Ryanair Cries Foul on State Aid Schemes, Will Challenge Bailouts in European Courts
Ryanair announced last Friday (May 1, 2020) an update on market conditions relative to the global COVID-19 Pandemic. The carrier plans a return to service in the second quarter but decries a distortion in a level playing field with legacy airlines receiving €30 billion in State Aid.
When you build an airline from scratch, follow all the rules and have a business model that makes money, it is certainly understandable that the receipt of taxpayer funded State Aid by competitors might seem unfair. Last Friday (May 1, 2020), Ryanair Holdings Plc announced their COVID-19 market update and the airline, led by the outspoken and gregarious Mr. Michael O’Leary, made no bones about the fact that they are unhappy about a host of State Aid schemes for legacy European airline competitors. Ryanair believes that the over €30 billion in pledged State Aid not only distorts what should be a level “playing field,” but is in breach of EU competition and State Aid rules, unlawful and discriminatory. Therefore, the company has pledges to challenge the distribution of State Aid in European Courts.
Ryanair expects to operate less than one percent of their scheduled flying program through June 2020. For the first quarter of 2020, the company expects less than 150,000 passengers, 99.5% behind the budgeted quarterly level of 42.4 million passengers. The company expects some improvement in their fiscal second quarter (July-September), but doesn’t expect to achieve more than 50% of the Q2 target of 44.6 million passengers. For the full-rear 2020, the carrier expects to carry less than 100 million guests, 35% less than their original 154 million passenger projection.
Ryanair believes that traffic on reduced flight schedules will be stimulated by below cost fares from carriers who have received “State Aid war chests,” or in the case of Alitalia, by nationalization. Therefore, the company is calling on EU governments to cut passenger taxes, airport taxes, and departure taxes industry-wide, as an equitable alternative to what the company calls State Aid “doping” for European flag carriers.
The airline projects that any return to pre-pandemic customer levels in unlikely to occur before summer 2022. Therefore, Ryanair is in negotiations with Boeing and Laudamotion’s A320 lessors to cut the number of aircraft deliveries over the next two years in order to reduce near-term CAPEX commitments. The carrier will shortly notify the associated trade unions about their restructuring and job loss program that will commence from July 2020 and is expected to include the loss of up to 3,000 mainly pilot and cabin crew jobs, unpaid leave, pay cuts of up to 20% and the temporary closure of a number of European bases. Ryanair Group’s CEO, Michael O’Leary, will extend a 50% personal salary reduction started in April through March 2021. The carrier entered the COVID-19 crisis with €4 billion in cash but expects to report a first quarter loss of over €100 million, with further losses projected for the second quarter.