Merrion downgrades airline to ‘hold’ after results

RYANAIR was downgraded by one stockbroking firm yesterday as analysts clamoured to offer their take on the airline’s latest set of results.

Merrion Capital downgraded Ryanair’s stock from “buy” to “hold” as it feels the downturn is having a greater impact on the airline’s yields and earnings than it previously expected.

Despite this downgrade the airline was held at buy by many other analysts.

Merrion said: “Demand is significantly less responsive to price promotion, exacerbated by Ryanair’s own pace of capacity growth at a time of consumer weakness,” it said.

Ryanair was raised to “buy” from “hold” at Citigroup and held at “buy” by Bloxham, RBS and Goodbody.

The company “is putting pressure on other low-fare carriers and flag carriers, which could cause some to reduce capacity or exit the business, as it exploits the recession to build market share”, it said.

Citi said Ryanair should be a “major beneficiary” of the potential failure and capacity cutbacks of other airlines this winter, driven by 20% plus lower ticket prices.

Ryanair, when announcing its quarter one profits on Monday said it expects net income to be at the lower end of its €200 million to €300m guided range.

Goodbody expects net income of €286m and it anticipates earnings will decline in 2011.

It said Ryanair is using these “difficult times to pressure competitors” but it remains wary of the “most cautious yield figures guided by the company”.

NCB said fare risk and fuel price volatility may continue to dampen appetite for the stock in the very short term, however continued market share gains as passengers trade down to its fast-expanding network position Ryanair favourably for the medium term.

“The stock is attractive at current levels, however the key to momentum over the coming months will clearly be the development of the revenue environment,” NCB said.

Bloxham also said that it believes Ryanair is a straight “buy” after a 10% share price correction on Monday.

Meanwhile, Ryanair said it has lodged proceedings in the High Court in Dublin against a German screenscraping ticket-tout, Travelviva.

It said Travelviva has been engaged in “unauthorised screenscraping and reselling of Ryanair’s flights with unjustified markups and it is refusing to commit to desist from this unauthorised practice in the future”.