Ryanair 2012 Annual Report Download - page 80

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Ryanair has offered to keep Aer Lingus as a separate company, maintain the Aer Lingus brand, and to
grow its traffic from 9.5 million to over 14.5 million passengers over a five year period post acquisition, by
growing Aer Lingus‘ short haul traffic at some of Europe‘s major airports where Aer Lingus currently operates
and Ryanair does not. Ryanair also intends to increase Aer Lingus‘ transatlantic traffic from Ireland, which has
fallen in recent years, by investing in operations. If the offer is accepted, the Irish government would receive
€173 million in cash. The offer of €1.30 per share represented a premium of approximately 38% over the
closing price of €0.94 for Aer Lingus shares as of June 19, 2012. The offer is conditional on competition
approval by the European Commission. The Company anticipates that the EU merger review process will be
completed between September 2012 and February 2013.
The available for sale financial asset balance sheet value of €149.7 million reflects the market value of
the Company‘s stake in Aer Lingus as of March 31, 2012, as compared to a value of €114.0 million as of March
31, 2011. In accordance with the company‘s accounting policy, this investment is held at fair value. This
investment is classified as available-for-sale, rather than as an investment in an associate, because the Company
does not have the power to exercise any influence over Aer Lingus. The change in the available for sale
financial asset from €114.0 million at March 31, 2011 to €149.7 million at March 31, 2012 is comprised of a
gain of €35.7 million, recognised through other comprehensive income, reflecting the increase in the share price
from €0.72 per share at March 31, 2011 to €0.94 per share at March 31, 2012. All impairment losses are
required to be recognized in the income statement and are not subsequently reversed, while gains are recognized
through other comprehensive income. The investment had in prior periods been impaired to €0.50 per share. In
fiscal year 2010, the Company recorded an impairment charge of €13.5 million in the income statement on its
Aer Lingus shareholding.
The Company's determination that it does not have control, or even exercise a ―significant influence,‖
over Aer Lingus through its minority shareholding has been based on the following factors:
(i) Ryanair does not have any representation on the Aer Lingus Board of Directors; nor does it have a right to
appoint a director.
(ii) Ryanair does not participate in Aer Lingus policy-making decisions; nor does it have a right to participate in
such policy-making decisions.
(iii) There are no material transactions between Ryanair and Aer Lingus, there is no interchange of personnel
between the two companies and there is no sharing of technical information between the companies.
(iv) Aer Lingus and its significant shareholder (the Irish government: 25.1%) have historically openly opposed
Ryanair‘s investment or participation in the company.
(v) In August 2007, September 2007 and November/December 2011, Aer Lingus refused Ryanair‘s attempt to
assert its statutory right to requisition a general meeting (a legal right of any 10% shareholder under Irish law).
(vi) On April 15, 2011, the High Court in Dublin ruled that Aer Lingus was not obliged to accede to Ryanair‘s
request that two additional resolutions (on the payment of a dividend and on payments to pension schemes) be
put to vote at Aer Lingus‘ annual general meeting; and
(vii) The European Commission has formally found that Ryanair‘s shareholding in Aer Lingus does not grant
Ryanair ―de jure or de facto control of Aer Lingus‖ and that ―Ryanair‘s rights as a minority shareholder…are
associated exclusively to rights related to the protection of minority shareholders‖ (Commission Decision Case
No. COMP/M.4439 dated October 11, 2007). The European Commission‘s finding has been confirmed by the
European Union's General Court which issued a decision on July 6, 2010 that the European Commission was
justified to use the required legal and factual standard in its refusal to order Ryanair to divest its minority
shareholding in Aer Lingus and that, as part of that decision, Ryanair‘s shareholding did not confer control of
Aer Lingus (Judgment of the General Court (Third Chamber) Case No. T-411/07 dated July 6, 2010).
Historical Results Are Not Predictive of Future Results
The historical results of operations discussed herein may not be indicative of Ryanair‘s future operating
performance. Ryanair‘s future results of operations will be affected by, among other things, overall passenger
traffic volume; the availability of new airports for expansion; fuel prices; the airline pricing environment in a