Ryanair foresees using equity or bond financing to finance its future Boeing 737 Max orders but does not rule out using the Export Import Bank of the United States (Ex-Im) as a “backstop”.
Speaking on an analyst call, Ryanair Group chief executive officer Michael O’Leary said the carrier would likely use a mix of equity and “low-cost” bond financing to fund future orders.
But in a “crisis eventuality” Ryanair could also tap US Ex-Im support.
O’Leary ruled out sale and leaseback transactions to fund orders, describing those airlines that did so as securing “distressed prices” and leasing back the aircraft at what are “very disadvantageous financing costs in the current climate”.
Ryanair by contrast continues to have a fleet which is approximately 80% unencumbered, he added.
O’Leary also disclosed that the Irish carrier was in discussions with Boeing over additional orders, including for 737 Max 10 aircraft.
He said discussions were currently focused on the 737 Max 200, of which Ryanair currently has 135 firm orders and 75 options, as the US manufacturer was not in a position to engage on more detailed discussions regarding the Max 10.
“Boeing are not in a position to engage in discussions about the Max 10 at the moment. They have pushed back production and deliveries of the Max 10 by anything up to two years,” he said.
“We have agreed with Boeing that we will be first in the queue when it comes to a discussion on Max 10 availability and pricing and it is something certainly we would be looking at going forward,” O’Leary added.
Ryanair chief financial officer Neil Sorahan said that the carrier has no cash flow related to capital expenditure between now and March 2021, even with 30 Max aircraft due for delivery in the first half of next year.
While the Dublin-headquartered carrier received €250 million ($287 million) of “supplier reimbursements” in the second quarter, compensation discussions will not be finalised or concluded with Boeing until the Max returns to service and revised delivery schedules can be finalised and agreed.
At the end of its first half, on 30 September, Ryanair had more than €4.5 billion of cash available and a fleet with a book value of over €7 billion.
O’Leary said the group has no plans to raise additional debt or equity in the market, unless there is no prospect of a vaccine and the Covid-19 crisis stretches out several years.
With £660 million ($757 million) of UK government-backed financing and another €850 million bond that matures in 2021, he estimated the carrier would have approximately €3.5 million of cash by the middle of the year.
He said Ryanair would not go below a reserve of €1 billion of cash.
O’Leary said Ryanair would be open to extending the lease contracts of existing aircraft if lessors were prepared to offer attractive rates.
Aircraft rentals fell by 83% to €4.8 million in the six months to 30 September due to 14 fewer leased 737 aircraft in the fleet.
Ryanair suffered a 99% drop in profits in the second quarter, to €10.6 million, from €1 billion in the same period a year before.
Revenues fell 66% to €1.05 billion from €3.07 billion in the same three months in 2019. Operating expenses fell 50% to just over €1 billion, from €2.06 billion the year before.
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