Ryanair Holdings PLC (RYAAY) 2016 Q1 法說會逐字稿

I'll now hand you to our host, Michael O'Leary.

Good morning, ladies and gentlemen.

You're all very welcome to the Q1 results conference call, it's somewhat outdated these days.

I'll refer you to our Investor Relations page on the ryanair.com website where we've put up and posted a video of myself and Neil doing the results; details of the results, detail of the slide presentation and also a summary Q&A.

And having covered most of that detail, I don't propose to re-read them all here today.

A couple of quick themes, and then we'll open it up for Q&A.

I think Q1 was reasonably strong; good performance on load factor, good performance on traffic.

The yields were down 4%, largely as a result of a weaker April.

May and June were that bit stronger and April was largely driven by the move of the first half of Easter into the March of last year's Q4.

Always Getting Better continues to perform very well.

There is no doubt that it has helped us on a -- the combination of Always Getting Better, the enhanced customer experience, in addition to having significantly lower fares and better on-times than any of our competitors both at primary and secondary airports, is leading to very strong load factors, strong forward bookings and strong performance.

Underneath all that, however, and I think it was the concern this time last year, was that we'd lose the cost discipline.

We'd get all fluffy and warm and not focus on cost.

I think this morning's numbers have disabused people of that concern.

Cost discipline remains unmatched in the industry.

In Q1, including fuel and remember a lot of our fuel we're still hedged at $92 a barrel, unit costs were down 7%.

Excluding fuel, unit costs were down 1% and that's in a period when the vast majority of our growth was taking place at primary airports, where we have more expensive airport costs, handling costs, etc.

So the cost discipline remains unmatched.

I think from an operational perspective, the platform -- we continue to perform really incredibly well in the way we deal with curveballs thrown our way, and clearly in the last number of months, that would be the Greek situation where Ryanair is the number two airline in Greece and yet we're responding with much lower fares and keeping load factors high.

We had various attempts by the Danish unions to impose some outdated closed shop model on us.

We simply flipped the aircraft out of Denmark.

We're continuing to fly to and from Billund, Aarus and Copenhagen with very strong load factors and very good fares during the peak summer period.

And we will shortly be announcing further growth in Copenhagen and in Denmark in the winter period, but without any ability of the Danish unions to interfere in that.

We've also extended in the quarter onto the Sabre GDS.

We've dealt with things like the French air traffic control strikes, again entirely unwarranted interference in the freedom of European citizens to move around; something we continue to campaign against.

And also, the unexpected fire in May in the terminal 3 in Fiumicino.

And you see, despite all that, our on-time performance in the quarter was up 2 percentage points from 89% last year to 91% this year.

Looking forward, and I assume that's where we'll spend most of this call, the forward bookings remain strong, up 4% over the prior year, [into] in the month of July to October, and remember the prior year already this time last year included higher load factors.

We expect full-year traffic -- we've raised our full-year traffic guidance now from 100 million to 103 million, which means traffic growth over last year has jumped from 10% to 14%.

Much more of that is in the second half of the year.

Our H2 traffic growth has now gone from 10% to 15% increase.

Fuel hedging; we've extended, taken advantage of some of recent softening.

We've extended our hedging out into FY17; we're now at 70% hedged at about $66 per barrel.

That's a saving of about EUR250 million into FY17.

The share buyback continues.

We expect to complete the EUR400 million share buyback by the end of August.

However, as indicated, our faster second -- our H2 growth, allied to lower fuel and some of our competitors are beginning to benefit from lower fuels as their hedges unwind, means we remain pretty pessimistic for the winter.

We expect there to be downward pressure on fares.

We expect some of our more idiotic competitors to try to defend market share by lowering prices, and we will lower prices significantly lower than they will, which is why we think it's sensible at this point in time to expect that our yield decline in the second half of the year, which we originally envisaged would be in a range of minus 4% to minus 8%, to be towards the upper end of that range, the worst end of that range, up towards minus 8%.

By that, I mean we expect to be offering incredibly low prices to consumers right across Europe, but delivering very strong traffic and load factor growth in the second half of the year.

As we have repeatedly alluded to, the Ryanair model is load factor active, yield passive.

We don't really care what we get paid, by passengers, as long as we fill our flights.

And if somebody wants to have a price war with us, we're very happy to have a price war.

Although in most markets, particularly in Ireland, we have to put up our fares to be able to have a price war with the competition here in Ireland.

There has been some ill-educated commentary in the media here recently that we're going to add a load of more capacity in the Irish market this winter.

We're not.

We've already rolled out the winter schedules.

There may be one or two minor additions around the edges, but other than what we have, the winter schedule has now been out and on sale since about February of this year and we don't plan to add anything further to it.

We will, however, fill all the flights that we intend to operate here this winter and at whatever fare that happens to be, that's what it will be.

Accordingly, on the back of that, our profit growth, despite that bearish outlook for the second half of the year, but a reasonably better first half of the year has moved to the upper end of the current range of EUR940 million to EUR970 million.

But that EUR970 million guidance is heavily dependent on the close in remaining bookings for the Q2, which is the close in bookings through the end of -- through August and September.

And then fundamentally dependent on what the fares will be in the second half of the year, as we step up traffic growth from 10% to 15%.

That's all I really have to add by way of opening remarks, and we're now going to open up for Q&A please.

(Operator Instructions).

Oliver Sleath, Barclays.

Three questions, please; two about the winter growth and one a bit more about yield management.

First one on winter growth, I'm not sure if David's there, but maybe someone could just run through the key areas where you will be expanding this winter, both in terms of the geographic markets and the type of routes.

Obviously, we've got the new bases at Berlin, Gothenburg and growth at Copenhagen you suggested.

And I'm particularly interested to know in the London market, is it likely your growth rate there might actually reduce a little bit, as some of the Stansted expansion annualizes?

That's the first question.

The second question is just about the winter growth, the timing.

So I think you said 13% capacity growth in Q3 and 17% in Q4.

Is that to do with just the delivery pipeline coming in and the difference in those rates?

Is there any effect from Easter moving more into March as well?

And the third question is on yield management, and just coming back to your point.

I understand the load factor active, yield passive is your driving strategy.

I just wondered, is there an opportunity for you, looking forward, to be a little bit more nuanced in revenue managing, particularly the high frequency, city pair business-type routes.

Things like, for example, tactically trimming some of the underperforming frequencies in the winter, or holding back for some of the later booking customers.

Any lessons learnt over the last year that you think you can apply to your revenue management going forward?

Thank you.

Okay, David, will you take the first two parts of that and then I'll do the final one on nuancing.

Sure.

Well you're right, the greater part of our expansion this winter, the headline part, is in Germany and in Denmark.

Copenhagen, we'll be applying about four aircrafts' worth of activity additionally into Copenhagen, beginning in September, in fact.

Berlin, we're opening that with five aircraft and a base and adding two more aircraft to Cologne to operate the Berlin-Cologne route.

So that's a lot of capacity going in there.

Around the edges then, there's some interesting developments.

Clearly, the Israeli routes could be the sign of things to come.

Much shorter distances to winter sun from Central Europe than to the Canaries, so that will be an interesting experiment.

With respect to the Q3 and Q4 capacity, one of the aspects of Q3, of course, is that it has October in it.

And October is effectively the summer and has lower capacity increases than the remainder of the winter.

That's about it really.

And you do have the bit where we're bringing forward the summer schedule effective launch into the second half (inaudible), which is why the capacity in --

Yes, and if not mistaken February has one extra day, which is 3% in that month.

So that's it in summary.

And in terms of the yield management, although I always get nervous when somebody says anything about yield management.

But I think our load factor management is more nuanced.

But across a fleet of more than 1,500 routes, there's a significant number of routes within that where we're not adding capacity and where competitors are not -- are taking away capacity, where we are seeing fares and yields rise.

But there is a much bigger contingent particularly this year and into next year, where we're still taking load factors up strongly across the entire system.

Remember last year, we went from 83% to 88%.

This year, we plan to go from 88% to 90%.

You see that being translated in the monthly traffic and load factor stats.

And there are some markets where undoubtedly we are being very aggressive on pricing.

I give you the example; Greece in the last two months where the banks were closed, bookings began to fall off the system-wide average.

Our system-wide average is up around 90%.

We went in with EUR4.99 one-way fares on the domestics.

We slashed the internationals by 30%.

We probably could have been somewhat more nuanced and built up that, responded slower.

But, frankly, the underlying business performing so well, we should use these kind of measures to respond quickly and aggressively in those markets where we have such an enormous price advantage over every other competitor, it's a shame not to use that pricing power.

Okay, great.

Thank you.

Maybe if I could just follow up with David very quickly.

The extra growth that you've announced today, are there any particular markets that that's going into, i.e., maybe Copenhagen or --?

No, it's generally across all markets.

We've some increased frequencies, a couple of routes around the edges, so as I mentioned, the Israelis that type of thing.

So no, nothing monumental in any given location.

I should say, by the way, Oliver, that our growth this winter in Stansted is around about 10% and that's been on sale since March of this year.

Okay, super.

Thank you very much, guys.

Thanks.

Damian Brewer, RBC.

Two questions please.

First of all, just on the quarter, could you give us a feel of how much of the revenue was in sterling and how much of the cost base?

And, therefore, whether there's any benefit or cost that ran through the business because of currency on that side.

And then secondly, looking forward.

On your Always Getting Better campaign, particularly on Ryanair Labs focus, could you just tell us where you are on the trajectory of the improved CRM experience; when the rollout is; and what the first impacts of that we should expect to see are?

Thank you.

Neil, do you want to take the first bit of that and then we'll get Kenny to answer AGB.

Damian, just on the sterling impact, we had about a net EUR20 million benefit from sterling when you net off the costs and the revenues.

We'd expect to see probably about a 2% improvement throughout the year from the sterling.

Okay, thank you.

Okay, Kenny, you're on.

Damian, yes, on Always Getting Better, the trajectory of CRM and the platform, I guess three things I would call out.

The site; we're working hard on the site at the moment.

In October, we will have a new desktop version of the site.

That will be quite significant.

Within that, there will be a lot of new features.

We're working on the app on an ongoing basis.

We now have a native app that's native to iOS and Android.

And pretty much every month, there is an update to the app.

Some of those are significant and if you use the app, you'll see them.

Some of them are below the watermark and customers don't see them, but they're making it more efficient.

We've had over 6 million downloads and more and more, we're seeing very strong numbers of customers actually boarding aircraft through the app, so that will continue.

So significant change in the platform.

That makes it faster, more simple, more personalized and smarter and more targeted to ancillary cross and upsell; all of that coming in October, and a significant change in My Ryanair.

That then from the end of October will drive the first phase of our CRM program.

That is really identifying unique customers with unique offers and a low-cost marketing approach as we start to send bespoke offers to those customers, who are having personalized versions of the website first by customer segment.

So I think platform; think of that towards the first end of October; and then from the end of October a scale-up in CRM as we use the customer data and we use that new platform going forward.

But I think it's fair to say, even before we get there, the feedback -- continuing feedback we're getting from our existing customer base to both the recent improvements we've made on the website, the mobile app, have been universally positive.

Yes, judging that by visits, judging that by conversion rates, and then, even if -- we've done limited trials of targeted activity.

So, for example Michael and David mentioned the activity in Greece.

When we're sending a somewhat targeted campaign email, for example, to a specific market, we're getting a fantastic return in terms of visits and conversions.

And it's all low-cost marketing and it's working very well.

Okay.

So Greece works and the rest is to come basically?

Yes, I've been thinking platform start of October, CRM from the end of October, yes.

Okay, thank you very much.

Neil Glynn, Credit Suisse.

Two questions from me please.

The first one on the ancillary revenue per passenger.

I appreciate you're ahead of your targeted run rate of 20% of passenger or of total revenues, but can you guide as to whether the first quarter means that this year the number will be structurally lower than last year?

I know there was some commentary on the video, but some elaboration on that would be very helpful.

And then a second question as to where you are on your own plans for fair comparisons on your website.

I saw some comments this morning with respect to an offer or a proposal to some of your competitors to have various functionality on their website.

So if you could provide us some color on that, please.

Yes, okay.

As you can see, Neil, in the first quarter, ancillaries have fallen behind the rate of scheduled traffic and revenue growth.

Some of that was due to a stronger performance in the prior year where we had first taken up the forward bookings very significantly and we had a spike upwards in credit card fees.

Also, that would be affected in Q2.

We'll have no car hire income through Q2 because of the Hertz termination through July, August and September.

I expect ancillaries this year will lag behind, but they will still stay -- currently, they're about 24% of total revenues; we expect that to fall backwards, they'll still be above 20%.

And then I would imagine -- or we expect that from the end of this calendar year, or as we move into Q3, the performance to pick up again as we begin to use the personalized app and the website to be much more targeted and much more effective at stimulating ancillary take-ups, particularly of the travel-related products; the car hire, the hotels, etc., etc.

We're very reasonably close to identifying a new car hire supplier.

We would expect to have them up and running by about October 1, if not slightly earlier, and then we'll begin using the platform of the new website and mobile platform to go through all of the existing suppliers, the hotels, everybody else, where we're going to say look, performance is not up to speed, we have a brand new platform here now, we expect much better penetration over the medium term.

So I expect ancillaries down this year, still above our long-term average of 20%, and then beginning to trend upwards into next year.

Fair comparison website is something I believe all the airlines should be working together on.

Through our incompetence, we allow all of these useless third-party price comparison websites to create a business out of our failure to work together with each other.

We've written to all of the other -- or the other big five airlines saying, look, why don't you put your fares up on our website and we'll put ours up on yours.

Obviously, we would propose that because we've much lower fares than everybody else.

But the point we're making is look, our load factors are now north of 90%.

We spill a lot of passengers at this point in time and we'd like to spill them into other higher fare competitors like easyJet or BA in the UK, rather than spilling them across to some third-party price comparison website that does nothing for anybody except makes a living on the back of the airlines.

If we don't get their agreement, we may have to look at working with some screen scrapers; it's an option, but I would hope that we'd be able to persuade them to let's all work together.

Our load factors are all particularly high, so I don't expect that we'll take a lot of traffic from easyJet or BA on the back of price, simply because we're already full anyway.

And where we have a spill factor, I'd like to spill to easyJet or to BA rather than spilling to some no-name price comparison website that's then selling different hotels or different car hire providers when the airlines should be capturing all of that themselves.

Understood.

And just to follow on, on that.

Given where we are with that at the moment, does this suggest a slight delay in your plans for rolling out your own fare comparison part of your website, or do you feel you're on track from a timing perspective?

Certainly it would be faster -- if we can get agreement from the other airline CEOs, then it will certainly be faster.

If we can't get agreement from them, I may have to spend some time persuading them first, or alternatively going around them and working either with a price comparison website or with screen scrapers.

But I would be generally optimistic.

I would hope that they'll see the sense in what we're proposing, because it makes sense for the airlines to stop promoting third-party intermediaries who don't do anything or bring nothing to the table in terms of the European air travel piece.

That's great.

Thank you, Michael.

Andrew Light, Citi.

Just a couple of quick questions.

First of all, on the union situation in Demark.

Is that a particularly unique situation?

I guess France probably also applies as well.

And are there any other countries around Europe, around Scandinavia, that have similar issues that might hold you back from setting up bases there?

And then the second question; does the revised guidance include I think the likely EUR14 million gain on the Aer Lingus shares?

The Denmark unions; we don't believe -- the lawyers have [traded] -- we don't believe that any other country in Europe has these kind of closed shop regulations that are quite as bizarre as the Danish ones are where -- what was unusual in Denmark is the unions admitted that they had no members among Ryanair pilots or cabin crew, and yet we're able to use SAS employees to blockade our aircraft so that the unions could impose themselves, not on Ryanair, but on our pilots and cabin crew.

And yet under this bizarre Danish model which, let's [face] it, has not exactly been a particular success in the airline industry where in the past we've seen Danish airlines like Cimber, Sterling, Maersk all go bust, probably not unrelated to the Danish model.

But by slipping the aircraft out of Denmark, we can continue to grow in Denmark and the Danish unions can't do anything about it.

Now I would like over time that we re-establish bases in Denmark, but it will be on our terms, not on some (inaudible) Danish union terms.

In the revised guidance, we don't have any gain on the Aer Lingus disposal.

We have recognized -- the gain essentially comes from the dividends we've received over recent years.

Our total cost was EUR407 million and I think our total proceeds will be EUR406 million.

And what we -- so the profit, if you like, or the gain over the [greater] has been the dividend income and we recognize the dividend income in the P&L when it's received in our revised guidance.

Yes, (inaudible), Michael, is that clearly back in 2008, 2009 we impaired our investment in Aer Lingus back to --

Oh sorry.

About EUR0.50.

So when this closes, there will be an exceptional gain on that, but the gain that we're talking about in the press release and today is purely the cash gain on the investment.

Okay.

And just --

Do we mark that to market every quarter through the P&L or through the balance sheet rather?

Not through the P&L, it's through the -- under accounting rules, when we impair it, we just take the charge to the P&L, however, we take any movement upward in the price through the OCI and balance sheet reserves, but there will be a one-off I suppose extraordinary gain on that, which is totally outside our guidance.

Right, okay.

And we'll keep it there.

It will be in an exceptional.

We won't recognize it in underlying profits.

Okay.

And just a follow up.

I read a story that you'd applied for slots in Amsterdam and just wanted to verify that.

And is that in your future plans?

And are there any other maybe new airports that you'd like to apply for slots at?

As you know, Andrew, there's a slot conference held twice a year.

We generally go round -- mainly, we go round and we apply for slots everywhere.

I've seen us applying for slots at Charles de Gaulle and we'll never show up in Charles de Gaulle, so I wouldn't lose -- I don't read too much into us applying for slots.

It makes sense to apply for them.

Where we get some, we certainly have a look at it.

But the overriding ambition remains, as I said, over the next number of years, I expect that we will show up at almost every primary airport in Europe with the exception of Charles de Gaulle, Heathrow and Frankfurt Main.

I wouldn't pay any attention to what we applied for in terms of slots.

It's more a -- if you don't apply for them you can never get them, so we apply for far more than we plan to use or intend to use.

Okay, thank you very much for that.

Stephen Furlong, Davy.

Maybe for David, could you just talk about the existing markets, Italy and Spain in particular?

I'm just wondering how they're going, particularly what's going on in places like Rome and movement around the competitors, etc., at Barcelona.

Are you happy with those two markets?

Thanks.

The very quick answer is yes, we are, Stephen.

Load factors are generally up across all markets and there are no exceptions.

I think Spain obviously benefits also from the bucket and spade brigade out of the United Kingdom, which other airlines have alluded to as well.

And in the case of Italy, we're seeing retreat by some of the competitors there, so the environment is changing.

Both of them performing perfectly adequately.

Okay.

Savi Syth, Raymond James.

Just on the -- one quick question on the Easter impact.

Do you hope to quantify just how much of a drag it had in the quarter?

No.

I'm sure we'd sit down and have a guess at it, but it probably takes EUR10 million, EUR15 million -- we've never looked at it, but the April performance on average fares and yields was below our budget by a material extent, and we picked up a significant amount of that in May and June.

Got it.

And then just on the load factor side.

As we go into the winter, I know we're at historically high numbers and with the change in the strategy, but how unrealistic is it to expect maybe some load factor increases in the second half?

I know your expectation is for flat, but given how well load factors have been performing here in the first half, I was just wondering what's the upside to your expectations?

The plan is flat on last year for the winter.

We've got a 15% capacity increase.

If load factors drift above that, we'll take it, but we don't necessarily see that; it will be the fares coming down rather than the load factors going up.

Is it something about the markets you're entering in the winter that maybe you might not be able to push that?

Well we haven't -- first of all, we're not necessarily pushing it, we're aiming for the same load factors as last year.

And the markets we're entering are going to be quite competitive.

I mean -- putting five -- sorry, eight aircraft into Germany is no small thing.

We're crossing the Rhine there, and they're certainly going to defend themselves.

Makes sense.

And then just lastly on the non-fuel cost side, I realize probably load factor increasing helps that number more than anything else, but I'm just wondering on -- just with the capacity growth, why we might not see more downward pressure on non-fuel unit costs?

Well we're targeting unit costs ex-fuel to be flat this year, sadly, which I think is a pretty strong performance in the year in which we're clearly growing more in primary airports where costs tend to be typically higher.

So I'd be comfortable that our unit costs ex-fuel are very much in control, and indeed our fuel costs with the hedging that we have are going to give us great benefit as we move forward.

Makes sense.

All right.

Thank you.

And I would add to that, if you look across at our competitors, very few of them (inaudible) delivering or even forecasting unit costs flat excluding fuel.

Generally, if you take out unit fuel, their unit costs are all rising, and that's the key trend here in Europe.

We have a significant there -- as the competition's fares are rising faster than ours, well ours are flat, and their unit costs are rising faster than ours, the price gap between us and every other airline in Europe is widening materially and significantly.

Now while (inaudible) will rabbit on about having different models or not, I mean they all contort themselves to explain how they don't really compete with us, yet in every market where we compete with them, they seem to retreat.

And that's all of them, it's not just one or two.

In almost all cases where they argue or contend that they don't compete with us, that's in actual fact true, because every time we show up in a market, they either close the base, switch capacity, take traffic out because they're not able to compete with us.

Okay, fine.

All right.

Thanks, Michael.

Mark Simpson, Goodbody.

A couple of questions.

On the fuel front, it looks like a strong performance and trying to reverse back up out on the FX and capacity growth suggests you're getting some fuel burn efficiencies.

I wonder if you could take us through what you're seeing on that, on that change for the fleet?

The second question; Business Plus.

Obviously on the ancillary side, I am assuming there's a circa 2% dilution to ancillary revenue per PAX given the growth in Business Plus.

Is that a reasonable assumption looking at it over this year and the following year?

And then the last thing, I just want to clarify.

I'm maybe getting a little bit confused on the load factor discussions, the capacity discussions.

You're talking about load factors being flat for the second half but with a capacity growth of 19%.

And in the slide, on slide 13, you've got a 17% growth in Q4 passengers.

So load factors down in Q4 suggesting a strong load factor performance in Q3.

I wonder if you'd just clarify that?

Okay, thanks, Mark, on those.

Let me come back to them briefly to hit them.

I'm not quite sure what you're seeing.

Our burn is slightly up because of the load factor growth, so our fuel burns are up.

But we're picking up some -- it's essentially -- all we're doing this year is we're picking up quite a lot of savings on the un-hedged 10%; we're 90% hedged at effectively $92 a barrel.

There was an interesting figure I thought in easyJet's numbers last week where they were 70% hedged out to the September of next year at something in the -- was it mid -- they were 10% -- their rate was 10% higher than ours, so we have got a 10% fuel saving against them, but we are 90% hedged to September 2017 or September 2016 and there's I think were 80% hedged.

But it's neither here nor there.

But we would continue -- so we are still picking up some fuel consumption savings from various efficiencies, but the burn is going up because of the load factor growth.

Business Plus; no it's optimistic to expect a 2% dilution in ancillary.

Some of that -- Business Plus is continuing to grow meaningfully, but again it's small beer.

We expect to get to 10% of traffic over a five-year period which will center in year two.

But they don't get things like free teas and coffees on board, so it's not all a 2% dilution in ancillaries.

And on the load factor discussion, the capacity growth in the second half of the year is 15%; across the two quarters 13% in Q3; 17% in Q4.

And I'm not sure why -- we just -- we expect the load factors to be the same as they originally were.

Traffic will be up, load factor will be the same, but the capacity growth is higher.

Okay, that's great, thanks.

Jarrod Castle, UBS.

Just in terms of the minus 8% fare, that you're thinking about for H2.

Obviously that's on a reported basis, but have you got any idea what the positive benefit from the pound would be in that guidance?

Then just secondly, any thoughts in terms of the Gatwick slots related to Aer Lingus?

And then just lastly on balance sheet.

I don't expect you obviously to say anything now, but you do have over EUR500 million in cash, you're likely getting another wad from Aer Lingus.

When do you think the Board would sit down and re-evaluate how the balance sheet is looking?

Thanks.

Do you want to take the first?

Yes, I suppose Jarrod, just following on from what I said to Damian earlier.

For the rest of the year we're probably looking at about a 2% benefit from sterling.

Okay, thanks.

On the Gatwick slots, I wouldn't want to make too big an issue out of it.

The Commission, or IAG, have offered it as part of the remedy to Aer Lingus to hand over some of the Gatwick -- a small amount, I think it's about five pairs of Gatwick slots ostensibly for Dublin and Belfast.

We'll have a look at it when it comes round, but a lot depends on what the -- if you look at what IAG did round the Heathrow slots previously, they screwed around for about 12 months then made the slots pretty much -- sterilized the slots.

So by the time I was at Virgin, and our little red Virgin Aer Lingus started operating, they could make no use out of them.

I don't think that it is significant, certainly not significant in the context of our overall business.

But we would certainly be urging the Commission that giving somebody like IAG and Aer Lingus nine months to go about sterilizing these slots and having them all done has generated no real competition benefit in the Heathrow in the case of the British Midland acquisition.

And they need to do something much faster and more dramatic in the case of -- if the Aer Lingus deal goes ahead.

If there is additional slots there on Gatwick-Dublin, we would certainly be in there looking for them.

In Gatwick-Belfast, we'd be less impressed about but we'll have a look at it, no more than that.

But I'd be generally skeptical of them.

A lot depends on when those slots are handed over and how effective IAG are, and they're very good at it, how effective they are at sterilizing those slots and making them effectively unusable by the time anybody gets there.

I think the key thing here is though, when you have the number one and number two operator on the Dublin-Heathrow route coming together and having a much bigger hold over the business traffic between Ireland and the UK, the European Commission and the competition authorities need to do something much more significant and dramatic on places like Gatwick if you're going to sustain competition there.

On the Board and the balance sheet, net cash continues to build.

We do expect -- I think we expect to receive the proceeds if the IAG deal goes ahead some time around mid-September.

And I think the Board at that stage has already said they'll consider what they'll do with the Aer Lingus proceeds.

That probably -- we may announce something around the AGM.

Obviously, in terms of balance sheet, I wouldn't get too excited yet.

We are entering a period of very significant CapEx for the next number of years.

I do think we'll be using some of the increase or the cash flows probably to increase the amount of equity we put into new aircraft deliveries, and reduce the amount of debt that we take on new aircraft deliveries, particularly as interest rates begin to rise.

I think we want to continue to use the balance sheet strength to maintain very low cost aircraft financing.

And if there's some spare cash going around, then I'm pushing hard for a senior management bonus program in the light of the dramatic, some would say [store line] Damascene conversion to Always Getting Better here.

We're having an internal debate as to who -- how we define senior management, but --

Absolutely.

Thanks a lot.

We'll make some decisions at the -- we'll make some announcement I think at the AGM.

Gerry Moore, Investec.

Just two questions from me please, sticking with the yield.

So for Q2, I guess your guidance has implied that we'll see a slight increase in yield.

I'm just wondering if you could give us a bit of color where that is coming from.

Is it across the Group because of higher load factors?

Or are there any markets doing better than others?

And then really the same question for Q3 and Q4 on the flipside in terms of the weakness.

Is that really coming from areas where you're expanding, i.e., Denmark, Germany, Stansted?

Or is it right across the Group?

Or maybe any detail you can give us there would be appreciated.

Thanks.

I think, Q2, yes we're expecting yields to be slightly higher.

We've nearly finished July and the yield July over last year is a little bit higher than the previous year.

I would still, however, be cautious because so much of the outturn of Q2 will depend on the close in bookings through August and the first half of September, before the school holidays are over.

And a two or three-day air traffic control strike or something like that, could derail that guidance.

The numbers we're talking about now, those close in bookings over the next six to eight weeks, will have a material effect on Q2.

So I think -- I understand it's disappointing that we're not out there ramming up the yield guidance and ramming up the expectations, but we should continue to be cautious, because Q2 depends very much on the close in April bookings.

Into Q3 and Q4, again it's the same thing.

We go through this every year.

We are load factor, active yield passive.

We generally tend to be very conservative in our yield guidance through the second half of the year, because we have no visibility.

At the moment, we've 10% of our Q3 bookings already in the system, 90% still have to book.

And we have 2% of our Q4 bookings, 98% of them are still to make a booking.

So for those of you who are of a ballsy disposition, off you go and work out the number yourselves.

We think that the figure should be towards the minus 8%.

Only because I think it's inevitable, as we expand -- I give you the example, we're going on Cologne-Berlin this winter four or five times a day, is it?

Five times.

Five times a day.

Lufthansa, Germanwings, Eurowings weren't operating on Cologne to our airport, Schonefeld, and announced that this winter, in response to our arrival, despite the fact they operate the route generally Cologne to the other Berlin airports, 10, 12, 15 times a day, they're going to put --

Three extra.

Three extra a day onto.

So there's going to be those kind of outbreaks across the winter.

You may well see IAG, if they acquire control of Aer Lingus, decide we're going to show Ryanair what we can do.

In which case, there'll be some more capacity, as in the Irish market.

They may attempt to come in here with some of their Spanish high fare airlines, in which case there'll be --.

So if the outcome -- put it this way.

I don't think the yield outcome for the winter's going to be any worse than minus 8%, unless there's some Armageddon event.

But there's going to be lots of stupidity in this business, as other airlines begin to come out of their high fuel hedging periods in the winter and say -- easyJet for example, who've been murdered by us on a Stansted to Glasgow and Edinburgh, have added a daily frequency I think on Edinburgh and Glasgow to Stansted this winter.

Well, okay, if you want to have a row with us on price, let's have a row.

We'll win, you'll lose, and be it so.

But I think we should be generally cautious this winter.

And remember, we're still only less than 18 months away from two profit warnings in September and October of 2013.

So we are blinded the second half of the year.

We generally, at this point in time of the year, say are very conservative on our pricing.

That's also helpful, in that if any of the competitors think they want to be brave enough and have a go toe to toe with us this winter, be upstanding and you'll get killed.

And if it's any better than that, then it will be better than that.

You'll see it though as we get to the half-year results and maybe the Q3 numbers in early February.

That's very clear.

Thanks a lot.

And I know people would like us to predict the future, with compelling accuracy, but unfortunately it's the airline business, and we can't.

(Operator Instructions).

I think that we'll take that that there's no further questions.

We're not doing a roadshow obviously on the Q1s.

I would again urge you to go and have a look at the Q&A and the presentation on the website.

And if anybody has any follow-up queries or questions, Justin McAleese is our Head of Investor Relations, is here and he'll be able to field those questions.

And if you'd like to talk to Neil, myself or any of the rest of the team over the coming days, please feel free to do so.

Can I just leave you again with the -- currently, the underlying business is going very well.

The first half of the year is a little bit stronger than we originally predicted.

We expect the second half of the year will be worse, and if it turns out to be any better than that, clearly you will all be the first to know.

But you really won't know until I suspect it's September, or maybe the AGM, or the half-year results in early November.

Okay, everybody, thank you very much.

Good to talk to you, and in the meantime, book your cheap Ryanair flights.

There'll be lots more of them this winter.

Thank you.

That concludes the conference.

Thank you all very much for attending.

You may now disconnect your lines.