Michael O’Leary, no doubt, is sincere in his aim to restart two out of every five Ryanair flights from the beginning of July. But note how his plan came with two large conditions: “Subject to government restrictions on intra-EU flights being lifted, and effective public health measures being put in place at airports.”
Think of the flight-plan, then, as also being a lobbying exercise. Having glimpsed that the lockdown door is ajar, Ryanair wants to force it open. And it would rather fuddy-duddy politicians didn’t make troublesome rules such as enforced blocking of the middle seat, a measure O’Leary has called “idiotic”.
Ryanair is not alone in the aviation industry in trying to push the pace. Yet, far from showing how easy it would be to observe social distancing measures, the company’s two-minute “return to flying” video really demonstrated the reverse. It portrayed a passenger rolling her bag through an airport that was comically empty. Real life isn’t like that, at least not when flying Ryanair.
You can’t blame O’Leary for giving it a go, but simply declaring that “it’s time to get Europe flying again” is unlikely to be enough. Government messaging on social distancing may be woefully confused but ministers, not Ryanair, still set rules on public safety.
More property gloom, courtesy of Landsec
You’d think it would not be possible to lay more gloom on the UK’s property sector, but the giant Landsec managed it. All it took was an airing of a “severe but plausible downside scenario” that imagines a 75% fall in rent receipts from retailers this year plus a 20% shortfall from office tenants.
Such an outcome would definitely count as severe, but few would previously have considered it plausible. Landlords and tenants are quarrelling over the fallout from Covid-19, but Landsec was describing a rental catastrophe.
The modelling, the owner of Bluewater in Kent and Deutsche Bank’s shiny new London office, tried to explain, was more a “going concern” exercise designed to show that the balance sheet can withstand most storms.
On that score, it’s almost certainly correct. Landsec has less financial leverage than most of its peers. It is spread across sectors, which is just as well since the value of its retail portfolio was slashed by a fifth. And it can even afford to throw £80m into a relief fund for struggling small retail tenants to keep them alive.
Yet Landsec still managed to knock 13% off its own share price, whacking valuations across the entire sector in the process, and one can understand why. The property world is inhabited by born optimists. If one of the stronger outfits thinks recovery will take until 2022 “at the earliest,” that is a very downbeat view from the ground.
Dull is profitable these days
It’s a bit rich for Nick Read, Vodafone’s chief executive, to boast about the group’s “progressive” dividend policy. It was only a year ago that he slashed the distribution by 40%, having previously defended the divi as “affordable”. Another cut now would have been killed credibility, regardless of Covid-19.
Vodafone can clearly afford to dish out €2.4bn (£2.1bn) to shareholders. It may be losing out on roaming charges, but data usage is up during lockdown, so revenues are roughly predictable. In a rarity for FTSE 100 companies these days, it dared to offer a financial forecast for the current year: free cashflow will be “at least €5bn”, so not wildly different from the €5.7bn recorded in the 12 months to March. The dividend arithmetic works.
Shareholders will probably be equally reassured by Read’s decision to rule out a counter-bid for Virgin Media. Vodafone probably couldn’t afford to intervene anyway, but leaving Virgin to marry 02 in peace looks sensible in its own right. The UK is only 10% of Vodafone, and half those revenues come from the business end of the market, where the chief rival will remain BT.
Instead, the main corporate action will be a long-planned spin-off of the European towers and masts infrastructure, where valuations have held up because of utility-like cashflows.
Indeed, a dull utility is a fair description of modern Vodafone, whose go-go years have retreated with the share price – down from 220p two years ago to 123p. The compensation for buyers at today’s levels, though, is a dividend yield of 6%, which may finally act as support. Dull is OK these days.