Ryanair braces for deepening losses from new lockdowns

Ryanair Holdings Plc said losses are set to worsen this winter as a new wave of coronavirus lockdowns frustrates attempts to bring back flights at Europe’s biggest discount carrier.

The shortfall in the fiscal second half, which began on Oct. 1, is set to exceed the 197 million-euro ($229 million) loss of the first six months, Ryanair said in a statement Monday. By comparison, the Irish firm recorded a profit of 1.15 billion euros in summer 2019.

Airlines across Europe have been paring back already reduced schedules as a resurgence in the virus prompts a return of restrictions. Ryanair will offer 40% of its usual capacity this winter and said the figure could drop further, with revised full-year passenger targets also under pressure. Chief Executive Officer Michael O’Leary said the fresh curbs reflect a deficit of government policy.

“Lockdowns are a failure,” he said on Bloomberg Television. “They should be avoided wherever possible. They’re only useful if you use the time to get your testing and tracing system in place.”

At the same time, November may be the best month to be locked down, O’Leary said, falling between October’s school holidays and the festive season. Forward bookings for the month “were already terrible,” so it’s not clear how much further impact there’ll be.

Shares of Ryanair traded 1.1% lower at 11.7 euros as of 8:04 a.m. in Dublin, extending their decline this year to 20%.

The Stoxx 600 Travel & Leisure Index, which includes airlines and hospitality companies, has slumped 33% this year, making it among the worst performing sectors.

Ryanair is hoping for a Covid-19 vaccine to be announced “this side of Christmas,” driving a rebound in travel next year, according to O’Leary

The carrier is meanwhile extending efforts to cut costs, beyond temporary pay reductions for staff that it’s already agreed, and can’t rule out further job losses, Chief Financial Officer Neil Sorahan said separately.

Ryanair has about 4.5 billion euros in cash, and 80% of its fleet is unencumbered, the carrier said in the statement.

“There are no reasons to be concerned on liquidity,” Daniel Roeska, an analyst at Sanford C. Bernstein said in a note, though the current 12-month passenger projection of 38 million appears “too optimistic.”

Sorahan said that Ryanair intends to operate its previously announced schedule in the U.K., the company’s biggest market, despite a lockdown announced at the weekend that will see leisure travel effectively ruled out from Thursday.

Ryanair says it sees a release in pent-up demand whenever restrictions are eased, including a recent bookings surge when the U.K. added the Canary Islands to an approved-travel list, flights people may not now be able to take.

Ryanair said it expects to receive its first Boeing Co. 737 Max jets early in the new year after the model grounded in the wake of two fatal crashes returns to service in the fourth quarter. The carrier, which has 135 orders for the high-density Max-200 variant, expects to have 30 of the planes by next summer.

O’Leary said discussions are ongoing with Boeing for a follow on order for new planes.