Earnings Call: Q4 2018

May 21, 2018

Good morning, ladies and gentlemen. Welcome to the Ryanair Full Year Conference Call. Michael O'Leary, Chief Executive. Joining me this morning is Neil Thoreman and later we'll be joined by Stephen Furlong of our company broker, Davies, who will try to lighten up our usually boring question and answer session. This morning, as you've seen, we reported a 10% increase in full year profit to €1,450,000,000 to the year ended March 31, 2018. That was driven by lower fares. We We cut fares by 3% in the last year to stimulate a 9% growth in traffic to over 130,000,000 passengers. During the period, we cut unit cost by 1% ex fuel that rose by 3%. We stimulated record ancillary spend. The ancillary spend was up 4% per passenger. We took delivery of 50 new Boeing 737 aircraft last year. We have negotiated new 5 year Pay and productivity deals with most of our pilots and its capital group, and we have returned over €800,000,000 to shareholders via buybacks, which brings to almost €6,000,000,000 the funds that have been returned to shareholders through buybacks, especially dividends over the last 8 years. I think the key in the last 36 months was the way we as a company and a management team have recovered quickly from the September 2017 pilot rostering failure. Over the last year, most of our growth has taken place in the larger EU markets of Germany, Italy and Spain. We expect above average EU Assetty growth to continue into summer 'nineteen, and therefore, that will have a downward effect on airfares. However, significantly higher Oil prices will impact margins, particularly of those EU airlines who are continuing to expand despite having no prospect of achieving profitability. And we think that will feed into higher airfares, but it will have a lag effect as it usually goes off about 12 months. Last year, we opened 4 new bases in Burgas, Menium, Naples and Poznan. We launched over 2 60 new routes. This summer, we are already entering new markets in Jordan, Turkey and the Ukraine. Labs has established and continues to grow 3 new 3 development offices, 1 in Dublin, 1 in Brosnan and Madrid, which is growing rapidly. Labs continues to transform our customer service and our ancillary services. The My Ryanair membership has grown to over 43,000,000 customers. Our improved mobile and digital platforms have delivered a 13% increase in ancillary revenues, An increase in spend of 4% per guest to over €2,000,000,000 and we're well on track. In fact, we'll hit our target of 30% ancillaries, amounting to 30% of total revenues, a year ahead of target. In terms of customer service, we've lowered our check-in bag fees, while increasing the bag allowance announced that that has speeded up gate boardings. In May, we launched our new environmental policy, which commits Ryanair to a series of industry leading environmental targets, including moving becoming the 1st airline to commit to becoming traffic free within 5 years. One downside of the last year has been a decline in our on time performance, regrettably from 88% to 86%. More of the this entire the entire of this decline is due to the continuing momentum of services provided to us by ATC Services in Europe, not just the frequency of French, Spanish and Italian aircraft control strikes, but also the continuing experience we have of UK and German ATC being short staffed, particularly weekends are not Ross Finner Staffing Property, which is leading to significant ATC capacity delays, particularly at weekends. On costs, Ryanair has a significant cost advantage over all other EU airlines. In the last year, our ex Q unit cost rose 3%, mainly due to the cost arising from the September 2017 cancellations, EU261 costs, rights to care, passenger refunds and also the impact of higher staff costs, mainly pilots and cabin crew, which baked into the last 6 months of the year. In the next year, FY 'nineteen, we will continue to invest substantially in our people, Also a new management, new systems in our business. As we scale up now to take delivery of over 200 Boeing 737 game changer aircraft over the next 6 years to see the fleet rise to 600 aircraft and traffic rise to over 200,000,000 passengers. This year we expect our staff costs will rise by about 200,000,000 dollars 100,000,000 of that was the Pay increases negotiated with Paris and Cabin Crew last year. The other $100,000,000 will be the increase additional headcount. Fuel this year will be a major cost wind for major cost headwind. We are hedged for FY 'nineteen, 90% hedged at $59 per barrel, which is significantly lower than the current spot, which is somewhere in the high $77 per barrel. But into FY 'twenty, I think we're also facing significantly higher oil prices. We believe that will be reflected as it has been in the last 3 years with lower fares or lower oil leading to lower fares. We think fares will begin to step upwards to cover higher oil prices, but there will be a lag effect of about 12 months. In terms of consolidation, we think the higher oil prices will lead to more airline failures in the EU this winter. Already in the Last year, we've seen the bankruptcy of Monarch, the bankruptcy and subsequent sale of Air Berlin to Lufthansa. IAG has made offers to buy the Grenhilly Lossmaking Norwegian. And we ourselves have participated in that process with a 25% investment in Laudamotion, And we hope to set that up to a 75% ownership within the next number of months. We've also set up Ryanair Sun, a Polish charter subsidiary, which has started flying in April and will be trading profitably in its 1st year of operations. M and A will continue. We don't see ourselves as being a prime mover in European M and A because we intend to continue to grow strongly and organically with our new low cost aircraft deliveries. But it's undoubtedly that there will be other opportunities like Cloud Emotion and we will certainly be Live to them and we'll participate in them where we believe it will deliver will enhance Ryanair's profitability. On Brexit, we remain concerned at the possibility of a hard Brexit. If there isn't a hard Brexit or if there is an extensive or long transition period, then that's fine, since it's fine, but we must prepare, I think for a hard Brexit either in March of 'nineteen or in January of 2021. And we'll be bringing proposals to the AGM in September, which in the event of a hard Brexit and that we will need to address our non European shareholder base. And it is certainly likely that we will seek or move to remove the voting rights from non EU shareholders, all non EU shareholders in the event of a hard Brexit. Just briefly to touch on the balance sheet, we continue to have a very strong balance sheet. We have 400 aircraft on the balance sheet at the net purchase price, which is a very significant and substantial discount to current market values. We continue to have very large cash balance since about $3,500,000,000 We maintain a small in fact, effectively a 0 net debt position, Despite generating over $2,000,000,000 in free cash flow over the last year, we spent about $1,500,000,000 in CapEx. We returned over $800,000,000 to Shareholders in Buybacks and Yet the Net Debt position really didn't change. It moved from a true figure of $240,000,000 in March 'seventeen to about $280,000,000 in March 'eighteen. It would have been 0 if we hadn't launched the share buyback in February. Turning to the outlook. We are, I think, pessimistically cautious for the next 12 months. We do expect our underlying growth to be strong. Traffic will be up 7% this year to 139,000,000 passengers. Load factors will be flat at 95% because it's not practical to increase them any higher than this. This year, we expect unit costs ex fuel to rise by about 6% per passenger. Including fuel, they will rise by about 9% per passenger. We think this will be a one off jump. Thereafter, we've made this adjustment this year, we expect particularly with the delivery of low cost Boeing 737 game changers, both with 4% more seats and the 16% lower fuel consumption that unit costs thereafter or after this year We'll continue to be flat or slightly downwards. However, when we adjust for $200,000,000 in higher staff costs this year, The continuing rise in EU261 costs as more and more customers both claim their entitlements and become entitled to these compensation, mainly as a result of ATC failures and a $400,000,000 higher oil bill. We do not believe that the growth in ancillary revenues, which will be strong, will be sufficient to cover that. We have limited We have very limited fare and yield visibility. In the first quarter, with the first half Easter had moved into the Q4 of last year. So in the Q1, Average fares were down about 4%. We expect in the Q2 to September average fares to be up by a similar amount, about 4%. Again, this is subject to the qualification on the level of closing last minute closing bookings. And then for the remainder of the year, we expect overall fares to be flat. So our outlook for the next year is fares will be flat, Ancillary revenues will be slightly up, but not as sufficient to cover 2 significant increases in costs, mainly on the staffing, EU261 and fuel side. And accordingly, we're guiding full year profit next year will be down at a range of between $1,250,000,000 to $1,350,000,000 compared to this year's 1,450,000,000 None of these figures include any of the investments in Laudamotion. And we would hope within the next before the end of calendar 2018 to have Received EU approval to acquire 75% share in Laudamotion, and we will then make an exceptional provision of about 100,000,000 to cover the startup costs and the 1st year losses of Vowden Motion. With that, we'll now take you through the I'll share the slide presentation and then we'll open it up for questions. So I'll touch briefly. As with some of these slides have changed, Ryanair remains the lowest cost, lowest fare airline in Europe. We're number 1 for traffic, number 1 for coverage, number 1 for customer service. Our year end profits have grown 10% as we have maintained a 20% net margin despite the costly impact of the September 2017 on Roster and Failure. And the key underlying, I think strength of our model is we have 210 Boeing MAX Aircraft on order, which will lower our costs as we grow 200,000,000 passengers by FY 'twenty four. Last year, we reduced our average fare by 3% to 30 €9, it's significantly lower than all of our EU airline competitors, although we don't have their updated fares yet. In terms of costs, Our average cost per passenger ex fuel is €27 It is materially lower than every other airline from Wizz to Easyjet, up to Eurowings. And in fact, the gap between us and everybody else is widening as those airlines see their unit cost rise at a faster rate than Ryanair. Here. We remain number 1 for coverage for 86 bases spread across 37 countries and Canada. And this year, we expect to grow from 130 to 139,000,000 to passengers, Adam, as we established number 1 or number 2 market share across most of the major European markets. And Neil, do you want to take some of the results? Thanks, Marshall. Yes, strong year in FY 'eighteen. So our guests increased by 9% 130,000,000 customers at low factors, industry leading, 95%. Average fare was down 3% in the year. However, ancillaries were Extremely strong. We saw good growth and revenue as a result was up 8% to over €7,000,000,000 Profit was up 10% to €1,450,000,000 in the year with a net margin of 20%. And our buybacks have helped our earnings per share, which increased by 15%. Our balance sheet, which is a triple 50 plus rated balance sheet, is one of the strongest in the sector. We've had a lot of equity build up In the assets, in the year just past, we generated over $2,000,000,000 from operations. This funded $1,500,000,000 of AerCapEx and $830,000,000 of share buybacks, and yet we still ended up with a net debt position, which was broadly flat year on year. One of the key advantages of the strong cash generation in the business is that we've been able to reward our shareholders over the last decade with returns of just over 6,000,000,000 Michael, back to you. Okay. Thank you. In terms of current status, so we continue to grow strongly in Europe's bigger markets, Germany, the UK, Spain, Italy and Central Europe. Ryanair Labs and our investment in Ryanair Labs, which continues to pay significant dividends. We have a record of 1,000,000,000 visits to the ryanair.com website and mobile forms last year, and it is driving improved performance in ancillary sales. We are facing 2 major, we have that fleet cost wins this year. On pay, about up €200,000,000 fuel, we expect the fuel bid to rise by about €400,000,000 even with our Successful Hedging Policy. And there will also be continued growth in E261 costs. On union recognition, we've made significant progress over the last 6 months, there's more to be done, but we're working through a process of meetings, negotiations with both pilots and cabin crew unions across most of the major European countries. We've launched a radical environmental policy under which Ryanair commits to industry leading, In fact, revolution retargets, not least of which is to be plastic free within 5 years. We remain cautious on the Brexit. Yes, there's a transition deal in place to December 'twenty, but we have to put in place, I think, protections for our Shareholders and our business in the event of a hard Brexit, we are developing additional airlines, Ryanair Sun, the successful profitable Polish charter subsidiary and for the Motion, which we hope working with Niki Lauda and his team to make it Austria's number one at Lofairs Airlines. And we are on the cusp, I think, of a very exciting 5 year period of growth and profitability as we take delivery of over 200 game changers. Just to touch briefly on labs, it is driving as we have Neil and I have said, significant increases in penetration. The spend capacity is up 4% in the last year. We're on track to deliver 30% of total revenues through ancillaries a year ahead of our 5 year target. And just to give you a sample, the Plus products, which are the premium products have now grown in the last year from 3% in March 'seventeen to 10% of customers. Allocated seating has moved from 23% of passengers to 50% of passengers and priority boarding, which this time last year accounted for just 4% of customers. Now 20% of our passengers are choosing our the priority boarding service. I think it's important while next year we face a 6% increase in our ex fuel unit costs. We put that in context against our competitors. Over the last 8 years, over the last 7 years, We've seen even allowing for this year 6% increase in next year unit costs, our unit costs per passenger are down. During that period, most of our competitors, in this case we've used the example of Easyjet, have delivered significant rises in their unit Austin, their unit costs continue to rise inextricably on a yearly basis because they're unable to manage unit costs, which is why they're unable to compete with Ryanair in those markets, the many markets where we compete with them. To Church's Brief Young Union, we have made entered our first two recognition agreements with Valta in the UK and Ampac in Italy. These two markets alone represent over 45% of pilots. Over the last 6 months, more than 90% of our pilots have voted on and accepted 20% Pay Increases, which is key I think in a tightening market for pilots as we are not just competitive on pilot pay, in fact we're about 20% ahead of Our low cost 737 competitors on pilot pay and we're seeing a significant surge in pilot applications to us, both experienced pilots and new pilots. We continue our active engagement with other unions. We are in advanced discussions with pilot unions in Spain, in Germany. We are making less progress here in Ireland, mainly because the unions take months to reply to our letters, but we continue through that process. The cabin crew recognition process is underway, again with significant progress made in bigger major markets, less progress but continuing discussions underway with in smaller markets. And I think one of the certainly one of the opportunities that arises out of this union recognition process It has been the restart of our negotiations with airports in France and in Scandinavia, where previously we had avoided establishing bases because of our antipathy to union recognition. Now that we have union recognition, there's nothing to stop us open bases in some of the in those countries And those base negotiations have already begun. This doesn't mean that we won't face other strikes and we can't rule out strikes during the summer period. If there are, we will take them as we have in Germany at Christmas when the German pilots went on strike And in Portugal at Easter when the cabin crew went on strike, in both cases the strikes were poorly supported, mainly because The unions were unable to communicate either to us or to our people what exactly it was they were calling the strike over. I think we're engaged in active discussions with them. But Being unionized means we will have occasional strikes. If for some reason the demands from the unions are unreasonable, then we'll take the strikes and we will put up with them. Our environmental policy will make Ryanair. We are already Europe's greenest, cleanest airline, but it commits us to moving further in that direction. We expect to be plastic free in 5 years. The new aircraft will lower our noise emissions and our fuel consumption. In January, we introduced a voluntary The offset scheme for customers, which has been very successful and will lead to multimillion € donations. We're giving all that and charges over the coming years as we are also committed to the IATA 2,050 charges for CO2 issues. Brexit, as I said, we are cautiously optimistic that there will be a transition period, which will postpone it until December 2020, Hopefully, we must continue to manage the business for a hard Brexit. Again, we'll have proposals on that, which will essentially involved limiting or restricting all voting entitlements of non EU shareholders in the event of a hard Brexit. In terms of new AOCs, the Ryanair Sun, which The forward charter airline with 5 aircraft to cover 18, it will be profitable from year 1 and it is operating and trading successfully. Laudamotion will be a bit more complicated. At the moment, we have a 24.9% stake. We have an agreement with Mickey Laudamotion to take out to a 75% stake. The 1st summer's trading in Laudamotion will be very difficult, partly because Laudamotion has committed to entry leasing 9, it was It was supposed to be 12, but Lufthansa had failed to deliver 3 of those aircraft. The 9 that they have delivered will be very expensive and are in anything excessive for the expense of leases. Laudamotion is committed to those for a 2 year period, so he's likely to lose and that's where that forms the main basis of $100,000,000 start up costs. It's from the summer of 2018 will operate with about 19 aircraft, 9 of which are expensive Airbus leases from Lufthansa, where Ryanair is providing them with wet lease aircraft for 10 of our Boeing 737s, And we would hope to replace those with Airbus aircraft over the next 12 months, so that by summer of 2019, we expect Lavalin Motion to be operating a fleet of 20 plus aircraft, all of which will be Airbus. And its rate and pace of growth will be limited by our ability to source additional low cost Airbus aircraft over the next year or 2. And in the UK, we have we are actively working through the AOC occasion with UK CAA. We expect to have a UK AOC issued to us before the end of 2018. In terms of the MAX game changer, we have 210 orders for this aircraft, 135 firms, 75 options. The first five deliveries will come to us in the spring of 2019. In fact, as you see in Q1 April through June of FY 'twenty. This aircraft has 4% more seats, a minimum of 16% fuel savings, which will be key, particularly as oil rises to $80 per barrel. It also produces 40% lower noise emissions and it will be one of the key features which will enable us to drive significant unit cost savings over the period FY 2020 to FY 2024. We also in the last 12 months have successfully negotiated and completed a 10 year maintenance engine maintenance contract with CFM, which will deliver us meaningful savings each year for the next 10 years. So The focus on cost reduction continues and the focus on sensible low cost CapEx continues. Neil, guidance next year? Just a few things next year, Our low active deal passive policy will see us grow traffic by 7% to 9,000,000 guests. Average fares, we believe and we have very limited Visibility at this time, I'm posting some of our bookings and no visibility into Page 2, but we're guiding average shares broadly flat on a full year basis. Ancillaries will continue to perform strongly as we move closer to our 5 year target of 30% of total revenues a little bit ahead of time. But the gains from ancillaries will not be enough to offset the large increases in costs that are coming this year. Unit costs will be up 9%, including fuel. Our fuel goal will be up at least $400,000,000 when We add in volume for the year. When we strip out fuel, we see our unit costs up 6% this year, big items of that being a $200,000,000 increase in staff costs, half for those and half for annualization of stock deals that were agreed in the second half last year for pilots and cabin crew. So on that basis, profit after tax, we believe will be in a range of $1,250,000,000 to $1,350,000,000 This of course depends on close in bookings, Normal levels of ATC disruptions and absence of security events over the course of the year. Thanks, Stephen. And with that, we will now I'll hand over to Stephen Forlong of Davies, who will guide us through a Q and A session. Thanks, Michael. Thanks, Neil. Maybe can we talk about revenue? You reported a 3% drop in average fares and a 9% increase in traffic in FY 'eighteen. Do you see that continuing towards the trends there? Yes, we would expect we will know that to be passed by airline and we see the traffic continuing to rise next year as we take on more aircraft. So we're looking at a 7% increase In passing, it was $139,000,000 We have very limited visibility on fares at this point in time. So we're cautiously guiding fares flat On a full year basis. Where do you see the booking curve compared to last year? We're about 1% annualized. We'll be at the same time last year. So we're well booked into Some are fairly some bookings into winter, but not a huge amount of distinction. And in terms of ancillaries, they were up 13% in FY 'eighteen, Strong performance. Do you see that continuing? We do. I mean, we expect in the next year, our series will continue to outperform the growth in traffic. It's hard to be accurate what the percentage would be. I mean, I think it would be something similar to last year, but we're continuing to see significant customer for conversion into these services that we're making Egypt a little to adapt, particularly on the mobile app, the priority boarding, the reserve seating and the baggage fees. Okay. If you could talk about maybe just about ancillaries more detail and labs and also growth. So in terms of My Ryanair, how many members have you got now? We're up to 41 members 1,000,000 members at year end. We expect that to continue to grow. I believe it's grown on the it It has jumped from $25,000,000 to $41,000,000 in the space for the last 12 months, and we expect that probably to rise to about $50,000,000 over the next year. I think a stunning number is the fact that we've had 1,000,000,000 individual visits coming to the Ryanair mobile website and the mobile app over the last 12 months, which indicates the scale of and success of the ryanair.com platform. Even the last 12 months, we've seen that increase of for the Dream and it's so it's quite rapid. Okay. How does Ryanair rooms develop there? The volumes are strong. On Avenir. Now, it comes off a low base. The conversions have Joe Capri should be in the last 6 months as we've launched 2 things. 1, We have more hotel supply and more hotel inventory on the website. We're retailing it a lot more aggressively now across the website and mobile app. And the key, but it is the travel price. We're giving customers back essentially all of the commission. So you book a room on a hotel in Ryanair rooms, Whether you're a Ryanair customer or not, we're giving you back essentially 10% commission in the form of travel credits, which you can use and to travel again on Ryanair over the next 6 months. So we would expect that hotels We'll grow strongly, but you won't see it in the revenue or yield on the phone because of conversion first and then we'll begin to monetize it when we build the platform. Okay. How is the 2 cabin bag policy working? It's actually going very well, Steve, and it's been very well received by our guests, something that they actually want This has improved the boarding process and it's having a positive impact on our online performance, which is something that we're very focused on this year. Although it is creating a housing issue, particularly at peak periods, bank holiday weekends, summer peak periods, there are many factors where we're now having put 100, 120 gate bags into free of charge into the home. So if that continues to build, it's something we may have to look at again, but there is no doubt both the feedback from the cabin crew and from customers, is that nobody is struggling to find space on board in the hat bins or under the seats when they board the aircraft, so that's good. And in terms of generally growth opportunities for the year, where do you see that? Well, growth is going to continue all across Europe. And then the key growth This summer, we'll be in the 4 markets, again, U. S. And Germany, Italy, Spain and UK. We continue to grow Central and Eastern Europe as well. And add on, As we've been doing over the years, a number of new markets, group members like Jordan, Ukraine and Turkey, which we're funding for Dublin And Bosnia Herzegovony. So there's plenty of choice, plenty of scope over the next number of months. What about the always getting better initiatives? It's like I think year 4 of that. Can you tell me how that's developing? I think we've rolled out 2018 series initiatives, most of which are featured around the second bag, commitments on improving punctuality, etcetera, Very well received. I think it's time to date with the fact that we're now operating with industry record load factors of 95% and very positive and improving customer feedback. In terms of Ryanair Labs, I mean investors asked about how is that developing? Do you have the resources there? Maybe you could just talk about touch on Yes, labs is well vetted down at this stage. We've been treating very well established labs, one here in Dublin, one in Rochdale and Poland And the latest one in Madrid, probably just under 600 people employed in those labs, highly qualified digital and IT professionals We are delivering, as we saw on the ancillary side of things last year and we have big plans for the coming year as well. And really the asset size of that is The conversion of the growth, the announced revenue, the fact that this year despite having probably higher end city revenues than any other airline, the spend per passengers increased by 4 Percent in a year when traffic grew by 9%. It's a very impressive performance. Okay. In terms of like the flight connections, could Can you just give an update on that, both South Connect or with other airlines? I mean, the South Connect product is doing very well. It's focused here on 3 of our bigger hubs at the moment, Bergamo, Rome and Porto. And we're seeing double digit numbers of passengers with OE bases now connecting across Ryanair flights. And the partnership with Air Europa, I mean the numbers Tyli, you have the range of service that Air Europa offers and the only connections through Madrid is limited. I think the asset test of that connection, Connecting service will be when we roll out the deal the agreement with Aer Lingus. The agreement has now been completed. We and they are finalizing the IT or getting the computers to talk to each other. We expect to roll that out before making the business with customers before the end of the calendar year, so really for summer 2019 in that meeting. And given the scale of our Inksys long haul services out of Dublin and our short hold services in Dublin. We should see material numbers of passengers connecting. But I warn, it's not going to add to our load factor, at 95% load factor. So really in Dublin where we have a welcome Aer Lingus guest connecting on to Ryanair short haul service, And we just base what would otherwise be Ryanair point to point customers. In terms of you touched on it earlier, but on time performance It was a bit disappointing. It's a part of It's a real challenge, I mean, we are this year, for example, we've taken a number of measures. We've changed the boarding procedures, The free gate bags means so we're eliminating those today that were being said in particular calls by ourselves. And yet we continue to struggle, not just with the frequency of air traffic control strikes, which we've been on strike each of the last 5 weekends, but a recurring problem now has been Capata, the ATC euphemistically called capacity restrictions, which is basically staffing, ATC staff not showing up to work on Saturdays Sundays in the UK, in Germany, in Belgium and in Italy. This is a very badly managed service, particularly given the cost they're charging. And it's something that we had A4E, Together with the European Commission continue to campaign for action on. Something has to be done. I mean, the Germans opened up a new ATC control center in Karlsruhe of Baden this year. And yet the staffing is still refusing to move for Munich. So you have an empty site in Karlsruhe fully staffed Affiliate staff are down into the commensurate shambles that needs more exposure. Okay. Can I ask a few questions on costs? So Just on, I mean, in staff costs, I mean, there was a 17% increase in staff costs in FY 'eighteen. Is that entirely due to pilot pay? Pilot and cabin crew pay, and we went around in response to the rostering problems last September. I think partly with or due to there being a tightening in the market, particularly for experienced pilots, and we have committed that we will maintain or be 20% ahead, It's clearly ahead of our 767 competitors in Europe. That pay increase has gone down very well with our pilots and with the cabin crew. It has, I think, in many ways mean there's been very little industrial disruption despite as we work our way through the union recognition discussions. And we expect that to continue. But there won't be another meaningful jump in I think pilot pay or cabin crew A over the next year or 2, 20% is already a big increase. And therefore, as we've said, we've said our $200,000,000 is the cost increase in the next 12 months, about half of that is the underlying We'll jump in by the pay and the rest is additional headcount as we begin to spool up for the MAX 200s. I'll just add to that as well, Michael. In the last year, we've seen our 5 aircrafts increased by 10%, which drove some of that bigger. And we awarded our non flight personnel 2% pay increase at the start of the year. So that kind of drove the numbers along as well as the part of the pay increase. And I see as well as the marketing and distribution and other costs, is it others that jumped 27%. Yes. The big element of that, Stephen, was the $25,000,000 one off for the REU of 261 rights a share following our private rostering issues last September. We look at the overall ones up and our marketing bill was broadly flat year on year and I think our distribution costs, which are for the onboard spend grows at A slower rate than the onboard sales. So it's primarily down to the $261,000,000 $25,000,000 one off. And the rental line, it was It fell 4%. Yes, which is less Easter of African fees, so that's a strong cash. And you're guiding just Back to the guidance in terms of the increase in ex fuel cost by 6%, some of that I guess is staff cost maybe. Is there other components to it? So I believe the EU261 will be down on an absolute basis. There continues to be a cost that's rising for ourselves and all airlines as more Events becoming EU261able with compensation for passengers. Maintenance will be marginally up as we And aging fees in advance, the MAX starting to arrive next year as we do a few more checks on that. The key driver is $200,000,000 increase in staffing next year. And can you just talk about fuel hedging? Have you done anything for the current financial year? Yes, we're well hedged even for the current financial year. We're now up to 90% fuel hedging, which is over 5.90 It's a metric tonne. And indeed, as we look at into further out, well, we don't have any commodity in place. We will have a good element of our currency in place $1.20 about 50 percent, so $1.25 on the euro dollar. And in terms of the unions, how are the talks progressing? Reasonably well, I mean, as we've already explained, we signed our first two union recognition agreements with the pilot unions in the UK and Italy. We expect to add a number of more additional recognition agreements, most likely in Spain and Germany in the next number of months. The cabin crew discussions are progressing very well. In some cases, we're dealing with country by country anomalies, but I think we're working our way through that. And so we would expect to sign our 1st cabin crew recognition agreement in the next, I would say, month or 2 as well. Okay. Do you expect any disruptions or strikes or We're not expecting them, but I'd say for investors, we shouldn't rule them all either. The good thing about this I mean, the key thing about the recognition discussions at the moment is we're not essentially talking about pay. Even the unions accept that Ryanair is paying both for Bias and Pamukwu now is the Head of Industry, in fact, in many cases, the Head of their unionized competitors in those other countries. So what we're talking about now is the anomalies of Portuguese maternity leave, which actually is inferior to Irish maternity leave. And so the Portuguese Union wants, for example, Portuguese Maternity League, but the cabin crew wants Irish Maternity League. So I think those negotiations will continue. There may well be some other disruptions just because somebody wants to do wants to a bit like they've mismanaged or misguided the Port Cities Capital Strikes at Easter. They went on strike because they couldn't, not because they were actually looking for anything. And that's why it strikes recession and success. I think what's important here is we don't expect there to be strikes, particularly where our pay is competitive, where we're hiring. But we shouldn't rule it out. If something is going to feel reasonable, somebody wants to question or undermine the model, then frankly, We'll have a strike. And the obvious one is in some countries, for example, in Portugal, the Portuguese cabin crewmen are assisting that TAP cabin crew are involved themselves in these negotiations. We're not having competitor employees, whether it's TAP cabin crew or Our earliest pilots will not be involved in negotiations between this company and our people and their unions. And if they want to go on strike over the right of Competitor employees to participate in those discussions, they can strike all day and every day. We're not going to allow it. I mean, I think it's a breach competition low anyway. And equally, we wouldn't expect our players at cabin crew to be involved in Erinnitus pain negotiation issues or SAP pain negotiations. But I think the strength of the important thing is it's not about the money. The money is good. They accept the money. It's very much better than the competition. And that's why I think we're not going to see any return to the sort of staffing of the Austrian crisis we had last September. Thank you. The Hot topic I think has been, is there this talk of shortage of pilots in Europe or globally actually, maybe you could just comment on it. I think there is a certainly tightening in the market provided in the last 12 months. Most of that is because of uncontrolled or madcap expansion My last meeting here, I said Europe, most notably in our region who are operating in a sustainable model. The Chinese airlines are clearly offering Being very significant to pay, but China is not the most attractive country to live in from a lifestyle point of view. We do not have difficulty recruiting or attracting pilots. Because of our rostering of last September was this 9 month leave year crossover year, which we don't have this year. This year we require we'll have another over 1,000 pilots. We are addressing certainly, I think if there's going to be a shortage, a temporary shortage to pilots. You'll see it affect more the regional airlines and the smaller jet operators who frankly pilots will move from there to the larger operators like Ryanair, like EDG and others. Having said that, we have now ordered 3 more simulators, which will be delivered to us this winter That will increase our training capacity by about 50%. We move from 7 to 10 full simulators. We have reduced The bonding costs for direct entry pilots for might be €30,000 to €5,000 so now it's much cheaper and easier for pilots to join us and get trained within Ryanair. And we have addressed, I think one of the key criticisms we faced last year from our pilot body was They were all in basis they didn't want to be in. So we have actually significantly changed the way we allow pilots to on our basis and that we have rebased more than 900 pilots over the last 12 months. Some of our growth Going forward will be driven by where pilots want to work, because in actual fact in a lot of cases, we can base the aircraft at either end of the route. There is a it's more convenient from a lifestyle point of view, pilots want to live in one location, which actually pays more aircraft for those locations. In terms of opportunities elsewhere like France or Scandi, is that somewhere you talked about? Yes, we've started the negotiations with those unions. But I'm going to be careful. While France is of interest to us, I think our focus on base in the Vazalore French Airports. We frankly have very little interest in having a base in Paris where frankly slots aren't available. The 8 airports of Paris, airports are extremely expensive. But there are huge growth opportunities at the regional French airports where frankly neither Air France nor Egypt here. We intend to focus on Paris, our delivering any growth at all. In Scandinavia, more our focus would largely be on Copenhagen and in Denmark. We would not wish to expand in Sweden or in Norway where the governments are lobbying on huge environmental taxes, which is extraordinary in a country like Norway, which benefits from being a big oil exporter, but nevertheless that's what they're doing. If you tax air travel, you penalize growth. But at MR, which has not been taxing and has committed not to netting taxes on air travel. I think it is likely in the next 12 months that you'll see us open up a base reopen the base in Copenhagen with working hand with the unions, where previously we closed base 2 years because of unionization. Thank you. Can we ask about or talk about consolidation? Europe is a lot less consolidated So compared to the U. S, then obviously we've had the Monarch Air Berlin bankruptcies. Do you think that's going to help the capacity environment in FY 'nineteen? You want to take that? No, Stephen, most have been backfilled at this point in time. And this is a slight offset where we're seeing some capacity going back into Egypt and Turkey. But the Monarch capacity is fully taken up at this time. So I wouldn't expect anything in FY 'nineteen. Maybe beyond if we see some other financials, each atmosphere lines. We talked about a couple here already this morning. When we see that go out of business, that would take some irrational capacity out, which should be good for the industry. And we are seeing the beginning of a slight move on excess charter capacity back out of Spain, Portugal towards the Eastern Mediterranean. Those countries have faced security challenges in the last 2 or 3 years like Egypt, like Turkey beginning to come back. But again, I think that would be more the feature of summer 'nineteen rather than summer 'eighteen. So you say you expect further consolidation but more slow burn or it depends on the oil price? As we said in the statement, we don't see that there's going to be any there's still a both There's above market GR capacity growth to the base in December 'eighteen. I think the combination of 2 factors, 1, oil at $80 a barrel. And the recovery of those markets like Turkey and Egypt, I think with the much slower capacity growth Our maybe below market capacity growth for summer 'nineteen, so I'd be much more optimistic about summer 'nineteen. Summer 'eighteen, no, I think as we said in the statement, It is above average capacity growth. When you look at the German market, for example, Easyjet has taken over a Perssonbergen table. They lost a lot of domestic routes in a market where Eurowings and those hands that controls 97% of the market, they've responded by increasing German domestic capacity as well as the German market. In terms of traffic, it's very strong, but in terms of prices, it's weak at the moment. How do you think I think the structure of Ryanair is going to develop over time. I see us moving to a similar structure as not as similar as what IAG have at the moment. We have obviously 1 huge airline Ryanair DAC in the with under Ryanair Holdings. I think in the next 2 or 3 years, you will see Ryanair Sun and Laudamotion grow to be much more meaningful airlines in their own right. I think it would be 50 of 50, possibly even 100 aircraft over the next 5 years, either in Ryanair Sun or in Haudamotion. And Maybe we might add another 1 or 2 subsidiary airlines to that. I mean, there's undoubtedly, In my view, there's going to be further M and A opportunities, not that we would want to be in for Norwegian or Lufthansa, but that The competition of entities that we anybody who wishes to acquire those areas will have to engage and will throw up other opportunities. I mean, what is your long term plan to Laudamotion? I think the long term plan to Laudamotion is Laudamotion has 3 Key attributes. Firstly, it has an Austrian AOC, which is of interest to us and we can fly charters directly from Australia to outside the EU. Secondly, it's an Airbus airline. And we have wanted to have an Airbus Airline within the group for a number of years. It means to give us credibility with Airbus so that we can go and negotiate our new Airbus aircraft. And the third is it has a just a chunk of stalls At other otherwise congested airports that we wouldn't be able to enter like Berlin, Tegel, Dusseldorf, Stuttgart and Palma de la Autca. Now, We want to see Laudamotion grow as an Austrian low fares airline. And over the next 5 years, I would be very disappointed if it doesn't grow from a current Airbus fleet of 10 or 9 to 50 aircraft and begin to challenge Austrian Airlines to become the number one Austrian airline. It will largely operate as a low cost Austrian based low fares airline, serving Austria, the German and Spanish markets. Thanks. Just can you talk about your plan for investing for growth over the next 6 years? You're going to be a 600 aircraft fleet. I mean, do I think the structure of the business is ready for the 600 aircraft. It's almost like what's your vision for the next 5 years? Yes. I mean, I think we've done a lot of work and a lot of time and work over the last 6 months in fact, spooling up for the next 5 years of growth. We're taking on a new aircraft type, which is the MAX 200. We have certainly widened, if you look at the their Austrian problems since September 2017, We've almost completely rebuilt the operations management. We brought Peter Beileu back from Airline Data. We have hired new heads of engineering, deputy heads within engineering, brought in a lot more experience. We have significantly up weighted not just the Ryanair Labs, but also we're looking at changing the IT systems within operations to enable us to spool up to 200,000,000 passengers a year. And there's been heavy investments in the customer service department As well, we now have a specific EU261 group based in Madrid. So that we are if you like, we are putting in now over the next 12 months, We're putting in all the costs that we will need to be able to grow the business to 200,000,000 passengers. Yes. And on top of that, We've got huge investment simulator 7 simulator is underway in 3 this year, which will double our training capacity. We've got the low cost bonds for the pilots, which means we're getting a lot more highly qualified cadets and good quality cadets coming through. And we're spooling out A number of new hangars as well. We've got a new hangar in Madrid, which we recently opened with a new 2 leg hangar coming in Seville later on this year. And we're adding more capacity in the likes Bergamoinen and Milan and Stanstedt, so big capital expenditure as well as OpEx in the business to make sure we're ready for 600 aircraft. Thanks, Neil. When we talk about Brexit, I mean, is there any further details or update in terms of the ownership Issue or traffic rights? No, there isn't. I mean Brexit continues to be a fall of the wind decision. Everybody is waiting for the British government to kind of make decisions to tell the European Union what they want in terms of the customs union. I think the logical expectation is that everybody will agree to the 18 month transition period out to December 20 20, under which basically the EU, Britain will still pay, will still comply, will still obey. But I think it's sensible we have to have in place procedures or at least the Board has put in place the procedures in the event that there's a hard Brexit. I mean, there's no doubt that in a hard Brexit, certainly the French and German interests are pushing hard on strict interpretation of the ownership rules. That is likely that our UK shareholders will then be treated as non EU shareholders. That will take us into a small majority of non Basel, majority ownership by now on EU shareholders, and we either have to force those to sell on some kind of pro rata basis or we disenfranchise Iceland Promo Voting. And we have had intensive discussions with both EU authorities and the Irish authorities on disenfranchising All known EU shareholders, he asked probably the way we will go. Do you see is there any update in terms of the UK AOC? Yes, we expect that we're making good progress with the CA. We expect that the UK AOC issued by the end of this year. We would need to have a UK AOC in place for but I mean only so that we can operate the 3 UK domestic groups we presently operate at the tiny part of the overall business. But we will still have to have a structure under which there will have to be we will disenfranchise the It will have to be in the jar, any U. K. Owned, and we're still working our way through that process. Okay. I think maybe you could just talk about the balance sheet. What are the key strengths? I mean, obviously BBB plus, right? Absolutely, S and P and this range is one of the key strengths This is the aircraft themselves. We've got 4 of their own aircraft on the balance sheet. The vast majority of those aircrafts have got a massive amount by equity built up, we Bought them at low prices and we put them on price we bought them at. If you looked at the financing as well, over half our aircrafts were Most of those newer aircrafts have taken in since 2013. We've got $3,700,000,000 of gross cash, which gives us massive firepower. And the business is usually cash generative, which is one of the reasons why last year we had $1,500,000,000 of CapEx and $800,000,000 of distributions, and we still Kett brought the flat net debt position, so it's a very strong balance sheet. How was the buyback for Ryland? It's gone well. We're about halfway through at this Dave, so we're well on track to finish it by the October deadline. And one of the features of the buyback is that the average share price is always under €16,000,000 I think one of the key things, which I don't emphasize enough, is the EPS growth in the last 12 months, As you know, thanks to the 10% increase in profitability, we're delivering 15% increase in EPS because of the continued success of the share buyback program. And just on terms of the aircraft, you talked about the MAX, the game changer aircraft. When is it going to arrive, the MAX 200? First of June, it's for next year between about April of next year, it was like the first one. I mean, it's a phenomenal aircraft, 4% more seat capacity, 197 seats, 189, 16% fuel efficiency And 0.40 percent less noise. We get more opportunities to cross sell and that's the reason it'll help bring unit costs as we spread the costs over more passengers to provide this aircraft at a Have you hedged the MAX? Could you talk later? Yes. On the dollar exposure, we've had that done now for a while. We've 100% of that hedged at an Average rate, 124 over the delivery program between FY 'twenty and FY 'twenty four. And in terms of financing, are you financing it from cash So, David, it's very cash generative at the moment. So, we've been buying aircraft out of cash for the last couple of years and bond markets will remain available to We have a strong balance sheet, which we're going to be close rating. We can and may go back in some states in the bond markets. Leasing has been less attractive just because we've been able to finance ourselves Lada Motion is an Airbus operator. So are you signaling that you will consider buying Airbus Aircraft. Absolutely, the price is right. By the way, we've all assumed that. The difference I think has been in the relationship with Airbus over many years is they They'll believe that we will buy an Airbus aircraft. They think we would Boeing will always beat whatever it is that they will bid. We've explained to know if you will come to a cheaper price than Boeing, we'll buy Airbus. And that's very much the objective of the investment in Automotive. We're talking directly to Airbus about additional about an aircraft order. The challenge for Airbus is at the moment The order book is full, where they have engine difficulties with some of the current deliveries on the Nios. So, the order book is full out to 20, 2021. We are in active discussions with them for today, but we want to grow out motion between now and 2021. So I think we're looking at the secondhand market, we're looking at other lease alternatives. But if we don't, we're not wedded to it. I mean, ultimately, we don't and aren't able to find as sufficient volumes of low cost Airbus aircraft. We wouldn't rule out allocating some of our Boeing deliveries to Nautomotion over the period 2022 to 2025. But clearly, our preferred alternative would be to source up to 50 additional Airbus aircraft. And we'll not say that won't grow 5,002 100 aircraft. We would like to see within the Ryanair Holdings Group have a significant investment, our partnership with Airbus and they continue to build on the partnership with Boeing. What's your view on the bigger gauge aircraft Is that the Boeing, the MAX 10 or the A321? I mean, we're very keen on both aircraft as long as the prices are. It makes logical sense to operate more seats. It reduces your unit costs. It does also reduce the yields. It will give us also more opportunity for accelerating sales to more passengers on a per flight basis. But far too much excitement which is generated by this being a newer, bigger aircraft. And too many airlines are planned to run out and just order them regardless of the price. If it results in an increase in your cost per seat, then there's no sense in buying new or bigger aircraft. If as should happen, You can source these bigger aircraft and it reduces your costs or the airline's cost per seat. And frankly, we'll be very keen to buy either the MAX 10s or the A321s. Can I just ask, is Ryanair ready for GDP? Or is It's a hot topic. We've been working on savings the last couple of years, so we're ready to go on this session. You might maybe just go In terms of the guidance range again for FY 'nineteen, dollars 1,250,000,000 to $1,350,000,000 Net profit, what are the components again? As Michael said, anyone in the PR this morning, we're under the pessimist excited and cautious when it comes to guidance this year. We have very limited visibility Our average fares, so we would expect fares to be broadly flat on a full year basis as we deliver a 7% increase in traffic to 139,000,000 customers. And so we will continue to perform well, having had a good year last year, and we're well on track for our 30% of total revenues over 2020 As we flagged, it's not going to be enough statements as offset the increase in costs. Our costs are rising by 9% this year, which includes a 400,000,000 Headwind on fuel, when adjusted for additional volumes, yes, we're well hedged at 90% with the levels that are higher than last year. When we strip out the fuel, we've got about a 6% ex fuel increase in unit costs, most of which is down to increased payroll, dollars 200,000,000 is the annualization of the product and capital pay increases, which we put in place in the second half of last year and then about 50% for growth. So profit after tax, as you said, in a range of $1,250,000,000 to $1,350,000,000 in the next year. Okay. Thanks, Neil. Thanks, Mark. Thanks, Stephen. Thanks, Stephen.