Ryanair shares surge over 5% on winter bookings profits lift

Ryanair shares climbed 5.5%, as a late surge in bookings and higher prices bolstered hopes the airline was on a recovery path.

The trading update showed it had better-than-expected Christmas and New Year trading, as well as a pick-up in bookings for the next three months.

That also helped send the shares of European rivals, including Aer Lingus-owner, IAG, and EasyJet, sharply higher, too, as analysts said that Ryanair, along with other airlines, may be benefitting from the lessened competition.

Paradoxically, the long delay in recertificating for the global return of the Boeing 737 Max airline (grounded following two fatal crashes) might have also reduced capacity across Europe.

Fewer airline seats, in turn, can boost average ticket prices and the yield, or the money that airlines generate from selling each ticket.

In its trading update, Ryanair forecast it will carry 154m passengers in its financial year to the end of March, up by one million from an earlier forecast.

It said forward bookings had risen and it forecast “slightly-better-than-expected” average fares in its final quarter. After-tax profit for the year will rise to the mid-range of €950m and €1.05bn, it said.

It was not all good news, however. Losses at its Lauda airline will rise to €90m in the financial year, amid competition from Lufthansa, the airline said.

The latest surge means Ryanair shares have gained over 50% in the past year, with most of the gains secured since its AGM, in September, as investors bet the airline has come through the turbulence of the previous two years.

The shares traded at €16.08, up from their 2019 low of €8.40. That means that a €99m bonus for Ryanair’s Michael O’Leary, which was narrowly backed in September, may yet be achievable.

The terms of the stock options reward are triggered if the price exceeds €21 for a four-week period between April 2021 and March 2024.

Ryanair’s guidance is a respite to carriers, after the International Air Transport Association warned, last month, that global industry profits would come in lower than forecast, as geopolitical tensions, social unrest, and uncertainty around Brexit contributed to tougher business conditions.

Reduced capacity growth, following a spate of European airline bankruptcies and the continued grounding of Boeing’s 737 Max, may have improved yields.

“If a more benign capacity is, indeed, the root cause of the upgrade, Ryanair is unlikely to be the only one to benefit,” Daniel Roeska, an analyst at Sanford C. Bernstein, said.

“With the Max still grounded and capacity growth at lower levels, this may indicate a better yield environment through winter and a more supportive trajectory for sector profits,” the analyst said.

The shares of rivals joined in: IAG, which owns Aer Lingus and British Airways, climbed 5.5%, while EasyJet and Wizz Air rose 3% and 6.7%.

Ryanair, last month, cut its traffic forecast for the year to March 31, 2021 to 156m, from 157m, after scrapping some planned summer operations, due to delivery delays to the Max jets.

That forecast was based on Ryanair receiving 10 Max aircraft in time for the summer season.

Additional reporting: Bloomberg and Reuters