Tuesday 23 July 2019

Ryanair's rating would survive Brexit grounding - S&P

Michael O'Leary
Michael O'Leary
John Mulligan

John Mulligan

Ryanair's rating from global agency Standard & Poor's would survive flights being grounded temporarily between the UK and the EU in the event of a hard Brexit.

That's according to the agency's managing director of corporate and government ratings, Philip Baggaley. He also said that an EU cap on the number of flights between the trading bloc and the UK this year, at 2018 levels, could benefit airlines in the short term. The plan has been criticised by the International Air Transport Association.

"We actually undertook a stress test where we stopped UK-EU flying by [IAG, Easyjet and Ryanair], and actually all of their ratings held, mainly because they have so much headroom. They have very strong financial profiles," Mr Baggaley told the 'Airfinance Journal' conference in Dublin.

Ryanair has a long-term BBB+ rating from Standard & Poor's, and the same rating from ratings agency Fitch.

A cap on routes between the UK and the EU would be "inconvenient for passengers, but might not be a bad thing for the airlines," said Mr Baggaley. "As a barrier to entry, it would constrain supply. Long-term, it's not good obviously, but in the short-term it might be."

Mr Baggaley also said that the European airline industry is undergoing "slow motion consolidation".

Jonathan Root, senior vice president at Moody's Investors Services, said that airline bankruptcies in Europe last year should give potential new entrants pause for thought.

"These bankruptcies should be a warning sign to anyone who's looking to start an airline," he said.

"It's really important to have a good network, and as a startup you're not going to have a network, you're going to start with a couple of routes. The cost of entry is very low because you can find an aircraft and lease it, but I just think it's very risky."

Marjan Riggi, a senior managing director with bond rating agency Kroll, said there is an "excess" of LCCs (low-cost carriers) in Europe.

Irish Independent

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