Ryanair Says Coronavirus Could Keep Europeans Closer to Home

(Bloomberg) --

Ryanair Holdings Plc said demand for air travel within Europe could receive an unlikely boost if the Chinese coronavirus epidemic persists, prompting people to holiday closer to home.

Trends from 2003, when travelers shunned Asia after the Severe Acute Respiratory Syndrome outbreak, suggest consumers may begin to alter their travel habits, Ryanair Chief Financial Officer Neil Sorahan said in an interview.

“People tended to stay close to home,” Sorahan told Bloomberg Television on Monday. “They holidayed in Europe as opposed to heading as far afield as Asia and elsewhere.”

The coronavirus that spread from Wuhan in recent weeks has killed more than 360 people and infected 17,000. Dozens of nations and airlines are restricting travel, with almost 10,000 flights canceled through Jan. 31, according to data provider Cirium, even though the World Health Organization has so far said that such limits aren’t needed to control the advance.

SARS affected 26 countries, resulting in close to 800 deaths from about 8,000 cases, according to the WHO. Fitch Group said in a note that a prolonged outbreak of the coronavirus would weigh on the tourist economy in Thailand, affecting not only Chinese demand but travel from elsewhere. As of Monday the Southeast Asian country had 19 confirmed cases, Fitch said.

For Ryanair, a surge in European travel would bolster margins as it grapples with the grounding of Boeing Co.’s 737 Max jet. The discount giant reaffirmed that deliveries from a 200-strong order won’t commence until September or October, so that fuel-efficiency savings won’t be realized until late in the fiscal year starting in April.

Chief Executive Officer Michael O’Leary said he expects Boeing to compensate Ryanair for lost revenue from the Max both this fiscal year and next, and that the focus will be on revising the order price. The carrier has specified a high-capacity variant that will take longer to certify than the baseline model.

Ryanair has also issued proposals for the purchase of bigger Max 10 jets seating up to 230 people, O’Leary said, while adding that it may be too early for Boeing to give the matter serious consideration. He said the planemaker needs to target orders from major clients such as his own company and Southwest Airlines Co. to rein in Airbus SE’s lead in the narrow-body sector.

Ryanair posted net income of 88 million euros ($98 million) for the third quarter through December from a year-ago loss, aided by last-minute sales over the Christmas holidays. Bookings are 1% up on last year, with planes 96% full, so an increase in regional travel would push up fares.

Shares of Europe’s biggest low-cost carrier were trading 5.2% higher at 15.68 euros as of 1:11 p.m. in Dublin, where it is based.

To contact the reporters on this story: Siddharth Philip in London at sphilip3@bloomberg.net;Manus Cranny in London at mcranny@bloomberg.net;Nejra Cehic in London at ncehic@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, Christopher Jasper, John Bowker

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