Friday 22 February 2019

John Mulligan: 'Ryanair's lower than expected fares good for flyers, but may hit shareholders'

 

Ryanair's CEO Michael O’Leary, Photo: PA
Ryanair's CEO Michael O’Leary, Photo: PA
John Mulligan

John Mulligan

Ryanair's woes are good news for passengers, not so good for shareholders - at least in the short term.

But even with its shares at one point yesterday hitting their lowest level in four years, it's unlikely to faze Michael O'Leary.

When Ryanair shares came under pressure in September 2017 as its pilot rostering debacle unfolded, the outspoken chief executive said he couldn't give a "rat's ass" about where the stock was trading.

And he owns almost 4pc of the carrier.

And even with lower fares, Ryanair has pointed out that its ancillary sales have improved, helping to offset some of the impact.

The airline said its unit costs are also better than expected, as it's helped by lower fuel costs and the fact that 10pc of its fuel is unhedged. It's also expecting to carry 142 million passengers, compared to a previous expectation of 141 million. But Goodbody Stockbrokers is forecasting that the airline's unit costs, excluding fuel, will rise 5.6pc in Ryanair's current financial year. The carrier is shouldering higher labour costs after pushing through pay increases for pilots after almost a year of strife that kicked off in September 2017.

The global jet fuel price is 6.4pc lower than it was a year ago, according to the International Air Transport Association. However, as of January 11, it's up 3.2pc month-on-month. But Ryanair's oft-repeated prediction of increased consolidation, retrenchment and failures within the European aviation sector is in evidence.

That should have a medium-to-long term benefit for Ryanair. It can also weather any future economic storms better than smaller rivals.

Irish Independent

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