==============================================================================As filed with the United States Securities and Exchange Commission on
SeptemberJuly 20,2007 ==============================================================================2010UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
|_|
| ¨ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR (g)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
| x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Fiscal Year Ended: March 31, 2007
2010
OR
|_|
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR
|_| SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
| ¨ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Date of event requiring this shell company report:___________
For the transition period from _________ to _________
0-29304
(Commission
Commission file number)
number: 0-29304
Ryanair Holdings plc
(Exact
(Exact name of registrant as specified in its charter)
Ryanair Holdings plc
(Translation
(Translation of registrant'sregistrant’s name into English)
Republic of Ireland
(Jurisdiction
(Jurisdiction of incorporation or organization)
c/o Ryanair Limited
Corporate Head Office
Dublin Airport
County Dublin, Ireland
(Address
(Address of principal executive offices)
Please see “Item 4. Information on the Company” herein.
(Name, telephone, e-mail and/or facsimile number and address of company contact person)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
None
Title of each class | Name of each exchange on which registered | |
| American Depositary Shares, each representing five Ordinary Shares | The NASDAQ Stock Market LLC | |
| Ordinary Shares, par value 0.635 euro cent per share | The NASDAQ Stock Market LLC (not for trading but only in connection with the registration of the American Depositary Shares) | |
Securities registered or to be registered pursuant to Section 12(g) of the Act:
Title of each class Name of each national market
on which registered
American Depositary Shares, each
representing five Ordinary Shares Nasdaq National Market
Ordinary Shares, par value
0.635 euro cents per Share Nasdaq National Market*
None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:None
(Title of Class)
Indicate the number of outstanding shares of each of the issuer'sissuer’s classes of capital or common stock as of the close of the period covered by the annual report.
1,547,028,730
1,478,935,935 Ordinary Shares
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes |X|x No |_|
¨
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Yes |_|¨ No |_|
Note-Checkingx
Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes |X|x No |_|
¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes ¨ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated“accelerated filer and large accelerated filer"filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer |X|x Accelerated filed |_|filer ¨ Non-accelerated filer |_|
¨
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP ¨ International Financial Reporting Standards as issued by the International Accounting Standards Board x Other ¨
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement itemItem the registrant has elected to follow.
follow
Item 17 |_|¨ Item 18 |X|
¨
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes |_|¨ No |X|
(APPLICABLEx
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
Yes |_|¨ No |_|
_____________________
* Not for trading, but only in connection with the registration of the American
Depositary Shares.
===============================================================================
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| PART I | ||||
Item 1. | 1 | |||
Item 2. | 1 | |||
Item 3. | 1 | |||
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Item 4. | 18 | |||
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Item 4A. | 38 | |||
Item 5. | 38 | |||
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Item 6. | 56 | |||
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Item 7. | 62 | |||
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i
Page | ||||
Item 8. | 63 | |||
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| 67 | ||||
Item 9. | 67 | |||
| 67 | ||||
Item 10. | 69 | |||
| 69 | ||||
Options to Purchase Securities from Registrant or Subsidiaries | 69 | |||
| 70 | ||||
| 71 | ||||
| 71 | ||||
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| 74 | ||||
| 77 | ||||
Item 11. | 78 | |||
| 78 | ||||
| 78 | ||||
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Item 12. | 81 | |||
| PART II | ||||
Item 13. | 82 | |||
Item 14. | 82 | |||
Item 15. | 82 | |||
| 82 | ||||
| 82 | ||||
| 83 | ||||
| 84 | ||||
Item 16. | 84 | |||
Item 16A. | 84 | |||
Item 16B. | 84 | |||
Item 16C. | 84 | |||
Item 16D. | 85 | |||
Item 16E. | 85 | |||
Item 16F. | 85 | |||
Item 16G. | 85 | |||
| PART III | ||||
Item 17. | 86 | |||
Item 18. | 86 | |||
Item 19. | 86 | |||
ii
Presentation of Financial and Certain Other Information
As used herein, the term "Ryanair Holdings"“Ryanair Holdings” refers to Ryanair Holdings plc. The term the "Company"“Company” refers to Ryanair Holdings or Ryanair Holdings together with its consolidated subsidiaries.subsidiaries, as the context requires. The terms "Ryanair Limited" and "Ryanair" referterm “Ryanair” refers to Ryanair Limited, a wholly-ownedwholly owned subsidiary of Ryanair Holdings, together with its consolidated subsidiaries.subsidiaries, unless the context requires otherwise. The term "fiscal year"“fiscal year” refers to the twelve-month12-month period ended on March 31 of suchthe quoted year. All references to "Ireland"“Ireland” herein are references to the Republic of Ireland. All references to the "U.K."“U.K.” herein are references to the United Kingdom and all references to the "United States"“United States” or "U.S."“U.S.” herein are references to the United States of America. References to "U.S.“U.S. dollars," "dollars," "$"” “dollars,” “$” or "U.S. cents"“U.S. cents” are to the currency of the United States, references to "U.K. pounds“U.K. pound sterling," "sterling," "U.K.GBP"” “U.K. £” and "U.K.
pence"“£” are to the currency of the U.K. and references to "EUR," "euro"“€,” “euro,” “euros” and "euro
cents"“euro cent” are to the euro, the common currency of thirteen Member Statessixteen member states of the European Union (the "EU"“EU”), including Ireland. Various amounts and percentages set out in this annual report on Form 20-F have been rounded and accordingly may not total.
The Company owns or otherwise has rights to the trademark RYANAIR(R)Ryanair® in certain jurisdictions. See "Item“Item 4. Information on the Company-Trademarks."Company—Trademarks.” This report also makes reference to trade names and trademarks of companies other than the Company.
Until March 31, 2005, the
The Company publishedpublishes its annual and interim
Consolidated Financial Statements in accordance with accounting principles
generally accepted in Ireland ("Irish GAAP"), which differ in certain respects
from accounting principles generally accepted in the United States ("U.S.
GAAP"). Since April 1, 2005, Ryanair Holdings has been required to prepare its
annual consolidated financial statements in accordance with International Financial Reporting Standards as adopted for use inissued by the EU ("IFRS"International Accounting Standards Board (“IASB”),. Additionally, in accordance with applicableits legal obligation to comply with the International Accounting Standards Regulation (EC 1606 (2002)), which applies throughout the EU, law. For a detailed discussionthe consolidated financial statements of the differences
betweenCompany must comply with International Financial Reporting Standards as adopted by the EU. Accordingly, the Company’s consolidated financial statements and the selected IFRS financial data included herein comply with International Financial Reporting Standards as issued by the IASB and U.S. GAAP that affectalso International Financial Reporting Standards as adopted by the Company's Consolidated Financial
Statements, see Note 28EU, in each case as in effect for the year ended and as at March 31, 2010 (collectively referred to the Consolidated Financial Statements included in
Item 18.
as “IFRS” throughout).
The Company publishes its Consolidated Financial Statementsconsolidated financial statements in euro. Solely for the convenience of the reader, this report contains translations of certain euro amounts into U.S. dollars at specified rates. These translations should not be construed as representations that the converted amounts actually represent such U.S. dollar amounts or could be converted into U.S. dollars at the rates indicated or at any other rate. Unless otherwise indicated, such U.S. dollar amounts have been translated from euro at a rate of EUR1.00=€1.00=$1.3374,1.3526, or $1.00=EUR0.7477,€0.7393, the noon buyingofficial rate in New York City for cable transfers of
foreign currencies as certified for customs purposespublished by the U.S. Federal Reserve Bank
of New YorkBoard in its weekly “H.10” release (the "Noon Buying Rate"“Federal Reserve Rate”) on March 31, 2007.2010. The Noon BuyingFederal Reserve Rate for euro on September 19, 2007July 16, 2010 was EUR1.00=€1.00=$1.39501.2919 or $1.00=EUR0.7168.€0.7740. See "Item“Item 3. Key Information-Exchange Rates"Information—Exchange Rates” for information regarding historical rates of exchange relevant to the Company, and "Item“Item 5. Operating and Financial Review and Prospects"Prospects” and "Item“Item 11. Quantitative and Qualitative Disclosure About Market Risk"Risk” for a discussion of the effects of changes in exchange rates on the Company.
iv
iii
Cautionary Statement Regarding Forward-Looking Information
Except for the historical statements and discussions contained herein, statements contained in this report constitute "forward-looking statements"“forward-looking statements” within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended (the "Securities Act"“Securities Act”), and Section 21E of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act"“Exchange Act”). Forward-looking statements may include words such as "expect," "estimate," "project," "anticipate," "should," "intend"“expect,” “estimate,” “project,” “anticipate,” “should,” “intend,” and similar expressions or variations on such expressions. Any filing ofmade by the Company with the U.S. Securities and Exchange Commission (the "SEC"“SEC”) may include forward-looking statements. In addition, other written or oral statements which constitute forward-looking statements have been made and may in the future be made by or on behalf of the Company, including statements concerning its future operating and financial performance, the Company'sCompany’s share of new and existing markets, general industry and economic trends and the Company'sCompany’s performance relative thereto and the Company's expectationCompany’s expectations as to requirements for capital expenditures and regulatory matters. The Company'sCompany’s business is to provide a low-fares airline service in Europe, and its outlook is predominately based on its interpretation of what it considers to be the key economic factors affecting that business and the European economy. Forward lookingForward-looking statements with regard to the Company'sCompany’s business rely on a number of assumptions concerning future events and are subject to a number of uncertainties and other factors, many of which are outside the Company'sCompany’s control, that could cause actual results to differ materially from such statements. It is not reasonably possible to itemize all of the many factors and specific events that could affect the outlook and results of an airline operating in the European economy. Among the factors that are subject to change and could significantly impact Ryanair'sRyanair’s expected results are the airline pricing environment, fuel costs, competition from new and existing carriers, market prices for replacement aircraft and aircraft maintenance services, aircraft availability, costs associated with environmental, safety and security measures, terrorist attacks, actions of the Irish, U.K., EU and other governments and their respective regulatory agencies, fluctuations in currency exchange rates and interest rates, airport handling and access charges, litigation, labor relations, the economic environment of the airline industry, the general economic environment in Ireland, the U.K. and elsewhere in Europe, the general willingness of passengers to travel, the value of its equity stake in Aer Lingus Group plc (“Aer Lingus”), flight interruptions caused by volcanic ash emissions or other atmospheric disruptions, and other factors discussed herein. The Company disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
v
iv
PART I
Item 1. Identity of Directors, Senior Management and Advisers
| Item 1. | Identity of Directors, Senior Management and Advisers |
Not applicable.
Item 2. Offer Statistics and Expected Timetable
| Item 2. | Offer Statistics and Expected Timetable |
Not applicable.
Item 3. Key Information
| Item 3. | Key Information |
Ryanair operates a low fareslow-fares, scheduled passenger airline serving short-haul, point-to-point routes in Europe and Morocco from its bases atin Dublin, London (Stansted and Luton), Glasgow (Prestwick), Brussels (Charleroi), Frankfurt (Hahn), Milan (Bergamo), Stockholm (Skvasta), Rome (Ciampino), Barcelona (Girona), Nottingham East Midlands, Liverpool, Shannon, Pisa, Cork, Marseille, Madrid, Bremen, and Dusseldorf (Weeze), Bristol, Alicante, Belfast, Bournemouth, Birmingham, Kerry, Edinburgh, Reus, Alghero, Cagliari, Trapani, Bologna, Pescara, Oporto, Bari, Brindisi, Leeds Bradford, Faro, Oslo (Rygge), Malaga, Kaunas and Malta airports, which together are referred to as "Ryanair's“Ryanair’s bases of operations"operations” or "Ryanair's“Ryanair’s bases."” Ryanair plans to open bases at Bristol, Alicante,a new base in Barcelona (El Prat) in September 2010 and a further new base in Valencia and Belfast in the Fall of
2007. In operation since 1985,November 2010. Ryanair pioneered the low-fares operating model in Europe under a new management team in the early 1990s. As of August 31, 2007,June 30, 2010, the Company offered over 920approximately 1,300 scheduled short-haul flights per day serving 125
locations155 airports throughout Europe and Morocco, including 24 locations in the U.K. and
Ireland, with an operating fleet of 137250 aircraft flying approximately 4401,100 routes. As of September 20, 2007, theThe Company also holds a 29.4%29.8% interest in Aer Lingus, the Irish national flag carrier, which it has acquired through market purchases following Aer Lingus'Lingus’ partial privatization in 2006. The European Commission has prevented Ryanair from acquiring a majority stake in Aer Lingus pursuantand Ryanair filed an appeal with the European Court of First Instance (“CFI”). On July 6, 2010, the Court upheld the Commission’s decision. Ryanair has two months and 10 days from such date to a decision that the Company is in the process of appealing.appeal this judgment. For additional information, see "Item“Item 8. Financial Information-OtherInformation—Other Financial Information-Legal Proceedings-AerInformation—Legal Proceedings—Aer Lingus Merger Decision."
”
A detailed description of the Company'sCompany’s business can be found in "Item“Item 4. Information on the Company."
”
The following tables set forth certain of the Company'sCompany’s selected consolidated financial information as of and for the periods indicated, andpresented in accordance with IFRS. This information should be read in conjunction withwith: (i) the audited Consolidated Financial Statementsconsolidated financial statements of the Company and related notes thereto included in Item 1818; and with "Item(ii) “Item 5. Operating and Financial Review and Prospects." Note that the following tables do
not contain financial information presented in IFRS for the fiscal years ended
March 31, 2003 and 2004. Prior to April 1, 2005, the Company published its
financial information in Irish GAAP. The Company's financial information for the
fiscal year ended March 31, 2005 presented below has been restated in IFRS. The
Company has not restated its 2003 and 2004 financial information in IFRS.
However, U.S. GAAP financial information for the 2003 and 2004 fiscal years is
presented below. This information represents the reconciliation to U.S. GAAP of
the Company's previously reported Irish GAAP financial information for those
years.
1
Income Statement Data:
| Fiscal year ended March 31, | ||||||||||||||||||||||||
| 2010(a) | 2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||||||
| (in millions, except per-Ordinary Share data) | ||||||||||||||||||||||||
Total operating revenues | $ | 4,041.7 | € | 2,988.1 | € | 2,942.0 | € | 2,713.8 | € | 2,236.9 | € | 1,692.5 | ||||||||||||
Total operating expenses | (3,497.8 | ) | (2,586.0 | ) | (2,849.4 | ) | (2,176.7 | ) | (1,765.2 | ) | (1,317.5 | ) | ||||||||||||
Operating income | 543.9 | 402.1 | 92.6 | 537.1 | 471.7 | 375.0 | ||||||||||||||||||
Net interest (expense) income | (65.7 | ) | (48.6 | ) | (55.0 | ) | (13.2 | ) | (19.9 | ) | (35.7 | ) | ||||||||||||
Other non-operating (expense) income | (16.9 | ) | (12.5 | ) | (218.1 | ) | (85.0 | ) | (0.8 | ) | (0.4 | ) | ||||||||||||
Profit (loss) before taxation | 461.3 | 341.0 | (180.5 | ) | 438.9 | 451.0 | 338.9 | |||||||||||||||||
Taxation | (48.3 | ) | (35.7 | ) | 11.3 | (48.2 | ) | (15.4 | ) | (32.2 | ) | |||||||||||||
Profit (loss) after taxation | $ | 413.0 | € | 305.3 | € | (169.2 | ) | € | 390.7 | € | 435.6 | € | 306.7 | |||||||||||
Ryanair Holdings basic earnings (loss) per Ordinary Share (U.S. cents)/(euro cent)(b) | 27.97 | 20.68 | (11.44 | ) | 25.84 | 28.20 | 20.00 | |||||||||||||||||
Ryanair Holdings diluted earnings (loss) per Ordinary Share (U.S. cents)/(euro cent)(b) | 27.86 | 20.60 | (11.44 | ) | 25.62 | 27.97 | 19.87 | |||||||||||||||||
| Balance Sheet Data: | ||||||||||||||||||||||||
| As of March 31, | ||||||||||||||||||||||||
| 2010(a) | 2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||
Cash and cash equivalents | $ | 1,999.0 | € | 1,477.9 | € | 1,583.2 | € | 1,470.8 | € | 1,346.4 | € | 1,439.0 | ||||||||||||
Total assets | $ | 10,230.3 | € | 7,563.4 | € | 6,387.9 | € | 6,327.6 | € | 5,763.7 | € | 4,634.2 | ||||||||||||
Long-term debt, including capital lease obligations | $ | 3,998.6 | € | 2,956.2 | € | 2,398.4 | € | 2,266.5 | € | 1,862.1 | € | 1,677.7 | ||||||||||||
Shareholders’ equity | $ | 3,853.0 | € | 2,848.6 | € | 2,425.1 | € | 2,502.2 | € | 2,539.8 | € | 1,992.0 | ||||||||||||
Issued share capital | $ | 12.7 | € | 9.4 | € | 9.4 | € | 9.5 | € | 9.8 | € | 9.8 | ||||||||||||
| Cash Flow Statement Data: | ||||||||||||||||||||||||
| Fiscal year ended March 31, | ||||||||||||||||||||||||
| 2010(a) | 2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||
Net cash inflow from operating activities | $ | 1,178.8 | € | 871.5 | € | 413.2 | € | 703.9 | € | 900.8 | € | 610.6 | ||||||||||||
Net cash (outflow) from investing activities | $ | (2,095.3 | ) | € | (1,549.1 | ) | € | (388.3 | ) | € | (692.3 | ) | € | (1,189.0 | ) | € | (337.3 | ) | ||||||
Net cash inflow from financing activities | $ | 774.1 | € | 572.3 | € | 87.5 | € | 112.8 | € | 195.6 | € | 293.4 | ||||||||||||
Increase (decrease) in cash and cash equivalents | $ | (142.4 | ) | € | (105.3 | ) | € | 112.4 | € | 124.4 | € | (92.6 | ) | € | 566.7 | |||||||||
| (a) | Dollar amounts are translated from euro solely for convenience at the Federal Reserve Rate on March 31, |
| (b) | All per-Ordinary Share amounts have been adjusted to reflect the 2-for-1 split of Ordinary |
The following table sets forth, for the periods indicated, certain information concerning the exchange rate betweenbetween: (i) the U.S. dollar and the euro,euro; (ii) the U.K. pound sterling and the euro,euro; and (iii) the U.K. pound sterling and the U.S. dollar. Such rates are provided solely for the convenience of the reader and are not necessarily the rates used by the Company in the preparation of its Consolidated Financial Statementsconsolidated financial statements included in Item 18. No representation is made that any of such currencies could have been, or could be, converted into any other of the other such currencies at such rates or at any other rate.
U.S. dollars per €1.00(a)
Year ended December 31, | End of Period | Average(b) | Low | High | ||||
2005 | 1.184 | 1.239 | — | — | ||||
2006 | 1.319 | 1.256 | — | — | ||||
2007 | 1.458 | 1.371 | — | — | ||||
2008 | 1.395 | 1.471 | — | — | ||||
2009 | 1.433 | 1.394 | — | — | ||||
Month ended | ||||||||
January 31, 2010 | — | — | 1.389 | 1.451 | ||||
February 28, 2010 | — | — | 1.352 | 1.396 | ||||
March 31, 2010 | — | — | 1.330 | 1.378 | ||||
April 30, 2010 | — | — | 1.316 | 1.366 | ||||
May 31, 2010 | — | — | 1.223 | 1.320 | ||||
June 30, 2010 | — | — | 1.195 | 1.236 | ||||
Period ended July 16, 2010 | — | — | 1.244 | 1.292 | ||||
U.K. pounds sterling per €1.00(c)
Year ended December 31, | End of Period | Average(b) | Low | High | ||||
2005 | 0.689 | 0.682 | — | — | ||||
2006 | 0.674 | 0.682 | — | — | ||||
2007 | 0.735 | 0.685 | — | — | ||||
2008 | 0.957 | 0.797 | — | — | ||||
2009 | 0.887 | 0.891 | — | — | ||||
Month ended | ||||||||
January 31, 2010 | — | — | 0.866 | 0.900 | ||||
February 28, 2010 | — | — | 0.867 | 0.893 | ||||
March 31, 2010 | — | — | 0.891 | 0.912 | ||||
April 30, 2010 | — | — | 0.864 | 0.888 | ||||
May 31, 2010 | — | — | 0.846 | 0.870 | ||||
June 30, 2010 | — | — | 0.809 | 0.836 | ||||
Period ended July 16, 2010 | — | — | 0.824 | 0.844 | ||||
U.K. pounds sterling per U.S.$1.00(d)
Year ended December 31, | End of Period | Average(b) | Low | High | ||||
2005 | 0.581 | 0.551 | — | — | ||||
2006 | 0.511 | 0.543 | — | — | ||||
2007 | 0.504 | 0.500 | — | — | ||||
2008 | 0.686 | 0.546 | — | — | ||||
2009 | 0.627 | 0.641 | — | — | ||||
Month ended | ||||||||
January 31, 2010 | — | — | 0.610 | 0.627 | ||||
February 28, 2010 | — | — | 0.626 | 0.656 | ||||
March 31, 2010 | — | — | 0.651 | 0.675 | ||||
April 30, 2010 | — | — | 0.646 | 0.659 | ||||
May 31, 2010 | — | — | 0.656 | 0.698 | ||||
June 30, 2010 | — | — | 0.662 | 0.693 | ||||
Period ended July 16, 2010 | — | — | 0.651 | 0.665 | ||||
| (a) | Based on the Federal Reserve Rate for euro. |
| (b) | The average of |
| (c) | Based on the composite exchange rate as quoted at 5 p.m., New York time, by Bloomberg. |
| (d) | Based on the Federal Reserve Rate for U.K. pounds |
As of September 19, 2007,July 16, 2010, the exchange rate between the U.S. dollar and the euro was EUR1.00=€1.00=$1.3950,1.2919, or $1.00=EUR0.7168;€0.7740; the exchange rate between the U.K. pound sterling and the euro was U.K.GBP1.00=EUR1.4331,U.K. £1.00=€1.1834, or EUR1.00=U.K.GBP0.6798;€1.00=U.K. £0.8449; and the exchange rate between the U.K. pound sterling and the U.S. dollar was U.K.GBP1.00=U.K. £1.00=$1.9983,1.5289, or $1.00=U.K.GBP0.5004.U.K. £0.6541. For a discussion of the impact of exchange rate fluctuations on the Company'sCompany’s results of operations, see "Item“Item 11. Quantitative and Qualitative Disclosures About Market Risk."
5
SELECTED OPERATING AND OTHER DATA
The following tables set forth certain operating data of Ryanair for each of the fiscal years shown. Such data are derived from the Consolidated Financial
StatementsCompany’s consolidated financial statements prepared in accordance with IFRS (except as otherwise indicated) and certain other data, and are not audited. For definitions of the terms used in this table, see the Glossary in Appendix A. See the notes following the table
for explanatory material and Note 28 to the Consolidated Financial Statements
included in Item 18 for a detailed discussion of the principal differences
between IFRS and U.S. GAAP.
Operating Data:
| Fiscal Year ended March 31, | ||||||||
| 2010 | 2009 | 2008 | 2007 | |||||
Average Yield per Revenue Passenger Mile (“RPM”) (€) | 0.052 | 0.060 | 0.065 | 0.070 | ||||
Average Yield per Available Seat Miles (“ASM”) (€) | 0.043 | 0.050 | 0.054 | 0.059 | ||||
Average Fuel Cost per U.S. Gallon (€) | 1.515 | 2.351 | 1.674 | 1.826 | ||||
Cost per ASM (CASM) (€) | 0.047 | 0.058 | 0.051 | 0.054 | ||||
Operating Margin | 13% | 5% | 20% | 21% | ||||
Break-even Load Factor | 73% | 79% | 67% | 66% | ||||
Average Booked Passenger Fare (€) | 34.95 | 40.02 | 43.70 | 44.10 | ||||
Ancillary Revenue per Booked Passenger (€) | 9.98 | 10.21 | 9.58 | 8.52 | ||||
Other Data:
| Fiscal Year ended March 31, | ||||||||
| 2010 | 2009 | 2008 | 2007 | |||||
Revenue Passengers Booked | 66,503,999 | 58,565,663 | 50,931,723 | 42,509,112 | ||||
Revenue Passenger Miles | 44,841,072,500 | 39,202,293,374 | 34,452,733,067 | 26,943,689,231 | ||||
Available Seat Miles | 53,469,635,740 | 47,102,503,388 | 41,342,195,458 | 32,043,022,051 | ||||
Booked Passenger Load Factor | 82% | 81% | 82% | 82% | ||||
Average Length of Passenger Haul (miles) | 661 | 654 | 662 | 621 | ||||
Sectors Flown | 427,900 | 380,915 | 330,598 | 272,889 | ||||
Number of Airports Served at Period End | 153 | 143 | 147 | 123 | ||||
Average Daily Flight Hour Utilization (hours) | 8.89 | 9.59 | 9.87 | 9.77 | ||||
Personnel at Period End | 7,168 | 6,616 | 5,920 | 4,462 | ||||
Personnel per Aircraft at Period End | 31 | 36 | 36 | 34 | ||||
Booked Passengers per Personnel at Period End | 9,253 | 8,852 | 8,603 | 9,527 | ||||
Risks Related to the Company
Changes in Fuel Costs and Fuel Availability Affect the Company'sCompany’s Results and Increase the Likelihood of Adverse Impact to the Company’s Profitability. Jet fuel costs are subject to wide fluctuations as a result of many economic and political factors and events occurring throughout the world that Ryanair can neither control nor accurately predict, including increases in demand, sudden disruptions in supply and other concerns about global supply, as well as market speculation. FuelFor example, although they declined in the 2010 fiscal year, oil prices increased substantially in fiscal years 20072008 and 2006 and are currently close to historically high levels, which has2009, peaking in July 2008. These increases had a significant impact on Ryanair'sRyanair’s costs, and in turn, on its operating results.financial results—contributing to the net loss recorded in the 2009 fiscal year, which reflected, among other things, a 59% increase in fuel costs between fiscal year 2008 and fiscal year 2009. As international prices for jet fuel are denominated in U.S. dollars, Ryanair'sRyanair’s fuel costs are also subject to certain exchange rate risks. Substantial price increases, adverse exchange rates, or the unavailability of adequate supplies, including, without limitation, any such events resulting from prolonged hostilities in the Middle East or other oil-producing regions or the suspension of production by any significant producer, could havemay adversely affect Ryanair’s profitability. In the event of a material adverse effect
on Ryanair's profitability. A fuel shortage resulting from a disruption of oil imports or otherwise, could result additional increases in fuel prices or a curtailment of scheduled services.
While services could result.
Ryanair hadhas historically entered into arrangements providing for substantial protection against fluctuations in fuel prices, generally through forward contracts covering 12-18periods of up to 18 months of anticipated jet fuel requirements,requirements. Ryanair (like many other airlines) has, in light of the significant increases in oil prices inmore recent years, Ryanair now
entersperiods, entered into any such hedging arrangements on a more selective basis. At AugustAs of July 19, 2010, Ryanair had entered into forward jet fuel (jet kerosene) contracts covering approximately 90% of its estimated requirements for the fiscal year ending March 31, 2007,2011 at prices equivalent to approximately $730 per metric ton. In addition, as of July 19, 2010, Ryanair had entered into forward jet fuel (jet kerosene) contracts covering approximately 90% of its estimated requirements for the period from April 2011 to September 2007 through March 20082011 at prices equivalent to approximately $65$755 per barrelmetric ton. Because of Brent crude oil. Ryanair has not otherwise entered into material
agreements to seek to fix the pricelimited nature of a material quantity of fuel. As a result
of Ryanair's decision to be more selective in entering into newits hedging arrangements,program, the Company may be moreis exposed to risks arising from fluctuations in the price of fuel, especially in light of the recent significant increases.volatility. Any new increase in fuel costs could have a material adverse effect on the Company’s financial condition and results of operations. In addition, the recent strengthening of the U.S. dollar against the euro could have an adverse effect on the cost of buying fuel in euro. As of July 19, 2010, Ryanair had hedged 88% of its forecasted fuel-related dollar purchases against the euro at a rate of $1.38 per euro for the period to 30 June 2011, without, however, having entered into material hedging arrangements thereafter. See “—The Company May Not Be Successful in Raising Fares to Offset Increased Business Costs” below.
No assurances whatsoever can be given about trends in fuel prices, and average fuel prices for the 2011 fiscal year or for future years may be significantly higher than current prices. Management estimates that every $1.00 movement in the price of a metric ton of jet fuel will impact Ryanair’s net income by approximately €2.1 million, taking into account Ryanair’s hedging program for the 2011 fiscal year. There can be no assurance, however, in this regard, and the impact of fuel prices on Ryanair’s operating results may be more pronounced. There also cannot be any assurance that Ryanair'sRyanair’s current or any future such arrangements will be adequate to protect Ryanair from further increases in the price of fuel or that Ryanair will not incur losses due to high fuel prices will decline from their current historically high levels any
timealone or in the near future.combination with other factors. See "Item“Item 11. Quantitative and Qualitative Disclosures About Market Risk-FuelRisk—Fuel Price Exposure and Hedging."
Based upon Ryanair's fuel consumption for” Because of Ryanair’s low fares and its no-fuel-surcharges policy, as well as the fiscal year ended March 31,
2007,Company’s expansion plans, which will tend to have a change of one U.S. cent in the average annual price per gallon of
aviation fuel would have caused a change of approximately EUR3 million in the
Company's annual fuel costs. Ryanair's fuel costs in the fiscal year ended March
31, 2007, after giving effect to the Company's fuel hedging activities,
increased by 49.9% over the comparable period ended March 31, 2006, to EUR693.3
million, primarily due to the increase in the average price of fuel, an increase
in the number of sectors flown and the average sector length as a result of the
expansion of Ryanair's fleet and route network, offset in part by improvements
in fuel burn per hour due to the increasing use of wingleted aircraft and the
positivenegative impact on fuel costs of the strengthening of the euro against the
dollar. Ryanair estimates that its fuel cost would have been approximately
EUR639.6 million in fiscal year 2007, compared to EUR456.4 million in fiscal
2006 (excluding de-icing costs of EUR4.7 million in 2007 and EUR6.1 million in
2006) had Ryanair not had any hedging arrangements in place. Because of
Ryanair's low-fares policy,yields, its ability to pass on increased fuel costs to passengers through increased fares or otherwise is somewhat limited. Moreover, the anticipated substantial expansion of Ryanair'sRyanair’s fleet will result in a
substantialan increase, in absolute terms, in Ryanair'sRyanair’s aggregate fuel costs.
7
Terrorism
Based upon Ryanair’s fuel consumption for the 2010 fiscal year, a change of $1.00 in the United Kingdom or Elsewhereaverage annual price per metric ton of jet fuel would have caused a change of approximately €0.9 million in Europe Could Havethe Company’s annual fuel costs. Ryanair’s fuel costs in the 2010 fiscal year, after giving effect to the Company’s fuel hedging activities, decreased by 29% from the comparable period ended March 31, 2009, to €893.9 million, primarily due to the significant decrease in the cost of jet fuel. Ryanair estimates that its fuel costs would have been approximately €916.6 million in the 2010 fiscal year, as compared to €1,154.5 million in the 2009 fiscal year, had Ryanair not had any fuel hedging arrangements in place in either fiscal year.
Ryanair Has Decided to Freeze its Development in the U.K. Market and Curtail Certain U.K. Operations. Ryanair informed its U.K.-based pilots on June 16, 2009 that it had completed a Material
Detrimental Effectreview of its U.K. growth plans. The review was prompted by the recessionary environment in the U.K. and the impact it had had on Ryanair’s business, coupled with the Company
On August 10, 2006,negative impact of the U.K. security authorities arrested and subsequently
charged eight individuals’s then £10 Air Passenger Duty (“APD”), described in connection with
more detail below. As a plotsecondary issue, Ryanair also noted that the campaign conducted by the British Airline Pilots Association (“BALPA”) for union recognition had made Ryanair’s position in the U.K. more uncertain. See “—Risks Related to attack aircraft operating
on transatlantic routes. the Airline Industry—The Airline Industry Is Particularly Sensitive to Changes in Economic Conditions; A Continued Recessionary Environment Would Negatively Impact Ryanair’s Result of Operations” below.
As a result of these arrests,the review, Ryanair announced its decision to temporarily freeze overall growth at its existing U.K. authorities
introduced increased security measures which resultedbases from June 16, 2009 onwards. However, the Company may selectively increase capacity at some U.K. airports where opportunities arise such as its launch of a new base at Leeds Bradford. Any changes in all passengers being
body searched,the announced policy will be dependent upon the recovery of the U.K. economy, the status of the U.K.’s APD tourist tax and banned the transportation in carry-on baggage of certain
liquids and gels. The introduction of these measures led to passengers suffering
severe delays while passing through theseany other relevant factors (such as airport security checks. Asgrowth incentives). Furthermore, Ryanair announced on July 21, 2009 that, as a result of the U.K. government’s £10 APD tourist tax (as well as the then scheduled increase in APD from £10 to £11, which occurred in November 2009) and the high costs of operating at its London (Stansted) base, it would implement a 40% reduction in capacity at such base between October 2009 and March 2010. In particular, the Company announced its intention to reduce its London (Stansted)-based aircraft from the then current 40 to 24 during the aforementioned period, and also reduce by 30% the number of weekly Ryanair cancelled 279flights to and from the airport. The Company announced at that time that it expected these cuts to result in 2.5 million fewer passenger trips during the period. In addition, on June 29, 2010, due to the continuance of the U.K. government’s £11 APD tourist tax and high charges at London (Stansted) airport, the Company announced that capacity at London (Stansted) airport would be reduced from winter 2010 by 17% and the number of aircraft based at London (Stansted) would be reduced from 24 to 22. Ryanair also noted that, as a result of other capacity reductions at its U.K. bases except for the bases at Edinburgh and Leeds Bradford, its total U.K. capacity would fall by 16% in the period from November 1, 2010 to March 31, 2011.
The decision to freeze the Company’s development in the U.K. and reduce flights to and from London (Stansted) has presented some risks. In the past, the Company’s growth has been largely dependent on flights to or from the U.K. Such flights represented 24.1% of total flights in the days following2010 fiscal year. A weak U.K. economy, along with the incidentCompany’s decision to freeze growth at its U.K. bases (with the exception of launching a base at Leeds Bradford), and refunded a
total of EUR2.7 million in fares to approximately 40,000 passengers. Inreduce its London (Stansted) flights, may affect the days
following the arrests, Ryanair also suffered reductions in bookings estimated to
have resulted in a loss of an additional approximately EUR1.9 million in
revenue. As in the past, the Company reacted to these adverse events by
initiating system-wide fare sales to stimulate demand for air travel.
On September 1, 2006, Ryanair filed a claim for EUR4.6 million in
compensation against the U.K. Department of Transport under section 93overall growth of the U.K. Transport Act 2000. Section 93 ofCompany. In addition, the act provides for compensation for
airlines in cases in whichabovementioned measures affecting U.K.-based pilots may affect the department has issued directions under the act
that haveCompany’s labor relations. Such risks could lead to negative effects on the Company’s financial damagescondition and/or results of operations.
The Company May Not Be Successful in Reducing Business Costs to the airlines.Offset Reduced Fares.Ryanair operates a low-fares airline. The case issuccess of its business model depends on its ability to be heard in
the London High Court. There can be no assurance that the Company will be
successful in its legal action or in obtaining any compensation in connection
with its claims.
On August 14, 2006, the U.K. security authorities reduced the level of
security searches andcontrol costs so as to deliver low fares while at the same time introduced additional baggage
restrictionsearning a profit. The Company has limited control over its fuel costs and already has comparatively low other operating costs. In periods of high fuel costs, if the Company is unable to further reduce its other operating costs, operating profits are likely to fall. The Company cannot offer any assurances regarding its future profitability. See “—The Company Faces Significant Price and Other Pressures in relation toa Highly Competitive Environment” below and “—Changes in Fuel Costs and Fuel Availability Affect the size of baggageCompany’s Results and Increase the Likelihood that can be stowed in aircraft
cabins. Passengers have suffered delays on an ongoing basis as a result of
increased security measures and carry-on baggage restrictions.
In addition, reservations on Ryanair's flights to London dropped materially
for a number of days in the immediate aftermath of the terrorist attacks in
London on July 7, 2005. Although the terrorist attack in Glasgow on June 30,
2007 (in which a car filled with explosives was driven into the doorway of
Glasgow airport) and the failed terrorist attacks in London on July 21, 2005 and
June 29, 2007 had no material impact on bookings, there can be no assurance that
future such attacks will not affect our passenger traffic. In fiscal 2007,
flights into and out of London accounted for 18.9 million, or approximately 44%,
of passengers traveling on the Company's network. In fiscal 2006 and 2005,
flights into and out of London accounted for 17.5 million passengers and 15.4
million passengers, respectively, or approximately 50% and 56%, respectively, of
passengers traveling on the Company's network.
Future acts of terrorism or significant terrorist threats, particularly in
London or other markets that are significant to Ryanair, could have a material
adverse effect on the Company's profitability or financial condition should the
public's willingness to travel to and from those markets be reduced as a result.
See also "Risks Related to the Airline Industry-The 2001 Terrorist Attacks on
the United States Had a Severe Negative Impact on the International Airline
Industry."
Company May Incur Additional Losses” above.
The Company is Subject to Legal Proceedings Alleging Unlawful State Aid at Certain AirportsAirports. In December 2002, the European Commission announced the launch of an investigation into the April 2001 agreement between Ryanair and Brussels (Charleroi) airport and the airport'sairport’s owner, the government of the Walloon Region of Belgium whichBelgium. The agreement enabled the Company to launch new routes and base up to four aircraft at Brussels (Charleroi).
In February 2004, the European Commission found that a portion of the arrangements between Ryanair, the airport, and the region constituted illegal state aid, and therefore ordered Ryanair to repay the amount of the benefit received in connection with those arrangements. In May 2004, Ryanair appealed the decision of the European Commission to the European Court of First Instance (“CFI”), requesting that the decision be annulled. The CFI heard Ryanair’s appeal in March 2008. In December 2008, the CFI annulled the European Commission’s decision and Ryanair is still waiting forwas repaid the court
to schedule a hearing.
8
In addition, in April 2004,€4 million that the Commission had claimed was illegal state aid. Subsequently, the Walloon Region wrote to Ryanair requesting
repayment of all amounts that had been deemed illegal, although it acknowledged
Ryanair's right to offsetwithdrew a separate action for €2.3 million against these amounts certain costs incurred in
relation to the establishmentCompany.
Between July 2007 and March 2008, the European Commission launched formal investigations into Ryanair’s agreements with the Lübeck, Schönefeld, Tampere, Alghero, Pau, Aarhus and Bratislava airports. These investigations are ongoing, with the exception of the base,Bratislava airport case, which concluded in accordanceJanuary 2010 with a finding that the agreement was in full compliance with state-aid rules.
On June 17, 2008, the European Commission's decision. In September 2004,Commission launched a further investigation into Ryanair’s agreements at Frankfurt (Hahn) airport, which is a significant base for Ryanair. The European Commission announced in a public statement that its initial investigation had found that the Walloon Region issuedairport might have acted like a private market investor but that it had insufficient evidence to reach a conclusion and therefore had elected to open a formal demand that Ryanair repay a total of approximately EUR4 million, excluding any
interest that may be due. investigation. The formal investigation is ongoing.
Ryanair believes that no repayment is due when such
offsets are taken into account, although it has placed this amount in escrow
pending the outcome of its appeal.
In May 2005,positive decision by the Walloon Region initiated a new proceeding currently
pending before the Irish High Court to recover a further EUR2.3 million in
start-up costs that had been reimbursed to Ryanair in connection with its
establishment of the base. Ryanair does not believe any such payment is due and
is currently defending the action. For additional details on this matter, please
see "Item 8. Financial Information--Other Financial Information--Legal
Proceedings."
On September 6, 2005, the European Commission announced new guidelines on
the financing of airports and provision of start-up aid to airlines by certain
publicly owned airports based on the European Commission's findingCFI in the Charleroi case. See "Item 8. Financial Information-Consolidated Financial
Information-Legal Proceedings."
In an unrelated, though similar, matter,case has caused the Commission to rethink its policy in July 2003, a Strasbourg court
ruled (on the basis of a complaint by the Air France Group ("Air France")) that
marketing support granted by the Strasbourg Chamber of Commerce to Ryanair in
connection with its launch of services from Strasbourg to London (Stansted)
constituted unlawful state aid. The judgment took effect on September 24, 2003
and was upheld on the initial appeal. Ryanair appealed this decision to the
French Administrative Supreme Court (Conseil d'Etat) on the basis that the
marketing support granted was not state aid. In February 2006, the Conseil
d'Etat rejected this appeal and no further appeal can be filed. As a result of
the initial decision of the Strasbourg court to annul Ryanair's contract with
Strasbourg Airport, Ryanair decided to close the Strasbourg route and instead
opened a route from Baden-Karlsruhe in Germany to London (Stansted) (Baden
airport is located some 40 kilometers from Strasbourg).
Ryanair is facing similar legal challenges by third parties with respect to
agreements with certain other airports. In July 2006, a local court in Germany
required the City of Lubeck to disclose to a competing German airline operating
out of the main airport in Hamburg details of an agreement between Hamburg
Lubeck Airport and Ryanair.area. However, the ruling does not affect Ryanair's costs
at Lubeck Airport, as the airport was subsequently acquired by a private owner
who is offering the same arrangements to Ryanair and all other airlines. There
have also been complaints by competitors regarding Ryanair's arrangements with
Shannon Airport, Alghero Airport and Frankfurt Hahn Airport. In July 2007, the
European Commission announced that it had started investigations of airport
agreements at the Lubeck, Tampere, Berlin (Schonefeld) and Dortmund airports.
Ryanair has relatively limited operations to and from the first three airports
and does not operate flights to or from Dortmund.
Adverseadverse rulings in thesethe Frankfurt (Hahn) or similar cases could be used as precedents by other competitors to challenge Ryanair'sRyanair’s agreements with other publicly owned airports and could cause Ryanair to strongly reconsider its growth strategy in relation to public or state-owned airports across Europe. This could in turn lead to a scaling-back of Ryanair'sRyanair’s overall growth strategy due to the smaller number of privately-ownedprivately owned airports available for development. No assurance can be given as to the outcome of theselegal proceedings, nor as to whether any unfavorable outcomes may, individually or in the aggregate, have a material adverse effect on the results of operation or financial condition of the Company. For additional information, please see “Item 8. Financial Information—Other Financial Information—Legal Proceedings.”
The Company Faces Significant Price and Other Pressures in a Highly Competitive EnvironmentEnvironment. Ryanair operates in a highly competitive marketplace, with a large number of new entrants,low-fare, traditional airlines and charter airlines competing throughout the route network.
9
Ryanair'sRyanair’s competitors are state-owned or controlledstate-controlled flag carriers and in some cases may have greater name recognition and resources and may have received, or may receive in the future, significant amounts of subsidies and other state aid from their respective governments. In addition, negotiations between the EUEU-U.S. Open Skies Agreement, which was signed in April 2007 and entered into effect in March 2008, allows U.S. carriers to offer services in the United States on a
comprehensive "open skies" agreement couldintra-EU market, which should eventually result in the removal of current
barriers to the entry of U.S. carriers into the intra-EU market.increased competition. See "Item“Item 4. Information on the Company-Government Regulation-LiberalizationCompany—Government Regulation—Liberalization of the EU Air Transportation Market."
”
The airline industry is highly susceptible to price discounting, in part because airlines incur very low marginal costs for providing service to passengers occupying otherwise unsold seats. The number of new-entrant low-fares
airlinesBoth low-fare and traditional carriers offering lower, more competitiveairlines sometimes offer low fares in direct competition with Ryanair across its route network has increased
significantly as a result of the liberalization of the EU air transport market and greater public acceptance of the low-fares model. IncreasingIncreased price competition and the resulting lower fares, combined with the continuingcontinuous increases in the Company'sCompany’s capacity in recent years (including an increase of approximately 23%12% during the 2010 fiscal 2007)year), have combined to put downward pressure on the Company'sCompany’s yields. Ryanair's yieldRyanair’s Yield per ASMAvailable Seat Mile (“YASM”) decreased by 8.6%7.6% in the 2009 fiscal year 2006 and increaseddecreased further by 1.7%12.6% in the 2010 fiscal year 2007.
year.
Although Ryanair intends to compete vigorously and to assert its rights against any predatory pricing or other conduct, price competition among airlines could reduce the level of fares or passenger traffic on the Company'sCompany’s routes to the point where profitable levels of operationsprofitability may not be achieved.
achievable.
In addition to traditional competition among airline companies and charter operators who have entered the "low fares"low-fares market, the industry also faces competition from ground transportation (including high speedhigh-speed rail systems such as the "TGV" in
France)systems) and sea transportation alternatives, as businesses and recreational travelers seek lower-cost substitutes for air travel.
The Company Will Incur Significant Costs Acquiring New Aircraft Ryanair'sand Any Instability in the Credit and Capital Markets Could Negatively Impact Ryanair’s Ability to Obtain Financing on Acceptable Terms. Ryanair’s continued growth is dependent upon its ability to acquire additional aircraft to meet additional capacity needs and to replace agingolder aircraft.
Ryanair expects to have at least 163272 aircraft (assuming that the planned
disposal of six such aircraft is completed on schedule) in its fleet by March 31, 2008.2011. With the Company'sCompany’s current orders for aircraft it is obligated to buy (or "firm"(i.e., “firm” orders) under its contracts with The Boeing Company ("Boeing"(“Boeing”), the Company expects to increase the size of its fleet to consist of 262as many as 299 Boeing 737-800 "next generation" aircraft by December 2012March 2013 (assuming that the planned disposaldisposals of 46 such aircraft isand returns of leased aircraft are completed on schedule), and may elect to enlarge
its fleet further by exercising any of the 110 options to purchase new aircraft
it currently has for periods through fiscal 2014 under its agreements with
Boeing.. For additional information on the Company'sCompany’s aircraft fleet and expansion plans, see "Item“Item 4. Information on the Company-Aircraft"Company—Aircraft” and "Item“Item 5. Operating and Financial Review and Prospects--LiquidityProspects—Liquidity and Capital Resources."” There can be no assurance that this planned expansion will not outpace the growth of passenger traffic on Ryanair'sRyanair’s routes or that traffic growth will not prove to be greater than the expanded fleet can accommodate; inaccommodate. In either case, such developments could have a material adverse effect on the Company'sCompany’s business, results of operations, and financial condition.
Ryanair plans to finance its existingpurchases of firm-order aircraft through a combination of new bank loan facilitiesloans, operating and finance leases—including via sale-and-leaseback transactions—and cash flow generated from the Company’s operations. As in the past, Ryanair expects a majority of its financing to be supported by a guarantee fromguarantees granted by the Export-Import Bank of the United States and similar(“Ex-Im Bank”). Nonetheless, due to those alreadythe general deterioration in place,the availability of bank debt provided by commercial bankers, operating and finance leases via
sale-and-leaseback transactions, Enhanced Equipment Trust Certificates and cash
flow generated from the Company's operations.
10
However,credit facilities in recent years, no assurance can be given that suchsufficient financing will be available to Ryanair or that the terms of any such financing will be favorable. Any inability of the Company to obtain financing for the new aircraft on advantageousreasonable terms could have a material adverse effect on its business, results of operations, and financial condition.
In addition, the financing of new and existing Boeing 737-800 aircraft has already and will continue to significantly increase the total amount of the Company'sCompany’s outstanding debt and the payments it is obliged to make to service such debt. Furthermore, Ryanair'sRyanair’s ability to draw down funds under its existing bank loanbank-loan facilities to pay for aircraft as they are delivered is subject to various conditions imposed by the counterparties to thesuch bank loan facilities and related loan guarantees, and any future financing is expected to be subject to similar conditions. The Company currently has a
preliminary commitment from the Export Import Bank of the United Statesarranged or drawn down financing for all 16 aircraft to provide a loan guarantee covering 45 of the 171 firm-order aircraft and a final
commitment covering 15 aircraft. The company is currently assessing proposals
for financing aircraft due for deliverybe delivered in the medium termperiod between the date hereof and January 2011 through various
structures including sale-and-leaseback transactions, financialEx-Im Bank-supported finance leases and
commercial debt.(five of such aircraft remain subject to the issuance of preliminary credit guarantees by Ex-Im Bank). For additional details on Ryanair'sRyanair’s financings, see "Item“Item 5. Operating and Financial Review and Prospects-LiquidityProspects—Liquidity and Capital Resources."
In addition, ”
Ryanair is dependenthas also entered into significant derivative transactions intended to hedge its current aircraft acquisition-related debt obligations. These derivative transactions expose Ryanair to certain risks and could have adverse effects on its contracts with Boeing for the
acquisitionresults of the additional aircraft needed to implement its expansion plans.
A strike by Boeing machinists halted Boeing's aircraft assembly operations for
most of the month of September 2005, resulting in the delay of certain aircraft
deliveries to the Company and minor modifications to the Company's operating
schedule in Septemberfinancial condition. See “Item 11. Quantitative and October 2005. See "Item 4. Information on the
Company-Aircraft" for additional information. As a result of the strike, which
terminated on September 29, 2005, scheduled aircraft deliveries for the period
through April 2007 were affected, the retirement of some of the Company's Boeing
737-200s and the launch of certain routes were delayed and the Company was
required to lease additional aircraft capacity between January and April 2006 at
a cost of EUR5.6 million. See "Item 4. Information on the Company-Aircraft."
Qualitative Disclosures About Market Risk.”
The Company'sCompany’s Rapid Growth May Expose itIt to Risks
Ryanair'sRisks.Ryanair’s operations have grown rapidly since it pioneered the low-fares operating model in Europe in the early 1990s. See "Item“Item 5. Operating and Financial Review and Prospects--History."Prospects—History.” During the 2010 fiscal year, 2007, Ryanair announced 149356 new routes and extended its operations to five new countries,
adding destinations in Croatia, Hungary,originating from Belgium, France, Germany, Ireland, Italy, Lithuania, Malta, MoroccoNorway, Portugal, Slovakia, Spain, Sweden and Slovenia from
airports in the U.K., Ireland, Germany, Spain, France and Italy. Ryanair intends to continue to expand its fleet and add new destinations and additional flights, to its schedule, which are expected to increase Ryanair's scheduledRyanair’s booked passenger volumes in the 2011 fiscal year 2008 to approximately 5073.5 million passengers (prior to any reduction in passengers arising from the volcanic ash-related flight cancellations), an increase of approximately 19%11% over fiscal year 2007 level ofthe approximately 4266.5 million passengers althoughbooked in the 2010 fiscal year. However, no assurance can be given that these targetsthis target will in fact be met. If growth in passenger traffic and Ryanair'sRyanair’s revenues do not keep pace with the planned expansion of its fleet, Ryanair could suffer from overcapacity and its results of operations and financial condition (including its ability to fund scheduled aircraft purchases and related debt) could be materially adversely affected. Ryanair has also entered into significant derivative
transactions intendedSee “—Risks Related to hedge its current aircraft acquisition-related debt
obligations. These derivative transactions expose Ryanair to certain risks that
could have an adverse effectthe Airline Industry—Volcanic Ash Emissions Could Affect the Company and Have a Material Adverse Effect on its resultsthe Company’s Results of operations and financial
condition. See "Item 11. Quantitative and Qualitative Disclosures About Market
Risk."
Operations.”
The expansion of Ryanair'sRyanair’s fleet and operations, in addition to other factors, may also strain existing management resources and related operational, financial, management information, and information technology systems, including its internet-basedRyanair’s Internet-based reservation system, to the point that they may no longer be adequate to support Ryanair'sRyanair’s operations. This would require Ryanair to make significant additional expenditures. This expansionExpansion will alsogenerally require additional skilled personnel, equipment, facilities and systems. An inability to hire skilled personnel or to secure the required equipment and facilities efficiently and in a cost-effective manner may adversely affect Ryanair'sRyanair’s ability to achieve growth plans and sustain or increase its profitability.
11
Ryanair's
Ryanair’s New Routes and Expanded Operations may have an Adverse Financial Impact on its Results
Results.Currently, a substantial number of low-fares carriers operate routes that compete with Ryanair’s, and the Company's and RyanairCompany expects to face further intense competition. See "Item“Item 4. Information on the Company-Industry Overview--EuropeanCompany—Industry Overview—European Market."
”
When Ryanair commences new routes, its load factors initially tend to be lower than those on its established routes and its advertising and other promotional costs tend to be higher, which may result in initial losses that could have a material negative impact on the Company'sCompany’s results of operations as well as require a substantial amount of cash to fund. In addition, there can be no assurance that Ryanair'sRyanair’s low-fares service will be accepted on new routes. Ryanair also periodically runs special promotional fare campaigns, in particular in connection with the opening of new routes. Promotional fares may have the effect of increasing load factors and reducing Ryanair'sRyanair’s yield and passenger revenues on such routes during the periodperiods that they are in effect. See "Item
“Item 4. Information on the Company-RouteCompany—Route System, Scheduling and Fares."” Ryanair expects to have other substantial cash needs as it expands, including as regards the cash required to fund aircraft purchases or aircraft deposits related to the acquisition of additional Boeing 737-800s. There can be no assurance that the Company will have sufficient cash to fundmake such projects,expenditures and investments, and to the extent Ryanair may beis unable to expand its route system successfully, its future revenue and earnings growth wouldwill in turn be limited. Ryanair'sFurther volcanic ash emissions could make consumers less willing to travel and impact the launch of new routes or bases. See “—Risks Related to the Airline Industry—Volcanic Ash Emissions Could Affect the Company and Have a Material Adverse Effect on the Company’s Results of Operations.” See also “—The Company Will Incur Significant Costs Acquiring New Aircraft and the Continued Instability in the Credit and Capital Markets Could Negatively Impact Ryanair’s Ability to Obtain Financing on Acceptable Terms.”
Ryanair’s Continued Growth is Dependent on Access to Suitable Airports; Charges for Airport Access are Subject to Increase
Increase.Airline traffic at certain European airports is regulated by a system of "grandfather" rights in relation to "slot"grandfathered “slot” allocations. Each slot represents authorization to take-off and land at the particular airport during a specified time period. Although the majority of Ryanair'sRyanair’s bases of operations currently have no slot allocations, traffic at 33a minority of the airports Ryanair serves, including its primary bases, at Dublin, London (Stansted), Milan (Bergamo), Barcelona
(Girona), Rome (Ciampino) and Madrid, is currently regulated through slot
allocations. In addition, the airports in Bristol, Alicante and Valencia that
Ryanair plans to use as new bases of operations beginning in the Fall of 2007
are regulated through slot allocations. Applicable EU regulations currentlyappear to prohibit the buying or selling of slots for cash, although media reports indicate that the buying and selling of slots may have occurred at certain airports in Europe. Regardless of any such sales, there iscan be no assurance that Ryanair will be able to obtain a sufficient number of slots at slot-controlled airports that it may wish to serve in the future, at the time it needs them, or on acceptable terms. There can also be no assurance that its non-slot bases, or the other non-slot airports Ryanair serves, will continue to operate without slot allocations in the future. See "Item“Item 4. Information on the Company-Government
Regulation-Slots."Company—Government Regulation—Slots.” Airports may impose other operating restrictions such as curfews, limits on aircraft noise levels, mandatory flight paths, runway restrictions, and limits on the number of average daily departures. Such restrictions may limit the ability of Ryanair to provide service to, or increase service at, such airports.
Ryanair's
Ryanair’s future growth is also materially dependentdepends on its ability to access suitable airports located in its targeted geographic markets at costs that are consistent with Ryanair'sRyanair’s low-fares strategy. Any condition that denies, limits, or delays Ryanair'sRyanair’s access to airports it serves or seeks to serve in the future would constrain Ryanair'sRyanair’s ability to grow. A change in the terms of Ryanair'sRyanair’s access to these facilities or any increase in the relevant charges paid by Ryanair as a result of the expiration or termination of such arrangements and Ryanair'sRyanair’s failure to renegotiate comparable terms or rates could have a material adverse effect on the Company'sCompany’s financial condition and results of operations. For example, in March 2007, the discount arrangement formerly in place at London Stansted(Stansted) airport terminated, subjecting Ryanair to an average increase in charges of approximately 100%. TheThis increase in this
charge will be passed on in the form of a higher cost of travel and Ryanair
expects it to havecharges had a negative impact on yields and passenger volumes. In addition, in September 2006, the Dublin Airport Authority ("DAA"(“DAA”) announced that
it was planning to buildrecently completed a new terminal (Terminal 2) and other infrastructure at Dublin airportAirport at a cost in excess of approximately EUR400 million and spend approximately another EUR400 mllion on
upgrading the existing Terminal 1. This€1.2 billion. As a result of this capital expenditure, will mean that
charges at Dublin Airport willairport fees per departing passenger increased by 27% in May 2010, from €13.61 to €17.23, and could increase significantly, possibly doubling from
their current level. Ryanair plansby up to seek8.0% in November 2010 to €18.64 following the opening of Terminal 2 in November 2010 and by up to a judicial review offurther 12.0% in January 2011 to €20.88 in accordance with the planning
approval for the new approval. However there can be no assurance that this
appeal will be successful. The doubling ofCAR’s decision on December 4, 2009 in relation to airport charges between 2010 and 2014. Increases in the event of the
failure of a judicial review, couldairport charges tend to lead to increased fares and have an adverse impact on yields and passenger volumes at Dublin Airport. Ryanair has already responded to this change by moving to reduce capacity in both summer and winter periods. However, the Aviation Appeals Panel appointed by the Minister of Transport following a request from Ryanair ruled on June 2, 2010, that the Irish Commission for Aviation Regulation (“CAR”) should introduce differential pricing for the use of the existing Terminal 1 and the new Terminal 2. The CAR must decide whether to introduce such pricing by August 2, 2010. The Company is unsure as to whether the introduction of differential pricing will reduce costs at Dublin Airport. The increase in charges in May 2010, in combination with the introduction of the €10 Air Travel Tax described below, has led to substantially reduced passenger volumes and a significant decline in yields on flights to and from Dublin Airport. In June 2009, Ryanair announced that it was reducing its fleet at Dublin Airport to 17 by summer 2009, 16 by winter 2009, 15 by summer 2010 and 12 by winter 2010 (down from 22 in summer 2008 and 20 in winter 2008), as a result of rising airport charges and the introduction of an Air Travel Tax of €10 on all passengers departing from Irish airports on routes longer than 300 kilometers. Excluding the planned reduction by winter 2010, these reductions have been carried out. See "Item“Item 4. Information on the Company-Airport Operations-Airport ChargesCompany—Airport Operations—Airport Charges.” See also "-The“—The Company Is Subject to Legal Proceedings Alleging Unlawful State Aid at Certain Airports."
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The Company'sCompany’s Acquisition of 29.4%29.8% of Aer Lingus and Subsequent Failure to Conclude a Complete Acquisition of Aer Lingus Could Expose the Company to Risk
Risk.During the 2007 fiscal year, ended March 31, 2007, Ryanairthe Company acquired 25.2% of Aer Lingus,
and subsequent to the year end RyanairLingus. The Company increased its stake by a further 4.2%,
taking Ryanair's shareholdinginterest to 29.4% at September 20, 2007,29.3% during the 2008 fiscal year, and to 29.8% during the 2009 fiscal year at a total aggregate cost of EUR396.5€407.2 million. Following the acquisition of its
initial stake and upon the approval of Ryanairthe Company’s shareholders, Ryanair made
anmanagement proposed to effect a tender offer to acquire the entire share capital of Aer Lingus. This acquisition proposal was, however, blocked by the European Commission on alleged competition grounds. NotwithstandingRyanair filed an appeal with the CFI, which was heard in July 2009. On July 6, 2010, the Court upheld the Commission’s decision. Ryanair has two months and 10 days from such date to appeal filed by Ryanair in the European Court of
First Instance in relation to this EU decision, there can be no assurance that
the European Commission will not, at some future date, supplement its existing
decision and, in fact, oblige Ryanair to sell its existing 29.4% stake in Aer
Lingus. judgment.
The then EU Commissioner for Competition, Neelie Kroes, said on June 27, 2007 that, as“Since Ryanair didis not in a position to exert de jure or de facto control over Aer Lingus, the European Commission wasis not at the current time in a position to require Ryanair to divest its minority shareholding, which is, by the policyway, not a controlling stake.” In October 2007, the European Commission also reached a formal decision that it would not force Ryanair to sell its shares in Aer Lingus. However, Aer Lingus appealed this decision before the CFI. In January 2008, the CFI heard an application by Aer Lingus for interim measures limiting Ryanair’s voting rights, pending a decision of the CFI on Aer Lingus’ appeal of the European CommissionCommission’s decision not to force Ryanair to sell the Aer Lingus shares. In March 2008, the court dismissed Aer Lingus’ application for interim measures. Aer Lingus’ main appeal was heard in July 2009. On July 6, 2010 the court rejected Aer Lingus’ appeal and confirmed that Ryanair cannot be forced to dispose of its 29.8% stake in Aer Lingus. Aer Lingus has two months and 10 days from such date to appeal this judgment to the Court of Justice of the EU. In addition to the risk that the Court of Justice may overturn the lower court’s ruling, should Aer Lingus choose to appeal it, EU legislation may change in the future so as to require such a forced disposition. If eventually forced to dispose of its stake in Aer Lingus, Ryanair could suffer significant losses due to the negative share price impact on attainable prices of the forced sale of such a significant portion of Aer Lingus'Lingus’ shares.
During the 2010 fiscal year, Ryanair recorded an impairment charge recognized in the income statement of €13.5 million on its Aer Lingus shareholding reflecting a decline in the Aer Lingus share price from €0.59 at March 31, 2009 to €0.50 at June 30, 2009. The subsequent increase in the Aer Lingus share price from €0.50 at June 30, 2009 to €0.73 at March 31, 2010 resulted in a gain of €36.5 million, which was recognized through other comprehensive income within equity.
On December 1, 2008, Ryanair made a second offer to acquire all of the ordinary shares of Aer Lingus it did not own at a price of €1.40 per ordinary share. The offer of €1.40 per share represented a premium of approximately 25% over the closing price of €1.12 of Aer Lingus on November 28, 2008. Ryanair also advised the market that it would not proceed to seek EU approval for the new bid unless the shareholders agreed to sell their stakes in Aer Lingus to Ryanair. However, the Company was unable to secure the shareholders’ support, and accordingly on January 28, 2009, it withdrew its new offer for Aer Lingus.
Deteriorations in conditions in the airline industry affect the Company not only directly, but also indirectly, because the value of its stake in Aer Lingus fluctuates with the share price. However, as the value of the Company’s stake in Aer Lingus has already been written down to just €79.7 million (as of March 31, 2010), the potential for future write-downs of that asset is currently limited to that amount.
Labor Relations Could Expose the Company to RiskRisk. A variety of factors, including, but not limited to, the Company's recentCompany’s historical and current level of profitability and its planned payment of a €500 million dividend to shareholders, may make it more difficult for Ryanair to maintainavoid increases to its current base salary levels and current employee productivity and compensation arrangements.payments. Consequently, there can be no assurance that Ryanair'sRyanair’s existing employee compensation arrangements may not be subject to change or modification at any time. The Company has negotiated with all employee groups and has secured a pay freeze for fiscal years 2009, 2010 and 2011. In line with Ryanair's fleet replacement program, the Company completed the
retirement of all of its Boeing 737-200A aircraft based in Dublin from the fleet
in December 2005 and replaced them with Boeing 737-800 aircraft. As a result of
the retirement of the Boeing 737-200A aircraft, Ryanair has required its pilots
who lacked the necessary training to undergo a conversion training process to
enable them to fly the new Boeing 737-800 aircraft. Starting in the Fall of
2004, Ryanair made a number of written offers to its Dublin-based pilots to
enable them to participate in a re-training process in order to obtain the
correct type-rating for flying the Boeing 737-800 aircraft. After rejecting a
series of offers, all of these pilots have now been trained on the Boeing
737-800 aircraft, either by paying in advance the EUR15,000 cost of the
conversion training, or by executing a five-year bond, under which the training
is provided free of charge unless the pilots do not maintain their employment
with Ryanair for a period of at least five years, in which case they are
obligated to reimburse Ryanair for the training costs. However, some of these
pilots are at the same time challenging the terms of these bonds before the
Irish Labour Relations Commission and the Irish Labour Court. The initial Labour
Court decision was successfully overturned in a Supreme Court decision on
February 1, 2007, the case has now been referred back to the Labour Court for a
rehearing. In separate proceedings, 64 of these pilots (only 26 of whom remain
in the Company's employment) have also initiated proceedings before the Irish
High Court, claiming that the terms of the bond infringed their freedom of
association rights and their right to allow trade unions to negotiate on their
behalf.
While Ryanair believes these court proceedings to be without merit and is
contesting the pilots' claims, Ryanair could face potential sanctions in an
amount up to a maximum of twice the annual salary of the pilots involved if the
Labour Relations Commission ruled in favor of the pilots. With respect to the
Irish High Court proceedings, Ryanair estimates that damages up to a total of
EUR100,000 could be awarded to each pilot. The pilots involved in these
proceedings and currently employed by Ryanair represent 1.8% of the total
Ryanair pilot workforce. There can be no assurance thataddition, the Company will eliminate any positions that may be successfulidentified as redundant. These steps may lead to deteriorations in defending againstlabor relations in the Company and could impact the Company’s business or results of operations. The Company also operates in certain jurisdictions with above average payroll taxes and employee-related social insurance costs, which could have an impact on the availability and cost of employees in these claims.
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Ryanair currently negotiatesconducts collective bargaining negotiations with groups of employees, including its pilots, through "Employee Representation Committees," regarding pay, work practices, and conditions of employment, including conducting formal binding
negotiations with these internally elected collective bargaining units. Ryanair
considers its relationship with its employees to be good, althoughthrough collective-bargaining unites called “Employee Representation Committees.” In the Company
has once in the past (in 1998) experienced work stoppages by a small group of
its Dublin based baggage handlers. In addition, in the United Kingdom, the
British Airline Pilots Association ("BALPA") in 2001U.K., BALPA unsuccessfully sought to represent Ryanair'sRyanair’s U.K.-based pilots in their negotiations with the Company.Company in 2001, at which time an overwhelming majority of those polled rejected BALPA’s claim to represent them. On June 19, 2009, BALPA maymade a request for voluntary recognition under applicable U.K. legislation, which Ryanair rejected. BALPA has the option of applying to the U.K.’s Central Arbitration Committee (“CAC”) to organize a vote on union recognition by Ryanair’s pilots in relevant bargaining units, as determined by the CAC; however, in July 2009 BALPA confirmed that it was temporarily suspending its campaign. If BALPA were to proceed with an application to the CAC and be
successful in such a new ballot on representation be undertaken among
Ryanair's U.K. pilot body, which, if successful,initiative, this would allow it to represent the U.K. pilots to
be represented by BALPAat some or all U.K. bases in negotiations over pilot salaries and working conditions. For additional details, see "Item“Item 6. Directors, Senior Management and Employees-EmployeesEmployees—Employees and Labor Relations."
If any future occurrence of such events were to alter Ryanair's historical
experience of” Limitations on Ryanair’s flexibility in dealing with its employees or were to alter the public'saltering of the public’s perception of Ryanair generally it could have a material adverse effect on the Company'sCompany’s business, operating results, and financial condition.
The Company is Dependent on the Ireland-U.K. Market
For the fiscal years ended March 31, 2007 and 2006, passengers on Ryanair's
routes between Ireland and the U.K. accounted for 15.4% and 18.0%, respectively,
of total passenger revenues, with routes between Dublin and London accounting
for 4.9% and 9.3%, respectively, of total passenger revenues in fiscal 2007 and
2006, and the Dublin-London (Stansted) route alone accounting for 2.4% and 3.4%
of such totals, respectively. Ryanair's business would be adversely affected by
any circumstance causing a reduction in general demand for air transportation
services in Ireland or the U.K., including, but not limited to, adverse changes
in local economic conditions, political disruptions or violence (including
terrorism) or significant price increases linked to increases in airport access
costs or taxes imposed on air passengers. See "-Risks Related to the Airline
Industry-The 2001 Terrorist Attacks on the United States Had a Severe Negative
Impact on the International Airline Industry" below. In addition, so long as the
Company's operations remain dependent on routes between Ireland and the U.K.,
the Company's future operations will be adversely affected if there is increased
competition in this market. See "Item 4. Information on the Company-Industry
Overview-Ireland-U.K. and Continental European Market."
The Company is Dependent on Third-PartyExternal Service ProvidersProviders. Ryanair currently contracts some of its heavy airframe maintenance
overhauls, and all ofassigns its engine overhauls and "rotable"“rotable” repairs to outside contractors approved under the terms of Part 145, the European airline industryregulatory standard for maintenance.aircraft maintenance established by the European Aviation Safety Agency (“Part 145”). The Company also contractsassigns its passenger and aircraft handling and ground handling services at airports other than Dublin and those
served by Ryanaircertain airports in Spain and the Canary Islands to established third-partyexternal service providers. See "Item“Item 4. Information on the Company-MaintenanceCompany—Maintenance and Repairs-Heavy Maintenance"Repairs—Heavy Maintenance” and "Item“Item 4. Information on the Company-Airport Operations--AirportCompany—Airport Operations—Airport Handling Services."
”
The losstermination or expiration of any of Ryanair's third-partyRyanair’s service contracts or any inability to renew them or negotiate replacement contracts with other service providers at comparable rates could have a material adverse effect on the Company'sCompany’s results of operations. Ryanair will need to enter into airport servicesservice agreements in any new markets it enters, and there can be no assurance that it will be able to obtain the necessary facilities and services at competitive rates in new markets.rates. In addition, although Ryanair seeks to monitor the performance of thirdexternal parties that provide passenger and aircraft handling services, the efficiency, timeliness, and quality of contract performance by third-partyexternal providers are largely beyond Ryanair'sRyanair’s direct control. Ryanair expects to be dependent on such third-partyoutsourcing arrangements for the foreseeable future.
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The Company is Dependent on Key Personnel
Personnel.The Company'sCompany’s success depends to a significant extent upon the efforts and abilities of its senior management team, including Michael O'Leary,O’Leary, the Chief Executive of Ryanair,Officer, and key financial, commercial, operating and maintenance personnel. Mr. O'Leary'sO’Leary’s current contract may be terminated by either party upon 12 months'months’ notice. See "Item“Item 6. Directors, Senior Management and Employees-CompensationEmployees—Compensation of Directors and Senior Management-EmploymentManagement—Employment Agreements."” The Company'sCompany’s success also depends on the ability of its executive officers and other members of senior management to operate and manage effectively, both independently and as a group. Although the Company'sCompany’s employment agreements with Mr. O'LearyO’Leary and some of its other senior executives contain non-competition and non-disclosure provisions, there can be no assurance that these provisions will be enforceable in whole or in part. Competition for highly qualified personnel is intense, and either the loss of any executive officer, senior manager, or other key employee without adequate replacement or the inability to attract new qualified personnel could have a material adverse effect upon the Company'sCompany’s business, operating results, and financial condition.
The Company Faces Risks Related to its Internet Reservations Operations Asand its Announced Elimination of September 20, 2007, approximatelyAirport Check-in Facilities. Approximately 99% of Ryanair's dailyRyanair’s flight reservations wereare made through its website. Although the Company has established a contingency program whereby the website is hosted in three separate locations, each of these locations accesses the same booking engine, located at thea single center, in order to make reservations.
Ryanair has installed a stand-alone
A back-up booking engine is available to Ryanair to support its existing platform in the event of a breakdown in this facility. However,Nonetheless, the process of switching over to the back-up engine could take some time and there can be no assurance that Ryanair would not suffer a significant loss of reservations in the event of a major breakdown of theseits booking engine or other related systems, which, in turn, could have a material adverse affect on the Company'sCompany’s operating results or financial condition.
In addition, in March 2006, Ryanair also commenced its Check'N'Go web-based
Since October 1, 2009, all passengers have been required to use Internet check-in. Internet check-in service, giving passengers with an EU passport traveling with hand
luggage only the opportunity to check-in online across its entire route network,
asis part of a package of measures intended to improve service by reducing air
fares andairfares as well as reducing check-in and boarding gate lines. See "Item“Item 4. Information on the Company-Reservations/Ryanair.Com."Company—Reservations/Ryanair.com.” The Company has rolleddeployed this new system out across its network, although passengers departing from Italy to the U.K. cannot
make use of the system because of a general prohibition by the Italian aviation
authority on such facilities for carriers flying to the U.K.network. Any disruptions to the webInternet check-in service as a result of a breakdown in the relevant computer systems or otherwise could have a material adverse impact on these service
improvement effortsservice-improvement and make passengers less likely to use these services,cost-reduction efforts. The result of this requirement is that Ryanair has reduced airport and handling costs, as a result of the need to have fewer check-in staff and rented check-in desks. There can be no assurance, however, that this process will continue to be successful or that consumers will not switch to other carriers that provide standard check-in facilities, which would negatively affect the Company's operating results.
Company’s results of operations and financial condition.
Risks Related to the Airline Industry
Volcanic Ash Emissions Could Affect the Company and Have a Material Adverse Effect on the Company’s Results of Operations.Between April 17 and April 22, 2010, the majority of the airspace over northern Europe was closed by authorities as a result of safety concerns presented by emissions of ash from an Icelandic volcano. This closure forced Ryanair to cancel 7,855 flights. Since then, there have been periodic closures of parts of the European airspace due to further emissions of ash from the same volcano, which have resulted in the cancellation of a further 1,635 flights.
Under the terms of Regulation (EC) No. 261/2004, described below, Ryanair has certain duties to passengers whose flights are cancelled. In particular, Ryanair is required to reimburse passengers who have had their flights cancelled for certain reasonable, documented expenses—primarily for accommodation and food. As of the date hereof, the Company is uncertain as to the number of claims it will receive or the amount it will have to reimburse passengers in respect of these claims, but the Company expects that the amount will be significant. The Company estimates that the non-recoverable fixed costs associated with the cancellations, the repositioning costs for aircraft, and other costs associated with cancellations, as well as the aforementioned reimbursement claims for the initial 6.5 days of closure of European aerospace will amount to approximately €6 million per day, or approximately €40m for such initial period of closure. Based on the latest information available, the Company estimates that the cumulative costs in respect of volcanic ash disruptions experienced to date, excluding taxation credits, will amount to approximately €50 million. The Company has re-accommodated or refunded fares to approximately 1.5 million passengers due to flight cancellations.
Volcanic emissions may continue for some time and could lead to further flight cancellation costs which could have a material adverse impact on the Company’s financial condition and results of operations. Furthermore, volcanic emissions (whether from current or new sources) or similar atmospheric disturbances and resulting cancellations due to the closure of airports could also have a material adverse affect on the Company’s financial performance indirectly, as a consequence of changes in the public’s willingness to travel within Europe due to the risk of flight disruptions.
The Airline Industry Is Particularly Sensitive to Changes in Economic Conditions; A Continued Recessionary Environment Would Negatively Impact Ryanair’s Result of Operations. Ryanair’s operations and the airline industry in general are sensitive to changes in economic conditions. Unfavorable economic conditions such as high unemployment rates, constrained credit markets and increased business operating costs lead to reduced spending by both leisure and business passengers. Unfavorable economic conditions, such as the conditions persisting as of the date hereof, also tend to impact Ryanair’s ability to raise fares to counteract increased fuel and other operating costs. Total demand for European air travel has weakened between the period of the latter half of 2008 and the first half of 2010, which Ryanair believes can be primarily attributed to the crisis experienced in the worldwide credit markets, high oil prices and the global recession. A continued recessionary environment, combined with austerity measures by European governments, will likely negatively impact Ryanair’s operating results. It could also restrict the Company’s ability to grow passenger volumes, secure new airports and launch new routes and bases, and could have a material adverse impact on its financial results. Furthermore, demand for air travel could be impacted by emissions of volcanic ash, as noted above.
The Introduction of Government Taxes on Travel Could Damage Ryanair’s Ability to Grow and Could Have a Material Adverse Impact on Operations. The U.K. government levies an Air Passenger Duty (APD) of £11 per passenger. The tax was previously set at £5 per passenger, but it was increased to £10 per passenger in 2007 and £11 in 2009. The increase in this tax is thought to have had a negative impact on Ryanair’s operating performance, both in terms of average fares paid and growth in passenger volumes. In 2008, the Dutch government introduced a travel tax ranging from €11 on short-haul flights to €45 on long-haul flights. On March 30, 2009, the Irish government also introduced a €10 Air Travel Tax on all passengers departing from Irish airports on routes longer than 300 kilometers.
Both the Belgian and Greek governments planned to introduce similar taxes; however, they have now cancelled plans to introduce these taxes. The Dutch government withdrew its travel tax with effect from July 1, 2009. The introduction of government taxes on travel has had a negative impact on passenger volumes, particularly given the current period of decreased economic activity. The German government has also announced that it plans to introduce a passenger tax in 2010 for all departing passengers, however to date, no details on the amount of this charge have been published. The introduction of further government taxes on travel across Europe, such as that proposed by the German government in June 2010, could have a material negative impact on Ryanair’s results of operations as a result of price-sensitive passengers being less likely to travel.
Any Significant Outbreak of any Airborne Disease, Including Swine Flu or Foot-and-Mouth Disease, Could Significantly Damage Ryanair’s Business. Worldwide, there has, from time to time, been substantial publicity in recent years regarding certain potent influenza viruses and other disease epidemics. Publicity of this type may have a negative impact on demand for air travel in Europe. Past outbreaks of SARS, foot-and-mouth disease, avian flu and swine flu have adversely impacted the travel industries, including aviation, in certain regions of the world, including Europe. The Company believes that if any influenza or other pandemic becomes severe in Europe, its effect on demand for air travel in the markets in which Ryanair operates could be material, and it could therefore have a significantly adverse impact on the Company. A severe outbreak of swine flu, SARS, foot-and-mouth disease, avian flu or another pandemic or livestock-related disease also may result in European or national authorities imposing restrictions on travel, further damaging Ryanair’s business. A serious pandemic could therefore severely disrupt Ryanair’s business, resulting in the cancellation or loss of bookings, and adversely affecting Ryanair’s financial condition and results of operations.
EU Regulation on Passenger Compensation Could Significantly Increase Related CostsCosts. The EU has passed legislation for compensating airline passengers who have been denied boarding on a flight for which they hold a valid ticket (Regulation (EC) No. 261/2004). This legislation, which came into force on February 17, 2005, imposes fixed levels of compensation to be paid to passengers forin the event of cancelled flights,
except whenflights. In November 2009, the Court of Justice of the EU in the Sturgeon case decided that provisions of the legislation in relation to compensation are not only applicable to flight cancellations but also to delays of over three hours. However, such provisions, by their terms, do not apply to any cancellation, or any delay over three hours, in circumstances in which the airline canis able to prove that such a cancellation isor delay was caused by extraordinary circumstances, such as weather, air-traffic control delays, or safety issues. TheOtherwise, the regulation calls for compensation of either EUR250, EUR400€250, €400, or EUR600€600 per passenger, depending on the length of the flight. As Ryanair'sRyanair’s average flight length is less than 1,500 km-thekm—the upper limit for short-haul flights-theflights—the amount payable is generally EUR250€250 per passenger per occurrence.
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"assistance"“assistance,” including meals, drinks and telephone calls, as well as hotel accommodationaccommodations if the delay extends overnight. For delays of over five hours, the airline is also required to reimburseoffer the option of a refund of the cost of the ticket or provide alternative transport to the passenger's final destination.
This legislation has had no material impact on the Company to date; however,
thereunused ticket. There can be no assurance that the Company will not incur a significant increase in costs in the future due to the impact of this legislation, if Ryanair experiences an increase ina large number of cancelled flights, which could occur as a result of factorscertain types of events beyond its control. Implementation ofSee “—Risks Related to the Montreal Convention for Lost, Damaged or Delayed LuggageAirline Industry—Volcanic Ash Emissions Could Also Increase Costs
The Montreal ConventionAffect the Company and Have a Material Adverse Effect on the UnificationCompany’s Results of Certain RulesOperations.”
EU Regulation of Emissions Trading Could Increase Costs. On November 19, 2008, the European Council of Ministers adopted legislation to add aviation to the EU Emissions Trading Scheme with effect from 2012. This scheme, which has thus far applied mainly to energy producers, is a cap-and-trade system for International Air Carriage was adopted in Montreal in May 1999. The Convention
consolidated, updatedCO2 emissions to encourage industries to improve their CO2 efficiency. Under the legislation, airlines will be granted initial CO2 allowances based on historical performance and has replaced all previous agreements on air carrier
liability, including the 1929 Warsaw Convention. The Convention came into force
in all EU countries on June 28, 2004. Passengers can now claim up to 1,000
Special Drawing Rights (SDRs) (currently approximately EUR1,167) for lost,
damaged or delayed luggage. Passengers submitting baggage claimsa CO2 efficiency benchmark. Any shortage of allowances will have to provide evidencebe purchased in the open market and/or at government auctions. The cost and amount of such allowances that Ryanair will have to back up these claims. This comparesbuy in 2012 have yet to the previous
weight-based compensation system under the 1929 Warsaw Convention, which limited
liability for lost, damaged or delayed luggage to 17 SDRs (currently
approximately EUR20) per kilogram of checked hold baggage.
Although Ryanair has a record for losing fewer bags than many other major
European carriers, and the Convention's coming into force has had no material
impact on the Company to date, therebe determined. There can be no assurance that Ryanair will be able to obtain sufficient carbon credits or that the Companycost of the credits will not incurhave a significant increase in costs in connection with lost baggage, which
could have anmaterial adverse effect on the Company'sCompany’s business, operating costsresults, and in turn reduce
its profitability
financial condition.
The Company is Dependent on the Continued Acceptance of Low-fares Airlines
Airlines.In past years, accidents or other safety-related incidents involving certain low-fares airlines have had a negative impact on the public'spublic’s acceptance of thosesuch airlines. Any adverse event potentially relating to the safety or reliability of low-fares airlines (including accidents or negative reports from regulatory authorities) could adversely impact the public'spublic’s perception of, and confidence in, low-fares airlines like Ryanair, and could have a material adverse effect on the Company'sCompany’s financial condition and results of operations.
Terrorism in the United Kingdom or Elsewhere in Europe Could Have a Material Detrimental Effect on the Company. On August 10, 2006, U.K. security authorities arrested and subsequently charged eight individuals in connection with an alleged plot to attack aircraft operating on transatlantic routes. As a result of these arrests, U.K. authorities introduced increased security measures, which resulted in all passengers being body-searched, and a ban on the transportation in carry-on baggage of certain liquids and gels. The introduction of these measures led to passengers suffering severe delays while passing through these airport security checks. As a result, Ryanair cancelled 279 flights in the days following the incident and refunded a total of €2.7 million in fares to approximately 40,000 passengers. In the days following the arrests, Ryanair also suffered reductions in bookings estimated to have resulted in the loss of approximately €1.9 million of additional revenue. As in the past, the Company reacted to these adverse events by initiating system-wide fare sales to stimulate demand for air travel.
In addition, reservations on Ryanair’s flights to London dropped materially for a number of days in the immediate aftermath of the terrorist attacks in London on July 7, 2005. Although the terrorist attack in Glasgow on June 30, 2007 (in which a car filled with explosives was driven into Glasgow’s airport) and the failed terrorist attacks in London on July 21, 2005 and June 29, 2007 had no material impact on bookings, there can be no assurance that future such attacks will not affect passenger traffic. In the 2010 fiscal year, 17.8 million passengers were booked on Ryanair’s flights into and out of London, representing 26.7% of the total passengers booked on all of the Company’s flights in the fiscal year. Future acts of terrorism or significant terrorist threats, particularly in London or other markets that are significant to Ryanair, could have a material adverse effect on the Company’s profitability or financial condition should the public’s willingness to travel to and from those markets decline as a result. See also “—The 2001 Terrorist Attacks on the United States Had a Severe Negative Impact on the International Airline IndustryIndustry” below.
The 2001 Terrorist Attacks on the United States Had a Severe Negative Impact on the International Airline Industry. The terrorist attacks on the United States on September 11, 2001, in which four commercial aircraft were hijacked, had a severe negative impact on the international airline industry, particularly on U.S. carriers and carriers operating international service to and from the U.S.United States. Although carriers such as Ryanair that operate primarily or exclusively in Europe havewere generally been spared from such material adverse impacts on their businesses, to date, the cost to all commercial airlines of insurance coverage for certain third-party liabilities arising from "acts“acts of war"war” or terrorism has increased dramatically since theseafter the September 11 attacks. See "Item“Item 4. Information on the Company-Insurance."Company—Insurance.” In addition, Ryanair'sRyanair’s insurers have indicated that the scope of the Company'sCompany’s current act-of-war-related“act of war”-related insurance may exclude certain types of catastrophic incidents, such as certain forms of biological, chemical or "dirty bomb"“dirty bomb” attacks. This could result in the Company'sCompany’s seeking alternative coverage, including government insurance or self-insurance, which could lead to further increases in costs. Although Ryanair to date has passed on the increased insurance costs to passengers by means of a special "insurance levy"“insurance levy” on each ticket, there can be no assurance that it will continue to be successful in doing so. In response to the dramatic drop in revenue and
expected increases in costs, airlines in the U.S. and certain European carriers
with significant U.S. operations have sought, and in certain cases, already
received, governmental assistance in the form of financial aid, although Ryanair
has not sought or received any such aid. Ryanair does not fly to the United
States, and although it experienced a decline of approximately 10% in
reservations in the week following the September 11, 2001 terrorist attacks, the
number of flight bookings had returned to normal levels by the end of September
2001.
16
Because a substantial portion of airline travel (both business and personal) is discretionary and because Ryanair is substantially dependent on discretionary air travel, any prolonged general reduction in airline passenger traffic may adversely affect the Company. Similarly, any significant increase in expenses related to security, insurance or related costs could have a material adverse effect on the Company. Any further terrorist attacks in the U.S. or in Europe, particularly in London or other markets that are significant to Ryanair, any significant new military actions by the U.S. and any allies (such as the
current war in Iraq)United States or EU nations or any related economic downturn would be likely tomay have a material adverse effect on demand for air travel and thus on Ryanair'sRyanair’s business, operating results, and financial condition. See also "-Risks“—Risks Related to the Company-FurtherCompany—Further Terrorist Attacks in London and Other Destinations Could Have a Detrimental Effect on the Company."
”
The Company Faces the Risk of Loss and LiabilityLiability. Ryanair is exposed to potential catastrophic losses that may be incurred in the event of an aircraft accident or terrorist incident. Any such accident or incident could involve not onlycosts related to the repair or replacement of a damaged aircraft and its consequent temporary or permanent loss from service, but alsoservice. In addition, an accident or incident could result in significant potentiallegal claims ofagainst the Company from injured passengers and others.others who experienced injury as a result of the accident or incident, including ground victims. Ryanair currently maintains passenger liability insurance, employer liability insurance, aircraft insurance for aircraft loss or damage, and other business insurance in amounts per occurrence that are consistent with industry standards. Although
Ryanair currently believes its insurance coverage is adequate (although not comprehensive). However, there can be no assurance that the amount of suchinsurance coverage will not need to be increased, that insurance premiums will not increase significantly, or that Ryanair will not be forced to bear substantial losses from any accidents.accidents not covered by its insurance. Airline insurance costs increased dramatically following the September 2001 terrorist attacks on the United States. See "-The“—The 2001 Terrorist Attacks on the United States Had a Severe Negative Impact on the International Airline Industry"Industry” above. Substantial claims resulting from an accident in excess of related insurance coverage could have a material adverse effect on the Company'sCompany’s results of operations and financial condition. Moreover, any aircraft accident, even if fully insured, could cause alead to the public perception that Ryanair'sRyanair’s aircraft arewere less safe or reliable than those operated by other airlines, which could have a material adverse effect on Ryanair'sRyanair’s business.
EU Regulation No. 2027/97, as amended by Regulation No. 889/2002, governs air carrier liability. See "Item“Item 4. Information on the Company-Insurance"Company—Insurance” for details of this regulation. This regulation increased the potential liability exposure of air carriers such as Ryanair, and althoughRyanair. Although Ryanair has extended its liability insurance accordingly
to meet the requirements of the regulation, no assurance can be given that other laws, regulations, or policies will not be applied, modified or amended in a manner that has a material adverse effect on the
Company'sRyanair’s business, operating results, and financial condition or results of operations.
condition.
Airline Industry Margins are Subject to Significant Uncertainty
Uncertainty.The airline industry is characterized by high fixed costs and by revenues that generally exhibit substantially greater elasticity than costs. Although fuel accounted for 34.1% of total operating expenses (excluding de-icing costs) in the 2010 fiscal year, management anticipates that this percentage may vary significantly in future years. See “—Changes in Fuel Costs and Fuel Availability Affect the Company’s Results and Increase the Likelihood that the Company May Incur Losses” above. The operating costs of each flight do not vary significantly with the number of passengers flown, and therefore, a relatively small change in the number of passengers, or
in fare pricing, or traffic mix could have a disproportionate effect on operating and financial results. Accordingly, a relatively minor shortfall from expected revenue levels could have a material adverse effect on the Company'sCompany’s growth or financial performance. See "Item“Item 5. Operating and Financial Review and Prospects."” The very low marginal costs incurred for providing services to passengers occupying otherwise unsold seats are also a factor in the industry'sindustry’s high susceptibility to price discounting. See "-The“—The Company Faces Significant Price and Other Pressures in a Highly Competitive Environment"Environment” above.
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Safety-Related Undertakings Could Affect the Company'sCompany’s Results. Aviation authorities in Europe and the United States periodically require or suggest that airlines implement certain safety-related procedures on their aircraft. In recent years, the U.S. Federal Aviation Administration (the "FAA"“FAA”) has required a number of such procedures with regard to Boeing 737737-800 aircraft, including checks of rear pressure bulkheads and flight control modules, redesign of the rudder control system, and limitations on certain operating procedures. Most recently the FAA and EASA required an inspection of all 737NG aircraft
following a fire on a China Air aircraft. Ryanair'sRyanair’s policy is to implement any such required procedures in accordance with FAA guidance and to perform such procedures in close collaboration with Boeing. To date, all such procedures have been conducted as part of Ryanair'sRyanair’s standard maintenance program and have not interrupted flight schedules ornor required any material increases in Ryanair'sRyanair’s maintenance expenses. However, there can be no assurance that the FAA or other regulatory authorities will not recommend or require other safety-related undertakings or that such undertakings would not adversely impact the Company'sCompany’s operating results of operations or financial condition.
There also can be no assurance that new regulations will not be implemented in the future that would apply to Ryanair'sRyanair’s aircraft and result in an increase in Ryanair'sRyanair’s cost of maintenance or other costs beyond management'smanagement’s current estimates. In addition, should Ryanair'sRyanair’s aircraft cease to be sufficiently reliable or should any public perception develop that Ryanair'sRyanair’s aircraft are less than completely reliable, the Company'sCompany’s business could be materially adversely affected.
Currency Fluctuations Affect the Company'sCompany’s Results. Although the Company is headquartered in Ireland, a significant portion of its operations is conducted in the U.K. Consequently, the Company has significant operating revenues and operating expenses, as well as assets and liabilities, denominated in currencies other than the euro; for example,U.K. pounds sterling. In addition, fuel, aircraft, insurance, and some maintenance obligations are denominated in U.S. dollars, and U.K.-related
revenues and expenses are denominated in U.K. pounds sterling.dollars. The Company'sCompany’s results of operations and financial condition can therefore be significantly affected by fluctuations in the respective values of those currencies. Ryanair's
operations are alsothe U.K. pound sterling and the U.S. dollar. Ryanair is particularly subject to significant direct exchange rate risks between the euro and the U.S. dollar because of thea significant portion of its operating costs are incurred in U.S. dollars asand none of its revenues are denominated in U.S. dollars.
Although the Company engages in foreign currency hedging transactions between the euro and the U.S. dollar, between the euro and the U.K. pound sterling, and between the U.K. pound sterling and the U.S. dollar, hedging activities cannot be expected to eliminate currency risks. See "Item“Item 11. Quantitative and Qualitative Discussion About Market Risk."
The Introduction of Carbon Taxes and Emissions Trading could have a
Material Adverse Effect on the Company's Results
Ryanair is committed to reducing emissions and noise through investments in
"next generation" aircraft and engine technologies and the implementation of
certain operational and commercial decisions to minimize the environmental
impact of its operations.
However, the European Commission has forwarded proposals to the European
Parliament and the Council of Ministers to include air transportation in the
European Emissions Trading Scheme ("ETS") . The current proposals are to include
aviation in the ETS by 2011. Any such inclusion in the ETS is likely to result
in the imposition of an "emission levy" on airlines. Ryanair believes that any
such levy is likely to have a particularly disproportionate and unwarranted
impact on airlines such as Ryanair that have already heavily invested in cleaner
aircraft technology and more efficient operations, as they will have much less
ability to further reduce emissions in a cost effective manner. Ryanair believes
that any such additional costs imposed on airlines will increase fares and
damage the competitiveness of the industry.
Ryanair and the European Low Fares Airline Association (ELFAA) have called
on the European Commission to conduct a proper cost/benefit analysis before
proceeding with any legislative proposals that could impose significant costs on
the airline industry.
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Furthermore, in February 2007 the United Kingdom doubled Air Passenger Duty
from GBP5 to GBP10 and announced that the increase was to pay for environmental
projects to reduce carbon emissions to prevent climate change. In
September 2007, the Dutch government announced the introduction of a EUR11.25
per passenger environmental tax on short haul flights and EUR45.00 on long haul
flights, effective from July 2008
Notwithstanding the fact that the "Stern Report" commissioned by the UK
government concluded that aviation is only responsible for 1.8% of Greenhouse
Gas Emissions ("GHG"), within the European Union, the European media continues
to feature sustained and repeated comments that the aviation industry is one of
the primary causes of GHG and climate change. There is also considerable media
commentary urging consumers to reduce the emissions that they generate by flying
by either not flying at all or, alternatively, by taking a lesser number of
flights per annum.
No assurance can be given that the application of the ETS to aviation, the
introduction of environmental or other similar taxes or charges by governments
within the European Union, or the impact of media campaigns to encourage
consumers either not to fly or to fly less frequently, either individually or in
the aggregate, will not have a material adverse effect on the results of
operation or the financial condition of the Company.
”
Risks Related to Ownership of the Company'sCompany’s Ordinary Shares or ADRs
EU Rules Impose Restrictions on the Ownership of Ryanair Holdings'Holdings’ Ordinary Shares by Non-EU Nationals, and the Company hasHas Instituted a Ban on the Purchase of Ordinary Shares by Non-EU Nationals
Nationals.EU Regulation No. 2407/921008/2008 requires that, in order to obtain and retain an operating license, an EU air carrier must be majority-owned and effectively controlled by EU nationals. The regulation does not specify what level of share ownership will confer effective control on a holder or holders of shares. The board of directors of Ryanair Holdings is given certain powers under Ryanair Holdings'Holdings’ articles of association (the "Articles"“Articles”) to take action to ensure that the number of shares held in Ryanair Holdings by non-EU nationals ("(“Affected Shares"Shares”) does not
reach a level that could jeopardize the Company'sCompany’s entitlement to continue to hold or enjoy the benefit of any license, permit, consent, or privilege which it holds or enjoys and which enables it to carry on business as an air carrier. The directors, will, from time to time, set a "Permitted Maximum"“Permitted Maximum” on the number of the Company'sCompany’s Ordinary Shares that may be owned by non-EU nationals at such level as they believe will comply with EU law. The Permitted Maximum is currently set at 49.9%. In addition, under certain circumstances, the directors can take action to safeguard the Company'sCompany’s ability to operate that includeby identifying those shares, American Depositary Shares ("ADSs"(“ADSs”) or Affected Shares which give rise to the need to take action and treat such shares, ADRs,the American Depositary Receipts (“ADRs”) evidencing such ADSs, or Affected Shares as "Restricted“Restricted Shares."” The Board of Directors may, under certain circumstance,circumstances, deprive holders of Restricted Shares of their rights to attend, vote at, and speak at general meetings, and/or require such holders to dispose of their Restricted Shares to an EU national within as little as 21 days. The directors are also given the power to transfer such shares themselves if thea holder fails to comply. In 2002, the Company also implemented measures to restrict the ability of non-EU nationals to purchase Ordinary Shares, and non-EU nationals are currently effectively barred from purchasing Ordinary Shares, and will remain so for as long as these restrictions remain in place. There can be no assurance that these restrictions will ever be lifted. See "Item“Item 10. Additional Information-LimitationsInformation—Limitations on Share Ownership by Non-EU Nationals"Nationals” for a detailed discussion of the restrictions on share ownership and the current ban on share purchases by non-EU nationals. As of June 30, 2007,2010, EU nationals owned at least 56.3%53.6% of Ryanair Holdings'Holdings’ Ordinary Shares (assuming conversion of all outstanding ADRs into Ordinary Shares).
19
Holders of Ordinary Shares are Currently Unable to Convert those Shares into American Depository SharesDepositary Receipts. In an effort to increase the percentage of its share capital held by EU nationals, on June 26, 2001, Ryanair Holdings instructed The Bank of New York Mellon, the depositary for its American Depositary Receipt ("ADR"ADR program (the “Depositary”) program,, to suspend the issuance of new ADSsADRs in exchange for the deposit of Ordinary Shares until further notice to its shareholders.notice. Holders of Ordinary Shares cannot convert their Ordinary Shares into ADRs during this suspension, and there can be no assurance that the suspension will ever be lifted. See also "-EU“—EU Rules Impose Restrictions on the Ownership of Ryanair Holdings'Holdings’ Ordinary Shares by Non-EU nationals and the Company has Instituted a Ban on the Purchase of Ordinary Shares by Non-EU Nationals"Nationals” above.
The Company'sCompany’s Results of Operations May Fluctuate Significantly. The Company'sCompany’s results of operations have varied significantly from quarter to quarter, and management expects these variations to continue. See "Item“Item 5. Operating and Financial Review and Prospects-QuarterlyProspects—Seasonal Fluctuations."” Among the factors causing these variations are the airline industry'sindustry’s sensitivity to general economic conditions, and the seasonal nature of air travel.travel, and trends in airlines’ costs, especially fuel costs. Because a substantial portion of airline travel (both business and personal) is discretionary, the industry tends to experience adverse financial results during general economic downturns. The Company is substantially dependent on discretionary air travel.
The trading price of Ryanair Holdings'Holdings’ Ordinary Shares and ADRs may be subject to wide fluctuations in response to quarterly variations in the Company'sCompany’s operating results and the operating results of other airlines. In addition, the global stock markets from time to time experience extreme price and volume fluctuations that affect the market prices of many airline company stocks. These broad market fluctuations may adversely affect the market price of the Ordinary Shares and ADRs.
Ryanair Holdings DoesMay or May Not Intend to Pay Dividends
Dividends.Since its organizationincorporation as the holding company for Ryanair in 1996, Ryanair Holdings has not declared or paid dividends on its Ordinary Shares, and does not
anticipate paying any cash or share dividendsShares. However, the directors of Company declared on June 1, 2010 that Ryanair Holdings intends to pay a special dividend of €500 million, to be paid in October 2010, subject to shareholder approval at its Ordinary Sharesannual general meeting on September 22, 2010. The Company also indicated in the foreseeable future.same announcement that it may pay a further dividend of up to €500 million before the end of fiscal year 2013, subject to, amongst other things, its continued profitability and the absence of further aircraft purchases or any other significant capital expenditures. The Company may ultimately determine not to pay any such dividend, or may fail to obtain shareholder approval. The Company may pay other dividends from time to time, or it may not pay any dividends at all, as has been its practice to date. No assurances can be given that the Company will, or will not, pay dividends. See "Item“Item 8. Financial Information-OtherInformation—Other Financial Information-DividendInformation—Dividend Policy."” As a holding company, Ryanair Holdings does not have any material assets other than interests in the shares of Ryanair.
Item 4. Information on the Company
| Item 4. | Information on the Company |
Ryanair Holdings was incorporated in 1996 as a holding company for Ryanair Limited. The Companylatter operates a low-fares, scheduled passengerscheduled-passenger airline serving short-haul, point-to-point routes between Ireland, the U.K., Continental Europe, and Morocco. In operation since 1985, the CompanyIncorporated in 1984, Ryanair Limited began to introduce a low-fares operating model under a new management team in the early 1990s. See "Item“Item 5. Operating and Financial Review and Prospects--History."Prospects—History.” At August 31, 2007,June 30, 2010, with its operating fleet of 137 new250 Boeing 737-800 "next generation"“next generation” aircraft, the
CompanyRyanair Limited offered more than 920approximately 1,300 scheduled short-haul flights per day serving 125
locations155 airports throughout Europe and Morocco, including 24 in the U.K. and Ireland.Morocco. See "--Route“—Route System, Scheduling and Fares--RouteFares—Route System and Scheduling"Scheduling” for more details of Ryanair'sRyanair’s route network. Offering widely-availableSee “Item 5. Operating and Financial Review and Prospects—Seasonal Fluctuations” for information about the seasonality of Ryanair’s business.
Ryanair recorded a profit on ordinary activities after taxation of €305.3 million in the 2010 fiscal year, as compared to a loss on ordinary activities after taxation of €169.2 million in the 2009 fiscal year. This variation was primarily attributable to a 28.9% decrease in fuel costs from €1,257.1 million to €893.9 million, and a 2.0% increase in revenues from €2,942.0 million to €2,988.1 million. Ryanair generated an average booked passenger load factor of approximately 82.2% and average scheduled passenger revenues of €0.067 per ASM in the 2010 fiscal year. The Company has focused on maintaining low fares, Ryanair carried more than 37.5 million
passengers during calendar year 2006. Onoperating costs (€0.047 per ASM in the 2010 fiscal year).
The market’s acceptance of Ryanair’s low-fares service is reflected in the “Ryanair Effect”—Ryanair’s history of stimulating significant annual passenger traffic growth on the new routes on which it has commenced service since 1991. For example, on the basis of the U.K.“U.K. Airports Annual Statement of Movements, Passengers and Cargo (the "CAA Statistics")Cargo” published by the CAA in calendar year 2006, Ryanair had the leading market share (in terms of
passenger volume) on most of its scheduled routes between Ireland and provincial
cities in the U.K. and carried approximately 46% of all scheduled passenger
traffic between Dublin and London, a share favorably comparable to the
approximately 33% share of Aer Lingus, its primary competitor on its
U.K./Ireland routes. According to the CAA Statistics, Ryanair has also achieved
competitive market share results on the routes it launched from the U.K. to
continental Europe from the dates it began service on these routes.
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By generating an average scheduled flown passenger load factor of
approximately 76% and average scheduled passenger yield of EUR0.059 per
available seat mile ("ASM") and focusing on maintaining low operating costs
(EUR0.054 per ASM), Ryanair achieved a net margin of 17.9% on operating revenues
of EUR2,236.9 million for the fiscal year ended March 31, 2007. See "Item 5.
Operating and Financial Review and Prospects" and the Glossary in Appendix A.
The market's acceptance of Ryanair's low fares service is reflected in the
"Ryanair Effect" - Ryanair's history of stimulating significant growth in annual
passenger traffic on the new routes it has entered since 1991. On the basis of
the CAA StatisticsCivil Aviation Authority and statistics released by the International Civil Aviation Organization (the "ICAO"“ICAO”), the number of scheduled airline passengers traveling between Dublin and London increased from 1.7 million passengers in 1991 to 4.33.96 million passengers in calender 2006.the 2009 calendar year. Most international routes Ryanair has enteredbegun serving since 1991 have recorded significant traffic growth in the period following Ryanair'sRyanair’s commencement of service, with Ryanair capturing the largest portion of such growth on each such route. Although aA variety of factors contributed to this increase in air passenger traffic, including the relative strength of the Irish, U.K., and European economies in past years. However, management believes that the most significant factorfactors driving such growth across all its European routes hashave been Ryanair's low faresRyanair’s low-fares policy and its deliverysuperiority to its competitors in terms of better on-time flight punctuality, lower levels of lost bagsbaggage, and fewer cancellations when compared to
its competitors.
rates of flight cancellations.
The address of Ryanair Holdings'Holdings’ registered office is: c/o Ryanair Limited, Corporate Head Office, Dublin Airport, County Dublin, Ireland. The generalCompany’s contact person regarding this Annual Report on Form 20-F is: Howard Millar, Chief Financial Officer (same address as above). The telephone number is +353-1-812-1212.+353-1-812-1212 and the facsimile number is +353-1-812-1213. Under its current Articles, of Association, Ryanair Holdings has an unlimited corporate duration.
Ryanair’s objective is to firmly establish itself as Europe'sEurope’s leading scheduled passenger airline, through continued improvements and expanded offerings of its low-fares service. In the highly challenging current operating environment, Ryanair aimsseeks to offer low fares that generate increased passenger traffic while maintaining a continuous focus on cost-containment and operating efficiencies. The key elements of Ryanair'sRyanair’s long-term strategy are:
Low Fares. Ryanair's Ryanair’s low fares are designed to stimulate demand, particularly from fare-conscious leisure and business travelers who might otherwise have useduse alternative forms of transportation or wouldchoose not have
traveledto travel at all. Ryanair sells seats on a one-way basis, thus eliminating minimum stay requirements from all travel on Ryanair scheduled services,
regardless of fare.services. Ryanair sets fares on the basis of the demand for particular flights and by reference to the period remaining to the date of departure of the flight, with higher fares charged on flights with higher levels of demand and for bookings made nearer to the date of departure. Ryanair also periodically runs special promotional fare campaigns. See "-Route“—Route System, Scheduling and Fares-LowFares—Low and Widely Available Fares"Fares” below.
Customer Service. Ryanair's Ryanair’s strategy is to deliver the best customer service performance in Europe. Customer service is defined by Ryanair as lowest fares,
best punctuality, fewest cancellations and least lost bags.its peer group. According to reports
bythe data available from the Association of European Airlines (“AEA”) and the airlines'airlines’ own published statistics, Ryanair has achieved better punctuality, fewer lost bags, and fewer cancellations than all of the rest of its peer group in Europe. Ryanair achieves this by focusing strongly on the execution of these services and by primarily operating from uncongestedun-congested airports. Ryanair conducts a daily conference call with Ryanair and airport personnel at each of its base airports, during which the reasons for each “first wave” flight delay and baggage short-shipment are discussed in detail and logged to ensure that the root cause is identified and rectified. Subsequent (consequential) delays and short shipments are investigated by Ryanair ground operations personnel. Customer satisfaction is also measured by regular online, mystery-passenger and employee surveys.
Frequent Point-to-Point Flights on Short-Haul Routes. Ryanair provides frequent point-to-point service on short-haul routes to secondary and regional airports in and around major population centers and travel destinations. In the 2010 fiscal year, ended March 31, 2007, Ryanair flew an average route length of 621
kilometers661 miles and an average flight duration of approximately 1.491.55 hours. Short-haul routes allow Ryanair to offer its low fares and frequent service, while eliminating the necessityneed to provide "frill" servicesunnecessary “frills,” like in-flight meals and movies, otherwise expected by customers on longer flights. Point-to-point flying (as opposed to hub-and-spoke service) allows Ryanair to offer direct, non-stop routes and avoid the costs of providing "through service"“through service,” for connecting passengers, including baggage transfer and transit passenger assistance costs.
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In choosing its routes, Ryanair favors uncongestedsecondary airports with convenient transportation to major population centers and regional airports. Secondary and regional airports are generally less congested than major airports and, as a result, can be expected to provide betterhigher rates of on-time departures, faster turnaround times (the time an aircraft spends at a gate loading and unloading passengers), fewer terminal delays, and more competitive airport access, and lower handling costs. Ryanair's "on time"Ryanair’s “on time” performance record (arrivals within 15 minutes of schedule) for calendarthe 2010 fiscal year 2006 was 85%88%. According to the last available comparative data published by the AEA (which relates to the 2008-2009 winter season), exceedingRyanair’s “on time” performance record exceeded that of its principal competitors including Aer Lingus (approximately 79%),that make such data available, including: Air France (approximately 80%83%),; British Airways (approximately 83%); Iberia (approximately 70%), easyJet (approximately
73%), and Lufthansa (approximately 81%85%), and SAS (approximately 79%), according to
Ryanair,. Aer Lingus and easyJet and AEA published statistics for 2006.do not publish punctuality statistics. Faster turnaround times are a key element in Ryanair'sRyanair’s efforts to maximize aircraft utilization. Ryanair'sRyanair’s average scheduled turnaround time for the 2010 fiscal year
ended March 31, 2007 was approximately 25 minutes. Secondary and regional airports also generally do not maintain slot requirements or other operating restrictions that can increase operating expenses and limit the number of allowed take-offs and landings.
Low Operating Costs. Management believes that Ryanair'sRyanair’s operating costs are among the lowest of any European scheduled passengerscheduled-passenger airline. Ryanair strives to reduce or control four of the primary expenses involved in running a major scheduled airline: (i) aircraft equipment costs; (ii) personnel productivity;costs; (iii) customer service costs; and (iv) airport access and handling costs:
Aircraft Equipment Costs. Ryanair'sCosts. Ryanair’s primary strategy for controlling aircraft acquisition costs is to narrow its fleet of aircraft tooperate a single aircraft type. Ryanair completed the retirement of its Boeing 737-200As in December
2005 and currently operates a single fleet type of "next generation"only “next generation” Boeing 737-800s. Although Ryanair'sRyanair’s continuous acquisition of thenew Boeing 737-800s has already and willis expected to continue to significantly increase the size of its fleet and thus significantly increase its aircraft equipment and related costs (both on(on an aggregate and per-aircraft basis),. However, the purchase of aircraft from a single manufacturer enables itRyanair to limit the costs associated with personnel training, maintenance, and the purchase and storage of spare parts as well
aswhile also affording the Company greater flexibility in the scheduling of crews and equipment. Management also believes that the terms of itsRyanair’s contracts with Boeing contracts are very favorable to Ryanair. See "--Aircraft"“—Aircraft” below for additional information on Ryanair'sRyanair’s fleet.
Personnel Productivity.Costs. Ryanair endeavors to control its labor costs by seeking to continually improve the productivity of its already highly-productivehighly productive work force. Compensation for employees emphasizes productivity-based pay incentives. These incentives includinginclude commissions for on-boardonboard sales of products for flight attendants and payments based on the number of hours or sectors flown by pilots and flight attendants within limits set by industry standards or regulations fixing maximum working hours, as well as
participation in Ryanair's stock option programs.
hours.
Customer Service Costs.Costs. Ryanair has entered into agreements on competitive terms with third-partyexternal contractors at certain airports for ticketing, passenger and aircraft handling, ticketing and other services that management believes can be more cost-efficiently provided by third parties. Management attempts to obtain competitive rates for such services by negotiating fixed-price, multi-year contracts. The development of its own internetInternet booking facility
and reservations center has allowed Ryanair to eliminate travel agent commissions.commissions and third-party reservation systems costs. Ryanair generates virtually allover 99% of its scheduled passenger revenues through direct sales overvia its website and direct telephone
reservations.
22
Airport Access and Handling Costs.Costs. Ryanair attempts to control airport access and service charges by focusing on airports that offer competitive cost terms.prices. Management believes that Ryanair'sRyanair’s record of delivering a consistently high volume of passenger traffic growth at many of these airports has allowed it to negotiate favorable contracts with such airports for access to their facilities. Ryanair further endeavors to reduce its airport charges by opting, when practicable, for less expensive gate locations as well as outdoor boarding stairs, rather than jetways, which are more expensive jetways.
and operationally less efficient to use. In addition, since October 2009, Ryanair has required all passengers to check-in on the Internet. This requirement was instituted to reduce waiting times at airports and speed a passenger’s journey from arrival at the airport to boarding, as well as significantly reduce airport handling costs. Ryanair has also introduced a checked-bag fee, which is payable on the Internet at the time of booking and is aimed at reducing the number of bags carried by passengers in order to further reduce handling costs.
Taking Advantage of the Internet.Internet. In 2000, Ryanair converted its host reservation system to a new system, called Flightspeed, which it operates under a 10-year hosting agreement with Accenture Open Skies ("Open Skies").Navitaire that will terminate in 2013. As part of the implementation of the new reservation system, Open SkiesNavitaire developed an internetInternet booking facility called Skylights.facility. The SkylightsRyanair system allows internetInternet users to access Ryanair'sits host reservation system and to make and pay for confirmed reservations in real time through Ryanair'sthe Ryanair.com website. SinceAfter the launch of the SkylightsInternet reservation system, Ryanair has heavily promoted its website through newspaper, radio and television advertising. As a result, internetInternet bookings grew rapidly, and have grown rapidly, accountingaccounted for approximatelyover 99% of all reservations onover the past several years. In 2008, Ryanair upgraded the reservation system to a daily basis asmore scalable version, which offers more flexibility for future system enhancements and to accommodate the planned growth of September 2007. Ryanair.
In addition, in March 2006, Ryanair also commencedintroduced its Check'N'Go web-basedInternet check-in service giving
passengersand, in October 2009, it made its use mandatory. The Company therefore replaced its previous airport check-in facilities with an EU passport travelingsignificantly fewer bag-drop desks. The Company has also deployed kiosks with hand luggage only the opportunity
to check in online acrosspayment facilities at most of its route network.
main bases. See “Risk Factors—Risks Related to the Company—The Company Faces Risks Related to its Internet Reservations Operations and its Announced Elimination of Airport Check-in Facilities.”
Commitment to Safety and Quality Maintenance. Ryanair's commitment to
safety Safety is the primary priority of the CompanyRyanair and its management. This commitment begins with the hiring and training of Ryanair'sRyanair’s pilots, flight attendants, and maintenance personnel and includes a policy of maintaining its aircraft in accordance with the highest European airline industry standards. Ryanair has not had a single incident involving major injury to passengerspassenger or flight crew fatality in its 22-year25-year operating history. Although Ryanair seeks to maintain its fleet in a cost-effective manner, management does not seek to extend Ryanair'sRyanair’s low-cost operating strategy to the areas of safety, maintenance, training or quality assurance. Routine aircraft maintenance and repair services are performed at Dublin, London (Stansted and Luton), Barcelona (Girona),
Madrid, Pisa, Bremen, Dusseldorf (Weeze), East Midlands Nottingham, Shannon and
Corkprimarily by Ryanair, and,at Ryanair’s main bases, but are also performed at other base airports by maintenance contractors approved under the terms of Part 145, the European airline industry standard for
maintenance.145. Ryanair currently performs heavy airframe maintenance, but contracts with thirdother parties who perform heavy
airframe maintenance, engine overhaul services and rotable repairs. These contractors also provide similar services to a number of other airlines, including British Airways, Finnair and Aer Lingus.Iberia. Ryanair assigns a Part 145 certified145-certified mechanic to oversee heavy maintenance and authorize engine overhauls performed by thirdother parties.
Enhancement of Operating Results through Ancillary Services. Ryanair
provides various ancillary services and engages in other activities connected
with its core air passenger service, including non-flight scheduled services,
the in-flight sale of beverages, food and merchandise and internet-related
services. As part of its non-flight and internet-related services, Ryanair distributes accommodation services and travel insurance as well as car rentals
principallyprimarily through its website. Management believesFor hotel services, Ryanair has a contract with Booking.com, pursuant to which Booking.com handles all aspects of such services marketed through Ryanair’s website and pays a fee to Ryanair. Ryanair also has contracts with other accommodation providers that providing these
services through the internet allowsenable Ryanair to increase sales, while atoffer camping, hostel, bed-and-breakfast, guesthouse, villa and apartment accommodation to its customers. In addition Ryanair has a contract with the same time reducing costs onHertz Corporation (“Hertz”), pursuant to which Hertz handles all car rental services marketed through Ryanair’s website or telephone reservation system. Hertz pays a per-unit basis.per-passenger fee to Ryanair. Ryanair also sells cruises online and bus and rail tickets onboard its aircraft and through its website. Costa Cruises handles all cruise bookings made via Ryanair’s website and pays Ryanair a per-passenger fee. For the 2010 fiscal year, ended March 31, 2007, ancillary services accounted for 16.2%22.2% of Ryanair'sRyanair’s total operating revenues, as compared to 15.3%20.3% of such revenues in the 2009 fiscal year ended March 31, 2006.year. See "-Ancillary Services"“—Ancillary Services” below and "Item“Item 5. Operating and Financial Review and Prospects-ResultsProspects—Results of Operations-FiscalOperations—Fiscal Year 20072010 Compared with Fiscal Year 2006-Ancillary Revenues"2009—Ancillary Revenues” for additional information.
Focused Criteria for Growth. Building on its success in the Ireland-U.K. market and its expansion of service to continental Europe and Morocco, Ryanair intends to follow a manageable growth plan targeting specific markets. Ryanair believes it will have opportunities for continued growth by: (i) initiating additional routes in the EU andEU; (ii) initiating additional routes in countries party to a European Common Aviation Agreement with the EU that are currently served by higher-cost, higher-fare carriers; (ii)(iii) increasing the frequency of service on its
existing routes; (iii)(iv) starting new domestic routes within individual EU countries; (iv)(v) considering acquisition opportunities that may become available in the future; (v)(vi) connecting airports within its existing route network ("triangulation"(“triangulation”); (vi)(vii) establishing more new bases in continental Europe;bases; and (vii)(viii) initiating new routes not currently served by any carrier.
23
During the 2007 fiscal year, ended March 31, 2007, Ryanairthe Company acquired 25.2% of Aer Lingus. The Company thereafter increased its interest to 29.3% during the 2008 fiscal year, and to 29.8% during the 2009 fiscal year at a total aggregate cost of €407.2 million. Following the acquisition of its initial stake and upon the approval of the Company’s shareholders, approved the decisionmanagement proposed to purchaseeffect a tender offer to acquire the entire share capital of Aer Lingus and, as a result, at
September 20, 2007 Ryanair had acquired a 29.4% interest at a cost of EUR396.5
million. Our tender offer for the remaining shares of Aer LingusLingus. This acquisition proposal was, however, blocked by the European Commission on alleged competition grounds. Ryanair has filed an appeal with the CFI, which was heard in July 2009. On July 6, 2010, the Court upheld the Commission’s decision. Ryanair has two months and 10 days from such date to appeal this judgment.
On December 1, 2008, Ryanair made a second offer to acquire all of the European Commission's decision withordinary shares of Aer Lingus it did not own at a price of €1.40 per ordinary share. Ryanair offered to keep Aer Lingus as a separate company, maintain the European CourtAer Lingus brand, and retain its Heathrow slots and connectivity. Ryanair also proposed to double Aer Lingus’ short-haul fleet from 33 to 66 aircraft and to create 1,000 associated new jobs over a five-year period. If the offer had been accepted, the Irish government would have received over €180 million in cash. The employee share option trust and employees who own 18% of First
Instance. Aer Lingus would have received over €137 million in cash. The Company met Aer Lingus management, representatives of the employee share option trust and other parties, including the Irish Government. The offer of €1.40 per share represented a premium of approximately 25% over the closing price of €1.12 of Aer Lingus on November 28, 2008. However, as the Company was unable to secure the shareholders’ support (to sell their stakes in Aer Lingus to Ryanair), the Company decided on January 28, 2009, to withdraw its offer for Aer Lingus.
See "Item“Item 8. Financial Information-OtherInformation—Other Financial Information-Legal
Proceedings-AerInformation—Legal Proceedings—Aer Lingus Merger Decision."
INDUSTRY OVERVIEW
European Airline Market”
Responding to Current Challenges. In recent periods, and with increased effect in the 2008, 2009 and 2010 fiscal years, Ryanair’s low-cost, low-fares model has faced substantial pressure due to significantly increased fuel costs and reduced economic growth (or economic contraction) in the economies in which it operates. The Western European air transport marketCompany has historically been subjectaimed to significant governmental regulation, encompassing both domestic regulations
imposed by individual countries and rules enacted by the EU that apply
throughout its territory. The EU commenced a program to reduce the level of
regulationmeet these challenges by: (i) selectively grounding aircraft during the 1980s, followed2009-2010 winter season; (ii) disposing of aircraft (disposals totaled 6 in the 2008 fiscal year, 17 in the 2009 fiscal year and 3 in the 2010 fiscal year); (iii) controlling labor and other costs, including through wage freezes, selective redundancies and the introduction of Internet check-in; and (iv) renegotiating contracts with existing suppliers, airports and handling companies. There can be no assurance that the Company will be successful in achieving all of the foregoing or taking other similar measures, or that doing so will allow the Company earn profits in any period. See “Item 3. Key Information—Risk Factors—Risks Related to the Company—Changes in Fuel Costs and Fuel Availability Affect the Company’s Results and Increase the Likelihood that the Company May Incur Losses” and “—The Company May Not Be Successful in Raising Fares to Offset Increased Business Costs.”
The Company has announced capacity reductions, primarily at Dublin Airport, the most expensive airport in terms of airport charges that Ryanair serves. As a result of this airport’s high charges, certain routes are not economically viable to operate during the winter when the Company typically experiences lower load factors and fares. In June 2009, Ryanair announced that it was reducing its fleet at Dublin Airport to 17 by a package of liberalization measures
substantially reducing the ability of individual EU Member States to restrict
access to routes for air travel that were originally adoptedsummer 2009, 16 by winter 2009, 15 by summer 2010 and 12 by winter 2010 (down from 22 in 1992. Since
April 1997, EU carriers have been able to provide passenger service on domestic
routes within individual EU Member States outside their home country of
operation without restriction.
Partiallysummer 2008 and 20 in winter 2008), as a result of this progressive movement towards deregulation,
there has been a significant increase in the number of airlines providing
scheduled passenger service in the EU over the course of the past decade. The
prospects for additional market liberalization measures provided further impetus
for new entrants, including the conversion of some charter airlines into
operators of both scheduled and charter flights. Management expects that other
new carriers may be formed to capitalize on these opportunities. Notwithstanding
the overall increase in the number of carriers, a large majority of the new
entrants are quite small, although this may change,rising airport charges and the overall market has
been volatile, with severalintroduction of the new entrants ceasing operations. Among the
major causesan Air Travel Tax of their failure were the competitive responses€10 on all passengers departing from major airlines
and other low-cost carriers (including Ryanair) serving the same routes,
including a number of sustained price wars, rapid, unmanageable expansion at a
higher cost base than existing carriers, and the impact of increased costs of
operating aircraft arising from higher interest rates and fuel prices.
Air carriers operating in the intra-EU market have traditionally fallen
into one of four principal categories: flag carriers, independent airlines,
franchises of major airlines and charter operators. The flag carriers, which fly
inter-continental routes as well as those within Western Europe, are now largely
"commercial" flag carriers, such as British Airways, Air France, KLM,
Scandinavian Airline System ("SAS") and Lufthansa, which operate with little or
no state aid, although some flag carriers (such as Alitalia) continue to be
heavily dependent on aid from their respective governments. The independent
carriers include low-fares carriers, such as Ryanair and easyJet, and carriers
providing "frills" services more comparable to those of the flag carriers but at
slightly lower fares than the flag carriers, such as British Midland Airways
Ltd. ("British Midland"). Certain small carriers have become franchises of major
airlines, sharing some ticketing and other distribution systems with the flag
carriers. These franchises serve mainly regional routes on which flag carriers
cannot operate profitably due to their high overhead costs, and they serve to
feed regional passengers to their flag carrier-partners for interline service.
For the flag carriers, franchises represent a possible means of competing with
low-fares start-up carriers, although in Germany, Lufthansa has chosen to
compete with the low-fares carriers by acquiring Germanwings, a low-fares
24
carrier based in Germany. Charter flight operators are significantly more
established and more competitive in Europe than in the United States, with many
charter operations being owned by major travel groups or commercial airlines. A
number of charter operators have established their own low-fares subsidiaries,
including Monarch Scheduled in the U.K. (a subsidiary of Monarch Airlines).
Charter operators currently account for a significant portion of total intra-EU
annual passenger traffic and operate primarilyIrish airports on routes between northern and
southern Europe, targeting mainly price-conscious leisure travelers. A large
number of start-up airlines were established throughout Europe inlonger than 300 kilometers. Excluding the first half
of the current decade. Such start-ups benefited from the increased availability
of aircraft that resulted from capacityplanned reduction by winter 2010, these reductions by larger airlines
post-September 11, 2001 and a low interest rate environment. While the number of
start-up airlines commencing operations has recently declined due to higher
aircraft prices, the lack of availability of aircraft and higher interest rates,
which have driven up both finance and operating lease costs, there can be no
guarantee that future declines in aircraft prices, future low interest rates or
other favorable circumstances will not lead to a new uptick in the number of
start-up carriers.
Although the liberalization measures adopted by the EU were expected to
reduce air fares and increase competition significantly, the European market
continues to be characterized by higher operating costs per ASM than the
scheduled-passenger-service market in the United States. While active
competition has increased with the launch of the low-fares carriers, fares for
scheduled passenger services on intra-EU routes continue to be generally higher
than those on domestic U.S. routes of comparable distances. Ryanair believes
that the higher fares are the result of carriers passing on their higher costs
to passengers and the lack of significant competition on some intra-EU routes.
In addition, EU Member States may intervene to stop further fare reductions on a
route or group of routes where market forces have led to a sustained downward
movement in fares deviating from seasonal norms and resulting in widespread
losses among all carriers on the routes concerned.
At the same time, there is also a trend in Europe towards re-regulation of
air transport. The European Commission has enacted certain legislation aimed
exclusively at the air transport sector, while ignoring competing sectors such
as railroads and ferry transportation. These modes of transport have
traditionally been heavily subsidized by national governments and Ryanair
believes that the continuing protection of these sectors is having a negative
effect on the competitiveness of the air transport sector.carried out. The Company believes
that these measures, which include legislation for compensating or otherwise
providing assistance to airline passengers in cases of denied boarding,
cancelled flights or long delays (Regulation (EC) No. 261/2004) and the European
Commission's guidelines on the financing of airports and start-up aid to
airlines by certain regional airports; as well as proposals on extending the
European Emissions Trading Scheme (ETS) to airlines, will all have the effect of
increasing costs of air transport, without adding any significant benefits for
consumers. See "Item 3. Key Information-Risk Factors-Risks Related to the
Company-EU Regulation on Passenger Compensation Could Significantly Increase
Related Costs," "Item 4. Information on the Company--Government Regulation--
Regulatory Authorities and "-- Environmental Regulation."
Ireland, U.K. and Continental European Markets
The market for scheduled passenger air travel between Ireland and the U.K.
can be divided into two principal segments, the Dublin-London route and the
routes between Ireland and other locations in the U.K. outside of London.
Dublin-London Route. The Dublin-London route (including service from Dublin
to each of Heathrow, Gatwick, Stansted, Luton and London City airports) is
currently served by five carriers. Ryanair serves three London airports
(Stansted, Gatwick and Luton), Aer Lingus serves one airport (Heathrow) and has announced services to a second (Gatwick) and British Midland, British Airways
and Air France's subsidiary, CityJet, each serve one airport (Heathrow, Gatwick,
and London City, respectively).
25
Before Ryanair entered the Dublin-London route in 1986, it was serviced
only by British Airways and Aer Lingus. Management believes that Ryanair's
introduction of competition based on low fares contributed to the significantalso frozen growth in passenger volume and the heightened competition between airlines that
has characterized the Dublin-London route since Ryanair first commenced service.
British Midland entered the route in 1989 and British Airways withdrew in 1991,
then re-entered in 1992, while CityJet entered the route in 1994, then
temporarily withdrew from the route from January 2001 through October 2003. As a
result of increased competition, the lowest available fares have declined while
the route has experienced substantial annual traffic growth. By calendar year
2006, according to the CAA Statistics, annual traffic had risen to more than
4.25 million passengers.
Ireland-U.K. Routes. Prior to 1993, the market for air travel between
Ireland and other locations in the U.K. was dominated by Aer Lingus. As with the
London-Dublin route prior to Ryanair's entry, routes to provincial cities in the
U.K. were generally characterized by high fares, service on small-capacity
turboprop aircraft and slow traffic growth. Ryanair entered this market by
launching low-fares service using jet aircraft between Dublin and Birmingham in
1993 and has since expanded its service between Ireland and the U.K. to include
31 routes. Since Ryanair's entry into these routes with jet aircraft service and
low fares, each of the routes has experienced a significant reduction in fares
and, according to the CAA Statistics, a significant increase in traffic growth.
In each of these cases, Ryanair has captured a majority of this incremental
growth, and, as a result, Ryanair is currently the market leader in terms of
passenger volume on most of its routes between Ireland and provincial cities in
the U.K.
Continental Europe. In 1997, Ryanair began service on new routes to four
locations in continental Europe (Dublin to Paris (Beauvais) and Brussels
(Charleroi), and London (Stansted) to Stockholm (Skvasta) and Oslo (Torp)).
Since that time Ryanair has substantially expanded its continental European
service and now serves more than 136 locations in 26 European countries
(including England, Scotland and Northern Ireland). Ryanair has established
continental European bases at Brussels (Charleroi), Frankfurt (Hahn), Milan
(Bergamo), Stockholm (Skvasta), Barcelona (Girona), Rome (Ciampino), Pisa,
Marseille, Bremen and Dusseldorf (Weeze). Additional bases (each of which will
host two aircraft) at Bristol, Alicante, Valencia and Belfast airports are due
to commence operations during the Fall of 2007. Management also expects that
additional non-EU destinations will be added to the network in the future as new
states sign and ratify the European Common Aviation Area Agreement (ECAA), an EU
initiative designed to liberalize air transport among ECAA member states, or
sign bilateral "open skies" treaties with the EU. Ryanair currently competes
with a number of flag carriers, including British Airways, Lufthansa, Air
France, KLM, Iberia and Alitalia, and a larger number of smaller carriers,
including low-fares airlines such as easyJet, BMI Baby and Fly Be in the United Kingdom and Hapag Lloyd Express, Germanwings and easyJet in Germany, with the numberexception of launching a base at Leeds Bradford. Ryanair reduced capacity at its London (Stansted) base by 40% between October 2009 and identity of its competitors varying accordingMarch 2010. In addition, on June 29, 2010, due to the route flown.
Other Routes. In May 2006, Ryanair announced the execution of a five-year
agreement with the Government of Morocco to develop low-cost air access and
tourism in Morocco from Ryanair's bases throughout Europe. The agreement covers
mostcontinuance of the regional airports in MoroccoU.K. government’s £11 APD tourist tax and involves a commitment by Ryanair to
develop up to 20 routes, and to carry nearly 1 million passengers per year by
the end of the five-year period. Ryanair has begun services on a number of these
routes and does not anticipate any difficulty in satisfying its obligations
under the agreement.
The Acquisition of Buzz
On April 10, 2003, Buzz Stansted Limited ("Buzz Stansted" or "Buzz"), a
newly-formed subsidiary of Ryanair, purchased certain assets of Buzz, KLM's
former low-fares subsidiary, from KLM U.K. Limited for EUR20.8 million. These
assets were primarily composed of trademarks, domain names, computer equipment,
ticket desk equipment and certain aircraft documents, records and manuals. As
part of the transaction, KLM U.K. Limited agreed to transfer certain landing and
takeoff slotshigh charges at London (Stansted) Airportairport, the Company announced that capacity at London (Stansted) airport would be reduced from winter 2010 by 17% and the number of aircraft based at London (Stansted) would be reduced from 24 to Ryanair. In addition, Buzz
Stansted agreed to take over leases with International Lease Finance Corporation
("ILFC") on six Boeing 737-300s, which were novated22. Ryanair also noted that, as a result of other capacity reductions at its U.K. bases except for the bases at Edinburgh and Leeds Bradford, its total U.K. capacity would fall by KLM U.K. Limited to Buzz
Stansted, as well as to sub-lease four BAe146 aircraft from KLM during16% in the period from April 10, 2003November 1, 2010 to March 31, 2004, at which time2011. See “Risk Factors—Risks Related to the BAe146s were
returnedCompany—Ryanair Has Decided to KLM.
26
The leases with ILFC for the six Boeing 737-300 aircraft, which had a
formal term of approximately eight years, ending between October 2010 and
February 2011, had monthly lease payments that were substantially higher than
market rates. However, in August 2004, Buzz Stansted finalized an agreement with
ILFC for the early return of these aircraft, in October 2004. Following the
return of the aircraft to ILFC, Buzz Stansted ceased operations on October 30,
2004, and Ryanair now uses aircraft fromFreeze its existing fleet and those acquired
under its fleet delivery program to service the routes previously operated by
Buzz Stansted.
Buzz Stansted's results for periods in which it operated have been fully
consolidated with those of Ryanair and are includedDevelopment in the financialU.K. Market and operating data included in this annual report.
Ryanair recorded goodwill in the amount of EUR46.8 million in connection
with the Buzz acquisition. This figure is comprised of the purchase price of
EUR20.8 million and excess lease costs in the amount of EUR26.0 million, which
latter amount was calculated on the basis of a report from Avitas, independent
aircraft valuers. This independent valuation highlighted that the monthly
payments on the leases novated to Buzz Stansted were substantially higher than
existing market rates for leases on similar aircraft. The Company calculated the
amount of these excess lease costs over the remaining term of the leases at
EUR26.0 million, based on a calculation of the difference between the
contractual rates and these estimates of then-current market rates. All of the
purchase price in excess of the value of the net assets acquired was assigned to
the slot take-off and landing rights at Stansted Airport that Ryanair acquired
as part of the transaction. The slots do not have a limited life, and therefore
these rights are not amortized. As noted above, Buzz Stansted in 2004 returned
certain leased aircraft to ILFC. Under both IFRS and U.S. GAAP, the timeframe
for making such adjustments is limited to 12 months post-acquisition, and
therefore the reversal against goodwill of the EUR11.9 million onerous lease
provision was taken as a credit to Ryanair's IFRS and U.S. GAAP income
statements. See Note 28 to the Consolidated Financial Statements included in
Item 18 for additional information.
Curtail Certain U.K. Operations.”
ROUTE SYSTEM, SCHEDULING AND FARES
Route System and Scheduling
As of September 20, 2007,June 30, 2010, the Company offers over 920offered approximately 1,300 scheduled short-haul flights per day serving 125 locations155 airports throughout Europe and Morocco, including
24 locations in the U.K. and Ireland, flying approximately 4401,100 routes. The following table lists Ryanair'sRyanair’s top ten routes during the 2010 fiscal 2007year by number of passengers, includingas well as the date service commenced on each such route
and how many round-trip flights are scheduled on each such route per day.route. These routes in the aggregate accounted for 12.6%7.1% of the Company'sCompany’s scheduled passenger volume in the 2010 fiscal 2007.
27
Route Served | Date service commenced | |
Between Dublin and London (Stansted) | Nov-88 | |
Between Dublin and London (Gatwick) | Nov-94 | |
Between Milan (Bergamo) and Rome (Ciampino) | Mar-06 | |
Between Dublin and Manchester | May-94 | |
Between London (Stansted) and Belfast | Oct-07 | |
Between London (Stansted) and Rome (Ciampino) | Apr-02 | |
Between | Jan-86 | |
Between London (Stansted) and Milan (Bergamo) | Apr-02 | |
Between Frankfurt (Hahn) and London (Stansted) | Apr-99 | |
Between Dublin and | Oct-93 |
See Note 17, “Analysis of operating revenues and segmental analysis,” to the consolidated financial statements included in Item 18 for more information regarding the geographical sources of the Company’s revenue.
Management’s objective is to schedule a sufficient number of flights per day on each of Ryanair'sRyanair’s routes to satisfy demand for Ryanair'sRyanair’s low-fares service. Ryanair schedules departures on its most popular routes at frequent intervals, normally between approximately 6:00 a.m. and 11:00 p.m. Management regularly reviews the need for adjustments in the number of flights on all of its routes.
During the 2010 fiscal 2007, the Companyyear, Ryanair announced 149356 new routes originating from Belgium, France, Germany, Ireland, Italy, Lithuania, Malta, Norway, Portugal, Slovakia, Spain, Sweden and extendedthe U.K. See “Risk Factors—Risks Related to the Company—Ryanair Has Decided to Freeze its operations to five new countries, adding destinations in Croatia, Hungary,
Malta, Morocco and Slovenia from airportsDevelopment in the U.K., Ireland, Germany, Spain,
France Market and Italy. Since the fiscal year end in March 2007, Ryanair has announced
a significant expansions plans for the 2007-2008 winter season. In April 2007,
the Company announced the expansion of the Bremen base to three aircraft
beginning in September 2007. In May 2007, the Company announced the doubling of
aircraft at its Dusseldorf (Weeze) base from two to four and the addition of
eight new routes commencing in September 2007. Also in May 2007, Ryanair
announced the growth of the Barcelona (Girona) base from seven to nine aircraft
in October 2007, adding nine further routes and the growth of the Milan
(Bergamo) base from four to six aircraft beginning in December 2007, and the
addition of nine new routes. Ryanair's new Bristol two-aircraft base was
announced in May 2007 and will commence operations in November 2007. Ryanair's
21st and 22nd bases in Valencia and Alicante were announced in August 2007 and
are scheduled to commence operations in October and November 2007, respectively.
Ryanair's 23rd base, in Belfast, was announced in September 2007 and is
scheduled to commence operations in October 2007.
Curtail Certain U.K. Operations.”
Low and Widely Available Fares
Ryanair offers low multi-tier fare pricing,fares, with prices generally varying depending on the basis of advance booking, seat availability and demand. Ryanair sells seats on a one-way basis, thus removing minimum stay requirements from all travel on Ryanair scheduled services, regardless of fare.services. All tickets can be changed, subject to certain conditions, including fee payment of a fee and applicable upgrade charge, butcharges. However, tickets are non-cancelable and non-refundable and must be paid for whenat the reservation is made.
Ryanair'stime of reservation.
Ryanair’s discounted fares are "capacity controlled"“capacity controlled” in that Ryanair allocates a specific number of seats on each flight to each fare category to accommodate projected demand for seats at each fare level leading up to flight time. Ryanair generally makes its lowest fares widely available by endeavoring
to allocateallocating a majority of its seat inventory to its lowest fare categories. Management believes that its unrestricted fares as well as its advance purchaseadvance-purchase fares are attractive to both the business and the leisure traveler.
travelers.
When launching a new route, Ryanair'sRyanair’s policy is to price its lowest fare so that it will be significantly lower than other carriers'carriers’ lowest fares, but still provide a satisfactory operating margin.
28
Ryanair also periodically runs special promotional fare campaigns, in particular in connection with the opening of new routes, and endeavors to under-price attempts by its competitors to lower their faresalways offer the lowest fare on a particular
route. Ryanair offers weekday one-way fares starting at EUR0.99 on many of its
routes, and offers lower-fare trips on certain routes from time to time. Ryanair
promotions are made during a limited period of time and are only available for
travel during a specific period. Other promotional fares generally are available
only for mid-week travel, for a limited period and for a limited number of seats
per flight, and also require reservations in advance.any route it serves. Promotional fares may have the effect of increasing load factors and reducing Ryanair'sRyanair’s yield and passenger revenues on the relevant routes during the periodperiods they are in effect. Ryanair expects to continue to offer significant fare promotions to stimulate demand in periods of lower activity or during off-peak times for the foreseeable future.
MARKETING AND ADVERTISING
Ryanair's
Ryanair’s primary marketing strategy is to emphasize its widely-availablewidely available low fares.fares and price guarantee. In doing so, Ryanair primarily advertises its services in national and regional newspapers, in Ireland and the U.K. In continental Europe, Ryanair
advertises primarily through regional and national newspapers, as well as through controversial and topical advertising, press conferences and publicity stunts, and on billboards and other local media. Currently, the slogan
"Ryanair.com, Fly Cheaper" is prominently featured in all of the airline's
marketing to build its brand identity.stunts. Other marketing activities include the distribution of advertising and promotional material and cooperative advertising campaigns with other travel-related entities, including local tourist boards. Ryanair generally runsalso regularly contacts people registered in its database to inform them about promotions and special promotions in coordination with the
inauguration of service into new markets. Starting approximately four to six
weeks before the launch of a new route, Ryanair undertakes a major advertising
campaign in the target market and local media and editorial attention frequently
focuses on the introduction of Ryanair's low fares. Ryanair's sales teams also
visit each area and target pubs, clubs, shopping malls, factories, offices and
universities with a view to increasing consumer awareness of the new service.
RESERVATIONS/offers via e-mail.
Passenger airlines generally rely on travel agents (whether traditional or online) for a significant portion of their ticket sales and pay travel agents a commissioncommissions for their services. Followingservices, as well as reimbursing them for the introduction of its internet-based reservations and
ticketing service, which now allowsfees charged by reservation systems-providers. In contrast, Ryanair requires passengers to make reservations and purchase tickets directly through the Company'sCompany. Over 99% of such reservations and purchases are made through the website Ryanair's relianceRyanair.com. Ryanair is therefore not reliant on travel agents has been eliminated.agents. See "-Strategy-Taking“—Strategy—Taking Advantage of the Internet"Internet” above for additional information.
In 2008, Ryanair currently uses Flightspeed from Open Skiesupgraded its reservation system in order to providefacilitate the continued expansion of the airline. The prior reservation system had been approaching its capacity in terms of the total number of passenger transactions processed each year. The upgraded system is much more scalable and will be able to cope with the planned growth of Ryanair. In addition, the new system also gives the Company the ability to offer more enhancements to passengers, as the new platform is far more flexible in terms of future development. Under the agreement with the system-provider, Navitaire, the system serves as Ryanair’s core seatseating inventory and booking system. In return for access to these systems,system functions, Ryanair pays transaction fees that are generally based on the number of passenger seat journeys booked through such systems. In September 2005, Ryanair completed the installation ofsystem. Navitaire also retains a stand-aloneback-up booking engine to support its Open Skies platformoperations in the event of a breakdown in this facility.
In addition, in March 2006,the main system. Over the last several years, Ryanair commenced its Check'N'Go web-based
check-inhas introduced a number of Internet-based customer service giving passengers with an EU passport traveling with hand
luggage only the opportunity to check-in online across its route network (with
the exception of passengers traveling from Italy to the U.K.enhancements such as a result of a
general prohibition by the Italian aviation authority on such facilities for
carriers flying to the U.K.) as part of a package of measures intended to
improve service by reducing air fares andInternet check-in and boarding gate queues. At
the same time, Ryanair imposed new per-bag fees on passengers traveling with
checked luggage. The Company also announced that, with effect from September 20,
2007, passengers using web check-in/priority boarding would be ableservice. Since October 2009, Ryanair has required Internet check-in for all passengers. These enhancements and changes have been made to availreduce waiting time at airports and speed a passenger’s journey from arrival at the airport to boarding, as well as significantly reduce airport handling costs. Ryanair has also introduced a checked-bag fee, which is payable on the Internet and is aimed at reducing the number of this service for free whilstbags carried by passengers using desk check-in facilities will be
requiredin order to pay a charge of EUR3/GBP2 per flight.
29
Ryanair also plans to replace its "Open Skies" system supplied by Navitare
in November 2007 with an upgraded version of the system "Newskies" to facilitate
the continued growth of the airline.
further reduce handling costs.
Aircraft
As of August 31, 2007, Ryanair'sJune 30, 2010, Ryanair’s operating fleet was composed of 137250 Boeing 737-800 "next generation"“next generation” aircraft, each having 189 seats. During fiscal 2005, Ryanair also leased six Boeing 737-300 aircraft, each
having 148 seats, through its subsidiary Buzz Stansted. These leases were
terminated in October 2004. See "-Industry Overview-The Acquisition of Buzz."
Ryanair'sRyanair’s fleet totaled 133232 Boeing 737-800s at March 31, 2007.2010. The Company expects to have an operating fleet comprising 163272 Boeing 737-800s at March 31, 2008 (assuming that the planned disposal of six such aircraft is completed on
schedule).
Aircraft
Boeing 737-800s: 2011.
Between March 1999 and August 31, 2007,June 30, 2010, Ryanair took delivery of 137276 new Boeing 737-800 "next generation"“next generation” aircraft under its contracts with Boeing.Boeing (and disposed of 26 such aircraft). The new Boeing 737-800s share certain basic characteristics with Ryanair'sRyanair’s prior fleet of Boeing 737-200A aircraft, all of which were retired by December 2005, but2005. However, the new aircraft are larger (seating up to 189 passengers, as compared to 130 in the Boeing 727-200As)737-200As), capable of longer flights without refueling, and incorporate more advanced aviation technology. The Boeing 737-800s also comply with Chapter 3 noise reduction requirements established by the International Civil Aviation Organization,ICAO, which took effect in the EU in 2002.
Ryanair entered into a series of agreements with Boeing for Boeing 737-800 "next
generation"“next generation” aircraft starting in 1998, entering into a subsequent contract in
2002 and a supplemental agreement in 2003.1998. As of January 2005, 89 firmfirm-order aircraft remained to be delivered under those agreements, and the Company had options to purchase an additional 123 aircraft. On February 24, 2005, the Company announced that it had entered into a new agreement with Boeing for the purchase of a further 70 new Boeing 737-800s as well as purchase options for an additional 70 such aircraft.
Under the terms of the 2005 Boeing contract, while the basic price per aircraft that was applicable under the prior contracts will continuecontinued to apply to the firmfirm-order aircraft that remained to be delivered and purchase options outstanding thereunder, these firmfirm-order and option aircraft became subject to the commercial and other terms applicable to the firmfirm-order aircraft under the 2005 Boeing contract, including benefiting from more favorable price concessions.
In addition, as part of the 2005 contract with Boeing, the Company ensured that "winglets,"“winglets,” or wing-tip extensions, manufactured by Aviation Partners Boeing ("APB"(“APB”) would be incorporated oninto all aircraft to be delivered to the Company under its contracts with Boeing from January 2006 onwards. The cost of these winglets is included in the aircraft net price. With regard to the fleetprice of Boeing 737-800s aircraft delivered prior to January 2006,each aircraft. APB agreed to supply the winglets to the Company at a discounted rate. Ryanair has completed
the process of installing winglets onrate for all of its existing aircraft and all
future aircraft will also be fitted with winglets.the Boeing 737-800s delivered to Ryanair prior to January 2006. The cost of retrofitting all of these winglets has beenwas borne by Ryanair and the Company and has beenretrofitting was carried out during routine maintenance at the Company'sCompany’s facility at Glasgow (Prestwick). The winglets supplied by APB are attached to the existing wingwings and improve the aerodynamics of the aircraft; as a result, the aircraft consumesconsume less fuel per flight-hour. The winglet modification program has proved effective, with better aircraft performance and a reduction of approximately 4% in each aircraft'saircraft’s consumption of fuel per hour flown.
30
In October
On December 18, 2009, the Company announced that it was unable to conclude negotiations with Boeing in respect of a new agreement for the purchase of 100 new Boeing 737-800 series aircraft (with an option to purchase an additional 100) for delivery during the period 2013 to 2015. Although the Company had reached agreement with Boeing in relation to the aircraft price it was unable to conclude negotiations regarding other terms and conditions. The Company has no immediate plans to re-commence negotiations with Boeing. With the surplus cash that resulted from unsuccessful negotiations with Boeing, the Company has, subject to shareholder approval, decided to pay a special dividend of €500 million. See “Item 8. Financial Information—Other Financial Information—Dividend Policy.”
Beginning in June 2005, the Company exercised ninea number of purchase options for aircraft
to be delivered from September 2007 to November 2007. The Company alsoacquire new Boeing 737-800 aircraft. These exercised
10 purchase options are detailed in June 2006, for aircraft scheduled to be delivered from
March 2008 through June 2008, 32 purchase options in September 2006 for aircraft
scheduled to be delivered from September 2008 through June 2009 and 27 purchase
options in May 2007 for aircraft scheduled to be delivered from September 2009
through March 2010. the table below.
Date(s) Purchase Option Exercised | No. of Aircraft | Delivery Dates Agreed Upon | ||
June 2005 | 5 | Feb. 2007 to May 2007 | ||
October 2005 | 9 | Sept. 2007 to Nov. 2007 | ||
June 2006 | 10 | March 2008 to June 2009 | ||
August 2006 | 32 | Sept. 2009 to June 2009 | ||
April 2007 | 27 | Sept. 2009 to March 2010 | ||
June 2008, September 2008, October 2008 and January 2009 | 30 | June 2010 to March 2011 | ||
December 2009 | 10 | Sept. 2012 to Nov. 2012 |
Ryanair currently expects to take delivery of an additional 17172 aircraft under its contracts with Boeing.Boeing over the period from June 30, 2010 to March 31, 2013. These deliveries will increase the size of Ryanair'sRyanair’s fleet to 262299 by December 2012March 2013 (assuming that the planned disposal or return (under the terms of 46an operating lease) of 23 such aircraft is completed on schedule), or more should. As of June 30, 2010, Ryanair choose to exercise any of the additional 110 options to purchase aircraft
remaining under its existing purchase contracts with Boeing.
In May 2007, Ryanair entered into an agreement to sell 5 Boeing 737-800s
(acquired in 1999) in the period from September 2007 through November 2007. In
July 2007, Ryanair entered into a subsequent agreement with another party to
sell a further 15had sold 25 Boeing 737-800 aircraft in the period from March 2008 through
April 2010. These 20 aircraft were delivered to Ryanair in the period from
December 1999 through March 2001.third parties. Depending on market conditions and various other considerations, Ryanair planexpects to either dispose of 26 further23 more aircraft or return such aircraft to the relevant lessor during the period through March 31, 2013. (The foregoing does not take into account an aircraft involved in a bird strike at Rome (Ciampino) airport in November 2008, which has been retained but not repaired and is thus listed as a disposal in the table on page 51, bringing the total number of past and future disposals and/or returns to March 2013.
49.)
For additional details on the Boeing contracts, scheduled aircraft deliveries and related expenditures and their financing, as well as the terms of the arrangements under which Ryanair currently leases 55 of the aircraft in its operating fleet, see "Item“Item 5. Operating and Financial Review and Prospects-LiquidityProspects—Liquidity and Capital Resources."
”
Management believes that the purchase of the additional new Boeing 737-800 aircraft will allow Ryanair to continue to grow over the next five years andthree years. Management also believes that the significant size of its orders allowed Ryanair to obtain favorable purchase terms, guaranteed deliveries, and a standard configuration for all of the aircraft.
aircraft it purchased.
The Boeing 737 is the world'sworld’s most widely-usedwidely used commercial aircraft and exists in a number of generations, of which the Boeing 737-800s representbeing the latest.most recent. Management believes that spare parts and cockpit crews qualified to fly these aircraft are likely to be more widely available on favorable terms than similar resources for other types of aircraft, andaircraft. Management believes that its strategy of generally
reducinghaving reduced its fleet to one aircraft type enables Ryanair to limit the costs associated with personnel training, maintenance and the purchase and storage of spare parts, as well as affordingand maintenance. Furthermore this strategy affords Ryanair greater flexibility in the scheduling of crews and equipment. The Boeing 737-800s are fitted with CFM 56-7B26 and CFM 56-7B2756-7B engines and have advanced CAT III Autoland capability, advanced traffic collision avoidance systems, and enhanced ground proximityground-proximity warning systems.
At March 31, 2007,2010, the average aircraft age of the Company'sCompany’s Boeing 737-800 fleet was 2.72.94 years, and no aircraft was more than 8 years old.
Training and Regulatory Compliance
Ryanair currently owns and operates twofour Boeing 737-800 full flight simulators for pilot training, and contracted to purchase three additional 737-800 flightthe first of which was delivered in 2002. The simulators were purchased from CAE Electronics Ltd. of Quebec, Canada (CAE) in 2002.(“CAE”). The first of these
simulatorssecond simulator was delivered in January 2004, while the third and the second and thirdfourth simulators are
expected to bewere delivered in the 2008 fiscal 2009.year. In September 2006, Ryanair entered into a new contract with CAE to purchase five B737NG Level B flight simulators. The first two of these simulators are expected to bewere delivered in the 2009 fiscal year 2009.and are now fully operational. This contract also provides Ryanair with an option to purchase another five such simulators. The gross price of each simulator is approximately U.S. $8 million, not taking into account certain price concessions provided by the seller in the form of credit memoranda and discounts.
Management believes that Ryanair is currently in compliance with all applicable regulations and EU directives concerning its fleet of Boeing 737-800 aircraft and will comply with any regulations or EU directives that may come into effect in the future. However, there can be no assurance that the FAA or other regulatory authorities will not recommend or require other safety-related undertakings or
that such undertakings would notcould adversely impact the Company'sCompany’s results of operations or financial condition. See "Item“Item 3. Key Information-Risk
Factors-Safety-RelatedInformation—Risk Factors—Safety-Related Undertakings Could Affect the Company'sCompany’s Results."
31
Ryanair provides various ancillary services and engages in other activities connected with its core air passenger service, including non-flight scheduled services, Internet-related services, and the in-flight sale of beverages, food, and merchandise,merchandise. See “Item 5. Operating and internet-related services.
Financial Review and Prospects—Results of Operations—Fiscal Year 2010 Compared with Fiscal Year 2009—Ancillary Revenues” for additional information.
As part of its non-flight scheduled and internet-relatedInternet-related services Ryanair distributes accommodation services and travel insurance through both its website
and its traditional telephone reservation offices. Ryanair sells bus and rail
tickets on-board its aircraft and through its website. Ryanair incentivizesincentivises ground service providers at all of the airports it serves to collect establishedlevy correct excess baggage charges onfor any baggage that exceeds Ryanair'sRyanair’s published baggage allowances. The Company alsoallowances and to collect these charges customers a fixed fee to defray the
administrative costs incurred in processing debitaccordance with Ryanair’s standard terms and credit card transactions.conditions. Excess baggage charges these processing fees and Ryanair's new per-bag fee for
checked baggage are recorded as components of non-flight scheduled revenue. The
Company
Ryanair primarily distributes accommodation services and travel insurance through its website. For hotel services, Ryanair has a contract with Booking.com, pursuant to which Booking.com handles all aspects of such services marketed through Ryanair’s website and pays a fee to Ryanair. Ryanair also announcedhas contracts with other accommodation providers that with affect from September 20, 2007 all passengers
using desk check-in facilities will be requiredenable Ryanair to pay a charge of EUR3/GBP2 per
flight.
For car rental services,offer camping, hostel, bed-and-breakfast, guesthouse, villa and apartment accommodation to its customers. In addition Ryanair has a contract with the Hertz Corporation ("Hertz"(“Hertz”), pursuant to which Hertz handles all automobile-related aspects of
suchcar rental services marketed through Ryanair’s website or telephone reservation system. Hertz pays a per-passenger fee to Ryanair. Ryanair also sells cruises online and bus and rail tickets onboard its aircraft and through its website. Costa Cruises handles all cruise bookings made via Ryanair’s website and pays Ryanair a per-rentalfixed fee.
Ryanair sells gift vouchers on its website. Such gift vouchers are also redeemable online. In May 2009, Ryanair started to offer its passengers the possibility of receiving an SMS (text message) when booking, at a fee of £1 or €1, to Ryanair.com (or other relevant
reservations agent) as well asinform them of their flight confirmation details.
In April 2009, Ryanair signed a set amountcontract with Webloyalty International Ltd, which offers Ryanair’s customers who have a UK, German or French billing address a retail discount and cash-back programme. In February 2009, Ryanair introduced Google Adsense to its search results pages in order to monetize the traffic levels that those pages generate. In March 2009, Ryanair for marketing support.
expanded further into the area of third-party Internet advertising with the introduction of third-party display advertising on the homepages in the UK and Ireland.
Ryanair also receives a commission on all Hertz car rentals booked through the
Ryanair.com website.
For hotel services, Ryanairhas entered into a five-year contract in March 2007
with Expedia Private Label ("Expedia"),agreements pursuant to which Expedia handles all
aspects of such services and pays a commission fee to Ryanair.
Management believes that providing these services through the internet
allows Ryanair to increase sales, while at the same time reducing costs on a
per-unit basis. Ryanair also acts as an agent for MBNA and Barclaycard, both
issuers of Visa credit cards. As part of its agreements with MBNA and
Barclaycard, RyanairCompany promotes a Ryanair-branded credit card suppliedcards issued by MBNA, GE Money and BarclaycardBanco Santander onboard its aircraft and on boardits Internet site. The MBNA agreement relates to Irish residents only, the aircraft, on Ryanair's internet site,GE Money agreement relates to Swedish and via direct
marketing atPolish residents only and the airports served by Ryanair in the U.K. and Ireland.Banco Santander agreement relates to UK residents only. Ryanair generates revenuesrevenue from MBNA, GE Capital and BarclaycardBanco Santander on the basis of the number of cards issued and the revenues generated through the use of the credit cards.
In August 2006,April 2008, Ryanair entered into a letter of intentcontract with On Air, a provider of mobile voice and data solutions for aircraft, for the provision of an in-flight communications service that will allowallowed Ryanair passengers to use mobile phone and electronic communication devices such as Blackberries whilst on
board™ while onboard Ryanair aircraft. Ryanair will pay a fee for the equipment and bearbore the cost of its installation on Ryanair aircraft and will receiveaircraft. Ryanair received commissions on mobile calls (as well as onmade and text messages and email messages) madeemails sent using the service, which will bewere billed to customers based on international roaming rates. SubjectOn March 29, 2010, On Air notified Ryanair of its intention to regulatory approval,terminate the contract. Ryanair expects to launch a six-month trial ofwas pleased with the system by March 31, 2008. Ifperformance and passenger usage and had notified On Air of its wish to roll out the trial is successful,service across the entire fleet. On Air was unwilling to commit to this expense and exercised its right to terminate. Ryanair plans to install
this equipmentinvite other providers of similar services to tender for the business.
Ryanair has recently commenced a rollout of handheld Electronic Point of Sale (“EPOS”) devices across its route network. These EPOS devices will replace the existing manual and paper based systems on allboard the aircraft. The EPOS device will enable cabin crew to sell and record their on-board sales transactions more efficiently and generate vastly improved management sales reporting. The device will also be able to issue bus and rail tickets and will replace the existing manual ticket systems. Management expects to complete the rollout of its aircraft.
See "Item 5. Operating and Financial Review and Prospects-Resultsthe EPOS devices by the end of Operations-Fiscal Year 2007 Compared with Fiscal Year 2006-Ancillary Revenues"
for additional information.
32
General
As part of its commitment to safety, Ryanair endeavors to hire qualified maintenance personnel, provide proper training to such personnel, and maintain its aircraft in accordance with European industry standards. While Ryanair seeks to maintain its fleet in a cost-effective manner, management does not seek to extend Ryanair'sRyanair’s low-cost operating strategy to the areaareas of maintenance, training or quality control.
Ryanair's
Ryanair’s quality assurance department deals with the overall oversight of all maintenance activities in accordance with Part 145, the European regulatory
standard for aircraft maintenance and standards established by the145. The European Aviation Safety Agency (EASA). EASA(“EASA”), which established Part 145, came into being on September 28, 2003, through the adoption of Regulation (EC) No. 1592/2002 of the European parliament,Parliament, and its standards superseded the previous Joint Aviation Authority (JAA) requirements (or "JARs," which were developed and adopted by the JAA, an
associated body of the European Civil Aviation Conference, formed to enhance
co-operation between the national civil aviation authorities of participating
European countries, including Ireland).(“JAA”) requirements. See "--Government Regulation--Regulatory“—Government Regulation—Regulatory Authorities."
”
Ryanair is itself an EASA Part 145-approved maintenance contractor and provides its own routine aircraft maintenance and repair services on its
aircraft other than scheduled heavy maintenance.services. Ryanair also performs certain checks on its aircraft, including pre-flight, daily, and transit checks at some of its bases, as well as A-checks at its Dublin, facility.London (Stansted), Glasgow (Prestwick) and Bremen facilities. Since December 2003, Ryanair has operated a new two-bay hangar facility at its base at Glasgow (Prestwick) in Scotland, where it carries out both A-checks and C-checks on the fleet of Boeing 737-800 aircraft. The facility is capable of performingperforms two C-checks per week, enabling Ryanair to perform the majoritymost of the heavy maintenance that is currently required on its Boeing 737-800 fleet in-house. Ryanair also expects to complete the construction of a new three-bay maintenance hangar at Glasgow (Prestwick) airport by October 2010, which should accommodate some heavy maintenance work.
Ryanair opened a five-bay hangar and stores facility at its London (Stansted) airport base in October 2008 to allow Ryanair to carry out additional line maintenance on its expanding fleet. This facility also incorporates two flight simulator devices with space and provisions for two more, together with a cabin crew trainer and associated training rooms. Ryanair carries out checks and line maintenance in its single-bay aircraft hangar facility in Bremen. Ryanair has recently entered into a 30-year sole-tenancy agreement with Frankfurt (Hahn) airport to occupy a two-bay hangar and stores facility that also incorporates a two-bay simulator-training center. This facility is undergoing construction. It is expected to be completed by January 2011, allowing Ryanair to carry out additional line maintenance.
Maintenance and repair services that may become necessary while an aircraft is located at onesome of the other airports served by Ryanair are provided by other Part 145-approved contract maintenance providers. Aircraft return each evening to Ryanair'sRyanair’s bases, where they are examined by Ryanair'sRyanair’s approved engineers (or,or, in the case of Brussels (Charleroi), Stockholm (Skvasta), Rome (Ciampino), Frankfurt (Hahn), Milan (Bergamo), Marseille, Barcelona (Girona), Madrid, Alicante, Dusseldorf (Weeze), Kaunas, Bristol, Brindisi, Bari, Pescara, Trapini, Bologna and Liverpool,Cagliari, by local Part 145-approved companies).
companies.
Heavy Maintenance
As noted above, while Ryanair is nowcurrently has sufficient capacity to be able to carry out the majorityall of the routine maintenance work required on its Boeing 737-800 fleet itself,itself. However, Ryanair occasionally contracts with outside maintenance providers for some heavy maintenance services that it cannot accommodate in house.its own facilities. In particular, Ryanair currently hasenters into short-term, ad hoc contracts with reputable Part 145-approved suppliers of heavy maintenance in the U.K. and Europe, such as ATC Lasham, for the carrying-out of the heavy maintenance overhauls currently required on its relatively new fleet.
Ryanair is now lookinghas entered into a contract to replicate thebuild a new three-bay maintenance facilityhangar at Glasgow Prestwick(Prestwick) airport to provideaccommodate the additional heavy maintenance capacityrequirements that it expects to arise beginning in winter 2010 due to the aging and expansion of its fleet. This facility is already under construction and is looking at a number of potential sites in
Eastern Europe.
expected to be completed by October 2010, as is noted above.
Ryanair contracts out engine overhaul service for theits Boeing 737-800 aircraft to GEGeneral Electric Engine Services of Cardiff, Wales, a Part 145-approved contractor, pursuant to a 10-year agreement with an option for a 10-year extension, signed in 2004. This comprehensive maintenance contract provides for the repair and overhaul of the CFM56-7 series engines fitted to the first 155 of Ryanair'sRyanair’s Boeing 737-800 aircraft, the provisionrepair of spare parts and general technical support for the fleet of engines. By the end of the third quarter of 2007,On June 30, 2008, the Company expects
to finalizefinalized a contract for a similar level of coverage and support for the engines on all of its aircraft that have been or are scheduled to be delivered as well as any option aircraft delivered pursuant to the Company'sCompany’s current contracts with Boeing over the period through December 2011.November 2012. General Electric Engine Services mainly uses its Part 145-approved repair facility in Cardiff, Wales for this work, but also uses the KLKM Part 145-approved facility in Amsterdam, and occasionally its Part 145-approved facility in Celma, Brazil. By contracting with experienced Part 145-approved maintenance providers, management believes it is better able to controlensure the quality of its aircraft and engine maintenance. Ryanair assigns a Part 145-certified mechanic to oversee all heavy maintenance and to authorize all engine overhauls performed by third parties. Maintenance providers are also monitored closely by the national authorities under EASA and national regulations.
33
Ryanair expects to be dependent on third-partyexternal service contracts,contractors, particularly for engine and component maintenance, for the foreseeable future, notwithstanding the additional capabilities provided by its maintenance facilityfacilities at Glasgow (Prestwick), London (Stansted) and Frankfurt (Hahn). See "Item“Item 3. Key Information-Risk Factors-RisksInformation—Risk Factors—Risks Related to the Company-TheCompany—The Company Is Dependent on Third PartyExternal Service Providers."
”
SAFETY RECORD
During its 22-year operating history,
Ryanair has not had a single incident
involving major injury to passengerspassenger or flight crew. Ryanair'screw fatality in its 25-year operating history. Ryanair demonstrates its commitment to safe operations is manifested bythrough its safety training procedures, its investment in safety-related equipment, and theits adoption of an internal confidential reporting system for safety issues. The Company'sCompany’s board of directors also has an air safety committee to review and discuss air safety and related issues. Ryanair'sMichael Horgan, a Company director, is the chairman of this committee and reports to the board of directors.
Ryanair’s flight training is oriented towards accident prevention and covers all aspects of flight operations. Ryanair maintains full control of the content and delivery of all of its flight crew training, bothincluding initial, recurrent, and recurrent.upgrade phases. All training programs are approved by the Irish Aviation Authority (the "IAA"“IAA”), which regularly audits both operation control standards (JAR-OPS)
and flight crew training standards (JAR-FCL).
for compliance with EU legislation.
All of the Boeing 737-800s whichthat Ryanair has bought or committed to buy are certified for Category IIIA landings (automatic landings with minimum horizontal visibility of 200 meters and no vertical visibility).
Ryanair has a comprehensive and documented safety management system. Management encourages flight crews to report any safety-related issues through the SAIR (SafetySafety Alert Initial Report)Report reporting program or to use the confidential reporting system, (RCRS) which is available online through Ryanair's Flight
Safety Offices.Ryanair’s Crewdoc system. The confidential reporting system affords flight crews the opportunity to report directly to senior management any event, error, or discrepancy in flight operations that they do not wish to report through standard reporting channels. The confidential reporting system is designed to increase management'smanagement’s awareness of problems that may be encountered by flight crews in their day-to-day operations. Management uses the information reported through all reporting systems to modify operating procedures and improve flight operation standards.
Ryanair has installed an OFDM (OperationalOperational Flight Data Monitoring)Monitoring (OFDM) system on each of its Boeing 737-800 aircraft, which automatically provides a confidential report on deviations from normal operating procedures detected during the procedures followed by pilots.course of each flight. The purpose of this programsystem is to monitor operational trends and inform Ryanairmanagement of any instance of an operational limit being exceeded. Based on an analysis ofBy analyzing these reports, Ryanairmanagement is able to identify undesirable trends and potential areas of risk, andso as to take steps to rectify anysuch deviations, from
normal operating procedures, thereby ensuring adherence to ourRyanair’s flight safety standards.
In November 2008, a Ryanair aircraft suffered a multiple bird strike during its final approach to Rome (Ciampino) airport. This incident caused substantial damage to the aircraft, which resulted in an insurance claim being filed in respect of this aircraft. The damage that it suffered was such that the aircraft was not repaired. It is scheduled as a “disposal” in the table on page 51, although Ryanair has retained ownership of it for certain parts and for training purposes.
Airport Handling Services
Ryanair provides its own aircraft and passenger handling and ticketing services at Dublin Airport. Third parties provide these services to Ryanair at themost other airports it serves. Servisair plc provides Ryanair'sRyanair’s ticketing, passenger and aircraft handling, and ground handling services at many of these airports in Ireland and the U.K., excluding (excluding London (Stansted) (whereAirport where these services are
34
authority,authorities, either directly or through sub-contractors. Management attempts to obtain competitive rates for such services by negotiating multi-year contracts at fixed prices, although some
may have periodic increases linked to inflation.prices. These contracts are generally scheduled to expire in one to five years, unless renewed, and certain of them may be terminated by either party before their fixed termexpiry upon prior notice. Ryanair will need to enter into similar agreements in any new markets it may enter. See "Item“Item 3. Key Information-Risk Factors-RisksInformation—Risk Factors—Risks Related to the Company-TheCompany—The Company Is Dependent on Third PartyExternal Service Providers."
”
During 2009, Ryanair introduced Internet check-in for all passengers and also introduced kiosks at certain bases for the provision of other payment services. The Company has these kiosks in operation at London (Stansted), Frankfurt (Hahn), Belfast, Girona (Barcelona), Glasgow (Prestwick), Pisa, Dusseldorf (Weeze), Marseille, Edinburgh, Brussels (Charleroi), Bristol, Birmingham, Dublin, Milan (Bergamo), Bremen, Cagliari, Rome (Ciampino), Faro and Kerry. The introduction of Internet check-in and kiosks combined with the reduction in the number of bags carried by passengers, are expected to enable Ryanair to achieve further reductions in airport handling costs.
Airport Charges
As with other airlines, Ryanair is assessedmust pay airport charges each time it lands and accesses facilities at the airports it serves. Depending on the policy of the individual airport, such charges can include landing fees, passenger loading fees, security fees and parking fees. Noise surcharges have also been
imposed by a limited number of European airports in response to concerns
expressed by local residents. Ryanair attempts to negotiate advantageous terms
for suchdiscounted fees by delivering annual increases in passenger traffic, and opts, when practicable, for less expensive facilities, such as less convenient gates as well asand the use of outdoor boarding stairs rather than more expensive jetways. Nevertheless, there can be no assurance that the airports Ryanair uses will not impose higher airport charges in the future and that any such increases would not adversely affect the Company'sCompany’s operations.
With respect to Ryanair’s bases in Ireland, the DAA has recently completed a second terminal (“Terminal 2”) at Dublin Airport. When this was first announced, the DAA estimated that the proposed expansion would cost between €170 million and €200 million. Ryanair supported a development of this scale; however, in September 2006, the DAA announced that the construction of Terminal 2 would cost approximately €600 million. Subsequently, the cost of the new infrastructure rose in excess of €1.2 billion. Ryanair opposed this expansion at what it believed to be an excessive cost.
The Irish Commission for Aviation Regulation (the "CAR")CAR is currently responsible for regulating charges at Dublin Airport. In August 2001, the CAR
issued a determination in relation to charges which were to remain in effect for
five years, beginning September 24, 2001. The base charges for 2002 were
approximately 5% lower than the charges previously in effect, and an efficiency
factor (RPI-X) provides that the charges will decrease by the efficiency factor
minus the level of inflation in Ireland. The maximum charges permitted to be
levied at Dublin Airport remained essentially unchanged from calendar 2003 to
2005. However, in late September 2005, the CAR approved an increase in airport charges of more than 22%, to take effect on (effective January 1, 2006.2006). On March 30, 2006, following an appeal by the DAA, charges at Dublin Airport were increased by an additional 3%. On September 5, 2006, the CAR announced the launch of a public consultation to review and obtain feedback on the levels of airport charges at Dublin Airport. In September 2007, the CAR announced its decision not to change the cap on airport charges but appeared to allow approximately €1.2 billion of additional planned capital expenditures (including approximately €800 million for the new terminal) to be counted towards the regulated asset base, enabling the DAA to
substantially increase charges from 2010 onwards. Ryanair is vigorously opposedchallenged this decision in the Irish High Court but was unsuccessful. The High Court did, however, confirm that the CAR’s decision was a “determination” within the meaning of the Aviation Regulation Act 2001 and that Ryanair was therefore entitled to these increasesappeal this decision to an Independent Appeals Panel established by the Minister for Transport.
In December 2008, the Appeals Panel issued its decision in charges;
however,which it criticized the CAR for its “passive approach” to regulating the DAA monopoly and found that the new terminal (Terminal 2) was “considerably oversized” and that DAA should have to bear the full risk for that over-sizing. Despite the Appeals Panel’s findings, the CAR has refused to reduce airport charges.
In December 2009, the CAR issued its decision on charges at Dublin Airport for 2010-2014 and as a result, airport fees per departing passenger increased by 27% in May 2010, from €13.61 to €17.23, and could increase by up to 8.0% in November 2010 to €18.64 following the opening of Terminal 2 in November 2010 and by up to a further 12.0% in January 2011 to €20.88. However, the Appeals Panel, following a request from Ryanair, ruled on June 2, 2010, that the CAR should introduce differential pricing for the use of the existing Terminal 1 and the new Terminal 2. The CAR must decide whether to introduce such pricing by August 2, 2010.
In June 2009, Ryanair announced that it was reducing its fleet at Dublin Airport to 17 by summer 2009, 16 by winter 2009, 15 by summer 2010 and 12 by winter 2010 (down from 22 in summer 2008 and 20 in winter 2008), as a result of rising airport charges and the introduction of an Air Travel Tax of €10 on all passengers departing from Irish airports on routes longer than 300 kilometers. Excluding the planned reduction by winter 2010, these increases,reductions have been carried out. The introduction of the aforementioned €10 tax has likely had a negative impact on the number of passengers traveling to and from Ireland. The DAA has reported that passenger volumes fell by 13% in 2009 and by a further 14% in the period to June 2010, in each case compared to the prior-year numbers. Ryanair believes that this is partly reflective of the negative impact of the tax on Irish travel. Ryanair has called for the elimination of the tax to stimulate tourism during the recession. The Company increasedhas cited the example of the Dutch government, which withdrew its travel tax with effect from July 1, 2009. The Dutch travel tax had ranged from €11 for short-haul flights to €45 for long-haul flights and had resulted in a significant decline in passenger volumes at Schiphol Airport, Holland’s main airport, according to data published by the airport. The German government has also announced that it plans to introduce a passenger tax in 2010 for all departing passengers, however, to date, no details on the amount of airport charges added to its base fares and, accordingly, does not anticipate
any material adverse impact on the Company's financial results. In July, 2007,
the CAR made its decision on its review of airport charges and held that there
would be no further increase until the next review in 2009. this charge have been published.
In March 2007, the discount arrangement formerly in place at London Stansted(Stansted) airport terminated, subjecting Ryanair to an average increase in charges of approximately 100%. Ryanair believes that theThe increase in these charges, which will bewas passed on in the form of a higher cost of travel, will haveticket prices, had a negative impact on yields and passenger volumes.volumes in the winter, resulting in Ryanair’s decision to ground seven aircraft. Ryanair has responded to the increases by complaining tofiling complaints with the U.K. Office of Fair Trading (“OFT”) and the U.K. Competition Commission (“Competition Commission”), calling for the break-up of the British Airports Authority plc ("BAA"(“BAA”) airports monopoly and the introduction of competition in the London airports market. In July 2004,The OFT referred the Irish government enactedmatter to the State Airports Act 2004 (the
"State Airports Act"), which contemplatesCompetition Commission, whose preliminary findings were released in April 2008. The Competition Commission found that the break upcommon ownership by BAA of Aer Rianta, the former
Irish Airport Authority, into three competingmain airports at Dublin, Cork,in London affects competition and Shannon managed by independent airport authorities under state ownership. Under
the State Airports Act, Aer Rianta was re-named as the DAA as of October 1,
2004.
On February 12, 2004, the European Commission ruled that certain
concessions granted to Ryanaira “light touch” approach by the Walloon GovernmentCivil Aviation Authority was adversely impacting competition. The Competition Commission subsequently ordered the break-up of BAA, a reorganization that will require the sale of both London (Gatwick) and London (Stansted) airports and either Glasgow or Edinburgh Airport in connection with its
operations in Brussels (Charleroi) constituted illegal state aid. Ryanair is
still waitingScotland. In October 2009, London (Gatwick) was sold to Global Infrastructure Partners for a hearing of its appeal of£1.5 billion. In February 2010, this decision by the Competition Commission was quashed by the Competition Appeal Tribunal, and the quashed ruling was appealed by the Competition Commission and Ryanair to the European Court of First Instance. The Walloon Region also initiated proceedingsAppeals. This appeal was heard in 2005 to
35
recover start-upJune 2010 and a judgment is expected in the summer of 2010. In the meantime, however, costs that had been reimbursed to Ryanair in connection with
its establishment of the Charleroi base. This case is pending before the Irish
High Court. Several competing airlines have challenged other agreements between
Ryanair and publicly owned airports. Air France challenged Ryanair's agreement
with Strasbourg Airport, leading to the cancellation of theat London to Strasbourg
route. In July 2006, Air France announced that it was challenging Ryanair's
arrangement with Marseille Airport for the use of a low-cost facility. A
competing airline in Germany has challenged Ryanair's agreement with Hamburg
Lubeck Airport, even though this airport is now privately owned and offering the
same arrangements to Ryanair and all other airlines. There have also been
complaints by competitors regarding Ryanair's arrangements with Shannon Airport,
Alghero Airport and Frankfurt (Hahn) Airport. In July 2007, the European
Commission announced that it had started investigations of agreements at the
Lubeck, Tampere, Berlin (Schonefeld) and Dortmund airports. Ryanair has
relatively limited operations to and from the first three airports and does not
operate flights to or from Dortmund. See "Item 3. Risk Factors--Risks Related to
the Company--The Company Is Subject to Legal Proceedings Alleging Unlawful State
Aid at Certain Airports" and "Item 8. Financial Information--Other Financial
Information--Legal Proceedings."
(Stansted) remain high.
Following the December 2003 publication of the U.K. government'sgovernment’s White Paper on Airport Capacity in the Southeast of England, the BAA in 2004 announced plans to spend up to U.K. GBP4£4 billion on a multi-year project to construct a second runway and additional terminal facilities at London Stansted Airport,(Stansted) airport with a target opening date of 2013. The project is subject to regulatory
approvals and pending legal challenges, and remains in the planning stage.
Ryanair and other airlines using StanstedLondon (Stansted) support the principle of a second runway at StanstedLondon (Stansted), but are opposed to this profligate development because they believe that the financing of what they consider to be an overblown project will lead to airport costs approximately triplingdoubling from current levels. Following the current level. Any such
increase could meanfinal decision of the U.K. Competition Commission forcing BAA to sell London (Stansted), it is highly unlikely that low-fares airlinesBAA’s planned £4 billion program will not be able to grow at Stansted
and their existing operations could be at risk. BAA has failed to consult with
users of Stansted on the project,proceed, and Ryanair intends to oppose these attempts
by BAAwork with the new owners to proceed with a U.K.GBP4 billion project when, in Ryanair's opinion, a
second runway and a terminal extension should not cost more than U.K.GBP1
billion.develop appropriate low-cost facilities. The recently elected Liberal/Conservative U.K. Office of Fair Trading announced in July 2006government has also outlined that it would
investigate BAA's dominant position in London and other markets in the U.K. The
U.K. Office of Fair Trading has recognized flaws in relevant regulatory
processes and has referred the matter to the U.K. Competition Commission. As
part of its submissions to the U.K. Office of Fair Trading and the Competition
Commission, Ryanair has called for the break-up of BAA.
In September 2006, the DAA announced that it was planning to build a new
terminal (Terminal 2) at Dublin airport at a cost of approximately EUR400
million and spend approximately another EUR400 million upgrading the existing
Terminal 1. million. On August 29, 2007 the planning authority approved a
planning application from the DAA forwill not approve the building of Terminal 2 and other
facilities subjectany more runways in the southeast of England.
Ryanair announced on July 21, 2009 that, as a result of the U.K. government’s then £10 APD tourist tax (as well as the then scheduled increase in APD from £10 to a capacity restriction of 32 million passengers£11, which occurred in November 2009) and the buildinghigh costs of operating at its London (Stansted) base, it would implement a second runway subject40% reduction in capacity at such base between October 2009 and March 2010. In particular, the Company announced its intention to certain limitsreduce its London (Stansted)-based aircraft from the then current 40 to its hours24 during the aforementioned period, and also reduce by 30% the number of operation.weekly Ryanair flights to and from the airport. The approval will meanCompany announced at that time that it expected these cuts to result in 2.5 million fewer passenger trips during the period. In addition, on June 29, 2010, due to the continuance of the U.K. government’s £11 APD tourist tax and high charges at Dublin Airport will increase
significantly, possibly doublingLondon (Stansted) airport, the Company announced that capacity at London (Stansted) airport would be reduced from their current level.winter 2010 by 17% and the number of aircraft based at London (Stansted) would be reduced from 24 to 22. Ryanair plans to seekalso noted that, as a judicial reviewresult of other capacity reductions at its U.K. bases except for the planning approval. However there can be no assurance
that this appeal will be successful. The doubling of airport charges,bases at Edinburgh and Leeds Bradford, its total U.K. capacity would fall by 16% in the event ofperiod from November 1, 2010 to March 31, 2011. See “Item 3. Risk Factors—Risks Related to the failure of a judicial review, could have an adverse impactCompany—Ryanair’s Continued Growth is Dependent on yields and passenger volumes at Dublin Airport. 35
Access to Suitable Airports; Charges for Airport Access are Subject to Increase.” See also “Item 8. Financial Information—Other Financial Information—Legal Proceedings—EU State Aid-Related Proceedings” for information regarding legal proceedings in which Ryanair’s economic arrangements with several publicly owned airports are being contested.
The cost of jet fuel accounted for 39.3%34.1% and 34.5%43.8% of Ryanair'sRyanair’s total operating expenses in the fiscal years ended March 31, 20072010 and 2006,2009, respectively in(in each case, this accounts for costs after giving effect to the Company'sCompany’s fuel hedging activities but excludingexcludes de-icing costs. Jetcosts, which accounted for 1.2% and 0.8% of total fuel costs increased substantially in the fiscal years ended March 31, 20072010 and 20062009, respectively). Jet fuel costs experienced substantial variance in the fiscal years ended March 31, 2010 and are currently near
historically high levels.2009. The future availability and cost of jet fuel cannot be predicted with any degree of certainty, and because of Ryanair'sRyanair’s low-fares policy limits its ability to pass on increased fuel costs to passengers through increased fares or otherwisefares. Jet fuel prices are dependent on crude oil prices, which are quoted in U.S. dollars. If the value of the U.S. dollar, which has been depressed (in historical terms) in recent years, rises against the euro, Ryanair’s fuel costs, expressed in euro, may be limited.
increase even absent any increase in the U.S. dollar price of crude oil. Ryanair has also entered into foreign currency forward contracts to hedge against some currency fluctuations. See “Item 11. Quantitative and Qualitative Disclosures About Market Risk—Foreign Currency Exposure and Hedging.”
Ryanair has historically entered into arrangements providing for substantial protection against fluctuations in fuel prices, generally through forward contracts covering 12-18periods of up to 18 months of anticipated jet fuel requirements. In
light of theRyanair (like many other airlines) has, in more recent significant and unpredictable increases in oil prices, the
Company now entersperiods, entered into any such hedging arrangements on a much more selective basis. As of July 19, 2010, Ryanair had entered into forward jet fuel (jet kerosene) contracts covering approximately 90% of its estimated requirements for the fiscal year ending March 31, 2011 at prices equivalent to approximately $730 per metric ton. In addition, as of July 19, 2010, Ryanair had entered into forward jet fuel (jet kerosene) contracts covering approximately 90% of its estimated requirements for the period from April 2011 to September 2011 at prices equivalent to approximately $755 per metric ton. See "Item“Item 3. Key Information—Risk Factors-RisksFactors—Risks Related to the Company-ChangesCompany—Changes in Fuel Costs and Fuel Availability Affect the Company's Results"Company’s Results and "ItemIncrease the Likelihood that the Company May Incur Losses” and “Item 11. Quantitative and Qualitative Disclosures About Market Risk-FuelRisk—Fuel Price Exposure and Hedging"Hedging” for additional information on recent trends in fuel costs and the Company'sCompany’s related hedging activities, as well as certain associated risks. See also "Item“Item 5. Operating and Financial Review and Prospects-FiscalProspects—Fiscal Year 20072010 Compared with Fiscal Year 2006-Fuel2009—Fuel and Oil."
”
The following table details Ryanair'sRyanair’s fuel consumption and costs for scheduled operations (thus excluding fuel(i.e. it excludes costs related to now-discontinued
charter operations and de-icing costs),de-icing) after giving effect to the Company'sCompany’s fuel hedging activities for the fiscal years ended March 31, 2007, 20062010, 2009 and 2005.2008. The excluded de-icing costs amounted to EUR4,667,362, EUR6,090,400€11.6 million, €9.7 million, and EUR4,726,830,€5.5 million, respectively, for the fiscal years ended March 31, 2007, 20062010, 2009 and 2005.2008. De-icing costs, which are costs incurred for the labor and anti-freeze used to de-ice aircraft, have increased significantly in recent years as the Company'sCompany’s route network types of aircraft operated and number of sectors flown have increased; the Company therefore believes including these costs would
distort the year-to-year cost comparison.
increased.
| Fiscal Year ended March 31, | |||||||||
| 2010 | 2009 | 2008 | |||||||
Scheduled fuel consumption (millions of U.S. gallons) | 582.5 | 530.5 | 469.5 | ||||||
Available seat miles (ASM) (millions) | 53,469.6 | 47,102.5 | 41,342.2 | ||||||
Scheduled fuel consumption (U.S. gallons) per ASM | 0.011 | 0.011 | 0.011 | ||||||
Total scheduled fuel costs(a) (€ millions) | 882.3 | 1,247.3 | 785.8 | ||||||
Cost per U.S. gallon | € | 1.515 | € | 2.351 | € | 1.674 | |||
Total scheduled fuel costs as a percentage of total operating costs | 34.1% | 43.8% | 36.1% | ||||||
| (a) | Omits de-icing costs. |
Ryanair is exposed to potential catastrophic losses that may be incurred in the event of an aircraft accident or terrorist incident. Any such accident or incident could involve not onlycosts related to the repair or replacement of a damaged aircraft and its consequent temporary or permanent loss from service, but alsoservice. In addition, an accident or incident could result in significant potentiallegal claims ofagainst the Company from injured passengers and others.others who experienced injury or property damage as a result of the accident or incident, including ground victims. Ryanair currently maintains aviation third-party liability insurance, passenger liability insurance, employer liability insurance, directors and officers liability insurance, aircraft insurance for aircraft loss or damage, insurance for pilots' loss of license and other business insurance in amounts per occurrence that is consistent with industry standards. Although Ryanair currently believes its insurance coverage is adequate, therealthough not comprehensive. There can be no assurance that the amount of such coverage will not need to be increased, that insurance premiums will not increase significantly or that Ryanair will not be forced to bear substantial losses from accidents. Ryanair’s insurance does not cover claims for losses incurred when, due to unforeseen events, airspace is closed and aircraft are grounded, such as the airspace closures described on page 13, which resulted from volcanic ash in the northern European airspace during April and May 2010.
The cost of insurance coverage for certain third partythird-party liabilities arising from "acts“acts of war"war” or terrorism increased dramatically as a result of the September 11, 2001 terrorist attacks. In the immediate aftermath, aircraft hull
war-liabilityliability war indemnities for amounts above $50 million were, in the absence of any alternative coverage, provided by the Irish Government at pre-September 11, 2001 levels of coverage on the basis of a per-passenger surcharge. In March 2002, once such coverage was again commercially available, Ryanair arranged coverage to replace that provided by the Government indemnitygovernment indemnity. The replacement insurance coverage operated on the basis of a per-passenger surcharge andwith an additional surcharge based on hull values. Ryanair'sRyanair’s insurers have indicated that the scope of the Company'sCompany’s current war-related insurance coverage may exclude certain types of catastrophic incidents, which may result in the Company seeking alternative coverage. Ryanair to date has passed increased insurance costs on to passengers by means of a special "insurance levy"“insurance levy” on each ticket.
37
During the 2006 fiscal year, 2006, Ryanair established Aviation Insurance (IOM), Ltd
("AIL" Limited (“AIL”), a wholly owned insurance company subsidiary, to provide the Company with self-insurance as part of its ongoing risk-management strategy. AIL'sAIL’s activities are currently limited to underwriting a portion of the Company'sCompany’s aviation insurance program, which covers not only the Company'sCompany’s aircraft but also its liability to passengers and to third parties. AIL reinsures virtually all of the risk it underwrites with recognized third parties in the aviation reinsurance market, with the amount of AIL'sAIL’s maximum aggregate exposure not currently subject to such reinsurance agreements being equal to approximately U.S.$9.5$15.6 million.
Council Regulation (EC) No. 2027/97, as amended by Council Regulation (EC) No. 889/2002, governs air carrier liability. This legislation provides for unlimited liability of an air carrier in the event of death or bodily injuries suffered by passengers, implementing the Warsaw Convention of 1929 for the Unification of Certain Rules Relating to Transportation by Air, as amended by the Montreal Convention of 1999. This legislation also limits the ability of an
air carrier to rely on certain defenses in an action for damages, which would
otherwise have been available to it at law, and provides for uniform liability
limits for loss of, damage to or destruction of baggage and for damage
occasioned by delay. Ryanair has extended its liability insurance accordingly to meet the requirements of the legislation. You should read "ItemSee “Item 3. Key Information-Risk Factors- Information—Risk Factors—Risks Related to the Airline Industry-TheIndustry—The Company Faces the Risk of Loss and Liability"Liability” for information on the Company'sCompany’s risks of loss and liability.
38
The following are the principal properties owned or leased by the Company:
Location | Site Area (Sq. Meters) | Floor Space (Sq. Meters) | Tenure | Activity | ||||
Dublin Airport | 1,116 | 1,395 | Leasehold | Corporate Headquarters | ||||
Phoenix House, Conyngham Road, Dublin | 2,566 | 3,899 | Freehold | Administration Offices | ||||
Satellite 3, Stansted Airport | 605 | 605 | Leasehold | Sales Office and Operations Center | ||||
Dublin Airport (Hangar “EJT”) | 2,993 | 2,175 | Leasehold | Aircraft Maintenance | ||||
Dublin Airport (Hangar No. 1) | 1,620 | 1,620 | Leasehold | Aircraft Maintenance | ||||
East Midlands Airport | 3,890 | 2,801 | Freehold | Simulator and Training Center | ||||
East Midlands Airport | 2,045 | 634 | Leasehold | Training Center | ||||
Bremen Airport | 5,952 | 5,874 | Leasehold | Terminal and Aircraft Maintenance Hangar | ||||
Skvasta Airport (Hangar) | 1,936 | 1,936 | Leasehold | Aircraft Maintenance | ||||
Prestwick Airport (Hangar) | 4,052 | 4,052 | Leasehold | Aircraft Maintenance | ||||
Stansted Storage Facilities | 378 | 531 | Leasehold | Aircraft Maintenance | ||||
Dublin Airport Business Park | 955 | 749 | Leasehold | Administration Offices | ||||
Stansted Airport (Hangar) | 12,161 | 10,301 | Leasehold | Aircraft Maintenance Hangar and Simulator Training Centre |
Ryanair has agreements with the DAA, the Irish government authority charged with operating Dublin airport,Airport, to lease ticketbag-drop counters and other space at the passenger and cargo terminal facilities at Dublin Airport. The airport office facilities used by Ryanair at London Stansted(Stansted) are leased from the airport authority; similar facilities at each of the other airports Ryanair serves are provided by Servisair plc or other service providers.
Ryanair’s logo and the slogans "Ryanair.com“Ryanair.com The Low Fares Website"Website” and "Ryanair“Ryanair The Low Fares Airline"Airline” have been registered as Community Trade Marks ("CTM"(“CTMs”). Ryanair has also registered the CTM for the word “Ryanairhotels.com.” A CTM allows a trademark owner to obtain a single registration of its trademark, which registration affords uniform protection for that trademark in all EU member states. The registration gives Ryanair an exclusive monopoly over the use of its trade name with regard to similar services and the right to sue for trademark infringement should a thirdanother party use an identical or confusingly similar trade marktrademark in relation to identical, or similar services.
Ryanair has also registered the CTM for the word "Ryanair",
"Ryanairexpress.com", "Ryanairinns.com" and for "Ryanairhotels.com."
Ryanair has not registered either its name or its logo as a trademark in Ireland, as CTM
registrationCTM-registration provides all of the protection available from an Irish registration, and management believes there are therefore no advantages in making a separate Irish application.
Liberalization of the EU Air Transportation Market
Ryanair began its flight operations in 1985, during a decade in which the governments of Ireland and the U.K. liberalized the bilateral arrangements for the operation of air services between the two countries. In 1992, the Council of Ministers of the EU adopted a package of measures intended to liberalize the internal market for air transportation in the EU, includingEU. The liberalizations included measures allowingthat allow EU air carriers substantial freedom to set air fares, allowingprovided EU air carriers greatly enhanced access to routes within the EU, and introducingalso introduced a licensing procedure for EU air carriers. Beginning in April 1997, EU air carriers have generally been able to provide passenger services on domestic routes within any EU Member Statemember state outside their home country of operations without restriction. See also "--Industry Overview--European“—Industry Overview—European Airline Market."
39
The European Court of Justice in November 2002 ruled that bilateral
agreements between certain member states and the United States fell within the
exclusive competence of the EU and should not therefore have been entered into
by the member states individually. As a result of these rulings, the European
Commission was granted a mandate to negotiate with the United States to replace
the existing bilateral agreements between individual member states and the
United States with a single comprehensive EU-U.S. agreement establishing an open
aviation area between the two territories. In April 2007, the United State and
the EU concluded the Open Skies Agreement between them. This Agreement allows
any US airline and any EU airline to operate between any city in the US and any
city in the EU. This Agreement also allows these airlines to operate without
restriction in terms of the number of flights, aircraft, etc., and to set their
fares based on market demand.
”
Regulatory Authorities
As an Irish air carrier with routes to the U.K. and other EU countries,
Ryanair is subject to Irish and EU regulation, which is implemented primarily by the Department of Transport, the IAA, the JAAEuropean Commission, and the EASA. Management believes that the present regulatory environment in Ireland and the EU is characterized by an
increasedhigh sensitivity to safety and security issues, and an increased intensity
of reviewwhich is demonstrated by intensive reviews of safety-related procedures, training, and equipment by the national and EU regulatory authorities.
Commission for Aviation Regulation.Regulation. The CAR is currently primarily responsible for deciding maximum airport charges only at Dublin Airport. See "--Airport Operations--Airport Charges"“—Airport Operations—Airport Charges” above.
The CAR also has responsibility for licensing Irish airlines, subject to the requirements of EU law. It issues operating licenses under the provisions of CouncilEU Regulation 1008/2008 (formerly 2407/92.92). An operating license is an authorization permitting the holder to carry out carriage by air oftransport passengers, mail and/or cargo.cargo by air. The criteria for granting an operating license include,inter alia, an air carrier'scarrier’s financial fitness, the adequacy of its insurance, and the fitness of the persons who will manage the air carrier. In addition, in order to obtain and maintain an operating license, Irish and EU regulations require that (i) the air carrier must be owned and continue to be owned directly or through majority ownership by EU Member Statesmember states and/or nationals of EU Member Statesmember states and (ii) the air carrier must at all times be effectively controlled by such EU Member Statesmember states or EU nationals. The CAR has broad authority to revoke an operating license. See "Item“Item 10. Additional Information--LimitationsInformation—Limitations on Share Ownership by Non-EU Nationals."
Ryanair's current operating license was awarded effective December 1, 1993,
was reviewed” See also “Item 3. Key Information—Risk Factors—Risks Related to Ownership of the Company’s Ordinary Stock—EU Rules Impose Restrictions on November 30, 1999,the Ownership of Ryanair Holdings’ Ordinary Shares by Non-EU nationals and is subject to review and renewal each
year.
the Company has Instituted a Ban on the Purchase of Ordinary Shares by Non-EU Nationals” above.
The CAR is also responsible for deciding whether a regulated airport should be coordinated or fully coordinated under Council Regulation (EEC) No. 95/93 (as amended by Regulation (EC) No. 793/2004) on slots and for authorizing ground handling operations under Council Directive 96/67/EC and its implementing legislation. In April 2005, the CAR announced that Dublin Airport would be fully slot-coordinated beginning in March 2006. Ryanair successfully challenged this decision in the Irish High Court, and the decision was overturned in July 2006. In February 2007, the CAR re-imposed full coordination at Dublin Airport andAirport. Ryanair has again challenged this decision in the Irish High Court.Court, but subsequently withdrew the challenge. See "-Slots"“—Slots” below for additional information.information regarding this litigation.
Ryanair’s current operating license became effective on December 1, 1993, and is subject to periodic review. The Flight Operations Department is also subject to ongoing review by the Irish Aviation Authority (the IAA), which reviews the department’s audits, including flight audits, training audits, document audits, and quality audits. Ryanair’s current Air Operator Certificate No 05/2010 was issued on May 5, 2010.
Irish Aviation Authority.The IAA is primarily responsible for the operational and regulatory function and services relating to the safety and technical aspects of aviation in Ireland. To operate in Ireland and the EU, an Irish air carrier is required to hold an operator'soperator’s certificate granted by the IAA attesting to the air carrier'scarrier’s operational and technical competence to conduct an air serviceairline services with specified types of aircraft. The IAA has broad authority to amend or revoke an operator'soperator’s certificate, with Ryanair'sRyanair’s ability to continue to hold its operator'soperator’s certificate being subject to on-goingongoing compliance with applicable statutes, rules and regulations pertaining to the airline industry, including any new rules and regulations that may be adopted in the future.
40
The IAA is also responsible for overseeing and regulating the operations of Irish air carriers. Matters within the scope of the IAA'sIAA’s regulatory authority includeinclude: air safety,safety; aircraft certification,certification; personnel licensing and training,training; maintenance, manufacture, repair, airworthiness, and operation of aircraft,aircraft; implementation of JARs,EU legislation; aircraft noisenoise; and ground services. Each of the Company'sCompany’s aircraft has received an airworthiness certificateis required to have a Certificate of Airworthiness, which is issued by the IAA
and any additional aircraft the Company addsIAA. The validity of Certificates of Airworthiness is subject to the fleet will be required to
obtain an airworthiness certificate. These airworthiness certificates are issuedreview of a committee of the IAA. Each certificate is generally valid for a period12-month period. In March 2009, Ryanair received “Sub-Part (I) approval” from the IAA, which gives Ryanair the authority to extend the validity of 12 months, after which application for a further certificate
must be made.its certificates, subject to certain record checks and physical aircraft inspections being performed by Ryanair’s quality department. The Company'sCompany’s flight personnel, flight and emergency procedures, aircraft, and maintenance facilities are subject to periodic inspections and tests by the IAA. The IAA has broad and powerful regulatory and enforcement authority,powers, including the authority to require reports,reports; inspect the books, records, premises, and aircraft of a carriercarrier; and investigate and institute enforcement proceedings. Failure to comply with IAA Regulationsregulations can result in revocation of operating certification.
In July 1999, the IAA awarded Ryanair an air operator'soperator’s certificate, which is subject to routine audit and review, in recognition of Ryanair'sRyanair’s satisfaction of the relevant JAREU requirements for the operation of commercial air transport (“EU OPS 1”). The requirements of EU OPS 1 have been incorporated into European law as prescribed in Regulation (EEC) 3922/91 and were applied in full on July 16, 2008. All current regulatory requirements.
requirements are addressed in the Ryanair Operations Manual Part A (as amended). The current Manual, Issue 3 Revision 6, was approved by the IAA on March 4, 2010.
Department of Transport.Transport. The Department of Transport (“DOT”) is responsible for implementation of certain EU and Irish legislation and international standards relating to air transport e.g.(e.g., noise levels, aviation security, etc.).
In June 2005, the Minister for Transport enacted legislation strengthening rights for air passengers following the EU's passageenactment of EU legislation requiring compensation of airline passengers who have been denied boarding on a flight for which they hold a valid ticket (Regulation (EC) No. 261/2004), which came into force on February 17, 2005. See "Item“Item 3. Key Information—Risk Factors-RisksFactors—Risks Related to the Airline Industry-EUIndustry—EU Regulation on Passenger Compensation Could Significantly Increase Related Costs."
Joint Aviation Authorities. The JAA is an associated body of the European
Civil Aviation Conference representing civil aviation authorities of
participating European states who have agreed to co-operate in developing and
implementing common safety regulatory standards and procedures. The purpose is
to provide high and consistent standards of safety. The aim of the JAA is to
ensure that each individual Joint Aviation Requirement (JAR) becomes a uniform
code for all JAA member states without any national regulatory differences. EU
regulations provide for the harmonization of technical requirements and
administrative procedures on the basis of the JAR codes of the JAA and for the
acceptance of certification in accordance with common technical requirements and
administrative procedures.
”
The European Aviation Safety Agency.Agency. EASA is an agency of the EU whichthat has been given specific regulatory and executive tasks in the field of aviation safety. EASA was established through Regulation (EC) No. 1592/2002 of the European Parliament and the Council of July 15, 2002, on common rules in the
field of civil aviation and establishing a European Aviation Safety Agency.2002. The purpose of EASA is to draw-up common standards to ensure the highest levels of safety, oversee their uniform application across Europe and promote them at the global level. The EASA formally started its work on September 28, 2003, taking over the responsibility for regulating airworthiness and maintenance issues within the EU Member States.
In order to achieve continuity in the mutual acceptance and recognition of
certificates and approvals between EASA and non-EASA states, a framework has
been developed under which the JAA retains its functions and responsibilities in
operations and licensing, while acting as a service provider to EASA in
certification and maintenance.
41
Eurocontrol.The European Organization for the Safety of Air Navigation ("Eurocontrol"(“Eurocontrol”) is an autonomous European organization established under the Eurocontrol Convention of December 13, 1960. Eurocontrol is responsible for,inter alia, the safety of air navigation and the collection of route charges foren route air navigation facilities and services throughout Europe. Ireland is a party to several international agreements concerning Eurocontrol. These agreements have been implemented in Irish law, which provides for the payment of charges to Eurocontrol in respect of air navigation services provided for aircraft in airspace under the control of Eurocontrol. The relevant legislation imposes liability for the payment of any charges upon the operators of the aircraft in respect of which services are provided and upon the owners of such aircraft or the managers of airports used by such aircraft. Ryanair, as an aircraft operator, is primarily responsible for the payment to Eurocontrol of charges incurred in relation to its aircraft.
The legislation authorizes the detention of aircraft in the case of default in the payment of any charge for air navigation services by the aircraft operator or the aircraft owner, as the case may be. This power of detention extends to any equipment, stores or documents, which may be on boardonboard the aircraft when it is detained, and may result in the possible sale of the aircraft.
European Commission. The European Commission is in the process of introducing a "single“single European sky policy,"” which would bringlead to changes to air traffic management and control within the EU. The "single“single European sky policy"policy” currently consists of the Framework Regulation (Reg. (EC) No. 549/2004) plus three technical regulations on the provision of air navigation services, organization and the use of the airspace and the interoperability of the European air traffic management network. These regulations have recently been amended by the so-called “Single European Sky II” regulation (EU Regulation 1070/09). The objective of the policy is to enhance safety standards and the overall efficiency for generalof air traffic in Europe.
Europe, as well as to reduce the cost of air traffic control services.
On September 6, 2005, the European Commission announced new guidelines on the financing of both airports and start-up aid to airlines by certain regional airports based on the European Commission'sits finding in the Charleroi case, which Ryanaira decision that the CFI has appealed (and which appeal is currently pending in the
European Court of First Instance).since annulled. The guidelines only apply only to publicly owned regional airports, and place restrictions on the incentives that these airports can offer airlines to deliver traffic. The guidelines, however, apply only in cases
where the terms offered by a public airport are in excess of what a private
airport would have offered in a similar situation.However, Ryanair deals with airports,
both public and private, on an equal basis and receives the same cost deals from
both. Ryanair therefore considersbelieves that the guidelines willCFI’s annulment of the Charleroi decision severely undermines these guidelines.
The European Parliament and the European Council have no impactalso passed legislation on its
business. In January 2007, the Commission announced a draft Airports Charging
Directive which seeks to regulate airport charges (EU Directive 2009/12), which was originally intended to address abusive pricing at monopoly airports. However, the legislation includes all European airports with over 1five million passengers. Ryanairpassengers per year. Management believes that this will likely increase the administrative burdens on smaller airports and other airlines are opposedmay lead to higher airport charges, while the scope that exists within this legislation, which they believe should focus on monopolyDirective to address abuses of their dominant positions by Europe’s larger airports where strong
regulations are needed.
is very limited. See “Item 8. Financial Information—Other Financial Information—Legal Proceedings—EU State Aid-Related Proceedings.”
The European CommissionCouncil has proposedalso passed legislation calling for the
transparency ofin airline fares, which would requirerequires the inclusion of all mandatory taxes, fees, and charges in the advertised price.prices. Ryanair currently includes this information in its advertised fares in all markets where it operates.
Registration of Aircraft
Pursuant to the Irish Aviation Authority (Nationality and Registration of Aircraft) Order 2002 (the "Order"“Order”), the IAA regulates the registration of aircraft in Ireland. In order to be registered or continue to be registered in Ireland, an aircraft must be wholly owned by either (i) a citizen of Ireland or a citizen of another Member Statemember state of the EU having a place of residence or business in Ireland or (ii) a company registered in and having a place of business in Ireland and having its principal place of business in Ireland or another Member Statemember state of the EU and not less than two-thirds of the directors of which are citizens of Ireland or of another Member Statemember state of the EU. As of the date of this report, eight of the nineten directors of Ryanair Holdings are citizens of Ireland or of another Member Statemember state of the EU. An aircraft will also fulfill these conditions if it is wholly owned by such citizencitizens or companycompanies in combination.
42
particular,particular: (i) if the ownership requirements are not met,met; (ii) if the aircraft has failed to comply with any applicable safety requirements specified by the IAA in relation to the aircraft or aircraft of a similar typetype; or (iii) if the IAA decides in any case that it is satisfied that
it is inexpedientnot in the public interest for the aircraft to remain registered in Ireland.
Regulation of Competition
Competition/Antitrust Law.It is a general principle of EU competition law that no agreement may be concluded between two or more separate economic undertakings that prevents, restricts or distorts competition in the common market or any part of the common market. Such an arrangement may nevertheless be exempted by the European Commission, on either an individual or category basis. The second general principle of EU competition law is that any business or businesses having a dominant position in the EU common market or any substantial part of the common market may not abuse such a dominant position. Ryanair is subject to the application of the general rules of EU competition law as well as specific rules on competition in the airline sector (principally, Council
Regulation (EEC) 3975/87, as amended).
sector.
An aggrieved person may sue for breach of EU competition law in the courts of the Member Statesa member state and/or complain topetition the European Commission for an order to terminateput an end to the breach of competition law. The European Commission also may impose fines and daily penalties on businesses and the courts of the Member Statesmember states may award damages and other remedies (such as an injunction)injunctions) in appropriate circumstances.
Competition law in Ireland is primarily embodied in the Competition Act 2002. This Act is modeled on the EU competition law system. The Irish rules generally prohibit anti-competitive arrangements among businesses and prohibit the abuse of a dominant position. These rules are enforced either by public enforcement (primarily by the Competition Authority) through both criminal and civil sanctions or by private action in the courts. These rules apply to the airline sector, but are subject to EU rules that override any contrary provisionprovisions of Irish competition law. Ryanair has been subject to an abuse-of-dominance investigation by the Irish Competition Authority in relation to service between Dublin and Cork. The Competition Authority closed its investigation in July 2009 with a finding in favor of Ryanair.
State Aid.The EU rules control aid granted by Member Statesmember states to businesses on a selective or discriminatory basis. The EU Treaty prevents Member Statesmember states from granting such aid unless approved in advance by the EU. Any such grant of state aid to an airline is subject to challenge before the EU or, in certain circumstances, national courts. If aid is held to have been unlawfully granted it may have to be repaid by the airline to the granting Member State,member state, together with interest thereon. See "Item“Item 3. Key Information--Risk Factors--RisksInformation—Risk Factors—Risks Related to the Company-TheCompany—The Company Is Subject to Legal Proceedings Alleging Unlawful
State Aid at Certain Airports"Airports” and "Item“Item 8. Financial Information--OtherInformation—Other Financial Information--LegalInformation—Legal Proceedings."
”
Environmental Regulation
Aircraft Noise Regulations.Ryanair is subject to international, national and, in some cases, local noise regulation standards. EU and Irish regulations have required that all aircraft operated by Ryanair comply with Stage 3 noise requirements since April 1, 2002. All of Ryanair'sRyanair’s aircraft currently comply with these regulations. Certain airports in the U.K. (including London (Stansted)Stansted and London (Gatwick))Gatwick) and continental Europe have established local noise restrictions, including limits on the number of hourly or daily operations or the time of such operations.
43
Company Facilities.Environmental controls are generally imposed under Irish law through property planning legislation, specifically the Local Government (Planning and Development) Acts of 1963 to 1999, the Planning and Development Act 2000 and regulations made thereunder. At Dublin Airport, Ryanair operates on land controlled by the DAA. Planning permission for its facilities has been granted in accordance with both the zoning and planning requirements of Dublin Airport. There is also specific Irish environmental legislation implementing applicable EU Directivesdirectives and Regulations,regulations, to which Ryanair adheres to.adheres. From time to time, noxious or potentially toxic substances are held on a temporary basis within Ryanair'sRyanair’s engineering facilities at Dublin Airport, and
Glasgow (Prestwick) and London (Stansted). However, at all times Ryanair'sRyanair’s storage and handling of these substances complies with the relevant regulatory requirements. In ourAt Ryanair’s Glasgow (Prestwick) and London (Stansted) maintenance facility,facilities, all normal waste is removed in accordance with the Environmental Protection Act of 1996 and Duty of Care Waste Regulations. For special waste removal, Ryanair operates under the Special Waste Regulations 1998 (contaminated waste).1998. At all other facilities Ryanair adheres to all local and EU regulations.
Ryanair's
Ryanair’s Policy on Noise and Emissions.Ryanair is committed to reducing emissions and noise through investments in "next generation"“next generation” aircraft and engine technologies and the implementation of certain operational and commercial decisions to minimize the environmental impact of its operations. Ryanair is currently the industry leader in terms of environmental efficiency and is constantly working towards improving its performance.
In December 2005, Ryanair completed the fleet replacement program it commenced in 1999. All of Ryanair'sRyanair’s older Boeing 737-200A aircraft have beenwere replaced with Boeing 737-800 "next generation"“next generation” aircraft, and as of August 31,
2007, Ryanair now operates a single aircraft typesingle-aircraft-type fleet of Boeing 737-800 "next
generation"“next generation” aircraft with an average age of only 2.72.94 years. The design of the new aircraft is aimed at minimizing drag, thereby further reducing the rate of fuel burn and noise levels. The engines are also quieter and more fuel-efficient. Ryanair has a further 171 aircraft of this type on order from
Boeing and options on another 110. See "-Aircraft"“—Aircraft” above for details on Ryanair'sRyanair’s fleet plan.
Ryanair has completed the process of installingalso installed winglets on all of its existing aircraft and all future aircraft will also be fitted with winglets. Winglets reduce both the rate of fuel burn and carbon dioxide emissions by approximately 4% and also reduce noise emissions.
Furthermore, by moving to an all Boeing 737-800 "next generation"“next generation” fleet, Ryanair has reduced the unit emissions per passenger due to the inherent capacity increase in the Boeing 737-800 aircraft. The Boeing 737-800 "next
generation"“next generation” aircraft have a significantly superior fuel burnfuel-burn to passenger-kilometer ratio than Ryanair'sRyanair’s former fleet of Boeing 737-200A aircraft.
In addition, Ryanair has distinctive operational characteristics that management believes are helpful to the general environment; it:
o environment. In particular, Ryanair:
operates with a high-seat density of 189 seats and an all-economy configuration, as opposed to the 162 seats and two-class configuration of the Boeing 737-800 aircraft used by traditional network airlines, reducing fuel burn and emissions per seat-kilometer flown;
o
has reduced per-passenger emissions through higher load factors;
o
better utilizes existing infrastructure by operating out of underutilized secondary and regional airports throughout Europe, which limits the use of holding patterns and taxiing times, thus reducing fuel burn and emissions and reducing the need for new airport infrastructure;
o
provides direct services as opposed to connecting flights, in order to limit the need for passengers to transfer at main hubs and thus reducereduces the number of take-offs and landings per journey from four to two, reducing fuel burn and emissions per journey; and
44
o
has no late nightlate-night departures of aircraft, reducing the impact of noise emissions.
Emissions Trading. The On November 19, 2008, the European Commission has forwarded proposalsCouncil of Ministers adopted legislation to include air transportation inadd aviation to the EuropeanEU Emissions Trading Scheme ("ETS")as of 2012. This scheme, which has thus far applied mainly to energy producers, is a cap-and-trade system for CO2 emissions to encourage industries to improve their CO2 efficiency. Under the European Parliamentlegislation, airlines will be granted initial CO2 allowances based on historical “revenue ton kilometers” and a CO2 efficiency benchmark. Any shortage of allowances will have to be purchased in the Councilopen market and/or at government auctions. The cost and amount of Ministers. The ETSsuch allowances that Ryanair will have to buy in 2012 have yet to be determined. Management believes that this legislation is likely to result in the imposition of an "emission levy" on airlines, particularly on
those that have already heavily invested in cleaner aircraft technology and more
efficient operations, as they will have much less ability to further reduce
emissions in a cost effective manner. Ryanair believes that this additional cost
imposed on airlines will increase fares and damage the competitiveness of the
industry.
Ryanair and the European Low Fares Airline Association (ELFAA) have callednegative impact on the European Commission to conduct a proper cost/benefit analysis before
proceeding with any legislative proposals that could impose significant costs on
the airline industry. Ryanair takes its environmental responsibilities seriously and intends to continue to improve its environmental efficiency and to minimize emissions.
Ryanair believes that the application of the ETS will only increase airline
costs without having any material benefit to the environment.
Fuel Taxes/Emissions Levies.Levies. Ryanair is fundamentally opposed to the introduction of any fuel tax or emissions levy. Ryanair has and continues to offer the lowest fares in Europe, to make passenger air travel affordable and accessible to European consumers. Ryanair believes that the imposition on airlines of a tax on fuel or emissions will not only increase airfares, but will discourage new entrants into the market, resulting in less choice for consumers. Ryanair believes this would ultimately have adverse effects on the European economy in general. The UK government's doubling of the Air Passenger Duty (APD)
in February 2007, which purports to be an environmental tax, further
demonstrates that these taxes have no environmental benefits and only increase
costs to passengers.
As a company, Ryanair believes in free market competition and that the imposition of any of the above measures would favor the less efficient flag carriers - carriers—which generally have smaller and older aircraft, lower load factors, and a much higher fuel burn per passenger, and which operate primarily into congested airports - airports—and reduce competition. Furthermore, the introduction of a fuel tax or emissions levy at a European level only would distort competition between airlines operating solely within Europe and those operating also outside of Europe. We believe that the introduction of such a tax or levy would also be incompatible with international law.
Airport charges
The EU Airport Charges Directive of March 2009 sets forth general principles that are to be followed by airports when setting airport charges and provides for an appeals procedure for airlines in the event they are not satisfied with the level of charges. However, Ryanair does not believe that this procedure will be effective or that it will constrain those airports that are currently abusing their dominant position. This legislation may in fact lead to higher airport charges, depending on how its provisions are implemented and applied by EU member states and subsequently by the courts. The directive is to be transposed into national legislation throughout the EU by March 2011.
Slots
Currently, 33the majority of Ryanair’s bases of operations have no “slot” allocations; however, traffic at a substantial number of the airports served by Ryanair serves, including its primary bases, at
Dublin, London (Stansted), Milan (Bergamo), Rome (Ciampino), Barcelona (Girona)
and Madrid, are regulated by means of "slot"“slot” allocations, which represent authorizations to take off or land at a particular airport within a specified time period. In addition, the airports in Bristol, Alicante and Valencia that
Ryanair plans to use as new bases of operations beginning in the Fall of 2007
are regulated through slot allocations. In April 2005, the CAR announced that
Dublin Airport would be fully slot coordinated, beginning in March 2006. Ryanair
challenged this decision in the Irish High Court on grounds that the CAR failed
to apply the criteria in Regulation 95/93, which require a thorough capacity
analysis at the airport and consultation with the airlines and airport on ways
to avoid the need for full coordination, prior to taking its decision. The Irish
High Court overturned the decision of the CAR and Dublin Airport reverted to a
"schedules facilitated" scheme. In February 2007, the CAR re-imposed full
coordination at Dublin Airport and Ryanair has again challenged this decision in
the Irish High Court. EU law currently regulates the acquisition, transfer, and loss of slots. Applicable EU regulations currently prohibit the buying or selling of slots for cash. The European Commission adopted a regulation in April 2004 (Regulation (EC) No. 793/2004) that made some minor amendments to the current allocation system. It allowssystem, allowing for limited transfers of, but not trading in, slots. Slots may be transferred from one route to another by the same carrier, transferred within a group or as part of a change of control of a carrier, or swapped between carriers. 45
TheIn April 2008, the European Commission issued a communication on the application of the slot allocation regulation, signaling the acceptance of secondary trading of airport slots between airlines. This is now conducting a consultation that will allow itexpected to propose further measures to introduce a market mechanism for the allocation
of slots which will allow more flexibility and mobility in the use of slots and will further enhance possibilities for market entry. Any future proposals that might create a secondary market for the auction of slots or allow trading of slots among airlines could create a potential source of revenue for certain of Ryanair'sRyanair’s current and potential competitors, many of which have many more slots allocated at present than Ryanair. Slot values depend on several factors, including the airport, time of day covered, the availability of slots and the class of aircraft. Ryanair'sRyanair’s ability to gain access to and develop its operations at slot-controlled airports will be affected by the availability of slots for takeoffs and landings at these specific airports. New entrants to an airport are currently given certain privileges in terms of obtaining slots, but such privileges are subject to the "grandfather rights"grandfathered rights of existing operators that are utilizing their slots. While Ryanair generally seeks to avoid slot-controlled airports, there is no assurance that Ryanair will be able to obtain a sufficient number of slots at the slot-controlled airports that it desires to serve in the future at the time it needs them or on acceptable terms.
Other
Health and occupational safety issues relating to the Company are largely controlledaddressed in Ireland by compliance with the Safety, Health and Welfare at Work Act, 1989,1989; the Safety, Health and Welfare at Work (General Application) Regulations, 1993,1993; and other regulations under that act. Although licenses or permits are not issued under such legislation, compliance is monitored by the Health and Safety Authority (the "Authority"“Authority”), which is the regulating body in this area. The Authority periodically reviews Ryanair'sRyanair’s health and safety record and wherewhen appropriate, issues improvement notices or prohibition notices. Ryanair has responded to all such notices to the satisfaction of the Authority. Other safety issues are covered by the Irish Aviation Orders, which may vary from time to time.
The Company'sCompany’s operations are subject to the general laws of Ireland and, insofar as they are applicable in Ireland, the laws of the EU. The Company may also become subject to additional regulatory requirements in the future. The Company is also subject to local laws and regulations at locations where it operates and the regulations of various local authorities that operate the airports it serves.
For certain information about each of the Company'sCompany’s key facilities, see "-Facilities"“—Facilities” above. Management believes that the Company'sCompany’s facilities are suitable for its needs and are well maintained.
Item 5. Operating and Financial Review and Prospects
| Item 4A. | Unresolved Staff Comments |
There are no unresolved staff comments.
| Item 5. | Operating and Financial Review and Prospects |
The following discussion should be read in conjunction with the audited Consolidated Financial Statementsconsolidated financial statements of the Company and the notes thereto included in Item 18. Those consolidated financial statements have been prepared in accordance with IFRS. For a detailed discussion of differences between IFRS and U.S. GAAP, see
Note 28 to the Consolidated Financial Statements included in Item 18.
Ryanair’s current business strategy dates to the early 1990s, when a new management team, including the current chief executive, commenced the restructuring of Ryanair'sRyanair’s operations to become a low-fares airline based on the low-cost operating model pioneered by Southwest Airlines Co. in the United States. During the period between 1992 and 1994, Ryanair expanded its route network to include scheduled passenger serviceservices between Dublin and Birmingham, Manchester and Glasgow (Prestwick). In 1994, Ryanair began standardizing its fleet by purchasing used Boeing 737-200A aircraft to replace substantially all of its leased aircraft. Beginning in 1996, Ryanair continued to expand its service from Dublin to new provincial destinations in the U.K. In August 1996, Irish Air, L.P., an investment vehicle led by David Bonderman and certain of his associates at the Texas Pacific Group, acquired a minority interest in the Company. Ryanair Holdings completed its initial public offering in June 1997.
46
From 1997 through September 2007,June 30, 2010, Ryanair launched service on approximately
550more than 1,100 routes throughout Europe and also increased the frequency of service on a number of its principal routes. During that period, in addition to Dublin, Ryanair established, London (Stansted and Luton), Glasgow (Prestwick), Brussels (Charleroi), Frankfurt (Hahn), Milan (Bergamo), Stockholm (Skvasta), Rome (Ciampino), Barcelona (Girona), Nottingham East Midlands, Liverpool, Shannon, Pisa, Cork, Marseille, Madrid, Bremen, Dusseldorf (Weeze), Bristol, Alicante, ValenciaBelfast, Bournemouth, Birmingham, Kerry, Edinburgh, Reus, Alghero, Cagliari, Trapani, Bologna, Pescara, Oporto, Bari, Brindisi, Leeds Bradford, Faro, Oslo (Rygge), Malaga, Kaunas and BelfastMalta airports as bases of operations. Ryanair plans to open two new bases in Barcelona (El Prat) and Valencia in September and November of 2010, respectively. Ryanair has increased the number of booked passengers flown from 4.9 million in the 1999 fiscal year to approximately 39.366.5 million in the 2010 fiscal 2007, has taken delivery of 137year. Ryanair had 250 Boeing 737-800 aircraft as of August 31, 2007,June 30, 2010, and now serves 125155 airports while employingwith a team of over 4,9008,000 people.
Ryanair expects to have 163272 aircraft in its operating fleet by March 31, 2008 (assuming that the planned disposal of six older aircraft is completed on
schedule).2011. During the period through December 2012,March 2013, the Company expects to take delivery of additional Boeing 737-800 aircraft that, net of further scheduledplanned retirements and lease terminations, are expected to increase the size of the Company'sCompany’s fleet to 262 aircraft by that date (assuming that the planned disposal
of 46 such aircraft is completed on schedule), with that number increasing
should Ryanair choose to exercise any of the 110 options remaining under its
current contracts with Boeing.299 aircraft. See "--Liquidity“—Liquidity and Capital Resources"Resources” and "Item“Item 4. Information on the Company--Aircraft"Company—Aircraft” for additional details.
Since Ryanair pioneered its low fareslow-fares operating model in Europe in the early 1990s, its passenger volumes and scheduled passenger revenues have increased significantly as Ryanairbecause it has substantially increased capacity. Ryanair'sRyanair’s annual scheduled flownbooked passenger volume has grown from approximately 945,000 passengers in the calendar year 1992 to 39.3approximately 66.5 million passengers in the 2010 fiscal year 2007.
Ryanair'syear.
Ryanair’s revenue passenger miles (RPMs)(“RPMs”) increased 32.4%14.4% from 18,832.539,202.3 million in the 2009 fiscal year 2006 to 24,927.944,841.1 million in the 2010 fiscal year 2007, due primarily to a 32.0%13.5% increase in scheduled available seat miles (ASMs)(“ASMs”) from 24,282.147,102.5 million in the 2009 fiscal year 2006 to 32,043.053,469.6 million in the 2010 fiscal year 2007.year. Scheduled passenger revenues increased 30.8%decreased 0.8% from EUR1,433.3€2,343.9 million in the 2009 fiscal year 2006 to EUR1,874.8€2,324.5 million in the 2010 fiscal year 2007. During this period, flown
passenger load factors were 77% in fiscal year 2006 and 76% in fiscal year 2007.year. Average yield per RPM was EUR0.076€0.060 in the 2009 fiscal year 2006 and EUR0.075€0.052 in the 2010 fiscal year 2007.year. The decrease in average yield per RPM in the 2010 fiscal years 2006 and 2007year was principally attributable to an increase in seat capacity, poor economic conditions, increased competition inprice promotions and the market and an increase in average sector length without a
corresponding increase in average yield per passenger, oradverse impact of the amountstrengthening of scheduled revenues per passenger flown. The Company expects average yields to be
soft during fiscal year 2008 (with declines of up to 5% being possible), largely
as a result of a general softening of market conditions that has been reflected
in lower load factors and yields for April, May and June 2007.
The combination of expandingthe U.K. pound sterling against the euro.
Expanding passenger volumes and capacity, high load factors and aggressive cost containment has(together with a reduction in fuel costs) have enabled Ryanair to continue to generate operating profits and profits after taxation despite increasing price competition and increases in certain costs, particularly fuel costs. Ryanair'sRyanair’s total break-even load factor was 68%79% in the 2009 fiscal year 2006 and 72%73% in the 2010 fiscal year 2007.year. Cost per ASM was EUR0.052€0.058 in the 2009 fiscal year 2006 and EUR0.054€0.047 in the 2010 fiscal year, 2007,with the reduction primarily reflecting increased costs, particularlya lower fuel costs and ancost per ASM of €0.017 in the 2010 fiscal year, as compared to €0.027 in the 2009 fiscal year, as well as a 13.5% increase in ASMs in the number of pilot crews per aircraft from four to five.2010 fiscal year. Ryanair recorded an
operating profitprofits of EUR375.0€92.6 million in the 2009 fiscal year 2006 and EUR471.7€402.1 million in the 2010 fiscal year. The Company recorded a loss after taxation of €169.2 million in the 2009 fiscal year 2007, and profit after taxation of EUR306.7€305.3 million in the 2010 fiscal year
2006 and EUR435.6 million in fiscal year 2007.year. Ryanair recorded seat capacity growth of approximately 23%12% in the 2010 fiscal 2007,year, compared to approximately 27%14% in the 2009 fiscal 2006,year, and expects capacity to increase by approximately 21%11% in the 2011 fiscal 2008,year, reflecting the current aircrafttimetable for the delivery timetableof aircraft under the Company'sCompany’s contracts with Boeing.
47
At September 20, 2007 Ryanair had acquired 29.4%
Investment in Aer Lingus
The Company owns 29.8% of Aer Lingus, which it acquired in fiscal years 2007, 2008 and 2009 at a total cost of EUR396.5€407.2 million. Following the approval of Ryanair'sits shareholders, management proposed in the Company
proposed2007 fiscal year to effect a tender offer to acquire the entire share capital of Aer Lingus. This acquisition proposal was, however, blocked by the European Commission on competition grounds. Ryanair viewsgrounds in June 2007. Ryanair’s management viewed the acquisition of Aer Lingus in the context of the overall trend of consolidation among airlines in Europe (the combined European market share of Ryanair/Aer Lingus would be less than 5%)
and believesbelieved that the acquisition would lead to the formation of one strong Irish airline group able to compete with large carriers such as Lufthansa/SwissLufthansa, Air France/KLM and Air France/KLM.British Airways. During the EU competition review, of the proposed
acquisition, RyanairCompany made a commitment tothat if the acquisition was approved, Ryanair would eliminate Aer Lingus'Lingus’ fuel surcharges and reduce its fares, thus savingwhich would have resulted in Aer Lingus passengers saving approximately EUR100€100 million per annum.year. The Company was thus surprised and disappointed by the European Commission’s decision to block the merger. This decision was the first adverse decision taken in respect of any EU airline merger and the first everfirst-ever adverse decision in respect of a proposed merger of two companies with less than 5% of the EU market for their services. On September 10, 2007 Ryanair filed an appeal ofwith the CFI, which was heard in July 2009. On July 6, 2010, the Court upheld the Commission’s decision. Ryanair has two months and 10 days from such date to appeal this judgment.
In October 2007, the European Commission also reached a formal decision that it would not force Ryanair to sell its shares in Aer Lingus. However, Aer Lingus appealed this decision withbefore the European CourtCFI. This case was heard in July 2009 and on July 6, 2010 the court rejected Aer Lingus’ appeal and confirmed that Ryanair cannot be forced to dispose of First Instance.
At March 31, 2007, the Company had acquired a 25.2%its 29.8% stake in Aer Lingus. Aer Lingus has two months and 10 days from such date to appeal this judgment to the Court of Justice of the EU.
On December 1, 2008, Ryanair made a new offer to acquire all of the ordinary shares of Aer Lingus it did not own at a costprice of EUR344.9 million. In accordance with€1.40 per ordinary share. Ryanair offered to keep Aer Lingus as a separate company, maintain the Company's accounting policy,
this asset is held at fair value withAer Lingus brand, and retain its Heathrow slots and connectivity. Ryanair also proposed to double Aer Lingus’ short-haul fleet from 33 to 66 aircraft and to create 1,000 associated new jobs over a corresponding adjustmentfive-year period. If the offer had been accepted, the Irish government would have received over €180 million in cash. The employee share option trust and employees, who own 18% of Aer Lingus, would have received over €137 million in cash. The Company met Aer Lingus management, representatives of the employee share option
trust and other parties, including members of the Irish Government. The offer of €1.40 per share represented a premium of approximately 25% over the closing price of €1.12 for Aer Lingus shares on November 28, 2008. As the Company was unable to equity
following initial acquisition. secure the shareholders’ support, it decided on January 28, 2009 to withdraw its new offer for Aer Lingus.
The balance sheet amountvalue of EUR406.1€116.2 million reflects the market value of the Company'sCompany’s stake in Aer Lingus as at March 31, 2007.2010, as compared to a value of €93.2 million as of March 31, 2009. In accordance with the Company’s accounting policy, this investment is held at fair value. This investment is classified as available-for-sale, rather than as an investment in an associate, because the GroupCompany does not have the power to exercise a significantany influence over Aer Lingus. During the 2008 fiscal year, Ryanair recognized an impairment charge of €91.6 million on its Aer Lingus shareholding reflecting the fall in Aer Lingus’ share price from the date of purchase to March 31, 2008. Ryanair recorded a further impairment of €222.5 million in the 2009 fiscal year reflecting a fall in the Aer Lingus share price from €2.00 at March 31, 2008 to €0.59 at March 31, 2009. Ryanair recorded an impairment of €13.5 million in the 2010 fiscal year reflecting a fall in the Aer Lingus share price from €0.59 at March 31, 2009 to €0.50 at June 30, 2009. The subsequent increase in the Aer Lingus share price from €0.50 at June 30, 2009 to €0.73 at March 31, 2010 resulted in a gain of €36.5 million, which was recognized through other comprehensive income. All impairment losses are required to be recognized in the income statement and may not be subsequently reversed, while gains are recognized through other comprehensive income.
The Company’s determination that it does not have control, or even exercise a “significant influence,” over Aer Lingus has been based on the following factors:
| (i) | Ryanair does not have any representation on the Aer Lingus board of directors; nor does it have a right to appoint a director. |
| (ii) | Ryanair does not participate in Aer Lingus policy-making decisions; nor does it have a right to participate in such policy-making decisions. |
| (iii) | There are no material transactions between Ryanair and Aer Lingus, there is no interchange of personnel between the two companies and there is no sharing of technical information between the companies. |
| (iv) | Aer Lingus and its principal shareholders (Irish government: 25.1%; Employee Share Ownership Plan: 14.2%) have openly opposed Ryanair’s investment or participation in the company. |
| (v) | On August 13, 2007 and September 4, 2007, Aer Lingus refused Ryanair’s attempt to assert its statutory right to requisition a general meeting (a legal right of any 10% shareholder under Irish law). The Aer Lingus Board of Directors refused to accede to these requests (by letters dated August 31, 2007 and September 17, 2007). |
| (vi) | The European Commission has formally found that Ryanair’s shareholding in Aer Lingus does not grant Ryanair “de jure or de facto control of Aer Lingus” and that “Ryanair’s rights as a minority shareholder…are associated exclusively to rights related to the protection of minority shareholders” (Commission Decision Case No. COMP/M.4439 dated October 11, 2007). The European Commission’s finding has been confirmed by the European Union’s General Court which issued a decision on July 6, 2010 that the European Commission was justified to use the required legal and factual standard in its refusal to order Ryanair to divest its minority shareholding in Aer Lingus and that, as part of that decision, Ryanair’s shareholding did not confer control of Aer Lingus (Judgment of the General Court (Third Chamber) Case No. T-411/07 dated July 6, 2010). |
Historical Results Are Not Predictive of Future Results
The historical results of operations discussed herein may not be indicative of Ryanair'sRyanair’s future operating performance. Ryanair'sRyanair’s future results of operations will be affected by, among other things, overall passenger traffic volume,volume; the availability of new airports for expansion,expansion; fuel prices,prices; the airline pricing environment in a period of increased competition,competition; the ability of Ryanair to finance its planned acquisition of aircraft and to discharge the resulting debt service obligations,obligations; economic and political conditions in Ireland, the U.K. and the EU,EU; terrorist threats or attacks within the EU,EU; seasonal variations in travel,travel; developments in government regulations, litigation and labor relations,relations; foreign currency fluctuations, competition and the public'spublic’s perception regarding the safety of low-fares airlines andairlines; the value of its equity stake in Aer Lingus; changes in aircraft acquisition, leasing, and other operating costs, as well ascosts; flight interruptions caused by volcanic ash emissions or other atmospheric disruptions; and the rates of income taxes paid. Ryanair expects its depreciation, staff and fuel charges to continue to increase as additional aircraft and
related flight equipment are acquired. Future fuel costs may also increase as a result of the currentdepletion of petroleum reserves, the shortage of fuel production capacity and/or production restrictions imposed by fuel oil producers, as well
as the Company's decision to enter into fuel hedging arrangements on a more
selective basis.producers. Maintenance expenses may also increase as a result of Ryanair'sRyanair’s fleet expansion and replacement program. In addition, the financing of new and
existing Boeing 737-800 aircraft will significantly increase the total amount of the Company'sCompany’s outstanding debt and the payments it is obliged to make to service such debt. The cost of insurance coverage for certain third-party liabilities arising from "acts“acts of war"war” or terrorism increased dramatically following the September 11, 2001 terrorist attacks. Although Ryanair currently passes on increased insurance costs to passengers by means of a special "insurance levy"“insurance levy” on each ticket, there can be no assurance that it will continue to be successful in doing so. See "Item“Item 3. Key Information-Risk Factors-TheInformation—Risk Factors—The 2001 Terrorist Attacks on the United States Had a Severe Negative Impact on the International Airline Industry."
”
RECENT OPERATING RESULTS
As of April 1, 2005, the Company prepared its consolidated financial
statements, in accordance with IFRS as adopted by the European Union instead of
Irish GAAP, which the Company previously used for the presentation of its
financial information. The Company has restated its fiscal year 2005 financial
statements in IFRS.
48
For the quarter ended June 30, 20072010 (the first quarter of the Company'sCompany’s 2011 fiscal year 2008)year), Ryanairthe Company recorded an increasea decrease in operating profit, of 15.2%,
from EUR136.7€154.7 million in the first quarter of the 2010 fiscal 2007year to EUR157.4€119.4 million in the recently completed quarter. Total operating revenues increased from €774.7 million in the first quarter of fiscal 2008. Total operating revenues increased 22.3%, from
EUR566.62010 to €896.8 million in the first quarter of fiscal year 20072011. The decrease in operating profit was therefore due to EUR693.0a 25% increase in operating expenses. Operating expenses increased from €620.0 million in the first quarter of fiscal 2008,2010 to €777.4 million in the first quarter of 2011, due primarily asto a result of34% increase in fuel costs, an increase in other operating costs associated with a higher level of 17.5%activity in scheduled passenger revenues, which totaled EUR575.9line with the growth of the airline including an estimated €50 million costs relating to the closure of airspace in April and May 2010 due to the Icelandic volcanic ash disruption. The Company’s profit after taxation for the quarter ended June 30, 2010 was €93.7 million, as compared to €123.0 million for the quarter,
as well as a 52.8% increase in ancillary revenues to EUR117.1 million. Operating
expenses increased at a higher rate, rising by 24.6%, from EUR429.9 million incorresponding period of the three months ended June 30, 2006 to EUR535.6 million in the three months
ended June 30, 2007, as fuel costs increased by 13.7%, totaling EUR190.4
million, and other costs related to the growth of Ryanair's fleet and route
network and the general level of activity (particularly staff costs and airport
and handling costs) also increased.previous year. The Company'sCompany’s cash and cash equivalents, restricted cash and financial assets with terms of less than three month summedmonths amounted to EUR2,289.3€3,072.8 million at June 30, 2007,2010 as compared with EUR2,198.0 million at
March 31, 2007. The Company had cash and cash equivalents of EUR1,345.1€2,500.1 million at June 30, 2007, as compared with EUR1,346.4 million at March 31, 2007. Capital
expenditures for the quarter, primarily relating to deposit payments for future
aircraft deliveries, totaled EUR96.6 million, as compared with EUR21.3 million
in the first quarter of fiscal year 2007.
2009.
The following discussion and analysis of Ryanair'sRyanair’s financial condition and results of operations is based on its Consolidated Financial Statements,consolidated financial statements, which are included in Item 18 and prepared in accordance with IFRS. IFRS differs in
certain significant respects from U.S. GAAP. For additional information
regarding differences between IFRS and U.S. GAAP, please refer to Note 28 to the
Consolidated Financial Statements included in Item 18.
The preparation of the Company'sCompany’s financial statements requires the use of estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. Actual results may differ from these estimates under different conditions or assumptions.
estimates.
The Company believes that its critical accounting policies, which are those that require management'smanagement’s most difficult, subjective and complex judgments, are those described in this section. These critical accounting policies, the judgments and other uncertainties affecting application of these policies and the sensitivity of reported results to changes in conditions and assumptions are factors to be considered in reviewing the Consolidated Financial Statementsconsolidated financial statements included in Item 18 and the discussion and analysis below. For additional detail on these policies, see Note 1, "Basis“Basis of preparation and significant accounting policies,"” to the Consolidated Financial Statementsconsolidated financial statements included in Item 18.
Available-for-Sale Securities
The Company holds certain equity securities, which are classified as available-for-sale, and are measured at fair value, less incremental direct costs, on initial recognition. Such securities are classified as available for sale, rather than as an investment in an associate because the Company does not have the power to exercise significant influence over the investee. Subsequent to initial recognition they are measured at fair value and changes therein, other than impairment losses, are recognized directly in equity. The fair values of available-for-sale securities are determined by reference to quoted prices at each reporting date. When an investment is de-recognized the cumulative gain or loss in equity is transferred to the income statement.
Such securities are considered to be impaired if there is objective evidence which indicates that there may be a negative influence on future cash flows. This includes where there is a significant or prolonged decline in the fair value below its cost. All impairment losses are recognized in the income statement and any cumulative loss in respect of an available-for-sale asset recognized previously in equity is transferred to the income statement.
Long-lived assets
Assets
As of March 31, 2007,2010, Ryanair had EUR2.9€4.3 billion of long-lived assets, virtually all of which were aircraft. In accounting for long-lived assets, Ryanair must make estimates about the expected useful lives of the assets, the expected residual values of the assets, and the potential for impairment based on the fair value of the assets and the cash flows they generate.
In estimating the lives and expected residual values of its aircraft, Ryanair has primarily relied on its own and industry experience, recommendations from Boeing, the manufacturer of all of the Company's ownedCompany’s aircraft, and other available marketplace information. Subsequent revisions to these estimates, which can be significant, could be caused by changes to Ryanair'sRyanair’s maintenance program, changes in utilization of the aircraft, governmental regulations on aging of aircraft, changes in new aircraft technology, changes in new aircraft fuel efficiency and changing market prices for new and used aircraft of the same or similar types. Ryanair evaluates its estimates and assumptions in each reporting period, and, when warranted, adjusts these assumptions. Generally, these adjustments are accounted for on a prospective basis, through depreciation expense.
49
Ryanair periodically evaluates its long-lived assets for impairment. Factors that would indicate potential impairment would include, but are not limited to, significant decreases in the market value of an aircraft, a significant change in an aircraft'saircraft’s physical condition and operating or cash-flowcash flow losses associated with the use of the aircraft. While the airline industry as a whole has experienced many of these factors from time to time, Ryanair has not yet been seriously impacted and continues to record positive cash flows from these long-lived assets. Consequently, Ryanair has not yet identified any impairments related to its existing aircraft fleet. The Company will continue to monitor its long-lived assets and the general airline operating environment.
The Company’s estimate of the recoverable amount of aircraft residual values is 15% of market value, determined periodically, based on independent valuations and actual aircraft disposals during the current and prior periods.
During the fiscal year ended March 31, 2009, accelerated depreciation of €51.6 million arose in relation to aircraft disposals during the year and an agreement to dispose of additional aircraft in the 2010 fiscal year. In particular, this charge arose due to an adverse change in the exchange rate between the U.S. dollar and the euro between the accounting periods in which the aircraft were purchased and March 31, 2009. There was no such accelerated depreciation recognized in the 2010 fiscal year.
Heavy maintenance
Maintenance
An element of the cost of an acquired aircraft is attributed, on acquisition, to its service potential, reflecting the maintenance condition of the engines and airframe. Additionally, when
For aircraft held under operating lease agreements, Ryanair hasis contractually committed to either return the aircraft in a lease commitmentcertain condition or to perform aircraft maintenance, acompensate the lessor based on the actual condition of the airframe, engines and life-limited parts upon return. A provision is made duringover the lease term for this obligation. contractual obligation, based on the present value of the estimated future cost of the major airframe overhaul, engine maintenance checks, and restitution of major life-limited parts, calculated by reference to the number of hours flown or cycles operated during the year.
Ryanair’s aircraft operating lease agreements typically have a term of seven years, which closely correlates with the timing of heavy maintenance checks. The contractual obligation to maintain and replenish aircraft held under operating lease exists independently of any future actions within the control of Ryanair. While Ryanair may, in very limited circumstances, sub-lease its aircraft, it remains fully liable to perform all of its contractual obligations under the ‘head lease’ notwithstanding any such sub-leasing.
Both of these elements of accounting policies involve the use of estimates in determining the quantum of both the initial maintenance asset and/or the amount of provisionprovisions to be set asiderecorded and the respective periods over which such amounts are charged to income. In making such estimates, Ryanair has primarily relied on its own and industry experience, industry regulations and recommendations from Boeing; however, these estimates can be subject to revision, depending on a number of factors, such as the timing of the planned maintenance, the ultimate utilization of the aircraft, changes to government regulations and increases and decreases in the estimated costs. Ryanair evaluates its estimates and assumptions in each reporting period and, when warranted, adjusts theseits assumptions, which generally impact on maintenance and depreciation expense in the income statement on a prospective basis.
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The following table sets forth certain income statement data (calculated under IFRS) for Ryanair expressed as a percentage of Ryanair'sRyanair’s total revenues for each of the periods indicated:
| Fiscal Year ended March 31, | |||||||||
| 2010 | 2009 | 2008 | |||||||
Total Revenues | 100% | 100% | 100% | ||||||
Scheduled Revenues | 77.8 | 79.7 | 82.0 | ||||||
Ancillary Revenues | 22.2 | 20.3 | 18.0 | ||||||
Total Operating Expenses | 86.5 | 96.9 | 80.2 | ||||||
Staff Costs | 11.2 | 10.5 | 10.5 | ||||||
Depreciation and Amortization | 7.9 | 8.7 | 6.5 | ||||||
Fuel and Oil | 29.9 | 42.7 | 29.2 | ||||||
Maintenance, Materials and Repairs | 2.9 | 2.3 | 2.1 | ||||||
Aircraft Rentals | 3.2 | 2.7 | 2.7 | ||||||
Route Charges | 11.3 | 9.8 | 9.5 | ||||||
Airport and Handling Charges | 15.4 | 15.1 | 14.6 | ||||||
Other | 4.8 | 5.1 | 5.1 | ||||||
Operating Profit | 13.5 | 3.1 | 19.8 | ||||||
Net Interest Income (Expense) | (1.6 | ) | (1.9 | ) | (0.5 | ) | |||
Other Income (Expenses) | (0.5 | ) | (7.4 | ) | (3.1 | ) | |||
Profit/(Loss) before Taxation | 11.4 | (6.2 | ) | 16.2 | |||||
Taxation | (1.2 | ) | 0.4 | (1.8 | ) | ||||
Profit/(Loss) after Taxation | 10.2 | (5.8 | ) | 14.4 | |||||
FISCAL YEAR 20072010 COMPARED WITH FISCAL YEAR 2006
Profit2009
Profit/(Loss) after Taxation. Ryanair's Ryanair recorded a profit on ordinary activities after taxation increased by 42.0%, from EUR306.7of €305.3 million in the 2010 fiscal year, ended
March 31, 2006, to EUR435.6as compared with a loss of €169.2 million in the 2009 fiscal year. This profit was primarily attributable to a 28.9% decrease in fuel and oil costs from €1,257.1 million to €893.9 million, partially offset by a decrease in revenues driven by a 12.7% decline in average fares.
Scheduled Revenues. Ryanair’s scheduled passenger revenues decreased 0.8%, from €2,343.9 million in the 2009 fiscal year, ended March 31, 2007,to €2,324.5 million in the 2010 fiscal year, primarily reflecting a 32.2% increase in total operating revenues from
EUR1,692.5 million to EUR2,236.9 million, together with the EUR34.2 million
benefit to the effective tax rate discussed at note (c) in the above table. The
increase in revenues reflected an increasedecrease of 30.8% in scheduled revenues and of
39.7% in ancillary revenues, each as described in more detail below. Total
revenue per passenger increased by 8.1%, primarily due to a 7.0% increase12.7% in average fares and the growth in ancillary revenues. Ryanair's profit on ordinary
activities before taxation increased 33.1%, from EUR338.9 million in the fiscal
year ended March 31, 2006 to EUR451.0 million in the fiscal year ended March 31,
2007.
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Scheduled Revenues. Ryanair's scheduled passenger revenues increased 30.8%,
from EUR1,433.4 million in the fiscal year ended March 31, 2006, to EUR1,874.8
million in the fiscal year ended March 31, 2007, as overallfares. The number of passengers booked increased 22.2%13.6%, from 34.858.6 million to 42.566.5 million, reflecting increased scheduled passenger volumes on existing passenger routes and the successful launch of new bases at Marseille, Madrid, BremenTrapani, Pescara, Oporto, Bari, Brindisi, Leeds Bradford, Faro and Dusseldorf (Weeze)Oslo (Rygge) in the 2010 fiscal 2007. The higher scheduled revenues also reflected anyear. There was a one-percentage-point increase of 7.0% in average fares. Bookedbooked passenger load factors decreased from 83%81% in the 2009 fiscal year to 82%.
in the 2010 fiscal year.
Passenger capacity (as measured in ASMs) during the 2010 fiscal 2007year increased by 32.0%13.5% due to the addition of 3051 Boeing 737-800 aircraft (net of disposals), as well as an 6.1%a 12.3% increase in sectors flown and a 1.0% increase in the average length of passenger haul and a 20.1% increase in sectors
flown.haul. Scheduled passenger revenues accounted for 83.8%77.8% of Ryanair'sRyanair’s total revenues for the 2010 fiscal year, ended March 31, 2007, compared with 84.7%79.7% of total revenues in the 2009 fiscal year.
Ancillary Revenues. Ryanair’s ancillary revenues, which comprise revenues from non-flight scheduled operations, car rentals, in-flight sales and Internet-related services (including insurance, accommodation and cruises), increased 11.0%, from €598.1 million in the 2009 fiscal year ended March 31, 2006.
to €663.6 million in the 2010 fiscal year, while ancillary revenues per booked passenger decreased to €9.98 from €10.22. Revenues from non-flight scheduled operations, including revenues from excess baggage charges, debit and credit card transactions, sales of rail and bus tickets, accommodations and travel insurance, increased 8.9% to €463.6 million from €425.8 million in the 2009 fiscal year. Car rental revenues decreased 7.1%, to €29.9 million from €32.2 million in the 2009 fiscal year, reflecting the terms of a new contract with Hertz. Revenues from in-flight sales increased 4.0%, to €86.5 million from €83.2 million in the 2009 fiscal year. Revenues from Internet-related services, primarily commissions received from products sold on Ryanair.com or linked websites, increased 46.9%, from €56.9 million in the 2009 fiscal year to €83.6 million in the 2010 fiscal year. The rate of increase in revenues from Internet-related operations exceeded the increase in overall passengers booked, while the rate of increase in the other categories grew at a slower rate than passenger bookings.
The following tables settable sets forth the components of ancillary revenues earned by Ryanair and each component expressed as a percentage of total ancillary revenues for each of the periods indicated:
| Fiscal Year ended March 31, | ||||||||||
| 2010 | 2009 | |||||||||
| (in millions of euro, except percentage data) | ||||||||||
Non-flight Scheduled | € | 463.6 | 69.9% | € | 425.8 | 71.2% | ||||
Car Rental | € | 29.9 | 4.5% | € | 32.2 | 5.4% | ||||
In-flight Sales | € | 86.5 | 13.0% | € | 83.2 | 13.9% | ||||
Internet-related | € | 83.6 | 12.6% | € | 56.9 | 9.5% | ||||
Total | € | 663.6 | 100.0% | € | 598.1 | 100.0% | ||||
Operating Expenses.Expenses. As a percentage of total revenues, Ryanair'sRyanair’s operating expenses increaseddecreased from 77.8%96.9% in the 2009 fiscal year ended March 31, 2006 to 78.9%86.5% in the 2010 fiscal year, ended March 31, 2007, reflecting a 28.9% reduction in fuel costs from €1,257.1 million in the fact that operating
expenses grew at a faster rate than revenues.2009 fiscal year, to €893.9 million in the 2010 fiscal year. In absolute terms, total operating expenses increased 34.0%decreased 9.2%, from EUR1,317.5€2,849.4 million in the 2009 fiscal year ended March
31, 2006, to EUR1,765.2€2,586.0 million in the 2010 fiscal year, ended March 31, 2007, principally as a result of the aforementioned decrease in fuel costs, which was partially offset by incremental increases in certain operating expenses associated with the 13.5% increase in scheduledbooked passenger volumevolumes and the 20.0%12.3% increase in the number of sectors flown, which were reflected in increases in
fuelflown. Maintenance expenses, aircraft rental expenses and route charges increased as a percentage of total revenues, while staff, costsdepreciation and amortization, fuel and oil, airport and handling charges. The
increase in operating expenses also reflected the adverse impact of an increase
of 6.1% in average sector lengthcharges and higher jet fuel prices in U.S. dollars that
were only partially offset by the strength of the euro against the U.S currency.marketing, distribution and other costs decreased. Total operating expenses per ASM increaseddecreased by 1.5%20.1%, with the decrease reflecting, higherprincipally, the increase in passenger capacity (as measured in ASMs) during the 2010 fiscal year and the impact of the lower fuel costs
and higher marketing and distribution costs.
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The following table sets forth the amounts in euro centscent of, and percentage changes of Ryanair'sin , Ryanair’s operating expenses (on a per ASMper-ASM basis) for the fiscal years ended March 31, 20072010 and March 31, 20062009 under IFRS. These data are calculated by dividing the relevant expense amount (as shown in the Consolidated
Financial Statements)consolidated financial statements) by the number of ASMs in the relevant year as shown in the table of "Selected“Selected Operating and Other Data"Data” in Item 3 and rounding to the nearest euro cent; the percentage change is calculated on the basis of the relevant figures before rounding.
| Fiscal Year Ended March 31, 2010 | Fiscal Year Ended March 31, 2009 | % Change | ||||
Staff Costs | 0.63 | 0.66 | (4.6)% | |||
Depreciation and Amortization | 0.44 | 0.54 | (19.0)% | |||
Fuel and Oil | 1.67 | 2.67 | (37.4)% | |||
Maintenance, Materials and Repairs | 0.16 | 0.14 | 13.4% | |||
Aircraft Rentals | 0.18 | 0.17 | 7.6% | |||
Route Charges | 0.63 | 0.61 | 3.4% | |||
Airport and Handling Charges | 0.86 | 0.94 | (8.8)% | |||
Marketing, Distribution and Other | 0.27 | 0.32 | (16.0)% | |||
Total Operating Expenses | 4.84 | 6.05 | (20.1)% | |||
Staff Costs. Ryanair's Ryanair’s staff costs, which consist primarily of salaries, wages and benefits, increased 0.2%decreased 4.6% on a per-ASM basis, while in absolute terms, these costs increased 32.2%8.3%, from EUR171.4€309.3 million in the 2009 fiscal year ended
March 31, 2006, to EUR226.6€335.0 million in the 2010 fiscal year ended March 31, 2007,
primarily reflecting anyear. The increase in pilot crewing ratios,absolute terms was primarily asattributable to a result
of continued increases in sector length, a 30.2%10.4% increase in average employee
numbersheadcount to 3,991 (reflecting an increase in the number of pilot crews per
aircraft from four to five) and7,032, which was partially offset by the impact of a Company-wide pay increases grantedfreeze, the higher proportion of contract crew operating during the year, and the rise, during the year, in the proportion of cabin crew members who earn below-average salaries. Employee numbers rose due to the growth of the business.
Depreciation and Amortization. Ryanair's Ryanair’s depreciation and amortization per ASM decreased by 12.6%19.0%, while in absolute terms these costs decreased 8.1% from €256.1 million in the 2009 fiscal year, to €235.4 million in the 2010 fiscal year. The decrease was recorded notwithstanding the addition of 39 owned aircraft (net of disposals) to the fleet during the 2010 fiscal year, as the figure for the 2009 fiscal year had included accelerated depreciation of €51.6 million in relation to aircraft disposals during the year and an agreement to dispose of additional aircraft in the 2010 fiscal year, while there was no such accelerated depreciation recognized in the 2010 fiscal year. See “—Critical Accounting Policies—Long-lived Assets” above.
Fuel and Oil. Ryanair’s fuel and oil costs per ASM decreased by 37.4%, while in absolute terms, these costs decreased by 28.9% from €1,257.1 million in the 2009 fiscal year to €893.9 million in the 2010 fiscal year, in each case after giving effect to the Company’s fuel hedging activities. The 28.9% decrease reflected a 35.6% decrease in average fuel prices paid, the impact of which was partially offset by a 12.8% increase in the number of hours flown and a 1.0% increase in the average sector length. Fuel and oil costs include the direct cost of fuel, the cost of delivering fuel to the aircraft, and aircraft de-icing costs. The average fuel price paid by Ryanair (calculated by dividing total fuel costs by the number of U.S. gallons of fuel consumed) decreased 35.6% from €2.35 per U.S. gallon in the 2009 fiscal year to €1.52 per U.S. gallon in the 2010 fiscal year, in each case after giving effect to the Company’s fuel hedging activities.
Maintenance, Materials and Repairs. Ryanair’s maintenance, materials and repair expenses, which consist primarily of the cost of routine maintenance and the overhaul of spare parts, increased 13.4% on a per-ASM basis, while in absolute terms these expenses increased by 28.7% from €66.8 million in the 2009 fiscal year to €86.0 million in the 2010 fiscal year. The increase in absolute terms during the fiscal year reflected an increase in the average number of leased Boeing 737-800 aircraft, which grew from 40 to 50 during the year, additional costs arising from increased line maintenance activity at new bases and costs incurred to satisfy provisions of lease contracts dealing with the condition of aircraft due to be returned in 2010 and 2011. These factors were offset in part by the positive impact of the weakening of the euro against the U.S. dollar during the period, as many of these expenses are denominated in U.S. dollars.
Aircraft Rentals. Aircraft rental expenses amounted to €95.5 million in the 2010 fiscal year, a 22.1% increase from the €78.2 million reported in the 2009 fiscal year, reflecting an increase in the weighted average number of leased Boeing 737-800 aircraft by ten, bringing the total to 50 during the 2010 fiscal year, the negative effect of which was somewhat offset by lower lease rates and the impact of a weaker euro versus the U.S. dollar.
Route Charges and Airport and Handling Charges. Ryanair’s route charges per ASM increased 3.4% in the 2010 fiscal year, while airport and handling charges per ASM decreased 8.8%. In absolute terms, route charges increased 17.3%, from €286.6 million in the 2009 fiscal year to €336.3 million in the 2010 fiscal year, primarily as a result of the 12.3% increase in sectors flown. In absolute terms, airport and handling charges increased 3.5%, from €443.4 million in the 2009 fiscal year, to €459.1 million in the 2010 fiscal year, reflecting the overall growth in passenger volumes, partially offset by lower average costs at Ryanair’s newer airports and bases.
Marketing, Distribution and Other Expenses. Ryanair’s marketing, distribution and other operating expenses, including those applicable to the generation of ancillary revenues, decreased 16.0% on a per-ASM basis in the 2010 fiscal year, while in absolute terms, these costs decreased 4.7%, from €151.9 million in the 2009 fiscal year to €144.8 million in the 2010 fiscal year, with the overall decrease primarily reflecting the achievement of cost reductions, through an increased focus on Internet-based selling.
Operating Profit.As a result of the factors outlined above, operating profit more than tripled on a per-ASM basis in the 2010 fiscal year, and also increased sharply in absolute terms, from €92.6 million in the 2009 fiscal year to €402.1 million in the 2010 fiscal year.
Finance Income. Ryanair’s interest and similar income decreased 68.8%, from €75.5 million in the 2009 fiscal year to €23.5 million in the 2010 fiscal year reflecting the combined impact of lower market interest rates and a shift in the Company’s policy towards placing its deposits with highly rated and guaranteed financial institutions which typically provide a lower yield, which factors were partially offset by higher average cash balances on hand.
Finance Expense. Ryanair’s interest and similar charges decreased 44.7%, from €130.5 million in the 2009 fiscal year to €72.1 million in the 2010 fiscal year, primarily due to the impact of lower market interest rates, the impact of which was partly offset by the drawdown of debt related to the acquisition of additional Boeing 737-800 aircraft. These costs are expected to increase as Ryanair further expands its fleet.
Foreign Exchange (Losses) Gains. Ryanair recorded foreign exchange losses of €1.0 million in the 2010 fiscal year, as compared with foreign exchange gains of €4.4 million in the 2009 fiscal year, with the different result being primarily due to the strengthening of the U.K. pound sterling and U.S. dollar exchange rates against the euro during the 2010 fiscal year.
Taxation. The effective tax rate for the 2010 fiscal year was 10.5%, as compared to a tax benefit of (6.3%) in the 2009 fiscal year. The effective tax rate reflects the statutory rate of Irish corporation tax of 12.5%, the positive impact of the reduced rates of tax applicable to Internet-related businesses and the loss due to the
impairment of the Company’s available-for-sale financial asset (its Aer Lingus holding, which is not subject to corporation tax). Ryanair recorded an income tax provision of €35.7 million in the 2010 fiscal year, compared with a tax credit of €11.3 million in the 2009 fiscal year (the tax credit of €11.3 million was primarily due to the recognition of a deferred tax asset of €34.3 million in respect of net operating losses incurred and available to carry forward to future periods). The determination regarding the recoverability of the deferred tax asset was based on future income forecasts, which demonstrated that it was more likely than not that future profits would be available in order to utilize the deferred tax asset. A deferred tax asset’s recoverability is not dependent on material improvements over historical levels of pre-tax income, material changes in the present relationship between income reported for financial and tax purposes, or material asset sales or other non-routine transactions.
FISCAL YEAR 2009 COMPARED WITH FISCAL YEAR 2008
(Loss)/Profit after Taxation. Ryanair recorded a loss on ordinary activities after taxation of €169.2 million in the 2009 fiscal year, as compared with a profit on ordinary activities after taxation of €390.7 million in the 2008 fiscal year. The loss, which was recorded notwithstanding an 8.4% increase in total operating revenues to €2,942.0 million from €2,713.8 million in the prior year, was primarily attributable to (i) a 58.9% increase in fuel and oil costs from €791.3 million to €1,257.1 million, (ii) an impairment charge of €222.5 million on the available-for-sale investment in Aer Lingus, reflecting a significant decline in the Aer Lingus share price from March 31, 2008 to March 31, 2009 and (iii) accelerated depreciation of €51.6 million arising from aircraft disposals during the year and an agreement to dispose of additional aircraft in the 2010 fiscal year. These negative effects were offset in part by an increase in revenues and a €11.3 million tax credit. The increase in revenues reflected an increase of 5.3% in scheduled revenues and an increase of 22.5% in ancillary revenues, each as described in more detail below. Total revenue per passenger decreased by 5.7%, primarily due to an 8.4% decrease in average fares, as offset in part by a 22.5% increase in ancillary revenues.
Scheduled Revenues. Ryanair’s scheduled passenger revenues increased 5.3%, from €2,225.7 million in the 2008 fiscal year, to €2,343.9 million in the 2009 fiscal year, as overall passengers booked increased 14.9%, from 50.9 million to 58.6 million. This change reflected increased scheduled passenger volumes on existing passenger routes and the successful launch of new bases at Alghero, Birmingham, Bologna, Bournemouth, Cagliari and Edinburgh in the 2009 fiscal year. The higher scheduled revenues were recorded notwithstanding a decrease of 8.4% in average fares and a one-percentage-point decrease in booked passenger load factors from 82% in the 2008 fiscal year to 81% in the 2009 fiscal year.
Passenger capacity (as measured in ASMs) during the 2009 fiscal year increased by 13.9% due to the addition of 18 Boeing 737-800 aircraft (net of disposals), as well a 15.2% increase in sectors flown (the effect of which was partially offset by a 1.1% decrease in the average length of passenger haul). Scheduled passenger revenues accounted for 79.7% of Ryanair’s total revenues for the 2009 fiscal year, compared with 82.0% of total revenues in the 2008 fiscal year.
Ancillary Revenues. Ryanair’s ancillary revenues, which comprise revenues from non-flight scheduled operations, car rentals, in-flight sales and Internet-related services, increased 22.5%, from €488.1 million in the 2008 fiscal year to €598.1 million in the 2009 fiscal year, while ancillary revenue per booked passenger increased to €10.22 from €9.58. The overall increases reflected higher revenues in each of the aforementioned categories. Revenues from non-flight scheduled operations, including revenues from excess baggage charges, debit and credit card transactions, sales of rail and bus tickets, accommodations and travel insurance, increased 27.3% to €425.8 million from €334.6 million in the 2008 fiscal year, and car rental revenues increased 27.3%, to €32.2 million from €25.3 million. The rate of increase in revenues from non-flight scheduled operations and car rental revenues exceeded the increase in overall passengers booked, while the rate of increase in the other categories lagged somewhat behind. Revenues from in-flight sales increased 13.5%, to €83.2 million from €73.3 million in the 2008 fiscal year. Revenues from Internet-related services increased 3.4%, from €55.0 million in the 2008 fiscal year to €56.9 million in the 2009 fiscal year.
The following table sets forth the components of ancillary revenues earned by Ryanair and each component expressed as a percentage of total ancillary revenues for each of the periods indicated:
| Fiscal Year ended March 31, | ||||||||||
| 2009 | 2008 | |||||||||
| (in millions of euro, except percentage data) | ||||||||||
Non-flight Scheduled | € | 425.8 | 71.2% | € | 334.6 | 68.5% | ||||
Car Rental | € | 32.2 | 5.4% | € | 25.3 | 5.2% | ||||
In-flight Sales | € | 83.2 | 13.9% | € | 73.3 | 15.0% | ||||
Internet-related | € | 56.9 | 9.5% | € | 54.9 | 11.3% | ||||
Total | € | 598.1 | 100.0% | € | 488.1 | 100.0% | ||||
Operating Expenses. As a percentage of total revenues, Ryanair’s operating expenses increased from 80.2% in the 2008 fiscal year to 96.9% in the 2009 fiscal year, reflecting the fact that operating expenses grew at a significantly faster rate than revenues. In absolute terms, total operating expenses increased 30.9%, from €2,176.7 million in the 2008 fiscal year, to €2,849.4 million in the 2009 fiscal year, principally as a result of the increase in booked passenger volume and the 15.2% increase in the number of sectors flown, which were reflected in increases in fuel expenses, route charges, staff costs, route and airport charges and handling charges. The increase in operating expenses also reflected the adverse impact of significantly higher jet fuel prices in U.S. dollars that were only partially offset by the strength of the euro against the U.S. currency, as well as an increase in depreciation and amortization expenses related to aircraft disposals. Depreciation, amortization, maintenance, aircraft rental and other expenses also increased, while marketing and distribution costs decreased. Total operating expenses per ASM increased by 15.4%, with the slower rate of growth reflecting the increase in passenger capacity (as measured in ASMs) during the 2009 fiscal year.
The following table sets forth the amounts in euro cents and percentage changes of Ryanair’s operating expenses (on a per ASM basis) for the fiscal years ended March 31, 2009 and March 31, 2008 under IFRS. These data are calculated by dividing the relevant expense amount (as shown in the consolidated financial statements) by the number of ASMs in the relevant year as shown in the table of “Selected Operating and Other Data” in Item 3 and rounding to the nearest euro cent; the percentage change is calculated on the basis of the relevant figures before rounding.
| Fiscal Year Ended March 31, 2009 | Fiscal Year Ended March 31, 2008 | % Change | ||||
Staff Costs | 0.66 | 0.69 | (4.9)% | |||
Depreciation and Amortization | 0.54 | 0.40 | 35.0% | |||
Fuel and Oil | 2.67 | 1.91 | 39.4% | |||
Maintenance, Materials and Repairs | 0.14 | 0.14 | 3.4% | |||
Aircraft Rentals | 0.17 | 0.18 | (5.5)% | |||
Route Charges | 0.61 | 0.63 | (3.0)% | |||
Airport and Handling Charges | 0.94 | 0.96 | (1.8)% | |||
Marketing, Distribution and Other | 0.32 | 0.33 | (3.0)% | |||
Total Operating Expenses | 6.05 | 5.24 | 15.4% | |||
Staff Costs. Ryanair’s staff costs, which consist primarily of salaries, wages and benefits, decreased 4.9% on a per-ASM basis, while in absolute terms, these costs increased 8.4%, from €285.3 million in the 2008 fiscal year to €309.3 million in the 2009 fiscal year. This increase in absolute terms was primarily attributable to a 21.0% increase in average headcount to 6,369 and a €3.8 million charge for share options granted to eligible employees. Employee numbers rose due to the growth of the business.
Depreciation and Amortization. Ryanair’s depreciation and amortization per ASM increased by 35.0%, while in absolute terms these costs/increased 45.6% from €176.0 million in the 2008 fiscal year, to €256.1 million in the 2009 fiscal year. This reflects an additional 10 owned aircraft (net of disposals) in the fleet at March 31, 2009 and accelerated depreciation of €51.6 million in relation to aircraft disposals during the year and an agreement to dispose of additional aircraft in the 2010 fiscal year. See “—Critical Accounting Policies—Long-lived Assets” above.
Fuel and Oil. Ryanair’s fuel and oil costs per ASM increased by 39.4%, while in absolute terms, these costs increased 15.4%by 58.9% from EUR124.4€791.3 million in the 2008 fiscal year ended March 31, 2006, to EUR143.5€1,257.1 million in the 2009 fiscal year, ended March 31, 2007, primarily reflecting higher depreciation
as a result of the net increase in the size of Ryanair's "owned" fleet from 86
to 101 aircraft due to the retirement of nine Boeing 737-200A aircraft. in
fiscal 2006 and a decline in the cost of amortization of capitalized maintenance
of Boeing 737-800 aircraft as a result of more favorable terms in Ryanair's new
engine maintenance agreement with GE; charges for fiscal year 2006 had been
reduced due to the retirement of nine Boeing 737-200A aircraft. The increase was
also offset in part by the effect of the strength of the euro against the U.S.
dollar on the depreciation and amortization charges relating to new aircraft
deliveries when expressed in euro.
Fuel and Oil. Ryanair's fuel and oil costs increased by 13.6% per ASM, and
by 50.0% in absolute terms to EUR693.3 million from EUR462.5 million in the
fiscal year ended March 31, 2006, in each case after giving effect to the Company'sCompany’s fuel hedging activities. The 58.9% increase reflected a 20.0%40.7% increase in average fuel prices paid and a 13.4% increase in the number of sectorshours flown, an increasethe effect of 6.1%which was offset in part by a decrease of 1.1% in the average sector length and the significant increase in the average dollar-denominated fuel price
discussed below, offset in part by the positive impact of the strengthening of the euro against the U.S. dollar during the period. Fuel and oil costs include the direct cost of fuel, the cost of delivering fuel to the aircraft, and aircraft de-icing costs. The average fuel price paid by Ryanair (calculated by dividing total scheduled fuel costs by the number of U.S. gallons of fuel consumed) increased 23.6%40.7% from EUR1.48€1.67 per U.S. gallon in the 2008 fiscal year ended
March 31, 2006 to EUR1.83€2.35 per U.S. gallon in the 2009 fiscal year, ended March 31,
2007, in each case after giving effect to the Company'sCompany’s fuel hedging activities.
53
Maintenance, Materials and Repairs. Ryanair'sRepairs. Ryanair’s maintenance, materials and repair expenses, which consist primarily of the cost of routine maintenance and the overhaul of spare parts, decreased 14.8%increased 3.4% on a per-ASM basis, while in absolute terms these expenses increased by 12.4%,17.8% from EUR37.4€56.7 million in the 2008 fiscal year, ended March 31, 2006, to EUR42.0€66.8 million in the 2009 fiscal year ended
March 31, 2007.year. The increase in absolute increaseterms during the fiscal year reflected the higher number of leased Boeing 737-800 aircraft, which grew to 3243 from 1735 during the year, and the increased level of activity, offset in part by a lower level of maintenance costs incurred due to the improved reliability of the Boeing 737-800s operated and the positive impact of the strengthening of the euro against the U.S. dollar during the period.
Marketing and Distribution Costs. Ryanair's marketing and distribution
costs (including baggage commissions) per ASM increased 29.6%, while in absolute
terms these costs increased by 71.0%, from EUR13.9
Aircraft Rentals. Ryanair recorded €78.2 million in aircraft rental expenses during the 2009 fiscal year, ended March 31, 2006 to EUR23.8a 7.6% increase from the €72.7 million reported in the 2008 fiscal year, ended March 31, 2007. The
increase in absolute terms was primarily the result ofreflecting an increase in the level
of marketing activity related to an increase of approximately 67% in theweighted average number of routes in operation (to 428 at year end) , the addition of three more bases
(bringingleased Boeing 737-800 aircraft by eight, bringing the total to 18) and increases in baggage commissions paid to airports
arising from the growth in ancillary revenues.
Aircraft Rentals. Ryanair recorded EUR58.2 million in aircraft rental
expense43 during the 2009 fiscal year, ended March 31, 2007, a 22.8% increase from the EUR47.4 million reported in fiscal year 2006, reflecting the additional 15
Boeing 737-800 aircraft onnegative effect of which was somewhat offset by lower lease during the year. An additional expenditure of
US$5.5 million was incurred on short-term leases during the fourth quarter of
fiscal 2006, due to a combination of a delay in aircraft deliveries due to a
strike of Boeing machinists in September 2005rates and the impact of a stronger euro versus the delayed
conversion training of some Dublin pilots to enable them to fly the new Boeing
737-800 aircraft.
U.S. dollar.
Route Charges and Airport and Handling Charges. Ryanair's Ryanair’s route charges per ASM decreased 8.3%3.0% in the 2009 fiscal year, ended March 31, 2007, while airport and handling charges per ASM decreased 4.1%1.8%. In absolute terms, route charges increased 21.1%10.5%, from EUR164.6€259.3 million in the 2008 fiscal year ended March 31, 2006,
to EUR199.2€286.6 million in the 2009 fiscal year, ended March 31, 2007, primarily as a result of the 20.0%15.2% increase in sectors flown and the increase(the effect of 6.1% in
average sector length, as well as an increase in route charges based on aircraft
weight, as the average weight of the fleet increased due to the higher
proportion of Boeing 737-800s in the fleet (as Ryanair still operated some
Boeing 737-200A aircraft in fiscal year 2006),which was offset in part by a reductionthe decrease of 1.1% in en route charges in certain EU countries.average sector length). In absolute terms, airport and handling charges increased 26.5%11.9%, from EUR216.3€396.3 million in the 2008 fiscal year, ended
March 31, 2006, to EUR273.6€443.4 million in the 2009 fiscal year, ended March 31, 2007, reflecting the overall growth in passenger volumes as well as increased costs at certain airports already served by Ryanair, particularly our Dublin base, which
grew significantly inLondon (Stansted) airport, where unit costs doubled during the 2009 fiscal year, 2007 and has much higher average costs per
passenger than our other airports, the effects of which werecharges at Dublin Airport, both offset in part by lower average costs at newRyanair’s newer airports and bases.
Marketing Distribution and Other Expenses. Ryanair's Ryanair’s marketing, distribution and other operating expenses, including those applicable to the generation of ancillary revenues, decreased 7.1%3.0% on a per-ASMper ASM basis in the 2009 fiscal year, ended March 31, 2007, althoughwhile in absolute terms, these costs increased 22.6%9.2%, from EUR79.6€139.1 million in the 2008 fiscal year ended March 31,
2006 to EUR104.9€151.9 million in the 2009 fiscal year, ended March 31, 2007 due towith the overall increase reflecting increased passenger numbers. This increase in passenger numbers, wasas partially offset by improved margins on some existing ancillary products and a reduction is some
indirect costs. Other expenses recorded in fiscal year 2006 reflected an
exceptional creditthe achievement of EUR5.9 million, arising from the settlement of an
insurance claim relating to scratches on six Boeing 737-200A aircraft that were
retired early during 2003. The decline on a per-ASM basis reflected improved
margins on some new and existing products, as well as cost reductions, realized
in relation to certain indirect overhead costs, while the increase in absolute
terms was primarily attributable to the increased passenger volumes.
54
Operating Profit.As a result of the factors outlined above, operating profit decreased 4.7%84.8% on a per-ASM basis in the 2009 fiscal year, ended March 31,
2007, but increased 25.8%and decreased 82.7% in absolute terms, from EUR375.0€537.1 million in the 2008 fiscal year ended March 31, 2006, to EUR471.7€92.6 million in the 2009 fiscal year ended March
31, 2007.
year.
Finance Income. Ryanair's Ryanair’s interest receivable and similar income increased
64.8%decreased 10.0%, from EUR38.2€83.9 million in the 2008 fiscal year ended March 31, 2006 to EUR63.0€75.5 million in the 2009 fiscal year, ended March 31, 2007, primarily reflecting lower average interest rates received on its deposits during the year, the impact of which was partially offset by higher average cash balances on hand due to Ryanair's continuing profitability, as well
as higher average interest rates received on our deposits during the year.
hand.
Finance Expense. Ryanair's Ryanair’s interest payable and similar charges increased 12.1%34.4%, from EUR74.0€97.1 million in the 2008 fiscal year ended March 31, 2006, to EUR82.9€130.5 million in the 2009 fiscal year, ended March 31, 2007, reflecting the increase in debt related to the acquisition of additional Boeing 737-800 aircraft. These costs are expected to continue to increase as Ryanair further expands its fleet.
Foreign Exchange Gains (Losses). Ryanair's Ryanair recorded foreign exchange gains of €4.4 million in the 2009 fiscal year, as compared with foreign exchange losses decreased to EUR0.9of €5.6 million in the 2008 fiscal year, ended March 31, 2007, from EUR1.2
million inwith the fiscal year ended March 31, 2006,different result being primarily due to the positive impact of changes in the U.K. pound sterling and U.S. dollar exchange rates against the euro.
euro during the 2009 fiscal year.
Taxation. The tax credit of €11.3 million recorded in the 2009 fiscal year was primarily due to the recognition of a deferred tax asset of €34.3 million in respect of net operating losses incurred and available to carry-forward to future periods. The recoverability of the deferred tax asset is based on future income forecasts which demonstrate that it is more likely than not that future profits will be available in order to utilize the deferred tax asset. The deferred tax asset’s recoverability is not dependent on material improvements over historical levels of pre-tax income, material changes in the present relationship between income reported for financial and tax purposes, or material asset sales or other non-routine transactions. The effective tax rate for the 2009 fiscal year ended March 31, 2007
was 3.4%a tax benefit of (6.3%), as compared to 9.5% in the fiscal year ended March 31, 2006. The effective tax rate reflects the statutory rate of Irish corporation tax of
12.5%; a release of a tax contingency reserve, principally from deferred tax, of
EUR34.2 million (which relates to the recognition of certain previously
unrecognized tax benefits, and which resulted in a benefit to the Company's
effective tax rate that is not reasonably expected to recur); the positive
impact of Ryanair.com (which benefits from a reduced corporation tax rate); and
the continued benefit of Ryanair's international leasing and internet-related
businesses. Profits from qualifying activities at Ryanair.com are currently
levied at an effective 10% tax rate in Ireland. Ryanair.com will continue to be
eligible for the 10% preferential tax treatment until the scheduled expiration
of its license in 2010.
FISCAL YEAR 2006 COMPARED WITH FISCAL YEAR 2005
Profit after Taxation. Ryanair's profit on ordinary activities after
taxation increased by 9.5%, from EUR280.0 million in the fiscal year ended March
31, 2005, to EUR306.7 million in the fiscal year ended March 31, 2006, primarily
reflecting a 28.3% increase in total operating revenues from EUR1,319.0 million
to EUR1,692.5 million. The increase in revenues reflected an increase of 27.1%
in scheduled revenues and of 35.7% in ancillary revenues, each as described in
more detail below. Total revenue per passenger increased by approximately 2%,
primarily due to an approximately 1% increase in average fares and the growth in
ancillary revenues. Ryanair's profit on ordinary activities before taxation
increased 9.6%, from EUR309.2 million in the fiscal year ended March 31, 2005 to
EUR338.9 million in the fiscal year ended March 31, 2006.
Scheduled Revenues. Ryanair's scheduled passenger revenues increased 27.1%,
from EUR1,128.1 million in the fiscal year ended March 31, 2005, to EUR1,433.4
million in the fiscal year ended March 31, 2006, as overall passengers booked
increased 26.1%, from 27.6 million to 34.8 million, reflecting increased
scheduled passenger volumes on existing passenger routes, the successful launch
of new bases at Liverpool, Shannon and Pisa and in Cork and Nottingham East
Midlands in the third and fourth quarters of fiscal 2006, respectively. The
higher scheduled revenues also reflected an increase of approximately 1% in
average fares. Booked passenger load factors decreased from 84% to 83%.
Passenger capacity (as measured in ASMs) during fiscal 2006 increased by
approximately 36% due to the addition of 21 Boeing 737-800 aircraft, offset in
part by the retirement of nine Boeing 737-200A aircraft, as well as an 8.1%
increase in the average length of passenger haul and a 21.2% increase in sectors
flown. Scheduled passenger revenues accounted for 84.7% of Ryanair's total
revenues for the fiscal year ended March 31, 2006, compared with 85.5% of total
revenues in fiscal year ended March 31, 2005.
55
The following tables set forth the components of ancillary revenues earned
by Ryanair and each component expressed as a percentage of total ancillary
revenues for each of the periods indicated:
Fiscal Year ended March 31,
2006 2005
------------------------------------------------------------------------------------------
(in thousands of euro, except percentage data)
Non-flight Scheduled.............. EUR166,796 64.4% EUR115,916 60.7%
Car Rental........................ EUR19,752 7.6% EUR15,706 8.2%
In-flight Sales................... EUR45,306 17.5% EUR34,939 18.3%
Internet-Related.................. EUR27,299 10.5% EUR24,360 12.8%
------------------------------------------------------------------------------------------
Total............................. EUR259,153 100.0% EUR190,921 100.0%
==========================================================================================
Ancillary Revenues. Ryanair's ancillary revenues, which comprise revenues
from non-flight scheduled operations, car rentals, in-flight sales and
internet-related services, increased 35.7%, from EUR190.9 million in the fiscal
year ended March 31, 2005 to EUR259.2 million in the fiscal year ended March 31,
2006, while ancillary revenue per booked passenger increased to EUR7.45 from
EUR6.92. The overall increase reflected higher revenues in each of the
components. Revenues from non-flight scheduled operations, including revenues
from excess baggage charges, debit and credit card transactions, sales of rail
and bus tickets, hotel accommodation and travel insurance, increased 43.9% to
EUR166.8 million from EUR115.9 million in fiscal 2005, while car rental revenues
increased by 25.8%, to EUR19.8 million from EUR15.7 million. Revenues from
in-flight sales increased 29.7%, to EUR45.3 million from EUR34.9 million in
fiscal year 2005. Revenues from internet-related services, primarily commissions
received from products sold on websites linked to the Ryanair.com website,
increased 12.1%, from EUR24.4 million in fiscal year 2005 to EUR27.3 million in
fiscal year 2006.
Operating Expenses. As a percentage of total revenues, Ryanair's operating
expenses increased from 74.1% in the fiscal year ended March 31, 2005 to 77.8%
in the fiscal year ended March 31, 2006, reflecting the fact that operating
expenses grew at a faster rate than our revenues. In absolute terms, total
operating expenses increased 34.7%, from EUR978.3 million in the fiscal year
ended March 31, 2005, to EUR1,317.5 million in the fiscal year ended March 31,
2006, principally as a result of the increase in scheduled passenger volume and
the 21.2% increase in number of sectors flown, which were reflected in increases
in fuel expenses, route charges, staff costs and airport and handling charges.
The increase in operating expenses also reflected the adverse impact of an
increase of approximately 8% in average sector length and higher jet kerosene
prices in U.S. dollars that were only partially offset by the strength of the
euro against the U.S currency. Nonetheless, total operating expenses per ASM
declined by 1.2%, reflecting declines on a per ASM basis in all components other
than fuel and oil costs and aircraft rentals.
The following table sets forth the amounts in euro cents and percentage
changes of Ryanair's operating expenses (on a per ASM basis) for the fiscal
years ended March 31, 2006 and March 31, 2005 under IFRS. These data are
calculated by dividing the relevant expense amount (as shown in the Consolidated
Financial Statements) by the number of ASMs in the relevant year as shown in the
table of "Selected Operating and Other Data" in Item 3 and rounding to the
nearest euro cent; the percentage change is calculated on the basis of the
relevant figures before rounding.
56
Fiscal Year Fiscal Year
Ended Ended
March 31, 2006 March 31, 2005 % Change
------------------------------------------------------------
Staff Costs................................................. 0.71 0.80 -11.2%
Depreciation and Amortization............................... 0.51 0.62 -17.3%
Fuel and Oil................................................ 1.90 1.49 27.9%
Maintenance, Materials and Repairs.......................... 0.15 0.15 4.4%
Marketing and Distribution.................................. 0.06 0.11 -48.0%
Aircraft Rentals............................................ 0.20 0.19 3.8%
Route Charges............................................... 0.68 0.76 -11.0%
Airport and Handling Charges................................ 0.89 1.00 -11.1%
Other Operating Expenses.................................... 0.35 0.45 -21.0%
Purchase Accounting Adjustment (a).......................... - -0.07 -%
Aircraft Insurance Claim (b)................................ -0.02 - -%
------------------------------------------------------------
Total Operating Expenses.................................... 5.43 5.50 -1.2%
============================================================
(a) Subsequent to the acquisition of Buzz Stansted Ltd. in April 2003, Ryanair
renegotiated the terms and conditions of certain onerous leases and agreed to
return the aircraft to the lessors in late 2004, thereby releasing Ryanair from
any remaining lease obligations at that time. IFRS 3 provides that such an
adjustment must be made only in the 12-month period following the acquisition,
and, accordingly, as the event occurred more than 12 months after the
acquisition date, this adjustment resulted in a one-off, non-cash credit to the
income statement for the year to March 31, 2005 of EUR11.9 million.
(b) Operating expenses in fiscal 2006 included a credit of EUR5.9 million
arising from the settlement of an insurance claim for the scribing of six Boeing
737-200 aircraft.
Staff Costs. Ryanair's staff costs, which consist primarily of salaries,
wages and benefits, decreased 11.2% on a per ASM basis, while in absolute terms,
these costs increased 21.0%, from EUR141.7 million in the fiscal year ended
March 31, 2005, to EUR171.4 million in the fiscal year ended March 31, 2006,
primarily reflecting an 17.6% increase in average employee numbers to 3,063 and
the impact of pay increases of 3% granted during the year.
Depreciation and Amortization. Ryanair's depreciation and amortization per
ASM decreased by 17.3%, while in absolute terms these costs increased 12.7% from
EUR110.4 million in the fiscal year ended March 31, 2005, to EUR124.4 million in
the fiscal year ended March 31, 2006, primarily reflecting higher depreciation
as a result of the net increase in the size of Ryanair's "owned" fleet from 74
to 86, offset by lower amortization charges due to the retirement of nine Boeing
737-200A aircraft and a decline in the cost of amortization of capitalized
maintenance of Boeing 737-800 aircraft as a result of more favorable terms in
Ryanair's new engine maintenance agreement with GE. The increase was also offset
in part by the effect of the strength of the euro against the U.S. dollar on the
depreciation and amortization charges relating to new aircraft deliveries when
expressed in euro.
Fuel and Oil. Ryanair's fuel and oil costs increased by 27.9% per ASM, and
by 74.3% in absolute terms to EUR462.5 million from EUR265.3 million in the
fiscal year ended March 31, 2005, in each case after giving effect to the
Company's fuel hedging activities. The increase reflected a 21.2% increase in
the number of sectors flown, an increase of approximately 8% in the average
sector length and the significant increase in the average dollar-denominated
fuel price, offset in part by the positive impact of the strengthening of the
euro against the U.S. dollar during the period. Fuel and oil costs include the
direct cost of fuel, the cost of delivering fuel to the aircraft and aircraft
de-icing costs. The average fuel price paid by Ryanair (calculated by dividing
total scheduled fuel costs by the number of U.S. gallons of fuel consumed)
increased nearly 39.6% from EUR1.06 per U.S. gallon in the fiscal year ended
March 31, 2005 to EUR1.48 per U.S. gallon in the fiscal year ended March 31,
2006, in each case after giving effect to the Company's fuel hedging activities.
57
Maintenance, Materials and Repairs. Ryanair's maintenance, materials and
repair expenses, which consist primarily of the cost of routine maintenance and
the overhaul of spare parts, increased 4.4% on a per ASM basis, while in
absolute terms these expenses increased by 42.2%, from EUR26.3 million in the
fiscal year ended March 31, 2005, to EUR37.4 million in the fiscal year ended
March 31, 2006. The absolute increase reflected the higher number of leased
Boeing 737-800 aircraft, which grew to 17 from 13 during the year, offset in
part by a lower level of maintenance costs incurred due to the improved
reliability of the Boeing 737-800s operated, the release of maintenance overhaul
provisions of EUR5.9 million pre-tax during the year associated with the
earlier-than-scheduled return of six leased Boeing 737-300s, the retirement of
the remaining nine Boeing 737-200As and the positive impact of the strengthening
of the euro against the U.S. dollar during the period. Under IFRS, the
accounting treatment for these costs with respect to leased aircraft differs
from that for aircraft owned by the Company, for which such costs are
capitalized and amortized.
Marketing and Distribution Costs. Ryanair's marketing and distribution
costs per ASM decreased 48.0%, while in absolute terms these costs decreased by
29.1%, from EUR19.6 million in the fiscal year ended March 31, 2005 to EUR13.9
million fiscal year ended March 31, 2006. The decrease in absolute terms was
primarily the result of a reduction in the level of marketing activity and
related expenditures.
Aircraft Rentals. Ryanair recorded EUR47.4 million in aircraft rental
expense during the fiscal year ended March 31, 2006, a 119.8% increase from the
EUR21.5 million reported in fiscal year 2005, reflecting the additional four
Boeing 737-800 aircraft on lease during the year. This EUR21.5 million amount
for fiscal year 2005 included an EUR11.9 million credit due to a change in the
accounting treatment of business combinations following the adoption of IFRS,
relating to the reversal of certain aircraft lease provisions arising on the
acquisition of Buzz and reflected as a reduction to aircraft rentals in the
income statement for fiscal year 2005. An additional expenditure of U.S.$5.5
million was incurred on short-term leases during the fourth quarter of fiscal
2006, due to a combination of a delay in aircraft deliveries due to a strike of
Boeing machinists in September 2005 and the impact of the delayed conversion
training of some Dublin pilots to enable them to fly the new Boeing 737-800
aircraft, was largely offset by the decrease in costs resulting from the early
return of six leased Boeing 737-300 aircraft to ILFC.
Route and Airport and Handling Charges. Ryanair's route charges per ASM
decreased 11.0% in the 2008 fiscal year ended March 31, 2006, while airport and
handling charges per ASM decreased 11.1%. In absolute terms, route charges
increased 21.3%, from EUR135.7 million in the fiscal year ended March 31, 2005,
to EUR164.6 million in the fiscal year ended March 31, 2006, primarily as a
result of the 21.2% increase in sectors flown and the increase of approximately
8% in average sector length, as well as an increase in route charges based on
aircraft weight, as the average weight of the fleet increased due to the higher
proportion of Boeing 737-800s, offset in part by a reduction in en route charges
in certain EU countries. In absolute terms, airport and handling charges
increased 21.3%, from EUR178.4 million in the fiscal year ended March 31, 2005,
to EUR216.3 million in the fiscal year ended March 31, 2006, reflecting the
overall growth in passenger volumes as well as increased costs at certain
airports already served by Ryanair, the effects of which were offset in part by
lower average costs at new airports and bases.
Other Expenses. Ryanair's other operating expenses, including those
applicable to the generation of ancillary revenues, decreased 21.0% on a per ASM
basis in the fiscal year ended March 31, 2006, although in absolute terms these
costs remained virtually unchanged, from EUR79.5 million in the fiscal year
ended March 31, 2005 to EUR79.6 million in the fiscal year ended March 31, 2006.
Other expenses recorded in fiscal year 2006 reflected an exceptional credit of
EUR5.9 million, arising from the settlement of an insurance claim relating to
scratches on six Boeing 737-200A aircraft that were retired early during 2003.
The decline on a per ASM basis reflected improved margins on some new and
existing products, as well as cost reductions realized in relation to certain
indirect overhead costs, while the increase in absolute terms was primarily
attributable to the increased passenger volumes.
58
Operating Profit. As a result of the factors outlined above, operating
profit decreased 19.3% on a per ASM basis in the fiscal year ended March 31,
2006, but increased 10.1% in absolute terms, from EUR340.7 million in the fiscal
year ended March 31, 2005, to EUR375.0 million in the fiscal year ended March
31, 2006.
Finance Income. Ryanair's interest receivable and similar income increased
34.8%, from EUR28.3 million in the fiscal year ended March 31, 2005 to EUR38.2
million in the fiscal year ended March 31, 2006, primarily reflecting higher
average cash balances on hand due to Ryanair's continuing profitability, as well
as higher average interest rates on deposit during the year.
Finance Expense. Ryanair's interest payable and similar charges increased
28.3%, from EUR57.6 million in the fiscal year ended March 31, 2005, to EUR74.0
million in the fiscal year ended March 31, 2006, reflecting the increase in debt
related to the acquisition of additional Boeing 737-800 aircraft. These costs
are expected to continue to increase as Ryanair further expands its fleet.
Foreign Exchange Gains (Losses). Ryanair's foreign exchange losses
decreased to EUR1.2 million in the fiscal year ended March 31, 2006, from EUR2.3
million in the fiscal year ended March 31, 2005, primarily due to the positive
impact of changes in the sterling and U.S. dollar exchange rates against the
euro.
Taxation. The effective tax rate for the fiscal year ended March 31, 2006
was 9.5%, compared to 9.4% in the fiscal year ended March 31, 2005. The effective tax rate reflects the statutory rate of Irish corporation tax of 12.5%, the positive impact of the reduced rates tax applicable to Ryanair.com (which benefits from a reduced
corporation tax rate)and other Internet-related businesses and the continued benefitloss due to the impairment of Ryanair's international
leasing and internet-related businesses. Profits from qualifying activities at
Ryanair.com are currently levied at an effective 10% tax rate in Ireland.
Ryanair.com will continuethe Company’s available-for-sale financial asset (which is not subject to be eligible for the 10% preferential tax treatment
until the scheduled expiration of its license in 2010. Ryanair recorded an
income tax provision of EUR32.2 million for the fiscal year ended March 31,
2006, compared to an income tax provision of EUR29.2 million for the fiscal year
ended March 31, 2005.
corporation tax).
The Company'sCompany’s results of operations have varied significantly from quarter to quarter, and management expects these variations to continue. Among the factors causing these variations are the airline industry'sindustry’s sensitivity to general economic conditions and the seasonal nature of air travel. Ryanair typically records higher revenues and income in the first half of each fiscal year ended March 31 than the second half of such year.
U.S. GAAP RECONCILIATION
The Company's consolidated net income determined in accordance with U.S.
GAAP was EUR433.3 million, EUR314.8 million and EUR283.4 million for the fiscal
years ended March 31, 2007, 2006 and 2005, respectively, as compared with net
income of EUR435.6 million, EUR306.7 million and EUR280.0 million, respectively,
for the same periods, as determined under IFRS.
The Company's total assets determined in accordance with U.S. GAAP were
EUR5,731.6 million and EUR4,672.9 million at March 31, 2007 and 2006,
respectively, as compared with EUR5,691.2 million and EUR4,634.2 million,
respectively, under IFRS. Shareholders' equity determined in accordance with
U.S. GAAP was EUR2,567.5 million, EUR2,020.4 million and EUR1,629.8 million at
March 31, 2007, 2006 and 2005, respectively, as compared with EUR2,539.8 million
EUR1,992.0 million and EUR1,734.5 million, respectively, under IFRS. The main
differences affecting the determination of shareholders' equity at March 31,
2007 include the different treatment of pension costs, unrealized losses on
derivative financial instruments and capitalized interest on aircraft
acquisitions. For a discussion of the principal differences between IFRS and
U.S. GAAP as they relate to the Company's consolidated net income and
shareholders' equity, see Note 28 to the Consolidated Financial Statements
included in Item 18.
59
RECENTLY ISSUED ACCOUNTING STANDARDS
Please see Note 281 to the Consolidated Financial Statementsconsolidated financial statements included in Item 18 for information on recently issued accounting standards that are material to the Company.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity. The Company finances its working capital requirements through a combination of cash generated from operations and bank loans for the acquisition of aircraft. See “Item 3. Key Information—Risk Factors—Risks Related to the Company—The Company Will Incur Significant Costs Acquiring New Aircraft” for more information about risks relating to liquidity and capital resources. The Company had cash and liquid resources under IFRS at March 31, 20062010 and 20072009 of EUR1,972.0€2,813.4 million and EUR2,198.0€2,278.2 million, respectively, with
therespectively. The increase at March 31, 20072010 primarily reflectingreflects cash generated from operating activities of €871.5 million and proceeds from the growth in profits,sale of three Boeing 737-800 aircraft and two spare engines, offset in part by the cash used to fund the purchase of tangible assets, property, plant, and equipment—primarily the42 new Boeing 737-800 aircraft andaircraft. During the acquisition of 25.2% of Aer Lingus at a
cost of EUR344.9 million During the2010 fiscal year, the Company funded its EUR495.0€997.8 million in purchases of tangible assetsproperty, plant, and equipment with EUR339.4€788.1 million in loans and EUR155.6 million inthe balance from cash generated from operations. Cash and liquid resources included EUR200.0€67.8 million and EUR254.9€291.6 million in "restricted cash"“restricted cash” held on deposit as collateral for certain derivative financial instruments entered into by the Company with respect to its aircraft financing obligations and other banking arrangements at March 31, 20062010 and 2007, as well as EUR4.0 million held
in escrow relating2009, respectively. With respect to ongoing legal proceedings at both Marchaircraft deliveries between November 2009 and January 2011, the Company announced on July 31, 20062009, that it had entered into an agreement with a syndicate of banks consisting of BNP Paribas, Crédit Agricole Corporate and 2007.Investment bank and Sumitomo Mitsui Banking Corporation to provide US $1.6 billion of financing for these aircraft to support Ryanair’s Export Import Bank of the United States (the “Ex-Im Bank”) euro-denominated export credit facilities. See "Item“Item 8. Financial Information--OtherInformation—Other Financial Information--LegalInformation—Legal Proceedings."
”
The Company'sCompany’s net cash inflowinflows from operating activities in the 2010 and 2009 fiscal years 2006 and 2007 totaled EUR610.6amounted to €871.5 million and EUR869.9€413.2 million, respectively, reflecting the strong growthincrease in the Company's profitability and increases in
cash received for ticket purchases during these periods.Company’s operating profitability. During the last two fiscal years, Ryanair'sRyanair’s primary cash requirements have been for operating expenses, additional aircraft, including advance payments in respect of the new
fleet of Boeing 737-800s and related flight equipment, payments on related indebtedness and payments of corporation tax (asas well as payments for our stake
in Aer Lingus in fiscal year 2007).share buy-backs. Cash generated from operations has been the principal source for these cash requirements, supplemented primarily by aircraft-related bank loans.
The Company'sCompany’s net cash used in investing activities in fiscal years 20062010 and 20072009 totaled EUR337.3€1,549.1 million and EUR1,158.0€388.3 million, respectively, primarily reflecting the Company'sCompany’s capital expenditures, and investment of cash with maturities of greater than three months, as described in more detail below, and the acquisition of 25.2% of Aer Lingus at a cost of EUR344.9
million in fiscal year 2007.
below.
The Company'sCompany’s net cash provided by financing activities totaled EUR293.5€572.3 million in the 2010 fiscal 2006year and EUR195.6€87.5 million in the 2009 fiscal 2007,year, largely reflecting the receipt of proceeds from long-term borrowings of EUR386.8€788.1 million and EUR339.4€459.0 million in fiscal years 20062010 and 2007,2009, respectively, offset in part by repayments of long-term borrowings of EUR123.9€230.3 million and EUR155.1€327.1 million in fiscal years 20062010 and 2007,2009, respectively.
Capital Expenditures.The Company'sCompany’s net cash outflows for capital expenditures in fiscal years 20062010 and 20072009 were EUR546.2€997.8 million and EUR495.0€702.0 million, respectively. Ryanair has funded a significant portion of its acquisition of new Boeing 737-800 aircraft and related equipment through borrowings under facilities provided by international financial institutions on the basis of guarantees issued by the Export-Import Bank of the United States
("ExIm Bank"), as described in more detail below.Ex-Im Bank. At March 31, 2007,2010, Ryanair had taken deliverya fleet of 133232 Boeing 737-800 aircraft, the majority of which (151 aircraft) were funded by ExIm Bank guaranteed financing
(91 aircraft).Ex-Im Bank-guaranteed financing. Other sources of on-balance-sheet financeaircraft financing utilized by Ryanair are Japanese operating leaseOperating Leases with call options ("JOLCOs"Call Options (“JOLCOs”), which are treated as finance leases (8 aircraft),(20 of the aircraft in the fleet as of March 31, 2010) and commercial debt finance (2 aircraft)financing (6 of the aircraft in the fleet as of March 31, 2010). The
remaining 3255 Boeing 737-800 aircraft in Ryanair'sRyanair’s fleet at March 31, 20072010 were financed through operating lease arrangements. 60
acquisition relatedacquisition-related working capital requirements. Management believes that the working capital available to the Company is sufficient for its present requirements and will be sufficient to meet its anticipated requirements for capital expenditures and other cash requirements for the 2011 fiscal year 2008.
year.
The table on the following tablepage summarizes the delivery schedule for each of the Boeing 737-800 aircraft Ryanair has purchased, or is required to purchase, under its past and current contracts with Boeing, including through the exercise of purchase options. These Boeing 737-800s are identical in all significant respects, having 189 seats and the same cockpit and engine configuration. The table also provides details of the "Basic Price"“Basic Price” (equivalent to a standard list price for an aircraft of this type) for each of these aircraft. The Basic Price for each of the firmfirm-order aircraft to be delivered pursuant to the 2005 Boeing contract, as well as for each of the firmfirm-order aircraft that remained to be delivered and purchase options outstanding under the prior contracts at January 1, 2005, will be increased by (a) an estimated U.S.$900,000$900,000 per aircraft for certain "buyer furnished"“buyer furnished” equipment the companyCompany has asked Boeing to purchase and install on each of the aircraft, and (b) an "Escalation Factor"“Escalation Factor” designed to increase the Basic Price of any individual aircraft to reflect increases in the published U.S. Employment Cost and Producer Price indices from the time the Basic Price wasis set through the period oftime six months prior to the delivery of such aircraft. The Basic Price is also subject to decrease to take into account certain concessions granted to the Company by Boeing pursuant to the terms of the contracts. These concessions take the form of credit memoranda, which the Company may apply towards the purchase of goods and services from Boeing or towards certain payments in respect of the purchase of the aircraft. These credit memoranda are generally incorporated into Boeing’s final aircraft invoices and thus reduce the amount paid by Ryanair for aircraft. Boeing and CFM International S.A. (the manufacturer of the CFM56-7B engines that power the Boeing 737-800 aircraft) have also agreed to give the Company certain allowances for promotional and other activities, as well as provide other goods and services to the Company on concessionary terms. These credit memoranda and allowances will effectively reduce the price of
each aircraft to the Company. As a result the Company expectsof credit memoranda received from Boeing, the effective price of each aircraft willpurchased in the past has been, and the effective prices of aircraft to be delivered in the future are expected to be, significantly below the unadjusted Basic PricePrices in the table on the following table.
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Aircraft Delivery Schedule
Deliveries and Scheduled Deliveries in the Fiscal Year ending March 31, | 1998 Boeing Contract (Incl. Options) | 2002 Boeing Contract (Incl. Options) | 2003 Boeing Contract (Incl. Options) | 2005 Boeing Contract (Incl. Options) | 737-800 Disposals | Total No. of Boeing 737-800 Aircraft | ||||||||||||
1999 | 1 | — | — | — | — | 1 | ||||||||||||
2000 | 4 | — | — | — | — | 4 | ||||||||||||
2001 | 10 | — | — | — | — | 10 | ||||||||||||
2002 | 5 | — | — | — | — | 5 | ||||||||||||
2003 | 8 | 5 | — | — | — | 13 | ||||||||||||
2004 | — | 18 | — | — | — | 18 | ||||||||||||
2005 | — | 13 | 14 | — | — | 27 | ||||||||||||
2006 | — | 16 | 9 | — | — | 25 | ||||||||||||
2007 | — | 27 | 1 | 2 | — | 30 | ||||||||||||
2008 | — | 21 | — | 15 | (6 | ) | 30 | |||||||||||
2009 | — | 3 | — | 32 | (17 | )(a) | 18 | |||||||||||
2010 | — | — | — | 54 | (3 | ) | 51 | |||||||||||
Total as of March 31, 2010 | 28 | 103 | 24 | 103 | (26 | ) | 232 | |||||||||||
2011 | — | — | — | 50 | (10 | ) | 40 | |||||||||||
2012 | — | — | — | 25 | (c) | (10 | ) | 15 | ||||||||||
2013 | — | — | — | 15 | (3 | ) | 12 | |||||||||||
Expected Total as of March 31, 2013 | 28 | 103 | 24 | 193 | (49 | )(b) | 299 | |||||||||||
Basic Price per aircraft (unadjusted) | $ | 47 | $ | 51 | $ | 51 | $ | 51 | ||||||||||
| (a) | This includes the aircraft that was involved in the |
| (b) | At June 30, 2010 the Company had sold and delivered a cumulative total 25 Boeing 737-800 aircraft. The Company expects to dispose of 23 further aircraft before March |
| (c) | On December 18, 2009, Ryanair exercised 10 |
The following table summarizes the aggregate purchase options available to the Company under its contracts with Boeing atas of the start and end of fiscal 2007
and at September 20, 2007,dates specified, broken down by periods in which the relevant option aircraft are deliverable.
| For Deliveries in Fiscal 2007 – 2011 | For Deliveries in Fiscal 2012 – 2014 | Total Boeing 737-800 Options | ||||||
Options available as of April 1, 2007 | 67 | 70 | 137 | |||||
Options granted in the period | — | — | — | |||||
Options exercised in the period | (27 | ) | — | (27 | ) | |||
Options cancelled in the period | — | — | — | |||||
Options available as of March 31, 2008 | 40 | 70 | 110 | |||||
Options granted in the period | — | — | — | |||||
Options exercised in the period | (30 | ) | — | (30 | ) | |||
Options cancelled in the period | — | — | — | |||||
Options available as of March 31, 2009 | 10 | 70 | 80 | |||||
Options granted in the period | — | — | — | |||||
Options exercised in the period | (10 | ) | — | (10 | ) | |||
Options cancelled in the period | — | — | — | |||||
Options available as of March 31, 2010 | — | 70 | 70 | |||||
Options granted after March 31, 2010 | — | — | — | |||||
Options exercised after March 31, 2010 | — | — | — | |||||
Options cancelled after March 31, 2010 | — | — | — | |||||
Options available as of June 30, 2010 | — | 70 | 70 | |||||
As can be seen from the delivery schedule table above,on the preceding page, delivery of the Boeing 737-800s already ordered will enable the Company to increase the size of its summer schedule fleet by between 13 and 4140 additional aircraft (net of planned disposals) eachin fiscal year during the period from2011, by 15 additional aircraft (net of planned disposals) in fiscal 2008 toyear 2012 and by 12 additional aircraft (net of planned disposals) in fiscal 2012, significantlyyear 2013, thereby increasing the size of the fleet, which is expected to total 262299 at the end of that period (assuming that the planned disposal and/or lease return of 4623 such aircraft is completed on schedule). If traffic growth proves to be greater than can be satisfied by these new aircraft, the Company may exercise its rights to acquire some of the 110 option aircraft detailed in the above table to cater to this demand.
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Capital Resources. Ryanair'sResources. Ryanair’s long-term debt (including current maturities) totaled EUR1,677.7€2,398.4 million at March 31, 20062009 and EUR1,862.1€2,956.2 million at March 31, 2007,2010, with the increase being primarily attributable to the financing of new aircraft. Please see the table "Obligations“Obligations Due by Period" in "-Contractual
Obligations"Period” below for more information on Ryanair'sRyanair’s long-term debt (including current maturities) and finance leases as of March 31, 2007.2010. See also Note 11 to the Consolidated Financial Statementsconsolidated financial statements included in Item 18 for further information on the maturity profile of the interest rate structure and other information on, the Company'sCompany’s borrowings.
The Company'sCompany’s purchase of the 13354 Boeing 737-800 aircraft delivered as of
March 31, 2007,in the 2010 fiscal year has been funded by a combination of structuresfinancing solutions, including bank loans supported by ExImEx-Im Bank guarantees (91(42 aircraft), JOLCOs (8 aircraft),
commercial debt (2 aircraft) and sale-and-leaseback structures (32financings (12 aircraft). At March 31, 2007,2010, the majority of the aircraft in Ryanair’s fleet had been financed through loan facilities with various financial institutions active in the structured export finance sector and supported by a loan guarantee from ExImEx-Im Bank. Each of these facilities takes essentially the same form and is based on the documentation developed by Ryanair and ExImEx-Im Bank, which follows standard market forms for this type of financing. On the basis of an ExImEx-Im Bank guarantee with regard to the financing of up to 85% of the eligible U.S. and foreign content represented in the net purchase price of the relevant aircraft, the financial institution enters into a commitment letter with the Company to provide financing for a specified number of aircraft benefiting from such a guarantee; loans are then drawn down as the aircraft are delivered and payments to Boeing become due. Each of the loans under the facilities is on substantially similar terms, having a maturity of twelve12 years from the drawdown date and being secured by a first priority mortgage in favor of a security trustee on behalf of ExImEx-Im Bank.
Through the use of interest rate swaps, Ryanair has effectively converted a significant portion of its floating-rate debt under its financing facilities into fixed-rate debt. LoansApproximately 45% of the loans for approximately 41% ofthe aircraft acquired under the above facilities are not covered by such swaps and have therefore remained at floating rates linked to EURIBOR;EURIBOR, with the interest rate exposure from these loans islargely hedged by placing a similar amount of cash
on deposit at floating interest rates. The net result is that Ryanair has effectively swapped or drawn down fixed-rate euro-denominated debt with a maturity ofmaturities between 7 and 12 years in respect of more than
approximately 59%55% of its outstanding debt financing at March 31, 2007.
2010. 30% of this debt has been partially swapped, with the relevant swaps covering the first 7 years of the 12-year amortizing period.
The table below illustrates the effect of swap transactions (each of which is with an established international financial counterparty) on the profile of Ryanair'sRyanair’s total outstanding debt at March 31, 2007.2010. See "Item“Item 11. Quantitative and Qualitative Disclosures About Market Risk-InterestRisk—Interest Rate Exposure and Hedging"Hedging” for additional details on the Company'sCompany’s hedging transactions.
At March 31, 2010 | EUR Fixed | EUR Floating | |||||
| (millions) | |||||||
Borrowing profile before swap transactions | € | 737.9 | € | 2,218.3 | |||
Interest rate swaps—Debt swapped from floating to fixed | 901.7 | (901.7 | ) | ||||
Borrowing profile after swap transactions | € | 1,639.6 | € | 1,316.6 | |||
The weighted-average interest rate on the cumulative borrowings under these facilities of EUR1,862.1€2,956.2 million at March 31, 20072010 was 4.87%2.76%. Ryanair'sRyanair’s ability to obtain additional loans pursuant to each of the facilities in order to finance a portionthe price of the purchase price offuture Boeing 737-800 aircraft to be
delivered in the futurepurchases is subject to the issuance of further bank commitments byand the
banks and satisfaction of various conditions contained in the documentation for
the facilities.contractual conditions. These conditions include, among other things, the execution of satisfactory documentation, the requirement that Ryanair perform all of its obligations under the Boeing agreements and provide satisfactory security interests in the aircraft (and related assets) in favor of the lenders and ExImEx-Im Bank, and that Ryanair does not suffer a material adverse change in its conditions or prospects (financial or otherwise).
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ExIm Bank's
Ex-Im Bank’s policy on facilities of this type is to issue a binding final commitment approximately six months prior to delivery of each aircraft being financed. ExImEx-Im Bank has already issued final binding commitments and related guarantees with respect to the 91 ExIm157 (net of 25 aircraft disposals) Ex-Im Bank-financed Boeing 737-800 aircraft delivered between 1999 and March 2007. ExIm Bank's31, 2010. Ex-Im Bank’s final binding commitment is also subject to certain conditions set forth in the documentation for facilities and the ExImEx-Im Bank guarantee. These conditions include, among other things, the execution of satisfactory documentation, the creation and maintenance of the lease and related arrangements described below, that Ryanair provide satisfactory security interests in the aircraft (and related assets) in favor of ExImEx-Im Bank and the lenders, and that the subject aircraft be registered in Ireland, be covered by adequate insurance and maintained in a manner acceptable to ExImEx-Im Bank. Ryanair expects that any future commitments or guarantees issued by ExImEx-Im Bank will contain similar conditions. The terms of the facilities and the ExImEx-Im Bank guarantee require that Ryanair pay certain fees in connection with such financings. In particular, these fees include arrangement fees paid to the facility arranger, and a commitment fee based on the unutilized and non-cancelled portion of the guarantee commencing 60 days from the date of issuance of the guarantee and payable semi-annually in arrears. An exposure fee for the issuance of the guarantee on the date of delivery is also payable to ExImEx-Im Bank (based on the amount of the guarantee). Ryanair'sRyanair’s payment of the 3%applicable exposure fee to ExImEx-Im Bank of(based on the amount of the loan providedprovided) is eligible for financing under the facilities. Ryanair anticipates that similar fees will be incurred as additional aircraft are delivered and financed.
As part of its ExImEx-Im Bank guarantee-based financing of the Boeing 737-800's,737-800s, Ryanair has entered into certain lease agreements and related arrangements. Pursuant to these arrangements, legal title to 91the 157 aircraft delivered at Augustand remaining in the fleet as of March 31, 20072010 rests with a number of United States special purpose vehicles (the "SPVs"“SPVs”) in which Ryanair has no equity or other interest. The SPVs are the borrowerborrowers of record under the loans made or to be made under the facilities, with all of itstheir obligations under the loans being guaranteed by Ryanair Holdings plc.
Holdings.
The shares of the SPVs (which are owned by an unrelated charitable association) are in turn pledged to a security trustee in favor of ExImEx-Im Bank and the lenders. Ryanair Limited operates each of the aircraft pursuant to a finance lease it has entered into with the SPVs, the terms of which mirror those of the relevant loanloans under the facilities. Ryanair has the right to purchase the aircraft upon termination of the lease for a nominal amount. Pursuant to this arrangement, Ryanair is considered to own the aircraft for accounting purposes under both
IFRS and U.S. GAAP.IFRS. Ryanair does not engage in the use of special purpose entities for off-balance sheet financing or any other purpose which results in assets or liabilities not being reflected in Ryanair's Consolidated Financial
Statements.Ryanair’s consolidated financial statements.
At June 30, 2010, Ryanair hashad mandated twoa number of lenders to provide financing for up to 2316 of its firm orderfirm-order Boeing 737-800 aircraft under ExImEx-Im Bank guaranteed financing structures (although guarantees inwith respect of eightto 10 of such aircraft remain subject to the receipt of ExIm Bank'sEx-Im Bank’s final commitment and 5 remain subject to the receipt of Exlm Bank’s preliminary commitment). The companyCompany expects to finance the remaining 14872 Boeing 737-800 aircraft it is obligated to purchase under its contracts with Boeing by December 2011November 2012 and any option aircraft it acquires under those agreements (including the 27 options exercised in May 2007)
through the use of similar financing arrangements based on an ExImEx-Im Bank guarantee,guarantees, bank debt provided by commercial banks, and finance and operating leases, including via sale and leasebacksale-and-leaseback transactions such as those described below, Enhanced Equipment Trust Certificates andas well as cash flow generated from the Company'sCompany’s operations. At August 31, 2007, the Company had received preliminary and final
commitments from ExIm Bank in relation to 45 and 15 aircraft, respectively,
which are to be delivered over the period from September 2007 to September 2008.
The terms of these preliminary and final commitments are the same as those
outlined above in relation to the guarantees already issued. It is expected that any future ExImEx-Im Bank guarantee-based financing will also be subject to terms and conditions similar to those described above. However, no assurance can be given that such financing will be available to Ryanair, or that the terms of any such financing will be as advantageous to the Company as those available at the time of the facilities. Any inability of the Company to obtain financing for the new aircraft on advantageous terms could have a material adverse effect on its business, results of operation and financial condition.
64
The Company financed 3255 of the Boeing 737-800 aircraft delivered between December 2003 and March 20072010 under seven-year, sale-and-leaseback arrangements with a number of international leasing companies, pursuant to which each lessor purchased an aircraft and leased it to Ryanair under an operating lease. As a result, Ryanair operates, but does not own, these aircraft, which were leased to provide flexibility tofor the aircraft delivery program. ItRyanair has no right or obligation to acquire these aircraft at the end of the relevant lease terms. Fifteen15 of these leases are denominated in euro and require Ryanair to make variable rental payments that are linked to EURIBOR. Through the use of interest rate swaps, Ryanair has effectively converted the floating ratefloating-rate rental payments due under eleven12 of these leases into fixed-rate rental payments. Twelve30 of these leases are denominated in euro and require Ryanair to make fixed rental payments over the term of the lease. FiveThe remaining 10 operating leases are U.S. dollar-denominated and two require Ryanair to make variable rental payments that are linked to U.S. dollar LIBOR, while a further twoeight require Ryanair to make fixed rental payments. The Company has an option to extend the initial period of seven years on 78%28 of the operating lease aircraft on pre-determined terms. Ryanair
financed an additional three aircraft, delivered in April and May 2007, through
similar sale-and-leasebackTen operating lease arrangements, including six with international leasing companies.
Twoextension options, will mature during January, February or March 2011. The Company has decided not to extend any of these operating leases are euro-denominated whilefor a secondary lease period. In addition to the others are
denominated in dollars; each requires Ryanair to make fixed rental payments. In
fiscal year 2007,above, the Company also financed four20 of the Boeing 737-800 aircraft underdelivered between March 2005 and March 2010 with 13-year euro-denominated "Japanese operating lease" structures. The Company
previously financed four aircraft under similar "Japanese operating lease"
structures in fiscal year 2005.JOLCOs. These structures are accounted for as finance leases and are initially recorded at fair value in the Company'sCompany’s balance sheet. Under each of these contracts, Ryanair has a call option to purchase thesethe aircraft at a predeterminedpre-determined price after a period of ten10.5 years, which it intends tomay exercise. Six aircraft have been financed through euro-denominated 12-year amortizing commercial debt transactions.
Since, under each of the Company'sCompany’s operating leases, the Company has a commitment to maintain the relevant aircraft, an accounting provision is made during the lease term for this obligation based on estimated future costs of major airframe and certain engine maintenance checks by making appropriate charges to the income statement calculated by reference to the number of hours or cycles operated during the year. Under IFRS, and U.S. GAAP, the accounting treatment for these costs with respect to leased aircraft differs from that for aircraft owned by the Company, for which such costs are capitalized and amortized.
In 2000, Ryanair purchased a Boeing 737-800 flight simulator from CAE Electronics Limited of Quebec, Canada ("CAE"(“CAE”). The simulator is being used for pilot training purposes. The gross purchase price of the simulator and the necessary software was approximately U.S.$10$10 million, not taking into account certain price concessions provided by the seller in the form of credit memoranda. The Company financed this expenditure with a 10-year euro-denominated loan provided by the Export Development Corporation of Canada for up to 85% of the net purchase price, with the remainder provided by cash flows from operations.
In 2002, Ryanair entered into a contract to purchase three additional Boeing 737-800 flight simulators from CAE. The first of these simulators was delivered in January 2004 and the second and third simulators are expected to bewere delivered in the 2008 fiscal year 2008.year. The gross price of each simulator was approximately U.S.$10.3$10.3 million, not taking into account certain price concessions provided by the seller in the form of credit memoranda. In September 2006 Ryanair entered into a new contract with CAE to purchase five B737NG Level B flight simulators. The first two of these simulators are expected
to bewere delivered in the 2009 fiscal year 2009.year. This contract also provides Ryanair with an option to purchase another five such simulators. The gross price of each simulator is approximately U.S.$8$8 million, not taking into account certain price concessions provided by the seller in the form of credit memoranda and discounts.
Contractual Obligations.The following table below sets forth the contractual obligations and commercial commitments of the Company with definitive payment terms, which will require significant cash outlays in the future, as of March 31, 2007.2010. These obligations primarily relate to Ryanair'sRyanair’s aircraft purchase and related financing obligations, which are described in more detail above. For additional information on the Company'sCompany’s contractual obligations and commercial commitments, see Note 2423 to the Consolidated Financial Statementsconsolidated financial statements included in Item 18.
65
The amounts listed under "Finance“Finance Lease Obligations"Obligations” reflect the Company'sCompany’s obligations under its Japanese operating leases.JOLCOs. See "Item“Item 5. Operating and Financial Review and Prospects-- Prospects—Liquidity and Capital Resources."
”
The amounts listed under "Purchase Obligations"“Purchase Obligations” in the table reflect obligations for aircraft purchases and are calculated by multiplying the number of aircraft the Company is obligated to purchase under its current agreements with Boeing during the relevant period by the Basic Price for each aircraft pursuant to the relevant contract, with the dollar-denominated Basic Price being converted into euro at an exchange rate of U.S.$1.332=EUR1.00.$1.3526=€1.00 (based on the Federal Reserve Rate on March, 31, 2010). The relevant amounts therefore exclude the effect of the price concessions granted to Ryanair by Boeing and CFM, as well as any application of the Escalation Factor. As a result, Ryanair'sRyanair’s actual expenditures for aircraft during the relevant periods will be lower than the amounts listed under "Purchase Obligations"“Purchase Obligations” in the table.
With respect to purchase obligations under the terms of the 2005 Boeing contract, the Company was required to pay Boeing 1% of the Basic Price of each of the 70 firm orderfirm-order Boeing 737-800 aircraft at the time the contract was signed in February 2005, and will be required to make periodic advance payments of the purchase price for each aircraft it has agreed to purchase during the course of the two yeartwo-year period preceding the delivery of each aircraft. These payments
terms also apply for the 89 aircraft that remained to be delivered under the
2002 and 2003 Boeing contracts as of January 2005. As a result of these required advance payments, the Company will have paid up to 30% of the Basic Price of each aircraft prior to its delivery (including the addition of an estimated "Escalation Factor"“Escalation Factor” but before deduction of any credit memoranda and other concessions); the balance of the net price is due at the time of delivery.
The amounts listed under "Operating“Operating Lease Obligations"Obligations” reflect the Company'sCompany’s obligations under its aircraft operating lease arrangements.
Obligations Due by Period
Contractual Obligations | Total | Less than 1 year | 1-2 years | 2-5 years | After 5 years | ||||||||||
| (millions) | |||||||||||||||
Long-term Debt(a) | € | 2,394.7 | € | 233.0 | € | 240.2 | € | 762.9 | € | 1,158.6 | |||||
Finance Lease Obligations | 561.5 | 32.5 | 34.0 | 149.7 | 345.3 | ||||||||||
Purchase Obligations | 3,399.7 | 1,888.7 | 944.3 | 566.7 | — | ||||||||||
Operating Lease Obligations | 398.8 | 77.8 | 74.1 | 134.7 | 112.2 | ||||||||||
Total Contractual Obligations | € | 6,754.7 | € | 2,232.0 | € | 1,292.6 | € | 1,614.0 | € | 1,616.1 | |||||
| (a) | For additional information on Ryanair’s long-term debt obligations, see Note 11 to the consolidated financial statements included in Item 18. |
OFF-BALANCE SHEET TRANSACTIONS
Ryanair uses certain off-balance sheet arrangements in the ordinary course of business, including financial guarantees and operating lease commitments. Details of each of these arrangements that have or are reasonably likely to have a current or future material effect on the Company'sCompany’s financial condition, results of operations, liquidity or capital resources are discussed below.
Operating Lease Commitments.Commitments. The Company has entered into a number of sale-and- leasebacksale-and-leaseback transactions in connection with the financing of a number of aircraft in its fleet. See "-Liquidity“—Liquidity and Capital Resources-Capital Resources"Resources—Capital Resources” above for additional information on these transactions.
Guarantees.
Guarantees. Ryanair Holdings has provided an aggregate of EUR9.8€4,384.2 million in letters of guarantee to secure obligations of certain of its subsidiaries in respect of loans and bank advances, including those relating to aircraft financing and related hedging transactions. All of these guarantees are eliminated in the Company'sCompany’s consolidated balance sheet.
For information on Ryanair's results of operations in the quarter ended
June 30, 2007, see "-Recent Operating Results" above. For information onconcerning the principal trends and uncertainties affecting the Company'sCompany’s results of operations and financial condition, see "Item“Item 3. Key Information-Risk Factors" and
"-BusinessInformation—Risk Factors,” “—Business Overview," "-Results” “—Recent Operating Results,” “—Results of Operations" and "-LiquidityOperations,” “—Liquidity and Capital Resources" Resources” and “Item 4. Information on the Company—Strategy—Responding to Current Challenges”above.
Inflation hasdid not hadhave a significant effect on the Company'sCompany’s results of operations and financial condition during the three fiscal years ended March 31, 2007.
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Item 6. Directors, Senior Management and Employees
2010.
| Item 6. | Directors, Senior Management and Employees |
Ryanair Holdings was established in 1996 as a holding company for Ryanair. The management of Ryanair Holdings and Ryanair are integrated, with the two companies having the same directors and executive officers.
The following table sets forth certain information concerning the directors of Ryanair Holdings and Ryanair as of September 20, 2007:
June 30, 2010:
Name | Age | Positions | ||
David Bonderman(a)(b) | 67 | Chairman of the Board and Director | ||
Emmanuel Faber(c) | 46 | Director | ||
Michael Horgan(d) | 73 | Director | ||
Klaus Kirchberger(e) | 52 | Director | ||
Charles McCreevy | 60 | Director | ||
Declan McKeon(c) | 59 | Director | ||
Kyran | 66 | Director | ||
Michael | 49 | Director and Chief Executive Officer | ||
James | 61 | Director | ||
Paolo Pietrogrande(e) | 53 | Director |
| (a) | Member of the Executive Committee. |
| (b) | Member of the Nomination Committee. |
| (c) | Member of the Audit Committee. |
| (d) | Member of the Air Safety Committee. |
| (e) | Member of the Remuneration Committee. |
| (f) | Mr. O’Leary is also the chief executive officer of Ryanair Holdings and Ryanair. None of the other directors are executive officers of Ryanair Holdings or Ryanair. |
David Bonderman (Chairman).David Bonderman has served as a director of Ryanair
Holdings since August 1996 and has served as the chairman of the board of directors since December 1996. In 1992, Mr. Bonderman co-founded Texas Pacific Group, a private equity investment firm. He currently serves as an officer and director of the general partner and manager of Texas Pacific Group. Mr. Bonderman is also an officer, director and shareholder of 1996 Air G.P. Inc., which owns shares of Ryanair. He also serves on the boards of directors of the following public companies:companies such as General Motors Company, CoStar Group, Inc.; Gemalto S.A.; and Burger King HoldingsHarrah’s Entertainment, Inc. He
serves as a principal and general partner of Texas Pacific Group., among other companies. Mr. Bonderman is a U.S. citizen.
Emmanuel Faber (Director).Emmanuel Faber has served as a director of Ryanair
Holdings since September 2002. He holds the title of Executive Vice President,
Asia-PacificCo-Chief Operating Officer for Group Danone and also serves as a director of a number of French public companies. Mr. Faber is a French citizen.
Michael Horgan (Director).Michael Horgan has served as a director of Ryanair
Holdings since January 12, 2001. A former Chief Pilot of Aer Lingus, he sometimes actshas acted as a consultant to a number of international airlines, and civil aviation authorities, the European Commission and the European Bank for Reconstruction and Development. Mr. Horgan is the Chairman of the Company’s Air Safety Committee. Mr. Horgan is an Irish citizen.
Klaus Kirchberger (Director).Klaus Kirchberger has served as a director of
Ryanair Holdings since September 2002 and is also the Chief OperatingExecutive Officer of Bayer Bau and ImmobilienDOBA Grund Beteiligungs GmbH & Co. KG.in Munich, Germany. He also serves as a director of a number of German listed corporations. Mr. Kirchberger is a German citizen.
Charles McCreevy (Director).On May 28, 2010, the board of directors appointed Charles McCreevy as a director of the Company in accordance with the Company’s articles of association. Mr. McCreevy has previously served as EU Commissioner for Internal Markets and Services (2004-2010) and has held positions in several Irish Government Ministerial Offices, including Minister for Finance (1997-2004), Minister for Tourism & Trade (1993-1994) and Minister for Social Welfare (1992-1993). Mr. McCreevy is an Irish citizen.
Declan McKeon (Director).On May 28, 2010, the board of directors appointed Declan McKeon as a director of the Company in accordance with the Company’s articles of association. Mr. McKeon is a former audit partner of PricewaterhouseCoopers and continues to act as a consultant to PricewaterhouseCoopers. He is currently a director and member of the audit committee of Icon plc. Mr. McKeon is an Irish citizen.
Kyran McLaughlin (Director).Kyran McLaughlin has served as a director of
Ryanair Holdings since January 2001, and is also Deputy Chairman and Head of Capital Markets at Davy Stockbrokers. Mr. McLaughlin also advised Ryanair during its initial flotation on the Dublin and NasdaqNASDAQ stock markets in 1997. He is also the chairman of the board of directors of Elan Corporation plc, and he serves as a director of a number of other Irish private companies. Mr. McLaughlin is an Irish citizen.
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Michael O'Leary (Director)O’Leary (Executive Director).Michael O'LearyO’Leary has served as a director of Ryanair since 1988 and a director of Ryanair Holdings since July 1996. Mr. O'LearyO’Leary was appointed chief executive officer of Ryanair on January 1, 1994. Mr. O'LearyO’Leary is an Irish citizen.
James R. Osborne (Director). Mr.James Osborne has served as a director of Ryanair Holdings since August 1996, and has been a director of Ryanair since April 1995. Mr. Osborne is a former managing partner of A & L Goodbody Solicitors. He also serves as a director of a number of Irish private companies. Mr. Osborne is an Irish citizen.
Paolo Pietrogrande (Director). Paolo Pietrogrande, has served as a directorcitizen of Ryanair Holdings since January 2001. Mr. Pietrogrande is the president and
scientific director of Netplan Management Consulting, LLC. He is a former CEO of
Enel Green Power S.p.A. Mr. Pietrogrande is an Italian citizen.
T. Anthony Ryan (Director). Dr. RyanUnited States, has been a director since 2001. He is presently also Executive Chairman of Ryanair since April
1995. Dr. Ryan9REN Group, formerly Gamesa Solar. A chemical engineer by training, he has served as an executive at KTI Group, Bain & Company, General Electric, Enel, Ducati Motor Holding and Sviluppo Italia; as chief executive officer of Enel Greenpower, CISE, and Nuovi Cantieri Apuania; and as chairman of Atmos Holdings and Solar Energy Italia. His previous board memberships include different companies of the Enel Group, Trinergy Plc, Ducati Motor Holding and Atmos Holdings and its subsidiaries. He also currently serves on the advisory board of directors of Ryanair in 1996
and he has been a director of Ryanair Holdings since that year. Dr. Ryan served
as chairman of GPA Group plc from 1983 to 1996. Dr. Ryan is an Irish citizen.
Wheb Ventures.
The Board of Directors has established a number of committees, including the following:
Executive Committee. The board of directors established the Executive Committee in August 1996. The Executive Committee can exercise the powers exercisable by the full board of directors in circumstances in which action by the board of directors is required but it is impracticable to convene a meeting of the full board of directors. Messrs. Bonderman, O'LearyMcLaughlin, O’Leary and RyanOsborne are the members of the Executive Committee.
Remuneration Committee. The board of directors established the Remuneration Committee in September 1996. This committee has authority to determine the remuneration of senior executives of Ryanair Holdingsthe Company and to administer the Ryanair Holdings Stock Option Plan.stock option plans described below. The board of directors as a whole determines the remuneration and bonuses of the chief executive officer, who is the only executive director. Messrs. Osborne, Pietrogrande and Kirchberger are the members of the Remuneration Committee.
Audit Committee. The board of directors established the Audit Committee in September 1996 to make recommendations concerning the engagement of independent chartered accountants; to review with the accountants the plans for and scope of each annual audit, the audit procedures to be utilized and the results of the audit; to approve the professional services provided by the accountants; to review the independence of the accountants; and to review the adequacy and effectiveness of the Company'sCompany’s internal accounting controls and treasury
policies & procedures.controls. Messrs. McLaughlin, Faber, McKeon and since September 21,
2006, Mr. Osborne are the members of the Audit Committee. Mr. Osborne was
appointed to the Audit Committee to replace Mr. Raymond MacSharry, who
retired from the board of directors and thus from the Audit Committee on
September 21, 2006. See "-Composition and Term of Office." In accordance with the recommendations of the Irish Combined Code of Corporate Governance (the "Combined Code"“Combined Code”), a senior independent non-executive director, KyranMr. McLaughlin, is the chairman of the Audit Committee. All members of the Audit Committee are independent for purposes of the listing rules of the NasdaqNASDAQ National Market ("Nasdaq"(“NASDAQ”) and the U.S. federal securities laws.
Nomination Committee. The board of directors established the Nomination Committee in May 1999 to make recommendations and proposals to the full board of directors concerning the selection of individuals to serve as executive and non-executive directors. The board of directors as a whole then makes appropriate determinations regarding such matters after considering such recommendations and proposals. Messrs. Bonderman, O'LearyMcLaughlin and RyanO’Leary are the members of the Nomination Committee.
69
Air Safety Committee. The board of directors established the Air Safety Committee in March 1997 to review and discuss air safety and related issues. The Air Safety Committee reports to the full board of directors each quarter. The Air Safety Committee is composed of Mr. Horgan (who acts as the chairman), as well as the following executive officers of Ryanair: Messrs. Conway, Hickey, O'BrienO’Brien and Wilson.
Powers of, and Action by, the Board of Directors
The board of directors is empowered by the Articles of Association of
Ryanair Holdings to carry on the business of Ryanair Holdings, subject to the Articles, of Association, provisions of general law and the right of stockholders to give directions to the directors by way of ordinary resolution.resolutions. Every director of Ryanair Holdings who is present at a meeting of the board of directors of Ryanair Holdings has one vote. In the case of a tie on a vote, the chairman of the board of directors has a second or tie-breaking vote. A director may designate an alternate director to attend any board of directors meeting, and such alternate director shall have all the rights of a director at such meeting.
The quorum for a meeting of the board of directors, unless another number is fixed by the directors, consists of three directors, a majority of whom must be EU nationals. The Articles of Association of Ryanair Holdings require the vote of a majority of the directors (or alternates) present at a duly convened meeting for the approval of any action by the board of directors.
Composition and Term of Office
The Articles of Association of Ryanair Holdings provide that the board of directors shall consist of no fewer than three and no more than 15 directors, unless otherwise determined by the stockholders. There is no maximum age for a director and no director is required to own any shares of Ryanair Holdings.
Directors are elected (or have their appointment by the directorsappointments confirmed) at the annual general meetings of stockholders. Save in certain circumstances, at every annual general meeting, one-third (rounded down to the next whole number if it is a fractional number) of the directors (being the directors who have been longest in office) must stand for re-election.
[Accordingly, there-election as their terms of office ofexpire. Accordingly Mr. Faber, Mr. KirchbergerKlaus Kirchberger’s term will have expired, and Dr. Ryanhe will endbe eligible to offer himself for re-election at the annual general meeting scheduled to be held on September 20, 2007. They
each stood22, 2010. Mr. Emmanuel Faber’s term also will have expired, but he has decided not to offer himself for re-election at that meetingre-election. In addition, Mr. Charles McCreevy and were each re-elected][Confirm].
Mr. Declan McKeon, two newly appointed directors, have offered themselves for election.
Exemptions from NasdaqNASDAQ Corporate Governance Rules
At the time of the listing of Ryanair'sRyanair’s ADSs on the NasdaqNASDAQ in 1997, the Company received certain exemptions from the NasdaqNASDAQ corporate governance rules. These exemptions, and the practices the Company adheres to, are as follows:
- -
The Company is exempt from the Nasdaq'sNASDAQ’s quorum requirements applicable to meetings of shareholders, which require a minimum quorum of 33% for any meeting of the holders of common stock, which in the Company'sCompany’s case are its Ordinary Shares. In keeping with Irish generally accepted business practice, the Articles of Association provide for a quorum for general meetings of shareholders of three shareholders, regardless of the level of their aggregate share ownership.
- -
The Company is exempt from the Nasdaq'sNASDAQ’s requirement with respect to audit committee approval of related-party transactions, as well as its requirement that shareholders approve certain stock or asset purchases when a director, officer or substantial shareholder has an interest. The Company is subject to extensive provisions under the Listing Rules of the Irish Stock Exchange (the "Irish“Irish Listing Rules"Rules”) governing transactions with related parties, as defined therein, and the Irish Companies Act also restricts the extent to which Irish companies may enter into related-party transactions. In addition, the Company's Articles of Association contain provisions regarding disclosure of interests by the directors and restrictions on their votes in circumstances involving a conflictconflicts of interest. The concept of a related party for purposes of each of the
Nasdaq'sNASDAQ’s audit committee and shareholder approval rules differs in certain respects from the definition of a transaction with a related party under the Irish Listing Rules.
70
- - The Nasdaq
NASDAQ requires shareholder approval for certain transactions involving the sale or issuance by a listed company of common stock other than in a public offering. Under the NasdaqNASDAQ rules, whether shareholder approval is required for such transactions depends, among other things, on the number of shares to be issued or sold in connection with a transaction, while the Irish Listing Rules require shareholder approval when the size of a transaction exceeds a certain percentage of the size of the listed company undertaking the transaction.
The Company also follows certain other practices under the Combined Code in lieu of those set forth in the NasdaqNASDAQ corporate governance rules, as expressly permitted thereby. Most significantly:
- - Independence. The Nasdaq requires that a majority of an issuer's board of
directors be "independent" under the standards set forth in the Nasdaq
rules and that directors deemed independent be identified in the Company's
annual report on Form 20-F. The board of directors has determined that each
of the Company's eight non-executive directors is "independent" under the
standards set forth in the Combined Code. Under the Combined Code, there is
no bright-line test establishing set criteria for independence, as there is
under Nasdaq Rule 4200(a)(15). Instead, the board of directors determines
whether the director is "independent in character and judgment," and
whether there are relationships or circumstances which are likely to
affect, or could appear to affect, the director's judgment. Under the
Combined Code, the board of directors may determine that a director is
independent notwithstanding the existence of relationships or circumstances
which may appear relevant to its determination, but it should state its
reasons if it makes such a determination. The Combined Code specifies that
relationships or circumstances that may be relevant include whether the
director (i) has been an employee of the relevant company or group within
the last five years, (ii) has had within the last three years a direct or
indirect material business relationship with such company; (iii) has
received payments from such company, subject to certain exceptions, (iv)
has close family ties with any of the company's advisers, directors or
senior employees; (v) holds cross-directorships or other significant links
with other directors; (vi) represents a significant shareholder; or (vii)
has served on the board of directors for more than nine years. In
determining that each of the eight non-executive directors is independent
under the Combined Code standard, the Ryanair Holdings board of directors
identified such relevant factors with respect to Messrs. Bonderman,
McLaughlin, Osborne and Ryan. The Nasdaq independence criteria specifically
state that an individual may not be considered independent if, within the
last three years, such individual or a member of his or her immediate
family has had certain specified relationships with the company, its
parent, any consolidated subsidiary, its internal or external auditors, or
any company that has significant business relationships with the company,
its parent or any consolidated subsidiary. Neither ownership of a
significant amount of stock nor length of service on the board is a per se
bar to independence under the Nasdaq rules.
- - CEO compensation. The Nasdaq rules require that an issuer's chief executive
officer not be present during voting or deliberations by the board of
directors on his or her compensation. There is no such requirement under
the Combined Code
71
SENIOR MANAGEMENT
| • | Independence. NASDAQ requires that a majority of an issuer’s board of directors be “independent” under the standards set forth in the NASDAQ rules and that directors deemed independent be identified in the Company’s annual report on Form 20-F. The board of directors has determined that each of the Company’s nine non-executive directors is “independent” under the standards set forth in the Combined Code. Under the Combined Code, there is no bright-line test establishing set criteria for independence, as there is under NASDAQ Rule 4200(a)(15). Instead, the board of directors determines whether the director is “independent in character and judgment,” and whether there are relationships or circumstances which are likely to affect, or could appear to affect, the director’s judgment. Under the Combined Code, the board of directors may determine that a director is independent notwithstanding the existence of relationships or circumstances which may appear relevant to its determination, but it should state its reasons if it makes such a determination. The Combined Code specifies that relationships or circumstances that may be relevant include whether the director: (i) has been an employee of the relevant company or group within the last five years; (ii) has had within the last three years a direct or indirect material business relationship with such company; (iii) has received payments from such company, subject to certain exceptions; (iv) has close family ties with any of the company’s advisers, directors or senior employees; (v) holds cross-directorships or other significant links with other directors; (vi) represents a significant shareholder; or (vii) has served on the board of directors for more than nine years. In determining that each of the nine non-executive directors is independent under the Combined Code standard, the Ryanair Holdings board of directors identified such relevant factors with respect to non-executive directors Messrs. Bonderman, McLaughlin, Osborne, Horgan and Petrogrande. When arriving at the decision that these directors are nonetheless independent, the board of directors has taken into account the comments made by the Financial Reporting Council in its report dated December 2009 on its review of the impact and effectiveness of the Combined Code. The NASDAQ independence criteria specifically state that an individual may not be considered independent if, within the last three years, such individual or a member of his or her immediate family has had certain specified relationships with the company, its parent, any consolidated subsidiary, its internal or external auditors, or any company that has significant business relationships with the company, its parent or any consolidated subsidiary. Neither ownership of a significant amount of stock nor length of service on the board is aper se bar to independence under the NASDAQ rules. |
| • | CEO compensation. The NASDAQ rules require that an issuer’s chief executive officer not be present during voting or deliberations by the board of directors on his or her compensation. There is no such requirement under the Combined Code. |
The following table sets forth certain information concerning the executive officers of Ryanair Holdings and Ryanair Limited at September 20, 2007:
June 30, 2010:
Name | Age | Position | ||
Michael | 56 | Deputy Chief | ||
Ray | 55 | Chief Pilot | ||
Caroline | 46 | Director of Customer Service | ||
Michael | 47 | Director of Engineering | ||
Juliusz Komorek | 32 | Director of Legal & Regulatory Affairs; Company Secretary | ||
Howard | 49 | Deputy Chief | ||
David | 46 | Director of Flight Operations and Ground Operations | ||
Michael | 49 | Chief Executive Officer | ||
Edward | 46 | Director of Personnel and In-flight |
Michael Cawley (Deputy Chief Executive; Chief Operating Officer).Michael Cawley was appointed Deputy Chief Executive and Chief Operating Officer on January 1, 2003, having served as Chief Financial Officer and Commercial Director since February 1997. From 1993 to 1997, Michael served as Group Finance Director of Gowan Group Limited, one of Ireland'sIreland’s largest private companies and the main distributor for Peugeot and CitroenCitröen automobiles in Ireland.
Ray Conway (Chief Pilot).Captain Ray Conway was appointed as Chief Pilot in June 2002, having joined Ryanair in 1987. He has held a number of senior management positions within the Flight Operations Department over the last 17 years, including Fleet Captain of the BAC1-11 and Boeing 737-200737–200 fleets. Ray was Head of Training between 1998 and June 2002. Prior to joining Ryanair, Ray served as an officer with the Irish Air Corps for 14 years where he was attached to the Training and Transport Squadron, which was responsible for the Irish government jet.
Caroline Green (Director of Customer Service).Caroline Green was appointed HeadDirector of Customer Service in February 2003. Prior to this, Caroline served as Chief Executive Officer of Ryanair.com between November 1996 and January 2003. Before joining Ryanair, Caroline worked in senior positions at a number of airline computerized reservations system providers, including Sabre.
Michael Hickey (Director of Engineering).Michael Hickey has served as Director of Engineering since January 2000. Michael has held a wide range of senior positions within the Ryanair engineering
departmentEngineering Department since 1988 and was Deputy Director of Engineering between 1992 and January 2000. Prior to joining Ryanair in 1988, Michael worked as an aircraft engineer with Fields Aircraft Services and McAlpine Aviation, working primarily on executive aircraft.
Juliusz Komorek (Director of Legal & Regulatory Affairs; Company Secretary).Juliusz Komorek was appointed Company Secretary and Director of Legal and Regulatory Affairs in May 2009, having served as Deputy Director of Legal and Regulatory Affairs since 2007. Prior to joining the Company in 2004, Juliusz had gained relevant experience in the European Commission’s Directorate General for Competition and in the Polish Embassy to the EU in Brussels, as well as in the private sector in Poland and the Netherlands. Juliusz is a lawyer, holding degrees from the universities of Warsaw and Amsterdam.
Howard Millar (Deputy Chief Executive; Chief Financial Officer).Howard Millar was appointed Deputy Chief Executive and Chief Financial Officer on January 1, 2003, having served as Director of Finance of Ryanair sincefrom March 1993. Between April 1992 and March 1993 he served as Financial Controller of Ryanair. Howard was the Group Finance Manager for the Almarai Group, an internationalthe largest integrated dairy food processing company in the world, in Riyadh, Saudi Arabia, from 1988 to 1992.
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David O'BrienO’Brien (Director of Flight Operations and Ground Operations).David O’Brien was appointed Director of Flight Operations and Ground Operations in December 2002; previously, he served as Director of Flight Operations of Ryanair from May 2002, having served as Director of U.K. Operations since April 1998. Prior to that, David served as Regional General Manager-EuropeManager for Europe and CIS for Aer Rianta International. Between 1992 and 1996, David served as Director of Ground Operations and In-flight withfor Ryanair.
Michael O'LearyO’Leary (Chief Executive Officer).Michael O’Leary has served as a director of Ryanair since November 1988 and was appointed Chief Executive Officer on January 1, 1994.
Edward Wilson (Director of Personnel and In-flight).Edward Wilson was appointed Director of Personnel and In-flight in December 2002, prior to which he served as Head of Personnel since joining Ryanair in December 1997. Prior to joining Ryanair he served as Human Resources Manager for Gateway 2000 and held a number of other human resources relatedresources-related positions in the Irish financial services sector.
COMPENSATION OF DIRECTORS AND SENIOR MANAGEMENT
EXECUTIVE OFFICERS
Compensation
The aggregate amount of compensation paid by Ryanair Holdings and its subsidiaries to the nineeight sitting directors and nine executive officers named above in the 2010 fiscal year ended March 31, 2007 was EUR5.0€4.5 million. For details of Mr. O'Leary'sO’Leary’s compensation in such fiscal year, see "-Employment
Agreements-Employment“—Employment and Bonus Agreement with Mr. O'Leary"O’Leary” below. For details
of stock options that have been granted to the Company's employees, including
the executive officers named above, see "Item 10. Additional Information-Options
to Purchase Securities from Registrant or Subsidiaries."
Each of Ryanair Holdings' eightHoldings’ nine non-executive directors is entitled to receive EUR32,000€32,000 plus expenses per annum, as remuneration for his services to Ryanair Holdings. Each of Messrs.Mr. Bonderman and Ryan executed an agreement with Ryanair Holdings waiving his respective entitlement to receive this remuneration for the 2010 fiscal year ended March 31, 2007.year. The additional remuneration paid to Audit Committee members for service on that committee is EUR15,000€15,000 per annum. Mr. Horgan receives EUR40,000€40,000 per annum in connection with his additional duties in relation to the Air Safety Committee.
Each
For further details of stock options that have been granted to the 11 non-executive directors then in office were issued 50,000
share options afterCompany’s employees, including the 2-for-1 share split in December 2001 in respect of an
equivalent number of Ordinary Shares having a strike price of EUR3.70 under
Ryanair's Share Option Plan 2000 See "Itemexecutive officers, see “Item 10. Additional Information-OptionsInformation—Options to Purchase Securities from Registrant or Subsidiaries." Following the 2:1 stock
split that occurred on February 26, 2007, the number of options was adjusted to
100,000 and the strike price was adjusted to EUR1.85.
Emmanuel Faber and Klaus Kirchberger were appointedSubsidiaries,” as well as Note 15 to the board of
directors as non-executive directors on September 25, 2002, and the appointments
were approved by the Company's shareholders at the annual general meeting held
on September 24, 2003. In connection with such appointments, each of Messrs.
Faber and Kirchberger was granted 25,000 share options, exercisable between June
2008 and June 2010, at a strike price of EUR5.65. Following the 2:1 stock split
that occurred on February 26, 2007, the number of options was adjusted to 50,000
and the strike price was adjusted to EUR2.83.
Under the Option Plan 2000 the seven non-executive directors were granted
25,000 options, for a total of 155,000 options, at a strike price of EUR4.96 on
June 11, 2007. These options can be exercised between June 12, 2012 and June 11,
2014.
As of August 1, 2007, the directors and executive officers of Ryanair
Holdings as a group owned 87,515,290 Ordinary Shares, representing 5.8% of
Ryanair Holdings' outstanding Ordinary Shares as of such date. See Note 20(d) to
the Consolidated Financial Statements in Item 18. See also "Item 7. Major
Shareholders and Related Party Transactions-Major Shareholders
73
Employment Agreements
consolidated financial statements included herein.
Employment and Bonus Agreement with Mr. O'Leary. O’Leary
Mr. O'Leary'sO’Leary’s current employment agreement with Ryanair Limitedthe Company is dated July 1, 2002 and can be terminated by either party upon twelve months'12 months’ notice. Pursuant to the agreement, Mr. O'LearyO’Leary serves as Chief Executive Officer at a current annual gross salary of EUR565,000,€595,000, subject to any increases that may be agreed between Ryanair Limitedthe Company and Mr. O'Leary.O’Leary. Mr. O'LearyO’Leary is also is eligible for annual bonuses as determined by the Boardboard of Directorsdirectors of Ryanair Limited;the Company; the amount of such bonuses paid to Mr. O'LearyO’Leary in the 2010 fiscal year 2007 totaled EUR365,000.€241,000. Mr. O'LearyO’Leary is subject to a covenant not to compete with Ryanairthe Company within the EU for a period of two years after the termination of his employment with Ryanair.the Company. Mr. O'Leary'sO’Leary’s employment agreement does not contain provisions providing for compensation on its termination.
The following table sets forth the number of Ryanair’s personnel at each of March 31, 2010, 2009 and 2008:
Classification | Number of Personnel at March 31, 2010 | Number of Personnel at March 31, 2009 | Number of Personnel at March 31, 2008 | |||
Management | 99 | 99 | 99 | |||
Administrative | 276 | 271 | 259 | |||
Maintenance | 180 | 202 | 201 | |||
Ground Operations | 297 | 384 | 485 | |||
Pilots | 2,032 | 1,852 | 1,599 | |||
Flight Attendants | 4,284 | 3,808 | 3,277 | |||
Total | 7,168 | 6,616 | 5,920 | |||
Ryanair’s pilots, flight attendants and maintenance and ground operations personnel undergo training, both initial and recurrent. A substantial portion of the initial training for Ryanair'sRyanair’s flight attendants is devoted to safety procedures, and cabin crews are required to undergo annual evacuation and fire drill training during their tenure with the airline. Ryanair utilizes its own
Boeing 737-800 aircraft simulators for pilot training. Ryanair has established
an in-house apprenticeship program to train maintenance engineers that currently
produces between four and six qualified engineers at Dublin and eight at
Prestwick per year. Ryanair also provides salary increases to its engineers who complete advanced training in certain fields of aircraft maintenance. Ryanair utilizes its own Boeing 737-800 aircraft simulators for pilot training.
IAA regulations require pilots to be licensed as commercial pilots with specific ratings for each aircraft to be flown andflown. In addition, IAA regulations require all commercial pilots to be medically certified as physically fit. At March 31, 2007,2010, the average age of Ryanair'sRyanair’s pilots was 3637.8 years and their average period of employment with Ryanair was 2.73.8 years. Licenses and medical certification are subject to periodic re-evaluation requirements, includingand require recurrent training and recent flying experience.experience in order to be maintained. Maintenance engineers must be licensed and qualified for specific aircraft. Flight attendants must haveundergo initial and periodic competency fitness training. Training programs are subject to approval and monitoring by the IAA. In addition, the appointment of senior management personnel directly involved in the supervision of flight operations, training, maintenance and aircraft inspection must be satisfactory to the IAA. Based on its experience in managing the airline'sairline’s growth to date, management believes that there is a sufficient pool of qualified and licensed pilots, engineers and mechanics in Ireland, in the U.K. and within the EU to satisfy Ryanair'sRyanair’s anticipated future needs in the areas of flight operations, maintenance and quality control and that Ryanair will not face significant difficulty in hiring and continuing to employ the required personnel. Ryanair has also been able to satisfy its short-term needs for additional pilots by
contracting with certain employmentthrough the use of contract agencies. Ryanair had 1,147 such pilots from these agencies that represent experienced flight
personnel and, as of March 31, 2007, Ryanair had 369 such pilots under contract.2010. These contract pilots are included in the table above. 74
Ryanair has licensed a number of IAA-approved organizations in Sweden and the Netherlands to operate pilot training courses using Ryanair'sRyanair’s syllabus, in order to grant Boeing 737 type-ratings. Each trainee pilot must pay for his or her own training and, based on his or her performance, he or she may be offered a position within Ryanair.operating on Ryanair aircraft. This program enables Ryanair to secure a continuous stream of type-rated co-pilots.
Ryanair's
Ryanair’s employees earn productivity-based incentive payments, including commissions on in-flightfor onboard sales for flight attendants and payments based on the number of hours or sectors flown by pilots and flight attendants within(within limits set by industry standards or regulations fixing maximum working hours.hours). During the 2010 fiscal year, ended March 31, 2007, such productivity-based incentive payments accounted for approximately 39% of an average flight attendant'sattendant’s total pay
packageearnings and approximately 48%37% of the typical pilot'spilot’s compensation. Reservations
personnel also receive incentive payments basedPilots at all Ryanair bases are covered by four-year agreements on the number of bookings madepay, allowances and sales of ancillary services such as car rentals and travel insurance.rosters. In November 2000, Ryanair's pilots approved a five-year pay arrangement which
expired in the first quarter of calendar 2006 and which, in return for certain
productivity enhancements, provided for annual increases in base salary of 3%
and increases in daily allowances of between 3% and 20% (depending on the number
of hours flown). In April 2007,December 2009, negotiations on new pilotemployee pay arrangements successfully concluded in a one-year pay freeze and the extension of all existing agreements by one year at all of Ryanair'sRyanair’s bases. Pilots at 12 of these bases
approved a one-year deal with a basic pay increase of 2% while pilots at six
other bases voted in favor of a four-year deal. Included in this latter group
are the pilots at Luton, who voted for an amendment to the five-year deal,
agreed in 2006. In September 2007, negotiations with the Dublin pilots
successfully concluded, resulting in a four year pay agreement to March 31,
2012, which will be implemented with effect from November 1, 2007.
Ryanair'sRyanair’s pilots are currently subject to IAA-approved limits of 100 flight-hours per 28-day cycle, 300 flight-hours every three months and 900 flight-hours per fiscal year. For the 2010 fiscal year, ended March 31, 2007, the average flight-hours for each of Ryanair'sRyanair’s pilots wereamounted to approximately 6264 hours per full working month and approximately 744758 hours for the complete year, almost identical to the previous year. Were more stringent regulations on flight hours to be adopted, Ryanair'sRyanair’s flight personnel could experience a reduction in their total pay due to lower compensation for the number of hours or sectors flown and Ryanair could be required to hire additional flight personnel.
An EU Working Time Directive, which became effective in January 2007, has
limited our flight attendants' duty hours to 2,000 hours per fiscal year and
their flight hours to 900 flying hours per fiscal year. Prior to the
introduction of this EU directive, there were no cumulative duty-time or
flight-hour limits. As a result of the directive, Ryanair estimates that its
ratio of flight attendants per aircraft will increase from approximately four
crews per aircraft (or 16 flight attendants per aircraft) in fiscal 2007 to
approximately five crews per aircraft (or 20 flight attendants per aircraft) by
the end of fiscal 2008.
Ryanair considers its relationshiprelations with its employees to be good. Ryanair currently negotiates with groups of employees, including its pilots, through "Employee“Employee Representation Committees" ("ERCs"Committees” (“ERCs”) regarding pay, work practices and conditions of employment, including conducting formal binding negotiations with these internal collective bargaining units. Ryanair'sRyanair’s senior management has quarterly meetings with the different ERCs to discuss all aspects of the business and those issues that specifically relate to theeach relevant employee group.
In 2001,
On June 19, 2009, BALPA sought(the U.K. pilots union) made a request for voluntary recognition under applicable U.K. legislation, which Ryanair rejected. BALPA now has the option of applying to obtainthe U.K.’s Central Arbitration Committee (CAC) to organize a formalvote on union recognition agreement under
schedule A1 of Trade Union & Labour Relations (consolidation) Act 1992, butby Ryanair’s pilots in relevant bargaining units, as determined by the CAC. If BALPA were successful in such a secret ballot resultedinitiative, this would allow it to represent the U.K. pilots in more than 82% of eligible negotiations over salaries and working conditions.
Ryanair Pilots opting not to
have BALPA recognized for collective bargaining purposes. The result of this
ballot precluded BALPA from seeking a recognition agreement with Ryanair for a
period of three years (until October 2004). Since October 2004, BALPA has again
been authorized to seek a formal recognition agreement for collective bargaining
purposes.
75
Ryanair Holdings'Holdings’ shareholders have approved a number of share option plans for employees and directors. Ryanair Holdings has also issued share options to certain of its senior managers. For details of all outstanding share options, see "Item“Item 10. Additional Information--OptionsInformation—Options to Purchase Securities from Registrant or Subsidiaries."
Item 7. Major Shareholders and Related Party Transactions
”
| Item 7. | Major Shareholders and Related Party Transactions |
As of September 1, 2007, 1,547,028,770June 30, 2010, 1,483,867,225 Ordinary Shares were outstanding. At that date, 118,335,860 ADRs, representing 591,679,300 Ordinary Shares, were held of record in the United States by 3881 holders, and represented in the aggregate 38.2%39.9% of the number of Ordinary Shares then outstanding. See “Item 10. Additional Information—Articles of Association” and “—Limitations on Share Ownership by Non-EU Nationals.”
Based on information available to Ryanair Holdings, the following table summarizes the holdings of those shareholders holding 3% or more of the Ordinary Shares as of July 31 2007, 2006June 30, 2010, June 30, 2009 and 2005,June 30, 2008, the latest practicable date prior to the Company'sCompany’s publication of its statutory annual report in each of the relevant years.
| As of June 30, 2010 | As of June 30, 2009 | As of June 30, 2008 | ||||||||||
| No. of Shares | % of Class | No. of Shares | % of Class | No. of Shares | % of Class | |||||||
Capital Research and Management Company. | 227,952,645 | 15.36% | 195,559,515 | 13.24% | 211,322,630 | 14.29% | ||||||
Michael O’Leary(a) | 60,035,418 | 4.04% | 60,000,016 | 4.06% | 65,000,016 | 4.39% | ||||||
Gilder Gagnon Howe & Co. LLC(b) | Not Reportable | 76,570,295 | 5.19% | 93,372,870 | 6.31% | |||||||
FMR LLC(b) | Not Reportable | 64,938,500 | 4.40% | 46,806,380 | 3.15% | |||||||
FIL Limited(b) | Not Reportable | 62,235,643 | 4.22% | 51,086,444 | 3.44% | |||||||
Chieftain Capital Management Inc(b) | Not Reportable | 52,789,800 | 3.58% | 77,871,400 | 5.27% | |||||||
| (a) | On June 5, 2009, Michael O’Leary sold 5 million Ordinary Shares at €3.75 per share in a private sale conducted outside the United States in accordance with Regulation S under the Securities Act. |
| (b) | These shareholdings have passed below the reportable threshold in Ireland of |
As of Class % of Class No. of Shares % of Class
No. of Shares
Capital Group Companies Inc............. 180,029,994 11.9% 108,080,926 7.0% 91,035,466 6.0%
Gilder Gagnon Howe & Co LLC............. 93,749,190 6.2% 105,164,488 6.8% 136,701,880 9.0%
Wellington Investment Management........ 91,442,743 6.0% 121,033,440 7.7% 133,477,654 8.8%
Fidelity Investments.................... 90,452,075 5.9% 222,645,612 14.4% 212,656,750 13.9%
Michael O'Leary (1)..................... 65,000,016 4.3% 70,000,016 4.5% 70,000,016 4.6%
Bank of Ireland Asset Management Ltd. 61,970,409 4.1% - - - -
Chieftain Capital Management Inc........ 54,743,575 3.6% - - - -
(1) On June 7, 2005, Michael O'Leary sold 6 million30, 2010, the directors and executive officers of Ryanair Holdings as a group owned 75,266,933 Ordinary Shares, at EUR6.50
per share in a private sale conducted outsiderepresenting 5.07% of Ryanair Holdings’ outstanding Ordinary Shares as of such date. See also Note 19(d) to the United States in
accordance with Regulation S under the Securities Act.
consolidated financial statements included herein.
The Company has not entered into any "related“related party transactions"transactions” as defined in Item 7.B. of Form 20-F in the three fiscal years ending March 31, 20072010 or in the period from March 31, 20072010 to the date hereof.
Item 8. Financial Information
| Item 8. | Financial Information |
CONSOLIDATED FINANCIAL STATEMENTS
Please refer to "Item“Item 18. Financial Statements."
”
Legal Proceedings
The Company is engaged in litigation arising in the ordinary course of its business. Although no assurance can be given as to the outcome of these
proceedings, except as otherwise described below,any current or pending litigation, management does not believe that any of these proceedingssuch litigation will, individually or in the aggregate, have a material adverse effect on the results of operations or financial condition of the Company.
76
EU State Aid-Related Proceedings
Proceedings.On December 11, 2002, the European Commission announced the launch of an investigation into the April 2001 agreement among Ryanair, the Brussels (Charleroi) airport and the government of the Walloon Region of Belgium, the owner of the airport, which enabled the Company to launch new routes and base up to four aircraft at Brussels (Charleroi). The European Commission'sCommission’s investigation was based on an anonymous complaint alleging that Ryanair'sRyanair’s arrangements with Brussels (Charleroi) constituted illegal state aid.
The European Commission issued its decision on February 12, 2004. As regards the majority of the arrangements between Ryanair, the airport and the region, the European Commission found that although they constituted state aid, they were nevertheless compatible with the EC Treaty provisions and therefore did not require repayment. However, the European Commission also found that certain other arrangements did constitute illegal state aid and therefore ordered Ryanair to repay the amount of the benefit received in connection with those arrangements. On April 20, 2004, the Walloon Region wrote to Ryanair requesting repayment of all deemed illegalsuch state aid, although it acknowledged that Ryanair could offset against these amountsthe amount of such state aid certain costs incurred in relation to the of establishment of the base, in accordance with the European Commission'sCommission’s decision. Ryanair made the requested repayment.
On May 25, 2004, Ryanair appealed the decision of the European Commission to the European Court of First Instance,CFI, requesting the Courtcourt to annul the decision on because:
the bases that:
- - The European Commission infringed Article 253 of the EC Treaty by failing to provide adequate reasons for its decision; and
- - The
the European Commission misapplied Article 87 of the EC Treaty by failing to properly apply the Market Economy Investor Principle ("MEIP")(MEIP), which generally holds that an investment made by a public entity that would have been made on the same basis by a private entity does not constitute state aid.
In March 2008, Ryanair is still awaiting ahad its hearing in its appeal before the European Court
of First Instance.
In September 2004,CFI, and in December 2008, the Walloon Region issued a formal demand that Ryanair
repay a total of approximately EUR4 million, excluding any interest that may be
due. Ryanair has informed the Walloon authorities that it does not believe it is
obliged to make any repayment as Ryanair's costs of establishing the base far
exceeded the concessions granted by the Walloon region. However, Ryanair agreed
with the Walloon Region to place this amount into an escrow account pending the
outcome of the appeal toCFI annulled the European Court of First Instance. In addition, in
May 2005,Commission’s decision, and Ryanair was repaid the Walloon Region initiated a new proceeding currently pending before€4 million that the Irish High Court to recover a further EUR2.3 million in start-up costs that
were reimbursed to Ryanair in connection with its establishment of the base.
Ryanair does not believe any such payment is due and is currently defending this
action before the Irish Supreme Court.
In an unrelated, though similar, matter, in July 2003, a Strasbourg court
ruled (on the basis of a complaint by Air France) that marketing support granted
by the Strasbourg Chamber of Commerce to Ryanair in connection with its launch
of services from Strasbourg to London (Stansted) constituted unlawfulCommission had claimed was illegal state aid. The judgment took effect on September 24, 2003 and was upheld on appeal.Belgian government has also withdrawn a separate €2.3 million action against Ryanair appealed this decision toarising from the Conseil d'Etat on the basis that the marketing
support granted was not state aid. In February 2006, the Conseil d'Etat rejected
this appeal and no further appeal can be filed. As a result of the initial
decision of the Strasbourg Court to annul Ryanair's contract with Strasbourg
Airport, Ryanair decided to close the Strasbourg route and instead opened a
route from Baden-Karlsruhe in Germany to London (Stansted) (Baden airport is
located some 40 kilometers from Strasbourg).
77
Ryanair is facing similar legal challenges by third parties with respect to agreements with certain other airports. In July 2006, a local court in Germany
required the City of Lubeck to disclose to a competing German airline operating
out of the main airport in Hamburg details of an agreement between Hamburg
Lubeck Airport2007 and Ryanair. This competing airline is seeking to have Ryanair's
agreement with the airport annulled on the basis of it constituting illegal
state aid. However, the ruling of the Lubeck court does not affect Ryanair's
costs at Lubeck Airport, as the airport was subsequently acquired by a private
owner who is offering the same arrangements to all airlines as were offered to
Ryanair. There have also been complaints by competitors regarding Ryanair's
arrangements with Shannon Airport, Alghero Airport and Frankfurt (Hahn) Airport.
In July 2007,2008, the European Commission announced that it had startedbegun investigations of airport agreements at the Lubeck,Hamburg (Lubeck), Tampere, Berlin (Schonefeld), Alghero, Pau, Aarhus, Bratislava and Dortmund airports.airports; however, Ryanair has relativelyonly limited operationsflights to and from the first threeseven of such airports and does not operate flights to or from Dortmund. AdverseOn June 17, 2008, the European Commission launched a further investigation into Ryanair’s agreements at Frankfurt (Hahn) airport, which is a significant base for Ryanair. The European Commission announced in a public statement that its initial investigation had found that the airport might have acted like a private market investor but that it had insufficient evidence to reach a conclusion and therefore had elected to open a formal investigation. This investigation is ongoing. Previous complaints by Lufthansa about Ryanair’s cost base at Frankfurt (Hahn) have been rejected by German courts. In addition, Ryanair is involved in legal challenges including allegations of state aid at Alghero and Marseille airports. In January 2010, the European Commission concluded the Bratislava state-aid investigation with a finding that Ryanair’s agreement with Bratislava airport involved no aid.
In September 2005, the European Commission announced new guidelines on the financing of airports and the provision of start-up aid to airlines departing from regional airports, based on the Commission’s finding in the Brussels (Charleroi) case, which Ryanair successfully appealed. The guidelines apply only to publicly owned regional airports, and place restrictions on the incentives these airports can offer airlines to deliver traffic. The guidelines apply only in cases in which the terms offered by a public airport are in excess of what a similar private airport would have offered. Ryanair deals with airports, both public and private, on an equal basis and receives the same cost agreements from both. The guidelines have therefore had no impact on Ryanair’s business, although they have caused significant uncertainty in the industry in relation to what public airports may or may not do in order to attract traffic.
Ryanair believes that the positive decision by the CFI in the Charleroi case has caused the European Commission to rethink its policy in this area. Ryanair believes that the Court’s findings should be addressed in the upcoming revision of the guidelines. However, adverse rulings in thesethe above or similar cases could be used as precedents by other competitors to challenge Ryanair'sRyanair’s agreements with other publicly-ownedpublicly owned airports and could cause Ryanair to strongly reconsider its growth strategy in relation to public or state-owned airports across Europe. This could in turn lead to a scaling back of Ryanair'sRyanair’s growth strategy due to the smaller number of privately-ownedprivately owned airports available for development. No assurance can be given as to the outcome of these proceedings, nor as to whether any unfavorable outcomes may, individually or in the aggregate, have a material adverse effect on the results of operations or financial condition of the Company.
On September 6, 2005,
In November 2007, Ryanair initiated proceedings in the CFI against the European Commission announced new guidelinesfor its failure to take action on a number of state aid complaints Ryanair had submitted against Air France, Lufthansa, Alitalia, Volare and Olympic Airways. Following the financing of airportsCommission’s subsequent findings that illegal state aid had been provided to Air France and start-up aid to airlines by certain regional
airports, based onOlympic Airways, Ryanair withdrew the two relevant proceedings. Ryanair is currently awaiting hearings in the remaining three cases.
In November 2008, Ryanair initiated proceedings in the CFI contesting the European Commission's findingCommission’s refusal to grant Ryanair access to documents relating to the Commission’s state aid investigations at Hamburg (Lubeck), Tampere, Berlin (Schonefeld), Alghero, Pau, Aarhus, Bratislava and Frankfurt (Hahn) airports. These cases were heard on July 7, 2010 and a judgment can be expected in six to twelve months.
In March 2009, Ryanair also appealed (to the Charleroi case,
which Ryanair has appealed. The guidelines apply onlyCFI) two decisions issued by the European Commission in November 2008 relating to publicly-owned regional
airports,the sale of Alitalia’s assets to Compagnia Aerea Italiana (CAI) and place restrictions onto a €300 million rescue loan granted to Alitalia by the incentives these airports can offer
airlines to deliver traffic. The guidelines, however, apply only in cases in
which the terms offered by a public airport are in excess of what a similar
private airport would have offered. Ryanair deals with airports, both public and
private, on an equal basis and receives the same cost agreements from both.
Ryanair therefore considers that the guidelines will have no impact on its
business. In January 2007, the Commission announced a draft Airports Charging
Directive which seeks to regulate airport charges at all European airports with
over 1 million passengers. Ryanair and other airlines are opposed to this
legislation, which they believe should focus on monopoly airports where strong
regulations are needed.
Challenge to U.K. Security Measures
On August 10, 2006, U.K. security authorities arrestedItalian government and subsequently charged eight individualsconverted into Alitalia’s capital. A date for hearing has not yet been set, but Ryanair expects these proceedings to last between two and four years, in connectionline with an alleged plot to attack aircraft
operating on transatlantic routes. As a resultthe average duration of these arrests, U.K.
authorities introduced increased security measures, which resulted in all
passengers being body-searched, and banned the transportation in carry-on
baggage of certain liquids and gels. The introduction of these measures led to
passengers suffering severe delays while passing through these airport security
checks. As a result, Ryanair cancelled 279 flights in the days following the
incident and refunded fares to 40,000 passengers for a total of EUR2.7 million.
In the days following the arrests, Ryanair also suffered reductions in bookings
estimated to have resulted in a further loss of revenue of approximately EUR1.9
million. As in the past, the Company reacted to these adverse events by
initiating system-wide fare sales to stimulate demand for air travel.
On September 1, 2006, Ryanair filed a claim for EUR4.6 million in
compensation against the U.K. Department of Transport under section 93 of the
U.K. Transport Act 2000. Section 93 of the act provides for compensation for
airlines in cases in which the Department has issued directions under the Act
that have lead to damages to the airlines. The case is to be heard in the London
High Court. There can be no assurance that the Company will be successful in its
legal action or in obtaining any compensation in connection with its claims.
78
On August 14, 2006, the U.K. security authorities reduced the level of
security searches and at the same time introduced additional baggage
restrictions in relation to the size of baggage that can be stowed in aircraft
cabins. Passengers have suffered significant delays as a result of increased
security measures and carry-on baggage restrictions. See also "Risk
Factors-Risks Related to the Company-Terrorism in the United Kingdom or
Elsewhere in Europe Could Have a Material Detrimental Effect on the Company."
CFI proceedings.
Aer Lingus Merger DecisionDecision. During the 2007 fiscal year, the Company acquired 25.2% of Aer Lingus. The Company increased its interest to 29.3% during the 2008 fiscal year, and to 29.8% during the 2009 fiscal year at a total aggregate cost of €407.2 million. Following the acquisition of its initial stake and upon the approval of the Company’s shareholders, management proposed to effect a tender offer to acquire the entire share capital of Aer
Lingus. This acquisition proposal was, however, blocked by the European Commission on competition grounds. Ryanair filed an appeal with the CFI, which was heard in July 2009. On July 6, 2010 the Court upheld the Commission’s decision. Ryanair has actedtwo months and 10 days from such date to block Ryanair's proposed acquisitionappeal this judgment. (see also: “Item 5. Operating and Financial Review and Prospects—Business Overview”).
The then EU Commissioner for Competition, Neelie Kroes, said on June 27, 2007 that, “Since Ryanair is not in a position to exert de jure or de facto control over Aer Lingus, the European Commission is not in a position to require Ryanair to divest its minority shareholding, which is, by the way, not a controlling stake.” In October 2007, the European Commission also reached a formal decision that it would not force Ryanair to sell its shares in Aer Lingus. However, Aer Lingus appealed this decision before the CFI. In January 2008, the CFI heard an application by Aer Lingus for interim measures limiting Ryanair’s voting rights, pending a decision of the CFI on Aer Lingus’ appeal of the European Commission’s decision not to force Ryanair to sell the Aer Lingus shares. In March 2008, the court dismissed Aer Lingus’ application for interim measures. Aer Lingus’ main appeal was heard in July 2009. On July 6, 2010 the court rejected Aer Lingus’ appeal and confirmed that Ryanair cannot be forced to dispose of its 29.8% stake in Aer Lingus. Aer Lingus has two months and 10 days from such date to appeal this judgment to the Court of Justice of the EU. In addition to the risk that the Court of Justice may overturn the lower court’s ruling, should Aer Lingus choose to appeal it, EU legislation may change in the future to require such a forced disposition. If eventually forced to dispose of its stake in Aer Lingus, Ryanair could suffer significant losses due to the negative impact on attainable prices of the forced sale of such a significant portion of Aer Lingus’ shares.
On December 1, 2008, Ryanair made a second offer to acquire all of the ordinary shares of Aer Lingus whichit did not own at a price of €1.40 per ordinary share. Ryanair announced followingoffered to keep Aer Lingus as a separate company, maintain the partial floatationAer Lingus brand, and retain its Heathrow slots and connectivity. Ryanair also proposed to double Aer Lingus’ short-haul fleet from 33 to 66 aircraft and to create 1,000 associated new jobs over a five-year period. If the offer had been accepted, the Irish government would have received over €180 million in cash. The employee share option trust and employees who own 18% of Aer Lingus would have received over €137 million in cash. The Company met Aer Lingus management, representatives of the Irish flag carrier. In October 2006,employee share option trust and other parties. The offer of €1.40 per share represented a premium of approximately 25% over the closing price of €1.12 of Aer Lingus on November 28, 2008. Ryanair notifiedalso advised the European Commissionmarket that it had acquired 19.2% ofwould not proceed to seek EU approval for the ordinary share capitalnew bid unless the shareholders agreed to sell their stakes in Aer Lingus (thisto Ryanair. However, as the Company was subsequently increasedunable to 29.4%). Ryanair offered remediessecure the shareholders’ support it decided, on January 28, 2009, to the Commission in
the first phase of the Commission's merger investigation but the Commission
opened a second phase investigation, something that it has done in no other
previous airline merger, including Air France/KLM. Despite demonstrating that
the merger of the two airlines would have significant consumer benefits and
efficiencies, and despite offering substantial remedies -- including guaranteed
fare and fuel levy reductions or eliminations, which would save consumers
approximately EUR100 million per annum, and large numbers of slot surrenders --
the Commission nevertheless prohibited the merger in June 2007. Ryanair
submittedwithdraw its appeal of the decision to the European Court of First Instance on
September 10, 2007.
new offer for Aer Lingus.
Legal Actions Against Regulated Monopoly AirportsAirports. Ryanair is involved in a number of legal and regulatory actions against the Dublin and London Stansted(Stansted) airports forin relation to what Ryanair considers to be ongoing abuses of their dominant positions in the Dublin and London Stansted(Stansted) markets. Management believes that both of these airports have been engagedengaging in "regulatory
gaming"“regulatory gaming” in order to achieve inflated airport charges under the regulatory processes in the U.K. and Ireland. By inflating its so-called "regulated“regulated asset base" (RAB - essentiallybase” (essentially the value of its airport facilities), a regulated airport can achieve higher returns on its assets through inflated airport charges. The U.K. Office of Fair Trading,With respect to London (Stansted), the OFT, following complaints from Ryanair and other airlines, has recognized that the regulatory process is flawed and provides perverse incentives to regulated airports to spend excessively on infrastructure in order to inflate their airport charges. The U.K. Office of
Fair Trading hasOFT referred the mattercase to the U.K. Competition Commission, which is investigatingreleased its preliminary findings in April 2008. It found that the competitive structurecommon ownership by BAA of the three main airports in London affects competition and that the “light touch” regulation by the Civil Aviation Authority was having an adverse impact on competition. In March 2009, the Competition Commission published its final report on the BAA and ordered the breakup of BAA, (which will involve the sale of London (Gatwick) and London (Stansted) and either Glasgow or Edinburgh Airport in Scotland). In October 2009 London (Gatwick) was sold to Global Infrastructure Partners for £1.5 billion. In May 2009, BAA appealed the Competition Commission’s decision on the bases of apparent bias and lack of proportionality. Ryanair secured the right to intervene in this appeal in support of the Competition Commission. The case was heard in October 2009 and in February 2010 the Competition Appeal Tribunal quashed the Competition Commission’s ruling on the basis of the “apparent bias” claim. This decision is currently under appeal by both the Competition Commission and Ryanair before the Court of Appeal. The appeal was heard in June 2010 and the judgment is likely to be issued in July or August 2010. If the Competition Appeal Tribunal judgment is upheld, the Competition Commission will be required to undertake a fresh review of the common ownership of airports marketby the BAA, which may lead to different findings than the original investigation.
With respect to Dublin airport, Ryanair appealed the December 2009 decision of the CAR, which set maximum charges at the airport for 2010 through 2014, to the Appeals Panel set up by the Minister for Transport. In June 2010, the Appeals Panel found in favor of Ryanair on the matter of differential pricing between
Terminal 1 and Terminal 2, recommending that such differential pricing be imposed by the CAR. This would lead to lower charges at Terminal 1, which is considering a possible break-up of BAA.
used by Ryanair. However, the Appeals Panel’s recommendation is not binding on the CAR; the CAR is expected to decide on whether to vary its pricing by August 2, 2010.
Ryanair has also been trying to prevent both the BAA in StanstedLondon and the DAA in Dublin from engaging in further wasteful capital expenditure. In the case of StanstedLondon (Stansted) Airport, the BAA iswas planning to spend GBP4£4 billion on a second runway and terminal, which Ryanair believes should only cost approximately GBP1£1 billion. Similarly,Following the final decision of the U.K. Competition Commission forcing BAA to sell London (Stansted) airport, Ryanair believed that it was highly unlikely that BAA’s planned £4 billion plans would proceed. The recently elected Liberal/Conservative government in the U.K. has also outlined that it will not approve the building of any more runways in the Southeast of England. Consequently, in May 2010, the BAA announced that it would not pursue its plans to develop a second runway at London (Stansted).
In the case of Dublin, the DAA is proceeding withhas built a second terminal, costing over four times its initial estimate. When the DAA first announced plans to build a second terminal which will(“Terminal 2”) at Dublin Airport, it estimated that the proposed expansion would cost over four times its initial estimate.
Inbetween €170 million and €200 million. Ryanair supported a development of this scale; however, in September 2006, the DAA announced that it was planning to build a new
terminal (Terminal 2) at Dublin airport at athe construction of Terminal 2 would cost approximately €800 million. Subsequently, the cost of approximately EUR400
million and spend approximately another EUR400 million on upgrading the existing
Terminal 1.new infrastructure rose in excess of €1.2 billion. Ryanair opposed expansion at what it believed to be an excessive cost. On August 29, 2007, however the relevant planning authority approved athe planning application from the DAA for the building of Terminal 2, a second runway, and other facilities, subjectall of which went ahead. On May 1, 2010, the airport fees per departing passenger increased by 27% from €13.61 to €17.23, and could increase by up to 8.0% in November 2010 to €18.64 following the opening of Terminal 2 in November 2010 and by up to a capacity restriction of 32 million passengersfurther 12.0% in January 2011 to €20.88 in accordance with the CAR’s decision on December 4, 2009 in relation to airport charges between 2010 and the building of a
second runway subject to certain limits to its hours of operation. The approval
will mean that charges at Dublin Airport will increase significantly, possibly
doubling from their current level.2014. Ryanair plans to seeksought a judicial review of the planning approval. However there can be no assurance thatapproval; however, this appeal will
be successful.was unsuccessful. The doubling of airportincrease in charges, in combination with the eventintroduction of the failure of a
judicial review,€10 Air Travel Tax mentioned above, could have an adverse impact on yields andlead to substantially reduced passenger volumes atand a significant decline in yields on flights to and from Dublin Airport. 79
Dividend Policy
Policy.
Since its organizationincorporation as the holding company for Ryanair in 1996, Ryanair Holdings has not declared or paid dividends on its Ordinary Shares. However, the directors of Company declared on June 1, 2010 that Ryanair Holdings anticipates, forintends to pay a special dividend of €500 million, to be paid in October 2010, subject to shareholder approval at its annual general meeting on September 22, 2010. The Company also indicated in the foreseeable future,same announcement that it will retainmay pay a further dividend of up to €500 million before the end of fiscal year 2013, subject to, amongst other things, its continued profitability and the absence of further aircraft purchases or any earnings in orderother significant capital expenditures. The Company may ultimately determine not to fund the business operations ofpay any such dividend, or may fail to obtain shareholder approval. The Company may pay other dividends from time to time, or it may not pay any dividends at all, as has been its practice to date. No assurances can be given that the Company including the
acquisition of additional aircraft needed for Ryanair's planned entry into new
markets and the expansion of its existing service, as well as to replace its
current fleet. Ryanair Holdings doeswill, or will not, therefore, anticipate paying any cash
or share dividends on its Ordinary Shares in the foreseeable future.pay dividends. Any cash dividends or other distributions, if made, are expected to be made in euro, although Ryanair Holdings'Holdings’ Articles of Association provide that dividends may be declared and paid in U.S. dollars. In the case of ADRs, The Bank of New York, as
depositarythe Depositary will convert all cash dividends and other distributions payable to owners of ADRs into U.S. dollars to the extent that, in its judgment, it can do so on a reasonable basis, and will distribute the resulting U.S. dollar amounts (net of conversion expenses)expenses and any applicable fees) to the owners of ADRs. See “Item 12. Description of Securities Other than Equity Securities” for information regarding fees of the Depositary.
Share Buy-back A share buy-back, which was approvedProgram
Following shareholder approval at the 2006 annual general meeting of shareholders, a €300 million share buy-back program was formally announced on June 5, 2007. With effect from June 7,
2007 and untilThis buy-back program was not completed before the 2007 annual general meeting. The Directors therefore sought a renewal of the above authority. Permission was received at the annual general meeting of the shareholders held on September 20, 2007 the Company planned to repurchase up to a maximum of EUR300m75.6 million Ordinary Shares representing 5% of the Company’s then outstanding share capital. The €300 million share buy-back of approximately 59.5 million shares, representing approximately 3.8% of the Company’s pre-existing share capital, was completed in November 2007. In February 2008 the Company
announced a second share buy-back program of up to €200 million worth of shares, or a total maximumwhich was ratified by shareholders at the annual general meeting of 77.2 million shares. Atthe shareholders held on September 20, 2007 the
Company had repurchased 46.118, 2008. 18.1 million shares were repurchased under this program at a total cost of EUR229.1approximately €46.0 million and, as a result, the total amount spent on the two share buy-back programs was €346.0 million. All Ordinary Shares repurchased have been cancelled.
See “Item 10. Additional Information—Description of Capital Stock—Trading Markets and Share Prices” below for further information regarding share buy-backs.
No significant change in the Company'sCompany’s financial condition has occurred since the date of the Consolidated Financial Statementsconsolidated financial statements included in this annual report.
Item 9. The Offer and Listing
| Item 9. | The Offer and Listing |
TRADING MARKETS AND SHARE PRICES
The primary market for Ryanair Holdings'Holdings’ Ordinary Shares is the Irish Stock Exchange Limited (the "Irish“Irish Stock Exchange" or "ISE"Exchange”); Ordinary Shares are also traded on the London Stock Exchange. The Ordinary Shares were first listed for trading on the Official List of the Irish Stock Exchange on June 5, 1997 and were first admitted to the Official List of the London Stock Exchange on July 16, 1998.
ADRs, each representing five Ordinary Shares, are traded on the Nasdaq.NASDAQ. The Bank of New York Mellon is Ryanair Holdings'Holdings’ depositary for purposes of issuing ADRs evidencing the ADSs. The following tables set forth, for the periods indicated, the reported high and low closing sales prices of the ADRs on NasdaqNASDAQ and for the Ordinary Shares on the Irish Stock Exchange and the London Stock Exchange, and have been adjusted to reflect the two-for-one splitssplit of the Ordinary Shares and ADRs effected on February 26, 2000, December 7, 2001 and February 26, 2007:
80
ADRs
(in U.S. dollars)
High Low
2001.................................................................. 16.025 8.7475
2002.................................................................. 24.000 14.000
2003.................................................................. 26.025 17.190
2004.................................................................. 28.940 13.080
2005
First Quarter...................................................... 21.475 20.395
Second Quarter..................................................... 23.237 20.414
Third Quarter...................................................... 24.321 22.635
Fourth Quarter..................................................... 28.461 22.736
2006
First Quarter...................................................... 28.339 26.167
Second Quarter..................................................... 27.855 23.365
Third Quarter...................................................... 31.645 25.760
Fourth Quarter..................................................... 40.750 31.110
2007
First Quarter...................................................... 49.215 41.950
Month ending:
March 31, 2007..................................................... 47.790 41.950
April 30, 2007..................................................... 49.560 44.870
May 31, 2007....................................................... 47.400 40.000
June 30, 2007...................................................... 41.000 37.750
July 31, 2007...................................................... 41.490 36.210
August 31, 2007.................................................... 42.970 36.940
Period ending September 19, 2007..................................... 42.540 38.680
81
Ordinary Shares
--------------------------------------------
(Irish Stock Exchange)
(in euro)
High Low
2001.................................................................. 3.55 1.88
2002.................................................................. 4.10 2.48
2003.................................................................. 3.65 2.55
2004.................................................................. 3.80 1.81
2005
First Quarter...................................................... 3.35 2.72
Second Quarter..................................................... 3.33 2.80
Third Quarter...................................................... 3.47 3.16
Fourth Quarter..................................................... 4.15 3.31
2006
First Quarter...................................................... 4.05 3.76
Second Quarter..................................................... 3.88 3.25
Third Quarter...................................................... 4.23 3.54
Fourth Quarter..................................................... 5.24 4.20
2007
First Quarter...................................................... 6.30 5.22
Month ending:
March 31, 2007..................................................... 6.16 5.38
April 30, 2007..................................................... 6.33 5.89
May 31, 2007....................................................... 6.12 5.21
June 30, 2007...................................................... 5.42 4.86
July 31, 2007...................................................... 5.30 4.71
August 31, 2007.................................................... 5.60 4.93
Period ending September 19, 2007...................................... 5.41 4.94
82
Ordinary Shares
------------------------------------------
(London Stock Exchange)
(in euro)
High Low
2001.................................................................. 3.45 1.89
2002.................................................................. 4.10 2.50
2003.................................................................. 3.63 2.59
2004.................................................................. 3.78 1.83
2005
First Quarter...................................................... 3.35 2.73
Second Quarter..................................................... 3.33 2.79
Third Quarter...................................................... 3.46 3.16
Fourth Quarter..................................................... 4.15 3.32
2006
First Quarter...................................................... 4.05 3.77
Second Quarter..................................................... 3.89 3.24
Third Quarter...................................................... 4.23 3.53
Fourth Quarter..................................................... 5.21 4.19
2007
First Quarter...................................................... 6.30 5.28
Month ending:
March 31, 2007..................................................... 6.09 5.42
April 30, 2007..................................................... 6.27 5.82
May 31, 2007....................................................... 6.12 5.24
June 30, 2007...................................................... 5.42 4.88
July 31, 2007...................................................... 5.30 4.75
August 31, 2007.................................................... 5.61 4.97
Period ending September 19, 2007...................................... 5.41 4.90
| ADRs | ||||
| (in U.S. dollars) | ||||
| High | Low | |||
2004 | 28.940 | 13.080 | ||
2005 | 28.740 | 19.795 | ||
2006 | 40.750 | 23.365 | ||
2007 | 49.560 | 36.210 | ||
2008 | ||||
First Quarter | 37.670 | 25.700 | ||
Second Quarter | 32.410 | 24.190 | ||
Third Quarter | 35.010 | 22.150 | ||
Fourth Quarter | 31.930 | 16.020 | ||
2009 | ||||
First Quarter | 30.540 | 21.770 | ||
Second Quarter | 31.410 | 23.300 | ||
Third Quarter | 30.930 | 26.590 | ||
Fourth Quarter | 30.600 | 24.970 | ||
Month ending: | ||||
January 31, 2010 | 27.950 | 25.980 | ||
February 28, 2010 | 27.650 | 26.280 | ||
March 31, 2010 | 27.720 | 26.000 | ||
April 30, 2010 | 30.370 | 27.810 | ||
May 31, 2010 | 28.140 | 22.580 | ||
June 30, 2010 | 28.400 | 24.240 | ||
Period ending July 19, 2010 | 30.220 | 27.660 | ||
2004 2005 2006 2007 2008 First Quarter Second Quarter Third Quarter Fourth Quarter 2009 First Quarter Second Quarter Third Quarter Fourth Quarter Month ending: January 31, 2010 February 28, 2010 March 31, 2010 April 30, 2010 May 31, 2010 June 30, 2010 Period ending July 19, 2010 Ordinary Shares
(Irish Stock Exchange) (in euro) High Low 3.80 1.81 4.15 2.72 5.24 3.25 6.33 4.40 4.59 2.55 3.39 2.71 3.39 2.24 3.27 1.97 3.41 2.76 3.77 2.87 3.61 3.04 3.49 2.74 3.53 3.33 3.57 3.35 3.69 3.40 4.08 3.67 3.62 3.03 3.80 3.51 3.92 3.58
| Ordinary Shares (London Stock Exchange) | ||||
| (in euro) | ||||
| High | Low | |||
2004 | 3.78 | 1.83 | ||
2005 | 4.15 | 2.73 | ||
2006 | 5.21 | 3.24 | ||
2007 | 6.30 | 4.44 | ||
2008 | ||||
First Quarter | 4.59 | 2.60 | ||
Second Quarter | 3.27 | 2.64 | ||
Third Quarter | 3.39 | 2.22 | ||
Fourth Quarter | 3.27 | 1.98 | ||
2009 | ||||
First Quarter | 3.42 | 2.78 | ||
Second Quarter | 3.77 | 2.86 | ||
Third Quarter | 3.60 | 3.03 | ||
Fourth Quarter | 3.49 | 2.73 | ||
Month ending: | ||||
January 31, 2010 | 3.54 | 3.32 | ||
February 28, 2010 | 3.58 | 3.36 | ||
March 31, 2010 | 3.72 | 3.40 | ||
April 30, 2010 | 4.05 | 3.67 | ||
May 31, 2010 | 3.62 | 3.02 | ||
June 30, 2010 | 3.80 | 3.53 | ||
Period ending July 19, 2010 | 3.94 | 3.57 | ||
Since certain of the Ordinary Shares are held by brokers or other nominees, the number of direct record holders in the United States, which is reported above (81), may not be fully indicative of the number of direct beneficial owners in the United States, or of where the direct beneficial owners of such shares are resident.
In order to increase the percentage of its share capital held by EU nationals, beginning June 26, 2001, Ryanair Holdings instructed The Bank of New
Yorkthe Depositary to suspend the issuance of new ADRs in exchange for the deposit of
Ordinary Shares until further notice. HoldersTherefore, holders of Ordinary Shares cannot currently convert their Ordinary Shares into ADRs. The Bank of New YorkDepositary will continue tohowever convert existing ADRs into Ordinary Shares at the request of the holders of such ADRs. The Company in 2002 implemented additional measures to restrict the ability of non-EU nationals to purchase Ordinary Shares, andShares. As a result, non-EU nationals are currently effectively barred from purchasing Ordinary Shares. See "Item“Item 10. Additional Information-LimitationsInformation—Limitations on Share Ownership by Non-EU Nationals"Nationals” for additional information.
At the annual general meeting of the shareholders held on September 21, 2006, the Boardboard of Directorsdirectors of Ryanairthe Company received shareholder approval for a share buy-back planprogram allowing a maximum repurchase of 77,171,868approximately 77.2 million Ordinary Shares, representing 5% of the Company's currentlyCompany’s then outstanding share capital. Following receipt of this approval, the Company announced, in June 2007, the commencement of a €300 million share buy-back program. This buy-back program was not completed before the 2007 annual general meeting. The Directors therefore sought a renewal of the above authority. Permission was received at the annual general meeting of the shareholders held on September 20, 2007 to repurchase a maximum of 75.6 million Ordinary Shares representing 5% of the Company’s then outstanding share capital. The €300 million share buy-back of approximately 59.4 million shares, representing approximately 3.8% of the Company’s pre-existing share capital, was completed in November 2007. In February 2008 the Company announced a second share buy-back program of up to €200 million worth of shares, which was ratified by shareholders at the annual general meeting of the shareholders held on September 18, 2008. 18.1 million shares were repurchased under this program at a cost of approximately €46.0 million and, as a result, the total amount spent on the two share buy-back programs was €346.0 million. All Ordinary Shares repurchased have been cancelled.
The maximum price at which the Company may repurchase Ordinary Shares, will, in accordance with the Listing Ruleslisting rules of the Irish Stock Exchange and of the Financial Services Authority, beis the higher of 5% above the average market value of the Company'sCompany’s Ordinary Shares for the five business days prior to the day of the repurchase and the price stipulated by Article 5(1) of Commission Regulation (EC) of 22 December 2003 (No. 2273/2003) (which is the higher of the last independent trade and the highest current independent bid on the Irish Stock Exchange). The minimum price at which the Company may repurchase Ordinary Shares is their nominal value, currently EUR0.635. Any Ordinary Shares repurchased will
be cancelled. Authorization for the repurchases will be valid for fifteen months
from the date of the annual general meeting at which the resolution approving
the buy-back plan was approved or, if earlier, until the day following the
Company's next annual general meeting.
83
A share buy-back, which was approved at the 2006 annual general meeting of
shareholders, was formally announced on June 5, 2007. With effect from June 7,
2007 and until the 2007 annual general meeting of shareholders on September 20,
2007, the Company planned to repurchase up to a maximum of EUR300m worth of
shares, or a total maximum of 77.2 million shares. At September 20, 2007 the
Company had repurchased 46.1 million shares at a total cost of EUR229.1
million.
€0.635.
As of July 1, 2007,June 30, 2010, the total number of options over Ordinary Shares outstanding under all of the Company'sCompany’s share option plans was 37,492,11330,931,665, representing 2.4%2.1% of the Company'sCompany’s issued share capital at that date. The number
of outstanding options could potentially represent 2.5% of the issued share
capital of the Company if the Company were to purchase all of the Ordinary
Shares it is authorized to repurchase under the share buy-back plan authorized
by the Company's stockholders at the annual general meeting on September 21,
2006.
Item 10. Additional Information
| Item 10. | Additional Information |
Ryanair Holdings'Holdings’ capital stock consists of Ordinary Shares, each having a par value of 0.635 euro cents.cent. As of March 31, 2007,2010, a total of 1,547,028,7301,478,935,935 Ordinary Shares were outstanding. On February 26, 2007, Ryanair effected a 2-for-1 share split byas a result of which each of its then existing Ordinary Shares, par value 1.27 euro cents,cent, was split into two new Ordinary Shares, par value 0.635 euro cents.cent. Each Ordinary Share entitles the holder thereof to one vote in respect of any matter voted upon by Ryanair Holdings'Holdings’ shareholders.
OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES
In April 1998, the Board of Directors of
Ryanair Holdings adopted an
employee shareHoldings’ shareholders approved a stock option plan (the "Option(referred to herein as “Option Plan 1998"2000”), withunder which all employees of the
Company being eligible to participate. The Option Plan 1998 was approved by
Ryanair Holdings' shareholders at the annual general meeting held on September
29, 1998. Options under this plan were granted over a five-year period beginning
in 1998.
Ryanair Holdings' shareholders approved subsequent share option plans in
2000 (the "Option Plan 2000") and 2002 (the "Option Plan 2002").
All employees and directors are eligible to participate in Option Plan
2000, and grantsreceive options. Grants of options may be made inwere permitted to take place at the close of any of the ten years beginning with fiscal year 2000 only if the Company'sCompany’s net profit after tax for the relevantsuch fiscal year hashad exceeded its net profit after tax for the precedingprior fiscal year by at least 20%25%, or if an increase of 1% in net profit after tax for anythe relevant year would have resulted in such criterionrequirement being met. Under the terms
of the
Ryanair Holdings’ shareholders have also approved a stock option plan options will become exercisable five years from the time of the
first grant under the program, provided that the grantee is still employed by
the Company. If the grantee has ceased(referred to be a full-time employee before this
vesting date, the grantee will generally lose his or her complete option
entitlement automatically.
The Optionherein as “Option Plan 2002 was2003”) established in accordance with a tax-favorable approved share option scheme available in Irelandunder Irish law, so that employees will not be taxedsubject to income tax on the exercise of options (subject to certain conditions). The Option Plan 20022003 was approved by the Revenue Commissioners on July 4, 2003 for the purposes of Chapter 4, Part 17, of the Irish Taxes Consolidation Act, 1997 and Schedule 12C of that act. All employees and full-time directors are eligible to participate in the plan, under which grants of options may be made inat the close of any of the ten years beginning with fiscal year 2002 only if the Company'sCompany’s net profit after tax for the relevantsuch fiscal year has exceeded its net profit after tax for the precedingprior fiscal year by at least 25%, or if an increase of 1% in net profit after tax for anythe relevant year would have resulted in such criterionrequirement being met.
Under the termsOption Plan 2000, 20 senior managers (including seven of the plan,current executive officers) were granted 10,500,000 share options, in the aggregate, at a strike price of €3.21 in July 2005. Some or all of these options will become exercisable five years from the
time of the first grantbetween August 1, 2010 and August 31, 2013, subject to certain targets being achieved and other conditions being complied with. Also, under the program.
84
As of March 31, 2007, 14 separate grants of an aggregate total of
87,326,328 options in respect of an equivalent number of Ordinary Shares had
been made to eligible employees under the Company's various option plans, and an
aggregate of 35,107,978 options to purchase an equal number of Ordinary Shares
were outstanding.
Under Option Plan 1998, 10,400,000 options were granted to 15 key senior
executives and managers at a strike price equal to the closing price of the
Ordinary Shares on the date of the grant. These options became exercisable in
June 2003 and were exercisable through June 2005, but only for managers who were
still employed by the Company in June 2002. Under the Option Plan 2000, 23
senior managerseach of the non-executive directors were granted 9,116,00025,000 share options, at a strike price of EUR2.83 on June 30, 2002.€4.96, during the 2008 fiscal year. These options will become exercisable between June 1, 20072012 and June 1, 2009,2014. In addition, 39 senior managers (including eight of the current executive officers) were granted 10,000,000 share options, in the aggregate, under Option Plan 2000, at a strike price of €2.56, on September 18, 2008. These options will become exercisable between September 18, 2013 and September 17, 2015, but only for managers who continue to be employed by the Company through June 1, 2007. September 18, 2013.
Under the Option Plan 2002,2003, 47 senior managers (including seven of the current executive officers) were granted 5,550,000 share options at a strike price of EUR2.35€2.35 on November 3, 2004. These options have either become exercisable or will become exercisable between November 3, 2009 and
November 3,by June 2011, but only for managers who continuecontinued to be employed by the Company through November 3,June 2009.
The aggregate of 35,107,97830,931,665 Ordinary Shares that would be issuable upon exercise in full of the options described in this
section that were outstanding as of March 31, 2007 wouldJune 30, 2010 under Company’s option plan represent 2.3%approximately 2.1% of the
current issued share capital of Ryanair Holdings.Holdings as of such date. Of such total, options in respect of an aggregate of 14,907,19615,925,305 Ordinary Shares arewere held by the directors and executive officers of Ryanair Holdings. MEMORANDUM AND For further information, see notes 15 and 19 to the consolidated financial statements included herein.
The following is a summary of certain provisions of the Memorandum and Articles of Association of Ryanair Holdings. This summary does not purport to be complete and is qualified in its entirety by reference to the complete text of the Memorandum and Articles, of Association, which are filedincluded as an exhibit to this Report.
annual report.
Objects. The Company's Ryanair Holdings’ objects, which are detailed in its Memorandum of
Association,Articles, are broad and include carrying on business as an investment and holding company. The Company's registeredRyanair Holdings’ Irish company registration number is 249885.
Directors. Subject to certain exceptions, directors may not vote on matters in which they have a material interest. The ordinary remuneration of the directors is determined from time to time by ordinary resolutionresolutions of the Company.shareholders. Any director who holds any executive office, serves on any committee or otherwise performs services, which, in the opinion of the directors, are outside the scope of the ordinary duties of a director, may be paid such extra remuneration as the directors may determine. The directors may exercise all the powers of the Company to borrow money. These powers may be amended by special resolution of the shareholders. The directors are not required to retire at aany particular age. There is no requirement for directors to hold shares. One thirdOne-third of the directors retire and offer themselves for re-election at each annual general meeting of the Company. The directors to retire by rotation are those who have been longest in office since their last appointment or reappointment. As between persons who became or were appointed directors on the same date, those to retire are determined by agreement between them or, otherwise, by lot. All of the shareholders entitled to attend and vote at the annual general meeting of the companyCompany may vote on the re-election of directors.
Annual and General Meetings.Annual and extraordinary meetings at which special resolutions are to be voted upon are called byupon 21 days cleardays’ advance notice. Extraordinary general meetings at which ordinary resolutions are to be voted upon aremay be called byupon 14 days clear notice.days’ advance notice subject to compliance with certain additional requirements of the Shareholders Rights Regulations 2009. All holders of ordinary sharesOrdinary Shares are entitled to attend, speak at and vote at general meetings of the Company, subject to limitations described below under "Limitations“—Limitations on the Right to Own Shares."
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Rights, Preferences and Dividends Attaching to Shares.The Company has only one class of shares, being ordinary shares of EUR0.00635Ordinary Shares with a par value each.of 0.635 euro cent per share. All such shares rank equally with respect to payment of dividends and on any winding-up of the Company. Any dividend, interest or other sum payable to a shareholder whichthat remains unclaimed for one year after having been declared may be invested by the directors for the benefit of the Company until claimed. If the directors so resolve, any dividend which has remained unclaimed for 12 years from the date of its declaration shall be forfeited and cease to remain owing by the Company. The Company is permitted under its Articles of Association to issue redeemable shares on such terms and in such manner as the
Company may, by special resolution, determine. The ordinary sharesOrdinary Shares currently in issue are not redeemable. The liability of shareholders to invest additional capital is limited to the amounts remaining unpaid on the shares held by them. There are no sinking fund provisions in the Memorandum and Articles of Association of the Company.
Action Necessary to Change the Rights of Shareholders.The rights attaching to shares in the Company may be varied by special resolutionresolutions passed at a meetingmeetings of the shareholders of the Company.
Limitations on the Rights to Own Shares.The Articles of Association contain detailed provisions enabling the directors of the Company to limit the number of shares in which non-EU nationals have an interest or the exercise by non-EU nationals of rights attaching to shares. See "Item 10. Additional
Information-Limitations“—Limitations on Share Ownership by Non-EU Nationals."Nationals” below. Such powers may be exercised by the directors if they are of the view that any license, consent, permit or privilege of the Company or any of its subsidiaries that enables it to operate an air service may be refused, withheld, suspended or revoked or have conditions attached to it that inhibit its exercise and the exercise of the powers referred to above could prevent such an occurrence. The exercise of such powers could result in non-EU national holders of shares being prevented from attending, speaking at or voting at general meetings of the Company and/or being required to dispose of shares held by them to EU nationals.
Disclosure of Share Ownership.Under Irish law, the Company can require parties to disclose their interests in shares. The Articles of Association of the Company entitle the directors to require parties to complete declarations indicating their nationality and the nature and extent of any interest which such party holdsparties hold in sharesOrdinary Shares before allowing such parties to transfer shares in
the Company.such Ordinary Shares. See, "Item 10. Additional Information-Limitationsalso “—Limitations on Share Ownership by non-EU nationals."nationals” below. Under Irish law, if a party acquires or disposes of shares
in the Company bringingOrdinary Shares so as to bring his interest above or below 5% of the total issued share capital of the Company, or changing his percentage interest above 5% (once his
interest has been rounded down to the nearest percentage), he must notify the Company of that. The Irish Stock Exchange must also be notified of any acquisition or disposal of shares which bringthat brings the shareholding of a party above or below certain specified percentages percentages—i.e., 10, 25, 5010%, 25%, 50% and 70%.
Other Provisions of the Memorandum and Articles of Association.There are no provisions in the Memorandum and Articles of Association:
o delaying or prohibiting a change in the control of the Company, but
which operate only with respect to a merger, acquisition or corporate
restructuring;
o discriminating against any existing or prospective holder of shares as
a result of such shareholder owning a substantial number of shares; or
o governing changes in capital,
Articles:
| (i) | delaying or prohibiting a change in the control of the Company, but which operate only with respect to a merger, acquisition or corporate restructuring; |
| (ii) | discriminating against any existing or prospective holder of shares as a result of such shareholder owning a substantial number of shares; or |
| (iii) | governing changes in capital, |
in each case, where such provisions are more stringent than those required by law.
86
In February 2005, the Company and Boeing entered into a new series of agreements for the purchase by the Company of new Boeing 737-800 aircraft for delivery during the period from April 2008 through December 2011,March 2013, as well as for options to purchase additional aircraft. See "Item“Item 4. Information on the Company-Aircraft"Company—Aircraft” and "Item“Item 5. Operating and Financial Review and Prospects-LiquidityProspects—Liquidity and Capital Resources"Resources” for a detailed discussion of the 2005 Boeing contract.
Except as indicated below, there are no restrictions on non-residents of Ireland dealing in Irish securities (including shares or depositary receipts of Irish companies such as the Company), and dividends. Dividends and redemption proceeds also continue to be freely transferable to non-resident holders of such securities.
Under the Financial Transfers Act 1992 (the "1992 Act"“1992 Act”), the Minister for Finance of Ireland may make provision for the restriction of financial transfers between Ireland and other countries. Financial transfers are broadly defined, and the acquisition or disposal of the ADRs, which represent shares issued by an Irish incorporated company, the acquisition or the disposal of Ordinary Shares and associated payments may fall within this definition. Dividends or payments on the redemption or purchase of shares and payments on athe liquidation of an Irish-incorporated company would fall within this definition. Orders made by the
Minister for Finance pursuant to the
The 1992 Act prohibit certainprohibits financial transfers to (or in respect of funds held byinvolving the government of) the Federal
Republic of Yugoslavia,late Slobodan Milosevic and associated persons, Zimbabwe
(including senior membersBelarus, Burma (Myanmar), certain persons indicted by the International Criminal Tribunal for the former Yugoslavia, Osama bin Laden, Al-Qaida, the Taliban of Afghanistan, the Zimbabwean government), Iraq, Liberia,
Burma/Myanmar,Democratic Republic of Congo, the Republic of Serbia, Al Qaeda, Osama Bin LadenGuinea, the Democratic People’s Republic of Korea (North Korea), Iran, Iraq, Côte d’Ivoire, Lebanon, Liberia, Zimbabwe, Uzbekistan, Sudan, Somalia, certain known terrorists and terrorist groups, and countries that harbor certain terrorist groups, without the Talibanprior permission of Afghanistan.the Central Bank of Ireland.
Any transfer of, or payment in respect of, an ADS involving the government of any country that is currently the subject of United Nations sanctions, any person or body controlled by any of the foregoing, or any person acting on behalf of the foregoing, may be subject to restrictions pursuant to such sanctions as implemented into Irish law. The Company does not anticipate that Irish exchange controls or orders under the 1992 Act will have a material effect on its business.
LIMITATIONS ON SHARE OWNERSHIP BY NON-EU NATIONALS
The board of directors of Ryanair Holdings is given certain powers under Ryanair Holdings'the Articles to take action to ensure that the number of shares held in Ryanair Holdings by non-EU nationals does not reach a level which could jeopardize the Company'sCompany’s entitlement to continue to hold or enjoy the benefit of any license, permit, consent or privilege which it holds or enjoys and which enables it to carry on business as an air carrier (a "License"“License”). In particular, EU Regulation 2407/92 requires that, in order to obtain and retain an operating license, an EU air carrier must be majority- ownedmajority-owned and effectively controlled by EU nationals. The regulation does not specify what level of share ownership will confer effective control on a holder or holders of shares. As described below, the directors will, from time to time, set a "Permitted Maximum"“Permitted Maximum” on the number of Ordinary Shares that may be owned by non-EU nationals at such level as they believe will comply with EU law. The Permitted Maximum is currently set at 49.9%.
Ryanair Holdings maintains a separate register (the "Separate Register"“Separate Register”) of shares in which non-EU nationals, whether individuals, bodies corporate or other entities, have an interest (such shares are referred to as "Affected Shares"“Affected Shares” in the Articles). Interest in this context is widely defined and includes anany interest held through ADRs in the shares underlying the relevant ADRs. The directors can require relevant parties to provide them with information to enable a determination to be made by themthe directors as to whether shares are, or are to be treated as, Affected Shares. If such information is not available or forthcoming or is unsatisfactory then the directors can, at their discretion, determine that shares are to be treated as Affected Shares. Registered holders of shares are also obliged to notify the Company if they are aware that any share which they hold ought to be treated as an Affected Share for this purpose. With regard to ADRs, the directors can treat all of the relevant underlying shares as Affected Shares unless satisfactory evidence as to why they should not be so treated is forthcoming.
87
In the event that,inter alia, (i) the refusal, withholding, suspension or revocation of any License or the imposition of any condition which materially inhibits the exercise of any License (an "Intervening Act"“Intervening Act”) has taken place, (ii) the Company receives a notice or direction from any governmental body or any other body which regulates the provision of air transport services to the effect that an Intervening Act is imminent, threatened or intended or (iii) an Intervening Act may occur as a consequence of the level of non-EU ownership of shares or an Intervening Act is imminent, threatened or intended because of the manner of share ownership or control of Ryanair Holdings generally, the directors can take action pursuant to the Articles to deal with the situation. They can,inter alia, (i) remove any directors or change the chairman of the board of directors, (ii) identify those shares, ADRs or Affected Shares which give rise to the need to take action and treat such shares, ADRs, or Affected Shares as Restricted Shares (see below) or (iii) set a "Permitted Maximum"“Permitted Maximum” on the number of Affected Shares which may subsist at any time (which may not, save in the circumstances referred to below, be lower than 40% of the total number of issued shares) and treat any Affected Shares (or ADRs representing such Affected Shares) in excess of this Permitted Maximum as Restricted Shares (see below).
Also,
In addition to the above, if as a consequence of a change of law or a direction, notice or requirement of any state, authority or person it is necessary to reduce the total number of Affected Shares below 40% or reduce the number of Affected Shares held by any particular stockholder or stockholders in order to overcome, prevent or avoid an Intervening Act, the directors may resolve to (i) set the Permitted Maximum at such level below 40% as they consider necessary in order to overcome, prevent or avoid such Intervening Act, or (ii) treat such number of Affected Shares (or ADRs representing Affected Shares) held by any particular stockholder or stockholders as they consider necessary (which could include all of such Affected Shares or ADRs) as Restricted Shares (see below). The directors may serve a Restricted Share Notice in respect of any Affected Share, or any ADR
representing any ADS, which is to be treated as a Restricted Share. Such Noticesnotices can have the effect of depriving the recipients of the rights to attend, vote at and speak at general meetings, which they would otherwise have had as a consequence of holding such shares or ADRs. Such Noticesnotices can also require the recipients to dispose of the shares or ADRs concerned to an EU national (so that the relevant shares (or shares underlying the relevant ADRs) will then cease to be Affected Shares) within 21 days or such longer period as the directors may determine. The directors are also given the power to transfer such shares, themselves, where there isin cases of non-compliance with the Restricted Share Notice.
To enable the directors to identify Affected Shares, transferees of Ordinary Shares are generally will be required to provide a declaration as to the nationality of persons having interests in those shares and each stockholder isshares. Stockholders are also obliged to notify Ryanair Holdings if they are aware that any of his, her or its Ordinaryshares, which they hold, ought to be treated as an Affected Shares become Affected Shares.for this purpose. Purchasers or transferees of ADRs need not complete a nationality declaration because the directors expect to treat all of the Ordinary Shares held by the Depositary as Affected Shares. An ADS holderholders must open an ADR accountaccounts directly with the Depositary if he, she or it wishesthey wish to provide to Ryanair Holdings a nationality declarationdeclarations or such other evidence as the directors may require in order to establish to the directors'directors’ satisfaction that the Ordinary Shares underlying such holder'sholder’s ADRs are not Affected Shares.
In deciding which Affected Shares are to be selected as Restricted Shares, the directors can take into account which Affected Shares have given rise to the necessity to take action. Subject to that they will, insofar as practicable, firstly view as Restricted Shares those Affected Shares in respect of which no declaration as to whether or not such shares are Affected Shares has been made by the holder thereof and where information which has been requested by the directors in accordance with the Articles has not been provided within specified time periods and, secondly, have regard to the chronological order in which details of Affected Shares have been entered in the Separate Register and, accordingly, treat the most recently registered Affected Shares as Restricted Shares to the extent necessary. Transfers of Affected Shares to Affiliates (as that expression is defined in the Articles) will not affect the chronological order of entry in the Separate Register for this purpose. The directors do however have the discretion to apply another basis of selection if, in their sole opinion, that would be more equitable. Where the directors have resolved to treat Affected Shares held by any particular stockholder or stockholders as Restricted Shares (i) because such Affected Shares have given rise to the need to take such action or (ii) because of a change of law or a requirement or direction of a regulatory authority necessitating such action (see above), such powers may be exercised irrespective of the date upon which such Affected Shares were entered in the Separate Register.
88
After having initially resolved to set the maximum level at 49.0%, the directors increased the maximum level to 49.9% on May 26, 1999, after the number of Affected Shares exceeded the initial limit. This maximum level could be reduced if it becomes necessary for the directors to exercise these powers in the circumstances described above. The decision to make any such reduction or to change the Permitted Maximum from time to time will be published in at least one national newspaper in Ireland and in any country in which the Ordinary Shares or ADRs are listed. The relevant notice will specify the provisions of the relevant
Article which canArticles that apply to Restricted Shares and the name of the person or persons who will answer queries relating to Restricted Shares on behalf of Ryanair Holdings. The directors shall publish information as to the number of shares held by EU nationals annually.
As of June 30, 2007, EU nationals owned at least 56.3% of Ryanair Holdings'
Ordinary Shares (assuming conversion of all outstanding ADRs into Ordinary
Shares). Ryanair continues to monitor the EU national ownership status of its
Ordinary Shares, which changes on a daily basis.
In an effort to increase the percentage of its share capital held by EU nationals, on June 26, 2001, Ryanair Holdings instructed The Bank of New York,
the depositary for its ADR program,Depositary to suspend the issuance of new ADSs in exchange for the deposit of Ordinary Shares until further notice to its shareholders. Holders of Ordinary Shares cannot convert their Ordinary Shares into ADRs during such suspension, and there can be no assurance that the suspension will ever be lifted.
As a further measure to increase the percentage of shares held by EU nationals, on February 7, 2002, the Company issued a notice to shareholders to the effect that any purchase of Ordinary Shares by a non-EU national after such date will immediately result in the issue of a Restricted Share Notice to such non-EU national Purchaser. The Restricted Share Notice compels the non-EU national purchaser to sell the affected sharesAffected Shares to an EU national within 21 days of the date of issuance. In the event that any such non-EU national shareholder does not sell its shares to an EU national within the specified time period, the Company can then take legal action to compel such a sale. As a result, non-EU nationals are effectively barred from purchasing Ordinary Shares for as long as these restrictions remain in place. There can be no assurance that these restrictions will ever be lifted.
As of June 30, 2010, EU nationals owned at least 53.6% of Ryanair Holdings’ Ordinary Shares (assuming conversion of all outstanding ADRs into Ordinary Shares). Ryanair continuously monitors the ownership status of its Ordinary Shares, which changes on a daily basis.
Irish Tax Considerations
The following is a discussion of certain Irish tax consequences of the purchase, ownership and disposition of Ordinary Shares or ADSs. This discussion is based upon tax laws and practice of Ireland at the date of this document, which are subject to change, possibly with retroactive effect. Particular rules may apply to certain classes of taxpayers (such as dealers in securities) and this discussion does not purport to deal with the tax consequences of purchase, ownership or disposition of owning the relevant securities for all categories of investors.
The discussion is intended only as a general guide based on current Irish law and practice and is not intended to be, nor should it be considered to be, legal or tax advice to any particular investor or stockholder. Accordingly, current stockholders or potential investors should satisfy themselves as to the overall tax consequences by consulting their own tax advisers.
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Dividends. As discussed herein, it is not currently anticipated thatIf Ryanair Holdings will pay dividends. However, if it does paypays dividends or makes other relevant distributions, the following is relevant:
Withholding Tax. Unless exempted, a withholding at the standard rate of income tax (currently 20%) will apply to dividends or other relevant distributions paid by an Irish resident company. The withholding tax requirement will not apply to distributions paid to certain categories of Irish resident stockholders noror to distributions paid to certain categories of non-resident stockholders.
The following Irish resident stockholders are exempt from withholding if they make to the Company, in advance of payment of any relevant distribution, an appropriate declaration of entitlement to exemption:
o An
Irish resident company;
o Ancompanies;
Pension schemes approved by the Irish Revenue approved pension scheme;
o A qualifyingCommissioners (“Irish Revenue”);
Qualifying fund managermanagers or qualifying savings manager;
o A managers;
Personal Retirement Savings Account ("PRSA"(“PRSA”) administratoradministrators who is
receivingreceive the relevant distribution as income arising in respect of PRSA assets;
o A qualifying
Qualifying employee share ownership trust;
o A collectivetrusts;
Collective investment undertaking;
o A tax exempt charity;
o A designated brokerundertakings;
Tax-exempt charities;
Designated brokers receiving the distribution for a special portfolio investment account;
o Aaccounts;
Any person who is entitled to exemption from income tax under Schedule F on dividends in respect of an investment in whole or in part of payments received in respect of a civil action or from the Personal Injuries Assessment Board for damages in respect of mental or physical infirmity;
o
Certain qualifying trusts established for the benefit of an incapacitated individual and/or persons in receipt of income from such a qualifying trust;
o A
Any person entitled to exemption to income tax under Schedule F by virtue of Section 192(2) Taxes Consolidation Act ("TCA"(“TCA”) 1997;
o A unit trust
Unit trusts to which Section 731(5)(a) TCA 1997 applies; and
o
Certain Irish Revenue-approved amateur and athletic sport bodies.
The following non-resident stockholders are exempt from withholding if they make to the Company, in advance of payment of any dividend, an appropriate declaration of entitlement to exemption:
o
Persons (other than a company) who (i) are neither resident nor ordinarily resident in Ireland and (ii) are resident for tax purposes in (a) a country which has in forcesigned a tax treaty with Ireland (a "tax“tax treaty country"country”) or (b) an EU Member Statemember state other than Ireland;
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o
Companies not resident in Ireland which are resident in an EU Member Statemember state or a tax treaty country, by virtue of the law of an EU member state or a tax treaty partner
country or an EU Member State, and are not controlled, directly or indirectly, by Irish residents;
o
Companies not resident in Ireland which are directly or indirectly controlled by a person or persons who are, by virtue of the law of a tax treaty partner country or an EU Member State,member state, resident for tax purposes in a tax treaty country or an EU Member Statemember state other than Ireland and whowhich are not controlled directly or indirectly by persons who are not resident for tax purposes in a tax treaty country or EU Member State;
o member state;
Companies not resident in Ireland the principal class of shares of which is substantially and regularly traded on a recognized stock exchange in a tax treaty country or an EU Member Statemember state including Ireland or on an approved stock exchange; or
o
Companies not resident in Ireland that are 75% subsidiaries of a single company, or are wholly-owned by two or more companies, in either case the principal class(es)classes of shares of which is/is or are substantially and regularly traded on a recognized stock exchange in a tax treaty country or an EU Member Statemember state including Ireland or on an approved stock exchange.
In the case of aan individual non-resident stockholder resident in an EU Member Statemember state or tax treaty country, the declaration must be accompanied by a current certificate of tax residence from the tax authorities in the stockholder'sstockholder’s country of residence. In addition, in the case of both an individual and corporate non-resident companies that are tax
residents ofstockholder resident in an EU Member State other than Irelandmember state or a tax treaty country or
non-resident companies controlled by residents of an EU Member State including
Ireland or of a tax treaty country or whose shares are substantially and
regularly traded on a stock exchange in an EU Member State other than Ireland or
a tax treaty country, certain certification by their auditors is required. Thethe declaration also must contain an undertaking by the non-resident or non-ordinarily resident person that he, she or sheit will advise the relevant person accordingly if he, she or sheit ceases to be a non-resident or non-ordinary resident. No declaration is required whereif the stockholder is a 5% parent company in another EU Member Statemember state pursuant to the Parent/Subsidiary directive.EC Parent-Subsidiary Directive (Council Directive No. 90/435/EEC). Neither is a declaration required on the payment by a company resident in Ireland to another company so resident whereif the company making the dividend is a 51% subsidiary of that other company.
American DepositoryDepositary Receipts. Special arrangements with regard to the dividend withholding tax obligation apply in the case of Irish companies using ADRs through U.S. depositary banks whichthat have been authorized by the Irish Revenue Commissioners.Revenue. Such banks, which receive dividends from the company and pass them on to the U.S. ADS holders beneficially entitled to such dividends, will be allowed to receive and pass on the gross dividends (i.e., before withholding) based on an "address system"“address system” where the recorded addressaddresses of such holder, as listed in the depository bank'sdepositary bank’s register of depositorydepositary receipts, is in the U.S.
United States.
Taxation on Dividends. Companies resident in Ireland other than those taxable on receipt of dividends as trading income are exempt from corporation tax on distributions received on ordinary sharesOrdinary Shares from other Irish resident companies. Stockholders whichthat are "close"“close” companies for Irish taxation purposes may, however, be subject to a 20% corporation tax surcharge on undistributed investment income.
Individual stockholders who are resident or ordinarily resident in Ireland are taxablesubject to income tax on the gross dividend at their marginal tax rate, but are entitled to a credit for the tax withheld by the company paying the dividend. The dividend will also be subject to the new income tax levy. An individual stockholder who is not liable or not fully liable tofor income tax by reason of exemption or otherwise may be entitled to receive an appropriate refund of tax withheld. A charge to Irish social security taxes/levies can also arise for such individuals on the amount of any dividend received from the Company.
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Except in certain circumstances, a person who is neither resident nor ordinarily resident in Ireland and is entitled to receive dividends without deductions is not chargeable toliable for Irish tax on the dividend.dividends. Where a person who is neither resident nor ordinarily resident in Ireland is subject to withholding tax on the dividend received due to not benefiting from any exemption from such withholding, generally the amount of that withholding will generally satisfy such person'sperson’s liability for Irish tax.
Capital Gains Tax.A person who is either resident or ordinarily resident in Ireland will generally be liable for Irish capital gains tax on any gain realized on the disposal of the Ordinary Shares or ADSs. The current capital gains tax rate is 20%25%. A person who is neither resident nor ordinarily resident in Ireland and who does not carry on a trade in Ireland through a branch or agency will not be subject to Irish capital gains tax on the disposal of the Ordinary Shares or ADSs.
Irish Capital Acquisitions Tax. A gift or inheritance of the Ordinary Shares or ADSs will be within the charge to Irish Capital Acquisitions Tax ("CAT"(“CAT”) notwithstanding that the disposer (e.g., a donor) or the donee/successor in relation to such gift or inheritance is resident outside Ireland. CAT is charged at a rate of 20%25% above a tax-free threshold. This tax-free threshold is determined by the amount of the current benefit and of previous benefits taken since December 5, 1991, as relevant, within the charge to CAT and the relationship between the donor and the successor or donee. Gifts and inheritances between spouses (and in certain cases former spouses) are not subject to CAT.
In a case where an inheritance or gift of the Ordinary Shares or ADSs is subject to both Irish CAT and foreign tax of a similar character, the foreign tax paid may in certain circumstances be credited in whole or in part against the Irish tax.
Irish Stamp Duty. It is assumed for the purposes of this paragraph that ADSs are dealt in on a recognized stock exchange in the United States (the Nasdaq National Market(NASDAQ is a recognized stock exchange in the United States for this purpose). Under current Irish law, no stamp duty will be payable on the acquisition of ADSs by persons purchasing such ADSs or on any subsequent transfer of ADSs. A transfer of Ordinary Shares (including transfers effected through CREST)Euroclear U.K. & Ireland Limited) wherever executed and whether on sale, in contemplation of a sale or by way of a gift, will attractbe subject to duty at the rate of 1% of the consideration given or, in the case of a gift or whereif the purchase price is inadequate or unascertainable, on the market value of the Ordinary Shares. Transfers of Ordinary Shares whichthat are not liable tofor duty at the rate of 1% (e.g., transfers under which there is no change in beneficial ownership) may attractbe subject to a fixed duty of EUR12.50.
€12.50.
The Irish Revenue Commissioners (the "Irish Revenue") treattreats a conversion of Ordinary Shares to ADSs made in contemplation of a sale or a change in beneficial ownership (under Irish law) as an event chargeablesubject to stamp duty at a rate of 1%. The Irish Revenue has indicated that a re-conversion of ADSs to Ordinary Shares made in contemplation of a sale or a change in beneficial ownership (under Irish law) will not be treated assubject to a stampable event.stamp duty. However, the subsequent sale of the re-converted Ordinary Shares will give rise to a
charge to Irish stamp duty at the 1% rate. If the transfer of the Ordinary Shares is a transfer under which there is no change in the beneficial ownership (under Irish law) of the Ordinary Shares being transferred, nominal stamp duty only will be payable on the transfer. Under Irish law, it is not free from doubt
thatclear whether the mere deposit of Ordinary Shares for ADSs or ADSs for Ordinary Shares would not be deemed to constitute a change in beneficial ownership. Accordingly, it is not certainpossible that holders would not be subject to stamp duty at the 1% rate when merely depositing Ordinary Shares for ADSs or ADSs for Ordinary Shares and, consequently, the Depositary reserves the right in such circumstances to require payment of stamp duty at the rate of 1% from the holders.
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The person accountable for payment of stamp duty is the transferee or, in the case of a transfer by way of a gift or for a consideration less than the market value, all parties to the transfer. Stamp duty is normally payable within 30 days after the date of execution of the transfer. Late or inadequate payment of stamp duty will result in a liability tofor interest, penalties and fines.
United States Tax Considerations
Except as described below under the heading "Non-U.S.“Non-U.S. Holders,"” the following is a summary of certain U.S. federal income tax considerations relating to the purchase, ownership and disposition of Ordinary Shares or ADRs by a holder that is a citizen or resident of the United States, a U.S. domestic corporation or that is otherwise subject to U.S. federal income tax on a net income basis in respect of the Ordinary Shares or the ADRs ("(“U.S. Holders"Holders”). This summary does not purport to be a comprehensive description of all of the tax considerations that may be relevant to a decision to purchase the Ordinary Shares or the ADRs. In particular, the summary deals only with U.S. Holders that will hold Ordinary Shares or ADRs as capital assets and generally does not address the tax treatment of U.S. Holders that may be subject to special tax rules such as banks, insurance companies, dealers in securities or currencies, traders in securities electing to mark-to-market,mark to market, persons that own 10% or more of the stock of the Company, U.S. Holders whose "functional currency"“functional currency” is not U.S. dollars or persons that hold the Ordinary Shares or the ADRs as part of an integrated investment (including a "straddle"“straddle”) consisting of the Ordinary Shares or the ADRs and one or more other positions.
Holders of the Ordinary Shares or the ADRs should consult their own tax advisors as to the U.S. or other tax consequences of the purchase, ownership, and disposition of the Ordinary Shares or the ADRs in light of their particular circumstances, including, in particular, the effect of any foreign, state or local tax laws.
For U.S. federal income tax purposes, holders of the ADRs will be treated as the owners of the Ordinary Shares represented by those ADRs.
Taxation of Dividends.Dividends, if any, paid with respect to the Ordinary Shares, including Ordinary Shares represented by ADRs, will be included in the gross income of a U.S. Holder when the dividends are received by the holder or the Depositary, as the case may be.Depositary. Such dividends will not be eligible for the dividends received“dividends received” deduction allowed to U.S. corporations in respect of dividends from a domestic corporation. Dividends paid in euro will be includible in the income of a U.S. Holder in a U.S. dollar amount calculated by reference to the exchange rate in effect on the day they are received by the holder or the Depositary, as the case may be.Depositary. U.S. Holders generally should not be required to recognize any foreign currency gain or loss to the extent such dividends paid in euro are converted into U.S. dollars immediately upon receipt.
Subject to certain exceptions for short-term and hedged positions, the U.S. dollar amount of dividends received by an individual prior to January 1, 2011 with respect to the Ordinary Shares or ADRs will be subject to taxation at a maximum rate of 15% if the dividends are "qualified“qualified dividends."” Dividends paid
during or after the 2005 taxable year on the Ordinary Shares or ADRs will be treated as qualified dividends if (i) the issuer is eligible for the benefits of a comprehensive income tax treaty with the United States that the IRSInternal Revenue Service has approved for the purposes of the qualified dividend rules and (ii) the Company was not, in the year prior to the year in which the dividend was paid, and is not, in the year in which the dividend is paid, a passive foreign investment company (a "PFIC"“PFIC”). The income tax treaty between Ireland and the United States has been approved for the purposes of the qualified dividend rules. Based on the Company'sCompany’s audited financial statements and relevant market data, the Company believes that it was not treated as a PFIC for U.S. federal income tax purposes with respect to its 2006/72008/9 taxable year. In addition, based on the Company'sCompany’s audited financial statements and its current expectations regarding the value and nature of its assets, the sources and nature of its income, and relevant market data, the Company does not anticipate becoming a PFIC for its 2007/82010/11 taxable year.
Under the U.S.-Ireland Income Tax Treaty currently in effect, in the event the Company were to pay any dividend, the tax credit attaching to the dividend (as used herein the "Tax Credit"“Tax Credit”; see "-Irish“—Irish Tax Considerations"Considerations”) generally will be treated as a foreign income tax eligible for credit against such U.S. Holder'sHolder’s United States federal income tax liability, subject to generally applicable limitations and conditions. Any such dividend paid by the Company to such U.S. Holder will constitute income from sources withoutoutside the United States for foreign tax credit purposes, and generally will constitute "passive income"“passive category” income for such purposes.
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Foreign tax credits may not be allowed for withholding taxes imposed in respect of certain short-term or hedged positions in securities.
U.S. Holders should consult their own tax advisors concerning the implications of these rules in light of their particular circumstances.
Distributions of Ordinary Shares that are made as part of apro rata distribution to all stockholders generally will not be subject to U.S. federal income tax.
Sale or Disposition of Ordinary Shares or ADRs.ADRs. Gains or losses realized by a U.S. Holder on the sale or other disposition of ADRs generally will be treated for U.S. federal income tax purposes as capital gains or losses, which generally will be long-term capital gains or losses if the ADRs have been held for more than one year. The net amount of long-term capital gain recognized by an individual holder after May 5, 2003 and before January 1, 20092011 generally is subject to taxation at a maximum rate of 15%. The net long-termdeductibility of capital gain
recognized by an individual holder before May 6, 2003 or after December 31, 2008
generallylosses is subject to taxation at a maximum rate of 20%.
limitations.
Deposits and withdrawals of Ordinary Shares by U.S. Holders in exchange for ADRs will not result in the realization of gain or loss for U.S. federal income tax purposes.
Non-U.S. Holders.A holder of Ordinary Shares or ADRs that is, with respect to the United States, a foreign corporation or a nonresident alien individual (a "Non-U.S. Holder"“Non-U.S. Holder”) generally will not be subject to U.S. federal income or withholding tax on dividends received on such Ordinary Shares or ADRs unless such income is effectively connected with the conduct by such holder of a trade or business in the United States. A Non-U.S. Holder of ADRs or Ordinary Shares will not be subject to U.S. federal income tax or withholding tax in respect of gain realized on the sale or other disposition of Ordinary Shares or ADRs, unless (i) such gain is effectively connected with the conduct by such holder of a trade or business in the United States or (ii) in the case of gain realized by an individual Non-U.S. Holder, such Non-U.S. Holder is present in the United States for 183 days or more in the taxable year of the sale and certain other conditions are met.
Copies of Ryanair Holdings'Holdings’ Articles of Association may be examined at its registered office and principal place of business at its Corporate Head Office, Dublin Airport, County Dublin, Ireland.
Ryanair Holdings also files reports, including annual reports on Form 20-F, periodic reports on Form 6-K and other information, with the SEC pursuant to the rules and regulations of the SEC that apply to foreign private issuers. You may read and copy any materials filed with the SEC at its Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
Item 11. Quantitative and Qualitative Disclosures About Market Risk
| Item 11. | Quantitative and Qualitative Disclosures About Market Risk |
Ryanair is exposed to market risks relating to fluctuations in commodity prices, interest rates and currency exchange rates. The objective of financial risk management at Ryanair is to minimize the negative impact of commodity price, interest rate and foreign exchange rate fluctuations on the Company'sCompany’s earnings, cash flows and equity.
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To manage these risks, Ryanair uses various derivative financial instruments, including interest rate swaps, foreign currency forward contracts and commodity forwards. These derivative financial instruments are generally held to maturity and are not actively traded. The Company enters into these arrangements with the goal of hedging its operational and balance sheet risk. However, Ryanair'sRyanair’s exposure to commodity price, interest rate and currency exchange rate fluctuations cannot be neutralized completely.
In executing its risk management strategy, Ryanair selectivelycurrently enters into forward contracts for the purchase of aviation fuel.some of the jet fuel (jet kerosene) that it expects to use. It also uses foreign currency forward contracts intended to reduce its exposure to certainrisks related to foreign currencies, principally the U.S. dollar. It alsoFurthermore, it enters into interest rate contracts with the objective of fixing certain borrowing costs and hedging principal repayments, particularly those associated with the purchase of new
aircraft such as the Boeing 737-800s. Ryanair is also exposed to the risk that the counterparties to its derivative financial instruments may not be creditworthy. Were a counterparty to default on its obligations under any of the instruments described below, Ryanair'sRyanair’s economic expectations when entering into these arrangements might not be achieved and its financial condition could be adversely affected. Transactions involving derivative financial instruments are also relatively illiquid as compared with those involving other kinds of financial instruments. It is Ryanair'sRyanair’s policy not to enter into transactions involving financial derivatives for speculative purposes.
The following paragraphs describe Ryanair'sRyanair’s fuel hedging, foreign currency and interest rate swap arrangements and analyze the sensitivity of the market value, earnings and cash flows of the financial instruments to hypothetical changes in commodity prices, interest rates and exchange rates as if these changes had occurred at March 31, 2007.2010. The range of changes selected for this sensitivity analysis reflects Ryanair'sRyanair’s view of the changes whichthat are reasonably possible over a one-year period.
FUEL PRICE EXPOSURE AND HEDGING
Fuel costs constitute a substantial portion of Ryanair'sRyanair’s operating expenses (approximately 39.3%34.6% and 34.9%44.1% of such expenses in fiscal years 20072010 and 2006,2009, respectively, after taking into account Ryanair'sRyanair’s fuel hedging activities). Ryanair engages in fuel price hedging transactions from time to time, pursuant to which Ryanair and a counterparty agree to exchange payments equal to the difference between a fixed price for a given quantity of jet fuel and the market price for such quantity of jet fuel at a given date in the future, with Ryanair receiving the amount of any excess of such market price over such fixed price and paying to the counterparty the amount of any excessdeficit of such fixed price overunder such market price.
Ryanair has historically entered into arrangements providing for substantial protection against fluctuations in fuel prices, generally through forward contracts covering 12-18periods of up to 18 months of anticipated jet fuel requirements. In
light of the significant increasesRyanair (like many other airlines) has, in oil prices inmore recent years and their
volatility, the Company, starting in fiscal 2004, hasperiods, entered into suchhedging arrangements on a much more selective basis. See “Item 3. Key Information—Risk Factors—Risks Related to the Company—Changes in Fuel Costs and Fuel Availability Affect the Company’s Results and Increase the Likelihood that the Company May Incur Losses” and “Item 11. Quantitative and Qualitative Disclosures About Market Risks—Fuel Price Exposure and Hedging” for additional information on recent trends in fuel costs and the Company’s related hedging activities, as well as certain associated risks. See also “Item 5. Operating and Financial Review and Prospects—Fiscal Year 2010 Compared with Fiscal Year 2009—Fuel and Oil.” As of July 19, 2010, Ryanair had entered into forward jet fuel (jet kerosene) contracts covering approximately 90% of its estimated requirements for the fiscal year ending March 31, 2011 at prices equivalent to approximately $730 per metric ton. In addition, as of July 19, 2010, Ryanair had entered into forward jet fuel (jet kerosene) contracts covering approximately 90% of its estimated requirements for the period from April 2011 to September 2011 at prices equivalent to approximately $755 per metric ton.
While these hedging strategies can cushion the impact on Ryanair of fuel price increases in the short term, in the medium to longer-term, such strategies cannot be expected to eliminate the impact on the Company of an increase in the market price of aviationjet fuel. The unrealized gainsgains/(losses) on the outstanding forward agreements at March 31, 20072010 and March 31, 2006,2009, based on their fair values, amounted to EUR52.7€42.6 million and nil,€(106.7) million (gross of tax), respectively. Based on Ryanair'sRyanair’s fuel consumption for the 2010 fiscal year, ended
March 31, 2007, a change of one U.S. cent$1.00 in the average annual price per U.S.
gallonmetric ton of aviationjet fuel would have caused a change of approximately EUR3€0.9 million in Ryanair'sRyanair’s fuel costs. See "Item“Item 3. Key Information-Risk Factors-RisksInformation—Risk Factors—Risks Related to the Company-ChangesCompany—Changes in Fuel Costs and Fuel Availability Affect the Company's
Results."
Company’s Results and Increase the Likelihood that the Company May Incur Losses.”
Under both IFRS, and U.S. GAAP, the Company'sCompany’s fuel forward contracts are
routinely treated as cash-flow hedges of forecastedforecast fuel purchases for risks arising from the commodity price of fuel. The contracts are recorded at fair value in the balance sheet and are re-measured to fair value at the end of each fiscal period through equity to the extent effective, with any ineffectiveness recorded through the income statement. The Company has considered these hedges to be highly effective in offsetting variability in future cash flows arising from fluctuations in the market price of jet fuel because the jet fuel forward contracts typically relate to the same quantity, and time, and location of delivery as the forecastedforecast jet fuel purchase being hedged and the duration of the contracts is typically short. Accordingly, the quantification of the change in expected cash flows of the forecastedforecast jet fuel purchase is based on the jet fuel forward price, and in the 2010 fiscal year, ended March 31, 2007, the Company recorded no material hedge ineffectiveness within earnings. The Company has recorded no material level of ineffectiveness on its jet fuel hedges in its income statements to date. 95
ended March 31, 2007, the Company recorded a positive fair valuefair-value adjustment of EUR46.1€37.3 million (net of tax) within accumulated other comprehensive income in respect of jet fuel forward contracts. Thecontracts, and in the 2009 fiscal year, the Company was
unhedged at March 31, 2006.
recorded a negative fair-value adjustment of €93.3 million (net of tax) within accumulated other comprehensive income.
FOREIGN CURRENCY EXPOSURE AND HEDGING
In recent years, Ryanair'sRyanair’s revenues have been denominated primarily in two currencies, the euro and U.K. pound sterling. The U.K. pound sterling and the euro accounted for approximately 44%28% and 62%, respectively, of Ryanair'sRyanair’s total revenues in the 2010 fiscal year, 2007, as compared to approximately 48%32% and 58%, respectively, in the 2009 fiscal year 2006, with the euro accounting for
a large portion of the balance in each period.year. As Ryanair reports its results in euro, the Company is not exposed to any material currency risk as a result of its euro-denominated activities. Ryanair'sRyanair’s operating expenses are primarily denominated in euro, U.K. pounds sterling and U.S. dollars. Ryanair'sRyanair’s operations can be subject to significant direct exchange rate risks between the euro and the U.S. dollar because a significant portion of its operating costs (particularly those related to fuel purchases) is incurred in U.S. dollars, while none of its revenues isare denominated in U.S. dollars. Appreciation of the euro against the U.S. dollar positively impacts Ryanair'sRyanair’s operating income because the euro equivalent of its U.S. dollar operating costs decreases, while depreciation of the euro against the U.S. dollar negatively impacts operating income. It is Ryanair'sRyanair’s policy to hedge against a certain portion of its exposure to fluctuations in the exchange rate between the U.S. dollar and the U.K. pound sterling at the time Ryanair enters into U.S. dollar-denominated purchases. In general,From time to time, Ryanair does not hedgehedges its operating surpluses and shortfalls in currencies other than the U.S. dollar and the U.K. pound sterling. Ryanair matches certain U.K. pound sterling costs with U.K. pound sterling revenues and may choose to sell any surplus U.K. pound sterling cash flows for euro.
Hedging associated with operating expenses.the income statement. In the 2010 and 2009 fiscal year 2007 and fiscal
year 2006,years, the Company entered into a series of forward contracts, principally euro/U.S. dollar/eurodollar forward contracts to hedge against variability in cash flows arising from market fluctuations in foreign exchange rates associated with its forecastedforecast fuel, maintenance and insurance costs.costs and euro/U.K.pound sterling forward contracts to hedge certain surplus U.K. pound sterling cash flows. At March 31, 2007,2010, the total unrealized lossgain relating to these contracts amounted to EUR24.9€43.3 million, compared to a EUR12.3€46.0 million unrealized gain at March 31, 2006. In the fiscal years ended
March 31, 2006, the Company also entered into a series of U.K. pound
sterling/euro forward contracts to hedge against variability in cash flows
arising from market fluctuations in foreign exchange rates associated with its
forecasted U.K. pound sterling expenses. At March 31, 2007, the total unrealized
gain or loss relating to these contracts amounted to nil compared to a EUR0.2
million unrealized loss at March 31, 2006.
2009.
Under both IFRS, and U.S. GAAP, these foreign currency forward contracts are treated as cash flowcash-flow hedges of forecastedforecast U.S. dollar and U.K. pound sterling purchases to address the risks arising from U.S. dollar and U.K. pound sterling exchange rates. The derivatives are recorded at fair value in the balance sheet and are re-measured to fair value at the end of each fiscalreporting period through equity to the extent effective, with ineffectiveness recorded through the income statement. Ryanair considers these hedges to be highly effective in offsetting variability in future cash flows arising from fluctuations in exchange rates, because the forward contracts are timed so as to match exactly the amount, currency and maturity date of the forecastedforecast foreign currency-denominated expense being hedged. Under IFRS, inIn the 2010 fiscal year, ended March 31, 2007, the Company recorded a negative fair valuepositive fair-value adjustment of EUR21.8€37.9 million (net of tax) within accumulated other comprehensive income in respect of these contracts, (2006: EUR10.8as compared to a positive adjustment of €40.2 million gain). Under U.S. GAAP certain of these derivatives do
not qualify for hedge accounting, with the result that a loss of EUR13.3m was
recorded in the U.S. GAAP income statement in respect of these. See Note 28 to
the Consolidated Financial Statements included in Item 18 for additional
information.
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Hedging associated with capital expenditures.expenditures. During the 2010 and 2009 fiscal years, 2007 and
2006, the Company also entered into a series of U.S. dollar/U.K. pound sterlingsterling/U.S. dollar and euro/U.S. dollar/eurodollar contracts to hedge against changes in the fair value of aircraft purchase commitments under the Boeing contracts, which arise from fluctuations in the U.S. dollar/U.K. pound sterlingsterling/U.S. dollar and euro/U.S. dollar/eurodollar exchange rates. At March 31, 2007, the total unrealized losses relating to these
contracts amounted to EUR17.5 million, while at March 31, 2006, unrealized gains
amounted to EUR7.5 million.
Under both IFRS, and U.S. GAAP, the Company generally accounts for these contracts as fair valueeither cash-flow hedges and accordingly, such
financial instrumentsor fair-value hedges. Fair-value hedges are recorded in the balance sheet at fair value. Any gains or losses arising on these instruments, as well as the related gain or loss on the underlying aircraft purchase commitment, are recorded in the income
statement.balance sheet. Any related ineffectiveness is measured by the amount by which these adjustments to earnings do not match. Cash-flow hedges are recorded at fair value in the balance sheet and are re-measured to fair value at the end of the financial period through equity to the extent effective, with any ineffectiveness recorded through the income statement. The Company expects these hedges to be highly effective in offsetting changes in the fair value of the aircraft purchase commitments arising from fluctuations in exchange rates because the forward exchange contracts are always for the same amount, currency and maturity dates as the corresponding aircraft purchase commitments.
At March 31, 2010, the total unrealized gains relating to these contracts amounted to €59.5 million, while at March 31, 2009 unrealized gains amounted to €144.0 million. Under IFRS, the Company recorded positive fair-value adjustments of €59.5 million and €143.3 million for cash-flow hedges in the 2010 and 2009 fiscal years, respectively, and €0.7 million for fair-value hedges from other accumulated comprehensive income in respect of these contracts in the 2009 fiscal year. No amounts were recorded for such fair-value hedges from other accumulated comprehensive income in the 2010 fiscal year.
Holding other variables constant, if there were an adverse change of ten percent in relevant foreign currency exchange rates, the market value of Ryanair'sRyanair’s foreign currency contracts outstanding at March 31, 20072010 would decrease by approximately EUR112€153.0 million (net of tax), all of which would ultimately impact earnings when such contracts mature.
mature.
INTEREST RATE EXPOSURE AND HEDGING
The Company'sCompany’s purchase of 91177 of the 133232 Boeing 737-800 aircraft deliveredin the fleet as of March 31, 20072010 has been funded by bank financing in the form of loans supported by a loan guarantee from ExIm Bank. A further 10 aircraft were
financed with finance leaseEx-Im Bank (with respect to 151 aircraft), JOLCOs and commercial debt structures.debt. With respect to these 101177 aircraft, at March 31, 2007,2010, the Company had outstanding cumulative borrowings under these facilities of EUR1,862€2,956.2 million with a weighted average interest rate of 4.87%2.76%. See "Item“Item 5. Operating and Financial Review and Prospects-LiquidityProspects—Liquidity and Capital Resources-Capital Resources"Resources—Capital Resources” for additional information on these facilities and the related swaps, including a tabular summary of the "Effective“Effective Borrowing Profile"Profile” illustrating the effect of the swap transactions (each of which is with an established international financial counterparty) on the profile of Ryanair'sRyanair’s aircraft-related debt at March 31, 2007.2010. At March 31, 2007,2010, the fair value of the interest rate swap agreements relating to this floating rate debt was represented by a loss of EUR49.0€63.1 million (gross of tax), as compared with a loss of EUR75.1€60.9 million at March 31, 2006.2009. See Note 11 to the Consolidated Financial Statementsconsolidated financial statements included in Item 18 for additional information.
The Company also enters into interest rate swaps to hedge against floating rental payments associated with certain aircraft financed through operating lease arrangements. Through the use of interest rate swaps, Ryanair has effectively converted the floatingfloating-rate rental payments due under 12 of these leases into fixed ratefixed-rate payments. At March 31, 2007,2010, the fair value of the interest rate swap agreements relating to leases on a mark-to-market basis was equivalent to a loss of EUR23.4€13.3 million (gross of tax), as compared with a loss of EUR34.2€23.9 million at March 31, 2006.2009. These financial instruments are, accordingly, recorded at fair value in the balance sheet and are subsequently re-measured to fair value through equity to the extent effective, with ineffectiveness recorded through the income statement. The Company has recorded no material level of ineffectiveness on these swaps as they have the same critical terms as the underlying item being hedged. Under both IFRS, and U.S. GAAP, the Company accounts for all of its swaps as cash-flow hedges of variable rental payments or variable rate debt payments. At March 31, 2007,2010, the Company recorded a total negative fair valuefair-value adjustment of EUR63.3€11.7 million (net of tax) relating to these arrangements, (of which EUR14.4
million is the current year impact), which was included within accumulated other comprehensive income, as compared with a EUR95.6€20.9 million negative fair valuefair-value adjustment at March 31, 2006.2009. This loss will be realized within earnings over the period from the expected drawdown of the related financing (i.e., over a period of up to 12 years from March 31, 2007)2010), with an increase in the related interest expense.
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If Ryanair had not entered into such derivative agreements, a plus or minus one percentage point movement in interest rates would impact the fair value of this liability by approximately EUR39€35.1 million. The earnings and cash flowcash-flow impact of any such change in interest rates would have been approximately plus or minus EUR10€13.2 million in the 2010 fiscal year.
| Item 12. | Description of Securities Other than Equity Securities |
Holders of ADSs are required to pay certain fees and expenses. The table below sets forth the fees and expenses which, under the deposit agreement between the Company and The Bank of New York Mellon, holders of ADRs can be charged or be deducted from dividends or other distributions on the deposited shares. The Company and The Bank of New York Mellon have also entered into a separate letter agreement, which the Company believes should have the effect of reducing some of the fees listed below. However, the Company and The Bank of New York Mellon have not yet reached final agreement on the exact application of such separate letter agreement to certain of the fees listed below, so it is possible that such fees may be assessed by The Bank of New York Mellon without any such reduction.
Persons depositing or withdrawing ADSs must pay: | For: | |
$5.00 (or less) per 100 ADSs (or portion of 100 ADSs). | Issuance of ADSs, including issuances resulting from a distribution of common shares or rights or other property. | |
| Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates. | ||
$0.02 (or less) per ADS. | Any cash distribution to the holder of the ADSs. | |
$0.02 (or less) per ADS per calendar year. | Depositary services. | |
| A fee equivalent to the fee that would be payable if securities distributed to the holder of ADSs had been shares and the shares had been deposited for issuance of ADSs. | Distribution of securities distributed by the issuer to the holders of common securities, which are distributed by the depositary to ADS holders. | |
Registration or transfer fees. | Transfer and registration of shares on our share register to or from the name of the depositary or its agent when the holder of ADSs deposits or withdraws common shares. | |
Expenses of the depositary. | Cable, telex and facsimile transmissions (when expressly provided for in the deposit agreement). | |
| Expenses of the depositary in converting foreign currency to U.S. Dollars. | ||
| Taxes and other governmental charges the depositary or the custodian have to pay on any ADSs or common shares underlying ADSs (for example, stock transfer taxes, stamp duty or withholding taxes). | As necessary. | |
| Any charges incurred by the depositary or its agents for servicing the deposited securities. | As necessary. | |
Reimbursement of Fees
From April 1, 2009 to June 30, 2010 the Depositary collected annual depositary services fees (annual fees of $0.02 (or less) per year.
Item 12. DescriptionADS, as noted in the table above) equal to approximately $3.49 million from holders of Securities Other than Equity Securities
Not applicable.
PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies
None.
Item 14. Material ModificationsADSs, net of fees paid to the Rights of Security Holders and Use of
Proceeds
Depositary.
| Item 13. | Defaults, Dividend Arrearages and Delinquencies |
None.
Item 15. Controls and Procedures
Item 15A.Disclosure Controls and Procedures
| Item 14. | Material Modifications to the Rights of Security Holders and Use of Proceeds |
None.
| Item 15. | Controls and Procedures |
DISCLOSURE CONTROLS AND PROCEDURES
The Company has carried out an evaluation, as of March 31, 2007,2010, under the supervision and with the participation of the Company'sCompany’s management, including the chief executive officer and chief financial officer, of the effectiveness of the design and operation of the Company'sCompany’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon the Company'sCompany’s evaluation, the chief executive officer and chief financial officer have concluded that, as of March 31, 2007,2010, the disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports the Company files or submits under the Exchange Act is recorded, processed, summarized and reported as and when required, within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to the Company'sCompany’s management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
Item 15B.Management's Annual Report on Internal Control over Financial
Reporting
MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The Company'sCompany’s management is responsible for establishing and maintaining adequate internal control over financial reporting, (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). The Company'sCompany’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with applicable generally
accepted accounting principles.IFRS. The Company'sCompany’s internal control over financial reporting includes those policies and procedures that:
(i)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
98
(ii)
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors; and
(iii)
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company'sCompany’s assets that could have a material effect on the financial statements.
The Company'sCompany’s management evaluated the effectiveness of the Company'sCompany’s internal control over financial reporting as of March 31, 2007,2010, based on the criteria established in "Internal Control - “Internal Control—Integrated Framework,"” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)(“COSO”). Based on the evaluation, management has concluded that the Company maintained effective internal control over financial reporting as of March 31, 2007.
Because of inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
2010.
Our independent registered public accounting firm, KPMG, has issued an auditors' report on management's assessment of our internal control over
financial reporting. Thisauditor’s report on the audit of our assessment ofCompany’s internal control over financial reporting, which is included in its entirety below.
Item 15C. Attestation Report of the Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
To the
ATTESTATION REPORT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders of
Ryanair Holdings plc:
We have audited management's assessment, included in the accompanying
Management's Annual Report on Internal control over Financial Reporting that
Ryanair Holdings plc maintained effectiveplc’s (the “Company”) internal control over financial reporting as of March 31, 20072010, based on criteria established in Internal Control
- - Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Ryanair Holdings plc'sThe Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting.reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting, appearing under Item 15 in this Annual Report on Form 20-F. Our responsibility is to express an opinion on management's assessment and an
opinion on the effectiveness ofCompany’s internal control over financial reporting of
Ryanair Holdings plc based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management's assessment,assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control andbased on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company'scompany’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company'scompany’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company'scompany’s assets that could have a material effect on the financial statements.
99
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, management's assessment that Ryanair Holdings plc maintained
effective internal control over financial reporting as of March 31, 2007, is
fairly stated, in all material respects, based on criteria established in
Internal Control - Integrated Framework issued by COSO. Also, in our opinion,
Ryanair Holdings plcthe Company maintained, in all material respects, effective internal control over financial reporting as of March 31, 2007,2010, based on criteria established inInternal Control - Control—Integrated Framework issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the accompanying consolidated balance sheets of Ryanair Holdings plcthe Company and subsidiaries as of March 31, 20072010, 2009 and 2006,2008 and the related consolidated income statements, cash flow statements andconsolidated statements of recognizedcomprehensive income, changes in shareholders’ equity and expensecash flows for each of the years in the three-year period ended March 31, 20072010, and our report dated SeptemberJuly 20, 20072010 expressed an unqualified opinion on those consolidated financial statements.
/s/ KPMG
Chartered Accountants
Dublin, Ireland
September
July 20, 2007
100
Item 15D. Changes in Internal Control over Financial Reporting
2010
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There has been no change in the Company'sCompany’s internal control over financial reporting during the 2010 fiscal year ended March 31, 2007 that has materially affected, or is reasonably likely to materially affect, the Company'sCompany’s internal control over financial reporting.
Item 16A. Audit Committee Financial Expert
| Item 16. | Reserved |
| Item 16A. | Audit Committee Financial Expert |
The Company's BoardCompany’s board of Directorsdirectors has determined that each of Emmanuel Faber qualifiesand Declan McKeon qualify as an "audit“audit committee financial expert"expert” within the meaning of this Item 16A. Mr. Faber is "independent"and Mr. McKeon are both “independent” for purposes of the listing rules of the
Nasdaq.
Item 16B. Code of Ethics
NASDAQ.
| Item 16B. | Code of Ethics |
The Company has adopted a broad Code of Business Conduct and Ethics that meets the requirements for a "code“code of ethics"ethics” as defined in Item 16B of Form 20-F. The Code of Business Conduct and Ethics applies to the Company'sCompany’s chief executive officer, chief financial officer, chief accounting officer, controller and persons performing similar functions, as well as to all of the Company'sCompany’s other officers, directors and employees. The Code of Business Conduct and Ethics is available on Ryanair'sRyanair’s website at http://www.ryanair.com. (Information appearing on the website is not incorporated by reference into this annual report.) The Company has not made any amendment to, or granted any waiver from, the provisions of this Code of Business Conduct and Ethics that apply to its chief executive officer, chief financial officer, chief accounting officer, controller or persons performing similar functions during its most recently completed fiscal year.
Item 16C.Principal Accountant Fees and Services
Audit and Non-Audit Fees
The following table sets forth the fees billed or billable to the Company by its independent auditors, KPMG, during the fiscal years ended March 31, 20072010, 2009 and 2006:
| Year ended March 31, | |||||||||
| 2010 | 2009 | 2008 | |||||||
| (millions) | |||||||||
Audit fees | € | 0.5 | € | 0.5 | € | 0.5 | |||
Audit-related fees | — | — | — | ||||||
Tax fees | 0.3 | 0.3 | 0.2 | ||||||
Total fees | € | 0.8 | € | 0.8 | € | 0.7 | |||
Audit fees in the above table are the aggregate fees billed or billable by KPMG in connection with the audit of the Company'sCompany’s annual financial statements, as well as work that generally only the independent auditor can reasonably be expected to provide, including the provision of comfort letters, statutory audits, discussions surrounding the proper application of financial accounting and reporting standards and services provided in connection with certain regulatory requirements including those under the Sarbanes-Oxley Act of 2002.
Audit-related fees in the above table are the aggregate fees billed by KPMG for assurance and related services that are traditionally performed by the independent auditor, including due diligence related to mergers and acquisitions and employee benefit audit plans.
101
Tax fees include fees for all services, except those services specifically related to the audit of financial statements, performed by the independent auditor'sauditor’s tax personnel, including tax analysis, work performed in support of other tax-related regulatory requirements and tax compliance reporting.
Audit Committee Pre-Approval Policies and Procedures
The audit committee expressly pre-approves anyevery engagement of Ryanair'sRyanair’s independent auditors for all audit and non-audit services provided to the Company.
Item 16D.
| Item 16D. | Exemptions from the Listing Standards for Audit Committees |
None.
| Item 16E. | Purchases of Equity Securities by the Issuer and Affiliated Purchasers |
None.
| Item 16F. | Change in Registrant’s Certified Accountant |
Not applicable.
| Item 16G. | Corporate Governance |
See “Item 6. Directors, Senior Management and Employees—Directors—Exemptions from the Listing StandardsNASDAQ Corporate Governance Rules” for Audit Committees
Not applicable.
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Neither the Company nor any affiliated purchaser purchased any of the
Company's Ordinary Shares or ADRs during fiscal year 2007. See "Item 9. The
Offer and Listing-Trading Markets and Share Prices" forfurther information regarding recent share buy-backs.
the ways in which the Company’s corporate governance practices differ from those followed by domestic companies listed on NASDAQ.
PART III
Item 17. Financial Statements
| Item 17. | Financial Statements |
Not applicable.
102
Item 18. Financial Statements
| Item 18. | Financial Statements |
INDEX TO FINANCIAL STATEMENTS
| Page | ||
| F-1 | ||
| F-2 | ||
| F-3 | ||
| F-4 | ||
| F-5 | ||
| F-6 | ||
| F-7 | ||
| Item 19. | Exhibits |
| 1.1 | Memorandum and Articles of | |
| 1.2 | The total amount of long-term debt securities of Ryanair Holdings authorized under any instrument does not exceed 10.0% of the total assets of the Company on a consolidated basis. Ryanair Holdings hereby agrees to furnish to the Securities and Exchange Commission upon request a copy of any instrument defining the rights of holders of long-term debt of the registrant or of its subsidiaries for which consolidated or unconsolidated financial statements are required to be filed. | |
| 4.1 | Purchase Agreement No. 2403 between The Boeing Company and Ryanair Holdings plc relating to Model Boeing 737-800 aircraft, together with ancillary documents (subject to a request for confidential treatment that has been granted) (incorporated herein by reference to Exhibit 4.1 of Ryanair Holdings’ Annual Report on Form 20-F filed on September 30, 2002 (Commission file No. 000-29304)). | |
| 4.2 | Supplemental Agreement No. 6 to Purchase Agreement 2403 between The Boeing Company and Ryanair Holdings plc relating to Model Boeing 737-800 aircraft, dated as of February 28, 2005, together with ancillary documents (subject to a request for confidential treatment that has been granted) (incorporated herein by reference to Exhibit 4.2 of Ryanair Holdings’ Annual Report on Form 20-F filed on September 30, 2005 (Commission file No. 000-29304)). | |
| 8.1 | List of principal subsidiaries of the registrant (incorporated herein by reference to Exhibit 8.1 of Ryanair Holdings’ Annual Report or Form 20-F filed on September 20, 2007 (Commission file No. 000-29304)). | |
| 12.1 | Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 13.1 | Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
RYANAIR HOLDINGS PLC
/s/ Michael O' Leary
Name: Michael O'Leary
Title: Chief Executive Officer and Director
Date: September 20, 2007
104
| RYANAIR HOLDINGS PLC | ||
/s/ MICHAEL O’ LEARY | ||
| Name: | Michael O’Leary | |
| Title: | Chief Executive Officer and Director | |
Date: July 20, 2010 | ||
Report of Independent Registered Public Accounting Firm
To the
The Board of Directors and Shareholders of
Ryanair Holdings plc:
We have audited the accompanying consolidated balance sheets of Ryanair Holdings plc and subsidiaries (collectively, 'the Company')(the Company) as of March 31, 20072010, 2009 and 2006,2008 and the related consolidated income statements, cash flow statements andconsolidated statements of recognizedcomprehensive income, changes in shareholders’ equity and expense,cash flows for each of the years in the three-year period ended March 31, 2007.2010. These consolidated financial statements are the responsibility of the Company'sCompany’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Ryanair Holdings plc and subsidiaries as of March 31, 20072010, 2009 and 2006,2008, and the results of their operations and their cash flows for each of the years in the three-year period ended March 31, 2007,2010, in conformity with International Financial Reporting Standards (IFRSs)(IFRS) as issued by the International Accounting Standards Board and also IFRS as adopted by the European Union (EU).
IFRSs as adopted by the EU vary in certain significant respects from U.S.
generally accepted accounting principles. Information relating to the nature and
effect of such differences is presented in Note 28 to the consolidated financial
statements.
Union.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Ryanair Holdings plc'splc’s internal control over financial reporting as of March 31, 2007,2010, based on criteria established inInternal Control - Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated SeptemberJuly 20, 20072010 expressed an unqualified opinion on management's assessmentthe effectiveness of and the effective operation of,Company’s internal control over financial reporting.
/s/ KPMG
Chartered Accountants
Dublin, Ireland
September
July 20, 2007
F-1
Consolidated Balance Sheet
At March 31, At March 31
2007 2006
------------ ------------
Note EUR000 EUR000
Non-current asset
Property, plant and equipment..................................... 2 2,884,053 2,532,988
Intangible assets................................................. 3 46,841 46,841
Available for sale financial assets............................... 4 406,075 -
Derivative financial instruments.................................. 5 - 763
------------ ------------
Total non-current assets............................................. 3,336,969 2,580,592
------------ ------------
Current assets
Inventories ...................................................... 6 2,420 3,422
Other assets ..................................................... 7 77,707 29,453
Trade receivables................................................. 8 23,412 29,909
Derivative financial instruments.................................. 5 52,736 18,872
Restricted cash................................................... 9 258,808 204,040
Financial assets: cash > 3 months................................. 592,774 328,927
Cash and cash equivalents......................................... 1,346,419 1,439,004
------------ ------------
Total current assets................................................. 2,354,276 2,053,627
------------ ------------
Total assets......................................................... 5,691,245 4,634,219
============ ============
Current liabilitie
Trade payables.................................................... 54,801 79,283
Accrued expenses and other liabilities............................ 10 807,136 570,614
Current maturities of debt........................................ 11 178,918 153,311
Derivative financial instruments.................................. 5 56,053 27,417
Current tax....................................................... 12 20,822 15,247
------------ ------------
Total current liabilities............................................ 1,117,730 845,872
------------ ------------
Non-current liabilities
Provisions........................................................ 13 28,719 16,722
Derivative financial instruments.................................. 5 58,666 81,897
Deferred income tax liability..................................... 12 151,032 127,260
Other creditors................................................... 14 112,177 46,066
Non-current maturities of debt.................................... 11 1,683,148 1,524,417
------------ ------------
Total non-current liabilities........................................ 2,033,742 1,796,362
------------ ------------
Shareholders' equity
Issued share capital.............................................. 15 9,822 9,790
Share premium account............................................. 15 607,433 596,231
Retained earnings................................................. 16 1,905,211 1,467,623
Other reserves.................................................... 16 17,307 (81,659)
------------ ------------
Shareholders' equity................................................. 2,539,773 1,991,985
------------ ------------
Total liabilities and shareholders' equity........................... 5,691,245 4,634,219
============ ============
The accompanying notes are an integral part of the financial information.
F-2
Consolidated Income Statement
Year ended Year ended Year ended
March 31, March 31, March 31,
2007 2006 2005
---------- ---------- ----------
Note EUR000 EUR000 EUR000
Operating revenues
Scheduled revenues....................................... 1,874,791 1,433,377 1,128,116
Ancillary revenues....................................... 17 362,104 259,153 190,921
---------- ---------- ----------
Total operating revenues-continuing operations.............. 17 2,236,895 1,692,530 1,319,037
---------- ---------- ----------
Operating expenses
Staff costs.............................................. 18 (226,580) (171,412) (141,673)
Depreciation............................................. 2 (143,503) (124,405) (110,357)
Fuel & oil............................................... (693,331) (462,466) (265,276)
Maintenance, materials & repairs......................... (42,046) (37,417) (26,280)
Marketing & distribution costs........................... (23,795) (13,912) (19,622)
Aircraft rentals......................................... (58,183) (47,376) (21,546)
Route charges............................................ (199,240) (164,577) (135,672)
Airport & handling charges............................... (273,613) (216,301) (178,384)
Other.................................................... 19 (104,859) (79,618) (79,489)
---------- ---------- ----------
Total operating expenses.................................... (1,765,150) (1,317,484) (978,299)
---------- ---------- ----------
Operating profit - continuing operations.................... 471,745 375,046 340,738
Other income/(expenses)
Finance income........................................... 62,983 38,219 28,342
Finance expense.......................................... 21 (82,876) (73,958) (57,629)
Foreign exchange (losses)................................ (906) (1,234) (2,302)
Gain on disposal of property, plant and equipment........ 91 815 47
---------- ---------- ----------
Total other income/(expenses)............................... (20,708) (36,158) (31,542)
---------- ---------- ----------
Profit before tax........................................... 451,037 338,888 309,196
Tax on profit on ordinary activities..................... 12 (15,437) (32,176) (29,153)
---------- ---------- ----------
Profit for the year - all attributable to equity holders of parent.... 435,600 306,712 280,043
========== ========== ==========
Basic earnings per ordinary share (in euro cents)........ 23 28.20 20.00 18.43
Diluted earnings per ordinary share (in euro cents)...... 23 27.97 19.87 18.33
Number of ordinary shares (in 000's)..................... 23 1,544,457 1,533,666 1,519,822
Number of diluted shares (in 000's)...................... 23 1,557,503 1,543,562 1,528,006
========== ========== ==========
The accompanying notes are an integral part of the financial information.
F-3
Consolidated Cash Flow Statement
Year ended Year ended Year ended
March 31, March 31, March 31
2007 2006 2005
---------- ---------- ----------
EUR000 EUR000 EUR000
Operating activities
Profit before tax................................. 451,037 338,888 309,196
Adjustments to reconcile profits before tax to net cash provided by
operating activities
Depreciation...................................... 143,503 124,405 110,357
Decrease/(increase) in inventories................ 1,002 (962) (424)
Decrease/(increase) in trade receivables.......... 6,497 (9,265) (5,712)
(Increase) in other current assets................ (30,849) (882) (4,855)
(Decrease)/increase in trade payables............. (24,482) (12,835) 24,182
Increase in accrued expenses...................... 233,839 150,083 89,406
(Decrease)/increase in other creditors............ 75,351 11,403 (10,986)
Increase in maintenance provisions................ 11,997 9,486 714
(Gain) on disposal of property, plant and equipment (91) (815) (47)
Decrease/(increase) in interest receivable........ 48 (3,959) (505)
Decrease in interest payable...................... 2,671 1,159 3,420
Retirement costs.................................. 589 507 167
Share based payments.............................. 3,935 2,921 488
Income tax........................................ (5,194) 436 (4,198)
---------- ---------- ----------
Net cash provided by operating activities............ 869,853 610,570 511,203
---------- ---------- ----------
Investing activities
Capital expenditure (purchase of property, plant and equipment) (494,972) (546,225) (631,994)
Proceeds from sale of property, plant and equipment 495 8,460 2,234
Purchase of equities classified as available for sale (344,917) - -
Investment in restricted cash..................... (54,768) - (4,040)
(Investment)/reduction in financial assets: cash > 3 months (263,847) 200,480 (216,662)
---------- ---------- ----------
Net cash used in investing activities................ (1,158,009) (337,285) (850,462)
---------- ---------- ----------
Financing activities
Net proceeds from shares issued................... 11,233 30,590 5,382
Proceeds from long term borrowings................ 339,409 386,809 550,021
Repayments of long term borrowings................ (155,071) (123,938) (88,146)
---------- ---------- ----------
Net cash provided by financing activities............ 195,571 293,461 467,257
---------- ---------- ----------
(Decrease)/increase in cash and cash equivalents..... (92,585) 566,746 127,998
Cash and cash equivalents at beginning of year.... 1,439,004 872,258 744,260
---------- ---------- ----------
Cash and cash equivalents at end of year............ 1,346,419 1,439,004 872,258
========== ========== ==========
The accompanying notes are an integral part of the financial information.
F-4
Consolidated Statement of Recognized Income and Expense
Year ended Year ended Year ended
March 31, March 31, March 31
2007 2006 2005
---------- ---------- ----------
EUR000 EUR000 EUR000
Net actuarial gains/(losses) from retirement benefit plans 1,988 2,327 (4,733)
Cash flow hedge reserve-effective portion of fair value changes to derivatives
Effective portion of changes in fair value of cash
flow hedges ......................................... 79,025 65,966 -
Net change in fair value of cash flow hedges transferred to profit and loss (32,920) (22,960) -
---------- ---------- ----------
Net movements into cash flow hedge reserve.............. 46,105 43,006 -
Net increase in fair value of available for sale
asset................................................ 48,926 - -
---------- ---------- ----------
Income and expenditure recognized directly in
equity............................................... 97,019 45,333 (4,733)
---------- ---------- ----------
---------- ---------- ----------
Profit for the year..................................... 435,600 306,712 280,043
---------- ---------- ----------
---------- ---------- ----------
Total recognized income and expense..................... 532,619 352,045 275,310
---------- ---------- ----------
The accompanying notes are an integral part of the financial information.
F-5
| At March 31, 2010 | At March 31, 2009 | At March 31, 2008 | |||||||
| Note | €M | €M | €M | ||||||
Non-current assets | |||||||||
Property, plant and equipment | 2 | 4,314.2 | 3,644.8 | 3,582.1 | |||||
Intangible assets | 3 | 46.8 | 46.8 | 46.8 | |||||
Available for sale financial assets | 4 | 116.2 | 93.2 | 311.5 | |||||
Derivative financial instruments | 5 | 22.8 | 60.0 | — | |||||
Total non-current assets | 4,500.0 | 3,844.8 | 3,940.4 | ||||||
Current assets | |||||||||
Inventories | 6 | 2.5 | 2.1 | 2.0 | |||||
Other assets | 7 | 80.6 | 91.0 | 169.6 | |||||
Current tax | 12 | — | — | 1.6 | |||||
Trade receivables | 8 | 44.3 | 41.8 | 34.2 | |||||
Derivative financial instruments | 5 | 122.6 | 130.0 | 10.3 | |||||
Restricted cash | 9 | 67.8 | 291.6 | 292.4 | |||||
Financial assets: cash > 3 months | 1,267.7 | 403.4 | 406.3 | ||||||
Cash and cash equivalents | 1,477.9 | 1,583.2 | 1,470.8 | ||||||
Total current assets | 3,063.4 | 2,543.1 | 2,387.2 | ||||||
Total assets | 7,563.4 | 6,387.9 | 6,327.6 | ||||||
Current liabilities | |||||||||
Trade payables | 154.0 | 132.7 | 129.3 | ||||||
Accrued expenses and other liabilities | 10 | 1,088.2 | 905.8 | 919.4 | |||||
Current maturities of debt | 11 | 265.5 | 202.9 | 366.8 | |||||
Current tax | 12 | 0.9 | 0.4 | — | |||||
Derivative financial instruments | 5 | 41.0 | 137.4 | 141.7 | |||||
Total current liabilities | 1,549.6 | 1,379.2 | 1,557.2 | ||||||
Non-current liabilities | |||||||||
Provisions | 13 | 102.9 | 72.0 | 44.8 | |||||
Derivative financial instruments | 5 | 35.4 | 54.1 | 75.7 | |||||
Deferred tax | 12 | 199.6 | 155.5 | 148.1 | |||||
Other creditors | 14 | 136.6 | 106.5 | 99.9 | |||||
Non-current maturities of debt | 11 | 2,690.7 | 2,195.5 | 1,899.7 | |||||
Total non-current liabilities | 3,165.2 | 2,583.6 | 2,268.2 | ||||||
Shareholders’ equity | |||||||||
Issued share capital | 15 | 9.4 | 9.4 | 9.5 | |||||
Share premium account | 15 | 631.9 | 617.4 | 615.8 | |||||
Capital redemption reserve | 0.5 | 0.5 | 0.4 | ||||||
Retained earnings | 2,083.5 | 1,777.7 | 2,000.4 | ||||||
Other reserves | 16 | 123.3 | 20.1 | (123.9 | ) | ||||
Shareholders’ equity | 2,848.6 | 2,425.1 | 2,502.2 | ||||||
Total liabilities and shareholders’ equity | 7,563.4 | 6,387.9 | 6,327.6 | ||||||
The accompanying notes are an integral part of the financial information.
Consolidated Income Statements
| Year ended March 31, 2010 | Year ended March 31, 2009 | Year ended March 31, 2008 | |||||||||
| Note | €M | €M | €M | ||||||||
Operating revenues | |||||||||||
Scheduled revenues | 2,324.5 | 2,343.9 | 2,225.7 | ||||||||
Ancillary revenues | 17 | 663.6 | 598.1 | 488.1 | |||||||
Total operating revenues—continuing operations | 17 | 2,988.1 | 2,942.0 | 2,713.8 | |||||||
Operating expenses | |||||||||||
Staff costs | 18 | (335.0 | ) | (309.3 | ) | (285.3 | ) | ||||
Depreciation | 2 | (235.4 | ) | (256.1 | ) | (176.0 | ) | ||||
Fuel and oil | (893.9 | ) | (1,257.1 | ) | (791.3 | ) | |||||
Maintenance, materials and repairs | (86.0 | ) | (66.8 | ) | (56.7 | ) | |||||
Aircraft rentals | (95.5 | ) | (78.2 | ) | (72.7 | ) | |||||
Route charges | (336.3 | ) | (286.6 | ) | (259.3 | ) | |||||
Airport and handling charges | (459.1 | ) | (443.4 | ) | (396.3 | ) | |||||
Marketing, distribution and other | (144.8 | ) | (151.9 | ) | (139.1 | ) | |||||
Total operating expenses | (2,586.0 | ) | (2,849.4 | ) | (2,176.7 | ) | |||||
Operating profit—continuing operations | 402.1 | 92.6 | 537.1 | ||||||||
Other income/(expense) | |||||||||||
Finance income | 23.5 | 75.5 | 83.9 | ||||||||
Finance expense | 20 | (72.1 | ) | (130.5 | ) | (97.1 | ) | ||||
Foreign exchange gain/(loss) | (1.0 | ) | 4.4 | (5.6 | ) | ||||||
Loss on impairment of available-for-sale financial asset | 4 | (13.5 | ) | (222.5 | ) | (91.6 | ) | ||||
Gain on disposal of property, plant and equipment | 2.0 | — | 12.2 | ||||||||
Total other income/(expense) | (61.1 | ) | (273.1 | ) | (98.2 | ) | |||||
Profit/(loss) before tax | 341.0 | (180.5 | ) | 438.9 | |||||||
Tax (expense)/benefit on profit/(loss) on ordinary activities | 12 | (35.7 | ) | 11.3 | (48.2 | ) | |||||
Profit/(loss) for the year—all attributable to equity holders of parent | 305.3 | (169.2 | ) | 390.7 | |||||||
Basic earnings/(losses) per ordinary share (euro cent) | 22 | 20.68 | (11.44 | ) | 25.84 | ||||||
Diluted earnings per ordinary share (euro cent) | 22 | 20.60 | (11.44 | ) | 25.62 | ||||||
Number of ordinary shares (in Ms) | 22 | 1,476.4 | 1,478.5 | 1,512.0 | |||||||
Number of diluted shares (in Ms) | 22 | 1,481.7 | 1,478.5 | 1,524.9 | |||||||
The accompanying notes are an integral part of the financial information.
Consolidated Statements of Comprehensive Income
| Year ended March 31, 2010 | Year ended March 31, 2009 | Year ended March 31, 2008 | |||||||
| €M | €M | €M | |||||||
Profit/(loss) for the year | 305.3 | (169.2 | ) | 390.7 | |||||
Other comprehensive income: | |||||||||
Net actuarial (loss)/gain from retirement benefit plans | — | (7.5 | ) | 4.5 | |||||
Cash-flow hedge reserve-effective portion of fair value changes to derivatives: | |||||||||
Effective portion of changes in fair value of cash-flow hedges | 129.8 | 256.8 | 24.9 | ||||||
Net change in fair value of cash-flow hedges transferred to property, plant and equipment | (16.7 | ) | (1.0 | ) | 1.9 | ||||
Net change in fair value of cash-flow hedges transferred to profit or loss | (50.8 | ) | (115.6 | ) | (130.0 | ) | |||
Net movements in cash-flow hedge reserve | 62.3 | 140.2 | (103.2 | ) | |||||
Available for sale financial asset: | |||||||||
Net increase/(decrease) in fair value of available-for-sale asset | 23.0 | (222.5 | ) | (140.5 | ) | ||||
Impairment of available-for-sale asset written off to the income statement | 13.5 | 222.5 | 91.6 | ||||||
Net movements in available-for-sale financial asset reserve | 36.5 | — | (48.9 | ) | |||||
Total other comprehensive income/(loss) for the year, net of income tax | 98.8 | 132.7 | (147.6 | ) | |||||
Total comprehensive income/(loss) for the year—all attributable to equity holders of parent | 404.1 | (36.5 | ) | 243.1 | |||||
The accompanying notes are an integral part of the financial information.
Consolidated Statements of Changes in Shareholders’ Equity
| Ordinary Shares | Issued Share Capital | Share Premium Account | Retained Earnings | Capital Redemption Reserve | Other Reserves | Total | ||||||||||||||||
| Hedging | Other Reserves | |||||||||||||||||||||
| M | €M | €M | €M | €M | €M | €M | €M | |||||||||||||||
Balance at March 31, 2007 | 1,547.1 | 9.9 | 607.4 | 1,905.2 | — | (39.0 | ) | 56.3 | 2,539.8 | |||||||||||||
Profit for the year | — | — | — | 390.7 | — | — | — | 390.7 | ||||||||||||||
Other comprehensive income | ||||||||||||||||||||||
Net actuarial losses from retirement benefits plan | — | — | — | 4.5 | — | — | — | 4.5 | ||||||||||||||
Net movements in cash-flow reserve | — | — | — | — | — | (103.2 | ) | — | (103.2 | ) | ||||||||||||
Net change in fair value of available-for-sale asset | — | — | — | — | — | — | (48.9 | ) | (48.9 | ) | ||||||||||||
Total other comprehensive income/(loss) | — | — | — | 4.5 | — | (103.2 | ) | (48.9 | ) | (147.6 | ) | |||||||||||
Total comprehensive income | — | — | — | 395.2 | — | (103.2 | ) | (48.9 | ) | 243.1 | ||||||||||||
Issue of ordinary equity shares | 3.2 | — | 8.4 | — | — | — | — | 8.4 | ||||||||||||||
Repurchase of ordinary equity shares | (59.5 | ) | — | — | (300.0 | ) | — | — | — | (300.0 | ) | |||||||||||
Capital redemption reserve fund | — | (0.4 | ) | — | — | 0.4 | — | — | — | |||||||||||||
Share-based payments | — | — | — | — | — | — | 10.9 | 10.9 | ||||||||||||||
Balance at March 31, 2008 | 1,490.8 | 9.5 | 615.8 | 2,000.4 | 0.4 | (142.2 | ) | 18.3 | 2,502.2 | |||||||||||||
(Loss) for the year | — | — | — | (169.2 | ) | — | — | — | (169.2 | ) | ||||||||||||
Other comprehensive income | ||||||||||||||||||||||
Net actuarial losses from retirement benefits plan | — | — | — | (7.5 | ) | — | — | — | (7.5 | ) | ||||||||||||
Net movements in cash-flow reserve | — | — | — | — | — | 140.2 | — | 140.2 | ||||||||||||||
Total other comprehensive income | — | — | — | (7.5 | ) | — | 140.2 | — | 132.7 | |||||||||||||
Total comprehensive income/(loss) | — | — | — | (176.7 | ) | — | 140.2 | — | (36.5 | ) | ||||||||||||
Issue of ordinary equity shares | 0.7 | — | 1.6 | — | — | — | — | 1.6 | ||||||||||||||
Repurchase of ordinary equity shares | (18.1 | ) | — | — | (46.0 | ) | — | — | — | (46.0 | ) | |||||||||||
Capital redemption reserve fund | — | (0.1 | ) | — | — | 0.1 | — | — | — | |||||||||||||
Share-based payments | — | — | — | — | — | — | 3.8 | 3.8 | ||||||||||||||
Balance at March 31, 2009 | 1,473.4 | 9.4 | 617.4 | 1,777.7 | 0.5 | (2.0 | ) | 22.1 | 2,425.1 | |||||||||||||
Profit for the year | — | — | — | 305.3 | — | — | — | 305.3 | ||||||||||||||
Other comprehensive income | ||||||||||||||||||||||
Net movements in cash-flow reserve | — | — | — | — | — | 62.3 | — | 62.3 | ||||||||||||||
Net change in fair value of available-for-sale asset | — | — | — | — | — | — | 36.5 | 36.5 | ||||||||||||||
Total other comprehensive income | — | — | — | — | — | 62.3 | 36.5 | 98.8 | ||||||||||||||
Total comprehensive income | — | — | — | 305.3 | — | 62.3 | 36.5 | 404.1 | ||||||||||||||
Issue of ordinary equity shares | 5.5 | — | 14.5 | — | — | — | — | 14.5 | ||||||||||||||
Share-based payments | — | — | — | — | — | — | 4.9 | 4.9 | ||||||||||||||
Transfer of exercised and expired share-based awards | — | — | — | 0.5 | — | — | (0.5 | ) | — | |||||||||||||
Balance at March 31, 2010 | 1,478.9 | 9.4 | 631.9 | 2,083.5 | 0.5 | 60.3 | 63.0 | 2,848.6 | ||||||||||||||
The accompanying notes are an integral part of the financial information.
Consolidated Statements of Cash Flows
| Year ended March 31, 2010 | Year ended March 31, 2009 | Year ended March 31, 2008 | |||||||
| €M | €M | €M | |||||||
Operating activities | |||||||||
Profit/(loss) before tax | 341.0 | (180.5 | ) | 438.9 | |||||
Adjustments to reconcile profit/(loss) before tax to net cash provided by operating activities | |||||||||
Depreciation | 235.4 | 256.1 | 176.0 | ||||||
(Increase)/decrease in inventories | (0.4 | ) | (0.1 | ) | 0.4 | ||||
(Increase)/decrease in trade receivables | (2.5 | ) | (7.6 | ) | (10.7 | ) | |||
Decrease/(increase) in other current assets | 11.6 | 73.8 | (35.9 | ) | |||||
Increase in trade payables | 21.3 | 3.4 | 2.0 | ||||||
Increase in accrued expenses | 189.7 | 13.3 | 80.6 | ||||||
Increase/(decrease) in other creditors | 30.1 | 6.6 | (5.2 | ) | |||||
Increase in maintenance provisions | 30.7 | 19.0 | 14.1 | ||||||
(Gain) on disposal of property, plant and equipment | (2.0 | ) | — | (12.2 | ) | ||||
Loss on impairment of available-for-sale financial asset | 13.5 | 222.5 | 91.6 | ||||||
(Increase)/decrease in interest receivable | (1.2 | ) | 4.8 | (1.0 | ) | ||||
(Increase)/decrease in interest payable | (0.5 | ) | (3.5 | ) | 1.2 | ||||
Retirement costs | (0.1 | ) | (0.3 | ) | 0.4 | ||||
Share-based payments | 4.9 | 3.8 | 10.9 | ||||||
Income tax refunded/(paid) | — | 1.9 | (47.2 | ) | |||||
Net cash provided by operating activities | 871.5 | 413.2 | 703.9 | ||||||
Investing activities | |||||||||
Capital expenditure (purchase of property, plant and equipment) | (997.8 | ) | (702.0 | ) | (937.1 | ) | |||
Proceeds from sale of property, plant and equipment | 89.2 | 314.2 | 150.0 | ||||||
Purchase of equities classified as available for sale | — | (4.2 | ) | (58.1 | ) | ||||
Decrease/(increase) in restricted cash | 223.8 | 0.8 | (33.6 | ) | |||||
(Increase)/decrease in financial assets: cash > 3 months | (864.3 | ) | 2.9 | 186.5 | |||||
Net cash used in investing activities | (1,549.1 | ) | (388.3 | ) | (692.3 | ) | |||
Financing activities | |||||||||
Shares purchased under share buy-back programme | — | (46.0 | ) | (300.0 | ) | ||||
Net proceeds from shares issued | 14.5 | 1.6 | 8.4 | ||||||
Proceeds from long term borrowings | 788.1 | 459.0 | 646.4 | ||||||
Repayments of long term borrowings | (230.3 | ) | (327.1 | ) | (242.0 | ) | |||
Net cash provided by financing activities | 572.3 | 87.5 | 112.8 | ||||||
(Decrease)/increase in cash and cash equivalents | (105.3 | ) | 112.4 | 124.4 | |||||
Cash and cash equivalents at beginning of year | 1,583.2 | 1,470.8 | 1,346.4 | ||||||
Cash and cash equivalents at end of year | 1,477.9 | 1,583.2 | 1,470.8 | ||||||
The accompanying notes are an integral part of the financial information.
Notes forming part of the Consolidated Financial Information
1. Statements
| 1 | Basis of preparation and significant accounting policies |
The accounting policies applied in the preparation of the consolidated financial statements for the 2010 fiscal year are set out below. These have been applied consistently for all periods presented, except as otherwise stated.
Business activity
Ryanair Limited and its subsidiaries ("(“Ryanair Limited"Limited”) has operated as an international airline since it commencedcommencing operations in 1985. On August 23, 1996, Ryanair Holdings Limited, a newly formed holding company, acquired the entire issued share capital of Ryanair Limited. On May 16, 1997, Ryanair Holdings Limited re-registered as a public limited company, Ryanair Holdings plc.plc (the “Company”). Ryanair Holdings plc and its subsidiaries are hereinafterhereafter together referred to as "Ryanair“Ryanair Holdings plc," "we," "our," "us," "Ryanair," "the Company"plc” (or “we”, “our”, “us”, “Ryanair” or "the Group." The Companythe “Company”) and currently operatesoperate a low fareslow-fares airline headquartered in Dublin, Ireland. All trading activity continues to be undertaken by the Groupgroup of companies headed by Ryanair Limited. These
Statement of compliance
In accordance with the International Accounting Standards (“IAS”) Regulation (EC 1606 (2002)) which applies throughout the European Union (“EU”), the consolidated financial statements have been prepared in accordance with International Accounting Standards and International Financial Reporting Standards (IFRSs)(collectively “IFRS”) as adopted by the European Union (EU)EU, which are effective for the year ended and as more particularly detailed below. The following
accounting policies have been applied consistentlyat March 31, 2010. In addition to all periods presented
exceptcomplying with its legal obligation to comply with IFRS as otherwise set out below.
Basis of preparation
Theadopted by the EU, the consolidated financial statements have been prepared in accordance with IFRSs as adopted by the EU that are effective for the year ended March 31, 2007.
IFRSs as adopted by the EU differ in certain respects from IFRS as issued by the International Accounting Standards Board (IASB)(“IASB”). However, none of these
differences are relevant in the context of Ryanair and theThe consolidated financial statements for the periods presented would be no different had IFRS as
issued by the IASBhave also been applied. Ryanair's financial statements are therefore,
also prepared in accordance with IFRS as issued by the IASB.
Companies Acts, 1963 to 2009.
Details of legislative changes and new accounting standards or amendments to accounting standards, which are not yet effective and have not been early adopted in these consolidated financial statements, and the likely impact on future financial statements are set forth below in the prospective accounting changes section.
New accounting standards adopted during the year
The following standards, interpretations and amendments to existing standards were adopted for the first time in 2010:
| • | IFRS 8—Operating Segments(“IFRS 8”). We adopted IFRS 8 which replaces IAS 14—Segmental Reporting(“IAS 14”), during the year ended March 31, 2010. IFRS 8 requires a “management approach” under which segment information is presented on the same basis as that used for internal reporting purposes. IAS 14 required identification of two sets of segments—one based on business units and the other on geographical areas. IFRS 8 requires additional disclosures around identifying segments and their products and services. Our operations are organised as a single business unit, which is the provision of low-fares airline-related activities, including scheduled services, car hire services, and internet and other related services to third parties. There has been no change to the operating segment as a result of the adoption of IFRS 8 and the reportable segment is consistent with that previously reported under the primary business segment format of the segment reporting under IAS 14. Comparative segment information has been represented, where necessary, in conformity with the requirements of IFRS 8. Since the change in accounting policy only impacts the presentation and disclosure aspects of the financial statements, there is no impact on reported results or earnings per share. |
| • | IAS 1 (revised)—Presentation of Financial Statements. The revised standard prohibits the presentation of items of income and expense (that is “non-owner changes in equity”) in the statement of changes in equity, requiring “non-owner changes in equity” to be presented separately from owner changes in equity. All “non-owner changes in equity” are required to be shown in a performance statement. Entities can choose whether to present one performance statement (the statement of comprehensive income) or two statements (the income statement and the statement of comprehensive income). We have elected to present two statements: an income statement and a statement of comprehensive income. Also, the revised standard includes the statement of changes in shareholders’ equity as a primary statement, rather than as a note to the financial statements. Since the change in accounting policy only impacts the presentation and disclosure aspects of the financial statements, there is no impact on reported results or earnings per share. |
| • | Amendment to IFRS 7, “Financial Instruments: Disclosures”. The amendment requires enhanced disclosures about financial instrument fair-value measurement and liquidity risk. In particular, the amendment requires disclosure of fair-value measurements reflected in the balance sheet by level, using a fair-value measurement hierarchy. We applied the amendment to IFRS 7 from April 1, 2009 and opted not to include the equivalent comparative information as permitted by the standard. The adoption of the amendment has resulted in additional disclosures, but has had no impact on our financial position or results from operations. |
Basis of preparation
These consolidated financial statements are presented in euro rounded to the nearest thousand,million, the euro being the functional currency of the parent entity and the majority of the group companies. They are prepared on the historical cost basis, except for derivative financial instruments and available
for saleavailable-for-sale securities which are stated at fair value, and share basedshare-based payments, which are based on fair value determined as at the grant date of the relevant share options. Any non-current assets classified as held for sale are stated at the lower of cost and fair value less costs to sell.
Critical accounting policies
The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. These estimates and associated assumptions are based on historical experience and various other factors believed to be reasonable under the circumstances, and the results of whichsuch estimates form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ materially from these estimates. These underlying assumptions are reviewed on an ongoing basis. RevisionsA revision to an accounting estimates
are recognizedestimate is recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if these are also affected. Principal sources of estimation uncertainty have been set outforth in the critical accounting policypolicies section within this note.
Statement of compliance
below. Actual results may differ from estimates.
The consolidated financial statements have been prepared in accordance with
IFRSs as adopted by the EU as were effective for the year ended March 31, 2007
further to the IAS Regulation (EC 1606/2002).
The IFRSs as adopted by the EU and applied by us in the preparation of
these financial statementsCompany believes that its critical accounting policies, which are those that were effective forrequire management’s most difficult, subjective and complex judgements, are those described in this section. These critical accounting policies, the year endedjudgements and other uncertainties affecting application of these policies and the sensitivity of reported results to changes in conditions and assumptions are factors to be considered in reviewing the consolidated financial statements.
Available-for-sale securities
The Company holds certain equity securities, which are classified as available-for-sale, and are measured at fair value, less incremental direct costs, on initial recognition. Such securities are classified as available-for-sale, rather than as an investment in an associate if the Company does not have the power to exercise significant influence over the investee. Subsequent to initial recognition they are measured at fair value and changes therein, other than impairment losses, are recognised directly in equity. The fair values of available-for-sale securities are determined by reference to quoted prices at each reporting date. When an investment is de-recognised the cumulative gain or loss in equity is transferred to the income statement.
Such securities are considered to be impaired if there is objective evidence which indicates that there may be a negative influence on future cash flows. This includes where there is a significant or prolonged decline in the fair value below its cost. All impairment losses are recognised in the income statement and any cumulative loss in respect of an available-for-sale asset recognised previously in other comprehensive income is also transferred to the income statement.
Long-lived assets
As of March 31, 2007. The following provides a brief outline2010, Ryanair had €4.3 billion of property, plant and equipment long-lived assets, virtually all of which consisted of aircraft. In accounting for long-lived assets, Ryanair must make estimates about the expected useful lives of the likely impact on
future financial statements of relevant IFRSs adopted byassets, the EU which are not
yet effective and have not been early adopted in these financial statements:
F-6
o Amendment to IAS 1 - Capital Disclosures (effective for annual periods
beginning on or after January 1, 2007): this amendment will require
additional disclosure about our capital structure;
o IFRS 7 - Financial Instruments: Disclosures (effective for annual
periods beginning on or after January 1, 2007). This will require the
Company to make further disclosures relating to our financial
instruments than are currently required under IAS 32.
o IFRIC 9 - Reassessment of Embedded Derivatives (effective for annual
periods beginning on or after June 1, 2006) deals with the requirement
of an entity to re-assess embedded derivatives during the lifeexpected residual values of the underlying contract. This interpretation is not expected to have any
material effectassets and the potential for impairment based on the Company's future financial statements.
o IFRIC 10 - Interim Financial Reportingfair value of the assets and Impairment (effectivethe cash flows they generate.
In estimating the lives and expected residual values of its aircraft, Ryanair has primarily relied on its own and industry experience, recommendations from Boeing, the manufacturer of all of the Company’s aircraft, and other data available in the marketplace. Subsequent revisions to these estimates, which can be significant, could be caused by changes to Ryanair’s maintenance program, changes in utilisation of the aircraft, changes to governmental regulations on aging aircraft, and changing market prices for annual periods beginning onnew and used aircraft of the same or after November 1, 2006). This provides
certain guidance to entitiessimilar types. Ryanair evaluates its estimates and assumptions in accounting for impairments within
interimeach reporting period, financial statements. This is not expected to have any
material impact on the Company's financial statementsand, when adopted.
o IFRIC 11 - IFRS 2 Group and Treasury Share Transactions (effective for
annual periods beginning on or after March 1, 2007) addresses how
share based payment arrangements that affect more than one company in
a groupwarranted, adjusts these assumptions. Generally, these adjustments are accounted for on a prospective basis, through depreciation expense.
Ryanair periodically evaluates its long-lived assets for impairment. Factors that would indicate potential impairment would include, but are not limited to, significant decreases in the market value of an aircraft, a significant change in an aircraft’s physical condition and operating or cash flow losses associated with the use of the aircraft. While the airline industry as a whole has experienced many of these factors from time to time, Ryanair has not yet been seriously impacted and continues to record positive cash flows from these long-lived assets. Consequently, Ryanair has not yet identified any impairments related to its existing aircraft fleet. The Company will continue to monitor its long-lived assets and the general airline operating environment.
The Company’s estimate of the recoverable amount of aircraft residual values is 15% of market value, determined periodically, based on independent valuations and actual aircraft disposals during the current and prior periods.
Heavy maintenance
An element of the cost of an acquired aircraft is attributed, on acquisition, to its service potential, reflecting the maintenance condition of the engines and airframe.
For aircraft held under operating lease agreements, Ryanair is contractually committed to either return the aircraft in a certain condition or to compensate the lessor based on the actual condition of the airframe, engines and life-limited parts upon return. A provision is made over the lease term for this contractual obligation, based on the present value of the estimated future cost of the major airframe overhaul, engine maintenance checks, and restitution of major life-limited parts, calculated by reference to the number of hours flown or cycles operated during the year.
Ryanair’s aircraft operating lease agreements typically have a term of seven years, which closely correlates with the timing of heavy maintenance checks. The contractual obligation to maintain and replenish aircraft held under operating lease exists independently of any future actions within the control of Ryanair. While Ryanair may, in very limited circumstances, sub-lease its aircraft, it remains fully liable to perform all of its contractual obligations under the ‘head lease’ notwithstanding any such sub-leasing.
Both of these elements of accounting policies involve the use of estimates in determining the quantum of both the initial maintenance asset and/or the amount of provisions to be recorded and the respective periods over which such amounts are charged to income. In making such estimates, Ryanair has primarily relied on its own and industry experience, industry regulations and recommendations from Boeing; however, these estimates can be subject to revision, depending on a number of factors, such as the timing of the planned maintenance, the ultimate utilisation of the aircraft, changes to government regulations and increases or decreases in estimated costs. Ryanair evaluates its estimates and assumptions in each company's financial statements. This
is not expected to result in any material changereporting period and, when warranted, adjusts its assumptions, which generally impact maintenance and depreciation expense in the way that share
based payment transactions are accounted for by the Group.
income statement on a prospective basis.
Basis of consolidation
The consolidated financial statements comprise the financial statements of Ryanair Holdings plc and its subsidiariessubsidiary undertakings as of March 31, 2007.2010. Subsidiaries are entities controlled by us.Ryanair. Control exists when we haveRyanair has the power either directly or indirectly to govern the financial and operating policies of thean entity so as to obtain benefit from its activities.
All intercompanyinter-company account balances and any unrealised income or expenses arising from intra-group transactions have been eliminated in preparing the consolidated financial statements.
The results of subsidiariessubsidiary undertakings acquired or disposed of in the period are included in the consolidated income statement from the date of acquisition or up to the date of disposal. Upon the acquisition of a business, fair values are attributed to the separable net assets acquired.
Business combinations
The purchase method of accounting is employed in accounting for the acquisition of businesses. In accordance with IFRS 3, the cost of a business combination is measured as the aggregate of the fair values at the date of exchange of assets given and liabilities incurred or assumed in exchange for control, together with any directly attributable expenses. The assets and liabilities and contingent liabilities of the acquired entity are measured at their fair values at the date of acquisition. When the initial accounting for a business combination is determined provisionally, any adjustments to the provisional values allocated are made within 12 months of the acquisition date and are effected prospectively from that date.
F-7
Foreign currency translation
Items included in the financial statements of each of the Group'sgroup entities are measured using the currency of the primary economic environment in which the entity operates (the "functional currency"“functional currency”). The consolidated financial statements are presented in euro, which is the functional currency of the Group'smajority of the group entities.
Transactions arising in foreign currencies are recordedtranslated into the respective functional currencies at the rates of exchange in effect at the datedates of the transaction.transactions. Monetary assets and liabilities denominated in foreign currencies are retranslatedre-translated at the rate of exchange prevailing at the balance sheet date and all related exchange gains or
losses are accounted for through the income statement.date. Non-monetary assets and liabilities denominated in foreign currencies are translated to euro at foreign exchange rates in effect at the dates the transactions were effected. Foreign currency differences arising on retranslation are recognised in profit and loss, except for differences arising on qualifying cash-flow hedges, which are recognised in other comprehensive income.
Property, plant &and equipment
Property, plant and equipment areis stated at historical cost less accumulated depreciation and provisions for impairments, if any. Cost includes expenditure that is directly attributable to the acquisition of the asset. Cost may also include transfers from equity of any gain or loss on qualifying cash-flow hedges of foreign currency purchases of property, plant and equipment. Depreciation is calculated so as to write off the cost, less estimated residual value, of assets on a straight linestraight-line basis over their expected useful lives at the following annual rates:
| Rate of Depreciation | ||
Plant and | 20-33.3% | |
Fixtures and | 20% | |
Motor | 33.3% | |
Buildings | 5% |
Aircraft are depreciated on a straight linestraight-line basis over their estimated useful lives to estimated residual values. The current estimates of useful lives and residual values at year-end are:
Aircraft Type | Number of Aircraft | Useful Life | Residual Value | |||
Boeing 737-800s | 177(a) | 23 years from date of manufacture | 15% of |
| (a) | The Company operated 232 aircraft as of March 31, 2010, of which 55 were leased. |
The Company’s estimate of the recoverable amount of aircraft residual values is 15% of market value, determined periodically, based on independent valuations and actual aircraft disposals during the current and prior periods.
An element of the cost of an acquired aircraft is attributed on acquisition to its service potential, reflecting the maintenance condition of its engines and airframe. This cost, which can equate to a substantial element of the total aircraft cost, is amortizedamortised over the shorter of the period to the next maintenance check (usually between 8 and 12 years for Boeing 737-800 aircraft) or the remaining life of the aircraft. The costs of subsequent major airframe and engine maintenance checks are capitalizedcapitalised and amortizedamortised over the shorter of the period to the next check or the remaining life of the aircraft.
Advance and option payments made in respect of aircraft purchase commitments and options to acquire aircraft are recorded at cost and separately disclosed within property, plant and equipment. On acquisition of the related aircraft, these payments are included as part of the cost of aircraft and are depreciated from that date.
Rotable spare parts held by the GroupCompany are classified as property, plant and equipment if they are expected to be used over more than one period and are accounted for and depreciated in the same manner as the related aircraft.
F-8
Gains and losses on disposal of items of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and are recognised on a net basis within other income in profit and loss.
Aircraft maintenance costs
The accounting for the cost of providing major airframe and certain engine maintenance checks for owned aircraft is described in the accounting policy for property, plant and equipment.
With respect to the Group's
For aircraft held under operating lease agreements, whereRyanair is contractually committed to either return the Group hasaircraft in a commitmentcertain condition or to maintaincompensate the aircraft,lessor based on the actual condition of the airframe, engines and life-limited parts upon return. A provision is made duringover the lease term for thethis contractual obligation, based on the present value of the estimated future costscost of the major airframe and certainoverhaul, engine maintenance checks, by making appropriate charges to the income statementand restitution of major life-limited parts, calculated by reference to the number of hours flown or cycles operated during the year.
Ryanair’s aircraft operating lease agreements typically have a term of seven years, which closely correlates with the timing of heavy maintenance checks. The contractual obligation to maintain and replenish aircraft held under operating lease exists independently of any future actions within the control of Ryanair. While Ryanair may, in very limited circumstances, sub-lease its aircraft, it remains fully liable to perform all of its contractual obligations under the ‘head lease’ notwithstanding any such sub-leasing.
All other maintenance costs are expensed as incurred.
Intangible assets - assets—landing rights
Intangible assets acquired are recognizedrecognised to the extent it is considered probable that expected future benefits will flow to the GroupCompany and the associated costs can be measured reliably. Landing rights acquired as part of a business combination are capitalizedcapitalised at fair value at that date and are not amortized,amortised, where those rights are considered to be indefinite. The carrying valuevalues of those rights are reviewed for impairment at each reporting date and are subject to impairment testing when events or changes in circumstances indicate that carrying values may not be recoverable. No impairment to the carrying values of the Group'sCompany’s intangible assets has been recorded to date.
Available for sale securities - equities
The Group holds certain equity securities which are classified as available
for sale, and are measured at fair value, less incremental direct costs, on
initial recognition. Subsequent to initial recognition they are measured at fair
value, and changes therein, other than impairment losses, are recognized
directly in equity. The fair values of available for sale securities are
determined by reference to quoted prices at each reporting date. When an
investment is de-recognized, the cumulative gain or loss in equity is
transferred to the income statement.
Such securities are considered to be impaired if there is objective
evidence which indicates that there may be a negative influence on future cash
flows of that asset. This includes where there is a significant or prolonged
decline in the fair value below its cost. All impairment losses are recognized
in the income statement and any cumulative loss in respect of an available for
sale asset recognized previously in equity is transferred to the income
statement.
Other financial assets
Other financial assets Other(other than available-for-sale financial assetsassets) comprise cash deposits of greater than 3 monthsthree months’ maturity. All amounts are classifiedcategorised as held to maturity as there is a significant
financial disincentive from redeeming such amounts at an earlier stage. All such
amountsloans and receivables and are carried initially at fair value and then subsequently at amortizedamortised cost, using the effective interest method in the balance sheet.
Derivative financial instruments
Ryanair is exposed to market risks relating to fluctuations in commodity prices, interest rates and currency exchange rates. The objective of financial risk management at Ryanair is to minimise the impact of commodity price, interest rate and foreign exchange rate fluctuations on the Group'sCompany’s earnings, cash flows and equity.
To manage these risks, Ryanair uses various derivative financial instruments, including interest rate swaps, foreign currency forward contracts and commodity contracts. These derivative financial instruments are generally held to maturity. The GroupCompany enters into these arrangements with the goal of hedging its operational and balance sheet risk. However, Ryanair'sRyanair’s exposure to commodity price, interest rate and currency exchange rate fluctuations cannot be neutralised completely.
F-9
Derivative financial instruments are recognizedrecognised initially at fair value. Subsequent to initial recognition, derivative financial instruments continue to be restatedre-measured to fair value.
value, and changes therein are accounted for as described below.
The fair value of interest rate swaps is computed by discounting the projected cash-flowscash flows on the company'sCompany’s swap arrangements to present value.value using an appropriate market rate of interest. The fair value of forward foreign exchange contracts and commodity contracts is their quoted
market price at the balance sheet date, beingdetermined based on the present value of the quoted forward price. Recognition of any resultant gain or loss depends on the nature of the item being hedged.
Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognizedrecognised asset or liability or a highly probable forecasted transaction, the effective part of any gain or loss on the derivative financial instrument is recognized directlyrecognised in equityother comprehensive income (in the cash flow hedging reserve)reserve on the balance sheet). When the hedged forecasted transaction results in the recognition of a non financialnon-financial asset or liability, the cumulative gain or loss is removed from equityother comprehensive income and included in the initial measurement of that asset or liability. Otherwise the cumulative gain or loss is removed from equityother comprehensive income and recognizedrecognised in the income statement at the same time as the hedged transaction. The ineffective part of any hedging transaction and the gain or loss thereon is recognizedrecognised in the income statement immediately.
When a hedging instrument or hedge relationship is terminated but the underlying hedged transaction is still is expected to occur, the cumulative gain or loss at that point remains in equityother comprehensive income and is recognizedrecognised in accordance with the above policy when the transaction occurs. If the hedged transaction is no longer expected to take place, the cumulative unrealizedunrealised gain or loss recognizedrecognised in equityother comprehensive income is recognizedrecognised in the income statement immediately.
Where a derivative financial instrument hedges the changes in fair value of a recognizedrecognised asset or liability or an unrecognizedunrecognised firm commitment, any gain or loss on the hedging instrument is recognizedrecognised in the income statement. The hedged item also is stated at fair value in respect of the risk being hedged, with any gain or loss also being recognizedrecognised in the income statement.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is based on invoiced price on an average basis for all stock categories. Net realisable value is calculated as the estimated selling price arising in the ordinary course of business, net of estimated selling costs.
Trade and other receivables and payables
Trade and other receivables and payables are stated at cost, less impairment losses, which approximate toapproximates fair value given the short-dated nature of these assets and liabilities.
Cash and cash equivalents
Cash represents cash held at banks and available on demand.
demand, and is categorised as “loans and receivables.”
Cash equivalents are current asset investments (other than cash) that are readily convertible into known amounts of cash. Cash equivalents include
investments in commercial paper, certificates of deposit andcash, typically cash deposits of more than one day but less than 3three months. Deposits with a maturity ofmaturities greater than 3three months are recognizedrecognised as short term investments.
F-10
Interest bearingshort-term investments, are categorised as loans &and receivables and are carried initially at fair value and then subsequently at amortised cost, using the effective-interest method.
Interest-bearing loans and borrowings
All loans and borrowings are initially recorded at fair value, being the fair value of the consideration received, net of attributable transaction costs. Subsequent to initial recognition, non-current interest bearinginterest-bearing loans are measured at amortizedamortised cost, using the effective interest yield methodology.
Leases
Leases under which the Company assumes substantially all of the risks and rewards of ownership are classified as finance leases. Assets held under finance leases are capitalizedcapitalised in the balance sheet, at an amount equal to the lower of their fair value and the present value of the minimum lease payments, and are depreciated over their estimated useful lives. The present values of the future lease payments are recorded as obligations under finance leases and the interest element of thea lease obligation is charged to the income statement over the period of the lease in proportion to the balances outstanding.
Other leases are operating leases and the associated leased assets are not recognised on the Company’s balance sheet. Expenditure arising under operating leases is charged to the income statement as incurred. The GroupCompany also enters into sale and leasebacksale-and-leaseback transactions whereby it sells the rights to acquire an aircraft to a thirdan external party and subsequently leases the aircraft back, by way of an operating lease. Any profit or loss on the disposal where the price achieved is not considered to be at fair value is spread over the period during which the asset is expected to be used. The profit or loss amount deferred is included within other creditors“other creditors” and analyzeddivided into its components of greater or less than one year.
Provisions and contingencies
A provision is recognizedrecognised in the balance sheet when we havethere is a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefit will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future outflow at a pre-tax rate that reflects current market assessments of the time value of money and, when appropriate, the risks specific to the liability.
We assess
The Company assesses the likelihood of any adverse outcomes to contingencies, including legal matters, as well as probable losses. We record provisions for such contingencies when it is probable that a liability will be incurred and the amount of the loss can be reasonably estimated. A contingent liability is disclosed where the existence of the obligation will only be confirmed by future events, or where the amount of the obligation cannot be measured with reasonable reliability. Provisions are remeasuredre-measured at each balance sheet date based on the best estimate of the settlement amount.
In relation to legal matters, we develop estimates in consultation with outsideinternal and external legal counsel handling our defence in these matters using the current facts and circumstances known to us. The factors that we consider in developing our legal provisions include the merits and jurisdiction of the litigation, the nature and number of other similar current and past litigation cases, the nature of the subject tomatter of the litigation, and the likelihood of settlement and current state of settlement discussions, if any.
Segment reporting
A segment
Operating segments are reported in a manner consistent with the internal organisational and management structure and the internal reporting information provided to the chief operating decision maker, who is a distinguishable componentresponsible for allocating resources and assessing performance of the Group that is engaged
either in providing products or services (business segment), or in providing
products or services within a particular economic environment (geographical
segment), which is subject to risks and returns different to those of otheroperating segments. The Group's primary reporting segments comprise geographic segments
relating to the origin of its turnover,Company is managed as the Group only operates in onea single business segment, the provision of aunit that provides low fares airline-related services, including scheduled airline serviceservices, and ancillary services including car hire services, and internet and other related services to third parties, across a European route network.
F-11
Income statement classification and presentation
Individual income statement captions have been presented on the face of the income statement, together with additional line items, headings and sub-totals, where it is determined that such presentation is relevant to an understanding of our financial performance, in accordance with IAS 1, “Presentation of Financial Statements”.
Expenses are classified and presented in accordance with the nature-of-expenses method. We disclose separately on the face of the income statement, within other income and expense, losses on the impairment of available-for-sale financial assets and gains or losses on disposal of property, plant and equipment. The nature of the Company’s available-for-sale asset is that of a financial investment; accordingly any impairment of the investment is categorised as finance expense and included in other income/(expense) as a separate line item. The presentation of gains or losses on the disposal of property, plant and equipment within other income/(expense) accords with industry practice.
Revenues
Scheduled revenues comprise the invoiced value of airline and other services, net of government taxes. Revenue from the sale of flight seats is recognizedrecognised in the period in which the service is provided. Unearned revenue represents flight seats sold but not yet flown and is included in accrued expenses and other liabilities. It is released to the income statement as passengers fly. Unused tickets are recognizedrecognised as revenue on a systematic basis. Miscellaneous fees charged for any changes to flight tickets are recognizedrecognised in revenue immediately.
Ancillary revenues are recognizedrecognised in the income statement in the period the ancillary services are provided.
Share-based payments
The GroupCompany engages in equity-settled, share-based payment transactions in respect of services received from certain of its employees. The fair value of the services received is measured by reference to the fair value of the share options granted on the date of the grant. The grant measurement date is the date that a shared understanding of the terms of the award is established between the Company and the employee. The cost of the employee services
received in respect of the share options granted is recognizedrecognised in the income statement over the period that the services are received, which is the vesting period, with a corresponding creditincrease in equity. To the extent that service is provided prior to equity.the grant measurement date, the fair value of the share options is initially estimated and re-measured at each balance sheet date until the grant measurement date is achieved. The fair value of the options granted is determined using a Binomial Lattice option pricingbinomial lattice option-pricing model, which takes into account the exercise price of the option, the current share price, the risk
freerisk-free interest rate, the expected volatility of the Ryanair Holdings plc share price over the life of the option and other relevant factors. Non marketNon-market vesting conditions are taken into account by adjusting the number of shares or share options included in the measurement of the cost of employee services so that ultimately, the amount recognizedrecognised in the income statement reflects the number of vested shares or share options.
On transitioning to IFRS for the first time in the year ended March 31,
2006 the Group also availed itself of the transition provisions in IFRS 1 for
share based payments by only applying the fair value calculation to share option
grants that were made after November 7, 2002, but which had not vested by
January 1, 2005.
Pensions and other post retirementpost-retirement obligations
The GroupCompany provides certain employees with post retirementpost-retirement benefits in the form of pensions. The GroupCompany operates a number of defined contribution and defined benefit pension schemes.
Costs arising in respect of the Group'sCompany’s defined contribution pension schemes (where fixed contributions are paid into the scheme and there is no legal or constructive obligation to pay further amounts) are charged to the income statement in the period in which they are incurred. Any contributions unpaid at the balance sheet date are included as a liability.
A defined benefit plan is a post-employment benefit plan other than a defined-contribution plan. The liabilities and costs associated with the Group'sCompany’s defined benefit pension schemes are assessed on the basis of the projected unit credit method by professionally qualified actuaries and are arrived at using actuarial assumptions based on market expectations at the balance sheet date. The discount rates employed in determining the present value of each scheme'sscheme’s liabilities are determined by reference to market yields at the balance sheet date of high quality corporate bonds in the same currency and with termsterm that is consistent with those of the associated pension obligations. The net surplus or deficit arising on the Group's defined benefitCompany’s defined-benefit schemes is shown within non-current assets or liabilities on the balance sheet. The deferred tax impact of any such amount is disclosed separately within deferred tax.
The GroupCompany separately recognises the operating and financing costs of defined benefitdefined-benefit pensions in the income statement. The standardIFRS permits a number of options for the recognition of actuarial gains and losses. The GroupCompany has opted to recognise all actuarial gains and losses within equity as permitted
under IFRS.
F-12
Income taxes including deferred income taxes
Income tax on the profit or loss for thea year comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognized directlyrecognised in equityother comprehensive income (such as certain derivative financial instruments, available for saleavailable-for-sale assets, pensions and other post retirementpost-retirement obligations), in which case it is recognized in equity.. Current tax payable on taxable profits is recognised as an expense in the period in which the profits arise using tax rates enacted or substantively enacted at the balance sheet date.
Deferred income tax is provided in full, using the balance sheet liability method, on temporary differences arising from the tax bases of assets and liabilities and their carrying accounts in the consolidated financial statements. Deferred income tax is determined using tax rates and legislation enacted or substantively enacted by the balance sheet date and expected to apply when the temporary differences reverse.
The following temporary differences are not provided for: (i) the initial recognition of assets and liabilities that effect neither accounting nor taxable profit and (ii) differences relating to investments in subsidiaries to the extent that it is probable they will not reverse in the future.
A deferred tax asset is recognizedrecognised to the extent that it is probable that future taxtaxable profits will be available against which temporary differences can be utilized.utilised. The carrying amountamounts of deferred tax assets isare reviewed at each balance sheet date and reduced to the extent that it is no longer probable that a sufficient taxable profit wouldwill be available to allow all or part of the deferred tax asset to be realized.
Critical accounting policies
The Group believes that its critical accounting policies, whichrealised.
Share capital
Ordinary shares are those
that require management's most difficult, subjectiveclassified as equity. Incremental costs directly attributable to the issuance of ordinary shares and complex judgments,share options are those described in this section. These critical accounting policies, the
judgments and other uncertainties affecting application of those policies and
the sensitivity of reported results to changes in conditions and assumptions are
factors to be considered in reviewing the consolidated financial statements.
In accounting for long lived assets (principally aircraft and related
parts), Ryanair must make estimates about the expected useful lives of the
assets, the expected residual values of the assets and the potential for
impairment based on the fair value of the assets and the cash flows they
generate. In estimating the lives and expected residual values of its aircraft,
Ryanair has primarily relied on its own and industry experience, recommendations
from Boeing, the manufacturer of all of the Company's owned aircraft, and other
available marketplace information. Subsequent revisions to these estimates,
which can be significant, could be caused by changes to Ryanair's maintenance
program, changes in utilisation of the aircraft, governmental regulations on
ageing of aircraft and changing market prices for new and used aircraft of the
same or similar types.
Ryanair evaluates its estimates and assumptions in each reporting period
and when warranted adjusts these assumptions. Generally, these adjustments are
accounted for on a prospective basis, through depreciation expense.
Ryanair periodically evaluates its long lived assets for impairment.
Factors that would indicate potential impairment would include, but are not
limited to, significant decreases in the market value of aircraft, a significant
change in an aircraft's physical condition and operating or cash-flow losses
associated with the use of the aircraft. While the airline industryrecognised as a whole
has experienced manydeduction from equity, net of these factors from time to time, Ryanair has not yet
been seriously impacted and continues to record positive cash flows from these
long lived assets. Consequently, Ryanair has not yet identified any impairments
related to its existing aircraft fleet. The company will continue to monitor its
aircraft and the general airline operating environment.
F-13
An element of the cost of an acquired aircrafttax effects. When share capital
recognised as equity is attributed on acquisition
to its service potential, reflecting the maintenance condition of the engines
and airframe. Additionally, where Ryanair has a lease commitment to perform
aircraft maintenance, a provision is made during the lease term for this
obligation. Both of these accounting policies involve the use of estimates in
determining the quantum of both the initial maintenance asset and/orrepurchased, the amount of provision toconsideration paid, which includes any directly attributable costs, net of any tax effects, is recognised as a deduction from equity. Repurchased shares are classified as treasury shares and are presented as a deduction from total equity, until they are cancelled.
Prospective accounting changes, new standards and interpretations not yet adopted
The following new or revised IFRS standards and IFRIC interpretations will be set aside and the respective periods over which such amounts
are charged to income. In making such estimates, Ryanair has primarily relied on
industry experience, industry regulations and recommendations from Boeing;
however, these estimates can be subject to revision, depending on a number of
factors, such as the timingadopted for purposes of the planned maintenance,preparation of future financial statements, where applicable. We do not anticipate that the ultimate utilisationadoption of the aircraft, changes to government regulationsthese new or revised standards and increases and decreases
in the estimated costs. Ryanair evaluates its estimates and assumptions in each
reporting period and, when warranted, adjusts these assumptions, which generallyinterpretations will have a material impact on maintenance and depreciation expense in the income statement, on a
prospective basis.
F-14
2. Property, plant and equipment
our financial position or results from operations.
| • | IFRS 3 (revised 2008), “Business Combinations” (effective for new acquisitions occurring in |
| • | Amendment to IAS 27, “Consolidated and Separate Financial Statements” (effective for |
| • | Amendments to IAS 39, “Financial Instruments: Recognition and Measurement: Eligible Hedged Items” (effective for |
| • | IFRIC 17, “Distribution of Non-cash Assets to Owners” (effective for fiscal periods beginning on or after 1 July 2009). |
| • | The IASB’s second annual improvements project, “Improvements to International Financial Reporting Standards 2009”, published on April 16, 2009 (effective dates are dealt with on a standard-by-standard basis). |
| • | Amendments to IFRS 2, “Share-based Payment—Group Cash-settled Share-based Payment Transactions” (effective for fiscal periods beginning on or after January 1, 2010). |
| • | Amendment to IAS 32, “Financial Instruments: Presentation—Classification of Rights Issues”(effective for fiscal periods beginning on or after February 1, 2010). |
| • | IFRIC 19, “Extinguishing Financial Liabilities with Equity Instruments”(effective for fiscal periods beginning on or after July 1, 2010). |
| • | IAS 24 (revised 2009), “Related Party Disclosures”(effective for fiscal periods beginning on or after January 1, 2011). |
| • | Amendments to IFRIC 14, “IAS 19—The Limit on a Defined Benefit Assets, Minimum Funding Requirements and their Interaction”(effective for fiscal periods beginning on or after January 1, 2011). |
| • | IFRS 9, “Financial Instruments” (effective for fiscal periods beginning on or after January 1, 2013). |
| • | The IASB’s third annual improvements project, “Improvements to International Financial Reporting Standards 2010”, published on May 6, 2010 (effective dates are dealt with on a standard-by-standard basis). |
| 2 | Property, plant and equipment |
| Aircraft | Hangar and Buildings | Plant and Equipment | Fixtures and Fittings | Motor Vehicles | Total | |||||||||
| €M | €M | €M | €M | €M | €M | |||||||||
Year ended March 31, 2010 | ||||||||||||||
Cost | ||||||||||||||
At March 31, 2009 | 4,220.5 | 38.5 | 15.2 | 20.2 | 2.1 | 4,296.5 | ||||||||
Additions in year | 992.3 | 0.7 | 1.2 | 3.5 | 0.1 | 997.8 | ||||||||
Disposals in year | (143.2 | ) | — | — | — | — | (143.2 | ) | ||||||
At March 31, 2010 | 5,069.6 | 39.2 | 16.4 | 23.7 | 2.2 | 5,151.1 | ||||||||
Depreciation | ||||||||||||||
At March 31, 2009 | 618.3 | 7.0 | 9.9 | 14.8 | 1.7 | 651.7 | ||||||||
Charge for year | 226.3 | 1.9 | 2.4 | 4.6 | 0.2 | 235.4 | ||||||||
Eliminated on disposals | (50.2 | ) | — | — | — | — | (50.2 | ) | ||||||
At March 31, 2010 | 794.4 | 8.9 | 12.3 | 19.4 | 1.9 | 836.9 | ||||||||
Net book value | ||||||||||||||
At March 31, 2010 | 4,275.2 | 30.3 | 4.1 | 4.3 | 0.3 | 4,314.2 | ||||||||
Year ended March 31, 2009 Cost At March 31, 2008 Additions in year Disposals in year At March 31, 2009 Depreciation At March 31, 2008 Charge for year Eliminated on disposals At March 31, 2009 Net book value At March 31, 2009 Aircraft Hangar and
Buildings Plant and
Equipment Fixtures
and
Fittings Motor
Vehicles Total €M €M €M €M €M €M 4,149.7 25.9 11.9 16.8 1.9 4,206.2 637.0 12.6 3.4 3.4 0.2 656.6 (566.2 ) — (0.1 ) — — (566.3 ) 4,220.5 38.5 15.2 20.2 2.1 4,296.5 597.2 5.5 7.7 12.4 1.3 624.1 249.5 1.5 2.3 2.4 0.4 256.1 (228.4 ) — (0.1 ) — — (228.5 ) 618.3 7.0 9.9 14.8 1.7 651.7 3,602.2 31.5 5.3 5.4 0.4 3,644.8
| Aircraft | Hangar and Buildings | Plant and Equipment | Fixtures and Fittings | Motor Vehicles | Total | |||||||||
| €M | €M | €M | €M | €M | €M | |||||||||
Year ended March 31, 2008 | ||||||||||||||
Cost | ||||||||||||||
At March 31, 2007 | 3,362.4 | 23.0 | 10.0 | 13.2 | 1.6 | 3,410.2 | ||||||||
Additions in year | 954.2 | 2.9 | 1.9 | 3.6 | 0.3 | 962.9 | ||||||||
Disposals in year | (166.9 | ) | — | — | — | — | (166.9 | ) | ||||||
At March 31, 2008 | 4,149.7 | 25.9 | 11.9 | 16.8 | 1.9 | 4,206.2 | ||||||||
Depreciation | ||||||||||||||
At March 31, 2007 | 486.7 | 4.4 | 5.8 | 10.9 | 0.9 | 508.7 | ||||||||
Charge for year | 171.1 | 1.1 | 1.9 | 1.5 | 0.4 | 176.0 | ||||||||
Eliminated on disposals | (60.6 | ) | — | — | — | — | (60.6 | ) | ||||||
At March 31, 2008 | 597.2 | 5.5 | 7.7 | 12.4 | 1.3 | 624.1 | ||||||||
Net book value | ||||||||||||||
At March 31, 2008 | 3,552.5 | 20.4 | 4.2 | 4.4 | 0.6 | 3,582.1 | ||||||||
At March 31, 2007,2010, aircraft with a net book value of EUR2,504.1m (March 31,
2006: EUR2,124.4m)€3,863.6 million (2009: €3,163.3 million; 2008: €3,061.5 million) were mortgaged to lenders as security for loans. Under the security arrangements for the Group'sCompany’s new Boeing 737-800 “next generation” aircraft, the GroupCompany does not hold legal title to those aircraft while these loan amounts remain outstanding.
At March 31, 2007,2010, the cost and net book value of aircraft includes EUR392.6m (March 31, 2006: EUR301.5m)€397.8 million (2009: €405.3 million; 2008: €469.8 million) in respect of advance payments and options on aircraft. This amount is not depreciated. The cost and net book value also includes capitalizedcapitalised aircraft maintenance, aircraft simulators and the stock of rotable spare parts. In prior years, aircraft assets have also included the fair value of certain foreign currency for firm commitments to buy aircraft, which are permitted to be included within the Company’s balance sheet for fair-value hedges undertaken in respect of these commitments. At March 31, 2010, the amount included in aircraft assets was nil (2009: €0.7 million; 2008: €27.2 million).
The net book value of assets held under finance leases at March 31, 20072010, 2009 and 20062008 was EUR183.1m€422.8 million, €435.5 million and EUR91.6m€316.0 million respectively.
F-15
3. Intangible assets
There were 3 (2009: 16; 2008: 6) Boeing 737-800 aircraft disposed of during the year. There is no agreement to dispose of further aircraft at future dates. The sale proceeds generated on the delivery of aircraft sold amounted to €65.6 million (2009: €314.2 million; 2008: €150.0 million). Additional proceeds received in the year amounted to €23.6 million in respect of the sale of two spare engines and insurance proceeds for an aircraft damaged by a bird-strike in a prior year.
During the 2010 fiscal year, no accelerated depreciation (2009: €51.6 million; 2008: €10.6 million) arose in relation to aircraft disposals or agreements to dispose of aircraft at future dates.
| 3 | Intangible assets |
| At March 31, | ||||||
| 2010 | 2009 | 2008 | ||||
| €M | €M | €M | ||||
Landing rights | 46.8 | 46.8 | 46.8 | |||
Landing slots were acquired with the acquisition of Buzz Stansted Limited in April 2003. As these landing slots have no expiry date and are expected to be used in perpetuity, they are considered to be of indefinite life and accordingly are not amortized.amortised. The directorsCompany also considerconsiders that there has been no impairment of the value of these rights to date. The recoverable amount of these rights has been determined on a value-in-use basis, using discounted cash flowcash-flow projections for a twenty-year period for each route whichthat has an individual landing right. The calculation of value in usevalue-in-use is most sensitive to the operating margin and discount rate assumptions. Operating margins are based on the existing margins generated from these routes and adjusted for any known trading conditions. The trading environment is subject to both regulatory and competitive pressures that can have a material affecteffect on the operating performance of the business. Foreseeable events, however, are unlikely to result in a change of projections of a significant nature so as to result in the landing rightsrights’ carrying amounts exceeding their recoverable amounts. These projections have been discounted using a rate that reflects management'smanagement’s estimate of the long-term pre-tax return on capital employed for its scheduled airline business, estimated to be 5.0%2.96% for 20072010, 3.48% for 2009 and 4.7%5.40% for 2006.
4. Available for sale financial assets
During the year the Company acquired a 25.2% stake2008.
| 4 | Available-for-sale financial assets |
| At March 31, | ||||||
| 2010 | 2009 | 2008 | ||||
| €M | €M | €M | ||||
Investment in Aer Lingus | 116.2 | 93.2 | 311.5 | |||
As at March 31, 2010 Ryanair’s total holding in Aer Lingus plc. an
Irish airline, at a cost of EUR344.9m.was 29.8% (2009: 29.8%; 2008: 29.3%). The balance sheet value of EUR406.1m€116.2 million (2009: €93.2 million; 2008: €311.5 million) reflects itsthe market value of this investment as at March 31, 2007.2010. In accordance with the Company'sCompany’s accounting policy, these assets are held at fair value with a corresponding adjustment to equityother comprehensive income following initial acquisition. All impairment losses are recognised in the income statement and any cumulative loss previously recognised in other comprehensive income is transferred to the income statement once an impairment is considered to have occurred. During the year, the Company recorded an impairment charge of €13.5 million (2009: €222.5 million; 2008: €91.6 million) on its Aer Lingus shareholding reflecting the decline in the Aer Lingus share price from €0.59 per share at March 31, 2009 to €0.50 per share at June 30, 2009. The subsequent increase in the Aer Lingus share price from €0.50 at June 30, 2009 to €0.73 at March 31, 2010 resulted in a gain of €36.5 million, which was recognised through other comprehensive income. All impairment losses are required to be recognised in the income statement and may not be subsequently reversed, while gains are recognised through other comprehensive income.
This investment is classified as available for saleavailable-for-sale, rather than as an investment in an associate, because the GroupCompany does not have the power to exercise a significantany influence over the entity. 5. Derivative financial instruments
The Company’s determination that it does not have any influence over Aer Lingus has been based on the following factors, in particular:
| (i) | Ryanair does not have any representation on the Aer Lingus board of directors, nor does it have a right to appoint a director; |
| (ii) | Ryanair does not participate in Aer Lingus’ policy-making decisions, nor does it have a right to participate in such policy-making decisions; |
| (iii) | There are no material transactions between Ryanair and Aer Lingus, there is no interchange of personnel between the two companies and there is no sharing of technical information between the companies; |
| (iv) | Aer Lingus and its principal shareholders (Irish government: 25.1%; Employee Share Ownership Plan: 14.2%) have openly opposed Ryanair’s investment or participation in the company; |
| (v) | On August 13, 2007 and September 4, 2007, Aer Lingus refused Ryanair’s attempt to assert its statutory right to requisition a general meeting (a legal right of any 10% shareholder under Irish law). The Aer Lingus Board of Directors refused to accede to these requests (by letters dated August 31, 2007 and September 17, 2007); and |
| (vi) | The European Commission has formally found that Ryanair’s shareholding in Aer Lingus does not grant Ryanair “de jure or de facto control of Aer Lingus” and that “Ryanair’s rights as a minority shareholder…are associated exclusively to rights related to the protection of minority shareholders” (Commission Decision Case No. COMP/M.4439 dated October 11, 2007). The European Commission’s finding has been confirmed by the European Union’s General Court which issued a decision on July 6, 2010 that the European Commission was justified to use the required legal and factual standard in its refusal to order Ryanair to divest its minority shareholding in Aer Lingus and that, as part of that decision, Ryanair’s shareholding did not confer control of Aer Lingus (Judgment of the General Court (Third Chamber) Case No. T-411/07 dated July 6, 2010). |
On December 1, 2008 Ryanair made a second offer to acquire 70.2% of the ordinary shares of Aer Lingus plc that it does not already own. However, the Company was unable to secure the shareholders’ support and accordingly on January 28, 2009 withdrew its offer for Aer Lingus.
| 5 | Derivative financial instruments |
The Audit Committee of the Board of Directors has responsibility for settingmonitoring the treasury policies and objectives of the Group,Company, which include controls over the procedures used to manage the main financial risks arising from the Group'sCompany’s operations. Such risks comprise commodity price, foreign exchange and interest rate risks. The GroupCompany uses financial instruments to manage exposures arising from these risks. These instruments include borrowings, cash deposits and derivatives (principally jet fuel derivatives, interest rate swaps and forward foreign exchange contracts). It is the Group'sCompany’s policy that no speculative trading in financial instruments takes place.
The Group'sCompany’s historical fuel risk management policy has been to hedge between 70% and 90% of the forecastedforecast rolling annual volumes required to ensure that the future cost per gallon of fuel is locked in. This policy was adopted to prevent the GroupCompany being exposed, in the short term, to adverse movements in worldglobal jet fuel prices. However, when deemed to be in the best interests of the Group,Company, it may deviate from this policy. At March 31, 2010, the Company had hedged approximately 85% of its estimated fuel exposure for the year ending March 31, 2011. At March 31, 2009, the Company had hedged approximately 75% of its estimated fuel exposure for the year ending March 31, 2010. In more recent times,the 2008 fiscal year, due to fundamental changes in the worldglobal energy markets, the Group hasCompany adopted a more selective approach to fuel hedging. Athedging, with approximately 2% of its estimated fuel exposure hedged for the 2009 fiscal year at March 31, 2007, the Group had hedged approximately 73% of its
fuel exposure for the year ended March 31, 2008. (March 31, 2006: Nil).
Foreign currency risk in relation to the Group'sCompany’s trading operations largely arises in relation to non-euro currencies. These currencies are primarily SterlingU.K. pounds sterling and the U.S. dollar. The GroupCompany manages this risk by matching Sterlingpounds sterling revenues against Sterlingpounds sterling costs. Surplus Sterlingpounds sterling revenues are sometimes used to fund forward foreign exchange contracts to hedge U.S. dollar currency exposures that arise in relation to fuel, maintenance, aviation insurance, and capital expenditure costs in addition to euro currency on hand, orand excess pounds sterling are converted into euro. Additionally, the Company swaps euro for U.S. dollars using forward currency contracts to cover any expected dollar outflows for these costs. From time to time, the Company also swaps euro for U.K. pounds sterling using forward currency contracts to hedge expected future surplus pounds sterling.
The Group'sCompany’s objective for interest rate risk management is to reduce interestinterest-rate risk through a combination of financial instruments, which lock in interest rates on debt and by matching a proportion of floating rate assets with floating rate liabilities. In addition, the GroupCompany aims to achieve the best available return on investments of surplus cash - cash—subject to credit risk and liquidity constraints. Credit risk is managed by limiting the aggregate amount and duration of exposure to any one counterparty based on third party market basedthird-party market-based ratings. In line with the above interest rate risk management strategy, the GroupCompany has entered into a series of interest rate swaps to hedge against fluctuations in interest rates for certain floating rate financial arrangements and certain other obligations. The GroupCompany has also entered into floating rate financing for certain aircraft, which is matched with floating rate deposits. Additionally, certain cash deposits have been set aside as collateral for the counterparty’s exposure to mitigate certain counterparty risk of fluctuations on certain derivative and other financing arrangements ("restricted cash")with Ryanair (restricted cash). At March 31, 2007,2010, such restricted cash amounted to EUR255m
(2006: EUR200.0m)€67.8 million (2009: €291.6 million; 2008: €288.4 million). Additional numerical information on these swaps and on other derivatives held by the GroupCompany is set out below and in note 11.
F-16
The Group utilizesCompany utilises a range of derivatives designed to mitigate these risks. All of the above derivatives have been accounted for at fair value in the Group'sCompany’s balance sheet and have been utilizedutilised to hedge against these particular risks arising in the normal course of the Group'sCompany’s business. All have been designated as hedges for the purposes of IAS 39 and are fully set out below.
Derivative financial instruments, all of which have been recognizedrecognised at fair value in the Group'sCompany’s balance sheet, are analyzedanalysed as follows:
| At March 31, | |||||||||
| 2010 | 2009 | 2008 | |||||||
| €M | €M | €M | |||||||
Current assets | |||||||||
Gains on fair-value hedging instruments—maturing within one year | — | 0.7 | — | ||||||
Gains on cash-flow hedging instruments—maturing within one year | 122.6 | 129.3 | 10.2 | ||||||
| 122.6 | 130.0 | 10.2 | |||||||
Non-current assets | |||||||||
Gains on cash flow hedging instruments—maturing after one year | 22.8 | 60.0 | — | ||||||
| 22.8 | 60.0 | — | |||||||
Total derivative assets | 145.4 | 190.0 | 10.2 | ||||||
Current liabilities | |||||||||
Losses on fair value hedging instruments—maturing within one year | — | — | (44.4 | ) | |||||
Losses on cash flow hedging instruments—maturing within one year | (41.0 | ) | (137.4 | ) | (97.3 | ) | |||
| (41.0 | ) | (137.4 | ) | (141.7 | ) | ||||
Non-current liabilities | |||||||||
Losses on fair value hedging instruments—maturing after one year | — | (0.3 | ) | ||||||
Losses on cash flow hedging instruments—maturing after one year | (35.4 | ) | (54.1 | ) | (75.4 | ) | |||
| (35.4 | ) | (54.1 | ) | (75.7 | ) | ||||
Total derivative liabilities | (76.4 | ) | (191.5 | ) | (217.4 | ) | |||
Net derivative financial instrument position at year-end | 69.0 | (1.5 | ) | (207.2 | ) | ||||
All of the above gains and losses were unrealised at the period-end.
The table above includes the following derivative arrangements:
| Fair value 2010 | Fair value 2009 | Fair value 2008 | |||||||
| €M | €M | €M | |||||||
Interest rate swaps(a) | |||||||||
Less than one year | (41.0 | ) | (30.7 | ) | (10.5 | ) | |||
Between one and five years | (38.6 | ) | (49.8 | ) | (38.3 | ) | |||
After five years | 3.2 | (4.3 | ) | (10.7 | ) | ||||
| (76.4 | ) | (84.8 | ) | (59.5 | ) | ||||
Foreign currency forward contracts(a) | |||||||||
Less than one year | 80.0 | 130.0 | (127.0 | ) | |||||
Between one and five years | 22.8 | 60.0 | (26.4 | ) | |||||
After five years | — | — | (0.3 | ) | |||||
| 102.8 | 190.0 | (153.7 | ) | ||||||
Commodity forward contracts | |||||||||
Less than one year | 42.6 | (106.7 | ) | 6.0 | |||||
| 42.6 | (106.7 | ) | 6.0 | ||||||
Net derivative position at year end | 69.0 | (1.5 | ) | (207.2 | ) | ||||
| (a) | Additional information in relation to the above interest rate swaps |
Interest rate swaps are primarily used to convert a portion of the Group'sCompany’s floating rate exposures on borrowings and operating leases into fixed rate exposures and are set so as to match exactly the critical terms of the underlying debt or lease being hedged (i.e. notional principal, interest rate settings, repricingre-pricing dates). These are all classified as cash flowcash-flow hedges of the forecasted variable interest payments and rentals due on the Group'sCompany’s underlying debt and operating leases and have been determined to be highly effective in achieving offsetting cash flows. Accordingly, no material level of
ineffectiveness has been recorded in the income statement relating to these hedges in the current year. Unrealized losses on the Group's interest rate swaps
of EUR72.4m (2006: EUR109.3m) will be amortized to the income statement from
equity over the period in which forecasted interest and lease payments will be
made (typically 1-10 years from the year end), as an offset to the related
interest and rental expense.
preceding years.
Foreign currency forward contracts are utilizedutilised in a number of ways: Forecast Sterlingforecast U.K. pounds sterling and euro revenue receipts are converted into U.S. dollars to hedge against forecasted U.S. dollar payments principally for jet fuel, insurance, capital expenditure and other aircraft related costs. These are classified as either cash flowcash-flow or fair valuefair-value hedges of forecasted and committed U.S. dollar payments and have been determined to be highly effective in offsetting variability in future cash flows and fair values arising from the fluctuation in the U.S. dollar to Sterling pounds sterling and euro exchange rates for the forecastedforecast and committed U.S. dollar purchases. No material levelBecause the timing of anticipated payments and the settlement of the related derivatives is very closely coordinated, no ineffectiveness has been recorded for these foreign currency forward contracts in the current year as theor preceding years (the underlying hedged items and hedging instruments have been consistently closely matched.
matched).
The GroupCompany also utilizesutilises jet fuel forward contracts to manage exposure to jet fuel prices. These are used to hedge the Group'sCompany’s forecasted fuel purchases, and are arranged so as to match as closely as possible against forecasted fuel delivery and payment requirements. These are classified as cash flowcash-flow hedges of forecastforecasted fuel payments and have been determined to be highly effective in offsetting variability in future cash flows arising from fluctuations in jet fuel prices. No material
level of ineffectiveness has been recorded on these arrangements in the current or prior year.
F-18
6. Inventories
preceding years.
The gains/(losses) on the aircraft firm commitments are recognised as part of the capitalised cost of aircraft additions, within property, plant and equipment. The gains/(losses) on interest rate swaps, commodity forward contracts and forward currency contracts (excluding aircraft firm commitments) are recognised in the income statement when the hedged transaction occurs. The gains/(losses) on the hedged item attributable to the hedged risk for fair-value hedges associated with foreign currency on aircraft firm commitments, which equalled nil in the 2010 fiscal year (2009: gains of €0.7 million; 2008: losses of €27.2 million included within current liabilities of €44.4 million), are matched by the gains/(losses) recognised in relation to the fair value of hedging instruments of the same amount in the above table, due to the effectiveness of the Company’s hedge arrangements.
The following table indicates the amounts that were reclassified from other comprehensive income into the income statement, analysed by income statement category, in respect of cash-flow hedges realised during the year:
| Year ended March 31, | |||||||||
| 2010 | 2009 | 2008 | |||||||
| €M | €M | €M | |||||||
Commodity forward contracts | |||||||||
Recognised in fuel and oil operating expenses, net of tax | (20.2 | ) | (94.7 | ) | 144.3 | ||||
Interest rate swaps | |||||||||
Recognised in finance expense, net of tax | (32.9 | ) | (10.5 | ) | (13.9 | ) | |||
Foreign currency forward contracts | |||||||||
Recognised in fuel and oil operating expenses, net of tax | 2.3 | (10.4 | ) | (260.4 | ) | ||||
| (50.8 | ) | (115.6 | ) | (130.0 | ) | ||||
The following table indicates the amounts that were reclassified from other comprehensive income into the capitalised cost of aircraft additions within property, plant and equipment, in respect of cash-flow hedges realised during the year:
| Year ended March 31, | ||||||||
| 2010 | 2009 | 2008 | ||||||
| €M | €M | €M | ||||||
Foreign currency forward contracts | ||||||||
Recognised in property plant and equipment—aircraft additions | (16.7 | ) | (1.0 | ) | 1.9 | |||
| (16.7 | ) | (1.0 | ) | 1.9 | ||||
The following tables indicate the periods in which cash flows associated with derivatives that are designated as cash-flow hedges were expected to occur, as of March 31, 2010, 2009 and 2008:
| Carrying Amount | Expected Cash flows | 2011 | 2012 | 2013 | 2014 | Thereafter | |||||||||||||||
| €M | €M | €M | €M | €M | €M | €M | |||||||||||||||
At March 31, 2010 | |||||||||||||||||||||
Interest rate swaps | (76.4 | ) | (149.2 | ) | (44.2 | ) | (37.8 | ) | (23.9 | ) | (17.8 | ) | (25.5 | ) | |||||||
U.S. dollar currency forward contracts | 99.8 | 107.9 | 83.4 | 24.4 | 0.1 | — | — | ||||||||||||||
U.K. pounds sterling currency forward contracts | 3.0 | 3.0 | 3.0 | — | — | — | — | ||||||||||||||
Commodity forward contracts | 42.6 | 42.6 | 42.6 | — | — | — | — | ||||||||||||||
| 69.0 | 4.3 | 84.8 | (13.4 | ) | (23.8 | ) | (17.8 | ) | (25.5 | ) | |||||||||||
| Carrying Amount | Expected Cash flows | 2010 | 2011 | 2012 | 2013 | Thereafter | |||||||||||||||
| €M | €M | €M | €M | €M | €M | €M | |||||||||||||||
At March 31, 2009 | |||||||||||||||||||||
Interest rate swaps | (84.8 | ) | (92.3 | ) | (22.0 | ) | (25.2 | ) | (19.6 | ) | (10.9 | ) | (14.6 | ) | |||||||
U.S. dollar currency forward contracts | 189.3 | 182.8 | 123.1 | 38.3 | 21.3 | 0.1 | — | ||||||||||||||
Commodity forward contracts | (106.7 | ) | (106.7 | ) | (106.7 | ) | — | — | — | — | |||||||||||
| (2.2 | ) | (16.2 | ) | (5.6 | ) | 13.1 | 1.7 | (10.8 | ) | (14.6 | ) | ||||||||||
| Carrying Amount | Expected Cash flows | 2009 | 2010 | 2011 | 2012 | Thereafter | |||||||||||||||
| €M | €M | €M | €M | €M | €M | €M | |||||||||||||||
At March 31, 2008 | |||||||||||||||||||||
Interest rate swaps | (59.5 | ) | (52.4 | ) | (13.3 | ) | (12.8 | ) | (11.0 | ) | (5.5 | ) | (9.8 | ) | |||||||
U.S. dollar currency forward contracts | (109.0 | ) | (137.4 | ) | (91.3 | ) | (34.0 | ) | (10.9 | ) | (0.4 | ) | (0.8 | ) | |||||||
Commodity forward contracts | 6.0 | 6.0 | 6.0 | — | — | — | — | ||||||||||||||
| (162.5 | ) | (183.8 | ) | (98.6 | ) | (46.8 | ) | (21.9 | ) | (5.9 | ) | (10.6 | ) | ||||||||
The following tables indicate the periods in which cash flows associated with derivatives designated as cash-flow hedges were expected to impact profit or loss, as of March 31, 2010, 2009 and 2008:
| Carrying Amount | Expected Cash flows | 2011 | 2012 | 2013 | 2014 | Thereafter | |||||||||||||||
| €M | €M | €M | €M | €M | €M | €M | |||||||||||||||
At March 31, 2010 | |||||||||||||||||||||
Interest rate swaps | (76.4 | ) | (149.2 | ) | (44.2 | ) | (37.8 | ) | (23.9 | ) | (17.8 | ) | (25.5 | ) | |||||||
U.S. dollar currency forward contracts | 40.3 | 44.6 | 38.6 | 5.9 | 0.1 | — | — | ||||||||||||||
U.S. dollar currency forward contracts capitalised in property plant and equipment—aircraft additions | 59.5 | 63.3 | 44.8 | 18.5 | — | — | — | ||||||||||||||
U.K. pounds sterling currency forward contracts | 3.0 | 3.0 | 3.0 | — | — | — | — | ||||||||||||||
Commodity forward contracts | 42.6 | 42.6 | 42.6 | — | — | — | — | ||||||||||||||
| 69.0 | 4.3 | 84.8 | (13.4 | ) | (23.8 | ) | (17.8 | ) | (25.5 | ) | |||||||||||
At March 31, 2009 Interest rate swaps U.S. dollar currency forward contracts U.S. dollar currency forward contracts capitalised in property plant and equipment—aircraft additions Commodity forward contracts Carrying
Amount Expected
Cash
flows 2010 2011 2012 2013 Thereafter €M €M €M €M €M €M €M (84.8 ) (92.3 ) (22.0 ) (25.2 ) (19.6 ) (10.9 ) (14.6 ) 46.0 43.6 43.8 (0.4 ) 0.1 0.1 — 143.3 139.2 79.3 38.7 21.2 — — (106.7 ) (106.7 ) (106.7 ) — — — — (2.2 ) (16.2 ) (5.6 ) 13.1 1.7 (10.8 ) (14.6 )
| Carrying Amount | Expected Cash flows | 2009 | 2010 | 2011 | 2012 | Thereafter | |||||||||||||||
| €M | €M | €M | €M | €M | €M | €M | |||||||||||||||
At March 31, 2008 | |||||||||||||||||||||
Interest rate swaps | (59.5 | ) | (52.4 | ) | (13.3 | ) | (12.8 | ) | (11.0 | ) | (5.5 | ) | (9.8 | ) | |||||||
U.S. dollar currency forward contracts | (88.4 | ) | (100.0 | ) | (84.3 | ) | (14.1 | ) | (0.4 | ) | (0.4 | ) | (0.8 | ) | |||||||
U.S. dollar currency forward contracts capitalised in property plant and equipment—aircraft additions | (20.6 | ) | (37.4 | ) | (7.0 | ) | (19.9 | ) | (10.5 | ) | |||||||||||
Commodity forward contracts | 6.0 | 6.0 | 6.0 | — | — | — | — | ||||||||||||||
| (162.5 | ) | (183.8 | ) | (98.6 | ) | (46.8 | ) | (21.9 | ) | (5.9 | ) | (10.6 | ) | ||||||||
| 6 | Inventories |
| At March 31, | ||||||
| 2010 | 2009 | 2008 | ||||
| €M | €M | €M | ||||
Consumables | 2.5 | 2.1 | 2.0 | |||
In the view of the directors, there are no material differences between the replacement cost of inventories and the balance sheet amounts.
| 7 | Other assets |
| At March 31, | ||||||
| 2010 | 2009 | 2008 | ||||
| €M | €M | €M | ||||
Prepayments | 74.1 | 67.2 | 121.6 | |||
Interest receivable | 6.5 | 5.2 | 10.0 | |||
Refundable operating lease deposits | — | 15.8 | 34.1 | |||
Value Added Tax recoverable | — | 2.8 | 3.9 | |||
| 80.6 | 91.0 | 169.6 | ||||
All amounts fall due within one year.
| 8 | Trade receivables |
| At March 31, | |||||||||
| 2010 | 2009 | 2008 | |||||||
| €M | €M | €M | |||||||
Trade receivables | 44.4 | 41.9 | 34.3 | ||||||
Provision for impairment | (0.1 | ) | (0.1 | ) | (0.1 | ) | |||
| 44.3 | 41.8 | 34.2 | |||||||
All amounts fall due within one year.
The movement in the provision for trade receivable impairments is as follows:
| Balance at beginning of year | Additions charged to expenses | Write-offs | Balance at end of year | ||||||
| €M | €M | €M | €M | ||||||
Year ended March 31, 2010 | 0.1 | — | — | 0.1 | |||||
Year ended March 31, 2009 | 0.1 | — | — | 0.1 | |||||
Year ended March 31, 2008 | 0.2 | — | (0.1 | ) | 0.1 | ||||
No customers accounted for more than 10% of our accounts receivable at March 31, 2010 or at March 31, 2009. The following customer accounted for more than 10% of our accounts receivable at March 31, 2008:
| At March 31, | |||||||
| 2010 | 2009 | 2008 | |||||
Travelscape | — | — | 16 | % | |||
At March 31, 2010 €0.6 million (2009: €0.7 million; 2008: €0.7 million) of our total accounts receivable balance was past due, of which €0.1 million (2009: €0.1 million; 2008: €0.1 million) was impaired and provided for and €0.5 million (2009: €0.6 million; 2008: €0.6 million) was considered past due but not impaired.
| 9 | Restricted cash |
Restricted cash consists of EUR255m (2006: EUR200m)€67.8 million (2009: €291.6 million; 2008: €288.4 million) placed on deposit as collateral for certain derivative financial instruments and other financing arrangements entered into by the Group, andCompany. In the year ended March 31, 2008 a further EUR4m (2006: EUR4m)€4.0 million was held in escrow relating to an ongoing legal proceedings.
F-19
10. Accrued expenses and other liabilities
proceeding. This amount was released from escrow during the year ended March 31, 2009 upon the successful outcome of the legal proceeding. See details of this matter in Note 23 to the consolidated financial statements.
| 10 | Accrued expenses and other liabilities |
| At March 31, | ||||||
| 2010 | 2009 | 2008 | ||||
| €M | €M | €M | ||||
Accruals | 260.3 | 226.4 | 283.4 | |||
Taxation | 282.3 | 231.9 | 231.0 | |||
Unearned revenue | 545.6 | 447.5 | 405.0 | |||
| 1,088.2 | 905.8 | 919.4 | ||||
Taxation comprises:
| 2010 | 2009 | 2008 | ||||
| €M | €M | €M | ||||
PAYE (payroll taxes) | 4.3 | 3.9 | 5.3 | |||
Value added tax | 1.7 | — | — | |||
Other tax (principally air passenger duty) | 276.3 | 228.0 | 225.7 | |||
| 282.3 | 231.9 | 231.0 | ||||
| 11 | Financial instruments and financial risk management |
The Group utilizesCompany utilises financial instruments to reduce exposures to market risks throughout its business. Borrowings, cash and cash equivalents and liquid investments are used to finance the Group'sCompany’s operations. Derivative financial instruments are contractual agreements with a value whichthat reflects price movements in an underlying asset. The GroupCompany uses derivative financial instruments, principally jet fuel derivatives, interest rate swaps and forward foreign exchange contracts to manage commodity risks, interest rate risks and currency exposures and achieve the desired profile of borrowings and leases. It is the Group'sCompany’s policy that no speculative trading in financial instruments shall take place.
The main risks attaching to the Group'sCompany’s financial instruments, the Company’s strategy and approach to managing these risks, and the details of the derivatives employed to hedge against these risks have been givendisclosed in note 5.
(a) Commodity risk
Note 5 to the consolidated financial statements.
| (a) | Financial assets and financial liabilities—fair values |
The Group's exposure to price risk in this regard is primarily for jet fuel
used in the normal course of operations.
At the year end, the Group had the following jet fuel arrangements in
place;
| Available For Sale | Cash-Flow Hedges | Fair-Value Hedges | Loans and Receivables | Total Carrying Value | Total Fair Value | |||||||
| €M | €M | €M | €M | €M | €M | |||||||
At March 31, 2010 | ||||||||||||
Available-for-sale financial assets | 116.2 | — | — | — | 116.2 | 116.2 | ||||||
Cash and cash equivalents | — | — | — | 1,477.9 | 1,477.9 | 1,477.9 | ||||||
Financial asset: cash > 3 months | — | — | — | 1,267.7 | 1,267.7 | 1,267.7 | ||||||
Restricted cash | — | — | — | 67.8 | 67.8 | 67.8 | ||||||
Derivative financial instruments | ||||||||||||
—U.S. dollar currency forward contracts | — | 99.8 | — | — | 99.8 | 99.8 | ||||||
—U.K. pounds sterling currency forward contracts | — | 3.0 | — | — | 3.0 | 3.0 | ||||||
—Jet fuel derivative contracts | — | 42.6 | — | — | 42.6 | 42.6 | ||||||
Trade receivables | — | — | — | 44.3 | 44.3 | 44.3 | ||||||
Total financial assets at March 31, 2010 | 116.2 | 145.4 | — | 2,857.7 | 3,119.3 | 3,119.3 | ||||||
| Available For Sale | Cash-Flow Hedges | Fair-Value Hedges | Loans and Receivables | Total Carrying Value | Total Fair Value | |||||||
| €M | €M | €M | €M | €M | €M | |||||||
At March 31, 2009 | ||||||||||||
Available-for-sale financial assets | 93.2 | — | — | — | 93.2 | 93.2 | ||||||
Cash and cash equivalents | — | — | — | 1,583.2 | 1,583.2 | 1,583.2 | ||||||
Financial asset: cash > 3 months | — | — | — | 403.4 | 403.4 | 403.4 | ||||||
Restricted cash | — | — | — | 291.6 | 291.6 | 291.6 | ||||||
Derivative financial instruments | ||||||||||||
—FX on aircraft purchase firm commitments | — | — | 0.7 | — | 0.7 | 0.7 | ||||||
—U.S. dollar currency forward contracts | — | 189.3 | — | — | 189.3 | 189.3 | ||||||
Trade receivables | — | — | — | 41.8 | 41.8 | 41.8 | ||||||
Total financial assets at March 31, 2009 | 93.2 | 189.3 | 0.7 | 2,320.0 | 2,603.2 | 2,603.2 | ||||||
| Available For Sale | Cash-Flow Hedges | Fair-Value Hedges | Loans and Receivables | Total Carrying Value | Total Fair Value | |||||||
| €M | €M | €M | €M | €M | €M | |||||||
At March 31, 2008 | ||||||||||||
Available-for-sale financial assets | 311.5 | — | — | — | 311.5 | 311.5 | ||||||
Cash and cash equivalents | — | — | — | 1,470.8 | 1,470.8 | 1,470.8 | ||||||
Financial asset: cash > 3 months | — | — | — | 406.3 | 406.3 | 406.3 | ||||||
Restricted cash | — | — | — | 292.4 | 292.4 | 292.4 | ||||||
Derivative financial instruments | ||||||||||||
—FX on aircraft purchase firm commitments | — | — | 27.3 | — | 27.3 | 27.3 | ||||||
—U.S. dollar currency forward contracts | — | 4.2 | — | — | 4.2 | 4.2 | ||||||
—Jet fuel derivative contracts | — | 6.0 | — | — | 6.0 | 6.0 | ||||||
Trade receivables | — | — | — | 34.2 | 34.2 | 34.2 | ||||||
Total financial assets at March 31, 2008 | 311.5 | 10.2 | 27.3 | 2,203.7 | 2,552.7 | 2,552.7 | ||||||
The carrying values and fair values of changes in borrowings during the year
| Amortised Cost | Cash-Flow Hedges | Fair-Value Hedges | Total Carrying Value | Total Fair Value | ||||||
| €M | €M | €M | €M | €M | ||||||
At March 31, 2010 | ||||||||||
Long-term debt | 2,956.2 | — | — | 2,956.2 | 2,955.8 | |||||
Derivative financial instruments | ||||||||||
—Interest rate swaps | — | 76.4 | — | 76.4 | 76.4 | |||||
Aircraft maintenance provision on operating leased aircraft | 92.6 | — | — | 92.6 | 92.6 | |||||
Trade payables | 154.0 | — | — | 154.0 | 154.0 | |||||
Accrued expenses | 260.3 | — | — | 260.3 | 260.3 | |||||
Total financial liabilities at March 31, 2010 | 3,463.1 | 76.4 | — | 3,539.5 | 3,539.1 | |||||
At March 31, 2009 | ||||||||||
Long-term debt | 2,398.4 | — | — | 2,398.4 | 2,398.1 | |||||
Derivative financial instruments | ||||||||||
—Interest rate swaps | — | 84.8 | — | 84.8 | 84.8 | |||||
—Jet fuel derivative contracts | — | 106.7 | — | 106.7 | 106.7 | |||||
Aircraft maintenance provision on operating leased aircraft | 61.9 | — | — | 61.9 | 61.9 | |||||
Trade payables | 132.7 | — | — | 132.7 | 132.7 | |||||
Accrued expenses | 226.4 | — | — | 226.4 | 226.4 | |||||
Total financial liabilities at March 31, 2009 | 2,819.4 | 191.5 | — | 3,010.9 | 3,010.6 | |||||
At March 31, 2008 | ||||||||||
Long-term debt | 2,266.5 | — | — | 2,266.5 | 2,278.7 | |||||
Derivative financial instruments | ||||||||||
—Interest rate swaps | — | 59.5 | — | 59.5 | 59.5 | |||||
—Jet fuel derivative contracts | — | 113.2 | 44.7 | 157.9 | 157.9 | |||||
Aircraft maintenance provision on operating leased aircraft | 42.8 | — | — | 42.8 | 42.8 | |||||
Trade payables | 129.3 | — | — | 129.3 | 129.3 | |||||
Accrued expenses | 283.4 | — | — | 283.4 | 283.4 | |||||
Total financial liabilities at March 31, 2009 | 2,722.0 | 172.7 | 44.7 | 2,939.4 | 2,951.6 | |||||
Estimation of the underlying structures (typically between 10 and 12 years).
The Group holds significant cash balances that are invested on a short-term
basis. At March 31, 2007, all of the Group's cash and liquid resources had a
maturity of one year or less and attracted a weighted average interest rate of
3.85% (2006: 2.71%). The Group also holds an equity investment of EUR406.1m,
which was classified as an available for sale security (2006: nil). This has no
fixed maturity and is non interest bearing.
Within 2007 Within 2006
Financial assets: 1 year Total 1 year Total
---------- ---------- ---------- ----------
EUR000 EUR000 EUR000 EUR000
Cash and cash equivalents.............. 1,346,419 1,346,419 1,439,004 1,439,004
Cash > 3 months........................ 592,774 592,774 328,927 328,927
Restricted cash........................ 258,808 258,808 204,040 204,040
---------- ---------- ---------- ----------
Total financial assets................. 2,198,001 2,198,001 1,971,971 1,971,971
========== ========== ========== ==========
Interest rates on cash and liquid resources are generally based on the
appropriate EURIBOR, LIBOR or bank rates dependant on the principal amounts on
deposit.
(c) Foreign currency risk
The Group has exposure to various foreign currencies (principally Sterling
pounds and U.S. dollars) due to the international nature of its operations. The
Group manages this risk by matching Sterling pound revenues against Sterling
pound costs. Any unmatched Sterling pound revenues are used to fund U.S. dollar
currency exposures that arise in relation to fuel, maintenance, aviation
insurance and capital expenditure costs or are sold for euro. Further details of
the hedging activity carried out by the Group are given in note 5.
F-22
The following table shows the net amount of monetary assets of the Group that
are not denominated in euro at March 31, 2007 and March 31, 2006 and have been
translated using the following year end foreign currency rates: 2007 EUR to GBP
0.6798, EUR to USD 1.3318 (2006: EUR to GBP 0.6964, EUR to USD 1.2104):
March 31, 2007 March 31, 2006
------------------------------------- -----------------------------------
euro euro
GBP U.S.$ equiv GBP U.S.$ equiv
--------- --------- ---------- ---------- ---------- ----------
Monetary assets GBP000 $000 EUR000 GBP000 $000 EUR000
GBP cash and liquid resources......... 68,114 - 100,197 79,424 - 114,049
USD cash and liquid resources......... - 15,877 11,921 - 54,839 45,307
--------- --------- ---------- --------- ---------- ----------
68,114 15,877 112,118 79,424 54,839 159,356
========= ========= ========== ========= ========== ==========
All of the Group's equity securities held as available for sale assets are
denominated in euro currency. All of the Group's financial liabilities are
denominated in euro.
The Group also enters into U.S. dollar and Sterling pound currency forward
contracts in order to manage currency risk which arises on its forecasted
aircraft payments, fuel, maintenance and aviation insurance costs, which are
primarily denominated in U.S. dollars, and certain of its revenue income streams
which arise in Sterling pounds. See further details in note 5.
The following table gives details of the notional amounts of the Group's
currency forward contracts as at March 31, 2007 and at March 31, 2006:
March 31, 2007 March 31, 2006
------------------------------------- -----------------------------------
euro euro
GBP U.S.$ equiv GBP U.S.$ equiv
--------- --------- ---------- ---------- ---------- ----------
Monetary assets GBP000 $000 EUR000 GBP000 $000 EUR000
U.S. dollar currency forward contracts
- for aircraft purchases.......... - 870,000 668,915 - 480,000 384,268
- for fuel and other purchases..... - 989,000 762,228 - 592,923 470,775
GBP currency forward contracts
- sterling revenues................ - - - 37,039 - 53,044
- 1,859,000 1,431,143 37,039 1,072,923 908,087
(d) Fairfair values
Fair value is the amount at which a financial instrument could be exchanged in an arm'sarm’s length transaction between informed and willing parties, other than as part of a forced liquidation sale. The following methods and assumptions were used to estimate the fair value of each material class of the Group'sCompany’s financial instruments:
o
Cash and liquid resources: carryingCarrying amount approximates to fair value due to the short-term nature of these instruments. o Cash and cash resources comprise cash and cash equivalents, short-term investments and restricted cash.
Fixed-rate long-term debt: theThe repayments which Ryanair is committed to make have been discounted at the relevant market rates of interest applicable (including credit spreads) at March 31, 20072010, 2009, and March 31, 2006,2008 which would be payable to a third party to assume the obligation.
o Derivative - obligations.
Derivatives—interest rate swaps: discounted cash flowDiscounted cash-flow analyses have been used to determine the estimated amount Ryanair would receive or pay to terminate the contracts. Discounted cash flowcash-flow analyses are based on estimated futureforward interest rates.
o Derivative -
Derivatives—currency forwardforwards and aircraft fuel: afuel contracts:A comparison of the contracted rate to the market rate for contracts providing a similar risk management profile at March 31, 20072010, 2009 and 2008 has been made.
The table below analyses financial instruments carried at fair value in the balance sheet categorised by the type of valuation method used. The different valuation levels are defined as follows:
Level 1: Inputs are based on unadjusted quoted prices in active markets for identical instruments.
Level 2: Inputs are based on quoted prices for identical or similar instruments in markets that are not active, quoted prices for similar instruments in active markets, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the asset or liability.
Level 3: Inputs for the asset or liability are not based on observable market data.
| Level 1 | Level 2 | Level 3 | Total | |||||||
| €M | €M | €M | €M | |||||||
At March 31, 2010 | ||||||||||
Assets measured at fair value | ||||||||||
Available-for-sale financial asset | 116.2 | — | — | 116.2 | ||||||
Cash-flow hedges—US dollar currency forward contracts | — | 99.8 | — | 99.8 | ||||||
Cash-flow hedges—GBP currency forward contracts | — | 3.0 | — | 3.0 | ||||||
Cash-flow hedges—jet fuel derivative contracts | — | 42.6 | — | 42.6 | ||||||
| 116.2 | 145.4 | — | 261.6 | |||||||
Liabilities measured at fair value | ||||||||||
Cash-flow hedges—interest rate swaps | — | (76.4 | ) | — | (76.4 | ) | ||||
| — | (76.4 | ) | — | (76.4 | ) | |||||
During the year ended March 31, 2006 has been
made.
F-23
| (b) | Commodity risk |
The fair valueCompany’s exposure to price risk in this regard is primarily for jet fuel used in the normal course of operations.
At the year-end, the Company had the following jet fuel arrangements in place:
| At March 31, | |||||||
| 2010 | 2009 | 2008 | |||||
| €M | €M | €M | |||||
Jet fuel forward contracts—fair value | 42.6 | (106.7 | ) | 6.0 | |||
All of the Group'sabove commodity contracts mature within the year and are matched against highly probable forecast fuel purchases.
| (c) | Maturity and interest rate risk profile of financial assets and financial liabilities |
At March 31, 2010, the Company had total borrowings of €2,956.2 million (2009: €2,398.4 million; 2008: €2,266.5 million) from various financial instrumentsinstitutions, provided primarily on the basis of guarantees granted by the Export-Import Bank of the United States to finance the acquisition of 151 Boeing 737-800 “next generation” aircraft (2009: 109; 2008: 107). The guarantees are secured with a first fixed mortgage on the delivered aircraft. The remaining long-term debt relates to 20 aircraft held under finance leases (2009: 20; 2008: 14), 6 aircraft financed by way of other commercial debt (2009: 6; 2008: 6) and aircraft simulators. The three remaining aircraft in Ryanair’s fleet at March 31, 20072009, which the Company had agreed to dispose of at future dates in 2010 (see Note 2 to the consolidated financial statements), were owned free and clear of financing-related encumbrances.
The maturity profile of the Company’s financial liabilities (excluding aircraft provisions, trade payables and accrued expenses) at March 31, 20062010 was as follows:
| Weighted average fixed rate | 2011 | 2012 | 2013 | 2014 | Thereafter | Total | |||||||||||||||
| (%) | €M | €M | €M | €M | €M | €M | |||||||||||||||
Fixed rate | |||||||||||||||||||||
Secured long term-debt | 3.03 | % | 55.4 | 57.4 | 58.4 | 60.5 | 314.5 | 546.2 | |||||||||||||
Debt swapped from floating to fixed | 4.68 | % | 100.2 | 102.7 | 105.4 | 108.3 | 485.1 | 901.7 | |||||||||||||
Secured long-term debt after swaps | 4.06 | % | 155.6 | 160.1 | 163.8 | 168.8 | 799.6 | 1,447.9 | |||||||||||||
Finance leases | 2.63 | % | — | — | — | — | 191.7 | 191.7 | |||||||||||||
Total fixed rate debt | 155.6 | 160.1 | 163.8 | 168.8 | 991.3 | 1,639.6 | |||||||||||||||
Floating rate | |||||||||||||||||||||
Secured long-term debt | 177.6 | 182.8 | 188.4 | 194.4 | 1,105.3 | 1,848.5 | |||||||||||||||
Debt swapped from floating to fixed | (100.2 | ) | (102.7 | ) | (105.4 | ) | (108.3 | ) | (485.1 | ) | (901.7 | ) | |||||||||
Secured long-term debt after swaps | 1.22 | % | 77.4 | 80.1 | 83.0 | 86.1 | 620.2 | 946.8 | |||||||||||||
Finance leases | 1.70 | % | 32.5 | 34.0 | 35.6 | 37.2 | 230.5 | 369.8 | |||||||||||||
Total floating rate debt | 1.35 | % | 109.9 | 114.1 | 118.6 | 123.3 | 850.7 | 1,316.6 | |||||||||||||
Total financial liabilities | 265.5 | 274.2 | 282.4 | 292.1 | 1,842.0 | 2,956.2 | |||||||||||||||
All of the above debt maturing after 2014 will mature between 2014 and 2022.
The maturity profile of the Company’s financial liabilities (excluding aircraft provisions, trade payables and accrued expenses) at March 31, 2009 was as follows:
| Weighted average fixed rate | 2010 | 2011 | 2012 | 2013 | Thereafter | Total | |||||||||||||||
| (%) | €M | €M | €M | €M | €M | €M | |||||||||||||||
Fixed rate | |||||||||||||||||||||
Secured long term-debt | 5.81 | % | 1.0 | 1.0 | 1.0 | — | — | 3.0 | |||||||||||||
Debt swapped from floating to fixed | 5.96 | % | 63.3 | 64.8 | 66.4 | 68.0 | 214.6 | 477.1 | |||||||||||||
Secured long-term debt after swaps | 5.96 | % | 64.3 | 65.8 | 67.4 | 68.0 | 214.6 | 480.1 | |||||||||||||
Finance leases | 2.63 | % | — | — | — | — | 187.0 | 187.0 | |||||||||||||
Total fixed rate debt | 64.3 | 65.8 | 67.4 | 68.0 | 401.6 | 667.1 | |||||||||||||||
Floating rate | |||||||||||||||||||||
Secured long-term debt | 170.9 | 176.4 | 182.3 | 188.4 | 1,089.6 | 1,807.6 | |||||||||||||||
Debt swapped from floating to fixed | (63.3 | ) | (64.8 | ) | (66.4 | ) | (68.0 | ) | (214.6 | ) | (477.1 | ) | |||||||||
Secured long-term debt after swaps | 2.12 | % | 107.6 | 111.6 | 115.9 | 120.4 | 875.0 | 1,330.5 | |||||||||||||
Finance leases | 2.63 | % | 31.1 | 32.5 | 34.0 | 35.5 | 267.7 | 400.8 | |||||||||||||
Total floating rate debt | 2.20 | % | 138.7 | 144.1 | 149.9 | 155.9 | 1,142.7 | 1,731.3 | |||||||||||||
Total financial liabilities | 203.0 | 209.9 | 217.3 | 223.9 | 1,544.3 | 2,398.4 | |||||||||||||||
The maturity profile of the Company’s financial liabilities (excluding aircraft provisions, trade payables and accrued expenses) at March 31, 2008 was as follows:
| Weighted average fixed rate | 2009 | 2010 | 2011 | 2012 | Thereafter | Total | |||||||||||||||
| (%) | €M | €M | €M | €M | €M | €M | |||||||||||||||
Fixed rate | |||||||||||||||||||||
Secured long term-debt | 5.17 | % | 202.8 | 37.1 | 8.6 | 9.0 | 19.8 | 277.3 | |||||||||||||
Debt swapped from floating to fixed | 5.92 | % | 66.1 | 67.7 | 69.4 | 71.1 | 296.3 | 570.6 | |||||||||||||
Secured long-term debt after swaps | 5.67 | % | 268.9 | 104.8 | 78.0 | 80.1 | 316.1 | 847.9 | |||||||||||||
Finance leases | 2.63 | % | — | — | — | — | 127.5 | 127.5 | |||||||||||||
Total fixed rate debt | 268.9 | 104.8 | 78.0 | 80.1 | 443.6 | 975.4 | |||||||||||||||
Floating rate | |||||||||||||||||||||
Secured long-term debt | 142.9 | 147.6 | 152.5 | 157.4 | 978.4 | 1,578.8 | |||||||||||||||
Debt swapped from floating to fixed | (66.1 | ) | (67.7 | ) | (69.4 | ) | (71.1 | ) | (296.2 | ) | (570.5 | ) | |||||||||
Secured long-term debt after swaps | 4.52 | % | 76.8 | 79.9 | 83.1 | 86.3 | 682.2 | 1,008.3 | |||||||||||||
Finance leases | 5.13 | % | 21.2 | 22.1 | 23.1 | 24.2 | 192.2 | 282.8 | |||||||||||||
Total floating rate debt | 4.65 | % | 98.0 | 102.0 | 106.2 | 110.5 | 874.4 | 1,291.1 | |||||||||||||
Total financial liabilities | 366.9 | 206.8 | 184.2 | 190.6 | 1,318.0 | 2,266.5 | |||||||||||||||
The following provides an analysis of changes in borrowings during the year:
| At March 31, | |||||||||
| 2010 | 2009 | 2008 | |||||||
| €M | €M | €M | |||||||
Balance at start of year | 2,398.4 | 2,266.5 | 1,862.1 | ||||||
Loans raised to finance aircraft | 788.1 | 459.0 | 646.4 | ||||||
Repayments of amounts borrowed | (230.3 | ) | (327.1 | ) | (242.0 | ) | |||
Balance at end of year | 2,956.2 | 2,398.4 | 2,266.5 | ||||||
Less than one year | 265.5 | 202.9 | 366.8 | ||||||
More than one year | 2,690.7 | 2,195.5 | 1,899.7 | ||||||
| 2,956.2 | 2,398.4 | 2,266.5 | |||||||
The maturities of the contractual undiscounted cash flows (including estimated future interest payments on debt) of the Company’s financial liabilities are as follows:
| Total Carrying Value | Total Contractual Cash flows | 2011 | 2012 | 2013 | 2014 | Thereafter | ||||||||||
| €M | €M | €M | €M | €M | €M | €M | ||||||||||
At March 31, 2010 | ||||||||||||||||
Long term debt and finance leases | ||||||||||||||||
—Fixed rate debt | 3.89% | 1,639.6 | 1,767.6 | 183.9 | 184.4 | 184.1 | 185.0 | 1,030.2 | ||||||||
—Floating rate debt | 1.35% | 1,316.6 | 1,422.2 | 127.7 | 130.4 | 133.2 | 136.3 | 894.6 | ||||||||
| 2,956.2 | 3,189.8 | 311.6 | 314.8 | 317.3 | 321.3 | 1,924.8 | ||||||||||
Derivative financial instruments | ||||||||||||||||
—Interest rate swaps | 76.4 | 149.2 | 44.2 | 37.8 | 23.9 | 17.8 | 25.5 | |||||||||
Aircraft maintenance provision on operating leased aircraft | 92.6 | 92.6 | 36.2 | 7.6 | 9.5 | 22.4 | 16.9 | |||||||||
Trade payables | 154.0 | 154.0 | 154.0 | — | — | — | — | |||||||||
Accrued expenses | 260.3 | 260.3 | 260.3 | — | — | — | — | |||||||||
Total at March 31, 2010 | 3,539.5 | 3,845.9 | 806.3 | 360.2 | 350.7 | 361.5 | 1,967.2 | |||||||||
At March 31, 2009 Long term debt and finance leases —Fixed rate debt —Floating rate debt Derivative financial instruments —Interest rate swaps —Jet fuel—derivative contracts Aircraft maintenance provision on operating leased aircraft Trade payables Accrued expenses Total at March 31, 2009 Total
Carrying
Value Total
Contractual
Cash flows 2010 2011 2012 2013 Thereafter €M €M €M €M €M €M €M 5.96% 667.1 826.6 96.6 94.2 91.7 88.3 455.8 2.20% 1,731.3 1,976.0 179.5 181.6 183.9 186.4 1,244.6 2,398.4 2,802.6 276.1 275.8 275.6 274.7 1,700.4 84.8 92.3 22.0 25.2 19.6 10.9 14.6 106.7 106.7 106.7 — — — — 61.9 61.9 — 14.5 13.8 8.4 25.2 132.7 132.7 132.7 — — — — 226.4 226.4 226.4 — — — — 3,010.9 3,422.6 763.9 315.5 309.0 294.0 1,740.2
| Total Carrying Value | Total Contractual Cash flows | 2009 | 2010 | 2011 | 2012 | Thereafter | ||||||||||||||||
| €M | €M | €M | €M | €M | €M | €M | ||||||||||||||||
At March 31, 2008 | ||||||||||||||||||||||
Long term debt and finance leases | ||||||||||||||||||||||
—Fixed rate debt | 5.67% | 975.4 | 1,186.7 | 318.4 | 147.9 | 107.8 | 105.4 | 507.2 | ||||||||||||||
—Floating rate debt | 4.65% | 1,291.1 | 1,656.1 | 157.5 | 156.9 | 156.1 | 155.3 | 1,030.3 | ||||||||||||||
| 2,266.5 | 2,842.8 | 475.9 | 304.8 | 263.9 | 260.7 | 1,537.5 | ||||||||||||||||
Derivative financial instruments | ||||||||||||||||||||||
—Interest rate swaps | 59.5 | 52.4 | 13.3 | 12.8 | 11.0 | 5.5 | 9.8 | |||||||||||||||
—U.S. dollar currency forward contracts—gross cash outflows | 157.9 | 2,148.9 | 1,366.7 | 600.0 | 148.0 | 28.8 | 5.4 | |||||||||||||||
—U.S. dollar currency forward contracts—gross cash inflows | — | (1,961.1 | ) | (1,225.3 | ) | (565.6 | ) | (138.9 | ) | (26.6 | ) | (4.7 | ) | |||||||||
Aircraft maintenance provision on operating leased aircraft | 42.8 | 42.8 | — | — | 11.7 | 10.9 | 20.2 | |||||||||||||||
Trade payables | 129.3 | 129.3 | 129.3 | — | — | — | — | |||||||||||||||
Accrued expenses | 283.4 | 283.4 | 283.4 | — | — | — | — | |||||||||||||||
Total at March 31, 2008 | 2,939.4 | 3,538.5 | 1,043.3 | 352.0 | 295.7 | 279.3 | 1,568.2 | |||||||||||||||
Interest rate re-pricing
Floating interest rates on financial liabilities are generally referenced to European inter-bank interest rates (EURIBOR). Secured long-term debt and interest rate swaps typically re-price on a quarterly basis with finance leases re-pricing on a semi-annual basis. We use current interest rate settings on existing debt at each year-end to calculate contractual cash flows.
Fixed interest rates on financial liabilities are fixed for the duration of the underlying structures (typically between 10 and 12 years).
The Company holds significant cash balances that are invested on a short-term basis. At March 31, 2010, all of the Company’s cash and liquid resources had a maturity of one year or less and attracted a weighted average interest rate of 0.93% (2009: 1.84%; 2008: 4.51%).
| March 31, 2010 | March 31, 2009 | March 31, 2008 | ||||||||||
| Within 1 year | Total | Within 1 year | Total | Within 1 year | Total | |||||||
| €M | €M | €M | €M | €M | €M | |||||||
Financial assets | ||||||||||||
Cash and cash equivalents | 1,477.9 | 1,477.9 | 1,583.2 | 1,583.2 | 1,470.8 | 1,470.8 | ||||||
Cash > 3 months | 1,267.7 | 1,267.7 | 403.4 | 403.4 | 406.3 | 406.3 | ||||||
Restricted cash | 67.8 | 67.8 | 291.6 | 291.6 | 292.4 | 292.4 | ||||||
Total financial assets | 2,813.4 | 2,813.4 | 2,278.2 | 2,278.2 | 2,169.5 | 2,169.5 | ||||||
Interest rates on cash and liquid resources are generally based on the appropriate EURIBOR, LIBOR or bank rates dependant on the principal amounts on deposit.
As described in Note 4 to the consolidated financial statements, the Company also held €116.2 million of an equity investment in Aer Lingus at March 31, 2010 (2009: €93.2 million; 2008: €311.5 million). This has no fixed maturity and is not interest bearing.
| (d) | Foreign currency |
The Company has exposure to various foreign currencies (principally U.K. pounds sterling and U.S. dollars) due to the international nature of its operations. The Company manages this risk by matching U.K. pound sterling revenues against U.K. pound sterling costs. Any remaining unmatched U.K. pound sterling revenues are used to fund U.S. dollar currency exposures that arise in relation to fuel, maintenance, aviation insurance and capital expenditure costs or are sold for euro. The GroupCompany also sells euro forward to cover certain U.S. dollar costs. Further details of the hedging activity carried out by the Company are disclosed in Note 5 to the consolidated financial statements.
The following table shows the net amount of monetary assets of the Company that are not denominated in euro at March 31, 2010, 2009 and 2008. Such amounts have been translated using the following year-end foreign currency rates in 2010: €/£: 0.8898; €/$: 1.3479 (2009: €/£: 0.9308; €/$: 1.3308; 2008: €/£: 0.7958; €/$ 1.5812).
| March 31, 2010 | March 31, 2009 | March 31, 2008 | ||||||||||||||||
| GBP | U.S.$ | euro equiv. | GBP | U.S.$ | euro equiv. | GBP | U.S.$ | euro equiv. | ||||||||||
| £M | $M | €M | £M | $M | €M | £M | $M | €M | ||||||||||
Monetary assets | ||||||||||||||||||
U.K. pounds sterling cash and liquid resources | 35.6 | — | 40.0 | 24.4 | — | 26.3 | 48.5 | — | 60.9 | |||||||||
USD cash and liquid resources | — | 12.4 | 9.2 | — | 13.9 | 10.4 | — | 7.1 | 4.5 | |||||||||
| 35.6 | 12.4 | 49.2 | 24.4 | 13.9 | 36.7 | 48.5 | 7.1 | 65.4 | ||||||||||
All of the Company’s financial liabilities are denominated in euro.
The following table gives details of the notional amounts of the Company’s currency forward contracts as at March 31, 2010, 2009 and 2008:
| March 31, 2010 | March 31, 2009 | March 31, 2008 | ||||||||||||||
| U.S.$ | euro equiv. | U.S.$ | euro equiv. | U.S.$ | euro equiv. | |||||||||||
| $M | €M | $M | €M | $M | €M | |||||||||||
Currency forward contracts | ||||||||||||||||
U.S. dollar currency forward contracts | ||||||||||||||||
—for fuel purchases | 1,437.4 | 770.4 | 1,780.1 | 1,268.8 | 1,434.4 | 1,011.7 | ||||||||||
—for aircraft sales | — | — | (101.5 | ) | (75.8 | ) | (105.0 | ) | (70.9 | ) | ||||||
—for aircraft purchases | 1,123.8 | 1,021.8 | 1,464.0 | 985.0 | 1,771.5 | 1,208.1 | ||||||||||
| 2,561.2 | 1,792.2 | 3,142.6 | 2,178.0 | 3,100.9 | 2,148.9 | |||||||||||
| March 31, 2010 | March 31, 2009 | March 31, 2008 | ||||||||||
| Stg £ | euro equiv. | Stg £ | euro equiv. | Stg £ | euro equiv. | |||||||
| £M | €M | £M | €M | £M | €M | |||||||
Currency forward contracts | ||||||||||||
U.K pounds sterling currency forward contracts | 122.3 | 140.3 | — | — | — | — | ||||||
| 122.3 | 140.3 | — | — | — | — | |||||||
| (e) | Equity risk |
The Company has exposure to equity price risk primarily in relation to its 29.8% investment in Aer Lingus. The Company does not have significant influence over Aer Lingus and accordingly, this investment is classified as an available-for-sale financial asset rather than an investment in an associate.
| (f) | Credit risk |
The Company holds significant cash balances, which are invested on a short-term basis and are classified as either cash equivalents or liquid investments. These deposits and other financial instruments (principally certain derivatives and loans as identified above) give rise to credit risk on amounts due from counterparties. Credit risk is managed by limiting the aggregate amount and duration of exposure to any one counterparty primarily depending on its
third party market based ratings and bythrough regular review of these ratings.counterparties’ market-based ratings, Tier 1 capital level and credit default swap rates and by taking into account bank counterparties’ systemic importance to the financial systems of their home countries. The GroupCompany typically enters into deposits and derivative contracts with parties that have at least an "A"“A” or equivalent credit rating. The maximum exposure arising in the event of default on the part of the counterparty is the carrying value of the relevant financial instrument. While authorised to place funds on deposit for periods up to 18 months, the Company typically does not enter into deposits with a duration of more than 12 months.
The Group'sCompany’s revenues derive principally from airline travel on scheduled services, car hire and in-flight and related sales. Revenue is wholly derived from European routes. No individual customer accounts for a significant portion of total revenue.
(f) Guarantees
At March 31, 2010 €0.6 million (2009: €0.7 million, 2008: €0.7 million) of our total accounts receivable balance was past due, of which €0.1 million (2009: €0.1 million, 2008: €0.1 million) was impaired and provided for and €0.5 million (2009: €0.6 million, 2008: €0.6 million) was past due but not impaired. See Note 8 to the consolidated financial statements.
| (g) | Liquidity and capital management |
The Company’s cash and liquid resources comprise cash and cash equivalents, short-term investments and restricted cash. The Company defines the capital that it manages as the Company’s long-term debt and equity. The Company’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to maintain sufficient financial resources to mitigate against risks and unforeseen events.
The Company finances its working capital requirements through a combination of cash generated from operations and bank loans for the acquisition of aircraft. The Company had cash and liquid resources at March 31, 2010 of €2,813.4 million (2009: €2,278.2 million; 2008: €2,169.5 million). During the year, the Company funded €997.8 million in purchases of property, plant and equipment. Cash generated from operations has been the principal source for these cash requirements, supplemented primarily by aircraft-related financing structures.
The Board of Directors periodically reviews the capital structure of the Company, considering the cost of capital and the risks associated with each class of capital. The Board approves any material adjustments to the capital structure in terms of the relative proportions of debt and equity.
Ryanair has generally been able to generate sufficient funds from operations to meet its non-aircraft acquisition-related working capital requirements. Management believes that the working capital available to the Company is sufficient for its present requirements and will be sufficient to meet its anticipated requirements for capital expenditures and other cash requirements for the 2011 fiscal year.
| (h) | Guarantees |
Details of the Group'sCompany’s guarantees and the related accounting have been givendisclosed in note 24.
(g) Sensitivity analysis
Interest rate risk: IfNote 23 to the Group had not entered into its interest rate
derivative agreements, a plus or minus one percentage point movement in interest
rates would impact the fair value of its liability at March 31, 2007 by
approximately EUR39m. The earnings and cash flow impact of such a change in
interest rates would have been approximately plus or minus EUR10m per year.
Foreign currency risk: If the Group had not entered into its foreign
currency forward contracts, holding other variables constant, if there was an
adverse change of 10% in relevant foreign currency change rates, the market
value of the Group's foreign currency forward contracts outstanding at March 31,
2007 would decrease by approximately EUR112m.
F-24
12. Deferred and current taxation
consolidated financial statements.
| (i) | Sensitivity analysis |
| (i) | Interest rate risk: Based on the levels of and composition of year-end interest bearing assets and liabilities, including derivatives, at March 31, 2010, a plus or minus one-percentage-point movement in interest rates would result in a respective increase or decrease of €12.4 million (net of tax) in net interest income and expense in the income statement. All of the Group’s interest rate swaps are used to swap variable rate debt to fixed rate debt; consequently any changes in interest rates would have an equal and opposite income statement effect for both the interest rate swaps and the debt. |
| (ii) | Foreign currency risk: A plus or minus change of 10% in relevant foreign currency exchange rates, based on outstanding foreign currency-denominated financial assets and financial liabilities at March 31, 2010 would have a respective positive or negative impact on the income statement of €4.8 million (net of tax) and on equity of €153 million (net of tax). |
| (iii) | Equity price risk: A decrease of 10% in the Aer Lingus share price as of March 31, 2010 would result in a decrease of €11.6 million in the fair value of the available-for-sale financial assets. The decrease would be recognised in other comprehensive income. An increase of 10% in the Aer Lingus share price at March 31, 2010 would result in an increase of €11.6 million in the fair value of the available-for-sale financial assets reserve. Such an increase would be recognised in other comprehensive income. |
| 12 | Deferred and current taxation |
The components of the deferred and current taxation in the balance sheet wereare as follows:
| At March 31, | |||||||||
| 2010 | 2009 | 2008 | |||||||
| €M | €M | €M | |||||||
Current tax liabilities/(assets) | |||||||||
Corporation tax provision/(prepayment) | 0.9 | 0.4 | (1.6 | ) | |||||
Total current tax | 0.9 | 0.4 | (1.6 | ) | |||||
Deferred tax liabilities | |||||||||
Origination and reversal of temporary differences on property, plant and equipment, derivatives, pensions, and available-for-sale securities | 229.1 | 189.8 | 148.1 | ||||||
Total non-current deferred tax liabilities | 229.1 | 189.8 | 148.1 | ||||||
Deferred tax (assets) | |||||||||
Net operating losses | (29.5 | ) | (34.3 | ) | — | ||||
Total non-current deferred tax assets | (29.5 | ) | (34.3 | ) | — | ||||
Total deferred tax liabilities (net) | 199.6 | 155.5 | 148.1 | ||||||
Total tax liabilities (net) | 200.5 | 155.9 | 146.5 | ||||||
| At March 31, | |||||||||
| 2010 | 2009 | 2008 | |||||||
| €M | €M | €M | |||||||
Reconciliation of current tax | |||||||||
At beginning of year | 0.4 | (1.6 | ) | 20.8 | |||||
Corporation tax charge in year | 0.8 | 0.7 | 28.6 | ||||||
Adjustment in respect of prior-year over-provision | (0.3 | ) | (0.4 | ) | (3.8 | ) | |||
Tax refunded/(paid) | — | 1.7 | (47.2 | ) | |||||
At end of year | 0.9 | 0.4 | (1.6 | ) | |||||
| At March 31, | |||||||||
| 2010 | 2009 | 2008 | |||||||
| €M | €M | €M | |||||||
Reconciliation of deferred tax | |||||||||
At beginning of year | 155.5 | 148.1 | 151.0 | ||||||
Adjustment in respect of prior year overprovision | (1.7 | ) | 0.1 | — | |||||
Recognition of deferred tax asset re net operating losses | — | (34.3 | ) | — | |||||
Release of deferred tax asset for prior-year net operating losses | 6.6 | — | — | ||||||
New temporary differences on property, plant and equipment, derivatives, pensions and other items | 39.2 | 41.6 | (2.9 | ) | |||||
At end of year | 199.6 | 155.5 | 148.1 | ||||||
As at March 31, 2010, a deferred tax asset of €29.5 million was recognised in respect of net operating losses incurred and available to carry forward to future periods (2009: €34.3 million, 2008: nil). The releaserecoverability of the deferred tax contingency reserve included above relatesasset is based on future income forecasts which demonstrate that it is more likely than not that future profits will be available in order to utilise the recognition of certain previously unrecognizeddeferred tax benefits, resulting in a
benefit to the Group's effectiveasset. The deferred tax rate whichasset’s recoverability is not reasonably expected to
recur. dependent on material improvements over historical levels of pre-tax income, material changes in the present relationship between income reported for financial and tax purposes, or material asset sales or other non-routine transactions.
New temporary differences arising in the year to March 31, 2007
principally2010 consisted of EUR26.7mtemporary differences of €30.2 million for property, plant and equipment recognized
withinrecognised in the income statement EUR0.2m for pensions, EUR6.9m and a charge of €9.0 million
for derivatives, and
EUR12.2mall recognised in respect of available for sale assets, all recognizedother comprehensive income. The charge in equity. The
chargethe year to March 31, 20062009 consisted of temporary differences of EUR34.9ma charge of €22.6 million for property, plant and equipment recognizedrecognised in the income statement, EUR0.3m€1.0 million for pensions, and a deferred tax creditcredits of EUR12.1m€20.1 million for derivatives, recognizedall recognised in equity.
The components of the tax (credit)/expense in the income statement were as follows:
| Year ended March 31, 2010 | Year ended March 31, 2009 | Year ended March 31, 2008 | |||||||
| €M | €M | €M | |||||||
Corporation tax charge in year | 0.8 | 0.7 | 28.6 | ||||||
Adjustment in respect of prior-year over-provisions | (2.0 | ) | (0.3 | ) | (3.8 | ) | |||
Deferred tax charge relating to origination and reversal of temporary differences | 36.9 | (11.7 | ) | 23.4 | |||||
| 35.7 | (11.3 | ) | 48.2 | ||||||
The following table reconciles the statutory rate of Irish corporation tax to the Group'sCompany’s effective corporation tax rate:
| Year ended March 31, 2010 | Year ended March 31, 2009 | Year ended March 31, 2008 | |||||||
| % | % | % | |||||||
Statutory rate of Irish corporation tax | 12.5 | (12.5 | ) | 12.5 | |||||
Adjustments for earnings taxed at higher rates | 0.1 | 1.0 | 1.3 | ||||||
Adjustments for earnings taxed at lower rates | (1.1 | ) | (13.2 | ) | (4.8 | ) | |||
Loss on impairment of available-for-sale financial asset | 0.5 | 18.6 | 2.8 | ||||||
Adjustments for prior year over-provisions | (0.6 | ) | (0.2 | ) | (0.8 | ) | |||
Other differences | (0.9 | ) | — | — | |||||
Total effective rate of taxation | 10.5 | (6.3 | ) | 11.0 | |||||
Deferred tax applicable to items charged or credited directly to equityother comprehensive income were as follows:
| At March 31, | ||||||||
| 2010 | 2009 | 2008 | ||||||
| €M | €M | €M | ||||||
Defined benefit pension obligations | — | (1.1 | ) | 0.6 | ||||
Derivative financial instruments | 9.0 | 20.0 | (14.7 | ) | ||||
Available for sale securities | — | — | (12.2 | ) | ||||
Total tax charge/(credit) in other comprehensive income | 9.0 | 18.9 | (26.3 | ) | ||||
The majority of current and deferred tax recorded in each of fiscal 20072010, 2009 and 20062008 relates to domestic tax charges and there is no expiry date associated with these temporary differences. In fiscal 2007,2010, the Irish headline corporation tax rate remained at 12.5%.
Ryanair.com Limited is engaged in international data processing and
reservation services. In these circumstances, Ryanair.com Limited is entitled to
claim 10% corporation tax rate on profits derived from qualifying activities in
accordance with Section 448 of the Taxes Consolidated Act, 1997. This
legislation provides for the continuation of the 10% effective corporation tax
rate until 2010.
The principal components of deferred tax at each year endyear-end were:
| At March 31, | |||||||||
| 2010 | 2009 | 2008 | |||||||
| €M | €M | €M | |||||||
Arising on capital allowances and other temporary differences | 221.8 | 191.4 | 168.6 | ||||||
Arising on net operating losses carried forward | (29.5 | ) | (34.3 | ) | — | ||||
Arising on derivatives | 8.6 | (0.3 | ) | (20.3 | ) | ||||
Arising on pensions | (1.3 | ) | (1.3 | ) | (0.2 | ) | |||
Total | 199.6 | 155.5 | 148.1 | ||||||
At March 31, 20072010, 2009 and 2006,2008, the GroupCompany had fully provided for all required deferred tax assets and liabilities. NoThere are no taxable temporary differences on overseas subsidiaries and, on that basis, no deferred tax has however, been provided for on the unremittedun-remitted earnings of overseas subsidiaries because there is no intention to remit these to Ireland.
F-26
13. Provisions
| 13 | Provisions |
| At March 31, | ||||||
| 2010 | 2009 | 2008 | ||||
| €M | €M | €M | ||||
Provision for aircraft maintenance on operating leased aircraft(a) | 92.6 | 61.9 | 42.8 | |||
Provision for pension obligation(b) | 10.3 | 10.1 | 2.0 | |||
| 102.9 | 72.0 | 44.8 | ||||
| At March 31, | ||||||
| 2010 | 2009 | 2008 | ||||
| €M | €M | €M | ||||
(a) Provision for aircraft maintenance on operating leased aircraft | ||||||
At beginning of year | 61.9 | 42.8 | 28.7 | |||
Charge for the year | 30.7 | 19.1 | 14.1 | |||
At end of year | 92.6 | 61.9 | 42.8 | |||
The expected timing of the outflows of economic benefits associated with the provision at March 31, 2010, 2009 and 2008 are as follows:
| Carrying value | 2011 | 2012 | 2013 | 2014 | Thereafter | |||||||
| €M | €M | €M | €M | €M | €M | |||||||
At March 31, 2010 | ||||||||||||
Provision for leased aircraft maintenance | 92.6 | 36.2 | 7.6 | 9.5 | 22.4 | 16.9 | ||||||
| Carrying value | 2011 | 2012 | 2013 | 2014 | Thereafter | |||||||
| €M | €M | €M | €M | €M | €M | |||||||
At March 31, 2009 | ||||||||||||
Provision for leased aircraft maintenance | 61.9 | 14.5 | 13.8 | 8.4 | 14.4 | 10.8 | ||||||
| Carrying value | 2011 | 2012 | 2013 | 2014 | Thereafter | |||||||
| €M | €M | €M | €M | €M | €M | |||||||
At March 31, 2008 | ||||||||||||
Provision for leased aircraft maintenance | 42.8 | 11.7 | 10.9 | 7.1 | 8.9 | 4.2 | ||||||
| At March 31, | |||||||
| 2010 | 2009 | 2008 | |||||
| €M | €M | €M | |||||
(b) Provision for pension obligation | |||||||
At beginning of year | 10.1 | 2.0 | 7.0 | ||||
Movement during the year | 0.2 | 8.1 | (5.0 | ) | |||
At end of year | 10.3 | 10.1 | 2.0 | ||||
The present value of the net pension obligation before tax is €10.3 million (2009: €10.1 million; 2008: €2.0 million) in Ryanair Limited. See Note 21 to the consolidated financial statements for further details.
| 14 | Other creditors |
This consists of:
o Deferredof deferred gains arising from the sale and leaseback of aircraft. During fiscal year 2007,2010, Ryanair entered into a sale and leasebacksale-and-leaseback arrangement for 1512 (2009: 8; 2008: 3) new Boeing 737-800 (2006: 4)“next generation” aircraft, in addition to a further 1743 in previous years.
o The present value of the net pension obligation before tax of
EUR7.0m (2006: EUR8.7m) in Ryanair Limited. See note 22 for further
details.
o Loss on fair value movement in firm commitments to acquire aircraft
- maturing within the year of EURNil (2006: EUR7.5m), (forming part of
the Group's fair value hedge accounting - see note 5).
15.
| 15 | Issued share
The movement in the share capital balance year on year principally relates to The share capital of Ryanair consists of one class of stock, the ordinary equity shares. The ordinary equity shares do not confer on the holders thereof the specific right to be paid a dividend out of profits.
The Details of the share options outstanding
The mid-market price of Ryanair Holdings The At March 31, 2010 the range of exercise prices and weighted average remaining contractual life of outstanding and exercisable options was as follows:
The Company has accounted for its share option grants to employees at fair value, in accordance with IFRS 2, using a binomial lattice model to value the option grants. This has resulted in a charge of The weighted average fair value of the individual options granted during the years ended March 31,
The total share based payments reserve at March 31,
The As of April 1, 2009 the Company determines and presents operating segments based on the information that internally is provided to Michael O’Leary, CEO, who is the Company’s Chief Operating Decision Maker (CODM). When making resource allocation decisions the CODM evaluates route revenue and yield data, however resource allocation decisions are made based on the entire route network and the deployment of the entire aircraft fleet, which are uniform in type. The objective in making resource allocation decisions is to maximise consolidated financial results, rather than results on individual routes within the network. The CODM assesses the performance of the business based on the consolidated adjusted profit/ (loss) after tax of the Company for the year. This measure excludes the effects of certain income and expense items, which are unusual, by virtue of their size and incidence, in the context of the Company’s ongoing core operations, such as the impairment of a financial asset investment and accelerated depreciation related All segment revenue is derived wholly from external customers and, as the Company has a single reportable segment, inter-segment revenue is zero. The Company’s major revenue-generating asset class comprises its aircraft fleet, which is flexibly employed across the Company’s integrated route network and is directly attributable to its reportable segment operations. In addition, as the Company is managed as a single business unit, all other assets and liabilities have been allocated to the Company’s single reportable segment. There have been no changes to the basis of segmentation or the measurement basis for the segment profit or loss since March 31, 2009. Reportable segment information is presented as follows:
Reconciliation of reportable segment profit or loss to consolidated profit after income tax is as follows:
Entity-wide disclosures: Revenue is
Ancillary revenues included in total revenue above comprise:
Non-flight scheduled revenue arises from the sale of rail and bus tickets, hotel reservations and other sources, including excess baggage charges and payment handling charges, all directly attributable to the low-fares business. All of the
The average weekly number of
At March 31, 2010 the company had a staff of 7,168 people (2009: 6,616; 2008: 5,920). The aggregate payroll costs of these persons were as follows:
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