Earnings Call: Q1 2019

Jan 22, 2019

Good morning, and welcome to the EasyJet Q1 Analyst Call. My name is Rosie, and I'll be your coordinator for today's conference. For the duration of the call, you will be on listen only. However, at the end of the presentation, you'll have the opportunity to ask questions. Will now hand you over to Johan Lundgren to begin today's conference. Thank you. Thank you for that. Good morning, everyone, and thank you for joining us us our Q1 twenty nineteen update. And Tony McGahn, who is Andrew Findlay, our CFO, as well as Stewart and Michael from our IR team. You should have been sent to slides along with the statement, which are also available on our corporate website. And As usual, we will review the Q1 results and then follow-up with time to time for any questions that you may. So we'll need to do presentation on the overview. Overall, ETF has delivered a good performance in Q1. Our growth plans are disciplined and see if they're building a strengthening market positions in key airports and cities across Europe. A robust demand environment has seen ECS delivered positive underlying revenue trend with ancillary revenue continue to perform strongly and growing by 20%. Cost control continues to be a key focus at least yet, and we have delivered an underlying Q1 form is in line with our full year guidance. Unfortunately, in December, we experienced a EUR 16,000,000 impact from the drone issues at Gatwick, as we looked after a customer renewed this event, 1,000,000 of this impacted the cost line and 1,000,000 impacted the revenue. This affected around 82,000 customers and led to over 400 flights being canceled. As always, I fair to say that I think that our people did a great job in dealing with issues, something that I'm very proud of. Today, I will focus on the trading statement, but I just wanna to highlight that we continue to make good progress on the strategic initiatives announced last year, and we look forward to updating you on their progress later this year. The customer perception is also improving, particularly in the UK and Germany, and you will have seen the results of the recent switch service, which position as well ahead of digital Airways and a number of other airlines. Now let me just run you through the key financial information. Passengers increased by 15.1% to SEK 21,600,000 in the quarter driven by an increase in capacity of 18.2 percent. As expected load factors decreased by 2.4 percentage points to 89.7% this was driven by last year's high comparables from Monmouth and Ryan near late demand as well as the inclusion of Tango flying a Q1 schedule for the first time. Revenue proceed, the constant currency decreased by 4.2% for the quarter, which is in line with what we expected, and I will give you further details on this in the next slide. Cost control remains strong, cost per seat excluding fuel at constant currency increased by 1% and that includes the impact of the drilling of Chevron And Gatwick, which represents around one percentage point of cost in the quarter. Kmart was received at constant currency, including fuel increased by 2.2% reflecting the higher price of fuel. Moving on to revenue. First, I'd like to emphasize that we continue to benefit from our winning market positions a leading network and schedule and a reward winning customer service. Total revenue per seat decreased by 4.2% at constant currency, in line with expectations, This overall outcome is built up as follows. The move to IFRS 15 negatively impacted Q1 RPS by 0.6% This will be a bigger negative impact in Q2, but reverses in the second half of the year as the booking fees are now accounted for and flown and not when the booking is made. As we would expect, our highest passage growth in the first quarter for Berlin Tigal has been diluted, in particularly as we completed the 1st 12 months flying in Q1, where the schedule is still in the early stages of optimization. This had had a negative 2.9% impact on the RPS for the quarter and will improve as we go through the year, especially in the summer period. The one off benefits experienced in 2018 from the bank proceeds of Air Berlin and Monmouth as well as Ryanair winter scheduled cancellations combined to have a 2.2 percent negative impact on RPS this year. Therefore, underlying revenue proceeds increased by 1.5% due to robust underlying solid demand as well as the continued growth in ancillary revenue per seat through better bag and allocated seating sales. Costs. Focusing costs continues to be key strategic objective for Easyjet to ensure we maintain our competitive advantage Headline cost per seat increased by 2.2 percent at constant currency while headline cost per seat excluding fuel at constant currency increased by 1%. This is a good performance considering the drone issue experienced at Loma Gatwick, which had a GBP 10,000,000 impact on costs for the quarter. And as I mentioned earlier, adjusted for this cost would have been flat in the quarter. Our underlying cost performance was driven by the annualization of crew pay deals better than expected through retention levels and increasing ownership costs reflecting new aircraft, some additional leasing costs resulted from late airbus airbus aircraft deliveries and the impact of IFRS 16 accounting. It is also worth noting that we have seen incremental cost increases due to the setting up of the Brexit compliance corporate and operational structure and the significant amount of management time that this has involved. Ethernet cost program has continued to deliver substantial savings, particularly in volume driven contracts with airports, maintenance price benefits and the benefits from fleet updating with our average seat gauging Q1 this year increasing from 170 to 173 seats per aircraft. Costs will continue to be an area of relentless focus for myself and organization, and we will continue to invest in initiatives such as disruption to deliver improved cost performance. Brexit. Easy to get this very well prepared for Brexit. We now have 130 aircraft registered in Austria, and the process of distributing our spare parts pool in the new 27 and transferring crew licenses to the EU is going well and will be completed by March 29. Both the year and the UK have committed to ensure that flights continue in the event of a Nordium Brexit. On ownership, ETS has increased its ownership by qualifying EEA nationals to 49%. As a reminder, we have a number of options available to us on controlling ownership if required, principally those currently existing in articles of association, So we are well prepared. And as we come to later, demand in the second half continues to be robust. June and hedging, this slide summarize our forward GAAP and currency hedge positions. And as you can see, we remain well hedged and have been increased for the year and next year as big prices. Although increases in fuel price impact us in the short term are strong hedge position sectors in good stead over the medium term versus the number of our competitors. Now turning to forward bookings. Each volumes broadly in line with the same time last year with around 74% of the seats booked for the half, 58% of seats are booked for Q2. Looking into the second half of the year, we can see the forward bookings are slightly in front of the same time last year, highlighting the continuous robust and solid demand we are seeing across the network, including strong demand in the UK post March. In capacity, Next slide shows the expected capacity growth across the European short haul network through the winter. And as you can see, short haul capacity in each desk market is expected to grow by 7.1% in the half, with Easyjet reaching just under 15% growth, mainly due to the impact of Tegan Klein, which represents majority of our growth in the first half. Interest and competitors on our routes, we're expecting an increasing capacity of circa 3.9% a decrease from the previous estate of 4.3% with last year's figures reflecting the demise of Monica and Air Berlin and the reduction of UK domestic routes by Ryanair. Moving on to the outlook. We plan to grow full year 2019 capacity by circa 10% with H1 growth being around 15% at normal levels of disruption. We expect revenue proceeds at currency to decrease by mid to high single digit, which is a small change of previous guidance on mid single digits. We continue to see positive underlying training including solid demand for the UK consumer. However, there is the largest and anticipated negative impact from both IFRS 15 and the Easter in the first half. Which will reverse in the second half of the year. In Berlin, we are experiencing a more aggressive competitive environment than expected as well as experiencing constraints on our ability to deliver network optimization. As a result, whilst we will make a big improvement on last year expect to make a loss in Berlin market in full year 2019. Despite this, we continue to believe Berlin is a very attractive market and summer bookings and heat development look robust. Hemarcos proceeds excluding fuel and are constant currency expected to be broadly flat for the full year, which reflects the impact on the drone incident at Gatwick Airport. Our FX guidance is not changing, taking into account market update since our full year results announcement in November, Unit Fuel will have a negative impact about 10 1,000,001,000,000 with a total fuel bill expected to be circa 1,000,460,001,000,000. Despite the uncertainty created by Brexit for both consumers and the broader economic environment, forward bookings and consumer demand remains strong into the second half of the year, and we are comfortably delivering a full year activity that is broadly in line with current consensus. Thank you for listening, and we will now take questions. You. And your first question comes from the line of Savi Syth from Raymond James. Please go ahead. Hey, good morning. Just wondering if the only area of weakness you're seeing versus previous expectations is Berlin and Also, in France, if you've seen any impact related to kind of the division protests that you saw in December? No, I think you're right. I mean, the one that we're mentioning specifically is Berlin and that due to the 2 factors that have to do with competitive environment in there. And then also the constraints we're seeing in optimizing the schedule, at the 2 airports. So for instance, we would have wanted to get more domestic flying in the peak summer out of Berlin and do more of the Beach and, leisure flying as an example. And we would also wanted to see more through the slot application process that we can get more flying in from Teagle into places like Geneva and Amsterdam as an example. But apart from that, we feel that the underlying the demand for what we're doing is solid. It's robust. And France, the domestic continues to perform well for us. So we're very pleased about that. And if I might just follow-up real quick on the capacity growth, just could you remind me of the timing of aircraft deliveries this year and where that growth will be focused? I've delivered throughout the the year. So we have a a schedule that we've agreed with AirPlus, but obviously, as we've mentioned, the, the standard is a number of, a number of delays. In the first half of the year, we talked about a growth of of, 15%, 7% of that is clear Teagle. We've got about 1% in We've got some up gauging around 2%. And the underlying is around 4% and a lot of that is going into regional France as per our long term strategy. So we'll see some growth within France. But with the second half of the year is more general across the rest of the network, but the big us in half one is around France. The next question comes from the line of Jared Castle from UBS London. Please go ahead. Good morning, gentlemen. 3 if I may, please. Just Firstly, on Teagle, obviously, you're kind of saying it's going to be loss making, but if you could give some color on scale, are we talking tens of 1,000,000? Secondly, just coming to the holiday business, how that is progressing in terms of plans. And then obviously, Ryanair seems to have closed there. It's down. Does that suggest anything in terms of the market opportunity. And then just lastly, on the balance sheet, anything that you can say at this stage about IFRS 16, the scale and how the balance sheet will progress during the year? Thanks. Alright. Thank you. I'll do the 2 for us and then, and we'll do the third one. So in terms of the table, we're, as you said, we're not gonna we don't believe we're going to achieve a breakeven or a profit position there this year. We would call it a moderate loss and it still represents a huge improvement from last year results, operational results in there. And we, in terms of the things that comes with optimizing the schedule, it's not can't get what we want to get. It's just that it will take slightly longer for us to do. And then the competitive environment there has been more tougher than anticipated. It's been a lot of pressure on the yield and aggressive pricing from Ryanair and also from Lufthansa. And that has had an effect that we, we're absolutely convinced that this will deliver great value for us going forward. On the holidays, no, I don't read anything into, to, you know, what you just mentioned in terms of Ryan and closing down what they've been doing in there. I feel strongly that this is a great opportunity for us. Gary Wilson has joined the company now and we're getting the team in place. And we're looking through a number of things in here that we believe is going to present a lot of opportunities for the company going forward. And we'll update you more on that into the in our H1 results in May. Andrew. Yeah. Hi, Chad. So, we set it as the full year that's approximately 4 a 545,000,000 lease liabilities and 5% of of assets will come up to the balance sheet as a result of the new accounting standard IFRS 16. That's absolutely nothing's changed there. So from a point of view of of balance sheet. There's nothing of any surprise that we're seeing coming through apart from what we've guided on. Cash is in a good place. You haven't disclosed exactly what the cash is, but it's where we want it to be in its healthy position. The only thing that's bouncing around slightly is our derivative position as you'd expect our jet position as you expect has been bouncing around from your assets. We're liability that to an asset again. So that's the only thing that's really moving around. And, relationship with the rating agencies is very good. With recent meetings with both of them and they're very supportive of our of our current rating as it stands. So, nothing really surprised. Thanks very much. The next question comes from the line of Neil Glynn from Credit Suisse. Please go ahead. Good morning, everybody. If I could ask, firstly, just a quick question on the Easter. Is it possible to elaborate to what extent the change in expectations on Easter timing was prompted by UK experience or estimates versus Europe. Is there any any differential there? And then just a couple on TEGAL. First of all, if I'm correct, I think you lost $86,000,000 in the second half of last year, at TEGAL. It fair to think given the extent of that loss in the summer that the second half of this year should actually be a tailwind in Berlin after a difficult winter? And then just finally, again, on Tango, given the capacity constraints at Tango that you touched on, is it fair to think that this could actually end up being a multi year now to optimize the schedule by the time you're through? Yes. So on, you have to be right, it is a tailwind in the second half. So, and you're absolutely right on the multi year record. We always said it would be take a number of years. It's just taking slightly longer than we hoped in the first instance to get that that optimization in the first period, but we we have optimized. We've shifted flights from between Teagues and Surna Felton. We've reduced some of our network points, but we wanted to do more and we have been able to. But it will take slightly longer. With respect to Easter, now Easter is always very difficult. As you know, we've we've found it very difficult back in 2017 and then 2018 and back into, you know, chipping around. But fundamentally, a lot of that is UK driven, the impacts of school holidays and the closeness to the May Bank holiday, etcetera. So, a lot of that is out to the UK. Sorry, just to take it as well. I think that, you know, it's, you know, we've been doing a lot of focus to be sure that we'll operationally get this in a good place as well. And the brand presence that we have is increasing also month by month in there. So we think that we're setting ourselves up also to get this in a very good place, but the family said it just takes that long and they were anticipated. Understood. Yeah. Just to follow-up on the table second half comment. Mean, I guess given it's summer, would it be fair to think it would be quite surprising if you actually lost money in Tango in the second half in the summer? We haven't just given to be guidance on on the split between half and a half 2, but I think it's fair to say that we hope we'd be in a much better position than we were last year, which we clearly expect to be. I think, you know, you know, I think from our perspective, you know, the contribution for dropout, which we measure, as you know, is doing very well. It's just the fact that we need to cover those costs associated with depreciation of the assets associated with us, building our base there. So that's the key for us. But from a contribution point, contribution with Rock out, it's positive and growing. So, that's the key focus of the network and scheduling team to maximize that to to, to cover cost base. Great. Thank you both. Thank you. The next question comes from the line of Stephen Berlin from Davy. Please go ahead. Hi guys. Sorry to come back on Easter and Berlin, and just for myself, I mean, slightly confused. So could you just talk about why is the $50,000,000 shift from winter to summer just kind of slightly unusual and that the fact that Easter is later, does that make a big impact from the summer perspective? Cause I know last year kind of straddled it's been at the start of April to kind of straddle winter and summer schedule. And then just a general question on Berlin, I mean, a big obviously, team in the U S, and then following in Europe is consolidation, and it's believed obviously consolidation is going to help the stronger surviving players. Do you think like what we've seen out of Berlin, Air Berlin going and then log plants, easy gas, and rider coming in, is that true or it's just a timing thing as the market, somebody goes out of the market and just have to kind of consolidate. Thank you. Okay. I'll answer these questions first. I think at the beginning of the year, when we do our budget, we do our budget back at the the tail end of the summer because obviously our year starts at the beginning of October, we have to make an estimation of what we believe the impact of the shift of Easter from half 1 into half 2 is And along with that, we'll overlay that as also the IFRS impact the accounting change, whether booking fees are recognized when flown. Now, as you'd expect, as our bookings increase for that Q2 and Q3 period, we get a much better sense of what that that phasing impacted. And, fundamentally, we've adjusted those those estimates based on the bookings that we've seen. So you see the booking numbers that you're you've got for Q2. We've got the booking numbers for Q3. We've got a a good feel and what that that's looking like. Can we reestimate what those numbers are? Now I have 15, the adjustment that we've made there is small given the scale of the revenue we've got in this business. It was relatively small movements, and that Obviously, it's definitely a phasing thing that will come back in the second half of the year. It needs to be the same. And it's always the way we have the same a challenge back in, 2018 when Easter shifted into the first half, we look to estimate what that would be. And the the the analogy is actually 2017, but there are substances around school holidays and the timing of that at Easter weekend. So I just wanted to have as our best estimate and that's reflected in the revised guidance we've got for Q2. That's fair. Thanks, Yes, as I think on the consolidation piece, I mean, it's, I don't think the consolidation is necessarily linked into certain specific countries. We've seen the trend on consolidation taking place really across Europe. So it's a European phenomenon. Just back in of 5. There were about 25 airlines that accounted for just about 80% of the overall flights in Europe. And that number in 2015 is just about think it's 11% to get to the same 80%. So strong airlines and we include ourselves in there, we'll become stronger and will grow and then outperform. And if you are weak and you are struggling, you will disappear. Or there will be restructures taking place. Just in 2018, as an example, we're used to a number of airline facing difficulties with you know, both big and small events. We delivered, you know, one of the best results, whoever had. So, I I think that this consolidation will take place, not only specific market, but really across Europe. But Jeremy is no exception from that. Next question comes from the line of James Holland from Exane. Please go ahead. Hi, good morning. 2 for me, please. Firstly, on your competitor capacity, you've talked about up, I think, 3.9% in this half. I know it's way too early to talk about H2 with any real certainty and no one knows what Norwegian is doing in the rest of it. I was wondering if you could just give us a flavor of how your internal systems are looking at competitor capacity for H2 or maybe just Q3? And then the second one is just running through some of the maths on your Q2 implicit, RPS guidance So if we assume it's sort of down 8% to 10% from your guidance, with Easter at 1,000,000, I think you're implying that IFRS has cost you about 42,000,000 in Q2 alone. If that's close to 10% year on year impact, Are we if we then take out Tagle as well, would it be best to assume you're guiding to around about the same as your Q1 on underlying RPS of up 1 a half percent? Any thoughts on both would be lovely. Thank you. I could do, I'll do the start off with the first one. I've entered capacity. So you would have seen that if you're looking at the what we believe now for H1, you would see that the competitive capacity on the routes that we're flying and our markets actually come down from previously 4.3% to 3.9%. And And whilst, you know, we got some, you know, limited visibility now for H2 from what we can see is that, that will come down even further. So we're looking at an increase in competitive capacity on our routes about around 2%. But that, that, like I said, you know, that is not, we don't have the full picture yet, but that's where we are today on that. So, We are watching the competitor capacity quite closely. We're looking at those of the pricing. We're using data by block together pricing information from our competitors to make sure that we are maximizing the yield and the revenue in the market we operate into focus on. On profit per seat, really. So, that is one of the main focuses within ourselves from a competitive point of view and how we are monitoring that. Andrew? Yes, James, on your revenue, your fundamental question, do you expect the underlying performance that we've seen in Q1 to continue to Q2? Yes. I think you said to say us as a good estimation. And we've got quite a few moving parts to expect, And, I think you've fully captured most of those moving parts that we've got in that Q2 period as you say, IFRS. 15, you're you're about right. Giving the guides. We've given the Q1 and QQ2. Easter, we've given the number pretty much for what that impact is. You've still got a few underlying movements with respect to, to monitor some of the fundamentals for the underlying number that we expect to see going into the second quarter. Is around what we see in the first quarter. Got it. If I could just follow-up on Johan with that 2% you're seeing again without getting too much into detail. We know it can change. Are there any particular territories where you're seeing, I guess, an even better number, whether it's flat or down or something any more detail would be useful. Thanks. No, I mean, it's a dynamic thing. We are watching this and looking at this clearly on route by route basis as well, but I wouldn't want to go into specifics around that. But, we're seeing, for instance, a table has become more competitive in terms of the aggressive price and delicious there. And then we have right, other areas where we're doing better. So it's just a constant dynamic movement out of the 152 aircraft that we're operating in I don't want to go and be more specific than that. Sorry about that. Oh, yeah. No. That's good detail. So are you gonna say? So as we said, to be fair, Jake, that's very early OAG stats. So the, you know, which you'd like it to as well. So you know, it's how how early it is in the in those stats. Yes, lovely. Thanks guys. Thank you. The next question comes from the line of Andrew Lobbenberg from HSBC. Please go ahead. Oh, hi there. If I dare maybe change the subject, can I ask a little bit about the Airbus delays? Cause I thought that back at the full year results, you were sounding fairly confident in thinking that any delays would be manageable and not of a major consequence. And yet we're seeing in the announcement here some impact on cost and leasing. Needs. So, how do you see that playing out for the balance of the year? You're gonna need to keep on leasing and indeed, are the new neared as they come in, are they behaving as you hope? And then the second theme I'd be interested to discuss is, is how are you thinking strategically about Gatwick at the moment because we went through the monarch failure and you were outbid by IAG, for those slots. And then the slide b slots were available, and Havens above. IAG bought those 2. So, are are you guys not not feeling like buyers of Gatwick slots at the moment, or are you just seeing that they're so aggressive at bidding that you don't want to fight with them? On the graphic stuff, I mean, we're clearly following and seeing opportunities that are there, but we won't buy anything. If we don't think it's worth buying a for the cost that is out there. And if somebody else wants to pay over and above, if we think it's worth, then that's what's going to happen. It's not like we're taking, I mean, Andrew, on your point, it's not like we're taking intrinsic questions that we're not looking to buy things if we think that they would make sense for us to do. Our strategy is to maintain and have number 1 and number 2 positions at the primary airports. And if those opportunities arise, then we'll do that. But as you know, Gatwick, we're very big in at the moment. So, but there's no principal decision or not looking for an exercise on opportunities that we see. Yeah. On Airbus, so the neos, yes, they are behaving as we'd expect. And on Airbus, we are still seeing delays. You're absolutely right. We've we've commenced on it in our Q1. We may see some incremental lease costs coming through in, in, in the second quarter as we prepare for it into the summer. For us, we're working very closely with them to manage that through. And for us, we wanna make sure that we can fly our schedules. So we are looking at various options of making sure that we're we're covered. And at the same time, we're looking at incremental standby as well. So that might you may see some of that come through into into, into the the line of lease costs as well for, particularly in the Q2 period as we're preparing for summer as part of our focus on ensuring the summer is much better placed from a from a destruction perspective. But, you know, it's fluid at this point time, and we're working closely with them to manage that through. But at the same time, we're keeping our options open as to in the lease market, just in case. Obviously, you have a real tight relationship with her, but she's very important for one another. Do you get compensated for for these disruptions or incremental costs yeah, we do. So, you know, we have a we have an arrangement with them, and, as part of the, the discussion, you know, as part of the the, the deal that we did at the end of last financial year, we enhanced that. So to a certain extent we do, but clearly, we'd rather have, the revenue in the contribution and flying passengers around our network than the than the, you know, the latest shift from Airbus, contributing towards that that impact. Okay, thanks. The next question comes from the line of James Goodall from Redburn. Please go ahead. Good morning, everyone. Just a couple of quick ones. Firstly, following up on Mr. Holland's question, how does a positive underlying RPS performance in both Q1 and Q2 compared to your original expectations. Am I right in saying that you were originally expecting a flat underlying yield environment for the winter? And then secondly, if you could just clarify what your expected organic capacity growth is in H2. Okay. So which was, you know, the guidance is the guidance we gave. So we guided to, you know, mid single digit for half 1, and we're now guiding to to, mid to high negative single digit up here to half 1. And that's We've talked about those, the factors around that, which is IFRS shift, Easter shift, and softening in, some softening in Tiegel. So, with respect to there's a number of moving parts that we expect given what happened last year, but pretty much Q1 is in line for what we expect internally. Our revenue per seat number that we've delivered on uh-uh is pretty much in line with what our internal projections were for the first quarter. So from that perspective, we've got, you know, there's there's that underlying confidence that we have going through for the rest of the rest of the year. Respect to organic growth into half 2. As I said to James earlier, really we are looking to, as you know, we will we look to OAG And that sets us down nearly as we as we approach, half 2. But early early indications are that the growth in the second half is is is lower than, from our competitors on our on our network is lower than we've seen in the in the first half of the year. Clearly that that could change. And as, as James referred to, you know, the laws of Norwegian Norwegian are changing as we speak. No. Sorry. Sorry. On that on that second question, I just want clarify what your, what Easyjet organic growth is in H2, are you spitting out the the T Eagle growth? Oh, I see. So thinking that's around 3 and a half percent. Okay. So, yeah, so I I think, we've given guidance for full year. It's around 10%. We know what our first half guidance is. You know, I think we haven't been disclosing exactly what the the the TIGL number is, but effectively annualizes out over time because of the the, the growth that we saw in, in TIGO last year. It's, it says, instead of a fair proportion of that growth, that full year growth. Is is TIGO related. We can come back to you on exactly what that that second half is, but, I think the maths that you've got enough maths out there based on what we flew last year and the guide took in this year to work it through. The next question comes from the line of Damian Brewer from Royal Bank. Is Canada. Please go ahead. Good morning, everybody. Two questions, please. Just coming back to Teagle, could you elaborate a little bit more on what exactly is delaying the optimization. I assume you would have already taken into account the slot coordination committees and the other issues. So you say a little bit more and what has incrementally caused the delay there and how fixable you think that is? And then secondly, just sort of, I guess, a sort of derivative of the last question. Looking at H1, where clearly, you need to start to lap the take all startup till January this year at the beginning of Q2. Could you talk a little bit more about the relative route maturity within the business in H1 versus H2 this year. In particular, as growth slows down, you lap some of the Berlin start ups does the group portfolio significantly mature versus H1 or is what you're doing in regional France and the uptick in table seats offsetting that? Thank you. I mean, on on on the table and what we've been trying to do there and what the plan was and is. And and that's just give me a little bit of context is that as we go through the the supplemental swap application process, We've been trying to do a number of things. 1 is to actually just, you know, coordinate, you know, the best available program between Schoenfeld and Tiegel And we've been looking for more routes to be flown from Tigall into areas like Amsterdam, with Geneva and Bossel. And so on. And at the same time also for the summer, and I think we talked about that actually last year that we're having there were too many domestic flying in the peak schedule that was originally there for air Berlin that is supporting its long haul operation. I'd say that this is something that we would like to shift out to do more of a lesser destinations in December. And we got some of that coming in, but I think that as a result of that the result of the swap application process and what get back from that and how when we're working quite hard on it, we didn't get really the way we wanted it to be. So, we didn't get into the efficiency of the program that we were hoping for. That doesn't mean that we won't get there. It's just that it's a delay in what we've been doing. It's fair to say also that it's been a shoot focus for us, you know, in, in, integral to land it operationally. And now it's full focus to continue with that, but we can make sure that commercially, we get this back into very good pace, which you think it will be because it had all the parameters to do that. It's the 2nd largest sitting in Europe, a lot city in Germany. And we also got very strong preference scores in that marketplace from the Berliners. So are going to get into good faith there, but, it's taking a longer time than we thought, which is to be upfront about that. Yes. So on obviously the, as we optimize the TIGL, that will become more mature as normal. You're absolutely right on expansion into, France will will be a bit of investment as we establish ourselves. Just put in context, just give you some figures at the start of of this financial rate, we had about 980 routes. New routes in Q1 were about 50 really and we've terminated about 20 routes. That gives you the kind of a scale of the continued churn that we we operate and optimize our our roof portfolio, and, that gives you an indication of, of where we are. But, there is there is gonna be a continued expansion to, into, it's France as we as we talked about. And, we put extra aircraft in the Manchester, but typically they'll be onto the roof that we've already got, and we already operate. And and just to add to that as well, clearly, when we're allocating growth, we are aiming to get ourselves into that number 1 and number 2 position and get the scale and efficiencies. And there are a secondary couple of basis also where we haven't reached that yet. So that's also something that we see opportunity to come at. Think out of the 30 basis, we're going to have this year, we're going to have the number 1 and number 2 leadership positions in 20 4 of those, at the moment. So, that's where we're gonna allocate the growth coming forward to. And out of the 150 six airports that I think we're operating from as well about, you know, that that gives us the opportunity to to, to get more number 1 and under 50% and that's how we're allocating the growth. Okay. Thank you very much. Thank you. The next question comes from the line of Kaia Slater from Bernstein. Please go ahead. Hi. Good morning. Two questions, please. First one is, how satisfied are you with the performance of your revenue management system in Q1? You know, is it performing well enough to support the pivot towards business passengers? How are you thinking about fine tuning it or, developing the system? And then second question is, given a potential slowdown in the economy, how are you preparing for that? So what changes or measures are you putting in place? And how would you plan to react if demand grew slower than you're expecting? Thank you. Yes. I mean, on the first question, it's really interesting. I mean, we're spending a lot of time on the revenue as well as the whole, you know, areas and the focus on actions around yield. It's, we got to the system is very good. It works very well, you know, as a demand driven system, but we are definitely need to do a lot of intervention when coming into in granularity looking at the dynamics that exist in the marketplace where if you compared to the last year where demand was just picking up. Now, we go in need to go in and adjust the system also to make sure that when it gets tougher, as you would have seen from the RPS in the Q1, that that takes more manual intervention to do. I think the other thing which we're investing quite a lot in is that we want also the systems to start taking into account competitor, capacity, which it doesn't do at the moment because that is data that is available out there and we want to be able to, through data basically give that as an input to make sure that we're maximizing our yield and load factors as well as also competitive pricing. So the initiative that we announced last year about doing a lot more that into data and data scientists and data analytics, you know, I would say that, you know, probably one third of all the efforts is going into sure that we will improve our revenue management system. The system is good, but you know, I just think that there is an endless in terms of how we can also start yielding ancillaries as an example, a much more granular level than we do today. It's another great opportunity for us. I think the other question was about business traveler I'm happy to say that actually as of last night, we won the business travelers award of best business airline for the first time. So we're exceptionally pleased about that apart from also being the best shortfall airline. And that was from the business travel communities and the TMC. So we're doing quite a lot of work in there. I'm sorry. I was so so excited about that. So I forgot to ask you what the question was. Sorry. The the other question was around, if the economy slows down, what are you doing? Kind of prepare for that? And how would you react if demand grew slower over something you're expecting? Yes, I think it's, I mean, we have the flexibility to make sure that we will add ourselves in our fleet plan going forward on a longer term basis. And I think that's one of the good things with our fleet and not only have we exceptional prices on that, but it also is flexibility within our fleet plan. And the other point is to say that in when the environment gets tough, this airline tends to outperform. That's something that's been historically true. And I think it comes back to the fantastic positions that we have. We have tremendous a lot of assets in the slots that we have and we know that we can outperform. We have a competitive cost advantage And we also have still a lot of revenue opportunities that hasn't fully been exploited. So, you know, the good gears and the good times are there to set yourself up for the tough times to come. And I think that, you know, we are going to be in a good place and continue to outperform also when it gets tougher and probably even more so if that's what we've done in the past and that we reckon we can do in the future as well. That's great. Thanks very much. Thank you. The next question comes from the line of Alex Patterson from Investec. Please go ahead. Good morning, everybody. Can I just very briefly go back to Teagle and ask if you haven't managed to get the slot that you were hoping for, during this period? What gives you confidence that you're going to be able to get them in the future, please? It's basically just a matter about ongoing improvements that we're getting, you know, basically in all the markets we're operating through these processes as well. So I have no doubt in my mind that we are going to be able to get there. It's been a it's as you know, it's a big operation for us in there and there was a lot of changes that needed to be done. And I think in hindsight, we perhaps was a little bit optimistic that we should have got it in place, as we get we wanted to do. But there's no doubt in my mind that we're going to be able to do that because it's not rocket science and it's not constrained in order to the level that you're going to you're going to say, you're never going to get there. So these are self help measures that we can continue to do and get better results of single file. Thank you. Thank you. The next question comes from the line of Walter Schultz from Commerzbank. Please go ahead. Hi, Malte speaking. Good morning. Two questions left from my side. First of all, maybe we haven't spoken about it. Maybe you can give us on your current stand on Italia and your interest. And if you can, is there anything else to any changes to your plans and how do thing now that there was rumors that Air France KLM is joining Delta in a bit? And the second question would be also unfair and a little bit more. I think Ryan is particularly aggressive at the moment in lowering fares to squeeze out also a little bit the competition? Is it also something which can see your mind, especially if you look at Norwegian is quite weak at the moment, that you would then on competitive routes maybe enhance the pressure a little bit to maybe force them to go out of market? I think on the other side, there's nothing else to, add to what we stated previously, we are still engaged in discussions with the commissioners around this as well, but, There's no specifics around that that I would like to comment on at this moment in time. In terms of the, in the price and some of our competitors. Yes, I think that there is more aggressive pricing that is out there. But we have relatively little overlap with Ryanair, and we have proven that we can fare well and do well in the conclusion that any airline partly because of the positions we have, partly because of the structural cost advantages we have, and also because of the preference we have in our brand. We are consistently being voted as the number one when it comes to value for money across Europe our network and that's something that we know is going to make us successful, but the, you know, the it's your point. I mean, the marketplace is very dynamic when it comes to the pricing And, and I think it's fair to say that it's become definitely more competitive this winter compared to last winter, which was also very benign, as you know. So, Yeah. If you allow me to follow-up, but is it something you plan also to do a little bit more in the future to maybe to force a competitor out of business. So it's not just direct towards liner, but also to do to kind of copy the strategy, I mean, to be more aggressive. I mean, we are looking to maximize profit in what we do. You know, we know that we are more than almost any other airline that is out there and particularly on the roofs that we are flying on. And I think that that is enough to make competitors had a difficult time. And I think that if you take a moment as an example, that was one of the competitors that we would compete on headwind. We had a much more efficient model in there, but we were competing and trading as we think what's the right to do when they run into problems on that. Anything bad No. No. Yeah. No. Okay. I think that, yeah, as you say, our our aim is to maximize that that that profit. And we'll we'll have those competitive battles and we'll treat them independently and individually as we see fit as we do it, at any other time, over over over over the period, we we should trade it. Think we'll just we'll take one more question, yes, now if that's okay. Of course. So the final question comes from the line of Catherine Leonard from Numis. Please go ahead. Good morning, everyone, and thank you. Just a couple, if I may, if that's okay. Just in terms of the go match the Easter and the phasing and the underlying yield, expectations, sort of reiterating the point, but are you able to just say what has, what components are underlying versus your prior expectations. I mean, just thinking about, I know we've gone through it already, but the Easter contribution, I think you previously said about 1,000,000. And the interim, sorry, the prelim guidance on IFRS was about 2, 2.5 percentage points contribution as well, which you guided to. So on that basis, it doesn't look like there has been a big jump in terms of the the phasing impact on that. So I just wanted to, could you break out, what's underlying versus, just phasing in terms of that deterioration capital deterioration from mid to high single digit deterioration from mid. And then the second question, which is on levels of disruption and the, cost guidance. You've clearly seen some increased disruption in Q1 already and your, again, there's been some subtle deterioration in the cost per seat guidance for the full year from, slight improvement, including IFRS, to, flat or, unchanged. Given that we've that's just from Q1 disruption that's abnormal, I mean, can you just clarify or give any more color on, you know, what you now assume is normalized disruption? And and how that might then trend through the year. Obviously, you've got some easy comps for Q1, but obviously, some are being a tougher period. I mean, how much inflation should we expect from that? And then thirdly, you mentioned your progress on reducing the levels of delays and cancellations in the first quarter, despite the London gap drain incident. Are you able just to say, by how much improvement you've seen there? I know it's a key target and just what claim rates are doing on the E261. Thanks. Let me start from the with the last questions then. I mean, we launched a big program internally about disruption to make sure we're increasing on resilient, but it's partly in adjusting the schedule to avoid the 3 hour delays. It's partially an increase in the standby aircraft availability. Cope with the, you know, congestions and the disruption that sits outside our control. And then also it's about, you know, our own processes and procedures. We're going through every single line of detail instance with first wave. We think that's going to have an improvement going forward on disruption. You would see that the cancellations, were less. In Q1, but then of course, you had the drone incident as well that, that, took a big had a big impact from what we were doing. In terms of the disruption for the year, we anticipated to be in line with with last year, excluding also the effect of the beast from the east, but we got a huge focus on reducing the impact of the structure both for our customers. And actually, it's a big cost saving opportunity that we are going to be able to refit on. Yeah. On the, Catherine, on the phase, but by far the majority of the revised guidance of Q2 relates to the that the the the fact that our original estimates for IFRS 15, and if there was, 100% right. So think it's fair to say that the majority of that of that. And then you've got a a small, a small element of the softening within TIGO, which we've we've we've we've talked about. So they're the 3 main factors of that, that revised guidance into, of the, the half one guidance. That's helpful. Thank you. Right. So, thank you all very much and, have a great day and thanks for joining in on the call. You for joining today's conference.