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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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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 €81.6 million in the 2013 fiscal year, compared with a tax provision of €72.6 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.


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.

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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.

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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 €3,241.7 million and €3,559.0 million, respectively. The decrease at March 31, 2014 primarily reflects cash generated from operating activities of €1,044.6 million, which was offset by the cash used to fund the purchase of 69.5 million Ordinary Shares via a share buy-back costing €481.7 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 €390.8 million of borrowings. Cash and liquid resources included €13.3 million and €24.7 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 InformationOther Financial InformationLegal Proceedings.‖ The Company‘s net cash inflows from operating activities in the 2014 and 2013 fiscal years amounted to €1,044.6 million and €1,023.5 million, respectively. The €21.1 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 €133.9 million in cash in 2014, compared with €67.4 million in 2013. This increase in net cash generated from working capital of €66.5 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 €549.2 million and the payment of a €491.5 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 €1,023.5 million and €1,020.3 million, respectively. The €3.2 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 €493.8 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 €291.0 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 €146.4 million, or 8.1%, increase in non-fuel related operating expenses (excluding a €20.4 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 €67.4 million in cash in 2013, compared with €101.8 million in 2012. This decrease in net cash generated from working capital of €34.4 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 €300.7 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 €1,821.5 million and €185.4 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 €856.1 million in the 2014 fiscal year, largely reflecting the repayments of long-term borrowings of €390.8 million and shares purchased under a share buy-back program of €481.7 million, offset in part by shares issued of €16.4 million. Net cash used in financing activities totaled €669.4 million in fiscal year 2013. This was due to the receipt of proceeds from long term borrowings of €234.6 million and shares issued of €21.4 million, offset in part by repayments of long-term borrowings of €366.4 million, the payment of a €491.5 million dividend and shares purchased under a share buy-back program of €67.5 million.

The Company experienced a net cash outflow from financing activities of €154.9 million in fiscal year

2012. This was due to the receipt of proceeds from long term borrowings of €292.3 million being more than offset by repayments of long-term borrowings of €329.7 million and the expenditure of €124.6 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 €505.8 million and €310.7 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 €290.4 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 guaranteedfinancing.

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:

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Capital Resources. Ryanair‘s long-term debt (including current maturities) totaled €3,083.6 million at March 31, 2014 and €3,498.3 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.

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Borrowing profile before swap transactions

Interest rate swaps – Debt swapped from floating to fixed............... 1,098.9 (1,098.9) Borrowing profile after swap transactions

The weighted-average interest rate on the cumulative borrowings under these facilities of €3,083.6 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 €850.0 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).

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