Ryanair 2016 Annual Report Download - page 58

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In addition to traditional competition among airline companies and charter operators who have entered the low-
fares market, the industry also faces competition from ground transportation (including high-speed rail systems) and sea
transportation alternatives, as businesses and recreational travelers seek substitutes for air travel.
The Company Will Incur Significant Costs Acquiring New Aircraft and Any Instability in the Credit and Capital
Markets Could Negatively Impact Ryanair’s Ability to Obtain Financing on Acceptable Terms. Ryanair’s continued growth
is dependent upon its ability to acquire additional aircraft to meet additional capacity needs and to replace older aircraft.
Ryanair had over 350 aircraft in its principal fleet by June 30, 2016 and has ordered an additional 315 new aircraft (a mix
of new Boeing 737-800 next generation aircraft and 737-MAX-200 aircraft, of which 100 are firm orders and 100 are
subject to option) for delivery post June 30, 2016 to fiscal 2024 pursuant to contracts with the Boeing Company (the “2013
Boeing Contract” and “2014 Boeing Contract”). Ryanair expects to have approximately 546 operating aircraft in its fleet
by March 31, 2024, depending on the level of lease returns/disposals. For additional information on the Company’s aircraft
fleet and expansion plans, see “Item 4. Information on the Company—Aircraft” and “Item 5. Operating and Financial
Review and ProspectsLiquidity and Capital Resources.” There can be no assurance that this planned expansion will not
outpace the growth of passenger traffic on Ryanair’s routes or that traffic growth will not prove to be greater than the
expanded fleet can accommodate. In either case, such developments could have a material adverse effect on the Company’s
business, results of operations, and financial condition.
As a result of the 2013 Boeing Contract and 2014 Boeing Contract, the Company has raised and expects to
continue to raise substantial debt financing to cover all of the expected aircraft deliveries over the period from September
2014 to November 2023, including Ryanair’s issuance of €850.0 million in 1.875% unsecured Eurobonds with a 7 year
tenor in June 2014 and issuance of €850.0 million in 1.125% unsecured Eurobonds with an 8 year tenor in March 2015
that are both guaranteed by Ryanair Holdings. Furthermore, Ryanair’s ability to raise unsecured or secured debt to pay for
aircraft as they are delivered is subject to various conditions imposed by the counterparties and debt markets to such loan
facilities and related loan guarantees, and any future financing is expected to be subject to similar conditions. Any failure
by Ryanair to comply with such conditions would have a material adverse effect on its operations and financial condition.
Additionally, Ryanair’s ability to raise unsecured or secured debt to pay for aircraft is subject to potential volatility in the
worldwide financial markets.
Using the debt capital markets to finance the Company and the 2013 and 2014 Boeing Contracts requires the
Company to retain its investment grade credit ratings (the Company has a BBB+ (stable) credit rating from S&P and a
BBB+ (stable) credit rating from Fitch Ratings). There is a risk that the Company will be unable, or unwilling, to access
these markets if it is downgraded or is unable to retain its investment grade credit ratings and this could lead to a higher
cost of finance for Ryanair.
Ryanair has also entered into significant derivative transactions intended to hedge its current aircraft acquisition-
related debt obligations. These derivative transactions expose Ryanair to certain risks and could have adverse effects on
its results of operations and financial condition. See “Item 11. Quantitative and Qualitative Disclosures About Market
Risk.”
The Company’s Growth May Expose it to Risks. Ryanair’s operations have grown rapidly since it pioneered the
low-fares operating model in Europe in the early 1990s. Ryanair intends to continue to expand its fleet and add new
destinations and additional flights, with the goal of increasing Ryanair’s booked passenger volumes to approximately 180.0
million passengers per annum by March 31, 2024, an increase of approximately 69% from the approximately 106.4 million
passengers booked in the 2016 fiscal year. However, no assurance can be given that this target will be met. If growth in
passenger traffic and Ryanair’s revenues do not keep pace with the planned expansion of its fleet, Ryanair could suffer
from overcapacity and its results of operations and financial condition (including its ability to fund scheduled purchases
of the new aircraft and related debt repayments) could be materially adversely affected.
The continued expansion of Ryanair’s fleet and operations combined with other factors, may also strain existing
management resources and related operational, financial, management information and information technology systems.
Expansion will generally require additional skilled personnel, equipment, facilities and systems. An inability to hire skilled
personnel or to secure required equipment and facilities efficiently and in a cost-effective manner may adversely affect
Ryanair’s ability to achieve its growth plans and sustain or increase its profitability.