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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.
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—SafetyRelated Undertakings Could Affect the Company‘s Results.‖
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 inflight 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 €10 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 €5. 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‖.
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 ―Government RegulationRegulatory 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 preflight, 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.
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 145approved 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.‖
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 safetyrelated 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).