Ryanair 2016 Annual Report Download - page 193

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which reflects increases in the published U.S. Employment Cost and Producer Price indices between the time the Basic
Price was set and the period of 18 to 24 months prior to the delivery of such aircraft.
The “Basic Price” (equivalent to a standard list price for an aircraft of this type) for each aircraft governed by the
2014 Boeing contract will be increased by (a) an estimated U.S.$1.6 million per aircraft for certain “buyer furnished”
equipment the Company has asked Boeing to purchase and install on each of the aircraft, and (b) an “Escalation Factor”
designed to increase the Basic Price, as defined in the purchase agreement, of any individual aircraft by applying a formula
which reflects increases in the published U.S. Employment Cost and Producer Price indices between the time the Basic
Price was set and the period of 18 to 24 months prior to the delivery of such aircraft.
Boeing has granted Ryanair certain price concessions as part of the Boeing 2013 Contract and the 2014 Contract.
These take the form of credit memoranda to the Company for the amount of such concessions, which the Company may
apply toward the purchase of goods and services from Boeing or toward certain payments, other than advance payments,
in respect of the purchase of the aircraft under the various Boeing contracts.
Boeing and CFMI (the manufacturer of the engines to be fitted on the purchased aircraft) have also agreed to give
the Company certain allowances in addition to providing other goods and services to the Company on concessionary terms.
These credit memoranda and allowances will effectively reduce the price of each aircraft to the Company. As a result, the
effective price of each aircraft (the purchase price of the new aircraft net of discounts received from Boeing) will be
significantly below the Basic Price mentioned above. At March 31, 2016 and March 31, 2015, the total potential
commitment to acquire all 283 “firm” aircraft, not taking such increases and decreases into account, will be approximately
U.S. $24.6 billion.
Operating leases
The Company financed 76 of the Boeing 737-800 aircraft delivered between December 2003 and March 2014
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. Between October 2010 and March
2016, 33 operating lease aircraft were returned to the lessor at the agreed maturity date of the lease. At March 31, 2016
Ryanair had 43 operating lease aircraft in the fleet. As a result, Ryanair operates, but does not own, these aircraft. Ryanair
has no right or obligation to acquire these aircraft at the end of the relevant lease terms. Nine of these leases are
denominated in euro and require Ryanair to make fixed rental payments over the term of the leases. 34 remaining operating
leases are U.S. dollar-denominated which require Ryanair to make fixed rental payments. The Company has an option to
extend the initial period of seven years on 23 of the 43 remaining operating lease aircraft as at March 31, 2016, on pre-
determined terms. The following table sets out the total future minimum payments of leasing 43 aircraft (2015: 51 aircraft;
2014: 51 aircraft), at March 31, 2016, 2015 and 2014, respectively:
At March 31,
2016
2015
2014
Minimum
Minimum
Minimum
payments
payments
payments
€M
€M
€M
Due within one year
93.5
139.9
118.7
Due between one and five years
184.8
272.7
292.1
Due after five years
0.5
20.2
61.9
Total
278.8
432.8
472.7
Finance leases
The Company financed 30 Boeing 737-800 aircraft delivered between March 2005 and March 2014 with 13-year
euro-denominated Japanese Operating Leases with Call Options (“JOLCOs”). These structures are accounted for as finance
leases and are initially 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. Ryanair
exercised this option for 4 of these aircraft in fiscal year 2015. 6 aircraft have been financed through euro-denominated
12 year amortising commercial debt transactions.