Ryanair Holdings PLC (RYAAY) 2018 Q4 法說會逐字稿

Welcome to the Ryanair FY '18 Results Call.

(Operator Instructions) Just to remind you, the call is being recorded.

I'll now hand the floor to our host, Michael O'Leary, CEO.

Please begin.

Okay, good morning, everyone.

Welcome to the Ryanair Full Year Results Conference Call.

As you'll have seen earlier this morning, we released our full year results on the website, the detailed MD&A and a question-and-answer session which was kindly hosted by Stephen Furlong of Davy's and myself and Neil Sorahan which deals with most or all of the numbers and I think the key issues.

I'm therefore going to run through this pretty quickly, and then we will open it up for Q&A.

I'm joined this morning -- we're a bit dispersed.

Neil Sorahan is in New York.

David O'Brien, the Chief Commercial Officer, is in Denver.

And Eddie Wilson, the Chief People Officer, is dialing in from Stockholm.

And Peter Bellew and Kenny Jacobs are in Dublin.

So you see this morning we are pleased to report a 10% increased -- increase in profits last year and an unchanged net margin of 20% despite a 3% cut in our airfares.

I mean that's the strength of the model.

We continue to lower fares and lower costs in a market environment where our competitors are raising prices and raising costs.

We expect, however, above-average yield capacity growth will continue for the remainder of this year, and that will continue to having a downward effect on fares.

Unlike most of the competition who are predicting airfare increase this year, we believe the underlying yields will be flat.

We are continuing to grow strongly.

We're opening -- this summer, we've opened 200 new routes, including new country markets in Jordan, Turkey and the Ukraine.

Ryanair Sun, the new Polish charter airline, commenced flying in April.

And we have also invested or taken a 25% stake in Laudamotion, which we believe, hopefully with EU approval, we can grow to 75% before the end of the half -- our half year in September.

While airfares fell, ancillaries have performed well.

Ancillary spend per passenger is up 4%.

With a 9% growth in traffic, total ancillary revenues last year grew by 13%.

And we're now well on track to achieve our 5-year goal of getting to 30% of revenues coming from ancillaries.

In the area of customer service, we lowered the checked bag fees this year while increasing the bag allowances.

And by moving the 2 free carry-on bags to our priority board customers, we have slimmed down or improved significantly the boarding experience of both customers and crews.

One negative on the customer service side has been a continuing decline in on-time performance, fell by 2% last year from 88% to 86%.

All of this decline was due -- was created by additional ATC strikes or capacity staffing shortages in -- largely in German, French and U.K. ATC services.

And this looks like continuing through most of the summer of 2018.

ATC is going to be a real problem for us and most of the airlines across Europe.

We're really giving them what we pay for Europe-controlled in ATC charges.

The service we received is lamentable.

Unit costs last year fell by 1% largely due to our very good fuel hedging position.

And however, ex fuel unit costs rose by 3% mainly due to the one-off EU261 costs and the pay increases negotiated with our pilots and cabin crew following the September 2017 rostering failure.

In FY '19, we will invest substantially in the cost base as we gear up now to take delivery of 200 -- 210 Boeing Gamechangers, the first of which will be delivered to us in April of 2019.

This year, we'll see a modest increase in our ex fuel unit costs, up probably about 6%.

Fuel this year, despite our very good hedging position, we have 90% hedged out to March 2019 at about $59 a barrel compared to current spot for Brent which is about $80 per barrel, but nevertheless we have that on hedge 10%, we'll be paying a higher rate for.

Over the next 12 months, we expect our staff costs will rise by about EUR 200 million.

Half of that will be the growth or additional-headcount pilot, cabin crew; and a pretty extensive recruitment program in the operations area in particular, where under Peter Bellew we're putting in place a new team in engineering, in rostering and in operations gearing up for the move to a fleet of 600 aircraft and 200 million passengers per annum.

Accordingly, we expect unit costs over the next year will rise by 9%.

ex fuel, they'll increase by 6%.

However, we expect that to be a one-off jump.

Thereafter, we expect the impact of the lower-cost Boeing 737 MAX aircraft, a new 10-year lower-cost engine maintenance agreement as well as continuing growth in centers and airports to result in flat or slightly declining unique union (sic) [unit] costs.

On labor, we've made significant progress with our union recognition negotiations.

We've already signed the first 2 recognition agreements with BALPA and ANPAC.

We expect that -- we're close to doing deals, I think, in Germany and Spain.

The good news is that we have now negotiated 5-year pay deals with all of the pilots and the cabin crews, so we're not now a -- we're not -- in the discussions with the unions, it's we're not focusing on pay issues.

They all accepted our pay as very competitive, better than in many cases 737 competitors Jet2 and/or Norwegian, but we are dealing in some cases with silly issues, union sort of inefficiencies.

For example, the Spanish unions want the pilots committee to have an extra 36 days off a year to think and reflect about union issues.

We've made the point those rules apply in Spain for people working in canning factories doing it Monday to Friday with 2 days off at weekend.

Our guys get 5 days off, followed -- 5 days on, followed by 4 days off.

And if they want 36 days off for the 6 committee members in Spain, then those committee members can go to a 5/3 roster or and they can think about union issues on -- while they're on their 3 days off, followed by 1 day a month -- or 1 day a week of union contemplation.

So we're down to those kind of issues.

I think we will continue to make progress both on the pilot and with the cabin crew unions, but we are not going to accept any ridiculous inefficiencies.

And if that means we have occasional strikes such as the ones we had with the German pilots in December or with the Portuguese cabin crew in Easter, we think they will be reasonably small in number and will be on a country-by-country basis but only where we're dealing with unreasonable demands or expectations.

We have done an extensive survey of our pilots, more than 50% participation; and have taken great comfort from the degree to which the pilots have reflected that they're happy with the terms and conditions, the rostering and the pay in Ryanair.

They want to see us make improvements on the way we allocate annual leave and base transfers that we have made under Peter.

And the new team and operations have made significant progress in those areas.

I think the key issue for us over the next 12 months is we are more bearish on pricing than most of our competitors.

We do not see airfares rising over the next 12 months.

We think it's sensible at the moment to be reasonably cautious.

We're guiding for flat fares for the next -- for the remainder of FY '19 (inaudible) to be.

What could change that will be an upward tick or an increase or an acceleration in the rate and pace of European consolidation, which I think is likely this winter if oil remains at $80 a barrel.

I mean the challenge being faced by airlines like Alitalia, which last year lost money with oil was at $40 a barrel; Norwegian, which lost money when oil was at $40 a barrel.

These airlines will face major challenges this year with they're largely unhedged and they're facing $80 a barrel for oil.

So I think, if there is some acceleration in consolidation, then the outturn, that will slow down capacity growth in Europe.

And that would clearly change our outlook on fares and capacity, but for the moment we think we should be cautious and we remain that.

We are doing our bit for European consolidation with the establishment of the Polish charter airline Ryanair Sun.

That looks like it will trade profitably in its first 12 months of operation, but it's only a 5-aircraft operation.

We've also acquired 25% stake of Laudamotion, which is an Austrian-based AOC.

It's an Airbus operator.

We're working to increase our stake to 75%.

And we're working with Niki Lauda and his team to relaunch Laudamotion as Austria's #1 low-fares airline.

We will see that growing to a fleet of 30 to 50 aircraft over the next 3 to 5 years.

It has a very valuable portfolio of slots at many congested airports in Germany, Vienna and Palma de Mallorca; and is -- and underlying is a reasonably profitable operation.

But we expect that there will be startup losses of about -- loss of about EUR 100 million over the first 12 months mainly because we've had to pay all the pilots and the cabin crew for during the period from February through to June before the airline starts operating.

And then because we'd released its summer schedule pretty late, it's gone into that German, Spanish marketplace with very low fares.

And we will offer very low fares through Laudamotion in order to fill those flights at whatever price it can get for the first 12 months.

And we should touch briefly on Brexit.

We hope there will be a transition agreement from at least April of 2019 through to December 2020, but we continue to plan that there will be a hard Brexit.

We think there's a likelihood, admittedly it's a small likelihood but nevertheless a likelihood, that the outcome of the discussion between the British and the Europeans will be unsuccessful.

And in those -- in that circumstance, there will be a disruption to flights as early as April 2019.

We don't think that disruption will be long lasting because, I think, the consequences [for] U.K. flights and for the U.K. government to avert the shortage of flights will be severe, but we are putting in place preparations for a hard Brexit.

And we have had extensive discussions with the European Commission.

And we'll ask Juliusz maybe to answer questions during the conference call.

We have -- we believe that what -- we will secure our futures in EU airlines, but that will may involve us invoking our existing rights under our (inaudible) franchise [all] non-EU shareholders so they will -- and we will remain a majority owned and controlled by EU shareholders by not allowing non-EU shareholders to vote on any shareholder resolution in the event of a hard Brexit.

Touching briefly on the balance sheet.

We continue to be very strongly cash generative, generating over EUR 2 billion a year.

In the last year, despite CapEx of EUR 1.5 billion and a -- and buybacks of over EUR 800 million, the net debt position, closing year-end net debt position, was a fraction over EUR 200 million at pretty much unchanged over the previous year.

And I think the success of our buyback program has been illustrated by the results this morning, where in a year when net profits after tax grew by 10% earnings per share grew by 15%.

I think, the key issue for us in terms of outlook and guidance, we remain on the pessimistic side of cautious.

We expect traffic to grow next year by 7% to about 139 million.

Load factors will be flat at 95% because we don't think we can get them any higher than that.

This year, we expect unusually unit costs will rise by 9% due to higher -- essentially higher staff and oil prices.

The staffing cost step-up will be 1 year.

Oil prices could last for a year or 2, but then we expect that there will be years and fares will lag the oil price rise by about 12 months, so I think you'll see maybe a better fare environment into the FY '20 numbers.

We don't expect to see that in FY '19.

We'll add almost EUR 400 million to our fuel bill.

So ex fuel unit costs this year will rise by about 6%, including fuel unit cost rise about 9%.

We have -- reasonably, we have limited H1 fare visibility.

Obviously, quarter 1 is largely in the bag, but we have -- we're still waiting to see what fares look like in the second quarter, which is the key quarter of the year, the July, September -- July, August and September pricing.

At the moment, in Q1, without Easter having moved into March, there was about a 5% fare decline in Q1.

We expect to pick up most of that with about a 4% rise in Q2 fares, so essentially flat for the first half of the year.

Thereafter, we think, the second half of the year, fares will be no worse than flat, but we're guiding flat for the year.

Ancillary revenues will continue to outperform traffic growth but not by sufficient to make up a decline in our flat average fares or the rise in costs.

And therefore, we're guiding that full year profits for FY '19 will fall by about 10% to a midpoint of about EUR 1.3 billion, down from the EUR 1.45 billion this year.

This guidance is heavily dependent on what H2 fares look like, so if there is some further consolidation in the second half of the year, that would be an -- that will be upside in that guidance.

If there isn't consolidation and there continues to be above-average capacity growth, then it could -- we think that's what the base -- the guidance was based on.

None of that guidance have we included the investments in Laudamotion.

So if we are -- we received an EU approval to acquire 75% in Laudamotion, we would expect to provide about EUR 100 million in exceptional startup costs in next year's number.

They are not baked into this year's guidance.

With that, I'm going to hand over to Neil Sorahan.

Neil, do you want to take, give us some key themes on the MD&A and on costs.

You might also briefly touch on the hedging position as well.

Sure, Michael.

Fine, will do.

I suppose I'll just draw everyone's attention back to Michael's comments there on the balance sheet, very strong balance sheet with over 400 aircraft, with over half the debt on those unencumbered.

So a very strong balance sheet, BBB+, raises.

On hedging, we're well hedged into next year, with 90% of our hedging in place now at $583 per metric ton.

This compares to $493 last year but is well below the $800 that we're seeing at the moment.

The MAX is also well hedged.

We'll take the first MAX in April of next year.

And we've got the euro-dollar hedged on that at an average rate of EUR 1.24 against the dollar.

Last year was a strong year which saw unit costs down 1%.

Guests were up 9% to 130.3 million.

And revenue was up 8%, driven primarily by a good performance in ancillaries.

And so profit after tax ended up 10%; and our EPS up 15%, helped by the buyback.

The latest buyback is now halfway through, EUR 380 million spent on the current buyback; and we're well on track to finish the balance before the end of October.

So with that, I'll pass back to yourself, Michael.

Okay, thank you.

We're going to open it up for Q&A.

Now what we've done in the interest of speed here, we're not going to have multiple questions this morning.

So, one, analysts, if you could, don't ask kind of silly questions that we've already covered in the detailed Q&A that went up on the website this morning, which I'm sure you've all seen.

And we're not going to allow multiple questions either, so if you have 1 or 2 parts to your question, that's fine.

If there's 3 or 4 parts, we're stopping at 1 and 2. So we want to try and get as many questions as we can, but keep it to kind of either 1 or 2 questions and no follow-ups, please.

So with that, let's open it up for the MD&A -- for the Q&A rather, sorry.

(Operator Instructions) Our first question comes from Daniel Röska of Bernstein.

Two questions, if I may.

Number one, in your outlook you mentioned the systems investment to facilitate the growth.

Could you elaborate a bit on the changes you want to do, especially to your back-office systems in, let's say, PSS, res, RMs, fleet planning, whatever it may be?

And secondly, you touched on the opportunity of building a larger group of airlines under the Ryanair Holdings banner in the next 3 years.

A little bit more on the strategic side: Which key assets of Ryanair such as the labs or the brand do you see scaling across all those operators in the group?

What's the opportunity here?

And which elements will remain with the newly acquired airlines?

Thanks, Daniel.

Okay, quickly on that.

The systems, it's not so much computer systems.

An angle we're talking about there in terms of investment for -- to spoon up to 600 aircraft is largely in the operations and engineering side.

We have invested heavily in the last 6 months.

There's a new management team within operations, new head of engineering.

We have significantly beefed up the rostering side of the house, where we had that failure last September.

Main rostering team has doubled in size with significant kind of managements there.

We're also investing heavily in simulators.

We've signed a deal to take the 3 more simulators coming at the end of this year, which will increase our pilot training capacity by some 40%.

And we are also investing heavily in -- we have new hangars coming in place in Seville.

There's another one in Stansted, another one.

I think, the third one, somewhere I can't remember.

(inaudible) where it is, but an investment in engineering, tooling.

And then within the Laudamotion operation, it has a 2-bay hangar in Vienna.

So there's a lot of physical infrastructure going in place in the operations, rostering, pilot training.

And we've done the new 10-year engine maintenance deal, so we are -- it's not so much, I mean, having John Hurley with me here in London.

I mean we think that, the systems, we currently have.

We are working on an operations system to replace this line, but that won't come in place for about another 12, 18 months.

That's one that we're building internally within Ryanair Labs.

But so it's much more scale -- there is much more management, physical infrastructure in operations and engineering to cope with the 200 aircraft.

On the group structure, I mean I think we will evolve, I think, maybe over the next (inaudible).

The thinking is Ryanair Holdings will evolve probably into a holding company not similar to IAG over the next 2 to 3 years, where Ryanair DAC will become a -- is already the -- I mean, at the moment, it's a subsidiary of Ryanair Holdings, but we would see a rapidly growing Ryanair Sun; and hopefully, subject to regulatory approval, Laudamotion become much more significant airlines in their own right and begin to report through to holdings as a kind of a proper holding company determining our capital allocations to the subsidiary companies.

Within that, a lot of the Ryanair skills, certainly the website and the mobile app, are scalable.

I mean we've gotten -- Laudamotion has -- we're helping Laudamotion with the sales, with their website developments straightaway.

Much of that work has been done by Ryanair Labs simply because Laudamotion didn't have those resources to do it on their own.

And I think a lot of the kind of the labs technology and the customer service technology that we have evolved over recent years have very low pricing.

And then encouraging passengers to take up optional service such as reserve sitting, priority boarding; and check-in baggage if they so wish to, we think we can roll that out across those of the subsidiary company.

I also think there will be other opportunities within the M&A space, not only we will lead in that space, but for example, if -- I mean, if an IAG or somewhere, Lufthansa, were to acquire Norwegian, for example, I think it's inevitable that there will be significant competition divestment coming out of that.

And we would certainly want to play a role in any kind of competition divestments that will arise out of a restructuring or a takeover of either an Alitalia or a Norwegian or any of the SAS, any of the other loss-making airlines at the moment.

And a group structure, again modeled on the IAG structure, would enable us to build some scale to participate in those kind of processes.

The next question is from Savi Syth of Raymond James.

Just a couple of questions from me just on the cost side.

First, that in labor the costs increased.

I appreciate the color on that.

Is that a little bit higher than you were expecting?

And is that due to tightness?

Or maybe because some of the costs didn't come through in fiscal year '18.

And then second one is I know you mentioned maintenance and EU261 kind of driving the year-over-year even though your comps are a bit easier because of the disruption last year.

Just wondering if you could talk a bit more about that and if the inspections related to the Southwest accident is having an impact there.

Well, I might ask Peter to just touch on the Southwest inspection.

Let me deal with the first.

No, actually labor is not much that a surprise to us.

I don't think labor surprised us.

We have well telegraphed what we have done in the last 6 months.

I think a significant achievement by Eddie Wilson and the team was to put in place 5-year pay deals with our pilots and our cabin crew.

In some cases, despite the opposition of local unions in certain countries, our pilots voted directly or in some many cases over the heads of the unions on these pay deals which have now gone into place.

That has been reflected.

I mean what those pay deals -- a lot of the pay was front-ended into the 5 engines, so it's year 1 of the 5-year pay deal.

So you've seen an impacts on it on the last 5 months of last year's numbers but then a renewal.

And the full 12 months for the -- or for the first 7 months of the next 12-month period.

And I mean there's a lot of a kind of an analysis or, I think, speculation at the time that the unionization could cost us anything up to EUR 140 million, actually between EUR 140 million and EUR 240 million of pay increases.

We're not there.

The number is EUR 100 million.

We felt we've indicated we felt it will be EUR 100 million, and I think we cap it out at that.

There is, though, continuing growth here and, I think, both on the management side, management and, if you like, structural side which I've dealt with, in operations, engineering, rostering, on those kind of areas, so that we avoid a repeat of the September 2017 (expletive) up in rostering.

And we are very confident that won't be repeated.

And we are putting that.

So I think that investment is necessary.

A lot of that, you'll see in the engineering and the operations side.

I mean there is a pitch point in engineering and maintenance around the industry at the moment as well.

And we have to kind of factor that in.

I think in many cases we do much of our own maintenance in-house.

We need to invest in those, both facilities and in the people.

On the maintenance and -- I mean EU261 is just an ever-expanding claims fest for customers.

It is going to become a greater challenge for airlines.

And particularly it is a point at issue where we have a problem with the European Union on EU261.

It's where we are completely not responsible for these cancellations and delays such as ATC strikes.

The legislation says that you're entitled to recover your EU261 costs, but the ATC providers around Europe have kind of legal protection from claims, so we can't recover those costs.

And as more and more people have become aware of their entitlement to claims, I mean, there is a rising percentage of customers who are making those claims.

Now we have successfully fended off, I mean we've had a number of very notable victories, court victories, getting rid of the claims, ambulance chasers who are in the middle charging customers 40% for their claims, but frankly customers are now becoming more and more aware of their entitlement to compensation; when are their right to care, either where there's more than a 3-hour delay or where there's a strike.

In the case of strikes that we're not responsible for, we still have the right to care obligations.

So people spend more time in hotels or meals, the airline is being -- airlines are being expected to pick that up despite the fact that competing transport doesn't have to do that here in Europe.

So we think that will be a growing area of cost for not just for us but for all airlines.

And Peter, do you want to touch briefly on the south -- on post Southwest inspection?

Yes, on the -- yes, sure.

On the fan blades, we're fortunate that we have almost 40 spare engines, say, with across the company.

So that's enabled us to kind of mitigate problem around this.

We're doing 5 inspections a night on the fan blades across the engines.

We're doing them in Stansted's, Dublin and our recently opened hangar in Madrid.

We have support for logistics on that from CFM.

We've got a very -- fairly robust plan in place that we will get all the inspections done by the end of June, which is required.

CFM support on the spare blades has been quite poor, but because we have the spare engines and we have other spares and stuff, we will be able to manage that.

And it is creating additional demands on our engineering and (inaudible) department.

And it creates some additional manpower and resources that we need to put in place, but we have a robust plan in place.

And we would have it done in time for the end of the period.

Thanks, Peter.

Okay, thanks, Savi.

The next question is from Neil Glynn of Crédit Suisse.

If I could ask one short-term question and one medium term, please.

The first one, just based on the staff cost guidance, and certainly I calculate you need the rest of ex fuel unit costs of about 4% this year to make 6%, I'm just interested on what the biggest drivers are there.

I know the Q&A had mentioned maintenance.

How significant is EU261 on your thinking there?

Then the second question: One thing, I think, is probably easily missed this morning.

I mean your return on assets actually were the highest this century at 12%, the highest since 1999.

I'm just interested.

Once you get through the 2-year fuel headwinds, given your top line story should become less asset intensive with ancillary growth, is it fair to think you expect just structurally higher returns from the business as we go forward through the medium term?

Okay, let me touch on that.

So I mean I think, if you're looking through to next year, we expect kind of -- obviously we've already baked in quite a significant jump in staff costs and a significant jump in fuel and oil.

Even with our hedging position at $59 a barrel, which it looks very attractive compared to $80 spot, it's still a significant jump on last year's hedge position, where the average cost of fuel was in the low 50s.

And we will expect airport and handling charges to rise pretty much in line with traffic growth.

And I think that there will be a significant increase next year in the maintenance, materials and repairs, which this year only grew by 5%.

And on the marketing and distribution costs, there will continue to -- I think, to be an exceptional growth in EU261 costs and claims.

I mean that was an area where we and all other airlines are very concerned about the continuing kind of claims culture among passengers.

It's not so bad where we are responsible for the delay or cancellation, which is very rarely, but where we are now responsible, right to care on the huge volumes of cancellations that we are not responsible for.

I mean, if you take the month of May alone, we've already canceled over 300 flights in the month of May.

Last May, we canceled less than 100 flights.

This year, we've already canceled 300 flights because of 3 weekends of French ATC strikes.

And tomorrow, there's a national strike in France, but we may -- we face another probably 300 flight cancellations.

That's 600 flight cancellations in the first 3 weeks of May alone, all of which are outside of our control and due to strikes, but we have the right to -- and the difficulty will be probably just to re-accommodate passengers when our load factors are running at 95%.

So it is very difficult to re-accommodate passengers.

Despite the fact we're not responsible, we don't have to pay EU261 compensation, we are responsible for their rights to care.

I would -- and so going forward, I mean, next year, the big areas apart from staffing and fuel will be maintenance and EU261.

I will like a calm down on the return on assets.

Even though I think we are facing this year a -- certainly a structural step-up in unit costs, we will still be significant -- have a very large and widening unit cost advantage over all of our other EU competitors, most of whom are facing much of the same costs themselves.

We will continue, though, to be very cash generative this year.

We will this winter take less aircraft because of the -- we're in the gap this winter between the end of the NG order and the start of the Gamechanger order.

But no, I don't think -- I think, over -- after -- once we get through this year, I would expect reasonably -- return to a reasonably flat, slightly declining unit cost outturn, particularly as more and more Gamechangers come through the system with 4% more seats and 16% lower fuel consumption.

And I think ancillaries will continue to perform well, but I don't think it's realistic to expect a continuing improvement in our returns.

This year, we've managed a 20% net margin.

That net margin may be under stress where I think there will be a downward trend there depending on the outcome of yields next year, but thereafter I would expect us to return to a 20% net margin, which is where our long-term kind of profitability should be.

And the driver of that in the next number of years will be the outturn on pricing, and that would be driven by consolidation.

There is no doubt that Europe is moving towards a similar outturn as North America, where consolidation will take us towards 4 or 5 very large major airlines in Europe.

Most of those major airlines are reasonably well run.

And you have France clearly have issues with unions, which is a separate issue, but they're clearly well run.

There will be less and less, I think, capacity growth in Europe in the next number of years and more and more a focus on pricing, particularly in markets like Germany where air -- where Lufthansa now controls the entirety of the German domestic market and much of the short-haul market.

And I think they -- you, we will see a return to fuel surcharges in the summer of 2019, but that won't feed into our numbers until FY '20.

But so I would expect us to maintain current profitability.

We don't really run the business for return on assets.

We run the business for profitability and cash flow.

And we would expect to maintain the recent performance on both of those fronts, with a likelihood of a dip this year in terms of the profit outturn.

The next question comes from the line of Jarrod Castle of UBS.

Two, please.

One, just looking at the holding company structure that you are potentially talking about, would be interested to get your views on kind of long haul, low cost; and whether or not that potentially is back on the table.

And then secondly, just looking at Ryanair Labs, 600 individuals now.

That sounds like a lot of the skill base, but I'm just trying to get a profile in terms of what is the spend that's going into Ryanair Labs.

And how should we be thinking about that evolving over the next few years?

So Jarrod, the -- your line was particularly faint at the end there, Jarrod, but (inaudible) what's the outlook on long haul, low cost, I have no -- frankly, we have no interest in long haul, low cost.

I'm not sure.

As the Norwegian experience would suggest, I don't think long haul, low cost is a profitable area.

It is too much of the long haul market is controlled by the legacy airlines who are continuing to exercise very significant pricing power at the premium end of the cabin and can afford to dump the economy end of the cabin almost down at any price.

And I think the struggles that Norwegian are experiencing or suffering; and their entering into long haul, which has proven to be the more they grow the more money they lose, I think, ultimately that long-haul piece will be -- long haul, low cost will be loss-making.

I would continue, though, to see a -- I think we're excited by the opportunities available to feed into long haul.

I think that will -- we've reached agreement now with Aer Lingus.

We would hope to have the system issues dealt with before the end of the year and to be launching a serious business or a serious business feeding into Aer Lingus through Dublin, where we have 85 short-haul routes, on to their long-haul operations.

I think that's likely to be a reasonably small but growing business opportunity for us in the next number of years.

Ryanair Labs, we continue to invest very heavily in Ryanair Labs, where we now have 3 development centers in Dublin, in Wroclaw in Poland and in Madrid.

The costs are not significant relative to the income that Ryanair Labs is generating through ancillaries or the speed at which Ryanair Labs is a developing operating kind of systems for us, but I have John Hurley here in London.

And I might ask John just to give a comment on Ryanair Labs.

Then I'll ask Kenny Jacobs in Dublin just to give us, provide color for what Ryanair Labs is doing on the ancillary side.

So John?

Ryanair Labs, as Michael said, has 3 data centers in Dublin, Poland and Spain.

It all in has no contracting, low cost.

And we're using the data [of a payment] business per year to utilize, I think, the best possible solution moving forward.

Having -- going forward, it's a big focus on ancillaries, improving ancillary revenue.

You saw results this year were quite promising.

Next year, we'll be continuing the growth in that space.

And...

That's right.

I guess, as you know, we -- when you're looking at the costs of Ryanair Labs, like these are generally expensive individuals, but the costs of Ryanair Labs on an annualized basis are a fraction of what we will be paying to consultants and to third-party providers, the data Lexus of this world who have I think profit margins of about 30%.

We will be paying these guys a fortune, and the delivery will be an awful lot slower than it is through Ryanair Labs where actually we pick up the labor costs of our own in-house developers.

And we are able to develop much more quickly and deliver products and services and change much more quickly.

And Kenny, maybe you want to give a -- touch on the digital plan going forward in ancillaries.

Yes.

You can hear me there, can you?

Just checking.

Yes.

Yes, okay.

Yes, to take up from there: I mean I think you can -- the bigger numbers that I would call out, just there's -- obviously they're in the deck, but in addition to the 43 million people we now have with myRyanair accounts, we've got 33 million people are -- have -- are active users of the app, so the app continues to be the #1 most used travel app across Europe.

A lot of the focus and a lot of the uptick in penetration we've had in the past 12 months has been on the -- what I would call the day-of-travel products.

So this is priority boarding is an example that was building nicely on penetration.

When we changed the policy on January 15, that gave us then an extra kicker in penetration of priority boarding.

And because we've got 33 million people with the mobile app and we've got data on 43 million people, we do see a good number of customers take priority boarding on the date that they're actually traveling.

On the other big product, seats, it's you can see it's a very high number at 50%.

It's close to -- closer to saturation, but there's still some to go for on seats.

Then Plus products at 10%, ahead of when we thought we would get to 10%.

It's quite interesting.

That's hard work on all of these products, and it's hard work on driving penetration of Plus.

It's interesting when you start to look at this by different types of customer segments in different markets.

So you would have the cheapskates across Europe, but we'd also have some countries and some bases where over 15% of the sectors we now sell are a Plus sector.

So I think plenty to go for still on Plus.

On Ryanair Rooms, conversion is on plan and visits are strong.

We will have a busy summer improving the website and improving the app.

And it's more like you're managing an OTA site than managing a low-cost airline website when it comes to Ryanair Rooms because it's a different type of competition.

And as we said previously, about half of the bookings on Ryanair Rooms are people who do not have an upcoming Ryanair flight attached.

So it's a different type of animal to manage.

I think, going forward, it's really interesting to see how the behavior of the consumer is also changing.

We see a lot of customers.

And you might take the same individual who will book late in, pay a high fare, add in fast track, add in high priority to their booking when they're going on business travel.

And they might be Europe's biggest cheapskate when they're buying their own travel.

So I think the trip, as we call it, is becoming unbundled; and that plays into our strategy of being able to really just target the right product to the right customer at the right time.

And the more you unbundle it, as in the same individual might want everything and pick the flexi Plus fare, they might also say, "No, I don't want a bag.

I don't want to board early on certain flights." And we will say, look, it's customer choice.

The only thing I would say is we're also using the power of Ryanair Labs to improve customer service.

We've learned through the past 6 months.

If you take the strikes in France tomorrow, all the customers will have received an e-mail already with the option of a refund or a move.

And we're saving money because they're not calling the call center.

They're simply -- it's one click on the app to make that move.

So we're using digital to improve customer service already.

Okay, thanks, Kenny.

And I mean I should also say there's a big misunderstanding that with -- that attracts some negative publicity in the last weeks for the move of non-reserved passengers could check in for 4 days before travel.

We've reduced that to 2 days before travel mainly so that we can create more space for people who want to pick up or take reserved seats, but it's not a measure that's designed to force people to pay airport check-in fees of GBP 50.

In actual fact, the vast majority of our customers are now checking in on a mobile app.

So whether they're away for the weekend up in the Spanish hills or they're -- they have no difficulty checking in online on the mobile app within the 48 hours, which is still double.

Typically British Airways, Aer Lingus and others, for their economy passers, only allow them to check in 24 hours before departure.

So it's not a moneymaking move.

It's simply a reflection of the fact that actually online check-in has moved to the mobile app, but we will have no difficulty reducing that to add a 48 hours or even 24 hours without causing any passenger any inconvenience whatsoever.

Thanks, Jarrod.

Our next question comes from Anand Date of Deutsche Bank.

I was just wondering 2 things, please.

So you've talked about engineering.

We know about rostering.

You've talked about maintenance.

Are there any other areas you just think you need to be -- you need to bulk out just to make sure that, 2024, the infrastructure is all in place to get there?

And then secondly, particularly with Laudamotion now as well and the things you've said in the past, do you have any updated thoughts on A321neos?

Because obviously you've got (inaudible) Wizz saying the unit cost is just spectacular.

Yes.

No.

I mean I think we have -- the 3 areas of bulk-out have been in operations, engineering and labs.

That, they're well flagged.

Finance, there has been some new management added to the senior team in finance.

That's all there now embedded down.

Sales and marketing, I think, Kenny, that is reasonably stable.

No.

So I think we're reasonably happy now, but we have frontloaded a lot of that investment both in staffing and in management, with a view towards how we got the right resources in place for 600 aircraft and how do we avoid having a kind of rostering management failure or a kind of a bunker mentality within any one area of the business that could fall over going forward.

So we don't expect there to be any other areas of significant investment on the labor side.

Laudamotion, I mean again the attraction of Laudamotion is, one, it's an Austrian AOC with a big presence in Vienna.

It's also an Airbus operator.

And that has been -- it was one of the reasons we originally made a bid for Aer Lingus and to that back as far as 2006.

We want to have some -- an Airbus -- a relationship with Airbus.

I think we need to have -- to establish credibility with Airbus, we need to have an Airbus operation within the fleet.

I am less motivated by aircraft.

I've always been kind of a pretty much -- I don't know what the word is, but I never really care which aircraft it is or what -- it's always about the cost of the aircraft.

And I think, when you look at the A321neos; the Boeing MAX 10s, which take -- which are Boeing equivalent of about 240 seats, they are both very good aircraft.

The question is what cost do you buy them at.

And the market has been overheated, I think, for the last 2 years on both 73s and on Airbuses on the neo front.

And the lease rates and the costs for those aircraft, I think, are too high.

We have -- I mean Boeing has made us an offer on the MAX 10s which would have been significantly ahead of where we'd ever bought an aircraft before.

So we politely said, "Thank you, but no Thank you." But so whether it is we can grow, I mean the attraction of having Laudamotion there is, if the right opportunity comes along and remember we have a very low-cost order for MAX -- for 197-seat 737 200 Gamechangers that are going to come through over the next 6, 7 years out to 2024.

So we're securing our aircraft fleet program.

And we already have a huge aircraft maintenance or cost leadership over easyJet.

When you look at, for example, Wizz' and Norwegian's aircraft ownership costs, they are ridiculously expensive because they're doing these sales and leasebacks and putting them on the balance sheet at an inflated price.

We had all our aircraft in the balance sheet at a net purchase price.

And we don't play games on -- we're not trying to take out or take profit off the table on the aircraft, so you're getting -- shareholders are getting the benefit of our significant buying power and our -- we -- the fact that we opportunistically put those deals in place in 2013 and 2014 when Boeing needed a -- somebody to buy the remaining NG production and the lead customer for the -- 2 of the Gamechangers.

I would be very happy to take either an A321neo or a MAX 10 737 but only when we get to the next downturn in the industry.

And I suspect the next downturn in the industry is coming at us sooner rather than later as oil prices rise towards $80 a barrel.

And who knows?

Maybe they're heading for $100 a barrel.

Frankly, in the more short to medium term, I hope they hit $100 a barrel because that will speed up consolidation and will take us into the next round of opportunistic aircraft orders.

The next question comes from Monique of Citi.

Just a couple of questions from me.

The first one, on fares.

Obviously 4Q fares really strong, up 6. And even if you strip out underlying impact from Easter, maybe it's 2 percentage points.

It still looks like a big move in the underlying fare outlook 4Q versus 1Q this year.

Could you comment on that?

Is that partly a result of some of the short-term capacity exits you saw from -- in Germany, for instance, from the likes of Air Berlin coming back online?

And then secondly, ancillary revenue growth also really strong in the year and fourth quarter in particular.

And that, I suppose, is despite some headwind you would have seen from your new baggage policies and lower baggage fares.

So could you just give us some indication of what kind of headwind that caused to your ancillary revenues and say what the kind of underlying ancillary revenue growth was?

Well,I knew the Q4 fares are somewhat distorted, but obviously you've identified that the first half of Easter was in Q4 and not in the prior-year comparable.

It's also the quarter where we had grounded 25 of the winter aircraft so that we can accomplish all of the pilot leave over the winter period.

So in many respects, we grounded 25 aircraft.

We were operating less capacity than we thought we originally would.

And you've seen that reflected in others, like easyJet reported very strong underlying yield performance in Q -- in that quarter mainly because we had taken out a lot of our U.K. domestic flights where we can beat head-to-head with them.

So I think some of the Q4 was a -- is based on Easter and us grounding more aircraft.

They were all back flying again once we got to the -- to April.

And so we're into a more normal steady state going forwards.

Q1, the fares are down 5%.

We should always be cautious on airfare tier in this industry.

Q2 looks like fare is up about 4%.

A lot of that is -- depends on the -- what the close-in bookings will be and also how many more cancellations of high-yielding weekend flights we have to suffer through May and into June if the French continue to have these weekend strikes of their traffic control (inaudible).

We are -- those -- it's not so much as the cancellations.

And clearly the cancellations are painful, but you're canceling what are high-yielding, very profitable flights at weekend, but so is everybody else.

Ancillary revenues, again be cautious.

We have performed very well in the last 12 months: traffic growth of 9%; ancillary revenue growth of 13%, up another 4%.

Most of that has come from what is really cost-free services such as the continuing -- to say, the continuing, I think, trend of customers to take up those kind of reasonably cheap services like the reserved seating in the priority boarding.

Baggage, remember baggage goes into the underlying.

I mean we put our baggage fees in the underlying airfare, so it's not in ancillaries.

And -- but the pickup of baggage has continued to decline.

We're down to low teens now of customers who are checking in bags.

There is an operational challenge for us in that we have at least eliminated the baggage issue at the boarding gate, but certainly during the summer here, we're seeing flights where we're taking anything between 100 and 150 second-gate bags, second bags going in the hole free of charge.

We need to be able to manage that.

And we have to be able to regulate that at some point in time in the future.

We may have to do something more on the numbers of passengers who can bring a second bag free of charge to the gate.

We're not quite sure what, but it's got to be operationally efficient.

Neil, do you want to add anything else on the ancillary revenues there?

No.

I think it's fine.

Monique, just you referred to the Plus products.

The Plus products do get caught in the scheduled revenue, as opposed to ancillaries.

You will have seen that we're up to 10% penetration now on Plus.

That includes a bag which would normally be scheduled, but it has some other bits and pieces like fast track et cetera that will be down in the ancillaries, but I wouldn't get caught-up money trying to figure out what's the cannibalization between Plus and the ancillaries.

We will split them out, as we've done today.

And it's relatively straightforward.

Thanks, Neil.

The next question comes from the line of James Hollins from Exane.

Two, please, from me.

Firstly, one for John, on the move to Amazon Web Services.

I was wondering if that would, over the next few years, both improve your cost base and more specifically improve your yield management.

Certainly the press release from Amazon would suggest as much.

I was wondering if you might speak up from their behalf.

And secondly, you're talking about capacity above average.

I was just wondering if you could quantify either what you're seeing as industry growth over the next couple of quarters; or better still, on competing routes with you, what you're seeing in terms of the data point on competing capacity.

Okay, maybe I'll take the second one, first.

I -- we were surprised that Lufthansa were allowed to buy off Air Berlin with no kind of competition divestments at all.

I mean they went to a 97% share of the German domestic market.

That certain means that a lot more Air Berlin capacity has remained flying in Germany.

The easyJet came in and took up the Berlin operations.

And we, through Laudamotion, have come in and taken up a lot of the flights from valuable slots of Berlin, Stuttgart, Düsseldorf that we otherwise couldn't get access to.

So there has been -- I mean Germany, I think, is a -- going to be a very underperforming market this year, particularly because we're -- the Laudamotion is selling a lot of its capacity at very short notice into the peak summer period.

But that's ultimately good for Laudamotion.

Customers are enjoying incredibly low prices on (inaudible) [of New Yorkers] during the peak period.

But you take that kind of -- that capacity not being taken out of the system.

You still have Norwegian adding kind of scattergun capacity in Spain, in Italy, not entirely very well thought out or planned.

They seem to be just taking -- feed our short-haul aircraft and don't bring them into markets, where they just lose more money.

We are adding capacity.

I will say our capacity utilization are rational but across the system, doing well now in Spain and Portugal and in Central Europe.

Italy is performing well.

Germany is weak.

The U.K. has certainly improved given the Monarch bankruptcy last year, but again none of that capacity is impacted by easyJet; ourselves; or adding more aircraft to bases in Birmingham, East Midlands and Manchester.

And Jet2 have taken up some of that capacity as well.

So I think some of the capacity we thought would have come out last year through bankruptcies hasn't necessarily come out, and that's likely to continue.

I think the big issue for us is -- will be the timing and nature of the -- of what's been the inevitable, in my opinion, demise of Norwegian at $80 a barrel.

I would have said it will go bust.

Clearly now it looks like it may be rescued by a BA, an IAG or a Lufthansa or somebody like that, but I think even within that, that would take an illogical competitor.

I think the -- one of the upsides of Norwegian to these guys is their order book.

And I think -- instead of those short-haul aircraft being deployed on excess new capacity growth elsewhere, I think they'd take some of those orders to re-fleet within their existing operations.

Now I'm not sure about the timing or of the strategy of the IAG announcement.

It seems to us that they have given the bondholders in Norwegian hope, but one way or another, it will be helpful to the industry generally to see illogical loss-making competitors like SAS, Norwegian, Alitalia which continues to lose money; and is in administration, either rationalized or joined in the consolidation process because I think ultimately then the capacity growth in Europe will settle down to more being reflective of GDP growth rather.

And at the moment, it's running at 2 or 3x ahead of EU-wide GDP growth.

John, do you want to touch briefly on the Amazon-based web service and their teams?

Yes, certainly.

[Teams] are a little bit overexcited.

Basically Ryanair has got 3 data centers across Europe, both on the website.

That gets -- that kit is refreshed every 5 years.

18 months from now, we're -- we'll do a refresh.

On the third refresh in that kit, we'll move into the cloud basically.

And we're primarily doing it to get scale, to get protection as you grow the website to 200 million passengers over the next 6 years.

It's already busy at 1 billion unique visits per year, and it's to protect that all in scale et cetera.

It will reduce costs slightly but nothing material to call out [or note on].

And yes, Amazon has a lot of interesting products we are looking at and particularly around live streaming of daily use and changes.

That will give us a benefit going forward.

Will it benefit around yield in the future?

Who knows?

We're definitely looking to that space.

It will -- certainly will help us having better products offered to customers at the right time.

Great.

Thanks, John.

The next question comes from the line of Mark Simpson of Goodbody.

Okay.

I just wanted to touch, first off, on the ancillaries side.

If you plug in your kind of headline guidance FY '19, the residual line is ancillary per pax.

And essentially it kind of implies 13% growth in ancillary revenue per pax for FY '19.

I'm sure you're not saying that.

Can you give us a firmer sort of guide on that?

And given the fact that you were woefully off in the Q3 full year '18 guidance that you gave at plus 2 and it came in at plus 4.3, let's just say some guidance on the ancillary sort of forecast for this year will be good.

Second question: Last year, you gave us 5 quarters of hedge positions, which included the first quarter of the second year.

Can you give us, say, Q1 '20 sort of commentary on your hedge position?

Okay, I'll do the first.

I'm sure Neil will add.

[Future coming] on the hedge position in the first quarter of FY '20, look, we've given you what we've given you on ancillaries.

I wouldn't -- I think we -- your implication is it is overly optimistic.

We think, in the next year, traffic grows about 7%.

And I think the most likely outturn on ancillaries will be a similar performance as this year.

We'd be hopeful that ancillaries will continue to build revenue per passenger up, I think, around 4%, as region.

That could be 3%.

It could be 5%.

Remember some of our -- as Kenny pointed out, some of the service products we're doing at the moment will top out.

I'm not sure that there's much more room in reserves feeding above kind of 50%, 55%.

Priority boarding will continue to grow, but again, I mean, it's at 20% at the moment.

It may get to 30% over the year, but I'm not sure it'd go much higher than that.

And so be cautious.

I mean I think at 7% traffic maybe around 4% is a reasonable outturn.

So we'll be more at 10, 11 rather than 13.

And Neil, on fuel on the first quarter of the following year?

Yes, Mark, just on (inaudible) about 10% of FY '19 hedged.

We don't have any commodity hedging in place since the first quarter of FY '20 at this stage, but we do have a fair bit of our OpEx or euro-dollar cover in place out there.

We're about 50% hedged for the full year.

And that's kind of skewed toward the first half of the year, where we're hedged at about EUR l.25 for just over 80% of our OpEx in the first half of the year on the fuel side but no commodities, yes.

Just going back to your ancillary guidance, well, Mark, I think your numbers are very much based on the upper end of the guidance.

Clearly the ancillaries will be a determinant on whether it's the upper or lower end of the guidance.

The next question comes from Johannes Braun of MainFirst.

Just two from me also.

Firstly, obviously you are increasing large client to Fraport not only in Frankfurt but also in Greece.

Just interested how do you think about the targeted significant fee hike that Fraport has stipulated with the Street authorities; and which will kick in, in 2020, '21?

[As manager], any way you can challenge this fee hike?

And then secondly, can I just ask about Ryanair Sun and Laudamotion?

At which unit cost and profitability levels do you expect these airlines to operate after the startup phase?

And also, will these 2 sub-units be unionized as well, or will you try to keep them union-free?

Okay, yes.

David will come back to you for some color on the Fraport fee hike in 2020.

And just briefly on Ryanair Sun: We will expect it to operate at similar margins to Ryanair.

It will be profitable in year 1. A lot depends on the speed at which it builds over the next year or 2. And that's we need to see how the charter market in Poland performs this year and what the demand it will be for flights in Ryanair Sun into the September '20 program.

Laudamotion will be loss-making in year 1. Probably we will hope to be close to breakeven in year 2. I mean the challenge for Laudamotion is that, while it's been split out by Lufthansa, Lufthansa has been forced by the competition authorities to lease its originally 14 aircraft.

Now Lufthansa hasn't provided all the aircraft.

It's now down to 9 aircraft, but the leases are very expensive.

And they run over a 2-, 2.5-year period.

So until we can replace those expensive Lufthansa aircraft, I think Laudamotion will be loss-making but not significantly loss-making year 2.; hopefully, close to breakeven or a small profit in year 3. Thereafter, once we can restructure the fleet in Laudamotion and, I think, get it to a reasonable scale of 30 to 50 aircraft, I see no reason why Laudamotion won't run at the same kind of cost base and margins that Ryanair operates at given the benefits of the Ryanair kind of the website, our sales, the ability to deliver sales and our presence in the 2 big markets of Germany and Spain.

Obviously we will lean heavily on Niki Lauda and the Lauda brand in Austria, where it is a much higher, greater presence than Ryanair has in Austria.

And Austria, I think, is a market that is certainly attractive to us.

And for many years, it's been dominated by Austrian Airlines, the Lufthansa subsidiary, with very high fares, so it needs choice and competition.

And David, Fraport?

Yes.

Well, the Fraport increases are entirely predictable.

If they're going to sell the monopoly to the highest bidder, that's what's going to happen.

And it has already happened.

They've had some increases in the first year.

And our response has been to concentrate our activity in the summer peak, when you can make money at higher prices in Greece at the summer peak.

The issue is what they do for the rest of the year.

And we are in discussions with Fraport about a growth plan that would incorporate shoulder periods and the winter because that's what they need to do.

Otherwise, it will be summer peaks, and we'll live with that.

Thanks, David.

Thanks, Johannes.

And the final question in queue comes from Kathryn Leonard of Numis.

Just in the interest of time, I'll try and be quick, but in terms of the credit that you currently have with operation of the Ryanair Rooms, do you have a penetration level that you're aiming at until the point where you'll remove that credit?

How should we think about the time until that becomes profitable or margin accretive to the group?

And just secondly, just on the cost increases to staff costs that you've alluded to, I know that we've talked a little bit about those already, but when we met in February, you talked about staff cost per pax not exceeding sort of EUR 6 per pax, or EUR 6.1 level.

And that was sort of in line with the guidance you'd given on the EUR 100 million of annualization of costs.

That kind of guidance implies sort of a EUR 6.8 per pax if my calculations aren't incorrect.

Just wondering if -- what has changed so rapidly in the last few months.

I know you've talked about investment et cetera, but can you just give any more color on that?

Okay.

I mean I -- we haven't got a threshold at which penetration of Ryanair Rooms.

Ryanair Rooms is growing significantly at the moment, but I mean it's a non-profit earner.

We're giving back effectively the 10% commission we make on the hotel rooms to customers in the form of travel credits on Ryanair services.

We would expect that to continue.

And we would expect to be delivering that kind of a kickback of commissions, I think, certainly for the foreseeable future certainly over the next couple of years while we build up the penetration of Ryanair Rooms.

And then the test of this is to see how quickly and how much we can, say, build not just to convince Ryanair customers to book hotel rooms using Ryanair Rooms but to persuade non-Ryanair customers to book hotels using Ryanair Rooms because we're giving back.

We're offering a combination of the lowest hotel prices, but we take you back the commission.

And we think that's ultimately how we can attack the business models of the Booking.coms and the Expedias who are very successful on what they do but have a very high margin built into their system.

And we need to be able to persuade the hotel providers, "Look, we can do it.

Ryanair Rooms will do it at much cheaper commission price than you will have to pay to the hotel dot-coms, the Booking.coms." In the short term or in the more medium term, it's not about making money out of that.

It's about building scale.

At cost increases, I'm not quite sure what the point is, but maybe Neil, do want to answer that question?

I thought we had slightly said it well what the labor cost increase was going to be.

Well, yes.

I mean, Kathryn, we had EUR 6 per passenger; just under EUR 6 per passenger, round up to EUR 6, in the year just ended.

We're going to be under EUR 7, so just approximately EUR 1 per pax going up there.

I thought we'd made that point quite clear actually at the Analyst Day back in February, but it's pretty much in line with what we then indicated where we would see the staff go up for effectively EUR 1. That's what's happening and that's coming through in the numbers, so no real surprises.

Any other questions?

We do have one further question that's come through.

That's from Alex Paterson of Investec.

It's just one question for you.

Just on Laudamotion, has your guidance changed slightly?

You previously said EUR 50 million of startup and operating losses in year 1. You're now saying EUR 100 million until the breakeven.

Is that now greater than EUR 50 million in year 1?

Well, it's greater than EUR 50 million in year 1, but year 1 will kind of be spread across the -- will run across our fiscal year.

What we didn't factor into was the delay -- I mean, well, 2 things.

One was the delay in getting the aircraft out of Lufthansa.

And two was the delay in being able to put the aircraft on sale.

We really only released the Laudamotion summer schedule from Germany to Spain in April.

It's a very short window for selling the -- we -- clearly we'll fill those flights, but we will fill those flights at low fares.

And a lot of the Germans had already pre-booked their trips to Malaga, Spain and to Greece at that point in time.

So there have been significant startup costs, mainly paying the pilots and the cabin crew during the months of February, March, April and May; and then allowing for much lower yields through to summer peak because of the late release of the soft -- our late release of the flight program.

We're looking then -- we will have a major drive that will be announced in the next week or 2. There will be a very large Laudamotion schedule focused around Vienna this winter.

We're also -- you have others like Wizz, Vueling also talking about expanding in Vienna this winter.

And it's likely to be a very low yields environment in Vienna this winter.

In almost all cases wherever we've come up against Vueling and/or Wizz on a point-to-point basis, they tend to retreat.

And we see no reason why that won't be the outcome of the expansion in Vienna this winter.

So I think the difference, where we had foreseen with up to a year 1 startup cost of EUR 50 million, that's risen to EUR 100 million, which is largely going to be lower than our aggressive yield and pricing in the Laudamotion environment for the first up until March of 2019.

Thereafter, though, we would expect, next year, the summer '19 schedule for Lauda air, particularly if we can add more aircraft from Germany, the main fleets in Germany and Austria, to Spain, to be very strong.

We'll have been in the market early.

We'll have released the summer '19 schedule much earlier, many months earlier than this year.

And David, maybe you wanted to add some color then on the Laudamotion prospects for summer '19.

Yes.

I mean we really can't read too much into summer '18.

As you say, we put seats on sale 5 months ahead of flight days which had already been on sale for 5 months with competitors, but it's interesting.

If you take Düsseldorf, where Laudamotion itself had no presence and Ryanair has no presence this year, between us it will represent about 30% of the capacity between Düsseldorf and Palma, but pretty much all of that went on sale with 5 weeks to go.

But it's clearly a very lucrative market but not this summer.

And I've a feeling the late entry of our own capacity and Laudamotion's capacity generally across the piece is going to dampen closed-in bookings for competitors as well.

I mean (inaudible) and Air Berlin have been well replaced in Germany.

Lufthansa and Eurowings have put in about 4.5 million seats; easyJet 2.5 million seats; ourselves and Laudamotion, between us, about 2 million seats, which is pretty much all of Air Berlin.

So there's a lot going on there, and it won't be pretty this summer.

Okay, thank you, David.

Okay...

Michael, if I can just add there.

The one other thing, James, that has changed -- or sorry, Alex, that has changed since we announced it back in February is that fuel has gone up between $10 and $15 a barrel.

Yes.

And Laudamotion is essentially unhedged this year.

Okay, this -- thank you very much for participating on the call.

We have extensive road shows.

I think there's 14 teams on the road across U.K., Europe and U.S.; and we look forward to meeting you all at some stage during the week.

If you haven't got a meeting, please contact us at Citi or Davy's; and we'll be happy to schedule a meeting, an investor meeting, for you during the week.

Other than that, we'll -- Shane will be back too in the office next Monday.

And if you have any individual questions, please route them to Shane O'toole, the Head of Investor Relations.

And we'll deal with them on a one-to-one basis.

Thank you very much, everybody.

God bless.

Bye-bye.

This concludes the conference.

Thank you all very much for attending.

You may now disconnect.