Ryanair 2009 Annual Report Download - page 148

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148
Interest rate swaps are primarily used to convert a portion of the Company’s floating rate exposures on
borrowings and operating leases into fixed rate exposures and are set so as to match exactly the critical terms of
the underlying debt or lease being hedged (i.e. notional principal, interest rate settings, re-pricing dates). These
are all classified as cash-flow hedges of the forecasted variable interest payments and rentals due on the
Company’s underlying debt and operating leases and have been determined to be highly effective in achieving
offsetting cash flows. Accordingly, no ineffectiveness has been recorded in the income statement relating to
these hedges in the current and preceding years.
Foreign currency forward contracts are utilised in a number of ways: forecast U.K. pounds sterling and
Euro revenue receipts are converted into U.S. dollars to hedge against forecasted U.S. dollar payments
principally for jet fuel, insurance, capital expenditure and other aircraft related costs. These are classified as
either cash-flow or fair-value hedges of forecasted and committed U.S. dollar payments and have been
determined to be highly effective in offsetting variability in future cash flows and fair values arising from the
fluctuation in the U.S. dollar to pounds sterling and Euro exchange rates for the forecast and committed U.S.
dollar purchases. Because the timing of anticipated payments and the settlement of the related derivatives is very
closely coordinated, no ineffectiveness has been recorded for these foreign currency forward contracts in the
current or preceding years (the underlying hedged items and hedging instruments have been consistently closely
matched).
The Company also utilises jet fuel forward contracts to manage exposure to jet fuel prices. These are
used to hedge the Company’s forecasted fuel purchases, and are arranged so as to match as closely as possible
against forecasted fuel delivery and payment requirements. These are classified as cash-flow hedges of forecast
fuel payments and have been determined to be highly effective in offsetting variability in future cash flows
arising from fluctuations in jet fuel prices. No ineffectiveness has been recorded on these arrangements in the
current or preceding years.
The following table indicates the periods in which cash flows associated with derivatives that are
designated as cash-flow hedges are expected to occur:
Expected
Cash flows 2010 2011 2012 2013 Thereafter
€000 €000 €000 €000 €000 €000
At March 31, 2009
Interest rate swaps ................................
.....
(84,803) (30,730) (27,606) (11,919)
(7,724) (6,824)
U.S. dollar currency forward contracts
.....
189,268 129,298 38,608 21,187 92 83
Commodity forward contracts
...................
(106,710) (106,710) - - - -
(2,245) (8,142) 11,002 9,268 (7,632) (6,741)
Expected
Cash flows 2009 2010 2011 2012 Thereafter
€000 €000 €000 €000 €000 €000
At March 31, 2008
Interest rate swaps ................................
.....
(59,527) (10,492) (15,076) (12,342) (6,623) (14,994)
U.S. dollar currency forward contracts
.....
(108,952) (82,303) (20,437) (4,468) (1,190) (554)
Commodity forward contracts
...................
6,015 6,015 - - - -
(162,464) (86,780) (35,513) (16,810) (7,813) (15,548)