Jul 25, 2011
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 Neil Sorahan - Howard Millar - Chief Financial Officer and Deputy Chief Executive
Analysts
Eamonn Hughes - Goodbody Stockbrokers Neil Glynn - Crédit Suisse AG Andrew Light - Citigroup Inc Gerard Moore - Merrion Stockbrokers Ltd. Jonathan Wober - Societe Generale Cross Asset Research Peter Hyde - Liberum Capital Limited James Parker - Raymond James & Associates, Inc.
Tim Marshall - Redburn Partners LLP Brian Devine - NCB Group Limited Stephen Furlong - Davy Bob McAdoo - Avondale Partners, LLC Geoff van Klaveren - Deutsche Bank AG Joe Gill - Bloxham Stockbrokers Jarrod Castle - UBS Investment Bank
Operator
Good day, and welcome to the Ryanair Q1 Results Conference Call. Today's conference call 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 the Ryanair Q1 results call. I'm here with my colleagues in Dublin.
Howard Millar is joining unfortunately at the moment on the mobile phone from London, but we'll push on. As you have seen, the results this morning are on the website, the Investor page and the homepage.
This morning, we announced Q1 net profit of EUR 139 million, a slight increase of 1% on Q1 last year. Revenues were up 29% to EUR 1.15 billion, as traffic increased 18% and average fares rose 11%.
Unit costs rose by 14% due to a 49% increase in fuel costs. Excluding fuel, sector length adjusted unit costs fell by 1%.
The traffic growth in Q1 was flattered by the air space, the volcanic ash airspace, closures in April and May last year, which caused the cancellation of 9,500 flights and the loss of almost 1.5 million Ryanair passengers. So our 18% traffic growth combined with an 11% rise in average fares led to a 29% increase in revenues.
Significantly higher revenues were largely offset by higher costs, principally fuel, which rose 49% to EUR 427 million. Despite substantially higher fuel costs, we still recorded profit after tax of EUR 139 million, slightly up on Q1 of last year.
Our robust result is testimony to the strength of the Ryanair lowest fares, lowest cost model. Ancillary sales grew 22% to EUR 248 million, somewhat faster than traffic and amounted to 21% of total revenues.
We've recently started trials of reserved seating for the 21 extra legroom seats on selected routes for a fee of EUR 10 per seat. And if these trials are successful, particularly during the peak period, we'll roll out reserved seating across more of our longer routes in the network this winter.
Unit costs increased 14%, primarily fuel accounted for by fuel, which increased 49% to EUR 427 million. Excluding fuel, sector length adjusted they fell 1% as we rigorously controlled costs despite a 2% increase in basic pay for all staff from early April and Eurocontrol charges which rose 34% in the quarter and substantially higher and unjustified airport charges at Dublin Airport, which largely accounted for the 31% increase in airport fees.
Our new routes and bases at summer are performing well. We recently announced a 45th base in Manchester, which starts in October with 2 aircraft and 17 routes, rising to 4 aircraft and 26 routes in summer 2012.
A combination of recession and competitive capacity cuts continues to create significant growth opportunities across Europe as numerous airports aggressively compete against each other to attract Ryanair's growth. We expect Dublin Airport's traffic to fall in 2012, which will be its fourth consecutive annual fall due to the DAA monopolies unjustified 40% increase in airport charges.
This has led to winter capacity cuts by Ryanair and many other airlines. And we believe we'll see traffic again, as I said, for day 2011 fall again at Dublin.
Traffic in Dublin has plummeted by some 30% to just over 18 million passengers in 2011 from its 2007 peak of 24.5 million. We believe the Irish government can only reverse its downward spiral in air traffic and return to tourism and jobs growth when the DAA airport monopoly is broken up and replaced with competing terminals at Dublin and competing airports at Cork and Shannon, which will lead to a much more competitive airport charges and more efficient terminal facilities instead of the expensive white elephants, which the DAA have delivered over recent years.
We've recently submitted a proposal to the Irish government to deliver 5 million extra passengers annually over the next 5 years to kick start Irish tourism and job creation. This will create about 5,000 jobs in the Irish airport directly.
This growth proposal is based on airport charges falling to return to competitive levels here in Ireland and the government's scrapping the remaining EUR 3 tourist tax. And we still await the government's response to our proposal.
The latest U.K. Competition Commission's confirmation of its original 2008 recommendation that the BAA airport monopoly should be forced to sell Stansted and at least one Scottish airport will we hope finally end the BAA policy of using legal appeals to delay the sale.
These delaying tactics have not stopped the BAA at Stansted overcharging airlines, generating excessive monopoly profit by losing even more routes and traffic. We call on the U.K.
government to force the early sale of Stansted and one of the Scottish airports, and allow a competition between the U.K. airports in order to deliver better facilities and lower cost for airport users.
We intend to shortly launch legal proceedings against the BAA Stansted seeking a recovery of the substantial overcharges, which Ryanair believes it and other airlines have suffered at the BAA Stansted monopoly's hands in recent years, and which have been used to fund Ferrovial's acquisition and operation of Heathrow. Fuel prices remain stubbornly high as spot is trading at around $116 a barrel.
We're 90% hedged for FY '12 at about $86 per barrel, an 18% price increase on the previous year but significantly below current prices. We've taken advantage of recent price dips to hedge about 20% of Q1 of FY '13 at an average price of just over $100 per barrel.
Higher oil prices though are forcing competitors to further increase fuel surcharges and fares, which makes Ryanair low fares even more attractive. It will also drive further consolidation and more airlines will exit the industry this winter.
This would generate further growth opportunities for Ryanair because we operate the most fuel-efficient aircraft and at the lowest operating costs. The recent reason Brighter Planet survey ranked Ryanair as the greenest, cleanest airline in the world.
And that survey is available to you, if you care, on the ryanair.com website. In June, we signed an MOU with COMAC, a Chinese aircraft manufacturer, to enter discussions on the development of a new 200-seater, short-haul aircraft for Ryanair that should be available from 2018 onwards.
We believe this aircraft, which will be a larger version of the C919, would be a real alternative to the existing short-haul duopoly of Boeing and Airbus. Real competition in the aircraft manufacturing industry will deliver more choice and lower cost for airlines and passengers.
We also believe it will make economic sense for Ryanair to become, in time, a 2-aircraft operator if the present Boeing fees economies can be matched or improved by another aircraft manufacturer. Our outlook for the remainder of the year remains unchanged.
We anticipate traffic in FY '12 will grow by 4%, comprising 10% growth in H1 and will then fall by approximately 4% monthly in H2, which will be the first time in our history that we've contracted during a winter period. We expect average fares in FY '12 to rise by up to 12% due to the better mix of new routes and bases, our winter capacity cuts, higher competitor fares and fuel surcharges.
We also anticipate that Q2 yields will rise by between 12% to 15%. We expect operating cost per passenger for FY '12 to rise by 13%, primarily due to higher oil prices.
Excluding fuel, sector length adjusted costs should rise by no more than 2% mainly due to Eurocontrol, Dublin Airport and staff pay increases. However, with very little, limited visibility on H2 bookings or yields this time, our full year guidance remains sensibly unchanged as we expect profit after tax for FY '12 to be similar to the FY '11 results of EUR 400 million profit after tax.
Howard, do you want to take us to the MD&A?
Howard Millar
Yes, Michael. Thank you.
For the purposes of the MD&A, all figures and comments are by reference to the adjusted income statements, including the exceptional items referred to below. There were no exceptional items in the period ended June 30, 2011.
Exceptional items in the period ended June 30, 2010, amounted to a net of tax charge of EUR 44.8 million, reflecting the estimated cost relating to close of airspace in April and May of 2010 due to the volcanic ash disruptions. This estimate was still subsequently reduced to a net of tax amount of EUR 26.1 million at the year ended just on March 31, 2011.
Turning then to the summary of the results. Adjusted profit after tax increased by 1% to EUR 139.3 million compared to EUR 138.5 million in the period ended June 30, 2011, primarily due to an 8% increase in arbitrage and strong ancillary revenues, offset by 49% increase in fuel costs.
Total operating revenues increased by 29% to EUR 1,155 million as average fares rose by 11%. Ancillary revenues grew by 21%, faster than the 18% increase in past year numbers to EUR 247.7 million due to improved product mix and higher Internet-related revenues.
Total revenues per passenger, as a result, increased by 9% whilst load factor remained flat at 83% during the period. Total operating expenses increased by 35% to EUR 985.5 million, primarily due to an increase in fuel prices and a higher level of activity and operating cost associated with the growth of the airline.
Fuel, which represents 43% of total operating cost compared to 39% in the prior periods, increased by 49% to EUR 426.6 million due to the higher price per gallon paid and the 29% increase in the number of hours flown. Unit costs excluding fuel increased by 7%, and sector length adjusted, they fell by 1%; including fuel, unit costs rose by 14%.
Operating margin decreased by 4 points to 15%, while stock operating profit was flat at EUR 169.9 million. Adjusted earnings per share for the period was largely unchanged at EUR 0.0935 compared to EUR 0.0936 in the previous quarter.
On to the balance sheet. Gross cash increased by EUR 273.2 million to EUR 3.23 billion.
The group generated cash from operating activities of EUR 348.7 million, which funded net capital expenditure of EUR 3.4 million and debt repayments. Gross debt increased by EUR 78.3 million to EUR 3,571 million.
Net debt has fallen from EUR 708.8 million at March 31, 2011, to just EUR 357.3 million at the period end. That's the end of the MD&A.
Back to you, Michael.
Michael O'Leary
Okay. Thanks, Howard.
Okay. We're going to open it up for questions, if I could.
Please as you see, we've given you guidance for yields in Q2. That's as much we're doing on yield for the year, we have no idea yet on yield in Q3 and 4.
So in the interest of speed, I'd appreciate if nobody ask any silly questions about yield's guidance for Q2 or the second half. Other than that, can we open up for questions now, please?
Howard Millar
Michael, can I just add one thing to that?
Michael O'Leary
Please.
Howard Millar
So just to clarify something that's in the press release, we quote the 90% hedge at $86 per barrel. That should read that that's the blended rates.
So 90% of our fuel for the coming year is hedged at $82 per barrel. When you include the 10% that's unhedged, that's $86 per barrel.
So I just want to clarify that because that's one of the questions that's come up this morning.
Michael O'Leary
Okay. Thanks, Howard.
Operator
[Operator Instructions] Our first question is from Stephen Furlong from Davy.
Stephen Furlong - Davy
Maybe, Michael, you might just comment on some of the external events that happened in the quarter, particularly just interested in your -- just comments about the aircraft. And obviously, you have in an MOU now with the Chinese but also, what happened with the American deal and that Boeing are going for a re-engined aircraft rather than a new aircraft, and we're just interested in what your view of that was.
And then the second thing maybe, what's happening at Stansted or could happen at Stansted. Do you think that London is a place where there's still a lot of growth potential and you could maybe, in time, expand that at that market again after many years of cuts?
Michael O'Leary
Let me deal with the 2 first. First, I have to say we've been extraordinary impressed by the Chinese COMAC.
In a series of 4 meetings they've have responded very quickly and favorably to every request we've made of them. We're going out there.
We're sending a delegation out there where our first quarterly meeting takes place at the end of September, early October. I'm going for my first trip to China in November to meet with COMAC and see the facilities down there.
We're going to advance our discussions on a development of a 200-seat variant of the C919, which at the moment, is about 174 seats. So I think those discussions have been very positive, and we see them as a very credible alternative to Boeing and Airbus.
There's been some kind of concerns about all Chinese aircraft but, anybody, this is a glorified Airbus sub-assembled in China. Some 80% of the components are Western made.
It's Western engines, Rockwell Collins' avionics all the rest of it. And the Chinese have assembled almost everything else that the West consumes at the moment, so I don't have any issue with the aircraft.
We were interested in the American Airlines' order last week. And I think it was noteworthy that firstly -- it's the first time Airbus has won a narrow-body order into one of the -- into American Airlines, which to date has always been a -- what do you call them, MD-80 [ph] and Boeing operator.
Also struck by the fact that Boeing had or Airbus had the majority of the narrow-body order of 260 A320s and just 200 737s. And it seems to me that Boeing think they are just leasing the aircraft to American Airlines.
Boeing seems to be so desperate not to get loose on the order they can be funding the deliveries to American Airlines as well. And to be fair, we scheduled a follow-up meeting with Boeing.
I expect that to take place over the next week or 2 when they promised to update us on this -- the new, what the re-engining; when it will -- how long it'll take, what will be the benefits of re-engining. I'm not a great fan of re-engining.
I think they should have redesigned the aircraft, made it bigger and moved a view or do a step change ahead of Airbus. And so it strikes us is that they're running somewhat beyond the Airbus NEO at the moment.
But they can always catch up, and the best way to catch up would be to drop the price of the aircraft. And we'd be very happy to work with them if that's what they have in mind.
Other than that, clearly, the re-engined 737 will significantly devalue the value of 737 deliveries in '14 -- '13, '14 and '15 when I'm glad to say Ryanair doesn't have any orders at the moment. And as you can see with the price of oil at the moment, frankly, I am very happy with our current position that is not ordering or taking delivery of aircraft at the backend of '13, '14 or '15 unless somebody makes it extremely worth our while to do so.
So I'm overall very pleased with where we are. Our occasional discussions with Boeing, with Airbus and with more active discussion with the Chinese will continue for the next year or 2, but I'm very happy with oil at up around $115 a barrel, not to have a lot of aircraft orders out there at the moment.
In relation to Stansted and London. I think that I couldn't be happier with the recent decision by the Competition Commission last week to confirm the original 2008 decision.
I think the way the BAA monopoly has used every legal appeal, maneuver, tactic to repeatedly delay and frustrate the sale of Stansted and Glasgow Airport has been typically or exactly what you'd expect of a monopoly operator. And all I can say is for those of you who's seen the interview by Colin Matthews in the Sunday Times, you need look no further than the reasons why that bloody monopoly should be broken up.
He was there lying through his teeth talking about apparently Ryanair are so powerful we have a -- Ryanair have a choice that Ryanair can make requirements and we can move from Stansted if the BAA don't meet them. Of course, he forgets to say that we can't move to Heathrow because it's full gap, because it's full London, because it's full our London City.
He also in his quest to demonstrate the greediness that BAA is not a monopoly. He failed to explain that in 2011 to date, easyJet, Turkish, Cyprus, Air Berlin, Thompson, Thomas Cook, Astraeus, Star1, AirAsia X and Ryanair have all announced significant route and capacity cuts at Stansted.
Precisely because that this monopoly has doubled the charges to the airlines over the past 4 years and presided over a 30% decline in traffic. Mr.
Matthews in his Sunday Times article yet he tried to explain that when responding to the BAA has doubled Stansted fees in 5 years he said and I quote, "Yes, but the regulators set the maximum we can charge. And when Stansted was in development, we had to charge less and when it starts to fill up, we began to charge near the maximum to repay the investment.
Stansted has never got close to its 30 mppa capacity." At its height 4 years ago, it was at 24 million with significant overcapacity, and the reason why the BAA doubled the charges and has seen traffic collapse is because it is a rapacious overcharging monopoly.
I think I couldn't have put it any better than the opinion piece at the Times newspaper last week where they said, "Yes, Stansted has suffered during the past 4 years, but any other company faced with a 30% drop in passenger numbers would respond by cutting its prices. BAA's response has been to more than double landing charges in Stansted, which is precisely why its traffic has declined by 30%."
We will and I hope to be at -- later on this week to be announcing details of a significant legal action, which we intend to launch against BAA Stansted. We believe they're overcharging the airlines at the moment by up to GBP 15 million annually on the back of a totally artificial and insulated or RAB regulated asset base.
And let me give you 2 examples. The idiots in the CAA have allowed them to inflate that regulators, the RAB, by GBP 270 million over the last 10 years to allow for inflation.
And at last count, these halfwits have managed to waste GBP 200 million. When actually, in fact, it was GBP 198 million on blight costs for the second runway, which is now not preceding.
So while the BAA spent 10 years out there buying up land and property and houses that it didn't have to buy against the advice of Ryanair and the other airlines at Stansted, they now believe that we should pay for their stupidity and incompetence to the tune of GBP 200 million or a 6% recovery on GBP 200 million wasted by them on the second runway. The second runway has been canceled.
The BAA monopoly should never have spent the money on the second runway anyway. And we don't believe that Ryanair or the other airlines at Stansted or our passengers should be penalized, pay for the mistakes or the regulatory gaming, which Colin Matthews at the BAA have engaged in, in Stansted in recent years.
So we look forward to seeing the bastards in court and hopefully to getting a very significant reduction, not just for Ryanair, but for all of the other airlines for the very substantial overcharging, which has been allowed to take place in Stansted in recent years and which continues today, which is why at a time when all of the other airports in London are full, Stansted is declining and airlines, God bless them, even easyJet, who as you know, like to pretend that they fly to the central favorite airports, are now taking 3 aircraft away from Stansted to fly to Central Southend. So rapacious had been the charges by the BAA monopoly at Stansted.
I hope that kind of gives you some explanation, Stephen, of our views on Stansted and the London airports. We'll have further detail in the press conference in London later this week.
Operator
Next question is from Joe Gill from Bloxham.
Joe Gill - Bloxham Stockbrokers
So it's a couple of questions maybe for Howard as well. In terms of airport charges there's a big hike obviously in the first quarter.
How will that work out through the year on a quarter-by-quarter basis? Will the year-on-year effect start to fade as you get into the second half?
And secondly just in relation to the CapEx number, obviously it's de minimis in the current quarter. How will that actually travel through the year and once we get by the end of the financial year?
Michael O'Leary
Howard, do you want to take those?
Howard Millar
Yes, Joe, in terms of the CapEx, we're probably looking at about EUR 400 million this year. And some of that we will use through sale and leaseback transactions.
So the gross CapEx will be EUR 400 million, while what will appear on the balance sheet will be less. We've already signed up for 5 aircraft, and we're probably going to have another 5 signed very shortly.
So I expect that something like 40% of this year's deliveries will be in sale and leaseback transaction, and the rest will be on balance sheet. In terms of airport charges, there was a slightly odd impact in Q1.
And if you look at the absolute increase of EUR 37 million, about EUR 21 million of that is due to just increased passenger numbers. Passenger numbers rose by 18%.
The balance of EUR 15 million is really split by a massive increase in charges at Dublin airport. We got a double whammy what effectively 40% into one quarter.
So that gives us about 1/3 or about 5 million passengers. We also have a significant increase in local air ATC charges, which we account for as part of airport and handling.
You can see that new charges rose by 33% and local ATC charges went up by about EUR 5 million during the quarter as well. And the final bit of that is some higher charges in Spain in particular, we've obviously got this running dispute with Alicante over the air bridges.
That's pretty much the makeup of Q1. Throughout the year, you won't see anything like the increase you've seen in Q1.
You'll see a slower rate of increase closer to the increase in passenger volumes.
Michael O'Leary
Again, that depends on what kind of direction the non-independent regulator in Ireland get from the equally non-independent Department of Transport who are far more concerned with propping up the fiscal position or the financial position of the BAA -- of the DAA monopoly than they are with promoting lower-cost access and tourism.
Joe Gill - Bloxham Stockbrokers
Okay. And just one follow-on, in relation to the news on Boeing and the re-engining.
A couple of people are just asking a point about would it have any effect on your book values for your existing 737-800s as these NEOs and re-engined aircraft come on stream?
Michael O'Leary
Unlikely in the short term, Joe. I mean, as you know, the book values would tend to kind of -- in terms of our book values we write them down over 23 years.
Again we would plan to continue to operate and depreciate those. And opportunistically as and when, if secondhand values rise, we may sell more to meet the market, but we haven't sold any secondhand aircraft now for about 18 months.
So I don't think it will have any effect on book value in the short term. And we have to wait and see just precisely how much fuel savings these NEOs will actually deliver.
I've seen the 40% figure from Airbus. We haven't yet got a figure out of Boeing, and a lot of it depends into how much of the premium are you looking for the aircraft for these notional fuel savings.
Howard Millar
Maybe, Michael, I might just add to that, that we're using 15% of current market values write down a new aircraft when it comes in. And current market value is something in the $45 million range.
So we're assuming in 23 years, the plane will be worth something like $67 million. And if you take inflation over a 23-year period, I think our assumptions are very modest.
Generally to the trend that the classics, if you recall, was that in the initial years that the classics were introduced or the NGs were introduced, it took a very long time for a Classic 737 prices to decline. And I expect you'll see the same given that it takes a long time for production to increase.
So I don't think certainly in the distant future there'll be any impact on residual values.
Operator
Our next question is from Jarrod Castle from UBS.
Jarrod Castle - UBS Investment Bank
Two questions. Firstly, I mean, what do you think you can get back from Stansted if you've got a successful outcome from the courts?
Could this be material number coming out? And secondly, I mean, is there potential given the cash flow that you kind of generated in Q1 for maybe some form of dividend in the second half of the year or is it too early to kind of be thinking about that?
Michael O'Leary
Well, let me do the second one first. There's no chance of a dividend in the second half of the year.
The only indication we've given on dividends will be prior to the end of 2013. We're not going to get into an annual dividend stream or having a debate about it.
So there won't be any dividend this year come hell or high water. The issue on Stansted, the numbers potentially, I mean, we believe, if you look at the regulatory accounts for Stansted, they're quite an extraordinary document.
It's quite clear that I think that Stansted is overcharging the airlines collectively thereby to the tune of about GBP 50 million each year. Let me give you some examples from recent Stansted regulatory accounts.
Let me see, we'll just give you a couple of snapshots here. Obviously, the big one is the fact that there is GBP 200 million shoved into the RAB for the second runway, which the airline should not be paying for since we never supported it, and now that it's been abandoned, it should be the BAA that should be writing that down.
And if you look at it over the 4-year period from 2008 to 2011, traffic at Stansted had fallen by over 21%, but total cost, operating cost at Stansted have risen. The reason they've risen is blatant intercompany transfers or a head office transfers into the Stansted regulatory accounts.
There's a wonderful -- for example, in the case of other costs in 2008 or in 2009 regulatory accounts for Stansted other costs jumped from 7.7 million to 25 million without any explanation. The only reference to it is that these costs are, and I quote, "A combination of supply chain initiatives and cost bundling, less marketing spend and reduced insurance premiums."
So somehow less marketing spend and reduced insurance premiums managed to drive up Stansted's cost by some GBP 15 million. There's another beauty in the 2009, over the last 3 or 4 years, Stansted, BAA Stansted has suffered what euphemistically described of them again I quote "Intergroup costs" of wait for it, "GBP 70 million."
And there's a real doozy here in we had a -- even by the standards of the BAA. In 2010 -- let me see, sorry, in 2011 no, where have I got?
The utilities bill in 2010 at Stansted jumped by, despite the way in 2010 where Stansted's traffic was down 10%, their utilities bill increased by 80% from 13 million in 2009 to 23 million. And this was due to a "Revised allocation of electricity charges between Heathrow and Stansted."
Now I can't wait to see Colin Matthews explain to a court or preferably the OFT just how in the hell another 15 million of Heathrow's electricity bill got shoveled onto the airlines in Stansted at a time when traffic in Stansted was declining by 7% in 2010. But we intend to give him the opportunity, and I think the more we flush out what's going on here, the scamming that's been going on by the BAA monopoly at Stansted, most of it I think resulting in them taking money away from Stansted to prop up the funding of Heathrow, I think the more we expose exactly what the Competition Commission originally found in the U.K.
and that is that the way the BAA monopoly has operated has adversely affected competition, and the way the CAA has regulated the BAA monopoly has adversely affected competition. But in total, if you take out all these padding costs, we think there's probably something up to about GBP 15 million a year of the regulatory profit at Stansted, which they're reporting at the moment, at the order GBP 50 million is actually probably close to GBP 100 million and running at twice the regulated cap.
Operator
Our next question is from Geoff van Klaveren from Deutsche Bank.
Geoff van Klaveren - Deutsche Bank AG
Just a first question on can you just give a bit of more explanation on marketing and other costs, which were up 52%. And second question you said before you see you might consider flying some of the grounded aircraft this winter depending on discussions with airports.
Can you give us any update on that? Is it going to be quite opportunistic if airlines, other airlines go bust, is that when you start or do you have anything to report now?
Michael O'Leary
Yes. I mean, again just to be careful here the marketing and distribution costs are pretty tiny in our overall.
They've gone up here from the prior year from EUR 31 million to EUR 43 million. We're talking about the Q1 when we're launching a lot of bases, there is a lot of advertising.
And some of the commissions paid to airports also finishes up in that category. So it's not a statistically or meaningful rise and over the year, we would still expect marketing and advertising to rise at a slower rate than the growth in headline traffic.
You're just seeing a slightly distorted report in Q1. On the other issue, I think at this point in time, what we were looking at with grounding the 80 aircraft is we made an opportunistic proposal to the Irish government to start growing traffic rapidly at 3 Irish airports from October.
That would absorb anything up to 10 aircraft if it comes through. And we made -- we have 1 or 2 other proposals out there.
Manchester was already in our horizon so that won't affect it. But if 1 or 2 other airports came in with very good deals, we'd respond to them.
But I think the principal initiative we have that would materially reduce the 80 aircraft was the 5 million passenger proposal with the Irish government. And we're still waiting to hear back from them on that.
Geoff van Klaveren - Deutsche Bank AG
So it's pretty likely then that those 80 aircraft will stay grounded?
Michael O'Leary
Yes, I think so. I mean, if you look at it where oil is, I think we're in a very comfortable with the original strategy and that was the aircraft and we didn't extend our hedging program for the second half of the year but we were closing it out at $100 a barrel.
We've done deals at a number of airports across Europe for very a cheap or in some cases, no parking fees those aircraft for the winter. And I think well, we'll have to cut back on staffing a bit.
It's absolutely the right thing to do this winter to cut back very meaningfully when oil is so expensive.
Operator
Our next question is from Alexia Dogani from Liberum Capital.
Peter Hyde - Liberum Capital Limited
It's Peter Hyde actually here. A couple of questions really.
You talked about staff and taking longer holidays and unpaid. I mean, just how much do you think staff is going to have to be reduced with people taking longer holidays?
And then secondly, I was just wondering if you could help us out a bit on the exchange rates within the fuel, Howard, which is how do you actually look at sort of the dollar Euro movements within that fuel bucket because it covers I think potentially distorts some of the trends.
Michael O'Leary
I'll do the first one first. On the staff, bear in mind, most of the flexibility of the staff will be on the pilot and the cabin crew end.
More than 50% of our pilots and cabin crews are contractors. So they're paid as they fly.
They're not paid when they don't fly, and they would be flying a lot more during the current summer. For example we have a prohibition on leaves from July through to the end of September.
A lot of those will have gotten very close to their 900 hours by the time we get to the end of October. And we're running the schedule that way through the summer.
In fact, you've seen a lot of speculation on some of the lunatic websites that oh we're short of pilots or we're short of cabin crew, no evidence of it whatsoever. We're fully crewed through the summer peak already.
We will have a rise though in staff costs during the Q3 and Q4 because we won't be able to get rid of everybody for the 6 months of the winter period. And we also have to start recruiting some some additional pilots and cabin crew for the aircraft growth for summer '12.
But there will be a very significant cutback in activity in the second half of the year. There will be a meaningful reduction in head count numbers for the second half.
But obviously, we have to carry some staff costs over the winter as we don't want to get rid of all the contractors or all the employees that relate to those grounded aircraft. Howard, will you do the exchange rates on fuel?
Howard Millar
Yes. I think, Peter, if you go to that Slide 13 on the presentation we have on the website, we've put in the absolute dollar cost.
However, you're quite right. There is an exchange rate movement, and for this year, we're using a $1.40 for FY '12 as opposed to $1.34 for the previous year.
And for the bit we've done for fiscal 2013 you should be using $1.43. So effectively, if you take example of the first quarter of next year when you really bring that back to kind of a constant dollar amount that's equivalent about $1,000 per barrel.
So there is some movement reflecting that. So what we've given to just to guide you, we've given the absolute dollar price per tonne and then you need to just adjust that to get that back, as I said, back into euros.
Peter Hyde - Liberum Capital Limited
Yes, just to kind of be absolutely clear then. So we should be using kind of $1.34 for '11, $1.40 for '12 and $1.43 for '13.
So the whole of the fuel bill as it were?
Howard Millar
For the whole of the fuel bill. It's a blended average over the year.
It will be slightly different obviously across the quarters, but that's what you should be using. And as you know, we have a longer horizon on the dollar.
We're hedged pretty much for 50% to 70% of our requirements for fiscal 2013 already.
Peter Hyde - Liberum Capital Limited
Okay. And could I just ask one last question, sorry, which is EU 261 charges.
I mean I know they came in, in April but what kind of percentage of your passengers actually paid that in the first quarter?
Howard Millar
It was very small.
Michael O'Leary
Small, I mean, because we had most a lot of pre-bookings in the system and remember the passengers booking the promotional fare is included free of charge for most of the fares. So it's small in Q1, but it will rise as we move through the year Q3, 2, 3 and 4.
And by the time we get to the second half of the year, quarter 3 and 4, 30% of the seats will be sold at the promotional prices sold, pretty much all of the balance of 70% will be paying the 261 admin fee.
Operator
The next question is from Andrew Light from Citi.
Andrew Light - Citigroup Inc
From the fleet plan, I mean, given that COMAC won't be able to deliver the earliest 2018 the NEO is probably sold out for the first 2 or 3 years and Boeing unlikely to introduce a new plane until 2017, 2018. I mean, will it be fair to say that you're going to have a pretty much a static fleet of around 300 planes from 2013 right the way through to 2018?
And what are other options would you have for both growth and replacement aircraft? Would you just let the fleet get old?
Michael O'Leary
Yes. I mean, I think it's safe to plan at the moment on the staffing fleet to '13, '14 and '15.
I'd be somewhat more optimistic from '16, '17, '18 we'd like to start growing again on that stage but at a more modest pace maybe 4% or 5% annually. And at that state, we'd be looking at either you could be looking at tail end NG Boeing aircraft.
You could be looking at the possibility with the COMAC of taking 919s in advance of a stretch version aircraft. You could be leasing some aircraft or there's a possibility of -- I mean, I hate to add this but there's a remote possibility of acquisition generating some more aircraft.
But we have nothing in the pipeline at the moment for acquisitions. So please don't be asking me what we're looking at.
But I think it's very basically a static fleet at the moment through '13, '14, '15 and then '16, '17, '18 we want to start growing again. So there's lots of options and at least one more deep downturn in the aviation industry on the rule of one every 4 or 5 years to go.
We're very happy not to have a big aircraft commitment at the moment.
Howard Millar
Okay. I think, Michael, it was most interesting with American Airlines that American were able to spring some aircraft deliveries in 2013 from the so-called full order book as of 2015.
So I don't think Boeing or indeed Airbus' order book is as solid as they make out.
Michael O'Leary
Yes, if you look at about their order book to be fair I think Airbus have had a great year thus far, particularly with the NEO. But Boeing's order book is full of rubbish.
Some airlines that have gone both -- lots of airlines they can't pay for aircraft. And they keep telling you where the North Americans are going to refleet.
Yes, it looks like if you to take the American model, they're going to refleet with Boeing providing them aircraft and the financing. I'm not sure that's a great business model going forward.
So I don't believe all of this nonsense that the order books -- if the order books were as solid as Boeing and Airbus said they would, we'd be selling secondhand aircraft at the moment at ludicrously high prices. We have seen no evidence of that.
In fact, at the moment, in the last I'd say 2 months, we have been approached by 4 or 5 of the leading goo-goo, ga-ga new leasing companies offering to lease us aircraft for delivery in 2013 and 2014. So there's an awful other bulls*** talk by the manufacturers and the lessors about how wondrous and how tight the backlogs are.
Typically, the word would be-- the laws of economics tell you, there's a huge backlog secondhand aircraft values rise and at the moment, there is no sign of any significant demand for secondhand aircraft, and we would know because we sell the newest and the best quality secondhand aircraft as long as somebody has the money to pay for them. No evidence of it whatsoever.
We haven't sold a secondhand aircraft for about 18 months to 2 years. So I think it's an awful lot of horses*** out there, particularly from Boeing on their order book.
Andrew Light - Citigroup Inc
Howard, on the -- just a quick one. Was there any meaningful FX impact on the revenue line in the quarter?
And also do you expect to maintain that 8% average sector length growth for the rest of the year?
Howard Millar
Yes, I think the sector length is likely distorted with the first quarter. The routes that we launched and the comparative with the previous year and particularly with the volcanoes.
So I think what you're going to see is we're going to start to settle down as we go through Q2, 3 and 4. By the year end, the average will be 5%.
So we're pretty happy with that. Sorry, what was your other question, Andrew?
Andrew Light - Citigroup Inc
Was there any meaningful foreign exchange impact...
Howard Millar
Not really on the revenue side. You have to remember our U.K.
percentage, which is the main mover of our total sales is down now to 28% and has fallen. So no, it wasn't really material.
This was less than 0.05%.
Operator
We have now Neil Glynn from Credit Suisse.
Neil Glynn - Crédit Suisse AG
Three for me if I can. Maybe if I can start with reserved seating.
Just interested I know it's early days I think it's 2 months into your trial, but what you're seeing there in terms of the take-up if there's anything significant at this point. Second of all, if, Howard, I could touch on the staff cost development in unit terms in the first quarter.
I'm just interested in the 2% growth, which you've attributed partly to salary increases. If we were to adjust that by sector length, would that suggest an 8% fall or is there something else at play there?
And then thirdly, if we could just revert back to the aircraft financing side of things. Obviously, we've got the NEO and we've now had a decision from Boeing.
Is that helping you in your negotiations with lessors for sale leasebacks that you've touched on?
Michael O'Leary
The last one first. The lessors know we've recently completed another financing of some aircraft for next year.
However, if you're going to say if they were paying slightly over 3% for a 7-year money. It hasn't had any impact as far as we can see.
And remember most of our financing is on the back of Ex-Im and bank guarantees. So it's not based on either the Ryanair as a credit or the asset value itself or the 737 NG as an asset.
It's based on the Ex-Im and bank guarantees. So there's been no material change to our aircraft financing in either the Airbus NEO or the Boeing aircraft.
Reserved seating has gone surprisingly well over the last 3 months. But then remember, we trialed this first on the route to Malaga for Malaga, Dublin and Dublin, Gatwick.
We all thought reserved seating would sell well. The big issue for us, would it just dilute priority boarding?
In other words, was it just a priority boarding move to the reserved seating and we get no other effects in that. It's a little bit distorted at the moment because we're moving into the summer.
So we've extended it already to most routes from both Stansted and Dublin now to Malaga, Ibiza, Palma, the Canary Islands. So the longer routes where there certainly is a propensity towards taking it up.
But it's too early to say. We want to see what it's like over a full summer period.
I think the fact that we started off on 2 routes, it's now been extended to about 20 routes is indicative of the fact that it does seem to be generating incremental revenues without any significant dilution in priority boarding. But that may take some time for the priority borders to realize that they've got to get reserved seating if what they really want is the extra legroom seats.
Although the significant number of priority borders, just want to, I, myself, want the aisle seats close to the front, not interested in the long legroom, people like Michael Cawley need the long legroom, and they're welcome to pay for it. Howard, do you want to take the staff cost?
Howard Millar
Yes, in terms of the staff cost, there's a couple of factors in here. Again, I'd go back to what I said earlier on.
Q1 again is slightly distorted because obviously we adjusted staff cost for the downtime we experienced during the volcano last year. So it's probably slightly the latter.
I think what I would expect for the remaining quarters is that staff costs will continue to push ahead of the increase in passenger volumes simply by the fact that we are flying a bit more hours, and we've also given a 2% increase. So I would expect unit costs actually adjusted for the full year will be slightly ahead of sector lengths and slightly ahead of volume.
So that would suggest something like 7%.
Operator
Our next question is from Brian Devine from NCB Stockbrokers.
Brian Devine - NCB Group Limited
I just wondered if you could give a bit more color on ancillary revenue for passenger aside from the new-seat trial?
Michael O'Leary
No, there isn't any more color in it. Most streams are performing well, tracking in line or slightly ahead of the growth in schedule numbers.
And we try not to give too much analysis of ancillary revenues other than remember with us the whole thing with ancillary revenues to try and manage in such a way that we maintain it at or about 20% of revenues. And in the first quarter, it's running at I think about 21% to 22% total revenues.
Operator
And the next question comes from Jonathan Wober from Société Générale.
Jonathan Wober - Societe Generale Cross Asset Research
Just a couple. First of all, just coming back on reserved seating and on the other side of the equation, you talked about revenues.
But did it add cost or complexity in any way? That's the first question.
And the second question just a detail on average staff numbers. Can you say what it was for the quarter?
It's normally in the statement, but it doesn't seem to be there this time.
Michael O'Leary
No, there is no cost or complexity arising from reserved seating. We were a little bit concerned.
Originally, we trialed it out of Dublin on a long route and a short route. At Dublin we do our own handling.
I think the concern was there'd be confusion among passengers and cabin crew that delayed a 25-minute turnaround. It's been remarkably smooth.
Cabin crews seem to have adjusted very well to it. Passengers indeed seem to have adjusted very well to it as well, and it has no incremental cost.
As long as reserved seating is incremental to revenue, if it doesn't completely bastardize priority boarding, then it's just pure -- it's absolutely incremental revenue, incremental profits. On apologies the average staff numbers, can you give me a number.
The average staff number I think at the start of Q1, sorry, it's the type is too small. Neil Sorahan will reveal all here.
I can't read the numbers.
Neil Sorahan
It's 8,856.
Michael O'Leary
Great.
Jonathan Wober - Societe Generale Cross Asset Research
8,856.
Michael O'Leary
8,856.
Neil Sorahan
So 13% on the quarter. Again, it's 13% of 7,828 last year and 8,856 at the end of the first quarter.
Operator
The next question is from Tim Marshall from Redburn Capital.
Tim Marshall - Redburn Partners LLP
In the quarter, you added about 150 net new flights, of which about 100 were in Spain and 50 were in Italy. So I think those 2 markets have become increasingly important to you.
I just wonder if you could just talk us through what your experiences are there looking into the summer?
Michael O'Leary
Sorry. There's a bit of confusion.
150 routes, is it?
Tim Marshall - Redburn Partners LLP
Yes, net new flights that you've added in the quarter.
Michael O'Leary
New routes. Okay.
Sorry, I just -- so run the question again, 150 new routes...
Tim Marshall - Redburn Partners LLP
Yes, that basically that Spain and Italy are increasingly important for you now and just how those 2 markets are developing.
Michael O'Leary
Again, look, remember this is an opportunistic company. So we move wherever the airport deals encourage us to move.
Both Spain and Italy have performed well. They are performing well this summer.
We've grown very rapidly in both countries. We're now the largest airline in both.
We out carry Italia in Italy and we out carry Iberia in Spain. Italy I think is slightly more.
We've been in Italy for longer. The airports are a bit more competitive both with each other and more aware of the international comparisons.
Spain, I think we've grown very rapidly in Spain in the last 2 years, but Aena have got a bit complacent. So we've run into problems at various airports in Spain where Aena just think they have us by the balls.
Now they start introducing ludicrous charges such as Alicante where they opened up a new terminal a bit like Dublin, a new terminal they can't pay for and require that everybody we use air bridges pay for air bridges and use air bridges to get on and off. It has massively delayed our turnarounds.
It's a shamble of an operation. We're just dependent on some Spaniard to be there on time to drive an air bridge, which had never happen in the history of Spain.
We've also had routes where airport charges at Girona where this week we'll announce significant further cuts for the winter schedule. We've closed Reyes.
So I think Spain, Italy continues to grow strongly and well where we have like-minded airports. Spain has grown very rapidly in recent years, but I can see this winter there's going to be a number of disputes with Aena, which still, while I think they were desperate for traffic 2 years ago.
Now thanks to Ryanair's growth, they're less desperate for traffic but begin to kind of believe that this traffic belongs to them and not to Ryanair. So I think you will see cutbacks in Spain, significant cutbacks in Spain this winter.
Most of the 80 aircraft we will ground this winter will come from Dublin, Stansted and Spanish airports. Although we're still growing strong in a place like the Canary Islands where we have good relationships with the authorities down there.
So I wouldn't want to overestimate it. With the new base this winter in Manchester likely to be 1 or 2 new bases announced in the coming weeks, probably something in Central Europe and something out at Continental Europe.
But at the moment, there won't be any new bases in Spain or likely to be any more bases in Italy at the moment. We are talking to 2 other Italian airports, but they're not particularly competitive yet.
So yes, I think to summarize, Italy and Spain have grown very strongly. Expect Italy will continue to grow, Spain less though until we sort out some of this nonsense that Aena are engaged in.
But other than that, with the exception really of Ireland, where the airports are crazy, the U.K. is growing for us, the base at Leeds Bradford, the coming base in Manchester.
Scandinavia is doing quite well. Germany is suffering because of the travel tax, and Central Europe, far more Central Europe is doing well.
Tim Marshall - Redburn Partners LLP
Great. I wondered if I could just ask -- well, one comment and then one question.
Typically, you've sold some shares in the summer. So I just wondered if you could comment on that and then finally, as a customer I think reserved seating should stay.
I thought it was great.
Michael O'Leary
Okay. Well, never comment on my share sale, it's none of your business.
Reserved seating, I think reserved seating is great as long as it doesn't compromise or completely destroy priority boarding. So there's a balance to be struck there between reserved seating for those who want to pay more for reserved seating but not if it's just the priority borders switching directly across to reserved seating.
Tim Marshall - Redburn Partners LLP
I've never done priority boarding, Michael.
Michael O'Leary
Well, lots of people, at the last count, 10% of our traffic disagrees with you. But again...
Tim Marshall - Redburn Partners LLP
But perhaps on reserved seating is my point.
Michael O'Leary
Pardon me?
Tim Marshall - Redburn Partners LLP
I did do reserved seating, but I would never pay for priority boarding. So...
Michael O'Leary
That's fine, and I think what we need to find that balance. I mean, I think clearly priority reserved seating certainly works on the longer segments to the Canaries, the holiday destinations, people traveling with families.
But then priority boarding also works very well in those routes too. So we just need to find that balance.
I don't think, for example, we'll roll out reserved seating across every route, domestic routes within Spain or within Italy. We're not sure if it would have any appeal at all.
So rest assured we'll keep trying to refine it. We'll keep rolling it out.
And where it works, we'll happily implement it and where it doesn't or there's more of a demand for priority boarding, we'll go that way.
Howard Millar
Michael, it's Howard here. I've got to drop off.
I've got to go to a meeting. So I'll talk to you later.
All the best. Bye.
Operator
Our next question is from Eamonn Hughes from Goodbody Stockbrokers.
Eamonn Hughes - Goodbody Stockbrokers
Just a question on the inter-cost performance in Q1 was actually quite favorable minus 1% x fuel sector length adjusted. Just wondering in terms of the guidance for the full year plus 2%.
I mean, you've been pretty good in Q1 and presumably given the volume of activity in Q2 potentially is it the case the risk bias in that 2 number guidance for the full year could be a little bit lower? And just maybe leading off that a little bit, it was only sort of back in May when you kind of gave the capacity guidance for the full year and the cut in the second half of 4%.
Just wondering though that fuel was $110 around about that. It's now sort of $117 or so whether you have any further thoughts in terms of additional cuts potentially in the winter or even maybe in terms of the summer schedule next year to park a little bit more?
Michael O'Leary
Okay, let me reverse back into that. I mean, I think the significant driver of the 2% on the unit cost could it be slightly better than 2%?
It could be slightly better than 2%. But will it get to 0?
No, I don't think so. There will be a slight increase in unit cost this year.
Some of that is inevitable. It's inevitable consequence second half performance of unit cost so we're going to ground up to 80 aircraft.
We will have a slight increase in staffing costs, ownership costs without the kind of, if you like, the corresponding revenue. But we would be very, I mean, we would be hopeful.
Obviously, our guidance at the moment, on the base of Q1 to Q2 years is pretty conservative. We would be hopeful that grounding 80 aircraft will translate into a much more or a better yield performance in the second half of the year.
But we've no visibility on it yet. So I think the key driver of that unit cost performance over the full year obviously apart from when fuel is stripped out, but it will be the grounding of the 80 aircraft in the second half of the year.
And the second question, which was...
Eamonn Hughes - Goodbody Stockbrokers
Just around the fuel prices probably in FY '10 it goes $110 since it came to the market last time in terms of the revised capacity growth guidance. I'm just wondering now with $117, have you had any more thoughts in relation to additional cuts potentially in the winter or summer?
Michael O'Leary
No, remember we're hedged now for 90% of what we expect to fly this winter. So and cutting 80 aircraft out of the fleet of 280 aircraft.
We're really we'll be down to kind of core numbers to this stage. If there's likely to be any change that is likely to be on the upside.
We're likely to ground less than 80 aircraft. But at this point in time, there's no sign of that unless something like the Irish government wants to take up our offer of rapid growth in the winter.
And really I wouldn't be disappointed if the Irish government doesn't take up our offer or can't make a decision greatly because frankly, with oil at $110, $115 per barrel, I don't want to be flying a lot of passengers around even if the Irish airport have very low fares this winter, paying that kind of those kind of expensive oil prices. As we move out into FY '12 or summer or FY '13, summer '12 much depends on the oil price at the moment.
As you can see, we're kind of a bit more likely hedged at the moment, with only 20% in Q1 done and that only $103 a barrel. We remain hopeful that the price is a little bit high at the moment, with the kind of general bearish economic sense.
And I doubt there are not much growth around the world, we don't understand how U.S. up, what the hell oil was doing around $115, $120 a barrel.
We would still, however, hope to have hedged about 50% of half H1 FY '13 by the time we get to the half-year results in November.
Eamonn Hughes - Goodbody Stockbrokers
Okay. Maybe just one final point a lot of the commentary around Stansted area in the Q&A session was around the potential if you're going to take them on legally whatever, what potentially you could realize.
Just trying to get a view to the next stage would be the airport is sold and what would kind of your thoughts be around in terms of the materiality if you guys were able to negotiate lower charges when the new potential owners what sort of impact that could have on your airport charges potentially.
Michael O'Leary
We've had meetings with about 3 or 4 consortia all of whom are expressing an interest in getting involved in Stansted if, for and whenever the BBA can eventually be forced to sell it. Now, if you probably take garlic and a stake through Colin Matthew's heart, eventually get it sold, but we'd happily deliver the blow.
I think in each case, what we've said to each of the consortia is we believe there is very significant potential traffic growth at Stansted. The declines of recent years have been entirely attributable to the BAA's rapacious pricing and the scamming of the regulatory accounts, which they are engaged in.
But on the converse of that, the only way we can deliver rapid traffic growth to Stansted would be very significant fare and yield reductions. So there has to be a quid pro quo.
I think we believe that fundamentally, our position at Stansted has doubled its charges to the airlines over the last 5 years. Almost all of that price increase has been abusive and monopoly exploitation.
We think airport charges at Stansted should be halved again, and which would still allow the BAA or any other to make a 6% return on RAB that has been inflated by about 50%. But I think you'll be more -- we would be looking for something of the order.
If Stansted is overcharging the airlines by 50 million a year, we account for about 70% of Stansted's traffic, we're getting overcharged to the tune of about GBP 35 million a year. We would want to get all of that GBP 35 million back, but I think you would see GBP 30 million in the first year or 2, a very rapid traffic growth to Stansted.
We have to share an awful lot of those savings in terms of revenue and yield decline. So I think there's great potential in Stansted but only when it returns to being an airport for our low-cost airline.
And that the BAA and Colin Matthews could bloody well pay the GBP 200 million they pissed away on their planning for G2. It shouldn't be the low-fare airlines at Stansted paying for their bulls***.
Operator
The next question is from Bob McAdoo from Avondale Partners.
Bob McAdoo - Avondale Partners, LLC
Just a quick one. When you talk about wanting to look for a larger aircraft, just slightly larger aircraft, the 200-seat type airplane, is there something about the 737-900, 900 ER version that would not make that an equivalent airplane?
Is there something operationally around that, that I don't understand? I'm just curious.
Michael O'Leary
Yes, I mean, the sweet spot we think for us is we have the regulations require one cabin crew per 50 seas. So we have 4 cabin crew at the moment for 198, 199-seat [ph] aircraft.
We like to get that up to 199 seats to get those 10 extra seats free, essentially free of charge. We think a very reasonable -- we've made reasonable proposals to Boeing over the last 2 years to remove the rear 2 toilets and stick in an extra 10 seats.
Boeing very reluctant, who really don't give a s***, frankly; have made no effort to work with us to increase that seating. And the problem for the 900 is a, it's priced at the basis that you can get about 215 or 219 seats in it.
And it will actually work the penalty against it because you got to put in a fifth cabin crew for only 15 extra seats. It also complications on turnaround because you've got a third door on it potentially offloading passengers to 3 doors instead of forward and rear door.
So I think we run into -- when you get involved you could look at the A321 as well 220-seat, you're almost Boeing 757 at that stage. And 25-minute turnarounds becomes difficult, but Boeing has simply not priced the 900 we believe isn't cheap enough compared to our 800.
But we don't want to put on a fifth cabin crew member.
Bob McAdoo - Avondale Partners, LLC
So either the 900 priced so that it was a competitive with an 800 would be great or something that takes you up to just under 200, the 199 is really the ideal thing is. .
.
Michael O'Leary
Yes, basically the 900 was the same price 800. We take it and put 199 seats into it.
But the 900 is priced at the 20% or 30% premium than the 800 and we don't think it's justified, and we certainly wouldn't pay it. If we get any explanation for Boeing as to why that.
They talking about some nonsense passenger evacuation trial done back in 1963 or something where a bunch of fat people took 2 nanoseconds longer to get off the plane. But logic says if you remove the bottleneck, which is the 2 rear toilets, 10 more people would get the hell off the plane an awful lot faster than they used to in 1963 when they last did that test.
But it's been one of our problems in the relationship with Boeing in recent over the last year or 2 is they just have been very unresponsive and very unimaginative. And now are being bounced by Airbus into a re-engining project instead of actually we'd be much more interested instead of putting new engines on it, shove 10 more seats into it, it'd be a much more valuable aircraft.
Operator
Our next question is from Gerard Moore from Merrion Capital.
Gerard Moore - Merrion Stockbrokers Ltd.
Two questions, please. First of all, you've indicated that this year, your fuel bill is going to rise by EUR 350 million.
If brand prices stay where they are, what kind of fuel inflation do you think you'll see in your fuel bill for next year for FY '13? And then the second question, you gave an indication during the call about the different trends you're experiencing in some different markets such as Italy, Spain, Germany, et cetera.
In terms of your yield increase over the year, what has your experience been in different regions? Will you say, for example, the 11% increase you saw this quarter was fairly consistent across different markets between Germany and Ireland, U.K.
for example?
Michael O'Leary
There's no point in doing an estimate of what the fuel will be for FY '13 on different fuel numbers. At this stage, it's too early to say with only 20% Q1 hedged and you can work it out yourself.
But any of the model analysts will work that out. The trend in yields have been relatively stable across the system with a couple of exceptions, obviously.
In Germany, yields are significantly down because the airlines probably the German tax. The U.K.
is being hit again with the increase in APD. With slightly lower yields in places likes Spain and Italy where we have a higher proportion of domestic routes in the system this year.
And the domestic routes book later and have tend to have lower fares, lower yields on average than the international routes. And the one market where the yields are probably significantly up has been out of Ireland where -- but the yields have not risen by the 40% increase in the DAA's airport fees.
Now we're benefiting slightly this summer by the fact that the travel taxes have gone down from EUR 10 to the EUR 3. But the DAA price increases, which 40% increase but the inflation is 0 and traffic has collapsed at the Dublin Airport by 30% over a 4-year period.
The yield out of Ireland are not paying the increased DAA airport fees, but generally it's stable with a couple of market segments.
Operator
[Operator Instructions] Our next question is from Jim Parker from Raymond James.
James Parker - Raymond James & Associates, Inc.
I'm just curious given this new era of very high fuel prices if it wouldn't make sense perhaps to rethink your route network meaning you've gone much longer haul and with high fuel prices pulling back the trip length and that perhaps the pullback in fares aren't as great as they reduction in fuel cost on shorter trip. Then also historical, you haven't really lost money in the December, March quarters.
But the mix of your business now appears in high fuel prices causes you to have to park aircraft in the winter. So question is, is there any likelihood that you may rethink your route network given the very high fuel prices?
Michael O'Leary
I mean, let me do the first one first, when we refused the trip length. Actually no, there aren't full enough for the yields longer sectors aren't a multiple of the yields of the shorter sectors.
The fuel consumption is less pro-rata on the longer sectors because you spend more time in the cruise. So there is a like-for-like.
There would be -- we would not want to reduce our sector length because of higher fuel cost. If anything, we'd want to increase the sector length because of higher fuel costs.
But the business remains fundamentally opportunistic. I mean, in Spain in the last couple of years we've got some terrific airport deals and to grow rapidly at airports like El Prat, for example, where their traffic has collapsed.
The Canary Islands has been we now have 2 bases there and short of 3 bases in Canary Islands, which is the longest flights we operate. But very high yielding in terms of summer and also very good not high-yielding, but very strong yields in the winter at a time when an awful lot of domestic rubbish, rubbish between Ireland and the U.K.
fundamentally collapses under U.K. APD, Irish travel tax and the DAA's high charges.
So no, we don't -- our route network never develops on the basis of fuel. It always develops on the basis of competitive airport packages and airports incentivizing Ryanair to grow.
And that will continue to be the case. I think sometimes you can get too caught up in fuel.
Yes, fuel prices are significantly higher this year. It looks they'll be significantly higher again next year.
But you look at what's happening in terms of yield. We're getting a lot of natural hedging in there, the competitive flags over Europe are raising their fuel surcharges.
They're also cutting back capacity again, particularly on the short-haul marketplace. And as we've been guiding investors for the last 2 years, there is relative capacity stability in Europe.
Frankly, I wouldn't be unhappy to see oil prices stay where they are this winter. I think you'll see a couple of more airline bankruptcies in places like Spain, Central Europe, the U.K.
and that would undoubtedly create some further opportunities for us to grow not in winter 2011, '12 but in summer 2012 definitely.
James Parker - Raymond James & Associates, Inc.
Michael, you made it clear I guess that you're not going to pay a quarterly dividend, but I'm curious, why not?
James Parker - Raymond James & Associates, Inc.
Annual dividend. You said we're not going to be a quarterly dividend.
I said we're not going to pay an annual dividend.
James Parker - Raymond James & Associates, Inc.
I'm wondering why you don't pay a quarterly dividend because you have a lot of cash, and it's going to build from this point.
Michael O'Leary
It is, but we still have A, I think it's wrong that we suddenly become some kind of dividend play. This is a very cyclical, capital-intensive industry.
Yes, we manage it though. We have always managed this company in a very conservative way to maximize cash flow.
We still have a net debt position at the moment of about EUR 300 million -- EUR 350 million at the end of the quarter. Yes, we have a lot of cash, but we also have a lot of debt.
We do, at some point in time, in the next 2 years, 3 years expect or hope to be announcing another aircraft order at some time. And there may also be some acquisition opportunities over the next year or 2.
We have indicated that there will be another significant dividend in the end of FY '13, but there won't be one in FY '12 simply because every year, we'll waste another 25 minutes on the conference call ravishing on about bloody dividend in an airline. Anybody who's investing in Ryanair for the dividends needs their heads examined.
We intend to deliver capital growth. Speaking personally, I have no interest in dividends.
I am very interested in getting the share price of this airline up. And we will use the cash and manage it sensibly the next year to try to deliver that result for the benefit of all of our shareholders.
And I will be one of the principal beneficiaries by way of a dividend. So you're not getting one in FY '13 -- FY '12 sorry.
Operator
There are no further questions at this time.
Michael O'Leary
Okay, everybody. Can I thank you, all, for joining the call.
I said we're not doing a roadshow on Q1 as is normal. But if anybody has any follow-up questions or queries, please route them through David Broderick or Howard here in Dublin.
We're happy to get back to you with any answers you may need. Thanks very much, everybody.
Appreciate your time. Bye.