Earnings Call: H1 2018

May 15, 2018

So, I'll be ready to go, Stewart. Very good. Well, listen, thank you so much coming here and good morning, everybody. As well, we have a very exciting agenda for you today. As you've already seen in today's announcement, We haven't delivered a fantastic performance in the first half, which Andrew will cover shortly. And I've been at Easyjet for 6 months. So after we've gone through the H1 numbers, I will also share my reflections on easy yet. And we'll also highlight some areas where I think we can take this excellent business from strength to strength in the future. So with that, I'm going to hand over to Andrew to take through the results. Thank you, Johan, and good morning, everyone. Before I start, I just wanted to highlight a slight adjustment to our slide presentation with the addition of our Teagle operation, So as we run through, I'll ensure to keep you updated on exactly what is being presented. Starting off with some key stats. On the right of the total stats, including Tiegel, highlighted in the middle, our underlying stats, excluding Tiegel, to help you, there are couple of circled numbers that refer to the measures that we have previously guided to. In the 1st 6 months of the year, our total Paste, including Tiegelsen, grew by 7.8% with passenger numbers reaching 36,800,000 an increase of 8.8%. Excluding Teagle, capacity grew by 4.6% with passengers up 6.6%. Overall loads have increased in the half with total load factor up 0.9 percentage points, despite the lower average loads in Tiegel, reflecting the rapid startup of operations. Excluding Tiegel, there has been a 1.7 percentage point increase to 91.9% strong for the winter season. On a total reported basis, revenue per seat was up 10.9% and up 8.3% at constant currency, When excluding Teagle, these were 12% and 9.5% respectively, a result that's positioned us at the high end of our guidance range. Our total reported headline cost per seat was broadly flat in the half, whilst at constant currency decreased by 1.5% highlighting our continued delivery of cost cutting initiatives offsetting inflation pressures and the benefit of our fuel hedging position. Excluding Tiegel Flying, our headline cost per seat, excluding fuel at constant currency, was up 1.3% for the half, which is slightly higher than expected, mainly due to severe weather driving de icing, disruption and crude productivity in the period, plus investments in resilience. I'll give you more detail on revenue and costs later in the presentation. Moving on to the income statement, as with the previous slide Teagle operation is included in total numbers on the right, with our underlying numbers excluding Teagle highlighted in the middle. Total revenue increased by GBP 356,000,000 for the half, which reflects a combination of our capacity growth, strengthening euro as well as a strong trading performance, Teagle generated GBP 42,000,000 of revenue in the period. Total headline costs, excluding fuel, increased by GBP 160,000,000 which was mainly driven by increased capacity, a strengthening euro, inflation linked to prepaid deals, which we highlighted in Q1, plus the tough weather conditions and disruption. This was partially offset by cost initiatives, including the continued leverage of Scaler Airport and the benefits of our organizational review. Fuel costs increased by only GBP 2,000,000 in the half, which reflects an effective postage fuel price of $5.47 per metric ton, which represents a reduction of 17%. As a result, including the headline loss associated with our Teagle operation, each of which has delivered a headline loss before tax, of GBP 18,000,000, which is GBP 194,000,000 improvement on last year. When excluding Teagle flying, we delivered a headline profit before tax of GBP 8,000,000 for the first half, highlighting the underlying strength of the business model. In terms of non headline costs, there was a GBP 50,000,000 impact in the half the largest elements being GBP 24,000,000 of Teagle integration costs and the accounting entries associated with the sale and leaseback of 10 A319 aircraft in the period. Moving on to some detail of our Teagle operation. As a reminder, our first flight from the airport was on January 5th. We So these results reflect less than a quarter of trading. They also reflect a schedule that is currently under optimized and being operated primarily by wet lease aircraft. That said, I'm happy to say that it's been a good start with our capacity and operational performance being in line with our plans. Since launch, we have flown over 700,000 passengers from Tiegel, delivering a load factor of 63.4 percent, which reflects the rapid ramp up of the operations, with tickets not going on sale until December 2017. Lo factor levels are increasing as expected with April hitting almost 80%. We made a headline loss before tax of 1,000,000 for the period. Which is a solid performance given the factors already mentioned. In terms of operational measures, our performance is excellent. On time performance of $0.91 for the period has been strong and would have been higher if it wasn't for the full full weather in March. Are progressing in Lambda Fleet Transition Plan, and our recruitment and training pipeline is also on track. As I said, 1st March, we already had 2 33 Teagle based pilots and cabin crew. The smooth launch of such a large base is the fantastic operational capabilities we have within this business, everyone involved has done a great job. So moving on to detail of our detailed receipts, performance excluding Seagull. Revenue per seat at constant currency was 13.1% in Q2 and 9.5% in the half, and was driven by 3 main factors. Seasonality shifts mainly the partial movement of Easter into Q2, which delivered 78 pence per seat or 1.6 percentage points, We estimate the combination of monarch and Air Berlin bankruptcies plus the issues experienced at Ryanair that the capacity redemptions reductions to living a 1.96 impact for the half being circa 4 percentage points. Finally, underlying trading, which includes a strong ancillary performance, delivered a further 1.91 improvement in the half, I. E. 3.9 percentage points. We have seen good performance across all parts of the network driven by our network brand customer service and attractive fares. Ancillary revenue seat drove a 1.8 percentage for its improvement and was delivered through the ongoing benefits of last year's improvement to our bag and seats offering as well as our new bag proposition offering 1523 kilogram bags and the increase in load factor for the period. Finally, when including the impact of ForEx, EZ Jets reported revenue per seat for the half, excluding Teagle, increased by 12%. Moving on to Costa C to get excluding Teagle. In summary, headline cost per seat decreased by 1.6% at constant currency, reflecting our hedged fuel position, while headline cost per seat, excluding fuel, or constant currency, increased by 1.3%, slightly higher than previously guided. Focusing on costs continues to be a strategic objective for EastJet to ensure we maintain our competitive advantage. Our cost program has delivered 6,000,000 of benefits in the period. However, at constant currency and excluding fuel, this has not been sufficient to fully offset cost per seat pressures in the half. One of these pressures includes the increase in load factor, which although has a positive impact on profitability, has partially offset the cost per seat benefit of increased aircraft gauge in the period. That said, during the half, we have continued to deliver considerable success in leveraging our scattered airports, offsetting underlying inflationary pressures, the impact of high de icing costs, up by over 6,000,000 in the half, and our investment in resilience, particularly in ground handling at Gatwick. There'll be a great impact from regulatory price increases towards the end of the year, But on a half year basis, we have performed well to more than offset these increases. The two areas of significant cost increase were in crew costs, and disruption and welfare costs, the latter 2 included with an overhead. The increase in crew costs reflects inflation linked through pay deals we highlighted in Q1, some one off costs and the impact of cancelled flights and a significantly better crew retention rate than expected impacting productivity. But which did help resilience. With an overhead, the impact from disruption has offset a lot of the benefits from our organizational review savings, which we have completed. The severe adverse weather experienced during the half, which included over 1200 cancellation for the month of March alone, drove disruption related costs. Beast from the Easter loan drove a cost impact of around 8,000,000 in the half and this excludes the cost of de icing. I'll discuss disruption in more detail in the next slide. Navigation costs continue to fall, and maintenance and ownership costs were up as anticipated reflecting the maintenance work relating to return of 9 leased A319 aircraft, and the purchase of new A320s. Taking to account the unforeseen weather and disruption cost drives in the half of the year, as well as the expected payment of higher staff incentives due to our strong profit and operational performance, I'm updating our full year headline cost per seat ex fuel guidance to an increase of 2%. Where or not for the factors just highlighted, we would still be expecting an increase of around 1% if not lower. Cost will continue to be an area of leftist focus for us to ensure we continue to be a low cost leader in the markets that we operate. Now I've spoken about disruption before, but I thought it'd be worth to give you some context as highlighted in the graph in this slide. Disruptions has been the biggest single largest largest driver of cost increases at Eastjet in the last 4 years. This industry problem has been driven by increasingly condensed air airspace and airport to right across Europe, changed the legal interpretation of EU261 passenger compensation events, increasing customer awareness as well as rising welfare costs such as hotels. In scenario, we've been investing in for some time to reduce the events within our control, So far, investment in resilience for the operation has included predictive maintenance with Airbus and increased spare parts inventory, DF Shell introduced as ground handlers at Gatwick, investment in shared resilience, increased crew and aircraft standby levels and many others. It's helped drive improvements in both on time performance and avoided even higher disruption costs, with our on time performance improving by 6 percentage points at Gatwick in the last 12 months. And our cost per seat trajectory is staying in check despite the industry wide factors previously mentioned, but we need to do more and Johan will touch upon this later in the presentation. This slide summarizes the impact of fuel prices currency and hedging. The average market price for jet fuel for the half was $6.20 per tonne, after taking into account our commodity and currency hedging the sterling cost of fuel per metric ton was £393, which is a £56 or 12.5% decrease compared to half 1, 2017. Excluding the U. S. Dollar FX impact, the unit cost reduction benefits our cost base some GBP 57,000,000 despite the increasing market fuel price experienced through the period. These to be advantage compared to a loss of our competitors over the next 12 to 18 months based on the increasing fuel price and our current hedge position, which now also reflects our achievable requirements. Moving on to foreign exchange, the euro rate fluctuates between 11 and 1.15 during the half. Net net, there was a headline 14,000,000 positive impact from currency movements which includes those within the revenue fuel and other cost lines. Egypt continues generate strong sustainable cash flows with operating cash flow reaching 1,000,000,000, which funded a return of 1,000,000 to shareholders, through the payment of the 2017 ordinary dividend. Our working capital benefit from a combination of our higher revenue per seat changes to ticket sale timings plus an improvement in supplier payment terms. Our investing and financing activities included a generation of GBP 106,000,000 by the sale and leaseback of 10 A319s, This contributed towards 1,000,000 of capital investment, primarily on new aircraft. The capital expenditure also includes engineering and maintenance investment us investments in systems with a particular focus on our future commercial platform as well as the 1,000,000 invested in the Air Berlin Seagull assets. We continue to have one of the strongest balances in aviation, which provides resilience, flexibility, and access to cheaper unsecured debt. During the 6 month period, intangible assets grew by GBP 45,000,000, reflecting investment in IT software and development in the Seagull assets. Fixed assets increased by GBP 123,000,000, principally representing the investment in new aircraft, offset by the sale and leaseback of 10 A319 aircraft. At the end of the period, 69 percent 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 959,000,000, resulting in GBP 665,000,000 of net cash. Our liquidity is supported by the GBP 500,000,000 dollars revolving credit facility, which as we have previously highlighted, has been extended to February 2022 and has no covenants nor draw stocks. Also as a reminder, an innovative policy has been written with Munich REIT to provide business interruption insurance of GBP 150,000,000 to cover large short term shock events which also supports our liquidity buffer, pricing is competitive without source of funding and frees up cash for use in the business. As at 31st March, our liquidity position was GBP 4,100,000 per hundred seats versus our minimum liquidity target of GBP 2,600,000 per hundred seats. Moving on to forward bookings for the remainder of 2018. 57% of our seats have been booked. Of our half two seats have been booked, which is 2 percentage points in front of the same time last year, although this is a positive position to be in includes the benefits of an earlier summer schedule release than last year. This slide shows the expected capacity growth across European short haul network through the summer. Please note this information is sourced from OAG, includes Easyjet flying from Seagull Airport. As you can see, short haul capacity is expected to grow by around 5% in the half, with each jet reaching double digit double figure percentage growth, mainly due to the impact of TIGO flying, which represents circa 80% while growth in the second half. In terms of competitors on our routes, we are expecting a decrease in capacity of circa 2%. This decrease in growth is mainly down to the lower backfill compared to last year's monarch and Air Berlin capacity. So moving on to the more detailed line by line outlet slide, the first section of which excludes Teagle. 2018 capacity is expected to increase by circa 5% This is a slight change from previous guidance and reflects a higher number of cancellations experienced in the half. Based on current current trading half two revenue per seat is currently expects to be slightly positive despite the shift of Easter out of Q3. Full year headline cost per seat excluding fuel and the constant currency, is expected to increase by circa 2%, subject to normal levels of summer disruption and full year headline cost per seat at constant currency is expected to be circa flat assuming normal levels of disruption. As a reminder, the increase in guidance was driven by the abnormal levels of disruption experienced in the half, as well as the expected payments of employee incentives due to our strong operational and financial performance expectations. As an exchange rate highlighted, we expect to headline GBP 25,000,000 year on year positive impact for the full year, of which we saw GBP 13,000,000 issonets in half 1. Full year unit costs are expected to be 1000000 to 1000000 year on year favorable, with expected total fuel cost of 1,120,000,000. Moving on to the Teagle operation. We continue to be on track in the ramp up of our Teagle operations and are now confident of delivering a total reported loss before tax in our original guidance of GBP 160,000,000. Regarding our headline, loss expectation from operations, we are expecting a slight cost increase of circa 15,000,000 which reflects the unhedged fuel price increase in the period, the recent increase in securities charges across German Airports, as well as the lower average gauge and planned on some of our wet lease aircraft. Regarding summer revenue, there is uncertainty whilst revised the summer optimal Air Berlin schedule, especially within the German domestic market. We have already commenced our planning for optimization of the future schedule to give our customers a more desirable offering and are well progressed in building our brands to continue to be very confident in its future. This is reflected in significantly improved trading benefits of Berlin Schirnafel's airport, which has benefited from the improved Berlin customer proposition. Additional cost and revenue risk we own in the range of our full year headline impact late Seagull to circa $75,000,000 to $95,000,000 loss. This increase in headline loss has been fully offset by savings in non headline costs, which are now planned to be surfaced $60,000,000 for Seagull. This saving reflects how effectively we have established the Teco base. Moving on to total headline profit. We expect the FY18 headline PBT results, including steel operations to be between GBP 530,000,000 580,000,000. Finally, moving on to CapEx for FY 'eighteen, including Teagle's total CapEx in FY 'eighteen, including the acquisition of Air Berlin Assets, will still amount to circa 1,000,000,000 in line with previous guidance. With that, I'll now hand you back to Johan. So, firstly, let me just say that it's clear to me that we have outperformed the market in the half because of the strength and the competitive position that the company has built up over the years. And as you may remember, during my Q1 results that mean 100% that I talked about, how my ambition was really to take the company from strength to strength. And this remains my view. And my approach will be, as I said earlier, as well, it will be evolution and it will not be revolution. Now this evolution We'll build on the foundations that we have and capitalize on the opportunities that so clearly exists and that we have not fully explored in our business to date. I'll go into more detail on what those opportunities are in a moment, but first, I want to share my reflections on Easyjet as we stand today. When I started in December, I was very clear that I wanted to take the time to meet and listen to people both inside and outside the company. Since then, I spent a huge amount of time with our stakeholders. This has included investors, suppliers, partners, regulators, customers, and also, of course, our own people. I also spend a lot of time reviewing our current strategic framework with the team and the board to really understand where we come from, perhaps more importantly also where we're going and how we are going to get there. All this has confirmed my early observation that we are a business with many unique strengths and with many opportunities. There are also some challenges that we want to address which As we do so, we'll lead to further operational and performance improvements. But let me just recap on some of those findings. Firstly, our network, we have Europe's leading point to point network between the Continence Primary Airport, which appeals equally to both business and leisure travelers. The destinations, the slots, the frequencies gives us an unparalleled customer proposition provide barriers to entry, and as a whole, are extraordinarily difficult, if not impossible, to replicate in its whole. Our strategy remains that we will continue to strengthening our number 1 and number 2 airport positions. 2nd is our cost base. We have a cost advantage where we operate, and I spend a lot of time with Andrew and with the team to understand our costs and it's very clear that there is a structural cost advantage in the primary network locations we fly to and from. But we can do better and we must do so. As mentioned earlier by Andrew, disruption is the single biggest driver of cost increase and cost pressure that we and the industry face. And we have already taken action around resilience, but we need to do more in this area. Radically attacking this issue will address 2 big priorities, driving down costs and at the same time also improve the customer experience. Moving on to scale. We have almost 300 aircrafts and we are set to carry 90,000,000 customers this year as well as being a large airline. We are also relatively simple one with one aircraft type, 1 brand, 1 main distribution channel, which means we can leverage scale across the company and with the partners that we work with. We're also very mindful that as we go forward, we need to drive up complexity and keep our focus on simplicity and efficiency. And our recent organization review helps us to take a step forward on this. Are people easy to pass some of the best people in this industry. And I'm not just referring to a handful of individuals but really across the whole of the operations and where we operate. And to build on this and as you will have seen from the announcement today, I'm really pleased also to welcome several new top quality members today and B with a mix of both external and internal recruitment. A further unique asset is our brand. Our brand position is extraordinary in our main markets. In the UK, our largest market, we are now the most considered airline brand, moving ahead of British Airways for the first time and reaching our highest score to date We're also ranked number 1 in terms of value for money perceptions, 14 points ahead of British Airways and 19 points ahead of Ryanair. In Switzerland, 4 in 10 consumers consider is yet their first choice airline was in France and Italy more than 1 in 5 say the same. And this is absolutely quite incredible. In Germany, our brand perception is now improving rapidly, achieving our best preference score ever in Berlin. We were also recognized just 2 weeks when E suggests was rated Europe's best value airline for short haul by Skyscanner. This brand's strength gives us the unique competition what our growth plans and that we can build upon. Finally, data, we have billions of data points in our company and our focus on data begun earlier, some years ago. And in many respects, I think that we are ahead of our competitors, However, we are still just at the beginning of this journey. We still have only seen fragments of what this will do for us when it comes to reducing costs increasing revenue and also how we are engaging with our customers. Data will also be a key enabler to stay efficient and drive complexity out of the business. The winner in the industry in the future will be the one who takes care delivers and or maximizes the potential of what data brings. In summary, it's therefore clear to me that ECS has a number of strengths, which in combination no other airline can match and which together has laid the platform for the airline's growth and success. And I plan to build on these strengths. Earlier I said my approach will be evolutionary. However, this does not mean that we will not be bold. We will. In some areas, I will take you through, we will radically accelerate what we do, particularly in the less capital intensive areas. And this will enable us to take big leaps to create a competitive advantage over others and also greater returns. As a team, we have looked closely at the value chain and the strengths we have. And we have identified 3 significant areas of opportunity, which we haven't yet fully capitalized on. That is holidays, business customers and loyalty. All three will be unlocked by supercharged in our data capability and all will be delivered successfully by our people both existing and new top quality talent who fundamentally are our greatest assets. Taken together with a focus on cost and disruption, these initiatives will drive what I believe needs to be our most important financial measure, profit proceeds. As well as increase our return on capital employed and increase the reward to shareholders. Going forward, our focus on profit per seat will drive decision making for the benefit of EasyGES. It will also encourage us to make the right sort of investments, which will deliver long term sustainable returns. We will give more details in November, but I will now outline the exciting opportunity we see for each of these areas. The first one of these is holidays. Based on my previous experience, I know that ETF has a huge opportunity in this area that we just haven't leveraged. Easyjet entered the holiday markets a year, some years ago, but its approach to date has been limited. We now have all the necessary ingredients to successfully do more in this area. And these ingredients include a pan European network with the best destinations frequencies many times for the day, every day of the week, a well loved, trusted and powerful brand, a cost advantage over the leading competitors a customer base with high spending power and the scale to capture a significant share of this market. And to illustrate this, on the biggest and most attractive flows into the most popular beach and ski and city destinations in Europe, ETS has a market share, a free see and most importantly, a cost position that no one else can match. To many of the biggest holiday destination, we are market leaders when it comes to capacity, but we simply do not convert enough customers to book hotel with us. We don't need to even go out to get new customers. We already have them. But today, they just don't book their accommodation trust to the extent that we would like to do, and that is something that we will change. Ecjet's strong brand in its core European markets attracts a wide breadth of passengers to these destinations from couples, families, and those traveling for a short weekend trip or a longer break. ETS has a cost advantage of at least 20% over the leading operations which allows us to offer great value when we sell flights also with hotels. Despite all these ingredients, only around 500,000 of our customers book hotel with us today. That is from an addressable market we estimate to be around 20,000,000 passengers. We now believe the time is right to invest more in this area and combined with our existing Easyjet offer, we can significantly increase the number of people we take. On Easyjet holidays. And to do this, we are going to establish closer relationships with selective partners, including hotels and destination services. By combining a quality, great value hotel offer with the flexibility and the multiple of frequencies, to major European destinations, we will deliver a better value proposition for our customers. And just to be clear, our focus is not to take on hotel inventory risk. It's just increasing the revenue and the profit receipt opportunity. To drive this initiative, forward, I'm really pleased today to announce that Gary Wilson from Tuohy Group will be joining the business and we'll head out this new unit. He is currently managing director of 2 group product and purchasing. I know Gary for over 12 years, and he's one of the most experienced holiday industry professionals in the world, and he would report directly to me and also take place of the airlines A and B. His pedigree is well known to everybody in the industry And this is a clear thing that we are accelerating our efforts in this area. Next, we move from leisure to business travelers. You heard us more about attracting more passengers traveling on business and with Europe's leading network linked in the biggest airport, Esojat offers a strong platform to attract and retain these travelers. We have made great progress in driving this area of the opportunity over the last few years, but again, we can really do more. As a reminder, business passengers are attractive airline for a number of reasons. That travel at times a day, days of the week and month of the year that complement our large leisure flows. They value a primary airport network. The passengers tend to book late and therefore pay a higher fare and provide to us a higher return. And they also travel without for leisure. This is great, and we have seen the number of passengers traveling on business rides from NOK 10,000,000 a year in 2012 to over 13,000,000 a year to date despite our growth in leisure routes. And we will continue to develop our network to bring more business travelers to Easyjet. For example, with our expansion in Teagle, we have started flying German domestic routes for the first time linked in Berlin with Frankfurt Vistedov, Stuttgart, Cologne and Munich. And as we see expected, we are and as expected, we are seeing high numbers of business passengers on these routes at around 60% penetration. But despite this growth in business line, our overall business penetration has remained relatively flat. There's a lot of simple things we can do to make it easier for businesses and business passengers to work with Easyjet and for us to track more of those passengers. So what are we gonna do? Well, there's 4 things for stockers. We need to make sure they have a schedule that is better tuned to business demand with peak time flights off to all major business centers. We will develop a business class targeted fare bundle. We will automate our invoicing processes, which previously been a barrier for some corporates. And we will also build a new online portal to allow small and medium sized businesses to book more easily without But we also believe there's more we can do to ensure the business community is aware of the great value that we offer. We offer a similar product for the average business passenger in comparison to the so called full service carriers, but for many times less than half of the price. We offer similar seats, kitchen leg room, one carry on bag that do give you a snack, but unless you actually have part of the loyalty stages program, you'll be way back at the plane. Add on Easyjet plus, which many of our corporates have and you can sit in the 1st row and be out first For example, we even have a better Turbine location in Berlin. It takes, so you're quicker out to the taxi rank. With legacy carriers, you can earn loyalty, but that's something that I'm going to come on to in a moment. So educating the business community, both travelers, and the corporate procurement team is critical for us to deliver this program. Once our business customers try Easyjet, they want to come back again. In fact, 92% of our customers who fly with us say they would consider flying Easyjet next time they travel. So this is the price we need to go after. And with the new initiatives I have outlined here and others we are developing, we will build on our share of business and capture more of the we see within holidays and business, we will create an Easyjet loyalty program that truly rewards and recognizes our loyal Easyjet customers. In summary, loyal, regular flying customers create lost value. Returning customers book twice as many flights a year as new passengers do. We also know from our data that this end more with us on other products and services, whether that is on holdback or our In flight Bistro. That said, 46% of our customers only fly with us once a year. This presents a great opportunity to drive loyalty further and in ways which would complement the new initiatives in holidays and business. We already have our flight club program for our most loyal and frequent travelers and Easyjet Plus, which is a great problem for those who travel regularly with us. But we want to build on these great programs, but in a much more ambitious way. When I look around the industry, I see all of our rivals offering loyalty programs. However, legacy airlines and their loyalty schemes are increasingly less compelling as the flexibility and the attractiveness is devalued. And passengers dissatisfaction with them is not insignificant. The world has changed and the ways of rewarding and recognizing customer loyalty are also evolving. It's hard to go out to even buy proper coffee without being encouraged to join one of the lawyers schemes But at the other end of the spectrum, we have Amazon Prime, which has completely rewritten the expectations about the power of loyalty scheme memberships. Amazon Prime members as an example spend more than non members, about $1100 a year compared to $600 for shoppers who don't join and Amazon retains, like, fortunately 95% of them after 1 year. When you're looking at the airline industry, you see similar trends. American Airlines Program drove 3.9 percent revenue growth in other revenue, while overall revenues fell 2% and it is estimated that the top 4 airlines in the U. S. Generated $9,500,000,000 in loyalty revenues last year. Quanta's estimated revenues from its loyalty ancillary to double by 2022 despite modest growth in the airlines and little increased penetration. Every second household in Australia participates already. The program is estimated to be worth some SEK 4,000,000,000. Now we are still very early stages of assessing how to best develop our own unique easyJet proposition that really reflects our value. Simple, efficient, convenient, and value for money. In 2010, 37,000,000 of our 50,000,000 annual passengers were returning to EasyDent. This year, over 60 of our 90 1,000,000 are doing so. If each returning customer books, one additional flight and buys one additional product, the revenue and the profit per seat opportunity is huge. We'll come back later in the year with our plans in this area. So we have 3 very exciting opportunities, holidays, business, and loyalty, but underpinning the delivery of these will be a significant investment in our data capability. I see data as an absolute game changer for this industry that will deliver customer benefits for ourselves, additional revenue and lower costs. And as I said earlier, Easyjet is a large airline build on a simple business model. We fly 300 aircraft over 1500 sectors every day and will carry 90,000,000 passengers this year. This generates billions of data points. We're already using machine learning, we're using AI, but only on a limited basis and with small team of data scientists, we're only just beginning to scratch the surface of what truly can be achieved. And as I told you at our Q1 results, I'm creating a new role as Chief Data Officer whose key role will be to commercially and operationally capitalize on the airlines extensive and rich sources of data. And I'm really pleased to announce that this role has been filled, and I appointed Luke at Sikola from Experian to supercharge this opportunity. Luca is currently heading up Experience DataLab and Head of Analytics in the Asia Pacific region and its base in Singapore. We will focus on 3 main areas. The first is revenue. We are already well advanced in its air compared to most other airlines, but there is so much more we can do. Using the 1,000,000,000 plus searches each year on easyjetter.com added to the history of our customer's journey with us, we will be best to try to understand and leverage the future customer demand trends. For example, telling us which destinations and timings are in demand that we can optimize both our schedules and prices for. The second one is improving costs and improving operational efficiency. With our recent announcement that we did about our Skywise partnership with Airbus, we are investing to take predictive maintenance much further. The move is part of our aim of eliminating delays caused by technical events, which will benefit passengers who will experience fewer delays and fewer cancellations. These technical events have come down from 10 per 1000 flights in 2010 to just over 3 per 1000 flights today on our newest aircraft. And our aim is to get to 0. The 3rd area is improving our customer proposition their satisfaction when flying with us. For example, predicting the sort of demand for certain items of food and drink on each flight so that supplies match customer demand. Tailoring offerings on board. So we know what you want to buy from us before you knew what you wanted to buy. This is such an exciting area for the business and one I know will drive value across the whole of airlines, investing in this area, combined with opportunities I mentioned earlier, would be the driving force behind Easyjet's profitability in the future. As a result of this, I'm setting a challenge to ourselves to make Easyjet the most data driven airline in the world. I would now also like to say a few words about our people without whom none of this would be delivered. I've worked in the travel industry now for for more than 30 years. And I can honestly say that I have never come across a group of such talented and dedicated people. In particularly our crew are amazing. And sometimes people tells me that short haul European flying, that's a commodity. You can't differentiate yourself by doing that. I think that's completely wrong, and I think we've proven people wrong, I completely disagree with that statement. Any business which views its passengers as commodities rather than recognizing them as individuals will be found out by them. The proof of this is delivered every day by ECS crew who prove that you can offer a differentiated service on short haul flights. And this is done by a business that engages with our people who then cares about our passengers and customers. Our crew are highly engaged and committed to Easy Jets with only 6% turnover. Our customers feel this as well as is demonstrated by the satisfaction score with the friendliness and approachability of our crew at 86%. This is 15% higher than customers' overall satisfaction with their end trend journey, which includes time at airport security and border control both areas that are not in our control. The attraction of the Easyjet brand in culture is fantastic, And is it a competitive strength that we can build on to secure people, engagement, loyalty, and a true customer focus? So finally, moving on to costs. As I mentioned right at the start, cost is core to our DNA. Easyjet has a strong underlying cost advantage on the network we operate using the scale and the growth plans to drive significant competitive advantage in major areas such as Air Force, ground handling and aircraft costs. However, as Andrew highlighted earlier, the biggest cost challenge we face is disruption. Without disruption, our cost per seat executed in resilience last year has delivered improvements in our on time performance as well as increases in our customer satisfaction, but that is still not enough. Chris Brown sits there up there. And her team are developing a plan. They will take up further costs all the way from scheduling to the on day disruption management as well as ensure higher productivity. In short, costs and disruption will be a huge focus myself and to everyone in this airline. So to summarize, I will update you more in detail about this exciting new plant as we go through the year, but it's very clear to me that we have a fantastic opportunity to unlock significant value This will require investments. We're working through the specific details and we will obviously need further input from Gary, Luke and the rest of the team and so we'll come back to you in November with a clear guidance on this. However, the majority of these investments will occur in financial year 2019 and start to deliver increase in profit proceed by full year 2020. That investment will be relatively risk free and we will deliver increased return on capital and higher profit proceeds, which in turn will give shareholders sustainable long term returns. So we are building this company on a successful business model. We're building this company on a strategy that works and to provide a great foundation and that gives us the confidence that we in our increased headline profit per tax target this year of SEK 530,000,000 to SEK 580,000,000. And by focusing on business holidays and loyalty whilst leveraging data, investing in the people and driving down costs, we will take this business from strength to strength. Well, thank you very much for listening, and we will now open up the floor for questions. Okay. Yes. Penny Butcher from Morgan Stanley. Three questions on my side. The first in relation to Teagle given the updates that you've announced now for the operating cost profile in 2018. Is it fair to say that still on an FY 'nineteen basis, you're expecting at least a breakeven outturn for the operation overall and beyond that profitability. On the ancillary side, I mean, you've made mention of a couple of these new initiatives, particularly on the hotel side. Can you help us with any color about maybe a sort of amount per seat uplift that these initiatives are designed to give on the ancillary side, just to maybe scale the opportunity. And finally, on the PBT per seat, plan, appreciate that you probably don't want to give a number until you're ready to give a number. But maybe just to connect that sort of management compensation and plans going forward once you maybe introduce such a target do we assume that that is then going to be connected to management compensation? I'll do the second question. The first one and then you could do the 50. I mean, on the holidays, as I mentioned, I just think it's a great opportunity and the timing is right. We today convert 500,000 customers that we sell hotels to, but we're realizing that we have people on board the planes about 20,000,000 that doesn't book hotels with us. So one of the great things is here that we don't need to go out and target lots of new customers. We wanted to have them in there. I think with the scale that we have and with the brand that we have, it will be a very interesting discussion to come and join up with hotel partners, selected hotel partners, but also other parts of the whole value chain around the holidays, like destination services as well. That would just be able to provide a lot better value. And when you take the cost advantage that we have compared to some of the leading operators in the field, But bundling that together with the hotel, I think that's going to give us a tremendous opportunity to deliver also value in this chain. It's too early to come back on some of the profit receipt number in this as well, but I see great opportunities in this area. Benny on Teagle, yes, absolutely. It can take some time to optimize, but we're running a very inefficient schedule at the moment. What various indirectly in front of me is on the case to make sure that we can get it optimized or take a number of seasons to get us there. But I think by the time we get to 2020, we should be in an optimized position. But it's currently it's very much inbound. It was serving the long haul for Air Berlin, slightly too many domestic frequencies and also it doesn't connect well to our the rest of our network. So we've got to do some optimization around that. So the gang are on it already. With respect to PBTFC, If you think about the PBT per seat, it's actually a good linkage to Rocky because your seat is your CapEx and your PBT is your turn. So to a certain extent, you've got a better linkage and it's more visible for our colleagues internally to look at that rather than rockets more complex to calculate with PBT C, you can actually tangibly touch that. So whether it's going to be linked to us as a target, something for the Remco and the boards to decide, but it has already a strong linkage to Rocky anyway. So but it's a much more meaningful measure for our colleagues within the business. Good morning. Daniel Ruska from Staphroberstein. And maybe first one on your hand, and you'll appreciate that that listing when you talk about holidays, are you talking about selling hotels or tour packages? And how does that possibly compare to other offers in the market that competitors also have out there? Second question on the whole business strategy, what organizational setup and capabilities are you putting in place after the the corporate sales items you talked about, what will happen in that regard with the Navy Jet? And third also on business, if you're planning on selling more short term, how are you actually changing the revenue management system? What do you have to do on the revenue management system side to free up those seats in the short term? And is there any risk associated to that? As you kind of not sell the long term scheme? Right. I'll kick this off. I mean, in terms of the opportunities within the holiday, I think we'll do both. I think we'll be able to do both self hotels in its own right and also part of a bundle and part of a packet I think Tour operating has definitely changed over the years. Tour operating used to be somebody who chartered a full plane and then went on to take on the whole hotel and that is definitely changed. I mean, we already have the most constrained part of that value chain through the network that we operate. From the primary destination, and to primary airports. So we already have that, which so many leading operators are struggling with at this point in time. So this is about bringing up the scale into the selected number of hotels out there to provide that value. So I think we'll be in both the hotel sector and also as a bundle. Do you want to do? Yes. I think it's fair to say that business is a number of short term things. We could do a number of long term things to do. I think for us, on business really, we are taking a look at some of our schedules and timings around where we can swap things out and make it more attractive for our office passengers. I think the interfaces that we have with our business partners is an optimal. So as we make it very difficult for our business partners to reclaim VAT on some of their flights. Some of our flights aren't available on some of the OTA websites and interfaces there. So we, you know, I think the opportunities that we have into the primary airports, we could do a lot better, and a lot of short term things we can do. But again, over time. And once we get the hybrid system in place, we can see there's a lot more opportunity beyond that. But I think for us, the impetus is there, and we're looking at the infrastructure to focus on that, from a people perspective as we speak as part of the review of the A and B. But just to say that, I mean, we've had, now a record of 30,000,000 business passengers in the year gone by as well. We have signed up Zacks 40 companies the we got 34 other FTSE 100 companies that we have corporate arrangement with agreement with, but we don't make it as easy for them as we should do in terms of making these bookings. We're developing a portal for small sized midsized companies as well. So we're able to offer both a good product, both for the big corporations, but also for the small family run companies that fits in there. And it would be really as with all these initiatives, whether that is loyalty or holiday, it will be about value for money. It will be about the convenience and the use of friendliness of this. It will go through like a red thread on everything we do also when it comes to business. And on the yield, Robert, do you want to say anything about the yield? Our yield strategy director Sure. I think to answer your question on the 20 towards the mouth. Okay. Got it. Thanks. Early start. No, On the question about yield, I think short answer is no. Our revenue management system can handle that capability already, and we've been testing some upgrades to it for this summer that will allow us to really go after that short term yield as well. Hi, Neil. I'm from Credit Suisse. If I could ask 3, the first on the hotel side, the low level of conversion today, would you attribute that more to awareness customers worry that they're going to get ripped off or competition in the market? 2nd question, you've obviously mentioned a lot of initiatives and there's a lot going on. I don't think I heard worldwide by Easyjet mentioned. Just interested in terms of where you would rank that relative to the other initiatives you're pursuing And then the 3rd question back to Berlin. Obviously, you're developing the presence of Tango. You've got a bigger position in the city now. Is that bigger position actually helping performance at Shonafield this summer? So, on the, what's the reason why we're not converting as much as we do. Look, we have today, 0.5 of a full time employee, the works of business, the holidays. So I think that we can do by adding some more resources in this as well. And really looking at selected number of hotels that is out there. And given also my background and the knowledge and the network that I have within my previous experience as well, I do, I think I have a pretty good idea where to look So I just think that we just need to do put more focus on it. But it's important to understand that this lies within the strategy of each jet, if you think about it. This is about going from the right airports to the right destinations having a cost structural advantage that we have against some of these players, using the brand to leverage the attraction, both from partners who want to join us and also from customers who wants to travel with us. We know it is a trusted brand. So I think it's more about coming out and be able to offer that in a much more way. I think the company has done well with the resources that we have put into it, but I just see that there's bigger opportunities. And that's what we were discussing with the team. But now is the right time to do that. I think on the worldwide, the worldwide is doing good for us. It's an excellent way for us to package pace in the sales of long haul without taking on the risk of buying expensive long haul planes. We have now 7 airports that are connected to the Worldwide program, and we are currently negotiating with other airline long haul partners who wants to join this. And it's proven to be quite a good success. So it's not astronomical numbers of where we are today, but it's our way of dipping the toe into the water and we want to focus on this going forward. So for our customers, once again, we are now with the network that we have, that is a big advantage of what we do. And that's what we're noticing when we're now speaking to other long haul carriers. They see this at a fantastic feeder into themselves to be able to do that and offer that to the customers where they can take advantage of the network and the cost. Think it's a great way. On the other one was on Berlin, yes? Yes, it shouldn't have been absolutely So, we're seeing a big upside from point of view of the ground presence activity that we've undertaken in Berlin, generally. It'll be part of the optimizations there. There are flights at churn. I felt that we'd like to move to Teagle and vice versa. So that'll be part of the work that Rob A and the team will be doing over the coming year, to re optimize between the two airports, but yes, Shona felt we're definitely seeing an upside. Damian Brewer, RBC. Three questions again, I guess. First of all, you talked about the business market. There are some obvious routes where you're missing the first flight out, London, Edinburgh comes to mind many days of the week. But when you look across your your schedule. Do you have a feel for how many sort of seats are in unoptimized business routes at the moment to give us an idea of scale of the opportunity there. If you could just optimize your schedule, your first out, your last out facts. Secondly, I noticed no mention of the 2019 cost per seat target, but I think I get it. Can you just confirm that the focus now very much says on PBT per seat? Rather than just cost in isolation, are you doing things that are NPV positive long term rather than just focusing on costs And if so, can you talk a little bit more about the thought process behind that? And then very finally, CapEx, 1,000,000,000 for the year. That implies an awfully large amount of CapEx for the summer, given delays with Airbus elsewhere, is that now still a highly probable event or could there be some slippage in that? Thank you. So I'll do the first thing you need to do. 23. I mean, it's difficult to give specific numbers on how many seats that are not optimize for this, but we do see that there's an opportunity by adapting the leisure flows to the business flows. I mean, we do have examples where we are flying out on leisure destinations, beach destinations in the first wave early in the morning. And then suddenly when you're coming into the second wave, And then they actually lost the first way where normally business travelers goes to, but at the same time, we have families with children who's been staying over at the hotel and get free to travel somewhere. I mean, those are the obvious things that we would look to. And Robert and Chris is doing a lot of work to make sure that that is corrected. And we will get the effect on that from 2019, I guess, from the summer program of 2019, primarily, but the but I don't want to give the specific target of that is, but there's an opportunity that lies within the area. On cost per seat, in the honesty, there's a comment there about FY 'nineteen. We see that's to now be flat to marginally up on FY 2018 and that reflects the investments that we expect to make and we'll give more guidance on that when we come to the premiums in November. But I think it's fair to say that our decision making around investments has somewhat been a little bit constrained by our absolute focus on costs. So holidays is a very good example, you know, having half the investment that we've done on holidays in the past reflects itself in in the profits we generate from holidays. I think it's clear to see that if we look at it slightly differently, we could generate a whole load more money on the back of that investment. So that's going to be the kind of thought process around how we move forward, but needed to say we're absolutely going to focus on on cost, particularly disruption, and we're going to make sure that we identify and single out those areas investments very carefully and track them very carefully. With respect to CapEx, you have 1.2 is in line with what we expected. So we've still got the 6 A321s coming in this year. We are looking forward to accepting our 1st Farmra. So that's on track. Our guidance reflects where we are with Airbus. There have been a small, we have been discussing with Airbus about some of the, the engine delays there, but fundamentally, we're in good shape for this financial year and it's reflected in our numbers. And our capacity numbers guidance this year as well. It's James Hollins from Exane. A few for me, please. The first one, the cost per seat moving from 1 2%. Could you just give a bit more breakdown on how that splits between, I guess, additional bonuses that maybe weren't there in the previous guidance? How much of it is in this staffing up for investments, etcetera. I know you've given some detail on disruption. The second one is should we expect more sale and leasebacks this year? And finally, your use of wet leases in Berlin, are you feeling just maybe a sort of qualitative diesel on sort of fleet to market availability across Europe. I mean, I know certain people in this room had talked about BA maybe struggling to fill those monarch slots Are you seeing some sort of constraints there, which you think A might help this summer and B might last longer term to give generally positive market conditions or is that wishful thinking? Yes, cost fees, the main driver fundamental driver is the incentive payments to our colleagues and is well deserved given the performance that we expect to deliver this financial year. So There's an element in there of disruption, which increases that we gave the original guidance around 1% now going to 2%. So some of that will be disruption that we've seen in the first half of the year. Particularly in March. But that's the main 2 drivers of that uplift. With respect to selling lease basis financially, no. We don't expect to do any, so we set out do a number per year, but we don't expect to do any more this financial year. Well, this is so Well, at least, I think it's fair to say that to ramp up Teagle, we have to go and find quite a few wet leases very, very quickly. Hence, the reason why we're operating in some of our routes on BA-146s, which reflects the fact that our numbers are slightly different to what we expected. But it is I think it's fair to say that it's a a seller's market at the moment on wet leases given the capacity that's come out of the market and the fact that we're currently taken on a lot of the dry lease aircraft from Air Berlin and currently converted them into ours. But I think it's fair to say that we acted quickly We got into the market, got what we needed, and it's fair to say that, we don't want to demise another demise in the market, grabbing all of the wet leases, it's been proven difficult by other airlines as you've seen by the comments from BA on Qatar. And on the think on the 3rd point in terms of capacity back into market, it clearly capacity has gone out in the winter as you've seen as well in terms of the coming back in, again, which is usually done pretty quickly in this market. I think that somewhere between 20% to 30% on Gatwick and Luton are now those former monarch slot that's been filled by Wissen in Luton and then also IG in Gatwick. And then we just need to remain to see what happens with the pricing on Hi, it's Andrew Lop from HSBC. Can I ask one on the holidays? If you're going into the holiday business more aggressively, I guess, how confident are you of of sorting primetime accommodation, because you said that you have the most scarce resource, but primetime accommodation on in August is extremely scarce. And previously, if you're a bit part player in this game, then people were perhaps happy to sell you accommodation. If you're going in there more more serious there? Are you more of a threat to the people who are providing hotels? Does that make it more of a constraint? On the flip side, moment you collaborate, I think with Thomas looking a bit with TUI, with them taking blocked spaces with you. To what extent do you see a risk that if you're going into their territory big time, that that will constrain that, that collaboration. And then if that's 2, which maybe it is, Let's just talk about Italy, and how are we trading in Milan? Is there Italy, Qatar back has all sorts of ambitions. And all things have gone mighty quiet about Talithalia, which I think I can imagine why, but what's the status from your perspective there? I'll do them the first 2 in regards to the holidays. Look, I mean, first of all, we are, as you said, we ordered in the holidays business, we do already sell hotel there. I think that the difference is that we have the scale, we have the scale and we have the brand. And that is really what the hoteliers are interested in doing. And I must say that I think it's a great opportunity for 2 and or Thomas Cook and other operators sell actually hotels to us. So in terms that they actually own hotels themselves, we are Europe's largest leisure carriers into these destinations. We are providing huge of the passengers to these destinations. So anybody who has a hotel, whether that is somebody who who would be like a Retiri or Thomas Cook or just tel chains or individual telesales would be interested in wanting to work with ourselves. So I think that that is one of the the great attraction that we have as a business partner. So I'm not concerned about that. On Alltelia, As you know, we've put a statement out that we've put in an expression of interest in part of the process, engaged in the process so far. That expression of your interest, with our consortium partnerships, with the commissioners for consideration. And clearly, with the the political situation, basically, we're waiting for that process to reconfigure you, but that's all I can say. Milan, very well. Milan is doing very well. I'm very pleased with Milan. Think it's fair to say across our whole network we've seen, we've seen strong trading. So, and our brand has been very well in Italy generally. Yeah, so I can say. Hi there. Good morning. It's Ashita from Barclays. I just wanted to come back to costs. I mean, you made it pretty clear that you're frustrated with disruption. And it's anything around words, you want to tackle it radically. But I'm guessing this is not necessarily fully in your control. It's an industry wide problem. So what exactly is radical can you do? Can you maybe elaborate a little bit more? Yes. I mean, you're right. I mean, a lot of this is not within our control, but what is in our control is actually how we mitigate and how we deal with the consequences on that. And I think data will be absolutely the key enabler on how to do this. And they say in itself on cost, it touches the many ways. I think partly in terms of utilization, in terms of the productivity we can do, fuel efficiency and then the 4th thing, the resilience that we have I give you an example, I mean, there's a number of things that happens out there that whilst it's not in, in our control, when they happen, there's a predictable to happen. So for instance, if there is announced that it's going to be a strike every weekend for the foreseeable future in Marseille, which I think was been the case as well. We kind of know from history what will happen, what happens to our flows, what happens to the congestions in the airspace, And I think picking up exactly the movements from previously historical events will allow us to much more through machine learning and AI through algorithm to say, look, this is the way we're going to go about this. This is the optimal way on how we're now scheduling, rostering, crewing our aircraft and how we are informing our passengers in advance in case we need to precancel as an example. So that's just in a way where we're actually taking the history of the events through the self learning that AI gives to ourselves and therefore can mitigate that. And the same thing comes with disruption when it comes to weather as an example, but I think that there's a number of cases where we see that that actually going from a more previously, we kind of think the industry had been doing that at hot way. Okay, now we have a strike there. We a congestion over there. We're going to deal with it in that way. So I should look at the historical issues, what actually happens in the airspace and what happens. In terms of how we best can optimize that. It's a great opportunity for us. Hi. It will come from Liberum. Three questions if I can. You talked about CapEx for this year. Could you maybe give us some guidance for later years and in particular, update us where you are in terms of currency hedging? Secondly, you talked a bit about employee incentives. Could you maybe give us a hint as to where the sort of thresholds sit, and how you go about structuring that scheme. And finally, I think there was something in the same about a new UK AOC, but could you perhaps elaborate about what, what, what the purpose there is, please? Yes, CapEx, we haven't given specific guidance beyond FY 2018, but we'll give more color in the prelims. But our fleet patterns as well. So I wouldn't I don't think there's anything you should read. There's no or 2 emotive around that. Our fleet panels as well. With respect to, do you want to take the others? On the second one, I didn't quite get your question there. Sorry, Joe. Deploy incentives? Yes. So, I think it's fair to say that we set the incentives when we set the budget, we We have various targets on PBT, cost receipt, customer satisfaction, on time performance, depending on the group of you're in and they're set at the beginning of the end agreed with our consultation with our board. So that's something we said at the time of the year. So it's more variable target. In terms of the performance and what results it can give So basically, a number of years ago, obviously, with 2016 2017 performance, with some of the events there, a lot of colleagues in getting any thought of very little bit more bonus and clearly this year, based on our expectation, we expect it's prudent for us to accrue appropriately. UK OC, should I cover that up for you? Yes. So UK OC, so effectively that whole structure, we've got our Austrian AOC set up. And that's the aircraft are transferring as we speak across that as being very successful. The setting up of the UK OC is to almost have a kind of a mirror set up that we've got in Austria. And effectively, what we'll have is a central group operating, come a structure that will effectively provide services to both of those AOCs. Effectively, we've got agreement from the Austrian regulatory and the CAA that this operation effectively can be provided with services from that central entity. So effectively, Luton will be the hub that have a UK OC that will, face off the CAA and make sure that the UK element is safely operated and you've got the AOC in Austria, ensuring that that's safely operated for the Austrian regulatory and regulatory services will be provided it almost like a shared service function, both those entities. And that's the structure that we're setting at. And it's really part of the future proofing of of the situation post Brexit? Daniel from Bernstein again. May I just follow-up on one question, does that remove ownership restrictions on the Egypt PLC shares, or is there a pathway towards removing ownership restrictions that you're kind of delegating the AOC and the regulatory issues one level down? Are you considering putting infrastructures to make that happen? So you're aware that to operate in Europe, you have to be majority EU owned. And obviously, when the UK exits the EU that will require increased 50 percent ownership by EU27 And, as we speak, we're spending a lot of time in Europe and we're very close to that percentage already. As you know, we changed our our articles to ensure and to enforce that going forward. In the UK, we need to to operate, you need to be a a UK airline and we have, agreement from the Secretary of State that we are a UK airline as well, even though we may be EU owned. So We've got all bases covered. That's the plan. We can come off offline. It is complex, but it's we've covered every angle matter, the question is, right. Setting up the AOC structure below the core holding, right. I'll open up the possibility of you kind of moving the whole ownership question for the operating airline, one level down? Why we've done the ASCs is more regulatory and safety? It's all about making sure that we operate a safe airline and we have a structure in place that satisfies the safety regulators in each of the entities, both Europe and UK. And this works and effectively it's the most efficient way of doing it and, make sure that we can operate safely in Europe. That below is more of an operational aspect the things that I talked about before more the ownership aspects. Hi, it's Catherine Nana from Numis Securities. I just have 3 really quick ones, if that's okay. Just in terms of sorry to go back on a labor point, but on the hotels of ambition, just struggling to understand, I know that you might detail this further again in November, but what you're doing differently. So, I know that you've talked about the personnel and the changes there. But obviously, this is an ambition that the group has had whilst perhaps not executed fully for some time. So just trying to understand what logistically, we'll be changing the business for what other passenger I might be seeing differently and sort of connected to that. You talk in a statement directly about direct supply. Just interested on your decision making on on that and why you've chosen not perhaps to go through the route of partnering out with the hotels dot com or Booking dot com? And also sorry, the length of time that then takes to execute given that clearly, you know, the sourcing in the industry is known as one of the, the struggling factors that other, others have. And then just a very quick one, just in terms of costs and disruption and your opportunities there. Is there opportunity to expand the DHL services agreement that you have at Gatwick? I know that that's been very successful and has obviously improved on time very much so. And then just really quickly, again, thirdly on on capacity. Do you correct me if I'm wrong, but am I right in thinking that your capacity plans for 2nd half have reduced about a hundred bps. So you talked about 5 to 6¢ for the full year, and that's about just under 6% for the second half and then now guiding to 5. Just wondering if there's any particular reason for that? Is it fuel? Is it reallocation to Tiegel? Thank you. Yes. So in terms of what we're going to do differently? We're going to contract directly which we don't do today. Today, we go through intermediaries and we give away some of that value, which you know, I think it would be better used to giving away to the customer to provide a better value and therefore driving better demands. So we will definitely do setting up a contract and the great direct relationship with hotels. It's also about the experience of Novart Hotel to contract. Hotels are different depending on what they stand for and we're going to focus much more also making sure that we have this right on the customer segmentations. One of the fantastic opportunities we have with Jeff is that when I look through a lot of the customer data and the customer segmentations, we really have everything from customers who are really only there for the low price but we also have a lot of people who spend a lot of money on their holidays. So you're buying a flight ticket for us £50 and then you go down to Madamal in Maruyork and spend €15,000 on a week. So we have those customers already sitting on our plane, which means have also the ability to take part of that if we can offer better arrangements and well known hotels. So that's what we are going to do. Another point also there, I think I probably forgot to mention it has to do with this, you know, discards to do, which you mentioned in like August as an example. We do something that others don't ordinary value, you know, what sits outside August. We will not do just 71049. That value will also give us an opportunity to take better part of also the peak flying. So we can do 2 days, 3 days, 4 nights, 5 day to day, which others can't do. And that's because the way our schedule work. That's a great opportunity for us to also get into some of the peak flying that exists there. So I hope that answers your question on that. On, I'll talk about capacity first. The range of 5 to 6 is always pre disruption. So you have an impact of disruption. Those numbers are always that it's always an impact on there. There is a bit of of a small amount of legal overlap that's impacted that, but fundamentally also is around finalizing our schedule. So at the beginning of the year, we give a range and that's the for operational purposes because we know that we'd like to finalize our schedule anyway. So, with respect to DHL. DHL, we've got a fantastic partnership with them in Gatwick. They're doing a great job. We have invested. It's costing slightly more from a point of view of of their expense, but we've got a partnership with them to take costs out, which is great. And it's a slightly different contract than the normal ground handling contract that's much more symbiotic. We would love to have that model elsewhere across our network, but again, it's a cost balance. I think fair to say, and if DHL listening, they've got to sharpen their pencil to make sure that we can get them in elsewhere. And we'd always have to balance that off with our with the investment there with return. That's a ways away. And we know of other providers would love to partner with us on similar models, which we're in discussions with as well. But fundamentally, we see DHS as a great partner on a gate. A great solution for spec. Just two questions for me please. Firstly, when you were talking about aircraft reliability, that has improved now to three problems per thousand sectors, or something like that. To improve from here, I think you were highlighting the replacement of a new aircraft, are there other things you can do in terms of self help and how quickly can you bring those in? And then the other question was simply putting all of these initiatives together, is that enough to get you back to peak margin if they all sort of fire at once, or do you need other things as well to move up to sort of 14% or so? I mean, we have a on the first one, we have a number initiatives that lies within improving the technical capability of the aircraft. But really, I mean, the goal should be that an aircraft in an airline such as ours, it doesn't fly overnight. Should never be delayed for technical reasons. There is absolutely no reason why we should have a technical delays, particularly while they're not flying also in the during the night time. So the predictive maintenance is part of doing that, and that will enhance what we're already doing. We have that out now, just 85 of our aircraft as well. And depending on the age of the aircraft, it will depends on how much we roll that out also to other aircraft. But there's a number of of things and activities that we're giving in that, that Chris, you're leading. Is it something you want to mention more in that area? Okay. We'll come back to you more later on that, but there's a Florida thing. And I think also when you're looking at disruption as a whole, it really touches every part of of the company. Chris is leading the work here, but we'll do it together with Robert as well who's setting up the schedule, everything from how you plan your program, how you're set to schedule the resilience you build in there to take a look at not only the utilization and the productivity of the plane, but also take a look at the overall profit that you get in there in terms of how you operate and actually how you fly that. How you prove it how you make sure that you have the right amount of people, let them know when they're going to fly in the planes. And if you get disruptions, what are you doing in that case? That can all be driven by data to get a better insight in decision making. And in a number of cases, also do the work for you. And it's extraordinary exciting. I think the digibilty is the key. I think with this Skywise partnership, we've got with Airbus and they're loading up the systems as we speak all about getting a dashboard for predictions. We've done wavell analysis on on a statistical analysis on what parts we need and we're slightly to go, which we've stocked up around the network. And that's only on the technical side of things. But as Johan said, predicting where your start or your crew need to be, predicting based on patterns where you think your parts need to be. That's all about, you know, machine learning and really getting data underneath the decision making where we put our assets. But another example on that predictability as well. If you we've done a trial in April where we looked at creating an algorithm for what supply we should stock onboard the trolleys and in flight sales. And basically by doing that it up because you realize that there are clearly different amounts. If you go to a beach on a Friday night and it is going to Edinburgh at 6 o'clock in the morning in terms of what's being bought from the trolley. By doing that, we were managed to reduce the amount of waste of fresh food items with 3 fresh food items that we would have thrown away. After each flight. If you take that multiple, the amount of flights we do per day, there was 2250 fresh food items per day that we didn't throw away from that. If you take that considering about the year, that's 800,000. We haven't done it yet because we only did in April. Just to give you the opportunity, that 800,000 less fresh food item that would just go wasted. You know, so part of the obvious cost savings in there, that also means that we can stop the trolley with the things that actually is in demand in much better shape. So the keyword as Andrew Rytupona is that predictability and how you can use that further. And that's what data will unlock. To say that you become a data driven airline, that's really kind of some store, but that is where they enable us right to take down the cost even further. Revenue enhancing initiatives with also and also engaging with the customers in a different way that we do today. Sorry, just to add, we will have the entire fleet fully equipped by the end of 2019. Which is a massive data capability for us. Yes. And the point on margin, I think the 3 initiatives we talked about is all about focusing driving margin. Bing and Burke and obviously. I just come back to the summer given going back 2 years, it was something that caught the airline slightly off foot. When you look at capacity this summer of what you're operating and particularly on the beach routes, how much of that capacity is into the Iberian Peninsula versus into the Eastern Mediterranean, particularly thinking they look like sizable seat count reductions into Spain. We've already seen in Q1, it's and it looks like those gather pace for summer, particularly after the UK. It's just a feeling just very broadly what's in Summer Beach towards Iberia. Versus Eastern Med? Thank you. Yes. I mean, Robert, you want to say a couple of words on fill in, but in general, there has been a slight shift on it, but we are we can easily adapt to any changes that we see on the flows on that. It's not significant that I think you've seen from some of the tour operators out there. Spain and the Western Mediterranean remains really strong for us, continuously, which is all reflected in the numbers as well. But we're in that position that we can easily adapt to the demand that is out there, but there is a small shift now. Thank you. Thank you very much. Thank you very much for joining today's call. Ladies and gentlemen, you may now replace your handsets.