Ryanair 2011 Annual Report Download - page 79

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it missed, 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 within
time. 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.
The balance sheet value of 1114.0 million reflects the market value of the Company’s stake in Aer
Lingus as at March 31, 2011, as compared to a value of 1116.2 million as of March 31, 2010. In accordance
with the company’s accounting policy, this investment is held at fair value. This investment is classified as
available-for-sale, rather than as an investment in an associate, because the Company does not have the power to
exercise any influence over Aer Lingus. During the 2008 fiscal year, Ryanair recognized an impairment charge
of 191.6 million on its Aer Lingus shareholding reflecting the fall in Aer Lingus’ share price from the date of
purchase to March 31, 2008. Ryanair recorded a further impairment of 1222.5 million in the 2009 fiscal year
reflecting a fall in the Aer Lingus share price from 12.00 at March 31, 2008 to 10.59 at March 31, 2009. Ryanair
recorded an impairment of 113.5 million in the 2010 fiscal year reflecting a fall 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. 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. All impairment losses are required to be recognized in the income
statement and may not be subsequently reversed, while gains are recognized through other comprehensive
income.
The Company's determination that it does not have control, or even exercise a “significant influence,”
over Aer Lingus has been based on the following factors:
(i) Ryanair does not have any representation on the Aer Lingus Board of Directors; nor does it have a
right to appoint a director.
(ii) Ryanair does not participate in Aer Lingus policy-making decisions; nor does it have a right to
participate in such policy-making decisions.
(iii) There are no material transactions between Ryanair and Aer Lingus, there is no interchange of
personnel between the two companies and there is no sharing of technical information between the companies.
(iv) Aer Lingus and its significant shareholder (the Irish government: 25.1%) have openly opposed
Ryanair’s investment or participation in the company.
(v) On August 13, 2007 and September 4, 2007, Aer Lingus refused Ryanair’s attempt to assert its
statutory right to requisition a general meeting (a legal right of any 10% shareholder under Irish law). The Aer
Lingus Board of Directors refused to accede to these requests (by letters dated August 31, 2007 and September
17, 2007).
(vi) On April 15, 2011, the High Court in Dublin ruled that Aer Lingus was not obliged to accede to
Ryanair’s request that two additional resolutions (on the payment of a dividend and on payments to pension
schemes) be put to vote at Aer Lingus’ annual general meeting; and
(vii) The European Commission has formally found that Ryanair’s shareholding in Aer Lingus does not
grant Ryanair “de jure or de facto control of Aer Lingus” and that “Ryanair’s rights as a minority
shareholder…are associated exclusively to rights related to the protection of minority shareholders”
(Commission Decision Case No. COMP/M.4439 dated October 11, 2007). The European Commission’s finding
has been confirmed by the European Union's General Court which issued a decision on July 6, 2010 that the
European Commission was justified to use the required legal and factual standard in its refusal to order Ryanair
to divest its minority shareholding in Aer Lingus and that, as part of that decision, Ryanair’s shareholding did
not confer control of Aer Lingus (Judgment of the General Court (Third Chamber) Case No. T-411/07 dated
July 6, 2010).