(Alliance News) - Budget airline Ryanair said Friday it expects a significant decline in air traffic in 2020, while complaining about the "distorted" playing field as it charged that legacy European airlines have received over EUR30 billion in state aid.
Ryanair said this is a "clear breach" of both EU competition and state aid rules.
"This unlawful and discriminatory state aid will be challenged by Ryanair in the European Courts," the airline added. "When Ryanair returns to meaningful flying from July, the competitive landscape in Europe will be distorted by unprecedented volumes of state aid from some EU governments to their 'national' airlines."
It said: "As a direct result of the unprecedented Covid-19 crisis, the grounding of all flights from mid-March until at least July, and the distorted state aid landscape in Europe, Ryanair now expects the recovery of passenger demand and pricing (to 2019 levels) will take at least 2 years, until summer 2022 at the earliest."
Ryanair said it will begin restructuring, starting in July, which could see the loss of up to 3,000 mainly pilot and cabin crew jobs, unpaid leave, and pay cuts of up to 20%, as well as the closure of a number of aircraft bases across Europe until traffic recovers.
Due to continent-wide EU government flight restrictions, Ryanair expects to operate less than 1% of its scheduled flying program in April, May and June.
First-quarter traffic is expected to be down 96% year on year at 150,000 passengers.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: called down 105.31 points, 1.8%, at 5,795.90
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Hang Seng: markets in China and Hong Kong closed for holiday.
Nikkei 225: closed down 2.8% at 19,619.35
DJIA: closed down 288.14 points, 1.2%, at 24,345.72
S&P 500: closed down 0.9% at 2,912.43
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GBP: down at USD1.2561 (USD1.2601)
EUR: up at USD1.0961 (USD1.0874)
Gold: down at USD1,674.00 per ounce (USD1,704.48)
Oil (Brent): up at USD26.76 a barrel (USD26.50)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Friday's Key Economic Events still to come
holidays in China, France, Germany, Italy, South Africa, Spain And Switzerland.
0930 BST UK CIPS-Markit manufacturing purchasing managers' index
0930 BST UK monetary and financial statistics
0945 EDT US manufacturing PMI
1000 EDT US ISM manufacturing report on business
1000 EDT US construction spending - construction put in place
1600 EDT US domestic auto industry sales
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UK Prime Minister Boris Johnson has promised to deliver a "comprehensive plan" next week on how the lockdown may be eased after declaring the UK is "past the peak" of the coronavirus outbreak. Johnson said on Thursday he would be producing a "road map, a menu of options" explaining how to get the economy moving and children back to school while still suppressing the disease's spread. Testing is a key part of the strategy in any effort to ease restrictions, and the public may find out on Friday if the government reached its target of carrying out 100,000-a-day by the end of Thursday. Johnson made his commitment as he fronted his first Downing Street press conference since leaving hospital for Covid-19, and he praised the NHS saying he had been "very, very lucky" but "thousands of people have been less fortunate than I was". With the death toll having exceeded 26,700 and under pressure to detail a blueprint for easing the lockdown, the PM said: "We are past the peak and on the downward slope."
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UK house prices were gaining momentum before Covid-19 crippled the country, Nationwide said. Annual house price growth was 3.7% in April, with prices up 0.7% month-on-month. In March, prices had risen 3.0% annually and 0.8% on a monthly basis. "It's important to note that the impact of the pandemic is not fully captured in this month's figures. This is because our index is constructed using mortgage approval data, and there is a lag between mortgage applications being submitted and approved," Robert Gardner, Nationwide's chief economist, highlighted.
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Britain's manufacturers have suffered a "collapse" in demand because of the impact of the global lockdown amid warnings that conditions are unlikely to return to anywhere near normal for some time, a new survey suggests. Research among almost 300 firms by manufacturers' organisation Make UK showed three out of four had seen sales fall. One in five said orders had slumped by more than 50% and a similar number had furloughed workers. Make UK warned the extent of the fall is likely to mean the recent Office for Budget Responsibility forecast of a 55% reduction in manufacturing output in the second quarter of the year is likely to be an underestimate.
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Ireland suffered a record fall in manufacturing output and orders in April, the AIB purchasing managers' index showed. The PMI slumped to 36.0 in April from 45.1 in March, the worst reading since 2009. Any reading over 50 indicates expansion in the sector and one below contraction. Output, new orders, exports and purchasing in Ireland all fell at the fastest rates in the 22-year survey history. Jobs were shed at the joint-fastest rate on record, matching the pace seen in February 2009. Data signalled "collapsing demand" from both domestic and international markets, with new export orders contracting at a record pace.
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Japan's manufacturing sector saw its downturn intensify in April with production falling at the sharpest rate since 2009, IHS Markit data showed. The headline au Jibun Bank purchasing managers' index dropped to an eleven-year low of 41.9 in April from 44.8 in March. Order books slid deeper into contraction and sales dropped at the fastest rate for over eleven years amid reports of order cancellations. Overseas demand dropped and new export orders fell at a rate not seen since the height of the financial crisis.
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BROKER RATING CHANGES
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HSBC CUTS SHELL TO 'HOLD' (BUY)
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CREDIT SUISSE CUTS SHELL PRICE TARGET TO 1700 (1900) PENCE - 'OUTPERFORM'
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GOLDMAN SACHS CUTS SHELL B PRICE TARGET TO 1850 (2000) PENCE - 'BUY'
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HSBC RAISES NEXT TO 'BUY' ('HOLD') - TARGET 5570 (7050) PENCE
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UBS RAISES WHITBREAD TO 'BUY' ('NEUTRAL') - TARGET 3610 (4875) PENCE
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COMPANIES - FTSE 100
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RBS followed UK banking peers in reporting a sharp drop in profit due to a significant rise in credit impairments. Operating pretax profit dropped to GBP519 million in the first quarter from GBP1.01 billion a year before. The lender upped its impairment losses to GBP802 million for the period from just GBP86 million a year before. Net interest income was down to GBP1.94 billion from GBP2.03 billion, as the lender's net interest margin worsened to 1.89% from 2.07%. This was partly offset by its customer loan book rising to GBP351.3 billion from GBP306.4 billion.
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Lloyds Banking said Chief Operating Officer Juan Colombas has agreed to stay in his post until September. Colombas was scheduled to retire in July but has agreed to stay on and help the lender deal with the Covid-19 crisis.
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Housebuilder Barratt Developments said its construction work will recommence on May 11. Barratt will start a phased return to construction, with 180 sites - around 50% of the total - in the first phase. The housebuilder noted it is not planning to restart work in Scotland at the moment. Barratt said a "significant proportion" of the 85% of its workforce that has been furloughed will be able to return to work in May - but is not opening its sales centres or show homes. "Since our sales centres closed, we have continued to see customer interest, albeit at reduced levels compared to the period to March 22, 2020. As expected, since closing our sales centres, we have experienced a low level of reservations. We expect reservations to continue at low levels until our sales centres and show homes reopen," Barratt said. At April 26, Barratt has completed 11,776 homes - versus 11,723 the year before. Total forward sales stand at 12,271 with a value of GBP2.85 billion. Barratt said it continues to be financially strong, with about GBP430 million of cash at April 28.
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COMPANIES - FTSE 250
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McCarthy & Stone late Thursday said it has sold a portfolio of apartments to Waverstone for GBP35 million, as part of the company's strategy to exit its development activity from Scotland. The retirement homes developer sold 135 units with a balance sheet asset value of GBP32 million. This comprises the sale of 41 show flats and sales offices with a subsequent 12-month leaseback, and the sale of 94 finished apartments and apartments under construction in Scotland. McCarthy & Stone expects to receive GBP13 million cash on completion with the remaining GBP22 million balance expected to be paid over the next three years. The transaction is expected to generate a net profit of GBP3 million over a three-year period, it said.
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COMPANIES - INTERNATIONAL
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US pharmaceutical firm Gilead Sciences on Thursday said first quarter profit fell as it incurred costs ramping up remdesivir, a drug being trialled as a possible Covid-19 treatment. Total revenue for the first three months of the year rose 5% to USD5.55 billion from USD5.28 billion a year ago, with product sales up 5.1% to USD5.47 billion from USD5.20 billion. Product sales benefited from around USD200 million in revenue related to increased customer buying patterns and patient prescription trends, primarily in the US, due to the Covid-19 pandemic. However, attributable net income fell 21% to USD1.55 billion from USD1.98 billion, and earnings per share slipped to USD1.22 from USD1.54. "The total investments in remdesivir, primarily to expand manufacturing production, throughout 2020 could be material, but the amount, timing and accounting for the investments as well as the potential to recoup Gilead's at-risk investments at some point in the future are dependent on clinical trial and regulatory outcomes. Where authorized by regulatory authorities, Gilead will focus on making remdesivir both accessible and affordable to governments and patients around the world," it said.
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Friday's Shareholder Meetings
John Menzies
Independent Oil & Gas
Capital & Counties Properties
Man Group
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By Tom Waite; thomaslwaite@alliancenews.com
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