Ryanair Holdings today (1 Nov.) reported a H1 loss of €48m, compared to a PY H1 loss of €411m. Highlights of this 6-month period include:

 

• H1 traffic rebounded by 128% from 17.1m to 39.1m.
• 1^st B737-8200 “Gamechanger” delivered in June (65+ for peak S.22).
• Customer Advisory Panel 1^st met in Sept.
• €1.2bn 5-year unsecured bond issued in May at record low 0.875% coupon.
• Strong Sept. cash balance of €4.24bn (up from €3.15bn at 31 Mar.).
• Net debt fell from €2.28bn at 31 Mar. to €1.50bn at 30 Sept. (CCFF £600m loan repaid in Oct).
• 560 new routes & 14 new bases announced for W.21/S.22.
• 5-year growth accelerates to 225m p.a. by FY26 (prev. 200m p.a.).

 

H1 – Group	30 Sept. 2020	30 Sept. 2021	Change
Customers	17.1m	39.1m	+128%
Load Factor	72%	79%	+7pts
Revenue	€1.18bn	€2.15bn	+83%
Op. Costs	€1.35bn	€2.20bn	+63%
Net Loss	(€411m)	(€48m)	n/m

 

Ryanair’s Michael O’Leary, said:

 

OUR ENVIRONMENT:

Ryanair has shown we can grow traffic while reducing our impact on the environment.  Every passenger that switches to Ryanair from legacy airlines reduces their CO₂ emissions by up to 50% per flight.  Over the next 5-years our traffic will grow by 50% to 225m p.a.  This will be achieved on a fleet of new B737 “Gamechanger” aircraft, which offer 4% more seats, but consume 16% less fuel and cuts noise emissions by 40%, which helps to lower each passenger’s CO₂ and noise footprint over the next decade.

 

We continue to work with the EU, our fuel suppliers and aircraft manufacturers to incentivise sustainable aviation fuel (SAF) use.  We are working with A4E and the EU Commission to accelerate reform of the Single European Sky, to minimise ATC delays which will lower fuel consumption and CO₂ emissions.  Last year Ryanair received an industry leading “B-” climate protection rating from CDP[1], and we are committed to improving this to an “A” rating over the next 2 years.  In April, we established a Sustainable Aviation Research Centre partnership with Trinity College Dublin to accelerate the development of SAFs.  Ryanair’s goal is to power 12.5% of our flights with SAF by 2030.  These initiatives will help Ryanair achieve our target of cutting CO₂ per passenger/km by 10% to just 60 grams by 2030.

 

Our growth plans over the next 5 years will create 5,000 new jobs for pilots, cabin crew and engineers.  Ryanair recently invested €50m in an Aviation Skills Training Centre in Dublin and we plan to invest over €100m in 2 more, high skills, training centres in possibly Spain and Poland during this period.

 

In Sept. our Customer Advisory Panel met for the first time in Dublin. This Panel will meet again in the spring and their advice and input will shape Ryanair’s customer improvements for 2022, reinforcing our commitment to delivering the lowest fares, the most on-time flights and a great customer service as the Group stimulates very strong post Covid-19 growth. We have already implemented a number of their suggestions, including a Day of Travel feature in the Ryanair App to assist customers through every step of their Ryanair journey.

 

COVID-19 – RAPID RECOVERY & GROWTH:

Following a very badly disrupted Q1, which saw most Easter flights cancelled and a slower than expected easing of EU Govt. travel restrictions in May and June, traffic rebounded in Q2 with the successful rollout of the EU Digital Covid Certificates (“DCC”) in July.  H1 bookings were mostly “close-in” and required price stimulation, particularly to/from the UK where consumer confidence was undermined (until early Oct.), by the UK Govt.’s confusing and inconsistent traffic light system.  In recent weeks, we have seen a surge in bookings for the Oct. mid-term and Christmas breaks and we expect this peak buoyancy to continue into Easter and S.22.  We will continue our load active/yield passive recovery strategy as we rebuild load factors (consistently above 80% in Q2) and, in time, yields over the second half of FY22.

 

The Covid-19 crisis accelerated the collapse of many European airlines including Flybe, Norwegian, Germanwings, Level, Stobart and led to substantial capacity cuts at many others including Alitalia, TAP, LOT, SAS, etc.  The tsunami of State Aid from EU Govts. to their insolvent flag carriers (Alitalia, Air France/KLM, Iberia, LOT, Lufthansa, SAS, TAP and others) will distort EU competition and prop up high cost, inefficient, flag carriers for many years.  Ryanair was one of the very few airlines to use the Covid crisis to place significant aircraft orders, to expand our airport partnerships and to secure lower operating costs so that we can pass on even lower fares, post Covid, to our customers.  Together with our airport partners, we are leading Europe’s traffic recovery and we plan to deliver accelerated growth in both traffic and jobs over the next 5 years.

 

During H1 our Route Development team continued their work with airport partners across Europe, and have negotiated lower airport costs, recovery incentives and the extension of many low-cost airport growth deals.  In addition to its new base deals (Agadir, Billund, Chania, Corfu, Rhodes, Riga, Stockholm, Venice Treviso, Turin, Zadar & Zagreb), over 560 new route announcements and long-term extensions of low-cost growth deals in Stansted (to 2028), Bergamo (to 2028), Manchester (to 2028), East Midlands (to 2028), Charleroi (to 2030), the Group has doubled its capacity in Rome (Fiumicino), Lisbon, Vienna and will launch new bases in Cork, Newcastle and Venice (Marco-Polo) for S.22.

 

In June Ryanair took delivery of our first B737-8200 “Gamechanger” aircraft (from our 210 orderbook) and we expect to have over 65 in the Group fleet by S.22.  These Gamechangers will, we believe, further widen the cost gap between Ryanair and all other European airlines over the next decade.  While load factors have yet to recover to pre-Covid levels, the performance of the Gamechangers has exceeded our expectations this summer.  Operational reliability, fuel consumption and CO₂ emissions have, so far, exceeded guidelines with very positive passenger and crew feedback to these new, more fuel efficient, quieter aircraft.  Based on our 210 order book and available fleet capacity, we plan to accelerate our traffic growth to 225m p.a. by FY26.

 

H1 FY22 BUSINESS REVIEW:

 

Revenue & Costs

H1 scheduled revenues increased 61% to €1.27bn as traffic jumped 128% from 17.1m to 39.1m (at a 79% load factor). The Covid disruption of Easter traffic, the delayed relaxation of EU travel restrictions into May/June, and the uncertainty caused by the UK’s confusing traffic light system this summer and the close-in nature of bookings required price stimulation – resulting in average fares of just €33 (down 30% on H1 last year).  Ancillary revenue continued its strong performance, generating over €22.50 per passenger, as guests choose priority boarding and reserved seating.  Total revenue increased by over 80% to €2.15bn in H1.

 

While sectors and traffic more than doubled, operating costs increased by just 63% to €2.20bn, driven primarily by lower variable costs such as aircraft, airport & handling, route charges and fuel.  Lower costs, coupled with rising load factors, led to a marked reduction in cost per passenger (ex-fuel) to €38.  We expect to see further improvements in costs as our new, lower cost, more fuel-efficient aircraft deliver and EU countries (such as Ireland, Spain & Italy) rollout Covid recovery incentive schemes.

 

Our fuel requirements are 80% hedged for Q4 FY22 (50% jet swaps at $580, with the balance hedged with caps at $750 per met. tonne).  H1 FY23 is 80% hedged (60% jet swaps at $620 and 20% caps at $715) and H2 FY23 is 60% hedged at $625.  Carbon credits are fully hedged for FY22 and 70% hedged for FY23 at €24 and €40 per EUA respectively.

 

Balance Sheet & Liquidity

Ryanair’s balance sheet is one of the strongest in the industry with a BBB credit rating (S&P and Fitch), €4.24bn cash and almost 90% of our B737 fleet unencumbered. In May Ryanair issued a €1.2bn 5-year, unsecured, bond at a record low coupon of just 0.875%.  In June the Group repaid its (2014) maturing €850m 1.875% bond and last week the Group repaid its UK CCFF £600m loan 5 months early.  Strong operating cashflows and supplier reimbursements, offset by capex, drove a €0.8bn reduction in net debt to €1.5bn at 30 Sept. (31 March: €2.3bn).  During Q2 the Group agreed to sell its 10 oldest B737NGs.  2 of these aircraft were delivered in Sept. and the remainder will exit the fleet before the financial year end.  The strength of Ryanair’s balance sheet ensures that the Group can capitalise rapidly on the many growth opportunities that exist in Europe in the post Covid-19 recovery.

 

POTENTIAL LSE DELISTING:

Trading on the London Stock Exchange (“LSE”) as a percentage of overall trading volume in Ryanair’s ordinary shares has reduced materially during 2021. The migration away from the LSE is consistent with a general trend for trading in shares of EU corporates post Brexit and is, potentially, more acute for Ryanair as a result of the long-standing prohibition on non-EU citizens purchasing Ryanair’s ordinary shares being extended to UK nationals following Brexit.  The Board of Ryanair is now considering the merits of retaining the Standard listing on the LSE. Ryanair has a primary listing on the regulated market of Euronext Dublin, which offers shareholders the highest standard of protection, including compliance with the UK Corporate Governance Code, and its ADRs are listed on NASDAQ.

 

OUTLOOK:

The outlook for pricing and yields for the winter of FY22 will be challenging.  With the booking curve remaining very close-in, traffic recovery will require continuing price stimulation.  This, coupled with rising costs for the small unhedged balance of our fuel needs, means that visibility for the remainder of FY22 is very limited.  It is therefore difficult to provide meaningful FY22 guidance.  We believe that FY22 traffic has improved to just over 100m and (subject to winter fares) expect to record an FY22 loss of between €100m to €200m.  This outturn will be crucially dependent on the continued rollout of vaccines and no adverse Covid-19 developments.

 

ACCELERATED POST-COVID GROWTH:

As noted above, subject to no adverse Covid developments, and high vaccination levels remaining across Europe, Ryanair will take delivery of 210 Gamechanger aircraft over the next 5 years which allows Ryanair uniquely to accelerate growth into the post Covid-19 recovery. These aircraft deliver industry lowest costs, lower emissions, and will enable Ryanair to exploit growth opportunities at primary and secondary airports all over Europe – particularly where legacy carriers have failed or cut back their fleet as a result of Covid-19 and State Aid.  As announced at our AGM in Sept., Ryanair Group now expect to deliver accelerated growth over the next 5 years, with the growth forecast raised from 33% to 50%.  As a result, Ryanair’s pre-Covid traffic of 149m is expected to grow to over 225m guests p.a. by March 2026 (previously targeted at 200m p.a.).”

 

[1] CDP – Carbon Disclosure Project is an independent, non-profit, global environmental reporting organisation.