Ryanair Holdings PLC (RYAAY) 2012 Q1 法說會逐字稿

Welcome to the Ryanair Q1 results conference call.

Today's conference call is being recorded.

At this time, I would like to turn the conference over to Michael O'Leary.

Please go ahead, sir.

Okay.

Good afternoon, ladies and gentlemen.

You're all very welcome to the Ryanair Q1 results call.

I'm here with my colleagues in Dublin.

Howard Millar is joining us -- unfortunately, at the moment on a mobile phone from London, but we'll push on.

As you have seen, the results this morning are on the website, the Investor page and the Home page.

This morning, we announced Q1 net profit of EUR139 million, a slight increase of 1% on Q1 last year.

Revenues were up 29% to EUR1.15 billion as traffic increased 18% and average fares rose 11%.

Unit costs rose by 14% due to a 49% increase in fuel costs.

Excluding fuel, sector-length adjusted unit costs fell by 1%.

The traffic growth in Q1 was flattered by the air space, the volcanic ash air space closures in April and May last year, which caused the cancellation of 9,500 flights and the loss of almost 1.5 million Ryanair passengers.

So our 18% traffic growth, combined with an 11% rise in average fares, led to a 29% increase in revenues.

Significantly higher revenues were largely offset by higher costs, principally fuel, which rose 49% to EUR427 million.

Despite this vastly higher fuel costs, we still recorded profit after tax of EUR139 million, slightly up on Q1 of last year.

Our robust result is testimony to the strength of the Ryanair lowest fares, lowest cost model.

Ancillary sales grew 22% to EUR248 million, somewhat faster than traffic and amounted to 21% of total revenues.

We recently started trials of reserved seating for the 21 extra leg-room seats on selected routes for a fee of EUR10 per seat.

And if these trials are successful, particularly during the peak period, we'll roll out reserve seating across more of our longer routes and the network this winter.

Unit costs increased 14%, primarily fuel -- accounted for by fuel, which increased 49% to EUR427 million.

Excluding fuel, sector length-adjusted, they fell 1%, as we rigorously controlled costs, despite a 2% increase in basic pay for all staff from early April [at] Eurocontrol charges which rose 34% in the quarter, and substantially higher and unjustified airport charges at Dublin Airport, which largely account for the 31% increase in airport fees.

Our new routes and bases this summer are performing well.

We recently announced a forty-fifth base in Manchester, which starts in October with two aircraft and 17 routes, rising to four aircraft and 26 routes in summer 2012.

Combination of recession and competitor capacity cuts continues to create significant growth opportunities across Europe, as numerous airports aggressively compete against each other to attract Ryanair's growth.

We expect Dublin Airport's traffic to fall in 2012, which will be its fourth consecutive annual fall, due to the DAA monopoly's unjustified 40% increase in airport charges.

This has led to winter capacity cuts by Ryanair and many other airlines.

And we believe we'll see traffic again, as I said, [for] 2011 fall again at Dublin.

Traffic at Dublin has plummeted by some 30% to just over 18 million passengers in 2011 from its 2007 peak of 24.5 million.

We believe the Irish government can only reverse its downward spiral in air traffic and return to tourism and jobs growth when the DAA airport monopoly is broken up and replaced with competing terminals at Dublin, and competing airports at Cork and Shannon, which will lead to much more competitive airport charges and more efficient terminal facilities instead of the expensive white elephants which the DAA have delivered over recent years.

We've recently submitted a proposal to the Irish government to deliver 5 million extra passengers annually over the next five years to kickstart Irish tourism and job creation.

This will create about 5,000 jobs to the Irish -- the Irish airports directly.

This growth proposal is based on airport charges falling to returning to competitive levels here in Ireland, and the government scrapping the remaining EUR3 tourist tax.

And we still await the government's response to our proposal.

The latest UK Competition Commission's confirmation of its original 2008 recommendations that the BAA airport monopoly should be forced to sell Stansted, and at least one Scottish airport will, we hope, finally end the BAA's policy of using legal appeals to delay the sale.

These delaying tactics have not stopped the BAA at Stansted overcharging airlines, generating excessive monopoly profit by losing even more routes and traffic.

We call on the UK government to force the early sale of Stansted and one of the Scottish airports that allow competition between the UK airports, in order to deliver better facilities and lower costs for airport users.

We intend to shortly launch legal proceedings against the BAA Stansted, seeking a recovery of the substantial overcharges, which Ryanair believes Ace and other airlines have suffered at the BAA Stansted monopoly's hands in recent years, and which have been used to fund Ferrovial's acquisition and operation of Heathrow.

Fuel prices remained stubbornly high as spot is trading at around $116 a barrel.

We're 90% hedged for the remainder -- or for FY '12 at about $86 per barrel, an 18% price increase on the previous year, but significantly below current prices.

We've taken advantage of recent price dips to hedge about 20% of Q1 of FY '13 at an average price of just over $100 per barrel.

Higher oil prices, though, are forcing competitors to further increase fuel surcharges and fares, which makes Ryanair's low fares even more attractive.

It will also drive forward the consolidation and more airlines will exit the industry this winter.

This will generate further growth opportunities for Ryanair because we operate the most fuel-efficient aircraft and at the lowest operating costs.

The recent Brighter Planet survey ranked Ryanair as the greenest, cleanest airline in the world.

And that survey is available to you, if you care, on the Ryanair.com website.

In June, we signed an MOU with COMAC, the Chinese aircraft manufacturer, to enter discussions on the development of a new 200-seater shorthaul aircraft for Ryanair that should be available from 2018 onward.

We believe this aircraft, which will be a larger version of the C919, will be a real alternative to the existing shorthaul duopoly of Boeing and Airbus.

Real competition in the aircraft manufacturing industry will deliver more choice at a lower cost for airlines and passengers.

We also believe it will make economic sense for Ryanair to become in time a two-aircraft operator, if the present Boeing fleet economies can be matched or improved by another aircraft manufacturer.

Our outlook for the remainder of the year remains unchanged.

We anticipate traffic in FY '12.

We grow by 4%, comprising 10% growth in H1, and will then fall by approximately 4% monthly in H2, which will be the first time in our history that we've contracted during a winter period.

We expect average fares in FY '12 to rise by up to 12%, due to the better mix of new routes and bases, our winter capacity costs, higher competitor fares and fuel surcharges.

We also anticipate that Q2 yields will rise by between 12% to 15%.

We expect operating costs per passenger for FY '12 to rise by 13%, primarily due to higher oil prices.

Excluding fuel, sector length-adjusted costs should rise by no more than 2%, mainly due to Eurocontrol, Dublin Airport, and staff pay increases.

However, with very little -- limited visibility on H2 bookings or yields at this time, our full-year guidance remains sensibly unchanged as we expect profit aftertax for FY '12 to be similar to the FY '11 results of EUR400 million profit after tax.

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

Yes, Michael.

Thank you.

For the purposes of the MD&A, all figures and comments are by reference the adjusted income statements, including the exceptional items referred to below.

There were no exceptional items in the period ended June 30, 2011.

Exceptional items in the period ended June 30, 2010 amounted to a net charge of -- amounted to a net of tax charge of EUR44.8 million, reflecting the estimated costs relating to closure of airspace in April and May 2010, due to the volcanic ash disruptions.

This estimate was subsequently reduced to a net of tax amount of EUR26.1 million at the year ended, just gone, March 31, 2011.

Turning then to the summary of the results, adjusted profit aftertax increased by 1% to EUR139.3 million compared to EUR138.5 million in the period ended June 30, 2011, primarily due to an 8% increase in average fares and strong ancillary revenues, offset by a 49% increase in fuel costs.

Total operating revenues increased by 29% to EUR1,155,000 as average fares rose by 11%.

Ancillary revenues grew by 21%, faster than the 18% increase in past year numbers to EUR247.7 million due to improved product mix and higher Internet-related revenues.

Total revenues per passenger, as a result, increased by 9%, whilst the load factor remained flat at 83% during the period.

Total operating expenses increased by 35% to EUR985.5 million, primarily due to an increase in fuel prices and the higher level of activity, and operating costs associated with the growth of the airline.

Fuel, which represents 43% of total operating costs compared to 29% in the prior period, increased by 49% to EUR426.6 million, due to the higher price per gallon paid and the 29% increase in the number of hours flown.

Unit costs, excluding fuel, increased by 7%, and sector length adjusted, they fell by 1%.

Including fuel, unit costs rose by 14%.

Operating margin decreased by 4 points to 15% whilst operating profit was flat at EUR169.9 million.

Adjusted earnings per share for the period was largely unchanged at EUR9.35 compared to EUR9.36 in the previous quarter.

On to the balance sheet, gross cash increased by EUR273.2 million to EUR3.23 billion.

The group generated cash from operating activities of EUR348.7 million, which funded net capital expenditure of EUR3.4 million and debt repayments.

Gross debt increased by EUR78.3 million to EUR3.571 million.

Net debt has fallen from EUR708.8 million at March 31, 2011 to just EUR357.3 million at the period end.

That's the end of the MD&A.

Back to you, Michael.

Okay, thanks, Howard.

Okay, we're going to open it up for questions.

If I could, please, as you see, we've given you guidance for years in Q2.

That's as much as we're doing on years -- for the year.

We have no idea yet on years in Q3 and Q4.

So in the interest of speed, I'd appreciate if nobody asked any silly questions about yield guidance for Q2 or the second half.

Other than that -- can we open it up for questions now, please?

Michael, can I just add one thing to that?

Please.

Just to clarify something that's in the press release, we quote the 90% hedge at $86 per barrel.

And that should read that -- that's the blended rate.

So 90% of our fuel for the coming year is hedged at $82 per barrel.

When you include the 10% that's unhedged, that's $86 per barrel.

So I just wanted to clarify that because that's one of the questions that's come up this morning.

Okay, thanks, Howard.

(Operator Instructions).

Stephen Furlong, Davy.

Maybe, Michael, you might just comment on some of the external events that happened in the quarter, particularly just hinted in your comments about the aircraft.

And obviously, you have an MOU now with the Chinese, but also what happened with the American deal, and that Boeing are going for a re-engined aircraft rather than a new aircraft.

I was just interested in what your view of that was.

And then the second thing was maybe what's happening at Stansted or could happen at Stansted?

Do you think that London is a place where there's still a lot of growth potential and you could maybe in time expand that, that market, again after many years of cuts?

Thanks.

Thank you, let me give you the two first.

First, I have to say we've been extraordinarily impressed by the Chinese.

COMAC, in a series of four meetings, have responded very quickly and favorably to every request we've made of them.

We're going out there -- or sending a delegation out there where our first quarterly meeting takes place with them at the end of September, early October.

I'm going for my first trip to China in November to meet with COMAC and see the facilities down there, and to advance our discussions on a development of a 200-seat variant of the C919, which at the moment, is about 174 seats.

So I think those discussions have been very positive and we see them as a very credible alternate to Boeing and Airbus.

Been some kind of concerns about, oh, a Chinese aircraft, would anybody -- this is a glorified Airbus sub-assembled in China.

Some 80% of the components are Western-made -- it's Western Engines, Rockwell Collin's Avionics, all the rest of it.

And the Chinese have assembled almost everything else that the West consumes at the moment.

So I don't have any issue with aircraft.

We were interested in the American Airlines' order last week.

I think it was noteworthy that, firstly, it's the first time Airbus has won a narrowbody order into one of the -- into American Airlines, which to date has always been -- what do you call it?

-- an MD80 and Boeing operator.

Also struck by the fact that Boeing has -- or Airbus has a majority of the narrowbody order of 260 A320s and just 200 737s.

And it seems to me that -- Boeing seems to be -- they're just leasing the aircraft to American Airlines -- Boeing seems to be so desperate not to get news on the order, they have been [defunding] the deliveries to American Airlines as well.

And to be fair, we've scheduled a follow-up meeting with Boeing; expect that to take place over the next week or two when they've promised to update us on the news as to what the re-engining -- how long it will take, what will be the benefits of re-engining.

I'm not a great fan of re-engining.

I think they should have redesigned the aircraft and made it bigger, and do a step change ahead of Airbus.

And so the strike costs that they're running at is somewhat behind the Airbus NEO at the moment.

But they can always catch up.

And the best way to catch up would be to drop the price of the aircraft.

And we'd be very happy to work with them if that's what they have in mind.

Other than that, clearly, the re-engined 737 will significantly devalue the value of 737 deliveries in '14 -- '13, '14, and '15, when I'm glad to say Ryanair don't have any orders at the moment.

And as you can see with the price of oil at the moment, frankly, I'd be very happy with our core position -- that is not ordering or taking delivery of aircraft in the back end of '13, '14 or '15, unless somebody makes it extremely worth our while to do so.

So I'm, overall, very pleased with where we are.

Our discussions -- occasional discussions with Boeing, with Airbus, and with more active discussions with the Chinese will continue for the next year or two.

But I'm very happy with oil at up around $115 a barrel, not to have a lot of aircraft orders out there at the moment.

In relation to Stansted and London, I think I couldn't be happier with the recent decision by the Competition Commission last week to confirm the original 2008 decision.

I think the way the BAA monopoly has used every legal appeal, maneuver, tactic to repeatedly delay and frustrate the sale of Stansted, and that Glasgow Airport has been typical, or exactly what you'd expect of a monopoly operator.

And all I can say is, for those of you who've seen the interview by Colin Matthews in the Sunday Times, you need look no further than the reasons why that bloody monopoly should be broken up.

He was there lying through his teeth, talking about -- apparently Ryanair are so powerful, we have a choice -- Ryanair have a choice, that Ryanair can make requirements, and we can move from Stansted if the BAA don't meet them.

Of course, he forgets to say that we can't move to Heathrow because it's full [gap], because it's [full of looting] because it's [fuller than London city].

He also in his quest to demonstrate that really, the BAA is not a monopoly, failed to explain that in 2011 to date, EasyJet, Turkish, Cyprus, Air Berlin, Thomson, Thomas Cook, Astraeus, Star One, Air Asia X, and Ryanair, have all announced significant route and capacity cuts at Stansted.

Precisely because this monopoly has doubled the charges to the airlines over the past four years and presided over a 30% decline in traffic.

Mr.

Matthews, in his Sunday Time article yesterday, tried to explain that when responding to the BAA has doubled Stansted fees in five years, he said, and I quote, yes, but the regulators set the maximum we can charge.

And when Stansted was in development, we had to charge less.

When it started to fill up, we began to charge near the maximum to repay the investment.

Stansted has never got close to its 30 MPPA capacity.

At its height four years ago, it was at 24 million, with significant overcapacity.

And the reason why the BAA doubled the charges and the thin air traffic collapsed is because it is a rapacious, over-charging monopoly.

I think I couldn't have put it any better than the opinion piece in the Times newspaper last week, where they said, yes, Stansted has suffered during the past four years, but any other company faced with a 30% drop in passenger numbers would respond by quoting its prices.

BAA's response has been to more than double landing charges at Stansted, which is precisely why its traffic has declined by 30%.

We will -- and I hope to be later on this week, be announcing details of a significant legal action which we intend to launch against BAA Stansted.

We believe they're overcharging the airlines at the moment by up to GBP50 million annually on the back of a totally artificial and inflated regulated RAB or Regulated Asset Base.

And let me give you two examples.

The idiots in the CAA have allowed them to inflate that regulators, the RAB, by GBP270 million over the last 10 years to allow for inflation.

And at last count, these half-wits have managed to waste GBP200 million -- well, actually, in fact, it was -- it's GBP198 million -- on blight costs for the second runway, which is now not proceeding.

So while the BAA spent 10 years out there buying up land and property and houses that it didn't have to buy, against the advice of Ryanair and the other airlines at Stansted, they now believe that we should pay for their stupidity and incompetence to the tune of 200 million -- or at 6% recovery on 200 million ways to buy them on the second runway.

The second runway has been canceled.

The BAA monopoly should never have spent the money on the second runway anyway.

And we don't believe that Ryanair or the other airlines at Stansted, or our passengers, should be penalized, paying for the mistakes or the regulatory gaming, which Colin Matthews and the BAA have engaged in at Stansted in recent years.

So we look forward to seeing the [expletive] in court, and hopefully, to getting a very significant reduction not just for Ryanair, but for all of the other airlines for their very substantial overcharging, which has been happening, which has been allowed to take place in Stansted in recent years, and which continues today -- which is why, at a time when all of the other airports in London are full, Stansted is declining.

And airlines -- God bless them, even EasyJet, who, as you know, like to pretend that they fly to the central favorite airports -- are now taking three aircraft away from Stansted to fly to Central Southend.

So rapacious has been the charges by the BAA monopoly at Stansted.

I hope that gives you some explanation, Stephen, of our views on Stansted and the London Airport.

Thanks for that.

(multiple speakers)

(multiple speakers) But we have further detail at the press conference in London later this week.

Thanks a lot.

Joe Gill, Bloxham.

Just a couple of questions, maybe for Howard as well.

In terms of airport charges, there's a big hike, obviously, in the first quarter.

How will that work out through the year on a quarter-by-quarter basis?

Will the year-on-year effects start to fade as you get into the second half?

And secondly, just in relation to the CapEx number, obviously it's de minimis in the current quarter.

How will that actually travel through the year once we get to the end of the financial year?

Thank you.

Howard, you going to take those?

Yes, Joe, in terms of the CapEx, we're probably looking at about EUR400 million this year.

And some of that we will use through sale and leaseback transactions.

So the gross CapEx will be EUR400 million; what will appear on the balance sheet will be less.

We've already signed up for five aircraft and we're probably going to have another five fairly shortly.

So expect something like 40% of this year's deliveries will be sale and leaseback transactions, and the rest will be on balance sheet.

And in terms of airport charges, there was a slightly odd impact in Q1.

And if you look at the absolute increase about -- of EUR37 million, about EUR21 million of that is due to just increased passenger numbers; passenger numbers rose by 18%.

The balance of EUR15 million is really split by a massive increase in charges at Dublin Airport.

We got a double whammy -- we got effectively 40% into one quarter.

So that gives us about a [total] of about 5 million passengers.

We also have a significant increase in local air ATC charges, which we account for as part of airport and handling.

You can see that the [blue] charges rose by 33%, local ATC charges went up by about EUR5 million during the quarter as well.

And the filing date of that is some higher charges at -- in Spain; in particular, we've obviously got this -- running this [fuge] with Alicante over the air bridges.

That's pretty much the makeup of Q1.

Throughout the year, you won't see anything like the increase you've seen in Q1.

You'll see a slower rate of increase, closer to the increase in passenger volumes.

But again, that depends on what kind of direction the non-independent regulator in Ireland gets from the equally non-independent Department of Transport, who are far more concerned with propping up the fiscal position or the financial position of the DAA monopoly than they are with promoting lower cost access and tourism.

Okay, and just one follow-on.

In relation to the news on Boeing and the re-engining -- a couple of people were just asking the point about, would it have any effect on your book values for your existing 737-800s as these NEOs and re-engined aircraft come onstream?

Well, likely in the short-term, Joe.

I mean, as you know, the book values with -- in terms of our book values, we write them down over 23 years.

And we would plan to continue to operate and depreciate those.

And opportunistically, as and when if secondhand values rise, we may sell more of them into the market.

But we haven't sold any secondhand aircraft now for about 18 months.

I don't think it will have any effect on book value in the short-term.

And we have to wait and see just precisely how much fuel savings these NEOs actually deliver.

I've seen the 14% figure from Airbus.

We haven't yet got a figure out of Boeing.

And a lot of it depends once they -- how much of a premium are they looking for the aircraft for these notion of fuel savings.

Okay, thanks.

So, Joe, maybe Michael, I might just add to that, that we're using 15% of current market values to write down a new aircraft when it comes in.

Current market value is something in the $45 million range.

So we're assuming in 23 years, the plane will be worth something like $6 million to $7 million.

If we take inflation over a 23-year period, I think our assumptions are very modest.

Generally, to the trend that the classics, if you recall, was that in the initial years that the classics were introduced or the NGs were introduced, it took a very long time for our classic 737 prices to decline.

I expect you'll see the same, given that it takes a long time for production to increase.

So I don't think certainly in the distant future, there will be any impact on residual values.

Thanks, Howard.

Thanks, Joe.

Jarrod Castle, UBS.

Two questions.

Firstly, what do you think you can get back from Stansted if you've got a successful outcome from the courts?

Could this be a material number coming out?

And secondly, I mean, is there potential, given the cash flow that you generated in Q1, for maybe some form of dividend in the second half of the year?

Or is it too early to be thinking about that?

I'll give you the second one first.

There's no chance of a dividend in the second half of the year.

The only indication we've given on dividends were the -- prior to the end of 2013.

We're not going to get into an annual dividend stream, we're having a debate about it, so there won't be any dividend this year come hell or high water.

The issue on Stansted, you know, I mean, the numbers potentially -- I mean, we believe, if you look at the regulatory accounts for Stansted, they're quite an extraordinary document.

It's quite clear that I think that Stansted is overcharging the airlines collectively there by -- to the tune of about GPB50 million each year.

Let me give you some examples from recent Stansted regulatory accounts.

Let me just give you a couple of snapshots here.

Obviously, the big one is the fact that there is 200 million shoved into the RAB for the second runway, which the airline should not be paying for, since we never supported it.

And now that it's been abandoned, it should -- the BAA should be writing that down.

If you look at it over the four-year period from 2008 to 2011, traffic at Stansted had fallen by over 21%; but total comps operating costs at Stansted have risen.

The reason they've risen is blatant intercompany transfers or head office transfers into the Stansted regulatory accounts.

There's a wonderful -- for example, in the case of other costs, in 2008 -- or in 2009 regulatory accounts for Stansted, other costs jumped from 7.7 million to 25 million without any explanation.

The only reference to it is that these comps are, and I quote -- a combination of supply chain initiatives and cost bundling, less marketing spend and reduced insurance premiums.

So somehow, less marketing spend and reduced insurance premiums managed to drive up Stansted's costs by some GPB15 million.

There's another beauty in the 2009 -- over the last three, four years, Stansted, BAA Stansted has suffered what's euphemistically described of -- and again I quote -- intergroup costs of, wait for it, GPB70 million.

And then there's a real doozy here in -- we had a fantastic -- even by the standards of the BAA -- in 2010 -- let me see -- or sorry, in 2011 -- no, what have I got?

-- the utilities bill in 2010 at Stansted jumped by -- this by the way, in 2010, when Stansted traffic was down 10%, their utilities bill increased by 80% from 13 million in 2009 to 23 million.

And this was due to a quote, revised allocation of electricity charges between Heathrow and Stansted.

Now I can't wait to see Colin Matthews explain to a court or preferably, the OFT, just how in the hell another 15 million of Heathrow's electricity bill got shoveled onto the airlines at Stansted at a time when traffic at Stansted was declining by 7% in 2010.

But we intend to give them the opportunity.

And I think the more we flush out what's going on here -- the scamming that's been going on by the BAA monopoly at Stansted, most of it, I think, resulting in them taking money away from Stansted to prop up the funding of Heathrow.

I think the more we expose exactly what the Competition Commissioner originally found in the UK, and that is that the way the BAA monopoly has operated has adversely affected competition.

And the way the CAA has regulated the BAA monopoly has adversely affected competition.

But in total, if you take out all this padding costs, we think there's probably something up to about 50 million a year -- the regulatory profit at Stansted, which they are reporting at the moment of the order of 50 million, is actually probably close to 100 million and running at twice the regulated cap.

Okay.

Thanks very much.

Geoff Van Klaveren, Deutsche Bank.

This first question on -- can you just give a bit more explanation on marketing and other costs, [so you're up] 52%.

The second question, you said before you might consider flying some of the grounded aircraft this winter, depending on discussions with airports.

Can you give us any update on that?

Is it going to be quite opportunistic if other airlines go bust?

Is that when you start?

Or do you have anything to report now?

Thanks.

Yes, thanks.

I mean, again, just to be careful here, the marketing and distribution costs are pretty tiny in our overall.

They've gone up here from the prior year from 31 million to 43 million.

We're talking about the Q1 when we're launching a lot of bases, there is a lot of advertising.

And some of the commissions paid to airports also finishes up in that category.

So it's not a statistical or meaningful rise.

And over the year, we would still expect marketing and advertising to rise at a slower rate than the growth in headline traffic.

You're just seeing a slightly distorted report in Q1.

On the other issue, I think at this point in time, what we were looking at with grounding the [80] aircraft is we made an opportunistic proposal to the Irish government to start growing traffic rapidly at three Irish airports from October.

That would absorb anything up to 10 aircraft if it comes through.

We've made -- well, we had one or two other proposals out there.

[Manster] was already in our horizon so that won't affect it.

But if one or two other airports came in with very good deals, we'd respond to them.

But I think the principle initiative that we had that would materially reduce the [80] aircraft was the 5 million passenger proposal with the Irish government.

And we're still waiting to hear back from them on that.

Okay.

So it's pretty likely then that those 80 aircraft will stay grounded?

Yes, I think so.

I mean, if you look at where oil is, I think we're in a very comfortable with the original strategy and that was ground aircraft.

And we hadn't -- we didn't extend our hedging program for the second half of the year when we were closing it out at $100 a barrel.

We don't deal for a number of airports across Europe for very cheap or, in some cases, no parking fees for those aircraft for the winter.

And I think while we have to cut back on staffing a bit, it's absolutely the right thing to do this winter, to cut back very meaningfully when oil is so expensive.

Okay.

Thanks, Michael.

Alexia Dogani, Liberum Capital.

It's Peter Hyde actually here.

(multiple speakers)

Alexia, your voice has broken.

(laughter)

Exactly.

A couple questions, really.

You talked about staff and taking longer holidays and unpaid.

I mean, just how much do you think staff is going to have to be reduced or people taking longer holidays?

And then, secondly, I just wondered if you could help us out a bit on the exchange rates within the fuel, Howard?

Which is, how would you actually look at the dollar/euro movements within that fuel bucket?

Because it kind of, I think, potentially distorts some of the trends.

Thanks.

Thanks, Peter.

I do the first one first.

On the staff, bear in mind most of the flexibility on the staff will be on the pilots and the cabin crew end.

More than 50% of our pilots and cabin crews are contractors, so they're paid as they fly; they're not paid when they don't fly.

And they will be flying a lot more during the current summer -- for example, we have a prohibition on leave from July through to the end of September.

A lot of those will have gotten very close to their 900 hours by the time we get to the end of October.

And we're running these schedules that way through the summer.

You've seen a lot of speculation on some of the lunatic websites that, oh, we're short of pilots and we're short of cabin crew.

No evidence of it whatsoever.

We're fully crewed through the summer peak already.

We will have a rise though in staff costs during the Q3 and Q4, because we won't be able to get, if you like, rid of everybody for the six months of the winter period.

And we also have to start recruiting some additional pilots and cabin crew for the aircraft growth for summer '12.

There will be a very significant cutback in activity in the second half of the year.

There will be a meaningful reduction in headcount numbers for the second half; but obviously, we have to carry some staff costs over the winter as we -- we don't want to get rid of all the contractors or all of the employees that relate to those grounded aircraft.

Howard, you'll do the exchange rates on fuel?

Yes, I think, Peter, if you go to that slide 13 on the presentation we have on the website, we put in the absolute dollar cost.

However, you're quite right, there is an exchange rate movement.

For this year, we're using 140 for FY '12 as opposed to 134 for the previous year.

And for -- the bit we've done for our fiscal 2013, you should be using 143.

So effectively, if you take example of the first quarter of next year, when you really bring that back to kind of a constant dollar amount, that's equivalent to about $1,000 [about].

So there is some movement reflecting that.

What we've given, just to guide you, we've given the absolute dollar price per ton.

And then you need just to adjust that to get that back, as I said, back into euros.

Yes, just to kind of be absolutely clear, then, so we should be using kind of 134 for '11; 140 for '12 and 143 for '15.

Correct

Yes, for the whole of the fuel bill, as it were.

For the whole of the fuel bill.

But it's a blended average over the year.

It will be slightly different, obviously, across the quarters but that is what you should be using.

And as you know, we have a longer horizon on the dollar, we are hedged pretty much for 60% to 70% of our requirements for fiscal 2013 already.

Okay, and just ask one last question, sorry, which is EU261 charges, I know that came in in April but what kind of percentage of your passengers actually paid that in the first quarter?

It was very small.

Because we had most -- a lot of pre-bookings in the system.

And remember the passengers booking the promotional fares, it is included free of charge with most of the fares.

So it's small in Q1 but it will rise as we move through the year, Q3 -- two, three, and four.

By the time we get to the second half of the year quarter three and four, 30% of the seats will be sold at the promotional prices sold -- pretty much all of the balance, the 70% will be paying the 261 admin fee.

Yes, sure.

All right, thanks.

Andrew Light, Citi.

On the fleet plan, given that COMAC won't be able to deliver -- the earliest is 2018, the NEOs are probably sold out for the first two or three years, and Boeing unlikely to introduce a new plane until 2017, 2018, would it be fair to say that you can have pretty much a static fleet of around 300 planes from 2013 right the way through to 2018?

And what other options would you have for both growth and replacement aircraft?

Would you just let the fleet get old?

I think it's safe to plan at the moment on a static fleet through 2013, 2014, and 2015.

I'd be somewhat more optimistic from 2016, 2017, 2018.

We'd like to start growing at that pace, but at a more modest pace, maybe 4% or 5% annually.

And at that stage we'd be looking at either -- you could be looking at tail-end [NG] Boeing aircraft; you could be looking at the possibility with COMAC uptaking 919s in advance of the stretch version aircraft; you could be leasing some aircraft; or there is the possibility of -- and I hate to add this -- but there is a remote possibility of acquisitions generating some more aircraft.

So we have nothing in the pipeline at the moment for acquisitions, so please don't be asking me what we're looking at.

I think it's very safe to say static fleet at the moment through 2013, 2014, 2015 and then 2016, 2017, 2018 we want to start growing again.

But there's lots of options and at least one more deep downturn in the aviation industry on the rule of one every four or five years to go.

We're very happy not to have a big aircraft commitment at the moment.

I thought, Michael, it was most interesting that American Airlines -- American were able to spring some aircraft deliveries in 2013 from the so-called full order book as of 2015.

So I don't think Boeing or indeed Airbus's order book is as solid as they make out.

Yes, if you look at their order books, I should be fair, I think Airbus has had a great year thus far, particularly with the NEO.

But Boeing's order book is full of rubbish.

Some airlines that have gone bust -- lots of airlines that can't pay for aircraft.

And they keep telling you, well, the North Americans are going to re-fleet, but it looks like if you take the American model, they are going to re-fleet with Boeing, provide them the aircraft and financing, I'm not sure that's a great business model going forward.

So I don't believe all of this nonsense that the order book -- if the order books were as solid as Boeing and Airbus said they were, we'd be selling secondhand aircraft at the moment at ludicrously high prices.

We have seen no evidence of that.

In fact, at the moment, in the last I'd say two months, we've been approached by four or five of the leading goo-goo, ga-ga, new leasing companies offering to lease us aircraft for delivery in 2013 and 2014.

So there's an awful lot of (expletive) talk by the manufacturers and the lessors about how wondrous and how tight the backlogs are.

Typically the laws of economic tell you if there's a huge backlog, secondhand aircraft values rise.

And at the moment, there's no sign of any significant demand for secondhand aircraft.

And we would know, because we sell the newest and best quality secondhand aircraft as long as somebody has the money to pay for them.

No evidence there whatsoever.

We haven't sold a secondhand aircraft for about 18 months, two years.

So I think there's an awful lot of (expletive) out there, particularly from Boeing, on their order book.

Thanks.

Howard on the -- just a quick one -- was there any meaningful FX impact on the revenue line in the quarter?

And also, do you expect to maintain that 8% average sector length growth for the rest of the year.

Yes, I think the sector length is slightly distorted with the first quarter, the routes that we've got -- so on the comparison with the previous year and particularly with the volcano.

So I think what you're going to see is it's going to start to settle down as we go through Q2, Q3 and Q4 but year end the average will be 5%.

So we're pretty happy with that.

What was your other question, and Andrew?

Was there any meaningful foreign exchange impact movement --?

Not really on the revenue side.

You have to remember our UK percentage which is the main mover of our total sales is down to 28% and has fallen.

And no, it wasn't really material.

It was less than 0.5%.

Thank you very much.

Neil Glynn, Credit Suisse.

Three for me, if I can.

Maybe if I could start with reserve seating.

Just interested, I know it's early days, I think it's two months into your trial, but what you're seeing there in terms of the takeup, if there's anything significant at this point.

Second of all, if, Howard, I could touch on the staff cost development in unit terms in the first quarter.

I'm just interested in the 2% growth which you've attributed partly to salary increases.

If we were to adjust that by sector length, would that suggest an 8% fall or is there something else at play there?

And then thirdly, if we could just revert back to the aircraft financing side of things, obviously we've got the NEO and we've now had a decision from Boeing.

Is that helping you in your negotiations with lessors for sale and leasebacks as you've touched on?

The last one first.

Lessors know we've recently completed another financing of some aircraft for next year, they were paying slightly over 3% for seven year money.

It hasn't had any impact as far as we can see.

And remember, most of our financing is on the back of (inaudible) and bank guarantees so it's not based on either Ryanair as a credit or the asset value or the 737 as an asset, it's based on the (inaudible) bank guarantee.

So there's been no material change to our aircraft financing in recent -- either the Airbus NEO or the Boeing aircraft.

Reserve seating has gone surprisingly well over the last three months but then remember, we tried it first on the routes to [Malagat], or Malagat Dublin and Dublin Gatwick.

We always thought reserved seating would sell well, the big issue for us would it just dilute priority boarding?

In other words, was just the priority boarding moved to the reserve seating and we get no other effect of that.

It's a little bit distorted at the moment because we're moving into the summer, so we've extended it already to most routes from both Stansted and Dublin now to Malagat, [Ebita], [Palma], the Canary Islands.

So the longer routes where there certainly is a propensity towards taking it up.

But it's too early to say.

We want to see what it's like over a full summer period.

I think the fact that we started off on two routes, it has now been extended to about 20 routes is indicative of the fact that it does seem to be generating incremental revenues without any significant dilution in priority boarding.

But that may take some time for the priority boarders to realize that they've got to get reserve seating if what they really want is the extra leg room seats.

Although a significant number of priority boarders just want aisle, like myself, want aisle seats close to the front, not interested in the long leg room -- people like Michael Cawley need the long leg room and -- they are welcome to it, but pay for it.

Howard, do you want to take the staff costs?

Yes, in terms of staff costs, there is a couple of factors in here.

Again, I'll go back to what I said earlier on.

Q1 again is likely distorted because obviously we adjusted staff costs for the downtime we experienced during the volcano last year.

So it is probably slightly flatter.

And I think what I would expect for the remaining quarters is that staff costs will continue to push ahead of the increase in passenger volumes, simply by the fact we are flying a bit more hours and we've also given that 2% increase.

So I would expect unit cost -- if we adjusted for the full year will be slightly ahead of sector length and slightly ahead of volumes.

So that would suggest something like 7%.

That's very helpful.

Thanks, guys.

Brian Devine, NCB Stockbrokers.

What was the name?

Repeat the name again, please, moderator.

Brian Devine.

Okay, Brian, go ahead.

I was wondering if you could give a bit more color on ancillary revenue per passenger aside from the new seat trial.

No, there isn't any more color in this.

Most streams are performing well; tracking in line or slightly ahead of the growth in scheduled numbers.

I'll be trying not to give too much analysis of ancillary revenues.

You remember with us the whole thing around ancillary revenues is to try and manage it in such a way that we maintain it at or about 20% of revenues.

And the first quarter is running at I think about 21%, 22% total revenues.

Perfect.

Jonathan Wober, Societe Generale.

Thanks very much.

Just a couple of -- first of all, just coming back on reserve seating.

And on the other side of the equation -- you talked about revenues but did it add cost pr complexity in any way?

That is the first question.

And the second question, just a detail -- average staff numbers -- can you say what it was for the quarter?

It's normally in the statement, but doesn't seem to be there this time.

No, there's no cost or complexity arising from reserve seating.

We were a little bit concerned with the -- originally we trialed it out of Dublin on a long route and a short route.

Dublin we do our own handling.

I think the concern was that there would be confusion among passengers and cabin crew that it would delay the 25-minute turnaround.

It has been remarkably smooth and cabin crews seem to have adjusted very well to it.

Passengers indeed seem to have adjusted very well to it as well.

And it has no incremental cost -- as long as reserve seating is incremental to revenue, if it doesn't completely bastardize priority boarding, then it's just -- it is absolutely incremental revenue and incremental profit.

On apologies at the average staff numbers -- give me a number -- the average staff number I think for Q1 was -- sorry, the type is too small -- Neil Sorahan will reveal all here.

I can't read the numbers.

It is 8856.

8856.

13% on the quarter.

Again, it's 13% up, 7828 last year and 8856 at the end of the first quarter.

Thank you very much.

Tim Marshall, Redburn Capital.

In the quarter, you added about 150 net new flights of which about 100 were in Spain and 50 were in Italy.

So I think those two markets have become increasingly important to you.

I just wondered if you could talk us through what your experiences are there looking into the summer.

Sorry, there's a bit of confusion here -- 150 routes is it?

Yes, net new flights that you've added in the quarter.

New routes, okay.

So run the question again?

150 new routes?

Yes, that basically Spain and Italy are increasingly important for you now.

And just how those two markets are developing.

Look, this is an opportunistic company so we move wherever the airport deals encourage us to move.

Both Spain and Italy have performed well and they are performing well this summer.

We have grown very rapidly in both countries.

We're now the largest airline in both.

We out-carry Italia in Italy and we out-carry Iberia in Spain.

Italy I think is slightly more -- we've been in Italy for longer.

The airports are a bit more competitive both with each other and more aware of the international comparisons.

Spain, I think we've grown very rapidly in Spain in the last two years but I think [Iena] has got a bit complacent, so we've run into problems at various airports in Spain where Iena just think they have us by the balls now they started infusing ludicrous charges such as Alicante where they opened up a new terminal a bit like Dublin, a new terminal they can't pay for and required that everybody -- we use air bridges -- pay for air bridges and use air bridges to get on and off.

It has massively delayed our turnarounds.

It's a shambles of an operation.

If you are depending on some Spaniard to be there on time to drive an air bridge which has never happened in the history of Spain.

We've also had rounds with our airport charges at Girona where this week we will announce significant further costs for the winter schedule.

We've closed [Reat].

So I think Spain -- Italy continues to grow strongly and well where we have like-minded airports.

Spain has grown very rapidly, in recent years but I can see this winter there's going to be a number of disputes with Iena which still while I think they were desperate for traffic two years ago now thanks to Ryanair's growth, they are less desperate for traffic but beginning to believe that this traffic belongs to them and not to Ryanair.

So I think you'll see cut backs in Spain.

There were significant cut backs in Spain this winter.

Most of the 80 aircraft we will ground this winter will come from Dublin, Stansted, and Spanish airports.

Although we're still growing strongly in places like the Canary Islands where we have good relationships with the authorities down there.

So I wouldn't want to overestimate it.

With the new base this winter in Manchester, likely to be one or two new bases announced in the coming weeks -- probably something in Central Europe and something else in Continental Europe.

But at the moment there won't be any new bases in Spain or likely to be any more bases in Italy at the moment.

We are opening two other Italian airports but they are not particularly competitive yet.

So yes, I think to summarize, Italy and Spain have grown very strongly.

Expect Italy will continue to grow; Spain, less so until we sort out some of this nonsense that Iena are engaged in.

But other than that with the exception really of Ireland where the airports are crazy, the UK is growing for us at -- the base in (inaudible) [Bradford] is the base that -- the [current] base in Manchester.

Scandinavia is doing quite well.

Germany is suffering because of the travel tax.

And Central Europe, or former Central Europe is doing well.

Thank you.

I wonder if I can just ask -- well one comment and then one question.

Typically you've sold some shares in the summer.

I just wondered if you could comment on that.

And then finally the customer, I think reserve seating should stay.

I thought it was great.

Well, let me deal with that.

Never comment on my share sales -- none of your business.

And I think reserve seating is great as long as it doesn't compromise or completely destroy priority boarding.

So there's a balance to be struck there between reserve seating for those who want to pay more for reserve seating but not if it is just a priority boarder switching directly across to reserve seating.

I've never done priority boarding, Michael.

Well, lots of people -- at last count, 10% of our traffic disagrees with you.

But again --

But I have done reserve seating, is my point.

Pardon me?

I did do reserve seating, but I would never pay for priority boarding.

That's fine.

And I think what we need to find that balance.

Clearly reserve seating certainly works on the longer segments -- to the Canarys, the holiday designations, people are traveling with families.

But then priority boarding also works very well on those routes, too.

So we just need to find that balance.

I don't think, for example, we will roll out reserve seating across every route -- domestic routes within Spain or within Italy.

We're not sure if they have any appeal at all.

So rest assured we'll keep trying to refine it.

We'll keep rolling it out.

And where it works, we will happily implement it.

And where it doesn't, or there's more of a demand for priority boarding, will go that way.

Great.

Thanks a lot.

Michael, it's Howard here.

I've got to drop off.

I've got to go to a meeting, so I'll talk to you later.

All the best.

Eamonn Hughes, Goodbody Stockbrokers.

Just a question on the unit cost performance in Q1 was actually quite favorable at -1%X fuel (inaudible) adjusted.

Just wondered in terms of the guidance for the full year of plus 2%, they have been pretty good in Q1 and presumably given the volume of activity in Q2 potentially is it the case the risk bias in that 2% number guidance for the full year could be a little bit lower as it was just maybe leading off of that a little bit?

It was only back in May when you gave the capacity guidance for the full year and the cut in the second half of 4%.

Just wondering though if that [two] was 110 roundabout then.

It is now 117 or so, whether you have any further thoughts in terms of additional cuts potentially in the winter or even maybe in terms of the summer schedule next year to park a little bit more?

Okay, let me reverse back into that.

I think the significant driver of the 2% on the unit costs -- could it be slightly better than 2%?

It could be slightly better than 2%.

But will it get to zero?

No, I don't think so.

There will be a slight increase in unit costs this year.

Some of that is inevitable.

It is the inevitable concept of the second half performance on unit costs where we are going to ground up to 80 aircraft.

We will have a slight increase in staffing costs and ownership costs without the, if you like, the corresponding revenue.

But we would be hopeful.

Obviously, our guidance at the moment on the base of Q1, 2Q two years is pretty conservative.

We would be hopeful that grounding 80 aircraft will translate into a much more or a better yield performance in the second half of the year but we have no visibility on it yet.

The key driver of that unit cost performance over the full year obviously, apart from what fuel is stripped out it will be the grounding of the 80 aircraft in the second half of the year.

And the second question, which was --

Just around the fuel prices -- not quite (inaudible) -- but it's up from 110 since it came to the market last time in terms of the revised capacity growth guidance.

I am just wondering now at 117 have you had any more thoughts in relation to additional cuts potentially in the winter or summer?

No.

Remember, we are hedged now for 90% of what we expect to fly this winter, and cutting 80 aircraft out of a fleet of 280 aircraft we really will be down to core numbers at this stage.

If there is likely to be any change in that, it's likely to be on the upside.

We're likely to ground less than 80 aircraft but at this point in time there is no sign of that unless something like the Irish government wants to take up our offer of rapid growth in the winter.

And really, I wouldn't be disappointed if the Irish government either doesn't take up our offer or can't make a decision quickly.

Because frankly with oil at $110, $115 a barrel, I don't want to be flying a lot of passengers around, even at the Irish airport at very low fares this winter -- paying those kind of expensive oil prices.

As we move out into FY 2012 or summer -- or FY 2013, summer '12, much depends on the oil price at the moment.

As you can see, we are a bit more likely hedged at the moment with only 20% of Q1 done and that only at $103 a barrel.

We remain hopeful that the price is a little bit high at the moment with the general bearish economic sentiment out there and not much growth around the world -- we don't understand -- also with high US stocks, what the hell oil is doing up at around $115, $120 a barrel.

We would still however, hope to have hedged about 50% of half H1, FY 2013 by the time we get to the half-year results in November.

Maybe just one final point.

A lot of the commentary around Stansted area in the Q&A session was around the potential if you are going to take them on legally whatever, what potential you could realize -- just trying to get a view to the next stage would be the airports are sold -- what would your thoughts be around in terms of the materiality if you guys were able to negotiate lower charges with the new potential owners -- what sort of impact that could have on airport charges for you potentially?

We have had meetings so far with about three or four consortium all of whom are expressing an interest in getting involved in Stansted if or whenever the BAA can eventually be forced to sell it.

Now it would probably take garlic and a stake through Colin Matthews's heart eventually to get it sold but we would happily deliver the blow.

I think in each case what we have said to each of the consortium is we believe there is very significant potential traffic growth at Stansted.

Declines of recent years have been entirely attributable to the BAA's rapacious pricing and the scamming of the regulatory accounts which they are engaged in.

But on the converse of that the only way we can deliver rapid traffic growth at Stansted would be very significant fare and yield reductions.

So there has to be a quid pro quo.

We believe that fundamentally our position at -- Stansted has doubled its charges to the airlines over the last five years.

Almost all of that price increase has been abusive and monopoly exploitation.

We think airport charges at Stansted should be halved again.

And which still allows the BAA or any other to make a 6% return on a raft that has been inflated by about 50%.

But I think -- I think we would be looking for something of the order -- if Stansted is over-charging the airlines by 15 million a year and we account for about 70% of Stansted's traffic, we're getting overcharged to the tune of about 35 million a year.

We would want to get all of that 35 million back but I think you would see certainly in the first year or two, a very rapid traffic growth at Stansted.

We would have to share an awful lot of those savings in terms of revenue and yield declines.

So I think there's great potential in Stansted, but only when it returns to being an airport for a low cost airline.

And that -- the BAA and Colin Matthews could bloody well pay the 200 million-- they pissed away on their planning for G2.

It shouldn't be the low fare airlines at Stansted paying for their (inaudible).

Thanks, Michael.

Bob McAdoo, Avondale Partners.

Just a quick one.

When you talk about wanting to look for a larger aircraft, a slightly larger aircraft, the 200-seat type airplane, is there something about the 737-900, 900ER version that would not make that an equivalent airplane?

Is there something operationally around that that I did not understand?

I'm just curious.

The sweet spot we think for us is we have the regulations require one cabin crew per 50 seats.

So we have four cabin crew at the moment for 198 9-seat aircraft.

We'd like to get that up to 199 seats and we get those 10 extra seats essentially free of charge.

We think we made reasonable proposals to Boeing over the last two years to remove the rear two toilets and stick in an extra 10 seats.

Boeing very reluctant -- could really go give a (expletive) frankly have made no effort to work with us to increase that seating.

And the problem for the 900 is, A, it is priced on the basis that you can get about 215 or 219 seats in it.

And it actually works -- there's a penalty against it because you've got to put in a fifth cabin crew for only 15 extra seats.

It also -- complications on turnaround, because you've got a third door on it and potentially offloading passengers through three doors instead of four and a rear door.

So I think we run into -- when you get involved -- you can look at it and say the -- A321 is 220 seats, you are almost up into 757s at that stage.

And 25 minutes turnarounds become difficult.

But Boeing has simply not priced the 900, we believe -- isn't cheap enough compared to our 800.

But we don't want to put on a fifth cabin crew member.

So either the 900 priced so that it was competitive with an 800 would be great or something that takes you up to just under 200 to 199 is really the ideal thing is (multiple speakers).

Yes, basically, a 900 -- the 900 was the same price as the 800.

We take it and put 199 seats into it.

But the 900 is priced at a 20% or 30% premium to the 800.

We don't think it's justified and we certainly wouldn't pay it.

We have yet to get any explanation from Boeing as to why -- they talk about some nonsense passenger evacuation trials done back in 1963 or something where a bunch of fat people took two nanoseconds longer to get off the plane.

But logic says you remove the bottleneck, which is the two rear toilets, 10 more people would get the hell off the plane an awful lot faster than they used to in 1963 when they last did that test.

But it has been one of our problems in the relationship with Boeing over the last year or two.

They just have been very unresponsive, very unimaginative.

And now being bounced by Airbus into a re-engining project instead of actually -- we'd be much more interested, instead they are putting new engines on it -- shove 10 more seats into it, it would be a much more valuable aircraft.

I understand.

Thank you very much.

(inaudible), Marian Capital.

Two questions, please.

First of all, you've indicated that this year, your fuel bill is going to rise by EUR350 million.

If brand prices stay where they are, what kind of fuel inflation do you think you'll see in your fuel bill for next year for FY 2013?

And then the second question, you gave an indication during the call about the different trends you are experiencing in some different markets such as Italy, Spain, Germany, et cetera.

In terms of your yield increase over the year, what has your experience been in different regions?

Would you say for example the 11% increase you saw this quarter was fairly consistent across different markets between Germany and Ireland and the UK for example?

There is no point in doing an estimate of what the fuel would be for FY 2013 at different fuel numbers.

At this stage it's too early to say.

We have only 20% of Q1 hedged and you could work it out yourself, but any of the analyst models will work that out.

The trend in yield as been relatively stable across the system with a couple of exceptions.

Obviously, in Germany, yields are significantly down because the airlines are having to fund the German tax.

The UK is being hit again with the increase in EPD.

We have cited a lower yield in places like Spain and Italy where we have a higher proportion of domestic routes in the system this year.

And the domestic routes book later and tend to have lower fares and lower yields on average than the international routes.

And the one market where yields are probably significantly up has been out of Ireland where the yields have not risen by the 40% increase in the DAA's airport fees.

Now we are benefiting slightly this summer by the fact that the travel tax has gone down from EUR10 to EUR3, but the DAA price increases which [cut] 40% increase when inflation is zero and traffic has collapsed at the Dublin airport by 30% over a four year period.

The yields out of Ireland are not paying the increased DAA airport fees.

Okay, thanks a lot.

But generally, it's stable with a couple of market segments.

(Operator Instructions).

Jim Parker, Raymond James.

I'm just curious, given this new era of very high fuel prices, if it wouldn't make sense perhaps to rethink your route network meaning you've gone much longer haul and with high fuel prices pulling back the trip lift and that perhaps the pullback in fares is not as great as the reduction in fuel costs on shorter trips.

Then also, historically you haven't really lost money in the December/March quarters, but the mix of your business now appears in high fuel prices causing you to have to park aircraft in the winter.

So the question is, is there any likelihood that you may rethink your route network given the very high fuel prices?

Thank you.

Let me do the first one first.

Will we reduce the trip length?

Actually no.

Funny enough, the yields on the longer sectors aren't a multiple of the yields on the shorter sectors.

The fuel consumption is less pro rata on the longer sectors because you spend more time in the crews.

So it is like for like.

We would not want to reduce our sector length because of higher fuel costs.

If anything, we'd want to increase the sector length because of higher fuel costs.

But the business remains fundamentally opportunistic.

In Spain in the last couple of years we've got some terrific airport deals to grow rapidly at airports like El Prat for example where their traffic had collapsed.

The Canary Islands has been -- we now have two bases -- we will -- three bases in the Canary Islands, which is one of the longest flights we operate but very high yielding during the summer.

And also very good -- not high yielding, but very strong yields in the winter at a time when an awful lot of the domestic rubbish or stated rubbish between Ireland and the UK fundamentally collapses under UKAPD Irish travel tax and the DAA's high charges.

So no, our route network never developed on the basis of fuel.

It always develops on the basis of competitive airport packages, our airports incentivizing Ryanair to grow.

I think that will continue to be the case.

Sometimes you can get too caught up in fuel.

Yes, fuel prices are significantly higher this year.

It looks like they will be significantly higher again next year but you look at what's happening in terms of yields -- we're getting a lot of natural hedging in there.

The flights over Europe are raising their fuel surcharges.

They are also cutting back capacity again, particularly on the short haul marketplace.

And as we have been guiding investors for the last two years, there is relative capacity stability in Europe.

Frankly, I wouldn't be unhappy to see oil prices stay at where they are this winter.

I think you'd see a couple of more airline bankruptcies in places like Spain, Central Europe, the UK.

And that would undoubtedly create some further opportunities for us to grow -- not in winter 2011/2012, but in summer 2012, definitely.

Michael, you made it clear I guess that you are not going to pay a quarterly dividend but I am curious why not.

An annual dividend, Jim.

(multiple speakers) -- the cash that you have.

Excuse me?

Annual dividend.

You said we're not going to pay a quarterly dividend.

I said we're not going to pay an annual dividend.

I'm wondering why you don't pay a quarterly dividend because you have a lot of cash and it's going to build from this point.

It is.

But we still have -- A, I think it's wrong that we've suddenly become some kind of dividend play.

This is a very cyclical, capital-intensive industry.

Yes, we manage it -- have always managed this company in a very conservative way to maximize cash flows.

We still have a net debt position at the moment of about EUR300 million, EUR350 million at the end of the quarter.

Yes, we have a lot of cash but we also have a lot of debt.

We do at some point in time in the next two years, three years expect or hope to be announcing another aircraft order at some time.

And there may also be some acquisition opportunities over the next year or two.

We have indicated that there will be another significant dividend at the end of FY 2013.

But there won't be one in FY 2012, simply because then every year we'll wait another 25 minutes on the conference call ravaging on about bloody dividends in an airline.

Anybody who's investing in Ryanair for the dividend stream needs their heads examined.

We intend to deliver capital growth.

Speaking personally, I have no interest in talking dividends.

I am very interested in getting the share price of this airline up.

And we will use the cash and manage it sensibly the next year or two to try to deliver that result for the benefit of all of our shareholders.

And I would be one of the principal beneficiaries by way of a dividend.

So, you're not getting one in FY 2012 -- sorry.

Michael, that's great clarity, thanks.

Thanks, Jim.

Any other questions?

There are no further questions at this time.

Okay, everybody.

Can I thank you all for joining the call?

Since we're not doing a road show in Q1 as is normal, but if anybody has any follow-up questions or queries, please route them through to David Broderick or Howard here in Dublin.

We'd be happy to get back to you with any answers you may need.

Thanks very much, everybody.

Appreciate your time.