Ryanair Announces Winter Flights Reduction; Industry Remain Apprehensive of Demand Recovery

  • October 16, 2020 10:01 AM BST
  • Team Kalkine
Ryanair Announces Winter Flights Reduction; Industry Remain Apprehensive of Demand Recovery

Summary

  • Ryanair, in its winter schedule (Nov - Mar) has taken its capacity down from 60 per cent to 40 per cent of the prior year
  • Ryanair plans to operate with a 70 per cent load factors to break even and minimise cash burn due to weakening expected in winter bookings
  • European airline expects full year (FY21) traffic to fall to circa 38 million travellers

In the light of an increasing number of coronavirus infections, the air travel to and from much of Central Europe, the UK, Ireland, Austria, Belgium and Portugal have been heavily curtailed, and the EU government has imposed stringent flight restrictions, which are expected to weigh heavily on the deeply battered aviation sector. The restrictions imposed by the government are likely to impact forward bookings in November & December (upcoming festive season).

Europe's largest airline, Ryanair Holdings Plc (LON: RYA) has recently released its revised schedule for the winter. Ryanair plans to operate with a 70 per cent load factors in order to break even and minimise cash burn due to weakening expected in winter bookings. The airline in its winter schedule (Nov - Mar) has taken its capacity down from 60 per cent to 40 per cent of the prior year, according to its recent announcement. Ryanair has announced further base aircraft cuts in Belgium, Germany, Spain, Portugal, and Vienna that were in addition to the winter closure of bases in Cork, Shannon, and Toulouse. Ryanair will operate with reduced frequencies and expects to service up to 65 per cent of its winter route network.

Also read: Global Aviation Industry Likely to Have A $314 Billion Of Coronavirus Impact

The European airline expects full year (FY21) traffic to fall to circa 38 million travellers and has, therefore, reduced its winter capacity and load factors substantially. However, this guidance may be further revised if lockdown is extended or travel restrictions are imposed by the EU government. These cutbacks can be attributed to air travel mismanagement by the government and might lead to further job losses. A lot of workforce has undergone pay cuts to protect their jobs. Notably, the furlough scheme is to be phased out this month.

In September, Ryanair operated with a 71 per cent load factor and witnessed a plunge of 64 per cent in traffic down to 5.1 million guests due to the travel restrictions induced by the coronavirus pandemic. Similarly, in August, Ryanair operated with a 73 per cent load factor and witnessed a plunge of 53 per cent in traffic, down to 7 million guests.

In August, Ryanair announced cutbacks (Flight capacity) of 20 per cent for the months of September & October due to weakening of forward bookings in some EU countries as Covid-19 case rates rose recently. Notably, these cutbacks essentially meant frequency reductions rather than route closures. Furthermore, adding nations to the quarantine list could deter the confidence of travellers that could eventually impact the airline business.  

(Source: Company’s filings, LSE)

 

During the first quarter of 2021, the traffic dropped by 99 per cent to just 0.5 million, which drove the revenue down by 95 per cent to €125 million. In case of a no-deal Brexit, challenging trading environment is expected for the European airline. The company expects to have a trade deal in place that allows free movement of people between the UK and Europe. Notably, being a European airline, Ryanair is more immune to Brexit in comparison to UK based airlines.

The trading environment is expected to remain challenging for the remaining part of FY21. The nations are currently fearing a second wave of the pandemic, and it is still difficult to assess the impact of the coronavirus pandemic and predict as to how long will it persist.

Another European airline, Wizz Air Plc (LON: WIZZ) is also anticipating a subsequent drop in demand for travel during the winter period in light of ongoing travel restrictions as a result of the Covid-19 pandemic.

Wizz Air is likely to operate 50 per cent of its capacity compared to last year during October. The fastest growing European airline anticipates not to operate at a higher level of capacity during winter than its projection for October because of continuous rise in the level of restrictions due to the increase in coronavirus cases.

Also read: Covid -19 Battered UK Aviation Sector Still Has the Hope Of Government Support

Low-cost European airline, EasyJet Plc (LON: EZJ) anticipates flying 25 per cent of its planned capacity during the first quarter of 2021. EasyJet flew only 38 per cent of its planned capacity with a load factor of 76.3 per cent during the fourth quarter of 2020.

Most of the airlines returned to skies during August; however, customer demand was materially affected by changes in government travel guidance and quarantine rules during September and visibility for customers remains limited.

The coronavirus pandemic has posed the most severe threat in the history of the aviation sector. The load factor and capacity are likely to be less than normal levels due to a lesser number of travellers and stringent travel restrictions imposed by the government. The battered sector has witnessed a lot of job losses and needs a special package from the government to aid the recovery process.

 

 

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