Can Ryanair survive airline industry meltdown & crunch?

I’m looking at Ryanair these days and I’m not impressed.

I’ve made the point before that Ryanair have ongoing legal issues with the EU, are suffering rocketing oil prices, are locked into contracts to continually buy new airplanes, are grounding planes over the winter, are considering expanding across the atlantic, are having to deal with a lot of negative PR loose canon MO’L, are only forecasting a break-even this year, depend on the lower classes/middle classes having disposable income for weekends away, when people are struggling to pay bills let alone weekends in Bratislava. Oh, and Ryanair are listed on the ISEQ. I’m very bearish on Ryanair, but not as bearish as the banks though!

IMO, Ryanair should be adopting a much conservative strategy that involves cutting back and putting expansion plans on hold. Or maybe this downturn is an opportunity for them – an opportunity to go in for the kill. But how can they raise the funds when they’re on such a tight margin and nobody’s lending, least of all to an airline company.

On the upside, Ryanair will get customers from the airlines that fail, like XL, Alitalia, Zoom etc. In other words, less competition for customers. MOL said that this was part of his strategy.

Forget about profit during a recession. Just use the recession to put your competitors out of business, and be in pole position, when the next upturn starts.

didn’t ryanair only hedge their oil for six months while everyone else, including the ESB bought for thwelve and two years ahead on the advice (probably from VIs) that oil prices will only go up from now on.
can the majors ground planes as easily as ryanair without running up against unions, i think not.
while i’m bearish about airlines too, i think as long as ryanair has ability to cut they’re a good bet

Big cash pile.
No dividend commitments.
Own their own planes (so huge assets to sink into in terms of sale and leaseback).
Lowest operating cost in Europe.
Most fuel efficient fleet in Europe.
Many airport operations almost entirely staffed by servicing companies (not owned by Ryanair).
No pseudo diversification.

I think many airlines will fail before Ryanair do. In terms of stock, though, I don’t see much upside to them.

Only for september and october, I believe and they are probably rueing their capitulation at that!

That seemed to be the outspoken strategy of M’OL but to be honest I heard XL went bust but I didn’t follow the story so I didn’t realise how big an airline they where.

This reminds me of the builders who wont reduce price in the current market and are struggling. Now we have airlines with low prices who are struggling who won’t increase prices somewhat? Perhaps I am being to simplistic.

It just seems to me that the majority of the high flying (when in don’t pun it out) business poster boys of the BOOM are finding it hard to adapt their business models once untouchable golden goose grail spewing forth cash cash cash.

Considering the passenger volumes surely modest increases would see them through. I don’t think we’d go back to the days of 400 to London but I for one have no problem paying 50 euro to fly somewhere instead of 1c. especially when that airline might treat me a little bit better in the event of any problems.

Taking a flight is not like taking a BUS but some business models have undermined our sense of intrinsic values and intrinsic risks possibly sewing the seeds of the utter demise of that which made these Poster Boom Boys so BoOmbastic.

Ryanair will have to raise guidance at their next results. It’s a steal at these levels. They hedged for Sept/Oct at higher prices and now they’ve come in and you have to believe they will back the truck up with regard to hedging at these levels. They talked about breaking even at $135/bbl so now they are in great shape.

Absolutely no chance whatsoever of them hitting the wall. If they hit the wall who the hell would survive!

OW, part of the problem with many of the airlines that are going bust is that they have presold vast amounts of seats. As catbear identifies, they have probably forward bought fuel at a high price. They cannot now afford to fly the passengers with the cost of fuel they have to pay. With recession looming in parts of the world, forward demand is thin, so there is no light at the end of the tunnel. Competition on routes is ferocious, so many airlines are unable to increase prices since their low-cost model is posited on cheaper flights rather than better service. I always like to misquote the great airline analyst Private Fraser: “Doomed, they’re all doomed.”

A bold new world then… my parents flew back to Ireland return trip with XL about a week before they went bust :blush:

Thats the Irish bubble and now a Airline Bust they have both escaped by the skin of their teeth each time relatively clueless.

Ryaniar have hedged for Q4 at $127 and Q1 09 at $121. They also locked in a $1.50 to the € exchange rate.

Yesterday, I might have thought that looked awfully expensive. This evening, I think it might look kind of lucky - what is the BK of Lehman’s going to do to the dollar? Mind you, it’ll probably blow over and so it will be expensive.

Still as matters stand at the moment $100 a barrel at $1.40 to the € it looks like another wrong call and with much of the developed world entering recession oil will still be heading south for a while yet.

I flew with them two days before they went bust. All the people who were dropped off by the plane we flew back on are now stranded. Mind you the weather being the way it is being stranded overseas might not have been such a bad thing…