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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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Aviation Taxes. Ryanair is fundamentally opposed to the introduction of any aviation taxes, including any environmental taxes, fuel taxes or emissions levies. Ryanair has and continues to offer the lowest fares in Europe, to make passenger air travel affordable and accessible to European consumers. Ryanair believes that the imposition of additional taxes on airlines will not only increase airfares, but will discourage new entrants into the market, resulting in less choice for consumers. Ryanair believes this would ultimately have adverse effects on the European economy in general. There is in particular no justification for any environmental taxes on aviation following the introduction of the Emissions Trading Scheme for airlines.

As a company, Ryanair believes in free market competition and that the imposition of aviation taxation would favor the less efficient flag carriers – which generally have smaller and older aircraft, lower load factors, and a much higher fuel burn per passenger, and which operate primarily into congested airports – and reduce competition. Furthermore, the introduction of a tax at a European level only would distort competition between airlines operating solely within Europe and those operating also outside of Europe. We believe that the introduction of such a tax would also be incompatible with international law.

Airport charges

The EU Airport Charges Directive of March 2009 sets forth general principles that are to be followed by airports with more than five million passenger per annum, and all capital city airports irrespective of their passenger throughput, when setting airport charges, and provides for an appeals procedure for airlines in the event they are not satisfied with the level of charges. However, Ryanair does not believe that this procedure will be effective or that it will constrain those airports that are currently abusing their dominant position, in part because the legislation was mis-transposed in certain countries, such as Ireland and Spain, so as to deprive airlines of even the basic safeguards provided for in the Directive. This legislation may in fact lead to higher airport charges, depending on how its provisions are applied by EU member states and subsequently by the courts.

Slots

Currently, the majority of Ryanair‘s bases of operations have no ―slot‖ allocation restrictions; however, traffic at a substantial number of the airports Ryanair serves, including its primary bases are regulated by means of ―slot‖ allocations, which represent authorizations to take off or land at a particular airport within a specified time period. In addition, EU law currently regulates the acquisition, transfer, and loss of slots. Applicable EU regulations currently prohibit the buying or selling of slots for cash. The European Commission adopted a regulation in April 2004 (Regulation (EC) No. 793/2004) that made some minor amendments to the current allocation system, allowing for limited transfers of, but not trading in, slots. Slots may be transferred from one route to another by the same carrier, transferred within a group or as part of a change of control of a carrier, or swapped between carriers. In April 2008, the European Commission issued a communication on the application of the slot allocation regulation, signaling the acceptance of secondary trading of airport slots between airlines.

This is expected to allow more flexibility and mobility in the use of slots and will further enhance possibilities for market entry at slot constrained airports. Any future legislation that might create an official secondary market for slots could create a potential source of revenue for certain of Ryanair‘s current and potential competitors, many of which have many more slots allocated at primary airports at present than Ryanair. The European Commission proposed a revision to the slots legislation reflecting the principle of secondary trading, which is currently being negotiated by the EU institutions, and will not be finalized before the middle of 2014.

Slot values depend on several factors, including the airport, time of day covered, the availability of slots and the class of aircraft. Ryanair‘s ability to gain access to and develop its operations at slot-controlled airports will be affected by the availability of slots for takeoffs and landings at these specific airports. New entrants to an airport are currently given certain privileges in terms of obtaining slots, but such privileges are subject to the grandfathered rights of existing operators that are utilizing their slots. There is no assurance that Ryanair will be able to obtain a sufficient number of slots at the slot-controlled airports that it desires to serve in the future at the time it needs them or on acceptable terms.

Other

Health and occupational safety issues relating to the Company are largely addressed in Ireland by the Safety, Health and Welfare at Work Act, 2005 and other regulations under that act. Although licenses or permits are not issued under such legislation, compliance is monitored by the Health and Safety Authority (the ―Authority‖), which is the regulating body in this area. The Authority periodically reviews Ryanair‘s health and safety record and when appropriate, issues improvement notices or prohibition notices. Ryanair has responded to all such notices to the satisfaction of the Authority. Other safety issues are covered by the Irish Aviation Orders, which may vary from time to time.





The Company‘s operations are subject to the general laws of Ireland and, insofar as they are applicable in Ireland, the laws of the EU. The Company may also become subject to additional regulatory requirements in the future. The Company is also subject to local laws and regulations at locations where it operates and the regulations of various local authorities that operate the airports it serves.

–  –  –

For certain information about each of the Company‘s key facilities, see ―—Facilities‖ above.

Management believes that the Company‘s facilities are suitable for its needs and are well maintained.

Item 4A. Unresolved Staff Comments There are no unresolved staff comments.

Item 5. Operating and Financial Review and Prospects The following discussion should be read in conjunction with the audited consolidated financial statements of the Company and the notes thereto included in Item 18.

Those consolidated financial statements have been prepared in accordance with IFRS.

–  –  –

Ryanair‘s current business strategy dates to the early 1990s, when a new management team, including the current chief executive, commenced the restructuring of Ryanair‘s operations to become a low-fares airline based on the low-cost operating model pioneered by Southwest Airlines Co. in the United States. During the period between 1992 and 1994, Ryanair expanded its route network to include scheduled passenger services between Dublin and Birmingham, Manchester and Glasgow (Prestwick). In 1994, Ryanair began standardizing its fleet by purchasing used Boeing 737-200A aircraft to replace substantially all of its leased aircraft. Beginning in 1996, Ryanair continued to expand its service from Dublin to new provincial destinations in the U.K. In August 1996, Irish Air, L.P., an investment vehicle led by David Bonderman and certain of his associates at the Texas Pacific Group, acquired a minority interest in the Company. Ryanair Holdings completed its initial public offering in June 1997.

From 1997 through June 30, 2014, Ryanair launched service on more than 1,600 routes throughout Europe and also increased the frequency of service on a number of its principal routes. During that period, in addition to Dublin, Ryanair established 69 airports as bases of operations. See ―Item 4. Information on the Company—Route System, Scheduling and Fares‖ for a list of these bases. Ryanair has increased the number of booked passengers from approximately 4.9 million in the 1999 fiscal year to approximately 81.7 million in the 2014 fiscal year. Ryanair had a principal fleet of 297 Boeing 737-800 aircraft and 5 additional leased aircraft acquired on short term leases for the summer of 2014 to provide extra capacity, and now serves approximately 186 airports.

Ryanair expects to have approximately 426 aircraft in its operating fleet by March 31, 2019. This is subject to lease handbacks and disposals over the period to March 31, 2019 meeting current expectations. See ―Liquidity and Capital Resources‖ and ―Item 4. Information on the CompanyAircraft‖ for additional details.

BUSINESS OVERVIEW

Since Ryanair pioneered its low cost operating model in Europe in the early 1990s, its passenger volumes and scheduled passenger revenues have increased significantly because it has substantially increased capacity and demand has been sufficient to match the increased capacity. Ryanair‘s annual booked passenger volume has grown from approximately 945,000 passengers in the calendar year 1992 to approximately 81.7 million passengers in the 2014 fiscal year.

Ryanair‘s revenue passenger miles (―RPMs‖) increased approximately 8% from 59,865.6 million in the 2013 fiscal year to 64,470.4 million in the 2014 fiscal year due primarily to an increase of approximately 7% in scheduled available seat miles (―ASMs‖) from 72,829.9 million in the 2013 fiscal year to 77,916.5 million in the 2014 fiscal year. Scheduled passenger revenues decreased approximately 1% from €3,819.8 million in the 2013 fiscal year to €3,789.5 million in the 2014 fiscal year. Average booked passenger fare decreased from €48.20 in the 2013 fiscal year to €46.40 in the 2014 fiscal year.

Expanding passenger volumes and capacity, high load factors and aggressive cost containment have enabled Ryanair to continue to generate operating profits despite increasing price competition and increases in certain costs. Ryanair‘s total break-even load factor was 70% in the 2013 fiscal year and 72% in the 2014 fiscal year. Cost per passenger was €52.56 in the 2013 fiscal year and €53.61 in the 2014 fiscal year, with the increase primarily reflecting the higher fuel cost per passenger of €24.65 in the 2014 fiscal year, as compared to €23.79 in the 2013 fiscal year. Ryanair recorded operating profits of €718.2 million in the 2013 fiscal year and €658.6 million in the 2014 fiscal year. The Company recorded a profit after taxation of €569.3 million in the 2013 fiscal year and profit after taxation of €522.8 million in the 2014 fiscal year. Ryanair will take delivery of 11 Boeing 737-800 aircraft in 2015 fiscal year and expects that these deliveries, along with its plan to ground fewer aircraft in the winter of 2015 fiscal year and increased load factors will allow for an approximately 4% increase in fiscal 2015 traffic See ―Item 3. Key Information—Risk Factors—Risks Related to the Company— Ryanair Has Decided to Seasonally Ground Aircraft.‖

Investment in Aer Lingus

The Company owns 29.8% of Aer Lingus, which it acquired in fiscal years 2007, 2008 and 2009 at a total cost of €407.2 million. Following the approval of its shareholders, management proposed in the 2007 fiscal year to effect a tender offer to acquire the entire share capital of Aer Lingus. This 2006 offer was, however, prohibited by the European Commission on competition grounds in June 2007. Ryanair‘s management viewed the acquisition of Aer Lingus in the context of the overall trend of consolidation among airlines in Europe and believed that the acquisition would lead to the formation of one strong Irish airline group able to compete with large carriers such as Lufthansa, Air France/KLM and British Airways/Iberia (now ―International Airlines Group‖). During the EU competition review, the Company made a commitment that if the acquisition was approved, Ryanair would eliminate Aer Lingus‘ fuel surcharges and reduce its fares, which would have resulted in Aer Lingus passengers saving approximately €100 million per year. The Company was therefore disappointed by the European Commission‘s decision to prohibit this offer. This decision was the first adverse decision taken in respect of any EU airline merger and the first-ever adverse decision in respect of a proposed merger of two companies with less than 5% of the EU market for their services. Ryanair filed an appeal with the CFI, which was heard in July 2009. On July 6, 2010, the CFI upheld the Commission‘s decision.

In October 2007, the European Commission also reached a formal decision that it would not force Ryanair to sell its shares in Aer Lingus. Aer Lingus appealed this decision before the CFI. This case was heard in July 2009 and on July 6, 2010 the court rejected Aer Lingus‘ appeal and confirmed that Ryanair cannot be forced to dispose of its 29.8% stake in Aer Lingus under the European Merger Regulation. However, EU legislation may change in the future to require such a forced disposition. If eventually forced to dispose of its stake in Aer Lingus, Ryanair could suffer significant losses due to the negative impact on market prices of the forced sale of such a significant portion of Aer Lingus‘ shares.

On December 1, 2008, Ryanair made a new offer to acquire all of the ordinary shares of Aer Lingus it did not own at a price of €1.40 per ordinary share. Ryanair offered to keep Aer Lingus as a separate company, maintain the Aer Lingus brand, and retain its Heathrow slots and connectivity. Ryanair also proposed to double Aer Lingus‘ short-haul fleet from 33 to 66 aircraft and to create 1,000 associated new jobs over a five-year period. If the offer had been accepted, the Irish government would have received over €180 million in cash. The employee share ownership trust and employees, who owned 18% of Aer Lingus, would have received over €137 million in cash. The Company met Aer Lingus management, representatives of the employee share ownership trust and other parties, including members of the Irish Government. The offer of €1.40 per share represented a premium of approximately 25% over the closing price of €1.12 for Aer Lingus shares on November 28, 2008.

As the Company was unable to secure the shareholders‘ support, it decided on January 28, 2009 to withdraw its offer for Aer Lingus.



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