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UPDATE 2-Ryanair steels for winter 'write-off' as travel gloom deepens

Wed, 9th Sep 2020 09:24

* Ryanair cuts traffic goal on COVID resurgence

* Move follows easyJet, Wizz Air cutbacks

* Well-funded low-cost carriers at advantage - analysts
(Adds detail, comments, background)

By Conor Humphries and Laurence Frost

DUBLIN/PARIS, Sept 9 (Reuters) - Ryanair slashed its
annual passenger target by another 10 million on Wednesday,
becoming the latest European airline to signal more capacity
cuts as resurgent COVID-19 infections and travel restrictions
dent recovery hopes.

"The winter of 2020 will be a write-off," Ryanair Group
Chief Executive Michael O'Leary predicted in an interview.
Europe's biggest low-cost carrier is preparing to close some
bases and shrink others, he told Reuters.

Airlines have blamed an uneven patchwork of travel
restrictions and quarantine rules across Europe for a stop-go
recovery that has proven tougher than many expected.

Ryanair's low-cost rival easyJet, already cutting
4,500 jobs and closing three UK bases, further reduced its
flying schedule for the current quarter on Tuesday.

And Wizz Air, which had touted an aggressive push
for market share and even a new London Gatwick base, last week
scaled down operations for the current quarter to 60% of
capacity from the previously expected 80%.

Overall, September short-haul schedules have been cut to 43%
of European capacity from 47.6% in August, Barclays analyst
Rishika Savjani said - and that only tells part of the story.

"We think demand is tracking below these levels, and
therefore we'd expect weaker load factors and weaker pricing for
the quarter," Savjani said in a Tuesday note, referring to a key
metric for the proportion of aircraft seats filled.

"Pricing is going to be aggressively down" in coming months,
the Ryanair boss said. O'Leary was among the first CEOs to warn
of a virus-induced price war in comments since borne out by a
recovering Chinese market, where some carriers now offer
all-you-can-fly deals.

Ryanair now expects to fly 50 million passengers in the
fiscal year to March, one-third of the previous year's number.
The goal was previously cut to 60 million in July from 80
million in May and could go lower still, O'Leary cautioned.

"We're probably looking at closing more bases and
withdrawing more capacity in those countries where you're
operating completely defective and non-scientific quarantines,"
he added - citing Britain, Ireland, Spain and Portugal.

Fourteen-day Western European infection rates that have
risen to 64.9 per 100,000 from 19.4 in late July are "not
reflected in share prices", with airline stocks up 14% over the
period, Goodbody analyst Mark Simpson warned.

Behind the cutback announcements, Ryanair and Wizz remain
relatively well positioned over traditional airlines with more
"exposure to high-risk long-haul markets", Simpson said.

Further setbacks may leave legacy carriers like Air
France-KLM and Lufthansa in need of yet more
funding on top of their multibillion-euro state-backed bailouts,
other analysts warn. Air France needs a strong recovery to avoid
the looming prospect of nationalisation.

O'Leary, who last week bolstered Ryanair's already strong
balance sheet with a 400 million-euro share issue, remains
confident the Irish no-frills carrier can come out on top.

"Our rivals have withdrawn huge amounts of capacity," he
said. "The competitive landscape if anything is getting easier."
(Reporting by Conor Humphries and Laurence Frost; editing by
Jason Neely and Mark Potter)

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