IMD431

I N T E R N A T I O N A L v. 03.09.2007

RYANAIR: DEFYING GRAVITY

Research Associate Atul The integration of the EU aviation market and the simultaneous Pahwa prepared this case emergence of low-cost airlines revolutionized the way people under the supervision of traveled across Europe. The pioneer of the low-cost movement Professor Adrian Ryans as a in Europe was , which in 2004 was the most profitable basis for class discussion airline in the world (in terms of percentage operating profit), and rather than to illustrate either whose low-cost base and operating efficiency was the envy of effective or ineffective handling the airline industry. of a business situation. Ryanair had a strong commitment to price value with fares that were consistently the lowest in the industry. With almost one quarter of the seats given away for free (before taxes, fees and charges) and an average fare of €44, Europeans became accustomed to “doing a Ryanair” and heading out to far-flung cities across Europe for weekend jaunts. CEO Michael O’Leary was quoted as saying, “Our strategy is like Wal-Mart’s--we pile it high and sell it cheap.” However, Ryanair faced strong competition from traditional carriers, charter airlines and the almost 50 low-cost copycat carriers in Europe, threatening Ryanair’s ambitious plans to double its customer base within five years and deliver consistent returns to shareholders. More immediately, O’Leary had to respond for the first time to serious competition from easyJet, Ryanair’s larger low-cost rival, in its home market, Ireland. On September 23, 2004 easyJet announced its first three routes to the Republic of Ireland from Gatwick and its CEO Ray Webster commented:

These are our first services to the Republic of Ireland, where air fares have remained stubbornly high and have generated consistently strong year-round returns for the incumbent airline. We are bringing easyJet’s well-established brand to Ireland and will be flying to the right places at the right prices for hundreds of thousands of passengers.

The great news for consumers is that all of these routes will be offered from Gatwick Airport in south London which will attract thousands of new passengers and give a new low-cost option for those who prefer to fly from Gatwick.

Copyright © 2005 by IMD - International Institute for Management Development, Lausanne, Switzerland. Not to be used or reproduced without written permission directly from IMD. - 2 - IMD-3-1633 I N T E R N A T I O N A L

Company Background In 1985 Ryanair began operations with a 15-seater airplane providing service from the southeast of Ireland to London. Within a year it was challenging the Aer Lingus and duopoly on the Dublin–London route, forcing the incumbents to reduce their prices by over 50% to match those of Ryanair. Over its first five years, a haphazard expansion of aircraft and routes attracted over 700,000 passengers, but also resulted in £20 million in losses. Insisting that this was an investment for the future, the Ryan family restructured the airline and infused another £20 million in capital, but not before sending a young manager, Michael O’Leary, to and study Southwest Airlines. A brainchild of Herb Kelleher, Southwest had left an indelible mark on aviation history by running a highly successful airline, which offered point-to-point flights on a single type of aircraft, no assigned seating, a single class of service and a flight crew that could have moonlighted as stand-up comedians.1 O’Leary returned and convinced the company’s management team and founders that he could adapt and better the Southwest model for the European market by providing a no-frills low-fare service on an extremely low-cost base. With the backing of the founders and the lure of a significant financial upside if he managed to pull it off, O’Leary began to institute the necessary changes while taking on the role of deputy chief executive. Born again as the “value for money” airline, Ryanair adopted a no-frills approach while extending the Southwest model to drive down costs to levels well below that of the competition. In 1994 O’Leary became CEO and shortly thereafter launched an offensive on European routes typically dominated by duopolies of the national flag carriers, with the advent of the open-skies policy in the European Union.2

Over the next few years, Ryanair grew aggressively, sweeping through the European mainland like a capitalist hurricane, leaving a fundamentally altered airline market in its wake. Ryanair fares were priced on a one-way basis and depended on advance booking, seat availability and demand. Fares were typically much lower than competition, but were non-cancellable, non-refundable and had to be paid at the time of booking. Europeans, fed up with high-priced train tickets, motorway tolls and expensive airfares from traditional airlines, defected in droves. In the fiscal year ending March 2004 Ryanair carried 23 million passengers on 150 routes. Exhibit 1 shows the routes in operation in 2003, the number of passengers carried on those routes and the new routes that were to be launched in 2004.

1 Even Kelleher was known to routinely participate in the in-flight entertainment antics while traveling. On one flight he asked the passengers to put their hands together for a round of applause, for someone in the front of the plane had just turned 98 years of age. Shortly after, he would tell the passengers to make sure they wished the captain “Happy Birthday” on their way out. 2 In 1997, just as the industry was completely deregulated, only 6% of Europe’s routes were operated by three or more carriers; 30% by two carriers, the rest were monopolies. - 3 - IMD-3-1633 I N T E R N A T I O N A L

By the end of 2004 Ryanair was expected to carry about 27 million passengers over 217 routes. It claimed to have the lowest fares and seat costs in Europe and reported net margins of over 28% for the six months ending September 2004. It also claimed several number ones--among them were the most punctual airline and the airline with fewest cancellations and lost bags. Passenger growth was at 27% CAGR over the previous decade, and for the fiscal year ending March 2004 revenues were €1.07 billion and profit after tax was €227 million (refer to Exhibit 2).

Managing Costs Ryanair had a low-cost structure and a relentless focus on driving it down even further. Like most other leading low-cost carriers, it emphasized a strong brand and low fares, short-haul routes, direct and online bookings,3 ticketless travel, the use of secondary airports (though some competitors strayed away from this rule). Its point-to-point service provided a no-frills experience with everything from food on board to credit card payments costing extra. For a comparison of costs per available seat kilometer for several European airlines refer to Exhibit 3. At the heart of the Ryanair model was the emphasis on using virtually exclusively low-cost secondary airports. It advertised Frankfurt and flew to Hahn--about 125 km by road from the city center, and similarly chose secondary airports at Brussels, Hamburg, London and Stockholm. The major bases and the number of aircraft stationed at each one are shown in Exhibit 4. The airline was not only able to bargain hard and obtain significant discounts on airport charges, but also turn around its planes quicker in these less congested airports. This contributed to industry-beating aircraft-scheduled turnaround times of only 25 minutes. Point-to- point services meant that Ryanair avoided the costs of providing through services for connecting passengers including baggage transfer and transit passenger assistance. All this allowed it to keep its planes in the air about 30% more than the typical carrier. O’Leary noted that Ryanair could run two more flights a day in its schedule than rivals such as British Airways: “This is the most important cost advantage we have.” O’Leary was the driving force behind the aggressive cost cutting and negotiating with the company’s suppliers. He likened the airline industry to a commodity business where the lowest cost operator prevailed. Ryanair’s core strategy was based on striking good deals with under-utilized regional airports and local chambers of commerce, which hoped to reap substantial economic benefits from a stream of well-heeled foreign visitors. Ryanair negotiated with airport authorities at Charleroi in Belgium and obtained a 50% discount on landing charges, a preferential passenger handling charge of €1 (10% of the airport’s normal basic rate) and a contribution of €4 per passenger brought into the airport for up to 26 flights per day over the next 15 years. Similar deals had been struck at airports across the continent (it was rumored that Ryanair’s fees at Klagenfurt, Austria were only 10% of what Austrian Airlines was paying). Given the scale of Ryanair’s business, it was no wonder that no service provider had walked away in over 15 years.

3 About 97% of flight reservations were made through its website, Ryanair.com. - 4 - IMD-3-1633 I N T E R N A T I O N A L

Ryanair, like Southwest, insisted on using a single aircraft family, the Boeing 737, thereby avoiding costly complexity in maintenance, spares and crew training. And the aircraft had been bought cheaply. Originally it was second-hand aircraft but as the airline prospered it started buying new aircraft. Its largest order for 100 planes plus fifty options was placed post September 11 at the bottom of the market in January 2002 at what was believed to be a very low price.4 This was where the airline saw a large part of its future cost savings. The new Boeing 737-800s provided greater fuel efficiency,5 lower maintenance costs and with 189 seats were still flown by the same two-man crew that previously flew the 130-seat 737- 200s. Planes were ordered without window shades, reclining seats, headrests or seat pockets. No free snacks meant fewer wrappers or food stuck between seat cushions, which contributed to the shorter turnaround time. Like other low-cost start-up carriers, Ryanair had chosen from the outset to use outside suppliers for services ranging from catering, aircraft maintenance, passenger and baggage handling to call centers. It received a flat per-plane fee from its catering provider plus a commission on all products sold in exchange for the opportunity to provide such a service to Ryanair passengers. In Ryanair lingo these were “reverse costs” or costs that had been converted into revenue. Ryanair’s vision of the next wave of cost cutting was centered on further simplifying its airport operations. Getting rid of checked-in baggage altogether would enable the airline to take about £5 per passenger off costs. The airline was even considering providing a token cash incentive for passengers checking in with just carry-on luggage. Ryanair preferred to use airport gates without extendable jetways because they were often cheaper and also allowed passengers to embark and disembark from both the front and rear of the plane speeding up the turnaround process. Passengers seemed to appreciate the elimination of amenities such as business lounges and meals as the savings were passed on to them--with a smile. O’Leary was open and certainly less than apologetic about these seemingly spartan policies stating that it was all about re-educating the passenger to accept a lower level of service in exchange for the lowest fares. Staff were not immune from stringent cost-cutting measures. Pilots and cabin crew paid for their own training, uniforms and airport IDs, and were forbidden from charging their mobile phones at work. 30% of pilots and cabin crew were on fixed-term contracts and Ryanair planned to increase this to 50%. While contract pilot salaries were close to those of their salaried peers, they flew about 5% to 10% more hours. Regulatory filings disclosed that Ryanair pilots flew 887 hours a year, close to the allowed 900 hours annually. Cabin crew and pilots were paid lower salaries and instead earned significant variable compensation. Cabin crew typically received a 10% commission on all on-board sales. These commissions for cabin crew and high productivity bonuses for all flight crew resulted in 40% and 56% of the pay being variable for pilots and cabin crew respectively. Even reservation staff were incentivized based on the number of bookings made.

4 O’Leary said “I would call the discount wholly inadequate. Boeing would call it rapacious! I wouldn’t even tell my priest what discount I got off Boeing. Some things will forever remain a secret.” 5 The 737-800s were 50% more fuel efficient than the 737-200s on a passenger-mile basis. - 5 - IMD-3-1633 I N T E R N A T I O N A L

But the spartan policies drew the ire of some of the employees. The savings to Ryanair customers came partly at the expense of employees who had the lowest number of annual paid holidays in the industry and long probation periods. Pilots who were switched to the newer Boeing 737-800s were required to pay for the all re-training up front. These measures contributed to employee costs that were one half of those of British Airways and allowed Ryanair to handle 10,050 passengers per employee, in contrast to British Airways’ 760 and Lufthansa’s 1,280. easyJet’s ratio was 6,300:1. Fuel costs constituted a substantial portion (23.4%) of Ryanair’s operating expenses. Ryanair typically hedged part of its fuel requirements for the following 12 to 18 months. Unlike many other airlines, Ryanair never applied fuel surcharges to its fares. Other savings came from the no-refund ticket policy that helped minimize paperwork costs (the airline even pocketed the fees and taxes paid by no shows-- about 8% of all ticketed passengers--earning about €7.5 million from this alone, in 2003) and from developing all the advertising and marketing material in-house, rather than engaging an advertising agency. Simple newspaper and poster ads emphasized the low fares and were generally spiced up with controversial attacks on the competition (refer to Exhibit 5 for some representative Ryanair ads). If they created waves, that was deemed good and free publicity. Ryanair’s website appeared cluttered and insistent, but screamed “low cost.” O’Leary’s antics added to Ryanair’s publicity stunts. Once, dressed in a snowman costume with a colleague in Santa attire, he announced that a million seats would be given away at under £1, literally turning the heat on for the competition. In another extravagant stunt he hired a World War II tank and drove up to the front of Luton Airport, home of easyJet, Ryanair’s main rival, claiming to liberate the public from its rival’s fares, rousing his troops and singing “I’ve been told and it’s no lie, easyJet’s fares are way too high.” A third incident had him flamboyantly dressed up as the Pope, as the airline announced its new base in Rome. Needless to say, all this was lapped up by the press at no cost to the airline. The constant search for economies was typical of Ryanair’s approach. It was consistently driving costs down with its suppliers by promising large growing volumes based on projected passenger numbers. The overall cost base had dropped by 25% between 2001 and 2004 and the breakeven load factors in 2004 were about 60%. With costs 40% below those of its nearest competitor it was determined to reach a first or second rank in market share for each of the city pairs it flew and gain even further economies of scale.6 (Exhibit 6 shows market share data for London-Italy routes in 2003.)

6 Ryanair expected that unit operating costs would continue to fall each year through 2010. It was already the #1 or #2 in market share for the majority of the routes it flew. - 6 - IMD-3-1633 I N T E R N A T I O N A L

Growing Revenues

Better to reduce profits and sell at lower prices for a couple of years to consolidate market share. Michael O’Leary

O’Leary believed that in the long term there would be an increasing number of airline seats chasing too few passengers in Europe. While this would result in an eventual consolidation in the industry, the goal of stimulating additional demand would be possible only with low price points.7 This assumed that consumers would behave rationally when confronted with a value judgment and would prefer to pick and choose frills and pay for them separately. In fiscal 2004 Ryanair average fares were €44 and provided load factors of 85% and net margins of 21%- -both among the highest in the industry.

Ancillary Revenues Ancillary revenues accounted for 15.5% of the revenue and grew by 35% between fiscal 2003 and 2004. This was the highest in the world (refer to Exhibit 7). They were believed to contribute over 30% of operating profits. O’Leary drew the analogy to cinemas where a large portion of the revenue was generated through ancillary sales. An increasing penetration into categories like car and hotel bookings and travel insurance coupled with new product innovations, like scratch cards and on-board entertainment (this was scheduled to be introduced on a trial basis in November 2004), suggested that these revenues and profits would continue to grow. Ancillary revenue sources included commissions from car and hotel bookings, excess baggage charges of about €7 per kilo (which had been increased significantly in 2004 to raise revenues as well as deter passengers from carrying in checked-in luggage), on-board catering and travel insurance. Links on the Ryanair website also directed people to the local tourism offices of the areas to which Ryanair provided flight services, and personal loan offers from a leading European bank. It also sold rail tickets both through its website and on board and incentivized ground service providers at all airports to collect excess baggage charges on all baggage exceeding Ryanair’s stated limits. In February 2003 it launched a Ryanair credit card with MBNA, a large credit card issuer. By July 2004 it had over 200,000 users and was adding over 2,500 new users per week. Ryanair received a fee for each card issued and a commission based on all charges made on the credit card. Users could earn free flights by using the card to purchase Ryanair tickets and based on the total charges made on the card.

Ryanair rented out overhead storage bins and seat backs to advertisers. It also offered companies the chance to emblazon their logos on the exterior of all its

7 A survey conducted for the European Low Fares Airline Association indicated that 59% of low- cost carrier passengers were not customers of other airlines and that the release of this demand benefited the airline industry as a whole. 71% of these would otherwise not have traveled. The remainder would have used other transport. - 7 - IMD-3-1633 I N T E R N A T I O N A L planes. Such a move, if successful, had the potential to generate over €30 million of net profit to the airline each year. Hertz, Kilkenny, Jaguar and Vodafone were among the companies that had already signed on. Ryanair even planned on creating revenue generating partnerships with car parking facilities, hostels and activity breaks providers, and to develop a more defined online advertising offering on its site.

Future Outlook With the goal of increasing to 30 bases and 70 million passengers by 2010 and a longer-term vision of 48 bases and 100 million passengers by 2015, Ryanair set its sights on rapidly increasing its share of the European market. While the penetration of low-cost carriers in the UK was about 40%, it was only 20% in Europe overall, suggesting an opportunity of considerable growth (refer to Exhibit 8). Secondly, with the addition of ten countries to the EU in 2005, there was a whole market waiting to welcome the arrival of Ryanair with open arms. Finally, the opportunity to serve intracountry routes was extremely appealing. It already served a number of routes within the UK and there were additional opportunities both within the UK and elsewhere in Europe. Analysts believed that intracountry routes were more profitable than intercountry routes for low-cost carriers, given the typically shorter route lengths and the lower air-traffic control charges. Other low-cost carriers, such as Volare and GermanWings, were already targeting domestic routes in Italy and Germany, respectively. It was estimated that the total European short-haul market would grow from perhaps 100 million passengers in 2005 to 230 million passengers in 2012.

Competitive Threats

A Crowded Sky for Low-Cost Carriers Of the 34 airlines created after the deregulation of the US airline industry in 1978, 32 had gone bust. The deregulation environment within Europe was still in its infancy and there were bound to be several casualties in the near future. Low interest rates, a glut of second-hand planes and off-the-shelf software were responsible for several entrepreneurs wanting to imitate the Ryanair and easyJet models, and the number of low-cost carriers in Europe grew from 7 in 2001 to about 50 in 2005.

But several of the start-ups did not survive. In 2002 Barbara Cassani, the CEO of Go, the low-cost airline launched by BA, said of the price wars with Ryanair: “You can’t take on someone with lower costs because they dig deeper than you to lower prices and still make money while you are bleeding.” Go was subsequently bought by easyJet, the KLM subsidiary Buzz was bought by Ryanair and the Dutch-owned V-Bird disappeared. - 8 - IMD-3-1633 I N T E R N A T I O N A L

Bureaucratic Hurdles Ryanair found itself wrangling with the European Commission over the legality of its subsidized arrangements with the publicly owned Charleroi Airport, south of Brussels. Rival airlines had complained that the benefits offered to Ryanair by the airport put them at a disadvantage and breached EU competition rules. The findings declared some of the arrangements to constitute illegal aid. Ryanair was required to pay back about €4 million of the subsidies and soon its financial dealings with several other airports also came to light, forcing the European Commission to pass a ruling on the limits of acceptable aid from airports. Ryanair appealed against the decision. easyJet The most direct threat to Ryanair came from none other than easyJet, which had risen behind Ryanair to become the largest low-cost carrier in Europe in terms of revenues. easyJet was founded by Stelios Haji-Ioannou, a second-generation Greek Cypriot shipping tycoon who was determined to challenge the British Airways hegemony on key intra-European routes with a no-frills service. Under the slogan “London to Scotland for the price of a pair of jeans,” its first flight flew out on November 10, 1995 with a one-way fare of £29 from London Luton to Glasgow. easyJet had fiscal 2004 revenues of €1.5 billion and before-tax profits of €121 million (refer to Exhibit 9). With only 27% of its routes having both the origin and destination outside the UK market, it was still far from developing its strategy to establish a pan-European presence, suggesting a strong growth opportunity. Spain was one of its most important markets though, accounting for almost 25% of its revenues. easyJet was in the process of converting its fleet from Boeing 737s to Airbus 319s. An order for 120 Airbus 319s was announced in 2003 with price protection on an additional 120 aircraft until 2012. easyJet had reportedly received an “exceptional deal” from Airbus, which was eager to convert one of the major low-cost carriers in Europe from Boeing. The 156-seat Airbus 319s would allow easyJet to reduce its unit costs by 10%. Still it was believed that easyJet’s breakeven load factor was as high as 80%. (Refer to Exhibit 10 for a comparison of revenues and cost structures for Ryanair and easyJet.) easyJet differentiated itself from other low-cost airlines by focusing on airports with large catchments of passengers (central airports like London Gatwick, Geneva, and Liverpool) and high frequencies of flights. It averaged 12 departures per destination each day. (Refer to Exhibit 11 for weekly departure levels from easyJet’s bases.) However, easyJet’s increasing emphasis on more central airports had resulted in higher average airport charges over time. Its advertising and PR had frequently compared easyJet with flag carriers, particularly British Airways. While Ryanair largely targeted the leisure travel market, easyJet’s value proposition was aimed at both the business travel market and the tourist trade, thereby coming under some pressure from traditional carriers who were moving quickly to compete with low-cost carriers to protect their lucrative routes frequented by business travelers. This, combined with the possibility of additional government support for some national airlines, such as Alitalia, began to erode - 9 - IMD-3-1633 I N T E R N A T I O N A L easyJet’s profitability and led to a much more volatile earnings outlook. easyJet fought back with some innovative offerings. In late 2004 the airline withdrew weight restrictions on cabin baggage. It also implemented a fully automated check-in kiosk designed to reduce check-in time and continued to focus on PR to maintain a high brand awareness in the 64 markets it served.

Charter Airlines Charter airlines, which focused on holiday passengers and package tour vacationers on short- and long-haul routes, were in the most direct competition with low-cost carriers. They had to scramble to redesign their business strategies as vacationers began taking advantage of the abundance of information and choices by tailoring their own individual packages online rather than going for standard offerings of charter companies. Charter airlines had long been a favorite of European travelers and in 2005 flew 80 million passengers. It was estimated that they would grow at just under 2% a year for the foreseeable future. TUI in Germany was one of the world’s largest tourism empires with more than 400 companies ranging from tour operators and travel agents to airlines and hotel groups, catering to 20 million passengers. It began to convert two of its charter airlines--Hagap Lloyd Express and ThomsonFly--into scheduled low-cost services. With over 50 Internet booking sites, it also began to allow customers to tailor their vacations. Other charter airlines began to offer airline seats independent of holiday packages, allowing them a hybrid operating model. Air Berlin was the most hybrid of them all, with equal sales in the charter and low-cost airfare businesses. Although a distant third in Europe after the low-cost leaders, it differentiated itself with a partnership with the Austrian airline Niki, offered a comprehensive frequent-flier program and served hot meals on longer flights. It also launched a city shuttle in 2002 to connect German airports with major European cities. For the business traveler, Air Berlin’s highest-level frequent-flier card provided plenty of frills including free seat reservations, extra luggage allowance, priority desks for faster check-in, 5% discount on purchases from the Air Berlin onboard shop, free flight rebooking and an exclusive hotline to contact the service center. All passengers could reserve a seat online at a cost of €8 with family groups getting the service for free. The airline appeared to be morphing into a traditional carrier while retaining its low-cost structure.

Traditional Network Carriers

Traditional network carriers, which had originally embraced the hub and spoke system to rationalize the efficiency of their services, had begun to decrease their costs by adopting certain elements of the low-cost business model. Travel agent commissions were reduced, e-tickets were issued with paper tickets collecting an additional convenience fee. With 70% of British Airways’ short-haul traffic in direct competition with that of low-cost carriers, it had been forced to redesign its entire strategy while slashing costs as it was struggling to break even on its European short-haul services. Its frequent service and newly lowered fares were a - 10 - IMD-3-1633 I N T E R N A T I O N A L success and a survey by Condé Nast Traveller magazine in the UK named it the favorite short-haul airline of passengers. Lufthansa developed a contrarian strategy and morphed into being a broadly based aviation group. Services such as catering, maintenance, repair and overhaul, ground handling and package holiday tour operations were seen as an opportunity to expand into and not to divest, as these allowed for an opportunity to serve other customers. Simultaneously, it also hedged its best by purchasing a 49% stake in GermanWings and just under a 30% stake in bmi. bmi, the second-biggest European short-haul operator at London Heathrow, abandoned business class on most of its flights in an effort to cut costs and stem losses. In common with other network carriers in Europe, it had been hit by a continuing fall in business class passenger volumes. Catering would still be available but be charged for separately while three fare types would offer different levels of flexibility. In 2002 it opened a low-cost subsidiary, bmibaby, which flew an all Airbus fleet to secondary airports. Aer Lingus had been turned from a small loss-making traditional flag-carrier into a model no-frills style airline with a serious long-haul division. Business class and cargo provisions for short-haul flights were removed and in October 2005 it withdrew all remaining Boeing aircraft to have an Airbus only fleet. While in several instances low-cost carriers were growing the overall market as well as taking away market share from the network carriers, paradoxically the latter were also growing their revenue premium over the low-cost airlines suggesting that they were still serving largely different customer segments. Quality conscious business travelers were often thankful for the low-cost revolution as it drove down prices on their usual flights on bmi and British Airways while still providing them access to London Heathrow. Besides, a wider range of destinations and greater frequency of flights meant that these carriers did not necessarily have to match the prices of the lowest player in the market.

The Battle for Leadership It was anticipated that low-cost carriers would continue to gather momentum and gain market share at the expense of rivals. In terms of number of passengers carried, Ryanair and easyJet were almost equal in terms of market share and together they had captured about 55% of the European low-cost market. This was probably an unstable situation and one of them was likely to become the undisputed market leader over time. O’Leary had no doubt that this would be Ryanair. easyJet’s entry into Ireland could well be a defining moment in this battle for market leadership in Europe. Its announcement indicated that it would offer twice- daily service from Cork and daily services from Shannon and Knock. All flights would be to London Gatwick, one of easyJet’s major bases. easyJet’s move had apparently been provoked by a Ryanair decision to launch services on two of easyJet’s newest routes from Stansted to Valencia and Almeria in Spain. easyJet described the moves as “deliberately provocative.” O’Leary and his team had to decide on their next moves. - 11 - IMD-3-1633 I N T E R N A T I O N A L

Exhibit 1 Ryanair Routes in 2003 and Flight Schedule in Effect in September 2004

Route served Date service Round trip No. of Route served Date service Round trip No. of commenced flights passengers commenced flights passengers scheduled per booked in scheduled per booked in day calendar day calendar year 2003 year 2003 Between Dublin and London: London (Luton) Jan-86 5 411,920 Maastricht (c) Apr-03 61,118 London (Stansted) Nov-88 12 1,200,582 Groningen (d) May-03 44,951 London (Gatwick) Nov-94 6 439,322 Between London (Stansted) and Austria: Between Dublin and UK Provincial Airports: Salzburg Apr-01 2 219,637 Liverpool May-88 3 264,180 Graz Apr-02 1 111,018 Birmingham Nov-93 2 287,917 Klagenfurt Apr-02 1 85,044 Manchester May-94 5 254,297 Linz Jan-04 1 Glasgow (Prestwick) May-94 3 254,908 Between London (Stansted) and Belgium: Cardiff May-96 1 75,178 Ostend-Bruges (c) May-03 44,468 Bournemouth May-96 1 77,289 Between London (Stansted) and Spain: Leeds/Bradford May-96 3 251,268 (Girona) Feb-03 4 368,922 Bristol May-97 3 220,467 Murcia May-03 4 152,261 Teesside Nov-97 1 72,798 Jerez May-03 2 21,303 Edinburgh Aug-01 3 306,004 Valladolid Nov-03 1 16,715 Aberdeen Apr-02 1 75,726 Barcelona (Reus) Nov-03 2 20,106 Newcastle Jan-03 2 129,806 Between Glasgow (Prestwick) and: Blackpool May-03 1 46,290 London (Stansted) Oct-95 6 802,511 East Midlands Apr-04 3 - Paris (Beauvais) Nov-98 2 150,945 Between Dublin and Continental Europe: Frankfurt (Hahn) Mar-00 1 108,547 Paris (Beauvais) May-97 3 287,775 Oslo (Torp) Apr-02 1 73,919 Brussels (Charleroi) May-97 4 295,254 Bournemouth Feb-03 1 92,316 Malaga Mar-03 3 per week 24,007 Barcelona (Girona) May-03 1 58,527 Faro Mar-03 3 per week 15,840 Gothenburg Oct-03 1 16,881 Barcelona (Girona) Apr-03 1 12,050 Shannon Dec-03 1 5,345 Reus Apr-04 1 - Milan (Bergamo) Jan-04 1 Between Shannon and Continental Europe: Between Brussels Charleroi and: Paris (Beauvais) Feb-02 1 78,948 London (Stansted) (d) Apr-01 364,599 Between London (Stansted) and Irish Provinical Airports: Toulouse (Carcassonne) Apr-01 1 122,152 Cork Oct-91 3 398,751 Prestwick Apr-01 1 91,788 Knock May-91 1 121,441 Pisa Apr-01 2 193,716 Kerry Jun-97 1 125,097 Shannon Apr-01 1 110,662 City of Derry Jul-99 2 143,574 Venice (Treviso) Apr-01 2 246,144 Shannon Apr-00 2 328,267 Liverpool (b) Jun-02 109,471 Between London (Stansted) and UK Provinical Airports: Rome (Ciampino) Jun-02 2 139,324 Newquay Apr-02 2 146,109 Barcelona (Girona) May-03 2 74,570 Blackpool May-03 2 78,964 Valladolid Jan-04 1 Between London (Stansted) and Germany: Between Frankfurt (Hahn) and: Altenburg May-03 1 55,590 Shannon May-00 1 per week 38,224 Frankfurt (Hahn) Apr-99 4 581,749 Bournemouth (b) Feb-02 78,951 Friedrichshafen Apr-02 1 108,219 Milan (Bergamo) Feb-02 2 217,795 Hamburg (Lübeck) Jun-00 4 262,877 Pescara Feb-02 1 112,801 Niederrhein Apr-03 3 179,182 Oslo (Torp) Feb-02 1 112,832 Berlin Schoenefeld May-03 2 208,025 Montpellier Mar-02 1 105,843 Baden-Karlsruhe Sep-03 2 51,588 Pisa Mar-02 2 210,801 Erfurt Jan-04 1 - Barcelona (Girona) Dec-02 2 261,475 Between London (Stansted) and Italy: Rome (Ciampino) Dec-02 2 230,020 Venice (Treviso) May-98 3 402,507 Bologna (Forli) Dec-02 1 102,794 Pisa Jun-98 4 342,223 Stockholm (Skavsta) Dec-02 2 170,286 Genoa May-99 2 160,776 Gothenburg Feb-03 1 95,981 Ancona Jul-99 1 91,696 Malmo (c) Mar-03 78,593 Turin Jul-99 2 156,810 Kerry Apr-03 1 79,737 Alghero (Sardinia) Jul-00 2 174,057 Perpignan (b) Mar-02 19,018 Brescia Jul-00 2 133,438 Treviso Oct-03 1 18,197 Trieste Apr-01 1 108,948 Alghero Oct-03 1 17,619 Pescara Apr-01 1 97,314 Barcelona (Reus) Jan-04 2 Bologna (Forli) Nov-01 2 162,389 Tampere Jan-04 1 Rome (Ciampino) Apr-02 6 656,989 Between Milan (Bergamo) and: Palermo May-03 2 103,685 London (Stansted) Apr-02 4 387,349 Bari Jan-04 1 - London (Luton) Feb-03 2 183,087 Between Pisa Airport and Germany: Paris (Beauvais) Feb-03 2 215,215 Hamburg (Lübeck) May-03 1 65,039 Brussels (Charleroi) Feb-03 2 203,693 Between London (Stansted) and France:: Barcelona (Girona) Feb-03 2 232,396 Lyon (St. Etienne) May-98 1 103,569 Hamburg (Lübeck) Feb-03 1 100,882 Toulouse (Carcassonne) Jun-98 2 147,710 Between Stockholm (Skavsta) and: Biarritz Apr-99 3 143,090 London (Stansted) Jun-97 3 305,813 Brittany (Dinard) Apr-99 1 95,485 Aarhus (c) Apr-03 58,028 Nimes Jun-00 2 110,143 Paris (Beauvais) Apr-03 2 144,687 Perpignan Jun-00 2 125,329 Hamburg Apr-03 1 131,896 Montpellier Apr-02 1 101,231 Glasgow (Prestwick) Apr-03 1 74,639 Strasbourg (a) Oct-02 138,001 Tampere (c) Apr-03 78,324 Pau Apr-03 1 56,650 Oslo (Torp) (c) Apr-03 71,771 Reims (b) Apr-03 43,150 Brussels (Charleroi) Oct-03 1 16,823 Rodez May-03 1 47,644 Rome (Ciampino) Jan-04 1 Bergerac May-03 2 71,428 Milan (Bergamo) Jan-04 1 Brest (c) May-03 50,485 Between Barcelona (Girona) and: Clermont Ferrand (b) May-03 46,384 Bournemouth Oct-03 1 15,407 Limoges May-03 2 68,794 Birmingham (d) Oct-03 14,519 La Rochelle May-03 1 46,893 Paris (Beauvais) Feb-04 2 Poitiers May-03 1 56,904 Liverpool Feb-04 1 Tours May-03 1 44,646 Baden Feb-04 1 Between London (Stansted) and Scandinavia: Turin Feb-04 1 Oslo (Torp) Jun-97 3 244,335 Treviso Feb-04 1 Aarhus Sep-99 2 149,614 Eindhoven Feb-04 2 Malmo Jul-00 2 185,237 Alghero Feb-04 1 Esbjerg Apr-01 2 83,339 Rome (Ciampino) Feb-04 2 Stockholm (Västerås) Apr-01 1 159,762 Between Birmingham and: Gothenburg Apr-01 3 208,571 Murcia (d) Oct-03 18,272 Haugesund Apr-03 2 45,380 Between Rome (Ciampino) and: Tampere Oct-03 1 19,413 Klagenfurt Jan-04 1 Between London (Stansted) and The Netherlands: Baden Jan-04 1 Eindhoven Apr-02 2 141,046 Paris (Beauvais) Jan-04 2 a) Service to Strasbourg was discontinued in September 2003 after a Strasbourg court ruled that the marketing support granted by the Strasbourg Chamber of Commerce to Ryanair in connection with the route was illegal and constituted unlawful state aid to Ryanair. Ryanair is appealing this decision; pending the outcome of this appeal, it has opened a route from Baden Karlsruhe in Germany to London (Stansted). See “Item 8. Financial Information Other Financial Information Legal Proceedings.” b) Services from Frankfurt (Hahn) to Bournemouth and Perpignan were discontinued on October 25, 2003 and March 28, 2004, respectively. c) On January 14, Ryanair discontinued services between London (Stansted) and Reims, Clermont Ferrend, Ostend and Maastricht; Frankfurt (Hahn) and Malmo; Stockholm (Skavsta) and Aarhus, Tampere and Oslo (Torp); and Brussels (Charleroi) and Liverpool. d) On April 28, 2004 Ryanair discontinued services between London (Stansted) and Brest, Groningen and Charleroi; Barcelona (Girona) and Birmingham; and Birmingham and Murcia. Management’s objective is to schedule a sufficient number of flights per day on each route to satisfy demand for Ryanair’s low-fares service. Ryanair schedules departures on its most popular routes at frequent intervals normally between approximately 6:30 a.m. and 11:00 p.m. Management regularly reviews the need for adjustments in the number of flights on all of its routes. Source: Ryanair’s 20-F, September 2004 - 12 - IMD-3-1633 I N T E R N A T I O N A L

Exhibit 2 Ryanair Operating and Financial Review

2004 2003 € million € million Operating revenues Scheduled revenues 925 732 Ancillary revenues 150 111 Total operating revenues -continuing operations 1,074 843 Operating expenses Staff costs -124 -93 Depreciation & amortization -98 -77 Fuel and oil -175 -129 Maintenance, material & repairs -43 -30 Marketing & distribution costs -16 -15 Aircraft rentals -12 Route charges -110 -68 Airport & handling charges -147 -108 Other costs -78 -60 Total operating expenses -803 -579 Operating profit before amortization of goodwill and exceptional items 271 263 Total other expenses/income -20 1 Adjusted profit on ordinary activities before tax 250 265 Tax on profit on ordinary activities -24 -25 Adjusted profit for the financial year 227 239 Total exceptional items and goodwill amortization -20 0 Profit for the financial year 207 239

For fiscal years ending March 31

Consolidated Balance Sheet

Fixed Assets Intangible assets 44 0 Tangible assets 1,577 1,352 Total fixed assets 1,621 1,352 Current assets Cash and liquid resources 1,257 1,060 Other current assets 61 54 Total current assets 1,318 1,114 Total assets 2,939 2,467 Total current liabilities 487 378 Total other liabilities (primarily long term debt) 997 847 Total liabilities 1,484 1,225 Shareholders' funds - equity 1,455 1,242 Total liabilities and shareholders' funds 2,939 2,467

Note: Figures may not add up due to rounding

Source: Company information - 13 - IMD-3-1633 I N T E R N A T I O N A L

Exhibit 3 Costs in the European airline industry per available seat kilometer (ASK) on intra-European services in 2003

14.00 140 12.82 11.63 12.00 11.55 120 10.35 10.00 9.97 10.00 100 Index: BA =100

8.00 7.18 80

6.00 5.49 60 3.82 4.00 40 Cost per available seat

kilometer (ASK) (Euro cents) 2.00 20

0.00 0 Austrian Lufthansa Air SAS Alitalia BA Iberia easyJet Ryanair France Airline

Source: The Airline Business: Rigas Doganis - 14 - IMD-3-1633 I N T E R N A T I O N A L

Exhibit 4 Ryanair’s Bases in 2004

Base Number of aircraft Number of routes London (Stansted) 36 71 Dublin 9 24 Glasgow (Prestwick) 4 17 Frankfurt (Hahn) 5 22 Milan (Bergamo) 5 16 Rome (Ciampino) 4 16 Stockholm (Skavsta) 4 11 Barcelona (Gerona) 3 19 Brussels (Charleroi) 3 11

London Stansted

Dublin Glasgow - 15 - IMD-3-1633 I N T E R N A T I O N A L

Exhibit 4 (continued)

Frankfurt Rome Milan

Stockholm Brussels Barcelona

Source: Company information - 16 - IMD-3-1633 I N T E R N A T I O N A L

Exhibit 5 Ryanair Ads - 17 - IMD-3-1633 I N T E R N A T I O N A L

Exhibit 5 (continued)

Source: Company information - 18 - IMD-3-1633 I N T E R N A T I O N A L

Exhibit 6 Market Shares on Selected London-Italy Routes in 2003

London Total Ryanair % easyJet % BA, Alitalia, to/from Passengers bmi, etc. % (thousand)

Rome** 1,881 33 9 58

Milan** 1,380 36 11 53

Venice/Treviso 851 43 20 37

Florence/Pisa 588 54 * 46

Bologna/Forli 405 36 21 43

Naples 354 46 * 54

Genoa 212 68 * 32

Verona/Brescia 209 58 * 42

Alghero 163 100 * *

Turin 151 94 * 6

Trieste 99 100 * *

Palermo 97 100 * *

Pescara 89 100 * *

Notes * = no services ** Rome = Fiumicino and Ciampino; Milan = Linate, Malpensa and Bergamo; airports in close proximity, such as Florence and Pisa, are treated as a single market.

Source: compiled by Rigas Doganis from the UK Civil Aviation Authority data - 19 - IMD-3-1633 I N T E R N A T I O N A L

Exhibit 7 Ancillary Revenues in 2004

Airline % of Revenue total revenue per passenger

Ryanair 15.50% € 7.30 easyJet 5.70% € 3.60 Southwest 2.00% € 1.40 JetBlue 3.60% € 3.00 Frontier 1.50% € 1.20 AirTran 3.60% € 2.10 Virgin Blue 4.60% € 3.50

Source: Davy

Exhibit 8 Low-Cost Penetration Rates 2003-2004 (% of capacity)

July 2003 July 2003 July 2004 July 2004 (Domestic) (Intra-Europe) (Domestic) (Intra-Europe)

Austria 0.0% 10.6% 0.0% 15.9% Belgium 0.0% 32.1% 0.0% 26.5% Finland 0.0% 1.8% 0.0% 3.3% France 1.2% 14.9% 4.0% 20.1% Germany 21.5% 13.7% 17.9% 16.3% Ireland 0.0% 39.6% 0.0% 42.2% Italy 2.8% 25.0% 13.9% 29.6% Netherlands 0.0% 18.6% 9.0% 19.4% Scandanavia 10.5% 18.2% 12.6% 20.6% Spain 0.0% 22.2% 0.1% 28.5% Switzerland 0.0% 12.6% 0.0% 17.0% UK 40.3% 36.0% 41.8% 39.4%

Simple Average 6.40% 20.40% 7.50% 23.20%

Source: Davy - 20 - IMD-3-1633 I N T E R N A T I O N A L

Exhibit 9 easyJet Highlights (2003 & 2004)

2004 2003 (€ million) (€ million)

Passengers (m) 24 20 Total Revenue 1,558 1,331 Revenue per passenger 64 66 Profit before taxes 88 74 Profit after taxes 60 48

Balance Sheet

2004 2003 (€ million) (€ million) Aircraft (incl. deposits) 464 448 Cash 728 478 Goodwill 443 471 Other assets 257 211 Total assets 1,892 1,608

Debt 171 104 Other liabilities 594 422 Shareholders' funds 1,127 1,082 Total equity and liabilities 1,892 1,608

Fiscal years ending September 30 Source: easyJet

Exhibit 10 Comparison of Ryanair and easyJet Revenues and Costs per Passenger (2004) Ryanair six months easyJet year Difference ending Sep 2004 ending Sep 2004 Operating Revenue Scheduled Revenues €44.12 €61.84 –€17.72 Ancillary Revenues €7.39 €3.71 €3.68 Total Revenues €51.51 €65.55 –€14.04

Operating Expenses Staff €4.95 €7.62 –€2.67 Aircraft Ownership and Maintenance €6.15 €13.07 –€6.92 Marketing and Distribution €0.77 €1.83 –€1.06 Route Charges €4.85 €5.27 –€0.42 Airport and Handling Charges €6.45 €18.19 –€11.74 Fuel and Oil €8.13 €8.83 –€0.70 Other €3.39 €6.31 –€2.92 Total Operating Expenses €34.68 €61.12 –€26.44

Operating Profit before non recurring items and goodwill €16.82 €4.43 €12.39 Goodwill amortization €0.08 €1.03 –€0.95 Non recurring items €1.40 €0.37 €1.03 Operating Profit after non recurring items and goodwill €15.33 €3.03 €12.30

Source: Based on company financial statements - 21 - IMD-3-1633 I N T E R N A T I O N A L

Exhibit 11 easyJet Bases in September 2004 (ranked by daily departures)

450

400

350

300

250

200

150

100

50

0 d ly t ol tle r un ck s s O ed i Berlin sgow tm t rist burgh is la tw B n r Luton a Belfa Geneva G Dor tans G Pa S Liverpool Edi Newca East Midlands

Source: easyJet