Running head: RYANAIR 1

Ryanair: Europe’s Discount Airline

Patrick O’Keefe

Peru State College

RYANAIR 2

Ryanair: Europe’s Discount Airline

Using financial management techniques the purpose of this research paper is to provide

an overview of Ryanair Holding, Plc. After analyzing the information from different resources,

this research paper provides analytical data which typically assist executives to make many

decisions required to effectively manage of business and to develop impending financial plans

for the future requires reliable and pertinent information on the financial performance and

financial position of the firm. Financial analysis is an essential element in all businesses and can

be a harbinger of financial problems if the analysis forecasts serious cash flow difficulties or

provides evidence of poor performance.

Financial management techniques in today’s business

The main objective of financial management is maximizing shareholders’ wealth. All

companies need sound financing to grow and sufficient cash flow to acquire the resources to

necessary to operate. Finance traditionally has concerned itself with the best use of funds for

investment and financing of internal organizational activities (Petrova & Sinclair, 2006).

Financial management concerns the effective decisions used by executives to manage a

company’s finances that provide acceptable returns to shareholders or business owners.

Managing a firm’s cash and credit resources requires expertise, time and money in a particular

way, to achieve a specific set of managerial objectives. These financial objectives typically

govern the decisions to be made with respect to a firm’s strategy and positioning a portion of

which importantly includes financial strategies and outcomes.

A company’s major objective is maximizing the wealth of its shareholders, but other

objectives should be satisfied at the same time, like managerial objectives, short-term objectives,

external stakeholder objectives, as well as non-financial objectives. All companies need

RYANAIR 3

machines, staff, and working capital to exist and grow in the market, which is one reason

financial managers consider investment strategies. In order to understand an organization’s

direction it is necessary to answer questions with respect to the external environment of the

company using both financial and external environmental analysis.

Determining the current environment, capacity for change, financial strength and other

factors requires the use of such analytical tools as an external environmental scan sometimes

referred to as Poltical, Economic, Social and Technological (PEST) scan and a Strengths,

Weaknesses, Opportunities and Threats (SWOT) assessment which can help to analysis the

company’s existing situation. The rule of thumb is that long-term funds and short-term assets

should finance long-term assets by short-term funds. Short-term finance is usually cheaper than

long-term finance. This is largely due to the risks underwritten by creditors.

About Ryanair

The Irish company, Ryanair, is a low-fare airline company in Europe. Started in 1985,

Ryanair went public in 1997 with an Initial Public Offering (IPO) when it floated Ryanair

Holdings, PLC on the Dublin and on the New York (NASDAQ) Stock exchanges. In 1997,

executives stated goals were for the Ryanair to become Europe’s largest airline by 2005, eight

years from the IPO. Ryanair currently operates 950 routes across 11 European countries and in

the North African country of Morrocco. The company offers daily services on routes in these

countries. By 1999, Ryanair had become the biggest passenger carrier on the Dublin-London

route. However, compared with other large airlines, Ryanair was limited to operations on

European continental routes. At the time of the case. Ryanair lacks links with other continents

(“Annual Report”, 2000).

RYANAIR 4

Besides route availability, the actual flight schedule is a major factor in gaining passenger

traffic and is important to maximize the available flying time for aircraft, as money is generated

by flights in the air, not by idled planes sitting on the ground. Thus passenger capacity, number

of flights, availability and convenience of scheduled departures and arrivals are an airline’s most

significant intangible asset. Employees who serve the airline from flight crews to ground crews

and from ticketing agents to baggage handlers are critical in quick turns of aircraft to keep planes

flying and thus generating revenue. The most tangible assets, of course, is the aircraft. Ryanair

has a fleet of 200 Boeing 737-800 aircraft (“Annual Report”, 2009).

Over the past ten years, Ryanair has increased its annual traffic from under 700,000 to

over 15 million passengers. In accomplishing this passenger traffic growth, Ryanair changed the

face of air travel, broke higher fare cartels, rocked airport monopolies and made it possible for

millions to travel at deeply discounted prices. “A first mover competitive advantage could

explain why the most successful airlines seem to be able to maintain … market leadership”

(Malighetti, Paleari & Redondi, 2009, p. 196) such as Southwest Airlines and JetBlue in the US

and by Ryanair and Easyjet in Europe.

Ryanair provide unique services with low price. Like Southwest Airlines, Ryanair uses a

version of open seating, where in when seats are not booked, customers may sit in any open seat

in the cabin. However, like Southwest Airlines. Ryanair’s in-flight services are strictly limited.

For example, customers have to for drinks or food. One complaint about airlines in general is

the gernal policy of overbooking flights. Ryanair, like its industry counterparts, frequently

receives complaints from customers about overbooked flights.

Ryanair has committed itself to safe operations and has put in place extensive safety

training programs to ensure the recruitment of suitably qualified pilots and maintenance

RYANAIR 5

personnel. In addition, the company is also committed to the operation and maintenance of its

aircraft in accordance with the highest European Aviation Industry Standards, which are closely

monitored by the Irish Aviation Authority.

In year 2000, Ryanair launched Europe’s largest travel website at www.ryanair.com,

which within three months of its launch was taking over 50,000 bookings per week, by offering

unbelievably low airfares. The passenger acceptance of this website enabled Ryanair to reduce

travel agent commission. The result is that Ryanair has outperformed rivals in terms of increased

passenger traffic and share price (Gill, 2010).

Ryanair is well positioned in European market to implement its low cost strategy. After

the full EU air transport deregulation in 1997, Ryanair was free to set up new routes to

Continental Europe. The airline entering these market offered airfares, which were more than

50% lower than the cheapest fares then provided by the flag carrier airlines. The European

airline sector is dominated by high-cost, long-haul national carriers like British Airways,

Lufthansa, and KLM. These airlines control 50-60% of market share, but are beginning to lose

the bottom end of the market to low cost carrier like Ryanair.

Competition

Ryanair now has a number of low-cost competitors. In 2004, approximately 60 new low-

cost airlines were formed. Although traditionally a full-service airline, Aer Lingus moved to a

low-fares strategy from 2002, leading to a much more intense competition with Ryanair on Irish

routes.

Airlines which attempt to compete directly with Ryanair are treated harshly, with Ryanair

reducing fares to significantly undercut their competitors. In response to MyTravelLite, who

started to compete with Ryanair on the Birmingham to Dublin route in 2003, Ryanair set up

RYANAIR 6

competing flights on some of MyTravelLite's routes until they pulled out. Go was another airline

which attempted to offer services from Ryanair's hub at Dublin to Glasgow and Edinburgh in

Scotland. A fierce battle ensued, which ended with Go withdrawing its service from Dublin.[73]

In September 2004, Ryanair's biggest competitor, EasyJet, announced routes to the

Republic of Ireland for the first time, beginning with the Cork to London Gatwick route. Until

then, easyJet had never competed directly with Ryanair on its home ground. Easyjet announced

in July 2006, that it was withdrawing its Gatwick-Cork, Gatwick-Shannon and Gatwick-Knock

services; within two weeks, Ryanair also announced it would withdraw its own service on the

Gatwick-Knock and Luton-Shannon routes.

Ryanair has asked the high court to investigate why it has been refused permission to fly

from Knock to Dublin. This route was won by CityJet, which was unable to operate the service.

The runner up, Aer Arann, started flights, a move Ryanair criticizes on the basis that not

initiating an additional tender process was unlawful.

Financial Situation

The major revenues of Ryanair gain from the tickets sold during the year. That is the

only different with the tangible stock value. Once the tickets are sold, the company gets the

revenues from the operation. The company receives the cash and books the income on its ledger.

The company uses cash to pay the relevant cost, like staff wages, fuel and oil cost, marketing and

distribution cost as well as other operating expenses. The rest of the revenues are retained profit

as the capital of company. If the profit grows, the company share price will increase

accordingly. Once the share price increased, the shareholders enjoy a return on investment, more

and more investors will have more interest in the company. Therefore, the company achieves the

RYANAIR 7

source of finance. After that, Ryanair must consider shareholders when investing for grwth

potential to expand the company.

In 2009, Ryanair company’s operation revenues were $4.02 billion an increase of than

2001). It includes net cash inflow from operating activities: 125417. This should thank for the

contribution of the sales team. Ryanair insists to offer lower airfares in European countries and

try to increase sales continuously. Increased revenue is one of the major sources of finance.

The strength of the performance is highlighted by the fact that the groups’ cash on hand is

equivalent to 53.6% of annual turnover. This figure is a little bit high according to their sale

growth. They should invest the cash flow to generate more return. However, there is a special

reason that they have to maintain a deposit US$500,000 with the guarantor bank for as long as

the bank gave its guarantee.

The operating expenses during the year are Ђ 229740; Net cash inflow from operating

activities is 12304; profit and loss account is 112758. As the growth of the profit during the

year, EPS increased by 17% to 35.16 and is based on 164,759,808 shares, which represent the

weighted average number of ordinary shares outstanding during the year. We can see the profit

is increasing; the capital of the company is increasing. Because the market is growing, Ryanair

should think about where they should invest and how. i.e. Invest new aircraft, improve quality of

service or setup new routes.

Ryanair announced a new investment program with a US$2billion order for up to 45 new

Boeing 737-800 series aircraft. Continued strong cash flows generated from trading operations

RYANAIR 8

combined with the proceeds of the London offering and the receipt of debt financing for the first

of the Boeing 737-800 next generation aircraft, has allowed the group to increase its cash on

hand by 74m. Before Ryanair makes decision about buying what type of aircraft, the two

alternatives would be mutually exclusive, in that the choice of one will exclude the other. The

company may use NPV and IRR to calculate which one may give more return.

Ratio Analysis

Ratios are a common method of analyzing financial management. Financial ratios refer

to the use of simple ratios, which are calculated from the figures of financial statements in order

to measure certain aspects of a firm’s financial condition. A set of financial ratios conducted on

Ryanair is located in Appendix D.

Ratios make comparisons with:

The performance of the business in previous years

The budgeted or planned performance in the current years

The performance of similar business

The ratios make easier to make better decision. However, there are some limitations in ratio

analysis. For instance, since ratios are constructed from accounting data, if we do comparison

within two different firms, their accounting policies (i.e. depreciation charge, the accounting

years) could lead to the inaccurate illustration.

RYANAIR 9

The Net Profit Ratio was dramatically increased by 15% during the year 2001 and 2002. Even

though their expenses cost had increased by a certain percentages in different items and because

of their low fares system. They still gained a high return in net profit when compared to 2001.

The reason of this was that the rise of sales and the interest received. These revenues gave the

company a good return that could cover the expenses and other additional costs. The increase in

profitability reflects the positive impact of the growth in passenger’s volume because of the

increase in seat capacity on existing routes and the launch of new seven European routes during

the year.

In the Return On Capital Employed Ratio the amount of money that the investors can get back

after investing in the company, the ratio decreased to 28% in that year. The explanation of this

figure was because their company needed to consider the contract that with Boeing worth US$2

billion by ordering for up to 45 aircraft in the coming years, in order to succeed the expansion of

our company.

Asset Turnover Ratio is a measure of productivity as much as profitability. Within 2001 and

2002, the ratio dropped from 1.56 to 1.04, it meant that more assets were to be used to generate

every unit of sales .The reason was because their introduction on new fleet of 22 aircraft on our

network of 27 routes in request to increase the level of passengers and the low fares system.

According to the Current Asset Ratio, the company had a well cover of their current liabilities

under current assets. Even though in Acid Test Ratio, which we examined that by excluding the

inventories, their current assets also covered the liabilities by 1.14 in 2001, and 1.60 in 2002. It

RYANAIR 10

increased by 46%. From the current assets, cash was the major inflows to their company in the

past two years. Especially in 2002, there was an increase in cash from 892160 TO 12742400.

Move to the cash flows statement. Cash is King. Company fail, not because of their insufficient

profits, but because they have run out of cash to pay their liabilities. Cash and bank balances

should be kept to a minimum, as they earn nothing for the company, but make sure you have

enough cash to pay employees and creditors. Cash generated from operating activities grew up

for 25.6 million. This increase was due to the increase of sales and profits and the add back of

the non-cash items primarily depreciation charge since they had a new aircraft during the year.

The cash flows was from trading operations combined with the proceeds of the London offering

and the receipt of debt financing for the first Boeing 737-800 next generation aircraft, has

allowed the group to increase the cash on hands despite having to pay advance deposits to

Boeing. The performance is highlighted by the fact that the cash on hand is equivalent to

53.6%of annual turnover.

The next ratio is Gearing which means how reliable of the company on the financial institutions

when raising the finance. Even though the ratio was slightly increased by 2 %, the company still

in a low-geared situation in these two years. The interest coverage was good since Ryanair only

needs to pay interest once a year and they could pay 4.4 times in 2001 and 6.6 times in 2002.

The Earning Per Share (EPS) considers the profits that could be paid to each ordinary

shareholder. The increase in profit resulted in the increase in EPS. This also stated that the

increase in the value of shareholders as the company’s profit and traffic has grown.

RYANAIR 11

After finishing the ratio analysis, Ryanair is financially healthy. Ryanair, in comparison with

other major airline companies and industrial averages, Is above average in sales over 2009, but

below industry averages in net income (See Appendix C). The industry ratios suggest that

Ryanair’s performance is good, but could improve.

Other non-financial considerations

Ryanair has a bad reputation for over booking and early check-in time. On the other way, every

company has limitation. For airline companies, these problems are normal. Ryanair changed

their booking system last Christmas and the new system is more accurate and working well.

Company said that they would not only improve the hardware but also the staff. There are a

group of new staffs now is trained by American Airline.

Conclusion

After reading the research paper, hopefully you have an understanding of airline finance.

Ryanair is a new member of airline companies (started from 1985). It is young and healthy.

Based on Europe and has a strong relationship with America, there are many areas that it can

improve and expand to. Ryanair is developing speed like a flying superman, going up and away.

It is the kind of company we should put money in.

RYANAIR 12

References

Creaton, Siobhán (2007). Ryanair: The full story of the controversial low-cost airline. London,

UK, Aurum Press.

Creaton, Siobhán (2004). Ryanair: How a Small Irish Airline Conquered Europe. London:

Aurum Press.

Gill, Rob (2010, July 23). Airlines handle the turbulence. Travel Trade Gazette UK & Ireland,

2922, p. 16. 

Malighetti, P., Paleari,s. & Redondi, R. (2009, July).Pricing strategies of low-cost airlines: The

Ryanair case study. Journal of Air Transport Management, 15(4), 195-203. doi:

10.1016/j.jairtraman.2008.09.017.

McCormick, T. (2010, October).  Understanding costs using the value chain a Ryanair

example. Accountancy Ireland, 42(5) 28-30. 

Yahoo! Finance (2010). Retrieved November 15, 2010 from

APPENDICES

RYANAIR 13

Running head: RYANAIR 14

Appendix A

Report Date 03/31/2010 03/31/2009 03/31/2008 03/31/2007 03/31/2006Currency EUR EUR EUR EUR EURAudit Status Not Qualified Not Qualified Not Qualified Not Qualified Not QualifiedConsolidated Yes Yes Yes Yes YesScale Thousands Thousands Thousands Thousands Thousands

Aircraft, cost - - - 3,344,908 2,870,085Accumulated depreciation - aircraft - - - (486,682) (350,577)Aircraft, net - - - 2,858,226 2,519,508Hangar & buildings, cost - - - 23,037 13,265Accumulated depreciation - hangar & buildings - - - (4,359) (3,674)Hangar & buildings, net - - - 18,678 9,591Plant & equipment, cost - - - 9,954 6,540Accumulated depreciation - plant & equipment - - - (5,846) (4,876)Plant & equipment, net - - - 4,108 1,664Fixtures & fittings, cost - - - 13,247 11,773Accumulated depreciation - fixtures & fittings - - - (10,910) (9,923)Fixtures & fittings, net - - - 2,337 1,850Motor vehicles, cost - - - 1,609 981Accumulated depreciation - motor vehicles - - - (905) (606)Motor vehicles, net - - - 704 375Property, plant & equipment, cost 5,151,100 4,296,526 4,206,174 3,392,755 2,902,644Accumulated depreciation - property, plant & equipment (836,900) (651,702) (624,048) (508,702) (369,656)Property, plant & equipment 4,314,200 3,644,824 3,582,126 2,884,053 2,532,988Intangible assets 46,800 46,841 46,841 46,841 46,841Available for sale financial assets 116,200 93,150 311,462 406,075 -Derivative financial instruments 22,800 59,970 - - 763Total non-current assets 4,500,000 3,844,785 3,940,429 3,336,969 2,580,592Consumables - - - 2,420 3,422Inventories 2,500 2,075 1,997 2,420 3,422Prepayments 74,100 67,185 121,555 39,253 14,643Interest receivable 6,500 5,244 10,014 9,028 9,076Refundable deposits - 15,801 34,104 24,088 -Value added tax recoverable - 2,823 3,907 5,338 5,734Other assets 80,600 91,053 169,580 77,707 29,453Current tax - - 1,585 - -

RYANAIR 15

Trade receivables, gross 44,400 41,928 34,315 23,600 30,362Provision for impairment - trade receivables (100) (137) (137) (188) (453)Trade receivables 44,300 41,791 34,178 23,412 29,909Derivative financial instruments 122,600 129,962 10,228 52,736 18,872Restricted cash 67,800 291,601 292,431 258,808 204,040Financial assets: cash more than 3 months 1,267,700 403,401 406,274 592,774 328,927Cash & cash equivalents 1,477,900 1,583,194 1,470,849 1,346,419 1,439,004Total current assets 3,063,400 2,543,077 2,387,122 2,354,276 2,053,627Total assets 7,563,400 6,387,862 6,327,551 5,691,245 4,634,219Trade payables 154,000 132,671 129,289 54,801 79,283Accruals 260,300 226,322 283,374 207,311 109,681Taxation 282,300 231,877 230,970 193,887 111,291Unearned revenue 545,600 447,516 405,005 405,938 349,642Accrued expenses & other liabilities 1,088,200 905,715 919,349 807,136 570,614Current maturities of debt 265,500 202,941 366,801 178,918 153,311Current tax 900 425 - 20,822 15,247Derivative financial instruments 41,000 137,439 141,711 56,053 27,417Total current liabilities 1,549,600 1,379,191 1,557,150 1,117,730 845,872Provisions 102,900 71,964 42,790 28,719 16,722Derivative financial instruments 35,400 54,074 75,685 58,666 81,897Deferred tax 199,600 155,524 148,088 151,032 127,260Other creditors 136,600 106,549 101,950 112,177 46,066Non-current maturities of debt 2,690,700 2,195,499 1,899,694 1,683,148 1,524,417Total non-current liabilities 3,165,200 2,583,610 2,268,207 2,033,742 1,796,362Issued share capital 9,400 9,354 9,465 9,822 9,790Share premium account 631,900 617,426 592,761 607,433 596,231Capital redemption reserve 500 493 23,432 - -Retained earnings (accumulated deficit) 2,083,500 1,777,727 2,000,422 1,905,211 1,467,623Other reserves 123,300 20,061 (123,886) 17,307 (81,659)Shareholders' equity 2,848,600 2,425,061 2,502,194 2,539,773 1,991,985Total liabilities & shareholders' equity 7,563,400 6,387,862 6,327,551 5,691,245 4,634,219

Running head: RYANAIR 16

Appendix B

Balance Sheet

AssetsCash and Short Term Investments 2,745.6 1,986.6 1,877.12 1,939.19 1,767.93

Cash & Equivalents

Short Term Investments

Total Receivables, Net 50.8 65.66 82.2 61.87 44.72

Accounts Receivable - Trade, Net

Accounts Receivable - Trade, Gross

Provision for Doubtful Accounts

Receivables - Other

Total Inventory 2.5 2.08 2.0 2.42 3.42

Prepaid Expenses 74.1 67.19 121.56 94.24 14.64

Other Current Assets, Total 190.4 421.56 304.24 311.54 222.91

Total Current Assets 3,063.4 2,543.08 2,387.12 2,409.27 2,053.63

Property/Plant/Equipment, Total - Net 4,314.2 3,644.82 3,582.13 2,901.51 2,532.99

Goodwill, Net 0.0 0.0 0.0 0.0 0.0

Intangibles, Net 46.8 46.84 46.84 46.84 46.84

Long Term Investments 116.2 93.15 311.46 406.08 0.0

Note Receivable - Long Term 0.0 0.0 0.0 0.0 0.0

Other Long Term Assets, Total 22.8 59.97 0.0 0.0 0.76

Other Assets, Total 0.0 0.0 0.0 0.0 0.0

Total Assets 7,563.4 6,387.86 6,327.55 5,763.69 4,634.22

Liabilities and Shareholders' Equity

Accounts Payable 154.0 132.67 129.29 127.24 79.28

Payable/Accrued 0.0 0.0 0.0 0.0 0.0

Accrued Expenses 260.3 226.32 283.37 207.31 109.68

Notes Payable/Short Term Debt 0.0 0.0 0.0 0.0 0.0

Current Port. of LT Debt/Capital Leases 265.5 202.94 366.8 178.92 153.31

Other Current Liabilities, Total 869.8 817.26 777.69 676.7 503.6

Total Current Liabilities 1,549.6 1,379.19 1,557.15 1,190.17 845.87Total Long Term Debt 2,690.7 2,195.5 1,899.69 1,683.15 1,524.42

Long Term Debt

Deferred Income Tax 199.6 155.52 148.09 151.03 127.26

Minority Interest 0.0 0.0 0.0 0.0 0.0

Other Liabilities, Total 274.9 232.59 220.43 199.56 144.69

Total Liabilities 4,714.8 3,962.8 3,825.36 3,223.91 2,642.23

RYANAIR 17

Redeemable Preferred Stock 0.0 0.0 0.0 0.0 0.0

Preferred Stock - Non Redeemable, Net 0.0 0.0 0.0 0.0 0.0

Common Stock 9.4 9.35 9.47 9.82 9.79

Additional Paid-In Capital 631.9 617.43 615.82 607.43 596.23

Retained Earnings (Accumulated

Deficit)

2,207.3 1,798.28 1,876.91 1,922.52 1,385.96

Other Equity, Total 0.0 0.0 0.0 0.0 0.0

Total Equity 2,848.6 2,425.06 2,502.19 2,539.77 1,991.99

Total Liabilities & Shareholders’

Equity

7,563.4 6,387.86 6,327.55 5,763.69 4,634.22

Total Common Shares Outstanding 1,478.94 1,473.36 1,490.8 1,547.03 1,542.03

Total Preferred Shares Outstanding 0.0 0.0 0.0 0.0 0.0

RYANAIR 18

Appendix C

Statement of Cash Flows

2010 2009 2008 2007 2006

Period End Date 03/31/2010 03/31/2009 03/31/2008 03/31/2007 03/31/2006

Period Length 12 Months 12 Months 12 Months 12 Months 12 Months

Stmt Source 20-F 20-F 20-F 20-F 20-F

Stmt Source Date 07/20/2010 07/29/2009 07/31/2008 07/31/2008 07/31/2008

Stmt Update Type Updated Updated Updated Reclassified Restated

Net Income/Starting Line 341.0 -180.49 438.93 451.04 338.89

Depreciation/Depletion 235.4 256.12 175.95 143.5 124.41

Amortization 0.0 0.0 0.0 0.0 0.0Non-Cash Items 47.1 245.31 104.41 15.84 11.59

Unusual Items

Other Non-Cash Items

Changes in Working Capital 248.0 92.19 -15.39 290.46 135.69

Accounts Receivable

Inventories

Other Assets

Accounts Payable

Taxes Payable

Other Liabilities

Other Operating Cash Flow

Cash from Operating Activities 871.5 413.13 703.9 900.84 610.57Capital Expenditures -997.8 -702.02 -937.12 -525.96 -546.23

Purchase of Fixed Assets

Other Investing Cash Flow Items,

Total

-551.3 313.68 244.81 -663.04 208.94

Sale of Fixed Assets

Purchase of Investments

Other Investing Cash Flow

Cash from Investing Activities -1,549.1 -388.33 -692.31 -1,188.99 -337.29Financing Cash Flow Items 0.0 0.0 0.0 0.0 0.0

Other Financing Cash Flow

Total Cash Dividends Paid 0.0 0.0 0.0 0.0 0.0

Issuance (Retirement) of Stock, Net 14.5 -44.4 -291.59 11.23 30.59

Issuance (Retirement) of Debt, Net 557.8 131.95 404.43 184.34 262.87

Cash from Financing Activities 572.3 87.55 112.84 195.57 293.46

Foreign Exchange Effects 0.0 0.0 0.0 0.0 0.0

RYANAIR 19

Net Change in Cash -105.3 112.35 124.43 -92.59 566.75

Net Cash - Beginning Balance 1,583.2 1,470.85 1,346.42 1,439.0 872.26

Net Cash - Ending Balance 1,477.9 1,583.19 1,470.85 1,346.42 1,439.0

Running head: RYANAIR 20

Appendix D

Key Financial Ratios

Price Ratio Company Industry Average S&PCurrent P/E 18.7 21.5 21.3

Debt/Equity Ratio .99 .77 1.4Current Ratio 2.3 1.2 1.4Quick Ratio 2.3 1.1 .09

Return on Equity (ROE) 11.8 15.2 25.4Return on Assets (ROA) 4.8 4.1 8.0

Receivable Turnover 71.1 39.8 17.0Inventory Turnover 820.5 206 10.8

RYANAIR 21

Appendix D

SWOT Analysis

Strengths Weaknesses

Low cost leader

Innovative cost reductions

First mover advantage

Robust route network

Strong fleet operaitons

Declining profitability

Volatile customer relations

Dependence on Michael O’Leary

Antagonistic relationships with competitors

Unfunded employee post-retirement benefits

Opportunities Threats

Growth

Continued cost reduction

EU Expansion

Increased tourism and destinations

Global Recession

Ireland national debt problem

Increased competition

New entrants of low cost competitors

Availability of alternative transportation

RYANAIR 22

Appendices:

Net Profit Ratio:

In 2001,

54822/233736*100%=23%

In 2002,

112758/298124*100%=38%

Return On capital Employed:

In 2001,

56736/149385*100%=38%

In 2002,

68410/287752*100%`=28%

Asset Turnover:

In 2001,

233736/149385=1.56

In 2002,

298124/287752=1.04

Current Assets Ratio:

In 2001,

88979/71877=1:1

In 2002,

RYANAIR 23

197879/115319=2:1

Acid-Test Ratio:

In 2001,

(88979-6638)/71877=1:1

In 2002,

(197879-13021)/115319=1:1

Total Gearing:

In 2001,

14834/(134551+14834)*100%=10%

In 2002,

34760/(252992+34760)*100%=12%

Equity Gearing:

In 2001,

14834/134551*100%=11%

In 2002,

34760/252992*100% =13%

Interest Cover:

In 2001,

63017/(1087+13388)=4.4times

RYANAIR 24

In 2002,

76662/(239+11368)=6.6times