Ryanair 2010 Annual Report Download - page 69

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time that it expected these cuts to result in 2.5 million fewer passenger trips during the period. In addition, on
June 29, 2010, due to the continuance of the U.K. government’s £11 APD tourist tax and high charges at
London (Stansted) airport, the Company announced that capacity at London (Stansted) airport would be reduced
from winter 2010 by 17% and the number of aircraft based at London (Stansted) would be reduced from 24 to
22. Ryanair also noted that, as a result of other capacity reductions at its U.K. bases except for the bases at
Edinburgh and Leeds Bradford, its total U.K. capacity would fall by 16% in the period from November 1, 2010
to March 31, 2011. See “Item 3. Risk FactorsRisks Related to the CompanyRyanair’s Continued Growth is
Dependent on Access to Suitable Airports; Charges for Airport Access are Subject to Increase.” See also “Item
8. Financial InformationOther Financial InformationLegal ProceedingsEU State Aid-Related
Proceedings” for information regarding legal proceedings in which Ryanair’s economic arrangements with
several publicly owned airports are being contested.
FUEL
The cost of jet fuel accounted for 34.1% and 43.8% of Ryanair’s total operating expenses in the fiscal
years ended March 31, 2010 and 2009, respectively (in each case, this accounts for costs after giving effect to
the Company’s fuel hedging activities but excludes de-icing costs, which accounted for 1.2% and 0.8% of total
fuel costs in the fiscal years ended March 31, 2010 and 2009, respectively). Jet fuel costs experienced
substantial variance in the fiscal years ended March 31, 2010 and 2009. The future availability and cost of jet
fuel cannot be predicted with any degree of certainty, and Ryanair’s low-fares policy limits its ability to pass on
increased fuel costs to passengers through increased fares. Jet fuel prices are dependent on crude oil prices,
which are quoted in U.S. dollars. If the value of the U.S. dollar, which has been depressed (in historical terms)
in recent years, rises against the euro, Ryanair’s fuel costs, expressed in euro, may increase even absent any
increase in the U.S. dollar price of crude oil. Ryanair has also entered into foreign currency forward contracts to
hedge against some currency fluctuations. See “Item 11. Quantitative and Qualitative Disclosures About Market
Risk—Foreign Currency Exposure and Hedging.”
Ryanair has historically entered into arrangements providing for substantial protection against
fluctuations in fuel prices, generally through forward contracts covering periods of up to 18 months of
anticipated jet fuel requirements. Ryanair (like many other airlines) has, in more recent periods, entered into
hedging arrangements on a much more selective basis. As of July 19, 2010, Ryanair had entered into forward jet
fuel (jet kerosene) contracts covering approximately 90% of its estimated requirements for the fiscal year ending
March 31, 2011 at prices equivalent to approximately $730 per metric ton. In addition, as of July 19, 2010,
Ryanair had entered into forward jet fuel (jet kerosene) contracts covering approximately 90% of its estimated
requirements for the period from April 2011 to September 2011 at prices equivalent to $755 per metric ton. See
“Item 3. Key Information—Risk Factors—Risks Related to the Company—Changes in Fuel Costs and Fuel
Availability Affect the Company’s Results and Increase the Likelihood that the Company May Incur Losses”
and “Item 11. Quantitative and Qualitative Disclosures About Market Risk—Fuel Price Exposure and Hedging”
for additional information on recent trends in fuel costs and the Company’s related hedging activities, as well as
certain associated risks. See also “Item 5. Operating and Financial Review and Prospects—Fiscal Year 2010
Compared with Fiscal Year 2009—Fuel and Oil.”