, particularly helped when we have a balls-up in the printing and three cards are won on one flight from Milan to Barcelona, where, by the way, we sold out of scratch cards once they realized that everybody was winning bloody cars.

But it's been terrific.

The publicity, it's amazing.

You get far more publicity out of a balls-up than we ever get when we're trying to spin something ourselves.

The credit card fee continues, the admin fee continues to generate funds.

Baggage revenue I think will fall.

We continue to see more passenger discipline now.

There are fewer passengers checking in bags, which we think is a good thing.

But we're looking at other lines.

We've introduced reserved seating, or we're trialing reserved seating on the Gatwick and Malaga routes now to see if there is a demand for people for -- who want the front row seats or view over wing exits.

I'm not sure it'll be successful on the short flights to places like Gatwick.

But I think there probably is something in it on the longer flights to the Canaries, Faro, Malaga, places like that.

The yield revenue, the guidance is 12% increase in fares, in yields.

I think that's reflected in total fares as well.

Should be able to get the total revenue per passenger up by about 12%.

And --

That means sector is about 5% for this year?

It's about 5%, but it's not written in stone, like a lot depends.

If for example we were to start doing -- we got a, I don't know, we open up a new base in -- Morocco for the winter or something, a lot of -- we're doing winter sun and it could alter slightly.

But I think 5% is reasonably --

(inaudible question -- microphone inaccessible)

For this year?

For the year coming.

For the year coming.

Not sure.

Sorry, unit cost per --

Fuel --

Unit costs are up 2%.

Up 2%.

Up 2%.

Yes, that's (inaudible question -- microphone inaccessible)

So 7% gross, 5% sector movements in that too.

Yes.

(multiple speakers)

And per passenger base, so it was -- I'll just cover off some of the other questions we'd expect.

And if you take, say, fuel costs per passenger we get a base 21% rise on a cost per passenger basis.

So from just over 17% to somewhere around 21%, about EUR4 maybe slightly less.

Okay.

Back of the room.

Hi, thanks.

It's James Dixon from Meditor.

I've got three questions, please.

On the unit cost, just to clarify, for the winter coming, when you have the reduction in capacity, what do you expect to happen to unit costs then?

Second one was on carbon.

Could you update on the timing and the financial impact of any carbon-related taxes or factors?

And lastly, was on -- sorry, the third, I wonder if you could just comment on the changes in strategy or tactics you're seeing at BA or Air France or Lufthansa, aside from the fuel surcharge points?

So maybe I'll deal with the first two.

So unit costs, we've guided 7% unit cost increase.

We would see slightly better than that in the first six months of the year, and slightly worse than that in the second six months of the year, because we will have the ownership costs associated with those aircraft on the ground.

So that would affect the unit costs.

In terms of carbon-related, what we've done we believe rather well is the whole divvying up of the carbon credits.

So we've had a look at what our first year might be like in terms of what we might have to buy at a very modest number.

Certainly so we're in the region of EUR12m, EUR15m would be the cost of the carbon credits we have to buy.

That said, it's somewhat -- we're somewhere within a range, given that we have to forecast what we might be burning during that period.

But we estimate for us it'll be very modest.

The people who hav,e the larger aircraft, long haul (inaudible), they're really going to be hurt.

But for us, new fleet, very efficient operator, we've done --

And growth slowing down.

And growth slowing down, we'll see somewhere in that range certainly in the first year.

So it'll be lost in the rounding really on the fuel bill.

And on the other one.

Actually, no, I think to be fair, BA, Air France, Lufthansa behavior, we've seen no change in the strategy.

I think the strategy is the right one, for further consolidation, increased fares, get the fuel surcharges up, and control capacity.

I think it is the right strategy for those three big feed or connecting carriers.

They have enormous cost pressures, principally at their airport hubs, in Frankfurt, in Charles de Gaulle, or in Frankfurt and Paris and in London.

I think that will continue to be -- particularly we're seeing at the moment between BA and Iberia in the UK, the Spanish market, some very significant capacity coming out of short-haul, cutting capacity, focusing more on the Latin America business and on the Asian business.

Our fleet doesn't compete with those.

Interesting the next 12 months, what Vueling does, Clickair does in Barcelona.

We think they'll continue to cut capacity there.

That could change, if Spanair goes bust, which it -- at some point in time even the Catalan government runs out of elections, or runs out of money to bail out Spanair pre-local elections down there.

That could change the dynamic down there.

That could also change our winter capacity allocation as Spanair falls over in practice.

Winter, we could suddenly show up there with another five or 10 aircraft, as long as we were whispered nicely to by AENA.

And so no, I think these -- I think it's very clear that for the next four or five years Europe is moving towards a situation where there's going to be four very big airlines, BA, Air France, Lufthansa and us.

And we're the only ones that are going to be down there in the low fare piece.

I think there's a real opportunity for us to make a lot of money doing that in the next couple of years, as long as we don't do anything stupid.

Any other questions?

No?

Okay, folks, thank you very much for coming.

You're here for a bit, are you?

Yes, I'm going to be here for a few minutes.

Howard's going to be here for a few minutes.

I've got to go off and do the press conference, the results press conference.

So -- but I'm sure we'll see you all at some stage over the week in London.

Thanks, everybody.