What’s Going On Here?Ryanair reported worse-than-expected results on Monday, but that won’t stop the company from putting the “budget” in “Europe’s biggest budget airline”. What Does This Mean?Tourists flocked back onto Ryanair’s planes last quarter, with October a particularly busy month for jetsetters and globetrotters. But vacations and coronavirus aren’t known for going hand in hand, and the arrival of Omicron brought both Europe-wide restrictions and a travel-shy customer. That might be why the airline posted a bigger-than-expected $107 million loss last quarter – twice as much as the one before (tweet this). Ryanair reckons there could be more Covid flare-ups ahead too, and warned investors that it’ll be cutting prices this quarter to try to tempt as many passengers on board as possible. That wasn’t what they wanted to hear: they sent the company’s stock down after the announcement. Why Should I Care?Zooming in: Ryanair’s future is now.
Ryanair’s arguably in a much better position to cut fares than a lot of its rivals, not least because it’ll be saving a lot more on jet fuel than them. See, airlines often agree to the price of a certain amount of fuel ahead of time by buying futures contracts, which protects them from any spikes in the oil price. And since Ryanair has locked in more than 60% of its purchases for the next 15 months, it’s in a much cushier position than most.
The bigger picture: A Russian roadblock.
Case in point: the oil price is on track for its biggest January gain in at least 30 years. In fact, investment banks are predicting that the dusky earth-juice will soon be worth $100 a barrel, up from $91 now. And that’s without taking tensions between Ukraine and Russia into account, which could prompt the latter to cut off supplies into Europe and send the price even higher. Ryanair’s disgruntled investors, then, might soon snub its less forward-thinking rivals when they realize its cut-price ticket costs are by far the lesser of two evils. | 