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LONDON, United Kingdom (UPDATED) – Ryanair‘s annual profit sank as the coronavirus halted travel and the Irish no-frills airline bet on jet fuel prices being much higher ahead of an oil price crash, it said on Monday, May 18.
Net profit, including exceptional items, sank 27% to almost 649 million euros ($694 million) in the year to March 31.
Ryanair added that global lockdowns heavily impacted the end of the period.
Excluding one-off items, net profit rose 13% to 1 billion euros at the Ireland-based airline.
But the group expects a loss of more than 200 million euros in its 1st quarter to June.
Ryanair added that annual passenger traffic grew 4% to 149 million travelers and revenues swelled 10% to 8.5 billion euros.
However, it made a one-off charge of 353 million euros due to the “ineffectiveness” of fuel hedges, which are essentially bets on the price of jet fuel refined from crude oil.
“Airlines buy forward contracts to lock in lower prices” and guard against price volatility, said Naeem Aslam, chief market analyst at AvaTrade.
“Obviously…when Ryanair hedged the oil price, it wasn’t that low. And now, we are looking at a very different landscape,” he told Agence France-Presse.
Airlines have been caught out by the 2020 oil price crash that sent United States futures into negative territory.
A price war between oil producers saw the cost of crude slide at the beginning of this year and then collapse as the coronavirus pandemic killed demand for crude.
‘No visibility’
“Given the uncertainty over the impact and duration of the COVID-19 pandemic, coupled with no visibility on what customer behavior and demand will be following a return to service, Ryanair cannot provide 2020-2021 [profit] guidance at this time,” it said.
Ryanair last week said it planned to restore 40% of flights from July.
Since the middle of March, the airline has been operating only 30 flights per day between Britain, Ireland, and the rest of Europe.
Ryanair is cutting 3,000 pilot and cabin crew jobs, or 15% of staff, mirroring moves by airlines globally to save cash in the face of collapsing demand.
Britain – a significant market for Ryanair – had revealed last week that international arrivals will soon face a 14-day quarantine to stop new coronavirus infections.
Ryanair on Monday added that it expected to carry less than 80 million passengers in the current 2020-2021 financial year, almost 50% fewer than originally forecast.
‘Significant opportunities’ ahead
The airline, which has faced much criticism for offering vouchers instead of cash to millions of passengers whose flights were canceled over the virus, said it saw opportunities ahead.
“As we look beyond the next year, there will be significant opportunities for Ryanair’s low-cost growth model as competitors shrink, fail, or are acquired by government-bailed-out carriers.”
Airlines worldwide are slashing thousands of jobs as a result of the virus grounding planes.
This is the case in Britain, with British Airways and Virgin Atlantic quick to wield the axe, despite the United Kingdom government paying up to 80% of workers’ salaries in a bid to safeguard their positions until they are able to return to work.
On Monday, transport minister Grant Shapps told parliament that 43,500 airline staff had been furloughed – and an additional 2,600 airport workers. – Rappler.com
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