Ryanair 2011 Annual Report Download - page 46

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The Company’s Rapid Growth May Expose It to Risks. Ryanair’s operations have grown rapidly since
it pioneered the low-fares operating model in Europe in the early 1990s. See “Item 5. Operating and Financial
Review and ProspectsHistory.” During the 2011 fiscal year, Ryanair announced 328 new routes across its
network and intends to continue to expand its fleet and add new destinations and additional flights, which are
expected to increase Ryanair’s booked passenger volumes in the 2012 fiscal year to approximately 75 million
passengers, an increase of approximately 4% over the approximately 72.1 million passengers booked in the
2011 fiscal year. However, no assurance can be given that this target will in fact be met. If growth in passenger
traffic and Ryanair’s revenues do not keep pace with the planned expansion of its fleet, Ryanair could suffer
from overcapacity and its results of operations and financial condition (including its ability to fund scheduled
aircraft purchases and related debt) could be materially adversely affected. 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.”
The expansion of Ryanair’s fleet and operations, in addition to other factors, may also strain existing
management resources and related operational, financial, management information, and information technology
systems, including Ryanair’s Internet-based reservation system, to the point that they may no longer be adequate
to support Ryanair’s operations. This would require Ryanair to make significant additional expenditures.
Expansion will generally require additional skilled personnel, equipment, facilities and systems. An inability to
hire skilled personnel or to secure required equipment and facilities efficiently and in a cost-effective manner
may adversely affect Ryanair’s ability to achieve growth plans and sustain or increase its profitability.
Ryanair’s New Routes and Expanded Operations may have an Adverse Financial Impact on its Results.
Currently, a substantial number of carriers operate routes that compete with Ryanair’s, and the Company
expects to face further intense competition. See “Item 4. Information on the Company—Industry
OverviewEuropean Market.”
When Ryanair commences new routes, its load factors initially tend to be lower than those on its
established routes and its advertising and other promotional costs tend to be higher, which may result in initial
losses that could have a material negative impact on the Company’s results of operations as well as require a
substantial amount of cash to fund. In addition, there can be no assurance that Ryanair’s low-fares service will
be accepted on new routes. Ryanair also periodically runs special promotional fare campaigns, in particular in
connection with the opening of new routes. Promotional fares may have the effect of increasing load factors and
reducing Ryanair’s yield and passenger revenues on such routes during the periods that they are in effect. See
“Item 4. Information on the Company—Route System, Scheduling and Fares.” Ryanair expects to have other
substantial cash needs as it expands, including as regards the cash required to fund aircraft purchases or aircraft
deposits related to the acquisition of additional Boeing 737-800s. There can be no assurance that the Company
will have sufficient cash to make such expenditures and investments, and to the extent Ryanair is unable to
expand its route system successfully, its future revenue and earnings growth will in turn be limited. Further
volcanic ash emissions, similar to those experienced in April and May 2010, could make consumers less willing
and/or able to travel and impact the launch of new routes or bases. 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.” See also “—The Company Will Incur Significant Costs Acquiring New
Aircraft and the Continued Instability in the Credit and Capital Markets Could Negatively Impact Ryanair’s
Ability to Obtain Financing on Acceptable Terms.”
Ryanair’s Continued Growth is Dependent on Access to Suitable Airports; Charges for Airport Access
are Subject to Increase. Airline traffic at certain European airports is regulated by a system of grandfathered
“slot” allocations. Each slot represents authorization to take-off and land at the particular airport during a
specified time period. Although the majority of Ryanair’s bases currently have no slot allocations, traffic at a
minority of the airports Ryanair serves, including its primary bases, is currently regulated through slot
allocations. Applicable EU regulations appear to prohibit the buying or selling of slots for cash, although media
reports indicate that the buying and selling of slots may have occurred at certain airports in Europe. Regardless
of any such sales, there can be no assurance that Ryanair will be able to obtain a sufficient number of slots at
slot-controlled airports that it may wish to serve in the future, at the time it needs them, or on acceptable terms.
There can also be no assurance that its non-slot bases, or the other non-slot airports Ryanair serves, will
continue to operate without slot allocations in the future. See “Item 4. Information on the Company—
Government Regulation—Slots.” Airports may impose other operating restrictions such as curfews, limits on
aircraft noise levels, mandatory flight paths, runway restrictions, and limits on the number of average daily