Ryanair 2010 Annual Report Download - page 58

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airline industry standards. Ryanair has not had a single passenger or flight crew fatality in its 25-year operating
history. Although Ryanair seeks to maintain its fleet in a cost-effective manner, management does not seek to
extend Ryanair’s low-cost operating strategy to the areas of safety, maintenance, training or quality assurance.
Routine aircraft maintenance and repair services are performed primarily by Ryanair, at Ryanair’s main bases,
but are also performed at other base airports by maintenance contractors approved under the terms of Part 145.
Ryanair currently performs heavy airframe maintenance, but contracts with other parties who perform engine
overhaul services and rotable repairs. These contractors also provide similar services to a number of other
airlines, including British Airways, Finnair and Iberia. Ryanair assigns a Part 145-certified mechanic to oversee
engine overhauls performed by other parties.
Enhancement of Operating Results through Ancillary Services. Ryanair distributes accommodation
services and travel insurance primarily through its website. For hotel services, Ryanair has a contract with
Booking.com, pursuant to which Booking.com handles all aspects of such services marketed through Ryanair’s
website and pays a fee to Ryanair. Ryanair also has contracts with other accommodation providers that enable
Ryanair to offer camping, hostel, bed-and-breakfast, guesthouse, villa and apartment accommodation to its
customers. In addition Ryanair has a contract with the Hertz Corporation (“Hertz”), pursuant to which Hertz
handles all car rental services marketed through Ryanair’s website or telephone reservation system. Hertz pays a
per-passenger fee to Ryanair. Ryanair also sells cruises online and bus and rail tickets onboard its aircraft and
through its website. Costa Cruises handles all cruise bookings made via Ryanair’s website and pays Ryanair a
per-passenger fee. For the 2010 fiscal year, ancillary services accounted for 22.2% of Ryanair’s total operating
revenues, as compared to 20.3% of such revenues in the 2009 fiscal year. See “—Ancillary Services” below and
“Item 5. Operating and Financial Review and Prospects—Results of Operations—Fiscal Year 2010 Compared
with Fiscal Year 2009—Ancillary Revenues” for additional information.
Focused Criteria for Growth. Building on its success in the Ireland-U.K. market and its expansion of
service to continental Europe and Morocco, Ryanair intends to follow a manageable growth plan targeting
specific markets. Ryanair believes it will have opportunities for continued growth by: (i) initiating additional
routes in the EU; (ii) initiating additional routes in countries party to a European Common Aviation Agreement
with the EU that are currently served by higher-cost, higher-fare carriers; (iii) increasing the frequency of
service on its existing routes; (iv) starting new domestic routes within individual EU countries; (v) considering
acquisition opportunities that may become available in the future; (vi) connecting airports within its existing
route network (“triangulation”); (vii) establishing new bases; and (viii) initiating new routes not currently served
by any carrier.
During the 2007 fiscal year, the Company acquired 25.2% of Aer Lingus. The Company thereafter
increased its interest to 29.3% during the 2008 fiscal year, and to 29.8% during the 2009 fiscal year at a total
aggregate cost of 1407.2 million. Following the acquisition of its initial stake and upon the approval of the
Company’s shareholders, management proposed to effect a tender offer to acquire the entire share capital of Aer
Lingus. This acquisition proposal was, however, blocked by the European Commission on competition grounds.
Ryanair filed an appeal with the CFI, which was heard in July 2009. On July 6, 2010, the Court upheld the
Commission’s decision. Ryanair has two months and 10 days from such date to appeal this judgment.
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. Ryanair offered to keep Aer Lingus as a separate company,
maintain the Aer Lingus brand, and retain its Heathrow slots and connectivity. Ryanair also proposed to double
Aer Lingus’ short-haul fleet from 33 to 66 aircraft and to create 1,000 associated new jobs over a five-year
period. If the offer had been accepted, the Irish government would have received over 1180 million in cash. The
employee share option trust and employees who own 18% of Aer Lingus would have received over 1137 million
in cash. The Company met Aer Lingus management, representatives of the employee share option trust and
other parties, including the Irish Government. 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. However, as the
Company was unable to secure the shareholders’ support (to sell their stakes in Aer Lingus to Ryanair), the
Company decided on January 28, 2009, to withdraw its offer for Aer Lingus.
See “Item 8. Financial Information—Other Financial Information—Legal Proceedings—Aer Lingus
Merger Decision.”