• 3/14/2020 5:00 AM
  • Niva

Lowcost airines in crisis due to coronavirus pandemic, Ryanair takes the biggest financial hit

WizzAir’s CEO estimates that current travel crisis and dramatic drop in demand for flights can last up to six months. A number of adjustments is planned to mitigate the financial hit, but the main problem for lowcost airlines is the fact, that Italy is their biggest market.

Each day brings grim news for aviation industry around the world. Most airlines see drastic declines in bookings and numerous flight cancellations. Last week Lufthansa slashed 7100 flights until end of March and now they’re cutting another 23,000 flights planned between 29 March and 24 April. German flagship carrier also requested government help due to these dramatic circumstances and at this moment it’s hard to predict how long will this situation last and what measures are yet to be taken.

“Over the next few weeks, the flight schedule may be reduced further by up to 70 percent compared to the original plan,” the airline said.

Airlines seem to be preparing for the worst.

Wizz Air is preparing for a six-month crisis

A letter written by airline CEO József Váradi informs employees that they are expecting an unprecedented downturn in the April-June quarter due to coronavirus outbreak. However, Váradi adds that he hopes the company will be fully operational again in July. WizzAir plans to reduce operations in the next 3 months by at least 20% and look for further savings in staff dismissal – even the management positions are being reduced. The airline also attempts to renegotiate contracts with suppliers, extend payment deadlines, and even postpone the delivery of new aircrafts.

“Today’s situation is painful for the industry as a whole, including Wizz Air, but the company is in a stable position thanks to its high cash holdings, which will help us out of the crisis. Experiences of the September 11, 2001 terrorist attack and the SARS epidemic have shown us to result in a half-year long crisis, “said Wizz Air’s CEO.

But the problems that airlines are dealing with are more complex – current crisis comes in a time of year that brings the most profit. It’s the beginning of summer flight schedule, when many passengers would book their holiday flights to countries currently affected by coronavirus pandemic. It’s clear that some companies will not survive the financial struggle.

That’s why we should look closer at Ryanair’s situation:

This is the list of ENAC, the Italian civil aviation authority, which sorts airlines operating in Italy by the number of passengers transported. This data set shows numbers for 2018 as data for 2019 is not yet available, but it’s easy to see that Ryanair’s situation heavily relies on operations to Italy. In 2018 they carried over 37.8 million passengers not only from and to Italy, but also on many domestic routes. To put things in perspective: in 2018 Ryanair carried a total of 139.2 million passengers, so Italian market adds up to 27.1% of total passengers carried that year. And even if we’re not sure of exact numbers for 2019, we can assume that Italy was at least as important for Ryanair. What about WizzAir? Data comparison shows that Italian market added up to “only” 14% of passengers.

Ryanair has large cash reserves and thanks to previous changes in structure and employment contracts, it can quickly react to aviation crisis, but it’s currently not clear how big of a financial hit the company is going to take .

Main photo: Shutterstock.com
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