Hello, and welcome to today's Ryanair Q1 FY '19 Results Call. [Operator Instructions]. And just to remind you, this is being recorded. So today, I'm very pleased to pass you over to Michael O'Leary, CEO. Please begin.

Okay, good morning, ladies and gentlemen. Welcome to the Ryanair Q1 profit -- or Q1 conference call. I'm joined here by the management team in Dublin. Neil Sorahan, the CFO, is in London where he's doing the press and the media briefing this morning. As you will see, all of the information, together with the details, MD&A, question-and-answer session is up on the ryanair.com -- Investor Relations page of the ryanair.com website. So we'll be going through some brief comments and then open it up for Q&A. When we get to the questions, obviously, we would limit the questions. Nobody can ask more than two questions each, just so we can try to get everybody into the one hour duration of the call. So if you see this morning, we reported 20% fall in Q1 profits to €319 million after tax, but excluding exceptionals. The key drivers of this was a 4% decline in average fare in the quarters, partly due to the earlier time of -- earlier timing of Easter. The first half of Easter fell into last year's Q4. Higher fuel and staff costs were offset by stronger ancillary revenue growth in the quarter. Currently, at the moment, bookings are slightly ahead of last year, but at lower airfares. We've seen a number of factors in recent weeks driving that, most notably the World Cup or the impact of the World Cup, the heat wave in Northern Europe and, in recent weeks, a degree of customer uncertainty about the pilot strikes or the cabin crew strikes. Our investment in Labs and Always Getting Better continue to drive improvement in ancillary revenue, which has now jumped to 30% of total revenues in Q1. On costs, we continue to have significantly lower costs per passenger than any of our competitors,…

No, Michael, I think you covered it all there. I'd just highlight again the strength of the balance sheet, very strong space, high CapEx of €462 million in the quarter and €265 million of buybacks. We managed the net debt position down to just over €250 million from €280 million, so balance sheet continues to be in good shape.

Okay, thanks, Neil. Okay, we'll open up the Q&A, and we would limit everybody to no more than two questions or one question in two parts. Let's open it up now, please.

[Operator Instructions]. And the first question is over to the line of Daniel Röska at Sanford Bernstein. Daniel Röska: Two questions. Number one, on Laudamotion, when would you expect that operation to break even? And anything that would prompt you to walk away from that over time? And the second one, maybe longer term over the fleet plan, given the current state in the European sector, you also commented on high-capacity growth in the videos this morning, anything you consider changing around your previous statement that you would be taking up all the options on the MAX contract?

Okay, Daniel, thank you. At the moment, we're reasonably confident that Laudamotion will break even in year three. I think that will largely be a function of when we can redeliver, that's when the Lufthansa expenses, Lufthansa leases will need to be redelivered. It's, to a certain extent, opaque, so it depends on the rate and speed of the fleet growth in Laudamotion. And Laudamotion and the management team there are making significant progress on sourcing other Airbus aircraft for summer '19. But clearly, it will need to grow to be a 40 or 50 aircraft over a 3 or 4 year period, at which stage, we think it will be a significant profit contributor to the overall group. And we see no reason to walk away from it. It has been a very challenging and difficult first summer. I think some of that was inevitable given the late nature of the -- or the reorganization of the administration and Niki Lauda successfully acquiring the -- what was a grounded airline. And we remain confident it will be a profit contributor over time. The fleet plan, at this point in time, it's a bit premature. I think what will really drive the fleet plan over the next number of years will be -- the rate and pace of airline failures and consolidation in Europe this winter. Clearly, most of our -- and most of the market focus will be on Norwegian, which continues to lose money hand over fist. And we would -- I think the market generally expects Norwegian will not survive in its current form. Whether it's taken over by somebody else or just goes bust this winter, we don't know. But I think that will significantly alter both our growth prospects in certain markets, the availability of pilots in other markets and may significantly affect the valuation of the lease rates on Airbus aircraft going forward. We remain very pleased with our existing order for -- which consists now of over 210 Boeing MAX 200 Gamechangers. The first five of those comes in the spring of next year. It is likely that we will place those aircraft somewhere in Continental Europe, particularly those areas where were growing very strongly, and that would presently be in the German market or possibly in Austria or in Central Europe where Ryanair Sun, in particular, has had a very good summer. It is growing. There seems to be a very significant demand for Ryanair Sun to grow more rapidly from the Polish tour operators in that charter market.

The next question is from the line of Savi Syth at Raymond James.

I apologize, my voice is a bit off, I'm a bit under the weather here. But just on the revenue side, I know there's an accounting change that's distorting the base fare versus the ancillary. I was wondering if you could, as a result, kind of provide what your thinking is for kind of the total fare per passenger trend for the second quarter, just a little bit more color on that. And then on the balance sheet side, I know you've been at like €16 million year-over-year profits this year, you have the Laudamotion investment. Just wondering if you can give some updated thoughts on your thinking about use of cash.

Yes. We're not going to give any more detail on our outlook for the total fare per passenger. I think our focus is that the underlying average yield is going to be softer, we think flat in the second half of the year. Ancillaries will continue to be strong. But I don't think -- and now it's a bit early in the year for coming up with a forecast on total fare per passenger. Uses of cash will continue to be as before. We continue to be strongly cash generative. The uses of that cash will be CapEx. The new aircraft delivery is funding those deposits. There will be a funding requirement on Laudamotion. The investment in Laudamotion, as or whenever we move to 75%, and we expect that to take place in the current quarter, subject to discussions with Niki Lauda and his team. And we have another still 30% of the share buyback to take place.

It is over to the line of Jarrod Castle at UBS.

Two. One, you've given a lot of kind of detail in terms of the operational disruption due to ATC and the strikes. But can you actually give us a financial number for the previous quarter and the coming quarter? And then second question, just on fuel hedging, any plans to adjust how you're going to hedge for 2020, just given IMO 2020? Is that changing your thinking on the hedging on the fuel?

Okay, the operational disruption we've set out in Q1, there was 2500 flights canceled as a result of air traffic control strikes and staff shortages. There continues to be, while thankfully, differential staff striking in the second quarter, we're still suffering, I mean, on a daily basis, typically standing between 15% and 20% of our first-wave flights mainly out of the U.K., Germany, Greece. And Greece and France are being delayed by staff shortages within ATC, not just us, but all other airlines as well. And the problem for us and for other airlines is that with reasonably quick 25-minute turnarounds, this builds up through the day and leads to cancellations later on almost on a daily basis, either because we can't achieve the curfew limitations at some airports or because our crews are running out of hours as a result of cumulative ATC delays. So in many respects, it's the staff shortages that are the kind of epidemic dissemble within ATC. Because the degree of customer understanding, where the French air traffic control strike at a weekend that there will be cancellations and everything else, it's much harder to explain to customers why flights are running 2, 3 hours late. We had one particularly appalling weekend, last weekend, when the -- as you know, France were in the final of the World Cup. On Sunday afternoon, most of the French ATC basically down 2s. And on the Monday, when they were all returning back to Paris, most the French ATC is down two. We were taking three, four, five hour flight delays without the reason of being on strike. It's an issue for all of the airlines. We, IAG, easyJet and others have been to the fore in taking legal action now against the French Government for the ATC strikes. But we are increasingly getting aggressive with the ATC providers, most notably the Germans and the British, who continue to cover up on our staff shortages with euphemism, such as weather and capacity. But there are no such -- there is no such thing as an ATC capacity restriction. It's generally that somebody hasn't showed up for work and they haven't rostered enough air traffic controllers. On the fuel hedging, no, from a practical point of view, we won't be changing our policy, and that is to continue to roll forward on a 12-month basis at around 90% coverage. For FY '19, we are building in the Laudamotion and the Ryanair Sun fuel capacity as well. And Neil, do you want to comment briefly on the accounting policy change?

Yes. Well, the IMO '20, Jarrod, that's evolving at the moment. The technology around scrubbers for the likes of the cruise, liners and the cargo shipping is becoming cheaper. So I think it mightn't be as big an issue as it was originally feared when it was first announced, keeping it under review. But as Michael said, I don't see any reason to move away from the kind of hedge strategy that we have at the moment.

We're going over to Stephen Furlong at Davy.

Can we just talk about aircraft for a second? You're happy with what you've seen so far with the Asian port development with the MAX aircraft coming in April. And then secondly, I was just wondering if you have any further discussions either with the manufacturers or with leasing companies for other aircraft types going forward, including for Laudamotion?

Yes. What happened with the MAX aircraft, it's coming in April. All of the indicators are that it will deliver its -- well, obviously, it will deliver 4% increase in revenue per flight because it has 4% more seats and a minimum of 16% fuel consumption -- 16% reduction per passenger in fuel savings. These will be very meaningful cost savings going forward and will widen the gap between us and our competitor airlines, most notably with the likes of Wizz who continue to make these mythical claims about having lower cost than Ryanair while their aircraft financing costs balloon through the roof. Ours, we will be adding these aircraft to our balance sheet with a net purchase price, giving us materially lower costs than even our existing aircraft costs. The cost to manufacture the leasing companies, no, we have an ongoing dialogue with both Airbus or with Boeing. We have also opened up discussions with Airbus in conjunction with Laudamotion because, clearly, we want to secure, I think, a line of Airbus aircraft for Laudamotion, which has had an Airbus AOC, Austrian AOC with Airbus aircraft in it. We haven't made much progress with the manufacturers. Their order books are reasonably full. Again, I think we would want to be opportunistic this winter if there's some major shakeout in of the European aviation sector or in Asia with oil at $75, $80 a barrel. We have -- Laudamotion has had made progress with some of the leasing companies in procuring aircraft that are returning from Asia for the summer of 2019 schedule, which hopefully will allow Laudamotion to continue to grow, but with lower cost to Airbus aircraft, which they will need because the Lufthansa leased aircraft are particularly expensive. But the -- so there's -- but the leasing is not our chosen way forward. We would like to place an order with Airbus or a manufacturer for a flow of Airbus aircraft at Laudamotion. We're very happy with our aircraft order book with Boeing. That runs out to 2023, 2024. Again, I mean, I think we've had a number of discussions between ourselves and Boeing that are predicated on being opportunistic if there is some major shakeout this winter, which we expect if oil remains at $80 per barrel. And I think both we and Boeing are conscious of the fact that there may be some opportunities there for aircraft, but we're already looking at Boeing aircraft for the period, I think, 2023 to 2027 at this stage and, obviously, with a focus on maybe a bigger aircraft, the MAX 10, at that point in time. But there's no pressure on us at the moment. We are very pleased with the order book we have on the MAX 200, which will be more than sufficient aircraft to take us up to 200 million passengers by 2024.

Next question is over to the line of Neil Glynn at Crédit Suisse.

If I could also ask two. The first one -- they're both actually related to disruption. But the first one, clearly, you're thinking of an optimal load factor change dramatically over the last few years, and now you are clearly at a very, very high load factor. Just interested, is there a growing argument for targeting a lower load factor in some markets to absorb disruption, whether it's even just keeping open seats for lucrative last-minute fares? The second one, on the strike impact and your guidance for fares in the second quarter, can you give us some color as to whether the negative impact from strike concerns is contained to bases where strikes are actually announced? Or do you feel that that's a broader issue impacting bookings here, there and everywhere because of media coverage and pervasive concerns from passengers?

Yes, I think it's important, and we're conscious today not spending too much time on strikes. Let's put the strikes in some context. In Dublin, so far, we've had three days of strikes by 1/4 of our pilots, that has affected less than 10% of our flights to and from Ireland. Now because it's Ireland, they have received a disproportionate amount of publicity. And we have undoubtedly seen a downturn, not in bookings, but in the pricing of close-in bookings and forward bookings for the next couple of months. So a reasonably limited, in fact, very limited strike by a very small number of pilots in Ireland has had an impact on pricing going forward. Ultimately, that's good for our customers. They're getting lower fares at the peak periods, which I think they will appreciate. And I think we've demonstrated, too, quite an impressive ability to manage our way around disruptions. Having had three days of pilot strikes in Ireland, the fact that we have now canceled less than -- well, if you take it all, the three days, an average of 25 flights, and when we do more than 2500 flights per day, I think it indicates fast, limited impact these strikes have had. But it does damage forward pricing in some geographical markets. And we think that is largely focused around the Irish market. Certainly, there's some impact in the Belgian market this week where there are some sort of cabin crew protest strikes in Portugal, Spain and Belgium this week. We don't think there'll be much in Italy because of the work we've done with the Italian unions where we have agreed recognitions. So without wishing to overplay it, even if you look at the big, broad scale of a kind of a coordinated strike by cabin…

I just wanted to double check, actually, I probably should have been clear. But the first part of the question was actually more related to the ATC issues. You've probably covered it there, but ATC issues and those had HR causing -- or likely to cause any change in load factor taking either way?

I don't think so. I mean, because you have to take -- it's very painful that we're taking ATC staff shortages, particularly on the first wave during the peak summer period. There will be less impact of ATC staff shortage in the winter period. And even though the kind of 15% of our first wave of flights get delayed to reduce 100% of the load factor and 100% of our flights throughout each day when we're still running with 75%, 80% punctuality, would not be a sensible decision or an economically sensible decision.

We are now over to Mark Simpson at Goodbody.

Just two questions related to Laudamotion and Tegel. First off, the €150 million loss that you talked about, is that the total loss of the 75% related to your holding once consolidated? And just thinking about the medium-term Tegel, from where you stand at the moment, do you think that's going to stay open or close?

I'll ask David to do the second half of that. The €150 million refers to the total loss for Laudamotion for the full year, which we will have to incorporate into our numbers or they're probably an exceptional item in the first year if we take to -- if we move to 75% control within the current year. So that is the total, not 75% that was. David, do you want to give us some insight in what you think is going to happen in Tegel?

Nothing for a while. I mean, it's obvious Tegel should stay open. But politically, the decline is unpalatable in Berlin. And I think and the likely outcome is simply further delay to the opening of Brandenburg. It will just get pushed along a little further because it's an attractable political problem there. There will be insufficient capacity between Brandenburg and Schönefeld to accommodate the existing traffic. So I think it can get kicked a little bit further down the road there. But our presence via Laudamotion in Tegel, I think, is important because the original rules by which airlines would be allocated to Brandenburg will rig in favor of Tegel airlines. And our presence via a Laudamotion in Tegel will be helpful when that comes to a head.

Over to the line of Damian Brewer at RBC.

Two questions. First of all, just could you elaborate a little bit more on the ancillaries? If I strip out the IFRS 15 distortion, it still looks like you're up about 12% or just over year-on-year. Could you elaborate a little bit more on sort of what's going well there, whether it's priority boarding, reserve seating and just give us a little bit more flavor? And then secondly, just coming back to Lauda. Could you give us a little bit more on the sort of the bridge to breakeven, in particular, that €150 million total loss delta, how much of that would be eliminated just by removing the Lufthansa leases at their expense and replaced with more market-based levels? And secondly, how much would be eliminated by just sort of taking out the very limited lead-up you had with selling this year?

Okay, thanks, Damian. Firstly, there's no -- we're not going to give you more color on ancillaries. Traffic is up 9%. The accounting accounts for about 5% of the 20% or the 25% growth in ancillaries in Q1. And most of the stronger performing services within ancillaries, these are set out in the press release, has been the priority boarding, reserve seating, those kind of optional services, which more and more customers are now taking or using the better presentation of them, thanks to Ryanair Labs, through the website and the mobile app, in particular. We don't want to get into any more detail than that at the moment. It creates too much kind of optimism or irrational exuberance among analysts, whereas we would rather play it reasonably low key. There's no doubt that customers are -- more and more customers are taking those services. They'd also include fast track at a growing number of airports. And Laudamotion, the bridge to breakeven, we will -- Laudamotion's losses will be significantly curtailed in year two. If I were to give you sort of numbers, I think the reasonable will be €150 million this year; we think under €50 million next year, in year two; and breakeven, maybe a small profit in year three. That's based on having the Lufthansa aircraft in there over those 3 years. The vast majority of the exceptional losses this year would be and in the very lease, Lufthansa, and Laudamotion didn't. Part of the problem with Laudamotion was that it would be -- if you go back when Niki did the deal with the Austrian administrator this year, they were going through a lot of flying for Lufthansa and some of the Eurowings in the early months of March, April and May this year. When he…

We're now over the line of James Hollins, Exane.

One on cost, one on ancillaries, please. On the cost side, your guidance stayed the same. Obviously, EU261 has ballooned et cetera. Are you doing slightly better elsewhere? Or is it a rounding issue? And also what assumptions are you using for your expected cancellations from ATC? Do they stay elevated levels? Or are you bringing that assumption down? And then on the ancillaries, I was wondering if maybe Neil could guide on what the profit impact was from the, I guess, the exceptional accounting changes. Is it all of that €25 million? Or is it slightly less? And maybe one for Kenny, if he's on...

That's two.

That's two.

That's two. So I assume that's the two you have. Cost at EU261, we expect that to continue to balloon. We think that the short staffing, particularly through the summer, will continue right through to September, October. We think that will have a material impact on the marketing distribution and cost line. Almost all of that increase in there is the EU261 cost. So we expect a material adverse outcome on the EU261, both compensation and claims through the remainder of this year. The other underlying in there, which is the marketing spend, distribution commissions to airports is in line with the 7% growth in traffic. Neil, do you want to do the ancillaries?

Yes, on the IRFS 15, revenue accounting change, yes, the €25 million is the net figure that came through in the quarter. That will increase to about €70 million in Q2 and then wash its way out over the second half of the year.

Okay. James, with your other questions, just route them through to Shane here later on today.

It's from the line of Alex Paterson of Investec.

Just on the Laudamotion, the €150 million, I was just wondering if there's any risk that, that gets worse. So excluding oil prices, is there anything else that you're relying on from Lufthansa? Are there any other risks that could see that worsen? And then secondly, obviously, you want Laudamotion to be an Airbus fleet. If you are struggling to get aircraft, is there a possibility you could run a mixed fleet, perhaps relocating Boeing aircraft from areas if you have ongoing issues with the unions?

Okay, yes, the €150 million could worsen. I mean what would materially worsen that is the spike up within oil prices. Obviously, if it goes above $80 a barrel this winter, then because it's unhedged. The results will spike. We could also spike because fares would be worse than we're presently, but we're presently pretty conservative on the airfares in Laudamotion for the remainder of the summer and into the winter in Vienna. Going forward, we would like it to be an Airbus fleet and it is geared up. It has an engineering structure. It has an AOC that's Airbus-related. Although it is operating a 20-aircraft, 19-aircraft fleet this summer, that is nine Airbus and then it's wet leasing 10 of Ryanair's 737s. So we would not see it operating a mixed fleet going forward. We will, I think, make a decision at some point in time largely when we did -- I think maybe after this winter, and the preferred decision would be for it to be an Airbus airline. But if we can't get a deal with Airbus, we may well say, "To hell and let's go ahead, and we will put the Boeing aircraft in there," but that would be a longer term, more painful outcome. And I think it is important that we have, within the Ryanair group of companies, an Airbus operation, not because Boeing or Airbus will be particularly price competitive against each other because the two compete, they don't, but we want to be -- and certainly in the Airbus side of the market there, we've seen significant value in the leasing side at the moment. We would like to have an Airbus operation within the Ryanair Holding group, but we'd like to have -- obviously, we're going to continue to be a very large Boeing customer. But our -- the value of aircraft and doing deals comes not because Boeing Airbus particularly compete against each other, but it comes by having the discipline to wait until there's a major downturn in the industry, which we would be hopeful will happen this winter. With oil remains an $80 a barrel remainder, there will be big shakeouts of loss-making airlines in Europe and in Asia, many of whom have humongous aircraft order books that they can't possibly fund or can't possibly fund.

Okay, it's over to the line of Monique Pollard at Citi.

Michael, just a couple from me. Firstly, would you be able to give an update on what's going on with your negotiations in Spain with the pilot and cabin crew unions? And then secondly, on the slide that the World Cup had some impact on forward bookings and such, are you seeing that now stop, revert and return?

Thanks, Monique. Let me do the second one first. Yes, I mean, we've seen an uptick in bookings post the World Cup, but it's been small. I think while we've been slightly disappointed, two things have happened, obviously, since the World Cup has gone down to its last week is, one, we continue to have a heat wave in Northern Europe where normally, at this time of the year, the Irish are all getting depressed and booking -- last-minute booking is going to Spain and Portugal. And there's a noticeable weakness in those markets, some of which we think is caused by the extended heat wave in the U.K., in Ireland, in Northern Europe, and therefore, we're not seeing that surge of last-minute bookings that we would normally have seen in a -- at the end of a World Cup period when rain in Ireland prevails. As also, we think the Irish market is also being affected by a disproportionate kind of coverage of fairly minor strikes by a fairly small number of pilots here. You'd swear the entire country had shut down where it has appeared on the front page of newspapers, but it's actually pretty small. So there's a number of factors there that we think that are affecting forward pricing in the Irish market, also the Portuguese market and, to a lesser extent, in the Belgian market. Well, Spain seems to be reasonably unaffected at the moment, but we continue to monitor closely. Negotiations, I'll ask Eddie to comment, but it's like we're making progress. We have meetings with the Spanish pilots and with the Spanish cabin crew, and we are making reasonable progress there. Maybe, Eddie, you want to give your insights on that?

Yes, just broadly speaking, the difference between where we're making good progress and little progress is where we have the involvement of competitors, involved in the negotiation process. And there's the added complication in Spain, the number of unions are very small one, which is more of a separate than the larger cabin crew union. So the pilots are taking a legal case on local contracts. So the negotiations are -- have stalled on that for the time being, but we're pretty much, I would say, 90% there. And on the cabin crew side, negotiations will start again after the strike. But the big difference is if you didn't have competitors involved, we've got a cabin crew [indiscernible] for another airline in the middle of the negotiation process in Spain, and that's...

Yes. No, a Norwegian cabin crew, like it's a joke. We have to go to a meeting with the cabin crew union last week in Spain, and we find ourselves negotiate with a Norwegian cabin crew, like the same issue in Portugal where there's the TAP cabin crew is the chairperson of the union. And because of the recognition, the union in Portugal doesn't have any Ryanair people on its committee council because the council elections only happen in September each year. And it's very difficult for us to go through a negotiation with a Portuguese, a TAP cabin crew, to talk about Ryanair's paying conditions. In Ireland, for example, we've endured 7 out of 9 hours spread over two event meetings with the small minority, 25% of the Irish pilot. While we sit down with our committee and the four Union, they say they have 11 requirements of seniority. We take space of the -- our proposals already agreed 8 of their 11 points, and then they went out of the room for an 1.5 hours to consult with 1 or 2 Aer Lingus pilots, and then come back in and say, no, we want to -- they can't even explain what it is they want. So until we get a couple of Aer Lingus pilot out of this process, I don't see there's going to be any significant change in Ireland, and -- but we've demonstrated that we can continue to work our way around this. But I can contrast that with the progress we've made. I mean the pilots are in the U.K. Pilots have no difficulty agreeing on day one that there will be no British Airways pilot, no Monarch, no Egypt pilot involved in these negotiations. We're negotiating with BALPA and the Ryanair council. Same…

Thank you.

Thank you. That's very flexible.

There you go. Okay.

The next question is over to the line of Gerald Khoo at Liberum.

Firstly, I know Ryanair Sun is still small, but just wondering how that's being accounted for. And particularly, am I right to say that revenues is going to the schedule revenue line, but the passenger numbers don't go into the passenger counts? And secondly, you talked about getting a pay rise deal with 90% of the pilots. So just wondering what's the situation with the other 10%.

Okay, I'll do the second half. Neil, I guess, you can answer the Ryanair -- the accounting question. Most of your -- the 10% is a couple of holes as we have a small group of Irish -- or some of the Irish pilots haven't reviewed -- have not accepted the pay increase. In most of the countries, it has been, but the big one will be in Italy where we're very close now. I mean there's the kind of a complicated structure in Italy where our pilots and the unions want to change the basis of pay to mirror what kind of the same basic and allowance payments in Alitalia because its tax advantageous for Italian pilots. As long as your unionized, it's tax advantageous for Italian pilots to receive more of their payments in expenses and stuff like that and less in basic pay. It's called [indiscernible]. So it's taken us a number of months. Eddie, again, I think you had...

Yes, I mean, it is -- the largest number is in Italy like perversely where we're probably making most progress on a comprehensive collect of late payments because the union give [indiscernible] and offered this individually for pilots in that market, and that does account for the sort of 1% there. But Michael's quite right, the rest of it is pilots [indiscernible] where people haven't opted into the new structure.

I mean, [indiscernible] we will have -- about 97%, 98% of all pilots will have agreed. And I asked the kids, they've all -- they have agreed to 20% pay increases this year. This is the kind of a joke of what we are dealing with here in Ireland. We have about 1/4 of our pilots who are earning between 150,000 to 200,000 a year, got a 20% pay increase this year, are now engaged in strikes over seniority that doesn't affect them or base transfers that they don't what -- they're not -- they're already in the base they want to be in. So it is nothing other than they -- a couple of us being gamed by a few Aer Lingus pilots to the benefit, frankly, of Aer Lingus. I mean if that's what we have to put up with for a period of time until the majority of our pilots in Ireland actually walk out that their interests are better served in dealing directly with us and not listening to a couple of Aer Lingus pilots, then we may have to take some more strikes in Ireland. But that would certainly cause, I think, to materially look at the way we allocate aircraft in Ireland this winter or in summer of 2019. And Neil, you want to take Ryanair Sun and the accounting changes?

Sure, sure, sure. On Ryanair Sun, that is relatively modest, five aircraft flying this year as the schedule of revenue -- the revenue -- the schedule of revenue line to the extent that they've got any scheduled passengers [indiscernible], there was [indiscernible] capacity numbers, otherwise, they won't. And the costs, they get broken down over the various cost lines.

Over to the line of Johannes Braun at MainFirst.

Just two for me as well. Obviously, despite all these, some brokers in union recognition deals with north of Germany cabin crew union where you also signed, I'm just wondering what does recognition deal with the union actually give you? I mean, obviously, it's not a CLA yet, which would cover working conditions and all that. It seems to me that the really hard part is still to come for all those countries that you do have now recognition deal in place. And then secondly, any new thoughts on France regarding a potential basing of [indiscernible] there?

Okay. I'm going to ask Eddie Wilson to do the first half, and David will give an update on the second question.

Yes. Just in relation to the recognition agreement with Berlin, it just adds up. The relationship was actually how you can build business on that, and there's a commitment in that recognition agreement to start negotiations on a CLA pretty much immediately. But we already have a deal in place for our cabin crew, which goes to effect in 2021, which has a 5/3 roster and predetermined pay increases, all that included there. So we'll be sitting down with Berlin in the next week or so to start that in fairly rapid format to try and formalize a collective labor agreement for our general cabin crew.

David, in France?

Yes. Actually -- what it actually regulates in terms of the other countries, U.K., Italy, where you have recognition deals in place, is this different to the German one? Or is it...

Yes, well, in some countries, you need an actual recognition agreement to have the procedures. It's less stringent in Germany. You pretty much get into a CLA straightaway, but we at least have agreed the ground rules of how we engage with one another. It's not required by law in Germany, but that's what we're doing, and we're very happy with it.

And I think there's a [indiscernible] -- what's interesting about the strikes thus far is, even the Irish pilots, it's not about pay. So with the cabin crew, the cabin crew won this week, which is more of a protest, paying is not featuring in these discussions. I mean our cabin crew earn up to 40,000, Our captains are in between 150,000 to 200,000. So union clear in smaller markets constructing disruption over really easy [indiscernible] like seniority, which we already have seniority offers on the table with the Irish pilots, with the German pilots, to the extent, on the seniority list. So the good news in all of this is we're not having strikes about pay. We're not a low-pay airline, even the pilot can't argue that they're lowly paid. And so the recognition is the most important. So we actually started the process of negotiating or at least having relationships with these people, but we do not have recognition in Ireland and nor we have until we get Aer Lingus pilots off this pitch. David, France?

We're negotiating with five French airports, and we have deals that are more or less acceptable, at this point, with three, out of which we should select two. It ultimately depends on our aircraft available next summer, which could be determined in fact by some of the activities going on at the moment if we move aircraft as with some market to make France more like [indiscernible] next summer.

It's over the line of Ruxandra Haradau-Doser of Kepler Cheuvreux.

Two questions, please. First, what share of your current capacity is at primary airports? And what share trends are you seeing at these airports? There is a lot of capacities at -- in that primary airport over the last year that should have reached maturity now. And second, how do we expect the average unit airport cost to develop over the next three years? Some competitors mentioned potential increase in the airport cost.

Okay. The majority of our aircraft are at primary airports. We don't see maturity. We're growing at the moment by -- even this year with ATC strikes, traffic in the Q1 grew by 7%. That means our -- if you take our growth this year, we plan to add about another 9 million, 10 million passengers. I mean, we're growing at the same size, at the total size of Aer Lingus on an annual basis. So I never hold this idea that because we're at primary airports, you won't grow or we're at maturity and we should expect higher yields. There is undoubtedly higher fares as the fares are slightly higher at the primary airports, but so are the costs. And the average airport unit cost, I think I would generally expect them to be flat going forward. We've seen interestingly the -- in the Q1 numbers, the airport and handling costs have only risen by 5% in a quarter where traffic was up by 7% and block hours were up 9%. So you can see, despite the fact that we have a majority of primary airports, we're still doing very good growth incentive schemes with the primary airports as well as with the secondary airports, and they're competing against each other. So I think the reasonable assumption going forward would be flat on airport unit cost and it might do a little bit better.

It's over the line of Michael Kuhn at Societe Generale.

Two questions, one again on ATC, one on the Laudamotion. On the ATC side, it looks like some of the problems are quite contractual, no willingness on the ATC side to train enough people. Do you see that situation changing? Or could that develop into a serious growth obstacle for the whole sector going forward? And then on Laudamotion, would you be willing to share with us the current expected top line and operating margin that you see for the current year?

Okay, I'll do the first one first. No, we wouldn't be willing share it with you. And on the first part of the question, ATC. I mean, like -- I think one of the issues that has materially changed with aircraft, like you look at the biggest offender at the moment, it's the German air traffic control services [indiscernible]. They're about 50. They have deliberately chosen 2 or 3 years ago to adopt or to take on the low traffic forecast, there's a low, medium and high traffic forecast model, so that they could under recruit air traffic controllers, therefore, make more [indiscernible], but that allows them then to say they have less flights, charge a higher unit rate and then on the recruits. So then they come up this year, oh, we're surprised by the growth in Germany, which is strange given that Air Berlin [indiscernible] in the last 12 months. Now some of that -- a lot capacity has been taken over. It is simply their regulatory gaming by the providers, NATS in the U.K. NATS in the U.K. are doing some system upgrade, and most of the delays, most of the system upgrade was seems to take place between 5:00 a.m. and 7:00 a.m. on a Saturday morning and a Sunday morning. Now I -- we -- anybody knows anybody, the people working in IT, millennials do not work at 5:00 a.m. on a Saturday morning or a Sunday morning, yet we have a wave of delays. Typically, we get the morning, we have 39 departures out of Stansted between 5:00 a.m. and 8:00 a.m., and 32 of those 35 aircraft were delayed largely because of this system upgrade work being undertaken by NATS. I mean, it's complete bullshit. They are just understaffed, and they -- lots…

It's over to the line of Duane Pfennigwerth at Evercore ISI.

Michael, do you have examples, historically, of basis that Ryanair have closed? Or you switched completely from serving a market with a local aircraft to serving the market with aircraft from other bases? It seems like where you are today, given the number of bases and the network that you have, this would be really easy. What prevents you from doing this more aggressively?

Okay, it's good question, Duane. Unfortunately, I mean, we do have examples in the past. The obvious one was Copenhagen about two years ago when we announced the forward aircraft based there. We've got attacked by the Danish union, and we flipped the aircraft out of Copenhagen and based them in the U.K. [indiscernible] and a couple of other airports and have still over that last two years grown to be the number three airline. Are we number two or number three? The number three behind Norwegian and SAS. We're the number three airline in Copenhagen with no aircraft based there. However, and it is absolutely critical, we are not talking about base closures here. Base closures create current [indiscernible] opportunity for competitors to arrive in and take advantage of the work we've done over many years in growing bases. What we're talking about is moving a proportion of aircraft out of the base. And so say, if you have aircraft and has 10 aircraft based there, you probably have 20 aircraft worth of flying to and from that base because 10 aircraft will be in base and 10 aircraft will be at other bases outside that base that are flying inbound into those bases. And what we're talking about doing is if we are taking [indiscernible] our business being hit by customer confidence or lower fares in one market, we might reduce from 10 aircraft in the base to, I don't know, 5 or 6 aircraft. Some of those aircraft will go -- we could increase. There will be very little reduction in capacity at that base because we might allocate about 14 of the aircraft elsewhere to fly in and out that base. So there's still be largely about 20 aircraft worth of flying to and from the…

Yes, with the network you have today, it seems very straightforward.

Okay, we are now over to Kathryn Leonard at Numis Securities.

Just two really quick ones to finish off. Just without the ancillaries, you mentioned the full year results that you -- Michael, that you saw allocated seating would probably desaturated around 50% level, which you reached in March '18. I just wonder, given the commentary, have you sort of -- have your thoughts on that, in terms of saturation, priority boarding, allocated seating, changed outputs from there? And then secondly, just really briefly on the -- you mentioned on the recorded comments U.K. and U.S. ownership, voting rights, et cetera, and disenfranchise-ation. Just in terms of -- could you actually tell me what percentage of your shareholders are U.K. and U.S. at the minute, please?

Okay, thanks. No, sorry, we may have gotten -- we've communicated [indiscernible] allocated seat or the priority board -- sorry, allocate -- reserved seating, we think will max out at around 50% of passengers, we're not there yet. We're close to it. Priority board, again, we would limit priority boarding. It's already limited to just under 50% of passengers. It's limited to I think 90 passengers per flight. And beyond that, it makes no sense to me, it's not priority boarding if it's more than or -- at or more than 50% of passengers. So there is those the reserved seating, priority boarding are continuing to grow strongly as we retail to better using the mobile app. Brexit, again, and we would continue to caution, we have long believed that the risk of Brexit is being underestimated. We still, like most of the market, believe that there will be a transition agreements that would at least get us from April '19 through to December 2020, mainly because we don't see any other outcome. But there is a growing risk, I think, of political uncertainty in the U.K., and that may lead to everybody falling back into a Brexit, a hard Brexit. In those circumstances, at the moment, we have about 44% of the stock is currently held by non-EUs, about 20% of the stock is held by U.K. -- currently, U.K. shareholders. We think half of that 10% would we flag pretty readily into European shareholding, half that won't. And therefore, we run the risk of running between 44% and 54% non-EU shareholding in a hard Brexit scenario. In those circumstances, we would immediately disenfranchise all non-Brexit shareholders, which would be the ADRs currently, close to say about 10% of the U.K. shareholders. We would also put in place the restriction we've exercised a couple of times before in that those who are U.K. shareholders who are not able to reflag to Europe. They would immediately be same restrictions that were previously placed on at the ADR, and that is they can only sell to an EU share resident or EU national shareholder, resident shareholder, which was readily over a very limited period of time, we think weeks or months, bringing us back to a 50.1% EU ownership. And once we get back to 50.1% ownership, we would then probably -- we would then remove or we would reinstate the voting capacity of non-EU shareholders, but it will be very important to us to ensure that we protect our EU ownership and control in a hard Brexit environment. And we've had extensive discussion with the European Commission that others, regulatory agencies, who seem reasonably comfortable that those measures would ensure that we continue to remain EU-owned and controlled even in a hard Brexit scenario. Juliusz, Neil, do you want to add anything on that?

No, that's a good summary.

This is the final question for today, and it's over the line of James Goodall at Redburn.

Just a quick one from me. What's your current thinking in terms of revenue management between your fare revenue and your ancillary revenue? I guess what I'm trying to ask then is, to what extent, if any, you're allowing ancillary revenue to cannibalize fares?

We're not. We're going to allow and consider it to cannibalize fares. Our current thinking, we're still I think in year three or year 4 of our 5 year program to get ancillary revenues to 30% of total revenues. We've got there 18 months early. Partly, that's a function of the fact that the yields environment has been weaker in Q1 than we had originally thought with the move of Easter into Q4. We don't allow -- we don't run ancillaries here to cannibalize underlying airfares. What drives underlying airfares in Ryanair is our commitment to being load factor active price passive. And therefore, we are price takers. In the current environment where we think -- and this is not new today. I mean, on the full year results, when there was a lot of optimism this year that airfares will rise higher into the year, we are very cautious. We don't see it. We're continuing to grow very strongly. I mean, we will get to probably 130 million passengers this year, and that's very strong growth off 139 million this year. That's 10 million passenger growth. An awful lot of our own yield softness comes from our rate of growth. You see other much smaller airlines that a Norwegian, the Wizz is growing at 10%, 20% month-on-month. But I mean, their growth, they may add about 4 or 5 million passengers this year. We'll have double that, 10 million passengers. So we -- ancillaries are performing strongly. I mean, that is the major of the work that's being done by Kenny and his team on the digital side and also John Hurley and his team on the lab side. And we continue to see that profit continuing to grow, but we're not running down the underlying average fare so…

Okay. Folks, I think that's -- where we are. Thank you for participating in the call. If anybody has any further or follow-up questions, Shane O'toole is here with -- and the IR team in Dublin, we'll be happy to answer the questions. We know roadshow, as obvious, on the Q1 results, but we will continue to communicate with you as best as we can. And we will, hopefully, lead up to the half-year results in, I think, at the end of October. We'll be on comprehensive roadshow at that date. Thanks very much, everybody. Good talking to you. Bye-bye.

This now concludes the call. Thank you all very much for attending. You may now disconnect your lines.