General Industry

Ryanair Raises €1.2bn In Bond Sale; Wins Fights Against State Aid For Rivals KLM And TAP

By Dave Simpson
Ryanair Raises €1.2bn In Bond Sale; Wins Fights Against State Aid For Rivals KLM And TAP

Ryanair has raised €1.2 billion in a bond sale and won its fights against state aid for rival airlines KLM and TAP.

Ryanair raised the €1.2 billion at a record low coupon rate in a five-year bond sale, as Europe's largest low cost airline took advantage of favourable market conditions to bolster its finances.

The sale happened a day after the Irish carrier recorded a record annual loss of €815 million as a result of travel restrictions linked to the COVID-19 pandemic. Senior executives said earlier this week that conditions were good to tap capital markets, though they noted there was no urgent need to raise funds.

Ryanair had €3.15 billion in cash at the end of March and unencumbered aircraft worth at least €7.3 billion, Ryanair chief financial officer Neil Sorahan said ahead of the bond issuance. Ryanair is one of the few airlines that has an investment-grade credit rating, with a BBB score from both S&P Global Ratings and Fitch Ratings.

"We are pleased with the success of our latest, low-cost, unsecured bond issue," Sorahan said in a statement. The sale was "keenly priced" at a coupon of 0.875%, he added.


It received demand of €5.2 billion, according to two lead managers.

Head of UK and Ireland corporate debt capital markets at Citigroup Colm Rainey said that the coupon was the lowest ever achieved by Ryanair in part due to the fact investors are keen on its management, cost discipline and sheer size and scale.

"Within this sector this is where you place your bets," Rainey said.

An investor presentation ahead of the Ryanair sale highlighted that the airline also has an €850 million bond maturing this June and £600 million of borrowing under the Bank of England's COVID Corporate Financing Facility maturing in March of 2022.

Ryanair said that it has the funds for the repayments and is planning to use the proceeds for general corporate purposes. The company has reduced the term of its bond offerings to five years since the start of the pandemic.


Ryanair Group chief executive Michael O'Leary said earlier this week that the airline had decided to tap the markets to capitalise on the "very favourable recovery story that I think is now apparent" ahead of the wider reopening of European aviation and very favourable financing rates.

In a previous memo, Ryanair saidthat  it had hired BNP Paribas, Citigroup and Commerzbank for the sale.

Fights Against State Aid For KLM And TAP

Ryanair also won two victories in its fight against billions of euros extended in state aid to rivals as Europe's second-highest court annulled the support given to KLM and Portugal's TAP on the grounds that regulators failed to justify the huge cash injections.

However, the Luxembourg-based General Court said the annulments - and the recovery of the money - would be suspended pending new decisions by the Commission.

Ryanair can challenge those new decisions at the same court if it is not satisfied with them.


"The General Court annuls the Commission's decision to approve the Netherlands financial aid for the airline KLM amid the COVID-19 pandemic on the grounds of inadequate reasoning," the court said.

Judges also rejected the EU executive's clearance of state aid for Portuguese carrier TAP, citing "an inadequate statement of reasons" by the Commission.

Last year, the EU competition enforcer cleared a €3.4 billion Dutch bailout for airline KLM and a €1.2 billion rescue loan for Transportes Aereos Portugueses (TAP).

"The European Commission's approvals of state aid to Air France-KLM and TAP went against the fundamental principles of EU law and reversed the clock on the process of liberalisation in air transport by rewarding inefficiency and encouraging unfair competition," Ryanair said after the ruling.

But KLM, which is the Dutch arm of Air France, said that the judgment is of no consequence as the state aid will not have to be repaid until the Commission has a chance to review the decision.


TAP declined to comment when contacted by Reuters.

Portugal's prime minister, Antonio Costa, told reporters that the decision is preliminary and the aid is justified in view of the impact of the pandemic.

"Given the crisis that hit the aviation sector around the world, it was unthinkable for the European Commission not to lift restrictions on state aid," he said. "There is no reason to believe their legal experts did not study the matter well."

Spanish Fund Challenge And Frankfurt-Hahn Airport Case

On Wednesday March 19, the court rejected Ryanair's challenge to a €10 billion Spanish fund for virus-hit companies approved by the European Commission, saying that the measure complies with EU law.

Ryanair also suffered a setback when the court backed Lufthansa's challenge to the Commission's 2017 decision allowing state aid to Frankfurt-Hahn Airport, where the Irish carrier was the main beneficiary.

The Commission said that it will study the rulings before deciding on its next steps.

Billions Of Euros Pumped Into The Airline Industry

Governments around the world have pumped billions of euros into the airline industry, which has been hit hard by virus-related restrictions and lockdowns.

Other Support Cases

Last month, the same court backed EU competition regulators' approval of support for SAS and Finnair while in February judges also upheld state aid granted to rivals including Air France and SAS.

Europe's biggest budget airline has filed 16 lawsuits against the Commission for allowing state aid to individual airlines such as Lufthansa, KLM, Austrian Airlines and TAP, as well as national schemes that mainly benefit flag carriers.

The cases are T-465/20 Ryanair v Commission, T-643/20 Ryanair v Commission, T-628/20 Ryanair v Commission and T-218/18 Deutsche Lufthansa v Commission.

News by Reuters, edited by Hospitality Ireland. Click subscribe to sign up for the Hospitality Ireland print edition.