Ryanair reported a €196.5 million ($228.59m) loss in the first half of the fiscal year as its chief executive Michael O’Leary said winter air traffic in Europe could fall to 25 per cent of normal levels.
The Irish carrier’s loss in the six months ended September 30 followed a profit of €1.15bn in the same period a year earlier, as Covid-19 restrictions pushed passenger numbers down 80 per cent in the first half of this fiscal year.
The low-cost airline now expects losses to deepen further in the fiscal second half, as the winter brings fresh lockdowns across Europe amid rising coronavirus cases and air travel slows.
"I think the reductions [in air travel] will be greater. Probably a 60, 70, maybe 75 per cent reduction," Mr O’Leary said in a pre-recorded video presentation following the release of its financial results.
Mr O’Leary said the airline would offer 40 per cent of its usual capacity this winter and said the figure would drop further depending on government restrictions across Europe. Prior to Covid-19, the company said it was on track for 150 million passengers across the full financial year, in line with the 149 million that flew with the carrier last year.
“Hopefully next summer we expect to operate over 2,000 routes but … our best guess at the moment is 38 million passengers but if there are continuing lockdowns and travel restrictions across Europe this winter, that figure may have to be lowered as well,” he said.
Covid-19 grounded the group's entire fleet from mid-March, as EU governments imposed flight or travel bans to help curb the spread of coronavirus. While Ryanair helped to repatriate customers and operate rescue flights during the crisis, it did not resume passenger flights until July 1 when it operated up to 60 per cent of its capacity in the second fiscal quarter,
The airline declined to forecast profit for the full financial year ending March 31 but said it expected a second-half loss greater than the first.
In a separate Bloomberg TV interview on Monday, Mr O’Leary said “lockdowns are a failure”.
“They should be avoided where possible. They’re only useful if you use the time to get your testing and tracing system in place.”
However, he said November may be the best month for country-wide lockdowns, as it falls between the half-term holidays of October and the festive season. Forward bookings for the month “were already terrible” he said.
Mr O’Leary said the company’s strong balance sheet will see the airline through “this unprecedented crisis” with this financial strength combined with its reducing cost base making the airline the “long-term winner” in the aviation industry.
The company said it had €4.5bn in cash at the end of September along with aircraft worth about €7bn. Its cash balance was further supported by a €250bn supplier reimbursement from Boeing in the July to September quarter.
Ryanair has yet to finalise terms with Boeing over the compensation for 18 months of delays linked to deliveries of the grounded 737 Max jet. It said it hoped to receive about 30 Max jets ahead of next year's peak summer season.
“Ryanair’s message in its half-year update was loud and clear: things are going to get worse for the industry – and itself – before it gets better," said Adam Vettese, analyst at multi-asset investment platform eToro.
“Airlines have at least two more years of pain and struggle ahead of them and, not all of them will survive. Ryanair, on the other hand, has a very strong balance sheet and has €4.5bn sitting in reserve to see it through the crisis. It is also likely that the budget, short-haul end of the market will recover quicker, meaning carriers such as Ryanair will probably outperform their long-haul rivals throughout this crisis and beyond.”
Ryanair has only posted one annual loss in the past 30 years, in 2009 during the global financial crisis. It still managed to make a small profit in the summer of that year.