Ryanair Holdings plc’s financial report

Ryanair Holdings plc

Ryanair is a low-cost, low-fare airline headquartered in Dublin, Ireland, operating over 200 routes in 20 countries. The company has directly challenged the largest airlines in Europe and has built a 20-year-plus track record of incredibly strong passenger growth while progressively reducing fares. It is not unusual for one-way tickets (exclusive of taxes) to sell on Ryanair’s Web site for less than €1.00. See Exhibit 1 for an excerpt of Ryanair’s Web site, where fares between London and Stockholm, for example, are available for 19 pence (approximately US.33). CEO , formerly an accountant at KPMG, described the airline as follows: “Ryanair is doing in the airline industry in Europe what Ikea has done. We pile it high and sell it cheap…. For years flying has been the preserve of rich [people]. Now everyone can afford to fly.”"‘ Having created profitable operations in the difficult airline industry, Ryanair, as did industry analysts, likened itself to U.S. carrier Southwest Airlines, and its common stock has attracted the attention of investors in Europe and abroad.

Low-Fare Airlines

Historically the airline industry has been a notoriously difficult business in which to make consistent profits. Over the past several decades, low-fare airlines have been launched in an attempt to operate with lower costs, but with few exceptions, most have gone bankrupt or been swallowed up by larger carriers (see Exhibit 2 for a list of failed airlines). Given the excess capacity in the global aircraft market in more recent years, barriers to entry in the commercial airline space have never been so low. Price competition in the U.S. and Europe, along with rising fuel costs, has had a deleterious affect on both profits and margins at most carriers. The current state of the indusrn-can be described for most carriers as, at best, tumultuous.

The introduction of the low-fare sector in the United States predated its arrival in Europe. An open-skies policy was introduced through the Airline Deregulation Act of 1978, which removed controls of routes, fares, and schedules from the control of the Civil Aeronautics Board.’ This spurred 22 new airlines to be formed between 1978 and 1982, each hoping to stake its claim in the newly deregulated market.’ These airlines maximized their scheduling efficiencies, which, in combination with lower staff-to-plane ratios and a more straightforward service offering, gave them a huge cost advantage over the big airlines. This led to the current two-tier industry structure, with the low-fare airlines waging fare wars with the larger established carriers.

This was, however, a challenging time for the start-ups. First, the’Federal Reserve raised the funds rate from 7.93% in 1978 to 12.26% in 1982. This had a dramatic effect on the financing costs for the

start-up airlines, making financing of capital expenditures excessively costly. In addition, at this time the incumbent airlines were generally in relatively strong financial positions. Their deep pockets made it possible for them to run at a loss on certain routes in order to undercut the start-ups where necessary. As a result, many of the new companies failed.

One notable exception, however, was Southwest Airlines. By focusing on secondary airports, lightning-fast turnarounds, information technology, and a strong firm culture, it managed to gain passenger share and profitability. Within a decade, ticket prices in the U.S. had fallen by 33%, and the volume of passengers had more than doubled.’

In Europe, it was not until 1992, with the signing of the Maastricht Treaty, that years of protectionism by the governments of the so-called flag carriers began to be dismantled. In 1993, European Union (EU) national carriers were for the first time permitted to offer international services from other EU countries. By 1997, this was broadened to include domestic destinations and opened to any certified EU airline. Open skies had arrived in Europe.

Even before then, start-up airlines had begun to enter the European space. These companies would typically negotiate with their country’s flag carrier for the right to fly to secondary airports only. Ticket sales were handled by agents, and the resulting cost structure forced the start-ups to compete with the incumbents primarily on service. Because they were not competing to provide traffic for the major hubs but rather targeting customers who had not previously considered flights for travel, they were in effect growing the market and were thus not seen as a major threat to the legacy carriers. However, with the Maastricht Treaty, the number of new airlines entering the industry greatly increased, and these start-ups were now free to compete solely on cost, looking across the Atlantic to the Southwest model.

Subsequently, as the new entrants vied for market space, prices fell, encouraging previously untapped demand. European passenger volumes had a strong upward trajectory (5%-plus compound annual growth rate between 1998 and 2003). However, while low-cost passenger numbers soared, the long-haul operators faced reduced traffic and higher fuel costs due to events such as the SARS virus and the September 11 attacks. The flag carriers, now financially constrained, were forced to renegotiate, and even cancel, contracts for the delivery of new aircraft from Airbus and Boeing. The two aerospace giants were left with significant numbers of planes for which the start-ups proved to be welcome customers.

Unlike the arrangements legacy carriers negotiated with major airports, start-up airlines negotiated dramatically lower landing and facility charges with secondary airports. They argued that, because they were bringing a significant number of passengers through these airports on a regular basis, the airports would be able to substantially increase the rents they received from concession stands and other retailers. As the low-fare airlines had no particular loyalty to one airport over another, the threat that they could simply stop flying to a particular airport was real.

Ryanair

Ryanair was Europe’s first low-fare carrier, with an initial route between Waterford, Ireland and London. The initial cabin crew had to be no taller than 5′ 2″ because the aircraft being deployed were among the smallest being flown on commercial routes. The company immediately challenged incumbents Aer Lingus and British Airways and obtained approval for a Dublin-London (Luton) route, charging less than half of what the large carriers were charging. A price war ensued, but over the next decade Ryanair eventually overtook Aer Lingus and British Airways on this route, the

largest international route in Europe at that time 6 (See Exhibit 3 for Ryanair’s remarkable passenger growth from 1985 through 2004.)

The company went public on May 9, 1997, and shortly thereafter was voted “Airline of the Year” by the Irish Air Transport Users Committee, “Best Managed National Airline” in the world by International Aviation Week magazine, “Best Value Airline” by the U.K.’s Which consumer magazine, and most popular airline on the Web by Google 3 Relative to that of other airlines, Ryanair’s common stock has performed reasonably well since the company went public, despite negative events such as the Iraq war and significant increases in fuel prices. The company emphasizes that it defines customer service by low airfares and safety, rather than by the quality of food, pleasantness of staff, and other peripheral items.

See Exhibit 4 for the stock price performance of Ryanair and selected European airlines since Ryanair’s initial public offering. Additionally, see Exhibits 5-7 for Ryanair’s 2004 financial statements and supplemental revenue and cost information. The financial statements were prepared under Irish and U.K. accounting standards. Because the company has shares trading on the NASDAQ in the U.S., they also provide a reconciliation of major line items from Irish and U.K. accounting standards to U.S. accounting standards (see Exhibit 8).

Ryanair’s objectives, as set forth in its 2004 annual report, include: - Increasing passenger traffic by 20% each year - Reducing fares by 5% each year

- Reducing costs by 5% each year

- Realizing a profit margin of 20% or more

To date, there are numerous factors that have contributed to the company’s profitability, including the following:

1. Cut-price deals. Ryanair will frequently sell a large number of seats in advance for a nominal fee, for example, €1.00 or less. Indeed, currently approximately 25% of passenger tickets are free, and Mr. O’Leary has a goal of eventually bringing this figure to 50°o by 2010. This attracts immense publicity as customers scramble to log in and purchase seats. For each seat purchased, tax and duties must also be paid, which typically amount to €3040. The tickets are sold on a nonrefundable basis. Because they are so cheap, many buy multiple seats to gain flexibility, and the “no show” rate is therefore much higher for these types of tickets. Average fares reflect these cut-price deals as well as higher fares that travelers pay to secure seats on routes in higher demand.

2. Point-to-point flights. Each route is a mini-business unit. Capacity is tailored to fit demand according to computer-simulated models. If a route is unprofitable, it can simply be cut from the schedule. Passengers may not buy connecting flights so must check in for each Ryanair flight individually. This reduces the firm’s liability in the event of a delay and reduces instances of lost baggage.

3. Flights to secondary airports. By avoiding the large hubs, Ryanair is able to negotiate reduced landing charges. There is the added benefit of lower congestion at such airports. This allows the aircraft to complete the journey in the shortest possible time. The downside to passengers is that sometimes these airports are located in locations far from the intended destination. For example, the company flies to Frankfurt-Hahn, not Frankfurt, which is 100

kilometers away. Asy states, “For the price-sensitive customers, distance is no problem.”‘

4. Quick turnaround. Ryanair aircraft are expected to land and take off again from an airport inside 25 minutes. This is only possible because they fly into secondary airports. This allows the firm to maximize the number of flights per day.

5. No overnighting of staff. By flying point to point, a Ryanair plane ends the day where it started. This means that crew can return to their homes, and expensive hotel bills and per diems are avoided.

6. Internet bookings. The firm sells over 97% of its tickets via the Internet at its website, NAw-w.ryanair.com, which is now the most popular European travel site. This cuts out travel agent commission costs (averaging approximately 10% of the ticket cost) and gives the airline maximum control over scheduling and capacity. Moreover, it funnels customers towards other services such as car hire and rail tickets, for which Ryanair collects a commission itself. O’Leary is not bashful about this substantial source of cost savings and revenues, having stated, “Screw the travel agent. Take the [agents] out and shoot them. What have they done for passengers over the years?”‘

7. One class. Ryanair does not offer passengers the choice of business and economy class, eliminating the requirement for food to be delivered to the aircraft when it lands, thus facilitating low turnaround times. Moreover, offering only one class of service furthers the goal of providing low fares, which the company believes is the ultimate in customer service. According to its passenger service and lowest fares charter, “Ryanair believes that any passenger service commitment must involve a commitment on pricing and punctuality, and should not be confined to less important aspects of ‘service’ which is the usual excuse the high fare airlines use for charging high air fares.”‘

8. One aircraft type. The company flies Boeing 737 planes exclusively. This reduces maintenance training costs and allows for bulk buying of spare parts. The strong financial position of the company allowed it to purchase many of the aircraft that had been canceled by incumbent airlines. These new airplanes are more fuel efficient and have a higher passenger capacity. As of the end of fiscal 2004, the company had fully hedged fuel costs through September 2004, but were largely unhedged thereafter. Subsequently, the company hedged its fuel through the end of fiscal 2006 at US per barrel, while market values topped US per barrel. Additionally, the company has ordered winglets that will be retrofitted on all aircraft, which will reduce fuel burn by approximately 2.5%, which translates into savings of approximately US,000-14,000 per aircraft per month.

9. Personnel costs and incentives. Because the aircraft that Ryanair pilots fly are new, the firm claims that their pilots’ experience is of value to the competition. Therefore, it charges pilots for training, the cost of which is earned back by the pilots through years of service. Pilots have financial incentives for smooth landings, not so much for passenger comfort but for reduced maintenance costs. Additionally, the airline does not provide food or beverages for free but does offer items for sale on each flight. Flight attendants are paid a commission based on the total of beverage and other sales in flight.

Ryanair has an entrepreneurial culture and takes great pride in breaking with old conventions. This spirit is disseminated from the top by the swashbuckling manner of CEO . Irish business folklore has it that when he first decided to employ the Internet to sell seats, did not hire a firm of IT consultants and Web designers. He instead visited a local technical college and

offered the project as a challenge to the eager students in the computer lab. They learned by doing, and O’Leary got a Web site with the necessary functionality at a fraction of list price. He is also known for wild publicity stunts, such as driving a tank to easyjet’s headquarters in England and broadcasting the theme to the television show “The A-Team.” He taunts the competition even with the painting of aircraft. One of Ryanair’s airplanes is painted with the message, “Arrivederci Alitalia.”‘°

O’Leary is not bashful of his company’s achievements, and has a unique demeanor for a company CEO, often charmingly foul-mouthed and offensive. In a recent interview, he stated “I don’t give a [*&%#] if nobody likes me. I am not a cloud bunny, I am not an aerosexual. I don’t like aeroplanes. I never wanted to be a pilot like those other platoons of goons who populate the air industry.”" Attacking competitors is not out of the question either, as he recently said of Jurgen Weber, CEO of Lufthansa, “Weber says Germans don’t like low fares. How the [*&%#] does he know? He never offered them any. ,12

He positions the airline as a champion against inefficiencies and monopolies, and his manner has been described as arrogant and dismissive. Even in financial reports for investors, he often leads off with tirades against airports that charge too much or other issues that adversely affect Ryanair. For example, the 2005 road show included several slides titled “Stansted Airport: The Rip-Off,” which highlighted costs of a cross-subsidization plan across airports run by the British Airport Authority. Similarly, in discussing 2005 financial results, the company report stated:

In Ireland, the situation at Dublin Airport has descended into a farce. The Dublin Airport Authority which is responsible for this third world facility is to be rewarded for its incompetence by being allowed to build the second terminal. This facility will not be available until 2009 at the earliest and in the mean time passengers at Dublin will be forced to endure long queues and intolerable overcrowding while the Government protects this failed monopoly by blocking competition. … The [prime minister] recently demonstrated how hopelessly out of touch he is by claiming that the present overcrowded terminal has the capacity for 6 million more passengers per annum. It would appear that there aren’t any queues at the VIP escort to the Government jet…. Had the Government heeded Rvanair’s calls for a competing second terminal seven years ago, this current embarrassment for Irish tourism would have been avoided. As always in Ireland the ordinary passengers suffer, while the

politicians fudge.13

Turbulence in 2004

Just after reporting third-quarter profit increases of 10% (quarter ended December 31, 2003), Ryanair issued a profit warning in January 2004 for the company’s upcoming full-year results for the fiscal year ending March 31, 2004. O’Leary stated, “While we. now expect after-tax profits for the current year to dip slightly, our annualized profit margin will still be in excess of 20%, and Rvanair will continue to be the world’s most profitable airline by margin.” Ryanair’s share price dropped 30% on the news (see Exhibit 9). The expected fall in profits for the fourth quarter was attributed to lower yields (i.e., average passenger fares) and lower load factors (i.e., seats with paying passengers as a fraction of total seats available). According to O’Leary, the lower yields were due to Ryanair’s strategy of steadily lowering fares as part of its battle plan. He argued, “This is not due to overcapacity. It’s the result of the ongoing fare wars under way across Europe, and we’re winning them. It’s like Southwest in the U.S. When they first went into California, their stock price fell by 40% to 50% due to fare wars with the likes of the United [Airlines] shuttle and other California carriers. Ten years later, Southwest owned California.”"

More bad news followed immediately after the profit warning, when Ryanair received an unfavorable ruling from the European Commission (EC) regarding million in financial incentives it had received from Charleroi Airport in Belgium between 2001 and 2003. The commissioners indicated that the ruling was an attempt to encourage economic growth while simultaneously ending state subsidies that have been declared illegal under the EU. The ruling put additional pressure on Ryanair’s stock price. In response, O’Leary explained, “Any share price jumps up and down, and ours is no exception. But as long as the basic business model is sound and you’re executing it properly, nothing will stop you–certainly not a bunch of EU commissioners who think everyone should pay higher fares.”‘

Financial Performance

Prior to the profit warnings in early 2004, Ryanair had been profitable every quarter and reported annual increases in sales, operating profit, and net income in every year (see Exhibit 10). As forewarned in January 2004, despite an increase in sales for fiscal 2004, net income declined for the fiscal year ended March 31, 2004 relative to the fiscal 2003 level. This was the first reported yearover-year downturn in profits since the company went public.

Nevertheless, Ryanair continued to add capacity in 2004, increasing available seat kilometers by 64%. The overall load factor for 2004 exceeded 80%, relative to a break-even level of 59%. The company ‘s fleet of planes had 189 seats, implying that, on average, 111 seats had to be filled for the company to break even. Ryanair has the lowest cost structure of any comparable airline, as seen in Exhibit 11. The company is obsessive about low costs, down to details such as making employees provide their own pens and not allowing the charging of cell phones in corporate facilities. Low costs permit Ryanair to charge lower fares and still provide a high return on investment. See Exhibit 12 for average revenue per passenger, return on equity (ROE), and other financial metrics for 15 airlines. Ryanair’s average revenue per passenger (in US$) is just . The only other airlines with similarly low fares include U.K.-based easyJet (US per passenger) and Southwest Airlines (US). Nearly half of the airlines listed (all U.S.-based incumbent carriers) report losses and/or have meaningless ROE because the denominator of the calculation (i.e., book value of equity) is negative. For 2004, Rvanair reports the highest ROE, 17%. The only other airline with profitability approaching that of Ryanair is Japan Airlines, but the duPont decomposition of ROE indicates that this is largely driven by Japan Airlines’ use of significant leverage, relative to limited leverage at Ryanair. Even with the relatively strong profitability, the stock market values Ryanair at just a modest level relative to other airlines, trading at a price-to-earnings ratio of 20.8 relative to 50.5 for newcomer JetBlue Airways and 40.7 for veteran low-fare airline Southwest.

Valuation

Following the series of bad news announcements in early 2004, the investor community split into two camps: those that saw the downturn in profits and cash flows as the end of Ryanair’s strong performance run versus those that believed the stock price drop to be an overreaction to a company that retained strong fundamentals. Exhibit 13 provides an analysis of Ryanair’s profitability and operating, investment, and financing activities over the most recent three years. The overall picture is that of a financially healthy company with strong sales growth, high profitability, and negative net debt (i.e., interest-bearing liabilities less than cash and liquid resources).

Exhibit 14 summarizes equity analyst reports released during the first six months of 2004 that encompass the profit warnings in January, the EU decision in February, and the announcement of earnings in June. The recommendations span the range from sell, with target prices below the current trading price (e.g., target price of €4.40 when the current stock price was €4.65), to buy, with target prices at lofty levels up to 35% above the current trading price (e.g., target price of €6.00 when the current stock price was €4.41).

Clearly, discrepancies in valuations reflect divergent opinions on numerous issues that plague the airline sector, such as fare competition, cost containment, regulation, and macroeconomic vulnerability. Perhaps not surprisingly, in contrast to many market observers in the airline industry, Ryanair continues to have a bullish outlook, signing purchase agreements for an additional 140 Boeing 737 aircraft in February 2005. Each aircraft will have an approximate cost of US million. With the addition of these aircraft to the 91 in service already, the company expects to grow annual passenger traffic to 70 million by 2012, almost triple the number in 2004.

106-003

Exhibit 1 Ryanair Web Site

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Exhibit 2 Failed Airlines in the U.S. and Europe

U.S.

People’s Express

Italy

Volare

Frontier Airlines

Agent Air

Texas Air

Air Freedom

New York Air

Free Airways

Windjet

Great Britain

Duo

Now

Poland

Air Polonia

DreamAir

Ireland

Fresh Aer

GetJet

JetMagic

Silesian Air

JetGreen

White Eagle

Skynet

Finland

Flying Finn

Germany

Berlinjet

Low Fare Jet

Norway

Goodjet

V-Bird

Bosnia

Air Bosnia

France

Aeris

Air Littoral

Spain

Air Cataluyna

Airlib Express

Fly Eco

Source: Merrion Stockbrokers Irish Equity Research report, January 21, 2005.

Ryanair Holdings plc

Exhibit 4 Relative Stock Price Performance of Selected European and U.S. Airlines: 1997-2003

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106-003

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-Southwest Airlines -~ British Airways ~-~ \ a-thwest Airlines

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Source: Standard & Poor’s Compustat Global database.

106-003 Ryanair Holdings plc

Exhibit 5 Financial Statements

Consolidated Profit and Loss Account (all amounts in €000, except per share and share amounts)

2004

2003

2002

Operating revenue

Scheduled revenues

924,566

731,951

550,991

Ancillary revenues

149,658

110,557

73,059

Total operating revenue - continuing operations

1,074,224

842,508

624,050

Operating expenses

Staff costs

(123,624)

(93,073)

(78,240)

Depreciation and amortisation

(101,391)

(76,865)

(59,010)

Other operating expenses

(597,922)

(409,096)

(323,867)

Total operating expenses excluding goodwill

(822,937)

(579,034)

(461,117)

Operating profit - continuing operations before

amortisation of goodwill

251,287

263,474

162,933

Amortisation of goodwill

(2,342)

Operating profit – continuing operations after

amortisation of goodwill

248,945

263,474

162,933

Other (expenses)/income

Foreign exchange gains

3,217

628

975

(Loss) on disposal of fixed assets

(9)

(29)

527

Interest receivable and similar income

23,891

31,363

27,548

Interest payable and similar charges

(47,564)

(30,886)

(19,609)

Total other (expenses)/income

(20,465)

1,076

9,441

Profit on ordinary activities before tax

228,480

264,550

172,374

Tax on profit on ordinary activities

(21,869)

(25,152)

(21,999)

Profit for the financial year

206,611

239,398

150,375

Earnings per ordinary share (€ cents)

Basic

27.28

31.71

20.64

Diluted

27.00

31.24

20.32

Weighted average number of ordinary shares (000′s)

Basic

757,447

755,055

728,726

Diluted

759,300

766,279

739,961

Exhibit 5 (continued)

Consolidated Balance Sheet (all amounts in €000)

2004

2003

Fixed assets

Intangible assets

44,499

Tangible assets

1,576,526

1,352,361

Total fixed assets

1,621,025

1,352,361

Current assets

Cash and liquid resources

1,257,350

1,060,218

Accounts receivable

14,932

14,970

Other assets

19,251

16,370

Inventories

26,440

22,788

Total current assets

1,317,973

1,114,346

Total assets

2,938,998

2,466,707

Current liabilities

Accounts payable

67,936

61,604

Accrued expenses and other liabilities

338,208

251,328

Current maturities of long term debt

80,337

63,291

Short term borrowings

345

1,316

Total current liabilities

486,826

377,539

Other liabilities

Provisions for liabilities and charges

94,192

67,833

Accounts payable due after one year

30,047

5,673

Long term debt

872,645

773,934

Total other liabilities

996,884

847,440

Shareholders’ funds-equity

Called-up share capital

9,643

9,588

Share premium account

560,406

553,512

Profit and loss account

885,239

678,628

Total shareholders’ funds-equity

1,455,288

1,241,728

Total liabilities and shareholders’ funds

2,938,998

2,466,707

Exhibit 5 (continued)

Consolidated Statement of Changes in Shareholders’ Funds-equity (all amounts in €000)

Called-up

share

capital

Share

premium

account

Profit

and loss

account

Total

Balance at March 31; 2002

9,587

553,457

439,230 1,002,274

Issue of ordinary equity shares (net of issue costs)

Profit for the financial year

239,398

Balance at March 31, 2003

9,588

553,512

678,628

1,241,728

Issue of ordinary equity shares

6,894

6,949

Profit for the financial year

206,611

Balance at March 31, 2004

9,643

560,406

885,239

1,455,288

Source: 2004 and 2003 Ryanair annual reports.

106-003 Ryanair Holdings plc Exhibit 6 Supplemental revenue information (€000)

Ancillary revenues comprise:

2004

2003

Nonflight scheduled

66,616

35,291

Car Hire

35,110

27,615

Inflight

30,100

23,142

Internet income

17,721

12,159

Charter

111

12 350

149,658

110 557

All of the group’s operating profit arises from airline-related activities. Nonflight-scheduled revenue arises from the sale of rail and bus tickets, hotel reservations and other revenues. Inflight revenues reflect sales of refreshments (e.g., peanuts, drinks) and other items (e.g., duty-free sales, etc.). Internet income comprises revenue generated from Ryanair.com excluding Internet care hire revenue which is included under the heading ‘Car Hire.’

Ancillary revenue increased by 35% to €149.7 million and reflects strong growth in nonflight scheduled revenue, car hire and hotel revenue, offset, by the cessation of the charter program as Ryanair replaced charter capacity with scheduled services. Ancillary revenues were also negatively impacted by the strengthening of the euro versus sterling in the year, as 65% of ancillary revenues are denominated in sterling. Ancillary revenue, excluding charters increased by 52%, higher than the growth in passenger numbers, and accounted for 14% of total revenues compared to 13% in the year ended March 31, 2003.

Source: 2004 Ryanair annual report.

Exhibit 7 Supplemental cost information (€000) Staff Number and Costs

Average weekly number of employees, including the executive

director, during the year, analyzed by category:

2004

2003

Flight and cabin crew

1,530

983

Sales, operations and administration

758

763

2,288

1 746

Aggregate payroll costs of these persons:

2004

2003

Wages, salaries and related costs

112,258

82,633

Social welfare costs

9,660

7,835

Other pension costs

1 706

2,605

123,624

93,073

Other Operating Expenses

Other operating expenses comprise:

2004

2003

Fuel and oil

174,991

128,842

Airport and handling charges

147,221

107,994

Route charges

110,271

68,406

Maintenance, materials and repairs

43,420

29,709

Marketing and distribution costs

16,141

14,623

Aircraft rentals

11,541

Other costs

78 034

59 522

582,619

409,096

Exceptional costs

Aircraft rentals

13,291

Buzz reorganization

3 012

16,303

597,922

409,096

Other costs include, among other things, certain direct costs of providing inflight service, car hire costs and other non-flight scheduled costs.

Exceptional items are those items that are material items which derive from events or transactions that fall within the ordinary activities of the group but which need to be disclosed by virtue of their size or incidence. The exceptional costs relate to the closure of Buzz for one month post acquisition to restructure the business and integrate it into Ryanair and the exceptional lease costs associated with the early permanent retirement of 6 Boeing 737-200 aircraft which are no longer operated due to scratch marks which occurred during an aircraft painting program. The costs are treated as exceptional as they are material to the results for the year.

Source: 2004 Ryanair annual report.

106-003 Ryanair Holdings plc Exhibit 8 Summary of Differences between Irish/United Kingdom and U.S. GAAP (€000)

2004

2003

2002

Profit for financial year as reported in the consolidated profit and loss

account and in accordance with Irish and U.K. GAAP

206,611

239,398

150,375

Adjustments

Pensions

697

751

Derivative financial instruments (net of tax)

(4,189)

Amortisation of goodwill

2,342

Employment grants

469

464

Capitalised interest regarding aircraft acquisition programme

7,213

5,262

5,027

Darlev Investments Limited

Taxa±k,n- effect of above adjustments

(913)

(1,156)

Net income in accordance with U.S. GAAP

215,430

241,810

155,549

Total assets as reported in the consolidated balance sheets and in

accordance with Irish and U.K. GAAP

2,938,998

2,466,707

1,889,572

Adjustments

Pensions

3,200

3,111

2,414

Amortisation of goodwill

2,342

Capitalised interest regarding aircraft acquisition programme

17,502

10,289

5,027

Darley Investments Limited

(151)

(239)

(327)

Total assets as adjusted to accord with U.S. GAAP

2,961,891

2,479,868

1,896,686

Shareholders’ equity as reported in the consolidated balance sheets

and in accordance with Irish and U.K. GAAP

1,455,288

1,241,728

1,002,274

Adjustments

Pension

3,200

3,111

2,414

Amortisation of goodwill

2,342

Employment grants

(469)

Capitalised interest regarding aircraft acquisition programme

17,502

10,289

5,027

Darley Investments Limited

(151)

(239)

(327)

Minimum pension liability (net of tax)

(2,631)

(2,656)

Unrealised (losses) on derivative financial instruments (net of tax)

(116,681)

(73,371)

12,448

Tax effect of adjustments (excluding pension and derivative adjustments)

(2,588)

(1,675)

(1,760)

Shareholders’ equity as adjusted to accord with U.S. GAAP

1,356,281

1,177,187

1,019,607

Source: 2004 and 2003 Ryanair annual reports.

106-003 Ryanair Holdings plc Exhibit 10 Ryanair Financial Performance 1997-2004

Sales

~ Operating profit

— O-Net income

–*-Cash flow from operations

199

1998

1999

2000

2001

2002

2003

2004

Source: Thomson Financial Datastream.

Ryanair Holdings plc 106-003 Exhibit 11 Comparison of Costs per Available Seat Kilometer for Various Airlines

0.16_________________________________________________________________

SAS Group •

· Luft Group

0.14

0 Alitalia

o.12

• • Swiss Air

· 0.10

Austrian • • Air France

;, • Finnair • KLM

y 0.08 - Iberia •

• British Airways

a 0,06 - easyJet •

Southwest •

· • 0.04 - Ryanair • Jet Blue •

0.02 -

0.00

. ,

0 500 1000 1500 2000 2500

Average Stage Length (km)

Source: Davy Stockbroker report on Ryanair, February 16, 2004.

Exhibit 12 Financial and Operating Metrics for Selected Airlines

P/E

Market

Value

(000

$US)

Average

Revenue/

Passenger

($US)

Load

Factor

Margin

Turnover

Leverage

ROE

JetBlue Airways

50.5

2420

104

0.83

0.04

0.45

3.70

0.06

Southwest Airlines

40.7

1,2780

0.69

0.05

0.58

2.05

0.06

British Airways

24.2

5,501

330

0.73

0.03

0.67

4.60

0.10

Japan Airlines

24.2

6,752

201

0.64

0.01

0.98

11.10

0.15

Ryanair

20.8

4,273

0.74

0.20

0.44

1.99

0.17

Lufthansa

13.1

6,564

280

0.74

0.02

0.86

4.55

0.09

easyjet

12.4

917

0.85

0.04

0.82

1.68

0.05

Qantas Airways

9.8

4,526

208

0.78

0.06

0.62

3.02

0.11

Singapore Airlines

9.6

8,000

540

0.73

0.12

0.54

1.76

0.11

SAS

n.m.

1,486

137

0.64

-0.03

0.91

5.16

-0.15

American Airlines

n.m.

1,765

185

0.75

-0.04

0.65

n.m.

Delta Air Lines

n.m.

1,046

125

0.75

-0.35

0.69

n.m.

Northwest Airlines

n.m.

952

152

0.80

-0.08

0.80

n.m.

United Airlines

n.m.

151

176

0.79

-0.10

0.79

n.m.

US Airways

n.m.

151

0.76

-0.09

0.85

n.m.

Sources: , company annual reports.

Notes: n.m.=not meaningful.

Load factor= Revenue passenger miles (or kilometers) /Available seat miles (or kilometers). Margin = Net income/Sales.

Turnover= Sales/Total assets.

Leverage= Total assets/Stockholders’ equity.

Exhibit 13 Ratio Analysis, 2002-2004a

DECOMPOSING PROFITABILITY:

DUPONT ALTERNATIVE

2001

2002

2003

2004

NOPAT / Sales

20.1%

23.0%

28.4%

21.2%

Sales / Net Assets

2.3

1.4

1.3

1.1

Operating ROA

46.2%

31.8%

36.3%

22.4%

Financial Spread”

43.4%

28.6%

36.1%

32.0%

Net Financial Leverage`

-0.5

-0.3

-0.2

Financial Leverage Gain

-22.6%

-9.4%

-12.4%

-5.7%

ROE (Operating ROA + Financial Spread

* Net Financial Leverage)

23.7%

22.4%

2.3.9%

16.6%

EVALUATING

MANAGEMENT

OPERATING

2001

2002

2003

2004

Key

Growth Rates:

Annual Sales Growth

31.7%

28.0%

35.0%

27.5%

Annual Net Income Growth

44.1%

43.9%

59.2%

-13.7%

Key

Profitability Ratios:

Sales / Sales

100.0%

Cost of Sales / Sales

76.6%

73.9%

68.7%

76.6%

Gross Margin

23.4%

26.1%

31.3%

23.4%

SG&A / Sales

0.0%

Other Operating Expense / Sales

0.0%

Investment Income / Sales

0.0%

Other Income, net of Other Expense / Sales

0.3%

0.2%

0.1%

Minority Interest / Sales

0.0%

EBIT Margin

23.7%

26.3%

313%

23.5%

Net Interest Expense (Income) / Sales

-1.6%

-1.3%

-0.1%

2.2%

Pre-Tax Income Margin

25.3%

27.6%

31.4%

21.3%

Taxes / Sales

3.9%

3.5%

3.0%

2.0°0

Unusual Gains,

0.0%

QO°o

Net of Unusual Losses (after tax) / Sales

Net Income Margin

21.4%

24.1%

28.4%

19.2%

EBITDA Margin

35.9%

35.8%

43.3%

37.1%

NOPAT Margin

20.1%

23.0%

28.4%

21.2%

Recurring NOPAT Margin

19.8%

22.8%

28.3%

21.2%

106-003 Ryanair Holdings plc Exhibit 13 (continued)

EVALUATING INVESTMENT

MANAGEMENT

2001

2002

2003

2004

Working Capital Management:

Operating Working Capital / Sales

-18.0%

-21.2%

-26.8%

-24.1%

Operating Working Capital Turnover

-5.5

-4.7

-3.7

-4.2

Accounts Receivable Turnover

22.2

71.8

81.6

71.8

Inventory Turnover

26.8

28.9

33.8

36.1

Accounts Payable Turnover

16.3

15.4

12.4

13.4

Days’ Receivables

16.5

5.1

4.5

5.1

Days’ Inventory

13.6

12.6

10.8

10.1

Days’ Payables

22.3

23.7

29.5

27.3

Long-Term Asset Management:

Net Long-Term Assets Turnover

1.6

1.1

1.0

0.8

Net Long-Term Assets / Sales

61.5%

93.5%

105.0%

119.0%

PP&E Turnover

1.5

1.0

0.9

0.8

Depreciation & Amortization / Sales

12.1%

9.5%

11.9%

13.6%

EVALUATING FINANCIAL MANAGEMENT

2001

2002

2003

2004

Short-Term Liquidity:

Current Ratio

2.77

3.28

3.04

2.95

Quick Ratio

2.63

3.14

2.95

2.85

Cash Ratio

2.47

3.10

2.92

2.81

Operating Cash Flow Ratio

1.04

1.03

1.13

1.22

Debt and Long-Term Solvency:

Liabilities-to-Equity

0.61

0.91

0.89

0.99

Debt-to-Equity

0.28

0.61

0.55

0.68

Net-Debt-to-Equity

-0.52

-0.33

-0.34

-0.18

Debt-to-Capital

0.22

0.38

0.36

0.40

Net-Debt-to-Net Capital

-1.08

-0.49

-0.52

-0.22

Interest Coverage Ratio

11.31

9.79

9.57

5.80

Dividend Payout Ratio

n/a

Sustainable Growth Rate:

23.7%

22.4%

23.9%

16.6%

a All ratios incorporating balance sheet measures are computed using beginning-of-year values

b Operating ROA - effective after-tax interest rate.

` Net Debt/Net Equity, where Net Debt = Interest-bearing liabilities-cash and marketable equity securities.

Exhibit 14 Equity Analyst Reports on Ryanair, January-June 2004

Report

date

Equity

Research Firm

Report title

(€ per share, except

where noted)

Recommendation

Target

Price

price

28-Jan-04

ABN Amro

The Emporer Falls Off His Throne

Sell

4.75

5.15

29-Jan-04

UBS

Ryanair Holdings plc’s financial report

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