Ryanair taps UK loan plan, digs in for slow recovery

Bloomberg

Ryanair Holdings Plc boosted its liquidity with a 600 million-pound ($726 million) loan backed by the UK government and said the coronavirus crisis will reduce passenger numbers by half over the next year.
Europe’s biggest low-cost carrier is tapping Britain’s Covid Corporate Financing Facility (CCFF) as it digs in for a slow recovery that’s set to see a price war across a much diminished
air-travel market, it said in a statement on Monday. Group operations are under review and its Austrian arm could close.
While Chief Executive Officer Michael O’Leary aims to resume flying in July in a bid to rescue at least some revenue this summer, Ryanair said it expects to carry fewer than 80 million passengers in the 12 months through March 2021, compared with an original target of 154 million. Bookings are edging up, but not enough to stem losses in what’s usually the peak season.
“We’re seeing a little bit of a pickup,” Chief Financial Officer Neil Sorahan said. “There’s definitely people starting to look at kind of August September out to get some sun before the kids go back to school.” The company said it will book a loss of more than 200 million euros ($216 million) for the June quarter and a smaller hit in the three months through September.
Ryanair shares were trading 4.6% higher at 8.84 euros as of 8:10 am in Dublin, where the group is based, paring the stock’s decline this year to 40%.
The company, which counts London Stansted as its biggest base, tapped the UK’s support program after vehemently arguing against aid for its rivals, though Sorahan said the funding doesn’t compare to billions of euros destined for Deutsche Lufthansa AG and Air France-KLM. The Bank of England-administered CCFF is available to all firms with an investment grade credit rating “whether you’re a house builder, an airline or a boot manufacturer,” the CFO said. “It’s not illegal state aid.”
The funding lifts Ryanair’s cash balance to 4.1 billion euros, giving it “one of the strongest cash positions in the industry,” according to Sanford C Bernstein analyst Daniel Roeska,
who said the company could probably withstand a shutdown beyond the end of the calendar year without a need for fresh equity.
O’Leary is also slashing costs by deferring capital investments, suspending share buybacks and cutting management pay, and plans to eliminate 3,000 pilot, cabin crew and office jobs, with remaining staff taking a 20% salary cut.
With more than 99% of flights grounded the average weekly cash burn has dropped from 200 million euros in March to just over 60 million euros.