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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 market‘s acceptance of Ryanair‘s low-fares service is reflected in the ―Ryanair Effect‖ – Ryanair‘s history of stimulating significant annual passenger traffic growth on the new routes on which it has commenced service since 1991. For example, on the basis of the ―U.K. Airports Annual Statement of Movements, Passengers and Cargo‖ published by the U.K. Civil Aviation Authority and statistics released by the International Civil Aviation Organization (the ―ICAO‖), the number of scheduled airline passengers traveling between Dublin and London increased from 1.7 million passengers in 1991 to 3.9 million passengers in the 2013 calendar year. Most international routes Ryanair has begun serving since 1991 have recorded significant traffic growth in the period following Ryanair‘s commencement of service, with Ryanair capturing the largest portion of such growth on each such route. A variety of factors contributed to this increase in air passenger traffic, including the relative strength of the Irish, U.K., and European economies in past years. However, management believes that the most significant factors driving such growth across all its European routes have been Ryanair‘s low-fares policy and its superiority to its competitors in terms of flight punctuality, levels of lost baggage, and rates of flight cancellations.

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.


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 shortshipment 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 huband-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 ―Aircraft‖ 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 relaunched 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 costeffective 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.

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