Ryanair

Monday, February 4, 2019 - 10:53

“Markets were steady at the start of the new week with sterling rising against the euro and US dollar. The FTSE 100 advanced 0.15% to 7,030 led by Royal Dutch Shell and BP which were lifted by a stronger oil price. Brent crude advanced 0.6% to $63.12 per barrel. “The commodity price appreciation was bad news for fuel-hungry airlines, with EasyJet and International Consolidated Airlines among the top fallers on the FTSE, also weighed down by a negative quarterly update from Ryanair which showed that fierce competition was still hurting the sector. “Corporate news flow is scheduled to pick up as the week progresses with BP, GlaxoSmithKline and Ocado among the large cap stocks publishing results,” says Russ Mould, Investment Director at AJ Bell.

Ryanair

Ryanair may have just posted a quarterly loss but the man at the top is not going anywhere. Despite rumours to the contrary, partly fuelled by the man himself, the pugnacious Michael O’Leary is signing on for another five years as CEO.

“A pioneer in bringing the low-cost airline model first adopted in the US over to Europe, O’Leary has been in charge since 1994 making him one of the longest-serving chief executives around.

“For all the controversy and success, investors are entitled to at least question if O’Leary is the right man to take the company forward given the patchy recent track record and a stalling share price.

“The senior management team are not escaping completely unscathed from this disappointing recent period. Chairman David Bonderman has been around almost as long as O’Leary but will step down after a quarter of a century in 2020 after 30% of shareholders voted against his re-election last September.

“The company faces competitive pressures, which were the main contributor to a swing into the red in this latest quarter, but also the challenge of disputes with staff over pay and conditions.

“A new management structure, with O’Leary concentrating on managing costs, buying aircraft and M&A and leaving day-to-day running of the underlying airline franchises to others, will probably put some distance between him and the unions. That’s not a bad thing given he has a particularly fractious relationship with them.

“Tight management of costs, historically one of O’Leary’s and Ryanair’s strengths, will likely be fundamental to whether the next half decade proves a success, and this could require some finesse in industrial relations.”

These articles are for information purposes only and are not a personal recommendation or advice.


The daily market comment is written by Russ Mould, AJ Bell’s Investment Director and his team. The article highlights the movement in the main index, winners and losers on the day and any macro-economic announcements.


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