Ryanair 2009 Annual Report Download - page 51

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Commitment to Safety and Quality Maintenance. Safety is the primary priority of Ryanair and its
management. This commitment begins with the hiring and training of Ryanair’s pilots, flight attendants, and
maintenance personnel and includes a policy of maintaining its aircraft in accordance with the highest European
airline industry standards. Ryanair has not had a single incident involving major injury to a passenger or a
member of its flight crew in its 24-year operating history. Although Ryanair seeks to maintain its fleet in a cost-
effective manner, management does not seek to extend Ryanair’s low-cost operating strategy to the areas of
safety, maintenance, training or quality assurance. Routine aircraft maintenance and repair services are
performed primarily by Ryanair, at Ryanair’s main bases, but are also performed at other base airports by
maintenance contractors approved under the terms of Part 145. Ryanair currently performs heavy airframe
maintenance, but contracts with other parties who perform engine overhaul services and rotable repairs. These
contractors also provide similar services to a number of other airlines, including British Airways and Aer
Lingus. Ryanair assigns a Part 145 certified mechanic to oversee engine overhauls performed by other parties.
Enhancement of Operating Results through Ancillary Services. Ryanair provides various ancillary
services and engages in other activities connected with its core air passenger service, including non-flight
scheduled services, the in-flight sale of beverages, food and merchandise and Internet-related services. As part
of its non-flight services, Ryanair distributes accommodation, travel insurance and car rentals, principally
through its website. Providing these services through the Internet allows Ryanair to increase sales, while at the
same time reducing costs on a per-unit basis.
For the 2009 fiscal year, ancillary services accounted for 20.3% of Ryanair’s total operating revenues,
as compared to 18.0% of such revenues in the 2008 fiscal year. See “—Ancillary Services” below and “Item 5.
Operating and Financial Review and Prospects—Results of Operations—Fiscal Year 2009 Compared with
Fiscal Year 2008—Ancillary Revenues” for additional information.
Focused Criteria for Growth. Building on its success in the Ireland-U.K. market and its expansion of
service to continental Europe and Morocco, Ryanair intends to follow a manageable growth plan targeting
specific markets. Ryanair believes it will have opportunities for continued growth by: (i) initiating additional
routes in the EU; (ii) initiating additional routes in countries party to a European Common Aviation Agreement
with the EU that are currently served by higher-cost, higher-fare carriers; (iii) increasing the frequency of
service on its existing routes; (iv) starting new domestic routes within individual EU countries; (v) considering
acquisition opportunities that may become available in the future; (vi) connecting airports within its existing
route network (“triangulation”); (vi) establishing new bases in continental Europe; and (vii) initiating new routes
not currently served by any carrier.
During the 2007 fiscal year, the Company acquired 25.2% of Aer Lingus. The Company thereafter
increased its interest to 29.3% during the 2008 fiscal year, and to 29.8% during the 2009 fiscal year at a total
aggregate cost of €407.2 million. Following the acquisition of its initial stake and upon the approval of the
Company’s shareholders, management proposed to effect a tender offer to acquire the entire share capital of Aer
Lingus. This acquisition proposal was, however, blocked by the European Commission on competition grounds.
Ryanair filed an appeal with the CFI, which was heard in July 2009, and currently expects the CFI to announce
its decision approximately nine months thereafter.
On December 1, 2008, Ryanair made a new offer to acquire all of the ordinary shares of Aer Lingus it
did not own at a price of €1.40 per ordinary share. Ryanair offered to keep Aer Lingus as a separate company,
maintain the Aer Lingus brand, and retain its Heathrow slots and connectivity. Ryanair also proposed to double
Aer Lingus’ short-haul fleet from 33 to 66 aircraft and to create 1,000 associated new jobs over a five-year
period. If the offer had been accepted, the Irish government would have received over €180 million in cash. The
employee share option trust and employees who own 18% of Aer Lingus would have received over €137 million
in cash. The Company met Aer Lingus management, representatives of the employee share option trust and
other parties. The offer of €1.40 per share represented a premium of approximately 25% over the closing price
of €1.12 of Aer Lingus on November 28, 2008. However, as the Company was unable to secure the
shareholders’ support (to sell their stakes in Aer Lingus to Ryanair), the Company decided on January 28, 2009,
to withdraw its new offer for Aer Lingus.
See “Item 8. Financial Information—Other Financial Information—Legal Proceedings—Aer Lingus
Merger Decision.”
Responding to Current Challenges. In recent periods, and with increased effect in the 2008 and 2009
fiscal years, Ryanair’s low-cost, low-fares model has faced substantial pressure due to significantly increased