Earnings Call: Q1 2018

Jul 24, 2017

Hello, and welcome to this Ryanair Q1 of the Full Year 2018 Results Call. Throughout this call, all participants will be in listen only mode and afterwards there will be a question and answer session. Also just to remind you, this session is being recorded. I'll now hand you over to Michael O'Leary. Please begin. Okay. Thank you. Good morning, ladies and gentlemen, and welcome to the Ryanair Q1 results conference call. As usual, you'll have seen this morning on the ryanair.com website both the quarterly results, the share presentation and a video presentation or video Q and A with myself and Neil Soren, the CFO. Accordingly, I'm going to zip through this and then we'll open up to questions fairly quickly. So you'll have seen this morning, we reported a Q1 increase in profit of 55% to just under €400,000,000 This result, however, was distorted by the timing of Easter, which fell entirely into August or into April, rather, with no holiday period in the prior year comparable. But in summary, for the Q1, traffic is up 12% to 35,000,000 The load factor has continued to improve, up 2 points to 96%. The average fare distorted by that presence of Easter in Q1 finished up 1% At just over €40 unit costs were down 6%, and I think that's the key takeaway. Excluding fuel, unit costs were down 3%, which It is in marked contrast to most of our competitors who are still talking about lowering costs while delivering rising unit costs. As notable in the quarter, we announced 10 additional MAX 7 37 MAX aircraft, 5 5 in spring 'nineteen and 5 in spring 'twenty. It takes the firm, a game changer order, up From 100 to 110 with 100 options. We returned over €200,000,000 to shareholders via share buyback. And at the end of Q1, we had just under 400 737s operating in the fleet. 2, I think, key points I would make in the quarter It's a continuing uncertainty over Brexit, which becomes increasingly I was hoping increasingly into view. We will need some sort of legal certainty by about September of 2018, which is now worryingly close, We're 15 months away. We continue to campaign for the UK to remain at least in open skies. But if the UK government continues to hold to its position, then It won't exceed the ECJ jurisdiction, and there's a great danger that the UK must leave open skies. We do not believe that the UK has either the time, the ability or the goodwill on both sides to negotiate a timely replacement bilateral with the EU 27, In which case, there may well be a disruption of flights for a period of weeks and or months from April 2019 onwards. We've been saying this for A considerable period of time. We do not see any other solutions out there. And more recently, efforts Some of our competitors either set up the UK AOCs or Austrian AOCs under one holding company will not Negate or trade away that risk. If there is not some kind of bilateral between the UK and the EU 27 By around September or October of 2018, then I think we are facing some precipitous disruptions. I wouldn't underestimate the And to which the competitors in Germany and France, in particular, would like to see or encourage that kind of disruption. In terms of cost, we've, I think, continued to show unit cost declining 3% in Q1 in marked contrast to a number of competitors, Chris, Easyjet and others who are reporting unit costs ex fuel rising despite bullshitting on for the last number of years about how bigger The lower their unit cost, it seems the more bigger aircraft they take, the higher their unit cost ex fuel rises. And we continue to make the point That gap it's that rising gap between us and our competitors on cost is what is going to make our march Ryanair out from them. I think then we'll touch on guidance. As we have repeatedly said to the market, the Q1 was very strong, We still see H1 fares will fall by about 5%. So in other words, we see Q2 fares falling by between 6% to 8%. H1 traffic is growing strongly on the back of these lower fares, But years are also being affected by a steep decline in baggage revenue, both the penetration of checked in bags and the rates being paid by Check-in bags are declining. We attribute a considerable portion of that to the continuing success of our Always Get the Better program and, in particular, Many more customers switching to carrying 2 free carry on bags and actually creating some problems for us with the volume of free carry on bags that are going on board the aircraft. We've raised the full year traffic target for up by $1,000,000 from $130,000,000 to $131,000,000 As I said, we We have no yield visibility into the second half of the year. And so at this stage, we continue to guide the average fair Decline in H2 will be 8%, and for the full year, average fare is falling by between 5% 7%. Excuse unit costs are on track to deliver a 1% reduction this year. Ancillary revenues continue to grow in line with We as we continue to discount pricing to drive rising penetration. And therefore, based on all of the above, we continue to guide For a full year profit after tax in a range of $1,400,000,000 to $1,400,000,000 which is a high single digit growth on last year's profit after tax. Neil, anything you want to add there by way of commentary on the MD and A before we open up to questions? I just want to highlight that the EPS performed well in the quarter as well as the back of share buybacks that we've done, so EPS of 63% At a time when the profit after tax of €55,000,000 and the balance sheet is in good shape. We saw a reduction in our net debt figure by €150,000,000 to just 90 €4,000,000 at the end of the quarter. That was after €200,000,000 buybacks, €200,000,000 worth of buybacks and €400,000,000 worth of CapEx in the quarter. Okay. Thanks. I will open it up to questions now, but I'm going to ban questions asking for color on the second half of the year yields. We don't know. We have No visibility. I'm also banning any questions on color for next year's year as we have equally zero visibility on that as well. Other than that, if you've got a question that isn't already answered in our video or in the results release, please feel free. Thank you very much. You can withdraw your question at any time by pressing the 0.2. And our first question comes from the line of Savi Taitt of Raymond James. Please go ahead. Your line is now open. Hey, good morning. Good morning. Three questions for me. First on the average fare trend, I was wondering what the trend was excluding kind of the impact from the bag fees and when you might expect that to normalize, At least the drag from the bag fees. 2nd one on the non fuel, if we click, just what the benefit was from sterling and what you have The sterling impact in your cost guidance for the year. And then finally, I know this is kind of very early stages and overall we're talking about Small numbers, but I was wondering if you have any color on how many connecting passengers you're seeing currently or what you might expect for the full year? Thank you. Okay. I'll do 1 and 3, and Neil asked you to do 2. Average fare trend, as I said, we continue to see average fare trend declining. We continue to see check-in bags as they are also declining. Although the rate and pace of the decline will, I It is slowed down over time. We have seen a penetration over the Q1 this year over last year down and also the rate per bag down. And that's just a function of more and more passengers changing their behavior and bringing more carry on bags. Connecting passengers are too small to mention. We Our offering connecting services only over 2 of our bigger Italian hub airports in Rome and in Milan Bergamo. There is a it is a meaningful number at both of those airports, but not something that a system wherein It's not something that is a significant statistically significant number yet. I think what's more important to us at this Point in time, we're not noticing any particular handling difficulty, which is why we are running it as a trial at those airports. We're not having passengers miss their flights. We don't seem to have any difficulty transferring the checked bags. Mind you, we don't have a lot of Thanks. And but we're not going to roll out that connecting to any other hubs until the end of the summer, until we get News 2, what are the issues with those connections? Neil, what's the non the fairly impact on nonfuel? We're looking at about just under 1.5% in the quarter. Thank you. Next question, please. Thank you. Our next question comes from the line of Daniel Rusco of Sanford Bernstein. Please go ahead. Your line is now open. Good morning, Michael. Good morning, Neil. Glad you didn't add any questions on Brexit. 2 on those and one on the ancillaries, if I may. So first question is, you talked about this a little Your Q and A this morning on the site and website, what additional options beyond disenfranchising, forcing to sell for the shareholders have you considered? And why did you chose this part did you discard any of those options you looked at and why? 2nd part What's your reading on the most recent EU guideline from June on the ownership and control regulations they put forth? Because If I read it correctly, there may be this may make reallocating the shares to Mainline Europe a little bit more difficult as the Final best beneficial owner is kind of the bar you have to pass. And lastly, on the ancillaries, You said you're just discounting pricing to incentivize the uptake, but I was just wondering, could you give us some color of the different buckets flowing into those ancillaries As you report them, because I think Neil, you today said that seat bags were in the seat revenue. So what's actually left in the ancillaries? And if If you could classify that in 2, 3 buckets and how are they developing into the future, that would be great. Thanks. Okay. Thanks, Avid. With those working my way backwards, though, we're not giving you any further color on ancillaries or the bookings. Our guidance for the year is ancillaries to be generally flat sorry, flat for the year and it's Marginally in Q1, but we expect to give that back in the rest of the year. We don't see any significant change in the EU guidelines on ownership and control. We I said, oh, therefore, over a period of time, when they come to sell, we'll be required to sell to EU shareholders, Which is why we don't think the IAG ownership structure will survive a hard Brexit. We don't believe that the Easyjet Structure of having a holding company only an Austrian, a Swiss and a UK AOC will survive a hard Brexit. And We don't think the whiz nonsense last week of setting up a UK AOC will have any effect during a hard Brexit. If it's a hard Brexit, there is likely to be a period of months. I think maybe even through the summer period of 2019, there may be no flights for a period of time. In a bizarre way, I think given the weakness of the UK government, that might actually be one of the areas where they wake up the UK government to the realities of what It means instead of the nonsensical cliches they've been drumming out in the UK for the last number of weeks months, Our view of life being in a hard Brexit, I doubt if there will be a forced sale of UK shareholders on the 1st April 2019, But I think they will be the treatment will be something similar to ADRs at the moment. The UK shareholders will only be able to sell to EU resident shareholders or we may have some sort of period of time when we force them to sell. If there's a forced sale, that would clearly be downward have a downward impact on our share price, and we may well speed up our Share buyback program to take advantage of that and also to facilitate UK shareholder selling. Additional options on the share What was the addition of the shareholder sales? That was the same thing. The first part of the question was what we would be were there any other options other than for sale of the UK And I think you call it on that when you call it on the IG and Egypt structure. So basically, you look at trust structures and you don't think they will hold up, right? No, we see I mean, if there's a hard Brexit and we know for that the certainly mainland European competitors, most notably the Germans and the French, are All over this like a rash, they will not I think they will certainly be campaigning very hard for To look through the something like, say, an IAG structure, for example, and I noted at a conference in Brussels 2 Weeks ago where Willie Walsh was very active calling for reform of the arcane EU ownership rules, which I thought was somewhat surprising given how relaxed he has purported to be over the last year or I think given how relaxed he has purported to be over the last year or 2 about how good the IAG structure is. I don't see any way There's going to be blind trust that will survive a hard Brexit. But maybe that's I continue to hope against hope that In a hard Brexit environment, the British may well blink or at least have a more considered view of the outcome of Brexit. Okay. Fair enough. Thanks for the color. Thanks, Daniel. Thank you. Our next question comes from the line of Jared Castle of UBS. Please go ahead. Your line is now open. Hi, good morning, gents. 3 as well then. 1, Michael, I mean, how serious are you about looking at Alitalia? Is this just really to look under the bonnet to see what's going on? I mean, again, it comes to issues with kind of Short haul, long haul, trade unions, etcetera. So just to kind of give some color around, I guess what you are and aren't doing when it comes to them. Secondly, just on unit cost performance, a good showing in Q1. I mean, is there some potential that you could do a little bit better than guidance as you kind of move through the quarters? And then secondly, just in terms of you mentioned Brexit in the UK and you mentioned it also on the on your Q and A about UK kind of fares performing worse than the rest of the network. Can you give some color relative to the average fare being up plus 1 Across the whole network, what the UK was doing? Thanks. Okay. To start, you take those in segments. Anatolia, look, As the largest airline in Italy, it is incumbent upon us to work with the Italian government and the commissioners in Italy to try to assist A positive outcome for Alitalia, its customers and the people who work there. We are Serious in indicating that we have an interest in Alitalia, but we're also serious in that our interest in Alitalia is only if there's going to be some fundamental form. There's the Chapter 11 process under which the commissioner 3 commissioners currently run out of Italia. They can bring about some fundamental They do have the legal power to significantly restructure Alitalia. And if there was a significant restructuring Such that Italia could reasonably be seen to operate on a profitable basis, then yes, I think we would have an interest in it. But Those are high bars to cross, but clearly something Anitania is going to have some cross to cross some high bars if it's going to survive in its current form. And it would also obviously involve an absence of Italian government interference, which again would be another high bar. In unit cost, yes, we're always striving to do better on unit cost. But I think our remember, last year, we reduced unit cost by 5% when every other competitor We have in Europe solar unit cost rise. In Q1, we've taken that down. This is ex fuel by another 3 percentage points, whereas In the last couple of weeks, we've seen fairly pathetic unit cost performance from alleged competitors of ours, many of whom have been going around for about 2 years Promising to be able to match Ryanair on costs. Our gut has to beat Ryanair on costs because they're getting new super dupery, longer, shinier aircraft. And yes, every quarter, they continue to report unit costs increasing, but some kind of failed hope that by the end of the year or in 2025, Their unit cost will decline. The reality is we deliver unit cost declines. We are far better at managing unit cost than any other airline, and our Our competitors are pretty pit poor at it. So I think we would certainly be striving to do better, but I think it would be unreasonable to expect Anything more at this stage than a 1% decline for the full year. And on Brexit or U. K, breaking it down, no, look, we're in Q1 results, we're not giving you color on sectors or basis or markets or anything else. We'll do that on the We'll be going around and do the Investor Relations roadshow, but it is fair to say as we have publicly that certainly the market from the UK and UK, particularly to Spain and Portugal and Italy, where there's been and continues to be a large volume or large capacity increase in both charter capacity Switching out or continue to switch out of Egypt, Turkey, North Africa, some other of the Monarch These guys arriving down there with very significant capacity increases. That has put inordinate downward pressure on airfares, And that continues to be the case. But we're not in the position on Q1 breaking out the sector details. Okay. Thanks very much. Thanks, Joe. Thank you. Our next question comes from the line of Duane Pfennigwerth of Evercore ISI. Please go ahead. Your line is open. Hi, thanks for the time. Just with respect to your Q2, fares down 6% to 8%, Is that what you're seeing on the books in July so far, down 7? It's in that area, yes. Okay. And then, can you just talk about how far out your order book Is fully committed, what periods are still open depending upon pricing? And then with respect to the MAX, Does this bring new markets given the Range capabilities, does this put new markets on the table for you that you haven't historically been able to serve? By reference to the order book, I assume you mean the aircraft, is it? Yes. Yes. We have the aircraft orders run out to the end of summer or the autumn of We have currently we take the last of the NGs in the autumn of 2018. We take the first of the MAX Gained 200 well, 110 firm MAX game changers in the spring of 2019. We still have 100 of those that are under options, But I would be amazed. I mean, unless there was some kind of very significant adverse event, I expect us to take all All of those be confirming all of those options as they fall due 2 years prior to delivery. The MAX aircraft won't And our range of operations that we have very we have no interest in flying the MAX, for example, across the Atlantic, Again, because of its range limitations, we can do Dublin to kind of Boston, but we can't unless you're going to serve both the East Coast On the West Coast, with a long haul, low cost carrier, we don't think you have the scale or the ability to penetrate that market properly. So we don't see the MAX as being some Sort of quasi transatlantic or quasi long haul aircraft. The MAX are the game changer. It's going to significantly lower our unit cost. It has 4% more seats. It has 16% lower fuel per seat, and it is going to transform significantly the unit cost base of what is already, And by some distance, the lowest cost carrier in Europe and the cost carrier or the carrier in Europe that has a widening unit cost advantage over With Easyjet, Norwegian and all the other lunatics out there who can't manage their cost base, I think it's a particularly Important message for some of the ADS analysts out there who keep writing shite that somebody is going to close the cost base between Ryanair either in 2018, It would be helpful if you looked at the current quarter and the previous 6 or 7 quarters And show the inability of the others to manage their unit costs, whereas we continue to deliver declining unit costs. And that's Why, by the way, as we add very significant capacity, I mean, we will grow this year by another 10,000,000 passengers, which is not far off Half of Wizz is total traffic on an annualized basis. We are supremely confident in our ability to fill those extra seats. We We continue to deliver impressive returns for shareholders because we are actually reducing unit costs. We're not just talking about reducing unit costs. Thanks, Michael. Thank you, Duane. Next question? Thank you. Our next question comes from the line of Mark Simpson of Goodbody. Please go ahead. Your line is open. Yes, Michael, hi. Hey, Michael. Tiptook carefully into this. In terms Super duper shiny big aircraft. Yes. Your favorite central venue. You want to Talk about the number 2 carrier in Central Europe again, do you? Well, no, I don't want to talk out with on your call, but in So some plays of the imagination, but who would bet? Well, it comes down to per Pax or per ASK, but let's not dwell on that. Oh, it bloody doesn't. Now in terms of the comment though, Bloomberg suggesting that you might be interested in the MAX 10 in 2023. Is that just Bloomberg commentary? Or is that something which you would contemplate? I mean, it's Bloomberg Commentary, there's been no development there. I mean, we make no secret we are interested in the MAX 10, but we're only interested in the MAX 10 if it can lower our unit cost. Thus far, the discussions with Boeing haven't gone anywhere. They are I think their pricing on the aircraft at the moment is far too high. It's not something that we have any interest in, but we have told them to go back. And if they can come up with a pricing on the MAX ten that meaningfully reduces our unit costs, We'd be very happy to place an order. We were overwhelmed by the orders they announced at the Paris Air Show, which were basically Conversions of existing orders from United and SpaceJet and a few others. Like, if that's what your order book consists of and Godspeed, If or when there's going to be a this aircraft, and I'm like, we do believe a 2 30 seat aircraft Deliver us a meaningful reduction in unit costs, then it will be of interest to us. But if it's the typical Boeing stuff For years, 30% more seats and pay us 30% higher price, frankly, it's of no interest to us. And we are We have no need to place another aircraft order on for about another 5 years at this point in time. So We are very interested in the aircraft, but we're only very interested in this aircraft or indeed any aircraft if it lowers our unit cost. If it's just a shiny book and toy, as your friends in Wizz there who like shiny toys, yet as their traffic rises, their Aircraft ownership cost right at an ever faster rate. That's not the business model we're in and haven't been for some 30 years now. Yes, fair point. I just wonder what's your view there of residual risk for the MAX-two hundred on the basis that the market seems to favor 180, 190 seaters or 230, 240 seaters. Is there a perception of residual risk in the MAX 200 and you're going to have to sweat that asset to the end of its useful life? We wouldn't give a rasher. We've never worried. I've never ever get ordered an aircraft and worried about the residual life of an aircraft because we know we're an end user. We've It's been an end user of these aircraft. What the residual value is, frankly, I couldn't care less because we can fly them until they're 20 years old. But the price at which we're buying them is so competitive. I mean, if we get this aircraft in here and we have 4% more revenues and 16% lower fuel costs, I'd And then one final issue different to ancillary revenue per packs. You highlighted lower hotel penetration rates in your release. Is that just a transition period from booking.com to Ryanair rooms? Or is that seen as slightly disappointing? I wonder if you could give us an idea of what you're targeting on conversion rates. No, I mean, I think it's actually it's a cut across. We Ryanair rooms is a new product. Actually, the penetration rate started off very lowly. The penetration rate is rising very quickly, both on rooms and on holidays, but it's very low numbers at the moment. And I think it's something that we're looking to I think Kenny and John Hurley and the digital team are working actively on. And we're looking for much more have much more inventory online by about the end of this calendar year. I think you'll see a big push into Ryanair rooms for 2018. Okay, that's great. Thank you. Thanks, Mark. Next question, please. Thank you. Our next question comes from the line of Neil Gwynn at Credit Suisse. Please go ahead. Your line is open. Hi there. Two questions for me please. The first one, I know some of your top growth routes this summer include Italy domestic and Poland domestic. Just prompts the question, to what extent do you feel you need to increase domestic penetration in some of these markets to produce more balance with international services To ultimately optimize your relevance to local customers. And then secondly, on the bag charges, obviously, you've mentioned, Michael, they're weighing in the Q1. Just wondering to what extent do you have a plan to deal with this if indeed you need to? And on top of that, you've A very good on time performance number in the Q1. Just interested, do the 2 carry on bags, are they having any negative impacts on turnaround times at all? Okay. The top line growth, yes, I mean the domestic Italy is doing well, but domestic Poland is tiny. Domestic Poland is only 2 routes. So don't get distracted by do we need to do more like we never look at business on the base of are they domestic or international. It's short sectors. Short sectors do help us to maintain efficiency. And unlike all the other airlines who sell their airfares on some seat kilometer basis, we only sell our And manage our costs on a per passenger basis, which is why we like shorter sectors. But I think there's a very limited growth in the domestic market generally. Domestic Spain is sizable, but we're reasonably big in it. Domestic Italy is sizable, we're reasonably big in it. Domestic Germany is I have no desire to be big in domestic Germany. I'd far rather be doing intra European out of Germany. So I think don't get too distracted by different by smaller, by Spectral issues always look at us as a kind of pan European airline. And if we're doing a short flight, whether it's a domestic or it's an intra European flight, It's just a short flight. Bag charges, yes, we continue to see significant change in customer behavior. I did think we last year, when we were above 20 just about 20 percent in check-in bag penetration, but that was probably as low as it would go. We have been surprised this year to see check Ag penetration fall below 20%, now running at around 16% in the into the peak summer period which is unusual, it does show that more and more passengers are now traveling with 2 carry on bags. We are I mean, it isn't affecting our on time performance, but it is affecting the speed at which we can board Our on time performance is struggling at the moment mainly because of staffing issues within German, British and French ATC, particularly at weekends where they are pit poor. It's also being affected by we have this same as last year, an outbreak of thunderstorms, which seems to hang over Continental Europe For the month of June July, this is the Azores high in the wrong place. And that has it's fundamentally the bigger problem. I think, though, it is becoming an issue for us the volume of carry on bags. Our handling agents do a good job Managing the queues, but we are putting far too many, I think, second bags into the hold free of charge at the boarding gates. I'm not quite sure how we'll get there, but I think we'll have to do something before the maybe the end of this year or sometime into early next year Just to reduce the number of carry on free carry on bags that are being put into the hold of the aircraft, it seems clear to me anyway, although we're the management team are not entirely united on this, that there is team are not entirely united on this that there is a people are now gaming the system because they know they can just Show up at the bloody boarding gate and get the bag carried free of charge instead of going to the check-in desk and checking in the bag. And I think we are looking at different ways where we may limit the number of people who can bring 2 carry on bags. That might be priority boarding. It might be by splitting the pricing of different products into a standard and a basic pricing on airfares, But we will need something to limit the amount of free gate carry on bags we're taking into the whole of the aircraft. I would again, in that light caution, I mean, in many respects, I think that the I look favorably on the declining check-in bag penetration or the increasing penetration of 2 bead capacitors bringing Gaming the system by bringing more bags down to the boarding gate is just one of the valued byproducts of our always getting better program. And it's the always getting better program and its success That has continued to mean that we are seeing very strong traffic growth. Load factor is up at 96% And rising profits up in the Q1 by 55% and even profit growth in the over the full year of high single digits. The fact that bank penetration is down is one of the negatives of always getting better, but it goes to the heart of what we're doing, which is still passing on more value to customers in the form of lower fares and now more more value to customers in the form of lower fares and now more and more free carry on bags. Next question, please. Thank you. Our next question comes from the line of Stephen Furlong of Davy. Please go ahead. Yes. Hi, Michael. Can I just ask you about you talked about Italy, so can you just talk about Germany? What do you think is going to happen? How it's going to play out with Air Berlin? And And also what's going on with the Berlin airports and how you think that will play out? Again, it's difficult to say how it can play out. Clearly, Air Berlin is teetering on the edge of bankruptcy. It seems to us that it is Lufthansa that's keeping them alive in what is a flagrant breach of EU competition rules, but the Germans seem to be able to breach Competition rules whenever suits them. I suspect, but again, I also I caution, I was the one who thought the UK would vote to stay in the European Union. I suspect that Lufthansa will somehow be allowed to buy Air Berlin, that they will reduce Air Berlin's capacity because they will then ultimately control the German Big market, which will mean higher fares for German consumers, but less capacity. That should, I think, assist our growth in the German market Because more and more of the German Air Force will look to have low cost intra European traffic growth make up For the decline in the German domestic traffic they will have at their airports. And the second part of the question was? Berlin Airport. Yes. Berlin Airport, I mean, they have this mad idea to close the 2 airports, Brandenburg and Teagle, Schonefeld and Teigle into 1 smaller airport, Brandenburg, which can handle has a capacity of about 27,000,000 passengers. The combined traffic at Teigle and Schonefeld at the moment is about 34,000,000 passengers. It's nuts. The only people who are in favor of this plan are Lufthansa, who think that It's better to have less capacity in Berlin, less competition to Lufthansa, but at least the poor Germans won't be confused about Having operating at the city with more than one airport, it's clearly a scam by Lufthansa to limit competition and keep fares high in the German market. I think there is a reasonable prospect, there's certainly more momentum behind the campaign to keep Tagil open. Kenny was over there last week and he did a good job of, In fact, not just keeping Taegele open. By the time he was finished, he was calling for a 3rd airport in the Berlin market basin. To be fair, if you look at the way London has mushroomed once the BAA monopoly was broken up and Heathrow forced to sell graphic and sunset. Nobody would argue, I think, in retrospect That was anything but good for consumers and good for competition. Berlin should have at least 2 and if not 3 airports, not one smaller airport. Okay, got it. Thank you. Thanks, Stephen. Next question. Thank you. Our next question is from the line of Damian Brewer of RBC. Please go ahead. Hi, good morning. Two questions, please. First of all, just one simple one. If we take at least What was the May June revenue per seat development like? Just to understand what the next Easter effect was like. Secondly, Just looking at your outlook for the year, fleet growth and therefore seat growth in theory looks like it would be About 12% if it followed the fleet growth, but passenger growth up 9%. So clearly, it looks like you're grounding a lot more capacity this winter or something else is going on there in terms of fleet timing. Could you expand a little bit more about what's going on there that the passenger growth still lags the fleet growth this year? Okay. Let's do Easter. I wouldn't break out Easter on the revenue per passenger, but in terms of profitability, I think Easter roughly is now around $50,000,000 in our profit, so about $50,000,000 tends to move around, and that's been one of the key drivers of the For kind of Q1 numbers this morning. Fleet growth, I think it's a little bit distorted. Remember, we get a significant most of our deliveries come The big flow of our deliveries comes through January, February, March, April May. We're taking about 9 Craft a month or 8 or 9 aircraft each month. So the fleet growth is heavily skewed towards Q4, whereas the traffic growth is spread across the 12 There's nothing untoward in that. We are still we still believe our load factor will hold up At or slightly ahead of where it was last year, which was what, 95% or 94% for the full year, We expect that, that would be repeated again. So there's nothing we're not grounding more aircraft in fact we would be flying. We'll be grounding only as we did Last week, we'd only be grounding what we need for our winter maintenance program. So there's no disconnect between the fleet growth and the traffic growth. Okay. So it's all in the timing of deliveries basically. Finally of the deliveries. And as you can see this morning, we have raised the traffic for the year Our next question comes from the line of James Hollins of Exane. Please go ahead. Good morning. I'm not sure if you have 3. The first one is just on the UK inbound, you highlighted Terra Tech London, Manchester. I was wondering if you feel they're still seeing an impact just as it might impact the late booking market for the summer. The second one is on airport handling charges. I just noticed on your video, Neil, you said discounts are coming forward. Just wondering if you're seeing an acceleration in airport charge discounting or maybe quantify that some point. And third one is just on CapEx hedging again on your video. I think you said you're now fully hedged 21 to 24 partly hedged on 2020. Just wondering if you could say what proportion is hedged on 2020 and what average rate you've got on 2021 to 2024? Thanks. Thanks, James. I'll do the first. I'll get you to part 2 and 3. UK inbound, look, whenever that we have terror attacks, and we had them in Brussels and Paris last year, But buses and tariffs are a smaller part of our overall traffic than the UK is. Our immediate response to those is to open up more cheap seats. So you never see the impact of these terrorist events on traffic volumes. In Ryanair, you will always see it impacting on yields. So There's no doubt we have had a London has had a difficult spring that is particularly prevalent into Q2 where post Manchester and the 2 attacks in London. We opened up more seats, keep everybody flying at that point in response to those. So The response to the terror attacks is not a fall off in traffic, it's a fall off in pricing. Neil, the handling charge In the quarter, just to end this point we were making is that we've got volume discount deals in place at both primary and secondary airports, which will continue to deliver savings for us into the future. And then on the CapEx, as you correctly said, fully hedged On the MAX firm deliveries from FY 2021 to 2024, and we're about 70% now through FY 2020 At an all in blended rate of just over $1.20 against the euro dollar on each of those years. Okay, lovely. Thanks a lot. Thanks. Next question, please. Thank you. Our next question comes from the line of Robert Bide of Cantor Fitzgerald. Please go ahead. Good morning, guys. Just one actually. Going back to the Brexit theme, in broad terms, can you say how many of your flights This is a proportion of the total are between the UK and the EU. Thanks. It's about 40% of the traffic operates between the UK and the EU that splits and there's slightly more UK That EU originating, but it's about 40% of the total capacity. Now as an EU airline post We can still in an Armageddon and one of our Armageddon events is we would take up to 80 or 90 aircraft that are currently based in the UK and we allocate them across our remaining bases in Continental Europe. We would have the capacity to do that. In a hard Brexit, we think we'll be doing that and taking up enormous opportunities that would arise because Either IAG or pretty sure Iberia won't be flying as the subsidiary of BA. Our easyJet's Austria and AOC won't be operating at all. But Nevertheless, while we are reasonably flexible in moving aircraft around, moving the crews, the pilots of the cabin crew would be Expensive and logistically difficult for us for that period of time. But I continue and I think it's important that we front On this issue, I mean, what's been disappointing in the whole Brexit debate is the extent to which the other airlines have been kind of sticking their heads in the sand and say, no, no. We don't do it. Oh, no. It won't be that bad. It won't be blah. It will. And if they were all a bit more upfront about it instead of kind of Trying to mumble through it. We put more pressure on the British government to begin our initiated bilateral discussions on the with EU-twenty 7. The problem is because the Brexit discussions haven't even got started yet, they still have no they haven't even initiated discussions on either the exit bill, The rights of EU citizens and vice versa, they cannot even start the bilateral with the EU 27. And so I think there is a real likelihood at this stage that there will not be a separate bilateral. And therefore, if the British don't blink, which I ultimately think is what May well happen certainly with regard to flights, but the idea that Gove and Johnson and some of the village idiots over there would have you believe that the European airports like The German car manufacturers will put pressure on their government to do a deal with Britain to ensure that they continue to welcome British travelers. That's It's simply not going to happen. Thanks, Michael. That's clear. Thank you. Thanks, Rob. Next question, please. Our next question comes from the line of Anand Daid of Deutsche Bank. Please go ahead. Yes. Hi. Good morning, everyone. I was just wondering with the developers you've got in Dublin and Eastern Europe, What are the metrics you're using to analyze their performance? What are you actually tangibly looking to get out of them? Just interested in that. And then secondly, on the Business Plus and the Leisure Plus, could you just outline maybe What proportion of tickets are booked that way? Basically, I'm trying to figure out how much of what we might classify as ancillary is actually sitting in schedule. Thank you. Okay. Thanks. Labs, devs, what we're trying to do here is hire talented IT developers who can quickly we can spool up quickly and give us more, what do you call it, development teams so We can actually implement more than one project at a time. Here in Dublin, we have about 5 or 6 development teams. I'm looking at Kenny, about 5 or 6 We have now in Vaclav replicated that. So we have been told between 10 12 development teams. So then we're looking for about another 5 or 6 in Madrid over the next 18 months. And it is so that we can be very flexible, very adaptable. But we, Kenny and John Hurley set the way we develop both mobile app and the penetrations. And I think if you look at the way the penetrations are jumping, It has been enormously successful. And I think that's so what we're looking for is to hire bright, young development talent. And the advantage of doing that in Brothlop and in Madrid is there it's cheaper there than it is in Dublin with a Our lower rate of turnover, I mean, the problem here in Dublin is that the market is very hot. We bring in bright Kids here, both domestically and in from Europe, within 2 within a peer, reasonably even less than 12 months, They are being distracted or having their heads turned by working for the back office officers here for Google and Facebook and all these guys Who in Dublin do no IT developments at all. They're just issuing fucking invoices. But nevertheless, they have all the The appearance of doing sexy stuff and the kids can't help. So the advantage primarily of Brotsev and of Madrid is much lower rate of Turnover of these IT development talent and lower costs. Business and leisure plus penetration is now rising up around Between the 2, we're now heading between 6% 7%. If you find it difficult to break it out, how much of Ancillary is in the underlying airfares. Although there is clearly some and it's a growing percentage, it's The continuing growth of the business, Closhen Leisure Plus, is also partly responsible for the decline in the Chegg's bag revenues as well because they have bags included in them. Can I ask a quick follow-up as well? Yes. Just a bit longer term, we're hearing from some of your competitors as well that the ancillary mix is permanently changing, Right. Because customers are behaving differently. Is the implication therefore that revenue growth on ancillary might be slower, But that actually margins are more likely to go up because the newer products are higher margin? I don't think so. I mean look, it depends. The problem with that is you're trying to predict what's going to happen to ancillaries into the future, and it is a very fast changing area. If you look at what we talked about with Ryanair Rooms, Ryanair Rooms in the next 2 or 3 years could generate very significant revenues for us, but almost no profitability because, frankly, We're willing to promote Ryanair rooms on the basis that we get. We'll make no money. Whatever commissions we get from the hotels, we will give away to customers in the form of Either discounting below the prices being charged by booking.com and the other GDS suppliers or we'll give them discount off their flight. So, we're willing to do hotel rooms for 0 margins. So, but that could change again in 12 months' time. So making predictions as to what's going to happen, I think, to the margins on ancillaries or the profitability on ancillaries is very dangerous in what is a very Changing environment. If I just dialed it, it's about driving the conversion rates. And I think if you go back over the past number of years, next number of years, there's still loads to go In getting a higher percentage of the customers who fly with us buying various ancillary products, be that seats, be it Fast Track and the kind of the owned ancillary Related around the flying product or be it car hire or as Michael said, rooms to scope plenty to go for in terms of the overall penetration rate. Okay, lovely. Thanks, guys. Thanks, Aaron. Next question, please. Thank you. Our next question comes from the line of Johannes Braun of MainFirst Bank. Please go ahead. You are open. Yes. Hi. Good morning. Just 2 for me. Firstly, On the full year guidance net profit, on what sterling rate is that more or less based on? And did you hedge any of your net sterling exposure by now? And secondly, again, on costs. I mean, I can see what you are seeing on your relative cost performance versus peers. Still, I mean, just looking at your moving parts here, you're guiding minus 1% unit cost per passenger. So you still have the benefit of the weak sterling, the benefit of higher load factors and you also have growth benefit of almost 10% growth. I was just wondering or trying to understand if there's any underlying cost inflation there. Is it marketing? Is it wage inflation? Do you have growth costs? Or is it just you being, again, conservative? Well, let me address the second question first, Johan, is I'd like to correct We don't have peers. We have a basket of other people out there claiming to be peers. But when you analyze their cost It becomes pretty fucking evident that we don't have any peers in the marketplace. I think The point I'd make, Julian, is our cost guidance unit cost guidance, and it's ex fuel, down 1% for the year. It's another superb performance coming on the back Last year, when we reduced unit cost by 5% ex fuel, we're lower these are meaningfully lower costs. And I contrast I mean, there was some silly analysis produced recently By Bernstein, I believe, who are writing that, oh, as we move to primary airport, our costs will increase. We started moving to primary airport 3 years ago. We're now moving to year 4 of AGB. And the whole analysis, though, as we move into Main Madrid, Main Rome, Main Brussels, Frankfurt Main, Our costs will explode. Handling rules, we have all these uncontrollable costs that EZJ and others seem to whine on about. We're now in our 4th year at a lot of those airports. I think the key message is if you go through each of our cost lines, staff, airport and handling, route Just maintenance and materials, even the others, we are there is unit cost reductions across all of those classes. There is one, I think, where we have cost inflation. That's the continuing ramp and scamming of EU261 claims and these plug in ambulance chasers who we are trying to bury across Europe. I mean, it is a complete Not a scam, but we have with an average share of €40 have to pay out compensation of €250 every time some bloody judge thinks The delay was our fault. We somehow should be responsible for these delays when it's ATC And others who are MANTA, who are clearly responsible for the delays. We continue to believe that if there's going to be customer compensation as in most other industries, it should Lease reflect the airfare paid. So that's the only area we have cost inflation. But even that cost inflation, which is included in our other, It is on a per on a unit cost basis close to flat because Kenny and his team are spending less money on advertising and more And more marketing as we use our lower fares, lower declining bag fees and the brilliance of AGB to continue to deliver And 9%, 10% traffic growth. And the third impact on the full year guidance, Shane, you'll take that or Neil? Well, 1st and foremost, Johannes, we don't give out our budget rate to you guys. What we can say is that we had a positive impact Sterling, which I already indicated, about 1.5% in the first half of the year. We would expect Sterling to go in the opposite direction As the comps get more difficult in the second half of the year. And you are not hedged on your net exposure? No, we're not hedging on net exposure. Can I just come back to the cost point? I mean the point I was trying to make is that Given that you are calculating unit cost on a per passenger basis and you do not adjust the currency, you do have a Tailwind from the currency side and you do have a tailwind from higher load factors. Those are flat this year. Yes, load factors are flat, but not higher. Q1, they were up. So if you just check these out, you have It seems that you would have some cost inflation underlying. I was just trying to understand this one. No. We don't. Okay. Thank you, Anders. Next question, please. We have no further questions in the queue at this time. Well done, everybody. That's the first time we've managed to get this bloody call down to under an hour. Look, if there's any follow-up questions, Shane is here in Dublin. Neil is in London doing the presto. Again, the underlying theme is our traffic is strong. Yields will be weak into Q2. I would say we did we are the only ones for the last number of months who've been predicting fares would be weak this year. Well, all about is we're predicting fares would be up. Our unit cost discipline continues. We are continuing to deliver unit cost declines. When most and in fact, all of our competitors Our delivery new unit cost increases, and it's that widening unit cost gap between us and the competition that will continue to enable Ryanair to succeed, Particularly as we expand the demand of head competition we have with these so called peers, the only other one out there is that clearly Brexit continues to be an issue. It's going to become more and more of an issue, I think particularly as we get to the second latter half of this year and we are less than 12 months away from September 2018, We will be trying to keep this issue front and center in the UK. I don't think anybody should get panicked, but until the UK begins to realize The weakness of their negotiating position, particularly in this sector, there's a real risk of a disruption to flight from April Okay, everybody. Thank you very much. And if there are any follow-up questions, please feed them back to Shane here in Dublin. Thank you. Bye bye. This now concludes our call. Thank you for attending. Participants, you may disconnect your lines.