The airline looks to cut costs as it predicts a €200m loss in first quarter
Ryanair to cut staff numbers by 3,000
- Ryanair beat market expectations by reporting a 14% rise in full-year pre-tax profit to €1.08bn on the back of a 10% increase in sales to €8.5bn
- However, the company warned it expects passenger numbers to drop from 154m to just 80m in the current financial year due to the coronavirus outbreak
- The shares rose 5% in early trading as the market greeted the better than expected figures but that must be seen in the context of the big drop experienced by the company since February, in common with most of its peers
Ryanair announced this morning that it intends to reduce its staff numbers by around 3,000 as it continues to criticize the UK government’s plans for a 14-day quarantine and plans to restart a significant number of flights from July. The company underlined the degree of uncertainty it faces by confirming it could not provide any full-year guidance for the current financial year although it does expect to record a loss of more than €200m in the first quarter.
The company is right to expect competition to be reduced in the wake of the crisis and there are other positive factors for investors. The substantial €4bn in cash on the balance sheet and the reduction in costs are reassuring, but the big unknowns for Ryanair, and its peers, are how long the restrictions will last and what the level of demand will be when they are finally removed.
There’s no doubt airlines around the world are experiencing one of the most difficult periods in their history. That’s clearly reflected in the sharp drop in share prices seen across the sector with some companies seeing as much as an 85% collapse over the past three months.
With most aircraft still grounded many airlines are now firmly in survival mode. That includes placing staff on furlough, deferring new aircraft orders and increasing financial resources as much as possible. The one glimmer of hope for them is that when the restrictions are finally removed, there is a good chance that those airlines which survive will face much less competition and we may see more consolidation as stronger airlines look to increase their market share through acquisitions. Another positive is that some airlines, including Ryanair and Wizz Air, are already talking about resuming some flights in a limited way with all the necessary precautions in place.
Flights will resume in due course but the recovery is likely to be very gradual. The combination of the huge cost of buying and maintaining aircraft alongside the great uncertainty about future passenger numbers could make for a bumpy ride for investors.
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