General Industry

Ryanair To Be Opportunistic In Financing MAX Jets, Says CFO; Cautious About 'Fragile' Recovery

By Dave Simpson
Ryanair To Be Opportunistic In Financing MAX Jets, Says CFO; Cautious About 'Fragile' Recovery

Ryanair RYA.I has no plans to tap the bond market to finance its Boeing BA.N 737 MAX deliveries but it is ready to move at short notice should attractive opportunities arise, chief financial officer Neil Sorahan has said.

The Irish airline, Europe's largest low-cost carrier, last May raised €1.2 billion at a record low rate in a five-year bond sale with a coupon of 0.875%. It is due to take delivery of 150 new Boeing 737 MAX aircraft over the next three years.

"We continue to be opportunistic. Lowest costs will really determine what we're going to do," Sorahan told the Airfinance Journal conference in Dublin.

"Debt markets look like they might be the cheapest (option) for the next while," he said.

But Ryanair will consider offers on secured debt or sale-and-leaseback as alternatives.


About 90% of Ryanair's fleet of approximately 500 aircraft is debt-free and the airline hopes to increase that proportion further in the coming years, Sorahan said.

Ryanair has reduced its debt to €1.5 billion from 2.3 billion and its focus in the coming years will be to reduce that further, he said.

Ryanair Cautious About "Fragile" Recovery, Berates Boeing

The above news was followed by news that Ryanair RYA.I has said that it was impossible to give detailed 2022 guidance beyond hoping for a return to "reasonable profitability" amid uncertainties over COVID-19 and the Ukraine war, knocking its shares despite a smaller annual loss.

Europe's largest airline by passenger numbers also became the latest Boeing BA.N customer to criticise the planemaker. Chief executive Michael O'Leary said  thatits management needed to step up and deliver aircraft more quickly or make way for a new team.

Ryanair posted a €355 million loss for the pandemic-scarred 12 months to 31 March and said that it planned to grow traffic to 165 million passengers this year, from 97 million a year ago and a pre-COVID-19 record of 149 million.


However, O'Leary said that it was "impractical, if not impossible" to provide a sensible or accurate target until the second half of its fiscal year.

He added that while bookings had improved in recent weeks, he was a little concerned that competitors were talking up the summer recovery too much and that caution was needed heading into a winter with an expected economic downturn.

"It's too fragile, there remains too many moving parts," O'Leary said, adding that Ryanair would nevertheless thrive if any of its markets dip into recession due to its lower cost base.

Chief financial officer Neil Sorahan told Reuters that fares were lower in recent weeks than anticipated. While cautiously optimistic that peak summer fares will be "somewhat ahead" of pre-pandemic levels, O'Leary said it was impossible to predict winter pricing.

Customers were also still waiting until much closer than usual to the time of their trips to book.


Boeing Criticism

O'Leary also said that while Ryanair remained a willing Boeing customer and hoped to receive more 737-8200 jets than planned over the next two summers, it could turn to the second-hand leasing market to fuel further growth unless Boeing stepped up with some additional orders.

Ryanair has issued a market tender for 50 jets, industry sources say.

Ryanair last year walked away from negotiations with Boeing for 200 of its largest single-aisle aircraft: the upcoming 737 MAX 10.

O'Leary described Boeing management on Monday as "running around like headless chickens" and said "they need to bloody well improve".

"Boeing need a management reboot in Seattle and either the existing management needs to up its game or they need to change the existing management," O'Leary told analysts.


Boeing declined comment.

O'Leary has persistently lashed out at Boeing over the past year in what many industry executives viewed as a tactic in deadlocked MAX purchase negotiations.

But his latest comments coincided with broader pressure on Boeing after two leasing industry leaders, Air Lease Corp AL.N executive chairman Steven Udvar-Hazy and Avolon CEO Domhnal Slattery, questioned its leadership.

By contrast, the head of the world's largest lessor, AerCap AER.N boss Aengus Kelly, last week threw his weight behind Boeing and said that it would overcome recent problems.

Boeing shares fell 2.5%.

At the end of April, Boeing expressed doubts over hitting jet delivery targets as technical problems, inflation and supplier risks clouded its recovery.

Boeing chief executive officer Dave Calhoun said at the time: "We're going to deliver great airplanes. And we're going to recognize the costs associated with it."

O'Leary said that Ryanair, which has hedged 80% of its 2023 fuel needs and 10% for 2024, would likely be profitable in the coming year, even if the outlook was worse than anticipated but that it would be significantly behind pre-pandemic levels.

Ryanair Loses Challenge Against State Aid For Condor

All of the above news was followed by news that Ryanair RYA.I has lost its challenge against the 2019 government bailout of German charter airline Condor, as the EU's General Court ruled there was no reason to doubt the legitimacy of the aid.

Europe's biggest budget airline had won a first challenge against the rescue of Condor at the Luxembourg-based EU court in June 2021.

But the court on Wednesday May 18 said that Ryanair had failed to demonstrate any grounds for doubt regarding the European Commission's handling of the aid application.

The EU executive in 2020 cleared a €550 million German state-guaranteed loan to Condor, which had filed for insolvency in September 2019 after its parent company Thomas Cook collapsed.

"The applicant did not succeed in rebutting the Commission's findings that Condor's difficulties were the result mainly of the Thomas Cook group being placed into liquidation and not of an arbitrary allocation of costs within the group," the court said.

"The General Court dismisses the action in its entirety."

Condor operated a fleet of more than 50 aircraft before the COVID-19 pandemic.

Ryanair has filed more than a dozen lawsuits against the Commission in recent years for allowing state aid to Lufthansa LHAG.DE, Air France KLM AIRF.PA and others, as well as against national schemes benefiting flag carriers.

It scored some initial victories last year when the General Court rejected aid given to KLM and Portugal's TAP, but that aid was later granted by the European Commission after it had addressed the court's concerns.

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