Ryanair 2010 Annual Report Download - page 47

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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.
During the 2010 fiscal year, Ryanair recorded an impairment charge recognized in the income
statement of 113.5 million on its Aer Lingus shareholding reflecting a decline in the Aer Lingus share price
from 10.59 at March 31, 2009 to 10.50 at June 30, 2009. The subsequent increase in the Aer Lingus share price
from 10.50 at June 30, 2009 to 10.73 at March 31, 2010 resulted in a gain of 136.5 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 11.40 per ordinary share. The offer of 11.40 per share represented a premium of
approximately 25% over the closing price of 11.12 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 179.7 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 Risk. A variety of factors, including, but not limited to,
the Company’s historical and current level of profitability and its planned payment of a 1500 million dividend to
shareholders, may make it difficult for Ryanair to avoid increases to its base salary levels and employee
productivity payments. Consequently, there can be no assurance that Ryanair’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 addition, the Company
will eliminate any positions that may be identified as redundant. These steps may lead to deteriorations in labor
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 jurisdictions.