Ryanair 2010 Annual Report Download - page 187

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Finance leases
The Company financed 20 of the Boeing 737-800 aircraft delivered between March 2005 and March
2010 with 13-year euro-denominated Japanese Operating Leases with Call Options (“JOLCOs”). These
structures are accounted for as finance leases and are initially recorded at fair value in the Company’s balance
sheet. Under each of these contracts, Ryanair has a call option to purchase the aircraft at a pre-determined price
after a period of 10.5 years, which it may exercise. The following table sets out the total future minimum
payments of leasing 20 aircraft (2009: 20 aircraft; 2008: 14 aircraft) under JOLCOs at March 31, 2010, 2009
and 2008, respectively:
At March 31,
2010 2009 2008
Minimum
payments
Present
value of
Minimum
payments
Minimum
payments
Present
value of
minimum
payments
Minimum
payments
Present
value of
minimum
payments
1M 1M 1M 1M 1M 1M
Due within one year
.................
38.9 32.5 45.1 31.1 35.7 21.1
Due between one and five
years................................
.........
203.7 183.7 184.5 139.3 141.5 94.8
Due after five years
..................
353.7 345.3 443.0 417.4 320.6 294.4
Total minimum lease
payments................................
..
596.3 561.5
672.6 587.8
497.8 410.3
Less amounts allocated to
future financing costs
...............
(34.8) -
(84.8) -
(87.5) -
Present value of minimum
lease payments
.........................
561.5 561.5
587.8
587.8
410.3 410.3
Commitments resulting from the use of derivative financial instruments by the Company are described
in Notes 5 and 11 to the consolidated financial statements.
Contingencies
The Company 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 Company. Should the Company 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 Company’s results of operations or financial position.
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).
Ryanair advised the regional government that it believed no money was repayable as the cost of establishing the
base exceeded the amount determined to be illegal state aid. Ryanair also appealed 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 Company placed 14 million in an escrow account
pending the outcome of this appeal. In December 2008, the CFI annulled the Commission’s decision against
Charleroi Airport and Ryanair was repaid the 14 million that the Commission had claimed was illegal state aid.
A further action taken by the Belgian government for 12.3 million has also been withdrawn. In 2007 and 2008
the European Commission launched eight state aid investigations involving Ryanair’s agreements with airports.
One of these investigations was closed in January 2010 with a finding that Ryanair’s agreement with Bratislava
airport did not involve any aid. The remaining seven investigations are pending (Lübeck, Schönefeld, Hahn,
Alghero, Pau, Aarhus and Tampere).
The Company 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 for
the counterparty’s exposure to risk of fluctuations on long-term derivative and other financing arrangements
with Ryanair (restricted cash) (see Note 9 to the consolidated financial statements for further details). Additional
numerical information on these swaps and on other derivatives held by the Company is set out in Notes 5 and 11
to the consolidated financial statements.