Ryanair 2011 Annual Report Download - page 52

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public’s perception of, and confidence in, low-fares airlines like Ryanair, and could have a material adverse
effect on the Company’s financial condition and results of operations.
Terrorism in the United Kingdom or Elsewhere in Europe Could Have a Material Detrimental Effect
on the Company. On August 10, 2006, U.K. security authorities arrested and subsequently charged eight
individuals in connection with an alleged plot to attack aircraft operating on transatlantic routes. As a result of
these arrests, U.K. authorities introduced increased security measures, which resulted in all passengers being
body-searched, and a ban on the transportation in carry-on baggage of certain liquids and gels. The introduction
of these measures led to passengers suffering severe delays while passing through these airport security checks.
As a result, Ryanair cancelled 279 flights in the days following the incident and refunded a total of 12.7 million
in fares to approximately 40,000 passengers. In the days following the arrests, Ryanair also suffered reductions
in bookings estimated to have resulted in the loss of approximately 11.9 million of additional revenue. As in the
past, the Company reacted to these adverse events by initiating system-wide fare sales to stimulate demand for
air travel.
In addition, reservations on Ryanair’s flights to London dropped materially for a number of days in the
immediate aftermath of the terrorist attacks in London on July 7, 2005. Although the terrorist attack in Glasgow
on June 30, 2007 (in which a car filled with explosives was driven into Glasgow’s airport) and the failed
terrorist attacks in London on July 21, 2005 and June 29, 2007 had no material impact on bookings, there can be
no assurance that future such attacks will not affect passenger traffic. In the 2011 fiscal year, 16.2 million
passengers were booked on Ryanair’s flights into and out of London, representing 22.5% of the total passengers
booked on all of the Company’s flights in the fiscal year. Future acts of terrorism or significant terrorist threats,
particularly in London or other markets that are significant to Ryanair, could have a material adverse effect on
the Company’s profitability or financial condition should the public’s willingness to travel to and from those
markets decline as a result. See also “—The 2001 Terrorist Attacks on the United States Had a Severe Negative
Impact on the International Airline Industry” below.
The 2001 Terrorist Attacks on the United States Had a Severe Negative Impact on the International
Airline Industry. The terrorist attacks on the United States on September 11, 2001, in which four commercial
aircraft were hijacked, had a severe negative impact on the international airline industry, particularly on U.S.
carriers and carriers operating international service to and from the United States. Although carriers such as
Ryanair that operate primarily or exclusively in Europe were generally spared from such material adverse
impacts on their businesses, the cost to all commercial airlines of insurance coverage for certain third-party
liabilities arising from “acts of war” or terrorism increased dramatically after the September 11 attacks. See
“Item 4. Information on the Company—Insurance.” In addition, Ryanair’s insurers have indicated that the scope
of the Company’s current “act of war”-related insurance may exclude certain types of catastrophic incidents,
such as certain forms of biological, chemical or “dirty bomb” attacks. This could result in the Company’s
seeking alternative coverage, including government insurance or self-insurance, which could lead to further
increases in costs. Although Ryanair to date has passed on increased insurance costs to passengers by means of a
special “insurance levy” on each ticket, there can be no assurance that it will continue to be successful in doing
so.
Because a substantial portion of airline travel (both business and personal) is discretionary and because
Ryanair is substantially dependent on discretionary air travel, any prolonged general reduction in airline
passenger traffic may adversely affect the Company. Similarly, any significant increase in expenses related to
security, insurance or related costs could have a material adverse effect on the Company. Any further terrorist
attacks in the U.S. or in Europe, particularly in London or other markets that are significant to Ryanair, any
significant military actions by the United States or EU nations or any related economic downturn may have a
material adverse effect on demand for air travel and thus on Ryanair’s business, operating results, and financial
condition. See also “—Risks Related to the Company—Further Terrorist Attacks in London and Other
Destinations Could Have a Detrimental Effect on the Company.”
The Company Faces the Risk of Loss and Liability. Ryanair is exposed to potential catastrophic losses
that may be incurred in the event of an aircraft accident or terrorist incident. Any such accident or incident could
involve costs related to the repair or replacement of a damaged aircraft and its consequent temporary or
permanent loss from service. In addition, an accident or incident could result in significant legal claims against
the Company from injured passengers and others who experienced injury as a result of the accident or incident,
including ground victims. Ryanair currently maintains passenger liability insurance, employer liability