Ryanair 2010 Annual Report Download - page 145

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Aircraft are depreciated on a straight-line basis over their estimated useful lives to estimated residual
values. The estimates of useful lives and residual values at year-end are:
Aircraft Type
Number of Aircraft
at March 31, 2010 Useful Life Residual Value
Boeing 737-800s 177(a) 23 years from date of manufacture 15% of market value,
determined periodically
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(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 amortised 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 capitalised and amortised 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 Company 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.
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.
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.
All other maintenance costs are expensed as incurred.