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Markets Today: Positive outlook for the strongest in the travel arena

Catch up with today's top business stories
Markets Today: Positive outlook for the strongest in the travel arena
  • Ryanair and Heathrow look to the future with optimism 
  • Cruising resumes in the US 
  • UK companies updates: Cranswick first quarter update, Anglo American platinum

Ryanair and Heathrow numbers highlight Covid pain

Ryanair (RYA) might have unveiled 379 new routes in an attempt to capitalise on the slow re-opening of air travel in 2021, but management said that Covid-19 has “continued to wreak havoc on our business”. The group posted a first-quarter loss of €273m, wider than losses of €185m reported a year earlier, even as passenger traffic rebounded from 0.5m to 8.1m. An uptick in capacity in May and June wasn’t enough to offset the blow dealt by Easter travel being cancelled and the increase in costs from getting planes back in the sky.

But exacerbated costs won’t last forever. Indeed, chief executive MIchael O’Leary believes his company will have a “materially lower cost base” going forward which will contribute to ”an industry leading recovery”. Management also reckons that FY22 traffic has “improved to a range of 90m to 100m”, having previously expected to hit the lower end of a range of 80m to 120m.

June’s cash balance stood at €4.06bn, up from €3.15bn in March, and net debt fell from €2.28bn to €1.66bn. 

First half numbers from Heathrow airport also showcase the pain that Covid-19 restrictions have inflicted on the UK’s travel industry. While Covid-induced cumulative losses stand at £2.9bn, but management said that its “financing remains resilient” after it reduced cash burn by more than a half versus H1 2019. Heathrow has cut operating costs by more than a third and capital expenditure by more than three-quarters. 

For the six months ending 30 June, Heathrow’s revenues sunk 51 per cent year-on-year to £348m. Pre-tax losses narrowed from £1.1bn to £868m. HC 

Cruising returns to the US 

Meanwhile, celebrations are taking place on the Pacific coast of the US as cruise ships relaunch for the first time in almost 18 months. Princess Cruises and Holland America - two lines belonging to listed group Carnival (CCL) - kicked off their summer season of exploring in Alaska over the weekend with the launch of one ship each out of the port of Seattle. 

International travel has had a bad pandemic and cruising has been especially badly hit. The negative press surrounding the outbreak of the virus on the Diamond Princess cruise liner back in early 2020 has scared many potential customers away from booking cruises even as ships have relaunched. And the fallout from the lack of travel has impacted many industries, especially in the ports from which the boats normally dock and launch. The two cruise lines which have resumed sailing from Seattle over the weekend contribute more than $364,000 to the local economy per ship during a full season.

Cruise ships are expensive to operate at the best of times, but keeping them docked for prolonged periods has been painfully expensive, many companies have scrapped vessels to stem the hemorrhaging of cash from their balance sheets. 

And yet in 2021 share prices of many of the cruise lines have recovered. Carnival was one of the highest risers in the FTSE 250 in the first few months of the year and peer Saga (SAGA) has also delivered handsomely for shareholders. As ships return to the waters it will be interesting to see whether passenger numbers can justify that recovery. 

UK looks to remove China from nuclear power projects

The future of the UK’s planned nuclear projects at Sizewell in Suffolk and Bradwell-on-Sea in Essex is in doubt as Britain looks to remove China's state-owned nuclear energy company China General Nuclear Power Group (CGN) from all future power projects.

Sizewell C - the next nuclear power station due to begin development in the UK - is currently contracted to French energy company EDF, but will rely on funding from CGN. 

Chinese involvement in British nuclear is an undoubtedly contentious subject. On the one hand, the race to net zero will prove a tricky task without nuclear energy (and building the power stations won’t be easy without the financial power of China), but on the other the political and safety concerns continue to plague planning. You can read more about the UK’s nuclear future in our recent analysis.