Ryanair Holdings plc (RYAAY) Q1 2015 Earnings Report, Transcript and Summary

And you're very welcome to the Ryanair Half Year Investor Conference Call. I'm here with my colleagues, our new Chief Financial Officer, Neil Sorahan; and David O'Brien, our Chief Commercial Officer. We're being joined from New York by Howard Millar and Kenny Jacobs. I will run through the quick summary of the details. We've put out the press release, and the investor presentation is on the ryanair.com website this morning. We'll give you some brief comments on that, and then I'll ask Neil to add some comments on the financial side. David has some comments on the commercial side and commercial development. And then we'll open it up for Q&A. So as you've seen this morning, we reported very strong half year numbers. Profits were up 32% to EUR 795 million, a combination of traffic growth, load factor growth and average fares rising by 4%, 5% in first half of the year. At the same time, unit costs fell, including fuel. Excluding fuel, they rose by 3% in the half year. But we expect that over the full year, they will be flat excluding fuel and will fall by 4% including fuel for the full year. As a result, a very strong performance, most of which is due to the strategy we launched at September of being more aggressive with forward price and taking forward of our forward bookings. We've seen fuller flights, stronger load factors and much better performance. The customers who are flying with us are also enjoying the improvements that we've headed with our group together, under the Always Getting Better program. That seemed to significantly improve almost every aspect of the customer experience at Ryanair from every touch point. So from the point where they originally go on the website, which has significantly improved, new mobile app, a lot easier at check-in, most of the check-in being done online. The boarding gate is a much more relaxed environment now because of the allocated seating. We're no longer fighting with passengers over the size of their bags. And onboard, our crews and passengers are enjoying that better experience. So we've seen a lot of positive developments. And there is a lot of momentum in the business as we move into the second half of the year. As a result of that, we've taken up both traffic guidance for the second half of the year. We expect -- we added some capacity in the winter. We've also taken up the load factors. What's most reassuring at the moment is that the forward booking profile, which has been running 5% ahead of where we were last year through the summer, it looks like it will continue through the winter as well. Currently, today, we're 5 percentage points on average ahead of where we were last year in November, December, January, February and March despite the fact that from November onwards, the capacity will increase by about 16%. On top of that, the other key developments in the second half of the year has been the launch of new services, the Family Extra product has gone very well, the Business Plus product. The bonds of our first successful eurobond, EUR 850 million over a 7-year period at less than 2%. The board has approved or the AGM has approved the special dividend with all EUR 520 million, which will be payable at the end of February. And we have, I think, clarified our growth prospects for the next 10 years with the September order for 200 Boeing 737 MAX aircraft. That will allow us -- give us the capacity in a controlled manner to grow from 80 million passengers last year to over 150 million passengers over the next 10 years. We'll be doing that with a higher forward bookings, stronger load factors and a much better customer experience as the Always Getting Better program continues to deliver. In terms of new bases and new route development, again I'll ask David to touch on it, but it continues to be very strong. The 4 new summer bases, all at primary airports in Athens, Brussels, Lisbon and Rome, have done extraordinarily well, high load factors. Initially, we started off with relatively low yields as we broke into the market, but the yields rose quickly during the summer period. Forward bookings on the 4 new winter bases in Glasgow International, Cologne, Gdansk and Warsaw are also building quickly. And we're excited to report that success. A lot of the winter capacity is also going to take place by building out schedules, business-type schedules, on European city international routes and on domestic routes. We've used the example here in the U.K., where we've entered Glasgow International and moved this winter. That's given us an opportunity to enter the Glasgow-London market with 3 times daily flights. Having entered the Glasgow-London market, we've also entered the Edinburgh-London market with 3 times daily flights, undercoursing both easyJet and BA by up to 50%. And we've seen a surge in passengers and bookings on those domestic routes as we significantly lowered the cost for business people flying between Dublin -- between Edinburgh, Glasgow and London. On top of that, we're making it easier for business people to -- business passengers to interact with Ryanair. We've extended the GDS distribution from Galileo and Worldspan now to Amadeus. So we're visible on about 95% of Europe's corporate GDS booking screens. And we expect, therefore, that the number of the percentage of business passengers switching to Ryanair through a combination of better visibility present at the primary airport and improved schedule this winter will continue to pay benefits. Fuel. We've taken advantage of the weaker fuel environment in the last couple of months to hedge forward out to March 2016. We've now hedged out to 90% to March 2016 at about $93 a barrel. We expect that, that will lock away not just cost certainty but slightly lower unit costs for this year, the remainder of this year and next year. We will take up some of the lower spot prices with the 10% of the fuel that is unhedged. As a result of all that progress over the last 6 months, we closed out September with a very strong balance sheet. Our cash balance, net cash has grown from EUR 150 million to over EUR 600 million during the 6 months despite paying -- spending nearly EUR 300 million on CapEx and repaying debt -- debt repayments of EUR 200 million. So we sit here today after a very strong first half, where I think the strategy we set out last September is working. The Always Getting Better program is delivering. As a result, we are raising the full year traffic guidance from 87 million to 89 passengers. That will represent 9% traffic growth over last year, where based on what visibility we have on Q3 yields at the moment, which is pretty good. We still have very limited yield visibility on Q4. We expect traffic in Q3 to grow by approximately 12%. Average fares to fall by between 3% and 5%, which is a slightly lower fall than the previous minus 6% to minus 8%. In the fourth quarter, with step-up capacity growth, we expect traffic to grow by 20% in the weaker fourth quarter. We may have to discount slightly more, so we expect average fares to fall by minus 6% to minus 8% in Q4. And if all that is -- if that guidance, the yields, the guidance is accurate into Q4, that means we should significantly raise the full year profit guidance now. So we've taken that up from a figure of about EUR 650 million after tax to a new range of EUR 750 million to EUR 770 million, midpoint of about EUR 760 million, which represents 45% profit growth over last year. I would caution, particularly for the analysts, that those are very ambitious targets. We don't want people running mad. The business is performing very well. The profits are growing strongly. But we need to control some of the irrational exuberance as well. With that, I'm going to hand over to Neil to give you a quick commentary on the financial numbers for the half year, and then I'll ask David to update you on some commercial insights. Neil?

Thank you, Michael. We've had a very solid first half of the year and we saw traffic increase by 4% to 51 million passengers, which was driven by the high increase in load factor, where we grew our load factor from 85% to 89%. Average fare was up by 5%, EUR 54. Total revenue, just over EUR 3.5 billion, and net profits, up 32% to EUR 795 million, giving us a net margin of 23%. The balance sheet is in particularly strong shape, as Michael alluded to earlier on. We've seen our net cash position increase from EUR 158 million at year-end to EUR 618 million now. And we expect to be in a net cash position at year-end after a EUR 520 million dividend in February. Pass it over to David.

David, your comments on the commercial developments?

Yes. Thank you, Michael. This winter sees a very different winter schedule for Ryanair with a lot of growth on -- in fact, most of our growth divided between increased domestic frequencies and increased international frequencies, associated also with our new bases in Cologne, Gdansk, Glasgow and Warsaw. The schedule has been reshaped to support higher load factors and a more stable schedule through the winter. So if you take Q4, Q4's growth is largely a continuation of the new high-frequency routes from Q3, whereas before, it might have been flexed through increasing or reducing leisure routes. Our focus on domestic frequencies will be in Italy, Scotland, Poland and Portugal, where the airports in each of those countries are concerned at reductions by Alitalia in the first instance, underperformance by Eurolot and easyJet's current disinterest in Scotland at this point. So all of these new routes are pinned on new deals at these airports. And again, we are supporting our business products with increased international frequencies between the main cities, starting initially with Dublin and Stansted, into the largest cities, Rome, Madrid, Barcelona, et cetera. Another feature of this winter schedule is that we put it on sale some several months earlier. And in fact, we're working on winter '15 right now and in discussions with a lot of airports to see what we've done at the larger airports this winter and how one's become part of that game. So we're in discussion with more Scandinavian airports, more German airports with competition between them for a slice of our winter '15 activities.

David, thank you very much. So with that, we're going to open it up to questions. If it's okay with those people who are on the phone, we'll take the questions in the room here first, where we have a group of analysts here in London. And then once we've exhausted that, we'll open it up for our telephone questions. So if you just call out your name, ask the question.

Michael, it's Jarrod Castle from UBS. Can you just give a bit of color in terms of the business products that came in relatively, I guess, late during the quarter? Can you talk a little bit about the takeup? I think maybe Howard has mentioned in the past, it could be 5% to 10% takeup there. And then also maybe just a bit of color in terms of what the takeup was on the Family product, which obviously came in a lot earlier for the summer period. Then just on fuel, obviously the per metric ton is down 2% year-over-year, given your hedging. But there will be some obviously efficiency with the new planes. So can you maybe give a bit of color in terms of how you see the total fuel goal for 2016? And then lastly, just on acquisitions, there was obviously a lot of talk about Cyprus. Anything happening on that front?

Thanks, Jarrod. I'll just take those. As the base -- I mean, the Family products took off like a rocket during the summer, primarily because there's lots of families traveling during the summer. We were discounting allocated seating, discounting the bag fee for families, children traveling as part of family groups. That was very successful. In percentage terms, it's not enormous. But I think it's part of the new Ryanair of communicating that we care about your family. We recognize that some of the additional fees are prohibitive if it's a family group of 3 or 4. And it certainly has been very well received by families traveling with us during the summer period. The business product was more a -- we expected we did kind of a quiet launch through the summer. The takeup -- remember, we've got 25% of passengers traveling on business -- already traveling on business. The objective over a 3- to 5-year period is to see if we can convert about half of that 25%, so 10% or 12%, to paying us a premium for a package of services. The build at the moment in the summer is slow. It's low single digits. We would expect it to grow during the winter period. And again, it's one of the reasons, as David mentioned, why we've specifically gone into certain markets, like the Glasgow there, London, Edinburgh-London. But also why we're fleshing out schedules, particularly from Dublin to the U.K. piece in London and from Stansted to European cities. So we'd hoped to see it build to mid-single digits over the winter period. But I think it's a product that will build slowly as people -- more and more people become aware of it. Cyprus, we're into the second round of offers. The [indiscernible] process is a little bit chaotic down there partly because the Cypriot government are trying to deal with this state aid investigation by the European Union, which we believe is likely to rule Cyprus Airways did receive illegal state aid and therefore, must repay us. I again take the view we're unlikely to be the winners. I suspect it's also Aegean because Cypriot's camp has been told to pass it on to the Greeks. If it does go to Aegean, we would simply proceed with our application for a Cypriot AOC and we'll establish a Ryanair Cyprus operation, which would exploit some of the opportunities that undoubtedly exist and to rebuild traffic between the island of the Cyprus and a lot of those Middle Eastern destinations. And Neil, will you take the fuel question?

Yes, sure. Jarrod, in relation to fuel, as you said yourself, we've got less than 2% unit cost reductions into next year. We've hedged to $930 per metric ton. We've got the euro-dollar locked in at about 1.33. That's going to deliver 2% unit cost reduction. In relation to the new aircraft that are coming in, we started taking delivery of the 180 NG order. Those aircraft won't be hugely more efficient than aircraft that we already have. We've updated most of our engines under the existing fleet with the tech insertions to get the maximum benefit from those engines. There will be a moderate fuel burn improvement. But the real change will come in 2019, when we start to take the MAX, which has got 18% unit -- 18% fuel burn efficiency over the NG.

It's Oliver Sleath from Barclays. Three questions, please. Firstly, on the ancillaries, can you talk your latest review on that? I think we were assuming flat at the moment. I'm interested to know if things like the Business Plus, does any of that get accounted in ancillaries or not if I just roll in the base? Secondly, on the primary airports, obviously you have some of the primaries, like Rome, going for a little while now. So I guess, a question for David is, I mean, are you actually seeing a higher average fare in the primary airports now versus your sort of underlying secondary airport mix? Or is it just more in the load factor still? And then thirdly, how much of the growth this winter is actually going to be pure frequency versus new routes?

Putting them in reverse order, I would say about 50%, maybe 60% is increased frequency through the course of this winter, certainly the existing routes, such as Dublin and Stansted, the remainder is new, and new high frequency, if you take Glasgow and Edinburgh into London. In terms of the primary airports, we're encouraged by what we see. Every -- the load factors have been excellent and the start of the yields are growing in the direction we would like them to grow. There is competition, but the evidence seems to be that the competition are losing enthusiasm. And if you take Brussels, you don't hear Vueling say anything about Brussels anymore. One could expect to retreat there, I imagine.

And on the third part, ancillaries, we would expect the ancillaries be flat over the year, whoever's next has got to keep it moving. Ancillaries, we expect to be generally flat over the next year. As you can see, the allocated seating is making up for a lot of the fee reductions, the airport and baggage fee reductions, which is a good performance. And we would expect that to continue. To the extent that Business Plus, as there's a pickup in Business Plus, some of the ancillary revenue will move above the line into yields because we'll be including some of those services, such as the reserve seating, the free bag, would actually go up into yields. So I think the objective, if we can continue to keep ancillaries growing at the same rate as headline traffic growth, I think we would be pleased with that performance. Stephen Furlong?

Yes. Stephen Furlong from Davy. Just a couple of quick ones. In terms of the forward bookings, Michael, does that help in giving you greater visibility in terms of where you could see yields going. Presumably even with those forward bookings, it gives you some idea of Q3, but it's still well too early to know where Q4 is going to be. Just my comment on that. And for Dave, I was wondering, in terms of the frequencies that you've added since the last quarter, has it been in some of these domestic routes, where you're seeing you're booked up very well? Or you've obviously added somewhere. Maybe give an example where you've just bumped up the frequencies, that will be good. And then you might just talk just quickly, I noticed you announced a base in Copenhagen. You've looked at that before. Maybe just what your views about what's going on in Scandinavian markets. And is there a lot of interest there from airports, please?

Yes. I think I've been nervous on the forward bookings. The forward bookings are very strong. But ultimately, the final yield is determined by the close-in bookings. All I can say at this point in time, that for the last number of months and again in September and again in October, we have been pleasantly surprised by the strength of the close-in bookings and the strength of the yields at close-in bookings even as we are taking out lower fares because the load factors are rising. There seems to be no resistance to people closer in paying the higher fares. Now I ascribe some of that to the fact that actually the competition is just pushing or trying to push up fares even higher. And so in essence, they're sending traffic in our direction. There's no doubt we've been helped by almost continuous cycle of industrial relations problems among other airlines, strikes in Aer Lingus, TAP pilot strike for 4 days, Lufthansa, Air France, et cetera. But there does seem to be an underlying momentum in the business at the moment that I thought would dip as we went into the winter. And thus far, although still little bit early, it doesn't seem to be dipping. I don't think that gives me great confidence on our visibility into the final yields for Q3 or Q4. As you can see in our guidance, we still expect the yields to dip. We continue to be pleasantly surprised. I think the real objective though is that through this winter is to push out lost capacity, grab a lot of market share, even if we do so by cutting prices during the winter. We will emerge into the H1 of 2016 or next year's summer peak with so much forward momentum in such a good shape in a lot of these market bases, particularly as the word gets out that Ryanair is changing, it's not steep enough anymore, it's cheap and very good and the experience is excellent. I think that will have a lot of positive momentum built in itself. So stronger forward bookings doesn't give us a lot of yield visibility, which is why the guidance has changed. So relatively rapidly in a relatively short period of time at the AGM at the end of September, we were still saying upper end of the [indiscernible] EUR 650 million and why today, we're able to go, say, EUR 760 million with a reasonable degree of confidence. But I don't think it's going to go much above that. There will be some analysts out there going, "Oh, let's stick an EUR 800 million number on it." It won't -- I don't think it'll be EUR 800 million because I still expect, given the capacity additions we're going to be making this winter, that it will come in still somewhere below EUR 800 million. I think the guidance we're giving now with reasonable visibility in Q3 should be fairly accurate. But I hope I continue to be positively surprised. David, do you want to touch on the frequency additions in Copenhagen?

Sure. So we launched a lot of our domestic routes this summer, if we take routes in Poland and in Portugal. In fact, we were aware at the time that we didn't have enough frequencies. So what we're doing now is adding sufficient frequency to give a decent schedule. If you take Gdansk and Brussels up to Warsaw, we were running 1 a day, we're now running 2 a day. And ultimately, we can see that go to 3 or 4. Clearly 1 a day isn't an adequate schedule, so we're down to 2. Similarly, with Lisbon in Portugal, it was 1 a day [indiscernible] and it will inevitably grow into perhaps winter '15. Stansted-Glasgow, Stansted-Edinburgh, that's from 0 up to 3. And that's on foot of exceptional enthusiasm by both Glasgow Airport and Edinburgh Airport for growth, which they're not seeing the way they expected before from other carriers. So it's part of the growth deal there and it's an excellent utilization for our aircraft, also supports our business product and feeds into a very substantial route network at Stansted. Informally, it could be a lot of -- more self-connected [indiscernible]. And finally, in Italy, as in Alitalia, they're 1 reduced, we're simply adding there, taking the opportunity to take Rome Fiumicino to Catania or to Palermo. That represents us filling a gap being vacated by Air One and Alitalia. With respect to Scandinavia, I think our announcement in Copenhagen has created a lot of reaction within the other Scandinavian cities, which recognize that their overreliance on -- if you take Norwegian's own results, they've described themselves as make or break and described -- in their own presentation, described SAS as need government bailout. When you consider that 80% of Orlando [ph] is either needs government bailouts or is make or break, you can understand there. And we are the only people now that can help them out. So those conversations are ongoing. They're ongoing for winter '15, which gives us quite an amount of time to pick and choose. Meanwhile, we have the other parts of the network, take the Eastern Mediterranean, with its own demand for our deliveries.

I think Jack is next.

Just 2 questions for me this morning. Firstly, in relation to the percentage growth in average fare during Q2, how much do you attribute that to improvement in underlying trading versus, I guess, FX movements during the period? And secondly, just on sector length, with the increased focus on domestic line, how do you see this evolving into H2 '15 and possibly in FY '16 in terms of a percentage reduction year-on-year?

Well, in relation to the average fare, approximately 1% of that will be related to FX, primarily on sterling. Now with a natural hedge in relation to sterling, where we offset our cost against our revenues, you could -- will contribute about 1%, 1.5% to Easter [ph] and the rest is on underlying trading within business.

And tax events?

Tax events for the full year will be broadly flat. It was up -- sorry, it was down 1% in the first half and we're expecting this to be broadly flat for the full year.

Into next year?

Into next year, we haven't done the budget yet for next year. But based on the schedule, I think I wouldn't see a major change on what we've had this year.

Mark Irvine-Fortescue from Jefferies. Just one, please. Has the easier fuel environment been a significant driver of your decision to ground fewer planes this winter? Or would you have been as aggressive if the oil price stayed where it was?

I think I wouldn't have made any difference. I mean, what's driving the aggression or the aggressive expansion this winter has been the successful growth during the summer and the exceptional demand for the Ryanair services all across Europe and I think the continuing cutbacks in short-haul capacity by Air Berlin in Germany, Alitalia in Italy, Iberia in Spain, TAP in Portugal. I mean, we're not expanding -- the expansion has nothing to do with fuel. I suspect if fuel prices were rising, it might be somewhat more difficult, but there would then probably be more short-haul capacity being taken out by other competitors. So really, as Neil has explained earlier, what we tried to do with the fuel hedging strategy is just lock away cost certainty on a 12-month basis, and then run the business commercially, as David has explained, tried take advantage of opportunities where they arise. And certainly, there's an enormous opportunity now at the primary airports around Europe, who are very concerned that easyJet, BA and others are not going to grow or are going to -- will not meet their previously agreed growth objectives, and they need somebody else in there who will.

Yes. We come into this year as 90% hedged. So our decisions were well made before the current dip in oil prices.

It's James Hollins from Nomura. Just on your increased traffic guidance. I was wondering if you could split sort of how much was high capacity, and then how much is high loads. Should I be thinking about load factor up 4 percentage points as you were in H1 for the full year? And sort of adjunct to that, do you think you can grow that load factor in full year '15? And the second one is I know you're always good for views. I was wondering, Michael, if you can give your view on those compensation changes that are coming through or seems to be coming through from this court case we've had recently and how you plan to deal with that if you [indiscernible].

Yes. A significant proportion of the traffic growth this winter will come from load factor growth. We expect load factors to remain about 4% higher than they were at this time last year, but that's obviously on the back of very significant capacity growth this winter. Overall, for the year, we expect load factors will rise from 83% in FY '14 to about 87% in FY '15. We then expect to take up load factors next year into FY '16 by maybe another 1 or 2 percentage points. I mean, the objective is over the next 2 years, FY '16 and '17, to get average load factors up from 87% to about 90%, which will mean a lot of full flights almost on a year-round basis. But to be fair, so easyJet has demonstrated that they can do it with smaller aircraft, so we see no reason that we can't achieve those load factors with bigger aircraft but with much lower fares. And certainly, one of the reasons why our unit costs has been so good at the moment is taking up those load factors and has a significant impact on unit costs. In EU261, I mean, the latest kind of decisions are more of the same trend, where you're getting really some crazy court rulings that now makes the airlines responsible for tech. Apparently now, we're supposed to know when aircraft will go wrong, which, of course, if we knew they were going to wrong, we'd fix them, they wouldn't go wrong. But I think it's really around the edges. It's another area of competitive advantage for Ryanair. We have better punctuality than every other airline in Europe. We have a higher rate of technical reliability, we have fewer cancellations and fewer delays. So whereas there, those could be some costs, it would be far less for Ryanair than for any of our other competitors. A question over here?

Damian Brewer from RBC. Two questions, please. First of all, can you give us an update on where you are on sort of technology and Web-enabled selling in terms of what you were developing? And then secondly, whether there's anything that, that can translate into sort of further efficiencies on the cost base or just being able to leverage the business more, so not just on the revenue side but on the cost side as well. And then can you give us an update on where you are in Aer Lingus? Obviously, competing much harder against it with the frequencies, where does that leave you in terms of what you do with the stake in the business?

Okay. The Ryanair Labs development is moving along at some pace. We're seeing now almost biweekly updates or updated and improved versions of both the desktop, the website and the mobile app. Over the next 6 to 12 months, you'll see a number of other developments. We're looking at making the ryanair.com website not just the kind of the capital website -- not just a website for low prices but making it a much more one-stop travel opportunity. At the moment, we spend a lot of time improving the way we retail things, like airport transfers, the car hires. There's a new hotel partner coming online very shortly. But we're now looking at different developments over the next 12 months, where you'll see us put up, for example, the one I'm particularly keen on is comparison pricing. So every time you're on our website on any of our routes, we'll put up the competitor prices, our low-fare competitor prices. Because we are spilling a lot of people going off into these price aggregators or the Skyscanners and the eDreams, looking at who's got the lowest fares. Well, come to our website straightaway, and we'll give you the same price comparisons, they'll sit down at the right-hand side while you're booking on. And as you change a data or a flight or a destination, the price comparison technology will change on the right-hand side. So we want to pull you on to our website, where you know you've got the lowest fares. We'll confirm it every time by putting up all of the lower fares of our competitor airlines on that route, on that date, on that flight, and then expanding into other developments, like putting up TripAdvisor feature on the website, customer feedback, rate the flight, rate the destination, rate your hotel, rate the experience. So that we are -- more and more people, we know they have to come to Ryanair for the fare -- for the flight and the fare, so why don't we keep them on our website for all the other kind of services that are, heretofore, they would have gone to a different website for? So whether it's customer reviews, ratings, recommendations or price comparisons, keep them on our website. There's a whole series of innovations that Ryanair Labs, which we've only just set up and the CTO is only there less than 4 weeks, are working on. And you'll see those rolled out over the next 12 months. I think what they will do is there'll be significant efficiencies in terms of we'll have to spend less money on marketing. As we've done, there's been a big jump in marketing spend this year to kind of support the Always Getting Better program. So we'll have more people now registered with Ryanair, customizing their travel for them, sending them individually tailored offers. We'll know with big data, we'll know more about the profile of each individual customer. So I think there'll be a big significant savings for us in sales and marketing. There should be some upward spike in ancillary revenues. But other than that, there won't be any other significant efficiencies. On Aer Lingus, the U.K. appeal will be heard before the end of calendar [Technical Difficulty]

[Operator Instructions]

Months, maybe 18 or 24 months. In the meantime though, however, the Aer Lingus thing has kind of -- well, we've gone beyond it now, like we originally wanted Aer Lingus because it was going to be the vehicle by which we would go into the primary airports and kind of outdo easyJet at the primarily airports. We're now going to do that as Ryanair. We won the price -- the kind of price war. Now we're using Ryanair to be the softer -- to soften the somewhat harsh image of Ryanair, go into the primary airports, and we will now do what we wanted to do in Aer Lingus, we'll now do it as Ryanair. Having said that, we'll continue to make those appeals. We still think -- I mean, we're still stuck in this area where we had the bizarre situation that the European Union has blocked the current offer on the basis that competition intensified between Ryanair and Aer Lingus over the previous 3 years. The Brits have then come along and said, "You have to settle [ph] down because competition lessened over the 3 years." But if the Brits are right, then the Europeans can't blocked us buying it. And if the Europeans are right, then the Brits can't get involved anyway. So it's a tiresome irritant but increasingly, it's become about as increasingly irrelevant. We've now -- I think around on the back of the government's decision now to scrap the travel tax, we're expanding rapidly in Ireland. We're taking enormous amounts of market share away from Aer Lingus. Customers, as we flesh out the schedules on from Ireland to the U.K., be in Europe this winter, are increasingly switching to Ryanair for their travel needs. And I think Aer Lingus will continue to shrivel and really not go anywhere in a hurry. It just becomes one of that group of peripheral European airlines that don't have any significant future but will continue to exist as peripheral subscale carriers in Europe. Alexia?

It's Alexia Dogani from Goldman Sachs. I have 3 questions as well. Just firstly on FY '16 and sort of unit cost of fuel drivers, clearly this year, given the increase in capacity growth, you're going to have a flat unit cost of fuel position. Should we expect similar situation next year? And what are the moving parts? Then secondly, on your comments about the load factor, I mean, clearly you have delivered earlier than expected some of the improvements. Do you think there is scope to go beyond 90%? Or would you then say we prefer to take more of the market through price rather than volume? And then just finally, in the context of the lower oil fuel price now, I mean, do you see a bit of the economics of the 737 MAX change sort of unfavorably in the sense of the fuel savings slightly reduced? Any comments around that would be helpful.

Thanks, Alexia. So okay, on FY '16, we're staying away from FY '16. We're too early in the cycle to be getting into -- we haven't even done the budget for FY '16 yet. However, absent anything that we haven't yet seen, such as some crazy EUROCONTROL price increase, we think it's reasonable to expect that x fuel unit costs will be reasonably flat as long as the sector length remains reasonably unchanged out into FY '16. And any further than that, I wouldn't go. Load factor, as we build the load factor, I think over the next 2 years, up from 87% to 90%, there's no reason why we would stop at 90%. But I think the gains would be harder at that point in time. Because you're really now -- at 90%, you're full essentially on Thursdays, Fridays, Saturdays and Mondays, and you're trying to get up from 75% to 76% to 77% in Tuesdays and Wednesdays. But I think we would, certainly on the basis of our experience this year, err in favor of raising load factors rather than trying to raise yields. We continue to believe that the -- as we double in size in the next 10 years, the real upside for Ryanair is capitalizing on what is a huge price advantage over every other airline in the same way that Lidl and Aldi are doing such damage to Tescos and Sainsbury's and everybody else here. We wouldn't want to give that away. And there's a lot of unit cost advantages to bringing up the load factors. So on balance, we won't stop at 90%, but it would be harder to cross those kind of load factor gains. Lower oil prices, yes, it may around the edges have lessened the effect. But I think there's no doubt when fuel is our biggest cost and we have an aircraft here that has 4% more revenue opportunity, 4% more seats and an 18% lower per seat fuel savings, almost regardless of what the fuel price is, it's a huge unit cost advantage for us in 5 years' time that nobody else will have. And I think again it just begins -- you build, began to establish not just a huge price leadership over every other airlines but a widening unit cost gap between us and other airlines. I don't worry too much about the short-term fluctuations in fuel. I mean, one of the downsides, for example, of the declining spot price in fuel is some of the flakier, loss-making competitors, like Norwegian and Wales and those guys, who are on hedge because they don't have a balance sheet to be able to hedge, will probably do a little bit better in the short term. Frankly, I don't think it makes any difference. We have the cost discipline. We certainly have enormous momentum in the business model. And I think that one of the great things about having these Damascene conversions is there's an enormous appetite out there across Europe for the Ryanair Damascene conversion. So the more I talk about having this enlightening moment last year in changing and realizing that everything I've done all my life was all wrong and yada, yada, yada, you get enormous acreage of free publicity about the Ryanair change and Ryanair is now being nice to the customers, yada, yada, yada. That on BBC this morning, all they want to talk about is some stupid survey at the weekend of 18,000 who says Ryanair is the second-worst brand in the world and [indiscernible]. Long may we continue to be so while the traffic grows by 9% and the profits jump 45%. So in some cases, pandering to whatever it is the impression out there works. But having said that, we are committed to improving the current customer experience and we're not there yet. We still have another year, 2 years of improvements to go. Neil Glynn - Crédit Suisse AG, Research Division: Neil from Crédit Suisse. Just one question on how you deploy your fleet through the winter. You've obviously made the decision, I think you're grounding on these 50 this winter?

Yes. Neil Glynn - Crédit Suisse AG, Research Division: It's not that long ago where you operated a full fleet or thereabouts in the winter, I think maybe 4 years ago. And as you progress, as you make the business less seasonal, do you think could we ever get back to you operating in nearly full fleet in the winter?

Such as there's inevitably -- the question is there are different amounts in the summer to the winter. And as we grow frequencies to even higher levels, the trick would be to have frequencies in the winter. And into the shoulders, it's sufficiently high level to be able to drop some of them to cater for the summer growth. That's the conundrum that would take a number of years to address because you need to have capacity that is exclusively directed towards summer products and flying on ski routes every Saturday is not a balancing thing. So as we increase frequencies on primarily routes, that creates then the capacity for the summer and balances it, if that makes sense.

Can we just take some phone questions now if you don't mind, please? Just run them through.

We have 5 questions on the phone so far. The first is from Donal O'Neill of Redburn.

It's Donal O'Neill from Redburn. A couple of questions, please, guys. First one, just in terms of the growth you're expecting in the second half of the year. You've kind of touched a little bit on market share. But what proportion of the growth is 16% in the second half do you think will come from market share gains versus from sort of underlying demand or prices-stimulated demand, given what you're trying to do on fares? The second question for the change in guidance for second half cost from plus 4% to flat are actually unit costs. Is all of that down to load factor? Or is there a portion of that, that has a change in the underlying cost base? And what that might be? And lastly, on kind of a more of forward-looking question, the net cash balance is pretty strong in the first half and obviously is going to be positive again in the second half. And if we were to take a sort of a flat assumption for FY '16 versus FY '15, it's going to be even greater in net cash the year after. Have you thought about what you might do with the balance sheet for FY '16?

Okay. Thanks, Donal. I'll take the first of that. Neil will do the guidance and units costs, then I'll do 1 and 3. On the second half growth, I mean, in essence, nearly all of it will come from market share gains. While some of these are new markets for us, as we go into Glasgow-London, Edinburgh-London here, it's inevitable that we will take significant market share off easyJet and British Airways, partly because we have much lower fares but also because we have better times and a much better punctuality. Same thing, for example, in the market in Portugal, we're going double daily from Porto to Lisbon. Italy, we're taking -- but in Italy, we're not just taking market share, Alitalia is ceding the market share, too, as is Air Berlin in Germany. So while all of this will be new growth for us, most will come at the expense of market share gains. And I think we'll take significant -- we're already taking significant market share off Aer Lingus on the Dublin-U.K. [indiscernible] routes. But also this winter, we're going double dailies from Dublin, for example, to the main European capitals of Madrid, Barcelona, Rome, Milan, whereas Aer Lingus only do single dailies. I think we will take all of that significant market share off them, particularly for business passengers who want to go out and back on the same day. In terms of the net cash balances, yes, they're writing strongly. But remember, we're entering into a period of significant CapEx growth here for the next 2 or 3 years, where we're ramping up a lot of aircraft orders. We will probably pay more. I mean, we'll probably spend more of our own cash on those aircraft deliveries going forward than we did in the past. But if trading continues as it to be -- if we continue in line with guidance, the cash generation will continue to be strong. And as we have previously said in the past, we will revisit it on an annual basis. I think the special dividend will be paid in February. As long as we have some confidence into FY '16 that we'll look then at another -- a share buyback program. Because I think on balance, we should be doing every second year, a special dividend and share buyback. So certainly, the board has already disclosed the possibility of another share buyback into calendar 2015 once we've paid out the special dividends. So I think, yes, we will continue to look at rewarding the shareholders -- we returned EUR 2.5 billion to shareholders in the last 6 years through special dividends and share buybacks. And we expect to continue that program. Neil, do you want to comment on the...

Yes. On the H2 cost guidance, we've added an extra 2 million passengers into the mix. We've gone from 87 million to 89 million passengers for the full year. And this is the primary reason why we've been able to drop the unit cost savings down from plus 4% to flat. With fuel included, we're expecting 9% unit cost reductions on fuel this year. So when fuel is taken into the mix, we have a 4% unit cost reduction on total cost.

Our next question comes from Robin Byde of Cantor Fitzgerald.

Just 2 for me, please. Firstly, just on refinancing. Obviously, you've very successfully just issued your first bond. So do you have any further refi needs in the next 12 months? And then just secondly on CapEx, just as sort of follow-on to the earlier question, can you just update us on your expected gross outflows in FY '16 and '17? Is that still about EUR 1 billion each year? And do you expect to see any significant inflows from disposals?

Okay. Robin, just on the CapEx first, we haven't changed our guidance on that. It's still EUR 1 billion a year for the next 2 years. The predelivery payments on the MAX deal don't really kick in after about '17 onwards. On refinancing, we had a very successful bond issuance earlier on this year. We're at BBB+ rating, the most highly rated airline in the world. It's something that we will be looking at again. We have a EUR 3 billion EMTN program in place. We've drawn down EUR 850 million of that and we can refresh it at anytime we want. We will continue to pay PDPs out of cash. And some of our CapEx next year will be debt-financed then. At the moment, the unsecured eurobond market looks attractive.

It's likely that we'll raise another eurobond -- I mean, another issuance some time before the end of FY '16.

Our next question comes from Mark Simpson of Goodbody.

Just 2 questions. One, just wanted to touch on the business traffic again. You're talking about mid-single digit in terms of penetration in the winter months. That kind of suggests that you're looking at over 9,000 travelers a day on that Business Plus. Just wondering if you can give us a kind of number or numbers in terms of steady sales. And then the second side is you've mentioned in a sense some of the response by competitors, where you are being more aggressive. I wonder if you could tell us a bit more about whether you see airlines retreating or whether you see them trying to match your prices. But given the widening cost gap, obviously that's going to be a significant cost not sustainable from those competitors. So I'm wondering if you could just give us a bit more picture about how you see them responding to your current program.

Thanks, Mark. The figures you quote on the business traffic, there are days when we are selling those kind of numbers. But I really don't want to get any -- or lock us into any kind of number or forecast on the uptake of Business Plus. It's a product that I think would be a slow build, particularly in primary airports, where at the moment, many of the primary airports haven't even flown with Ryanair before. I think what gives us confidence is that we have 25% of passengers traveling with us on business. The question is how many of those will convert? And I think 10% over a 2- or 3-year period is a reasonably ambitious objective. It's too early to say yet. I think what will be instructive is how it builds this winter, particularly on those routes where we do have business schedules, like double dailies out of Dublin to Europe, the 4 and 5 times dailies out of Dublin to the U.K. [indiscernible] and the Scotland-London route. Response by competitors, I mean, it's kind of hard for us at moment to notice much of the response by competitors. In general terms, we tend not to see much of a pricing response because most of them are pricing so much higher than we are and they're under cost pressure themselves either from their airports, the airports they're at or their unions. I think actually most of what we know at the moment is the extent to which there are significant capacity reductions coming through in Germany, in Italy, in Spain, in Portugal. And I think really we see more and more people taking out short-haul capacity as being the response. But it's a response more to their own kind of economic difficulties than necessarily response to our expansions. But we see very little aggressive pricing response from any of the airlines, whether it's Aer Lingus in Ireland, easyJet in the U.K., TAP in Portugal, Alitalia in Italy, because frankly none of them can compete with us on pricing anyway. David, do you want to add anything to that in terms of competitor response?

No, that's a reasonable summary.

Our next question comes from Savi Syth of Raymond James. Savanthi Syth - Raymond James & Associates, Inc., Research Division: Just 2 very quick questions. One is would you be doing less subleasing over the summer now that you have your fleet going back or expect a similar amount? And then the second question is just on the primary airport costs, given your new plans, is there additional pressure there from a cost perspective?

We leased in this summer 7 aircraft just to kind of keep -- so that we have that kind of capacity during the summer because we're taking delivery of 15 aircraft in the remainder of the fiscal -- in the winter part of fiscal year. We want to have some of those routes up and running. Having parted out the summer '16 schedule already, and we again released it 3 months earlier than we did last year so that we can maintain this positive momentum in forward bookings, already we thought it looks like we need to new lease in another 6 or 7 aircraft next summer. That's because we only take delivery of 20 aircraft from Boeing between now and the end of May -- the end of June next year. The following winter, winter '15 and '16, we take delivery of almost 40 aircraft. So for summer '16, we won't need any lease-in aircraft. So I think what you'll see is as we lease in 7 in summer '14, we've got to need another 6 or 7 in summer '15, and then nothing in summer '16 because we have enough aircraft delivery to be able to handle it all ourselves. I think on primary airports, we have a mix there because undoubtedly, the primary airports tend to be more expensive than the average of our secondary airports. But as you can see in the cost analysis and the unit cost discipline, the key feature for us at the primary airports is one that we can secure 25-minute turnarounds and therefore, maintain our efficiency. There's no doubt that the cost or the opportunities at the primary airports are getting better as more and more primary airports compete with us to get our scarce capacity into summer '15 and summer '16. So we're getting real and material discounts at the primary airports. And to that, you have to balance the fact that we have a 10-year growth agreement at London Stansted, where we have very low-cost base for growth. You have a growth deal at Dublin Airport, allied to the Irish government scrapping the travel tax, which has been good for our cost out of Dublin. So we're able to mix-and-match some of the primary airport development with also declining cost in some of our existing primary airports as well as in some cases, [indiscernible] the very low-cost secondary airports. So if you look at the numbers for the quarter, yes, the cost of the airport -- the handling costs have risen at a slightly higher rate than passenger traffic volumes but nothing that we can't handle within an overall flat unit cost for the full year.

And the final question on the phone so far is from Anand Date of Deutsche Bank.

Michael, I'm just wondering if I could have your latest thoughts on maybe Ryanair holidays or the way your latest thinking is on maybe a frequent flyer program. That seems the one thing that is maybe missing that you've been reluctant to do in the past. And also just out of curiosity, could you maybe go through some of the basic dynamics of a difference between domestic routes and international routes? So just what you kind of see versus each other in terms of loads, business versus the FI [ph] yields and whether given you're becoming fairly dominant on some markets for domestic, whether you'll return to potentially offering tie-ups with the legacy carriers there.

Yes. Thanks, Anand. The first 2 of those are very much part of the Ryanair Labs strategic and development program. I think we already carry a huge number of holidaymakers across Europe. I think it's inevitable that we will -- but it's over a medium-term rollout kind of holiday product, where you'd be able to get all-inclusive holiday packages on the Ryanair website. But it's not high up on the agenda. It won't be in the next 12 months. It might be something over the next 2 or 3 years. Frequent flyer program, we won't have a frequent flyer program in the sense of the traditional frequent flyer program with plastic cards and accounts and points and all the rest of it. But for the passengers who register with us on the My Ryanair registration, we'll have -- big data will enable us to have a much more individualized or tailored frequent flyer program. So what I see us doing maybe as early as the end of calendar '15 is those passengers, we'll be writing to passengers, thanking them for flying with us in 2015. Those who flew maybe 4 times than last year will get an incentive to fly more than 6 times in 2016. Those who flew 20 times within 2014 will get a thank you of a 50% off a flight in January and February 2015. So we'll have individual, tailored, I think, offers recognizing the volumes for each individual passenger and trying to incentivize each individual passenger rather than a big cumbersome FFD program that takes a lot of administration and everything else. We were able to do the analysis. The data mining we're doing now will enable us to have an individually designed kind of encourage more flying program with each individual passenger. David, do you want to comment on the domestic and international routes?

Sure. I mean, the key -- one of the key features of the domestic route is that it tends to be shorter and demand higher frequencies, which is useful in delivering on volume to airports, while at the same time, allowing you to have a highly efficient schedule by attaching a short domestic, let's say, first thing in the morning, to a longer international flight, solving the airport passenger volume problem and adding new routes. The negative with domestics is that they tend to be later bookings, so you don't see the future as early and they tend to attract lesser ancillaries. So on balance, they are a very positive development in terms of fleet utilization, traffic volumes and so on and sector length.

So Michael, is it possible could I ask a follow-up?

Yes.

Just in terms of the big data, is there any other way you can monetize it as well? Because I'm just kind of thinking if I look at Smiles, if I look at Multiplus, you've probably got one of the few data sources that is growing and probably getting a deeper amount of data per passenger. Is there anything else you can do with the data as well in terms of third parties or anything like that?

I think there's lots of things we can do, but I think we need to be careful. Like we're not in the old days, we'd simply run around and sold the data. I think what we want to do is to bring more and more people on to the ryanair.com website, more and more people to register. And I think there's a number of different things we're looking at under the Ryanair Labs banner, where we can exploit the data and use or monetize probably by attracting other partners to come and work with the ryanair.com website to provide other value to our passengers. We'll be able to give them very rich content, very detailed profiles off of an enormous passenger base. But that's really not for today. I'm conscious of the fact that if we want to give kind of the whole Ryanair Labs development, I think it's something that we'll be doing -- detailing in much more detail when we get to the full year results roadshow next May. Are there any more questions in the room? Nothing more on the phone? So thanks, everybody, then for joining in today. I'll say we have extensive roadshows, there's 8 teams on the road covering all of the markets. If you haven't or you want a meeting with us through the week, please let us know either through Davy or at Citibank or through our own Investor Relations team and we'll pencil you in. Other than that, I look forward to meeting everybody hopefully on a one-to-one basis during the weekend. Thank you very much for dialing in and coming this morning. As I said, the business is progressing very well. Certainly, the more aggressive forward bookings and pricing is certainly finding favor among the customer base.The changes we've made in the customer experience and the improvements, which I think is year 1 of a 3-year program, is certainly being welcomed by our passengers. I think we have a lock on, but there's still much more to be done over the next 2 or 3 years. And can I please again caution the analysts, don't be inventing numbers here. The figure won't be north of EUR 800 million for the current year. We've done very well. We expect profits to grow by about 45%, but that will be enough for this year, I hope. And we're beginning to focus in on next year and how we roll out further improvements, and hopefully further profitability and share price gains. Thanks very much, everybody.