Ryanair 2012 Annual Report Download - page 76

76
provides direct services as opposed to connecting flights, in order to limit the need for
passengers to transfer at main hubs and thus reduces the number of take-offs and landings per
journey from four to two, reducing fuel burn and emissions per journey; and
has no late-night departures of aircraft, reducing the impact of noise emissions.
Emissions Trading. On November 19, 2008, the European Council of Ministers adopted legislation to
add aviation to the EU Emissions Trading Scheme as of 2012. This scheme, which has thus far applied mainly
to energy producers, is a cap-and-trade system for CO2 emissions to encourage industries to improve their CO2
efficiency. Under the legislation, airlines were granted initial CO2 allowances based on historical ―revenue ton
kilometers‖ and a CO2 efficiency benchmark. Any shortage of allowances has to be purchased in the open
market and/or at government auctions. The Company has estimated its carbon credit requirements in respect of
2012 and has hedged its exposures at a cost of approximately €10 to €15 million. Management believes that this
legislation is likely to have a negative impact on the European airline industry. Ryanair takes its environmental
responsibilities seriously and intends to continue to improve its environmental efficiency and to minimize
emissions.
Aviation Taxes. Ryanair is fundamentally opposed to the introduction of any aviation taxes, including
any environmental taxes, fuel taxes or emissions levies. Ryanair has and continues to offer the lowest fares in
Europe, to make passenger air travel affordable and accessible to European consumers. Ryanair believes that the
imposition of additional taxes on airlines will not only increase airfares, but will discourage new entrants into
the market, resulting in less choice for consumers. Ryanair believes this would ultimately have adverse effects
on the European economy in general. There is in particular no justification for any environmental taxes on
aviation following the introduction of the Emissions Trading Scheme for airlines.
As a company, Ryanair believes in free market competition and that the imposition of aviation taxation
would favor the less efficient flag carriers – which generally have smaller and older aircraft, lower load factors,
and a much higher fuel burn per passenger, and which operate primarily into congested airports – and reduce
competition. Furthermore, the introduction of a tax at a European level only would distort competition between
airlines operating solely within Europe and those operating also outside of Europe. We believe that the
introduction of such a tax would also be incompatible with international law. See ―Item 3. Key Information—
Risk Factors—Introduction of New or Increases in Existing Aviation Taxes Could Increase Costs.‖
Airport charges
The EU Airport Charges Directive of March 2009 sets forth general principles that are to be followed
by airports with more than five million passenger per annum, and all capital city airports irrespective of their
passenger throughput, when setting airport charges, and provides for an appeals procedure for airlines in the
event they are not satisfied with the level of charges. However, Ryanair does not believe that this procedure will
be effective or that it will constrain those airports that are currently abusing their dominant position, in part
because the legislation was mis-transposed in certain countries, such as Ireland, so as to deprive airlines of even
the basic safeguards provided for in the Directive. This legislation may in fact lead to higher airport charges,
depending on how its provisions are applied by EU member states and subsequently by the courts.
Slots
Currently, the majority of Ryanair‘s bases of operations have no ―slot‖ allocation restrictions; however,
traffic at a substantial number of the airports Ryanair serves, including its primary bases, are regulated by means
of ―slot‖ allocations, which represent authorizations to take off or land at a particular airport within a specified
time period. In addition, EU law currently regulates the acquisition, transfer, and loss of slots. Applicable EU
regulations currently prohibit the buying or selling of slots for cash. The European Commission adopted a
regulation in April 2004 (Regulation (EC) No. 793/2004) that made some minor amendments to the current
allocation system, allowing for limited transfers of, but not trading in, slots. Slots may be transferred from one
route to another by the same carrier, transferred within a group or as part of a change of control of a carrier, or
swapped between carriers. In April 2008, the European Commission issued a communication on the application
of the slot allocation regulation, signaling the acceptance of secondary trading of airport slots between airlines.
This is expected to allow more flexibility and mobility in the use of slots and will further enhance possibilities
for market entry at slot constrained airports. Any future legislation that might create an official secondary
market for slots could create a potential source of revenue for certain of Ryanair‘s current and potential