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Ryanair Holdings (NASDAQ:RYAAY)

Q3 2014 Earnings Call

February 03, 2014 9:30 am ET

Executives

Michael O'Leary - Chief Executive Officer, Executive Director, Member of Nomination Committee, Member of Executive Committee, Chief Executive Officer of Ryanair Limited and Director of Ryanair Limited

Howard Millar - Chief Financial Officer and Deputy Chief Executive

David O'Brien

Jimmy Dempsey

Analysts

Savanthi Syth - Raymond James & Associates, Inc., Research Division

Stephen Furlong - Davy, Research Division

Alexia Dogani - Goldman Sachs Group Inc., Research Division

Oliver Sleath - Barclays Capital, Research Division

Jarrod Castle - UBS Investment Bank, Research Division

Tim Marshall - Redburn Partners LLP, Research Division

Penelope Butcher - Morgan Stanley, Research Division

Suzanne R. Todd - Morgan Stanley, Research Division

Edward Stanford

Robin Byde - Cantor Fitzgerald Europe, Research Division

Johannes Braun - Commerzbank AG, Research Division

Anand Date - Deutsche Bank AG, Research Division

Neil Glynn - Crédit Suisse AG, Research Division

James Hollins - Investec Securities (UK), Research Division

Andrew Light - Citigroup Inc, Research Division

Donal O'Neill - Goodbody Stockbrokers, Research Division

Operator

Good day, and welcome to the Q3 2014 Results Investor and Analyst Conference Call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Michael O'Leary. Please go ahead, sir.

Michael O'Leary

Okay, good afternoon, ladies and gentlemen. You're all very welcome to our Q3 Results Call. As you have seen, we have put the detail of the press release. The full MD&A and the investor presentation have been on the website since early this morning. You'll find it on the Investor Relations page at the ryanair.com website.

I therefore just have to do some summary remarks on this, and we'll open it up to questions. I'm joined here in Dublin by the usual crew. I have Howard; Neil; Jimmy; John; and David O'Brien, who is sitting in as well, our new commercial -- our Head of Commercial. Michael Cawley should be joining us from London.

As you have seen this morning, the Q3 loss of EUR 35 million is in line with the previous guidance and mainly due to a 9% fall in average fares and weaker sterling. We responded to that weaker pricing environment quickly last September with aggressive seat promotions and lower fares. That has stimulated traffic across all markets, resulting in a 6% growth in Q3 traffic and a 1% rise in monthly load factors. Ancillary revenues have continued to perform well and have grown by 13% during the period. Excluding fuel, Q3 sector length adjusted unit costs fell by 9% as we continued to execute and deliver industry-leading cost control.

The new routes and bases are performing well. In December, we opened 4 new Italian bases in Rome, Fiumicino; Catania and Palermo in Sicily; and Lamezia in the south of Italy. We've also announced 4 new bases for spring '14 at Brussels, Zaventem, opens at the end of February; Athens and Thessaloniki in the 1st of April; and Lisbon on the 2nd of April. Advanced bookings of these new routes are well ahead of expectations. We expect these new bases to provide substantial growth opportunities for Ryanair, particularly as we begin to take deliveries in September 2014 of our new 175 Boeing 737 aircraft order. Over the next 5 years, as we grow from 80 million to 110 million customers annually, we expect a significant proportion of this growth to take place at primary airports such as Dublin and Stansted; Lisbon; Rome, Fiumicino; and Brussels, Zaventem, where high-fare incumbents have financially weaker restructuring.

In Q3, we announced a series of initiatives to further improve our already industry-leading customer service. In addition now therefore to the lowest fares, the most on-time flights, the fewest lost bags, the fewest customer complaints and the youngest fleet, Ryanair passengers are now enjoying an easier-to-use website, a free small second carry-on bag, quiet flights in early morning and late evening, a 24-hour grace period to correct minor bookings, significantly reduced boarding card and airport bag fees and a new service to cater for groups and business travel across the network. This weekend or the weekend just gone, we returned to allocated seats on all flights, as a result of which, our passengers can now preselect their chosen seats on-board either when making their original booking or during the 30 days prior to departure when they have to come back in and check in online. The uptake of reserved and allocated seatings has grown significantly in the last weeks of January, and it now appears that the sales of reserved and allocating seats will exceed the revenue loss from cutting of some of these airport and bag fees, which were paid by very few passengers. We hope that this should enable us to continue to deliver strong growth in ancillary revenues during FY '15.

We are also continuing to roll out an extensive overhaul of our website and digital strategy. This process started last November when we launched a new, easier-to-use website, reducing the booking process from 17 to 5 clicks. In December, we launched the My Ryanair customer registration service, which has had a very significant uptake among our customers, allowing them to securely store their personal and payment details on board so that they don't have to keep typing it in every time they interact with the website.

We are on target to roll out mobile boarding passes in April, a new travel product by the end of May, and we will have a brand-new, significantly easier-to-use website by the end of April and an industry-leading mobile app by the end of June. In addition to these digital improvements, we're also broadening our own distribution base. We're very pleased to have been the first low-fares airline to partner with Google's European web search function, currently available in most of the major EU markets but with more EU countries to follow. We think the Google Flight Search function will become the price comparison website of choice for consumers all over Europe. And we look forward to continue to work closely with Google so that everybody keying-in cheap flights or low-cost flights around Europe will see our -- Ryanair's flights and inventory. And the important thing in the ranking in the Google system on shorthaul is that the lowest fares are ranked top of the page, and therefore, we would expect to be ranked top of the page in 99.9% of all searches.

In addition to that, we are in continuing negotiations with a number of the major GDS systems. I don't want to comment too much more on that other than to say that we expect to be available in one or more of the GDS systems by probably midyear of 2014. And we think that this combination of the improved Ryanair website, available on a strong or powerful price search functions like Google, and GDS availability will significantly widen Ryanair's distribution and give us an entry into or make us much more visible to corporate travel agents and the larger business houses, particularly as we expand our services into a number of major airports over the -- over this year.

In terms of fuel, we have -- as you know, we're 90% hedged for FY '14 at a cost of about $98 per barrel. We've taken advantage of recent oil price weaknesses to hedge out next year at approximately $96 a barrel, but together with the benefit of the weaker dollar, it means that we've locked away costs -- fuel cost savings of approximately EUR 80 million for FY '15.

The balance sheet remains one of the strongest in the industry. By the end of Q3, we completed just over EUR 400 million in share buybacks. We announced a systemic share buyback program to be completed by the end of March for another EUR 70 million, which will bring us to almost EUR 490 million, the total of buybacks done this year. That's about EUR 90 million ahead of the original EUR 400 million we planned. We remain on target to return another EUR 500 million to shareholders next year. And our ambition is to probably pay another one-off or a special dividend sometime towards the back end of FY '15.

In terms of the full year guidance. We -- the market pricing remains soft but is no longer declining. Because we reacted quickly to last autumn's weaknesses with a range of lower fares, seat promotions and a recently increased advertising and marketing spend, we're seeing significantly stronger forward bookings in Q4 despite the fact that we don't have Easter in Q4 this year. And forward bookings into FY '15, particularly Q1 of FY '15, are running significantly ahead of last year's Q1, even allowing for the fact that Easter is in this year's Q1.

Thanks to the earlier launch of these new bases in Italy, and Brussels, Zaventem and rising load factors, we expect our full year traffic to rise slightly to about 81.5 million. Based on current visibility, we expect the Q4 yields to decline by approximately 8%. Think about half of that is the absence of Easter in this year's Q4. So an underlying 4% decline, but this is better than the original projection with when -- the original projection of 10% for Q4. As full year traffic will be slightly stronger, our focus on cost control delivers a 4% fall in Q4, x fuel unit cost, we're now confident that the full year net profit outturn will finish in the range of EUR 500 million to EUR 520 million, as previously guided.

We put -- the MD&A is up on the website. And rather than to ask Howard to read through it, I think we'll just -- we'll assume everybody has seen it, so that we can maximize the time for questions. Just before I open it up to questions, please, I know we do this every year on the Q3s, we're not going to give any guidance into FY '15. Please don't ask for yields, loads or anything else out into FY '15 other than the fuel hedging which we have now done. But other than that, we'll try to answer any questions you have as best we can for the remainder of this year and any of the business issues that you'd like us to touch upon.

Okay, LeAnn, could you open it up for questions, please?

Question-and-Answer Session

Operator

[Operator Instructions] We will take our first question from Savanthi Syth with Raymond James.

Savanthi Syth - Raymond James & Associates, Inc., Research Division

Just on your commentary about growth coming from primary airports in the future. Just wondering what kind of pressure that will add to costs then; and maybe what the airport handling costs per passenger, what the difference is between primary airports and secondary airports today.

Michael O'Leary

Thank you. I -- in terms of costs, primary airports are more expensive than our average at the moment, but they'll be a relatively small proportion of the overall airports traffic for us in FY '15. Handling costs tend not to be that much. Well, there's a little differential but not that much. And I would also point to the fact that at a number of these major airports, increasingly, these major airports are coming to us recognizing that the flag carrier or the incumbent is likely to cut a significant proportion of its existing either domestic or intra-European travel. Now therefore, we would point to a 10-year growth deal, for example, at London Stansted. The fact that the growth that Dublin is now taking place because the Irish government have, I'd like to be fair to them, been quite visionary in scrapping the travel tax. There will be some airports, such as the Zaventems and the Fiumicinos, where the average the -- airport or the passenger fees would be higher than our average, but they'll form a relatively small proportion of our overall traffic next year. So whereas there'll be a small rise, I think, in the average of the airports and handing costs into FY '15 and FY '16, it won't to be significant or material.

Savanthi Syth - Raymond James & Associates, Inc., Research Division

Understood. And then just on the retirement plans, your fleet plan, has there been any change on like the timing of the retirement of the 60 aircraft?

Howard Millar

Savi, we pretty much went with the plan we gave out in November, which would see our fleet rise to 410 aircraft by March 19.

Operator

And we take our next question from Stephen Furlong with Davy.

Stephen Furlong - Davy, Research Division

Just 2 ones. Can you just talk about the allocated seating, where you see it changes in any way the business? Obviously, it's a revenue benefit, but in terms of any turnaround times on any airport or -- just double check that and how that works, particularly with some of the bigger airports. And the second just question, with the aircraft starting in September, maybe Howard can just talk about the financing plan of that. That would be great.

Michael O'Leary

Okay, we've -- I'll ask David O'Brien, the new -- or Head of Commercial, to sit in. And having previously come from operations, I can think of nobody better to give us a briefing on how the allocated seating has gone over the first 2.5 days. And then I'll ask Howard to do the aircraft financing. So David?

David O'Brien

Yes, we launched on Saturday. It's a pretty significant change. However, there's been no identifiable effect on punctuality. It's gone well. We opened a help desk in Dublin for any of our airports with difficulties. And from 2,000 flights, we had 4 queries. So we closed the desk on Sunday morning. It's -- we're satisfied it should have no material effect on our operational performance.

Michael O'Leary

I think, as Dave said, we still have some customers that are boarding with allocated seats and thinking it's still free seating, but it's not presently...

David O'Brien

That will go over time. That will vanish over time. So it had no operational penalty whatsoever.

Howard Millar

Okay, Stephen, in terms of aircraft financing, well I think we flagged up earlier on in the year that with the change in x-ing [ph] and financing, we previously paid a onetime fee of 4%. That's now down to not quite double, but it won't be far off doubling. That means that it's now opportune for us to look at perhaps using a more of a capital market products to fund our business. Within that, we would be looking to increase our range of financing, including unsecured debt or perhaps a EETC product down the line. So we need to look at whether we get a raising or not. We're currently evaluating that process. And that would be the precursor to doing either unsecured or indeed secured financing using EETC. Over the medium term, I would expect that we will have a mix of what we've done traditionally, be it sale and leaseback type transactions and also some x-ing [ph] and financing. But I think the capital markets at this point in time are particularly attractive, so we should look to take advantage of that.

Operator

And we take our next question from Alexia Dogani with Goldman Sachs.

Alexia Dogani - Goldman Sachs Group Inc., Research Division

I had 3 questions, please. Just firstly on capacity for next year, can you give us an update whether you have changed the timing of the lease retirements over the summer, and how the 11 aircraft that are going to be delivered by March are slightly spread out over the winter season? And then my second question is the recent reallocation of capacity towards primary airports. Where have you funded that growth from -- i.e., where have you taken aircraft out to put into Athens, Rome and Brussels? And then my last question is, just when we start thinking about unit cost, clearly, you flagged the factor that advertising costs will be higher year-on-year, and IT costs. Is there any other sort of cost item we should be thinking about when we look at next year?

Michael O'Leary

Thank you. Howard, do you want to take the capacity question?

Howard Millar

Yes. Well, obviously, we -- as you quite rightly pointed out, we've launched new bases at Zaventem and in Italy and Athens and Thessaloniki as well. To assist us with additional lift over this summer, we have entered into some short-term lease arrangements, which you will see us get an additional 5 aircraft. Those aircraft become available to us in May, and we plan to run them through September to give us out additional lift we need to satisfy that demand. In terms of another hand backs, we did extend during this year some of the 8 of the 10 aircraft leases. We extended those in favorable terms. That also maintains our capacity at just short of 300 as we move into April. And then we'll have those additional 5 aircraft that will operate across the summer for May. So kind of peak capacity in terms of aircraft. We've got 303 aircraft as we move across the summer, which if my memory serves me right, is similar to what we had last year with 305.

Michael O'Leary

I'm taking the second part of the question, Alexia, the reallocation of the capacity. You're not talking about a lot of capacity here. We have 2 aircraft allocated to Charleroi -- sorry, no: 2 in Athens; we have 4 in Ciampino, Rome; and 4 in Zaventem. Most of that, some of that aircraft, 2 have come from Charleroi. Most of davco [ph] will come from the reallocation of aircraft away from Spain, where for the last year, the government has been -- our government and Aena have been doubling airport fees and the Eurocontrol taxes. There's also some reallocation within Italy to find the aircraft for the Fiumicino bases. So generally speaking, the reallocations are taking place within markets and some aircraft coming out for -- still coming out of Spain compared to this time last year. We will be relatively flat in terms of capacity through the summer even with the lease-ins, but we begin to take the deliveries in October from Boeing. And one of the things we believe is that, obviously, with new bases in places like Zaventem and Lisbon, Athens and Fiumicino, they will -- we'll be grounding fewer aircraft next winter and flying more business-type flights from those major cities during the winter period. In terms of the marketing costs and IT costs, remember, if you take our unit cost, and it's on Page 4 of the investor presentation, well, we have the lowest unit cost in the industry. Our total sales, marketing and other cost, which is largely the convert of our ancillary revenue costs, are EUR 2 per passenger. We intend to triple the advertising and marketing budget this year from about a spend of about EUR 12 million last year to a spend probably EUR 35 million, EUR 36 million, but that's less than EUR 0.50 per passenger on a unit cost base. You really won't notice that. And while we intend to commit to that kind of spending, if the advance bookings remain strong or the forward bookings remain strong, some of it may not get spent. We will do a little bit of -- say, of advertising and marketing. We're also looking to get television advertising to support the launch of the new website, which is due sometime around April, and also to do a bit more of the brand -- brand-led advertising [indiscernible] and be kind of focusing not just on -- historically, we've always just gone out there with a cheap price advert. And really, we've won the argument on pricing. Nobody comes close to us on pricing anymore. But I think we will be doing a little bit more on customer service, punctuality, family, product, better website, et cetera. IT costs, yes, we are recruiting some more IT staff resources. We're taking a lot of that, and particularly the website development and the front-end development, in-house ourselves again, but it's not material. It would need -- it will be in the less than a couple of million a year in terms of salaries and costs you well noted. So there's no fundamental cost curve coming at us over the next 12 months that we can see. The only thing that we can't see yet is whether there's any kind of surprises on Eurocontrol fees or the kind of European bureaucratic price increases like AESA. But generally speaking, with volumes in Spain declining, Italy fairly wary, and actually in fact, some of them are now introducing discounts, I don't think you're going to see a repetition of the kind of major government-led price rises in Italy or in Spain that we've seen in the last 2 years. So with fuel locked away, lower-cost aircraft being delivered, a reasonable mix of growth incentive schemes at secondary airports helping us to fund somewhat more expensive growth at primary airports and the ownership and maintenance locked away, in reality, we think the cost orient in FY '15 is going to be one of continuing cost discipline, plus or minus sector length.

Alexia Dogani - Goldman Sachs Group Inc., Research Division

Okay, great. And are you willing to give us a guidance on sector length?

Unknown Executive

Yes.

Michael O'Leary

Honestly, no, because it's still too early. Like, much depends, at the moment, still on where we -- how we finalize. We're now working to finalize the winter schedules. And a lot depends on where -- which routes, and a lot of those negotiations are still underway.

Operator

And we have our next question from Oliver Sleath with Barclays.

Oliver Sleath - Barclays Capital, Research Division

Just 3 questions, please. Firstly, on GDS. I know you're reluctant to talk too much, Michael, but I just wondered if you could say, because you're on another set of system, does that mean that you can add GDS functionality with relatively little added costs versus somebody like easyJet, the auto bus [ph] book system? That's the first question. Second question is just could you comment on the kind of yield trends you're seeing in primary airports like Fiumicino, and maybe forward bookings at Brussels, compared to your network average? It sounds like everything is fairly subdued right now with all the promotions, but any color you could add there? And then just thirdly, for Howard, what should we think in terms of ancillary revenue growth for Q4 given it sounds like uptake on allocated seating is a bit stronger than you'd previously expected?

Michael O'Leary

Yes, thanks. Yes, in the discussion with the GDS systems, because we are on Navitaire, they can take a straightforward API, which is a feed directly from Navitaire. It's not like flicking a switch. There is some kind of programming work that will need to be done, but we're talking a matter of weeks from -- if we reach agreement with one of the GD, one or more GA, it would be a matter of weeks to turn it on and no more than that. So it's a relatively straightforward process. Most of the discussion at the moment, obviously, their focus is around whether we're going to allow them to have access to all of our fare inventory. And we're in -- disinclined to give them access to our very lowest price, which we think we should continue to distribute through the ryanair.com website and across price comparison sites like the Google Flight Search, and also costs, and we're down to very, very small. And it's going to be very cheap distribution if we decide to proceed with it. But clearly, there's certain risks with that, opening ourselves up into travel agency distribution and everything else, but if we're going to go after that business market, which we are, and there's a combination of the business market and primary airports, we do need to have some GDS distribution there. I don't think we will be on all the GDS systems, but we'll certainly be, I suspect, on 1 or 2 by midyear, and then we'll see where it goes from there. On yield trends, again, it's far too early to say. I mean, we've just launched the Rome base just before Christmas. The Lisbon base is coming at the end of February. Zaventem is coming at the end of February. What we see at the moment is very strong forward bookings at those bases but at relatively low yields because we go in there with lots of cheap seats, making a virtue of the fact that low fares have finally arrived for the first time in Zaventem, at Lisbon, in Athens and in Rome, Fiumicino. But really, we won't get a good feel for the yields profile until we actually have been flying the base for a month or 2 and you get that mix then of the people who book early for the cheap seats and the kind of walk-up fares of which they would appear to be quite a few day closer in the walk-up fares, the business type fares, which are typically booked in the day or days prior to travel. So thus far, I mean, with no great surprise. We have very strong forward bookings on those and -- at the primary airports, but because we're selling seats at a fraction, typically 40% -- 50%, 40% of the cost of the incumbents, we won't have a good feel for the yields until we've been in there for a couple of months and established a position. And Howard, on the ancillary?

Howard Millar

Yes, on ancillary revenues, there's a couple of moving parts to that. Firstly, you may recall we increased the admin charge on the 5th of March last year from EUR 6 to EUR 7 -- or GBP 6 to GBP 7. So that will annualize in the early part of March. So we'll still get some benefit of that through January and February. We have, as part of our customer initiatives, reduced some of our charges, so that will be a net negative. However, the early indications is that reserved seating is going -- or allocated -- and the allocated seating is going well. So overall, for Q4, we would expect to see certainly high-single-digit, possibly 10%, increase in ancillary revenue per passenger over that period.

Operator

And the next question comes from Jarrod Castle with UBS London.

Jarrod Castle - UBS Investment Bank, Research Division

Two or 3 questions. You've spoken about GDSs, you've spoken about Google Flight Search. Would you have a look to do any kind of direct tie-ups with OTA's or land-based travel agents or the likes of BCD in terms of business travel agents? Secondly, can you just confirm? I guess, profitability at the primary airports, is this in line or better or worse than the secondary airports? Kind of just general commentary around that. And then just a quick one: Alitalia. You've got Lufthansa talking about any potential aid from Etihad as being unfair competition. How do you see the scenario panning out? Is it better that kind of Alitalia kind of continues to exist through some form of kind of aid? Or do you think kind of market forces should kind of let it be, so to speak?

Michael O'Leary

Okay. Direct tie-ups with agents, I mean, again, we wouldn't rule it out. But I'm not sure what a value an agency would bring to us. I mean, clearly, by putting ourselves out there by going hosting on GDSs, at some point perhaps later in this year, we're going to be available to travel agents. We'll appear on the green screens. We're not willing to pay the travel agents so -- but that model has largely changed. Travel agents may charge their customers a fee on top for the Ryanair service, but I think it's important that we are available, particularly with those agents who are in business houses, who now don't effectively see the Ryanair offering on their screens that you put the Ryanair screen up there, and a awful lot of the business house are now operating on the basis of a fee. So that gives the business the lowest fare that they can see and get paid a fee for it. To be honest, I have never heard of, I'm not sure who the agency was, BDS [ph]. We haven't heard of them, but that's not to say that we wouldn't at some point in time in the future. Whereas some large agent could demonstrate that they would bring some value to us and not be kind of cross-selling against us, which is in the past what agents tended to do, then we certainly wouldn't rule it out, but it's not on the agenda at the moment. Profitability at the primary airports, honestly, again, too early to say. I think what will depend ultimately is, as I've said, our entry at the primary airports is where will the yields fall. Undoubtedly, the primary airports are a little bit more expensive. It depends on what the ultimate yields will be there, but again, we're trying to at least tap into that marketplace that has been -- well clearly these is the move of the market towards the low-fare carriers. Unfortunately, there are many primary airports. They've never had exposure to a low-fare carrier because Ryanair hasn't been there, but they get exposure to us at a lot of those airports over the coming weeks and months, and I think there would be a significant uptake for us. If you look at it, clearly, we're not going to be, for example, first of all, places like Gatwick are full, but we will offer quite significant competition and choice to airlines at Gatwick. For example, you take -- we go into the Lisbon market, we'll be offering flights from Lisbon to London at a significant lower fares with the business product by a stand-stead. And that will, I think, there will be a significant -- we'll take a significant chunk of that market. But ultimately, profitability will depend on yields, but we will have the benefit of having larger aircraft, lower cost base, much more efficient operating cost. And if we have some kind of commensurate yields profiled to the cost profile of the primary airport, then they should be as profitable as our existing operation, and remember, our existing operation, which is largely focused on secondary airports, is still the most profitable airline in Europe by a distance. Nobody comes close to us on margins. Some -- there's others that there that report kind of pretax numbers and various other EBITDAR and EBIT somethings. We report net after tax profits, and nobody comes close. So if the couple of primary airport that we're entering are as profitable as our existing business, we'd be very happy. And the third one, Alitalia, I -- look, I think the -- we would always prefer that the markets would determine these things. But there is kind of a political realities in countries like Italy, in France, where, obviously, Air France continue to see enormous public subsidies that are called PSOs, which makes them legal. In Germany, Aer Lingus have -- or in Germany, Lufthansa has a quasi monopoly in Munich, which is a publicly funded airport, which is another hidden subsidy for the likes of Lufthansa. So we think the Lufthansa tend to cry when it's not them receiving the state aid, but they're very happy to have a monopoly down in Munich. I think the reality is Alitalia will be rescued by somebody. Clearly, the Italian post office is not the ideal candidate for rescuing Alitalia, but it's the only show in town at the moment. If Etihad goes ahead and provides some funding to Alitalia in much the same way as it did with Air Berlin, I wouldn't be surprised to see Lufthansa and some of the others complaining about this, but I think it's going to happen anyway. So I don't see much point in us complaining about it. I think what will happen is that you won't -- still won't have the kind of significant and deep-seated restructuring that Alitalia needs, but we do believe that an Etihad investment would lead to a similar reorganization that had taken recently in Air Berlin in the last year or 2, where there'll be a dramatic cut in Alitalia domestic and short-haul intra-European operations, and maybe more of a focus on their long-haul and feeding traffic to and from airports in the Gulf, but who knows. Certainly, the feedback we've had from the Italian airports, who are very exercised that Alitalia, no matter what happens, will have a significant cut and reduction in their domestic and short-haul intra- European operations, have been very exercised to get Ryanair to go in there and establish bases, and give them or guarantee them that we'll be there and we'll add capacity. If Alitalia contains to withdraw their capacity, that will continue to be the case. So we are, by far and away, the #1 airline in Italy, much significantly larger than Alitalia, a multiple of 3x or 4x the easyJets and Meridianas or anything else. I saw some kind of silly forecast there recently from some other airline, saying they were going to be the #2 airline in Fiumicino, which they won't be. There'll be the #3 airline in Fiumicino by the time we get finished with them because we have a very large and successful operation in Italy, and it's going to expand very rapidly over the next couple of years.

Operator

We take our next question from Tim Marshall with Redburn.

Tim Marshall - Redburn Partners LLP, Research Division

So first question is just in terms of all the changes that are taking place, reserved seating, the website, GDS, the management changes, are there any areas which you're sort of most focused in getting right or were the risks are perhaps highest?

Michael O'Leary

I think the ones we are most focused on are the ones that we're addressing, but I mean, the biggest challenge has been redesigning the website, making it much more usable, moving from a mobile app that doesn't work to one that will be the state-of-the-art by the end of June. I mean, this is a process. A lot of people think this process started last September, October, by -- when we have the process [ph] for it. This process started almost a year ago. So there's a major investment going on behind the scenes here in radically revamping the way we interact with customers, not just the service issues, which I think there's a lot of very positive feedback from customers on the service issues, but much more key is to make the distribution. I think for too many years, we've relied on the fact that we have a huge price advantage over everybody else, and therefore, it doesn't matter how bad our website is, people will simply stick on us all-day long. Now we have 81 million people who will stick on it all day long, but over the next year or 2, we intend to go after that floating 10 or 20 million of passengers who actually are willing to pay a premium to avoid a less-than-optimal website. We're going to give them a better-than-optimal website in -- by the end of April, a the super duper mobile app by the end of June, and it's not going to stop there. We're going to continue to invest heavily in our IT platform, in our digital marketing, in the way we improve the website, and make it easier for our customers to get the lowest fares so that we can get them on and off the website quickly, which creates more opportunity for other customers to come on the website and secure the lowest fares as well. So I think many of the service things, we changed, which have looked like kind of tenets of biblical proportion here for many years are not that difficult for us to do, although the allocated seating was a big logistical issue. As David has pointed out, we rolled it out on Saturday morning, was almost barely an issue. But the website and the mobile development are big and they are, I think, the gateway to a period of very strong growth for us over the next 2 to 3 years, where we're going to have to continue to segment our marketplace by getting the price sensitive people that only want the cheap seats. We're going to take them straight to that seat on that plane where that cheap price is available, while also giving ourselves our targeting business passengers or people who want slightly different services, such as the reserved sitting in front of the plane, boarding last, getting off first, whatever it is, but -- so I think the biggest challenge to us, and this has now been about 8 months in the cooking has been the redesign of the website and the mobile app. Howard, what's your biggest challenge?

Howard Millar

Well, I think, just this year, the amount of developments we're doing. You may remember, Tim, in June in London, I spoke about the digital marketing strategy. We talked about our project Amazon [ph], which is the My Ryanair. In some cases, we're actually at some of these 12 and 14 months. So it's a lot of development, but that development has been worked on over a period of time. Just delivering it on time, making sure it all works is our challenge, certainly, over the next couple of months.

Michael O'Leary

David, as you take over the commercial area, biggest challenge for you?

David O'Brien

Well, what interests me most since I have taken over this role is the volume of airports looking to engage with us on growth, and the challenge is going to be to sort out the best from amongst those, but it's more an opportunity than a challenge, to be honest, in that regard.

Michael O'Leary

Jimmy, anything you want to add?

Jimmy Dempsey

I think the -- well, one of the areas I look like at in treasury, like one of the big challenge for the business is successfully going through the capital markets process, and raising funding for the business over the next 3 to 5 years. There's a heavy delivery program coming from Boeing. But the business, given the underlying balance sheet and strength there, the underlying business should be rated favorably by the agencies, which will allow us to fund very successfully in the capital markets.

Michael O'Leary

Okay. Anything else, Tim?

Oliver Sleath - Barclays Capital, Research Division

Yes, 2 quick questions. Just the first quarter, 15 percentage of seats booked in terms of the comments on forward booking. What was the number there?

Michael O'Leary

You're not getting it? I mean, the number at this point in time too will be a little bit misleading because the Easter is in Q1, and isn't in the Q1 prior year comparable. But even stripping out easter, we are running significantly ahead in Q1 of where we were in bookings last year. Now part of that [indiscernible]

Tim Marshall - Redburn Partners LLP, Research Division

[indiscernible] the region sort of we're talking like 10%? Are we talking like 25%? Just to get some idea as to...

Michael O'Leary

I won't. Honestly, it won't help you to tell you what the percentage is because -- but what I would say to you though, and again, I want to temper that with some degree of caution. What we have been doing in the past was effectively ignoring bookings more than 4 or 5 months out. So we will be pricing up 5 or 6 months out because we weren't worried about it. We were allowing competitors there to price close to us 4 and 5 months out, and where we had the emergence of this kind of view at Ryanair. Somebody has only 10 or 15 quid more expenses than Ryanair further out, and then we would price down into 2 or 3 months prior to departure because, right, we got to get ourselves up to our targets, advanced booking [indiscernible], we'd be very aggressive. And then there was big price gap would open up between ourselves and the competition, but a lot of the price sensitive traffic would already have booked with the competition at that stage because there wasn't that much difference between us. Since last November, we've now been pricing down further out. Whereas our loads are significantly higher further out, the yields are significantly lower, but we would expect that to -- as we move through the month, we won't be pricing down as aggressively 2 and 3 months out. We'll still be pricing upwards into the day or day of flight. In all cases, the policy remains to price below all competitors on all routes. That continues to be the case even, for example, the recent weeks we've seen some sporadic price cutting by some of the smaller competitors here in Ireland where they were pricing up at around 29. They came down to 19. We were at 15. We went straight away to 9. So if anybody wants to price down in our market, we would simply go without even thinking about it. We'll go in and under, and maintain a significant price advantage against them. So forward bookings are significant -- significantly stronger into next year or into Q1, but Easter does -- [indiscernible] -- is on the back of a significantly lower yield on those forward bookings than we had at this time last year.

Penelope Butcher - Morgan Stanley, Research Division

Okay. I sort of have 2 more questions. But firstly, just the EUR 80 million fuel cost savings next year, include any impact from fuel burn savings? And then my final question is just on reflection, what would you suggest is the main reason for the drop in fares that we saw in the December quarter?

Michael O'Leary

The main reason of the drop of the fares when we were out there, opening up a lot of promotions and cheap seats. What was causing the fare weakness through the most of last summer with the exception of August, which is very strong, we think, it was just an underlying softness out there. There may have been some little bit of Ryanair image. There's underlying softness. Following up when we came out with a warning in September, we were followed within days by Norwegian, Aer Lingus, almost every other carrier with a notable exception of easyJet. So I think the market was just a bit softer. We respond very quickly, as we tend to do with these cases. We've clearly righted the forward bookings. The load factors are up. Yes, it's been at the cost of lower yields, but as you can see in Q3, where unit cost, sector length adjusted, fuel, excluding sector length, adjusted unit cost, down 9%, down another 4% in Q4. No other airline in Europe is delivering those kinds of unit cost savings. So the gap between us and all of our competitors' price fuel is actually widening now even as we move into some of the space where we've allowed them to have a lead over us in the last 12 or 18 months. All those gaps are going to get closed in the next 6 months.

Howard Millar

In terms of fuel, Tim, what we've done a lot of the -- we've taken a lot of the low-hanging fruit. We've taken down our average burn per hour by nearly 6% since 2011. So a lot of the easy ones have been done. So it's difficult at this stage to see if there's much more on it, but that doesn't mean we're going to stop looking, and we have a few things in mind that we're working on. But certainly, all of the big cuts have been done and anything else will be smaller, and I suppose more difficult to eke out.

Operator

The next question comes from Suzanne Todd with Morgan Stanley.

Suzanne R. Todd - Morgan Stanley, Research Division

Just one question on the December quarter yields, Michael. Could you say what the yield decline was at constant currency in the quarter year-on-year?

Michael O'Leary

Yes, when the sterling was down, sterling is the equivalent of -- has a 1% impact on the third quarter so 8% is just -- is slightly or it's about 1.25% with the impact of sterling. So obviously, the balancing then being just 7.75%

Operator

And the next question comes from Edward Stanford with Lazarus Partnership.

Edward Stanford

A question on the exercise to improve your focus on customer service in the market, and how long do you think it will take before the new messaging is accepted? And how long -- and how you're going to measure the progress with that, please?

Michael O'Leary

I think it's difficult to know. I mean, there's been a ready acceptance of the message, at least, over the last several months that we're trying to change. There maybe some kind of skepticism as to whether it's real or just a publicity stunt on our part. But I think what you see, we -- certainly, the feedback we've had from our poll, customers since Christmas, that the website has materially improved, moving from 17 to 5 clicks to make a booking. There's been very positive feedback on that. The second carry-on, small carry-on bag, very positive feedback on that. We would expect similar very positive feedback from the allocated seating, which starts this weekend. So every customer, remember, we are carrying 250,000 passengers a day. Every customer is seeing what our real tangible change is on a daily basis. I think when we move to the new website. You're seeing advancing website by the end of April. Then -- and it's associated with a program, an advertising program, a different approach to the media as well. We are now trying to -- we're interacting actively with the travel journalist and that kind of space where, previously, we would have been pretty dismissive of them, the GDS distribution availability in travel agents. Like, this is not a kind of some sort of warm, cultural re-branding exercise. They are very real and very meaningful changes both in terms of our flight practices, our fees, our charges, the customers are seeing on a daily basis every time they either book with us, fly with us or interact with the website. So I think you'll see the -- certainly, some of it translate into some more coverage of -- this change is real. They're serious about it. It is changing. There is kind of a myth out there that Ryanair is immovable. We have never changed since 1997 or whatever, 1987. Whenever -- sometimes, we may be a little bit slow to change, but once we get the message, nobody changes faster or quicker than we do, and that comes from having a very flat management structure and a pretty young, average age within the company. And so I think I would be very surprised if you don't see some kind of meaningful improvement or recognition of these changes through the second calendar quarter of this year. We see it in the financial results, yes, but then that's partly because Q1 will have Easter in it this year and a weak prior year comparable, all the rest of it. But I -- you're just going to judge it for yourself. And then when we roll out the website and the mobile app in April and June, there's a business product in May, there's family product probably by the end of May. It won't stop there. We are -- already have a team working on once we've redone the website by the end of April, where we're going next with the websites. We're looking at some of these web retailers, best-in-class, the Amazon's and some of the other booking dot-coms, and saying like, "Having done that, now what are we going to do?" We have teams of web developers, programmers here, and it's going to be a continuous improvement process. But you won't see it. The changes won't be as dramatic as the ones you'll see in April and June this year.

Operator

Your next question comes from Penny Butcher with Morgan Stanley.

Penelope Butcher - Morgan Stanley, Research Division

Just a quick few follow-ups from Suzanne's question. I just want to, perhaps, to ask another way some of the cost questions that have come up today. Conceptually going into fiscal '15, you've obviously been quite explicit on the fuel guidance. So looking at the cost x fuel, is that something that we could expect to continue, stage links aside, the run rates that you're exiting in Q4? I mean, how should we think about it that the reported number could actually be down given the volume growth that you are stimulating with the lower yields going into the summer season? Is that a fair way to think about the nonfuel costs overall?

Michael O'Leary

Honestly, it's just too premature at this stage, Penny. We're not going to go there into the Q, other than, obviously, what we've given you on the fuel, which is a known into Q '15. It's too early. We haven't finalized the budget forecast into Q '15. All I would say, sector length adjusted, I don't think it will be materially up or down. We would expect to continue to exercise a significant degree of cost discipline going forward, which will mean we'll be significantly better than any other airline in Europe, but that's about it at this stage. It's too early.

Penelope Butcher - Morgan Stanley, Research Division

Okay. That's fair. One other follow-up was with regard to sort of the, well, now pre-disposal to speak to the primary airports, and I think it makes -- it's clear why Italy and certain markets are definitely keen to engage. But I guess, you haven't really commented on, I would say, France and Germany as sort of country markets where there are arguably gaps in the primary airports. Does it go back to your earlier point that, perhaps, the subsidy environment, it just makes that not worth your time? Or are there opportunities we could think about in France or Germany, going forward, as well?

Michael O'Leary

I think, Penny, there's certainly opportunities in France and Germany going forward. But there is a much greater pressure, I think on primary airports in countries like Portugal, in Italy, in Greece, in Scandinavia, in Belgium, where you have an incumbent flag carrier and that is either financially weak going through a significant restructuring or likely facing a significant cut in its short loss-making short-haul capacity. There are more opportunities for us in those markets in the near-term the next 12, 18 months. I think David said that that's what we're seeing, and also and obviously Central Europe. That's where we are seeing the most, what is it, positive approaches on those airports?

David O'Brien

Yes. Absolutely, and they also happen to be the host to pretty weak incumbents who are doing very little for them.

Michael O'Leary

But we are in discussions with a number of the German airports, with a number of the French airports, who we have very good relationships with. And we don't have any bases in France, but we fly to 23 French airports. But I think there is a greater pressure on those primary airports where the incumbent is in kind of restructuring mode, and that's where we're getting, I would imagine, certainly the most favorable offers at this point in time. Is that fair to say?

David O'Brien

That's a fair to say.

Howard Millar

The reality is, though, we have very limited capacity to allocate. We pretty much allocated most of our capacity for pretty much all of this summer and into the start of the autumn. You may have noticed, Penny, over the last year or so, we have increased our presence in Germany opening up a few more airports. But certainly, the state of Air Berlin isn't getting any better. But I think, as Michael said, we're taking the best opportunity that lie in front of us at the moment. These bases aren't going anywhere in the near term. And perhaps, when we get some more capacity rolling into FY '16, it will be an opportunity to have a look at these places.

Operator

The next question comes from Robin Byde with Cantor Fitzgerald.

Robin Byde - Cantor Fitzgerald Europe, Research Division

Just 2 quick ones for me. Just on the timing of a potential special dividend, assuming you pay, would that be within this calendar year, say, beyond the AGM, so November time? And then just on parked up fleets, can you just update on how many aircraft you are currently parking up? I think you were saying on the last call, you're expecting 70 to 80 this winter.

Michael O'Leary

Okay. Special dividend this year, I would -- I'd be surprised if it's in the calendar year. I think it's more likely to be Q4 of our fiscal year so in the January, March periods. That's we're kind of working to at the moment. And the winter grounding, we're down -- remember, it's a variable number. I mean, there's less grounds on weekends than there is midweek. But the number towards the bottom, we previously had 70 to 90. We're now down at around 70 only because they -- some of the Italian bases have now started moving. So think about 70.

Operator

Next question comes from Johannes Braun from Commerzbank.

Johannes Braun - Commerzbank AG, Research Division

Just 3 rather technical ones for me. Firstly, can you comment on the currency impact you had on your unit costs in Q3? And secondly, regarding your hedging on what price are you hedged in terms of dollars for 2014, '15? And then finally, just on the fuel guidance for this year, is this still confirmed at plus EUR 130 million?

Howard Millar

Yes, Johannes, that's confirmed at EUR 130 million. In terms, then, on our cost, I gave the impact on our average fare was about 1.25%. On unit cost of the 6% saving, because we only have about 25% of our cost in Sterling, so it translates roughly to about less than 1%. So less than 1%, about 0.6 of 1% was due to Sterling. In terms of fuel for next year, well, our average exchange rate this year is running just under EUR 132. We would expect about EUR 134 as being the average for next year. So if you take where we were in terms of fuel, the average price this year was EUR 98 per barrel, that's moving down by about 2% to EUR 96 a barrel, and then it's about another 2% on currency as we go from EUR 132 to about EUR 134.

Operator

The next question comes from Anand Date with Deutsche Bank.

Anand Date - Deutsche Bank AG, Research Division

Just a quick one from me. I was just interested in what you're thinking is for the time frame you're planning to get any sort of payback from the brand strategy for advertising or customer service improvement? So if you're looking to change perspectives about how good Ryanair is, is there a point in time in which you say there might be yield headroom on the back of this?

Michael O'Leary

Let's be careful here. Because I'm not sure here that some of this is -- we're not expecting a payback per se. I think a lot of what we've done in terms of the customer service -- look, this is an airline that last year carried 81 million -- this year, it carries 81 million passengers, we have an 82% load factor, we have a plus 90%, close to on-time performance record and enormous repeat business. This works. We service 81 million price-sensitive customers we have or the 81 million customers who happen to need access to our specific airports. It works. So there's not something -- we're also going to make $0.5 million net after-tax profit, $0.5 billion rather, in after-tax profit. This is not something that's broken that somehow needs to be fixed. We do get -- generate a lot of media coverage, which by the way, we're happy to run with, which is all this kind of damascene conversion stuff, we've been torturing people for 28 years, and now we've suddenly woken up, we're going to be nice to people. We've always been nice to people for 28 years by not charging disproportionately high airfares, by giving them on-time flights, on brand new aircraft and delivering a brilliant service. There are aspects of it, however, where clearly, there's an opportunity for us to move into more mainline airports. As those more primary airports, you have a large slug of the traffic, doesn't pay for it's own ticket, is not particularly price-sensitive and does want a slightly different service, which is, they don't want a free seat, they want a seat in the front of the plane, they want another reserved seat, they want certain aspects of service, which in our old model, we didn't -- we would have said, "Hump you, you can take it, it's the same for everybody, if you don't like it, bugger off." Going forward, we now want to welcome, instead of telling that 10 million or 15 million people to bugger off. We say, "Look, come to us, if you want a specific allocated seat, we have an allocated seat for you. You want to carry a second carry-on bag, done. You want a business type product where you get fast access through security, done." We want to cater to all of those markets. And the comparison I make all the time is kind of IKEA and Lidl and Aldi. And you'll see Lidl and Aldi moving noticeably, having, certainly, in the Ireland, U.K. market, broken into the market very dramatically in recent years on the back of price, but now advertising very heavily, we use Irish beef, or we -- eat British vegetables for British consumers, quality at Lidl and -- we're doing the same thing. So rather than present this as -- transforming what's the payback on our -- most of what we're doing has no cost at all. We did it and there are reasons why we have certain policies in recent years. Free seating was designed originally post Lockerbie to get everybody to the boarding gate because everybody had to check in bags, and we needed to know who you were so that if you didn't show up at the boarding gate, we could get your bag off. We no longer need it because now only 20% of people check in their bag. And so the chances are if you don't show up at the boarding gate and haven't checked in, either 4 and 5 of you haven't checked in a bag, and if you're one of the people who have checked in a bag, there's only 30 or 40 bags in the whole of the plane. We get it off quickly without delaying the flight. So a lot of what we're doing has no cost implication for us at all, and we expect, although I wouldn't want to put in the cost-benefits analysis, we expect that there will be a very strong uptake in terms of the coverage of Ryanair, where we really are changing, we're trying to welcome families in particular, business people as well, we're catering for your needs. If there's something we're not doing that you think we should do, tell us and we'll bend over double and do that as well. So I'd expect to see -- I mean, I think, to the extent that we're going to see a payback, I think were seeing the payback already even though most of the initiatives haven't really rolled out yet, in the fact that we have much stronger advance bookings, we've had a very ready acceptance at a number of primary airports where we're now -- haven't even started flying. But we've gone in there and everybody knows about us already in Brussels, Zaventem and in Athens, David got an enormous welcome down there because the Olympic and Aegean are very high fare with not -- there's much alternatives down there. So I think we're seeing the payback immediately. We don't expect to see it in terms of higher fares. We didn't get into this business, and we're not changing aspect of our service so that we can charge people higher fares. I like periods like the last 9 months, where we can say our fares have gone down by 9% in the last 3 quarters because it puts further distance from our competitors, and lowest fare always wins. But what we want to do going forward is we are warmer, you're going to like the service, we are really trying to eliminate -- we're working very hard to eliminate those aspects of our service, which unnecessarily teed people off, and we no longer want to tee people off because we want everybody to like flying with Ryanair, not just for the savings in time and money, but also because we deliver great products and a great service.

Anand Date - Deutsche Bank AG, Research Division

Okay, that's interesting. Can I ask a follow-up, if that's all right?

Michael O'Leary

Sure.

Anand Date - Deutsche Bank AG, Research Division

So it sounds as if it's still volume, very much volume, that you want to convert more people to just believe that Ryanair has a good product, which, we know it is, et cetera, et cetera. Do you think that is going to have an impact on your booking curve, i.e., would you expect, all else equal, to be more booked earlier, so now you'll be yield managing the last 10 percentage points of load factor more aggressively?

Michael O'Leary

Personally, I think, yes, we expect our forward loads to be stronger. I think that will have 2 effects. One, it will result in -- slightly, in higher load factors going forward into the next year or 2, and there's been a noticeable difference between, say, for example, easyJet load factors and Ryanair's load factors in the last 2 years. I think a lot of that has to do with the fact that their website was more usable. We'll eliminate that shortcoming in the next number of months. So I think we'll have stronger forward bookings, although people will be getting much lower prices on Ryanair than any other airline well in advance. You'll have higher load factors. And yes, I expect, but more by virtue the fact that we'll be flying to a number of more primary airports and actively going after that business traffic, or the traffic that doesn't pay for its own tickets, that we would be selling higher fares close there in.

Operator

The next call -- question comes from Neil Glynn with Credit Suisse.

Neil Glynn - Crédit Suisse AG, Research Division

Just a question, really, following your move into Fiumicino in Rome, and obviously, Zaventem and Brussels. As you have been in number of cities where you have more than one airport, it's obviously growing with that. And I'm just interested in terms of whether that changes the way you manage the business at all. On one side, I could see maybe a better opportunity to tailor supply to demand, or on the other side, on the cost side, maybe more opportunities to trade airports within the same city off against one another?

Michael O'Leary

Yes. I wouldn't actually -- I mean, we've been serving cities with multiple airports for many years, London being the most obvious, we've been serving Luton, Stansted and Gatwick for many years now, back since 19 -- at the mid 1990s. In Barcelona, we serve Girona, Reus, El Prat. In Rome we now have Fiumicino and Ciampino. In Brussels we have Zaventem and Charleroi. And we actually have, up in Stockholm, we have Västerås and Skavsta. So no, we don't tend to tailor the market's update. What tends to happen in a lot of those cases, though is, the people who are either living around the airport that we fly to are the people who want to travel close to that airport as a destination tend to favor our services to those airports. But for example, with the -- there's communities there that will not go to Ciampino or will now fly, use us at Fiumicino. And there's clearly communities who live in Barcelona who would tend not to use Girona or Reus, but would certainly use El Prat. But the inbound market into those cities tends to be pretty flexible. And we'd go to whichever of the inbound airports you want to use, usually on the basis of price, timetable or airport destination. So no, I wouldn't expect it to be tailoring it, although there's no doubt that at the main -- major airport like El Prat in Barcelona, Barracas in Madrid, [indiscernible] Lisbon, Zaventem in Brussels, Fiumicino in Rome. There is a higher proportion of business passengers, politicians, bureaucrats, the people -- consultants, all the people that never for pay for their own flight and who only can go to the expensive airports. And I think, we have a major growth opportunity for us in the next 12, 24 months, both in seeing our load factors rise and in targeting those, particularly that kind of business traffic, our non-price-sensitive traffic by virtue of having an extensive and frequency and route network of those major airports.

Operator

And the next question comes from James Hollins with Investec.

James Hollins - Investec Securities (UK), Research Division

The first question is on -- you talked about the market pricing no longer declining. I mean, historically, you've talked about both of the competitive environment and also the customer backdrop being a little bit tougher. I just wonder which of those had gotten better or both? The second one is on a potential split of the EUR 500 million of dividends and buybacks. I think you were deliberately guiding more towards a special, wondering if you could any guidance on that. And the third one is a bit more general. I mean, this whole sort of consumer perception changed, and that's something us analysts, investors talk about a lot. Is this something which is very much -- something you're having to talk about in the U.K. and Ireland because of the media coverage around Ryanair and indeed, of yourself, or is this something that -- having to across Europe or in the rest of Europe or you regarded just as a decent operator with a decent product?

Michael O'Leary

I'll take those in reverse order, then. The consumer perception one is very much the story in Ireland, the U.K. and Spain. In most other countries, in Italy, for example, the comparable is Alitalia. Generally speaking, they're very good, but Ryanair is very well perceived. In Central Europe, in Poland, for example, where LOT is the alternative, we're very well perceived. So it tends to be the kind of -- the negativity that surrounds both Ryanair and myself, personally, tends to be confined to Ireland, the U.K. and Spain. And those are the markets where we are spending some considerable time, also me, myself, going -- may have [indiscernible], get warmer and cuddlier, which is very much the drive behind a lot of the changes we've been doing. The advantage of that, too, is there's a big appetite or market appetite out there for Ryanair's changing, they got it wrong, O'Leary is changing [indiscernible]. And we've garnered enormous press coverage in the recent months as a result of the change. Some of us say, some of it's skeptical, some of it -- well, if you're asking the question, is it real or just a PR stunt, then, it's absolutely real. The state of the EUR 500 million, as I said, we've set out a plan to return about EUR 1 billion to shareholders over a 2-year period. We've done -- by the end of March, we'll have done about EUR 480 million, that leaves us about EUR 520 million to do next year. Special dividend, I think, would be no less than it was the last time, but that would be something of the order about EUR 400...

David O'Brien

EUR 486 [ph]

Michael O'Leary

EUR 480 million-odd it would have been share buyback. So it's probably something of EUR 470 million, EUR 480 million special div, and a couple of small share buybacks in and around that to bring it up to EUR 1 billion return to shareholders over the 2-year period. And the first part of the question then, which was the market pricing.

Unknown Executive

[indiscernible]

Michael O'Leary

What we're trying to contrast is -- the kind of commentary we gave you in September, October, look, fares are falling, it's very steep, can't quite put our finger on why it is, et cetera, but year-on-year, there's a big material decline. Looking forward into the -- in Q4, you could see that the year's guidance is somewhat less negative than it was back then. Into Q1 next year, it would be less, but again, we have the Easter movement into Q1, so -- and a weak comparable. So I think whatever trend was emerging there in August, September, October last year, we have arrested it by responding quickly and aggressively with lower fares, price promotions and we seem to have generated a significant momentum into calendar Q1 and calendar Q2 of this year. We wouldn't want to put it any stronger than that.

James Hollins - Investec Securities (UK), Research Division

Okay, great. Just a, very quick follow up. Are you seeing any sort of crazy capacity moves in any areas or any routes which give you cause of concern into sort of spring, summer this year?

Michael O'Leary

Not really, most of the summer shakethroughs are already out there. You have some of the airlines, some of the mid-priced carriers like Norwegian and Vueling have some aircraft orders into this summer. I think most of that capacity is already announced. Vueling have announced bases in Rome. Fiumicino and Zaventem strangely seem to want to compete with us, which we welcome, all competitors. We like competition. Norwegian, they may still have some aircraft capacity coming this summer that isn't yet announced, but they have a lot of issues to juggle with at the moment, given the 787 and the long-haul issues, which are the challenges that they're dealing with. But we don't see any meaningful capacity coming on stream during summer 2015 or summer 2014 that isn't already announced. And in fact, in many respects, I think, we've probably announced more new route growth, certain new base growth in summer '14 than anybody expected, although it's largely by virtue of churning some of the underperforming aircraft and routes elsewhere.

Operator

And the next question comes from Andrew Light, Citigroup.

Andrew Light - Citigroup Inc, Research Division

A couple of quick questions. First of all, on reserved seating, you were able to comment on what you expect the take-up to be. I think you said, in the past, it's been like 30% to 60% when you were selling 45 premium seats. And secondly, on load factor, I mean, do you think you can close all of the 8-point gap or so with easyJet or is it partly just because you've got larger planes than they have?

Michael O'Leary

Well, reserved seating, I mean, I've got be careful with the number. It's too early to say yet now because we'll have the combination of both reserved seating and allocated seating. I think, previously, what we said, there were flights where we have sold 40% and 50% of the reserved seats previously. But it wouldn't have been a number on an ongoing basis across the entire fleet. It's not something I'd want to get into yet because I think if we made a guess at it, I think we would be wrong. We have seen quotes from competitors, saying that 25% or 30% of their seats are taken up of their allocated seats are being bought. That seems to us to be a reasonable number, but really, it's too early to say. I can't really predict how many will be taken up. But certainly, the -- every time we've added more reserved seats, there has been a significant uptake of the demand for those reserved seats, which is why I think one of the key things about moving to allocated seating is we no longer have to block off rows 3 and 4 for weights and balance reasons. So now, we have a much more consistent product, rows 1 to 5 will be sold as reserved seating. And there's no doubt, there's lots of flights that we will operate on particular routes during the week where we'd expect to sell, 100% of those seats will be taken up. But really, we'd want to let it settle down over a 4- to 6-month period before we get an accurate handle on it, Andrew. And I'd be nervous to say anything else other than that because we'll set off expectations that may or may not be managed. On load factor, I don't expect to close the gap with easyJet on load factor yet, although I think there's no doubt that our load factor will rise over the next year or 2. One of the interesting features of that will be the new website, and I think one of the things that easyJet has done well in the last year or 2 has been this kind of price fees, the price kind of...

David O'Brien

Finder.

Michael O'Leary

Pardon me?

David O'Brien

Fare Finder, you mean.

Michael O'Leary

The Fare Finder feature, where you'd click on to a fare on easyJet and it takes you straight to the aircraft or the seat where that fare is available. We will replicate that feature by the end of April and also not alone on it, but the difference would be that our Fare Finder fares will be significantly lower than easyJet's Fare Finder fares in all markets. So I think we would take a lot of that very price-sensitive traffic back off easyJet, where -- on the many routes that we compete with them because we have simply much lower air fares, and that would be good for consumers. I wouldn't expect -- there's an average load factor differential between us of about 6 or 7 percentage points, we're hovering around 82%, and they're around 89% year-round. But it does give us -- and it depends on how successful our Fare Finder feature will be, and we think it will be very successful. It does give us an enormous headroom for our profitable growth and expansion if we were to take up our load factor over the next 2 or 3 years by 2% a year or something like that. I think there's a real opportunity for us to do that and keep the traffic rising by seeing our load factors rise. I think to be fair to easyJet, and they've done a great job over the last year or 2, the website is very usable and user-friendly. And their load factors are significantly higher. Those are 2 areas of significant opportunity for us while growing off a much lower cost base. So I think we should have the humility to learn from our competitors when they're doing something well, and I think, we hopefully have that humility and make no -- we're not ashamed we'll be copying those aspects of the businesses that they do well. It's just they don't do cost base as well as we do.

Operator

The last question for today comes from Donald O'Neill with Goodbody.

Donal O'Neill - Goodbody Stockbrokers, Research Division

Last one on this, hopefully. Three quick questions. First one, on pricing in Q3, can you just give us a sense of how that developed month-on-month? So October, November, December? I guess my sense was that it was probably quite a bit stronger in December than the other 2 months. Second question, in the current quarter, how do you see the competition pricing, I guess, given that there has been a bit of a long slow drag from September into now, with pretty aggressive pricing across the markets? And the last question, we haven't heard any chat around an aircraft order for a while for a MAX order, and I just wonder, what our friends from Boeing and TAP [ph] weeks ago, what are in developments there?

Michael O'Leary

I think it's basically, the Q3 pricing, a lot of that was driven by the initiatives we launched at the back of -- at the end of August and September, where we opened up the pricing further out. So I think it's fair to say, the decline was easing where decline was at its greatest in October, slightly less in November, slightly less in December. But some of that was kind of a byproduct of the fact that we have begun selling out November and December more aggressively from the end of August into September. So the yield attrition was -- the rate of attrition was declining as we went through the quarter. Into Q4, it's hard to see. We look around the competitor pricing, we see occasional sort of price promotions from some of the smaller competitors. They're all pricing well above us, and there seems to be some commentary out there that we're pricing like lunatics and we're damaging everybody's business and we're pricing too low. I don't get any sense that we have the cost base, the unit cost base to be able to price down what we're pricing and still be profitable. But we don't see anybody at the moment who are aggressively trying to price in our markets because we're significantly lower than everybody else. And those occasional price promotions run by -- you can see the occasional one from Aer Lingus. We cover all of those by lowering our prices again, that seems to peter out fairly quickly. On the aircraft order side of the house, discussions continue with Boeing on the MAX. They've probably been interrupted, somewhat, I'd say, over the weekend by the glorious victory of the Seahawks in the Super Bowl. We don't expect to have any intelligent conversation with Boeing for at least another 2 or 3 days until they sober up again. But the dialogue continues. I mean, Boeing are continuing to develop the MAX. We are -- I expect to have another round of talks with them that are scheduled for February. But all of our focus at the moment is on taking the first aircraft deliveries next September, to say we're not under any pressure to take any more aircraft. We have the order book now essentially full out until the end of...

Howard Millar

Summer [indiscernible].

Michael O'Leary

Summer '18. And we are working -- but we are working closely with Boeing on the next order. And as they are -- as their own designs are evolving and they're still refining the engine efficiency at the moment, which continues to improve, we are in the tent as part of that dialogue and working closely with them. I don't think we can get to say anything more than that. We're not expecting to be announcing any new aircraft order for the next 6, maybe even 12 months, but we very much move at Boeing's pace. We have told Boeing, if they can produce the aircraft with a significant fuel saving, we would certainly be there and want to be there as one of the lead customers. And that position hasn't changed. Boeing themselves have said they want Ryanair to be the lead, one of the lead customers for new -- the MAX aircraft, and that continues to be case.

Donal O'Neill - Goodbody Stockbrokers, Research Division

And just sort of interest, would that potentially be on a larger gauge aircraft, a 195 or 197 aircraft?

Michael O'Leary

I don't want to get into those kind of discussions. But it will be, for whatever they are -- Boeing are working on. I think most of the discussions are around aircraft weight and engine performance, and that continues to be the case. All of our studies and work at the moment continues to be on a 189-seat aircraft on a like-for-like basis.

Okay. Ladies and gentlemen, thank you for participating in the call. As we stated and as usual, we're not doing a road show on the Q3 results. We do the half year and the full year. As John and the team were here in the new low-cost palace, the new Dublin office, if anybody wants to call us or come over and see us in the next couple of weeks, we're be very happy to see you. In the meantime, we keep our heads down, you'll continue to see significant development on the -- both the website, the digital platform and on the customer service. And I hope that those developments will be rewarded over the coming few quarters with stronger bookings, stronger load factors and an improved net profit performance than last year. Thanks very much everybody. I'll either see you or talk to you soon. Bye bye.

Operator

And that will conclude today's conference call. Thank you for your participation, ladies and gentlemen, you may now disconnect.

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Source: Ryanair Holdings Management Discusses Q3 2014 Results - Earnings Call Transcript

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