Ryanair 2010 Annual Report Download - page 79

77
BUSINESS OVERVIEW
Since Ryanair pioneered its low-fares operating model in Europe in the early 1990s, its passenger
volumes and scheduled passenger revenues have increased significantly because it has substantially increased
capacity. Ryanair’s annual booked passenger volume has grown from approximately 945,000 passengers in the
calendar year 1992 to approximately 66.5 million passengers in the 2010 fiscal year.
Ryanair’s revenue passenger miles (“RPMs”) increased 14.4% from 39,202.3 million in the 2009 fiscal
year to 44,841.1 million in the 2010 fiscal year due primarily to a 13.5% increase in scheduled available seat
miles (“ASMs”) from 47,102.5 million in the 2009 fiscal year to 53,469.6 million in the 2010 fiscal year.
Scheduled passenger revenues decreased 0.8% from 12,343.9 million in the 2009 fiscal year to 12,324.5 million
in the 2010 fiscal year. Average yield per RPM was 10.060 in the 2009 fiscal year and 10.052 in the 2010 fiscal
year. The decrease in average yield per RPM in the 2010 fiscal year was principally attributable to an increase in
seat capacity, poor economic conditions, increased price promotions and the adverse impact of the strengthening
of the U.K. pound sterling against the euro.
Expanding passenger volumes and capacity, high load factors and aggressive cost containment
(together with a reduction in fuel costs) have enabled Ryanair to continue to generate operating profits despite
increasing price competition and increases in certain costs. Ryanair’s total break-even load factor was 79% in
the 2009 fiscal year and 73% in the 2010 fiscal year. Cost per ASM was 10.058 in the 2009 fiscal year and
10.047 in the 2010 fiscal year, with the reduction primarily reflecting a lower fuel cost per ASM of 10.017 in the
2010 fiscal year, as compared to 10.027 in the 2009 fiscal year, as well as a 13.5% increase in ASMs in the 2010
fiscal year. Ryanair recorded operating profits of 192.6 million in the 2009 fiscal year and 1402.1 million in the
2010 fiscal year. The Company recorded a loss after taxation of 1169.2 million in the 2009 fiscal year and
profit after taxation of 1305.3 million in the 2010 fiscal year. Ryanair recorded seat capacity growth of
approximately 12% in the 2010 fiscal year, compared to approximately 14% in the 2009 fiscal year, and expects
capacity to increase by approximately 11% in the 2011 fiscal year, reflecting the current timetable for the
delivery of aircraft under the Company’s contracts with Boeing.
Investment in Aer Lingus
The Company owns 29.8% of Aer Lingus, which it acquired in fiscal years 2007, 2008 and 2009 at a
total cost of 1407.2 million. Following the approval of its shareholders, management proposed in the 2007 fiscal
year 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 in June 2007. Ryanair’s management
viewed the acquisition of Aer Lingus in the context of the overall trend of consolidation among airlines in
Europe and believed that the acquisition would lead to the formation of one strong Irish airline group able to
compete with large carriers such as Lufthansa, Air France/KLM and British Airways. During the EU
competition review, the Company made a commitment that if the acquisition was approved, Ryanair would
eliminate Aer Lingus’ fuel surcharges and reduce its fares, which would have resulted in Aer Lingus passengers
saving approximately 1100 million per year. The Company was thus surprised and disappointed by the
European Commission’s decision to block the merger. This decision was the first adverse decision taken in
respect of any EU airline merger and the first-ever adverse decision in respect of a proposed merger of two
companies with less than 5% of the EU market for their services. 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.
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. This case
was heard in July 2009 and 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.