logo-loader
viewRyanair

Ryanair cuts 2020 summer guidance as Boeing MAX drama delays aircraft deliveries

The budget airline is now expecting to grow 3% in the summer of 2020, down from previous predictions of 7% as a result of a smaller fleet of planes

Ryanair aircraft
Ryanair is also planning some base closures in the 2019 winter and 2020 summer periods

Ryanair Holdings PLC (LON:RYA) has cut its 2020 summer growth rate guidance to 3% from 7% as the ongoing saga over Boeing Co’s (NYSE:BA) MAX aircraft delayed its fleet upgrade plans.

On Tuesday, the budget carrier's colourful chief executive Michael O'Leary said that while it expected the MAX range of aircraft to return to service by September this year, the exact date was “uncertain” and could be as late as December.

READ: Ryanair, easyJet and IAG descend on Lufthansa warning

Ryanair currently has a number of MAX200 aircraft, a variant of the MAX range, on order for next year, however, O’Leary said that assuming the MAX returned to service by December it expected to receive up to 30 MAX200’s by May 2020, less than the 58 originally predicted.

As a result of the lower number of new planes and the subsequently lower summer growth forecast, the CEO said full-year traffic growth for 2020 was now expected to be around 157mln passengers, down from previous estimates of 162mln.

O’Leary added that the shortfall in aircraft would also necessitate “some base cuts and closures” for both the 2019 winter and 2020 summer periods.

The Boeing MAX range of aircraft have been grounded since March after two fatal crashes involving the aircraft occurred in Indonesia and Ethiopia less than six months apart.

While the causes of the two accidents have not yet been confirmed, there is speculation that it may be due to a fault in the stability computer that helps keep the plane in the air.

Several airlines have either cancelled or delayed their own orders for MAX aircraft following the incidents, while Boeing itself has seen its share price take a hammering as it struggled to address the faults and appease regulators.

Shares higher on possible margin benefits

Despite the seemingly glum news, shares in Ryanair were 1% higher at €10.2 in early trading on Tuesday.

The reason behind the bounce, according to Markets.com’s Neil Wilson, appeared to be that while Boeing’s woes had “shattered Ryanair’s 2020 planning”, stripping out excess capacity through having a smaller fleet of aircraft could boost pricing power and lift margins.

However, he added that the loss of capacity would also benefit Ryanair’s rivals as a result of the market leader having less space for passengers.

This appeared to have borne out in the market, with shares in competitor easyJet up 2.6% at 1,022p.

Broker retains target despite forecast cut

Meanwhile, analysts at Liberum maintained their ‘buy’ rating and €12.5 target price for Ryanair, saying in a note that the price was “justified” given the carrier’s market leadership among fellow European airlines and saw any short-term weakness in the share price as a “buying opportunity in the long-term”.

However, the broker concurred that the read-across for other European short-haul airlines was “positive”, particularly for non-MAX operators, while Ryanair’s plans for base closures later this year could point to “underlying weakness” in the group’s trading.

--Adds analyst, broker comment and share price--

Quick facts: Ryanair

Price: 14.24 EUR

LSE:RYA
Market: LSE
Market Cap: €15.78 billion
Follow

Add related topics to MyProactive

Create your account: sign up and get ahead on news and events

NO INVESTMENT ADVICE

The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is...

FOR OUR FULL DISCLAIMER CLICK HERE

Watch

Full interview: Impax Asset Management reveals key themes investors should...

Impax Asset Management Group PLC (LON:IPX) Head of Client Services and Business Development David Richardson tells Proactive key themes investors should look out for in 2020.  Richardson says he's seeing expansion in developing renewable energy projects in Europe, increased interested in...

2 days, 1 hour ago

RNS

Transaction in Own Shares

2 days, 8 hours ago

Transaction in Own Shares

3 days, 8 hours ago

Transaction in Own Shares

4 days, 8 hours ago

Total Voting Rights

4 days, 23 hours ago

Transaction in Own Shares

5 days, 8 hours ago

Transaction in Own Shares

6 days, 8 hours ago

3 min read