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Ryanair: Fully-Fledged Recovery Not Yet Priced In

Karreta Advisors profile picture
Karreta Advisors


  • Ryanair operates a low cost and free cash flow generative business, providing it the financial stamina to recover from the pandemic.
  • We believe the carrier can take advantage of falling intra-European flight capacity as its peers retrench.
  • With the shares trading on a free cash flow yield of 5.1% for FY3/2023, we are buyers of the shares.

Investment thesis

Ryanair (NASDAQ:RYAAY) is poised to bounce back from the pandemic in better shape that its peers, with increased routes and capacity as it takes orders for the Boeing 737-8200. With an estimated free cash flow yield of 5.1% in FY3/2023, we are buyers of the shares.

Our objectives

We want to assess the following in this piece:

  • Look at the company's estimates over recovery in passenger numbers.
  • Ryanair's market position versus its peer group.

We will take each in turn.

A recovery in stages

The company's 3Q FY3/2021 results highlighted orders for the Boeing 737-8200 has been increased by 75 to 210. Ryanair is in a position to do this, as it has a strong balance sheet and underlined management's intention to gain share as other carriers fail or retrench. The company's outlook for passenger volumes is as follows.

Guest volume projections by company

Ryanair guest volume projections

Source: Company, created by author

With a patchy vaccine rollout in Europe, we anticipate Easter travel volumes will remain subdued, and a tangible recovery in passenger numbers will start from summer 2021. Guest volumes may be at the lower end of FY3/2022 company range. We also think projections of FY3/2023 which matches the peak seen in FY3/2020 is too optimistic even with pent-up demand for both leisure and business travel.

Vaccination doses given - select European countries

Covid vaccination doses

Source: Our World In Data, created by author

Longer term we see Ryanair as a beneficiary from the pandemic. Peers that have disappeared since 2020 include Flybe, Germanwings, Level and Montenegro Airlines, with Norwegian under creditor protection examinership. Flag carriers are retrenching, and intra-European flight capacity is being reduced. Ryanair is poised to gain market share, the timing of which is dependent on the vaccination roll-out program and people's attitude to overseas holidays. We believe Ryanair is positioned well for a recovery.

This article was written by

Karreta Advisors profile picture
We are an independent research house. We look at global stocks, favoring those with sustainable growth and recognized or emerging as a high quality franchise at suitable valuations. We primarily serve institutional investors.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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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Comments (3)

Maybe I should get in here, but only if nobody flies. Because the market says the more loss the higher the share price. The Market says, fewer passengers, means higher company value. And i want be as smart as the market.
Mktneutralhedger profile picture
Without flying the stock is close to all-time highs and the recovery it's not priced in? Please be serious.
Invested in Ryanair. Great to see the share price higher today than before the pandemic. Hard to believe. The team have proven to be the best in the business, long Ryanair
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