Ryanair Share Discussion Threads

[albert3591] 24/4/2020 11:32

I wonder if obleary was at the recent Cheltenham race meeting,mixing with 240000 other race goers

[frazboy] 24/4/2020 08:24

EI - that link doesn't work (truncated?) - I think this is the link you meant to post:



I still see no way of airlines flying across borders (particularly UK/EU) to resume any form of normal service in the near future - due primarily to Covid-19 insurance related issues.

[frazboy] 16/4/2020 11:27

Spob - thanks for correcting me on that. Yes, I think you're right. That makes much more sense in the context of the cash burn rate (there has to be quite a bit of hedged fuel to get that monthly cash burn rate). And, had I read further down the announcement:

"To mitigate the effects of over-hedging, a number of actions have been taken including the ceasing of jet fuel hedging, whilst the fleet is fully grounded, for time periods from April 2020 through to October 2021. Hedging continues for later time periods, to take advantage of the low-price environment. Once there is further clarity on the likely duration of the fleet grounding, easyJet's regular hedging programme will resume for both FX and jet fuel"

So, RYA's cash burn rate is probably a good bit less than the number I quoted a couple of posts backs - perhaps, a bit higher than Easyjets as they hedged 90% for this FY.

[spob] 16/4/2020 11:09

okay no 'take or pay' contracts says EZJ

surely fuel hedging contracts are a separate issue

yes no ?

[frazboy] 16/4/2020 09:53

EI, FF, Cumnor, anbody who is listening

A couple of snippets caught my eye from the EZJ update:

"Fuel - easyJet does not operate 'take or pay' contracts for fuel. Our fuel tenders are based on indicative volumes only. If/when we do not lift the volume of fuel we have tendered for, we are not liable"

But my understanding is, that Ryanair does operate a "take or pay" contract.

And:

"Cash flow deferrals have also been achieved through payment term extensions negotiated with many of our major suppliers including airports, ground handlers and fuel providers. All government tax payment schemes have been explored including 'time to pay' arrangements and reclaiming corporation tax payment on account. We estimate that our operating costs burn is in the region of £30-40 million per week, whilst the fleet is grounded. This compares to circa £125 million when flying a full schedule."

I'm surprised at their cash burn rate given the fact their fuel is not take or pay. In fact, having read the paragraphs in the announcement above where I extracted this from, I can't work out where all the cash is going!? Assuming Ryanair's cash burn rate is similar (it is a bigger company, after all, even if costs are lower), and they're paying for fuel too, then Ryanair are cash burning maybe 50 to 60 million Euros per week? Seems a bit high but is certainly supportive of EI's remark that a dilutive equity raise could be on the cards.

[essentialinvestor] 14/4/2020 14:01

The medium term investment case is largely dependent on whether RYA need an
diluative equity raise in 2021?. That's my rudimentary take fwiw.

[flyfisher] 13/4/2020 20:24

frazboy, I had a similar look into ezj, but did not hazard a guess into full year results, other than it will be a loss this year.

I came to the conclusion that current monthly cash burn will be in the region of £160m pm ex d&a. They have lesser hedging in place than rya.

With the outlook for 2020 / 21 being so opaque, it is no wonder stelios is trying to get future airbus orders cancelled, or deferred as much as possible.

I took a holding in EZJ several days ago.

[essentialinvestor] 13/4/2020 18:55

fraz, appreciate the view. I'm not holding atm, however at least worth watching.

[frazboy] 13/4/2020 18:50

FF,

I reckon Ryanair will lose around 1.6bn Euros YE Mar 2021, perhaps more, but I would be surprised if it exceeds 2bn Euros. I've assumed that revenues/flights that go ahead meet basic, if you will, running costs (navigation, airport handling, depreciation, marketing etc). The loss comes from excess charges/costs which are unused fuel hedges (the largest cost - I've got it down as 1bn Euros), excess depreciation (for unused aircraft), maintenance (even unused aircraft still have to fly to keep them airworthy), aircraft rentals (can they get out of those?) and staff (they will be used less efficiently). Regardless, it's utter guess work really - I guess the cash cost will be the same, less depreciation. Perhaps the biggest cost uncertainty is, to what extent airport handling charges are variable (almost completely I think)? And what navigation charges will be for the maintenance/service flights - it won't be zero. And what about those 737 Maxes on order??

Anyway, I've done some further crude analysis using 1.6 bn Euro loss for YE Mar 2021, somewhere between break even and 0.5 bn profit YE Mar 2022 and normal-ish service thereafter. The current share price is reasonable in my view, I'm a buyer if it gets much below 9.

[jd 1965] 13/4/2020 18:00

Apparently he only sold in the American airlines so he didn't go over a 10% holding

[qantas] 13/4/2020 09:07

Please do your own research as always.

[cumnor] 12/4/2020 21:40

Air travel will struggle after the lockdown is lifted for a couple of years, Recession, threat of further lockdowns, reluctance to travel, insurers will not cover against covid 19 and some countries will be reluctant to allow travel from ongoing hotspots (ongoing 2 week quarantining for air passengers being mooted by some). Plenty of time to buy airlines.

[frazboy] 12/4/2020 20:49

EI - agree, very difficult, even if Ryanair have an awful 2020, and are flat in 2021, you can see them making further inroads into the competition thereafter which lends supports to the current share price It's still bizarre that the price dipped so low in August last year - that was the real trading opportunity - I wouldn't rush out and buy at the current price.

[essentialinvestor] 12/4/2020 19:58

fraz, would be pretty sure RYA ultimately end up stronger,
however it's very difficult to value businesses atm.
Wider equity markets (on the recent rapid bounce) appear to suggest a strong V shaped recovery,
not sure it's going to be quite that easy.

[frazboy] 12/4/2020 19:45

EI - the fuel hedges are a strong negative at the moment, they’re locked into paying for fuel they won’t use at too high a price

FF - will come back to you about costs. I had a quick look at the last annual reports from Easyjet and Ryanair - my gut feeling is, fuel hedging aside, maybe 75% of costs (Staff, routing, marketing, airport handling etc) are variable (avoidable), perhaps more. Aircraft maintenance and depreciation/leasing costs perhaps less so. For easyjet valuation you have the added complexity of Stelios and the airbus order - the 737 MAX order is less of an issue!

[essentialinvestor] 12/4/2020 18:54

You have competing forces atm.

The main positive is sector capacity being taken out,
coupled with significantly lower fuel prices, which the can lock in going forward -
their more expensive hedges have someway to run off yet.

The negative flip side is recession with very weak consumer sentiment,
once airlines resume a more normal service.

[spob] 12/4/2020 15:12

i'm genuinely surprised the RYA share price has not fallen much further

these were down to 8.5 last year before anyone had even heard of corona


would have expected these to go down to 3 or 4 euros at some point

[flyfisher] 12/4/2020 11:56

frazboy, Perhaps a look at the income statement, with % reductions on a line by line basis, removing fuel cost but adding fuel hedge cost, will give the best approximation of monthly cash burn.
The comment on RYA hedge loss has allowed me to make an estimation for EZJ a stock i am looking at, stelios would have us believe it will be it be bust by august, but he has his own agenda, i don't see it.

The bigger issue is what will operating losses look like if and when they do restart flights and how long to recover.

[cumnor] 12/4/2020 10:29

Certainly much of the Euro 3.6 Bln will be gone by the time this gets back to 'normal' in 6-9 months or so. If things ever get back to 'normal'.

[flyfisher] 12/4/2020 10:08

frazboy, Thanks for your reply. I have been trying to put a number on idle opex for a couple of weeks, but not getting far with it.
The RYA comment on the fuel hedge cost is useful, rya would seem to be 90% hedged, ezj 71%, others less so, so considerable pain in some cases.

Staff costs have reduced due to furlough, but they still need many office staff and a core of maintenance engineers, so will still be substantial, interest costs are measurable.

I was thinking that aircraft leasing costs may have a temporary holiday, but the lease companies seem to be more heavily geared than the airlines themselves, so limited scope for that.

The damage to equity is measurable, the damage to the balance sheet not yet so.

A news article commented that delta is burning $60m per day.

[frazboy] 12/4/2020 08:05

FF - I don't think it's a meaningful question; it's just a planned schedule, will it actually happen? How many of their planned routes are to restart, a few domestic flights perhaps? If international flights restart how do UK citizens get health (specifically for Covid 19) insurance for foreign travel? Finally, the cash burn for grounded airlines is difficult to fathom, they've got staff costs (much will be covered by the furloughing), plane maintenance costs (I believe Eastjet are drilling flying their planes every few days to keep them serviceable, airport handling charges (some of which are still being paid?), fuel hedging, interest costs, G&A, etc). If you find a good article giving a breakdown of these costs and hence balance sheet damage then please point me in the right direction!

[flyfisher] 11/4/2020 21:55

Have read that RYA, JET2 and TUI are scheduled to restart flights on 17th june.

If that proves to be the case, what damage to the balance sheet is likely?

[frazboy] 03/4/2020 07:36

So, unused fuel hedging is costing Ryanair E150m per month.

‘Ryanair is currently operating less than 20 daily flights, which is 99% less than its pre-Covid 19 daily schedule of over 2,500 flights. The airline expects its fleet to remain largely grounded for at least April and May. We therefore expect to record ineffectiveness on our FY21 fuel hedges as an exceptional item in our FY20 results. We currently estimate that this will amount to an exceptional charge of approximately €300m’

1bn Euro exceptional for fuel hedging for FY 2021 doesn’t look unreasonable at this stage. Although RYA are a survivor, and will be price makers in the future, the market place will be very different (smaller) - to my mind the damage to the BS will be enormous - I’m a buyer but it’ll have to be a bit cheaper.

[buywell3] 03/4/2020 03:18

Chartwise 6.5 looks likely IMO