Ryanair misses traffic target and braces for hedging hit as lockdown kicks in

Ryanair has frozen recruitment and cut pay by 50 percent. (Shutterstock)
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Updated 04 April 2020

Ryanair misses traffic target and braces for hedging hit as lockdown kicks in

  • It reported 2020 traffic up 4 percent to 149 million passengers, but that was short of the 151 million it had expected as of March 10 and lower than its earlier target of 154 million

DUBLIN: Ryanair missed its 2020 target for passenger traffic and expects to book an exceptional charge of around €300 million ($324 million) for the financial year that ended last month, it said on Friday.

Europe’s largest budget airline said the impact of the coronavirus disease (COVID-19) meant it was not able to provide guidance for 2021. 

It reported 2020 traffic up 4 percent to 149 million passengers, but that was short of the 151 million it had expected as of March 10 and lower than its earlier target of 154 million.

Ryanair has been forced to park much of its fleet. It is currently operating fewer than 20 daily flights, or less than 1 percent of its normal schedule of more than 2,500 flights.

For 2020 it expects to report a pre-exceptional profit after tax at the lower end of €950 million to €1 billion, it said on Friday.

That is a slightly narrower range than the €950 million to €1.05 billion it gave in February.

The €300 million exceptional charge it will take for 2020 relates to the ineffectiveness of its 2021 fuel hedges.

Ryanair said it has one of the strongest balance sheets in the industry, with year-end cash equivalents of €3.8 billion and 327 aircraft, 77 percent of the group’s owned fleet, debt free.

That compared to €4 billion in Ryanair’s last update on March 16, which Goodbody analyst Mark Simpson said suggested it was burning through €100 million a week in its initial handling of the crisis as it grounded planes.

The cash-burn could be cut to around €135 million a month if the lockdown continues into the next quarter due to cost-cutting measures, Simpson said.

He also expects Ryanair to book further exceptional charges stemming from fuel hedging in the first quarter of the financial year which has just started.

Ryanair said it was grateful to many EU governments for their “foresight and speed of response in recognizing that airlines are one of the most exposed industries” but emphasised that any such support must comply with EU state aid rules.

Ryanair is scheduled to release its 2020 results on May 18.

It said it would continue to focus on delivering cost savings in the meantime.

Last month it deferred all capital expenditure and share buybacks, froze recruitment and cut pay by 50 percent.


INTERVIEW: Humanity is not handling coronavirus pandemic very well, says health care investment chief Helmut Schuehsler

Updated 07 June 2020

INTERVIEW: Humanity is not handling coronavirus pandemic very well, says health care investment chief Helmut Schuehsler

  • Head of TVM Capital on the challenges and opportunities, successes and failures, of the COVID-19 crisis

Helmut Schuehsler has had what you might call a pretty challenging time of late — and it is by no means over.

He runs the health-care investment firm TVM Capital Healthcare from Dubai, at a time when the reputation of the medical business is being called into question due to the scandal over NMC Healthcare. The UAE’s biggest provider has gone bust with more than $4 billion in unaccounted debt.

Schuehsler operates in the private equity investment sphere, which itself is facing bigger issues than ever before, especially in health care and more so in Dubai, after the 2018 collapse of Abraaj Group, once the private equity flagship in emerging markets.

And there is the small issue of the most significant health challenge humanity has faced in over a century — the coronavirus pandemic, which has changed the economic fundamentals of the medical industry beyond recognition in the space of a few months.

“Things are coming apart,” Schuehsler told Arab News on a Zoom call from his house on the Palm, Jumeirah, where he has been self-isolating for the past three months, apart from a couple of visits to the doctor.

He was referring to the global medical infrastructure and specifically to the problems with the World Health Organization (WHO), rather than the TVM business, for which he still sees big opportunities in South East Asia and the Middle East, especially Saudi Arabia.

As a professional investor with more than 30 years’ experience in health care, he holds firm views on the way the international community has responded to the pandemic crisis.

“Humanity is not handling this very well. We should have had a strengthening of the WHO. It is irrational to destroy international cooperation in the face of an international challenge. We’re doing things in a very myopic way,” he said.

He uses the term “titration” to describe the policy response of lockdown followed by reopening and, sometimes, reimposition of curfews and travel bans. Titration is a chemical process in which two compounds are mixed together in varying quantities until they neutralize each other.

“It is a case of titrating openness against social distancing. In the beginning, it was all about not overwhelming the capacity of intensive care units to ensure people had access to beds. Now, we are managing better. The public and private sector have made room for that. The first phase of the response — providing critical health care and devices — is coming together,” Schuehsler said.

“Now you’ll see a gradual reopening and closing, again and again. The danger of an exponential growth in infection rates does not go away. If people stop social distancing and we have demonstrations and concerts with thousands of people, it will go exponential tomorrow,” he explained.

He sees some cause for optimism in the work of the pharmaceutical industry — in which TVM has been a big investor over decades — to first develop effective therapeutics and, finally, a vaccine.


BIO

BORN: Vienna, 1959

EDUCATION: PhD in social and economic sciences, business administration, Vienna University of Economic and Business

CAREER

  • Investment manager, Horizonte Venture Management, Vienna
  • Managing partner, TVM Capital, Munich, Germany

  • Chairman and CEO, TVM Capital Healthcare, Dubai


“I think that by the end of this year there will be between two and five drugs that will gain emergency approvals for marketing in Western Europe. That does not mean they will be available worldwide, but availability will be just around the corner, depending on manufacturing times and how long it takes to set up distribution systems. These will prevent people from becoming so sick that they have to go to hospital,” he said.

On the possibility of a vaccine, Schuehsler believes there could be something available by the end of next year. He does not like talk of a “silver bullet” to take out the virus, however, partly due to the long development and processes of testing and approval necessary for vaccines, and partly because of a growing sentiment worldwide against vaccines.

“It’s only a silver bullet if people are actually using it, and we all know there is a growing resistance movement against vaccines, which is unfounded and which endangers people, especially children. If we want to see our children dying again from polio or measles or chicken pox, we should stop vaccinating them,” he said.

The overall response by regional authorities in UAE and Saudi Arabia has been “OK,” he said, especially considering the distraction caused by the volatility in global oil markets.

“The confluence of those two elements — oil and the virus — has caused a difficult situation for governments. They have to spend a tremendous amount in terms of getting their pandemic response up and running,” he said.

Schuehsler was a pioneer of the biotech investment business in Germany, with a network of investors in Europe and the US, before looking at the growing health-care market in the Middle East in 2009.

Now, TVM is also expanding in South East Asia, a region Schuehsler sees as having great potential in the post-pandemic world.

The pandemic will change the way he does business. In the UAE, with its sizeable expatriate populations, some medical services will change as people leave; others have already gone through a period of contraction during the most intense phase of the COVID-19 crisis.

Fertility treatment, for example, via the Bourn Hall clinic in Dubai, saw a sharp decline in business in April, Schuehsler said, though that has recovered “a bit” last month.

About four years ago, he began to look at Saudi Arabia, the biggest health market in the Middle East. The growth there has been patient and deliberate.

“Saudi Arabia is a much larger market, with different economics and setups, but we consider it to be a very attractive area. The country is the focus point of the Middle East.

“You need to believe certain things when it comes to Saudi Arabia. For example, that the Vision 2030, the opening up and diversification of the economy, will still happen even despite the COVID-19 and oil crises. You have to believe that they will stay the course and that things have been simply delayed and not indefinitely postponed. But we are making that assumption,” he added.

TVM does not invest in hospital chains, but rather in more specialist medical businesses: Long-term acute care, home care and disease management, ventilated care, fertility and reproductive treatment, and the manufacture of medical devices via an Egyptian subsidiary.

Schuehsler has expanded from the UAE to the Kingdom via the Manzil Healthcare Services brand in Riyadh and the Cambridge Medical business in Dhahran. The medical devices business recently signed a partnership deal with the well-known Olayan Group to expand distribution in the Kingdom.

He believes there are still opportunities to invest despite the crisis but warns that the investment outlook has changed.

“Deal making is less clear to me. For an investor, this is not a particularly great time because none of us can predict the future. If you look at a company that has lost half its business and you think you can do great deal, then maybe,” he said.

Timing of investment decisions takes on critical importance, he added.

There is also potential in introducing investors from the US and Germany to Saudi partners. 

“There are a lot of German companies that have good connections in Saudi Arabia, and Saudis appreciate German technology and products. There have been many contacts made with the Saudi government and health-care industry. We can help investors from Germany because we have excellent relationships in the Kingdom,” he said.

During his career, Schuehsler has raised more than $1 billion in committed capital from global investors, overseen 120 investments in the health industry, and been involved in more than 80 major transactions over the years, including the lucrative sale of his ProVita International business to NMC in 2015.

He understands the concerns of investors, employees and patients in the health business and how to avoid the pitfalls that have bedeviled health care and private equity recently in the Middle East.

“TVM has all the transparency and governance you could want. We run our business in the Middle East in the exactly same way we would have run it if we’d been in Boston or Munich,” he said.

“I think people look at private equity and health care with suspicion because so many bad things have happened. We get caught in this, but we are the most internationally minded player in the way we build partnerships, the way we compensate people, the way we run our board meetings in portfolio companies.

“That’s what I’m trying to put in place: Openness, transparency and compliance in the markets we invest in. That’s our contribution to broader society,” he added.