Ryanair cuts growth forecast, confirms it is looking at base closures
Delays in delivery of 737 Max aircraft will hit summer passenger growth
Ryanair is looking at cutting its bases from winter as the delays in the delivery of new aircraft are expected to hit passenger growth.
Ryanair cut forecasts for growth in passengers next summer to 3 per cent and confirmed it was looking at base cuts and closures from November amid delays in the delivery of new Boeing 737 Max aircraft.
The airline’s shares rose 2.22 per cent to close at €10.38 in Dublin on the back of the news yesterday. Share dealers said investors calculated that fewer aircraft would mean higher fares and better profits next year.
Ryanair was due to receive 50 Boeing 737 Max aircraft in the later months of 2019 and in the first quarter of 2020. However, two fatal crashes blamed on software faults saw regulators ground the aircraft earlier this year.
The company said it expects the 737 Max to return to service before the end of the year, but the Max200 variant it has ordered needs to be separately certified by authorities in Europe and the United States. That is expected to be within two months of the Max returning to flying service.
“Boeing is hoping that a certification package will be submitted to regulators by September with a return to service shortly thereafter. We believe it would be prudent to plan for that date to slip by some months, possibly as late as December,” said chief executive Michael O’Leary.
“Accordingly, Ryanair now hopes to receive its first Max200 aircraft sometime between January and February 2020. Since Ryanair can only take delivery of between six to eight new aircraft each month, we are now planning our summer 2020 schedules based on taking up to 30 B737 MAX aircraft deliveries up to end of May 2020.”
Mr O’Leary told analysts on Tuesday that Ryanair is likely to demand that Boeing cover some of the cost of the delays.
He explained that the hold up with the Max 737 could prompt Ryanair to extend its leases on at least some of the 16 aircraft that it is due to return to their owners over the next year and to delay on delivering up to 10 other planes that it has already committed to selling.
Mr O’Leary noted that Ryanair would have to discuss these steps with the other parties involved.
“That does have some cost ramifications in terms of maintenance and further lease commitments,” he told analysts.
“In our discussions with Boeing, we will be asking them to contribute to any costs that arise therefrom,” Mr O’Leary added.
With just 30 of the planned 58 new aircraft now expected to arrive in time for next summer, the company has revised its summer 2020 schedule figures from 7 per cent growth to 3 per cent. Full year traffic growth for the year to March 2021 is expected to be five million less than the 162 million originally planned.
“This shortfall in aircraft deliveries will necessitate some base cuts and closures for summer 2020, but also for the winter 2019 schedule,” Mr O’Leary said.
“We are starting a series of discussions with our airports to determine which of Ryanair’s underperforming or loss-making bases should suffer these short-term cuts and/or closures from November 2019. We will also be consulting with our people and our unions in planning and implementing these base cuts and closures, which are directly caused by the B737 Max delivery delays to the B737 Max programme.”
The airline said it was working towards the restoring normal growth levels next winter.
The Irish Times last week reported Ryanair pilots had been sent a letter by chief operating officer Peter Bellew warning base closures and cuts would be necessary.
The airline is offering unpaid leave and job shares to pilots over the coming winter, and has stopped recruiting captains. Mr Bellew said the airline has a surplus of 300 pilots.
He also told pilots European airlines was being affected by falling air fares, rising oil prices and uncertainties such as Brexit.