Ryanair 2011 Annual Report Download - page 47

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departures. Such restrictions may limit the ability of Ryanair to provide service to, or increase service at, such
airports.
Ryanair’s future growth also materially depends on its ability to access suitable airports located in its
targeted geographic markets at costs that are consistent with Ryanair’s low-fares strategy. Any condition that
denies, limits, or delays Ryanair’s access to airports it serves or seeks to serve in the future would constrain
Ryanair’s ability to grow. A change in the terms of Ryanair’s access to these facilities or any increase in the
relevant charges paid by Ryanair as a result of the expiration or termination of such arrangements and Ryanair’s
failure to renegotiate comparable terms or rates could have a material adverse effect on the Company’s financial
condition and results of operations. For example, in March 2007, the discount arrangement formerly in place at
London (Stansted) airport terminated, subjecting Ryanair to an average increase in charges of approximately
100%. For additional information see “Item 4. Information on the Company—Airport Operations—Airport
Charges.” See also “—The Company Is Subject to Legal Proceedings Alleging State Aid at Certain Airports.”
The Company’s Acquisition of 29.8% of Aer Lingus and Subsequent Failure to Conclude a Complete
Acquisition of Aer Lingus Could Expose the Company to Risk. During the 2007 fiscal year, the Company
acquired 25.2% of Aer Lingus. The Company 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 2006 offer was, however, prohibited by the
European Commission on competition grounds.
The then EU Commissioner for Competition, Neelie Kroes, said on June 27, 2007 that, “Since Ryanair
is not in a position to exert de jure or de facto control over Aer Lingus, the European Commission is not in a
position to require Ryanair to divest its minority shareholding, which is, by the way, not a controlling stake.” In
October 2007, the European Commission also reached a formal decision that it would not force Ryanair to sell
its shares in Aer Lingus. This decision has been affirmed on appeal. However, EU legislation may change in the
future to require such a forced disposition. If eventually forced to dispose of its stake in Aer Lingus, Ryanair
could suffer significant losses due to the negative impact on attainable prices of the forced sale of such a
significant portion of Aer Lingus’ shares.
The United Kingdom’s Office of Fair Trading (“OFT”) wrote to Ryanair in September 2010, advising
that it intends to investigate Ryanair’s minority stake in Aer Lingus. Ryanair objected to this investigation on
the basis that the OFT’s investigation is time-barred. Ryanair maintains that the OFT had and missed the
opportunity to investigate Ryanair’s minority stake within four months from the European Commission’s June
2007 decision to prohibit Ryanair’s takeover of Aer Lingus. The OFT agreed in October 2010 to suspend its
investigation pending the outcome of Ryanair’s appeal against the OFT’s decision that its investigation is not
time barred. Ryanair is currently awaiting the judgment of the Competition Appeal Tribunal. If the OFT
investigation proceeds, it may result in a referral to the Competition Commission. The Competition Commission
could order Ryanair to divest some or all of its shares in Aer Lingus, as a result of which Ryanair could suffer
significant losses due to the negative impact on attainable prices of the forced sale of such a significant portion
of Aer Lingus’ shares. For more information, see “Item 8. Financial Information—Other Financial
Information—Legal Proceedings—Matters Related to Investment in Aer Lingus.”
During the 2010 fiscal year, Ryanair recorded an impairment charge recognized in the income
statement of 113.5 million on its Aer Lingus shareholding reflecting a decline in the Aer Lingus share price
from 10.59 at March 31, 2009 to 10.50 at June 30, 2009. The subsequent increase in the Aer Lingus share price
from 10.50 at June 30, 2009 to 10.73 at March 31, 2010 resulted in a gain of 136.5 million, which was
recognized through other comprehensive income within equity. The subsequent decrease in the Aer Lingus
share price from 10.73 at March 31, 2010 to 10.72 at March 31, 2011 resulted in a loss of 12.2 million, which
was recognized through other comprehensive income within equity.
Deteriorations in conditions in the airline industry affect the Company not only directly, but also
indirectly, because the value of its stake in Aer Lingus fluctuates with the share price. However, as the value of
the Company’s stake in Aer Lingus has already been written down to just 179.7 million (the equivalent of 10.50
per share as of June 30, 2009), the potential for future write-downs of that asset is currently limited to that
amount.