ii view: Ryanair wants to break even this year

A record loss, but passenger numbers are expected to rise over coming months. Buy, sell or hold?

Full-year results to 31 March

• Customers down 81% to 27.5 million
• Revenue down 81% to €1.64 billion
• Operating costs down 66% to €2.5 billion
• Loss of €815 billion compared to profit €1 billion last year
• Cash of €3.15 billion held as of 31 March

Guidance:

• Expects to about breakeven over the current financial year to March 2022

ii round-up:

Low-cost airline Ryanair (LSE:RYA) today reported a marginally better than expected full-year loss of €815 million as the Covid-19 pandemic cut passenger numbers to 27.5 million from 149 million the year before. 

The record loss beat analyst estimates of nearer to €835 million, with management cautiously predicting a rebound to around 80 million passengers. Bosses also expect a near breakeven outcome over the current year to the end of March 2022 given the ongoing rollout of vaccines across Europe. 

Ryanair shares rose marginally in UK trading to leave the share price at double its pandemic low back in March 2020. Shares for rival easyJet (LSE:EZJ) are up by more than 90% over the same time, while shares for British Airways owner International Consolidated Airlines (LSE:IAG) are up by just over 45%.

Ryanair expects first-quarter traffic to the end of June to be heavily curtailed at between 5 million and 6 million passengers. Looking beyond the pandemic and given expected vaccinations, the low-cost carrier expects to have a much-improved cost base and a strong balance sheet. 

Ongoing deliveries of the Boeing B737 are expected to reduce fleet costs for the next decade. The plane fives 4% more seats while reducing fuel costs. Ryanair previously raised its order to 210 aircraft from a prior 135.  

Cash liquidity at the airline came in at €3.15 billion, down from €3.5 billion at the end of 2020, although still giving it seven months of liquidity before reaching its minimum cash level of €1 billion according to broker Morgan Stanley. Ryanair management still sees no reason to look to raise additional capital at the current time. Over 85% of its B737 plane fleet is unencumbered.

Operating costs over the year to the end of March 2021 were cut by 66% to €2.5 billion. Over the year it raised €1.95 billion in new finance and currently has a BBB credit rating with agencies S&P and Fitch. 

ii view:

Ryanair Holdings is the parent company for Buzz, Lauda, Malta Air and Ryanair itself. It usually connects over 200 destinations in 40 countries via a fleet of over 470 aircraft. The additional 210 Boeing craft should enable to reach 200 million passengers per annum by 2025.

For investors, any recovery from the pandemic for both Ryanair and the broader industry is very much dependent on government decisions and the success of vaccines. Factors outside of management’s control. Cash and the ability to raise new cash if required have become central. 

But Ryanair’s ability to reduce costs and conserve cash is again underlined in these latest results. Management points to one of the strongest balance sheets in the industry. The latest lifting of Covid restrictions in the UK, an improving rollout of vaccines across Europe and a highlighted improvement in bookings since early April, all offer hope. In all, there is clearly still room for significant caution, but the Irish carrier’s strong management and moves to further raise efficiency via new Boeing planes leave it well positioned for when business picks up again. 

Positives: 

• Cash liquidity of €3.15 billion as of 31 March
• Costs down by 66% over the year

Negatives:

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

The average rating of stock market analysts:

Buy