Ryanair 2009 Annual Report Download - page 38

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The Company Faces Significant Price and Other Pressures in a Highly Competitive Environment.
Ryanair operates in a highly competitive marketplace, with a number of new entrants, traditional airlines, and
charter airlines competing throughout the route network. Airlines compete primarily with respect to fare levels,
frequency and dependability of service, name recognition, passenger amenities (such as access to frequent flyer
programs), and the availability and convenience of other passenger services. Unlike Ryanair, certain of
Ryanair’s competitors are state-owned or state-controlled flag carriers and in some cases may have greater name
recognition and resources and may have received, or may receive in the future, significant amounts of subsidies
and other state aid from their respective governments. In addition, the EU-U.S. Open Skies Agreement, which
was signed in April 2007 and entered into effect in March 2008, allows U.S. carriers to offer services in the
intra-EU market, which should eventually result in increased competition. See “Item 4. Information on the
Company—Government Regulation—Liberalization of the EU Air Transportation Market.”
The airline industry is highly susceptible to price discounting, in part because airlines incur very low
marginal costs for providing service to passengers occupying otherwise unsold seats. The number of new-
entrant low-fares airlines and traditional carriers offering lower, more competitive fares in direct competition
with Ryanair across its route network has increased significantly in recent years as a result of the liberalization
of the EU air transport market and greater public acceptance of the low-fares model. Increased price competition
and the resulting lower fares, combined with continuing increases in the Company’s capacity in recent years
(including an increase of approximately 15% during the 2009 fiscal year), have combined to put downward
pressure on the Company’s yields. Ryanair’s Yield per Available Seat Mile (“YASM”) decreased by 7.8% in
the 2008 fiscal year and an additional 7.6% in the 2009 fiscal year.
Although Ryanair intends to compete vigorously and to assert its rights against any predatory pricing or
other conduct, price competition among airlines could reduce the level of fares or passenger traffic on the
Company’s routes to the point where profitability may not be achievable.
In addition to traditional competition among airline companies and charter operators who have entered
the low-fares market, the industry also faces some limited competition from ground transportation (including
high-speed rail systems such as the “TGV” in France) and sea transportation alternatives, as businesses and
recreational travelers seek more comfortable or convenient substitutes for air travel.
The Company Will Incur Significant Costs Acquiring New Aircraft and the Continued Instability in the
Credit and Capital Markets Could Negatively Impact Ryanair’s Ability to Obtain Financing on Acceptable
Terms. Ryanair’s continued growth is dependent upon its ability to acquire additional aircraft to meet additional
capacity needs and to replace older aircraft.
Ryanair expects to have 232 aircraft in its fleet by March 31, 2010. With the Company’s current orders
for aircraft it is obligated to buy (i.e., “firm” orders) under its contracts with The Boeing Company (“Boeing”),
the Company expects to increase the size of its fleet to as many as 302 Boeing 737-800 “next generation”
aircraft by March 2012 (assuming the exercise of 10 options, and that planned disposals of aircraft and returns
of leased aircraft are completed on schedule). For additional information on the Company’s aircraft fleet and
expansion plans, see “Item 4. Information on the Company—Aircraft” and “Item 5. Operating and Financial
Review and ProspectsLiquidity and Capital Resources.” There can be no assurance that this planned
expansion will not outpace the growth of passenger traffic on Ryanair’s routes or that traffic growth will not
prove to be greater than the expanded fleet can accommodate. In either case, such developments could have a
material adverse effect on the Company’s business, results of operations, and financial condition.