Ryanair 2011 Annual Report Download - page 57

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Aircraft Equipment Costs. Ryanair’s primary strategy for controlling aircraft acquisition costs is
focused on operating a single aircraft type. Ryanair currently operates only “next generation” Boeing
737-800s. Ryanair’s continuous acquisition of new Boeing 737-800s has already and is expected to
continue to increase the size of its fleet and thus increase its aircraft equipment and related costs (on an
aggregate basis). However, the purchase of aircraft from a single manufacturer enables Ryanair to limit
the costs associated with personnel training, maintenance, and the purchase and storage of spare parts
while also affording the Company greater flexibility in the scheduling of crews and equipment.
Management also believes that the terms of Ryanair’s contracts with Boeing are very favorable to
Ryanair. However, as Ryanair’s existing delivery program expires in November 2012, the Company
may have to consider other aircraft manufacturers for future deliveries for growth or fleet replacement
purposes. See “Aircraft” below for additional information on Ryanair’s fleet.
Personnel Costs. Ryanair endeavors to control its labor costs by seeking to continually improve the
productivity of its already highly productive work force. Compensation for employees emphasizes
productivity-based pay incentives. These incentives include commissions for onboard sales of products
for flight attendants and payments based on the number of hours or sectors flown by pilots and flight
attendants within limits set by industry standards or regulations fixing maximum working hours.
Customer Service Costs. Ryanair has entered into agreements on competitive terms with external
contractors at certain airports for ticketing, passenger and aircraft handling, and other services that
management believes can be more cost-efficiently provided by third parties. Management attempts to
obtain competitive rates for such services by negotiating fixed-price, multi-year contracts. The
development of its own Internet booking facility has allowed Ryanair to eliminate travel agent
commissions and third-party reservation systems costs. Ryanair generates over 99% of its scheduled
passenger revenues through direct sales via its website.
Airport Access and Handling Costs. Ryanair attempts to control airport access and service charges by
focusing on airports that offer competitive prices. Management believes that Ryanair’s record of
delivering a consistently high volume of passenger traffic growth at many airports has allowed it to
negotiate favorable contracts with such airports for access to their facilities. Ryanair further endeavors
to reduce its airport charges by opting, when practicable, for less expensive gate locations as well as
outdoor boarding stairs, rather than jetways, which are more expensive and operationally less efficient
to use. In addition, since October 2009, Ryanair has required all passengers to check-in on the Internet.
This requirement was instituted to reduce waiting times at airports and speed a passenger’s journey
from arrival at the airport to boarding, as well as significantly reduce airport handling costs. Ryanair
has also introduced a checked-bag fee, which is payable on the Internet at the time of booking and is
aimed at reducing the number of bags carried by passengers in order to further reduce handling costs.
See “Risk Factors—Risks Related to the Company—The Company Faces Risks Related to its Internet
Reservations Operations and its Announced Elimination of Airport Check-in Facilities.”
Taking Advantage of the Internet. In 2000, Ryanair converted its host reservation system to a new
system, which it operates under a hosting agreement with Navitaire that will terminate in 2013. As part of the
implementation of the new reservation system, Navitaire developed an Internet booking facility. The Ryanair
system allows Internet users to access its host reservation system and to make and pay for confirmed
reservations in real time through the Ryanair.com website. After the launch of the Internet reservation system,
Ryanair heavily promoted its website through newspaper, radio and television advertising. As a result, Internet
bookings grew rapidly, and have accounted for over 99% of all reservations over the past several years. In 2008,
Ryanair upgraded the reservation system to a more scalable version, which offers more flexibility for future
system enhancements and to accommodate the planned growth of Ryanair.
Commitment to Safety and Quality Maintenance. Safety is the primary priority of Ryanair and its
management. This commitment begins with the hiring and training of Ryanair’s pilots, flight attendants, and
maintenance personnel and includes a policy of maintaining its aircraft in accordance with the highest European
airline industry standards. Ryanair has not had a single passenger or flight crew fatality as a result of an accident
with one of its aircraft in its 26-year operating history. Although Ryanair seeks to maintain its fleet in a cost-
effective manner, management does not seek to extend Ryanair’s low-cost operating strategy to the areas of
safety, maintenance, training or quality assurance. Routine aircraft maintenance and repair services are
performed primarily by Ryanair, at Ryanair’s main bases, but are also performed at other base airports by
maintenance contractors approved under the terms of Part 145. Ryanair currently performs heavy airframe