Ryanair blasted Boeing for delaying the delivery of the first of 210 737 Max 8 200 aircraft, despite regulators certifying the high-density version of the jet in early April. The European low-cost-carrier now says it has no confidence that Boeing will deliver any of the aircraft in time for the expected surge in summer demand.
“We are quite upset with Boeing that eight weeks later we’re still waiting for the first delivery,” Ryanair Group CEO Michael O’Leary said during the company’s fiscal-year 2021 earnings call. “We’re being told by [Boeing] will be in late May, but I’m not sure we necessarily believe that.” Both the FAA and the European Union Aviation Safety Agency approved the aircraft for commercial service in early April.
Ryanair had hoped to have 40 of the new aircraft in its fleet in time for summer. “The management in Seattle have continuously missed promised deadlines for the first delivery,” O’Leary said. “But as the management team in Seattle continues to mismanage the process, I think there’s a real risk now that we may not see any of these aircraft in advance of summer 2021.” Instead, Ryanair hopes to have 60 of the -8 200s in its fleet by next summer, when it expects demand to be closer to 2019 levels.
Ryanair said it will resume talks with Boeing for the 737-10 after delivery issues with the -8 200 have been resolved, but the carrier says it could add the -10 to its fleet later this decade. Boeing has assured Ryanair that if it does, it will be “at the front of the queue,” O’Leary said. The carrier’s remaining Airbus A320s, operated by Lauda Air, will exit the fleet by the end of the decade.
Unlike his counterparts in the U.S., who believe this summer will see a surge in leisure demand, O’Leary thinks European demand will not return until the end of the summer, stretching into the autumn. The booking curve is lengthening, however, but still remains historically short. Ryanair reported about 500,000 bookings in the first week of April, rising to 1.5 million in the first week of May. This growth is probably unsustainable, O’Leary acknowledged, but signals increasing confidence in Europe as vaccination programs reach a larger percentage of the population.
As Europe begins to emerge from Covid, the airline market that awaits it will be significantly different. Several carriers — Flybe, Level, and Norwegian, for example — have either shut down or scaled back significantly. Even the legacy carriers that benefited from state aid, like Lufthansa, Alitalia, TAP Air Portugal, and Air France-KLM, have retired large parts of their fleets and slashed short-haul flying. This is capacity that will not easily come back to the market, O’Leary said, predicting that the Europe’s airline industry will be 70-80 percent of the size it was before Covid for several years.
This presents Ryanair with huge growth opportunities, O’Leary said. The carrier is taking delivery of 210 Boeing 737 Max aircraft over the next several years and will have a fleet of 600 aircraft by fiscal year 2026. It is one of the few airlines in Europe that is continuing to grow. Because so many airports saw revenues collapse as other airlines retrenched, Ryanair has the chance to enter new markets at lower costs than it would have had before the pandemic. The carrier opened eight new bases, including Stockhold Arlanda and Zagreb, during the last fiscal year. O’Leary said it has extended agreements at several of its existing airports, including Charleroi and Stansted, through the end of the decade.
The carrier expects to fly between 80-120 million passengers this fiscal year. Now, it projects to reach the low end of that range by next March, but if the pace of vaccinations picks up in Europe and travelers are increasingly willing to fly, it could hit 120 million. Much also depends on the trajectory of the disease and if vaccines can keep any new virus variants at bay. With its larger fleet, Ryanair expects to fly 200 million passengers annually by fiscal 2026.
As Europe inoculates more of its population, O’Leary said he hopes governments will drop testing requirements and quarantines. “We see no reason for testing, whether its antigen or PCR,” he said. ”It adds nothing.” Vaccine passports are a good idea, but he has no faith that governments will “get their acts together” in time to create a standard that can be used during the summer peak. Instead, in the near term, Ryanair is allowing passengers to upload proof of testing and vaccines into the airline’s app and hopes that is enough to satisfy regulators.
Covid taught Ryanair the necessity of being flexible with fuel hedges. The carrier incurred significant losses from being 80-90 percent hedged at pre-Covid fuel prices. It enters the new fiscal year 50 percent hedged at $55 per barrel, Chief Financial Officer Neil Sorahan said.
If traffic patterns hold, Ryanair expects to breakeven this fiscal year or to report a “small” loss, Sorahan said. The last fiscal year was “the most challenging in Ryanair’s 35-year history,” O’Leary said, adding that the carrier’s €815 million ($990 million) loss was “traumatic.” By comparison, Ryanair reported a €1 billion profit in the previous fiscal year. Revenues for fiscal 2021 were 81 percent lower than fiscal 2020, to €1.6 billion. Ryanair ended the fiscal year with €3.2 billion in cash.