Ryanair’s debt will triple to €1.2bn by the end of its current financial year as it remains under pressure due to the pandemic, according to global ratings agency Standard & Poor’s.
It warned that the higher debt – compared to €434m at the end of last March - will leave the carrier’s credit metrics “under considerable pressure” in the next few quarters.
However, the ratings agency reaffirmed its BBB rating on Ryanair Holdings, Ryanair DAC as well as the carrier group’s debt instruments, but with a negative outlook. S&P said that a Covid resurgence across Europe had resulted in renewed travel restrictions.
“We now expect the recovery of air traffic to be slower than we previously foresaw,” noted analysts at the agency.
They said that while vaccinations in the UK have begun, the widespread availability and acceptance of the Covid treatment, which it added is “critical” for restoring air travel demand, “may lag”.
Standard & Poor’s pointed out that Ryanair has lowered its traffic assumptions and doesn’t expect to fly more than 38 million passengers in the financial year that ends next March.
That compares to the almost 150 million it flew in the 12 months to the end of March this year.
“The number could be less, depending on Christmas season traffic and the duration of lockdowns,” noted S&P.
It added that while Ryanair – which last week placed an order for 75 more Boeing Max jets - is adjusting capacity and cutting operating costs, and will also benefit from a lower fuel bill, “we think these factors will be insufficient to counterbalance the collapse in revenue this year”.
S&P expects Ryanair’s fuel bill to be between €800m and €850m in the current financial year, compared to €2.7bn in the 2020 fiscal year.
“Based on the negative reported earnings before interest, tax, depreciation and amortisation (Ebitda ) after exceptional items of nearly €50m for the first six months of fiscal 2021, we estimate that Ryanair's adjusted Ebitda will be negative €150m to €160m this fiscal year, compared with a strong €1.48bn (after deducting the ineffective hedge loss) in fiscal 2020,” it added.
“This, aggravated by large working capital needs, mostly owing to ticket refunds (largely settled) and sluggish forward bookings, will result in significantly negative operating cash flow and rising debt in fiscal 2021,” said S&P.