Earnings Call: Q1 2019

Jul 23, 2018

Hello, and welcome to today's Ryanair Q1 FY 2019 Results Call. Throughout this, all participants will be in listen only mode and afterwards, there'll be a question and answer session. And just to remind you, this is being recorded. So today, I'm very pleased to pass you over to Michael O'Leary, CEO. Please begin. Okay. Good morning, ladies and gentlemen. Welcome to the Ryanair Q1 profits or Q1 conference call. I'm joined here by the management team in Dublin. Neil Sarhan, the CFO, is in London where he's doing the press and the media briefing this morning. As you will see, all of the information together with the detailed MD and A question and answer session is up on the ryanair.com Investor Relations page of the ryanair. Website. So, we'll go through some brief comments and then open it up for Q and A. When we get to the questions, obviously, we're going to limit the questions. Nobody can ask more than 2 questions each, just so we can try to get everybody into the 1 hour duration of the call. So as you see this morning, we report 20% fall in Q1 profits to $319,000,000 after tax, but excluding exceptionals. The key drivers of this was a 4% decline in average fare in the quarters, partly due to the earlier timing of Easter, the first half of Easter fell into last year's Q4. Higher fuel and staff costs were offset by stronger ancillary revenue growth in the quarter. Currently, at the moment, bookings are slightly ahead of last year, but had lower airfares. We've seen a number of factors in recent weeks driving that, most notably the World Cup, the impact of the World Cup, the heat wave in Northern Europe, And in recent weeks, a degree of customer uncertainty about the pilot strikes or the threat of cam crew strikes. Our investment in labs and always getting better continues to drive it's. Improvement in ancillary revenue, which has now jumped to 30% of total revenues in Q1. On cost, we continue to have significantly lower cost per passenger than any of our Competitors, but we're facing into a number of headwinds, most notably fuel. And there is a 10% unhedged balance fuel in Q1 where we were buying at spot prices close to $80 per barrel. We have significant increase in staff costs, which was well flagged Principally as a result of a 20% pay increase to all or most of our pilots are agreed by over 90% of our pilots in the at the start of the year and also our cabin crew. And there's been a meaningful jump in the EU261 right to care costs. They're up 40% in quarter 1, primarily due to 2,500 air traffic control related flight cancellations. Despite this, the balance sheet remains strong, cash generation is Strong, in quarter 1, we've had CapEx of $460,000,000 shareholder distributions of 265,000,000 But we still managed to cut our net debt by $24,000,000 in the quarter to finish at just under $260,000,000 at the end of June. Air traffic control staff shortages and strikes continue to bedevil our operations and those of many other European airlines. Repeated air traffic and staff shortages, mainly in the UK, Germany and Greece and recurring strikes, particularly weekends in France, It caused us to cancel over 2,500 flights in the Q1 that cost us the loss of 450,000 guests. It was also a loss of higher yielding weekend traffic and a steep rise in our EU261 right to care costs. Punctuality has also been severely affected, falling to 75% on time flights in Q1 compared to 89% last year, a 14 percentage its. All of which is directly related to 1st wave ATC staff shortages and strikes at weekends. Fuel, as you see, we are paying significantly higher oil prices for the unhedged balance of 10% of our fuel. While this is in the short term painful, we believe over the medium term, it's good for our business as there's a number of European airlines Who are pretty much unhedged and suffering significant cash flow squeezes and who are close to breaching their debt covenant. If oil remains in the mid to high 70s or close to $80 a barrel this winter, we believe this will accelerate the rate of EU airline As you know, we have suffered a number of our strikes ourselves Despite signing pilots and cabin crew recognition agreements in most of our major markets, most notably the UK and Italy, And a recent agreement as recently as last week with our German cabin crew, we're making slower progress in smaller markets, most notably Ireland, Belgium and Portugal, Largely where competitor employees, pilots and cabin crew are involved in and impeding progress. To date, we've suffered 2 unnecessary strikes by a small minority just last quarter of our Irish based pilots. There's a third one taking place tomorrow. The cabin crews in Spain, Portugal and Belgium are also starting to strike on Wednesday Thursday this week. Our approach to this has been to take to Confront these strikes, we try to minimize and we work hard to minimize the impact on our customers by canceling a small proportion of flights well in advance, 5 to 7 days, which gives us sufficient room to reaccommodate or refund all of the passengers. Although the impact of this is that it does mean we're losing the ability to sell unsold or the last remaining unsold seats at high yields because we're re accommodating passengers onto those flights from other disruptive flights. We're making good progress here in Dublin, where on the first day of the With a quarter of our pilots on strike, we canceled 32 out of 290 flights. On the second day, last Friday, we canceled 24 out of over 2.90 flights and tomorrow, 3rd day, we will cancel less than 20 of our 2.90 flights. And we're extremely grateful to the vast majority of our pilots and our cabin crew in Ireland who are working normally, which means we're able to Pretty much minimize the impact of this on our customers, although it does affect our forward bookings and our ability to sell last minute seats at higher fares. Brexit remains a concern. We remain concerned of the danger of a hard, I. E, no deal Brexit in March 2019, And we continue to believe that the risk of a hard Brexit is being underestimated. What this all this means in terms of our guidance is that we see no reason to alter the full year guidance At this time, it continues to fall within a range of $1,250,000,000 to $1,350,000,000 That is down on the $1,450,000,000 we recorded last year. The key drivers of this is the weaker fare environment. We think that will also be impacted in Q2 As a result of customer concern at the prospect of further pilot and or cabin crew strikes And then we accommodating passengers who have booked at cheap fares well in advance onto these remaining empty Hi. What we would otherwise have been selling these seats at high fares. That means our Q2 fare guidance now has fallen. Previously, we had guided up 4% in Q2. Now, we think it will be up about 1%. We continue to have almost zero visibility in H2, the second half of the year, But we see no reason to expect that H2 guidance won't remain broadly flat over last year. Ancillary revenues continue to perform well, but will not offset a €430,000,000 higher fuel bill or a 6% increase in our ex fuel unit costs. I should also touch briefly on Laudamotion. Their results are not included in this guidance. At the moment, we have an investment of 24.9%. We recently, I think in the last 2 weeks, obtained EU approval to increase that to 75%, and we'll be sitting down with Nicky Laud over the coming weeks, hopefully to finalize that investment or increase our investments in Laudamotion to 75%. Laudamotion's trading this summer has been adversely affected by 3 factors. Firstly, with the late release of its fares and inventory into the summer season, so the its. Fares are lower than we would originally have expected. 2, it was completely unhedged on oil, so it has been badly impacted by having to pay for Spot oil prices up at high 70s close to $80 a barrel. And 3, Laudamotion has continued to struggle with a number of anticompetitive actions by Lufthansa, Who delivered less aircraft than they were originally required to deliver to Laudamotion this summer and then in recent weeks have sought to We'll trigger a termination event, which would allow Laudamotion to our the Pansa II. We take The 9 aircraft it has delivered to Laudamotion this year so that they could return them to a direct competitor Eurowings. And I'm pleased to report that as The results of a increased management hearing in London on Friday, that threat at least has been postponed until late November, early December, Thereby removing the threat to Laudamotion's operations for the remainder of the summer season. However, The combination of lower fares in an intensely competitive market in Germany, higher spot oil prices has meant that Laudamotion's losses for the 1st 12 months have risen from an expected €100,000,000 to approximately €150,000,000 in what will be a first difficult year. Already, we're making significant progress in Laudamotion next year. The management team in Laudamotion has made good progress in securing additional aircraft, hopefully in time for Summer 2019 at lower prices than some of the Lufthansa aircraft. And the airline will obviously Much longer run into the summer 2019 schedules, where schedules seats particularly on high yielding markets between Germany, Andrea and Palmer De Meijer will be on sale well in advance. Okay. Neil, is there anything you want to touch on briefly or highlight in the MD and A? No, Michael, I think you covered it all there. Just highlight again the strength of the balance sheet, very strong despite High CapEx of €462,000,000 in the quarter and €265,000,000 of buybacks. We managed the net debt position down to just over €250,000,000 $280,000,000 So balance sheet continues to be in good shape. Okay. Thanks, Liam. Okay. We'll open up to Q and A, and we're going to limit everybody to no more than Two questions are one question in 2 parts. Let's open it up now, please. Thank after it's just ask that question. And the first question is over to the line of Daniel Roscoe at Sandler Bernstein. Please go ahead, Daniel. Your line is now open. Thank you very much. Good morning, gentlemen. Two questions. Hi, Daniel. Hi, good morning, Michael. And number 1 on Laudamotion, when would you expect that operation to breakeven? And anything that would prompt you to walk away from that Over time. And the second one maybe longer term, over the fleet plan, given the current state in the European sector, you also commented on high capacity growth in the videos this morning. Anything you consider changing around your previous statement that you would be taking up all the options on the MAX contract? Thanks. Okay, Daniel, thank you. At the moment, we're reasonably confident that Laudamotion will breakeven in year 3. I think that will largely be a function of when we can redeliver. That's when the Lufthansa expensive Lufthansa leases We need to be redelivered. It's a to a certain extent opaque though. It depends on the rate and speed of the fleet growth in Laudamotion. And now the motion and the management team there are making significant progress on sourcing other Airbus aircraft for summer 2019, but clearly it will need to grow to be a 40 or 50 aircraft Over a 3 or 4 year period, at which stage we think it will be a significant profit contributor to the overall group. We see no reason to walk away from it. It has been a very challenging and difficult first summer. I I think some of that was inevitable given the late nature of the reorganization of the administration And Nicky, Lauda successfully acquiring the what was a grounded airline. We remain confident that it will be a profit contributor over time. The fleet plan, at this point in time, it's a bit premature. I think what will really drive the fleet plan over the next Number of years will be what the rate and pace of airline failures and consolidation in Europe this winter. Clearly, most of our and most of the market The focus will be on Norwegian, which continues to lose money hand over fist. And we would I think the market generally expects Norwegian will not survive in its current form, whether it's taken over by somebody else or just goes bust this winter, we don't know. But I think that will Significantly alter both our growth prospects in certain markets, the availability of pilots in other markets and may Significantly affect the valuation of the lease rate on Airbus aircraft going forward. We remain very pleased Our existing order for which consists now of over 210 Boeing MAX 200 game changers, the first five of those comes in the spring of next year. It is likely that we will place those aircraft somewhere in Continental Europe, particularly those areas where we're growing very strongly. And that would presently be in the German market or possibly in Austria or in Central Europe where Ryanair Sun in particular Had a very good summer and is growing. There seems to be very significant demand for Ryanair Sun to grow more rapidly from the Polish Cool, operator, then that's Chart to Market. Excellent. Next question, please. The next question is over to the line of Savi Syth at Raymond James. Please go ahead. Your line is now open. Savi Hey, good morning. I apologize my voice is a bit off. I'm a bit under the weather here. But just on the revenue side, I know there's an accounting change that's It's distorting the base fare versus the ancillary. I was wondering if you could, as a result, kind of provide what you're thinking is for Total fare for passenger trends for the Q2, just a little bit more color on that. And then on the balance sheet side, I know you're going to expecting lower year over year profits this year. You have the Laudamotion investment. Just wondering if you can give some updated thoughts on your thinking about the use of cash? Thanks. Yes. We're not going to give any more detail on our outlook for the total fare per passenger. I think our focus is that the underlying average yield It's going to be softer. We think flat in the second half of the year. Ancillaries will continue to be strong, But I don't think that now it's a bit early in the year for coming up with forecast on total fare per passenger. Uses of cash will continue to be as before. We continue to be strongly cash generative. The uses of that cash will be CapEx, the new aircraft deliveries, funding those deposits. There will be a funding requirement on Laudamotion, invested in Laudamotion as or whenever we move to 75% and we That's to take place in the current quarter, subject to discussions with Niki Lauda and his team. And we have another still 30% of the share buyback will take place. Okay. Thank you. Thank you. Next question, please. It's over the line Eric Castle at UBS. Please go ahead. Your line is now open. Thank you. Hi, Michael. 2, one, you've given a lot of kind of Detail in terms of the operational disruption due to ATC and the strikes, but can you actually give us a financial number for The previous quarter and the coming quarter? And then second question, just on fuel hedging. Any plans to adjust how you Going to hedge for 2020, just given IMO 2020, if that's changing your thinking on the hedging on the field? Okay. The operational disruption, we've set out Q1, there was 2,500 flights canceled as a result of air traffic control strikes and staff shortages. There continues to be, while thankfully the French have stopped striking in the Q2, we're still suffering, I mean, on a daily basis, Typically, anything between 15% 20% of our first wave flights, mainly of the UK, Germany, Greece and France Are being delayed by staff shortages within ATC, not just us, but all other airlines as well. And the problem for us and for other airlines Is that with reasonably quick 25 minute turnaround, this builds up through the day and leads to cancellations later on almost on a daily basis, Either because we can't achieve the curfew limitations at some airports or because our crews are running out of hours as a result of cumulative ATC delays. So in many respects, it's the staff shortages that are the kind of epidemic this summer within ATC. There's a degree of customer understanding when there's a French air traffic control strike at a weekend that there will be cancellations and everything else. It's much harder to explain Customers' flight are running 2 and 3 hours late. We had one particularly appalling weekend last weekend when the as you know, France were in the its final of the World Cup. On Sunday afternoon, most of French ATC basically down tools. And on the Monday, when they were all returning back Paris, most of the French ATC just down 2. So we were taking 3, 4, 5 hour slot delays without them even being on strike. This is an issue for all of the airlines. We, IAG, Easyjet and others have been to the fore in taking legal action now against the French government for the ATC strikes. But we are increasingly getting aggressive with the ATC providers, most notably the Germans and the British, who continue to cover up what our staff shortages With euphemisms such as weather and capacity, there are no such there is no such thing as an ATC Capacity restriction, it's generally that somebody hasn't showed up for work or they haven't rostered enough air traffic controllers. On the fuel hedging, no, From a practical point of view, we won't be changing our policy and that is to continue to roll forward on a 12 month basis at around 90% coverage. For FY 2019, we are building in the Laudamotion and the Ryanair Sun fuel capacity as well. And Neil, do you want to comment briefly on the accounting policy change? Yes. Well, what is the IMO 20? Jarrod, that's evolving at the moment. And indeed, the technology around scrubbers for the likes of the cruise liners and the cargo Shipping is becoming cheaper. So I think it might not be as big an issue as it was originally feared when this was first announced, keeping it under Review, but as Michael said, I don't see any reason to move away from the kind of hedge strategy that we have at the moment. Okay. Next question, please. Yes. We're going over to Stephen Furlong with KB. Please go ahead. Your line is now open. Stephen, Hi. Just can we just talk about aircraft for a second? You're happy with what you've seen so far With the obviously important development of the MAX circa coming in April. And the second thing, I was just wondering if you've had any further discussions either with The manufacturers or with leasing companies for other aircraft types going forward, including for Laudamotion? Yes, we're happy with the MAX aircraft. It's coming in April. All of the indicators are that it will deliver a signal well, obviously, it will deliver a 4% increase in revenue per flight because it is 4% more seats And the minimum of 16% fuel consumption 16% reduction per passenger in fuel savings. These will be very meaningful cost savings going forward and will widen the gap between us and our competitor airlines, Most notably the likes of Wizz who continue to make these mythical claims about having lower costs than Ryanair while their aircraft fund financing costs balloon through the roof. Hours, we will be adding these aircraft to our balance sheet at net purchase price giving us materially lower costs than even our existing aircraft costs. Talk to manufacturers and leasing companies, no, we have an ongoing dialogue with both Airbus or with Boeing. We have also opened up discussions with Airbus in conjunction with Laudamotion because clearly we want to Secure, I think, a line of Airbus aircraft for Laudamotion, which is an Airbus AOC, Austrian AOC with Airbus aircraft in it. We haven't made much progress with the manufacturers. Therefore, all the books are reasonably full. Again, I think we would want to be opportunistic this winter If there is some major shakeout in of the European Aviation sector or in Asia with oil at $75, dollars 80 a barrel, We have Laudamotion has had made progress with some of the leasing companies in procuring aircraft that are returning from Asia for The summer of 2019 schedule, which hopefully will allow Laudamotion to continue to grow, but with lower cost Airbus aircraft, Which they will need because the Lufthansa lease aircraft are particularly expensive. But the so there's But the leasing is not our chosen way forward. We would like to place an order with Airbus or a manufacturer for A flow of Airbus aircraft to Laudamotion. We're very happy with our aircraft order book with Boeing. That runs out to 2023, 2024. But again, I mean, we've had a number of discussions between ourselves and Boeing that are predicated on being opportunistic if there is some major shakeout This winter, which we expect if oil remains up at $80 a barrel. And I think both we and Boeing are Conscious of the fact that there may be some opportunities there for aircraft, but we're only looking at Boeing aircraft for the period, I think 2023 to 2027 at this stage. And obviously, with a focus on maybe a bigger aircraft, the MAX 10, at that point in time, but there's no pressure on us at the moment. We are very pleased with the order book we have on the MAX 200, which will be more than sufficient aircraft to take us up to 100,000,000 passengers by 2024. That's great. Very clear, Michael. Thank you. Thanks, Stephen. Next question The question is over the line of Neil Glynn at Credit Suisse. Please go ahead. Your line is now open. Good morning. I'd like to ask 2. The first one, they're both actually related to disruption. But the first one, clearly, you're thinking on an optimal load factor changed dramatically over the last few years. And now you're clearly at a very, very high load factor. I'm just interested, is there a growing argument for targeting a lower load factor in some markets to absorb disruption, whether it's even just keeping open seats for lucrative last minute fares. The second one, on the strike impact and your guidance For fares in the Q2, can you give us some color as to whether the negative impact from strike concerns is contained to basis where strikes are actually announced? Or do you feel that that's a broader issue impacting bookings here, there and everywhere because of media coverage and provides us concerns from passengers. I think it's important and we're conscious today not spending too much time on strikes. Let's put the strikes in some context. In Dublin, so far, we've had 3 days of strikes by a quarter of our pilots that has affected less than 10% of our flights to and from Ireland. Now because it's Ireland, they have received a disproportionate amount of publicity. And we have undoubtedly seen a downturn, Not in bookings, but in the pricing of closing bookings and forward bookings for the next couple of months. A reasonably limited, in fact, very limited strike by a very small number of pilots in Ireland has had an impact on pricing going forward. Ultimately, that's good for our customers. They're getting lower fares at a peak period, which I think they will appreciate. And I think we've demonstrated too quite an impressive ability to manage our way around disruptions. Having had 3 days of pilot Strikes in Ireland, the fact that we've now canceled less than if you take it over to 3 days, an average of 25 flights, when we do more than 2,500 Per day, I think it indicates what limited impact these strikes have had, but it does damage forward pricing in some geographical markets. And we think that is largely focused around the Irish market. Certainly, there's some impact in the Belgian market this week where there's some Cabin crew protest strikes in Portugal, Spain and Belgium this week. We don't think there'll be much in Italy because of the work we've done with the Italian unions where we have Agreed recognition. So without wishing to overplay it, even if you look at the big broad scale of a kind of a coordinated Strike by cabin crew across 3 bigger markets, Portugal, Belgium and Spain this week. We're canceling each day about 300 flights out of almost over 2,500 flights, Which is not insignificant, but it's still only 10%, 11% of the traffic on those days. And we have quite impressively in the 7 days prior to those strikes, we accommodated almost over 90% of those passengers have been re accommodated or received refunds. Now the challenge for us in that is that by re accommodating those passengers in the 7 days prior to the strike or the 5 days after the 2 days of strike, If you're taking up seats, we're filling up seats that would we would otherwise sell close in last minute at higher fares. And so the impact, There is an impact on our yields, but not on our traffic numbers. So to answer the question in that roundabout way, We think there will continue to be some industrial disruptions. It would be reasonably selective Around the Irish, but we hope the Irish pilots are at least the quarters that are involved in this, largely misled by a couple of Aer Lingus pilots, Which is remarkable that with our pilots being misled by some Aer Lingus pilots into taking action that directly benefit Aer Lingus, but we are where we are. We would like to see that they would come and meet with us to discuss whatever they think their outstanding issues are, but that's a matter for them. So, no, we wouldn't adjust our load factor disruption because I mean if you take the fact that we're running with a 95%, 96% load factor On 2,500 daily flights, the very fact that we have to cancel even 300 of those flights means we're still running with a 96 Load factor on the other 2,200 daily flights. And that's key to our the revenue forecast. It's key to our ancillary revenue potential. It's also key to continuing to drive our very low unit costs and our unit cost leadership over everybody else. Other than that, the strike impacts are reasonably Small. They are significant in certain country markets, and I wouldn't underestimate the impact that it's having on forward airfares in the Irish market, To a lesser extent in the Portuguese market and the Belgium forward pricing on forward looking Belgium, Spain seems to have been largely unaffected. We had a very good conclusion last week with the Spanish government on minimum services. We're now operating. In fact, we slightly over canceled in advance this week. We Counted about 50% of the flights on the Spanish based aircraft, which is about 25% of our total flights to and from Spain And the Spanish government, who are not particularly happy with the strikes, have imposed minimum service of about 60% of the flights on the Spanish originating aircraft. Now having said that, Eddie Wilson and the personnel team are working their way through meetings. We are making very significant progress in certainly in our bigger markets. But it was inevitable that where we have unions, there was going to be occasional strikes. There will be a period of bedding down when we have to learn Our way around dealing with these unions. And also these unions have to learn that Ryanair is not some legacy airline that's going to roll over Every time we're threatened with a strike, we will take strikes in those markets where we think we're that we are facing unreasonable demand. I I mean, for example, in Germany, we're expecting the German pilots issues with some strike notice recently where they now want to determine what the crewing ratios will be. Now unions and particularly Lufthansa unions will not be determining what our accruing ratios are. We determine that ourselves. Now we're meeting with the unions in Germany on Friday. We hope that we will be able to at least negotiate with them in a way we haven't been with, say, for example, the Irish Pilots Union. But if we have to take strikes in those certain markets over the next number of weeks months, We will and we continue to work our way around it. But the kind of key message I would want to communicate to our both our customers and our investors is These are reasonably limited. Their impact, despite some of the kind of crazy PR and some of the coverage, even in some of the analyst notes, Their impact on the overall operation is reasonably small, but it is damaging certain geographic markets, which is why we said today, we're now Actively relooking at some of our base allocations of aircraft for the winter schedule, and we'll be communicating those decisions in the coming days weeks, depending on whether we how much progress we make in our negotiations with our people and their unions in those country markets. We have at the same time other markets. Again, I would point most notably to the strong growth of Ryanair Sun in Poland, where we're short of aircraft. And if we could reallocate more aircraft this winter or next summer Some of those markets, we could grow more strongly in some of those markets. So with 450 aircraft across 87 bases, We do and we will and the Board has continued to look actively at our base allocation decisions and how we can Perhaps change some of those allocations, so that we devote more of the aircraft assets to those markets that are growing strongly and profitably. And we may be forced to take some aircraft away from markets where pricing is weak or pricing and forward the pricing of forward book in particular Has been affected or customer confidence may be being affected by unreasonable behavior by a small minority of our people. But we would hope to avoid that kind of decision because people will come to work with us. We want to work with our people and our unions. We did say we were serious about union recognition last December. And I think the fact that we've signed recognition agreements with pilots and cabin crew in most of our bigger markets It's indicative of how serious we are. Thanks, Michael. I just wanted to double check. Actually, I probably should have been clear, but the first part of the question was actually more related to the ATC issues. You've probably covered it there, but ATC issues and those headaches aren't causing or Are you likely to cause any change in load factor thinking either, right? I don't again, it's very I don't think so. I mean, because to take Well, it's very painful that we're taking ATC staff shortages, particularly on the first waves during the peak summer period. There will be less impact of ATC staff shortage in the winter period. And even though the 10% or 15% of our 1st 1,000,000 flights get delayed To reduce 100% or the load factor and 100% of our flights throughout each day, but we're still running with 75%, 80% punctuality Would not be a sensible decision or an economically sensible decision. Great. Thank you. Thanks, Niamh. Next question, please. We are now over to Mark Simpson at Goodbody. Please go ahead. Your line is now open. Mark, hi. Good morning, Mark. Hi. Just two questions related to Malomotion and Tigor. First off, the €150,000,000 loss that you talk about, Is that the total loss or the 75% related to your holding once consolidated? And just thinking about the medium term Tigall, from where you stand at the moment, do you think that's going to stay open or close? I'll ask David to do the second half of that. The $150,000,000 refers to total loss for Laudamotion for the full year, Which we will have to incorporate into our numbers, although probably as an exceptional item in the 1st year, if we take to we move to 75% Control within the current year. So that is the total, not 75% of it. David, do you want to give us some insight in what you think is going to happen in Teagle? Well, nothing for a while. I mean, it's obvious Tiegel should stay open. But politically, they find it unpalatable in Berlin. And I think the more likely outcome is simply further delay to the opening of Brandenburg. It will just get pushed along a little further because there's an intractable political problem there. There will be insufficient capacity between Brandenburg and Schoenfeld to accommodate the existing traffic. So I think it can get kicked a little bit further down the road there. But our presence via loud emotion in Tigall, I think, is important because the original rules by which airlines will be allocated to Brandenburg We're rigged in favor of Tigall Airlines and our presence via Laudamotion in Tigall will be helpful when that comes to a head. Okay. Thanks, David. Next question, please. Over the line of Damian Brewer at RBC. Please go ahead. Your line is now open. Good morning. A few questions. First of all, just could you elaborate a little bit more on the answer is if I strip out the IFRS 15 distortion, It still looks like you're up about 12% or just over year on year. Could you elaborate a little bit more on sort of what's going well there, whether it's priority boarding reserve seating and just give us a little bit more flavor. And then secondly, just coming back to Lauda. Could you give us a little bit more on the sort of the bridge To breakeven, in particular, the EUR 150,000,000 total loss delta, how much of that would be eliminated just by removing the Lufthansa leases at their expense and replacement at more market based levels. And secondly, how much would be eliminated by just Sort of taking out the very limited lead up you have for summer selling this year. Okay. Thanks, Damian. Touch briefly, no, I'm not going to give you more color on ancillaries. Traffic is up 9%. The accounting accounts for about 5% of the 25 it's. Growth in ancillaries in Q1 and most of the stronger performing services within ancillary days as set out in the press release has been the priority boarding, We're seeing those kind of optional services, which more and more customers are now taking or using the better presentation of them, thanks to Ryanair Labs Through the website and the mobile app in particular. We don't want to get into any more detail on that at the moment. It Creates too much kind of optimism or irrational exuberance among analysts, whereas we would rather play it reasonably low key. There's no doubt that customers are more and more customers are taking those services. It also includes fast track at a growing number of airports. Laudamotion, the bridge to breakeven. We will Laudamotion's losses will be significantly curtailed in year 2. If I was to give you sort of numbers, I think the reasonable will be $150,000,000 this year. We think under $50,000,000 next Year 2 and breakeven maybe a small profit in year 3. That's based on having the Lufthansa aircraft in there over those 3 years. The vast majority of the exceptional losses this year would be, I mean, the very late, your Lufthans Laudamotion didn't. Part of the problem with Laudamotion was that if you go back, when Nicky did the deal with the Austrian administrator this year, They were going through a lot of flying for Lufthansa and some of the Eurowings in the early months of March, April May this year. When he then did the agreement with us, Lufthansa pulled all that flying and left them effectively with no flying for a number of months with a number of aircraft. The Panza were then late in delivering the aircraft that they were required to deliver under the European Commission Decision of the competition, the decision with Air Berlin. And then, lo and behold, the leases that did arrive We're significantly expensive. But by having a significant or a reasonable run, A full run into the summer 2019 schedule, we think that The losses that will be of the order will be reduced by at least $100,000,000 in year 2. Also, the $150,000,000 this year allows For a very significant uptick in the base in Vienna this winter, Laudamotion will be operating, I think it's 8 aircraft from the Vienna base this winter. We expect a very material fair war there this winter with other high Cost airlines like Wizz, Level, IAG and Austrian, Laudamotion will win that fare war because it will have materially lower fares than everybody else. So, we are kind of kitchen thinking the results in Laudamotion this year in the 1st 12 months of operation. But and we would believe that the It will lose less than $50,000,000 in year 2 and will be very close to breakeven. It could be a couple of million either side of breakeven year 3. And then, again, the profitability into years 45 will depend on how many aircraft we can procure at what rates Airbus aircraft far is into that period of time, but we think Laudamotion has a very bright future as Austria's Number 1, low fares airline. The Lauda brand is very strong in Austria, whereas brands like Level and Wizz are particularly weak. And in the past, wherever we have come up against Wizz in a fair war or an IAG Considering whether it was Vueling or Iberia Express, we've never yet come up with level, but we don't think it's where it will be particularly low cost. We expect we will win that fair war comprehensively, but the numbers won't be pretty in Laudamotion in year 1, but we still think The assets in Laudamotion, most notably very scarce sloth in Palma de Mallorca and a number of the main German airports In Dusseldorf, Tigheil, where we were effectively blocked out of those airports, will be long term a medium and long term very profitable for at the Ryanair Holdings Group. Next question please. We're now over to the line of James Holland, Exane, please go ahead. Your line is now open. Hi, good morning. One on cost, one on ancillaries, please. On the cost side, your Guidance has not stayed the same. Obviously, E261 has ballooned, etcetera. Are you doing slightly better elsewhere? Or is it a rounding issue? And also what assumptions are you using for your expected cancellations from ATC? Do they stay at elevated levels? Or are you Bringing that assumption down. And then on the ancillaries, I was wondering if maybe Neil could guide on what the profit impact It was from the, I guess, the exceptional accounting changes, all of that €25,000,000 or is it slightly less? And maybe one for Kenny, if he's on. That's 2. That's 2. Okay. Right. So let's deal with the 2 you have. Cost EU261, we expect that Continue to balloon. We think that the short staffing, particularly through the summer, will continue right through to September, October, and we think that will have a material impact on the Distribution and cost line, almost all of that increase in there is the EU261 cost. So we expect A material adverse outcome on the EU261, both compensation and claims through the remainder of this year. The other underlying in there, which is the marketing spend, distribution, commissions to airports It's in line with the 7% growth in traffic. Neil, do you want to do with the ancillaries? Yes. On the IFRS 15 revenue Thanks, James. Yes, the €25,000,000 is the net figure that came through in the quarter. That will increase to about 70 in Q2 and then wash its way out over the second half of the year. Okay. Thanks, James. If you have other questions, just route them through to Shane here later on today. Next question, please. It's over the line of Alex Paterson of Investec. Please go ahead. Your line is now open. Good morning, everyone. Good morning, everyone. Just on the The other motion, the €150,000,000 I was just wondering if there's any risk that, that gets worse. So excluding oil prices, is there anything else that you're relying on from Lufthansa, are there any other risks that could see that worsen? And then secondly, obviously, you want Laudamotion to be an Airbus fleet. If you are struggling to get aircraft, is there a possibility you could run a mixed fleet perhaps relocating Boeing aircraft from its Okay. Yes, the $130,000,000 could worse. I mean, what would materially worsen that is a spike upwards in oil prices. Obviously, if it goes above $80 a barrel this winter, then because it's unhedged, The results will spike. We could also spike because fares would be worse than where presently, but we're presently it's on airfares and loud emotion for the remainder of the summer and into the winter in Vienna. Going forward, we would like it to be an Airbus Fleet, it is geared up. It has an engineering structure. It has a main or it has an AOC that's Airbus related. Although, it is operating at 20 aircrafts, a 19 aircraft fleet this summer that is 9 Airbus and then it's wet leasing 10 of Ryanair's 737. So We would not see it operating a mixed fleet going forward. We will, I think, make a decision at some point in time, Largely when we did, I think maybe after this winter and the preferred decision would be for it to be an Airbus airline. But if we can't get a deal with Airbus, We may well say, to hell, let's go ahead and we will put that Boeing aircraft in there, but that would be a longer term more painful outcome. And I think it is important that we have within the Ryanair Group of Companies an Airbus operation, Not because Boeing or Airbus would be particularly priced, they get competitive against each other because of the 2 compete, they don't. But we want to be and certainly in the Airbus side of the market, we've seen significant value in the leasing side at the moment. We would like to have an Airbus Operation within the Ryanair Holding Group, I would like to have obviously, we're going to continue to be a very large Boeing customer. But the value of air Craft and doing deals comes not because Boeing and Airbus particularly compete against each other, but it comes by Having the discipline to wait until there's a major downturn in the industry, which we would be hopeful will happen this winter with oil remains at 80 There will be big shakeouts of loss making airlines in Europe and in Asia, many of whom have humongous aircraft order books that they can't possibly fund or can't possibly fund. Next question, please. It's over to the line of Monique Pollard at Citi. Please go ahead. Your line is open. Monique, hi. Good morning, Michael. Just a couple from me. Firstly, would you be able to give an update on what's going on with your negotiations in Spain with the pilot and cabin crew unions? And then secondly, obviously, you flagged that the World Cup had some impact on forward bookings in fares. Are you seeing that now start to reverse and return? Thanks, Manik. Let me do the second one first. Yes, I mean, we've seen an uptick in bookings post the World Cup, but it's been small. I think what was we've been slightly disappointed. 2 things have happened obviously since the World Cup has run down to its last week is 1, We continue to have a heat wave in Northern Europe where normally this time of year, the Irish are all getting depressed and booking last minute bookings going to Spain and Portugal. And there is a noticeable weakness in those markets, some of which we think is caused by the extended heat wave in the UK, in Ireland, in Northern Europe. And therefore, we're not seeing that surge of last minute bookings that we would normally have seen in a At the end of the World Cup period when rain in Ireland prevails. And also, we think the Irish market is also being affected by the disproportionate Kind of coverage of fairly minor strikes by a fairly small number of pilots here. And you'd swear the entire country had shut down where it appears on The front page of newspapers, but it's actually pretty small. So there's a number of factors there, we think, that are affecting forward pricing in the Irish market, also in Portuguese market and to a lesser extent in the Belgian market as well. Spain seems to be reasonably unaffected at the moment, But we continue to monitor closely. And negotiations, I'll ask Eddie to comment briefly. We're making progress with we have meetings with Spanish pilots and with the Spanish cabin crew. We are making reasonable progress there. And maybe Eddie, do you want to give your Yes. And the insights on that, just broadly speaking, the difference between where we're making good progress and little progress is where We have the involvement of competitors involved in the negotiation process and there's the added complication in Spain of a number of unions, a very small one, which is more of a separate standard of the larger capital for the union. So the pilots are taking a legal case on local contracts. So the negotiations and have stalled on that for the time being. But we're pretty much, I would say, 90% there with them. And on the cabin crew side, Negotiations will start again after this strike, but the big difference is if you didn't have competitors involved, we've got a Having crew member for another airline in the middle of the negotiation process in Spain, is that Norwegian capital, like it's a joke. We had to go to a meeting with the cabin crew union last week in Spain, and we'll find ourselves negotiating with a Norwegian cabin crew. Like, We have the same issue in Portugal, where there's a TAP cabin crew is the chairperson of the union. And because of the recognition, the union in Portugal doesn't have any Ryanair, people on its committee's council because the council elections only happens in August or September each year. And it's very difficult for us to go through a negotiation With the Portuguese, the TAP cabin crew to talk about Ryanair pain conditions. In Ireland, for example, we've endured 7 hour, 9 hours spread over 2 of the meetings with the small minority, 25% of the Irish pilots, Well, we sit down with our committee and the Forza Union. They say they have 11 requirements on seniority. We've explained that our proposals already agreed 8 of their 11 points and then they run out of the room for an hour and a half to consult with 1 or 2 Aer Lingus pilots So then come back in and say, no, we want to they can't even explain what it is they want. So until we get a couple of Aer Lingus pilots out of this process, I don't see there's going to be any significant change in Ireland. But we've demonstrated that we can continue to work our way around this. But And I would contrast that with the progress we've made. I mean, with Balfa in the UK, Balfa had no difficulty agreeing on day 1 that there would be no British Airways pilot, No Monarch, no easyJet pilot involved in these negotiations. We're negotiating with Balfa and the Ryanair Council. Same in Italy. We're negotiating with Anpak and the group of Ryanair pilots. But yes, I know of no other industry. If you look at Subair, For example, you take the media with RCE would be sitting there negotiating with a TV3 union rep. So it's a bit bizarre. And that means these people holding themselves out, it was a Norwegian cabin crew down in it's Spain holding himself out as the man who's going to negotiate for Ryanair cabin crew. Even Ryanair cabin crew was surprised when that to be notified last week But the discussion is being held up by a Norwegian cabin crew member. So these are I'm Perfectly willing, we as a group are perfectly willing to accept that we have to learn and there is a process here that we have to go through. But we're not going to learn how to negotiate with Aer Lingus pilots who Aer Lingus is an airline with 40 aircraft and one base. We're in aircraft with nearly 500 aircraft in 87 basis. Even the Aer Lingus pilots don't know what the hell they're talking about in this process. And some of the proposals that they have designed would damage Irish pilots. So or prevent us, I mean, one of the Give you a flavor, one of them, they want the right to refuse to be transferred somewhere else even if there's a promotion, which would mean we couldn't crew a new base. We're never going to agree to that. And if first officers want a promotion, normally it happens by being moved to a new base where we have promotion opportunities for. Nearly all of our first officers want promotions, which you have a couple of our English pilots in there trying to run negotiations that would now disadvantage almost all of our first afterwards and limit our ability to grow. So in those countries and again, without looking like this is Remember, what we're talking about here is 25% of our Irish pilots, which is less than, I think, 1% of our or maybe 2% of our total pilot. So this is reasonably small scale. And I think in time, we will move to the same footing as we've established with Baupia in Italy, even in In some of the other countries where we're negotiating with the unions and our own people. When we agreed to recognize unions last December, we didn't agree to recognize unions And competitor airline employees, and we're not recognizing competitor airline employees. So it's up to the unions in these countries To come to Melia discuss or negotiate with us with a group of our own people, not with some competitor hostee or pilot. Great. Thank you. That's a fair assumption. There you go. Okay. Next question, please. Next question is over the line of Gerald Khoo at Lebron. Please go ahead, Gerald. Your line is now open. Morning, a couple of questions. Firstly, I know Ryanair Sun is still small, but I'm just wondering how that's being accounted for. In particular, am I right to say that the revenue is going to be going into the scheduled revenue line, but the passenger numbers don't go into the passenger counts? And secondly, you've talked about getting a pay wise deal with 90% of the pilot. So just wondering what's the situation with the other 10%? Okay. I'll do the second half. Neil, I'll get you to answer the Ryanair film, the accounting question. Most of the other the 10% is Couple of holdouts. We have a small group of Irish some of the Irish pilots have reviewed have not accepted the pay increase. In most of the countries, it has been, but the big one would be in Italy, where we're very close now. I mean, there is a kind of a complicated structure in Italy, Where our pilots and the unions want to change the basis of pay to mirror what kind of the same basic And allowance payments in Alitalia because it's tax advantageous for Italian pilots. As long as you're unionized, it's Thanks, advantageous for Italian pilots to receive more of their payments in expenses and stuff like that and less in basic pay. It's called some denaria or something, the diaria. So it's taken us a number of months. Eddie, again, I think Yes. I mean, like, it is the largest number is initially like perversely where we're probably making most progress on a comprehensive collective labor agreement Because the union didn't want us to go out and offer this individually to pilots in that market. And that accounts for the sort of lump of it there. But Michael is quite right. The rest of it is pilots and sites around the place where people haven't opted into the new structure. I mean, I'm going to be easily done. We will have about 97%, 98% of all pilots will have agreed. And I think that's the case. They've all will have agreed to 20% pay increases this year. This is the kind of joke of what we are dealing with here in Ireland. We have about a quarter of our pilots who are earning between $150 to $200 a year, Got a 20% pay increase this year, are now engaged in strikes over seniority that doesn't affect them or base transfers that They don't want they're not they're already in the base they want to be in. So, it is nothing other than a couple of us being gamed by a few Aer Lingus pilots To the benefit, frankly, of Aer Lingus. And if that's what we have to put up with for a period of time until the majority of our pilots in Ireland actually work out that their To better serve in dealing directly with us and not listening to a couple of Aer Lingus pilots, then we may have to take some more strikes in Ireland. But That would certainly cause us, I think, to materially look at the way we allocate aircraft in Ireland this winter or in the summer of 2019. And Lee, do you want to take the Ryanairstone, the concentrated On Ryanairstone, as you said, it is relatively modest, 5 aircraft This year, the scheduled revenue the revenues in the scheduled revenue line, to the extent that they've got any scheduled passengers, and they'll have some Pass new numbers, otherwise they won't. And the cost will get breaking down over various cost lines. Okay, thanks. Thanks, Neil. Next question, please. Over to the line of Johannes Braun at Mainstream. Please go ahead. Your line is now open. Hi, good morning. Just 2 for me as well. Obviously, despite all this, some progress in union recognition deals with now the German cabin crew union, Verdi, also signed. I was just wondering what does recognition deal with the union actually give you? I mean, obviously, it's not a CLA yet, which would cover working conditions and all that. So it seems to me that the really hard part is still to come for all those countries where you do have now recognition deal in place. And then secondly, any new thoughts on France regarding a potential pacing of planes there? Okay, Johannes. I'm going to ask Eddie Wilson to do the first half and David give you an update on the second question. Yes. Just in relation to the recognition agreement with Verdi, It just sets up the relationship. It's actually how you conduct business on that. And there's a commitment in that recognition agreement to start Negotiations on a CLA pretty much immediately. But we already have a deal in place for our cabin crew, which goes up until 2021, which has their 5.3 roster and predetermined pay increases already included there. So we'll be sitting down with Verdi in the next week or so to start that In fairly rapid format to try and formalize a collective labor agreement for our German cabin crew. And David, Yes. Just in terms of what it actually regulates in terms of the other countries, U. K, Italy where you have recognition deals in place, Is this different to the German one? Or is it No. In some countries, you need an actual recognition agreement to have the Procedures, it's less stringent in Germany. You pretty much get into a CLA straight away, but we at least have agreed the ground rules of how we engage It's not required by law in Germany, but that's what we're doing and Verdi are happy with it. And I think just to add to the bag, what's interesting about the strikes thus far is Even the Irish pilots admit it's not about pay. So with the cabin crew, even the cabin crew was this week, which is more of a protest Pay is not featuring in these discussions. I mean, our cabin crew earn up to $40 Our captains earn between $150,000 $200,000 You have unions here in smaller markets constructing disruption over really esoteric stuff like seniority, Which we already have seniority offers on the table with the Irish pilots, with the German pilots. We sent them the seniority list. The good news in all of this is we're not having strikes about pay. We're not a low pay airline. Even the pilots can't argue that they're lowly paid. And so the recognition is the most important thing. So we actually start into the process of negotiating or each having a relationship with these people. But we do not have recognition in Ireland and nor will we have until we get Aer Lingus pilots off this pitch. David, France? Yes, we've been negotiating with 5 French airports, and we have deals that are more or less acceptable at this point with 3, out of which we should select 2. Ultimately, it depends on our aircraft availability next summer, which could be determined, in fact, by some of the activities going on at the moment. If we move aircraft out of some of the market, Make France more likely next summer. Thanks, David. Next question, please. Is over to the line of Ruxandra Harodu Doerse of Kepler Cheuvreux. Please go ahead. Your line is now open. Hi, Fahadu. Good morning. Two questions, please. First, what share of your current capacity is at primary airport? And what fare trends are you seeing at this airport? There is a lot of capacities that entered primary airports over the last years and should have reached maturity now. And second, how do you Expect average unit airport costs to develop over the next 3 years. Some competitors mentioned potential increases in airport costs. Okay. The majority of our aircraft are at primary airports. We don't see maturity. We're growing at the moment by even this Here with ATC strikes, traffic in the Q1 grew by 7%. That means our if you take our growth issue, we plan to add about another 9,000,000, 10,000,000 I mean, we're growing at the same size, at the total size of Aer Lingus on an annual basis. So, I never hold this idea that because we're primary airports, you won't grow or we're at maturity and we should expect higher yields. There is undoubtedly higher fares at the fares are slightly higher at the primary airports, but so are the costs. And the average airport unit costs, I think I would generally expect them to be flat going forward. We've seen interestingly in the Q1 numbers, the airport Handling costs have only risen by 5% in a quarter where traffic was up by 7% And block hours were up 9%. So as you can see, despite the fact that we have a majority of primary airports, We're still doing very good growth incentive schemes with the primary airports as well as with the secondary airports, and they're competing against each other. So I think the reasonable assumption going forward would be flat on airport unit costs and we might do a little bit better. Thank you. Next question please. It's over the line of Michael Kuhn at Societe Generale. Please go ahead Michael. Your line is now open. Morning. Two questions. One again on ATC, one on LOTA Motion. On the ATC side, it looks like some of the problems are quite So no willingness on the ATC side to train enough people. Do you see that situation changing? Or could that develop into a serious growth obstacle for the whole sector going forward. And then on Lola Motion, would you be willing to share with us The current expected top line and operating margin that you see for the current year? Thank you. Okay. I'll leave the first one first. No, we wouldn't be able to share it with you. And on the first part of the question, ATC, I mean, like I think one of the issues that has materially changed with aircraft like You look at the biggest offender at the moment, it's the German traffic control service at Karlsruhe. There are about 50, they have deliberately chosen 2 or 3 years To go to adopt or to take on the low traffic forecast, there's a low, medium and high traffic forecast model, So that they could under recruit air traffic controllers, therefore make more but that allows them then to say they have less Flights charge a higher unit rate and then under recruits. So then they come up this year, oh, we're surprised by the growth in Germany, Which is strange given that Air Berlin went bust in the last 12 months. Now some of that gallbladder capacity has been taken over. It is simply the regulatory gaming by these Providers, NATs in the UK. NATs in the UK are doing some system upgrade and most of the delays, most of the system upgrade work seems to take place Between 5 am and 7 am on a Saturday morning and a Sunday morning. Now I we anybody who knows anybody, people working in IT, Millennials do not work at 5 am on a Saturday morning or a Sunday morning, yet we have a wave of delays. Typically, I think yesterday morning, we had 39 departures out of Stansted between 5 and 8 am. And 32 of those 35 aircraft were delayed largely because of the system upgrade work being undertaken by NAF. I mean, it's complete bullshit. They are just understaffed. They get lots of air traffic controllers to show up to work on Tuesdays, Wednesdays and Thursdays. They either don't roster them to work weekends or they call in sick of weekends and the delays are just shoveled on to the airlines. That it's not just us. Easyjet, IAG will all confirm this is the same issue. So the worst offenders are NAFs, the Germans And when your entire zoo goes down, more of these sites then get shoveled onto neighboring systems and Maastricht, they go down because they get overstressed. And you have the French then, whether they're on strike or not on strike, just won't show up on a Saturday or Sunday morning. So the 2 peak days, You have both of these people understaffed on ATC. Is it structural? Yes, it's structural, but it's Structurally because their regulatory system allows them to gain that system. Will it become a growth obstacle? It is Probably a growth off field, but a lot depends on how much capacity disappears out of the system this winter with oil at $80 a barrel. I I mean, if there's a bankruptcy of Norwegian or a significant slowdown in their growth plans of loss making airlines like Norwegian, Alitalia continues to be loss making. SAS is loss making. If there was a material change in that kind of capacity, then It would free up some ATC services. But the fundamental challenge remains, they continue is they need to hire more air There's no shortage of the sky up there. The shortage is badly managed, badly rostered, but Extremely expensive air traffic control services on the ground. And the more endemic problem is not the strikes because people will understand When the French run strike, it's that they don't understand that this ATZ capacity shortage is on Saturdays and Sunday mornings. As Laudamotion second half, no, we're not breaking down any detail on Laudamotion for the moment. We would probably give people much more Color on that when we get to the full year results in miner, we won the 1st full year of Laudamotion revenues, etcetera, in our numbers. So that will be about May of next year. Next question please. It is over to the line of Duane Pfennigwerth at Evercore ISI. Ed, Dwayne? Hey, good morning. Thanks for the question. Michael, do you have examples historically of bases that Ryanair have closed where you switched Completely from serving a market with local aircraft to serving a market with aircraft from other bases. It seems like where you are today, given the number of bases and the network that you have, this would be really easy. What prevents you This would be really easy. What prevents you from doing this more aggressively? Okay. It's a good question, Duane. Firstly, We would. I mean, we do have examples in the past. The obvious one was Copenhagen about 2 years ago when we announced the 4 aircraft base there. We got attacked by the Danish Union And we flipped the aircraft out to Copenhagen, based them in the UK, Kaunas and a couple of other airports and have still over the last 2 years grown to be the number Number 2, number 3, number 3 behind Norwegian and SaaS. We're the number 3 airline in Copenhagen with no aircraft base there. However, and this is absolutely critical, We are not talking about base closures here. Base closures create or invites an opportunity for competitors to arrive in and take advantage The work that we've done over many years in growing the bases. What we're talking about is moving a proportion of aircraft out of a base. So say, if you have an aircraft that has 10 aircraft base there, you probably have 20 aircraft worth of flying to and from that base because 10 aircraft will be in base and 10 aircraft will be at other bases outside that base that are flying inbounds into those bases. And what we're talking about doing is if we are taking if our business is being hit by customer confidence or lower fares in one market, We might reduce from 10 aircraft in the base to, I don't know, 5 or 6 aircraft. Some of those aircraft will grow, but we could increase, there will be very little reduction And capacity at that base because we might allocate about 14 of the aircraft elsewhere to flying in and out that base. So there's still been largely about 20 aircraft worth of flying to and from the base, but instead of it being 10 based and 10 non based, it might become 15 non based and 5 based. It would also free up the opportunity for us to reallocate Some of those aircraft to more profitable flying elsewhere and in particular, we think we have a very significant opportunity in Poland With Ryanair Sun, where it has traded very substantially and profitably this year, there also looks to be some aircraft Airlines in that marketplace, most notably Small Planet, which is teetering, we think, are struggling financially. And we think there will be more opportunities. And you take a market like Poland, where there is a economy is doing well, propensity Travel is rising rapidly. It's a market where Ryanair is already the number one airline in that market. Despite all the Talk of Wizz about being number 1 in the Central Europe, Eastern European markets, we are by far and away the number 1 airline both in Central and Eastern Europe and in Poland. And it would be a very useful allocation of aircraft to switch them to Poland. I think we're also looking at a possibility as we take the first five of the MAX 200 Those aircraft might also go to Poland next year to the Ryanair Sun subsidiary, particularly where if At markets in Dublin or in the UK where it would have been our natural decision, it would have been the natural home for those aircraft. If we're having difficulties with pilots in those markets, then we may send the new aircraft to charter market in Poland, But we haven't finalized those decisions yet. So for example, Wayne, we can close the base and move the aircraft elsewhere, But we're not planning to close bases here. If you take those markets like Portugal, Ireland and Belgium, we're certainly looking at Reducing some base aircraft, we would not be closing bases. We would simply be reallocating moving aircraft out of Portugal, maybe to Poland for the winter, Allocating aircraft to Poland, but we would still have a lot of additional aircraft flying down to Portugal from aircraft based overseas where A lot of those aircraft already operate. We have no requirement to have aircraft based in Faroe or in Ponta Delgado, Lisbon, our portal for the winter period, we could readily move aircraft out of there and we'll do so if we are Facing a repeated unnecessary disruptions caused by TAP cabin crew. Yes. With the network you have today, it seems very straightforward. Thanks for the answer. Thank you. Next question please. Okay. We are now over Catherine Leonard at EMEA Securities. Please go ahead, Catherine. You're now open. Good morning, everyone. Just two really quick ones to finish off. Just without the ancillaries, you mentioned the full year results that Michael that you saw allocated seating would probably be saturated around 50 level, which you reached in March 2018. I just wondered, given the commentary, have you sort of as your thoughts on that in terms of saturation priority boarding hours could see to change upwards from there? And then secondly, just really briefly on the you mentioned on the recorded comments, U. K. And U. S. Ownership, voting rights, etcetera and Different franchisization. And just in terms of could you update on what percentage of your shareholders are U. K. And U. S. At the minute, please? Okay. Thanks. Sorry, we may have got we communicated it again. Allocated seed are the priority board sorry, Okay. So reserve thinking, we think we have maxed out at around 50% of passengers. We're not there yet. We're close to it. Priority boarding, again, we would limit priority boarding is already limited to just under 50% of passengers. It's limited to 90 passengers per flight. And beyond that, it makes no sense. I mean, it's not priority boarding if it's more than our pay at or more than 50% of passengers. But there is those reserve seating, priority boarding are continuing to grow strongly As we retail, the better using the mobile app. Brexit, again, we would continue to caution, we have long believed that the risk Brexit is being underestimated. We still, like most of the market, believe that there will be a transition agreement that would at least get us from April 2019 through to December 2020, mainly because we don't see any other outcome. But there is a growing risk, I think of political uncertainty in the U. K. And that may lead to everybody falling by accident into a Brexit, a hard Brexit. In those circumstances, at the moment, we have about 44% of the stock is currently held by non EUs. About 20% of the stock is held by U. K. Currently U. K. Shareholders. We think Half of that 10% would re flag pretty readily into European shareholdings, half of it won't. And therefore, we run the risk of running between 44% 54% non EU shareholding in a hard Brexit scenario. In those circumstances, we would immediately disenfranchise all non Brexit Shareholders, which would be the ADRs currently, plus say, about 10% of the UK shareholders. We would also put in place the restriction we've exercised a couple of times before, in that those who are U. K. Shareholders who are not able to reflag to Europe, They would immediately be subject to the same restrictions that were previously placed on at the ADRs and that is they can only sell to an EU shareholder, resident shareholder, which would readily over a very limited period of time, you think weeks or months, Bring us back to 50.1 percent EU ownership. And once we get back 50.1 percent ownership, we would then probably we would then remove or we would reinstate The voting capacity of non EU shareholders, but it will be very important to us to ensure that we protect our EU Ownership and control in a hard Brexit environment, and we've had extensive discussions with the European Commission that other Regulatory agencies who seem reasonably comfortable that those measures Would ensure that we continue to remain EU owned and controlled even in a hard Brexit scenario. Judith, do you want to add anything to that? No, that's a good summary. Okay. Great. Thanks so much. Next question, please. This is the final question it's changed for today. And it's over the line of James Goodall at Burn. Please go ahead, James. Your line is now open. Hi, everyone. Just a quick one for me. I'm Justine, what's your current thinking in terms of revenue management between your fare revenue and your ancillary revenue? I guess what I'm trying to ascertain is to what extent, If any, you're allowing ancillary revenue to cannibalize fares? Thanks. We're not. We don't allow considerally to cannibalize fares. Now current thinking, we're still, I think, in year 3 or year 4 of our 5 year program to get ancillary revenues to 30% of total revenues. We've got there 18 months early. Partly that's a function of the fact that the yield environment has been weaker in Q1 than we had originally thought, With the move of Easter into Q4, we don't allow we don't run ancillary here to cannibalize underlying airfares. What drives underlying airfares in Ryanair is our commitment to being load factor active price passive. And therefore, we are price takers In the current environment where we think and this is not new today. I mean, on the full year results, there was a load of optimism this year that airfares will rise Higher into the year, we said we're very cautious. We don't see it. We're continuing to grow very strongly. I mean, we will get to probably 130,000,000 passengers this year. And that's very strong growth of $139,000,000 or $9,000,000 this year. That's $10,000,000 passenger growth. You know that. An awful lot of our own yield softness comes from our rate of growth. You'll see other much smaller airlines like the Norwegian, the Wizz is growing at 10%, 20% month on month. But I mean, their growth, they may add about 4,000,000 or 5,000,000 passengers this year. We'll add double that 10,000,000 passengers. So We ancillaries are performing strongly. I think that is the measure of the work that's being done by Kenny and his team on the digital side and also John Hurley and his team on the lab side, we continue to see that process continuing to grow. But we're not running down the underlying average fare so that we can boost ancillaries. We will price the average fare at The highest price we possibly can as long as we continue to maintain 95% or 96% load factors. It's just there are a number of events at the moment, Particularly in the current months, such as the impact of the World Cup, the generally good weather, unseasonably unseasonable heatwave in Northern Europe And in certain markets, most notably Belgium, Ireland and Portugal, where some concern a disproportionate coverage of very limited Strikes by very small numbers of our people may be having an impact on forward the forward pricing and the pricing of our forward bookings. That will continue. I think it's important if we're going to preserve our low cost model and our cost advantage over other airlines Is that while we don't want to invite strikes, we want to resolve these issues by negotiation with our people. We're inviting our people to meet with us. But if we are being dealt with unreasonably, in some cases, by competitor employees interfering in the process, Then the strikes are inevitable and we will take strikes and we've demonstrated already that we can work our way around strikes, while at least trying to minimize the impact on Our customers. I would far happier take a hit to our earnings this year, but convey the message that we will face down strikes, While trying to resolve these issues, negotiating and negotiate with our people and Eddie Wilson, Peter Beldu and their team, we are engaged in very active Negotiations were down today, for example, in Lisbon meeting with the Portuguese Pilots Union and the Capital Union. So there is a really large Program of work and we are making, I think, very considerable progress in those works. We still have an image of some lazy media want to Characterized us as being anti union, we're not anti union. We recognized in December that we were going to negotiate with unions. We're open to doing that and we're open to reasonable very reasonable accommodations with our people, particularly our very well paid pilots and cabin crew Who enjoy very good conditions or terms and conditions of employment and very favorable rosters. But If we're going to be pushed around by a couple of competitor people trying to distort the process, then find it's inevitable that we will take on those strikes and we will Face more strikes during the remainder of July August. We are prepared for them and we're ready for them, although we hope to avert them because we want to minimize the disruption in our people, Of course, we will follow. Okay, folks. I think that's it. We've been telling you where we are. Thank you for participating in the call. If anybody has any further or follow-up questions, Shane, Toole is here with the and the IR team in Dublin. We'll be happy to answer the questions. We've no roadshow as obvious on the Q1 results. But we will continue to communicate with you as best we can. And we will hopefully lead up To the half year results in, I think, which are at the end of October? Yes. We'll be on a comprehensive brochure at that stage. Thanks very much, everybody. Good to talk to you. Bye bye. This now concludes the call. Thank you very much for attending. You may now disconnect your line.