Ryanair Holdings – stock analysis with alternative data

Overview

RYAAY with its subsidiaries, provides scheduled-passenger airline services. It operates a low fare, low-cost airline group serving short-haul, point-to-point routes from 86 bases to airports across Europe and North Africa, which together are referred to as “Ryanair’s bases. Prior to the grounding of aircraft in March 2020, because of EU governments measures to the spread of Covid-19, the Group offered approximately 2 500 scheduled short-haul flights per day serving approximately 240 airports. As of June 30, 2021, Group had a principal fleet of approximately 422 Boeing 737 aircrafts and 29 Airbus A320 aircrafts.

Ryanair Group also provides various ancillary services and engages in other activities connected with its core air passenger service, such as non-flight scheduled and Internet-related services; in-flight sale of beverages, food, and merchandise; and marketing of car hire and accommodation services, and travel insurance through its website and mobile app.

Ryanair Holdings was founded in 1985 and is headquartered in Ireland. It is Europe's largest airline group and aside from the Ryanair brand operates with the following brands: Buzz, Lauda, and Malta Air.

COVID-19 Pandemic

The Covid-19 virus, which spread around the world from March 2020, had a profound and devastating impact on air travel last year. The Covid-19 crisis accelerated the collapse of many European airlines including Flybe, Norwegian, Germanwings, Stobart and Level, and caused material capacity cuts at many others including TAP and Alitalia.

Ryanair’s monthly traffic collapsed from 10.5milion in February 2020, to 5.7milion in March, and then to just 0.04 milion in April 2020, as many EU Governments grounded flights. After partial recovery in July, August and September 2020, a second Covid wave across Europe followed by a third wave caused unprecedented crisis for the world in airline industry in 2020 and 2021. It affected Ryanair’s financial result in 2021 (Fiscal year ended March 31). Total revenues fell 81% year over year to €1.63 billion. Traffic dropped 82% year over year to 27.5million due to travel restrictions imposed by several EU governments. Ancillary revenues dropped 80% year over year in fiscal 2021 due to significant decline in traffic. Ryanair reported an average load factor 71% compared with 95% in fiscal 2020

Recovery

Looking at Ryanair’s reported financial results for Q3 FY22 (ended 31 Dec. 2021), total revenues increased by 331% to €1,469.9M over the period due to a 286% increase in traffic (from 8.1milion to 31.1milion) and a 15% increase in average fares to €25. The results proved recovery of traffic during the third quarter.

Source: Ryanair report for 3Q 2021

The forecast of air traffic for fiscal year 2022 is over 97milion (compared to 27.5milion in FY21). Ryanair expected strong recovery into Easter and into summer of 2022 and anticipates summer fares to be 5-10% higher than in 2019 (pre Covid-19). Traffic passed pre Covid-19 level in March 2022 with 11.2milion passengers compared to 10.9 milion in March 2019, the first time it had carried more people in given month than in the corresponding pre-pandemic period.

Looking at Ryanair 's web traffic in 2022, we can see an upward trend, which can be attributed to recovery in air travel. European Governments have started to ease and remove travel restrictions/lockdowns and people started travelling again. The website traffic is up by 20% in the last month and 13% in the last quarter. Based on above mention about very strong traffic in March 2022 and upward trend according web traffic, we expect traveling people in greater numbers in the following months and strong reported Ryanair 's air traffic numbers.

Ryanair.com Website Traffic

Mobile application ranking also shows increasing interest in traveling from March 2021 to February 2022.

Ryanair.com Mobile Apps

All the indications are, there will be a strong recovery into summer of 2022.

The Ryanair Group plans to deliver 165 million passengers in fiscal year 2023 (11 % growth compared 149 milion carried pre-COVID in the fiscal year 2020) and expect to grow to 225 milion passengers over the next 5 year (previously expected growth to 200 milion passengers).

Ryanair.com Passengers

Catalyst for Growth

• European air travel is recovering. People have been locked up at home for the last two years and they want to travel again (as proven by Ryanair’s air traffic in March 2022).
• Collapse and fail of some European airlines.
• Ryanair announced 720 new routes and open 15 new bases, all of which will operate in the summer of 2022.
• 41 Game Changers delivered up to 31 December 2021. It has a total 210 Game Changers, which are going to help Ryanair to be more efficient (lower fuel burn, lower CO2, lower costs).
• Unique non-fuel costs basis (€31 per passenger).
• The airline is strongly hedged on fuel. They are hedged at prices that are at significant discount to the current spot. There was fuel hedging to 100% into Q4, it has increased hedging to 80% into H1of FY23 and 70% into H2 of FY23. Fuel hedge position (mix of swaps & caps) give company very strong cost base going forward. It has much lower cost base than competitors in Europe.
• Ryanair’s Climate Disclosure Project rating improved from “B-” to “B”

Ryanair is Europe's leading low-cost airline. It is grabbing market share at a fast pace. It has continued to grow market share in places like Italy witht huge investment in Italy over the last 12 months. Despite fail of some European airlines during the Covid crisis, there are still some market players. There are huge growth opportunities for Ryanair, not just in new bases, but also to replace the capacity that’s been lost by other airlines.

Share of Search may also be a good indicator of the Ryanair’s health. There is the relationship between Share of Search and Share of Market. They correlate very closely in Airlines Industry. By looking at Graph below, we can see that Ryanair’s Share of Search has been dominant over the whole period. The trend confirms leading Ryanair’s market position. There is no indication that anyone else should take over the leadership market. On the contrary, there has been a slight increase Ryanair’s proportion from January 2022 to March 2022. It implies Ryanair’s faster post-pandemic recovery, than recovery in any other low-cost airline in Europe.

Ryanair.com Share of Search

Risks

• During the Covid crisis, net debt has risen to over €2.1 billion. Company went into COVID crisis with zero net debt position. Management plan to reduce this net debt to zero as quickly as possible over the next 2 years.
• Cost inflation (especially staff costs),
• New COVID-19 variants and return of travel restrictions/lockdowns
• Competition (less risk than before the pandemic due to weakened companies by the pandemic)