Tag Archives: Ryanair Holdings PLC

Southwest and British Airways deals send Velocys shares surging

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Shares of London-listed fuels technology firm Velocys rose by more than 40% on Wednesday after it announced two deals related to the supply of aviation fuel.

In a statement, the company said its subsidiary, Velocys Renewables, had entered into an agreement with Southwest Airlines.

The deal relates to a planned biorefinery in Mississippi, with Southwest set to buy an expected 219 million gallons of sustainable aviation fuel at a fixed price across a period of 15 years.

“After blending, this will enable approximately 575 million gallons of net zero SAF,” Velocys said. The Bayou Fuels biorefinery is slated to start commercial delivery of fuel “as early as 2026.”

In addition to the deal with Southwest, Velocys Renewables signed a memorandum of understanding with the International Consolidated Airlines Group. Again, the deal is connected to the Bayou Fuels project.

According to Velocys, it “covers the purchase by IAG’s constituent airlines, which includes British Airways, Aer Lingus and Iberia amongst others, of an expected 73 million gallons of SAF, in aggregate, at a fixed price.”

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The purchase contract is due to last for 10 years from 2026. Post blending, the equivalent of 192 million gallons of net zero SAF will be generated.

In a statement issued alongside Velocys’ announcement, IAG’s CEO, Luis Gallego, described the agreement as “another important step towards achieving our goal of 10 per cent sustainable aviation fuel use by 2030.”

Although the European Union Aviation Safety Agency says there’s “not a single internationally agreed definition” of sustainable aviation fuel, the overarching idea is that it can be used to reduce an aircraft’s emissions.

According to Velocys, Bayou Fuels will focus on processing waste from the lumber and paper industries, which it describes as “woody biomass forest residue that would otherwise rot on the forest floor or contribute to forest fires.”

Carbon capture and storage technology will be used at the project to allow for what Velocys calls “the commercial-scale production of SAF with an extremely negative carbon intensity.”

Aviation’s challenge

As concerns about sustainability and the environment mount — the World Wildlife Fund describes air travel as “the most carbon intensive activity an individual can make” — discussions around aviation are increasingly focused on how innovations and ideas could cut its environmental footprint.

In a recent interview with CNBC’s Steve Sedgwick, Ryanair CEO Michael O’Leary was cautious when it came to the outlook for new and emerging technologies in the sector.

“I think … we should be honest again,” he said. “Certainly, for the next decade … I don’t think you’re going to see any — there’s no technology out there that’s going to replace … carbon, jet aviation.”

“I don’t see the arrival of … hydrogen fuels, I don’t see the arrival of sustainable fuels, I don’t see the arrival of electric propulsion systems, certainly not before 2030,” he went on to say.

“So it will certainly be after my career in the airline industry is finished … but I hope it will get here before the end of our mortal lives.”

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Europe’s low-cost airlines could have the edge in a post-Covid world

Ryanair and EasyJet airplanes.

Horacio Villalobos | Getty Images News | Getty Images

LONDON — European low-cost airlines have clear advantages over larger flag carriers in a post-pandemic world, analysts have told CNBC, despite the massive support packages deployed from governments around the world.

It’s been a bruising time for airlines as the coronavirus pandemic brought travel to a halt. But now, low-cost carriers seem to be showing signs of recovery compared with national carriers, which can often be subsidized or given preferential treatment.

“You are seeing legacy carriers unable to move so quickly compared with the lost-cost carriers out of the pandemic,” Paul Charles, chief executive officer of the luxury travel consultancy firm The PC Agency, told CNBC’s “Squawk Box Europe” Monday.

The International Air Transport Association said earlier this month that both international and domestic flights surged in July compared to June, but demand was still “far below pre-pandemic levels.” In Europe alone, passenger traffic was still down 56.5% from July 2019.

However, easyJet, a British low-cost carrier, said it expects to fly up to 60% of its 2019 levels in the three months between July and September. In comparison, IAG — the owner of British Airways said it only expects to fly around 45% of its 2019 capacity over the same period.

Lufthansa, another flag carrier, predicts it will fly around 40% of its 2019 levels in the whole of 2021. Budget airline Ryanair, meanwhile, said its fiscal full-year traffic to March could reach between 90 and 100 million passengers — which would represent between 60% and 67% of the 148.6 million passengers it flew in the full year to March 2020.

Laura Hoy, equity analyst at Hargreaves Lansdown, said that low-cost airlines benefit from being focused on short-haul flights. These are proving to be more attractive to consumers given ongoing travel restrictions and uncertainty over the pandemic. 

In addition, Hoy added that amid economic uncertainty and potential for further disruption going forward, consumers are not keen to spend much on flights, which also benefits the business model of low-cost airlines.

Ryanair shares are up 1.8% year-to-date. Wizz Air shares, another low-cost firm, are up by 7.5% over the same period, while easyJet’s are down 9%. Wizz Air had approached easyJet over a potential merger, but the latter declined the offer last week.

On the other hand, IAG is down 2.6% year-to-date and Lufthansa shares are also lower by 19.7% over that period.

The outlook

“You are going to see the likes of easyJet able to take up more opportunities. That means potentially getting more slots, but also moving their fleet around more quickly in order to take advantage of where demand is,” Charles from The PC Agency also said.

This is despite the massive injections of cash that different governments made in the wake of the pandemic to flag carriers, namely the 9 billion euros ($10.6 billion) that the German government gave to Lufthansa. British Airways also received a £2 billion loan from the U.K. government in December.

“The aid got them through a bad time,” Hoy said, but it didn’t support their growth. The financial help came with a lot of conditions attached, including restrictions to dividend payouts, she added.

In addition, there are question marks about how far governments will be willing to go to keep their flag carriers afloat. They have supported the sector, but some are facing legal action over it and they are, in general, strapped for cash after the efforts to contain the economic shock from the virus.

“There is going to be a change of tune,” Charles said, as “governments are looking to offload where they can, they can’t afford to keep some of these stakes, they would rather cash them in and see private sector buyers inject more innovation into the sector.”

“I think you will see some loosening over time, especially in Europe, of some of these restrictions on who can own carriers, so now is the time that actually you will see more private equity starting to emerge into the sector. And this is on the back, of course, of many short-haul carriers able to take their market share from those legacy carriers,” he added.

 

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Europe’s travel industry desperate as Covid surges

Workers carry a scaffolding on “Paradise” beach in the Greek Cycladic island of Mykonos in 2020. The island is traditionally crowded with wealthy foreigners but turned into a ghost island last year.

ARIS MESSINIS | AFP | Getty Images

During the Covid-19 pandemic, perhaps no other industry has been harder hit than the global travel and tourism sector with planes grounded, resorts closed and care-free vacations a distant memory for most of us.

Some countries in Europe — Greece, Spain and Portugal, for example — rely on tourism to boost economic growth with the prosperity of thousands of businesses, livelihoods and communities tied to the success or failure of the season.

As Covid vaccinations were rolled out across the region since late 2020 there were high hopes that Europe could look forward to a rebound in summer tourism this year.

Instead, the season is looking highly uncertain as the delta variant surges in Europe, prompting a plethora of varying rules and restrictions, traffic-light systems designating country risk profiles as well as possible quarantines and vaccine entry requirements.

Fourth wave?

Travel within Europe these days is certainly not for the faint-hearted, in more ways than one. The Covid infection rate has surged across the region as the highly infectious delta variant has swept the globe.

As with the previous alpha variant (which delta has now usurped) the U.K. was something of a harbinger of doom when it came to what the rest of Europe could expect. Britain saw a further Covid wave at the start of the year caused by the alpha variant and is now seeing another wave with delta.

Despite efforts in the continent to hold back the variant, the inevitable spread has taken place with the strain now accounting for the majority of new infections from country to country.

The Netherlands and Spain have seen big surges in cases, largely attributed to the night time sector after both countries reopened their nightclubs in late June, only to reverse course two weeks later. Meanwhile, France declared it was entering a fourth wave of the pandemic earlier this week, with government spokesman Gabriel Attal sounding the alarm:

“We have entered a fourth wave. The dynamics of the epidemic are extremely strong. We see a faster wave, and a sharper rise than all the previous ones … the incidence rate continues to explode … A rise so big, so sudden, we haven’t seen that since the beginning of the pandemic,” Attal said on Monday.

Tourism and airline stocks took a beating at the start of the week when global markets plunged sharply on renewed fears for the global recovery. EasyJet and Ryanair, well-known low-cost airlines in Europe, were among the stocks seeing pronounced declines. Shares of easyJet, for example, were trading at 842.20 pence on Friday but plunged to 758.20p by Monday early afternoon.

Easyjet’s CEO Johan Lundgren told CNBC on Tuesday that the travel sector was facing an “extraordinarily challenging” situation, but that vaccination programs in Europe were the key to reopening. Data shows two doses of the Pfizer-BioNTech or AstraZeneca-Oxford University are effective against the delta variant and lower the risk of hospitalization and death.

“We always knew that [the recovery] was not going to be a straight line … But we are seeing that restrictions are being unwound. But it’s absolutely true that when you do open up societies and communities, there is an increase also in infections. The question is to make sure the vaccinations are breaking the link between [infection and] severe hospitalization and death, and fortunately it looks to be that way,” Lundgren told CNBC’s “Squawk Box Europe.”

Complex travel

Anyone making last-minute plans for a European vacation this year should brace themselves for an often confusing, complex and rather stressful experience — and that’s before you’ve even stepped off the plane.

Take going to Greece from the U.K. — a vacation that 3.4 million Brits did in 2019, official statistics show — as a general example of the complexities of going on vacation in these troubled times:

Greece is allowing visitors from the U.K. if they can provide proof of a negative Covid-19 PCR test, undertaken within the 72-hour period before arrival into the country or proof of a negative rapid antigen test undertaken by an authorized lab within the 48-hour period before the scheduled flight; or proof of two doses of a Covid vaccine completed at least 14 days before travel.

Before you even get to Greece, however, you have to fill in a Passenger Locator Form no later than 11:59 p.m. (local time) of the day before arriving stating your vaccination status, vacation address and next of kin. Then before returning to the U.K., holiday makers have to do a PCR test and fill out another passenger locator form and then within two days of after arriving back in the U.K. do a further PCR test or quarantine for 10 days.

All that, and Greece is actually one of the easier places to go on vacation this year.

Like its fellow European countries, Greece has not escaped the somewhat inevitable rise in Covid cases as the economy (particularly the island night time economy) has opened up. Still, the daily number of cases appears small compared to, say, France or the U.K. On Wednesday, Greece reported 2,972 new cases, 19 of which were located after checks at the country’s borders.

Busier times in Paliouri beach, Greece: This image was taken in 2017 which was considered to be one of the best performing summers, in terms of visitors arrivals.

NurPhoto | NurPhoto | Getty Images

Wolfango Piccoli, co-president of risk consultancy Teneo Intelligence, noted on Wednesday that the resurgence of Covid-19 in Greece “poses new challenges, especially with regard to another meager tourism season and the economic consequences that will follow,” circumstances that put pressure on Prime Minister Kyriakos Mitsotakis.

“Mitsotakis had been hoping to leave the pandemic behind this summer as his center-right government reached the midway point of its four-year term in office. He was aiming to oversee an improvement in tourism receipts, the launch of Greece’s recovery plan and a return to growth. However, Covid-19 numbers have risen significantly in recent weeks and the vital tourism sector is already pushing for more state support in the autumn amid fears of more disappointing visitor numbers this year,” Piccoli noted.

As the Delta variant is gradually becoming more dominant, Piccoli noted that Greece faces a conundrum as “the number of daily vaccinations has slowed this month to below 100,000 despite the government offering Greeks aged 18-25 a 150-euro ($177) incentive to get vaccinated.”

So far, he said, only around 120,000 out of an estimated 980,000 Greeks in this age group have been vaccinated.

Vaccination levels in the general population have reached almost 52% for at least one dose of the vaccine and nearly 44% for complete vaccination, Piccoli noted, adding that “the recent slower uptake has raised doubts about whether the government can achieve its target of vaccinating 70-75% of the adult population by the end of the summer.”

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