Ryanair has reported a third quarter net loss of €96million, compared to a Q3 loss of €321million a year ago.
The airline said that there was a strong traffic rebound in Q2 (Sept. quarter) following the successful rollout of the EU Digital Covid Certificates (DCC) in July, and the relaxation of EU travel restrictions. And although Q3 got off to a good start with strong bookings for the Oct. mid-term break, the Omicron variant had impacted travel.
“Ryanair’s load active/yield passive recovery strategy saw Oct. traffic rise to 11.3m (84% load factor). Our Nov. load factor improved to 86% (10.2m guests), albeit at lower fares. The sudden emergence of the Omicron variant (late Nov.), and the media hysteria it generated in Dec., forced many European Govts. to reimpose travel restrictions in the run-up to Christmas, which significantly weakened peak (close-in) Christmas & New Year bookings and fares. As a result, Dec. traffic slowed to just 9.5m (with a lower 81% load factor), well behind the expected target of 11m guests. Jan. capacity was cut by 33% on 22 Dec. which lowered the Jan. traffic target from 10m to between 6m-7m customers.”
Ryanair expressed the hope that the rollout of booster vaccines across Europe, and the growing evidence that Omicron is less virulent than other variants, that governments will remove travel restrictions and “restore consumer confidence in inter EU air travel well in advance of Easter and peak Summer 22”.
Ryanair’s Q3 scheduled revenues increased 345% to €0.79bn as traffic recovered strongly from 8.1m to 31.1m guests (at an 84% load factor). Ancillary revenue delivered a solid performance, generating €22 per passenger (+8%), as guests choose priority boarding and reserved seating. Total revenues increased by over 330% to €1.47bn in Q3.
While sectors more than doubled (+220%) and traffic rose 286%, operating costs increased by just 136% to €1.59bn, driven primarily by lower variable costs such as airport & handling, route charges and improved fuel burn. Ryanair has almost fully hedged its fuel requirements for Q4 FY22 (over 60% jet swaps at $580 per metric tonne, with caps hedging the balance at $750). H1 FY23 is 80% hedged (60% jet swaps at $620 and 20% caps at $715) and H2 FY23 is 70% hedged at $640. Carbon credits are fully hedged for FY22 and 80% hedged for FY23 at €24 and €45 per EUA respectively (well below the current spot price of c.€85). “Ryanair’s very strong and sensible hedging policy will deliver significant savings for all our customers and shareholders at a time when many airline competitors have unwisely reduced or abandoned sensible hedging strategies,” said the airline.
Ryanair has €3bn in cash (at 31 Dec.) and 90% of its 737 fleet remains unencumbered. In October 2021, the Group repaid its UK CCFF £600m loan five months early. During the Covid crisis, net debt has risen to €2.1bn, which the group states it intends to reduce to zero “as possible over the next two years”.
Ryanair maintains the outlook for the remainder of FY22 is “hugely uncertain”, especially since its January 2022 capacity was cut by 33% due to the Omicron disruption.
Ryanair’s full year traffic forecast remains unchanged at ‘just under’ 100m passengers, but due to Covid uncertainty the FY22 net loss guidance remains within a wider than normal range of €250m to €450m. “This outturn is hugely sensitive to any further positive or negative Covid news flow and so we would caution all shareholders to expect further Covid disruptions before we here in Europe and the rest of the world can finally declare that the Covid crisis is behind us.”