Ryanair Holdings PLC (RYAAY) 0 Q0 法說會逐字稿

You're very welcome to the Ryanair half-year investor conference call. I'm here with my colleagues, our new Chief Financial Officer, Neil Sorahan, and David O'Brien, our Chief Commercial Officer. We're being joined from New York by Howard Millar and Kenny Jacobs, and we'll run through the quick summary of the details.

We've put out the press release, and the investor presentation is on the Ryanair.com website this morning. I won't -- well, we'll give you some brief comments on that, and then I'll ask Neil to handle comments on the financial side. David has some comments on the commercial side and commercial development, and then we'll open it up for Q&A.

So as you've seen this morning, we reported very strong half-year numbers. Profits are up 32% to EUR795m, a combination of traffic growth, load factor growth and average fares rising by 4%, 5% in the first half of the year.

At the same time, unit costs fell, including fuel. Excluding fuel, they rose by 3% in the half year, but we expect that over the full year, they'll be flat excluding fuel and will fall by 4%, including fuel, for the full year.

As a result of this very strong performance, much of which is due to the strategy we launched last September of being more aggressive with forward pricing, taking forward or taking up our forward bookings, we've seen fuller flights, stronger load factors and much better performance.

The customers who are flying with us are also enjoying the improvements that we've headed in our Group together under the Always Getting Better program. That's seen us significantly improve almost every aspect of the customer experience at Ryanair from every touch point.

So from the point where they originally go on the website, which is significantly improved, new mobile app, a lot easier at check-in, most of the check-in being done online -- the boarding gate is a much more relaxed environment now, because the allocated seating, we're no longer fighting with passengers over the size of their bags. And onboard, our crews and passengers are enjoying that better experience.

So we've seen a lot of positive developments, and there is a lot of momentum in the business as we move into the second half of the year. As a result of that, we've taken up the both traffic guidance for the second half of the year. We expect -- we've added some capacity in the winter. We've also taken up the load factor.

Most reassuring at the moment is that the forward-booking profile, which has been running 5% ahead of where we were last year through the summer, looks like it will continue through the winter, as well. Currently today, we're 5 percentage points, on average, ahead of where we were last year in November, December, January, February and March, despite the fact that from November onwards, the capacity will increase by about 16%.

On top of that, the other key development in the second half of the year has been the launch of new services. The Family Extra product has gone very well. The Business Plus product, the bonds -- our first successful Eurobond, EUR850m over a seven-year period at less than 2%. The Board has approved -- or the AGM has approved the special dividend [with all] EUR520m, which will be payable at the end of February.

And we have I think clarified our growth prospects for the next 10 years with the September order for 200 Boeing 737 MAX aircraft. That will give us the capacity in a controlled manner to grow from 80m passengers last year to over 150m passengers over the next 10 years. We'll be doing that with a higher forward bookings, stronger load factors and a much better customer experience, as the Always Getting Better program continues to deliver.

In terms of new bases and new route development, again, I'll ask David to touch on it, but it continues to be very strong. The four new summer bases, all at primary airports in Athens, Brussels, Lisbon and Rome, have done extraordinarily well. High load factors -- initially, we started off at relatively low yields, as we broke into the market, but the yields rose quickly during the summer period.

Forward bookings on the four new winter bases in Glasgow International, Cologne, Gdansk and Warsaw are also building quickly, and we expect to repeat that success. A lot of the winter capacity is also going to take place by building out schedules, business-type schedules on European city international routes and domestic routes.

We've used the example here in the UK where we've entered the Glasgow International route this winter. That's given us an opportunity to enter the Glasgow-London market, with three times daily flights. Having entered the Glasgow-London market, we've also entered the Edinburgh-London market with three-times-daily flights, undercutting both easyJet and BA by up to 50%, and we've seen a surge in passengers and bookings on those domestic routes, as we significantly lower the cost for businesspeople flying between Edinburgh, Glasgow and London.

On top of that, we're making it easier for businesspeople to -- business passengers to interact with Ryanair. We've extended the GDS distribution from Galileo and Worldspan now to Amadeus, so we're visible on about 95% of European's corporate GDS booking screens, and we expect therefore that the number of the percentage of business passengers switching to Ryanair through a combination of better visibility, presence at the primary airports and improved schedules this winter will continue to pay benefits.

Fuel, we've taken advantage of the weaker fuel environment in the last couple of months to hedge forward out to March 2016. We've now hedged out to 90% of March 2016 at about $93 a barrel and we expect that that will lock away not just cost certainty but slightly lower unit costs for this year, the remainder of this year and next year. We will pick up some of the lower spot prices with the 10% of fuel that is unhedged.

As a result of all that progress over the last six months, we closed out September with a very strong balance sheet. Cash balance -- net cash has grown from EUR150m to over EUR600m during the six months, despite paying out or spending nearly EUR300m on CapEx and debt repayments of EUR200m.

So we sit here today after a very strong first half, where I think the strategy we set out last September is working. The Always Getting Better program is delivering. As a result, we are raising the full-year traffic guidance from 87m to 89m. That would represent 9% traffic growth over last year, where based on what visibility we have on Q3 yields at the moment, which is pretty good.

We still have very limited yield visibility on Q4. We expect traffic in Q3 to grow by approximately 12%, average fares to fall by between 3 and 5 percentage, which is slightly lower fall than the previous minus 6% to minus 8%.

In the fourth quarter, we'll step up the capacity growth. We expect traffic to grow by 20% in the weaker fourth quarter. We may have to discount slightly more, so we expect average fares to fall by minus 6% to minus 8% in Q4. And if all that guidance -- the yield guidance is accurate into Q4, that means we should significantly raise the full-year people guidance now, so we've taken it up from a figure of about EUR650m after tax to a new range of EUR750m to EUR770m, midpoint about EUR760m, which would represent 45% profit growth over last year.

I would caution particularly for the analysts that those are very ambitious targets. We don't want people running mad. The business is performing very well. Profits are growing strongly, but we need to control some of the irrational exuberance as well.

With that, I'm going to hand over to ask Neil to give you a quick commentary on the financial numbers for the half year. Then I'll ask David to update you on some commercial insights. Neil?

Thank you, Michael. We had a very solid first half of the year. We saw our traffic increase about 4% to 51m passengers, which was driven by the high increase in load factor, where we grow our load factors from 85% to 89%.

Average fare was up 5% to EUR54. Total revenue, just over EUR3.5b and net profits up 32% at EUR795m, giving us a net margin of 23%.

The balance sheet is in particular strong shape, as Michael alluded to earlier on. We've seen our net cash position increase from EUR158m at year end to EUR618m now, and we expect to be in a net cash position at year end after a EUR520m dividend in February.

So over to David.

David, do you want to comment on commercial development?

Yes. Thank you, Michael. This winter sees a very different winter schedule for Ryanair, with a lot of growth on -- in fact, most of our growth divided between increased domestic frequencies and increased international frequencies, associated also with our new bases in Cologne, Gdansk, Glasgow and Warsaw.

The schedule has been reshaped to support higher load factors and a more stable schedule through the winter. So if you take Q4, Q4's growth is largely a continuation of the new high-frequency routes from Q3, whereas before it might have been flexed through increasing or reducing leisure routes.

Our focus on domestic frequencies will be in Italy, Scotland, Poland and Portugal, where the airports in each of those countries are concerned at reductions by Alitalia in the first instance, underperformance by Eurolot and easyJet's apparent disinterest in Scotland at this point. So, all of these new routes are pinned on new deals at these airports.

And again, we are supporting our business products with increased international frequencies between the main cities, starting initially with Dublin and Stansted into the larger cities -- Rome, Madrid, Barcelona, etc.

Another feature of this winter schedule is that we put it on sale from several months earlier. And in fact, we're working on winter 2015 right now and in discussions with a lot of airports who see what we've done at the larger airports this winter and now want to become part of that game. So we're in discussion with more Scandinavian airports, more German airports, with competition between them for a slice of our winter 2015 activities.

David, thank you very much. With that, we're going to open it up to questions. If it's okay with those people who are on the phone, we'll take the questions in the room here first, where we have a group of analysts here in London, and then once we've exhausted that, we'll open it up for telephone questions.

So if you just call out your name, ask questions. Shoot.

Thanks, Michael. It's Jarrod Castle from UBS. Can you just give a bit of color in terms of the business product. It came in relatively I guess late during the quarter. Can you talk a little bit about take-up? I think maybe Howard has mentioned in the past, it could be 5% to 10% take-up there.

And then also maybe just a bit of color in terms of what the take-up was on the family product, which obviously came in a lot earlier for the summer period.

And then just on fuel, obviously, the per metric tonne is down 2% year over year, given your hedging. But there will be some obviously efficiency with the new plane. Can you give maybe a bit of color in terms of how you see the total fuel bill for 2016?

And then, lastly, just on acquisitions, there was obviously a lot of talk about Cyprus, and anything happening on that front? Thanks.

Thanks, Joe. Just take those as a base. The family product took off like a rocket during the summer, primarily because we have lots of families traveling during the summer. We were discounting allocated seating, discounting the bag fees for families, children traveling as part of family groups. That was very successful.

In percentage terms, it's not enormous, but I think it's part of the new Ryanair communicating that we care about your families. We recognize that some of the additional fees are prohibitive if it's a family group of three or four, and it certainly has been very well received by families traveling with us during the summer period.

The business product will be more -- we expect that we did kind of a quiet launch through the summer. The take-up, remember, we have about 25% of passengers traveling on -- are already traveling on business. The objective over a three to five-year period is to see if we can convert about half of that, 25%, so 10% or 12%, to paying at the premium for a package of services.

The build at the moment in the summer is slow. It's low single digits. We would expect it to grow during the winter period. Again, it's one of the reasons, as David mentioned, why we've specifically gone into certain markets like the Glasgow there, London, Edinburgh-London, but also why we're fleshing out schedules, particularly from Dublin to the UKPs and London and from Stansted to European cities.

So we would hope to see it build to mid-single digits over the winter period, but I think it's a product that will build slowly, as more and more people become aware of it. On Cyprus, we're into the second round of offers. The process is a little bit chaotic down there, partly because the Cypriot government are trying to do a deal with the state aid investigation by the European Union, which we believe is likely to rule that Cyprus Airway did receive illegal state aid, and therefore must repay it. I again take the view we're unlikely to be the winners.

I suspect it's us and Aegean and then the Cypriots can't help themselves but pass it onto the Greeks. If it does go to Aegean, we would simply proceed with our application for a Cypriot AOC, and we'll establish a Ryanair Cyprus operation, which would exploit some of the opportunities that undoubtedly exist to rebuild traffic between the island of Cyprus and a lot of those Middle Eastern destinations.

And, Neil, will you take the fuel question?

Yes, sure, Jarrod. In relation to fuel, as you said yourself, we've locked in 2% unit cost reductions into next year. We've hedged the jet $930 from every tonne. We've got the euro/dollar locked in at about 1.33, so that's going to deliver 2% unit cost reductions.

In relation to the new aircraft that are coming in, we've started taking delivery of the 180 NG order. Those aircraft won't be hugely more efficient than the aircraft that we already have. We'll have updated most of our engines under the existing fleet, with the tech insertions to get the maximum benefit from those engines.

There will be a moderate fuel burn improvement, but the real changer will come in 2019, when we start to take the MAX, which has got 18% fuel burn efficiency over the NG.

Hi. It's Oliver Sleath from Barclays. Three questions, please. Firstly, on the ancillaries, can you talk -- at your latest review on that, I think we're assuming flat at the moment. I'm interested to know, things like the Business Plus, does any of that get accounted in ancillaries or not? Does that just roll in the base?

Secondly, on the primary airports, obviously, you've had some of the primaries like Rome going for a little while now. So I guess the question for Dave is are you actually seeing a higher average fare in the primary airports now versus your underlying secondary airport mix? Or is it just more in the load factor still?

And then thirdly, how much of the growth this winter is actually going to be pure frequency versus new routes?

Dealing with them in reverse order, I would say about 50%, maybe 60% is increased frequency through the course of this winter on, certainly, the existing routes out of Dublin and Stansted. The remainder is new.

The new high frequency, if you take Glasgow and Edinburgh into London, in terms of the primary airports, we're encouraged by what we see. The load factors have been excellent from the start, and yields are growing in the direction you would like them to grow.

There is competition, but the evidence seems to be that the competition are losing enthusiasm. If you take Brussels, you don't hear Vueling say anything about Brussels anymore. One could expect a retreat there, I imagine.

And on the third part, ancillaries, we will expect ancillaries to be flat over the year. Whoever's next has got to keep it moving. Ancillaries we expect to be generally flat over the next year. As you can see, the allocated seating is making up for a lot of the fee reductions, the airport and baggage fee reductions, which is good performance. And we would expect that to continue.

To the extent that Business Plus, there's a pickup in Business Plus, some of the ancillary revenue will move above the line into yields, because we'll be including some of those services, such as the reserved seating, the free bags -- will actually go up into yields, so I think the objective, if we can continue to keep ancillaries growing at the same rate as headline traffic growth, we would be pleased at that performance.

Stephen Furlong.

Stephen Furlong from Davy. Just a couple of quick ones. In terms of the forward bookings, Michael, does that help in giving you greater visibility in terms of where you could see yields going? Presumably, even with those forward bookings, it gives you some idea of Q3, but it's still well too early to know where Q4 is going to be, is just my comment on that.

And for Dave, I was wondering, in terms of the frequencies that you've added since the last quarter, has it been in some of these domestic routes, or where you've seen you've booked up very well, or you've obviously added somewhere. Maybe just give an example where you've just bumped up the frequencies. That would be good.

And you might just talk just quickly --I noticed you announced a base in Copenhagen. You've looked at that before. Maybe just what your views of what's going on in the Scandinavian market, and is there a lot of interest there from airports, please. Thank you.

I'd be nervous on the forward bookings. The forward bookings are very strong, but ultimately, the final yield is determined by the close-in bookings. All I can say, at this point in time, but for the last number of months, and again in September, again in October, we have been very pleasantly surprised by the strength of the close-in bookings and the strength in yield of close-in bookings, even as we are taking out lower fares because the load factors are rising. There seems to be no resistance to people closer in paying the higher fares.

Now, I expect some of that's the fact that actually the competition is trying to push up fares even higher, and so [in effect], they're sending traffic in our direction. There's no doubt we've been helped by the almost continuous cycle of industrial relations problems among other airplanes, strikes in Aer Lingus, TAP, pilots are out for days, Lufthansa, Air France, etc.

But there does seem to be an underlying momentum in the business at the moment that I thought would dip as we went into the winter, and thus far, although it's still a little bit early, it doesn't seem to be dipping. I don't think that gives me great confidence on our visibility into the final yields for Q3 or Q4.

As you can see in our guidance, we still expect the yields to dip, but we continue to be pleasantly surprised. I think the real objective though, through this winter, is to push out a lot of capacity, grab a lot of market share, even if we do so by cutting prices during the winter.

We will emerge into the H1 of 2016 or next year's summer peak with so much forward momentum, in such good shape in a lot of these marketplaces, particularly as the word gets out that Ryanair is changing. It's not cheap enough anymore. It's cheap and very good, and the experience is excellent -- I think that will have a lot of positive momentum built in, itself.

So stronger forward bookings doesn't give us a lot of yield visibility, which is why the guidance has changed so relatively rapidly in a relatively short period of time. At the AGM at the end of September, we were still saying upper end of the existing [pre] range of EUR650m, and why today we're able to go say EUR760m with a reasonable degree of confidence.

But I don't think it's going to go much above that. There will be some analysts out there going, oh, let's stick an EUR800m number on it. I don't think it'll be EUR800m, because I still expect, given the capacity additions we're going to be making this winter, that it will come in still somewhere below EUR800m. I think the guidance we're giving now with reasonable visibility in Q3 should be fairly accurate, but I hope I'll continue to be positively surprised.

David, do you want to touch on the frequency additions in Copenhagen.

Sure. When we launched a lot of our domestic routes this summer, if we take routes in Poland and in Portugal, in fact, we were aware at the time that we didn't have enough frequency, so what we're doing now is adding sufficient frequency to give a decent schedule.

If you take Gdansk and Brussels out to Warsaw, we were running one a day. We'll now run two a day, and ultimately we can see that going through to three or four. Clearly, one a day isn't an adequate schedule, and (technical difficulty) two.

Similarly, with Lisbon, Portugal, it was a one a day. Now it's up to two, and it will inevitably grow into perhaps winter 2015. Stansted-Glasgow, Stansted-Edinburgh, that's from zero up to three, and that's on foot of excellent enthusiasm by both Glasgow Airport and Edinburgh Airport for growth, which they're not seeing the way they'd expected before from other carriers.

So it's partly the growth deal there, and it's excellent utilization for our aircraft. Also supports our business product and feeds into a very substantial route network at Stansted. Informally, it could be a lot of -- more self connect out of there.

And finally, in Italy, as Alitalia and Air One reduce, we're simply adding there, taking the opportunity to take Rome-Fiumicino to Catania or to Palermo. That represents us filling a gap being vacated by Air One and Alitalia.

With respect to Scandinavia, I think our announcement in Copenhagen has created a lot of reaction within the other Scandinavian cities, which recognize that they are overly reliant on -- if you take Norwegian's own results, they describe themselves as make or break and, in their own presentation, describe SAS as need government bailout.

When you consider that 80% of Arlanda either needs government bailout or is make or break, you can understand their nervousness, and we are the only people now that can help them out. So those conversations are ongoing. They're ongoing for winter 2015, which gives us quite an amount of time to pick and choose.

Meanwhile, we have the other parts of the network, if we take the eastern Mediterranean, with its own demands for our deliveries.

Jack, you're next.

Goodbody. Just two questions for me this morning. Firstly, in relation to the percentage growth in average fares during Q2, how much do you attribute that to improvement in underlying trading versus I guess FX movements during the period?

And secondly, just on sector length with the increased focus on domestic flying, how do you see this evolving into H2 2015 and possibly into FY16 in terms of a percentage reduction year on year? Thanks.

Neil?

Well, in relation to the average fare, approximately 1% of that will be related to FX, primarily on sterling. We have a bit of natural hedge in relation to sterling, where we offset our costs against our revenues. You could attribute about 1%, 1.5% to Easter, and the rest is underlying trading within the business.

And sector length?

Sector length for the full year will be broadly flat. It was down 1% in the first half, and we're expecting it to be broadly flat for the full year.

And into next year?

Into next year, we haven't done the budget yet for next year, but based on the schedule that's in place, I wouldn't see a major change on what we've had this year.

Mark Irvine-Fortescue from Jefferies. Just one, please. Has the easier fuel environment been a significant driver of your decision to ground fewer planes this winter? Or would you have been as aggressive if the oil price had stayed where it was?

I think it wouldn't have made any difference. What's driving the aggression or the aggressive expansion this winter has been the successful growth during the summer of the demand, exceptional demand, for the Ryanair services all across Europe, and I think the continuing cutbacks in shortfall capacity by Air Berlin in Germany, Alitalia in Italy, Iberia in Spain, TAP in Portugal.

The expansion has nothing to do with fuel. I suspect if fuel prices were rising, it might be somewhat more difficult, but there would then probably be more capacity shortfall capacity being taken out by other competitors. So really, what, as Neil has explained earlier, what we tried to do with the fuel hedging strategy is just lock away cost certainty for on a 12-month basis, and then run the business commercially, as David has explained, try to take advantage of opportunities where they arise.

And, certainly, there is an enormous opportunity now at the primary airports around Europe, who are very concerned that easyJet, BA and others are not going to grow or will not meet their previously agreed growth objectives, and they need somebody else in there who will.

Yes. We came into this year at 90% hedged, so our decisions were well made before the current dip in oil prices.

Next question, for you there.

It's James Hollins from Nomura. Just on your increased traffic guidance, I was wondering if you could split how much was high capacity and how much is high loads. Should I be thinking about load factor up 4 percentage points, as you were in H1, for the full year? And adjunct to that, do you think you can grow that load factor in full-year 2015.

And the second one is, I know you're always good for a view, so I was wondering, Mike, if you'd give your view on these compensation changes that are coming through or seem to be coming through from this court case we've had recently and how you plan to deal with that, if and when. Thanks.

Yes, so it's still a significant proportion of the traffic growth this winter will come from load factor growth. We expect load factors to remain about 4% higher than they were at this time last year, but that's obviously on the back of very significant capacity growth this winter.

Overall for the year, we expect load factors will rise from 83% in FY14 to about 87% in FY15. We then expect to take up load factors next year into FY16 by maybe another 1 or 2 percentage points. The objective is over the next two years, FY16 and FY17, to get average load factors up from 87% to about 90%, which would mean a lot of full flights almost on a year-round basis.

But to be fair, easyJet has demonstrated that they can do it with smaller aircrafts, so we see no reason that we can't achieve those load factors with bigger aircraft but with much lower fares. And certainly, one of the reasons why our unit cost discipline is so good at the moment is taking up those load factors and has a significant impact on unit cost.

EU 261, the latest kind of decisions are more of the same trend, where you're getting really some crazy court rulings that now makes the airlines responsible for tech. Apparently, now, we're supposed to know when aircraft will go wrong, which of course if we knew when they were going to go wrong, we'd fix them. They wouldn't go wrong.

But I think it's really around the edge. It's another area of competitive advantage for Ryanair. We have better punctuality than every other airline in Europe. We have a higher rate of technical reliability. We have fewer cancellations and fewer delays. So whereas there will undoubtedly be some costs. It would be far less for Ryanair than for any of our other competitors.

Next question, over here?

Damian Brewer. Damian Brewer from RBC. Two questions, please. First of all, can you give us an update on where you are on technology and web-enabled selling in terms of what you were developing?

And then secondly, whether there's anything that that can translate into in -- further efficiencies on the cost base, or just being able to leverage the business more; so not just on the revenue side but on the cost side as well.

And then can you give us an update on where you are on Aer Lingus, obviously competing much harder against it with the frequencies? Where does that leave you in terms of what you do with the stake in the business?

Okay with -- the Ryanair Labs development is moving along at some pace. We are seeing now almost biweekly updates, or updated and improved versions of both the desktop, the website and the mobile app. Over the next 6, 12 months you'll see a number of other developments.

We are looking at making the ryanair.com website not just a -- travel website -- not just a website for low prices, but making it a much more one-stop travel opportunity. At the moment we've spent a lot of time improving the way we retail things, like airport transfers, the car hire. There's a new hotel partner coming online very shortly.

But we are now looking at the different developments over the next 12 months, where you'll see us put up, for example -- the one I'm particularly keen on is comparison pricing. So every time you are on our website, on any of our routes, we'll put up the competitor prices, our low-fare competitor prices because we are spilling a lot of people going off into these price aggregators, or -- the Skyscanners and the eDreams, looking at who's got the lower fares. Well, we -- come to our website straight away; we'll give you the same price comparison stuff set out on the right-hand side, while you are booking on. And as you change a date or a flight, or destination, the price comparison technology will change on the right-hand side.

So we want to pull you onto our website where you know you've got the lowest fares. We confirm it every time by putting up all of the lower fares of our competitor airlines, on that route, on that date, on that flight. And then expanding into other developments, like putting a Trip Advisor feature on the website, customer feedback rate, the flight rate, the destination, rate your hotel, rate the experience.

So that we are -- more and more people, we know they have to come to Ryanair for the fare, for the flight and the fare, but why don't we keep them on our website for all the other -- services that -- heretofore they would have gone to a different website for? So whether it's customer reviews, ratings, the recommendations, or price comparison, keep them on our website.

There's a whole series of innovations that Ryanair Labs -- which we've only just set up and the CTO is only there less than 4 weeks -- are working on. And we'll see those rolled out over the next 12 months.

I think what they will do is there'll be significant efficiencies in terms of we'll have to spend less money on marketing, as we've done. There's been a big jump in marketing spend this year to -- on the -- this is support the Always Getting Better program. But we'll have more people now registered with Ryanair, customizing their travel for them, sending them individually-tailored offers. We'll know -- with big data we'll know more about the profile of each individual customer.

So I think there'll be a very significant saving for us in sales and marketing. There should be some upward spike in ancillary revenues but, other than that, there won't be any other significant efficiencies.

On Aer Lingus -- the UK appeal will be heard before the end of calendar (technical difficulty).

(Operator Instructions).

(Technical difficulty) month, maybe 18 months or 24 months. In the meantime, however, the Aer Lingus thing has -- we've gone beyond it now. We originally wanted Aer Lingus, because it was going to be the vehicle by which we would go into the primary airports and -- outdo easyJet at the primary airports. We are now going to do that as Ryanair.

We've won the price war. Now we are using Ryanair to be the softer -- or to soften the somewhat harsh image of Ryanair going into the primary airports. And we will now do -- what we wanted to do at Aer Lingus we'll now do it as Ryanair.

Having said that, we'll continue to make those appeals; we still think -- we are still stuck in this area where we had the bizarre situation that the European Union has blocked the third offer, on the basis that competition intensified between Ryanair and Aer Lingus over the previous three years. The Brits have then come along and said you have to sell down, because competition lessened over the three years. Well, if the Brits are right, then the Europeans can't block us buying, and if the Europeans are right, then the Brits can't get involved anyway.

But -- so it's a tiresome irritant, but increasingly it's become about -- increasingly irrelevant. We've now -- on the back at the government's decision in Ireland to scrap the travel tax rate, e are expanding rapidly in Ireland; we are taking enormous amounts of market share away from Aer Lingus.

Customers, as we flesh out the schedules on -- from Ireland to the UKPs and Europe this winter, are increasingly switching to Ryanair for their travel needs. And I think Aer Lingus will continue to shrivel and really not go anywhere in a hurry. It just becomes one of that group of peripheral European airlines that don't have any significant future, but will continue to exist as peripheral, subscale carriers in Europe. Alexia.

Hi, it's Alexia Dogani from Goldman Sachs. I have three questions as well. Just firstly, on FY16 and -- unit-cost ex-fuel drivers, clearly this year, given the increase in capacity growth, you are going to have a flat unit-cost ex-fuel position. Should we expect similar situation next year, and what are the moving parts?

And then secondly, on your comments about the load factor, clearly you have delivered earlier-than-expected some of the improvements. Do you think there is scope to go beyond 90%, or would you then say we prefer to take more of the market through price, rather than volume?

And then just finally, in the context of the oil -- lower oil fuel price now, do you see a bit of the economics of the 737 Max change unfavorably, in the sense that the fuel savings slightly reduce? Any comments around that would be helpful. Thanks.

Thanks, Alexia. Okay, on FY16, we are staying away from FY16; we are too early in the cycle to be getting into it. We haven't even done the budget for FY16 yet. However, absent anything that we haven't yet seen, such as a -- some crazy euro-control price increase, we think it's reasonable to expect that ex-fuel unit costs will be reasonably flat as long as the sector length remains reasonably unchanged out into FY16, and any further than that I wouldn't go.

Load factor -- as we build the load factor I think over the next two years, up from 87% to 90%, there's no reason why we would stop at 90%, but I think the gains will be harder at that point in time because you are really now -- at 90% you are full essentially on Thursdays, Fridays, Sundays and Mondays and you are trying to get up from 75% to 76% to 77% in -- Tuesdays and Wednesdays.

But I think we would -- certainly on the base of our experience this year -- err in favor of raising load factors, rather than trying to raise yields. We continue to believe that the -- as we double in size in the next 10 years, the real upside for Ryanair is capitalizing on what is a huge price advantage over every other airline, in the same way that Lidl and Aldi are doing such damage to Tesco's and Sainsbury's, and everybody else here.

We wouldn't want to give that away, and there's a lot of unit-cost advantages to bringing up the load factor. So on balance we won't stop at 90%, but it would be harder to plot those kinds of load-factor gains.

Lower oil prices, yes, it may around the edges have lessened the effect, but I think there's no doubt when fuel is our biggest cost, and we have an aircraft here that has 4% more revenue opportunity, 4% more seats, and an 18% lower per-seat fuel saving, almost regardless of what the fuel price is, it's a huge unit-cost advantage for us in 5 years time that nobody else will have. And I think, again, it just begins -- you build -- establish not just a huge price leadership over every other airline, but a widening unit-cost gap between us and other airlines.

I don't worry too much about the short-term fluctuations in fuel. One of the downsides, for example, of the declining spot price in fuel, is some of the flakier loss-making competitors, like Norwegian and Wales and those guys, who are unhedged because they don't have a balance sheet to be able to hedge, will probably do a little bit better in the short term.

Frankly I don't think it makes any difference. We have the cost discipline. We certainly have enormous momentum in the business model, and I think one of the great things about having these Damascene conversions, is that there's an enormous appetite out there across Europe for the Ryanair Damascene conversion.

So the more I talk about having this enlightening moment last year and changing and realize that everything I've done in all my life was all wrong, and yada, yada, ya. You get enormous acres of free publicity about the Ryanair change, and Ryanair is now being nice to the customers yada, yada, ya.

I -- on BBC this morning and all they want to talk about is some stupid survey at the weekend of [18,000] that says that Ryanair is the second-worst brand in the world, or the UK -- I don't know what it was. Long may we continue to be so, while the traffic grows by 9% and the profits jump 45%.

So in some cases pandering to the whatever it is is the impression out there, works. But that -- having said that, we are committed to improving the [current] customer experience, and we are not there yet. We still have another year or two years of improvements to go.

Yes, sir.

Hi there, Neil from Credit Suisse. Just one question on how you deploy your fleet through the winter. You've obviously made the decision -- I think you are grounding only 50 this winter?

Yes.

It's not that long ago where you operated a full fleet, or thereabouts in the winter, I think maybe 4 years ago. And as you progressively make the business less seasonal, do you think could we ever get back to you operating at nearly full fleet during the winter?

(technical difficulty). But there's inevitably -- the question is that there are different demands in the summer to the winter. And as we grow frequencies to even higher levels, the trick will be to have frequencies in the winter, and into the shoulders at sufficiently high level to be able to drop some of them to cater for the summer growth. That's the conundrum that will take a number of years to address, because you need to have capacity that is exclusively directed towards summer products. And flying on ski routes every Saturday is not a balancing thing.

So as we increase frequencies on primary routes, that creates then the capacity for the summer and balances it, if that makes sense.

Good, who's next?

Can we just take some phone questions now, if you don't mind please; just run them through?

Indeed. Donal O'Neill, Redburn

Hi, it's Donal O'Neill from Redburn. A couple of questions please, guys. First one, just in terms of the growth you are expecting in the second half of the year, you kind of touched a little bit on market share. But what proportion of the growth, the 16% in the second half, will come from market-share gains versus from underlying demand, or price-stimulated demand, given what you are trying to do on fares?

And second question, for the change in guidance for second-half costs from plus 4% to flat on ex-fuel unit cost, is all of that down to load factor, or is there a portion of that that is a change in the underlying cost base, and what might that be?

And lastly, on -- more of a forward-looking question -- the net cash balance is pretty strong in the first half, and obviously going to be positive again in the second half. And if we were to take a flat assumption for FY16 versus FY15, there's going to be even greater net cash the year after. Have you thought about what you might do with the balance sheet for FY16? Thanks.

Okay, thanks Donal. I'll take the first. I'll ask Neil to do the guidance and unit cost, and then I'll do 1 and 3.

On the second-half growth, in essence more -- nearly all of it will come from market-share gains. While some of these are new markets for us, if we go into Glasgow, London, Edinburgh, London here, it's inevitable that we'll take significant market share off easyJet and British Airways, partly because we have much lower fares, but also because we have better times and a much better punctuality.

Same thing, for example, in the market in Portugal; we are going double-daily from Porto to Lisbon. Italy, we're taking -- in Italy we are not just taking market share; Alitalia is ceding the market share to us, as is Air Berlin in Germany.

So while all of this will be new growth for us, most of it will come at the expense of market-share gains. And we'll take significant -- we are already taking significant market share off Aer Lingus on the Dublin to UKP route. But also this winter we are going double-dailies from Dublin, for example, to the main European capitals; the Madrids, Barcelonas, Rome, Milans, where Aer Lingus only do single-dailies

So I think we'll take all of them -- significant market share off them, particularly for business passengers who want to go out and back on the same day.

In terms of net cash balance, yes, they are rising strongly, but remember we are entering into a period of significant CapEx growth here for the next two years or three years, where we are ramping up a lot of aircraft orders. We will probably pay more -- we will probably spend more of our own cash on those aircraft deliveries going forward than we did in the past. But if trading continues as it -- if we continue in line with guidance, the cash generation will continue to be strong. And, as we have previously said in the past, we will revisit it on an annual basis.

I think the special dividend will be paid in February. There's every likelihood, as long as we have some confidence into FY16 that we'll look then at another share buyback program because I think on balance we should be doing, every second year, special dividend, share buyback, special dividend share buyback. Certainly, the Board has already discussed the possibility of another share buyback into calendar 2015, once we've paid out the special dividend.

So I think yes, we will continue to look at rewarding the shareholders. We've returned EUR2.5b to shareholders in the last six years, through special divs and share buybacks. And we would expect to continue that program.

Neil, do you want to comment on the --

Yes, of course. Donal --

(Multiple speakers).

-- on the H2 cost guidance, we've added an extra 2m passengers into the mix; it's gone from 87m passengers to 89m passengers for the full year. And this is the prime reason why we've been able to drop the unit-cost savings down from plus 4% to flat. With fuel included, we are expecting 9% unit-cost reductions on fuel this year. So when fuel is taken into the mix we have a 4% unit-cost reduction on total cost.

That's great, thanks a lot, guys.

The next question on the phone, please.

Yes. Robin Byde, Cantor Fitzgerald.

Good morning, guys, good morning, everybody. Just two from me please. Firstly, just on refinancing, obviously you've very successfully just issued your first bond. So do you have any further refi needs in the next 12 months?

And then just secondly, on CapEx, just a follow on to the earlier question. Can you just update us on your expected gross outflows in FY16 and FY17? Is that still about EUR1b each year? And do you expect to see any significant inflows from disposals? Thanks.

Okay, Robin, just on the CapEx first. We haven't changed our guidance on that. It's still about EUR1b a year for the next two years. The pre-delivery payments on the Max still don't really kick in until about 2017 onwards.

On refinancing, we had a very successful bond issuance earlier on this year; we are at BBB+ rated, the most highly-rated airline in the world. It's something that we will be looking at again. We have a EUR3b EMTN program in place; we've drawn down EUR850m of that, and we can refresh it at any time we want.

We will continue to pay PDPs out of cash, and -- but some of our CapEx next year will be debt financed. And at the moment the unsecured Eurobond market looks attractive.

Perfect, thanks very much.

So it's likely that we'll raise another Eurobond -- it will be another issuance sometime before the end of FY -- say FY16.

Seems likely, yes.

Thanks guys.

Thanks Robin. Next question, please.

Mark Simpson, Goodbody.

Yes, thanks -- morning guys. Just two questions. One, I just want to touch on the business traffic again. You were talking about mid-single-digit in terms of penetration in the winter months.That kind of suggests that you are looking at over 9,000 travelers a day on that business, plus fare. I'm just wondering if you can give us a -- nominal numbers in terms of daily sales.

And then the second side is you've mentioned in a sense some of the response by competitors, where you are being more aggressive. So I wonder if you could tell us a bit more about whether you see airlines retreating, or whether you see them trying to match your prices. But given the widening cost gap, obviously that's going to be a significant cost and unsustainable from those competitors. I'm wondering if you could just give us a bit more picture about how you see them responding to your current program.

Thanks, Mark. The figures you quote on the business traffic, there are days where we are selling those kind of numbers, but I really don't want to get any -- tie -- lock us into any kind of number of forecast on the uptake of Business Plus. It's a product I think that will be a slow build, particularly in primary airports, where you know at the moment many of the primary airports haven't even flown with Ryanair before.

I think what gives us confidence is that we have 25% of passengers travelling with us on business. The question is how many of those will convert? And I think 10% over a two or three-year period is a reasonably ambitious objective; it's too early to say yet.

I think what would be instructive is how it builds this winter, particularly on those routes where we do have business schedules, like the double-dailies out of Dublin to Europe, the four- and five-times dailies out of Dublin to the UKPs, and the Scotland to London routes.

Response by competitors, it's kind of hard for us at the moment to notice much of a response by competitors. In general terms we tend not to see much of a pricing response, because most of them are pricing so much higher than we are. And they are under cost pressure themselves, either from their airport -- the airports they are at, or their unions.

I think actually most of what we notice at the moment is the extent to which there are significant capacity reductions coming through in Germany, in Italy, in Spain, in Portugal. And I think really we see more and more people taking out short-haul capacity, as being the response. Whether -- but it's a response more to their own kind of economic difficulties than a necessary response to our expansion.

Certain -- but we see very little aggressive pricing response from any of the airlines, whether it's Aer Lingus in Ireland, easyJet in the UK, TAP in Portugal, Alitalia in Italy because, frankly, none of them can compete with us on price anyway.

David, do you want to add anything to that in terms of competitor response?

No, that's a reasonable summary.

Okay, thanks, Mark.

Savi Syth, Raymond James.

Hi guys, just two very quick questions. One is would you be doing less subleasing over the summer, now that you have your fleet growing back, or expect a similar amount?

And then the second question is just on the primary airport costs, given your new plans. Is there additional pressure there, from a cost perspective?

Good morning, Savi, how are you? We leased in this summer seven aircraft, just to -- keep -- so that we have that kind of capacity during the summer, because we are taking delivery of 15 aircraft in the remainder of the fiscal -- in the winter part of the fiscal year. We want to those routes -- some of those routes up and running.

Having plotted out the summer 2016 schedule already, and we've again released it three months earlier than we did last year so that we can maintain this positive momentum in forward bookings. Already it looks like we need to lease in another six or seven aircraft next summer. That's because we only take delivery of 20 aircraft from Boeing between now and the end of May or the end of June next year.

The following winter, winter 2015/2016, we take delivery of almost 40 aircraft. So for summer 2016 we won't need any lease-in aircraft, so I think what you'll see is we lease in seven in summer of 2014; we're going to need another six or seven in summer 2015, and then nothing in summer 2016, because we have enough aircraft delivery to be able to handle it all ourselves.

I think on primary airports, we have a mix there. There's undoubtedly -- the primary airports tend to be more expensive than the average of our secondary airports. But as you can see in the cost analysis, and the unit-cost discipline, the key feature for us at the primary airports is, one, that we can secure 25-minute turnarounds and, therefore, maintain our efficiency.

There is no doubt that the cost or the opportunities at the primary airports are getting better, as more and more primary airports compete with us to get our scarce capacity into summer 2015 and summer 2016. So we are getting real and material discounts at the primary airports. And to that you have to balance the fact that we have a 10-year growth agreement at London Stansted, where we have very low cost base for growth. You have a growth deal at Dublin Airport allied to the Irish government scrapping the travel tax, which is -- has been good for our costs out of Dublin.

So we are able to mix and match some of the primary airport development with also declining costs at some of our existing primary airports, as well as in some cases enjoying the (inaudible) into very low-cost secondary airports.

So if you look at the numbers for the quarter, yes, the costs -- airport handling costs have risen at a slightly higher rate than passenger traffic volumes, but nothing that we can't handle within an overall flat unit cost for the full year.

God it. Very helpful, thank you.

Thanks Savi. Next question please.

Okay. Anand Date, Deutsche Bank.

Yes, hi, morning everyone. My -- I was just wondering if I could have your latest thoughts on maybe a Ryanair holidays, or what you latest thinking is on maybe a frequent-flyer program. That seems the one thing that is maybe missing that you've been reluctant to do in the past.

And also, just out of curiosity, could you maybe go through some of the basic dynamics of the difference between domestic routes and international routes? So just what you see versus each other in terms of loads, business versus VFR yield and whether, given you're becoming fairly dominant on some markets for domestic, whether you'll return to potentially offering tie-ups with the legacy carriers there?

Yes, thanks, Anand. The first two of those are very much part of the Ryanair Labs, the digital development program. I think we already carry a huge number of holidaymakers across Europe. I think it's inevitable that we will, but it's over a medium-term rollout -- holiday products, where you'll be able to get all-inclusive holiday packages on the Ryanair website. But it's not high up on the agenda. It won't be in the next 12 months; it might be something over the next two years or three years.

Frequent-flyer program, we won't have a frequent-flyer program in the sense of the traditional frequent-flyer program, with plastic cards and accounts, and points and all the rest of it. But for the passengers who register with us on the My Ryanair registration will have -- big data will enable us to have a much more individualized, or tailored frequent-flyer program.

So what I see us doing, maybe as early as the end of calendar 2015, is those passengers -- we'll be writing to passengers, thanking them for flying with us in 2015. Those who flew maybe four times that last year will get an incentive to fly more than six times in 2016; those who flew 20 times with us in 2014 will get a thank-you of a 50% off their -- off a flight in January and February 2016.

So we'll have individual, tailored, I think, offers recognizing the volumes for each individual passenger, and trying to incentivize each individual passenger, rather than a big, cumbersome FFP program that takes a lot of administration and everything else.

We are able to do the analysis -- the data mining we are doing now will enable us to have an individually-designed -- encourage more flying programs with each individual passenger.

David, do you want to comment on the difference between domestic and international routes?

Sure. The key -- one of the key features of the domestic route is that it tends to be shorter and demands higher frequencies, which is useful in delivering on volume to airports while, at the same time, allowing you have a highly-efficient schedule by attaching a short domestic, let's say first thing in the morning, to a longer international flight, solving the airports' passenger-volume problem and adding new routes.

The negatives with domestics is they tend to be later-booking, so you don't see -- you don't see the future as early. And they tend to attract lesser ancillaries. So on balance they are a very positive development in terms of fleet utilization, traffic volumes and so on, and sector length.

Okay, thank you. Michael, is it possible -- could I just ask a follow-up?

Yes.

Just in terms of the big data, is there any other way you can monetize it as well? Because I'm just thinking, if I look at Smiles, if I look at Multiplus, you've probably got one of the few data sources that is growing, and probably getting a deeper amount of data per passenger. Is there anything else you can do with the data as well, in terms of third parties or anything like that?

There is. I think there's lots of things we can do, but I think we need to be careful, like we're not -- in the old days we'd simply run around and sold the data. I think what we want to do is to bring more and more people onto the ryanair.com website; more and more people to register. And I think there's a number of different things we are looking at under the Ryanair Labs banner, where we can exploit the data and use our monetized -- probably by attracting other partners to come and work with the ryanair.com website, to provide other value to our passengers.

We'll be able to give them very rich content; very detailed profiles of an enormous passenger base. But that's really not for today. I'm conscious of the fact that we want to give the whole Ryanair Labs development, I think it's something we'll be doing -- detailing in much more detail when we get to the full-year results road show next May.

Okay, cool. Thanks a lot, guys.

Thanks, Anand.

Have we any more questions in the room? No we don't. Nothing more on the phone lines? No (multiple speakers).

(Multiple speakers).

Sorry. Can I think everybody then for joining in today? As I say, we have extensive road shows; there's eight teams on the road, covering all of the markets. If you haven't or you want a meeting with us during the week, please let us know, either through Davy's or Citibank, or through our own Investor Relations team, and we'll pencil you in.

Other than that, I look forward to meeting everybody, hopefully on a one-to-one basis during the week and thank you very much for dialing in and coming this morning.

As I said, the business is progressing very well. Certainly the more aggressive forward bookings and pricing is certainly finding favor among the customer base. The changes we've made in the customer experience and the improvements, which I think is the year one of a three-year program is certainly being welcome by our passengers.

I think we have a lot done, but there's still much more to be done over the next two years or three years. And can I please again caution the analysts, don't be inventing numbers here; the figure won't be north of EUR800m for the current year. We've done very well; we expect profits to grow by about 45%, but that will be enough for this year, I hope.

And we'll begin to focus then on next year and how we can roll out further improvements and, hopefully, further profitability and share-price gains. Thanks very much, everybody.