Ryanair 2009 Annual Report Download - page 90

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At June 30, 2009, Ryanair had mandated a number of lenders to provide financing for up to 65 of its
firm-order Boeing 737-800 aircraft under ExIm Bank guaranteed financing structures (although guarantees with
respect to 55 of such aircraft remain subject to the receipt of ExIm Bank’s preliminary commitment). The
Company expects to finance the remaining 88 Boeing 737-800 aircraft it is obligated to purchase under its
contracts with Boeing by March 2012 and any option aircraft it acquires under those agreements through the use
of similar financing arrangements based on ExIm Bank guarantees, bank debt provided by commercial banks,
and finance and operating leases, including via sale-and-leaseback transactions such as those described below,
as well as cash flow generated from the Company’s operations. It is expected that any future ExIm 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 43 of the Boeing 737-800 aircraft delivered between December 2003 and
March 2009 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. 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. Fifteen 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 12 of these leases into fixed-rate rental payments.
Twenty-one of these leases are denominated in Euro and require Ryanair to make fixed rental payments over the
term of the lease. The remaining seven 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 five require Ryanair to
make fixed rental payments. The Company has an option to extend the initial period of seven years on 77% of
the operating lease aircraft on pre-determined terms. Ryanair has financed an additional four aircraft, delivered
in May and June 2009, through similar sale-and-leaseback arrangements with international leasing companies.
In addition to the above, the Company financed 20 of the Boeing 737-800 aircraft delivered between March
2005 and March 2009 with 13-year Euro-denominated JOLCOs. These structures are accounted for as finance
leases and 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.
The remaining three aircraft in Ryanair’s fleet at March 31, 2009 were originally acquired through ExIm Bank-
guaranteed financing but were not subject to any financing-related encumbrances as of such date.
Since, under each of the Company’s operating leases, the Company has a commitment to maintain the
relevant aircraft, an accounting provision is made during the lease term for this obligation based on estimated
future costs of major airframe and certain engine maintenance checks by making appropriate charges to the
income statement calculated by reference to the number of hours or cycles operated during the year. Under
IFRS, the accounting treatment for these costs with respect to leased aircraft differs from that for aircraft owned
by the Company, for which such costs are capitalized and amortized.
In 2000, Ryanair purchased a Boeing 737-800 flight simulator from CAE Electronics Limited of
Quebec, Canada (“CAE”). The simulator is being used for pilot training purposes. The gross purchase price of
the simulator and the necessary software was approximately $10 million, not taking into account certain price
concessions provided by the seller in the form of credit memoranda. The Company financed this expenditure
with a 10-year Euro-denominated loan provided by the Export Development Corporation of Canada for up to
85% of the net purchase price, with the remainder provided by cash flows from operations.
In 2002, Ryanair entered into a contract to purchase three additional Boeing 737-800 flight simulators
from CAE. The first of these simulators was delivered in 2004 and the second and third simulators were
delivered in the 2008 fiscal year. The gross price of each simulator was approximately $10.3 million, not taking
into account certain price concessions provided by the seller in the form of credit memoranda. In September
2006 Ryanair entered into a new contract with CAE to purchase five B737NG Level B flight simulators. The
first two of these simulators were delivered in the 2009 fiscal year. This contract also provides Ryanair with an
option to purchase another five such simulators. The gross price of each simulator is approximately $8 million,
not taking into account certain price concessions provided by the seller in the form of credit memoranda and
discounts.