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Ryanair (RYAAY) stock was down about 0.32% on Friday but today in the-premarket it is over 9% up. This comes as the airline industry is taking a serious hit due to the COVID-19 pandemic.
Ryanair (NASDAQ: RYAAY) stock price fell by about 0.32% in the last trading session. The reason for this has been ascribed to the purported job cuts within the Irish airline. At the time of filing this report, in the pre-market, however, Ryanair (RYAAY) stock was at $54.49 (+9.53%).
Sources say that the job cuts come as the COVID-19 situation cut passenger numbers by as much as 5 million. The budget airline is reportedly in talks with unions and employees for up to 3,000 job losses.
Ryanair (RYAAY) Stock Price Falls as the Air Travel Industry Goes into Shock
This comes as the coronavirus has wiped out the travel industry. This is because of the movement restrictions. They have kept most countries out of the skies. There are more than 1 billion people on lockdown.
Ryanair CEO Michael O’ Leary is positive about the return of travel to the European skies. He told sources that “deep price discounting” on bookings is bound to occur.
Its year-end results in March paint the picture of a healthy company. Ryanair reported a year-to-date 10% revenue increase (€8.49 billion). Profits were at € 1 billion.
Ryanair has already indicated a tough year ahead because of COVID-19. Most of its places have been grounded since March. Only about half its fleet’s capacity will resume in the second quarter of this year.
Micheal O’Leary told sources that he expected many European travelers to go on summer break. He said:
“We do think families will still go on the summer holidays once the school holidays come around, but at best we think we are talking about 50% of our normal traveling”.
This shows that even the best optimistic estimates are half of what things used to be. This cautious optimism is expected to continue until a COVID-19 vaccine that works is found.
O’Leary also said that Ryanair won’t be taking any government stimulus. He said that such measures destroy the competitive environment. This comes as European governments are seeking to prop up airlines across the region. He underlined:
“As the restrictions ease or lose all credibility … I think you will see people returning in quite quick numbers, but mainly on the back of deep price discounting both for the airfares and also for the hotel and accommodation packages”.
Air Travel Will Rely on a New Business Model
Such a business model won’t be possible without some form of external support. Creditors at this time aren’t lending to risky businesses. Airline travel is one of the riskiest and most profitable businesses on earth.
Most governments are stepping in to fill this gap. Micheal also indicated his dislike for the 14-day isolation rules for travelers. He also said that Ryanair is in discussions with several governments on the issue.
Though Michael O’ Leary is light years away from the paper napkin moment when Ryanair was born, he still needs some of that creativity to survive this period.
That may be the difference between sinking or swimming.