Ryanair 2006 Annual Report Download - page 66

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23 COMMITMENTS AND CONTINGENCIES (Continued)
Contingencies
(d) The group is engaged in litigation arising in the ordinary course of its business. Management does not believe that any such
litigation will individually or in aggregate have a material adverse effect on the financial condition of the group. Should the group
be unsuccessful in these litigation actions, management believes the possible liabilities then arising cannot be determined but are
not expected to materially adversely affect the group’s results of operations or financial position.
(e) The company has provided 30.5m in letters of guarantee to secure obligations of subsidiary undertakings in respect of loans and
bank advances (see also note 15).
(f) In order to avail of the exemption contained in Section 17 of the Companies (Amendment) Act, 1986, the holding company, Ryanair
Holdings plc, has guaranteed the liabilities of its subsidiary undertakings registered in Ireland. As a result, the subsidiary
undertakings have been exempted from the provisions of Section 7 of the Companies (Amendment) Act, 1986. Details of the
company’s principal subsidiaries have been included at note 26. The Irish subsidiaries of the group covered by the Section 17
exemption are listed at note 26 also. One additional Irish subsidiary covered by this exemption which is not listed as a principal
subsidiary at note 26 is Airport Marketing Services Limited.
(g) The group has also entered into a series of interest rate swaps to hedge against fluctuations in interest rates for certain floating
rate financing arrangements. Cash deposits have been set aside as collateral (subject to an agreed capped amount of 200.0m)
to mitigate certain counterparty risk of fluctuations on long-term derivative and financing arrangements (“restricted cash”). At
March 31, 2006 such collateral amounted to 200.0m (2005: 200.0m). Additional information on these swaps and on other
derivatives held by the group is set out in notes 3 and 15 of the financial statements.
(h) In February 2004 the European Commission ruled that Ryanair had received illegal state aid from the Walloon regional government
in connection with its establishment of a low cost base at Brussels (Charleroi). Subsequently Ryanair was requested by the regional
government to repay all deemed illegal state aid, but in accordance with the Commission ruling Ryanair may deduct various costs
incurred in establishing its base at Brussels (Charleroi) from this amount. Ryanair has advised the regional government that it
believes no money is repayable as the cost of establishing the base exceeded the amount determined to be illegal state aid. Ryanair
is also appealing the decision of the European Commission to the European Court of First Instance, requesting that the Court annul
the decision on the basis that Ryanair’s agreement at Brussels (Charleroi) was consistent with agreements at similar privately
owned airports and therefore did not constitute illegal state aid. The group has placed 4m in an escrow account pending the
outcome of this appeal.
(Continued)
Notes
66
ANNUAL REPORT & FINANCIAL STATEMENTS 2006