Welcome to the Ryanair FY 2018 results call. For the first half of the conference, all participants are on listen-only mode. There's no need to mute your own individual lines. Afterwards, there'll be a question and answer session. Just to remind you, the call is being recorded. I'll now hand the floor to our host, Michael O'Leary, CEO. Please begin.
Okay. Good morning, everyone. Welcome to the Ryanair full-year results conference call. As you'll have seen earlier this morning, we released our full-year results on the website. There's the details, MD&A, and a question and answer session, which was kindly hosted by Stephen Furlong of Davy with myself and Neil Sorahan, which deals with most or all of the numbers, and I think the key issues. I'm therefore going to run through this pretty quickly, and then we will open it up for Q&A. I'm joined this morning. We're a bit disparate. Neil Sorahan is in New York, David O'Brien, the Chief Commercial Officer, is in Denver. I have Eddie Wilson, the Chief People Officer, dialing in from Stockholm, and Peter Bellew and Kenny Jacobs are in Dublin.
You see this morning, we are pleased to report a 10% increase in profits last year and an unchanged net margin of 20%, despite a 3% cut in our airfares. I mean, that's the strength of the model, and we continue to lower fares and lower costs in a market environment where our competitors are raising prices and raising costs. We expect, however, above-average EU capacity growth will continue for the remainder of this year, and that will continue to have a downward effect on fares. Unlike most of the competition who are predicting airfare increases this year, we believe the underlying years will be flat. We're continuing to grow strongly. This summer, we've opened 200 new routes, including new country markets in Jordan, Turkey, and Ukraine.
Ryanair Sun, the new Polish charter airline, commenced flying in April, and we have also invested or taken a 25% stake in Laudamotion, which we believe, hopefully with EU approval, we can grow to 75% before the end of our half-year in September. While airfares fell, ancillaries have performed well. Ancillary spend per passenger is up 4%, with a 9% growth in traffic. Total ancillary revenues last year grew by 13%, and we're now well on track to achieve our five-year goal of getting to 30% of revenues coming from ancillaries. In the area of customer service, we lowered the checked bag fees this year while increasing the bag allowances. By moving the two free carry-on bags to our priority board customers, we have slimmed down or improved significantly the boarding experience of both customers and crews.
One negative on the customer service side has been a continuing decline in on-time performance, fell by 2% last year from 88% to 86%. All of this decline was created by additional ATC strikes or capacity short staffing shortages largely in German, French, and U.K. ATC services, and this looks like continuing through most of the summer of 2018. ATC is going to be a real problem for us and most of the airlines across Europe. We're really giving them what we pay for Eurocontrol and ATC charges. The service we receive is lamentable. Unit costs last year fell by 1%, largely due to our very good fuel hedging position. However, ex-fuel unit costs rose by 3%, mainly due to the one-off EU261 costs and the pay increases negotiated with our pilots and cabin crew following the September 2017 rostering failure.
In FY 2019, we will invest substantially in the cost base as we gear up now to take delivery of 200, 210 Boeing Gamechanger, the first of which will be delivered to us in April 2019. This year, we'll see a modest increase in our ex-fuel unit costs up probably about 6%. Fuel this year, despite our very good hedging position, we have a 90% hedge out to March 2019 at about $59 a barrel compared to current spot for Brent is about $80 per barrel. Nevertheless, we have an unhedged 10% we'll be paying a higher rate for. Over the next 12 months, we expect our staff costs will rise by about EUR 200 million.
Half of that will be the growth, our additional headcount, pilots, cabin crew, and a pretty extensive recruitment program in the operations area in particular, where under Peter Bellew, we're putting in place a new team in engineering, in rostering, and in operations, gearing up for the move to a fleet of 600 aircraft and 200 million passengers per annum. Accordingly, we expect unit costs over the next year will rise by 9%, ex-fuel daily increase by 6%. However, we expect that to be a one-off jump. Thereafter, we expect the impact of the lower-cost Boeing 737 MAX aircraft, a new 10-year lower-cost engine maintenance agreement, as well as continuing growth incentives at airports to result in flat or slightly declining union costs. On labor, we've made significant progress with our union recognition negotiations. We've already signed the first two recognition agreements with BALPA and ANPAC.
We expect that we're close to doing deals, I think, in Germany and Spain. The good news is that we have now negotiated five-year pay deals with all of the pilots and the cabin crew. We're not in the discussions with the unions. We're no longer focusing on pay issues. They all accept that our pay is very competitive, better than, in many cases, 737 competitors, Jet2 and/or Norwegian. We are dealing in some cases with silly issues, union sort of inefficiencies. For example, the Spanish unions want the pilot's committee to have an extra 36 days off a year to think and reflect about union issues. We've made the point those rules apply in Spain for people working in canning factories doing a Monday to Friday with two days off at weekends.
Our guys get five days on, followed by four days off. If they want 36 days off for the six committee members in Spain, those committee members can go to a 5-3 roster, or they can think about union issues while they're on their three days off, followed by one day a month or one day a week of union contemplation. We're down to those kind of issues. I think we will continue to make progress both on the pilot and with the cabin crew unions, but we are not going to accept any ridiculous inefficiencies.
If that means we have occasional strikes such as the ones we had with the German pilots in December or with the Portuguese cabin crew in Easter, we think they will be reasonably small in number and will be on a country-by-country basis, but only where we're dealing with unreasonable demands or expectations. We have done an extensive survey of our pilots, more than 50% participation, and have taken great comfort from the degree to which the pilots have reflected that they're happy with the terms and conditions, the rostering, and the pay at Ryanair. They want to see us make improvements on the way we allocate annual leave and base transfers, and under Peter and the new team in operations, we've made significant progress in those areas.
I think the key issue for us over the next 12 months is we are more bearish on pricing than most of our competitors. We do not see airfares rising over the next 12 months. We think it's sensible at the moment to be reasonably cautious. We're guiding for flat fares for the remainder of FY 2019, and I think that's a sensible place to be. What could change that would be an upward tick or an increase or an acceleration in the rate and pace of European consolidation, which I think is likely this winter if oil remains at $80 a barrel. I mean, the challenge being faced by airlines like Alitalia, which last year lost money when oil was at $40 a barrel, Norwegian, which lost money when oil was at $40 a barrel.
These airlines will face major challenges this year with their largely unhedged. They're facing $80 a barrel for oil. I think if there is some acceleration of consolidation, that will slow down capacity growth in Europe, and that would clearly change our outlook on fares and capacity. But for the moment, we think we should be cautious, and we remain that. We are doing our bit for European consolidation with the establishment of the Polish chartered airline, Ryanair Sun. That looks like it will trade profitably in its first 12 months of operation, but it's only a five-aircraft operation. We've also acquired 25% stake of Laudamotion, which is an Austrian-based AOC. It's an Airbus operator, and we're working to increase that stake to 75%, and we're working with Niki Lauda and his team to relaunch Laudamotion as Austria's number one low-fares airline.
We would see that growing to a fleet of 30 to 50 aircraft over the next three to five years. It has a very valuable portfolio of slots at many congested airports in Germany, Vienna, and Palma de Mallorca, and underlying is a reasonably profitable operation. We expect that there will be costs and loss of about EUR 100 million over the first 12 months, mainly because we've had to pay all the pilots and the cabin crew for during the period from February through to June before the airline starts operating. Because we'd released its summer schedule pretty late, it's gone into that German-Spanish marketplace with very low fares, and we will offer very low fares through Laudamotion in order to fill those flights at whatever price it can get for the first 12 months. We should touch briefly on Brexit.
We hope there will be a transition agreement from at least April 2019 through to December 2020, but we continue to plan that there will be a hard Brexit. We think there is a likelihood. Admittedly, it's a small likelihood, but nevertheless, a likelihood that the outcome of the discussions between the British and the Europeans will be unsuccessful. In that circumstance, there will be a disruption to flights as early as April 2019. We don't think that disruption will be long-lasting because I think the consequences for U.K. flights and for the U.K. government of a disruption to flights would be severe. But we are putting in place preparations for a hard Brexit, and we have had extensive discussions with the European Commission. We'll ask Juliusz maybe to answer a question on it during the conference call.
We believe that we will secure our future as an EU airline, but that may involve us invoking our existing rights under our memorandum to disenfranchise all non-EU shareholders. So we will remain majority-owned and controlled by EU shareholders by not allowing non-EU shareholders to vote on any shareholder resolutions in the event of a hard Brexit. Touching briefly on the balance sheet. We continue to be very strongly cash generative, generating over EUR 2 billion a year. In the last year, despite CapEx of EUR 1.5 billion and a buyback of over EUR 800 million, the net debt position, closing year-end net debt position was a fraction over EUR 200 million, pretty much unchanged over the previous year. I think the success of our buyback program has been illustrated by the results this morning, where in a year when net profit after tax grew by 10%, earnings per share grew by 15%.
I think the key issue for us in terms of outlook and guidance, we remain on the pessimistic side of cautious. We expect traffic to grow next year by 7% to about 139 million. Load factors will be flat at 95% because we don't think we can get them any higher than that. This year, we expect on unit cost will rise by 9% due to essentially higher staff and oil prices. The staffing cost step-up will be one year. Oil prices could last for a year or two, but then we expect that yields and fares will lag the oil price rise by about 12 months. So I think you'll see maybe a better fare environment into the FY 2020 numbers. We don't expect to see that in FY 2019. We'll add almost EUR 400 million to our fuel bill.
Ex fuel unit cost issue will rise by about 6%, including fuel unit cost rise, about 9%. We have limited H1 fare visibility. Obviously, quarter one is largely in the bag. We're still waiting to see what fares look like in the second quarter, which is the key quarter of the year, the July, August, and September pricing. At the moment in Q1, without Easter having moved into March, there was about a 5% fare decline in Q1. We expect to pick up most of that with about a 4% rise in Q2 fares, so essentially flat for the first half of the year. Thereafter, we think the second half of the year fares will be no worse than flat, but we're guiding flat for the year.
Ancillary revenues will continue to outperform traffic growth, not by sufficient to make up a decline in our flat average fares or the rise in costs. Therefore, we're guiding that full year profits for FY 2019 will fall by about 10% to a midpoint of about EUR 1.3 billion, down from the EUR 1.45 billion this year. Excuse me. This guidance is heavily dependent on what H2 fares look like. If there is some further consolidation in the second half of the year, that would be an upside in that guidance. If there isn't consolidation, there continues to be above-average capacity growth, it could, we think, that's what the base the guidance is based on. None of that guidance have we included the investments in Laudamotion.
If we receive an EU approval to acquire 75% in Laudamotion, we would expect to provide about EUR 100 million in exceptional start-up costs in next year's numbers. They're not baked into this year's guidance. With that, I'm going to hand over to Neil Sorahan. Neil, do you want to give us some key themes on the MD&A and on cost?
Sure, Michael.
You might also briefly touch on the hedging position as well.
Fine. Will do. I suppose I'd just draw everyone's attention back to Michael's comments there on the balance sheet, a very strong balance sheet. We've over 400 aircraft, with over half the debt on those unencumbered. Very strong balance with BBB+ ratings. On hedging, we're well hedged into next year. We've 90% of our hedging in place now at $583 per metric ton. This compares to $ 493 last year, but is well below the $ 800 that we're seeing at the moment. The MAX is also well hedged. We take the first MAX in April of next year, and we've got the euro dollar hedged on that at an average rate of 124 against the USD. Last year was a strong year which saw unit cost down 1%. Guests were up 9% to 130.3 million. Revenue was up 8%, driven primarily by a good performance in ancillaries.
Profit after tax ended up 10%, and our EPS up 15%, helped by the buyback. The latest buyback is now halfway through. EUR 380 million spent on the current buyback, we're well on track to finish the balance before the end of October. With that, I'll pass back to yourself, Michael.
Okay, thanks, Neil. We're going to open it up for Q&A. What we've done in the interest of speed here, we're not going to have multiple questions this morning. One analyst. If you could, don't ask kind of silly questions that we've already covered in the detailed Q&A that's up on the website this morning, which I'm sure you've all seen. We're not going to allow multiple questions either. If you have one or two parts to your question, that's fine. If it's three or four parts, we're stopping at one and two. We want to try and get as many questions as we can, but keep it to either one or two questions and no follow-ups, please. With that, let's open it up for the MD&A. No, for the Q&A rather. Sorry.
Thank you. If you wish to ask a question, please dial zero one on your telephone keypad now to enter the queue. Once your name is announced, you can ask your question. If you find it's answered before it's your turn to speak, you can dial zero two to cancel. Once again, that's zero one to ask a question or zero two if you need to cancel. Our first question comes from Daniel Roeska at Bernstein. Please go ahead. Your line is open.
Good morning, gentlemen. Two questions, if I may. Number one, in your outlook, you mentioned systems investment to facilitate the growth. Could you elaborate a bit on the changes you'll want to do, especially to your back-office systems in, let's say, PSS, RES, RM, fleet planning, whatever it may be? Secondly, you touched on the opportunity of building a larger group of airlines under the Ryanair Holdings banner in the next three years. A little bit more on the strategic side, which key assets of Ryanair, such as the Labs or the brand, do you see scaling across all those operators in the group? What's the opportunity here? Which elements would remain with the newly acquired airlines? Thanks.
Thanks, Daniel. Okay, quickly on that. The systems, it's not so much computer systems. I think what we're talking about there in terms of investment for to spool up to 600 aircraft is largely in the operations and engineering side. We have invested heavily in the last six months. There's a new management team within operations, new head of engineering. We have significantly beefed up the rostering side of the house where we had that failure last September. Main rostering team has doubled in size with significant kind of management there. We're also investing heavily in simulators. We've signed a deal to take the three more simulators coming at the end of this year, which will increase our pilot training capacity by some 40%. We are also investing heavily in, we have new hangars coming in place in Seville.
There's another one in Stansted, another one, I think the third one, somewhere I can't remember off the top of my head where it is. An investment in engineering, tooling. Then within the Laudamotion operation, it has a two-bay hangar in Vienna. There's a lot of physical infrastructure going in place in the operations, rostering, pilot training, and as we've done the new 10-year engine maintenance deal. It's not so much, I think John Hurley with me here in London. We think that the systems we currently have, we are working on an operations system to replace this line, but that won't come in place for about another 12, 18 months. That's one that we're building internally within Ryanair Labs. It's much more management, physical infrastructure in operations and engineering to cope with the 200 aircraft.
On the group structure, I think we will evolve. I think maybe over the next The thinking is Ryanair Holdings will evolve probably into a holding company not dissimilar to IAG over the next two to three years, where Ryanair DAC will become It's already that. At the moment, it's a subsidiary of Ryanair Holdings. We will see a rapidly growing Ryanair Sun and, hopefully, subject to regulatory approval, Laudamotion become much more significant airlines in their own right and begin to report through to holdings as a proper holding company, determining capital allocations to the subsidiary companies. Within that, a lot of the Ryanair skills, certainly the website and the mobile app are scalable. Laudamotion has We're helping Laudamotion with the sales, with their website development straight away.
Much of that work has been done by Ryanair Labs simply because Laudamotion didn't have those resources to do it on their own. I think a lot of the labs technology and the customer service technology that we have evolved over recent years of very low pricing and then encouraging passengers to take up optional service such as reserved seating, priority boarding, and checked-in baggage if they so wish to, we think we can roll that out across those other subsidiary companies. I also think there will be other opportunities within the M&A space.
Not that we will lead in that space, for example, if an IAG or Lufthansa were to acquire Norwegian, for example, I think it's inevitable that there would be significant competition divestments coming out of that, we would certainly want to play a role in any kind of competition divestments that would arise out of a restructuring or a takeover of either an Alitalia or a Norwegian or any of the SAS and the other loss-making airlines at the moment. A group structure, again, modeled on the IAG structure, would enable us to build some skills to participate in those kind of processes.
Great. Thanks for that, Michael.
Thanks, Daniel. Next question, please.
Thank you. The next question is from Savi Syth of Raymond James. Please go ahead. Your line is open.
Hey, good morning.
Hey, Savi.
A couple of questions from me, just on the cost side. First, the labor, the cost increase, I appreciate the color on that. Is that a little bit higher than you were expecting, and is that due to tightness or maybe because some of the costs didn't come through in FY 2018? The second one is, I know you mentioned maintenance and EU261, kind of driving the year-over-year, even though your comps are a bit easier because of the disruption last year. Just wondering if you could talk a bit more about that and if the inspections related to the Southwest accident is having an impact there. Thanks.
Well, I might have Peter just touch on the Southwest inspection. Let me deal with the first. No, actually, labor is not, first of all, I don't think labor is the price we have well telegraphed. What we have done in the last 6 months, I think a significant achievement by Eddie Wilson and the team was to put in place 5-year pay deals with our pilots and our cabin crew. In some cases, despite the opposition of local unions in certain countries. Our pilots voted directly, or in many cases, over the heads of the unions on these pay deals, which have now gone into place. That has been reflected. What those pay deals, a lot of the pay was front-ended into year one of the 5-year pay deal.
So you see an impact on it on the last 5 months of last year's numbers, and the full 12 months for the next, for the first 7 months of the next 12-month period. There's a lot of kind of analysis, I think speculation at the time that the unionization could cost us anything up to EUR 140 million. I'd say between EUR 140 million and EUR 240 million of pay increases were not there. The number is EUR 100 million. We indicated, we said it would be EUR 100 million, and I think we cap it out at that. There is still continuing growth here, and I think both on the management side, management and structural side, which I've dealt with in operations, engineering, rostering on those kind of areas so that we avoid a repeat of the September 2017 fuckup in rostering, and we are very confident that won't be repeated.
So I think that investment is necessary. A lot of that you'll see in the engineering and the operations side. There is a pinch point in engineering and maintenance around the industry at the moment as well. We have to kind of factor that in. I think in many cases, we do much of our own maintenance in-house. We need to invest in those both facilities and in the people. On the maintenance of the EU261 is just an ever-expanding claims fest for customers. It is going to become a greater challenge for airlines. Particularly, it is the pointed issue where we have a problem with the European Union, the EU261, is where we are completely not responsible for these cancellations and delays, such as ATC strikes. The legislation says that you're entitled to recover your EU261 cost.
The ATC providers around Europe have kind of legal protection from claims, we can't recover those costs. As more and more people have become aware of their entitlement to claims, there's a rising percentage of customers who are making those claims. We have successfully fended off. We've had a number of very notable court victories getting rid of the claims ambulance chasers who are in the middle, charging customers 40% for their claims. Frankly, customers are now becoming more and more aware of their entitlement to compensation when or their right to care, either where there's more than a three-hour delay or where there's a strike. In the case of strikes that we're not responsible for, we still have the right to care obligations. People have to spend more time in hotels or meals.
Airlines are being expected to pick that up, despite the fact that competing transport doesn't have to do that here in Europe. We think that will be a growing area of cost, not just for us, but for all airlines. Peter, do you want to touch briefly on the Southwest post engine inspections?
Sure. On the fan blades, we're fortunate that we have almost 40 spare engines across the company. That's enabled us to kind of mitigate the problem around this. We're doing five inspections a night on the fan blades across the engines. We're doing them in Stansted, Dublin, and our recently opened hangar in Madrid. We have support with logistics on that from CFM. We have a very robust plan in place that we would get all the inspections done by the end of June, which is required. CFM support on the spare blades has been quite poor, but because we have the spare engines and we have other spares in stock, we will be able to manage that. It is creating additional demands on our engineering department, it creates some additional manpower resources that we need to put in place.
We have a robust plan in place, we will have it done in time for the end of the period.
Thanks, Peter. Okay, thanks, Savi. Next question, please.
Thank you. The next question is from Milgram of UBS. Please go ahead. Your line is open.
Good morning, everybody. If I could ask one short-term question and one medium-term, please.
Yeah.
The first one, just based on the staff cost guidance. Certainly, I calculate you need the rest of ex-fuel unit costs of about 4% this year to make 6%. I'm just interested what the biggest drivers are there. I know the Q&A had mentioned maintenance. How significant is EU261 in your thinking there? The second question. One thing I think is probably easily missed this morning, your return on assets actually were the highest this century at 12%, the highest since 1999. I'm just interested, once you get through the two-year fuel headwind, given your top-line story should become less asset intensive with ancillary growth, is it fair to think you expect structurally higher returns from the business as we go forward through the medium-term?
Okay. Let me touch on that. I think if you're looking through to next year, obviously we've already baked in quite a significant jump in staff costs and a significant jump in fuel and oil. Even with our hedging position, at $59 a barrel, which it looks very attractive compared to $80 a spot, it's still a significant jump on last year's hedge position where the average cost of fuel was in the low 50s. We will expect airport and handling charges to rise pretty much in line with traffic growth, and I think that there will be a significant increase next year in the maintenance materials and repairs, which this year only grew by 5%. On the marketing distribution cost, there will continue to be an exceptional growth in EU261 costs and claims.
That was an area where we and all other airlines are very concerned about the continuing claims culture among passengers. It's not so bad where we're responsible for the delay or cancellation, which is very rarely. Where we are now responsible for right to care on the huge volumes of cancellations that we're not responsible for. If you take the month of May alone, we've already canceled over 300 flights in the month of May. Last May, we canceled less than 100 flights. This year, we've already canceled 300 flights because of three weekends of French ATC strikes. Tomorrow there's a national strike in France, where we face another probably 300 flight cancellations. That's 600 flight cancellations in the first three weeks of May alone, all of which are outside of our control and due to strikes.
The difficulty for us is to re-accommodate passengers when our load factors are running at 95%. It is very difficult to re-accommodate passengers. Despite the fact we're not responsible, we don't have to pay EU261 compensation, we are responsible for their right to care. Going forward, the next year, the big areas, apart from staffing and fuel, will be maintenance and EU261. I would calm down on the return on assets. I think we are facing this year certainly a structural step-up in unit cost. We will still have a very large and widening unit cost advantage over all of our other EU competitors, most of whom are facing much of the same cost themselves. We will continue, though, to be very cash generative this year.
We will, this winter, take less aircraft because we're in the gap this winter between the end of the 737NG order and the start of the Gamechanger order. Once we get through this year, I would expect a return to a reasonably flat, slightly declining unit cost outturn, particularly as more and more Gamechangers come through the system with 4% more seats and 16% lower fuel consumption. I think ancillaries will continue to perform well, I don't think it's realistic to expect a continuing improvement in our returns. This year we've managed a 20% net margin. That net margin may be under threat. I think there will be a downward trend there depending on the outcome of yields next year. Thereafter, I would expect us to return to a 20% net margin, which is where our long-term kind of profitability should be.
The driver of that in the next number of years will be the outturn on pricing, and that will be driven by consolidation. There is no doubt that Europe is moving towards a similar outturn as North America, where consolidation will take us towards four or five very large major airlines in Europe. Most of those major airlines are reasonably well-run. Air France clearly has its issues with unions, which is a separate issue, but they are clearly well-run. There will be less and less, I think, capacity growth in Europe in the next number of years, and more and more a focus on pricing, particularly in markets like Germany, where Lufthansa now controls the entirety of the German domestic market and much of the short-haul market.
I think we will see a return to fuel surcharges in the summer of 2019, but that won't feed into our numbers until FY 2020. I would expect us to maintain current profitability. We don't really run the business for return on assets. We run the business for profitability and cash flow. We would expect to maintain the recent performance on both of those fronts with a likelihood of a dip this year in terms of the profit outturn.
Great. Thanks, Michael.
Thanks, Andrew. Next question, please.
Thank you. The next question comes from the line of Jarrod Castle of UBS. Please go ahead. Your line is open.
Jarrod, hi.
Hi, good morning. Two, please. one, just in looking at the holding company structure that you were potentially talking about. I'd be interested to get your views on kind of long-haul, low-cost and whether or not that potentially is back on the table. Secondly, just looking at Ryanair Labs, 600 individuals now. That sounds like a lot of a skill base. Just trying to get the profile in terms of what is the spend that's going into Ryanair Labs, and how should we be thinking about that evolving over the case
Sorry, your line was particularly faint at the end there, Jarrod. Is the outlook on long-haul, low-cost? I have no idea. Frankly, we have no interest in long-haul, low-cost. I'm not sure, and as the Norwegian experience would suggest, I don't think long-haul, low-cost is a profitable area. Too much of the long-haul market is controlled by the legacy airlines, who are continuing to exercise very significant pricing power at the premium end of the cabin and can afford to dump the economy end of the cabin almost down at any price. I think the struggles that Norwegian are experiencing, are suffering in their entry into long-haul, which has proven to be the more they grow, the more money they lose. I think ultimately that long-haul, low-cost will be loss-making.
I would continue, though, I think we're excited by the opportunities available to feed into long-haul. We've reached agreement now with Aer Lingus. We would hope to have the system issues dealt with before the end of the year and to be launching a serious business feeding into Aer Lingus through Dublin, where we have 85 short-haul routes onto their long-haul operations. I think that's likely to be a reasonably small but growing business opportunity for us in the next number of years. Ryanair Labs, we continue to invest very heavily in Ryanair Labs. We now have three development centers in Dublin, in Wrocław in Poland, and in Madrid. The costs are not significant relative to the income that Ryanair Labs is generating through ancillaries or the speed at which Ryanair Labs is developing operating systems for us.
I have John Hurley here in London, and I might ask John just to give a comment on Ryanair Labs. I will ask Kenny Jacobs in Dublin just to give us a color for what Ryanair Labs is doing in the ancillary side. John.
Hello, everybody. Ryanair Labs, like I said, three data centers in Dublin, Poland, and Spain. It's all in-house, no contracting, low cost. We are using the data of a billion visitors per year to utilize and build the best possible solution going forward. Going forward, it's a big focus on ancillaries, improving ancillary revenue. You saw the results this year were quite promising. Next year will be continued growth in that space.
I think it's fair to say that when you're looking at the cost of Ryanair Labs, these are generally expensive individuals. The cost of Ryanair Labs on an annualized basis is a fraction of what we would be paying to consultants and to third-party providers, the Datalex of this world who have, I think, profit margins of about 30%. We would be paying these guys a fortune. The delivery would be an awful lot slower than it is through Ryanair Labs, where actually we pick up the labor cost of our own in-house developers, and we are able to develop much more quickly and deliver products and services that change much more quickly. Kenny, maybe you want to give a touch on the digital plan going forward in ancillary.
You can hear me there, can you? Just checking.
Yeah.
To take up from there, I think the bigger numbers that I would call out, obviously they're in the deck. In addition to the 43 million people we now have with myRyanair accounts, we've got 33 million people are active users of the app. The app continues to be the number 1 most used travel app across Europe. A lot of the focus and a lot of the uptick in penetration we've had in the past 12 months has been on what I would call the day-of-travel products. Priority boarding is an example that was building nicely on penetration when we changed the policy on January 15th. That gave us then an extra kicker in penetration of priority boarding.
Because we've got 33 million people with the mobile app and we've got data on 43 million people, we do see a good number of customers take priority boarding on the day that they're actually traveling. On the other big product, seats, you can see it's a very high number at 50%. It's closer to saturation, there's still some to go for on seats. Plus products at 10%, ahead of when we thought we would get to 10%. It's quite interesting. It's hard work on all of these products, and it's hard work on driving penetration of Plus. It's interesting when you start to look at this by different types of customer segments in different markets. You would have the cheapskates across Europe, we'd also have some countries and some bases where over 15% of the sectors we now sell are a Plus sector.
I think plenty to go for still on Plus. On Ryanair Rooms, conversion is on plan and visits are strong. We will have a busy summer improving the website and improving the app, and it's more like you're managing an OTA site than managing a low-cost airline website when it comes to Ryanair Rooms, because it's a different type of competition. As we said previously, about half of the bookings on Ryanair Rooms are people who do not have an upcoming Ryanair flight attached. It's a different type of animal to manage. I think going forward, it's really interesting to see how the behavior of the consumer is also changing.
We see a lot of customers. You might take the same individual who will book late in, pay a high fare, add in Fast Track, add in high priority to their booking when they're going on business travel, and they might be Europe's biggest cheapskate when they're buying their own travel. I think the trip, as we call it, is becoming unbundled, and that plays into our strategy of being able to really just target the right product to the right customer at the right time. The more you unbundle it, as in the same individual might want everything and pick the Flexi Plus fare, they might also say, "No, I don't want a bag.
I don't want to board early on certain flights." We would say, "Look, it's customer choice." One thing I would say is we're also using the power of Ryanair Labs to improve customer service. We've learned through the past six months. If you take the strikes in France tomorrow, all customers would have received an email already with the option of a refund or a move, and we're saving money because they're not calling the call center. It's one click on the app to make that move. We're using digital to improve customer service already. Okay?
Thanks, Eddie. I should also say, there's a big misunderstanding that we've attracted some negative publicity in the last week for the move of non-reserve passengers could check in four days before travel. We produced that to two days before travel, mainly so that we can create more space for people who want to pick up or take reserve seats. But it's not a measure that's designed to force people to pay airport check-in fees of EUR 50. In actual fact, the vast majority of our customers are now checking in on a mobile app. Whether they're away for the weekend up in the Spanish hills or they have no difficulty checking in online on the mobile app within the 48 hours, which is still double. Typically, British Airways, Aer Lingus, and others for their economy passengers only allow them to check in 24 hours before departure.
It's not a money-making move. It's simply a reflection of the fact that actually, online check-in has moved to the mobile app, and we would have no difficulty reducing that to either 48 hours or even 24 hours without it causing any passenger any inconvenience whatsoever. Thanks, Jarrod. Next question, please.
Thanks.
Thank you. Next question comes from Alan Bates of Deutsche Bank. Please go ahead. Your line is open.
Hello, Alan.
Hi, morning, everyone. I was just wondering, there's two things, please. You talked about engineering, we know about rostering. You talked about maintenance. Are there any other areas you just think you need to bulk out, just to make sure that 2024, the infrastructure is all in place to get there? Secondly, particularly with Laudamotion now as well and the things you've said in the past, do you have any updated thoughts on A321neos? Because obviously you've got easyJet and Wizz saying the unit cost is just spectacular. Thank you.
I think the three areas of bulk out have been in operations, engineering, and labs. They're well flagged. Finance, there's been some new management added to the senior team in finance. That's all there now embedded down. Sales and marketing, I think Kenny would say is reasonably stable. I think we're reasonably happy now, but we have front-loaded a lot of that investment, both in staffing and in management, with a view towards have we got the right resources in place for 600 aircraft, how do we avoid having a kind of rostering management failure or a kind of a bunker mentality within any one area of the business that could fall over going forward. We don't expect there to be any other areas of significant investment on the labor side.
At Laudamotion, again, the attraction of Laudamotion is, one, it's an Austrian AOC with a big presence in Vienna. It's also an Airbus operator, and it was one of the reasons we originally made a bid for Aer Lingus back as far as 2006. We want to have a relationship with Airbus. I think we need to establish credibility with Airbus. We need to have an Airbus operation within the fleet. I am less motivated by aircraft. I've always been kind of pretty much. I don't know what the word is, but I never really care which aircraft it is or what. It's always about the cost of the aircraft. I think whether you look at the A321neos, the Boeing MAX 10s, which are the Boeing equivalent of about 240 seats. They're both very good aircraft. The question is, what cost do you buy them at?
The market has been overheated, I think, for the last 2 years on both 73s and on Airbuses on the neo front. The lease rates and the cost of those aircraft, I think are too high. Boeing has made us an offer on the MAX 10s, which would have been significantly ahead of where we'd ever bought an aircraft before. We politely said, "Thank you, but no thank you." Whether it is we can grow, the attraction of having Laudamotion there is if the right opportunity comes along. Remember, we have a very low-cost order for MAX for 197 seat, 737, 200 Gamechangers that are going to come through over the next six, seven years out to 2024. We're secure in our aircraft fleet program, and we already have a huge aircraft maintenance or cost leadership over easyJet.
You look at, for example, Wizz Air's and Norwegian Air Shuttle's aircraft ownership costs, they are ridiculously expensive because they're doing these sales and leasebacks and putting them on the balance sheet at an inflated price. We add all our aircraft to the balance sheet as a net purchase price, and we don't play games on. We're not trying to take out or take profit off the table on the aircraft. You're getting the benefit of our significant buying power and the fact that we opportunistically put those deals in place in 2013 and 2014, when Boeing needed somebody to buy the remaining NG production and a lead customer for the 800, for the two of the Gamechangers. I would be very happy to take either an A321neo or a MAX 10737, but only when we get to the next downturn in the industry.
I suspect the next downturn in the industry is coming at us sooner rather than later, as oil prices rise towards $80 a barrel. Who knows, maybe they're heading for $100 a barrel. Frankly, in the more short to medium term, I hope they hit $100 a barrel because that will speed up consolidation and will take us into the next round of opportunistic aircraft orders.
Okay. Very clear. Thank you.
Thanks, Alan. Next question, please.
Thank you. The next question comes from Monique of Citi. Please go ahead, your line is open.
Monique.
Morning, everyone. Just a couple of questions from me. The first one on fares. Obviously, 4Q fare is really strong, up six. Even if you strip out underlying impact from Easter, maybe two percentage points, it still looks like a big move in the underlying fare outlook 4Q versus 1Q this year. Could you comment on that? Is that partly a result of some of the short-term capacity exits you saw in Germany, for instance, from the likes of Air Berlin coming back online? Secondly, ancillary revenue growth also really strong in the year and fourth quarter in particular. That, I suppose, is despite some headwind you would have seen from your new baggage policies and lower baggage fares.
Could you just give us some indication of what kind of headwind that caused to your ancillary revenues and say what the kind of underlying ancillary revenue growth was?
Anyway, the Q4 fares are somewhat distorted. Obviously, you've identified that the first half of Easter was in Q4 and not in the prior year comparable. It's also the quarter where we had grounded 25 of the winter aircraft so that we could accomplish all the pilot leave over the winter period. In many respects, we grounded 25 aircraft. We were operating less capacity than we thought we originally would. You see that reflected in others, like easyJet reported very strong underlying yield performance in that quarter, mainly because we had taken out a lot of our U.K. domestic flights where we compete head-to-head with them. I think some of the Q4 is based on Easter and us grounding more aircraft. They're all back flying again once we got to April. We're into a more normal steady state going forward.
Q1, the fares are down 5%. We should always be cautious on airfares here in this industry. Q2 looks like fares up about 4%. A lot of that depends on what the close-in bookings will be, and also how many more cancellations of high-yielding weekend flights we have to suffer through May and into June if the French continue to have these weekend strikes of air traffic control. It's not so much that the cancellations, and clearly the cancellations are painful, but you're canceling what are high-yielding, very profitable flights at weekends. So is everybody else. Ancillary revenues, again, be cautious. We have performed very well in the last 12 months. Traffic growth of 9%, ancillary revenue growth of 13%, up another four.
Most of that has come from what is really cost-free services, such as the continuing, I think, trend of customers to take up those kind of reasonably cheap services like the reserve seating, the priority boarding. Baggage, remember, baggage goes into the underlying. We put our baggage fees in the underlying airfare, so it's not in ancillary. The take-up of baggage has continued to decline. We're down to low teens now of customers who are checking in bags. There is an operational challenge for us in that we have at least eliminated the baggage issue at the boarding gate. Certainly during the summer here, we're seeing flights where we're taking anything between 100 and 150 second gate bags, second bags going in the hold free of charge.
We need to be able to manage that, and we'll have to be able to regulate that at some point in time in the future. We may have to do something more on the numbers of passengers who can bring a second bag free of charge to the gate. We're not quite sure what, but it's got to be operationally efficient.
Understood. Thank you.
Michael, do you want to add anything else on the ancillary revenues there?
No, I think it's fine.
Monique, you just referred to the Plus products. The Plus products do get caught in the scheduled revenue as opposed to ancillaries. You would've seen they're up to 10% penetration now on the Plus. That includes a bag, which would normally be scheduled, but it has some other bits and pieces, like Fast Track, et cetera, that would be down in the ancillaries. I wouldn't get caught up, Monique, trying to figure out what's the cannibalization between Plus and then the ancillaries. We'll spit them out for you as we've done today. It's relatively straightforward.
Thank you. Next question, please.
Thank you. The next question comes from the line of James Hollins at Exane. Please go ahead. Your line is open.
James, hi.
Hi there. Two, please, from me. Firstly, one for John on the move to Amazon Web Services. I was wondering if that would, over the next few years, both improve your cost base and more specifically, improve your yield management. Certainly, the press release from Amazon would suggest as much. I was wondering it might just be guff from their behalf. Secondly, you're talking about capacity above average. I'm just wondering if you could quantify either what you're seeing as industry growth over the next couple of quarters or better still, on competing routes with you, what you're seeing in terms of the data point on competing capacity. Thanks.
Okay, maybe I'll take the second one first. We were surprised that Lufthansa were allowed to buy up Air Berlin with no kind of competition divestment at all. They went to a 97% share of the German domestic market. That did mean that a lot more Air Berlin capacity has remained flying in Germany. easyJet came in and took up the Berlin operations, and we, through Laudamotion, have come in and taken up a lot of the flights from valuable slots at Berlin, Stuttgart, Düsseldorf, that we otherwise couldn't get access to. Germany, I think, is going to be a very underperforming market this year, particularly because Laudamotion is selling a lot of its capacity at very short notice into the peak summer period. That's ultimately good for Laudamotion.
Customers are enjoying incredibly low prices on flights to destinations in Palma de Mallorca during the peak period. You take that capacity not being taken out of the system, you still have Norwegian adding kind of scattergun capacity in Spain and Italy. Not something very well thought out or planned. They seem to be just taking short-haul aircraft and dumping them into markets where they just lose more money. We're adding capacity. I would say our capacity additions are rational, but across the system. Doing well now in Spain and Portugal, in Central Europe. Italy is performing well. Germany is weak. The U.K. has certainly improved given the Monarch bankruptcy last year. Again, a lot of that capacity has been backfilled by easyJet, ourselves, or adding more aircraft to bases in Birmingham, East Midlands and Manchester, and Jet2 have taken up some of that capacity as well.
I think some of the capacity we thought would've come out last year through bankruptcies hasn't necessarily come out, and that's likely to continue. I think the big issue for us is, will be the timing and nature of the inevitable, in my opinion, demise of Norwegian at $80 a barrel. I would've said it will go bust. Clearly now it looks like it may be rescued by a BA, an IAG or a Lufthansa or somebody like that. I think even within that would take an illogical competitor. I think one of the upsides of Norwegian to these guys is their order book. I think instead of those short-haul aircraft being deployed on new capacity growth elsewhere, I think they'd take some of those orders to replete within their existing operations. I'm not sure about the timing of the strategy of the IAG announcement.
It seems to us that they have given the bondholders in Norwegian hope. One way or another, it would be helpful to the industry generally to see illogical loss-making competitors like SAS, Norwegian, Alitalia, which continues to lose money and is in administration, either rationalize or join in the consolidation process. I think ultimately then the capacity growth in Europe will settle down to more being reflective of GDP growth rather than at the moment, it's running at two or three times ahead of EU-wide GDP growth. John, do you want to touch briefly on the Amazon-based web service?
Yeah, certainly.
-claims.
Claims are probably a little bit overexcited. Basically, Ryanair has got three data centers across Europe hosting the website. That gets refreshed every five years. 18 months from now, we're due a refresh. Instead of refreshing it, we're moving to the cloud, basically. Primarily doing it to get to scale, to get to protection as we grow the website to 200 million passengers over the next six years. It's already busy at 1 billion unique visits per year, and to protect that, all the scale, et cetera. It will reduce costs slightly, but nothing material to call out a note on. Yes, Amazon has a lot of interesting products. We are looking at them, particularly around live streaming of data using Kinesis that will give us a benefit going forward. Will it benefit our needs in the future? Who knows. We're definitely looking into that space.
It certainly will help us having better products offered to customers at the right time.
Great. Thanks, John. Next question please.
Thank you. The next question comes on the line of Mark Simpson of Berenberg. Please go ahead. Your line is open.
Okay. Yeah, morning. Just wanted to touch first off on the ancillary side. If you plug in your headline guidance FY 2019, the residual line is ancillary per pax. Essentially, it kind of implies 13% growth in ancillary revenue per pax for FY 2019. I'm sure you're not saying that. Can you give us a firmer sort of guide on that? Given the fact that you were
Woefully off in the Q3 full year 2018 guidance that you gave at +2, and it came in at +4.3. As I say, some guidance on ancillary to a forecast for this year would be good. Second question. Last year you gave us five quarters of hedge positions, which included the first quarter of the second year. Can you give us a Q1 2020 commentary on your hedge position?
Okay. I'll do the first, that Neil asked you to comment on the hedge position in the first quarter of FY 2020. We've given you what we've given you on ancillaries. I think your implication is a bit overly optimistic. We think in the next year, traffic growth about 7%, I think the most likely outturn on ancillaries would be a similar performance as this year. We'd be hopeful that ancillaries will continue to build revenue per passenger upper, I think around 4% is reasonable. That could be three, it could be five. Remember, as Kenny pointed out, some of the service products we're doing at the moment will top out. I'm not sure that there's much more room in reserve seating above 50%-55%. Priority boarding will continue to grow. Again, it's at 20% at the moment.
It may get to 30% over the year, I'm not sure it'd go much higher than that. Be cautious. I think at 7% traffic, maybe around 4% is a reasonable outturn. We'd be more at 10, 11 rather than 13. Neil, on fuel in the first quarter of the following year?
Mark, this time last year, I think we had about 10% of our FY 2019 hedged. We don't have any commodity hedging in place since the first quarter of FY 2020 at this stage, we do have a fair bit of our OpEx or Euro dollar cover in place out there. We're about 50% hedged for the full year. That's kind of skewed toward the first half of the year, where we're hedged at about 125 for just over 80% of our OpEx in the first half of the year on the fuel side, no commodities yet. Just going back to your ancillary guidance as well, Mark, I think your numbers are very much based on the upper end of the guidance. Clearly the ancillaries will be a determinant on whether it's the upper or lower end of the guidance.
Fair point. All right.
Thanks Neil. Next question please. We've got about five more minutes for questions. If we could speed it up, that'd be helpful.
Thank you. The next question comes from Johannes Braun of. Please go ahead. Your line is open.
Yes. Hi, good morning. Just two for me also. Firstly, obviously you are an increasing large client to Fraport, not only in Frankfurt, but also in Greece. Just interested, how do you think about the targeted significant fee hike that Fraport has stipulated with the Greek authorities and which will kick in in 2020, 2021? Is there any way you can challenge this fee hike? Secondly, can I just ask about Ryanair Sun and Laudamotion, at which unit cost and profitability level do you expect these airlines to operate after the startup phase? Also, will these two subunits be unionized as well or will you try to keep them union-free?
Okay. David, may I come back to you for some color on the Fraport fee hike in 2020? Can I just briefly on Ryanair Sun, we expect it to operate at similar margins to Ryanair. It will be profitable in year one. A lot depends on the speed at which it builds over the next year or two. We need to see how the charter market in Poland performs this year and what the demand will be for flights in Ryanair Sun into the September 2020 program. Laudamotion will be loss-making in year one. Probably, we would hope to be close to breakeven in year two. The challenge for Laudamotion is that while it's been split out by Lufthansa has been forced by the competition authority to lease it originally 14 aircraft. Lufthansa haven't provided all the aircraft. It's now down to nine aircraft.
The leases are very expensive, and they run over a two and a half year period. Until we can replace those expensive Lufthansa aircraft, I think Laudamotion will be loss-making, but not significantly loss-making year two, hopefully close to breakeven or a small profit in year three. Thereafter, once we can restructure the fleet in Laudamotion, and I think get it to a reasonable scale of 30 to 50 aircraft, I see no reason why Laudamotion won't run at the same kind of cost base and margins that Ryanair operates at, given the benefit of the Ryanair website, our sales, the ability to deliver sales, and our presence in the two big markets of Germany and Spain. Obviously, we will lean heavily on Niki Lauda and the Lauda brand in Austria, where it is a much higher, greater presence than Ryanair has in Austria.
Austria, I think is a market that is certainly attractive to us. For many years, it's been dominated by Austrian Airlines, the Lufthansa subsidiary, with very high fares. It needs choice and competition. David, Fraport?
Well, the Fraport increases are entirely predictable. If they're going to sell a monopoly to the highest bidder, that's what's going to happen. It has already happened. They've had some increases in the first year, and our response has been to concentrate our activity in the summer peak, when you can make money at higher prices in Greece at the summer peak. The issue is what they do for the rest of the year. We are in discussions with Fraport about a growth plan that would incorporate shoulder periods and the winter, because that's what they need to do. Otherwise, it will be summer peaks, and we'll live with that.
Thanks, David. Thanks, Johannes. Next question, please.
Thank you. The final question in the queue comes from Catherine Leonard, Numis. Please go ahead. Your line is open
Morning, everyone. Just in the interest of time
Right
I'll try and be quick but in terms of the credit that you currently have operational for the Ryanair Rooms, do you have a penetration level that you're aiming at until the point where you remove that credit? How should we think about the time until that becomes profitable or margin-accretive to the group? Just secondly, just on the cost increases to staff costs that you've alluded to, I know that we talked a little bit about this already, but when we met in February, you talked about staff costs per pax not exceeding sort of the six EUR per pax or EUR 6.1 level, and that was sort of in line with the guidance you'd given on the EUR 100 million of annualization of costs. The current guidance implies sort of a EUR 6.8 per pax, if my calculations aren't incorrect.
Just wondering what has changed so rapidly in the last few months? I know you talked about investment, et cetera, but can you just give a little more color on that?
Okay. We haven't got a threshold at which penetration of Ryanair Rooms. Ryanair Rooms is growing significantly at the moment, but it's a non-profit earner. We're giving back effectively the 10% commission we make on the hotel rooms to customers in the form of travel credits on Ryanair services. We would expect that to continue, we would expect to be delivering that kind of a kickback of commissions, I think certainly for the foreseeable future, certainly over the next couple of years, while we build up the penetration of Ryanair Rooms. The test of this is to see how quickly and how much we can build, not just to convince Ryanair customers to book hotel rooms using Ryanair Rooms, but to persuade non-Ryanair customers to book hotels using Ryanair Rooms. We're offering a combination of the lowest hotel prices, but we kick you back the commission.
We think that's ultimately how we can attack the business models of the Booking.com's and the Expedia's, who are very successful at what they do, but have a very high margin built into their system. We need to be able to persuade the hotel providers, "Look, we can do it. Ryanair Rooms will do it at a much cheaper commission price than you will have to pay to the Hotels.com's, the Booking.com's." In the short term or in the more medium term, it's not about making money out of that, it's about building scale. Cost increases, I'm not quite sure what the point, but maybe Neil, do you want to answer that question?
Yeah.
I thought we had priced it pretty well, what the labor cost increase was going to be.
Yeah, Catherine, we had six per passenger, or just under six per passenger, rounds up to six in the year just end. We're going to be under seven, so just approximately EUR 1 per pax going up there. I thought we'd made that point quite clear, actually, at the analyst day back in February. It's pretty much in line with what we indicated, where we would see the staff go up by effectively EUR 1. That's what's happening and that's coming through in the numbers. No real surprises.
Okay.
Thanks, Catherine. Any other questions?
We do have one further question that has come through. That is from Alex Patterson, Investec. Please go ahead. You are online.
Last question, Alex. Off you go.
It is just one question for you.
Yeah.
Just on Laudamotion, has your guidance changed slightly? You previously said EUR 50 million of start-up and operating losses in year one. You're now saying EUR 100 million until the break-even. Is that-
Yeah
now greater than EUR 50 in year one?
Well, yeah. It's greater than EUR 50 in year one, but year one will run across our fiscal year. What we didn't factor into was the delay in getting the aircraft out of Lufthansa, and two was the delay in being able to put the aircraft on sale. We really only released the Laudamotion summer schedule from Germany to Spain in April. It's a very short window for selling the. Now, we clearly will fill those flights, but we will fill those flights at low fares. A lot of the Germans had already pre-booked their trips to Malaga, Spain, and to Greece at that point in time. There have been significant start-up costs, mainly paying the pilots, the cabin crew during the months of February, March, April, and May.
Allowing for much lower yields through the summer peak because of the late release of the flight program. We're looking then, we will have a major drive, it will be announced in the next week or two. There will be a very large Laudamotion schedule focused around Vienna this winter. You have others like Wizz, Vueling also talking about expanding in Vienna this winter, it's likely to be a very low-yield environment in Vienna this winter. In almost all cases, wherever we've come up against Vueling and/or Wizz on a point-to-point basis, they tend to retreat, we see no reason why that won't be the outcome of the expansion in Vienna this winter.
I think the difference, where we had foreseen was a year one start-up cost of EUR 50 million, that's risen to EUR 100 million, which is largely going to be lower than our aggressive yield and pricing in the Laudamotion environment for the first up until March 2019. Thereafter, though, we would expect next year, the summer 2019 schedule for Laudamotion, particularly if we can add more aircraft from Germany, the main cities in Germany and Austria to Spain to be very strong. We'll have been in the market early. We'll have released the summer 2019 schedule many months earlier than this year. David, maybe you want to add some color to that on the Laudamotion prospects for summer 2019?
Yeah. We really can't read too much into summer 2018. As you say, we put seats on sale five months ahead of flight dates which had already been on sale for five months with competitors. It's interesting, if you take Düsseldorf, where Laudamotion itself had no presence and Ryanair has no presence this year. Between us, we'll represent about 30% of the capacity between Düsseldorf and Palma. Pretty much all of that went on sale with five weeks to go. It's clearly a very lucrative market, but not this summer. I have a feeling the late entry of our own capacity and Laudamotion's capacity generally across the piece is going to dampen close-in booking for competitors as well. Niki and Air Berlin have been well replaced in Germany.
Lufthansa and Eurowings have put in about 4.5 million seats, easyJet, 2.5 million seats, ourselves and Laudamotion between us, about 2 million seats, which is pretty much all of Air Berlin. There's a lot going on there, and it won't be pretty this summer.
Great. Thanks, David.
Michael, if I could just add there-
Sorry.
The one other thing, James, that has changed, or sorry, Alex, that has changed since we announced this back in February, is that fuel has gone up between $10 and $15 a barrel.
Laudamotion is essentially on track this year. Okay.
Thank you.
Ladies and gentlemen, thank you very much for participating in the call. We have extensive roadshows. I think there's 14 teams on the road across U.K., Europe, and U.S., we look forward to meeting you all at some stage during the week. If you haven't got a meeting, please contact either Cindy or Davies, we'll be happy to schedule a meeting, an investor meeting for you during the week. Other than that, we'll shave it back to in the office next Monday, if you have any individual questions, please route them through Shane or to the head of investor relations, we'll deal with them on a one-to-one basis. Thank you very much, everybody. God bless. Bye-bye.
This concludes the conference. Thank you all very much for attending. You may now disconnect.