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«Chief Executive‟s Report 9 Summary Operating and Financial Overview Directors‟ Report 15 Corporate Governance Report Report of the Remuneration ...»

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The investigations are expected to be completed in mid to late 2014, with the European Commission‘s decisions being appealable to the EU General Court. Investigations between 2010 and 2014 into Ryanair‘s agreements with the Bratislava, Tampere, Marseille, Berlin (Schönefeld) and Aarhus airports concluded with findings that these agreements contained no state aid. On July 23, 2014 the European Commission announced a ‗no state aid‘ decision in respect of Dusseldorf (Weeze) airport, as well as findings of state aid to Ryanair in its arrangements with Pau, Nimes and Angouleme airports, ordering Ryanair to repay a total of approximately €9.7m of alleged aid. Ryanair will appeal these ‗aid‘ decisions to the EU General Court where proceedings are expected to take between 2 and 4 years. In addition to the European Commission investigations, Ryanair is facing allegations that it has benefited from unlawful state aid in a number of court cases, including in relation to its arrangements with Frankfurt (Hahn) and Lübeck airports. Adverse rulings in the above state aid matters could be used as precedents by competitors to challenge Ryanair‘s agreements with other publicly owned airports and could cause Ryanair to strongly reconsider its growth strategy in relation to public or state-owned airports across Europe. This could in turn lead to a scaling-back of Ryanair‘s overall growth strategy due to the smaller number of privately owned airports available for development.

On July 25, 2012, the European Commission decided that Ryanair, along with Aer Lingus Group plc (―Aer Lingus‖) and Aer Arann, had been in receipt of unlawful state aid from the Irish government as a result of being an identified beneficiary of the two-tier air travel tax in place for flights departing from Irish airports between March 2009 and March 2011. Ryanair was the original complainant to the European Commission, alleging that the air travel tax favored Aer Arann and Aer Lingus. Ryanair appealed the decision of the European Commission to the EU General Court on November 14, 2012. The hearing in the EU General Court took place in June 2014, and judgment is expected within six months of the hearing. The EU General Court may affirm or annul the European Commission decision. The Irish State is obliged to recover the unlawful state aid from Ryanair before the Irish courts notwithstanding Ryanair‘s appeal of the EU Commission decision, and initiated its claim in April 2013. The Irish State is seeking approximately €12 million plus interest from Ryanair in these proceedings. Ryanair has also issued proceedings before the Irish courts for recovery of the entire amount of the air travel tax paid during the period March 2009 – March 2011 on the basis of the two-tier nature of the tax being unlawful under EU law.

No assurance can be given as to the outcome of these legal proceedings, nor as to whether any unfavorable outcomes may, individually or in the aggregate, have an adverse effect on the results of operations or financial condition of Ryanair.

For additional information, please see ―Item 8. Financial InformationOther Financial InformationLegal Proceedings.‖ The Company Faces Significant Price and Other Pressures in a Highly Competitive Environment. Ryanair operates in a highly competitive marketplace, with a number of low-fare, traditional and charter airlines competing throughout its route network. Airlines compete primarily in respect of fare levels, frequency and dependability of service, name recognition, passenger amenities (such as access to frequent flyer programmes), and the availability and convenience of other passenger services. Unlike Ryanair, certain competitors are state-owned or state-controlled flag carriers and in some cases may have greater name recognition and resources and may have received, or may receive in the future, significant amounts of subsidies and other state aid from their respective governments. In addition, the EU-U.S. Open Skies Agreement, which came into effect in March 2008, allows U.S.

carriers to offer services in the intra-EU market, which could eventually result in increased competition in the EU market. See ―Item 4. Information on the Company—Government Regulation—Liberalization of the EU Air Transportation Market.‖ The airline industry is highly susceptible to price discounting, in part because airlines incur very low marginal costs for providing service to passengers occupying otherwise unsold seats. Both low-fare and traditional airlines sometimes offer low fares in direct competition with Ryanair across a significant proportion of its route network as a result of the liberalization of the EU air transport market and greater public acceptance of the low-fares model. Ryanair‘s average booked passenger fare decreased in the 2014 fiscal year, and there can be no assurance that it will not decrease further in future periods.

Although Ryanair intends to compete vigorously and to assert its rights against any predatory pricing or other similar conduct, price competition among airlines could reduce the level of fares and/or passenger traffic on Ryanair‘s routes to the point where profitability may not be achievable.

In addition to traditional competition among airline companies and charter operators who have entered the low-fares market, the industry also faces competition from ground transportation (including high-speed rail systems) and sea transportation alternatives, as businesses and recreational travellers seek substitutes for air travel.





The Company Will Incur Significant Costs Acquiring New Aircraft and Any Instability in the Credit and Capital Markets Could Negatively Impact Ryanair’s Ability to Obtain Financing on Acceptable Terms. Ryanair‘s continued growth is dependent upon its ability to acquire additional aircraft to meet additional capacity needs and to replace older aircraft. Ryanair had 297 aircraft in its fleet by March 31, 2014 and has ordered an additional 180 new Boeing 737-800 next generation aircraft (the ―New Aircraft‖) for delivery during fiscal 2015 to fiscal 2019 pursuant to a contract with the Boeing Company (the ―2013 Boeing Contract‖). Ryanair expects to have approximately 426 aircraft in its fleet by March 31, 2019, depending on the level of lease returns/disposals. For additional information on the Company‘s aircraft fleet and expansion plans, see ―Item 4. Information on the Company—Aircraft‖ and ―Item 5. Operating and Financial Review and ProspectsLiquidity and Capital Resources.‖ There can be no assurance that this planned expansion will not outpace the growth of passenger traffic on Ryanair‘s routes or that traffic growth will not prove to be greater than the expanded fleet can accommodate. In either case, such developments could have a material adverse effect on the Company‘s business, results of operations, and financial condition.

As a result of the 2013 Boeing Contract, the Company is expected to raise substantial debt financing to cover all of the expected aircraft deliveries over the period from September 2014 to December 2018, including Ryanair‘s issuance of €850.0 million in 1.875% unsecured eurobonds with a 7 year tenor in June 2014 that are guaranteed by Ryanair Holdings. This aircraft order is expected to increase the Company‘s outstanding debt from fiscal 2015 onwards. Furthermore, Ryanair‘s ability to raise unsecured or secured debt to pay for aircraft as they are delivered is subject to various conditions imposed by the counterparties and debt markets to such loan facilities and related loan guarantees, and any future financing is expected to be subject to similar conditions. Any failure by Ryanair to comply with such conditions would have a material adverse effect on its operations and financial condition.

Using the debt capital markets to finance the Company and the 2013 Boeing Contract requires the Company to obtain and retain investment grade credit ratings, (the Company has a BBB+ (stable) credit rating from S&P and a BBB+ (stable) credit rating from Fitch). There is a risk that the Company will be unable, or unwilling, to access these markets if it is downgraded or is unable to retain its investment grade credit ratings and this could lead to a higher cost of finance for Ryanair.

Ryanair has also entered into significant derivative transactions intended to hedge its current aircraft acquisition-related debt obligations. These derivative transactions expose Ryanair to certain risks and could have adverse effects on its results of operations and financial condition. See ―Item 11.

Quantitative and Qualitative Disclosures About Market Risk.‖ The Company’s Growth May Expose It to Risks. Ryanair‘s operations have grown rapidly since it pioneered the low-fares operating model in Europe in the early 1990s. Ryanair intends to continue to expand its fleet and add new destinations and additional flights, with the goal of increasing Ryanair‘s booked passenger volumes to approximately 112.0 million passengers per annum by March 31, 2019, an increase of approximately 37% from the approximately 81.7 million passengers booked in the 2014 fiscal year. However, no assurance can be given that this target will be met. If growth in passenger traffic and Ryanair‘s revenues do not keep pace with the planned expansion of its fleet, Ryanair could suffer from overcapacity and its results of operations and financial condition (including its ability to fund scheduled purchases of the New Aircraft and related debt repayments) could be materially adversely affected.

The continued expansion of Ryanair‘s fleet and operations, at a rate lower than in previous years (although in absolute terms it may be higher), in addition to other factors, may also strain existing management resources and related operational, financial, management information and information technology systems. Expansion will generally require additional skilled personnel, equipment, facilities and systems. An inability to hire skilled personnel or to secure required equipment and facilities efficiently and in a cost-effective manner may adversely affect Ryanair‘s ability to achieve its growth plans and sustain or increase its profitability.

Ryanair’s New Routes and Expanded Operations May Have an Adverse Financial Impact on its Results. Currently, a substantial number of carriers operate routes that compete with Ryanair, and the Company expects to face further intense competition.

When Ryanair commences new routes, its load factors and fares tend to be lower than those on its established routes and its advertising and other promotional costs tend to be higher, which may result in initial losses that could have a material negative impact on Ryanair‘s results of operations as well as require a substantial amount of cash to fund. In addition, there can be no assurance that Ryanair‘s low-fares service will be accepted on new routes. Ryanair also periodically runs special promotional fare campaigns, in particular in connection with the opening of new routes. Promotional fares may have the effect of increasing load factors and reducing Ryanair‘s yield and passenger revenues on such routes during the periods that they are in effect. Ryanair has other significant cash needs as it expands, including as regards the cash required to fund aircraft purchases or aircraft deposits related to the acquisition of additional Boeing 737-800 series aircraft. There can be no assurance that Ryanair will have sufficient cash to make such expenditures and investments, and to the extent Ryanair is unable to expand its route system successfully, its future revenue and earnings growth will in turn be limited. See ―—The Company Will Incur Significant Costs Acquiring New Aircraft and Any Instability in the Credit and Capital Markets Could Negatively Impact Ryanair‘s Ability to Obtain Financing on Acceptable Terms.‖ Ryanair’s Continued Growth is Dependent on Access to Suitable Airports; Charges for Airport Access are Subject to Increase. Airline traffic at certain European airports is regulated by a system of grandfathered ―slot‖ allocations. Each slot represents authorization to take-off and land at the particular airport during a specified time period. Although the majority of Ryanair‘s bases currently have no slot allocations, traffic at a minority of the airports Ryanair serves, including some of its primary bases, is currently regulated through slot allocations. In addition, many of the primary airports that Ryanair intends to serve as part of its recent strategic initiatives are subject to slot allocations.

There can be no assurance that Ryanair will be able to obtain a sufficient number of slots at slotcontrolled airports that it may wish to serve in the future, at the time it needs them, or on acceptable terms. There can also be no assurance that its non-slot constrained bases, or the other non-slot constrained airports Ryanair serves, will continue to operate without slot allocation restrictions in the future. See ―Item 4. Information on the Company—Government Regulation—Slots.‖ Airports may impose other operating restrictions such as curfews, limits on aircraft noise levels, mandatory flight paths, runway restrictions, and limits on the number of average daily departures. Such restrictions may limit the ability of Ryanair to provide service to, or increase service at, such airports.



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