Ryanair and Aer Lingus 'face €1.5bn losses'
29.06.08
Ryanair and Aer Lingus face combined losses of €1.5bn (£1.2 billion) by the end of next year if oil prices hit the $200 mark, the Irish Independent reports. Calculations by Davy analyst Stephen Furlong suggest that Ryanair could lose €555m this year and €651m in 2009 on oil prices of $200 per barrel. Aer Lingus would face loses of €51.3m this year and a further €238m next year.
Oil prices jumped sharply last week, hitting another record of over $140 on Thursday. Opec President Chakib Khelil said that prices could reach $170 a barrel in the coming months, with Russian firm Gazprom forecasting oil prices passing $250 in future trading.
Mr Furlong said, despite suffering ‘profitability issues’, neither Ryanair nor Aer Lingus was likely to go bust. He said: ‘The chances of either going bust are zero. Very few airlines have a net cash position. They both have tons of cash, so they are not in the same kind of position as someone like Austrian airlines.'
Cash burn rates at the two Irish airlines will soar with higher jet fuel prices. Mr Furlong forecasts that Ryanair could eat up to 19.2% of its €2.17bn cash mountain next year. This would indicate that Ryanair has 5 years worth of cash to insulate it against huge oil prices.
Aer Lingus cash burn rates are forecast to be lower at 12.6% next year. However, airlines would conserve cash by slashing capacity and hiking prices if oil was to bust through the $200 mark. Shares in Ryanair fell 10% last week, with Aer Lingus shares hitting an all-time low of €1.49, down nearly 11%.
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