Ryanair: Competitive Advantages Outweigh The Downside

Apr. 19, 2019 10:56 AM ETRyanair Holdings plc (RYAAY)4 Comments
Aleksey Razdolgin profile picture
Aleksey Razdolgin
1.73K Followers

Summary

  • Ryanair’s stock is down ~31% from its 52-week high, and I believe that the shares are finally poised for a rebound.
  • Ryanair has one of the highest margins in the industry, while at the same time, it has the lowest fares in Europe.
  • There are a couple of risks that are associated with Ryanair, but I believe that its competitive advantages outweigh the downside.

At the beginning of April, US-based hedge fund Citadel, run by Ken Griffin, opened a short position in Ireland-based low-cost airline Ryanair (NASDAQ:RYAAY). Those of you who follow me know that I have been bullish on the airline since last year. While my position is in red at the moment, I believe that Citadel is making a mistake of shorting Ryanair at the current market price, and I think that the company's stock has a potential to rebound in the foreseeable future.

Low Fares. Made Simple.

Ryanair continues to be the biggest low-cost carrier of Europe that offers the most attractive fares among its competitors. In Q3, Ryanair's average fare was €39, 18% less from its closest competitor Hungarian-based airline Wizz Air (OTCPK:WZZAF). Below is the table that shows the average fare of other low and mid-cost airlines of Europe. Being the cheapest airline on the continent, while at the same time having the biggest coverage in Europe, puts Ryanair in a winnable position in this turbulent environment, as there's always going to be a demand for its flights. Ryanair's current slogan is: Low Fares. Made Simple.

Source: Ryanair. The table was created by the author.

According to ACI Europe, more than 2.34 billion people travelled by air in Europe in 2018, which is an increase of 6.1% Y/Y. Europe remains to be an attractive market for air travel, and I believe that Ryanair is the airline that benefits the most from such a growth.

At the moment, Ryanair conducts its operations in 234 airports across Europe, North Africa, and Near East. It has 84 bases in EU and more than 2,100 routes. To cover such a wide network, Ryanair has more than 450 Boeing (BA) 737-800 planes, which have an average age of less than 7 years.

To strengthen

This article was written by

Aleksey Razdolgin profile picture
1.73K Followers
Aleksey is CEO of the proprietary trading company Arbitrage Trades. Aleksey is in charge of creating new opportunities in this rapidly growing investments field. He is personally investing his own money into stocks, cryptocurrencies and other emerging trends of the financial industry.

Disclosure: I am/we are long RYAAY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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