ii view: Ryanair passengers remain grounded

Shares for this budget airline outperformed many rivals in 2020, but they've started 2021 badly.

December traffic numbers

ii round-up:

Low-cost airline Ryanair (LSE:RYA) has reported another dire set of monthly passenger figures as lockdowns under the global pandemic continues to hit.

Passenger numbers in December collapsed by 83% to 1.9 million compared to the 11.2 million seen prior to the virus outbreak in December 2019. The Irish airline ran just over a fifth of its normal year-end flights schedule, with an average of 73% of the seats filled.

Ryanair shares fell by more than 2% in afternoon UK trading, with the update coming a day after the UK went into a third lockdown. The shares are up over 70% since March pandemic lows and were up 12% during 2020. Shares for rival easyJet (LSE:EZJ) are up by just over 40% since March, while British Airways owner IAG (LSE:IAG) is up just over 10%, having fallen by 61% during 2020. 

Ryanair passenger numbers on a rolling annual basis fell 66% to 52.1 million having dropped by 80% over the first half to the end of September. The budget airline previously reported a first-half loss of €197 million, although liquidity to help see it through the pandemic rose from €3.9 billion in late June to €4.5 billion as of late September. 

At the end of December, Ryanair moved to restrict the voting rights of British shareholders in order to ensure it remains majority European Union owned so as to retain full licensing and flight rights within the trading bloc. The move came as the UK exited the EU. 

December passenger numbers from rival Wizz Air (LSE:WIZZ) also fell 80% year-over-year to just over 650,000. Its shares have more than doubled since late March. 

ii view:

Dramatically reduced passenger numbers because of the pandemic have left airlines in a battle for survival. Cash is now king. Many operators, including Ryanair, have moved to raise cash. Broker Morgan Stanley previously estimated that its cash of €4.5 billion as at the end of September should be enough to see it through 18 months of grounded aircraft. 

For investors, one of the strongest balance sheets in the industry offers comfort. The continued delivery of new aircraft also serves to underline management’s confidence in its longer-term future. And the rollout of vaccines during 2021 now offers firm hope. But the degree of uncertainty caused by the pandemic is still sizeable, especially with the UK now retightening Covid related restrictions. In all, while Ryanair’s chances of surviving and prospering post the pandemic look favourable, any investment is still arguably only for higher risk investors.  

Positives: 

• Cash liquidity of €4.5 billion as of 30 September
• Almost 80% of its fleet is unencumbered

Negatives:

• Highly uncertain outlook due to Covid-19
• Considers EU assistance to rivals unfair

The average rating of stock market analysts:

Buy