Emergency Exit

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What's going on?

Ryanair admitted in its full-year earnings report on Monday that it’s expecting half the usual number of passengers this summer, but the Irish airline’s emergency measures might’ve shown investors a way out of the panic.

What does this mean?

With coronavirus having transformed the prospect of travel from exciting to unnerving, airline stocks have now fallen around 50%. And even though Ryanair announced a $1.1 billion profit for the 12 months ending in March, its future initially looked bleak: the airline forecast a loss for this quarter, and it didn’t even try to predict how bad things might get this year.

So you’d be forgiven for doing a double-take as investors sent the Irish airline’s shares soaring 16% higher. Turns out the company has something to look forward to after all: the airline just won a UK government-backed loan that’ll increase its cash pile to nearly $4.5 billion. And given that its also trimmed weekly cash burn from over $200 million in March to just $65 million, the company should be able to keep going for some time yet.

Why should I care?

For you personally: Cheap and cheerful.
A crisis can be a prime opportunity to pick up stock market bargains, but beware: some stocks are cheap for a reason. Whether you think that includes Ryanair – whose shares are trading at about 10 times last year’s profits, a quarter cheaper than the average London-listed stock – depends if you think airlines will survive this crisis, or if they’ll fold under further COVID-related travel restrictions.

The bigger picture: Oversize baggage.
Some travel operators have offered their customers full refunds in the name of good PR – even if it costs them millions. But reputation-nurturing hasn’t always been a priority for Ryanair and its famously combative CEO, who argues that passengers only care about cheap fares and reliable services. But after getting flak recently for failing to reimburse customers and cutting 3,000 jobs, he may be about to get a rude awakening…

Originally posted as part of the Finimize daily email.

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