Ryanair 2010 Annual Report Download - page 51

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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 Costs. 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 in the event of cancelled flights. 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 is able to prove that such cancellation or delay was caused by extraordinary
circumstances, such as weather, air-traffic control delays, or safety issues. Otherwise, the regulation calls for
compensation of 1250, 1400, or 1600 per passenger, depending on the length of the flight. As Ryanair’s average
flight length is less than 1,500 km – the upper limit for short-haul flights – the amount payable is generally 1250
per passenger per occurrence. Passengers subject to long delays (in excess of two hours for short-haul flights)
are also entitled to “assistance,” including meals, drinks and telephone calls, as well as hotel accommodations if
the delay extends overnight. For delays of over five hours, the airline is also required to offer the option of a
refund of the cost of the unused 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 a large number of
cancelled flights, which could occur as a result of certain types of events beyond its control. 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.”
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 CO2
emissions to encourage industries to improve their CO2 efficiency. Under the legislation, airlines will be granted
initial CO2 allowances based on historical performance and a CO2 efficiency benchmark. Any shortage of
allowances will have to be purchased in the open market and/or at government auctions. The cost and amount of
such allowances that Ryanair will have to buy in 2012 have yet to be determined. There can be no assurance that
Ryanair will be able to obtain sufficient carbon credits or that the cost of the credits will not have a material
adverse effect on the Company’s business, operating results, and financial condition.
The Company is Dependent on the Continued Acceptance of Low-fares Airlines. In past years,
accidents or other safety-related incidents involving certain low-fares airlines have had a negative impact on the
public’s acceptance of such 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’s perception of, and confidence in, low-fares airlines like Ryanair, and could have a material adverse
effect on the Company’s financial condition and results of operations.