Ryanair 2011 Annual Report Download - page 78

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million in the 2011 fiscal year. Scheduled passenger revenues increased approximately 22% from 12,324.5
million in the 2010 fiscal year to 12,827.9 million in the 2011 fiscal year. Average yield per RPM was 10.052 in
the 2010 fiscal year and 10.053 in the 2011 fiscal year. The slight increase in average yield per RPM in the 2011
fiscal year was principally attributable to a combination of longer sector length and a better selection of new
routes and bases.
Expanding passenger volumes and capacity, high load factors and aggressive cost containment have
enabled Ryanair to continue to generate operating profits despite increasing price competition and increases in
certain costs. Ryanair’s total break-even load factor was 73% in the 2010 fiscal year and 72% in the 2011 fiscal
year. Cost per ASM was 10.047 in the 2010 fiscal year and 10.049 in the 2011 fiscal year, with the increase
primarily reflecting the higher fuel cost per ASM of 10.019 in the 2011 fiscal year, as compared to 10.017 in the
2010 fiscal year, as well as an increase of approximately 19% in ASMs in the 2011 fiscal year. Ryanair recorded
operating profits of 1402.1 million in the 2010 fiscal year and 1488.2 million in the 2011 fiscal year. The
Company recorded a profit after taxation of 1305.3 million in the 2010 fiscal year and profit after taxation of
1374.6 million in the 2011 fiscal year. Ryanair recorded seat capacity growth of approximately 8% in the 2011
fiscal year, compared to approximately 12% in the 2010 fiscal year, and expects capacity to increase by
approximately 5% in the 2012 fiscal year. See “Item 3. Key Information—Risk Factors—Ryanair Has Decided
to Seasonally Ground Aircraft.”
Investment in Aer Lingus
The Company owns 29.8% of Aer Lingus, which it acquired in fiscal years 2007, 2008 and 2009 at a
total cost of 1407.2 million. Following the approval of its shareholders, management proposed in the 2007 fiscal
year to effect a tender offer to acquire the entire share capital of Aer Lingus. This 2006 offer was, however,
prohibited by the European Commission on competition grounds in June 2007. Ryanair’s management viewed
the acquisition of Aer Lingus in the context of the overall trend of consolidation among airlines in Europe and
believed that the acquisition would lead to the formation of one strong Irish airline group able to compete with
large carriers such as Lufthansa, Air France/KLM and British Airways/Iberia (now “International Airlines
Group”). During the EU competition review, the Company made a commitment that if the acquisition was
approved, Ryanair would eliminate Aer Lingus’ fuel surcharges and reduce its fares, which would have resulted
in Aer Lingus passengers saving approximately 1100 million per year. The Company was thus surprised and
disappointed by the European Commission’s decision to prohibit this offer. This decision was the first adverse
decision taken in respect of any EU airline merger and the first-ever adverse decision in respect of a proposed
merger of two companies with less than 5% of the EU market for their services. Ryanair filed an appeal with the
CFI, which was heard in July 2009. On July 6, 2010, the CFI upheld the Commission’s decision.
In October 2007, the European Commission also reached a formal decision that it would not force
Ryanair to sell its shares in Aer Lingus. Aer Lingus appealed this decision before the CFI. This case was heard
in July 2009 and on July 6, 2010 the court rejected Aer Lingus’ appeal and confirmed that Ryanair cannot be
forced to dispose of its 29.8% stake in Aer Lingus. However, EU legislation may change in the future to require
such a forced disposition. If eventually forced to dispose of its stake in Aer Lingus, Ryanair could suffer
significant losses due to the negative impact on attainable prices of the forced sale of such a significant portion
of Aer Lingus’ shares.
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 11.40 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 1180 million in cash. The
employee share option trust and employees, who owned 18% of Aer Lingus, would have received over 1137
million in cash. The Company met Aer Lingus management, representatives of the employee share option trust
and other parties, including members of the Irish Government. The offer of 11.40 per share represented a
premium of approximately 25% over the closing price of 11.12 for Aer Lingus shares on November 28, 2008.
As the Company was unable to secure the shareholders’ support, it decided on January 28, 2009 to withdraw its
new offer for Aer Lingus.
The United Kingdom’s Office of Fair Trading (“OFT”) wrote to Ryanair in September 2010, advising
that it intends to investigate Ryanair’s minority stake in Aer Lingus. Ryanair objected to this investigation on
the basis that the OFT’s investigation is time-barred. Ryanair maintains that the OFT had the opportunity, which