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

Good day, and welcome to the Ryanair full-year results conference call. Today's conference is being recorded. At this time, I would like to hand the conference over to Michael O'Leary. Please go ahead.

Good afternoon, ladies and gentlemen. You're all very welcome to the Ryanair full-year results conference call. I'm here with Howard Millar. Michael Cawley is joining us on the conference call as well.

And I hope you all have seen the results this morning. They're on the website, www.Ryanair.com, together with the investor presentation. We have the full week investor roadshow, so there will be one of us coming to a town, village or market square close to you between now and Friday.

We've done the analyst briefing this morning, so we'll just run through this pretty quickly. As you can see from the results, we announced full-year profit rise of 26% to EUR400 million. Revenues rose 21% to EUR3.6 billion as traffic grew 8% and average fares rose 12%.

Unit costs were up by 11% due to higher oil prices and a 10% increase in sector length. Excluding fuel, however, which was up 37%, unit costs rose by just 3%.

Highlights of the past year include profit growth of 26% to EUR401 million. Traffic grew by 8% to 72 million passengers. We added 40 new aircraft, eight new bases, over 300 new routes. Customer service metrics continued to improve, and we continue to be the number one on-time major airline in Europe. We paid our first one-off dividend of EUR500 million in October, bringing it to the EUR850 million, the amount of cash we've returned to shareholders over the past three years.

I think these were a very good set of results, particularly given they cover a year in which we suffered higher oil prices, dealt with the impact of the global recession, suffered the disruptions of the volcanic ash in Q1 last year.

As we've said, fuel increased 37% to EUR1.2 billion, as average oil prices rose from $62 to approximately $73 per barrel. Excluding fuel, unit costs rose 3%. Sector length-adjusted unit costs fell by 7%, thanks to our continuing rigorous cost control, including reductions in staff, airport, and handling unit costs.

Another strong performance in our in-flight sales in particular helped ancillary to grow 21% to EUR802 million, somewhat faster than traffic growth, and amount to -- and at year-end amounted to 22% of total revenues.

In 2010, following a 27% hike in fees, Dublin Airport traffic fell by 3 million passengers to just over 18 million, a collapse of 30% from its 2007 peak of 24.5 million. Dublin Airport's traffic continues to decline in the first quarter of 2011.

To reverse this disastrous collapse and return to tourism growth, the Dublin Airport monopoly should be broken up and replaced with competing terminals at Dublin and competing airports in Ireland, which we believe is the only way to deliver competitive airport charges, which are currently absent. We hope the new government will introduce these reforms, and then traffic at the Irish airports -- if they don't, traffic at the Irish airports will continue to fall, leading to further tourism and job losses in the Irish economy.

We very much welcome the new government's recent decision to scrap the tourist tax as a step in the right direction. But unless it's accompanied by real reform and competitive airport charges at the Irish airports, traffic, tourism, and jobs growth will not return in Ireland.

Last year, some 14,000 Ryanair flights were canceled, arising primarily from three separate incidents -- the volcanic ash disruptions in April, May; the airport snow closures in the UK and across much of Europe in December and January; and a total of 15 national air traffic control strikes across Europe last summer.

This brings into further focus the unfair discriminatory airline EU 261 regulations, which force airlines to pay for right to care expenses and compensation during these events, even though they're beyond our control. It's absurd, for example, that the insurance companies last year paid out nothing during the volcanic ash crisis because it was an act of God, yet the airlines were passed on all of those costs and the compensation.

It's also discriminatory that competing train, ferry, and coach operators in Europe escaped liability during these force majeure events, yet the 261 regulations force airlines to suffer these costs. These discriminatory regulations should be reformed to provide a fair and level playing field for all EU transport operators, and we very much hope that our court case we are taking to the European Court will lead to that reform or bring about some measure of fairness in what are clearly unfair and discriminatory regulations.

In terms of oil, higher oil prices continue to force our higher-fare competitors to increase fares and fuel surcharges, which are making our lower fares even more attractive. In many cases, competitors' fuel surcharges are higher than Ryanair's lead-in fares.

Higher oil prices will, as previously, lead to further consolidations, increased competitor losses, and more airlines going broke this autumn. This creates further growth opportunities for Ryanair because we operate the most fuel-efficient fleet, have the lowest operating costs, and also the strongest balance sheet. We expect to increase our market share and expand further into new markets as high oil prices force more competitors to cut capacity or go bust this autumn and winter.

In Ryanair, we are 90% hedged for the remainder of the fiscal year at about 800 -- about $82 a barrel. This is still, however, a 12% price increase on last year, but significantly below current spot prices, which are trending around -- above $100.

Higher oil prices next winter and the refusal of some airports to offer lower charges make it more profitable to tactically ground up to 80 aircraft this winter, compared to the 40 aircraft we grounded last winter, rather than suffer losses operating into high-cost airports such as, example, Dublin, and at low winter yields.

Although we expect to grow traffic in the coming year by 4% to over 75 million passengers, this will be characterized by strong growth in the -- of up to 10% in the first half. But then our steeper winter capacity cuts will cause monthly traffic in the second half to fall by approximately 4%. This will be the first time in our history that we will have cut capacity and cut traffic for a period of time.

However, despite these winter capacity cuts, we still expect the full-year fuel bill will rise by approximately EUR350 million. And to put that in some context, as you'll know, we've just announced full-year profits of EUR400 million, and yet our fuel bill will go up by almost that amount next year.

In terms of the balance sheet, we remain one of the strongest in the industry with EUR3 billion in cash, despite having returned EUR850 million to shareholders over the past three years and EUR500 million to shareholders last October. Our floating cash deposits will benefit, we believe, from rising interest rates over the coming month and year or two, and we've taken advantage of the low -- of recent low interest rates to secure almost 60% of our fleet, financed over seven years at an all-in rate, including margin, of under 4%.

We also extended our long-term dollar hedging program to cover all of our remaining Boeing deliveries, and we'll be purchasing these new aircraft in FY11 and -- or in, sorry, calendar 2011 and calendar 2012 at a dollar/euro exchange rate of 1.43.

In terms of outlook, we expect to grow traffic by 10% in the first half and then cut traffic by 4% in the second half. Accordingly, traffic overall for the year will grow 4% to 75 million passengers. Half 1 figures will be boosted by the late Easter and modest prior-year comparables due to the volcanic ash disruptions last April and May, but will also be impacted by a 40% increase in Q1 fuel costs, partly due to volume increases, but also due to the fact that we had very favorable fuel hedges in place in Q1 last year.

Due to the higher oil prices, we expect operating cost per passenger to rise by 13% in FY12. That includes a 5% growth in sector length. Excluding fuel, sector length-adjusted unit costs will rise by just 2%, mainly due to excessive euro-controlled increases and some staff cost increases.

Since we've limited visibility on bookings, we remain concerned at the impact of the recession, austerity measures, and falling consumer confidence may have on fares. However, despite these concerns, we cautiously expect average sales to rise to up to 12% this year, due to a better mix of new routes and bases, slower traffic growth, and the higher competitor fuel surcharges which are already having an impact on our summer bookings and yields.

However, these higher fares will only help us to find -- to offset higher fuel and rising sector length-related costs, and accordingly, we expect profit after tax for FY12 to be similar to the FY11 result of EUR400 million.

And with that, I'll ask Howard to take you through the full-year MD&A.

Thank you, Michael.

The MD&A comes with the usual caveats. For the purpose of the management discussion and analysis, all figures and commentary are by reference to the adjusted income statement, excluding exceptional items.

There was one exceptional item in the period to March 31, 2011, which amounted to EUR29.7 million pretax costs relating to the closure of airspace in April and May 2010 due to the volcanic ash disruptions. In the prior year ended March 31, 2010, an exceptional item amounted to EUR13.5 million, reflecting an impairment of the Aer Lingus shareholding.

So then, in summary for the year, adjusted profit after tax increased by 26% to EUR400.7 million, compared to EUR318.8 million in the year ended March 31, 2010, primarily due to a 12% increase in average fares and strong ancillary revenues, offset by a 37% increase in fuel costs.

Total operating revenues increased by 21% to EUR3,629 million as average fares rose by 12%. Ancillary revenues grew by 21%, faster than the 8% increase in passenger numbers, to EUR801.6 million, due to an improved product mix and higher Internet-related revenues. Total revenue per passenger, as a result, increased by 12%, while load factor was up 1% to 83% during the year.

Total operating expenses increased by 20% to EUR3,113 million, primarily due to an increase in fuel prices, the higher level of activity, and higher operating costs associated with the growth of the airline. Fuel, which represents 39% of total operating costs, compared to 35% in the prior year, increased by 37% to EUR1,226 million due to the higher price per gallon paid and a 17% increase in the number of hours flown. Unit costs excluding fuel increased by 3%, and including fuel, they rose by 11%.

Operating margin rose by one percentage point to 14%, while operating profit increased by 28% to EUR516.2 million. Adjusted net margin was 11%, in line with the previous year ended March 31, 2010, and adjusted earnings per share for the period was EUR0.2997, compared to EUR0.2159 at March 31, 2010.

Turning to the balance sheet, gross cash increased by EUR127.2 million in the year to EUR2,940 million. The Group generated cash from operating activities of EUR786.3 million, which partially funded capital expenditure of EUR897.2 million and the payment of a EUR500 million dividend.

Capital expenditure largely consists of advanced aircraft payments for future aircraft deliveries and the delivery of 44 new Boeing 737-800 aircraft in the year.

Gross debt increased by EUR693 million to EUR3,649 million. Net debt at year-end increased by EUR566 million to EUR708.8 million, and that compares to EUR142.8 million in the prior year ended March 31, 2010.

So with that, I'll hand you back for questions.

Thanks, Howard. Marian, if you can open up for questions, please.

(Operator Instructions). Eamonn Hughes, Goodbody Stockbrokers.

Just three questions, if you don't mind. Actually, just firstly, on the ancillaries, maybe picking up some of the guidance in the conference call area today on the webcast. Are you guys essentially kind of guiding sort of similar ancillary growth to the yield growth (multiple speakers)?

Eamonn, I've had that at a couple of investor meetings since the call. There seems to be some confusion here.

What we guided was that average fare would rise by 12%, but ancillary revenues, although they would grow faster than the growth in passenger volumes, they would not rise at the same rate as average fare. So we would expect them to be rising about 8% or so on a year-on-year basis.

I think there was some confusion, and there may be a note issued by somebody who should remain nameless, which I think has caused this confusion. So just to clarify that, we expect average fare to rise by 12%, but ancillaries to rise by something like 8% or 9%.

Okay, Howard, maybe just even in terms of -- I know you generally don't give guidance sort of a further year out or so, but could you see the ancillary numbers stay in positive territory, do you think, in FY13? Just give us, maybe, some of the things you might be planning a little bit further out?

I think we've highlighted, Eamonn, that 20% is really where we see it. You know, if we go -- roll the clock back a year or so ago, it dipped below the 20% level. This year, it was up above -- up at 22%.

So overall, we feel the long-term number will be in and around 20%, but it may bounce above this level or bounce down slightly below that level from time to time. But I think, at this stage, we're happy with that 20% as a relevant number.

Okay. Maybe just if I can move on to the unit cost, ex-fuel, traditionally I think the view was that with sort of the capacity growth figures that you were planning over the medium term, you were hoping to keep those probably heading into sort of neutral to slightly negative, as in, in your favor, unit costs would be down a little bit each year, but at modest levels.

The guidance now for this year is sort of gross seven plus two, net of sector length. I just was wondering, with the slowdown in capacity growth now, over the next two years or so, do you think you'll be able to keep your unit costs flat or will they start to creep up, do you think?

The intention, excluding fuel, is to keep unit costs flat or slightly down.

Again, it will be a little bit bumpy. Like this year, we have a, as I said, very significant increase in euro-controlled fees, totally unjustified, in our view. We've had two years of pay freezes. We can't have a third one. So there's going to be a small -- there's an increase in staff pay. We're sitting 80 aircraft on the ground for five months of the winter, and while we may have some redundancies that we may be letting some people go over the winter, we can't let all of the staff go.

But there could still be upsides. We expect, I think at some point in time, that there will be some significant restructuring of the Irish airport costs, maybe not in the short term but over the longer term. We're paying a huge amount of money each year at Dublin Airport, despite the fact that we're causing traffic. In Shannon Airport last year, even as the last passenger departed, the DA increased fees by 33% on 1 November, on the way into the winter schedule, like [nosy stuff].

At Stansted, there could well be some upside there. I think when Stansted is ultimately sold, a new buyer, we believe, will be very keen to grow traffic quickly. We'll be very keen to work with them on growing traffic quickly, but I think there will be a significant opportunity there for significant restructuring of airport charges and fees away from high aeronautical charges in favor of stimulating traffic.

And is it the case that -- like we've gone from sort of a minus seven number in the year just past to a guidance of two, net sector length adjusted. Is it all down to sort of en route charges or airport charges that really has led to that complete reversal, and a little bit on staff? Is it that simple, or would it be -- I assume maybe touching there, that hopefully there's a buyer so that the number's actually a little bit better.

I would hope the number -- yes, the actual number, I would hope, will be a little bit better.

But last year was a very good year in terms of -- but last year, we probably opened up a lot of new -- I mean, we opened up eight new bases in one year, which was kind of exceptional. I wouldn't expect to open up eight new bases this year.

So I think that the performance in the airports last year was exceptional. They only grew in total by -- airport handling grew 7% this year.

Next year, we'll have slower capacity growth. We won't be opening up that rate of -- each different heading is somewhat -- are slightly different. 2%-plus adjusted for sector length is a very good performance at a time where, as far as I can see, if you look at other competitors across the [piece], easyJet, Aer Lingus, all talking about very significant increase in costs. But we will -- the plan will be to try to do a little bit better than plus 2.

If you remember, Eamonn, last year we said we would be at 4%, and we actually ended up at 2.9%. So, obviously, we need to manage that.

We're obviously predicting costs for the next year, which obviously we have a fair idea of most of them. So, there is a little bit to be filled in. I think we will probably make some improvement on that, but we want to give you a number that we can certainly deliver, and hopefully, as Michael said, we'll do better than that.

We also can't underestimate the fact that we are -- there is some drag on the P&L, particularly in the third and fourth quarters from the fact that we have 80 aircraft grounded. We have a very flexible way we're dealing with this. We largely have the ownership cost. But it is a factor that would be having a small drag on the P&L in Q3 and Q4.

Okay. Maybe just one final question, slightly unfair, but I'm going to ask it anyway. Just -- there's a EUR350 million headwind on the fuel bill in FY12. Even just in terms of where you're sitting there, whatever, 110, are you probably looking at sort of a EUR500 million headwind as you follow into the following year, or are you kind of willing to comment on that at this stage?

Haven't even looked at the following year yet.

Okay. Thank you. Thanks for everything, guys.

Bob McAdoo, Avondale Partners.

As we're trying to think about how to model the last half of the year with the grounding of that many airplanes, it's something around 30% of the airplanes down. Trying to figure out, what should we think about in terms of how much of the costs could you squeeze out? We kind of talked in general about for the year.

Obviously, depreciation per passenger is going to be up. Maintenance per passenger up. I assume aircraft handling, that line per passenger, is that going to be flat? On balance, what should we be thinking about in terms of cost per passenger as you go into a period where you've got that much down? And kind of the other piece of that is, in total, if you've got one-third of the airplanes on the ground, does that mean your total flying is going to be down by about 30%, or maybe not quite that much?

30? Remember, Bob, I think there is some slight confusion there. If you look, last year we had 40 aircraft on the ground, so it isn't actually a -- there are 40 incremental, if you like, aircraft on the ground.

So I think in general in terms of cost guidance and unit cost, we think it will be a bit better than the headline number we've given in the summer and a bit worse in the winter. But no more than that.

Okay, all right. But I guess somehow I had the wrong number in my head for last year. I didn't realize it was 40 last year. I thought it was (multiple speakers)

Yes, it was 40 last year, so (multiple speakers)

(Multiple speakers) 27 or 28.

I think that was the previous year. You're talking about 2009.

So, yes, approximately 40 this year. Obviously, that peaks and troughs. At peaks -- sometimes at Christmas and other events like that, we will not have them all set on the ground. So we will tactically deploy them some of the half-term holidays, but certainly that's what we're looking at, in and around that number.

One final thing. As we think about how you -- I've watched how you operate at airports a time or two. In a smaller airport, where -- not one of your big bases, if you completely stop flying there for a while, do you have any remaining expenses there, or can you wipe out those expenses and then come back in X months later and restart without any particular costs?

The arrangement of each airport will be slightly different. But in principal, no, we would have almost no fixed or overhead costs at airports.

Okay, very good. I appreciate it. Thank you.

I should just go back on the one point that Howard made. I think it's important just to bear in mind, some people got a little bit panicked about oh, gee, you're going to sit 80 aircraft on the ground this winter, the model is broken, all the rest of it.

We've just reported EUR400 million profit, up 26% in a year where we've had 40 aircraft on the ground last winter. And we sat on the ground because it was the sensible profit-making, or at least least loss-making, thing to do during the winter period.

Now clearly, there isn't a future in this business if we were going to sit 300 aircraft on the ground for the winter. But tactically, it gives us a lot of negotiating power with a lot of airports in the next couple of months, not least of which a few down in Spain who are going to get it between the eyes and the Irish airports who are going to get it between the eyes, because they don't believe that we're going to cut this much capacity out of the system in the winter.

Well, now we've announced it. Now we're going to roll it out, and you're going to see -- there will be brush road or sheep grazing on the runways in Dublin Airport after President Obama leaves some time around November of this year, unless there's going to be a change in strategy that reverses these kind of crazy 40% price increases last year. And that is all about the price discipline that we continue to promise and deliver for shareholders.

In an airport like Alicante where you've had your issues, do you see traffic moving to an alternative airport? Will customers -- are customers willing to go to one of the other airports that's close by, like a Valencia or something?

I think some do, but no, I don't think they're interchangeable.

I think what will happen is at Alicante, we've taken capacity out. Nobody else will come in and take up the capacity. We're not going to close that many routes. We've closed some routes where we had -- that nobody else would fly those routes. But generally speaking, what we do is we significantly cut back capacity on existing routes. It generally tends to -- or to ensure that you don't get a lot of people coming in to compete with us on those routes.

And in the meantime, that drives the average fare for that particular route where you have less traffic -- I mean, less capacity, obviously.

Yes, but that's not the intention. The intention at Alicante -- you know they opened up a new terminal in March, forced us into it, forced us to use air bridges where 25-minute turnarounds are well-nigh impossible, and then we've got to pay for these useless air bridges that we don't want to use.

Alicante then lied -- or Aena lied for a week or two, including in court, saying you had to -- oh, it's a safety issue. When we pointed out to the judge that actually all the aircraft that were parked on remote stands were being booked from exactly the same stands, just by being walked down the steps that we wanted to use on the air bridges, even Alicante were forced to admit in court that, actually, they're not necessary and there's no safety implication whatsoever.

The court in Alicante found last week -- now, they didn't give us our injunction solely because we couldn't demonstrate, as of this time, the pressing immediate need, since we're still flying there. But they did rule that Alicante -- that Aena and Alicante were in a dominant position, abusing their dominant position, and were in breach of Spanish and EU competition rules.

Are you using the jet bridges there yet or no?

No, we are. This summer, we're using the jet bridges. It's delaying a lot of flights. We're having to pay, I think, EUR2 million extra this year at Alicante for the privilege of using their unnecessary jet bridges, and as a result of that, we're going to cut back traffic at the air -- our traffic at Alicante.

Remember, we're the largest airline in Alicante. We account for about 50% of the traffic. We're going to cut back by about 80% this winter. Now, we would in normal circumstances have been cutting back probably about 50%, summer to winter. We're going to cut back 80%, and they won't get that traffic back until we have an accommodation on -- that allows us to continue to fly in and out there without using air bridges or paying for them.

Understood. Thank you.

(Operator Instructions). Jonathan Wober, Societe Generale.

Just a couple of questions. Just regarding the standing down of 80 aircraft in the winter, what would be the implications for employee costs, the profiling of that line item through the year? Could we see in absolute terms a reduction in costs year on year for the winter or will you have people sort of on standby, as it were, in case you need them?

And then, the second question was just a return to something that did come up in the presentation this morning, but just to make sure I got it right, and that's the dollar hedge situation. Thank you.

Do you want to take the dollar hedge?

Yes, the dollar hedge, Jonathan, is -- for CapEx is 1.43. It's at a similar level for operating -- it's 1.43 out to the end of December 2012. So it's the remaining Boeing deliveries.

And on operating expenditure beyond this year, we're hedged about 50% for the first three quarters of fihscal 2012 at a similar level, 1.43.

Right. And the employee cost?

On the employee cost, no, it's not credible to have a reduction in employee costs during the winter.

We will and are operating a lot of the -- what I'd call the flexible or the variable staff, which is the pilots, the cabin crew. A lot of those will fly their 900 hours. We can condense their flying through the, say, the first nine or 10 months of the year. A lot of people will be getting their leave, allocated leave and unpaid leave, during the winter.

And I think there may well be some job cuts. It's not beyond the bounds of possibility that we may have some redundancies, although I think the number will be small this winter, if we're not able to secure sufficient unpaid winter leave.

But we will still be -- we still have to gear up. While we ground the 80 aircraft from November through to March, we still have to gear up to fly those aircraft through March, April, May, the roll into Easter and the summer schedule. So no, I think the growth in staff costs will be slower in Q3 and Q4, but there is no possibility of reductions.

Jim Parker, Raymond James.

Howard, just a quick question here regarding your net interest expense, that in the fourth quarter, it almost doubled from the third quarter. It went to EUR22 million from EUR12 million. You increased debt. You also paid out the dividend. Is there anything else going on there? And what is the run rate going forward?

On a year-on-year basis, obviously interest payable rose as we expanded our fleet. So that went from, I think, 19 to 25, Jim. And interest payable rose -- or interest receivable only rose from EUR5.6 million to EUR6 million.

So clearly, we have been impacted by having a lower absolute level of cash on a year-on-year basis, although it will tick up a bit this year, given interest rates are rising.

Overall, looking forward into next year, I still think we'll have an interest expense in or around the same level as we have this year. So something in the -- this year, the total for fiscal 2011 was EUR65 million. I think something in and around that. We would hope to do better than that this year, but I think if you're modeling it, something in or around EUR60 million to EUR65 million.

Thank you. And your presentation, on page 13, of course, you present passenger growth by quarter. Are you assuming flat load factors in each quarter? Is capacity going to grow in line with the passenger growth? Or what is the capacity growth?

This year was a little bit distorted, particularly in Q1, because we were -- when we had the volcanic ash disruptions, we were filling the aircraft to try and repatriate people home, so therefore, the load factor was a bit flattered. Otherwise, other than Q1, it's a very similar load factor.

So I reckon where we kind of rounded up to 83% this year, we might round down a tad, maybe down to 82%, which is consistent with the previous year.

Okay. Just quickly, can you give us an update on the volcanic eruption? Is there any impact on your bookings? What happened over the weekend? What's going on today?

No, nothing perceptible so far. There's been a lot of media stuff this morning on the newswire, the dramatic photographs of volcanic ash plumes.

Remember, the procedures this year in Europe are different. They've been brought into line with what previously applied in the U.S. in Alaska and in Indonesia for volcanic eruptions. There's now, instead of shutting -- getting met people to forecast where this bloody mythical cloud will go, they're now establishing a no-fly zone in the immediate vicinity of the volcano, and I suspect there won't be any airspace closures out beyond that 100-, 150-mile no-fly zone. Airlines will then be left to fly where we already fly.

We'll certainly have to step up our rate of inspections, just in case. You know, we fly through something that you can't see. But the further away you get from Iceland, the more dispersed this material becomes, and the evidence of last year is even when we were flying is there was no volcanic ash cloud or dust anywhere over most of continental Europe.

So we think as long as the regulators or the bureaucrats don't make a balls of it, airspace won't be closed this year and they'll leave it to the airlines to manage it ourselves, which we will do very well, hand in hand with the safety authorities, by increasing the rate of post-flight inspections.

Robert Pickels, Manning & Napier.

Just curious, as the number of planes you park in the winter increases, I'm curious if you start to think about alternative uses of those aircraft, and maybe there is an opportunity to sublease some of these aircraft to other airlines in other parts of the world where seasonal demand is a little bit stronger.

I guess I see one of the true assets of Ryanair is its young fleet and the fact that so many other airlines are trying to do what you're doing with the business model. It would just seem like you would have an opportunity to potentially lease some of these aircraft outside of the region.

We looked at it before, but this kind of -- reverse season leases tend to be mythical. We want the planes up here in the northern hemisphere for seven months -- seven of the 12 months, so then the reverse season lessor wants them for the reverse seven months of their 12 months, right? We've never made it -- I've never seen it work properly.

That's not to say you don't have events like the Hajj and things like that where there may be short-term opportunities. But we want to fly -- we would want these aircraft flying here from March through until effectively the end of October, which really only leaves them available for lease somewhere else for four, 4.5 months. It doesn't make sense.

I would far rather keep them here on the ground. While we have 80 aircraft on the ground, that's not to say, for example, if we don't reach an agreement, or if the Irish government is successful in getting the airport, the Irish airports, to lower their costs, we could well take 10 or 15 of these aircraft and start flying, starting to work with the Irish government to really grow traffic and tourism from September, October this year. I would far rather keep the aircraft here, keep them flexible, and be able to allocate them as we want, partly because there is very little -- we have very little variable costs associated with the aircraft that we can't lay off for four or five months of the winter.

Okay. Just one other question. I'm looking at a headline that says Ryanair to ground brand-new planes amid high fuel costs, and I guess my question is, it sounds like you're going to have a challenge here in trying to address this whole issue. What percentage, would you say, of your parking is due to fuel costs and what percentage of it is more strategic in trying to get better airport agreements?

I think, you know -- if you look at -- let me just check what page it is. If you look at page -- I think it's in the ancillaries of the -- the fuel hedge, page 12 of the presentation, we have the fuel hedges extended. Our fuel hedge rate in Q1 is $77 a barrel, Q2 $77 a barrel, Q3 $80 a barrel, Q4 $97 a barrel. Most of this is fuel related.

There is some of it that's tactical. We are going to have a row with a number of Spanish airports. We are going to cut capacity at the Irish airports this winter. We may take -- do some tactical cutting elsewhere.

But in large measure, most of it is fuel related. And you know, in the same way as we have just reported a year where we've grown profits by 26% despite sitting 40 aircraft on the ground for the winter, we think it was a sensible thing to do. If we'd flown those 40 aircraft in the winter, we could've burned our way through EUR80 million or EUR100 million over the last five months. We think this is the sensible thing to do.

And also, if we're on a plan, as we are over the next three to four years, to try to manage yields or some upward pressure on yields by growing slower, it makes more sense to try to do that during the winter as well, because under the winter, we can always fill the planes, but we fill them at far cheaper fares.

Yes, I guess the question is, is there really a need for another aircraft or -- as you're parking more and more planes in the winter?

Yes. Look, if we -- if nothing else changes, we got a couple of more airports deals or a couple of better airport deals, next year, if oil remains stable at $100 a barrel, I think you will see, generally speaking across Europe, airfares and fuel surcharges rise to reflect those higher oil prices.

I would have no difficulty, then, flying -- we might only ground 30 or 40 aircraft next winter. But we would have better airport deals. We would have lower -- we would have a better yield environment, as well. We'd also have the ancillary revenues kicking in on the flights that we operate.

I think we're looking at the moment at a very volatile fuel situation. Our average rate for the year is about $82 a barrel, but in Q4 it's nearly $100 a barrel. And if we were to go out and, say, fly another 10 or 20 aircraft this winter, the spot rate now for Q3 and Q4 is $100, $110 a barrel. This is very expensive flying. Whereas I'd rather do the deals with the airports, and then say, fine, but we'll start growing at your airport in March or April of next year.

So it is pretty tactical. I don't see any set of circumstances where the following winter we would ground 80 aircraft. I think we'd ground far less aircraft. Then we would have less aircraft to play with anyway because we're running out of aircraft orders, so some of our growth would take place by flying more in the winter.

So part of this is just the speed with which fuel has risen, the industry hasn't had a chance to adjust, and so you don't think it's a long-term issue. You just need the industry to adjust the pricing to reflect the fuel before you're going to start flying all these planes in the winter? Is that fair?

(Multiple speakers). Yes, I think that's more accurate, but I'd hate not to describe fuel as a long-term issue. I think clearly it is a long-term issue, but it's fuel volatility that really screws up our earnings.

You know, we're in a very good hedging position this year to the rest of the industry, $82 a barrel. I don't want to blow that by doing a lot of flying in the winter at $110 a barrel. But the rest of the industry, nobody is in as good a hedging position as we are this year. They're all going to be under significantly more pressure this winter, and we're happy to kind of cut back the growth, sit aircraft on the ground. By the time you emerge into the summer of 2012, I think the market will have adjusted to that, if oil prices have been relatively stable.

So the kind of nightmare scenario, though, is that oil prices will slump in the short term, be cheap this winter while we're at 80 [dooda], and then shoot back up again next summer if there's some kind of recovery. But look, oil is just something we've got to manage as best as we can through a mix of hedging and a mix of kind of capacity discipline. And that's what we're trying to do this winter.

Now that's not to say if somebody came along and said, look, I've got an airport here, I'll give you -- you can have 100% discount, plus I'll give you some marketing monies if you deliver me significant growth starting in September, October. Hey, we'd talk to you, even if oil was $110 a barrel.

But at the moment, you've got to persuade us to fly these aircraft, not the other way around. We're not desperate to find homes for them this winter.

[Jared Moore], [Marin Stockbrokers].

Just a couple of points of clarification, really. First of all, on FY12 guidance, just to be sure, is your guidance based on jet fuel prices of $1,100?

Secondly, can I just be sure that for FY13, you have at the moment no hedging in place?

Thirdly, this morning, I think you mentioned that the currency -- there would be a currency benefit of around 4%. Were you talking about FY12 or FY13 for that comment?

And then, the last question, it really follows on from the remarks that you just made, but you also updated this morning your passenger guidance for FY13. Was that kind of based on the assumption of where fuel and jet fuel prices are at the moment? So if these prices did stay in until next year, would we expect those passenger numbers to come through, as you had in the presentation today? Thanks.

Thanks. No, there's no way of backing us into FY13 guidance. The thing on the slide this morning is just based on there is the capacity additions into FY13, take an 80% load factor, you get to 79 million passengers. It's not a guidance. It's just a number. Don't waste any time on it.

You're right. We have no fuel hedges into FY13. We have no guidance for FY13. It's far too early to look at at the moment. We're too busy trying to manage FY12. And yes, our FY12 guidance is based on our current fuel hedges, which is 90% hedged at about $82 a barrel, plus the balance hedged out at current rates was about $105, $110 -- our guidance based on $110 --

Our guidance is based on current rates as of last Friday, which were approximately $105.

For the balance -- the remaining 10% (multiple speakers)

10% unhedged, which translates into an average for the year of $85 a barrel, and that's equivalent to EUR350 million of an increase.

Okay. Thanks a lot.

Tim Marshall, Redburn.

Hi, I just want to come back to the dollar hedging, and I apologize for not understanding this. But the Q3 conference call, you suggested that you were hedged at 70% for FY12 at an average rate of $1.34. So, I was just wanting to clarify your comments on the 1.43, whether that was for --

That's fiscal 2012.

So, you're hedged at 1.43 for fiscal 2012.

We're hedged at 1.43 for CapEx and 1.34 for operating expense. And as you go into next year, it's 1.43 for both.

Perfect. Okay, that's brilliant. Thank you very much.

And that's why Jared mentioned in the previous question about the 4% improvement.

Yes, got it.

4% improvement is up from 1.34 to 1.43.

Perfect. Thank you.

(Operator Instructions).

Okay, folks. There doesn't seem to be any other questions, then. So, we'll wrap up the conference call.

As I said, we have an extensive roadshow program running all week. If you haven't got a meeting and you want a meeting, please contact either Davy's or Morgan Stanley, or you can get us through David Broderick, the head of investor relations, in Ryanair. Send us a text or a message, and we get a -- we'll be happy to set up a meeting with you during the week.

If not, and anybody has any separate questions, please feel free to contact David, Howard, myself at any stage over the week and we'll try and answer them.

Thank you very much to everybody, and bye-bye. We'll see you later in the week. Bye.

Thank you. That will conclude today's conference call. Thanks for your participation, ladies and gentlemen. You may now disconnect.