Irish Airlines Ryanair's Shares Soared

Irish Airlines Ryanair's Shares Soared

almost 4 years ago2 mins

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.

Source: The Wall Street Journal
Source: The Wall Street Journal

Why should I care?

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.

Source: The Wall Street Journal
Source: The Wall Street Journal

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…

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