Ryanair is set to show a €300m hit from fuel costs in its latest annual results as the effects of the Covid-19 crisis begin to materialise on its balance sheet.
The airline said it will still post a profit for the 12 months to the end of March, but that it will be at the lower end of a narrower guidance of €950m-€1bn.
Ryanair is currently running fewer than 20 daily flights across its European route network; 99% fewer than its normal pre-Covid-19 schedule of more than 2,500 flights per day.
It said its planes will remain largely grounded during April and May at least.
As a result, it said its fuel hedging — the practice of buying fuel at an agreed price to guard against future oil price volatility — for its recently-started current financial year will be ineffective and will equate to an estimated €300m cost hit.
The airline said it will record that as an exceptional charge item in its annual results for the 12 months to the end of March, which will be published in May.
Ryanair still has one of the strongest balance sheets in the airline industry, and ended its year with cash equivalents of €3.8bn and 77% of its fleet debt-free.
It has done a lot to cut operating costs to face down the current crisis — including grounding its fleet, cutting executive and staff pay, deferring spend, suspending its share buyback programme, and freezing recruitment.
However, that cash position is down from €4bn at the time of its last update on March 16.
Goodbody aviation analyst Mark Simpson said that suggests Ryanair has burned through €100m a week dealing with the crisis since mid-March.
“We think that this cash-burn could move to around €135m a month if the lockdown continued into the next quarter,” Mr Simpson said.
He said Ryanair is likely to announce further exceptional charges when it reports results for the first quarter of its new financial year, which began at the start of April.
Ryanair also said the early effects of the coronavirus outbreak meant it missed its full-year passenger growth targets.
In March, the first month of serious virus defence measures, Ryanair’s group passenger levels — when its Austrian subsidiary Lauda is included — plummeted 48% year-on-year to 5.7m people.
That slowed full-year passenger growth to just 4%; meaning Ryanair carried 149m people in its latest financial year instead of a targeted 154m, which the airline said it was on track to achieve even as late as early March.
Currently, half the world’s aeroplanes are in storage, suggesting the aviation industry may take years to recover from the coronavirus pandemic.
“It is likely that when we get across to the other side of the pandemic, things won’t return to the vibrant market conditions we had at the start of the year,” said Olivier Ponti, vice president at data firm ForwardKeys.
“It’s also possible that a number of airlines will have gone bust, and uneconomic discounts will be necessary to attract demand back,” Mr Ponti said.
Data firm OAG said that several years of industry growth had been lost, and that it could take until 2022 or 2023 before the volume of international fliers returns to the levels that had originally been expected for 2020.