REG - Ryanair Holdings PLC - Annual Financial Report <Origin Href="QuoteRef">RYA.I</Origin> - Part 7
06/09/2014 22:39
- Part 7: For the preceding part double click ID:nRSd7552Nf
impairments related to its existing aircraft fleet. The Company will continue to monitor its long-lived assets and the
general airline operating environment.
The Company's estimate of the recoverable amount of aircraft residual values is 15% of current market value of new
aircraft, determined periodically, based on independent valuations and actual aircraft disposals during prior periods.
Aircraft are depreciated over a useful life of 23 years from the date of manufacture to residual value.
Heavy Maintenance
An element of the cost of an acquired aircraft is attributed, on acquisition, to its service potential, reflecting the
maintenance condition of the engines and airframe.
For aircraft held under operating lease agreements, Ryanair is contractually committed to either return the aircraft in a
certain condition or to compensate the lessor based on the actual condition of the airframe, engines and life-limited parts
upon return. In order to fulfill such conditions of the lease, maintenance, in the form of major airframe overhaul, engine
maintenance checks, and restitution of major life-limited parts, is required to be performed during the period of the lease
and upon return of the aircraft to the lessor. The estimated airframe and engine maintenance costs and the costs associated
with the restitution of major life-limited parts, are accrued and charged to profit or loss over the lease term for this
contractual obligation, based on the present value of the estimated future cost of the major airframe overhaul, engine
maintenance checks and restitution of major life-limited parts, calculated by reference to the number of hours flown or
cycles operated during the year.
Ryanair's aircraft operating lease agreements typically have a term of seven years, which closely correlates with the
timing of heavy maintenance checks. The contractual obligation to maintain and replenish aircraft held under operating
lease exists independently of any future actions within the control of Ryanair. While Ryanair may, in very limited
circumstances, sub-lease its aircraft, it remains fully liable to perform all of its contractual obligations under the
'head lease' notwithstanding any such sub-leasing.
Both of these elements of accounting policies involve the use of estimates in determining the quantum of both the initial
maintenance asset and/or the amount of provisions to be recorded and the respective periods over which such amounts are
charged to income. In making such estimates, Ryanair has primarily relied on its own and industry experience, industry
regulations and recommendations from Boeing; however, these estimates can be subject to revision, depending on a number of
factors, such as the timing of the planned maintenance, the ultimate utilization of the aircraft, changes to government
regulations and increases or decreases in estimated costs. Ryanair evaluates its estimates and assumptions in each
reporting period and, when warranted, adjusts its assumptions, which generally impact maintenance and depreciation expense
in the income statement on a prospective basis.
Tax Audits
Income tax on the profit or loss for the year comprises current and deferred tax. Current tax payable on taxable profits
is recognised as an expense in the period in which the profits arise using tax rates enacted or substantively enacted at
the balance sheet date. Deferred tax is provided in full, using the balance sheet liability method on temporary
differences arising from the tax basis of assets and liabilities and their carrying amount in the consolidated financial
statements.
Social insurance, passenger taxes and sales taxes are recorded as a liability based on laws enacted in the jurisdictions to
which they relate. Liabilities are recorded when an obligation has been incurred.
Ryanair reviews its tax obligations by jurisdiction regularly. There are many complexities and judgements in determining
tax obligations due to the inherent complexity of tax law, the manner in which airline businesses are carried out whereby
operations can begin and end in different jurisdictions and assumptions made about the timing and amount of individual
balances to be included in financial statements and tax returns.
Ryanair has an internal tax group and takes professional advice on more complex matters in estimating its tax liabilities.
Ryanair also deals extensively with revenue authorities in each jurisdiction in which it operates. Tax liabilities are
based on the best estimate of the likely obligation at each reporting period. These estimates are subject to revision
based on the outcome of tax audits and discussions with revenue authorities that can take several years to conclude.
RESULTS OF OPERATIONS
The following table sets forth certain income statement data (calculated under IFRS) for Ryanair expressed as a percentage
of Ryanair's total revenues for each of the periods indicated:
Fiscal Year ended March 31,
2014 2013 2012
Total revenues...................................................................... 100% 100% 100%
Scheduled revenues......................................................... 75.2 78.2 79.8
Ancillary revenues........................................................... 24.8 21.8 20.2
Total operating expenses.................................................... 86.9 85.3 84.5
Fuel and oil........................................................................ 40.0 38.6 36.3
Airport and handling charges......................................... 12.2 12.5 12.6
Route charges................................................................... 10.4 10.0 10.5
Staff costs.......................................................................... 9.2 8.9 9.5
Depreciation...................................................................... 7.0 6.7 7.0
Marketing, distribution and other.................................. 3.8 4.1 4.1
Maintenance, materials and repairs............................... 2.3 2.5 2.4
Aircraft rentals.................................................................. 2.0 2.0 2.1
Operating profit.................................................................... 13.1 14.7 15.5
Net interest expense............................................................ (1.3) (1.5) (1.5)
Other income......................................................................... 0.0 0.1 0.3
Profit before taxation........................................................... 11.8 13.3 14.3
Taxation................................................................................. (1.4) (1.6) (1.7)
Profit after taxation .............................................................. 10.4 11.7 12.6
(1.6)
(1.7)
Profit after taxation ..............................................................
10.4
11.7
12.6
FISCAL YEAR 2014 COMPARED WITH FISCAL YEAR 2013
Profit after taxation. Ryanair recorded a profit on ordinary activities after taxation of E522.8 million in the 2014 fiscal
year, as compared with a profit of E569.3 million in the 2013 fiscal year. This 8.2% decrease was primarily attributable to
an increase in total operating expenses of 5.1%, and a 3.7% reduction in average fares, offset, in part, by strong
ancillary revenues and increased traffic.
Scheduled revenues. Ryanair's scheduled passenger revenues decreased 0.8%, from E3,819.8 million in the 2013 fiscal year,
to E3,789.5 million in the 2014 fiscal year, primarily reflecting a decrease of 3.7% in average fares. The number of
passengers booked increased 3.0%, from 79.3 million to 81.7 million, reflecting increased passenger volumes on existing
routes and the successful launch of new bases at Athens, Thessaloniki, Brussels (Zaventem) , Lisbon, Rome (Fiumicino),
Catania, Lamezia and Palermo in the 2014 fiscal year. Booked passenger load factors increased to 83% in fiscal 2014
compared with 82% in fiscal 2013.
Passenger capacity during the 2014 fiscal year increased by 2.4% due to an increase in the average number of aircraft in
the fleet. Scheduled passenger revenues accounted for 75.2 % of Ryanair's total revenues for the 2014 fiscal year, compared
with 78.2% of total revenues in the 2013 fiscal year.
Ancillary revenues. Ryanair's ancillary revenues, which comprise revenues from non-flight scheduled operations, in-flight
sales and Internet-related services, increased 17.2%, from E1,064.2 million in the 2013 fiscal year to E1,247.2 million in
the 2014 fiscal year, while ancillary revenues per booked passenger increased to E15.27 from E13.43. Revenues from
non-flight scheduled operations, including revenues from excess baggage charges, administration/credit card fees, sales of
rail and bus tickets, priority boarding, reserved seating, accommodation, travel insurance and car rental increased 21.6%
to E1,012.4 million from E832.9 million in the 2013 fiscal year. Revenues from in-flight sales increased 6.8%, to E117.3
million from E109.8 million in the 2013 fiscal year. Revenues from Internet-related services, primarily commissions
received from products sold on Ryanair.com or linked websites, decreased 3.3%, from E121.5 million in the 2013 fiscal year
to E117.5 million in the 2014 fiscal year, reflecting a combination of factors including an improved product mix and the
implementation of a reserved seating system across the network. The rate of increase in ancillary revenues exceeded that of
the increase in overall passengers booked.
The following table sets forth the components of ancillary revenues earned by Ryanair and each component expressed as a
percentage of total ancillary revenues for each of the periods indicated:
Fiscal Year ended March 31,
2014 2013
(in millions of euro, except percentage data)
Non-flight Scheduled.................... 1,012.4 81.2% E832.9 78.3%
In-flight Sales.................................. 117.3 9.4% E109.8 10.3%
Internet-related............................... 117.5 9.4% E121.5 11.4%
Total................................................. 1,247.2 100.0% E1,064.2 100.0%
1,247.2
100.0%
E1,064.2
100.0%
Operating expenses. As a percentage of total revenues, Ryanair's operating expenses increased from 85.3% in the 2013 fiscal
year to 86.9% in the 2014 fiscal year. Total revenues increased by 3.1%, slower than the 5.1% increase in operating
expenses. In absolute terms, total operating expenses increased 5.1%, from E4,165.8 million in the 2013 fiscal year to
E4,378.1 million in the 2014 fiscal year, principally as a result of a 6.8% increase in fuel and oil costs from E1,885.6
million in the 2013 fiscal year to E2,013.1 million in the 2014 fiscal year, partially offset by the weakening of the U.K.
pound sterling to the euro. Airport and handling charges, maintenance, materials and repairs and marketing, distribution
and other costs decreased as a percentage of total revenues, while staff costs, depreciation, route charges and fuel and
oil expenses increased and aircraft rental expenses stayed constant. Total operating expenses per passenger increased by
2.0%, with the increase reflecting, principally, the increase in passenger capacity during the 2014 fiscal year and the
impact of the higher fuel costs.
The Company's decision to ground aircraft did not have a material impact on the results of the Company for the year ended
March 31, 2014 and, at present, is not anticipated to have a material impact on future operations. The Company anticipates
that any revenues which could have been generated had the Company operated the grounded aircraft would have been lower than
the operating costs associated with operating these aircraft, due to significantly higher fuel costs, airport charges and
taxes. The Company does not anticipate that any material staff costs will be incurred during future periods of the
grounding of aircraft, as the relevant staff can be furloughed under the terms of their contracts without compensation and
the maintenance costs associated with the grounded aircraft will be minimal. However, the Company will still incur aircraft
ownership costs comprised of depreciation and amortization costs, lease rentals costs and financing costs.
The following table sets forth the amounts in euro cent of, and percentage changes in, Ryanair's operating expenses (on a
per-passenger basis) for the fiscal years ended March 31, 2014 and March 31, 2013 under IFRS. These data are calculated by
dividing the relevant expense amount (as shown in the consolidated financial statements) by the number of booked passengers
in the relevant year as shown in the table of "Selected Operating and Other Data" in Item 3 and rounding to the nearest
euro cent; the percentage change is calculated on the basis of the relevant figures before rounding.
Fiscal Year Ended Fiscal Year Ended % Change
March 31, 2014 March 31, 2013
E E
Fuel and oil....................................................................................... 24.65 23.79 3.6%
Airport and handling charges....................................................... 7.56 7.71 (2.1%)
Route charges.................................................................................. 6.39 6.14 4.1%
Staff costs........................................................................................ 5.68 5.50 3.3%
Depreciation..................................................................................... 4.31 4.16 3.6%
Marketing, distribution and other................................................ 2.36 2.50 (5.5%)
Maintenance, materials and repairs.............................................. 1.42 1.52 (6.7%)
Aircraft rentals................................................................................. 1.24 1.24 0.3%
Total operating expenses............................................................... 53.61 52.56 2.0%
0.3%
Total operating expenses...............................................................
53.61
52.56
2.0%
Fuel and oil. Ryanair's fuel and oil costs per passenger increased by 3.6%, while in absolute terms, these costs increased
by 6.8% from E1,885.6 million in the 2013 fiscal year to E2,013.1 million in the 2014 fiscal year, in each case after
giving effect to the Company's fuel hedging activities. The 6.8% increase reflected a 3.0% increase in average fuel prices
paid and the impact of a 7.6% increase in the number of hours flown, which were offset in part by a lower fuel burn across
the fleet. Fuel and oil costs include the direct cost of fuel, the cost of delivering fuel to the aircraft, aircraft
de-icing and EU emissions trading costs. The average fuel price paid by Ryanair (calculated by dividing total fuel costs by
the number of U.S. gallons of fuel consumed) increased 3.0% from E2.38 per U.S. gallon in the 2013 fiscal year to E2.45 per
U.S. gallon in the 2014 fiscal year, in each case after giving effect to the Company's fuel hedging activities.
Airport and handling charges and route charges. Ryanair's airport and handling charges per passenger decreased 2.1% in the
2014 fiscal year, while route charges per passenger increased 4.1%. In absolute terms, airport and handling charges
increased 0.9%, from E611.6 million in the 2013 fiscal year to E617.2 million in the 2014 fiscal year, reflecting the
overall growth in passenger volumes, increased charges in Spain, and a quadrupling of ATC charges in Italy during the
summer, partially offset by the mix of new route and bases launched and the weakening of U.K. pound sterling against the
euro. In absolute terms, route charges increased 7.3%, from E486.6 million in the 2013 fiscal year, to E522.0 million in
the 2014 fiscal year, primarily as a result of the 2% increase in sectors flown.
Staff costs. Ryanair's staff costs, which consist primarily of salaries, wages and benefits, increased 3.3% on a
per-passenger basis, while in absolute terms, these costs increased 6.4%, from E435.6 million in the 2013 fiscal year to
E463.6 million in the 2014 fiscal year. The increase in absolute terms was primarily attributable to a 7.6% increase in
hours flown and a pay increase of 2.0% granted in fiscal 2014, partially offset by the weakening of U.K. pound sterling
against the euro.
Depreciation. Ryanair's depreciation per passenger increased by 3.6%, while in absolute terms these costs increased 6.7%
from E329.6 million in the 2013 fiscal year to E351.8 million in the 2014 fiscal year. The increase was primarily
attributable to the increase in the average number of owned aircraft in the fleet in the 2014 fiscal year (246) compared to
the 2013 fiscal year (242) and spare engines purchased during the year. See "-Critical Accounting Policies-Long-lived
Assets" above.
Marketing, distribution and other expenses. Ryanair's marketing, distribution and other operating expenses, including those
applicable to the generation of ancillary revenues, decreased 5.5% on a per-passenger basis in the 2014 fiscal year, while
in absolute terms, these costs decreased 2.6%, from E197.9 million in the 2013 fiscal year to E192.8 million in the 2014
fiscal year, with the overall decrease primarily reflecting the reduced marketing spend per passenger and lower ancillary
revenue costs.
Maintenance, materials and repairs. Ryanair's maintenance, materials and repair expenses, which consist primarily of the
cost of routine maintenance, provision for leased aircraft and the overhaul of spare parts, decreased 6.7% on a
per-passenger basis, while in absolute terms these expenses decreased by 3.8% from E120.7 million in the 2013 fiscal year
to E116.1 million in the 2014 fiscal year. The decrease in absolute terms during the fiscal year reflected improved terms
on lease extensions, offset in part by costs arising from the increased level of activity.
Aircraft rentals. Aircraft rental expenses amounted to E101.5 million in the 2014 fiscal year, a 3.4% increase from the
E98.2 million reported in the 2013 fiscal year, reflecting the negative impact of higher lessor financing costs and the
adverse impact of changes in the euro/dollar exchange rate.
Operating profit. As a result of the factors outlined above, operating profit decreased 11.0% on a per-passenger basis in
the 2014 fiscal year, and also decreased in absolute terms, from E718.2 million in the 2013 fiscal year to E658.6 million
in the 2014 fiscal year.
Finance expense. Ryanair's interest and similar charges decreased 16.2%, from E99.3 million in the 2013 fiscal year to
E83.2 million in the 2014 fiscal year, primarily due to lower interest rates and reduced level of debt in the 2014 fiscal
year compared to the 2013 fiscal year. These costs are expected to increase in future periods as Ryanair further expands
its fleet.
Finance income. Ryanair's interest and similar income decreased 39.8%, from E27.4 million in the 2013 fiscal year to E16.5
million in the 2014 fiscal year, reflecting lower interest rates and gross cash balances, partially offset by increased
dividend income from Aer Lingus shares received in the 2014 fiscal year.
Foreign exchange gains/losses. Ryanair recorded foreign exchange losses of E0.5 million in the 2014 fiscal year, as
compared with foreign exchange gains of E4.6 million in the 2013 fiscal year, with the different result being primarily due
to the negative impact of changes in the euro exchange rate against the U.K. pound sterling.
Taxation. The effective tax rate for the 2014 fiscal year was 11.6%, as compared to an effective tax rate of 12.5% in the
2013 fiscal year. The effective tax rate reflects the statutory rate of Irish corporation tax of 12.5%. Ryanair recorded an
income tax provision of E68.6 million in the 2014 fiscal year, compared with a tax provision of E81.6 million in the 2013
fiscal year, with the decrease primarily reflecting lower pre-tax profits. The determination regarding the recoverability
of the deferred tax asset was based on future income forecasts, which demonstrated that it was more likely than not that
future profits would be available in order to utilize the deferred tax asset. A deferred tax asset's recoverability is not
dependent on material improvements over historical levels of pre-tax income, material changes in the present relationship
between income reported for financial and tax purposes, or material asset sales or other non-routine transactions.
FISCAL YEAR 2013 COMPARED WITH FISCAL YEAR 2012
Profit after taxation. Ryanair recorded a profit on ordinary activities after taxation of E569.3 million in the 2013 fiscal
year, as compared with a profit of E560.4 million in the 2012 fiscal year. This 1.6% increase was primarily attributable to
an increase in revenues driven by a 4.3% increase in average fares and a 20.1% increase in ancillary revenues, partially
offset by a 18.3% increase in fuel and oil costs from E1,593.6 million to E1,885.6 million. The result in fiscal 2012
included E57.8 million, net of tax, relating to a one off release of ticket sales revenue due to a change in accounting
estimates arising in enhancements to Ryanair's revenue accounting system.
Scheduled revenues. Ryanair's scheduled passenger revenues increased 9.0%, from E3,504.0 million in the 2012 fiscal year,
to E3,819.8 million in the 2013 fiscal year, primarily reflecting an increase of 4.3% in average fares. The number of
passengers booked increased 4.5%, from 75.8 million to 79.3 million, reflecting increased passenger volumes on existing
routes and the successful launch of new bases at Chania, Eindhoven, Fez, Krakow, Maastricht, Marrakech and Zadar in the
2013 fiscal year. Booked passenger load factors remained flat at 82% in both fiscal 2012 and fiscal 2013.
Passenger capacity during the 2013 fiscal year increased by 4.7% due to the addition of 11 Boeing 737-800 aircraft (net of
lease handbacks). Scheduled passenger revenues accounted for 78.2 % of Ryanair's total revenues for the 2013 fiscal year,
compared with 79.8% of total revenues in the 2012 fiscal year.
During fiscal year 2012, changes in estimates relating to the timing of revenue recognition for unused passenger tickets
were made, resulting in increased revenue in the 2012 fiscal year of E65.3 million. This change reflects more accurate and
timely data obtained through system enhancements.
Ancillary revenues. Ryanair's ancillary revenues, which comprise revenues from non-flight scheduled operations, in-flight
sales and Internet-related services, increased 20.1%, from E886.2 million in the 2012 fiscal year to E1,064.2 million in
the 2013 fiscal year, while ancillary revenues per booked passenger increased to E13.43 from E11.69. Revenues from
non-flight scheduled operations, including revenues from excess baggage charges, administration/credit card fees, sales of
rail and bus tickets, priority boarding, reserved seating, accommodation, travel insurance and car rental increased 23.0%
to E832.9 million from 677.4 million in the 2012 fiscal year. Revenues from in-flight sales increased 2. 8%, to E109.8
million from E106.7 million in the 2012 fiscal year. Revenues from Internet-related services, primarily commissions
received from products sold on Ryanair.com or linked websites, increased 19.0%, from E102.1 million in the 2012 fiscal year
to E121.5 million in the 2013 fiscal year. The rate of increase in revenues from all ancillary revenue categories exceeded
that of the increase in overall passengers booked.
The following table sets forth the components of ancillary revenues earned by Ryanair and each component expressed as a
percentage of total ancillary revenues for each of the periods indicated:
Fiscal Year ended March 31,
2013 2012
(in millions of euro, except percentage data)
Non-flight Scheduled..................... E832.9 78.3% E677.4 76.4%
In-flight Sales................................... E109.8 10.3% E106.7 12.0%
Internet-related................................ E121.5 11.4% E102.1 11.5%
Total.................................................. E1,064.2 100.0% E886.2 100.0%
E1,064.2
100.0%
E886.2
100.0%
Operating expenses. As a percentage of total revenues, Ryanair's operating expenses increased from 84.5% in the 2012 fiscal
year to 85.3% in the 2013 fiscal year, as total revenues increased by 11.2%, slower than the 12.4% increase in operating
expenses. In absolute terms, total operating expenses increased 12.4%, from E3,707.0 million in the 2012 fiscal year to
E4,165.8 million in the 2013 fiscal year, principally as a result of an 18.3% increase in fuel and oil costs from E1,593.6
million in the 2012 fiscal year to E1,885.6 million in the 2013 fiscal year. Staff costs, depreciation, aircraft rental
expenses, route charges, airport handling charges and marketing, distribution and other costs decreased as a percentage of
total revenues, while maintenance and fuel and oil expenses increased. Total operating expenses per passenger increased by
7.5%, with the increase reflecting, principally, the increase in passenger capacity during the 2013 fiscal year and the
impact of the higher fuel costs.
The Company's decision to ground aircraft did not have a material impact on the results of the Company for the year ended
March 31, 2013 and, at present, is not anticipated to have a material impact on future operations. The Company anticipates
that any revenues which could have been generated had the Company operated the grounded aircraft would have been lower than
the operating costs associated with operating these aircraft, due to significantly higher fuel costs, airport charges and
taxes. The Company does not anticipate that any material staff costs will be incurred during future periods of the
grounding of aircraft, as the relevant staff can be furloughed under the terms of their contracts without compensation and
the maintenance costs associated with the grounded aircraft will be minimal. However, the Company will still incur aircraft
ownership costs comprised of depreciation and amortization costs, lease rentals costs and financing costs.
The following table sets forth the amounts in euro cent of, and percentage changes in, Ryanair's operating expenses (on a
per-passenger basis) for the fiscal years ended March 31, 2013 and March 31, 2012 under IFRS. These data are calculated by
dividing the relevant expense amount (as shown in the consolidated financial statements) by the number of booked passengers
in the relevant year as shown in the table of "Selected Operating and Other Data" in Item 3 and rounding to the nearest
euro cent; the percentage change is calculated on the basis of the relevant figures before rounding.
Fiscal Year Ended Fiscal Year Ended % Change
March 31, 2013 March 31, 2012
E E
Fuel and oil....................................................................................... 23.79 21.02 13.2%
Airport and handling charges....................................................... 7.71 7.31 5.6%
Route charges.................................................................................. 6.14 6.08 1.1%
Staff costs........................................................................................ 5.50 5.47 0.4%
Depreciation..................................................................................... 4.16 4.08 2.0%
Marketing, distribution and other................................................ 2.50 2.37 5.2%
Maintenance, materials and repairs.............................................. 1.52 1.37 11.0%
Aircraft rentals................................................................................. 1.24 1.20 3.5%
Total operating expenses............................................................... 52.56 48.90 7.5%
3.5%
Total operating expenses...............................................................
52.56
48.90
7.5%
Fuel and oil. Ryanair's fuel and oil costs per passenger increased by 13.2%, while in absolute terms, these costs increased
by 18.3% from E1,593.6 million in the 2012 fiscal year to E1,884.6 million in the 2013 fiscal year, in each case after
giving effect to the Company's fuel hedging activities. The 18.3% increase reflected a 15% increase in average fuel prices
paid and the impact of a 3.7% increase in the number of hours flown, which were offset in part by a 2.2% decrease in the
average sector length. Fuel and oil costs include the direct cost of fuel, the cost of delivering fuel to the aircraft,
aircraft de-icing and EU emissions trading costs. The average fuel price paid by Ryanair (calculated by dividing total fuel
costs by the number of U.S. gallons of fuel consumed) increased 14.4% from E2.08 per U.S. gallon in the 2012 fiscal year to
E2.38 per U.S. gallon in the 2013 fiscal year, in each case after giving effect to the Company's fuel hedging activities.
Airport and handling charges and route charges. Ryanair's airport and handling charges per passenger increased 5.6%, while
route charges per passenger increased 1.1% in the 2013 fiscal year. In absolute terms, airport and handling charges
increased 10.4%, from E554.0 million in the 2012 fiscal year, to E611.6 million in the 2013 fiscal year, reflecting the
overall growth in passenger volumes and higher charges at Dublin and London (Stansted) airports, partially offset by lower
average costs at Ryanair's newer airports and bases. In absolute terms, route charges increased 5.7%, from E460.5 million
in the 2012 fiscal year to E486.6 million in the 2013 fiscal year, primarily as a result of the 4.7% increase in sectors
flown.
Staff costs. Ryanair's staff costs, which consist primarily of salaries, wages and benefits, increased 0.4% on a
per-passenger basis, while in absolute terms, these costs increased 5.0%, from E415.0 million in the 2013 fiscal year to
E435.6 million in the 2013 fiscal year. The increase in absolute terms was primarily attributable to a 3.7% increase in
hours flown and a flight crew pay increase of 2% granted in fiscal 2013.
Depreciation. Ryanair's depreciation per passenger increased by 2.0%, while in absolute terms these costs increased 6.6%
from E309.2 million in the 2012 fiscal year to E329.6 million in the 2013 fiscal year. The increase was primarily
attributable to the addition of 11 owned aircraft to the fleet during the 2013 fiscal year. See "-Critical Accounting
Policies-Long-lived Assets" above.
Marketing, distribution and other expenses. Ryanair's marketing, distribution and other operating expenses, including those
applicable to the generation of ancillary revenues, increased 5.2% on a per-passenger basis in the 2013 fiscal year, while
in absolute terms, these costs increased 9.9%, from E180.0 million in the 2012 fiscal year to E197.9 million in the 2013
fiscal year, with the overall increase primarily reflecting the higher level of activity and increased onboard product
costs reflecting the higher level of sales.
Maintenance, materials and repairs. Ryanair's maintenance, materials and repair expenses, which consist primarily of the
cost of routine maintenance, provision for leased aircraft and the overhaul of spare parts, increased 11.0% on a
per-passenger basis, while in absolute terms these expenses increased by 16.0% from E104.0 million in the 2012 fiscal year
to E120.7 million in the 2013 fiscal year. The increase in absolute terms during the fiscal year reflected the additional
costs arising from increased level of activity and the opening of new bases.
Aircraft rentals. Aircraft rental expenses amounted to E98.2 million in the 2013 fiscal year, an 8.2% increase from the
E90.7 million reported in the 2012 fiscal year, reflecting the negative impact of higher lessor financing costs and the
adverse impact of changes in the euro/dollar exchange rate on new leased aircraft and the handback of 4 aircraft due to the
maturity of leases.
Operating profit. As a result of the factors outlined above, operating profit increased 0.6% on a per-passenger basis in
the 2013 fiscal year, and also increased in absolute terms, from E683.2 million in the 2012 fiscal year to E718.2 million
in the 2013 fiscal year.
Finance expense. Ryanair's interest and similar charges decreased 9.0%, from E109.2 million in the 2012 fiscal year to
E99.3 million in the 2013 fiscal year, primarily due to lower interest rates in the 2013 fiscal year compared to the 2012
fiscal year. These costs are expected to increase as Ryanair further expands its fleet.
Finance income. Ryanair's interest and similar income decreased 38.2%, from E44.3 million in the 2012 fiscal year to E27.4
million in the 2013 fiscal year, reflecting the reduced yields on term deposits.
Foreign exchange gains/losses. Ryanair recorded foreign exchange gains of E4.6 million in the 2013 fiscal year, as compared
with foreign exchange gains of E4.3 million in the 2012 fiscal year, with the different result being primarily due to the
positive impact of changes in the U.K. pound sterling and the U.S. dollar exchange rates against the euro.
Taxation. The effective tax rate for the 2013 fiscal year was 12.5%, as compared to an effective tax rate of 11.5% in the
2012 fiscal year. The effective tax rate reflects the statutory rate of Irish corporation tax of 12.5%. Ryanair recorded an
income tax provision of E81.6 million in the 2013 fiscal year, compared with a tax provision of E72.6 million in the 2012
fiscal year, with the increase primarily reflecting higher pre-tax profits. The determination regarding the recoverability
of the deferred tax asset was based on future income forecasts, which demonstrated that it was more likely than not that
future profits would be available in order to utilize the deferred tax asset. A deferred tax asset's recoverability is not
dependent on material improvements over historical levels of pre-tax income, material changes in the present relationship
between income reported for financial and tax purposes, or material asset sales or other non-routine transactions.
SEASONAL FLUCTUATIONS
The Company's results of operations have varied significantly from quarter to quarter, and management expects these
variations to continue. Among the factors causing these variations are the airline industry's sensitivity to general
economic conditions and the seasonal nature of air travel. Ryanair typically records higher revenues and income in the
first half of each fiscal year ended March 31 than the second half of such year.
RECENTLY ISSUED ACCOUNTING STANDARDS
Please see Note 1 to the consolidated financial statements included in Item 18 for information on recently issued
accounting standards that are material to the Company.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity. The Company finances its working capital requirements through a combination of cash generated from operations,
debt capital market issuances and bank loans for the acquisition of aircraft. See "Item 3. Key Information-Risk
Factors-Risks Related to the Company-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" for more
information about risks relating to liquidity and capital resources. The Company had cash and liquid resources at March 31,
2014 and 2013 of E3,241.7 million and E3,559.0 million, respectively. The decrease at March 31, 2014 primarily reflects
cash generated from operating activities of E1,044.6 million, which was offset by the cash used to fund the purchase of
69.5 million Ordinary Shares via a share buy-back costing E481.7 million, as well as the purchase of property, plant, and
equipment - primarily pre-delivery payments on new Boeing 737-800 aircraft, spare engines and the repayment of E390.8
million of borrowings. Cash and liquid resources included E13.3 million and E24.7 million in "restricted cash" held on
deposit as collateral for certain derivative financial instruments entered into by the Company with respect to its aircraft
financing obligations and other banking arrangements at March 31, 2014 and 2013, respectively. See "Item 8. Financial
Information¾Other Financial Information¾Legal Proceedings."
The Company's net cash inflows from operating activities in the 2014 and 2013 fiscal years amounted to E1,044.6 million and
E1,023.5 million, respectively. The E21.1 million increase in net cash flows from operating activities for fiscal year 2014
compared to fiscal year 2013 was principally due to a number of factors including an increase in accrued expenses. This
movement, which primarily relates to cash received in advance for flights, and receipt of other receivables and increases
in other payables balances, generated E133.9 million in cash in 2014, compared with E67.4 million in 2013. This increase in
net cash generated from working capital of E66.5 million, or approximately 98.7%, is primarily due to the an increase in
cash receipts from advance bookings, some of which is due to the timing of Easter which fell in April 2014.
During the last two fiscal years, Ryanair's primary cash requirements have been for operating expenses, additional
aircraft, including advance payments in respect of new Boeing 737-800s and related flight equipment, payments on related
indebtedness and payments of corporation tax, as well as share buy-backs of E549.2 million and the payment of a E491.5
million special dividend to shareholders. Cash generated from operations has been the principal source for these cash
requirements, supplemented primarily by aircraft-related bank loans.
The Company's net cash inflows from operating activities in the 2013 and 2012 fiscal years amounted to E1,023.5 million and
E1,020.3 million, respectively. The E3.2 million increase in net cash flows from operating activities for fiscal year 2013
compared to fiscal 2012 was principally due to a number of factors including a E493.8 million increase in operating
revenues, due to a combination of a 4.3% increase in average fares, a 4.5% increase in booked passengers and a 20.1%
increase in ancillary revenues, partially offset by a E291.0 million, or 18.3%, increase in fuel and oil costs, due to the
increase in the level of activity and increases in the average price of fuel, and a E146.4 million, or 8.1%, increase in
non-fuel related operating expenses (excluding a E20.4 million, or 6.6%, increase in non-cash depreciation) due to the
growth of the business. In addition, movements in working capital, related principally to cash received in advance for
flights, and receipt of other receivables and increases in other payables balances, generated E67.4 million in cash in
2013, compared with E101.8 million in 2012. This decrease in net cash generated from working capital of E34.4 million, or
approximately 34%, is primarily due to the timing of Easter, which led to lower future fly revenues at year end.
The Company's net cash inflows from investing activities in fiscal year 2014 totaled E300.7 million, primarily reflecting,
as compared to fiscal year 2013, the Company's decreased investment of cash with maturities of greater than three months,
as described in more detail below
The Company's net cash used in investing activities in fiscal years 2013 and 2012 totaled E1,821.5 million and E185.4
million, respectively, primarily reflecting the Company's capital expenditures, and increased investment of cash with
maturities of greater than three months, as described in more detail below.
Net cash used in financing activities totaled E856.1 million in the 2014 fiscal year, largely reflecting the repayments of
long-term borrowings of E390.8 million and shares purchased under a share buy-back program of E481.7 million, offset in
part by shares issued of E16.4 million. Net cash used in financing activities totaled E669.4 million in fiscal year 2013.
This was due to the receipt of proceeds from long term borrowings of E234.6 million and shares issued of E21.4 million,
offset in part by repayments of long-term borrowings of E366.4 million, the payment of a E491.5 million dividend and shares
purchased under a share buy-back program of E67.5 million.
The Company experienced a net cash outflow from financing activities of E154.9 million in fiscal year 2012. This was due
to the receipt of proceeds from long term borrowings of E292.3 million being more than offset by repayments of long-term
borrowings of E329.7 million and the expenditure of E124.6 million under the share buy-back program.
Capital Expenditures. The Company's net cash outflows for capital expenditures in fiscal years 2014 and 2013 were E505.8
million and E310.7 million, respectively. Ryanair has funded a significant portion of its acquisition of new Boeing 737-800
aircraft and related equipment through borrowings under facilities provided by international financial institutions on the
basis of guarantees issued by the Export-Import Bank of the United States ("Ex-Im Bank"). At March 31, 2014, Ryanair had a
fleet of 297 Boeing 737-800 aircraft, the majority of which (210 aircraft) were funded by Ex-Im Bank-guaranteed financing.
Other sources of on-balance-sheet aircraft financing utilized by Ryanair are Japanese Operating Leases with Call Options
("JOLCOs"), which are treated as finance leases (30 of the aircraft in the fleet as of March 31, 2014) and commercial debt
financing (6 of the aircraft in the fleet as of March 31, 2014). Of Ryanair's total fleet of 297 Boeing 737-800 aircraft at
March 31, 2014 there were 51 aircraft which were financed through operating lease arrangements. Ryanair has generally been
able to generate sufficient funds from operations to meet its non-aircraft acquisition-related working capital
requirements. Management believes that the working capital available to the Company is sufficient for its present
requirements and will be sufficient to meet its anticipated requirements for capital expenditures and other cash
requirements for the 2015 fiscal year.
The Company's net cash outflows for capital expenditures in fiscal year 2012 was E290.4 million. Of the 25 new Boeing
737-800 aircraft which Ryanair took delivery of between April 1, 2011 and March 31, 2012, 11 were financed through
sale-and-leaseback financings and the remainder through Ex-Im Bank guaranteed-financing.
The following table sets forth the dates on which and the number of aircraft that will be delivered to the Company pursuant
to the 2013 Boeing Contract:
Opening Fleet 305 297 308 343 371 403 305
Aircraft delivered 0 11 40 50 50 29 180
Planned lease returns/disposals (8) - (5) (22) (18) (6) (59)
Closing Fleet 297 308 343 371 403 426 426
Closing Fleet
297
308
343
371
403
426
426
Capital Resources. Ryanair's long-term debt (including current maturities) totaled E3,083.6 million at March 31, 2014 and
E3,498.3 million at March 31, 2013, with the change being primarily attributable to the repayment of existing debt
facilities. Please see the table "Obligations Due by Period" below for more information on Ryanair's long-term debt
(including current maturities) and finance leases as of March 31, 2014. See also Note 11 to the consolidated financial
statements included in Item 18 for further information on the maturity profile of the interest rate structure and other
information on, the Company's borrowings.
At March 31, 2014, the majority of the aircraft in Ryanair's fleet had been financed through loan facilities with various
financial institutions active in the structured export finance sector and supported by a loan guarantee from Ex-Im Bank.
Each of these facilities takes essentially the same form and is based on the documentation developed by Ryanair and Ex-Im
Bank, which follows standard market forms for this type of financing. In November 2010, Ryanair financed seven aircraft
through a U.S. dollar-denominated Ex-Im Bank Capital Markets Product ("Eximbond"). The Eximbond has essentially the same
characteristics as all previous Ex-Im Bank guaranteed financings with no additional obligations on Ryanair. On the basis of
an Ex-Im Bank guarantee with regard to the financing of up to 85% of the eligible U.S. and foreign content represented in
the net purchase price of the relevant aircraft, the financial institution investor enters into a commitment letter with
the Company to provide financing for a specified number of aircraft benefiting from such guarantee; loans are then drawn
down as the aircraft are delivered and payments to Boeing become due. Each of the loans under the facilities are on
substantially similar terms, having a maturity of 12 years from the drawdown date and being secured by a first priority
mortgage in favor of a security trustee on behalf of Ex-Im Bank.
Through the use of interest rate swaps or cross currency interest rate swaps, Ryanair has effectively converted a portion
of its floating-rate debt under its financing facilities into fixed-rate debt. Approximately 34% of the loans for the
aircraft acquired under the above facilities are not covered by such swaps and have therefore remained at floating rates
linked to EURIBOR, with the interest rate exposure from these loans largely hedged by placing a similar amount of cash on
deposit at floating interest rates. The net result is that Ryanair has effectively swapped or drawn down fixed-rate
euro-denominated debt with maturities between seven and twelve years in respect of approximately 66% of its outstanding
debt financing at March 31, 2014 and of this total approximately 48% of this debt has been partially swapped, with the
relevant swaps covering the first seven years of the twelve-year amortizing period.
The table below illustrates the effect of swap transactions (each of which is with an established international financial
counterparty) on the profile of Ryanair's total outstanding debt at March 31, 2014. See "Item 11. Quantitative and
Qualitative Disclosures About Market Risk-Interest Rate Exposure and Hedging" for additional details on the Company's
hedging transactions.
At March 31, 2014 EUR EUR
Fixed Floating
(in millions of euro)
Borrowing profile before swap transactions................................. 945.1 2,138.5
Interest rate swaps - Debt swapped from floating to fixed........ 1,098.9 (1,098.9)
Borrowing profile after swap transactions.................................... 2,044.0 1,039.6
2,044.0
1,039.6
The weighted-average interest rate on the cumulative borrowings under these facilities of E3,083.6 million at March 31,
2014 was 2.49%. Ryanair's ability to obtain additional loans pursuant to each of the facilities to finance the price of
future Boeing 737-800 aircraft purchases is subject to the issuance of further bank commitments and the satisfaction of
various contractual conditions. In addition, as a result of the Company obtaining a BBB+ credit rating from Standard &
Poor's and Fitch Ratings and following Ryanair's recent issuance in June 2014 of an unsecured eurobond in the amount of
E850.0 million with a coupon of 1.875% with a tenor of 7 years that are guaranteed by Ryanair Holdings, the Company may
decide in the future to issue additional debt from through the capital markets to finance future aircraft deliveries. These
conditions include, among other things, the execution of satisfactory documentation, the requirement that Ryanair perform
all of its obligations under the Boeing agreements and provide satisfactory security interests in the aircraft (and related
assets) in favor of the lenders and Ex-Im Bank, and that Ryanair not suffer a material adverse change in its conditions or
prospects (financial or otherwise).
As part of its Ex-Im Bank guarantee-based financing of the Boeing 737-800s, Ryanair has entered into certain lease
agreements and related arrangements. Pursuant to these arrangements, legal title to the 210 aircraft delivered and
remaining in the fleet as of March 31, 2014 rests with a number of United States special purpose vehicles (the "SPVs"). The
SPVs are the borrowers of record under the loans made or to be made under the facilities, with all of their obligations
under the loans being guaranteed by Ryanair Holdings.
These Aircraft are financed using a standard Ex-Im Bank "orphan" ownership structure. The shares of the SPVs (which are
owned by an unrelated charitable association and not by Ryanair) are in turn pledged to a security trustee in favor of
Ex-Im Bank and the lenders. Ryanair operates each of the aircraft pursuant to a finance lease it has entered into with the
SPVs, the terms of which mirror those of the relevant loans under the facilities. Ryanair has the right to purchase the
aircraft upon termination of the lease for a nominal amount. Pursuant to this arrangement, Ryanair is considered to own the
aircraft for accounting purposes under IFRS. Ryanair does not use special purpose entities for off-balance sheet financing
or any other purpose which results in assets or liabilities not being reflected in Ryanair's consolidated financial
statements. In addition to its purchase option under the finance lease, Ryanair is entitled to receive the balance of any
proceeds received in respect of the aircraft that remain after Ex-Im Bank and the lenders are paid what they are owed under
the loan guarantees.
Ryanair has a track record in securing finance for similar sized aircraft purchases. The 1998, 2002, 2003 and 2005 Boeing
Contracts totaling 348 aircraft were financed with approximately 66% US Ex-Im Bank loan guarantees and capital markets
(with 85% loan to value) financing, 24% through sale and operating leaseback financing, and 10% through Japanese operating
leases with call options ("JOLCOs"). See "Item 5. Operating and Financial Review and Prospects-Liquidity and Capital
Resources."
Under the new Aviation Sector Understanding which came into effect from January 1, 2013, the fees payable to Ex-Im Bank for
the provision of loan guarantees have significantly increased, thereby making it more expensive than more traditional forms
of financing. As a result, Ryanair intends to finance the New Aircraft obtained under the 2013 Boeing Contract through a
combination of internally generated cash flows, debt financing from commercial banks, debt financing through the capital
markets in a secured and unsecured manner, commercial debt through JOLCOs and sale and operating leasebacks. These forms of
financing are generally accepted in the aviation industry and are currently widely available for companies who have the
credit quality of Ryanair. Ryanair may periodically use Ex-Im Bank loan guarantees when appropriate. Ryanair intends to
finance pre-delivery payments ("Aircraft Deposits") to Boeing in respect of the New Aircraft via internally generated cash
flows similar to all previous Aircraft Deposit payments.
At March 31, 2014, Ryanair had 51 operating lease aircraft in the fleet. As a result, Ryanair operates, but does not own,
these aircraft, which were leased to provide flexibility for the aircraft delivery program. Ryanair has no right or
obligation to acquire these aircraft at the end of the relevant lease terms. 18 leases are denominated in euro and require
Ryanair to make fixed rental payments over the term of the lease. The remaining 33 operating leases are U.S.
dollar-denominated and require Ryanair to make fixed rental payments. The Company has an option to extend the initial
period of seven years on 34 of the 51 remaining operating lease aircraft as at March 31, 2014 on pre-determined terms. This
includes 3 operating lease arrangements which are due to mature during the year ended March 31, 2015 but have been extended
for a further 7 years. In addition to the above, the Company financed 30 of the Boeing 737-800 aircraft delivered between
March 2005 and March 2014 with 13-year euro-denominated 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. Six aircraft
have been financed through euro-denominated 12-year amortizing commercial debt transactions.
Since, under each of the Company's operating leases, the Company has a commitment to maintain the relevant aircraft, an
accounting provision is made during the lease term for this obligation based on estimated future costs of major airframe,
engine maintenance checks and restitution of major life limited parts by making appropriate charges to the income statement
calculated by reference to the number of hours or cycles operated during the year. Under IFRS, the accounting treatment for
these costs with respect to leased aircraft differs from that for aircraft owned by the Company, for which such costs are
capitalized and amortized.
Ryanair recently obtained a BBB+ (stable) corporate rating from both Standard & Poor's and Fitch Ratings and established a
E3 billion EMTN program. In June 2014, Ryanair issued E850.0 million in unsecured eurobonds with a 7 year tenor at a coupon
of 1.875% under this program that are guaranteed by Ryanair Holdings. The Company intends to use the proceeds from this
issuance for general corporate purposes, including the financing of aircraft.
Contractual Obligations. The table below sets forth the contractual obligations and commercial commitments of the Company
with definitive payment terms, which will require significant cash outlays in the future, as of March 31, 2014. These
obligations primarily relate to Ryanair's aircraft purchase and related financing obligations, which are described in more
detail above, and do not reflect the E850.0 million in eurobonds issued in June 2014. For additional information on the
Company's contractual obligations and commercial commitments, see Note 23 to the consolidated financial statements included
in Item 18.
The amounts listed under "Finance Lease Obligations" reflect the Company's obligations under its JOLCOs. See "Item 5.
Operating and Financial Review and Prospects¾ Liquidity and Capital Resources."
The amounts listed under "Purchase Obligations" in the table reflect obligations for aircraft purchases and are calculated
by multiplying the number of aircraft the Company is obligated to purchase under its current agreements with Boeing during
the relevant period by the Basic Price for each aircraft pursuant to the relevant contract, with the dollar-denominated
Basic Price being converted into euro at an exchange rate of $1.3788 =E1.00 (based on the European Central Bank Rate on
March 31, 2014). The relevant amounts therefore exclude the effect of the price concessions granted to Ryanair by Boeing
and CFM, as well as any application of the Escalation Factor described below. As a result, Ryanair's actual expenditures
for aircraft during the relevant periods will be lower than the amounts listed under "Purchase Obligations" in the table.
With respect to purchase obligations under the terms of the 2013 Boeing Contract, the Company was required to pay Boeing 1%
of the Basic Price of each of the 175 firm-order Boeing 737-800 aircraft at the time the contract was signed in April 2013
(such deposit being fully refundable if the Company had not received the shareholder approval it received at an
extraordinary general meeting on June 18, 2013), and will be required to make periodic advance payments of the purchase
price for each aircraft it has agreed to purchase during the course of the two-year
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