Ryanair will take advantage of the bruised global aviation market to place a fresh order for Boeing’s troubled Max jet by the end of the year, Davy Stockbrokers believes.
Ryanair group CEO Michael O’Leary has previously indicated that the airline has been having discussions with Boeing in relation to its Max 10 variant. Eddie Wilson, the chief executive of Ryanair, recently confirmed that talks with Boeing are continuing.
In a report on the embattled airline sector published yesterday, Davy analysts Stephen Furlong and Ross Harvey said the pandemic will “hasten” consolidation within the European airline market.
They pointed out that just six carriers account for 95pc of all airline earnings in Europe, but the top six airlines only account for 66pc of capacity.
In the United States, the top 10 carriers control 99pc of the market.
Davy predicts that in Europe some of the bigger airlines such as Lufthansa could shrink after the crisis, while weaker airlines such as Norwegian and Alitalia could also contract, with other carriers vanishing altogether.
“As we enter the winter season, when cash burn is traditionally the highest, we expect more failures and heightened consolidation in the sector,” noted the broker.
Ryanair has already cut capacity by 20pc for September and October due to weaker forward bookings,
“Demand may return quicker in leisure markets, but we should also see industry supply being at least 20pc less in 2021,” added Davy. “Weak winter cashflows could see that number accelerate.”
Airlines have been clambering to shore up their balance sheets in order to weather the Covid storm.
Last week, Aer Lingus owner IAG raised €2.74bn in a highly dilutive equity placing. Ryanair raised €400m earlier this month, saying the proceeds would be used for opportunities that arise from the crisis, but also to de-risk repayments on debt.
Davy pointed out that just four airlines in the world now have an investment grade rating – Ryanair , Wizz and EasyJet in Europe, and Southwest in the United States. All are low-cost carriers.
The broker noted that the “pertinent question” for network carriers, which transfer passengers through large hubs connecting long-haul destinations, is whether they can recover and if so, how long it takes,
Davy also said that while corporate travel has always recovered following a global crisis, the adoption of services such as Zoom for meetings during the pandemic could mean it will be the last travel segment to do so.