Ryanair 2016 Annual Report Download - page 60

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by government agencies in a number of countries to the applicability of Irish labor law to these contracts, and if Ryanair
were forced to concede that Irish jurisdiction did not apply to those crew who operate from continental Europe then it
could lead to increased salary, social insurance and pension costs and a potential loss of flexibility. In relation to social
insurance costs, the European Parliament implemented amendments to Regulation (EC) 883/2004 which, in the majority
of jurisdictions, imposes substantial social insurance contribution increases for either or both Ryanair and the individual
employees. While this change to social insurance contributions relates primarily to new employees, its effect in the long
term may materially increase Company or employee social insurance contributions and could affect Ryanair’s decision to
operate from those high cost locations, resulting in redundancies and a consequent deterioration in labor relations. For
additional details see — “Change in EU Regulations in Relation to Employers and Employee Social Insurance Could
Increase Costs” below.
Ryanair currently conducts collective bargaining negotiations with groups of employees, including its pilots and
cabin crew, regarding pay, work practices, and conditions of employment, through collective-bargaining units called
Employee Representative Committees (“ERC”). Following negotiations through this ERC system, pilots at all of Ryanair’s
84 bases are covered by four, five or six year collective agreements on pay, allowances and rosters which fall due for
negotiation at various dates between 2017 and 2021. Cabin crew at all of Ryanair’s bases are also party to long term
collective agreements on pay, allowances and rosters, which expire in March 2021. Limitations on Ryanair’s flexibility in
dealing with its employees or the altering of the public’s perception of Ryanair generally could have a material adverse
effect on Ryanair’s business, operating results, and financial condition. For additional details, see “Item 6. Directors, Senior
Management and Employees—Staff and Labor Relations.”
The Company is Dependent on External Service Providers. Ryanair currently assigns its engine overhauls and
“rotable” repairs to outside contractors approved under the terms of Part 145, the European regulatory standard for aircraft
maintenance established by the European Aviation Safety Agency (“Part 145”). The Company also assigns its passenger,
aircraft and ground handling services at airports other than Dublin and certain airports in Spain (including the Canary
Islands) and Portugal to established external service providers. See “Item 4. Information on the Company—Maintenance
and Repairs—Heavy Maintenance” and “Item 4. Information on the Company—Airport OperationsAirport Handling
Services.”
The termination or expiration of any of Ryanair’s service contracts or any inability to renew them or negotiate
replacement contracts with other service providers at comparable rates could have a material adverse effect on the
Company’s results of operations. Ryanair will need to enter into airport service agreements in any new markets it enters,
and there can be no assurance that it will be able to obtain the necessary facilities and services at competitive rates. In
addition, although Ryanair seeks to monitor the performance of external parties that provide passenger and aircraft
handling services, the efficiency, timeliness, and quality of contract performance by external providers are largely beyond
Ryanair’s direct control. Ryanair expects to be dependent on such outsourcing arrangements for the foreseeable future.
The Company is Dependent on Key Personnel. Ryanair’s success depends to a significant extent upon the efforts
and abilities of its senior management team, including Michael O’Leary, the CEO, and key financial, commercial,
operating, IT and maintenance personnel. In October 2014, Mr. O’Leary signed a five-year contract with the Company.
This contract can be terminated by either party giving twelve months’ notice. See “Item 6. Directors, Senior Management
and Employees—Compensation of Directors and Executive Officers—Employment and Bonus Agreement with Mr.
O’Leary.” Ryanair’s success also depends on the ability of its executive officers and other members of senior management
to operate and manage effectively, both independently and as a group. Although Ryanair’s employment agreements with
Mr. O’Leary and several of its other senior executives contain non-competition and non-disclosure provisions, there can
be no assurance that these provisions will be enforceable in whole or in part. Competition for highly qualified personnel
is intense, and either the loss of any executive officer, senior manager, or other key employee without adequate replacement
or the inability to attract new qualified personnel could have a material adverse effect upon Ryanair’s business, operating
results, and financial condition.
The Company Faces Risks Related to its Internet Reservations Operations and its Announced Elimination of
Airport Check-in Facilities. Ryanair’s flight reservations are made through its website, mobile app and GDSs. Ryanair has
established contingency programs which include hosting its website in three separate locations and having a back-up
booking engine available to support its existing booking platform in the event of a breakdown in this facility. Nonetheless,
the process of switching over to the back-up engine could take some time and there can be no assurance that Ryanair would