Hello, welcome to the Ryanair third quarter FY 2019 results call. Throughout this, all participants will be in listen- only mode, after there will be a question-and-answer session. Just to remind you, this is being recorded. Today, I am pleased to present Michael O'Leary, Chief Executive, and Neil Sorahan, CFO. Please begin.
Okay. Good morning, ladies and gentlemen. Welcome to the Ryanair Q3 results conference call. I am here with the management team in Dublin. Neil is joining us from London, where he was doing the PR this morning. As you will see, all of the results were released this morning on the website at seven o'clock. We have a videoed MD&A on that, which should address much of the questions that might arise.
Couple of quick themes. While the EUR 20 million loss in Q3 was disappointing, we take considerable comfort that all of it was due to weaker-than-expected airfares. There is not a cost issue here, lower prices is good for our current and for our future traffic growth, bad for our competition. Ancillary revenues have performed strongly in the quarter, up 26%, it has helped us to offset higher fuel, higher staff costs, and higher EU261 costs.
Ryanair has the lowest unit cost of any EU airline, this gap is widening. We take delivery of the first five 737 MAX game changer aircraft from April. These aircraft have 4% more seats, are 16% more fuel efficient, they will drive unit cost efficiencies over the next five years. Unlike other airlines, we will not be talking about adding lower cost aircraft and then seeing our aircraft and ownership costs rise faster than our traffic. With these aircraft, you will see our aircraft and ownership costs rise at a slower rate than our traffic growth over the coming years. Consolidation continues and weaker European airlines fail, some of them are currently up for sale at the moment, the airports around Europe are increasingly keen to attract Ryanair's dependable high load factor traffic growth.
David and the team are going through an extensive series of negotiations with airports and potential new bases, both as we conclude the winter 2019 schedule, we are also beginning to focus on the summer 2020. Balance sheet remains strong with EUR 2.2 billion of gross cash. We emphasize again, we own 93% of our aircraft fleet of more than 450 aircraft. 60% of that fleet is unencumbered. In December, Lauda acquired the remaining 25% of Laudamotion we did not already own from Niki Lauda and his family. Lauda is heading for an exceptional year one start-up loss. That loss has been reduced from an estimated EUR 150 million to approximately EUR 140 million. Most of this loss was accounted for by the very late release of Lauda's summer 2018 schedules due to the takeover of the airline from Lufthansa.
Lufthansa showed up late with fewer aircraft than expected at very expensive lease rates. Ryanair was able to supplement that fleet by giving Lauda 10 of our 737 aircraft last summer, it meant that the schedules were very late on release, therefore we priced most of that schedule through last summer at very low prices just to fill. We are in a much better situation now with Lauda going into the second or summer of 2019. The airline will operate 24 aircraft, up from 19 last year. Of that 24 aircraft, only five will be 737s. Lauda will operate 19 Airbuses.
We expect the losses will narrow very substantially in the year two of operation, down from EUR 140 million to a figure of anywhere between EUR 50 million to breakeven, which is a wide range, we really don't know what the final outturn on yields, particularly the peak summer years, will be in that German to Palma market, we're reasonably optimistic. Underneath that, Lauda is growing its presence in the Vienna market very strongly. I think one of the noticeable developments in the last six months has been LEVEL has scaled back its growth plan for Vienna almost entirely and will seem to have slowed down their announced growth plans quite significantly. By year three, which is summer 2020, Lauda will be operating a summer fleet of 30 aircraft.
We have letters of intent already signed, we'll grow to be carrying 7.5 million customers and will be trading profitably. The big trend at the moment remains higher oil prices and lower fares due to overcapacity in market. The past four months has seen a wave of EU airline failures. Primera in the U.K., for example, Germania are currently seeking a buyer in Germany. That's about a 30- aircraft charter airline. We understand the rumors they weren't able to meet their January payrolls last week. WOW, Flybe in the U.K. are also for sale. The big one, obviously, is Norwegian, who has announced a significant multiple base closures through this summer and into the winter.
I think the key development of those base closures is they're all bases where they're competing with Ryanair: Las Palmas, Palma, Tenerife, Edinburgh, Belfast, they're going to cut the Dublin base from six to one aircraft. They are trying to refinance themselves, we would expect to continue to see, not just in Norwegian, but among other loss-making low fares airlines, further contraction, further consolidation in the winter of 2019. Brexit remains a major concern on our horizon. The risk of a no deal remains worryingly high. We have obtained a U.K. AOC to protect our three U.K. domestic routes, that's a tiny part of our overall operation.
We will and have plans in place to proceed to place restrictions on the voting rights and the share sales of non-EU shareholders, which for a period of time after a hard Brexit, will also include U.K. nationals and U.K. citizens. We do that to ensure that Ryanair will remain at all times an EU-owned and EU-controlled airline. In terms of forward guidance, we are on track. Our profit guidance for the remainder of FY 2019 is to be in a range of between EUR 1.0 billion to EUR 1.1 billion. That is excluding the Laudamotion losses of about EUR 140 million in the first year. We have reasonable visibility on Q4 bookings now, but we cannot rule out further cuts to airfares and/or cycling slower full-year guidance if there are some unexpected Brexit and/or security developments over the next eight weeks.
I have been a bit taken aback by some of the commentary that comes from competitor airlines in recent weeks on their announcements of their December quarter results. It seemed to us they were all covering over the fact that their airfares had been disappointing. None of them seemed to have met their original ambitions for stronger airfares during the winter. They were all pretty poor in terms of cost containment as well, and it seemed to us they were trying to distract from those poor results by hoping and praying that the summer 2019 yield outturn fares would be stronger. We see no evidence of that at the moment. As of this morning, we have now 18% of our seats sold for the period from April through to September. The average fare is 1% down on last summer, which is nothing catastrophic.
It is a stronger performance than the pricing this winter or indeed last summer. I think I would urge everyone to be cautious on pricing this summer. If Norwegian gets refinanced, there will still be idiotic loss-making capacity out there in the marketplace. Germania may not survive, but there are other airlines out there losing money. There is excess capacity there this summer, and unless there is a more meaningful takeout of short-haul capacity, we expect that the traffic growth into summer 2019 will be strong, but we expect it will be at the cost of airfares, which I think will be flat to slightly down in summer 2019. We see no evidence of the kind of promised or mythical fare increases that were being promised on the Wizz Air and EasyJet conference calls in recent weeks. We have set out this morning, as well, some guidance for our shareholders.
We are moving towards a group structure, which is planned along similar lines to that IAG. A very small senior management team will oversee the development of four separate airline subsidiaries. Ryanair DAC, the Irish-based airline, Laudamotion, Ryanair Sun in Poland, and Ryanair U.K. Each will have their own CEOs and management teams, but reporting to me as the Group CEO. We think this group structure will enable us to deliver cost and operating efficiencies. Each of these airlines will compete with each other for both capital allocations, aircraft deliveries, and will also compete with each other to lower our costs. We think the group structure will also give us the opportunity to look at other small-scale M&A opportunities, and I emphasize small scale, something like the successful development of Lauda over the last six months.
In terms of board succession, there was some uncertainty on that, or some concern from some shareholders. We have announced this morning, I've agreed to enter a new five-year contract as the Group CEO. I will replace myself as the CEO of Ryanair DAC, the Irish airline, between now and the end of the year. The board has also set out its succession plans this morning. Thankfully, David Bonderman and Kyran McLaughlin have agreed to lead the board for at least one more year until the summer of 2020. In the meantime, Stan McCarthy has agreed, the former Kerry Group CEO who joined our board in 2017.
Stan has kindly agreed to take on the position of Deputy Chairman from April 2019, and he will transition to Chairman of the Board of Ryanair Holdings in the summer of 2020 to succeed David Bonderman and Kyran McLaughlin, whom have indicated they don't wish their names to go forward for reconsideration at the September 2020 AGM. David and Kyran will serve at least something between another 12 to 14 months, but then will not go forward to the September 2020 AGM. With that, Neil, I'm going to hand you over to you to give us a quick run through the M&A and some key themes on the cost side.
Thanks, Michael. Well, just to echo Michael's comments earlier this morning. Guests grew strongly in the quarter to 33 million customers. That was driven by a 6% reduction in average fare. However, ancillaries performed very strongly, which meant that total revenue per guest was up 1% in the quarter. Fuel, as expected, increased by 32% to just over EUR 570 million. However, other unit costs, ex-fuel, were up 6% in line with expectations. And actually below the growth in passenger numbers.
As a result, profit after tax came in at EUR 20 million of a loss in the quarter. Balance sheet very strong. BBB+ rated balance sheet. EUR 2.2 billion gross cash. And as Michael said, 93% of the fleet owned, only 7% of the fleet leased, and the vast majority unencumbered. So, a very strong balance sheet. Cost, as I said, very much under control.
Thanks, Neil. We'll open up for questions and answers. And as before, we're going to limit everyone to just two questions, please, so we get through this with some reasonable speed.
Thank you. Ladies and gentlemen, if you haven't already, please could you push zero and then one on your phone keypad now to enter the queue. After I announce you, please ask your question. If you find that question has been answered before, it's your turn to speak, please press zero and then two to cancel. As told, please restrict yourself to just two questions. The first is over the line of Daniel Roeska at Bernstein Research. Please go ahead. Your line is now open.
Two questions, if I may. One on the group structure. Could you elaborate a little bit more on the elements of the IAG model you'd be planning to adopt? What are the individual airline CEOs going to be able to decide or be responsible for? Is that more a labor arbitrage game? Is it a cost-plus? Is it a full P&L? Where do the commercial functions and Ryanair Labs fit in that environment? Secondly, on the topic of M&A, every other airline's unit cost in Europe is more expensive than Ryanair's. Until now, it seems organic growth has always been a little bit better than inorganic growth. What factors have changed in your assessment of the strategic growth opportunities for Ryanair to make M&A more compelling at this point in time? Thanks.
Thanks, Daniel. Okay. I'm not going to get into detail of the group structure on this call. I think we'll be able to feed that out more appropriately to shareholders when we do the full- year results roadshow in July. Suffice to say that there will be a small group staff headed by myself, the chief executive. There'll be a group finance and a group legal. Underneath that, the individual airline CEOs will have responsibility for running each of the individual airlines. They will be responsible for their own cost management. Out of that, cost management will come aircraft allocations and capital allocations. There will be some central functions, but they will largely for the most be handled by Ryanair, most notably Ryanair Labs.
That we will run the sales function as we do currently of Laudamotion, Ryanair Sun and others through the Ryanair or the ryanair.com website, which is now the world's most visited airline website. In terms of the M&A and the organic growth, the focus will continue to be on where we can replicate effectively our kind of unit cost efficiency. For that, I would give you the example of what we're doing in Laudamotion. It was an airline that was being bought out of, or it was a forced divestment out of the Lufthansa purchase for Air Berlin. It had a reasonably high cost base, having come out of Air Berlin. Having said that, we have, in the space of less than 12 months now, replicated a very low-cost operating aircraft fleet. 30 A320s with an average monthly lease rate of under EUR 200,000 per month.
It is using Ryanair's low-cost technology. The sales are done across the Ryanair website. The efficiencies, they're moving towards 25, 30-minute turnarounds. You will see Laudamotion, certainly by next year, begin to mirror Ryanair-type margins. That's why I think I say we would look at small-scale M&A where there's an opportunity to take over what are not necessarily shell companies, but very small AOCs, one or two small AOCs, where we can reverse some of our organic growth into those AOCs. That would make sense from our point of view in places like Ryanair in Poland. May I put that in some perspective? In Poland, for example, Ryanair has its Sun. Had a very successful first year in the Polish charter market, it is now taking over Ryanair's scheduled flying in the Polish market.
It's doing that because there are tax advantages for our Polish pilots and Polish cabin crew moving to the same type of contract employment that LOT, the national airline in Poland, has promoted. Therefore, we're able to replicate. We can get a lower operating cost in the Polish market by replicating that type of structure that LOT and Enter Air have benefited from. We will see opportunities across the group opportunistically to lower costs in certain markets where there are local considerations that make it sensible for us to do so. We'll give you more details, though, on that group structure and how we see it working on the July full-year results roadshow. Next question.
Our next question is over to the line of Jarrod Castle at UBS. Please go ahead. Your line is open.
Jarrod, hi.
On the fuel hedging, you had hedged 52% at $718 at the half-year results. Now we're at 90% at $709. I'm trying to understand why some of the fuel benefit doesn't seem to be coming through in the hedge ratio, where you were hedging. Secondly, just looking at the balance sheet. You should continue to draw some cash. Should we be expecting some further capital returns in the next 12 months? Thanks.
Okay. Thank you. Yeah, we took it on the fuel on the half year, which were in September. Spot oil at the time was $84 a barrel. We were trying to get forward rates under $70 a barrel. At the time, we tried to close it out. By the time we finished closing out the hedge for them, we had 90% of FY 2020 hedged at $71 a barrel. We're very delighted with that success, as oil, the spot oil, was $84 a barrel. In the space of about four weeks, it went from $84 a barrel down to under $60 a barrel. What looked like a very clever hedging strategy quickly became a not-so-clever hedging strategy. I think our general view is that fuel is likely to trend slightly back upwards.
We're a bit out of the market at the moment compared to spot. We are looking now at hedging out into FY 2021. Again, based on current spot rates, we're trying to get forward rates out at around or under $600 per ton. Again, we don't use fuel hedging here to try to beat the market. We try to use fuel hedging to give us cost certainty for the next 12 months. On the balance sheet, balance sheet remains strong. I think our position has been consistently that, yes, we would like to do another capital return to shareholders. I think it will be done in the context of once we have some certainty on the outcome of Brexit. We very much hope we will have certainty on the outcome of Brexit.
In the event of a hard Brexit, obviously, we would have a slight and we would for a period of time, depending on how many of the U.K. shareholders don't re-flag into Europe, we may have a small surplus or a majority of non-EU shareholders. I think we would be timing another share buyback at the same time as we'd be imposing restrictions on all non-EU shareholders, voting and share sale restrictions. The timing of a share buyback would facilitate some of those shareholders being able to dispose of their non-EU held shares, they could participate in the buyback. I think the timing of a further share buyback would be very much driven by some developments on Brexit over the next couple of months.
Thank you.
Thanks, Jarrod. Next question.
Our next question is over the line of Savanthi Syth at Raymond James. Please go ahead. Your line is now open.
Savi, hey.
Mike, just two questions. Michael, you indicated if the opportunity presented itself, you would consider accelerating the MAX growth. Would that be incremental growth, or would that be kind of accelerating retirements in return? Neil.
Sorry. Just go back on that. I didn't get that question. We'd consider opportunities to what?
To accelerate the MAX growth.
Accelerate the MAX growth.
If the opportunity arose, I know you mentioned you would consider getting more MAX aircraft. I was just wondering if that would be accelerating the retirements or if it would be incremental growth. The second question, on the cost. It's helpful to indicate flat to down costs looking forward. Wondering if you could talk about, Neil, the trends of some of the bigger cost items as you exit this year and head into next year.
We're always willing to accelerate growth if there's a cost opportunity to do so. That would require some collapse in aircraft values or some crisis in the aircraft. I suspect both Airbus and Boeing are presently facing a lot of canceled orders or aircraft redeliveries. I would imagine at the moment, in the next 12 or 24 months, our fleet growth, any unplanned fleet growth, is likely to take place on the Airbus side through Laudamotion. We have been struck by the ready availability of reasonably low-cost A320s, good 8 to 10-year-old secondhand A320s. Coming back on the market, it seems to me where leasing companies are stuffing these airlines with new NEOs and taking back delivery of very clean, reasonably young CEOs.
We have seen when we first started trying to procure a fleet for Laudamotion 12 months ago, I think we've seen the lease rates on those secondhand A320s go from over EUR 200,000 a month back down to up to 10% below. We're looking at lease rentals now between EUR 170,000 and EUR 190,000 per month. I certainly believe that would encourage us to accelerate the fleet growth in Laudamotion from 19 aircraft last year, 24 aircraft in summer of 2019, and up to 30 aircraft in summer of 2020. If we see some further opportunities on the secondhand Airbus side, I think we would jump on those. I don't foresee much on the MAX side at the moment. It will be a new aircraft to us. We are taking five this year. Next winter, we take 50 of those aircraft.
I think half of those 50 will be reallocated to Ryanair Sun and go on the Polish register. Probably half will be on the Irish register. I wouldn't see us accelerating that growth much beyond that at the moment. I think it'll be a big jump for us to take 50 MAX next winter and pulling those aircraft into a lot of bases where they will not yet be familiar with dealing with the MAX aircraft. If there's any accelerated growth, I think in the next 12 or 18 months, it would be through Laudamotion or through some small-scale M&A.
Got it.
Neil, do you want to address the cost point?
Yeah. I suppose, Savi, just to be clear, we're doing our budgets at this time of year, so we haven't got the full year numbers yet, and I'll give more color on that in May. As we move into next year, we start to see the costs, for example, on the staff line, stabilize with the 20% pay increases factored in. We start to see the benefits coming through on the MAX, although we only really have 5 MAXs operating this summer. While 10% of the fleet will be MAXes by the end of FY 2020, it's really summer 2020 where we see the huge benefits. Airport and handling continue to see good opportunities there, and we've nearly 20 leases going back next year as well, which will drop down the aircraft rentals line.
We'll see it stabilize, and then beyond that, start to drop on a per- passenger basis.
All right.
I think we're reasonably confident now that unit cost next year will be flat, slightly down. The only one that I think will still be out of control will be the EU261 compensation claims. We're expecting another torrid second calendar quarter. We think the understaffing in U.K., German, repeated strikes in French ATC will reappear in April, May, and June again of this year because none of those problems have been addressed. With the exception of EU261 costs, we are reasonably optimistic that unit costs will be flat to slightly down for the next 12 months.
Helpful. Thank you.
Next question, please. Next question, please.
Go to the line of Duane Pfennigwerth at Evercore. Please go ahead. Your line is now open.
Duane, hey.
Most of my questions have been asked. Michael, how do you see your job changing in the new structure? What are the things you'll be excited to do that you could not do previously?
I don't think there'll be that much change in the new structure. For the next 12 months, I'll still be chief executive of the airline. I'm spending a reasonable proportion of my time at the moment working with Andreas, who's the chief executive of Laudamotion, with Michal, the chief executive of Ryanair Sun, overseeing the development of those airlines and allocating aircraft and capital to those companies. I think it will be an evolution over the next year or two. The key challenge is to get the right Chief Executive for Ryanair, the airline, in place by the end of this year, and then hold his or her hand over the next 12 months so that we don't lose the focus on cost, and we continue to run. I would see and continue to encourage each of the airlines to compete actively for capital and aircraft.
I think the big opportunity for us in the next year or two, certainly as a group of airlines, is to encourage much more competition between Ryanair, Laudamotion, Ryanair Sun to compete for aircraft because they can use those aircraft more profitably or at lower cost than other airlines in the group.
Thanks for the thoughts.
Thank you. Next question, please.
We now go to Stephen Furlong. Davy, please go ahead. Your line is now open.
Stephen, hi.
Hello. Yeah, hi. Hi, Michael . Just two quick ones. Can we just go back to the leases on the Lauda aircraft? I'm just interested in what's the tenor or the time of those leases, is the ultimate intention to refinance those leases with owned aircraft down the road from either Boeing or Airbus? Just a second, quick one. I was just wondering, usually it's around this time, last couple of years, there's been some kind of branding, marketing push, like Always Getting Better. Is that planned for this year? Thanks.
Yeah. Leases at the moment, the tenor of those leases are five years. We're redelivering at the moment the nine Lufthansa, very expensive Lufthansa aircraft. They will be delivered back to Lufthansa starting in January, the last will be gone in June. We have the first. At the moment, Laudamotion will have this summer or for summer 2019, they will have a fleet of 19 Airbus aircraft on five-year leases. We've already signed up otherwise for another 11 aircraft, Airbus aircraft for next year, for summer 2020, with five-year leases. They will run through until 2023, 2024. We are accelerating our, what we'll call, dialogue with Airbus. The kind of initial discussion with Airbus last year was that we're about to buy Laudamotion. We need aircraft for delivery in 2019, 2020; we can grow.
They said, "Look, we don't have aircraft in that period." Now that these There are significant opportunities for us in the lease market. I would have no difficulty at the moment at these kind of prices continuing to use operating leases into 2021, 2020 or 2022. We certainly see the Laudamotion fleet growing from 30 aircraft in summer 2020 to 40 in 2021 to 50 in 2022. We will be talking, I think at the end of those leases, though, which is starting around 2023, we would like to see new aircraft, preferably from Airbus or from Boeing, coming through and replacing those operating leases. If there is real value, typically or historically, anytime you get operating leases at under EUR 200,000 a month, that's a pretty good deal.
With the help of Ryanair backing, [audio distortion] will not be paying maintenance reserves or security deposits, although it is providing for maintenance on an hourly basis. I think we'd be reasonably non-doctrinaire about it. If operating leases are cheaper, we do operating leases. If we can secure a fleet of new aircraft directly from Airbus, then we'd be happy to do so. I think a lot will depend. I'd say Airbus and Boeing, I think, are beginning to feel the pressure with the likes of Norwegian canceling orders and deferring deliveries. See even EasyJet and Wizz Air deferring some deliveries recently. Hopefully there'll be some opportunities there. Branding and marketing opportunities. Kenny is straining at the leash almost on a monthly basis, wanting to announce new branding and marketing strategies. I think what we wanted to do, though, was not focus on those yet.
We had obviously a second profit warning in January. Pricing is weak. We wanted to get the kind of board succession management plan group structure out of the way now. I think you will see a rebranding, not a rebranding, but you will see some branding and marketing initiatives that we're concluding at the moment, announced probably sometime in late February, early March, for both Ryanair and for Ryanair Sun and also in Laudamotion. Sometime pre the kickoff of the summer schedule.
That's great, Michael. Thank you.
Thanks, Stephen. Next question, please. Come on, next question.
We now go to James Holland of . Please go ahead. Your line is open.
James, hi.
Hi. Can you hear me?
Yes, we can.
First on summer capacity, obviously you're dismissing out of hand what EasyJet and Wizz Air is saying. Just putting some numbers on, EasyJet talked about their competitor route capacity being up about 2% in the summer.
You've obviously done that work yourselves on how you would initially see your own competitive capacity. I was wondering if you could put a number on it. Secondly, just on the German market, I think it's obviously been a very tough period with you, EasyJet, Lufthansa themselves sort of growing into where Air Berlin was. Maybe just give us an update on how you see the German market on capacity trading, et cetera, into the next few months. I think you specifically said Lauda was looking quite good on that market. Maybe just the wider market in general. Thank you.
Without wishing to speak ill of my competitors, we thought most of the commentary that surrounded their summer 2019 stuff was just blind optimism, coming from airlines who in recent months, have promised us, "Don't worry about higher oil prices, because higher airfares will cover higher oil prices." We didn't see there was any basis for that. It's all right for somebody to go out there and say, well, there's only 2% of capacity growth in that marketplace this summer. The reality is none of the airlines have sufficient visibility on the two summer quarters this year. We generally have stronger advanced bookings than anybody else. As of today, we've only 18% of those seats sold.
It is far too early to be guiding optimistically for this summer, particularly if Norwegian doesn't go bust between now and as they survived into the summer, and there will still be capacity out there. We could take it through this summer, and Norwegian are closing bases where they compete with us, and it's all hunky-dory. Fundamentally, I think there's still overcapacity out there in the marketplace. There are market segments. We see Spain and Portugal a little bit weaker this year because a lot of that traffic is going back to Turkey and Egypt. Germany is a torrid market at the moment and will continue to be a torrid market. I think even EasyJet, who were also confirming that the Berlin base will lose money for a second year in operation. No sign of stronger yields out of that marketplace.
At this time of the year, I think it's wrong to be promising good news or optimism, particularly when it comes from airlines who've been repeatedly making optimistic noises on fares only to subsequently disappoint. I think the best guidance I can give you at the moment is that we have sold 18% of our summer seats, and the average fare is 1% below where it was this time last year. It's not 7% below, it's not 5% below. It is marginal at best, but I think everybody should be much more cautious into this summer than either EasyJet or Wizz were on their calls. It seemed to me most of them were trying to duck and dive on costs. They didn't want to talk about costs. It was all, "Don't worry about the costs.
The fares will rise this summer." It was more of the mañana you get out of them at this time of the year. In our case, we're generally much more cautious because we're good on costs, and we're much more cautious on forward booking. David, do you want to give just a taste of what you're seeing in the German market?
You pretty much covered it there, Michael. The difference this year is that I do think that by the end of the year, there could be something of a shakeout. If Germania goes, that could change things somewhat in the market. I think when you're talking about a 2% change to competing route capacity, you're really looking at the wrong thing and struggling in the wrong area because it's choice in Germany that's happening now. People have choices all over the place, not on specific routes, but to many different destinations. As Michael said, Turkey and Greece has opened up along with elements of North Africa. We've still more than 70 million seats to sell for this summer. We're in no position to give any sort of particular guidance there.
I can say the Canaries in particular from Germany would be a weakish market, competing as it does with some of the other longer or medium-haul routes into Turkey and the like. On a slightly positive side, but not in any great volumes, we're very content with the bookings on our new capacity to Jordan, into Israel, but these are and Ukraine, but very peripheral, I have to say.
Okay. Thanks, David. Thanks, James. Next question, please.
Is over to Damian at RBC. Please go ahead. Your line is now open.
Hello. I hope you can hear me.
Yes.
Great. Two questions, please. First of all, coming back and following up on one of the things you mentioned about capital allocation. Could you talk a little bit more about the profit decline for Q3 and whether that was across the piece or were there certain locations or bases that dragged that down? I'm guessing, given the base cuts, that's already been the case, and given you talked about MAX allocation of half of that to the Polish register. Can you elaborate a little bit more on what that does mean for the MAXes that get allocated on the Irish registration on the assumption that I assume the capital follows the highest returns? Secondly, you talked about ticket fares, but can you also elaborate a little bit more on ancillaries?
Was it just the priority boarding and bag policy change in Q3 that improved, and how much of that rolls forward into this summer? Thank you.
Thanks. If I characterize the profit decline in Q3, it was spread. There weren't significant geographic segments. It was spread across the piece. As you know, we were predicting a 2% decline in average fares this winter, and that was against a prior year comp that we thought was reasonably benign. If you remember the prior year, we had the rostering screw-ups and flight cancellations. If anything, we thought it would be a reasonably benign prior year comparator. We were genuinely surprised by the fact that airfares across the piece, particularly into the Christmas, close bookings in on Christmas, were weaker than we had expected in the past. There's been some sort of misanalysis that somehow this is something to do with the unions or lack of passenger confidence in flights. We have no evidence of that at all. There was no disruptions over Christmas.
Even when there's a very small number of disruptions last summer. We didn't think it had any impact on the fares because we managed our way through it very well. I believe there is too much capacity out there this winter, and that has been reflected in significant pricing downwards. That was reflected in both the pricing commentary on the calls by Norwegian, Wizz Air, EasyJet, everybody else, without seeing the same story on short-haul Europe. The only difference between us and them is they're all promising treats tomorrow or this summer, and I don't see really any fundamental basis for that unless there was a big shakeout of a Norwegian or a Germania or something else. Next winter, there's certainly going to be a big shakeout of Norwegian bases closing, capacity being taken out of the place. They'll lose another EUR 200 million this summer.
I think they'll have to come back to doing more refinancing. I've long held the view that Norwegian is a turkey that isn't going to survive. You may see that impact next winter and into the summer of 2020. On ancillaries, generally speaking, the ancillary performance across most segments has been the increased penetration. The large movers of the dial in Q3 was the increasing propensity of customers choosing to take up the priority boarding, the reserved seat service. There was also improved performances of the others, mainly across Ryanair Labs and Ryanair Rooms did well. Car hire is performing reasonably well. Fast Track as a product through airports is also performing well. The continuing ability of Ryanair Labs and the commercial team to monetize those additional services continues to drive that ancillary performance.
That goes through to next summer?
Yep. Should do.
Okay. Thank you.
Next question, please.
Over to Ruxandra Döser at Cheuvreux. Please go ahead. Your line is now open.
Ruxan, hi.
Yes. Hello, good morning. Just one question. You mentioned 18% of capacity between April and September being sold at this stage at fares down 1%. I suppose the current bookings refer particularly to the start of the summer schedule. If you adjust for the positive effect from Easter, what is the underlying fare decline on bookings that you see in April at this stage? Thanks.
I think it's the continuing trend. I mean, you're right to highlight the fact that Easter is in April. We don't have that many bookings in the system yet for through the second quarter, which is essentially June, July, August and September, which would be where a lot of the higher- yielding traffic will come through. This is why I think that we should be cautious and I would be reasonably. I mean, I'm not pessimistic for pricing this summer; I am much more conservative than competitors who were out there last week, frankly, with very little visibility on the summer bookings, talking up pricing.
Okay. Thank you.
Thank you very much, Ruxan. Next question.
Okay, we are now to the line of Catherine Leonard at . Please go ahead, Catherine, your line is now open.
Hello. Morning.
Yes, Catherine, go ahead.
Hi. I think when we last spoke, you guys spoke about priority boarding and seat allocation meeting peak penetration round about the time of November at 50%. I think since then, the group has increased the availability of priority boarding. You previously, Michael, spoke about that peaking at 50% because it wasn't priority if more than 50% of the plane could be a priority boarder. As I understand it, that is now 100, and the plane ride I took recently, all 100 of the priority boarders were taking up that privilege. Firstly, the question is how sustainable is that? I thought the idea going forward was once we reach penetration, that the yield management of those products would then give additional growth into FY 2020. That doesn't seem to be happening.
You seem to just be increasing the number that it's available to. How do we think about the ancillary growth at FY 2020 if you are at penetration already? Okay, fine, you've raised the bar a little bit. Then you've mentioned about Ryanair Rooms obviously being a small contributor, but then at the credit that you're giving is reducing the contribution overall at the bottom line. How should we think about 2020?
I think we should continue to see increased penetration on a per passenger basis through to 2020, Ruxan. The priority boarding is capped at 100. I mean, it's a fraction over on 189. That's a fraction over 50%, but that was always the cap. We haven't raised the cap on that. The priority boarding is now the only way that passengers can bring two carry-on bags on board. In many ways, the description of it as priority boarding is slightly historical. It's really the way that those customers who want to bring both carry-on bags on board can bring both carry-on bags on board, although they still enjoy priority boarding. We have changed some of the pricing algorithms on the seat allocation. There has been some yield management there, and we are beginning to band the pricing of priority boarding.
If you take that 50%, it's a fraction over 50%, but there's one price for the first 20 to book it, there's a second price band for the second 20% to book it, and then there's a third price for the last 10% to book it. We are beginning to band. I mean, it's not really yield management, but it is clearly capable of being monetized in favor of encouraging people to take it, preferably at the time of booking. The point I make is correct. We are still building meaningful penetration growth per passenger on those other products. Yes, we're not making huge return from Rooms because we're giving away most of the commissions, but it is still building. Car hire is still building. Fast Track through airports is still building. Airport car parking is still building.
Labs is doing a stunning job at very low cost of increasing customer uptake on these optional services. We see that continuing into the following year. You won't see a big jump upwards. There's no kind of killer conversion like we had with priority boarding this year. You will have a full year's penetration of priority boarding and the reserve seating into next year.
Okay. Then just definitely on the net debt. Neil, are you able to give any guidance on what you expect the net debt to be for the full year? Just in the context of the earlier question on the share buybacks, I think previously you've said that you're comfortable with a net debt position of sort of EUR 200 million-EUR 300 million. Based on whatever guidance you're about to say, how does that sort of come into. I know that Michael's comments are on Brexit, but taking aside any hard Brexit and any incentivization or facilitation, you use share buybacks just to give on an underlying basis.
Based on where the numbers are at the moment, Catherine, we would expect to be somewhere around EUR 500 million-ish on the net debt at year-end. Balance sheet in very strong position.
Okay, thanks, Catherine. Next question, please.
Is over to the line of Mark Simpson at Goodbody. Please go ahead.
Mark. Hi.
Mark, your line may be muted. Can you unmute your line, please?
Yeah. No. Can you hear me?
Yes. Go ahead, Mark.
Yeah. Okay. Thanks. Look to one positive transformational improvement is what you term and expect to happen on digital platform by the year-end. Could you give us a bit more sort of specifics behind that phrase? The other part, which is I probably sort of take a level of disagreement to your comments in terms of December yields from the competition. You could point to Wizz sort of doing a ticket, RASK being up 5% in that quarter. There is this perception, and it's perception reality that there are people concerned about booking with Ryanair in the peak holiday season, and that this is the reason why there's this large spread between the performance of yields from your competition and what you revealed for this quarter.
I think there is a spread there, I'm not quite sure, other than this idea that there is a slight buyer's hesitation, why that spread's there.
Thanks, Mark. We won't give you any further details on digital platform because I think Kenny will be doing his big reveal on that at some time. It will be part of the customer experience, customer service improvements that we'll be rolling out sometime at the end of February, middle of March. On the December yields, the kind of guidance you were getting from Wizz and EasyJet, if you go back six months earlier, they were talking up fares much more aggressively. To be fair, Wizz has cut a lot of winter capacity. They grounded a considerable amount of their winter capacity to try to manage their yields. That's why their cost performance was particularly poor. Neither of these two were able to manage their unit costs are always dreadful.
The conference calls were always distracted by lots of positive and optimistic future sounds on fares and yields. None of it ever covers their cost management. I disagree, but we reserve the right to disagree with your call on customer confidence. I point to the fact that, if you take our numbers this morning, we have 9%, 8% traffic growth in the third quarter, and load factor is unchanged at 96%. Yes, it is at lower than previous airfares, but I get no sense of in the marketplace that there's any concern about passengers making bookings with Ryanair. There was no threat of strikes over Christmas. I suspect we have no threat of strikes through January, February. That covers a period when we did close bases, as somebody asked, I've forgotten. When Damian asked the question, what was the impact of the base cost?
Our base costs were tiny. We closed Bremen, which was a two-aircraft base. We closed Eindhoven, that was a four-aircraft base. In the Eindhoven case, we flipped the aircraft out of Holland, and the same four aircraft are still flying to and from Eindhoven. In the case of Bremen, the aircraft were flipped out of Germany. We allocated the capacity elsewhere. When we cut those bases, it's not like we sit that capacity on the ground and try and manage the business for higher fares, which is what Wizz seemed to have done this winter. Yet their cost performance was atrocious. This is the airline that for three or four years has been promising that they'll overtake, they'll beat Ryanair on unit cost because they've got some super-dupery, biggery, shinery new A321neos.
Yet their aircraft ownership and maintenance cost keeps rising faster than their traffic growth. These guys are adding more expensive aircraft, not less expensive aircraft. The cost gap between us and them continues to widen, as it does with EasyJet. Despite the fact this is a year where we have had a step-up change in labor cost, not through unionization. We had a step-up in labor cost to get ahead of the unionization issue, which is why Eddie and the team have made such great progress over the last six months, putting in place agreements in most countries across Europe on recognition, and we're now working actively on CLAs. We see nothing.
At the moment, if you take our advanced bookings into this summer, they're in line with where they were this time last year for the summer of 2018, when we did have lots more threats of strikes and the other. Frankly, I don't agree with the perception, and our numbers this morning, I would say, undermine those perceptions.
Fair point. Okay, thanks.
Thanks, Mark. Next question, please.
We're now over to the line of Gerald Khoo. Please go ahead. Your line is now open.
Gerald. Hi.
Hey. A couple of questions. You talked about anticipating more air traffic control problems this summer, but you said that you think it's going to be at its worst in the shoulder peak periods of April, May, June. I'm just wondering why you think it's going to be worse than in the peak of summer?
Secondly, I was just wondering whether you could give an indication on where Laudamotion's average fares and ancillary revenue per passenger sits versus the group average, and whether you think that's presumably they're below, and whether you think that they could converge on the average or exceed it?
Okay, thanks. On the ATC problems, I think historically, the worst of the ATC problems tend to take place in that quarter, April, May, June, and will run on to the first half of July. That's usually because the French start striking around April, May, and June. We have still short staffing in the U.K., in Germany, in the Karlsruhe ATC that flows over into Maastricht, but the French tend not to strike in January, February, and March. Also, April coincides with the switchover to the summer schedule, so it's always the month where ATC falls over because you get all the charter capacity coming into the marketplace. They're still understaffed. You get all these euphemisms about ATC capacity and all the rest, which is just a euphemism for being short-staffed.
In our view, the air traffic controllers in France will then resume striking again through April, May, and June. That's why typically it tends to be at its worst through those three months. It tends to improve into July and August, one, because the capacity They get a bit more used to the summer capacity, and two, because the French air traffic controllers and their families tend to be going on holidays in July and August, so they tend to stop striking in July and August. That's just the way it is. It has been historically that way for the last number of years. The French are at their most revolting in April, May, and June. It is exacerbated by the staffing shortages, particularly in what is a very mismanaged service in NATS in the U.K. and in Germany.
I don't want to break out this as the Laudamotion pricing and ancillaries. Laudamotion, I would say in general term, the Laudamotion pricing is ahead of the Ryanair pricing. We would expect it to be materially better than Ryanair pricing during the peak summer months, at those high-yielding German airports down to Palma. I would expect out of Vienna, which is where there is a big push on. I mean, Laudamotion has grown from four aircraft in Vienna last summer to eight aircraft this winter, to 11 aircraft in the summer of 2019, and it will grow again to probably 14 or 15 aircraft in the winter of 2019. The Vienna yields at the moment are similar to Ryanair's yields. On balance of going forward, we would expect the Laudamotion yields once the German market settles down and we build a large presence.
Laudamotion will be the number two airline out of Vienna this summer. I think we will see their LEVEL appear to have given up on Vienna as a project, and you will see Wizz start to withdraw capacity from the Vienna market, where they are, as is always the case, unable to compete with Ryanair or Laudamotion on cost or on price. Ancillaries in Laudamotion is still slightly behind Ryanair, but catching up rapidly.
Some of that is historical. They subcontracted out the in-flight sales activity for the first year of operation. Ryanair has taken that over, or it becomes more Ryanair-ized from the 1st of April or 1st of March this year. I think you will see ancillaries in the next 12 months in Laudamotion begin to mirror Ryanair ancillaries, but the underlying airfares in Laudamotion should be slightly higher, certainly through the summer period. Some of the costs are slightly higher as well because they have at the German airports and at Vienna, they're pretty close to public rates.
Okay, thanks very much.
Next question, Lee.
Is over to the line of Neil Glynn at Credit Suisse. Please go ahead. Your line is open.
Good morning, everybody. The first one, just on the Airbus engagement you mentioned earlier, Michael. Just interested, do you need to agree a plan with Airbus to fleet the U.K. AOC with Airbus planes, perhaps at some point over the next five years or so to drive proper engagement at scale? The second question, just on culture in the context of the group or the organization. Obviously, the culture has evolved through this decade through Always Getting Better and Ryanair Labs, et cetera, but just interested in terms of how you think about a more, I guess, clunky organization relative to the lean Ryanair in the past. Do you need to focus on managing those businesses, the U.K. and the DAC business in particular, via internal appointments? How do you think about maintaining the culture in a bigger organization?
Yeah. The U.K. AOC, a lot depends on Brexit. If there is a hard Brexit, I think the U.K. AOC will generally be a reasonably small operation. It's designed to be able to operate the three U.K. domestic routes and some U.K. non-EU routes. The U.K. to, say, Morocco or some of those markets. I wouldn't envisage that ever being an Airbus fleet vehicle. It would never be a large vehicle. Hopefully, we won't need it at all because there'll be some agreement on a deal in Brexit. I would have preferred a 21-month transition and then a more orderly or at least have a trade agreement in place so there's as little as possible disruption. No, I don't see the U.K. AOC being an Airbus fleet.
Laudamotion clearly will be an Airbus fleet, and if there's some other small-scale M&A in the next two or three years, maybe that. I think the advantage going forward with Laudamotion and with Ryanair is we now have a credible Airbus operation, and we have a credible Boeing operation, and therefore, if an opportunity came up, I sense most of these opportunities will come out of competition divestments. Like if IAG had bought Norwegian, for example. Norwegian has a large presence in the Spanish market, where up beside you have IAG with Iberia, Vueling, and Iberia Express.
I think there would've had to been some competition divestments coming out of that. I see the small. When I say small-scale M&A, I think it's much more us facilitating competition divestments for other large-scale M&A. A bit like oil, which is how the Laudamotion opportunity cropped up. We're not running around the place trying to buy things that lose money, or that lose money that we can't turn around. The second part, I forgot the second part of the question, Neil.
Culture.
What was it?
Culture.
Oh, yeah. Culture. I think we would take the view, Laudamotion has a distinct, somewhat Austrian culture. They don't get our jokes. They don't like the swearing. Much the same, I think, in Ryanair Sun and Poland. I would encourage each of the airlines, we want to encourage each of these airlines to have their own culture. We want to. I see the strength of this, not unlike IAG being, you have individuals or line airlines that compete with each other for capacity, for capital allocations. Where an airline develops a cheaper way or a lower-cost way of organizing itself, the rest of the other airlines in the group can decide whether they want to take advantage of that or not. No, I'm not a great fan of these unitary kind of cultures or one culture fits all. We are Irish.
We take our beatings, such as the rugby on Saturday, well, we learn to get on with it. Again, Laudamotion will, I think, have a It's an Austrian AOC. It will have an Austrian culture. I think certainly, Ryanair Sun is a Polish AOC and certainly has a Polish austere culture, and we should encourage that. We should encourage those differences, because out of those differences, I think, will come opportunity. I think the critical thing that each of the airline CEOs will need to understand, though, that if you want to grow, you're going to compete with the other airlines for the next aircraft or the next 10 aircraft, next 20 aircraft. Go ahead and demonstrate that you can get better growth incentives from airports or better handling deals.
You can do a better job, we'll reward that with more aircraft. Again, not unlike the way IAG, I mean, I've always been impressed with the way Willie has managed IAG. The turnaround, for example, of Iberia, using different brands such as Vueling. He has driven a lot of cost efficiency in Iberia and in BA. Looking at kind of management succession, again, I think the way that Willie has taken Álex Cruz out of Vueling and put him into BA. There's much more mobility between the management teams, I think also gives us an opportunity. I think there's a big opportunity also for the management, the middle management team in Ryanair. Where we've a reasonably stable senior management team, there was always a view here or a kind of a bit of a pushback that my way forward is blocked. I can't get further.
How do I rise through the organization? We would be encouraging more people. Now you rise through the organization by taking on. You could become the commercial director in Laudamotion. The engineering director in Ryanair Sun could become the Ryanair engineering director. I think it gives us more opportunity to cross-pollinate the middle management or promote them into senior management positions. Again, the way IAG have managed to develop each of their airlines.
That's great. Thanks, Michael.
Thanks, Neil. Next question, please.
We go to the line of Johannes Braun at MainFirst. Please go ahead. Your line is open.
Johannes, thank you.
Hi, two for me as well. Firstly, on that framework agreement that you had with the German pilot union recently. Just wondering how comfortable are you to reach a full CLA based on that framework agreement? I think you have a deadline for the end of this month. Secondly, on the new company structure. Just curious, what will be the head count of the new management team within the new structure compared to the old structure? It should include the operating units in that.
At the union agreements, we're making good progress. I think most notably, we have announced most recently that the Spanish cabin crew have signed up a recognition agreement. We're moving to a CLA with those. We are in active negotiations with the German unions on the CLAs. There is a commitment there on their side that the agreement will be finalized by the end of February. I wouldn't die in a ditch over a deadline at the end of February, but we'd like to see it done by the end of February. We have made some other agreements that we can't yet announce, but they are significant because they are being balloted at the moment, and the unions have asked us not to comment on them publicly until they're over the line. We've made very good progress.
I think I have been struck by the amount of sort of negative foreboding coming out of analysts and both media. We'll never manage this. It'll never get done. Really, I think we've made extraordinary progress this winter with no disruptions. Does that mean we will rule out disruptions this summer? No. I think once we have unions, there will always be the threat of disruptions, but I think there will be far more threats than there will be active disruptions. I would suspect occasional disruptions around Easter or into this summer are likely, and if they happen, we will manage our way around them very successfully as we've done in recent years or over the last 12 months. The new management team, it will start very small. I think generally speaking, it would be me, a group legal function, and a group finance function.
That is probably about three people and a dog. It will evolve, I think, over the next 12 months. We're not going to have a big group office. There isn't going to be a lot of infrastructure. A lot of the group service that will be, as I said, kind of labs. Some of the marketing will come out or will be driven here from Ryanair, and will be then adapted or adopted by the other companies. Where the other companies can offer services at cheaper rates, we're moving some of the procurement out of Ryanair, for example, into Ryanair Sun.
We're certainly looking at opportunities to do more of the pilot training in Poland at the moment, where again, I think one of the challenges for us in recent years has been we have lots of Western pilots, many of whom don't foresee themselves wanting to go and base themselves in Eastern Europe. I think we would want to be encouraging much more Eastern and Central European pilot recruitment and training in the next number of years because they're equally at home, whether they're working in Eastern and Central Europe or crewing in Western Europe as well. Next question, please.
Thank you.
We now go to [audio distortion] at Investec. Please go ahead. Your line is open.
Hi. Morning, everyone. Can you just remind me why the ratio of staff to aircraft at Laudamotion is much higher than for the rest of the group? Is that simply a function of using a different aircraft, i.e., Airbus, not Boeing, or is it just not integrated in the same way and therefore the scope to improve on that, please?
Yeah. We inherited a group of staff, mainly on the management side. We inherited that out of the divestment that came out of Air Berlin. It started off last year with a tiny fleet of just nine leased Lufthansa aircraft. In order to grab those valuable slots in Berlin, Dusseldorf, Stuttgart, and Palma, we wet leased it 10 of our aircraft. The management there have done quite a degree of pruning this winter. Some of the middle management people have been taken out. I would be very confident that as Laudamotion moves to a 30-aircraft fleet by the summer of 2020, none of which will be aircraft leased in from Ryanair, it will be operating at similar staffing ratios. In fact, maybe staffing ratios to Ryanair. The other issue that also with Laudamotion came, it has a maintenance facility there.
Laudamotion has the Niki Lauda hangar and about 100 engineering staff there. It was kind of because it came out of a divestment, we took everything that was there. We didn't have a choice but to take the maintenance base. It's a bit just distorted. It will, by the summer of 2020, be operating at the same staff-to-aircraft ratio as Ryanair.
In between 2020 and 2019, do you actually have an increase in staff per aircraft? You go from around 47 to 52. Even if you take the 100 off for maintenance, it still leaves you 48. Rest of group's what? 35 or so.
Yep. I'm not sure those numbers are correct. We haven't released staff per aircraft ratios for Laudamotion for 2020.
Maybe I'm misinterpreting where you say jobs on the Laudamotion slide. Slide 11.
Look, that's more PR than anything else. That's a s lide for the press down in Austria.
I know.
Mine are PR slides.
Fantastic.
They're always good news.
There may be a few disappointed applicants then.
I'm sure we'll have lots of very excited applicants, but the actual getting down to the detail of how many jobs we'll need or how many jobs will be employed to deliver a fleet of 40 or 50 aircraft. Don't lose too much sleep over that at the moment. It went down very well with the Austrian press, suffice to say. Next question. Thanks, Alex.
Thanks for the line.
You get the prize for the observant boy in the class this morning.
We now go to Malte Schulz at Commerzbank. Please go ahead, Malte. Your line is open.
Hi. Good morning. Thank you for taking my questions.
You're welcome.
First of all, on your negotiations with airports, you mentioned that they were quite keen on getting more Ryanair flights to the airports. Is there any concessions we can expect from it, or do you expect a significant progress on your airport fees? The second one is on your new structure a little bit. If you compare it with IAG on the individuality of each airline, should we expect that there is, in the end, also in the terms of product, a difference between Laudamotion and Ryanair Europe, for example, or even Ryanair U.K.? Or will it be mostly on a cost competition only, but the product itself will be always the same?
Okay. There's a lot of airports out there at the moment who are very nervous about the future of their Norwegian capacity, Germania capacity, and some others there as well, particularly airports who have Flybe as a large base. By the way, what we are seeing is we are seeing very interesting growth opportunities there. Airports pitching not just at Ryanair, but also at Lauda, interestingly enough, as well. Seeing some very enlightened, I might would have said, forward-looking growth incentive schemes, which are now becoming, I think, more and more prevalent, not just at secondary airports, but also primary airports. Obviously, I can't give you any detail on that, but we are continuing to encourage that process. Laudamotion, for example, has written out to 50 new airports in the last week, talking about their growth plan for the winter of 2019 and the summer of 2020.
It is meeting more than 20 of those airports in London next week. Within the space of seven days, more than 20 of the 50 airports have taken up the opportunity to meet in London. They want to do it in London so they can get everybody through the place in two days, and I think that is a reasonable indication of the appetite that they have for growth. In terms of new structure, yes, there will be some obvious product differentiation. The most obvious product differentiation is that Laudamotion will have Airbus aircraft and Ryanair Sun will have Boeing aircraft. That, I think, will be the most significant product innovation. I would expect on short-haul though, that most of the service elements will converge, because where it works in one airline, it should work in others.
Laudamotion will, in the next number of months, I think, be moving towards the Ryanair model of priority boarding, and using priority boarding to restrict the number of people who can bring two bags on board the aircraft. It is facing challenges with the volume of free gate bags they are taking at the airport gates at the moment. That's not to say that there won't be. There's a different, for example, in-flight product or some difference in the in-flight product in the Laudamotion between Ryanair. I know they eat more bratwurst or sausages or some stuff like that than what we do, the old paninis. Around the edges, there'll be some differences. They speak German, we speak mangled English.
Other than that, I think the aircraft will be the big area of differentiation, and the product will largely, not exclusively, but will largely merge towards whatever is the most profitable, lowest cost provision. Next question, please.
There are currently no questions in the queue.
Great.
I'll just pass it back to you for any closing comments at this stage.
Okay. Neil, have you any closing comments you'd like to make?
No, Michael, I think we covered it off there. We'll have the full- year numbers out in May, and we will update everybody again at that stage.
Okay, we'll do a full roadshow in May, where I think we'll put more meat on the bones of both customer service enhancements this year, the group structure, and everything else. Other than that, I would just conclude by saying, I think we're facing a year of strong traffic growth. I would be cautious on the summer pricing. Our unit cost performance into the next 12 months will be good. Unlike most of our competitors, we can manage our unit costs. I think we're excited about the growth potential in Laudamotion, particularly as we're now signing up aircraft leases, reasonably opportunistic aircraft leases. Ryanair Labs is continuing to monetize what is a very successful platform, increasingly improving both the customer communications and the ability to convert customers into taking optional services. We'll continue to have a weekly, monthly focus on punctuality.
Our punctuality numbers have significantly improved in recent months. We would be, again, very worried about that period through April, May, June, when I think all airlines are going to be in Europe, as we launch our summer schedules, are heading for a torrid time with air traffic control services that are not fit for purpose. We're still not making much progress with the European Commission or the European Union in tackling the striking French air traffic controllers. I mean, it's another example of where Europe likes to put the vested interest of tiny numbers of producers ahead of the interest of the millions of consumers whose flights will be delayed and canceled as a result of a few French air traffic controllers. Other than that, we're reasonably happy.
I think we have set out this morning, management succession has been addressed, board development has been addressed, and therefore, I think most of the kind of ancillary concerns of shareholders over the last 12 months have now been addressed. The big issue for the next 12 months will be the rate and speed of airline failures and consolidation. Clearly, if oil prices rise back towards $80 a barrel, that rate and speed will accelerate. Nevertheless, nobody can compete with Ryanair's unit cost across Europe. Nobody can compete with our pricing, and we would expect to keep pushing competitors out of the way or seeing them withdraw capacity from those markets where they compete with us, both through the summer of 2019 and into the winter of 2019. Okay, I think that's all I want to conclude with.
If anybody has any further follow-up questions, please direct them here to Shane O'Toole, our Head of Investor Relations, to Neil, who'll be back here later on this afternoon. With that, if anybody wants to come and see the operation or visit the operation, please feel free to do so. Shane would be happy to facilitate a visit. Thanks very much, everybody. Bye-bye.
This now concludes today's call. Thank you all very much for attending, and you can now disconnect your lines.