In early July, the Ryanair share price fell to a 21-month low, partially due to the negative news surrounding such airports as London Gatwick, Dublin, and Manchester. Fears of a cost-of-living crisis are also behind the decline as investors are worried that consumers might cut back on discretionary spending items like holidays. The lockdowns and the subsequent reopening of economies led to problems like staffing shortages which caused chaotic scenes at some airports, and that prompted airlines to cancel flights. Some carriers were worse affected than others but overall, the sector performed poorly. Another impact of the pandemic has been a surge in costs, and inflation in the UK is at a 40-year high. There is growing speculation that Britain could be moving towards a recession, so investment sentiment has been deteriorating.
In May, the group announced a full year loss of €355 million, which beat expectations as analysts were anticipating a loss of €370 million. It was a major improvement on the €1 billion loss registered in the previous year. Michael O’Leary, the Ryanair CEO, said it will be difficult to issue a profit guidance, but he expects the airline to return to “reasonable profitability”. The release of pent-up demand saw the number of passengers surge by 253% to 97.1 million, but it was obviously starting from a low base. Although it is very encouraging to see such as turnaround in activity, the customer numbers are still 35% below the pre-pandemic mark, so there is still a long way to go before it can get back to the trading conditions of 2019.
The travel industry has arguably been hit the hardest by the lockdowns and the re-opening of economies. Some workers in the sector chose not to go back to their old jobs following the resumption of business, and that has led to major queues at certain airports, which brought about cancelled flights. Industrial action in pockets of Europe has added to the headaches for holidays goers. Even though business is bouncing back, it is fair to say that things have not gone smoothly recently, especially considering it is the first uninterpreted summer of travel in three years.
Inflation is on the rise, it hit a four-decade high in the UK and it is at an all-time high in the eurozone. Rising costs typically eat away at people’s disposable income and air travel often fits into the discretionary end of consumerism. On the plus side, Ryanair’s air fares are at the more competitive end of the market so savvy travellers might seek out the Irish airline.
The Ryanair share price has been trending lower for nine months, in early July it fell to its lowest level since October 2020. If the broader bearish trend continues, it might target 11.25 or 10.89. Lately the stock has been recovering, and if the rally continues it might encounter resistance at 13.29 or 14.04.
Ryanair will announce their first quarter figures on 25 July.