Ryanair 2009 Annual Report Download - page 40

40
Ryanair’s New Routes and Expanded Operations may have an Adverse Financial Impact on its Results.
Currently, a substantial number of carriers operate routes that compete with Ryanair’s, and the Company
expects to face further intense competition. See “Item 4. Information on the Company—Industry
OverviewEuropean Market.”
When Ryanair commences new routes, its load factors initially tend to be lower than those on its
established routes and its advertising and other promotional costs tend to be higher, which may result in initial
losses that could have a material negative impact on the Company’s results of operations as well as require a
substantial amount of cash to fund. In addition, there can be no assurance that Ryanair’s low-fares service will
be accepted on new routes. Ryanair also periodically runs special promotional fare campaigns, in particular in
connection with the opening of new routes. Promotional fares may have the effect of increasing load factors and
reducing Ryanair’s yield and passenger revenues on such routes during the periods that they are in effect. See
“Item 4. Information on the Company—Route System, Scheduling and Fares.” Ryanair expects to have other
substantial cash needs as it expands, including as regards the cash required to fund aircraft purchases or aircraft
deposits related to the acquisition of additional Boeing 737-800s. There can be no assurance that the Company
will have sufficient cash to make such expenditures and investments, and to the extent Ryanair is unable to
expand its route system successfully, its future revenue and earnings growth will in turn be limited. See “—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 on Access to Suitable Airports; Charges for Airport Access
are Subject to Increase. Airline traffic at certain European airports is regulated by a system of grandfathered
“slot” allocations. Each slot represents authorization to take-off and land at the particular airport during a
specified time period. Although the majority of Ryanair’s bases currently have no slot allocations, traffic at a
minority of the airports Ryanair serves, including its primary bases, is currently regulated through slot
allocations. Applicable EU regulations appear to prohibit the buying or selling of slots for cash, although media
reports indicate that the buying and selling of slots may be happening at certain airports in Europe. Regardless
of any such sales, there can be no assurance that Ryanair will be able to obtain a sufficient number of slots at
slot-controlled airports that it may wish to serve in the future, at the time it needs them, or on acceptable terms.
There can also be no assurance that its non-slot bases, or the other non-slot airports Ryanair serves, will
continue to operate without slot allocations in the future. See “Item 4. Information on the Company—
Government Regulation—Slots.” Airports may impose other operating restrictions such as curfews, limits on
aircraft noise levels, mandatory flight paths, runway restrictions, and limits on the number of average daily
departures. Such restrictions may limit the ability of Ryanair to provide service to, or increase service at, such
airports.
Ryanair’s future growth also materially depends on its ability to access suitable airports located in its
targeted geographic markets at costs that are consistent with Ryanair’s low-fares strategy. Any condition that
denies, limits, or delays Ryanair’s access to airports it serves or seeks to serve in the future would constrain
Ryanair’s ability to grow. A change in the terms of Ryanair’s access to these facilities or any increase in the
relevant charges paid by Ryanair as a result of the expiration or termination of such arrangements and Ryanair’s
failure to renegotiate comparable terms or rates could have a material adverse effect on the Company’s financial
condition and results of operations. For example, in March 2007, the discount arrangement formerly in place at
London (Stansted) airport terminated, subjecting Ryanair to an average increase in charges of approximately
100%. This increase in charges had a negative impact on yields and passenger volumes. In addition, in
September 2006, the Dublin Airport Authority (“DAA”) announced that it was planning to build a new terminal
(Terminal 2) at Dublin Airport at a cost of approximately €800 million. Subsequently, the projected cost of the
new terminal has risen to in excess of €1.0 billion. This capital expenditure will mean that charges at Dublin
Airport will increase significantly, possibly doubling from their current level, leading to increased fares and an
adverse impact on yields and passenger volumes at Dublin Airport. Ryanair has responded by moving to reduce
capacity in both summer and winter periods. The increase in charges, in combination with the introduction of
the €10 Air Travel Tax described below, could lead to substantially reduced passenger volumes and a significant
decline in yields on flights to and from Dublin Airport. See “Item 4. Information on the Company—Airport
Operations—Airport Charges.” See also “—The Company Is Subject to Legal Proceedings Alleging State Aid at
Certain Airports.”