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Budget airline Ryanair is soaring after solid third quarter results sent its share price 4.4 per cent higher despite delays in delivery of the new Boeing 737 MAX.
Ryanair reported a third quarter net profit of 88m EUR for the third quarter, compared to a 66m EUR loss in the same period of the previous year. Share prices for the budget airline now stand at 15.98 EUR at the time of writing although it has warned that it will be impacted by the Boeing delays in the longer term.
The airline announced that it hasn’t received any of the Boeing 737 Max Jets it ordered, which still has not received approval for its return to use after two crashes, and its unlikely to get them before its summer season. Chief Executive, Michael O’Leary, warned that the delays meant much slower growth for 2021 and ‘very modest growth’ in the summer of 2020.
Last month, the no-frills airline updated its full year guidance to between 950m EUR and 1.05 bn EUR, from previous expectations of between 800 and 900m EUR. Advance bookings were up one per cent on last year and the airline expects full year customer number growth of eight per cent.
So, can Ryanair continue its smooth flight path or are the Boeing delays likely to throw a spanner in the works?
The budget airline has described the Boeing Max’s as ‘gamechangers’ saying they will give four per cent more seats while burning 16 per cent less fuel, but analysts are concerned about the impact of the delivery delays. Daniel Roeska, senior analyst at Bernstein Research pointed out that the delay will make it much harder for Ryanair to achieve its 200bn EUR annual operating profit target. He said: “Moving that goalpost makes that 2bn EUR even harder to achieve, if at all” and that if the budget airline changes its growth target, it could benefit the rest of the industry.
Ryanair has already announced that the delivery delays will mean the closure of two bases, in Nuremberg, Germany and Stockholm Skavsta in Summer 2020. Some analysts have pointed out though that the Boeing issue is likely to be an industry wide problem and not isolated to Ryanair, which is partially reassuring for investors.
The airline is facing other headwinds though, including rising fuel costs, an increased maintenance bill and higher pilot pay but most of these obstacles will also apply to the industry at large.
While there could still be turbulent times ahead for the budget airline, this latest trading update will have reassured investors that there is the possibility of a smoother course ahead.
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