easyJet plc (LON:EZJ)

Earnings Call: H2 2018

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Nov 20, 2018

Ready to start? Yes. Yes. Very good. Lita Janssen, ladies and gentlemen, thank you very much for coming here today to 2018 full year results. My name is Johan Langren, and you would already know what Andrew Findlay, who's the company's CEO here. And I also have a lot of prominent guests here from the company as well. John, our chairman, I saw you earlier. Hasn't made it in here yet. Oh, John, I was just introducing you. So you made a, yeah, very good. And then I also have my colleagues here from the executive team of A And B. And if you haven't had a chance to speak with them, prior to this presentation and the coffee, I would suggest you do so because there's a huge wealth of experience within that team as well. And I'm really pleased have them also in place, to gear for, he suggests, particularly in the context of an industry in somewhat of a turmoil. I've been here almost year now, and we have achieved a lot in that year. Our headline profit before tax increased by 41%, meaning our underlying profit, excluding decisions was a record for the company. The structural advantage means we have increased revenue by 17% with both passenger and a similar revenue performance being very strong. Cost control has been strong delivering GBP 107,000,000 in savings this year, and we've been recognized in years as the best value short for Airline by Skyscanner and our brand has continued to strengthen this year as the best airline across all our markets. Across the whole of the network, we continue to build our strong positions with an additional 7 airports added to the list of airports where we now have a number one position in. We have successfully acquired and started up operations at Teagle, which was a fantastic effort by the team. Overall losses were slightly better than first expected, and we are now the number one airline in Berlin. And despite the fact that it's been a difficult summer for disruption across the industry, we have seen a small increase also in customer satisfaction. Combined, if you take all of these things into consideration, I think it's very clear that Easyjet has outperformed everyone in this sector for 2018. Recommending a 43% increase in the dividend to our shareholders. Earlier this year, we also identified 3 big areas where we can drive margin returned and we're now making good progress when it comes to holidays, business, and loyalty initiatives, and I will come back to those later on. All this will be underpinned by the investments we will do in beta with the objective to become the most data driven airline in the world. While the disruption remains a major challenge for the whole of the industry, we believe we're leading the indirect response, with a comprehensive integrated program investing in a more resilient operation to decrease the impact on our customers. It is our currently our big prior to log with the focus on Brexit, of course, as well as safety, and we see it actually as a major opportunity. We'll come back to talking more about that later on. We're investing in people, an easy that has never been in such demand by cabin crew and pilot. We've had over 75,000 applications from pilots and cabin crew to join us, which is close to 8000 more than we received the year before. So since about the fact that, oh, there's a pilot shortage that doesn't at all apply to ourselves. And we'll come on to talk about that more and more in details. We also have, as I mentioned earlier, we have a new leadership team who have the right expertise and the experience to deliver on the strategy. Finally, we also have positioned ourselves extremely well in a period of uncertainty. We have a strong investment grade balance sheet with £396,000,000 of net cash. We are well prepared for Brexit, and I'll talk more about that later in this presentation. Our fleet position It's both flexible and other changes, and we have today confirmed an order of 17 aircraft with Airbus. Our fuel hedging position gives us a high degree of certainty also over the next 18 months. And really to summarize, it. You've taken all of these things as a snapshot. We are a structural winner. We have great foundations that we can continue to build on, which we'll talk more about in this presentation with plenty of opportunities to go for. And with that, I'm going to hand over to Andrew. So thank you, and good morning, everyone. Before I start, I just wanted to highlight that this presentation will be the final time we submit out the financial performance. Of our Teagle operation. As we run through the slides, I'll make sure to keep you updated on exactly what is being presented. Starting off with some performance highlights, which include the Teagle operation. Our total capacity grew by 9.8% with passenger numbers reaching 88,500,000, an increase of 10.2%. Overall loads have increased for the year with a load factor up 0.3 percentage points, despite the lower average loads in Tiegel, reflecting the rapid startup of operations. On a total reported basis, revenue seat was up 6.4% and up 4.7% at constant currency, resulted as positioned us at the high end of guidance ranges provided through the year. Total reported headline cost per seat was up 4.4% and a 2.7% constant currency, reflecting the wet lease operation at Teagle as well as the difficult disruption environment experienced through the year. I'll give you more detail of revenue and cost later in the presentation. Finally, Easyjet delivered a headline PBT per seat increase of 28.7% 6.07, highlighting the continued strength in our underlying strategy. Moving on to the income statement, as with the previous slide, the Teagle operation is included in the numbers provided. Total revenue increased by 1,000,000 for the year, which reflects a combination of our capacity growth, a strengthening euro as well as a strong trading performance. Excluding fuel increased by 1,000,000, which was mainly driven by increased capacity, a strength in euro, inflationally through pay deals, which we've highlighted earlier in the year, but high levels of disruption. This was partially offset by cost initiatives, including the continued leverage of our Scalar Airports and other benefits driven by a cost and efficiency program. Fuel costs increased by 1,000,000, reflects an increase in fuel price through the year, which was partially offset by our advantaged hedge position. As a result, despite the headline loss associated with our Teagle operation, EastJet has delivered a headline profit before tax, of GBP578 1,000,000, which is GBP 170,000,000 improvement on last year. When excluding the Teagle acquisition, we delivered a headline PBT performance of 1,000,000, a record for Easyjet. In terms of non headline costs, there was a million impact in the year largest element is being GBP 65,000,000 for the commercial IT platform as we take a more flexible IT approach to securing future commercial revenues, £40,000,000 of tegan integration costs and £19,000,000 of the accounting entries associated with the sale and leaseback of 10 A319 aircraft in the period. Now moving on to the detail of our revenue performance, and this excludes Teagle, Revenue proceed to constant currency was up 6.7% for the year, which driven by 3 main factors. We estimate the combination of monobank see the issues experienced with Ryanair and the French industrial action delivered £1.98 impact for the year being circa 3.4 percentage points. Ansidiary revenue delivered a sustainable £1 34 increase through the ongoing benefits of last year's improvements, including our new holdback proposition, with differential pricing for 1523 kilogram bags. And finally, underlying passenger revenue was strong, by a network of brand, customer service, and attractive fares, but include the impact of Forex, HCS reported revenue per seat, excluding Siegel, increased by 8.3%. Moving on to cost, again, excluding Teagle, total headline cost per seat at constant currency was up 2% and excluding fuel was up 3.80%. In terms of the detail, I'll stop the left hand side of the chart. The first bar reflects the impact of doing business at large regulated primary airports, which underpins our network differentiation. The increase in crew costs of 56p reflects inflation in crew pay deals we highlighted earlier in the year, the negative productivity impact of cancelled flights, and significantly better crew retention rate than expected. Higher depreciation charges plus interest on the 2 bonds drove ownership costs up by 18p These factors, as well as underlying cost inflation pressures, combined to drive costs £1 to 94 pence per seat higher in the year. To alleviate these cost increases, we doubled our efforts on delivering cost saving measures, increased mix of A320 and A321 aircraft, and the fleet delivered saving of £29 as we added 45 A320s and to A321s for the mix in the year. Meaning we still have a significant opportunity to deliver cost savings. Our year end average gauge finished at 172 seats. 2019 saw continued focus on delivering sustainable savings through the Egypt cost and efficiency program. The next column represents the cost reductions delivered in the year. Which include enhanced long term airport and ground handling deals, engineering and maintenance savings, overhead efficiency through improved process and structure with a focus on increased automation, for example, auto bag drop facilities. We have a strong pipeline of cost saving measures in place which will drive efficiency and maintain our position as one of the low cost leaders in the industry, particularly to the primary network that we operate. Combining all the factors just mentioned would have led to a cost per seat ex fuel or constant currency increase of 1.1% for the year, which was in line with our original guidance. The next column highlights the higher bonus payments across the business as a result of our financial app performance in the year, and then we move on disruption costs, which had a single biggest impact on cost per se, ex fuel in 2018. We do everything we can to ensure we look after our customers during the disruption events As such, these costs also include welfare costs that we bear when having to cancel flights for ATC strikes and severe weather with a €250 compensation is not payable. Johan will give you further details on disruption and the initiatives we have underway to address it later in the presentation. Finally, fuel costs per seat fell by 52p at constant currency despite the market increase, reflects the impact of our hedging policy and increased aircraft gauge. The impact of foreign exchange increased cost per seat by 88p, primarily due to the weakness in pound against the Moving on to some of our Teagle operation detail of our Teagle operations for the final time. As I've said previously, we're extremely happy with the progress made through the year to deliver a very challenging plan of building a 23 aircraft base in around 11 months. This smooth launch of such a large base is testament to the outstanding operational capabilities we have within this business and it illustrates that easyJet is set up to to deliver a smooth transition if another opportunity like this arises in the future. In 2018, we flew 3,900,000 passengers from Teagle, delivering a load factor of 80.6 percent, which reflects the rapid ramp up of their operations with tickets not going on sale until December 2017. Load factor levels are increasing as we expect, and we hit around 85% during the summer months. We made a headline loss before tax of GBP 112,000,000 for the period, which is a solid performance given the factors already mentioned. With our total loss before tax of 1,000,000 coming in lower than our original guidance, reflecting a ramp up of operations faster than we originally anticipated. In terms of operational measures, our performance is excellent. OTP of 82% for the period has been strong and would have been higher if it wasn't for the difficult year disruption based across Europe. Our recruitment and trading was executed to plan, and as of 30th September, 6 65 Eastjet pilots and cabin crew were working at 8, we will continue to optimize the schedule and operations throughout 2019 and into 2020. This slide summarized the impact of fuel prices, currency and hedging. The average market price for jet fuel for the year was $6.64 per ton, an uplift of 33%. After taking into account our commodity and currency hedging the sterling cost of fuel per metric ton, with GBP 434, which is a GBP 22 or 5% increase compared to 2017. Moving on to foreign exchange, the euro rate fluctuates between 10 and 16 during the year. And net net There was an 8 there's a headline million positive impact on currency movements, which includes those within the revenue, fuel and other cost lines. Eachjet continues to generate strong sustainable cash flows with operating cash flow reaching 1,000,000,000, which funded the return of GBP 162,000,000 to shareholders through the payments of 2017 ordinary dividend. Our working capital benefited from a combination of our higher revenue seat changes to ticket sale timings, plus an improvement in supplier payment terms. Our investing and financing activities include the Generate of GBP 106,000,000 by the sale and leaseback at 10 A319s. This contributed towards GBP 977,000,000 of capital investment, primarily on the aircraft. You can see the split between growth and replacement aircraft as well as other CapEx, which includes engineering and maintenance spend, plus investments in systems as well as the 1,000,000 invested in the Air Berlin Tiga Assets. Rated at Baa1 and BBB plus, we continue to have 1 strongest balance sheets in aviation, which provides resilience flexibility, thus access to cheaper unsecured debt. During the year, fixed assets increased by 1,000,000, principally represented the investment in new aircraft, offset by the sterling leaseback of 10th A319s. At the end of the period, 71% of our aircraft were on balance sheet, with 98% of those being unencumbered. Looking at our cash position, each year ended the period with 1,000,000,000 in cash and money market deposits, and borrowings of GBP 977,000,000 resulting at GBP 3 96,000,000 of net cash. Our liquidity is supported by the USD 500,000,000 revolving credit facility as well as a further million RCS which was taken out in the year. Both of these RCS have no covenants or draw stocks. We also have business interruption insurance of GBP 150,000,000 to cover a range of large short term shock events, which also supports our liquidity buffer. As at the 30th December, our liquidity position was 3 £3,900,000 for 100 seats versus our minimum liquidity target of 1,000,000 for 100 seats. Besides summarized our forward jet and currency hedge positions, although, recent increases in fuel price will impact us in the short term, based on the hedging disclosure of our competitors, we expect to be significantly advances over the next 12 to 18 months as a result of our current hedge position. Moving on to our fleet plan. Today, we announced an agreement with Airbus that converts 17 purchase rights into firm orders securing valuable slots at a time when the Airbus order book has limited availability. So the agreement includes the exercise of purchase rights for us to deferred orders for 17 A320s, neos, and the existing framework agreements signed in 2013. The deferral of delivery dates of 18 A320neo aircraft by up to 24 months, and the conversion of 25 purchase rights for A320neos into purchase options to ensure delivery stops slots in 2024. As a result of this agreement with Airbus, we have increased our forward flexibility and have a range of outcomes over the coming years direct towards continuing our yearly capacity growth, of somewhere between 3% 8% per year over the medium term. The flexibility in our plan allows to maximize our PBT exceeding cash generation whilst ensuring we continue to grow capacity in our key markets. This chart illustrates that flexibility. This chart summarize our gross CapEx over the next 4 years. It reflects our current fleet plan, including the delivery of 30 A321s, of which 2 were delivered in 2018 and a modest investment in parts to aid resilience and fleet recovery. Our policy is to hedge aircraft purchases once they become committed, and we are currently hedged for circa 88% of FY19 aircraft delivery payments. In Q1 this year, we anticipate entering a further 10 A319s selling leasebacks in which we anticipate raising between 1000000 and 1,000,000 which is not reflected in this chart. Moving on to forward bookings for 2019, 50% of our half 1 seats have been booked one percentage point behind the same time last year, which is a strong performance, considering the inclusion of Teagle flying, the movement of east into Half 2, a one off increase in bookings experience of monoclonal Ryanair issues in the first half of FY 'eighteen. Our first look at Half 2 booking position shows we are slightly ahead versus the same time last year. This slide shows the expected capacity growth across European short haul network through the winter Please note, this information is sourced from OAG and includes the East jet flying from Siegel Airport. As you can see, the short haul capacity is expected to grow by around 6% in the half. With each jet reaching double digit figure percentage growth, mainly due to the impact of TIGL flying, which represents the majority of growth in the first half. In terms of competitors and our routes, we are expecting increasing capacity of circa 4.3% with last year's figures reflecting the demise of monarch and Air Berlin and the reduction of UK domestic routes by Ryanair. In addition to the previous slide, I've added this chart, which gives a breakdown of Egypt growth for the half. Starting for the less 4% of growth reflects the annualization of route capacity from FY2018, the continued investment in building our number 1 and number 2 positions at primary airports as well expanding our network to airports and routes that will deliver margin accretive returns. Prior year cancellations and up gauging represent a combined 3% uplift. And finally, the strategic investments in Manchester where we are consolidating a strong positioned following the demise of monarch and in Teagle where we will fly a full year schedule for the first time. So moving on to the more detailed line by line outlook slide, a reminder that this guidance includes our Seagull operation. 2019 capacity expected to increase by circa 10% On a like for like accounting basis, revenue per seat for the first half is expected to be down by low to mid single digit in line with previous guidance. This includes the effective annualization of 1 off revenue benefits from the 2018 financial year, dilution from Berlin and the effect of Easter moving into the second half. For the financial year. Adjusting for the prospective impact of IFRS 15, revenue per seat in the first half is currently expected to be down by mid single digits, mainly due to the treatment of booking fee revenue, which is now recognized at the time of flying, and which will benefit the second half of the year as well as the revised treatment of EU261 compensation costs which are now partially offset against revenue. So on a like for like accounting basis, total headline cost per seat, excluding fuel at constant currency, and assuming normal levels of disruption is expected to be flat to 12 months 30th September 2019. This includes expenditures on the strategic initiatives to drive margin and returns in the long term. Adjusting to the prospective impact of IFRS 15 again, as your headline costs per se, excluding fuel, at constant currency, expect to improve slightly as some disruption cost is offset against revenue, as noted above. Placing exchange rates highlighted, we expect to headline $10,000,000 year on year adverse impact for the full year. Full year unit fuel costs are expected to be 1000000 to 100000000 year adverse. And finally, total CapEx for 2019 will be circa 1,000,000,000. IFRS 16, the new accounting standard related to leases that we have chosen to adopt early in financial year 19, is not expected to have a material impact on the income statement as the annual operating lease expenses and maintenance charges are anticipated to be replaced by similar levels of depreciation and interest expense. However, it should be noted the adjusted net debt at the 30th September 2018 would be circa 600,000,000 lower than reported as the capitalized leases will be we will recognize in our balance sheets going forward are significantly less than the 7 times estimate used in our current calculations. We anticipate FY19 that this will have a positive impact on headline return on capital employed of circa 1.5 percentage points. I will now hand you back to Johan. Andrew. So what I'd like to start off with is to introduce you to our plan This is something that we have recently introduced into the business. And the purpose really of this is to refresh and simplify what we have said previously to get everybody in the organization focused on a clear set of priorities and also promises that we make into our state holder. But we also came up with a purpose, and I think this is really, really important for an organization where so many of the people in the organization are facing our customers on a daily basis. So the purpose that also part of the business study is the seamlessly connecting Europe with a warmest welcome in the skies. And this is something that's gonna down really, really well within the organization. We get a clear framework on the 5 priorities that is shown on the page here, and I'm gonna talk you through those a little bit later as well. And that gives us really the clarity and the focus on what we are going to do to be successful. And then the promises, the 5 promises that we also have in here about safe, responsible on our customer side in it together, always efficient and forward thinking. It's really the things that describes how we do things in the easy, just ways. Now if you're looking at the 5 priorities, they are building upon the structural advantages that Easyjet currently has. We will continue to build number 1 and number 2 position to strengthen our unique network at Primary Airport. We will give our customers travel experience, that means that they want to travel again and again with us. And we are investing in new initiatives that offer them more reasons to do so within holidays business and loyalty. And we will continue to focus on cost, but also in efficiency in every part of our organization. We want to attract and invest in the right people in the organization, and we want to accelerate also our investments in data to improve the customer offer drive revenue, reduce costs, and improve operational excellence and efficiency. These priorities this is important. These priorities doesn't work only in isolation. I think it is when all these things comes together that you'll see that they will bring and add up more to the sum of their part to really maximize the customer experience and therefore also maximize the returns to our shareholders. We will consistently measure and report our progress against those priorities with 6 KPIs, which can see on the bottom of the slide that are all aligned to the success and the sustainability of the business. We've done a big work within the organization to be absolutely clear what are the things we want to measure to make sure that the right people have the right things to look to see that we can involve and measure the progress about what we do from a strategic point of view and also from a shorter term point of view. So let me talk you through these priorities. The first of these priorities. And by the way, there's no priority among the priorities just to get that straight. They're all equally important as priorities for us. The first one is, to be the number 1 and number 2 in primary air force. And, with this slot portfolio that we have, we have at absolutely Europe's leading point to point network between the continent's primary airport. The range of destinations that we have, the frequencies which we fly on gives our customer a fantastic offer and, as a whole, are also extraordinary difficult to replicate. You got to think about this that this is something that's been built up now since the airline started in 95. And therefore, these slots are physical assets that are somebody can't just take away from yourself. We have a number 1 or number 2 positions at 24 out of the 29 basis and out of 1 out of the 156 airports that we serve. And the percentage of our capacity detaches the number one airport has increased from 79% to 88% in the year. And as I mentioned before, we became number 1 at 7 additional airports this year, including Kegel, Bordeaux and Lille as an example. These investments in the network is delivering increasingly strong returns with contributions up 20% on average since 2014. Oh, we got plenty of things to go for as well. And by gaining more and more share in attractive primary airports and offering more frequencies and more destinations, we can increase the returns, and we believe that we can compete successfully with anyone in the market. The track record we have of successful growth and increasing returns drives our future investment plans. Where we have a number 1 and number 2 positions, there are 6 6,000,000 seats flown by legacy airlines in, and on easy debt routes. And that gives you sense of the great opportunities that we still have. To progress in this area. We're well established already in the airports that are largely stocked constraint and with our average seat gauge growing, from 172 seats currently and further increasing over the coming years, growing at slot constrained airport is an advantage that we can benefit from unlike many of our competitors. This is before you consider that we'll have also other opportunities elsewhere including some of those airports that you will see on the slide there on the right. Our next priority is to win our customer's loyalty today, you see that we know we have a great offer. We got a great brand that drives customer loyalty and loyal customers are very valuable, valuable trust. We better understand what they want. And they come annual innovation in our offer and our great customer service that is delivered by an amazing group of people that we have on board our aircrafts. You see in our brand scores that show that we are the best value airline in Europe with a number of awards this year that reflect this. And over 2 thirds, of consumers in key European markets states that they would seriously consider fly us over our competitors. I think that's an amazing step and tells you and gives evidence of that opportunity we have. 2 thirds of these consumers in these markets say they will seriously consider flying without over any other airline. 2018 has seen the highest level of consideration to date in UK, France, Germany and in Berlin, around the Easyjet brand have significantly improved with a 6 percentage point increase in serious consideration since last year. This is all reflected in our revenue performance, a 6.4% increase in total revenue per seat and an 11.7% increase in ancillary revenue proceeds. Loyal customers fly twice as off to them and spend more than double with us. It also drives increasing loyalty. Last year, we had Fifty eight million seats booked by customers but also booked in the previous 2 years. That is an increase with SEK 11,000,000. We will continue to invest in evolving the customer experience and leveraging our brand in strong markets with the aim of returning sorry, of retaining and growing our customer base and increasing spend per passenger. And as I said in May, this gives us a huge opportunity to drive significant profit and returns over the next 5 years We will build on the strong foundations of the core of the business, of the core of the airline, leveraging the customer base that we have. And then in addition to that, build on that brand with investments that we wanna do now, and we are doing within the holidays, business, and loyalty. So let me talk you through these initiatives, and I'll start with holidays. As you may recall, we had 500,000 customers out of 20 million who fly to our top 29 destinations that books a hotel through Easy Debt. This is despite low current investment, a suboptimal technology experience, and a low level, if any, level of personalization. This is a massive opportunity for us, and we will radically improve on how and what we currently offer to capture that opportunity. We'll base this on our unique and highly attractive fundamentals, a pan European network of destinations and frequencies by many times of the day, many times of the week to city, beach, and ski destinations. An efficient, flexible, low cost operation that we have within the airline and a great trusted brand and the loyal customer base. And this is this is combinations that you take all of these things in consideration as a whole, you will not find in any airline that is out there. You mind finding parts of this that fits with our some with some of our competitors when you put all of these things in together, There is nobody who can compete with these fundamentals, and that's why we want to continue to build on. We also have, on top of that, a now it's team of industry leading people and expertise. We have the ability to develop an offer that is tailored, personalized, and offer fantastic value and therefore capture a significant share of this market. Now let me talk you through a little bit more in detail what this that will look like. Since May, we've had an interim team in the business who made good progress in 3 main areas, where the aim is to improve the experience and take direct control of specific part of this value chain. And what you can see from this slide is actually the description of the value chain that you see on top of the slide. And then you have from where we basically are today and at the bottom of the slide 2 is where we aim to go as we are progressing our efforts in this area. We're moving to a more targeted, better user experience offering where we have a clear idea of what we want our hotel offer to be, and we've had also, I must say, a number of discussions with some of the most in demand some of the most loved hotel partners in Europe. And, with absolutely no exceptions, had they said that they are absolutely thrilled to engage in a commercial relationship with ourselves, which is a fantastic start for what we wanna do. And this is exciting, and this is very positive. We also have a very clear idea of the technological experience that we will offer our customers And we now have, as I mentioned earlier, also a team in place, Gary Wilson joined us here at the last Monday. Already been in this company for more than a week time flies. And we also have, in addition to that, we appointed a CFO We have a Head of Marketing, we have a Head of Customer, Head of PR, and we also had a great addition in from James Hardy who comes from Jet 2, who will head up our e commerce and digital, and we work together both with the airline and also support those, those activities we do within the holidays team. But really excited about how we are gonna move this forward as well. So what we plan to do is then in 'nineteen, launch the new Easy death holiday prospect. And the big next season will be 2020, but we will continue to roll out and involve the improvements in the offer starting from now and over the next 18 to 24 months. But that is a time scale that we can prepare, ourselves for when you're gonna see more news coming in from Easyjet holidays. I could talk to you about business. Our customers tell us that when you meet people who travel with us, the business today, and I seen some of them in focus groups and what they tell is very clearly, let's say that look, Easyjet is the smart contemporary way of travel of business in 2018. And I think that that is at the core of the offer of what we do but it reflects also the customer experience that we give today, which is based on that point to point network at the primary Air Force with the frequencies that we have on all the major commercial routes, which of course now also includes tail. We built this business customer base from SEK 10,000,000 in 2012 to over 15000000 in 2018 and an increase of 17% versus 2017. That is just on the year on year growth between 2018 2017. But we can do more than that by developing also a great product offering a seamless convenience at great value that is consistent with the Easyjet way of doing things. We will target many more of the short haul business versus who fly in Europe every year. Our objective is to increase the business penetration on the business network, and we're already starting to make schedule improvements on a much more granular lever and much more to grow up larger extent than we have done before. From Berlin, we for example, now, sir, from both airports in Berlin, Shaw De Gold. We are launching, Zurich to Thiago. We've added Berlin to Boston. That's an example. We've added a first way and last way departure from bodaux to meet, and I could go on about the number of things we're doing here to really enhance the the the schedule. For business passengers. We are also starting to fly Gatwick to Dusseldorf coming in January all really something that will attract more business customers flying to ourselves. We already done a number of improvements that I mentioned at a half one that we need to do just to make ourselves to become a better alternative and partner to work with both companies. We are now able to separate the VAT invoicing, which was a big hurdle for us in Germany, and we're also looking at to do a number of other things launching a core portal that will come out also in 2019 that will help establishing our presence within this market. And I think one of the big drivers of this is clearly also to look how loyalty fits into this and the schemes and the recognition and reward we want to do for our most loyal customers. So we do have a large and the loyal customer base today, and we do have existing loyalty programs that are very popular. The invitation only program that we have with Fly Club, is for those who flies, basically, more than 20 times a year with us. Has increased by 45% in 2018. And it's all over 9% now of all Easyjet bookings that coming from from people who have booked us flight club customers. Easyjet Plus, which is our paid membership program, that allows Catherine to access additional privilege for an annual fee increase in membership by 52% also in the year. But there's still quite limited in the scale, and it's still quite limited in terms to the value that it provides. And the opportunity is that if you take a look at 2018, that 66 of ECS customers had flown with us in the past 2 years, Returning customers by twice as many flights per year as first timers, but just under half, of EasyJet customers today on the travel with us once a year. Our EasyJet Plus And Flight Club members have consistently driven incremental year on year revenue. And we want to grow value by customer by recognizing and rewarding them, which will drive and we will set up make sure that that drives contribution to our bottom line. We have been pointed now also our first ever head of loyalty. And we're assembling also a team under that person to deliver a program that encourages customer to spend with Easyjet and our partners to redeem points to get access to exclusive rewards and then also to be recognized and advanced quickly through the loyalty levels we have in order to access further enhanced benefits. And this is something that we intend to roll out also during 2019, and we believe it may will make a great also, part of the offers we're doing within holidays and also within the business. 3rd priority is value by efficiency, which is equally important to driving the profit proceeds. And as Andrew has showed you earlier, one of our biggest cost drivers this year has been the disruption cost, which has increased by almost EUR 70,000,000 in 2018, and that is clearly all included in our numbers. Our cost and efficiency program continues to drive both short term efficiencies and longer term structural cost savings across all areas of the business leveraging the increasing scale that we have. The program has been able to deliver large and sustainable savings, GBP 107,000,000 in savings this year, and over SEK 500,000,000 savings have been achieved since 2011. We will continue to invest in efficiency and invest in systems and pro that drive operational excellence to put reliable decision making, reduce complexity, and use data to make better decisions faster. Operational efficiency is key to any successful organization and we see a great opportunity for improvements in this area. And quite frankly, it is so that customers are not willing to pay for any inefficiencies and then the organization. And we will do a lot of to make sure that we continue to be even more efficient as we go forward. In addition to this, we're also investing in highly efficient next generation aircraft that deliver up gauging benefits of around 1% cost per seat per year, 15% fuel savings compared to prior generation aircraft and 50 percent less noise, which is attracted to many Airports and customers in Europe. Me talk to you about disruption. Disruption has been the single largest driver of non fuel cost increases and customer dissatisfaction across the entire industry over the past 4 years. And as you can see and as you would know, this is an industry issued that really affects everyone in the sector and all the airlines. It's driven by a lack of investments in systems Chronic under staffing in European, ATC centers, regular strife in both ATC and ground handling, and congested airspace with no spare capacity due to inefficient use. So this is really about how the current airspace is being in use. It's not like the airspace that that there isn't enough of airspace. It's the fact that it's not being used as sufficient as it could and as it also should be. And that means that it's a big knock on impact when disruption occurs. Network delay minutes have increased by 5.8% per year on flight on average across the last 5 years, And there were over 27,000 canceled flights for all airlines across Europe during a 6 week period, during the summer 1st July to 12th August, which gives you a bit of an idea of what difficult summer this has been. But we do see this as an opportunity, and I'll describe why that is the case. We started talking about that. And I think we were one of the first airlines to really come out early to say that this is a big huge issue, not only from the cost perspective, but also on the way that this impacts on my customers. And I think that we have taken the lead in setting out also plans to tackle the issue. 2 years ago, we actually started talking about taking the first steps to reducing the impact for the customers and reducing the cost of boldness. And although this has helped, it hasn't been anywhere near enough where we need to be to really crack down on this topic. So we have initiated the most comprehensive the most integrated program we've done in this area to ensure that we can cut and reduce the cost of system involved in this. And that we have a, basically, a program that involves touch points across the whole of their organization. The recorded operation resilience program and its focus really on 3 key strategies to build, to execute and to recover. The build is really to invest intelligently in the schedule in our aircraft, in our crew to deliver more resilient operation. Execute focus on delivering a robust operation through a combination of data driven, predictive tools, including automation and optimization. And the recover focusing on improving the customer experience during disruption, minimizing the impact and preserving the customer satisfaction. And there's a huge number of self help initiatives that we will be investing in, which will include modifying schedules to improve overall resilience, increasing the standby aircraft availability, focusing on the 1st wave, departure to minimize the delay minutes as the day progresses, implementation, automation and data driven decisions, making it available across all organization through the use of our own time performance simulator, developing strategic partnerships such as in ground handling with DHL, to deliver better processes and equipment levels into the contracts with our round handlers, improving operational and customer communications across the operation control center, ground handlers and the crew. And the operation resilience program is really there to deliver reduced costs and minimize the impact on our people, the right people. We are investing significantly in people to make sure we have the right people to take this business forward. On our aircraft aircraft, I think it's fair to say. And I'm sure everybody who's traveled with us before, and I know and I hope that you all done that as well. That we have a fantastic crew. Our crew stands out from any other of the airlines crew that is out there, and they are a big part of what Kepler thinks about when they are looking to what value we represent. We have an amazing customer engagement scores in our in our, among our crew across the company. And in a trial that we have done on a new employee listening to a peak on, our cabin crew net promoter score was 41, which is an exceptionally strong result, and which is also reflected what I said earlier in the customer satisfaction scores that we see on board. Looking at the A and B, who sits there, we clearly have also invested in industry leading exports into the core of the airline in the holidays and the business and the loyalty teams, they have great employee retention. You know, at 6.5% turnover for the whole of the business, and on the 5% turnover for flight tech, that gives us a great opportunity and start and that we can continue to grow with people who want to come and work for this company. I said earlier, 75,000 at cations from pilot and cabin crew to come and join this company. So this whole thing about there's a pilot short, shorter child in Europe aviation, that doesn't exist for ourselves. We've had more applications than ever It's an increase actually in applications of 8000 versus 2017. Glassdoor features also Easyjet now in the top to place it to work in as UK in the UK as voted by our own people and our own employees. And, within that, we are also the one airline. So we have invested a lot and we will continue to invest and make sure that we are the most attractive partner and company to work with within this space. And the 4.2 star rating that puts us ahead of Unilever and Waitrose, SAP, and PwC as an example. And it's only with the right people that we're gonna be able to obtain outstanding and successful and sustainable results for Abixis. Fixed priority is innovating with data. And this area encompasses all of the priorities I've ordered to take taking you through. And it's important is highlighted in the vision that I stated earlier to become the most data driven airline in the world. The investments we're currently making will enhance the use of data to improve customer experience, drive revenue benefits reduce costs and also improve operational efficiency. And I'll give you some of the examples now of what the data team is currently working on. With pricing and market forecasting, we are driving revenue opportunities by improving demand forecasting to deliver competitive pricing not only on the ticket, but also on the ancillaries product such as seat allocation as an example. Our service optimization will enhance our customer experience through data driven decisions for the onboard food and beverage. The networks and the flights getting, we're also developing a lot of our ability to make the most out of the fleet that we have and the network that we have today to make sure that we can drive and make effective decisions around managing disruption, as an example, by implementing the tool that's called opt in. An opting is really a planning solution that we are aiming to introduce in full here for 2019. So what Optum does, that is really a software tool that takes commercial and operational data constraints and variables into consideration to make sure that it gives us an automated view on how we can look at the schedule in different way. It basically gives us a number of opportunity of what the schedule should be like. So we know what the outcome could be with different types of schedule. Really helps us to make that trade off between the commercial value, what we do and also the operational performance such as on time performance as an example. Data will also have us to minimize the impact of disruption by using automation and machine learning predictions of delays to find the best solutions. During this year, we also developed our own OTP simulator, which is a fantastic tool. So what it does is that basically, after the first wave, we can take the performance of the first way and then see what actually the changes we should do, give us the constraints and the congestions that have been taking place in Europe, what this means throughout the rest of the day. So we can earlier take decisions on the changes we want to make throughout the day to therefore minimize the disruption and therefore also decreasing cost Luca Takolo, who's also sitting here today, our new CEO, he joined the company in August, and they continue to have to order the strong team through the recruitment of a large number of data scientists, not just data analysts. And this is important. We have a huge number of capability that we are waiting to bring into the to already add on to the strong team we have within our data department. And I know no other commercial airline who's investing more on the relative scale on data scientists and the data analysis into the company. And as a result of this, we are now currently just to give an example of the scale of what we're doing. We're working now on fix the project that is all relating into the things which I talked about earlier about driving down costs increasing revenue, improve the operational resiliency and improve the customer satisfaction with ourselves. And that's 50 projects. That is more than double the projects of data that we have just in the last six months. So this is something that we're really accelerating. Brexit. We started planning, and this is important. We started planning for the Brexit 2 years to go. This is not something that we have started focusing on in the last couple of months. And we have planned basically for every scenario that it's out there. And we are confident that Easyjet will continue to fly with no disruption, Pointsmart 29, 11 pm. The focus that we have done is stands over a number of areas, and I give you more detail on that now. First, our structure and our flying rights, both the EU and the UK have said that their objective is to maintain the flying rights between EU and the UK, even in the event of a no deal. That was something that came out from the European Commission as late as last week on 13th December with a proposed measure to protect those rights. And that has also been reciprocated, by earlier states and from the UK government. Esojets Europe has been established, which is headquartered in Vienna and will enable Esojets to continue to operate flights across the EU and domestically within EU countries after the UK has left the EU. And the new structure means that ECS now is a Pan European Airline group with 3 airlines based in Austria, Switzerland and also in the UK. And as you can see in the table here, Only 35% of our capacity flies between UK and EU. And therefore, the majority of our network is in a solid position no matter what the outcome is. 2nd, let me talk you through the operation. The specific steps we are taking to ensure our ability to operate are ensuring that the Austrian operation has no reliance on our UK operation, in particular by obtaining Austrian safety certificates where it's required, making sure that our 3rd party suppliers are Brexit ready and have the required certificate completing also our plan for spare parts to make sure that they are in the right place post Brexit. So we don't face any risk of custom delays, and we're not reliant on the UK certificate spare parts. We're also ensuring that our people are protected, and this is being addressed by We're also transferring the 1400 Pison licenses that we have today from UK to the U27. We're transferring over 3000 cabin crew at the stations, both to be completed by the Brexit date. And of course, we're also keeping a close eye on the residency requirement that might be required and supporting our people in the process if this is appropriate. We have aircraft in the right place and we'll continue to allocate those around the network to maximize the contribution and the return. And that is already in the schedule for next year in the summer 2019. Next thing is the ownership. Regards ownership, EasyDAP is well prepared with a more advantage position than many other affected airlines. And a number of options that are being considered to ensure that if we remain EO and then controlled, We begin from a positional strength with approximately 47 percent of the shares already held by qualifying nationals. E suggested investor relation program has focused mainly on Europe since 2016, with intention of increasing this to above the 50% prior to the UK exit from the EU. In addition to Easyjet Optical Association, which will contain provisions to allow us to take action if necessary to ensure he continues to satisfy the year ownership and control requirements. These provisions permit each year to regulate the level of ownership by nonqualifying nationals by suspending voting rights to attend the voted meetings of shareholders and or forcing the sale of shares owned by non qualified nationals to qualify nationals. And similar powers exist also in the articles association of other airlines as well in the articles of companies that works in different industry, but have a similar national share ownership requirements. Now it's true to say that it's important to say that we have no current intention of exercising these powers. The position will be kept on the review pending the outcome of the Brexit negotiations between UK and EU. But that is the powers that we have and that it's all been approved and they're all well known. And like I said, with that 47% of the shareholder we have today, It's a very small percentage that we are talking about. Regarding our consumer demand, we are seeing UK demand remain strong. And then what you've seen from the slide that Andrew presented earlier, the H2 bookings are actually slightly ahead of the same time last year. Finally, we also have the significant financial strength within investment grade credit rating and strong, liquidity in the company. So if you bring all of these things in together, you take the core of the airline, you take the foundations that I talked you through, the 5 priorities that we have that we've gone through in detail adding on them to also the initiatives that I talked about within holidays, within, business passengers, and with the loyalty, you're going to see that this is an airline who has the strength and foundations and opportunity to capture revenue and decrease cost that I must say that I don't think you can find anyone else out there in Europe who has the same opportunities to do so. We have clear strategy now in terms of the priorities I talked about. We get team in place to deliver this, not only the people are here today, but a fantastic team of individuals and and and, and other people in the organization, This will be a year of investments, and we will make sure that we continue to invest in the things that really paid off that really drives that profit proceeds. We're going to invest a lot in data because data will be the key to to reduce significantly cost out of this business to drive revenue performance, improve operational efficiency, and also increase customer satisfaction. We get a strong investment grade balance sheet that we are ready to use. If there are opportunities to come up, that we will benefit from. And what this all means for the shareholders, clear that we're going to maximize the return on capital employed. We're going to maintain the capital discipline we have within the company. We're going to make sure that we are maximizing the profit proceeds by investing in the core of the airlines and initiatives that I talked about. And also generating sustainable positive cash flows into the business post payments of dividends or repayments of dividends And we'll do that and through the property we have continue to invest also in the fleet to make sure we have not only great deal on the fleet of the aircraft we're getting, but also flexibility within the fleet plan. So with that, I'm going to open up for questions. Good morning. Thanks for Bernstein. 3 questions if I may. Number 1, on the strategy, maybe if I could elaborate the big ideas and the big strategies you decided against in that strategy. So what are the things you're not pursuing that sometimes be a harder thing to do when developing a lot more. Maybe next to that. Secondly, on the cost, kind of the way you phrased and you provide the guidance. You had a lot of one off issues with the wet leases and the higher disruption costs in your 18 base. You're keeping that flat into 19. Kind of seems to be fair to say there's around $100,000,000 in there you're spending on project. Now that's the run rate around that level you're putting higher investment into the business to develop the business. Should we think about that as a step change that's here to stay and you'll continue investing more in the business? Or is that kind of a transitory period for 12, 24 months? And kind of the project costs will subside after that? And then lastly, on the different KPIs, how fast will you be able to implement that into management and team conversations? And is there any difference in the pyramid kind of between the top and the bottom in the terms of KPIs you'll be measuring people again? I'll kick off and you can fill in on that. I mean, on the cost, it's fair to say that the the investments we're making for instance in the 3 initiatives as in holidays and business lawyer, they're all very risk free. But we know that they are there to deliver sustainable, really return for the business. That's the same thing when you're looking at the data. Data is the key enabler for us to reduce the cost that sits within the area of today of disruption as an example. We could not continue to manually fix and trying to mitigate some of these things without using data as an example. But I think that it is with very limited risk around this, and it also has quite early paybacks on these things. So, the biggest cost thing we have to focus on is disruption bond on. I mean, that is the really, really the key thing. We talked here about what the increase has been in this year's numbers, and that gives you an example of the scale. And I think also other airlines have talked about what the size fits in here. But I don't think that there's anyone else who actually has come out with a way on tackling this. And when I look through all the things we're doing, I think we're well on way, to, to make a significant change on that. But having said that, this issue won't go away. It's not like we're thinking that the projections in the airspace and the efficiencies on how this is being used in 2019 is just suddenly going to be much improved. But we are working and I'm engaging a lot with the European Commission on this, with the dual control on this matter to make sure that they actually, you know, get direct together faster ATC rights. And then start using the systems in a better way. You want to add something on the cost. On the KPIs, that's something that we work through and that has been implemented right now into everyone's targets for 2019. And I think it's fair to say on the case by why this is so powerful. We've had a number of issues that's okay for us before, but I think that what we found out, we wanted to get more clarity around the 5 strategic priorities that I talked about so we can easily measure and people can feel that how they relate into what they do so we can measure the progress amongst those KPIs. Any difference in the top or bottom KPI? Is there a cost KPI somewhere in the pyramid? Well, there is and it goes through everything what we do. What we're doing and we talked about the 6 KPIs that we have in here, we're breaking those downs as well. So it actually relating to help people get on and do the day to day job. Damian Brewer from RBC. First of all, just coming to the sort of CSAT scores and the OTP, they seem to have dislocated, are you still got good CSAT scores to quite despite the OTP. I think I remember Chris saying in the past that basically the view was an easyJet, your front line is your bottom line. Taking all that together, good CSAT scores, staff that seem happy. How quickly, given you've also got a fuel cost to deal with? You think you can improve the yield in the business, whether it's directly through fair or through ancillaries? So appreciate everything you've given us in the detail. But how quickly does that turn into improvement and how fast can you move on that given the very good backdrop you've got? And then secondly, on cash flow, I guess there's sort of 2 parts to it. First, you've given us the sort of minimum and maximum fleet, for the base case CapEx level. What would be the differential in the CapEx in 20212022 at the minimum maximum levels of fleet? And then secondly, on the cash flow, clearly the last 2 years you benefited from improvements in the fuel payment terms, improvements in credit card terms, in terms of moving the free cash flow forward in future years, what is it that drives the free cash flow better in future after those 2, what look like, 1 offs? I'll do this firstly, Andrew, for the third one. So you're right. I mean, I think it's the first time that we actually see that the customer satisfaction score has actually improved, despite the period situation around the disruption. And I think that comes back a lot with the focus we've had on looking after our customers, which is far more than you can say that some of our competing airlines are doing and that pays off because we know that this also drives loyalty, which is an important thing for ourselves. There's a number of things we can do to drive revenue. I'll show some of them in here as well. The way our yield system works, we have a great yield system. We get a great revenue I mean, there as well. But we get more to do in terms of actually how we can yield and trade on, for instance, ancillaries as an example. We have more things we can do that we're implementing right now also to take a more strategical view about competitor capacity that exists out in the market to make sure that our systems and our algorithm take that into consideration. Also, when it looks at competitive pricing as an example, I think that we're now feeding into our system to be able to optimize the benefit from the revenue performance. So I think that, that Robert is spending most of his time really looking we can drive these revenue benefits as well. And the opportunities we have with an already good system is really there for us to take on to to next level. So we're looking for this to continue in, and having effect also in 2019. I think it's important to say that you know, as we drive forward and we do improve on the revenue perceived, that doesn't exclude anything of our attention and focus to reduce costs. It's not like we're ever being complacent about the fact that we think we can only get here by revenue enhancement opportunities to continue to build on the success. Costs will be absolutely key and disruption is the key thing to take that cost out of the business. So just talk about the fleet plan, I think it's fair to say that even at the minimum fleet plan, we'll see fixed capacity growing given the fact that we've got A321s and an up gauging trajectory within this plan. So and this the the range of this plan absolutely supports the range of 3% to 8% annualized seed capacity growth that we've guided and delivered on the parts on an organic basis. From a point of view of, cash CapEx, with the difference between the top and the bottom, I think it's fair to say in the, in the arrangement that we've re agreed with Airbus, we've effectively pressed the restart button off flexibilities remember back in 2013 when we did the original deal, we had significant flexibility. We've effectively repressed that restart button and gained significant flexibility. The difference between the top and bottom, within those 3, so within between 2020 2022, we can defer up to 30 aircraft if we so wish. So, fundamentally, the rest of it would be, the rest of the difference is fundamentally things like, lead returns, early lease returns or non extension of existing leases or exit of our 3, 3 19 to 16 years. So That gives you an idea of the difference between the top and the bottom based on CapEx flexibility with respect to that deferral capability within that period of time. So one of your free cash, I'm not going to give you exact specifics around that the impact from free cash, please. It's 30 aircraft work. There's a difference in those in that top and the bottom, but with respect to free cash, we absolutely are targeting to to manage our capacity growth and our fleet investment to maximize PBT receipts, returns on capital employed and deliver on free cash flow. Which are the 3 objectives we're absolutely focused on over the coming years. And with respect to the where we see the generation of of that cash through the margin accretive initiatives that we talked about. So holidays, business, and your loyalty, all relatively low capital intensive opportunities and we can see how effectively driving the PBT proceed to the incremental margin will help deliver that, that free cash flow. Fundamentally, the things around the balance sheet, as you say, payment terms, and credit card deals, etcetera, have pretty much been solidified within the cash flow is now around operational performance and driving that PBT percentile via those low caps intensive opportunities. It's James Holland from Exane. 3, please. The first one's on a table. I was wondering if you could let us know if you're still targeting breakeven in full year 2019 and whether there's, going more exceptionals this year or whether we'll sort of cost there will be in the bottom line. Secondly, I was wondering if you can update on your target for lease to be owned before fleet, whether that's changed, how you think that evolves through till 2024? And then finally, you're probably about 80% sold on Q1. I was wondering if revenue per seat were down year on year? So, on the table, I mean, we've, as I mentioned, we are strongly pleased with the way that we've managed out to integrate into the business as well. We don't accept anything more from an exceptional point of view. In there. And the prediction is we now have a number one market, place there and we are targeting, of course, the breakeven in Berlin as the whole, so that hasn't changed. I think it's fair to say with the scale of this operation that, you know, to take some time before we get up to the average of the network profitability, but that remains our target to be profitable for the whole of the Berlin. With respect to, James, it looks like it's a lease purchase, we moved away from having a specific target, Historically, it used to be 2018. We moved away from that. We did a capital structure review back in 2016. And fundamentally, it's a balance between managing resilience, managing cost and managing flexibility. The outcome of that would be your fleet, mix of owned versus leased. Currently with 30, 30% leased has a step up as a result of the, inorganic activity within Teagle over the period of time that will drift downwards. But fundamentally, it's all around managing, we, we don't see, leases or selling leasebacks as a funding engine. It's more of resilience management and a management a management process to exit the 3 19s, this worked well. So the 2, SLV, transactions we've done to date 20. We understand where they're going. They're not they're not they've been secured outside of Europe. They won't be competing against us. So that's and, it helps to sustain the the ongoing price, secondhand price of a 3.90 is just so it's done its job. So we'll see that tracked down. Respect to Q1, I think it's fair to say we all know that it was tough comps in Q1. So half one reflects the tough comps in Q1 and into Q2. That's the shift of each through into from a half 1 into half 2. So I think it's fair to say that we should see, RPS down in line with the half one guidance we've given. Just to mention on CAGR, because I think it's an important one as well. I mean, the way that the organization and the way we have integrated that and the team has been absolutely fantastic. You would see from some one of our competitors who Russia stated very clearly that a big reason why they missed some of the numbers was because of the integration of their part of this transaction. And this has been really is an airline decisive monarch that we've been seamlessly integrating in operation, which gives us a great foundation to build on in the future. Hi, Neil Glynn from Credit Suisse. If I can ask two questions, on revenue. And the first one with respect to 2019, the ancillary revenue per passenger or sorry, per seat was up 10% at constant currency in 2018. So a lot of momentum. I guess you've got big plans in terms of driving that going forward. So just interested, should that 10% slow down into 2019? Or how should we think about ancillaries this year. And then, more medium term, I think Johan, you mentioned near to half of your passengers basically fly. You can get one year. It just makes me think if there a way including partners, for example, that you can make Easyjet a more relevant part of potential passengers day to day life. Thinking about things like branded credit cards or are there other initiatives you think could potentially make Easyjet more meaningful for nonflying passengers? Yes. So I mean, on ancillaries, I mean, we have continued to have a huge pipeline of products and services that we can offer. So there's no end in terms of what we think we can do in this area. And I think also with the things that we talked about, the ability we have also to to now looking at how we price and how we revenue this from an optimization point of view, that gives us further additional benefits when it comes to the offers within the ancillary and what it will do to our bottom line. In terms of posture, you're absolutely right, but it's definitely one of the things we're looking at. For those customers who are not the frequent travelers to make sure that we can capture them early on and get them engaged into the loyalty program and with established partnership with other companies, make sure that it plays a bigger relevance and a reminder of them that when they do their booking, when they think about flying, that we are 1st in mind of that, that is something that we're looking to do within the loyalty program. Hi there. Good morning. It's Rashika from Barclays. Just one question, from me on disruption, actually. So I think you quantified that the increase this year was 70,000,000 or so. The the program around operational resilience is the intention there that that operational dense program stabilizes the situation such that disruption costs don't rise, or do you think there's opportunity here to actually bring that disruption cost level back down again? And, you know, achieve you want advice to get in get it in there. You know, are you willing to quantify your total, spend this out this this year on disruption, not just the increment? Thank you. So I mean, the first part, our ambition is clearly to reduce its costs. I mean, but in one hand, you will see from the increase in here that the first could that would be to stabilize that. But I think it's fair to say that we have now over, I think we're at 100 and 20, 100 and 30 different points in there that you can contribute substantial value to. But of course, what doesn't remain in our control is what the overall situation will be. So, you know, we have to assume that this situation won't get better. It might even get worse. You know, but if it gets worse, we're going to make sure that we not only recover the increase of the disruption that takes place for the things that sits outside our control but we are sure that we can continue to mitigate, some of that from that base level point of view. And I must say we're making good progress Chris Brown, our CEO and our Robert here, our Chief Commercial Officer, is working through that whole thing about how we build it we executed and how we recovered. And I feel, I must say I feel very confident about our own self help measures and initiatives here that we will have an impact So I think we'll definitely perform better than others. And then it just remains to see how much benefit we would get out of this in 2019. Sorry, the yes. What's the absolute number? Oh, okay. Yeah. Well, yeah, we haven't disclosed the absolute number. But it's big. Thanks, Joel. 2 from Liberum. Okay, for me, you talked about your advantageous fuel hedge position. How do you go about using that? You take that to the bottom line, you use that to drive pricing squeeze competitors? What's your thoughts there? Secondly, on the fleet change, something to get my head around here, is it fair to say that that's in next terms are moved to the right in terms of, in terms of the delivery profile. And finally, suppose in the context of the IT write off, you talked a lot about the investments in, sort of data and systems, How do you strike the balance between developing in house, and or waiting to see if an external solution emerges? To do the first one. I mean, on the fuel hedging, I mean, it's very clear. What it allows us to do, it gets uncertainty over the costs. And this is one of the great things that decrease of the volatility that exists in there. Of course, we want to maximize revenue as much as we can to make us make sure that we get as much as we can on the bottom line in there. But it's also important to maintain a really competitive pricing policy to make sure that we can capture the growth in the market. I think we've seen in 2018, a number of airlines who've been exposed to this who hasn't have the ability to hedge how that hits weaker models. It is brutal, if you're running an inefficient operation with an unsustainable business model that it doesn't take a lot. And that represents an opportunity for us to get more passengers in their will always be mindful to make sure that we have the right pricing, so we can continue to achieve growth. But at the same time also drive revenues through initiatives that we talked about here today. So it's a mix about where we want it to go, but definitely we want to capture as much as possible on that. Yes, with the fleet, I think it's fair to say that the 2018 deferrals we've referred to is more of an adjustment around that the fleet profile and that fits our PBT pursuit, Rocky and growth aspirations. But I think it's fair to say, if you look at the graph, we've got significant growth coming through in 2019 2020. And if you remember, we've got up gauging overlaid on top of those, those numbers as well. So I think it's fair to say we've got plenty of scoped grow between the 3% to 8% as we've previously stated and in line with what we've done previously. So I think, all of this has been around triangulating those 3 things, and to do that data in the system. So I think it's fair to say on the IT, platforms that we'll use for data. They'll definitely be off the shelf. It's well developed off the shelf systems, for example, Hadoop. Which we, which we, which we're currently using in leveraging. And I think that the vast investment data around capability and as you as Johan said, that we've got, Luca and our team, we're building up that capability. We've got billions of points of data that we are using to the extent we could be. And from an IT perspective, it's all about really integrating the existing systems into that cut into the off the shelf platform that these teams can then go in and analyze and use it to monetize, which is exactly what we want to do. So it's a very different proposition from an IT perspective to what we what we did, from a point of view of the FTP platform. Hello. Yep. I've answered some goodbody. I have three questions. One for Andrew, just some capacity guidance, the implication is that this second half will see 6% growth. Can you break that down? As you did for the first half, between organic, up gauging, Teagle. On the Easyjet holidays, I don't know if there's any consideration about buying hotel inventory to package up the right product. But if not, in the sense, how do you engage with hotels to be a partner and to encourage, obviously, say, the right product to your customer. And then thirdly, just probably a timing issue, but if you look at your 23 aircraft at Teagle, 665, partisan cabin crew ratio of 29 per plane, your last reference point at the end of last year was actually a ratio of 39 silver planes. So we're wondering if that's either you're doing something very clever in Tiegel or is that just a mismatch those 2 data points. I'll take the first one. So I think it's fair to say that there's an element of annualization, from Teagle into the summer because obviously we would have had a lower capacity growth as a result of using BA 1460s, which obviously lower gauge, and we've now got 3 20s in place. There'll be a significant uplift there. And, you'll have some manualization from the activity that we're doing, you mentioned, as we talked about. And the rest really is around focusing on building our number 1 and number 2 positions. So, for example, in winter, we've got incremental aircraft in Belfast, Bristol, Gatwick, Manchester, basil, nice. Alpensa, we've got some in Venice So it's definitely dotted around our existing network and building those positions and building the roots of those positions. So I think, fundamentally, it's leveraging our, our, exposure in those places. And as I said, we've got 7 as Johan said, we've got 7 incremental number 1 positions, in FY18. And clearly, we want to, to solidify those and build from those. On the holidays, there's no plans at the moment to buy any hotel inventory because we simply don't need to. If you think about it and this is really important and part of the attraction of the Hologis pieces in here, that a number of the competitors that are buying hotel inventory, who owns Sachi, their stock in there, they also highly inefficient airlines. We have cost advantages here of, you know, 35% towards them. So actually, with the cost space that we have. And with the frequencies and how we can fly, I mean, we fly, you know, many times for the days, all days of the week to some of these destinations where others on a 35% higher cost base would fly 3, 4 days a week. We actually would like to go in to where other competitors are, because that's where we can expose really the value of what we're going to be able to contribute throughout the whole chain. So if we down the road, we'll have exclusivities in something that will be a natural involvement of where we stand today, but actually the opportunity for us comes within the fact that we can be on, on, in the hotels that is in the most demand, that is most loved ones. But we also see, and, and we would have lots of hoteliers being actually already offering us so called differentiated hotel products, product that has specific, you cater to specific needs when it comes to the food and beverage, when it comes to the entertainment, when it comes to the facilities, And that's because they can see the value in 1,000,000 web bitages we have every year and also with the frequencies and the scale that we have into the operation. So from us, it would be better actually to go in where everybody else is because that's where we can demonstrate this value that is in anything else. Sorry, what was the third question? I cannot answer that. Robert? Tommy. Difference from. So the actually the 320 aircraft will operate to be identically as we do our core fleet. Hi, it's Andrew Lob from HSBC. You've given us your KPIs, and in particular, you ended the presentation with a focus on the shareholder oriented KPIs. Are there going to be targets at any stage? And I guess very specifically, you speak of sustainable cash flows, is there any commitment to positive free cash flows on any specific time horizon? And then can I ask about M And A? How do you see the industry developing broadly? Do we expect more consolidation, or do you think the recent pullback in the fuel price means that the Darwinism is servicer for now? And I guess in that context, specifically, where you're publicly involved in, Alitalia, I guess, curious to see what happens there. I'll I'll do first one, 3. We haven't set out targets. We do believe that there is quite a lot of uncertainty out there into the market. But we what we have done and what we will continue to do is to demonstrate the opportunities that we've had and clarify what is in the plans, talked about the initiatives and also the investments on how that can increase revenue and drive down cost and what impact that will have. But at the moment, we don't feel that there's a need for us to go out with specific targets of that. And I can just do the third question as well. On the M and A. I mean, consolidation will continue to happen, both organically and also through, through transactions. It's quite interesting when you look at the consolidation of the whole of the aviation, there was about 25 airlines in 2005 that accounted for some 80 4% of European aviation. That number in 2015 was 11 airlines. Now so this is something that has happened over a period of time, And I think it is partly because inefficient legacy models are basically year by year growing out of fashion and can't compete with the companies such as ourselves and also others for that, for that matter. We have the balance sheet. We got the financial strength to take and participate in opportunities if transactions are available as we did with air Berlin is a good example. But like I said earlier, and I've said on previous occasions, there are three things that needs to happen for us to be interested. 1, it needs to be strategically needs to make sense. And of course, we are focused on short haul. We are focused on Europe. It needs to be commercial terms here. That we would find, attracted to ourselves. And we also need to have the capability to handle any transaction. And once again, just to reiterate the enormous achievement that I think that we've seen with Air Berlin this year as an example, But you're right. Opportunities will will will will come. And they they we have done a very thorough job to look at each and every one of the European airlines and working out what everyone's position is and also thinking where everybody's going. And based on that, we think we have tremendous strength and we will continue to participate in strategic opportunities if they arise. Yeah, just to just to add that point, you mentioned Darwin, if if that means the strong gets stronger, then yes, there is an element of that. Yeah. We've all said that. So with respect to, cash flows, we haven't given a specific date, but obviously we've got some significant investment in the next couple of years with respect to the fleet. And as I said to Damien's question, our cash flow is all driven by the delivery of a number of our our focus areas, which includes the initiatives and the margin accretive initiatives that will drive profit per seat, and that will help us to the the, the the position of a free cash after dividend. And we've got a, we've got a clear plan, that we've we've all bought into as may and be as a board to get to that place, within the horizon of the Pampers for that today. So I think Next couple of years, we'll see some investment. And then as we deliver on some of the initiatives that we've talked about and we deliver extra margin, we'll see that cash flow coming through. Penny, which are from Morgan Stanley. I'm gonna try and ask Andrew's question in a slightly different way on the management goals with regard to the bracing and PBT. I appreciate you don't wanna set timings or formal numbers, but could you at least say whether some of the goals you did have in the past on those metrics, sort of the 15, 20 percent ROCE, the £10 per pbt per per seat. Are they kind of the the numbers that that would seem fair even if you don't want to set a time horizon for for achieving them? And then just one question on, the financial outline in, I think it's slide 8, Andrew, where you kind of walk through the headline cost per seat. That doesn't seem to quite correlate with the table you have in the appendix as to the drivers by the different line them. So is it possible that you could just talk about what's in the other component of that slide 8, factor? Because in the the appendix that seems to refer to increase in disruption costs, but you've called that out separately. So what's actually in the other in the first table, that would be helpful. Thank you. Sure. I mean, on the first one to say that, look, the that we have introduced within the company that we set up and the focus that is all there to improve the ROCE, it's all there to improve the the PBT proceed. It is all there to make sure that we continue to do more when it comes to the cash flow and the positive net cash flow that we want to deliver on a sustainable basis. That's all there to do. It is an ambitious plan we have internally with a lot of, self health initiatives. We're not relying on the external factors to make that happen. But we are keeping, you know, those targets and the process internally for the time being because there are uncertainties out into the market, but we would like to improve every number would have seen from the 2018 results. Yes. Okay. With respect to the, the, the, the reconciliation. So In this table across here, you've got it by driver. In the table here, it's by by essentially the P and L line. So you'll have, effectively, impact of each cost program savings will have impacted across the lines in the accounting. So airports and ground handling, as you would have seen, we've got a reduction on cost, whereas in this table on page 8, we've got an increase. So you can search shows that the focus of a lot of our cost saving initiatives about in other inflation, we've got effectively other central cost inflation plus ground handling we've invested So some some monies in DHL, which we've talked about before, and, effectively, that's driving incremental returns for us. And we will look to invest in improving our, around having opportunities elsewhere to improve that one time performance. And we've had a market change the day we put DHL in Gatwick. It's had a huge impact on our OT performance. And what it's done is also help, reduce our our disruption costs, even though albeit it's been a significant uplift in those costs. But, that's fundamentally the 2 key points. Hi, it's Catherine Mammoth from New Mexico Securities. Just three for me, if that's okay, please. Just thinking about the forward bookings for the second half of this year and in fact, those are just slightly ahead. Just wondering whether that's required any yield stimulation at all? And whether you've seen any changes in the trajectory as through the course of the Brexit negotiations and the big headlines, Secondly, just on the holidays piece, just thinking about, how you create that value for the customer more against rather than a 2 reason Thomas Cookson as well, but the OTA appears that you have, whether it be tom booking.com Expedia or in the UK market, some smaller peers, how do you differentiate yourself? And does that come into ultimately discounting? And does that impact how we think about the the meaningful contribution to profit and how we should think about that. And then another question, just on the aircraft being in the right place, for Brexit? And you've given the various figures on which markets those are in. Looking at that, I mean, that suggests that 7 54% of your aircraft are currently in the UK market. Is somewhat ahead of the 35 percent of capacity. So just wondering whether there'll be any shifts around with that just as we get closer to any harder potential Brexit. Thanks. I'll start doing it randomly on this for three questions and then, ma'am, we can fill the gap on that as well. I mean, we haven't done anything to incentivize or stimulate the numbers for the H2. I mean, that's pretty much in line with what we would always do, but it's quite encouraging to see that despite all the noise in the media about Brexit and perhaps other things as well that there is a demand out that it comes across in the bookings that we're seeing. On the holiday piece, it's important because I think you, you, you don't, it's a good question because on one hand, you have the competitor set that it's kind of the old legacy tour operator models. And that's what I did explain about, you know, where I believe we have some fantastic opportunity to provide additional value when it comes to what we can offer from the airline point of view as well. Now the question is then to say, how do that? So that is something that I feel very confident that we can complete very, very successful on when it then comes to the OTA's and the booking dot com, we got to remember that those players, Expedia bookings as well, they are mostly technology platforms. I mean, Booking dot com has something like 1,300,000, 1,400,000 hotels out there. We don't need 1,300,000 hotels here. We need to get ahold of which we established relationship with some of the most loved in demand hotels that exist on the network that we fly on to. And by giving them also the opportunity to our distribution, those 350,000,000 unique visitors that we have per year, the 90,000,000 customers that travel with us every year, we can make sure that we provide them with much more volume than if we were to spread this out across like in their case in Booking dot com, 1,300,000. So I think we are an extraordinary, good position to compete with anyone in this space. So, I think in that all out there, you've got to recognize in there includes our flights between UK and Switzerland. So that won't be impacted by you've got all the UK domestic flying And also you've got the EU 2727. So it's a combination of a number of things in there, but, we've done all the work. We're Europe 117 aircraft, we still got a little way to go to get to the target position before March. But it's not much more than that it's that 130 you need to get to, to get sort of the right balance base in the schedule that we've got and the mix of the flying between jurisdictions that we've got, so in good shape. Listen, thank you all very much for coming as well. I hope you're excited as we are. We've had a fantastic year for 2018 as well, and the foundations we have to build upon is quite extraordinary. So thank you very much for that. And I hope to see you soon out there so we can have a chat with them.

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