On Tuesday, the budget carrier's colourful chief executive Michael O'Leary said that while it expected the MAX range of aircraft to return to service by September this year, the exact date was “uncertain” and could be as late as December.
Ryanair currently has a number of MAX200 aircraft, a variant of the MAX range, on order for next year, however, O’Leary said that assuming the MAX returned to service by December it expected to receive up to 30 MAX200’s by May 2020, less than the 58 originally predicted.
As a result of the lower number of new planes and the subsequently lower summer growth forecast, the CEO said full-year traffic growth for 2020 was now expected to be around 157mln passengers, down from previous estimates of 162mln.
O’Leary added that the shortfall in aircraft would also necessitate “some base cuts and closures” for both the 2019 winter and 2020 summer periods.
The Boeing MAX range of aircraft have been grounded since March after two fatal crashes involving the aircraft occurred in Indonesia and Ethiopia less than six months apart.
While the causes of the two accidents have not yet been confirmed, there is speculation that it may be due to a fault in the stability computer that helps keep the plane in the air.
Several airlines have either cancelled or delayed their own orders for MAX aircraft following the incidents, while Boeing itself has seen its share price take a hammering as it struggled to address the faults and appease regulators.
Shares higher on possible margin benefits
Despite the seemingly glum news, shares in Ryanair were 1% higher at €10.2 in early trading on Tuesday.
The reason behind the bounce, according to Markets.com’s Neil Wilson, appeared to be that while Boeing’s woes had “shattered Ryanair’s 2020 planning”, stripping out excess capacity through having a smaller fleet of aircraft could boost pricing power and lift margins.
However, he added that the loss of capacity would also benefit Ryanair’s rivals as a result of the market leader having less space for passengers.
This appeared to have borne out in the market, with shares in competitor easyJet up 2.6% at 1,022p.
Broker retains target despite forecast cut
Meanwhile, analysts at Liberum maintained their ‘buy’ rating and €12.5 target price for Ryanair, saying in a note that the price was “justified” given the carrier’s market leadership among fellow European airlines and saw any short-term weakness in the share price as a “buying opportunity in the long-term”.
However, the broker concurred that the read-across for other European short-haul airlines was “positive”, particularly for non-MAX operators, while Ryanair’s plans for base closures later this year could point to “underlying weakness” in the group’s trading.
--Adds analyst, broker comment and share price--