The Case For Ryanair

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That the short haul airline business is going through a shakeout is obvious enough. That this shows we’ve a competitive industry is also obvious enough. If people aren’t stretching the envelope and thus – often enough – failing then we’ve an absence of both competition and innovation.

So, in a horribly competitive industry undergoing consolidation by bankruptcy, what’s the case for Ryanair?

Ryanair’s Position
So, what happens when cashflow is king to the survival of a company and we’re also in an increasingly competitive market? Everyone cuts prices in order to be able to gain that cashflow of course. Even at the expense of profits they’ll cut cashflow. And who wins in such a market? He with the deepest pockets, the most capital able to withstand the pressure. With airlines, that’s the people who own their planes rather than lease them. Therefore my view here. Ryanair is the most likely airline to survive the increasing competition in the European short haul market. Thus if you want exposure to this sector, Ryanair is the stock to have.

This isn’t definitive of course. No one person’s opinion, if you’re not the Senior Lecturer, is. But it is I think a good place to be starting from.

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That really depends. “Owned” usually means high percentages of debt to value, rarely simply owned. And leasing companies are usually unlikely to just pull an aircraft from an airline. They will usually renegotiate prices and terms, particularly in a market where airlines are failing and they may not be able to place an aircraft. Lessors might also be willing to reduce your fleet if they can place an aircraft and so help you cut unprofitable routes quickly and cheaply. Where Ryanair wins is its ability to shift aircraft around a large network of bases. It can reduce exposure to underperformed… Read more »