REG - Ryanair Holdings PLC - Annual Financial Report <Origin Href="QuoteRef">RYA.I</Origin> - Part 5

Ryanair HoldingsAnnouncement

06/09/2014 22:39

- Part 5: For the preceding part double click  ID:nRSd7552Nd 

The address of Ryanair Holdings' registered office is: c/o Ryanair Limited, Corporate Head Office, Airside Business Park,
Swords, County Dublin, Ireland. The Company's contact person regarding this Annual Report on Form 20-F is: Howard Millar,
Deputy Chief Executive and Chief Financial Officer (same address as above). The telephone number is +353-1-945-1212 and the
facsimile number is +353-1-945-1213. Under its current Articles, Ryanair Holdings has an unlimited corporate duration. 
 
STRATEGY 
 
Ryanair's objective is to firmly establish itself as Europe's biggest scheduled passenger airline, through continued
improvements and expanded offerings of its low-fares service. In the highly challenging current operating environment,
Ryanair seeks to offer low fares that generate increased passenger traffic while maintaining a continuous focus on
cost-containment and operating efficiencies. The key elements of Ryanair's long-term strategy are: 
 
Low Fares. Ryanair's low fares are designed to stimulate demand, particularly from fare-conscious leisure and business
travelers who might otherwise use alternative forms of transportation or choose not to travel at all. Ryanair sells seats
on a one-way basis, thus eliminating minimum stay requirements from all travel on Ryanair scheduled services. Ryanair sets
fares on the basis of the demand for particular flights and by reference to the period remaining to the date of departure
of the flight, with higher fares typically charged on flights with higher levels of demand and for bookings made nearer to
the date of departure. Ryanair also periodically runs special promotional fare campaigns. See "-Route System, Scheduling
and Fares-Low and Widely Available Fares" below. 
 
Customer Service. Ryanair's strategy is to deliver the best customer service performance in its peer group. According to
the data available from the Association of European Airlines ("AEA") and airlines' own published statistics, Ryanair has
achieved better punctuality, fewer lost bags, and fewer cancellations than its peer group in Europe. Ryanair achieves this
by focusing strongly on the execution of these services and by primarily operating from un-congested airports. Ryanair
conducts a daily conference call with airport personnel at each of its base airports, during which the reasons for each
"first wave" flight delay and baggage short-shipment are discussed in detail and logged to ensure that the root cause is
identified and rectified. Subsequent (consequential) delays and short shipments are investigated by Ryanair ground
operations personnel. Customer satisfaction is also measured by regular online, mystery-passenger and by passenger
surveys. 
 
Ryanair is implementing a series of strategic initiatives that are expected to have a significant impact on its customer
service offering. Ryanair has also announced and introduced a series of customer-service related initiatives, including a
new, easier-to-navigate website with a fare finder facility, reduced penalty fees, allocated seating and more
customer-friendly baggage allowances and change policies. Further, these initiatives include scheduling more flights to
primary airports, selling flights via travel agents on GDS, increasing marketing spending significantly to support these
initiatives, and adjusting the airline's yield management strategy with the goal of increasing load factors and yield. 
 
Frequent Point-to-Point Flights on Short-Haul Routes. Ryanair provides frequent point-to-point service on short-haul routes
to secondary, regional, and more recently, certain primary airports in and around major population centers and travel
destinations. In the 2014 fiscal year, Ryanair flew an average route length of 788 miles and an average flight duration of
approximately 1.87 hours. Short-haul routes allow Ryanair to offer its low fares and frequent service, while eliminating
the need to provide unnecessary "frills," like free in-flight meals and movies, otherwise expected by customers on longer
flights. Point-to-point flying (as opposed to hub-and-spoke service) allows Ryanair to offer direct, non-stop routes and
avoid the costs of providing "through service," for connecting passengers, including baggage transfer and transit passenger
assistance. 
 
In choosing its routes, Ryanair primarily favors secondary airports with convenient transportation to major population
centers and regional airports. Secondary and regional airports are generally less congested than major airports and, as a
result, can be expected to provide higher rates of on-time departures, faster turnaround times (the time an aircraft spends
at a gate loading and unloading passengers), fewer terminal delays, more competitive airport access, and lower handling
costs. As part of its strategic initiatives, Ryanair plans to increase the number of primary airports that it serves,
focussing particularly on those that facilitate a quick turnaround and offer opportunities for the Company to profitably
enhance its route choice by adding city pairs that are attractive to both business and leisure customers alike. Ryanair's
"on time" performance record (arrivals within 15 minutes of schedule) for the 2014 fiscal year was 92%. Faster turnaround
times are a key element in Ryanair's efforts to maximize aircraft utilization. Ryanair's average scheduled turnaround time
for the 2014 fiscal year was approximately 25 minutes. 
 
Low Operating Costs. Management believes that Ryanair's operating costs are among the lowest of any European
scheduled-passenger airline. Ryanair strives to reduce or control four of the primary expenses involved in running a major
scheduled airline: (i) aircraft equipment costs; (ii) personnel costs; (iii) customer service costs; and (iv) airport
access and handling costs: 
 
Aircraft Equipment Costs. Ryanair's primary strategy for controlling aircraft acquisition costs is focused on operating a
single aircraft type. Ryanair currently operates only "next generation" Boeing 737-800s. Ryanair's continuous acquisition
of new Boeing 737-800s has already and is expected, through the end of fiscal 2019, to increase the size of its fleet and
thus increase its aircraft equipment and related costs (on an aggregate basis). However, the purchase of aircraft from a
single manufacturer enables Ryanair to limit the costs associated with personnel training, maintenance, and the purchase
and storage of spare parts while also affording the Company greater flexibility in the scheduling of crews and equipment.
Management also believes that the terms of Ryanair's contracts with Boeing are very favorable to Ryanair. See "¾Aircraft"
below for additional information on Ryanair's fleet. 
 
Personnel Costs. Ryanair endeavors to control its labor costs by seeking to continually improve the productivity of its
already highly productive work force. Compensation for personnel emphasizes productivity-based pay incentives. These
incentives include sales bonus payments for onboard sales of products for flight attendants and payments based on the
number of hours or sectors flown by pilots and flight attendants within limits set by industry standards or regulations
fixing maximum working hours. 
 
Customer Service Costs. Ryanair has entered into agreements on competitive terms with external contractors at certain
airports for ticketing, passenger and aircraft handling, and other services that management believes can be more
cost-efficiently provided by third parties. Management attempts to obtain competitive rates for such services by
negotiating fixed-price, multi-year contracts. The development of its own Internet booking facility has allowed Ryanair to
eliminate travel agent commissions. As part of its strategic initiatives, the Company has broadened its distribution base
by making Ryanair's fares available to Travelport (Galileo and Worldspan) at nominal cost to the Company. Ryanair generates
over 99% of its scheduled passenger revenues through direct sales via its website. 
 
Airport Access and Handling Costs. Ryanair attempts to control airport access and service charges by focusing on airports
that offer competitive prices. Management believes that Ryanair's record of delivering a consistently high volume of
passenger traffic growth at many airports has allowed it to negotiate favorable contracts with such airports for access to
their facilities, although the recent change in strategy by the Company may see it access some more primary airports, which
typically have higher airport charges and greater competition along with slot limitations. Secondary and regional airports
also generally do not have slot requirements or other operating restrictions that can increase operating expenses and limit
the number of allowed take-offs and landings. Ryanair further endeavors to reduce its airport charges by opting, when
practicable, for less expensive gate locations as well as outdoor boarding stairs, rather than jetways, which are more
expensive and operationally less efficient to use. In addition, since October 2009, Ryanair has required all passengers to
check-in on the Internet. This requirement was instituted to reduce waiting times at airports and speed a passenger's
journey from arrival at the airport to boarding, as well as significantly reduce airport handling costs. Ryanair has also
introduced a checked-bag fee, which is payable on the Internet at the time of booking and is aimed at reducing the number
of bags carried by passengers in order to further reduce handling costs. See "Risk Factors-Risks Related to the Company-The
Company Faces Risks Related to its Internet Reservations Operations and its Announced Elimination of Airport Check-in
Facilities." 
 
Taking Advantage of the Internet. In 2000, Ryanair converted its host reservation system to a new system, which it operates
under a hosting agreement with Navitaire that was extended in 2011 and will terminate in 2020. As part of the
implementation of the reservation system, Navitaire developed an Internet booking facility. The Ryanair system allows
Internet users to access its host reservation system and to make and pay for confirmed reservations in real time through
the Ryanair.com website. After the launch of the Internet reservation system, Ryanair heavily promoted its website through
newspaper, radio and television advertising. As a result, Internet bookings grew rapidly, and have accounted for over 99%
of all reservations over the past several years. In May 2012, Ryanair further upgraded the reservation system, which offers
more flexibility for future system enhancements and to accommodate the future growth of Ryanair. In November 2013, Ryanair
re-launched its website in a new, easier to use, format that reduced the booking process from 17 to 5 "clicks". Various
other initiatives were also introduced, including a fare finder facility which enables customers to easily find the lowest
fares. The new "My Ryanair" registration services, which allows customers to securely store their personal and payment
details, has also significantly quickened the booking process and made it easier for customers to book a flight. The
Company also launched a new mobile app on July 15, 2014, which will make it simpler and easier for customers to book
Ryanair flights. 
 
Commitment to Safety and Quality Maintenance. Safety is the primary priority of Ryanair and its management. This commitment
begins with the hiring and training of Ryanair's pilots, flight attendants, and maintenance personnel and includes a policy
of maintaining its aircraft in accordance with the highest European airline industry standards. Ryanair has not had a
single passenger or flight crew fatality as a result of an accident with one of its aircraft in its 30-year operating
history. Although Ryanair seeks to maintain its fleet in a cost-effective manner, management does not seek to extend
Ryanair's low-cost operating strategy to the areas of safety, maintenance, training or quality assurance. Routine aircraft
maintenance and repair services are performed primarily by Ryanair, at Ryanair's main bases, but are also performed at
other base airports by maintenance contractors approved under the terms of a European Aviation Safety Agency ("EASA") Part
145 approval. Ryanair currently performs heavy airframe maintenance, but contracts with other parties who perform engine
overhaul services and rotable repairs. These contractors also provide similar services to a number of other airlines,
including Southwest Airlines, British Airways, Air France and Alitalia. 
 
Enhancement of Operating Results through Ancillary Services. Ryanair distributes accommodation services and travel
insurance primarily through its website. For hotel services, Ryanair has a contract with Hotelscombined PTY Ltd, and they
provide a hotel comparison website to Ryanair which generates commissions for Ryanair on the number of bookings made.
Ryanair also has a contract with Bookings.com to market hotels during the website booking process. In addition, Ryanair has
a contract with the Hertz Corporation ("Hertz"), pursuant to which Hertz handles all car rental services marketed through
Ryanair's website or telephone reservation system. Ryanair also sells bus and some rail tickets onboard its aircraft and
through its website. For the 2014 fiscal year, ancillary services accounted for approximately 25% of Ryanair's total
operating revenues, as compared to approximately 22% of such revenues in the 2013 fiscal year. See "-Ancillary Services"
below and "Item 5. Operating and Financial Review and Prospects-Results of Operations-Fiscal Year 2014 Compared with Fiscal
Year 2013-Ancillary Revenues" for additional information. 
 
Focused Criteria for Growth. Building on its success in the Ireland-U.K. market and its expansion of service to continental
Europe and Morocco, Ryanair intends to follow a manageable growth plan targeting specific markets. Ryanair believes it will
have opportunities for continued growth by: (i) using aggressive fare promotions to increase load factors; (ii) initiating
additional routes in the EU; (iii) initiating additional routes in countries party to a European Common Aviation Agreement
with the EU that are currently served by higher-cost, higher-fare carriers; (iv) increasing the frequency of service on its
existing routes; (v) starting new domestic routes within individual EU countries; (vi) considering acquisition
opportunities that may become available in the future; (vii) connecting airports within its existing route network
("triangulation"); (viii) establishing new bases; and (ix) initiating new routes not currently served by any carrier. 
 
Responding to Current Challenges. In recent periods, and with increased effect in the 2012, 2013 and 2014 fiscal years,
Ryanair's low-fares business model has faced substantial pressure due to significantly increased fuel costs and reduced
economic growth (or economic contraction) in some of the economies in which it operates. The Company has aimed to meet
these challenges by: (i) grounding (approximately 70 in fiscal 2014 and 80 in fiscal 2013) aircraft during the winter
season; (ii) disposing of aircraft (lease hand backs totaled four in the 2013 fiscal year and eight in the 2014 fiscal
year); (iii) controlling labor and other costs, including through wage freezes for non-flight crew personnel in fiscal 2011
and fiscal 2013, selective redundancies and the introduction of Internet check-in in fiscal 2010; and (iv) renegotiating
contracts with existing suppliers, airports and handling companies. There can be no assurance that the Company will be
successful in achieving all of the foregoing or taking other similar measures, or that doing so will allow the Company to
earn profits in any period. See "Item 3. Key Information-Risk Factors-Risks Related to the Company-Changes in Fuel Costs
and Fuel Availability Affect the Company's Results and Increase the Likelihood of Adverse Impact to the Company's
Profitability" and "-The Company May Not Be Successful in Increasing Fares and Revenues to Cover Rising Business Costs." 
 
In recent years, in response to an operating environment characterized by high fuel prices, typically lower seasonal yields
and higher airport charges and/or taxes, Ryanair has adopted a policy of grounding a certain portion of its fleet during
the winter months (from November to March inclusive). In the winter months of fiscal 2014, Ryanair grounded approximately
70 aircraft and the Company announced in May 2014 that it intends to ground approximately 50 aircraft during the winter
months of fiscal 2015. While seasonal grounding does reduce the Company's operating costs, it also decreases Ryanair's
potential to record both flight and non-flight revenues. Decreasing the number and frequency of flights may also negatively
affect the Company's labor relations, including its ability to attract flight personnel interested in full-time employment.
See "Item 3. Key Information-Risk Factors-Ryanair has Decided to Seasonally Ground Aircraft." 
 
ROUTE SYSTEM, SCHEDULING AND FARES 
 
Route System and Scheduling 
 
As of July 25, 2014, the Company offered over 1,600 scheduled short-haul flights per day serving approximately 186 airports
largely throughout Europe, and flying approximately 1,600 routes. The following table lists Ryanair's operating bases: 
 
 Operating Bases                                                                                                                                                                                                          
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
 AlgheroAlicanteAthensBaden-BadenBarcelona (Girona)Barcelona (El Prat)BariBillundBolognaBournemouthBirminghamBremenBrindisiBristolBrussels (Charleroi)Brussels (Zaventem)BudapestCagliariCataniaChaniaCologne             Dusseldorf (Weeze)East MidlandsEdinburghEindhovenFaroFezFrankfurt (Hahn)Gdansk (a)Glasgow (Prestwick)Glasgow International (b)Gran                                        ManchesterMarrakechMarseillesMilan (Bergamo)PalermoPalma MallorcaPaphosPescaraPisaPortoOslo (Rygge)Rome (Ciampino)Rome (Fiumicino)SevilleShannonStockholm (Skavsta)Tenerife SouthThessalonikiTrapaniValenciaWarsaw        
 (a)CorkDublin                                                                                                                                                                                                            CanariaKaunasKrakowLameziaLanzaroteLeeds BradfordLisbonLiverpoolLondon (Luton)London (Stansted)MadridMalagaMalta                                                          (Modlin) (a)WroclawZadar                                                                                                                                                                                                  
 
 
ManchesterMarrakechMarseillesMilan (Bergamo)PalermoPalma MallorcaPaphosPescaraPisaPortoOslo (Rygge)Rome (Ciampino)Rome
(Fiumicino)SevilleShannonStockholm (Skavsta)Tenerife SouthThessalonikiTrapaniValenciaWarsaw (Modlin) (a)WroclawZadar 
 
(a)    In April 2014, Ryanair announced that it would open bases in Cologne, Gdansk and Warsaw Modlin. 
 
(b)    In July 2014, Ryanair announced that it would operate a base in Glasgow International Airport. 
 
See Note 17, "Analysis of operating revenues and segmental analysis," to the consolidated financial statements included in
Item 18 for more information regarding the geographical sources of the Company's revenue. 
 
Management's objective is to schedule a sufficient number of flights per day on each of Ryanair's routes to satisfy demand
for Ryanair's low-fares service. Ryanair schedules departures on its most popular routes at frequent intervals; normally
between approximately 6:00 a.m. and 11:00 p.m. Management regularly reviews the need for adjustments in the number of
flights on all of its routes. 
 
During the 2014 fiscal year, Ryanair opened 121 new routes across its network. See "Risk Factors-Risks Related to the
Company-Ryanair's New Routes and Expanded Operations May Have an Adverse Financial Impact on Its Results." 
 
Low and Widely Available Fares 
 
Ryanair offers low fares, with prices generally varying on the basis of advance booking, seat availability and demand.
Ryanair sells seats on a one-way basis, thus removing minimum stay requirements from all travel on Ryanair scheduled
services. All tickets can be changed, subject to certain conditions, including fee payment and applicable upgrade charges.
However, tickets are generally non-cancelable and non-refundable and must be paid for at the time of reservation. 
 
Ryanair's discounted fares are "capacity controlled" in that Ryanair allocates a specific number of seats on each flight to
each fare category to accommodate projected demand for seats at each fare level leading up to flight time. Ryanair
generally makes its lowest fares widely available by allocating a majority of its seat inventory to its lowest fare
categories. Management believes that its unrestricted fares as well as its advance-purchase fares are attractive to both
business and leisure travelers. 
 
When launching a new route, Ryanair's policy is to price its lowest fare so that it will be significantly lower than other
carriers' lowest fares, but still provide a satisfactory operating margin. 
 
Ryanair also periodically runs special promotional fare campaigns, in particular in connection with the opening of new
routes, and endeavors to always offer the lowest fare on any route it serves. Promotional fares may have the effect of
increasing load factors and reducing Ryanair's yield and passenger revenues on the relevant routes during the periods they
are in effect. Ryanair expects to continue to offer significant fare promotions to stimulate demand in periods of lower
activity or during off-peak times for the foreseeable future. 
 
MARKETING AND ADVERTISING 
 
Ryanair's primary marketing strategy is to emphasize its widely available low fares, route choice and great service. In
doing so, Ryanair primarily advertises its services in national and regional media across Europe. In addition, we use
topical advertising, social media, press conferences and publicity stunts. Other marketing activities include the
distribution of advertising and promotional material and cooperative advertising campaigns with other travel-related
entities, including local tourist boards. Ryanair also regularly contacts people registered in its database to inform them
about promotions and special offers. 
 
RESERVATIONS ON RYANAIR.COM 
 
Passenger airlines generally rely on travel agents (whether traditional or online) for a significant portion of their
ticket sales and pay travel agents commissions for their services, as well as reimbursing them for the fees charged by
reservation systems providers. In contrast, Ryanair requires passengers to make reservations and purchase tickets directly
through the Company. Currently, over 99% of such reservations and purchases are made through the website Ryanair.com.
Ryanair is therefore not reliant on travel agents. See "-Strategy-Taking Advantage of the Internet" above for additional
information. 
 
In May 2012, Ryanair further upgraded its reservation system in order to facilitate the continued expansion of the airline.
 The upgraded system gives the Company the ability to offer more enhancements to passengers, as the new platform is far
more flexible in terms of future development. Under the agreement with the system provider, Navitaire, the system serves as
Ryanair's core seating inventory and booking system. In return for access to these system functions, Ryanair pays
transaction fees that are generally based on the number of passenger seat journeys booked through the system. Navitaire
also retains a back-up booking engine to support operations in the event of a breakdown in the main system. Over the last
several years, Ryanair has introduced a number of Internet-based customer service enhancements such as Internet check-in,
priority boarding service and limited reserved seating since January 2012. Since October 2009, Ryanair has required
Internet check-in for all passengers. These enhancements and changes have been made to reduce waiting time at airports and
speed a passenger's journey from arrival at the airport to boarding, as well as significantly reduce airport handling
costs. Ryanair has also introduced a checked-bag fee, which is payable on the Internet and is aimed at reducing the number
of bags carried by passengers in order to further reduce handling costs. On April 1, 2014, the Company entered an agreement
with Travelport who operate the Galileo and Worldspan GDS. The Company's fares (except for the three lowest fare
categories) will be distributed on the Galileo and Worldspan systems. Ryanair has negotiated an attractive per segment
price and expects to sell tickets via travel agents at no commission to a mix of largely business/corporate travelers. See
Item 3. Key Information-Risk Factors-Risks Related to the Company-Ryanair Faces Risks Related to Unauthorized Use of
Information from the Company's Website." 
 
AIRCRAFT 
 
Aircraft 
 
As of June 30, 2014, Ryanair had a principal fleet of 297 Boeing 737-800 aircraft and 5 additional leased aircraft acquired
on short term leases for the summer of 2014 to provide extra capacity. The principal fleet was composed of 297 Boeing
737-800 "next generation" aircraft, each having 189 seats. Ryanair's fleet totaled 297 Boeing 737-800s at March 31, 2014.
The Company expects to have an operating fleet comprising approximately 426 Boeing 737-800s at March 31, 2019 depending on
the level of lease returns/disposals. 
 
Between March 1999 and March 2014, Ryanair took delivery of 348 new Boeing 737-800 "next generation" aircraft under its
contracts with Boeing and disposed of 51 such aircraft, including 25 lease handbacks. 
 
Under the terms of the 2013 Boeing Contract, Ryanair has agreed to purchase the 180 new aircraft over a five year period
from fiscal 2015 to 2019, with delivery beginning in September 2014. The new aircraft will benefit from a net effective
price not dissimilar to that under the 2005 Boeing Contract which was approved by shareholders in 2005 and will be used on
new and existing routes to grow Ryanair's business. 
 
The Boeing 737-800 represents the current generation of Boeing's 737 aircraft. It is a short-to-medium range aircraft and
seats 189 passengers. The basic price (equivalent to a standard list price for an aircraft of this type) for each of the
Boeing 737-800 series aircraft is approximately US$78.1 million and the basic price will be increased for certain
"buyer-furnished" equipment, amounting to approximately US$2.9 million per new aircraft, which Ryanair has asked Boeing to
purchase and install on each of the new aircraft. In addition, an "Escalation Factor" will be applied to the basic price to
reflect increases in the Employment Cost Index and Producer Price Index between the time the basic price was set in the
2013 Boeing Contract and the period 18 to 24 months prior to the delivery of any such new aircraft. 
 
Boeing has granted Ryanair certain price concessions as part of the 2013 Boeing Contract. These will take the form of
credit memoranda to Ryanair for the amount of such concessions, which Ryanair may apply toward the purchase of goods and
services from Boeing or toward certain payments, other than advance payments, in respect of the new aircraft. Boeing and
CFMI (the manufacturer of the engines to be fitted on the new aircraft) have also agreed to provide Ryanair with certain
allowances for promotional and other activities, as well as providing certain other goods and services to Ryanair on
concessionary terms. Those credit memoranda and promotional allowances will effectively reduce the price of each new
aircraft payable by Ryanair. As a result, the "effective price" (the purchase price of the new aircraft net of discounts
received from Boeing) of each new aircraft will be significantly below the basic price mentioned above. The effective price
applies to all new aircraft due for delivery from September 2014. 
 
For additional details on the Boeing contracts, scheduled aircraft deliveries and related expenditures and their financing,
as well as the terms of the arrangements under which Ryanair currently leases 51 of the aircraft in its operating fleet,
see "Item 5. Operating and Financial Review and Prospects-Liquidity and Capital Resources." 
 
The Boeing 737 is the world's most widely used commercial aircraft and exists in a number of generations, the Boeing
737-800s being the most recent. Management believes that spare parts and cockpit crews qualified to fly these aircraft are
likely to be more widely available on favorable terms than similar resources for other types of aircraft. Management
believes that its strategy, to date, of having reduced its fleet to one aircraft type enables Ryanair to limit the costs
associated with personnel training, the purchase and storage of spare parts, and maintenance. Furthermore, this strategy
affords Ryanair greater flexibility in the scheduling of crews and equipment. The Boeing 737-800s are fitted with CFM 56-7B
engines and have advanced CAT III Autoland capability, advanced traffic collision avoidance systems, and enhanced
ground-proximity warning systems. During fiscal 2012, Boeing announced that it was going to manufacture a variant of the
737 with new, more fuel-efficient engines called the Boeing 737 MAX aircraft. A senior Ryanair working group is continuing
to evaluate the benefits of the MAX aircraft. This new variant could impact the Company insofar as the residual value of
its aircraft could be reduced when this new variant enters production, currently expected to be in late 2017. 
 
At March 31, 2014, the average aircraft age of the Company's Boeing 737-800 fleet was just over 5.5 years. 
 
Training and Regulatory Compliance 
 
Ryanair currently owns and operates four Boeing 737-800 full flight simulators for pilot training, the first of which was
delivered in 2002. The simulators were purchased from CAE Electronics Ltd. of Quebec, Canada ("CAE"). The second simulator
was delivered in 2004, while the third and fourth simulators were delivered in the 2008 fiscal year. In September 2006,
Ryanair entered into a new contract with CAE to purchase B737NG Level B flight simulators. Two such simulators were
delivered in the 2009 fiscal year. 
 
Management believes that Ryanair is currently in compliance with all applicable regulations and EU directives concerning
its fleet of Boeing 737-800 aircraft and will comply with any regulations or EU directives that may come into effect in the
future. However, there can be no assurance that the FAA or other regulatory authorities will not recommend or require other
safety-related undertakings that could adversely impact the Company's results of operations or financial condition. See
"Item 3. Key Information-Risk Factors-Safety-Related Undertakings Could Affect the Company's Results." 
 
ANCILLARY SERVICES 
 
Ryanair provides various ancillary services and engages in other activities connected with its core air passenger service,
including non-flight scheduled services, Internet-related services, and the in-flight sale of beverages, food, and
merchandise. See "Item 5. Operating and Financial Review and Prospects-Results of Operations-Fiscal Year 2014 Compared with
Fiscal Year 2013-Ancillary Revenues" for additional information. 
 
As part of its non-flight scheduled and Internet-related services, Ryanair incentivizes ground service providers at many of
the airports it serves to levy correct excess baggage charges for any baggage that exceeds Ryanair's published baggage
allowances and to collect these charges in accordance with Ryanair's standard terms and conditions. Excess baggage charges
are recorded as non-flight scheduled revenue. 
 
Ryanair primarily markets accommodation services and travel insurance through its website. For hotel and accommodation
services, Ryanair has a contract with Hotelscombined PTY Ltd. ("Hotelscombined"), which operates a price comparison
website, pursuant to which Hotelscombined handles all aspects of such services marketed through Ryanair's website and pays
a fee to Ryanair. Ryanair also has a contract with Bookings.com to market hotels during the booking process on its website
and Ryanair receives a commission on these sales. In addition, Ryanair has a contract with Hertz, pursuant to which Hertz
handles all car rental services marketed through Ryanair's website or telephone reservation system. 
 
Ryanair also sells bus and some rail tickets onboard its aircraft and through its website. In addition, Ryanair markets car
parking, attractions and activities on its website, with the latter having gone on sale in-flight in spring 2012. 
 
Ryanair sells gift vouchers on its website, which are redeemable online. In May 2009, Ryanair started to offer its
passengers the possibility of receiving an SMS (text message) when booking, at a modest fee, to inform them of their flight
confirmation details. 
 
In April 2009, Ryanair signed a contract with Webloyalty International Ltd, which offers Ryanair's customers who have a UK,
German or French billing address a retail discount and cash-back program. A similar contract was signed in 2013 with LEV-8
for customers with billing addresses in Norway, Poland, Portugal and Sweden. In April 2011, Ryanair began to sell
advertising on its boarding cards. In fiscal 2012, a boarding card redesign along with increased passenger volumes allowed
for further growth in this area. 
 
In fiscal year 2012, Ryanair rolled out handheld Electronic Point of Sale ("EPOS") devices across its route network. These
EPOS devices replaced manual and paper based systems on board the aircraft. The EPOS device enables cabin crew to sell and
record their on-board sales transactions more efficiently and generate vastly improved management sales reporting. The EPOS
device also issues bus and rail tickets and tickets for tourist attractions. 
 
In fiscal year 2011, Ryanair began offering reserved seating in twenty-one extra legroom seats on each aircraft for a fee
on certain routes and this feature was rolled out to all routes in fiscal year 2012. In February 2014, Ryanair introduced
fully allocated seating on each of its flights.  Passengers can pay a fee of E10 for seats located at the front of the
aircraft, at the overwing exits and at the two rear rows of the aircraft.  All other seats can be reserved for a fee of E5.
In the event a passenger does not wish to purchase an allocated seat, a random seat will be allocated during the booking
process. 
 
In November 2013, the Company launched a new website which reduced the number of clicks to make a booking from 17 to 5.  At
the same time, the Company reduced the exposure of certain other ancillary products during the booking process on the
website which had a negative impact on sales along with a reduction of certain penalty fees and charges at airports.  The
Company anticipates that the reduction in revenues arising from these changes will be offset by the increased revenues
arising from allocated seating. See "Item 3 Key Information-Risk Factors-Ryanair May Not Achieve All of the Expected
Benefits of its Recent Strategic Initiatives". 
 
MAINTENANCE AND REPAIRS 
 
General 
 
As part of its commitment to safety, Ryanair endeavors to hire qualified maintenance personnel, provide proper training to
such personnel, and maintain its aircraft in accordance with European industry standards. While Ryanair seeks to maintain
its fleet in a cost-effective manner, management does not seek to extend Ryanair's low-cost operating strategy to the areas
of maintenance, training or quality control. 
 
Ryanair's quality assurance department deals with oversight of all maintenance activities in accordance with Part 145. The
European Aviation Safety Agency ("EASA"), which established Part 145, came into being on September 28, 2003; through the
adoption of Regulation (EC) No. 1592/2002 of the European Parliament, and its standards superseded the previous Joint
Aviation Authority ("JAA") requirements. See "¾Government Regulation¾Regulatory Authorities." 
 
Ryanair is itself an EASA Part 145-approved maintenance contractor and provides its own routine aircraft maintenance and
repair services. Ryanair also performs certain checks on its aircraft, including pre-flight, daily, and transit checks at
some of its bases, as well as A-checks at its Dublin, London (Stansted), Glasgow (Prestwick), Bremen and Frankfurt (Hahn)
facilities. Since December 2003, Ryanair has operated a hangar facility at its base at Glasgow (Prestwick) in Scotland,
where both A-checks and C-checks are performed on the fleet of Boeing 737-800 aircraft. The facility performs up to four
C-checks per week and Ryanair has recently opened a new C-check hangar facility in Kaunas, Lithuania where it carries out
between one and two light C-checks per week, enabling Ryanair to perform all of the heavy maintenance that is currently
required on its Boeing 737-800 fleet in-house. In January 2014, Ryanair opened another single bay hangar facility in
Kaunas. 
 
Ryanair opened a five-bay hangar and stores facility at its London (Stansted) airport base in October 2008 to allow Ryanair
to carry out additional line maintenance on its expanding fleet. This facility also incorporates two flight simulator
devices with space and provisions for two more, together with a cabin crew trainer and associated training rooms. Ryanair
has completed the building of a separate training facility adjacent to the hangar to accommodate a full size 737NG training
aircraft to allow for cabin crew and engineering training. Ryanair carries out A-checks and line maintenance in its
single-bay aircraft hangar facility in Bremen. Ryanair has also entered into a 30-year sole-tenancy agreement with
Frankfurt (Hahn) airport and has taken acceptance of a two-bay hangar and stores facility that also incorporates a two-bay
simulator-training center. This facility was completed in January 2011 and allows Ryanair to carry out additional line
maintenance including A-checks. 
 
Maintenance and repair services that may become necessary while an aircraft is located at some of the other airports served
by Ryanair are provided by other Part 145-approved contract maintenance providers. Aircraft return each evening to
Ryanair's bases, where they are examined by either Ryanair's approved engineers or by local Part 145-approved companies. 
 
Heavy Maintenance 
 
As noted above, Ryanair currently has sufficient capacity to be able to carry out all of the routine maintenance work
required on its Boeing 737-800 fleet itself. Ryanair opened a new three-bay maintenance hangar at Glasgow (Prestwick)
airport in winter 2010 to accommodate the additional maintenance requirements arising from its expanding and aging fleet
and opened a new C-check facility in Kaunas in January 2013 to carry out light C-checks. 
 
Ryanair contracts out engine overhaul service for its Boeing 737-800 aircraft to General Electric Engine Services pursuant
to a 10-year agreement with an option for a 10-year extension, which was signed in 2004 and subsequently extended for three
years to November 30, 2017. This comprehensive maintenance contract provides for the repair and overhaul of the CFM56-7B
series engines fitted to the first 155 of Ryanair's Boeing 737-800 aircraft, the repair of parts and general technical
support for the fleet of engines. On June 30, 2008, the Company finalized a contract for a similar level of coverage and
support for the engines on all of its aircraft that have been or were scheduled to be delivered over the period through
November 2012. Due to the fact that engines on recently delivered aircraft will not require a scheduled engine overhaul
prior to the expiry of the current contract with GE, Ryanair has decided, at this time, not to take up its option to have
engines delivered with aircraft after October 2010 covered by this contract. General Electric Engine Services mainly uses
its Part 145-approved repair facility in Cardiff, Wales for this work, but also uses the KLM Part 145-approved facility in
Amsterdam, and its Part 145-approved facility in Celma, Brazil. By contracting with experienced Part 145-approved
maintenance providers, management believes it is better able to ensure the quality of its aircraft and engine maintenance.
Ryanair assigns a Part 145-certified mechanic to oversee all heavy maintenance and to authorize all engine overhauls
performed by third parties. Maintenance providers are also monitored closely by the national authorities under EASA and
national regulations. 
 
Ryanair expects to be dependent on external service contractors, particularly for engine and component maintenance, for the
foreseeable future, notwithstanding the additional capabilities provided by its maintenance facilities at Dublin, Glasgow
(Prestwick), London (Stansted), Frankfurt (Hahn) and Kaunas. See "Item 3. Key Information-Risk Factors-Risks Related to the
Company-The Company Is Dependent on External Service Providers." 
 
SAFETY RECORD 
 
Ryanair has not had a single passenger or flight crew fatality in its 30-year operating history. Ryanair demonstrates its
commitment to safe operations through its safety training procedures, its investment in safety-related equipment, and its
adoption of an internal open and confidential reporting system for safety issues. The Company's Board of Directors also has
an air safety committee to review and discuss air safety and related issues. Michael Horgan, a Company director, is the
chairman of this committee and reports to the Board of Directors. 
 
Ryanair's flight training is oriented towards accident prevention and covers all aspects of flight operations. Threat and
Error Management (TEM) is at the core of all flight crew training programs. Ryanair maintains full control of the content
and delivery of all of its flight crew training, including initial, recurrent, and upgrade phases. All training programs
are approved by the Irish Aviation Authority (the "IAA"), which regularly audits operation control standards and flight
crew training standards for compliance with EU legislation. 
 
All of the Boeing 737-800s that Ryanair has bought or committed to buy are certified for Category IIIA landings (automatic
landings with minimum horizontal visibility of 200 meters and a 50 feet decision height). 
 
Ryanair has a comprehensive and documented safety management system. Management encourages flight crews to report any
safety-related issues through the Safety Alert Initial Report reporting program or to use the confidential reporting
system, which is available online through Ryanair's Crewdock system. The confidential reporting system affords flight crews
the opportunity to report directly to the Flight Safety Officer any event, error, or discrepancy in flight operations that
they do not wish to report through standard reporting channels. The confidential reporting system is designed to increase
management's awareness of problems that may be encountered by flight crews in their day-to-day operations. Management uses
the information reported through all reporting systems to modify operating procedures and improve flight operation
standards. Additionally, Ryanair promotes the use of CHIRP, a confidential reporting system that is endorsed by the UK CAA
as an alternative confidential reporting channel. 
 
Ryanair has installed an automatic data capturing system on each of its Boeing 737-800 aircraft which captures and
downloads aircraft performance information for use as part of Operational Flight Data Monitoring (OFDM) which automatically
provides a confidential report on variations from normal operating limitations detected during the course of each flight.
The purpose of this system is to monitor operational trends and inform management of any instance of an operational limit
being exceeded. By analyzing these reports, management is able to identify undesirable trends and potential areas of
operational risk, so as to take steps to rectify such deviations, thereby ensuring adherence to Ryanair's flight safety
standards. 
 
In November 2008, a Ryanair aircraft suffered a multiple bird strike during its final approach to Rome (Ciampino) airport.
This incident caused substantial damage to the aircraft, which resulted in an insurance claim being filed in respect of
this aircraft. The damage that it suffered was such that the aircraft was not repaired, although Ryanair has retained
ownership of it for certain parts and for training purposes. 
 
AIRPORT OPERATIONS 
 
Airport Handling Services 
 
Ryanair provides its own aircraft and passenger handling and ticketing services at Dublin Airport. Third parties provide
these services to Ryanair at most other airports it serves. Servisair plc provides Ryanair's ticketing, passenger and
aircraft handling, and ground handling services at many of these airports in Ireland and the U.K. (excluding London
(Stansted) Airport where these services are provided primarily by Swissport Ltd.), while similar services in continental
Europe are generally provided by the local airport authorities, either directly or through sub-contractors. Management
attempts to obtain competitive rates for such services by negotiating multi-year contracts at fixed prices. These contracts
are generally scheduled to expire in one to five years, unless renewed, and certain of them may be terminated by either
party before their expiry upon prior notice. Ryanair will need to enter into similar agreements in any new markets it may
enter. See "Item 3. Key Information-Risk Factors-Risks Related to the Company-The Company Is Dependent on External Service
Providers." 
 
During 2009, Ryanair introduced Internet check-in for all passengers and also introduced kiosks at certain airports for the
provision of other services. The Company has these kiosks in operation at many of its key bases. 
 
Airport Charges 
 
As with other airlines, Ryanair must pay airport charges each time it lands and accesses facilities at the airports it
serves. Depending on the policy of the individual airport, such charges can include landing fees, passenger loading fees,
security fees and parking fees. Ryanair attempts to negotiate discounted fees by delivering annual increases in passenger
traffic, and opts, when practicable, for less expensive facilities, such as less convenient gates and the use of outdoor
boarding stairs rather than more expensive jetways. Nevertheless, there can be no assurance that the airports Ryanair uses
will not impose higher airport charges in the future and that any such increases would not adversely affect the Company's
operations. 
 
As a result of rising airport charges and the introduction of an Air Travel Tax of E10 on passengers departing from Irish
airports on routes longer than 300 kilometers from Dublin Airport (E2 on shorter routes), Ryanair reduced its fleet at
Dublin airport to 13 during winter 2010 (down from 22 in summer 2008 and 20 in winter 2008). The introduction of the
aforementioned E10 tax likely had a negative impact on the number of passengers traveling to and from Ireland. The Dublin
Airport Authority ("DAA") reported that passenger volumes declined by 25% from 30 million in 2007 to 23 million in 2012.
Ryanair believes that this is partly reflective of the negative impact of the tax on Irish travel. Ryanair called for the
elimination of the tax to stimulate tourism during the recession. Ryanair also complained to the European Commission about
the unlawful differentiation in the level of the Irish Air Travel tax between routes within the EU. From April 2011, a
single rate (E3) of the Air Travel Tax was introduced on all routes. In May 2011, the Irish Government announced that it
would abolish the Air Travel Tax, and the tax was ultimately abolished on April 1, 2014. No assurance can be given that the
tax will not be reintroduced in the future at similar levels or higher levels, which could have a negative impact on demand
for air travel. 
 
The Greek government planned to introduce similar taxes; however, it has now cancelled plans to introduce these taxes. The
German government introduced an E8 passenger tax on January 1, 2011 for all departing domestic or short-haul passengers and
a passenger tax of E25 for all departing passengers on flights bound for southern Europe and northern Africa. The E8 tax
was reduced to E7.50 in January 2012. In addition, the Austrian government introduced an ecological air travel levy of E8
effective January 1, 2011. In July 2013, the regional Walloon Government in Belgium announced a E3 passenger travel tax
from January 2014. However, the plan to introduce this tax was later abandoned. The Moroccan government has also introduced
a similar tax (equivalent to approximately E9) from April 2014. 
 
In March 2007, the discount arrangement formerly in place at London (Stansted) airport terminated, subjecting Ryanair to an
average increase in charges of approximately 100%. The increase in these charges, which was passed on in the form of higher
ticket prices, had a negative impact on yields and passenger volumes in the winter, resulting in Ryanair's decision to
ground seven aircraft. Ryanair responded to the increases by filing complaints with the U.K. Office of Fair Trading ("OFT")
and the Competition Commission, calling for the break-up of the British Airports Authority plc ("BAA") monopoly and the
introduction of competition in the London airports market. The OFT referred the matter to the Competition Commission, which
found that the common ownership by BAA of the three main airports in London negatively affected competition and that a
"light touch" approach to regulating BAA by the Civil Aviation Authority adversely impacted competition. In March 2009, the
Competition Commission ordered the break-up of BAA. In October 2009, London (Gatwick) was sold to Global Infrastructure
Partners for £1.5 billion. Following a delay caused by various appeals by the BAA, the BAA proceeded to sell Edinburgh
Airport in April 2012, and Stansted airport to Manchester Airports Group plc in March 2013. Following the December 2003
publication of the U.K. government's White Paper on Airport Capacity in the Southeast of England, the BAA in 2004 announced
plans to spend up to £4 billion on a multi-year project to construct a second runway and additional terminal facilities at
London (Stansted) airport with a target opening date of 2013. Ryanair and other airlines using London (Stansted) support
the principle of a second runway at London (Stansted), but are opposed to this development because they believe that the
financing of what they consider to be an overblown project will lead to airport costs approximately doubling from current
levels. In May 2010 the BAA announced that it would not proceed with this £4 billion program. On January 10, 2014, the UK
Civil Aviation Authority completed its regulatory investigation into market power determination for passenger airlines in
relation to London (Stansted). It found that London (Stansted) did not enjoy substantial market power in the market for the
provision of airport operation services to passenger airlines, and as such declined to continue to regulate the airport. On
September 16, 2013, Ryanair announced that it had agreed a 10 year growth agreement with Manchester Airports Group plc, the
owners of London (Stansted), in relation to an expansion of capacity at London (Stansted) in return for significant airport
charge reductions for the incremental passenger volumes delivered.  Once this 10 year growth deal expires, Ryanair may be
subject to increased airport charges at London (Stansted) as the airport is no longer subject to regulation. 
 
See "Item 3. Risk Factors¾Risks Related to the Company¾Ryanair's Continued Growth is Dependent on Access to Suitable
Airports; Charges for Airport Access are Subject to Increase." See also "Item 8. Financial Information¾Other Financial
Information¾Legal Proceedings¾EU State Aid-Related Proceedings" for information regarding legal proceedings in which
Ryanair's economic arrangements with several publicly owned airports are being contested. 
 
FUEL 
 
The cost of jet fuel accounted for approximately 46% and 45% of Ryanair's total operating expenses in the fiscal years
ended March 31, 2014 and 2013, respectively (in each case, this accounts for costs after giving effect to the Company's
fuel hedging activities but excludes de-icing costs, which accounted for approximately 0.3% and 1.0% of total fuel costs in
the fiscal years ended March 31, 2014 and 2013, respectively). The future availability and cost of jet fuel cannot be
predicted with any degree of certainty, and Ryanair's low-fares policy limits its ability to pass on increased fuel costs
to passengers through increased fares. Jet fuel prices are dependent on crude oil prices, which are quoted in U.S. dollars.
If the value of the U.S. dollar strengthens against the euro, Ryanair's fuel costs, expressed in euro, may increase even
absent any increase in the U.S. dollar price of jet fuel. Ryanair has also entered into foreign currency forward contracts
to hedge against some currency fluctuations. See "Item 11. Quantitative and Qualitative Disclosures About Market
Risk-Foreign Currency Exposure and Hedging." 
 
Ryanair has historically entered into arrangements providing for substantial protection against fluctuations in fuel
prices, generally through forward contracts covering periods of up to 18 months of anticipated jet fuel requirements. As of
July 25, 2014, Ryanair had entered into forward jet fuel (jet kerosene) contracts covering approximately 90% of its
estimated requirements for the fiscal year ending March 31, 2015 at prices equivalent to approximately $950 per metric ton.
In addition, as of July 25, 2014, Ryanair had entered into forward jet fuel (jet kerosene) contracts covering approximately
55% of its estimated requirements for the first half of the fiscal year ending March 31, 2016 at prices equivalent to
approximately $950 per metric ton, and had not entered into any jet fuel hedging contracts with respect to its expected
fuel purchases beyond that period. See "Item 3. Key Information-Risk Factors-Risks Related to the Company-Changes in Fuel
Costs and Fuel Availability Affect the Company's Results and Increase the Likelihood of Adverse Impact to the Company's
Profitability" and "Item 11. Quantitative and Qualitative Disclosures About Market Risk-Fuel Price Exposure and Hedging"
for additional information on recent trends in fuel costs and the Company's related hedging activities, as well as certain
associated risks. See also "Item 5. Operating and Financial Review and Prospects-Fiscal Year 2014 Compared with Fiscal Year
2013-Fuel and Oil." 
 
INSURANCE 
 
Ryanair is exposed to potential catastrophic losses that may be incurred in the event of an aircraft accident or terrorist
incident. Any such accident or incident could involve costs related to the repair or replacement of a damaged aircraft and
its consequent temporary or permanent loss from service. In addition, an accident or incident could result in significant
legal claims against the Company from injured passengers and others who experienced injury or property damage as a result
of the accident or incident, including ground victims. Ryanair maintains aviation third-party liability insurance,
passenger liability insurance, employer liability insurance, directors and officers liability insurance, aircraft insurance
for aircraft loss or damage, and other business insurance in amounts per occurrence consistent with industry standards.
Ryanair believes its insurance coverage is adequate, although not comprehensive. There can be no assurance that the amount
of such coverage will not need to be increased, that insurance premiums will not increase significantly or that Ryanair
will not be forced to bear substantial losses from accidents. Ryanair's insurance does not cover claims for losses incurred
when, due to unforeseen events, airspace is closed and aircraft are grounded, such as the airspace closures described in
"Risk Factors - Risks Related to the Airline Industry - Volcanic Ash Emissions Could Affect the Company and Have a Material
Adverse Impact on the Company's Results of Operation", which resulted from volcanic ash in the northern European airspace
during April and May 2010. 
 
The cost of insurance coverage for certain third-party liabilities arising from "acts of war" or terrorism increased
dramatically as a result of the September 11, 2001 terrorist attacks. In the immediate aftermath, aircraft liability war
indemnities for amounts above $50 million were, in the absence of any alternative coverage, provided by the Irish
Government at pre-September 11, 2001 levels of coverage on the basis of a per-passenger surcharge. In March 2002, once such
coverage was again commercially available, Ryanair arranged coverage to replace that provided by the government indemnity.
The replacement insurance coverage operated on the basis of a per-passenger surcharge with an additional surcharge based on
hull values. Ryanair's insurers have indicated that the scope of the Company's current war-related insurance coverage may
exclude certain types of catastrophic incidents, which may result in the Company seeking alternative coverage. Ryanair to
date has passed increased insurance costs on to passengers by means of a special "insurance levy" incorporated in each
ticket. 
 
During the 2006 fiscal year, Ryanair established Aviation Insurance (IOM) Limited ("AIL"), a wholly owned insurance company
subsidiary, to provide the Company with self-insurance as part of its ongoing risk-management strategy. AIL underwrites a
portion of the Company's aviation insurance program, which covers not only the Company's aircraft but also its liability to
passengers and to third parties. AIL reinsures virtually all of the aviation insurance risk it underwrites with recognized
third parties in the aviation reinsurance market, with the amount of AIL's maximum aggregate exposure not currently subject
to such reinsurance agreements being equal to approximately $16.5 million. In addition to aviation insurance, AIL has
underwritten most of the single trip travel insurance policies sold on Ryanair.com since February 1, 2011. 
 
Council Regulation (EC) No. 2027/97, as amended by Council Regulation (EC) No. 889/2002, governs air carrier liability.
This legislation provides for unlimited liability of an air carrier in the event of death or bodily injuries suffered by
passengers, implementing the Warsaw Convention of 1929 for the Unification of Certain Rules Relating to Transportation by
Air, as amended by the Montreal Convention of 1999. Ryanair has extended its liability insurance to meet the appropriate
requirements of the legislation. See "Item 3. Key Information-Risk 

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