Earnings Call: Q1 2018

Jan 23, 2018

Good morning, ladies and gentlemen, and welcome to the EasyJet Q1 Results Call. My name is Dave, and I'll be your coordinator for today's conference. For the duration of the call, your lines will be on listen only However, at the end of the presentation there'll be an opportunity to ask questions. And you'll be connected to an operator. I'm now handing you over to Johan Lundgren to begin today's conference. Thank you. Thank you, everyone, and good morning to everyone. Everybody in the room as well. And also everybody who is on the phone with us today I have with me here my, CFO, Andrew Findlay as well, as well as Stewart and Michael from our IR team as well, and a number of the analyst that covers Easyjet as well in that is here with me in this room as well. So just to go through the presentation. And then as you will see, we have issued 2 announcements today, one covering the Q1 trading and the other one announcing some changes to my top team. And I will, on this call, first cover the Q1 trading, and then I will touch off on the second announcement later on on this call as well. Now you should have been sent to slides along with the statement, which are also available on our corporate website. And as usual, we will review the Q1 results and then follow-up with plenty of time for questions that anyone have. We'll start with questions inside the room and then we will then move forward and take questions from those who are on the phone call as well. But looking at this slide and 2018 on Slide number 2 as well, we have had a strong start. We delivered a strong performance in Q1. Maintain a focus on our key strategic objectives, enabling us to continue to go profitably and deliver return to our shareholders. Our growth plans are purposeful and discipline and CE suggest building and strengthening market positions in key airports across Europe while delivering a positive revenue trend throughout the period. Cost control continues strong Q1 performance in line with our full year guidance. This is despite the cost of the increased year on year weather disruption as well as the incremental cost associated with an improved load factor. As you know, we have invested in the resilience of our operation through the summer, which is delivering results for the customer, Q1 OTP figures have improved with the gas peak north terminal being a key driver of overall improvement increasing OTP for Q1 with 7 percentage point, which I think is a fantastic achievement and improvement. Our market leading digital offering is continuing to follow-up with our new website driving an increase in conversion and ancillary revenue, and this is underpinned by the strength of our investment grade balance sheet, which provides us with flexibility, and ensures continued access to low cost funding. Passengers increased by 8% to 18,800,000 in the quarter, driven by an increase in capacity of 5.5 percent, with load factor increasing by 2.1 percentage points to 92.1%. Revenue proceed to constant currency continues its improving momentum last year with RPS increasing by 6.6% for the quarter, which is slightly ahead of the guided increase of low to mid single digits. This includes a very strong performance from ancillary revenue, increasing by 12.3% on a revenue per seat basis, as we provide customers with more of what they want, spending more in the full range of our product from higher cars to allocated seats to hand free bags and Fibatory tonic, which saw the 900,000 of sales throughout the quarter. Cost control remains strong with headline cost proceed at constant currency, including fuel, decreasing by 3.3%, aided by a lower effective fuel price as well as continued delivery Obviously, you suggest lean projects. On capacity, Excluding our TEGAL operation, Easyjet's group capacity by 5.5% in the quarter and is expected to grow by 5% for the half. This growth continues our discipline and sustainable approach to deploying aircraft into strong positions throughout the network. As you can see in the graph on the left of the slide, growth in Easyjet markets in H1 has been lower than last year, which is mainly due to the impact from monoc, Ryanair, and Air Berlin capacity decreases. In terms of expectations for H2 growth in the market, it It is still too early to get a clear picture. What we do know is that IAG purchased the wake up monarch slots at Gatwick. And for this summer planner, use a VA to fly around 50% of those slots to a number of short haul European routes that compete head to head with us. Also, we are planning on that basis that Ryanair will fly a full summer schedule following the capacity decreases seen over winter. Regarding Easyjet's growth, on the right hand side, you can see that we have continued our strategy to reinforce our leading positions in the UK and Switzerland to reinforce our strong number 2 position behind the legacy carrier in France, which together with a 50 focused strategy in Italy, the Netherlands and Germany is working. And as you know, we deliver our lean basing initiatives out of Spain and Portugal. Moving on to the revenue. Our strong revenue performance in the quarter was driven by a number of factors. Firstly, we continue to benefit from our winning business model comprising strong market positions, a leading network and schedule and our award winning customer service. Capacity decreases by competitors in the market. Ancillary revenue increased by 12.3% on a per seat basis at constant currency making up circa 20 percent of the total revenue for the quarter and was driven by products such as our new bag offering as well as yield management and growth in the take up of allocated seating, both of which were helped by the increase in load factor, up 2.1 percentage points for the period. Our strategy will be to continue innovating and offering customers the products and services that they want, which will enable Easyjet to continue to build on this strong performance. These factors were supported by solid demand across the Eastern network and our disciplined approach to aircraft, so it was on the wrong slide here. And that was the wrong one. Yes, exactly. We'll continue to be a discipline approach there. Of the allocation as well. So on Slide 6, costs focusing on costs continues to be a key strategic objective if we suggest to ensure we maintain our competitive advantage, headline cost per seat decreased by 3.3% at constant currency while headline costs proceeds, excluding fuel, a constant currency increased by 1 percentage, which was mainly driven by underlying inflation, such as crew costs. This is the strong performance considering we experienced a 2 percentage point increase in load factor and the impact of disruption and de icing costs of severe was weather experienced during the quarter. This was highlighted by cancellations for the first quarter, increasing by over 100 by increased by 50 compared to last year. So we had actually cancellations that were in excess of 1000 cancellations for the for the Q1 versus the 500 that we've seen the year before. But despite the cost including that, we capture our guidance on that. Our underlying cost performance has been strong, resulting from volume driven contracts with airports, navigation charge price benefits, and the benefits from fleet up gauging that our average seat gauge in Q1 this year increasing from 167 to 107 per aircraft. E suggest continues to be the driving force behind this Easyjet lean continues to be the driving force behind this cost saving and has already delivered 28,000,000 of sustainable savings so far this year. Let's see. And I also got to say that on the side of that because it's an important, you know, critical factor to for the success of this business. This is something that I will, together with the team and with Andrew, be it focusing real as well in order to be able to continue to offer extremely low fares for the customers of our, that we have as well. Moving on then to Slide 7, Easyjet is always trying to make things easier for customers to deliver a robust operational service. We know that airport and airspace congestion will not change overnight, but we are investing in the tools to ensure better performance and improve our on time performance. We have invested in the resilience of the schedule and the operations over the past 18 months, which is delivering results evidenced by our Q1 OTP being above 80% which continue continuously improving trend seen through the previous financial year. We're working together with DHL to disrupt the ground handling model and transform what we do at Gatwick Airport. Since starting in November, they have provided quality service, new ideas, innovation, and a razor sharp approach to efficiency and consistency which has been the driving force behind a 7 percentage point increase in our OTP at the airport in Q1 as well. So on the Teagle operation and moving on to some details around that. I'm happy to inform you that while it's still early days and with the first flight on Friday, January 5th, The initial flying schedule is running along smoothly with a transition to wet lease aircraft happening as we speak and capacity gradually building up through the year as highlighted at our full year results in November. Our services undertaken has been warmly received by the Berliners, and we've had fantastic feedback from our customers since the start of 5th January. Considering the winter schedule was released around a month ago, we are in the very early days trading so far has been in line with our expectation and has been supported by significant positive PR on the day of launch. The summer schedule is due to be released by theendofthemonth, and we will update you at our H1 results. The headline loss on the new 2018 Tega flying schedule is expected to be SEK 60,000,000 and we will update you in the more detail at a half year results when we add more visibility on summer bookings. Regarding the transition to full Easyjet operation in winter 2018, I'm pleased to say that we are on track to deliver this. Dry lease aircrafts have been secured under easyJet terms and conditions and the combustion process has also commenced. The 1st group of Air Berlin, of ex Air Berlin crew have completed their training and there's a strong pipeline of candidates in line to complete training throughout the year. The anticipated non headline PBT impact of the transition to an easyJet operation is up to SEK 100,000,000, which is no change to the guidance that we have previously provided. As a reminder, we expect that our Teagle operation will be PBT accretive in 2019. I'm sure you remember the next slide from our full year results that we had in November. This was a walk from the consensus that the time taken into account upstate to trading fuel and effect. We've seen a strong start to the year, which is highlighted by a further a SEK 35,000,000 net trading improvement since we last updated the market. It's important to note this trading upside is somewhat underpinned by the benefits arising from current lower capacity where we operate. However, it's also reflecting higher cost toxic doses relating to increased loads, disruption and also de icing costs that are also factors contributing to this. Taking these factors into account would leave us with a pretegull operation PBT of around GBP 530,000,000. When we take into account the unchanged GBP 60,000,000 PBT impact from our 2018 Jager operations as well. Therefore, when flowing through this, in a consensus model, the net cost, net of the cost for the table operation, the leaves a full year 2018 headline PPD consensus figure of around 1,000,000. Regarding second half revenues, as you know, it is way too early to make assumptions at this stage, but what we do know is that Easter party moves in H1 this year. As a result, you should expect the Q3 RPS to be down on the year and competitive capacity plants are still very much unknown and any free stock capacity currently in the market from monarch and Evelyn is highly likely to be filled for the summer BA flights and monarch slots displayed in Capital Care for being a good example of that. So looking at the forward bookings, Customer demand is strong with encouraging levels of forward bookings and as you can see, bookings are slightly ahead, which reflect building earlier loads than last year as well as an earlier schedule release this year. There are still around 40% of seats to be booked in Q2, which is 5% in front of the same time last year. Having a quick look on the second half of the year, the summer capacity outlook still yet to be confirmed. And with only 20% of our seats booked, at this stage, you can understand the uncertainty that currently exists with the revenue guidance for this period. Moving on to fuel and FX. This slide summarizes our forward jet encourage the hedge positions. All those increases in fuel price impact us in the short term are strong hedge positions have been a good step. Over the medium term versus the number of our competitors. Moving on to Slide 12. We plan to grow full year capacity, in 2018, measured in fees flown by between 5% to 6% before disruptions. We expect revenue per seat at constant currency to increase by mid to high single digits in quarter 2 which is an increase to the previous guidance that we provided. Headline costs per seat excluding fuel and at constant currency is to increase by circa 1% for the full year, assuming normal levels of disruption. Our FX and fuel guidance is changing slightly, taken into account market update since our full year results announcement in November with an expected favorable FX impact of circa 5,000,000 and expected favorable unit fuel impact of between 1000000 to 1000000. And finally, the expected headline loss related to our TEGO flying has not changed from the circa million adverse impact on headline PBT. So Slide 13. So in summary, I've been in the business now since the start of December. And I spend a lot of time meeting people, seeing people across the network in the organization at our basis, suppliers, shareholders, some investors as well. And I must say that my impression of this is that this is a company with a really, really strong strategic framework. A framework is, will extract it as clearly as working as you can held by the results that we announced this morning as well. And also, not only distracted, but also with a depth and a knowledge of hugely talented people. People are really, really committed, really passionate about moving this company forward as well. And just a reflection on, you know, what I've seen from this company from the outset, both as a competitor previously. And also as a customer, this was always a company that I think focused a lot on the customer and that comes through in everything that we're doing. Which is really, really impressive. What we also can tell by that, to summarizing what we're seeing that is that this flowing through into the results as well. The strategy we have of the point to point primary airports taking number 1 and number 2 positions, really strong position together with that absolute focus on the cost. To make sure that the cost base is as low as it possibly it can be in order for us to continue to offer extremely low fares for customers that will continue to be a focus of myself and Andrea in and the team going forward. So those are the things that really stands out to me. And there's a number of things we're going to deliver also in 20 18 as well. Teagle being a massive focus for ourselves. We want to execute that because it's a 25 plane operation that that we're doing. And we come off to a good start. We've been, as I said earlier, the feedback from the customer has been fantastic on that. And, you know, Berlin is, you know, by far the biggest city in Germany as well. And together with operations, they've already had in Schoenfeld. I think it's amazing position to continue to build on. We're going to move from 80,000,000 to 90,000,000 passengers this year. We're going to take into, into the fleet also the A321 starting in the summer. And we are transition and also the fleet over from the 3, 2019, 3320s Neos, which should also deliver better fuel performance for ourselves as well. So there's really a lot to look forward. And there's a number of these important milestones in 2018 that I just wanted to point out as well. I just wanted to touch base before we kick off also with some questions here about the changes that I've done in the structure, which was announced on this morning as well. One of the key things that I've done since I started was actually really trying to get to know the teams, really trying to get to know the people, the structure, understanding how we do things, why we do things the way we do. And I see that we are, you know, quite advanced in a number of areas. But there's one one position that I have, decided to announce that we have, you know, starting looking for immediately. And that is the one of Achieve Data Officer. When I look around, you know, in our business today, we do a lot of things when it comes to the data science as well. But I want to have one position at the A and B level reporting into, to myself, who basically takes a view about what do we do with all this 500,000,000 data points that we have in the company. How do we make sure that we know what data to collect? How we've maintained that data? How we explore that data in order to drive further efficiencies in the companies, drive revenues, and also the way we engage with our customers. And I think that also having up to date data will also allow us to have a better consumer insight and allows us to take better, better take quality decisions based on what the data is providing us as well. So that's the position that I wanted to create. And when I also looked them through the structure of the company, I decided I wanted to move the revenue and the pricing and the yield piece It was currently sitting within that was previously sitting within our chief commercial officer area. I wanted to move that out and bring it into the scheduling. The areas of the responsibility for the schedule lies, which is quite normal in the industry. And the reason why that is the case is that it allows you to get a more holistic view of everything from when you plan your aircraft, where they're going to fly and how they're going to fly to also know what is the revenue intake you can plan and forecast based on that as well. So I wanted to do that, and that also fits very well with the experience and the knowledge of, of Robert Carey, who's in charge about scheduling and started at the moment that he was doing that he should be doing this as well. And as part of those changes, that means that that current position of a Chief Commercial Officer basically wasn't there. So the role became redundant. And as a result of that, Peter Duffy has left the business. And I'm now going to work together with the rest of this team, which is in marketing, digital, customer experience and CRM to work, what is the net, the best structure to formalize that map, perhaps into also one position as well that we report into but that will allow me to get closer also to those issues. I don't expect any other board changes, at this moment in time. Like I said, this is not only about the board, is to shoot talent, massive strength in the team and in the organization as well. And we're building on that. And I think with this structure, we're getting ourselves in a better position to to, to take advantage of the opportunities that exist going forward. So, I think that concludes the presentation. And then we are happy to take some questions first from there, my colleagues. Can you just make sure you speak up so they can hear you from me. Thanks. Thank you. Jared Carter from UBS. The last 3, if I may. You know, what sort of kind of why you took the Easyjet role and what do you think you'd bring that perhaps previous CEO wasn't bringing? Secondly, Is there any kind of views on when you look at CapEx and growth if there's any initial changes that you that you foresee? And then maybe just one for Andrew. Just give us a sensitivity now where things stand with currency and fuel. In terms of changes. Thanks. I'll do the first one where you can do the 2 out of us as well. I mean, why took the role? As you know, I used to work too, and I left, too, in the May 2015. And I had this relationship with Easy just both at the customer. It was, there's a a favorite airline on myself on the roof that we didn't operate clearly within a Tribute to travel with. And I think it was something about the company that it was actually had been transforming the, the way that people travel to different price points that was out there. In a different way, engaging with customers in a different way that I just thought was contemporary. So I always love the company as a customer. As a competitor, I was quite impressed by it by looking at the growth and looking at what it was doing. So when the opportunity came up, I thought that is something where I can contribute. I have worked extensively, as you know, some of you know as well with, with setting up and working through pan European and we're on our way now also with the expansion we've seen in Kagan and German as well to grow that European part. UK will continue to be absolutely critical for us. It's big, it's huge. We got more opportunities there as well. But I also think with the European concern that I that I've, had that this would come into play. I also, have focused a lot in my previous jobs that are really, really putting the customer at the center of what we do, finding things that differentiate ourselves from others. And I think that this is something that has been working well within the company in terms of having that price point, the low cost base, point to point, flying to the primary airport and really reengaging with the customers in a way that I don't think anybody else is doing. And that sits very close to me and that's what I will continue to do. Yes, on CapEx, no change. So clearly with the investment in Teagle, that will have, an off balance sheet impact, obviously, from a capitalized perspective, because we are seeing, obviously, significant growth there, but underlying no change. As you know, we've got 6 A321s coming in this year at the end of the year, which we bought forward from 'nineteen into 'eighteen, so we get the benefit in the year, but no change from that perspective. With respect to currency, I'd say around $10 on fuel is circa 3 to 10, 3 to £5,000,000 impact on euro, It depends on the time of the year, but we'll give you some more guidance on that, you know, the half. But I think it's fair to say, given the fluctuations, what we've given guidance on is a reflection of what we think the likelihood of that would be going forward. But as you can see from our hedging position, we're in a strong place, with both this year and FY 2019. Will continue to hedge forward. One thing we are building up our position on, TIGO flying when it comes to fuel tables that you see, they don't include that. The impact of it is marginal on our percentage coverage. Yes, Stephen Furlough from Davy. Just two quick ones for Andrew, just on Easter, what's the effect of It's just one of your time. Obviously, it's in Q2 in RPS, would you say roughly? Yes. So I'll give you the absolute numbers. We to Maids. And I'll just be clear, it's very difficult to estimate Easter as we found last year. We didn't get it quite right because, it has an impact of when is the, how closely is the Wixson holiday as well, but we estimate it around 1,000,000 to 1,000,000 on Q3 and Q2. So, well, that does the half. So for the quarter, it's about 3% impact. So obviously, that that bolstered in Q2, but obviously detrimental impacts in Q3. Can I just pass that follow-up on the French market? Could you just talk about that how attractive you see that market? I mean, I know Riner's making noises of moving in there as well. We get a strong position in France. It's, I mean, we are, you know, sectors in terms of consideration from customers in the could say it a long way away from the number 3. So we believe that we still have, you know, plenty to go with France. We're opening the Bordeaux base coming up in this summer as well. And, yes, I've seen the announcements of Ryanair as well and I'm not sleepers over that, you know, they will struggle to get into only as an example, they fly from Bogot, and I actually think that actually it highlights the difference in the strategies where we fly from those main airports, the primary airports rather than the secondary airports as well. But, you know, as with anything, you watch out for competitors, but once again, focusing on what you do well, we'll continue to success going forward. Thanks. Hi. It's James Holland, Trex, and Keith Meach, on fully capacity, we were guiding 6 at, you know, 5 to 6. Is that just for Q1, for some disruptions, or is there anything else within that small callback? The first one is on, further in Fayetteville. I was wondering if there are any surprises being a good or bad, what we've seen so far, whether it's cost of leases, staff recruitment, etcetera. And then, 3rd one's more generally. I imagine a lot of your time at Tilly, we spent, discussing disintermediation. Both as clearly a risk to the business strategically as well as potential upside for the airlines even you've now made the sort of 180 degree turn on the VU standard on that. Can you just sort of let us know how we used to think about it and maybe how we feel about it. Do you wanna do the capacity? Yeah. Capacity you're after you arrive. It's just a flex around disruption, and we make sure we reflect that in the in the numbers, we think it's going to be near 6, but we'll just make sure we give you a range between 5 and 6. I mean, there's no surprise into the cost that we have there as well. I mean, clearly, it's we put the program of sale in the beginning of December as well and take some time to get the loads up and the yields up there as well since it was the start in 5th January. But the guidance we had on the the PBT headline number for $60,000,000 still stands and the one off that $100,000,000 as well as it transferring setting up the base stands as well. We think that that is realistic. But like I said from the trading yield point, we're very early on into that. But as so far, it goes that we expected it to be. And in terms of, you know, that this intermediation on the contrary, this is great. There's nothing taken go between us because we are the ones who's going to take customers from one place to another one. It's different if you're sitting in a vertically integrated travel group where you can have companies who come see and then take different parts of your value chain. This is the value chain. So I think that having the assets, whether that is, you know, the the airline and the airplane themselves actually to do that as well, that is a massive benefit then you can have use on who's going to distribute that. But I think that your direct model, that we have is working really well and that will continue to do So I feel very comfortable in my new job on that. Daniel Rustom from Bernstein, good morning. First question, you're coming in being together at an exciting time, industry is consolidating arguably, we'll continue down that path in Europe for the foreseeable future. So where would you like to see Easyjet? Among all those competitors at the end. I'm pretty sure you want it to still be there, but how do you think the industry will look and what will Easyjet's role be? You touched a little bit on distribution. The second question, how would you see distribution changing now that kind of all the legacies also are moving away from the GDSs doesn't that also pose some risk of just intermediation in the end? Think about Google Philippines or Facebook. Maybe also with your view from Tuohy, how does how did you think about this at TUI? How do you think about it at at Easyjet, where you see kind of the selling of that capacity? How how will that go forward? And lastly, on your comments towards the cost reductions, any specific areas you'd highlight or you think, look, this is where you think it can bring value to the company, how does that also relate to IT and the CEO role? Any specific areas where they look at something where you just could do better? Yes, okay. I mean, on the first one as well, I think we are, as you know, we are in a very strong position looking at the European short term market. It's not about that we still have a market share of 10% only. If you're comparing some of the other markets and you would know that we're looking at the U. S. And more consolidated picture as well, European market is still quite fragmented. And with 10% of market share, so we believe that there's still a lot of way to go just looking at this organically as well. But you know what, take a look at 2017, you know, monarch, Alexalia, Air Berlin, all the changes that happened in there. And I would also say that that was, you know, as a result of partly a result of what we have been doing well. What the company has been doing well as well. So I think that, you know, that just underlines my belief that if you're focusing on things that you do really well, that is appreciated by the customers. So they come back to you more often than other ones. You will stand a good chance of succeeding. Having said that, it's also that we are because of our strength that we have in the company financial strength, we can take the opportunity when others are in progress as well as we have done with Air Berlin as well. So I think there's the mix to continue to grow organically, which we've got scope to do as well as also, you know, making sure that we do explore opportunities that exist because of other failures. I think from the second question was about the distribution, please, as well. Think distribution piece is very much for us who has a direct model. That's how we engage even closer to the customers. One thing that is the beauty of don't not having any agencies in between or not having others in between, if that engagement and that direct relationship that you can have with a customer, That is the key thing. That's the key thing for the success of how we can continue to do that, not if other ones is moving out of the GDS coming to direct model as well. It's actually on how good you are with engaging with the customers at the right point in time. And on the buccan filling and also on the cost side as well. I do think that we got more to do with the in response to this how we use the data as an example, in terms of becoming more efficient in the way we do things. In terms of getting better quality for decision making in terms of not having to reconcile data, which will make sure that we do things and have processes in the company that is even leaner. There's a number of initiatives going forward as well in terms of reducing the cost that seen 28,000,000 continuing the Q1 on the LEAN projects as well. And it's absolutely a critical thing that we continue to do so. That's what's been a success of what's cut this company where it is today, and it will continue to be a success factor of where the company will be tomorrow. I don't know if you want to add anything. Yeah. So, you know, the way the the the clear opportunities are, around disruption management the OTP simulation, how you can use data and machine learning to best simulate the operation of the network. You've got opportunities around predictive maintenance, which we talked about earlier as we can take that step further. There's quite a few things in the operations area that we're not quite leveraging at the moment. So from a cost perspective, that's a big opportunity. And the revenue opportunity, clearly, you know, it's all around leveraging our customer data. And, as we said earlier, I'm packaging up deals to better leverage that. But I think from a cost opportunity, there's a huge amount that we crack on with it. We've already started. What we need to do is really build that team. I think, I think, I said, fair to say, organizationally, this this move has been welcomed because that everyone realizes the opportunity we now have with with the stuff we've done with data science, and the team that already exists, what more we could do. Yeah. Hi. This is Ben from Credit Suisse. I can ask you briefly. The first one is obviously a volatile industry. Pretty, sort of a crack of the way of the volume. So how effective how appropriate do you think maybe in terms of target for the AB? Margin, whether they be okay, we're also keeping for this business on the side. 2nd question, the entire media is obviously possibilities It's been to you with Adi, George speaking with that company. Can you rule that out? But I think the only big market for sure. This revenue proceeds from the performing other areas of the market on the sublease needs and what our trend goal is Yes. I mean, on the talk, there's a feeling here, Andrew. I think that look, we, we, you know, it's one of the things where you feel comfortable giving the targets where you have disability or where you have to. And like I said, you're looking at the summer as well, only 20% sold in there as well, but we're saw the momentum at the end of last year. That has continued in there. There's no doubt that that has also been because of the easiness in some of the competitive pressure that exists in there. But I believe that in terms of looking at kind of the midterm and the longer term targets, that's an opportunity that me and Andrew and the team will have chance to sit down and look at more here in the spring. I've only been 2 months in the business as well. But, do you want to give them? No. I think I think they said that we always our shareholders around the new EPS target for the purposes, but I think it's absolutely right. You have handy staff can't come to figure out exactly pathway to blood set internally, and then we'll consider what we need to publish externally as well. Alex, are extraordinary boring answer can't comment on that. We did express in November, I think it was, yes, that we or even only that we had engaged with the commissioners on the issue of of looking at part of the Allotalia assets and that's just where things stand at the moment. But I can't comment on it. The third thing was. I'll just back to France, obviously consolidation benefiting everywhere else, but it's been a good month. Yeah. Yeah. It's doing it. We're really pleased with, you know, our performance in a number of our markets. We've been encouraged by it. Therefore, launching the Bordeaux base as well. So it's definitely a market where we continue to see opportunities. Hi. Hi. It's Andrew from OTC. I was going to ask about the decision not to put you aggressively as the Monarch assets. You know, given the key strategic focus of building leadership positions and and, you know, exercising progress is why why would you let with with take more in your home base or that IAG take more gas. And then a second question would be, around Brexit. No? So quite soon, the airline industry will be wanting to sell 7 19. It's not there that we'll have, you know, full knowledge of what the traffic rights are at that time. How are you gonna manage the the risk of selling into an environment with unfair traffic rights? And, you know, within that, how do you sustain consumer confidence? Because if you say too much, you will wrap up in team of confidence, and that could be a thoughtful select program for you. Panel industry. Now it's not good to you. Yeah. I mean, on the moment piece, I mean, that was done prior to myself as well, but there was something that the company looked at and they made it called commercially on it as well. And we didn't think it was viable to continue after the interest that we had in there as well. Just want to say as well that if you're looking at that, you take a gap with that as an example, but that's fine aircrafts. The operation that we haven't taken is 25. We couldn't do both at the same time. The, the Air Berlin transaction strategically makes more sense for us. We believe it's a full scale operation that gets us into that strong position that we have. We ordered to have a strong position in Gatwick, but it's a bigger one and it fits into that that thing, but coming into markets, in this case, Berlin is a fantastic big market as well. I just think it strategically makes much more sense to do. If you're looking at, Luton as an example, there were 4 aircrafts I think the waste has taken over them. And the only overlap I've seen that they've had is the one that they collided us and looking to Reykjavik. And the other 9 planes that they had in Manchester has gone back into the slot pool. So we don't know fully to what full extent the A and AIG will now sell the former 9 aircraft. I think that it put 50% on sale for the summer. There remains see what they're going to do with that. But I think this absolutely would be an absolute missed opportunity not to do the in Berlin so we can build, on that. On the Brexit 1, you know, we, we, well, there are still companies think some companies actually started selling already the 2 operators are on sale as well. We're confident that there will be a deal. I'm happy aviation minister in UK here the last week as well. And after that meeting, I'm still very confident that there will be be as well and there are time on it. They said that aviation will be a priority in the trade talks here in March, April, when we start as well. And there's nothing that tells us that we won't see a deal. So I am not concerned about it at the moment. You want to? No, I think from a point of view of, Richard, I think let's say that the to operate is going to be ahead of us when it comes to the schedule release anyway. So to a certain extent, we won't be a leader. We'll be more of a following that in that situation. So we're going to see how they manage that and we'll learn from that as well as, as Johan said, we believe that there will be a solution. With respect to monarch, I think, look, we've got to make decisions with respect to how we allocate our assets. And I think it's fair to say that Airplane was an opportunity that really we believe wouldn't come around again very quickly. Getting ourselves to our number one position Berlin absolutely fits with our strategy so far so good. The operation is working very well. We went through a lot of scenarios with respect to Monarch and the assets there around what, what we would, you know, number of scenarios through and what would happen there. And frankly, we've baked in a scenario that, is actually slightly worse than what IAG are doing now, and we concluded it was still and it was still the right thing to down do air Berlin. Frankly, what our BA are doing to a certain extent is kind of holding the slot be very interested to see what they do longer term because we still believe that that'll be a a long haul solution against Norwegian for them. And we kind of expected this short haul capacity to come in And frankly, having somebody, VA against this is a better position from an RPS perspective than a monarch So with all the scenarios, when we respect to Luton again, as, Johan said, we looked at exactly where who and what the likely outcomes would be. We expect that the outcome there. And again, we've landed as we expected. So from our perspective, And finally, the price that we know that IAG paid was well above anything that we would have considered anyway for Gatwick as well. There's definitely long haul pricing for those lots. So all in all, it made absolute sense to focus on Berlin and Berlin, get number 1 there and so far, so good. Alex Patterson from Investec. Three questions, please. Just in your sort of expectations for the year, I would guess that you're assuming roughly flattish yield. Is that not a bit conservative given what we've seen in the first quarter Secondly, DHL looks like it's working very well in Gatwick and there are other airports that you might think about deploying them and has there been know there were sort of transition costs as you move to them, but are there, on their cost savings coming through as well. And then finally, on the TEGAL integration. Have you had any snags? Are there any challenges that you can see with doing that? Can you do the first one? Yes. So, I think you said, say, on Q1, we've been, you know, separately supported by the actions of mono and actions of Ryanair and Air Berlin come out of the market. That's what's the underpinned, our performance. Q2, there'll be a bit of a roll forward and obviously you're splitting into Q2. Q3, and Q4. It's very hard to be exactly what the capacity for the OAG stats aren't out. We fully expect Ryanair to reinstate their domestics. So obviously that will be an impact on the domestic line in the UK. We, obviously, we know that now IAG are coming back in with about 50% of their capacity in in UK to Spain. And frankly, you know, there's a, there's a, a level of uncertainty. We've only got 20% bookings for the second for the second half. So from that perspective, we are, as you'd expect at this point in the year, still, making sure that we we don't we don't overcook any expectation for the market. I think for us, planning Q1 is a great result. It gives us momentum into the market. Q2 is great. Q3, Q4, still uncertainty, and we do expect capacity to grow far more than it has done in the first quarters of the year. So from that perspective, I think, where we're positioning is absolutely right. And I think, you know, our focus is on making sure that we grab the opportunities as they arise as things pan out over the coming quarters. But I think, what we've said in the presentations absolutely appropriate for what we can see in the market. In regards to DHL, I mean, I think it's fantastic work that's been done there by Chris Brown and the operations team in there. I think that the efficiencies and the costs that we will get benefit from it. It was actually been just 2 benefits on that one. If you look at the improvement in the OTP and CapEx, that's 7%. That represents a cost saving. Apart from that, it also represents a huge improvement for our customers. They actually predicted that we do fly on time as well. And we are definitely looking in other ways how we can take this model together with DHL or together with others to make sure that we can drive some of the learnings out of this one. Now having said that, I mean, it's in the wintertime. You know, we know there are less capacity out there as well, but that's a good start so we can get that operation going. We did have the big Christmas and New Year in the well and they work really, really well for us. And the main thing is to make sure now that we're getting in for the summer. That that is still, something that continues to deliver. I'm spending a lot of time myself together with the team to looking at the scheduling to looking at the way we can avoid disruptions to looking at the way things we can change things internally also in order to reduce the disruption that we have because it brings annoyed customers and costs to the company. It's simpler and we kicked off now for 2019, in particular, to reiterate, take a holistic approach on this one. We've heard that 'eighteen's very much planned at the moment. We hope to see improvements on there as well, but that is a it's got to be a focus for us. On the tailgate, no, there's nothing in there that stands out. It's been exceptionally well planned, I think, by the team, in a very short period of time, as you know, since we engage in this deal. You know, people been working relentlessly. I met with a lot of the several in crew as well as part of the training, both the cabin crew and the pilot. And as you can imagine, they are extraordinary excited to come from what has been, you know, a huge period of uncertainty in in the in the work and lives to come and join join us as well. And I think that they actually are, you know, I spoke to one of them here just the other week, you know, flights as well, and they said, it just feels like you want to bring out that spirit and enthusiasm that they have to do customers there as well. So I think that's fantastic to see. So there's nothing else from the operation? No, I think, I think, you know, it's fair to say, we, we went in with a bit of trepidation the extent that we had wet leases going in, we expect, you know, potentially you're sitting on a web, EGA website, customers turn up, and it's on these aircraft. Actually, ironically, the feedback has been pretty good. Yeah. Really? Yeah. To the extent that, you know, we've got some BA 1460 slide WDL, which is a wet lease operator. And, actually, they're German speaking individuals, and the that all the domestic flying passengers love the fact that they're generally speaking. So it couldn't have been better, frankly. Great, Dalton. Think I think for us, like the underlying business, the uncertainty still lies in Q4, you know, we haven't released the schedule for summer yet that's coming up. Next week. And as soon as you receive visibility, I'm looking exactly if there's more visibility around exactly where million will land. And again, it's uncertainty like the others, but, but operationally, so far so good and, the airport of Linton had been very supportive see them setting ourselves up. Thank you. Yes, Damian Brewer from All Bank of Canada. Two questions. First one, just on the on time performance at Gatwick, the up to 7 percentage points. Historically, when you've had significant material movements in OTP. How has that translated into either your net promoter or your repeat customs scores? And how long is the lag between that turning up in a structural rather than a cyclical change in your revenue base as customers preparedness to pay or travel changes. If you could just talk a little bit more about that, that would be very useful. Secondly, on the airport side, could you give us some feel of how many passengers on either end of the route now have chair ports where you have? For you centric yields. And therefore, with the consolidation in the market and the nervousness around some therefore, whether it's headroom to do more of those kinds of deals going forward. Sorry, what's happening? The volume driven out right, but so it's more accurate. And then very finally, on the unit revenue, Could you just elaborate a little bit more on Q1, in terms of whether it's being very broad based or whether there's any particular areas you'd want to call out to be stronger or weaker than average? Thank you. I have to admit, I don't know the answer on the first question because it it's too early for me to see what effect that the OTP is really critical for us. But I don't know what effect those points have in terms of customer retention and how they come back. But I'm sure it's there, but that's definitely something that I will get get into moving forward. But it has an effect. We know that in terms of the general perception of a flight, you know, that going on time is one of the key parameters in there. So it does have an impact. Yeah. I there's a click correlation between OTP and and updates at schools. The two key areas of CSAT driver are OTP in flight and their boarding processes. The boarding is one of the areas. So, another area of focus is boarding and baggage as well. So clear correlation, actually the correlation is pretty rapid. So you improve OTP, you'll see some crews. To the extent that that leads on to obviously improved return customers, clearly there's a there's a lag, but having a happy customer flying, and leaving on time will obviously have an impact on our return base. And that's one of the that's why OTP is so important for us to focus on the reason why we invested in relation with DHL improve the OTP and Gatwick, because as you know, if Gatwick gets the, a flu, there's the, network gets rid of the pole. Yes, on so it's about volume centric. A fair proportion of our fields but we even in some of our regulated airports where we can have some kind of market relationship of volume centric. To the extent whether it might be a gauge gauge mix or tax numbers departing patches or total passengers, has some form of elements of all of you. And that's how we manage to leverage our scale in these airports. Respect to getting the best deal. I think it's fair to say that, one of the one of the things that we is one of our, big areas of focus is absolutely leveraging our growth in the airports that we can. To generate those deals that reward growth and reward flying to new destinations of the or driving business passengers or passengers to new routes. And that's the fundamentals of what we do with respect to the airport deals. So with respect to revenue in the quarter, it's pretty, pretty much network wide. So obviously Germany, benefit of mayor Berlin. We've had benefits from UK from Monica and, Ryan flying to Spain. Again, monarch. You've, France, obviously, it was annualized against some of the impacts that we saw prior years from all the disruption that we saw in France. One area in Q1 being very transparent. We've seen slightly slower performances on ski, but that's a relatively small part of the revenue in Q1 is obviously built in Q2 as the whole season starts. But we suspect that's because last year it was quite a rainy quite rainy in the outs rather than snow and actually there's more snow now and week on week. We've seen that improve as we've, as we requested with Q1, just looking to ramp up because obviously it's almost too much snow now and now. So that's been one area, but the rest of it has been pretty uniform, good performance. Okay, Dave. We'll hand over to you for questions from the conference call. We have a question from Savi Syth from Raymond James. Please go ahead. Okay. Good morning. Just to follow-up on the improved revenue outlook, I was just kind of curious my first question was, you know, what versus the end of, you know, versus November, where you saw the real improvements? I'm guessing, you know, capacity was about what you were expecting. I'm kind of curious where the kind of improvement came from. And then also a second question. I was wondering if you could kind of provide an update on the ancillary revenue. I know there were some bad finishes last year. Do we start wrapping them and, and and when do we see the kind of the hybrid FTP system roll out coming on? And thanks for taking my questions. Yeah. So on on, hi, Savi. So on capacity, actually, if you look at our previous chart. Actually, capacity in half one is actually reduced as we've gone through, the quarter that are the 1st half. And that's the result of clarity around what's happened with Air Berlin and clarity around Monica and Ryan. So that has had an impact on Q1, clearly, in Q2 as we got clarity. And I think for us, you know, as, as you know, there's uncertainty until we get clarity around schedules and scheduled releases from other airlines clarity around exactly what the capacity number will be going forward has an impact on our expectations. Obviously, Easter, we've got better clarity around Easter and Easter bookings, which has helped in Q2, but obviously, detriment in Q3. So that's fundamentally the underpinned for for what we've seen in the performance of of, of Q2. One one other thing we if you if you look at the slide deck, you'll see that we We've got slightly more bookings in the period than we have previously. And that's because we we bought our our schedule release date starting earlier. We were on sales start earlier. So we've got slightly better visibility than we did last time around. Got it. That's it. Yeah. So ancillaries It's fair to say that we did quite a lot of work, at the end of last financial year, around ancillaries and our charging structure in our baggage. So I don't know if you've seen that in the in the quarter just gone, we have changed our baggage policy. We've got a split policy. Two weights, and with variable pricing on, which has been very successful. That will annualize through in Q4. So we won't, you know, so if we have to sort of step up into Q4 through into Q1, and that will annualize throughout in the in the second half of the year, But fundamentally, we have seen an increased, a conversion rate as a result of our front end improvements on So we've got 2 steps to FCP, which are the front end website. We've seen conversion rates improve, particularly around some of our, our ancillary products. And we've seen improvement actually on forward as well. With respect to FCP, that's going to be progressed over the over the year and we'll we'll see releases as we go throughout this ownership. But a lot of the front end impacts from a customer's perspective is already in place. The bit that we we still, still looking at, which kind of falls into that the whole concept of why we focus on data is linking that with our CRM to better drive, bundles and driver ancillary product even further. That that was likely to impact more FY19 and beyond rather than FY18. And just to add to that as it is, I do think it's a continuous opportunity to keep developing, ancillary of choice to customers what they want. If you're looking at the insight picture as we have an example, we talked about the the CV3, as an example, 900,000 units sold over 1 quarter as well. And this provided a great uplift So it shows also the reflection of the customers we have, but they are willing to buy the ancillaries we have because we think provide a great choice and also that you can provide quality ancillaries that also contributes to the overall experience of what the easiest stands for. So I think we're definitely going to continue to drive that. And, you know, a 20% uplift, a bigger part of that uplift and it takes a bigger part of the overall revenue as well. I think it's a good one because it provides choice and it's something that also makes customers more satisfied with what we're getting. Absolutely. That's very helpful. Thank you. Yep. We have a question from Mark Simpson from Goodbody. Please go ahead, Mark. Yeah, good morning. Two questions. First off, just on the Tigall process, you've kept the operational cost or loss expected this year up to 1,000,000. Any change to the exceptional numbers you gave us 100,000,000 wonder if you could say, a, for any change. And, can you actually break that number down to a bit more detail? That wasn't given in the last release, but it's pretty big numbers, so good to understand that. Secondly, I'd like to return to the sort of targets and return, within the LTIP. You've got in the last, report on accounts 5 years of history, LTIP Awards from December 12, December 16. Can you tell us if an award has been agreed with regards, to be made in December 2017 for the 3 years to 20? Yep. So on, hi there, Mark. So on Teagle I think, as I said earlier, you know, we we were very clear at the start. We've got a, an underlying impact. So we'll get get better clarity on that when we once we release the, the summer schedule, but at this stage, 60 feels about right. Based on what we can see, we will update at half half 1. With respect to the operation or the the one offs, we've kept the guidance 100, but frankly, if anything will will come, we believe, will come in below that. So, the the the costs associated with fundamentally, ramping up the business. So it's associated with nonflying. So as you know, we are starting with wet leases in the process of signing up dry leases. Those dry leases, aircraft needs to be converted to ETF state standards, which we've already started. We also have to ramp up and train the crudes that is an onboarding element of that. It's one off that we incur. So we're recruiting around a 1000 new colleagues in the operation within Tiegel. So there's an element of that. And then, there's an element of, you know, obviously the, the work we need to do to set the operations up in the, in the, in the business. But there also will be an element of wet leasing as well, which is nonflying wet leasing in there. The mix between the 2. So in total, 160, the mix of 22, too too much shifts slightly. Fundamentally, that 100 is likely to be lower, but we the guidance there just to ensure that any unforeseen issues, and we'll give you more clarity around that in the second half of the majority of that relates to signing up the crew, and converting the aircraft and effectively setting up the operations within the, within the, business. And also in that cost is the element of the operating lease charge for the aircraft whilst they're not flying. Because obviously whilst they're not flying on the ground, until we actually get them flying, they'll become a part of the trading performance of the business All of that will go for FY19, and we expect the 6 it's a Teagle operation to be profitable. So the 100 is a one off the 60 is effectively the ramp up of the operations and we expect to be profitable in FY 2019. With the LTIPs, yes, there has been, an award, and I think it's part of the, the AGM notice that's gone out, but it felt that it has an award for made in in December 4 2020. That would be great. Yeah. Yeah. I mean, I mean, obviously, you know, the question on, you know, that thresholds as established. I mean, significant reduction, but, in terms of the previous comment, in in targets, I mean, to some extent, given a a better environment, you assume that we've seen a trough in terms of those, those levels that, in order to divest. I mean, if you look at the December 16 award, you know, vesting started at 9% return on capital, which is, a harder demanding, targets in terms of your business. Yeah. So I think it's fair to say that all of these are subject to consultation with our shareholders as per normal. So our REMCO chair will consult with our shareholders with respect those, and we'll adjust accordingly and take feedback accordingly. And that's that's the process that we've gone through every year. And we'll continue to do so. I think as I said earlier, you know, we have introduced a new measure for the next, which is more so we've got a more balance with the CSR, EPS, and return on capital employed. And those measures again have been consulted with shareholders as part of the process. Yeah. That's fair enough. Alrighty. Thanks for that. And we have a question from Victoria Moore's from ATW. Please go ahead. Yes. Good morning gentlemen. Thank you for the call this morning. My question for Johan is what you see as the main challenge in being CEO of this year at this time? Thank you. I actually see the main challenge is to choose from all the opportunities we have. But no, I mean, look, there's a number of things happening 2019, we want to make sure, Alan, we want to make sure that the table operation, you know, that we execute that one properly. We want to make sure that that we, take deliveries of A321s, which is a new aircraft type within Airbus Family that we do that correctly, that come successfully into their operation. We stay, as you know, very focused to the next reservation. We are confident there will be a deal as well, but that is definitely an important thing to do. And then the continued focus on the cost, the the FTP, which you know about the future commercial platform as well. But those are things that it's in there and they provide also, in many cases, some of the most tremendous opportunities for us. So I don't think that there there's a number of things we have to go at. I think that the key thing for us will be to prioritize. The key thing for us to make sure that we actually We continue to do what we do well and really put a laser sharp focus on these things that really matters for our customers that really delivers return for our shareholders. And that's what I'm going to spend my time on. But there's nothing in here coming into the organization, nothing in here that you're thinking, okay, we need to change that or that doesn't work. And you know that as well. This is company that is in great shape as well and now the opportunity is to use to move that forward. Dave, could we just get one more question, please? That's currently all the questions coming through. Right. Okay. With that, thank you everybody who was on the line at all and thank you all in this room as well. So hereby conclude this presentation. Thank you. Ladies and gentlemen, thank you for joining today's conference. You may now replace your handsets. Thank you.