Ryanair 2011 Annual Report Download - page 51

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type may have a negative impact on demand for air travel in Europe. Past outbreaks of SARS, foot-and-mouth
disease, avian flu and swine flu have adversely impacted the travel industries, including aviation, in certain
regions of the world, including Europe. The Company believes that if any influenza or other pandemic becomes
severe in Europe, its effect on demand for air travel in the markets in which Ryanair operates could be material,
and it could therefore have a significantly adverse impact on the Company. A severe outbreak of swine flu,
SARS, foot-and-mouth disease, avian flu or another pandemic or livestock-related disease also may result in
European or national authorities imposing restrictions on travel, further damaging Ryanair’s business. A serious
pandemic could therefore severely disrupt Ryanair’s business, resulting in the cancellation or loss of bookings,
and adversely affecting Ryanair’s financial condition and results of operations.
EU Regulation on Passenger Compensation Could Significantly Increase Related Costs. The EU has
passed legislation for compensating airline passengers who have been denied boarding on a flight for which they
hold a valid ticket (Regulation (EC) No. 261/2004). This legislation, which came into force on February 17,
2005, imposes fixed levels of compensation to be paid to passengers in the event of cancelled flights. In
November 2009, the Court of Justice of the EU in the Sturgeon case decided that provisions of the legislation in
relation to compensation are not only applicable to flight cancellations but also to delays of over three hours.
However, such provisions, by their terms, do not apply to any cancellation, or any delay over three hours, in
circumstances in which the airline is able to prove that such cancellation or delay was caused by extraordinary
circumstances, such as weather, air-traffic control delays, or safety issues. The Sturgeon case was referred to the
Court of Justice of the European Union for a preliminary ruling from the High Court of Justice (England &
Wales), Queen's Bench Division (Administrative Court) on December 24, 2010. The case is still pending. The
regulation calls for compensation of 1250, 1400, or 1600 per passenger, depending on the length of the flight.
As Ryanair’s average flight length is less than 1,500 km – the upper limit for short-haul flights – the amount
payable is generally 1250 per passenger per occurrence. Passengers subject to long delays (in excess of two
hours for short-haul flights) are also entitled to “assistance,” including meals, drinks and telephone calls, as well
as hotel accommodations if the delay extends overnight. For delays of over five hours, the airline is also
required to offer the option of a refund of the cost of the unused ticket. There can be no assurance that the
Company will not incur a significant increase in costs in the future due to the impact of this legislation, if
Ryanair experiences a large number of cancelled flights, which could occur as a result of certain types of events
beyond its control. 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.”
EU Regulation of Emissions Trading Could Increase Costs. On November 19, 2008, the European
Council of Ministers adopted legislation to add aviation to the EU Emissions Trading Scheme (“ETS”) with
effect from 2012. This scheme, which has thus far applied mainly to energy producers, is a cap-and-trade system
for CO2 emissions to encourage industries to improve their CO2 efficiency. Under the legislation, airlines will be
granted initial CO2 allowances based on historical performance and a CO2 efficiency benchmark. Any shortage
of allowances will have to be purchased in the open market and/or at government auctions. The cost and amount
of such allowances that Ryanair will have to buy in order to cover the shortage that will arise in 2012 are not yet
known. The Company will be in a position to forecast its carbon credit requirements in respect of 2012 with a
greater degree of certainty once the European Commission has published certain figures permitting the
calculation of the efficiency benchmark (expected in late 2011). The Company estimates the related cost will be
in the region of 120 million in fiscal year 2012 but could increase significantly over the coming years. There can
be no assurance that Ryanair will be able to obtain sufficient carbon credits or that the cost of the credits will not
have a material adverse effect on the Company’s business, operating results, and financial condition.
Introduction of New or Increases in Existing Aviation Taxes Could Increase Costs. A number of
European states, including the United Kingdom, Ireland, Germany and Austria, currently impose taxes on air
travel, often disguised as environmental taxes. Although the Netherlands reduced its aviation tax to zero in 2009
and Ireland announced in May 2011 that it would abolish its Air Travel Tax, due to government budgetary
deficits these taxes may be reinstated in their previous or a new form. Further, other state governments or the
European Union may introduce aviation taxation. Any such taxes would increase costs and could have a
negative impact on demand for air travel. See also “—Environmental Regulation—Aviation Taxes” below.
The Company is Dependent on the Continued Acceptance of Low-fares Airlines. In past years,
accidents or other safety-related incidents involving certain low-fares airlines have had a negative impact on the
public’s acceptance of such airlines. Any adverse event potentially relating to the safety or reliability of low-
fares airlines (including accidents or negative reports from regulatory authorities) could adversely impact the