Ryanair 2011 Annual Report Download - page 93

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connection with such financings. In particular, these fees include arrangement fees paid to the facility arranger,
and a commitment fee based on the unutilized and non-cancelled portion of the guarantee commencing 60 days
from the date of issuance of the guarantee and payable semi-annually in arrears. An exposure fee for the
issuance of the guarantee on the date of delivery is also payable to Ex-Im Bank (based on the amount of the
guarantee). Ryanair’s payment of the applicable exposure fee to Ex-Im Bank (based on the amount of the loan
provided) is eligible for financing under the facilities. Ryanair anticipates that similar fees will be incurred as
additional aircraft are delivered and financed.
As part of its Ex-Im Bank guarantee-based financing of the Boeing 737-800s, Ryanair has entered into
certain lease agreements and related arrangements. Pursuant to these arrangements, legal title to the 185 aircraft
delivered and remaining in the fleet as of March 31, 2011 rests with a number of United States special purpose
vehicles (the “SPVs”) in which Ryanair has no equity or other interest. The SPVs are the borrowers of record
under the loans made or to be made under the facilities, with all of their obligations under the loans being
guaranteed by Ryanair Holdings.
The shares of the SPVs (which are owned by an unrelated charitable association) are in turn pledged to
a security trustee in favor of Ex-Im Bank and the lenders. Ryanair operates each of the aircraft pursuant to a
finance lease it has entered into with the SPVs, the terms of which mirror those of the relevant loans under the
facilities. Ryanair has the right to purchase the aircraft upon termination of the lease for a nominal amount.
Pursuant to this arrangement, Ryanair is considered to own the aircraft for accounting purposes under IFRS.
Ryanair does not use special purpose entities for off-balance sheet financing or any other purpose which results
in assets or liabilities not being reflected in Ryanair’s consolidated financial statements.
At June 30, 2011, Ryanair had mandated a lender to provide financing for up to five of its firm-order
Boeing 737-800 aircraft under a sale and leaseback transaction. The Company expects to finance the remaining
35 Boeing 737-800 aircraft it is obligated to purchase under its contracts with Boeing by November 2012
through the use of similar financing arrangements based on Ex-Im Bank guarantees, bank debt provided by
commercial banks, and finance and operating leases, including via sale-and-leaseback transactions such as those
described below, other capital markets products, as well as cash flow generated from the Company’s operations.
It is expected that any future Ex-Im Bank guarantee-based financing will also be subject to terms and conditions
similar to those described above. However, no assurance can be given that such financing will be available to
Ryanair, or that the terms of any such financing will be as advantageous to the Company as those available at
the time of the facilities. Any inability of the Company to obtain financing for the new aircraft on advantageous
terms could have a material adverse effect on its business, results of operation and financial condition.
The Company financed 61 of the Boeing 737-800 aircraft delivered between December 2003 and
March 2011 under seven-year, sale-and-leaseback arrangements with a number of international leasing
companies, pursuant to which each lessor purchased an aircraft and leased it to Ryanair under an operating
lease. Between October 2010 and March 2011, 10 operating lease aircraft were returned to the lessor at the
agreed maturity date of the lease. At March 31, 2011, Ryanair had 51 operating lease aircraft in the fleet. As a
result, Ryanair operates, but does not own, these aircraft, which were leased to provide flexibility for the aircraft
delivery program. Ryanair has no right or obligation to acquire these aircraft at the end of the relevant lease
terms. Five of these leases are denominated in euro and require Ryanair to make variable rental payments that
are linked to EURIBOR. Through the use of interest rate swaps, Ryanair has effectively converted the floating-
rate rental payments due under two of the remaining five leases into fixed-rate rental payments. Thirty of these
leases are denominated in euro and require Ryanair to make fixed rental payments over the term of the lease.
The remaining sixteen operating leases are U.S. dollar-denominated and two require Ryanair to make variable
rental payments that are linked to U.S. dollar LIBOR, while a further 14 require Ryanair to make fixed rental
payments. The Company has an option to extend the initial period of seven years on 28 of the 51 remaining
operating lease aircraft as at March 31, 2011, on pre-determined terms. Three operating lease arrangements will
mature during the year ended March 31, 2012. The Company has decided not to extend any of these operating
leases for a secondary lease period. In addition to the above, the Company financed 30 of the Boeing 737-800
aircraft delivered between March 2005 and March 2011 with 13-year euro-denominated JOLCOs. These
structures are accounted for as finance leases and are initially recorded at fair value in the Company’s balance
sheet. Under each of these contracts, Ryanair has a call option to purchase the aircraft at a pre-determined price
after a period of 10.5 years, which it may exercise. Six aircraft have been financed through euro-denominated
12-year amortizing commercial debt transactions.