Ryanair 2011 Annual Report Download - page 68

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reduce by 30% the number of weekly Ryanair flights to and from the airport. The Company announced at that
time that it expected these cuts to result in 2.5 million fewer passenger trips during the period. In addition, on
June 29, 2010, due to the continuance of the U.K. government’s £11 APD tourist tax and high charges at
London (Stansted) airport, the Company announced that capacity at London (Stansted) airport would be reduced
from winter 2010 by 17% and the number of aircraft based at London (Stansted) would be reduced to 22.
Ryanair also noted that, as a result of other capacity reductions at its U.K. bases except for the bases at
Edinburgh and Leeds Bradford, its total U.K. capacity fell by 16% in the period from November 1, 2010 to
March 31, 2011. The U.K. government also increased APD from £11 to £12 in November 2010. See “Item 3.
Risk FactorsRisks Related to the CompanyRyanair’s Continued Growth is Dependent on Access to
Suitable Airports; Charges for Airport Access are Subject to Increase.” See also “Item 8. Financial
InformationOther Financial InformationLegal ProceedingsEU State Aid-Related Proceedings” for
information regarding legal proceedings in which Ryanair’s economic arrangements with several publicly
owned airports are being contested.
FUEL
The cost of jet fuel accounted for approximately 39% and 34% of Ryanair’s total operating expenses in
the fiscal years ended March 31, 2011 and 2010, respectively (in each case, this accounts for costs after giving
effect to the Company’s fuel hedging activities but excludes de-icing costs, which accounted for approximately
1% of total fuel costs in each of the fiscal years ended March 31, 2011 and 2010). Jet fuel costs experienced
substantial variance in the fiscal years ended March 31, 2011 and 2010. The future availability and cost of jet
fuel cannot be predicted with any degree of certainty, and Ryanair’s low-fares policy limits its ability to pass on
increased fuel costs to passengers through increased fares. Jet fuel prices are dependent on crude oil prices,
which are quoted in U.S. dollars. If the value of the U.S. dollar, which has been depressed (in historical terms)
in recent years, rises against the euro, Ryanair’s fuel costs, expressed in euro, may increase even absent any
increase in the U.S. dollar price of crude oil. Ryanair has also entered into foreign currency forward contracts to
hedge against some currency fluctuations. See “Item 11. Quantitative and Qualitative Disclosures About Market
Risk—Foreign Currency Exposure and Hedging.”
Ryanair has historically entered into arrangements providing for substantial protection against
fluctuations in fuel prices, generally through forward contracts covering periods of up to 18 months of
anticipated jet fuel requirements. Ryanair (like many other airlines) has, in more recent periods, entered into
hedging arrangements on a much more selective basis. As of July 22, 2011, Ryanair had entered into forward jet
fuel (jet kerosene) contracts covering approximately 90% of its estimated requirements for the fiscal year ending
March 31, 2012 at prices equivalent to approximately $820 per metric ton. In addition, as of July 22, 2011,
Ryanair had entered into forward jet fuel (jet kerosene) contracts covering approximately 20% of its estimated
requirements for the first quarter of the fiscal year ending March 31, 2013 at prices equivalent to approximately
$1,035 per metric ton, and had not entered into any jet fuel hedging contracts with respect to its expected fuel
purchases beyond that quarter. See “Item 3. Key Information—Risk Factors—Risks Related to the Company—
Changes in Fuel Costs and Fuel Availability Affect the Company’s Results and Increase the Likelihood that the
Company May Incur Losses” and “Item 11. Quantitative and Qualitative Disclosures About Market Risk—Fuel
Price Exposure and Hedging” for additional information on recent trends in fuel costs and the Company’s
related hedging activities, as well as certain associated risks. See also “Item 5. Operating and Financial Review
and Prospects—Fiscal Year 2011 Compared with Fiscal Year 2010—Fuel and Oil.”