Bon Voyage

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What's going on?

Ryanair reported better-than-expected results on Monday, as Europe’s biggest low-cost airline lives out all its mid-pandemic fantasy of seeing the world again.

What does this mean?

A few factors have been working in Ryanair’s favor lately: a successful vaccination rollout, Europe’s introduction of digital travel passports, and, of course, huge pent-up demand to go somewhere, anywhere new. That led to a surge in late summer bookings and a smaller-than-expected quarterly loss, and it’s been stoking hopes for a long-awaited rebound for Europe’s airlines.

Ryanair’s expecting to post a profit this quarter too, which should help the company just about break even when its financial year ends in March 2022. It also said it’s now expecting total passenger numbers to exceed 90 million by the same point. That’s up from a previous forecast of 80 million, sure, but it’s still a long-haul flight away from the 150 million people a year it used to ferry before the pandemic broke out…

Why should I care?

For markets: Choose your low-cost fighter.
Investors sent Ryanair’s shares 4% higher on Monday, and the firm’s optimistic travel outlook helped boost the stocks of other regional carriers: EasyJet and Wizz Air saw their share prices tick up 4% and 1.5% respectively (tweet this). But don’t be fooled: these three budget airlines are in fierce competition with one another to poach as much recovery-driven business as they can, which is why they’ve all outlined plans to grow rapidly as the pandemic starts to fade.

The bigger picture: Ryanair thinks long term.
Airlines often enter hedging contracts that allow them to buy a certain amount of jet fuel at a predetermined price, to protect them from the rising price of oil. And Ryanair, for its part, has already locked in 60% of its anticipated fuel purchases for the financial year at $565 per metric ton. That was probably a shrewd move: the price of oil hit a six-year high earlier this month, pushing the cost of jet fuel to $628 per metric ton.

Originally posted as part of the Finimize daily email.

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