Ryanair expects a record loss of EUR 200 million in its first quarter of Fiscal Year 2021, which started in April. Q2 will be a little bit better as flying resumes from July but total passenger number in FY21 will be a maximum of 80 million compared to the 154 million targeted. The Irish low-cost announced its results on May 18.
Before Covid hit and hurt, Ryanair had a solid year. It has ended FY20 with a profit before tax of EUR 1.002 billion compared to 885 million the previous year. The operating profit was EUR 1.127 billion, up from 1.016 billion. Revenues increased to EUR 8.494 billion from 7.697 billion, of which 2.9 billion in ancillary revenues as more passengers opted for priority boarding.
Expenditures were higher thanks to higher fuel costs (plus 14 percent to EUR 2.8 billion), higher staff costs as aircraft were grounded, and higher maintenance costs for the 737NG-fleet. These were offset by EUR 261 million in lower route charges and better on-time performance. Ineffective fuel hedging due to Covid-groundings has cost the group EUR 353 million for FY21 already but Ryanair expects favorable currency hedges for fuel and reduced Capex will make up for this.
From April 2019 to April 2020, the airline group that includes Ryanair, Buzz Air, LaudaMotion, and Malta Air flew 148.6 million passengers versus 143.1 million in the same period in 2018/19. Keep in mind that from January to January the group flew 152.4 million passengers, which shows the impact of Covid-measures and a reduced appetite for flying has in March. It lost 5.2 million passengers in Q4.
LaudaMotion facing an existential crisis
Ryanair DAC, Buzz Air, and Malta Air performed satisfactory, showing strong growth in their respective markets. Underperforming is Vienna-based LaudaMotion, which had to compete hard with Lufthansa-subsidiary Austrian and other low-cost airlines like Wizz, easyjet, and LEVEL. Traffic was up to 6.4 million passengers, but the sums haven’t added up to make a profit. According to Michael O’Leary, it is facing an ‘existential crisis.’
With Austrian negotiating EUR 800 million in state aid, O’Leary and LaudaMotion CEO David O’Brien are working on a restructuring plan. However, the play hardball. Unless staff and unions (which include many Austrian Airlines-members) agree to drastic cost reductions on May 20 (by coincidence the first anniversary of Niki Lauda’s death…), LaudaMotion will close its base in Vienna to be taken over by parent Ryanair. Already ended are leases on eight Airbus A320ceo’s.
As previously announced, Ryanair plans to cut 3.000 cockpit cabin crew jobs plus 250 staff jobs out of 19.000 to reduces costs. The group is in talks with unions to secure a 20 percent pay-cut, which would soften job cuts. Cash burn has been reduced from EUR 200 million per week in March to 60 million in May. All non-essential capital expenditures have been slashed and Ryanair’s share buyback program put on hold. The airline is reviewing which bases are to be closed this FY21.
First MAX hopefully arriving in October
O’Leary is still eagerly awaiting the first MAX 200s in his fleet between October and March but is negotiating with Boeing to defer deliveries of some aircraft for the next two years. Also discussed are compensation for the grounding but also an additional order for the MAX 10 but this all depend on how the MAX performs after entry into service.
Ryanair has EUR 4.1 billion in liquidity available, including GBP 600 million received under the UK’s CCFF state aid program. If needed, it could sell 330 737NGs worth EUR 7 billion in unencumbered assets to bolster its cash position plus another 300 million in assets.
While operating at just one percent capacity until June, Ryanair expects to resume operations from July and hit 40 percent in July to 60 percent in August. The success depends on countries lifting travel restrictions. O’Leary is most critical of the UK’s plan to place inbound travelers in a two-week quarantine, calling the measure ‘absurd’. At the same time, Ryanair is in talks with a number of airports to either increase the number of slots or open up new flights.