Boeing Customer Ryanair May Ground Whole Fleet, Has $4.47 Billion In Liquidity To Get Through Coronavirus Crisis

Boeing customer Ryanair is the latest European airline to announce drastic cuts in scheduled service, as the industry copes with the spread of the coronavirus and government-imposed travel restrictions. The Irish carrier announced plans to cut capacity by up to 80% in April and May, but would not rule out the grounding of the fleet.

Ryanair, which operates a low-cost, single-fleet business model inspired by Southwest Airlines, has been grappling with changing travel restrictions across Europe. In the last week, Italy, Malta, Hungary, Czech Republic, Slovakia, Austria, Greece, Morocco, Spain, Portugal, Denmark, Poland, Norway and Cyprus have imposed bans to stem the spread of the coronavirus infection, leading to a dramatic and swift reduction in air traffic.

“In those countries where the fleet is not grounded, social distancing restrictions may make flying to all intents and purposes, impractical, if not, impossible,” Ryanair states.

Unlike other European competitors, including Air France/KLM, British Airways, Iberia and Lufthansa, Ryanair does have a strong cargo and logistics business to supplement passenger traffic. Ryanair’s other large low-cost rival, easyJet, also announced that it might ground its entire fleet, and joined others in the airline sector asking for government support.

The Ryanair Group has strong liquidity with over €4 billion ($4.47 billion) in cash and cash equivalents, which puts it in a better position to withstand a prolonged grounding than most of its competitors. Ryanair has said it is also taking “immediate action to reduce operating expenses, and improve cash flows.”

That includes grounding surplus aircraft, deferring all capex and share buybacks, freezing recruitment and discretionary spending. The company is also curbing employment costs by asking staff to take voluntary leave, temporarily suspending employment contracts, and reducing working hours and payments.

“We are working with our people and our unions across all EU countries to address this extraordinary and unprecedented COVID-19 event, the impact and duration of which is, at this time, impossible to determine,” the airline states.

The airline is communicating with customers who may be stranded abroad by email and SMS, and organising rescue flights.

“Our focus now is on completing as much of the scheduled flying program as is permitted by National Governments over the next 7 days, so that we can repatriate customers, where possible, even as flight bans are imposed and ATC and essential airport services are reduced,” the airline states.

The group’s chief, Michael O’Leary, described the situation as “extraordinary and unprecedented” and noted that some governments had made their decision to restrict flights on short notice.

“Our priority remains the health and welfare of our people and our passengers, and we are doing everything we can to ensure that they can be reunited with their friends and families during these difficult times,” O’Leary said. “Ryanair is a resilient airline group..we can, and will, with appropriate and timely action, survive through a prolonged period of reduced or even zero flight schedules, so that we are adequately prepared for the return to normality.”

Ryanair is one of Boeing’s biggest 737 customers and also has an order outstanding for 210 Boeing 737 MAX. The first 55 of these jets were due to be delivered in time for this summer schedule, but the delivery was postponed when the aircraft was grounded. Despite the prolonged grounding of the Boeing 737 MAX fleet, last month Reuters reported that Ryanair had been in discussion to buy more of the aircraft once it is approved by regulators, though the exact number was undisclosed.