The continent’s largest low-cost carrier sold €850m of five-year bonds on Tuesday at a yield of 3 per cent © Paul Faith/AFP/Getty

Ryanair has become the first big European airline to sell a bond since the start of the pandemic, as investors shrugged off concerns about tightening travel restrictions in Europe.

The continent’s largest low-cost carrier sold €850m of five-year bonds on Tuesday at a yield of 3 per cent, after investors put in €4.4bn worth of orders.

Airlines have been hit hard this year by nationwide shutdowns, travel restrictions and social distancing measures imposed by governments to reduce the spread of coronavirus. On Monday, the UK government added seven Greek islands to its quarantine list.

Mark Lynagh, co-head of Emea debt markets at BNP Paribas, who worked on the deal, said the bond sale was an “opportunistic refinancing exercise”, as Ryanair has an €850m bond due to be paid back next summer.

The deal underlined the hunger for yield from investors after drastic action from central banks this year cut interest rates to record lows. Ryanair’s is the first straight bond sale by a European carrier in that environment — but follows an issuance by Finnair, the Finnish airline, which last month raised €200m of hybrid debt with a 10.25 per cent coupon in late August.

One UK-based fund manager and investor in Ryanair said the Irish airline has “the best quality balance sheet” compared with its European peers, with €3.9bn of cash at the end of June. The investor added that a long-term decline in business travel does not present a threat to the group.

The budget carrier has maintained its triple-B, investment-grade credit rating during the pandemic, unlike rival airlines such as British Airways which sank further into “junk” territory yesterday after Moody's downgraded its owner IAG to Ba2. The rating agency cited IAG’s high exposure to long-haul and corporate travel.

Tuesday’s bond sale by Ryanair followed a €400m raising of equity last week.

“In an environment where it’s all about liquidity, they are in a very solid position,” said a banker working on the bond deal.

Ryanair declined to comment.

The airline came under fire this month for paying a €450,000 bonus to chief executive Michael O'Leary despite putting staff on furlough and taking £600m in government financial support.

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Meanwhile, a resurgence of coronavirus cases across Europe has led Ryanair to cut its flight numbers for the autumn months. The airline had hoped to run 70 per cent of its normal schedule in September, more than its main rival easyJet. 

“They'll always do well in a recession,” said Mr Lynagh of BNP Paribas, noting that Ryanair has lots of domestic routes that would be unaffected by new or existing restrictions on international travel.

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