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The pandemic has hit travel more heavily than any other sector. But the financial markets have deemed well-run, low-cost European airlines to be winners in the recovery. Leading that pack is Ryanair, which said net losses of €815m over the past year were its largest ever on Monday.
Those were of little concern to investors. They have pushed Ryanair shares ever higher since vaccine breakthroughs last year. The Irish group’s efficiency and its strong balance sheet should allow it to take market share and capitalise on fast-growing new markets.
Ryanair plans to expand while rivals such as easyJet are scaling back. Shares at 13 times 3-year earnings are at the top of the past decade’s range. A return to pre-pandemic levels of flying, though, will take longer. Plans for vaccine passports would delay an already lacklustre recovery in regions where it is needed most. New variants of coronavirus mean the new normal is replete with uncertainties.
Almost 150m passengers flew with Ryanair annually before the pandemic. Passenger numbers this year would be towards the lower end of estimates at between 80m-100m, the company has confirmed. That might be enough to get the group back into the black. Current analysts’ consensus suggests a €115m net profit. Short-term predictions are exercises in guesswork as governments impose sporadic lockdowns.
Airline investors expect big things from eastern Europe. Fast economic growth, underpenetration of flights and a growing cohort of business travellers all play in the region’s favour. Ryanair is second in the region to Hungarian rival Wizz Air with a sixth of narrow-body market share.
Those pros need to be balanced against the constraints that health passports would impose. The EU’s Digital Green Certificate could become a requirement for travel, for example. But almost two-fifths of Poles say they do not plan to get the jab. Hesitancy in Slovenia, Croatia and Bulgaria is even higher.
Wizz Air’s prospects are tied even closer to eastern European markets. Shares have kept up with Ryanair the past year and also command a premium. Expect turbulence for both as travel restrictions evolve, with Ryanair the safer bet.
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